That's why I'm really excited about what I do because I focus on AI investments at the pre seed stage. Yeah. And pre seed is anti cyclical. The companies I invest in now are gonna be big five to ten years from now when the next bubble comes around. Mhmm. Welcome to The Investor, a podcast where I, Joel Palofinkle, your host, dives deep into the minds of the world's most influential institutional investors.
In each episode, we sit down with an investor to hear about their journeys and how global markets are driving capital allocation. So join us on this journey as we explore these insights. So we're live now. Again, this is my second one today. Excited to get another guest on here. You know, after my discussion with Idamar, who's our guest today, Idamar Novig from Recursive Ventures.
It's just really exciting to kinda hear more about the ecosystem on the West Coast, especially Silicon Valley, with me being a New Yorker. So Itamar is, an emerging manager, also a really seasoned entrepreneur. Think you had, I think you had a liquid an exit a couple years ago, right? Yeah, that's true. I was, fortunate to be part of the life three sixty journey, and, help take it public in 2019. Yeah. Yeah. So excited to kinda go deep in terms of that entire journey.
And and there's a lot of people that, as a pathway to to venture capital, that's kind of been their jump off point. Right? They were an operator, successfully took a company to liquidity, probably did not want to start another company or just kind of got excited about maybe building a firm. And I think the benefit of launching a firm is being able to support many companies at scale, right?
Because I mean, your your entire time and energy really goes into really building one company and and really taking that to where it needs to be. And it's tough to do multiple things at the same time. So I think you get a little bit of leverage running a firm and investing, opposed to, you know, focusing on one company, but we're going to talk about all that. But again, you know, thank you again for being a guest excited to hear about your journey.
So if we were to just kick this off, maybe you can share a little bit about your family, your background, where you grew up. And let's start with how you started your company, your first company. Yeah, thanks. Thanks for having me, Joel. I'm really excited to be here on this podcast. And thanks for everybody that's listening. You know, I've I've been in startups my entire professional career, which is, you know, roughly twenty years now. Mhmm. And I started off I I'm originally from Israel.
So I was in the Israeli Defense Force, which is mandatory. You know, you gotta go serve your country for three years. And I've been coding my entire life. I think I started coding when I was 11 or 12. So, you know, I had I had, like, decent, you know, coding skills, engineering skills, and I also leveraged some of that in my service in the IDF. So when I left the army, it was actually 4001 that period. Mhmm. That sort of the end of the bubble. So you served for three years?
Yes. Yeah. And I I guess back then in Israel, we just didn't get the memo that the bubble has burst in The US. Right? We didn't get memo, and I was like, oh my god. You know? So what if I'm 21? I'm gonna open this startup company, and it's gonna be massive, and I'm gonna, you know, gonna IPO it for billions of dollars. So I just need to get going. And that's really what I did when I left the service.
I started the software company focused on billing, which was an interesting area back then, still is today in many ways. And, you know, I had one customer. It was the Israeli government, and I thought this is gonna be this massive startup. And then a year in, my single customer, which is the Israeli government calls me and tells me, hey. You know, nobody's really using your software. We're still using pen and paper to get the billing calculations going.
And I was like, no. But we did training and everybody should be up to speed than what you're supposed to And they're like, no, not really. Can we just stop paying you the license for the software? I was like, oh my god. The sky is falling. I have to set I have to, you know, part ways with the seven employees that I hired and basically realized that I don't know a lot about business, and I should learn from some of the best. So my first startup story was, you know, a complete failure.
But guess what? It's a learning opportunity. Yeah, it's also your mentality of how you see life too. Right? So I think people, there's some people that think your failures really define who you are. And, a lot of us have different times in our life. I feel like there's different seasons, right? So there's a great season where you're crushing it and like, you're the hero. And then there's other times in life where you're a low time. And, some people feel like that defines us, right?
Or like, if you're super smart, I mean, I worked in corporate America. Right? So if you if you're super smart and then you got laid off, it's a huge maybe tarnish in your mind. It's like, oh, I'm a failure. Like, I'm not smart enough for, like, working for these sophisticated corporates. So that's who I am. You know, I'm defined by my job, but I I feel personally like we're all these beings and, you know, we can literally kind of take our journey however we wanna, you know, take it.
And I've seen people completely turn things around, kind of like how you did, but you know, any, any reactions to what I just said, or just kind of like, you know, again, I embrace failure, and I encourage my founders to embrace failure as well. Failing fast, as we all know, is sometimes a very positive thing to do. Yeah. Continuing to harp on something that doesn't work or doesn't scale and kind of wasting your time. I mean, time is money. So I don't view failure as something negative.
And also in reaction to what you said, if I was working in corporate America and somebody basically, you know, canceled my entire department and it's not really personal and I got laid off in the process, I wouldn't put myself, you know, I wouldn't think that it's it's a failure.
It's just, you know, sometimes people high up make decisions because they've gotta make their decisions, and it's not it's not really it doesn't really, you know, reflect on on my capabilities and my contribution to the organization. Yeah. Yeah. And I mean, it's, you know, one may say it's just as risky to join a company, then start your own, you know, because at least, at least you can't fire yourself, you know, hypothetic.
I mean, in theory, you can't, but you know, at least you can kind of have some control of your destiny, even if you have to kind of reorganize your company where you're at the mercy of the organization, right? If you're working for somebody. So well, it's true. But you know, if you look at the classic startup journey, it's actually a journey where you start with all the control. And then over time, you have a way control and build something bigger. Right?
Yeah. And I mean, we we can we can have a whole podcast just about that, but then it's a lot of friction sometimes where, you know, used to be your baby as a founder, and suddenly it's everybody else's baby. And and then you even go public, and then it's really everybody's baby. And and you gotta adjust, and you gotta change as a founder. So Mhmm. The perception of, you know, it's my company. I'm in control.
Doesn't really Mhmm. Last all the way through when you have to be addressed as a founder, but that's, you know, it's for all the good reasons, all the right reasons when you do it. Yeah. And I think it's, you know, a framework too is control versus freedom. Right? So if you have full control, a lot of times you don't have freedom because you have to control everything. You have to manage everything.
And then if you can give away some freedom, you you are giving away control, maybe even having somebody operate the entire company. And maybe you're, you're a chair chairperson, but so tell me about the next chapter. So the company didn't work out, you lost your sole client. So what did you do? You just, dissolve the company and just thought about the next step? Dissolve the company and figured out that I should go and work for people that know more than me.
They're smarter than me, are more experienced. I started working in the Israeli tech scene in a bunch of startups. And I was very fortunate to come across the founders of a company called Giga. Mhmm. And that was, you know, 2007 ish time frame. And they were just amazing, brilliant founders.
I've learned so much from And this is an advice I give young professionals who are focused on startups and wanna be, you know, creating their own startups in the future or really, you know, building a career in in in the startup ecosystem. Typically, the advice that I give folks is, look, just find the smartest, you know, repeat entrepreneur that you know, and whatever they want you to do in the company, whatever title you you what you would take on if you would join the company, just do it.
Because really the opportunity it's an apprenticeship business. The opportunity to learn from the best entrepreneurs is the best opportunity you can have to kind of educate yourself on how to build companies down the line. And I was very fortunate that, you know, coming into Gigi, I was employee number five, the first product manager, and the founder founding team, the founders were just stellar. They were they knew everything about the web. Web was the big thing back then.
They were cutting edge from a technology standpoint, from a business standpoint. I mean, they build a SaaS company in 02/2007. Like, nobody was even thinking about SaaS. And it was a developer platform with APIs charging for API usage. This is 02/2007. Like, way ahead of Right? So I was fortunate to learn from some of those folks, and the company ended up selling to SAP for $350,000,000. It was a Mayfield benchmark, first run back company.
So, you know, very, very good VCs, very good founders involved in at the end of exit. And that was sort of my first real experience of seeing the light of, oh, wow, like startups, it could could work. If you do it right, it could work for everybody's benefit. And I think a good tip, you know, Gary Tan put out an episode for students, one of his YouTube shows, where he talked about learning while you earn.
So I think that's a great way if you can just work for an operator, you can learn while you're doing all that operational work and then also get paid, know, it's it's kind of a win win. It's a win win. And again, I would really focus on who would be the best mentor to teach me startups, because it's sort of a profession, right? Like some people have a natural knack for it and they just like build their first company and they get it and they know what to do and it works out.
But the majority of people, that's not the case. The majority of people that know how to make startups scale and and and tick. They have had previous experiences either as, you know, repeat founders through second or third rodeo, or they've learned from really good entrepreneurs, and they kinda know how, you know, navigate through building a company at the earliest stages. Mhmm. Sure. And so you so you worked at a company operated a company all the way out to the the IPO? Well, it wasn't IPO.
We we we we they sold the company eventually to SAP for $20,000,000. And and I was, you know, I've I've I've I was spending time on, you know, the the kind of link between Silicon Valley and Silicon Valley, Israel, right? Tel Aviv, which has the the biggest number of startups, I think, outside of Silicon. Yeah. Thousands and thousands of startups. Huge startup ecosystem back in Israel, right?
And because we also at Giga, we had a help in office in Palo Alto, I was spending increasingly more and more time in the valley. And I, you know, being back then, I think it still is, different conversation. Being the Mecca for startups. Mhmm. I figured that I might as well, you know, move, over, and I moved to The States in 2010 to get my MBA at Berkeley Haas with a mindset of, wow, I really want to learn from the best, maybe I should, you know, try to do venture capital.
And I was very fortunate. I came for school. I was very fortunate that within a few months, I joined I joined Morgantare Ventures, which was a great Sandhill Road VC and and kinda learned, you know, the the the VC, you know, ropes from from some of the best in the business. Mhmm. Back then, I was a junior guy, a senior associate at at Morgan Tower Ventures and it was a great time. You know, I I think about like 02/2009, 2010, 2011. Those are some of the best vintages in venture capital, right?
So, I think 2009 to 2011? Yep. Yeah. Yeah. Yeah. Yeah. Some best vintages in in venture capital. Sure. And I think, you know, the the the time that what we had then is actually what I think would unfold in twenty third, twenty twenty three, 2024, 2025, you know. Yeah. Even conversation but but I was fortunate to be part of the ride from a VC point of view in the beginning of mobile. Right?
So so Morgantair was an inventor investor in Evernote, which back then was really, like, the number one productivity business productivity play in mobile. That was huge. And more in their ventures was also an early investor in LendingClub, which I now consider part of the, you know, second wave of of fintech innovation and and the key wave that's still ongoing in many ways in fintech which, you know, is kind of business model innovation, right? Like trying to rethink how we do finance.
So, that gave me sort of a front seat view into all the disruption that's happening in the world and still happening today. And through that, I was fortunate to also meet Life360, which was brought in to for us to invest in the seed. I did all diligence. We didn't end up investing, but I ended up staying close to the company, supporting them as a as an adviser.
Mhmm. And later on, I decided that I should, you know, basically basically, I realized that there is no clear career path from being a senior associate at a venture fund to being a general partner. The Yeah. The and and the right thing to do for me was to go in hands on, help build another big company, right? A significant company. And then potentially, you know, go back to venture capital.
So now basically, I'm, you know, full circle, having went through the Life360 journey and back into venture capital. Sure. So what was your role in Life360 and maybe you can talk a little more about the company and maybe some of the inflection points that you experienced working there and scaling it to an exit. Well, so I actually did something a little bit untraditional.
Mhmm. And when I came into Life three sixty, I really doubled down on the company because I bought a cofounder, then wanted to leave. So I basically I basically joined the company after its formation, but joined it as, let's call it, the late cofounder because I had that cofounder position. Right? Okay. Yeah. Initially, I was running product. After that, I was sort of doing a bunch of CO type of stuff.
So I started taking on operations, customer support, design, finance, and then over time, I gravitated as the company scaled, I gravitated more for finance, legal, and business development, corporate development. So basically had kind of every role in the company other than CTO and CEO, which, you know, my two partners were were running those. And it was, you know, for me, it was a ten year journey. It was a crazy journey. You know, the company almost died twice, Honestly, it was pretty hectic.
Yeah. We weren't we weren't well well understood. It was funny because on one hand, it's a Silicon Valley company and it's it's it's been so disruptive in its area and it's done so well. But on the other hand, we weren't really fully recognized by Silicon Valley. Like every VC firm on Sandhill basically passed on the deal, right? Sure. And everyone. Why do you think they passed? Was it just like product market fit or just the business model or they just weren't interested?
I think they didn't understand life three sixty. And I think many people don't understand life three sixty even today. So so I'll give a little bit of background. Yeah. So, the way I view Life three sixty is we're basically the the family network. Like a safety and peace of mind product for families, for parents, and for teens, right? Yeah. So, the the the first functionality which is free and will always remain free.
It's a freemium app is gives you the ability to see people's location in real time, right? So, you integrate it in with the Google, the Apple tag because that would be nice to put a little tag in my my little son's book bag. Just in case, you know, I I don't know where he is, at least they can kinda, you know, have some tracking of where he is, because he's not he doesn't have a phone right now. Actually, life three sixty acquired tile. Oh, got it. Okay. So Tyler is part of life three sixty.
And today, life three sixty enables you to see track whatever you want to call it. People, pets, and things. Right? Sure. So, there's tags, there for for things and and people and then, there's also, you know, the smartphone itself. If your kid has a smartphone, then, you can see where they're at. They were supposed where they're supposed to be in that right neighborhood where, you know, in their friend's house and kind of know that they're safe.
And I think what a lot of VCs missed here is that there is demand for this product. Like parents and teens, they want this product, because it creates this contract that helps everybody feel a little bit safer, that things are under control, and it creates that peace of mind. So there's real demand for the product. And that's also what I saw when I was doing diligence as a senior associate on the company.
I was like, wow, at the top of the funnel for this company, there is massive demand like people want this thing, right? So that's really the basics. Then on top of that, what we built is really a robust freemium safety and peace of mind product for families. Think about it. It's a membership. Think about it like Amazon Prime, but for families that wanna have a little bit of, you know, peace of mind, day to day.
So we added features like crash detection and response, which is a life saving feature. Right?
Basically, using your smartphone and using the accelerometer, the gyro, even Bluetooth, we know that you've been going, you know, 50 miles per hour, got hit by the side at 20 miles per hour and got dragged for 50 yards and that this is a severity eight accident and we can really, you know, at the time we see that accident, we know in real time, we know the location and we can have an ambulance get to you faster.
And, you know, last three sixty sends dozens of ambulances daily now in The US, you know, company has 15,000,000 monthly active users, one of the biggest apps in the world. When do you think humans will be comfortable with implanting a chip? You know, maybe maybe right here or something, know, like, right here doesn't hurt that much. It's like an earring, But like implanting something to kind of just track people better? Do you think we'll ever be comfortable doing that? I think we will.
Yes. I mean, if it's like on a piece of extra skin or something, know, I mean, I, I probably put it on my case, the benefits are gonna be so crazy. Yeah, it's super safety for tracking. So you know where everybody is. But that I'm not sure tracking by itself is a big enough benefit that would justify that intrusive intrusive device. But if I give you a device, let's say it's an implant in your brain, that would help you instantly recall or instantly access any type of data.
I think the benefits would be so huge that they would outweigh any potential concerns around having an implant. It's really for me an equation of benefits versus downside. When the benefits outweigh the downside, then I think the accelerometer, you know, so especially with elderly people, if there's a fall, a lot of times there's there's no knowledge, you know, you know where they are or to your point. Right? But you don't know if they actually fell.
So if there's some some type of tracking or some type of motion detection, which is like a not a typical way that they've moved really, and it kind of relates to a fall, at least it kind of gets you to be aware of that. You can just maybe triple check to make sure they're okay. And if they're not picking up the phone, you know, and it's been an hour, then at least, you can do something about it versus not. And Life360 is a player in senior care as well.
And there's a lot of, opportunities in that space. I don't know if you've been following the senior care space, but I think it's one of the spaces that has been least disrupted by technology so far. So if it's the biggest market size, everybody's gonna everybody in the entire world is gonna be old, right? So, so there's always some type of need for it. It's not going to become obsolete, like I'll only care.
As long as there's humans on the earth and the population is growing, it's a growing, in my mind, a growing market size. Correct. So with life three sixty, I think the the bottom line is it wasn't well understood early on. People thought about it as a tracker. They didn't understand that actually what we're building is the leading family brand and safety and peace of mind product.
And, you know, I think now folks understand that, you know, the company has gone public, it has, I mean, all the data is out there, you know, hundreds of millions of dollars in revenue, 50 monthly active, 50,000,000 monthly active users and over one.
5,000,000 families paying for the paid products which include a bundle of of several things, not just the crash detection responses, also identity theft there and and and and medical assistance and a bunch of other products that really help, you know, parents have more peace of mind when when it comes to, you know, the safety of their family. Yeah. And the and then what were some of your biggest learnings working there?
I know you, you know, literally took that ride for ten years, you told me the company, you know, almost went under, that's pretty typical for every single business. There's, there's that time that that happens. But what are your biggest takeaways and maybe life and also in business, just looking back if you were to summarize? Yeah. I mean, well, there's a lot. What would be the highlights? I guess, what brought us here is not necessarily what's gonna bring us to the next level.
Mhmm. That's that's I mean, people say that, but a lot, but it's kind of when see it firsthand, you understand it in-depth. I think startups in their journey to scale up, then they tend to break culturally, right? And their mode of operation, the way they operate tends to change rapidly at certain points, right? The first point that I typically see startups kind of break in is somewhere between fifteen, twenty five, 30 employees.
And that's when you get to a point where there's not just like the founders who are running the company and a bunch of, you know, employees working with them. Suddenly, you you introduce management to the company and there's layers, right? There's at least one layer of management under the founders. And whenever that happens, the whole communication structure breaks. And you have this need to start really reinforcing, you know, values and culture.
And here's how we do things in a company in this company, right? So that's kind of the first point where you need leadership needs to change and adopt, Then, typically, there's another breaking point. It's like, what's the what's the purpose of the management? So there's the maybe tell maybe for an for the audience, You can maybe just give you don't have to give a specific example. But like, a typical example, when they get to scale, round is that?
Is that like, growth, growth, equity around where they get to that stage? Or, you know, so there's the co founders, they probably hired a team of engineers below them, probably some product developers. Right? So it's kind of still a core team. And then what stage do they need to come in and hire, like, like a, like a chief customer officer or something like that? Guess what's that? What are those titles of those people? And then kind of how does that change?
I think it really depends on the business and be it really depends on the founder's DNA and what they're good at. Right? If as a founder, you're really good at one thing, let's say engineering, but you're not great at handholding customers fruits to success, then you might wanna hire a chief customer success officer early. I don't know. It really depends on your situation. But typically, senior management is brought in when you have product market fit, when you're ready to start scaling. Right?
Yeah. I don't expect as an investor. Mhmm. I don't expect founders to kinda, you know, parachute in senior executives to figure out what the product should be and where the product market fit. Yeah. That's typically the founder's job and the founding team early employees job. And once you have it, once you know what you're selling, who exactly is the buyer persona, and how to best serve them, then, you know, potentially, you're ready to scale up.
And that's when you need to increasingly add more and more and more executives who have experience in scaling up organizations. Yeah. So I would say in my opinion, you know, I'm assuming definitely after series A, but, you know, probably around the late series A series B is kind of when they're really are ready for, you know, more of the senior executive management. I don't know if that's kind of what you're thinking too.
Well, you know, I really think about a company's evolution in terms of product market fit. Yeah. Versus a series of investment they're in. Right? Because, I mean, we have people starting companies, especially we had them during this recent bubble that burst last year. That's at least my view that we're in a bubble and it burst. We've had people raise $50,000,000 out of bat, which is an equivalent to a series A. Do they have a product market fit? I doubt that. Yeah. That that takes time.
And the way I think about it even even like taking it more to a philosophical level is startups, entrepreneurship, being a founder is basically a journey. It's a journey inside the founder's head of how quickly they get from where they are today to a place where they really understand their product market fit. Like, what are we what are we doing? How are we positioning this thing?
The faster you kinda sprint through that and the different stages of, like, getting to that realization of what is this thing, the better off you do, right? Yeah. It's the journey in the founder's And let me let me rephrase my question too. So what is your definition of product market fit? And how do you measure that? Is it a revenue? Metric? Is it, staffing metric? I guess what is product market fit?
In your market fit is when you know you can repeatedly provide the same value proposition to a set of customers to do it in a scalable way. Yeah. And there's a high likelihood that they would be interested in buying and paying and have a high willingness to pay. Yeah. That that drives, you know, decent unit economics. And and and that's really and and of course, there's nuances like. Sure. Know, the go to market for that. Yeah. That's an important part of of you know, product management.
Is your product actually built and delivering all those things that you promised? Of course, that's also important. But but really that that those are the basic building blocks. Do you have something, a product that you can sit in front of the same type of target customer in different companies, in different verticals? Yep. And then they look at this and they're gonna say, wow, I I really wanna consider buying this thing. That's product marketing. Not just one, but again and again and again.
Yeah. Yeah, no, that's, that's a good analogy. And I think also, it's, it's interesting. I mean, I also see it as if you can essentially predictably turn up the dial. So like, if you wanted to, like, if you're at like 100 ks, or 150 ks in revenue, if you wanted to, you could probably turn up the dial to get to like $304,100 ks in revenue, but you still have to kind of like do that slowly or else things are gonna go crazy.
You have to kind of have the infrastructure and the customer customer support in place. But as far as maybe acquiring those customers, you probably could have you just turned the dial, in a in a very repeatable way. And then, you know, it's very easy for the VCs as they're evaluating the companies to maybe see that as well.
And then I also think it's really interesting with with just b to b SaaS, if you're building the product one time, you know, essentially, it's a beautiful thing if you can build it once and then sell it a 100 times. Right. The same exact product. I wish it was that easy. But I think one thing that a lot of founders, don't always think through is this concept of really, like, unit economics. And and why are software companies so valuable? People don't always think about that.
The reason why software companies can get to be so valuable is because the marginal cost of servicing one more customer trends to zero. That's really the power of software. You build it once. Of course, this is very theoretic because you have to keep updating and and and and really make your software better. But conceptually, you build the software once and you can replicate it and give it in the give it to a thousand customers, right?
Yeah. And that's really where, that's why software companies are so highly valued because our terminal margins could be amazing, right? Unlike traditional businesses where you spend a lot of money in cost of goods sold or other, you know, types of services, types of businesses. That's really the magic of software and why, you know, software companies are the most valuable companies in the world right now. Yeah, no, that's, that's, that's totally true. Totally agree with you.
I think it's really the concept of leverage, right? So having a few inputs for many in exchange for many outputs versus, you know, a lot of these physical businesses, there's a lot of labor and time and inputs for maybe a minimal amount of, you know, outputs, right, maybe one or two x outputs. So I think the software platforms and approaches definitely get you there. So you took this company all the way out to to the IPO.
And maybe for the audience, can walk people through what happens typically when a company goes to an IPO. Some of the people here are interested in, you know, learning about, you know, transitioning into VC. But typically, in my experience, you know, if you're part of the founding team or even if you're the CEO, you still have to kind of be part of the larger conglomerate as an employee for, like, three, four years and and, vest out. You know?
So maybe you can share a couple examples of, like, how those play out, the pros and cons of getting acquired by a big company versus just getting bought out. And then sometimes you get bought out in cash, sometimes you get bought out in in shares. So any just high level thoughts in terms of just exits and how founders should think about that? Yeah. So let's start with IPOs because that's, you know, one area that I'm clearly knowledgeable about.
I was actually running our IPO process at Life three sixty. So an IPO is not an exit, quote unquote. Yeah. It's really an a a a a a milestone in the company's evolution of becoming public and living up to being a public company in terms of standards, And setting expectations with the public markets. It is a milestone. It is not a liquidity event, and it's a continuation of a journey. And a lot of folks might think that, you know, going public is magical and money rains from the sky.
No. It is one more step in making your company bigger and more valuable and more impactful. Unlike IPOs, selling your company to a bigger company is, you know, you get liquidity fairly quickly. If it's a cash, you know, buyout, then then you get cash instantly for the value of of the company. And if it's, you know, with with with stock or all stock, part stock, then you can, you know, hopefully liquidate in a fairly short amount of time. Right?
So I think really actually, this is true for any investment slash, you know, funding opportunity around that you're putting together. At any point in time, as a founder, you should look at all the options on the table. I can raise money, which means a selling a selling a piece of my company for this much. Right? I'm gonna get cash in, and I'm gonna give away 20% of my company. Right? That's that's that's a funding decision.
Or I can sell my company and get out of the business now, get cash as a founder, and, you know, here it is. You know, you you you really realize the value of your investment so far, right? And cashed out and of course, there's other options. So, in every one of those intersections, what I encourage the founder to do is really think about what they wanna do and where they can maximize value for all the the stakeholders in the company.
Does it make sense to sell now because that is a local maximum and you're gonna maximize the the value creation for your shareholders, for US founders, and for your employees and customers, okay. That might be the right decision.
Does do you think that there is a long way to go here and we're just getting started and you should take, you know, a funding round in, take the $1,020,000,000 that VCs are offering you, give them the share of the company, and then take that money and invest it in the business in order to create an even greater return for all the stakeholders, great, then that's the right choice.
And every time you get into this funding slash acquisition situation, you gotta you gotta think through that equation of like, what is the path that maximizes value for all the stakeholders in the company? And you gotta be thoughtful about it because it impacts not just you as a founder, it impacts everybody around the table. Like, everybody's relying on the company to make the right decisions there.
Mhmm. So it is an important intersection in the company's life that you have to really think through. Yeah. No. That's really helpful. And, you know, as you're building this this track record of kind of like being a founder, you know, people that do come into liquidity, what have you seen in terms of, like, their next step and how do they what's their what's their, out, like, I'll take on life.
I mean, I've seen a lot of people that come into liquidity, they kind of don't know what to do, you know, so that's kind of the impetus for Tiger twenty one. And you know, they have like, why I guess Tiger twenty one is probably more relevant than YPO YPOs for CEOs. But, you know, there's people that just they just sold their company, and they just kind of maybe fall into some type of weird funk because they're not doing anything anymore. Right?
So, you know, you've been in Silicon Valley, I'm sure you've ran into a lot of people that have been in that situation. So what's the mindset that somebody should have? When they come into liquidity, obviously, talk to an accountant first, to make sure that, you deal with all the income tax and all that. But that's what I would do first, probably.
But any any reactions to just kind of like, observations to your peers that have kind of come into liquidity, and how they think about wealth and like what's supposed to be done next? So I'd say that the cases you're describing are the exception in my world at least. Like most people that come into significant liquidity, those are the type of people that are not gonna stop. Right?
And it's the same mentality of like building a company to really make it great versus building a company to sell it to somebody in the short term. If you do the latter, you're not gonna sell the company because only when you try to build something really, really big and you're thinking about long term, would somebody step in somewhere in the process and say, wow, I wanna take this from here forward to building a huge company with you, and that's why I'm gonna buy it.
You don't get to exit by dumping, you know, assets at people. That that doesn't really produce for in most cases, the kind of Well, you know, mean, I'm thinking about like, you know, maybe maybe an example you're talking about is like Travis Kalanick, right? He sold red swoosh, he probably took, you know, he came into liquidity, I think. And then he came in and then he and then he then he launched I think I think Uber was right after red swoosh, right?
But you know, it's people like him, they keep building right? I mean, after Uber, he's now got he's got cloud kitchen. So that's, that's kind of how I think about that. I see that way. Like, keep building, they go on to the next thing. Yeah. It could be another company. It could be working with other companies like VCs. It it could be a lot of things, but most people don't just retire on some tropical island and and you know, that's I mean, the majority.
Well, I think the whole purpose of Tiger twenty one from, you know, I just watched the video with the founder. So I think it's sometimes it's just good to have maybe a support system or a community of other people that have gone through the same thing to kind of think about to help you maybe think about the next thing like, hey, should I launch another company? Do I have another? Do I have another one in me? Or, or should I launch a, you know, a fund?
And, you know, maybe that's my next question for you. Why not build another life? Why not build another life three sixty type of company or join another operating team? What made you decide to join a fund? I mean, start a fund. I should actually start a fund or continue because Recursive Ventures has actually been around for ten years now. I've been moonlighting. Yeah. And I've had Recursive Ventures one and Recursive Ventures. And you build that track record over time as well.
Yeah. Yes. But now I have I'm really focused on recursive ventures three, which is a full scale kind of full time gig for me. So I'd say, you know, here's the non obvious question. Non obvious answer. I think VC is actually not for everybody. A lot of people that come into VC, they're kind of disappointed because it looks glorious and great on the other side. You know, everybody's rushing to you to get funded, and it's just like you feel like you're at the top of the world.
Actually, VC is 90 plus percent kind of negative in many ways. I mean, you say no to founders 99% of the time. Otherwise, you're not really doing your job. Most companies fail. So there's actually it's it's it's pretty tough and there's a lot of negativity involved. But I'd say you know just more generally being a VC is something that like becoming a VC is something that probably takes five to ten years of training to do. And for me, specifically, I was a VC before I went into Life360.
Kinda spent two years doing that. I also built an incubator called Upward Slabs. Mhmm. At at the same time frame. So I I spent a bunch of years getting basic training in venture capital and really experiencing venture capital then went back to building a company and now I'm back to being a VC. So, I kind of know what I'm getting into.
And I think there are a lot of people now in the category in venture capital with they don't necessarily know what they're getting into, and they haven't necessarily been trained. And it's okay, you know, that's why we have a lot of emerging managers and the diversity is extremely important for us to being able to create innovative and disruptive companies.
Yeah. But at the same time, you know, I I don't think it's for everybody and I think it's because either they're not going to be happy at the job. It's a different job. You're not building stuff. You're really there to support founders, right? You're really on the financing side. It's different. You're not gonna have the experience of building something and seeing it grow, right? So that's kind of disappointing for some folks. That's one.
The other thing that, you know, I've already mentioned is there's a lot of negativity in venture capital. Like, probably one of the most important skills is being great at saying no. Yeah. That's not fun. I know. And then, you know, people don't necessarily expect that and the last thing, especially in this environment is people don't necessarily appreciate how hard it is to a VC. I actually work harder as a VC than I worked as an entrepreneur.
Because what makes it harder than being an entrepreneur? I think as an entrepreneur, you you do a bunch of sales all the time when you're selling your company, you're selling it, you know, selling to customers. But I think as a VC, you're constantly selling because in a way, you're almost always fundraising, especially as an emerging manager. Like, an emerging manager raises money. It's like a big chunk of their job. Yeah. For, like, the first five to ten years.
Yeah. And they don't have they don't have all these huge, you know, LP demo days. Right? I mean, they have they have small private groups that you have to get invited to. You sent me a private link to some event that nobody knew about only because you and I chatted like I was lucky to get that secret invite. Versus you know, like VCs are everywhere you go to the startup demo day, you go to tech stores there. There's a bunch of VCs.
They have like emerging manager happy hours where like, you don't actually have to be an emerging manager to go. So I think it's much easier to meet VCs as a founder than it is to, to and this is my opinion, you know, and, and, you know, I'd like to go deeper on this. But in terms of just meeting, the LPs and getting access to them, finding the right GP LP fit, I think that's also a challenge, too. So I think that's what makes it hard, I guess the profile types. It's one of the reasons.
It's one of the reasons. But on the other side of that, of course, raising money in this private market of JPLP is really hard and takes time and you got to kind of find the right people. But I think the flip side of that is and I'm going to say something a little bit negative but I believe it's true. Even if we take all those emerging managers and we give them the capital that they want, right? You want to do a $30,000,000 fund? Here's your 31. Go. The majority of them are going to lose money.
Because there's only so many good companies getting started every year out there. Right? And there's now a tremendous amount of competition on those deals. Right? And there's still a lot of dry powder out there even though the market is changing and, of course, access to capital is becoming limited. There's only so much. And then if you're really investing in the company, what's your ability to actually guide them to success, right?
So there's a lot of folks that haven't really walked in the founder's shoes, that haven't gone through the ups and downs of entrepreneurship, who are deploying capital now. And in a way, I think it's kind of negative almost because like, don't know how to help founders and founders would call them up say, Hey, you know, dear VC, who hasn't really gone through this journey before, what do I do when X, Y and Z happens? And they're not necessarily going to have the right set of advice for them.
And I think that I see that, you know, I've invested in over 100 companies over the last twelve years. And I see that, you know, sometimes when you take money from the wrong people who are not really, you know, very experienced and skilled in what they're doing, it could actually be pretty bad for your business, right? Yeah. Investors wisely as an entrepreneur. So the following also is VCs, you know, I think you have to pick your LPs wisely, too, right?
I mean, I think it's there's so many similarities, which is kind of the LP GP fit, and then also just the founders. But I mean, I think the other pieces, I think I look at it as closing capital and then essentially fulfillment, right? Like as a VC, you're fulfilling on the capital, you got to find really great deals to hopefully return the fund or at least return the benchmark that's expected.
And I think that's that's a lot of pressure to to make sure that you're performing is a lot of pressure, especially in a very competitive environment. Yeah, probably early on in your VC career, when you're creating a new fund, you'll be working day and night for years and years and years to come. Yeah. And you know, you've gotta both raise and you gotta compete for the best deals and again, as I mentioned, there's only so many of them out there.
There's only X, you know, good deals that happen every year and you gotta be in one of them or more. Yeah. And also the way that the venture capital market is structured, there's increasingly an advantage for bigger and bigger players, right?
Like, you're not going to outdo, outcompete with like Andreessen Horowitz on winning a series A round, unless you have, I don't know, it's going to be really hard, and you're not going be able to create better services to companies than they're doing, because they have unlimited budget, and they've had hundreds of people who's focused on that. So, how do you really compete?
You gotta really find your niche, find your focus, find your differentiation, and and and be able to show, demonstrate that it actually makes an impact in the market and you can get into those, you know, some of those best deals and. And a lot of folks out there raising money, they they're not really in a position to do that. So I think, you know, generally, I'm pretty pessimistic about what's going to happen to startups and VCs over the next year or two.
I think we're going to see a lot of folks just, you know, sort of exit the category or close out their companies because, you know, we're no longer in a bubble and funding is gonna be much more complicated and only the strong and fit are actually gonna be able to survive. Mhmm. Some of the insights I got, you know, just talking to a couple LPs and and I've posted all of these publicly, but I thought they're pretty helpful.
So, you know, the feedback I got and we love your, you know, your insights, especially being on the other coast. But, you know, essentially, a lot of the funding and capital allocation happened like the first part of last year, and then some of it kind of slowed down. And, and then with all that happened recently, what the feedback I got was there was not still still not a lot of capital calls. So in that sense, in the beginning, you kind of think that's negative.
But it is also nice to hear because that means, you know, people aren't panicking, like trying to call all their capital immediately, and people are kinda holding off a little bit to try to find the right deals. And and and, you know, there's a little bit of activity. I think some people have said there could be some, some IPOs this year, but I wanna hear your opinion in terms of just kinda what the emerging managers should expect.
I'm actually going to a little emerging manager meetup, in a couple hours. So I'll be you know, I'm gonna hear a lot of inputs from them too, but just kinda how do you think 2023 is gonna play out, you know, in the next six, seven months taking us to the end of the year. I think we're in a different environment and it's not necessarily a really bad or unhealthy one. It's it's actually what happened before in 2021 and 2022, which I, you know, honestly, I consider that to being a bubble.
And. Yeah. If you, if you're a fund manager and you raised a billion dollars because the foundation was, I do series A rounds, but series A rounds are done in $100,000,000 post. Right? And that's why I need and I need to hit my ownership target of whatever 20%. So, I need to invest $20,000,000 in that round, and that's why I need 50 companies equals a billion dollar. Right? Yeah. Now you're looking at a very different landscape.
Yeah. Where People were raising for, the 2021 kind of ecosystem, and they're kind of stuck in that that vintage now. Right? That goes back to capital calls, I think it's not unlikely that we're going to see a bunch of GPs, bunch of managers go back to LPs and say, you know what, we should actually downsize this through an, you know, mutual agreement, because That has happened. So like the the, know, many of the funds have taken it. They've trimmed their haircut. There's one fund.
I don't know if you saw, Vibe Capital, but they, the the GP was, also operating a company, and he he trimmed down his AUM from, I think, '75 Peter Thiel cut his AUM by half. Look at that. And the order came directly from Peter Thiel according to the news. So so that's and and I think those guys are actually at the forefront of it. You're gonna see other these follow. And think about it this way, just like theoretically.
If startups cut twenty, thirty, 50% of their workforce, shouldn't VCs do the same? Yeah. So I think, yeah, that's kind of the the the period we're gonna go through here, and I think it's natural. It's part of the cycle, and we should just all really adjust. And and it's healthy. It's healthy. Yeah. Because guess what? Out of this, you know, potential tech recession, I think we are in a tech recession. We're gonna see the next amazing set of companies.
Yeah. Come to life and it's gonna be hopefully like 2009 to 02/2011. Best years investment. The best price point to get in because you don't wanna you don't wanna invest when everything's like, you know, like a 50,000,000 pre, you know, getting into the highest price point. So I think kinda coming in, you know, and and kinda readjusting, being lean pretty much as a VC, same same the same way that your your founders are.
That's a good signal to your founders too that you're kind of really, you know, really rethinking things, as well. So besides the AUM drop, which I've been seeing, what other things do you think you'll see with some of the emerging managers? I mean, I think we're going to see a bunch of pay to play provisions.
So as an emerging manager myself, I am kind of staying on the safe side of things, keeping more cash sort of available to be able to continue fund my companies because I don't want to be in a situation where I'm kind of forced out in a pay to play recap when it comes to good companies, right? That other people could be, you know, trying to take advantage of the situation to get, you know, their ownership stake. So, that that is part of that.
Definitely, for emerging managers who are starting, you know, their first fund or the next fund now, just realize what you're going to go into like the private markets have dried out significantly and it's much harder to raise capital and it's it's a flight to to quality, right? So whoever has the track record, they have the experience and they can convince LPs that they can really shine through recession likely. Those are the ones that are gonna come out stronger on the other side.
If you're an emerging manager that doesn't have some of those proof points, yeah, it might have been easy for you to raise in 2021, 2022, but now it's a very different environment. The flip side of that is like we keep mentioning, if you have the capital, right? If you have a fund up and running, I think some of the most the the best investment opportunities are going to present themselves in the next, you know, year or two three. And we also have new disruptive ways such as AI.
So that's why maybe a good way to kind of summarize things in my end. That's why I'm really excited about what I do because I focus on AI investments at the pre seed stage. And pre seed is anti cyclical. The companies I invest in now are going to be big five to ten years from now when the next bubble comes around. Mhmm. And AI is the next disruptive platform. So I can think about a better place to be in than making pre seed bets on AI companies today.
Hi, you know, I'm not really a precede person. I'm more like, know, pre, you know, seed seed plus. And there, you know, so it's very valuable to, to get a couple inputs from you. And I know we're out of time, but just maybe one or two bullets on, just how to be a good pre seed investor. You know, what are some things that you look at over the course of time you built a lot of these skills? But like, know, what are some things that you can look at as you're evaluating founders at the pre seed?
Is it just access? Is it like, hey, you know what, somebody else referred me to this founder? And I'm gonna and I know that, you know, they're vetted? Or is are there things that you kind of, test the founders on to make sure that they're essentially a pre seed? Good bet? I think excesses is part of it for sure. We should acknowledge that.
But I think you got to be really, really good at evaluating whether those are the right people for the task, whether they have the right track record, the right insights and the capability to deliver. For me, over 40% of the investments I make, I would repeat entrepreneurs who have proven their, you know, sort of operational expertise and are able to operate very well in in the target market that they're in. So, so most of them have so most of them have already started a company in the past.
This is their second second go around. Okay. So that helps to mitigate a lot of the risk. Yeah. Execution risk. It it reduces. Yeah. The second thing I would say is is that's really acute in the pre seed is focusing on on big markets, right? TAM. I know this is a thread that that is true for every, you know, venture capital investment and even beyond.
Even when you invest in public companies, you want to know how this topic this this thing can get if it's a younger you know, public company but but it's kind of like when you're building something and it's going back to portfolio construction, when you're building something that's addressing a huge market, yeah, maybe it's competitive, it's hard, right? There's a lot to be done.
But if you're actually successful, if you can disrupt, if you can really innovate in that space, then, you know, the the outcome could be could be massive. Yeah. So, for emerging managers focused on pre seed, coupling those concepts with the right portfolio construction because naturally, a lot of companies are not going be able to make it but if you do, which is what what I do actually, that's what I believe in.
If you make 25 to 30 bits in a fund with strong repeat entrepreneurs who have been able to do it before in targeting big markets that are proven markets where customers will buy a product that works better, right? That really does things way better makes an impact on them and their financials and their operational capabilities for those customers. You're going to hit one or two or three winners. And that's what I've been able to consistently demonstrate.
So to be a great pre seed investor, you got to have access, you got to have a way to really vet the opportunities. And you're going to have the right portfolio construction that gives you the right combination of alpha and beta, and kind of leads to the outcome that you're in there, your LPs expect. Yeah. Well, this is amazing, man. Really good advice.
Great storytelling and hope we get to hang out sometime in person, you know, when you make it out here, when you don't want all your renovations, you know, and the dust. I'll in New York. And I hope to see you here in the in the San Francisco Bay area as soon as well. So we were just getting started. And I want to thank you so much for having me. I do need to jump, but it's been great. And hopefully we can do this again soon. Yeah, it was a good time. Thanks. Thanks a lot.
I appreciate all your time and generosity. Have a good one. Catch up soon. Thanks.