The NFX podcast is about seeing what others do not. And getting at the true mechanisms behind people and companies that endure change in the world. If you enjoyed this episode, let us know by leaving a rating and review and by sharing with friends you think should listen. You can also discover more content, like other episodes, transcripts, essays, and videos by following us on Twitter at nfxandvisitingnfx.com. And now onto the show.
So I am very pleased that we have Sara from CRV here with us today. I've known SAR for 18 years. He's one of the very best investors in Silicon Valley. And today, we're gonna get to know SAR and what he's sees at the early stages. He has debuted at number 34 on the Midas list.
If you want some statistics about why you should be banked to what Sarger says, everyone who's on the inside here in Silicon Valley knows that you listen to what he says, but now I guess the rest of the world is figuring it out as well. So we're so glad to have you here today, James, it's so kind to you. That's an amazing introduction that hard to deliver after that, but thanks. Not at all, buddy. Not at all.
So let's talk about, like, where you came from because I want people to understand about the way you see the world. Right? So one of the things we talk about in investing and being entrepreneurs and whatnot is to have a unique sense, unique perspective, the unique way of seeing that others do not have. And you've got that. And we've known that about you for many years, and of course, the numbers are proving it out, but can you tell us a little bit about your background first?
And then we'll get into what you see in the early stage companies that you invest Yeah. I mean, I'll go way back, you know. So first of all, you know, I have a very funky name, but I was born in Pittsburgh, Pennsylvania. My parents were immigrants from Israel. And, you know, I think from an early days, I had the role models of my parents who were very passionate about what they did and wanted to have impact positive impact in the world.
And so I think, like, you know, many immigrant kids, you know, especially Jewish immigrant kids went down this path of thinking I might be a doctor. I studied biochemistry. I love the science and was trying to figure out, honestly, you know, how I might have impact in the world's And through that journey, I just feel so lucky that I fell in love with the internet, you know, in in kind of the early days for me in terms of my career, I just felt the internet was gonna change the world.
It was early.com days. And through that, you know, I feel like There was a lot of brainstorming of all the ways that the internet was going to impact consumer lives, and that's really been the sort of you know, guide rails of my career, if you will, while I've had lots of different roles and different opportunities. I still love dreaming the dream of, you know, starting with a founder, how a unique product might just, you know, improve someone's life or a small business owner's life, etcetera.
Well, it's interesting because if I recall, the high school you went to in Pittsburgh was pretty tough high school. Oh, man. Yeah. I think the most famous person to go to my high school was with Khalifa. If those of you that know him, you know, he's a very famous rapper metal detectors etcetera.
But, yeah, I think that was also a great education and also just, you know, not just knowing the broader world and the different perspectives that people have, but also just seeing how to hustle and how to make things happen and sort of opening my eyes to all the ways in which, you know, people could earn a dime and try and make something of themselves. Yeah. And it seems like your passion in your investing and where you've taken your Currier really around consumer. Right?
I mean, at CRV and for the last 20 years, you've been really focused on how does this tech technology affect people, not businesses as much, but people like how do their psychology or making a dollar or protecting their home or Right? Absolutely. I say for me, the internet, you know, offered scale that when I looked at so many businesses over the years that I worked on or spend energy around or spend times thinking about, you know, I wanted to have, you know, impact at scale.
And I guess that's just been the amazing thing about, you know, it's not just software. Like, sort of the internet and software that really still draws my passion in that if something works, it's just so accessible to people and can have such a big impact in their life and touch so many people. What were some of these businesses that you worked on that were not scalable?
As you know, my wife and I, you know, going back many years, started a yogurt concept that she really started and ran, but I was heavily involved in. We built it to force stores and, you know, making yogurt every day and, you know, cleaning tables and, you know, just doing all these things that really don't you just spend so much time trying to reproduce the same product every day and the same experience every day.
And the amazing thing with software, right, is once you build that experience, you know, you can now focus on how to make it better. You don't have to spend 99% of your effort just trying to recreate that same experience again a second time. And this was called Freight. You know, it was actually quite James. Because it was known as having the very best homemade yogurt around. That's right.
Yeah. We were lucky that we had a lot of celebrity customers, including, you know, Steve Jobs and others who, you know, appreciated our product, which was nice. I remember somebody on Twitter saying they were moving to Palo Alto because Frache was there. Yeah. Kind of a high price to pay to get access to your yogurt. So you've been involved in unscalable businesses and Pete, and so now this internet gives us the scale. And you lived in LA and then came up Pete.
How did you migrate to Silicon Valley? Yeah. So, you know, I was lucky. I graduated with a biochemistry degree I wanted to learn about business. I ended up joining an investment bank out of college to work on internet investment banking and really wanted to learn how to start a business. So I came out to Stanford Business School. I was lucky to do that. When I graduated, it was like the heart of the dot com bust where you just couldn't find a job.
You know, many folks forget, but, like, you know, the newspapers had pictures of coffee shops full of unemployed people, you know, in San Francisco who ultimately had to go to their hometowns, and that was the environment that I graduated into. So I had a friend of mine who had started a dotcom who had an idea for a real estate business that I originally brought me down to LA to try. We ended up, you know, going through this transaction.
But as I said, you know, in some ways, even real estate, you know, I wear for a year on a business that ended up doing well, but my heart just wasn't in it. You know, it just didn't scale. You know, I couldn't dream that dream, and I was just lucky that I've always loved how entrepreneurs and always picked up the phone if I could be of any assistance. And, you know, even though I was a kid and really didn't know much, I seemed to have a lot of other founders and people that wanted advice.
And through a friend of mine at business school, he had met someone who needed some, you know, needed some advice.
And that person ended up being, gentleman named Josh Peterson, who was running this internet company in the heart of the dot com bust, you know, financed on credit cards who really needed help and what started as a few conversation ultimately drew me to move back to San Francisco and, you know, help him build this company ad directive that kinda brought me back into working on internet related companies. Got it. And I think that was when you and I originally met. Correct.
Yes. Maybe at Morgan Hoffman's founders, brunches, or something. Absolutely. That was it. You were starting your company. I was running tickle. Yeah. There was a small group of, you know, entrepreneurs crazy enough to keep working, you know, on consumer internet and internet related companies in that window as you remember and not many VCs, you know, interested in giving money to those companies.
Yeah. And that directive was, you know, famous for doing a lot of different sort of ad tech and lead gen, and it got really big, really fast. And then to kinda scale down after that sort of boom bust. And then you hopped off and you ended up going back and founding Bright Roll. Yeah. You know, again, it goes kind of back.
I was lucky that Todd, one of my best friends, we started brainstorming in an office, actually, with Mark Pincus and Morgan and Zothat, some friends of mine who all wanted to start a company, and we Pete trying to figure out, you know, where there might be something to do.
And, you know, I had a bit of an ad background and Todd had a unique experience coming from Plaxo where he had worked on some integrations with some startups one of those startups now looking back was called YouTube that was growing pretty quickly. And this is Todd Soster Doty. Yes. Correct. And so, Todd and I, you know, we didn't really know what the big product idea was. It just seemed like there was a need for video ads on some of these emerging sites, and and that led to bright roll.
But, you know, as I said, I really wanted to work on consumer oriented things. I wanted to get out of ad tech, which is what Adtiractive did. And so I worked with Joe Green and Sean Parker on causes. For a bit, which was an app that grew on Facebook and then ultimately sort of found my way into trying venture capital. Yeah. And Bright Row eventually sold for over 600,000,000. So that was a big success for Todd and for you. And then you found your way into venture capital because why?
So funny in this environment to even describe the situation back then. It just sounds like a different planet. And we're talking about sort of 2006. Right? Correct. Yes. So, you know, if you go back to that window, there were no angel or seed funds. You know, consumer internet was just kinda coming back, but a lot of VCs were not active in the space. And while I was not trying to be an angel investor, I didn't have a lot of personal capital.
I was helping entrepreneurs as I've always loved doing know, trying to raise money. And it was the first time in all my years of trying to help startups where there were these amazing companies that didn't need my help on, you know, product or strategy or customer acquisition, you know, they literally just needed money. Like, they had one of my companies rock you, needed money for servers. Like, they were growing so fast they just needed server money.
And I remember thinking, like, server money's gotta be, like, good money, like, a good investment to make. You know, I wrote them my first Angel Check and, you know, and then I had some other friends who were, you know, trying to raise money for their companies. And, anyway, you know, to cut to the chase, basically, it was so hard to raise money for these companies. Like, it was crazy how many meetings we had to take.
And so just as consumer internet was coming back, the folks at CRV approached me and, you know, Pete very supportive. They wanted to build a firm that was more active in consumer internet and SAS and more West Coast based. And the idea that I just wouldn't have to go through all this pain helping my friends raise money, but I could just give them large bounce of money seemed really compelled.
You know, I jokingly used to say back then, you know, in my case, like, my parents love me, but they couldn't give me a $1,000,000 to start a company. And venture capital is just this incredible privilege, you know, that having not come from money that, you know, to be able to meet an entrepreneur fall in love with their idea. And if your partnership is supportive, give them 1,000,000 of dollars to go pursue their dream.
You know, just felt like it would be the coolest job in the world and, you know, super fun. And and so that's what drew Flint, at least try it. Well, I know that there was a number of venture firms who Pete trying to get your in at that time. I remember we were sitting, I think, at a Starbucks down in downtown San Francisco, and you were sort of describing all the different folks that you were talking to. And I had had experience with CRV.
And, you know, this was originally a Boston based VC firm that, you know, sort of migrated out here along with the other Boston firms, like, you know, Greylock and Beller and matrix and whatnot, and a really, really special group of people on equal partnership where everybody owns equal amounts of equity and very communicative, high IQ, high EQ people that really kind of a standout group and when you told me that they were interested in you, it didn't surprise me at all.
Given just your personality and how you think about things. But I know that there was a lot of firms that were interested in you because of your connectivity. And I think a lot of people who are either CEOs right now or just trying to think about whether they should do angel investing, can really learn a lesson from that where you were just out, becoming friends with Pete. You are out helping people.
You are out paying it forward, and you did that for so many years that everyone got to know you, and then all the venture firms wanted you to join them. And they wanted to give you their, you know, 50, you know, 30 year history of fundraising and then let you go, you know, invest that money. I thought it was a great fit with CRV. They're such a wonderful group of guys. Beller, no. Thanks. I appreciate you saying that. It is funny looking back.
I had, you know, CRV was not much of a brand out here on the West Coast at the time. And as you mentioned, I had much better brands pursuing me, but I feel like the job of venture in partnerships, it's sort of like, once I came around to deciding I wanted to do venture, it's sort of like coming around and deciding you wanna get Currier, That sounds great, but there's a lot of details in who you actually marry. Like, you don't just wanna check box.
And I just I feel lucky that back then, I spent a bunch of time with a lot of the people at these different firms. And even though at that time, you know, CRV was not as well of a known firm, you know, everything luckily have worked out on the people side here, like you said, and for me, that really mattered.
And, you know, it's just so nice to be at a firm where we can focus on just doing what's right by our entrepreneurs and not having to worry about, you know, internal politics or, you know, relationships, feeling that trust and support for my partners has meant the world for sure. Yeah. I mean, those guys in it, SAR has been such a support to NFX as have you, and, you know, you've helped so many people all around you. So to take this job on your venture capitalist now and then what happens?
I mean, you start seeing some interesting companies. How do you are think about how you best. So you guys are primarily investing series a. So you're looking to invest, you know, 6 to 12,000,000 for 20% of companies. Is that sort of the general target you've got?
Yeah. You know, we tend to, you know, so many things have changed in terms of you know, seed, series a, check size, you know, the way I've described most of my investments has been sometimes I have a thesis and I've gone, you know, Pete product with a team that I love, but many of my investments have been in what I would call post product pretraction. Meaning, you know, there's a prototype and James, you know, I've learned a lot of this from you.
There's so much you learn from watching a team, put together a prototype, pick a name, you know, get some customer feedback that I feel like over time, I've gravitated much more towards that sweet spot, which which often means it's an investment of, you know, as little as, you know, a couple $1,000,000 to you know, in this market, you know, $10,000,000 or Morgan. But that often is, like, I'd say how to characterize a lot of my investments. Got it.
I know that sometimes, sir, you won't make an investment for, like, a year. Right. Like, you won't find anything that grabs you for a year. And then other times, you'll make 2 investments in a Currier. What are you looking for? I use this language earlier, but I feel like I wanna dream the dream. And there just aren't, you know, Beller will miss amazing companies all day long and things that, you know, change and Morgan.
But I do feel like, you know, some of the bigger companies that I've been involved in, you know, they basically had a big idea from the beginning. And, you know, I look back you know, to my seed investment in DoorDash, you know, Tony from day one had this vision of what he was gonna build that wasn't just about food delivery. It was, you know, these other things, you know, which now thanks to the pandemic, you know, we're doing a lot of those things, groceries, and pharmacies, and other things.
But, you know, it often, I guess, To me, it's finding those few companies that, you know, have a big idea where I can dream the dream with the entrepreneur and just see how it will continue to, you know, get more exciting, be more interesting. The trends are in our favor, you know, and I think that's at probably the core.
I do fall in love occasionally with, you know, a team and an idea where it may not be as obvious and I'm ready to go on that journey and just see where it goes, but I think many of my best investments have had kind of a big idea combined with a team behind them.
And so that's where I guess I just, you know, often just don't get excited enough and then all of a sudden I might get really excited, especially if there's a new form change or a a massive change in consumer behavior, you know, or often the entrepreneur that I meet with, you know, will show me something I hadn't thought about you know, blows my mind and I just have a ton of excitement around it. Got it. So it's just emotional reaction you're having.
I think this is instructed to a lot of founders as well that you might say no to them it's not because they're not gonna succeed. It's just not resonating with you. Absolutely. Or you're sort of emotionally unavailable for some other reason, and therefore, they shouldn't always feel bad when they get nose from you because you have to say no to 99% of the things you see anyway.
And I spend a lot of time trying explain this to founders, like, now that I'm on the venture capital side for the last three and a half years, I'm seeing that there's not always the correlation between whether they think you're gonna be successful or whether they make the investment. Sometimes they just aren't feeling it. Totally. And it's not your fault. It's just that there's not that connection, and that's okay.
I think, yeah, so much of it, to your point, in terms of what I think about what I do for a living, I generally am the lead investor. Meaning, I wanna be the person is calling to riff on stuff. You know, being a CEO is so lonely and whether it's, you know, I'm thinking of this higher. Could you meet them and offer an opinion or, you know, I've just had this shitty day at work. I just want a vent, you know, I had an entrepreneur recently had to do a bunch of layoffs.
He just called to Morgan, like, vent and have a shoulder to cry on. You know, and I I work hard to play that role, but that also means, you know, when I look at my time, I wanna be available to my entrepreneurs. You know, I wanna be able to spend time in any way that I can help. That also means I'm, you know, that takes time to build companies. So, you know, I don't have that many slots, and the bar is high of you know, who I wanna spend time with and also what I wanna spend time on.
And if I don't care about the problem, it may be an insane business. But if it's not a problem that I have a personal passion for, there's gotta be I just believe there's gotta be a better, you know, set of investors who will do more you know, serve that entrepreneur better than I will. And honestly, the opposite is Pete. When I find a company that I just can't lose, you know, I'm losing sleep over. I just keep thinking about it.
You know, and and I'm just so excited about what I'm learning or how I think about the business, then I honestly think I'm the best investor in the world for you, you know, and honestly believe that because I will not leave anything on the field trying to make that company successful. And, you know, I guess that's like, you know, very different framework that I have in terms of the things I wanna get involved in. Yeah. No. It makes total sense.
And I gotta tell you, I have heard from multiple people that you are the most viable member on their board by far. I've heard that from multiple of your founders, unsolicited. Just the buzz around is that the insight, the balance, the support, the real knowledge, the data analysis, like the way you approach supporting your founders is second to none. So that is well known around my work. If that's where you sit, so well done on that. You're listening to the NFX podcast.
If enjoying this episode, feel free to rate and review our channel and share this conversation with someone you think would benefit from these insights. Follow us on social, add n effects, and visit nfx.com for more content. And now back to the show. So look, in 2013, you introduced me to 2 companies, invited me into the seed round of DoorDash and Patrion.
Think DoorDash is now a public company at 40,000,000,000 Morgan cap, Patrion, just raised at about 3,000,000,000, both incredible investments, touching tons of consumers. Everyone talks about them as models for other businesses. We're like Patrion, but, woah, we're like DoorDash, you know, they're real icons in the consumer internet and scalable area that you like to invest in.
Talk me through what you saw with DoorDash because there was a lot of companies doing food back then, and there was a bunch of companies doing delivery back then. And to have picked the right one is quite something. It wasn't easy to do that. What did you see back then that might be instructive for early stage founders today? Yeah. Well, thanks, James. Yeah. It's interesting because it will we can touch on both.
1, I view as a thesis based investment where I was, you know, in the DoorDash example, I was actually looking for DoorDash I'll explain in a minute. And the other one was more of a theme that I was interested in an area and then met Jack, and it was like, this is the solution. But to go back to DoorDash, So as you know, my wife was running a yogurt store called Fresh in Palo Alto. And one of the things that we observed, we had four stores at our peak.
We had a driver, and we got a lot of catering orders. And people we were fortunate. People loved the product. So, you know, people would often call us and ask if we deliver, you know, frozen yogurt or breakfast, you know, to their homes, which at that time, you needed to have a driver where you guaranteed their hours, you know, and you needed to guarantee hours and and expensive, and there was a lot of uncertainty as to whether orders would come in.
And that was happening in the background while as you know, you know, I was very excited about what was happening with Uber and Lyft and in ride sharing and specifically from a product perspective what I found so interesting was Uber.
It's now obvious, but at that time, putting words around the experience was less clear, but Uber was taking this moment of uncertainty if you were in San Francisco and you needed to order a cab, you did not know if they cab was gonna come and you were highly anxious. And in particular, because San Francisco was such a hard place to get a cab, you were outright lied too Morgan, and the cab would never show, and you'd miss a flight was common, etcetera.
And Uber took that moment of uncertainty and turned it into a moment of delight. That moment of seeing the blue dot and the car roll up at the same time was a magical product experience that was uniquely enabled by a mobile phone that to me felt like it could be applied in other area. And that felt more obvious at the time.
You know, there were lots of other on demand startups, but just thinking about at that time I had a young son and seeing what was happening with my wife's business, it felt to me like food delivery could potentially even be a larger or as large of an opportunity as ride sharing because, you know, as young parents living in the suburbs, you know, if you wanna call Palo Alto suburb, you know, it just felt like if you could actually take the uncertainty
of food delivery and create certainty around it, it could change your behavior because anyone with young kids knows that, you know, your kids will melt down if you don't get them dinner on time, and no one had ever done in food delivery. You know, most food delivery systems were totally unreliable. And so that was, like, the early thought. And then the question was, like, okay, I have a thesis.
Like, I'm looking for someone that builds an Uber like service for food delivery and, you know, interestingly, you know, without talking about all the competitors. I went on this path. I met with, you know, companies like Postmates several James, and Postmates had its own pivot you know, into the food delivery business from where they started. They started in a different place and and number of other companies.
And along the way, and this you know, at least now, you know, the famous story within CRV, there was a startup named Fluck, FLUC of all things that had a very compelling founder, you know, who I still love. I got named Adam who was raising a seed round, and he had some traction here in Palo Alto. And I started doing diligence on this seed and, you know, fast forward. 2 great firms ended up investing in that company. There's a lot of luck in the venture business.
I was doing references with business owners on flock and I happen to have a friend of mine who was the general manager at Morgan, Thomas, in Palo Alto, who's just, you know, very thoughtful.
And to her credit, I've actually posted this tweet on Twitter, you know, she basically says, I'm happy to chat about flock, you know, but there are these kids out of Stanford who started this company DoorDash that you should really talk to, they really understand our problem more deeply than all these other delivery companies. And it was that email.
And then, you know, I knew Misty, I hopped on the phone with her and gave me, you know, a stronger reference that led me to go and, you know, meet this team of 4 young kids out of Stanford and At that point, my thesis was pretty clear that it was like, you know, while other folks were trying to do Uber for pharmacy and Uber for, you know, all these other things that you needed a high frequency product and a high frequency use case that would then allow
you to expand into other things, you know, that you do more occasionally. And when I met the DoorDash team to their credit, they had this bigger vision day 1, and they knew they were running a logistics business. Day 1. And many of these other startups had sort of fallen into the on demand thing. I mean, taskrabbit was a great exam and others that were sort of like playing different themes.
But when it comes to food delivery, you know, every minute matters, and the DoorDash team from day one was sort of on it thinking about how to make deliveries faster the example that I give is they knew at that time. If you talk to them about Orange homeless, they could tell you here's a restaurant that has excess demand. There's always lines out the door. The front of house, the number of seats that they can offer for customers is small, but they have excess kitchen capacity.
And if we can basically put an iPad in the kitchen, we don't even deal with the host us, we can use that excess kitchen capacity, you know, and get orders to all this pent up demand of people that potentially don't wanna wait outside for a Dave and, you know, just those little glimmers of greatness to me, I'd, you know, jokingly, Tony, and I say, like, I I felt like we were finishing each other you know, I was like looking for them, you know, so
grateful that they happen to be graduating from Y Combinator at the time. I had knock on to that demo day. They happen to be fundraising and, you know, there's so much luck in this business, but I happen to be meeting with them, you know, right as they were fundraising and the rest is history. Got it. And that was sort of an 8 pre $2,000,000 seed round. Now it's something like that. And what happened with Patrion? How did that come together?
Yeah. So, you know, Patrion, to me, with interesting there is kind of following themes, you know, back I mentioned earlier that I had worked on causes with Sean Parker and was very interested in basically, like, you know, all these movements of doing good and other themes. And what really caught my attention actually was Kickstarter originally because Kickstarter had not just products that they were selling, but all these amazing, you know, creative endeavors that were getting funded.
And I was you know, questioning myself, what had changed, you know, on the internet between causes and Kickstarter and was just kind of very interested in exploring this theme that, you know, time and time again, we see that if a category is happening, you know, Facebook, friendster wasn't the social network, you know, even Facebook wasn't the end all be all social network. It led to all these amazing products. And so starting with watching the traction on Kickstarter.
I started pursuing this theme of just Kickstarter as a theme. Let's just meet all these companies that look similar. And then working on bright roles in my video ad business, you know, and interactive before that. You know, I had a sense of monetization on the internet.
You know, and then as these things go, you know, Jack and Sam pitched us the business of Pete, which, you know, sounded to many folks totally crazy other than, you know, Jack as someone who had produced videos on YouTube could very clearly articulate the problem, which was, you know, when he uploads a video on YouTube as an artist, he would get 50,000 views. And at a dollar CPM, he'd make $50, but in his mind, he's filling Stanford's football stadium for 8 minutes.
You know, why is he only making $50? And to his credit, he just said that some of these folks are super fans. And if I just ask them to subscribe or pay me for every video that I upload, I think I'll make a lot more than $50 and it turned out, I think the 1st month that Patriot launched, he went and started making $8000 a month on Patreon, which we jokingly say in venture, we're looking for products that are ten times or more Beller.
And, you know, here's this product that's like, a hundred times better than existing solutions and really empowered Jack. You know, if you spent time talking to him, he hated that he didn't know who these viewers were. On YouTube, you know, YouTube wouldn't give him access to get email addresses or be in control of his audience. And so there was something just really empowering about that vision and his unique insight.
And then lastly, I would say, you know, that investment sounded crazy because Jack actually was still a full time artist He wanted to work on Pete kind of on the side. He didn't wanna draw a salary from Patreon, but he also, you know, wanted to continue to tour.
And so there were, like, a million reasons not to invest in that seed, but one of the things that I think we saw that other folks didn't see is and this is available on YouTube as well as Jack in terms of just his ability to figure out problems, there's a music video that he produced.
There's a robot head and a bunch things, and he built a background that looks like you're in a Star Wars, a spaceship, you know, that he knew nothing about any of these things, and he just sort of figured and convinced his friends to help him build the set, program the robots, do all these things. And, you know, what stood out to me and just like, really watching the behind the scenes videos that he had posted and everything else was that he wasn't just a musician.
He's not just a guy, you know, playing guitar on YouTube, you know, he's a very creative thinker and problem solver with a huge growth mindset. And as I said, very much, it was like I think this could work, you know, and that was what drew me in to Pete, and it's really been rewarding to see, you know, how it's evolved since Is there something about Patreon that people don't understand? Cause, obviously, the creator economy is now a phrase that is thrown around a lot, but it wasn't back then.
Yeah. I first of all, I just think that the relationship that people have now I think we're starting to understand this, but, you know, you can see this I think, you know, watching Instagram or other things, the lines of Beller between the people that we follow and impact our lives online who we may not know and the people we actually know.
You know, if I go through my Instagram feed, there's people that I've never met, but I have been following them long enough that they feel like friends right next to a post of you know, you on Instagram with, you know, and I can comment as if it's a similar relationship. And I think that's really at the core of what I think a lot of folks didn't understand is just how meaningful a lot of these creators are in people's lives and that these relationships are real.
And as a result, when creators you know, ask for support or wanna offer membership tiers or offer, you know, exclusive rewards, like, you know, join a chat or get early access to content. You know, these feel very natural because these relationships actually are very deep in a way that I think many people didn't fully grok, you know, now what is, you know, 8 plus years ago when we invested in the company.
Yeah. And, you know, you mentioned the idea of super fans funding, you know, another thing that I remember years ago, you invested in a company called TopHatter. It was a marketplace for selling things in a sort of fast auction, and they did a very interesting thing.
What I tell a lot of founders about, which is they would strict the times of the auctions between 8:9 Pete or something so that it would get everyone there at the same time for the 1st few weeks while they were getting going to make sure that everyone was, you know, bidding and, well, these were, like, the first 1000 true fans. You seem to and you've said to me before are, you said, you know, there's something interesting going on in that community.
They've got 500 people on there, and something interesting is going on. And you said that about topatter, and I think top hat is now doing quite Beller. Right? Yes. I mean, it's maybe 10, 12 years later, but it's a big marketplace. The marketplace has take a long time. But and you noticed that there was something going on. Do you have frameworks that founders should be thinking about or ways of thinking about their super fans, their first 500, their first 1000, their first 10,000 users?
It's a great question. I tend to think of it as you know, the extreme users often are what I tend to look Morgan. And the way I would describe that, sometimes they can be the fans, but it's it's the people that, you know, are Morgan, you know, they've sort of hacked together a solution. Like, they care so deeply about the problem. You know, this is why I think, you know, so many companies have reference readots and subreddits as places where interesting things have come out of.
But I kind of view it as, like, it's often the extreme users people that just care so deeply that they're in these subreddits because they really care.
Like, they really wanna know the answer to something, or they really have passion around something and, you know, reddit happens to be one of those products that can collect a lot of those communities, but it's often like those hardcore users that end up seeing some of these products that may look very weird in the early days, but then over time become, you know, mainstream behaviors and, you know, to separate even like, internet technologies.
When I think about, you know, kombucha or, you know, fun fact, James, I know you're familiar with Esselin, one of the stories I heard is that one of the founders of Esselin was a Stanford undergrad who was kicked out of Stanford for doing Morgan. On campus. It was illegal to do yoga. It was seen as this, like, counterculture thing.
And yet, you know, if you fast forward, you know, I don't know, 20 years ago, if I had told you there'd be more yoga studios in Palo Alto than gyms, you know, you just would never guess. And and so to me, I guess as an investor, I love to embrace the weird, you know, but look for users where, you know, there's clearly some real value that they're getting from a product or a movement you know, that could be meditation, you know, is a more recent trend.
James, I remember bringing you into CRV, you know, to look at companies like Headspace back when they were first starting. And, you know, that some of these things seemed crazy at the time, but to your question about users, you could find that the product was clearly resonating very deeply with a set folks that leads to that early glimmer of greatness if you can then say, okay. I think this could go mainstream, or I think there's lots of people that could have this problem.
It's just that people that, you know, really identify early on, especially if they're educated customers and they've tried a lot of things and they seem to be swarming around one thing. That to me, it feels like a really ripe area to spend time. Interesting. And that might help you differentiate between good, weird, and bad weird. Correct. Yeah. We were just talking about the sleep streamers on the Twitch or in the early days of Pete, we had a big category of ASMR videos.
You know, a lot of these things are not per se. They're just consumer trends. But then occasionally, you know, when we can find a product that plays well into a you might say Peloton or something like that, you know, then there's great investment opportunities that can be really exciting. And do you spend time on Reddit looking around at what's going on? Yes. For sure. And you're going into the subreddits.
You're looking so if I'm a founder, I may wanna develop a real subreddit and make sure that it's active. And it's a way of talking to my customers. It's a way of hearing them talk to each other about my product or about what we're doing. Yeah. I think in any case, like, to me, movements are really interesting. And any community that's hacking on something. Amazing things can come out of that.
As you know, I was early in crypto and kinda watching that was totally fascinating, you know, because especially in that case, a lot of what was happening in crypto was fully online in some ways unlike a lot of things in Silicon Valley that have happened with physical bodies in a physical place like a garage or a Pete. You know, a lot of what happened in crypto is totally decentralized and global.
And so as a venture investor, for sure, you know, we are spending a lot of time online monitoring, reading, looking, you know, engaging with folks. And in some cases, you know, those people end up doing amazing things, you know, because they were there early and can develop a point of view and rally a community around them to work on something. Well, I remember in 2014, you sent me an email saying, hey.
I just gave this to my partners explaining that you thought that Dogecoin might overtake Bitcoin someday. Yeah. So I I did repost it on Twitter. It's been fascinating to just kinda reread it. You have to kinda go back to the state of the world back then that it didn't you know, it wasn't clear there would be any other cryptocurrency other than Bitcoin. And, yeah, you know, Dogecoin, which was started as kind of a joke, had a lot of elements that to me felt super interesting.
And, you know, we won't have a whole crypto conversation here, but, you know, one of them that it touched on was James. And just for mass culture, like, the fact that it was funny and playful and approachable, again, as thinking about the broad consumer, felt actually quite interesting. I didn't fully grok, you know, how much meme culture would really take off, you know, back then, but, you know, that was interesting. Also, you know, just adopt of wallets was a real issue.
And back then, there was this very interesting culture happening within the Dogecoin community of people sort of gifting doge to others, you know, doing sort of micro tips because it didn't feel like it was gonna be that valuable. It just felt very playful and people were, you know, gifting it.
And there was this community coming together around at that time, they were, like, even coming together to make donations around different pauses and that kind of combination of, you know, approachability, fun, gifting, and the James. I think to me just really had my attention as, like, the world may not play out, you know, as rationally as many people think. It never does. Right?
I mean, the pandemic is a great example of that where 2 years go has you told us that the world would play out the way it has. Very few people would have ever guessed that in their top thousand guesses of what was gonna happen over the next couple Right. And so at those Flint, you were seeing this community. You were seeing these early adopters. You were feeling the movement, as you say.
Yes. Yeah. And now I guess it's number 4 on the coin market cap list or something, you know, after Bitcoin and Ethereum. It's even above XRP, which I think you were one of the first people to get some XRP from ripple. Is that right? Was the first external person, I think, in the world to ever get XRP. That's amazing. And you talk about these founders. So you a few years ago, said that there were some things you were looking for in founders.
And, like, if I'm a founder, I read that stuff, and I'm like, well, who are you as a VC to judge me whether I can do it or not? But I as a founder will also look at those sorts of lists and say, well, am I those things? Like, should I be the CEO? Maybe I should be the VP of product, or maybe I should be the VP of sales, or maybe I should be the VP of engineering and not necessarily the CEO. What are some of those things that you found makes for these founders to go to the moon?
Mhmm. It's interesting because I characterize there's sometimes like the 0 to 1 stage of, you know, just really seeing something that other people don't see. And then, you know, a very different set of skills once, you know, I often describe my job as like you know, after product market fit, the company becomes the product. And, you know, many CEOs who are great at finding product market fit may not be great scaling and optimizing and growing a company for the next, you know, 10 to 15 years.
So in the early days around product market fit, I find so much of it is around what I call original product thought. It's understanding a problem deeply in some ways deeper than most would see at the surface and then having some unique insight into how you might solve that.
And often there is a set of creativity, you know, to the solution, you know, and ideally, that's matched with a real passion around the problem space where, you know, you just have so much energy that you can rope ins, you know, you can sell investors, you can sell people on, you know, what you're doing. You know, startups though are wacky, and it doesn't always turn out that way. You know, often things can start in one place and kind of grow.
And as I often say, the lane can get wider over time when I think of that example, and I often think of my friend, Jamie Syminoff, at Ring where I was, you know, fortunate to be an investor in his company, but, you know, the company to Jamie's credit, it started in something else. It was actually on this Kickstarter theme. It was a Kickstarter that would validate products because people were getting screwed at the time on ordering things on Kickstarter and not getting their products.
And then to his credit, you know, James launched his own idea on the website, which was like, a doorbell that was connected to your phone because he was working out of his garage in LA and couldn't hear the doorbell ring. And, you know, I still remember, you know, that was the early signs of some level of product market fit without a product. Jamie was selling preorders for this wifi doorbell called DoorBot.
And eventually, he ended up scratching the Kickstarter idea, you know, working on DoorBot, and it was still not fully clear what it would become until a bit later when he realized that more than a Wi Fi connected doorbell, he could flip home security on its head and become the largest home security company in the world. And, you know, I think of other companies you know, Facebook when it started and others. They didn't start with that big vision.
They just started in a different place, but then, you know, the lane got wider. The vision got bigger and the opportunity sort of presented itself. So I think in that sense, Morgan, week founder has a really unique insight into a problem that other people don't see that secret to me is gold if they then have a great idea on how to solve it or have some early proof points in how they've solved it. Got it. Well, sorry.
I mean, you're a treasure to this community, and I'm very jealous of all the founders that get to have you as an investor. And we're gonna continue to follow your story you go. I know CRV is doing great things on your leadership and with your partners, and it's just an absolute pleasure to be your friend. And thank you for coming on the NFX podcast. James, thank you so much.
You know, I love you, and I treasure our friendship and all the adventures we've had over these years that I I'm grateful for you having me on the show. At NFX, we believe creating something of true significance starts with seeing what others do not. Send this episode to any friends that may need these insights and frameworks, and feel free to rate and review us on your favorite podcast platform. Thanks for listening to the NFX podcast.