Sarah Cone Discusses Disrupting Venture Capital

are some really bold faced names. UM certainly ones that anybody who tracks investing, politics, venture capital, technology would would surely recognize. Uh. Sarah has really a fascinating work history and a fascinating approach to disrupting UM the vent world of venture capital. Her approaches really to look for company is that not only are making a difference in the world,

but can produce a strong internal rate of return. Her philosophy as, if you really want to impact the world, will build a billion dollar company and see how that changes how everybody lives, operates and behaves in the real world. It's really um quite fascinating. She's really charming and delightful and and really really intelligent. UM with just the world's craziest rolodex and some really interesting stories. So I think you'll find this really intriguing. I had a great time

speaking with her. With no further ado, my conversation with Social Impact Capitals Sarah Cone. This is Masters in Business with very Ridholts on Bloomberg Radio. My special guest today is Sarah Cone. She is the founder of Social Impact Capital. She began her career at the VC group Omdior Network. Pierre Omdier was the founder of eBay. She was an associate at Illuminate Ventures, where she worked on B two B Software as a Service UH in Silicon Valley Venture

Capital UH. In addition, she worked at the nonprofit Public Knowledge UH Group UH Tech Policy Public Policy Group. Sarah Cone, Welcome to Bloomberg. Thank you for having me. I mangled your background, but really, to state it more conversationally, you've worked at a number of the big giant tech firms right and in the early days of your career, Google and others. You've been moving in venture capital circles for a long time, and your VC social impact focuses on

more than just technology. Tell us a little bit about what social impact capital does. So we are a venture capital firm, UM, but we go in as early as possible into what we call the best ideas and impact which we are we think are the company is most likely to have, you know, both make venture capital profits but also have an incredible, you know, world changing positive effect on the world. So it's both. It's not just

socially responsible or impact investing for its own sake. You have limited partners and they're expecting a serious return on investment exactly. Um. I think what's pretty hilarious about my firm is that, in fact, um my LPs are sort of this who's who of capitalism and they I don't really have a single impact investor in the firm um at the moment. And they actually even have two LPs that are on the record stating how stupid they think impact investing is. So why do they give you money

if they think what you do is stupid? Or are they looking past the impact side towards Well? I asked one of them one time, and I was like, why are you in this firm anyway? And he's he applied to me the performance, that's that's the interest, And well, I I know you were bound by non disclosure rules. You can't say who these people are, but I know who some of them are, and they are front page name brand investors. Is that a fair statement they are?

Does that impact how you look at the world or is it it would be the same if it was just a big, faceless institution. Um, well, I have. It's sort of an internal joke at our firm because I refer to them as widows and orphans. Um. It's it's sort of a joke because of course they're you know, all sort of billionaires that are able to take on early risk in a young venture capital firm. Um. But it's aspirational because we aim, you know, to become a top tier firm that produces such great returns that I

am allowed to manage the money of widows. So so so let's talk a little bit about that, because I think that's kind of interesting. There are friends and family rounds when somebody first gets an idea, and then there's the angel round and eventually you moved to big firms, A round to be around the sea round? Where is social impact in that spectrum of early to late venture investments. We are the earliest possible. Um, we like to go in.

We'll do anything in the seed stage. So we'll do you know, pre see the seed stage has become even more segmented UM. So we'll do but we'll do anything in the seed stage. We'll do preseed, we'll do seed, we'll do seed extensions, UM sort of anything in the

early days. And then what we do is what we specialize is is in creating these social impact companies, getting them into the place where they're real businesses, and then getting them led by top tier venture capital firms in the Series A and so far at the firm, we have an eight rate of doing that, meaning that you do a set of investment but eventually not bring in additional exactly the downstream money is, you know, from top

tier firms. I love it because I get my you know, and the founders get their philanthropic business plots then funded by commercial capital because they are good businesses, and so they're able to do that. And now, how can you tell if you're so early stage, they really it's a business plan. It's a couple of founders, but typically there isn't a product, there's barely a website. Is it more

idea than actual business? It definitely is. We're going in UM extremely early, and so I'm making these, you know, pretty risky bets, and um what, we spend a lot of time and diligence, We spend a lot of time with the founders, and we just do our best. But as in any venture capital portfolio, you expect a you know, a number of those to fail and then a number of them to succeed wildly and compensate for those failures.

So let's talk about that distribution. Typically with a venture firm that are making let's call it a rounds, so they're a little more developed. There's it's not a finished product, but at least there's a product, some software, websites, something you can look at. Um with those sort of a rounds, typically ten or total bus another maybe they break even, t makes some money and it's a really small slice that really hits the bowl out of the park. What's

it like when you're doing earlier seed stage? I would imagine the failure rate is much higher. Well at our firm, I mean, the funny thing about the venture capital industry is that you tend to there's not data published on it that is very reliable, so you tend to only know what's going on in your firm, and then sort of what you read in the media. So I've read um from on CB Insights that the failure rate for seed stage investing is that only of the follow on

rounds get funding at all from seed stage deals. In our firm, we actually have a hundred percent hit rate right now. Um, but you know, it's venture capital, so you don't really know anything until seven years, ten years down the line back cycles. There's a huge lag It's It's pretty excellent though, because what it creates is this sort of uncompetite. I always describe venture capital is the only uncompetitive field in finance. Why is that? It's because

they're basically no good venture capitalists in the world. So when you so by the time you learn and you actually really get the knowledge, which can you know, is seven to ten years down the line, it's this incredibly long lag time. So by the time you learn the lessons from that, all the technology has changed, all of the business models have changed, and the entire world has changed.

So if you actually take those lessons and adopt them, which many venture capitalists do, then you're investing wrong in your next fund, and you see that play out over and over again. So I think that the only really good venture capitalists are the sort of intense real time learner venture capitalists. So it's sort of like looking at the light from a star. By the time the light gets to us that hey, that star could be gone from me exactly. That's the perfect way to describe it.

Quite fascinating. Let's talk a little bit about um launching your own firm. You're here in New York, but you used to be out in Silicon Valley. What made you say, A, I wanna kick off my own shop and be let's leave all those people behind on the West Coast and come to New York City. Well, I started my own fund because I see this incredible arbitrage opportunity and earliest stage impact investing that I was not able to kind of concentrate on that thesis anywhere else in the world.

So is it too niche, too small? Why couldn't you can't strain on that elsewhere? Well, what's wonderful is I always describe it as the you know, it's almost like an invisibility cloak because primarily no one in the world believes that impact investing can actually produce top tier returns. I keep hearing, By the way, it's political it's so yeah.

I mean, I hear self indulgent luxury junk. I just completely I constantly hear this, and I constantly I'm like, vcs are like kind of always saying to me, like, Sarah, you're a great investor, you can just drop the social impact branding. Now I'm like, guys, this is what's producing their return. But I really I used to kind of annoy me, but I realized that this is actually my competitive advantage because it means that there's a ton of open ice here because no one else is, you know,

coming into this field. So you know, when I'm getting better valuations than anyone else in the VC industry, when I'm getting into better companies than anyone else in the VC industry, then they're sort of baffled. They still don't understand it. Um, So this is it's a it's a fantastic competitive advantage. Bafflement is a great It really is. You know, I'm kind of intrigued by the concept of cumulative advantage, where firms that have done well attract a

network of better vcs, better, better LPs, better companies. Do you see that in the social impact side or has it not yet developed that far? Where communal advantages is accruing.

I think cumulative advantage is UM one of the most important things to any pc a firm period and one of our advisors for our firm, Ashby Monk, has actually written widely about this UM and we how we have thought about it at our firm is that we have an unusual structure in that it's a solo GP firm, but I work with a wide variety of venture partners and advisors that all have pretty specific domain expertise and specific institutional you know connections. What other venture firms are

you working with is part of your broader network? Oh, I mean all venture It's a part of the industry that venture capital firms work with other venture capital firms. Every venture capital firm does that. I'm saying, we especially for follow up rounds, and we work with a bunch of you know kind of at our firm, we work with a bunch of academics and you know, um kind of people in industry and people out in the world.

So more than just other other venture funts UM and this has been this has been an incredible accumulating advantage to us over time. What do you hear from your limited partners. Do they stay in close contact? How do you communicate with them? How often do you update that I have you know a small number of them, um that you know I'm in pretty close contact with, and then you know most of them I send quarterly updates to their people. And how do you source and find

potential investments? I think that you know, we we basically scour the earth. I I, you know, will do anything to find an investment, and we look at everything. But I think most of our deals come in into primary ways. One is through the advisory board and venture partner network that I just talked about, And then the other way is that we sort of have a reputation as being good foundation builders for seed stage companies. So I got a ton of deal flow through Series A and later

vcs that go, Hey, Sarah, I love this company. It's too you know early for me. You should take it, And I'm like, thanks, I'll invest in this and get it into great shape for you and pass it along when it's you know, interesting to you. What when you say pass along? What sort of resources do you pour into besides just writing a check? What else do you do to help a startup company get off the ground?

And move forward. So we have these the venture partner and advisory board are this immense resource us for these people where we almost always will have the exact advice that you need for the exact problem that you have, and we sort of match it an ad hawk basis. So it's like, are you a biotech company that is wondering how to handle the FDA. Well, Linda a Vy who was the co founder of twenty three and me is on our advisory board, who knows a ton about that.

So we just connect you for a call um and it's a lot better than you know, having some venture partner, I mean venture partner at a venture capital firm sort of pontificate on areas that they haven't had really really intimate familiar experience. So it's the network. What about the specific day to day of running and building a new

from um. You know, we tend to sort of be hands off unless we're asked UM because we do a lot of upfront work um into our companies, so we tend to not sort of have the the the you know, we need so much help in this company. You know, we tend to only kind of invest in the companies that are pretty fully formed and then we're there to assist entrepreneurs with the best of class resources when they

have trouble. UM. But other than that, we try to stand out their way of building huge companies and well, how how are the deals typically structured, what do they look like? What what does the entrepreneur give up and what do they get? So, I mean the entrepreneur gives up equity UM, and then they give up a controlling share something we usually try and target about twenty percent each share. UM. It depends a little bit on on what the metrics of the business are in the stage

of the business. But we think that's a pretty you know fair We like clean, fair, middle of the road terms, and we think that works well. And how do you value a company when it's so early stage? That's UM, that's the magic UM. I actually have a PhD and applied math that sort of helps me do all of the evaluation. UM. But it's a it's one of the most questions that venture capitalists disagree on most of all

in the in the profession. So with a more mature company, you have products, revenue, maybe even profits, and there's a formula to generate some multiple on that. But when it's so early stage, it feels so much squishier. How much of this is science and how much of this is art? I would say it's all art. I mean, the way to think about it is it's a discount on a future cash flow. But that's an imaginary thing. So it's

a discount on your imagination. UM. And some venture capitalists are able to imagine greater scenarios and some venture capitalists have no imagination at all. So, and we haven't really talked about returns. We know you do subsequent rounds. What have the return has been like for the farm? Are you out? By the way, hedge funds I know are very much precluded from sharing return information except with their

accredited UM potential investors. Are do you have similar limitations with venture I wish we could talk about our returns, but no, UM, it's the SEC frowns upon that. Under understood. Let's talk a little bit about some of the work you're doing in social impact investing, and in particular I want to ask you about defive ventures and build dot org. Um. We'll talk a little bit about about each of those. First, what was the motivation to start along a social impact

access as opposed to merely doing early seed stage venture investment. Well, I love investing. I mean it's been my primary hobby in the world since I was eight. Um, but what were you investing in at eight? Well, you know public equities really, I mean yes, through through adults. But um so, I you know, back then, the stocks were in the newspaper. So I would come home from school every day and the first thing I do is get the newspaper and look at my stocks. Real um yes, but I never

considered that I could go into finance as a career. Um. I didn't know any women in finance. It never even passed my mind. My what I wanted to do was, you know, to do something positive for the world, to go into public service. Um So it was quite a um, you know, great day in my life when I realized that I could actually combine those two things. And we talked about this briefly that it's neither impact first nor

r o I first. It's you make the investment in a space that you might have been attracted to because of its impact component, But the investment in itself is strictly on the same metrics as any other venture investment exactly. I mean, my philosophy here is that you don't change the world by playing small games. You change the world by making billion dollar companies. And I want to encourage the sort of world change or do good our types like me to think bigger and to think more, you know,

about building these huge companies that can do good. So I was going to ask you a question, but I kind of think you answered already. Typically venture investments are looking for an exit, either by going I P O or an acquisition. No different with impact investing, is that right? No different um in venture capital exits or everything. They are the returns to our LPs, so they really matter. So let's talk about those two firms. I mentioned that

your adventure advisor to what is build dot org. Those are volunting. Those are actually volunteer um jobs that I do um. Build dot org teaches entrepreneurial skills to high school students and to five ventures teachers entrepreneurial skills to former inmates. So both very talent. I mean, the world is full of talented entrepreneurs, and I like to encourage all of them. I've read that venture investing is very much a relationship game. Do you do you think that

is true? In venture investing as well as philanthropy. I definitely think that is true. I mean, I think that being human is a relationship game. But in particular with UM, you know, venture capital and philanthropy, you're dealing with these complex coordination problems, which is why they become social problems because they're so hard to solve. So you have to build these huge, extensive networks where you can interact with you know, the nonprofit sector, with government, with the for

profit sector. UM. So we always very much concentrate on building these broad alliances between different people. And and let let me UM reference some of the work you did in in academics. You see Barkeley, you want a number of awards, the Advocacy Award for Persuasive Writing, the Jurisprunce Award for Academic Excellence. But I want to talk about your thesis Reforming Federal tax Policy to support Social Entrepreneurs

that that received UM some honors as well. How does one reform federal tax policy and how does tax policy support social entrepreneurs? This is a very actually complicated tax policy question, UM, and it has to do with you know, kind of are you allowed to deploy nonprofit assets into impact investing. So if you're a nonprofit organization and you have a little spare cash, you are okay, can you

put that into an social impact investing type of funds? Right, so you are allowed to deploy nonprofit money into you know, for profit businesses. Um. You know, the idea of it being a nonprofit. It is just that you can't ever take it out and buy a yacht or something. It has to kind of stay in the do good or realm as defined by the i r S. Anyway, so the i r S needs, you know, issue has issued

rules around this. They're very unclear, um, and you know they kind of they kind of just make everyone nervous in this sector. So your thesis helped clarify those rules for the broader It suggested how I thought they should be clarified, and mainly that I think they do need to be clarified because no one is certain how to act in this realm and it's depressing. It. It's very

important because actually the nonprofit sector is incredibly large. It is actually, you know, the nonprofit sector is actually six times larger than the entire venture capital industry. And it's a form of permanent capital as well. It is I mean well managed anyway, it should persist for forever. Exactly we think of you know, we tend to think of anything nonprofit is like, oh, they're these weak, poor, you know, cash drapped organization, but they definitely have those. But the

sector as a whole is an incredibly wealthy sector. UM. And so these regulations really matter about how capital is deployed into the world. The Gates Foundation, the Go Down the List, the Bezos Foundation, the Case Found. These are giant, multibillion dollar entities and they're structured to to be UM perpetual. Yes, um, they you know, they have a large influence on how how capital is getting deployed. And the tax you know,

the tax regime has a large influence. You know, the tax regime basically is controlling how that capital is getting deployed. Let's talk about some of the recent social impact type deals in the public sphere when when we look at something like Beyond Meat, that i p O has been wildly successful, far more than most of the other sorts of UM i p O s we've seen in generally, UM, at least, it's done better than most of the unicorns out there, like Uber and we work it certainly has.

It was actually the best UM event. I rather, it was the best venture backed I p O in two decades. Really, so would you consider that like a social impact investment? I absolutely would. If my fund had existed, then no doubt we would be on that deal. Um. So that's the you know, that's the type of thing we're doing. Um. What else is taking place in the fake foods space? For lack of a better really, the I guess the better phrases green foods or low impact, low carbon impact foods. Um,

how do you look at that space? What else is coming along there? Oh? We we're seeing a number of really exciting companies in that space. Food systems are a big problem in the world, and they're quite ripe for disruption, as venture capitalists love to say. Um. Some of the companies we have in that space are actually Wild Pets, which is a dog food company. I know we've talked about this company and you dislike it because you feed your dog steak every night. No, no, no, you can't

steak us a little rich. We basically use Purina pro Plan, which is a commercially developed and then we put the Stella and Chewies toppers, and my dogs are so spoiled that despite all that delicious goodness, I'll give them a little little scrambled egg or a little something to just make it special. Well, I'm going to send you a bag of our vegan dog food, which is made from a mushroom that's actually higher protein than steak. It was

developed with a veterinarian. It has all of them, you know, acids dogs need, and we have I jokingly call it our dogs Save the World thesis because it turns out that of the agriculture in the US growing neat just goes to feed dogs and cats. So we thought, you know, by replacing some of that with you know, this vegan alternative that is healthy for dogs, then you know that is a is an easier way than to ask people to give up their hamburgers and has a bigger impact.

The other thing about it is that it looks like um, a vegan diet actually has longevity um effects on dogs. So we're going to be exploring that with some academics in the future. One of the dogs that actually lived the longest UM was on an all vegan and you know the when I think it was in the top four for the world's record holder of of you know, dogs that live forever. It was an incredibly long time. I think it was like a hundred and eighty five years and people years was on an all vegan diet.

What's in? What's it in actual solar years? I don't really track the dog world very really well, aside from my daughter constantly begging me to get a dog. I will try vegan dog food, but from an evolutionary perspective, you know, the packs of wolves, they weren't hunting wild mushrooms. They were out hunting meat, and there seems to be

a predilection towards that. Left to their own devices. Although dogs will eat grass, and we feed our dogs on occasion the stew of yams and spinach and other things carrots that are really good for their digestive system. My dogs are incredibly spoiled. Just so you know, we have a pool for the dogs. I they occasionally let me go in, but effectively the pool is there. Well, you have to tell me what they think about this dog food,

because I've heard that the dogs love it. Yeah, we've you know, we did tests where we put two dog foods next to each other to see which ones the dogs would eat. Really wouldn't go to this, So yeah, all right, um, and what else? What else is in the food system space? We have another company called Endless

West UM, which can molecularly manufacture foods. I'm scinated by that because I saw something not too long ago in Business Week where they were describing chicken make nuggets not from chicken, but from cells grown in a lab from a chicken. Exactly. It's the same space. It's a little bit different because that is um, they're not Endless West isn't doing proteins. That is what we call the cellular

agriculture space. When you're growing a protein, that's very difficult, and we think that that technology is not really here yet in terms of cost, So we haven't gone into that space. Eventually, you got to think they Eventually, it definitely will happen, you know. I think it's still twenty years off before it's going to be you know, get down to the level. So you know, it's it's it's close on the horizon. Years people will be eating food

that did not come from an animal other than a culture. Absolutely. I have tried it and it is wonderful and you cannot tell the difference. Um. The only problem is is that it's too expensive. You know, it's it's it's two tho dollars a pound to make and it shrinks up to almost nothing after Yeah, um so, but the so in other words, this is really just a efficiency and production issue. Once that is resolved and this becomes competitive price wise. Am I understanding this correctly? That sounds like

this is inevitable. It's it's definitely inevitable. Yeah, it's one of those trends in the world that's quite amazing. Let's let's move away from the discussion on food systems because it's both fascinating and horrifying. Um Frank and foods, Let's talk a little bit about valuations. Um Mark and Reason suggested that valuations don't matter. You know, he said, if he would have paid double what he paid for Facebook, wouldn't remain any difference. Do you agree or disagree? Well,

Mark Andrewson is completely right. I never disagree with Mark Andreason. Um so, he's completely right in that you there's you know, gonna be fifteen deals a year that you know, out of the thousands and thousands that you look at that are going to become these you know, outsized companies. As a venture capitalist. All you need to do is be in those fifteen deals, so it doesn't matter what you

pay for them as a matter of practice. Um about if you look at what has actually happened in the world, the valuations of some of the biggest businesses in the world were incredibly low. So you know, Airbnb first started raising money at a one point five million dollar valuation. Yeah, Uber's valuation was at five million valuation, you know, So I almost look at it as if you're raising with two high of evaluation. It's like a negative signal um

the low. I'm not sure if it's actually that the entrepreneurs are so good so they're optimizing the valuation in the seed stage for shots on the goal instead of owning a lot of the company, or if it's just that those ideas are so contrarian that no one wants them in the seed stage and they don't become obvious.

So you know, kind of what we say is that in the seed stage, the wisest route to take is to optimize for shots on the goal and do a low valuation so you have more flexibility with your capital, and then every yeah, every subsequent round after that optimized for valuation. Quite quite quite fascinating. So Uber, Airbnb, we Work, Facebook all had very low I mean I don't track

we work, so I'm not sure about that. But they all had surprisingly low valuations in the seed stage, and then they become these major companies, you know, peloton Um. It's the in the seed stage, they're not obvious. And furthermore, these deals robin Hood is another one, they're they're also widely shopped ump I mean Uber. I think when Uber was pitching to open rooms of angel investors um in in the seed stage? Is that unusual? Is usual? One on one? What what's the typical structure of those No,

I mean it depends. I mean it sort of depends on the entrepreneurs network and and the sort of you know, the company. But it's a lot of these, a lot of the deals that become the biggest they're they're just not apparent at all at the seat stage. So um, they're out there, they're contrarian everybody who looks at it. And it's only with all of this kind of ex post factor um looking back that we we believe we believe that hindsight bias, of course, so obvious after the

fact that it's going to be huge. That's right, that's that's really quite a quite interesting. Um. So I I go to these regular dinners that we host, where there's so much intellectual capital in New York. We try and, um just grab a group of random hedge fund economists, academic media people and see if there's an interesting conversation. Been to one of those I know, and it was one where I bailed. I think I was traveling. I missed it. I invited you to one and then didn't

show up. I had the time of my life. Did you still? You know? Best friends with about four of the women that I met at that dinner. We we make it, you know, kind of gender blended where it's not just like eight white dudes. We don't love that. But um, you've tried to get some billionaires together for

dinner on your own. How has that worked out? Oh? Well, So it's a It's an important part of our social impact capital is that we hold these Jeffersonian dinners, UM, where we bring you know, people in the world together to have honest dialogues about issues. UM. It's part of our you know, solving these complex coordination problems. So you actually have an issue to be if you say, Jeffersonian, I assume you mean a debate takes place. It's not.

It's not such a debate. It's ah, you know, it's a it's an honest converse station about about real topics in an incredibly confidential forum. Um. So, you know, it gets harder and harder now in the world to actually have these forms where you can say what you think. So we try and convene those between different stakeholders, and um, this was one that was you know, I always joke about because it was a lot of billionaires and I

was trying to bring them together and it was basically impossible. Um. You know, they all had different business rivalries against each other, and we're like, I won't get in the room with him. He sued my company for twenty years. And then they all had personal rivalries against each other, like I heard he went slept with my daughter. I'm never getting in

the room with him. And then they all, you know, beyond that, they were all you know, they had political rivalries, like I totally disagree with what he thinks about tax policy, so I'm not going to talk to him. And at the end of it, I was like, well, you know, I finally brought it together. But at the end of it, I was like, the good thing about this dinner is that it really has impressed upon me that there is no way these people are getting in the room together

to control the world. It's just there's no no trilateral commission. As a non billionaire, you definitely have this image that they all got in you know, some smoky room, you know, smoke cigars and just decide how the world is going to go. And I was like, I know firsthand now that that is completely impossible, and that's even before their impossible schedules. They're like, great, that sounds wonderful. Let's do it. I have an open lunch in you know. Yeah, that's hilarious.

It's so no Illuminati running the world just it's I mean, you can never be sure, because it could have been all an elaborately coordinated plot about that, but I'm pretty sure. Hey, hey, this girl Sarah is hot on our trail. We need some ruse to throw her off. I know, let's make it impossible to do a dinner. She'll buy that, yeah, And then I I pulled it off the end, and then everyone just argued and it was incredible. And then at the end, they're like, this is this was more

fun than these things usually are. What I was going to say, was it productive? If you got everybody in the room, did they have an intelligent conversation? We definitely did have a very intelligent conversation, and I I wouldn't call it necessarily so productive. Um, and that nothing really emerged in the best ideas, Like you know, things emerge out of them. But it's certainly I think, you know, gave people some understanding that they didn't have coming in.

M quite quite interesting. Um. I got a bunch of questions I didn't get to. Can you stick around a bit? We have a ton more things to talk about. Absolutely, we have been speaking with Sarah Cone, founder of Social Impact Investing. If you enjoy this conversation, well be sure and come back for the podcast extras. Will we keep the tape rolling and continue discussing all things venture capital and impact related. You can find that at iTunes, Google podcast, Stitcher, Spotify, overcast,

wherever your finer podcasts are sold. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. Give us a review on Apple iTunes. Be sure to check out my weekly column on Bloomberg dot com. You can sign up from my Daily Reads at Redholts dot com. I'm Barry Dholts. You're listening to Masters in Business on Bloomberg Radio. Welcome to the podcast, Sarah. Thank you so much for doing this. We have been

trying to get this together for quite a while. And um, you and I first met on Twitter, where all great venture investments begin their their lives. And um, you and I were arguing about something, but in a very polite, respectful way. We were disagreeing about something. I don't remember

what it was me either. I. In fact, I frequently meet people in the world that say I was disagreeing with you on Twitter about something, and I have no recollection, and I have like I think some of this comes from years and years of blogging, back in the day when blogs had comments, and there would be this robust community associated with a blog. Um and the big picture during the financial crisis, you know, I do a blog post and I get a hundred comments and like this

crazy robust conversation. But eventually tragedy of the commons rears its head and it became overran with trolls and spammers and other sorts of stuff. Who Hey, there's a crowd here that must have some value. Let me market my jump to that. Um So, I have zero tolerance for nonsense in blog comments and that's kind of carried over to Twitter. I'm I'm way too cute quick to mute people and probably too cute too quick to block people.

That is the only way to use Twitter. Actually, I think Twitter is a very usable platform if you spend hours and hours curating and blocking people. Well, actually incubating a company at Social Impact Capital that we hope will solve that problem because we think it's actually the root. I mean, we have this information problem I think online now where we live in the information age, but the information that exists in the world is sort of getting worse and worse and acts. Yes exactly. So, um we

are building a you know, a new social network. We call it a you know the ideas that it makes you know, our users smarter, and we are kind of partnering with what we call the offline intelligent networks, like the people that went to your dinner. Other examples are you know, milk in or WF um So, we're kind of bringing those together. So in between your meetings, offline. You can banter online um in a forum, and I

think it's going to be incredibly interesting. Does that have a name yet that's public or is it still below the radar? But you will be the first to know, all right, I'm intrigued by that. So so I don't remember what we were arguing about with Twitter. I do think we discussed the soft block on Twitter, right the is it the mute? No? Alright, so the soft block.

I'm going to reveal this, and this has been around for forever and I didn't invent this, but the soft block is simply, if someone is following you and you block and then immediately unblocked them, what you've effectively be effectively done is forced them to unfollow you. So then you so you block unblock them. Now they've unfollowed you, you mute them, and it's sort of like a stealth breakup.

I did not know that. That is Twitter gold. I will tell you that people have have said to me it's life change, life changing, just like the only thing that's close to that. It used to be the ability to move the cursor on an iPhone by holding down the tab key, and you can now goes to the

cursor where if you want. But the latest technology, which I tweeted, was you now have this ability I think it came out about a month ago, and or by the time this broadcast two months ago, that you can set your phone so that if a caller is not in your phone book, it automatically goes to voicemail, which means no more robot calls. This is why I came on the show, because I knew I was going to

get this kind of life tips. Right, this is right, That's really what the show should be about, life changing technology. It's not even tech, it's technology settings. Somebody else has made a tech product that's so complicated that in order to derive value from it you need these little tweaks that suddenly Twitter is more worthwhile. And this iPhone, which is completely useless to me as a phone because of the robot calls, now is actually a fully functioning phone

a decade after Steve Jobs first released it. That's now come up with a name for that, right, I get tech tweaks for geeks or something um silly like that. So there's there's a bunch I love these digressions. There's there's a bunch of questions I did not get to that. I want to work my way through. And I'm gonna give you a couple of options on some questions and if if you have a conflict or a compliance issual issue, will just wave them off. Um, early, early, early in

your career, you did one off with Howard Buffett. Do you want to just discuss that really briefly or do we not want to talk about that next? That was way early in your career. Um, So such a corny question. How do you balance doing good with doing well? I'm gonna skip that. Um. It's so it's isn't it a terrible question? It really is? Um? But this is a good question. So you invest in a broad variety of areas. It's not like you have one teeny tiny niche. You're

pretty pretty broad. What areas do you think are right for disruption? We've already talked about food processes. What else are you look? And social networks? What else is ripe for disruption? Well? I think as a venture capitalist, your most fundamental belief is that everything is right for disruption.

So I think healthcare, you know, food systems, education, transportation, housing, water, energy, even social media is all right for disruption and my day is basically an endless stream of ideas in my inbox about how to disrupt all of these fields. Um. I joke that my inbox is pretty much the most inspiring place in the world. Really, that's quite interesting. So to feel that way about your inbox. I have an idea for a new company, but it will disrup up

to venture investing. Yes, can I get capital is one of the most DISRUPTI you know, disruptible fields. Is that true? I was kidding, But is that really true? No, it definitely is true. I think, you know, I have a bunch of It's not really my field, but because you know, I think venture capital is fantastic. But certainly venture capitalists talk all the time about ideas to disrupt venture VC, disrupting vs. Well, what wasn't Andrews and Horowitz say, somewhat

disruptive venture firm when they rolled out? They absolutely were. What were they doing that was so different than the Kleiner Perkins um of the world. Well, they really popularized the portfolio. Um, they really sorry, should we take that again? It's not the chime, Um, it's eleven o'clock. Yeah, I'll turn off this. So we both turned off a phone, and I forgot to turn off my other devices. Um. So I'll tell you another setting that I love. I don't know if it's on this What I want to

do is, oh my god. Yeah, I didn't even know that, Oh my god until I leave this location. So now you will not get any noises until you really know how to operate this stuff. You know what it is. I'm an idiot savant with this stuff. You really should have a show just on this. No, because basically I'm done. I've given you my four biggest tricks. Now what do I do for the next two hours? Let's get to get it interspersed with the finance. So I'll tell you

how I got that. I discovered that trick. Uh. By the way, I not discovered it. If it doesn't have anything to do with meat, he's not discovering. Um. I really hate whiney journalists complaining about plane delays. Um, and so I've tried really hard not to fall into that group,

although it's really really challenge. I will say most of the arguments I get into on Twitter are when I'm on a plane delay, well, because you've got nothing to do with and your irritated, and it's like but I said on Twitter, God damn it, why does an Apple have a setting like I would shut my phone off to record something? Because everybody has a podcast. They all

everybody in the world has this problem. They shut their ringer off to um to record a podcast, and then they leave and the ringer is off and they missed subsequent calls. Now, there is an entire subgroup of people who say, you turn your ringer on. What's sort of a monster? So I was intrigued by that. But the other group said, um, when I asked this question on Twitter, Yeah, this is a setting you could either turn your ringer off for an hour, or even better, turn your ringer

off until you leave a given location. And I'm like, why didn't I know about this? And the answer is these things are so complex and so many new features come out it's impossible to keep up with. That's actually a perfect illustration of the thinking behind our social media platform. Is that what so everyone thinks that Stuart Brand said information wants to be free. It's been spread all around the internet that he said that. I feel somewhat sorry

for him because he didn't actually say that. If you sort of the full quote was, you know, he said something like information wants to be expensive because the right information at the right time just changes your life, the most valuable thing in the world. On the other hand, information wants to be free because it's so easy to replicate and pass along. Now and he said, these things are going to be competing. Um, and context matters exactly. So, um.

So social media is fantastic for kind of getting you the right information at the right time. Um. And so we're kind of, you know, creating the best platform in the world for that, except for the whole ambition, that whole undercoting democracy thing. We're going to try and not not do that. Not you're not going destroys that's on the mission statement. So okay, so maybe I have another

technology tip. But it's just a website quote investigator dot com, which is awesome because you find out that all these quotes that you've been using your whole life are nonsense, I know, and especially Albert Einstein pretty much said nothing clever, nothing about compounding, nothing about hydrogen and stupidity, nothing about there are all these Einstein, Mark Twain, Marcus Aurolius. Go

down the list of these people who you constantly see quoted. Um. It turns out that most of these quotes came about decades after they passed away, and and you can track end quote. Investigator does the genesis of these quotes based on when they first appeared in print, when they first appeared in a book, and if it's and whether or not it's in the person's body of writing, body of work. And so if something shows up fifty years after Mark Twain dies, probably not a Mark Twain quote, which is

which is pretty amazing. So the public markets are fairly efficient. They do a pretty good job at figuring out what an appropriate valuation is relative to future discounted cash flow. How efficient are the private markets? How efficient are venture capital investing? Relative to what is or isn't no known? It seems more opaque then we we see in the public markets. Yeah, it's certainly more opague. Um, the information

isn't public. In fact, I don't even know most of the performance of my very close friends in venture capital. So I always describe it like running a venture capital firm. I'm running Olympic race, but I don't even know what the times are of any of the people that I'm running against. Right, Um, so there's just not this information that you have in in the public markets in in private markets, and then simultaneously they just have two different

incentive systems. So the private markets are basically these max auctions, and by the time you get to the public markets, um, you know, you're no longer a monopoly seller of your stock and you can't walk away to avoid setting a low price, and there are no transfer restrictions. So you're merging these two different incentive systems into each other. And I think it's like, you know, merging a car onto a high speed freeway. There's only a few drivers in

the world that can really do that very well. So it's why I am incredible. I don't know, I'm not a great driver. It's why I am, um, you know, glad to be an early stage investing because by the time the companies get to that stage, you know, for me, it's like, is this going to be a hundred x on my return or a thousand X? And that's you know, my only worry there. How do you measure how impactful a given investment is? We've we've talked about how do

you measure how successful something is? And that basically is the return on investment? But how can you determine whether or not something is moving the needle. So UM this was this is a this is always a big topic of debate in my firm and I when I originally started out my firm, I was dad set against UM any kind of impact investing metrics. Finally, my partner convinced me that these impact you know US US tracking and impact metric would be a good idea UM because LP

has really really wanted this UM. You know, he thought for marketing the fund. He thought impact LPs would really really care about impact metrics. And I said, find one metric. It has to be something related to actually running the business.

So that is what we do. UM. When we have an agree illegal agreement with our entrepreneurs when we make an investment that there's one metric they come up with it, I sort of have to approve of it because I don't want something that is not inherently related to running the business. UM. When you're an early stage startup, I always tell my entrepreneurs, because they're real do getters, always want to solve every problem at once, and I say,

pick one. Solve it, like you know that by giving us your capital, we're working on all the world's problems, so you can rest assured that they are all. You know, progress is being made and all of them. You need to just get your one done. Is this for your entrepreneurs or your LPs or my LPs do not care about, you know, social impact at the moment, I'm hoping to attract some LPs into the firm that care about social impact. I would I would imagine given them, I'm looking for

the right word and wokenesses in it. Given the rise of E S G investing and the push towards better governance and more diverse investing, that we would see more institutional investors into uh UM something like social impact. But you're relatively relevant to them, and I think someday will be incredibly popular with them. But in the beginning, they typically don't like to come into fund one right they have to. You have to see a three year or

five year track records. I want to see you know that we can return cash to our back to our investors. Can what you do at the seed level scale. So if you get a Cowpers and some of these other giant firms, maybe a little bit of soft bank because they have more money than they know how to intelligently invest, can you scale up to tens of billions of dollars or by by nature does Early Seed have to be

much smaller? No, um. That is one of the issues that I paid a lot of attention to and how I structured the firm so we can scale up to large au M and I actually have a plan for that. I feel like Elizabeth Warren, I have a plan for that. Um for everything. Yeah, too many plans, UM, but I care for all. Are you going to invest in that or or or are we going to see disruption of healthcare from the private sector instead of the political sector. I personally think that we are Americans, so we will

see disruption from healthcare come from the private sector. But who knows what's going on with the Buffett Amazon Chase healthcare program that started a couple of years ago. I haven't heard anything about that. Yeah, it's right, I haven't. I haven't heard much about that either. I mean, they seem to be attracting good people, and I look forward

to what they're going to do interesting. So we've seen all sorts of studies that suggest that the bulk of venture capital is Silicon Valley, New York, Boston, and then a vast waste land around the rest of the country. Steve Case is doing some some rise of the rest. They literally take bus trips to different cities to do it. But most of the rest of the country isn't seeing

a lot of venture activity. What do you see across the country geographically for where entrepreneurs and venture capitalists can find each other? Yeah? Absolutely, I mean we invest all across the US, and you know some of our best performing companies are outside of the US. Where else have you invested? So not just US like New York and San Francisco, but global? What what other countries are you investing in? We even we have an investment in Africa, and we have an investment in the UK. Um London

is becoming a great location for VC. Really why is that Brexit? I have no idea, really, I think it's I think it's you know, it's still a cosmopolitan city. But the engineers, you know, it's it's still somewhat livable. Brexit has depressed the prices um, so it becomes more reasonable.

I wasn't kidding when the engineers the engineers salaries are, you know, they're more reason The bull done in half in half of San Francisco and New York is particularly bad because that, you know, all the fine Goldman pays enormous salaries to the engineers, so they're they're stealing all of the best talent. Doesn't that sort of vacillate depending on how well the stock market does. When the market is doing well, all these quands ends up going to

Wall Street. When it's doing poorly, they go to tech company exactly. I mean, all of these are markets, so everything vacillates. So we have built, you know, a company where we can do deals anywhere. We just want to do the best deals in the world. And um, before we get to our favorite question, I just have to ask you about a magically delicious box of lucky Charms that you snuck into the White House. Can you can you explain that we did not sneak that into the

White House? You are you are allowed to bring snacks into the White House, so you didn't sneak it in. You brought it in. So you do not deny I'm gonna imagine you're the water the impeachment hearings. You do not deny that you brought an authorized box of lucky Charms into the Truman lanes on the White house delicious. We had a breakfast. Um, we had a breakfast bowling session. Why well these Um, it was just it was, you

know something, this was the Obama White House. Um, it was just something that we we they invited us to do because I'm a big bowler. I really like bowling, and we had some um you know, we're reaching some work with them, and it was it was a fun thing. So we invided some of our advisory board members bowing with that. So you skipped over the meaty part. What was the work you were doing for the Obama White House? Not allowed to talk about that. It's all n s

A deep states. You like to work with I mean, we like to work with everyone, so you know, well we'll work with anyone who asks us. Will you know, show up anyone do anything. We're very nonpartisan. Great, that's fair. So let's let's jump to our favorite questions. One of which I changed just for you. What are you streaming, downloading or watching on TV? These days? Because I can't ask you a car question. You learned that the last time. Um, let's see and by the way, it turns out that

that's a much more interesting question. It is such a good question because everybody who's over fifty has probably has a car, and lots of people under fifty, not only or under forty, not only don't they have cars. Half of them don't even have licenses. It's a fantastic question. It gives you someone's age, it gives you um there, you know, interest, social class, and it gives you how good their memory is about the car. Everybody remembers that the first car. Yeah, of course I have zero idea.

I mean, I know what I know what Brando was. Sorry, you call those models. I know what model? What model is? It is a Buick, right, and that I would actually that's the make. That's the make. The model is the Buick Skylark or the This is like me inviting you on a finance show and going, what is the difference between a top and a blouse? Um? No, no, dude, right, So a blouse, I would I would be able to

fake that. I would say, well, a blouse is usually a stand alone um, as opposed to a top, which is part of an outfit with a top and a bottom. Completely wrong, not but it sounds good, right, I could b s with the best of them. What is the difference between the top and a blouse. Um, usually just a top is more informal, and a blouse is more formal with buttons down. No, I don't like that. I like top is part of a set, a top and the bottom a blouse, freestanding. I'm gonna go with mine.

Let you redefine there was. If I was in Ohio, I could get away with that. But here in New York, I actually have to be a reality. But I can tell you about the car I want there. You know, electric Porsche. It's so the take hand, Yes, really handsome car. Have you seen the new Ford Mustang E suv that came out yesterday? Yeah, So they basically took a Ford Mustang,

which is a six or eight cylinder gasoline car. It's only been around for fifty eight years, so who cares, And they turned it into sort of an suv and and it's all all electric, competing with Um Model X and the Model three of Tesla. The interior looks like it's pure Tesla just ripped it right off of Elon musk Um. He's doing okay. Hopefully hopefully he comes out of this. I like he. You know, arguably Elon has already won everybody, definitely, right, everybody is now doing electric cars,

so whether Tesla survives or not, he's already dentity. Every time Elon gets criticized on Twitter, which is quite a bit, I post the gift of him law landing the rockets, and I say, anyone that can do this deserves at least six months of criticism, free living, right, But he had that five years ago, and now that six months has a lot well lea should it should get you at least a decade. I mean, that's pretty impressive stuff. You know, mushing Solar City and with Tesla turns out

to have been a mistake. But um, but you've got to give him properas were made. But you know, move fast, break, Everyone makes mistake. He is a very consequential entrepreneur and I'm fascinated by what he does, and I think people slag him way too much. I agree, and I think that, you know, I think what's great about him is that I hope he's you know, a lot of our entrepreneurs are inspired by him, and I think that he's inspiring a whole generation of young entrepreneurs to think bigger and

to do bigger things in the world. The other day, I rarely flick around television anymore. I used to just sort of randomly rotate and see what's on. But I did this the other day actually, to be honest, I turned on the TV and what was on was a uh well, since the show ended, it has to be an older one. But um, a big bang episode one where it's Thanksgiving and they go to a soup kitchen to serve food and Elon Musk is on the episode cleaning dishes, and I have to tell you it, it's

such a charming episode. You gotta give a guy like that props. All right, So let's get to our favorite questions that we ask all of our guests. Tell us what you're either streaming, down loading, or or watching, be it video or audio. Well I am. I am streaming Silicon Valley the Hbokay, so but I can not. I always fall asleep. I can never make it through. You know, you don't have to watch it when a broadcast, you

can no I watch it. I usually I keep trying to make it through the episodes and then I fall asleep. What time starting right before bad? This is like my bad time thing I watched to tell That's what I'm suggesting is watch that the next to watch that on a Monday at eight instead of a Sunday at ten. That would be a good idea. But alright, so Silicon Valley love it. Yeah, it's atastic show. In fact, it's almost two realists and this is the last final season.

I know. I'm very sad about it. Well, the only good news is when it's over, when I just hope the VC has got an exit. You know, that's a happy ending for me. Um. The whole Holy Purchase things that it was fantastic, but it is very accurate about how quickly fortunes in Silicon Valley can rise and fall, come and go very quickly. Give us another show. What else are you watching? Mm hmm, Well I'm a big West Wing fan as well. So I do you like

anything has done? I do? In fact, I just saw his play to Kill a Mocking Verse, so amazing, right Badway, which was incredible with Jeff Daniels. Yeah, he was fantastic in it. The whole cast everybody was. Really he's my number one person that I would want on Twitter that isn't on Twitter. They I'm hoping that he'll come to our social media. Huh. That could be interesting. But Yeah,

fantastic stuff. So if you like West Wing, you know the show he Sorkin did before West Wing was a delightful little show called sport Night and it only lasted like two and a half season, but it was really really good. You can stream that if you like that sort of fast paced, rapid dialogue, but a different context, not in the White House. It's all um, they're putting on an ESPN type show and all the characters are great.

And I haven't seen it in years, but I remember really loving that show and was hugely disappointed when I was canceled. Alright, so we got Silicon Valley, got West Wing, Give me one more anything you're downloading or streaming. So Eric weinz he has a great new podcast called The Portal, which I listened to a lot. He had Pierre Till on the first episode and then Verner Hurtzog in the second episode. So that's fantastic. Really, I love getting new Uh he's my favorite new media star, and that he

has these somewhat like you. He has these very you know, deep real conversations with Eric Weinstein. Oh okay, wow, this is relatively new, thoughtful and insightful conversation all right, I'm definitely checking this out. He looks vaguely familiar. This podcast does something different. All right, I'm definitely there. I'm definitely gonna check that out. Um, what's the most important thing

people don't know about, Sarah Cone? Um? I think it's that my I r R is above my b M I. That is the main metric that I run my life by. So your I r R is above your b M I. And is this a metric that we see elsewhere? It's the It's the most important metric for the woman investor. So you're encouraging, though, um, either very high I r R or very low b m I. You don't want to give, not too low, not too low, So that that's kind of interesting. Mostly just high I r R.

There you go. How about your mentors? Who who has guided your career? Um? In the world's venture investing? Oh well, so the person that really taught me m venture capital and this was a long time ago, um, before anyone cared about more women being in venture capital was Rob Hayes Um. And it's quite a funny story because he's a very famous venture capitalist. Now he led the seed round into Uber. He's been a long time partner at

First Round Capital. He stays somewhat under the radar, but in Silicon Valley he's extremely you know, well known as as a great investor. But back then when he was my mentor, he really wasn't. He didn't quite have that profile. But I thought he was the smartest you know person investing in VC. So I basically just showed up at his doorstep at a mediaor network and said, Hi, I'm Sarah, and I'm going to learn venture capital from you. Don't worry,

you don't have to pay me or anything. Um. And he said like, okay, well you seem, you know, pretty smart and hard working. Um, I guess I'll teach you venture capital, but I'm gonna pay you. Yeah. So I learned from him, and it was great because back then, you know, he he actually had the time to really teach me, you know, everything that he thought about venture capital. And now I get to go, um, yeah, I was, you know, mentored by this extremely famous um and and

well known venture capitalists. So that's my advice to young people is that when you're seeking out your mentors, like seek the people that you know are going to be famous in ten years and learn from them, not the creative today. I literally wrote, I literally tweeted the other day there's there's a technical indicator that I think is just junk, the Hindenburg omen and that name was was

the hint that it's junk. But I advise people the best way to use this is only follow the signals that precede big market crashes, ignore the rest of them. So you basically have the same philosophy. Go find a mentor who's going to be incredibly successful and famous, and find them ten years before they become successful, and just attach yourself exactly. And if you're going to be a good venture copitist at all, then you'll probably be pretty

good at doing that. And any other vcs influenced the way you look at the world of venture investing startups,

I'm really not so much influenced by other vcs. I'm I'm influenced by other areas of finance um particularly I mean hedge funds, particularly the very math heavy and research heavy hedge fund managers I love of, you know, I have a PhD in in math that I've done a lot of our portfolio construction work with and a lot of revaluation work with, and we're kind of doing some advanced work there, and then in due diligence as well.

I love due diligence. I describe it as a combination of library research and financial modeling, spy work and gossip and it's basically the most fun that you could ever have trying to understand the world and every deal we do. I feel like, is this incredible sort of romp through some obscure, you know, realm of the world that I then gain a lot of knowledge about, which is what

I love. So I'm I'm much more influenced by those investors rather than venture capitalists, who I like to mostly make fun of um by saying that it's and it's an industry where all the decisions are made by men's

guts and the guts of their wives. And I only added that last part because I was saying that once to a very um famous and prestigious venture cap I said, you know, to this very famous and prestigious venture capital like, you know, sometimes I feel like I'm more king in an industry that's really just run by men's guts, And he was like, Sarah, that is completely untrue. You know, that is very offensive. UM My firm is also run by the gut feelings of my wife. She is an

incredibly important part of my firm. And I was like, okay, well, so he kind of explains a lot. He kind of missed the point that I wasn't making a comment about gender. It was about guts. I was making a comment about gut right, talk talk about talk about missing the forest for the trees right there. Let's let's talk about books. What are some of the things you've really like to read, What do you like to recommend? Tell us what you're

reading these days. Well, I have a um twenty month year old daughter, so I mainly spend my time reading to her. And there's this fantastic series of books that was written everybody poops, I'm familiar with it. It was the series of books was written by a quantum physicist and it just boils scientific principles down to baby language, so that it is it's it's like quantum computing for babies, neural networking for babies, chemistry for babies. So I read these to her every day and I have for now

two years. You just solved a holiday present um issue for me. For somebody who I know who is really smart and just had a baby, and that's a perfect I'm a big fan of these books because they're the only books that are both interesting to me and her, so we love them and it works on both levels, it really does. And her her fourth word was adam, Um, so you know, so it was it's been fantastic. Um. We really love these books. So these are my favorite

for babies. Yes, and my dream in life is that someone will write these about finance, so we need like monetary policy for babies, option trading for babies. It really needs to happen. What a genius idea. And the other non infant books you might want to mention, um, even

if you haven't read them recently. Um, there's a book called Mating, which is a book of fiction that I love by Norman Rush and it's a it's a book about, you know, sort of the main themes of my life, which are you know, creating a better world and all the intricacies and human nous that goes on in that. I like it tell us about a time you failed and what you learned from the experience. Ah, well, this was one of the times. So I know, we have

this mutual friend who's a venture capitalist. Um. Named Josh Wolfe at lux Capitalist, who is that this dinner? And so he so the one portfolio, the one company in my anti portfolio, which is the things the companies where you make a mistake and you didn't invest them. I didn't invest. He tried to get me into the seed round of this company called Citizen, and I said, you know, it's kind of a safe it's an app that's safety

alert for people. I said, Josh, that is you know, it would be very important to the world, but it's completely ridiculous. No one will use it. I'm not even going to meet with the entrepreneur and waste their time. And really turned out to be completely wrong. Ten percent of New York City is now on this app. Really yea. And what does it do? It just tells you it's like safety alerts about what is going on, and then now you can also kind of take eyewitness accounts and

report things to it. So you're gonna laugh about this. I know Josh pretty well and he never mentioned this company to me. But Eric Kamorrow is my chief operating officer at r w M, and she's the one who showed that app to me. And it's also a site and it shows you arrest here person with a gun. They're just all sorts of crazy things that have been filed through. They must just be scraping the information off

a public source. Yeah, they definitely started with that, and they've kind of expanded from there into more things that you can do to keep the world safe as a citizen. But um so, my takeaway from that, well, first of all, aside from always listening to Josh Wolf, is that you should you should never you should never make venture investments with your gut because your gut is going to be wrong. Didn't you stay away from that? Now? But didn't you learn that from the other VCS wife, Scott I did?

I mean, it's it's just amazing how all like everything just makes you like all the pressures in the industry are causing you to feel like your gut is you know, the best gut out of all the guts, and you have to constantly kind of be saying yourself, don't make gut decisions, don't make so so true story one of the things I'm gonna tell my war story, which makes the guys in my office cringe. So I began on a trading desk and eventually you learn how to listen

to your own body's reactions. And I had a very identical experience to you you where I would someone would bring me a trading idea and I go, oh, that company, it's the worst. And after you miss a couple of good trades that way, you eventually figure out, oh, if my reaction is this is the worst, then most other people's reaction is this is the worst, and based on the work of gene Varma, it's probably reflected in the stock price, and now it's a good opportunity to buy it.

So eventually I learned how to become more sensitive to my own reaction to something. But it took missing a lot of great opportunities to become aware of, Oh, everybody must feel this way, and therefore it's a contrarian indicator, not a don't listen to your gut. Is kind of the takeaway from that. That's an excellent way to frame it. Yes,

it's it's kind of interesting. I'm fascinated by the fact that you were repulsed by a VC who did the exact same thing, and yet human nature, you couldn't help yourself. The world is full of hypocrites. I don't exempt myself. But you know, at least I'm trying to you know, that's not so much hypocritical as just the human condition. We can help but be a slave to our emotions

to some degree. It's also the only one. I mean, I think more most vcs have more than one in their There's literally, wow, there's literally a cognitive bias called the bias bias that we all have a tendency to observe these biases and other people and be completely blind in our ourselfs. Like I'm always pointing pointing out to people, Oh, you're confirmation bias, and and of course I'm as guilty of it as anybody else, but we're blind to it. It's it's it's quite amazing. Um, what do you do

for fun? What do you do when you're not reading quantum physics for babies to your daughter? Well, I started this social impact venture capital firm that you might have heard of. So I work a huge amount um and don't have too much time for fun. I hear it's not igislatively mandated to have hobbies, so I just don't have anything just anything like that. I pretty much just work and then take care of my baby. But I

do my I take my baby um to art. We go to art galleries a lot because we live incredibly close to the art galleries and Chelsea, so it's a very convenient thing for us. Is she entertained by this? She loves it. And so I've started this Twitter account to you know, record her reactions to the art called Ada baby art critic and that's my hobby. What are her reactions to art? Well, she's had this incredibly complex

language of art criticism. So when she was really little baby and she couldn't move her neck, I would sort of hold her in front of the works and then she would she would make a little sound like when she wanted to go to the next one, and sometimes she would look for hours, and I'd be like, okay, so representational contemporary and just basically go to whatever is close by, but geographic, geographic, anything, And you know, does

she have a preference? Does she like? She definitely has favorite artists and they don't The disappointing thing to me is that they don't match mine. So well, that's a good thing. Yeah, I know, I say, it's good. It's good that you have your own characteristics. But what does she like? Um, she liked well. She was I always called her. She was born in the year of the month of Sai Twambly, so they were having a huge Si Twambly retrospective at um In. So we went to

that every single day and she loved it. Those she would look at those for hours and hours. So I always but now she can do even better now now that she's too she's making her own works and she can even I think she can even do better work to have her tastes evolved. All they definitely they know she tends to like like so she she really she seems to really like Damian hurst Um a lot, like the Shark time. I really don't like him. I think he's kind of banal and commercial, but she loves vanal

is the right word fraud um? So yeah, so we so we shop you like the urinal in the corner. She's never seen any shomp. We then there was so I love Sarah Ze and we went to the Sara Ze Show, which I loved, and she didn't like it at all. I was like, I don't, I don't know, like maybe you just don't really have good taste in art because you're just a baby, or maybe she has

the purest taste in art. Have you taken her to the you know, MoMA just finished this wonderful renovation and there's a ton of twentieth century contemporary American artists, and if you like that sort of post impression. Yeah, she loves the I mean we go to the mat sometimes to MoMA. She likes, she loves Picasa. She she really likes all like. She likes a lot of the old art. And it's going to be hilarious. I'm thinking like Jackson Salek would be entertaining for a baby, or maybe Rothco,

which I've evolved very much. She liked Troytin a lot, well, giant cartoons, why not in comics. Everybody likes that as a as a whatever. So then when she was a little bit older, she then would turn her head like dramatically away from the painting when she didn't want to look at it anymore. And then when she was even older,

not than if she liked it, she would point. And now that she's older she can say no. So she go in front of them and the paintings and go no, no, no, that's funny, because that's what I'm like in a lot of museums. My wife, who who used to teach fashion, illustration and design is dragging around to every museum in the world and every now and then, but I don't repeat it. Usually I just look at something, go no, and onto the next. Um, what's the name of the

Twitter account from your art critic? A d A baby art critic. That's hilarious hobby that now I know what you do for fun. That is a good hobby. So so let's talk about within the world of startups and venture investing, what are you most optimistic about and what do you least optimistic we're most pessimistic about. Well, I am still very optimistic about venture capital. Um. I think it's the most effective way to deploy capital that man

has ever invented. And I'm incredibly excited that I am able to start deploying it to solving some of the world's most tough problems, which is this, you know, putting venture capital towards these problems has really never been tried at all at scale. So I think my fund, you know, this ability to do this is going to be incredibly exciting, and I'm excited to see what we can do in the world because we've already done so much you know, in the first three years of our existence, what I

am the most pessimistic about is immigration. And I think that America's entire competitive advantage used to be, you know that all the smartest people in the world I wanted to come to America, and all the hardest working people in the world wanted to come to America. What is it fift of Silicon Valley c suite. Yeah, yeah, so it's you know, fifty five of all of America's billion dollar startups had an immigrant founder. So this is incredibly important.

Immigration is incredibly important to the engine of the American economy. And I see us as a culture sort of becoming less welcoming to these people. Not very smart long term, is not very smart for you know, for for competition reasons. You know, in my opinion, if you walk a thousand miles with your child on your back and you apply, you know your you fit under American asylum laws. Come on in. You're extremely welcome in my country. So you're an American. You know, if you do that, you're an

American to me. So I'm onto the assumption that the past three years is a temporary aberration and a setback, and it eventually it will revert to what the prior to d years alike. Although I could be wrong. I hope so, because we aren't an immigrant society, and one of the greatest things about America is our ability to incorporate all these ideas and differences into a tolerance. I DA. I don't think there's any country in the world that has done that as successfully as we have, and it's

been a huge advantage to the economy. So to the extent that we are are turning in the opposite direction, our economy is going to get worse, and I very much worry about that. So a recent graduate comes up to you and says their interest in career um, either as a venture capitalist or in a startup. What sort of advice would you give them? Well, I tell them that, you know, I try to find out what they care about most in the world, and I say, do not

compromise between that and making money, because you can do both. Um. It's the fundamental premise of my fund that you can, you know, accomplish what you most want to accomplish and make money. And if you don't do that and you just decide that you want to make money, you eventually

end up incredibly old and bitter very quickly. I'm often told that I, you know, people seem to think I'm a lot younger than I am, which is always funny to me and I I think the reason is because I still have ideals and that makes you just appear incredibly young to the world. So I it's like some miracle face cream to just have ideals and continue to execute them because most people are giving those up. Huh,

that that's the pressing. Um, I'm sorry, I'm meaning it's the pressing to you that most people are giving up their ideals. And our final question, what do you know about the world investing today? I want to say that again, our final question, what do you know about the world of startups and venture capital investing today that you wish you knew? Can I say twenty years ago, fifteen years ago, thirty it's not thirty years ago? No, Um, I mean

I went so I'm somewhat late into the industry. So I wish that I had known that women could go into this field, because I would think they weren't allowed. I didn't that that thought didn't cross my mind, you know, because I was a child. So it's it's more that. Um. You know, it's more that if you don't see it, then it doesn't cross your mind that that's a career

path for That's interesting. So I think that now there's all these incredibly amazing women that are inspirations to me and venture capital, like Marymaker, who just reached the first billion dollar venture capital fund. You know, yeah, she started on chop called bond. They just raised a huge fund. And so now it's it's extremely easy for me now to go, oh, I want to be like her. Let me man role models? How important that is? That? That's interesting?

I don't I never really thought of that. Um, but I guess it a thing to think about think about because I go, why, I must have been really stupid that it never crossed my mind. But it just it literally didn't. I mean, finance was my main hobby, it was my main love in life, and it never occurred to me that it could be a career. It just just goes to show you that having role models make a big difference, and that's why these things seem to take generations to change. He and spleens um correct. A

lot of the man splaining is correct. All right, Well, Sarah, thank you so much. For doing this, We have been speaking with Sarah Cone. She is the managing partner at Social Impact Capital. If you enjoy this conversation well, be sure to look Up an Inch or Down an Inch on Apple iTunes, where you can see any of our previous three hundred or so conversations that we've had over the past five plus years. We love your comments, feedback and suggestions right to us at m IB podcast at

Bloomberg dot net. Check out my weekly column you can find that at Bloomberg dot com slash Opinion. Sign up for my daily list of reads that's at Rit Halts dot com. Follow me on Twitter at rit Halts. I would be remiss if I did not thank the crack staff that helps me put together these conversations each week. Karlin O'Brien is our audio engineer. Michael Boyle is my producer. My holbat Nick is my head of research. I'm Barry Riholts.

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