20VC: Investing Lessons From Observing Doug Leone and Bill Gurley, Why It Is Easier To Be Contrarian As A VC Than As An Angel & What It Takes To Run Tinder's Product and Revenue Alongside A Seed Fund with Jeff Morris Jr, Founder @ Chapter One

Jeff Morris Jr is the Founder of Chapter One, an early stage seed fund investing in blockchain assets, mobile and subscription businesses. Chapter One's Portfolio includes the likes of Lyft, Brandable, Crypto Kitties and many more incredible companies. However, Jeff is unique as Chapter One is only one of his hats, Jeff is also the Director of Product & Revenue @ Tinder and when asked to lead the revenue team they were ranked #17 in the app store. Within a year, under Jeff's leadership, Tinder became the #1 top grossing app in the world. In Today’s Episode You Will Learn: 1.) How Jeff made his way into the world of startups and angel investing, how that lead to his role as Director of Product and Revenue @ Tinder and a leading early-stage investor with Chapter One? 2.) Jeff has previously said, "apply an investor mindset to every product decision I make". What are the foundational questions involved? What are the inherent challenges of being so deep in product and investing simultaneously? What does Jeff think of VCs giving product advice to founders? What should the founders look for? What advice does Jeff give to the common question of "how do I get into investing and VC"? 3.) Why does Jeff disagree with the platform shift and the downturn in consumer mobile? What core innovations will drive the next wave of consumer mobile? Valuations in the space are often lofty, how does Jeff think about price and evaluate his own price sensitivity? How does Jeff think about scalable customer acquisition today in a world where incumbents dominate and price up the traditional channels? 4.) Jeff has said before that "investors treat crypto teams as if they are superhuman", what makes Jeff think this? How do their interactions differ than towards non-crypto teams? Why are lofty expectations dangerous for valuations? How does that put undue pressure on employees? Why are lofty expectations dangerous for product development? How do they affect the product roadmap negatively? 5.) How does Jeff approach the diligence aspect when it comes to investing? What have been some of his major lessons from making over 35 investments on the right diligence framework? How do shortened fundraising cycles negatively affect investor diligence processes? What can founders and investors do under these constrained time frames? 6.) Having worked with some of the greats from Doug Leone to Bill Gurley, what are some of the common traits in how the very best investors engage with founders? What were Jeff's personal learnings from seeing these greats in action? How did it change the way Jeff thinks about founder interaction and engagement? Items Mentioned In Today’s Show: Jeff’s Fave Book: The Catcher In The Rye, Googled Jeff’s Most Recent Investment: Radar Relay As always you can follow Harry, The Twenty Minute VC and Jeff on Twitter here! Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC.

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

• 0:00Harry Stebbings?

  This is the 20 Minute VC with me, Harry Stebbings, at H Stebbings 1996 on Instagram. And my word, I could not be more excited for our episode today. Our guest today, he's truly unique as he doesn't only manage to wear both operating and investing hats simultaneously. But my word, he does it with insane success. And I'm also probably his biggest fanboy on Twitter and you must check him out at JMJ. That might have given it away though, but I'm thrilled to welcome Jeff Morris Jr. to the hot seat today. Now Jeff is the founder of Chapter One, an early-stage seed fund investing in blockchain assets, mobile and subscription businesses. Chapter One's portfolio includes the likes of Lyft, Brandable, CryptoKitties and many more incredible companies. However, Jeff, as I said, is unique as Chapter One is only one of his hats. Jeff is also the Director of Product and Revenue at Tinder.

• 0:45Harry Stebbings?

  When asked to lead the revenue team, they were ranked number 17 in the App Store. Within a year, under Jeff's leadership, Tinder became the number one top grossing app in the world. Absolutely incredible journey and as I said, that's a must follow on Twitter at JMJ. I do also want to say a huge thank you to Andrew Farr at Density for the intro to Jeff today. I really do so appreciate that, Andrew. But before we dive into the show today, I want to talk a little bit about Hims, the new wellness brand for men. So I'm going to draw an interesting analogy, so stick with me here. But I think hair is quite like customers. When you start to notice hair loss slash customer loss, it's probably too late. And like customers, it's easier to keep the customer slash hair that you have than try and regain what you've lost. So it's time to be proactive about hair loss and head over to forhims.com.

• 1:28Harry Stebbings?

  The one-stop shop for hair loss, skincare and sexual wellness for men. But back to our analogy, and unlike churn, baldness is optional today. And Hims connects you with real doctors and medical-grade solutions to treat hair loss. And it's just so easy with the products even being shipped to your door. Even better though, listeners of 20 VC get a trial month of Hims for just $5 right now while supplies last. Go to forhims.com/20vc, that's F-O-R-H-I-M-S.com/20vc. And thanks to my friends at WePay. Let me introduce you to another cool player in this space we love, Pluto. Pluto is a payment management platform for small and medium-sized businesses that want to automate and streamline their payments. Trusted by more than 35,000 companies.

• 2:10Harry Stebbings?

  Pluto offers a suite of simple features to give users complete control in managing bills, invoices, vendors and customers all in one place. And with it, people can spend less time on admin tasks and more time growing their business. Learn more at P L O O T O dot com. And to learn how you can grow your revenue with integrated payments like Pluto did, visit we pay dot com forward slash Harry and we pay's got this awesome case study about how another platform, Team Snap, is working with WePay to make payments its number one revenue stream, more than its subscription business. Check that out at we pay dot com forward slash Harry. And finally, if Hims can transform yourself, Terminal can transform your company. As we all know the reality that hiring amazing developers is just simply really hard, but it's much harder if you're looking only in a 25 mile radius of your office.

• 2:54Harry Stebbings?

  And that's where Terminal comes in. Terminal is your dedicated partner in rapidly standing up remote technical teams. How do they do it with both speed and quality? Well, Terminal does this by focusing on everything necessary to successfully source, set up and support these teams. From physical elements like beautiful workspaces and equipment to ongoing resources like HR, payroll, legal, professional learning and development. But don't take my word for this. Take the word of Eventbrite, former 20 VC guest Hims and Dialpad, all customers and lovers of Terminal. And you can find out more today at terminal.io. But I'm now very excited to welcome my all time favorite on Twitter, Mr. Jeff Morris Jr. I cannot wait for this one.

• 3:36Speaker 01

  You have now arrived at your destination.

• 3:39Harry Stebbings?

  Jeff, I have to say, I am probably one of the biggest fans of your Twitter feed. So thank you so much for joining me today. A huge thank you to Andrew Farrar at Density. But it really is such a pleasure to have you on the show today.

• 3:50Speaker 02

  This is bucket list, Harry. I told you I listen to 20 minute VC on my job to work every morning. So a bit surreal to be on the show. I feel like I'm in Truman Show or something.

• 3:59Harry Stebbings?

  Well, I promised to pay you in crypto to thank you for that. But what can I say? I would love to kick off today with a little bit on you. So tell me, Jeff, how did you make your way into the world of startups, your position today with Tinder? And the fascinating element of coming to also found chapter one benches?

• 4:15Speaker 02

  Yeah, sure. So startups has been kind of a crazy journey for me. So. Actually went to USC Film School and I thought I was gonna be a producer for a long time. And I graduated USC Film School in 2009 and that was right when the recession was happening. So all the studios were shutting down and decided, hey, I should probably actually move to San Francisco and start working in tech. And from there, I just started busy hopping on Twitter and trying to make connections. And one of the connections I made was with the founder at Zerly, again, Beau Fishback. And so on March 11th, I still remember the day, he tweeted out at around 2:00 AM that he was looking to make his first hire. And I immediately sent him my resume and he ended up moving me to Kansas City the very next day. So I was suddenly working in tech, but it all started with Twitter for me.

• 5:00Harry Stebbings?

  I mean, that is such a good starting story. Tell me then, how did it come to be that you also form this phenomenal portfolio that you now have in the investing world? And what was that entrance then from startup employee to startup investor?

• 5:12Speaker 02

  Yeah, sure. So I was sitting, obviously, in an operator's seat. And I was doing a lot of diligence on different products that we were thinking about, using different SDKs, third-party applications. And there was a couple of founders who I met who were so talented that I ended up asking them if I could actually invest in their companies. And it's funny, when you start investing, like the moment you make your first investment and you actually sign that deal memo, you become an investor. So suddenly, when I signed my first deal memo, immediately after that, people suddenly started referring to me as an investor. And after that, I just became addicted. I think investing is kind of like getting a tattoo. It's like you get one investment and you just want more. So from there, really started to expand my expectations of myself and launch an AngelList syndicate about two years ago, which has become one of the most popular syndicates on AngelList.

• 5:57Speaker 02

  And again, from there, just had more leverage with entrepreneurs. So instead of going to coffee shops and getting 25K checks from angels, they can get one check from me for about 200 to 300K. And so it just, for me, has been a long kind of journey from being an operator and getting on one cap table and suddenly you're an investor. And now I'm on 35-plus cap tables and people refer to me as an investor.

• 6:18Harry Stebbings?

  But now I'm following on AngelList's testament to the incredible portfolio that you have built. But I want to start on the unique background there of both being an operator and an investor. It's not something that I have the joy of on the show. Often. So much to unpack there. So before we kind of really dive in, I want to start with something you've said to me before, which is I imply an investor's mindset to every product decision I make. How can I not start with this, Jeff? Can you unpack this for me? What are the foundational alignments and questions involved?

• 6:47Speaker 02

  Yeah, sure. So I think, you know, as a product manager, you're kind of managing a portfolio of products and really you have a limited set of resources. And there's only so much you can be doing at any given time. So in terms of looking at products, I do the same diligence process that I apply in investing to actually decide what products get built. So it's really understanding the risk return profiles of every product you can be building, doing forecasts, really kind of getting in the weeds on the impact relative to the cost to build. It's the same process with investing. You have a capital pool and you have to deploy it and how do you want to spend that capital? So it's really actually the same process. I think people talk about product management as being, you need to be fluent in software engineering, stats, marketing design.

• 7:26Speaker 02

  And one piece that I'd like to add to that list is is portfolio theory. So I think every product manager should have some sense of the portfolio of products they want to build. And really apply an investor's mindset to making those decisions.

• 7:37Harry Stebbings?

  No, I absolutely love that. Carlos, do you think being an investor has made you a better product person?

• 7:41Speaker 02

  Absolutely. When I hear ideas, I'm far more, I think skeptical is the wrong word, but I just want to ask more questions. And so just as I'm doing, when I'm looking at a company, I'm always asking questions. And so if someone pitches an idea to me, I really want to understand why they want to build that idea. I also want to understand if they've done the research in terms of what they expect the impact to be, what are their OKRs and metrics? I'm really starting to kind of evaluate different ideas just as an investor might be doing diligence on a company.

• 8:06Harry Stebbings?

  Can I pose an off schedule, but one I'm too interested by is the element of loss ratio where I struggle to see the alignment? If you're looking at a product portfolio, having a high loss ratio is, in my mind, wouldn't be so tolerated by leadership. And then compared to maybe a small seed fund or seed investing practice whereby high loss ratio is very much expected. How do you think about that?

• 8:29Speaker 02

  Yeah, I can. I think it depends on the product. So when you're kind of in optimization experiment mode, your loss ratio will be much higher and that's actually encouraged. So if you're churning out products and it doesn't Take that much time to build. You're learning a lot in a short period of time. You know, if you're going for a big kind of blockbuster product and you lose, at the end of the day, that's a big loss and a big hit to your company and your resources. So, you know, it just depends on the scale of the product and what you're looking to build. But I would say in terms of losing, if you're experimenting fast and you have a nimble team, it's okay.

• 8:59Harry Stebbings?

  Yeah, no, and I think actually also testament to the company behind you that kind of really inserts that risk-taking mindset. But much alignment and many mutual benefits, as you said there. Are there any inherent challenges of being both product specialist as you are, but also investor at the same time?

• 9:15Speaker 02

  Yeah, I think the biggest challenge is knowing your priorities. So my day job is to work at Tinder, to grow subscriptions, to grow revenue. And really, this is my core number one thing that I have to do when I wake up every morning. If you want to be an investor while you're operating, you have to find time. And so what I mean by that is I wake up at absurd hours and give up most of my weekends to invest. But you have to find those hours outside of work. And I think one thing that's been really helpful for me in terms of investing is just focus. So rather than being kind of a generalist, the only way I can have any edge in terms of competing with other venture capitalists is if I really go deep on one or two topics. And for me, that's been more on blockchain. And I think in terms of being competitive and having a point of view, really going deep on those topics.

• 9:58Speaker 02

  So when I'm going home at night, I'm pretty deep in Reddit forums on obscure topics related to the blockchain. And that's really how I have an edge, is just through focus and making more time.

• 10:07Harry Stebbings?

  Oh, and Jeff, if there's one thing you have, it's definitely an opinion going from the Twitter feed, which I love so much. But I do want to merge the two themes even further. Often investors offer teams product advice and strategy, wearing both hats and seeing both sides of the table, so to speak. How do you think about this investor to founder product advice? And what are the core questions maybe the team receiving the advice should be asking?

• 10:29Speaker 02

  Yeah, this is really personal and dear to me. So chapter one is a product fund. And what I mean by that is I love to actually roll up my sleeves with product teams and help with recruiting, prioritizing your roadmap, building relationships with your engineering team. And so I see a lot of investors who are on cap tables and give product advice. And really, at times, it can be, I would say, detrimental to the team's Progress. The one thing founders must know is that investors advice is another data point. So you have all these data points to consider when you're building products. And really, you shouldn't give it any extra weight because it comes from an investor. One thing you should really ask yourself is have these investors ever sat in the trenches and actually built products? If so, what types of products have they built? At the end of the day, you really need to know where your advice is coming from.

• 11:13Speaker 02

  Whenever anybody gives you advice and it's similar to investors. So I'd really kind of do diligence on your investors and figure out how they came to these ideas. And make the calls to yourself as to whether you want to take that advice and actually apply it.

• 11:24Harry Stebbings?

  Again, too interested not to ask, but what can I say, you're a unique guest. In terms of those investors asking those questions, and you mentioned the 200 to 300 K maybe check that you now pose into a round. How do you think about the co-investors that you invest with? And are there commonalities in the traits and characteristics of the people that you like to invest with?

• 11:43Speaker 02

  Yeah, I think the people I love to invest with just love products. So they have a really differentiated point of view on design. And most of the time, they really appreciate kind of intricacies of building complex products, especially for mobile. The products that I'm drawn to are heavy on design. And so generally speaking, the investors I invest with tend to place some extra emphasis on product quality.

• 12:05Harry Stebbings?

  Yeah, no, absolutely. I think kind of design is an often misunderstood or undervalued element of the evaluation process. But I do want to finish on one final alignment between products and investing. We're both history nerds and we've chatted before about history. So from your interactions with founders and investors alike, how does history play a role in their thinking and their approach?

• 12:25Speaker 02

  Yeah, I think the best product people I know have this really unique view on Silicon Valley history, or more generally just software history. And so when I think about dating as a category, as an example, dating's been around since the 1800s. Men used to take out ads in newspapers and it would pay 25 cents to advertise their profiles in newspapers, which is now about $5. But when I'm building products, I'm really digging deep into the history of the category that I'm in. You know, similarly, when I talk to investors who I really admire, they can just rattle off products from the late 80s, late 90s. And they know the history of our industry, so they have this reference. It almost feels like when you go to like a record store and you see someone talking about vinyl, like it's that same level of detail in terms of knowing the history of each record.

• 13:08Speaker 02

  And it's the same way with companies, people who are great investors, I find have that historical knowledge.

• 13:13Harry Stebbings?

  No, I totally agree. Instantly, the ones that come to mind there are the Colossians with Stripe and how they think about kind of the evolution of payments is incredible. But we did speak about opinions and your thesis and theme driven investing. So if we dig one layer deeper now into the art of investing itself, many people approach me wanting to become that investor. I'm super interested to hear, what's your response to the very common question, Jeff, how do I become an investor?

• 13:37Speaker 02

  Yeah, I think you have to have skin in the game. So, and it's so easy to do that now. If you're accredited, you can go on Angelus and invest a thousand dollars in a startup. And if you're not accredited, you can go on Robinhood and start investing in the public markets. You can invest in crypto as an example, but you really need to practice that skill. How to invest in just like products and art, you know, we're all kind of learning the game to actually play in it. And so if you want to become an investor, you really have to figure out a way to start playing. And once you kind of start to see more and more cycles, you'll start to identify what you're actually interested in. And more importantly, what you think you're good at.

• 14:11Harry Stebbings?

  I couldn't agree more. I always actually remember asking Peter Fenton's advice on how to get into VC. It was quite a lucky person to ask, I have to admit, but I asked him and he said, you want to invest, right, Harry? And I said, yeah, absolutely. That's what I want to do. And he was like, then invest. I don't know why you're talking to me. And I was like, huh, that's a great response. So very much agreed with you there. The first point though, that you mentioned was the picking the theme element. One theme that every investor actually seems to have written off now is mobile. The platform shift is the common wording I hear on the show. However, I know you have some different views. So why do you remain a believer in the next wave of investing in mobile? Let's start with that.

• 14:48Speaker 02

  Yeah, I think if you just look at global trends, so by 2020, there will be 4.78 billion smartphone users in the world. The average American adult spends two hours and 51 minutes on their smartphone every day. And more importantly, consumer tastes change. So if you look at entertainment, any form of media, tastes just change over time. So if you look at your phone and assume the applications that we use today will Be used in five years or 10 years, I would think that you're just wrong. And you know, I think it's hard to imagine beating the big players in the game. So you know, the Facebooks of the world, Instagrams, but pace will change. And entrepreneurs who are creative enough to identify where those gaps in the market will succeed.

• 15:25Harry Stebbings?

  Absolutely. In terms of kind of frontier elements like 5G, AR, VR. How do you think about those and are they platform shifts that remove us away from mobile opportunity? Or are they actually kind of integrated into the opportunity that mobile has over the coming years?

• 15:40Speaker 02

  I think they'll they'll integrate. The question as always is just timing. So if you look at the first wave of VR, it's easy to see that most of those investments didn't do so well. We're obviously pushing AR to become a real thing. And the question just comes down to timing. You know, I look at folks who push markets to become a reality. So folks like Adam Draper, who are more market makers and he saw what he did with crypto. And he's now trying to do it with AR and VR. You know, I think it's our role as investors to invest in the technologies we want to see in the world and to push them into existence. So rather than waiting for the markets to happen, I'd really challenge us to try and make those markets happen with our wallets.

• 16:17Harry Stebbings?

  You mentioned the element of market timing there. It's always the one risk that I get very nervous of when investing myself. How do you think about market timing risk and kind of your subsequent thought process around that when investing?

• 16:29Speaker 02

  Yeah, I think anyone who claims to know how to time markets, I think is crazy or just a little bit too self-confident. So I don't try to time markets. I do try and just back the best possible entrepreneurs in a given space. So if you think about AR, your job is to go find the best possible product line in that space and back them. And I don't try and time markets. I think that's a fool's game and something that I don't think I'll ever be good at. The one thing I do know is product. And so I rely on those instincts to inform where I place my bets.

• 16:59Harry Stebbings?

  Can I ask, how does your role at Tinder further help your expansive mindset when it comes to investing in mobile? And does it further inform your investing thesis in the space?

• 17:08Speaker 02

  It does, just because I see the power of mobile. I see once you kind of reach escape velocity, how incredible the economics can be, especially selling digital products. The margins are amazing. And once we create a product, we own the IP and it kind of lasts forever. So I'm always looking for mobile products where you own the IP and you can sell other subscriptions or not purchases. I think it's just the best business model ever. Tough to find, but once you find it, it's kind of the gift that keeps on giving.

• 17:36Harry Stebbings?

  I couldn't agree more in terms of the inherent attractiveness around the margins there. Another theme, though, that's drawn the world's attention and actually is one of the themes you mentioned of particular interest for you and we've seen over the last 12 months is obviously the world of crypto. Now, we chatted before about investing in crypto and you said investors treat crypto teams as if they are superhuman. Too enticing for me not to ask, but you did leave me on a cliffhanger here, Jeff. So what makes you think this?

• 18:01Speaker 02

  Yeah, I look at how investors treat crypto entrepreneurs and it's like they're superhumans. Then you actually meet with those teams, you go to their offices, you sit in their product meetings and they're having the same exact challenges as every other team. So I think, you know, in the last crypto wave, we saw just an absurd amount of money going to these teams. And then the question was, when will their product ship? Well, most of these products were being funded off of white papers. Many of them hadn't written a lot of code and suddenly you expect them to release products within a few months and it just won't happen. So I think the thought there is if you actually go and spend time with these entrepreneurs, they're having the same exact struggles as every other part of the industry.

• 18:36Speaker 02

  It's tough to hire in the crypto world. They're having the same exact challenges that we have. And so to expect them to deliver products faster just isn't realistic and we just need to be patient with the industry and see how these projects develop over time.

• 18:49Harry Stebbings?

  I mean, the nice thing is with some of the amounts they've raised, at least they have some pretty decent runway ahead of them. But you did also say to me before that these expectations from the investors are dangerous for both valuations and product. If we take it one by one, how do these expectations hinder first valuations?

• 19:05Speaker 02

  Yeah, I mean, I think when you see projects raising at 60 caps in seed rounds, it starts to make you question what's going on. And what it does in terms of employees is it puts, I think, a lot of undue pressure on individual employees to ship products faster than they probably should be shipping. You see quality suffer. I think over time we'll see how these valuations play out, but anytime you raise rounds, especially your seed rounds at absurd valuations, it just creates pressure. Within companies that is really tough for employees to grapple with, especially as they start to release products and and they don't necessarily hit the market in the way they want them to. So we'll see as these projects kind of struggle to find product market fit. It'll be interesting to see what that does to the psychology of the teams.

• 19:44Harry Stebbings?

  I'm too interested not to ask here. It's always a big dilemma for me in terms of kind of that search for product market fit in the early days. Always runway is the core determinant of how long you have to really iterate and test. How long do you always advise, suggest and feel comfortable with when investing for the runway that a company has? Is it a hallowed eighteen months? Do you go for the Jeff Clavier thirty six months? I often feel twenty four is optimal. Where do you sit on this desired runway?

• 20:09Speaker 02

  Yeah, I think it just depends on each company. A lot of it depends also on the CEO and whether your company, he or she can raise around. There's some CEOs, when they tell the world that they're raising money, they can just do it really quickly. So I'm not as concerned about runway in those cases. But if it's a first time entrepreneur, I do want to see twenty four plus months just to give me the assurance that they have time to build their product before they start raising money again.

• 20:31Harry Stebbings?

  No, absolutely. In terms of the rounds themselves, we spoke about the valuations there for crypto projects. We've also seen these rounds done at speeds never seen before. What's the effect of such kind of rapidity of round, do you think?

• 20:43Speaker 02

  Yeah, I think what it does is it forces venture capitalists to make decisions that aren't entirely informed. So if you actually read a white paper, it's basically thirty pages of really technical information that requires diligence, which you couldn't possibly do in in a couple of days worth of time. And so what I'm seeing a lot is investors making decisions that question whether they're actually reading the white papers or doing diligence. And the downstream impact is that every other investor has to make a fast decision because the rounds are moving so quickly that if you want to get in, you just have to participate without basically having enough time to do that diligence.

• 21:15Harry Stebbings?

  Can I ask you again, another off schedule question, but being the biggest fanboy there is of you, I feel I have the right. What is your kind of framework for diligence that like I have friends who have very specific framework, be it five diligence calls, extensive time with the team? How do you think about the framework for diligence and is it the same for all projects? How do you think about that?

• 21:35Speaker 02

  Yeah, it's much different for every project. I think whenever there's a working product, I become a Customer that product for at least a couple of days and really dig into the product. The benefit of working at a place like Tinder is if there are companies that are doing something outside of my domain, I can normally pull in an expert. So a good example is when I'm looking at ML or AI companies, I have a data science team at Tinder and a machine learning team who I can pull in to help me. And so there's someone on my team named Nick Wheel, who's done billions of calls for me in that space. So really, I'm trying to dig into the product, but also find people to help me. And being an operator, you have a lot of support in that realm.

• 22:09Harry Stebbings?

  Yeah, Kar, do you also find that founders just feel so much more naturally aligned to you, given your current operating hat? And there's that kind of much more warmth in the relationship earlier on?

• 22:20Speaker 02

  Totally, yeah. The conversation is much like you and I talking right now, and we're very much equals. And I think the conversations are also much more specific. So we're talking about retention curves. We're talking about churn on a very specific basis. And the conversations just get really detailed and in the weeds. And I think the founders kind of look at me as just another person on their team who they can access when they need help.

• 22:41Harry Stebbings?

  No, absolutely. We mentioned there the speed of rounds there for crypto projects. On rounds more generally in fundraising, as you know, often VCs ask the question, tell me, who else is involved in the round? Who's joining this? And founders often get quite uncomfortable and unsure at this point. So is there a right answer in your mind? And how do you often see founders go wrong here?

• 23:01Speaker 02

  Yeah, I think those initial calls are really about building trust and transparency. And so if you know an investor is actually interested in your company and is talking to you for the right reasons, being asked the question, who else is investing in your round, I think is a totally fair question. And on the investor's side, like you really want to know the round dynamics. You want to know who's going to be co-investing with you because ideally you will build a relationship with those investors. And so I've seen a lot of entrepreneurs who kind of shy away from that question. And it honestly boggles my mind, especially on the third or fourth call. At that point, you've established a relationship and you should just be totally transparent on both sides.

• 23:36Harry Stebbings?

  No, I couldn't agree more in terms of that transparency and kind of just further engenders that warmth within the relationship. But moving kind of one step before the quickfire round, and I do have to ask this, because you've worked with some of the greats in venture, from Leoni and Gurly. Seeing them in action amongst others. So what are the common traits in what you've seen of the truly special investors? And how they engage with founders and interact?

• 23:59Speaker 02

  Yeah, I mean, so I grew up going to school with Doug Leone's daughter and I got to know Doug just through growing up. And investors like him and Bill Gurley, Tim Draper, they really make you feel like you're the center of your world for a moment in time. And what I mean by that is most of them are taking notes and they're actively listening. So they're really digging deep into what you are there to talk to them about. And it seems like for that brief moment in time, their entire focus is on you. And so those meetings aren't always long, they're normally actually pretty short. But for that 10, 20, 30 minutes, you're the focus of their attention and they want to get to know you. So I think what I've learned from the best investors is just being a really great listener and also the power of taking notes. And so there's something when someone's taking notes as you're talking, it makes you feel appreciated. And that's something that I've kind of taken away from them.

• 24:42Harry Stebbings?

  No, absolutely. Can I ask, did it change the way that you thought about investing and engaging and interacting with founders yourself?

• 24:49Speaker 02

  Yeah, I think it's really about getting to know someone's background on a very deep level. And so rather than being transactional, like actually figure out what people like to do in their spare time. Really figure out their story, where did they go to high school, where did they go to college, where did they study? Ask like very specific background questions, just so you can get to know somebody because you're really developing their relationship. And you know, you wouldn't go into any relationship and just start talking about business. You need to get to know people better.

• 25:14Harry Stebbings?

  No, I couldn't agree with you more. Tell me, one other element that's often attributed to the most successful is contrarianism. So what does contrarian investing mean to you, Jeff? Let's start with that.

• 25:24Speaker 02

  Yeah, I mean, I think it starts with the fact that you think differently about the world than everybody else. That's the obvious answer. I think the practical way to become a contrarian is just to dive really deep on some topic. And so I talked about crypto as an example, and you know, if you go deep enough on the internet, you can become a contrarian just by digging more than other people. And so I think being a contrarian is this thing that people have glorified throughout the past few years. And really what it means to me is you just wanted to become an expert and you're so obsessed with some topic that you decided to learn more about it than everyone else. That's really what it comes down to. I think everyone wants to claim they're contrarian, but really it's about developing. That few other people have and that's the thesis that gives you an edge.

• 26:03Harry Stebbings?

  Final element, and it really is episodes like this that made me really hate the day that I called it the twenty minute VC. But tell me, how do fund structures then encourage or allow for contrarian investing to be forgotten when gone wrong?

• 26:17Speaker 02

  Yeah, I think if you look at the life cycle of a venture fund and the sizes of these funds, it allows you to be Contrarian on a selective basis. So if I placed a bet in two thousand nine, that was contrarian. If it worked out, great. If not, people probably forgot about that. So in terms of the larger funds, if you're placing more bets, it allows you to be Contrarian in more situations and a lot of times without a lot of accountability, I would say. As an angel investor, it's a lot more risky because it's your own money. And if you make a bad bet, that's money you'll never see again. And you know, most of us aren't making management fees and we're kind of getting by by the returns that we make for ourselves. So it's a much different outlook on being contrarian. I feel like you have to have a lot more confidence as an angel to be Contrarian.

• 26:59Harry Stebbings?

  Now, I would love to tie this next question to what we were just talking about in terms of contrarian investing. But I realised that I have to ask it and I've got no reasonable way of tying it to anything. So I'm going to ask it anyway. And it's about price sensitivity because it's always a passion point for me. For you in terms of your thinking, would you align with Peter Fanton's don't get hung up on price, it's a mental trap? Or do you take a maybe a more rigid view on price sensitivity and willingness to engage on loftier prices?

• 27:26Speaker 02

  I would agree with that. I think you need to focus on building an amazing product that has value. Pricing is something you can figure out after you discover or unlock some amazing value for your customers. You know, the one piece on pricing which I believe is true is you can always charge a little more than you think customers are willing to pay. And I saw Adam Draper mention you can charge four X the amount that you think customers are willing to pay. I think that's probably a little bit high, but I do think we underestimate what the willingness to pay for a great product is at times.

• 27:53Harry Stebbings?

  Yeah, absolutely. And for you as an investor, how does it come into your mindset when evaluating deals?

• 27:59Speaker 02

  I think for an angel looking at companies, you can't be too price sensitive because really the opportunities are fewer and harder to find. So when I see a deal or a company that I love, I'm normally Not as price sensitive just because I want to get in business with that entrepreneur and I want to go along for the ride. And so for me, it's less about being price sensitive because also you're not only leading the round and kind of making the terms of that round. So I think when you find a great company, you have to back them and if the price is a little high, you kind of have to accept that as being part of the risk you take.

• 28:30Harry Stebbings?

  For sure. No, I agree with you there on that kind of elasticity. I do want to finish it, as you know, on the quickfire round. You've heard it before on the drive in to work. I say a short statement, you give me your immediate thoughts, about sixty seconds per one. Are you strapped in, Jeff?

• 28:43Speaker 02

  I am so ready for this.

• 28:45Harry Stebbings?

  Okay, so your favourite book and why? What must I be reading?

• 28:48Speaker 02

  I love reading, hence the name Chapter One, so I might break rules and name two books. The first book's Catch on the Rise, so to me, Holden Caulfield is the ultimate outsider misfit. And that's a trait I look for in entrepreneurs. I read this book in high school and immediately started writing myself and it really taught me how to write. And the other book is called Google by Ken Aletta. And funny stories, I actually optioned the film into your TV rights to this book a long time ago. And the reason I love this book so much is that it shows the impact of Bill Campbell on Google, Apple and so many other companies. Bill was actually my middle school football coach and he's to me, one of the most legendary leaders in our entire industry and someone I really admire.

• 29:24Harry Stebbings?

  I mean, Bill being your middle school football coach has to be one of the most awesome experiences ever. That is, that's a sensational and cool thing. Tell me, career highlight for you so far and why, Jeff?

• 29:35Speaker 02

  Yeah, for me, it was really building Tinder Gold. So that's our most premium subscription tier. And it was amazing team effort. I think what it did for Tinder though is it really put us on the map and made people take us a lot more seriously as a product team. So Tinder and the monthly consumers was a fun app. We're now the number five top grossing app of all time. And we finished number two in the place to an app store behind Netflix last year in terms of top grossing apps. So I think Tinder Gold was what really put us on the map and I'm especially proud about that product.

• 30:00Harry Stebbings?

  What advice do you hear most often that you maybe disagree with?

• 30:04Speaker 02

  I think the advice that you need to be in Silicon Valley to build a company is a complete lie. I grew up in Silicon Valley and now I'm in Los Angeles with Tinder. You know, great companies and ideas can come from anywhere. And I know many VCs would prefer to keep companies in their backyard, but we really need more diversity of thought. That's not going to come from backing entrepreneurs in one single location. So I would encourage entrepreneurs to get outside the valley and build companies and let the investors come to you.

• 30:29Harry Stebbings?

  How to forecast expected value of a product?

• 30:32Speaker 02

  Yeah, I think it really comes down to knowing the number of consumers in your target market. So sizing the market and then you have to make some assumptions regarding the proportion of people you expect to buy your product. And sometimes these assumptions are very hard to make. Really recommend looking at market comps, something that are hard to find for a lot of entrepreneurs, especially building products in new industries. But as much as you can find comps, it's really valuable. And then you need to really make some judgment of what you think the patterns of repeat purchase behavior might be. And that will help you understand your LTV, which will inform your tax. So we could dive a lot deeper in this. I think it would probably be a full episode.

• 31:05Harry Stebbings?

  Well, I mean, I think that's a suggestion for round two with the Mijitos. But I want to steal from one of your tweets now. I told you I was a big fanboy. If you had to make a career decision, who would you call for advice?

• 31:16Speaker 02

  I would call my grandfather. So my grandpa is a guy named Mervin Morris. He started Mervins, which is a department store. He grew to 500 stores. And to me, he's the ultimate entrepreneur, someone who I just trust their advice. He's the most straightforward, honest person I've met and just gives me a really practical, straightforward advice.

• 31:34Harry Stebbings?

  How to pitch products to the company the right way?

• 31:37Speaker 02

  I think it's about knowing your audience. So if you're pitching a blockchain startup, you probably shouldn't be cold emailing an investor who focuses on green tech. You know, I often receive pitches that are just way outside my area of focus. And pitching a startup is really a sales game. So as an entrepreneur, you really need to target the right investors. And so often I see entrepreneurs forget this and they just take a spray and pray approach, but they don't really consider who they're pitching to.

• 31:59Harry Stebbings?

  And then I want to finish with your most recent publicly announced investment. And why did you say yes, Jeff?

• 32:04Speaker 02

  Yeah, so Radar Relay was the one I announced recently. It's a decentralized exchange. They've done over $150 million in transaction volume during their beta. They have users in 150 countries. And more importantly, Alan Curtis, who's the CEO, is a brilliant product mind. And they've really taken a product-first approach to building the exchange, which is pretty rare in the crypto world. And so I was really happy to back Alan, just based on the fact that he loves product as much as I do.

• 32:28Harry Stebbings?

  Jeff, next time I'm going to be out in LA and we're going to do this in a hot tub overlooking the ocean with a mojito. And it's going to be a very special round two. Is that a deal?

• 32:37Speaker 02

  You're talking to me. That's what I'd love to do. So yeah, let's make it happen.

• 32:43Harry Stebbings?

  I mean, what can I say with that? I just cannot wait for round two. And if you'd like to see more from Jeff, which clearly is a must, then you can find him on Twitter, @JMJ. Likewise, I'd love to see you behind the scenes here at the 20 Minute VC. You can do that on Instagram, @HStubbings1996 with two Bs. It'd be great to see you there. But before we leave you today, I want to talk a little bit about Hims, the new wellness brand for men. So I'm going to draw an interesting analogy, so stick with me here. But I think hair is quite like customers. When you start to notice hair loss slash customer loss, it's probably too late. And like customers, it's easier to keep the customer slash hair that you have than try and regain what you've lost. So it's time to be proactive about hair loss and head over to forhims.com, the one-stop-shop for hair loss, skincare and sexual wellness for men.

• 33:27Harry Stebbings?

  But back to our analogy, and unlike churn, baldness is optional today, and Hims connects you with real doctors and medical-grade solutions to treat hair loss. And it's just so easy with the products even being shipped to your door. Even better though, listeners of 20 VC get a trial month of Hims for just $5 right now while supply is last. Go to forhims.com/20vc, that's F-O-R-H-I-M-S.com/20vc. And thanks to my friends at WePay, let me introduce you to another cool player in the space we love, Pluto. Pluto is a payment management platform for small and medium-sized businesses that want to automate and streamline their payments. Trusted by more than 35,000 companies, Pluto offers a suite of simple features to give users complete control in managing bills, invoices, vendors and customers, all in one place.

• 34:12Harry Stebbings?

  And with it, people can spend less time on admin tasks and more time growing their business. Learn more at P-L-O-O-T-O.com. And to learn how you can grow your revenue with integrated payments, like Pluto did, visit wepay.com/harry. And WePay's got this awesome case study about how another platform, TeamSnap, is working with WePay to make payments its number one revenue stream, more than its subscription business. Check that out at wepay.com/harry. And finally, if Hims can transform yourself, Terminal can transform your company. As we all know the reality that hiring amazing developers is just simply really hard, but it's much harder if you're looking only in a 25-mile radius of your office. And that's where Terminal comes in. Terminal is your dedicated partner in Rapidly standing up remote technical teams. How do they do it with both speed and quality?

• 34:57Harry Stebbings?

  Well, Terminal does this by focusing on everything necessary to successfully source, set up and support these teams. From physical elements like beautiful workspaces and equipment, to ongoing resources like HR, payroll, legal, professional learning and development. But don't take my word for this. Take the word of Eventbrite, former 20 VC guest Hims and Dialpad, all customers and lovers of Terminal. And you can find out more today at terminal.io. As always, I cannot thank you enough for your support and have a very special Thanksgiving.