June 7, 2021

Spotting a Unicorn: Vik Sasi on Being One of the Earliest Investors in Clubhouse.

Spotting a Unicorn: Vik Sasi on Being One of the Earliest Investors in Clubhouse.

Vik Sasi, Partner at Dreamers VC—co-founded by Will Smith—talks about spotting unicorns, the epic takeoff of Clubhouse and about the ways founders can be sure that investors see their venture as a future unicorn. We also spoke about partnering up with celebrities (such as Will Smith) while being a founder and how much sense those partnerships make.


 

Vik's LinkedIn: https://www.linkedin.com/in/vikramsasi/

Vik's Email: vik@dreamers.vc 

Dreamers VC: https://www.dreamers.vc/

Capbase: a super useful tool for cap table management: https://capbase.com/

Section of Fundraising Radio on the legal side of fundraising: https://www.fundraisingradio.com/category/legal/

Transcript

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And today's guest speaker, we have big sassy partner ad dreamers. Vc. That is Co, founded by Will Smith. And in this episode, we'll talk about what it feels like working with a fund. Does Co, founded by Will Smith was like to work with celebrities.

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What kind of founder should try to put a lot of actual effort into getting in touch with such funds etc etc. So Vick let's kick it off by you giving us some background on yourself and.

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Yeah, sure so I'll start with some of the fund. Yeah, so we're a 55Million dollar fund 1.

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we launched at the end of 2018 since then we have been number and we're based and as you, as you said by Will Smith and then a really big Japanese soccer player named Honda.

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And the interesting thing is that despite the star power of those 2, we're not a celebrity fundraising, which traditionally think about it, nor an offer to the family office.

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Um, we're actually structured, like, a 2 in 2000 venture fund and capitalized with all Japanese limited partners. So so we'll as most people as most people would maybe assume, is actually, is not an L. P.

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he's a general partner at the fund. And so, our base is a bunch of Japanese corporations.

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Know more of the big investment bank is our anchor and then we've a pretty diverse composition of the rest of our capital base, the financial and we're going to be she sado densu a 6.

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I'll make up the rest of our base, which is what has enabled us to be generalists. So, since we launched in November 2018, we've been incredibly active. We've done 65 deals in the last 2 and a half years. Yeah investing in a breakneck pace.

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The breakdown by sector is about 25% consumer probably about 25% healthcare and the other 50 is a random smattering of gaming fin tech E, sports.

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Et cetera, so I can go into more detail about some other things and then long story short on my end, as I grew up in in Wisconsin, did my undergrad and bio worked abroad for about 5 years in East, Central Africa and Haiti.

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And then did my full time MBA, and then joined an early stage venture fund. A lot of fin tech and insure tech. It was a corporate venture fund and then joined dreamers.

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Um, when we launched fund 1 in November of 2018, so yeah, so happy to be here and thanks for having me. Absolutely. Uh, thanks for your time to participate. So, 1st, question is obvious. Let's talk about the structure of the fund.

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How did come up to have a normal makes? I've intrude quite a few funds all over the world and I would say that very few if none have structures like yours. So, are Co funded by?

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Will Smith another famous, fruitful player from Japan and your major? Oh, these are.

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Japanese corporations, how did this happen? How how did you have structured like that?

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Yeah, so it actually the, the genesis of the fund was interesting, because each of the, um, the, the gentleman that ran the family offices 1 for and 1 for will had been friends for a few years.

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And they were always trying to come up with ways to to work together and usually that ended up being, like, okay, let's look at some deals together.

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But, if you look at, so has obviously been the line, like, he's had an established family office for a decade plus now. And and he's actually been doing every family office has been doing venture investing for quite some time going back to some of the earlier rounds of Huber.

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And, and there are some other things that are that are still public from from then. And he is obviously very recognizable, obviously carries a lot has been the line forever.

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And so his, his influence really matters and given that we're in this day of this era of influential influencer marketing, where.

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You know, some people estimate that even up to 30% of all venture dollars, actually trickle down to Google and Facebook because of how much start ups are spending on advertising and acquiring customers.

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If you bring someone with the profile of of will Smith or even some members of his family, they can bring the marginal cost of acquiring that customer to 0 If they post about it and somebody sees it and then converts and it becomes a customer.

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So, that can be very, very powerful. And so because of that, he has served as just a total honeypot for deal flow and has been investing.

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You know,

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for the past decade,

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in early stage venture,

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and then case in case family office said,

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you know,

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well,

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I'm very cordial with a lot of these head honchos over in Japan and they're always on the hunt for more innovation from the best and brightest coming out of Silicon Valley,

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maybe there's a way to actually marry these 2 and essentially that marriage was will be a honey pot for deal flow along with all the folks associated with all of their networks.

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That we've sort of built off of combined with the corporate Capitol from Japan and, and sort of that bridge. And so that's basically what we what we created here. Dreamers.

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Nice this is really interesting, but let's go on talk about the hot topic of today specifically clubhouse just released the update that they have raised money at, for billing validation, which is absolutely insane.

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And you were actually 1 of the investors between them, investing them quite a while ago about a year ago. Can you tell us a little more what happened there? How do you identify that company? How do you run into them? Just a little more about those initial interaction.

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Sure, yeah, so we so, prior to dreamers getting formed in the months preceding the Smith family office became an L.

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P and entry son's cultural leadership fund, which is at the time was, was a pure play almost Co, investment fund from any other deals. Andreasen was doing.

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And it was meant to offer underrepresented basic demographics and folks access into technology and just sort of trying to put that on the map for a lot of folks who didn't have it as part of their career.

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And so, some of the other, or and there's very strong network and a who's who? Of influential?

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Most often African Americans, and because we have this long relationship run by a gentleman named Chris lions, who's in absolute rock star future future occupier of a spot on the mightest list. I'm sure.

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Um, you know, they've been giving us a ton of offering us as an L. P. a ton of CO, investment opportunities and 1 of those was clubhouse last summer.

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And when we obviously, when we got on it, it was very much made for the moment given that the whole world was at home, because of coded, and introduced to this new drop in audio format.

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But when we spoke for the 1st time to Paul, it was 1 of the most impressive conversations out of the couple 1000 I've had adventure for 1.

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he was incredibly humble despite having created.

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Something of immense value that we all knew, and it was like, wow, you can already tell a lot of other folks, you know, and I've come across founders and just, you know, who would not be they would let it go to their head, but he was like no, we are absolutely heads down.

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We were trying to build the best 100% focus on the end user.

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Incredibly humble, Super pedigree double Stanford. He was like an rga Miller scholar in school. We talked to some other folks in his in his class, and they were like.

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You know, imagine, it's like, when you're watching, like like, imagine the, the jock or like the captain of the football team, and like to use an American and all American sort of like metaphor who's also the valedictorian.

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And they were like, that's Paul, and they were, like, you know, his, his Co, founder is is equally as impressive and incredibly accomplished and Paul, you know, he sold a company, I think, highlight to Pinterest.

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He was an entrepreneur in residence at Benchmark 10 years ago. So, you know, his network and his is just incredible and then yeah. Simply what they came up with and getting to finally use, it was.

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Yeah, it was it was just such a treat to be along for the ride and clearly, you know, they're now raising what's reported to be a 4Billion dollar round. I mean, they've 40 X, their, their company's valuation and not even a year. So, as an investor, you certainly can't complain.

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Absolutely most definitely in the best of luck to clubhouse.

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Personally, use it quite a few times, but not not not not going to go too much into sales there. Let's move on rather to talk about green Flex. That's investors such as yourself can see and the companies such as clubhouse.

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So, let's say founder probably is not going to be as as epic as Paul has like, the least though achievements that Paul has, it just keeps going just spending about minutes talking about him.

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But what are other major green flags that walk and find a early stage start specifically in founders? What kind of things should founders put up there on the beach deck specifically for investors? You see.

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Yeah, so so 1, is that despite, uh, yeah, I mean, not everyone's going to be a Paul where it's like, sort of a slam dunk when you just.

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See his resume and meet him,

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but I would say,

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and this is something that I'm stealing from a business school like admissions calendars that we look for ordinary people that have done things because it's like,

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truthfully,

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like,

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lots of folks come from very modest means are humble beginnings,

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they didn't know that much tax they weren't the technical,

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and they've obviously built incredible companies from our perspective,

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just to give you a little insight as to how we look at deals,

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which I'm sure we'll keep it very similar to a lot of your other distinguished guests on this on the show,

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because we're early stage,

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we basically centered around team product and market and the earlier stage the company is the more we overweight towards the team.

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And so things we really look for, when we're 1st introduced to accompany, or when we're going through a deck or on the phone with someone is very much got it got to hammer this home founding team.

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We believe in the 2nd, to sort of what kind of traction obviously we'd love to. Everyone always love to see up into the right user growth and or engagement. Preferably organic.

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3, is that this potential for uncapped upside if it works, which you'll also see, or regarded as blue sky potential basically, there's no ceiling on how big this this business can get.

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The 4th is that if they've figured out a business model, or even a path to monetization, we're fine investing up Pre revenue but there needs to be something compelling as to how they're going to eventually get there. Especially if they're analogs are precedent.

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Companies that have followed a traditional path another 1 is sort of like a compelling theory on defensibility again.

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If your Pre revenue, Pre product clearly, it's probably a little premature to be talking about a note before you have something in market but we're happy to entertain all sorts of theories.

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And then finally, and this is again, very idea in an ideal world is capital light, but but that said.

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You know, we're happy to look at hardware and even gross margins that aren't software can still end up being incredibly huge businesses. So.

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Yeah, those are the things that we look for. Nice and yeah, I mean, those are standard things, as you said, let's let's actually talk a little bit more about spying you and of course, specifically and how founders sometimes.

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Try too hard to present their companies as the inquiry. So, the major value proposition for investor there is that, you know.

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Our company might become a unicorn valid at 10Billion dollar sentence, just to cover your entire fund. So, how should founders present this idea of their company in the future? Becoming unicorn without sounding like unrealistic or too ambitious?

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What's Where's that? Thin line between.

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Trying too hard to show it yourself off as unicorn and not trying hard enough.

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Yeah,

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I mean,

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look,

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this is a,

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this is the 1Million dollar question and venture I mean,

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the way I kind of look at it and what we recommend to even our portfolio founders who,

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even after they get a great term sheet from a top to your fund it's like,

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well,

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guess what that only buys you so much time in terms of brand value and recruiting and et cetera,

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and literally burn rate.

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And then eventually they just got to put that hat back on and start pass the hat around for their series. A, or B1 thing I'll say that I recommend is just be 50%.

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Project 50% confidence in 50% humility in that, you know, that you were the right person. That this is the right company at the right time. That, you know, in a few years is going to end up being as you said, this unicorn deck whatever.

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It may be, but at the same time with an AI that there are a 1,000,001 reasons of why this could go wrong and how you're trying to just keep a clear head.

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Software things that you can make just see that see the present as clearly as you can in order to get to that future.

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Um, future point, but honestly, it's, you know, there's no sort of like playbook that anybody can follow in terms of, like, trying to pitch or anything, I think it just it's it's so much of it is serendipitous as as I'm sure.

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You know, and crafting a good narrative and I think it's like.

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Just don't like 1 thing. I'll just say the other thing that I that I also say is.

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Run your own race,

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and by that,

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I mean,

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don't compare yourself to a competitor that just came out of it came out of stealth mode and got all this press on tech crunch,

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or or got a top tier fund to maybe give them a term sheet or something,

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I mean,

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at the end of the day,

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what's going to matter is your product and the revenue it brings in and just don't don't get distracted by all of the nonsense that's on that's on Twitter just run your own race,

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you know do right by your employees do right by your customers and then do right by we're investors they're on for their along that ride for you to buy the 1st 2 and I don't think you can go wrong.

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Absolutely, most definitely great here. Great points. Great quotes moving on to the next discussion point, which is again call up house. I forgot to ask this question. So, yeah, coming back to it's a pivotal point in the clubhouse for a while.

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It was just like, just an app, a bunch of people were there, but not as much buzz but then at 1 moment, literally, everyone started talking about absolutely. Everyone started talking about it. When was that point what happened there?

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Is there some particular events such as I know someone famous tweeting about it? Maybe Will Smith was the 1 who twisted about it and then everything changed or what happened there.

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Yeah,

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I think they,

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they used the power of PCs and how self important we all think we are their advantage and I think by that and I say that half jokingly,

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but half seriously because.

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Um, you know, and they're also following the a very similar path to superhuman this email client that started off being only available to this, like, superset of.

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Incredibly influential vc's and just, you know, big wigs and tech and after that, it just became this like, oh, my goodness. Do you have superhuman? I heard. It's amazing.

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It's super fast and all this stuff and then they sort of slow, slowly slow, drip of of information. And invites and they just created, like, manufactured scarcity to some extent.

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It's like, oh, well, it's still invite only and then when you get on, even if you told him the product, you just feel so content to be part of this exclusive club of this email client.

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Um, which obviously I use it, it's a great product, but clubhouse executed that to perfection.

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And so they did that with just the existing sort of like, VC celebrities and then they mix that with actual celebrities with Kevin hearts. You know, there were some really like M.

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C hammer, I mean, folks from all sorts of small parts of the spectrum from famous folks 30 years ago. 2 people that are very intellectual right now. And I think that was just brought in so many. It was the organic growth was.

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Just unprecedented, at least in terms of social, you know, I mean, I will hand it off to ticked off, but, I mean.

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Very recently, I feel like it wasn't until a few years ago when PCs were actually investing in social snap was probably the last 1.

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Um, they were, like, look like Facebook I mean, I mean, it's just too hard to compete with them. They're going to copy you just like they did with.

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Instagram stories with snap and and it's like, you know, it's just not worth it and now, because of tick tock and bite dance and clubhouse. And now you literally see all of these incumbents, Twitter about to launch Twitter spaces. Facebook is gonna launch.

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There's, I mean, it's, you know, you've got something incredibly valuable, but yeah, but they asked what you were saying. Yeah, I think it was just they used VSI celebrities and then actual celebrities to really see the platform.

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Right. That's very true. And, I mean, pretty much every single company is now creating the copycat of CO op house I just read news. That's right. Is doing the same exact thing. So, going to be it going to be a fun fight.

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Let's let's move on stop talking about clubhouse for a sec. Maybe we'll come back to once again at the end just because it's such a phenomenal company. It's so interesting to talk about it, but let's talk about early stage founders for relation to this.

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Right now the majority of them do not have clubhouse on their hands. So, let's talk about them on our Pre to call. You've mentioned that right now you believe is the time to start a company can you elaborate on that? Why do you think is the time to start a company?

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Because it's still pandemic.

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Yeah, it is still pandemic I mean, from my from my view, and from my lens, there has never been.

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More capital, sort of like running around the, the Valley looking for the best start ups to invest in and I think if you're.

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Remotely credible with, in terms of background and in terms of team and you've got some sort of like product or idea.

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It's likely that you can raise a Pre seed round, just given how much, you know, all these folks because capital just gotten so cheap and part of that is macro. Economically.

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I mean, the US government has piled in trillions of dollars in the last year alone. So, interest rates are near 0, everyone's looking for yield, et cetera, et cetera and then.

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You combine that with the fact that look at the, the aggregate market cap of all the tech companies, or even just companies that were venture backed. So obviously, you know, you have the Facebook Apple.

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Et cetera Google Shopify, et cetera. Um.

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But even just the up and coming ones, I mean, cloud index shows that these valuations have gone up. I don't know if it was allegations of revenue by, like, 150% in, in the last, like, 1 or 2 years. And so basically, it's just saying, look now that we.

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Even a few years ago before Microsoft became the 1st or Amazon in the 1st, 1Trillion dollar company, that was still sort of this unknown and now imagine if you're coming out of high Square, something you're like yeah, of course, you can be a 1Trillion dollar company.

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Microsoft Amazon, 1.7Trillion or whatever it is so, because the those goal posts are the, those numbers. Don't seem that ridiculous. And it's like, look, clubhouse could easily be 100Billion dollar company.

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Now, that basically means you can underwrite for these astronomical outcomes from the early stages. Which means if something has even a snowball's chance in hell of working chances, are you'll be able to find someone willing to give you capital to try it.

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Now, 1 thing that I must practice this with, is that.

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No, 1 that I know actually thinks that they are going to be.

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Necessarily more outcomes, more successful outcomes rather There'll be a similar number of outcomes that scale with the amount of capital going in, but they'll just end up being larger. So they won't just be a home run. They'll hit them.

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Um, we won't necessarily have that that many more home runs or grandslams versus compared to the amount of capital coming in. So, I do want to say, it's still going to be incredibly difficult. No one's saying that and just because you raise a Pre seed round of seed round.

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Who cares, you know, I mean, it's like, it's still heads down building and there are way more stories of folks winding down their companies that they're making it, but, um, you know, it's just yeah, I still standby that. It's it's just such a magnificent time right now.

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Especially coming out of this pandemic when.

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All sorts of things, you know, it's a new paradigm to some extent, and certainly in some sectors. So, yeah, that's that's sort of how I take it away.

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So the more and more people are going back to the office, there is a class going on that people should go back to the office or if they should just stay remote, even though everyone's vaccinated. So just really curious to see how this plays out.

150
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I'm very curious to see how it's going to end up. Is Silicon Valley going to die eventually or not? But that's the discussion for.

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6 months later, you know, maybe we'll come back to that layer with you as well for. Now let's actually touch on to the evaluations that you've mentioned, they are going up there continuously going up a deep and dynamic kind of slowed it down.

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Dropped it to a normal rate now is going back up again, would you think is going on there? Do you think it's just going to keep going up? Do you think there's gonna be some breaking point where people are going to be like, okay, that's just too much people we're going to drop the whole thing.

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What do you think is going to happen? Where do you feel VC feel is going in general as a whole specifically in the United States?

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Yeah, that is if I knew the answer to that question, I, I'd hope I'd be Richard. No, I, it's a good question. Look we all honestly.

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Even from folks at much higher levels that are far smarter and a lot more experience than I do that I talked to is no, 1 really knows everyone. It's a brave new frontier.

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And especially is valuations have never been higher and honestly with with the arrival of the hedge funds, coming into the early stage venture or growth stage, venture space as well, like, Tiger, global Dragon, near Co 2.

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I mean, they are really they are just stomping on some of these formerly late stage or growth equity investors and they're coming in.

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They're running a diligence process in 48 to 72 hours, and they're dropping term sheets with copying valuations at the founders. They're basically making them an offer they can't refuse.

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And so I think a lot of vc's were like, okay, well, part of this, they were literally used to it because that's what we saw with a vision fund. And then.

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You know, we saw vision fund obviously well, what we thought was implode, but I think now they're actually above water and actually going to do quite well given. Oh, yeah.

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Because the calculations that have come out of POV,

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but honestly,

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I think that the arrival of hedge funds and marking everything up is really going to actually move even more folks it's going to create that barbell in terms of the middle is going to get cleared out.

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Maybe at that growth equity stage, so then all of those formerly late stage investors, it makes no sense for them to go late because the hedge funds are basically saying, look, there's no real value add at growth.

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It doesn't matter how brand name your fund is.

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The fact of the matter is that you clearly have a flywheel going, you know, you're, you're already at 1020, 50Million dollars a, are, like, you just got to step on the gas and we're going to literally not even take a board see a voting board.

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So maybe we'll be an observer or something, and we're just going to let you run your company and we're going to give you 15% higher than any other term sheet you can get. And so that, I think is making all these late stage and private equity folks, move upstream, coming into the early stage.

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And now you have all the traditional Series A B, folks just saying, okay, now we got to do.

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Um, well, we got to be a multi stage fund. We got to support our earlier companies and so.

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It all feeds back in the fact that there's more money there's more capital coming into the early stage, which means great time to, you know, to be an entrepreneur and how it all ends.

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I mean, I think we all sort of assume that maybe when there's a some kind of economic shock and the public markets, it will make its way into the privates but.

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I, I haven't heard anybody say this, and I don't really know how or why it could happen, but.

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Yeah, I mean, I think it may take a couple of these, like, juice zeroes or something, you know, like companies that have been really marked up and then go nowhere for things to kind of come back down. But honestly, we've gotten no signals that that's coming.

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Anytime soon, probably not coming anytime soon I hope it's not the case I really don't want to say it's coming honestly, but at the same time, the other part of me definitely wants to see that happening.

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So, headsets have very mixed mixed feelings here, but very much agree on you the fact that more and more larger institutions come in later stages enforcing those to go early stages. It's awesome.

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For early stage insurance people. If you're licenses most likely you're in early stage. 1st go enjoy the thing that's going on, in VSI right now.

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So, let's actually talk about the thing that promise to talk about in the beginning of the episode, which is working with celebrities and specifically who should take their time to try to get in touch with celebrities. Their family offices funds that work with celebrities.

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And we should not so, can you give us a few examples of maybe types of startups that specifically should be like, great we're going to start our fundraising by reaching out to these 150 family offices. There were led by some kind of celebrities.

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Right, yeah, so I think it very much lends itself having influencers and celebrities on your capital. It really lends itself. If you're a consumer retail company.

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If you are a B2 B, SAS company, it I'm not sure how much help you'll be getting by having Will Smith or Jay Z part of your cap table because at the end of the day, it's likely not going to help you sell more.

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You might get a lot more earned media and PR that picks up the story. But those tend to be a flash in Japan anyway and fundamentally, you know, your sales.

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Your sales matters a lot more, but for the so, yeah, so it's 100% of consumer retail companies. And then the other thing I would say is, I think it's always worth finding out and acquire even when you're talking to them.

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Um, you know, having a compelling story for why this makes sense for that family office, or for that celebrity, and especially, you know, asking what kind of value do you intend to add obviously, you can't get them to sign contracts. I mean, your round will be closed.

184
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Well, before the lawyers finish marking up and red lining everything, but sometimes it's just a press release it. Yeah, you can mention my name.

185
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And that's usually good enough other times they'll say, yeah you know, as long as we like the product, which we expect to try before we invest.

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Um, you know, we're happy to sort of feature it on my social media channels, or, you know, as part of the show or whatever and yeah. And really making sure that this is something.

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And I think also there's kind of an educational part of this, which is making sure they understand that. This is.

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Like, you're going to keep they're going to be diluted in successive grounds unless they have their pro rata, or keep putting money in.

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Um, because sometimes, you know, we found that a lot of folks want to be involved, but they don't know the venture game as well. They just kind of assume, like, oh, I got 1% in this company. So.

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You know, if they grow to a 1Billion dollars, that's 10Million dollars and it's like, well, there's actually a number of different dilution events that happened before unless, like, a club house or something. But, yeah. So I would say, you know, make sure your sector makes sense.

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Find out what kind of value they're going to add, and then don't forget to make it a little more informative. Like, hey.

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This is what it's gonna look like, this is what you're, you know, if we achieve these milestones, et cetera, you're going to get diluted. And but this is how it works. And then, and because of that, you can also say, you know, maybe it makes more sense for.

193
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Has to give you warrants that way you choose whether you want to log in at the share price or not.

194
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Um, and that also has some protection for the founder too, because if they don't execute on what they were supposed to, it's a lot easier to claw that back. Then if you've already given shares.

195
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A 100% perfect advice. Absolutely. Love it. And on this and.

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Good note, I think, moving on to the very last question after today's episode, which is a call to action. So Vic, what do you want to listen to do? As soon as the app is over.

197
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I'm sorry, what do I want the audience to do?

198
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Yeah,

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well,

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I guess I would really hope if you well,

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1,

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is that dreamers look completely understand how hard it is to be a founder and it's a 1Trillion times harder than being a venture investor that's for sure.

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And we also know that people can get Valley can be a very insular place. And so we completely feel for folks that aren't on the coasts that have great ideas that.

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That you have the same potential to build huge businesses. So, 1 thing that we love to do, and, you know, are proud of is, like, we wish there was some way that to disrupt the warm intro.

205
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So, just extending along that is that we respond to every single.

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Um, email that we get cold or not I mean, especially cold. Yeah. I mean, it's look, it's the least we could do is to write 1 response and we do review everything that we get. Now.

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What I do, what I also want to say is that sometimes we know things aren't to fit, you know, there are certain spaces that we won't touch because we have a vice clause or other things or maybe we have a competitive portfolio company in the or a competitive company in our portfolio.

208
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Um, and so we're not the kind of fund that backs 2 courses in a race and so we're always yeah, we respond to everyone review everything. We see. And then, the other thing is that just don't, you know, this is a marathon, it's not a Sprint.

209
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Now I'm just sort of recycling all dislike cliched, keep your keep your head up sort of founder that.

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I mean, they're all true and, you know, all I'm trying to say is that we understand, you know, my email is the at dreamers. That VC. Yeah. I mean, look forward to speaking to your, to your audience.

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Perfect, yeah, I'll make sure to include links to dreamers. We see in the description sub zone, also there's going to be a LinkedIn.

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I'll fake,

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and also his email address,

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and also 1 more thing is going to be a tool called cap base as just regarding the thing that you said this,

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the best time to be a founder and cap base is just makes it so much easier to run all the fundraising stuff so if you're trying to figure out the legalities of this question,

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which are.

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Pretty complicated. 1st check out the descriptions. I mean, the description I'm going to include a link to do a fundraising review part, where we discuss illegal stuff off fundraising, and also there's gonna be cap base.

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So, if you want to make your life a little bit simpler, use some tools that 2021 provides definitely checkout description this episode as usually have a good.