Generated Transcript

[00:00:15] David Hornik
Hello and welcome to VentureCast. This is David Hornik of August Capital.

[00:00:20] Jeff klavius
This is Jeff klavius from SubTech BC.

[00:00:22] Howard Hartbaum
And Howard Hartenbaum, also from August Capital.

[00:00:25] David Hornik
So. So I was going to like announce that we had our favorite and only guest Jeff Clavier with us, but great to be back.

[00:00:33] Jeff klavius
Which number is that? Which Venture cast is that again?

[00:00:35] David Hornik
Yeah, I don’t know. That’s a good.

[00:00:37] Howard Hartbaum
We erased it.

[00:00:37] David Hornik
You. You’ve done a number of number.

[00:00:39] Jeff klavius
Oh, it’s my fifth or sixth or whatever.

[00:00:41] David Hornik
It’s fun. You’re like, you know, on Saturday Night Live, there’s always. It’s. Who are the two hosts that fight for the most often hosting on Saturday Night Live? Well, you win hands down because.

[00:00:51] Howard Hartbaum
So you’re the hostess with the mostest.

[00:00:53] David Hornik
That reminds me that I should probably check in at August because I’m sure someone is desperate to be the mayor.

[00:00:58] Jeff klavius
Oh, yes.

[00:01:00] David Hornik
And I refuse to allow that to happen. So Howard, feel free to talk about whatever. I’m busy.

[00:01:04] Howard Hartbaum
All right, so there’s a plug for forsware, unless you’re checking in on some other service.

[00:01:09] David Hornik
Yeah, so last I checked in was at Gravity down in la.

[00:01:13] Howard Hartbaum
Has anybody done an aggregator for check in services yet?

[00:01:16] Jeff klavius
Oh, yeah, yeah, yeah. I’ve seen like three or four where.

[00:01:18] Howard Hartbaum
You can like sign up for everything and you just check in and then suddenly you’re checked in in GOALA and.

[00:01:22] Jeff klavius
You’Re checked in on force. You. You have to authenticate on everything and then you end up on Everywhere and who cares?

[00:01:29] David Hornik
I have a real problem, actually. I think this is a problem. I think this is a sort of pseudo AT&T problem, which is when you check in. Do you have any problem finding August?

[00:01:39] Jeff klavius
No, just finding.

[00:01:40] David Hornik
You just found it, right? Howard and I are.

[00:01:43] Jeff klavius
That’s the last place I checked in two days ago.

[00:01:45] David Hornik
Very nice. See, Howard and I are on. They have. We have one of those microcells that’s connected to the network for August so that we can get connectivity here. But it must connected to some. Some random location because it won’t pull up August. So I have to get to it some other way. I have to search. It’s. It’s like. It’s ridiculous. It’s totally bizarre. But anyway, all right, I’ve checked in now, Howard, we can move on. Moving along, I’m sure this is fascinating podcast to listen to us checking in on Foursquare.

[00:02:19] Howard Hartbaum
Has Foursquare ever gone down big time like Facebook did yesterday?

[00:02:23] David Hornik
Well, not yet, but it will.

[00:02:27] Jeff klavius
I mean, a couple of times they were upgrading. Couple of times. They had sort of traffic issues. I think there have been ways. Times where you couldn’t just check in or it would take like forever.

[00:02:38] David Hornik
Yeah, see, Ash, that’s the problem. I often have where it’s like. Actually it has a little thing that says it’s unavailable. It’s like the fail. Well, but it’s. Yeah, but it doesn’t have a cute little comment.

[00:02:47] Jeff klavius
But I get it. I get questions.

[00:02:48] David Hornik
Yeah.

[00:02:49] Jeff klavius
Don’t you find that chicken is actually very difficult to pronounce? I say chicken all the time.

[00:02:52] David Hornik
Chicken. Only for the French.

[00:02:55] Howard Hartbaum
So I saw Bryce Roberts was here on Wednesday night. He was the first investor in Foursquare.

[00:03:00] David Hornik
I think he was.

[00:03:00] Jeff klavius
He was, yeah.

[00:03:02] Howard Hartbaum
And he’s very modest about it. I said, hey, weren’t you the first investor? He says, well, all that really matters is that the entrepreneur started the company.

[00:03:09] David Hornik
I like that.

[00:03:10] Jeff klavius
No, it’s true. I looked at Foursquare back in June, July of 2009, and Bryce was on it. And, you know, I didn’t see the long term retention. And so I went on vacation. And when I came back, it was sort of all the rage. And Fred Wilson had committed, whatever. But Bryce has been on it. Like, you know, but it’s.

[00:03:27] Howard Hartbaum
I like him.

[00:03:27] Jeff klavius
He’s really tall and, you know, he’s done an amazing sort of diet. He’s lost 50 pounds. He’s like super in shape now. You don’t want to go and bike with him. He’s gonna crush you.

[00:03:37] David Hornik
He had this awesome shirt on. It was an O’Reilly Alphatec shirt. It said OA, and then it had the lightning bolt TV sort of like the AC DC shirts.

[00:03:47] Jeff klavius
That was awesome.

[00:03:49] David Hornik
That’s awesome. He claims he’s sending me one. So. Bryce, don’t forget, I want my O’Reilly Alphatec Venture shirt.

[00:03:55] Howard Hartbaum
Yeah, yeah, we just plugged you. It’s the least you could do.

[00:03:58] Jeff klavius
Yeah, yeah, yeah, me too.

[00:04:00] David Hornik
I said large. But here’s the thing about it. I mean, he’s so tall that they probably only have like triple xl. Oh, but he’s lost all that weight, so maybe. Maybe you’re fine.

[00:04:10] Jeff klavius
Xl, that should be fine.

[00:04:13] David Hornik
I think he’s like a foot and a half taller than I am. How tall is he? He’s like, he’s got to be 6, 6, 6, 8. 6, 8.

[00:04:20] Howard Hartbaum
Something like that.

[00:04:21] Jeff klavius
Yeah. I look at him. Yeah, he’s six and yeah, he’s a hog.

[00:04:25] David Hornik
He took all my height.

[00:04:28] Howard Hartbaum
If we averaged you guys out, you’d be like, my height.

[00:04:30] David Hornik
Yeah, we would Be the height of an average human, of an average man. So what’s amazing to me about this Facebook outage.

[00:04:38] Jeff klavius
He just got his fifth kid.

[00:04:39] David Hornik
Oh, did he?

[00:04:40] Jeff klavius
So he beats you.

[00:04:40] David Hornik
Congratulations.

[00:04:41] Howard Hartbaum
Evidently, being tall makes you fertile.

[00:04:44] David Hornik
I don’t think. Yeah, I don’t think there’s a correlation. I don’t think I was gonna go back to the Facebook outage, but if you want to keep talking about my progeny or whatever, feel free.

[00:04:54] Howard Hartbaum
I actually, you know, I don’t use Facebook that much. Only a few times per day. And I saw the out adjusted, I was like, wow, remember when ebay went down? You know, what was it right after they went public and people were like, it could be the end of the company. What if it never comes back? And.

[00:05:11] David Hornik
But the amazing thing is that this is the first outage I can think of in Facebook.

[00:05:17] Jeff klavius
Can you think of a first time in four years? They claimed on the blog post that they made that is first time in four years.

[00:05:23] Howard Hartbaum
Good, technical people.

[00:05:25] Jeff klavius
Yeah, and they have been amazing with technical there. No, he was product. Yeah, he’s a product marketing product and biz dev. No, they have. Facebook is one of the most amazing engineering machines out there. And so they are super well organized, and it’s like, such talent. And so what’s interesting is that I looked at it because it’s interesting to see why Facebook failed, is they had a few configuration issues. They had a mechanism to recover on the configuration issue, and the recovery mechanism actually failed. Access databases. And you had millions and millions and millions and millions of people accessing databases to the tune of several hundred thousand requests a second. And so when that happens, the only way to do this is to bring it down, refund all the traffic, and restart slowly, slowly, and then reopen so that all those clients trying to access something like Facebook, you know, get throttled. We had the same issues in the financial markets, except that we never had 500 million users.

[00:06:29] David Hornik
Well, I mean, it’s a little bit like they say of airplanes these days, modern jets, that in order for it to go down, it has to be a succession of failures. Right. It can’t be. It’s not that. Oh, well, one engine stopped, or your nav system failed, or your pilot, you know, had a heart attack or whatever it has to be. First the engine fails, the nav system goes down. The pilot has a heart attack. The, you know, the tower has trouble.

[00:06:55] Jeff klavius
Contacting, and the bird flies into the engine.

[00:06:58] David Hornik
Well, that one’s probably a flock of birds. That one’s an interesting one that you can’t send the entire community of birds into your engines.

[00:07:06] Jeff klavius
And so what’s interesting is that they disabled the recovery mechanism so that if ever there is a problem, then you end up not accessing Facebook. But at least they don’t go down well.

[00:07:16] David Hornik
I remember the early days of Ofoto. They were using this third party who was doing all the storage. It was one of the. In the very beginning of, oh, we’ll have outsourced storage. And Ofoto was like their big premier customer. And the storage was very secure. And they were doing a backup. Oh, we’re going to make sure. And whatever. And there was. And it got corrupted during the backup process and as a result, screwed up the backup and destroyed the originals. And so they lost, I forget what, 100,000 of people’s photos.

[00:07:47] Howard Hartbaum
Wedding photos.

[00:07:48] David Hornik
Yeah, like, you know, their memories, you know, and it was catastrophic, people. And we really worried, frankly, that it was going to be hard to recover from. From that and being down on Facebook. Oh, my God, my wife won’t be able to hear what her friends, you know, objection to the green. Non green.

[00:08:09] Howard Hartbaum
The comments on the web are pretty funny, though, when you read. And it’s like, look at that, it’s sunny outside.

[00:08:17] Jeff klavius
No, but what’s interesting is that people are so used to Facebook reliability that, like, you knew there’s an event. You don’t always copy the event’s description and location in your outfit.

[00:08:28] David Hornik
Just pull it up.

[00:08:29] Jeff klavius
And I was supposed to, you know, go somewhere which was like a Facebook invite or whatever, and I couldn’t exit.

[00:08:33] David Hornik
It was like, shit, where do I go? That’s so I remember this. I had this problem when I bought the. I bought the very first Trio, right? You remember that Clamshell Trio is the worst phone ever, and it crashed all the time. And it was syncing up with my calendar or whatever, and my wife and I were heading to a dinner party and I had it in my phone. I said, no problem, whatever. And then my phone crashed. And we were halfway there and I couldn’t get the phone to recover.

[00:09:05] Jeff klavius
So you had to reset it.

[00:09:06] David Hornik
I couldn’t reset it. It was totally dead. So I couldn’t even reset it. And I couldn’t call anyone to get directions. We literally went home and she’s like, you know, don’t ever not print up paper directions. That electronic is unreliable. It took literally years before I could get away with, you know, I’ll just pull it up on my phone. That was brutal. What’s gonna happen to the Trio? I finally got rid of my Trio. I had a trio for six years.

[00:09:34] Howard Hartbaum
Go on ebay and see what they’re worth.

[00:09:36] Jeff klavius
Yeah, never.

[00:09:38] Howard Hartbaum
I mean, that’s just a joke because David, he brings in all these extra phones he has and I sell them on ebay for him. Were you happy with those sales? That was a goodly amount of money.

[00:09:46] David Hornik
Yeah. Right.

[00:09:47] Howard Hartbaum
After all, after ebay got all those fees and PayPal got all those fees, you made like 500, 600 bucks, didn’t you?

[00:09:53] Jeff klavius
Yeah.

[00:09:53] David Hornik
On a couple old iPhones.

[00:09:55] Jeff klavius
Pretty not bad.

[00:09:56] David Hornik
I mean, it paid for the broken phone that I had to replace for my son. It’s amazing to me, to tell you the truth, that this is the first screen that. That has been crashed by my teenagers. I may have two teenagers running around with iPhones, and this is the first one that.

[00:10:13] Jeff klavius
No, my son has already chewed on two iPhones.

[00:10:16] David Hornik
Yeah.

[00:10:17] Jeff klavius
But, you know, we basically pipe. So I get the last one. My wife gets dinner. And so he’s at the. He has a 3G. 3G now. Is that.

[00:10:24] David Hornik
Yeah, yeah.

[00:10:25] Howard Hartbaum
Chewed on like a baby. And he put it in his mouth.

[00:10:27] Jeff klavius
No, no, there’s a 13 year old. And so, no, it’s just, you know, it’s falling one. He was completely crushed. I said, what the hell did you do to crush your iPhone? Don’t know that.

[00:10:39] David Hornik
Don’t know.

[00:10:40] Howard Hartbaum
So my daughter got her driver’s license this week.

[00:10:43] David Hornik
Whoa. She passed.

[00:10:44] Jeff klavius
Congratulations.

[00:10:45] Howard Hartbaum
And I hand her the key this morning, I say, have a good time at school. And I’m thinking, if she comes home, dad, I crashed the car. I don’t know how I got.

[00:10:52] Jeff klavius
I hope that doesn’t happen.

[00:10:53] David Hornik
Well, but you’ll say, are you okay? And she’ll say, yes. You’ll say, all right, that’s.

[00:10:57] Howard Hartbaum
What’s just a car. Who cares?

[00:10:59] David Hornik
So she’s gonna drive to school now?

[00:11:01] Howard Hartbaum
Yeah. Isn’t that amazing?

[00:11:02] Jeff klavius
Did you buy a special car for that?

[00:11:04] Howard Hartbaum
Like. No, she gets my wife’s old car and my wife wants to get a new car, but they don’t have the color she wants yet.

[00:11:09] Jeff klavius
Is that a big one? Suv.

[00:11:10] Howard Hartbaum
She has like a medium sized suv.

[00:11:12] Jeff klavius
Okay.

[00:11:13] David Hornik
Yeah. I don’t know. What? Well, that’s sort of scary. So my. My oldest is going to get his permit in, well, this. So anyway, he’s going to get his permit in three months or something. And that scares me to death. And it scares him to death. So at 16 or whatever, you can start driving. But it reminds me. So Howard and I were meeting with this team of entrepreneurs. They were all living in one house and it was like a great, awesome, awesome set of entrepreneurs. And they were. Because they were living and working in the same place. We were over there at like two or something. And one of them rolled out of her bedroom, having just awakened and whatever. And I made some reference to the fact that it’s my 20th college reunion. And they started laughing. And one of the kids there was like, said, I wasn’t born yet. He said, I’m 19. I wasn’t born when you graduated from college. And it was sort of this horrifying moment when I thought, I’m so old.

[00:12:09] Jeff klavius
I can’t believe it.

[00:12:09] David Hornik
Like, I can’t relate. These poor. I used to think that I was a young VC and I could relate. And now they look at us, Howard.

[00:12:16] Jeff klavius
And we’re like, well, the thing is that as entrepreneurs sort of start younger and younger, they can all technically be our kids, which is kind of interesting.

[00:12:26] David Hornik
Yeah, no, it’s amazing.

[00:12:27] Howard Hartbaum
Is that why you treat them like kids when you’re on the board? Hey.

[00:12:30] David Hornik
God damn you.

[00:12:30] Howard Hartbaum
I told you not to do that.

[00:12:32] Jeff klavius
No, no, no. I never do that.

[00:12:35] David Hornik
So this is. I’m a freshman advisor at Stanford, so I have. This is before they pick their major and they get their major advisor. And I got an email from the head of the advisors saying, I have a student who I’d like you to speak with because he’s considering dropping out to join a startup. They’ve been in school for one week. He literally made it through orientation and, like, two days of classes before he said, nah, I’m out of here. I’m gonna go join a startup.

[00:13:06] Howard Hartbaum
That’s kind of.

[00:13:07] David Hornik
What do you think? Should he do it?

[00:13:08] Jeff klavius
No. What age?

[00:13:10] David Hornik
19.

[00:13:11] Howard Hartbaum
I think he should stay in school.

[00:13:15] David Hornik
Jeff.

[00:13:16] Jeff klavius
You know, life is too short. If he feels that this is what he wants to do, he can’t take a leave of absence, you know?

[00:13:23] Howard Hartbaum
Well, if you could take a leave of absence, I have no problem.

[00:13:26] David Hornik
One year.

[00:13:26] Howard Hartbaum
So I have no problem with the leave of absence thing. But if you have to, like, drop out of school and you’re in your freshman week, freshman month at Stanford, I wouldn’t take that risk. But I’m not a risk taker.

[00:13:37] David Hornik
Apparently you can have a year.

[00:13:38] Jeff klavius
You’re just a vc. You’re not the risk taker.

[00:13:40] David Hornik
Yeah, right.

[00:13:40] Howard Hartbaum
The entrepreneur’s job is to take the risk.

[00:13:42] David Hornik
So you know what I did? I’m going to get together with him on Monday, but I sent him a couple of answers on Quora because it turns out there are a couple different questions. Someone Said, should I drop out to join a Y Combinator company? Another one had another similar question, should you drop out of college? And actually, my answer on one of those questions was that the relationships that you build, you learn a lot of stuff, but you build a bunch of relationships with a ton of smart people, not all technical. Some business that. I think those are really valuable relationships. And so, yeah, you can go replicate that sitting out in the business world. And he’s going to go build what could be the next great company. But I found that having had the time to meet a ton of great people while I was at school has proven to be really. So it’s just proven to be really, well, have fun.

[00:14:34] Howard Hartbaum
I mean, school should be fun. Go to work.

[00:14:37] David Hornik
Work is hard.

[00:14:39] Jeff klavius
You have some young entrepreneurs like that. Remember, I made a presentation to the Teens in Tech conference.

[00:14:49] David Hornik
Teens in Tech.

[00:14:50] Jeff klavius
Teens in Tech.

[00:14:51] David Hornik
So it’s basically translating your French to English.

[00:14:53] Howard Hartbaum
I thought you were saying Shenzhen.

[00:14:58] Jeff klavius
Okay, enough of the French jokes. Thank you. And so you had entrepreneurs were 21 and down, as opposed to up. I think the youngest was 12. And so they had, like, done one startup, two startups or whatever. And it was just fascinating. And, you know, I went back home after having a really good chat with those guys and were very smart and very first you. Then, you know. The youngest entrepreneur I have backed was 19 when I backed him, but it was his third startup, one at 15, one at 17, at 19. Jared Kim. You know Jared, right?

[00:15:36] David Hornik
Yeah. No, I mean, truthfully. So I have a couple of different entrepreneurs who are freshmen, who I advise, and it’s fun to read. I did such and such when I was 12. And. And in fact, one of my freshmen last year dropped out in the first quarter. And I said, oh, my goodness, I can’t believe you’re dropping out. And he said, well, don’t worry, I think I’m going to stay in town. I’m going to buy a house in Palo Alto. And I was like, all right. I guess the entrepreneur thing’s working for him, if he can afford a house in Palo Alto. But I think he’s back. I think he’s back in school, so we’ll see what this is.

[00:16:09] Howard Hartbaum
You made the comment of being 20 years older than those guys in that startup. I look at it a little bit like my daughter is 16. Like, if it was my own kid, I would want them to stay in school, just very selfishly, because I wouldn’t tell my friends. My daughter’s in Stanford, which she’s not.

[00:16:26] David Hornik
What is she, a junior yeah, she’s gonna. All right, so we’ll have to. We’ll see. We’ll report back next.

[00:16:31] Howard Hartbaum
I heard if I just donate a building, then she’s in.

[00:16:35] David Hornik
I can actually tell you with 100% certainty that that is not sufficient, but.

[00:16:40] Howard Hartbaum
At Yale and Brown it is.

[00:16:41] David Hornik
Oh, really?

[00:16:41] Howard Hartbaum
Yeah. Stanford, it may not be.

[00:16:43] David Hornik
I didn’t know. What Yale and Brownship. Really? You have that on good authority?

[00:16:48] Howard Hartbaum
I heard it, like, from my friend’s cousin sister or something.

[00:16:50] David Hornik
All right, nice.

[00:16:51] Jeff klavius
So do you have any Skype shares you can sort of get out of retroactive? Yeah.

[00:16:56] Howard Hartbaum
No. No Skype shares. I saw the Skype founder Nicholas Zenstrom was here yesterday.

[00:17:00] David Hornik
Yeah, he was.

[00:17:01] Howard Hartbaum
He came in and visited. Came in and chatted in the morning.

[00:17:03] Jeff klavius
A little bit, and he wasn’t. He was, as I saw him from the back, from the other side of the. We. We had the.

[00:17:09] Howard Hartbaum
He’s tall, too, so he’s easy to see.

[00:17:11] Jeff klavius
The greatest party of the VC industry, the August party two days ago, which was amazing, as usual. Thank you so much for putting this together and inviting me. And so from the other side, knowing that it takes an hour to move from one side to the other. I never moved.

[00:17:26] Howard Hartbaum
You and I kind of stood in the same place. Like, you’re on one side of the.

[00:17:29] Jeff klavius
Door from the other side.

[00:17:31] Howard Hartbaum
So it was nice to see him. He started a venture firm which he just. In London, which he just closed his fund called Atomico. And he just moved offices and planted it right in between Index XL and Balderton, just for the fun of it. And we just did a deal together with him called Memolane. So we split a deal with a startup company where each firm put in a million bucks, and the company’s building something. It’s early. Yeah. Seed stage.

[00:18:00] David Hornik
One of these kind of. It was like a weekend of product.

[00:18:04] Howard Hartbaum
Yeah.

[00:18:04] David Hornik
And they came up with the idea in Copenhagen. Yeah, but I mean, this is. Exactly. So obviously, these are former Skype guys. You knew them. Nicholas knew them. It’s a great team of people. So I’m excited, but it’s awfully early. Howard, are you gonna assure me that this is a great deal?

[00:18:24] Howard Hartbaum
It will be awesome.

[00:18:26] Jeff klavius
Well, I like the. I’m not taking risk. And then he goes, like, so early that I couldn’t even get a demo of the product.

[00:18:31] David Hornik
Yeah.

[00:18:34] Jeff klavius
They were with me two days ago.

[00:18:36] Howard Hartbaum
Yeah, they like you.

[00:18:38] David Hornik
Uh. Oh. So what do you. So. So we’ve done. We did one early stage deal this quarter. How many have you done, Mr. Clavier?

[00:18:44] Jeff klavius
Oh, just seven.

[00:18:45] David Hornik
Just seven. Oh my God.

[00:18:47] Howard Hartbaum
How many boards vacation?

[00:18:49] Jeff klavius
None.

[00:18:49] Howard Hartbaum
No board seats.

[00:18:50] David Hornik
Are you on any boards?

[00:18:52] Jeff klavius
I’m on six, about to step off one of them. Essentially the reality of my work is that I have to multiplex and time switch across 45ish active companies. And so it’s about figuring out how I can add value on a short amount of time. So 10 minutes interaction, 20 minutes interactions. Both meetings. Yeah, both meetings take typically one to two hours. So this one I had two board meetings, which is fine, but when things.

[00:19:19] Howard Hartbaum
Are going good, they’re one to two hours. When things are going bad, they’re like three to four hours.

[00:19:22] Jeff klavius
Oh yeah, but then you make the time, right? Because when the shit hits the fan, it’s your role as the lead to actually take care of that. And so like Josh Koppelman from first round was an inspiration to us all. I take the bolt seat. If I lead the seed round, we’ll sit on the board for the first 18 to 24 months and then when my friends, the VCs come and mark up the deal, take the board seat, then we typically step off. And so if it’s a flat round.

[00:19:51] Howard Hartbaum
Then you don’t step off. It’s only when there’s a markup.

[00:19:53] Jeff klavius
It’s never a flat round.

[00:19:55] David Hornik
That’s probably, that’s almost assuredly true. It’s either up or it’s down. But it’s not flat.

[00:19:59] Howard Hartbaum
It’s either up or it’s not.

[00:20:01] David Hornik
Never down.

[00:20:02] Jeff klavius
No.

[00:20:02] David Hornik
Okay, it’s either up or it’s out of business.

[00:20:04] Jeff klavius
Yes, exactly.

[00:20:05] David Hornik
Whatever. That’s a down. To my mind, going to zero is a down round.

[00:20:09] Howard Hartbaum
No, no, no, no, no, no, no, no.

[00:20:10] Jeff klavius
I didn’t say going to zero. That’s the beauty of what we do, right, is that recovery is actually an option. If ever you bet on a great team that is building an interesting product, more often than that you will be able to find a very soft landing for those guys. And you’ll get money back, half of money back, twice as money back. Or you’ll get some Twitter, some Groupon, some glam that you will then make some decent performance on.

[00:20:35] David Hornik
So you don’t have any companies that have gone to zero?

[00:20:37] Jeff klavius
Of course, I’ve had 10 in out of 90 in six years.

[00:20:43] David Hornik
It’s pretty good.

[00:20:44] Howard Hartbaum
David, you’ve never had a zero, have you?

[00:20:46] David Hornik
Yeah, sadly yes I have.

[00:20:49] Howard Hartbaum
It’s painful, it’s awful. It’s like going to a funeral.

[00:20:52] David Hornik
It’s like.

[00:20:53] Howard Hartbaum
Why? It’s like watching a slow speed car crash and then going to the Funeral afterwards.

[00:20:57] David Hornik
It’s really sad. I remember when we were struggling with a company that our partner Dave had put money into and it was having. It was going to go out of business and watching how horrible. I mean this is Dave Marker who has had huge wins with the Microsoft’s and, and compacts and to it’s and whatever of this world. Actually I’ve just given him into it and he doesn’t get into it. Yeah, Seagate, whatever. But he was, it was killing him, literally. And he’s had very few, you know, things have worked really well for a day of overtime, but it doesn’t matter when they don’t. If something doesn’t work out, it is just brutal.

[00:21:32] Howard Hartbaum
Yeah, but there’s some good VCs who are very good at just when something’s really not working. It’s just sort of water off the back of the duck.

[00:21:42] David Hornik
But is that good? Like I don’t want to be that guy.

[00:21:46] Howard Hartbaum
I can’t be that guy. I just. Because I. But I think you can’t do it if you kind of feel responsibility to it. But a lot of people, it’s like if you buy a public stock and the public company were to go under, you would just write it off as a tax, tax loss. And there are some good VCs who just do that. I mean it’s not our style, but.

[00:22:03] Jeff klavius
Yeah, but I think that there’s two things. One is the actual financial investment and you have your fishery duty to your investors to take care of whatever you can. And then there’s the actual personal story of the people who are involved.

[00:22:16] Howard Hartbaum
I’m so worried about the employees of the company. There’s some single mom working there as a developer and she’s going to lose her job like next Tuesday and how is she going to pay her rent? I mean that just kills me.

[00:22:28] Jeff klavius
Yeah. And that’s why what you want to do is to find, you know, soft landing for, for these guys and you know, based on. So at the very early stage when we invest, there’s no proof point. You look at the team, the product, the market, if it makes sense, you know, you go in and you say I have 18 months to prove the whole thing in. And more often than not, the original thesis doesn’t work at all or not as much at all as well as you think. And so you pivot and you try other things and then you find something that works and sometimes you don’t. And so what’s important is to have clarity of hey, that team won’t find the next Opportunity or whatever. So what do we do about it? And you know, way before you have to shut down the company, you start thinking about, okay, what sort of asset do we.

[00:23:10] Howard Hartbaum
Yeah, but every now and then they call you up and they say, we planned wrong and we ran out of money.

[00:23:15] Jeff klavius
No, no. Anyway, I want to bring up something that happened once.

[00:23:19] Howard Hartbaum
See, it does happen once.

[00:23:20] Jeff klavius
That happened once.

[00:23:21] Howard Hartbaum
I want to bring up something that was very interesting that actually happened today, which was we had a very smart entrepreneur come in and pitch David and I a wonderful proposal. Good guy, experienced, had a bright idea, built a nice demo, interesting business, like, I think it’s interesting, and pitches this. And Reese says, well, that’s pretty interesting. That’s pretty good. And I said, okay, meeting’s over. I gotta go. I got something else scheduled. I go to the next room, have another entrepreneur, experienced, good guy, pitch exactly.

[00:23:51] Jeff klavius
The same business, exactly like, same target, same product.

[00:23:55] Howard Hartbaum
I would say 98% the same. Wow.

[00:23:58] Jeff klavius
Did you. You couldn’t choose them and say, hey.

[00:24:01] Howard Hartbaum
I said to the second guy, you may want to consider, because I’ve had.

[00:24:06] Jeff klavius
That the same week.

[00:24:08] Howard Hartbaum
This was back to back.

[00:24:09] Jeff klavius
They were in the same.

[00:24:10] Howard Hartbaum
David was still in the room with the first guy. And I’m talking to the second.

[00:24:13] David Hornik
Yeah. Meanwhile, you’re doing that meeting. I sat down with the development person from Harvard Law School who was gracious enough to only ask me to give her $10,000. Well, David, we appreciate all that you’ve done for the university and if you would just give us $10,000, that’d be great.

[00:24:32] Howard Hartbaum
Well, they want that money back. They paid you for being a lecturer there.

[00:24:34] David Hornik
I love that. Like, straight faced, unbelievable. I did it for free. That was my donation to the university.

[00:24:41] Howard Hartbaum
Did you pay your own plane fare to get there?

[00:24:43] David Hornik
Yes.

[00:24:45] Howard Hartbaum
Did August Capital pay your plate fair?

[00:24:48] Jeff klavius
Which is fine.

[00:24:49] Howard Hartbaum
It’s fine.

[00:24:50] David Hornik
You may have. I don’t recall.

[00:24:52] Jeff klavius
Well, you guys have so much in mind.

[00:24:54] David Hornik
You’ve certainly seen lots of, lots of companies where you see the same business a week later or two weeks later.

[00:25:00] Jeff klavius
Or whatever, and they come, and they come within a very short time span.

[00:25:03] Howard Hartbaum
It’s a very simple rationale for it. The entrepreneurs are thinking, I had this brilliant idea, but the reality is all the things going on around them gave them the input so they could construct that idea. And there’s another guy right next to door seeing the same things. He’s reading the same articles, he sees the same weather outside. He goes, what we need is a market for weather insurance contracts or something like that, which exists and Then suddenly, three of them.

[00:25:29] David Hornik
Isn’t that a first round company weather, Bill?

[00:25:31] Howard Hartbaum
Yeah, I always liked that idea.

[00:25:33] David Hornik
He’s supposed to be doing well, isn’t it?

[00:25:35] Jeff klavius
I heard he was doing really well. Yeah, I always like that idea. It’s kind of interesting. It’s very cyclical. So that’s why that. The risk that we have is to make investment decisions at the very early stage.

[00:25:44] Howard Hartbaum
No, the risk, you got to make them in 20 minutes. That’s the challenge you have.

[00:25:48] David Hornik
No, hey, I just want to say one thing, right?

[00:25:50] Jeff klavius
That’s not true.

[00:25:51] David Hornik
We VCs are beaten up about not acting quickly or whatever. I had a deal that I saw two weeks ago. I sat down with them on it. We sat down with them on a Thursday, like, thought it was interesting and exciting. Got them into our partnership the following Tuesday because we had Monday off and gave him a term sheet that night. So we’re not. So, you know, sometimes. And then we worked like crazy.

[00:26:14] Howard Hartbaum
That’s 20 minutes for us.

[00:26:15] David Hornik
That was a lot.

[00:26:16] Howard Hartbaum
And we did all. You did all the work between that Thursday and the Tuesday. So that when we gave the term sheet, there was no more due diligence to do. All the references were done and everything.

[00:26:27] David Hornik
Except for the call. Except for the calls that the company had to facilitate. Everything else was done. So anyway, I just wanted to say I know that you’re fast. I know you’re fast.

[00:26:37] Jeff klavius
You guys are learning.

[00:26:38] David Hornik
I’m glad to hear that.

[00:26:39] Jeff klavius
That’s cool.

[00:26:42] Howard Hartbaum
I just thought I would antagonize you a little bit for the fun of it. So that’s why I said that’s what you do, antagonize for the fun of it.

[00:26:49] David Hornik
Yes, exactly. How many years have I been. Have you been.

[00:26:53] Jeff klavius
Have you been antagonizing him?

[00:26:55] Howard Hartbaum
Two years. Have I antagonized you yet?

[00:26:57] David Hornik
Oh, of course. What, are you kidding me? I just don’t know if you know it.

[00:27:03] Howard Hartbaum
I haven’t yet, but it’s coming now.

[00:27:06] Jeff klavius
What’s interesting is that I’m sure you guys have seen that as well, is that the amount of companies, innovations, ideas, whatever, floating around is just overwhelming.

[00:27:15] David Hornik
Yeah, there’s a ton of smart people doing really, really interesting stuff.

[00:27:20] Howard Hartbaum
But I’m always amazing entrepreneurs. When they can’t believe anybody else has thought of the same idea, they’re like, this is my great idea. It’s big secret. We’re like, oh, we saw three of those.

[00:27:28] Jeff klavius
Yeah.

[00:27:28] Howard Hartbaum
And they’re like, you couldn’t have. And we’re like, well, we did.

[00:27:32] David Hornik
But then there’s the Flip side, which is every so often you see a deal and you go, oh my God, that makes a ton of sense. I. It’s so obvious really, someone must be doing it. And you dig and dig and dig and you can’t find anyone doing it. And then you sort of, okay, reluctantly, I’m going to invest in this, but something is going to show up because you can’t be.

[00:27:48] Howard Hartbaum
Or what’s wrong with this? Why? Is it for somebody else or it’s the market.

[00:27:52] Jeff klavius
Right. You want to have someone who set up. I’m doing this with number 59. So of close 58 investments in infant.

[00:27:59] Howard Hartbaum
Two, is that bin 38?

[00:28:02] Jeff klavius
Sorry, no, no, 58. Bin 38 thing.

[00:28:07] David Hornik
What is that? So 50. This is in one fund. Are you done? Are you out of money?

[00:28:11] Jeff klavius
How many can you do More?

[00:28:15] David Hornik
More? That’s your answer, is it?

[00:28:19] Howard Hartbaum
That’s a good answer.

[00:28:20] Jeff klavius
You know what, how much money have you left? You know. No, the thing is. What. Look, so the economics of a small fund actually pretty challenging from the standpoint of expenses and fees because we run, we. The VCs run a fixed cost business in terms of taxes and audits and all that. And so actually a substantial portion of the fund goes into expenses and fees. So I have to put some of those fees back in the.

[00:28:43] David Hornik
It’s actually worse than that for you, right. Because you have to track 58 investments. I actually think that, that, that in some ways the thing that’s most surprising and probably most challenging and will be a real issue for a group of super angels who haven’t thought about it, is that the tracking and managing of the financing documents and stock certificates and future financings and all that stuff is extraordinary.

[00:29:08] Howard Hartbaum
Two full time people, when you get.

[00:29:09] David Hornik
To that time, people.

[00:29:10] Jeff klavius
Well, and, and that’s when you know, the fact that I’ve been a GP for four years in a traditional fund. I was actually running the fund because the fund was based in the uk but it was a Delaware lp and so I was actually responsible for all that crap. Sorry, that back office.

[00:29:26] David Hornik
You knew where it was coming.

[00:29:27] Jeff klavius
Yes. And so I could structure it accordingly.

[00:29:29] David Hornik
Yeah. My guess is that you, Koppelman certainly First Round Capital has this pretty well in hand, etc. But look, I was the attorney, right. I do not underestimate the amount of paperwork and work and stuff. Challenging, you know, what is the D and O insurance? We should probably know that in all of our companies what is, you know, when a company merges, you know what’s happening.

[00:29:52] Jeff klavius
So anyway, so I must say that for the first time in six years and 58 deals, I sent the wrong six pages.

[00:30:03] David Hornik
The other day, for the first time. For the first time, you sent someone else’s. You were doing two deals at the same time.

[00:30:08] Jeff klavius
I was using four deals, so three new deals, one photo on.

[00:30:11] Howard Hartbaum
You were passing on one deal, but it had the same name. So you sent one guy say, we’re gonna do the deal, and here’s the terms.

[00:30:18] David Hornik
So this is why the footer says, you know, and you.

[00:30:20] Jeff klavius
That’s the day I was complaining on Twitter that for fuck’s sake, lawyers, please put the name of the company in the footer. Not everyone does that.

[00:30:31] David Hornik
Yeah, not 01227, whatever document.

[00:30:35] Jeff klavius
And so I had the issue and I sent SIG pages for one of the companies to the other one. And then the guy goes, what is that? I’m like, signature pages.

[00:30:49] David Hornik
See, that’s a relatively simple thing. That one’s not.

[00:30:52] Jeff klavius
It’s benign. Yeah.

[00:30:54] David Hornik
It’s like you were going to tell us something.

[00:30:56] Jeff klavius
Oh, yeah?

[00:30:57] David Hornik
What are you going to tell us? We’ve been waiting. How long have we been in? We’ve been at this 30 minutes and you haven’t told us.

[00:31:03] Jeff klavius
I’ve basically removed the term super angel from all my bios and references and everything. And so from today on, I’m a city stage vc. I think that, you know, venture capital.

[00:31:16] David Hornik
That’S what you’re doing.

[00:31:17] Howard Hartbaum
So I think that’s maybe the outcome of all this is the word super angel is gone.

[00:31:21] Jeff klavius
As far as I’m concerned, it’s dead. Because anyway, I’ve never liked it because we’re not angels.

[00:31:28] David Hornik
See, this is a very interesting thing, right?

[00:31:30] Howard Hartbaum
Angel is your own money.

[00:31:31] Jeff klavius
Yeah.

[00:31:31] David Hornik
Right. So. So I know.

[00:31:33] Jeff klavius
I have my money.

[00:31:34] David Hornik
Yeah.

[00:31:34] Howard Hartbaum
So I have my money in our fund.

[00:31:36] David Hornik
You’re required by law to have our money in your. In the fund. Right. That’s not the question. But so, you know, you and I were just on this panel, what, a week, two weeks ago?

[00:31:46] Jeff klavius
Yes, two weeks ago.

[00:31:47] David Hornik
Two weeks ago, for oric, the law firm was going to have this angel Super angel versus VC debate that you.

[00:31:54] Jeff klavius
Had started on TechCrunch. You had.

[00:31:56] David Hornik
First we had the bunch of videos and then you and McClure. But we had already. Actually, in fairness to Oric, we had already agreed with Chris, Yay. Who ran it, to do this for oric. Oh, really? I didn’t know that in advance of the videos. And so they started getting RSVPs, and it turns out that they filled up the space. They could do it In Oric. So they moved it to three seasons. There were 550 people or something attending and it was you, me and Dave McClure.

[00:32:21] Jeff klavius
Well, exactly. Hang on. So let’s step back. The, the week before the event, there was you and McClure doing a four part series or five part series on Angels versus VCs, right? Sort of, you know, the, the online version. And then the event was perceived as the cage match being. Okay. Now you see them fighting in front of you. And so the event, which had like maybe 50 or 70 people signed up, moved from 50 to 550. And. And people were like, well, you know, we’re not sure what’s gonna happen because we’ve already seen a preview of what the cage match could be on TechCrunch. And then I was just chatting with Chris and he said, well, we have to change some of the.

[00:33:04] Howard Hartbaum
How did you get caught in the middle of that?

[00:33:05] David Hornik
He put himself in the middle.

[00:33:07] Jeff klavius
I invited myself.

[00:33:08] Howard Hartbaum
Which side did you side with?

[00:33:09] David Hornik
You literally invited yourself. Right, and why did you invite yourself?

[00:33:13] Jeff klavius
No. Well, yes.

[00:33:14] David Hornik
Yeah.

[00:33:15] Howard Hartbaum
So did you align yourself with McClure or what?

[00:33:17] David Hornik
Did you align yourself with Stage VC? We know you’re with us.

[00:33:21] Jeff klavius
No, because I was chatting with Chris and he said, well, you know, how do we approach that?

[00:33:25] Howard Hartbaum
Or whatever.

[00:33:25] Jeff klavius
I said, well, if you need the middle, I’ll be the middle, because I am the middle. Because this whole. And you know, you can’t be in the middle.

[00:33:32] Howard Hartbaum
You got to be one or the other.

[00:33:33] Jeff klavius
What?

[00:33:33] David Hornik
Dude, he’s exactly right. The middle is the right.

[00:33:36] Jeff klavius
Ten people told me that was the voice of reason. And you know that there’s trouble if I’m the voice of reason. No, the problem is that the video were very entertaining, but they were projecting this sort of antagonistic position which doesn’t exist between us because we, the early stage investors, the seed stage VCs, do deals on the basis of a limited set of data that we believe are enough for us to make a decision for. We give 18 months of Runway and that’s it. We can’t sort of get to the next level unless the company sort of reaches cash for break even. And so we need you, the VCs to just take them, fund them and get to the next level. And I’ve had 40 companies raising north of $150 million in photo bonds over the past six years. And without you.

[00:34:28] David Hornik
You’re right. Where would that come from?

[00:34:29] Jeff klavius
I mean, not you, because you guys never invested in one of my companies.

[00:34:32] Howard Hartbaum
Josh Koppelman’s Number is like a billion in follow on financing. So he says, I know who butters my bread.

[00:34:38] David Hornik
Well, but it’s not even that. Right. It’s not about collaboration.

[00:34:41] Howard Hartbaum
It’s collaborative.

[00:34:43] David Hornik
We’re trying to build big businesses.

[00:34:46] Jeff klavius
So there’s no.

[00:34:47] David Hornik
I tried to say. This is what I tried to say on the videos and I tried to say it at the thing. Right. You know, ultimately, which is now, I find Dave McClure entertaining and he’s a friend that was all great, but he does tend to state things in the extreme. And he was taking quite extreme positions and very quick to say, like, look, you know, after the venture investors, because, you know, we are the right guys. And so it was interesting because you were definitely sitting in between going, look, I’m not saying that everything is perfect about the venture capital business, but on the other hand, I’m not. I’m not comfortable with this idea of that they’re the devil. So I appreciated that.

[00:35:26] Jeff klavius
No, there’s no devil. And the big question is, what sort of company are we building? And sometimes we figure out that we’ve put a million dollars in the company and there is some scale, but it’s not like venture scale. And then you have to figure out what to do with that. In some cases, well, you see the scale and then we go to you and say, hey, interesting. And then you raise a Fitbit where True Ventures. And I had put $2 million in this next generation photometer company two years ago.

[00:36:05] David Hornik
Well, that was unfortunate. It turns out that I put in brand new batteries into the recorder here and they were not good. So. And then it ran out of power. Exactly. When you heard Jeff was touting the Fitbit company and how well it has been doing, and then we ran out of power. And so I didn’t notice until the end of the podcast. And when I noticed, then Jeff sort of said, you’re an idiot in his only the kindest possible way with his French accent. And then he tweeted that I was an idiot. He basically said, david, replace the batteries with dead batteries. Now, I didn’t replace the batteries with batteries that I knew were dead. I replaced them with batteries that I thought were not dead, but it turns out they were dead. And so after 35 minutes of the show, we got cut off. But on the other hand, that’s probably merciful for all of you. You’re probably thinking, at 30 minutes in, enough already, you people didn’t have anything to say in the first 30 minutes, never mind the next 30 minutes. So anyway, that’s what happened? Sorry about that. Didn’t mean to. Didn’t mean to cut off there. Didn’t mean to cut you off. Jeff and I didn’t intentionally put in dead batteries, but. But there you have it. So anyway, in the rest of the show, we, you know, talked about how great Jeff was and Jeff talked about how great we were and we all hugged and it was very nice. Oh, yeah, we did have a section, the sucking up portion of the program when we, when I declared my love of what is now say Media, which is the merger of Six Apart and VideoEgg and sort of talked about why I’m excited about that. So the short version is that 6 apart has been a blogging leader and built an amazing network of massive scale. They’ve got 400 plus million uniques that are reading blogs and posts about content from women to technology to green whatever across their networks. And they’ve done a fabulous job of growing that, both the platform and the ability to. For individual publishers to express themselves. And then videog has done an equally amazing job of building up the kind of rich media ad platform and ad network to allow advertisers, brand advertisers to get at the audiences they’re looking for with really effective ad formats and get incredible performance out of those ad formats. And so it became perfectly clear that the two together were two great tastes that taste great together. So. So I’m thrilled that the two companies have come together. They’re now probably the second largest independent digital media company out there. That’s Both by scale, 450 million uniques in the course of any given month. But also in terms of revenue, they’re making tens of millions of dollars and are just a big interesting company. So I couldn’t be more excited to be be affiliated with both with both companies. And now if the merger goes through with the two companies joined together as same media. So that’s it. I’m sucking up to both teams of amazing entrepreneurs. Congratulations on that merger. And this is feeling very strange. It’s not a conversation, it’s just me talking. I could say anything I want about Howard and Jeff for that matter. What should I say? Well, I won’t. I’ll be nice. So again, our apologies for the technical difficulty that led to the podcast ending sort of mid sentence. My apologies to Mr. Clavier for cutting off his appearance, but as always, we’ve enjoyed having him here on venturecast. And thank you to our tweeter in the Middle east who asked for a new VentureCast because that’s awesome. We are very happy that people even in Saudi Arabia are listening to venturecast. And for the rest of you who are listening and thanks so much.