E219: How Emerging Managers Can Beat Multi-Stage Firms

How do you underwrite pre-seed founders when the only durable asset is the human—before there’s product-market fit? In this episode, I go deep with Mike Ma, Managing Partner at Sidecut Ventures, on his 30-day “work-alongside” diligence, why he optimizes for action-oriented self-awareness, and how to calibrate coachability—especially in go-to-market—without overfitting to investor bias. We unpack earned secrets, impact theses in education, climate, healthcare, and economic mobility, solo-GP advantages, alignment pitfalls from 2021-era rounds, and the mindset habits he wishes he’d had earlier: “write at a fourth-grade level” and “document your screw-ups.”

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Weisburd?

  Ben Horowitz famously coined this term earned secrets, which is the secrets that you earn through doing something for many years. Specifically, it's usually in a space, it's solving some kind of problem. How important is it for the companies that you invest in to have an earned secret that others would not know?

• 0:15Speaker 01

  It's everything and that earned secret, almost by definition, couldn't come from exclusively prior experience, pedigree, or signal. If it's truly novel, the prior pedigree and experience juxtaped advantage will come from the melding of an unknown opportunity with incredible talent and expertise. That collision generates all the return from our perspective.

• 0:36David Weisburd?

  I always look for this paradoxical mismatch between market size and awareness of market. You're one of the top Fortune 10 chief security officers and you're one of 10 people on the planet that understand the pain point of these large organizations. And yet that market could be $100 billion or a trillion dollars, but it's only known to these 10 people.

• 0:58David Weisburd?

  Mike, I've been excited to chat. Welcome to the How I Invest podcast.

• 1:02Speaker 01

  Thank you for having me. I'm a huge fan and it's a real honor to be here.

• 1:08David Weisburd?

  So you work alongside potential portfolio investments for 30 days. You quote unquote grind with them. What exactly are you trying to ascertain in those 30 days?

• 1:19Speaker 01

  What we're trying to get at is we're trying to get at the heart of the founder.

• 1:26Speaker 01

  At pre-seed, in my view, the only durable asset is the founder. The product will change, the go-to-market will change, the cap table will change. And trying to understand the founder, the carbon-based life form that you are putting money into for the next decade plus is something I want to understand. And that is what we're trying to figure out. And figure out in a respectful collaborative way that even if we don't invest, and by the way, historically so far, one in two, we only invest one in two of those investments that we do that 30-day process with. Even if we don't invest, hopefully you got a piece of advice that's useful to make the company grow.

• 2:06Speaker 01

  What I would say is the number one thing we have found is success is I've called it action-based self-awareness and to know and see that in real time gives us asymmetric edge on understanding that founder who has that and those who don't because those are the things that are most important. Of course, in the first two meetings, we diligence everything that I think a lot of my peers do, you know, we'll look at the go-to-market, the product, the TAM, etc.

• 2:35Speaker 01

  We want to know more. We want to know about the human and not just what they say because they think a lot of founders are fantastic pitchers and they say, and I'm human, I can get moved by a good story. We're trying to build an unbiased framework to watch the chef cook in this kitchen and taste the food in this restaurant, not relying on their past pedigree of the future, of the past restaurants they were in, or what culinary graduate school they came from. We're really interested and obsessed with what that founder is doing in this one and helping and being helpful along the way and proving it with our own, with our own hands and feet.

• 3:18David Weisburd?

  Said another way, you've identified two factors that are predictive of startup success, which is the founder being able to execute quickly and the founder being able to respond to feedback from the market internally or advisors very quickly. And one is not sufficient if you take the execution to extreme, somebody that executes lightning fast but never internalizes the feedback, that doesn't work. If you take somebody that internalizes the feedback but sits around, doesn't do anything, that doesn't work. Both of these are necessary and predictive of a successful founder.

• 3:49Speaker 01

  To build on those two things, it's also having self-awareness about what you are going to be good at and the limits of your own abilities, time and interest. Because at the end, and this gets to a very important part of allocating, which is they're going to have to build a team, right? The majority of that capital is going to be focused on Getting other people, right? I, I, one of the jokes we say in my firm is that venture is actually pretty easy. We give money to people so that those people hire more people to make us more money. If, if you don't understand where you and, and others begin and how to orchestrate that, you're probably not going to make a great hire or, or be a good person to work with on. And at, uh, and, and therefore probably a bad capital risk.

• 4:33Speaker 01

  So being able to see that in situ, understanding the founder's self-awareness as a, as a human, I think has a huge impact on team hiring culture. These are a lot of the assets that are off spreadsheet. That I think are really going to be predictive of survivorship and returns, et cetera, so on and so forth, that drive DPI, IRR, and all the things that LPs want, um, out of, out of an emerging fund.

• 4:58David Weisburd?

  At the pre-seed, obviously you want a unicorn founder that's a hundred out of a hundred and every single imaginable trait. But if you had to stack rank those two or three traits that are predictive of a startup founder, what are those?

• 5:12Speaker 01

  I, I'll go back to what I said. It's act, it's action oriented self-awareness and some people and, and that is the, the thrust of it. Some people have action based on driving more top of funnel. Some people have action based on, um, you know, just driving more PLG and product. I, I actually am relatively agnostic in, in, in what they pick. Because at the end of the day, you've mentioned this rubric of, of, of taking the feedback. If I've done my job right, the feedback doesn't come from me. Or any of my operating advisors who've helped me, the feedback will come from the questions we've asked together and what the market is telling them. And then will you do it?

• 5:52Speaker 01

  And learn more by doing versus talking. What's really cool about setting up a structure like that is

• 6:00Speaker 01

  founders solve it so many different ways. And it is one of the best parts about my job. The title of my last newsletter was founders, I love you the purplest. And it's not about being good or bad, or you have to be, you know, the, the, the bar is 7.0 and you're 6.9, you're out. And I know you're trying to get to this, this idea of like, what is the predictive success? The best answer I can give is action oriented self-awareness. And what's really cool and I've discovered so far, both in the first eight investments out of the fund. And then I, I tested this myself with my own money and Fund Zero, 25 angel investments is that rubric.

• 6:35Speaker 01

  Has so many cool, different ways that founders have solved for. And, and also too, I've, I've, I've missed.

• 6:43Speaker 01

  As well, like where I've mistaken talk for action. I've mistaken confidence for signal when I'm really looking for self-awareness and, and I got bluster. So what I would say is this is a work in progress and I am both equally confident and just like my founders who are confident in their MVP. I'm constantly iterating on that thought to make it better and better and more refined.

• 7:06David Weisburd?

  One of the things I'm really trying to do is define terms so that people know exactly what they mean and they could replicate our guest success. So you mentioned coachability. There's extreme versions of this, you could be completely unmovable, uncoachable, which you could also reframe as highly principle or first principles based. Or you could be the other extreme, which is too coachable, where every day you get another conversation, you change your, you pivot your strategy. Tell me exactly what level and type of coachability you're looking for. And the founders that you believe will lead to these billion, $10 billion outcomes.

• 7:42Speaker 01

  In terms of billion dollar outcomes, like those things happen in the first two meetings, right? That is the, that is the work that is done by precede venture to date. You know, we'll look at the TAM, we'll look at the go to market, the unit economics. I believe those are necessary and sufficient, but not sufficient conditions to generate those outcomes. And a lot of people can look at that in terms of what's the right TAM, what's the right LTV, the cap ratio. The X factor is understanding the human. Understanding the human in the box. That is going to be making these decisions and understanding how their psychology, how their frameworks work so that they, as their unit economics get disproven. As their TAM may shrink or grow.

• 8:25Speaker 01

  Are they going to have action oriented self-awareness to capitalize on that more rapidly than anyone else? That's competing with them in the space. That's the part that we're really interested in.

• 8:35David Weisburd?

  Coachability, I think it's a fascinating concept. It's one of the most misunderstood concepts in startup investing and venture investing, especially at the early stage. The way that I look at it, I have a couple of different frameworks. I don't have the perfect one framework. One is on average, if I'm looking for somebody that could build the next unicorn or Deca unicorn at the pre-seed stage, I want somebody that's mostly uncoachable, call it, or eight or nine on uncoachable and has some room for coachability. Another thing that I look for is are they coachable on the things where I have higher believability or they have lower believability? That's when I expect that founder to be coachable and something that they don't know. But if I'm coming in and I'm teaching a crypto founder about anything about the crypto space, that's kind of obvious.

• 9:18David Weisburd?

  And they haven't integrated that into their strategy. That tells me that they haven't done the due diligence. They haven't done the hard work. They haven't done the 10,000 hours to find these insights. And I find that as a big red flag, find that as a very weak part of their strategy. I'm trying to really understand for myself and for the audience, what does it mean to be, you know, 10 out of 10 in terms of somebody's like, has the perfect level of coachability? What does that mean?

• 9:42Speaker 01

  Look, um, you know, if I'm going to lecture, uh, you know, one of my founders on the future of AI, or if we're going to lecture, if I'm going to lecture Ben on distributed energy, I, we are not deep science or deep tech investors. We would have those discussions. Well, we are sluggers. So the coachability we're talking about is in the go to market. And at the pre-seed level, you can be incredibly seasoned salesperson, marketing person, and having a repertoire of skillsets. However, when you apply it in a new pre-seed startup, those battle lines are unknown. So our coachability is really focused on the go to market motion and to put some bounds on this.

• 10:24Speaker 01

  I don't want to debate somebody about, you know, like, look, have you really considered all the, all the gas charges on your crypto? Or like, have you really considered regulatory compliance frameworks on your, on your, on your wealth management? Uh, we are not doing that, you know, we, that is not, the coachability we're talking about is, is how they think about go to market, how they work with, um, the distribution aspect. That is the crux of, um, 90 to 95% of what we do. And inherently at the pre-seed level, regardless of how much experience you have, if you're entering a new space that has a billion dollar or Deca coin outcome. That interaction has to be unknowable. Cause if it were knowable and someone already put a framework together.

• 11:05Speaker 01

  Salesforce would already be, our Oracle would already be in, like Meta would already be in, that someone would already scaled it. And so we're looking for how you encounter. Novel go to market motions and that coachability. And watching those atoms collide at that pre-seed level and what you do with the energy that that hits those sparks. In the, in the hands of like someone who's incredibly skilled and crafted and has tenure and coachability, that's the founder we're looking for.

• 11:34David Weisburd?

  Ben Horowitz famously coined this term earned secrets, which is the secrets that you earn through doing something for many years. Specifically, it's usually in a space, it's solving some kind of problem. How important is it for the companies that you invest in to have an earned secret that others would not know?

• 11:52Speaker 01

  It's, it, it's everything. It's everything and that earned secret. Almost by definition.

• 12:00Speaker 01

  Couldn't come from. Exclusively. Prior experience pedigree or signal. If it's truly novel, the, the prior pedigree and experience juxtapose against a new unknowing frontier. Create these interesting collisions and that intersection, I think is where. You know, it, it, how we interpret. The earned secret. You know, what's the one and or other way, other parlance you hear, what's the one thing you know that no one else knows, what's your unfair advantage? That unfair advantage will come from the melding of an unknown. Opportunity with incredible talent and expertise and that collision. That collision generates all the. Well, generates all the risk and all the return from our perspective and, and, and watching.

• 12:45Speaker 01

  And having a system and a process. To ascertain that that's. That's the magic, that's the magic you can't. At least yet, like, I don't know how to put that on spreadsheet. I don't know how to, to, to do a regression analysis. On that or a, an AI enabled sourcing to find, oh, yep, that's the one, that's the one that will figure it out. And I think that's where you can find undiscovered. Undiscovered founders and therefore outsized return, outsized returns.

• 13:14David Weisburd?

  I always look for this paradoxical mismatch between market size and awareness of market. The best way to explain this is you're one of the top Fortune 10 chief security officers, and you're one of 10 people on the planet that understand the pain point of these large organizations. And yet, that market could be $100 billion or $1 trillion, but it's only known to these 10 people. I find that to be extremely powerful because you have this huge market. And almost by definition, it's not competitive because there's few people on the planet that have that earned secret. And I like, love this paradoxical mismatch between market size and awareness of market.

• 13:52Speaker 01

  Build on that. I mean, this is the, this is like, since we're revoking books, this is the zero to one, like Peter Thiel, like world's smallest monopoly, unfair advantage aspect of it. And I think a lot of it comes from people who have novel insights about weird juxtapositions of different problems that may have been old and intractable. To tell the story of one of our portfolio companies, MoneyStack, they do financial counseling for people with mental health problems. And it is one of these, oh yeah, it just makes sense. Like every mental health problem, and they're starting with problem gambling, is actually turns into a financial problem, right? And as someone who spent a lot of money for my time at Bank of America, we worked so hard and tried to acquire customers in what we call moments of truth.

• 14:36Speaker 01

  Loss of a loved one, death in the family. If I could be the financial person of record in that moment, I will, my LTV tech is out the roof because I don't. The problem with those traditional strategies are you're ambulance chasing. It's ingenuine. It's inauthentic. It's weird. Don't talk to me when I. But if you can hold the hand and actually add value at people's lowest moments, after they've said, okay, I've stopped doing daily fantasy and DraftKings, et cetera. I now need to rebuild credit. I now need to tell my wife of how to budget restitution payments. Or like, if you can actually hold them through the most moments, like you can be the advisor for life. And everything that we know about the unit economics and wealth are going to be there. So to me, that's an example of what I think of this, this earned secret,

• 15:20Speaker 01

  which by the way, it's hiding in plain sight, that everyone has a mental health problem at some point in time. And everyone has money problems, but no one's really put these together. I love that idea of earned secret, but that's how I conceptualize that in terms of where I look at the world and interpret what you, what you are, what you're thinking about.

• 15:43David Weisburd?

  One of the most valuable ideas in the startup ecosystem that I think applies to everywhere is how to create non-zero sum platforms. And if you were just to focus on value creation, if you were just to do a razor, I want to invest in any company that creates a trillion dollars in customer values. Let's forget about the business model. Let's just assume that we didn't even know the business model. You would be spitting out 100x funds over and over. And I think where people get stuck is they focus a lot on value extraction. And people should focus very much on how do we build? How do we help those people in need? How do we scale this on a platform level? And really, how do you build something extremely big?

• 16:26David Weisburd?

  Then how do we, you know, take, take, take every last dollar from the customer from day one? I think that's one of the biggest differences between the deck of unicorn founders I find and the average or median, or however you define the average, even venture backed founder.

• 16:43Speaker 01

  100% agree. It's, it's one of the reasons we have, we have an impact thesis at our firm. So we invest in the sectors of education, climate, healthcare and economic mobility. These, I mean, that, that is coachable superheroes is the name. Coachability is the, is how we deploy capital. The superhero parts talk about sector. And in addition to all the psychological benefits the founder has about being impact, our view is exactly that, that if you find the answer to energy, that by nature is a big human problem, that we don't have to worry about value extraction. That's a big deal from a value creation standpoint. If we solve mental health and the intersection of mental health and financial problems, that

• 17:27Speaker 01

  is a big deal that doesn't need extraction. One of my LPs is famous, like, um, this guy Trevor Sumner, he, you know, he said like, hey, if you're going to pick a problem, might as well pick a big one and start a company. And, um, and that, that, what you said resonates so hard. It definitely shapes a lot of what we do from an impact perspective. And we think if you can, hey, man, if you can solve.

• 17:51Speaker 01

  Energy brownouts across the globe and have a limitless way to figure that out. I think you're going to be, I think there's going to be enough money for everyone around. We have a big blue collar thesis in terms of future of work is economic mobility. If you can solve for what happens from AI and the loss and degradation of entry level test taking white collar knowledge workers, which are going to be

• 18:16Speaker 01

  disintermediated as they look to tradecraft and other parts of it, you can solve that problem. I don't have to worry about extracting every last dollar or pound out. We're going to solve a big problem, make the world a better place along the way. And we're going to make a lot of money.

• 18:30David Weisburd?

  One of the things that I really have changed my mind on over the years has been this reluctance about startups changing the world. I thought it was this superficial meme that people say to make lots of money. But then when you look at it from first principles, it's a necessary component. If you want to have a 10, $100 billion outcome, which you know, the mega, the multi-stage funds today have to invest in. The world will not allow you to extract $100 billion in value unless you are significantly creating likely trillions of dollars in economic value. So that changing the world, the scale of what you're doing has to be on that level of changing the world. Not because it's a nonprofit, but because it's a necessary condition for those kinds of exits.

• 19:15Speaker 01

  I a hundred percent agree, and that is one of the cool things that we get to see in 30 days. Like people put it on the slide deck and people can see that being pitched, but

• 19:25Speaker 01

  it's different to see in action. It's different to see when you sit in, when you sit in the seat and watch how the company operates to see if that ethos isn't just at the founder level, but it extends to everything that they do, that they are solving the world's biggest problems. Since you asked about Vanguard, we started at this, like if you ever go, and it's been a while. I've been working at 10 years, but like when I was there, like they live these principles about shareholder value. Like when I would take a recruit out, the recruit in our cafeteria would get an unlimited lunch voucher. Get what me as the hiring manager, I got a $5 lunch voucher. It is a temple that they live their values about making shareholder creation, value creation at the center of everything they do at the smallest iota.

• 20:11Speaker 01

  And that's something that you, you know, to get back to what you're saying like.

• 20:16Speaker 01

  Founders say that they want to solve the biggest problems in the world. Don't tell me, show me. I want to see it from the inside. I want to see it after most VCs turn the lights out and start their formal due diligence of looking at your corporation documents, your bank statements. I want to see how you treat your employees about it. I want to see how you talk to your customers about it. I want to see how, when your customer says no, how you use that grandiose mission to compel them otherwise. I think those are the really coolest things that I think are

• 20:47Speaker 01

  both incredibly valuable from understanding the underwriting basis, but then also understanding how far this company can go. And how far the willing, you know, everyone says in investing, I want missionaries, you know, not mercenaries. I think is what you're getting to. I want the same thing too, and I want to see it. I want to see actual evidence of it. So I'm just not wooed by a very nice presentation.

• 21:12David Weisburd?

  Said another way, no offense to nonprofits, but I've come to the realization that startups are the most leverageable way to change the world from zero to one, and sometimes even zero to 100. I have not found that to be the case in nonprofits. I see nonprofits as a way for a startup who has exited to now change the world from 100 to maybe 500, but that's zero to 100. I just have not seen that with my own eyes and I've had plenty, plenty examples to give.

• 21:40Speaker 01

  I still participate in a lot of nonprofits I donate to, and I've served on some really great nonprofit boards. I definitely appreciate their role in the ecosystem, but I guess I would say

• 21:51Speaker 01

  I vote with my feet and we're an impact fund and I think startups can change the world and I, I became a solo GP because I share the same ethos. It is the absolute best way to make a dent in the universe. And I got everything in, I'm all in on that, both personally, professionally, financially, philosophically, all the leads on that same idea. This is the best way. To change the world and make a dent in the universe.

• 22:15David Weisburd?

  So you mentioned solo GPs, you have entire community of solo GPs, you yourself are a solo GP. Why should startups take money from a solo GP?

• 22:24Speaker 01

  Because we have conviction and can move, move fast. And I think that those are the ones with the most interesting things to say that we're the freest ones in the industry to, to, to do things. We're the most unencumbered and, and able to move. I, I would also say, uh, that, that's where, you know, what I would say. I also would say solo GPs have to do the things that most founders are doing. We have the most operational empathy. Everyone is talking about founders hyperscaling, right? With AI, you know, who else has to do that? Solo GPs, because we have, we have to use AI. So when you talk about cultural fit at the pre-seed level, hustlers and grinders, and you're going to find, I think solo GPs are both industrious and diverse.

• 23:06Speaker 01

  Out of necessity, not out of some sort of like false luxury. Uh, I think there's a misconception that solo GPs will not help to lead other capital and, and they, you know, they want to, you know, um, and they're, they're mitigated by their networks. And, uh, you know, in my short time, I have found the exact opposite. I think that the emerging manager and solo GP community in specific, we always joke, there's like a informal union, solo GP local 144. Uh, and it's, it's, that ethos goes back to my podcast, Alone Together. Um, and that was the name of my podcast where we just talk about others, other solo GPs. We know each other in the, in the industry. So this idea of signal and network and solo GPs are lone wolves.

• 23:46Speaker 01

  I don't know, I, I hear a lot of this lore, um, both from founders as well as sometimes LPs. I, I am here to tell you that underground and undercurrent, um, exist and that culture is rich, vibrant, and I have at least one data point where, where I've led in my short career, where we, we, we can make good by founders and, and, and deploy very quickly. So I think this idea of being distributed is, it's an asset, not a liability.

• 24:14David Weisburd?

  There's a lot of innovation happening at the pre-seed in the startups themselves. There's a concept called seed strapping, where you raise a little money and then you become profitable. There's the advent of AI, which you mentioned, which is lowering costs and also allowing companies to scale their revenue quicker because one salesperson could do just so much more. How does SoloGP fit into this world of the AI startup?

• 24:41Speaker 01

  Seed strapping, hyperscaling, all the buzzwords. I think SoloGP is particularly pre-seed, early-stage SoloGP is to some degree,

• 24:51Speaker 01

  we don't care. Like, we don't care whether you skip around, you skip an A, etc. Our money is in and we can get conviction and see things before others because we just don't have as much bureaucracy or process. I mean, I definitely have a team, but I am the, you know, the IC is around, but like, do you want to do the deal? Let's do the deal. Like, let's, you know, so the idea that you can be in first at frankly, low valuations where there's a lot of our investment process philosophy and those who do pre-seed, there's a lot of, there are a couple of late-stage SoloGP's as well, which are great and awesome. So just speaking from my little neck of the woods on this, all these things that you mentioned,

• 25:32Speaker 01

  I'm good with any of them. I'm good with any of them. You do a proper pre-seed, seed, A, B, go through the alphabet? Great.

• 25:40Speaker 01

  You scale and hyperscale or seed strap? Also, great. I invest sub 10 million cap, mostly speaking. All this optionality is fine for me. It's again, that's a, this optionality is an asset and liability and I am here for all these potentials because I get to be the upstream part of the capital. And I wish LPs knew this, right? And or maybe they know it, they should act on it and start supporting a lot of these, not out of like some sort of like gratitude around changing the dynamic aspect of a venture. Because it makes sense. Generally outsized returns are going to have downside protection.

• 26:19Speaker 01

  Because we get in early, our entry price is lower. A lot of the big firms who are moving down into pre-seed, they pay higher entry fees and premium. Who's to say whether they're, you know, on the ground as much as?

• 26:33Speaker 01

  The Solo GPs and existing emerging managers are to the ground to the floor with the founders. We eat bad pizza and ramen too, out of necessity for how the fund economics work on this. And it's a really good cultural fit.

• 26:48David Weisburd?

  Let me double click on that term they used, alignment. It's also a buzzword that I've never heard of VCs say they're not aligned. And you mentioned the multi-stage firms are coming into the pre-seed, also writing checks, sometimes at higher valuations, more money. Why is that alignment so important? Break that down to second order effects of the venture fund having alignment with a startup at the early stage.

• 27:10Speaker 01

  Alignment is about getting a fair mark on your, on your company. So you have all the optionality in case things go wrong. We're not going to force you to grow into your valuation and make you make operational risky decisions

• 27:23Speaker 01

  to a founder that leave you high and dry because we pushed you to scale. Alignment is understanding what it feels like when you've lost your last customer, you're having a co-founder fight.

• 27:36Speaker 01

  Someone said something bad about you in TechCrunch and you don't know what to do. And you have your head on your desk and you're like, I don't know what to do. Who do I call? That's alignment. That's really alignment at the pre-seed level. I think that changes as you may move up the alphabet or down the alphabet. But that's how I think about alignment at this stage. And I'm, I don't have interest in the VC growth areas, but in my experience of being an operator, myself, a founder, and doing this through a couple of different firms, that's how I interpret alignment, calling a spade a shovel. And then being there to shovel with you.

• 28:13David Weisburd?

  One of the tragedies of the 2021 valuations that you mentioned, which the height of the valuations in venture is that otherwise good and excellent companies, we're talking about three, four, $500 million intrinsically valuable companies.

• 28:28David Weisburd?

  Are they still might sell at three, four, five hundred million dollars, but the founders are going to walk away with almost nothing. There's an old VC joke. You give me the valuation, I give you the terms. And that's what happened in the situation where VCs would get two X Lick pref would put in a hundred million dollars. And what that practically means is that unless you sell the company for over 200 million, assuming there's no other preference on the cap table, the founder walks away with zero or maybe some token 500K or something. So that is where misalignment or raising too much or raising at too high a valuation. That's a very practical thing that goes wrong. And these stories are highly undertold. They're not as sexy.

• 29:13David Weisburd?

  Everybody wants to suppress them because it doesn't make the venture investors look good. Although I would argue the founders were almost as complicit in those decisions as well. They knew their business better than the VC. So these are some of the tragic outcomes that come from these misaligned funding, funding rounds and funding partnerships. You've now built this finely tuned 30 day LLM where you do a project and then 30 days you find out the true character and executability of the CEO. What's been the most surprising? Where have you had to fine tune your LLM where your perception was different than how it played out? What are some patterns?

• 29:53Speaker 01

  So many times in that process, you will sometimes as an investor, and we all do this, you will superimpose your story on the founder. And that's called bias. And it's very hard. We'd like to think by watching them operate, our theater of discourse and underwriting is less subject to bias than seeing someone pitch, but we're still human. I think the number one thing.

• 30:21Speaker 01

  The biggest lesson I learned is like, do not superimpose your story on the founder in front of you. And really observe the actions and behaviors observed in those 30 days versus those large patterned recognition you may look at. A good parable we try and think about, we talk a lot about. We want this to be like our NFL Combine. We want to see all the data and performance

• 30:52Speaker 01

  as best we can, not as the only,

• 30:56Speaker 01

  not as the only selection criteria, but a really, really important one to see what it's like, you may have done great in college ball, but it is a whole different thing playing in the NFL. And we want to be able to use and look at our underwriting there. I guess the other thing I would add is it is not perfect. It is perfectly imperfect and we are constantly refining it. I would never say we understand the heart of the entire, the entire founder. What I would say is that

• 31:27Speaker 01

  we know more. I'd like to believe we know more than everyone else on the cap table of that particular. And that's, that's investing. Investing is about asymmetry. You never have perfect information. The goal is to have asymmetric, enough asymmetric information to hold an edge. We definitely have a process and a structure that is constantly being refined. But that is the number one thing that we've learned. Evaluate the founder in front of you. See the data and see the behaviors that they do. Not what you think they do, not what you want them to do. And it is a diet of the mind and the soul

• 32:01Speaker 01

  to try and extract that.

• 32:04David Weisburd?

  This confirmation bias that you talked to is very real. We so desperately want people to confirm our views on them. It's our aspirations. Same thing happens in interviewing. People subconsciously feed easier questions to the people they want to hire. And it's especially pronounced in people that are proactive because they want to help the person, they want to coach the person. The trick that I found is you need to really look at the steady state of the person. The way that I look at it is how somebody treats you the first day, the first week that they know you is extremely predictive of the next 50 years. I would probably say close to 90% predictive. I would go out on a limb and give that kind of number. And it's so rarely that it changes in both directions, by the way.

• 32:50David Weisburd?

  And why is that? It's because it's not about you, it's about them. These are fully formed adults. They might be coming to you at 20 years old. They might be coming to you at 50 years old. They might be even, even a seven year old is mostly formed. It has nothing to do with you and this desire to change people to have people conform to your views on them is so extremely strong and leads to so many bad mistakes in business and investing. It's, it's something you can't, we could talk about it every day on a podcast and still not talk about it again. That's, that's how deeply ingrained biases in people.

• 33:20Speaker 01

  That's actually a question we get about the coaching aspect of like you want, you just want people to follow your advice and tell you, do what you tell them is like, couldn't it be further from the truth? Couldn't it be, if you're asking me, I mean, like, look, I've been a multiple time CMO. If you're asking me, the last time I had my finger on the trigger of a full acquisition campaign was 2021, right? If you're asking me exactly what to do, I think you're in a bad spot. One of the things we, we, we tell our founders during that time is like, I do not have the answers. We have the right questions and order of questions to think through.

• 33:53Speaker 01

  But I am not going to tell you, nor will I accrue bias and positive signal if you do what I say. If anything, I think it's negative signal. If you're doing, there's a reason I'm an investor and not an operator anymore. It's because I know how hard it is. I've been in the fray.

• 34:10Speaker 01

  I've been out of the game, operating hardcore for a presidential administration for four years. Like if you're trusting me, like this is not, this is not good. You do not want that. I, I, I'm interested in, in how they respond to the, the conception of the tasks in front of them that they've chosen. They've chosen to try and build the next great wealth startup or change the future of work or change climate or change education. I'm just here to give them questions and parameters and, and milestones to look at and.

• 34:43Speaker 01

  That data is where we try and live versus, oh, do X. Oh, you did X over two. That's not enough. You're out. That is not, that is, that couldn't be further from the truth and would be a terrible way for us to execute that strategy.

• 34:58David Weisburd?

  Said another way, if you truly want to dramatically change somebody's life, go help somebody struggling in high school, in college, do not do it through your investment portfolio.

• 35:10David Weisburd?

  Going back to 1998, when you were just graduating Harvard, just celebrated 27 years. What is one piece of advice you would have given that younger version of yourself that could either accelerate your career or help you avoid some common mistakes?

• 35:24Speaker 01

  I would say two. Number one,

• 35:30Speaker 01

  write and understand everything like a fourth grader.

• 35:35Speaker 01

  If I don't understand this business like for at a fourth grade reading level, both externally, if I'm underwriting a company or even internally, why are you making this decision?

• 35:46Speaker 01

  You need to write at a fourth grade level internally and externally. Second,

• 35:53Speaker 01

  document your screw ups.

• 35:57Speaker 01

  I always deliver the quip, four stars, two exits. Founders say like, oh, tell me my exits. My answer is like, wrong question, wrong question. You should be asking about my screw ups.

• 36:07Speaker 01

  And write it down. I'm not saying to publish it or like, put it on LinkedIn. I swear that write it down for yourself, at least for yourself. And I would share it with a very small circle of people that you trust. Those are the two things, fourth grade level and write down your screw ups. I wish I did that more because I think a lot of time I wasted, and I hope people don't waste is seeing something that wasn't there and using, to be honest, as you mentioned Harvard, like a lot of

• 36:38Speaker 01

  polysyllabic, self congratulatory signal to make yourself feel better and just in. It's BS, doesn't work. Fourth grade level, write down your screw ups.

• 36:52Speaker 01

  Those are the two things I wish I would have told myself back then.

• 36:57David Weisburd?

  To quote Einstein, "If you cannot explain something simply, you do not understand it." It's a good gauge of whether you yourself understand it, or others understand it, or they're just charlatans trying to sell you confusion essentially, because there's no core truth to what they're saying. On that note, Mike, this has been absolute masterclass. Thanks for jumping on and I look forward to continuing the conversation.

• 37:19Speaker 01

  Likewise. Thank you so much for having me. This was an amazing time.

• 37:23David Weisburd?

  Thank you, Mike. Thanks for listening to my conversation. If you enjoyed this episode, please share with a friend. This helps us grow, also provides the very best feedback when we review the episode's analytics. Thank you for your support.