Episode #78: Alex Rubalcava, Stage Venture Partners, “If You’re Going To Be An Angel Investor… You Have To Be Devoting Significant Time To It”
Guest: Alex Rubalcava is a co-founder of Stage Venture Partners. Before Stage, he managed a small hedge fund, later turned family office, for high net worth investors, employing a long-biased value strategy. Prior to launching his own fund, Alex was an analyst at Anthem Venture Partners, a venture capital fund in Santa Monica, CA.
Date Recorded: 10/24/17 | Run-Time: 1:25:44
Summary: As Meb and Alex are friends, we start with Meb recalling the first time he met Alex over some egg tacos. Alex goes on to give us more about his background, which took him from pension funds, to dot.coms to VC investing.
Meb asks for more information on Alex’s group, Stage Venture Partners. Alex tells us that Stage is a classic seed venture fund. They invest in enterprise software companies that are about a year or two old. They look for companies that have a product in the market and are generating some early revenues. This dovetails into a broader discussion of how Alex landed on being a seed-stage investor, and the VC climate here in L.A. The guys talk about what Alex looks for, the size of the investment in a typical round for him, and where good ideas come from.
It’s not long before Meb references our podcast with angel investor, Jason Calacanis. We received a great deal of feedback after that show from listeners eager to start angel-investing. But Meb juxtaposes that interest with William Bernstein’s idea that most people shouldn’t invest their own money. Meb asks Alex if seed investing is harder than the way it’s presented.
Alex responds with some interesting points about seeing the deal, understanding the deal, and winning the deal. In short, to see the right deals, you have to be in the right places, actively participating in the community. If not, you’ll never see the next Uber. To understand the deal, you must recognize what you’re seeing. Lots of people passed on Facebook, AirBnB, and Uber, because they didn’t have the vision to see what it could be. And in terms of winning the deal, often, the really great startups are oversubscribed, meaning they might need $2M of funding, but have $20M worth of interest. So it can be a challenge to convey your value to a startup to win a seat at the table.
The guys then discuss how most of Alex’s deal flow comes across his desk. They discuss incubators, accelerators, going to conferences, calling people, you name it. But at the end of the day, Alex tells us he’ll look at about 1,000 start-ups this year, but will only make eight-to-ten investments.
This bleeds into a conversation about the attrition rate as startups move throughout the funding process. As you’d guess, there’s a huge failure rate. The guys discuss the drop-offs through the various rounds, as well as the major reasons for them. Meb also asks when to double down on your bets?
As part of this conversation, Alex tells us how attrition rates really vary by sectors. He discusses how investors in the consumer-based sector who didn’t get in on the big dogs like Facebook, Twitter, and Snapchat didn’t see anywhere near the returns that they would have otherwise. Meanwhile, other sectors have far more companies with successful exits (just not as monstrous as the Facebooks et al) – as Meb says, “more singles, doubles, and triples.”
A bit later, the guys discuss the idea of “why now?” When Alex is considering an investment, the founder must be able to effectively answer “why now?” Many times, the idea is there, but the timing isn’t, perhaps due to cost, or the market simply isn’t ready. This eventually morphs into a conversation about the three biggest risks that a founder faces when starting a company: building the product, hiring the right people, and getting the customer.
Meb switches gears, asking about about syndicates and funds. Are they right for investors looking to get exposure to angel investing?
You’ll want to hear Alex’s perspective on this. He tells us that “If you’re going to be an angel investor…you have to be devoting significant time to it.” He goes further, saying that unless it’s close to your job, angel investing isn’t likely to be great for most people – yet investing in angel funds might be a good answer. Alex goes on to give us his reasons, and tells us there are some great angel investing funds that are worthy of consideration. He even mentions specifics.
There’s way more in this episode, including the little-known angel-investing tax benefit that can save you millions – literally… Where Artificial Intelligence and Machine Learning are likely headed… A mnemonic Alex uses to sort through the hype… And of course, Alex’s most memorable trade. All of you would-be angel-investors will be feeling the FOMO (“fear of missing out”).
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Links from the Episode:
- 1:57 – Introduction and origin story for our guest, Alex Rubalcava, founder of Stage Venture Partners.
- 8:14 – An overview of Stage Venture Partners and the projects they like to fund
- 9:35 – What made them settle on seed stage companies and how many companies are they looking fund
- 13:59 – How Alex’s public market background influences his investing decisions
- 17:07 – Most important thing to think about when making angel investments
- 17:20 – Jason Calacanis Podcast episode
- 17:41 – William Bernstein Podcast Episode
- 21:48 – How do most deals come across Alex’s desk
- 24:05 – Pros and cons of looking for deals at accelerators
- 28:10 – A look at attrition levels in follow-up stage funding
- 29:58 – Soliciting listeners to find the latest series round funding for a free Idea Farm subscription
- 30:23 – Dan Primack
- 32:52 – How users can visualize attrition rates in startups using their smartphone
- 42:28 – Syndicates and investing in funds
- 45:10 – Funds Alex thinks highly of
- 50:18 – Sponsor: Roofstock
- 51:27 – Exploring the preferential tax treatment of the QSBS tax rules
- 55:46 – Robinhood’s twitter feed
- 57:54 – Exploring the virtual reality market
- 1:04:27 – Favstar
- 1:05:26 – Exploring AI: Machine Learning
- 1:07:16 – SOAR (segmentation, optimization, anomaly detection, recognize images)
- 1:13:22 – What does the future hold in terms of the things that Alex is seeing and investing in
- 1:17:25 – Most memorable investment or trade for Alex
- 1:20:43 – Any deals that Alex views with regret
- 1:22:28 – Resources that Alex recommends
- 1:22::54 – Mattermark
- 1:22:55 – Crunchbase
- 1:23:20 – Dan Primark’s Term Sheet
- 1:23:28 – Strictly VC
- 1:23:30 – Crunchbase Daily
- 1:23:31 – Mattermark Daily
- 1:23:4 – The Twenty Minute VC (podcast)
- 1:23:54 – Resource for finding goods VC’s
- 1:24:42 – Best place to find Alex – @alexrubalcava on twitter – com and firstname.lastname@example.org
Transcript of Episode 78:
Welcome Message: Welcome to the “Meb Faber Show,” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Disclaimer: Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
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Meb: Welcome podcast listeners and Happy Halloween. If you’re listening to this the day of launch, Halloween would have been yesterday, and that means I’m in New York. So if you’re in New York City, drop me a line, come say hello. Also, hitting up Orlando, New York again at the end of the month, Amsterdam, San Diego, come say hi, and then Nicaragua in February, so drop me a line.
Anyway, today we have a great show. One of the founders of Stage Venture Partners. He’s also managed the Hedge Fund, a family office, and worked with high net worth investors. On top of that, he’s been on boards of several LA non-profits. If you are one of the listeners that has been requesting more about private equity, seed-stage, and angle investing, this one’s for you. Welcome to the show, Alex Rubalcava.
Alex: Thank you, Meb. Great to be here.
Meb: I don’t know if you remember this. I love starting with origin stories, and the first time I think you and I met was over egg tacos in Manhattan Beach. Do you remember this?
Alex: Yes. I do.
Meb: Do you remember why we had originally crossed paths?
Alex: I don’t recall. It was so long ago. What is this, 10 years ago now?
Meb: I’ve only written two editorials to newspapers ever. One was to the Manhattan Beach Newspaper because they did away with a wonderful volleyball tournament or it really just, kind of, castrated the tournament, the six-man tournament, you know. And that was one. And then the other was I wrote an editorial about pension funds and all the problems involved, and this was a decade ago when I ventured to write a white paper.
But I think either in doing my research, I reached out to you, or you read the editorial. I can’t remember at this point, where you said, “Let’s talk about this. Let’s grab some coffee.” And so what a random auspicious thing to be writing editorial on something like that and then egg tacos, 10 years later, here you are at the podcast booth.
Alex: It’s great to be here. It’s funny how much time that I spent in pension reform over that decade. I’m not as active in the topic anymore as I once was.
Meb: You just gave up. You said it’s a lost battle. But you also, you got a girlfriend out of it, too, right?
Alex: I met my significant other, Morgan, thanks to giving a guest lecturer on pension reform at her graduate school class. So that is not something I expected to happen.
Meb: All the lectures I gave are attended by 99% men, so you got a little bit of a better audience.
Alex: I guess so.
Meb: And I’m not hating. But that’s quantitative finance, you know. That’s our world. All right. So let’s talk a little bit of origin stories, you know. So give us a little bit of your background. You were in the pension world. You know, did you grow up wanting to be a venture capitalist, a hedge fund manager, or what’s the kind of timeline here? Take us back in time.
Alex: Yeah. So I’m somewhat unusual in the venture capital world in the sense that venture was what I did right out of college, which is not common. But I did not get there with any sense of direction or purpose. I worked in all sorts of things when I was in high school and college. I worked at a hotel. I worked at an advertising company, at a billboard company, at a real estate development company. I worked at a dot-com in the summer of 2000 when all the dot-coms were dying, and I hated all of it. And the dot-com was actually just up the street from here in El Segundo, right on the border with Manhattan Beach. And they were dying at the time.
They had burned through about $80 million of investor money and really hadn’t ever generated revenue, but it was 2000, and that’s how we did things back then. And they couldn’t figure out what to do with me as their college student intern at the time, and I couldn’t figure out what to do there.
Meb: So you just made t-shirts?
Alex: I did whatever I could. I day traded until 1 p.m., and then read, basically, all of the internet until 6 p.m., and I had to go home. And back in those days, you could get through most of the internet in the summer.
Meb: This is literally a by the way…What year would this have been?
Meb: Okay. So this was literally my…it was a year too earlier for me. It was late ’90s, but I had the exact same experience as an intern at Lockheed. I think a lot of these companies are like, “We probably should have some interns. It seems like a good idea,” then they don’t really have like a good program to actually, you know, let them do things or contribute whatnot. We need some more interns, by the way. You guys, email Jeff. We need some more interns, if you’re interested. But same thing. Like, I would just…that’s how I learned about stocks was at Lockheed’s. Great pay, good fun softball team. Keep going.
Alex: Yeah. So unlike you’re internship, mine did not have great pay, and so, it was a kind of a waste of a summer. And I made a vow to myself that by the time I got my next, you know, $400 intern stipend or whatever it was at the end of that June that I was either going to find another job and do something more useful with my summer, or I would cash that pay check, quit, buy myself a surfboard and actually do something useful with my summer and spend it all outdoors.
As it turned out, I ended up talking my way from the dot-com to one of the venture funds that had backed them, and I started there after the Fourth of July. And I remember it being three or four days into that job, sort of looking up from my cubicle and going, “I can’t believe they pay people to do this. This is the most fun job ever.” And I have been an investor in both venture capital and in public equities ever since.
Meb: You know, that’s funny. I love the thing you did. Do you have any schwag left over from your time there, I guess?
Alex: Oh, I wish I did. That would be great.
Meb: We still have a bunch of… And so I lived briefly in San Francisco and then Tahoe in the early 2000’s aftermath, and, you know, a lot of friends were doing the dot-com stuff then, so I still have a fair amount of…Family beet was, I remember one, but a bunch of t-shirts, coffee mugs sitting around.
Alex: What I do have it’s unrelated to anywhere that I worked or participated in, but I do have a pets.com sock puppet in the box that I keep in my office as a reminder of what not to do.
Meb: You can get a lot of these good stuff on eBay. I have a good buddy who’s a natural resources hedge fund manager who loves buying up all the old like Lehman and failed, you know, Enron companies. He’ll buy like the backpacks, and so he’ll get on a plane or whatever and have like an Enron bag. Anyway, my whole thing on eBay was always buying the devalued currencies, so I used to give away at speeches. Like, the Zimbabwe twenty trillion dollar, you know, dollar bills and all those things.
So, eventually, fast forward, you did some hedge fund stuff, started Stage Venture Capital with your partner. Give us some general information about what Stage is, what kind of projects do you look to fund? Do you accept outside money? Give us all that good stuff.
Alex: Sure. Yeah, so Stage Venture Partners is a classic seed venture fund, so we invest in start-ups, usually, when they’re a year or two old. Often, when they have a handful of employees beyond the founders, they’ve got a product in the market, and some early revenue. And we are business model focused but not the thesis-driven as a fund, which is to say, we only invest in enterprise software companies. It can be someone selling to small businesses or to the largest companies in the world, but that’s all we invest in.
Within that vertical and within enterprise software, we will invest in any type of technology. We will invest in companies that can be in California or elsewhere. We have companies right now in our portfolio in Mexico and in Israel. And we are not driven by our own views about where we think the world is going or what our investment thesis is. Instead, we try to have an open mind to the best founders and to the voice of the customers in terms of what it is they’re buying? What are their pain points?
Meb: As soon as you close fund one, right? You’re on to fund two, about 20 million in size, so congrats.
Alex: Thank you.
Meb: And two questions. One, how did you settle on this part of the life cycle? How did you settle in on seed stage and this industry? And second is, like, how many companies are you looking to fund, and per year, kind of, the number of years you’ll be doing this?
Alex: Sure. So we discovered the need in our affinity for investing in enterprise software companies somewhat by accident just from having made our first few investments and then really found where, not only where we were good and effective investors and able to support founders with problems and challenges and opportunities that they had, but also where we thought that the investment prospects and the types of returns and risk were appropriate. Later on in this conversation, we can talk a little bit about base rates success in start-ups, and why enterprises are so different than let’s say consumer, and in particular, apps.
And then the final aspect of why we think that there is an interesting opportunity here, we’re based in Los Angeles. Our offices are only a few miles but several hours from your office based on LA traffic, and what’s interesting about the LA market is how much it’s grown in terms of the venture business. When I started in venture, 17 years ago, there were nine venture capital funds in Los Angeles. There are over 200 now. But despite the fact that there are over 200, you can count on one hand the number of firms that are specialists and excellent at investing in enterprise software at the seed stage.
I would hope that our firm is on that short list. There are certainly a few others that we respect a lot, but we think that there’s great enterprise companies being built here. And crucially, because Los Angeles is such a big market, there are lots and lots of customers here and we hope to bridge the world between customers, the big Fortune500 companies that have offices here or are based here, and the start-ups in Silicon Beach and elsewhere.
Meb: For the listeners that aren’t familiar, seed stage means how big of a cheque range are you writing and how many do you plan on writing in the next three or five years? However long this fund.
Alex: Sure. So typical rounds are $1 million to $2.5 million, often on pre-money valuations of under $10 million, and we are typically writing a six-figure cheque, which means that we’re investing alongside other venture firms or angel investors as part of the round. We are almost always co-investing along with other good firms into the deals we do.
Meb: Is it normally you guys finding it and taking it into the firms you like or is it friends at other firms that bring you? Is it both?
Alex: Yes. All of the above.
Meb: Okay. Cool. Well, it’s funny because I remember, you know, we’ve hung out over the years. I’ve seen all sorts of Rubalcava. There’s been the us having beers at the Berkshire annual meeting. There’s been a really sad night for you, a kind of humorous…Although, I… It actually, was really sad night for me, too. I’m pretty apolitical but enjoyed the drama of election night, where we had…we went to go watch all the drama unfold which we thought, at the time, wasn’t gonna be very much drama. But I remembered we went to a bar that was, I’m pretty sure, 100% Democrat, right? I mean, it’s LA, so it was…
Alex: The mood in the bar a year ago was universally glum as the results were coming in.
Meb: But at the beginning, it was like happy hour time. Everyone was still excited, happy, but it was funny because you, in, like, 10 minutes in, realised, like, one State started to…
Meb: Yeah, and you were, like, “That’s it. This is terrible news. It’s all going down.” Like, started to panic. And I was like, “What are you talking about? Like no one…They’re, like, still predicting like a 99.9% chance.” You’re like, “No. No. You don’t understand. Like, if this happens, this happens, this happens,” and so as it proceeded all the dominoes just fell.
But I was upset for a different reason, which was we had a Tail Risk ETF filed but not launched yet, and we were trying to get it out before the election because everyone was so crazy about the election. And then the future started plummeting that night, and I was like, “Oh, man. I can’t believe we missed our chance. The market’s gonna end up down 20 tomorrow.” You know, classic emotional investor reaction. I can’t tell you how many terrible e-mails and tweets we received about the election both before and after. People…Anyway, but that fund eventually launched, but it was a good thing it didn’t launch because, you know, what’s happened. We’ve had this ripping straight up market, anyway.
But over the years we’ve chatted about all sorts of different stuff, and I remember, you know, you kind of coming from a public market background, you know. Tell me how that sort of informs or influences the way you think about seed stage investing? And then also, you know, I remember you also used to do private, some private fund investing, or some private investing while you were doing publics too, right?
Jeff: Yes. [inaudible 00:14:16]
Meb: Like, you had some friends they were starting companies and, you know…Did you, kind of, start to dabble and then say, “Hey, look, this is more up my sleeve?”
Alex: Yes. So I can sort of give you a little bit of background about my career, and that can answer the question. So out of school, I was an analyst at a firm called Anthem Venture Partners in Santa Monica, and Anthem was a classic series A fund back in the day before there were seed funds. At Anthem, we invested in a lot of communications and networking in semiconductor companies and a few consumer as well.
Among consumer type companies that we invested in that I worked on while there, we were early investors in MySpace. We were investors in True Car, which is a publicly traded company today, and we were investors in Android. And Android, I think, is the really interesting one. That was a PowerPoint deck when we invested. I wrote the investment memo for the firm on that deal, and it’s 2.2 billion devices in use today. Nothing I ever invest in or touch or I’m associated with in any way will ever scale to that degree, again. Two point two billion people, that’s a lot of people.
So I worked there. After a while, I left. I did my, sort of, two or three-year tour of duty as an analyst and then left and started up my own fund investing in public equities. It was a classic long-short value fund like those have a lot of people that you’ve probably had on the show and who are public equity value investors. But on the side, I would occasionally do an angel investment.
And about four years ago, as a number of the investments that I was making started to have exits, I found myself in the, kind of, odd position of, having put up good numbers in my day job but absolutely smoked them in my hobby. And I was sort of wondering to myself, you know, why am I writing little $25,000 cheque to these start-ups and not going back to this? Because, apparently, I’ve selected well on the founders that I’ve backed.
Meanwhile, I had recently met the man who would become my partner, Rob Vickery, on the board of South Central Scholars, one of the non-profits that I served on. And one day after a board meeting, he mentioned that he was going out to look at a start-up that he was considering investing in, and I said to him, I said, “You know, I know how to do that. I’ve done this for many years.” And so I ended up cancelling a meeting, going to see that start-up with him, and then two weeks later, we visited another one and then two weeks later, another. And after a while, we, kind of, looked at each other and said, “This is fun working together,” and here we are four years later.
Meb: That’s a big one. I mean, it’s so important culturally to find people that you love working with. By the way, Jeff, don’t get any ideas as Alex is talking about his hobby and you and your option trading, so you’re not allowed to leave. We won’t allow it.
Alex: Options and currency trading being about the only thing that’s probably more risky than investing in start-ups.
Meb: Yeah. Well, hopefully, I’m assuming, I don’t know, but I’m assuming Jeff’s terrible at it, so I…Jeff’s sick, so he can’t defend himself. All right. So, you know, one of the things, you know, we had another angel on the podcast recently, Jason Calacanis, and part of his messages is, all right, and the seduction, of course, is that everyone should be an angel investor, you know, and just…And then on the flip side is, you know, we’ve had William Bernstein on who is like, “99% of people shouldn’t be investing their own money,” So you have these very different sort of perspectives.
But we’ve had a lot of e-mails from listeners who are a little bit seduced by, you know, kind of, the success stories. And in Jason’s case, you know, it’s easy to look back and say, “I was a early investor in Uber,” while, obviously, when you have a…whatever that is, a thousand bagger or a ten thousand bagger, you know, there’s a little bit of luck sprinkled in too. But talk to me a little bit about, you know, angel or seed investing, and if it’s harder than what’s kind of presented out there or do you think or do you not think it’s hard? Do you think maybe it’s easier for you? But, maybe, talk about, kind of, what’s the most important things, you know, as you’re making these investments?
Alex: Yeah. So in venture and in angel investing, we think in terms of seeing the deal, understanding and picking the deal, and then winning the deal, and those are three different things, and those are important for different reasons.
So let’s talk about seeing the deal. You have to be in the right places on earth, physically, in order to see the deals. There are only a few start-up communities in the world with an active technology and start-up ecosystem. Obviously, Silicon Valley is the most important, but markets like Los Angeles and New York and Boulder, Colorado and Austin, Texas are also important markets. Not only do you have to be there but you have to be in the right stream, and you have to be actively participating in the community in order to be top of mind. Jason is a great example for that.
Jason had been a reporter and founder of a journalism site covering the industry. He had spent 15 years building up relationships with top founders, executives of tech companies, VCs, angel investors. He’s as well connected as a person could ever get in the venture world, and he was that well-connected before he made his Uber investment, and so it’s not an accident that a company like Uber went to somebody like Jason in order to raise his round. If you were not in that kind of a position, then the kinds of deals that will get to you are not Uber. There will be significant adverse selection that will be present in anything you see, and it takes time to build up, and it takes time to maintain access to deal flow.
The second part then is you actually have to understand what you are seeing, and there’s all these famous examples of people who passed on Airbnb, and Uber, and Facebook, and whatnot for various reasons. Lots of people passed on Facebook because they thought it was too pricey all the way up. People thought it was too pricey, who would later have made a hundred or a thousand times their money on a deal that they thought was overpriced. People passed on Airbnb because if you are wealthy enough to be an angel investor or a venture capitalist, you are probably far removed from your days on…of sleeping on strangers couches. People passed on Uber because they could only see it as a black car service in San Francisco.
So you need the imagination and the context to be able to conceptualise, how big could this be? Is this something that can really transform the world, and is this founder somebody who can scale with that, because they’re never that when they’re first raising their round? You know, Travis Kalanick was not the Travis Kalanick we think of today when Uber was a seed stage company.
And then the final thing is you have to be able to win the deal. Often, really good start-ups are oversubscribed. A firm might be raising $2 million. A start-up might be raising $2 million from investors and have $20 million worth of interest. At this moment, I am competing to win a place in a seed round of a very hot start-up, that’s actually based less than a mile from here, and where I believe they have three term sheets for the lead investor right now, and we’re not going to be the lead investor. And we think that we’ve built a relationship strong enough with the company that we can slot in with whoever ends up being the lead, but that took three months of work to build up that kind of a relationship with the founders, to get to know them.
Meb: So there’s a lot in there you’ve wrapped in there, but let’s kind of dig in chunk a little bit about. So the deal flow. Like, how do most of the stuff come across your desk? Are you actively searching? Are you just chatting with people, or are you going into the accelerators, the conferences, like, what is the…?
Alex: All of the above.
Meb: All of the above. And so, you know, it’s funny because you talk about being in LA, but you mentioned potentially funding companies in Mexico or Israel or where…Is it just kind of a random, like, what do you think is the best use of time for you, or is it just to do everything?
Alex: So we actively look through our deal database software trying to find a signal in the noise, and we’re gonna see 1,000 start-ups this year, between my partner and me, two people. There is no signal in the noise, at least that we can see, right now.
Meb: And you’re gonna be making about eight investments per year, is that right?
Alex: Eight, 9, 10, something in that range. So far, we don’t see any signal in the noise.
Meb: So that’s like 1% of… So you’re passing on or not investing in 99%?
Alex: That’s correct. And it’s important that…
Meb: So this is my problem. I’m too much of an optimist. Is it like…? I look at most of these, I’m like, “That looks amazing, ” and that’s why I’m a quant because I have no ability to filter out.
Alex: And that’s why having strong, and consistent deal flow is so important. If you see lots and lots of start-ups every year, you can start to see quickly which ones are in over their heads, which projections are overly optimistic, which sectors are highly competitive. For example, last year, we were pitched somewhere on the order of forty or fifty social media marketing companies that wanted to connect brands with influencers on Instagram and Snapchat and elsewhere, and at least a third of them came into our office and said that they had no competition.
And I would always sort of chuckle about that, and I’d say, “Would you like me to open my calendar, and I will show you your competitors who I met with last week and the competitors I’ll be meeting with next week?” And it’s only the context that comes from meeting all of these people, meeting all of these founders, that gives you the perspective of knowing when something that is being told to you is inaccurate.
You mentioned accelerators. Accelerators are often thought of as a great place for angel investors to go to look for deals. One of the things that you have to understand about searching for deals at an accelerator is that there is the front of stage process that it is going on and then there is the backstage process that is going on.
So, for example, the start-up that I am working on funding right now that is oversubscribed, recently graduated from an accelerator. Everyone who showed up at demo day to see this company was impressed by it, but if they had not seen it by demo day, if they were only seeing it for the first time at demo day, they are already way behind. I saw the company about 75 days before demo day when they had just entered the accelerator. All the other venture funds that are in the mix and the angel investors who were in the mix for this company were similarly ahead of the game.
Meb: And that’s probably, you know, 5, 10 years ago. I mean, there’s accelerators, there’s Y Combinator. What are some other famous ones? That’s a big one.
Alex: Yeah. So the national scale ones are Y Combinator, Techstars, and 500 Startups. And then there are other specialised accelerators, so in our world of enterprise software, Alchemist Accelerator in Silicon Valley is excellent, NFX Guild in the Bay Area is also excellent.
Meb: Do we have any local LA sort of ones?
Alex: We have a number here in LA, so there is Amplify LA, there is Mucker Labs, there is…There are three Techstars programs in LA. There’s Techstars L.A, there’s Techstars music, and there’s Techstars healthcare. There is an Israeli-American focused one called Fusion Labs. So there are a very large number.
Meb: All right. But the challenge, I imagine, with some of the incubators is what’d you mention? The competition, right? Where competition between venture firms saying, “All right, these…” I would assume, and correct me if I’m wrong, that there’s more competition to invest in those, sort of, conference…or not conference, but it’s accelerator-generated companies just because there have more eyeballs on them, or is that not true or is it…?
Alex: It’s partially true, and that’s partially the value that accelerators provide in addition to the mentorship and the guidance of how to build a company and how to launch something in a short period of time. But I use the example of the accelerators because unlike other start-up fundraising, a company that doesn’t go through an accelerator and it’s just going out and pitching venture funds, where they know that they’re not gonna see every venture fund and every venture fund knows they’re not gonna see every start-up even though they try, an accelerator feels like an even playing field even though it’s not.
And for investors who are interested in start-ups as an asset class, you have to understand where something that feels like an even playing field really isn’t and then what you can do to tilt the odds in your favour, and that’s a very difficult and time-intensive thing to do.
Meb: So for a lot of these where you’re making, where it becomes a competition, or there’s multiple term sheets, is there like a value-add or pitch? Like, how do people try to win that? Is it that the people are trying to have a value-add from general partners of the VC? Like, what’s the pitch there to the company?
Alex: Yeah. It’s often case-specific. You know, usually, we will try to have the founders of the start-up we’re considering call the founders of start-ups that we’ve already invested in and to check references on us. We tell the founders about ways that we are able to help, either with recruiting, or with customer development, or with partnerships, or with helping to raise your next round. One of my portfolio companies is raising a round right now, and I have introduced that start-up where Stage is the only venture investor in that start-up. We invested alongside some sophisticated angels there. We’ve introduced that start-up to 49 venture funds in the last 30 days, and that’s, sort of, what we have to do to help our companies.
Meb: Do you guys participate in follow-on rounds at all or it’s…?
Meb: Okay. Take me…So listeners can follow along, so the whole funding stage, there is seed, which is often small and may or may not have venture funds, may have angel before that, but, kind of, just getting started, and then you go to series A, B, C, D, E, all the way down. I assume there’s got to be a pretty big failure rate as start-ups try to raise money through the various rounds and cheap market traction. Talk to me a little bit about attrition but also, how you approach follow-on stages as well.
Alex: Sure. So attrition rates from stage to stage are often very high. Interestingly enough, there really isn’t data about what the attrition rate is from start-ups that are founded and that receive angel funding to ones that receive seed funding, just because the investors aren’t reporting to data sources and collection is, essentially, impossible at that level. But there is data that shows that for start-ups that receive institutional seed funding, the drop-off rate to series A is very steep. I believe that it’s only about a third of the companies in the last few years cohorts graduate from there. And then the graduation rate from series A to B is about half, and then half and half and half again as you go up. Now, there are…
Meb: Rule of thumb for listeners, it’s basically the same things as, like, the CFA pass rates. You just cut them in a half at each stage. By the way, I’ll let you keep going, but this is a question I I asked Jason. I’ve always wanted the answer. What is the latest letter in the alphabet series you’ve ever heard? I’ve always been curious as to what company in history has raised the most rounds of venture funding, you know, has it ever get to, like, series M? I wonder what…That’s a great question, right?
Alex: Every once in a while at events, I tell people that our fund specialises in series H through N, just to see what people say to that.
Meb: Hey, listeners, all right, if you guys can find me the latest letter in the alphabet series, we’ll give a free Idea Farm subscription. If you can find it and it’s legit, the latest letter, we’ll tweet it out and publish it.
Alex: But I don’t know the answer in this particular case I’m about to tell you as to which letter it is, but I will tell you about a company where I was involved at one of the firms that I interned with in college, 17 years ago, in the Series A round of that company. And I read on Dan Primack’s newsletter, I believe two months ago, that they raised another venture round…
Alex: …17 years later. One would hope the company had paid out some sort of return to investors over that time period because that’s a really long holding period.
Meb: Man. All right. Sorry, I interrupted you. But we were talking about, you know, that there’s a huge attrition rate, you know. What’s the major reasons for that? And then I also, you know, for the ones that are successful, is it something where you, kind of, double down or add more funding or is it you’re kind of, like, that’s my one bet. This is what we do as seed. We’re moving on to the next thing. What’s, kind of, the…?
Alex: So let’s talk about base rates and graduation rates and then we’ll talk about reserving and follow-on investing after that. So with regard to graduation rates and to types of companies, one thing that’s important to note is that returns in different sectors follow different patterns. And so consumer-based investments, consumer-based start-ups, tend to have returns that are grouped in the best three or four or five investments per year, so the 2005 year of seed in series A investing in the consumer sector was dominated by people who put money into Facebook. Two-thousand-six was dominated by Twitter, 2010 was dominated by Snapchat and WhatsApp.
Meb: The major outliers.
Alex: The major outliers. And if you worked in one of those companies and you were investing in those sectors, then your returns look nothing like the returns of the funds like Excel that backed Facebook or Union Square that backed Twitter, or Sequoia that backed WhatsApp. And so you have to be in the handful of deals that you can really count on your fingers that matter every year in consumer. In enterprise, it’s not like that. It’s more based on cohorts and classes, where plenty of companies get to $200 million, $800 million, $2 billion in exits. And if you invested in a number of those companies at valuations of under $10 million at the seed stage or under 30 at the series A stage, you probably put up good returns for your clients.
Meb: So does that mean there’s more single, doubles, and triples rather than grand slams?
Alex: Correct. And the base rates are so different, and there are also so many more exit ramps along the way for companies that actually generate revenue and that have annual recurring revenue contracts with corporate customers than there are for consumer apps. There’s a really great way that your listeners can, sort of, visualise this issue right now as they’re listening to this podcast. So for those of you who are listening on the iPhone, if you go to settings, and Meb you should do this, too, right now. So if you go to your settings app on your iPhone and go to general settings, you can scroll down a little bit and see a little green icon that says battery, and click on your battery usage.
Meb: All right. Hold on. I went too far. It’s settings then battery. You don’t need to go to general.
Alex: Settings, yeah, settings then battery. And you look at…It will show you which apps on your phone over the last 24 hours and 7 days have used the most of your battery.
Meb: All right. I’m gonna tell you mine. Number one’s embarrassing. I need to delete this off, Twitter.
Alex: That’s number one for me, too.
Meb: Oh, God. That didn’t need…Oh yeah, Twitter, one. Home lock screen, mail, phone, messaging. Those don’t really count. Spotify. Although, I use that through Sono, some music. Here’s one that’s hilarious, and I…There’s a funnier side, a quick funny side. There’s a game, “Clash of Clans,” which my nephew plays. And my nephew, when he was in Los Angeles is 10 years old, and he’s like, “Uncle Meb,” and he wants to play with my phone while he’s here and he sets me up to join his clan of fellow, I assume ten-year-olds, but they have like a message board and stuff, and I’m, kind of, stuck in this awkward moment where if I leave he’s gonna be upset because uncle Meb left and like what, you know, rejecting him. But if I stay, I’m in a message group with a bunch of ten-year-olds playing a video game. So I think the correct answer is to leave and just be like, “Landon, I’m sorry.”
Alex: Just watch your language.
Meb: “Like, this game is distracting from work even though I don’t really play.” Anyway.
Alex: So your phone is typical of almost everybody that…
Meb: And then I’m gonna name a couple more, Instagram, Chrome, Tile, ESPN.
Alex: So let’s talk about…
Meb: And Jeopardy, and the reason when I downloaded Jeopardy is because Jeff and I and some friends were having a game where the loser had to pay for dinner and so we downloaded the Jeopardy app and played Jeopardy anyway.
Alex: I’ll play you one of these days. You can look me up. I was on Jeopardy in 1997.
Meb: Amazing. Wait. Wait. Wait. How did you do? Did you do okay?
Alex: I bet very aggressively on a topic that I thought I knew really well on a Daily Double and…
Meb: Your European history female authors or what?
Alex: It was colleges and universities.
Meb: Oh, man.
Alex: And I had… Yeah, I was sweeping that category, and then the question came up, the Daily Double came up, I bet everything because I was in third place and I needed…
Meb: When was this, the college edition or was this just regular?
Alex: It was actually the high school edition…
Meb: Oh, wow.
Alex: …back in 1997.
Meb: Oh, man.
Alex: So I was 17 years old.
Meb: That’s amazing. Do you remember the question?
Alex: The question was, category: colleges and universities, “William of Orange founded Leiden University in this country in 1660 or 1650 or whatever.”
Alex: So I guessed England because I knew that William of Orange was William the Conqueror, and I was…It’s either where he was from, or where he went, and I couldn’t remember where he was from, so I went with England. And, of course, he was from the Netherlands, and that was the correct answer.
Meb: Wow. That’s a tough one, man.
Alex: Yeah, I was expecting some question about, like, you know, Notre Dame Football or, you know…
Meb: See, you learned a bet sizing question. You learned a bet sizing question, really.
Alex: I learned early.
Meb: Okay. Sorry with my many interruptions. Let’s go back. So the apps.
Alex: So back to your apps.
Meb: And Yelp as the…I actually use Yelp probably more than anything that’s why I don’t know why that’s way down there. Anyway.
Alex: So what your apps have in common is that they are either the built-in Apple apps, they are apps from Fortune 500 publicly traded companies, ESPN, Google, you know, etc., or they are games that have app install ads that spend hundreds of millions of dollars to acquire people, and they monetize that through in-game purchases. What you are not gonna find there and what you will not find on almost anyone’s phone is some new consumer app that has been developed by a recent start-up, because it’s just so hard to break through. Do you know how many apps there are on the App Store right now?
Alex: There’s over two million apps available for download on the Apple iOS store right now, over three million on Google Play, and there’s at least two or three times that many that were once available that are no longer available.
Meb: It actually stresses me out, you know. I actually go into my phone quite a bit when I’m at the airport and just go through and delete a bunch. I mean, there’s the ones you have for reference like airline apps or [inaudible 00:37:24]…
Alex: Every time you do that, you kill a start-up, Meb.
Meb: Well, I’m just taking a machine gun to them. Because I’m also, kind of, a minimalist, you know. Like, I hate having clutter, and so I put them all into these folders that are in the way back fifth screens so I’ll never see them, but they’re for reference, and I only, yeah, I only use about 10.
Alex: Right. Which we just saw when you pulled up your phone.
Meb: And there’s a bunch, like, it’s the same problem I have with Netflix is which I always go download a bunch of documentaries on Netflix and never watch them because it’s, like, I should be reading these and it’s my bookcase at home that I want. I think I should be doing this. Same thing with the apps. Like, I have a bunch of news and abstract and apps that I feel like I should be using, but I never want to, and I never do.
Alex: So you don’t spend your time on sophisticated European literary criticism apps?
Meb: No, I don’t. No. But I have a bunch of the news ones that are like summaries of nonfiction but that’s so funny because I don’t want to do either. I don’t wanna read the book. I don’t even wanna read the summary at this point, but I keep the app because I think I should. Anyway, keep going. What’s the thesis? So you were just saying it’s hard to break in?
Alex: It’s unbelievably hard to break in. The average person downloads zero apps in a month, and any new start-up that is trying to get a consumer app or a consumer tool of any kind is essentially competing with inertia. The time that you have a fair fight against inertia as a new entrant is when there’s a new platform. And so if you look at the consumer apps that you use today, what they have in common, was that they either launched right before the iPhone in the initial web 2.0 era. Companies like Twitter, Yelp, Facebook, etc., or they launched right after the iPhone to take advantage of the new technological possibilities that a mobile…
Meb: Or you’re a Kardashian.
Alex: Or you’re a Kardashian. Those things tend to be flashes in the pan. So, you know, you think about Uber. Uber can only have been launched in 2010. That company and that product depended on a slack labour force. It depended on smartphones with apps, which were permission-less app stores as opposed to the decks on Verizon and AT&T that you used to have to get on. It required GPS. It required Google Maps. It required all of these things. It could not have been built before that. And that goes to one of the key questions that we always ask at our firm when we’re looking at a start-up to invest in. We ask, why now?
Why is this a company that can and should only be built today? And if there’s not a good answer to that, if we look at something and say the tech to build this existed five years ago and the customer needs have not changed in a material way, then it’s an instant pass for us. If we look at it and we say this is a great idea but it’s too much of a science project right now and it needs cost to come down or new technologies to come out of scientific labs in order to be commercialisable, then we wait and we try to make that investment in three or four years. But, “Why now?” is a critical question.
Meb: Yeah, I mean, I think, and Jason mentioned this, too, as a great filter, I mean, there’s so many companies that are just, kind of, a promise, and at least, having a product or a revenue probably like…Then you mentioned the attrition of it being 30%. I mean, that probably filters out a large chunk.
Alex: It does. The three biggest risks that a start-up founder has when he or she starts their business are, basically, building the product, hiring people, and getting a customer. We think of it as can he hire, can he ship, and can he sell? And someone who comes to us with a PowerPoint deck and a promise of what they are going to do is a big risk about, can they hire, ship, and sell?
Someone who comes to us and has a handful of early customers, means they’ve got a product, they’ve got someone paying for it, and they’ve probably hired a few people to go out and build it and to sell it. And so those three questions really are fundamental questions in thinking about, where do you spend your time on? Which companies to research, and which ones do you actually then make an investment in?
Meb: Just had my wheels spinning thinking about apps because it’s so similar to the investment fund space publicly with the ETFs, where if you look at these thousands of ETFs that have been launched, for mutual funds it’s same thing, the ones that launched early, so the spiders of the world, late ’90s, early 2000, gained massive traction. And that’s really the big three, State Street, Blackrock, Vanguard.
And so nowadays, you see so many people launching these ETFs that are so non…I mean, they’re either the 50th version of large-cap value, in which case, they never will get any assets. Or, they’re the most nonsensical ideas trying to find the tiny little niche that’s, like, the most ridiculous. But on occasion, you’ll have the Kardashian that will flame up because it’s a triple leverage social media, you know, biotech fund. Whatever. A lot of interesting parallels, anyway, random aside.
Switching gears briefly, unless you had anything else you wanted to touch on that general 17 topics we were bouncing around on.
Alex: Go ahead. Let’s switch gears.
Meb: You know, so thinking about analysing ideas and then I’d…Actually, talk to me real briefly about syndicates and funds. So there’s a lot of people listening to this say, “Okay, you know, I’m interested in this space. I’m either gonna do it on my own, or I wanna start doing my own deals or maybe all investors syndicates or maybe just do a fund.” What’s your thoughts there?
Alex: So, in general, I think, that if you’re going to be an angel investor, whether you invest through syndicates on Angel List or doing it yourself directly, you have to be devoting significant time to it. You know, 10, 20, 40, hours a week.
Meb: So it’s not a part-time, really, gig? Okay.
Alex: It takes so much time to source deals. It takes so much time to research them and to put yourself in a position that you’re in the stream, that unless it’s close to your job, I don’t think it’s going to work well for many people. With regard to funds, you know, one of the perceptions about…there are a couple of perceptions about venture capital that, I think, used to be accurate that are no longer accurate. There’s a great word for that, mess-of-fact. Basically, something that used to be true that has changed gradually that is no longer true. And one of the mess-of-facts about venture capital.
Meb: I can’t wait to use that word. I’m gonna use it today.
Alex: One of the mess-of-facts about venture capital is that all the returns are clustered in the top 10 or 20 firms and that you or I or anybody who was not an investor in them in 1975 cannot get access to them. So the access question is still, basically, true. You cannot send an e-mail to Sequoia or to Grey Lock or to Bessemer and say “Hey, I’d love to put $500,000 into your next fund, ” or even $10 million or even $50 million. They are fully allocated, and their investors have been with them for decades.
However, the change in the market over the last 20 years, in particular, the declining cost of starting a start-up and the emergence of smaller seed venture funds has created a new class of venture funds that don’t have that full allocation problem and aren’t impossible to get into. And so there are great seed funds out there that are investing 20 million, 50 million, 100 million bucks, that are raising a new fund every three years or so that are actually relatively open to individual investors and that, I think, are a better bet than trying to do this yourself, than trying to do angel investing, I guess…
Meb: Are you gonna name any names or am I…are you gonna keep your…zipped about that? You got any good ideas for us other than Stage?
Alex: I mean, there are firms here in LA that I think very highly of.
Meb: I just don’t know that world, so who’s a handful or you think highly of?
Alex: Yeah. So here in LA, Bonfire Ventures, which is a newly formed firm but which was the merger of Rincon Venture Partners and Double M partners, is an excellent firm and I know the people there very well and think very highly of them, and they’re very similar to us. In terms of a fund that’s very different from us with a different focus, there’s Making LA, which is a hardware-focused fund. And their principles and partners come out of the hardware industry. They know how to manufacture devices. They know how to do production. They know how to do prototyping. They have extreme expertise in that area, and I think very highly of those folks as well.
And so what, I think, most people don’t realize is that there’s an entire universe of hundreds of funds that are open to finding new investors that are very different from the Cliners and the Sequoias of the world who are not open to that. And your chances of success when you have the diversification of a fund, and you have somebody full-time doing it, I think are much higher. And in particular, you can look at track records. So when you’re looking at a seed venture fund, you know, probably, you shouldn’t be investing in fund one unless it’s someone that you know really well, that you’ve had a pre-existing relationship with.
But if you’re looking at someone you don’t know well, are they on fund two or are they on fund three, fund four? By the time they’re at fund four or five, they’re probably more institutional and your window of time has passed. But looking at if you’re considering investing in, let’s say in fund three, you can look at their fund one and fund two and look at what kind of returns they had, you know, the, sort of, minimum rate.
Meb: What’s a typical minimums for these guys? Is it 100 grand? Is it a million?
Alex: It depends on the size of a fund. Obviously, a $10 or $15 million fund will probably take someone at 100 grand, but a $50 million fund, you might need to put up 500k or a million. So you need to look at a few things to sort of determine how good are they. Are they on track to make at least a 4x or higher net return on the fund? And given the timing of capital calls and the duration of the fund, that usually, works out to an IOR and, sort of, the 25% or above range, which is what you should generate to compensate for the risk and the liquidity of venture capital, which are both very high.
You should be looking at, how many of their funds graduate from seed to Series A? You should be looking at who is leading the Series A rounds. You know, if you find a seed manager and their last five deals that have raised an A round have raised from Union Square Ventures and from founders fund and from Grey Lock, and Bessemer and good firms. That’s a sign that that partner at the seed fund is probably very good at what they do. You should look at how much they raise. You should look at how big their winners are.
And that’s one of the things that sort of paradoxical about venture is that in any venture or angel portfolio the performance of the portfolio is not going to be determined by the betting average of the manager. The performance is gonna be determined by how big the multiple is on the three best investments.
Meb: And doesn’t that make a little bit of an argument for more diversification rather than less, you know, that if you only invest in it, if the manager only invest in a couple of deals? Like, doesn’t it make more sense to invest in 10 or 20 or even 30?
Alex: Yeah, and so it’s a fine balancing point, and different firms do it in different ways. The accelerators have taken a very broad and shotgun approach and are able to generate the returns that they have generated by investing super early and super widely. And so they get the benefit of being in things like…For example, like, the first accelerator backed start-up ever to file an S-1 filed this week, and that is SendGrid, which is a Techstars company. And Tech Stars owns a decent chunk of the company. I think eight or nine years after they went through Techstars.
But in terms of diversification, it depends on how active a fund is, you know. Our firm tries to be pretty active with the companies that we invest in. As you and I sit here speaking, it’s Tuesday morning and I have spoken this week already with founders of 4 of 10 of my portfolio companies, either meetings or phone calls or text or email.
Meb: What’s the mood? What’s the mood?
Alex: The mood is strong. Our founders are out there kicking butt and taking names. And so, I can’t do that for 50 companies. I can do that for, my partner and I, can do that for 7, 8, 9, 10 investments per year with the knowledge that once they get to a series A stage, I’m basically handing off that company to the series A venture fund and then reallocating that time to the next seed start-up that I’m investing in.
And so the balance point that we’ve tried to strike is that we wanna make about 25 investments per fund over a three-ish year time frame. That gets us enough diversification in names and enough diversification in time and vantage year of investment that we think we can get at a reasonable balance.
Meb: Then you just need more interns. That will expand your universe.
Alex: If only interns had a good sense of deals.
Meb: You need a junior Rubalcavas.
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Meb: You were the first person to, as I was tweeting about angel and VC, to enlighten me to the world of some of the preferential tax treatment of the QSBS rules. I had never even heard of it, and you started tweeting about it when some monster… That wouldn’t work through funds, would it? That would only be only on individual…
Alex: It does.
Meb: Oh, it does. Explain what that acronym is and what it means because it’s a monster benefit that I hadn’t even heard about till about a couple of years ago.
Alex: It is an amazing tax benefit and…
Meb: All right. Explain.
Alex: …too few people are aware of it. So Section 1202 of the Internal Revenue Code details what’s called “Qualifying Small Business Stock, QSBS. And an issuer of QSBS stock is, basically, a C corporation with gross assets of $50 million or under, and that’s, again, gross assets on the balance sheet, that’s not valuation, and it cannot be in certain excluded lines of business. It cannot be in professional services, financial services, hotels, restaurants, or real estate. But it can be basically like [inaudible 00:52:30].
Meb: Which is like a who’s who of things you don’t wanna be investing in, anyway.
Alex: We can thank Congress for keep us away from sectors like that, I guess.
Meb: I mean, in LA, like, that’s my favourite. I’ve so many friends in that world of restaurants and movies, and it just seems like they’re always like…I’m like, “This seems like the worst possible investment world.” They love it, and some do really well, but to me, it’s like my…and real estate is also my nightmare. Anyway, keep going.
Alex: So, as long as you’re investing in a C corp that has $50 million or under that’s not in one of these sectors, and basically, every tech start-up qualifies, and you hold your shares for five years, you can exclude from taxation, 100% of your gains up to $10 million or 10 times your investment per issuer per year, whichever is greater.
Meb: Which is basically every single investment you could possibly do as an angel or a seed, right? And you’re not investing in anything that’s got 50 million in assets.
Meb: And a 10x or 10 million, means you have to be writing a million dollar cheque or less for it to even hit, and then if it goes 10x, or above. Like, it’s…
Alex: If you’re writing a $50,000 cheque, you have to turn $50,000 into $10 million where that…
Meb: And that’s tax-free.
Meb: It doesn’t even have to go in your IRA. That’s, to me…
Alex: One should never invest in start-ups in your IRA because of the QSBS benefit. Custodying start-ups in IRAs before the QSBS benefit was cleared up in 2015, was actually, kind of, a good idea and, you know, certain well-known investors did that. Mitt Romney, of course, did some of his investments through his IRA and generated an IRA that was worth, I think on public disclosures of $200 million.
Meb: That’s awesome.
Alex: Peter Teal is known to have invested in Facebook through his IRA, and his IRA could be a ten-figure IRA at this point.
Alex: Max Levchin invested in Yelp, and if you read Yelp’s S-1 from 2006, you can see the number of shares he held in his IRA. Now, there’s really no reason to do that because of the simplification of the QSBS rules in 2015.
Meb: And no one talks about this. And to me, so this, kind of, started me along…and so I started investing in private companies back in, like, 2014. Just dabbling, trying to get a education, you know. I call this tuition, and so I’ve done a very, very small level, but I’ve been doing it in about 25 companies and kind of…I laugh because, and I’m very self-aware about this, I say I’ve done almost no asset management Fin Tech deals probably because the reason I’m doing all these others is I’m the patsy, you know.
I’m like, that sounds amazing, this idea. But it’s going well so far, but the whole point that really changed my way of thinking was two-fold. One was this massive tax benefit. So in my mind, I said if I can just match the SMP on a after-tax basis, it’s a huge benefit. And then…
Jeff: It’s a huge benefit.
Meb: And then two is that, I think, it checks a really big behavioural box that, I think, a lot of people, and this is a benefit of a fund as well as investing individually is that you’re locked into these investments, and the problem for so many people with public markets is they can wake up every day and check e-trade or Robinhood, I guess is the better example. And by the way, I love the concept of Robinhood. Their Twitter feed is like the new…What was the big poster child for the brokerage commercials in the last bubble? Was Ameritrade or…?
Meb: Was it e-trade?
Alex: Money coming out the wazoo.
Meb: Yeah, “I’m trading stocks.” But Robinhood, essentially, has these now, their tweets, and I look at them, and I’m just, kind of, face palming about it. Anyway, but the beauty of private equity or angel investing and through individual funds is that you’re locked in. A lot of these companies liquidity is 3, 5, 10 never years. And so, that’s a good thing. I argue that’s, actually, a good thing not a bad thing.
Alex: It really makes you do your due diligence upfront. It makes you focus on asymmetry because it’s only worth locking up your money if you have a shot at 100x returns or something like that. And then finally, to go back to the QSBS treatment. QSBS has passed through to LPs in venture funds.
Meb: I didn’t know that. That’s really interesting. I think it’s one of the least talked but most important topics out there. So we’ll link to show notes stuff on there.
Alex: And you should always make sure that a stock purchase agreement that you sign with any start-up that you invest in has an attestation in it, that the company is a QSBS issuer. All of the term sheets that we sign from good law firms, not term sheets, stock purchase agreements and investor rights agreements, have a clause in there saying that they are a QSBS issuers. If they don’t, we ask the law firm to re-do the documents and put them in there so that we have that in our files.
Meb: And what are the steps you would have to do? Is it just you do it at the beginning? Is that, kind of, the best practices? Do you have to do that?
Alex: You don’t have to do that, but if 7, 10 years later you take the exclusion on your taxes and if there’s any questions, it’s better if the purchase paperwork that you have, that you’re retaining in your files anyways, has a very clear statement that the company was a qualified issuer at the time of your purchase.
Meb: And so the time when you make the note is when it gets sold, and you report the gains.
Alex: Correct, and there’s a very simple form that’s an addendum to your 1040 under which you can claim this.
Meb: There’s, Alex, there’s no simple forms with the IRS that…
Alex: I will agree with that.
Meb: Oh, my God. All right. So I wanna talk about just one or two more things before we wrap up. We’ve already held you for an hour. I wanna talk about themes. You know, one of the areas that you guys think a lot about is a pretty popular topic these days which is AI and machine learning. And this is unrelated, but Alex is the guy that I go to when I said, “Hey, I wanna buy a virtual reality rig just to understand this space and to try it out,” and I talked to his partner and they gave me all of the specs, so we ended up buying the PlayStation one.
And first of all, it’s like a life, this is a little dramatic, but it’s a life-changing experience to experience it for the first time. Like, I thought it was astonishing, already, how impressive it is, you know, just to go through and experience it. Like, everyone that’s come over and done it, it’s kind of jaw-dropping. And there is a good example where I started playing a game, and we only have like three or four games, and it was some alien shoot them up that you had suggested.
Alex: Space pirate.
Meb: No. It was your partner who suggested it, Vickery. If you said it, I’d remember. Anyway, but I started playing, and I’m like, “Hey, I’m just gonna try this for, like, an hour.” And the better way that I describe it to people is it’s like being in an immersive movie. To me, it’s not really like playing a video game, so it’s not social. So I haven’t played it since, and this moment is, kind of, the defining reason why.
It’s because my wife came up at two in the morning and she’s like, “Meb. Meb. Meb.” And I was like, “What?” And I, like, pulled up the visor. I’m like, sweating. I’m like, cramping. She’s like, “Do you know what time it is?” And I was like, “What?” And she’s like, “It’s two in the…You’ve been playing this for four hours straight without a break.” And I was like, “Oh, my God. That’s really horrifying but also amazing.” But to me, it’s not, like, I couldn’t be like, hey…Back in the day when we used to go play at India Jams or Tech Mobile. Like, it was social, right? And you hang out with people, and I’m sure it will be to a whole generation. I mean, eSports is already massive.
But, one, I just wanted to say was amazing, and the one defining characteristic that really blew my mind was the intro game it comes with. You’re like in a room at a bar, and there are some things on the table, and so it is your first time just trying it out, so you can pick up stuff and do things. There’s a cigar on the table which you can light. And then in my head, I’m like, there’s no way I could actually just, like, pretend to inhale and blow out smoke. And sure enough, I pretended to inhale, and then it blew out smoke on the screen, and that to me was just, like, the oh, my God, we are in a new world.
And I was like Googling it, and I’m like, “This doesn’t really like see me making this mouth…Anyway, that was the intro to this comment. And so it’s sitting on my table, and we’re gonna sell it just because I don’t want the option of playing this game. In which case, my life will devolve into playing virtual reality.
Alex: So let’s talk about virtual reality because we’ve looked at hundreds and hundreds of virtual reality start-ups and we’ve actually invested in none. Virtual reality, as you mentioned, is a very anti-social type of product. In fact, I once heard somebody say that, “Virtual reality is the most effective form of contraception ever invented.”
Meb: Yeah. It’s video games in general.
Alex: Because it cuts you off from human contact. And the problem with virtual reality is that the headsets are all here. The products are all here. You can buy them off the shelf today. You can use them, but nobody’s figured out what the application is. And I either always think about…
Meb: As usual, porn will be the first.
Alex: Right. But how much of a revenue model there is there, and then what kind of multiples you can put on something like that in an acquisition is a totally different conversation. But I always like to remind people about the early history of personal computers in the 1970s, because the Altair 8800 came out in 1974, that’s what convinced Bill Gates to drop out of college and start Microsoft. The Apple I came out in ’75 or ’76. The Apple II came out in ’77.
That entire time, no one could figure out what to do with them. No one could figure out what their applications were. If you look at the advertisements from those days, from the OEMs, what you’ll see is they all thought that the best use of a home computer was going to be recipes, housewives storing recipes on her kitchen computer. They all had this image in their ads, and, of course, that’s not what people actually use PCs for.
And it wasn’t until 1979 that the concept of the killer app came out. This idea that there’s an app that you spend 40 bucks to buy but you then buy the $3,000 computer back in 1979 when 3,000 bucks was a lot of money because you had to run it, and that was VisiCalc, the first spreadsheet. And VisiCalc made financial analysts, accountants, and other quantitative professionals so much more powerful than they ever would be. So much more productive that you had to buy it.
Back in those days, spreadsheets were spread sheets. They were very large chalkboard size pieces of paper that you wrote on in light pencil, and if you made a calculation error, you had to go back up to cell A1 and start all over again. And so the spreadsheet totally changed all that, and people rushed to buy computers in order to do that. That’s why Apple computer is around today.
Meb: And you’re just giving me sweaty palms thinking back to middle and high school using white-out and typewriters that it, like, could go back. I mean, this was designed…I used to use these back in the day, and just remembering the misery in doing that. Keep going.
Alex: So we are, today, in between the introduction of the hardware and the innovation and the application layer in VR. The hardware is all there. Apps are coming out. No one has yet really figured out what that killer app is, and the challenge with VR is that it is equally likely that the killer app will come out next month or in 10 years, and there’s no way to know, and there’s no way to predict. And so until that happens, we feel like VR is a market awaiting a customer, and a technology awaiting a used case.
Meb: It’s funny because as I would get a lot of these angel deals in the VR world, I’d just forward them to Alex and say, “Have you seen this one?” And he’s like, “Nope. Pass. Nope. Pass. Nope. Pass.” So thank you. All right.
Alex: Did I talk you out of that VR for dogs deal?
Meb: I don’t know. Probably. It’s funny. So, by the way, one of the things that you can go in and do, and we do this for our prolific tweeters, there’s not that many, but you’re one. And so you can go into this website called Fav Star or Fav Star. Awful website, but it has…It’s the only website I know where you can go and sort people’s tweets by their all-time most liked and re-tweeted, so we did this for you. Your number one which had like 10,000 re-tweets was about the Google memo that was posted all over the neighbourhood.
Alex: Yes, that’s when the alt-right decided to come after me. I’m actually surprised that it’s still on Fav Star because I deleted that to prevent them from coming after me.
Meb: But, yeah, the link is broken, so I couldn’t even actually open it. So you got some good hater. I’ve only blocked like five people, which is funny because you have to do something really offensive to get blocked by me, and I don’t talk about politics ever, but I remember a guy I ran into in New York. He’s like, “Meb, you blocked me on Twitter.” And I’m like, “Well, what did you do, A-hole? Because you had to have done something pretty bad for me to block you.”
Anyway, your number two tweet was, and this may lead into the topic. I’m gonna read both of these of kind of AI and machine learning if we’re done with VR. You may have more to add. I keep interrupting you.
Alex: We can go onto AI now and ML.
Meb: Okay. Okay. Sorry. It says, “Tweet, you’re worried about an AI apocalypse, I’m getting e-mails from Google Plus earnestly asking if I know my own mother.” That’s one. And the other one was, “If car companies advertise like IBM Watson, Ford would be telling us they have a car that’s powered by seawater that can fly a thousand miles per hour.” All right, that’s the lead-in. Now, you’re gonna tell me all about AI and machine learning.
Alex: Yeah. So let’s talk about AI and ML because AI and ML are in many way, the opposite of VR, where VR is a technology awaiting an application, AI and ML are real businesses and real revenue generators for pretty much everybody except IBM Watson today, where it’s all a bunch of hand-wavy vapourware, and we’ll get into that. I am deeply sceptical of Watson.
Meb: There’s something about Watson involved in an ETF launch. Did you see that, Jeff? I’ll have to look that up. I saw that come across my screen. I just ignored it, but [inaudible 01:06:24] had mention that. Keep going.
Alex: You can safely ignore almost everything about IBM Watson that you hear.
Meb: It sounds like a jaded former Jeopardy loser now that IBM Watson destroys people on Jeopardy. Maybe that’s the deep seeded emotional baggage you have.
Alex: Perhaps. Perhaps. But playing Jeopardy is the only thing that it is demonstrably good at, so we will stipulate to its trivia skills. In terms of anything else, I am deeply sceptical. But let’s talk about what AI and ML do because we see a lot, despite the fact that AI and ML are absolutely real and that we’re investing around it, we also see a lot of hand-wavy hype around it, and we like to think about ways, really simple ways to sort through that.
And so at our firm, we have a little mnemonic that we use to, sort of, help us to remember all the things that AI can do and that it cannot do, and the mnemonic is soar, S-O-A-R. And so, AI and ML can do one of four things, they can do segmentation, they can do optimisation, they can do anomaly detection, and they can recognise images. S-O-A-R, segmentation, optimisation, anomaly detection, and recognition of images. Every…
Meb: So like a hot dog, not hot dog?
Meb: Do you get my reference?
Meb: If any Silicone Valley TV show watchers.
Meb: That’s great.
Alex: And so that is actually a legitimate application of AI. That said, doing a simple yes or no image classification product is something that undergrads can do today. That’s table stakes. And the image recognition libraries that would enable someone to do that are open source so that there is nothing there that one can build anything on outside the confines of HBO.
So with regard to AI and ML, every application that you’re seeing today that’s generating revenue is some combinatorial assemblage of those four core capabilities, and if you can’t break down what AI and ML are doing to one of those four capabilities, then you’re probably being sold a bill of goods in some way. That said, within those four core capabilities, there is infinite application today.
So we have an AI and ML company that creates better short form video streams for people watching video on places like CNBC or the “LA Times,” and hundreds of other sites, and it keeps people on site longer because it serves them in an auto play format more relevant videos which means they see more ads and generate more revenue for the publishers. We have a company that…
Meb: And that’s always a great business model. Anything that makes…Or you can, like, go to a company and say this is gonna make you more money, it’s just a no-brainer, right?
Alex: Right. So in terms of optimisation, that’s an optimisation application. Another optimisation application, we have a company that helps consumer packaged goods companies, beverage companies, food companies, etc. to optimise their pricing, their SKU assortment, and their sales and promotion in real time in every store.
So they can tell, one of their customers is the world’s largest beer company, and they can tell the world’s largest beer company how to price a six pack in every single store, when to change it, and when to do a sale, and when to switch in a new product for whatever their goal is. You might want to just increase top-line sell through. You might want to increase margin. You might want to take away share from your competitor, and there is a pricing strategy for each of those.
But to do that on a store by store basis in real time is something that no human could do, no non-ML or AI software could ever do. And if you ever tried to put it in a spreadsheet, you’d probably have to run it on the entirety of Amazon Web Services to prevent Excel from crashing.
Meb: And you’d have to pay for Watson.
Alex: Exactly. And then hold your breath. And so our company enables their customers to do this for the first time. Another one of our companies is working with a very prominent subscription commerce start-up here…
Meb: Public [inaudible 01:10:36] house.
Alex: …that is based here in LA, and that was recently acquired and helping them on turn prediction.
Meb: What was that old company you used to put a penny on and send in, and you would get…
Jeff: Colombia House.
Meb: Colombia House. I wonder if that still exists. There’s, like, definitely, there was like a certain amount of people that were still subscribing to AOL dial-up. Our buddy was saying his mom still did it like a few years ago. Anyway, sorry.
Alex: Yeah. So in any case, these are some of the applications of AI and ML that are real today that are solving real business problems, and crucially, they answer that question that I alluded to earlier about why now? These are not businesses that could have been built just a few years ago because the data sets being collected weren’t large enough to properly train a deep learning network, and the deep learning frameworks and libraries were not available, and the people were not available because there were just so few people well trained on this.
And so one of the reasons why we’re so excited about AI and ML is that they’re solving really big problems that are worth a lot of money, and they’re right now, and they’re of this moment in a way that few other technologies are.
Meb: And that’s, you know, we talk a lot about on this podcast, the phrase we’ve adopted recently which is, kind of, that frustration arbitrage, and this is just simple like low-hanging fruit of companies is becoming better and more efficient. It’s such an easy way to describe like the first opportunity, right, where they could go in and just, hey, we can make your margins go up 10%. Like, why would you not?
Alex: Whenever our company is looking at machine data coming in off of their customer’s equipment, and their customer, in this case, is the largest industrial laundry company in the world. And so their washer and dryers are the ones that power big hotels and prisons and schools and laundromats, and they all have Raspberry Pi devices on them collecting data about the machine, but this is an industrial laundry company.
They can’t afford to hire data scientists in their workforce, so they’ve hired, they’ve contracted with our company to analyse this data, and we can now help them to predict when parts are going to fail. We can help them predict when maintenance needs to be done in a way that’s gonna save them tens of millions of dollars a year.
Meb: I’m surprised a lot of the big consultants are trying to, like, wedge their way in this, or are they?
Alex: In many cases, what AI and ML is replacing is the work of junior consultants.
Meb: Interesting. Okay.
Alex: So the consulting firms are going to have to move upmarket to more difficult and creative work because they are losing the base level work that’s been their bread and butter for many years to AI.
Meb: Future proofing. There you go. Another job gone bye-bye, a junior consultant. You had a good quote that said, “The best part about being a venture investor is I’m living two years into the future at all times. What I learned yesterday is less relevant than what’s gonna happen tomorrow than it is in almost any other field.” So give us a quick look next couple of years.
It could be AI, it could be what else, that these conversations we’re having because one of the nicest things that I like about at least dabbling in private investing the optimistic just experience of getting to talk to entrepreneurs, people that are highly motivated, and optimising building the cool ideas of the future, kind of…What’s going on that you’re seeing that’s particularly interesting to you or any companies or ideas or what else has got you excited?
Alex: Well, there’s just so many problems that we would consider intractable with the technology that we have today that are becoming possible and that are moving from latent and needed and unmet to things that are being met. One of the companies that we’re working with used satellite imagery and object recognition at incredible scale to map, within 24 hours, every street in Houston and in the Florida Keys that was flooded, and they shared that data with a number of the response…
Meb: That’s cool.
Alex: …teams that were going in to plan routes and to plan where you can set up tree house facilities and to determine where both were needed and where trucks were needed. And that enabled more people to be rescued quicker in a way that would never have been possible. Like, this would not have been possible in a hurricane two years ago, and now, it’s how we’re gonna respond to every natural disaster.
Meb: Well, knock on wood, LA is…We haven’t had ours in a long time, and then we’ve got the World Series here again. I’m getting a little nervous. We haven’t had a big shaker in many, many years.
Alex: Hot days in October are kind of earthquake weather, so let’s hope…
Meb: Oh, man.
Alex: Let’s hope that’s not the case.
Meb: Don’t tell me that.
Alex: We had a 4.0 last night off of Catalina. Did you feel it?
Meb: No, but I also ate a bunch of Indian food so it might have been the same thing, so I…
Alex: Earthquake Meb.
Meb: How often does Google Maps update? Do you have any idea?
Jeff: [Inaudible 01:15:33]
Meb: Jeff, will you Google that, out of curiosity?
Alex: They’re constantly updating. They’re driving their cars around everywhere. In fact, they’ve recently updated those cars, so they’re collecting much better data than they were a few years ago. But there’s all sorts of data that can be collected by anybody now because there are so many microsatellites up there in orbit that are going up with SpaceX payloads and other things.
Meb: I was laughing because my brother and I, you know, we have some river land in Colorado and…Did you see?
Jeff: Google Maps, satellite data on Google Maps definitely one three years old, yet it says the updates happen about once a month.
Meb: So the updates happen once a month. Although, it could be up to three years old somehow. Anyway, so were in Iceland and we were talking about, you know, a neighbour had asked us if he could, you know, go down to the river every once in a while and put out a chair and enjoy the sunset by the river. So being good neighbours, we said, “Of course.”
And then we were talking about doing a fishing trip and rafting, and so we pulled it up on Google Maps. Just, I’m like, “Hey, it’s pretty cool. You can look at the satellite and look at what’s going on.” And sure enough, there’s a RV parked on our land with like a storage shed, and I was like, “WTF, Wayne, what the hell?” And it turned out this guy was squatting on our land. You know, he said unintentionally, he didn’t know where the boundaries were. But a great example of technology. We were in Iceland looking this up. Not as world-changing as disaster prevention but still keeps the squatters off. Better than me going out there with a shotgun.
All right. That’s pretty cool. Couple of questions that I’d like to end with, and this could go on for hours. We didn’t even get into the lot of the non-profit stuff, so I have to have you back on in, like, six months to see what else is going in the world.
Meb: And we can talk about that because I don’t want to keep you all day. But what would you say, and this could be, this doesn’t have to be VC. It could be private, hedge fund related. What has been your most memorable investment or a trade, good, bad, whatever? Take your time. Cue the Jeopardy music.
Alex: When I was in college, I met a kid who was a freshman when I was a senior, and I helped him to get a job with a guy that I knew that I had worked with. And he called me, the employer called me about 60 days afterwards, and he said, “Do you know anyone else like David?” And I said, “I don’t know. What do you mean?” And he said, “I have 24 people on my team, and if I found three more people like David, I would only need four people.” And I said, “Oh, that’s interesting.” And I help him to open some other doors and and helped him out in a number of ways.
And he once asked me when he was still in school, like, you know, “What can I ever do for you?” You’ve helped me in all these things. And I said, “One day you’re gonna start a company. One day you’re gonna found something, and when you do, you call me, and I will write you a cheque.” And seven years, six or seven years later in the fall of 2008, which we all remember was a nice peaceful time, he started his company.
Meb: I loved it back then. It was a trend par. This was, like, the best time. We didn’t have any assets under management though, but every day I was like skipping to work because I was enjoying the world imploding because as a trend par, you were kind of sitting on the side lines and watching this. But it had the dual impact of being miserable for everyone else, so it’s kind of, like…
Alex: The rest of us were not as zen as you were.
Meb: If you’re like a short seller, it’s like you cheer up to a point and then you worry the whole system is gonna collapse. In the fall of 2008, it felt like it was.
Alex: Yeah. So Lehman Brothers had collapsed, Wachovia, and Washington and Mutual were collapsing. We were uncertain about TARP ever happening, and that’s right when David was saying, “I’m gonna raise my seed round for my start-up.” And I, of course, was dealing with the difficulty in the markets at the time. I was a public market investor mostly, at the time. And because of everything going on, I didn’t have a huge amount of liquidity, and yet, I knew that David’s start-up, whatever it was going to be, was gonna be something I wanted to be involved with.
And I made a conscious choice to pay my property taxes late and take a hit, take a penalty on that so I could get every dollar I could into his start-up. And he sold that company four and a half years later to a publicly traded company, and it’s one of the best investments I have ever made. He bided his time for a couple of years until he couldn’t take it anymore, and got fired and handed all of his stock vest on the day he got fired. And then started a new company and I was, like I was in the first one, I was basically the cheque that opened the bank account on that second company. And he has had funding from Accel Partners, Charles River, and Highland for that start-up and that’s still an…
Alex: …still an active investment today. And so, you know, backing somebody whose talent I recognize when I was a wise old 21-year-old and he was a 17-year-old and the fact that, you know, I’m 37 today, he’s 34, and he’s, you know, doing everything I knew he was going to be doing from the moment I saw him as a 17-year-old is something that is pretty cool.
Meb: You know, I love those stories. It gives me chills. Are there any regret, FOMO deals that you passed on?
Alex: Oh, I could talk about this for hours. Are you kidding? Over a decade ago when I was at Anthem, I spent six months looking at a video game company, and I ultimately, passed on it because I looked at the size of their specialty controller and the box that it would have to come in and I went to Best Buy and Walmart and I calculated how much volume metric space their boxes would take in order for it to be a platinum-selling game and said, “They’re gonna have to, you know, they’re gonna have to stack these up to the rafters in the month of December to be a big seller for Christmas,” and I just said, “I can’t imagine that the stores would spend that much of their space on a single SKU.” And I passed on it for that reason, and the controller was a guitar.
Meb: Oh, man.
Alex: And that was Guitar Hero.
Meb: That was awesome. I used to play that. I was an amazing Guitar Hero player. I cannot play a single song on the actual guitar, but what an amazing game. Whatever that…It kind of had its time in the sun. Is there anything like that still…?
Alex: That was sold to Activision for hundreds of millions of dollars.
Alex: That would have been an excellent investment.
Meb: Wow. And that kind of, I mean, that spawned a whole genre and a lot of competitors, I think, with drums and everything else.
Alex: Right. But I sort of out-thought…
Meb: I loved Guitar Hero.
Alex: Yeah. I out-thought myself on why that investment would not work.
Meb: There’s a handful of songs that I hear on the radio or Spotify to this day where it just takes me back to Guitar Hero. Like, the only time I hear “Wayward Son,” and I’m like, all right, Guitar Hero. Perfect. That’s great. I loved that, man.
Alex: “Carry on wayward, Meb.”
Meb: Yeah. Exactly. Talk to me, and we’re gonna wind this down, but talk to me a little bit about resources. So you were talking about software, VC software. Are there any newsletters, websites that you really like…any core must-use, resources used, and whether it’s sorting, finding deals, all that good stuff?
Alex: Yeah, so for quickly being able to tell who’s gotten funding and what competitors have raised and from whom, Mattermark and Crunchbase are excellent. Both of those have websites and mobile apps, and both of those apps are on the front screen of my iPhone. I use them daily.
Meb: So that would be top on your top five apps.
Alex: Indeed. But I suspect they don’t have more than, you know, high-five figures in terms of downloads and active users because it’s a very esoteric app, but it’s critical for someone in my business. In terms of newsletters, Primex, Term Sheet. It used to be called Pro Rata, or maybe, it’s Pro Rata now, but he’s with Axios. That’s sort of the must-read every morning. StrictlyVC and Crunchbase daily and Mattermark daily are also excellent newsletters. And then in podcasts, “Twenty Minute VC,” by Harry Stebbings. He interviews everybody in our business.
Meb: That’s amazing. I don’t know that one.
Alex: Harry Stebbings…
Meb: That’s been around for a long time though, hasn’t it?
Alex: A few years. Harry started it when he was an 18 year old…
Meb: Okay, that’s, yeah, that’s the story I remember.
Alex: …in England, and he is now a professional VC with his own fund up and running.
Meb: Yeah. I’ve read that. I love that story. Is there a good resource if someone wanted to go look for some seed series A VC firms. They said, “All right, I’m gonna invest in a handful of funds.” Like, what, like is there a way to go screen or look? Is there a good site?
Alex: Yeah. Just think about great start-ups and great kinds of companies that you’d want to be an investor in. So if you like, you know, enterprise software type of companies, go look at who invested in MongoDB or in Cooper Software or in Shopify or any company like that and then go on Crunchbase and Mattermark and look at who their seed investors were.
Meb: We have so much to talk about, Alex. I was gonna put you on the spot and Shark Tank you, and give you about five terrible ideas. But we’ll do it next time.
Alex: You’re dead to me, Meb.
Meb: Listen, this might be a quarterly one. Yeah. Where can people best find you?
Alex: Easiest place is on Twitter, Alex Rubalcava.
Meb: And if they wanna email you about Stage, about your new internship program we just started today, or about investments or anything but app pitches, what’s the website?
Alex: Our website is stagevp, as in stageventurepartners.com, and my email is email@example.com.
Meb: All right. Well, expect an inflood of emails coming. Alex, it’s been a blast.
Alex: I’m happy for those emails that I got to inbox zero last night, so the inbox is primed and ready to go.
Meb: Awesome. Look, listeners, thanks for taking the time to listen today. It was really fun. Send us feedback, questions, send them to Alex if you want, but also, for the mailbag at feedback at themedfabershow.com. As a reminder, you can always find the show notes and other episodes at mebfaber.com/podcasts. You can subscribe to the show on iTunes. If you’re enjoying it, leave us a review. Thanks for listening friends, and good investing.