How two straight guys bought Grindr and made $2B

the app store rating jeff was it one point eight one point eight and remember one star is the minimum so it's really zero point eight is the was the rating on the app and how are you doing a hundred million of revenue and forty five million of profit with a one point eight star rating so we look at this and we just see opportunity basically how we got here was sean and i were talking about grind i think last month and like how there was like this amazing story behind it and we found out that you were the two guys who bought it and took a public and made it this home run but sean is good friends with james carrier rick i've had a bunch of run with you early on in my career and then same with you jeff and we're were like we gotta get these guys on because you guys have been a little bit behind the scenes you don't talk that much you're just kinda quietly behind the scenes but you've had some major successes and like i i thought it'd had been cool it would be cool to like give you a platform and like tell the story because i think you guys have told a lot of these stories publicly maybe ever have you not a lot no we we we we've we've done a couple here there but no we have not been out there publicly and talked about what we did at grinder but we're happy to today so let's do story time how did you two guys end up owning grind what is the story of grind before you and then how did you guys get involved and what happened afterwards i wanna hear the grind story grind was created founded by a game a guy named joel sim ky about fifteen years ago and joel is a gay man who wanted the ability to create an app to find other gay men gps enabled kinda like uber right uber really existed once the iphone became ubiquitous and people could you know see where you are that proximity it became you know really tight so he created grinder grind took off and he ended up selling it to a chinese company called k lin and then a few years later cf the committee for foreign investment in the us forced the sale of grind okay so they were worried that that the the data that grinder was collecting could be used for you know in negative ways by the chinese ownership was that first sale a big sale like was grind considered like a big success of the time because i know some of the dating apps traded like for not that much money early on yeah so i i believe sam i'm i believe us sorry joel sold it for i i wanna say two hundred and sixty million okay so it was a great sale and he owned ninety percent of the company very others had equity so he did very very well and then cf forced the sale right true what was the chinese using it what what was that mean like they're i think read there like the accusation was that they were like straight met they were blackmail mailing straight man who are on grind i think it's hypothetically true that if you have the servers located in china and you're the chinese government and you wanted to watch it's sort of like if you know the answer to the question you can use grind backwards so if you know that you have users in the white house who are gay or using the app well then you can figure out how his users are and you can track where they are and you can say oh the president is about to leave the white house because people on his forward team who happened to use the app or using it and they're doing it well with the ukraine war we heard that soldiers on both sides were using the app to meet each other sort of between battles and you know people have talked about olympia being out in the village and so work was done a grinder to help avoid these sort of extreme cases and so gotcha i think there is possibility for abuse and there are certainly people who are closet or not well discussed in politics in the military and in high positions who yeah hypothetically if the chinese government wanted to and they had access the information they could exploit that information and potentially use it to blackmail you know our politicians okay so that's like a real that that that sounds very reasonable why a sale is forced so so so when they forced a sale what does that mean like there's an auction one day or how does they give the company one year you have one year to sell to a us ownership group k and if you do not the government will take control of the business and in the in the year the cf group which is it's partly comprised of us intelligence and us elected officials and administrators like congress people and so that board steps in in the company they they sort of put place digital steps in process and administrative steps in process to watch during the one year and mandate the sale so yeah it is a mandated sale did you just learn about that in the news or like is there like a look because you guys weren't like i mean this was like a this deal was like a pretty like level up deal for y'all right is that where you bought it or you bought it after that there somebody else bought it than you bought it no we bought it because yeah again cf was forcing the sale they had a certain timeline to sell the company and there was you know all the the typical buyers that you'd think about there was always someone super conservative on the investment committee that was like i can't be associated with gay sex i you know i i can't do this deal we we looked at raising money from some folks in the middle east they could not be associated with with gay sex gay dating so it really took a lot of the typical buyers out of the process and we were lucky enough to partner with another pe firm and actually buy the company it came down to three buyers in the end that put in you know legitimate bids and we are lucky enough to partner with the other pe firm about it let me just what what rick was talking about there's this weird thing where companies that had helped tinder go through all of its systems they were fine working with tinder but when it came to grind they were like oh we don't wanna touch that one and right right i didn't understand i i'd think the extent of the sort of latent homophobia that had at the time infected the whole process and we really benefit from that sort of homophobic behavior because you have this incredible company it's growing like crazy it's incredibly profitable the users love the product like it checks every box of what you would love in private equity and you love as a product person and so at the more we studied the company and the product where were like this thing is just an amazing business it's an amazing product joel really hit on something that sort of met the market's needs it was dominant in this market position and the people that are looking to buy it at this point it had gone through lots of sale processes we had heard playboy had tried to buy it and you know there were all these people that had tried over the years couldn't come up with a financing or couldn't make the deal work or they couldn't get the banks to work with them and get the deal done and so it ended up with three pretty non traditional private equity firms going after it ours being one of them as sam you said it was a step up for us we had not done a deal that was in the hundreds of millions of dollars prior to that we done tens of millions of dollars of deals and but when it came time to raise the money for the deal we raised it very quickly when we did find people that would listen to us and hear about the business people loved the fact that we had uncovered this sort of glitch in the system that this homophobic thing had kept the price down and the deal available to you know sort of newcomers to the space and operators that was the other thing people love there they're like i can't believe you guys have done diligence where you actually have a a a road roadmap for the product a road map for the security a road roadmap for the trust and safety the moderation we had done sort of all this work to understand what really the challenges were for the business hey let's take quick break for a message from our sponsor hubspot who's making this episode possible listen if you're trying to build something the big and i'm talking about a hundred million dollar or a billion dollar company one of the most important things is to focus on the market where is the opportunity you are like a surfer on a surfboard board and you were trying to find the biggest best wave possible for you to go on well hubspot has put together a cheat sheet that is studying and sort of reverse engineering what's working today so they're looking at the top performing industries that you could be looking at the funding routes that work the best and the growth strategies that the fastest growing companies are using so if you wanna one pager that is a cheat sheet on the the big company playbook you can get it right now just either scan this qr code that you see on the screen or click the link in the description below alright back to the show so roughly what what do you guys buy it for and what do you think it would have been had it not like let's just say it was a straight dating app like what do you think the same business if same metrics same everything else how much of a kind of a discount or premium do you think it ended out at rick i think fifty percent off at least right the deal was for six hundred million six fifty or something yeah we we will i mean okay so on on a multiple basis we weren't really that far off of market so we bought it for about six hundred million it was doing less than fifty million about forty five million of eb when we bought the company so you know call that kinda twelve thirteen x eb and the market was probably trading at more like twenty the public companies so but there's a private company discount so we we we bought it for under market for sure but it was really just the the the lack of competition in the process that allowed us to get that discount this is such an interesting story we learned so much in this process like that there was the other pieces to it which was normally i would say that private equity firms don't wanna touch a deal or investors that have more than sort of one problem and grind did have a bunch of problems it had a very public problem with privacy and data at least perceived problem because they were being sued for selling users hiv data by governments in europe and in the us they had this issue with the chinese ownership which was thorn issue and having dis involved and this was one of the only cases ever where cf had actually retroactively un unlocked deals cf had denied deals with foreign buyers but they had never what they're trying to do a tiktok today over the years is tiktok would be the second one after grind and then in addition it had a p problem and then lastly it had this sort of late and homophobic problem people just not wanting to touch the property so it had this series of problems none of which bothered us at all we just were so in love with the business and the product and how much the customers love the business and how much potential and there was customer frustration for sure but they had been sloppy on a lot of product work and a lot of customer care and a lot of modelling they had made mistakes not awful typical mistakes that small businesses where the growth gets ahead of them and they sort of get behind the ball and because rick and i had both worked at large companies in addition to startups we understood the complexity of that jump from when you move from sort of five million users to twenty million users and all the complexity and the legal you know things in the accounting and all the things that go into the difference in those businesses we also looked at some metrics that were shocking which was the app store rating jeff was it one point eight yeah one point one point eight and remember one star is the minimum so it's really zero point eight is the was the rating on the app well like that was horrible i think you're glass store views were like pretty horrible like we said was it was the management rating was like nineteen percent i never seen anything that low before i was like hi there still have bob at nineteen percent and how are you doing a hundred million of revenue and forty five million of profit with a one point eight star rating so we look at this and we just see opportunity we we realize this company is severely under managed you know clearly from the glass door rating iconic brands strong stable cash flow but we knew there was a lot of cleanup to do once we got in and you guys had already had success right you sold tickle for a hundred million of dollars or stuff so it's not like this was your you know you didn't have to do this you had options you could be doing a lot of different things in life and you signed up for like a big swing the biggest swing you'd taken and with a lot of hairy problems you're like oh it didn't bother it but i want you to take me in the room because before we get to the kind of the turnaround and the the what happened and how how you guys did it i just wanna go back because i've been in situations like that before and i remember feeling like man nobody really talks about this like i've read a lot of business books i've heard a lot of business podcasts but like right now i feel pretty naked and afraid where i don't really know if i'm making the wrong move or the right move because i'm doing a swing that's bigger than i've ever done i'm in the room it's unclear there's still fog of war right the story hasn't played out yet we don't know exactly what's gonna happen it was much worse than we thought to when we got into grind remember covid hits in march the deals halfway closed the users dropped twenty thirty like it just sort of this is a location based physical meat on site you know product covid hits everyone's locked at home we had plans to basically live at least part time in la from tampa so it got worse and then we got there and we started reading through all the the actual data for the business that was and we're like this is much worse i over the two and a half years i gained twenty five pounds my cholesterol went up thirty percent like i didn't see my kids like just just i it was nostalgic i look back at it so fondly i really enjoyed my time and i did love it at the time but it was mixed with incredible stress it was a very difficult role but i think for rick and for me our what we had learned in the twenty years prior was perfectly what the company needed at that moment like it was what felt so good was it was exactly the skill set we had built to that moment is exactly what that company needed at that time and so that match felt amazing and as a product manager to work on a product where the users were so engaged i had never seen anything like it and i'd probably maybe never will where the engagement on the product was so high that everything you tried you either failed or succeeded almost over i'd run mail before that and there's an anti of the sort of the customers don't really care you come out amazing features and they're like hey seven percent adoption rate over six months i grind we've come out of the that was like okay twenty seven percent adoption in the beta where we hit the feature behind something in two hours i'd be like oh my gosh this this product is incredible i mean it's incredible it was so as a product manager it was the most rewarding work i had done but was there any doubt when you were thinking about buying it like i now you say like well it was a perfect skill match for us and know did you guys go for some long walk or there was a dinner in one night where you were like are we really good do this like did you have one of those that muscle the the doubt muscle like i think it comes from i saw people as an entrepreneur after you've done four or five startups from rick and i both have four or five startups in our background and technically we've probably each done like nine but we don't even count the four that didn't get sort of far enough along but i have lost my super happy gene where i feel incredibly happy when things go well and i've also lost my super distressed gene when things are going badly and the stress is high so i feel the stress you can see that physical toll took on my body over this two and a half years but i don't recognize it in the moment you said this you said in the document you said so this is jeff writing said for me i've become dis of times that feel too good and equally i am skeptical of moments that feel too low so today i'm simply more emotionally level than i was in my twenties in part because i don't trust highs or lows and that has helped me focus and persist when others might quit or get sidetracked yeah yeah i think that it's probably true for both of us rick rick feels a little bit better he'll sometimes like shake me we were we're were at the ny and grind is going public and he's like dude we're we're we're did it we're like we're taking company public and i was like yeah i know i just can't i just some i just don't i i know i'm supposed to tap into this incredible joy i remember for the first time i got i wondered what it would be like when i got a wire for more than a hundred thousand dollars i got a wire for like seven hundred thousand dollars one google bought one of my companies and it was the first wire and i thought that will change everything like everything about how i feel will change when that wire hits and so i looked the wire hits and i feel the same exact yeah i just i'm like it was like relief combined with resignation just like i i wanna ask some details about the deal so you said you raised six hundred million dollars my i'm curious is buying a company for one million ten million a hundred million and a billion is that at all similar like our are each amounts similar are they is one harder or one easier and of the six hundred million how much of it was y'all money yeah i can take that so the the deal structure the six hundred there's was about two hundred of equity that went in and you know some of that was our personal money but most of it was outside money that we raised there was two hundred million of debt so fortress was our debt provider and then there was another two hundred million that was due basically an earn out upon the exit right so really with grind only two hundred million of equity went into the deal and we can fast forward you know to or we can talk later about where the exit came out but it ended up in a very very good roe return on the equity of only two hundred million going in i think the the other answer is it's roughly the same effort and work to raise a million dollars as it is to raise ten million dollars as it is to raise a hundred million as it is to raise the six hundred million you deal with different players they may have different questions but the businesses are all in such different states when you're doing it that the questions exist there's always there's a skepticism amongst there's an enthusiasm and a skepticism when you talk to the debt guys and we talk to the equity guys and you're trying to raise money with grind the difficulty was simply most of the additional channels were closed and so we were dealing with alternative debt maybe slightly more expensive debt we were dealing with alternative equity equities so we were dealing with family offices instead of going directly with you know and we were dealing with alternative banks and lawyers and things like that people who didn't didn't in mind working on the deal and when you raise that money so do you guys as the kind gp operator types do end up owning twenty percent of the company or fifty percent or eighty percent because you've you've raised you know certain amount of equity certain amount of debt like where do you what do you target what do you try to land at in a deal like that well we we work with another pe firm so the way it ended up being structured is that they brought in a lot of the equity we have the debt that we had brought in from fortress they brought in a lot of the equity and then so we had you know we had our our piece of that but then really because we ran the company jeff and i had a a a slug of equity related to to you know to our roles as ceo for jeff coo for me but in general for an equity deal i think if a private equity deal you have carry so you have sort of back end options and you might have attrition of a fund we don't do a fund we do sp for individual deals but yeah we would want to try to depending on how much of the money we put into ourselves you're structuring these deals in order to get twenty percent equity amongst the partners of the private equity firm that you'll split you'll do deals where you're in up ten percent and you'll but you have you know you have investors they're gonna take on a big slug debt is what you don't use in startups what you do use in private equity is this incredible multiplier so even though the debt expensive it is so cheap compared to equity and so i i sort of it's it is not that different to buy a company that it is to buy a house or an apartment building the sort of math works out the same you you're using leverage you're using cash there's oftentimes you're doing cash upfront and debt that you plan on any year once the business has been cleaned up a little bit to just restructure it right away so there is more financial work being done the role of your financial partners in those deals we have an amazing lawyer advisor tax lawyer who structures deals in ways that's like artistic and right just to make the deal work because we have to say like okay we have to do this so that this this investor can bring money in this way but we have to price it this way for this investor you know so it's just and we have this layer of debt this debt we don't wanna hold on to it for more than a year because it's expensive so we have another debt provider but there's all these rules so you do spend way more time in a private equity deal on the finance and it is it explains why some of private equity or majority of private equity driven by financially minded people that maybe don't know businesses well at all right yeah and sean dan answer on the economics of of the deal from a high level at least you know we took grind public and and we'll talk about how we got there but we took it public for two billion on the new york stock exchange two and a half years after we bought the company and as i mentioned as part of the deal structure that earn the first two hundred million went back to the original owner or the owner that we bought it from so that leaves you one point eight with two hundred million of equity going in because a debt just stayed on the business so we basically created a nine x return on that two hundred million right so that's about one point six billion of value created you know when you subtract out the original capital so about one point six and you know typically you'd have a twenty percent carry on that that's amazing and what what's the was there any obviously you did a lot of cleanup up you did a lot of best practices you did a lot you you executed a product road map and he marched on that way so we don't to go into all those details but i'm just curious was there any like aha moment key insight fun strategic moment that happened that like actually helped you build that value well there were some things that surprised us on you know when we first got in there we knew we are gonna have to do a lot of cleanup but the that we knew that the talent was gonna be an issue but we didn't know how bad it was so culturally unfortunately the chinese had really they'd had ruled by fear i was this black box nobody knew was going on there's five people that had equity and and and really had any kind of vision and and knowledge of what was going on so we and then we looked at the engineering team and jeff can speak to this more than than more than me and we realized they weren't that good they they were not committed to the company and definitely we're not committed to the community that we served and we ended up having a fire about seventy percent of the staff mostly the engineering team we didn't expect it to go that deep but when we got in they wouldn't realize how bad it was how bad badly the tech stack had decay we realized at that point that we needed to do a kind of a three part serial process the first part was reset the talent the second was fixed the tech stack and the third is where it got to be fun and that's where jeff really shines which is rebuild the product and start to drive revenue was was a large percentage of your staff gay of those that we kept on a very high percentage was it weird like because like i mean that there's like obviously cultural things going on here of like two non gay guys are now buying grind like and then you know it it'd be like me owning ebony magazine like there's like you know there's a clear like i don't know like is the could i trust the guy see he's up part of the community like yeah was that we i would say this was the biggest we sort of smile about it but i i i learned so much i went in trying my best to understand the user's needs and you're you're lucky to work in a where the customers are giving you this constant feedback so i had been i already talked to hundreds of customers during the diligence process we had read through thousands and thousands of customer care issues i had been on reddit forums going through every single post about the company and users were i would i would copy and paste into this document saying like what's this issue and i wanna find out what this is why this happening and then we get there and we had the employees had never many of the employees that were left over from joel original team had incredible knowledge but they didn't have incredible scale they had not scaled before so they didn't know like oh when you pat when you do this and you're moderating we had customers on hundred and ninety three countries so you're doing this moderation and you're doing these things in multiple languages and you're doing these things where you're being you you we i had this at yahoo so i just i just knew what to do when you have users in a hundred and ninety countries i just kind of knew what to do when you pass these issues and so i was able to bring on engineers with me from yahoo that new scale right away and i think the best hire we did was we had the head of global privacy and safety from yahoo who happened to be a gay man who had retired from yahoo and i'd known him he'd been there for eighteen years and i called them him and i said i need you to help me on this company and he goes what's the company and i said grind he's like i'm coming out of retirement i'm gonna help you i'm gonna do something for the community myself he just said i'll do it for the community he we were being sued at that point by thirteen attorney generals in the us over privacy and data leak leakage something the company had not done but it was everyone believed the company had done and it was funny something the company did that actually saved like ten thousand plus lives a year was was being sued for this feature which is what's your hiv status so and it's listed on your profile that's certainly an important thing to know before you you meet someone so he said i'll do this he got on the very first call with the thirteen attorney generals and they they said shane is that you and he's like yeah it's me i i'd now work at grind and they said you work at grind because he'd met them all and knew them all from when he was at yahoo we constantly dealt with all sorts of issues at yahoo and i'd learned about all these i dealt with the cia the nsa the fbi and every you know possible law agency when i was working at yahoo when i ran mail and essentially twelve of the thirteen attorney generals basically said we're good like shane there it's run by professionals we understand so simply the upgrade of talent almost started to resolve problems right away it caused tension inside the company because the same straight as they came in we're putting in people they're like oh they're just putting in their lack everywhere by the time rick and i left seventy percent of the hires from the in the company were minority hires basically we were hiring people from the lgbt q community or we were hiring people that were in in the d which is not something many people i talked about anymore but we had the most amazing ability to recruit and it was a superpower for the business because we were able to pull talent from incredible places because they believed in the mission of the company and so we actually used the the mission of the business and the impact it was having i don't think people understand the extent to which grind makes a difference in the gay community or the lgbtq community globally most of the information you're gonna get on sexual education about gay sex or people trans people that most of that information outside of english comes from grind so fifty seven languages is how many languages grind takes it safety and anal sex you know information and publishes it in fifty seven languages and when you need to know about trans health care and you need to find a doctor who will give you vaccines and you're a trans person in you're in india well that database is funded and built by grind so those things that the company does it's it creates a mission it creates all this incredible but it also is something tinder will never do tinder won't save lives nearly at the rate the grind does simply on educating people about safety and you can imagine if you're a closet trans or closet gay guy growing up and you've not been able to talk to your family and you've not been able to talk to your community about something that's going on in your life well being able to find community on grind and being able to find that information in a very uncensored way was valuable you know what i think is cool about you guys is that your og silicon valley like you know true and true right like the big kinda tech you web one point o two point o you guys were there you were in it even your near misses were basically correct you know whether it was like i drive before dropbox or you know rick you were doing branch out which was kinda like linkedin and you you you were so close to like you know the big the big big exit and or the big big kind of reward of getting that that thesis right but then you guys have like switched and you play your own game you don't you're not just a venture firm you know who's like only focused on you know venture backed startups like you went into private equity which is so different than like probably most of your friends in silicon we can valley why i i guess like can you just talk a little bit about that and specifically like if there's other people who are kinda similar right i've i i put myself in this bucket i was i thought i was a smart guy i was working hard but i was playing a game in silicon valley where it's it's feast or famine it's like either i'm gonna make a billion dollars i'm gonna make pretty much zero i'm i'm gonna grind super hard and really i'm just like i'm running around with a bottle trying to catch lightning is how i felt and then as soon as i switch to these like more bootstrap businesses or private equity where i was buying just chunks of businesses that we're already working and just growing them and i was like oh my god this is so much easier what was i doing before and why was i so brain by the movies and the tech crunch and the twitter and like what the vcs thought were cool like i really should've have played my own game a little earlier i guess can you talk to that talk to that can maybe that person or you know how you think about this yeah rick don't you think one of the most common questions we get from our friends is can you tell me more about what you guys are doing because secretly i think i'd like to do that too now the way you guys describe it it certainly sounds easier than starting a company like i i don't know if like anyway the fur whenever somebody comes and says i wanna be an entrepreneur i'm like good god why like you clearly have never done one before because all it does is just cause stress and gray hair and you know you don't see your family and so being an entrepreneur is so hard and i i love it but i fear it so because i think the thing that's most scary by being an entrepreneur is the lack of control on the time you don't know how long the company will take to get from initiation to success and it could take twelve years fifteen years it's not the it's gonna take a hundred hours a week i'm not scared so much of a hundred hours a week i i enjoy even though i'm quite the man of leisure nowadays but i i enjoy the work i don't fear the work i just don't love the inability to control what my next decade will be like and so with private equity you you get a little bit of the not quite sure but the time frames definitely come way down we we don't go into a deal that's gonna take ten years of private the math just doesn't work yeah and and right out there is you know i think most of our friend group for jeff and i are either venture capitalists or operators entrepreneurs right so as we look at you know having a foot and in kinda of both of those where jeff and i have both done over fifty angel investments and you know and i've got thirteen unicorns out of that so it's definitely worked but the reality is you know i also met with a thousand companies to find the fifty that i really liked and then you know some of those worked out but as we look at our friends in venture capital it's so crowded they're all chasing in the same ai deals at inflated valuations and it's such a long process to make any money at as well i mean some of these funds can take ten twelve years before the the partners are making a lot of money once they start stacking funds that's that's great in all but you know when you're fifty you know do you really wanna go start a venture fund that's highly competitive so that didn't make sense and as jeff said starting companies which we've both done five it's just so hard right you've gotta go raise money you got the cold start problem how do you get the flywheel going it's just really hard and then private equity is a little bit of both right where we are like okay we can take kind of the best of we know how to run these companies but we also know how to invest and really try to you know multiply that money so we found this this in between and for us you know we're not looking to go raise as a big private equity fund we really just do sp we find deals that we like that we think that we can add value and and you don't have the long timeline so that that was a good place for us and if somebody's not gonna go by a six hundred million dollar company like grind but like you know there's other kind of midsize ways to play this game right to go get a to go get a win and again unlike a startup you're not playing the product market fit risk game where most of the time you're just building something that there's no market appetite for it doesn't matter how how hard you work or how much you how well that product works if there was no market need for it you lose yeah i think we could segment private equity a little bit for you but but not even like i don't want the kinda industry top down i'm more like if i'm a guy what would i be looking up what would who would i be calling and what kind of deal would i be trying to do what business would you're not trying to buy what would you trying to buy a few ways you can source so one is you use your own network there's lots of businesses out there they're profitable and for whatever reason they the oftentimes the founders or the owners either wanna retire or they wanna finally cash out of their business or they're exhausted or you know the founders wanna break apart a little bit or something so there's that it could be we talk to our venture capital friends and say in your portfolio you must have companies that are successful but not venture businesses anymore they're not gonna go public they're not gonna break out they're growing a ten or twenty percent a year right now all of them have it and some of these brands are like amazing brands and so grinder like a home run because it's a dominant market player you know healthy business profitable etcetera usually these are like it's not such and such it's the second or third player in that space and they have challenges they're having trouble recruiting talent you know at the same level they were earlier this ai thing's gonna be tough so there's some challenges coming into the business but the founders motivated i think he'll work with you or show work with you or the founding team we generally are looking for deals where the founding team wants to stick around or at least part of them when we did ji jab greg left but his cfo became the ceo and he's an amazing operator and so we don't want to have to take over the whole business we're looking to partner with the existing team that's there and then we hope we can with the other thing that's nice about an sp is sean you might know a couple businesses and you might say i kind of get these businesses a little bit i know if some friends that really get them and so with an sp you can partner we sort of put together the perfect mix of players when we did grind our friend sam y he'd had been the chairman of match group right he had been the founder of a dating service that it got bought by match like he's knew the space inside and out he had been ceo so we partnered with sam he really brought us credibility in our and we were raising money from the family offices and he taught us a lot he had a great network we recruited from his network into grind that helped us balance out we weren't just bringing people in that i knew from yahoo and google and other starbucks we were bringing people in from sam's network that had been at tinder and match group and these others and you're you're almost making it sound like a it's like a it's like a big it was like a like a scheme it's like hey guys here's the deal this is happening in front of all of our eyes china has to sell this let's get all of our homie let's throw it a little bit of cash and let's do this thing like no one else wants it let's do it like you make it sound like it was a party we were on a call yesterday to talk about a deal i called them about a deal that it come across my plate and i go don't you think if we put x and y on this deal they're like they know this space so well they'll be able to evaluate the tech and really help us put together an amazing product plan the first three or four key hires are gonna really set the tone for this business if we can acquire and so we benefit from the size of our network from meeting all these entrepreneurs over the years and particular entrepreneurs that have had successful outcomes they have amazing networks they often are waiting for something to do that's like a big fun challenge so we we're always trying to figure out like who's that one operator that we know that needs the chance to become ceo or the be president or who's that person that can give us the unique insight to this industry that can help us connect the dots the other strategy sean is to take small companies and bundle them up together and make them big i think when you're looking for deals though most of the companies you'll find that will come to your plate when you're looking to do pe deals are not profitable or they're not profitable enough to make the economics of private equity really work well and it can be really disappointing the other thing is the entrepreneur has been told over the years my competitor three years ago when that we were all growing at sixty percent a year sold for blank x multiple on growth and i'm like i know private equities we give them our equation for private we can give them a spreadsheet here's how we're gonna price you it's this times this times this they're like i know but the saas business did we're like oh yeah saas businesses are multiples on revenue consumer businesses are multiples on eb and they're like and i'm like i'm not i don't do the math it's just how the math works out and so private equity in general doesn't like consumer because it's often advertising revenue it has other issues that they don't understand so there are these little sort of mistakes or glitches and how private equity works especially in the small and medium sized sometimes all the way up to the big ones that allow us to do deals but even then remember rick said he talked to a thousand companies to invest in fifty so like a one in twenty hit rate i private equity the same you're gonna look initially at twenty something deals then you're gonna look hard at five deals and then i would say the close rate on a private equity deal if it's a good deal and it's worth doing you're gonna close only one in three of them so mh they they are spread the hardest part about private equity without a fund is that unlike being a venture angel investor where you know rick and i could easily do ten investments a year as angel investors we get enough flow we meet enough great teams we can go out and find them and vcs will reach out to us and say can you help us on this deal you know the space can you invest in it and you know advise the ceo so i think those deals come at pretty high quantity on private equity they're smaller you do have a lot more work to find the businesses to sell not always the founding team or the investors don't always know they need to sell or they wanna sell you have to kinda talk them through it so it's a different set of skills it's longer between deals and we say no in private equity the risk has to be really low because you're working on a deal and a when we are a small team and we don't have a full fund you have to make the deal work it has to pay it has to pay at least one or two x so we spend a lot of time on risk reduction which is different than entrepreneurs when we're looking at angel investing or even a little bit later you're always doing the multiple on the one in ten success rate because you're gonna have a larger portfolio and private equity were instead doing all the math we do very little math on what could happen it's mostly what could happen on the bad side and what could go wrong and it feels wrong at first but it feels actually enlighten over time like being a chief risk officer instead of like a chief investment officer really thinking about risk differently and understanding how to mitigate risk it's made me a much better entrepreneur if slightly more cynical today's episode is brought to you by hubspot being a know at all used to be considered a bad thing but in business knowing it all it's everything because right now businesses are only using about twenty percent of their data unless you have hubspot that's where they take data that's buried in emails and call logs and meeting notes they become insights that i help you grow your business because when you know more you grow more you see being don't know it all isn't so bad after all visit hubspot dot com to learn more today where you guys because like when i think of jeff if you talked about being a product guy i of rick like you i think you had maybe a consulting background but you kinda morph into a growth marketing or but but also product a just very traditional silicon valley ceo i don't think that as having the skill set of looking at excel and like running the math and doing the numbers but is it a just not that challenging or did you just have to acquire that skill sam might hasn't come up yet but rick has a b degree so no see background finance my my background early on almost finance so i started my career in corp dev so m and a and corporate finance then went to hp and then that's met james curry sean to your earlier call out of james and we started tickle together on i was cfo there for seven years so a lot of what jeff is talking about really is my background in being able to yeah to to you know look at look at the company assess risks and private equity you can't take zeros in angel invest and you can take a lot of zeros and that's okay i on the other hand i'm like a numb i have to look up the acronyms in private equity which are just basic accounting acronyms all the i have to literally have i was like eb earnings i always forget one of the letters so i'm like the opposite i when i at yahoo and i was in charge of billions of dollars of revenue and profit i still was doing it i was always like what's that one mean again and they're like that's the profit part of my i knew it i knew that part that's fine i got it got then rick's rick's like jeff just put his vest stone and shut up yeah he literally he just he just lied actually rick and i have chats going on usually doing meetings so that he can tell me what a hug acronyms mean or i'll be like that parts bad right he goes yeah you don't want those things sean but earlier to your your question i have a thesis that's kinda of barbell which is in in the private equity deals i think ji jab is interesting and grind is interesting for different reasons on ji jab you know we we talked about we had to come in quickly the company was doing about five million of eb and we bought it for twenty million so four times eb which is a low multiple but you know greg needed to sell it quickly and and and and that's where we came out and we were able to put fifteen million dollars of debt on that so really we only put five million of equity so just those just use kinda round numbers if you had five partners and you each put in a million dollars if you could if you had the ability to put a million in you own twenty percent of the business right and with ji jab it was throwing off so much cash that we paid down the debt in about three years and then we we did a ref refill where we recap the company and and borrowed another fifteen million and then ended up buying out kinda half the investors with that and we've already repaid all of that and now we're just cash flowing the business so my point there is that if you had a you know a a a chunk of money a million dollars you could go and buy one of these companies for you know get twenty percent now with grind you know that same check that we put in to ji jab does not get too much of a six hundred million dollar business but we talked about the carry the carry of twenty percent on you know more than one point five billion of value created is a very big number now with grind it was so big that jeff and i ran it right with ji jab we have someone else running it so you could do multiple of these smaller companies and and just be a board member or more passive and create a portfolio or when you do find the grinder and you're an operator like jeff and i that's when you're like no gotta go all in and run this thing and you could do a blend right you could do like you could centralize business operations and marketing and customer care and those things and buy a bunch of different businesses more like ia right you could do the private equity ia model and we have friends that that's that's their focus they're like i wanna buy these and by the way that can work incredibly well bending spoons out of italy has an amazing business of buying individual apps but then using a common set of back end pieces and engineers right they can reduce the cost by seventy percent eighty percent on a business and grow it because they're really good at the game of how to grow businesses and do subscriptions so let's play game rick let's say i'm your nephew and i call you and i'm like oh rick i wanna get into this business i'm looking at a a bookkeeping business you there's like a commercial brokerage business and then there's ai i gotta think about like is that gonna wipe out a business or is there a business i can go in and bring ai that's gonna make it way better that seems like something i should think about what should i do uncle rick give me i i get like generally what i'm supposed to do but give me a place to look what's a rock i should go look under what's a type of business that you think is a good one to go look at right now at answer in two different ways the areas that i'm most interested in right now would be ai and crypto but i don't know if my nephew has any real you know expertise or any kind of moat around you know the ability to to go in and do something in either of those categories right let's assume the nephew can buy bitcoin and can use ai he's just not gonna build anything in crypto or build the new ai thing right so then those are probably not the categories that i would steer him into because you really have to know your stuff or you are just not you're not gonna build compete so then it would probably be let's go find an existing business with stable cash flow that has we love recurring revenue even you know consumer recurring revenue subscription based revenue is great let's go find something that's stable where you know the the owner is ready to to exit and and be able to put some debt on that business and if you can do that if you can add debt to the business you get in at a at a reasonable entry multiple and have some thesis some way that you are confident you're gonna be able to cut let's say double revenue in the next you know three four five years and then you're gonna get out at a higher multiple i can do the math and show you why that's a five to ten x the debt the reasonable multiple the increase in eb and the higher multiple on the way out is a five to ten x that's that'd that's my advice and how conservative are you when you're thinking of the upside so for example you're saying so like the big if there's two big ips here there's buying buying it at a low price which is one problem and then there's a second problem of you just said can i grow user base or revenue that's that's very challenging yeah so the two things there would be one to ensure the cash flow is stable that you're gonna be able to repay the debt right or else you lose a whole business and and and that's a disaster and the second is that if you don't have a solid thesis on how you're going to increase revenue you shouldn't be in that company right jeff and i looking at grind we we knew what we would need to do to double revenue and in two and a half years we took grind from a hundred million of revenue to two hundred million of revenue when we took it public and what was your thesis for doubling well i mean some of it in jeff's jumping here but some of it was really just upgrading from where the company was at the time again the talent was terrible that the the the tech was decaying and they hadn't launched any new products in a long time so we knew if we could clean up those three areas and then apply the tinder playbook which matt which you know match had done great with tinder and grind had not applied any of that we're like if we just do these things alone we should be up fifty percent if we do them really well a hundred percent yeah we went through i mean it got we went down to a low level we went to individual screens and said they're not even using the right buy buttons here like there it's just patterns we know that weren't you know you can do these conversions you know you can reduce on install rates by ten percent you know you can increase your seo by blank they didn't have a web version of for grind we knew that would be important they didn't use boost the equivalent boost feature on tinder we knew that feature would be we knew they were under pricing in certain markets and over pricing in certain markets they weren't doing anything on pricing strategy at all they just kind of uniformly used pricing everywhere so that playbook allowed us to put together sort of probably a three x in revenue and all we needed was oh you know we needed to double revenue in that time frame and so same way you would do with risk reduction we put together things saying that's good for ten percent that's good for forty percent that's good for whatever and when we were done with that whole list we had high confidence that we could grow the business our first year was really hard because a lot more disruption happened in the business than we thought and we had covid hit which dropped the business by thirty percent overnight and then it recovered but we still hit our numbers roughly we came in almost with it because we came in almost within a million dollars on every quarter that we wanted to hit off that piece and by the way that included like getting rid of advertising the product they've reintroduced it since but like we knew users hated to the advertising and it was causing prompts we don't wanna get rid of advertising in the product most of it and so we were trying to cut revenue in certain areas grow revenue in other areas increase retention increase pricing on certain customers like some customers were price insensitive and they were just getting too much value out of the product this is for the folks out there who have a business that does at least three million dollars a year in revenue because around this point that's when you're able to look up after being heads down for years building your company and you realize two things one you've done something great but you're still a long way from your final destination and two you look around and you realize i am all alone i've out run my peers which means you're now making ten million dollar decisions alone by yourself and that is when mediocrity can creep in my company hampton we solve this problem by getting a room of vetted peers of other entrepreneurs who are gonna hold you accountable call you out on your nonsense and help show you the way because the fact is is that there's only a tiny number of people in your town who know what you're going through and who have been there and they're hard to find the biggest risk is not failing you have a company and it's working you're gonna be fine but the biggest risk is waking up ten years from now and saying shit i barely grew in business and in life and for people like you who are ambitious wasted potential and regret is what we want to help you to avoid we have made so many of these groups and we have a thousand plus members and i know this stuff actually works it can change your life the change mind and i know it will change yours so check it out join hampton dot com in the doc you guys sent over before the episode you talked about like the opportunity in health that you see kind of like certain health trends or where where you know as an entrepreneur you know your spidey sense would start tingling what you know can you describe what what you're seeing and what you think about this i think rick for for me what those areas of disruption coming from crypto ai that's really our investment thesis on venture almost like so it for private equity those represent high disruption points which can transform a space they can disrupt a space they can take you know big players and make them weak players and vice versa so there are plays in private equity for these but there's a lot of unknown in those that make private equity more dangerous for the next couple years because businesses that have been very stable for a very long time have become potentially unstable from disruption on the investment side that's the perfect time to invest right even though people are saying there's bubble right now if you just take a macro level of the next decade will there be more disruption more wealth generated over the next decade regardless of like if individual prices for companies are over valued in the short term of the long run it's kinda like was amazon overpriced in two thousand sure but was it overpriced by the next twenty years now it was under priced by the next twenty years so as an investor ai does some things really well and it does things well when there's a lot of documentation and there's a lot of documentation in legal engineering and in medical and so those spaces are high value tons of money being spent in those spaces and there's high need the consumers desperately need better results from medical they desperately really need better results you know on engineering engineering costs are incredibly high for building high quality software and safe software that can't be hacked and all those other things and so as you look at these areas that's why i think those areas are right for disruption it's not like an unknown thing if you talk to the major vcs they'll tell you like yeah these are the areas we see entertainment as well is one i think the downside of entertainment is there's sort of an insider and a protection of ip and a legality to the entertainment industry that's always made it a little bit delayed on adopting or seeing disruption we see it in the long run we tend not to see it as quickly like that's why naps it didn't work and you know what spotify came in for later really have been done already but just didn't happen because of some of the pieces for so i do like those spaces i think as we were talking earlier about private equity it's what makes me a little nervous if i'm looking at deals i'm like there was other disruption on the consumer side which was when facebook lost its ability to see data because apple changed its rules in ios fourteen that broke so many small businesses it literally just broke businesses they could acquire customers before and they could no longer acquire customers and so what was seen is like this it's bad for you know we're we're we're gonna fight back against facebook it really was an action that apple took that hurts so many small and medium sized businesses so on the consumer side that reap the repercussions of the inability to acquire customers that are sort of reasonable price has destroyed so many businesses and it's made private equity sort of interesting in the space now because where do you get consumer where can you acquire customers when consumer when acquiring customers through advertising on on google and facebook and meta platforms it's just so wildly expensive this and what about this agency ai thing i've been working with a number of entrepreneurs we were trying to figure out how to do some businesses that involved ai and i just kept saying but how does this work if we can't talk to the old internet like if we can't talk to tripadvisor and we can't talk to ticket master and we can't talk to n nba dot com but like if we can't do any of these things how exactly does the world transform where i have an agent that helps me plan my weekend or my trip to new york city and all these things and so there were all these companies starting that we're building agents inside websites where you would and i don't like this theory that there'll be a a million l out there every time i go to website i have talk to an agent and it's just sort of replacing clicking on buttons with talking to an agent i assume that the world will instead end up with a smaller number of agents that act on behalf of consumers going out and doing work that changes fundamentally the internet it just means that if you have a website today that sells tickets or bicycles or whatever it is it won't be so much the customers type in specialized dot com or t dot com or whatever the bicycle company is and then go there and do it that traditional way they'll talk to an agent they'll hey i need a bike i want a mountain bike i'm doing all these things that i want you do an evaluation of these things and it says okay i pick these four bikes and you say that one looks good can i get a good deal on it says great i'll go do it there is no way for the world to do that connecting right now where it's like take the old world of commerce and connect it with this new world of agents and so you need a layer in there they are building things like mariner and operator from open and google that are attempting to surf the web on behalf of consumers and click buttons it is not efficient and mariner and operator the first ones tell you it's not efficient so what agency is is ai g e n c y that ai it's just the glue between the two so what happens is is when like an open ai agent comes to a website like a travel website or a luggage website right now it will surf every page looking for the request of the consumer it can take like ten minutes with ours we just redirect the traffic to an interim agent that doesn't intend to ever talk to consumer it's not an agent that's gonna you know make you feel good about yourself it just talks to an agent that talks to other agents so agents is how can we retroactively build take the web two point o world in the commerce world and allow it to talk to this new ai enabled world and so i had learned a while ago that typically a lot of the ideas i have for startups required a step that i assumed would be there but i didn't know who was gonna do it and this time i wanted to be one of the guys that worked on the interim steps because i think those create incredible value we see it over and over again it's like the guys that are doing data centers and the guys that are doing the layers of sort of strapping on top of these l m's rep you guys talked to the founder of rep for the ai coding you know it's really sitting on top of l engines and so a lot of the values being created in this middle wear stage that's necessary to sort of put these two pieces together and so that's what agency is it's an attempt to take these old businesses that could experience incredible disruption and help them understand what's happening with the ai world and just transform their current business they everyone's not gonna be able to hire ai engineers just not possible right you're you're not gonna you're not gonna be able to do it there's just so few and so you need this system to sort of my glues the two together so that's that's the you someone was sean and i had tim ferris on the other day and we were talking about through that in prep yeah i was watching through it yeah dude the top comment was like oh three still looking belly rich guys just discovered hobbies like they were making fun of us for like talking about some something so obvious and it's sort of funny because you guys are web one point o like og jeez like rick branch out when i was just getting going and that was like that was like the north star of like this guy got thirty five million users in like a year and you were in my mind we're kind of the poster child for like raise a lot of money go big and buy lottery ticket and hopefully it pays off but now what you're doing now does it seem like a lottery ticket at all it seems like you've like reduced risk as much as possible if you were twenty five now rick do you think that you would gone the bootstrapping running a cash flow business or do you think are you happy with the results of what you did with kind of buy buying lottery tickets i don't think that jeff and i would have been necessarily good at pe at twenty five i think grind worked because we could apply twenty five years of experience to it so i don't i don't think yeah i i i think the the right call was get that experience at twenty five i think that's when james and i found at tickle i think i was about twenty five and and you know get all that experience build that network and you know seen the movie a thousand times and know how it ends and then apply all of that to the bigger opportunity so yeah i wasn't ready back man at twenty five yeah and i think that the the risk i think it's great to go big like but i do think that there's a reason that entrepreneurs in their twenty we say freshmen and seniors make all the money in in the venture business like on the entrepreneur our business so you either don't know the rules so you go into your business and you break a bunch rules without knowing or you know all the rules and you build a business that sort of takes advantage of the the weakness of a market because of the rules and it's the sophomores and junior who kind of messed stuff up and typically as an investor i see this as like oh they're a director or senior director coming out of meta or google they have incredible experience and now they're ready to do a start startup up these typically have made not great entrepreneurs but entrepreneurs that drop out of college or you know some of the group that why comb sort of focuses on that are really scrappy we see a lot of amazing disruption there and then people that have spent twenty years in the industry they may the risk for that startup may look not as high but the outcomes can be incredible right like salesforce dot com i mean that's an incredible but that's industry experts trying to figure out like wow this trend of moving online to the cloud with apps from oracle sort of on prem it's a kind of a boring felt revolution i guess at the time but i mean it was sort of obvious and but still incredible amount of value was created so i think value gets created at both ends and it's true we're worse experienced so we tend to be more seniors and so the kinds of things we do they look lower risk and it's more sort of wiring together pieces of the world that need to be wired together but it it can create a tremendous amount of value there's still a huge amount of disruption in there when i was young doing my very first startup up in online storage people you just tell me no one will store anything online i just remember thinking like before the word cloud was invented the word side load we invented that during the thing like we just didn't have the vocabulary to talk about storing stuff in the cloud but so i love the disruption on both sides as an angel i'm sort of i like to find the guys in there the you know the the men and women in their twenties that are finding big disruptive ideas and i would love to invest in those but also my network gives me access to incredibly experienced entrepreneurs that know the this market just needs this piece to disrupt it and i can put that piece in place well one of the other fun things about being in the game for so long is that you you've probably met a lot of the main characters today back at their superhero origin story so like i don't know but but like you know elon or you know you guys were pre yc so like you know paul graham sam whoever the players who have gone on to do like really interesting things suck early on you know what were can you are there any cool stories like well you what who are these what mean like i did my first deal with travis from uber i did my first deal with travis when i had id drive he started a company called scour he was out of ucla with five guys so jason dr in travis they did scour i did id drive i had the largest collection of mp threes in the world on my file system they had the largest video and music search engine built ever we put the two together it was unbelievable it was the most incredible thing travis was an incredibly difficult guy to do business with back then and you know cutting and strong and through elbows his team was really talented and their tech was awesome and so yeah i got to know travis when he was twenty four or twenty five and did he have me a factor then listen i i've met so many of these guys that you and i know now to be billionaires you know when they were very very young z was started in the same dorm room of dropbox with drew so my founders of z that i did and sold yahoo that was started with drew they both were why comb class i think two and three and so and jack do i knew him when it was audio and spent time with them and twitter was failing and we i was to buy for nineteen million dollars at yahoo like so we've met all these people they are roughly the same people some of them have become personas and characters that are sort of surreal but then when you spend time with them they're they're the same you know but when i read about them online i'm like oh that's they i i sometimes spire i'm like if i become a bill i always told my kids if i become a billionaire make sure i am incredibly interesting because the role of billionaires in the nineteen twenties was to entertain society through eccentric contributions and naming universities after themselves and doing this but not for destroying the government and doing all these other things so you know there's you're supposed to entertain and keep people happy and add social good by building things that will survive generations whether it's universities or parks or you know things like that but so yeah i i i admire my friends that have had the success but i'll tell you the difference between my my most intelligent or most talented friends are not my richest friends and the correlation between success and talent is not nearly the overlap you would think we rewrite the story the origin stories of so many of these companies i talked with brian when he was getting airbnb starts it's one of the vcs called and said i'm trying to invest in the start all the airbnb i spoke with brian and we talked through like what he would look for in his first investor and why i like this investor and hearing from him he's like interesting guy and he had interesting things to say and i loved airbnb i was of the very first airbnb hosts but i didn't hang up the phone go holy shit that guy has it no i hung up and say guys a little bit hard to talk to on the phone like i didn't nothing again i just but i loved airbnb as a business but i didn't think that is the guy but i hear vcs talk about this all the time they're like when i met with this entrepreneur i knew and i'm like jack do is incredibly thoughtful but not incredibly well liked when he was young not by his c cofounder not by his investors but he turned out to be an incredible entrepreneur you know to do square and to do like it's incredible an incredible entrepreneur but was not i didn't walk away from my meetings with eve and jack and biz those guys and say jack's the guy and christ was like jack's curious fella smart and fun to talk to but curious and like i do accept what paul graham says which is and i think others have said this people who accomplish things in startups historically have a trail of accomplishments so they were amongst the best at things they did now the things they had a chance to do along the way might have been eliminates dan but you'll see this thing like people will point for me i sold raffle tickets for my school for something we were raising money for i didn't beat the other kids at the school and selling raffle tickets by like seven percent i beat them by seven hundred like i destroyed every record ever done in selling raffle tickets for my school i remember when the principal goes in seven hundred and seventy seven dollars of sale you know the person that had me was like sixty four real sales of tickets and i sold like seven hundred and something and they're just like i i don't know and so you tend to see this record of accomplishment in all the things they did now some of the things they may have done early on in life they just they might have come out of a small town that they didn't have opportunities to do big things so the best example of this i would say is like if you read paul wrote a blog post on or wrote essay on is a thing a long time ago about like you know the five founders who kind of stood out to him and it was like you know whatever it was like larry and sergei bill gates it was like the people who had already done it and he's like number five sam alt and it's like this guy who had done lube i think sold for like forty million bucks or something like nowhere near the accomplishments of bill gates larry sergei and he says like you know i remember when we first met him i thought to my myself i realized like oh this is what it would have been like to meet bill gates at eighteen and he just he called it this is like ten years before samuel became household name and so it's very interesting to me when people you know sort of have it what is it i think as an investor you wanna be able to recognize it as often as you can i think that's a very profitable skill as an investor i think as an entrepreneur you can actually you can actually develop it you can start to steal you you know pieces of other people's games you know if you notice that somebody's really good at doing something or you notice oh i thought i was good at this now i know that there's actually more room to grow there great i'm gonna yeah keep working at that it's sort of reset the there probably is some i think paul is sort of unique in his ability to sort of put really complex ideas into simple ideas and turn those into so i think that's why comment such incredible success in identifying the right founders in its first three or four classes that was really incredible they're now like doing six or seven hundred companies per class and so that they'll probably through the numbers say that they're identifying these things but it's had not been quite the persistent system that they were in those first like four ten when they were doing boston and the valley they were going back and forth and jessica were going back and forth between boston and the valley that was probably the best hit rate like ron conway hit rate for esp angel in in one was unbelievable he'd like a multiple hundred x on esp angel one two's been good a minute it's good fun then three is good and four but esp one was incredible so lots of people who say they have these incredible skills for identifying talent i think in general it's like historical thing we rewrite but i you do meet some entrepreneurs who are competitive or ambitious in a way that being a soc path and being a good entrepreneur it's like the circle comes very close to touching and i realized somewhere along line i love doing startups but i just don't have the soc path jean in me i would say there's a level of success amongst entrepreneurs that it may require a level of sort of drive or or competitiveness that may be is so far out on the on the unique but when i hear about y'all success i mean that's that's like something i i i mean i aspire to achieve what you you've achieved and you don't seem you seem pretty genuine i've i've known rick i've i've i've known of you for many years and i like you seem like a you seem like a pretty stay like if our first startups had been wildly more successful had my head id drive had i found somebody offered me two hundred and seventy five million dollars for eye drive when i was in two thousand and i was like raising at four hundred million you know it would have changed my you know i would be a different person i would be the most annoying person you've ever dealt with today because i would have built wealth early my career my first sample would have been my first startup was a huge success and i would have told myself there was something i was told by a very smart vc that i worked with and he said the smartest people in the valley are probably right thirty percent of the time and the normal smart people in the valley are right about ten percent of the time the sample size for the thirty percent right is that they're right so much more than the smart people around them that they're basically one hundred percent right they're run thought seventy percent of the time but their sample in their own brain is i'm right a hundred percent of the time relative to my friends because they we all sort of discount our failures enough that we see only you know the small selection of failure and successes so i think that's the problem with this concept which is smart people are probably still write ten percent of the time with their ideas and their work and their effort if luck corresponds with that talent that and you get enough shots at it you know like rick i think if you wanna be an entrepreneur be successful do it commit yourself to twenty years do you know be an entrepreneur for twenty years do four or five startups because the amount of luck that has to overlap from external and internal things that have to cross over to have that success when it happens on their first startup we typically as scribe that to genius we say like that's genius and so probably half of those are true half of those like the people are really uniquely talented the other half just the luck they had for when the wheels stopped and when they got their number was on their very first one and that success multiplied many times because raising money was easier and access to talent became easier the number of things you learn in the process of building a big company or you know you learn a ton and so you're getting your learnings earlier so there is just something to had the dot com burst happened three months later i would have sold my company for hundreds of millions of dollars and things would have been different and maybe i would have had more success today in terms of what people but i've had great success i'm super happy i love what i do i get a chance to work on hard problems but i think about this a lot you guys actually have the career that i i don't think i don't i don't see myself having this but the way that you describe it i'm like that sounds amazing which is you sort of have projects i think sean is i think tends to do this quite well where he finds a project and he gets in and it ends up being quite successful you guys have done that where it's like it's like every three or five years it seems like you have like a new thing if you look at your linkedin it's like there it's like a chapter very clearly chapters whereas what i tend to like is like multi decades on the same thing which the way that you're describing your life now like that sounds pretty amazing that sounds pretty fun do is there can you speak to that of like of like the because you you also said you're like what you're like pe doesn't work for ten years and i'm like oh that's it ted like even more for ten years and it works for only four years that's it that sounds amazing no i i think there's an evolution so that's probably why it looks like on a resume it's every three to five years what i've tried to do is find people that i really respect and sean to your you know earlier question about you know finding those people early you know i can give you three examples one would be james courier who you know was my classmates made at h hp we grew up four miles from each other new hampshire never knew each other until business school but he was someone that stood out as one of the brightest guys among all the students there which is a high bar right so and in you know james is one of my best friends jeff one of my obviously closest friends as well jeff you know brilliant product mind and and another guy naval ra and and you know neville was someone that i met twenty years ago and i give him a lot of credit he was a guy that got me into angel investing gave me a lot of good advice around that fifteen plus years ago got me into crypto eleven years ago and he was somewhere i just saw as just a really really big brain and all three of those guys i just i love hanging out with they're all good people and i've done things in my career with all three that i've been really meaningful right so for me the you know and and then i need to add value right so with jeff and james in particular both high level big vision guys and need an operator to make sure the execution gets done and that's where i've been able to add my value to you know to find these guys that i i wanna spend my time with that i have a ton of respect for and i think that that's a good life philosophy right so the five people you hang out with the most you tend to like you know take on their thinking their manner so you know the things that they say so really you know think hard about who do i wanna spend my time with and for me i've been blessed to find you know several people like jeff and james in particular to run companies with and be blessed that i bring what was pre guru naval like like you know when he was like guru in the making it it is funny now to see how he's blown up and it it's actually funny i'll go back to naval but there's a woman mel robbins who now is a huge podcast yeah he worked for us she was our head of marketing at no way really james and i found a tickle in this crappy basement level office in cambridge mass she was our head of marketing and my wife was listening to her podcast the other day and i recognized the voice i was like is at mel robbins she's like yeah she's huge i'm like mel was her like director of marketing in nineteen ninety nine i had no idea that she blew up so it's awesome to see that success for her would you predict do that no no i mean she had a big personality and everything but who would i mean i mean that she's gotten so big no but she she's she's awesome she's amazing we had crazy team early days at trickle but neville neville has i mean neville was always really cerebral roll incredibly smart one the smartest guys is silicon in valley and that's a very high bar but he's definitely gone more of the guru thing and i still seen neville all the time and you know have a ton of respect for him and he's definitely gone more of the philosophy and and and and really you know really become this google it's awesome to see but he was someone that early days inspired me for those two areas angel investigation and crypto that continue to be you know a important part of my career what was light bulb moment for you with crypto and then i guess like did anything change over time yeah with crypto i remember early days bitcoin you know was trading under a thousand dollars and i said to naval evolve so how big does this get and he said i said what's the price of bitcoin he said a million and i said a million it's only at like you know eight hundred and i said when and he said before we die and i was like i said before we die he's like i don't know when but it will be a million dollars before we die and i should have bought more i bought some should have bought more so i i love the way he can look out decades and be right k that's awesome to give you a why did you tell you what what the thesis that did it click for right away because i remember the it took me like seven smart people telling me about bitcoin before my dumbass could figure out like alright this maybe is worth doing and really even then it's not even because i actually understood what they were saying i was just okay that's too many smart people saying that this is a thing for me to to just not participate and and by the way it's happening right now if a million is true that that means that it is still true that we are foolish for not being you know all in or whatever it did yeah but you know at some point i started to like get a like wrap my head around like oh okay i understand why this makes sense now like my friend literally sent me a pdf he had written like a five page thing where he was like if warren buffett if i use warren buffett own investment like framework to look at bitcoin here's the case and i read that and that the day it clicked for me yeah no i think neville saw that early i think he saw the disruption and being able to move money very much what gable coins are doing now but he saw that early days in bitcoin as both a store of value and a transfer of value and i think he was probably also looking at you know non inflationary right you've got a fixed supply and and the ability for anyone to be able to buy bitcoin no matter where you are in the world so i think there were a lot of things that he saw early days before before were were were you part of james crew of one currency to rule them all when when james was brainstorming this james yeah we talked about it a lot obviously it never went anywhere but yeah yeah i was part of those discussions you know any of these things are just so hard to get off the ground in bitcoin is that one incredibly unique technical challenge that was solved and and change the world right sean i wrote this i wrote this presentation for yahoo in two thousand six and it was about what i called the emotional adoption curve and how angry customers was the biggest predictor of disruption for these embedded spaces and that instead people tend entrepreneurs tend to focus on making customers like delight customers and making customers happy and i said we really should focus more on pain and frustration and anger that it's the negative emotions that drive behavior changes not the positive emotions and so at the end i said if this is true what are the industry's most likely to be disrupted the internet is a form of democrat that gives consumers power to overthrow the chains that hold them back and make them upset and i literally said finance and money it's a weird thing it's like controlled it's it's it's opaque they can't understand it they don't understand what's going on the next one was health care especially in the us like just disruption has to happen here the customer is getting such a raw deal it's so bad for the consumer they're so angry and it has so much power over them this disruption has come entertainment i was like just to confusing consumers they have to pay these cable bills and didn't don't understand like this is just gonna drive them crazy this was before voice over ip taken over so i'd written about tele was like one was coming finance i included like credit cards and all the other things whom did you want the walk when when big bitcoin when you first heard about bitcoin no yes and no and i have a good story on how i screwed up on the bitcoin one but the last one by the way was the government is that the customers have anxiety and they have frustration with government and government services and things like that and i'm not a libertarian but i can see still that there's an and anxiety and frustration and so social networks adds sort of gas to that fire no it's not always good just because the consumers angry doesn't mean that we end up with like a delightful solution at the end it can be a a a worse solution but the abuse of control at the top and typically mono monopoly or oli type businesses or industries causes angry customers and those are the most ripe for disruption they're often hard to disrupt but the power of the internet was and what james recognized many people with currency was what the internet is done for a in the most easy to disrupt industries will eventually happen when you network voices together and they can multiply that will eventually lead to disruption in these bigger harder to crack spaces and so we're seeing now the internet's been around now for twenty five years and all the manifestations of it and all those things that come together it's slowly ticking away and sort of disrupting these industries that we thought couldn't be disrupted and currencies and governments are closely tied together but no i obviously didn't totally see it because i bought crypto over the years but i always buy things i can't afford to inspire myself to work harder and i bought a porsche at one point that i couldn't afford and i went to sell it and the guy office was like two thousand and eight or something he offered me bitcoin at like i don't know well under a thousand bucks it was like i don't even know hundred bucks for or something he's offering me bid because he's like i just pay in bitcoin i was like nah he should pay me in cash i gotta pay the bills still but you know how had i taken the bitcoin for that it i was like the three hundred and seventy two million dollar porsche i did the math at one point of what that porsche would be worth today if i had just taken the the bitcoin in it so did you guys are awesome it's it's fun talk you because you're i think you're like one one one generation above us but a lot of like attributes that we both admire which is you've been in the game for you've been very very consistent but you also seem to be having a lot of fun you've done like some serious stuff but you've taken it almost at a weird light hearted way that i appreciate like you like it seems like fun is a part of the conversation and and i really respect to how of that you gotta you gotta find the right people to do this with because it's hard right whether it's pe venture or starting a company find people that you respect and that you really wanna spend those hours with jeff is clearly one of those people for me jeff keeps me laughing all day he's hilarious but also you know as you've heard today incredibly insightful and so good at what he does so go find you know go find your partner if you're gonna do this stuff because it's hard that's awesome we'll we appreciate you guys so much yeah thanks for coming on guys yeah thank you that's it i feel like i could rule where i know i could be what i want to from at all in it like a days off on a road less travel never looked this episode is brought you by hubspot media they have a cool new podcast that's for ai called the next wave it's by matt wolf and nathan lands and they're basically talking about all the do tools that are coming out how the landscape is changing what's going on with ai tech so if you wanna be up to date on ai tech it's a cool podcast you could check out listen to the next wave wherever you get your podcast