20VC: The Roblox Memo: First Round's Chris Fralic on The 17 Year Journey to Build a $41BN Market Cap Company, Why It Is Way Harder To Increase Ownership Across Rounds Today & What Happens Post SPACMania

Chris Fralic is a Board Partner @ First Round Capital, one of the leading seed-stage venture firms of the last decade with investments in the likes of Uber, Square, Notion, Warby Parker and more. As for Chris, he has led deals in Roblox, Ring.com, HotelTonight, Rec Room and many more incredible companies. Prior to the world of venture, Chris was VP of Business Development at social bookmarking and tagging company del.icio.us through the Yahoo! acquisition. He was also one of the early employees at Half.com and after the eBay, acquisition spent six years with eBay in a variety of business development, media and entertainment roles. In Today’s Episode with Chris Fralic You Will Learn: 1.) How did Chris come to first meet Dave and the team at Roblox? Where was the first meeting? Who was in attendance? How did Chris feel post that first meeting with the team? 2.) Turning the company down: Why did First Round turn down Roblox on first look? How does Chris assess his own relationship to price? Through what mechanism does he determine whether to pay up or not? How does Chris retain relationships with founders when saying no? Does Chris believe you can buy up ownership post first check today, with the capital proliferate we have? 3.) What does Chris mean when he discusses the lessons from First Round's portfolio when it comes to "slow bake vs fast bake"? How did the First Round partnership analyse the Uber, Square, Roblox portfolio at the time? Through what framework does Chris think about reserves management given the challenge of "slow bake companies"? How does he address it today? 4.) What does Chris mean when he discusses the hype to substance ratio? Why is it more important than ever today? What does this mean for startups? How can startups with a low hype to substance ratio raise funds at good prices? What advice does Chris have for them? How does Chris think about the importance of firm and individual brand in venture today? 5.) How has Chris seen Dave evolve as a leader and CEO over time? What caused the changes in his leadership style? What moments stand out as the most challenging moments to Chris in the scaling of Roblox? Who does Chris believe are the behind the scenes rockstars that made Roblox possible? As always you can follow Harry and The Twenty Minute VC on Twitter here!

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

• 0:00Harry Stebbings?

  This is 20 VC and my favourite show of the month, The Memo. This is the show where we unpack the investing rationale associated with the investment made in a specific breakout company, all aligned to the core investment memo written at the time of the investment. Today, we're focusing on none other than Roblox and First Round Capital's early investment in the company. Joining me for the discussion, the man that made it happen, Chris Fralic, now board partner at First Round Capital. At First Round, Chris has led deals in the likes of Roblox, Ring.com, Hotel Tonight, Requiem and many more incredible companies. But prior to the world of venture, Chris was VP of Business Development at social bookmarking and tagging company Delicious through the Yahoo acquisition. He was also one of the early employees at Half.com and after the eBay acquisition,

• 0:42Harry Stebbings?

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• 2:10Harry Stebbings?

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• 2:53Harry Stebbings?

  They've grown with over a thousand startups like Scale.ai, Lattice and OpenAI, and no one can help you scale like they can. If you want to let Pilot focus on your financials so you can focus on growing your business, go to pilot.com forward slash two zero VC and get 20% off the first six months of core or select bookkeeping plans. That's pilot.com forward slash two zero VC. But enough from me tonight, I'm thrilled to head into our latest The Memo episode with Chris Fralic, board partner at First Round Capital.

• 3:28Speaker 01

  You have now arrived at your destination.

• 3:31Harry Stebbings?

  Chris, this is such a joy to do, my word. I mean, last time we met, it was at the Barclay and sadly in COVID world, it's over Zoom. But I'm so excited for this day, so thank you so much for joining me.

• 3:40Speaker 02

  Thank you for having me, Harry. It's a pleasure.

• 3:42Harry Stebbings?

  Now, I do want to dive straight in and say we're going to unpack the original investment really for you with Roblox, you know, way back in 2007. So I want to start with some history with some story. So how did you meet the team? Where was the meeting? Can you kind of paint that picture for me?

• 3:55Speaker 02

  Sure. So we were introduced in the fall of 2007. The first thing I did, given that it was a game, was I asked my son to take a look at it with me. So he and I started playing. I was introduced to the CEO, David Bazooki, November 2007. And for the next two months, we dug into the business and my partners took a look with me. We got interested, we got close, but sadly.

• 4:20Speaker 02

  Or at least initially for us, we decided not to invest in January of 2008. A lot of it was based on the price. Your listeners might laugh, but a $10 million valuation seemed outrageous, was way out of our normal range back then. And the game really looked raw. It was not anywhere near what it looks like today. Very blocky, broke a lot, hard to get going with it. And we passed, but luckily did it in such a way that I kept a relationship with Dave. Very glad that my son Max kept playing almost every day and I would watch him and play with him. And it gave me a good reason to stay in touch with Dave and to keep seeing him on trips to California and getting updated on the business. And luckily about six months later,

• 5:02Speaker 02

  we were able to make our first small investment and then later on did a larger investment.

• 5:07Harry Stebbings?

  So basically the takeaway is I need to have children to determine the grades.

• 5:12Speaker 02

  You do. I would, I would highly recommend that, especially if they're really into gaming and you're fortunate enough to be introduced to a future awesome company.

• 5:20Harry Stebbings?

  I love that. I love that. I do want to ask you, because the striking element for me is, you know, with the proliferation of capital that we have today, the time in between, as you said there, you know, you said no first and then you ended up, you know, writing the check, you know, six or eight months later. Today with so much capital in market, you often just don't have the luxury of being able to have that time to build the relationship. How do you think about relationship building today with such compression of around timelines?

• 5:44Speaker 02

  I think some things are different then and now. There was more time to get to know someone back then than you do now, particularly in a COVID world where things are done in days or weeks over Zoom. And we did miss the first round of Roblox and came in a little bit later in between the next round that we ultimately led and when I joined the board. But I think something that remains true is you can keep a relationship through a no. Even though we passed, it wasn't like that was the one opportunity for a transaction and it either worked or didn't. And then if it didn't, we never spoke again. We kept in touch. It was barely a speed bump. Like Dave acted like it didn't really matter that much that we passed initially. And I was glad and lucky that we had enough of a relationship to keep.

• 6:30Speaker 02

  In conversation and I think that might have surprised him a little bit and caused him to open up the kimono even more. And started showing me his business plan, which I remember distinctly was on version eighty seven of a company that was less than two years old. And the numbers were just going up and to the right and my son kept on playing. So we had this unique unfair advantage to know what was going on. Both from financial perspective of a potential investor, but also from a player who was super passionate. And kept the relationship with Dave was how we managed to get our foot in the door with the first smaller initial investment.

• 7:03Harry Stebbings?

  Can I ask also, you mentioned the element of the price being a sticker there for you and a challenge to get over. You know, I'm really struggling right now when we look at pricing environments today. How do you determine when to pay up versus when to stay disciplined? And how do you think about your own relationship to price?

• 7:18Speaker 02

  Yeah, I think we might have been fortunate back in those days to have made a really poor investment decision. Missed one of our biggest of all time with Twitter when we were all early users. We had an opportunity to invest at first round and didn't primarily, really only because the price was twenty million dollars. I remember the conversation where we said, it just doesn't fit our fund model. Didn't feel right at the time and clearly was a big miss for us, but it informed us to not get hung up on price. For what we think can be breakout companies. And so one example where we learned and invested at an even higher price. Was with Square, Jack Dorsey's then new company. And another example would be Roblox.

• 8:02Speaker 02

  We invested at about an eleven million dollar valuation when we first came in and then we led around. And put in about three million dollars at what was around a forty million dollar valuation, which was very high. But we could see the traction and the revenue and that again, it turns out to be one of the best investments that we ever made.

• 8:20Harry Stebbings?

  I mean, looking back now, what an investment that is. And if you're going to break the rules, that is one to break the rules on. I do want to dive into some lessons though, because with these kind of incredible journeys, there are several lessons that one can take from them. And one that you said is the slow bake versus the fast bake. And you know, how can I not dive on that element? What did you mean by the slow bake versus the fast bake in? With F R C here.

• 8:41Speaker 02

  Yeah, well, I think part of it is when you look back at a vintage of companies or a fund, it's not always obvious who the winners are out of the gate. Very clearly for us, in the case of First Round Capital Two, when we made our last investment in that, I distinctly remember looking with our partners, looking back and saying, are there any really great companies in this fund? And it turns out that fund had Uber and Square and Roblox in it. And we didn't know it at the time. Now, Square and Uber became what they're known for today much more quickly. And people have been excited about them and the evaluations have reflected that for a long time. Roblox was almost under the radar for probably 10, certainly nine or 10 of the 13 years we've been involved.

• 9:25Speaker 02

  You could very much call that a slow bake. It was quietly, but still consistently growing, but always under the radar. And I think one of the lessons is we've learned that some of these companies just take a longer time to bake and to percolate and become what they can be.

• 9:41Harry Stebbings?

  So can I ask that? The question is like, when you looked at that portfolio and you're like, hmm, not sure. But as you said, they're some of the most generational transforming companies that we've had over the last two decades. How do you think about reserves management, given the fact that you have to proactively forecast ahead of time when you don't actually know how the portfolio is going to bake in itself? How do you think about reserves management with that in mind?

• 10:02Speaker 02

  Yeah, I think it's changed over time. And fortunately for us and our thinking around Roblox was we were making relatively small bets. Our initial investment was 500 K Roblox or so, and that was probably on the high end of an average investment. And we were starting to think about our best companies and opportunities. Where could we put more capital to work? How could we deploy more into the best companies and buy up our ownership? And that's what we were able to do at Roblox. With that extra $3 million, we were able to almost triple our ownership percentage. And then in subsequent rounds where we didn't participate were diluted down, but still in the end managed to have over 5% of the company at their direct listing.

• 10:44Speaker 02

  I think what's shifted over time at First Round and in other funds is recognizing you may not Have that opportunity to buy up down the road, so you better get your ownership position upfront. And so average time to make a decision drops. Average check size and valuation has gone up dramatically. I think that's sort of the game that's being played more is buying more ownership upfront with bigger checks.

• 11:07Harry Stebbings?

  Well, that goes to something that I have to ask, which is I see a ton of managers still today who like, you know, kind of spray and pray and then say they can double down on their winners. And I'm just like, actually, I don't think you have that luxury in today's capital proliferated market, because your big multi-stage players come in and preempt rounds so much faster than they ever have done before. Do you agree with me in saying, actually, it's in 99% of the cases not possible to buy up post initial?

• 11:28Speaker 02

  I think it's way harder for everything you mentioned. And there's so much more capital that's around, so many more firms. Again, like I think Roblox was unique in being under the radar company for so long, whereas anything that's got traction and visibility will have swarms of investors circling them and, you know, potentially preempting or not making it easy. Or you're going to have to fight to maintain your pro at a much less build your position.

• 11:55Harry Stebbings?

  You mentioned the slow bake of Roblox there. My thinking there is I totally see you on the slow bake. How do you advise founders then, when it is potentially a slow bake profile company, but they still need to raise funding and generate that hype within VC markets? How does like a slow bake company do that efficiently, do you think? And were there any lessons from Roblox's subsequent fundraisings that maybe suggest?

• 12:15Speaker 02

  It is a unique story, but there's certainly lessons to be learned from it. I think Dave Bazooki is one of the greatest founders and leaders of our generation, certainly that I've ever personally worked with. From a product vision, from seeing that this could be the platform for human co-experience in the metaverse and millions or, you know, eventually hundreds of millions or even billions of people playing and communicating and building together. He's had that vision from day one and really never wavered from it. Even in the face of growth being relatively slow at some times, or certainly linear, and investors just not paying attention. There were a lot of times when the company was missing some numbers, when the company.

• 13:00Speaker 02

  Couldn't find hires that would stick and last when financings didn't come together. And Dave never wavered once. And even to the point when there were acquisition offers for the company. And he knew, he always knew that it could be bigger and better on its own. And he never wavered. And to be honest, I didn't share that conviction all the time. I didn't think it could be as big as it is now, but I think he always did.

• 13:25Harry Stebbings?

  I love that. Can I ask, when you look at the bumps, you said before about kind of bumps in the road, like any company has, every company has bumps. What do you think was the most significant bump where you were like, oh shit, Josh and FRC team, fuck, this happened?

• 13:39Speaker 02

  I would say as the company was going public, I was going back and looking through some notes of my takeaways from board meetings and just general updates. And there were periods of big misses on the financial side. There were key hires that weren't working out as hoped, needed to be replaced. And in particular, like we went out for a fundraise and couldn't get anybody interested. So that that was a tough period, but again, it never seemed to overly faze Dave. And he had complete conviction on what Roblox could be in spite of all those facts and never stopped. And then the numbers caught up and the reality caught up. And the world started to get a sense of what Roblox really, really was.

• 14:21Harry Stebbings?

  Speaking of kind of numbers catching up, it makes me think of another lesson that you've said before, which is like hype versus substance. And your partner Josh has spoken about the hype versus substance ratio. I love a good ratio. So help me out here. What is the ratio and how do you think about this relationship between hype versus substance?

• 14:38Speaker 02

  Yeah, I think in the current startup in tech world, that hype rules the day. Whether it's social media or tech news or a fundraising or a famous investor. Like there's a lot of forces that drive the perception of a lot of companies super high. If you look at the ratio of that to their actual substance, like what's happening in the business. Then Roblox is a fairly great example of a company that had almost no hype, an incredible amount of substance. And if you knew what the numbers were and where they were going. You knew what a business this was, but no one else knew it. Like, I remember really being on the lookout for validation of this, right? Like, I remember when the first child of a friend at their house

• 15:22Speaker 02

  knew what Roblox was and heard that I was involved and almost ran across the room to say, "Do you know BuilderMan?" That's Dave Bazooki's username on the site. I remember in 2017, when Mary Meeker put out her Internet Trends Report, which she does every year, and Roblox showed up on it with a growth chart, and it had hit 50 million monthly active users. And I quickly retweeted that out. I was so excited that Mary Meeker found Roblox in her chart. And it was just getting a little bit of hype out in front of what was amazing substance and growth. And Josh had said, like, it's a great example of how they were kind of upside down on the substance to hype ratio.

• 16:03Harry Stebbings?

  Can I ask you a tough one, which is like, when you have companies like Roblox, which do fundamentally change the game in so many ways, how do you prevent past successes or failures influence future decision-making? In terms of like, you know, gaming platforms now, whenever you meet them being all paved with gold, because you see how good it can be with Roblox. How do you prevent that infiltration?

• 16:22Speaker 02

  Yeah, I think you can use it positively, and you need to be careful to not have it impact you negatively. Like, so I'll give you on the negative side, I work with Josh at Half.com. We were acquired by eBay, so I've spent a lot of time in e-commerce, person-to-person e-commerce, and really felt like I knew it very well. And remember, we had the opportunity to look at Etsy, and I was almost dismissive, or I just thought of it as this little niche of handmade goods or something. And I think I was jaded. I mean, I thought I knew so much from eBay that it kind of turned me off to the whole category of what might take them on. But I would say, on the positive side, we're fortunate to be investors in a company called Rec Room,

• 17:05Speaker 02

  which started out as a pure virtual reality play, but with avatars and shared worlds and building experiences together. I could see early on it had a lot of similarities to Roblox. They have played that out in even Faster level and had some hype along with a lot of substance. To your point about preemptive rounds, Sequoia and Index just led a round that valued that once little company Rec Room at over a billion dollars. So I would say being in Roblox was helpful for me to see what this next generation VR originally version could be, and they're kind of so far living up to that. So that's what I've learned.

• 17:46Harry Stebbings?

  Amazing news on the Rec Room round, but you mentioned preemptive rounds. And I have to ask, because it's consistently happening within the 20 VC portfolio, which is always great and always happens within the FRC too, which is the rise of preemptive rounds are just so, so common these days. My question to you is, how do you advise founders on whether to take the preemptive round and engage versus actually when to stick to your knitting, keep your head down on products and focus? What does that look like?

• 18:10Speaker 02

  I think it's shifted. Generally, the advice is to take the money when it's offered. If it's serious interest, it's smart to spend a little bit of time to see if it's real and if it's something you want to consider. I think the world has changed pretty dramatically with how many dollars are around and how many funds. So I think companies can be overly distracted by it, but in general, if the market is offering you capital at an attractive price, it's generally a good idea to engage with it.

• 18:36Harry Stebbings?

  Tell me, this is a really hard one, but Bill Gurley said on the show that his biggest challenge is the bunny proliferation of capital that we have today and the oversupply of capital. Do you think that the oversupply of capital today has helped you and FRC more or hurt you more? And it helps obviously in terms of huge amounts to follow on into your companies and hurt in terms of just 400 seed funds now?

• 18:59Speaker 02

  I would probably say it's a little bit of both. Like at one point, we were as a full-time institutional seed stage fund back when Josh started it, probably in 04, 05. And when I joined in around 06, there were maybe one or two handfuls of firms. That focused on that. It was a very short list and a pretty unique positioning in the market. And so we were able to see most every deal that would fit our profile and were known in that marketplace. So the challenge is now there's hundreds and hundreds and hundreds of firms that would fit that profile and billions and billions of dollars. The good side of it is that follow on capital is much more available.

• 19:42Speaker 02

  The other big change is just that the public markets are open. Roblox is one great example that Bill Gurley is extremely excited to see that they went out in a direct listing versus an IPO process. He's been railing against mispriced IPOs and dollars left on the table and conflicts of interest in that process forever. And I think Roblox showed what can go right in that process. If you're able to do a direct listing has a lot of benefits if the company doesn't need the cash and can direct list, that works out well. But just the public markets being open to the level that they are today is a phenomenon I just have a hard time getting my head used to because most of my investing career, you could have said the IPO markets were closed.

• 20:26Speaker 02

  Or for maybe the mid to later part of my career, the narrative was that private markets were overvaluing companies relative to the public markets. And that's not true now either. It's really a whole new world. So I think on net it's good. I think it'll go too far. You know, the SPAC invasion of the SPACs, I think some of that will end badly. It's too much too quick, I believe. But in general, more public companies, more capital, more funds is good for us and more importantly, for our companies.

• 20:55Harry Stebbings?

  In terms of like the SPAC, I just have to ask, why do you think too much too soon? I agree with you. I'm just intrigued to hear your.

• 21:00Speaker 02

  I think what we have had in general is a dearth of public companies. The hurdles have been too high. I think I read that we are down to or were down to half of the number of public companies we had a decade or two earlier. That's in the US. The rest of the world hasn't slowed down. So just on a relative basis, it's not where you want to be. So it's good that we're finding more ways to get more public companies, but it almost feels like unnaturally fast. If you look at the number of companies. That would have on their own found their way to be public ready. That might be one number, but that issue is being forced by the number of SPACs that are out there with a ticking clock that have to find companies to merge with.

• 21:42Speaker 02

  It just feels like a race that won't end well, or the quality will by definition be diminishing over time. Companies that aren't really ready to go public will be dragged out into public and we'll see how that works. But it just feels like there's a little too much too soon. Maybe that we went from one guardrail of not enough companies and going public to the other guardrail of too many and we'll come back in the middle somewhere.

• 22:05Harry Stebbings?

  Yeah, I mean, I do share a lot of those beliefs. Before we move to Dave and the team, I do just have one final question. You know, another source of liquidity is secondary sales. And I think it was Samuel Shaw that said on the show, early-stage funds will have to navigate secondary sales of their positions much more effectively over the coming years. How do you think about secondary sales? I always say, you know, take a third off the table and then ride the upside on two thirds. What's your perspective?

• 22:28Speaker 02

  Yeah, I think that's probably one of the hardest decisions as an investor. With 2020 hindsight, you could look at what you might have done for the best outcome. And I think different firms have different takes on that. Different partners inside of funds have different perspectives on that. But if you look at our investments in our two most notable returns with Uber and with Roblox, we had taken some capital off the table along the way at various points, which made sense and drove great returns relative to that investment. And yet what was left was still enough to return multiples of the fund or even the entire firm. So in that case, we were able to do both.

• 23:12Harry Stebbings?

  I have a theory that funds actually become more successful the wealthier their partners become, because you A, lose the fear of downside protection and you've had success and you're like, you know what, we can take this risk. And then B also, you know what, ride the upside. I don't need to do cash back now.

• 23:27Speaker 02

  That makes intuitive sense to me, that there's a tendency to let more ride, to play it for the upside, even just in terms of fund management to. Make sure that you're calling and deploying all the capital in a fund versus 80% or not taking it. So I think you absolutely see that.

• 23:45Harry Stebbings?

  I do want to move to Dave and to the team because you know, you had an incredible purview with your board seat for many years. And when I spoke to many people before the show about David, everyone describes him as persistent. When you look at him, how has he evolved and developed as a CEO in your mind over the, what is it 14 years now?

• 24:02Speaker 02

  Yeah, I think the development and even transformation of Dave Bazooki as a CEO, there'll be books written on it. It's the most profound leveling up I've ever seen firsthand. Like, I think there'll be pictures of Jeff Bezos when he was skinny and, you know, young and had hair. And then he's bulked up and walking around Sun Valley like before and after. That would be a metaphor in my mind for how, not how Dave looks, but how he's developed personally. How he's been able to lead a team that is absolutely world-class. And even his decision, which is his personal decision to become a public company. There were a few years of board members politely, nicely asking when Dave thought he might be ready to be a public company. And it was always off in the future.

• 24:47Speaker 02

  And then there was one board meeting where the bit had flipped and Dave had changed his mind and decided he wanted to be a public company and a public company CEO. And it was off to the races and it's been incredible to see him do it. He's built himself up personally through coaching. He's become an expert on interviewing and hiring. Like when there's an open role, he will interview a dozen of the world's best people at that role. In order to find the one that is the right and best fit for Roblox. You're seeing it as he's building out and developing the board of directors. It's incredible to watch.

• 25:21Harry Stebbings?

  Can I ask, was there inflection points in his change? Like sometimes when a fundraiser falls apart and it just doesn't come together and you see them come back more hungry, more humble, more whatever that is. Were there any inflection points where something significant happened and he changed as a result?

• 25:36Speaker 02

  I'm not sure about in his personal development. He always had the vision, never changed his conviction or his vision of what it could be. The reality of the product and the rest of the world, I think, changed to come into alignment with his vision.

• 25:51Harry Stebbings?

  In terms of the mechanism of your purview, we mentioned, you know, your role on the board. I do want to ask, how do you think about your own style of board membership today? And then we'll touch on roadblocks in particular.

• 26:01Speaker 02

  I like to be as engaged and partnered and supporting the CEO as I possibly can. I've been a board observer as much as board member over many of the companies that I've worked with over fifteen years. One of the times that I kind of took pride in in not making a distinction between observing and being a board member was one of our companies was acquired by Adobe. When we were needing to work on the paperwork, neither the CEO nor I could remember if I was actually a board member or just an observer. And I was an observer, so I didn't have to sign anything, but it just showed that we were acting as if I was the full board member. That's the role I try and play. And I've worked in startups and in tech companies and pitched VCs as part of the first twenty years in business.

• 26:46Speaker 02

  So I have that perspective as an operator. I'm a sales and business development guy at heart, and so I bring that perspective. And then as an investor at First Round for the last fifteen years, I've deployed about a hundred million dollars in about seventy-five companies, got to work with dozens and dozens of great founders and kind of shift into that role. So that's what I bring to the table.

• 27:04Harry Stebbings?

  Can I ask, has your style changed? And what I mean by that is a lot of like young VCs listen who are adopting board seats for the first time. When you think about advising them or how you've grown and changed as a board member, what would you advise them? And I guess, you know, what would you advise me in terms of being the best board member I can be?

• 27:21Speaker 02

  I think you need to be authentic to what you can bring to the table and what level of engagement you expect to have. And I would suggest more listening and less talking as board members. You know, if I look at all the board members I've seen in action, the number that are really adding value, really trusted partners of the CEO are in a small percentage. I think probably the, maybe the bulk are mostly harmless or sometimes helpful and they write checks. And there's some that are just destructive. They're taking meetings in wrong directions or giving bad advice or won't shut up. Like first, don't destruct value. Maybe you can add value and maybe you can be.

• 28:01Speaker 02

  Somewhere in the middle and I've seen some new investors or first time board members try and be too helpful or to push their point of view too hard. I was on a nonprofit board that was involved with Peter Drucker, right? The famous management guru. It was based on his teachings. I wasn't in board meetings with him, but before I got there, he was. And they would say Peter would just be in the board meeting for an hour and a half and not say one word, but then would come in with his one question at the end that would encapsulate everything and drive home what they needed to do. And that's what I would hope to be.

• 28:35Harry Stebbings?

  Final one for the quick fire. And it's not the best, but who's the most memorable board member from the positive side? Where they really were an incredible partner to the CEO that you worked with, maybe outside the first round family.

• 28:47Speaker 02

  I'll combine this one with, if you think about someone who is involved in Roblox that people don't know so much, is Anthony Lee of Altos Ventures. If you want to talk to me about Roblox, you really want to talk to him about it. Because he led that first round that we didn't get involved in. He's been in the company since before we were. And he has remained on the board to this day. And when Roblox went public, Altos owned about 24% of the company. And you don't know who he is, or you might not know who he is. He is the most under the radar. You talk about the substance to hype ratio. And again, he's just been the absolute most consistent voice of reason, understanding the product. I would say that he would go into Roblox,

• 29:30Speaker 02

  I don't know if it was every week or every other week, but he was in the company sleeves rolled up in between board meetings for 13 years. So you got to get him on your show.

• 29:40Harry Stebbings?

  I do want to move into my favorite, which is the quick fire, Chris. I say a short statement, you give me your immediate thoughts. So what was the pre-mortem here? When you was chatting to the partnership, what was the it's not going to work because?

• 29:50Speaker 02

  I think we were concerned about things like Lego Universe, which was rumored to be launching and might be a competitor. We were thinking about things like Club Penguin back in the day. But generally, I think the biggest fear was they would be always under the radar, always second player to later Minecraft. Or maybe later Fortnite and not be able to break out and above it. And they certainly were able to.

• 30:17Harry Stebbings?

  If you were to choose one thing above anything else, and it can't be team, but that drove their success, what would it be?

• 30:23Speaker 02

  When the inflection point started to happen, there was, you know, a lot of different opinions of what was really driving it. My takeaway would be it was a thousand small things that they kept tweaking and working on consistently for years and years. I would also point to, in my opinion, one big thing that changed the thinking and drove them to new platforms was when they got accepted to be on the Xbox platform. In order to do that, they couldn't just open up all the millions of games that they have on Roblox that can look like YouTube in terms of almost too much choice. And Microsoft and Xbox forced them to have a very limited, small number of games that were on that version of Roblox. I think it was six games.

• 31:07Speaker 02

  And I believe that forced them to think about quality over quantity. Really focus on how good the games were, the first onboarding experience. It worked extremely well on Xbox, and I think that informed how important it was to have that same kind of experience, getting the best games front and center on the rest of the platform as well.

• 31:25Harry Stebbings?

  You mentioned Anthony in terms of unsung hero on the board. In terms of unsung hero within the Roblox team, who would you say that would be? And what did they do behind the scenes?

• 31:33Speaker 02

  I'd probably think of two. In the first phase, Keith Lucas was at the company for 10 years. He did everything from being in charge of product. He was in charge of engineering. He was the CTO at one point. And again, he was there for about 10 years in the earlier period. And when the company announced the direct listing, I called him up and said, Keith, I don't think Roblox would be Roblox without you, and I believe that. The other name I would mention, who's currently the chief business officer, is Craig Donato, formerly at QVC and Oodle and goes all the way back to Excited Home. He's been there about four years and kind of runs everything on the business side. And those that know him just think he's fantastic, and he is, but he's not as widely known as he might be.

• 32:18Speaker 02

  And I think the growth in where Roblox is today kind of started around when he joined. And it's not an accident. He's just an incredible business person.

• 32:26Harry Stebbings?

  I always like to call out the Ansong heroes. And then the final one is the favorite story for you from working with Roblox way back from 2007. What's the memorable one that you tell Max about again?

• 32:36Speaker 02

  Yeah, so the first one was with Max in 2011 when we went to the very first Roblox user conference. It was at the Exploratorium, I think it's called in San Francisco, and it was the first chance to see hundreds of Robloxians in person, meeting and talking and keynotes. And it was amazing to see it come to life in person. But I'd close with one of the most special experiences was when the company listed a couple of weeks ago. I live in Philadelphia. I drove up to the New York Stock Exchange that morning and knew Dave was going to be arriving around seven in the morning. And I got there a little early, had a cup of coffee and I was sitting there just looking up at the Roblox sign on the New York Stock Exchange with the little fearless girl statue right in front of me.

• 33:21Speaker 02

  And it was quiet and kind of surreal. And then Dave just pulled up in a black SUV with his wife. And I got to give him a high five and a wave and a good luck and thanks. And then he walked in and did the interview and rang the bell. And it was, you know, in COVID, not everybody can get into the exchange. But it was the surreal, cool, like almost dreamlike moment to watch him take the company public after 13 years of working with them.

• 33:45Harry Stebbings?

  Incredible, special story. Honestly, I'm so grateful to you for sharing it with me today, Chris. I've loved doing this. And so thank you so much for joining me again on the show.

• 33:53Speaker 02

  Thank you, Harry.

• 33:56Harry Stebbings?

  I really do just so love doing the memo. Chris, thank you so much for all you did to make that one so special. Such an exciting time ahead for Roblox as a public company. If you'd like to see more from us, you can, of course, on the 20minutevc.com. However, before we leave you today, question, why can you not invest in sports cards like you can stocks? Well, with Alt, you can. Alt is increasing the transparency and liquidity of alternative assets, allowing you to invest from as little as $7 to $1 million on their exchange. And with Alt, you also save on fees. There's only a 1.5% transaction fee. And they also have this incredible real-time valuation engine. And so you can see what your portfolio is worth in real time. That and so much more. Check them out.

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• 36:05Harry Stebbings?

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