208. Pre-Crisis Chat w/ Mark Suster – Building a VC Franchise; The Shift to Bite-Sized Video Content; Last-Mile Attribution; and The Impact of Corona Virus Over The Next 6-12 Months (Mark Suster)

Building a VC Franchise; The Shift to Bite-Sized Video Content; Last-Mile Attribution; & the Impact of Corona Virus Over The Next 6-12 Months
Nick Moran Angel List

Mark Suster of Upfront Ventures joins Nick on a Pre-Crisis chat to discuss Building a VC Franchise; The Shift to Bite-Sized Video Content; Last-Mile Attribution; & the Impact of Corona Virus Over The Next 6-12 Months. In this episode, we cover:

  • Last time we had you on the show was December 2016. Any notable updates or changes at Upfront since then?
  • Just chatting w/ Minnie Ingersoll and she was saying how great the Upfront Summit was and how I need to attend next year… what were the highlights for you this year?
  • Content companies are beginning to optimize for quick 1-5 minute gaps everyone has in their day, on their commute, between meetings, etc. where really short form content can be consumed beginning to end.  You had a chat w/ Meg Whitman, CEO of Quibi at the Summit… and I’m going to read a quote from your blog post about that interview “her analogy of content like “The Da Vinci Code” which had 464 pages and 105 bite-sized, fully realized chapters. In essence, you’re not intimidated by the size of each episode so you dig in and might just read 8 chapters in a sitting before realizing you read 35 pages. And so it is with video.”  Clearly Quibi is trying to capitalize on this short form video content w/ A-List celebrities and over $1.75B in venture funding…  Mark, do you believe this is significant emerging trend or is it overhyped and overfunded?
  • Quibi successfully sold out of $150m in first-year ad inventory even before they launched, which says a lot about the current marketing landscape. Channels like Google and Facebook are becoming saturated, and marketers are desperate to find that new channel that will give them an advantage… thoughts here on the macro digital marketing landscape?
  • Seen any great companies doing last-mile attribution? – Whether it be the corona virus, the election and/or a potential market correction… what do you think the next 6-12 months will hold and what effect will that have on early stage startups, funds and IPOs.
  • What’s the biggest mistake LPs or the VCs that are guiding them, make when co-investing?
  • Who haven’t you gotten yet as a featured guest at the Summit that you’d like to get in the future?
  • Since we last spoke, you’ve inserted an “Inclusion Clause” into your term sheets at the firm. Why’d you do it? 
  • Talk a bit about investing…  You wrote a blog post about key lessons since the first VC check you ever wrote.  Can you highlight the most critical things you’ve learned. – Assessing the intangibles are so important when evaluating an early stage founder ie. grit, personality, drive etc. Are there specifics methods you apply to assess for these intangibles?
  • Are there any traits or characteristics that you think are being over-indexed on by some investors?
  • Jason Calacanis was on recently and mentioned that you work harder for your startups than anyone else… what is your playbook for helping startups and what determines your level of involvement?
  • In early 2019, you wrote a post about why seed investing has declined. You ended the post saying “Seed investing is here to stay (although the firms may change — with some seed funds becoming A investors).” What are the biggest shifts you see happening in early stage VC?
  • It looks as though you took a 4 month “forced hiatus” from the blog.  What was the motivation for the break?

Guest Links:

Key Takeaways:

  1. At Upfront Ventures, they invest about 45% of their dollars in the greater LA region, from Santa Barbara to San Diego, about 25% in the Bay area and about 15% in New York City. 
  2. What’s most important about investing in general, is that you have an edge. That you do something, know somebody or have an unfair advantage in one particular area, that other people just don’t have.
  3. This year at the Upfront Summit they focused on showcasing everything that is uniquely great about Los Angeles, by highlighting LA based entrepreneurs, LA based funds, and also highlighting what unique things LA brings to the market. They also focused on raising awareness by taking on controversial topics such as gender equality, white privilege and sustainability. 
  4. How do you define a brand? A brand is not just your logo or your name, it’s how you represent yourself in the marketplace and how people and the market perceive you. 
  5. Fundamentally your customer is your LP because they’re giving you money, which is your sustenance. In the most simple of terms, a VC’s job is to give back more money than you received. Also from a returns standpoint, giving back more money than your LP’s could get by investing in another asset classes. The way to achieve that is with your product, and your product is a diversified portfolio.
  6. It’s important to understand how to create diversity in a portfolio fund and ultimately what you stand for. Upfront creates diversity across investment types by having market leaders who lead specific practice areas such as, computer vision, applied biology, marketing automation and security software, to name a few. Their goal is to dial in their investments on focused areas and avoid generically spraying dollars anywhere.
  7. For VC’s having an edge on geography matters because you truly never have a market all to yourself. If you do have a market to yourself, you’ll have a big competitive advantage, however those are typically the worst markets. 
  8. One of Mark’s biggest themes is playing offense, instead of defense. Knowing about deals before they’re being marketed and proactively figuring out which of those best fit his investment strategy. Furthermore, getting out and in front of them early, well before their fundraising and providing them with real value. 
  9. A common mistake Mark has seen in startups that build a great product, who have proven product market fit with users, won’t have the right monetization and fundamentally media. People consume more media today than they ever have, therefore the media business or media in general is not broken, the problem is that the economic model is broken.
  10. The single most important part of your job as a VC is to find, identify and have judgment on backing a founder. The other 25% of the job is working with them, getting to know their strengths, their weaknesses and being able to guide them over time to build out their staff in order to compensate for those weakness. 
  11. The industries that will be impacted the most by the coronavirus crisis include hotels, airplanes, trains and especially restaurants.
  12. The people who are most vulnerable are those of lower income who are on unfixed salaries, and dependent on their hourly wages. These impacts will spread from people in the service industry, to hospitality and healthcare. Mark predicts that society is going to be reasonably challenged by this, which will have a major effect on the economy.
  13. Often we operate with this idea of continuity until one day everything changes. Mark suspects that this will be a Black Swan event which will cause a resetting of things like valuations, while investors wait to see what happens.
  14. This time of uncertainty could last one month, three months or even 18 months. There are 2 things that are now changed in this equation, one is cash and the other is burn rate. Mark’s advice to founders it to load your balance sheet now, cut costs and extend your runway.
  15. Mark also predicts that valuation expectations may be greatly reduced after this period of uncertainty. 

Transcribed with AI:

welcome to the podcast about investing in startups, where existing investors can learn how to get the best deal possible. And those that have never before invested in startups can learn the keys to success from the venture experts. Your host is Nick Moran, and this is the full ratchet.

Welcome back to TFR, I want to take a quick moment to wish all of you the best amidst this terrible health crisis and financial crisis. I’ve built friendships and professional relationships with many of you in the audience over the past six years, and I I truly hope that you and your loved one stay safe. For those in the audience that I haven’t connected with directly and there are many of you. I appreciate your support of me TFR in new state ventures. We’re still in operation here talking with our portfolio companies communicating with LPs and looking at new potential investments. While may not seem like now is the right time to be thinking about new investments, we do have a job to do. And that’s to invest our LPS capital wisely. We will not neglect this responsibility. And we still have about eight more investments to do from our current fund. Special thanks to the team here at new stack Jr, Mark Lucey, Gio Liz, Ryan, and Austin, our newest team member, I’m just really amazed by the dedication and care that you all put in every day. And to all the founders out there. This will be an extremely trying time, we hope that TFR can provide some coverage on the crisis as it unfolds, and some some guidance on how to adapt and persevere. With that said, I recorded the following interview with the great Mark’s sister on March 4, which was really a good week before the threat intensified here in the States. We discuss a range of different VC topics in the interview. But specifically Mark had some real pressure thoughts on COVID-19 and its impacts that are now feeling very real. Now with that said, we’ll kick off the episode best of health and safety to you all. Here is the episode with Mark Sr.

Mark Suster is back on the program. Joining us today from Los Angeles mark is the managing partner at upfront ventures. A front is an LA based firm with investments in bird Maker Studios, goat and ring among many others. Mark also writes the influential blog both sides of the table. Prior to upfront Mark was the founder and CEO of two successful enterprise software companies, and the most recent of which coral was sold to salesforce.com, where he became VC of products. Mark, welcome back.

Nick, thrilled to be here. Thank you for having me.

Always good to connect. So last time you’re on the show was December of 2016. Any notable updates and changes at front since then?

Well, it sounds like I haven’t been on for a while. So I’m thrilled to be back here and boy is life changed. Yeah, you know, listen, we, as a firm, you may know this, but we have both a series a fund and what we call an early growth fund. Our series A funds are $400 million, and we raise one every three years. And just so you and your listeners are aware we do about 45% of our dollars in greater LA. And let’s call that from Santa Barbara to San Diego. We don’t like to consider ourselves a regional VC. So we invest nationally, about 25% of our investments are in the Bay Area about 15% in New York City. But what’s important in investing in general neck is that you have edge that you do something or know somebody or have an unfair advantage in some thing that other people don’t have. And with La being the second largest city in the country, and the third largest venture market and the fastest growing, you know, we think that’s an edge worth having. What has changed, which is actually your question is that we’ve opened an office in San Francisco, which we’re thrilled with. We have a partner there that is new, and she’s running our operations in San Francisco. Her name is Aditi Molly wall. She’s out of Google and Stanford and was formerly at crosslink. So had venture experienced before this. So you know, listen, we’re all in San Francisco, at least once a month, many of us there twice a month. We all have boards there portfolio companies there were there a lot. But just having a commitment to the Bay Area where people know we’re serious about being in that region, as well as being based in LA was important to us and so we’re thrilled to have a DT on board. Awesome.

Yeah, I do want to come back to this point about creating edge and you know, differentiating as a venture firm but before we jump in to sort of the meat potatoes here, you know, I was just chatting with many Ingersol over at 10 110. She was saying how great the upfront some It was this year, I think it was just last month and end of January, end of January. And she was saying how, you know, I need to attend next year. But I just curious, you know, for your your highlights from the summit this past year, or? Well, I

would say the first of all, the best way to lobby for anything is to do it when you’ve invited someone to be on a podcast that’s smart and clever, and you have my email address. So just reach out to me privately. So the highlight, honestly, we try to highlight what is uniquely great about Los Angeles, that’s what’s important to us. And so our view is we’re highlighting la bass entrepreneurs, we’re highlighting la bass funds. But we’re also highlighting what unique things la brings to the market. And we know that having influencers is something that makes us different, in a world in which you no longer rely upon big media companies to go from a product to a user. But where influencers can help you reach users more cost effectively, and a wider group of users, understanding how to work with influencers matters. The movies we make, the stories we tell for society, are driven from Los Angeles. So having people talk about, for example, gender equality, and how we’re trying to create more media to, you know, raise awareness of gender equality is a topic we took on we took on the topic of white privilege, and what does it mean to be white, and to have privilege and, and maybe not even to have realized the privileges that you have that other people don’t. But the big topic this year was sustainability. So Bill Gross, the founder of IDEA Lab, who created the most profitable part of the internet, which is sponsored search, has decided to dedicate the rest of his career defending and building companies to address climate change. And I say, you know, honestly, he’s sold the show, he was like the one person that everybody was raving about his presentation, and it will be available on YouTube, all of the all of the talks will be on YouTube. If you look on upfront summit on YouTube, you know, we put our videos there. And then in terms of climate, we had appeal sciences, which is a portfolio company of ours that has found a way to take the molecules from stems and plants and create a film around the outside of a plant that seals in moisture and prevents oxidation. The important thing about that is 45% of the US produce is wasted before it’s eaten about 70% in developing countries. And so if you really want to conserve water and increase, you know, total available food for a growing population, you’ve got to be able to preserve it longer. And it does it without refrigeration, herbicides or pesticides. And he appeared on stage with the former CEO of Whole Foods. And then we took on fish sustainability. So we had a company called insect which is like the word insect but with a Y instead of an AI. And they found a way using vertical farms to grow worms at an industrial scale, which I know sounds a bit weird. But the truth is that we’re depleting the world’s fish stocks. And we’re doing it because in particularly China, but in other growing economies, where more people have moved off the farm and into you know, urban environments, their diets have changed from purely carbohydrate to carbohydrate plus protein, which puts pressure on pork, and poultry and beef, but particularly fish and shrimp. And so we’ve really started to have problems with something that should be sustainable, which is, you know, animals and fish. But we’ve put pressure on that. And so the world’s people growing fish supplies are starting to feed soybeans and wheat to fish, which they weren’t designed to eat. So by producing worms at industrial scale, he’s able to put that into fish diets. And in the wild fish eat about 15% of their intake is already insects. And so he’s been able to actually prove over a three year period of time, he can decrease fish mortality, increase fish yields, and do it in a productive way where they don’t have to put hormones or antibiotics in the fish themselves. So those are the kinds of topics we took on. And the people who took on the topics of gender diversity and inclusion are, you know, people like Zoe Saldana? People like Eva Longoria, people like Reese Witherspoon, like people who are really influential and changemakers. You got to hear directly from them, which was great. Yeah,

even noticed that a talk up on YouTube from the summit with Albert winger and Fred Wilson talking about the impact of climate and I think Fred even said, it’s it’s the most sort of important crisis or most important issue of this decade.

I mean, basically, Albert has basically said he’s going to dedicate the rest of his career to investments that fight climate change, and that we, overall as venture capitalists need to take it seriously. And the good thing about venture capitalists We can both try to apply what interests us from a sciences perspective, we can apply what interests us from a political, geopolitical perspective. But if we’re right about fighting carbon, and you know, upfront has been spending a lot more time, not just sustainability, but looking at fighting carbon, if we can do that, and if we’re right that it’s urgent, it also is where the dollars are going to flow. So seven years ago, we made three bets in agriculture technology designed around sustainability. And honestly, when we did, like, people were scratching their heads. And I sort of said to my LPs, if I’m not making you scratch your head a little bit, I’m probably not doing my job, it’s the job of a VC is to be funding things that you really don’t know, as someone who doesn’t live in the worlds that we have to live in. So I place very small bets in the category. And as a result of spreading enough bets, we ended up in this magnificent company appeal sciences. And you know, really, it could help change society. Just to give you an example, Kroger, the largest grocery chain in the US, has announced publicly that they’re standardizing all their produce on appeal. Wow, if you look at the largest grocer in Germany, which is called Attica, they control north of 30%. Market share in Germany, I’m told also a standardizing on appeal. So if these people, the largest grocers in the world are standardizing on a product, you know, that says something about the impact that it’s both having and will have. So it’s heartening to know that other VCs are taking up the challenge. And I think you’re gonna see a lot more dollars going into areas that are going to have an impact on the future of society.

You know, always love your perspective and your content. And I think I think I noticed that you, you forced a four month hiatus on the blog, are you back to writing now? Yes,

I am gearing up to do a bunch more writing. So what I plan to do is, you know, I have a series of talks that I’ve been doing privately. And that’s kind of how my blog evolved anyways, which is, you know, talks that I was doing on a regular basis, I just decided why not make these public? One, I’ve done a whole series about how to build a venture capital franchise from, you know, how do you position yourself? How do you attract LPs? How do you find deals? What’s the best way to find deals? How do you market the deals that you’ve done? How do you get corporates? How do you attract entrepreneurs? So I have this talk that I’ve been doing. And I’ve decided, I’m just going to break that out into a series of 25 or so posts and write them. I’ve been doing a whole separate set of talks, as I’ve done some advisory work for LPS themselves on how to LPS do direct investing. And I think that’s something that, you know, I think a lot of mistakes are made. And I tried to give an insider’s perspective. Maybe both sides of the table now could apply to VC and LP, right, where we’re sitting on opposite sides of the table. But now I’m trying to hop over to their side and say, What would I do if I were you? And so I there’s a series of 20 or so posts that I want to do on that. So I got about 45 posts queued up in my brain. And then I think I mentioned to you before we got on this podcast, that I’m actually doing a keynote next week at Sastre and I’ve written a brand new presentation just for Sastre which I love doing because I love Jason Lemkin and I love the work that he does, called funding in the time of Coronavirus, meant to be a play on Gabrielle Garcia Marquez is loving that Time of Cholera. And so I’ll probably publish that and try to do a series of posts on that, we’re gonna

have to get you a round table mark, then you can be on the same side and, and the opposite out of all. There you go. All right. So let’s dive into that. How about on the topic of building a VC franchise? You know, not enough time and just this show to to cover the range of topics here, but can you can you highlight some of the sort of key areas that you shed light on in this presentation?

Yeah, I mean, I’ll do it super quickly. So yes, I can’t do a deep dive. But I’ll basically say I think the premise that most people start with is not a clear understanding of where they’re going to differentiate. And it’s, you know, one thing to say, Okay, we were all at Dropbox, or stripe, or Facebook or wherever, and we know people, other people don’t know, and we’re gonna just fund our smart friends. But I don’t think that’s sustainable. So I think you need to think about, I think in any investing, like sometimes MVC, newer VCs, can be a little bit naive to how funding markets overall work, just because they probably don’t have, you know, 20 years of investment experience. But any investing is about having edge, right, like for you to produce returns that other people don’t have. You really truly have to have some insights and some access that other people don’t have. Otherwise. I mean, you can make money otherwise, but it’s mostly luck. Yeah. And to be sustainable over time. You have to know something or somebody or have some angle that other people don’t have. So I think really focusing on what’s uniquely you, you know, in classic marketing terms they call it positioning, you know, what is your market positioning? And how are you going to build something that’s sustainable and defensible through good markets and bad? So that’s like the starting point. And then how do you define a brand, a brand is not just your logo or your name. It’s like how you represent yourself in the marketplace and how people and the market perceives you. So I talked through a whole bunch of brand building exercises and how to build a brand. I think most VCs were taught newer VCs were taught. And frankly, publicly, we’re supposed to say that our customer is an entrepreneur. And I actually don’t think that’s true. So I try to get people to realize that the entrepreneur in many ways is a product. And I don’t think of that pejoratively, because I’m a former entrepreneur, and I wake up every day thinking about the entrepreneurial journey of the companies that I backed. But fundamentally, your customer is your LP, because they’re giving you money. And that money is your sustenance, like that money is how you pay your bills and your staff. And that money is also how you make investments that drive returns and create jobs. And your simple job, if I could just describe it in the most simple of terms, is to give back more money than you got and give back more money on a return basis than they could by investing in another asset classes. And the way that you do that is with your product, and your product is a diversified portfolio. And again, I think not enough VC firms think about portfolio construction. So how do you create diversity? How many investments should you do? What is your you know, reserve policy? How many first checks? Do you want to write? What is your ownership threshold? And usually people are on fund three or fund four before they even start to think about that. And I think it’s important to understand how do you create diversity in a portfolio fund? And you know, what do you stand for? And you know, I’ll just give you some stats, just to give you a feel for how we think about it, like our median first check is $3.8 million. Our median ownership is 21.2%. We do 45% of our deals in Greater Los Angeles, from Santa Barbara to San Diego. And we look to create diversity across investment types. So we have market leaders who lead practice areas in computer vision, applied biology, we have a practice around marketing automation, we have a practice around security software, we have a practice around direct to consumer businesses, particularly targeting women, we have a practice around marketplaces, we have a practice area around video games. And we have partners who lead each of those practices, right so that we’re not just generically spraying dollars, we’re trying to invest in areas. And you know, like my partner, Kara, who has been very successful in investing in security software, and is building a practice, I keep saying to her, like keep doubling down, because your networks are only getting better, your knowledge is only getting better your referral sources are only getting better. And as you do that you become a better investor than other people in that category. Right? So. So that’s how we think about it. Overall, we’re eight investment partners, and we try to have areas that enough of us understand but that don’t have deep overlap. So anyway, so that’s the crux of the presentation that I give people, how do you get in front of entrepreneurs? How do you? How do you do one too many communications, like one to one is an effective like you will not be effective in your job? If everything you do is coffee meetings? Yeah, it just doesn’t work, you know, you can’t achieve scale. And so anyway, that’s the basis of my presentation started to go on and

on. No, it’s amazing. Sounds like really good asymmetry in the portfolio, too. So what’s your edge? I mean, I’ve made a little list and I’ve got a bunch of different things that you do and upfront does. But I’d love to hear from your perspective, what’s up front edge.

So, you know, I’ve discussed some of it, which is geography. And geography matters. Because if I’m competing for a deal on Sand Hill Road, it would be naive of me to think that there are eight other amazing firms talking to the entrepreneur at the same time. Yeah. So geography matters. Number two, and this is not widely known about up front. But in the last decade, we’ve done 12 cross border deals between France and the US. 12. So what a lot of people don’t know is the founder of upfront is not me, the founder, his name is Eve Sr, on and he’s from Lyon, France. And he’s lived in the US for 40 years. And as you know, if you’ve met him, you think, wow, he’s as American as the next guy. But he grew up in France and has relationships that other people don’t have. And France has amazing sciences, amazing engineers, but they typically haven’t globalized their businesses, because they have, you know, what is it I guess, almost 60 million people. And they have a large enough domestic market, whereas Israel that has roughly 6 million people, they have to think global from day one. And so here’s the difference is France has woken up to a new reality that the EU is not its only Savior, and that it needs to build global businesses. And so we’re not going to do the seed round In France, but if they raise three to $5 million in capital, and are looking at someone who really knows how to operate on both sides of the pond, I think, you know, up France competing with eight people, not 800. And what many people don’t know is I used to live in work in France, I lived in Europe for 11 years, I am a dual citizen of the UK in the US. And so between even myself, and we actually have people on the ground in France, we have Chu Lian, you know, as out of Airbus ventures now working for us in Paris. So we’re leaning into vectors, where we again, know something or somebody or have some access, not to ourselves, you’d never have any market to yourself, or you’re in a shitty market, but, but that is less competitive than the mass population. So me personally, just so you know, like, I mean, having built and sold to enterprise software companies, I spent a lot of time looking at SAS related businesses. But I’ve decided to focus my area personally on computer vision. And what I mean is cameras, lasers, infrared sensors that interpret the physical world, so the IO input output, that interpret the physical world better than humans do. And I’ve done like five or six investments in the category. And as I said, like, the more I do, the smarter I get, the more access I have, the more I learn, the better investor, it makes me in that category. Love

it, we may have may have some portfolio companies here in new stack that could be a fit for them upfront at some point.

But let’s let’s schedule a call. And I will tell you, Nick, in all truth, you know, one of my biggest themes is playing offense, not defense, I tried to tell every VC to do it, it’s like defense is I get an email from a friend saying, Hey, I funded this company, you should look at it. Yep. Well, at the time they do that, like, presumably, if they’re good at their job, they send it to five other people. What I need to do is know about the deals before they’re being marketed. And I need to proactively figure out which of those fit my kind of investment strategy best and I need to get out and get in front of them well, before their fundraising, yep, and get to know him early, and show that I have, you know, deeper insights or, you know, better follow through or, you know, would be valuable to them. And, you know, that’s my goal. So, you know, I call it doing a portfolio review with people who invest earlier than you do. And, Nick, I would love to do a phone call and understand, you know, where our overlaps lie, always

happy to always have to, you know, it’s, it’s challenging. So we’re mostly precede investors. And I talked to my team about this, but we really kind of set the venture clock. And we have to be really careful about when we invest and make sure that it’s the right time for the founder and the right time for us. But these things are not on the grid, these things are not, you know, published the startups prior to us making an investment. Typically, there’s no press on it. They’re not in PitchBook. They’re not on CrunchBase, for instance. And so it’s kind of a unique challenge, I think being a precede investor, because in order to hunt in to be on offense, it’s just like, it’s a unique approach to deal flow, you know, finding these opportunities.

Nick, if I could jump in and say, you know, I am a pre product, a round investor, the only difference between you and me from the way you describe it, is I’m looking to write bigger checks. And I mean that like, I look, I fun, here’s offense, okay. I spent, I don’t know, three or four years getting to know a guy who was working with Liz Murdoch. Initially, he was advising her as a venture investor. And then he came in to run one of our companies. And I just thought, I mean, first of all, I did it just like because he’s a nice guy. And I thought, I’m happy to mentor people. But then I thought this guy has insights other people don’t have. And when he was running a company for lives, he was running a company on Snapchat, that produced true crime. So they have a show called solve it’s on SNAP, it was, if I’m not mistaken, the third most watched media product on SNAP still is and the highest completion rate. But I said to him, like that is not a company, you know, that’s a distribution channel, a snap media company, that’s not a company so great, you have this awesome product sitting in your distribution channel. The only way you can build a business is if you go actually build a product where you can drive traffic from Snapchat to actually use a product and what you should do is build a video game and what I mean is literally that a video game like a game based on video, and I think the worlds of video like what we watch and linear storytelling and games, you know, whether that be fortnight whether that be FIFA or Madden, you know, World of Warcraft, whatever, those worlds are merging. And I said this is like you’ve proven that you have something that has product market fit with users, but you don’t have the right monitors Question. And fundamentally media, the media business. Media is not broken, like people consume more media today than they ever have. The problem is the economic model is broken. So he said to me, well, that all sounds good. But I don’t know, like, how do we get Liz on board? And I said, Why don’t we go there. So we went to see Liz, and we said, we think it’s better if you spin this asset out, create a new CO, let’s go build a video game, we’ve done it before we did it with this company, I don’t want to say we did it like this company that we funded locally called seriously, that built a product called Best Fiends did something very similar. And I think we could have some success. And you know, it’s a new proposition. So it took a couple of meetings, and she said, Let’s go for it. And we have built something that I promise you one year from now everybody’s going to be talking about the product is so phenomenal. And our metrics are so much better than because we’ve already tested it in Canada, so much better than you will see in other games, I think it’s really going to resonate. The reason I say this whole long story there is if you look at that company solve, I didn’t fund a company in PitchBook, I funded a guy who was not even founding the company. Okay, that’s what I’m looking for. Another example is a company called projector that does visualization inside of the browser. So you can do things like create media assets that will go on Instagram, or Twitter, you can also create slides, you know, better version of Google Slides, you can create short movies and pegs. And you can embed multiple things like a gift and an image to do visual storytelling. And they they said, I want to create something that is a better visual storytelling. So it was the head of product for the consumer part of Twitter with the head of engineering for the consumer part of Twitter. And this gentleman, Trevor, who prior to that was doing product on the consumer product of YouTube. And I had met him several times across both companies. And they just had this idea that they wanted to go do it. And I started riffing and saying, You know what, that’s a problem I’ve always had. Because I look at how do entrepreneurs better tell stories that help them do things like raise money, like attracts staff, like get press, like talk to business partners, and they’re not particularly good at it. And, you know, there’s a whole bunch of techniques I learned from people like Barbara Minto, or Nancy Duarte, who kind of talked about how to do visual storytelling. And you know, I’m in let’s go build a product that does that. No, obviously, I’m not building the product, but there was no pitch book. Like they hadn’t created the product and created the company. And I’m like, let me give you some money. And let’s go, let’s go on a 10 year journey together. And, you know, like I said, the only difference is that I can write $4 million to start to give them the resources to stay off the radar screen for a couple of years. Yep.

Yeah, I get it. I didn’t realize you were doing pre product. And you know, first check in at the level that you invest. But

it’s I think, as a former entrepreneur, like that’s where my heart always will be. It’s like ideation with super talented people where we say, I think there’s an open lane here. Like if you look at appeal sciences, when I first met James Rogers, he had just graduated his PhD program at UC Santa Barbara. And he had this idea about preserving fruit and veg. And even I had been working on this thesis of water conservation. And I don’t know, like, he’s just super smart, talented guy. And I said, rocket, you know, let’s, let’s go try and build this. And we even sent one of our most senior principals, and said, Why don’t you go work there for a couple of years and see how you get on? And, you know, I don’t know, it’s, gosh, what is it five and a half years later, they’ve raised hundreds of millions of dollars. And, you know, it’s it’s an awesome story. Love

it. Love it. I bet Bill Gross would be proud. You know, there’s some, some company building going on as well.

No, but no. Last thing I want to say on that topic, Nick is, I mean, you can ask Bill to get him on your show and tell you I’m a relentless pain in the ass. Like every time I talked to Bill. I’m like, Bill, you told me you have a company that’s solving carbon emission. You told me how they’re doing it. Why are we not funding it yet? Like you’re funding it? Take my money. Let’s go do this together. Is that kind of Oh, I know, I want to but I need to make more progress. No, I want to fund it now. I believe in your vision. Now. Let’s go do it. You

know, it’s funny, you bring that up, because we just had Jason Calacanis back on the program, and he was saying that of all the investors out there, Mark Schuster works harder than anybody and just gets involved. Thank you, Jason. You know, in light of that, what is your playbook? You know, what ways do you get involved? Is it just custom for every startup or do you have kind of standard it’s,

it’s different for every startup and it’s different for every stage of startup and you know, some entrepreneurs really want you more involved and, you know, come see you a lot and spend a lot of time and call you a lot and some just kind of want to be left alone for two, three months. And I can, I can work in any style, you know, with people I like to be involved, I like to be engaged, you know, but somewhat, it’s down to entrepreneur. And, and it waxes and wanes, like, you know, as companies get later, you really need to give them a little bit more rope. And then I tend to jump in on things like, are you upgrading your executive team? You know, you have to stop doing all this work yourself, you really need to get leverage and you know, how are we going to build out the team? You know, I often say for VCs, like, you know, truthfully, and this will sound like, I don’t know, a cliche or Pollyanna ish. But the single most important thing we do is find and identify and have judgment on backing a founder, that’s 70% of the job. And I would say, or maybe it’s 65% of the job, and maybe 25 to 30% is then as you work with them and get to know them, knowing their strengths and knowing their weaknesses, and being able to persuade them over time to build out their staff to compensate for their weakness. And the really biggest impact we make is how we build out their executive team with them and push them to hire the right people at the right time. And this is a conversation I have with entrepreneurs in our portfolio all the time.

Interesting, interesting. You know, Mark, you touched on content and video content. You know, I’ve noticed content companies that are becoming are beginning to optimize around these quick, one to five minute gaps that everyone has in their day, you know, on their commute between meetings, where this short form content can be consumed beginning to end, you had a chat with with Meg Whitman, the CEO of Kwibi at the upfront Summit, and I wanted to read a quote from your blog post about the interview, you said her analogy of content like The Da Vinci Code, which had 464 pages and 105 bite sized fully realized chapters. In essence, you’re not intimidated by the size of each episode. So you dig in. And you might just read a chapters in a sitting before realizing you’ve read 35 pages. And so it is with video. So clearly, Kwibi is you know, trying to capitalize on the short form video content with a list celebrities, and now they’ve got over 1.7 5 billion in venture funding. What do you think, mark of this? Is this a significant emerging trend? Or is it kind of overhyped in in overfunded?

Well, let me start by saying, I really have to give Jeffrey Katzenberg a little more credit for that quote, because I know I was on stage with Meg Whitman at the upfront Summit. But Geoffrey had been telling me that for the last two or three years, so it was already an analogy in my head. The idea is this, and I can give it to your listeners in a way that I think will resonate. When you’re home, and you think, you know, I want to check out from the world for a period of time, and I’ve been working too hard, I’ve been at my email, I want to break. And then you go to Netflix, or you go to Amazon, it’s really hard at 10 o’clock at night to say, I want to watch a movie, like, during the week, right? You know, we all have busy lives. So what do you do? You say, let’s, let’s watch a show. Let’s pick a series. And you start with a you know, it’s typically 22 minutes is the average length of a TV show 22 to 44 minutes. And so you say let’s watch Breaking that. Or you say, you know, let’s watch Game of Thrones, or let’s watch, you know, whatever, whatever show you want to watch, curb your curb, Silicon Valley, whatever, Silicon Valley, but what happens is, you sign up for a half hour, and you watch four of them. Two hours later, it’s 1215. And you’re like crap, I was gonna go to bed at 1130. Right? Yep. So it’s hard to make that commitment to say I want to do something for two and a half hours in my life or two hours in my life, it’s hard to make that commitment. And so when entry point to any product, I mean, this is not just video, it’s not just audio, like any product, when the entry point is easier to get started. And then when you’re in there, and you’re enjoying it and doing more of it, which presumes that you have a great product, you’re more likely to continue doing it. So I was having this conversation with a video game company yesterday. And we were talking about when is the right time to put up a paywall. And I was saying, like you need to push it back because the person needs to feel like they can get engaged with your product a little bit more fall in love with the product and the journey and make enough progress where they say you know what, I’m now ready and willing to continue the journey. And so that’s what I think the point was, and the point is like reading I read a lot. I tend to read on weekends and vacations. I have a hard time at 1030 Sam gonna read because I know that I pick it up and there’s a you know, 40 Page chapter and I don’t want to read like a quarter of it. After. And I think the analogy that Jeffrey and then Meg had is right, which is when you have a book and you know, it’s like five pages in a chapter. And like, I’ll just read a chapter two. Yep. But once you start that, then you’re eight chapters in and you stayed up till 1215. And you know, that’s healthy and good. Yeah.

And I mean, just on that point, acquittee I think they successfully sold out 150 million in first year Advent inventory, even before they launched lunch, you know, they

have unfair advantages. Okay, so I think the jury’s out on how the market will ultimately react to their product. And I don’t mean that in a negative way, like I’m huge fans of both Jeffrey and mag. But here’s the thing. When you’re Jeffrey Katzenberg and Meg Whitman, you can sell $150 million, you know, and when you raise a billion dollars in your seed round, and when you’re producing content with JJ Abrams and Tom Cruise, you’re not going to struggle for that. And then the second thing is because of who they are, they’ve actually done output deals with mobile operators. So the competition between like a Timo AT and T Verizon and all these players, they’re in a war for eyeballs and is not eyeballs. They’re in the water for consumers. Yeah. And so if I can have something unique Kwibi on my phone, and I use that as a marketing wedge to drive 100,000 new subscribers to Timo that otherwise might have picked sprint, otherwise might have picked Verizon, that’s a win for me. So I think they will get bundling done, and that will subsidize the cost for the consumer. And on the other side, they will get advertising done. And I think they have kind of a two year window to prove out the concept. Eventually, consumers are going to have to pay. And so we’ll find out whether they build high enough quality video, that’s a differentiated enough experience that I’m willing to pay for that alongside Disney, alongside Netflix, alongside Hulu. And alongside like my T VOD stuff on Amazon. And I think the jury’s out, it’ll come down to whether or not they have a compelling enough content. That’s, that’s differentiated from other platforms. They’re obviously betting they will. And like I always tell people, I would never bet against Jeffrey Katzenberg.

I mean, is there an element here where companies are desperate for another digital marketing acquisition channel with, you know, Google and Facebook being Instagram being saturated? And you know, marketers are looking for other forms of digital acquisition?

I think the statement you made is true, but I don’t think it applies to Kwibi. So the statement that people want to reach, like, it’s really Facebook, and Google, and Amazon, like those three controls, so much inventory of how you get access to consumers, and the job of any product you create, whether you’re a physical product or your digital product is how do I cost effectively reach end customers. And it’s very hard to do in a world where you have limited channels to find your customers. So I’ll give an example. I’ll sound like I always just plugged my portfolio, I don’t try to do that. But because because I know the companies better it like helps me with real world examples. So we backed a company out of the UK called infosum. Again, a founder I backed before he even created a product. He came to me I want to say four plus years ago, I had worked with him one time before. And he said Mark, there’s a real problem coming that no one’s ever heard of. And I said, what is that? He said, GDPR. And I said, What the fuck is GDPR? Right, like now we all know GDPR. But at the time, four or five years ago, wasn’t part of the lexicon. And he explained to me that this legislation was going to make it harder for you know, publishers and for people to share data. And one thing people don’t know about GDPR is if you control customer data, and you give that to a third party, and that third party leaks your data, you’re liable for it. And so an example is a lot of supermarkets have data. And they give that data to marketing companies like Catalina marketing, that then help consumer product companies market to their customers. And in the old world, you can hand Catalina marketing or the equivalent some of your data, let them market to your customers, and trust them not to leak your data. But in a world in which let’s say in Europe, where you’re liable if you do that, you’re not going to share the data. So what infosum did is they built a way to build data bunkers. So all of your data behind your own firewall, and they built a way to create joins where you could create data across companies where I can search your database without revealing PII personally identifiable information. And I thought what a great product for the future that we’re going to need and people don’t even know they need it yet. So like that’s my job again, to have vision about where the markets are going, and do I believe the story or not? So where are we today, fast forward, what they’ve done is they’ve worked with media companies, let’s say you’re the New York Times, let’s say you’re the Financial Times The Economist, let’s say your People Magazine, whatever. And you have access to users, no marketer in their own right, let’s say, your Stance Socks, let’s say you’re, I don’t know all birds, whatever your parachute home, and you want to reach customers, you’re not going to upload your database, and hand it over to people.com. So that you can find cohorts of customers to market to, because you’re not going to trust people.com with your data. Sure. But you did that with Facebook, you uploaded all of your emails so that you could find your customers, and you could build audiences and figure out how to target those audiences through Facebook. And that’s why your marketing campaigns and Facebook are so effective, because they have your user information, they have audience information, they can marry those two things together. And they can say, oh, women who are 35 to 50, who live in urban environments who earn more than $75,000 a year who have two kids buy your product two times more than people who are not. Right, right. So it’s so effective, that you spending your dollars in a place that doesn’t have that is not working. Now, what this company info some allows you to do is you keep all your data, you build your audiences behind your firewall, but you can find your audience through People Magazine, I’m just using people as an example, you can find your audience, even though you didn’t share the information with the media publisher. And I think this is an idea that starting to take off, it’s early days but starting to take off. So very long answer to a very short question, which is Everybody’s hungry to reach customers in a more cost effective way. Everybody knows that when distribution has monopolies or oligopolies called Facebook and Google and Amazon, that you’re never going to be able to cost effectively reach enough people through those channels. And I think whether it’s emphasize or similar technologies to that people are starving for a solution that that achieves that. Have

you seen any CPG or tech companies that actually sell a physical product that have done a really good job of tracking where consumers were sourced either offline or online and tracing everything back based on sales and serial numbers?

Well, the best companies all do that, to be honest with you. And it’s called attribution. And the actual term for it is last mile attribution. Let me just give you an example of the problem of last mile attribution. So basically, let’s say you run a campaign, and you decide I’m going to spend money on podcasting. I’m going to spend money on radio, and people hear about your product. I’ll pick a product, the aura ring, which I just happened to buy. Yep, I’m not an investor, I just bought one should be coming tomorrow, in fact,

sent me the wrong size. They really Yeah.

I hope they don’t do that. So I mean, actually, it was weird, because they send you like a plastic sizing kit first, and you have to try that on. And then you have to give it to me. The experience was a little bit weird if I’m honest, but But I understand why. So in any event, so let’s say you’re the aura ring. And you run podcast ads, and you run radio ads. And then what does a person do? A person goes to Google, and they search or a rings, or they go to Google, and they search, you know, whatever fitness tracking. And then they’re like, oh, yeah, there’s the aura ring. And they click on the ad, if you don’t understand the top of your funnel, in marketing, and you just look at what’s called the last mile, which is how they found your website. What you do is you say, Oh, God, podcasting doesn’t work. Radio doesn’t work. Let’s put all our dollars with Google. And then guess what? All of a sudden, your conversions go down? Because you thought that it was all coming from Google, when in fact, Google is just the last mile. So there are actually tools that help you better track what’s happening at the top and your funnel.

Yeah, misapplied attribution, in a lot of cases, especially early stage startups that don’t have a lot of bandwidth and people to focus on that.

Or the experience and sophistication. Exactly, yeah. Right.

Yeah, just sort of pitch actually from one of our companies called jiobit Last night, that are doing a lot of this last mile attribution, and it was pretty awesome to see but, you know, I feel like we got to touch on the elephant in the room, you know, very timely topic. Right now, Corona viruses is spreading rapidly impacting the markets. We’ve got an upcoming election, we’ve got a potential market correction. Give us your thoughts on these these effects right now and what you see over the next six to 12 months, and the the impacts on you know, the startup in the venture

space. Well, it’s interesting and in a way which is it’s like the percent of the elephant in the room because at least an elephant, you can see like, it’s funny that the human vulnerability comes from something you can actually see. Right. So let’s take on Coronavirus as a starting point. So first of all, as we sit here today, early March 2020, there’s still a lot of uncertainty, there’s uncertainty about the rate at which it’s spreading. And there’s uncertainty about the mortality rate. And, you know, mortality rate, at least as I’m reading today is anywhere between 0.8 and 2%, of the, of the infected population. Now, I was listening to a podcast that was describing this, if it’s the upper end of that range, that’s 20 times worse than the flu. And what the gentleman was saying it was on the daily podcast was saying is, if you have 2%, it doesn’t mean that necessarily you or your family or your kids or your cousins are going to die, because the healthy population is not impacted that much. But what it means is, almost certainly somebody you know, is going to die from this. And that just doesn’t happen with the flu. Wow. And so when you think about your parents or your grandparents, depending on your age, I mean, I look at my mother in law is 82. My mother is 76, I think. And, you know, that’s a vulnerable age in the population. You know, one of the things I haven’t talked about publicly is one of the things that I started dialing back my blog posts last year is my father passed away. And when my father passed away, I just needed a period of time where I just wasn’t publishing and I didn’t feel like writing and talking to the world. Oh, no, I thank you. It was a year ago. And in any event, like my father, in all likelihood died from the flu. So he had Parkinson’s. And people with Parkinson’s have compromised immune system, and particularly their lungs. And what my father actually passed away from is called sepsis. Basically, he got an infection, it infected his lungs, he was sick. And that caused his body to go into sepsis. And he went into the hospital, and they had to induce them into equivalent of a coma. Now, that’s just the flu. Like, I think in this flu season alone, 46,000 people in the United States have already died from the flu.

Now, it’s one thing to say this is just the flu. But if it’s 20 times worse than that, you know, you could see upwards of a million people dying in the US like that’s not small. And the reality is we don’t know yet. And so we have to wait and see. But there’s one thing that’s clear, which is this concept of social distancing, is now widely understood that that is if you’re infected, the most important way to not spread the infection. If you’re in a community where it’s already, you know, somewhat being dispersed, you probably employ some amount of social distancing from other people yourself. So who’s going to be impacted from that the there’s obvious intermediate people, hotels, airplanes, trains, but honestly, restaurants like if 2% of the population is dying, and you suddenly which may or may not be the case, but you suddenly find out that, you know, a good friend of yours mom just died from Coronavirus. You’re probably not going to go to the local restaurant where the waitstaff are putting their hands on your plates and handing you a plate of food. And the people who are most vulnerable, as usual, are the people of lower income who are not unfixed salaries who are dependent on it’s going to impact busboys, it’s going to impact dishwashers, it’s going to impact house cleaners, it’s going to impact nannies disproportional effect on disproportionate and and just think about the people who have hourly wages and are reliant upon that, who suddenly now for 60 days might have their kids at home every day. Well, so I think society is going to be reasonably challenged by this. And that has to have a knock on effect on the economy. So, you know, I think the you know, I don’t know if you read the book, Nassim Taleb book, The Black Swan, but if you haven’t, it’s amongst the best, most influential books I’ve read about investing. It’s a fantastic read. And what he basically said is, if you look over long periods of time, indices, like the vast majority of money that’s made is made in a very short number of periods, in which you have a major event that people couldn’t anticipate that massively changed the trajectory of a market, right. And the reason he called that a black swan is throughout all of history, people thought there were only white swans. And as we develop better technology to sail around the world and discover new lands, they discovered a remote island that had black swans on him. So until that time, it was unknowable. So examples of black swan 911 Yep, like everyone. one’s operating with this idea of continuity. And then one day, everything changes. And that was 911. And things have never been the same since then. And you know, the world after 911 looks different than the world before in different and unpredictable ways. And so we often don’t know what is going to cause it like 2008. The event was the bankruptcy of Lehman Brothers. Now, the momentum was already building for 911, like the, you know, terrorist networks and the Taliban and al Qaeda, it just hadn’t crossed our consciousness to a point where it changed market outlook, everything that was going on with subprime lending, and collateralized debt obligations, and, you know, all this kind of risk that was being built into our system prior to 2000. It was already there. But like the discontinuity, The Black Swan event caused the outlook after that to be totally changed. We have been in one of the most unprecedented periods of history in the last decade, like we have defied all logic that from March of Oh, nine until March of 2020, it’s been up into the right in everything to do with the United States economy, with our stock market, with our tech funding with venture with everything. And I don’t know what the next two years hold, but I suspect that this will be a black swan event. And I suspect that there will be a resetting of things like valuations. I suspect there will be a period of time where, because what investors don’t like is uncertainty. So when you enter a period of uncertainty, then people just say, You know what, I’d rather just wait and see what happens. So the wait and see what happens could be a month, three months, or 18 months. And so my advice to founders to startups isn’t the same as my advice to investors, but to founders and startups is, there’s two things that change this equation. One is cash. And the other is burn rate. So do what you can to load your balance sheet now and do what you can to cut costs and extend your runway. You know, the analogy that I’m going to give next week at my talk at Sastre is imagine this image Costco in Seattle last week. And you know, all the images were like these massive lines outside of Costco of people going in to stockpile yep, I bought my stuff 30 days before that. Because I was paying attention to Wuhan and Wuhan. And I was paying attention saying, You know what, there’s going to be a run on supermarkets. And I’m not an alarmist. But you know, I might as well have extra cereal and rice and meat and disinfectants and stuff in my garage. Thank God, I can afford to do that and like be able to buy some of this stuff in advance. But I want to do it now. Because when the general population discovers this, you’re going to have a massive queue outside of Costco. I mean, literally said that to my wife. I think the same is gonna happen in funding, I think whether it’s so they so the flu, the COVID COVID-19, or Coronavirus, is meant to start peaking late March to mid April in the US. And it’s meant to and nobody knows for sure. So I want to not pretend like I have a crystal ball. But if it’s anything like the Spanish Flu of 1918, they predict that it’ll go through like June or July and then start to wane with the hot months. But what happened in 1918, which may not be what happens with Coronavirus is starting in October, it got much worse. So far fewer people were impacted and died October through February, late 1918 9019. Then even caught it in the spring. So even if we go through a period of Oh, like the world is not ending and this thing is waning and life is good. I suspect it’s going to come back with a vengeance. And if it does, you’re gonna see lines at Costco, but instead it’s going to be lines at VC firms. When that happens, it’s not like VCs suddenly say, well, let’s fund five new companies. They go into something called triage, you know, triage a term from like an emergency situation, which is I have 20 patients on a Warfield. And I have two doctors, I can’t treat 20 patients at once. Okay, those five are gonna die anyways, I have to let them die. Let me focus on these four that are saveable. And those five you guys are fine, like come back to me like two days from now I have to treat these five patients that are saveable. And VCs go through triage to like, you know, you have 20 portfolio companies, you have 80 you have 150 I don’t know how many, but you’re gonna say which ones are gonna die, which ones are saveable that we have to spend all our time trying to get them through this tough period of time. And let’s not take on any new patients right now. And then the good news for entrepreneurs is VCs have raised so much money in the last five years, that eventually they got to put the money to work. So it’s not about whether you can raise money. But there’s two things I would say. One is there is likely to be a period of uncertainty. It’s not for sure, but I’m just saying that’s what I think will happen. And number two is valuation. expectations may be possibly greatly reduced after that period of uncertainty. So if people were willing to pay make it up 12 times trailing SAS Arr, you know, six weeks ago, yeah. After the period uncertainty, they might be paying four times. And so I’ve been telling businesses even since q4 of last year, I’m saying stop waiting to hit milestones to raise your money, because you may hit every milestone you think you’re going to hit, and still get paid 50%, the price and this how’s that possible, I’m making progress. And I’m saying it’s possible if investors take a different view on how businesses are valued. And if that happens, like, you’re gonna take a haircut, so get your cash now, put it on your balance sheet and live to fight another day?

Well, and a lot of that discretionary capital probably dries up like the the CO invests and you know, the angels and family offices and funds will have capital under management. But a lot of that

I don’t, I don’t even want to go down that path. Because we can spend an hour on that. I’ve been telling this to people for years, which is when market corrections happen. Angels are hit first. And the hardest follow on investment of party rounds and syndicates is impossible and doesn’t happen and you die. Having a very strong lead investor that has a vested interest in your 10 year journey is the best way to build long term shareholder alignment. I’m a big VC. So of course, everybody when I say that says, Yeah, but you have a vested interest. You’re just talking your own book, maybe. But I actually happened to believe it. And I also was an entrepreneur for a decade. And I believe that when I was an entrepreneur, and I’ve been like, I’m 51. I’ve been through I think, for economic cycles, and I just I’ve seen what the other side looks like. And it’s not pretty.

Yeah, yeah. All right, couple wrap up questions. Mark, what resource could be a book blog video article? Have you found particularly valuable that you’d recommend to listeners?

Well, I think the book that challenge there’s a series of books that challenged me the most, to think about the world in a different way than I’m used to thinking about it. And so for me, that’s the start of anything great. The author is not relatively well known. His name is Peter ze Han. And he wrote a book called The Accidental superpower. And I would start there with the accidental superpower. And it basically says, How did the world come to be the way the world is? And why is the United States so dominant globally, but he goes through the history of how societies got built, how societies traded, how societies protect themselves, what their natural resources are. And then, you know, he told me a lot of things I didn’t realize, which is, he basically says, the United States, if you look at it, the things that are obvious, right, we have oceans on both sides of us. So we’re geographically protected from being attacked. I didn’t quite realize just how hard it is to attack another nation from a naval perspective, land attacks are much more effective than water attacks, which is why England has been protected for so long. And which is why Germany has had such a hard time protecting itself through history because it’s surrounded by land masses of hostile neighbors, which is why Russia has had a hard time historically, I think Russia has 11 borders, if I’m not mistaken, in Germany, five or six. So the US was protected from that. But the second thing is, we have approximately And I may slightly misquote this but approximately 22,000 miles of navigable rivers, and the nearest country to us has 2500. And nowhere else in the world has anywhere near the navigable rivers. And the important thing about navigable rivers again, I might slightly misquote but it was from memory about 1/17 The cost of transportation. So during the Industrial Revolution, we were not only as cities, a great cities like St. Louis and Cincinnati and Pittsburgh and Chicago, creating products that were much cheaper than the rest of the world could, but we were transporting them and trading with each other at a fraction of the cost. And all of this created excess capital, and that excess capital didn’t have to be spent on defense. So what it got spent on was deepwater infrastructure to have navigable ships got spent on rail, it got spent on creating a national highway. It got spent on building education. So America had these inherent advantages that I often don’t think about. So then he started talking about something that I also spend No time thinking about which is fracking. And he started talking about how fracking has given us an advantage in oil. That means that the US is no longer totally dependent on the Middle East for oil. So what he basically said is the US is going to pull out of the Middle East. And I thought that doesn’t sound right. Like I read this eight or nine years ago, he wrote it pre Trump. But it was like a prediction that Trump would emerge, it was a prediction that world disorder would emerge. So it’s called the accidental superpower. And it’s so steeped in data, that it’s just like for me a goldmine. The second book he wrote was called the absence superpower. And that was the argument of what is the world look like when the US does retreat. And he goes back through history and talks about Bretton Woods post World War Two, how we protected the world’s trade. And he basically said the world has been conflict since human evolution, the only time of no conflict has been post World War Two, and the only no conflict has generally been ocean based trade, because the US has guaranteed ocean based trade for everybody. But he basically says the US isn’t going to guarantee that anymore. So he predicted like, I don’t know, call it a 50 to 100 year war in Asia, where every nation is going to be at war with each other over one thing, which is distribution of oil. And he calls it the tanker wars. And he goes country by country around the world, and says how much oil do they produce? How much do they consume? How much do they import? Where do they import it from? And what’s going to happen in a world where the US doesn’t guarantee deliveries? fascinating read. And then he just launched his third book, which I think is being published, maybe this month. But he came and spoke with a friend summit because his first two books like so blew me away. And so we handed it out at the upfront Summit. It’s called this United Nations. And it basically is what’s happening in the world, country by country. And why is the world moving towards more unilateral positions, country by country? And what’s going to happen to the US what’s going to happen to Japan, what’s going to happen to France in the UK, and he goes country, by country, brilliant read, and it just gave me a framework for thinking about how the future may look, you know, reading this stuff, like I forget the saying, which is, you know, the future is already here, it’s just unevenly distributed. Meaning that we, you know, if you work in the tech sector, oftentimes, you know, where things are going to be five, 710 years from now, and the rest of the population doesn’t have the insight because they don’t work at that sector. I felt like these books gave me that. So, you know, I feel like reading them, I was pushing portfolio companies to move production out of China, two years before anybody else based on the books. And, you know, he predicts much stronger alliance alliances, and I think started this, this starting to happen between Canada, the US and Mexico, and basically says, we’re going to retrench mostly from Asia, mostly from the Middle East and Europe. And that trading block is going to become the most important in the world. And he goes country by country and says, How much does each country import? How much does it export? how reliant are they on external countries, and the US is the least reliant major nation in the world. And I can’t remember the stat so I’ll probably misquote it. But I think it’s something like 80 plus percent of all of our consumption, maybe 78% of our consumption is domestic already. So in a world where there’s less global trade, the US is more insulated. Whereas if you’re 3040 50%, already dependent on third parties, and global trade starts to slide backwards, you’ve got to figure a way that you’re still going to get the resources you need to feed your population and to provide them with products that they’re expecting to consume. And that changes the world as it is. Sounds

like fascinating set of set of reads there. And just a big frame recent for me sitting here, you know, I’m often thinking about tech and the startup companies. But but

that but that’s it, you and me, we spent all our time thinking about like, what are you know, as VR coming? are coming? You know, we don’t think about how oil, you know, for example, he talked about petroleum, and how petroleum is an input, not just the plastics and other things that we know, but even the fertilizer. And he basically was going through Latin America and saying, Where are they not going to get oil? What impact is the lack of oil going to have on fertilizer? What impact is the lack of fertilizer going to have on agriculture? And what impact is that going to have on feeding their population? And basically, who’s going to starve? Amazed? I don’t spend time thinking about that. But when you do, you’re like, Okay, you know, I have a new framework or rubric for thinking about how the world may be five or 10 years from now. Sure, sure.

Yeah, I’ve come across some similar positions having to do with water, as opposed to petroleum or some of these other inputs, but to round out the interview here. Mark, what do you know, you need to get better at?

Well, this will sound terrible, Nick. But at 51, I’ve come to the conclusion that I’m not going to get better at the things that I would like to be better I am on Mark. But no, but no, I don’t mean that I can’t improve. What I mean is self awareness is important. And I have ADD, you know, been diagnosed, it’s not a terrible thing, it actually works well, for me, I’d publish a lot of stuff on it. But because I have this self realization that I do not have good organizational functions in my brain, that’s not how my brain works. Partnering with people who are really process driven, have better follow through than I do, complimenting me. So you know, we have 10 partners that upfront aid or investment partners to or not, so my partner, Stuart lander, who’s our chief operating partner, who basically runs the firm, the job of running a firm of doing the portfolio accounting, and looking at reserve policy and dealing with, you know, LP information, and doing forward planning and budgeting and things that, you know, need to happen. But isn’t your skill set to do having someone who’s so good at that and so complimentary to you helps you perform better, it’s almost like, you know, like, looking at a team and thinking, Okay, I’ve got a great quarterback, but unless I have receivers, like a great quarterback is wasted. So my Philadelphia Eagles has Carson Wentz. But unless we have receivers that can catch his passes, like we’re not going to win games. So I’ve just come to this realization, and I believe it about companies and people in general, which is, I don’t buy in the philosophy that we should spend all our time trying to make our negatives positive, so much as we should recognize what we’re good and bad at. And we should lean into our superpowers. And we should find ways to complement the things that we’re less good at, because I’m simply not going to take the way my brain is wired, and be processed, driven. It’s just not going to happen. So the realization, I think itself helps.

definitely resonates with me, my my big brother came and joined me about a year ago. And it’s been transformational because he keeps the trains running and keeps everything organized. While I do what I do, just at the end here, what’s the best way for listeners to connect with you?

Well, listen, as someone with ADHD who’s not process driven, who doesn’t believe in playing defense, I’m not particularly good at email. And I don’t use as an excuse. It’s just, it’s a place I go to, like, get crushed by the number of people who want things from me, and I just can’t spend all my time doing that. Yeah, I’m a very public person, I respond to people on Twitter, you know, I interact with people on Facebook, I, you know, have an Instagram account. I try to be out there and social and public and interact. And, you know, there are people over the years who politely you know, prod me on Twitter or provide information or have a conversation. And then you’ve been doing that for a year, you start to recognize the names and the people. And you know, of course, everybody does this, then you’re like, who is that person and you click on their link or their bio, and you try to read a little bit about him. I just think it’s a long game relationship building. And I’m pretty public. And I’m curious, and I like to know people and I’d like to know people who think differently than I do. So I find that valuable. So I just said, that’s the best way is probably through public social channels other than LinkedIn. Got

it? Well, there you have it. He is Mark Schuster, the man who needs no introduction, you know, one of the biggest brands we so appreciate your time, and it’s good to hear that you’ve got floss to

thank you New York. I appreciate your time. Awesome. Thank you Mark.

That will wrap up today’s episode. Thanks for joining us here on the show. And if you’d like to get involved further, you can join our investment group for free on AngelList. Head over to angel.co and search for new stack ventures. There you can back the syndicate to see our deal flow. See how we choose startups to invest in and read our thesis on investment in each startup we choose. As always show notes and links for the interview are at full ratchet.net And until next time, remember to over prepare, choose carefully and invest confidently thanks for joining us