Transcript
WEBVTT
1
00:00:12.439 --> 00:00:16.920
Hello and welcome to the consumer VC. I am your host, Michael,
2
00:00:17.160 --> 00:00:20.960
and on this show we talked about
the world of venture capital and innovation in
3
00:00:21.000 --> 00:00:25.480
both consumer technology and consumer products.
If you're enjoying this content, you could
4
00:00:25.480 --> 00:00:30.679
subscribe to my newsletter, the consumer
VC DOT substackcom, to get each new
5
00:00:30.679 --> 00:00:34.960
episode and more consumer news delivered straight
to your inbox. Our guest today is
6
00:00:35.000 --> 00:00:40.280
Patrick Chut found a partner of Ju
stappose. Ju Suppose is an inception stage
7
00:00:40.280 --> 00:00:45.039
investment firm. Some of the companies
they found it include ten care of and
8
00:00:45.159 --> 00:00:49.200
Dave faullward. Their process for how
they build companies is pretty unique, I'll
9
00:00:49.240 --> 00:00:52.960
be honest. We discussed their model, why their model is less risky than
10
00:00:53.000 --> 00:00:57.840
traditional VC and is process for finding
the right CEO to lead each business.
11
00:00:57.840 --> 00:01:11.959
Without further ADO, here's Patrick.
Patrick, thank you so much for joining
12
00:01:11.959 --> 00:01:15.760
me today. How are you?
I'm doing good. Thanks for having me,
13
00:01:15.799 --> 00:01:21.680
Mike. It's an absolute pleasure talk
to me about why you started and
14
00:01:21.760 --> 00:01:26.159
what is Ju suppose and what was
the initial insight that led you to to
15
00:01:26.200 --> 00:01:29.879
found it? Yeah, so just
suppose we're a bit of a unique investment
16
00:01:30.079 --> 00:01:33.799
or that in some ways Harkens back
to old school venture capital. And the
17
00:01:33.840 --> 00:01:36.879
real kind of big differentiator, if
I was going to summarize it at a
18
00:01:36.920 --> 00:01:41.519
bar ower drinks, is we're rather
than traditionally investing in companies where someone comes
19
00:01:41.560 --> 00:01:45.680
and pitches you an idea, will
spend years doing work in a space and
20
00:01:45.719 --> 00:01:48.959
then go and try to find a
world class athlete to partner with the start
21
00:01:49.000 --> 00:01:53.120
that company. And so a couple
of things that makes make our firm strategy
22
00:01:53.120 --> 00:01:56.920
different one. Rather than doing a
lot of things, which is the traditional
23
00:01:57.040 --> 00:02:00.680
venture model, we actually do very
few and so it forces a discipline on
24
00:02:00.799 --> 00:02:06.760
us to really get those things right, find the best absolute partners for them
25
00:02:06.799 --> 00:02:08.919
and really do those things very well. And then the second thing is because
26
00:02:09.000 --> 00:02:14.639
we take such wings and because our
model is usually premised on finding an opportunity
27
00:02:14.639 --> 00:02:20.280
of very complex space, we partner
with really, really experienced senior operators and
28
00:02:20.360 --> 00:02:23.039
that's a really, really important part
of our model. And so you know,
29
00:02:23.080 --> 00:02:27.000
I think to your question on the
insight, I've spent now over twenty
30
00:02:27.080 --> 00:02:31.159
years in the venture world and a
lot of what I saw and venture was
31
00:02:31.240 --> 00:02:35.159
not a good fit for me in
the sense that you had to spend a
32
00:02:35.199 --> 00:02:38.120
lot of time looking a lot of
things and say no to a lot of
33
00:02:38.159 --> 00:02:40.280
things to find the things that you
wanted to do. And I think what's
34
00:02:40.319 --> 00:02:44.719
really unique about our model is it
actually gives you the time and the space
35
00:02:44.759 --> 00:02:47.719
to go really, really, really
deep and you could almost separate the work
36
00:02:47.759 --> 00:02:52.400
that you do, diligence in an
opportunity, from diligence in the person,
37
00:02:52.560 --> 00:02:54.879
and then you could actually combine the
best of both worlds to start something,
38
00:02:55.039 --> 00:02:59.080
something that you want. I really
appreciate you sharing. I know you heard
39
00:02:59.080 --> 00:03:02.520
it off by saying exappos is what, maybe what traditional venture capital used to
40
00:03:02.560 --> 00:03:07.800
be. Do you mind explaining what
it was like, maybe when venture capital
41
00:03:07.879 --> 00:03:10.479
first came up, as as is
separate and maybe it was more formalizing to
42
00:03:10.599 --> 00:03:15.120
its own asset class and as well
as what you think venture capital has become?
43
00:03:15.439 --> 00:03:17.360
Sure, well, we could probably
have a longer conversation on the actual
44
00:03:17.400 --> 00:03:21.879
history of venture capital and how it
started. But but you know, I
45
00:03:21.919 --> 00:03:24.400
think if you think about, you
know, in terms of my comment,
46
00:03:24.680 --> 00:03:29.800
venture capital even twenty years ago,
forget seven years ago, but twenty years
47
00:03:29.840 --> 00:03:36.159
ago was a lot more. I
think of a craft investment asset class where
48
00:03:36.199 --> 00:03:39.199
you know the the venture capitalists themselves. You know, develop theeces had to
49
00:03:39.240 --> 00:03:44.039
go and search the world often because, you know, especially pre Internet days,
50
00:03:44.080 --> 00:03:46.960
where you didn't have information at your
fingertips, everyone wasn't tweeting at you,
51
00:03:46.960 --> 00:03:51.080
you had to go and actually find
the people or the spaces that you
52
00:03:51.080 --> 00:03:54.400
thought were interesting and often had to
construct what you thought the opportunity look like.
53
00:03:54.520 --> 00:03:57.800
Right. So you know, if
you had a very strong thesis in
54
00:03:57.840 --> 00:04:00.759
the space, you would go and
find really interesting entrepreneur operators. They would
55
00:04:00.759 --> 00:04:04.439
probably help you hold the insight maybe, and then you would take that insight,
56
00:04:04.479 --> 00:04:08.360
work with that operator and go build
something. And and I think a
57
00:04:08.360 --> 00:04:11.680
lot of great venture funds actually got
built because they were able to help construct
58
00:04:11.719 --> 00:04:15.439
those those deals. And there's still
other mentor funds like sorer Hill that do
59
00:04:15.479 --> 00:04:17.959
this as a core part of what
they do. I think, and again
60
00:04:18.040 --> 00:04:21.120
over the last ten, fifteen years, definitely over the last three to five
61
00:04:21.199 --> 00:04:25.199
years, in the world has just
become a place where information is a lot
62
00:04:25.240 --> 00:04:29.399
more available and if you're an entrepreneur, you're screaming everyone that you're an entrepreneur,
63
00:04:29.439 --> 00:04:31.480
if you're invent street, screaming everyone
that you're an investor. And so
64
00:04:31.959 --> 00:04:38.000
I think the function of the venture
capitalist in the traditional sense has evolved a
65
00:04:38.000 --> 00:04:40.560
bit, right, and so you
know, there's a lot of information that
66
00:04:40.600 --> 00:04:43.399
you have to process, there's a
lot of inbound that you have to deal
67
00:04:43.480 --> 00:04:47.439
with and in some ways what used
to be hard was finding that really unique
68
00:04:47.480 --> 00:04:51.000
thing, finding that unique person.
No one else was getting to them,
69
00:04:51.000 --> 00:04:55.839
convincing them, telling them what venture
capital was and then giving them the capital
70
00:04:55.879 --> 00:04:59.360
and support to do it. Now
it's a bit more you kind of know
71
00:04:59.399 --> 00:05:00.800
what could companies are out there.
You kind of know there's a lot of
72
00:05:00.800 --> 00:05:04.519
information out there and you kind of
have to do some sifting, but you
73
00:05:04.519 --> 00:05:06.920
have to do a lot of selling
to and so that's kind of what I
74
00:05:06.959 --> 00:05:11.800
meant. I feel like we're kind
of a throwback in that we construct everything.
75
00:05:11.800 --> 00:05:14.920
We don't do that many things.
We spend a lot of time really
76
00:05:15.000 --> 00:05:17.279
kind of hands on helping to build
the deals that we get into. Got
77
00:05:17.360 --> 00:05:21.120
It. So what I kind of
understand from this is what I think about
78
00:05:21.120 --> 00:05:25.759
traditional venture capital. Maybe it's a
bit more top down oriented or approach,
79
00:05:25.759 --> 00:05:29.879
where might be more specialized in certain
categories, right, and you look at
80
00:05:29.920 --> 00:05:34.120
what are the opportunities in the categories
and maybe go and maybe chase those opportunities
81
00:05:34.160 --> 00:05:40.480
there were. Right now, since
founders are pretty where venture capital is and
82
00:05:40.639 --> 00:05:46.360
obviously Vic's want to attract the best
founders, it's a bit more maybe bottoms
83
00:05:46.399 --> 00:05:49.439
up in a funny way, whereas
Hey, you know, entrepreneur, what
84
00:05:49.560 --> 00:05:53.680
is the actual insight here that you're
doing? And it's a bit less,
85
00:05:53.720 --> 00:05:56.560
maybe thematic, as it used to
be. If as for to say,
86
00:05:56.720 --> 00:06:00.120
yeah, I think that that's one
important vector of differentiation. Right. That
87
00:06:00.160 --> 00:06:02.399
the kind of time I like that
top down, bottoms up differential point.
88
00:06:02.480 --> 00:06:06.639
I would just add that the second
piece, I think even more old school
89
00:06:06.720 --> 00:06:10.720
venture. There was a lot of
the match making. You know somebody,
90
00:06:11.000 --> 00:06:14.040
you build this strong pieces, you
think this person would be perfect, come
91
00:06:14.079 --> 00:06:17.399
here, let me help do this
together, and that kind of match making.
92
00:06:17.519 --> 00:06:21.240
In the frenetic world now where deals
happen in two days and and not,
93
00:06:21.279 --> 00:06:25.399
you know, and we have all
these efficient processes where this we're interesting
94
00:06:25.399 --> 00:06:29.439
companies get surfaced and get accelerated.
It's a different sport. Yeah, now,
95
00:06:29.560 --> 00:06:32.519
that makes sense. How do you
think about and why? You know,
96
00:06:32.720 --> 00:06:40.160
your model, you believe is maybe
less risky than maybe currents venture capital.
97
00:06:40.240 --> 00:06:44.360
Yeah, I actually think it's quite
simple. We do more work and
98
00:06:44.399 --> 00:06:47.000
we say more, we say no
to more things, and then if,
99
00:06:47.000 --> 00:06:49.439
for the few things that we say
yes on, we set a really more
100
00:06:49.560 --> 00:06:54.040
high for the for the partner that
we can hand select to work with to
101
00:06:54.079 --> 00:06:58.079
build that thing. And so I
think, you know, it's kind of
102
00:06:58.360 --> 00:07:00.920
do a lot of work, say
no to more, say yes to less,
103
00:07:00.959 --> 00:07:03.000
and then, for the thing that
you're going to work on, make
104
00:07:03.040 --> 00:07:05.439
sure that your bar for the partner
that you're working with is very, very
105
00:07:05.519 --> 00:07:10.240
high. If you do all of
that, you probably will take risk out
106
00:07:10.279 --> 00:07:13.000
of the system, like I don't
think you know. So, said another
107
00:07:13.040 --> 00:07:17.279
way, I don't think that we
have some sort of arbitrage against traditional ventry
108
00:07:17.279 --> 00:07:19.639
capital. Like we don't. We
can't change the market to make the market
109
00:07:19.720 --> 00:07:23.519
less risky. What we can say
is, for the two things that we
110
00:07:23.560 --> 00:07:26.360
do every year, we're going to
make sure that the market is large.
111
00:07:26.360 --> 00:07:28.759
We're going to make sure we've spent
two to three years doing work, we're
112
00:07:28.800 --> 00:07:31.959
going to build tends of prototypes and
talk to hundreds of customers. We're going
113
00:07:32.000 --> 00:07:36.439
to then validate that, you know, from four or five different angles.
114
00:07:36.439 --> 00:07:41.079
And after we do all of that
and know exactly what the sport is that
115
00:07:41.120 --> 00:07:44.800
we want to play. Let's code. Then write out the kind of dream
116
00:07:44.800 --> 00:07:47.079
that the dream JD, the dream
kind of profile of the ask that you
117
00:07:47.120 --> 00:07:50.079
want, and then be willing to
take twelve to eighteen months, twenty four
118
00:07:50.079 --> 00:07:53.800
months, to find that perfect person
like and if you do that, I
119
00:07:53.800 --> 00:07:57.319
think the drawback to the model is, and there's a question then, is
120
00:07:57.319 --> 00:07:59.959
okay, well, if you could
do venture capital, that's risky. What
121
00:07:59.959 --> 00:08:03.040
are the what's the drawback? The
real tradeoff is we just can't do as
122
00:08:03.120 --> 00:08:05.639
much. Failure costs a lot more, and so if we're going to invest
123
00:08:05.680 --> 00:08:09.079
the resources we do and that kind
of model, we just have to make
124
00:08:09.120 --> 00:08:13.399
more certain that the thing that we
do works. Got To make more certain
125
00:08:13.439 --> 00:08:16.720
that the person we're working with is
the absolute right partner and we're going to
126
00:08:16.720 --> 00:08:18.920
have to invest a lot in that
thing to make sure it successful. So
127
00:08:20.160 --> 00:08:22.560
when you say do the work,
this is incubing a company, and you
128
00:08:22.560 --> 00:08:28.839
spend like one or two years validating
that this could actually be, you know,
129
00:08:30.120 --> 00:08:35.399
a large company and maybe a category
defining company in some capacity, and
130
00:08:35.440 --> 00:08:39.559
then you actually go out and you
pick who is the CEO that you want
131
00:08:39.639 --> 00:08:43.039
to be to partner with for this
company, is that is that roughly right
132
00:08:43.080 --> 00:08:45.600
in terms of like the early stages. Yeah, yeah, I think that's
133
00:08:45.679 --> 00:08:48.639
right. So we call that process
concept development and I think to your point,
134
00:08:48.759 --> 00:08:52.679
I think the way you describe it
is quite quite nice because it juxtaposes
135
00:08:52.000 --> 00:08:56.480
a lot of different, sometimes non
overlapping, functions together in terms of how
136
00:08:56.519 --> 00:09:00.480
we do it. But yes,
will we usually start with, if what
137
00:09:00.519 --> 00:09:03.639
we describe as an observation, it's
usually some sort of observation of the world.
138
00:09:03.679 --> 00:09:07.200
It's a true fact, and then
we will do a lot of commercial
139
00:09:07.200 --> 00:09:11.840
business, venture capital, private Acre
style research on that observation and will also
140
00:09:11.919 --> 00:09:16.679
do, you know, kind of
the creative aspects of the user research to
141
00:09:16.759 --> 00:09:20.799
design, the prototyping, the ethnographic
research to really see both sides of that
142
00:09:20.840 --> 00:09:24.399
picture. And after we do all
of that work and we validate that,
143
00:09:24.399 --> 00:09:28.840
there is a really large opportunity if
we pursue this for five to ten years,
144
00:09:28.879 --> 00:09:33.600
there is a very interesting mirror and
opportunity over the one or two years
145
00:09:33.639 --> 00:09:37.039
that we could diligence even more,
even more closely, because it's a lot
146
00:09:37.080 --> 00:09:39.559
easier to understand what's going to happen
a month from now, a year from
147
00:09:39.600 --> 00:09:43.679
now, two years from now,
that it is ten and once you have
148
00:09:43.720 --> 00:09:45.840
all of that and you kind of
have an idea, okay, what would
149
00:09:45.919 --> 00:09:50.679
be the absolute perfect person and people
to bring on to really attack that opportunity?
150
00:09:50.720 --> 00:09:52.799
That's then when we say, okay, let's go and do this.
151
00:09:52.240 --> 00:09:54.960
Got It. That's really, really
interesting. I mean, so start from
152
00:09:56.000 --> 00:10:01.120
the very, very beginning. What
is even the process in identifying like an
153
00:10:01.159 --> 00:10:05.240
observation, even if you have been
in examples of observation that maybe didn't make
154
00:10:05.320 --> 00:10:07.679
it to me be like the next
stage, for example, and how do
155
00:10:07.679 --> 00:10:11.600
you had to define like the different
kind of stages in order to eventually for
156
00:10:11.720 --> 00:10:20.240
this observation and idea eventually to become
a company? Yeah, it's so to
157
00:10:20.320 --> 00:10:24.120
start, how we define an observation? Is a true, verifiable fact in
158
00:10:24.159 --> 00:10:28.480
the world, and I start with
that definition because I think people are often
159
00:10:28.480 --> 00:10:31.279
asked like, okay, you guys, wow, you guys come up with
160
00:10:31.320 --> 00:10:33.320
ideas like that sounds so amazing,
like tell me how you come up with
161
00:10:33.360 --> 00:10:35.519
an idea and say, okay,
well, let's break this down to the
162
00:10:35.519 --> 00:10:39.799
component facts. Like what we actually
start with is pretty is actually quite simple.
163
00:10:39.840 --> 00:10:43.440
It's literally something that you can observe. It is a fact and if
164
00:10:43.480 --> 00:10:46.200
we all agree that that fact is
a fact. That's a good starting point
165
00:10:46.240 --> 00:10:48.759
for us to talk about. If
this is opportunity there, right and so
166
00:10:50.000 --> 00:10:52.080
and then then I'll get to a
couple of examples, but I would say
167
00:10:52.159 --> 00:10:56.559
at the observation level it could be
anything from I'm talking with Mike and he's
168
00:10:56.600 --> 00:10:58.919
saying, Hey, have you seen
this really cool thing? This thing is
169
00:10:58.919 --> 00:11:01.159
blowing up. Consumers love it,
like Oh, that's interesting. Okay,
170
00:11:01.159 --> 00:11:05.559
well, let's get to like what
is the you know, what is observable
171
00:11:05.600 --> 00:11:07.919
fact there? That could be the
inside for something. It could be a
172
00:11:07.919 --> 00:11:13.320
conversation with, you know, with
a spouse or the even a friend,
173
00:11:13.360 --> 00:11:16.519
and they're just telling you about a
big pain point they have. That probably,
174
00:11:16.519 --> 00:11:18.639
by the way, if a friend
tells you, you know what I
175
00:11:18.720 --> 00:11:22.159
really think, the roads in New
York City suck and there's a lot of
176
00:11:22.159 --> 00:11:24.960
potholes in New York City. I
don't know how useful of a fact that
177
00:11:24.080 --> 00:11:26.559
is, but that is a that's
an observation. We could put that in
178
00:11:26.559 --> 00:11:30.519
our observation. What that observation could
kind of filter out to a lot of
179
00:11:30.559 --> 00:11:33.519
different things, and so we usually
start there, which is let's find observa
180
00:11:33.639 --> 00:11:37.360
facts in the world that could come
from reading, talking with people, research
181
00:11:37.440 --> 00:11:41.840
we're doing, companies that we're seeing
in the market, and let's distill what
182
00:11:41.919 --> 00:11:46.559
it actually is that we're observing from
that observation. We will then go and
183
00:11:46.600 --> 00:11:50.080
say, okay, what are insights
that you can you can pull out from
184
00:11:50.120 --> 00:11:54.000
that observation and then maybe going to
your question. For an example, this
185
00:11:54.080 --> 00:11:58.360
is something that is an observation that
was true around two thousand and ten,
186
00:11:58.360 --> 00:12:01.440
two thousand and eleven, the I
phone pops up, it becomes this device.
187
00:12:01.679 --> 00:12:05.360
Everyone knows. It's just, you
know, computer in your pocket.
188
00:12:05.360 --> 00:12:09.720
But the real interesting observation at the
time that I think can sparked a lot
189
00:12:09.799 --> 00:12:15.159
of really cool companies is for the
first time ever you have a GPS always
190
00:12:15.159 --> 00:12:20.120
on device available in every car where
someone has a summart phone right. And
191
00:12:20.240 --> 00:12:22.879
if you step back and you think
about it like that is actually a pretty
192
00:12:22.919 --> 00:12:28.840
interesting observation. Like before you couldn't
do anything that looked anything like taxi dispatch
193
00:12:28.879 --> 00:12:33.120
because no one had people had to
have taxi dispatch machines in their car for
194
00:12:33.159 --> 00:12:35.399
you to communicate with them, or
you had to call them on their cell
195
00:12:35.399 --> 00:12:39.600
phones. Now suddenly you have this
device that is always on and has GPS
196
00:12:39.600 --> 00:12:41.639
beeping every moment. And so what
does that mean? Well, you could
197
00:12:41.639 --> 00:12:45.440
see that that observation will tell you. Well, there's going to be a
198
00:12:45.519 --> 00:12:48.240
lot of radio interference in the car. Can I build something around that?
199
00:12:48.320 --> 00:12:52.399
Now we have all this information flowing. We construct to track traffic flow.
200
00:12:52.440 --> 00:12:54.679
Well, what can we do for
that? Or you know, probably like
201
00:12:54.759 --> 00:12:58.279
you know, backing into maybe something
like an Uber or lift. You now
202
00:12:58.320 --> 00:13:03.480
have the ability to do on demand
dispatch. You can now send cars to
203
00:13:03.519 --> 00:13:09.120
somebody anywhere, anytime, right.
And so in that that's not an example
204
00:13:09.159 --> 00:13:11.080
that led to a company that we've
built, but I think it's an interesting
205
00:13:11.200 --> 00:13:16.919
it's kind of an analog around with
an observation. That's its basic as GPS
206
00:13:16.960 --> 00:13:20.720
always on in cars. You could
have fifty or a hundred different interesting insights
207
00:13:20.720 --> 00:13:24.120
than can then drive you to a
business opportunity. Yeah, that makes a
208
00:13:24.120 --> 00:13:28.879
lot of sense. How many kind
of observations you typically do or have or
209
00:13:30.039 --> 00:13:33.559
analyze maybe in a three month period, if that's fair to same. I'm
210
00:13:33.600 --> 00:13:37.200
not too sure what the amount of
period length is. And then kind of
211
00:13:37.279 --> 00:13:41.679
go into insights and then how many
do you do you think about on the
212
00:13:41.720 --> 00:13:45.759
insight side? That kind of graduate
maybe from our observation to a okay,
213
00:13:45.759 --> 00:13:48.360
this is actually a compelling insight through
it, and then kind of going down
214
00:13:48.399 --> 00:13:52.639
your funnel into you know what,
this is the one thing we want to
215
00:13:52.639 --> 00:13:54.559
pursue this year, in the next
couple years, in order to make her
216
00:13:54.600 --> 00:13:58.720
into an actual business. Yeah,
it's a good question and I think,
217
00:13:58.759 --> 00:14:03.000
like all, like a lot of
answers to really good questions. There's some
218
00:14:03.080 --> 00:14:05.559
new wants there, but I'll give
you some number because I think at the
219
00:14:05.639 --> 00:14:07.919
high level, and then I'll tell
you what the nuance is. Right.
220
00:14:07.960 --> 00:14:11.440
So I would say in a given
quarter we probably process, we probably track
221
00:14:11.559 --> 00:14:16.120
five hundred to a thousand observations,
of which we may talk about ten percent,
222
00:14:16.200 --> 00:14:20.360
like somewhere between fifty and a hundred, right. So in any given
223
00:14:20.399 --> 00:14:24.399
quarter because, again, observations are
we're not very precious about them, because
224
00:14:24.399 --> 00:14:26.679
the observation itself is just a fact, right, and and the fact,
225
00:14:26.720 --> 00:14:31.679
if we all can agree on the
verified fact, then that is useful because
226
00:14:33.039 --> 00:14:35.600
as a baseline at least, no
one will argue. Mike, that it
227
00:14:35.720 --> 00:14:39.200
might give you said that you really
feel like New York City doesn't have great
228
00:14:39.200 --> 00:14:41.440
Mexican food. The fact could be
that Mike said that New York City doesn't
229
00:14:41.440 --> 00:14:45.559
agree with Mexican food, that doesn't. You know whether that's useful or not's
230
00:14:45.559 --> 00:14:50.759
another question, right. But we'll
track like hundreds of hundreds of those observations.
231
00:14:50.759 --> 00:14:56.399
What will then happen is we will
prioritize from that observation some that we
232
00:14:56.440 --> 00:15:00.759
think are really useful and we will
start to do diligence and work around those
233
00:15:00.799 --> 00:15:05.120
observations to understand if there is a
business use case or an insight into that
234
00:15:05.159 --> 00:15:09.799
observation that will then maybe be the
spark for a bigger opportunity. And so
235
00:15:09.879 --> 00:15:13.919
in our process, usually that starts
with more of a commercial lens, and
236
00:15:13.960 --> 00:15:16.720
when I say commercial lends, it's
trying to understand from the observation what is
237
00:15:16.720 --> 00:15:20.720
the business opportunity that exists. And
so you could see, you know often
238
00:15:20.799 --> 00:15:24.799
that that, I would say,
looks sometimes like what you think of Private
239
00:15:24.799 --> 00:15:28.159
Equity Fund or a venture capital principle
would be doing like okay. Well,
240
00:15:28.240 --> 00:15:33.000
if in that observation, if we've
generated some concepts around that observation, one
241
00:15:33.039 --> 00:15:35.840
of them is text taxi dispatch.
Okay. Well, well, let's start
242
00:15:35.840 --> 00:15:39.679
by saying what is taxi dispatch?
What does that market size look like?
243
00:15:39.759 --> 00:15:41.840
What does that Industry Structure Look like? Is it very G is it very
244
00:15:41.840 --> 00:15:46.399
geographically bound as a national what are
regulations around that space? What are pain
245
00:15:46.399 --> 00:15:50.480
points that taxi drivers have? What
are paining points and consumers have? You
246
00:15:50.480 --> 00:15:54.200
know, what are thing what are
technologies that have been enabled and not enabled
247
00:15:54.200 --> 00:15:56.440
in that space? And so you
kind of start by taking that fact and
248
00:15:56.480 --> 00:16:00.399
then generating in different insights that then
allow you to build some sort of idea
249
00:16:00.440 --> 00:16:04.000
around a market. And then,
once you have that, I think for
250
00:16:04.120 --> 00:16:07.200
us we kind of describe the process
as a bit of a bow tie.
251
00:16:07.240 --> 00:16:10.440
You kind of are generative, you're
looking at a bunch of things and then
252
00:16:10.440 --> 00:16:12.679
you're starting to become really brutal and
we cut a lot right. And so
253
00:16:12.840 --> 00:16:17.080
I would say that out of any
out of a hundred observations we have,
254
00:16:17.240 --> 00:16:19.559
if we spend actual time on ten
or fifteen of them, out of the
255
00:16:19.600 --> 00:16:22.639
ten or fifteen will probably cut two, three, D and twenty five very
256
00:16:22.720 --> 00:16:26.519
quickly right. And the reason why
I see there's a little bit of nuance
257
00:16:26.559 --> 00:16:30.000
here is our funnels are not nothing
ever really dies in our funnel. A
258
00:16:30.039 --> 00:16:33.200
lot of things. What you basically
say is, wow, the place that
259
00:16:33.240 --> 00:16:37.840
we ended up going down in.
That dig ended up in the dead end,
260
00:16:37.840 --> 00:16:40.440
but there's usually some learning there.
And I could go back to a
261
00:16:40.440 --> 00:16:42.600
couple examples of companies we built where
it's been in our process. It took
262
00:16:42.600 --> 00:16:45.600
three or four years of work.
That didn't mean we had five people working
263
00:16:45.600 --> 00:16:48.240
one hundred percent time three to four
years. It meant that they kind of
264
00:16:48.240 --> 00:16:52.240
a recycled and they were they re
entered the funnel because a new insight was
265
00:16:52.240 --> 00:16:56.120
was derived from work and then later
on we came back to it. And
266
00:16:56.159 --> 00:17:00.519
so you know, if we have
let's say five hundred observations and we do
267
00:17:00.600 --> 00:17:04.400
work on fifty, it's like fifty
to seventy five of them. We quickly
268
00:17:04.440 --> 00:17:07.680
get down to five to fifteen things
that we're spending a lot of time on.
269
00:17:08.000 --> 00:17:12.119
Usually, for each of those things
will probably do at least four to
270
00:17:12.200 --> 00:17:15.440
six months of work before we green
light it, and usually we start one
271
00:17:15.480 --> 00:17:18.680
to two things a year. And
so that's kind of the funnel. It's
272
00:17:18.720 --> 00:17:22.079
a pretty brutal funnel, like we
just don't do that many things, I
273
00:17:22.160 --> 00:17:25.440
trust to post. Yeah, I
know exactly, because I know you only
274
00:17:25.559 --> 00:17:29.480
launch one or two companies a year. So I'm always kind of intrigued because,
275
00:17:29.680 --> 00:17:33.559
I mean started off from five hundred
to a thousand observations and then narrated
276
00:17:33.640 --> 00:17:37.960
down to fifty to a hundred maybe
insights, all the way down to that
277
00:17:37.039 --> 00:17:41.359
kind of fifteen number where you're quite
deep into the inside of the observation and
278
00:17:41.559 --> 00:17:45.200
kind of going on there. I
mean, and I'd imagine, what do
279
00:17:45.240 --> 00:17:48.400
you say? Things are maybe recycled
is it's a type of thing where it's
280
00:17:48.400 --> 00:17:52.000
like, okay, this is really
interesting, this other inside is other observation
281
00:17:52.319 --> 00:17:56.079
or category we find particularly this might
be the right moment in order to that.
282
00:17:56.119 --> 00:18:00.160
We're going to concentrate on this idea. Maybe we'll table that for for
283
00:18:00.359 --> 00:18:04.359
next year per se. Yeah,
it's a really good question. I would
284
00:18:04.359 --> 00:18:07.599
say when things have taken a long
time or we enter the funnel, it's
285
00:18:07.680 --> 00:18:15.119
less about US having been intentionally this
is the wrong time and usually more of
286
00:18:15.519 --> 00:18:18.079
wow, that is an interesting insight. This is going to take more time
287
00:18:18.119 --> 00:18:22.160
for us to dig into. And
we have this other thing that we're looking
288
00:18:22.200 --> 00:18:25.680
at that is deeper in terms of
US understanding the opportunity to space. Why
289
00:18:25.680 --> 00:18:27.599
don't we focus on that thing?
And so I'll give you a really good
290
00:18:27.599 --> 00:18:32.160
example of this. In our portfolio
we have a company a called Orchard.
291
00:18:32.200 --> 00:18:36.400
It's in the real estate space.
It really like the value proposition to the
292
00:18:36.400 --> 00:18:40.279
consumers to make it as easy and
seemless to buy a car at home as
293
00:18:40.319 --> 00:18:44.559
it is a car, so really
making that transaction a lot simpler. You
294
00:18:44.599 --> 00:18:47.319
know, the company is now,
you know, more than a dozen markets
295
00:18:47.319 --> 00:18:49.599
and, as you know, a
couple billion dollars of GMV. What's interesting
296
00:18:49.680 --> 00:18:55.240
was that company existed in two cycles
before we actually started the business. And
297
00:18:55.279 --> 00:18:59.519
the real interesting the initial insight that
we had that got us down the road
298
00:18:59.599 --> 00:19:03.960
of building what is effectively a full
stack, vertically integrated brokerage that does that
299
00:19:03.000 --> 00:19:07.400
makes life really easy for consumers,
was completely unrelated to making loaves really easy
300
00:19:07.400 --> 00:19:11.279
for consumers. The initial the initial
insight that we had was looking at what
301
00:19:11.319 --> 00:19:17.119
was happening in the single family homeworld
and where you had these big private equity
302
00:19:17.119 --> 00:19:21.920
firms and these big investment firms who
are able to in a matter of years,
303
00:19:22.000 --> 00:19:27.119
go and price very accurately by turnaround
and sell homes in a bunch of
304
00:19:27.160 --> 00:19:32.000
different markets. And we said Wow, oh, like twenty five years ago,
305
00:19:32.200 --> 00:19:37.200
and this goes to like a core
a core concept that we really are
306
00:19:37.240 --> 00:19:41.160
a core principle that we think is
really interesting for us to find businesses with
307
00:19:41.200 --> 00:19:45.000
this idea that there are obsolete assumptions
that a lot of people in the world
308
00:19:45.000 --> 00:19:49.039
hold and if you actually have an
insight that breaks that obsolete assumption in a
309
00:19:49.119 --> 00:19:52.839
large industry, you can clean a
lot of value. And in this case,
310
00:19:52.720 --> 00:19:56.720
what was the obsolete assumption, the
obsolute assumption, was its own unique
311
00:19:56.759 --> 00:19:59.680
thing and you can never do that
at scale for single family holms. You
312
00:19:59.680 --> 00:20:02.519
can never have an investment firm that
does all that work, that does that
313
00:20:02.640 --> 00:20:04.759
for thousands of homes within a quarter
in a you know, in a part
314
00:20:04.799 --> 00:20:10.599
of Phoenix, and through a combination
of technology, better algorithm and pricing and
315
00:20:10.680 --> 00:20:14.599
better operations, these investment firms basically
prove that that was obsolete. That is
316
00:20:14.599 --> 00:20:17.480
actually not true. You can do
that. And so when we saw that
317
00:20:17.519 --> 00:20:19.480
we said, okay, if that
is true, what else? How else
318
00:20:19.480 --> 00:20:23.920
does that apply into real estate markets
that currently are held back because they continue
319
00:20:23.920 --> 00:20:29.079
to hold that obsolete assumption? Wow, that's really, really interesting. What
320
00:20:29.119 --> 00:20:33.920
are some insights? You might have? Have Very, very capelling insight that.
321
00:20:34.119 --> 00:20:37.880
Okay, there's an opportunity here,
but how do you maybe separate that
322
00:20:37.960 --> 00:20:41.960
opportunity from making sure that they this
is actually the right time we're to actually
323
00:20:41.960 --> 00:20:45.880
start this business and not to maybe
wait a year two, if that makes
324
00:20:45.920 --> 00:20:49.640
sense. Yeah, we tend to
look for look at Evergreen Industries and Evergreen
325
00:20:49.680 --> 00:20:55.440
spaces where we think the opportunities are
large and we're actually trying to be overly
326
00:20:55.480 --> 00:20:57.920
precise around timing. Is a bit
of a fulls errand so that might sound
327
00:20:57.960 --> 00:21:03.039
a little bit of a strong statement, like and what I mean is like
328
00:21:03.079 --> 00:21:04.799
I think through our insight process and
you know, we do a lot of
329
00:21:04.799 --> 00:21:07.720
work that's more commercially oriented, but
we do a lot of work that's user
330
00:21:07.799 --> 00:21:11.039
oriented. I actually think you know
what you say, when you say timing
331
00:21:11.079 --> 00:21:17.640
is off, what I hear is
there are parts of our concept that actually
332
00:21:17.640 --> 00:21:21.400
we can disprove using our work right
and so when you say timing is off,
333
00:21:21.440 --> 00:21:23.400
for example, I think often what
I see in the venture markets is
334
00:21:23.440 --> 00:21:27.039
you have this great technology, like
really interesting technology. It's Ai, it's
335
00:21:27.160 --> 00:21:32.359
Vr, it's web three or Crypto, but we're not sure actually how that
336
00:21:32.400 --> 00:21:37.200
thing will be used right in in
your words, that could be an example
337
00:21:37.279 --> 00:21:41.680
of maybe that's something where timing is
off in our work. What that would
338
00:21:41.680 --> 00:21:45.240
mean is like if we saw we
thought web three was really interesting technology,
339
00:21:45.319 --> 00:21:48.599
or cryptoor or whatever machine learning are, we would then say, well,
340
00:21:48.640 --> 00:21:51.480
we have to have a thesis around
how that's in create value. And the
341
00:21:51.480 --> 00:21:53.680
truth is our process of probably while
we talk to a thousand users, we
342
00:21:53.680 --> 00:21:57.000
would test these feces and what would
likely happen is people are like, that's
343
00:21:57.039 --> 00:22:00.559
really cool, but I'm not ready
for that yet. I'm not going to
344
00:22:00.559 --> 00:22:03.000
buy that thing. I'm not I
don't understand how that's going to change my
345
00:22:03.039 --> 00:22:07.240
life, and so that's how we
would uncover that the timing is wrong.
346
00:22:07.480 --> 00:22:10.519
I think we actually are almost in
the opposite side of things, which is,
347
00:22:10.599 --> 00:22:12.839
let's choose opportunities that are so large, that are usually complex, that
348
00:22:12.880 --> 00:22:17.079
are hard to immediately arbitrage, such
that if it takes us one or two
349
00:22:17.119 --> 00:22:18.640
years to find the right person,
we're okay with it, like it's that
350
00:22:18.680 --> 00:22:22.240
big of an opportunity. It's that
it's going to be around for that long.
351
00:22:22.559 --> 00:22:27.799
In your process for you know,
creating companies and of course, you
352
00:22:27.799 --> 00:22:33.839
know launching maybe one to do companies
a year or every couple years, what
353
00:22:33.039 --> 00:22:38.079
is the hardest part of the entire
process. Is it recruiting, for example,
354
00:22:38.319 --> 00:22:42.519
and partner with a CEO, or
is it figuring out, since you,
355
00:22:42.559 --> 00:22:48.680
I'm sure you have several incredible insights
and opportunities, figuring out the exact
356
00:22:48.759 --> 00:22:52.039
one that you want to focus on
and be able to focus? What do
357
00:22:52.079 --> 00:22:55.440
you kind of think about, you
know, in the kind of studiom model
358
00:22:55.519 --> 00:22:57.960
that that you have, which is
very concentrated, what was the hardest part
359
00:22:57.960 --> 00:23:02.279
for you and your team? A
lot of it is hard and fun and
360
00:23:02.319 --> 00:23:06.519
I think the the challenge is actually
what makes it so so exciting is you
361
00:23:06.519 --> 00:23:08.279
know you kind of hit it right
and you're like wow, we've you know,
362
00:23:08.359 --> 00:23:12.559
we've really created magic. I would
say I think the bottleneck, the
363
00:23:12.599 --> 00:23:19.160
limited the limiting region in the reaction
is the exact right founding CEO for the
364
00:23:19.240 --> 00:23:22.160
right business. It's finding that match, but it's really on the talent side,
365
00:23:22.279 --> 00:23:26.799
and that's not to discount in any
way. Getting to really interesting insights
366
00:23:26.839 --> 00:23:30.480
and large spaces is hard and validating
that you know you kind of have an
367
00:23:30.519 --> 00:23:33.480
idea of what we describe as the
wedge pieces, but like the first couple
368
00:23:33.480 --> 00:23:37.400
of years, like knowing that you
built something that's going to have really economics
369
00:23:37.440 --> 00:23:40.319
is really going to stand by itself
and gets you gives you the chance to
370
00:23:40.359 --> 00:23:45.319
go and take the big venturous swing
like that's all difficult, but I think
371
00:23:45.319 --> 00:23:48.039
our strong view is having all of
that and then not having the right person
372
00:23:48.359 --> 00:23:52.559
is kind of not the right strategy
for juxtapose and in fact that would kind
373
00:23:52.559 --> 00:23:56.480
of start to break the flywheel that
we have, which is a few things
374
00:23:56.480 --> 00:24:00.920
doing them well, that working,
that attracting other really great people and that
375
00:24:00.920 --> 00:24:03.359
fly wont going. And so for
us, you know, it's sometimes painful
376
00:24:03.359 --> 00:24:07.559
when you're sitting on something that you've
spent twelve, eighteen months to work.
377
00:24:07.599 --> 00:24:10.440
You know you want to do it. Time is taking by, companies are
378
00:24:10.480 --> 00:24:14.440
getting built in the space and you're
just sitting there waiting to find the right
379
00:24:14.519 --> 00:24:17.680
person. But you know, in
our experience getting that right person is so
380
00:24:17.680 --> 00:24:19.640
important to we have to do it. Yeah, no, for sure,
381
00:24:19.680 --> 00:24:25.839
for sure, absolutely. What's one
thing do you think that you would change
382
00:24:25.880 --> 00:24:30.519
about venture capital? Overall, it
the whole business adventure. There are great
383
00:24:30.599 --> 00:24:33.960
venture firms and I think venture capital
right now is opening up a ton of
384
00:24:34.000 --> 00:24:38.599
opportunity for entrepreneurs. You know someone
with you know, an idea, insight,
385
00:24:38.640 --> 00:24:41.720
it's hard work. You know,
a couple friends beyond a computer can
386
00:24:41.759 --> 00:24:45.880
start a company. I think this
is generally it's an amazing asset class that's
387
00:24:45.920 --> 00:24:49.079
creating a lot of opportunity. I
think to your question, maybe not necessarily
388
00:24:49.119 --> 00:24:55.079
something that would change, but something
that does maybe frustrate me or give me
389
00:24:55.160 --> 00:24:59.240
ankst is that venture that, I
think, the actual true art adventure is
390
00:24:59.880 --> 00:25:03.480
about depth and it's about deep knowledge. It's about understanding something in a way
391
00:25:03.519 --> 00:25:07.839
that other people don't, having a
countertuitive insight. You know, some people
392
00:25:07.880 --> 00:25:11.519
talk about narrative violations, like a
violation around something that everything believes it is
393
00:25:11.559 --> 00:25:15.240
true. It's really like a Eureka
insight and I feel like right now the
394
00:25:15.279 --> 00:25:18.440
market is a lot of noise.
Everything is a sound by it. Everything
395
00:25:18.519 --> 00:25:22.400
is kind of a hundred forty characters
and they in that world it's hard to
396
00:25:22.400 --> 00:25:25.039
get your mind focused on trying to
go really deep, and so if there's
397
00:25:25.039 --> 00:25:27.839
anything that I would I would love
to see is less noise and more folks
398
00:25:27.880 --> 00:25:30.920
like kind of seeking truth. Yeah, and I think that and again,
399
00:25:30.960 --> 00:25:34.079
there's nothing wrong with this, just
just a different way to do it.
400
00:25:33.960 --> 00:25:37.359
It just seems like there's also,
you know, a lot of funds where
401
00:25:37.400 --> 00:25:41.079
are quite large funds but in terms
of your actual going deep aside of it.
402
00:25:41.119 --> 00:25:42.119
You know, they might not take
a board teat, for example,
403
00:25:42.119 --> 00:25:45.680
even they they made like a big
investment into a company, or it might
404
00:25:45.720 --> 00:25:48.680
not even go, you know,
that deep in terms of the actual that
405
00:25:48.799 --> 00:25:53.000
company itself. So it's pretty interesting
what's been happening. What's one book that's
406
00:25:53.039 --> 00:25:56.920
inspired you personally? One Book that's
inspired you professionally? You know, actually
407
00:25:57.279 --> 00:26:00.920
there's a book that I just read
which is kind of sits at the juncture
408
00:26:00.960 --> 00:26:04.160
of both. So it's kind of
a compot answer. But four thousand weeks
409
00:26:04.160 --> 00:26:07.799
by Oliver Brookman and it's it's interesting
book. It's about a journalist journey on
410
00:26:07.920 --> 00:26:11.599
thinking about time and when you read
the title it kind of sounds like a
411
00:26:11.599 --> 00:26:17.720
selfhelp book around how you manage time, but it's actually secretly a it's kind
412
00:26:17.720 --> 00:26:21.119
of a it's a philosophy book disguise
as a selfhelp book. You know,
413
00:26:21.160 --> 00:26:25.000
I read it. I think I
read about four months ago and coming out
414
00:26:25.000 --> 00:26:29.000
of this period during, you know, during covid and postcovid where time feels
415
00:26:29.000 --> 00:26:30.960
more and more abstract. You're in
front of your computer, you're in front
416
00:26:32.000 --> 00:26:36.039
of zooms all day and you know
all the normal things of life, all
417
00:26:36.079 --> 00:26:38.160
the normal milestones and markers of life, you don't have. It's really interesting.
418
00:26:38.200 --> 00:26:41.599
The book talks about not thinking about
how you manage time, which makes
419
00:26:41.640 --> 00:26:45.759
time feel like a resource, something
that needs to be controlled, and more
420
00:26:45.839 --> 00:26:49.880
about thinking about yourself and your life
actually just being time and that's it,
421
00:26:49.920 --> 00:26:53.039
and what that means about how you
how you spend your time. You know
422
00:26:53.079 --> 00:26:56.960
what what counts, what doesn't count, and and I feel like it's just
423
00:26:56.000 --> 00:27:00.759
a I think it's a really interesting
book as we continue to move this world
424
00:27:00.759 --> 00:27:03.960
where maybe you know, you could
still spend your time behind something like a
425
00:27:04.000 --> 00:27:08.200
screen twenty four hours a day,
and the way the reality of time feels
426
00:27:08.279 --> 00:27:11.839
less tangible and it's really kind of
gives you a bunch of different perspectives on
427
00:27:11.839 --> 00:27:15.160
how to think about time. Yeah, I really appreciate you. You're very
428
00:27:15.200 --> 00:27:19.279
original. Had anyone mentioned four thousand
weeks? So really say that that's our
429
00:27:19.279 --> 00:27:23.359
book list. My final question to
you is, what's one piece of advice
430
00:27:23.440 --> 00:27:26.200
that you have for founders? I'm
going to sound like a bit of a
431
00:27:26.240 --> 00:27:30.400
broken record here, because I think
I spoken about this a couple times now
432
00:27:30.640 --> 00:27:33.759
on this during this great conversation,
but I would urge someone who's thinking about
433
00:27:33.799 --> 00:27:37.200
starting a business or even in the
process of thinking about a company they want
434
00:27:37.200 --> 00:27:41.359
to join, I would urge them
to really look and seek the differentiated insight
435
00:27:41.359 --> 00:27:45.680
that either that company has or that
they think they have when thinking about the
436
00:27:45.680 --> 00:27:48.440
thing they're going to start. Right
and even if it's not a space per
437
00:27:48.440 --> 00:27:52.160
se like, what is it that
you see in the market that other people
438
00:27:52.240 --> 00:27:55.799
will disagree with and, if you
are right, is going to be worth
439
00:27:55.799 --> 00:27:57.839
a lot. I think there's I
think, again, going back to this
440
00:27:57.839 --> 00:28:00.759
point on is they're being a lot
of noise. It often feels like there's
441
00:28:00.799 --> 00:28:03.920
there's a lot of me too in
the market and there's a lot of I
442
00:28:03.960 --> 00:28:07.920
think the space is interesting and hot, which again, I think is not
443
00:28:07.960 --> 00:28:10.759
bad from a I want to experiment, I want to learn standpoint. I
444
00:28:10.759 --> 00:28:14.599
think the technology is really cool.
I think really great businesses get built off
445
00:28:14.680 --> 00:28:19.200
of the backbones of insights that are
either counterintuitive or that helped to prove obsolete
446
00:28:19.279 --> 00:28:22.920
assumption that others have, because then
you could do your zigging when everyone knows
447
00:28:22.920 --> 00:28:26.440
a Ya getting. I think it's
actually valuable. No, I love that.
448
00:28:26.480 --> 00:28:27.839
I love that. I think that
that's a really, really great piece
449
00:28:27.880 --> 00:28:32.200
of advice. Think some for sharing. Patrick, thank you so much for
450
00:28:32.200 --> 00:28:33.680
your time. I really appreciate you
coming on the show. No, Mike,
451
00:28:33.720 --> 00:28:36.640
Thanks for having me. This is
been a ton of fun. And
452
00:28:36.680 --> 00:28:38.279
there you have it. It was
such a punder tiding with Patrick. I
453
00:28:38.319 --> 00:28:41.079
hope you all enjoyed it as much
as I do. If you enjoyed this
454
00:28:41.119 --> 00:28:44.920
episode, I love it if you'd
write a review on the apple podcast.
455
00:28:45.160 --> 00:28:48.640
You're also welcome to follow me your
host, Mike, on twitter at Mike
456
00:28:48.640 --> 00:29:11.680
Guelb, and also follow for episode
announcements at Consumer VC. Thanks for listening, everyone,