Ben Lerer of Lerer Hippeau joins Nick to discuss How to Thrive in a Down Market; Investing through the AI Hype Cycle; and Consumer Exits and Key Lessons from Warby Parker, MIRROR, Casper, Allbirds, and Oscar. In this episode we cover:
Opportunities In the New York Tech Scene
The Challenges Of Building a DTC Company
How To Assess Purchase Frequency When the Market Is Low
Avoiding Startups Building With Generative AI
Where Is the Alpha In the Solar Space
What Makes For an Amazing CEO
Do Founders Have a Unique Superpower
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Nick Moran and Nate Pierotti of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
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Transcribed with AI: 0:18 Ben Lerer joins us today from New York. Ben is Managing Partner at Lerer Hippeau, a seed stage venture fund investing in consumer and enterprise startups. At Lerer he has invested in companies including Warby Parker, MIRROR, Casper, and Oscar amongst many others. Ben is also the CEO of Group Nine Media, a digital media powerhouse that owns Thrillist, NowThis, The Dodo, Seeker, and PopSugar. Ben, welcome to the show! 0:45 Thank you for having me. 0:47 Yeah, Tara. So your background, I know you’re a busy guy, you’ve got a lot of different roles, you know, talk us through your path to startups and venture? 0:55 Absolutely well, and I can say in, in a good way, I’m a little less busy these days, I, for a long time, I sort of juggled two jobs, both on the operating side at group nine. And, and, and building layer hippo at, in sort of my venture career and did both of those jobs simultaneously for over a decade, which was on a good day, a, I felt like the luckiest guy in the world getting to sort of have my cake and eat it too, and, and scratch very different itches. And it was, I really did think it was sort of the perfect job for a certain period of my life, as I have gotten older, I think I’ve come to sort of appreciate, sort of like this less is more like I want, I want fewer, deeper, better, everything. And and doing the two jobs. While there was lots of I would say sort of there, there was a really interesting symbiotic relationship between the two. And there were, there were times where I got, I would be sort of in a vacuum at one place and be able to have this departure that I think was really good for my sanity, and really good for learning opportunities at the other. But last March, after, you know, close to 14 years, we sold the media company. And so I got to sort of do the entire founder journey from starting a, you know, tiny email newsletter with 250k of investment to raising a few 100 million dollars and building a big team and almost screwing the thing up. So so many times and you know, got to see it all the way through and all the while, you know, again started lira hippo 11 or 12 years ago with a first fund that was eight and a half million dollars. No institutional investors really like a half professional Angel thing with no real thesis aside from investing in people that I met through my own entrepreneurial journey to now building, you know, what I what I think is a really, you know, well defined and hopefully respected fund, doing early stage investing across the whole tech ecosystem. And so I’m here now full time at Lear hippo. Again, for the last year, for the first time, exclusively focused on this. And it’s been, it’s been really fun to be 100% dedicated to something professionally. And that’s the plan for the rest of my career is that this is all I’m going to do. But I also ruined the entire venture ecosystem. The day I arrived, it would seem by I arrived almost the moment that the market took a big cooldown after a very high 10 year run. 3:44 Well, at least you started what 13 plus years ago? Yeah, he’s in timing there, Ben. Well talk us through where’s the firm at in its lifecycle? What fund are you on? What’s the size of the fund and kind of what’s the investment mandate and thesis? 3:59 Yeah, so we are currently investing our eight seed fund. And our fourth Opportunity Fund, which we call near hippo, select, the strategy at the seed fund is usually leading pre seed and seed rounds, and then following on through, you know, whatever sort of bridgy Twinery things are happening in the world all the way through a and then the Opportunity Fund is mostly focused on following on in our absolute best companies at the series D as well as some first check series a writing, usually in companies that we got to know at seed and for whatever reason passed on or we’re late to or, you know, just like the stars didn’t align at seed, but we developed a nice relationship and rapport and sort of found our way to back to the company at a and so overall we are an early stage fund. You know, we’re based in New York, we’re about 20 people Will everyone is everyone is in New York, over the course of the last, you know, 11 or 12 years, we’ve made about 400 investments, about 250 active companies, the largest community of New York based founders, with over 200 companies in the New York market, I think of any fund out there. And we are true generalist investing, you know, broadly across sectors and over time, are the areas that we’ve been interested in. And the business models that we’ve been interested in have shifted as the I think the ecosystem has changed as technology changes and happened, as you know, different industries have been disrupted in different ways. And so we are not specifically focused on one industry or another. In the early days, New York was a consumer town. If you go back, you know, 678 10 years ago, most of the startups coming out of New York were lighter on tech and heavier on sort of consumer and marketing. And so we did a bunch of those deals, and I think did so successfully over the last, you know, 567 years as New York has become, I think, a much broader tech market and startup market, our mandate has also brought in, and we’ve been investing in a bunch of different kinds of industries, we’re now more the majority of our deals are not consumer facing, although, you know, and I sort of struggle with this, because while we did, I think we did a really great job building a reputation as excellent consumer investors. I don’t want, I don’t want that to be forsaken, I want to continue to do consumer investing, I still love consumer investing, I think we’re really good at it. Again, we’ve built that reputation. At the same time. I think that in some situations, we’re a victim of our own success, where people associate us very directly with our consumer successes, and don’t recognize that we are a lot broader than that. And so, you know, this is the, this is the old, you know, I sort of, I want to keep what we were, I want to keep our good reputation for what we what we how we grew up. But I also want to build a reputation for the things that we actually have done a really good job doing over the last several cycles. And altogether, we’re about a little over a billion dollars under management. And yeah, and that’s, 7:20 in a way, we’re victims of our successes, right? We’ve become known for those and many of the inbounds that hit my my inbox are based on a small sample size of companies that yeah, don’t necessarily define the thesis. But I’d be curious, what do you think are the big opportunities in the New York tech scene now? And I’ve seen all these seed managers, some of which moved from San Francisco, but there’s a lot more firms investing in seed in New York. So guess your kind of two cents on the ecosystem? 7:50 Yeah, I we’ve moved well, path to the idea that New York is an emerging market where, you know, like, maybe there’s going to be good companies that that get birthed out of this town. I remember, you know, it might have been Tumblr, or whatever, you know, that there was like the first billion dollar venture backed exit in New York. And that was like, front page news. It’s like New York, you know, births unicorn, by the way, the term unicorn probably didn’t even exist at that point. But that is now commonplace in New York, I think is well understood that New York can produce outsized outcomes and really fantastic companies. But I think New York’s in a bit of a funny situation in that it, in many ways, was the epicenter, or the sort of the strongest market in terms of all the momentum around crypto. And I think that with some of the obvious cooling of that market, and the now, you know, incredibly overheated to AI, I do think that San Francisco is having a little bit of a rebound from what felt like a moment where like, some of the center of gravity was moving to New York. But you know, look, New York is New York, and it’s bounced back, I think really well from COVID. Much better in terms of lifestyle than than San Francisco, for instance. And this is going to be a place that amazing companies are going to be built forever. And I feel very confident that if we continue to be a firm that is focused on being the best early stage firm in New York, there’s going to be a gigantic long term opportunity to to have a really good lasting franchise that has good performance and backs a bunch of important companies. That being said, you know, we are not exclusively doing deals in New York. We’re a New York firm. We do more than half of our deals with companies that are headquartered here. But as you know, there’s more and more remote work. And also just as our network has grown, and as people move around, and our founders, you know, raise families and move to new places from prior slides. had goals and, you know, our CO investor network strengthens and grows, we’re finding opportunities all over the place, and we are not reluctant to do a deal that is not based in the city. 10:10 And, you know, with whether there are New York based firms or or across the country, there are many more seed firms now than there were, we could call them competition, we could call them co investors. But you know, how do you define Larry hippos sort of unique advantage in the current market? 10:29 Yeah. So if we were to start today, and I said, let’s go build an early stage, generalist New York fund. That’s not a super defensible position. I think that, you know, we are fortunate that we started when we did. And we were able to carve out a niche for ourselves, and a reputation for ourself, before New York was what it is today. And so we’ve been, we were sort of able to, like plant a flag at a time where the bet was New York was going to grow, and it did. And we’ve been able to sort of take that ride along with the city, we talk about the idea that like our brand is our community is our brand is our community is our brand is our community, we have, again, hundreds of founders that are now part of the sort of extended family of LH, dozens of them that are now LPS within our funds, who have had their successes and had their exits, and that are now part of our sort of like the fabric of the community that we have here, when we are going and meeting with a new color company and diligence in them and trying to understand trying to sort of formulate our opinion and thoughts on them. We are also we bring our community to bear, we bring our founders who who have who could be potential customers who have been building in similar markets, in many cases who have built really prominent and important companies that those companies look up to, to the table, sometimes as angel investors, sometimes as advisors, certainly as folks who can help us diligence and who can also help, I think, expressed to a founder in a competitive process, that we’re a great long term, empathetic value add partner who I think like, we just have a bunch of respect for founders. And we have a proven track record of helping companies go from zero to one, we’ve built a reputation. And I’m just I’m a big believer in like, there’s no substitute for experience. We’ve done this, and we’ve done this successfully for a long time. And we now have depth in a bunch of areas. And so you know, when you start a fund, particularly a generalist fun, I feel like you end up with this shotgun looking portfolio where you sort of have like one thing here, and one thing here, one thing here, and one thing here, over time, we built pockets of companies in a bunch of different markets, where if we’re looking at something focused on, you know, clean tech, or you know, sort of energy transition, like we can bring some, like we can bring some meat to the party, in terms of companies and folks in this ecosystem that CO investors that we’ve worked with, where we can credibly show up not just as a generalist, but as a generalist with some appropriate knowledge and depth that we bring to the table no matter what category we’re in. 13:24 So Ben, I know that you’re split between consumer and enterprise these days, but you were early to many DTC successes. So you’re early to that trend, you know, before other investors, companies like Casper and Warby and Allbirds, and the list goes on. What do you what did you guys see that other firms missed? 13:43 You know, I’ll probably end up saying this, this will be an answer to a few questions today. I just think we’re, we’re practical, I think we we are able to take a baby step back, look at a market, think about what we imagine a future would could should look like. And take a bet on if we believe that a founder that we’re talking to, is building for the right future in whatever space they’re in. I would say from a consumer perspective, there was a moment in time where there was a perfect storm that created a great opportunity to go build direct to consumer brands because you had a stagnant often sort of monopolistic you know, giant in every single big consumer category that was usually somewhat slow to come to the internet, and had, you know, rigid supply chain and distribution and just been, you know, sort of doing things one way for a long time. And suddenly you have this magical wonderful thing called social media that emerged and created opportunities to market and reach consumers very quickly and cost effectively and you You could and sort of supply chains got democratized in terms of being able to, you know, produce similar products to companies that had, you know, once had, where they were once the only people who could produce their product. And suddenly any startup could come in and produce something of similar quality pretty easily. And he was, again, it was just this moment where we and I will say, like, again, good deals, but get good deal flow. I met the Warby guys, right at the beginning of our investing. Right, right, right, we’re like, let’s start to like, you know, place a few bets, we met the Warby guys. And they had a very, like, it was obvious, they came in, they said, Here’s what luxotic has business looks like, here’s how they go to market here, we’re going to do things differently, we’re going to create a great, you know, luxury experience at a fraction of the price by going direct to consumer, and building a brand that’s going to market to young people and communicate differently. And, and right out the gates. It worked. And it worked really well and sort of it. And of course it did. If you like, you know, looking back, it was just like a perfect moment to do it. And then everyone saw what they did and said, I want to build the Warby Parker of x and we were in the Warby we were in the the original one. And everyone said, I want to go work with the folks who worked with them. And we learned a lot working with them. And then we learned a lot working with Casper. And we learned a lot working with glossier, and we and and we got smarter and smarter and had a brand that was more and more associated with the market. And by the way, over time, traditional companies got smarter and figured out where they were being sort of beaten up by this growing group of startups and the some of the design advantages in terms of building these sorts of millennial focus, you know, modern brands got commoditized by a bunch of agencies that made a bunch of brands that look similar. And your Instagram feed and your Facebook feed started to get filled up by a ton of copycats. And that moment where it was easy to go and scale quickly went away. And I think we were we we were there for when it was when there was this like wonderful arbitrage opportunity. And we recognized when the window with clothing closing for building those kinds of businesses. And we saw that folks who were maybe later to the category, overfunded, it’s on a startups and we pulled back and we said this, you know, this isn’t the time to go and plow money into this kind of company. We’re glad we did it. And we built a good reputation here. But there’s other markets that that are probably that have, you know, maybe not the same dynamics, but that have natural tailwinds the way that we identified the natural tailwinds of DTC, you know, back in that time period, 17:49 so, so the moment is over right now, for for DTC building a DTC company is this. I mean, you’ve mentioned that the 17:56 moment is different. Yeah. So, the moment, I think it is, it is harder today, it is harder, because of some, you know, it’s harder because of iOS 14, and some of the sort of challenges around, you know, how you can use data to retarget and reach users. In digital advertising. It’s harder, because traditional, like the big traditional companies have gotten smarter and and sort of, you know, made their digital transition over the last 10 or 15 years, it’s gotten harder, because there is less later stage financing available, because of things that have happened in sort of the macro market. And some of the outcomes that didn’t materialize for some of the some of the companies that got funded during during the boom. I also think that, but you know, we talk a lot about this internally now, which is, there was a time where, you know, you were looking at a founder profile and saying, Oh, is this person a great marketer, let’s back great marketers, like brands are gonna win because of marketing. I think over time, like there are situations where that’s true, you certainly see that be the case and a lot of these sort of brands, some of which had been hugely successful, but back in the day be unfair advantage, like the disruption was D to see like, if you were going direct to consumer, that was your disruption that was enough, that was the why now that was your advantage. Now, that is absolutely positively that is not disruption in any way, shape, or form. Now it is what is your unfair distribution advantage? How do you know do you have some spectacular relationship with traditional retail where you’re gonna get unfair distribution at Walmart and Target early, you know, relative to your peers and be able to scale with less paid acquisition as a result and you have, you know, talent associated with the brand in a way that is going to give you some unfair advantage from a distro perspective. I think very Interestingly, do you, not what is on the bottle, but what is in the bottle? Is your product actually superior and more efficacious and differentiated, we’re more likely to back a scientist creating a product than a marketer creating a product today, in terms of somebody creating something that is truly protected from an IP perspective that has the chance to be more than a sort of that where the hack is not your go to market but but maybe it’s something more fundamental to the product itself. 20:36 And been historically how have you underwritten in valued companies where the product in the purchase cycle is more episodic versus periodic, right? You’ve got companies like Casper, where you might buy a mattress every couple years or Warby. Were in Warby glasses. Right now, I think I bought these three years ago. But it’s a little more difficult than your standard SaaS model where you can look at cohorts and net revenue retention, and you’ve got, you know, a more periodic revenue cycle. So so how do you? How do you assess that when the purchase frequency is low? 21:12 Well, I think you know, I’m not going to blow your mind here by saying that we’d prefer to invest in companies that have a stickier revenue base, and then have more, you know, trusted LTV. I will say that, you know, and maybe Warby is a good example, it’s interesting that you bought those three years ago, Warby has actually shown over time, that they they do have a habitual purchasing in a way that and I think glasses as a category, particularly prescription glasses, are a product that, you know, Warby has your prescription, you’ve sort of been through their experience with an ophthalmologist in store, you have a, you know, a few styles that you like, like there is actually what well, it is not truly recurring revenue there, that business does have some repeat dynamics that are incredibly attractive Allbirds had a very similar dynamic where like, if you own one pair of all birds, you own 12 pairs of all birds, I think, generally we are interested in these habitual purchases, Casper, there is something to be said for if it is not a habitual purchase, then it is a larger ticket purchase, where you can make more, you can make a significant amount of contribution margin on an individual, one of the mistakes that we made at Casper was trying too hard to create a virtual purchasing by adding, you know, sheets and, and all these different mattress formats and trying to take over the bed room. And, you know, you do these things to try to grow ao V or LTV. And sometimes they are, they feel like the right thing to do. And in the short term, they sort of, you know, quote unquote, work, like, you know, cart size gets bigger, but they dilute why the brand was created in the first place. And I think that that’s a that’s a balancing act with these companies sometimes is, you know, chasing revenue too quickly wanting growth, and that that was a, you know, there are so many companies that were victims of that go go time. And you know, the victims of lots of late stage capital availability, where people tried to grow into these valuations too quickly and did things that were actually not really in the customers best interest. But we’re sort of theoretically in the p&l as best interest. Overall, when we’re looking at a consumer business, I think the first filter is like, does the world need this? Like, is there they’re there to why this product and why this brand is getting built in the first place? And I think if we if the answer is add on, like, I guess it could be a good business school deck or something, but like, is this we want the answer to be that this, that a brand needs to exist in this category or product needs to exist? And that if if that brand or that product went away tomorrow, people would miss it. And that is that’s a filter for us. We’re not always right. Sometimes we you know, we think something should exist. And it turns out that consumers don’t agree with us. Again, this goes back to being practical. And if you get too caught up in all of the nuances of of how a business model would could should work in the early days. I think you miss a lot of the a lot of the special brands are not necessarily built out of like deeply thoughtful business models. On day one glossier is by the way, a perfect example of this when we invested in glossier Emily had a blog called into the gloss she had a huge amount of influence and knowledge of have sort of, you know, the beauty space visa vie young women and had an amazing eye for good product and and again, sort of a following in terms of people trusting her recommendations on what products were good and what what products people should buy. She then had the vision to take that influence and turn it into glossier, creating her own brand. And that was the theoretical idea when we invested. But the name glossier didn’t exist, there was no product yet it was, it was a promise that she was going to take this influence to figure out how to create something that young women were going to be drawn to, we didn’t know what the business model was, we didn’t know what the, you know, purchasing frequency or number of skews or like it was just a bet on on a person who we thought was going to figure it out. And luckily, she did. 25:57 What does the future look like for glossier, amidst you know, this explosion of Challenger brands and other market dynamics that are not making things I think the 26:07 future looks very bright for glossier, I don’t need to be I don’t need to tell you that, like, last year was probably not an not a great year there. I think it was a time of transition. I think it was, they had been, for all the right reasons maniacal about controlling customer experience at every single step, never letting the brand out, never going to wholesale, always being you know, direct, exclusively protecting that experience on the website, building out these fantastic beautiful, expensive retail experiences. And COVID comms makes the retail experiences not work anymore for a period of time there. And digital acquisition gets harder. We know this with scale, by the way, that’s also during the same timeframe that iOS 14 changes happen, everyone’s CAC goes up, people are staying home, and a little bit less interested in you know, beautifying in certain ways, shapes and forms. And what has happened now with glossier, is wholesale has turned on the red Sephora, and that, not surprisingly, is doing incredibly well. And people, you know, I think that, you know, there’s a generation of women who shop at Sephora, that is where they that is where they do their beauty buying and to have their favorite brands available there is it makes a lot of sense. And I think, you know, from from my experience seeing glossier in store at Sephora, I think they’ve done a really good job of staying true to the Glossier brand and not having it feel like it’s just another product on the shelf. Obviously glossier has continued to roll out new retail stores, and there’s one right around the corner from our office and Soho, and I, it’s always nice to walk by and see a line out the door and, like, clearly just like a very vibrant and high performing retail experience happening there. And you know, and they made, they made hard, but but smart changes in terms of, you know, going from having their own platform, that by the way, you go back 10 years, every EECOM company had to build from the ground up their entire ecommerce platform. You know, 10 years later, you can get stuff off the shelf from Shopify, that’s pretty damn good. And you can, you know, partner with a few other vendors that that do a great job of powering different aspects of returns or, you know, personalization or loyalty. You know, the explosion of SAS software has made it so that you can run a much leaner team and still drive a really fabulous DTC experience. And glossier has made that transition, I think really well. And so I’m really bullish about the future for glossier, and what they never lost was, you know, even while the tech press could, you know, have their had their, you know, took their shots at, you know, layoffs and things that that I think happen to a lot of companies, young women that didn’t leak into the consumer mindset, consumers still absolutely love that brand, and trust that brand and want more, more and more. And so, you know, sometimes I think the tech world can get, I don’t know, yeah, the sort of echo chamber can make it seem like something is not what it is. And yeah, and so, you know, I think I’m very optimistic about last year. 29:34 every media outlet loves a story and you’d probably know that but I would 29:39 I would, I by the way, the more they love you, when times are tough, the the easier the punching bag you are it’s, you know, over time, I think you realize that it’s like, just put your head down and be quiet, the more you want attention. You know, there’s there’s always a price you pay for it. 29:56 Well, you know, while we’re on the topic of peaks and valleys, you mentioned the hype cycle now everyone’s favorite topic AI, generative AI, you know, how are you looking at this category? You know, what’s your framework on assessing applications or infrastructure within AI? Are you avoiding it? Or are you leaning in to startups building with generative AI, 30:20 we’re certainly not avoiding it. I think anyone who doesn’t think that this is a, this is a big deal. And this is just a sort of here to stay is getting themselves. I mean, this is very exciting. And I think as a early stage, you know, it’s really any stage investor, this is going to create a bunch of value, and probably destroy a bunch of value. And as well, but this is going to be a this is this is exciting. And we are certainly spending, you know, if you were to look at our pipeline, there’s a lot of.ai in it, let’s just put it that way. I mean, we are, we’re spending a huge amount of time, with with companies building around AI, there are a lot of interesting and challenging dynamics. with what’s happening in AI right now. I mean, one of which is, you know, I do think the the sort of, you know, the, there’s going to only be a handful of companies that are really going to, they’re going to take a lot of the value at the sort of LLM layer, and those are probably going to be mostly owned by big tech, they are financed to pay the exorbitant costs associated with maintaining and running these models. They’ve been, in many cases, they spent the last decade developing products in these areas that are only now sort of starting to see the light of day. And so that’s obviously a layer that we’re not gonna be able to play it as folks who are writing one and a half or $2 million echecks. Just this is like, these are like straight to Series II kind of opportunities. And so we are not, we’re not going to play at that layer. I think the thing that’s also a little bit that is quite unclear right now is what will, what will these large language models do natively and do themselves versus where will sort of the application layer be able to build experiences that will not be gobbled up by a Google or an open AI and the use cases there, and that that is really unclear right now. And so I do think that there’s going to be in the rush to find to sort of find gold, there’s going to be a ton of companies that get started that in some situations, maybe even weeks later, will be made obsolete by Google deciding that they’re going to do exactly that thing. And it’s like, okay, well, I’m gonna probably need to rethink my business model. Because, like, you know, Google just made that available to every single user in the universe, for free, natively in the products that everyone’s already using. So I’m gonna, I gotta rethink this. And so we’re, we’re being like, this is this is not blockchain or crypto in that. I do. By the way, I am still a like, fundamental believer in the significant, like, the importance of and the opportunity around the blockchain and what that sort of like, things that can be built on that. But you go back two years and the hype cycle around, crypto was, at the time it didn’t seem so much like a hype cycle, it seemed like, here we were, and it was time and you know, the amount of money is important, obviously, to see, to see the sort of crash, it is inevitable that what’s going on in AI is going to create, there’s going to be a ton of bodies. I mean, and you see this right now, deals are getting done at prices that make absolutely no sense. And there are funds, who I mean, you know, in certain ways, I think people are repeating the mistakes of 21. Around AI chasing into things that, you know, deals where there’s five term sheets in two days, and people are one upping each other in price and you’re getting to it sort of like who’s going to make money here, I just don’t understand the dynamics of these rounds. And you know, people are selling 5% of their company for for $4 million. And you’re surely Right. Like this is just like not the way that the startup ecosystem is supposed to operate and good hygiene. But the reason it’s happening is because the potential is so enormous ly exciting. And so like you know, I say all of this and today we’ll probably commit to a company to an AI company that we’ve been spending a bunch of time with. They are again coming back to practical, they have a an actual product, not just a theoretical idea, and a use case that I think is obvious in the best kind of way. It makes hidden. It is a it is a it is an application of AI that absolutely should exist that needs to exist. We You’d introduce them to several companies in our portfolio, that would be potential customers, it’s still advancing incredibly well, these companies want to use this technology, they haven’t seen other people approaching it this way, the team is the right fit for the market. In terms of their experience, they’re not this isn’t like, hey, we think this is a good idea. Let’s go run it. And we’ve been working on this for three weeks. This is a team that’s deeply steeped in this space that they’re working in, has been working on it for five years in different facets. And so like I, we’re going to be participating, but we’re going to be doing it the same way we did during the blockchain hype cycle or during any other hype cycle, which is we’re going to try to make sure that we’re not that we’re, we’re not doing it because of FOMO. But we’re doing it because we think there’s the right founder solving a real problem. And the why now for a lot of these companies, like AI is a really, really good and viable and real while now. Yeah, in terms and like why now is one of the two or three most important questions to any startup. And so AI is the answer to that for a whole bunch of stuff at the moment. 36:07 Seem like the mantra over the past few years is for the investors, if you get in, you win. But I think if you’ve been doing this long enough, that’s, that’s not winning. 36:17 If you look at like the really great outcomes of the last decade, most of those companies are not the deal that everyone clawed at each other to get in and see. That’s just not the way this business works. It’s like the obvious stuff, because it’s a great founder, that then gets priced up to x and raises at Y and over finances themselves early. Like that’s not usually the company that wins. Sometimes it is, but not usually. And so I think that this is a time. And by the way, it’s not easy. And but I think this is a time to be brave, and to to drown out some of the noise and to make decisions with to make your own decisions, to not let the market dictate your decision making. And because that’s that’s how these things run out of control. Well, thank goodness to that happen. 37:14 You know, with some of the tourists going away, it seems like a more sober process instead of partnerships. Now, instead of you know, chaotic commit this week, or you’re out sort of scenario. So maybe this is a good correction for all of Ben, we’d love we’d love your take on climate tech. Right? It seems some peaks and troughs, you’ve been at this long enough. Now you’ve seen them is now the right time to invest in in climate based tech. And if so, where is the alpha within the space? 37:45 Well, I think, you know, we’ve we’ve made a large handful of bets over the years in broadly, what I would say sort of energy transition, the idea that we’re shifting to renewable energy, and that we are going to be particularly, you know, around EVs and electrification, you don’t have to, and obviously, I think, certainly with the IRA, and just like the regulatory environment around, what is clearly going to be a bunch of incentives that are going to pour into hastening our you know, move to cleaner grid, and just like a more sustainable universe, not to mention that, like, clearly it’s the right thing for the world. We’re excited. And we think it’s a really interesting space, the bets that we’ve made have have generally panned out, well, one of one company, called Palmetto in the solar space has just had a great run the last several years. And Chris, the founder, there is really important part of our ecosystem. And we’ve co invested with him in a bunch of deals, and he’s advised some companies in the space. And I think a good example of a founder who we, as a fund just like to do business with and we think he’s he’s helped make us smarter in a space. 38:58 What exactly are they doing within solar, because that’s a specific area that seen, you know, a limited number of successes in 39:07 residential solar at like, at scale, and they’re one of the market leaders now. They, you know, I think that they will be one of the foundational platforms to how people are going to go from whatever power supply they currently use to moving to solar, and they’ve had like a competitor. No, I mean, look, I when I think about Tesla, I think of Tesla as the, the, the battery maker, right? I mean, Tesla is Tesla is. I don’t know, like Tesla is a hardware company. Right? Isn’t that the right way to like to really think about Tesla, I think, you know, when I think about Palmetto Palmetto is not making hardware. Paul mellott Palmetto is selling hardware and getting you set up at your house via a network you You right like it’s a it’s a very different part of the stack to where Tesla is playing. But another company that we just invested in very recently is kind of called Haven energy Haven is playing actually sort of a somewhat similar role to Palmetto. But for battery installation in your home. These are, this is like the tailwinds the consumer demand tailwinds are enormous. The, the way the IRA is helping to sort of underwrite and finance people to make these switches is going to drive on Billy. And by the way, there’s going to be a bunch of companies competing with Palmetto, I mean, other implementers at real scale, and Haven like these are obvious spaces that are gonna see enormous, enormous, enormous growth, our hope is that we’re there early enough, and that we’re betting on the right team. In certain situations, this is not going to be winner take all, I think, probably in a bunch of situations. But these are, again, like how to be practical, these are obvious markets, they’re going to grow. And if we’re there at the right time, we back the right team, there’s going to be big outcomes. And yeah, 41:09 we’ve talked about the markets a bit. But you mentioned the the gentleman that runs Palmetto and of course, Haven you know, what is it about the founders that gets you most excited, you know, what characteristics make for sort of an amazing startup CEO. 41:25 So I think that there are, you know, we sort of have like your your general checklist, and then every case is exceptions to the rule, there’s no, I can say the things that we sort of tend to bias towards. One is real market domain expertise. It’s not always the case, we like people who are playing in markets that they actually understand in and sort of have have lived in for a long time. That is one of the sort of like key founder market fit things that we look for. We are certainly biasing to folks who have run similar, go to market playbooks and have sort of seen and so you know, the founder, the CEO of Haven had been a regional GM at Uber, and had scaled local market business, which is going to be the Haven strategy, sort of going into specific locales and growing within communities. There’s a there’s a sort of playbook there. The other founder, by the way of Haven is one of the cofounders of Casper, who we know intimately who we have a ton of respect for have a second hand way of communicating with a real just like a trust, we know him to be incredibly creative, an amazing product person, really practical, really kind a great manager, someone who’s transparent, and we’ve had success with in the past, like the familiarity, I think that’s one of the advantages of being a fund that’s been around for over a decade is we now are in that cycle where we have repeat founders, we have folks we’ve worked with, who we get to work with, again, on their next project, or people who have been senior leaders and companies within our portfolio, who we’ve gotten exposure to who are moving on to do to take their swing of being a CEO. I think that that’s, you know, this is a very, this is a people business. And so getting, being able to sort of come back to and draw upon this network that that we’ve built over a long period of time is one of our big competitive advantages. 43:39 Ben, Ben, what advice you have for the founders right now in the current environment, right there. There’s some challenges, we’ve seen a lot of bridges, extensions, cash challenges, you know, what advice do you have for founders out there to emerge, you know, in a good place on the other side of this downturn? 43:57 I think a few things. One is that, you know, pick pick the thing that really matters, this is not a time to boil the ocean. This is a time to do you know, what is the core thing that your company does? What is your right to exist? What is your right to win, like, do that and do that exquisitely well, and Don’t overextend yourself. This is like, you got it. This is a time for focus. And and we were in a time where that was just not what was being rewarded. And so one is really, really, really reinforcing that message that starts by the way, with the way that we kick off a relationship with a portfolio company now is more structured than it used to be in terms of making sure that they get started with hygiene that I think there were times in the past where we felt like maybe it was heavy handed of us to sort of ask for are a certain kind of reporting beyond you know, financials, but certain kinds of at certain cadences. And, you know, there were times where we said, you know, like board meetings can start after series A where we’re now, even if we’re not on the board, and we’re rarely on the board, we typically want to have a writer or an observer seat. But don’t, we don’t, we don’t necessarily think the company needs to have a board as a precede company. But we do want that regular hygiene around putting your goals on paper, being really clear about having a wrapping your arms around your burn, wrapping your arms around the metrics that we’ve committed to being important in the business, knowing if we are delivering against the plans that we have taking responsibility, this may sound sort of silly, and I’m like, of course, who wouldn’t do this. But I’ll tell you who wouldn’t do this is like most people that founded companies over the last five years, the level that we’re talking about. And so you just just deliberate, focused Stober approach to business, not solving problems with money, not solving problems with not hiding, lack of product market fit behind marketing spend, just like creating a culture of, of real comfort and transparency, the first thing we say after we invest in a company, and first we tried to scare them a ton about how bad the market is. And then we’re like, we are on your team. Now, we are not like, I get that, like there’s a marketing thing with like getting investors interested. We are now on your team. There is a there’s a natural tendency for good news to travel fast and bad news to travel not at all. And we have to not just for us, but for you. We all have to be eyes wide open about what is happening in this business. There was for many years, there was this idea that like, if it’s not working, we’ll just raise more money. And now and we’ll we’ll raise more money to give ourselves more time to figure it out, there isn’t the more money and the more time now. So we need to be, we need to just hold ourselves to a way higher standard from minute one. And that is the best advice that I can give somebody is is like, you just gotta you got to own it now and take risk, and really be honest with yourself about what’s working in your business. 47:18 So Ben, we’re over time, a couple more quick ones short, then if we can feature anyone here on the show, who do you think we should interview? And what topic would you like to hear them speak about? 47:29 In any category or only in venture? 47:32 Well, we tend to feature VCs and in some cases unicorn founders. 47:36 I think probably founders are more interested in more interesting than VCs. So it would not be a VC. I think right now, God these are these are hard questions. I probably should have done, actually done preparation. I don’t know how to do that. The about, 47:52 I guess Said another way. Do you have any founders in your experience that have like a unique superpower? That’s super unique that you haven’t seen in many others? 48:01 I think I think like there’s a there’s a foul founder Keller, who is the CEO of zipline, it’s a company in our portfolio. That is you may be familiar with zipline, they’re a drone delivery company started by delivering blood in third world countries via a fixed wing drone network that they built that save 1000s and 1000s and 1000s of lives like a really important company that is now commercializing in the US and will be probably the first company doing like scaled drone delivery of packages to homes. That immune it’s a it’s a, I think a very prominent sort of, you know, very successful, valuable company in the portfolio. Keller is their journeys are really funny and interesting one, when we invested in the company, it was a robotics company building toy robots for kids that pivoted into saving 10s of 1000s of lives. That will probably be like a ubiquitous technology that we all use to get, you know, packages from Walmart and a few years. And Keller is just a really fascinating, kind founder who’s been on who’s just seen in just a really interesting, cool, bizarre journey to where he is today. And so I think Keller’s can never go wrong having Keller somewhere, 49:24 then do you have any habits, tactics or techniques that are a secret weapon? 49:30 Yeah. Number one is family first, always that I think that like if you do that, then that’s like grounding, for being able to be your best self and everything else. If you feel like you’re shirking like the most important responsibilities. I feel like it’s really hard to not. I just feel like it’s hard to be present in in the important stuff you do at work if you’re not taking care of the most important stuff when you’re not at work. One Two is You know, this is an old, an old, an old one, which is my dad said this to me a really long time ago. treat everybody like they’re your little sister. I think what he meant was just like, just be cool to everyone. And just like, take care, take care you. It was really treat everyone like you would like your little sister to be treated rather than how are you? Probably terrible. So it’s more treat everyone like, like just just, like bring empathy to everything that you do, and things will generally work out. Okay. And I try to do that and I fail sometimes. But 50:37 I’m finally here. Ben, what’s the best way for listeners to connect with you and follow along with their HIPAA? 50:43 Yeah, I mean, first of all, I don’t use social media other than a little bit of Twitter, but like, you can certainly, you know, slip into my DMs and hit me up and send me a note and send me my email is easily guessable at LH and I, I’m not great on LinkedIn, but I’m there somewhere. And like, we say, we’re a very available group, like when love outreach, and certainly if you’re building something and want us to take a look, we would love to do so. 51:11 Perfect. Well, Ben been a huge fan for a long time. Appreciate you doing this was a very enlightening and thank you for the time and all the way horse 51:18 Thank you. 51:24 All right, that’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guests know about it. Share your thoughts on social or shoot them an email, let them know what particularly resonated with you. I can’t tell you how much I appreciate that some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same accomplishment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently thanks so much for listening Transcribed by https://otter.ai