Leore Avidar - Creating and Selling Superpowers - [Founder’s Field Guide, EP.3]

My guest today is Leore Avidar. Leore is the co-founder and CEO of Lob, a company which makes it easy to send direct mail programmatically. He’s also the founder of a new company focusing on sports card collectibles, Alt, which is how we originally connected. Our conversation ranges from building Lob, buying a Lebron James rookie card, starting a 2nd business while operating his first and how Leore tries to create and sell superpowers. Like my conversation with Rahul Vohra from Superhuman, I think this conversation will inspire entrepreneurs out there to start building aggressively. Please enjoy. This episode is brought to you by Microsoft for Startups. Microsoft for Startups is a global program dedicated to helping “enterprise-ready” B2B startups successfully scale their companies. If you’re a founder running a B2B company targeting the enterprise, you should definitely check them out. This episode is also sponsored by Vanta. Vanta has built software that makes it easier to both get and maintain your SOC 2 report, at a fraction of the normal cost. Founders Field Guide listeners can redeem a $1k off coupon at vanta.com/patrick. For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club and new email newsletter called “Inside the Episode” at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag Show Notes (2:55) – (First question) – Origin of Lob (6:14) – Creating and selling superpowers to other people and its value proposition (7:23) – Defining an API in his words (8:44) – Early breaks for Lob (10:45) – Early lessons in responsible growth (12:19) – Physical infrastructure behind Lob (14:14) – Surprises in mail delivery (15:00) – Progression through their pricing models (18:10) – Leaders in the world of making the world programmable (19:07) – Their interest in the physical world (19:45) – Hardest part of scaling a physical business (21:09) – Building a culture that keeps people around (23:13) – Why he is fascinated by negotiations and what he’s learned from it (25:20) – Scarcity, time, and leverage impact’s on negotiations (26:35) – His interest in collectibles and the formation of Alt (30:18) – Size of the alternative market he focuses on (30:54) – The focus on cards (32:18) – An overview of collectible cards industry (33:19) – What is the API of card collection and trading (35:51) – Competitors in the space (37:19) – Buying a Lebron James card (38:21) – Building a fund around the collectibles and the strategy (39:45) – What it means to be a technology company (40:23) – Collectibles beyond sports (41:30) – Defining a good investor (43:32) – Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts (43:43) – Qualities he looks for in investors (45:03) – What does the collectible universe look like over the next 5-7 years (45:43) – Cultural value of assets (48:50) – Managing his time while launching two businesses (49:51) – What he’s most excited about over the next 6 months (51:45) – Consolidation of API businesses (52:19) – Kindest thing anyone has done for him Learn More For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club and new email newsletter called “Inside the Episode” at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag

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

• 0:00Patrick O'Shaughnessy?

  I know firsthand how complex the tech stack is for asset management firms. And seemingly every new tool and data source makes the problem even worse, adding more complexity, more headcount, and more risk. RidgeLine offers a better way forward. One unified platform that automates away the complexity across portfolio accounting, reconciliation, reporting, trading, compliance, and more, all at scale. RidgeLine is revolutionizing investment management, helping ambitious firms scale faster, operate smarter, and stay ahead of the curve. See what RidgeLine can unlock for your firm. Schedule a demo at ridgeline.ai. This episode of Founder's Field Guide is brought to you by Microsoft for Startups. Microsoft for Startups is a global program dedicated to helping enterprise-ready B2B startups successfully scale their companies.

• 0:43Patrick O'Shaughnessy?

  The program has been around for a couple of years, but I recently became intrigued when former Invest Like the Best guest Jeff Ma took over. Microsoft for Startups provides companies access to technology, including Azure Cloud and GitHub, coupled with a streamlined path to selling alongside Microsoft and their global partner ecosystem. Microsoft for Startups has a very compelling approach to working with startups and driving their long-term business value. If you're a founder running a B2B company targeting the enterprise, you should definitely check them out at startups.microsoft.com. To hear more about the program, stay tuned at the end of the episode to hear from me and current program member Abnormal Security. This episode is also brought to you by Vanta. Does your startup need a SOC 2 report to close big deals?

• 1:26Patrick O'Shaughnessy?

  Or do you already have a SOC 2 report and want to make it easier to maintain? Vanta has built software that makes it easier to both get and renew your SOC 2. With Vanta's continuous monitoring solution, you avoid hosting auditors on-site and taking screenshots to prove that you're compliant, so you can focus on building your business. Vanta partners with audit firms who file your SOC 2 report directly inside of Vanta at a fraction of the normal cost. Hundreds of companies, including more than 100 Y Combinator businesses, are leveraging Vanta's today to streamline compliance and focus on building their businesses. Founder's Field Guide listeners can redeem a $1,000 off coupon at vanta.com/patrick. That's vanta.com/patrick.

• 2:06Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Founder's Field Guide. Founder's Field Guide is a series of conversations with founders, CEOs, and operators building great businesses. I believe we are all builders in our own way, and this series is dedicated to stories and lessons from builders of all types. You can find more episodes at investorfieldguide.com.

• 2:29Speaker 01

  Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

• 2:54Patrick O'Shaughnessy?

  My guest today is Leore Avidar. Leore is the co-founder and CEO of Lob, a company which makes it easy to send direct mail programmatically. He's also the founder of a new company focusing on sports card collectibles, Alt, which is how we originally connected. Our conversation ranges from building Lob, buying a LeBron James rookie card, starting a second business while operating his first, and how Leore tries to create and sell superpowers. Like my conversation with Rahul Vohra from Superhuman, I think this conversation will inspire entrepreneurs out there to start building aggressively. Please enjoy.

• 3:28Patrick O'Shaughnessy?

  So, Leore, I've been looking forward to this one for a long time. We share a lot of common passions and interests. We're going to go all over the place, touching on entrepreneurship, the companies you've been building, technology, programming, the whole nine, baseball cards, collectibles. It's going to be a great conversation. Welcome to the show, and I think the best place to start would be the origin story of Lob and its mission, which I find its mission in particular to be quite fascinating that we could probably talk about for an hour.

• 3:54Speaker 02

  Yeah, excited to dive in on everything. So, yeah, the journey to start Lob is actually a long one. When I grew up, my dream job was to combine engineering and business to create this machine that would just trade all day long so that I could go and travel the world. So, I started my career on Wall Street. And I remember when I was at the desk at Citigroup, utilizing my engineering skills to be very transformative and progressive, and everyone kind of just kept telling me to just keep doing what I was supposed to be doing. I've always played around with a lot of new technologies, came around to this service called Amazon Web Services in 2010, 2011. And I just fell in love with it. I ended up going to work there. And I remember when I got there,

• 4:37Speaker 02

  I was like, wow, I'm in the business of selling superpowers to developers. This is going to be such a big thing in the future. Developers are finally going to be a front office of a company as opposed to what was considered back office or IT. Kind of the genesis or origin story of Lob really started from my experience at AWS. I was like, this is going to be the future. What other tools exist in the market? And I remember looking around and there wasn't much. Vaguely remember seeing Stripe and Y Combinator. It wasn't called Stripe back then. And then there was Twilio raising their Series B and they didn't really talk about APIs. So I was like, okay, I gotta do this. I gotta figure out an API to build. What problems are people facing that can basically show people that I can go and build an API company? At that time, when I moved to Seattle for Amazon Web Services, my co-founder for Lob, Harry, already lived in Seattle.

• 5:22Speaker 02

  He was working at Microsoft. He was doing a lot of product marketing for Microsoft. You know, mind yourself that we were 23, 24 when we started the company. Our goal every single day, we wanted to do really well in our job was also to come home and play video games most of the day. So there was this consistent pattern. I think it was maybe like February, March. Harry was not coming home at a reasonable time. And I was like, what's going on? And he kept telling me how to send out these really large direct mail campaigns. It takes them between 60 and 90 days. Managing the partners was a really cumbersome process. Sometimes they even did it internally and brought in help. And I was like, this makes no sense. At Amazon, we have an API that if I want to send out a million emails, I write a Python script and it sends it out.

• 6:04Speaker 02

  You guys are Microsoft. How do you guys not have a tool that sends out direct mail at scale? And that was really like the lightbulb moment. Wait a second, if it doesn't exist, maybe we can build it. And I remember we were so naive. We could sell it to Microsoft for $8,000. And then we can start playing live video games. That was the goal. Wasn't the company around it. Let's automate the work that you're doing so that you, that we can play NBA Jam. And I think that's kind of where it got started. When we started looking at the market and we were like, hey, if Microsoft has this problem, I wonder if everybody else has this problem. As soon as we started realizing everyone had this problem and specifically like enterprise customers, we applied to Y Combinator, got into Y Combinator in the summer of 2013. And then basically have been sprinting ever since.

• 6:47Patrick O'Shaughnessy?

  Before we get into specifically what Lob does, its various products, I want to dig a bit deeper on this idea of creating and selling superpowers to other people. Can you expand on what you've learned about that as a value proposition? It's such an interesting idea.

• 7:00Speaker 02

  I really love sales and I love marketing and I think when you hone on on what your product does, at least what an API does, I always say it does two things. So for a developer, an API can help them solve business problems faster. And so when they solve business problem faster, it allows them to, one, accelerate in their career. So that was like one really big value prop that I always pitched. And then the other one was just time savings. And for me, time savings meant, hey, you can go and solve this business problem faster so you can go and spend more time with your friends and family. And that really appealed to me back when I was 24. I was like, I want to go spend more time with my friends. So I can go and automate my job and then I can go and spend time playing NBA Jam. And so that value prop, saving time, is the superpower. I always thought that now the developers have their kind of this toolset. I just always imagine this Home Depot example, like literally

• 7:44Speaker 02

  developers have literally this belt and they're pulling out all these different APIs as they go and do construction on a problem. And I just really wanted to be that tool belt. That's kind of what really appealed to me.

• 7:56Patrick O'Shaughnessy?

  Just for the uninitiated, can you just give your version a high level of what an API means for a developer and why it saves them so much time?

• 8:03Speaker 02

  Yeah. So basically, an API is a workflow process. Instead of doing something manually, it allows developers to actually get code, which is basically their skillset. It provides them a toolset to automate the workflow. So an API takes something that was generally manual. So let's just take physical mail. Imagine that people are actually taking an envelope, putting in, printing, putting a stamp on, taking it to the USPS. What an API does is it's a programmatic way to do that entire process. So they can send instructions to some sort of service or system like Lob and Lob can do it completely for them. So they can send us the instructions and then they still get the same exact result, but they don't actually have to do the entire process themselves.

• 8:45Patrick O'Shaughnessy?

  So sort of like Stripe is hiding all sorts of hard, complex work behind a simple front end of code. You're doing the same, but for physical mail.

• 8:53Speaker 02

  Exactly. I always talk about there's this black box. There's an input and an output. So the input that we take, we take content in the form of HTML and an address. The black box does everything that you need. And then the output is that a physical mail piece actually ends up in a mailbox. And so Lob does all that black box stuff and you don't care. That's the magic of the API. All these companies, that magic is what's their secret sauce.

• 9:16Patrick O'Shaughnessy?

  I'm obsessed with companies' first big break. What stands out in memory as the first big break at Lob?

• 9:22Speaker 02

  I'll give you a couple. I remember when we were starting off in the early days and me and Harry really took the notion of fake it till you make it and just hack it together. So we were printing everything out of our apartment. So API requests would come in, I would check the database, I would go and print it. We literally would cut it with cutting tools and then we'd go to mail it off. But there was this company in 2013 called Benefiter. I wonder if they're still around. And they were like, okay, they sent in an API request for 30,000. So this was our first big break, but because it was the first time that we couldn't print as much and get it out within our SLA. I remember we actually attempted it, which was kind of funny. We went in, I think we printed out 300, we timed ourselves, we were like, how long is this going to take us?

• 10:04Speaker 02

  Okay, we can't do it in a week. That was the first time we partnered up with a woman named Paulina at a company called Sir Speedy in the South Bay in California. She printed it out, everything, and that's when we learned about insertion machines. And basically, we fulfilled that entire order within a weekend. That was like our first big break. 30,000 mailings was over $30,000. That was a lot of money to us. That was like a big step level. I would say that was one. There was another one that probably happened within six months. But one time, a company called Ubiquity, Ubiquity Networks, the public company, messaged us and said, hey, we are planning on launching this really big thing. Can you guys do X, Y, and Z mailings? And we're like, sure. And they're like, we're in South Bay, can you come and kind of give us the pitch? And I feel

• 10:48Speaker 02

  like back then, anytime someone said that, we just, because we were working with so many startups, we didn't really give the, it never hit us in the head that this is a public company. We just thought like we were going off to an office with 15 people. Lo and behold, we show up and it's literally a public headquarters like Ubiquity Networks. So that was our first really big deal. We had worked with a guy named JT back then and really kind of created our first enterprise offering. And then from then on out, that was kind of like our foray into more enterprise-type sales.

• 11:17Patrick O'Shaughnessy?

  Can you talk a bit about the early lessons in responsible growth? I love the story of you guys printing stuff out yourselves. It reminds me of the Seinfeld episode where Kramer takes over a movie phone, kind of faking the whole thing. The thing that I've learned building software is you do need to do it at a responsible pace. Growth is painful. Stuff breaks. So talk about the lessons that you learned about how to grow the right way and sort of how the infrastructure progressed. I'm especially interested because there's a physical component to this. How did you start to build the infrastructure in the right way in the early days?

• 11:47Speaker 02

  One of my big things is I optimize for learnings over making perfection. I actually think in the early days, you want to maximize learnings, not to maximize being perfect. So actually making mistakes in the early days is a key part of growing, just having that mentality. The reason we did everything ourselves is we want to understand the intricacies. We wanted to feel the problems. So when we were actually building out the solution, we were building it for ourselves. So growing responsibly in the early days is actually taking ownership of the problems. So that you have the customer empathy as you're building out the product and turning it into software. I think a lot of people start over optimizing and immediately building what the scalable state solution is, and not going that organic iterations. For example, at Lob, we've had four different business models on pricing.

• 12:29Speaker 02

  It was important to get that first one out, even if it's not perfect, so that you can start getting that customer feedback loop. So I always preach growing scalably in the early days. To grow scalably, you need to get that customer feedback loop going really, really early on. And it's critical because that's how you actually get growth. Growth is actually getting customer feedback, responding to that customer feedback, and getting that loop to go over and over and over again.

• 12:51Patrick O'Shaughnessy?

  So how does it literally work now? So I can use the API. I'm sending literal, physical, direct mail. When I enter an order through your system, the input and the output, what's in the black box? Are you partnered with tons of different printers? What is like the physical infrastructure behind this whole thing?

• 13:07Speaker 02

  I always talk about leveling up. So we've leveled up many times over the last seven years. So we went from a home printer to what we'll call a local mom and pop printer, to then regional, commercial-grade printer, to now public company printers. So now we actually have deep partnership with commercial print partners all over the world. They are experts in basically the manufacturing of print and mail, and we are the experts at software. And so we have built software that actually sits on some of these HP Indigo presses, IGENs. In conjunction with these print partners, we are basically helping them route the mail. So one of the things that we created is this print delivery network. And so the way it works is an API request comes in. There is software at Lob that takes in that request. And there is a lot of different dimensionality when a request comes in.

• 13:52Speaker 02

  Was it black and white? Where is it going? What kind of content? Is there capacity at which one of our printers? And we basically figure out who gets that letter. And so generally, we're trying to optimize for speed. So we print it as close as we can to that destination. But this routing engine is basically, it sits in front of our, we call it like our print delivery network. Once it gets routed to a printer, it's basically a print-ready PDF. They're basically doing their own version of control print at a much higher scale. They print it, they insert it, and then they basically hand it off to USPS. And then we have a direct partnership with USPS that allows us to extract metadata as that piece of mail goes throughout the system so that we actually have the insight, just like you do with a package from FedEx, as mail actually is going out through the world.

• 14:36Speaker 02

  One of the cool parts about Lob is that we live in a very data-driven world, and direct mail was not data-driven in 2013. And so we had to build all the infrastructure so that people can actually think about this channel, just like they do any digital channel.

• 14:47Patrick O'Shaughnessy?

  What would surprise people about the physical mail world?

• 14:51Speaker 02

  The scale. I think what's relevant right now, a lot of people are talking about the delays about USPS. And I was actually talking about it with the CEO of Shippo, Laura, who's one of my good friends. And Shippo does all the packages, big market share of actually producing labels, so they track packages. Lob obviously has all the data on the mail pieces and the letters. Everyone is asking us, are there actually delays? And both of us, we look at the data and we're like, there are no delays. I think the sheer scale that USPS operates in, no one really understands how much mail they are delivering every single day. It's in way excess of 100 million. When people are talking about the election right now, is the postal service going to be able to deliver all the ballots? They do that every single day. The ballot is less than a percent of the typical volume.

• 15:33Patrick O'Shaughnessy?

  You talked about changing the business model and pricing model a few times, and you and I have talked before about what you call SaaS+. I'd love to hear how you progressed through pricing models, because pricing in software has always been tricky for me to really get my head around. It sounds like you iterated your way through it. Can you describe that learning process?

• 15:50Speaker 02

  There's always a dichotomy. My big thing is I like simple pricing, and I want to price it in a way that customers really like. And then I also want to price it in a way that's going to create a sustainable business. So in the early days of Lob, when we started, it was, we wanted simple pricing, and it was all usage-based. So in the past, people priced out print and postage separately. There was always these labor charges. So our big thing was going to be all-in-one pricing. So I remember we started off a dollar for just a single-page letter. 60 cents for a postcard or whatever it is. And so that was kind of like the usage based model. And what we learned from that is that everyone always asked us like, hey, you guys are charging 60 cents for a postcard, but when I go to USPS directly, it's 45 cents. Why are you guys more expensive?

• 16:34Speaker 02

  So we always were perceived as the more expensive solution. And that was because we provided all these added services on top of the commodity product that people didn't appreciate or weren't able to connect. So the next variant of our pricing models, we actually separated out. So what traditionally was all inclusive pricing, we separate out a license for our direct mail pieces, our license for our product, and then the purely commoditized product. And therefore, when they looked at, hey, USPS charges 45 cents, they see that we are charging 42 cents. So we're actually cheaper on the commoditized products. And then on technology side, they're like, oh, these are the value added services that if you went to a traditional like commercial grade printer, they wouldn't be able to offer you. And these are the differentiators that we, that's why you're coming to Lob.

• 17:15Speaker 02

  So not only are you getting cheaper print and postage, but you're actually getting these value add services. And then I can have a really productive conversation with the end customer on, hey, do you actually find use in our value add services? And it's okay if it's not, but now we've separated it and we've quantified it and we've qualified it. That's been the business model for the second, third, fourth variation. I mean, it's more about like how we've actually priced that out. So beginning, we actually made you commit to everything upfront. So it was just pure SaaS. If you said you were going to do a hundred thousand mailings, we made you pay for the hundred thousand mailings upfront. And I would say that optimized really well for Lob. We had SaaS, but what it didn't do is it created a really negative experience for customers because at the end of the month, if they didn't utilize all of their mailings, they felt like we owed them something.

• 17:57Speaker 02

  It's almost like back in the day about these rollover minutes. I bought too high of a plan and I want my minutes to roll over. So then we started really thinking about, okay, if people are going to see it that way, maybe even though it's better for Lob, our North Star is always building what's best for the customer. Let's actually figure out what do we do that's best for the customer. So we said, okay, we're going to keep the license fee paid upfront because we need to make sure that we can invest in the business long term. And then on the usage side, we'll actually charge the customer at the end of the month when they actually have accrued all their usage. It's like pay as you go, which is what they're used to. And it's actually better than commercial printers because commercial printers made them pay the day of. So we actually were able to float people.

• 18:37Speaker 02

  And so we've turned this into more of a like a software expense as opposed to what people have thought about as something different.

• 18:43Patrick O'Shaughnessy?

  I've heard you say elsewhere that one of your missions is to make the world programmable. And I think APIs is an interesting thing, especially as it pertains to direct mail, a physical thing that's being affected by code. Who do you think are the interesting leaders in the kind of world's mission to make the world programmable? You've mentioned some of the well-known companies in the API space, but talk a bit about those that you respect as peers and what they're building.

• 19:08Speaker 02

  I've always loved Amazon Web Services. I think they're great. Willio and Jeff Lawson, I always look up to them and the work that they've done. Laura, as I mentioned, my peer. Shippo, I think is a really great business. I really love, when I say making the world programmable, I really specifically like the software that actually interacts with the physical world. So I think there's still so much opportunity to honestly make some changes there or maybe make an investment or opportunities to start new businesses. But those are probably the ones that just come to mind right away.

• 19:40Patrick O'Shaughnessy?

  What about the physical world is the most interesting to you? And I wonder, say how and how not Uber is a good example of this because it's a consumer application. So it's not necessarily an API, but it's software that affects the physical world. So I'm curious, kind of what aspects of the physical world are most interesting to you still?

• 19:56Speaker 02

  I like the boring things, the things that no one thinks about that just takes up a lot of time. Cause those things you shouldn't have any mind share on, but they should just happen. So those are the things that I think about that are just so tedious. They happen every single day. And when you automate it, you'll never really think about it again. So Uber doesn't completely fall into that example. I always think about back office productivity workflows.

• 20:18Patrick O'Shaughnessy?

  What would you say is the hardest part about scaling a business like this that has that physical component? The way of thinking about it was like the most stressful period in the growth of Lob for you personally?

• 20:30Speaker 02

  The physical world part hasn't always been tough. It's more about understanding it. I had no experience beforehand. You really have to like be open-minded to kind of dive into something like manufacturing and understand the intricacies of it. I like that part. So that's like type of challenge that I get really excited about. Like I love learning new things. What's coming to mind just in scaling the company is really culture. I care a lot about culture and culture not only is something internally, but it's externally. It's the values in which you kind of communicate with your customers. It's the values in which you communicate with your partners and getting those right. Definitely was a learning curve. I think in the beginning, a story that comes to mind, we had this woman, Monashika, who came in and we used to call all of our partners vendors.

• 21:14Speaker 02

  The word vendor was they work for us. It was very transactional. And then when we shifted it to partner, it really shifted our entire mindset as a company as they are equally important to our success. It's not like we can trade them in and out. Creating that ecosystem and really thinking about them as partners was a learning curve. And one of those, I guess, pivotal things, both from a culture standpoint and from just a partnership standpoint, that once we realized, hey, we're in business together, let's go and change the world together. We were able to move a lot faster.

• 21:42Patrick O'Shaughnessy?

  What have you learned on the culture front internally about building a place, like a product, that people that work for you want to come by and stay at Lob? Not bounce around and leave after a couple of years, but really stick it out. What have you learned there about building a culture that first attracts great people, but then keeps them?

• 22:00Speaker 02

  When I came in, I was looking at what everyone else did in the Bay Area and I was like, okay, everyone's keeping people for 1 point X years. You gotta do something different. And so most of the things that I brought into the culture have kind of stemmed from personal experience. So I think one is impact. I remember when I got up to Wall Street and one of my first jobs, I was a trader. They got me this stool and they said, just sit behind me. And I just remember thinking I was super capable. Let me make some impact. And then I remember one day, one of the traders, Max Jaeger, was like, okay, I'm gonna actually let you help me out. And I think that empowerment, I got really excited. So I want every person, no matter how tenured they are, to always have that feeling of impact.

• 22:43Speaker 02

  You always want to make sure that people can connect to the mission and really understand. And I talk about this linear story. What they are doing is going to help us accomplish our mission. So that's one. I think the second part is being your authentic self. When you come into work, you don't want to put on a facade. You just want to be yourself. You want everyone to appreciate who you are. And you don't want that mental overload of trying to be somebody that you're not. And I feel like when you're just who you are and people appreciate you for that, you can do your best work. And then I think the third one, and this is more nuanced, is I think the modern employee is looking for something very different than maybe five, 10 years ago. I think 10 years ago, it was a very transactional process. You came into work at the company. You did good work, you got paid. That was kind of the trade that everyone was doing. I think these days, the modern employee is coming with professional goals, but also personal goals.

• 23:27Speaker 02

  And it's the company's job to actually make sure that they excel at both of them. And a company who can invest in employee, help them build a career, but also help them kind of grow their skill set or help them define what happiness means outside of work is ultimately going to allow people to keep employees much longer. Cause you're just more fulfilled in general.

• 23:46Patrick O'Shaughnessy?

  You mentioned external partnerships earlier, which makes me think about a topic I know you love, which is negotiation. I think this is something that many investors don't fully appreciate because they're not doing a ton of it. Especially in public markets, they're often doing none of it. And it's really important part of building any business is structuring good relationships with external partners, and that involves negotiation. Talk to me a bit about why you like this topic so much and some of the things that you've learned.

• 24:12Speaker 02

  So one of the things I do every single day is I buy and sell stuff on eBay. I call these the at bats. I probably have the most at bats of negotiating than most people. But you learn how to negotiate. You see the different types of people out there and you learn the different negotiating styles and how to respond to them. And I would say those reps have basically translated to real business. I remember like early on, I'll use Comcast as an example. Unfortunately, people always assume that like, okay, at the end of the month, you have to call Comcast because they overcharged you and you have to negotiate and you have to yell and scream, otherwise you're going to get your way. And I remember like seeing people do that. And I learned really early on from all these at bats that yelling and screaming does not yield the best outcome.

• 24:55Speaker 02

  Actually, being a really kind person in the negotiation can actually yield higher outcomes. Again, you only learn this by doing a lot of reps and recording what the negotiations were. Again, the tactics on negotiating, there is this stigma that you have to be like a hard negotiator, uncomfortable and almost stubbornness. And I think that's actually not true. I think that's a myth. I find that when you approach it from kindness in both sides, there's a way to negotiate where it's win-win for both sides. I find that when there are negotiators where the other side needs to win, they need to know that you're going to win. It generally does not lead to the best outcome because people don't want to do business with you. And so maybe it optimizes one win, but you've got to think about negotiation as the long term. And so you may have got it one short-term win, but you lost out on everything else

• 25:39Speaker 02

  because your reputation for negotiating makes it so that no deals come your way. You have to look at it less about a single negotiation, one data point, and more the holistic nature of all your negotiations. And what is the reputation and how do you want to think about that?

• 25:53Patrick O'Shaughnessy?

  I'm really interested in how scarcity, like time and leverage play into negotiation. And I'm curious if any of those three strike you as especially important.

• 26:04Speaker 02

  I think what you're saying with time is like, if you need to do something within a short timeframe, I think that just generally translates to leverage. Let's just talk about leverage and scarcity. If you have leverage, you always have the upper hand because your best alternative to negotiating antics is always going to be stronger because you can just walk away or you might have like a second option. So it just gives you more optionality. So obviously, optionality is going to help you in the negotiation side. Scarcity as well. On some things, I think scarcity works. Collectible scarcity is a really strong leverage because if there's only one thing, and I've noticed this with a lot of cards that I've purchased. Maybe I'm negotiating with this person for, and we're off by like $2,000 on this rare sports card in which there's one of in the world.

• 26:49Speaker 02

  And then I lose out. That next person is not going to sell to me until it's like 2X. All of a sudden, given the scarcity, everyone wants their return. If there's only one thing in the world, if you miss out, you're going to start paying for it massively later on. So I think scarcity even trumps leverage, to be quite honest.

• 27:07Patrick O'Shaughnessy?

  You've given me the absolute perfect bridge into the part of the conversation, which is actually how you and I originally connected, which is another company that you're building, which I'm totally fascinated by. I'd love you to tell the origin story for what happened to make you interested in the world of collectibles? And then talk in some detail about Alt and what you're going to be building there.

• 27:27Speaker 02

  Yeah, so starting, I think when I was like six, seven or eight, I was really fascinated with sports. I really loved cards. I loved stats. I loved the art. Again, the trading or the negotiation with my friends around cards. Fast forward to 2016, I got really nostalgic and I was like, okay, I can finally afford buying some of the packs or cards that I wasn't able to afford when I was a kid and I had to save up all my allowance. I started buying cards. Part of it was just kind of the nostalgia factor, but two, I started seeing a lot of different arbitrages. And I always talk about arbitrages in the wild. There's just so many arbitrages all over the world. And I started seeing a lot of arbitrage plays in sports cards. And so 2016, I just started buying them.

• 28:10Speaker 02

  And I would say early 2017, I became very, very serious about it. Over the last five years, I've amassed a really large sports card collection. And one of the things that I am known for is that when someone says something is impossible or when it's a headache for somebody, I'm going to do that. Over the last three years, I've run into a lot of problems and headaches that people experience outside of just sports cards, but I would say anyone in the collectibles space. Kind of seeing that headache, I was like, okay, I need to solve it for myself because now I've amassed a pretty large collection of sports cards and a big part of my net worth. I need to do it, so why not solve it for more people? Similar to Lob, one of my big things is why just solve the headache for yourself? Why not solve it for everybody so that no one has this headache ever again? Alt is solving three core pain points.

• 28:55Speaker 02

  One is that everyone keeps track of all their collectibles in Excel. There is just no easy way to physically have like a brokerage type account for cards. The second part is insurance. Given that these are physical goods, insuring them is a really hard and cumbersome process because there's no one in the market as deemed expert in appraising. And without an appraising, you're the one who has to define the market value. And given that the market value is changing every single day, you're communicating with the insurance company every single day in order to make sure that you're fully insured to the market value. So you come into a rhythm of every single morning or evening, basically, talking to an insurance company. And then the last part is, a lot of people have made a lot of money in, whether it's art, or let's call it shoes, or wine. And when it's time that you actually want some liquidity, people want to get liquidity,

• 29:39Speaker 02

  but they don't want to give up possession. Figuring out a solution for that was something that I got really excited about because I don't want to ever sell my basketball cards, but I would really like to get some liquidity so that I can go and do other things, especially with some of my cards have appreciated over a thousand X over the last five years. Is there a mechanism, is there a financial mechanism in which that can happen? So basically, I kind of dove into my old days of trading derivatives and leveraged securities, and I'm like, okay, I'm going to start thinking about collectibles as this new age financial asset. There's been a couple of times in history where something has turned into a financial asset. There's been the stock market in the seventies and eighties, there was FX, and then there was cryptocurrency. I really believe that this collectibles industry is going to start turning into a

• 30:24Speaker 02

  financial asset. So alt is basically a gateway of people actually thinking about this financial asset and managing their entire collection, or kind of the new verbiage that I'm using is managing your new portfolio, your alternative portfolio, hence the word alt. Alternative assets have generally had this very defined meaning in the finance world. I am kind of changing that. I am saying alternative assets in my world are these sports cards, or any type of trading cards, shoes, watches, art, domain names, all these things that are just kind of haven't had the central repository. And so I want to be able to create kind of the centralized place.

• 31:01Patrick O'Shaughnessy?

  Can you step back a little bit and describe the size of, I'll call it the alternative market, to use your term? How big is the asset value of kind of all those categories that you just listed off? When you pool them all together, how big are we talking?

• 31:14Speaker 02

  If we just talk about the five that I just mentioned, it's $160 billion plus. And some of these markets are doubling year over year right now. And that's not going into antique cars or antique furniture or anything like that.

• 31:27Patrick O'Shaughnessy?

  What do you think is the most interesting part of the card market and why you're focusing? I know, obviously, you're personally interested in that and have amassed a collection there. Is there anything other than your own interest that makes cards a special place to start?

• 31:40Speaker 02

  Yeah, I think a couple of things. One is, I think, as our society gets more comfortable with gambling on sports, this is an indirect way of actually gambling on players. So imagine that you've been watching Luka Doncic play in Europe and you're like, man, this guy is going to be really great. How can you capitalize on that bet? And anything, every financial security is you're taking a bet. You cannot do that these days. The sports card is the most direct way of actually investing on the upside of a specific player. As gambling becomes more commercialized and legalized, I think this is another alternative way in which people can get exposure to players. The second part is our culture. Every generation has the set of assets that is a representation of culture. And people collect them.

• 32:24Speaker 02

  That is why collecting exists. And I do think that these cards or these collectibles are the next generation's culture. And so everyone wants a piece of their culture. And so this is a very standardized way to get a piece of something that people grew up in. And now everyone is starting to get that disposable income. So this is where they actually want to pour some money in. The fact that it's also an appreciating asset makes it even that more, I guess, lucrative to go into.

• 32:50Patrick O'Shaughnessy?

  Can you talk us through a little bit the dynamics in the sports card industry? So who are the major players here? Who are the ones that when they print a rookie Doncic card, it matters and people care? Talk a bit about like the grading companies. What does the industry look like for those that don't know anything about it, myself included?

• 33:08Speaker 02

  It started with true hobbyists, just like any industry does. So you're talking to people who collected when they were kids, kept doing it over the last 20 something years and maybe entered the market because of the nostalgia factor. In the sports card world, they just have a genuine interest in the players, the artistic value of the card, the collection. So they're literally trying to put together a collection. That, what I would say is the epicenter of the industry. Over time, you're starting to get these hybrid people in who are thinking about it both from like a hobby perspective and for making money. That drives in a lot of institutional money. So we have a lot of institutions coming in. You have people who are raising these funds. Alt has a fund in which we buy cards because you start seeing it as, hey, this is actually an investment at the exact same time.

• 33:52Patrick O'Shaughnessy?

  I'd love to map it back now to what you're going to be building in a company in Alt, maybe starting with valuation. And I'll stick with your theme of making the world programmable. So when you think about maintaining a function that helps people value their assets, how do you do that? What's behind the metaphorical API in this case?

• 34:09Speaker 02

  Just like Lob has a very succinct vision of making the world programmable, Alt has a very succinct vision of increasing the transparency and liquidity of these alternative assets. And so when you think about liquidity and transparency, the first step is transparency around prices. There's a lot of noise in what something is worth. There's a lot of manipulation in this industry. If you go look at eBay sold items, you're going to find a lot of things that either were bought then canceled because people are trying to bid up one another to just inflate the price. There's also just some false positives. Someone actually bought something at a discount, but then eBay just reports it incorrectly. What is the true price of a card is something that we want to clean up. We've been basically going around partnering with different, we call them exchanges, and are verifying transactions.

• 34:53Speaker 02

  So now that we have a set, the world's largest database of verified transactions, we can apply a lot of modern principles on valuation. We have a lot of quants from Wall Street and people who have been pricing homes at a company called Open Door. And basically, we can look at those historical transactions. We can look at how the market, we can create our own version of the S and P 500 for sports cards, and we can actually triangulate what the price based on the data set is of that card. So we basically have a mechanism to go and you can choose any type of card. There is a way to go and price that out by bringing it down into its components. The card doesn't necessarily have to have a data point for us to be able to go and price it.

• 35:31Patrick O'Shaughnessy?

  Do you envision that this company will have a consumer-facing component? Or are you really just powering other companies that need these functions? Valuation, insurance, co-mingling of funds, vaulting, all the services that you'll provide? Do you envision both a B2B and a B2C aspect of what Alt does?

• 35:49Speaker 02

  Absolutely. Call these these new fluid business segments. So even Lob, you can be a developer and send one API request. Or you can be a company like Capital One, who's the biggest mail sender in the world, and you can utilize Lob. Similar for Alt, we want to power the ecosystem. So we want to provide the infrastructure. So on the partnership side of things, we're doing a lot of enterprise-type deals and transactions. But also, this is a place where I'm trying to change the nomenclature. Everybody is a fund manager who is basically collecting cards. And so I want you to be able to go and run your fund on top of Alt. So whether you have five cards or you have 1,000 cards, you should be going to Alt, because that is your brokerage account these days.

• 36:24Patrick O'Shaughnessy?

  Say a bit about other companies in this space. Rally Road comes to mind. They started with cars. I think the direction that they've gone is to be more of an exchange. They're a broker-dealer, they're IPO-ing cars. I don't think that's where they're going to make money long-term. They want to stand up a secondary exchange. How do you think about other players entering the ecosystem? And who do you think about most?

• 36:43Speaker 02

  There's a lot of players coming into the ecosystem. I'm really excited to partner with all of them. Alt, our goal is to not be an exchange. We want to be an open platform. So we're providing the infrastructure that allows all these other companies to succeed. I love that Rally Road is securitizing assets. That's a great way to provide liquidity. Hopefully, you can take your Rally Road shares and put them into Alt and easily go. We can have a nice integration with a company like Rally. There's companies like Masterworks who do something very similar for art. I think over the next six months, probably right now, a lot of companies are fundraising to build ideas in this space. I think if people need to find their niche, otherwise they're going to be competing in a space that basically is going to drive transaction prices down, and we want that.

• 37:29Speaker 02

  So right now, for example, if you buy things on eBay, it's 10%. That is the cost that you have to pay to transact on eBay. I will put a prediction that in a year from now, it will be less than 2%, if not zero. So that is good. That's liquidity. Basically, like a transaction cost is the bid-ask spread. The bid-ask spread right now is 10%. We're going to see that go very, very low over the next year.

• 37:52Patrick O'Shaughnessy?

  Can you talk about the experience buying the LeBron James card? If you Google your name, you're a pretty quiet guy on the internet, but the LeBron thing does come up. I'd love to hear the story there. It's a marquee purchase.

• 38:02Speaker 02

  Yeah, that was a really exciting day for Alt. One of the key things that we are trying to change in the industry is we want to be known as a trustworthy company. We take possession of your cards if you're sending it to our vault. And so I wanted to make sure that people knew that, hey, it's not just that we're taking all your assets, but we have no skin in the game. We went out and bought the most expensive card in basketball history. And we put it into our vault and we said, hey, your cards are right next to our LeBron James card in our vault. That's the goal of that card is for people to have this sense of security and safety and that this company has skin in the game. Besides that, I actually love the card. I think for me, I'm very bullish on the industry. You're talking about buying the card in the industry. And so it's basically buying the apple if you're thinking if you want to have market exposure to tech.

• 38:46Speaker 02

  So there was an investment thesis around it and hey, we want to be a trustworthy company. This is how we think we can provide trust.

• 38:54Patrick O'Shaughnessy?

  I know you're also launching a fund as part of this and part of the vision here is that people can have sort of their own fund equivalent of their portfolio that others can participate in. Talk about that process. And I think, again, you're trying to be your own first customer where your fund will be the first one on the platform. Talk through the strategy in the fund itself. What will the investing strategy be?

• 39:14Speaker 02

  Okay, so there's two parts. There's some things we can't disclose because outside of just having direct beta exposure to the market, we actually have a lot of alpha strategies that generate size returns for us. A lot of people who have heard about my returns, my return over the last five years has been in excess of 150% in IRR over the past five years. And that's due to a lot of arbitrage opportunities. So one is now that we have this alt value, we can buy cards that basically are substantially undervalued in our opinion. That's one. Two, we are basically building out diversified market portfolios. So very much taking things that we've done on Wall Street that have been done on Wall Street. For example, we can't predict who the next hot quarterback is going to be. We don't know who the next Mahomes is going to be.

• 39:58Speaker 02

  But we have a very diversified portfolio that allows us that whoever they're going to win that next MVP or that Super Bowl, we will have outsized returns because we're going to have a diversified portfolio. We're less taking bets on specific players and setting up a portfolio based on a system of bets that we deem is going to have an outsized return based on the risk that we are taking.

• 40:18Patrick O'Shaughnessy?

  Do you think of Alt as a technology company? And what does that word mean to you these days?

• 40:24Speaker 02

  Yeah, I mean, technology is just how you build out your product. So technology companies solve problems with software first. A non-technology company solves it generally with people. I think that's the most binary way to think about a technology company. Every time we have a problem, we are solving it with software first. So we are a technology company. If we were saying, hey, every time we need to go do something, let's add more people. Then I would say, hey, we're not a technology company. So what you will find is that the makeup of our company will generally skew heavy towards product engineering, data science, as opposed to operations and other functions.

• 40:56Patrick O'Shaughnessy?

  What do you think are the next most interesting set of collectibles beyond sports cards? I know you're specifically a basketball fan, probably first and foremost, but then sports cards. What's beyond that that's really interesting? I've gotten really interested in trading card games like Magic the Gathering and others like that. What do you think about those areas?

• 41:13Speaker 02

  I think trading cards in general are all going to experience explosive growth. I think video games, again, the nostalgia factor.

• 41:21Patrick O'Shaughnessy?

  Literal video games like the cartridges and discs.

• 41:24Speaker 02

  Exactly. For something to be collectible, there has to be this standardization of what that collectible is, because if it's so unique, then it's really hard to put a collection together and you need this competitive nature for something to be a true collectible. The video game cartridges is a really good example. Someone else can build a set. So you can try to go and get the equivalent of a investment grade set. I think vintage books is going to be something that people are going to be going into. Collectible wines. Art has a very unique thing because it's just always evolving in our culture. So I think art is going to consistently be there as well. I think shoes is going to be a really big one in our culture.

• 42:03Patrick O'Shaughnessy?

  I'm curious how you would define a good investor. So you've got nice experience now where you've raised money for Lob. I'm assuming you're doing the same for Alt, working with the investing community to build these large businesses. What in your mind makes for just a fantastic investor that you want to work with?

• 42:21Speaker 02

  Okay, so there's different from who I want to work with versus what's a good investor.

• 42:25Patrick O'Shaughnessy?

  Let's do both.

• 42:26Speaker 02

  I actually have a very specific thing and I can tell a story around it too. One of the things that I realize and I try to help people understand is to understand the concept of returns versus risk. A lot of people quote, "I made forty percent this year and forty percent on the market beats seven percent." But was that fund manager better than the S and P 500? You don't know yet because you're missing out some other information. The Sharpe ratio, which is a financial measurement that a lot of people utilize, but what it really does is it tells you the amount of return you did for a unit of risk. If a fund manager took the same amount of risk that the S and P 500 did and outperformed it, that is a good investor because for the same unit of risk, they got a higher return.

• 43:09Speaker 02

  In an objective manner, I always want to look at how much return per the unit of risk that they took. That is like my single metric that I ask people that helps me evaluate if someone actually did better. Because theoretically, if someone just takes a ton of risk, they should be outperforming the market. But that doesn't mean that they did better. I think a good investor qualities of a specific person, I think requires a ton of discipline. That's probably the number one kind of key quality. You have to remove your emotion. So when you're buying, you have to be very disciplined about your entry port. And when you're losing, you have to know when to exit. I find that really good investors are really comfortable exiting positions even if they're losing money. I know that a lot of early investors or kind of young investors, they're going to hold on to something until it's either break even or make money

• 43:53Speaker 02

  because there's internal feeling that they can't lose on something. Good investors lose a lot. They just know how to exit the position when their thesis is disproven. So I'm reading this book right now, Thinking in Bets. It's less about the end result, it's about the decision making. So if you have very disciplined decision making, in the long term, you're going to have better results. But you can't always wait for the result to happen.

• 44:15Patrick O'Shaughnessy?

  What about on the investing side, working with you specifically? I'm guessing that someone's past Sharpe ratio is less important than some other attributes of someone that you want to be a board member or take money from to fund one of your businesses. So what are you optimized for there?

• 44:28Speaker 02

  Yeah, that is very different. I look for complementary skillsets because at the end of the day, I believe that investors want to be able to help. And so you have to give them room to help. So I'm working with one investor right now. My weakness is marketing. And so I'm looking to learn from somebody else on marketing. So that makes it a really great partnership. I care a lot about kindness because at the end of the day, you're going to be in business for a really long time. You want somebody that you're going to enjoy working with for a really long time. Some of these relationships are longer than the average marriage.

• 44:56Patrick O'Shaughnessy?

  Why do you think your weakness is marketing? And what has this investor, whoever it is, taught you?

• 45:01Speaker 02

  Well, it's in the early days still. I'm always trying to sharpen skills. I have my skills as a CEO and as an investor. I think marketing is something that I just haven't had time to dive in. And it could be from, hey, I've had a lot of really great people around me who have led marketing, but I just, over the seven years at Lob, I have run almost every function except marketing. I find it super interesting and I think it's one of those things that people don't give enough credit for. Right now, I'm really trying to understand like modern social media. I love product marketing, how language and literally articulating something can change the dynamic of a product.

• 45:35Patrick O'Shaughnessy?

  If you squint a little bit and look out five years, let's say, thinking specifically here about alt, what do you think that looks like in terms of how, what does the average collectible portfolio look like? How many different providers are they working with? How are they buying and selling? How big has that universe gotten? I'm just curious, as someone that's intimately close to that, how you see that unfolding over the next five or seven years?

• 45:56Speaker 02

  I think if people are going to start thinking about it as real estate, a pure asset class. So when you're going into your 401K, you have your equity investments, you have your bond investments, you have your real estate investments, and then you're going to have these precious metals and physical goods now that are going to be collectibles. So I think it's going to be a staple. Everyone is going to want to have exposure in some way or another to this asset class.

• 46:16Patrick O'Shaughnessy?

  Why is that? I've always been fascinated by gold because while gold does have some utility, for the most part, it's owned for its own sake. So its return is sort of dependent on what everyone else will think about it in the future versus cash flow yield or something you might get from real estate. What about collectibles makes you think that it will become such a key staple and continue to grow so significantly?

• 46:38Speaker 02

  So I think one is that someone will crack the code. And I think I've cracked the code on there is an intrinsic value to collectibles. So once there is an intrinsic value, then basically you can do a DCF and you can price out an asset. So it literally should yield some passive income.

• 46:52Patrick O'Shaughnessy?

  Can you say more about that? I don't know that I follow that. And if it's something you can't talk in detail about because there's a code to be cracked.

• 46:57Speaker 02

  I'll give you a glimpse of it. Let's just take art. What is the intrinsic value of art? Here's a very specific example. The Louvre houses the Mona Lisa. If you remove the Mona Lisa from the Louvre, how much would admissions go down? Again, I'm not saying that they're going to do that, but the intrinsic value of the Mona Lisa is it's basically it's, let's call it like its admission value or its appeal. So if someone were to loan it out, the amount that they would charge for the loan would be, should be in the long run equivalent to the profits that they would generate from sharing admissions to it. Technically, every product, and again, you'll have to derive that. And there has to be a function to be able to go and do that. Everything has an appeal and the appeal can literally be correlated directly to a value.

• 47:43Speaker 02

  So I believe that that process that I just articulated is going to be a lot more fluid and transparent in the future. Every product will have a transparent value and people will be loaning them one to another.

• 47:52Patrick O'Shaughnessy?

  It's kind of the financialization or securitization of culture in an interesting way.

• 47:57Speaker 02

  That's exactly it. That's exactly it. And the reason it appeals to people is because it's part of their culture. And so people want exposure to that. It has to do with storytelling, which is part of our like civilization. People want to tell the story of something. And so we are basically a value of stories. I know it's like a really weird thing to think about, but I do think that's very impactful in our culture.

• 48:17Patrick O'Shaughnessy?

  If you had to own in your portfolio, just for fun, not necessarily for return, a video game cartridge or asset, what would it be? You mentioned video games earlier.

• 48:25Speaker 02

  I think the original like Mario on Super Nintendo, actually the Game Boy. I remember getting that Game Boy back in the day and having like an unopened one. Imagine someone gave a kid this cartridge and this kid did not use it for 20 years. The discipline that that kid had to go through or whatever the story is of how this cartridge became to not be opened is really interesting to think about.

• 48:51Patrick O'Shaughnessy?

  I love that. You kind of cracked something open in my mind with the Mona Lisa example. That is a keystone description that unlocks a lot of the sense making in this space and answers the question, no one's showing up to see a gold bar. There is something fundamentally different about a culture asset than pure precious metal or something like that.

• 49:08Speaker 02

  A precious metal has its own utility. This just has a utility in a different way. Imagine the things, if there was a pop up museum in your neighborhood, what would they have to have for you to go and pay admission to? And I'm sure in your head, you could probably come up with a couple of things right now.

• 49:23Patrick O'Shaughnessy?

  I hope someday I can call you. The next Jack Dorsey is both Lob and Alt and whatever else you're doing are huge public companies, but how do you balance everything? I get this question sometimes. I know it's kind of a frustrating question because obviously you just love all this stuff, but how do you prioritize and balance yourself?

• 49:37Speaker 02

  I love running businesses. Right now it's a little bit more fluid. I've been doing Lob for so long that it's really my primary focus and I always want to make sure that I want to take that company public. I want to be able to prove myself that I can do that. Part of starting Alt, I think it's two parts for me. One, I want to prove to myself that Lob wasn't just a one hit wonder, that I actually have the skill set to do it repeatedly. The second part is Lob, it's like a passion project of mine. Like this is my decompressing from Lob. I plan on doing a lot of A B testing and even I've actually hired a really strong management team that runs day to day. So this is for me, I'm just kind of shaping the vision. Sometimes I'm doing some of the I C work just because that's what decompresses me again from Lob.

• 50:18Speaker 02

  It is pretty fluid, but given how large Lob is, it does draw the majority of my attention.

• 50:23Patrick O'Shaughnessy?

  What has you most excited for the next six to 12 months? What problems are on top of mind? Things that you're learning about you don't yet know really well, but you're actively changing that. What has you most excited?

• 50:35Speaker 02

  I love comparing and contrasting right now from alt to lob. I talked a lot about in the beginning about maximizing learnings. I feel like I'm maximizing learnings, but twice as fast right now. Kind of operate both businesses. I've learned how to be very disciplined on my time, be really good at delegating and trusting others. By having those in the focal point, when I hire somebody, I'm really honing in on what does it mean to be the right person? What am I looking for? I'm just excited to see how both companies evolve. I want to get lob to an IPO state by 2024. And so as that gets bigger, I love being able to buy companies, maybe do some things through M and A. I love financial engineering. Nothing compares to starting a company in the early days. There's a sense of camaraderie from the team, the relationships that you build early on.

• 51:20Speaker 02

  You're making lifelong friends, like the amount of friends and I would consider them close family now that I've made through lob. Wouldn't trade anything in the world for it.

• 51:28Patrick O'Shaughnessy?

  What do you think happens in the world of these developer tools? We opened our conversation with, I love the Home Depot reference, like literally the tool belt to make people go faster, build faster, build better. And now there's finally some big companies that offer, you offer, I think, two principal products through lob. Do you foresee a world where kind of like Salesforce has built one product, but then really built a distribution channel and an events business? And is really just a massive distribution story? And they buy up the assets to sell into that distribution? Do you see something similar happening in the world of APIs?

• 52:01Speaker 02

  A hundred percent. There's going to be consolidation over the next five years as more of these companies go public. Once you have that MSA sign, people trust your API documentation, your customer support. They're looking for you to solve more and more of their problem, their manual problems internally and automate them. So I always talk about how in the API space, you're either going to get consolidated or you can be one of the companies that starts consolidating. Obviously, to consolidate, you need to have a pretty large balance of cash to be able to go and do that. So again, I think Twilio just went public a couple of years ago. You're going to start seeing the next generation and then there's going to be a lot of movement in this space. I believe the next trillion dollar company in 10 years will be an API company, will be an infrastructure company.

• 52:41Patrick O'Shaughnessy?

  Well, this has been just an awesome, wide-ranging, interesting conversation. I think you cracked something in my brain about the collectible space that I couldn't get my head around until this conversation. So thanks for all the lessons. My closing question that I ask everybody is for the kindest thing that anyone's ever done for you.

• 52:58Speaker 02

  The thing that's coming to my head is just early on in my life, someone telling me that people will appreciate me for both my strengths and weaknesses and just accepting myself for who I am. And I think that gave me the confidence in my life to just kind of go through it and being my quirky and authentic self and not having to like change. And I think that just that statement early on just really, really stuck with me.

• 53:22Patrick O'Shaughnessy?

  That's a wonderful answer, a unique answer, really cool. It hit home. It makes me think a lot of things personally, too, and so neat. Love it. Yor, thanks so much. I hope we can do this often. Keep learning from you. I really appreciate your time today.

• 53:34Speaker 02

  Yeah, thanks, man.

• 53:35Patrick O'Shaughnessy?

  This episode was brought to you by Microsoft for Startups. Microsoft for Startups is a global program dedicated to helping enterprise-ready B2B startups successfully scale their companies. In our five-part mini-series, we are talking to Evan Reiser, CEO of Abnormal Security, about his experience with Microsoft for Startups. In this week's episode with Evan, we talk about one of my favorite topics in building a business, distribution and how Microsoft for Startups has helped them so far. Could you say just a bit more about, I'll call it, enterprise distribution? I think many founders underestimate the difficulty of distribution, especially at the enterprise level, tend to focus really on product first and foremost, which maybe they should be doing that, but that the ability to distribute through enterprises becomes

• 54:18Patrick O'Shaughnessy?

  really important for companies like yours pretty quickly. Just say a bit more about that experience, sort of what it's like and why you think a cloud provider, which is sort of counterintuitive, I bet most founders aren't thinking that way, why a cloud provider might consider this as part of their decision?

• 54:32Speaker 03

  So I do think a lot of entrepreneurs think about cloud infrastructure as a technology decision, but I think there's three things that drove our decision. And just at the stage, our business, we have a product that works really well, better than all of our peers. We have customers that really have that problem. So for us, the biggest existential risk we have at the company is the product distribution, right? How do we go to market before our competitors do or before attackers get to the customers before us and end up stealing money? For us, the big business decision was around how do we kind of accelerate our go-to-market? And so there's three things that Microsoft was able to provide as part of that Microsoft platform that enabled us to do that better. One is the Azure Marketplace that enables customers to procure a solution directly from Microsoft.

• 55:13Speaker 03

  That saves us months in sales and allows customers to buy directly on existing Microsoft contracts and paper, which helps them in their own procurement processes. So that shaves off months. The ability to kind of deploy the product instantly through the Microsoft API is a one-click deployment of an Azure application that allows customers to see value super quickly. So it'll take kind of the traditional 12-month sales cycle for enterprise sales and compress that down to show value within days opposed to quarters and then enable customers to purchase very quickly through things like the Azure Marketplace. And then the final thing, which I mentioned earlier, was the ability to go to market together with Microsoft and taking part of this Azure co-sell program to basically enable our customers to more easily discover us and more easily kind of integrate, integrate

• 55:57Speaker 03

  and evaluate our product to make sure it's actually solving their problems.

• 56:00Patrick O'Shaughnessy?

  Would it be fair to categorize that from the customer's perspective, from your end customer's perspective, almost like an app store for enterprises via Microsoft? Or am I stretching the analogy there?

• 56:11Speaker 03

  So in some ways, that's what the Azure Marketplace is, right? It's a enterprises can go, can go there and they can look for different solutions. All these solutions are like natively built into the Microsoft ecosystem. And so in some ways, that is a bit of an app store. And I'm less familiar with that product overall, but I imagine that it'd be reasonable for a customer to think of it that way. And generally, the Microsoft ecosystem is an app store where it's directly from the website. We're talking to the Microsoft sellers. A lot of CIOs have direct relationships with their, their Microsoft account executives and they rely on these people to help them identify up and coming innovation and ultimately help them solve their problems across the business.

• 56:47Patrick O'Shaughnessy?

  What has it literally been like working with Microsoft or startups? So what has that relationship felt like for you personally? And what have been sort of the interesting aspects of how you've worked with them to reach customers?

• 56:58Speaker 03

  I think a lot of entrepreneurs think about these startup programs as hey, you just get some credits and then like you're good to go. And so thankfully, Microsoft for startups does offer you know, credits to enable you to test out and build on their infrastructure. So that was kind of expected. I think what was less expected is the commitment that the Microsoft team had to helping ensure our ultimate go to market success or working with us to build that go to market plan, help us identify what are the key industries, where the key buying personas, what is the right way for us to message the product to help customers best understand. I think that was a surprising benefit. And you know, we just launched our Microsoft partnership last week. And I think in that first week, we were able to take place in the Microsoft Sales Planning Conference. And we set up about 20 meetings with Microsoft account teams to talk

• 57:42Speaker 03

  about how we could kind of work together to bring our product to various worship of our customers. So I mean, that's a pretty amazing thing, right? And if we were going to try to do that all by ourselves, that would take us months of time and potentially millions of dollars rather than a couple of weeks.

• 57:57Patrick O'Shaughnessy?

  Kind of referenced this chicken or egg type problem that I think younger startups have selling into enterprises where the enterprise is already huge. They're going to buy someone that they trust that they think will stick around. Just talk through that thinking there a little bit, that it's so hard to break into these bigger organizations typically and how the Microsoft partnership has maybe altered that.

• 58:14Speaker 03

  I think it's really challenging to be a IT executive. You have a thousand companies calling on you and trying to tell you why they're a great solution. And some of them are great, and some of them are fly by night startups that enterprises probably don't want to do business with. So I think that if you're a customer, you turn to people like Microsoft to help you identify who are the most innovative companies, what are those innovative solutions, and what are those solutions will integrate nicely into my existing Microsoft stack. People want to get more and more after investment in the Microsoft platform. And so being able to work with the Microsoft sales team and go to market together to talk to customers about how we can solve their problems, that is a competitive advantage that you wouldn't otherwise have without this type of partnership.

• 58:55Patrick O'Shaughnessy?

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