Arena Show Part I: Idea Dinner + YC Continuity

Transcript from https://podmenti.com/t/e4ca8ad4dbf99ffc

Woo boo. Holy crap.
Wow.
Oh.
Hello, acquired listeners.
Ha ha ha.

You didn't tell me you were gonna say that. That's good.
I got up here and I was overcome with emotion and none of this is scripted.
Thank you so much for coming tonight. I I um
I like
prepared things and I should read them off my iPad here.
Uh but the only thought that can occur to me right now is how different this is than what you and I normally do.
Uh David and I are very used to being on Zoom.
talking to each other through the internet, there are zero people uh watching live, and if we say something wrong, we delete it.
And that's not happening tonight.
Yeah.
More important than that is
You know we we get evidence.
that people listen in the form of analytics or tweets or uh
A anecdotes here and there of someone saying, Oh, I listened to the show.
But there's no human visceral way to feel that. Like we literally just refresh an analytics dashboard and a number goes up. And this is
So cool to see you.
Real.

Well, as fun as it is going to be to like watch the show and we've got some great stuff planned.
I think it will be much cooler to meet each other. For as many uh they call it parasocial relationships, where you hear us talk, but we don't get to meet you. We're gonna try and meet as many of you as possible. We want y a a lot of you to meet as many other people as possible, because you have an easy opener. Like what's your favorite episode?
How did you hear about acquired like
Uh my buddy dragged me here tonight and I never heard of it before this. Uh but everyone's got some answer to that question. So meet each other, take selfies, enjoy the time together, we have freaking climate pledge arena, uh and and enjoy the time in it.
Thank you to Pitchbook. Holy crap. John's not kidding.
Pitchbooks is uh Pitchbook is Seattle's like monster
amazing business hiding in plain sight. And it's been really cool to get to know their team more and more and more uh and understand the business and uh just learn
How
on four million dollars they've been able to build this multi hundred million dollar business. It's inspiring to us. Uh so thank you to John, thank you to Kai, uh thank you to Lauren and Val.
Thank you to Nas. Uh everyone we work at with at PitchBook is is just awesome. So thank you to them.
And
Happy Star Wars Day, Ben. Happy Star Wars Day. May the fourth be with you all.
Uh I hear
You see?

Yes, Paul McCartney is here tonight. We have a great show for you.
That was last night. That was last night. We do have a great show, though. Uh tonight we have Jim Weber, the CEO of Brooks Running, another Seattle monster business that we're very excited to talk to you about. We have Anu Hariharan tonight from Y Combinator, the infamous
Packie McCormick from Not Boring, Mario Gabriele from The Generalist, two of the internet's finest publications. So very excited to chop it up with them.
Uh
We learned from Arena Shows past
Live shows, Pat.
very small live shows passed. That uh
Our normal format of telling a three plus hour story of a business doesn't work very well in this sort of uh

You know, you could feel the audience getting antsy in in in those long stories. So we got three just like fast paced great stories, great segments for you tonight. Um
Being and out in a couple hours.
I don't know. We'll we'll enjoy it along the way, but it's gonna feel fast relative to your normal acquired episode.

Speaking of
Should we start our normal equipment?
We gotta do it.
The way that uh
I don't know. It feels like we have a way that we start acquired episodes, so we should do that. We should do that.
Who got the truth?
Is it you, is it you, is it you Who we got
No
Is it you, is it you, is it you?
Down.

Another story on the
Welcome to season 10, episode 7, the Arena Show, presented by PitchBook of Acquired.
The podcast
Mm.

About great technology companies and the stories and playbooks behind them. I'm Ben Gilbert and I am the co-founder and managing director of Seattle based Woo.
Pioneer Square Labs and our venture fund PSL Ventures.
And I'm David Rosenthal.
And most days.
I'm an angel investor based in San Francisco.
But today I'm an angel investor based in Seattle.
And we are your hosts.
All right.
Listeners.
Now is a great time to talk about a new partner of ours here on Acquired, Lagora.
The agentic operating system that is redefining how the world's best legal teams work.
Yep. It's sort of obvious that AI is gonna completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Lagora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?
So the founders did exactly what great founders do.
operate with obsessive customer focus.
They embedded inside a massive law firm for months.
They sat with the lawyers just watching how the work really gets done.
And that's how you get features that customers love, like tabular review where you
Drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legor's bed here is interesting, since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.
And they recently launched Lagora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.
And Lagora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Ligora numbers essentially
speak for themselves. When they have a head to head pilot with their top competitor, they win 70% of the time. Legora now has over a hundred thousand lawyers on the platform from twelve hundred legal teams in fifty countries.
And crazily, they went from one million

In about
Eighteen months.

truly insane numbers. And that is the real test.
Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client.
If your legal team wants to check it out, whether you're a law firm or you're in house at a company,
You can learn more at Lagora.com slash acquired
And just tell'em that Ben and David sent you.
David.
What do we have in Act One?
Well.
For act one tonight.
We start.
Back.
In February
Twenty twenty one.
When we were all boarded home.
Clubhouse was a thing.
GameStop.
Was going to the moon. And we decided to call up.

Internet friends.
Packing McCormick.
And Mario Gabrielli.
And uh
Pick some stocks.
Like everyone was doing. Like everyone was doing. This is not investment advice. Do your own research.
Uh and tonight
We're gonna recreate that magic live here.
In person.
Ladies and gentlemen, please welcome all the way from New York Packie McCormick and Mario Gabrielli.
Mm.
Whoa.
Oh my god.
Oh god.
Uh look how dirty my sneakers are too. This is perfect. This is a weird start.
Uh just change shoes from the beginning. Let's do it. Yeah, so the only rule is
You will lose the idea dinner unless you are wearing uh Did you ask us for a shoe sign? I don't even remember that.
This is actually the second most embarrassing thing to the pick that I'm about to make. Well we needed to
Delay a little bit because
We have one more thing.
Well special surprise. We wanted to raise the stakes.
Tonight.
So we brought in a judge.
Who is going to be a good thing.
To grade each of our picks acquired style.
And declare.
A winner and a loser.
At the end of the night. And a loser. This is very hard.
Please welcome.
From the capital of Silicon Valley
Miami, Florida. Great longtime friend of the show and former Softbank Latin America managing director, Shu Nuyata.
Who
Alright, so
Live into the idea dinner. Um
I'm happy to report.
when we were deciding the order that we were gonna go in. Uh I came up with the criteria which was who's picks
historically have performed the best.
That would be my way that you chose to select whose
Picks have performed the best, yours perform the best. Yes.
Not private picks, not blended, just public picks. Yes.
Okay. So I'm gonna back cleanup and
Mr Mario Gabriele is gonna lead us off. Uh before you talk.
Yeah. Well, I don't agree with the subject so far, but uh
Before you tell us your pick, um
For all two people that don't know about the generalist.
Tell us about The Generalist. Oh, wonderful. Thank you so much. The Generalist is a publication that covers tech, crypto, and venture capital. I aspire to the level of depth of these two gentlemen and uh always enjoy collaborating with them.
We cannot write the way that you write. So there's no like aspiration but so for people who haven't read The Generalist, it is
Uh deep writing about technology companies in the most whimsical style I can possibly imagine. Like Mario is a nov novelist at heart who covers tech companies. And it's very fun to read.
Now before we grill you on your pick, uh a little like rules of the game here.
We're all coming with our best investment idea starting today. What is today? May 4th. So the idea is to espouse something that you think would be a profitable investment, not investment advice.
Starting today, going forward on a time frame that you choose to specify, and then Shu ultimately will be the judge, because we don't have the benefit of all that time to know how they'll actually play out.
The godlike powers. So,
So Mario
Lead us off.
Well, since Shu is really my audience, I think I'll just um.
Take note.
All right, gentlemen.
My pick?
It's Snowflake.
Ooh.
Thank you.
Yeah.
So for those who perhaps are less familiar.
What is Snowflake? Snowflake is a managed data warehouse, and their sort of initial genius was that they separated storage and compute, made it super easy to take in all of this data that a company is managing.
and to run queries against it super fast. So you can get the insights and information from it.
That initial idea was
quite brilliant and you know has formed the company into the sophisticated, elegant uh product that it is today.
That made it, you know, something of a pandemic.
Darling, if we recall. It was, you know, one of the
craziest sort of IPO day pops that I think any of us have have seen in a long time.
And the stock traded as high as uh
Think four oh three a share.
Today it's about 183, 185.
Uh so it has taken quite a hammering.
Multiple compression, as they say. Indeed. Uh in especially this first quarter, it really got like I think a 45% drawdown.
But when you look under the hood at what
you know, the company has been doing. Certainly some of you know the multiple compression is merited, but
The growth on revenue, the net retention.
The free cash flow.
All of those things have moved in a stellar direction. So revenue's up about a hundred and five percent.
Um
net retention is 178. It was 168 the year before. Which that I think is like a record for a public company net retention. Trevor Burrus It may well be. It's pretty wild. And yeah, they are generating eighty plus million in free cash flow.
Uh and you know the business in Q four of last year.
actually got contract value of one point four million coming in, which is all of the revenue they had the the year prior.
So
I would submit to you that this is submit to Shu. I would submit to Shu, Judge Shu. Don't forget. That this is a business that has the potential to compound for many years, I think over a three plus year time horizon.
Uh it can do extremely well.
Um
It is a play.
That summarizes the growth of data in the technology industry, which feels like a safe bet. And it's run by one of the biggest ballers in the executive world, Frank Sloopman, who has done this now at least two and a half times, depending on how you parse it.
Um who is sort of the quintessential
uh sustainable growth CEO. He is someone who knows how to manage
In difficult circumstances, he's compared himself to General Patton.
Uh and this is a time for a patent like figure, I would submit. And so my biggest snowflake. Uh i it doesn't come without risks, but uh
Those are risks I'm willing to take.
Oof.

I think your first pick was a spac.
Bridge town's fast. Can we put a moratorium on on bringing up people's old pics. Like nobody's portfolio looks good right now. Except yours. Sorry, David's less negative than everyone.
Yeah.
Uh
Any any thoughts from the Peanut Gallery on Snowflake?
I mean
You have every sector tailwind in the world and the question is gonna be like so of course more companies are gonna be using cloud do cloud data warehouses in ways that you wanna have good UX around, and then the question is, are they gonna continue to capture all the value? Like how do they stand competitively?
Yeah, I think the sort of net retention shows that they're very good at growing with this customer base. They're growing faster than any other cloud company, which
isn't super surprising given their relative size.
Um
I think that's a a a fair question, but
Not one that I'm
Hugely worried out about given like
the overall growth of the of the sector.
Sweet.
No further comments.
Wow.
Shoes are we how how are we doing this? I'm not going to do real time grading. That's very fair.
Mr McCormick.
You asked the internet for your pick.
You know their favorite favorite stock. I ended up going actually with an oldie but a goodie, but we're gonna get there.
So
I think one of the most important things about twenty twenty
And twenty twenty one for a lot of people was learning about themselves.
And what I learned is that I'm a terrible, terrible stockic. Wait, wait, wait, but you're on C MBC like all the time.
Like I said, terrible, terrible stopping.
And
You know, a as we did the rankings, I gave Mario uh a little bit of gff, but
I think we were going back and forth for for last place.
And so the safe move and uh we also decided to only do publics because we didn't want to shill
our private market portfolio companies.
Composer is one of the companies in my portfolio that makes it really easy to invest in automated trading strategies.
I'm gonna go with one of the strategies that they have that's
Risk on, risk off, it looks at
Uh Treasuries and actually Nasdaq outperforms uh S P as an indicator.
Uh and then put you in a basket of like
3X, like TQQQ when things are good, and it puts you in like long dollar when things are bad. So if I wanted to be super safe.
That's my pick and that's actually where I'm putting it.
My my money.
Not gonna do that, because we're all the way out in Seattle.
Second thing you could do.
But we can't invest in this.
But
Uh maybe there are shares going around. Apparently it's possible to get into
The equity tranche of Elon's Twitter Take Private. Oh. At least like he's aggressively trying to f find people to take some of the equity tranche. He's aggressively. So if any of you want a piece of the Twitter Take Private.
Forty three, forty four, whatever. Minimum check. Minimum check.

I I I think actually they are taking relatively small checks from what I've


That is outside Not Boring Capital's very, very broad mandate, so like maybe I'll throw a YOLO check in there, but
Dude, you invested not boring capital's money in buying the constitution. This is outside. That one uh was a fifteen billion percent IRR for a little while. Time has gone on, but that was a 15 billion not investment. It wasn't an investment. I was
donating or contributing to the Constitution.
So the Twitter thesis.
And this isn't the pick, but the Twitter thesis is that
Everybody in this room, half of us are here because of Twitter.
I if you pulled the audience, the average that it would take to pull people off of Twitter has to be in the hundreds, if not thousands, or tens of thousands of dollars.
Yet they're monetizing like Android right now, right? Like Twitter needs to be the apple of social media. It has a small but loyal and a valuable user base.
the board doesn't use Twitter, Jack is doing whatever Jack stuff, but like somebody's gonna come in and monetize that thing. I think you charge for verification, you get rid of the bot problem. If if
The 80 million people who use Twitter in the US paid$3 a month, you're looking at like a$3 billion recurring revenue opportunity annually for Twitter.
Um
And he's gonna fireheadcount. He has to to pay his debt service, but like
I would imagine 90% of people at Twitter, and if there's anybody in the room, I'm so sorry, but like don't do very much.

So there's a lot you can do on the cost side.
And then I think with somebody like Elon, it's either gonna go horribly, horribly, horribly wrong.
And I think that you can kind of build the like missing
WhatsApp uh of the US kind of on the Twitter platform where you have all of these valuable, passionate users. So at forty three billion dollars, do you think like when he takes this thing public again in three years that
He can do that at you know a fifth of whatever Facebook's valuation is at that time.
Pretty safe to X.
Not the pick. So
We are just a straight up. We can't actually go to public market pick, right? We're not getting out of here at eight pm tonight, there's not change. The reason that I'm in last place is because of a company named Open Doors. Oh yes. Yes. Yes. Not the pick.
Open Door is the pick. And here's why.
Because we're in Seattle.
An open door vanquished.
A Seattle company, Zillow's I buying program.
own the I buying market themselves now did eight billion dollars of revenue last year. And now this is I I came from Breather where we counted top line revenue as like anything that you know it's it's a it's a generous top line.
I thought bank knows about this as well. The general is kind of top line. Just the We Work thing, and we competed with them and what a wonderful company. But still eight billion dollars of home that OpenDor did last year. They're currently trading at a five point zero zero
billion dollar market cap.
Housing is a multi-trillion dollar market, and everybody in the country, it seems like this past year.
Learned how awful that process is and so this is a point, and I've written about the company, but this is a point that I am taking from Twitter, which is somebody said it is the worst.
UI, UX, customer experience in the biggest market out there, and they have the best solution.
with i buying sometimes it doesn't have to be hard. I'm treating this more like a venture bet. Like two months ago, five billion dollars was a like series B valuation. So treating this like a venture bet, that they're the leader in this huge market that is inevitable.
They're operationally super sound. They finally turned uh an adjusted eBitDah profit last year so they can make money on this business.
And they did like thousands and thousands and thousands of homes and their biggest competitor.
It's dropped out of the market and Zillow's no longer doing iBying. So this market is there to lose.
Eric Wu is an absolute monster.
And
It can't go any lower. So I am doing what you're not supposed to do, doubling down on my biggest loser. Open, ladies and gentlemen. All right. Excellent. What about um
Redfin is still in the market, another great Seattle company.
Are you concerned about them as a competitor?
Above or below a billion dollar valuation right now. No, I I think I I think actually the mistake I made last time was I I did a basket of these these real estate stocks.
It is a massive market that is awful to operate in right now, as as a lot of people who bought a house over the past year uh have realized. I think that Redfin's gonna do really well. I think that Zillow now that it's kinda back to its uh original focus is gonna continue to do really well. It I I still love Zillow. Uh and I think that
Open Door is gonna do the the best. I think they have the biggest lead in I buying and I think that's a huge, huge opportunity.
Particularly because they have the best
uh company value in

pull every basis point out of operating these houses, and that is a really, really valuable thing. It does remind you of another Seattle company, Amazon, uh in that like that you really need to get your costs right, and they're the best by far at doing that.
There it is.
Then.
Because David is theoretically winning, I I will go next. Um
So my fr I'm I did actually what Packie did. I I made a list of things that I was contemplating and I thought I'd share some of those just um.
'Cause I think they're interesting things you could buy with with your pick right now.
Literally anything.
Because everything's on sale.
Uh I thought about Google again, which was I think the best pick any of us made, uh except Solana.
Uh
Yeah.
Still a amazing business. Uh still cheap by valuation, you know, the any way you want to slice it. Price to earnings, price to sales, whatever. Not my pick. Uh I kinda like the the thesis that's going around Fintwit right now, where
People are saying Amazon has gone so low
that they're basically valuing the retail business at zero and it's only AWS contributing to its market cap and I I think you can build some models to sort of show that.
Would I take Amazon's retail business as a free option? Absolutely I would. Again, not my pick, just like Packy. Uh there's a Twitter one that I had too, which is buy Twitter right now because there's free five dollar bills attached to every single share.
Uh and and for folks that don't get that joke, there's an in uh there's a there's basically an arbitrage you can run if you think that Elon is actually going to close this deal and
pay out every single Twitter shareholder at fifty four dollars and twenty cents per share. You can go buy a Twitter share right now for like forty nine bucks or fifty bucks. I don't know what market closed at today.
I mean, that's free money if you think Elon is actually gonna
Complete the deal.
Not my pick.
What I'm going with is one that I know David and I have discussed at length. I can't remember if we've done it on error, but I looked back at our idea dinner picks and we haven't actually picked it on the idea dinner.
And that's Coinbase.
Mm.
This is a value investment.
Yeah.
And I'll explain myself.
But this is a crypto value investment.
So let's set the anchor point that we should all think about this business.
In the last twelve months they've done ten billion dollars in free cash flow.
It's astonishing. That is money that piled up in their bank account based on the profits of the business that they're operating. So they're printing money.
The market cap at close today was thirty four billion dollars. Wow.
So if I was running a business that was generating a hundred dollars of cash per year just to make the math easy.
Uh would you buy that business from me at three
Three hundred and forty dollars?
That seems like a pretty good pickup.
Especially one that has network effects, the leading brand in the space.
uh growing incredibly fast.
in a gigantic wave. Now people can think crypto is gonna you know crash or the bubble's gonna pop.
They're the most established company in the space and it is still the first inning of all of crypto.
So you have the opportunity to do it.

Berkshire Hathaway style investment into a crypto company that is the leading
crypto brand in the world?

It seems pretty safe to me. Famous last words. But uh it i i to me, you're like very cheaply valuing their unbelievable business that they today they have today. And sure there's gonna be margin compression, and sure the take rate's gonna go down over time. But like
I think you have a lot of
resilience based into the price, not to mention all the free options that come stapled to that business, which are the NFT business and every other venture that they're going into.

I think a great way to play crypto in web three is
to look at the companies that have centralized all the activity.
and are able to run web two style businesses or web two business models using the heat and light that's all shown on web three. And Coinbase is literally the best example of that and has

Coinbase and FTX, they make money whether crypto goes up or down. Right. And if it goes up or down faster, they make more money.
So my pick is Coinbase.
I gotta say I really like it. I think it's really good. Yeah. I was thinking about this one
Two
And I think what

I s
A lot of pitches.
From senior
X coinbase people. And so it feels like there's a post IPO brain drain happening a little bit, which is natural and you also don't love to see.
I think FTX is
I mean like there's a lot of comparing FTX and Coinbase because they're right around the same market cap right now.
FTX has like two hundred people or something crazy. That was still that was one of the most surreal Okay, this is the most surreal moment of acquired, but uh That might have been second when we were interviewing
Sam.
This is Sam Bakeman Freed, the CEO of FTX, who Mario wrote
a three part unbelievable series on.
Yeah.
And he was
Just in the middle of
His office and people were like trading behind him. And almost certainly playing League of Legends over here.
Uh
Yeah, f fair packy. I mean um
The FTX bear case on Coinbase would be that
Derivatives are actually a much bigger market than trading direct equities or direct crypto.
Uh I think it's like three X of the volume in any given market is derivatives rather than the underlying asset.
And FTX is better poised for the derivatives market than Coinbase is. I still think
Coinbase at this market cap is an absolute steal.
Alright.
I agree. I think like FTX is
you know, scary uh in in lots of ways and are so
So efficient as a business, but
Especially factoring in the NFT play, I think there's like a really nice upside here.
The stuff that they've shown, at least on the NFT side, I think looks
Pretty promising.
Yeah.
No, I love it. It's a bet that cryp stays big and that decentralization is probably not as important to the next billion users as it was when we think, which is a pretty safe
I I love the pick actually. Also, would any of us have thought
at Coinbase IPO time that they would be shipping enough to do like a big NFT play? Like I had kind of in my head thought like okay.
We sort of have reached
product staleness.
But they've actually shown like a a rejuvenation on it.
Yeah.
Another way of framing this is I liked this pick so much in January, and other people on the stage did too.
that there were investments made in the company. And I'm speaking with pac passive voice for fun.
I like it a lot more today than I liked it then. Me too. Me too.
Yeah.
Ben, you've made me nervous. What for two reasons.
All right, I'm I'm I'm a legit That was one. Uh the other is when you were doing your not picks, which I'm not gonna do, uh, I got really scared that you were gonna take
My pick.
Because my pick.
It's the company that built
This arena.
Which is Amazon.
Or bought the naming right. Built as an aggressive.
Well, okay. Um
And
So I was thinking about this.
It's trading at about a one and a quarter trillion dollar market cap.
Most folks probably know.
probably a lot of folks here work at Amazon. The stock got hammered last week after reporting earnings. Um
But
Just looking at the fundamentals, Amazon
Did four hundred and seventy
billion dollars of revenue.
In the last year.
twelve months. That is the second highest amount of revenue that any company has ever done ever.
The only larger one being Walmart.
Which Amazon will almost assuredly pass very soon.
Um that means that Amazon is trading at two and a half.
Times revenue. Times last twelve months revenue. What are Amazon's margins, David?
Well, if you ask. Uh I thought about that.
About four hundred billion of that is retail revenue.
But about seventy five billion, more than seventy billion is AWS.
Revenue.
Which is very high margin revenue.
The reason I think
So each of those.
retail and AWS. I think there is a bare narrative around that I just simply don't agree with
Right now.
On AWS, I think the ba the bare narrative on AWS is
Yes, it's amazing.
High margin business.
Hats are off to
Bezos to Andy Jassy for building it.
Um
But its days are numbered.
Azure and Google Cloud.
Are growing faster.
And
Amazon despite being the early leader in cloud.
Might actually end up losing.
This market.
I think that's utterly ridiculous.
AWS is growing at thirty seven percent.
Annually.
on a seventy five billion dollar base. Google and Microsoft are growing at forty five percent.
But their market share combined
is still significantly less than Amazon. So yes, it's growing slower, but it's bigger than both of them combined.
Uh
But then just like none of that matters.
The market that we are talking about here
is the internet.
Like
This is the internet. This is the picks and shovels of the internet.
And Amazon is the clear market leader.
Growing over thirty per growing thirty seven percent a year.
I cannot imagine any other asset I would rather own, period anywhere. So that's AWS.
On the retail narrative, like you said, literally Goldman issued a research note last week. Now it was a thought exercise. I didn't actually mean this, but valuing retail
At zero.
That's people have been doing this for twenty years. How does that work? They issued a research report as a thought exercise. Well they have a buy on the stock, and I think they were saying that like the upside is so much that even if you just valued Amazon based on AWS, you would still buy the stock.
They think retail is worth something, but it was that was the thought exercise.
So let's
AWS has over a thirty three percent market share of cloud of the internet.
The largest application of the internet by revenue
Is e commerce.
Amazon has a fifty six percent market share.
of US e commerce, a fifty six percent market share.
I
So there's a really cool feature. If you go to your account in Amazon,
Of course this is so Amazon. You can download CSV reports of your own
Spending. It's scary. Which i they intentionally make it that you have to download a CSV report and you can't actually like see that in the web UI. That would be very scary.
So
Just me. Over the last five years.
I've grown my spend on Amazon by thirty four percent a year.
And in the last twelve months I ordered two hundred and thirty
Items.
On Amazon.
Because we had a kid, but yeah.
We have garage delivery setup, we have the Amazon credit card, they're launching Buy with Prime on the internet. I'm highly influenced by Amazon sponsored listings, which is a thirty billion dollar high margin revenue business within retail. Which was approximately zero five years ago. Exactly.
So this is my point.
the narrative that retail is worth zero completely misses the point. The reason that retail lost a billion and a half dollars last quarter
Is Amazon invests so far ahead of the curve. Like it's
Unimaginable to me that I would buy things
Anywhere else but Amazon.
And that moat is so deep that if they were to stop investing
They would become incrediblow positive and they'd still have years of runway before any competitor.
And to your point, I think their capex last year was something like that.
three or four X any of the other big tech companies, because they're just building out these warehouses and data centers.
Totally. Okay. So
to borrow a basos framework. I think you gotta think about what's not going to change.
In investing.
And
I think what's not gonna change is one, the internet is gonna keep growing. So I wanna own AWS.
Two.
I and others are gonna keep buying more stuff online.
So I want to own Amazon retail.
And I think that on the retail side, they'll keep adding credit cards, advertising, buy with prime, leveraging their infrastructure across other retailers on the internet. And all of those are
High margin products.
Yeah.
It's my pick.
No argument.
I gotta play to the home deck round.
I mean what happened though to Apple stock after Steve Jobs, right?
Mm.
Not to get back.
I think Andy Jassy could be the Tim Cook of Amazon.
I love that. I love that analog. That's a good one. That's a neat little framework.
Alright, so Shu.
So
I'm gonna change the rules a bit.
But first I'm gonna make some comments.
Some generalist comments.
No, no.
Yeah. And I'm going to positive.
that the future of investing is people who understand and create narratives.
And that's what you all do.
And
you actually are very good
stockpickers period, because you understand the power of stories.
and narratives.
So this is the future of investing, in my view.
It's no surprise you all have or are launching funds.
I I love how this is starting so far.
That's
Overall comment number one.
Overall comment number two is you all think like venture investors.
Nobody talked about downside. You guys say we have investment advice, right? Like enough time? I was waiting for the bear case and what could go wrong and it didn't come out.
For example, Coinbase over earns
From a consumer pricing point of view, compared to any other platform you look at that sells to consumers by some dramatic it's a total outlier.
And so if that collapses 80 percent, what happens to the stock? Maybe 120 is really expensive, et cetera. So there was none of that.
Generally, I'm not picking up that.
And the third thing is you were all focused on companies that are cheap. There was a focus on
Now's a good moment because it's cheap.
Expensive companies can be great investments, expensive so to speak. I think it's probably because we're in this part of the market cycle and so everyone's focused on everything's dirt cheap.
At these prices.
Who said that? By the way, the the consensus fickest Twitter between the two of you.
I had five criteria.
One was
Upside.
The other was downside.
The other was timing, why now? Mm-hmm.
The other was novelty, which you all failed on, by the way.
Snow Snowflake may be the most novel.
And and there's no
science to novelty. I mean a obvious stock can be a great investment. And the final one was flair.
Very scientific criteria.
Bips for breakfast, General Patton. That got me going. All right. Let's go, man. And so I have my ranking, but
We're gonna we're gonna get the audience involved. So I'm gonna hold I don't know if you know this from like an old show. I'm gonna hold my hand above a head.
And then you clap
A certain volume.
And I'll go one by one.
And the loudest clap wins. And then I'll tell you if that was my pick or not, okay?
So we start with
Random order.
Um
Open door.
Okay.
Let's go.
All right. Nobody hates me.
That's open door.
Five out of ten clap.
Then we go with Amazon.
By the whole time.
Really came through that.
Mm.
That's a solid eight out of ten clap.
Yeah.
We are in the Amazon arena.
Yeah.
So I'll notch it down to a seven.

Home crowd.
Coinbase.
Mm.
Wow, that seems pretty that was pretty hot.
No good.
That was better than the Amazon clap.
So that's an eight.
And then Snowflake.
Oh surprising.
All right. Wow.
So just like the French elections, this is gonna go to a runoff.
Mm-hmm.
Between Snowflake
And Coinbase.
Okay.
Did we get clap?
Oh.
No,'cause it'll sound louder.
Can do.
Okay, so think about it, okay? One of these two, Snowflake or Coinbase.
Snowflake.

Mm.
Coinbase.
And the winner is Cornbase.
Yeah.
My my pick was Snowflake for for the record, only because of General Patton.

Ha ha
How many of you ever seen crypto in this audience?
Yeah we
That's probably why. Yeah. And uh there is a tracker. There's an idea in a tracker spreadsheet that uh listener James Avery I think James started it, right?
uh maintains and so we'll get to
At any given point, look back and see.
Who actually won tonight.
And I think open door reports tomorrow. So we're gonna have a little fun with that one. But we're talking what, five
Five year hold period. I think that's right. So we reconvene again here in twenty twenty seven. Perfect. Perfect. See every time capsule. And and judge this contest. You'll need to use, you know, the rest of the arena at that point. That's right.
Well
Packing.
Mario Shu, thank you so much not only for doing this, but for like flying five hours to do this.
L'immigrant. Six and a half. Thanks so much.
And
Even more important than flying five hours. Thank you guys for being our friends. Thank you guys.co, readhealist.com. You should follow Shu on Twitter. He's the future of public investments.
Thank you.
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All right, David, what is act two of our evening? All right.
Pray for act two.

And for act two.
Story.
And I think most of you know.
But that we have not yet told on the main
feed of acquired itself and that is Y Combinator.
Specifically tonight we're gonna tell part two.
Of the Y C story.
I think most people
know about Y C's accelerator business that produced Airbnb, Dropbox, Stripe, Brex.
Friends of the show Modern Treasury.
Vouch Vantage.
came out of the accelerator business. But most people don't realize that that is only one half
of what Y C is today.
They're also one of the biggest and most active
late stage growth investors in the valley, and they have deployed literally billions of dollars into series B, C
D rounds in startups, both Y C alumni and non Y C alumni
alike over the past several years.
So tonight
We have Anu Harharin.
the managing partner of Y C's continuity fund, which leads all of these late stage investments.
Here to tell.
the story with us. Anyways had an amazing career. She went from a junior engineer at Qualcomm, great semiconductor company, to partner at Andreessen Horowitz.

Y C continuity where serves on the boards of Bricks.
Local fan favorite convoy.
Well.
Fair.
Monzo, Gusto, Revenue Cat, Rappi.
And vouch. And vouch. Ladies and gentlemen.
Welcome, Anu Harry Haran.
Thank you. Well I'll give you a.
We got you some shoes.
Yeah, big U.
Thank you for having me.
I don't know if you noticed, but we picked that.
Walk out music just for you. I don't know who can save San Francisco.
Uh, Pat Myhan, I think, the lead singer of Train, I was San Francisco Band. I think he wrote that song'cause he moved up here to Seattle.
Oh, yeah. So Ano is foreshadowing your own.
Move up to Seattle. I think Y C will Y C right now is remote first.
So we all live in San Francisco but we don't have an office.
So the mountain view
We own the mountain we're building.
We have that, but since the pandemic
All our batches have been fully removed.
Wow. So there's no requirement. It used to be before the pandemic, no matter where you were in the world, you had to come to Mountain View. Yes, that's not been true for the last
Three years.
Um and we have learned to do everything remote.
We always read applications online, but we learned how to do interviews remote.
That was strange for us because we believe in bringing everyone to Mountain View for the interview, and we had to learn how to test for that on Zoom.
And then we also learned how to run the batch on Zoom.
And we learned how to do a demo day on Zoom.
Wow.
The new normal going forward? Except
There will be tweaks for the new batch.
It has not yet been announced.
But
There will be a little bit of mix of in person.
As well as
Um you know, largely remote. But going remote really helped us. Fifty percent of our batch is international.
What uh what's the application deadline for the
The deadline has passed, but we are still accepting applications. YC always accepts even late applications. Yc.com/slash acquired get your laid application. Great. All for it.
Alright, so wait, uh let me let me kick us off here with just like a very let's dive right in.
We wanted to ask you what is Y C continuity.
But in a very mechanical way. Like
like w literally what is Y C continuity. Is it a fund? Is it a set of funds?
It's a
You know, it's literally the word continuity. So the way it was formed, a lot of our founders, the alumni came and said, Hey, you
Took us through the 12 week program. This is really why we started a company. It would be so cool if VIC can continue to support us.
in the form of investment and in the form of programs
Down the line too. Why do you stop at the accelerator?
And so that's really how we came up with continuity. So it is a multi stage fund.
We uh pretty much do primarily the growth stage.
C D and above.
Uh we have invested in uh primarily Y C companies actually. We double down on Y C companies. Our goal is to be partner, a lifelong partner.
For all the enduring companies in Y C to the extent possible.
A tremendous amount of post batch programming.
So people don't know this.
If you go through Y C today
You get
Ten times more what you got.
In 2012 batch or 2014 batch.
So we run three programs in continuity. We run the CDs A program.
We help you.
how to teach and teach you how to raise the CD Z A.
So we work with you on pitch techs, how to negotiate term sheets, how to identify investors.
After well after the batch. Usually the CDs A most companies raise CDs A two to three years after the batch.
Very few race during the batch.
So we you know we pretty much helped them nine months, six to nine months before they raise the A. Uh we sit down with them and say, are you ready to raise the C D A?
I do you really have metrics that are that you need to see for a typical CDC investor? How to put the pitch tech together.
Um we run workshops.
for how to help you raise the CDC, how to identify all the prep work. And we have you know Y C runs on WhatsApp. I don't know if you guys know this. Did not know that.
Around um four thousand companies and more than eight thousand five hundred alumni. So literally every morning
My phone is buzzing because I have so many WhatsApp groups.
So we actually can vouch for this, listeners. So uh you're on the board of revenue cat, so we're doing our diligence and we texted Jake and uh because Jake's another fellow Ohio State alum.
And uh he actually was at our very first acquired meetup in San Francisco. And I was like well tell me about some some stuff with Anu. And he was talking about how you WhatsApped him
I don't know exactly how much of that I can share, but
that you proactively were WhatsApping him before a round was coming together to uh tell him you were considering an investment.
Yes, so we actually know our founders.
From day one.
Right, Y C's one team. So even though continuity was launched seven years ago, by the way.
You know Y C itself is seventeen years old.
But
We are one team, so we actually know the companies through the batch.
So I knew Jacob in the revenue care example, I think
Even at the time of demo day when he was trying to figure out which investors to work with, he had reached out to us to say, Hey, how should I think about this? W you know, whether to raise from seed investors or CDs A. And then he went through the CDs A program, so that's how we helped him figure out
You know, how to uh which partner to go with. He decided to go with index. Behind the scenes we had actually helped him
a ton with how to pitch, how to negotiate the term sheet, and all of that. So by the time I usually say by the time we're investing
I'm not waiting for the founders to come tell me I'm fundraising.
Well it's kinda like I mean you acquired has been an investor.
White Combinator has been an investor in these companies.
For years at this point.
Before continuity started, was Y C w were there any like experiments in doing investing after the seed stage before continuity or was continuity the beginning of Continuity was the beginning.
Partners always invested in companies.
that graduated from Demode. So and I'll give you an example. A lot of people may not know this, but
Coinbase.
which was the ideal winner, uh did not get any money, or I think he got twenty to thirty percent of his ideal goal on Demoday.
Right, he w went out and said, I want to raise seven hundred and fifty K
Only thirty percent of the round got filled. Oh my goodness. So because no one understood Bitcoin at the time.
But our early stage partners have worked with these founders for twelve weeks.
So they're not
Picking
Uh company so they don't go by idea. They are going by who are the most earnest founders. That I want to give them a shot.
To build.
And so uh quite a few of the Y C partners helped fill Brian's round.
So that he can go back to building.
So Gary in fact was the one that accepted uh Brian into the badge. But that was the culture in Y City for continuity. It was more the partners helping out the founders. Individual investors.
You know, th there was no Y C follow on capital. It was individuals who built those relationships.
Wow.
How did the this idea come together? I mean
It's sort of obvious now when you say all these things, but thinking back to it was twenty fifteen when July twenty fifteen. July twenty fifteen when continuity was started.
The idea of
Raising a fund, a growth fund or
Most people would have thought that was crazy right?
Then we're picking winners.
Yes, so I think that at that time because growth cap growth stage capital itself was frowned upon, right? Remember the narrative was you need to go public.
You know, w the late stage investors are just throwing cash. There were only like I think less than ten people who could write hundred million dollar checks there.
Um
But what you saw was there were less than ten funds that could write hundred million dollar checks, but the median time to IPO, can you guess what it was in 2015?
Eleven years? Eleven years.
And so Y C Alums came to YC uh partners often and said
I uh you know, you train us so well at Demoday.
to tea and you teach us how to raise. And like then we were in the woods.
Right. And we all f we tell our phone dress it's never going to be as easy as Demod.
Well it's yeah, like

But I didn't thought about that. Like back then, yeah, there were, I don't know, less than number of investors you could count on two hands that could that were writing hundred million dollar checks. And so if you're like I can't go public
I need a hundred million dollars plus to finance this stage of growth in my company.
You know, it's a supply-demand equation, right? So it was primarily that, but I think VIC's mission has always been how do we support our founders more? And right, VIC was learning through its evolution. Remember, like seven years ago was when Dropbox had raised a late stage private crowd.
So Y C itself was learning what are its companies going through. When d when do they get help versus when do they not? So we saw an opportunity. We saw that
These companies still need help. And they you know, and we are in a
a great place and an amazing platform that really kudos to PG and Jessica t on how they built it.
Um
Why C can play a significant role.
You know, one of the things that
People don't understand and I didn't. I was at Andreessen Horwitz before, right?
The Y C founder
never views Y C as an investor.
That's the secret, right?
So what does that mean? Anytime a company is going through any issue.
Five years after they've graduated.
They will first come to their Y C partner.
Mm.
They don't have to talk every quarter, they don't have to talk every month. They may not even have talked for a year.
But they would reach out to the partner and say, I need urgent
There's an urgent issue. I need you for five minutes. I need you to help sort this through.
Does continuity change that relationship knowing that you
R available capital now.
No, I mean we s worked very hard not to change that. So
It goes back to our mission. If you ask
Venture funds, most of the omission statements are
Wanna own.
ten to fifteen or twenty percent of the best companies.
Our mission statement deliberately doesn't have that.
It is we want to help more founders start companies and more founders build enduring companies.
So what that means is there are many times
Um
We may offer term sheets and they would say.
out of you know, we would not want YC this round and we would like Y C in the next round because you're already in the cap table. And we will respect that.
Yep.
Because it's one D.
We don't we don't say
Oh, you know, let's play all the tactics that we need to play in the close process.
But we also know that if you've really helped them and earned the trust
We will earn the right to win.
Yeah. And so we often h internally have a saying that you have to earn the right to it.
And as long as it's the right decision for the company, sometimes we're the right partner and sometimes we aren't.
And
We have to be honest about that for us.
Why see companies succeeding is more important than what the returns of our funds are. But if we do write by them.
We know that we can have incredible returns. History has shown that.
How do you structure the partnership?
Like is are YC partners one big pool that sort of comprise one investment committee across accepting into the accelerator, making growth investments, or is it more like
A couple people are Y C continuity and then a handful of people are the accelerator partners making those admission decisions. Yeah. So uh the early stage
Uh has
Through partners.

And on continuity, it's Ali and I, Ali Rogani, uh who was the former CO of Twitter and Pixar and CF of Pixar. So we both run the continuity fund.
So on the gr on the early stage.
It's only one group partner needs to say yes.
Then
the company's accepted into the batch, so they apply. We shortlist a bunch of them.
and they go through the interview process. But as long as one group partner said
A strong yes, I really need them in the batch. They're accepted.
Now remember
The group partner is taking them and working with them for twelve.
So if they picked
If they didn't pick the right team, the feedback loop is really fast.
So they learn.
And the wall for the next match.
Right, so
That's kind of why we went with the model of one yes is enough. On continuity, it's a three people investing team uh investment committee. So it's just me, Ali, and one early stage vote in case Ali and I don't agree.
But it's primarily the continuity decision.
Fascinating.
And one other question just to help sort of frame up.

You're not a very high velocity investor. The the continuity fund
I think only does a
Handful of deals a quarter.
Maybe like leads two, three investments a quarter.
Yeah, so we've done thirty five investments in seven years.
Wow. Wow, so even less than I thought. And we have three thousand five hundred companies.
that have gone through Vic. We've done less than one percent.
Um now
It's for two reasons. We were uh so we pretty much are a start up with NYC.
So when we first launched
We were honing our investment strategy. What's right and what makes sense for the broader Y C.
Right. And then I would say we've always been undercapitalized relative to the success of Y C compan. And we are changing that. But every time we change that, the bat size grows and they're more successful. I mean the Y C's just had a ridiculous
track record if you look at do I
I'm sure there's some vanity stat that you know off the top of your head. Is it like total combined market cap of all Y C companies? It's on the Pittsburgh wall out there.
What is it?
Actually on it was It's well over five hundred billion.
Pittsburgh says six hundred billion.
So
I think no matter how much capital you raise, you're probably always gonna feel like you're Yeah, we always feel undercapitalized. Also we do global.
Right.
Our entire team is sitting in San Francisco, but we have investments in India. We have three investments in India. In fact the top three uh breakout companies in India in the last two years are all YC.
Wow. We have investments in London. We have investments in Latham.
Uh
The
You know, we have investments in Middle East. So we because for us it's about enable entrepreneurship globally.
That's the mission. And continuity needs to support that mission.
So you said
Yeah, continuity is this startup within the it's just crazy to me that YC is seventeen years old. I mean I guess that's true, but like
That makes me feel really old. In my head, it's still like an innovation in the venture capital landscape. That probably says more about the venture capital landscape than that. That's true. The Vicey Mob.
How many of you heard that? We we've been we we've never thought of the mob, but I was like oh we're the Vicey Mob.

I used to be on the other side of this because I
Qua used to compete with Y C in leading
Seed rounds.
The number of
V C firms throughout the whole life of Y C
That talk about YC, often in you know negative terms. Can you believe what they're doing? Can you believe how many companies they're taking? Can you believe they're investing now? It's like
It's just like the Andreessen story that we told. You know, if your name is on your competitors lips
You're winning. It doesn't matter what they say. You're winning. It is so true. I I I mean I also think it's really hard to understand.
and appreciate an organization like Y C from the outside.
You really deeply understand Y C in only two ways. If you're a Y C founder
And if you work within YC. And I I mean outside uh when I was at Andrees and Horowitz, I actually did not understand the depth and the cultural nuance with which YC was built.
And it's really hard to grasp that. Can we talk about that for a minute?
My I put this in the in the notes. Um
My current mental model of Y C
is like a university.
A top
call it an Ivy League university. It's very hard to get into. You take classes, you know, every year or every six months. Um
There's an endowment attached to it, which is continuity now. And wait, wait, David, what do you mean by endowment?


all of the proceeds from YC exits go into a big pool of capital that then f funds continuity. Is that what you're suggesting by endowment?
No, but I'm curious if that's the case. Uh I was I meant more just like
It's really


private capital markets and the venture capital markets.
In America.
Those dollars come from educational institutions, mostly private educational institutions. That's just very bizarre. Uh but anyway, the th that's kinda what I meant.
So think of the accelerator as the undergraduate programme and continuity as the graduate school.
Um and
We are modeled after a university in the sense of we have applications, you don't need to know anyone to apply to Y C.
Right. Second, we were the first to do mass production of investments in a batch of startups.
No one had ever done that.
Everyone usually does.
I met a set of companies, we have a Monday partner meeting and you pick one or two.
Right? And Vising from day one was a batch.
They always received investments together. And that I think goes to the insight that the founders of Visi had at the time, which was entrepreneurship is lonely.
Being in a group is how you motivate each other to learn from each other and that's your peer group.
And uh so
So fundamentally it came from the approach of a university. And Cornwall is graduate school is where as I talked about, like CDC is just one of the programs we run. We have two others, Post A and Growth. Post Day focuses on
Two months within you raise the CDZA. There's a six week program, we rebatch you, so now you have a new set of peers.
And our scale founders come teach how to form a recruiting team, how to hire engineers. Because your job changes as a CEO.
Right. And no one is writing a book about how your job changes and how to learn. And remember the median age.
of a Vice C phone that is twenty seven.
Which means
They have probably managed a sum total of three people in their life before they spawned the country. They really are like undergrads. So you cannot expect them to know.
So how are you going to provide resources so that they do they can learn from others?
And they do as few mistakes as possible.
And as quickly as possible. Because when you're scaling
You just go on a rocket ship path. You're you the the amount you demand out of these founders
It's a lot.
And their ability to learn in four years.
Is
I mean the bar you're setting is really high, right? And so in our community, that's why like Brian Chesky comes to speak every batch. He's the opening speaker of every batch. Wow, every batch. Every batch. And right now, uh for all these programs that we run, the growth program is how to scale as a CEO.
That's literally the program. It's an eight week session. It talks about hiring execs, performance, management, culture and so on.
And we have scaled founders and scaled exec, like Tony Shu comes for that. His execs, the CFO.
of Dodash, the head of engineering of Dodash, they come for the respective sessions. So it's really good to see the entire community working to transfer their learnings.
to the next batch of companies.
All right listeners.
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I actually wanna ask on a thing that I for some reason asked David, even though I probably should have asked you.
When
A company exits
Or has a liquidity event.

Uh
What does Y C do with that liquidity and is Y C an LP LP in itself for future continuity funds?
So right now it's set up just like any other funds, right? So we have uh incredible
Uh L P
Primarily university endowments because our mission is more
university oriented. So the structure is very similar to other funds.
Um and I think that's a new change for Y C since two thousand fifteen because
When Y C was started.
This model wasn't proven. So it was actually self funded by the founders.
Yeah.
Yeah.
Okay, so self funded by the founders. I know Sequoia was involved at one point.
Uh
putting up capital and I think that was the capital invested into batches for I don't know five five ish years. Yeah. So I think the different people there were quite a few LPs that came in on a batch basis. Remember the first check
N Vise, the first batch was twenty thousand dollars. I know. So when you're self funding something, that's how you start, right? And so but then when we asked as time progressed and when we asked startups to come to San Francisco.
You know
They needed at least one hundred to one twenty five K given all the inflation, even if they wanted to uh stay in Montrebu for a period of time. So that's when we brought in
You know, L Pas on a batch.
pretty much s uh fill the rest of the gap that Y C was not able to find.
And so is that still how it works, is each batch and each continuity fund has its own set of LPs that you go in an individual sort of
fundraising mission for that specific vehicle.
Yes, so both we have early stage fund as well as the late stage funds, and we have pretty much the same set of LPs across both funds. And as we've because our ambition is to grow the batch.
And why is that? Because we
We actually you know
We wanna keep the bar high and it's not that and when we say the bar high it is we want the founders to be working on the right problems.
Not the wrong problems. There are amazing founders.
But if they're working on a problem because
It's following a hype cycle.
And it's not a unique insight.
then accepting them, we are doing a disservice to them.
Because they've decided to stop doing whatever they're doing to work on this.
But
We're not like an Ivy League institution.
That things.
that the bat size has to be only like
You know, Princeton probably has a fixed class size that doesn't grow.
We don't want to be that.
Because we think there are incredible founders everywhere.
And if we have a chance
To give them that first opportunity.
And that really opens up doors for them. We want to be able to do that.
So we could see batch sizes of thousand, two thousand Y C companies in the future.
Our criteria is if there are if our application volume keeps going up
And
If there are that many really good.
uh applications we need to learn how to scale.
I mean it's not
You're already approaching the scale where we have around four hundred companies for bachelor. But I mean I I think this is why I think it's a very important thing
I I think y it's very hard to compare Y C to a venture fund.
Because
If you look at the types of opportunities we have given people.
In different parts of the world.
Yeah.
They would not have stood a chance.
Anywhere else.
That was true for Airbnb.
That was true for Coinbase. Yep. That was true for DoDash, one of the partners that Y C kept funding DoDash.
Because nobody believed in the idea. It was the third food delivery startup that came out when they came.
Uh it saved.
It was the first I mean it was a late application. He applied one week after the batch.
And we were pretty much like the bad starter.
And um
But I think like that's why
It's such a powerful and mission oriented organization and
You know?
It's very different.
What maybe um
Maybe that's a good place to to wrap.
Yeah, we we talk about powers, unacquired. Um
We can speculate a lot and I think we probably have on the show about Y C's power at various points in time, but I'm curious, you know, you're in it.
What do you think Y C's power is, you know, in the Hamilton Helmer sense of like
Enables Y C to enable to earn
Uh differenti better differential returns versus your competitors in the venture ecosystem.
Is it
The traditional VC power is brand, but it feels like it's something else with YC. Yeah, I think brand also comes much later, right? Unless you know.
You can either get brand because you have a lot of things you've built before and you launched.
Or you just launch something and it takes I mean just the way you all started acquired, it takes an incredible amount of time to build, right? It's never an overnight success.
Um at Y C I would say
If I had to pick one thing.
Why she's really good at
Across both early and continuity is
We go by based on founders.
And I know it sounds cliche.
But I think we also have an incredible advantage in assessing what makes a founder a really good founder. And we have incredible amount of data and pattern recognition and learning that we have honed it to a point.
That we know to spot them.
Hm. You know, you all have heard of the famous ten minute Y C interview and everyone asks, how do you know in ten minutes? The fact is we probably know in the first two minutes.
So we actually don't need the full ten minutes.
Yeah, but you know, sometimes one or two people will surprise us with the end of the interview.
Um and I think the three things I can articulate what it is on the founder we look for. One is um
At the continuity stage, right?
Often in the growth stage people.
I think pay attention to the founder, but they don't. Like if you're at a venture fund or a growth fund, you probably hung out with the founder for a week or two weeks before the investment. Some total of three hours. By the time continuity invests I probably know them for
Yours.
A month.
And I'm at a verse of interaction. So you're saying that you're paying attention more to the qualitative founder properties even at the growth stage than you are to their specific growth rate or you know what their margins look like or anything like that?
Yes, but you know, if the c three qualities hold
The metrics will show.
Hm.
I can either look at metrics.
But sometimes metrics don't tell you how good the internal sausage making is.
And
Many people can package the metrics in a fundraise deck. It's very well done. I mean we teach you to do it on the experts at it. So therefore we know it's gonna look great, right? So we also teach them how
What points to emphasize on?
Um we actually do practice runs. We write in demo day we actually even write the script sometimes. They don't understand what it is.
So
What we look for is
How fast does the founder move?
What is how fast do they move mean?
How fast do they ship?
How fast do they iterate?
It's the single biggest indicator in correlation to
Um
How successful they're gonna be how soon.
Because you won't be right about memo's many decisions early on, but at least are you learning from them fast and are you making changes. So that's one we measure.
Second at the growth stage is how
Well are you hiring?
Mm.
And if you're sloppy in hiring, it always hits a wall.
So one of the things we look for is how well are they hiring engineers, how good are they hiring execs. Will they be able to convince an incredible exec to come join them? Right? That's second. And third is clarity of thought.
Clarity of thought in the growth stage for us is
Are they can they write out two pages?
What makes this a five billion or a ten billion dollar company really well?
And if you're doing those three things,
You're gonna be on top of your metrics, your product market fit, your attention. No, there'll be rough edges, but I think because
Watching everyone from day one.
Uh we know how Tony scaled.
Uh we know deeply well how Josh and Gusto scale.
Uh so we know a lot of those founders, so we then know okay, these were rough edges, these are okay, you know, these other founders hadn't just have you I.
If you're a growth investor looking at these companies new, you're like, Oh I need I know that this is all going great, but you know
Those companies don't always all go great.
Some serious near death moments. Airbnb was not uh up into the right journey the whole time.
I know this is we're interviewing you, not not not me here, but it seems like
you invest based on the inputs rather than the outputs, or maybe the leading indicators rather than the trailing indicators. Where if somebody's
operating with those three principles.

the business probably won't consistently produce the results that someone would like to look for in a growth stage investment, but they much have they have a much higher probability at any given time of producing high quality results because
Those are the inputs that matter.
Yes, absolutely. And that's kinda why we feel strongly that inputs can be influenced.
Right? If you're learning
Uh best practices.
And those are your inputs.
then you can actually influence company building.
So when Tony comes and teaches our growth programme and says, These were my darkest moments, these are my mistakes I made and I sure hope you don't make these three mistakes, but these are two things I did really well.
That's incredibly valuable.
Yeah.
And so that
That colour is very hard to get outside of C.
Yeah.
All right, as we wind to a close, longtime listeners know.
There's a way that we need to close this and that's grading.
And with these episodes where we're covering a company in flight.
uh the only real way to grade it is to try and forecast future paths that could happen. So Anu, I'm curious in your mind
Paint us the A plus, the C and the F for Y C a decade from now.
And let's start with the F, because I think it's interesting. Like YC is so dominant. How could the whole thing go up in flames at this point? I think Y C is the only platform that has strong network effects, and as all network effects have shown, if you if we mess up
The Y C community that
That is that is that is the because it's we are s we we have this platform.
Only because of the Y C founders.
And there are community values. I mean we have written down community values. We have an internal book face, we have an ethics code.
I mean name one V C fund that has all that.
Right. So that's why we don't look like a venture fund. So for us, as long as we do right by the community.
We'll be good.
But if
If you in as negative network effects are very powerful, but they also decelerate very fast.
But if we met if we do any mistake with the community, then that would be the if.
Uh community the heavily community dependent business is just he heavily levered.
It reminds me of the
Acquired. Exactly. Yeah.
Absolutely.
Congratulations from where how far you've come. But we feel the same way. It's like it uh it's so amazing, but that's that is our fear. Like we
Nurturing the community and keeping it
The amazing thing that it is, is is the number one thing that we do. Okay, but you can't the C's boring so we won't cover it. But I I want the A plus. Like give me the B Hag for Y C from here. Like how do you change multiple orders of magnitude from where you are?
Or do you want to?
P or the A?
The A. Oh the A. Yeah. We definitely want to. Uh we want to be our

partner of the companies for the life of the companies.
And continuity I would say
has only strengthened the Visi community.
Because before they would reach out
Whenever they wanted help, or once in a while.
But now we have a full machine.
All the way to IPO and we have programming as I talked about, and it's really gotten the community super close.
And so I mean as I said, we are highly undercapitalized for the success of IC companies. Wait, wait, when you say all the way to IPO, so is IPO the end?
Ten years from now is there a Y C post IPO component?
Maybe, right? We already have post type we already have uh so if it's so funny. So we had the um
You know, we had we started with the Growth Program, which was just this CEO scaling programme, and the posting companies were like, Well, we need a programme.
And so we said, okay, we did the post A program. Now our companies have come and said, we need a pre-IPO program. You gotta get Airbnb and Coinbase to come teach this pre-IPO. And I'm sure soon they'll be like, we need up with it's the right. It's not like there's some magic moment and Brian Chesky and Brian Armstrong and Tony
don't have problems anymore. It's as hard as it gets. It never gets easier.
Um
I mean you do it so many times that you get better and better at the job, but you have other questions to ask and you need a peer group for it. Yeah. Right. So I think our ambition is
How do we scale YC to support more amazing companies and to especially also do it globally? Yeah.
Because we're I think the remote world will show us that companies can come from anywhere.
We already see that. A lot of BDB suc startups are based outside the US, but they service US customers. I mean, I'm sure you all have heard of Deal.
Uh and Alex lives in Israel.
Yeah.
Right. So Y C has to learn.
Scale globally because talent is everywhere.
That it is. Anu.
Thank you so much.
Thank you for having me.
Thank you.

You have to have it. Yeah.
All right listeners.
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Our next episode will be
The part two of the arena show with Jim Weber, the CEO of Brooks.
I mean, I was just listening back to the segment this morning and uh truly an unbelievable business growing from like twenty to thirty million in revenue.
two decades ago to clearing over a billion dollars in revenue last year.
Part of Berkshire Hathaway, deep personal relationship with Warren Buffett, purpose driven brand. There's just so many
Great.
things about the story. Ah, Jim, it's so wonderful.
We realized we had to make it its own episode.
Yes.
So we will be launching that in a couple days, and uh we really wanted to give it the space that it deserves.
So if you aren't in the acquired Slack, you should come join the eleven thousand other smart
creative members of the acquired community there.
Our thanks also to Pitchbook, their whole team.
Oh my gosh. This was such a life experience. Like whoever would have thought seven years ago that
acquired would be doing this. There were 44 people on and off the stage involved in the production of that event, so too many to think, but definitely the Pitchbook team came out in full force to put it on. We're super excited to share the the gym story with you, the and the story of Brooks.
And uh we'll we'll be doing that in a few days here.
And listeners.
We'll see you next time.
And we'll see you for the arena show part two.
Who got the truth?
Is it you, is it you, is it you Who got the truth now