Welcome back to the episode of the Startup Therapy Podcast. This is Rhine and Rachand from Startup.com. Join as always by Will Schroder, my friend, the founder and CEO of Startups.com. Well, you know, as I think back through all the episodes we've done, there's one population that we've given a fair amount of shit to. And I don't know that that's entirely fair, right? Investors always got an affair wrap, you know, we've kind of hard on them. So I was thinking there might be a way where that didn't have to happen anymore. And so what if we were just to imagine a world where investors
didn't exist at all, we would not talk shit about them anymore. That is shangirlah. And I think it's about to happen. I think I'm calling it here and I know this is one of those things where I, personally, I think it's easy to say like what might happen versus what does happen.
And no lack of people in the world do it, but I'm calling it. I think we are on day one of an evolution where investors will go the way of dinosaurs and be completely obsolete. And that's what that's what we need to talk about. If you're wrong in 10 years, I know the guy who has the keys to our podcast hosting software is all just going to lead it. This never happened. So you'll either be right or it never happened.
But think about, I mean, we're used to being in the start of business where things turn over all the time, right? And and obsolescence is actually part of our plan. It's part of our evolution. It's how we do things, right?
One part of this whole equation that seems to have stayed just as it is, if not gotten bigger, has been investors. It in particularly when we talk about the sale, I don't want to talk about all investors necessarily as much as VC investors specifically mainly because they are investing extraordinary amounts of cash.
They're the ones raising multi billion dollar funds and the days of needing multi billions of dollars to deploy into startups. I believe we'll be coming to an end. And I think that's it's going to be a great discussion.
Let's go backwards a little bit and provide some context for why we're saying this is happening. What are we seeing in the market right now? And it's pretty obvious. I think if you know the date stamp on this that we're early July of 2024, you can probably guess what the thing that we're talking about here is,
but we'll I don't we enlighten our listeners. Yeah, yeah. So it's AI. I mean, simply put in AI is widely hyped right now. It's widely. But I think for good reason. I again, you and I took plenty of shots at crypto. We thought that was complete bullshit. The last one. And we were right. Okay. So if we're going to this next one, it's AI, it's real.
You know, again, I think anybody that's even 50% denying it doesn't understand it. Like doesn't actually understand what's happening or how far along this thing is, even in its current state. In really, I don't want this episode. Yeah.
In its infancy. Yeah, exactly. Exactly. I don't want this episode to be about hyping AI because that's not really what it's about. But it sure is a catalyst to why this thing's happening. Yeah, I mean, interesting, right. Like amazing things we're seeing right now.
For decades now, we've seen the cost of playing the startup game. Just go up and up and up. Yeah, certain things got cheaper, right. Computing power got cheaper. But then we just needed that much more of it. The scale was that much bigger. The cost to produce a better and better and better version of what already exists. And that's part of it, right.
This is the first time where we've seen an evolution in the market that actually fights back against that exact thing that we've been fighting against, which is that as we have to create more and more of all solutions to problems, they get more expensive. Right. Right. If we're, you know, Mike Tyson's punch out. I don't know what that cost to produce. But it certainly didn't cost what like World of Warcraft did or I don't know now will I don't play games anymore.
You got lost of that analogy. Yeah, no, but here's the thing though. We are a such a pivotal time where all of the things are all burning and churning in compressing at a geometric rate at a geometric rate. That's the difference. And so one way to think about this if we step back and say, okay, why are investors at risk. It's because the cost of starting a company is at risk. It actually has nothing to do with something the investors are doing wrong.
It has to do with the fact that all of the stuff we raise money for to begin with is starting to we wrote and what will become five years from now in a way we can even fathom it. So let's set it up though. Right. If we look at the funding slide of a pitch deck, right where it says how much we're going to raise what stage we're going to raise and what we're going to spend it on use of funds.
Let's envision for, you know, for listeners, what that pie chart looks like. It generally covers three things more than more than everything it covers stat. And that's the one thing in the last few generations we were able to make a dent in and that's the ones going to change the most. In fact, it's scaled arguably it's scaled right what what used to take one engineer now, you have to have a front in person back in person.
Data is person in integrations person right. So that those costs have scaled. And now we're just seeing a trend in the exact opposite direction. You bet that the second line at him again the biggest for most people is marketing. Right. Marketing is about to go over under a massive massive change. Yeah, partially for the same reasons, right.
Parts of the same reasons because now we get started to do a lot more but a lot less people you bet the third one which people don't think about when they talk about operating expenses back office, etc. All of those little pieces parts of back office legal accounting EA everything right.
All of a sudden starts to get real cheap. So I think it's it's worth a fly by to talk about maybe these three categories and just some some quick you know moments in time right now where each of those categories are starting to get completely changed.
You know, so let's talk about staff right most folks raising money for the first half of their their budget probably 75% is going to be people. So why are we about to need exponentially less people because we can get exponentially more done with one person right. I mean with zero. I remember the first time I saw this I'm going to struggle to remember who it was.
Maybe in the CTO over at HubSpot it was a relatively large company and they came out and they just said like look we started to deploy AI within our dev teams in particular and we're now seeing a five X increase in output right amazing.
So if you got a team of of 10 they're now doing the work of 50 said differently if you were about to go raise funds for a team of five you can do it with one now right at least in theory right now I know there's yet there's there's some skill set issues and things you may need some more diversity in the team.
Whatever but there's still like I remember the first time I read that and we're like just consistent we're getting five X or greater the output on an individual basis just mind block right every time there's a step function in taking the the guardian.
The guardian ship away from knowledge or capability everything changes I give you an example like you can remember this because we both came from the web design world right there was a half of a second where if you knew HTML code you had some level of like proficiency or guardianship and then like front page came out in front
of the page I never really like change like much but it started to make people realize that there was software that could do what humans were to do right if that evolution continued now to your point earlier within software and engineering specifically it actually got substantially more complex you and I was joke about where you like either of us kind of left off in our engineering pads in life you know when for me who's when the server side includes we're introduced that was my last thing in
JavaScript was starting to get invented and I was like oh I'm out yeah I don't know math and so but now all the sudden things have come full circle I've been writing more code in the last three months that I've ever written in my life in the differences I don't know how to write code I'm writing batch files I'm writing JavaScript I'm writing API calls I'm writing everything and I don't even know what it is right but I have full code thanks the GPT
I haven't I haven't written a batch file since I needed to update I RQ settings to make my sound card work to play a win commander and I could write one tomorrow if I needed to yeah I know I get it I get it and so all of a sudden all of this knowledge
that was hidden behind all of these people now the sun becomes available to everyone it's almost like back in the day before a calculator right we're like well no I have to go to a mathematician to do this you know I I have to talk to somebody with all this experience and now you got the calculator like no I don't just like put you in there it is and you ever walked into any type of the service engagement with an expert beside you and just had that feeling of like you're walked into a dealership with somebody actually knows something about car standing next to you
you're walked into a doctor's office where you've already been given a consult by a family member something like that where you just you've been given that 80 90% knowledge about what's about to happen and you're armed and you're now dangerous what scenario doesn't exist like that now simply by having something as is uncomplicated the GPT in your pocket
think about the exponentiality of this right so right now 80% of the startup legal questions that I would typically ask I can ask an AI right when people think AI they they realize GPT is one and people say oh the GPT makes mistakes yes so to people but that's that's here or there a specialized a train startup GPT and LLM that is specifically focused on startup issues will learn exponentially quickly
and make you asking an attorney and these will be paying for that huge startup costs absolutely it just it just doesn't make sense if it can be done right right if you go and asking the question of what should I do versus here's my plan and you have them react to it you're talking at least a geometric up
down an exponential decrease in the cost of that call yep I'm about to create an operating agreement what are the 10 most common mistakes or decisions that I need to make and how do most people make them right now you may run that into an AI right now again we are in beta 1.0 for video game nerds out there this is the Atari 2600 evolution stage of what AI is right now except if we were to really look at what that means the Atari 2600 looks more like an Xbox right is
what we went from pong to Xbox right so so even step one is bananas but right now if we're like well I tried that it didn't work and yet today it didn't work right give it a week give it a month give it a year what you're going to see in that timeline makes what we're doing today seem hilarious so you start to apply that again let's go back to knowledge gatekeepers right
which is the fundamental of employment right I'm a knowledge gatekeeper of accounting so I get hired as a count I'm a knowledge gatekeeper of an engineering so I get hire for engineering right design you name it there's a point at which my ability to gate keep that knowledge attorneys are perfect example this right is no longer the value right it's not all the value right words quickly eroding as you know I'm a
carpenter right and you've worked on my workshop with me so you can appreciate this I would look at doing a project like right now I'm finishing a kitchen I would look at like building every cabinet by hand as a project as this like massive thing that no one could ever do and I have to hire these omnis wizards to like to figure this out right and all the sudden I dig into it I just kind of get the
knowledge that that person is no longer a gatekeeper and you and I are in my workshop banging out cabins right like like it's their job right yeah what's always you know knowledge is is relative always and you know when you're you don't have right it seems like this this massive mountain of information must exist that that separates the
expert from from the layman and in some cases there there are but typically not a mountain for what you need right I think that's the thing where we get this wrong all the time it's like well yeah you really do like to become a lawyer and have the same level of legal understanding expertise to the lawyer has takes years but I need an answer to like one line item in an
ordinary agreement that doesn't take years to understand if it did we wouldn't have lawyers at all so what's happening is all of these gatekeeper functions which translate to a massive amount of cost for us as founders are being chipped away at a geometric rate right I'll give you another example and let's go to like you know we're talking about the different buckets like marketing and and staff and in back office et cetera like you look at right now the
call center business right humans answering a phone answering chat answering email answering the same questions over and over and over those days are gone right that is a very small amount of institutional knowledge but in the hands of people who generally don't want to be doing that job in a way that's really complex for example you call and you get put on hold you're only put on hold because
there isn't a person available you ever been put on hold going to website no because it's always available within a few years call centers will be obsolete well there was a point with health dot right remember when they had to stand in line to get on you can make it happen only the government could figure out a way to make a line on a
but but in this case think of how like scaling a customer support function et cetera works right even if your customer support people only become the last line of defense you know kind of like back in the day when they did IVRs read call in press one press two press three and if you could kind of navigate that
call it eventually you could force yourself to talk to a human except they didn't work that's why it sucked yeah that's the thing like even if you knew the right buttons to push didn't work and so all the sudden and I want to get back to investors all the sudden all of the cost basis things that we were paying money to incorporate we were paying money to
set up our operating group we're paying money to account to set up things like all of this stuff can be wildly automated and frankly should be right again because that's the value isn't in the in the doing of the thing in a lot of cases the values the having of the thing right for the value in doing the thing then
cool but if the values in having the same right if there were not if we're not thinking through a new process this is something that doesn't need to be solved the case if you've done the value was in having the outcome right the values in having the operating agreement the
value was in let's go do an operating group it'll be a great team building interest I said no one ever right it's just a cost it's just a time suck it's a thing that we need and it's an important document to be sure but it's an important document right once it's done it's done we have it and it's done right we're good and there's not to say a word couldn't be involved but not for 80% of it like 80% of the same person
is the same thing every single time people come to startups calm and they say hey I need to build a pitch deck and we'd say the same thing to him every time cool understand that you the what we're going to walk you through has been done thousands of time before you
while your pitch deck is going to be unique the process of building it is just not right so you're basically taking the same process that a million people before you use and inserting your version of it however if you didn't have our guard rails to walk you through it if you did
something like I'm going to download a the Airbnb pitch deck and somehow try to turn that into my pitch deck you'd be screwed because you wouldn't have the knowledge to go along with it you would have the process exactly exactly and so what's going to start to happen at a very very increasing rate is the things that we spend a lot of money in time on times another big factor will start to go away will just simply start to go away will stop thinking about the types of
things that held us up remember when you staff to factor in time will yeah to watch a movie because you had to drive to blockbuster and then see if they had it and then drive home and put it in right like we're going to see all over the place right there's going to be all of these time and cost settings that just start to stack up in ways that we probably can't even imagine yet things that was still seem out of reach right now just won't be in very short periods of time I think you
you alluded to it earlier but like the rate at which these tools are improving the rate at which these technologies improving is unlike anything we've ever seen before right like when we talk about like the way the speed of computing moved this outstrips that by by quantum numbers at this point I'll go back to my carpentry example because I think this is such an easy way for people to understand right now building businesses up until now has been the equivalent of you if you and
I were carpenters and we were building a house in the 1800s we had to go saw the logs we had to like manually like like hammer in you know each of the spikes etc it would take us like two years at minimum to build a cabin right because of how much effort was involved to just build a cabin now there are a whole bunch of challenges that come when it's that hard to just build a cabin number one most people don't have homes because it's so hard to build a home right fast forward years later some
idiot shows up with power tools and is like hey you know would take you like three days like to cut this tree down I can do in like eight minutes with a chains off and all of a sudden not only can we make this house faster and cheaper but also more people can
have houses an example of that was my daughter building her like um taint business the other day right she's already got her tech stack you know because it is like a third or fourth company right she's got her tech stocks she's 12 years old as to how she's doing her
website how she's doing her incorporation how she's doing marketing how she's doing everything and again she's 12 right but it costs her zero dollars and she'll do it in a Saturday I'm a pair of that to what it would have taken your eye one years ago it would have taken us a
year and a half in a full round of DC funding to get to the same place she can get on a Saturday that's what I'm talking about yep the same place it yeah it's it's wild right like then it's funny because some of these things we've even already started to take for
granted right like it's it's fine but the same way we we take for granted like having a cell phone in our pocket right that wasn't a quality for me until is 21 years old and I don't remember not having it right but the fact that we can now spin up a website overnight the fact that we can add payment processing to that in five minutes right all of these things did just took all of this effort and knowledge and and trial and error and just figuring shit out there's so little to figure out
of the unique value you want to provide which is really what we want founders thinking about doing in the first place right in the past 20 years sorry right in the past 20 years we have mitigated a lot of costs like building your website etc and then as
as you mentioned but replace them with plenty more cost right and that still needs to be factored what we didn't do at scale all at once damn near overnight was replace people in time right so now for most startups whereas maybe server costs are like T1 lines back in the way would have been part of your internet cost lines that all got replaced with people may the end of the day and was so hard about making it all people is they take forever to staff they're for a hidden expensive they require a
shit ton of management right and in replacing them if you need to is a massive overhead it's fraught with so many issues right when you take just and that's just one part of the fire when you take that off the table and say dude all that's automated right you don't need to pay for it you don't need to staff it you don't need to staff managers to manage it you can just go just folks and building what you're trying to build all of a sudden the efficiency certainly with capital but with time with
effort etc change dramatically so let's talk about where does that leave investors in all of this in this whole thing yeah because I can hear somebody out there right now going but what about smart money but what about all the things that they bring beyond money because there's a lot of that stuff right there's tons of things that they bring to the table others in that check right no not really now so always tell me like I don't you get like all this other stuff with investors
like look here's the thing you can count on you can count the number of zeros in the check right and that's kind of it right that's that's all you should be expecting from them unless it's somehow otherwise implicitly agreed or explicitly agreed rather and it just usually isn't all those are the intangibles that this 10 not to happen yeah don't count on this those aren't happening let's call it what it is because most people have never been through this
process they don't we know a lot of investors have worked with a lot of investors I don't have a bone to pick with investors but I'm calling bullshit yes like 10% of them at the top top firms do offer an incredible
level of connectivity like if you're funded by Sequoia it's sometimes right even then like I have to write even then like I don't know that it's it's not it's not even consistent amongst the top five or 10 it's not like oh well then all that means I just need to make sure that I work with Sequoia
it's going to depend on whether they have a network right by nature of what we're building with startup companies oftentimes there just isn't a network that's going to be applicable is that we're building something brand new right and again like just you can't count on any of that even at that top level and I will agree completely that's where you're more likely to see it but even there it's not it given I don't want to work in addition to giving you money they want to give you money and then
have you do the work that's how they make their money this is the game you know something that's really funny about everything we talk about here is that none of it is new everything you're dealing with right now has been done a thousand times before you which means
the answer already exists you may just not know it but that's okay that's kind of what we're here to do we talk about this stuff on the show but we actually solve these problems all day long at groups dot startups dot com so if any of this sounds familiar stop guessing
about what to do let us just give you the answers to the test and be done with it part of the pitch is we're more than just money because they kind of have to say that because at the end of the day they're all writing a check right so it's a commodity
business until they say we're offering this next thing in some of it's true and frankly most of it's well intended so I'm not even trying to like vilify the investor what I'm saying is it's just not that true right it's just not that true when you take on money from investors right again unless you somehow got within the top core Kyle of investors which you probably did not statistically then the person that's giving you advice the only reason that they can give you advice oh two reasons
number one because you're doing this for the first time and they just happen to be done this many times doesn't mean they're right right I've played basketball many times and I suck at it okay so remember no one gets to grade them on how good their
advice was right and the second thing is anybody with a check all of a sudden has an opinion you know why because people have to listen to you right and I know more than a few investors get off on this fact right they get off on the fact that they get to sit there
with their their fingers tented spewing their opinions as if their facts right the golden rule because the poor bastard being the founders on the other side of that table has to listen right because they want that money beyond captivating which is hysterical
right so when you think about it that way right number one would you just take that person's advice if they weren't giving you the money the answer is generally no you know who I'd go to a founder who actually does this for a living a founder right somebody's actually done
this is out there doing it every day number two let's just say you did take their advice and you liked their advice would you be like he wasn't dismissed her here's 25% of my company in return no it's like there's so much wrong with that sales pitch right yeah
oh it's insane like again I hear this from founders going into it and I felt this way myself the first couple times that that I raised for previous companies I was like oh so great to have all these smart people around me there's a big part you're missing in
that right when they're saying we're going to guide you and give you advice they're not really talking about suggestions what they're saying is we're going to tell you what to do and we're going to be pissed if you don't do it right that's not the same as giving
advice did your parents give you advice or they just tell you what the F to do right in most of these relationships are in like I'm killing it so so much please give me even more sage like advice most of it is I'm totally f'd I'm running out of money and now they're telling
me what an idiot it right it's very different that's when the advice starts right yeah it's basically like when you start to screw up we will tell you what we think you should be doing differently at this point it's not like hey let's sit down and talk every morning let's
do a stand up where we go through your daily numbers and your goals it's not happening right they don't want to right and ultimately kind of your point they're probably not qualified to do it within your business anyways right they have money not knowledge to operate your
specific business I've sat in a program meeting with nearly every major VC right at some point in my career okay and generally get I don't have a bone to pick with VC as I want to be clear I also just don't like like by default believe their bullshit right because
I've actually built a company right you're you're the one who was not built a company trying to tell me how to operate one right I'm in the same way I'm not going to tell you how to invest money how if I know I never had any success doing that no idea not what I'm trying
to do right don't tell me how to run my business but my favorite part is I get into a meeting and I'm five minutes into my pitch in some partner on the other side from a venture firm is telling me how my business is going to run and I'm thinking to myself hey just like has
anybody mentioned this to you you've literally never run one of these companies before right the fact that you read a tech crunch article great and I'm looking around I'm not seeing the crystal ball either so given those two things your full of shit like what the hell like
and so again this may be something better I'm not better I'm just I'm aware of where well both it is you're aware and you know it's funny man like again let's go back to take money out of that equation because as founders we get this kind of feedback we get this
well who's what's going to happen with your business here's you get some of this bullshit sometimes the funny thing is if there isn't money attached to it we immediately write it off as bullshit we're like I wonder if that guy on the bus knew what he was talking about like
maybe right somehow we just assumed that because there's money attached to it that there's also validity attached to it those two things don't come as a package deal right but it's so funny to be see through it most of the time we ignore it we're like yeah they probably don't know what
they're talking about the minute you're sitting in a partner meeting it's a query like hey no they know they see my future oh dude like Bob Kagle from benchmark who did eBay and stuff back in the day Bob Kagle I think when he was giving me advice was floating levitating in the air
telling me like how all my kids were gonna be uh by the time they graduate my unborn children like that guy was genius right there are definitely folks in that industry that that are worth you know they're they're waiting bold and again I'm not knocking all of I'm saying most of them okay if
they're sitting there saying our value is our advice our guidance our network sure for one percent of my company maybe it's called an advisor right the days of taking 30 percent of capital or of company rather because you are the gatekeeper of capital goes away when companies don't need
the capital right see that's the part here that I think is getting really interesting because we're sitting here saying wait a minute if if this goes to zero and this goes to zero and this goes to zero all these seminal costs why do we need capital again and I'm not saying all investors are gone
not saying all investors are gone but look we've got funds you know you got like injuries and re raising like six billion dollar funds now where does that money actually go I want to be clear about that right the reason they need to deploy six billion dollars is because companies
need that much money where does that money actually go it goes to hire people generally anymore it now goes to a video but probably it would it would go to hire people right and what I'm trying to get at is the these costs these massive costs that were almost always mapped back to people are going
away not tomorrow it takes away their main value right we can we can argue about whether how much more value there is these other things that they do but let's let's all agree that the main value that they provide was money that's why they're called investors not advisors who also sometimes give
you money no they're investors right they're investors they're trying to put the triadplay capital yeah I mean I think that we're really in this out there they're the a-hab around the time that petrol fuels become a thing and all of a sudden we don't need whale whale anymore right so they're
just they we just we're not going to need the one thing that they that they provide were the main thing that they provide and and as that continues like they're just going to become less and less relevant in in the ways that we're used to well they recreate themselves I don't know I'm not going
to pretend I know their business better than they do that would be hypocritical what but here's what's happened over the years over the last couple decades when when when V.C. and really start up investing is really grown into its own maturity because it really wasn't that much of a
thing even in their early 90s I mean it really the dot com boom is what really made venture capital what it is today um in certainly everything since then again most of that capital is is being raised and deployed toward hiring giant legions of people right now all of a sudden if you need
fewer people you'll also start getting graded as a founder on how efficient you are when you say oh yeah and we're gonna step up in in add 5,000 people in the call center you're like wait what right or or the classic we're gonna hire a team of 600 engineers to solve this problem you
would look like a moron right like are you not paying attention to what's going on all of a sudden the things that you got rewarded with mountains of capital for become a giant red flag like well what are you doing well in the irony there is right that you know in order to be
intelligent about how they're investing their money which they want to do right they don't want to pay for a bunch of overhead that's unnecessary they're buying into the exact concept that's adding to and in creating their their their very obsolescence right this is the point
is the point the matrix where uh where um more fius right is sitting across from neo and he's explaining he's gonna kind of do the backstreet the matrix explaining like how this whole thing happened right and he was like all of this effort came down to he's holding a diracel battery
to turn us into one of these and he said fate it seems is it would not it would not without a sense of irony right yeah that's hysterical that's right man in this case bcs or in gobs of cash into ai which will remove the reasons they needed capital to begin with is basically morpheus holding
that battery being like damn it dude look we funded the very thing that prevented us from getting more capital there's gonna be a whole other argument in it's in it's in it's in it's it's fun to have which is yes people won't be as big of a cost but now again I mentioned alluded
to a second ago in video uh you're gonna need more ai processing and so the money is just gonna go there in what about marketing marketing is gonna get more complex there's gonna be far more channels and then the cost to acquire people is gonna go up I don't believe that actually I believe
it'll go down but you could make an argument as more technology gets introduced more cost get introduced right almost everything on our mxbola startups calm our companies that didn't exist even 10 years ago and so so you could easily make the argument and I would believe that that cost will
go to other places and I would say yes except they will be like significantly smaller and specifically they won't be people right there costs are gonna scale down as well right and and so like this this this isn't something I guess one of the most interesting things about this particular technology
is that it's showing ubiquitous and universal capability for application right whereas certain type technology will only apply in certain sectors and that will reduce those costs but other costs will change this has the ability to reduce the cost across the board meaning that yes you might start paying for more things but you're gonna pay less for all of those more things um I just don't see a version where we see the same kind of cost scale due to AI that we saw with the like the things
we talked about earlier like the cost of the complexity of engineering going up so we started to build more and more complicated shit that required more and more complicated engineering that drove costs I just don't see that happening here like we're already starting to see like the tools that we've
they've just been born are already getting cheaper by the day it's pretty incredible and I'm watching um my processes right you know as a as what I could consider myself a composer I compose all of these things um to create you know this this this is the earth that I want and uh the things that
I do daily like I'm our CFO as well so I do accounting right well I mean yes I'm still doing it but now most of the stuff that was taking me a long time I'm running through a process I'm prompting it in GPT and saying hey do this for me in five seconds oh man I did something in literally in like
30 seconds this morning that would have taken me at least half an hour right at least half an hour to go through and manually tag and and write some queries this morning 30 seconds right I had to think about the prompt for 30 seconds and then maybe GPT took 15 to process it that was it in
again and this is the shit version of GPT yeah that's it right this is the this is the Atari 2600 right we're playing pole position right now exactly we're at a laugh at like for right now it's blowing our minds in the same way that pole position or space invaders blur our minds because
we didn't have it yet you know I mean they'll compare it to yeah I can already tell how quickly we're gonna look back on this and say hey do you remember when you had this like goofy prompt that we had to like try to type things into and make the system do it and it had no intuition right
but if I'm an investor right now let's let's flip it for a second let's say that Ryan you and I want to become investors let's put on an entrepreneurial hat what would we have to do in order to be more valuable be more relevant be more you know um compelling to this market yeah I don't
I don't know man I mean like I feel like things like that have been attempted right like the traditional accelerator model right it basically said hey don't we're we're not just money we we literally built out a system we're like unlike an investor where they we talk about these
their intangels come with them something like an accelerator is literally predicated on these other services and and and things that are provided within that and like when you look at the outcomes the efficacy of those things it's just not there so I'm honestly not sure where where else
that goes because we do sort of know a couple things right now look not all investors haven't run a business right but most of them by the time they've had a career in investment haven't run one for a while right by virtue of having been an investor professionally for some period of time
and so I just I really struggle like what are your thoughts because like I'm I'm coming up shortens here's what I've been kicking around and and I geek out about this stuff so much right what if and this is this is me a silly example but I want to use it because it's silly um what if there
is an investor that was using AI to make the investments for example when my 12 year old daughter right is getting her her wicksight setup and she she's getting like you know her e-commerce site setup right what if there is an ability to be able to say I want to give that person X amount
of capital it could be $782 it kind of doesn't matter because you're not actually paying attention to it I want to give that person $782 it comes with a special contract for these types of things and I'm going to get paid back in a rev share or you know some some piece of a future sale but because
so many of the economics have distributing that money and in in getting my return fairly automated instead of having to make these big single wildly risky bets right what if I could make hundreds of thousands of small bets right across the board on all kinds of people in the same way
that you do with stocks right we take a portfolio strategy some places where you see this now it's a little wonky but it's actually interesting you see it within things like um cabbage you know the the the merchant cash advance company where they're like hey we can look at your stripe data
and we can see how much revenue you're bringing in and we can apply risk toward that we know that that much revenue is coming in we can always take some off the top if we have to they're using now where to make an investment essentially yeah I guess the the pushback against that one is
it yes I think you can see that I to me that feels like a transitional step that happens on their way out right on their way to extinction or obsolescence because at some point cheerpoint like well your daughter need that 700h I think it's the the fact that the need is erased is the part that
I'm I'm focused in on right that when we eliminate the need for money then it doesn't matter how clever you get about how you deploy it if the need isn't there right it's like it's like saying like hey we found a much better way to uh to deliver the um I don't know the uh it cheer for disease it
doesn't exist anymore right doesn't matter we don't have it right well here's what I'm saying I don't think it'll go to zero I think there will always be some sort of cash that needs to get paid for marketing or something else what I'm saying is right now the deployment model is going to feel
real iniquited the deployment model with someone comes to us with an idea of pitch deck we make a massive singular push giant check on one idea sent you to hire people and do in in float this thing for a while a little bit of this way if there are no such thing as companies that were more
than 12 people anymore right where that money even go let's look at this one a slightly different angle right so you're right there will always be some cost need to be covered so as no one is an investor does that make everyone an investor right to your point around being able
to look at risk in a really different way think about some of the ways that we that we use risk uh because at the end of the day you don't need money right you still don't really need money you know what money buys if you need advertising what if the ads platform can be the one who's
making that micro investment in you because the risk is explained and understood if Facebook can understand yeah the likelihood of return on this particular product based on the category they're going after based on the words they're using base and they're pricing based on based on based on all this data that we have we can reasonably make an investment and then we can let them run the ads for free and just get paid in the back end right cutting out that the middle man right same thing with
things like deferred comp right how many people do we know they go to work for a startup without a real ability to understand what they're actually putting at risk or without being able to defray that risk what if what if just hypothetically where we're spitballing here we're getting big brain thinking what if instead of an individual doing deferred comp in a single company there's a deferred comp will where a whole bunch of people take a shared risk across a thousand companies and everybody
that was going to get paid gets paid right or everybody could get paid to get paid something right so that we don't have to take singular and massive risk exactly the analogy I was going to use right it's the opposite version right where instead of a we all pay into it with the hopes that that
will you know one person will get covered if they have to right this goes the opposite we all contribute toward it in the idea that I'll get paid because one person will have a hit right exactly yeah the one person who wasn't going to get paid is now going to get paid exactly right and I don't
know if it's going to be me or not which is exactly how health insurance works right I get health insurance because if I might be the one who needs it right so I pay into it um this would be like I might be the one that does it make it so I want to make sure that I'm covered again like like
insurance in case someone else does exactly so I think there's all sorts of interesting ways that as we break down the the current structure of what investing means is again like you and I talk about this a lot we did a full episode on this which is like you don't really need money
you need all the things that it buys you um so if we can just turn if we can take money out of the equation and allow people to just invest the resource that you actually need more directly I think it's pretty interesting right without having to give up big chunks of the company we're
giving them up to people who actually made the inputs not just cash and again we're going to look back on this time period right and and of course we're going to have revisionist history about how great it was right and you're like um yeah venture capital was a phenomenal industry if you were
a middle aged white male like if you were anyone else and I didn't have quite the same feeling about how that was going right so so the democratization of it right where more people get more access is is great across the board right not to mention if you have like a good idea but it's just out of
venture capital good idea you are not going to get funded not in the current model right exactly right when I was writing the um uh the article for this uh yesterday um I was I I was in GPT because open at all times and I I said hey GPT what percentage of new businesses in the US get venture funded every year point 17 percent right and I thought that number was high point one seven percent that I yeah I had actually I'd I'd I'd want some fact checking on that one like a fraction
of one percent yeah it's a fraction one percent but that still feels high based on what you and I know I agree I agree and again I uh I'd have to dig into what that means but um just for folks that don't know this and again not that VC is the end all but just because it comes up
so often in our world um on average and this has been the way for a long time investors VC investors not angel investors VCs are further up the chain VC investors right on average and have for quite a long time a thousand new checks per year total across the entire category across the entire
category right those that call themselves VCs in the amounts that they deploy like now we have people that call themselves VCs and write twenty five thousand dollar checks right I'm kind of not counting them I'm talking about people writing five million dollar checks are bigger right you know
the traditional VCs and it's been that way for a long time they write another three thousand checks as follow on investments series BCD etc for the for the new ones going into new companies not very many people my point is we have an asset class that has kind of become synonymous
with startups that basically funds very few of them and leaves ninety nine percent of people but nothing to show for it right so anything that happens on a go forward basis to make not just them obsolete I'm fine with them right I'm not I'm not looking to like um you know and they're
in their careers no we're not saying they need to go away we're not saying they need to go away we're we're just looking at what everything is happening right now in tacit saying seems likely they do seems likely and it's good for everyone because all of those people that would
have never had access to the cash they needed to to your point by the stuff that they needed don't need that cash right they can just go do what they wanted to do it's when I daughter on a Saturday starting her fourth company right with no money in three hours and she's just
up and running right that's the world we want to be moving toward right if we go back and and I love wouldn't people can't see the future and which is fine but like if you go back 20 years and you're like hey the internet's going to come and anybody can start a business whatever
well they're going to make yeah well what about the attorneys they're they're going to get pushed out what about the people who got paid like you and I basically to build websites they're going to get pushed out right what happens to all those jobs and it's like you don't really understand
how this stuff works do you um for every job that gets displaced it creates 10 new jobs right in this case probably exponentially more and now all of a sudden people that didn't have access to starting a company because they couldn't afford to pay us at blue diesel a hundred thousand dollars
to build your website right on a Saturday can just do it people that didn't have 50 grand to pay an attorney this is bananas that this was even the case back then to form an LLC and write up in an operating agreement right can do it for 99 bucks online or less right that's sort of the point
the the point isn't that that person's going to lose their job or livelihood they'll find something else to do the point is Henex more people will need that service now that is cheaper and more affordable I think that's the part that gets left out you know what I mean yeah I think
it does and and I think to your point like this just creates opportunities to go on and do new things right another another just let's reimagine another used for venture capital they go build hard things like hardware right like we send more rockets to space we'll finally have time to go colonize the moon now because we won't be building software that a machine can build for us right so yeah the capital will get deployed progress will happen things will things will change hopefully improve
and the other things keep getting better and better but they they nothing has stayed the same for a long time I think part of what's scary about this is it's the first time where the rate of change is as fast as it is and I think the the level of understanding right you know we went from
a horse to a car it's still kind of did the same thing right move is point a to point B this is a bit of a shift for people I think it's where a lot of the trouble is coming from the resistance around it but again we're talking about AI but yeah and look in the anxiety and the anxiety is
well placed I get it this is replacing humans all the other things in the past right the last time we we did this was the industrial revolution you could say like the computer slash information revolution where we said okay we don't have people um necessarily keen things in into a computer like
the good you know or typing things rather than put a new computer but he still had people like it just created new jobs for those things these are things were entire industries are turning obsolete damn near overnight because a machine can already do them geometrically faster and and I
I think of course that makes people anxious what I want to remind people is that whenever we have one of these pivotal moments what it also does is create a massive new industry with tons of new opportunities that most people never had access to before right and so I think what we need to focus
on isn't so much investors being obsolete and I know that's that's kind of an engaging title this isn't about investors being obsolete this is about everyone getting an opportunity to build a startup without the investor being the catalyst for allowing them to start to begin with
overthinking your startup because you're going it alone you don't have to and honestly you should because instead you can learn directly from peers who've been in your shoes connect with boot strap founders and the advisors helping them win in the startups.com community check out the startups.com community at www.startups.com to see if it's for you could be just the thing you need I hope to see you inside.