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

[00:00:19] Howard Hartenbaum
And this is Howard Hartenbaum, also from August Capital.

[00:00:23] David Hornik
It’s been a sufficiently long. I know it is very inconvenient when our job interferes with our ability to talk about our job. That’s annoying.

[00:00:32] Howard Hartenbaum
Or you consider this your social life? Sitting here talking to me. That’s pretty sad.

[00:00:37] David Hornik
Yeah, that is sad. Howard, you’re my only friend.

[00:00:40] Howard Hartenbaum
Do you still go to Joni’s for breakfast every day?

[00:00:42] David Hornik
I did today. I had breakfast at Joni’s with Astro Teller, the head of Google X. It was very nice, actually. This was terrible. This is. Oh, this is. This is the problem with Lyft or this idea that, you know, every so often I’ll decide. I have a meeting in the city and I’d rather. Instead of drive up, I’ll take Lyft up to the city, right? And then I come back down and I go home, but my car’s here. And then I have this car that I forgot. So this morning I had breakfast and my car was here, but my wife had a meeting. She had her car. My daughter had the car at school, I had no cars. I looked for my scooter and it had disappeared. I don’t know where it was. So I ended up having to skateboard over to Joni’s. And I’m not that good at skateboarding anymore. I was a little perilous.

[00:01:33] Howard Hartenbaum
Like electric skateboard?

[00:01:35] David Hornik
No, just skating. I had to use my legs.

[00:01:37] Howard Hartenbaum
Wait, didn’t you break your wrist? Oh, that was rollerbladed.

[00:01:39] David Hornik
No, that was rollerblading. That was rollerblading, yes. No, I’m an excellent.

[00:01:43] Howard Hartenbaum
That’s a 5 inch scar I’m looking at.

[00:01:45] David Hornik
I think it’s 2. 2 inches. 5 inch would like go to your elbow. That’d be a giant’s car. So anyway, yeah, so it’s. It. I have. I do think this is this interesting thing, Right. Obviously there are times when, in fact I will. I would rather take a ride up than drive. But then you have this logistical challenge of getting your vehicle back. It’ll be so much better when your car just takes itself back home or.

[00:02:11] Howard Hartenbaum
Your car follows you around.

[00:02:14] David Hornik
You’Re still there. It’s like having a puppy dog.

[00:02:16] Howard Hartenbaum
No, you don’t have to ask. You know, it’s just following you along.

[00:02:19] David Hornik
So I was saying to Astro this morning that I had two kids who drive and I have two kids who don’t. One of whom insists on not driving and how. That’s ridiculous. And he was like, what’s ridiculous, ridiculous about him? That kid’s right. I was like, what are you talking about? He said, no one’s gonna need to drive. It’s stupid people. I. I said, I suspect that you have a shorter timeframe in which you think that will happen than I do. And he said, yes, I’m sure that’s true, but that’s his job. It’s his job at X to assume that cars will drive us around sooner than humans.

[00:02:53] Howard Hartenbaum
It’s going to be an interesting transition.

[00:02:55] David Hornik
Time, I’ll tell you. We drove up to Healdsburg on Friday and it should have taken two hours and it took three and a half. And I really wished my car could drive itself.

[00:03:07] Howard Hartenbaum
You could have taken a lift. Wait, didn’t we used to say Uber and now we say Lyft?

[00:03:12] David Hornik
Yeah, don’t go down there, Howard. We said we weren’t gonna go there. I. You could say whatever you want.

[00:03:21] Howard Hartenbaum
I just think it’s interesting to be in the pole position and saw off your own toes.

[00:03:27] David Hornik
That’s not you not going there. Jeff’s Emmett. Apparently he’s the front runner to be the CEO of Uber, but he doesn’t want to move out here.

[00:03:38] Howard Hartenbaum
So just move the whole company and.

[00:03:41] David Hornik
How much of the company? So we had a company pitch us today, and it has a distributed workforce. And we said, you know, let’s talk about that and why and how do you think about it or whatever. And he said, look at every company. When it gets to any degree of scale, as ultimately has, ultimately has a distributed workforce. Right. You automatically move. Oh, I’m going to build an engineering team overseas or I’m going to build a call center here or call center there. And actually, I had never thought about it that way, but it’s a good point, don’t you think?

[00:04:13] Howard Hartenbaum
I think as the communication tech capabilities and tools that are available keep growing, this whole concept of distributed team doesn’t work really is going away. Like, 15 years ago, the tools didn’t exist. And email. Email wasn’t definitely going to be delivered. Like, you don’t worry about email deliverability anymore between team members other than spam.

[00:04:36] David Hornik
Yeah. So when it’s between team members and you have the same domain, then. No.

[00:04:41] Howard Hartenbaum
And now you walk into offices and they have a big screen on the wall and they’ve got Skype channel open 247 between two places. Yeah. I think the technology’s caught up. And so much for trying to fund companies that are local. We shouldn’t even bother.

[00:04:59] David Hornik
But then we have to Skype into board meetings.

[00:05:01] Howard Hartenbaum
That’s good. You don’t have to drive that three and a half hours.

[00:05:04] David Hornik
It is true. If things are absolutely virtual, then there’s no longer this argument. Because we often say like we’d rather fund companies that are local because we have these deep relationships in the Bay Area. And if you’re trying to find a great VP of engineering or VP of marketing or whatever, we are more likely to have those relationships locally than we are elsewhere. But if in fact it doesn’t make a bit of difference, then who cares? Right. Then fine. I have relationships here and I can help you. If your company’s in Idaho, I can still help you find the right marketing person here in the Bay Area and that’s helpful as well.

[00:05:40] Howard Hartenbaum
Yeah, but helping to find people who are here. Yes, but funding a company in Quebec and hiring them a marketing person in Denver, we can’t really help there all that much.

[00:05:54] David Hornik
Well, that’s what I’m saying. But they don’t want, they don’t need someone in Denver. If they’re fully distributed, they’ll have them wherever. So if we know someone anywhere, it’s like great. Can get my friend Jason, who’s a sales guy in New Hampshire to work with the company. And salespeople have always been like this. Right. Jason’s on a plane more than he the. The best thing about the location of his house in New Hampshire is that it’s close to, I think to the Nashua airport or whatever.

[00:06:21] Howard Hartenbaum
When I moved to Luxembourg in 2002, I picked that country purely because it’s in the center of Europe. You could fly round trip non stop to any major city you wanted to. And from leaving your front door in the city to getting on the plane was under 30 minutes. Wow. Drive to the airport, park across the street, walk in, go through security, walk to the plane.

[00:06:44] David Hornik
And there was enough volume of flights that that that was fine.

[00:06:47] Howard Hartenbaum
Every day there was one flight that went out and one flight that came back and it went out somewhere between 6 and 8:30 in the morning and it came back sometime between 4 and 6:30 at night.

[00:06:55] David Hornik
So you could go meet with someone somewhere, come back and be done or hel.

[00:06:59] Howard Hartenbaum
Like the farthest flight was three hours. So yes, you could go anywhere you wanted.

[00:07:03] David Hornik
What is amazing to me is that there are people who live in that those circumstances and then don’t go anywhere. That seems insane, right? Americans go overseas, they go to, you know, study abroad and then they’re like, oh, I’m going to go to Berlin for the day. I’M going to do whatever. Because, like, this is amazing, particularly at Californian. Right. Where you can get everywhere for the time it would take you to get to la. So you might as well just, you know, hop in a plane. And yet there are all sorts of people who sort of stay in their provincial spots, like me.

[00:07:36] Howard Hartenbaum
David travels a lot, and I go out of my way not to. And between the two of us, it’s sort of back.

[00:07:41] David Hornik
It’s even. It’s even. But I was just saying I’m not traveling that much this semester because I’m teaching. And so I have to be in town to spread the wisdom. Howard, I must be present for wisdom spreading, not your language sharing. Wisdom sharing. Was it the spreading? I don’t think it was the wisdom.

[00:08:02] Howard Hartenbaum
Let’s talk about this new wave of speculative ICOs.

[00:08:08] David Hornik
What does that even mean?

[00:08:09] Howard Hartenbaum
So, initial coin offerings. Initial companies are now creating their own currencies. They’re offering up to sell some percentage of those currencies in order to generate cash. And they’re raising money to fund their company without selling off any equity in their company as they create a new currency. And I just don’t see how this ends well.

[00:08:34] David Hornik
That’s because it doesn’t. First of all, I’d like to take issue with ico. Okay. An IPO is an initial public offering. It’s not an ISO, an initial share offering. It’s an initial public offering. So these ICOs, initial coin offerings are actually IPOs, initial public offerings.

[00:08:53] Howard Hartenbaum
They’re selling with no regulation. With no regulation.

[00:08:56] David Hornik
Which I don’t under. How is that. Why is. You know, where is the sec?

[00:09:01] Howard Hartenbaum
I think the SEC will come out the first time we have a massive fraud scheme which is coming, coming for sure. Where the ones to date have been smart, techie, honest folks. And the next one that comes may well be a smart, techy, dishonest folk who raises $100 million in the blink of an eye and then absconds with the money somewhere. And people are going to be holding their coins.

[00:09:28] David Hornik
So to me. Right. Which they can verify. I Absolutely. It’s self verifying that I have this coin. Yes. And it’s worth $0. But you do have it. It’s a virtual.

[00:09:38] Howard Hartenbaum
You give out coins at the lobby.

[00:09:39] David Hornik
I always.

[00:09:40] Howard Hartenbaum
We should call. We should do an ICO this year where you say, okay, who wants to buy some of these coins?

[00:09:47] David Hornik
That’s true. Anyone who has the full collection needs to get them.

[00:09:50] Howard Hartenbaum
We could sell the coin logo to the highest sponsor. That would be like an ico.

[00:09:57] David Hornik
Yeah. Exactly. If anyone’s listening and they want to sponsor our, our game coins, let us know.

[00:10:04] Howard Hartenbaum
So I’m worried about the fraud here. I think it’s coming.

[00:10:07] David Hornik
So even if there isn’t fraud, right. So I, I agree with you. It’s definitely coming. There’s no question it’s not controlled enough whatever. In fact, it’s not not controlled at all. But even if it’s not, even if the people are actually acting completely honestly, here’s the problem and you, and you pointed it out. There are these technology companies that are supposed to be creating value with their technology. So different folks using, using the blockchain to create value either by, you know, data sharing or identity or all sorts of things that you could reasonably do with blockchain that maybe some super interesting. So they say we’re going to use blockchain to solve this real tech problem, but we’re going to raise money by doing this ICO and we’re going to sell coins using blockchain. And the problem is that there’s no relationship between the technology that they’re creating and the value of this coin that they’re selling, which is just gambling.

[00:11:09] Howard Hartenbaum
It’s just a prey on human nature.

[00:11:13] David Hornik
Yeah.

[00:11:13] Howard Hartenbaum
People want to collect things, they feel like they got to have some of those coins because it might be the next currency. And it’s just a speculative bet it.

[00:11:20] David Hornik
But it’s a Ponzi scheme. Right. You can it, it is only worth more if people want to pay more next people. I mean I suppose that’s all markets but, but it’s not like you look at and go, well what, what, what did the company do? Before I decide whether I want to pay more for this particular currency, you say gee, I want some of that currency. And it’s because people put money into, who put money into Bitcoin at 20 are now making a ton of money because it’s now worth thousands. Right.

[00:11:50] Howard Hartenbaum
How long do you think it is before we see a pitch which is a company that sells software that enables other companies to do coin offerings.

[00:11:57] David Hornik
Oh, it’s got to be built like who’s someone should be building.

[00:12:00] Howard Hartenbaum
That’s like Levi’s.

[00:12:01] David Hornik
Right.

[00:12:02] Howard Hartenbaum
We don’t need to mine the gold, we’ll just sell you the picks.

[00:12:04] David Hornik
Well, I talked to a former student of mine who’s working at a company that basically is creating that technology that enables companies to use to better utilize blockchain. Right. Which, that makes more sense to me. Then I talked to another student who was thinking about a fund related to blockchain Right. So anyway, I think it’s. I.

[00:12:30] Howard Hartenbaum
You own any digital currency? Do you own any coin?

[00:12:32] David Hornik
I do not. I.

[00:12:35] Howard Hartenbaum
It’s good to own coin.

[00:12:38] David Hornik
A digital coin or like coinage. Like I had some coins. I just collected up all my coins and I went to Molly Stones and I used their machine and I turned all of those coins into $328 worth of Amazon gift certificates. Is that.

[00:12:55] Howard Hartenbaum
You mean you gave them $400 worth of coin and you got 300?

[00:12:58] David Hornik
No, no, no. This is the beautiful beauty of Amazon. Right. Amazon wants you to use the Amazon dollars and so they pay the conversion so you don’t lose any money.

[00:13:10] Howard Hartenbaum
There’s got to be some trade there.

[00:13:12] David Hornik
Yeah. Who’s trading?

[00:13:13] Howard Hartenbaum
We can go in a circle. Like a perpetual money machine.

[00:13:17] David Hornik
No, I don’t think so. Well, that’d be good. But you could probably buy up coins from people at a discount if you took it into the machine and then use it for Amazon and then sell it on ebay.

[00:13:27] Howard Hartenbaum
Sell those gift cards.

[00:13:27] David Hornik
No.

[00:13:28] Howard Hartenbaum
Then ebay takes their cut.

[00:13:29] David Hornik
Yeah. Damn.

[00:13:32] Howard Hartenbaum
It’s got to be a way.

[00:13:33] David Hornik
Keep working on it. Anyway, so I don’t. I think that there is. I think that ultimately there will be interesting things built on top of blockchain.

[00:13:43] Howard Hartenbaum
Like, I don’t disagree with you there. I just look at ICOs and cryptocurrencies right now a little bit like people were looking at collateralized debt obligations in 2007 and nobody really understood what they were, but they were buying and selling and trading and that didn’t end well. Yeah, unless you were creating them. Then it ended great.

[00:14:09] David Hornik
There was that other thing. Remember? There were those. There was some like. I wish I could remember. The thing was supposed to be super liquid and all the high net worth people are putting their money into it. And toilet bulbs and it was super. No. Yeah, no, it was poppies. No, but it was like some. Some financial instrument that was supposed to be incredibly liquid. And the only thing is that all of a sudden one day people stopped buying and selling and the. And the market just stopped. The bottom fell out of the market and ultimately all of the investment banks were sued. I forgot. I can’t remember. But anyway, the whole point is if there’s no market. Did you have that? Do you remember what that was? Yeah, Bill Trenchard had a bunch.

[00:14:54] Howard Hartenbaum
It was like, it was like a play.

[00:14:56] David Hornik
Sorry to call you out, Bill.

[00:14:57] Howard Hartenbaum
It was like a play on treasuries and they made it sound like a bank account.

[00:15:00] David Hornik
Some educational. Educate. It had some like education in the Name.

[00:15:04] Howard Hartenbaum
It was ugly.

[00:15:04] David Hornik
And I’m sure someone will tell us. But anyway, it went from like perfectly liquid and reasonable returns to completely illiquid and losing all of its value.

[00:15:12] Howard Hartenbaum
They were sold as liquid bank accounts backed by Treasuries, and it turned out that they were. Were vapor.

[00:15:16] David Hornik
Yeah, exactly. And when they. And when the. And when the buck stopped, it stopped hard. And a bunch of people. And then all the banks got sued and they had to make good. It was ugly.

[00:15:26] Howard Hartenbaum
So one of my companies, Tony Mamoni and Danny Khatib, who were at Zimbio, and I remember right after we had backed them with Menlo, and this is Draper Richards days and this was happening, and I remember saying to. To Tony, where’s your money? And he said, oh, it’s in commercial paper. And I said, what do you mean by that?

[00:15:49] David Hornik
Yeah, right.

[00:15:50] Howard Hartenbaum
And he said, I don’t really know. And their entire $9 million of funding was locked up.

[00:15:57] David Hornik
This is the companies.

[00:15:58] Howard Hartenbaum
Companies money was locked up in this instrument. And we borrowed against our own locked up instrument with the bank. They. Because they didn’t want us to sue them. They were like. And then eventually, a few years later, we got like 95 cents on the dollar out of it. But it was purely illiquid for a while. But I just remember Tony saying, smart Stanford graduate students say, yeah, it’s in commercial paper. And I’m thinking, what do you mean by that? Is that like toilet paper?

[00:16:26] David Hornik
Who’s commerce? Whose paper? What is it? No, this is. So we have this conversation, like people often think to themselves what an incredibly sexy job it is. Going to board meetings all day. And we discuss only the sexiest and most exciting of topics. And this is one of the topics we often discuss, which is if you raise a bunch of money more than you are going to spend, right? Then you have to put it and put it somewhere. And so where do you put it? So they. So we all have. All these companies have to create an investment policy. And it always seems completely silly to me because the investment policy is absolutely simple. It is. There are two things and only two things that matter. Completely safe and completely liquid right now. If you can do those things and get a better, you know, better rate than if you just put it in a savings account. Okay, fine. Right. But don’t make it less safe and don’t make it less.

[00:17:22] Howard Hartenbaum
There’s always one guy who’s like, I can get 0.3% more if I just do that.

[00:17:27] David Hornik
Oh my God, I hate that guy. They do. And the more you raise the more you’re tempted because you’re like, oh, if we got 2%, we’d have so much more money. No, this company.

[00:17:39] Howard Hartenbaum
You should have seen Tony Mamoni’s face when he learned out what his commercial paper was. Tony, if you’re listening, somebody’s going to send this to Tony. He’ll call up and he can be a guest next time.

[00:17:52] David Hornik
I just like the name Tony Mamoni.

[00:17:55] Howard Hartenbaum
Isn’t that great?

[00:17:55] David Hornik
I wish my name was David McMaven and Howard McPowered.

[00:18:00] Howard Hartenbaum
Tony is awesome.

[00:18:01] David Hornik
David McMaven and Howard McBoward coming to you live. I think we’ve covered all the most important topics today.

[00:18:08] Howard Hartenbaum
So I have a company now that is doing okay, but it’s not a runaway success. And I have serious concerns for its ability to raise a next round of funding in a year. And a large company has come to them and met them a couple times, and then through their banker, said, we would like to buy you. And I’m thinking to myself, this doesn’t happen very often, and we should. You know, the business is not profitable. We’re not sure we can raise money in the future. Things are way tougher than we thought it would be. Let’s take this very, very seriously. And the CEO is thinking, maybe it works, maybe it doesn’t work. But let me tell you about this other stuff going on over here. And I’m like, stop. The number of times when you have a company that everything isn’t going perfectly, that somebody wants to buy you is less than one in ten.

[00:19:03] David Hornik
Oh, my God. I bet you it’s way worse than that. We have this illusion that the oil. Worst case, you can always go out, hire some bankers and sell the company. Right?

[00:19:14] Howard Hartenbaum
You can hire some bankers. I don’t think so. For the cases where I have hired bankers to sell a company where we didn’t have inbound interest, I don’t think we have ever gotten money back. We’ve gotten some money back, but we’ve never gotten all the money back.

[00:19:35] David Hornik
Yeah, no, it’s. It’s one of the things I’ve watched the very best bankers. And the very best bankers have a very. You can watch them. Here’s how it goes. They say, oh, your company’s very interesting. We’d love to work with you. So give us a call when someone offers to buy you, and then we’ll come help you sell the company. It’s like, well, why would I hire you if I have already got someone who wants to buy you? But they say, look it, if you have someone who wants to buy you, then we’ll go hit the alternatives and try and create a bit of a market and we can drive up the price. If there’s enough interest, then we can go back and forth and we’ll help you with the certainty of getting the company sold and that’ll be great. And, and that’s exactly what I’ve seen basically that, you know, bankers are good with process and if you already have an offer, they’ll help you manage it. They’ve. I haven’t seen lots of instances where they’ve been drummed up a lot of alternatives, but, you know, usually they’re able to increase the price enough to pay for themselves. So that’s good.

[00:20:35] Howard Hartenbaum
I would say, dirty little secret around hiring bankers is that in pretty much every case, if you don’t have somebody wanting to buy you and you go out and hire a banker, it’s a process issue. You’re thinking, probably the company won’t be able to raise money and it could be a shutdown. So you want to give enough time to get bankers to help you raise money or help you sell the company. But on average, it does not turn out well. Usually turns out with, we found you a buyer, you’ve got 25 million invested, they’ll give you back $3 million and they’ll take the team.

[00:21:14] David Hornik
Yeah, no, it’s funny, I remember back. So it’s amazing how this market has shifted so dramatically over such a short period of time. In the, in the early days of kind of Professional angels, right, where I was like, okay, I’m going to be an angel investor, but I’m going to raise a fund and I’m going to invest in a set of companies and I’ll do it alongside my pals and all this stuff. There was a sense that no matter what, you were fine because in the worst case scenario, you’d sell the team and some technology to Google. Right? That was, I always, I always heard it. Ah, I don’t know what happens with this one, but if it doesn’t work out, we’ll sell, you know, we’ll sell the team to Google or whatever. And I always said, how many companies do you actually think get bought by Google? Like what? You know, let’s say it’s 100. Even if it’s 100 companies that Google buys, you know, how many angel, how many companies are getting angel funded this year? A thousand? Two thousand? Ten thousand? Right. So that hundred and that, that would be the most prolific acquirer is not going to make up for all of those, even if you have buddies within the company, that’s not going to happen. So.

[00:22:27] Howard Hartenbaum
And in most cases, and Aqua Hire, which looks like an acquisition is almost as many times no money nowadays changes hands. It’s just jobs.

[00:22:36] David Hornik
Just jobs and a story, you feel, which by the way, I would much rather have my company and my, and the team join a big company and be part of it than just shut down. Right. That, that’s definitely better. But it is rarely the case that it is a, hey, we’ll give you a billion dollars for your company.

[00:22:57] Howard Hartenbaum
What percentage of venture backed companies end up being worth zero? Half. It’s.

[00:23:06] David Hornik
I bet you if you get to the Series A, it’s less than half. They get to zero. But it’s, it’s a much bigger percentage than anyone would think. Right. I was just, I just had a conversation with an entrepreneur where we were discussing this question of like, so either you raise money or you sell the company or you go out of business. And the entrepreneur said, well, so if we go out of business, what does that mean? I said, well, it means it’s like.

[00:23:37] Howard Hartenbaum
You are right now mean you close.

[00:23:39] David Hornik
The company, like you stop doing whatever you’re doing and you turn off the servers and everybody goes home. And it was really. He was, he had, he was sort of shocked in a way that was sort of like, that is, is that a possibility? Right?

[00:23:54] Howard Hartenbaum
Did you say to him, have you ever heard of this company called Circuit City?

[00:23:58] David Hornik
Wow, Circuit City. He’s never heard of Circuit City. He was too young to know Circuit City.

[00:24:03] Howard Hartenbaum
Circuit City was the size of Best Buy. And then one day they were gone.

[00:24:08] David Hornik
That was shocking.

[00:24:09] Howard Hartenbaum
Gone.

[00:24:11] David Hornik
It was a bad.

[00:24:12] Howard Hartenbaum
There was a sign out front, everything for sale this day only.

[00:24:18] David Hornik
Come and get it.

[00:24:20] Howard Hartenbaum
Nobody even valued that brand.

[00:24:22] David Hornik
Yeah, no, it’s amazing. So it is, it is. But so then there are these occasional, like, great outcomes. I’ve been having this conversation with people because, you know, these are the kinds of things I talk about because I have no life, Howard. So this is the question for you because we live in this world where we were around these tech companies, they’re always acquiring other tech companies. The conversation I have is, what is the best tech acquisition ever done by a tech company? Right. And so I have two primary contenders. Instagram, which has just been an amazing business hit, you know, just firing on all cylinders.

[00:25:07] Howard Hartenbaum
YouTube think their run rate is right now. Instagram.

[00:25:10] David Hornik
Couple billion billions. It’s got to be billions. They have more than 100 million active daily users. They have. And they have an amazing Sales execution team. Right. Or YouTube, which is even more users. Incredible monetization.

[00:25:31] Howard Hartenbaum
The only problem, it’s a whole nother topic. Not to interrupt you, but there was probably even bigger and better than those that got acquired and squashed.

[00:25:40] David Hornik
Yeah, for sure.

[00:25:41] Howard Hartenbaum
But we’ll never know. Well, I mean, anyway, back to Instagram and YouTube.

[00:25:45] David Hornik
So Instagram, YouTube, the other one that I was just. As I was just saying that. So I was having this conversation with super smart guy and he said, what about next? He said Apple was transforming by next and look how amazing Apple is now. And so what about next? But I think that’s a little bit too far. Like as, as an attorney who has existed.

[00:26:07] Howard Hartenbaum
Yeah, it doesn’t exist anymore.

[00:26:08] David Hornik
Yeah. But his argument was it’s the operating system that transformed Apple into this incredible behemoth and without it they would have never succeeded. And I don’t know if that’s true. And it’s very hard. So just in causation world, can you really give them full credit for that? But maybe. And then didn’t Google buy what was the big ad network?

[00:26:33] Howard Hartenbaum
No, they Overture? No, they just.

[00:26:35] David Hornik
No, not Overture. They bought like ad server company. Didn’t like Microsoft buy one and Google bought one. I’m sure Google’s putting it to good deals.

[00:26:47] Howard Hartenbaum
I can tell you. I wasn’t in that deal.

[00:26:49] David Hornik
Yeah, neither. Neither was I. Anyway.

[00:26:51] Howard Hartenbaum
All right, so think about the scope and scale of Instagram and YouTube. What I would say is, seems to me like YouTube may be more fundamental than Instagram. Like Instagram as a point solution was at risk of being squashed by Snapchat, but they managed to and squash back. But you don’t really see anything, or at least not yet that you feel like could put a huge dent in YouTube because. And maybe in both cases it’s just the content is so deep there. But the content in YouTube you still go back and watch old content, but in Instagram it’s much more in the present and the older content isn’t as valuable. So it seemed to me both of them, they were bought for the same roughly billion dollars and each of them is worth a couple hundred billion dollars each.

[00:27:47] David Hornik
I mean if they had stayed and managed to achieve these things on their own, they’d both be. They’d be two of the most important tech companies in the world. Yeah, I agree with you. I think YouTube would be a much more important company, but more defensible. It costs two or three billion dollars of Google dollars for them to get out of the hole, settle lawsuits, build the tech figure out the sales in order to become what it is. And Instagram was just like. And then they woke up and then they continued doing what they’re doing and boom.

[00:28:22] Howard Hartenbaum
Well, they had a few features here and there and they had.

[00:28:24] David Hornik
No. No since then. Yeah, it’s like they hired great people. I just had lunch with Jim Everingham who is awesome. Kevin Wheel is incredible.

[00:28:33] Howard Hartenbaum
We had backed Everingham at his prior company Luminate how to monetize Photos. He knew what he was doing.

[00:28:40] David Hornik
Yeah, that one didn’t quite work out as well as we would have hoped, but. But he’s an awesome guy. And then hopefully Kevin weil survived his six day run and like he ran 120 miles in five or six days. Days with a buddy. He came in second or third in this competition but now he’s back. So now he can create some more. Some more Instagram Snapchat crushing features, also known as Instagram features. Our buddy is also the. The head of product at Instagram and I get a sense that. I’m sorry at sense Snapchat and I get a sense that he’s a little annoyed at this point. Like stop it. Stop copying. By the way, we don’t know anything about WhatsApp. Maybe WhatsApp’s even better.

[00:29:34] Howard Hartenbaum
In terms of making money though.

[00:29:36] David Hornik
Fair point. But its scale is massive.

[00:29:38] Howard Hartenbaum
But maybe later it makes money.

[00:29:40] David Hornik
We’ll find out anyway. If you people listening have other contenders and you want to let us know, email us hornick@augustcap.com what are you H. Hartinbaum? I don’t know, it just comes up. Howard Howard. Howardgustcap.com avidhornick.

[00:30:00] Howard Hartenbaum
You don’t have an @howard H. But I don’t use it much.

[00:30:02] David Hornik
I know anything.

[00:30:03] Howard Hartenbaum
I just send to you.

[00:30:05] David Hornik
Hey, that is true.

[00:30:06] Howard Hartenbaum
You can you just tweet this? Here’s a good tweet.

[00:30:08] David Hornik
This might be a good tweet.

[00:30:10] Howard Hartenbaum
Here’s a good tweet.

[00:30:11] David Hornik
I’ll tweet it.

[00:30:12] Howard Hartenbaum
You’re a social media manager.

[00:30:14] David Hornik
I mean you’re official. Official tweeter.

[00:30:15] Howard Hartenbaum
You’re the tweeter.

[00:30:18] David Hornik
So yeah, let us know what you think are better.

[00:30:22] Howard Hartenbaum
What else more like it’s my job.

[00:30:25] David Hornik
I don’t know.

[00:30:26] Howard Hartenbaum
You’ve been busy this summer.

[00:30:27] David Hornik
That’s true. This is about like VCs go away and take the summer off and spend it in the south of France or wherever people. I guess I’ve watched people are often keep cod and in Martha’s Vineyard or.

[00:30:42] Howard Hartenbaum
Whatever like Rob Hayes and they don’t do any Kind of vacation. He’s, like, gone for the whole summer.

[00:30:47] David Hornik
Lucky bastard.

[00:30:48] Howard Hartenbaum
First money in Uber.

[00:30:50] David Hornik
That works.

[00:30:55] Howard Hartenbaum
You did some deals this summer. Well, so did I. Yeah, we’ve been busy.

[00:30:59] David Hornik
I. I was. I signed two term sheets the week of the 4th of July. That’s absurd. Like, what?

[00:31:07] Howard Hartenbaum
I was on jury duty the week of the fourth of July.

[00:31:10] David Hornik
That’s true.

[00:31:10] Howard Hartenbaum
That’s a whole other conversation.

[00:31:12] David Hornik
Oh, my goodness. That’s true. We didn’t. We get to hear about you. Were you the foreman?

[00:31:19] Howard Hartenbaum
Maybe.

[00:31:21] David Hornik
We had a bet that, of course Howard would be the foreman.

[00:31:23] Howard Hartenbaum
We started off, we picked another guy who was the foreman, but he couldn’t do his job, so I just fired him and took over.

[00:31:29] David Hornik
And he was okay with that? Yeah, he was like, okay, fine.

[00:31:33] Howard Hartenbaum
You know, he just pouted and did whatever I told him.

[00:31:36] David Hornik
But you just had to create structure. It seemed unlikely.

[00:31:38] Howard Hartenbaum
Anyway, back to cybertag work.

[00:31:40] David Hornik
All right. Anyway, yeah, I just think that it’s. I think that the reality of the venture business is that people are. People raise money when they can raise money, and that includes the summer. And if you are a venture investor who wants to go away for the summer, you’re more than welcome to do that. But you won’t miss out on all sorts of interesting stuff. That doesn’t mean we can’t take vacation. Obviously, we all have vacations. But I think the venture business is a really dynamic business, and it. And it happens when it happens. Right. And if someone is busy and they miss the opportunity to see something, it’s a. It’s a shame. Like, you can’t have that in both of these companies that I’m super excited about. I would have been. I could easily have not gotten the deals. They were competitive deals. I could easily have not gotten them by just disappearing for a week.

[00:32:25] Howard Hartenbaum
But the beauty of that is you wouldn’t have known.

[00:32:29] David Hornik
Happy. Blissfully ignorant of the fact that I didn’t know, because we started the conversation. In fact, one of them, we signed. We came to a handshake agreement that Friday, and then the CEO went and told one of our, you know, competitors. I put that in quotes. But another vc, hey, by the way, I was supposed to come in on Monday, but I’m not going to come in. And they were like, what. What do you mean you’re not coming in? I have a deal. I have come to an agreement. They, like, lost their minds. Like, you can’t have a deal. You’re supposed to come in Monday. How do you have a deal? You get. What if we come. Come See you this weekend. We’ll fly to you and we’ll visit you this weekend. You sort of like, no, it’s not gonna happen. They were. And. And I totally get that. That would be horrible. You’re like, wait a second now. I really want this deal. I didn’t even like you before, and now I’m desperate for you. Your deal.

[00:33:15] Howard Hartenbaum
That’s called screening through somebody else’s fund.

[00:33:18] David Hornik
Yeah. Except in this instance, not going to help you because I signed term sheet, got the deal.

[00:33:25] Howard Hartenbaum
And I did. But just one deal to your two.

[00:33:28] David Hornik
Yeah, take that. But I do remember after we finished them, I was like, well, that’s it for the summer. I’m done.

[00:33:35] Howard Hartenbaum
No, I think you said, that’s it for the fund.

[00:33:37] David Hornik
That’s it for my year. I did say you did for the year. I said, I’m done for the year. I’m done for the year. And you all like, no, you’re not. Shut up.

[00:33:44] Howard Hartenbaum
No, you’re on enough boards.

[00:33:46] David Hornik
If there’s new interesting stuff, you gotta do them.

[00:33:48] Howard Hartenbaum
And you’ve always. You haven’t had your first board meetings yet. And you always wonder, because sometimes you go to the first board meeting and they say something, and you think to yourself quietly, I knew I should have asked that question. But it’s too late now.

[00:34:01] David Hornik
Actually, one of them. I was getting ready to fund, and then one of my other CEOs made a reference to someone in the company. And I was like, oh, that’s interesting. I’m gonna go do some. Do some work on that, make sure it was fine. I’m feeling. I’m feeling fine about it.

[00:34:18] Howard Hartenbaum
Did you close those deals yet?

[00:34:19] David Hornik
I hope so. I don’t know.

[00:34:21] Howard Hartenbaum
You just passed it off.

[00:34:23] David Hornik
I’m not in charge of closing deals.

[00:34:24] Howard Hartenbaum
I’m just a lawyer’s job.

[00:34:26] David Hornik
He doesn’t charge of making deals, Howard. I just make deals. I think you were supposed to close my.

[00:34:32] Howard Hartenbaum
It’s your T shirt. Okay. Yes, sir.

[00:34:34] David Hornik
Did you not. Did you not close my deals?

[00:34:39] Howard Hartenbaum
We have people for that.

[00:34:40] David Hornik
I think one of them is closed. And the other one, we’re sort of holding off for a particular reason, but it’ll close. I feel good. I feel fine about that. How about yours?

[00:34:53] Howard Hartenbaum
Kind of on track. We asked Doug to be on the board.

[00:34:57] David Hornik
This is good, actually, by the way. So we have. Doug Leeds has been here with us as an eir. Formerly the CEO of ask. Fantastic guy, super smart, really deep in digital tech. And we saw this company, and he thought it was interesting, and it was right up his alley. And so it’s like, great. Why don’t you work with us on it? I think that’ll be awesome.

[00:35:22] Howard Hartenbaum
And when the CEO and Doug and I were meeting, the CEO said, are you here to take my job? And Doug and I both laughed and said, no, that’s not what we do. You should just be happy that Doug wants to help and doesn’t get distracted.

[00:35:36] David Hornik
Exactly. Exactly. He knew you weren’t there to take his job. You can’t do anything. VCs are like, you’re so nice to me. Are you here to take my job? No. We’re not capable.

[00:35:47] Howard Hartenbaum
We are capable. I just don’t want to. I’ve been a CEO before.

[00:35:52] David Hornik
You’ve been a CEO? I’m incre. Capable.

[00:35:55] Howard Hartenbaum
No, you might be capable. You just don’t realize how painful it is.

[00:35:58] David Hornik
Oh, I’m sure it’s horrible. So hard.

[00:36:01] Howard Hartenbaum
The hardest part about it is you have people coming to you with personal problems.

[00:36:05] David Hornik
Oh, that. I’d be fine with you. You know, that’s like.

[00:36:07] Howard Hartenbaum
That doesn’t bother me at all. I mean, but I don’t mind the operational stuff. It’s when people come to me and they’ve got their personal issues, and I’m thinking, go back to work.

[00:36:19] David Hornik
That is not a good management style.

[00:36:21] Howard Hartenbaum
Personal problems. Do you want to hear them?

[00:36:23] David Hornik
Yeah. Let me share those with you.

[00:36:25] Howard Hartenbaum
Maybe yours won’t seem so bad.

[00:36:27] David Hornik
Yeah, no, that’s not a good technique. No.

[00:36:30] Howard Hartenbaum
I was talking with a guy this weekend who’s the CFO for a company, and he’s a new CFO for this company. It’s like a $50 million company. I said, what’s it like? And he goes, well, actually, I think I’m also the CEO and the head of sales. And I said, what do you mean? He said, well, the founder and the CEO. This is a private company. It’s never raised any money. He said, the CEO just doesn’t really want to manage anybody. So, like, I worked there for a while, and I sent him, like, here’s what I think we should do. And he didn’t respond. And then I found if I sent him emails with alert, there’s a big problem, then he would call me back. But there’s, like, this just in. Yeah. Could you imagine? You took a job as a CFO and you actually were running the company. CFO types don’t usually like running companies.

[00:37:15] David Hornik
No, no. Well, it’s a different thing. They’d be like, you going, don’t share your. Your personal problems with me. That’s not my issue. And I don’t know how to do marketing and I don’t know. I’ve never run a company. I’ve never been in a company. I’ve seen lots of companies and I certainly know how hard it is. Holy cow. I have nothing but monumental respect for entrepreneurs because it is so hard. And the fact that it works on occasion is just miraculous. Like, completely amazing.

[00:37:50] Howard Hartenbaum
We’ve got a few that are working.

[00:37:51] David Hornik
Yeah.

[00:37:52] Howard Hartenbaum
Pretty good.

[00:37:53] David Hornik
No, we got lots of good stuff.

[00:37:55] Howard Hartenbaum
I’m always looking for more.

[00:37:57] David Hornik
That’s right. If you got the next big thing, we’re ready. Saw an awesome company today, and if all goes well, we’ll be investors in it. And then we may even tell you about it sometime.

[00:38:08] Howard Hartenbaum
Or maybe not.

[00:38:09] David Hornik
Or not. You’ll never know whether we’re talking about it.

[00:38:12] Howard Hartenbaum
Are we going to buy their stock or their coin.

[00:38:19] David Hornik
That I want to actually have? The security that I buy have underlying value that relates to the value of the company? That’s so old school.

[00:38:31] Howard Hartenbaum
Just because you don’t understand the coin doesn’t mean it’s not good.

[00:38:34] David Hornik
Oh, man. Oh, man. I’m just so old. If that’s the. If that’s the new mode, I think it’s pure speculation. We do, too. All right, folks, this is what we are going to leave you with, that warning. We believe that these ICOs that are where the value is independent of the actual value of the underlying assets is mere speculation.

[00:38:56] Howard Hartenbaum
That being said, at the next Venture Cast, we’re going to be doing an.

[00:39:00] David Hornik
Initial coin offering, the Venture Cast ico, and it’s going to be totally awesome. Do not miss out. It’s going to be amazing.

[00:39:08] Howard Hartenbaum
You might miss out.

[00:39:09] David Hornik
Yeah, that’s true. And that’d be bad because you don’t want to miss out. You don’t want to miss out. All right, until then, this has been David Hornik from August Capital and Howard.

[00:39:18] Howard Hartenbaum
Hardenbaum, also from August Capital.

[00:39:20] David Hornik
And thank you for listening to venturecast.