Semyon Dukach on MIT Blackjack, Backing Immigrant Founders and Venture Capital Myths.

Semyon Dukach came to the US at 10 years old as an immigrant, but that didn’t stop him from leading MIT’s legendary blackjack team and raking in millions of dollars from casinos all over the world. 

Today, as the Founding Partner of One Way Ventures, he backs exceptional immigrant founders building ambitious companies across sectors, with investments including Chipper Cash, Brex, and Helm.ai.

In this episode of OuiTalkPod, Semyon shares lessons from decades of entrepreneurship and venture investing.

He shares:

* What makes founders investable, and how venture capital can be a force for building a better future.
* Why the best investors don't always offer the highest valuations
* Why venture capital isn't the right path for every company
* Why many businesses are not fit for venture capital
* What separates great founders from everyone else
* How building successful companies can be a force for positive change

This conversation offers valuable insights for founders raising capital, investors deploying it, and builders looking to create lasting impact.

Subscribe to OuiTalkPod for more conversations with visionary entrepreneurs and investors as we unpack the people, processes, and playbooks behind companies we admire.

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Transcript

SPEAKER_02 0:01

You were one of the central characters played by Kevin Spacey in the 2008 movie 21. The story says you you guys eventually got kicked out of casinos. You had made north of 5 million bucks. What does having an edge really mean? Today we find out. From immigrating out of the Soviet Union to becoming one of the most successful members of the MIT blackjack team, he sat at tables where every decision is measured in milliseconds and probabilities. And now he operates in a world where decisions take years to play out, and the math is invincible. What are the odds that a stateless refugee from the Soviet Union ended up in MIT?

SPEAKER_00 0:43

It's just it's it's a pretty well understood fact that the country was built by immigrants. I mean, it's a country of immigrants. Yep. Fires every night to climb into dumpsters for furniture. We found furniture in the dumpsters. Not the guts. We're not judging the market. We're only judging the founder. We only invest in the CEO. Well, no, maybe they still if the incredible founder should be able to convince you that you're wrong about the space and re-educate you. And if they fail to do so again, they have some real gaps to the founder.

SPEAKER_02 1:14

Simeon Ducot. Simeon, welcome to the show. Thanks, Holy. Thanks for having me. Welcome back, guys. It's another exciting episode of We Talk Pod, the podcast where we talk to visionary entrepreneurs and investors around the world. Today I'm speaking to someone who's no stranger to the world of high odds. From blackjack to a crazy immigration story to high stakes of venture capital. No other than Simeon Dukart. Simeon, welcome to the show. Thanks, Sol. Thanks for having me. Um it's been a while we sat down and spoke, probably a year, a year and a half ago, and it was about the craziness of being in this industry: fundraising, deploying, helping founders in trouble, all that kind of stuff. But today we're gonna talk a little bit more about you. You do actually have one of the most interesting stories in all of entrepreneurship and venture capital, and it will be a crime not to bring this to people watching all around the world. Simeon, you were one of the central characters in the 2008 movie played by Kevin Spacey. Um, the movie 21. And it kind of highlights how crazy and incredible your life's journey has been. You immigrated to the US as a teenager, um 1970? 79, yeah. 79. Oh, 10, not even as a teenager. And a few years later, you found yourself in MIT. Tell us about that story. This is where two worlds collide. The blackjack story? Well, not the blackjack story, your immigration story. My immigration story, yeah.

SPEAKER_00 3:26

Well, I I was a kid, right? Uh my parents were able to get the hell out of the Soviet Union, and so they did, taking me and my sister with them. And uh yeah, we were stateless, I guess, people. We were in some kind of uh temporary uh transitional place, uh, briefly in Austria, then in Italy. I think my first uh like actual document said that in Italian, handwritten in Italian, the child who claims he is known as Seminukac, dot dot dot. Uh yeah, I have one of those. But you know, we're very fortunate to get refugee status into the US from there. So, you know, we didn't have to crawl across the border at the Rio Grande or anything really hard, you know. Um and yeah, that's that's it.

SPEAKER_02 4:18

So um I do know that you are from an academically astute background. What are the odds that a stateless refugee from the Soviet Union ended up in MIT? What are the odds?

SPEAKER_00 4:37

Uh yeah, I think they're not that bad, honestly. Uh I think there was a real focus on STEM education in the community that uh you know my parents were part of. And in general, I mean, kids of immigrants tend to go pretty far in immigrants themselves, you know. Uh they want it a little more than than folks who don't need it quite as much. So I don't think it's that shocking. Um but yeah, I got into computers, first video games, then programming computers, uh, had had the early Commodore 64. And uh I think that got me first to Columbia for undergrad um and building some cool stuff like virtual reality systems at IBM Research in New York. And then yeah, I got into MIT for grad school. But I didn't last that long.

SPEAKER_02 5:37

I like I like how you make it sound so easy.

SPEAKER_00 5:40

I mean, I was good at coding and yeah, I mean, not saying it was necessarily easy, but it wasn't that shocking. To me, the way my life turned afterwards was probably more surprising.

SPEAKER_02 5:57

So, um that's it's it's it's it's a good painted story. Can we double click into that, right? You landed as a teenager. Where did you land? How was life at the time day-to-day? How did you get back into school? How did you feel like that?

SPEAKER_00 6:14

Literally, where where like we landed when we flew into the US from Rome? We landed at JFK. Yeah, and uh some minivan took us to some some place to sleep for the first few days, which was And was it just you and your parents or who else? I think there was a couple of other families in this minivan. And uh yeah, um my dad my parents didn't speak English. Um I I just knew a few words. Yeah, yeah, yeah. My my father, I think he spoke Yiddish, right? Uh because his well, actually, all my grandparents are from these like Jewish settlers in Ukraine. Um and so, well, my parents were born in Moscow. They my father at least, who is older than my mom, he still had that, and you know, Yiddish is not that different than English early at the end of the day. He was able to get by. Uh it's like German, basically, it's just similar enough, you know. Um but what did I remember? I remember when they first left Moscow, just this uh kind of this mask of permanent fear that my parents worn kind of start to crack. Uh and I I asked my dad something about how is it like okay to say whatever now? And he was like, no, not until the plane lands. It's not okay to say anything, shut up. Yeah. And um then the next moment I remember, you know, that was Vienna and just the the uh storefronts, right? The crazy, you know, whatever, 40 different kinds of cheese, you know, in Russia. There was cheese, but there was no cheese. Usually there was no cheese. Maybe there was two kinds, right? But you just seeing that variety of capitalist culture, right? Of consumer products uh was pretty amazing. And in anyway, then the thing is we we we we got to take a hundred dollars. Like that's what the Soviet Union allowed you to convert at some crazy rate that they pretended was the exchange rate when it wasn't, right? Um and so like I think in in Italy there were some organizations uh uh just paying for the food and uh shelter, right? But uh when we in this minivan that we take it from GFK, it was like a long ride to to uh New York, which is where where like they put us in the projects, in high-rise projects in New York, right? Um and there was a stop at uh Burger King. And my dad went out there, you know, with a with a $10 bill out of this hundred, fully expecting to get you know nine dollars and a bunch of coins back after you know buying food for four people. And I remember like he just didn't know, like there was no information, right? He and you know he just got the coins back, right? Because it was nine dollars something at the time, 1979, so it'd be like 30 now, right? Correct. But anyway, I remember he just turned white and pale because he realized he just spent 10% of his capital on that particular meal, you know. But anyway, you get through that stuff.

SPEAKER_02 9:35

I want to talk a little bit more about that mindset that an immigrant has when they land in GFK with a hundred bucks to their knee. And it's one thing to be the parent, it's another thing to be the kid.

SPEAKER_00 9:53

Yeah, well that's that it's I think the scariest thing in the world for a kid is to see their parents scared, right? Correct. Because that's just like these are pillars, right? They're not supposed to be scared, yeah.

SPEAKER_02 10:04

Exactly. And so not talking about investing yet, but like what does that do to the mind, that uncertainty, right? What does that do to the mind of a kid who's determined to take from life what they deserve?

SPEAKER_00 10:26

Probably increases the level of ambition and grit and uh dogged determination. And um I don't know, I I just saw a lot of opportunity really. In a way, when you are suddenly in this new place, well your parents might be scared, but you're not really scared. Like it's all new, it's all exciting. Like I it took climbing to dumpsters for furniture. You know, we we found furniture in the dumpsters to furnish the place. Not the gut. No, no, it was like the big dumpsters full of trash, and you know, uh I got the uh lug up and climbed in there and handed stuff and you know, we furnished the house. It was fine, it was better furniture at the bottom of the Soviet Union, really. It was just, you know, you need a little repair here and there. Um But I don't know. Once I got into the computer stuff, I just felt anything is possible. And and yeah, when your parents um clearly don't know what the hell's going on and which way is up, well it gives you more of a chance to grow up faster, right?

SPEAKER_01 11:40

Mm-hmm.

SPEAKER_02 11:42

And was what was it like settling down? Settling in? Did you have to learn a new language? How was that? Dealing with the world and dealing to settle in?

SPEAKER_00 11:51

It was pretty confusing. Uh they so yeah, we lived in the in the project, which was just like fires every night in the in the trash compactor so that people could try to break into the apartment in case you know you run out of the smoke and you don't lock the door like that kind of thing. Uh I got beat up a lot, but I was getting up beat up a lot in Russia too, and it was like it was a little more confusing, I think, because I often didn't understand why. Um But um yeah. The language thing was weird because they put me into a uh ultra-religious orthodox Jewish school where there was Hebrew and the Yiddish, which I did not speak. And like we just were completely secular. There was no element of religion in my life before or after that time, and so that community was as bizarre, you know, and different from anything I was expecting. But yeah, the first few months that was the school, and there was not a word of English in that school. So then my dad actually got a job in Houston, Texas, and moved to Texas, and I got beaten up by very different people for very different reasons, I think, again. But um at that point, that's when English was introduced.

unknown 13:15

Wow.

SPEAKER_00 13:15

Yeah.

SPEAKER_02 13:17

Um, Simeon, I'm gonna show you something that looks pretty familiar.

SPEAKER_00 13:27

Here. How does that make you feel? Um like I'm holding a deck of cards. Memories? I mean you're referring to the MIT Blackjack team. And yeah, that was my first startup, and it was my first fund as well. Since you know it was a fund with investors and basically. Um memories. Yeah. It was different, like I never held the cards in my hand. You know, it was only blackjack. So there was the dealer Dalton out of a shoe. Correct. Uh, which is sat there and acted stupid while counting cards. Correct.

SPEAKER_02 14:09

Um your story into um investing, which we will get into. You were a part of the very famous uh amphibian MIT blackjack team. Um and that uh story was so notorious that they made it into a movie. Right? Um, even though your character was kind of split amongst um many features and individuals, right? Um the central story still remained the same. Um you had a very, very unique approach to Blackjack. And the stories are that you brought in a very unique approach because of your specialty in card counting. And for those who don't know, I I did have to do some research around it, right? Um, in a simple way, and tell me if I'm wrong. Uh card counting is the way you study those deck of cards that you know it so well, and you know that there's a high probability that a higher character uh higher count card is coming up or they're already on the deck. And it's it's very it's very similar and familiar to investing in a way. Right? And the story says you you guys eventually got kicked out of casinos around the country because you had made north of five million bucks, right, going in and out of Vegas. Um and I would note that the movie wasn't an accurate or perfect representation, but we kind of carried the spirit of the people and the characters that they wanted to write about.

SPEAKER_00 16:12

Yeah, I think that's fair. And uh, if people are interested, there's been about a dozen movies on the subject. There's a bunch of documentaries, like History Channel and BBC and Horizon Illumid documentaries. And actually, folks keep filming them to this day. I keep being asked to do another one, which I don't really have time to do, but um they those tend to be much more accurate. And yeah, the Hollywood film was loosely based on two books that Ben Nessrick wrote. One of them was about a second MIT team, there were two at the time. And the five million was actually combining the numbers for the both of them. And uh his second book was about me, and I'm the only one like that let him use my real name and my face and whatever. Correct. Uh so the the book's two-thirds true, you know, at least. Um and yeah, the Kevin Spacey movie is just inspired by it. But uh yeah, I mean, it's not that different from investing. It's it there's not a lot of like glamour from being in Vegas and all that stuff. Like that wasn't a part of it. Um I actually never gambled in casinos before after. Never really I didn't know the rules of the game when I first joined the team. Um but at the end of the day you're evaluating probabilities and you're modeling things and uh you're learning from experience as to whether your models are correct and adjusting them. Um we didn't invent card counting. I mean there were books published about it, there were other people doing it, there were people who made a lot more earlier. Um like uh Ken Uston, who wrote uh a few books about blackjack. Sure. And uh yeah, uh actually he wrote a book about the video game Pac-Man, which I really loved playing, so I found it in the library, and that's how I kinda first read his books, and so I actually knew that this existed but before I met the MIT team.

SPEAKER_02 18:12

Simeon, can you break it down a little bit? How does I know that basically the art of card counting can increase your odds from maybe around 0.5 to 2%? For those who don't know and who've never played blackjack, can you break it down how cart counting does affect your odds in the in the game and how then we can take it further to how it does come into investing as a practice?

SPEAKER_00 18:44

Yeah, so they designed the game so that it could be beat intentionally, right? Uh because it just takes a lot of practice and growth repetition and discipline and record keeping, and most people aren't gonna do that. And uh the fact that it can be beat is part of their marketing. It's a pretty big industry, I think they make some like ten billion a year globally from the profit from the game of blackjack, right? Um it's not like rocket science particularly, it just involves a lot of practice. And yeah, they kick you out, like they kick you out if you're betting too much and winning too much and sticking out too much. That's annoying. But one of the things, like all the movies, even the documentaries, um, they had to build a bit of a story arc, you know, to make it interesting. And so they all made it seem like if we played, we won, and eventually one day they figured us out and they kicked us out. It actually wasn't like that. Like we were, first of all, like winning maybe 55 or at most 60% of the trips that we would take to Vegas and other places. We actually played globally at some point, and so we would often lose. It's just we won more and we lost. And we got kicked out constantly. Like every once in a while you could you could go four or five or six trips to the same casino before they figure it out. But usually it was like an hour or or or at most a day. And so yeah, we just keep coming back under different names with new people, new looks. It was normal, it was part of the process. I guess over over the years you get kicked out more, you get known more, and uh like towards the end, I wasn't playing very much myself, I was kind of running the group. Um, but uh and that was the character um portrayed as Mickey Rosa. Like you pointed out earlier, in the movie they're just composites, there's no correct. Yeah.

SPEAKER_02 20:52

And let's dig down a little bit. This is like stuff of legends. Um, you know, it's it's folklore, masrage, um the mythos. What were the things that were really accurate about these stories?

SPEAKER_00 21:08

And what do you think they're really accurate for the most part? Like they had some Kabasa characters as well, but um yeah, and and well, all of them got the kind of the spirit of it, right? At least and um just uh the the basic nature of how you do it is pretty uh well published. Um yeah, the the the one thing that you'd get the wrong sense, you get it they make it seem like we always won, right? Which is just it wouldn't make sense. Of course. Yeah.

SPEAKER_02 21:49

Um and so let's let's let's dig a little bit deeper and talk about a thesis of doubling down. And odds both in terms of like playing the game and playing the game of investing. Investing is a power law art right where some of your bets basically uh deliver most of the returns. And a lot of people find your investment philosophy very, very interesting, especially with your history with blackjack, where basically you lean into the areas with highest probabilities. How does that affect how you think about investing today?

SPEAKER_00 22:45

Well, like every investor makes what we consider a positive bet, what they believe is a positive bet when they're making it. Every investor believes that the probability of the company succeeding times the amount of money they would make if they succeeded, right, is positive. You know, that's why you do it. You think it's a positive bet. I would say blockjack made me a little bit better at sizing these bets. Just because you have an advantage doesn't mean you should bet half your money on one thing. Right. So uh a lot of investors think that that's just like a subjective thing. This whole risk return equation is a matter of like personal taste or whatever, and that's actually false. Like you can calculate mathematically with a little calculus, some integrals. You can you can figure out like precisely what the optimal bet is if you know the deviation and the expected value and the size of your bankroll and whatnot, there's an optimal there an optimal bet. Now in investing, you never have all that information. But I think just knowing that there is a correct answer makes you be a little bit more rigorous about thinking about those things. And maybe avoiding some of the kind of natural fallacies, the counterintuitive things, where just human evolution didn't properly prepare us for making statistical calculations intuitively at the blackjack table. Some of the stuff is counterintuitive. Um not doing this fallacy of some costs. Not I guess one that applies all the time to uh venture capital investing is if we have an opportunity to sell, you know, to exit, then it's sometimes the company just sells and you take what you get. But often there's a chance to do what's called a secondary transaction, right? Where someone offers to buy your shares at some price and you can sell or keep it and keep going. And so the thing that after the Blackjack experience was very obvious to me, but it's not actually obvious to many investors, is that the decision to stay and not to sell is exactly the same as the decision to buy, to invest that amount of money that you would get if you sold. And people just they they don't think of it that way. They don't think uh of the sale, right? Like they think of it differently. And people in general, like when when it's resetting an object that they bought, they think a lot about the price that they paid and whether it's up or down. And it's actually completely irrelevant what you paid and whether you've won or lost money, right? The only relevant question is how much more you start to make by keep staying, and is that worth that a good bet, or would you be overbetting or underbetting, right? And so we try to always consider uh both buying and selling when we have the opportunity uh to uh exit or to Investorada, we try to make sure that we think about both decisions. Like we could we might want to buy or to sell, and it's foolish to only think about one half of it, right?

SPEAKER_02 26:04

Yeah. Um and it's funny that you said the blackjack team was your first fund? Well, it was a fund. It was because basically.

SPEAKER_00 26:14

It was a limited partnership, it was a Nevada uh, I think, uh LP. Correct.

SPEAKER_02 26:19

And how do you draw parallels between that and how venture capital works today? I mean because outside investors were providing some of the bankrupt, correct?

SPEAKER_00 26:29

Yeah, yeah. It was I mean, I wouldn't say how did the economics work? It was we we had really good returns. We had uh 50 to 100% annual returns. Wow. And uh we couldn't really use a lot of money. Uh like the team that was really my team that split off from another team where I was just learning on that one. My team started with $400,000, and there were uh three people. There were yeah, three people did a hundred thousand each. I was one of them because I made some money on that other team. I was also flipping houses at the time. Um and another 20 people invested the last hundred K, right? And then we grew that very quickly to a million or a little over a million, and then we didn't want we didn't increase the bankroll anymore. Like we, you know, the returns will just fall off because you can't really always bet 30,000, 40,000 at a time in the casino. That's the most we could sometimes bet. If it was like New Year's Eve or if Mike Tyson at the time was fighting, that was like especially people will come down from LA and you could blend in a little more with crazy bets, right? If especially if you're young, it's challenging, right? Young people don't tend to have that kind of cash. Um and so we didn't have a lot of outside investors for that reason. Like the the investment was a really good deal, and it would uh allow you to invest if you were participating in playing or in running a team or just doing some of the bookkeeping or just helping in some other way. Um so yeah, it was mostly the same people who and then I like I my investments in it, you know, increased uh to a point. For a while there, I was putting all my money into this thing. And then one day I just totally lost interest. It was still going strong. Like I didn't play much because yeah, I was pretty known, but we had a bunch of new players and it was it was fine. Uh but I just realized I was really bored of it. Interesting. Like, yeah, you know, you're not really creating any value. It's just arbitrage. It's not like a venture fund where you hope the companies grow. It's more like a hedge fund that trades, right? That's actual analogy. It is a fund, but it's not a venture fund. Correct. Right? It's exactly the same as like something that does, I don't know, currency futures or whatever, stuff like that, programmatic trading based on technical signal. You know, those guys do great, but they tend to burn out and go traveling for a while afterwards, right? Because you yeah, I guess that your arbitrage activity makes the world a better place, it makes the market more efficient. It's like very different than directly helping people. Correct. Like in most jobs, you actually have a customer, a client for whom you're doing something, and you know, you feel like you're a useful part of this world and not just the smart island kid who can take people's money. So, you know, I started and plus I missed the tech, the software. I mean, uh I was pretty deep into MIT, I almost got the PhD, I ended up with a master's. Um, and I I worked on the what basically would have been pretty much the very first payment protocol on the internet that I published in '92. Um and so I don't regret leaving, but I missed uh the tech a little. And of course the internet blew up, and and yeah, everyone I knew from MIT was doing far better than the blackjack team, right? Um although a number of people on the blackjack team subsequently did extremely well. Like I'm not the top three most successful people from the blackjack team. Like just even the little one that I played. Yeah, no. John Hirstick played with me, and you know, he started SolidWorks and OnShape, and Yu Chen Lee played on my team, and you know, he took Unica Public and then whatever he's thinking of the board of verdicts or something. There's a number of like really successful people.

SPEAKER_02 30:27

Um let's dig a little bit more into odds. But odds that actually, as you've said, affect how people live. Right? You have a very interesting story in the just at that intersection of a crazy immigrant experience and a background dealing with odds and mathematical probabilities. Immigrants in the US, even though they account for about 14% of the population, are oh you dropped that, are responsible for more than half of all the billion-dollar companies in the country. This is clear a case of odds, and you've decided to start doubling down on a different type of odds. You started OneWay Ventures in 2017-2018 to invest in a tight a different type of overperformers, immigrants, which kind of ties into your background and your personal lived experience. Can you tell us about how your perception of risk and perception of returns and the perception of odds have pushed you towards investing in immigrants through one-way ventures?

SPEAKER_00 31:54

Well, I've been investing for a long time, uh uh before OneWay. Uh I had my own startups uh in the late 90s. Um sold a company in late 99 actually. Um and uh did a lot of angel investing. And then I ran another over a hundred companies. Oh yeah, yeah, a lot over a hundred, well over a hundred. And uh then I also ran the Stex Stars Accelerator in Boston.

SPEAKER_02 32:21

Which is where where I actually need to meet you.

SPEAKER_00 32:23

Yeah, yeah.

SPEAKER_02 32:24

Uh introduced by my professor Mike Granny Nettie. Yeah. Shout out to Mike.

SPEAKER_00 32:29

And so I um I wanted to move on, I wanted to build a venture fund. It was just a natural progression for me given what I was good and what I knew. And uh I wanted to have some kind of mission or purpose that wasn't just about making a slightly higher return to a bunch of wealthy LPs, you know. Um and yeah, the idea came about. One of the uh mentors, uh tax stars, Joe Caruso actually kind of came up with it, because he saw me. He saw me jumping up and down at the protest at Logan Airport. Uh it was right af right when uh President Trump was inaugurated for the first time. And uh there was some like spontaneous last-minute change, and uh a bunch of people who were born in the wrong countries basically had a lot of people. And this is the Muslim ban of it. I don't know, yeah, Muslim. That's that's that's what they called political, that's what they called it, right? It I'm not sure it was designed specifically to be a Muslim ban, but the other countries are mostly Muslim. Um I think uh it was just whatever, some other set of prejudices played. Uh but it was the first implementation was just ridiculous because it wasn't like they weren't giving these people visas. They had visas, they had fasters, they had tickets, they they would just turn them around, right? Like uh and I think three days later the Supreme Court got rid of that, uh at least that version of that. Um but this guy Joe Carusa saw how excited I was, and I was already just trying to figure out what kind of venture fund to raise. And he said, why don't you just do that? Uh do venture fund tobacco immigrants. And uh in fairness, there was another fund called Unshackle that's still around that also does that. Um, like a slightly different strategy than us, but um yeah, I was like uh no-brainer. Uh I looking back, I mean most of the success in my angel portfolio, my Texas portfolio were immigrants, and so I just went off to the races and and raised the fund. Um but I would say all the similarities between venture investing and car counting, I mean, they're not necessarily related to to investing in immigrants, they're just related to everything else about how to invest. Uh just thinking objectively, probabilistically. Um the immigrant thing, it was just like an affinity, you know. I I grew the team, and um all of us now are still you know immigrants ourselves, and so we find that like these are the immigrants are kind of our people and our portfolio founders feel the same way, and we expand the identity to some extent, which enables us to get people to help each other more because they have that common thing. Um and it's just it's nice to have an aspirational mission, and we're not impact driven in the sense that like we don't invest for the purpose of helping these immigrants with funding. Like that's that's not a part of it. We very much compete for the full rounds, uh, the hot deals, and sometimes we see them before they fall. Occasionally we're able to identify them, you know, before it's obvious to others. But very often it's still competitive, and we're not directing money to people who need help the most by any means. Like we So this is no charity? No, we have we we we like you know my wife runs an incredible charity. Like we've we've donated money to charities. Charities are great, people need them. Sometimes we needed them at the time that we came here. But that's not what that's not the way that we make the world a better place. We make the world a better place, actually, by becoming really successful financially. And the fact that we only become immigrants makes it easier since they're just more likely to build really big businesses and with less risk, actually, because it turns out like many, many companies when you invest in early stages fail, and it's fine, because what matters is how big the biggest successes are, not how many fail. But for us, like not that many fail. Weirdly, like they there's just the immigrants kind of they bought the one-way ticket, they've committed, you know, they've committed to their crazy personal vision of their own life out there somewhere and cut ties to everything they had in order to go for it. And you do that, you can't really go back and say, oh, you guys are right, nobody really needed me over there in America. Like I you know, you can't do that. That's not an option. And you burned your bridges. And so when they stubbornly believe that their startup will be very successful, you know, the hard times hit, they tend to keep going, or pivot or whatever, but they rarely just quit and give up, much less than than folks who had a more comfortable life.

SPEAKER_02 37:18

Absolutely.

SPEAKER_00 37:19

Yeah, so um it's a good thesis, but then of course, yeah, there's a lot to running a VC fund, and we've learned a lot over the years, and we're still learning. We're in our third fund now. Um But uh I just wanted to touch on the actual mission. So we do believe we're making the world a better place, but not in that way, not by giving money to people who have more need. Uh they actually gift us the stock of their companies without charging us enough premium for it that they really deserve. Like the valuations of immigrants are more or less on par with the valuations of people born here. They're not lower, um, but they should be a lot higher. Like they're just statistically more likely. Given that something bigger. That's better. And they don't get that premium, so we don't pay that premium either. We get to invest without paying that premium, so we make more, like our investors make more. And where this is the mission, you might ask. Well, the mission is that as we begin to show some success, which we're now doing to some extent, and have a long way to go, uh, we're getting recognized, right? We get to go. Like I went with Bloomberg, the Boston Globe did a profile on me, it was like a very successful Boston VC. Uh, they really highlighted me versus a bunch of other people with bigger funds. And, you know, this was nice, but but it's actually in our case, the PR and the press isn't just nice because it's it's a path towards some additional success. It's actually uh the ultimate goal, right? The way to get recognized in venture is by having outsized returns at the end of the day. Like everything else is temporary and intermittent. You have to show that your founders became the superstars and return the most to investors, you get the most respect and the most recognition. But by bringing that recognition to a fund like ours and publishing it in the mainstream to people who don't know anything about technology or investing a venture or whatever, they just read the newspapers and and uh watch Bloomberg Business TV, and uh it makes them sort of notice, right? It makes it shifts attention, it shifts the narrative a little bit towards like the incredible value that these immigrants contain. Like we got successful and wealthy by investing in immigrants. So maybe people will think a little more about um what it means for America if Elon Musk builds space access Tesla in America, um what it means for his investors, what it means for his employees, right? The value uh that these people bring, and it'll therefore it will shift attention away from the fear that people naturally have of strangers coming to their country with their own cultures. Yeah, it's scary, it's legitimate, right? Sometimes there's crime, it's not made up. But there's a lot more value than there is to be afraid of. And that's how I believe like our success and every what we do every day will improve the world. It'll shift that attention to towards gratitude and away from fear. So that's that's what keeps me going, getting up every morning and then doing the hard work of building a venture brand.

SPEAKER_02 40:30

And we will talk a little bit more about your deals. One is sitting right here. You probably uh backed some you backed some incredible entrepreneurs, even like me, uh, who um eventually become probably best in class in their in their respective um uh industries or verticals, right? We'll talk about some. I want to talk a little still talk a little bit more about this immigrant story. I was speaking to uh Set Living co-founder and managing director at a Foundry Group uh a few months ago in Boulder and in his book, The New Builders, he highlighted that women of color start businesses at more than double the rate of Americans. And this is immigrants basically. It seems there is a common thread about how much of an impact immigrant entrepreneurship plays in keeping this country competitive. And you've spoken a lot about the ambition and the resilience, but the arbitrage is just so staggering. 14% of immigrants creating more than 50% of all the billion-dollar companies. If you were to name any other thing that you think would be responsible for this, what what else would it be?

SPEAKER_00 42:04

No, there's nothing else like it. I mean, yeah, those statistics are powerful, the the majority of the value. And by the way, it was 51% when we were raising the first fund, it was fifty-five when we were raising the second fund. Wow. Yeah, and now there was a number published, so 60-something percent of the AI unicorn specifically had immigrant founders, right? And we know that startups create most of the jobs, most of the big companies kind of stay even, right? The disruptive startups uh create new opportunities for everybody. But I think even all that aside, it's just it's it's a pretty well understood fact that the country was built by immigrants. I mean, it's it's a country of immigrants, right? Uh there were no cities in North America at least at the time, right? Uh, of the immigration. And uh yeah, people know that, but but they're scared, they're scared of change.

SPEAKER_02 43:04

Interesting interesting. So let's talk a little bit more about just your entrepreneurial journey. Um you sold fast engines to Darrow in the 2000, right before the uh dot-com bubble. How much of that was timing and how much of that was just profidence?

SPEAKER_00 43:31

I mean it was timing for sure. I packaged the company up for some kind of merger as a response to what seemed like completely insane pricing um of uh internet related startups uh in late ninety nine. And just the way I negotiate the deal, I was definitely very aware that uh the party could end. Um providence-wise I don't know. Uh I was lucky, I guess, to to close and the deal had a cash component, which ended up being quite fair for what the company was worth. But it was a small fraction of the overall deal, right? So we could say it was very unlucky that I didn't sell it, you know a month earlier and actually cash ten times more money. Yeah, I didn't make that much money from it. Like I personally made something like three million dollars from like yeah, maybe I made one million from LiveX, three million from selling that company. And uh, you know, then we have there's life, there's houses, divorce, whatever. It's not life-changing money. Correct. It's a lot of money, of course, but um I've made far more money investing than I have building these companies.

SPEAKER_02 44:53

There's a very popular story about a company that you backed. I think uh in your angel era that was about to shut down. They were probably two days away from shutting down, and you housed them in your living room to work. Tell us about that story. Yeah, I I honestly don't remember which what you've done too many company that was.

SPEAKER_00 45:15

That probably happened more than once. I don't know. I people don't usually hang out in the living room specifically, but there were many stories of near death, right? I I don't remember who specifically was in the living room. I'm sure it'll come to me. Do you know what the company is?

SPEAKER_02 45:29

I do not remember it, but it's it's it's it's a popular story.

SPEAKER_00 45:33

Well, yeah, I must have told it in some previous uh interview. Uh when my memory was better than it is at this age. But um the near-death experience, of course. But like most really successful companies have multiple near-death experiences. This isn't rare, like this isn't this unusual story that the company almost died and then succeeded. The really weird story would be a company that succeeded without having almost died three times along the way. That's unusual. Yeah. I haven't really seen any like that.

SPEAKER_02 46:05

And let's talk about you. What is the one time in your era either as an entrepreneur or as an investor that almost killed you? The hardest time for you?

SPEAKER_00 46:17

Um I mean, raising the first venture fund was a lot more challenging than I anticipated. Um but I think I had a much easier time than most people who are gonna do this sort of thing. And uh really I can't complain. Um I've obviously lost investments. I mean we had we had a company go public in one-way fund one around the time we were raising fund two, and it would have been a great return. And we were on lockup for six months, some number of months, and yeah, I think it was six months in that case, and uh the the fares have completely collapsed. Like 99.9% of the value were gone. Wow. Um, so you know, that happens. It's I wouldn't say it was a particularly traumatic experience, it was annoying. But you know, a lot of companies fail. And sometimes you have to full check and really you know commit to it and it fails quickly. Sometimes it grows and then fails. Correct. So all of that doesn't really stand out. Um and sometimes you're wrong about the people. You know, sometimes it fails and you you feel like you made the red bet anyway, investing in it. And it was a good bet, but like something changed in the market or whatever. And sometimes you were just wrong. And and the the you misread the people and you invest in people who will never invest in again, and yeah, that happens too. Not as often, thankfully, and that hurts more, right? But you learn from it. You you learn from all of your past mistakes, and you're always learning and re-examining these decisions. Um but uh it's also difficult, yeah, to like run your own. I mean, a fund is kind of like a company as well, right? So writing your own little startup while investing in startups can be can be a challenge. Um, I mean, sometimes sometimes hard things happen. Things don't work out the way you want them to.

SPEAKER_02 48:14

Interesting. Um you have a crazy rolodex of bets, successful bets that you've made. Um I want to talk about two in particular. Um first is uh Chipper Cash, which happens to be a company close to my heart because um it it is uh it was started by African immigrants. Um another one which has uh been in the news for the last three weeks is Brexit, started by two Brazilian uh immigrants. I think um that deal is probably a master class uh in venture capital investing. And uh the just the nuances surrounding valuations across rounds. Um you did invest as part of the uh the YC group in the siege stage, I believe. Or in and around that that time.

SPEAKER_00 49:18

I wish that were true, but uh it's not in this case. Yeah, we got in too late and it was too small a check. Um so we and we ended up uh selling it the very next round, nine months later. We made eleven times the money in nine months. So it was Did you say eleven times? Eleven times, yeah. Wow. Which was good, right? But I mean we sold it as three and a quarter billion dollar valuation. Had we in fact invested while they were in YC, it would have been a thousand X, right? Or five hundred X or something. And so no, it's a good thing. Give or take down X in this case was not something we brag about. It's not in our fundraising materials when we raise new funds.

SPEAKER_02 50:01

I think 11x is great.

SPEAKER_00 50:03

It's good, but but it's and uh yeah, depending on the privilege of the fact that we even knew them, but uh I would say when you it was the very beginning of our very first fund. And um as you mature, you kind of learn that uh you can't just be making small checks into later rounds of a bunch of things just because you can. Correct. Yeah, I mean it as an angel it would have been a great investment for sure. But for a fund, you know, we have to have something that's repeatable and that's impactful on results. Like it we spend a lot of time with our companies. And we're gonna you're gonna spend just as much time if you own 1% or 10%. Correct. And so we're not gonna invest if we can't get 10%. If it's already worth a couple hundred million, I think Brex was 180 million when we wrote the check. Even then we knew it was an exception. It's just that as you mature, you stop making exceptions and you really do what you do well. And Chipper Cash was, in fact, a core investment. Like that's we invested a year later, still 2018, so quite a while ago. I can't take any of the credit for Chipper Cash, but one way can, because my partner, Lex Zhao, led that deal based on the thesis that he had. Shout out to Lex. Yeah, yeah. It was a fantastic investment because that was the seed round, it was our full check size, and uh the company uh became to this day, I think, is now a really important part of the financial infrastructure of like eight or nine countries across Africa, right? Uh with some real barriers to entry, regulatory barriers, like they have things no one else has, and a broad product offering. Um but yeah, we we like the fact. I mean, he had a specific thesis related to what they did, which was peer-to-peer payments in developing countries. You know, he looked at WeChat in China and had a thesis around that. But um the most important consideration for us is who they are. And so they were, yeah, uh a guy from Uganda and uh and uh and the guy from Ghana, who uh uh were in Grinnell College in the middle of the US Midwest, and was certainly the only two Africans in that university, right? Um and uh yeah, very like they had trouble with visas, all kinds of issues. Um and they were determined to to build this company for Africa, really. I mean it's still its headquarters, San Francisco, but they have a couple hundred people now, like most of them are in several African offices.

SPEAKER_02 52:45

And uh it's it's very interesting just comparing the deals, right? And this is something that a lot of founders struggle with when they talk to VCs. Right? You've said you made probably around 10x money on BREX, wished you're gonna come in earlier.

SPEAKER_00 53:07

That's not a win.

SPEAKER_02 53:08

That's not another exactly coming earlier or done a bigger check, basically.

SPEAKER_00 53:13

Yeah, the founder might might actually try to convince us you'll make 10x, thinking that you'll be blown away. But they forget they they the founder cannot possibly appreciate just how likely it is that they'll not make anything, right? Because they they don't believe they shouldn't. It's not their job to believe. Unless you gotta worry about that. And so yeah, when you win, you have to win really big.

SPEAKER_02 53:34

And this is how do you think about this? Because as investors, you get this pushbacks all the time where a founder has a business that they believe is going to be successful. And um I categorize a business where you put in a dollar and you can consistently get two dollars as a successful business. Right. For the founder. And then a founder comes to you as an early stage investor and says, you know, I can make you four times, five times, ten times your money, and you still say no. Right? Can you walk us through how fund economics and being a fund manager different from an angel? How it plays a role in why you say no if you knew that the upside is 10x, and of course the downside is zero. I say minus one because you also spend your time supporting the company. How does this work?

SPEAKER_00 54:37

Yeah, and you have some other overhead in running your organization, employees, you know, you have to charge management fees to support the team, lawyers, don't forget the lawyers, they always get paid first, unfortunately, right? Um yeah. Um you just explain it to them. You show them that uh the model, right? Like it's I mean, you don't really have to justify not investing in someone's company, I don't think. At the end of the day, people understand that you're not gonna invest in most companies you look at. Um but you can certainly tell them why why you need the large returns, right? It has to do with all the many ways that things can go wrong, and you could not end up doing that 10x if you knew it was gonna be. I mean, there's perfectly good models in private equity in particular that invest usually in like safer, slower growing businesses that are already profitable, and they have sometimes a model where it's 5x in the best case, and every once in a while they lose as well, but they lose really rarely, and and it's always between you know three and four, uh, which at the end of the day, right, like the the asset class returns the same stuff as we're a subclass of that class, or the private equity class. So uh we have to do a little better in the public markets because we're illiquid, we're locked up for a decade or more. And so when you just add it up, like yeah, if we if we have two of these like really successful companies that reach the full potential that the founder envisions when they're raising money for the first round, you have like two or three of these in a three or four-year fund, like that's all you can really expect to have. And you know, if you're lucky, then one of them will be ten times bigger than anyone thought it was possible, and then your whole fund does a 10x. But very few funds do a 10x, and no fund does it over and over in multiple funds. Correct. Right? Because you know, over a decade it turns out that 3x is actually sufficient. Uh but to get to that 3x when you're modeling it out, like the the winners usually have to be like uh 50x or 30x sometimes. But to get to that 30x, there's always some dilution, there's option pools increasing, there's things along the way, that means that yeah, the company has to solve for at least a hundred times the valuation that you're investing in.

SPEAKER_02 56:58

Correct. And how do you because a lot of the countries where immigrants come from, venture capital and the venture capital model is not as pervasive as it is in the US. When a founder is coming or approaching one-way ventures, for example, how should they think about the return expectations before they decide to go take venture capital money?

SPEAKER_00 57:27

Most businesses just aren't fit for venture capital at all. Right? And they can be great businesses for the person running them, and that's that's totally fine. And I think when you have a technology business, it's probably not fit for venture capital either. Like most tech businesses aren't. Because it is it could be kind of almost a misfortune if your business is. You don't raise these large rounds because that's the glory and you get to be in tech crunch, right? You're raising large rounds because you know your company will fail without them, right? And so you take on a lot more risk. The venture investors are ahead of you in a preference stack, which is a fancy way of saying that they get paid first, right? And the if you take on $100 million in investment and you sell your company for $120 million, guess what? 100 million to your investors and 20 million to the lawyers. That's what it's gonna look like, right? It'll be a total fail. You'll have lost everything, having sold the company for $120 million. But if you underraise $10 million, right, you'll become a wealthy person. So it's not that great. If you happen to be a perfect fit for VCs, it's just you have it's because it's necessary, it's that capital intensive. Maybe it just means you're not that good at the new AI tools that you can't just build it without all this money and all these people. But not always, right? It just depends. And then if it's so when people are trying to build something really fundamental, really difficult, disruptive, something that will change the way business is done, something that can create a sustainable advantage, a moat for competitors not to be able to climb over, right? It's those are rare. And uh and usually it's a question of fit. Like it's rarely the case that like people think way too much about how do I convince investors to invest. Because they think that like the only thing missing from their success is investor capital. Correct. It's almost never the case. Like the people who have trouble convincing investors to invest it's because they they don't have the other ingredients necessary to succeed. If they find a foolish investor who makes a mistake and invests when they shouldn't, it doesn't benefit that founder, it hurts that founder because then they end up selling the company for less than the amount they raised, and the investor still gets the money back. Like the founder gets wiped out. You don't you don't want to raise money from people who don't want to invest in you. It's actually so that's what I mean. It's not like, can I get more money from the investor? No, it's actually a match. If it's the right thing for the investor, it's the right thing for the founder. If it's the wrong thing for the investor, it's actually the wrong thing for the founder. And if if it's when the smart investor passes on the founder, they're doing them the favor by passing. It wouldn't help the founder if they said yes. Absolutely. It would not. And at least not at that moment, not with their current plan. Not of course the investor could be wrong. Correct. But um but usually they're right that it's not a fit for their fund, and it could very well be a fit for another fund, which they've got to talk to a lot of people. Yeah. And you've got people, the the best founders, even when they have no money raised, and they they they still are very picky about the investors. They literally spend half the meeting trying to decide if they want your money, even though they don't know that you're gonna say yes. And in fact, they're getting a hundred no's in a row, and on the hundred in the first meeting, they're still spending half the weekend trying to figure out if they want this person's money. That's it's now some people fake that to get the likes. So don't fake it. Don't fake it. When you really but but if you're in a position of strengths, you you would be very picky because you're gonna work with these people for a long time. And in if you're if you have a really strong business that could create venture returns, you kind of know it, right? And then therefore, you unless you think all the VCs are idiots, which like I don't recommend that belief. It's it's simply not accurate, and it's bad for you to kind of get that cocky. Um you should probably assume that if you're right about your plans and your abilities to recruit people to execute on them, then of course some investor is gonna invest in you. You should like be very confident that they will, and so you're not gonna be particularly upset when a particular one doesn't, because you'll you will know that if you're right, you're right. You're not the only smart person in the world. So some other person will see what you see. Maybe you gotta get better at communicating why it's gonna succeed, right? So there's that. Uh the founders have to be good communicators.

SPEAKER_02 1:02:09

Facts. This is facts. It's interesting you touched um you touched on founders raising money when they weren't supposed to raise money, or raising venture capital when they weren't supposed to, and selling the company for even less than they raised. Um it's it's a classic thing, and it comes to for uh in the last few weeks again, just talking about BREX, right, where it made front pages. Oh um, Capital One acquires BREX for I think 5.1 or 5.5 million dollars uh billion dollars, right? And it's it's a very colorful headline. Um but the players in the industry also know that Brex heat um a peak valuation of about 12 billion, right? So this is probably uh a 60% discount on the peak valuation, and also uh it's there to note that some investors came in at 12 billion. How does uh this uh work? I want you to break down, for example, yeah, how a great exit can happen. Some investors will make 11x, some investors will make 50 or 100x, and some investors would make nothing. And also we would now double click into uh pref stacks, right? Basically liquidation preferences. How could that change for different investor classes? Let's start with like the really early guys and the guys who came in at when you came in and came out with a decent return outcome, and the later stage guys well it does depend on how much they raised.

SPEAKER_00 1:04:03

I don't think Brex they they weren't selling half the company in each of these rounds, like they were selling like five or ten percent of the company. Correct. And so when they raised at twelve billion, I I don't know how much they raised, but they probably raised at most one. Maybe less. Yeah. I suspect less than one. I think it was guys.

SPEAKER_02 1:04:23

I think the the last uh round was about four or twenty-five, actually.

SPEAKER_00 1:04:27

Right. They're taking four hundred million on a twelve million dollar valuation. It's not that scary, because then you can still sell the company for five and do okay. Right. Right. So four hundred of that will go right to the people who invested at twelve billion, probably with some interest, right? So maybe four hundred and fifty.

SPEAKER_02 1:04:47

And this is if if there's a liquidation preference.

SPEAKER_00 1:04:50

There's always a liquidation preference.

SPEAKER_02 1:04:52

In later rounds, correct. So let's imagine in series B and C there were like liquidation preferences. Um I don't know if for for us, for early stage, like seed pre-seed investors, we generally don't do liquidation preferences.

SPEAKER_00 1:05:10

Oh we we almost always have liquidation preferences. We invest on safes and convert all notes a lot. These days, safes pretty much. And uh those get converted into the priced round. Sometimes we do the price round with a seed round. Uh pre-seed is always safe, seed round, so often safes too, but then the series A gets priced typically. Or sometimes the B, right? And once it's priced, you get the same terms as the investors coming into that round. And it's always preferred stock with liquidation preference. It's usually just a 1x liquidation preference with some accrual of some dividends sometimes or other things. And uh later rounds, in fact, tend to have stronger preferences, if anything. Uh so generally you have to pay pay people back, and yeah, sometimes they mix the preferences. As if it was one big round, and other times uh the preferences are higher for the later round, so they have to be paid first before the middle round investors get paid. And sometimes it's actually reversed, uh, does vary a fair amount. Um and you know, at the end of the day, you sell for the much it's how much you raise matters. You have to sell for like double what you or 50% or 100% more than what you raised, you know, everyone's gonna make money. Uh when you you when you every time you raise an additional round of capital, you basically guarantee that if you sell for less than the total amount you've raised, you put like money back, the people who built the company will get nothing, right? Because they you have to first pay back all the investors. If there's not enough to pay them back, you get nothing. Correct. Um and that's something you have to be cognizant of. But then once you sell for five times more than the total amount you raised, like if Brux raised $400 million in the last round, maybe a billion in total, right, and they sell for five billion, everything works out. The the young uh man who I invested in uh back then did very well. But I will add one more caveat. That's when each round is an up round, when things are going well. Sometimes in those moments when you're really struggling, is when you're forced to raise around the funding. And typically then you might have a liquidation preference, not of one times that amount of money, but maybe three or four times. Or you might just have a valuation that's far lower than the last round. And then you might have terms like anti-dilution protections where some of the investors, let's say the series A was at a billion and the series B is at a hundred million. That can happen. It does happen. Well, those investors from the Series A want to get their deal recalculated at some average between those prices. And yeah, the dilution can get very stark, of course. And it funds investing at the seat stage, it's challenging because sometimes it's hard to protect your investment. It can basically turn into the account of common stock as well.

SPEAKER_02 1:08:14

And how does having the LICPREF or not having it change the economics for the founders? And also some investors then have participating, right? Which is like a double deep. Yeah, in a way. And how does that change the economics for a founder? For founders watching, they want to know.

SPEAKER_00 1:08:32

Yeah, of course. Well, the distribution waterfall, which is basically the term for deciding who gets how much of the exit proceeds, is a zero-sum game. So every preference, every term that favors some investors, well, that money comes from everyone who's not that investor. It favors all the investors, well, then who else is left? The founders, the stock option pool people, right? There's only a hundred percent. So how do you you know uh valuations rarely matter uh uh uh much when the terms get funky? And so you gotta first make sure that you're getting clean terms. And then sometimes founders push for the highest price. Exactly. They want that headline or whatever, right? Exactly. And and this can come back to the hurt. The bite some of the buttons, yeah, because I mean it's if you if the other terms are not favorable, and uh we we can only mention a few of these terms here because these agreements are like 500 pages long. There's terms that you it's gonna take me two hours to figure out myself what the other term means. And so, yeah, that you don't want any of that. Yeah, and you also don't want the highest valuation.

SPEAKER_02 1:09:46

You know, like uh how do you convince founders?

SPEAKER_00 1:09:49

Because I convince them at all time, because we we never pay the highest price, like we just don't. Uh how do I convince them to take a lower price?

SPEAKER_02 1:09:58

No, just for the round, because I think it's an ego thing. Yeah, yeah. The pages of TechFront to say I raise that so in still valuation. It's sometimes it's the wrong thing.

SPEAKER_00 1:10:08

First off, do you fundamentally believe that uh uh some investors can bring value by being on your board and working with you and helping you build a business? Some founders don't believe it because they're so arrogant or they're so good that really any attempt to help them would be just wasting their time. And then they should probably just take the highest valuation they can get. But most founders, I think, recognize that there's some people, of course, most VCs are going to be useless. Most VCs suck. This is facts. But and some VCs can be good in some cases for some people and bad for others, right? Um, but I think most founders recognize that there's some VCs who can help them tremendously. In particular, ones that have had a bunch of success in their portfolios and relationships with those founders, and it's like you want to be closer to that knowledge and network of success. And if you have a fund with a strong thesis, in our case, we work with immigrants, we know how to help them more. We have a PR function that we provide because they tend to not be very strong in that area, for example. Other funds help in other ways that they know about. You want investors who can help, and you want investors who really care who you click with, who you trust. Uh, but mostly you want ones that can really make the difference. Because if the company succeeds, you're gonna do great. Um it's the it doesn't matter what ownership you have of a really successful venture-scale business that sells for billions. Like it doesn't matter, right? Whether you end up with 10% or 15 or 5%, you're still gonna be a very wealthy man or woman uh sometimes. But what really matters is if you're if a person you're working with can change your probability of success, you know, from 5% to 10% or from 10 to 20, right? That's what you want. Correct. You want to because, right, you want to succeed. And that yeah, that's the value of it. And so that's how you explain it to them. You tell them that obviously there's a lot of investors out there, and you can rank them from best to worst, in theory, right? And by definition, if you talk to everyone and you take the highest offer, you're gonna literally have the worst possible person. Right? Like why why else do they have to pay the highest price? And the better the investor, the less they'll be paying. And so the the absolutely best investors command lower valuations, right? Because founders pay them more equity for their time. Yeah. And so it's just you, I'm just honest with people. It's like, look, we had a founder in recent investment out of a third fund where they really didn't want to take more money, they really wanted in this case, it wasn't so much valuation they were arguing about, it was just the amount of a raising. They wanted to raise less. They needed to do this deep tech business, they needed to de-risk some one thing. So ultimately it would be dilution because by taking less, they knew that once they make this milestone, it'll be worth much more. And so uh I we want we wouldn't do it if we don't get 10%. And uh he he had he finally got he wants he didn't want to he want to give a five. And he while we were negotiating, he got other offers for exactly what he wanted from other VCs. And I said, Look, if you really think that you'd rather work with them and they can help you business, you should take that money. But uh don't take the money from someone who is not gonna be able to do that. That's great because you because it's five percent, right? There's people who could probably help you more than me. And if you can get their money, they'll want 20%, of course. But if you can get their money for 5%, I'd like you to take it. But don't take the money of someone who's not gonna who you don't believe, you don't believe will help you as much as we will help you. And so they want the deal that way.

SPEAKER_02 1:13:50

Simeon, you've been described as a straight shooter and someone who's basically very impatient with perfumative investment culture, right? You talked a little bit about what kind of culture? Like perfumative investment culture, right? Um, and also just you know, when you speak, you you you just go straight to the thick of it. Yeah, yeah. Um, how how how have you found this? Because our industry is quite one of um signals and posture and those kind of things. Like, how have you how how does that part of your personality, how does it shine through? Have you found it easier to like make friends in the industry? Has it worked out very well?

SPEAKER_00 1:14:36

How do you how do you think industry? Like, I don't get I don't find most VCs and people I really want to be friends with, right? But I have some really good friends who are VCs. So I think uh being a straight shooter, yeah. I mean, some people are not diplomatic enough, some people are too diplomatic. I don't know. It's a there's different personality types. I actually try to be more thoughtful about what I say with age, right? But I wouldn't say that that's a area of strength. You know, I I yeah, but but on the flip side, like telling people what you really think is a strength. Correct. You know, it it sometimes costs everyone in the short term, and long term people really appreciate it, people value it. I've been complimented at least by people who told me that they thought I was a complete asshole at the time, and they're actually grateful, really grateful for that. For telling them the truth. For telling them and for knowingly paying the social price, knowing that they would think I'm an asshole. And telling them anyway. Yeah. That's a strength of mine, like that that I want to do the right thing, say the right thing, the true thing. Yeah. Even when it like it's not what they want to hear, and it's gonna cost me. Because nobody wants to make enemies, right? Like, no, no, no, absolutely.

SPEAKER_02 1:15:55

And yeah, it's it's it's a team game. But you find it more and more, as you said, right, more and more often where um um investors are not saying what they mean. It hurts the whole ecosystem eventually, right? They're not saying what they mean, the same proxies of what they mean just because they want to be politically correct. Yeah, right. Either when they pass in on founders or they Well, I'm not always honest when I pass on founders.

SPEAKER_00 1:16:21

I wouldn't that's just too c too hard. I if I like actually speak with them, talk to like have some relationship, I try the more I'm invested, the more human it is, the more I'm honest. But when it's just email or whatever, I don't usually tell them why we're passing. Oh, really? I mean, the I don't think I think most investors learn very quickly that that's not that's not a good way to go. It just pisses people off since you don't know them. They argue, it causes additional interactions. They generally argue with you know, they they try to convince you not to pass, and it doesn't really work. The more reasons you give them, the more arguments you get back.

SPEAKER_02 1:17:02

So eventually you just Yeah, this is a funny topic because I feel like at our firm, uh when we when we onboard like analysts or associates who sometimes have to send rejection emails, right? This is a big part because it's basically it's reputation management. And sometimes you're as a person who wants the best for a founder, you are stuck in between giving them a gift that would help them build a better company and basically cover your ass. Like I don't want to be on a Twitter thread.

SPEAKER_00 1:17:37

The main reason for rejection at the end of the day is often that they're not extraordinary enough. They're they're too ordinary. And very few people really are able to hear that. So usually it's what when I get past that point, when I think the founder is extraordinary and I pass for some other reason, then I c I tell them the truth. Right? But when they just never I mean, when they've invested their time in speaking to me, and you know, we invest our time, they invest theirs. I I do the thing that that that I think is a strength where I really tell them what I think. But when when they're blasting emails in my direction, no, I don't tell them why they're fast.

SPEAKER_02 1:18:19

Yeah, because oh really? Yeah, no, I don't know. Because I think as a young investor, that was something I had to deal with and had to implement a way where you almost had templates that would not put you in trouble. And the major thing was to not argue on facts and carve it and couch it as our opinion. Yeah, right? And sometimes I go out of my way and say, you know what, investors are wrong most of the time.

SPEAKER_00 1:18:47

I try to do that. Right.

SPEAKER_02 1:18:48

I hope I'm wrong, but this is why, this is what I think, basically.

SPEAKER_00 1:18:52

That's important to generally preference every everything you think with, I think, and that this is the truth. Yeah, yeah. Yeah. I'm often really sure, and I'm often maybe more sure than I should be, but I'll say, like, I'm really sure, but but that's just my opinion. It seems that way to me. Correct. And I don't see how the thing you're describing could possibly be a business. In fact, it's actually like the most ridiculous thing I've heard in in this entire year. Uh, but um, that's just my opinion. But I'm wrong.

SPEAKER_02 1:19:24

Sometimes I actually think some people who have great ability are building in the wrong spaces. And this is the one that makes me pull my hair the most, right? Um I think, of course, to be successful as a founder, you need some level of uh delusional resilience. Basically, you need to be delusional a little bit, right? Um and sometimes it affects how founders see the opportunity they're going after, right? There's a level of blindness.

SPEAKER_00 1:19:55

I think I think the best founders are always building in the right spaces, by definition. Like if they're building in the wrong spaces, then they're not the right founders. And and you're not really judging the space, you're just judging the founder. Because when you are sure that the space sucks and you really know that it's an amazing founder, well, that's like, but they're an amazing founder. They know their space. You cover several spaces. You're like have to raise funds occasionally, manage your team. There's no way in the hell you could be right. Like you're wrong, they're right. Right? Like they if they are really amazing, you don't know if they're that amazing. And so you think you're probably right about your space, you just think less of them, right? But if you re- what you're saying, where you you truly think they're this incredible founder just doing it in the wrong space. If you if you if you can convince yourself that it's an incredible founder, you write the freaking check. Because you well, no, maybe they still if they're an incredible founder, it should be able to convince you that you're wrong about the space and re-educate you. And if they fail to do so again, they have some real gaps as a founder. Right? Or you have some real gaps as not understanding their vision. And that could that could be the case as well.

SPEAKER_02 1:21:02

And I guess that's the thing. And so where do you sit in this dichotomy of investors? Are you the market investor or are you the founder, founder, founder, investor? I'm gonna look at founders. I see. Yeah.

SPEAKER_00 1:21:14

No, but look at the market. You have to understand the market because that's the founders in some countries where you need this you need to it's subject for conversation. You gotta talk to the founder about something, so you talk about the market with them in order to understand how well they think. Correct. But we're not judging the market. We're only judging the founder. We only invest in the CEO, really. We don't care about the rest of the team. We look at the team in order to decide how strong the CEO is. And we spend a bunch of time with the team. And if the team is amazing, that tells us a lot about the CEO. Like the it's literally the first founder. Sometimes CEO is the wrong word. You can actually have someone else to run it. But it's the the primary founder. There's always a primary founder. And even when they're two equal founders, three equal founders, there's somebody who's the leader. Yeah, where the the the whole thing comes from their heart, right? The drive comes from them. And ultimately, you're just evaluating that person, and every rejection is a personal rejection.

SPEAKER_02 1:22:17

Hmm.

SPEAKER_00 1:22:18

Yeah. That's all it is.

SPEAKER_02 1:22:20

That's tough. But it's just right. Some investors say that a rising tide lifts all boats. Basically, the a non-extraordinary founder can build a successful company when the market is in their favor. It's true. And then an extraordinary founder can just be swimming so hard against the top.

SPEAKER_00 1:22:45

The first thing you said is absolutely right. And you could invest if you really know which way the market's gonna go, you can invest in ordinary founders and they all get lifted. Hard to get those fund returners so that you might get the 10x's with the ordinary founders, but maybe not. Like that there's some truth to that. There's no truth to the second part. The right extraordinary founder is not going to spend their life swimming against the tide and getting nowhere. They will find the bigger market, they'll change the pivot, they'll change everything they do ten times over. And it's not always such a radical pivot. Sometimes it is, but most of the time, like how you think about the market, how you slice it, you change the world changes, you change the direction a little bit, they'll adjust. They're not going to fail, right? Because they're stuck on some idea they had 10 years ago and they're refusing to change it. That's not extraordinary vulnerable investment. Especially today with AI changing everything, right? Like, my God, all you can do is bet on the person with the grid, the immigrant in our case, right? Who is not gonna give up, who's going to be good at adapting to new uh changes in the environment, right? Survivability and adaptability. And that's that's all you can really bet on because we don't know how the world will change. Like this stuff is improving so fast. Like, how can anyone know what will really look like, what business will look like in five years? I think we know less than ever before what the world looks like in five years. The rate of change is the highest it's ever been in the history of civilization. This is correct, right? And so that's all the more important to bet on the person who will adapt. That's all you can do. And that was a good bet.

SPEAKER_02 1:24:30

Simeon, what are you betting on these days?

SPEAKER_00 1:24:34

Well, we've made three investments uh out of the current fund. Uh and yeah, I mean they're all related to artificial intelligence.

SPEAKER_02 1:24:44

Correct. Let's talk about it.

SPEAKER_00 1:24:46

Yeah, the the first one uh is uh a company uh called Deduction, which does uh fully agentic AI consumer tax preparation. So interesting. Yeah, you and it was a pre-seed idea stage check. Um they've launched, they launched uh beta and uh extension tax deadline in October, and now they fully launched like the the full product for the upcoming April 15th main US tax deadline. So they're launching the US. Um so lots of competitors of course, but fantastic team, and they're very happy with it. Um confident will be marking coming up soon enough. Um intense immigrant stories, of course, team that's worked together before. Um referred to us by the CEO of like a very successful fund to investment called Tabs, where they worked together in a previous startup, which actually went public. But Tabs we met because Lex also went to Lex College with the founder, actually. And that that company is really crushing right now. It's just they own all the billboards. They're like they're they're the the Brecks actually, they're like a very similar trajectory. Interesting. They haven't raised any billions quite yet, but like well, like any time. Oh yeah, like yeah, yeah, yeah, yeah.

SPEAKER_02 1:26:21

And why didn't you bring me into that deal?

SPEAKER_00 1:26:23

Um because uh well, I don't know. Why didn't I bring you into tabs? I didn't realize investing in in New York-based uh company. An angel check or an Africa. An angel check. Oh, an angel check. Well, the thing is, uh uh it was immediately full. There was another VC and it was also pre-preced first idea stage, full. Like there was no the rules.

SPEAKER_02 1:26:50

Yeah, and this usually happens.

SPEAKER_00 1:26:52

And so and so uh we were able to actually write the full, it was uh what I forget, I think we lost a million and a half, which was a full fund two check at the time for us. Um we were fortunate to to be a part of it, right? Uh but anyway, so that's how we met this company. Um and another there's a Jeep tech company that's somewhat still installed, but they they they're working on a new kind of transistor chemistry to potentially make AI chips or other kinds of chips, but especially AI chips that will consume a thousand times less power than than everything that exists today. So that's sort of interesting. Yeah, like high risk, long road. Yeah.

SPEAKER_02 1:27:36

And you have a technical background, right? When you look at the how AI is evolving, both in terms of like foundational models, agents, and how um it's getting embedded into even traditional industries, legacy um verticals. What's the future? What are you thinking?

SPEAKER_00 1:28:00

Buckle up. It's gonna be a lot of change.

SPEAKER_02 1:28:04

And what are you looking to invest in?

SPEAKER_00 1:28:07

I owe in and around AI. Incredible, extraordinary immigrant entrepreneurs. That's what we invest in. Yeah, like we the vertical around AI. I like um physical things like this last investment around AI, you like Jeep vertical integrated uh platforms with proprietary data, emotes, um and we're still looking at FinTech and some other stuff. Um and uh yeah, and Jeep Tech is not just around AI. We look at your space, we have a fantastic company in a second fund called Helogen that's doing biology in space, like growing tissues like for knee surgeries and stuff. Yeah, in orbit. Incredible. Um and yeah, a few other areas. So we of course we're more comfortable when we understand the vertical, like we can have a deeper conversation and the diligence is more manageable. But um we are very, very clear that the the critical decision is is always a question of the person. And you know, you can't just be a normal person and build this like a large disruptive deck of horn, like i uh you're saying a rising tide? Nah. Even in a rising tide, maybe there's three winners.

SPEAKER_02 1:29:32

Right? Yeah, something.

SPEAKER_00 1:29:35

Yeah, I mean, because of the way venture works, you sort of need really like one in a million type of people, not one in a thousand type of people. Interesting. Yeah, and it's hard of course to to judge it, and they can legitimately be angry at you for not recognizing their uniqueness. And of course, all of us are special in our own lane, whatever, right? But that is what they look for.

SPEAKER_02 1:30:03

This conversation has been mind-blowing for me. It's it's not every day you meet people with your story, your personality, and your track record. It's not every day. And that's why I said I needed to make the trip. I needed to talk to you because I feel like you just gave entrepreneurs and body and investors around the world a gift into how your mind works. And I think the biggest thing is that you can bring success out of adversity.

SPEAKER_00 1:30:45

Not always. Not a hundred percent. You can but I think the as a favor, yeah.

SPEAKER_02 1:30:50

So, um, I want to really thank you for coming and taking time to talk to me.