Rolling Fun #4: Q4 Portfolio Recap, Crypto Long-view, Uncapped Notes, and Fund Growth
We are back again for the fourth Rolling Fun episode with my friends and partners Bo and Al.
If you aren’t caught up, Rolling Fun is a rolling fund the three of us created. Our goal is to invest in early-stage companies created by interesting people doing interesting things.
As per usual, the episode is full of laughs as we talk through our Q4 investments and updates on prior companies. We start off with some musings on the state of crypto. Then we get to what’s going on with the fund. We also talk about the best way, besides gifting a box of pears, to thank LPs for passing along promising deals. Towards the end of our talk, I spark a friendly debate about uncapped convertible notes.
Links to Platforms:
Here’s what we explored in the episode :
Crypto has imploded. And it’s trying to bring down Larry David with it. But we still believe there’s promise for some long term things that solve problems via the blockchain.
Jonah Hill is our top choice for playing SBF when the movie on the FTX downfall eventually gets created.
Tonic Audio is one of out Q4 investments. Tonic Audio was created by musicians to solve the problem of music (and audio in general) collaboration.
Estelle Engineering, another Q4 investment, is aiming to solve a problem for hardware engineers. They are making product requirements and specs easier to access by digitizing the info, making it searchable and condensable.
NSION is the third company we invested in in Q4. NSION is essentially software for video streaming. Finnish police are already using NSION to find people that got lost in the cold, dark forest.
LPs deserve more than a poinsettia or box pears for referring deals. They also deserve a high five of money. We are talking some shared carry.
Stable Gains is not gaining stably. They are honorably discharging, having been caught in the Luna blow up.
We are still excited we invested in Positive Foods, Omella, Gently, Glyph, and Terran. These companies are all moving forward and look promising.
We settle on uncapped convertible notes having ratified nuance. Generally, they are probably a pass but occasionally might make sense.
The sponsor for this week’s episode is Givewell
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Learn more about Al, Bo, and Rolling Fun:
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Episode Transcript:
Bo Fishback: Even at a cap level, when things are moving fast early on, it is an unfair thing to ask of most teams to go and set their own price. So you need an investor who wants to set a price.
Eric Jorgenson: Hello again and welcome. I'm Eric Jorgenson and I don't know much, but I have some very smart friends. If you listen to this podcast, then no matter who, where, or when you are, you do to. The show explores technology, investing, and entrepreneurship to help you and the rest of humanity create a brighter, more abundant future. This podcast is one of a handful of projects I work on. To read my book, blog, newsletter, or invest alongside us in early stage tech companies, please visit ejorgenson.com. Today, my partners in Rolling Fun are back for part four. These are some of my very favorite conversations, and we have a great time today. We start off talking about crypto, everything that's happening, everything that we think might happen. Then we talk through the investments that we've made for the Q4 portfolio. Then we go through a few updates on prior companies. Then we have a polite disagreement about uncapped convertible notes, when they're appropriate, when they're not. Are they always a bad idea? Are they only sometimes a bad idea? And we resolve the ambiguity in a friendly way. Finally, a few minutes on sort of the fundraising progress we made and the positioning that we're sort of finding as a fund, which is an interesting little tidbit, I think. I'm honored that many readers and listeners here have already sort of joined the fund as co-investors with us. You can learn more at rolling.fun, which is linked in the show notes below. Accredited investors can invest with us through AngelList today, and if you have any questions or would like to hear more, please reach out to me through email or DM. I'd love to talk to you about it. Before we get to our conversation, I want to quickly tell you about another podcast.
I'm a super fan of the Founders Podcast. I've said it before, I'll say it again. It's now my most listened to podcast. I just got the Spotify wrapped, and it proves it. This is quickly climbing the ranks of my most listening hours. This used to be a paid podcast. I've said that before on previous sort of episodes and ads. But recently, David switched to an ad-based model. So if you search for Founders in any podcast player, you'll find the podcast, you'll find the full episodes of the whole archive. It's the white script on the black background. Pick any episode that sounds interesting and dive in. David Senra, the host, is a biography reading machine. He's read hundreds of entrepreneurs’ biographies, founders’ biographies, all through history. And this podcast is a solo cast of him sort of talking through his notes, quotes, and key insights from each book. And it's like receiving a phone call from an obsessive friend who is very excited to tell you everything that he learned from the books that he's reading and the documentaries he's watching. And he has this sort of superpower of connecting stories from Steve Jobs, from Andrew Carnegie, from Ed Thorpe, from Charlie Munger. He's an encyclopedia of knowledge. And since we don't all have time to spend 40 hours reading every detail of John D. Rockefeller’s whole life story, listening to David's high quality recaps in an hour or so is the next best thing. If you're a fan of my book, David has an episode on the Almanac of Naval. Recently, another that I've been listening to is the Essays of Paul Graham. There's a ton of essays. It took him forever to read them. And he's got a three part series where he's talking through the highlights, and I've learned a lot and enjoyed sort of hearing that as a refresh. So check out the Founders Podcast. I really enjoy it. David is a great guy. I've done episodes with him in the past if you want to learn more about his background.
Another sponsor for today is GiveWell, just in time for year end tax deductible donation season. A lot of people make donations during the holiday season, end of the year. But when you donate, you want to know that your money's going to make an impact. You want to know that the charity is going to be run efficiently, that the money is going to do the most good possible. And that's a hard thing to research unless you use givewell.org. They have free research and recommendations about the charities that can have the biggest impact, save the most lives or improve the most lives per donation. Each year they spend tens of thousands of hours researching charitable organizations and doing sort of evidence backed analysis of the opportunities to reach the most impact. They've had 100,000 plus people donate more than a billion dollars. And these evidence-based donations say that the impact of that will be saving over 150,000 lives and improving millions more. This is a free service. GiveWell wants as many donors as possible to have the maximum impact and make informed decisions. They publish all their research for free. There's no signup required, and they don't take a cut. You can just give in an informed way. If you've never donated before, they will match your donation, the first $100, as long as their matching funds last. And you can do that by going to givewell.org. To source that, pick a podcast, enter the name of this podcast, Jorgenson Soundbox, when you check out. Then they'll know you heard about it from me and you'll be able to get your donation matched and, of course, get my ad attributed. Thank you very much for supporting the sponsors who make the show possible. I'm careful to select sponsors that I only believe- I believe in their products, I enjoy them, I think you will too, and I hope that you truly enjoy learning about them. Now with both ears and everything in between, please enjoy this conversation arriving in three, two, one.
Al Doan: Kanye, man. That poor dude.
Eric Jorgenson: We're not going to talk about Kanye, Al.
Bo Fishback: Are we going to talk about crypto?
Al Doan: You got some story out of this, don't you?
Bo Fishback: No, not really. More just it's like lots of story. It's like since our last podcast, crypto has imploded.
Eric Jorgenson: Crypto has imploded. Larry David is getting sued for playing himself as a crypto skeptic in a commercial that they paid him to be in, which is so hilarious. It's like the most Larry David thing that has ever happened.
Al Doan: All right. Tell me the story.
Eric Jorgenson: You know that FTX commercial where he was being-
Bo Fishback: There's a guy selling crypto stuff to him and Larry David is sitting behind his desk. He's like, no-
Eric Jorgenson: Sounds like a scam, I don't think so.
Bo Fishback: Sounds like a scam. I don't like it. But it was for a commercial for them. And they literally have named him in a lawsuit for the whole FTX debacle to say like, hey, no, you were on the commercial. And he was like, I was literally in a commercial as a skeptic. And they are like no, no, but you were on the take and like your named with many, many other people.
Al Doan: Can we get the barista in there too?
Bo Fishback: Yeah, it's a mess. It's a big mess.
Eric Jorgenson: It's the best Curb Your Enthusiasm plot that is real.
Al Doan: The guys that have lost the billions of dollars, they got to be like, what could we possibly do to get some money back? Like, when you lose a billion, what is in your brain when that happens? Like, who can I hurt with me. Hurt people hurt people. That's what they always say.
Eric Jorgenson: People who lost a billion dollars fly to the Bahamas and murder SBF.
Al Doan: People that lose a billion dollars hurt people that have their billion dollars.
Bo Fishback: Yeah, it's a pretty big mess.
Eric Jorgenson: How much do you think it is going to be- Like, is this the Dot Com bust moment of crypto that like in 20 years, we're going to be like, oh, like that was a blip and does it change-
Al Doan: Everybody on Twitter says no, this is good for us. It really tightens it up.
Eric Jorgenson: Does it really change the long term?
Bo Fishback: I don't know. It’s been shaky enough that like I feel shaken by it. I think that this is not like the first one of these.
Al Doan: Do you wish you would have sold your Bitcoin at 60?
Bo Fishback: I mean, I sold a lot along the way, mostly in the high 50s. Which in hindsight makes me seem smarter than I felt at the time when I was like maybe it’s going to 500, but maybe it's not. I don't know, whatever. It's a great lesson in self custody. Like, it's pretty wild that big, very safe, very well respected places where people are like, yeah, I know self custody is a good idea. But it’s at FTX, so it's fine. Or it's BlockFi so it's fine. Or like it all of a sudden is like this is why the big self custody people-
Al Doan: Are my few bitcoins in Coinbase at risk?
Bo Fishback: I'm going to say at this point, yes, everything is at risk if it's not on some cold storage in your house, but even then, you're still exposed to the price fluctuation. So it's like the price is lower regardless.
Eric Jorgenson: Brian Armstrong would say no because like we hold everything one to one. We're regulated. We're compliant. We're like everything.
Bo Fishback: But Sam would also have said that six months ago. So it is just truly- and BlockFi said it also. And then, yesterday, they had their bankruptcy hearing. And they were like, well, we actually, custody one to one and it's in the Gemini store. And it's like, okay, well, then why can't I transfer my money out? And so, I mean, it's messy. It's going to, it's definitely going to burn a lot of people. I think that it's maybe not a full reset button. But like in 10 years, does it look like a blip with an 80% drawdown? Maybe. Or is it like that combined with lack of really tangible use cases? It's like, no, this is different. Like, the Internet was still working and growing then. That's different. Like, show me the good use cases, and then I'll buy it. And it's a little like, it's a little scarier than that.
Eric Jorgenson: We have talked ourselves still, like we feel confident still investing in some crypto things that are very, very long term oriented.
Al Doan: Like blockchain stuff still solves a problem, right?
Bo Fishback: Sure. Absolutely yes.
Eric Jorgenson: If it is a company with one of those long term views.
Al Doan: Tokens as holders of value maybe less enthusiastic.
Bo Fishback: I think at a very minimum, it's a great reminder that if you're going to be writing big checks, doing some diligence trumps social proof.
Al Doan: Do you feel- like, wasn't it a16z was the big backer of FTX? Who was it?
Bo Fishback: I kind of think everybody was at some point along the way, so sure.
Al Doan: And like can you write that a couple hundred million dollar check and just not verify or like look at the spreadsheet? Like how does that even happen?
Eric Jorgenson: Well, that was the letter that Sequoia wrote that was like, yeah, it was a big number that we put in but please remember how many billions of dollars we manage. Like this is a blip in our whole portfolio, we're still outperforming. Like it's all going to be fine. That was basically the letter they wrote to LPs.
Al Doan: Well, yeah, but like, they shouldn't have been able to write that check without getting deep in the numbers. Like, they wouldn't write me a check.
Eric Jorgenson: Especially now.
Al Doan: For even a few dollars without like getting very aggressive.
Bo Fishback: That is where I think there are a lot of similarities to like crazy Dot Com boom and bust, where like an entire sector, the hotness of the sector trumping seriousness of investors, where it's like, well, of course, it's fine because Tom Brady invested and Sequoia invested and the product exists, and yes, there was revenue. So now we don't care about the price. A $32 billion valuation gone to zero in 48 hours means that like, clearly, there was like a lack of diligence, obviously. But like, I think that's what happens in overheated sectors is like all the money goes because nobody's willing to do the work. And it's like a reminder, like you should probably talk to your founders, for example, before you invest.
Al Doan: Once you have like three people standing in line to write the check, there's so much pressure to finish the deal on that first one of like if I don't, I lose this deal. And then you got to make the decision right there, like yeah.
Eric Jorgenson: And it should feel so much different at later stage- like giving somebody a billion dollars as a series D should be a very, very different level of diligence than like Tom Brady's in and they're smart founders.
Bo Fishback: Yeah, that's a thing that I don't think that I have like a great feel for because like I know it's true, and I know as someone who's gone out to like raise seed rounds, raise A rounds, raise B rounds, at each one of those, the expectations from investors like really do change. I've never invested in or been a part of an F round, for example. And so, part of me thinks like, my God, the diligence should be going up and up and up and up and up, and they want to be in your office and looking at stuff and quadruple checking everything. And then the reality is it's like, I don’t know, it's just a lot of money floating around. Yeah, right. And I think that's right. Like, well, they wouldn't be in if that work hadn’t already been done. And so everybody assumes the work has been done. And I think that's like a very tricky thing in overheated spaces. I don't think we'll see it again for a while. We'll see it again in our lifetimes, for sure.
Al Doan: Also, if you're hiding- like, if you're Sam, and you're hiding the reality in there. Like, it's very easy to shut down, like oh, we want to get in there. And you say, look, man, I'm not going to waste my time with this. And they say, okay, well, now, we're back to the decision of like do I be a part of this great story or do I let it go?
Bo Fishback: Yeah, it's funny, like we're going to hear lots of, we've already heard many of them, we'll hear more, of the people who put in 100 million, a billion, 500 million, and it basically went to zero. It's harder to find, but I hope we get to hear some of the stories of like we were thinking about putting in 250 million, and we did not because of this. And I actually hope that LPs and those investors get to hear those stories and be like I'm really happy we are with these guys because they did not lose our 250 million. But those are like- nobody wants to brag about the past. Because at the time, they're embarrassed about that past. Like, hey, we did not put the money in, whether it's because something didn't smell right or we're a stodgy old investor or whatever. It's like, yeah, I don’t know.
Al Doan: You kind of keep your mouth shut on a lot of that stuff.
Eric Jorgenson: And then it's not even a good look of you're like- You're the guy next to the cemetery stone throwing deuces.
Bo Fishback: It’s not a good look, and so I think you don't get to hear a lot of those stories. But I'm sure they were- like for everybody who lost a nine figure number in that, there had to be a dozen who were the passes, who at the time were like, oh, my God, I hope we're not missing out on the next literally trillion dollar company. We're investing at 32 billion hoping it goes to a trillion, and instead within a week, it goes to zero. There are a lot of people who have to be like-
Eric Jorgenson: I have been vindicated. Unfortunately, I can't tell anyone.
Bo Fishback: And that's a crazy dynamic. But it also means there's still tons and tons of capital out there. Great companies are going to be built and all that stuff. People are going to do more diligence.
Al Doan: I mean, there's so much of that, like you make it through high school and then you get married, but like you see on Facebook all these exes. Like I didn't do that one! Guy! Yes! That's not me!
Eric Jorgenson: What's stopping you, Al?
Al Doan: Let me write a post. Dear Britany, if I may, I’m the one that didn’t go out with you. Look at you now.
Eric Jorgenson: Now I know what you do with your quiet moments. I haven't been on Facebook in a long time, but I feel like that's probably what's going on there.
Al Doan: Not enough of it. It's more just like ads for MLMs in the posts or in the marketplace, but there should be more like, to all my exes, I want to tell ya.
Eric Jorgenson: Do an Ariana Grande on them.
Bo Fishback: Anyway, yeah, it's been pretty messy. I think what you said is right, like definitely down to look at cool things being built in the blockchain and crypto spaces. I think like it remains super duper early. Is this going to look like Dot Com bust in 20 years where like, yeah, you just had to be in Amazon and Apple and Microsoft and everything worked out great and not be in pets.com. Or is it going to be like, hey, this whole space is going to end up serving big corporations who need to do distributed ledger stuff? I don't know. I don't know. But like down to see what comes out of this.
Al Doan: You don't have an answer?
Bo Fishback: No, I don't.
Eric Jorgenson: I get the sense this maybe- who knows how long it'll last. Like these are short cycles. But like, this may be the period, like 2000 to 2005, where like bravery is rewarded through like the slow burn of long term perspectives. And I think what we said originally was we want things that are like crypto native, like use cases, people are already in crypto and companies that can work just selling to those or like deep, deep slow burn infrastructure plays. Just change it even more towards the latter.
Al Doan: We love the web 2 entrance into web 3 was really interesting of like we're taking these use cases that like you have to sign up for the funky wallets and stuff, and now we've made it easy to get to. I think if you remove the financial opportunity that crypto represented and force people to like identify the other pieces of crypto that are interesting, like I think all that still holds true.
Eric Jorgenson: I think the web 2, like the consumer facing like not already into crypto stuff is going to suffer for like a while. And if you're trying to start one of those now, it's going to be a rough road. But if you're like- I just went to Money20/20, and like there was a ton of very well funded big crypto companies selling like crypto custody to existing banks and financial institutions. Like, they're sophisticated, they're advanced, they're growing, they are like closing deals. And I think it means we're going to see like crypto wallets inside your bank account within three years. Or at least start to get rolled out. And it's interesting to see oh, if that's the distribution channel, because it's already inside a trusted financial institution, regulators already approved it, I already have a relationship with my bank. Like, if that’s the install point, like I think that's what's added on top.
Bo Fishback: Its hilarious, because it's like so what we're going to do is re-invent the banking system with the banks. And it's like, oh, it's different than what I thought it was going to be.
Al Doan: Decentralized…thanks to Goldman Sachs.
Eric Jorgenson: That's exactly what happened in the early internet, though, too. There were all these like crazy ideologues that were like, oh good, governments are no longer relevant. And like, we won't build commercial enterprises or governments anymore. And all the internet did was like enable the currently existing powerful institutions, it created some new ones. But like, it's very likely that crypto will be even more so because it's so already regulated, like the financial pieces. I don't know, I think it'll be interesting to see.
Al Doan: It's funny, because I was talking to a guy yesterday that’s like building a front to GPT-3, where like you have to kind of know how to write the prompts to get stuff out and same with Stable Diffusion and Dali and stuff, and like being able to come one layer this way, to sort of web 2.0 it where you say, oh, yeah, this is what I'm looking for. And they say- they translate it into the thing that needs to go into the thing to give you the result that you're trying to get. I love that sort of idea for starting a company where essentially you're going to look at crypto and say, or blockchain and say, I understand how this is going to solve a thing, and it's hard for me to do, and I'm a smart person. Like, I'm going to do the little interface to make it easy. And if you- I mean, that's what retail is. If you can own the consumer interaction with the product, you're doing a great job. Like go start those companies. And we will be here; we will support it. Just don't start companies that are holders of asset value because that's not what we need right now. There's 40 minutes on our musings of crypto. I love- because I'm partly here because you guys love this stuff a lot and spend a lot of time and energy in it. And so I've been very curious to hear the debrief on it because I just see what's on Twitter. So nice. Very cool. Wait, does he go to jail?
Eric Jorgenson: SBF? I don't know.
Al Doan: I've loved watching like New York Times talk about him like, oh, this poor guy lost his money again. It's like, wait, wait, did he defraud everybody? Was he malicious?
Eric Jorgenson: He might just like John McAfee and just like stay in the Bahamas forever until- start his own militia.
Bo Fishback: I don't think Sam makes it out alive. That’s what I think.
Al Doan: You think he gets murdered?
Bo Fishback: I don't know.
Al Doan: You think he gets Silk Roaded?
Bo Fishback: Maybe. Like I think jail is definitely in bounds if he could get that far. I think he's going to have a tough go but I don't know. We'll see. I think it's wild that he's remained like active on Twitter and stuff, like completely wild.
Eric Jorgenson: Yeah, I feel like he’s having a meltdown.
Bo Fishback: Yeah, whatever, it's going to be a great movie when they make the movie.
Eric Jorgenson: Can you believe Michael Lewis has been following him around for six months?
Bo Fishback: It's going to be- I cannot wait to read the Michael Lewis book. It is going to be fantastic. I cannot wait.
Eric Jorgenson: Unbelievable. I saw somebody tweet like Jonah Hill better already be gaining weight and growing his hair out. I can't wait to see this thing. Let's go.
Bo Fishback: No I've seen Ryan Gosling as Sam with a hilarious- like it's going to be great drama if nothing else. So happy to get to see that.
Eric Jorgenson: I think Joe Lowe is still like at large on a yacht in international waters.
Al Doan: The billion dollar whale.
Eric Jorgenson: Still waiting for that movie.
Al Doan: Jonah Hill better start gaining weight and growing his hair out for that one too. The Malaysian Prince, come on.
Eric Jorgenson: He’d be pretty good, so would Bobby Lee.
Al Doan: I just want Jonah Hill in everything.
Eric Jorgenson: He's earned it. All right. Do we have other life or news updates? Do you have a town update, Mayor Doan?
Al Doan: No town updates of which to speak. Just had a nice Thanksgiving. That's all I was doing, man.
Eric Jorgenson: Did you cook?
Al Doan: No, we went- well, a little I guess. No, I mean, just traveling with three boys. Dude, I had my first time- like we got home, we flew home, get in the car. I didn't realize that it had been like six hours since these dudes have eaten. So, we get in the car and it is just like WAHHH! I go to hit the drive thru. And I'm like, I’d like three kids meals. And they are like AHHH! The poor lady at the front was like, I'm so sorry. I roll down the window. I’m like this never happens. Please give me food. I’ll do anything. It’s like the movies, parenting, it's great.
Eric Jorgenson: My only PSA regarding Thanksgiving is if you don't brine your turkeys and you roast, you're doing it wrong. You’ve got to get that brine. Don't blame the turkey for your laziness.
Al Doan: You know what I've been into, I’ve been into the Cajun turkey smoked. Make a second one just for sandwiches, you know what I'm saying. How’s the sandwich feed?
Eric Jorgenson: The sandwich feed is strong. Al is constantly guilting me about the quality of my sandwich feed relative to my updates about portfolio companies.
Al Doan: Our fund would probably be doing better if you put as much Twitter effort into our investments and updates as you do into that sandwich feed because that sandwich feed is on fire.
Eric Jorgenson: Yeah, I work hard on it. Thank you. Thank you for noticing. I got a lot of good- people are just like texting me photos of their sandwiches after Thanksgiving. I saw some very impressive specimens. Yeah, sausage wrapped in bacon. I got a buddy Derek who makes the moist maker and he like soaks the middle piece of bread in gravy. Like how do you get the gravy to stay on the sandwich. It's good.
Al Doan: A moist maker. Isn’t that your nickname in college? I made it a third of the way into that and I couldn’t finish. Just slow pitch softball, just laying it out there.
Eric Jorgenson: Too easy. Bo’s currently buying a domain.
Bo Fishback: Google domain moistmaker.com seems like a thing we should at least know that someone owns that.
Al Doan: Glenn Beck owns that already. Come on.
Eric Jorgenson: Oh my god. All right, so while we do that, while Bo does that, Al, do you want to start some investment updates? Some Q4 magic. Our first one was-
Al Doan: So this is who we are writing checks into in Q4.
Eric Jorgenson: Yeah, this is the Q4 portfolio to date. We have three of them. And Tonic Audio is the first.
Al Doan: So Tonic Audio, these are some friends of mine, Ethan and Allison Jennings. I know Allison for like a decade or more. And then I've stayed at their house and eaten wings with them in Reno. They are good people. Allison was an ecomm guru in the beginning and then she's a developer that has built like great, great things that people use all the time. And then she went into Pinocchio, which was an Internet of Things company that she built and did fantastic with. I don't know how the outcome was, but she was like designing hardware on my couch in Missouri when she was out visiting and it was awesome. And so now she's back doing another one, she and her husband, Ethan, and they're both musicians, and they're fantastic musicians, love the music space. And they came with a problem that like they've been staring at about like collaborating on writing a song and making music is kind of a pain. You're still sending files back and forth to each other and you're messing around with Dropbox and trying to- it's sort of like a GitHub for songs would have been nice sort of thing. And so they took blockchain sort of approach to writing music and determining contributions and simplifying feedback and results and all that stuff into music making, and they are rock and roll and they just got through the Tech Stars over in London. And they're building great stuff. And so super, super stoked to be backing them and like just honestly like great human beings that I love jumping in with and like figuring stuff out. And so they've been fun. You can check them out, tonicaudio.com. Go sign up and be on the waitlist and all that stuff.
Eric Jorgenson: Yeah, it's a cool- I remember my first impression was kind of like, oh no, is this sound- are we starting with SoundCloud? Like, is this a better SoundCloud with like some revenue stuff attached to it? And they’re like, no, no, no, this is like collaboration and creation tools. I was like oh, yes, yes, yes. Like GitHub version controlled contribution management, like all for audio, not just songs but like podcasts. Like producing a podcast is hard as hell.
Al Doan: This is a great example of blockchains still solves a lot of problems. Like we should be using this tech in a lot of ways that make lives better. And this is one of those that does exactly that.
Eric Jorgenson: And I think this is a cool- like we might have a- as we look back at like what companies won in the like blockchain-ification of stuff, I think we might end up with like a come for the tools stay for the network kind of thing, where it's like a company that is massively useful, a tool that is useful on its own, like this, that is like, oh, we just use it for collaboration for years before we actually like bothered with the monetization, like revenue driving piece would be really interesting.
Al Doan: Well, that really was what was exciting. It's like we don't have to dream of the future. They solve a problem today that you get to go get behind. And then all the other stuff that's coming down the pipe is what's exciting to us.
Eric Jorgenson: Yeah, it's cool. I'm excited to use it for podcast production. There's a lot of remote teams building podcast stuff. Like I'm not as familiar with the music industry, but I am certain that the remote work stuff is-
Al Doan: They were explaining to me, like and I got a couple of guys that are producers that I talked to as well and they confirmed this, but it's like there's like 50 iterations that will happen on a song, same as like a document before Google Docs. Where you're like wait final, final with my initials? Like, I have no idea which one we're supposed to be working on. And you're just emailing back and forth and hoping that you don't pick up the wrong one while somebody else is working on it. And that's solved with simple version control, but version control in a way that you can actually use and fits in the workflow is hard to do.
Bo Fishback: Yeah, this is one that I think is a kind of company that I love where it's like this is obviously going to exist. And then the question is like, but who's going to build it? And when somebody like you, Al, comes through and is like I know these people and I love these people, it's like, okay, fantastic. That's such an easy bet to make. I think that's going to obviously exist. Is it going to be in one year, two years or 20 years, who knows? But the right people working on it are going to manifest it sooner than later and then the bet is really like awesome people pull off great things like that. So it's a kind of a no brainer, so I'm excited to see what they do.
Eric Jorgenson: Where are they based?
Al Doan: Reno. If you ever get to Reno, go crash with them, man. They are the best and like the greatest hosts, so good.
Eric Jorgenson: We're going to Tahoe in a couple weeks, so I'll be flying through Reno.
Al Doan: Flying into Reno is terrifying. that's a hard airport to fly into because like the valley and stuff. But great food. Reno is so overlooked as a gem in the- well, there's really only two gems in Nevada. Elko is complaining but like you get to Reno, it's still a good time. You have a great spot.
Eric Jorgenson: Nice. I had somebody ask us, like some of the LPs that we're talking to, and they're like, oh, are you like a Midwest access fund? And I was like, I don't think so, but let me go check. So I like ran through all our portfolio companies, the investments we've made so far and was like actually we only have one in the Midwest.
Al Doan: I mean, our networks should produce a lot more in the Midwest. Like I think we're probably non San Francisco and New York focused, not deliberately focused, but like those ones have plenty of people investing in them. And like Lumo is out of New York. It's a buddy. Our network pulled us there. But like most of our stuff is like a Reno I don't think counts as San Francisco, right? Or Austin, Texas, isn't that yet.
Eric Jorgenson: Utah, Miami, Denver, Atlanta, LA, a couple in the Bay, a couple in Europe. But I never love the funds that are like we just only invest in like this one specific geography. That's just like not how networks work anymore. At least not with-
Bo Fishback: No, I agree. I think that's one of those like where do your deals come from, your deals come from like people you know and Twitter and those are just- honestly it feels like weirdly outdated to be regional if you have worked in tech for more than 10 years at this point.
Eric Jorgenson: And been moving and been writing and been podcasting. That's just a weird constraint.
Al Doan: I do like, like if we were Kansas City focused, trying to pull more people out of this ecosystem and maybe giving a few more shots to people that wouldn't otherwise get it. But the ones- like it's a completely different fund. That's not a fund for a monster return. That's a fund to try and improve an ecosystem that doesn't exist yet. And we're clearly focused on-
Eric Jorgenson: We are the monster return fund.
Al Doan: On big swings that we think can make it back. It's such a fun- like really our only filter we put on is can this 100x? And if we believe it can and we can justify that and we like the people, it's doable.
Eric Jorgenson: Yeah, this is the way. Our next 100x candidate is – this is a beautiful transition – Estelle engineering. I'm very excited about this one. Okay. So the two co founders, Mallory and Anne, met at Harvard Business School where they were co presidents of the aerospace club.
Al Doan: What dorks. Oh my gosh. No I’m just kidding.
Eric Jorgenson: We love to invest in nerds. Yes. Like Mallory has been at Androl, Raytheon, Airbus, and she was at Hadrian and like just left to start this company. She was like the first PM hire at Hadrian, who's like manufacturing precision parts for-
Al Doan: I feel like you are just showing off at that point on the resume where it's like I said, all of these, and this one and that one.
Eric Jorgenson: She is just making it easy to invest in her. That's great. We are not mad about that. But that is like the exact background you want to have. Like so Estelle Engineering is going to basically like sell-
Al Doan: If you're writing a movie and were like- you just write that in there and be like-
Eric Jorgenson: If you started with just here's the company idea, like who can you get to make this thing most successful? Like Mallory and Anne are the-
Al Doan: Were you a co president with anybody in college?
Eric Jorgenson: No, I wasn't.
Al Doan: I was the vice president of a math club and vice to the Filipino president, my roommate, Manny, a very nice man. But would love to start a company and just lead with like, I was a vice president of Math club with this guy. I just love that as the headline.
Eric Jorgenson: I don't think she would lead with that. But I thought it was like the right way to introduce the concept.
Al Doan: -as the thinkg like, they're awesome because they were co presidents of the aerospace club.
Eric Jorgenson: You’ve got to know that the founders know each other well and worked together before. You got to know that they know the space.
Al Doan: I'm going to venture to say they are much cooler than what you're representing.
Eric Jorgenson: I'm certain. I'm certain that they are. They're both wonderful, wonderful people. And the concept- I like the idea and what they're going to do because it is very like firsthand observing through their careers how much hardware engineers struggle to like find and work with product specs to build shit. Like, there's a lot of cads out there. There's a lot of- but like, the product requirements and specs are all in like PDFs that people are emailing around, that like Raytheon wrote in 1995. And people are like searching for this stuff. So they're taking all of that cruft, digitizing it, making it like searchable, easy, condensable.
Al Doan: Is this similar to like I'm trying to buy a piece for my John Deere tractor, and I look up the diagram, and you can't click on anything in the diagram, and you're trying to see if that's actually the one you need, and you are not sure.
Eric Jorgenson: And you want to be sure that it's the right year, and you want to be sure-
Al Doan: You are scrolling through thousands of pages of PDFs.
Eric Jorgenson: -for hardware engineers specifically in like this deep tech hardware space.
Al Doan: You can imagine how- I know how frustrating that is just to reorder lug nuts for a wheel. And like zoom into like a plane with all of those schematics and trying to like interact with that would be-
Eric Jorgenson: You're paying hardware engineers like hundreds of thousands of dollars a year to build satellites, and you're like, wait, you have a launch pad on the way because you can't find the right part have a thing- how much would you pay to solve that problem?
Al Doan: In my head, I'm like, well, for sure they have it all figured out. They wouldn't be doing this same bull crap as I'm doing. Oh no, they do. They live in the same world.
Eric Jorgenson: And she's like, let me show you like the problem. Here's the PDF. Here's the sticky notes. Here's like the garbage that we're dealing with like as PMs in this world. And I was like, oh, damn, that is so much worse than I thought. And so the problem is very real. I think it's like unsexy, hard work to like digitize a ton of PDFs, but there's a bunch of customers, and then they can kind of do this really cool- Like, that's a great beachhead actually to like work backwards into like supplier relationships where they are now the proprietary providers of that information. Now they got a little bit of Bloomberg, and then they've got like, oh, we're in the perfect place to like win this ERP business. So like, I see a path to them being like a really, really huge company.
Al Doan: All you need to do is be the preferred method. Like, once that exists and you're still over here paging through PDFs, you just say to your guy constantly like make my life easier. Save me thousands of hours a year and just give me this software.
Eric Jorgenson: And how many times have you like gotten a Slack from an engineer who's like hey, can I buy this thing? It'll save me like 10 hours a week, and you're like yes, buy immediate. So yeah, I think that's a cool- and I love, like we are in this space with a ton of like tailwind. Like space has taken off deep tech hardware has taken off. There's all these like money and growth in this space.
Al Doan: I think people are going to be building more stuff with engineers.
Bo Fishback: Yeah, safe bet.
Al Doan: We should go into this space.
Eric Jorgenson: But we're also not like taking that massive- like it's a B2B SaaS business model with exposure to all of us tailwinds.
Al Doan: How did you find these guys?
Eric Jorgenson: These were referred by Everest Brady who's an LP. He is like winning the trophy for most LP referrals. And he's at Hadrian. So he saw Mallory, like his coworker, leaving to start this company. He's like, dude, you should go meet Mallory.
Bo Fishback: Everest much love much. That's amazing. Thank you.
Al Doan: That's the perfect way to pull people in. You see it happening. You say no, I back- I'm in a fund. They should totally look at this. This is great. I have proprietary knowledge of what's happening. Let's go.
Eric Jorgenson: Yeah. And like Josh Wolf has a thing about this of like the place that we find the next great company is like at the edge of the last round of great companies that we found. I was like, oh, yep, this was like somebody at a growing amazing company like Hadrian, super cool, who's like leaving to start a thing that Hadrian needs to continue to grow. Like, money. I love that. It's also made us think harder, a little harder about like- actually the next company is also an LP referral. And it's been like how do we work with and reward LPs who like bring us companies that-
Al Doan: Well, first, a poinsettia.
Bo Fishback: I was going to say, do we have the best LPs? Maybe we have the best LPs, guys, way to go.
Al Doan: You got him an edible arrangement, didn’t you?
Eric Jorgenson: A seasonally appropriate arrangement is the first thing that you get.
Al Doan: I vote a box of pears. They're delicious. You get the one wrapped in gold. It's a nice thing to open.
Eric Jorgenson: This is the third time today that Al has mentioned pears. I don't know why-
Al Doan: I have a pear tree. I eat pears. I have pear pie. I can pears. I eat them fresh. I'm a big fan.
Eric Jorgenson: You've got a pear.
Bo Fishback: He's the Bubba Gump of pears. Amazing. I didn't know that's what we were in business with.
Eric Jorgenson: I talked to AngelList about like what can we do to reward them above and beyond poinsettias and edible arrangements, which Everest, I'm going to need your address, but rolling funds make it really easy for us to share carry on a deal by deal basis. So we have not like done math on specifics yet, but I think we're going to institute a policy of like carry share with referring LPs.
Al Doan: If you do some of that legwork, we want to give you a big high five.
Yeah, a big high five and hopefully a big check eventually.
Al Doan: It's the same thing in my world.
Eric Jorgenson: A high five full of money. I mean, I think it's a cool thing to be able to say like ideally if you refer us a deal, we can write a bigger enough check maybe then some people can individually that you like make more money by referring and sharing carry with us then you could invest 5 or 10,000 of your own money and because of the LP- like AngelList already has all LP paperwork and stuff.
Al Doan: Old and broken like scouts, new hotness, shared carry.
Eric Jorgenson: Yeah, I mean, for apparently a bunch of reasons. Like they make it pretty easy on us. And all the accreditation stuff is already done. It's pretty rad.
Al Doan: Send us your people.
Eric Jorgenson: And I think it's just like good karma to reward. I know Bo referred- we all have referred deals to investors who probably made a bunch of money and the companies are better off and that's all great and gravy, but like-
Al Doan: And they sent us a poinsettia.
Eric Jorgenson: If we're lucky. Like honestly, you don't even get follow ups most times you like send an intro. Like you're lucky to get a hey, I had a conversation with them and they did great, like we're really excited about it kind of thing without following up individually. But yeah, I think this is a cool deal. And it just feels like the right thing to do.
Al Doan: Bo, you’re a man of few words today. I'm just going to say- Well, you did give us a lot of crypto.
Eric Jorgenson: Bo’s trying not to incriminate himself, unlike Al over here.
Bo Fishback: I like this a lot. I think when your LPs work as scouts for you, because it's good for them and good for you and you can get those incentives aligned, it is like a thing that I'm actually like super duper excited about so like I think us figuring out how to make it super easy for LPs. And much props to Everett.
Eric Jorgenson: Everest, like the mountain. His Twitter bio is like just trying to live up to his name.
Bo Fishback: And I think Mark actually on this next one also referred it to us, who’s an LP, which is like that feels really like the engine stating to turn in the right way.
Al Doan: It's cool too if you like cut of check into us, use us- Like, we're not like a self directed charity fund or something, but like you put money in, have a say in where it goes. We're 100% open to ideas and connections and all that stuff.
Eric Jorgenson: It’s a good way to have- I mean, a lot of LPs-
Al Doan: Also, Eric takes most of those meetings. So it like impacts us very little. We say, yeah, absolutely, talk to Eric.
Eric Jorgenson: We have a bunch of LPs who have said like this is part of me like learning to angel invest more, and I want to be a part of a few funds and like learn who does what and why. So like, what will I learn from being a part of this, and individual companies are actually a really great way to like have some of those conversations. Like Everest has sent me a bunch and sometimes we chat through it. And it's kind of like, hey, this is actually like not that exciting for me for these reasons. He's kind of like, okay, cool, cool, cool, got it. Or this one is really exciting, and here's why. So it's a good way to kind of like interact and have stuff to talk about and move forward on.
Al Doan: Tell us about NSION.
Eric Jorgenson: I’m still not quite sure how to pronounce it. I'm going with NSION. So they're referred by Mark Bedwell, who's a LP. He's also like a board member of this company and has invested a lot and work done a lot of work with them personally. So very high like signal on that one for sure. And this is a special, special round because it was sort of like we are the only institution and we're the only like people outside the company who got to invest and it's because he's an LP. So he's like, hey, we're doing this, like you guys want to put a little money in? Because it's an insider round, it was absurd valuation deal, I think.
Bo Fishback: Good absurd.
Eric Jorgenson: Yeah, good absurd.
Al Doan: They're making money. They're doing a great job and they're giving us a very generous valuation.
Eric Jorgenson: Yeah, it’s like a late seed level of company robustness and maturity for like a very pre seed sort of valuation. So I'm excited about it. I think their tech is really cool. And it's a bunch of like people who have been in the industry a long time. Like, this is not a young kid startup. These are like seasoned execs, builds a board, got customers and government contract customers. So the tech itself is this software infrastructure for streaming video between any devices and any network quality. So their market specifically is these like critical communications. So security, military, police, fire, and then the cool like- the best way to sum it up is like video is the new radio. Like everybody you see with like a radio over their shoulder, like that's going to be a body cam and like streaming video. All the soldiers are going to have it. Like, it is just a total sort of upgrade to all that stuff.
Al Doan: It's just like a Tricaster for-
Eric Jorgenson: It's no hardware, software only. I don't know what a Tricaster is, but I just corrected you as though I did.
Al Doan: Like when Bo goes to a basketball game that he is playing and he sets up a couple cameras, you got a thing on your iPad, like switch between- it's the software, it's not the iPad. But it pulls in all the streams and then lets you sort of create a stream or dashboard that consumes all those, whether it's an iPhone, a drone, or a body cam. Some dude running around.
Eric Jorgenson: Yeah. And so I think, like if you think of the tail winds of this company as like the number of drones and body cams sending feeds to phones, iPads, command centers, and you need like any network quality, instant variability, like lives are at stake, that is a critical, critical thing.
Al Doan: It is funny because you think of this, like data makes a lot of sense. Like, I remember, what was it, Nip normalized the Twitter feed, so you could just be like, oh, from this guy to this guy, like, they made a bunch of money sitting as just normalizing the speed so that APIs could interact with it. You take that video, and it's like different bandwidths, different formats, different all that. Great, you're going to normalize it into one thing and let me write my program against it so that I can just say, oh yeah, I want to see this thing, and I don't have to think about anything else. There's a ton of money to be made.
Eric Jorgenson: A ton of money. It's a hard engineering problem. And so many of the customers are like big governments, organizations that I think it takes like a team with a sort of level of maturity and experience.
Al Doan: Do they need any help? I have a drone. I can beta test. No, I mean, that's kind of the best part. This feels more like a series A sort of stage company that's just doing a little bridge from their seed. So, we're getting in at a valuation that's like within our params.
Eric Jorgenson: Yeah, I mean, the big debate we had is how big can this thing get. And so I think it's kind of a slam dunk, like 20 to 50x, which is like a bold statement. But like risk adjusted, all things being equal, like it is a very robust early stage company.
Al Doan: We are pre rich with these guys, for sure.
Eric Jorgenson: Pre rich again. But I think the like next leg up that is cool and where they might potentially sort of take another order of magnitude is like the value of what can get laid on top of that video feed. So if you think about all the computer vision stuff, all the AI like image recognition, instant communications it can get like fired off, like the video feed itself, if you can deliver it, and if you are sort of the owner of it, can become really, really- can become a platform, I think honestly. Like that's a cool thing to see.
Al Doan: Was wasn't there like- there's a guy that did a TV show that was just like sort of built around the live feed fire and ambulance. You know what I'm talking about?
Eric Jorgenson: Cops?
Al Doan: There's Cops. No, there's another one that's like-
Eric Jorgenson: I don’t think we’re talking about live streaming battlefield footage.
Al Doan: Crisis management thing where like-
Eric Jorgenson: Reno 911.
Bo Fishback: I was thinking more like Minority Report. Yeah. I hope it's more Minority Report and less Reno 911, although I did learn on this podcast that Reno's a lovely town. Is it true that this is our first European investment?
Al Doan: Isn't it true? Isn't it?
Eric Jorgenson: Yeah, I think so, pretty true. We've invested in European founders before but I think this is the first European-
Al Doan: Are we focused on Europe?
Bo Fishback: Are we a global fund now?
Eric Jorgenson: We accept- Yes, we are now Rolling Fun International.
Al Doan: By buying dinner with the fund fees, we are professional investors. Did you know that?
Bo Fishback: Way to go, guys.
Eric Jorgenson: We have accepted money for this.
Al Doan: I didn't want to call it a full time job, but it's a job.
Bo Fishback: And we're professionals.
Al Doan: We're professionals. Do they pay us money to do this? Absolutely they do.
Eric Jorgenson: Now that we've invested in NSION, I think we can also say that we're officially saving lives.
Bo Fishback: Oh, I've been saying that all along.
Al Doan: The kitchen knobs gave us that.
Eric Jorgenson: That's true. Well, this is not the first time we've saved lives. But we are adding to our total. Repeat lifesavers. Mark told me a cool story about the Finnish police are already using NSION to- they like had drone footage. They were- apparently in Finland like it gets dark really early because they're so far north. And the whole thing is just a forest. And so people like just get lost all the time in the forest, like cats get lost off trees, and they got to go find them before they freeze because Finland's terrifying. So they're just like flying over huge swaths of land with drones as quickly as they can to like scan it and use NSION to like use the infrared. Like it's not like waiting on humans to recognize stuff. It's kind of like look for any infrared signal that is like above a certain size.
Al Doan: And drive your things as fast as you can across a thousand miles or so. Can we call them if I ever get lost?
Eric Jorgenson: Can we borrow your drone? Al’s got a big enough lot to get lost in his own land and freeze.
Al Doan: One time I was driving my tractor and my- you know the Emergency SOS stuff that happens on your phone when you push the button too long? So like, I didn't hear it. I was out there cruising with my son like mowing trails and like goes, calls 911. They try and call my phone. Of course, it's always on silent. It goes right to voicemail. Then it sends a text to like my sister and my mom and my wife that's like Al's having an emergency. Here's his location. Go to him. And so like I don't think anything of it. I pop out of this trail. And my wife is in the minivan driving through the field, just comes plowing in, like tears running. She’s got the babies thrown in the back. She’s like, are you okay? I got this text. I was like hey, what's going on? My sister comes flying in with her husband from 20 minutes away. Like they're going 100 miles an hour down the road, like we're going to come save you. My mom didn't even read the text.
Eric Jorgenson: Good riddance.
Al Doan: But I was like I’ve got to turn that off, man, that was like I'm so sorry. I'm not dead. Sorry you couldn't call me. I have a brush hog going on my tractor. Anyway, call NSION next time, not my sister. Can I put them as an emergency contact? Just give me the CEO’s number. I want the drone to come find me.
Eric Jorgenson: Next time Dre will just fly the drone out.
Al Doan: Oh, Al’s lost.
Bo Fishback: I like that. That'd be cool. I did not know that's how that feature worked. I've seen that thing before to but never gotten to the like it actually fires off anything. That’s pretty wild.
Al Doan: It calls 911 which is just like in our place, like it's Billy- you need a thing? And they called me back and like nothing happened so they did nothing. I was like good also- then it sends a text with your location, everybody, and they freak out. Now you know.
Eric Jorgenson: The more you know. Also the more you know about our portfolio updates.
Al Doan: Yeah, okay so a couple companies are killing it. All of them.
Eric Jorgenson: We're only going to tell you about the companies killing it.
Al Doan: We have one that's not killing it, Stable Gains.
Eric Jorgenson: Stable Gains is unironically-
Al Doan: Stable gains was the staking- we take ACHs to stake money against crypto assets and help you get those returns.
Eric Jorgenson: They got caught in the Luna blow up.
Al Doan: You could not ask somebody to like be a more class act through the implosion of their company. Like they did a fine job, was literally just on the wrong track.
Eric Jorgenson: I mean, they are honorably discharging their duties. But it does look like that company's not going to be left with any capital probably. The legal and regulatory compliance stuff is just like dwindling them down and they're looking for the exit ramp. It was our minimum check size. So like, I'm going to give the Sequoia line and say like, we're okay, other companies in that corner are doing great. That's not how we hoped that would go but that's-
Bo Fishback: In very, very, very early stage investing, you're supposed to lose money on many investments.
Al Doan: Eight of the ten are supposed to go- at least six of the ten. So like this is in the right category. We were early. We tried a thing. It didn't work. That's fine.
Bo Fishback: Yeah. Knowing everything we knew then, I would do this deal again. And also doing everything we do now, we would never do this deal. That means we got smarter in the process and that's part of the goal. Much props to those folks and excited to see what they go to do next.
Al Doan: But on the plus side-
Eric Jorgenson: Let’s look something more positive.
Al Doan: Gently.com.
Bo Fishback: Come on, Al. More positive – Positive Foods.
Al Doan: That was bump set, and then I went and got lunch.
Eric Jorgenson: Al's got low blood sugar. He's hungry. It's been 45 minutes since he ate something, so he's fading.
Al Doan: I'm a big guy. There's a lot of fuel in this body. Positive foods, this is our buddy Skyler. They're killing it. They're doing a great job. What was- I mean, their update, like big up and to the right graph, but they're slowly rolling out new stuff. They are in Whole Foods now. I think they took over the salad bar for some of the regional Whole Foods, which is really exciting because that's like that's much easier to manage than like one off inventory pieces. And so they have less spoilage. They also had some update to their algo that like reduced spoilage on their normal stuff to like 11% where the industry average is like 40%. And so doing an excellent job there. Making more money while losing less is a great spot to be. So good for them. And they did their series A. Was that new between the last podcast and this one?
Eric Jorgenson: I think so.
Al Doan: Yeah. So they moved into their series A. It's just a cool team. And it's such a cool product to like be excited about, where you are like, oh, everybody in America can eat fresh food every day because we're going to solve the supply chain issues. Great.
Bo Fishback: I love how they write great investor updates, really, really, really good investor updates. So that is one of those when you're on the investing end, you really appreciate it. When you're on the founding end sometimes a lot of people are like, oh, I got to do another one of these. But like props to them for being like thorough and clear and really-
Al Doan: Its always very satisfying when you make- like, oh, we made money again. Nailed it.
Eric Jorgenson: Actually all of the companies that we're going to talk about write good investor updates because that's how we know what's happening.
Al Doan: We can tell you a few companies we have no idea. Looking at you Dusk.
Eric Jorgenson: The shade gets like slightly stronger every podcast. Omella also like not just up and to the right but like step function up and to the right. The part of it is I think seasonal, like the back to school stuff is a big jump for them. But like, yeah, a lot more organization starting, a lot more micro schools, a lot more-
Al Doan: Remind me what Omella does.
Eric Jorgenson: Omella is a platform for mission driven sort of organization. So like, HOAs, that is probably a bad example. But mission driven organizations, churches, micro schools, sports leagues I think are sort of their like bread and butter right now. But they make it like really, really easy to collect information and money from a wide variety of families, people, groups.
Al Doan: So you kids are going on a field trip, and you need 26 of them to pay you money-
Bo Fishback: It is 10x better at least than Venmo. That is the-
Eric Jorgenson: It replaces the Venmo, spreadsheets, sticky notes, like the chaos salad that goes with like regular money collection from a large group.
Al Doan: Update your spreadsheet when you see that payment come in.
Bo Fishback: It's really clean. They're smart. They're growing. These dude you bet on every day of the week.
Eric Jorgenson: I just got an email from them. They launched new features. Like they write great updates. The first of the month, every single time, like here's our KPI. Here's our progress. Here's like three bullet points. It's money. Yeah, and this is like the whole thesis, like Brett is such an amazing like customer driven product iterator.
Al Doan: And this was your buddy, right?
Bo Fishback: Eric's buddy. I mean I knew him through Eric maybe prior even to Omella.
Al Doan: Good network, Eric.
Eric Jorgenson: Brett and I went to college together. This is what he did with Remind too. He's just like ruthless.
Al Doan: You were just telling us how much you hated going to college with Brett. That's so weird that he-
Bo Fishback: I remember that. I remember that, actually. It was just right before the podcast started.
Al Doan: Yeah. He didn’t turn it on yet. But yeah, so weird that its one of our best ones.
Bo Fishback: Brett is one of those where if he decided he wanted to shut this down tomorrow and start another one, it would be like a cool can we invest?
Eric Jorgenson: -come along every day doing anything. Yeah, he's awesome. And another step function was Gently too. They have been shipping like crazy.
Al Doan: Well, it's funny because we invested in them as two people.
Eric Jorgenson: Two people and an email alerts product.
Bo Fishback: With a different name I think, even.
Eric Jorgenson: A different name 10 months ago.
Al Doan: And then they raised a couple million bucks and like started building a team, and it's like, oh man, two plus five. This is great. They're doing great. So they're hiring, doing a good job, product looks cooler and cooler. But literally their usage went like from a nice little trajectory to like a steep jump that they were excited about.
Eric Jorgenson: They should get a huge holiday bump too I would guess.
Al Doan: I bet. Yeah, I bet. And again, Gently is the second hand aggregators. So like, you go there to search amongst Poshmark and eBay and Real Real and all those sites where people are going to list stuff, and they do the hard work of like identifying what that item, associate it with the actual product. So you can say I want to follow when a pair boots, this specific pair of boots for-
Eric Jorgenson: Size 14 high heeled goldfish boots for Al.
Al Doan: Once those show up, send me a note. And I'll look at it every time. And it just, it looks everywhere and sends you that, or shows you that stuff which is cool.
Eric Jorgenson: Alerts is where they started. They now have like platform, like they're building like the searchable sort of explore pages and like they're iterating- their vision is like Amazon for secondhand, to be the marketplace. I think alerts is like such a smart place to start.
Al Doan: They are like we don't ever want to be the marketplace. We just want to aggregate all these guys and let them do the hard work.
Eric Jorgenson: They make money every time you click through and purchase stuff. I'm going to buy you guys Christmas presents through gently.com. That's my resolution. Feel free to join in. No pressure.
Al Doan: I’m going to buy something else.
Bo Fishback: I'm going to get you the secondhand moist maker. I did learn, just so we- while are on those guys, I did learn that moist maker is currently owned, moistmaker.com, by a band that's now my new favorite band.
Eric Jorgenson: We've got to make that the outro music, Moist Maker. Let's see if we can license that real quick. Anything else on Gently? Like they're just growing like crazy. Please use them, buy stuff.
Al Doan: It's so fun when you like- I mean, this is with anything, but when you throw money into a thing, like I don't know. I think I like the idea. It makes sense to me. Let's go. And then it like works. You're just like, it's happening. We're watching a company happen.
Bo Fishback: And fast, right? Like they have like the web 2 dynamic of like the consumer web piece where like you hit the right vein, you find the right audience and it kind of goes. Like this is not an old company. Frankly, it feels very different to me than like what's in stock for Estelle Engineering. Like, hey, we're betting on a couple of really smart people who really understand the space. But we know this is going to be a grind over years to turn it into- This is one of those where it's like, oh, hey, right out of the gate, off to the races. Let's go guys. So it's cool to see those different kinds of companies in the portfolio.
Eric Jorgenson: Every time I get their updates- yeah, those are cool. Yeah, we have a very- I guess- I don't know, Tonic Audio probably doesn't really count as B2B. Is that C or B?
Al Doan: They'll be working with like music labels and stuff.
Eric Jorgenson: Okay, so yeah, we've got a pretty like b2b software heavy quarter. Accidental, but rad. I feel like those are going to make some money.
Al Doan: If you're not selling to consumers, you're going to make money.
Eric Jorgenson: It just feels less fickle. I don't know, maybe we're not taking enough risk. But I feel like those are all going to do great. Cool. Glyph. What do we- I don’t want to tip too much tea on Glyph.
Al Doan: A few updates. So Glyph is exciting. They changed their design. They're working through a bunch of stuff. This is a great team that knows how to execute already, instead of like- we expect to ship by Q3 next year. It's going to be a tight deadline. We think we can get it. We've already got like the factories online in China. They can get the manufacturing done. They’re solving a bunch of stuff. So enthusiastic supporters of them. Really a lot of our value is going to come as they start working through the distribution and marketing. We're going to- we'll hop on the phone again with those guys, but like another great updates. And they're not selling anything. They're just figuring their stuff out and watching it happen in real time, it's like we like this even more. This is great, which is a nice- All of our companies we haven't said that. Like some updates, you're like, oh, I'm not as excited about this one, but you've got my money, so that's fine. But when they're like, oh, you guys figured even more stuff out, I like that a lot.
Eric Jorgenson: Yeah, they're flying. I had no expectation that they were going to be on shelves in like 12 months. That feels like a crazy pace, but with this team, I trust it.
Al Doan: Yeah. And Glyph was the- it was the, just to remind you guys, it was the original Cricut team, the Cricut Cutter, to be clear. Yeah, they're coming back together because they were trying to solve the cutter plus. It's cutter plus printing, cutter plus printing and making and all these other use cases. We described it as the KitchenAid of the craft room. So that's what we're doing.
Eric Jorgenson: It's an impressive- If they can pull off what is on paper right now, it's going to be huge and quickly, I think.
Al Doan: Terran Robotics, that guy doing anything cool?
Eric Jorgenson: I think they're working on a next fundraise. They're building big big structures.
Al Doan: It’s not just him now, right?
Eric Jorgenson: There's a handful of them. They're added robotics engineers.
Al Doan: They're building real structures though?
Eric Jorgenson: They are building a bigger structure. Well, there's two things happening. One, they're building like a demo structure that is like largely by hand but they're testing finishes. So the main innovation is kind of like the drone and like AI flight to place everything. But they're also, and I don't think they get enough credit for this, like innovating on the material side too. So it's not just traditional adobe. They're figuring out like new ways to finish it and waterproof it and like build really sound, cool structures with it. So, they're doing some testing. And Daniel their like Chief Design Officer is like sort of leading that stuff. And so in their junkyard that they're based in basically, they're like building a big ass, I don't know, 15 feet tall with like adobe thing-
Al Doan: I want them to come build a thing on my property so bad. We just need like the Terran tribute.
Eric Jorgenson: Yeah, they got the first permit to build like a 3d printed- it fits under the 3d printed like qualification or whatever in Indiana. And they're working on that for Habitat for Humanity, which is like a revenue producing thing. And they're just like, if they have to build 90% of it by hand and 10% with drones, they are, if they can get to 80/20, if they can get to 50/50. Like they're doing a cool sort of like iteration between human and drone to keep moving that dial up. I know they're talking to some like seed stage investors. I don't think they've closed any of those. But I think they're like getting term sheets and showing progress and really, really smart cool guys. And just I love that. I love that vision. I think that's some portfolio updates.
Al Doan: What do you think of Twitter and Elon, Bo? I've been waiting to ask you.
Bo Fishback: Oh, God, I don't know. It's wild. Sites still up. It's one of these things where I feel like I've had a conversation like a dozen times over the last 20 years, where it's like, hey, if you have like a business that's really network effect driven like that or that is just a runaway leader in its market, and it is a software product, like Google search and AdWords or something, what would it look like instead of like chasing the 100,000 person company and the trillion dollar market cap, to say like, hey, can we do it with 20 people, could we do it with 50 people? Could you really run a super lean thing? And it's like a wild and aggressive experiment that he is like kind of intentionally pursuing to say like what does lean Twitter look like? And I'm like, I think I'm kind of into it. I mean, I think it's kind of wild and very disruptive to a lot of people. And I can understand why people would get in their feels about it. But I think it's going to be a really interesting experiment that-
Al Doan: Does he turn it into WeChat? Do we get the super app on the other side of it?
Bo Fishback: No, I think no. I think that the super app dynamic in the US is just very different than it is in like other parts of the world. But I think he may make a really profitable, really lean Twitter that can move in directions and more quickly than actually like any tech company of that size.
Al Doan: Do they have any advantage in like contextual ads? Because I mean, honestly, if their ad product got like to parity with Instagram, like they did it, they nailed it. Like, because people- advertisers need spaces to reach people. The problem is Twitter ads suck so bad. Is there enough data in my profile to give you a good idea what I should see?
Eric Jorgenson: I think so. You see such good, quote unquote, good data in the algorithm, in surface tweets, in topics that you- like they're auto assigning new topics constantly based on your activity, like if you feed the algorithm anything, like I think they could be doing- I get ads for prescription drugs and like random, random shit that is like not even close.
Al Doan: Random, ego driven dudes promoting their own tweets and stuff. It's like, I don't want to see any of that.
Bo Fishback: I love Twitter. I love the network there and the product is like good enough that I can love the network without the product getting in the way. I think there was like a different experiment going on, which is like hey, can you keep that network and take care of it and also make the product something that is like a first class experience? And I like hope so. That's what I would say is like I hope so. Because Twitter is the replacement for everything that I used to get news from and it has been for years for me and it's never really- it's different things to different people because it's a network driven product but like I hope the best Twitter gets found and they deliver us something that like really accelerates-
Al Doan: It would be amazing, like if he can cover his billion dollar a year interest payment and like live for two or three years, I think he's got a real swing at doing something cool. Unless Apple takes them off the app store. Little plot twist plot twist. Tim Cook hates you, Elon. Now what?
Eric Jorgenson: Shouldn't have talked shit. Fuck around and find out, Elon. There’s not a lot of people who can- fuck with Tim Cook.
Bo Fishback: Yeah, I think it is another very fun drama going on in the tech space that is a distraction from FTX and is easily as dramatic probably if you're on the inside. And I hope that they pull it off as a user. That's what I'd say. Like I'm probably like less inclined to have too many feelings about like what it is like internally because it sounds hard and messy and whatever. But I hope what comes out the other end is like something awesome.
Eric Jorgenson: I hope that for, like as an Elon fan too, which is like a dangerous kind of thing to say these days. He's got so much haters. But like, it was so clean like two years ago when it was like this is the guy that did Tesla, he did SpaceX, he did PayPal, like he's pushing like science and technological progress forward and now is just like a little bit more like, oh, I kind of wish you'd stay out of this fucking mess and like stayed Tony Stark.
Al Doan: He does become like very exposed here.
Eric Jorgenson: And it's a very different thing. Like there's a lot more feelings about it, to your point.
Al Doan: I feel like its kind of like running for president where like now today, you'd say why would anybody ever run for president? It's a huge, huge mistake. Where back in the day, it was supposed to be like oh well, you have means, you should run for president so that you can help us. And like, as Elon stepping into this, it's like, dude, you should never expose yourself to people, so much criticism, so much feedback. You should just stay on the sidelines, let Twitter slowly die. Like that would be a better outcome for you. But like, also, he's an egomaniac and this is what's driving him. So you're like, well, I don't have a ton of sympathy for you.
Eric Jorgenson: And I agree that it's important. Like, I don't think it's like a quixotic attempt at anything but like- I never know how to say that word. I mean, I know the etymology. I just don't know how to say it. I only read it. I don't know anybody else douchey enough to say it, so I've never heard it pronounced correctly.
Al Doan: Let me hear it again.
Eric Jorgenson: No.
Al Doan: Can you use it in a sentence?
Eric Jorgenson: Also no, apparently not. Okay, I'm going to throw a glove between you two because a thing that has come up in our life this quarter-
Al Doan: Glove between you two. I don't know this-
Bo Fishback: He's throwing the gauntlet for us. So neither of us have to throw the gauntlet because Eric is throwing it for us.
Eric Jorgenson: Yeah, I'll slap both of you with a glove, and then let you two fight. Because a thing that has come up in our fund this quarter is the concept of an uncapped convertible note. And we have feelings about it. We've had debates. And I think it's worth sort of exploring that for the edification of people who might be investing on their own, might see this, might not know what's going on.
Al Doan: To borrow the words of Maya Bitner who's a great Twitter follower, to borrow the words of Maya Bitner I've never not regretted investing in an uncapped note. Meaning without fail, I mean, the problem I have with investing in an uncapped note, which I've done a few because you're like, oh, yeah, I'm an early believer. And normally, those uncapped notes, you have like two years. You put this money in, and then two years later, some fund comes in, and they get the same stupid deal that I get. I get 20% better, but it doesn't adequately represent the risks that I took. And there's some of them with that money they take at the beginning, can take them to hundreds of millions of dollars in valuation at the point that you finally convert, and there's some that convert at a more reasonable valuation, 20, 25 millionish. But like, still, I'm always like, man, I took way more risk than what these guys did. Like I should have just waited and invested with the people that you were willing to give a price to. And so that's where like- I think that's kind of my stance in the uncapped notes stage is like it doesn't adequately represent what I'm trying to do as an investor and reward me for the risk.
Eric Jorgenson: Brief definition, I feel like most convertible notes have a cap on them.
Al Doan: I was just going to say what you were going to say, but I cut you off.
Eric Jorgenson: But you're going to do it better, so go ahead.
Al Doan: So yeah, when you get a convertible note, like when we invest in companies, we either get a safe, which is like, hey, here's the terms, here it is, and Y Combinator gave us this docs, we all trust it, it's fine. Or you do what's called a convertible note, which is an easy one for your lawyers to pull together. And it says, I'm going to give you a million dollars, it earns a nominal whatever interest so it's treated like a loan that converts into equity at the point that we do a round. And most of those will say like, I'm raising at- the cap is $8 million. And then I have a discount of a couple percentage points where like it’ll convert at 8 million dollars minus 20% or something. And that's what- yeah, that's what an investor writes in.
Eric Jorgenson: So you end up investing, in that case, in a company valued at 6.25ish million dollars, a million less 20% discount. That's what you end up paying for the equity.
Al Doan: Well, in a convertible note, it's the cap. So if they raise at a lower valuation, you get a lower valuation, and it works fine. And uncapped note makes no mention of the valuation and you just ae writing a check blindly and waiting to see what happens, which I hate. Bo, fight me back.
Eric Jorgenson: You might find out that you invested at a $90 million valuation two years after you write a check.
Al Doan: And these folks can show- like a fund will show up and workout the terms and say yeah, this is fair. We'll come in here. And then you're- I mean, you've effectively invested at a $90 million valuation minus 20%. And you say, man, like when I wrote this check, we did not know, we weren’t 90 million confident. We were 10 million confident.
Eric Jorgenson: You earned that like 10x by taking early capital risk on the company.
Al Doan: You should. What's your experience been with it?
Bo Fishback: Yeah, I have invested in some uncap notes.
Al Doan: Did you love it?
Bo Fishback: No, I didn't love it. But I've never done it when the outcome of that raise and that note was providing a company with more than 6 to 12 months of runway. And when there's- it's a very different dynamic, I think, if it is a short term raise from a group of people who really don't- look, the truth is, my perspective is that like the prices don't usually get set by the founders, the prices get set by the investors who are willing to set a price. And I didn't want to be the guy who was going in to set a price at an early stage company. I also did not want them to take my money and like run with it with a 10 year runway. And this is why you don't see like a $20 million convertible note but a 500,000 or a million dollar uncapped note when you know that a company has to go into a raise, and that price is going to get set in less than a year is something that I've just had more patience for, I would say, to say like, Hey, look, you're going to do an A round, you're a baby little company, I want to participate now. Because one of the tricky dynamics with it is it's not true that you would have that opportunity to invest in a year because the fund dynamics, especially with A rounds and even seed rounds, are an investor comes in and they decide they want to do the deal, they want the whole deal. You don't get to participate then. And it's not that, oh, now you get to participate on the same terms as 20%, it's like you're no longer invited to the party because that investor needs to own at least 20% of the company because that is how the big boy funds work. And then all of a sudden, you missed it. And so I don't like really any notes if that's all you're going to have to do. Because like, then all of a sudden, you're a debt investor, not an equity investor. But with short runway where another round is going to be required by professional investors, to be honest with you, the last two or three notes that I've done that were uncapped were literally 90 to 180 day bridges where they already had a likely lead, you knew the price was going to be something reasonable. And frankly, getting a 20% discount for investing four months before an A round is something that doesn't stress me out. And if they think the price, if it turns out that they think it's a 10- hey, we think it might be worth 10, and they go to market and they can get 20 four months later, good for them is actually what I think. Give me my 20% discount to your 20 because I don't know the price either. And so if Sequoia or Andreessen or whoever tells you that that is the price and it's in a short enough time window, I've just historically been okay with it. An example, the conversation that we had more recently with a company that is raising an uncapped note, it was much more like, hey, they may not need more money than this. If they may not need more money than this, it should never be an uncapped note. That doesn't make any sense. Or, hey, this might- this is a round that's going to give them three years of runway or even 18 months of runway, that is a full round. You should, when you're in a venture backed company, you're raising every 18 months. If it's going to be a full round to get you 18 months, an uncapped note is a weird thing that doesn't make sense to me. The shorter the timeline is, just the more- the shorter the timeline is and the more it is clear that they have to do another round is where I've said like, hey, in that case, that doesn't stress me out too much.
Al Doan: That actually feels like a great caveat to carve into like never do an uncapped note. It's like man, if it's operating like a bridge note or something like that, that doesn't-
Bo Fishback: Because there are other reasons to do notes, like notes, the paperwork is fast. It's really easy to do. And the truth is, without that money, it's very possible that that company that you are now thinking like, oh, great, I only got a 20% discount, they may never have gotten there. They needed that bridge to get there. And so it's kind of like-
Al Doan: In that scenario, would you be okay- because in a note, I mean, the cap is at the- it's the max valuation. And so you could say like it's not going to exceed 20. But also you kind of don't argue with the kid at that point where they're like trying to get enough money to pay their bills for three more months because they just got to hit this one thing.
Bo Fishback: So I have a real life example of this that you guys and almost probably everybody who would ever listen to this would appreciate. Like, I actually did a note with a cap in a company that we all know and love. And it was just a super high cap. And it was for some kind of non market reasons when they were first starting AngelList. And I was like, hey, we can't do a totally uncapped note. It was when I was at the Kauffman Foundation. We were kind of doing a program related investment. What's a cap that's like high enough that they're better terms then you would get anywhere else, but it gives us a cap. I don't think there had been a line of code or anything. It was like a napkin kind of thing to AngelList. And we put in 500,000 at a $20 million cap. And no one feels bad about that today. So it was kind of like give me a really high cap in that case. But also-
Al Doan: That's probably a great rebuttal of like I love what you're trying to do. Let's align interests here.
Bo Fishback: Yeah. And that's the thing is like if you get misaligned interests where all of a sudden, your investors are hoping for you to get a lower valuation, something is broken. And that is why like an uncapped note in something that's going to last- because when it's going to convert in three months, or even six months, or maybe at the outside of year, you as a seed investor as like I'm just super excited you guys got the round done and the company exists. And whatever the price is, I'm just happy to be a part of it. Because I'm investing because I like you and what you're doing. As soon as it gets past that, and you're like, whoa, this feels like it's been too long. Are you going out of business, or are you killing it? If you're going out of business, what are you going to do? You lose money on early stage investing. If you're killing it, and you know it, and you are not getting or having to go to the market in price, that means that now I'm paying the toll on that. And so I think the time component in any notes, but specifically uncapped notes, is just really important.
Al Doan: Yeah, and like by the contract, it's typically like three years, right?
Eric Jorgenson: Three years is too long.
Al Doan: But I mean, that's most of the notes I see are like three years, because the intent is you're going to go and raise a round. And so, if you're willing to put like a three year cap in there, give us a little valuation cap. I love the idea of like, look, man, we're not trying to price you down. But like for us as an early stage, we're saying we have to be below 30ish, like 30 is our top end.
Eric Jorgenson: We can't find out that we invested at an $80 million valuation. Like that's not a cool thing. We can't justify that to LPs. Like that means we got screwed, basically.
Al Doan: Well, we would never write that check knowing, even if they're like on the rise, we were supposed to be early. I actually like that. I appreciate that experience because it informs my lens a little bit.
Eric Jorgenson: I understand why as a founder, like you wouldn't want to overpay for capital if you don't really, really need it. I understand why you might not want to have a price round if you're like in the middle of working towards a much bigger price round.
Bo Fishback: Let me tell you one other- I'll tell you one other personal anecdote on this. I once raised $5 million on a convertible note with $100 million cap for basically a company that was at a seed stage. So it was a 50% discount or $100 million cap. And those subsequent rounds happened relatively quickly at a price that was high, but it was not $100 million. And it created this enormous, backwards looking negotiation to say like the new investors thought a 50% discount was too much. Because it was $100 million cap. And so like people have been kind of anchored on that. But the round actually ended up happening at 60 or something. So did they pay 30, 50% of the cap when they were willing to pay 100 of the round. It created this enormous misalignment of team, past investor, and new investor. And it was honestly like one of the grossest negotiations I’ve ever been a part of.
Al Doan: What do you wish it would have been? Like, what would have made it- 20% discount?
Bo Fishback: A 20% discount would have made it cleaner, frankly, but I think the investor at the time would have not liked that. Because they would have said like no, no, no, no, no.
Eric Jorgenson: How much time had passed in between?
Bo Fishback: 90 days. 90 days had passed between. And so 50% discount for 90 days felt really weird to people. But the opportunity to bring in that- so one version would be like, hey, we're not going to do this new round. And instead of taking in a new 15 million that is going to let us really go and grow, we're going to not take it and hope we can get there with 5. When you're looking at that and the team, you're like, gosh, strategic investor, brings on a super awesome board member. There's all of these reasons you want to take it and you're like, but I can't take it if you want to trigger the- So which is roughly to say like it causes non market decisions when the numbers get high, the discounts get big, the caps get really high, which is why it is not a trivial thing to say like, hey, just set a really high cap. Well, what's really high? 8, 20, 50, 100? I don't know. I know that 100 is really high because I lived that one. I know that 20 seemed, frankly, like out of market high to me and even like Naval when we were talking about it. And then in hindsight, let me tell you, AngelList is worth a lot more than $20 million. So like it actually wasn't high in hindsight. It was just like that ended up being like a supercharged company. And so I think that the time element of it is incredibly important because my example is very much like with 5 million, we could have lasted a lot longer than 90 days, obviously. But we would have sacrificed a huge opportunity to maybe go faster and grow faster. And so like then you are forced with these decisions that are not about the company. They're not about the customer. They're not about the team. They're just finance things. And it's like oh, burdening a baby startup with that level of finance making decision really sucks. And a note that gets you to the point-
Al Doan: Would it have helped if it was an uncapped note? Like if you got people to give you $5 million, and then you just figure everything out later, is that-
Bo Fishback: In a 90 day period, an uncapped note with a 20% discount absolutely would have made it super simple.
Al Doan: But nobody had any real expectation that it would be- that after $5 million, it'd be 90 days before you raise the next thing, right? I mean, you wouldn't have written that check- as an investor, you wouldn't have written that check with that expectation.
Bo Fishback: So it gets much more complicated because of the signaling that happens and all this stuff in the middle where it's like, hey, let's put $100 million cap on it and we're cool with the 100 million dollar cap. So like, we'll de facto treat that like that's the valuation. And then all of a sudden, you get there. It's like, no, no, no, no, give us our 50% discount. And it's like you are right. That's just a huge burden to put on an early stage company to have to navigate those things, when really, none of it's about making the company work. And so that is why I would say like, a first time team that's like maybe got a term sheet that they're even negotiating but also want to talk to some other investors, but they need money to survive for the next- I don't actually care if that's uncapped because there's a dynamic going on around that’s just like, hey, look, if they lose it, whatever, they lose all the money. If they are successful getting to that round, I feel good about a 20% discount, great. I don't want to do a bunch of uncapped convertible notes. But I think there is a time and place where like it let's teams move fast and not be burdened by their investors in a way that like I'm just not a default no on them. I'm a tell me why this makes sense in your circumstance. And a lot of times, it's going to be like, oh, well, that doesn't make sense for us. And other times, I'm like, totally hear you, let’s make this quick and easy for you. Let's go.
Eric Jorgenson: Al, what happened, what did convertible notes do to you? Or uncapped convertible notes. Why are you so hurt?
Al Doan: Let's see, I have one that I wrote a check in, I was very first check. Two and a half years later, big institutional money came in and converted them. And like that just felt sucky.
Eric Jorgenson: So you basically gave them like a loan for two and a half years.
Al Doan: That's exactly right. Like, you give them that, and then, your reward is 20% discount. I remember at the time I was just like it's brand new guys. I wrote the check. I didn't even ask what the valuation was because I knew it was nothing. And like, in my mind- I was just too dumb of an investor to ask. And then it's like it converts at 24, 25 millionish. And then, it goes to like a billion. Like, man, if I got in, like we're talking like a $4 or 5 million valuation when I came in, that's much different economics of like multiples.
Eric Jorgenson: So you missed 5x of whatever, 5x more on top of whatever your returns ended up being.
Al Doan: Well, and like at the very beginning, that x, which makes a big difference in the outcome. So like, on this, I'm not mad. They did great by me. But like, also, I look at it and say man, like I took a huge swing at you guys really early and like really believed in it. And these guys came in when like you had sales and all stuff is figured out. And like that's easy to write a check at that stage. It was really hard at my stage and like that reward wasn't there. And then the other time I did it was, let's see, yeah, there's another one, I wrote the check in, and like it immediately was- very hard startup. The 60 days later, the round went at like 250 million. It was like, holy crap, way to go, first. Very well done. Is this my friends and family round, is this good, that sort of thing. And you're not mad. Should I have gotten a $10 million valuation when it’s really worth $250 million dollars? No, no, probably not. But like, also would I have written a check at 250 million, I don’t know.
Eric Jorgenson: I think some of those are- I was talking to somebody recently about the Rome stuff. They were like oh, yeah, we were investors in Rome. Like, you gave them money at like $800 million valuation for them to go buy- they had two or three investors that did a price round like way late. They didn't need the capital. So they offered like an insulting valuation. Like, I'm not close enough to it to give any authority, but there's people who like want the logo or want to say they invested. And the founder’s like, I mean, if you're just going to give me free money, I'll take it and like go buy a compound in Arizona and like do my thing. But I don't think those investors- I think the people that go into early stage stuff at hundreds of millions are doing it for non return reasons, I guess I would say. Like, maybe they want to be able to tell the story, maybe they want to be close to the founder, maybe, I don't know.
Al Doan: Like if Elon goes and starts a company tomorrow, like that guy's worth-
Bo Fishback: I was going to say, it is such a hit driven thing, like it would have been really easy, and I know people did, like I've heard Cuban talk about it, passed on Uber at 300 million. Too expensive. What are you talking about? You're just getting going, you're in one city, whatever. And six months later, six months later, they're raising 3 billion. And in a hits driven business where like everybody knows it’s hits driven, and like would you rather have been in at 300 million or not? Was it too expensive? Like yes, and definitely not. It's messier than that. Which is one of the reasons that like I think that even at a cap level, when things are moving fast early on, it is an unfair thing to ask of most teams to go and set their own price. So you need an investor who wants to set a price. And so like that is their job.
Al Doan: But like at an early stage, like when I did Pretzel, first round, like great, what are you valuing it at? And you're kind of like, oh, I don't know, 10 million. You're trying to pick a thing that's fair for you and fair for them where you say, all right, I’ll sell-
Bo Fishback: What I think you're actually trying to pick for is what is like socially acceptable at the time by investors. Because you're really trying to say like, hey, if I was coming out of Y Combinator, what are the terms they set? Or hey, what's the going rate for a seed or A round? It has nothing to fucking do with the company. I has everything to do with what other investors are doing. And so it's like the reverse social proof lens of like, well, other people are raising at a 12. Oh, well, the markets- now other people are raising at an 8, raising at a 2. It's all made up. It’s all made up in the early stages.
Al Doan: You're trying to offer at a point that they'll accept, right? It's market dynamics. Your job is to charge the most that the market will bear. And so as a company, you're trying to price it at a point where you can do the round without leaving a bunch on the table.
Bo Fishback: So anyway, I think that early stage pricing is so messy. And there has honestly been an enormous amount of innovation, even in the last 15 years, about flexibility and different types of funds and all this kind of stuff that like I 100% get, I'll just never do an uncapped note because they're probably not great for the ecosystem. And then absolutely, if the right team came to me and said, hey, like this is an uncapped note because we're about to close an A round and we actually think- I mean, I have lived through the am I raising at a 12, a 50, or 100 for the same company at the same time depending on who you're talking to. And like as the founder, you're like, well, 100 is the most. Wait, does this make sense? Who is it? And do I want to work with them? And so it's like for the same thing, you have such different willingnesses to pay that I don't want to be the person writing a $50,000 check going in to tell somebody like no, no, you need to name the price. They're like we don't want to name the price. You name a price. I don't want to name the price. Like, no, no, I want to support you. And like I think I have high tolerance for ambiguity for things like that.
Al Doan: Is it acceptable- because in that space, where my head goes is I say, look, we want to be a check. Go put the round together and let us know. Which, I mean, for us, we're trying to be like early confident checks in. Like I hated, when I was fundraising, I hated the like, yeah, go find yourself a lead, and then we will be a part of it because it's like kind of douchey.
Eric Jorgenson: Is that because they need a lead? Or is it because they need a value? Just like, I'm not going to set terms, but like if the terms are set, and they're saying-
Al Doan: Yeah, if you can do this rolling angel round, a lot of it though is like the momentum that a lead brings. And like the $500,000 check means oh, we're actually doing this. And without that, it's like, well, we’ve got a lot of 25k checks that might do it. We’ll see. And I was part of both of those.
Bo Fishback: Look, on the investor end, I've definitely been on the like, oh, hey, you need a price to go and raise the round. I'll set your price for you. I've done that many times. But how did I set the price? Like, you are raising 2 million bucks, you are early, early stage. Let’s pick a price that feels- Yes, it is literally pulling it out of the air, putting it on paper so that they have something to go and shop. Actually like it is a thing that I did in order to help that founding team so that they can say, hey, we've got this guy Bo who's willing to invest at this price on these terms. Now you got a thing to go and shop.
Al Doan: And you shouldn't take that $2 million if you're giving up half the company, but like what's adequate at this stage? We’ll say 20 percent, we’ll just do that.
Bo Fishback: I think like I have a lot of empathy for like how hard that process is of I need a price to raise, but I need a raise in order to get a price and just the way that those conversations go, like I don't love being an investor that says, cool, we'd love to participate once you get a lead. Okay, actually, once you get a lead, and they're a blue chip, and I know- because the truth is when you get there like- There’s no room.
Al Doan: But also you don't- Yeah, it's not a- like by putting a price on your note does not mean that you're like that. And so it's funny because like in the year we've been doing this, this is the first uncapped note that’s comes in front of us. It's not super common. Normally, it comes- in my experience, it comes from like very confident founders that are like, look, man, you're lucky to be in here, I'll give you a shot. But like, you don't get to say what's going to happen. And it's sort of like if you want the logo, you go with it, and it's fine. Or what I'm hearing you say is that there's enough room for some empathy for that moment, like pause and consider it. We should not say we'll never do an uncapped note. There may be circumstances where it makes a lot of sense. I think, as a rule, leaving it open where none of our risk is guaranteed to be rewarded, we should try and lobby against that. But I think I'm with you where it's like, man, yeah, let's- if you came to me with a buddy that was like, this is why this makes sense. We should do a forum.
Bo Fishback: For the one that we looked at, for what it's worth, I actually think like poking on it a little bit like it actually probably doesn't make sense. But if they can get it from somewhere, fantastic. That said, I don't have like a perfect appreciation for the circumstances. And they could tell me one or two things, and I could have one or two conversations that would change how I think about it, which is why like I don't put it in the bucket of a thing that I'm religious about as much as a thing that like deserves more homework. And like, anyway, whatever.
Al Doan: You've talked me down from my religious zealotry. I was a Zionist Movement.
Bo Fishback: I’m generally resistant to religious zealotry of all kinds and that like includes uncapped convertible notes.
Eric Jorgenson: Let's get- so ratified ambiguity. Ratified nuance, a nuanced approach.
Al Doan: This is a long podcast.
Eric Jorgenson: This is a long podcast. We're almost done.
Bo Fishback: And is there Shake Shack in the future?
Eric Jorgenson: Al is waning quickly. We need to get him a shake.
Al Doan: You could have had half a quesadilla. We’ve got a pie in there. Want pie?
Eric Jorgenson: You are too selfless. We’ll very quickly go through like a couple of fun growth things. And then we'll wrap it and we'll go to Shake Shack. My most exciting update on the LP side is we've got our first family office commit. Huge news.
Al Doan: Way to go, Eric. Guys, you'd be so proud of us. We have a deck now.
Eric Jorgenson: We do have a deck.
Al Doan: I mean, when we started, we did not expect to put this kind of effort in. This was a full Saturday, at least.
Bo Fishback: Look, we have at least two other family offices that I know who are like excited to meet with us after like looking at the deck. So, we didn't even do a terrible job.
Eric Jorgenson: I think the deck is good.
Al Doan: At the beginning, we're like we're not going to do anything. We're just going to make investments. It is going to happen. And now it's like we kind of really wanted this to do a good job. We want to do a good job for you guys.
Eric Jorgenson: We're leveling it all up. We went from Notion website to real website, and we're going from like memo to deck.
Bo Fishback: Very importantly, I think that a reason that we are even having those conversations that we are finding that we are seeing better and more deal flow than we can effectively participate in right now. And when you're in that spot, we have no interest in going to raise a $100 million and being like really grown up fund managers. But the ability to actually pursue the thesis of like helping great founders who are building cool things, just we could, with two or three times the resources, we could actually do two or three times as much good stuff. And I think that's an awesome thing to feel good about.
Eric Jorgenson: We're a year in, so we have like 12, 15 great companies that I think we are impressed by like the quality of, and we have never once been told that we are hitting anywhere near like an allocation cap. Nobody's been like, hey, that check’s too small, can you give us like- can we go 50 grand last? Can we squeeze you out of anything? And so I feel like we know that we can basically double or triple the size of the fund, still, we think, provide great returns, be even more useful to founders by writing like bigger checks and less calls. And it's exciting. I mean, all of our investors so far have been kind of individuals. And it's exciting to sort of start working with like institutions and fund of funds and family offices.
Al Doan: And that being said, we're still a- our cap is still 3 to 5ish. Like, we're not- we have no intention of being like a big fund. In fact, that's one of our selling points, like we're an evergreen first time fund. We're not going to do 3 million and then go raise 50. We want to be this size all the time.
Eric Jorgenson: That's been an interesting I think journey over the last year. I feel like we started just kind of like without really thinking about a position, our position in like the market, the investor facing market, we kind of came at it as like we're angels that have been doing well and our track record is good. And we like working with founders. And sort of meeting other fund managers and seeing everybody else out there, you're kind of- and like hearing what LPs complain about in other funds and watching GPs like break their own models, like they have killer first funds and then they go out and raise one that's 10x the size. They have to change their strategy, they have to hire people, they over raise their deal flow. Or they’re solo GPs that just like can't scale their networks. Like there's just not enough time in the day. And so I feel like there's some secret sauce and people are responding to, hey, we're three partners, we’re part time, we have very different networks. We have a hard cap on our fund at like 5 million. And we will provide those like first fund kind of returns with like minority checks in 100x companies forever. And the real test will be like when we're at 5 million and somebody offers us five more and we will have to say no.
Al Doan: But what a baller feeling that will be.
Eric Jorgenson: Yeah, we'll just power trip on it instead.
Bo Fishback: Yeah, I think the reason that I know I don't want to go do the big fund thing is because as soon as you get on that wagon, you spend actually a lot of time raising money. And like that's one of those things that people don't ever talk about about venture capital in general is like everybody thinks of them as capital allocators. But actually, they are like fundraisers with a whole lot of their time. And they are going around to meet with endowments and foundations and high net worth and blah, blah, blah. And getting on the fundraising train is not a thing that I want to be in. I just don't want to be on it. And like, we have enough resources just amongst ourselves to do the kind of investing we want. And so it's like, hey, who else wants to be a part of what we are doing anyway.
Al Doan: The Rolling Fun is fun because it's like whatever you guys give us, that's what we're going to do. That's what we're going to put in. And let's see.
Eric Jorgenson: Maybe it'll be 50k checks, maybe 200k checks. Depends who shows up.
Al Doan: If you know a family office that would like to write us a nice little check to go into really early companies and be a part of this, Eric will take that meeting.
Eric Jorgenson: And we did recently learn that we can offer quarterly vintage diversification, which I did not know is a thing that family offices and LPs care about.
Al Doan: What does that mean?
Eric Jorgenson: Like that if you give $2 million to a traditional fund, that you have no idea where in those 24 months you're going to allocate it. And if you're like running a big portfolio, you really want to know what money is getting deployed where and when, and when your capital calls are going to be, and we say like, yeah, you're going to get- you're going to wire us a quarter million dollars in the first of every quarter and it's going to get deployed more or less in that quarter. And so you can like sort of underwrite that and like fit it into your model a little more easily. So is another like accidental benefit of rolling funds.
Bo Fishback: And also, thank you AngelList. That's pretty awesome.
Eric Jorgenson: Yeah, rolling funds continue to like impress and amaze as a vehicle. So cool. Well, happy almost- next year, next podcast, we'll be celebrating our one-year anniversary, wrapping up our fourth quarter. Happy Christmas to us all. I'm going to go by you guys gifts on Gently and let's go get some Shake Shack.
Al Doan: Let's do it. I like that we both left Eric hanging with the hat. We could have grabbed one, but no.
Eric Jorgenson: I appreciate you hanging out with us today. Thank you for listening. If you liked this episode, you will also love all of the previous episodes of Rolling Fun with Bo and Al. There are three more to go back to, previous quarters, previous stories, previous companies. And we also have an episode with Brett Kopf, the founder of Omella which is a company that we mentioned in this podcast. So if you want to learn more about Omella, more about Brett and his sort of customer-driven product iteration approach, go learn from him. He's a wonderful guy. I've known him a long time. It's a great interview and I think an underrated approach to building a very valuable company. Please check out the Founders Podcast and GiveWell, the sponsors that make this show possible. And if you enjoyed this episode, and you want to learn and invest alongside us in these exciting startups and many more to come, please visit rolling.fun or email me to learn more. Thank you for listening.