Pete all tend to go in both directions. Right? You tend underestimate the true game changing breakout companies at every stage. And that's why they always look expensive at the time and then cheap in hindsight. And then you tend to overestimate Pete the other companies in the ecosystem, well, half of the unicorns, the, you know, $1,000,000,000 market cap companies are not really worth a $1,000,000,000 Right? You know, the other half will and a subset of that will far exceed what people think.
So Eli, it's great to hear your voice today. You and I have sat down, I guess, for a bunch of years back when you were at the Twitter offices. And, you know, I've been able to follow all that you've been up to over the last 8 years, and I would love to just catch up and talk everything through. You know, this podcast we do is really about early stage founders and getting insights per minute into these podcasts. And then so in that spirit, I'd love to just run through a whole bunch of things.
You and I have so many overlaps and so many common interests. I know you're interested in network effect businesses as one of the best Angel Investors in the world, what I'd love to lead off with is just talking with you about what do you look for? What do you see when you're looking Morgan investments? Beller, thanks so much for chatting today. To your point, it's been a Beller, and it's always great to connect with you. So I'm sorry it's taken so long. I really appreciate the chat today.
The main thing I look for in startups to back or get involved with is ultimately 3 things. Number 1, I care about the product market And, you know, most early stage investors would say the thing that they care about most is the founders. And obviously founders are incredibly important to a company. They're really bad success of it.
I've started 2 companies myself, but the flip side of it is I think the market is even more important because I've seen great founders repeatedly get crushed by a terrible market and I've actually seen some pretty mediocre people do incredibly well if there's very strong product market fit and the company almost runs off on own irrespective of what the founders do as long as they have enough of an advantage where there's a network of factors, something else that will sustain them.
So, you know, ultimately, my focus is on product market and then founders. And then lastly, you know, if the founders were to call me at 10 o'clock at night on a Saturday night, which has happened to me, would I actually be excited to talk with them and wanna jump on and do they get people, ethical, etcetera, all that kind of stuff? Right. Is there good energy between you? Are you excited to help?
Exactly. As a quick aside, I think there's a really interesting question of, is entrepreneurship vouderlimited or market limited. In other words, are there only a handful of markets that are truly open for technology based entrepreneurship at any given we don't need more founders. We just need to direct them in that markets that already exist, or, and this may be the YC perspective. Are we founder limited and the more founders you can pull in, the more great giant companies are informed.
I don't know the right answer to that, but I do feel like we have way more founders than we ever Morgan instance that's created way more companies to talk to. So that's 1. 2 is there's way more industries being addressed by technology. And so it's hard to be an expert at everything. So you kinda have to pick and choose where you're actually gonna try to invest because there may be some really obscure interesting market.
But if you do understand it, while you may really stupid things relative to it. But I think the third thing is the positive version of it is that if you look at every single metric, technology markets are at least 10, if not Pete, tens of times bigger than they were just 10 years ago. If you look at internet usage, time spent online, a number of people with access to the internet, the penetration of e commerce, etcetera.
So by every metric standard, markets have literally grown 10 x. So that means that $10,000,000 niche business is ten times bigger and is now a $100,000,000, you know, medium sized business, which means it's a $1,000,000,000 market cap company. So suddenly there's so many more $1,000,000,000 companies that can be created And therefore, I think there's just a lot more entrepreneurial activity chasing more niches, which actually are interesting when before they weren't. It's interesting.
It's almost like tech is feeding on tech. Absolutely. There's so many tech companies. There's so many people having to use technology to make technology that then technology companies can feed them. You know, I often think of it like Phoenix where If you move a lot of people to the desert, it's something that they have needs.
And so then you have an insurance company and then you have a house and then you have a house builder and from nothing, you develop this whole economy, which is resting on itself. And that seems to be happening in tech as well. And so let's flip the script. How should these early stage founders pick a great or a VC. What do you tell founders about how to choose a good visa? I know you've published extensively on your blog about this, and anybody listen to this should go to Eli's blog and read.
It's great stuff. Would separate how to pick a good angel from how to pick a good VC board member because I feel like those are 2 very different things. I think if you're putting together a set of angels to participate in around then really what you're looking for is a portfolio of people because different people will have different skill Pete.
And just like you wouldn't have a team with, like, 1 monolith type of person, you know, your investor pool should have people who can help with hiring and firing and basic company stuff. People who can help with follow on rounds and fundraising. People who maybe can help with go to market marketing, you know, with a variety of different things. So I have a old blogger wrote about this a long time ago, which was like the 7 types of angel investors and I kinda try and Vietnam.
For a VC investor who's likely to take a board seat, you may want something very different because then you're mixing capital with advice and governance. So if you think about it, venture capital is a bundled product. You get money. You get somebody who sits on your board, and therefore, it could fire CEO or fired you as a founder. And then lastly, somebody is supposed to give you advice, and most people aren't good at all three of those things.
And so when you're looking at that board member, you have to go want somebody who's younger in their career, want more time and energy to support me. There's somebody late in their career who doesn't really have to worry about what their firm thinks about them, and therefore, they can just make decisions on their own. They don't have to go back to their firm for help. Is it somebody who has specific industry experience, or am I looking for somebody who's a great general operator?
Or is it somebody that I've known for a long time that I just trust and that there's a strong relationship? Am I looking for strategic sensibility? So I would treat it almost like a job wreck And I would write out, what do I want from this person who's my board member? And if I were to hire that person, what would they look like?
And then as part of the process of getting to know folks in the vendor community, my suggestion would be to ask other founders, you know, who you've worked with, looks like this, or what do you think of your investors and who's good and bad and where are they good and bad? How do they act if something doesn't work because that's often when, you know, bad things happen from a from a company perspective relative to the investor pool. So I'd almost Pete it like a higher No. That's great advice.
And when you're a startup founder, what do you think the mindset of psychology should be when you're interacting with these various investors? We wrote a blog a few weeks ago about the psychology that they should bring and sort of it was mainly about the mindset of figuring out how to get the most learning from VCs in your meetings with them. What are questions you want founders to ask you or what mindset do you wish they had? Yeah. It's a really interesting question.
I think You know, often when I was raising money for my own startups that I started, I would basically ask a lot of questions around, you know, what are the things that the person can uniquely help with or valuable at what are examples of how they've helped companies in the past, what are examples of where things have gone bad, and how did they help out or mitigate some of the bad things that were happening.
If it's an investor, sometimes I just ask about how do they tend to follow on and how do they think about investing over time with the company, because some people will do that and some will off a certain stages. And so that may impact how you think about it. There's a funny psychology between investors and founders, I think, where founders are coming to the investors and saying, please give me something I want.
The investors sit there and decide whether they're going to invest or not, and the investors might invest in 1% of the companies they look at over the course of a year, at least if you're professional VC and you're doing it full time. And so you get this weird dynamic. It's almost like dating. Right? It's almost like you're sort of an ugly male and she's a beautiful Morgan. She's the one who's deciding, you know, whether you get to procreate or something.
I mean, I feel like the founders come in with this odd relationship, and the YC comes along and flips the script. Say, no. The VCs are bad. They're trying to exploit you. You should put them in their place. You should run FOMO experiments. You should run speed experiments to sort of, you know, deconstruct their strength and their power and reverse it. How do you see that play? I mean, well, you've raised money for Beller genomics and for other startups that you've founded.
You've been alongside of founders that you angel invested in and Beller them raise money from VCs. What would you say about that psychology and how people can navigate that best? Yeah. You know, I think it's important to do some of that, but not overdo it.
And so I do think that if you kind of show up and you say, well, could you please fund me and please help me and know, you're coming from a place of real weakness and nobody's gonna back you because part of what people are looking to back are at least one of the founders needs to be good at James. And sales doesn't necessarily mean just selling customers. It means can you convince employees to join you? Can you convince people to give you capital?
Can you convince other companies to partner with you? And so you need to be convincing. And part of that is that ability to create excitement around what you're doing. And, you know, sometimes your numbers just speak for themselves and you have some distraction. Everybody's gonna chase that gateway. But you do need to come in with a little bit of that.
You know, people are excited about what we're doing, and we're running a process I think the flip side of it is you kinda wanna soften or temper that by saying, you know, we're not gonna over optimize for price, and we're really looking for the right term partner because we realized that if this thing works, it's you're still gonna be involved 10 years from now and say, who do we want along for that 10 year journey And where people tend to over optimize
it is they say, well, I'm just gonna go for the highest bidder. They don't really realize that you're stuck with those people forever. Right. Or the fastest check or the highest bidder. Yep. Yeah. It's almost like you wanna use the marriage analogy. Your cofounder is like your spouse or partner, and then your investors are like your in laws.
And you're gonna see them every Christmas and Thanksgiving and every holiday and, you know, if you don't want to see those people frequently, you probably shouldn't add them as an investor unless you're desperate, or it's a later stage round, and you're just never gonna see them, and that's As investors, we're always asking founders what they're doing that's different. Right? If they ask you what you do that's different, what would you say?
You know, it really depends on whether the company is early versus late. And I think I'm one of the few investors who can help throughout the life cycle of a company. And when I look at where a company needs a lot of help, you know, at the early stages, honestly, there's a really common set of things that have to and, you know, the primary reason companies fail is they either run out of money, which means they'd admit to product market Flint, or the founders fight with each other.
And then the company blows up. Right? And now to get a product market fit, obviously, you need to raise money. You need to hire people. You need to build things. You need to sell your first handful of customers. You need to do all those things and those things are really hard. At the same time, they're not that complicated after you've done it a bunch of times. It's always hard, but it doesn't necessarily always that complex once you learn it.
The part that I think tends to be the highest complexity in where founders need the most help is when a company really starts breaking out and suddenly you're going from 20 to a 100 to 500 people and you're hiring for roles. You've never dealt with before at Gigi and a CFO and you know, VP sales or whatever. Maybe you're internationalizing. You're adding multiple product lines. You're going through reworks. You're buying other companies. You're managing board members.
You're doing all this stuff, and it's all happening at once, and everything starts breaking. Until you put in place a strong executive team, things will continue to break. And then once you have a bunch of great it tends to stabilize because then you can delegate the chunks of the stuff to them. And so during that period where you're breaking up and you don't have executives, that's where I think companies actually need the most help from their investors and advisors.
And then once they get over that hump and they stabilize, it's back to the steady state of, oh, we're buying a company. Can you help out with that? Or, oh, we're doing a late stage round. Can that, or, oh, we're trying to close the CFO. Can you help with that? But it's a very different cadence, and it's back to the cadence of a very early stage startup where it's periodic intense help, but it's not ongoing constant.
Right. Well, I remember when you and I sat down a bunch of years back, you were saying, look. I'm gonna leave Twitter. I'm gonna go help companies move from this sort of, space of fifty people to move to 500 or 1500 people because you really were realizing how much dexterity it requires for founders to navigate that period. And, you know, we see so many companies, particularly in the New York ecosystem, start to grow into that phase and just blow up.
Because they don't have the advice that they get from a guy like you who's been through it multiple times. That's why he wrote the high growth handbook. Am I right? Yeah. But it's basically there's tons and tons of advice for early stage companies in terms to do, but there's very little written for these growth stage or breakout companies. And so it was really an attempt to answer the questions I got most from founders in terms of okay, what does my role as a CEO mean now?
You know, how do I buy company for the first time, or how do I add a second product line? How do I hire roles? I've never dealt with you know, how do you hire a hundred people a month? Yeah. I mean, it requires a lot of balance and a lot of things. Right? And it's like you were saying about even the fundraising at their early stages, you wanna be aggressive, but you also wanna be humble enough to bring somebody on that you're gonna be with for 10 years.
And it seems like saying a little bit the same thing here is that there's so many nuances to it that the best founders are the ones that are gonna be able to balance those things and not go too far in one way or the other. Absolutely. And honestly, a lot of it boils down to, can you hire a few really great people to anchor the rest of the team as executives? Can you put in place the minimal amount of process to make sure that things don't sort of break apart.
And then often you'll be fine if you have strong product market fit. Yeah. And is there anything that you notice about the personality or the psychology of teams that make through that successfully? You know, I feel like there's almost 2 types of teams that make it through, and maybe this is a difference between a company that really needs its potential and one that falls short. So for example, you know, Amazon has exceeded its potential by far relative to how it started or Netflix. Right?
They were sending DVDs in the mail And then they somehow became, like, the media powerhouse of our era and not because they were very nimble and they pivoted multiple times over the life of a company while running a big company and surveyed Hastings is an example of a founder who effectively took a company to a level that probably very few Pete, if any, would have made it to, or Elon Musk was SpaceX, right? It's just There's some singular individuals who really take things to the next level.
And those are the very, very, very best founders. And usually it's a marriage of some things working, and I have resources now let me apply those resources and directions that most people would be scared to go. That's generally the pattern. There's a whole separate part of the journey, which is getting from 0 to 1, and that's incredibly hard It tends to be a different skill saddle if there's overlap.
And, you know, I'd almost differentiate between the people who go from 0 to 1 to the people who go from 1 to 100. And I think there's very few people who can effectively us. Is there anything that you notice about them? Are they smarter? Are they higher on EQ? Did they have daddy problems? I mean, is there is there I think there's 2 separable questions. One is how big does a company get just out of sheer natural momentum of the company? That's eBay. They never really had an act too of any sort.
I mean, they bought PayPal and they bought which were smart acquisitions, but then they spun them off. And so eBay today really isn't that different from eBay from 20 years ago or whenever it was that they got going, more than that, I guess, now at this point, 25 years. And so that's a good example of a company that never really had a second act and therefore is a massive company because the market is so big but they didn't actually do anything that interesting later.
And then there's companies like Google building Waymo, you know, I think Stripe is in that class of company in terms of eventually it's just gonna be this and I think a lot of the characteristics are founders who are continuing to question and innovate things. They're still reasonably hands on. They're empowering their teams to try new things.
And to some extent, when I look at it, the pattern is that the companies that tend to innovate or add a second product line early tend to do that often infrequently late in companies that tend to innovate late actually never innovate again. And so if you're very 5, 6, 7 years to launch your second product area, It usually means you're not gonna ever come up with anything. So it's more of a muscle that people are training early on.
And maybe company like, Facebook gets lucky early on that they need keep pivoting all the time. And so that just becomes part of the DNA that allows them to maintain aggressiveness. And Totally. Or the founder just also happens to be adaptable that way because you know, maybe without Zuckerberg, they never would have done the second pivot, and they just would have been a subsidiary at Yahoo at this point.
And some other social network would have arisen 3 years later that they did the interesting stuff. Yep. Interesting. Yeah. There seems to be a healthy paranoia from some of these founders. Mhmm. Definitely. Not the endy road. Only the paranoid survive. I know it's interesting. Even as Facebook gets to be so big and it's having such an impact sociologically on us, they continue to behave as if they're just trying to survive. Mhmm. Yeah. Kind of an interesting mentality.
Sort of a early stage mentality is maintaining itself even as they're one of the top 5 market cap companies in the world. I think that's one of the interesting things about founder, the CEO transitions. And I think the place where people screw it up is a lot of founders when they leave the company as CEO, they'll promote the person who's the perfect compliment to them to become the CEO. So that'd be like the Tim Crooked Apple. And so, you know, you really appreciate that skill set as a founder.
You're like, this person is a great operator. They help me steal the company. They deserve it, etcetera. And in reality, maybe what the founder should be doing hiring somebody more like them themselves to become the next CEO. You kind of need that person who's hungry and paranoid and scared willing to try new things and destroy their own business and that's not the operator. The operator is the stabilizer. You know, whole career has been stabilizing what the farmers doing.
And so it's really interesting to see this pattern where CEO transitions keep going bad because they keep hiring that non entrepreneurial person or that very operation center person who's their perfect compliment, but again, they need somebody who's more like them rather than somebody who's different from them. What's interesting, I think the stabilizers often come in and they invoke conventional thinking. And often these first time founders are successful because they've broken with thinking.
I was just talking with Keith for a boy recently and he was saying that he aids the term best practices because it supports conventional thinking and whereas great founders need to learn the rules in order to break them. You have a set of playbooks that, you know, like navigating high growth stages and then other cases where you have to kind of throw out the playbook?
Yeah. It's a great point because I feel like very innovative founders sometimes innovative places where they really shouldn't because it's both kind of a waste of time, but also the things that work actually work pretty well. Does this increasing balance think on the product side, you wanna be constantly reinventing thing. I think if there's new forms of distribution, etcetera. But the reality is you don't need to reinvent all your HR practices.
Or you don't need to reinvent financial accounting, you know, tends to backfire. I actually think a lot of technical or product driven founders, and I'd include myself in that tend to over reinvent sales and go to market. I actually think sales is a discipline that's, you know, and technology at least existed for decades. And it actually works quite well and how sales comp works makes a lot of sense and how you run sales teams and goal them.
I mean, all that stuff really works if you're doing top down James. Even if you're doing bottoms up and then augmenting it with this. And, technical founders always want to reinvent that and maybe hire engineers to do the sales or all sorts of things that just don't really actually quite sense, for most products. And so sometimes the real good advice is, you know what? Just go hire a good VP sales and have them figure it out. You know, you don't need to reinvent this whole area.
Yeah. What's interesting is picking which places you need to reinvent, which James you don't, and having someone like you who's been through an attempt or several attempts to rethink all of sales and see them fail every time and go back to the norm could save people years of time.
Who I know has a really good saying on that where he says basically often as a technical founder, your 1st 2 or 3 years of sales is we don't need a sales team and we'll just do it ourselves and we'll do James, and we'll just hire 180. And then, like, year 4 or 5 is, the sales team actually kinda works and let's bring on ahead of James. We're never gonna do anything scammy, like, send the emails and try and convert people through that or direct mailer.
And then, like, year 7, you're like, let's do everything. So his advice now to founders is, you know, just get to your and don't waste 5 years, you know, trying to reinvent everything or saying you're not gonna do things at work. And if some pseudo moral thing that your customers actually don't care about Right. There's a pseudo moral thing that sometimes I find the founders are kind of afraid of sales, but not very afraid of it. They're just kind of against it in a way.
Yeah. And the arguments against it are things like, well, salespeople will just for our culture. It's like, well, no, just hire for culture as you're hiring your salesperson. A lot of founders don't wanna manipulate the buyer. They feel as if it's somehow disingenuous that if the product were good enough, the technology were superior enough, then you would just wanna buy it and you'd see what I see. Think that's definitely part of it.
But at the same time, I did this myself as a founder, you know, you go and you raise money and you do the opposite of that. You're Beller. Right? You're convincing. Saying, here's the big potential of what we're doing. Why would you not do that with customers if you're also doing that with investors and you're doing that with employees and you're, you know, you're doing that with every other aspect of your business? I would agree. I think the CEO and the founders are salespeople. Right?
That just means that they're convincing people of their perspective, but sometimes they might feel comfortable doing it for the VC, but they're not feeling comfortable sometime with their customer, and they don't want those types of folks around. So another thing investors love to ask startup founders is, you know, can this be a $1,000,000,000 business? Are there any really good answers you've got to that question?
You know, I think it's a really tough question because if something was very obvious that it's gonna be a massive business in market, everybody would already be doing it. There'd be no opportunity for a startup. So, definitionally, a startup has to be doing something a little bit non obvious. And then in hindsight, it was like, oh, of course, this thing worked. Right? And so I think it's really hard to estimate TAM for most things.
Or when people estimate it, they use kind of a BS number where they say, oh, you know, commerce is $20,000,000,000,000,000. And if we capture just one sliver, and so I feel like market sizing goes off in both directions. And it's really hard to actually know what the true size of the market is until, you know, you're far enough along that you're seeing real customer adoption, and then you can kind of extrapolate Right.
And so you look at college photo sharing becoming Facebook, right, or air mattresses becoming Airbnb. When you saw a company like tripe early on or Airbnb early on. What did you see that lets you know that that market was that big? You know, I kind of underestimated some of these things. Right? So for example, when I invested in Stripe, I thought it was at the series a, and I think that the time there were, like, 8 or 10 people, I thought, you know, oh my god.
It'd be an amazing success if they're worth a few $1,000,000,000 you know, now I think it's gonna be a multi $100,000,000,000 company over time. So, you know, it's just really hard to know. And I think part of it was I extrapolated the future growth of the internet, but not enough. So I remember at the time, I looked at things that would be comparables.
Like, there was, like, authorized.net, there's a couple other payment services that had sold for somewhere between half a $1,000,000,000 $1,000,000,000 each. And then Bradingtree was up and coming at the time and is worth a couple $100,000,000. So I said, well, you know, internet markets and e commerce has grown so much since 10 years ago when authorized dot Pete got started. And so Stripe can be five times bigger than that, and therefore, you know, 3 to 5,000,000,000, whatever it is.
And at the time, you know, if you go back 10 years, which is right around, I think I made my my 1st investment I made in Stripe 9 or 10 years ago, at the time, there weren't that many, like, 5 or $10,000,000,000 companies, right, that was actually a very, very, very rare milestone. And so even imagining something could be 5,000,000,000 stretch for a lot of things. So, you know, I think, people tend to go in both directions. Right?
You tend to underestimate the true game changing breakout companies at every stage, and that's why they always look expensive at the time and then cheap in hindsight, and then you tend to overestimate all the other companies in the ecosystem because you apply, you have, hey, this is the next Airbnb or this is the next strike of things that just really clearly aren't And so I think for example, half of the unicorns, the, you know, $1,000,000,000 market
cap companies are not really worth a $1,000,000,000. Right? They're probably not gonna end up there, but, you know, the other half will and a subset of that will far exceed what people think. So are there bad answers to this question about how you become a $1,000,000,000 company? Yeah. If you can point to something so clearly that that might be a advantage?
I think it's a bad answer is we're starting off doing this one thing we're gonna pivot later into this other thing based on the momentum of the first thing, and therefore, we're gonna be big. And so I'll give you a bad example. From years ago, people who used to say, well, I wanna win an advance, so I'm gonna start like a Yelp or local competitor so that I get enough liquidity of people interested in restaurants and events, and then I'm gonna pivot it into an events product.
You're like, well, just start an events product. You know? Like, all you're doing is commonly And so I think each startup needs to have a single miracle. It needs to experience Morgan one giant obstacle that needs to overcome to be successful. If you have more than 1, you have compounding small odds, and that means you're very, very likely to fail. So if you have multiple miracles, you need to overcome. I need to be Yelp, and then I need to build events.
You're most likely to just bail out, right, because you're never gonna get there. And you should just go after the target or prize that you really want to begin with and figure out what's the single obstacle and miracle related to that. Yeah. It's interesting. Smart people tend to see all the connections between things and they see a then b then c, and then you have a series of cascading miracles. That, need to happen in order for it to work. It's one of those is low probability.
You start multiplying out low probabilities and you're just gonna fail. So you've started company in 2013 called Beller Genomics. What was your answer to why you did that and how this company became a $1,000,000,000 company? Yeah. I mean, there was 2 or 3 things that were driving color and you know, one of them is Ocwen, my co founder, who's the CEO of the company now, or has been now for, like, 4 or 5 years at this point.
He had hereditary cancer in his family And so his mother's had breast cancer twice. Is that other family members affected? And so part of the impetus for color was just saying, how do we make sure that people have better access to their health information and to important genetic rather information about themselves because it was really hard to get for his family.
2nd, we saw there's a big trend in digital health and genomics other sort of big trends in general, Beller care tends to adopt technology, you know, 10 or 15 years after everybody else. It's a very slow moving industry.
So it felt like it was time for a lot of these different services to really become virtualized in terms of like patient care, delivery, or, you know, other aspects of the Beller care stack the impetus for color was really a mix of personal experience plus this sort of macro shift. I mean, thank you guys for founding that thing. I mean, because you guys are now powering all of the COVID testing in California. Am I right?
Color is partnered to provide a lot of the software stack for the, for the centralized California testing lab that was announced by Newsom. I guess it was a couple weeks ago now. And color is also very active in terms of doing COVID testing and, Sanrisisco and Alameda and a bunch of other places that is working with a big biotech cluster in Boston, and that's all thanks to Altman. So it was really his strategy and impetus to to drive the company in that direction worked remarkably well.
Well, good work on that. So you and Morgan are kind of a dream team of serial co founders that you work together at Google, and then you start mixer labs together, which you sold to Twitter, and then you co founded color in 2013. Is that right? Yeah. How did you guys Pete? And how did you know you were co founder material? That might be interesting to founders. Beller, we met through a mutual friend. I was actually doing an apartment search when I first moved out to California.
So we just met more in a social context than your initial roommates. Then we both ended up working at Google, though, on different products. And then we were both starting to think about different company ideas and things to found at about the same time. That eventually morphed into our first company mix her labs, which Twitter bought.
And then at Twitter, we initially worked together and then went in different directions often in the product, and I ended up running what we called corporate strategy, which basically meant how do you sell Twitter operationally as a company. And then we got back together just our Beller. And at this point, you know, I'm on the board of Beller and I try to help out where I can, but it's really, you know, Ottman's ship in some sense as CEO.
Just asking about the relationship we need to because knowing when you've got a good co founder, something very early stage startups ask all the time. And then there's, you know, a lot of companies blow up because of those relationships. You guys have had this longstanding partnership. Is there something there that you could share with folks about what makes that work? Yeah. This isn't specific to me and Altman.
I think more generically, is the thing that I've observed served is people will sometimes start companies with friends, and then they won't clarify decision making. And they'll say we're equal co founders, we're gonna split equity, equally, etcetera, etcetera. And I think ultimately Beller company needs a final decision maker. If you need somebody who can just make a call and everybody values around that call and use forward.
And so the place where I often see co founder relationships blow up is one that's either ill defined. And so, you know, you you've never actually clarified who's gonna make an important decision if it comes to it, or it's defined vaguely, like, well, this person will run all the engineering decisions, and this person will run all the business decisions. But if there's a decision that's existential with the company that impacts both of those things, you need somebody to be able to make a call.
And so usually when I see companies blow up, it's because of that. In terms of founder dynamics. I think that one of the big myths of Silicon Valley is that every founding relationship needs to be equal Pete people confuse equal equity with equal input into direction or equal exposure externally or equal whatever it may be. And so I think that gets really over extrapolated. And if you look at the biggest companies on the planet, many of them had very unequal co founding relationship. Right?
So Amazon was really just Jeff Bezos. And Apple, you know, Pete jobs was dominant in both equity and decision making relative to Wozniak. And, you know, Facebook, it was really just suck in terms of the primary decision maker there. Right? I used to say in Mark Zuckerberg production on Beller Facebook page. Right.
If you look at almost all the major breakout companies, it tends to be an unequal finding relationship, maybe the counter example that is Google, for example, and eventually they actually hired an air Schmidt and is this weird time for its structure, but most very large market cap companies ended up having somebody who's down with running it in one form or another. Right. And Intuit might be the other counter example. Entireo was really a sole founder too. Scott Right?
Yeah. They've had to travel for a long time, though. So maybe at some point, they transitioned over. Like, they've been swapping the CEO role for a bunch of years. And I think that came later. I think early on, it was one person sort of singularly driving it. And to your point, every startup is a team effort. Right? So it's not like any individual will build everything and do everything.
You know, I think it's more you need somebody who has a clear view of where the company's heading, and that singular view will drive things Yeah. We always say that each of these startups is a work of art. It's gotta have the fingerprints of somebody. It's gotta feel like something special and unique and can make most of the decisions by committee. Is, otherwise, it just feels beige, and it's not really that much art.
I mean, the other part of it is I think often in the startup, it's more important to make a decision, even if it's wrong and move forward and quickly realize wrong than to debate the decision. So at every startup that Ahman and I worked on together, for example, we said, look, if it takes longer to debate something than to build it, we should just build see. That's right. And you don't want the DNA of paralysis around analysis. Yeah. You need to banish that from the building.
Speaking of the building, I mean, what about early stage founders in remote work? Right? I mean, I know article recently analyzing your thoughts about, you know, what's gonna happen here as we've accelerated to digital accelerated to remote certain Beller up you know, one of the magic of startups is being in the same room and changing the business four times before lunch and new data is coming in all the time and that's facilitated by the incredible bandwidth that we get when we're in person.
The whole homo sapien brain has been designed for that. And now we're moving into a different modality where we're talking each other through these pipes. Yeah. Where do you think we're going with this, particularly for early stage startups? I think it's interesting because prior to COVID, if you were to ask, what are the really big remote only companies that our tech companies, there's only a very small handful that reached hundreds of people or more is basically automatic.
The makers of WordPress It's, Zapier and it's a GitLab, which I actually invested in GitLab when it was a handful of people as well and sort of saw them where it was a remote first company. Very, very few companies that actually pulled before COVID.
And I think it's exactly because of the reasons that you say, and it's interesting because if you talk about any other industry, which could do remote work, finance, and movies and everything else, they also see a lot of value in getting everybody together. And so I think post COVID, a lot of things will snap back to the way they were. And I think a lot of early teens still work together.
And I do think there'll be more remote first teams in part because of COVID and in part because there'll be more tooling and it'll be more acceptable. And I think some of those teams will succeed despite the fact they're remote versus because of it. The argument that tend to be made for remote is you know, you could hire a great talent anywhere in the world. But you know what?
If you're five people or seven people and you can't five five or seven great people and one of the main tech clusters you're probably doing something wrong in terms of being able to recruit people. You know, it's not like you need a thousand people early on. And to your point, I think we have a lot more velocity if everybody's room. And so one of the things that surprised me about COVID is the number of small teams that have continued to sort of aggregate live.
You know, they're basically former Beller, and it'll be like four people in a room, and they'll just be working together, and they they're actually not preferring to work, together in some cases. And then obviously there's lots of cases where everybody's roommates Yeah. I've noticed that too. There's a lot of co location of people moving to Hawaii together and getting an Airbnb for 3 months and doing a lot of sort of co living as well as co developing. Yeah. Exactly.
Yeah. And so I think the idea that, you know, San Francisco is dying somehow. I think before we started the podcast, you made a joke that you were the last person in San Francisco. That everyone is leaving. Do you really believe that, you know, San Francisco is gonna stop being the center of the tech world? Or No. I mean, I think when things step back, the Bay Area lease, will continue to be, you know, the primary US based technology hub.
It's always possible to lose some sort of market share equivalent in terms of technology companies, but I don't think it loses half maybe it loses 10%. But the reality is if you look at Beller single industry on the planet, there's clusters in regions where everybody working on a specific thing is in that region. So, you know, for finance, it's New York or Hong Kong or London.
For the movie business, it's Hollywood or Lagos or doing African movies, for example, you know, in every other industry, people find clusters really natural, and they tell you, hey, if you wanna make movies, you should really go to Hollywood never say, Hey, if you wanna make movies, you should really go to Austin. And if you think about it, you can write a movie script from anywhere. You can edit it digitally from anywhere. You can score the film from anywhere.
You often shoot off-site anyhow, you know, in terms of a location. And so why does Hollywood exist as a cluster? And it's because there's lots of network effects to a bunch of people working on the same thing getting together and that supply relationships, partnerships, capital, hiring, everything else. And so that's also true for tech. I don't think the Bayra is going anywhere. I do periodically analyze where is all the unicorn market which is sort of backwards looking.
And over the last 15 months, there's been about a 180 new unicorns generated, which is insane. That means 2 to 3 new $1,000,000,000 market capture have been a change in the last 15 months. And about a quarter of them globally are in the Bay Area, and that's about where the Bay Area was before that period as well. So, obviously, COVID may shift that and New York and LA were actually accelerating a little bit in terms of global share.
And so it's possible those clusters will continue to elevator thrive. I just wanted to step back. What advice would you give to startup founders about where they should start their companies? I would tell people to go to technology. In the context of COVID and shelter in place, being local anywhere doesn't matter that much, although I do see a lot of founders right now, There's some obviously still in the Bay Area. I see a lot of people in LA in New York.
Some of the New York people are heading to Miami. And then I see people in Denver and Salt Lake City. And those are the main people I'm actually seeing founders. I'm seeing a lot of investors go to Austin or go to a few other places aspen and things like that. But from a founder driven perspective, a lot of the really good founders I know are setting up in the cities I mentioned.
And even before COVID, I was seeing more and more people actually organically end up in Denver particularly Pete with families. And I didn't see very many people in Portland or Austin where a lot of the places that people talk about a lot of them. Maybe that's gonna shift with COVID. Who knows? But in general, my advice would be go to a technology cluster If I were to go to one cluster post COVID, it would be the Bay Area.
And then after that, it'd probably be New York and then LA just in terms of size and density and then for people doing interesting things. But again, these smaller clusters performing elsewhere. You can always start a company elsewhere, right? And then Shopify is a giant, and there's other sort of giant companies based outside of the clusters. It's just a lot harder in my opinion. And so back to what sort of advantages do you want to have?
And do you want to have out there that people can upscale you up and as a company, if it starts working and stuff like that? Right. I think people tend to underestimate the power of the network effect of the ecosystem and how much it amplifies, you know, your efforts or your intelligence. Absolutely.
Yeah. You're in the know Currier, new distribution hacks, or you have a bunch of customers you can sell to locally if you're building a SaaS product, right, like a lot of the SaaS companies to succeed and have other startups adopt their software first. And so if you can get your first ten customers much easier, that actually makes a huge difference terms of the rate. It was your iterative learn and start to have revenue and all the rest of it. Makes sense.
Well, yeah, that it's great to hear your voice. Great to talk with you and catch up. Thank you for doing this. Thanks so much for having conversation is a lot of fun. You bet, man. It's great to be in touch, and, we'll talk soon. You've been less to the NFX podcast. You can rate and review this show on Apple Podcasts, and you can subscribe to the NFX podcast on Apple Podcasts, Spotify, Google podcasts or wherever you get your favorite podcasts.
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