Recession-Proof - a podcast by Ramp

Geoffrey Woo Transcript
[00:00:00] Geoff: Business is not that complicated. You don't need calculus to look at a P&L and do arithmetic. You got to sell something that you charge more than it costs to make and some overhead. At the very, very first level, is your business actually unit-economic good? If not, you better have a damn super big brain strategy in how it's going to get good, and don't just say you're going to figure it out.
[00:00:27] Alex Song: Welcome to Recession-Proof, a podcast by Ramp. Join us for in-depth thought-provoking conversations with finance leaders, executives, and investors on the current state of the market, and what this means for your business through 2022 and beyond. I'm your host, Alex Song.
[00:00:49] Kimia Hamidi: Geoff, welcome to the Recession-Proof Podcast. This focus of the season is all around fundamentals and how businesses can help recession-proof their business. We're talking to people like yourself, investors, operators, everyone who has seen a lot across the board and can help our customers help the broader financial leaders and other businesses at large, really help understand what to do.
I'd love to just start with a quick background on yourself maybe a one to two minutes, and we can dive into the specifics of your expertise on recession-proofing, really anything that we find interesting, and then we can pull the threads from there.
[00:01:27] Geoff: Awesome. Kimia, thanks for having me on your program. We've gotten to know each other in the Miami tech ecosystem and been a long-time user fan of what you guys are building at Ramp. Honor for me to speak with you guys today. My background, grew up in Los Angeles, a math-science guy, did math competition science fairs, and then long story short, studied Computer Science at Stanford and got really deep into the startups Silicon Valley scene.
This was just dating myself. You graduated college in 2011. Right around when the social network Facebook movie came out, you can really see the uptick of interest for people thinking computer science was all going to be offshore to India and Asia and tech being not cool to, hey, tech in startups we're one of the coolest things that people could be studying.
Been building, starting investing in tech startups for the last 10 years, and then most recently, moved out to Miami where I have a couple of projects, both on the operating and investing side with angel investing or venture capital investing. Actually was lucky not to be a seed investor in Ramp personally and then scaling up that operation to launch Anti Fund with my partner, Jake Paul, who's a content creator professional boxer who is really really a genius in terms of just driving attention.
I think it's an interesting thing to think about it in terms of marketing and branding, but also staying very close on the operational side probably most relevant for this conversation have a e-commerce community automation software platform called Archive.com who are really thoughtful around being efficient with marketing spend, and how do you drive organic community energy with a very noisy, very, I would say, fast-moving dynamic within digital marketing today.
[00:03:20] Kimia: That's a classic story from got very interested, the social network came out, and then the trajectory from there. I'm curious on the parallels coming, 2008, you started in 2011 versus operating now and you really got your genesis of starting companies there. What are the parallels as an operator? Were you concerned, and again there's a lot of dry powder now, were you concerned then? If you could go back knowing what you know now, would you change anything? I'd love to just understand the differences in operating.
[00:03:51] Geoff: I think from an operator or founder perspective, macro should not really matter especially for early-stage idea genesis stage companies and teams. You're still going to have to get your first customer, your first five customers, first 10 customers, and get the initial cohort of true believers around you. I think, even at-- I was still, I think, a sophomore during the 2008 crash.
I remember some of the upperclassmen little bit worried about their career paths but it really just blew over. I think we're in an interesting time now where it looks like we're dating August 19, 2022, it feels like crypto has rallied from peak bottoms. I think CPI inflation has seemed to leveled off. I'm in this open debate. Is this really a false bottom? Are we going to have this recovery where it just gets further? I have no idea.
I think, frankly, no one really has an idea. I think as an early-stage operator founder, it really doesn't impact you. It's really we're in an economy where it really hits the fan and we need to value 9-millimeter bullets in water and canned food. Most businesses are just not going to work because we're going back to primordial survival world. Hedging that black swan, X percent outcome, just focus on making something that people want and just focus on the fundamentals. That's my perspective.
[00:05:19] Kimia: I think you've done that both on the operating side with HVMN and Archive, you have a lens into two of the most challenging things right now. One is supply chains on the e-comm side, and two is on Archive on the ad spend side. I'm curious, what's changing on each side? What would you advise founders? What are you worried about really on each one is what I want to know.
[00:05:41] Geoff: I think supply chain and just changing media spend or marketing spend dynamics, there's still just, I would say, like 10, 20, maybe the most impacted sectors like 40%, 50% sectors that they're deviating and that those are massive if we're talking about billion, trillion-dollar markets but there's still billions and trillions of dollars moving through the system.
I think, as up and coming founder and operator, just really make sure again that you have a skillset, you're offering a service that is more competitive, more efficient than anyone else in the market. I think on the HVMN side, we have this ketone drink. We have a multimillion-dollar military contract from special operations command. We work with a lot of elite athletes. At that high-level end of performance, people want that extra benefit and boost and recovery from having ketones.
I think, for HVMN, we have a widget of technology that is maturely better than a gator rate or a power rate or another electrolyte drink or a sugar drink. I feel like, for that specific business, we have a strong opinion around the potential of ketones from metabolism. We're solving it in a way that's more affordable, better tasting, cheaply. We're figuring out the supply chain.
I think it's like when there is customer demand, I think the great thing about capitalism is that resources are marshaled to follow where there is the most demand. If there's an inefficient use of something, I think very quickly the market demands that you got to reprioritize, reallocate where people's attention are. For better for worse, that's just where capital dollars money is what is a unifying attention focuser.
Again, if you just are able to find the core primal problem, which is, "Okay, this is a problem that I'm incrementally going to spend a little bit more effort to get your product or service," that's awesome.
[00:07:37] Kimia: I'm curious on the shifting attention. The capital following the tension, it's a natural segue into Archive, but the more specifically, how you think about even your portfolio companies generating eyeballs on the better places. How are you thinking about shifting attention now? Then how would you, say, extrapolate a lesson out to your portfolio companies?
Again speaking to our audience, a lot of our audiences is wondering where can they get the most efficient return on ad spend or return on invested dollars to generate customers. I'm curious, what are you seeing and then what are you advising your companies on?
[00:08:10] Geoff: I would bring it into two parts. One is actually being really crisp with your core narrative that you are putting out into the world, and then, two, how do you amplify it with technology, with media spend, with all the fancy stuff that you can buy out in the marketplace? I think you really need both to be special. I think, in my observation over my career, in terms of just like, I think in Silicon Valley, in tech, oftentimes you just read the tech punch headlines, you're like, "How did this company raise so much money? Why is this thing so hyped?"
I think it's easy to hate and easy to be like, "That's some bullshit." I think I used to be in that camp where my world is, "I don't understand. People are stupid. The investors are stupid." I think I've just matured in a way where, one, you step back, it's like an interesting game.
I think I've realized that you just don't know all the puzzle pieces behind the scenes of what has induced that specific outcome. I think one common thread that has become increasingly clear for me is that, if you can tie why your business is a part of a decade's long macro change in how some part of the world works, that's really critically important.
If you are opening a new coffee shop, that's awesome, like Starbucks, Blue Bottle, some of our favorite things that we visit are great businesses, great brands, a lot of customer affinity. Unless you have a really new way to talk about something that's billions of cups are consumed a day, pretty commodity type thing, it's hard to see that inflection of exponential growth of something that's a special story that helps your downstream marketing. I think I encourage that, for founders and operators, what was the original core spark that even made you want to start this business, in the first place? How does this tie into your view of the future and why this is one of the top 5, top 10 most important things to work about?
I think just looking at your entrepreneurial story or Ramp's broader story, I think it's one of the fastest growing companies ever, because I think a core thing around actually applying technology to financial services for business to actually save companies money is just a really primarily valuable story.
Being able to find that hook, I think, is the biggest cheat code. I think you can work super hard on something that just doesn't have a good story, and then you're just not going to get that tailwind that the entire world wants to see you succeed or they want to see you fail, but they're still paying attention. Now, once you have some of those tailwinds, and I think that's almost a key thing I look at both as an operating investor, you just need to choose a market chew and create a narrative that actually is going to be one of the most interesting stories that will be told top 5, top 10 stories in that year or the next decade.
If you're Elon Musk, you're telling the space multi-planetary species story, you're talking about the energy story, and that is amassing and allocating hundreds of billions of dollars. He's telling the best story, and therefore he, somehow, is able to memefy why he's able to marshal all these resources. I think that lens has oriented where I like to spend my limited time and resources.
Find that really core narrative of why this is interesting from a historical lens, and then two, what are the different tools, software, automation that are now available to disseminate that message in the most efficient way possible.
I think Facebook is an amazing business, but it's pretty interesting that one of the best CEOs of our generation is just hitting some headwinds with earnings faltering for the first time in the lifetime of Facebook Meta. I think what we're seeing across the industry with Archive's customers and just other digital marketers who are spending millions of dollars is that there's more of an increased focus on actually harnessing, amplifying existing community word of mouth.
I think, if you look at the industry of digital marketing over the last 5, 10 years, there's been this new growth marketing growth hacking discipline that's been created. I think a technical and hackery approach to driving attention is really, really smart, but I think, with a lot of specialization, sometimes if you specialize too much or so much, you miss what is the actual thing you're optimizing for.
The core thing of what marketing is is just a scaled positive word of mouth. That is the OG version of marketing. Kimia is saying, "Hey," or me saying, "Hey, Ramp is awesome." How do you harness that? How do you capture that? How do you amplify that? That is actually the core fundamental of marketing, the core primitive marketing, and then we built all this stuff around newspapers, TV, digital marketing, Facebook, TikTok, to all do certain attributes of that core primitive.
How do I get people to say good stuff about my product service brand? A lot of great companies, services, agencies really focus on media buying, audience targeting, audience selection. How do we build something that automatically harnesses capture identifies? For example, Instagram stories, ephemeral content, 80%, 90% of word content goes. Instagram is really figuring out how to get more people to just post different formats on their feed. There was never a solution to automatically capture all of this really great community content.
A couple of years ago, my partners and I were like, "Hey, why doesn't this exist? Why can't I have an app, a piece of software that automatically captures mentions of my product or brand on Instagram stories and have it in a very understandable, organized place?" The workflow there used to be hiring a social media intern or a social media manager, or a VA, a virtual assistant manually screenshotting all this stuff.
We were like, "Hey, let's build the first software tool to do that," and I think that was a trojan horse into automating, collecting, harnessing all this community data, and now we're building an API to turn and create workflows where, if someone mentions Ramp, for example, what if we were able to open up a DM in response to the Instagram mention with an incentive or an offer.
What if we were able to use that hook to- you've made a really great piece of content, we'd give you a gift card, we ACH you $20. If you can actually build a CDP or a custom data platform or an API to make the actions of a community actually actionable from the technology side, what does that unlock? That's the question that we're answering.
[00:14:53] Kimia: It's interesting because, back to your, how do you harness the attention and the narrative to get it in front of people, that is the core solution of Archive, and so is Meta in a sense, where you're taking this message, you're getting it out to customers so they understand that same message, and so you can go and that's the trend. I'm curious on the Anti Fund side of things. How are you thinking about that core narrative?
We were talking a few days ago, there's a lot of dry powder out there. You were saying there's still a lot of deals, if not more deals now. I'm curious what you're seeing on there and then how you're focusing in the attention and the narrative around Anti Fund.
[00:15:29] Geoff: Yes, with Anti Fund, I think one of the core premises that Jake and I realized in the very, very beginning was that, and this is the height of full bull market, we started Anti Fund in early 2021, was that there's really just two resources that all companies, all teams need. You need to have capital. You need to just be able to pay the bills, keep the lights o.
The second and arguably more scarce community is attention. At a certain point, we all have 24 hours in a day times 8 billion people. That is the max limit of attention that exists in this world. You can print money, do weird financial engineering with money, but literally, the max attention cap of humanity is some 8 billion times 24 hours a day. Anything that can wield attention, I think is going to be increasingly powerful over time.
I think just, especially within the last, say, 10, 20 years because of information and content decentralization. A kid in Indonesia, a kid in South Africa, a kid in Berlin, and a kid in America, we're all seeing the same culture, the same celebrities, same tastemakers across the board, and I think that cycle is getting tighter and tighter and tighter. I think that gives it opportunity where one that can master and have a platform to drive real attention has more and more outsized impact than in previous generations.
I think one of the core business models that Jake and I look at is, can we find intersections of categories that might not obviously make sense, but if we can drive attention, drive eyeballs onto something that should exist, that doesn't exist, that's misunderstood, and be able to put not just capital, but our network behind it, can we drive alpha?
For example, I think one of our recent plays was big into the sports betting category, particularly, micro betting. Can you create a gaming product where you can bet on every single outcome of a baseball pitch? Usually, sports betting is like, "Hey, Mariners is going to win or the Yankees is going to win." Some money line complicated. What if you could bet, like, "Hey, this is going to be a ball. This is going to be a strike. This is going to be a home run"?
That's actually a technically hard problem to dynamically create market odds that on average make money. The house needs to set odds in a spread that makes financial sense to be the house. That's a very difficult machine learning real-time, data processing problem, and we realized that if you can apply that technology set to sports, which is pretty different domains, could you create an interesting opportunity?
That was one area that we pushed quite hard in over the last year, year and a half, where we invested in Simplebet, which powers a lot of the real-time betting and draftings, for example, and also alongside that stood up our own consumer-facing sports book, where we're fully licensed, sanctioned in partnering with gaming operators and state gaming commissions to actually get licensed as gaming operators in their states.
I think the first announcement is that we partner with the NFL Hall of Fame village for Ohio. We're going to be one of the first day operators to open up our gaming product in Ohio when Ohio officially launches sports gaming. I think that's a good example. I think a really nice example of like, "Okay, how do you tie machine learning in sports?" Didn't no one really knew how to tie them together and then put attention around it?
So far, I think the reception and the business prospects in terms of like, hey, going from literally idea phase to being the first money in, to what was publicly announced a week ago, $50 million of capital raised for a pre-revenue pre-launch startup. I think it's super humbling in terms of a lot of that hard work in terms of what we thought was possible, starting at least from a capital raising side starting to pay off.
[00:19:47] Kimia: Yes, congratulations on the momentum, that's huge already. I'm curious, because, on that side, the common thread across a lot of your focus is how do you harness attention for cheap? I don't want to say cheap, but it is a great arbitrage opportunity to create a lot of demand very quickly, and on the recession-proof side of things on the theme of the podcast, it's what's top of mind, how do I drive max ROI for the minimum amount? Attention seems to be that thing.
How do you take a great story and how do you drive people to it in an effective way through various means? I'm curious on that thread as well. What are you seeing your great portfolio or other companies that you talk to do that the not-so-successful ones are doing? Is it that they're harnessing attention to drive cheaper eyeballs and therefore are getting a higher ROI? Are they just blocking and tackling on the basics? Have they found something else? What's jumping out to you in terms of who's doing well and who's not doing well?
[00:20:42] Geoff: Before answering that part, I almost want to reframe how you position arbitraging attention for cheap acquisition. To me, it's almost inverted where it's, you want your customers pulling product from you versus you pushing product towards them. For me, it's not even like an arbitrage question. It's just like, if no one really cares, you got to pay a lot of money to get people to care about what you're doing.
Maybe it's you should think about, why you care so much about it. Do you think the world will come to your perspective or you're playing a Sisyphean-like journey of pushing a boulder up a hill that no one actually cares?
I think it's like a hard question for a lot of entrepreneurs. You've got to believe that your idea, your market is one of the most interesting problems to solve. If you don't even have that self-belief, then it's maybe you should just step back and why are you even a founder, because it's fricking hard, expected values probably less than just working like a 9:00 to 5:00.
One, it's, why is this so important for you that you're dedicating 24/7 energy for something that was statistically likely to faill. If you don't believe that's one of the most interesting problems to solve, you should reflect on that. Then two, if the market is telling you that, "Hey, you got to really pay people the care," AKA high customer acquisition costs or high CPMs and all these marketing metrics, I think that induces a very valuable conversation to have with your partners, investors, board. Is this a market that's relevant and that they excites us.
I think that, in a world where there's just like people with really niche interests, if you don't just think what your market area is intellectually, curious at the very minimum, or this is a very big passion, I think it's hard to sustain the discipline and drive to grind through years and years of pain basically. I think all of us have these interesting stories where, I'm sure, Kimia, you've had years of effort around, how do you negotiate save SaaS offering and helping brands and entrepreneurs save money off of their subscription services and then Ramp broadly?
I know that Eric and Karim are doing email price refunds Paribus before they started Ramp, so that's not an overnight success story. It's just like Paribus was like a decent outcome, but it was nowhere near the success level of Ramp, and that was like a 10-year journey to even get to the point where like Ramp could be this crazy hockey stick growth. I think, to me, it's like, they've built, failed, learned, succeeded, and grinded through a bunch of learning, so even get to a spot where, hey, this is an area that just deep intellectual interests and network and personal excitement.
Those are the areas that the best companies have really found for themselves. If you cannot crisply articulate to yourself and therefore to your employees and stakeholders and to your customers, why you think that this is a top 5, top 10 problem that exists in the world, then I think that's the common thread. There are some irrational zeal passion for their business and for their market that it's driving people to have these really great outcomes. I think when you talk to founders, it's pretty good. Just trying to do the entrepreneur hustle. That's not enough, and especially in a market like this.
[00:24:23] Kimia: It's interesting. I'm sure you and I have both seen that across a lot of different founders where it's, "How are things going?" If they don't hit you back with 17 different answers, and they're like, "Yes, it's pretty good," it's probably not a good sign. It's really a question, to your point on, especially in recession on focus, what is the core problem that you are trying to solve for your customers, and why do you believe that they should believe in you, and how do you deliver the best solution?
On the threat of focus, I'm curious, are you seeing anything change across either your own companies or your investments in terms of just the basics. Again, there's the growth side and there's the let's generate attention, let's get in front of our customers, let's make sure sales are growing. There's also the cost side. I'm curious, how are you thinking about the bottom half of the business on the admin side or to your portfolio companies? How are you helping them prepare for anything that might be, I don't want to say impinging recession, but recession-proofing their business?
[00:25:23] Geoff: I think it's like business is not that complicated, you don't need calculus to look at a P&L and do arithmetic. You got to sell something that you charge more than it costs to make and some overhead. At the very, very first level, is your business actually unit-economic good? If not, you better have a damn super big brain strategy in how it's going to get good, and don't just say you're going to figure it out.
Across the board, I think what is exceeding in this current time, both for capital raises as well is just confidence for employees and team members. I think if, last year in a bull market, there was room for like super 10-year underwriting, 10 years magic roadmaps, and changing of the world and that resonating really well, I think just being super simple, little meat, I make this widget for $1, I sell it for $2, and I got to pay a bunch overhead for $0.50 and I put $0.50 back on the company's balance sheet.
Having mastery of that, and if you don't have that ruthlessness to get to that, I think it's just critical. That's, I think, what everyone should be focused on. How do you become default unit-economic, positive, default contribution margin positive, and then default cash flows/just straight profitable? How do you throw EBITDA on your balance sheet? I think if people aren't having that conversation, you're just missing the boat. We're running a business, a business is here to make money.
[00:26:58] Kimia: Yes. I would [unintelligible 00:26:58] that probably five or six months ago, EBITDA wasn't a term that a lot of these people raising money knew. On the point of changing pitches and cash flow is back in fashion, are you seeing a lot of the pitches change with focus on, we sell this for a $2, it costs us $1.50 to make, here's our margin, or are you still seeing some of the-- what I want to understand is, has the transition already happened to a severe attention to cashflow?
[00:27:26] Geoff: Yes. Aready, a lot of founders, CEOs are caveating. We are not chasing growth at any cost. A lot of that language, a lot of that just like, "Hey, I'm not crazy. I'm not just like in 2020 land." I think a lot of that context has already changed where before it might have been, "Hey, just crazy vision. I'm the next Elon Musk." We're focussed on disciplined growth.
I think the tenor of the entire market has changed. It's the right focus because I think everyone's generally pretty smart. You play the game that is being rewarded. I don't blame anyone or any group that optimized for top-line growth mode because a lot of people did actually make a lot of money playing that game.
If SoftBank or Tiger cash you the F out the top of the market with something that didn't really make sense. From a long-term perspective, they're like, "Hey, you cashed out like a couple hundred million personally and maybe your employees are screwed afterwards and everyone else loses money." Everyone was like a big boy and girl, these very sophisticated people that were [unintelligible 00:28:35] much capital cash you out.
As long as you didn't fraud people, lie to people, it might not be savory, might not be of the best taste, not might be a best for reputation, but it's like, "Hey, that's the game we're playing." I'm not here to point fingers and talk that on people, but I think it's like people respond to incentives, that with a zero interest rate environment, people were just taking more and more risk. There were some people that timed it super, super well.
I don't think you can really timed these things. It's like kind of hit the lottery ticket, got to punch out at the top of the market. Good play. Might not be the most savory outcome for everyone involved but, hey, you did well for yourself. That game is over. I think some founders are still hanging on to last year's game. I think you just got to get a cold water splash on our face.
I wish we all bought Bitcoin in 20, whatever, 10. We've all been there, no one cares. There are all these stories.
[00:29:34] Kimia: Everyone has a story about where they bought Bitcoin.
[00:29:36] Geoff: Yes. Like, "Oh, you could have been best friends with this celebrity or you could have invested or joined Dropbox as employee too." No one cares. Everyone has those stories, everyone has misses. Wake up to the new reality. Yesterday's price does not exist, yesterday's game doesn't exist, wake up, play the current game.
[00:29:56] Kimia: It's really back out to intellectual honesty about your business. I'm curious, on that line of intellectual honesty, are you seeing planning cycles compressed? To your comment on big brain plans for these startups that have raised a bunch of money, 10 years out, this is what we're going to do. We're going to put people on a meteor and then send rocks back. For the more realistic founders, that it's like, "Here's my cost, here's my cash flow. This is what I'm focusing on."
Is it more just, "This is our plan for three months, we'll reassess"? Again, how are you thinking about that for your own businesses?
[00:30:31] Geoff: Look, I think like, this is like the hard part about entrepreneurship. You need to have a 5, 10-year long vision, but also have a 3-month, month-to-month, 30-day plan of just like, "What are we de-risking across the business? What assumptions are we de-risking? Is this product scalable? Is this type of customer, this ICP something that like we can double down on?"
I think it is actually quite challenging to be able to be ruthlessly 30-day, week-by-week execution-focused, and be able to tell this 10-year narrative. I think, with startups, a lot of times, these are the outcomes that are the most interesting are these super rare outcomes. I think, by definition, 90% of the companies fail.
When we're talking about success, there's a survivorship bias around people that are great at both. Again, it goes back to what is interesting. I think the most interesting people can tell you this 10-year beautiful story and then go back to like, "We're shipping this next week. We're going to assign these 5 customers in 30 days. This is the quarter hiring targets, and we're going to potentially run these five experiments and we might need to shut down these two experiments." I think that's, oftentimes, very, very hard to find in one human.
Finding a strong group of partners, co-founders, executives, that is on the art of entrepreneurship. How do you have all your bases covered there? To your point, I think, especially if I'm an investor, I want to be seduced by the-- Damn, this is going to be one of the most interesting companies that's started in this year. I think any venture investor, that's what you need to tell yourself because, if you do the math, those are the outcomes that really move the needle for a venture fund. It's also like, "Hey, is this person actually going to execute or is it just going to be a social?"
I think we've been in Miami. There's a lot of people out running in Miami. You constantly just see at parties on Instagram. It's like, "We'll see." Maybe they pull out. Maybe not. I just know that the storytelling is sufficient or it's necessary but not sufficient.
[00:32:39] Kimia: You want to be George Clooney and actually rob the bank with your team? Maybe rob the bank's a bad analogy because you don't want to defraud anyone. You get the point, you want to assemble the team. You, actually, want to execute on the mission.
[00:32:50] Geoff: [unintelligible 00:32:50]
[00:32:52] Kimia: Exactly. You said something interesting that I want to touch on. On the certain things that you're de-risking, what are you de-risking in your business?
[00:32:59] Geoff: I think, at a certain point, there's probably some-- From zero to one, does anyone going to actually pay you for your product? Just going to a very, very primitive. Two, how much pricing power do you have? How much margin can you charge? Those are all risks across the lifetime of a business. One, can you actually get people to give you hard-earned dollars and you put it in your pocket? Like, "Oh, okay. People are actually value my services."
Two it's like, is there enough pricing, power and value for you can have an 80%, 90% software margin product, or is it like, "Hey, I'm more of a commodity type product where I can only charge 10%, 20%, a little bit of premium"?
De-risking how much pricing power, how much value are we actually offering versus the cost of goods. Then third from there, what types of customers, what channels actually are scalable? I think, oftentimes, anyone who has the confidence, the wherewithal, the courage, the fearlessness to be a founder, it's like you can probably get your five buddies to buy something from you and give you a shot.
Cool. You de-risk that someone's going to believe in you enough, kickstart your business. Can a team member sell it? Is this a repeatable process where you can do email cold outbound or is it required to have referrals, warm intros, all that stuff? I think these are all risks that need to be answered as you scale to a hundred million, billion-dollar revenue company where it's like, "We can hire 10 sales, people doing phone calls and then having a--" We've de-risked that, it's not a year-long sales cycle, it's like a three-month sales cycle.
You got to start super, super basic. Then I think each milestone is really answering a risk question. That's, to me, how I evaluate investment opportunities. That's how I evaluate resource allocation. I guess, to me, where I have a hat from an investor perspective and a hat and the operating perspective, I think it's really the same job. I'm just allocating resources. There's some levels of abstraction between being a passive investor, being a board director, being whatever, to being a more operational executive, different abstraction layers of how much individual contribution you're doing.
I think, fundamentally, we're all resource allocating, and it's basically our time/energy and attention, or our money. That's almost when I think about every single day, am I allocating my resources in a way that I want to be living my life?
[00:35:47] Kimia: I think a phrase I find I say to myself a lot is "simple, not simplistic." I really like-- a lot of what you said is really just where's the milestone, what are the risk? How do we operate? How do we evaluate? It's simple but it's not simplistic. It doesn't mean it's easy. A lot of what you're saying is really, are these the right people to help us get from here to there? If they're not, that is a risk. How do we answer that risk?
On the topic of team as well, obviously, I think a common thread, maybe a silver lining to recession-proofing of business is there is a lot of talent that may be available at a price that is beneficial to a company with cash or with a great story that has access to capital.
Are you seeing this across any of your portfolio companies, where they're getting more high- I don't want to say high-powered, but the talent that they need to execute? I would say six months ago, the fight for talent is very aggressive. I'm curious if that thread has changed at all.
[00:36:46] Geoff: I like your simple but not simplistic. I have a very similar thing I say, which is simple but not easy, which I think is expressing the same sentiment. A lot of, I don't know, like boxing. It's a pretty simple sport but it's not easy. We all viscerally understand these concepts, but that, by no means, is it actually easy or simplistic to execute it day after day after day not distracted.
[00:37:13] Kimia: Take the jab on the boxing analogy. I boxed for a few years. The jab looks like an easy punch. It is not an easy punch.
[00:37:20] Geoff: I think it's actually very funny, where there's a lot of just seeing Jake progress in his boxing career, a lot of bros just love shit-talking. It's like, dude, no one actually wants to be in a fight and they just want to shadow box. They just look like clowns. Anyways, I think the greatest athletes and the greatest operators just make everything look easy.
I think that is a sign of their greatness. In terms of talent. I think there's short term, the job market is-- basically, people are just being much more conservative with their hiring head counts. I think that's a little short-term local pocket. I think that just with my sense of our generation of professionals, the next generation of professionals, gen Z, et cetera, I think at least this is my perception, maybe this is the people that I attract and the circles that I'm attracted to, I feel like prestige is a lagging indicator of value.
When you realize why an investment make Goldman Sachs spend so much money hyping up their prestige, I think they're trying to buy a clout in a lagging way. I feel our generation and the next generations are just much more smart and attuned towards fake clout and like real clout.
I would say people are much more skeptical about games, scams, tricks. I think there's an increasing focus around being creators themselves. I think there's a recent poll that showed that being a YouTuber was literally the dream job for the next generation.
[00:38:56] Kimia: I heard when it flipped from astronaut to YouTube creator.
[00:38:59] Geoff: Yes.
[00:39:00] Kimia: That was a big one for me. I was like, "Whoa."
[00:39:02] Geoff: Again, I don't know if it's a good or bad thing, just an observation, that it feels more and more people are focused on telling and creating an individual journey rather than, "Hey, our parents generation just build a career at a Raytheon for 30 years. That's an awesome life." I think there's pros and cons to it actually. I think there is something about having loyalty, a tribe, compounding relationships year after year after year.
I think that's the only way deep work gets done. I think that's a opportunity for great employers, people thoughtful around building culture, to arbitrage this changing sentiment towards the role of a career role of a skill set in one's life. Again, it goes back to the first statement, the companies that are able to attract and be talent magnets have just great stories to tell. How do you have a story that's so exciting that a recent college grad or a mid-career professional is like, "Damn, I want to be part of this tribe. I want this to be a part of my life story"? I think that the façade of, "Hey, like I want to go join a Goldman Sachs and wear a suit," I think that's like less and less compelling. I think there is an opportunity, if one is thoughtful around--
To me, there's not, say, some kumbaya story, and I don't think people even want that. I think people just want like, "Hey, I want a team, an organization achieving a goal that I think is, like, intellectually interesting and should exist in the world and people are focused on being the very best in the craft. That's how I like to recruit people, like just we're a business, we think this is a super important problem, everyone here wants to be the world-class of what they do.
We're a team and a family, doesn't mean we're not going to have great friendship, great loyalty, all of that. Hey, we're here to win fucking championships, we're here to get shit done. We're not here to go on cool trips. That's a cool side effect, but that is not the goal of this company.
That seems to be quite compelling for that style has worked for me, where I think that there's a lot of doubt around, as a manager, as a founder, what is your role? I think it's important to be like, "Hey, I'm not here to be your life coach or your therapist or your dad, I'm here to build a business, I'm here to have a super high-performing team." Maybe other people have a different approach to it and that can also work, but my personal style is much more of a [inaudible 00:41:47].
[00:41:48] Kimia: I think it comes back to your point on value. People want to feel valued. On the thread of, again, recession-proofing, some individual contributors or employees might be concerned about their work. Then the business, they are extra concerned about keeping the best because this is when it's going to matter and this is when you have to focus.
To your point on how do you take your narrative, how do you take your story, how do you take your mission? Empower these people that you really, really want to keep, and then find other people to join your mission. It's really, again, to the story you told of, "Hey, we're a sports team, we're a high-performing team. Here's what we're trying to do." That attracts like-minded people, and you're here to win.
I know some of the best businesses were started at a recession or going into one because you just have this intense mentality of here's the vision, here's what we're doing, to what you said earlier, and then 30 day, 68, 90 day, we're going to block and tackle all the way down.
Are you helping your portfolio companies? Actually, this is a two-part question. A is, are you seeing pitches ramp up, and do you feel like your investment activity has ramped? B, are you helping them with that plan, or are you just seeing more of them come to that? Again, the cashflow piece, but I'm curious on the Anti Fund side.
[00:43:09] Geoff: I think we're seeing a lot of inbounds and introductions and people excited to partner with Anti Fund. I'm not sure if that's a reflection of macro or Anti Fund building somewhat of a track record over the last year and a half. I think, in terms of overall, inbound top-of-funnel activity has increased, but I would say we're much more circumspect in terms of deploying capital, deploying time.
One, I think we have a lot of projects in motion that we want to make succeed. Every incremental responsibility you take on, by definition, detracts from focus. Two, I think there's just like a increased focus on people that are as disciplined and quirk enough to fit and vibe well with both a Jake Paul and a Geoff Woo. I think we just are getting a sense of who our tribe is and the areas that we like to play in.
I think the fortunate thing about Anti Fund is that it's not where Jake Paul makes his living, it's not where I make my living, it's really just a passion project for both of us, and I think that's why it's really just a fun. In some sense, it's like we don't need to do anything unless we both are fricking down for it. I think it's literally one of the best projects that I've been lucky enough to create.
That sounds like the bar of, "Hey, Jake is super busy, I got projects going on, we're looking for just staff that we really think is both amazing from a technology and a market and a cultural perspective as well as I think just wanting to invest support great people." I think, at some level, I just want- and if me investing some money creates a great friendship, dude, that's the cheapest way to get a great new friend, in some level.
So far, that personal high bar of our own limited time and energy has been a decent barometer for selecting great outcomes like assuming that you think that we have reasonable taste in people and reasonable taste in market opportunities. I think that's an increasing question, do we try to scale this up, how will we scale this up, and I think those are those open questions. Maybe it's just not scalable and that's probably fine because I don't think venture is actually that scalable in some sense.
I think you've seen the SoftBanks, the Tigers, a lot of these crossover hedge funds trying to scale up venture, and so far that that has not paid off. They're down a lot. Not to say they won't be successful long term, but so far, track record of trying to scale up venture too aggressively and losing that artisan touch and tastemaking and care and attention,
the track record for it is not as good as like, "Hey, the bespoke custom artisanship of venture capital." In some sense, we're much more aligned to that latter school than the mega super cap index everything approach. That's not who we're.
[00:46:18] Kimia: I'd be very surprised if Tiger could replicate their strategy now, very surprised, given the changing climate. I think it'd be tall bar.
[00:46:27] Geoff: I think they're good guys. The product, I think, made sense at the time maybe. This time last year, people were like, "Holy F, these guys are like fricking kings."
[00:46:39] Kimia: They deployed $15 billion in Q1 and 2 or something?
[00:46:44] Geoff: Yes. Everyone was writing thought pieces and literally going viral commenting on the Tiger strategy and how they're geniuses and stuff. A part of me would be snark and be like "Oh, they're complete clowns," but SoftBank was down, up, down, up, down, up. I think, to have the courageousness and boldness to allocate and fire and take a big risk is commendable. Maybe I've matured in that sense, where it's like very, very easy to be snark and be like "Oh, someone's down."
It take huge courage to have that much conviction deployed that quickly and have a unique differential take on how to do the investing business. I guess maybe this is some maturation or learning. I feel like, unless you really are perfect, you're like a religious deity, you'll probably messed some stuff up. If people are just out there shitting on you when you made a mistake, it's like, "Hey, we're in America. We have second chances."
Again, as long as don't be Elizabeth Holmes and literally fraud people and mess people's healthcare decisions up. She's going to go to jail. If you're just earnestly trying to do something, like deploy a lot of capital, change how you can index in the tech companies, that's life.
People aren't going to execute perfectly on everything. I think part of me is much more gracious and have grace on people trying and failing and hopefully, they got to lick their wounds, figure out how to come back, got to re-earn trust, re-earn respect. What I realized, they've probably learned a lot of hard stuff that I haven't learned yet. If you go through that much pain and embarrassment and shit, those crucible moments are some of the moments that I have, when things are not going my way, those are the biggest places where you learn.
The same outlook for folks that these funds that are licking their wounds right now maybe they've learned some deep painful insights that they can come back and hopefully do well with. Good luck to them.
[00:48:46] Kimia: Yes, I agree. It's far more commendable to try. We're coming up in the hour, and I want to be respectful of your time. I have two questions for you, but I'll ask them in the same question. If you were to give any recession-proofing advice to a pre-product market-fit company and a post-product market-fit company, what would you give?
[00:49:04] Geoff: It's pre-product market fit. I'll just tie it back to Eric and Karim's story. For their first company, Paribus, basically email price checking differences, they were applying to Y Combinator. This was probably 2012, 2013. They were long-time high school friends, and they were asking for YC interview advice.
They were a little bit worried about launching and it wasn't perfect yet. I was like, "Yoh, effing just show the product to people." I think they've been very gracious to give me some credit to be like that accelerated Eric and Karim's in the butt to just go and get it out in the front of customers' faces. I'd give that same advice again, which is that if you're pre-revenue, pre-product market-fit, I get it, it's your baby, you have this massive theoretical idea of why this is going to change the world. Get outside of your ego. Just talk to people. No
one's going to steal your idea. Your idea's probably like pretty clever and smart, but look, it's just actually hit the rubber on the road. Just actually talk to people and get your idea test kicked. What you want to see is people be like, "Yoh, that's dope. Can I test it? Can I buy it? What can I do to alpha it?" That's what you're looking for. People pulling it from you.
That's probably going to be on the rarer side, but if people are like, "Hey, I don't know, maybe you should do this instead." That's super valuable learning. You don't want to be building something that no one actually wants for six months and then just talk to people, you never launch. Just get rejected earlier. Have people tell you why your idea sucks earlier because then you just save so much time and energy of not building the wrong thing.
Just have some courage, be a little bit fearless, be a little bit shameless, just sell people on your idea and see the response, and be intellectually honest. People just be nice to you or people are literally trying to pull it from you. I think for the outcomes that are super exciting, you want people more on the pulling like, "Hey, I'm done with pilot, I'm done alpha. Let me know when you have something testable." Be scrappy with it. On post-product market fit, I think you're in an awesome spot. Credit to you. It's very, very hard. You're starting to get to [unintelligible 00:51:21] here.
I don't want to be this arrogant armchair conceded quarterback where I'm going to tell you how to run your own business, but some broad principles to consider are just channel focus and depth focus. I think there's always a math equation. Can you add more value to your large customers? Do you want to go broad oftentimes like really, really focusing on the top 5%, 10% of paying customers?
They really, really care about your product. They really, really care about your area. They probably are, at scale, are really smart. They're somewhat successful to be like a top 5%, 10% customer of yours. They're put together. They know what the hell they're doing too. Be their best friends. Understand what problems they're thinking about. Can you solve more of their problems?
Oftentimes, how do you make them your best friend so you can help them more? Oftentimes, I think it's easy to be like, "Oh, just want to find the next shiny object for like, hey, your best people are like your existing day one believers who already are anchoring your business." Those are just some thoughts in terms of not being overly caught with the next new idea.
[00:52:34] Kimia: I think that's great. It reminds me of an anecdote from Ben Horowitz and Mark Cranney whose their old sales guy at VMware. Their objective in sales was not, are you closing the deal, but it's- this is dated a little bit, but who gets a key card to walk the halls? If you have a key card to your customer's building, that is a true win. If you're always there, if you're on the boots like true boots on the ground, true boots in their building walking the halls, you know you've won. Final question before we end it. What are you optimistic about going forward?
[00:53:04] Geoff: I feel like maybe this is me in my 30s now. I'm just optimistic to enjoy the journey. I think, oftentimes, when you're grinding in the startup world and in the business world, it's stressful, you always want that next incremental thing. People have told me this and I want to repeat those things. You got to enjoy the journey while you're in it. Celebrate the little win, celebrate with your people, and celebrate with your teammates.
It is pretty damn cool that in a world that's pretty chaotic, I think the last two, or three years have been out of a movie, there's folks like you, folks like us just trying to self-actualize, trying to create, trying to build things that entertain ourselves, entertain the world, and add value to the world.
As long as that human ingenuity, that resilience is still there, I'm just pretty generally pretty optimistic. I almost try not to think that macro. I think, if you're in this business of startups and entrepreneurship and being a founder, being an operator, you know that you have ambition, you know you have that drive. I think the real question is, can you simply wake up smiling every single day to do that every single day?
That, to me, is the real trick. No, one's going to doubt anyone that's probably listening to this podcast. You're top 1% in terms of ambition and drive. You're smart. You're spending an hour of your valuable time listening to Kimia and I bouncing around here. That already shows that you have that desire. I think the question is, can you make this enjoyable and can you make it this consistent over the long haul?
[00:54:44] Kimia: I love it. v, what a place to end. I've really enjoyed our conversation. This has been a ton of fun. Any final plugs where people find you. Anything you want to finally promote before we call it?
[00:54:54] Geoff: I'm on Instagram, Twitter @GeoffreyWoo, G-E-O-F-F-R-E-Y-W-O-O, Ketone drinks hvmn.com, Archive.com, Anti Fund VC. Thanks so much.
[00:55:07] Kimia: I love it. Geoff, thanks again for your time.
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