Generated Transcript

[00:00:15] Craig Syverson
Welcome to VentureCast 29. I’m Craig Syverson of Grunt Media.

[00:00:19] David Hornik
And I am David Hornik. And this is the Hanukkah edition here.

[00:00:24] Craig Syverson
In the smoking room. Hanukkah, the smoking room adventure.

[00:00:27] David Hornik
Craig is reacting to my new. Of my new furniture.

[00:00:32] Craig Syverson
It came with its own zip code.

[00:00:34] David Hornik
You have to admit that my old furniture had some issues.

[00:00:37] Craig Syverson
Yeah, it was. It was raggedy. It looked like it came from my Aunt Selma’s house.

[00:00:43] David Hornik
Exactly.

[00:00:43] Craig Syverson
So this one has come from my Uncle Thurston’s house.

[00:00:48] David Hornik
Come on, Big talk to Pamela about it. She picked it out.

[00:00:52] Craig Syverson
Oh, then it’s perfect.

[00:00:54] David Hornik
Thank you. It smells good.

[00:00:56] Craig Syverson
Yes. It’s a little large. Now, David has rather forebodingly large leather couches and chairs.

[00:01:06] David Hornik
Do you think that it’s in any way inappropriate that my chair. That I can’t reach the floor while sitting in my chair?

[00:01:12] Craig Syverson
I think it’s a little odd.

[00:01:13] David Hornik
You think that’s a problem?

[00:01:14] Craig Syverson
No fault of yours. It’s. The chairs are too deeply set back.

[00:01:17] David Hornik
They are.

[00:01:18] Craig Syverson
Yes. Part of the thing about being large.

[00:01:22] David Hornik
Yeah. Well, there was the suggestion was I needed throw pillows. But you know, throw pillows to remedy the. Remedy the overly large chair.

[00:01:30] Craig Syverson
And then you bring in the sultan when you have business meetings here. So that.

[00:01:33] David Hornik
Exactly.

[00:01:33] Craig Syverson
They all sit on the floor. Maybe that’s what you should just convert this to a. Like a sushi restaurant style office. Cut a hole in the floor.

[00:01:42] David Hornik
Are you are. You’re a large man. You must be comfortable.

[00:01:45] Craig Syverson
I’m comfortable. Yeah.

[00:01:46] David Hornik
That’s comfortable.

[00:01:47] Craig Syverson
I’m comfortable. But I am having an aesthetic problem with scale.

[00:01:52] David Hornik
All right.

[00:01:52] Craig Syverson
I’m feeling crowded. See how it’s crowding over there against your desk. Your rather large desk, I must say. Also.

[00:02:01] David Hornik
Can’t believe it. I should have known that you were going to jump right in.

[00:02:04] Craig Syverson
No, I’m just kind of cranky right now, so.

[00:02:08] David Hornik
Why? What’s your problem?

[00:02:10] Craig Syverson
I’ve been cooped up and I’m bored. All right.

[00:02:13] David Hornik
So sorry.

[00:02:14] Craig Syverson
I. I came off the horse on Thanksgiving. Didn’t really. I mean, I hurt something. You know, I could have.

[00:02:21] David Hornik
Considerate. That’s a euphemism for you fell.

[00:02:23] Craig Syverson
Falling off. Yeah, right. Come on.

[00:02:24] David Hornik
I came off.

[00:02:25] Craig Syverson
I came off.

[00:02:25] David Hornik
I came off like, you know. So you’re on a hiatus or you. You were thrown.

[00:02:30] Craig Syverson
I wasn’t thrown. No. I have a very nice horse. It was totally my fault. But it’s one of those terrifying things where the saddle slips off and you’re riding. Riding sideways on the horse. Yeah, yeah. It’s a long story, which I won’t.

[00:02:43] David Hornik
In terms of why I thought you hurt yourself and you were landed on.

[00:02:45] Craig Syverson
My head, which is the good news. Oh, geez. Helmet, of course. And nice soft dirt rather than, like the rocky terrain and trees that we were just in. Had I fallen off, I would be sitting here now impersonating a cucumber, but great. But yeah, no, it was because my back was out the day before for non equestrian reasons. And so when I landed, I got up and my back was fine. So it was like this perfect adjustment. But then a couple days later, I think I had, like, had a hairline fracture in a rib. And I went riding again a couple days later, and then that became a big hair fracture in my rib, I guess. So I was like, you know, hearing Depeche Mode. If I turn properly, I could hear it coming out of my side.

[00:03:27] David Hornik
Just can’t get enough. Just get enough.

[00:03:30] Craig Syverson
So I’ve been lying low for the past week or so, just kind of recovering from.

[00:03:33] David Hornik
Did you type?

[00:03:34] Craig Syverson
I could type. I just couldn’t laugh.

[00:03:36] David Hornik
Oh, man. Well, so do you want. You want me to play it straight?

[00:03:39] Craig Syverson
Play it straight because. Yeah, you just. You crack me up so much as it is. No, I’m fine. I’m fine. It’s much better now. I can extend my arm. I can. My foot didn’t break, which was another thing.

[00:03:53] David Hornik
Feature. That’s a good feature. All right.

[00:03:55] Craig Syverson
Well, I don’t know. It doesn’t just. I’m bored with everything. I’m bored with Facebook. I’m bored with. Holy cow, I’m bored. I don’t talk about it.

[00:04:03] David Hornik
Okay, fine.

[00:04:03] Craig Syverson
I mean, maybe because everyone’s been talking.

[00:04:05] David Hornik
No, skip it.

[00:04:06] Craig Syverson
Boring.

[00:04:06] David Hornik
I think we. I think we should skip it completely.

[00:04:08] Craig Syverson
Okay.

[00:04:09] David Hornik
This is a Facebook free. You know, in fact, I had this. I remember there was a time in the early days of Venture blog when I declared a moratorium on Google. Like, I just can’t. There will not be a discussion of Google because every post it was like, and now I will post on the trees in the sky. The trees are beautiful. Google, Google, Google. You know, and now I feel like, you know, don’t you think that’s like, where we are on Facebook?

[00:04:32] Craig Syverson
Yeah.

[00:04:33] David Hornik
There’s been a challenge to get to the moon where the rover will be tracked on Facebook.

[00:04:39] Craig Syverson
Exactly.

[00:04:40] David Hornik
Upheaval in, you know, the Middle east.

[00:04:42] Craig Syverson
And due to a new ad model of Facebook. Yeah, no, we have the same thing on the Mac shows it’s always about the iPhone and our media shows it’s always Been about the red camera. So. Yeah, these things happen, these news cycles.

[00:04:55] David Hornik
All right, forget it, we’re done. Okay, what else you got?

[00:04:57] Craig Syverson
What else you got?

[00:04:59] David Hornik
Well, I.

[00:05:00] Craig Syverson
You said there was something. We were talking about cash before the.

[00:05:02] David Hornik
Oh yeah, yeah, we were. We were talking about this fact that out in the tech world people are sort of musing about the fact that Apple has over $15 billion in cash.

[00:05:12] Craig Syverson
And this is cash. So this has nothing to do with the stock right now. This is just cash.

[00:05:15] David Hornik
You know, they’ve made more money than they’ve spent to the tune of $15 billion. In fact, what was interesting to me as I was flipping through these numbers is that for Apple, that’s truly the case. Apple has 15 point point whatever billion dollars in cash and zero debt. So you know, it’s cash, you know, spend it, buy back stock, do a dividend. They never have done a dividend. So the next two biggest are. Actually the two biggest companies are Microsoft and Cisco. This is Tech, Fortune 500 tech companies.

[00:05:47] Craig Syverson
So next biggest in terms of cash.

[00:05:49] David Hornik
Total cash on hand. I’m not, I don’t want to talk, you know, God only knows what GM or GE or M1. Any G, any G has, you know, on hand. Although one G company.

[00:06:02] Craig Syverson
What are you talking about? G?

[00:06:03] David Hornik
Oh, that kind of G. Like gmge. Get it?

[00:06:05] Craig Syverson
G. Got it. They all start with G. Yeah, I see. I thought you were talking about some sort of securities terminology.

[00:06:10] David Hornik
G Wiz. No. You sure? It was your rib that was injured. Good lord. Google. So you, you, when I asked you the question, and I asked you the question, which tech companies have the, have the most cash on hand, you thought Google. The interesting thing is actually Google’s very close. Google, what did I say? 13 billion. 13 billion on hand compared to Apple’s 15 billion. So it’s not like they’re far behind. And as we know, you know, that takes a quarter for Google to then.

[00:06:39] Craig Syverson
Or not buy something.

[00:06:40] David Hornik
If they don’t buy something with cash or do something on a dividend level or whatever, then Google will have, will be the number three pretty quickly. And actually Microsoft wasn’t much higher. Let me see, wasn’t 24, Microsoft. I thought Microsoft was huge. It actually has just under 19 billion in cash on hand. But that’s because they’ve paid out literally billions in dividends in relative recent years. And Cisco, which is the largest cash holder with 24 and a half billion, also has been paying out dividends. So man, they must add a lot of cash if they’re paying out dividends and, but the interesting thing, and I don’t, and you know, frankly, I’m just not sophisticated enough to understand why Cisco would have 20, 25 billion dollars on, on hand and then have six and a half billion in debt. I mean, you know, maybe they’re making more money on their cash than they are paying on their debt and someone’s, someone’s doing something wrong. That’s all I’m saying.

[00:07:36] Craig Syverson
So they’re mortgage loans, right?

[00:07:39] David Hornik
Exactly. I just hope it’s not, you know, negative amortization.

[00:07:44] Craig Syverson
Well, that was fancy.

[00:07:45] David Hornik
Dial 1-800-943-HOPE. No, no, President Bush, that’s 1-888-43-HOPE. He got it wrong.

[00:07:56] Craig Syverson
What’s that?

[00:07:56] David Hornik
Did you see that?

[00:07:57] Craig Syverson
No.

[00:07:57] David Hornik
Oh, yeah. The president, he announced that for families that were having trouble with mortgages, they were going to lose their homes. The government had created a relief program and that to, you know, look into it, you should call 1-800-979-3943. I don’t know what hope h o p e. So, you know, people immediately started calling 1-800-blah- blah- blah- blah hope. And it turns out it was some evangelical hotline. It was because President Bush got it wrong. It’s actually 1888. You know, whatever the number is, hope. So, so, you know, the hope people at the 1-800-number, they’re apparently according to NPR, their, their mailbox is full. So you can’t, can’t even leave a message.

[00:08:36] Craig Syverson
Oh, man. Didn’t they have a website faux pod too recently?

[00:08:40] David Hornik
Yeah, yeah, it’s, it’s confusing, that technical stuff, the details.

[00:08:44] Craig Syverson
Yeah.

[00:08:45] David Hornik
Www1-888.

[00:08:50] Craig Syverson
You know what I’m saying, nuclear.com it’s.

[00:08:52] David Hornik
Tough to keep track.

[00:08:54] Craig Syverson
So what, so what about cash? So what are they gonna do with it? Apple should buy somebody, people are saying. People are saying Apple should buy somebody.

[00:09:01] David Hornik
Yeah, I just saw the speculation. Do you see what, what the number one vote is for Nintendo is Nintendo.

[00:09:07] Craig Syverson
But it’s a Japanese company that’s hard to do.

[00:09:10] David Hornik
Yeah, Nintendo. What, because of the Wii? I don’t know what else living.

[00:09:16] Craig Syverson
And then TiVo. TiVo was the one that I kind of thought, well, you know, I mean, they’re not like money maker. Yeah.

[00:09:22] David Hornik
What are you gonna pay? Three bucks. So great. Then they still.

[00:09:24] Craig Syverson
300 million or something.

[00:09:25] David Hornik
15 billion.

[00:09:27] Craig Syverson
Right.

[00:09:28] David Hornik
Spent yesterday’s interest on TiVo. What do we get next?

[00:09:31] Craig Syverson
I know. Do you have to spend cash?

[00:09:35] David Hornik
No, there are no rules.

[00:09:36] Craig Syverson
Yeah.

[00:09:36] David Hornik
There’s no requirements. Just the market, the street. The street will punish you. They don’t like to have too much cash on hand. On the other hand, they like to see some cash on hand. And so.

[00:09:46] Craig Syverson
But if you have too much cash, then you’re a takeover. You’re a target for takeover, I suppose.

[00:09:50] David Hornik
But not at that, you know. So I think it’s mostly just considered bad form this day and age that if you’re not growing. But, but the reason Apple doesn’t have a problem is that they’re continuing to grow shareholder value without doing big acquisitions, without putting out dividends, so they haven’t had to use it to drive share price. Whereas Microsoft has put out big dividends over the past years because the share price has been relatively stagnant. And there’s some suggestion that, gee, if they weren’t dividending out money, then people would sell off the stock and it would drop even more. So they’re sort of propping up the share price.

[00:10:30] Craig Syverson
So that’s the motivation for dividends. I mean the new world, it’s a.

[00:10:34] David Hornik
It is a motivation.

[00:10:35] Craig Syverson
The old world, it seems like everyone did dividends back in the old days.

[00:10:38] David Hornik
When my dad this asset class and yeah, I owned the state old standard railroad and got myself dividend. Get your dividend and you use that for your retirement.

[00:10:49] Craig Syverson
Yep.

[00:10:50] David Hornik
I don’t. What am I, what do I know? Seriously, what do I know about the public markets? I’m just a private market guy. I just invest in these quirky little companies and you know, help them try and grow. Yeah, that’s the venture business for you, Craig.

[00:11:03] Craig Syverson
Like Meebo and VideoEgg. That’s close to your heart, probably.

[00:11:06] David Hornik
Yeah. That’s good. Exciting.

[00:11:08] Craig Syverson
So what. What happened there? They partner. Can you talk about it?

[00:11:11] David Hornik
I mean, if it’s written about. You’re reading about it.

[00:11:13] Craig Syverson
I’m written about it.

[00:11:14] David Hornik
Yeah. You’re.

[00:11:15] Craig Syverson
I’m reading about it. Came out yesterday.

[00:11:17] David Hornik
Yeah. No, I mean, look, what’s happened is Video Egg is partnering with a lot of folks that have rich media content and are driving these rich media experiences. Whether it’s amiibo experience or, you know, online gaming or. Or online. We have, you know, great platform to help folks monetize that traffic in interesting ways. And then the good news is because we’re, you know, because we. When I say we, I mean video because video reaching across all these networks. Then they can say to, to Ford or to, you know, men in or to Apple or whoever. Hey, what, you know, what’s the demographic you’re looking for or whatever. We can get to them in their natural. In the natural context of things that make sense?

[00:11:57] Craig Syverson
Yeah.

[00:11:58] David Hornik
And that’s. And that’s been really fun to watch. And, and I think that that’s a space that’s going to grow a lot. Video egg is one of the primary third party monetization engines for Facebook.

[00:12:09] Craig Syverson
I said it.

[00:12:10] David Hornik
Darn it.

[00:12:11] Craig Syverson
Can’t help it.

[00:12:12] David Hornik
All right, I have a quarter. And, and for other. Anyone for. And for others in the. And we’re looking forward to open social for these application providers to be able to monetize across a larger set of opportunities.

[00:12:25] Craig Syverson
So.

[00:12:26] David Hornik
Which is cool. I actually, I was giving a talk this morning and it was my old, you know, my old.

[00:12:30] Craig Syverson
You dressed that way. Yeah, you were.

[00:12:33] David Hornik
Well, what do you want me to wear?

[00:12:36] Craig Syverson
A collar. A collar?

[00:12:38] David Hornik
A collar.

[00:12:39] Craig Syverson
Anyway, go on. So Silicon Valley. Yeah, it was rather casually.

[00:12:43] David Hornik
I wore very clean sneakers.

[00:12:45] Craig Syverson
Okay.

[00:12:46] David Hornik
Converse.

[00:12:47] Craig Syverson
Yeah.

[00:12:47] David Hornik
Right. So sort of talking about. What was I talking about? Oh, it was my talking about viruses and how viruses take hold, etc. And that. I think that what’s interesting is that these, that, you know, in the viral world you sort of talk about vulnerabilities and the idea that physical vulnerabilities in the body allow for viruses to penetrate and take hold and then get. Make you sick. And in a lot of ways, if you look at what’s happening in Facebook, with the Facebook platform and with OpenSocial, it’s really essentially allowing for viruses to take hold and propagate within the. Within the platforms. Only in this instance, they’re positive. They’re actually adding a bunch of value. But you could see ways in which if you had the wrong set of applications or you or, or they overtook the system or whatever, that they could.

[00:13:32] Craig Syverson
In fact be malicious if they overtake the attention. Right.

[00:13:36] David Hornik
For example, or if they miss. Or they’re misguided in the ways in which they demonstrate attention or share information. But again, we’re not talking about Facebook, so we wouldn’t be implying anything there.

[00:13:46] Craig Syverson
Right.

[00:13:46] David Hornik
I’m just saying. So anyway, it was interesting. It’s interesting. I may actually come out of my blogging hiatus and venture blog.

[00:13:51] Craig Syverson
Yeah. What’s up with that? That’s an old. I looked at us like this old entry about the lobby. I know, it’s so. That’s so November.

[00:13:59] David Hornik
Exactly. Maybe, you know, some. I’m. I’m flying to China a week from Sunday, so maybe that’s a long flight. I can’t imagine I’ll sleep the whole time.

[00:14:08] Craig Syverson
Right.

[00:14:09] David Hornik
So maybe I can. Maybe I can do some blogging on.

[00:14:12] Craig Syverson
That WI Fi that you got going on There and China Air.

[00:14:15] David Hornik
Did you hear this announcement? Actually this is interesting.

[00:14:17] Craig Syverson
Americans finally getting around to it.

[00:14:19] David Hornik
JetBlue is going to do, is going to provide WI fi on their flights. The only thing you can do, according to the news I saw, was email. And the only email you can use is Yahoo. How is that?

[00:14:33] Craig Syverson
That’s it?

[00:14:33] David Hornik
Yeah.

[00:14:34] Craig Syverson
No web surfing? No.

[00:14:36] David Hornik
They want you to use the bandwidth so you can check your email and send your email on Yahoo.

[00:14:41] Craig Syverson
Huh.

[00:14:43] David Hornik
Doesn’t that seem crazy?

[00:14:45] Craig Syverson
I think Virgin America was talking about real web when I was on a flight. Oh yes.

[00:14:49] David Hornik
Yeah. Well, they had it, you know, they had it in some flights on Lufthansa.

[00:14:53] Craig Syverson
Yes.

[00:14:54] David Hornik
Because I remember getting emails from, I think it was Joe Ito was emailing the six apart board from Lufthansa at one point. This is a while ago.

[00:15:03] Craig Syverson
They’ve had it for a while.

[00:15:04] David Hornik
You know, it’s a stark contrast to United States where, you know, I go on United, get the United business class and you go to plug in your computer, you have the like stupid United thing. First of all, it’s a stupid proprietary thing.

[00:15:18] Craig Syverson
Yeah.

[00:15:18] David Hornik
And you go to plug it in and there’s like a panel that’s been secured over where one might plug something in. And they say, yeah, you know, as a cost saving measure, we didn’t actually wire all of the business class for power. What are you crazy? Like business class travel and you’re not going to provide power because you are saving costs.

[00:15:37] Craig Syverson
Right. And it’s like every third one or something. It’s like you have to be lucky to be in that seat.

[00:15:42] David Hornik
Crazy. You have to go on one of my favorite sites. You know what that is?

[00:15:45] Craig Syverson
Yes, Dub, Dub. Yes, go ahead, tell me. Guru, right?

[00:15:51] David Hornik
Have we talked about this?

[00:15:52] Craig Syverson
Yes, but no, they don’t have, they don’t know which seats they do well in these individual planes.

[00:15:57] David Hornik
Theory. No, no, you’re right. If, if the planes have been screwed up or wired or closed or whatever.

[00:16:02] Craig Syverson
And guess what, it’s United. So guaranteed.

[00:16:04] David Hornik
Pretty. Yeah, it’s pretty arbitrary. Yeah. So you know, I’m feeling pretty good about, you know, my whatever, executive status on United. Feeling, feeling pretty pleased that I’ve got that built up.

[00:16:14] Craig Syverson
Woohoo. Yeah.

[00:16:15] David Hornik
Yeah. Gotta put that to good use somehow. In fact, you know what’s interesting? I, in flying to China, I could have flown direct on United or I could have flown through what’s just north of Seattle and Canada.

[00:16:29] Craig Syverson
Vancouver.

[00:16:29] David Hornik
Vancouver. Sorry, Vancouver. Yeah, I could have flown to Vancouver and then Vancouver to, to Beijing and Air Canada. Bing, bing, bing, bing. Bing. I took Air Canada.

[00:16:41] Craig Syverson
Yeah.

[00:16:41] David Hornik
Their seats are so much better if.

[00:16:43] Craig Syverson
You get the right plane. They got a lot of old.

[00:16:46] David Hornik
I checked. You know how I checked?

[00:16:47] Craig Syverson
Sikh guru.

[00:16:48] David Hornik
Thank you.

[00:16:50] Craig Syverson
Have you invested in them?

[00:16:51] David Hornik
No, I just think that’s fine. You gotta admit, that’s a great. That’s just like a great service. Like, yeah. You know, where else could. Before Secretary guru, where could you get that information now?

[00:17:01] Craig Syverson
You couldn’t.

[00:17:01] David Hornik
You say, okay, I’m flying on Air Canada. And then it lists all the Air Canada jets. And then, you know, sometimes, oh, it’s a 777 configuration. One, two, three. And so maybe you don’t know which configuration is, but if you look at them, by and large, their configurations are basically the same. And so you can see. So what I did. So I checked and it turns out that they’re long haul planes in Air Canada. All are either live flat seats or they’re. Whatever the next best thing is. Whereas United didn’t have that at all. So it’d be like, you know, sleeping for 16 hours and it would be like sitting in my office. Yeah. And my feet still wouldn’t fit the reach of. I hate. I’m the only man in, in business class who’s annoyed because the seats are too big and they like hit the back of my knees. Everybody else, like, woo. Get lots of room. This is a problem with being a small person.

[00:17:50] Craig Syverson
Yeah.

[00:17:51] David Hornik
A little person.

[00:17:52] Craig Syverson
Yeah. From the mailbag that’s just in.

[00:17:56] David Hornik
Dear Craig and David.

[00:17:58] Craig Syverson
We get it. We get mail. I just, I’d never read it, but I thought, oh, well, you know what? It’s time for the mailbag.

[00:18:03] David Hornik
All right.

[00:18:03] Craig Syverson
Episode of this show.

[00:18:04] David Hornik
Excellent.

[00:18:05] Craig Syverson
This is from Peter in Melbourne, Australia. Really great show. Don’t know why I laugh, but I do. Maybe one day it’ll make sense.

[00:18:14] David Hornik
This is what you’re. This is why you’re pulling it up. So you can, I think from Melbourne, they can like make fun of us.

[00:18:20] Craig Syverson
Don’t know why I laugh, but I don’t love it.

[00:18:21] David Hornik
All right.

[00:18:22] Craig Syverson
I don’t know why.

[00:18:23] David Hornik
You don’t need to know why.

[00:18:24] Craig Syverson
It’s not even funny.

[00:18:25] David Hornik
Enjoy.

[00:18:28] Craig Syverson
It’s great hearing conversation over here in Melbourne, Australia, where it sometimes feels like we’re out of the venture loop. I spend two hours a day in the car listening to podcasts. A lot of hours. Yeah.

[00:18:37] David Hornik
In Melbourne. They must have a lot of traffic that I don’t know about. I guess it’s a big city.

[00:18:41] Craig Syverson
Yeah. I haven’t been. Thank you, sir.

[00:18:45] David Hornik
That’s it. He was Just.

[00:18:46] Craig Syverson
Yeah, yeah. No, it’s just very short.

[00:18:48] David Hornik
That’s what you got. I thought it was like a question. Ask Craig and Dave a question or some kind of observation or. That’s it.

[00:18:55] Craig Syverson
I like that one.

[00:18:55] David Hornik
Okay, good.

[00:18:56] Craig Syverson
Yep. But Robert Rice, thanks.

[00:18:58] David Hornik
Oh, we have another.

[00:18:59] Craig Syverson
Yes. Well, we. I’m just pulling. I thought I’d pull up some represent.

[00:19:03] David Hornik
Of our incredible fan mail quantity and.

[00:19:06] Craig Syverson
I, and I actually get this one a lot. Maybe you can ask David sometimes how he says no or how VCs say no to an entrepreneur or just let them hang. Also, it’d be interesting how quickly they make up their mind on deals. Like when people walk in, shake hands after the first presentation, after reading an email, etc.

[00:19:26] David Hornik
Wow, that’s a tough one.

[00:19:28] Craig Syverson
Yeah. I mean, a lot of people do ask. They want to know. They want to know, like, you know, how does it work? You always say you invest in people and that’s kind of like, okay, yeah, yeah.

[00:19:38] David Hornik
But, you know, it’s a good, it’s a good question. I mean, I actually think that the no process, even having now been in the business for eight years, ish. That no is still the hardest part. And it’s not contrary to popular belief, because I think that there is a sense that venture capitalists don’t say no because they’re sort of keeping open their options or whatever else is that, you know, people throw their heart, you know, their heart and souls into these companies. They, they’re excited, they’re energized, you know. You know, and it is in many ways a tough thing to time and time again have to say, I don’t believe in your vision.

[00:20:12] Craig Syverson
Yeah.

[00:20:12] David Hornik
And so, you know, so the wimpy thing is that you sort of put it off like, yeah, sure, you know, I try pretty hard as a general matter to get back to you after a cup, you know, within a couple of partner meetings when we’ve had a chance to talk about it. Right. Have a chance to sit with the rest of my partners and describe. Because what we do in partner meetings is we say, oh, what’d you see this week? And if we get to it, then we talk about this week, if we don’t get to it next week, whatever. But these are the companies we saw. Here’s what they do, here’s what, you know, I like or don’t like. It’s interesting. What do you think about this space? What do you think about this team? What do you think about ad generation in this particular area? What do you, you know, is this particular chip you know, doable within the laws of physics. Those things we do, we have these conversations.

[00:20:55] Craig Syverson
So now if I might interrupt. When. When you take a meeting.

[00:20:58] David Hornik
Yes.

[00:20:59] Craig Syverson
Is just generally one of you in terms of partners, you don’t.

[00:21:03] David Hornik
Most of the time. Most of the time.

[00:21:05] Craig Syverson
At least on the first pitch.

[00:21:06] David Hornik
Exactly. Unless something is moving very quickly, it’s being introduced by someone we know well, who’s urging us to see it, or we know there’s a reason why it’s likely to be engaging, etc. I’d say 99. No, that’s not 95% of the time. It’s one of the five of us in the partnership meet with someone and look into the deal and say, is this interesting? Discuss it with the full partnership. And then if the partnership thinks it’s compelling or interesting or wants to dig into more, then you figure out what’s the next thing. Okay, should we get in front of another partner? Should we ask industry or, you know, dig into the technology, whatever the thing is that sort of in question, and try and get more data. And over time, you get enough data to either say, no, I think it’s not enough of a market, or I think this isn’t the right team, or whatever, or you get enough data to say, wow, that’s very interesting. And, and in fact, as we originally thought, it’s sufficiently interesting to just say, let’s put some money in.

[00:22:02] Craig Syverson
Yeah, right.

[00:22:03] David Hornik
So how do you say no? I mean, actually, I think lots of people say no in different ways. When do you know? You know, some of the time you actually know quite quickly. Someone’s describing something for you and you had envisioned it as being something different. And it falls in a category of things you’ve looked at quite a bit and you already know it’s not a space in which you think there’s a lot of opportunity, you think it’s smallish, or you think that there’s already a big winner. And so it’d be hard to come up with a circumstance in which you can compete, etc.

[00:22:30] Craig Syverson
Like a new search engine.

[00:22:32] David Hornik
Right, Exactly. But on the other hand, you know, if it’s a big enough mark, this is the irony. So that’s absolutely the case. Like, gee, there. There’s some giant competitor that owns the space. For example, in routers, you know, guess what? A new router, that might be challenging. On the other hand, if someone comes in with some compelling new thing that is a new, great new way to look at routing or a great new search engine or whatever, then you look at, say, Gee, the market is so, so huge. Yeah. That even discounted by an incredibly small likelihood of success, it may be sufficiently interesting that you say, I’m going to, I’m going to try it, see how it goes. Right. And you know, keep in mind the venture investors have a portfolio of investments and they tend to have a portfolio of, of levels of risk. And I don’t, I don’t think we do this intentionally. Like, okay, we, this one’s a 10 in risk, so let’s do a 1. On the other hand, over time you see a bunch of things and you period, you will say to some of them, wow, this is so interesting that let’s, let’s see how it goes and if it makes progress, then we’ll keep investing. And if it doesn’t, we’ll say, well, that was a noble experiment and if it had worked, it would have been worth a pile. But it didn’t.

[00:23:35] Craig Syverson
Right, Right. So if someone comes in teamless, is that generally like a bad sign? Do you need a team ahead of time or do different firms treat that differently? Like will they say, well, we’ll find you a team or.

[00:23:49] David Hornik
Yes, some do. I mean, you know, there’s certainly certain early stage investors that are helpful in that respect.

[00:23:54] Craig Syverson
You know, okay, so that’s, that’s reserved for the angel stage, not solely.

[00:23:58] David Hornik
On the other hand, you know, if you’re talking with a Jeff Clavier or the first round capital guys or you know, or Ron Conway or those, you know, these sets of people, Peter Thiel, these early investors, oftentimes they’ll say, interesting idea, let me hook you up with this person. Or, you know, what you really need is X. And let’s, you know, let’s figure out how that happens. Sometimes venture investors will do that as well. Or they’ll say, wow, this is a fascinating enough idea that I don’t really care about the team. And as you know, I mean, there are varying degrees of belief in that team versus market or whatever. Paul Graham, who I think is just incredibly smart and thoughtful about how to build startups and particularly build early stage startups, has made the observation that if you can’t convince one other person. Yeah. You know, to work with you on a project, that that may be a bad indicator, you know, doesn’t necessarily exclude you instantaneously, but, but it is a point of reference.

[00:24:53] Craig Syverson
Yeah.

[00:24:53] David Hornik
So as a general matter, if I’m an entrepreneur thinking about going out to raise money, I think that I would try to mature the idea in the company sufficiently to have engaged more than Just myself in believing that this is a worthwhile project.

[00:25:06] Craig Syverson
Yeah. Now with August, the different partners have different areas of specialty, is that right?

[00:25:11] David Hornik
Yeah.

[00:25:11] Craig Syverson
So in these partner meetings these guys might be talking about, I don’t know, oil centrifuges and you’re sitting here saying I do social networking. But that probably makes it interesting.

[00:25:23] David Hornik
It’s very interesting and I think so. Sure. In my partnership there are five of us and we range from, and it’s not that anyone has a specific area in which they invest. In fact, as a general matter, we invest quite broadly. But that said, you know, my partner Andy Rapaport is a great chip investor. I mean invested in a Theros, he’s invested in Silicon Image, he’s invested in a lot of very interesting forward looking chip companies. But on the chip space, you know, my partner Dave Marquardt has done chip stuff. My partner Vivek Mehra has, has, has been a hardware engineer at Apple, built the Cobalt cubes, you know, so these guys can, I don’t know how much technical help I’m adding on the. How do we assess a next generation microprocessor company? And then there are varying degrees of other things. You know, my partner John Johnston and I look at software investments and have dealt in consumer and enterprise software and, and so I think that there’s a lot that we have to bring to bear in there. But at the same time, obviously the Cobalt experience and a number of things Vivek has done have been software related. It’s hard to not give Dave Marcourt a little credit on the software space as he sat on the Microsoft board for the 20 some odd years, you know, among others. So I think that we try and stay as, as broad and, and helpful as we can across these things both in understanding that, you know, in some instances storage. Right. My partner Dave has been, you know, was the very first investor in Seagate, has been a number of storage companies and then still is on the Seagate board as part of their recent buyout. And so if we’re looking at a storage deal and, and you don’t listen to Dave, then that would be. Look kind of nutty. Hey, David Hornik, what do you think of this storage deal?

[00:27:03] Craig Syverson
It holds a lot of things. That’s good.

[00:27:04] David Hornik
Yeah. Is it big?

[00:27:06] Craig Syverson
Is it big? Will hold my son’s loops of his.

[00:27:09] David Hornik
Yeah, see, you know, we’re not talking about Container Store.

[00:27:12] Craig Syverson
Yeah, okay.

[00:27:15] David Hornik
My son’s loops. So you raise, you raise.

[00:27:18] Craig Syverson
That’s a. Yeah, I’m going to hold off on that. I’m going to stay on this one. So.

[00:27:22] David Hornik
Okay. All right. We’re still on what?

[00:27:23] Craig Syverson
We’re still on new VC or new entrepreneur coming in. Round one goes well. You go to a partner meeting, they’re saying, let’s check it out more.

[00:27:31] David Hornik
Yep.

[00:27:32] Craig Syverson
Some time goes by, you guys do some internal research. You send the interns off to do the research.

[00:27:37] David Hornik
If we had interns, that’d be great. We are the interns. So whoever’s deal it is is sent off to do his own research.

[00:27:43] Craig Syverson
His own. And then so there’s another partner meeting after that. Maybe you come back and say, hey, this does look cool.

[00:27:49] David Hornik
Yeah, there’s some, you know, some work is done. Maybe the company meets with someone else in the partnership. They say, yeah, it’s interesting. You talk to potential customers, you get a sense of the market. Market. You do a lot of talking with people about the team themselves. Oh, people have worked with the, the members of the team in the past and the kind of how, how entrepreneurial are they and how thoughtful and etc. And so let’s say you come to the conclusion that this is pretty interesting. I’m excited about this. I think it’s pretty interesting. Think there’s some challenges, X, Y and Z. But it’s, you know, we talk about it, a partner meeting. Everybody says, yeah, let’s get it, get this team into the partner meeting.

[00:28:26] Craig Syverson
Okay.

[00:28:27] David Hornik
And what that means is, okay, you’re going to come in, you’re going to present to the whole partnership.

[00:28:31] Craig Syverson
So this is the callback of the callback.

[00:28:33] David Hornik
This is like the big moment. And different firms do it different ways. Some firms do it very early. They say, well, you know, might be interesting. Let’s bring them into the partner meeting and then if it’s interesting, then we’ll do some digging. You know, August is a place where we do a lot of digging before we get to that point. So if you get to the point of a partner meeting, it means you’ve made it through a lot of hurdles. It doesn’t mean you’re getting funded. And I don’t, you know, I don’t know how to handicap it. You know, on some weeks, everybody who shows up at the partner meeting gets funded. You know, other weeks it’s no one and it’s not, it’s not like how happy we are or whatever. Just, just depends on the business. So, so you come to the partner full partner meeting and, and present to everybody and then at the end of that meeting, then we sit around and talk about the business. Everybody has now seen the team In Action has heard about the business, we’ve talked about the markets, it’s, etc. And we decide if there are any outstanding issues. Sometimes the outstanding issue is, well, that’s not. It sounded interesting when you talked about it, David, but it’s not. Or you know, oh, David, you know, didn’t seem that interesting when you talked about it, but man, that’s interesting. Sometimes the outcome is, hey, let’s get him a term sheet. Sometimes the outcome is, David, go dig in on this thing and tell us we have a hard time believing X. And then do you have data on that? If not, then why don’t you go get it? You know, so you go through this process, an iterative process. Sometimes it’s quite quick, other times you do a lot of work and no matter what, at some point you have to come there. One of three things happens. You give them a term sheet and try and fund the company. You reject the company. I’m sorry, but it’s not, I don’t think we’re the right fit. Or they come to some outcome before you get around to it.

[00:30:12] Craig Syverson
Right.

[00:30:12] David Hornik
Some companies get funded while you’re messing around. Right?

[00:30:15] Craig Syverson
Yeah.

[00:30:17] David Hornik
You know, we hope that we at least have, we believe that ultimately people say, well, there’s a lot of value in these guys. And so let’s see whether we can convince them to be interested in the company. And if they are, then we’ll see what the term sheets look like, etc. Right. So. And I think that’s important. Right. Ultimately entrepreneurs get to choose with whom they work. They should, they should do diligence on us. They should figure out who, who they think will be the most, bring the most value and more importantly will be the least annoying, which. That can’t help me.

[00:30:46] Craig Syverson
Yeah, yeah, that’s your handicap. There’s the annoyance handicap with Hog Hornick.

[00:30:52] David Hornik
Hornick on the board. That’s like a seven in the annoying. Exactly.

[00:30:55] Craig Syverson
Bad joke zone.

[00:30:56] David Hornik
So anyway, and then you, and then, you know, you try and say, hey, here’s a term sheet that’s, that’s competitive in the market and let’s, let’s fund the company and then try and then. And the thing I, I love about being an early stage adventure investor and particularly about being early stage, because this is true, is that you come in early. There are a lot of things that have yet to been proven with which you have to deal in the long run and then you lock arms and basically everybody’s in the same position. It’s in everybody’s interest to build value in the business. When you go out and raise more money, you’re in the same position as entrepreneurs. You want to get the right new investor at the right price, you know, so it’s. There isn’t the kind of tension between the entrepreneur and investor that can occur at later rounds or can occur in different circumstances, you know, which is why I love it. I like getting in early and being, and, and being part of the early team that’s trying to build some idea.

[00:31:47] Craig Syverson
Yep. First presentation, then 20 slides, max.

[00:31:52] David Hornik
God, I hope so.

[00:31:53] Craig Syverson
What do you hope for? I don’t, you know, look, I know that this is one of those it depends questions.

[00:31:58] David Hornik
Yeah. You’re gonna have to come to my class at Harvard.

[00:32:01] Craig Syverson
Okay.

[00:32:02] David Hornik
I’m gonna be teaching this very question. But the preview is I want the slide on the team. I want a description broadly of what it is you’re doing. I want a market slide. But it’s really basically, you know, what the context in which this technology fits. I suppose I ultimately want a competition slide which says, you know, and it’s for, again, further context. Here are the sets of partners and competitors, etc. I suppose I want a financial slide because it gives a sense of what you’re thinking. So I don’t know that I care so much about the specifics of the slide. Right. I don’t know. Oh, you’re only going to make 12 million in 2023, you know, or you’re going to make 142 million in 2000, who knows? But when I say, what’s the head count? And you say, oh, they’re 12 people in, in 2015 with 90 million in revenue, really, you know, or there are 140 people on 2 million in revenue in 2012. Those are very telling things. And what are the pivot points for the financials? What are the things that make you more money, that bring in more people? And how are you thinking about that? That’s incredibly interesting data. And so, you know, that sort of data and how you’re thinking about it, users and, and whether it’s advertising, what’s the penetration and what’s the click through. And those sorts of things are valuable not because we say, oh, we’re going to hold you to those numbers, but because, you know, it’s a very good view of how someone is thinking about their business and whether they’re thinking about it realistically and, and what are the sensitivities? Sometimes you have a business that’s immensely sensitive around a particular thing and then you better, you better be really Comfortable with the idea that that thing is going to be true. You know, that’s a killer because sometimes you have no idea or whatever. So you have that and then you sort of a slide that says, I want to raise 2 million bucks. And why. And why doesn’t mean. Oh my God, why does not mean we’re gonna put that towards equipment and headcount. Duh. Like, what else would you put it? I guess it might be we’re gonna put 8 million towards marketing and a million towards headcount or whatever. But basically, you know, what you really want to know is what do you think you accomplish with the money? Over what period of time will you spend that money, invest that money in building your business? Right. Those are the things that are interesting. I think that’s pretty much it.

[00:34:22] Craig Syverson
So how long is that meeting? 30 minutes.

[00:34:25] David Hornik
No, I mean, usually you have an hour.

[00:34:27] Craig Syverson
Okay.

[00:34:28] David Hornik
And you know, I’ve had really great meetings that have ended in 30 minutes. I’ve had really great meetings that have ended an hour and a half. But, you know, most people sort of schedule an hour for you and, you know, don’t feel the obligation to fill it.

[00:34:41] Craig Syverson
Yep.

[00:34:41] David Hornik
And that, that’s going to be the indicator of whether or not someone’s engaged or not.

[00:34:45] Craig Syverson
Round two, the callback. You need spreadsheets in this one or do you give. Do they do the same.

[00:34:50] David Hornik
Same pitch?

[00:34:51] Craig Syverson
Same pitch, but with all the parties.

[00:34:52] David Hornik
Yeah, because ultimately these guys need to hear the same story.

[00:34:54] Craig Syverson
Right.

[00:34:55] David Hornik
And so you want to change it. If the first pitch was compelling, then do that, do that again. You know, sometimes you have more of the team. And so the discussion of the team is people describing themselves as opposed to you describing the team. Some, you know, but as a general matter, it’s exactly the same things that we want to hear. And so I wouldn’t change it.

[00:35:17] Craig Syverson
Do you send the whole team on the first meeting? Do they send the whole team or you should not?

[00:35:21] David Hornik
Sometimes you do. I don’t. It’s not a problem. If you have a great team and they’re compelling and all that, then, you know. Great.

[00:35:27] Craig Syverson
Yeah.

[00:35:27] David Hornik
On the other hand, you know, if you’re doing a bunch of meetings, that’s. That’s a big time sink for a whole team’s worth of people.

[00:35:34] Craig Syverson
Right, right.

[00:35:34] David Hornik
The engineers hate it. Yeah, they really do. I mean, they just, you know, like, I’m VP Engineering and you’re going to make me go to Sandhill Road.

[00:35:41] Craig Syverson
Yeah.

[00:35:42] David Hornik
You know, and that’s great. And same thing with sales. I mean, if the sales guy wants to go to your VC meeting. Things are going badly. You don’t want. You want them on the road. Not, you know, not sitting in VC meetings. Oh, I’m sorry. So I love the. I thought so and so was going to be with us, but it turns out he had to go to GE to close a $7 million deal. Right on.

[00:36:02] Craig Syverson
No problem.

[00:36:02] David Hornik
I don’t know that I believe you. Right. But that’s fantastic.

[00:36:05] Craig Syverson
Great line. Is your iPhone on?

[00:36:08] David Hornik
Am I you getting some?

[00:36:09] Craig Syverson
I’m getting the buzz.

[00:36:10] David Hornik
I don’t know which. Yeah, probably.

[00:36:12] Craig Syverson
For those of you out there, it’s not your thing, it’s mine.

[00:36:14] David Hornik
Sorry, people.

[00:36:15] Craig Syverson
Ours.

[00:36:16] David Hornik
I will turn off the iPhone and I will turn off the trio, since I have both in my pockets.

[00:36:20] Craig Syverson
Right.

[00:36:21] David Hornik
So sad. I’m turn it off completely. Right.

[00:36:24] Craig Syverson
Yeah. Or airline.

[00:36:25] David Hornik
Airline mode would be fine.

[00:36:26] Craig Syverson
On.

[00:36:26] David Hornik
I’ll turn this one off too.

[00:36:29] Craig Syverson
That’s good. That was good. Thank you. I think a lot of people have asked, have been wanting to know kind of the, you know, the gen. I mean, it’s. It’s all so vague in general, but yeah, still, I’d say.

[00:36:40] David Hornik
Well, let me just say this. I like this. I like this mailbag.

[00:36:44] Craig Syverson
Yeah, that’s good.

[00:36:46] David Hornik
Let’s do that. I like the mailbag.

[00:36:49] Craig Syverson
Now, execution matters, according to Loic Lemur.

[00:36:54] David Hornik
Oh, yeah.

[00:36:55] Craig Syverson
Who knew he put up a nice blog. This, you know, 10 good points about how to launch a startup.

[00:37:00] David Hornik
Yep. So Louis Lemur, who actually was most recently running Le Web, well, he runs Le Web, the conference which is coming up in a few days. And he also was the head of the EMEA picture practice for six Apart. And now he has moved to the Bay Area and he has his new company, Seismic.

[00:37:18] Craig Syverson
Oh, okay.

[00:37:19] David Hornik
And he’s sort of in real time video blogging the creation of a company. Ah. So I was sitting around actually the other night and I was reading Jeff Clavier’s blog and he was talking about the fact that he had been over visiting with Luik and that he was now an investor, and they had a video link to a video podcast about that. And it was. It’s great because Louie can, his co founder, who I don’t believe I’ve met, we’re sitting there with Jeff Clavier, and there was like dueling French accents. Dueling French accents. And Jeff Clavier said, the problem with you is your accent is I think we cannot understand you. And they’re saying, but you are one to speak to us about that Jeff Clavier. And it turns out that it’s actually Jean Francois Clavier. And so they were giving Jeff a hard time. You’re not Jeff. You’re Jean Francois. We know the truth about you. I don’t think any of them actually sound like that. Do I sound like. What is that? Like it’s a bad cartoon character. Anyway, so, yeah, so apparently Mr. Clavier and his and his fund have invested in. In seismic.

[00:38:20] Craig Syverson
And do you know what seismic is about?

[00:38:22] David Hornik
Well, again, it’s a. A podcasting. It’s a sort of video. Video podcasting experience. And not a lot has been said yet. Although I think if we follow sort of the. What they’re describing and podcasting and blogging about, then we should all come clear.

[00:38:38] Craig Syverson
Yes. So, yeah, so he just did 10 basic rules about how to launch a startup. And I think, you know, they’re very practical and I like them. Rule number one, don’t wait for a revolutionary idea. The idea of your life will never happen. Just focus on a simple, exciting, empty space you see, and execute as fast as possible.

[00:38:54] David Hornik
All right? Fast execution.

[00:38:55] Craig Syverson
Rule number two, share your idea as much as possible.

[00:38:58] David Hornik
Okay. Get it out there.

[00:38:59] Craig Syverson
Yep. Rule number three, build a community around you through blogging, etc.

[00:39:04] David Hornik
Community. Get some feedback.

[00:39:06] Craig Syverson
Feedback. Rule number four, listen to your community, answer questions, and build your product.

[00:39:10] David Hornik
Don’t ignore them, don’t speak to them, and then ignore their response.

[00:39:13] Craig Syverson
Read the mailbag. Rule number five, Gather a great team with a very different skill set than yours. Look for people who are better than you without being afraid of it.

[00:39:22] David Hornik
Yes, definitely. Always hire people who are better than you. Unless you’re the best. Because then it’s impossible. Yeah, because you’re the best.

[00:39:28] Craig Syverson
But you’re the best at that thing. So you hire someone better at something.

[00:39:32] David Hornik
That’s his whole point. Okay. Rule number six, Be the first to.

[00:39:36] Craig Syverson
Recognize a problem or mistake you have made. Never hide it.

[00:39:40] David Hornik
That’s right. Fix it. Man, oh man. There are actually lots of startups who spend a whole lot of time trying to sort of COVID up what they’ve screwed up while fixing, you know, while trying to fix it so that it becomes irrelevant and, you know, this becomes this incredible sleight of hand problem where you’re like, don’t look over here, don’t look over here.

[00:39:54] Craig Syverson
It becomes very irrelevant. Rule number seven, do not spend time on market research, but launch as early as possible in alpha or beta versions.

[00:40:03] David Hornik
Well, that is market research a little bit. Right?

[00:40:06] Craig Syverson
That’s the new market research.

[00:40:07] David Hornik
The new market research.

[00:40:08] Craig Syverson
Number eight, do not focus on a large spreadsheet business plan. You are so sure it’s not going.

[00:40:14] David Hornik
To happen anyway, so basically this I totally agree with, which is I get these huge business plans people have drafted up and by the time they finished writing them they no longer proved, you know, it’s like oh well, we had a bunch of assumptions in the business plan and several, several of the assumptions have been proven wrong. Now I actually think that there are some circumstances where the writing of the business plan is incredibly valuable. Right. Because it forces you to think clearly about your business. So it’s not that I discourage you from writing a business plan, that’s completely up to you, but please don’t do it for my sake. Right? I mean, you know, venture capitalists as a general matter are not looking for these incredibly carefully reasoned 140 page business plans as much as understanding that you appreciate the, the levers for your business.

[00:40:58] Craig Syverson
Yes.

[00:40:59] David Hornik
The levers or levers.

[00:41:01] Craig Syverson
I think it’s the levers.

[00:41:02] David Hornik
Press the lever. The lever. Rule number eight. Are we on nine?

[00:41:07] Craig Syverson
Nine. Rule number nine, do not plan huge marketing. Growing with your community loving the product is much more powerful.

[00:41:15] David Hornik
I would, I would translate that to Viral marketing is awesome, right? Because it’s free.

[00:41:21] Craig Syverson
Because it’s free.

[00:41:22] David Hornik
Do not spend money on marketing unless you are going to get massive viral secondary effects. It’s one thing to, you know, if you put a million bucks into something and get a massive base that then is multiplicative. Woohoo, that’s great. You know, then that may be a perfectly reasonable use. But you know, if you’re getting less than a user for every dollar that you’re spending, then man, oh man, that’s a waste of your money.

[00:41:44] Craig Syverson
That’s a harsh reality.

[00:41:45] David Hornik
And the number 10 rule for building.

[00:41:48] Craig Syverson
A startup, do not focus on getting rich or selling your company. Focus on your users. Money is a consequence of success. Can’t be a goal.

[00:41:58] David Hornik
Well, you know, this is an interesting, that’s an interesting debate.

[00:42:01] Craig Syverson
This philosophic.

[00:42:03] David Hornik
Trey. Philosophic. Luke. I’m not disagreeing, I’m not disagreeing. I do think that ultimately you need to be very focused on the experience and the product and the users. And the users and all of that. Right? I mean ultimately shy of that, what do you have?

[00:42:20] Craig Syverson
Right.

[00:42:22] David Hornik
But what I’ve seen in my partnership is that there’s also this question of is there someone there who at the end of the day is interested in making money, right? Not just making a product, but is focused on this question of where is the money in this business? And, and the combination of those two are incredibly powerful.

[00:42:39] Craig Syverson
Yeah.

[00:42:40] David Hornik
And the lack of either one, someone who’s immensely focused on where’s the money but not on how to build a product or, or a service or an experience or whatever. Not great.

[00:42:49] Craig Syverson
Right.

[00:42:50] David Hornik
Someone whose product and service and experience focused but not focused on money. Not great. So. So I half agree. I will give 10. Only 5.

[00:43:01] Craig Syverson
Well then, and this is sort of the complaint people have about VCs is all they’re interested in is, you know, returns. And if they’re not getting their returns on time, then they, you know, clamp us down, that kind of thing. But you know what, it’s also business reality.

[00:43:14] David Hornik
So yeah, here’s the thing. Companies I fund are losing money, right. It’s a very rare circumstance that I fund a company that’s making money. And in those few instances in which I fund a company that’s making money, in most instances I fund them so that they will go spend money and lose it. Right. Not lose the money, oh, I lost all that money. But that, that you’ll focus on market acceleration etc and spend. And if that is the case, then either you figure out how to get cash flow positive on that money, which is by the time you’ve run out of the money, you’re no longer losing money, you’re actually making money and therefore you’re fine. Or and this is the far more likely outcome, you run out of money. And when you run out of money, then you need to go raise more money. And if you do raise more money, you get to continue building a business. And if you don’t, you’re done.

[00:44:02] Craig Syverson
Yes.

[00:44:03] David Hornik
And it’s just the reality, it’s a very interesting reality of this business that huge amounts of time and entrepreneurs lives are spent raising money because they have a business in which they believe and they have made great progress, but they ultimately are making less money than they’re spending in the name of a big business. And that’s certainly true of venture backed companies because we want really big interesting companies and big interesting companies don’t get started on a shoestring and then get profitable. I mean it’s just a rarity that that happens. So I think you need people who understand and appreciate that the end goal has to be make more money than you spend. Yeah, that’s step one and then step two is. Okay, now that I have done that, how do I accelerate the growth of this experience with the money that I have on hand? And sometimes that means raise more money so you can spend more money to speed the growth of the company, even though you’re back to losing money. Right. So this is this very interesting delicate dance that happens till if you have the good fortune of ultimately having a Google business model that gets scales quickly and has result in massive revenue, then, you know, $25 million is all it takes and then boom, you’re in the stratosphere. And our end goal with all of my companies is that they ultimately are self sustaining and interestingly large companies. But I don’t want them to be self sustaining and not interestingly large. And it’s hard if they are interestingly large but not self sustaining. Right. Those two, you need them both.

[00:45:29] Craig Syverson
Yeah.

[00:45:29] David Hornik
Two great tastes. They taste great together.

[00:45:32] Craig Syverson
I don’t know.

[00:45:32] David Hornik
What was that rant all about?

[00:45:33] Craig Syverson
No, that was good. That was good. I get it. I think we’ve covered it well.

[00:45:37] David Hornik
Thank you, Loic.

[00:45:39] Craig Syverson
Got anything else for us?

[00:45:40] David Hornik
I’m sad that I’m not gonna be at Le Web.

[00:45:43] Craig Syverson
Oh, that’s right.

[00:45:44] David Hornik
You know, I’ve been at the last two or three Lew ebbs. Maybe this is the third. Is this the third?

[00:45:49] Craig Syverson
I think it’s the. I believe it is.

[00:45:53] David Hornik
I’m so bad. I go to. I go to Paris and. And I try so desperately to say just the simplest of phrases in ways that won’t embarrass me or more importantly, my wife. And in every instance I fail. It’s pathetic. It’s just sad.

[00:46:06] Craig Syverson
Maybe just not try.

[00:46:08] David Hornik
I honestly. Except they’d be very angry.

[00:46:11] Craig Syverson
None. My wife had a different experience.

[00:46:13] David Hornik
Yes.

[00:46:13] Craig Syverson
She has a vocabulary of French, you know, working vocabulary.

[00:46:17] David Hornik
Yes.

[00:46:17] Craig Syverson
Her business partner has a fluent vocabulary.

[00:46:19] David Hornik
Yes.

[00:46:20] Craig Syverson
They went on trip to Paris recently. He spoke in French very well and they sort of. She figured this out and saw that if she did not try at all to speak French and was very upfront.

[00:46:34] David Hornik
About her apologize in front of like, I’m very sorry. I wish I spoke your language.

[00:46:38] Craig Syverson
They were greater. So it’s funny.

[00:46:42] David Hornik
I was traveling this. I was traveling once on a train and I sat down. This was when I was, you know, decades ago. I was a kid. Remember then when we were kids traveling on trains in Europe with wheels? Good times. I think those trains were using coal. I was on the train and I was chatting with. With this woman. She sat down, I think I was going from Prague to Budapest or something. And she said something to me in German and I struggled to answer her in German and she was very kind and she spoke back to me, you know, sort of slowly and blah, blah. And then like a half hour into this conversation, I mean, Just. Just like imagine a half hour of just brutally bad German and struggling along. And I say something like, you know, blah, blah, blah, you know, blah. And then I say, oh, what’s the word for cabbage? Or whatever? And she says the German word for the thing that I’ve just said in English. What’s the word for that? And I look at her and I say, do you speak English? English, whatever. She’s like, oh, yes. You know, I said. I said, what? I’ve been struggling here. And she said, oh, in English, but you’re doing so well. I thought, like, wasn’t that nice? I mean, it was incredibly nice of her.

[00:48:00] Craig Syverson
It was gracious.

[00:48:01] David Hornik
It was very gracious and charming. But then I thought, holy cow, you know, like, why didn’t we just speak English? You speak such good English. Anyway, that’s an aside because that’s all we got.

[00:48:12] Craig Syverson
That’s all we got. Our sides. There’s other few things, but I think. I think we’ve. We’ve.

[00:48:17] David Hornik
Yeah, I think we’ve done it.

[00:48:18] Craig Syverson
We’ve done well. Are you here on the 28th of December?

[00:48:22] David Hornik
Yeah, I’ll be back. Should we try and do that?

[00:48:24] Craig Syverson
Yes.

[00:48:24] David Hornik
Do it like post Christmas, pre. New Year.

[00:48:27] Craig Syverson
Yeah. This won’t be the last show of the year.

[00:48:29] David Hornik
Between now and then, I will be in China, see?

[00:48:33] Craig Syverson
Or whatever they say in China. Guang.

[00:48:35] David Hornik
I don’t know. Actually.

[00:48:36] Craig Syverson
I don’t know. I don’t know what I just said. That was from Wayne’s World. Oh, no. Zhang. Which is excellent.

[00:48:43] David Hornik
Okay. Please. What any of our Chinese speaking listeners. Craig. Craig didn’t mean it.

[00:48:50] Craig Syverson
I know.

[00:48:51] David Hornik
Whatever I said between now and then, we’re gonna. We’ll find out how to say it. I actually have the phrase book because I have the little. You know, you should practice these sets of phrases. And. And if you think I’m brutalizing French, imagine how I’m brutal. I’ll brutalize China. Chinese. Excuse me. While I’m in China and you’re going where, what city? Or flying into Beijing, going to Hong Tu. And then it’s funny. So flying to Beijing, the big city, you know, and then we go to one of the small cities, Hong Tu. Do you know what the population of their small city is? 6 and a half million people. And it was described. Oh, this little. We’re gonna go one of the small cities. So you can get a sense of the small city. Six and a half million people. And that’s, you know, that’s one of our small states, actually. It’s one of our medium sized states, now that I think about it. And then, you know, that other big city, Hong Kong. No, no, I’m not allowed to talk about Hong Kong. That’s not China.

[00:49:47] Craig Syverson
Not anymore.

[00:49:48] David Hornik
I’m going to Shanghai. Okay. So I’m very excited. I have not been. This is not. This is a trip. I’m going with a group from Stanford Business School students, which is going to be really fun. And they’ve got an incredible itinerary because it’s basically, you know, everybody with whom we’re meeting is either a Stanford Business School alumni or, you know, well, the CEO or the board member went to the GSB and they introduced us to the president. And so. So we’re going to go to Alibaba and we’re going to go to Lenovo and we’re going to see factories and it’s just going to be. It’s going to be fascinating. I’m really excited about it. So hopefully I’ll have interesting things to share when I return.

[00:50:31] Craig Syverson
Excellent. We’ll see you then. Thank you to Cash Fly for providing bandwidth for our show. Happy Hanukkah.

[00:50:39] David Hornik
That’s right. We should let this one roll out with a little Hanukkah music.

[00:50:45] Craig Syverson
Oh, okay. You got some for me here, buddy?

[00:50:48] David Hornik
What do we. You know, it’s like the Adam Sandler song. That’s all I got. Call your friend Veronica. Celebrate Hanukkah. Light the Menorca. Celebrate Hanukkah.

[00:51:00] Craig Syverson
Okay, that’s it. For our fair use. Use. That’s right.

[00:51:02] David Hornik
That’s all right. Exactly.

[00:51:03] Craig Syverson
Yeah.

[00:51:04] David Hornik
Because as you know, limited amounts. Limited amounts for educational purposes.

[00:51:10] Craig Syverson
Good night and farewell, Sam.