Tod Sacerdoti (Flex GP and Pipedream CEO) on seed at scale and SaaS mispricing

Tod Sacerdoti is the CEO and co-founder of Pipedream, which recently sold to Workday. Tod is also a general partner at Flex Capital, where he's invested in over 400 companies including Chime, Vercel, Replit, CodeRabbit, Mercury, and many others. He previously founded BrightRoll, a programmatic video advertising platform that sold to Yahoo for $640 million in 2014. In this episode of Summation, Tod and Auren discuss: Why seed investing has the highest annualized returns of any venture as...

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

• 0:00Auren Hoffman?

  Hello data nerds. I'm Orin Hoffman. This is Summation, formerly known as World of Das. My guest today is Todd Sacerdoti. Todd is the CEO and co-founder of Pipe Dream, which recently sold to Workday. He previously founded Brightroll, a programmatic video advertising platform that will sell to Yahoo for $640 million in 2014. Todd is also a general partner at Flex Capital, where he's invested in over 400 companies, including AppLovin, Chime, Vercel, Replit, CodeRabbit, Mercury, and many others. And he happens to be my business partner for the last 20 years at Flex and many other ventures. And he's one of my closest friends. So Todd, welcome to Summation.

• 0:39Speaker 01

  Thanks for having me and finally getting to be on the pod. It's awesome.

• 0:43Auren Hoffman?

  I'm really excited to dive in. And we're gonna talk about, we're starting to talk about just like seed at scale. Like, why, why the focus on seed stage investing?

• 0:54Speaker 01

  I mean, I think fundamentally, seed investing has always had the highest annualized returns of any asset class within venture. And so it's where everyone would like to put the majority of their capital if they could. And obviously, the reason is, is because you're investing earliest at the lowest price and you get the largest ownership for the smallest check. And so if you can get in the, you know, marquee companies, then it's the single best place to be.

• 1:16Auren Hoffman?

  It outperforms Series A, it outperforms Series B, it outperforms Series C. Why do you think it does outperform? Because so, you have so many that do go to zero. Obviously, you occasionally get a hundred X or more, but why, why does the math work out usually?

• 1:31Speaker 01

  Well, I think first and foremost, each additional round in venture today gets more competitive because more risk is removed from those businesses. And I would say that you just think of all the tooling that has been created around investing over the last 20 years. It's, it's easier and easier for people to identify companies that are breaking out. So essentially, any company that has any traction could be as little as a large number of credit card swipes in a platform like Ramp, you know, can identify a company far earlier than it could have at any time in its history, all the way towards the more obvious and at-scale identification techniques. So each one of those rounds is becoming more competitive and You would argue sort of priced more efficiently. So seed is essentially the the least efficient of all the categories.

• 2:16Speaker 01

  So it has that that opportunity for outsized returns. And I think we would also agree that many of the the real marquee breakouts were not obvious at seed. And therefore, the prices were reasonable. It's a power law business. So if you get in a few of those at seed, it changes the economics for all.

• 2:33Auren Hoffman?

  So few VCs, almost like none of the super well known VCs do seed investing. Like, is it is it just because it's so operationally hard to do?

• 2:44Speaker 01

  Man, I think there's a lot of reasons they don't do it. I'd say, well, first of all, it is absolutely operationally challenging. You need to see far more companies, you know, probably 10 or 25 times as many as you would at a sort of a later stage firm. Obviously, you're you're saying no a lot. And so that's just extremely meeting heavy and operationally intense. I would say, second of all, you also have to have access to those entrepreneurs to even have those conversations in the first place. Maybe 20 years ago, you could get a large chunk of those meetings just by sending out repetitive emails like that. Obviously, doesn't work in today's market.

• 3:21Speaker 01

  And so I think access becomes like a huge problem. And then I think third, which might be like the cornerstone reason is just most of these funds net today are large and they need to put a lot of capital to work. And, you know, if you're ready, even a large seeds check today, say, a couple million bucks, you can just do the math. If you have a billion dollar fund, you have to do a lot of seed investments to fill that fund up. So most venture investors just standardize on, you know, we'll take fewer meetings, we'll relate larger checks and we'll take larger ownership in fewer companies. And that seems to have been the the most standard model pursued by larger firms today.

• 3:56Auren Hoffman?

  So these venture firms, also, they've got an ownership requirement.

• 4:00Speaker 01

  Absolutely.

• 4:00Auren Hoffman?

  Walk us through like why it's hard to have an ownership requirement in seed stage.

• 4:06Speaker 01

  Well, I think most folks who are raising the seed rounds won't allow any individual investor to take enough ownership to meet the ownership requirements of most venture firms. I mean, I think that has changed over time, but standard is kind of around 20%. I've seen folks dip down to as low as 10% in some of the more progressive firms. But at most seed deals, people are raising from a large number of individuals. They don't want a standard, single investor with 20% ownership at that stage. They might also want more control of that round and maybe the sizing of that round. So it just has different dynamics at seed than pretty much every other subsequent round.

• 4:41Auren Hoffman?

  Yeah, typically they're raising $3 million or something and they have a bunch of folks around or putting in some sort of safe with a cap on it. And in some ways, it's almost if you can get a lot of ownership, it probably means it's not a very competitive round. Like there's not a lot of demand to get into that round. And that may be saying something about that particular company.

• 5:04Speaker 01

  Yeah, I mean, I just think of my own startups. Like when I raised seed rounds in those companies, I don't try and think of I would ever have let a venture investor take ownership of that amount in the initial round. I would say probably not because you're also you're at a stage where you need help. You need people that can contribute to the business in different ways. You're not ready for a board seat from a traditional venture firm, having that like operational cadence. So I think it's unique that you would be able to do that at the seed stage.

• 5:34Auren Hoffman?

  Flex does, you're roughly, I'd say 50 seed investments a year. That's like one a week. It's a pretty high volume. Why do it at that level of volume?

• 5:46Speaker 01

  Well, I mean, it comes down to this concept of seed at scale, which is if you're doing far less volume than that, then you're just irrelevant as a percentage of the seed asset class and you can't build a sizable fund. The economics of the fund look better when you have a larger number of seed investments because the entire business is trying to get in a few of the power law outcome investments. You know, if you do a small number, let's say 10 or 15 a year, and you do that over a three or four year period, you can just do the math, the odds that you're in one of those companies mathematically is just actually quite low. And so given the power law returns of those few massive outlier companies, you need to have enough investments where you have a higher likelihood of getting in one of those companies.

• 6:29Speaker 01

  So if you're building a seed at scale firm, the first thing you'll do is do the math on how do I get in hundreds of seed investments where I increase the likelihood of being in a power law outcome return.

• 6:40Auren Hoffman?

  And of course, if you're trying to put $2 million into a seed round, there's very few companies that are going to let you do that. So you're almost going to, by default, get the less good companies that are less likely to have the power law returns.

• 6:55Speaker 01

  Yeah, there are a lot of anti-patterns, I think, at this specific stage where if, you know, you can get the exact allocation you want and a large amount of money in and a large ownership, you might want to ask the question of like, why, why am I getting that unique access? Because it could be an anti-pattern.

• 7:12Auren Hoffman?

  And the typically, there are, say, five to 10 breakout companies a year. So if a fund is a three-year fund, you're going to have, let's say, 20 breakout companies. Super important, right, for a seed firm to be in at least one of those 20 breakout companies.

• 7:28Speaker 01

  Yeah, I mean, it's, and you can do the math. Like, there are a lot of seed investments on an annual basis. And if you're investing in, let's say, 50 or less companies, you know, a year, you have a shot, but by no means a guarantee of getting in, you know, one of those breakouts. But if you're smaller, like you're an angel investor writing, you know, five checks a year, I think just mathematically, your odds are extremely low of getting access to one of those breakouts.

• 7:52Auren Hoffman?

  And at this pace, like, seeing thousands of companies, what, how does one, like, actually filter it in a smart way?

• 8:02Speaker 01

  Yeah, I mean, I think that this question gets a little bit to what, what diligence can you do at the seed stage to get to conviction on an investment? And I've been doing seed investing for, I guess, almost 20 years at this point. And I would say a few things really jump out to me. First of all, The best investments I have made at seed, the majority of them have actually ended up being pivots. Meaning that the company I invested at the time, if I had done, if I had hired BCG and done, you know, a month of diligence on the company. The results of that research would have been irrelevant because what actually worked out from the company was a completely different business model later.

• 8:40Auren Hoffman?

  It's not all of them. Crazy, right?

• 8:41Speaker 01

  Which is crazy, but it's not all of them, of course, but it is the majority, which, which sort of surprised me. And so I think that that just calls into question like, what is the decision-making process to make a seed investment? And over my career, it has landed on, it really comes down to the actual individual founding team that's starting that business more than anything else. More than the market, more than the product, you know, it's a bet on people. And at that stage, you have such little information about the performance of the business in most cases, that there really isn't much to diligence outside of maybe the TAM or the category they're in. And so I think ultimately it comes down to the way you operationalize is, is you, you know, shorten your decision-making process.

• 9:22Speaker 01

  You do a lot of pattern recognition on founder quality and, you know, sort of the origin story of the team and the business and how it came together. And you find a way to scale that, basically. That, that's the only way it can be done. If you take a week per company and make a decision, you have no chance of doing 50 deals a year.

• 9:41Auren Hoffman?

  And how obvious is it, like when you meet a high-quality team? Is it, okay, if you've, if we've got four or five people in our investment team, are we mostly agreeing that this person, these, this founding team is really exceptional? Or is there a lot of divergence?

• 10:00Speaker 01

  I mean, my view is, is at the seed stage, one person should think that an individual or founding team is like a superstar or a unique.

• 10:08Auren Hoffman?

  Exceptional.

• 10:09Speaker 01

  Exceptional. It's not really, the, the goal isn't to get consensus at the seed stage because you're really looking for these anomalous situations where, you know, a founder has a unique insight or a unique experience. Or, you know, has built a product that has unique distribution. It's all about these anomalous outcomes. And so I think it's not about getting five people to agree that someone is unique. It's really about one person being convinced that someone's a true outlier. I think that I would add that what's changed in, let's call it 2026 versus, you know, 10 years ago is. 10 years ago, if you found somebody who you thought was an outlier or a team that was an outlier, you would almost universally invest. And what's changed today is that, you know, seed prices can be so, I don't want to use the term outrageous, but I would just

• 10:53Speaker 01

  say so high out of the gate because of like just the overall perversion of capital going into AI startups today, that I almost feel like there's a two-step process more. So like 10 years ago, if I met an amazing kind of team, I would invest regardless. Like there was no, I didn't even need to know the price. And there were times that I wouldn't, I would just commit without even knowing what the price was.

• 11:13Auren Hoffman?

  Right. It was uncapped back then. You'd have these uncapped notes or something, right?

• 11:17Speaker 01

  Yeah, but I would say even, even if they weren't uncapped, I didn't even know the price because I knew it would be reasonable.

• 11:21Auren Hoffman?

  You're like, I'm in. Yeah.

• 11:22Speaker 01

  There was a seed deal yesterday that was, you know, 60 on 300. I'd like to know that. If I'm having a conversation, I'd like to know that's the price. Because that is, that is very different from a economic perspective.

• 11:35Auren Hoffman?

  One of the interesting oddities about seed is that these returns are often juiced by QSBS. Like, walk us through how that works.

• 11:46Speaker 01

  Sure. I mean, I've been fortunate enough to benefit from QSBS, you know, as a founder and as an investor. And I would say it's the sort of the probably single most important economic piece of, you know, startup investing that people don't talk about and don't understand. So I almost feel like the more it's talked about, the better it is for everybody in the ecosystem. So QSBS is basically a tax paradigm in the United States where if you invest in a startup that meets a certain amount of criteria, I believe the criteria used to be 50 million in value. It had to be less than 50 million in value. It's recently changed to less than 75 million in value. And you had to hold that investment for originally five years.

• 12:31Speaker 01

  And now there's like a proration period during that five years. But if you met that, that criteria, then you paid no federal taxes at all. And I'm in the state of California. So unfortunately, California does charge that tax, but there are many states that do not charge tax on those gains. And those gains were capped at, at up to $10 million. And so...

• 12:51Auren Hoffman?

  Her investment.

• 12:53Speaker 01

  Per investment and there's lots of, you know, mechanics you can do to, if you're the founder, obviously to invest through different entities and, and there's lots of ways to stack those. But let's just take this simple math, which is the first 10 million of gains are tax free. And in some cases universally tax free, including state taxes. And you just run that through a portfolio model of how that, you know, changes your returns. It changes them dramatically and it can change them dramatically as a founder. It can change them dramatically as an LP in a fund that does seed investing. And it can obviously be dramatic in terms of a GP who runs that fund. And so, you know, I would just say that it's probably, you know, not talked about enough because most people still don't even understand it. And then in the traditional venture world, you know, most LPs are, you know, institutions.

• 13:38Speaker 01

  A lot of them are, you know, taxed differently, so it doesn't affect them in the same way. But if you're a family office, a successful individual, an executive, it absolutely affects your bottom line directly. And, you know, I would advise people to both invest themselves and invest in funds where they can benefit from the, from the tax.

• 13:56Auren Hoffman?

  Yeah. So if the fund has, let's say a $50 million gain in a, in a great seed investment or something like that, and then you're an LP and you own 1% of the fund, you've got $500,000 gain, that's $500,000 gain is tax free, which so for an individual investor, some ways like these seed funds are even more juiced. Obviously the returns are generally higher, but now they're even more juiced if you're an individual US tax paying investor as opposed to like an endowment and stuff like that.

• 14:22Speaker 01

  Yeah. I mean, there's, there's many cases that I have seen where every single investor in the company at the seed stage received QSBS tax protection and their gains were less than 10 million, meaning that every single LP in the deal had all tax free gains, except for the states, if they were in certain states, because it's, it's generally rare for a seed investor individually to make more than $10 million in gain on that investment. It's possible as a firm, you'll make 10 million, but that's spread out over multiple LPs. So in many cases, like a hundred percent of the gains are tax protected, which I, I just think is truly incredible. Like it's, it's just a rarity to find such a, a powerful, I don't want to say loophole, but powerful, you know, asset to leverage.

• 15:07Auren Hoffman?

  To do see that scale, like if you just think of it, there's a funnel, like their first part of funnel is you have to see all the good deals that eventually become good deals. The second part is you have to be smart enough to invest in them. And the third is they have to be willing to take your money. On the first part, like, how does one see as many of these deals eventually become those power law deals?

• 15:30Speaker 01

  Yeah, I mean, I think that if I were to describe the single best seed investor in the world, like the archetype, it would be a founder of a company in an important emerging technology category that other people starting companies respect. So if you wanted to build as sort of a seed at scale firm, I think the first thing you do is find some of those individuals and then try to find a way to get many more of individuals who look like that connected to the firm in in some way. And so I almost think of this archetype as, you know, where I was in my career between,

• 16:11Speaker 01

  let's say, 2010 and 2015, maybe was like the absolute perfect archetype in that I ran an emerging company that was doing well. I was a similar age to the average person starting a company. I was based in Silicon Valley and I did not have children, so I was out all the time socially. And sort of like, if you put all of those together, you almost have like the perfect concoction of an angel investor. Obviously, as people's career matures, their lives mature, they have different constraints on their time, you know, I think, and the category they're in becomes either more important or less important. People as individuals fluctuate through that sort of angel investor archetype. But if you can find a way to aggregate tens or hundreds of those individuals, you know,

• 16:53Speaker 01

  to bring deal flow together, that would be like the single greatest seed at scale model you could create.

• 17:01Auren Hoffman?

  Which is the biggest trend that's happening right now is AI. Is AI, is that a tailwind or a headwind for seed?

• 17:12Speaker 01

  I mean, I think AI is a tailwind for, like, I think literally today, like, I was thinking about this on a call early this morning. I think today is the single best time to start a company in my entire career in Silicon Valley. And so

• 17:26Auren Hoffman?

  Why is that? Why do you think so? Because it's because you can build more quickly and get to a product market fit faster and you can

• 17:35Speaker 01

  Well, I would say that to me, there's a few reasons. First of all, product like the single biggest challenge in building a software company in my experience has always been hiring great engineers. And now with a small team, you can just be 10 or 50x more productive than you ever could be.

• 17:50Auren Hoffman?

  So the founders themselves, you might not even need to hire for a while. You can just build it with the founders.

• 17:55Speaker 01

  That constraint essentially has been removed. The second piece is like, there's always this challenge of, you know, can you get your innovation to market and get, you know, distribution before like an incumbent copies your innovation and applies it to their existing distribution? And my observation is, is that, you know, AI is greatly enabling the former, which is it's much easier to build product to get it to market. I have yet to see traditional companies outperform startups in terms of like innovation speed, even remotely close. I'd say most of the emerging innovation is coming out of private companies and small companies in Silicon Valley. So I think that the market for disruption is, is greater than ever. Um, I think you just also have a strategic environment where there's just lots of ways

• 18:39Speaker 01

  to win as a startup, right? You can stand alone, you can get profitable, you can get acquired, and all those options are just way more founder friendly today than they've ever been. So I just think AI just produces great options for, for founders that, you know, frankly, just didn't exist five or 10 years ago.

• 18:55Auren Hoffman?

  Now, I, I used to live in San Francisco. You live, you still live in San Francisco.

• 19:00Speaker 01

  The water's warm, you can come back anytime.

• 19:01Auren Hoffman?

  Yes, it's such a great place. And the, the, the, when I left four years ago, I thought, okay, there'll be, the companies will be a lot more distributed. You're going to have companies starting in Austin and Seattle and LA and Miami and all over the world, and you're going to have team, remote teams and stuff. But it still seems like so much of that innovation is still happening in San Francisco, even for Flex, like 60% of the deals are in San Francisco, not even in Silicon Valley, but in San Francisco itself. Why is San Francisco still so central to all this innovation?

• 19:41Speaker 01

  I mean, I feel like I have a public service announcement to deliver and that public service announcement is Silicon Valley is the center of the tech universe. There was a period of time where people thought that that either was not true or was no longer going to be true and that is incorrect. Austin is great, Miami is great. They are not even casting a shadow on Silicon Valley in terms of tech innovation and where companies are being started. And, you know, in addition to that, San Francisco, outside of just the tech industry, is just back. There's, there's more energy, there's more excitement. Downtown is looking good. It's safer, like everything is positive in San Francisco at the moment. That's my, my sort of PSA for your audience. But underneath that, you know, I would say that there is benefit to proximity.

• 20:27Speaker 01

  And the AI talent is here. Two primary AI labs are based here, OpenAI and Anthropic. Those organizations are absolute talent magnets. And then every company that is building on top of those models wants to be close to those companies. And it's not just like, I need to physically be near Anthropic's office. It's when I have a meeting, I have a meeting with those teams. I can have meetings with teams that are also meeting with those model companies. I can go to their offices, I can see what they're doing. And, you know, I can share ideas at coffee, at lunch, at a cocktail party. Like, these things are just completely self-reinforcing. It's always been Silicon Valley's advantage to have that proximity. But I would say now it's as prominent as it's been in the last 25 years.

• 21:11Speaker 01

  And I actually see it getting stronger because I think people are more likely to move to San Francisco now than they were maybe as far back as like 2015. There was a period where it waned a bit, but right now, if I talk to a founding team, they are most likely moving to San Francisco in the near term.

• 21:28Auren Hoffman?

  Is there a sense now that companies, because they're using all these AI tools, might need less funding in the future? Or when they do need funding, it's just, it's they're raising billions of dollars and it's a different kind of level of capital?

• 21:40Speaker 01

  Yeah, it's a really good question because my theory had always been that companies would need less capital. But what appears to be happening is too. Things that are sort of running counter to that. One is the companies that appear to be growing the fastest generally are companies that are actually leveraging the models in some like direct way. And the companies that are leveraging the models in a drug, this could be like coding tools or code review tools or, you know, anything along those lines. They actually tend to have high product delivery costs because they're always using

• 22:10Auren Hoffman?

  Their margins are lower. Yeah.

• 22:11Speaker 01

  Yeah, they're using the most recent model because if they don't use the most recent model, their competitor will. And then their competitor will have a better product. So in many ways, like the margin profile is actually much worse for these AI companies than previous software companies where you'd think, oh, it's almost a hundred percent margin. I mean, it's just, you know, you just sell that, you know, CD-ROM a hundred times and it doesn't cost you anything. That's not, that's not the reality of today. I'd say the second is, is that the valuation of these breakout companies can get so large, so fast that people would much prefer to invest more capital. And, you know, essentially win the category and king make somebody than they would to build like a more traditional, you know, profitable or more efficient business.

• 22:56Speaker 01

  So while I think, you know, if you're like a solo founder or you're trying to, you know, not go the traditional venture route, you can have fewer people and burn less capital than ever before. But I think if you're competing at like the, you know, the big leagues, the highest levels, the most competitive categories, I actually don't see companies raising less money.

• 23:17Speaker 01

  In fact, I think they're raising more money. I mean, in aggregate.

• 23:19Auren Hoffman?

  One thing that seems to be out there is just the level of competition in every piece of the stack, everywhere. From the most cutting edge AI models, all the way down to some random skin on top of an AI. It's just insanely intense. The customers are so high, they'll just, they'll happily move to someone else's product, even if it's just like a little bit better. So it's really hard to build a business because you just have to be running so fast all the time. Are you seeing something similar?

• 23:55Speaker 01

  Yeah, I mean, I I'm a little concerned for what I call like the first generation AI companies. And that's basically like companies that were built on top of the models. And they were building feature sets where the models didn't have capabilities. And the argument was, oh, as the model gets better, my product will just get better. And that was the the sort of shared thesis of many of these companies. And I actually thought it made a lot of sense, which is, you know, you just kind of build these, what feel like edge cases around that are unique to your vertical or your industry, your customer set. And then the model gets better, your product gets better. And I think what people didn't fully appreciate, and I definitely didn't appreciate, was that the acceleration and the capability of these models would actually start like, if you think of as concentric circles from the core, they would just start eating these

• 24:40Speaker 01

  adjacent concentric circles like faster and faster. So now, like, you look at coding agents, for example, like how fast people moved to Cursor and how fast people moved from Cursor to Claude Code has just blown me away because I thought once Cursor has, you know, an embedded customer base, like it's game over. And and now I'm really not, I mean, I think both of them are going to be phenomenal businesses. So I'm not criticizing Cursor necessarily, but I would just say that it's not a market dominant winner on its own, right? It's definitely going to have at least one major direct competitor and potentially multiple. And because these first generation tools were able to acquire customers so fast, I think we assumed they would just own that distribution. But they're actually the ones who are most vulnerable to be disintermediated now

• 25:25Speaker 01

  because their customers were the, you know, bleeding edge, early adopters that will adopt that tool the minute it comes out.

• 25:32Speaker 01

  And it's also not like, it's not these, you know, you know, I don't know, mid-level engineers who's like, you know, like, oh, I'm the tool guy in the in the company and everyone looks like, it's like the founders of at-scale companies that are just like ripping these tools out of the hands of developers and using them like the next day. It's, it is amazing how fast some of these products are being adopted in the market.

• 25:53Auren Hoffman?

  It's also interesting that back in the day, which wasn't that long ago, you'd have a SaaS company. Your product maybe is for some of these SaaS companies, the product didn't even get better, like over like a two or three year period. But they still kept their customers. It's very hard for customers to move, very customers to have the customers churn. Even though maybe the customers could have got a better product somewhere else in the AI world seems like if you're, yeah, if you don't, if your product doesn't get better in like the last week, they might stay. But if you go like a whole month and your product isn't improving massively, like those guys are moving just to your competitor like right away. It's very, very, very competitive. You can't sleep. You can't take a vacation. It's just so intense.

• 26:37Speaker 01

  Yeah, I mean, I I've been using the analogy lately of like tech competition feels much more like professional sports now than it ever did. Like maybe over the 2010s, it was more like, you know, D1 sports and you know, maybe before that it was more like high school sports. Like it is optimized to a degree that it was almost unfathomable, you know, a decade ago. And that's at every, every level. That's at the engineering level. That's at the product level. That's at the company building level. It's the venture level. There's really no pocket where you can say, wow, this is really like amateur hour. It is fierce competition all the way down. And I think it's because the stakes are so big now.

• 27:14Auren Hoffman?

  What is a, what, what is a, could be a gigantic seed fund? Like, could you have a billion dollar seed only fund?

• 27:23Speaker 01

  Man, think about it on the, on like a math basis. Like, let's say you put a million dollars in every seed investment, a billion dollar fund.

• 27:29Auren Hoffman?

  Which is kind of the opera limit, right? It's really doubtful you could even get that kind of allocation in most of the best companies.

• 27:35Speaker 01

  So let's just, I don't know, let's say maybe it made its reasonable start. You get a thousand companies. What would you have to look like? Like, are there, are there, is there a process where you could evaluate and invest in a thousand companies in a two to three year period with the same level of like confidence that back to our angel archetype would? I feel like that's probably towards the upper.

• 27:57Auren Hoffman?

  That would seem very unlikely. Yeah. Yeah, it seems really high.

• 27:59Speaker 01

  I feel like maybe it's in the 400 to 500, maybe it's like the true max if you scaled it.

• 28:06Auren Hoffman?

  And then maybe you can't put a million, you can only put 500,000, at least in the first, maybe you can put it later, but in the first check and then, and then you could later invest in the series A, series Bs of these companies.

• 28:17Speaker 01

  Yeah. I mean, maybe in my upper bound calculus, I'm also thinking about a world where startup creation continues to grow. You know, have to imagine a world where it's more volume, maybe more geographically distributed. That's the only way you could get up to those kind of numbers.

• 28:32Auren Hoffman?

  And in C to scale also requires kind of relationships at scale managing, because you have to add value to these companies. What does it mean when you're doing 150 investments in a fund? Like, how does one manage all that?

• 28:47Speaker 01

  Well, you know, it's funny, like I, I've said this to many people, which is I think you individually know more people than anybody I've met in my entire life. And it is, it is a unique skill set to be able to manage relationships at scale. Seed at scale is relationships at scale.

• 29:09Auren Hoffman?

  Yep.

• 29:09Speaker 01

  So if you're capable of managing a large number of relationships, you could be a candidate to do seed investing at scale. There are different types of people. Some people have a small number of relationships incredibly deep, right? And some people have a large number of relationships that are as deep as you can be, given the number of people that they're interacting with. And different people are good at, at different ends of that spectrum. I would say that anyone trying to tackle seed to scale needs to be someone who can manage a large number of relationships. And I would say, again, I think the worldview in general, but as it comes to managing a large number of relationships, you are a true unicorn.

• 29:45Auren Hoffman?

  One of the ways to get a lot of deal flow is to get the, the people probably know the best founders or other founders, right? And so if you invest in a founder, you want to give that founder a great experience for many reasons. Obviously, you told them that when you invested and then, and then you want to get more allocation later. So you want to help them. And then the better, more you help them, the more they're going to refer you to other deals. How does one like build out that flywheel of like helping all these founders at scale?

• 30:15Speaker 01

  Yeah, I mean, my, my experience as an entrepreneur, you know, going through the venture capital ecosystem, there are, there are lots of different types of firms and I would say lots of ways to win. But the ways that I resonated the most with me were firms that were building communities of founders. And the communities of those founders would, would essentially help each other. Uh, because no matter how good you are as an investor, like there's just an unlimited number of things in company building that you're not facing right now and you can't help with right now, right? Like if, if I were advising somebody on hiring a chief marketing officer, I've done that in the past. Have I done that in the last six months? No, I haven't. Have I done that last four years? No, I haven't done that, right? But

• 31:00Speaker 01

  there's probably a founder in most portfolios that did that last month, right? And so you just multiply that exact situation by the thing, the areas of starting and running companies, it's really unlimited in the areas you could need support. So I think the most valuable asset, particularly at the seed stage, that firms have done, at least in my experience and, and as being an operator and going through that, is building that founder community where people can help each other. And it comes in different forms. Sometimes it's text threads, sometimes it's Slack groups, sometimes it's email, not newsletters, but like email communities. Sometimes it's events. There's lots of ways to bring that to bear.

• 31:38Auren Hoffman?

  Dinner. Yeah.

• 31:39Speaker 01

  Yeah, dinners. But I think that it's, it's what is maybe underappreciated is that it becomes really self-reinforcing. Like when I raised my series A from True Ventures in 2006, I don't think the firm had done more than 10 investments. So it was challenging for me to, you know, get an answer to a question like, oh, I need to hire a lawyer for this or a proof of position, right? When I raised money for Pipe Dream in 2019, I don't know the exact number, uh, but True had, had funded hundreds of companies. So there was almost universally an answer or someone who could help me with any question. And I think that's specifically true for any seed fund. Like when a seed fund starts, they don't have that community. But when they've made hundreds, eventually thousands of investments, that

• 32:23Speaker 01

  becomes a real asset that can be brought to bear.

• 32:26Auren Hoffman?

  Let's, let's also chat about like, how does one, we're talking a lot about how you be friendly to your founders, how do you help the founders? How does one also be LP friendly? Like so many, like for instance, so many funds charge fees to the fund versus charging fees to the management company. How does one kind of think about how to be LP friendly?

• 32:50Speaker 01

  Yeah, I mean, there's, I guess I would bucket these in two categories. There's, there's being LP friendly in like the mechanics of fund management. And there's, I think the more that I've understood about the mechanics of fund management, the more I've understood that there's lots of decision points where you could do things that are to the betterment of the GPs or to the betterment of the LPs. And some of those I think are the right thing to do, like the right thing to do in some cases is to charge the LPs for something. And then there's other cases where the right thing to do is not to charge the LP something. And I think that most LPs just frankly, particularly at the individual level, would never understand those mechanics unless you like put it on paper and you walk them through.

• 33:33Speaker 01

  So it's really important, I think, just have that orientation and to say like, you know, here are the areas in which, you know, these decisions are made. And one of them is, is how fees are applied. That's absolutely one. Another one that's top of mind for me always is when you are, I'm an investor in 20 venture funds and when that venture fund does an SPV, it's sort of like when they do an SPV, they're obviously taking time away from managing the fund. They might position it as, well, I'm giving you the opportunity to invest in it. So that's a give to the LPs, but it's very possible they sourced that deal because the fund was an investor in it in the first place. And so should some of the economics from that SPV actually flow back to the LPs of the fund? Very few funds, funds do that, right? Flex does do that.

• 34:17Speaker 01

  And there are a few, limited number of funds that do share economics and SPVs back with the fund. But that's another example where I think a firm could be more LP friendly.

• 34:26Auren Hoffman?

  Right, the carry, the carry was almost paying for the people's time to go create that SPV so of the funds, sorry, not the carry, the management fees were, were, were paying. So let's, some of that carry of the SPV should go back to that fund.

• 34:39Speaker 01

  Yeah, I mean, I think it's, it's definitely more LP friendly to do it that way. I, I obviously support it. I would say it's, it's actually quite uncommon. I mean, I, I don't see it.

• 34:47Auren Hoffman?

  Yeah, you and I are LPs in many funds and extremely rare to see that.

• 34:52Speaker 01

  Yeah, I think I can only name one that I've ever actually seen it done, but it's been talked about. So those are like the fund mechanics, I guess I would say. And I think the second category is there's ways to be LP friendly that are not in the purely just the economics and the mechanics of the fund, but there's ways to bring LPs together. Like many of the LPs in Flex are incredible individuals that would greatly benefit from time spent together and building a community and network in a way for LPs to interact with each other. There's information you can provide, you know, it's not, you know, funds see lots of data points, whether it's emerging categories to invest in or trends that might impact other companies or other things they're invested in. It could be funds that they should consider

• 35:34Speaker 01

  investing. There's lots of information that can be provided to LPs, which most funds do nothing. So those are the two buckets for me. It's like the economic and the mechanics and then more of like the benefit outside of just purely your investment.

• 35:47Auren Hoffman?

  Okay. Every once in a while, like at Inflects, you're investing or investing in seed company. That seed company starts to do like pretty well. It's raising more money in the future and Flex has a decision to make. How much money should we invest? How much allocation should we ask for? Or how does one like make those decisions as the company gets bigger? And sometimes these valuations can get quite large over time.

• 36:13Speaker 01

  And the question is really about like, should that be in a fund or should that be done?

• 36:17Auren Hoffman?

  Yeah. How does one, how should one think about, how does one evaluate it? Should you have a separate team doing it? Should you, like, what do you think the mechanic should be to kind of like create something like that?

• 36:27Speaker 01

  Well, I'd say the first thing, and maybe this goes back to being like LP friendly again, but I think the first thing is every investment should be looked at as, is it a good investment on a standalone basis? I think that's like, there's the first primary criteria, which maybe it sounds silly to say, but I think there are many cases where it's not, right? There's other incentives to make an investment in a company. And I think first and foremost, it has to be viewed as an independent investment. Then the second thing is, it has to be determined, does that investment make sense in the fund that a firm is operating? So reasons it might not make sense, maybe it's too large. Maybe it would represent too large a percentage of the fund. Maybe the valuation is too high. Fund is focused on seed and series A and this is, you know, a series B, series C.

• 37:12Speaker 01

  It could be that the company has essentially pivoted and it's no longer in a category that makes sense for that fund. Maybe the fund is focused on SaaS and they're doing something to consumer. So I think the second question is like, does it fit in the fund? Yes or no? If the answer is yes, and it's obvious, it's done in the fund, and the answer is no, then the question is, does it make sense to do as a standalone vehicle? Obviously, that can have, you know, economics shared back with the fund, but then that would be a standalone, you know, SPV raised independently.

• 37:41Speaker 01

  And I think that would be the logical outcome if, you know, both it's a good investment and doesn't fit in the fund, then I would land on category three.

• 37:49Auren Hoffman?

  And you, you recently wrote about the founder code, some sort of unwritten set of rules in Silicon Valley. What are the non-obvious parts of the founder code that might take people years to figure out?

• 38:01Speaker 01

  Yeah, I'm pretty passionate about the founder code and I, I do understand that not everyone agrees with it. So I think it's fair to have a debate about what is in the founder's code and maybe, you know, is it, is it guidelines or is it more ironclad rules? I mean, to me, the foundation of the founder's code is when you take people's money to go start a business, you're agreeing to like a set of behaviors that are well understood by both founders and investors. Nobody sat me down and explained this to me. This was like observed behavior over many years. And I would say this is similar to the culture in a company, right? Like, not everything is written down. You understand the rules of the road. So for me, an example of that would be if I'm raising a seed round and I talk to you about investing

• 38:45Speaker 01

  and I tell you the price is $15 million. And then the next day I go meet with somebody else, I tell them the price is $10 million. I have an obligation if I close that round at 10 for, you know, Bob on Tuesday, to tell Orin, who I talked to on Monday, that that was the price. Like, I don't sell the same economics to, the same deal to different people at different economics at the same time. Like, that's just, you know, angels are not expecting that that is a behavior that might happen. By the way, that did happen to me on one deal and it really pissed me off. And there was another transaction I was involved in where the founder, it did exactly what I would expect. They came back and they said, hey, I've decided to close it at a lower price. I'm giving you that same price. And so I've seen on both those, but to me, again, Founder's code is there's a certain behavior. If you violate that code,

• 39:30Speaker 01

  you know, that's not somebody I would do business again. What I wrote about last week was an example where, uh, you know, somebody called me and said specifically, I'm selling the company and it was a company that was doing, performing quite well. Um, and they told me they were selling for half their valuation and I was shocked because this is actually one of our best investments that we've made over the past like three or four years. Company is doing well, growing fast. Um, you know, I'd say top 10%, maybe 20% in terms of, of growth. Um, and, and I, then I was like, oh, so it sounds like you're giving up. Right? Like you would only sell your company for half of the valuation if you were giving up. And the founder said, yeah, I'm going to go start an AI company. And I was just reflecting like, I literally started an AI company less than, you know, 18 months ago, inside my company. I didn't

• 40:15Speaker 01

  like give all the money back and then start a new company with a clean cap table and, and like, I don't want to say take advantage of, but like just basically sell my investors down a river and then go raise from new investors. Like to me, that was an anti-pattern. And so I would put that in the founder's code. Like if you raise money, start a company, it's going well. You don't just abandon it to start another company. That, that's just, that's just not how you behave in Silicon Valley, in my opinion.

• 40:38Auren Hoffman?

  What, uh, you, you, you've kind of also written a lot about founder compensation being broken. And you and I actually talked about this on a podcast, uh, back a few years ago. What should a new founder understand about founder comp and like when that becomes out of line? How to ask for more comp, et cetera?

• 40:58Speaker 01

  That's interesting. I think my, my sort of thoughts on this haven't changed in terms of it's still a problem and it's, and it's sort of often not handled well, but my thoughts have changed in like the advice to founders. Because now I've, I've just sat on more boards and I've been involved in more companies. And I've basically come to the consensus that Investors, this is probably my, my, my maybe most controversial statement, but investors will never approach a founder about paying them more money.

• 41:29Speaker 01

  In my entire career, I can think of it less than five times that it happened. It is just not top of mind on the investors, you know, tasks to do.

• 41:38Auren Hoffman?

  Yeah. Doesn't have to be more money, it could be more stock too. A lot of founders just want more stock, they don't need more money.

• 41:45Speaker 01

  They're never going to bring it up.

• 41:46Auren Hoffman?

  Yeah.

• 41:46Speaker 01

  And I actually don't think it's, it's like bad intentions or malice. I think it's just not in the like regular course of business, things that, that come across investors' desks, they're just not thinking about it. And frankly, the biggest sign that an entrepreneur should address their compensation is if they're thinking about it a lot. Like if it's on your mind, it means it's a problem. And so this paradigm has emerged where basically the only time it comes up is when the entrepreneur has reached a breaking point because it's on their mind so often that they like finally skittishly presented to the board as like, I need to get paid more. Whereas really what should happen is it probably should be part of a, an annual board review where we, where there's just an open item on the agenda, which is let's talk about

• 42:31Speaker 01

  your compensation, how are you feeling? Is this keeping you up at night? And I think that's why it gets so out of whack. The reason it's such a problem is because since it's not talked about and it is not addressed, you end up with these scenarios where you have founders that are five years into a company, you know, they have more complex lives, they're still being paid as if they're like, you know, eating a cup of ramen, you know, in a dorm room.

• 42:52Auren Hoffman?

  Their go forward equity often is zero.

• 42:54Speaker 01

  Yeah, and it's.

• 42:54Auren Hoffman?

  They're literally zero, like they're actually, their go forward is actually zero, which is kind of insane, like would you really want a CEO with no go forward equity?

• 43:03Speaker 01

  That is crazy. It's absolutely crazy. Yeah, and to make it even maybe more crazy is that I think an almost. Every case, the investors would be totally fine with the founder getting more compensation. They may not propose it, but when you look at their, you know, their sort of portfolio of options, like, do you want a founder undercompensated, dealing with this thought all the time that this is a problem in their life they need to address? Or do you want somebody who's like maniacally focused on building the biggest possible company? Like, as an investor, you will always choose the latter 100% of the time. Even, by the way, in situations where that compensation is more than you would probably have recommended as investor, you still want it, right?

• 43:47Speaker 01

  Because there is no better alternative. So I just, I guess my, my advice to founders is bring it up early, bring it up often and find a regular cadence so that it's not you having to like, I don't know, bring the, the sort of energy to like break through this hesitancy to talk about it, where you're just like, every year, we're going to have a conversation about myself, my founding team, make sure everyone's compensated and just make it a regular course.

• 44:15Auren Hoffman?

  It is because that flex, like, we don't usually take board spots. So a lot of times, we're getting these founders who are four or five years and the company's doing great. And they're kind of calling us and we're, we're almost helping advise them, sometimes even talking to the board members to encourage the board members to bring it up. So it's, you, sometimes you might need that kind of trusted other third party to help you kind of consigliere, help you navigate, because it is tricky and it gets emotional and there's lots of other things that go on in that, in that situation.

• 44:47Speaker 01

  Yeah, I mean, my, my universal answer when, you know, requested, you know, hey, I want to bring, I'm like, yes, I agree, you should bring it up. Yes, I agree with your, it's like, it's just so unreasonable the way most of these situations end up, that by the time it gets brought up, it's just, it's, I don't know, outrageous is how it feels in many cases. They're just so undercompensated and nobody has addressed it.

• 45:10Auren Hoffman?

  Well, let's talk about SaaS. So, so many people were talking about like the death of SaaS. Where are we at on that lifecycle?

• 45:18Speaker 01

  Death of SaaS. Yeah, I mean, I guess I would say a few things. The first thing I would say is SaaS, SaaS companies in general, a huge amount of the value of the company is far out in the future. That's just the dynamics of how this SaaS pricing model works, right? I'm giving you like a low priced subscription today because I'm hoping that you'll be my customer for 20 years. So that business model makes a ton of sense in every scenario except one. And the except one is where it's very unclear what the company will look like, you know, 10 plus years out. The minute you start saying 10 plus years out, things are extremely foggy. All of a sudden that SaaS business looks very different from like a valuation standpoint.

• 46:03Speaker 01

  And so I think what's unique about this exact moment in time is the only thing I know for certain is that software companies are completely mispriced. What I don't know is are they completely mispriced and massively overvalued? Or are they completely mispriced and massively undervalued? Because the current value of the software company is basically a probability that in 10 years, things go really bad for them. And so if they do go bad, then the companies are overvalued. And if they don't go bad, then the companies are undervalued. So I think all of that is frankly fair. Like I, in terms of like the SaaS apocalypse, I think it is fair at this exact moment in time to question the longevity of SaaS companies, right?

• 46:47Speaker 01

  Because that's just the reality of the situation we're in. Now, of course, underneath that is a very wide distribution of types of businesses. And, you know, the 10 plus year outlook for these companies across the spectrum vary dramatically. Some are nearly obviously going to be disrupted. And I would say some are nearly obviously unlikely to be disrupted. And I do go back to a comment I made earlier where, you know, the first generation companies are in AI, I think are the most vulnerable to AI. There's also like categories of SaaS that are much more vulnerable to AI. And so I just think that like everything is being bucketed together right now as opposed to a lot of people going through that nuance and really thinking through,

• 47:30Speaker 01

  like, what is the impact on this specific business as opposed to software in general?

• 47:35Auren Hoffman?

  Some of the moats are being taken over. There's drawbridges going over the moats. Some of those moats are still fairly defensible. What are, what, what would you say is a more defensible mote?

• 47:49Speaker 01

  I mean, the best moats thus far, and I think it will continue to be so, have been proprietary data. So data that nobody else can get that you have uniquely. I would say customer relationships and trust. People that are, have basically longstanding relationships with their customers and can use that relationship to bring like innovative products to market. I would say, I think an underappreciated new mote is speed of iteration. That hasn't historically been, you know, an incumbent advantage, but I think it's absolutely been an emergent company advantage. And then I'd say the last one, which is maybe a new area for me,

• 48:33Speaker 01

  is really on like business processes and workflows. Like there are, like, you know, a lot of businesses have very custom, very proprietary processes inside the companies. And companies that are like built into that infrastructure, you know, they're much more, less likely to be disrupted because the way they get disrupted is the entire process or workflow goes away as opposed to like an iteration on the workflow. And that is maybe the one that's the hardest to predict the AI impact on. Because, you know, I'll give an example from a company that I invested in a while ago, which was selling customer support software. It's very different to sell customer support software that's AI enabled to customer support operators.

• 49:17Speaker 01

  Because the AI is likely in the long run going to replace them. Right? If you eventually sell that customer support AI software to the chief operating officer of the company, and you convince them that they can fire the entire customer support team, that's a very different conversation. And that's a very different binary level of disruption.

• 49:37Auren Hoffman?

  Yes.

• 49:37Speaker 01

  Where you take an entire workflow and you remove it. And so I think that's the hardest to predict. And I'd say that, that people have actually been quite bad at predicting which internal business process and workflows can be replaced. But I'd say the, the other areas have been easier to see the disruption coming.

• 49:54Auren Hoffman?

  MCP Model Context Protocol is Anthropic's kind of attempt to standardize how AI systems connect to data sources and other applications. What are your thoughts broadly on MCP?

• 50:07Speaker 01

  God, MCP, such a broad topic. Thoughts on MCP? My first thought is, in my entire career in Silicon Valley, I've only seen a couple of standards adopted by a large number of technology companies in a short period of time, and then, you know, adopted by the entire industry. MCP is one of them. I would say Open API Spec was another one. Real-time bidding was probably the third, but they're actually quite rare. MCP may be the most impressive. So I give, you know, both of the team that created it and Anthropic in aggregate just enormous credit for what they created. I guess I would start with that. I would say, second, I think MCP is here

• 50:48Speaker 01

  to stay. I think it will be part of the AI ecosystem, but I do not believe that it will solve the majority of sort of integration and middleware-type problems within AI. I think it's being hailed as like the holy grail and it will solve all ills. And so a lot of people, frankly, and we saw this at Pipedream, a lot of people just say, we're stopping development on anything integration-related because we just see MCP will eventually solve the problem for us. And there are a lot of things that it doesn't solve today. You know, MCP is a standard, but how it's implemented in companies varies widely. Some companies have very broad API support within their MCP server. Some companies have very limited API support within their MCP server. You know, we operate thousands of MCP servers at Pipedream. I would say there are certain

• 51:33Speaker 01

  cases where the company's MCP server is dramatically better than ours. Like, doesn't even, ours pales in comparison. And there are certain cases where, you know, ours are superior. And you shouldn't have a third-party MCP server superior to your, you know, internally-built one if you're, you don't think you're really committing to MCP broadly. So I think there are going to be lots of cases. I'll give you just a few examples in the enterprise land, but, you know, a lot of enterprise companies have things around data residency. Where is my infrastructure running? And the minute you get an MCP land, you pull a tool from some third-party app. It's like, I've just outsourced my auth management, my infrastructure, my data residency to some third-party that I may or may not have any transparency into how they're applying those same standards.

• 52:17Speaker 01

  And I don't think it's in the MCP ecosystem's interest to solve any of that stuff in the immediate term. But as I've seen MCP implemented across hundreds of companies at this point, I don't see any move towards, okay, we need to like, create much deeper standards for those types of issues. I think it's going to be the consumer, you know, you know, simple actions, things that a chatbot would do, rather than like true enterprise workflows that are deterministic being built on MCP anytime soon. That's my current perspective.

• 52:49Auren Hoffman?

  Now, what, what are you, what tools are you personally using in your personal life or your work life? That our audience could benefit from understanding or maybe workflows that you're doing?

• 53:01Speaker 01

  Yeah, I mean, I, I almost feel like no matter how much AI I use in my daily ba- daily basis, I feel like I'm 10% of where I should be. So I don't even consider myself-

• 53:13Auren Hoffman?

  I 100% agree with that.

• 53:14Speaker 01

  A blaring example of, like, I have massive jealousy of, you know, someone in college that is preparing to look for a job. Everyone says, oh, it's going to be so hard to look for a job because the, you know, all the, you know, low-level, white-collar jobs are going away and knowledge is going to be free. But I'm like, those individuals have the time to spend eight hours a day using AI tools to be productive. And I am so confident that in a six-month period, they would dominate me, dominate me in daily productivity. So I can share like what I'm currently using, but I'm in no way like where I would like to be on that. I have been using Claude Co-Work more than I ever have before. Obviously, it's a new product, but it's still, I'm still trying to figure out exactly how to like,

• 53:57Speaker 01

  integrate it more regularly as opposed to like a dedicated effort. I just want to be like part of my daily workflow. I have not tried OpenClaw yet. That is one of my, that is on my list, but one of my regrets.

• 54:08Auren Hoffman?

  I'm sure by the time this podcast comes out, you will be an expert in it because I can see you but like going through all the way down.

• 54:15Speaker 01

  I have a lot of automations through, I use Pipe Dream, but you know, you can use any of the, you know, sort of workflow builders from the least technical.

• 54:25Auren Hoffman?

  Like, obviously, you're, I assume you're a Pipe Dream expert. All, there's all these people out there that use Pipe Dream or, you know, old school, be it Zapier or something like that. Like, what are you doing in the automations that maybe someone hasn't thought of?

• 54:41Speaker 01

  Interesting, somebody hasn't thought of. I mean, to me, the, the, most people should start not on the things that people haven't start, haven't thought of, but the things that people have thought of, but they're not doing.

• 54:50Auren Hoffman?

  Yeah, yeah, okay.

• 54:51Speaker 01

  Actually doing them is, is like, I always say, like, start with the, start with the easy stuff, you know, start filtering your emails, start unsubscribing from things, start, you know, summarizing content, start doing all of your writing. Like, every, every time you write on social media, you should run that through an automation of some kind. Like, I don't write a LinkedIn blog post without running it through a specific project. I, I currently use OpenAI, but I used to use Claude for it. A specific project just to optimize my LinkedIn posts so that they sound in my voice consistent and I don't have to write them from scratch every time.

• 55:24Auren Hoffman?

  Is it just like a very long prompt that's, that you do for every single thing? Or what, what is it?

• 55:30Speaker 01

  So, well, my project for LinkedIn specifically is a collection of posts that I think are world-class. They are a collection of writings that I've written that are my voice, a recommended format, like high-level format of how a good LinkedIn post should look, like, kind of like the, the template outline. And then I have a few other examples of people who I think have been effective, but I don't want to write like in their voice, but I want to take nuggets from their style and include in my own. And, you know, I, I would say that that would just, just an example, like, that would probably take one to two hours of work down to five to 10 minutes. And so, those are the things that I think people should be focusing on now because of the most accessible. Just find something you do

• 56:12Speaker 01

  that you can do in one-tenth the time, rather than like, I'm not really big on like, you know, find some obscure thing that nobody's doing that's really complicated and try to, you know, solve that problem. I just like, just start with the basics.

• 56:26Auren Hoffman?

  Okay, a few personal questions. I have thought a lot about nominal determinism. And so you have this name of your company Pipe Dream. A pipe dream is like, almost like an unrealistic hope or wish that's unlikely to happen. Why did you name your company that?

• 56:43Speaker 01

  Interesting. Nominal determinism, as in you name things, they become true? Like you will them into existence?

• 56:49Auren Hoffman?

  Yeah, it can be, or you know, sometimes you name someone scooter and they actually end up being really fast or something.

• 56:57Speaker 01

  That's interesting. So, I mean, I will say, when I picked the name Pipe Dream, there were a few people that said, "You can't name your name Pipe Dream because you're saying it's like a fantastical thought, therefore it's impossible for it to come into existence." But the true story is, we had a meeting at Chime, where we were sharing what we were working on. And the CTO of the company basically said, "I mean, it sounds interesting, but I think it's a pipe dream." That was kind of his response to our, our business. And I remember thinking, well, we're doing a lot of like data pipelines as a service. And I had previously named a company Bright Roll, and I kind of liked that two-name cadence. And so I just had like a nice ring to it.

• 57:39Speaker 01

  I didn't honestly, I don't think I really understood that time, by the way, that it's actually a drug reference. So Pipe Dream is actually...

• 57:45Auren Hoffman?

  I didn't know that either.

• 57:46Speaker 01

  Yeah, it was basically, people would smoke opium in the late 1800s, and then they would have these fantastical thoughts. So the original, like...

• 57:57Auren Hoffman?

  Oh, that's how it came. Okay, that makes sense. Yeah.

• 58:00Speaker 01

  That was what it was from. So it really wasn't like, you know, something that can't come true, or it was just more like you were out of your mind a little bit.

• 58:08Auren Hoffman?

  Yeah.

• 58:08Speaker 01

  And so ironically, I don't think anybody, no one really understands that, so it never came up. But I probably wouldn't recommend like drug references as company names. Maybe stick to the, you know, the children's books. That seems to be the trend of the day.

• 58:22Auren Hoffman?

  Last question we ask over, I guess, what is the conventional wisdom or advice that you think is generally bad advice?

• 58:29Speaker 01

  I mean, I generally don't like the advice of follow your passion. I've never really liked that advice because I've found that many people I know have amazing passions that are terrible businesses and they're able to apply the exact same like enthusiasm and energy to things that are much better uses of their time. So I feel like maybe, you know, enjoy your passions, but not necessarily follow them professionally.

• 59:00Auren Hoffman?

  You are a passionate pickleballer. You're a great pickleballer. You play a lot of pickleball. I don't know that you'd want to build a business in pickleball. Maybe you do, but I don't know that you want to build a business.

• 59:11Speaker 01

  Not people necessarily I know personally, but like I've read about people that have followed their passion with pickleball into some very odd businesses. And I'm not sure that's the best use of time or capital.

• 59:22Auren Hoffman?

  Why, why do you like pickleball? Why is it such an interesting game?

• 59:26Speaker 01

  You just took this, this podcast from like highly popular to, you know, how we're really going to get flamed.

• 59:31Auren Hoffman?

  No, it's super controversial. Yeah, yeah.

• 59:34Speaker 01

  My history is I was a competitive, random racket sports player and the racket sport I played was badminton. A lot of people don't know that pickleball was actually invented using badminton rackets and a badminton court and a badminton net. And they swapped out the badminton rackets for paddles. And eventually that became pickleball, but it is to the square inch, the identical court size as a badminton court. They eventually lowered the net, obviously. So to me, it fits exactly within a paradigm that I've always participated in, which is random racket sports. But I would say that underneath that, what a lot of people who don't play pickleball don't realize is it's probably the single greatest social sport that has been created in the last 50 years.

• 1:00:17Speaker 01

  I have done many offsites for my companies over the years and I use my, the single best athletic sport for a company offsite is bocce. And the reason is, is because you get four people in a very close space and they get to hang out for 15 to 20 minutes. And there's something about that cadence. Four people, limited amount of time, socially interacting and then switch. And pickleball gets the exact same dynamic. You can meet people very quickly, build relationships, you know, feel a part of a community and you just can't get that playing pickleball or tennis or other things in the same way at the same velocity. So I think it's the secret sauce of pickleball.

• 1:00:55Auren Hoffman?

  Yeah, one of the things I find is that. Almost always when I'm at a pickleball court, everyone else on the court is smiling and laughing. It's like the weirdest sport that you're just like, you're just have, everyone's just having a good time.

• 1:01:09Speaker 01

  Yeah, I have been told, to be fair, that I need to smile more. So I have, I've tried that. And then I told, I was told my smile was getting a little creepy. So I haven't found the right smile balance, but maybe you can help me with that.

• 1:01:22Auren Hoffman?

  Well, thank you, Todd, for joining us on Summation. By the way, for people who don't know, your name is T O D. It's three letters, so Todd with one D. I follow you at Todd, T O D on X. By the way, which is like an amazing handle. I don't even remember the story, but amazing handle that you've got, T O D on X. I definitely encourage our listeners to get you there. Also encourage listeners to engage with you on LinkedIn. As mentioned, you've got a ton of great content on LinkedIn. I knew this would be great. This has been a ton of fun. Thank you again for joining me on Summation.

• 1:01:50Speaker 01

  Thanks for having me.

• 1:01:51Auren Hoffman?

  One more thing before we go. I write a blog called Summation. It's the same as this podcast. The blog is about non-obvious idea sharing on business, talent, data, longevity, and random contrarian takes. If you like the conversations on this show, you'll probably like the blog. It's free. New content comes out twice a month. You could subscribe at orin.substack.com. That's orin.substack.com.