Generated Transcript

[00:00:15] David Hornik
Hello and welcome to VentureCast. I’m David Hornik from August Capital.

[00:00:20] Howard Hartenbaum
And I’m Howard Hartenbaum, also from August Capital.

[00:00:24] David Hornik
That’s right, we’re from August Capital.

[00:00:26] Howard Hartenbaum
August Capital went.

[00:00:28] David Hornik
It’s been a little bit since we recorded Venture Cast, but probably was August. I don’t think it was quite that bad. But we did so last. So last show, Howard, we had, we had the I Like Robots show. And then you got an email from a guy making robots saying, oh, you want to learn about robots? I have a robots deal. That was awesome.

[00:00:47] Howard Hartenbaum
Yeah. And he said, I’m not only I’ve got a robots deal, but I got a robots deal that’s kind of a real business and has some real technology and is looking for a venture capitalist to give them some money. Perfect.

[00:00:57] David Hornik
So what do we like today? I like web apps.

[00:01:04] Howard Hartenbaum
Consumer software.

[00:01:05] David Hornik
Yeah, exactly. We have to be specific, though, because we have to make people go, oh, man, I have that.

[00:01:11] Howard Hartenbaum
How about games? You can make money on games you.

[00:01:14] David Hornik
Can make money on. Well, oh, there was a big article in TechCrunch today about Zynga, Playfish and Playdom. And according to that, Zynga’s making 200 million bucks, Playfish was making 70, and Platem was making 60 million bucks. And Platem hasn’t raised a penny.

[00:01:32] Howard Hartenbaum
Well, if you actually read the article, you would see there are some rumors that they raised a bunch of money in the summertime. We know Stephen Lurie, who’s at Zynga, who’s their GM of mobile, and he was taking surfing lessons a few months ago and blew out his knee and.

[00:01:51] David Hornik
Then got stuck on a plane for hours waiting to head back. I hope he’s okay with a sword. Stephen, we’re thinking of you.

[00:01:57] Howard Hartenbaum
Yes, but Zynga, guys, all the team is working hard for you while you’re lying.

[00:02:02] David Hornik
I think he’s not lying anywhere because he emailed me and said, come have lunch with us at Zynga. Zynga has like, cafeteria. They have apparently good food. And, you know, it’s like Google all over again. They’re making all this money, they have cooks, and you can come visit and eat with them.

[00:02:19] Howard Hartenbaum
I met a very Smart, young, recent PhD graduate about a year ago who was interviewing with Google and he took the job and he moved out here, I think, at the end of like November or December of 2008, right as the economy was going down the toilet. And he was so happy to be in this new job and he doesn’t drive and he got an apartment when within A short bike ride of the Google campus so he could eat basically breakfast, lunch and dinner there. And right after he got there, they cut back on some of the weekend meals and stuff. Really? And he was so pissed he quit. He enjoyed Google for the food and.

[00:02:58] David Hornik
When they cut back on the food.

[00:02:59] Howard Hartenbaum
When they cut back, then he split.

[00:03:02] David Hornik
I mean, I’ve eaten lots of meals there. I will say that I think the food has gotten less good, but I don’t think that’s a money issue. Right. I just think that it’s hard to serve food to that many people.

[00:03:13] Howard Hartenbaum
No, I think if you’re saying single and lazy and your motivation is life is to be fed and you take a job for the food, you expect the food to be there.

[00:03:20] David Hornik
No, I agree. That’s a. That is, you know, this is the thing in startups and any companies, you have to be clear about your expectations. Expectation setting. Right.

[00:03:29] Howard Hartenbaum
Yeah.

[00:03:29] David Hornik
And truthfully, it would have been in Google’s complete interest to feed this guy every meal because he would have been there every meal.

[00:03:36] Howard Hartenbaum
Yeah.

[00:03:36] David Hornik
Think about how many hours you have to work for that to. For you to be there every meal.

[00:03:40] Howard Hartenbaum
No, what he said to me too is like Sunday, you know, maybe he’ll skip breakfast, but. But then he’ll go in for lunch and then he’ll hang around his office and work until dinner.

[00:03:48] David Hornik
Yeah. So there you go. So Sunday you got a minimum of five or six hours or a lot.

[00:03:53] Howard Hartenbaum
Of Zynga video games.

[00:03:55] David Hornik
Yeah. Right. Playing Zynga. Well, actually it was yet another article about, you know, I think this was in the Telegraph or something, that British companies estimate that they’ve lost however many billions of pounds and people wasting time on Twitter.

[00:04:09] Howard Hartenbaum
Yeah. Was it Twitter? Was it Twitter and Facebook?

[00:04:11] David Hornik
Who could have been both? Whatever.

[00:04:12] Howard Hartenbaum
Yeah, who cares?

[00:04:13] David Hornik
It’s one, it’s both, it’s all.

[00:04:15] Howard Hartenbaum
But they forget about all the productivity that those applications provide.

[00:04:18] David Hornik
Exactly. Like what?

[00:04:23] Howard Hartenbaum
Mental stimulation.

[00:04:25] David Hornik
Okay. Productivity. Well, no, I mean, I’ll make. I have so many business people on Facebook and Twitter. Like, you know, I don’t know why anyone’s following me on Twitter. I’m DavidHornick. One word. D a V I D H O R N I K. One word. Follow me on Twitter. But I’m not sure why you would. I mean, you know, periodically I have a little fun fact or, you know, something amuses me or whatever, but you.

[00:04:46] Howard Hartenbaum
Have this app on your computer and so that I won’t play preferences, I won’t name it, but it tweets like a stupid birdie every Time it comes.

[00:04:56] David Hornik
Well, now you’ve told. Now you’ve given me up.

[00:04:59] Howard Hartenbaum
So please don’t send any tweets to David. They have to listen to that sound.

[00:05:06] David Hornik
It must be turned off because it would be tweeting as we speak. So it’s.

[00:05:11] Howard Hartenbaum
I use it for search for stuff. One of my companies, people is consumer service called Swoopo. And people use Twitter to make comments that they just won or how do you play this? Or has anybody tried this? And I can kind of check the tone, how things are going simply by searching on Swoopo on Twitter. It’s kind of cool.

[00:05:29] David Hornik
That’s good.

[00:05:31] Howard Hartenbaum
Works for me.

[00:05:32] David Hornik
That’s what we call the real time search hour.

[00:05:36] Howard Hartenbaum
Yeah. That everybody wants to get into now. And, you know, some of the reports are saying that Microsoft is a little bit ahead in that game at the moment.

[00:05:43] David Hornik
Well, they just bought. Microsoft just bought the Twitter data. How amazing is that? I hope they paid a lot of money for that.

[00:05:50] Howard Hartenbaum
I wonder how much it was. Wonder how much it was. A lot. That’s all by itself.

[00:05:56] David Hornik
Is there anyone we can. Well, actually, you know what that business model is? That’s the Firefox business model. Right? We look at. They put a little search box in the upper corner of their browser and on the front page, and they get tens of millions of dollars from Google a year. So it’s great. Now it’s hard for them to grow that, you know, without getting more Firefox.

[00:06:15] Howard Hartenbaum
Users, but tens of millions of dollars per year doesn’t suck.

[00:06:18] David Hornik
Doesn’t suck. They can’t. In fact, Mozilla can’t spend it. I don’t know what they’re doing. They got all of this money. I don’t know what they’re doing with it.

[00:06:24] Howard Hartenbaum
Cafeteria.

[00:06:25] David Hornik
They should. They should have a cafeteria. And then they could hire your PhD friend to come to come eat there.

[00:06:32] Howard Hartenbaum
He moved to Los Angeles.

[00:06:34] David Hornik
Seriously.

[00:06:35] Howard Hartenbaum
Took a job with some other company in la.

[00:06:37] David Hornik
Are they feeding him?

[00:06:38] Howard Hartenbaum
I don’t think so. I think it was actually the job he wanted, but it was the job without food.

[00:06:44] David Hornik
So now he has to actually use the money they give him. See, he doesn’t understand that this thing called money, it is actually fungible. You can trade it for food.

[00:06:52] Howard Hartenbaum
I think money was just. It’s just the laziness factor. Right. Sort of like you never moved out of your house and mom just like makes your food all the time. It’s just easy.

[00:07:00] David Hornik
I think it is. I totally get it. I thought it was genius. I mean, like, you can go. They have A doctor there and you can get your car washed. You got all these things like dry cleaning, like what else? A massage. I mean you can get, you know, just. I mean it’s so good. How many, I wonder if any people are like meeting their future spouses there. So like you could meet your would be spouse and get married. Maybe they have marry you there.

[00:07:26] Howard Hartenbaum
Is it like 10% or 20% of your time? The engineers can build applications, they can do other types of.

[00:07:33] David Hornik
I think it’s called 10% time.

[00:07:34] Howard Hartenbaum
Yeah. So I’m sure there must be some smart guy there who’s built a Google dating app, which.

[00:07:40] David Hornik
For internally.

[00:07:41] Howard Hartenbaum
For internally. It looks at all of your information, what building you’re in, what work hours you’re on, what projects that you’re involved with, and it basically hooks you up.

[00:07:51] David Hornik
That’d be awesome if we did that here at August Capital. It’d be a little, you know, troubling. Everyone’s already married and they’re all men. That is not self troubling. I’m just saying that, you know, it’s not a great, it’s not a big pool. Yeah, it’s a pro. This is why the web is so great. You take your pool from like two people.

[00:08:18] Howard Hartenbaum
Google’s a big enough pool to do.

[00:08:19] David Hornik
All sorts of stuff like that.

[00:08:21] Howard Hartenbaum
Like they could say at any given time, you know, you guys would be about right. And we’ve got a rabbi over here to marry you.

[00:08:26] David Hornik
Right, Exactly. Well, I just recently went to what I like to think of as the Google bris. I was at, you know, some lovely friend of mine and her from Google and her Google husband and they had a Google baby.

[00:08:39] Howard Hartenbaum
What did they name the baby?

[00:08:40] David Hornik
Google. It was nice. What do you want to talk about, Howard? We’ve, we’ve, we’ve screwed around here enough.

[00:08:48] Howard Hartenbaum
We could do this all day long. God knows we do.

[00:08:50] David Hornik
Yeah, exactly. I wonder what anyone would. You keep listening, whoever you are out there. How much could we go on about? Nothing. Have you still be jogging along going, I’m not gonna switch to the random button on my ipod.

[00:09:04] Howard Hartenbaum
Yeah. Or something interesting like npr, which actually does real research on their stories.

[00:09:08] David Hornik
Yeah, exactly. Where you get real content from people who have much better voices. They all sound like Howard, not me.

[00:09:14] Howard Hartenbaum
You know what I’ve noticed about NPR is I’ll be. I listen to NPR all the time when I’m driving to work or driving around. They have some good stories on there and guaranteed I’ll listen to something that I think is really interesting. And later in the day I’ll be talking to some random person, whether it’s an entrepreneur, one of my partners, or some stranger on the street, and they’ll start a topic, a conversation about the topic of the NPR show. Like they were like, experts on this topic. And then it’s like, a couple days.

[00:09:40] David Hornik
Ago, you don’t know anything.

[00:09:41] Howard Hartenbaum
It was like, Dave.

[00:09:41] David Hornik
Right.

[00:09:42] Howard Hartenbaum
So he started talking about something. So you listen to that show on NPR this morning. He was like, yeah, yeah, exactly. But NPR must do a good job because they pick topics and they give you enough data and you can remember it, and then you can, like, sound knowledgeable in front of some other complete fool who listened to NPR that morning.

[00:09:56] David Hornik
It’s awesome. I had the good fortune of getting together a short while ago with the head of pri, Public Radio International, and she was awesome. And she. And I just wanted to keep, you know, when you’re a total psychophant, like a fanboy. Oh, you know, this American Life. I love that show. You know that show? Yes, David, I produced that show. Oh, really? Well, I love that show. Oh, what. What else do you do? Oh, that’s awesome, too. It was. I was totally. It was like. It really was like going to. Over to the Apple offices. Oh, I love that MacBook. It’s awesome. You made that MacBook.

[00:10:32] Howard Hartenbaum
Yes, I did. Moving on. So one thing we were talking about before was the, you know, being in the venture business, and one of the interesting topics we come across is entrepreneurs trying to decide how to pick a venture capitalist or two to work with and what that whole process looks like and what they’re looking for. And it was something that we had chatted about before.

[00:11:00] David Hornik
Yeah. I was like, you know, pick me. Pick me. No, pick me.

[00:11:03] Howard Hartenbaum
The entrepreneurs are in the driver’s seat. I mean, we’re a service provider, and we need the entrepreneur, and they need or want money, and they have more choices in financial partners. I often wonder if the entrepreneur is. When they start the funding process, I think they typically think to themselves, oh, I got to find some money to grow my business. And so they start pitching some VCs, and they kind of figure, yeah, I’ll find some money, and maybe I get a couple guys interested and I can get a good price. But they don’t really give too much more thought into it.

[00:11:37] David Hornik
Like, yeah, it’s just, oh, this is. I go, I need 4 million bucks. VCs have 4 million bucks. I’m going to go pitch them until I get the 4 million bucks, and then I can go to the next stage of my business.

[00:11:50] Howard Hartenbaum
But what normally happens is they start pitching and either their story isn’t baked enough yet, and so it’s getting more and more baked with each person they pitch, and eventually they find the right person, or they start pitching and they suddenly realize they’ve come across with something that a bunch of people at the same time happen to think is very interesting as well. And then without too much thought, the process sort of starts running. And I think in many cases, if the entrepreneurs had given more thought to how they wanted to run the process, they would be even happier with the outcome in the end, for the long run.

[00:12:23] David Hornik
Yeah, it starts having a life of its own. And I do, and I agree with you, it is a little bit bifurcated, Right. You have those companies that sort of have, you know, one offer or no offers, and then that’s the vast majority. Right. It’s very hard to raise money. And particularly now, it’s very hard to raise money. But then there are occasionally those companies that have three and four and five and, you know, seven. If you’re pitching too many people, you know, firms that are saying, I’d love to fund you. Take my money, take my money. And then they. And then they get in this process where, you know, it just takes on a life of its own. Or what’s, you know, everybody give me term sheets, and I’ll be accepting term sheets. And then in the following Thursday, I’ll be, you know, choosing the best term sheet. And that’s really not the best way to go about it for the entre. You know, it’s not the best way for the VC either, but it’s not the best way for the entrepreneur because it doesn’t necessarily optimize for the things that they need. Right. Or that they. Or that they want.

[00:13:18] Howard Hartenbaum
So if you were a young man and decided that you wanted to get married.

[00:13:22] David Hornik
Yes.

[00:13:22] Howard Hartenbaum
And you ran and you pitched 10 different women saying, I’m looking for a spouse to spend the rest of my life with. Give me your offer next Thursday. You may. You may get no offers. You may get one offer, and it may not be your choice.

[00:13:37] David Hornik
But so, but here’s the thing, right? That’s totally fair. But so here’s the thing that I hear a lot, right? And you see this. There are blogs out there that sort of talk about the venture process as this adversarial process. Like, okay, you go in and you pitch the bad guy VCs, and then if you get a bunch of them, then you have them bid against each other so you can drive up the price. And you take the best price. And like the, the win, the big win in venture finance is to get the best possible price you can. And if you get a really big price while containing, while maintaining all the control over your own company, then you have succeeded and won. And it’s a little bit like saying exactly what you said, like, oh, give me, here are my 10 potential brides. If I can convince the richest one to marry me, who’s the most submissive? Yeah, right. She’s the one. Right, Exactly. I get the most control and the most money. So, right, you know, okay, perfect. Then you’re the one I’m going to marry. And yet, you know, I’m pretty sure that wasn’t my process to getting married. There were a few other factors.

[00:14:31] Howard Hartenbaum
It may seem good at the point of the marriage because you have a really nice wedding and a very nice honeymoon, but like three months later you’re wondering to yourself, boy, maybe I didn’t run the right process. And that’s why we brought the topic up.

[00:14:42] David Hornik
Yeah, right. It’s like it turns out in marriage and in building ventures, it’s a little more collaborative than that. It’s not. Now look, I’ve heard, you know, the funny thing is I’ve heard seasoned entrepreneurs who say, look, you know what, I’ve been through this process before and so I don’t need, I don’t need all that help. And so I don’t need this particular VC or whatever. I just need a good price and get a bunch of money. And if everything goes perfectly, then that may be absolutely right. But, but it very rarely goes that way. Right. I mean, ultimately, so, so obviously, like I said, Howard and I think that this is the self interested portion of the program where we talk about. The reality is you have to pick the firm and you have to pick the people you want to work with. But that’s a little bit, you know, as always, you know, venture investors are wonderfully egomaniacal. We assume that all things being equal, you’d pick us. Like, oh, well, if we just say to you pick the guy who you want to work with, then you’ll pick with, you’ll pick me and Howard. But that, but I really do think, like even if you ultimately pick someone else, you say, oh, I’m going to pick someone else. I do think that that’s the process. The process is who are you going to be working with? Right. And not what firm are you going to be working with. Who are you going to be working with? You’re not going to have the firm sitting on your board, right?

[00:15:56] Howard Hartenbaum
Yeah. For example, you may be doing some very specialized technology related to reducing obesity, for example, and there is certainly some venture investors out there who are domain experts in your space and could provide a lot of interesting value and connections and whatever with something that’s very, very specialized. Going for the highest price may not make any sense at all. In that case, you may go for the lowest price, but the guy who actually understands your business and when you’re having problems, can even comprehend what the problems are. So there’s specialization, there’s experience in that industry. If you’re doing something that’s very focused around, you know, payments, you might want to go, go talk to Dana Stalder at Matrix, who’s out of PayPal and has a lot of experience in that space. Maybe you’ll think he’s the greatest guy for you. He certainly has the right background and understanding of the business space for you. And so saying things like, well, I just want the, you know, the highest price or the most control or whatever may not be the best thing for you to think about. So.

[00:17:08] David Hornik
But, you know, it’s interesting, as I say, oh, you know, you’re, you’re marrying a person, so. Right. You’re marrying David Hornik, not the Hornick family or whatever. It, it’s not that firms are without, without value. Right. I do think that there are firms that are collaborative and I do think that they’re, that they’re, that certain firms have, have brand and cachet that are helpful when you’re trying to recruit people, etc. So it’s not that it’s not a reasonable consideration. It’s a perfectly reasonable consideration. It’s just that it may not be as big a consideration as who’s going to sit on my board for, you know, if it goes well, they’re going to be sitting on your board for six and eight years. Right. As you’re building a big public company or if you’re, you know, our partner, Dave Marquard, who has sat on the Microsoft board for 28 years, geez, if Gates didn’t like him, he’s had 28 years of misery hanging out with Dave.

[00:17:56] Howard Hartenbaum
So what about the flip side? When things aren’t going so well, you might want to consider what is a venture firm done in the past with who your board member is? And you may sign up with one partner at the firm to be on your board and things are going poorly two years later or mediocre, and that partner makes a decision to replace himself on Your board with somebody else at his firm who you didn’t sign up with, and suddenly you have a different board member.

[00:18:20] David Hornik
That happens.

[00:18:21] Howard Hartenbaum
That happens most of the time, really.

[00:18:24] David Hornik
You know, see, this is the thing about August. Like, we don’t have minions. We don’t have any junior people to go, oh, this has turned ugly. Why don’t you take it? I’m going to try and do that with you, Howard. Oh, Howard, take this deal. No, but I guess you’re right. I mean, I have certainly have seen it happen. It just. It doesn’t happen around here.

[00:18:44] Howard Hartenbaum
It’s worth, you know, looking into if you’re looking at. If you think a firm is the right fit and you like the partner. And such references are, you know, the same way we’re trying to determine what it will be like to work with an entrepreneur. The entrepreneurs we encourage do the same thing and figure out what it’s like to work with their investor and board member. And it’s whenever. Calling just the firms, everything went great, you know, doesn’t tell you too much. Calling the firms where things didn’t go so great will tell you a lot more. And you may find that the partner that you like so much, if things are going poorly, disappears from your board and replaces himself with somebody who’s fresh out of undergraduate school. Something to watch out for.

[00:19:21] David Hornik
It’s certainly the case when I’m trying to. When I like a deal and I’ve given someone a term sheet, the next thing I do is send them an email with the email addresses and cell phones of everybody, all the founders, the companies I’ve worked with, because I figured.

[00:19:34] Howard Hartenbaum
Paid them all money to say.

[00:19:35] David Hornik
Good. Yeah, exactly. I’ve already paid them off. No, look, some of them are no longer at the companies. Some of them are not the CEOs. Whatever. I mean, it’s not like. And some of them are running big, exciting companies, but it just depends. Right? But if. But I take. But I. I agree with you. Like, ultimately, I’ve done reference checking on the entrepreneurs. They should do some reference checking on me. They might as well have the conversation. Because guess what? You know, if you’re gonna find me annoying, you might as well not put me on your board. And there are plenty of people who find me annoying. How? I know this might come as some surprise to you, but I’m just saying, some people find me annoying.

[00:20:09] Howard Hartenbaum
I haven’t met them yet.

[00:20:10] David Hornik
Can you imagine? Can you imagine that, Howard? People finding me annoying?

[00:20:15] Howard Hartenbaum
No, I can’t imagine that at all.

[00:20:17] David Hornik
Good. Thank you.

[00:20:18] Howard Hartenbaum
This is the David Hornik show, isn’t it?

[00:20:20] David Hornik
What have I told you? This is venturecast with David Hornik and Howard Hartenbaugh.

[00:20:27] Howard Hartenbaum
Sorry, Batman and Robin.

[00:20:28] David Hornik
Howard Hartbaum and David Hornik.

[00:20:31] Howard Hartenbaum
Could you imagine if Batman and Robin, if, like, they killed off Robin every show and he found a new Robin?

[00:20:36] David Hornik
Might as well. Like, what did Robin ever do? He didn’t do shit. You add something here, Howard. That’s what I’m saying.

[00:20:42] Howard Hartenbaum
The comic relief, he was always wearing funny colors, always wearing orange.

[00:20:50] David Hornik
Wait a second. Oh, man.

[00:20:53] Howard Hartenbaum
So anyway, so we talked about, like, not just firms, but partners and how you think about what are you looking for. And it’s easy to get wrapped into a process and suddenly have five term sheets. And then are you optimizing around the right things? That was just something that we wanted to bring up.

[00:21:08] David Hornik
Yeah. The other thing that’s interesting to me is how much I think. So I found that when you’re going through this process, oftentimes you end up fighting about stupid things. Like, I just think, truthfully, if you’re fighting over registration rights, you’re probably not fighting about the things that matter. Whereas, you know, so I was recently going through this process, some entrepreneurs who were new to the business of entrepreneurship, and I was giving them a term sheet or I was proposing a financing, and I said to them, look, you know, the bottom line is the things you care about are, you know, price. And price is reflected in a term sheet in a few different ways. And you care about control. You want to figure out how that balance is going to work out. And that’s basically reflected in the board. And, you know, that’s pretty much it. Like, what else do you care about? You care about. You care about the valuation. You care about how much money is being raised. You care about how big the stock option pool is. We, you know, entrepreneurs sort of care about what the vesting looks like in their stock, and that’s about it. And yet I find oftentimes when I’m negotiating with, like, an east coast firm, so you have companies that come from east coast and they got New York lawyers, and you start negotiating, and they negotiate over everything. And you’re like, you just want to say, well, that’s just typically matter.

[00:22:28] Howard Hartenbaum
Why are you fighting about that? The basic structure of a lot of deals on the east coast is different from the basic structure of the deals out here. So you end up arguing about a lot of little points like this, that. So one thing that’s for sure is it drives up the legal bills and it takes a lot Longer to close the deals.

[00:22:43] David Hornik
Yeah, exactly. I mean, at least I found this when I was a lawyer actually, and I was the guy, you know, doing some of these deals and I, and I was dealing with someone who had dealt with before and we dealt, you know, done these deals like say, okay, this stuff is all fine, like okay, 1 through 17, fine. Now let’s talk about 18 through 18 through, you know, 21. Because those things were the ones that mattered. And you fight about them and you come to somebody and ultimately they’d go to the, you know, the decision makers, the company founders and the VCs and they’d have a back and forth and they’d come to some conclusion and it would be put on paper and it’d be done right. You could be get a financing done in two weeks as opposed to this alternative, which is to fight about everything. And then you’re still at it a month later, an additional 40,000 bucks. And so I just think so often we fight about stupid things when we should just focus on what are the core things and more importantly, what are the things that matter to help build a big business. That’s what matters. If it’s a big business, everybody wins. If it’s a small or medium sized business, who gives a crap? That’s my question for you, Howard.

[00:23:48] Howard Hartenbaum
I give a crap.

[00:23:50] David Hornik
That’s great. That’s great.

[00:23:52] Howard Hartenbaum
I have to take devil’s advocate. I mean, that’s what I’m paid for.

[00:23:56] David Hornik
Yeah. I don’t want to lose all my money. I’m just saying like, you know.

[00:24:01] Howard Hartenbaum
Yeah.

[00:24:02] David Hornik
What else? What else, Howard?

[00:24:04] Howard Hartenbaum
Well, we have, we were chatting about.

[00:24:07] David Hornik
Oh, I just heard a little something beeped. That was an email.

[00:24:11] Howard Hartenbaum
We were chatting a little bit about kind of what happens in an early acquisition process, meaning finance. A company on the board working year and a half later, two years later, suddenly somebody wants to buy the company.

[00:24:29] David Hornik
Yeah. Not that we’ve seen that, but we’ve started seeing that again, right?

[00:24:34] Howard Hartenbaum
Yep.

[00:24:34] David Hornik
People are talking about it early and what’s the process and all that.

[00:24:37] Howard Hartenbaum
And I mean I have the personal belief, and you can tell me how you feel about this, that if the management comes to you and says we have this offer and we would like to consider it or maybe negotiate it and see where it ends up, that’s our recommendation, then I may say, well, certainly say my opinion, which would be. Seems fine to me. We’re either way behind where we expected to go, things aren’t going according to plan, or things are going great. And I can see how this is Going to potentially be something very large. Here’s my opinion. But in the end, the entrepreneurs sort of make the call what they want to do with the business. And if they want to negotiate a deal and try and sell the company, even though it may be a smaller outcome than anybody had desired from the start, if they’re making that call, it’s probably a sign that they’ve lost some of the self confidence in the business becoming a really huge business.

[00:25:31] David Hornik
But, but I mean, I do agree with you. Ultimately, you know, our job is to sort of convince them otherwise. Like, wait, no, there’s. Or not. Right. Ultimately, you know, ultimately. But we just are. One opinion. But we’re not the guys sort of built, you know, we’re not the guys who have to do the next six years and to build the business. And so if I agree with you, there was an article recently, so Mint got sold for almost 200 million bucks and there was lots of discussion, oh, this is a great big win. And then an entrepreneur wrote an email, wrote an email, wrote a blog post saying, goddamn VCs, I can’t believe that they’re forcing Mint to sell. This is how come big businesses don’t get built anymore. Because entrepreneurs try and build businesses and then the VCs take the easy way out. Right. And the reality is in Mint, that was just not the case. Right. It turned out that the VCs really wanted to go forward and worked hard to come up with some alternatives to try and make it work. But in the end, the entrepreneurs felt that this was a good deal. And, you know, Aaron Patzer, who was the CEO of Mint, as I understand it, is now running kind of the consumer businesses within Intuit, and that’s a pretty exciting job. And, and he found a great home for the company and he personally made a bunch of money. And so, you know, if you have guys that are ready to commit, like what, you know, what are we going to do? Grab onto their ankles. No, don’t do it. Please stop.

[00:26:55] Howard Hartenbaum
Right, yeah. No, my comment was more generalized and that if it’s. What’s something that the management wants to do, then it’s.

[00:27:01] David Hornik
Then they get to do it.

[00:27:02] Howard Hartenbaum
They sort of get to do it. And I don’t buy that the VCs wouldn’t let me do it type of scenario because there must be some cases where that happens, but they must be in businesses which have gone through some very difficult times because that’s the only way the investors end up holding some significant control over the business.

[00:27:23] David Hornik
Yeah, but I just. Anyway, I mean, I’m in complete agreement with you. At the end of the day, you know, it’s up to the entrepreneurs to build a business. And it’s up to the entrepreneurs then to say, this is our, this is our chance and this is appropriate opportunity. And that, you know, the alternative, of course, is very interesting. I mean, we, there were lots of us who thought that Mark Zuckerberg was insane. Lots of us who said, you know, wow, I can’t believe Zuckerberg’s getting multi billion dollar offers for his company and he’s not interested in selling in a time when it’s really hard to build multi billion dollars worth of valuation. And he had venture investors on his board who would have made really good returns at, you know, a couple billion dollars or whatever. And yet to his credit, Zuckerberg said, no, this is a big business, I want to build a big business, I don’t want to sell a little business. And, you know, now it quite clearly is a very big business and I can’t imagine a circumstance in which the company is worth less than a couple billion dollars. In fact, I think it’s probably, you know, 10x that at this point. And so, you know, good, good, good for him and good for the investors for, you know, letting, letting that company continue to, to grow and prosper, etc. So I think, I think it can go either way. And I, and I agree with you that ultimately if the VCs are doing the right thing, then they’re not, they’re not getting in the way. They’re not making these decisions. They’re trying to give advice and value, you know, value and advice to the entrepreneurs, which sometimes we do occasionally.

[00:28:58] Howard Hartenbaum
Tim Draper always says, never sell a business, Never, ever, ever sell your company. His rationale is interesting because his belief is that if you sell the company, you never know how big it could get. Google could have easily sold their business for half a million or a million or 3 million or 5 million. And I’m sure they had offers in that range initially. And Baidu was offered, I think, 30 million by Yahoo, and now there were 5 billion or 10 billion. And for every company that gets bought, you’re just cutting it off at the knees for the potential to be a really large business. Now, many of them couldn’t have ever become worth tens of billions of dollars. But how many of these businesses that have been sold, how many mints have been sold at that price, which had they kept running, could have easily been worth. Not easily, but could have been worth a billion or more dollars?

[00:29:47] David Hornik
So the interesting. Yeah, we won’t know for sure. I will say that I strongly believe that an independent YouTube today would be worth billions of dollars. Right. It’s is the second largest search engine on the web. There are, I think, I think the number was 3,000 hours of video uploaded a minute. I mean, and arguably the same thing could be said of Skype right now. They’re trying to spin it back out at a somewhere in the Valley. And I know you don’t want to talk about Skype, but I could talk about Skype. But on the other hand, would it. I would have found it really hard to vote against a $3 billion sale of a company at that stage in the business. So, yeah, maybe Skype would have been bigger. I think YouTube certainly would have been bigger. I mean, what else do we. What others do we have out there? I mean, you know, there are all sorts of companies that could have. Could have been bigger. There are also all sorts of companies that, that I was thinking more of.

[00:30:43] Howard Hartenbaum
The ones that are smaller that get sold for 20 million, 30 million, 50 million before they really had time to get all that traction. And some of them could have become really huge companies, but we’ll never know.

[00:30:56] David Hornik
Flickr had the opportunity to be a big company.

[00:30:57] Howard Hartenbaum
They were 30 million. They were sold.

[00:30:59] David Hornik
It’s unclear, but let’s say it’s 30.

[00:31:01] Howard Hartenbaum
That’s some rumor I heard.

[00:31:04] David Hornik
You know, somewhere in there. And I think Flickr has been a big, interesting, valuable thing to Yahoo. So, you know, could have been worth more. Sure. But you know, they’re just doing a bunch of them, but.

[00:31:16] Howard Hartenbaum
But sometimes they’re sold for a nice price and then they’re worth less.

[00:31:19] David Hornik
Right. Look at, you know, Dodgeball was sold and the guys made a bunch of money and now they’ve got Foursquare, which is kind of funny. Dodgeball Foursquare. Their next company will be Kickball.

[00:31:33] Howard Hartenbaum
Let’s go to get that domain name right now.

[00:31:34] David Hornik
Quick, go buy Kickball.

[00:31:36] Howard Hartenbaum
Oh, too late.

[00:31:37] David Hornik
I think I already own it. I own. I own vckball.com.

[00:31:43] Howard Hartenbaum
Nice.

[00:31:46] David Hornik
What do you think? I think we’re going to inaugurate a new. A new episode, a new part of our program.

[00:31:52] Howard Hartenbaum
What are we going to call it?

[00:31:55] David Hornik
Now is the time in Venture Cast when we suck up. We need a pithier like suck up moment. The moment where we kiss ourselves.

[00:32:07] Howard Hartenbaum
The moment we hear a sucking sound.

[00:32:08] David Hornik
Yeah, they think incredible sucking sound moment.

[00:32:11] Howard Hartenbaum
No. And this week the prize goes to our building mate.

[00:32:18] David Hornik
Yes.

[00:32:19] Howard Hartenbaum
Upstairs in our building is benchmark and we keep reading on TechCrunch, all these wonderful companies that Peter Fenton has built and sold. And we just wanted to say great job.

[00:32:33] David Hornik
Yeah, exactly. So each week we’re gonna, you know, suck up to someone that. That we admire and we feel we should work with more that we feel like we have had work with more.

[00:32:44] Howard Hartenbaum
Haven’T worked with at all.

[00:32:45] David Hornik
Well, that’s a good point, Peter. We haven’t worked with you. We feel. Howard and I would like to. We feel we should that to be good synergistic thing. And as Howard says, like, you know, we could walk up the stairwell together, we could chat about the businesses. So what? So just, you know, it’s true. He was called a rock star. Right? Wasn’t there a picture? Was a picture of the Benchmark Partners and then it said Rockstar in an arrow pointing to Peter Fenton.

[00:33:08] Howard Hartenbaum
I thought that was pretty cool.

[00:33:10] David Hornik
That’s awesome. That’s awesome. I want. I don’t know what I need to do to get that picture in TechCrunch.

[00:33:16] Howard Hartenbaum
You need to make money like Peter Fenton.

[00:33:18] David Hornik
Okay, well, that’s coming. No problem. That’s a piece of cake. I would. It’s so until.

[00:33:23] Howard Hartenbaum
If it was so easy, there’d be.

[00:33:25] David Hornik
A lot of rock stars, but there isn’t. There’s just Peter Fenton. And that’s why we’re sucking up to Peter today on Venture Cast, because we’re big fans of Peter Fenton and we would like. We would like to spend more time with you doing deals and otherwise enjoying the glow of your. Of your success and brilliance.

[00:33:42] Howard Hartenbaum
There must be lots of young women run up to him all day.

[00:33:45] David Hornik
They should. He is a rock star and he drives like a great car and he’s.

[00:33:49] Howard Hartenbaum
Which car is his?

[00:33:50] David Hornik
Oh, I shouldn’t say that. That’d be unfair to Peter. Peter, let me know if you want us to talk about your. Your specific car in the future.

[00:33:59] Howard Hartenbaum
I’m happy it’s in the same parking lot.

[00:34:01] David Hornik
So, yeah, just come on down. We’re at 2480 Sandhill Road, and you can check out the parking lot and you can pick up my car. Mine should be easy to spot on. You know, on one side they’ve got some. We’ve got a lot of sports cars.

[00:34:15] Howard Hartenbaum
David’s favorite color is orange.

[00:34:17] David Hornik
And on one side is, you know, our number of cars, including maybe a quite small car that’s orange. So that. That’ll be easy. Have we finished sucking up to Peter?

[00:34:32] Howard Hartenbaum
I mean. Yeah, no, I mean, I’m being.

[00:34:34] David Hornik
Yeah.

[00:34:34] Howard Hartenbaum
I mean, we were just chatting about.

[00:34:36] David Hornik
We’re Serious? Peter’s awesome. That guy’s. You’re the man. We’ll have to figure out who to suck up to next. Next Venture cast. But in the meantime, we’re just. It’s all.

[00:34:45] Howard Hartenbaum
We can just leave it to TechCrunch and they can tell us.

[00:34:47] David Hornik
Yeah, right. Exactly. If you think there’s some other rock stars. But really, no, I don’t do that because I think that Peter is the real deal. He got Benchmark. This is what I love. Benchmark stole him away from Excel Partners. He was like a partner over at Excel. And then he got. Then he. The Benchmark wooed him. What do you think they did to do that? I don’t know. That was good.

[00:35:09] Howard Hartenbaum
They didn’t woo me.

[00:35:10] David Hornik
That was a good move. That was a good move. You’re not a rock star if you’re a rock star. Are you a rock star?

[00:35:16] Howard Hartenbaum
No.

[00:35:17] David Hornik
You better be. Howard, what the hell? I wooed you, but you’re a dumbass. Great.

[00:35:22] Howard Hartenbaum
I am a rock star. You just don’t know it.

[00:35:24] David Hornik
I do know.

[00:35:25] Howard Hartenbaum
Practicing guitar every day. One of these days, I’ll play for you.

[00:35:28] David Hornik
Didn’t you just tell me you’re learning Stairway to Heaven?

[00:35:30] Howard Hartenbaum
Oh, yeah, that’s. That’s the. The. The most important sign of a young guitar learner student when you learn Stairway to Heaven. And I had. I learned Stairway to Heaven and my wife was holding her.

[00:35:41] David Hornik
Did you just call yourself a young guitarist?

[00:35:44] Howard Hartenbaum
Young. Not as an age young as in new to being a student.

[00:35:47] David Hornik
Say, come off it. You and I can’t lay claim to being young.

[00:35:51] Howard Hartenbaum
No, no, no, no. That was young me, new guitars.

[00:35:53] David Hornik
I haven’t. I’m going off to this.

[00:35:54] Howard Hartenbaum
We’ve only been doing it for nine years.

[00:35:56] David Hornik
I’m going off to this. Yeah. I’m going off to this event in. In Miami and. And it. And it’s basically a gathering of young entrepreneurs. And in this instance, it is young. Like, it’s legitimately young. 20. I think it’s mostly 20 something people. And. And I’m. And I’m going to this thing. It’s called the Summit Series. It’s. And it was started by a really smart young, young entrepreneur who basically said there should be a gathering for the successful 20 something crowd. And. But I’m going. And he basically. So he basically said, well, we’ll let you get away with it. You know, basically stay out of the way and pretend to be young and we’ll forgive you that you’re. You’re old. That you’re the old fart. But I think that’ll be a little embarrassing.

[00:36:50] Howard Hartenbaum
Well, if he’s like, 20 something. So 20 something includes 20. And if you’re 40, it’s twice your age.

[00:36:57] David Hornik
Oh, Howard.

[00:36:58] Howard Hartenbaum
That’s like, if you’re 40 and somebody’s 80. There’s a difference there.

[00:37:02] David Hornik
You’re killing me.

[00:37:03] Howard Hartenbaum
Yeah, you’re still alive.

[00:37:04] David Hornik
These poor young guys are gonna be like, what’s Hornick doing here? Good Lord. He’s practically bald and he’s, like, ancient.

[00:37:16] Howard Hartenbaum
But you’re a funk guy.

[00:37:18] David Hornik
Well, I’ll try. I will say this. They’re going skydiving, and I did have to pass on that. I just.

[00:37:24] Howard Hartenbaum
Oh, wow.

[00:37:26] David Hornik
Have you ever skydived?

[00:37:27] Howard Hartenbaum
No.

[00:37:28] David Hornik
Would you want to go skydiving?

[00:37:30] Howard Hartenbaum
No.

[00:37:31] David Hornik
That seems scary now.

[00:37:33] Howard Hartenbaum
I went scuba diving a couple times and made my ears really hurt, so I figured the same thing would happen to me. Skydiving, like, the rapid pressure change.

[00:37:39] David Hornik
Like, I just don’t want to die.

[00:37:43] Howard Hartenbaum
I have too many children.

[00:37:44] David Hornik
I have too many children to die.

[00:37:46] Howard Hartenbaum
I’m not worried about the death part.

[00:37:47] David Hornik
You aren’t?

[00:37:48] Howard Hartenbaum
Is it hurting your part?

[00:37:49] David Hornik
Yeah, you’re. I don’t care about dying, but I hate it when my ears hurt. That’s terrible.

[00:37:57] Howard Hartenbaum
Anyway, I think we’re out of topics for the day.

[00:37:59] David Hornik
That’s good. We should call it Adventure. Cast is. It doesn’t need to be so freaking long. It’s pretty long as it is.

[00:38:08] Howard Hartenbaum
Okay, then. So you just want to end it topics. But, you know, the way I am, when I’ve had enough of something, I just, like, get up and leave. Do we have anything else to talk about today?

[00:38:17] David Hornik
No, that’s it. I want to thank you for listening to venturecast. I’m David Hornik from August Capital.

[00:38:23] Howard Hartenbaum
And Howard Hartenbaum, also from August Capital. Thanks.

[00:38:26] David Hornik
Bye. Bye.