How to spot the tech unicorn to invest in: Opening Bid

hey there my investing curious friends welcome to opening bid I'm Brian sazy Yahoo finance's executive editor thank you for joining us either on YouTube yaho Finance Spotify iHeart media Pandora or Amazon music if you are loving opening bid hit us with those likes and fire off your questions and hot takes to me on X at Brian Sai and at Yahoo finance we are here to help and listen now let make some money and make you a lot smarter joining me today is M13 co-founder Carter uh his company has made early Investments on in some of America's most well-known businesses such as Lyft Pinos and bonobos he's a father of two young children and married to OG businesswoman Paris Hilton good to see you in person how are you can I just say thank you for answering your emails like is that one of your just secrets to success somebody emails you of credibility and you reply right back yeah you know I was telling someone the other day to me like life is so simple you got to have a vision you got to be able to recruit a world class team and you got to execute it and when I see you pop in my inbox I respond I I appreciate that so you I I don't even know where to begin but I'm going to start here you have managed to seed eight unor corn companies is that right eight unicorns in the seed five in the series a but who's counting Brian no I'm 13 total between seed and series a so I've had a good run yeah okay how do you get on a good run yeah I think you know like when you're doing an early stage Venture there's so many different dimensions at the end of the day it comes down to pattern recognition right you it's kind of Malcolm Gladwell outlier you just see certain things that lead you to believe that this company could have a shot right the the typical unicorn rate is 1 to 2% so you got to find a company that's an outlier uh it's funny I I wrote a book a few years ago called shortcut your startup and I actually talk about how you have a greater likelihood you or I to be an NBA basketball player than a unicorn founder I'm not which is crazy right I'm going to be an NBA bask are you're going to be a unicorn founder no and and that's tough for me to say because I like to think I I achieve in everything when these companies came to you in their early days their Founders they're jacked up they're feeling it what was their pitch to you and how do how do you spot BS yeah there's a lot of BS so you throw that out the window I think like the the way I kind of think about every founder is um is do they have a high winds above replacement for that idea like are they do they have a skill set or a point of view or past experience that makes them unique to be able to take on this idea and then you know trying to think what's the world going to look like in 5 or 10 years um I one thing I always talk about is I want to find I want Founders who as I say have a microscope in one eye and a telescope in the other eye so what I mean by that is a microscope in one eye means looking at the day-to-day executing building the team things like that but in today's world that's just moving so fast you got to have that telescope in the other eye to try to understand where the world's going to go 5 years from now 10 years ago uh and so I wish it was easier than that to just going oh I look for this maybe I will be a unicorn founder maybe I will come to you with I would love that please do what if I come to you and I want to go into some of the companies you you invested in early early on what should my pitch be how do I get your money yeah I mean I think it has to be you know where is the world going is there a big time right is the total addressable Market big um you know what's different now than even six seven eight years ago is there's so much competition right when I see did ring doorbell Jamie simonov was the first person to come up with the idea for a wireless doorbell now there's hundreds it is pretty awesome I mean can you imagine life without it no I can't actually I mean all those great moments of looking at who's looking back at your ring door man talking to the UPS you see somebody like stealing packages or like very two puppy going like this right up to your camera package Pirates you know it's it's always painful when you see that and you know you can't do anything you're stuck at work podcast like hey put my package back bro so um you know but when we seated that he was the only one with the idea now there hundreds if not thousands of them right and so at the end of the day what I look for most in in Founders now is can they Inspire and I think that's why you'd be a good founder is that you have to inspire in two ways you have to inspire great people to join your jersey can they recruit great people but that just comes down to inspiring and can they Inspire VCS to believe in the vision to give them money because I think what people have learned in this recessionary environment is that uh having the ability AB ility to wake up every day and innovate and having the capital to do that it is actually not a right it's a privilege it's hard now did you just call me inspiring you are inspiring appreciate you that's so Co I didn't want to make sure that wasn't lost on you no I appreciate that love man so what what three founders came to you early on that impressed the hell out you and what what did they do you know it's hard I mean like Jamie sim off from ring who we're just talking about clearly a very special founder obviously ended up selling that business to Amazon for over a Dollar in his case he was just a tinker right so at the at the time he just said I'm going to Tinker with a bunch of ideas and when I find the one I'm going to double down on it um and so I just kind of love this idea his that he was going to eventually figure it out he had built some technology companies before um when you think about people like pyel from class pass just the the vision she had the space she knew disrupting Fitness it seemed like a place that needed to be disrupted so it's hard there's never any pattern necessarily across everyone but again when you've done it enough times right you go with your gut but what your gut really is is seeing the pattern subconsciously in a way you're going man this person reminds me of this founder or this business model and where they could get to or things like that um so it's hard how do how have you and this I guess this one may apply to life in general but how do you spot BS how do you know someone doesn't have the number the concepts or it's just a crappy person yeah I was say I read this book when I growing up cuz I was a social psych major from Columbia and it was how to tell if somebody's lying and I remember it was like don't ask if you think someone lied to you and they went to the movies um don't say to them oh what did you think of the movie Try to throw something at them and then watch their eyes so if I thought you were lying about you told me you went to the movies last night all I would tell you is oh my God I heard that movie theater caught on fire last night right and in that minute you'll go shoot did it catch on fire what do you mean you know and you'll be able to tell so like I was talking to a Founder the other day and he mentioned a very uh famous kind of tech executive I said oh cool so if I call that person what will they say about you and in that minute before they even open up their mouth I know if they're like oh shoot he actually knows that famous guy or in this case the founder said oh yeah no problem definitely call him about me I was like okay right and so I think there's those little subtle things um but you know you also just got to do the work right we spend a lot of times getting to know companies weeks diving into their numbers what's that process like yeah I mean at M13 we write you know 20page memos and everything we start from what are the indicators of success for this company right every company has a different Force ranking of what the indicators of success are then we say like what can't we be wrong about right um it it could be hey we have a th p is that um this is a company that people just love and it's going to be product L marketing so we need to go do customer calls and make sure that's the case um sometimes it's hey can this business scale do the United economic scale right like VCS I think were famous years ago for saying oh don't worry about if if they ever make money we'll just build the company fig out's some more money they could just lose money just keep feeding them more money ex and that works back then doesn't work today right and so you know there used to be this famous slide in every pitch deck that was like here's the economics today and then here's the economics at scale the problem is they just never got to scale so we do a lot of what I call Cocktail napkin math right uh how big is the market how many customers do you need to get what's the average revenue per customer what is that penetration rate like me personally I'd rather back a company that needs to get 0.001 of the addressable Market than someone that has to go disrupt right you think about Uber they disrupted an entire Market much more difficult albeit more lucrative much more challenging so there's just a lot of nuances of that stuff to make sure you're right about the things you need to be right about because this is early right and it's going to be a five or 10 year Journey did you uh I know you're 5 years old young carterine did you want to become a VC investor I don't think what I knew knew what that was I just grew up in a town of a thousand people on a dirt road I was just dreaming of concrete one town over um you would be both yeah exactly uh I started my career after Columbia at Goldman Sachs as an invested Banker I was in the deal team that took KKR public and uh you know that was just great training Goldman teaches you how to work hard uh how to be analytical how to get up to speed on a new company or New Market and then uh after that my brother and I started and and sold a company uh over the course of a decade and it was through that what I realized was um I was a better operator because I was an investor and I was a better investor than I was an operator which is kind of why we built this model at M13 where for every invest at the firm we have three times as many full-time operators to kind of help our Founders how did you find out your core competency cuz I think I talked to you know I talked to Founders or look I even look at Elon Musk I mean the guy's running multiple businesses how do you know how did you identify this is what you wanted to do and you were going to be good at it yeah it's funny I I remember when I was working at Goldman and I told my dad I wanted to stay at Colman and he said sounds great except do you think uh when you distill down what your superpower is do you think that Goldman is the best place for you and what he was saying was what he said to me at the time was like you seem smart but everyone at Goldman is smart exctly thanks yeah um and then uh it was kind of like he said I think your EQ is what separates you from others but you can't use that in Investment Banking you should think about a place you can use that so um yeah I think you know with M13 what was fun was since we had built and sold a company and then we started this from scratch we really were able just to zoom out and go okay what are we great at and then we also asked ourselves what does a venture firm need to look like from the decades to come which is different than the decades prior at the end of the day what we decided what we thought we were uh our superpower it's overused term but it is a nice s s um was as Angel Investors so often because we are former operators I could talk to a founder and really quickly distill down um how to accelerate their business or how to remove a roadblock and as I say in life you don't need to be an expert in everything you just need to know an expert in everything so often so often I'd say oh you're having this problem I know who to call and I would text someone to do that and so we thought to ourselves how do we do this at scale and how do we really try to help the companies that we invest in because it's hard I imagine with what you do trust is very important you have to trust the founder but the founder has to trust you how do you go upon building trust yeah I'm very proud I was looking it up yesterday we have a Founder MPS of 78 which means that we're doing something right and and when I think about what it is is it starts from the minute we invest in a Founder uh we just explained to them we just want to be their sixth man we're just here to support hold that uh hold that thought sir uh if you're watching on our streaming platforms we're heading for a quick break everyone else stay with us we are still rocking our 24 minutes today as usual [Music] uh Carter so every day we come in here to Yahoo finance and we we're talking about stocks and and markets and if there's anything that has been consistent over the past year people are obsessed with ai ai this AI that is that the next big thing in your world or you're already past AI thinking about I don't know 2030 robots yeah well I mean it's good that we're doing this podcast podcast before you replaced by I'm just kidding not taking this really you don't think you're replaceable by AI I know am I replaceable by AI come on no um you know I think like clearly AI is a technological Revolution we've had this before things like the internet things like the mobile phone which basically put a superum and uh super computer in everyone's pocket things like cloud computing um so I'm of the belief it's going to effectively change everything we've had AI for a long time it's just for most of us it seems like it came out of nowhere but companies like Google and and AI had been working on this for 10 years if you think about at the end of the day AI is just better pattern recognition the reason you won't be replaced by AI is you have yeah exactly I know that was reassuring was right you have the ability to make better contextualized decisions versus ai's pattern recognition I think you know right now everyone's talking about the technology um but I would encourage people to think about the implications of it right the technology is amazing but that's the first Ripple the second the third the fourth Ripple of how it's going to you know open up new business models things like that if you think about all these great companies we have today Airbnb Uber Lyft they were they're because of the iPhone it wasn't that they just took things that had done in the past they thought they could think about it differently and so in AI it will disrupt so much but again right now we're like Isn't that cool I can say like I got a sh buy me some flowers yeah okay great that seems cool today but it's really what's going to happen that second and that third Ripple and I think the hardest part is for any investor is knowing where to get the best you know risk and probability adjusted outcome just investing in AI doesn't work right if you invest in the internet if you invest in a company called Amazon or Netflix you did really well you did okay now if you invested in pets.com you did less well are are having said that are valuations on AI companies are they overheated I I covered one unnamed IPO two weeks ago I'm not going to say who it is promising company AI company doing something in the cloud great sounded great on paper they're not making any money and it's unclear when they will make any money at all overheated would be a nice way to put it right everyone looks at open Ai and goes oh my gosh that's going to be a trillion dollar company so I'll pay whatever I think you know so often in VC people say it's just about picking great Founders and great companies and I'm part of the contrarian view that says yes that's part of it and I've done that historically very well but you also you know have to have other skills right you make your money when you buy when not when you sell right entry point valuation matters you have to know when a company showing early signs of success and you have to try to buy more of that company you need to know when to sell those positions and so um you know this is one of these Cycles where people get excited and in vcl land are willing to pay any price to invest in these companies but that's doesn't work right whether it's Aid in the public markets or in the private markets traditionally that has not been a successful story so where are you investing yeah so you know we think about AI as a horizontal technology so we invest in the future work Commerce Health um and money I think what's interesting about AI is you can invest in AI disruptors but you can also benefit from AI in companies that are existing right so this company I mentioned Petra they launched an AI feature that unlocked three or 4X growth but it's an Ecom business on the other side of the spectrum um we invested at a fatherson Duo first time we ever invested in a father son but you know the son was at McKenzie the father uh is one of the preeminent AI experts in healthcare so one guy knows his numbers and the other one working on AI I mean that sounds like that's a Dream Team yeah it's great and uh and they're basically right that company uh called kostic is basically using AI for earlier disease detection working with Healthcare systems and Pharma companies so I think there's a lot of different ways to benefit from the shift of Technology right same way historically you could invest in Amazon or you could invest in companies that benefited from the ability to use the internet right there's two different ways I think what is very interesting I would love your take is I believe AI the the challenge is going to be you're going to have the innovators fighting each other but you also have the big corporate guys in the game I think they're going to buy them all yeah I think you're going to have Microsoft Google uh Buy a lot of these early stage companies pay whatever they want they have the cash to do it and then further consolidate their position uh and put them even more in dominating positions over the next 20 30 years and what do you think about the doj in that context well well I would ra I will PT that back to you because what if they buy these companies in the early stages before before they they don't look like big businesses and they take them in their uh in their wings and I don't know 10 years from now now they're giant companies inside of a giant Microsoft controlling the world yeah not to be Doom and Gloom but yeah no I mean I think that's the challenge is that you have some very well you know it's like when a kid comes in he's like I have better AI than Google I was like factually not accurate it's just impossible for you to have better AI than Google who spent 10 billion plus or Microsoft and so that's why I think it's that we've never seen an adoption curve this fast everyone's heard the numbers on open Ai and all these other AI um but we're never going to see this much competition so many dollars are going at it big guys innovators um um and I think it's I would tend to agree with you I think the big guys are just going to get bigger and stronger because this is kind of classic fly well what what what type of investor are you um hopefully they say thoughtful so patient yeah I it's funny I was interviewing Shane Bader at our uh conference yesterday and I was talking about he and I both believe in this concept that you just have to do the right thing things long enough and it might not seem like it moves the needle but a lot of decisions dayto day compounded over a lot of time do right and so I'm always talking to Founders and I try to project this as an investor I say just respect the process you know everyone sees a bonfire and they go oh my God that's so cool but what they fail to realize with these 13 companies that I've been involved with or a bonfire it's Spark by Spark by Spark by spark and one day you get a bonfire and you go oh my God Isn't that cool you you seated ring but it was just Brick by Brick and so I just tell people just these little things compound over a longer periods of time and that's how you win nothing in this world is perfect uh what did what did you learn from your worst investing experience uh I learned if it's not a hell yeah it's a hell no right as an investor right if you there are times where I was debating Investments and every time I've debated it's been a bad investment in the end and and every time I just like couldn't get that investment out of my head after I'm meeting that founder I've had better success if you weren't a VC what would you be doing that's a good question I was a heck of an investment banker but uh I'm just glad I'm a you're a sports guy I mean do you got do you have time for any of this stuff ah no no I gotta you know M13 we have 47 people now so you know it's uh I gotta yeah well kep ask me on that one exactly tweeted at me so uh full and uh Fair disclosure um you know I'm an honest guy I originally reached out to you know try to talk to your wife first you're not the first or the last Bri this was the this was the uh fascinating part so I reached out your team I was went back I was doing some work maybe 20 minutes later what it was I go check my emails uh it was you you cut right through the fluff and the crap but I mean is that normal is that just one way do you just believe that in order to get stuff done you just need to like push things away and just like focus in well first of all you know don't be humble Brian I saw your name and I was like oh heck yeah you know I'm going to respond very kind but yeah my my wife's uh Media Company 1111 is a billion dollar plus company and part of what I Paris Hilton I Paris Hilton yep uh paris's Media company 11-11 and part of why she's been so successful three years since founding that company is uh like you said she just removed the friction she made things more efficient she has 25 people internally and this is a great example you know again in everything you do all day long you think to yourself what's the ROI I saw your name I saw Yahoo finess I said that's worth an email that's a pretty good Roi thank you and then you know I knew we'd get along famously once we met so what you're married to Paris and I think uh a lot of folks in my generation grew up watching her talk to us about her brand what is it today and having I mean you're married to her what what's her secret to success you know have you been able to I mean do you study her like that or just I don't I have no I don't know you should do a podcast and study her she heard a podcast the other day where Shaq's daughter said that Shaq had his daughter when she was in high school study Paris Hilton and said she's the blueprint I want you to study up and she was talking about it on podcast uh you know at the end of the day I'm just another proud husband I think I have the greatest wife out there and the two cute cutest little kiddos congrats thank goodness they look like they're mama so they're cute as all get up but you know I think you know Paris has always been about content Commerce and Community you know just to give a sense her products alone done 4 billion in Revenue the last decade wow and that was with a B if that wasn't obvious um and I think if you really think about her career it's been defined as being future thinking and not being afraid to take risks right so everyone told her she was going to ruin her life because she signed up to do this show that was a reality TV show turned out it did not ruin her life she was the you know OG of social media and you think about where that came from it came from her grandfather the founder of Hilton who understood customer service and she said oh how cool is this now I can communicate with my fans all over the world um you think about it she was you know tweeting it's been well documented in 2017 about ethereum having dinner with the founders in Berlin she had filmed herself in her documentary in 2018 calling talking about the metaverse and how she wanted to do a nightclub again she's just always been two steps ahead um and she never sets herself up in a position to fail but she's always willing to take risk um you know and the other day she turned over when she was giving me a kiss in the morning she's like I hope my legacy is for all the advocacy work and the impact she's having and so it's been a fun transition it's a she obviously recognizes the business success she's had but uh she realizes through kind of everything she's been doing changing state laws and uh Federal legislation that like this idea that she can leave the world better and in her case a little more sparkly than she found it is pretty awesome all right well thanks for being a longtime yaho Finance supporter we originally caught up with in 2019 where we were uh still launching our amazing uh video programming here Carter uh good to see you in person I will uh be staying in touch for sure thanks all right that's that's it for the latest opening bid [Music]

Channel: Yahoo Finance

Views: 1,161

Keywords: Yahoo Finance, Personal Finance, Money, Investing, Business, Savings, Investment, Stocks, Bonds, FX, Currencies, NYSE, Equities, News, Politics, Market, Markets, Yahoo FInance Premium, Stock market

Id: FWCJC-pV9J4

Length: 23min 44sec (1424 seconds)

Published: Fri May 10 2024