Generated Transcript

[00:00:14] David Hornik
All right, well, hey, welcome to VentureCast. I’m David Hornik from August Capital.

[00:00:19] Howard Hartenbaum
And I’m Howard Hartenbaum, also from August Capital.

[00:00:22] David Hornik
And it is, what, August 26th. Which means we got kids back at school, we’re heads down and focused, and.

[00:00:32] Howard Hartenbaum
We have to reset our lights at our house that they come on earlier and earlier every night.

[00:00:36] David Hornik
That is a problem.

[00:00:38] Howard Hartenbaum
There’s no going home after work and going for a bike ride anymore because it’s getting darker, Howard.

[00:00:43] David Hornik
I don’t get home until 9, 10 at night because I’m here working away. Yeah, and you go, and you go. You’re going home like 7:30.

[00:00:55] Howard Hartenbaum
Well, no, I mean, gotta have dinner with the family and stuff. I usually go home like 6:30.

[00:00:59] David Hornik
I’m with you. I’m with you. So how’s your summer been?

[00:01:04] Howard Hartenbaum
It’s been good. You know, things come in waves in our business. Like, you see all these companies and you go, I don’t just see the right one, and I’m never gonna find another one. I’m gonna be lonely and single for my entire life. And then all of a sudden, two beautiful companies walk in on the same day, and you’re like, wow, that’s true.

[00:01:23] David Hornik
That’s you. You have two super interesting companies you’re.

[00:01:28] Howard Hartenbaum
Talking to, and one’s called Company A and the other one’s called Company B.

[00:01:31] David Hornik
Exactly. And, and, and they’re fascinating, and they’re likely to make millions and billions of dollars.

[00:01:38] Howard Hartenbaum
Or not.

[00:01:39] David Hornik
But I, I think it’s amazingly cyclical. You know, I mean, I’ve done five deals in the last 12 months, which is nutty. Like, you know, you would have never said. Would you have said in November, oh, do three more deals over the course of the next six months? No way. And yet they were all interesting. And, you know, hey, you had to sign off on them. You must have thought they were worth doing.

[00:02:01] Howard Hartenbaum
Yeah, and I only did two, and I feel like a slacker.

[00:02:04] David Hornik
Yeah, well, you are compared to me.

[00:02:06] Howard Hartenbaum
Well, we got a partner who did none, so let’s slack on him for a while.

[00:02:12] David Hornik
Yeah, right, exactly. Maybe he should hear two awesome companies. Maybe he should do both of them. Yeah, all right, we’ll get that. We’ll get, we’ll work on that.

[00:02:20] Howard Hartenbaum
But it is, you know, it’s, it’s, it’s that like when you’re dating, you know, when you’re a young man, if you’re looking for a girlfriend, you’re never gonna find one. But when you’re not looking, suddenly one sits next to you. On the chairlift at the ski resort. And here it’s like you’re looking and then you’re kind of frustrated and then you go to some event and you meet some entrepreneur and he says, I figured out how to make you grow purple hair.

[00:02:41] David Hornik
And you going, cool, I want purple hair. Well, speaking of that, like, so I know that what it was a couple, few weeks ago, there was the Y Combinator demo day. And you know, Y Combinator is the program, I guess last week.

[00:02:56] Howard Hartenbaum
Last week it was last week, yes.

[00:02:57] David Hornik
Seriously, where was I? I guess I was, I wasn’t here. You got to go, got to check it out.

[00:03:03] Howard Hartenbaum
Yeah, they have it down in Mountain View at the Y Combinator office. And if any of you aren’t familiar with, with Y Combinator, it’s run by Paul Graham and Jessica Livingston. And they put money into like two to three person concepts to get them off the ground to build a product and a consumer product and test it in the market. And they’ve been doing this for a few years. And they must have 150 or so over the course.

[00:03:29] David Hornik
Yeah, they do two tranches. Right. They usually do a summer tranche and a winter tranche. So let’s say it’s 20 per, 25 per time is 50 times however many years they’ve been at it.

[00:03:39] Howard Hartenbaum
And yeah, so I, I did go to their. They have it over two days and the format is great. They have like four hours of pitches. With each pitch is four minutes.

[00:03:55] David Hornik
Four minutes.

[00:03:56] Howard Hartenbaum
And there’s a.

[00:03:56] David Hornik
Actually think about that next time you’re planning to pitch anyone on your business. See if you can do it in four minutes.

[00:04:02] Howard Hartenbaum
And that includes introductions and a demo.

[00:04:06] David Hornik
Yeah, yeah.

[00:04:07] Howard Hartenbaum
And I gotta say that they do a fantastic job at prepping and practicing. And those guys and girls get up and they give a four minute pitch that tells you you’re either interested or you’re not. And you have enough information to say, yeah, I don’t really want to meet you again, or I want to meet you again. And anybody who can do it as good as that, I think has a great leg up. Sometimes we see companies and you’re half an hour in and you’re still not quite sure what they do.

[00:04:36] David Hornik
Yeah. Remember actually that’s. You had just joined the firm. I don’t know if you remember this, but you had just joined August. You’d been been with us for, I don’t know, less than a month. And it was a meeting and there were maybe four partners in the meeting. And it was one of these instances where they were going on and on and they weren’t saying what they were doing. And everybody was kind of looking and frustrated. And all of a sudden you said, hang on a second. What do you do? What do you do? Like I said that? Yeah, you do. And I remember looking at my partners and going, oh, my. Because, you know, you just, hey, you just sort of wait and see if. See if you get to it. And you had just gotten to the breaking point. Like, seriously, it’s been a half hour.

[00:05:15] Howard Hartenbaum
I couldn’t take it anymore.

[00:05:16] David Hornik
What do you do? What is it you do? But these guys, if you don’t know in the first minute what they do, then, you know, that’s fine.

[00:05:21] Howard Hartenbaum
I’ll give them four minutes. Because sometimes they want to talk about who they are or where they grew up or a little bit, or how you got to meet them. But the Y Combinator guys, in four minutes you can say, not my cup of tea, or I would love to talk with those guys some more. And I want to go and try their product. So, you know, I saw a bunch of companies. I went. They have two days. I went on the second day. And it’s the same group of companies and they all pitch.

[00:05:45] David Hornik
Oh, is that right? Oh, I was thinking. So it’s. So everybody pitches across the two days. The two day thing is just because there’s so much demand, like the whole venture commute. I bet you every, you know, venture firm in Sandhill Road was represented over one of those two days.

[00:06:00] Howard Hartenbaum
Most. But I think they break it up. I think the first day is for people who have some affiliation with Y Combinator, have invested in a Y Combinator company before or something like that. And the second day, who they like, people they like, people they like. So I went to the second.

[00:06:13] David Hornik
Howard got to go to the second day.

[00:06:15] Howard Hartenbaum
I was invited to the first day, but I turned them down.

[00:06:18] David Hornik
Yeah, exactly.

[00:06:20] Howard Hartenbaum
And I’ve been going for a couple of years now, and it’s getting more polished and the quality, I would say, of the companies is improving. And maybe because Paul and Jessica have refined their screening process, maybe because they’ve changed what they’re, you know, where they’re recruiting from in the process. But pretty much all the companies that got up there, you know, I’m a natural skeptic. I think no matter what you can say to me is not going to be interesting. And pretty much all of them said something that was interesting. Maybe not to me, but interesting to somebody relevant. And they were building something. They all had users, they all had a problem they were solving, they all had built something that worked and was functional. They were across the map of different types of things you could do. Some of them may be great businesses over time and some might just be short lived things, but I think it was, they’re doing greater, greater stuff there.

[00:07:13] David Hornik
Yeah, no, I talked, I mean, my recollection is talking to Paul and Jessica about it. They, their view is that they have learned a lot about how to find the right sets of people and that they’re finding, you know, that they’re. First of all, you know, as we know, if you can’t fund someone unless they, you know about them. And so part of the battle is just to hear about lots of interesting companies or in this instance, lots of interesting people. So I think because they’ve been so successful and smart and good about it, then they’re hearing about a lot more, they’re getting a lot more applicants and a lot more interesting people. I know teams of, teams of people who have the beginnings of companies are really smart and then apply to Y Combinator to sort of work on that idea and rev it. And I think it’s in part because as you say, Paul and Jessica, by the time they finish beating on you for demo day, you have a heck of a presentation for those four minutes. And I’ve seen them, I mean, I remember it was a couple years ago that I had dinner with them the night before one of these demo days and Paul showed up at 10 or something because he was still grilling people until, you know, till 10 at night. So I think that it’s the high, you know, the high value piece. People think, oh, these guys only invest 10,000 bucks or 15,000 bucks or whatever it is. But that’s totally missing the point. Like this is a, it’s, it’s a summer boot camp and what you get is an incredible community of people and a boot camp and a bunch of value out of that. And then after that you also get, you know, just a boatload full of VCs listening to what you’re up to and hopefully funding you. So, you know, it’s pretty awesome. I was bummed that I couldn’t make it to this one.

[00:08:53] Howard Hartenbaum
Well, have no fear, I went in your steep.

[00:08:56] David Hornik
That’s good. I appreciate that. I’m glad.

[00:08:59] Howard Hartenbaum
So those guys, when they come out, they’re more polished in presentation than many companies who’ve taken $5 million, $10 million and spend 30 minutes and I have to yell, what do you do? I can’t take it anymore. So if any of you have not been there before and you’re investors. Contact them. Maybe you can go next year. Surrounded in the audience, there were all sorts of VCs I knew from big firms, from small firms, and I read on TechCrunch the day before a list of the other firms that were there the prior day. And it was just an incredible list. If you’re an entrepreneur, it’s like a sales job. You have an idea and you’re building something and you’re excited about it. And you got to find the right person for you, too. And what better way than to get it in front of 40 different VCs? And maybe all of them, or maybe just one of them will come up and say, hey, this interests me. Just because you have a great company doesn’t mean it will interest every single person that you’re presenting to. So I think it’s great. And I thought there was some pretty neat companies in there, and I’m going to get in touch with them.

[00:10:00] David Hornik
Company B. Company B. Perhaps you’re discussing Company Z. It’s hard to know.

[00:10:06] Howard Hartenbaum
Anyway, thanks, Paul and Jessica.

[00:10:08] David Hornik
So Paul and Jessica also introduced me to company C, the FriendFeed folks. Early on, before they built FriendFeed.

[00:10:17] Howard Hartenbaum
Was that a Y Combinator?

[00:10:18] David Hornik
I don’t think they were a Y Combinator. I think they just were. Paul was friends with Paul. And so they had, you know, they had a relationship. But, you know, sort of interesting stuff going on with FriendFeed. As they reported now, as you know, FriendFeed got bought by Facebook. And I have since heard through the grapevine that they were in conversations to be acquired by Twitter, which. That’s pretty interesting, right? You know, you think of them as competitors and so, oh, man, whoever gets Friend Feed can compete with face, you know, compete with Twitter. And yet here’s Twitter saying, well, maybe we’ll buy you. And in fact, the people, the person who gave me this information was saying that, you know, oh man, they really should have. If you’re, if you were Twitter, there’s real value there. So what do you think? Was it acquire the team, or does Facebook want to fight with Twitter, or what’s that all about?

[00:11:13] Howard Hartenbaum
I mean, FriendFeed by itself is a great product. And whether or not Facebook is thinking about Twitter, I’m sure they are thinking about it, but I think they’re kind of looking forward and saying, what do we want? What is cool and what are you doing? Good teams and great products. I think they just looked at it from that perspective. They don’t seem like particularly reactive Guys.

[00:11:31] David Hornik
To me, yeah, it doesn’t seem, you know, obviously there’s this question of, oh, they’ve changed the feed, and the feed is more like, you know, more like a Twitter experience or whatever. And yet, you know, my kids are not using friend feed because they feel like it’s a Twitter killer. My friends are using friend. My kids are using friend feed. What am I talking about? My kids are not using Facebook because they feel like it’s a. A Twitter alternative. They feel like it’s a, you know, this is their communications platform. And I think that the Facebook folks are just saying, look, you know, as real time becomes more important and as we think about real time, these guys have done some pretty great stuff around incorporating a ton of third parties into the feed to make it, you know, to make it all come together in a single single place. And if you’re, you know, clearly, if you’re Facebook, you want that single place to be Facebook. So it’s pretty smart.

[00:12:22] Howard Hartenbaum
I think your comment about your kids, I think is pretty interesting. Just in. I mean, I have kids and they use Facebook, but they don’t use Twitter. What does that mean for Twitter?

[00:12:34] David Hornik
Yeah, I mean, maybe. Maybe there’s a big business to be.

[00:12:36] Howard Hartenbaum
Had in a Twitter for kids.

[00:12:39] David Hornik
Well, well, maybe that’s true, but I don’t think that. I don’t think that’s the experience kids care about. Like, my kids, my kidder. For those of you who are listening, we have already trademarked Kidder.

[00:12:51] Howard Hartenbaum
Thank you for the legal advice.

[00:12:52] David Hornik
Is that Kitter K I T T R?

[00:12:54] Howard Hartenbaum
Did you know that there’s Evan Williams Bourbon on the market?

[00:12:59] David Hornik
No.

[00:12:59] Howard Hartenbaum
I bought a bottle of it. It’s in my office. I’ll show it to you later. I bought it for Evan, of course. I’m sure he’d heard of this. So I sent Evan an email and said, hey, Evan, I’m sure you’ve heard of this stuff called Evan Williams Bourbon, but I bought you a bottle of it. And he mailed back. He goes, did you get the single malt or the.

[00:13:17] David Hornik
That’s great. And all that? Well, you know, so Evan’s a new father maybe.

[00:13:21] Howard Hartenbaum
So it’s in my office. And, Evan, if you’re ever driving by Sandhill Road, I have a bottle of your bourbon for you. And this has not been a plug for Evan Williams Bourbon.

[00:13:30] David Hornik
Yeah, right. But if they would like to pay.

[00:13:31] Howard Hartenbaum
Us some promotional fee, maybe what Evan Williams Bourbon should do is they should get the Evan Williams signature edition of Evan Williams Bourbon and then market it to the Twitter user.

[00:13:43] David Hornik
Group, Right. Exactly. Sort of the same way that Stormhook wine has forever been appealing to the TechCrunch crowd.

[00:13:52] Howard Hartenbaum
Yeah.

[00:13:52] David Hornik
And they always sponsor the TechCrunch party here. And they have the wine. They. I mean, one party we had here out on our patio in August, they shipped in 40 cases or something in this one. I mean, it was two truckloads full. They just kept bringing it and bringing it and bringing. Must have been more than 40k. So it was some crazy amount. And we had a bunch left over. And I brought it up. I went to. I went to Tim O’Reilly’s food camp that year, and I brought a bunch of it with me to. To be drunk there and then. And Arrington was there. He’s like, what are you doing? My wine.

[00:14:23] Howard Hartenbaum
So you sold it to him?

[00:14:24] David Hornik
I said, I’m giving it. I’m giving it away. Like, oh, man. What are you up to?

[00:14:28] Howard Hartenbaum
Yeah.

[00:14:29] David Hornik
So now speaking, you know, speaking of Twitter and naming, or EV Williams and naming, you know, I’m sure this wasn’t, like the number one thing you watched on. On Tech Meme, but Twitter had applied for the trademark in the word tweet. They wanted to own Tweet tm, But it turns out that the trademark office denied it. They said that there were too many alternative uses, and so prior uses, et cetera. And so tweet wouldn’t. They couldn’t get the trademark. And I don’t know, maybe. You know, I’m sure that their lawyers are thinking about how they can. How they can go back at it.

[00:15:00] Howard Hartenbaum
Because maybe if they put an H in it.

[00:15:02] David Hornik
Thweet.

[00:15:03] Howard Hartenbaum
Tweet.

[00:15:06] David Hornik
Yeah, they should hire you for marketing, Howard. That’s what.

[00:15:09] Howard Hartenbaum
You know, I never understood that marketing stuff. You hire a guy, you pay him a lot of money, he spends a lot of money, and he says, I did my job. I spent the money. That’s marketing. And what did you do for that? Oh, trust me, I did my job.

[00:15:24] David Hornik
See? But good marketing, I got to tell you. Like, so I’m an investor in Splunk, and I remember when we changed the name.

[00:15:31] Howard Hartenbaum
Does that have an H in it?

[00:15:32] David Hornik
Splunk. S P L U N K. And I remember when they proposed changing the name to Splunk, and, oh, it’s great. It’s like spelunking, and it’s fun, and we like the energy, and it sounds good and whatever else. And I sort of went, you know, well, all right, it’s an enterprise product, but we’ll see. And then they started doing all this Quirky marketing. I don’t know if you’ve seen the splunk T shirts, but they’re like taking the sh out of it. And, you know, because ninjas are too busy and all this great stuff and their T shirts are awesome and their marketing is just awesome. Like people love if you go to a tech trade show, the splunk T shirts are highly sought after and they.

[00:16:08] Howard Hartenbaum
Probably have very attractive women in their booths with a big poster that you can get signed.

[00:16:12] David Hornik
Sadly, I think they don’t. I think they have a bunch of IT nerds that are handing out, you know, because ninjas are too busy. T shirts. But, you know, good, good marketing can really, can do great things for you.

[00:16:24] Howard Hartenbaum
So one thing that young companies do is in our area, we see a lot of really interesting young technical guys. And whenever they have money, the only thing they can conceive of spending it on is hiring more technical guys. And if you say to them, well, how much is your marketing budget? And they’re reacting, maybe you should have $500,000 in your marketing budget. And they’re like, but that’s foreign engineers. And everything is compared to the number of engineers they can hire because they don’t have the experience of doing that. And it seems like a waste of money considering you could buy engineers instead. And so we end up trying to have that discussion with a lot of companies and saying, you know, what can marketing do for you? And what is marketing? And can we introduce you to some professional marketers who’ve been very successful and you can talk to them. And usually they come away and say, I’d rather spend the money on engineers.

[00:17:15] David Hornik
But some of them sometimes. That’s right, right. You know, I mean, that was certainly Google’s bent for a long, long time. But, you know, but I agree in a lot of instances, you know, you fund a business that is an interesting business, technically interesting, but if it doesn’t reach a market, who cares? And it’s not going to be sold on features. Right. It’s going to be sold on. This is a great idea that solves a problem. But who, you know, the people who have the problem better know about it.

[00:17:39] Howard Hartenbaum
Yeah, I mean, like Twitter. I mean, their whole success is a result of having one good marketing guy. I just make this up. I mean, a great product.

[00:17:49] David Hornik
Sorry, one great product.

[00:17:51] Howard Hartenbaum
Do they have any marketing guys there?

[00:17:52] David Hornik
Well, they. I think they would argue they’re all marketing guys.

[00:17:55] Howard Hartenbaum
Evan is a fantastic.

[00:17:56] David Hornik
They’re all marketing guys. But, you know, look, if you can get superstar movie stars and sports Stars or whatever, to start promoting your thing for free. That’s an awesome model, right? I mean, I’m friends with the guys down at CAA and those, the agency and, and they realize, hey, they’re. They’re superstars, have a lot of value, and they can bring a lot of value to these companies. And so they’re starting to work with folks, you know, like the Funny or Die deal with Will Ferrell. Look, you know, without Will Ferrell, would anyone have gone to Funny or Die in the first instance? But, man, that, that landlord video was beyond funny and Will Ferrell’s hilarious, and so it got the ball rolling. Now, how much, you know, how much do you think Will Ferrell owns a Funny or Die? I don’t know what the answer is to that. Is it. And how much is it worth? Is it worth 5% of the company or 2% or 40%?

[00:18:46] Howard Hartenbaum
In that case, probably 100%.

[00:18:49] David Hornik
Well, that would be bad for Sequoia since I think they own some of it. Right. They’ve invested a bunch of money. Right. So anyway, so how do we get here, Howard?

[00:18:59] Howard Hartenbaum
I have, you know, it’s this meandering road and.

[00:19:02] David Hornik
Yeah, exactly. Hope they’re meandering. I hope they’re staying a straight and narrow. If they’re listening to this while driving. No, you know what? We start. We were talking about Facebook and, and, and acquiring Friend Feed and. Well, there are a couple of interesting things to me about Facebook and trying to acquire companies, Right. The first is it’s got to be tough to try and acquire companies if you’re Facebook. Not because people don’t want to work there. Of course people want to work there, but, but you don’t have enough cash to like, buy hot companies, right? You couldn’t, you can’t say, oh, I’ll give it. When they go public, they’re gonna be in a great position. And I suspect that their corp and biz dev guys are just dying for them to go public so that they can, you know, so they have this liquid stock that they can use to acquire everything on the planet, but right now they have to acquire you with illiquid stock that’s being valued at what, somewhere between seven and $10 billion. And so how much of that do they have to give you if you think your company’s pretty successful and interesting? It was reported that FriendFeed got $50 million, some combination of cash and stock.

[00:20:12] Howard Hartenbaum
Congratulations to those guys.

[00:20:14] David Hornik
No, awesome guys. I mean, look, I would have loved to fund those guys. It’s a little bit like when the StumbleUpon guys decided to go to be sold to ebay and I said, oh, darn, there it goes. So whenever you’re ready to spin Friend Feed out, we’d be happy to talk. We’ve got some experience in that now to stumble upon. No, they’re a great team. And one of the things that I’ve heard about Zuckerberg is that he’s a really good recruiter, that he can recruit smart people, he can get them engaged and energized about the business. And if you looked at the reports about the FriendFeed acquisition, there were pictures of the night that they signed the documents. They signed the documents at someone’s house, maybe Paul’s house, and they had pictures of Zuckerberg there. And, you know, all smiles, everybody hanging out. I mean, that is the kind of hands on CEO leadership you want. If there’s something, if it’s something that you think is meaningful and valuable to your company, then get the CEO down there and hanging out and saying, hey, we need you guys and there’s a big value here and we’re going to make this worth a pile of money. But if you’re getting stock at, you know, at a 7 million, $7 billion valuation. Right. You have to, you have to assume that it’s not going to be, you know, 100x that. So what do you assume? Maybe if it gets to 70 billion, then it’s a 10x that or whatever.

[00:21:32] Howard Hartenbaum
I mean, yeah, but think, I think all the guys who sold their companies for 1% of Google before the IPO.

[00:21:38] David Hornik
Well, Twitter have made a ton of money by selling, selling.

[00:21:43] Howard Hartenbaum
Blogger.

[00:21:44] David Hornik
Blogger. Thank you. And there were a few, there were a few that went that way. So if you think it’s going to be as big as Google, then, you know, great.

[00:21:51] Howard Hartenbaum
Yeah. Well, with Facebook acquisitions, I read about tipjoy.

[00:21:57] David Hornik
Yeah.

[00:21:57] Howard Hartenbaum
Which I thought was kind of an interesting yet controversial topic to bring up.

[00:22:02] David Hornik
Yeah, totally.

[00:22:04] Howard Hartenbaum
And for those of you who aren’t familiar, at least the reporting on it, whether it’s true or not, I really don’t know, was that there was some interest for Facebook to potentially acquire the company. And it fell apart. And soon after the core founder and one other guy were hired by Facebook, which was basically the end tipjoy. And if there were any other suitors for the company which might get some money back for the other shareholders, the investors, for example, that, that was basically gone because the main guy and the founder and the main engineering guy were now gone. And, you know, that’s kind of an interesting Topic.

[00:22:44] David Hornik
Yeah, right. I mean, what is your, what is your.

[00:22:45] Howard Hartenbaum
How about you put your foot in your mouth?

[00:22:47] David Hornik
No, I’m here. But like, what is your fiduciary duty? Right. You have a duty. I assume that the founder of the company was on the board and you know, as a board member, you have a fiduciary duty to the company. And so what is that duty? I mean, I’m sure he tried to sell the company and, and maybe the case was that when they didn’t buy the company that there really wasn’t an opportunity to do anything, anything more. So, so they were going to shut down the company anyway. But, but you’re certainly right that, you know, once the, once the core people leave the company, there’s not a whole lot left.

[00:23:19] Howard Hartenbaum
In this case, though, I think if you’re like the founder of the company, so this is my opinion, not August Kapital’s opinion, but my personal opinion is in that situation, if the founder were to then leave and take a job so as to do the right thing in that situation, whatever stock that he was given by the acquiring company, he would divvy that up with his other shareholders on a pro rata basis just so that nobody. If he was given a million dollars worth of stock, hypothet, it might have been $1,000 worth of stock, $100 worth of stock, if he had owned 20% of the company at the very end, then he takes 20 and he divvies up the rest. And nobody could ever claim later that there was any issue there. But I don’t know the guy, I don’t know any of the details, but with what little I know, I could imagine if that guy decides to go and try and start another company in the future, it will be very, very hard to raise money because, or work with partners where equity is involved, because the other partners may say, oh, you know, I work with this guy, I take risk and then I get nothing.

[00:24:25] David Hornik
Yeah, I mean, I think it’s an interesting, I think it’s an interesting challenge. But I think, you know, at the end of the day, if, like we say we don’t know what, what went down and if it turns out there wasn’t an opportunity and the company is closing down and they said, hey, we want you to join us, you know, then, hey, what are you gonna do? But I think it is a tricky situation. I mean, when does the conversation with the company end and when does the conversation with the founder begin and what is he, what is he gonna do there and etc. And so.

[00:24:55] Howard Hartenbaum
And it can be exacerbated by, you know, I don’t know, the financial situation, but it’s quite likely. Maybe the guy really needed a job and he needed it immediately.

[00:25:04] David Hornik
Yeah.

[00:25:05] Howard Hartenbaum
You know, to pay his mortgage or his rent or whatever. And the acquisition wasn’t happening, and he had a job offer and, you know, his obligation to his investors where the company didn’t work, or is it to his wife and baby? You know, so it’s really kind of, you know, without having.

[00:25:20] David Hornik
You’re trying to take food out of the baby’s mouth.

[00:25:23] Howard Hartenbaum
No, equity.

[00:25:24] David Hornik
Equity. That’s right.

[00:25:26] Howard Hartenbaum
College.

[00:25:27] David Hornik
College. It’s like the baby’s college fund.

[00:25:29] Howard Hartenbaum
Yeah. So, I mean, we have no details on it. We just read the press, which is often not exactly having all the proper details, but it is an interesting topic and that’s why we bring it up. Because you could imagine somebody ending in a situation where later people are saying, wait, what happened here? Was there a conflict? And it’s tough.

[00:25:47] David Hornik
So there was another fun one, which is, you know, MySpace goes and negotiates to buy I like. And shortly thereafter. And I like was what. I mean, I think his primary presence was on Facebook, right?

[00:25:59] Howard Hartenbaum
No, I think it was. Oh, it was a heavy presence on MySpace, but also a lot.

[00:26:05] David Hornik
It was on both. Right. I mean, it’s pretty. Well, pretty.

[00:26:07] Howard Hartenbaum
Were they backed by Ticketmaster last year? Two years ago.

[00:26:10] David Hornik
They’ve been around for a while. They’ve gone through a number of financings. But. But so what happens? So they get acquired by MySpace and then shortly thereafter, Zuckerberg says that he likes it.

[00:26:20] Howard Hartenbaum
Spotify.

[00:26:21] David Hornik
I’m a big fan of Spotify. Like, forget that. Forget that. I like. You know what I don’t like is I like. But Spotify, now, Spotify is a good company.

[00:26:30] Howard Hartenbaum
Spotify is another music company based. I think it’s a Swedish company.

[00:26:35] David Hornik
Yeah, it’s European. That’s one of. The. One of the European.

[00:26:38] Howard Hartenbaum
Very nice design. I like Spotify too.

[00:26:42] David Hornik
Do you? Do you. What’s that doing for us, Howard? Well, next time you’re over at the SWOOPO board meeting in Germany, why don’t you stop on over in Sweden or wherever they are, you know, check up on Spotify. Just a quick hop.

[00:26:55] Howard Hartenbaum
Right. So one of our partners, John Johnson, was in Sweden and before Spotify did a financing recently. And a couple of weeks beforehand, John emailed me, said, hey, do you think I should stop off and see Spotify? As long as I’m in Sweden, I’m like, yeah, why not? And then I Guess before he did, they got funded.

[00:27:14] David Hornik
Darn it. We gotta get to Sweden more often, eh?

[00:27:18] Howard Hartenbaum
Sweden in the summer is nice. Not in the winter. It’s really dark and cold.

[00:27:21] David Hornik
I’ve never been to Sweden at all. I should get there.

[00:27:26] Howard Hartenbaum
It’s nice.

[00:27:27] David Hornik
I only made it as far as Copenhagen.

[00:27:30] Howard Hartenbaum
If you like caviar, they have this Swedish caviar which is really delicious.

[00:27:34] David Hornik
Is it as salty as.

[00:27:36] Howard Hartenbaum
No, no, no. It’s. It’s different. It’s like a reddish color and it’s just good. And food is really good there. People are really nice. Sweden. Go Sweden.

[00:27:44] David Hornik
Yes, we are. We at August capital. Enjoy Sweden and like the Swedes.

[00:27:48] Howard Hartenbaum
So I had a. I lived in Tokyo when I was younger and my next door neighbor was a guy who worked at Ericsson. And we become good friends and we visit each other now and then my family visited his family at his house outside of Stockholm four or five years ago. And we come down for breakfast and had this big beautiful wooden table and they put out all this meat and cheese and fruits and vegetables and no dishes, no forks, no napkins. Just basically you eat everything right off of this. But you get like a knife and you’re like cutting the cheese and you’re eating and just like everything is with your hands. I’m like, just like. There’s like no serving dishes. There’s no dish. And I don’t know if this is just my friends messing with it.

[00:28:34] David Hornik
It was just on the table.

[00:28:35] Howard Hartenbaum
It was just on this big wooden table. Like it was a big.

[00:28:37] David Hornik
So if those of you from the area have any opinion and let us know. Is this the way to eat breakfast.

[00:28:44] Howard Hartenbaum
Or were they messing with.

[00:28:45] David Hornik
Or were they just messing with Howard?

[00:28:47] Howard Hartenbaum
But that’s what’s fun about travel. Sometimes you like you something is just completely different.

[00:28:51] David Hornik
Yep.

[00:28:53] Howard Hartenbaum
Where’s my dish?

[00:28:55] David Hornik
You know, this is not. This is, you know, not really related to that. But while I was in the Boston area over the summer, we ate on a number of occasions at Wagamama. And I just want to. Wagamama.

[00:29:09] Howard Hartenbaum
It means hard headed.

[00:29:10] David Hornik
Hard headed in Japanese, but it’s awesome. I gotta tell you, if you’re in Cambridge, go to Wagamama. If you’re in London, go to Wagamama. It’s so I would like, if someone’s listening and they could fund the expansion of Wagamama to the Bay Area. If there was one in Palo Alto, it would make a fortune. I’m telling you, it would like a.

[00:29:28] Howard Hartenbaum
Big Asian, Asian, Japanese ish noodle shop with big bench tables.

[00:29:33] David Hornik
Yeah. And they just put you there. You can’t. You get. Sit next to people, they serve you beer. Then they. And they serve it whenever it comes out, which I like. You know what? I just like a.

[00:29:41] Howard Hartenbaum
Five people order stuff and like only three people’s food comes out. You eat while the other two have to wait.

[00:29:46] David Hornik
It comes and you eat and then when they eat, you wait for them. That’s just how it goes.

[00:29:49] Howard Hartenbaum
Food is good.

[00:29:50] David Hornik
It’s good. So that’s. I’m also. I like the Swedes and Wagamama and.

[00:29:54] Howard Hartenbaum
We were not sponsored by the Swedes or Wagamama today.

[00:29:57] David Hornik
But like always, we’re happy to accept Swedish caviar or coupons at Wagamama.

[00:30:02] Howard Hartenbaum
But we don’t accept Swedish kroners.

[00:30:04] David Hornik
No. Because they’re worthless. There’d be no point.

[00:30:06] Howard Hartenbaum
We want gyros.

[00:30:09] David Hornik
So there you have it. We’ve covered a number of topics. What else have we got? I don’t know how we got off on the Swedes, but we were talking.

[00:30:17] Howard Hartenbaum
About acquisitions and music companies and there’s, you know, consistently more and more music companies are coming out.

[00:30:25] David Hornik
Yeah, you know, it’s.

[00:30:26] Howard Hartenbaum
That’s like the one area that, yeah, it seems like we see a lot.

[00:30:31] David Hornik
Why do you think that? I think it’s because people love music. Don’t you think? Like, people just love music so they can’t help themselves. You get pitched on some music deal and you go, oh, now that’s cool. Like, I really. That’s what I want to. You know what’s a cool company? I did spend time with the founder of. And we didn’t fund them, but I really like it is Blip fm. You know, it’s like a community around picking music.

[00:30:54] Howard Hartenbaum
And what country is FM for?

[00:30:57] David Hornik
I don’t know. Did you see that? You can get vc. What country is vc?

[00:31:02] Howard Hartenbaum
The Vatican.

[00:31:06] David Hornik
Well, we should. Don’t you think we should own August VC now? Someone’s gonna buy it. I’m going to go check it out. We need to trademark before we. Before we. Before we put this up. I’m going to make sure that if it’s available, we own August vc.

[00:31:19] Howard Hartenbaum
Yeah. Delicious did a neat thing with how they did their. And so, you know, people trying to figure out new ways of doing this. Like, you know, what was it? The Italian one. Is it. And there was a big scramble for somebody to buy sh. It who owns it and there’s a bunch of others. And then in it. Which I won’t go there.

[00:31:36] David Hornik
Yes, exactly. Like tw. Is that what you Meant I was.

[00:31:40] Howard Hartenbaum
Thinking of one that was.

[00:31:41] David Hornik
Yeah, yeah. We interrupt this.

[00:31:46] Howard Hartenbaum
How does that work? Like on the radio where they have somebody beeping. Is there like a.

[00:31:49] David Hornik
There’s a delay.

[00:31:50] Howard Hartenbaum
There’s a delay, and somebody’s job is to listen. And if they hear the word, there’s some delay, but they hit the beep, and then they match them back up later.

[00:31:56] David Hornik
No, they do it in real time. So they hit. They go, oh, that’s coming up. And then they switch over to the live feed and boop, beep you up.

[00:32:03] Howard Hartenbaum
I want that job.

[00:32:04] David Hornik
Yeah. Oh, that would be awesome. Of course, they were so good with. With the super bowl that they didn’t catch the little errant nipple clothing costume.

[00:32:15] Howard Hartenbaum
Malfunction that had been practiced 400 times.

[00:32:18] David Hornik
So, you know. Exactly. Because that’s hard to do. It’s hard to.

[00:32:21] Howard Hartenbaum
They did it perfectly.

[00:32:22] David Hornik
Hard to rip it off that way. No. So. So the. So the biggest financing news in the music business of Pandora, right?

[00:32:29] Howard Hartenbaum
Yep.

[00:32:31] David Hornik
With Greylock and David Z, who is a great investor and a good friend of ours, and putting, I assume, a bunch of money into the company.

[00:32:39] Howard Hartenbaum
I think it was a billion dollars.

[00:32:42] David Hornik
That’s right. Come to VentureCast, for all your misinformation. It was not a billion dollars, Howard, but it was. Was it tens of millions? I mean, it was a lot of money.

[00:32:50] Howard Hartenbaum
I don’t know the number.

[00:32:51] David Hornik
And David, I think, went on the board and so. And, you know, like, Pandora is an amazing experience, and people love it. But it is interesting to wonder, like, you know, how big can it get and how much. How much margin is there if you’re paying licensing fees for music? And so I think that what’s amazing to me is how much better it’s gotten. It used to be that you couldn’t license music from the record companies for less than one of your arms and one of your legs. And now they’re actually, you know, coming up with some reasonable licensing terms. So maybe there’s. Maybe there’s money to be made.

[00:33:23] Howard Hartenbaum
Think of how simple it was 20 years ago when you wanted to hear a song, you turned on the radio and you waited for it.

[00:33:32] David Hornik
Right. When we were kids, that was totally the case. You’re like, oh, I love my Sharona. Well, we’ll just wait, because in the next 20 minutes, it’ll be on.

[00:33:38] Howard Hartenbaum
And if you want to record it, you get your little tape deck next to it. You’ve got the ready to push the record button. There was some article in the press a couple of months ago about some mother who gave her 13 year old son Walkman.

[00:33:51] David Hornik
Like a real Walkman.

[00:33:51] Howard Hartenbaum
A real Walkman. The concept of like fast forwarding and going back and then he had to take the tape out and flip it over to hear the rest of the music on it. It was way too much for him.

[00:34:04] David Hornik
I’m sure he was quite bitter. But that sounds pretty awesome. You know, that idea of like clicking, you know, recording on your tape recorder that sits next to it. I remember we had a recording of. Oh, man. What was the song?

[00:34:17] Howard Hartenbaum
It was probably like My Sharona timing.

[00:34:19] David Hornik
Yeah. So it was, it was like it was past the duchy. You remember Pass the Dutchie on the left hand side. You don’t remember that song?

[00:34:26] Howard Hartenbaum
I’ll pretend like I’ve never heard of it before. I think the one you were recording was. Was that Mama Don’t Take my Kodachrome. But I remember when I was, when I was a youngster and literally staying home from school way back then and feigning sick with the radio and the tape recorder and waiting until the song came on so that I could record the song and then I could listen to it over and over and then flip the tape over.

[00:34:51] David Hornik
So what’s interesting is that since then, right, there have been all these efforts to try and figure out how you can, you can, you know, there’s one which is you buy the, you can buy the song, go to itunes, buy the song. But then there are all these games around. How do I get the song that I want while still pretending it’s streaming, etc. Etc. And it’s just because that was such a pain. The thing that I really want in my car, I keep asking is I want TiVo for my radio. I mean, so often I’m driving along and then I go, wow, that was interesting, but I only half heard it. Or that was a good song and I want to hear it again. And there. And nobody’s yet. Maybe, maybe they have. But I haven’t seen a good instance of a car radio that allows you to go back up and say, I want to listen to that again.

[00:35:36] Howard Hartenbaum
Like a radio with memory in it. It just records. Keeps the last.

[00:35:39] David Hornik
Have a hard drive and yeah, why don’t you keep a cache and let me go back? Or better yet, store. Oh, I wanted to hear Howard Stern, but I’m not driving during Howard Stern period of time. Well, why can’t I listen to that? Why can’t I listen to it from my drive from 11 to 1 instead of my drive from 9 to 11?

[00:35:57] Howard Hartenbaum
So do you think that all this explosion of music distribution companies is just a pure ratio to the explosion in the number of pieces of music that are available out there. I mean, recording equipment has become cheaper. You know, digital synthesizers have become cheaper over the years. And 30 years ago, there was, you know, 500 new songs came out per week, and then now there’s 500 new songs come out per hour or whatever. Is this just a sign of technology making it cheaper and easier to produce the content and distribute the content? It’s just some exponential effect when you think it’s something else.

[00:36:32] David Hornik
Yeah, I mean, I think it’s a little bit about the open system. Right. I mean, if you look at it now, there’s the capacity to produce and distribute your own music in ways that didn’t exist. And, you know, look, it was how many. It wasn’t very many years ago that anytime we were pitched on a. On a mobile business, it was, well, we can get a good relationship with Sprint. We can get on deck, you know, and we can. We can be distributed by Sprint because sprint and AT&T whatever, had a monopoly on the distribution of these things. And suddenly there’s this. The iPhone comes in the App Store and there’s this explosion of applications that can be built on top of it because it’s no longer this entirely closed platform. Now there are plenty of arguments to be made that Apple’s still kind of ruling with an iron fist, but as Android becomes bigger and the Palm Pre becomes a bigger platform and et cetera, there are going to be exponentially more applications available because the distribution is better and more broadly available. And I think the same is true of the music industry, where it used to be that the major labels had a monopoly on the ability to produce and distribute music, and now that’s just not the case. There are plenty of big artists who are getting their start independently and in fact, choosing to stay independent because it’s just a better business for them. I like that you got to appreciate the digital world.

[00:37:58] Howard Hartenbaum
This rapid increase in number of companies doing it just kind of says to me, nobody’s figured it out yet. And I think it’s one’s just going to jump out and be the solution.

[00:38:09] David Hornik
Much like, don’t mind my phone, I’ll just go get that.

[00:38:14] Howard Hartenbaum
Oh, yeah, David’s ringtone is pretty bizarre. It goes, hello, hello, hello. So thinking about, you know, itunes kind of came out of nowhere when it launched and just went so quickly and kind of took over everything, at least for a while. I think there’s another one coming. I don’t know what it is yet, but it’ll come. Somebody’s got some great idea and they’re building it right now. Maybe it’s a Y Combinator company. Maybe it’s some entrepreneur in his back room. Maybe it’s some venture capitalist who should rather be building a music company.

[00:38:46] David Hornik
Well, that’s why we keep looking at them, right?

[00:38:48] Howard Hartenbaum
Yep.

[00:38:49] David Hornik
We’re happy to keep looking.

[00:38:52] Howard Hartenbaum
I think that’s about it for the day. Cuz I have another meeting I have to go to right now.

[00:38:56] David Hornik
Wow. See? Howard’s burning the midnight oil.

[00:38:58] Howard Hartenbaum
Yep.

[00:38:58] David Hornik
All right, good talking you, Howard.

[00:39:00] Howard Hartenbaum
Thank you for listening.