He Timed 10 Exits for $500M. Here's the One Thing He'd Tell Every Founder.

Fred Krueger is one of the most prominent Bitcoin maximalists on the internet — and a Stanford PhD with 10 successful exits totaling over $500M. In this episode he says something that will surprise you — AI is bigger than Bitcoin, bigger than the internet, and the only thing founders should be focused on right now.

Fred left Wall Street at 32 after trading bonds at Salomon Brothers with a billion-dollar balance sheet and no transferable skills. He moved to North Carolina with his brother, bought Windows for Dummies, and built one of the first paint programs for Windows — accidentally inventing Photoshop layers in the process. What followed was 30 years of riding waves: Windows, consumer internet, and now Bitcoin and AI.

WHAT YOU'LL LEARN:

Why "timing is everything" and how to spot the wave before everyone else does
How Fred negotiated from $10M to $15M (then the stock doubled to $30M) by being willing to walk away
The near-death experience every founder should expect before their exit
Why most entrepreneurs quit too early — and the one mindset that keeps you in the game
Fred's take on AI: why small teams will win, and why you should spend all your time there right now
Why Bitcoin is bigger than the internet — and what tokenization means for founders

TIMESTAMPS:
01:27 From Quant to Startup Leap
05:06 Building Matisse on Windows
06:38 Inventing Layers and Shipping
08:06 Marketing and Distribution Hacks
13:38 Selling the Company
15:32 Negotiation and Founder Mindset
19:46 Project Two and Java Hype
23:42 Vignette Lifeline and Big Outcome
27:35 Luck Versus Timing
31:36 Dotcom Wave And Iwin
34:23 Crash And Quick Merger
38:20 Golden Age Of AI
42:11 AI Use Cases And Demos
45:11 Bitcoin And Tokenization
55:13 Closing Thoughts

ABOUT FRED KRUEGER:
Fred Krueger is a Stanford PhD mathematician who went from prop trading at Salomon Brothers to building 10 companies with 10 successful exits totaling over $500M. His first company co-invented Photoshop layers before selling to Macromedia. He's now a prominent Bitcoin advocate and AI builder.

GET THE BOOK: 📖 High Five Energy: A Different Kind of Founder features 18 visionary founders behind $200B+ in exits. Available wherever books are sold: https://a.co/d/iJlOfaq

LISTEN ON ALL PODCAST PLATFORMS:
🎥 YouTube: @H5EFounders
🎧 Spotify:

Transcript

SPEAKER_01 0:00

Buyers want people who are confident and who has a vision and will carry it through, right? The last thing they want is some guys like, yeah, I'll take two million dollars. That's not really cool.

SPEAKER_00 0:10

That's Fred Krueger, a Stanford PhD who went from trading bonds at Solomon Brothers to launching 10 companies with 10 successful exits, totaling over 500 million dollars.

SPEAKER_01 0:21

I exited this company, you know, and now have whatever, 10 million dollars plus in my bank account.

SPEAKER_00 0:26

And I was like, hmm, looking for project number two. He pivoted his first company after a one-star review nearly killed it, then sold it for 30 million, and reveals that 99% of entrepreneurs quit too early and that timing is everything.

SPEAKER_01 0:41

The great exit has nothing to do with your product. It really has a lot to do with your timing. Timing is absolutely everything.

SPEAKER_00 0:49

And now he's all in on Bitcoin, building these centralized tools for finance and AI, and challenging everything he helped build in Web 2.

SPEAKER_01 0:57

You gotta believe it yourself for other people to believe it. If you can convince yourself of that, it'll emanate, right?

From Quant to Startup Leap

SPEAKER_00 1:03

What's up, guys? I'm Jeff. I'm a serial entrepreneur and investor. And on this podcast, I sit down with the world's top founders to unpack how they actually build, scale, and think to help entrepreneurs get the tools and inspiration they need to succeed. What were you working on before you were quote unquote entrepreneur? And how did you make the jump into your first company?

SPEAKER_01 1:27

I was one of the first quant traders on Wall Street. In the 80s, a bunch of cone heads, as they called us, mathematicians, uh, came up with certain things like the Black Shoals option pricing model and uh the idea of doing arbitrage and bonds, including my boss, who was John Merriweather, who is the head of arbitrage at Solomon Brothers. And uh so I was hired after my PhD in math from Stanford to uh join Solomon Brothers, which was at that point the largest trader in the world and headquartered in New York. So I joined Solomon Brothers and uh I went to the sales and trading program and then I became a trader. I became a very successful trader at Solomon. I had the most suc the most profitable trade in the history of the firm of Solomon Brothers. It was a product that I created that bankrupted the oldest, at that point, the oldest company in the world, which was the East Asiatic Trading Company. I created a swap, which unfortunately for them, they took the other side of and they went bankrupt. But uh I also podcast. But you know, I I was in I was in the I was in that world for six years as prompt trading and uh made a bunch of money, and then at the age of 32, I basically said, I just can't do this anymore. I just I I need to do something else. And I realized I had no skills whatsoever because my skills involved I needed a billion-dollar balance sheet in order to do the kind of trades that I did. And you know, you you walk off the floor at Solomon and you know you're in the real world and there's nobody there lending you a billion dollars. You know, people are saying, well, go trade some equities. And I'm like, I don't even know how to do that. So uh so then I decided I I went on this trip in India with my brother. Uh we went to Rajasthan, and uh I was like, Richard, do you have any brilliant ideas? Because I just can't, I'm done with this trading. And he's like, Well, we'll just, you know, uh, I do. I think that we should we should do a startup together in software. And I'm like, startup and software? Okay. Okay, that sounds good. I said, That's fine. Let's do a startup and software. Let's go back after the trip. We'll go back. Uh, where do you want to do this? And he goes, Well, North Carolina, that's where I live. I think it's it's actually a really good place to do a startup. I said, Done. I'm gonna move to North Carolina. We'll do the startup. Got any ideas? And he's like, Well, I have an idea or two. Uh, we'll figure it out later when we when we go to North Carolina. So moved to North Carolina. My brother had been doing some health uh stuff. He was working at University of Singapore at the time, and he's doing some 3D uh visualization stuff. He's like, 3D silicon graphics is is is that's that's the ticket. So I was like, great, you know, I I actually knew the founder of Silicon Graphics from Stanford, and I'm like, yeah, okay, I'll let's buy a silicon graphics machine and get going. And then uh I started and I was like, great, we'd like to order two silicon graphics machines and and going together, they're like, What can we see your business plan? And I'm like, what do you mean? Like, I I got the money, let's just pay it. And he goes, No, no, we want to see your business plan. We we at Silicon Graph, and I was like, No, no, this thing is not gonna work, Richard.

SPEAKER_00 4:52

So they would not sell you a machine without a business.

Building Matisse on Windows

SPEAKER_01 4:54

It was sort of one of these like enterprise sales type deals where they're like, we have different pricing for different people, you know, we need to know you better. Come out and stop in. And I was like, Richard, Richard, I'm like, this is not gonna work. And I was like, what about this Windows thing, Richard? Windows, it was on Windows 3.0, and it just had come out, and I'm like, can't we do something for a Windows 3.0? Don't you have any some idea? Because I kind of like I think that thing's gonna take off. And uh my brother said, Well, I, you know, I did this paint program when I was at IBM. Paint, you want to do something in the the graphics world? And I said, done, perfect. Let's do a paint program for Windows. It doesn't seem like they have any really good ones. Like Photoshop was out on Mac, didn't wasn't out on Windows, and I said, Let's do a paint program on Windows, Richard. And and then so we said, okay.

SPEAKER_00 5:45

So what was the first step? Did you know anything about Windows at that moment?

Inventing Layers and Shipping

Marketing and Distribution Hacks

SPEAKER_01 5:48

No, I went to the store and I bought uh Borelin C and Object Windows Library, Owl, they called it. And so we bought just went to the store, bought every book, how to program Windows, Windows for Dummies, C for Dummies. And I was like, great, let's buy the stuff, learn this stuff, and write a program. And my brother's like, okay. So you're gonna pay for this? I said, Yeah, no problem, I'll pay for it. Let's let's, you know. So I I basically the two of us sat down in a room and we we started writing this program, and literally two guys in a room, and uh, I did about 40% of the code, and my brother did 60%. I I did the bad 40%. And uh and then we banged out this program called Matisse. Okay, and Matisse was was really part of the thing that that made it work was that we didn't have any preconceptions on as to how things should work. So, for example, I saw this, I said, Explain to me how this Photoshop stuff works, Richard. And he goes, Well, here you have the selection, you make a selection, you float the selection, and then you drop the selection. I said, Yeah, but I don't want to drop the selection, I want to keep these selections live. And he goes, Well, that's not how it works, Fred. You have to drop the selection. I go, What if we had multiple things that were just live at the same time? Well, that's what became Photoshop layers, right? That was our idea. So we were, you know, we're just like, well, I suppose we could do that, you know, and we could keep these things live and we could have this list of floating layers, and you know, and and I'm like, good, great, let's do that. And then we can just paint on an active layer, and then you move the layer and you paint on another layer. So effectively we created the concept of layers. Uh we sold our company to Macromedia a year later. Adobe two years later came out with Photoshop 3, which basically refined and improved on our concept, to be honest, you know. But you know, we we we we had the idea before, we showed it to Adobe before, we showed it to the world before, and you know, and and it it was a really revolutionary product, and people loved it, and it worked, and uh it made money. And we sold shrink wrap software, right? So we sold, you know, at that point you had these little you know uh uh floppy diskettes, right? And you made something called the Golden Master. So you put all your your things in, you got the book, you printed a book, you put it in in a box, and you ship the box to the distributor, which was Ingram Micro, sold to Comp USA, Egghead, and all these stores. And we sold Direct too, you know. So people would we took ads out and Windows magazine and people would call up and they'd be like, Can I get a copy of Matisse? And like, yes, sir, would you like the lights and surfaces? The what? We have an add-on, the lights and surfaces. You want those, sir? Oh, yeah, yeah, definitely want those. So we became really good at kind of direct marketing, too, you know. So we figured out like cost of like running an ad in the paper, how much money, how many Matises we could sell from that, et cetera, et cetera, et cetera.

SPEAKER_00 8:59

I just want to take a moment to talk about something that's really important to me and something I've been working on for years. If you like these conversations with founders, the mindset shifts, and the real questions behind building companies, I go much deeper on all that in my book, High Five Energy. I wrote it for people who are thinking about starting something or who already have, but want to lead with more clarity and purpose. The book gives you practical tools to get into high five energy flow state, attract the right people, and build in a way that actually feels aligned. High Five Energy includes interviews with 18 legendary founders who've had over 200 billion in exits and IPOs. If you're new to entrepreneurship or even just considering taking the leap, this book is for you. High Five Energy is available now wherever books are sold, or hit the link below. So, how long from buying windows for dummies till you actually had a product in the market?

SPEAKER_01 9:53

It took us about almost a year to build it because it's really slow. I mean, you're writing stuff almost at the It's not like now, right? You're just writing every like class point, you know, X, Y, you know, like you everything's super low level, right? Back then. But so we built it out in about a year, and then I remember my brother going, so what now, Fred? And I'm like, Well, now we gotta we gotta sell it. And he's like, How do we do that? And I go, Well, why don't we just try calling different graphic design firms in our area? So I literally called like yellow pages at that point, right? And I'm looking for graphic design firms in the Raleigh Durham, North Carolina area. So I remember we called this one, and the guy goes, Hi, do you use Photoshop? The guy goes, Yes. He goes, We have a new product that's like Photoshop, but for Windows and better. You interested? Uh yeah. You want to come by? Uh can we come by and give you a demo? The guy goes, Uh yeah, sure. Why don't you come by at 2 p.m. and give us a demo? So I came by and I go, Here, great. My brother will install the software on your uh computer. And the guy goes, Great. Uh okay, it won't hurt my computer. No, no, no, it's good. And then we install the computer. Uh, I'm sorry, your computer no longer works. We'll be leaving right now. Thank you. That was my first experience. Like, I fried this guy's computer. So it was it was only up from there. It was only up from and then, you know, then I did a uh, you know, so it's a very hot, it's funny stories now, but like then I uh I said somebody I met these people from this art institute uh and they were like, you guys have a great program. Why don't you come with us? We're gonna do a trade show in Los Angeles. And I'm like, hmm, trade show in Los Angeles? Okay, that sounds good. You guys have a booth? And they go, we have a 10x10 booth, but we would like to take a quarter of that 10x10 booth and offer it to you guys. And so I go, Great, so I'm gonna pay for a quarter of a 10x10. He goes, Yeah, well, just a like a little space like this, and you can put your Matisse on the booth. So I say, Great, I'll do that. So they I show up, it was in Anaheim, it was Siggraf in 1992. I show up on this little thing this big with a little laptop, right? And I'm showing Matisse. First guy to stop by from says, he goes, What's that? I go, uh my brother goes, uh, excuse me, your name? He goes, Nathan Miravold. He goes, What do you do? And he goes, CTO Microsoft. And he goes, my brother goes, hmm, okay, okay. You want to see the program? He goes, Yeah, we have these floating layers. And the guy goes, How much? And my brother goes, 99 bucks. And he goes, not the software, the company. The company. The company. Okay, the company. And so, you know, that was that was, you know, we realized kind of at that moment that we had something really special, right? The next the next guy to stop by was Alvy Ray Smith. And the guy comes by and he goes, Hi, Alvy Ray Smith. And I go, Hmm. Your name sounds familiar. He goes, I found a Pixar. And I go, Oh, okay. And he goes, So you got it too? And I go, Yeah. And he goes, You mean what? He goes, Layers. I just invented it today, too. And I go, Oh, okay. So we both invented layers at the same time on the same show in the same room. And he goes, Yeah. Anyways, that was the beginning of that experience. And Alby eventually sold his startup to Microsoft and he became kind of this Eminos grease of Microsoft. And then I sold my company to Micromedia.

SPEAKER_00 13:31

But when you sold it, was it the Matisse program that actually was the thing the buyer wanted, or was it something else?

Selling the Company

Negotiation and Founder Mindset

SPEAKER_01 13:37

No, so after Matisse, and this may you may f get something out of this or not, I don't know. But we had this really popular consumer product, right? And but at that point, you made one of these things and you had to upgrade to the new program, right? So people like, I got Matisse. Now what else you got to sell me, right? So we were like, okay, we need to get something new. We got something new to sell these people. Okay, so I came up with this new idea called X res. And it was like high resolution Matisse Super Pro. Like Matisse was 99 bucks, but XRes was going to be$700, right? Like this crazy program. Now the problem with XRes is it was too ambitious. And you know, a lot of times as a startup, you get into this the sort of version two, you try to make it way too too much. It tries to do too much. And that's what happened with X-Res. We tried to do way too much. We were saying we're going to edit, you know, at that time, gigabyte images online, which was just insane, you know, back in 1994. And uh so we we we got X-Res, and the first version of X res that we had, uh, I remember the the top reviewer of graphic design for Macworld, Bruce Fraser, said Dash's expectations. Two mice or one mice out of five. And I was like, oh God, Fraser just killed my program. But then I said, you know what, we're gonna go back to the lab, we're gonna work on X-Res, we're gonna improve X-Res, and blah, blah, blah. And we never I would say really a hundred percent got it to work, but ultimately that's what the Macromedia bought. They bought X-Res because they were like, we like it, we think we can finish it. These guys lacked the big company, you know. We'll take it from here, Fred. Great idea, we'll take it from here.

SPEAKER_00 15:32

How'd that negotiation go?

SPEAKER_01 15:33

It's like a courtship, right? So the freehand team were from Texas, and and they kind of got to know us and they they're like, we like you guys. So you you guys are like us, you know, you're techies, you got new tech, you guys are not, you're not scared, you're you're you're very fast. We like you guys. So there was already a like of us, and we kind of got to know them a little bit over, you know, a couple trade shows and stuff. And then they they they were like, okay, we we like you guys, we like X res. We like we like Bentis, we like X-Res, we think we can do some good stuff with you guys. We'll buy the company. And then uh and then I was like, okay, I'm making a million bucks a year right now. So I had a company that was cash flowing a million dollars a year. Now I was sort of like now how how many years could I keep that going? I don't know, right? It's like I was made I had made a million dollars, and then I says, they go, Well, we'll pay you ten million for this. And I was like, hmm, ten? I was like, normally I would say yes, but you're talking to a guy who made three million dollars personally the year before I started Matisse, you know, on Wall Street. So I'm gonna say no. And and they're like, Well, what would you take, Fred? And I said, I'll take twenty today. And then they were like, Fred. And my brother was like, You you you said what? You said I said no, we're not gonna take ten million dollars cash. And my brother's like, You're crazy, Fred. And so, and then they came back three weeks later and they're like, Look, how about fifteen? And I said, Okay, sure. Fifteen's good.

SPEAKER_00 17:17

Round of applause. Fifteen, done, yeah.

SPEAKER_01 17:19

And then of course it the stock doubled, it was thirty. So, you know, yeah, so like we got lucky, but uh, you know, it was it, you know, you you kind of have to have an edge in the negotiation. If if you don't have an edge, if you can't walk away, the price would have been five or two, or uh, you know, I don't know.

SPEAKER_00 17:38

So do you think that came from just the fact that you made a lot more money so you were able to just bring that confidence to the negotiation table?

SPEAKER_01 17:46

100%.

SPEAKER_00 17:47

So, what do founders do that don't have that background, that are in a negotiation, how do you can you fake that confidence, or do you just have to conjure it up?

SPEAKER_01 17:57

I have a friend who once told me, and I think this is really good advice, it's sort of like you gotta believe it yourself. You gotta get to the stage where you believe it yourself for other people to believe it, right? If you can convince yourself of that, right, then other people will it'll emanate, right? But if you can if you can sell yourself on it, but if you're hesitant, people will people will detect that hesitation immediately, right? And they're gonna they will sense fear. If they sense that, yeah, this guy, this guy kind of doesn't give a shit, you know? We we kind of gotta this guy's not be not not playing ball, you know. You kind of have to have that attitude. That's how you sell, you know. It's it's sort of like there was this book on uh picking up woman that came out about 10 years, 20 years ago. It was called The Game. Remember with a pickup artist on MTV? And you know, his whole thing was you know, the pickup line that worked the most was you walk into a uh a bar, you go with the hottest girl around, and you walk up to her and you go, you know what? You're pretty you're pretty good looking. What else do you got? And then the girl would be like, Excuse me? What well well, I have a good sense of humor. You know? I I'm I'm actually a good person. Oh, okay. All right. So, you know, that kind of that's the human selling thing. It's the attitude. It's the attitude. Buyers want people who are confident, right? They want confidence. If they're buying you and they're gonna invest your money in you, they want somebody who's gonna stick around and they want somebody who's confident and who has a vision and will carry it through, right? The last thing they want is some guys like, yeah, I'll take two million dollars.

Project Two and Java Hype

SPEAKER_00 19:42

You know, that that's that's just not that's not really cool. So when you moved on to the next one, was it the same circumstance where you're like, okay, let's do the next company. What's what's the idea that we're gonna come up with, or was it a problem that you face? You're like, this needs a solution.

SPEAKER_01 19:56

I think one of the big problems we all have as entrepreneurs is we're always looking for what how can we apply our you know skill set to go right do another company? And that's usually a bad idea, right? So like uh, you know, I had this, I exited this company, you know, and now had whatever$10 million plus in my bank account. And I was like, hmm, looking for project number two, you know. And I wasn't I wasn't about to waste any time either, you know, sort of like, okay, I've got 30 days have gone by. Uh let's see. Idea number one, two, three, you know, what do you got? You know? And so I just started hiring just people, just like, okay, you, you, you, you, you know, like, let's let's go. Let's get a band together. Let's let's build something. And they're like, what? And I go, I don't know, you got any ideas? You know, and so you know, we built something, we immediately pivoted because it was just a terrible idea. And uh, and then we built another thing, which also was kind of ultimately a terrible idea. Uh, we were building these uh websites in Java. It was it was a really bad idea, right? Because basically, Java had just come out, and uh and I sort of said, well, maybe we could make entire websites in Java and as opposed to HTML, right? Uh and and we didn't have kind of modern JavaScript HTML at as we know it now, right? We we just sort of had like really clunky go go to the Wayback Machine and look look at what a website looked like in 1995, right? That they were really not very interactive. And so I started, you know, and and Macromedia was sort of all talking about all you know, this flat, not quite flash yet, but they had director and some other stuff. So I was like, eh, Java sounds like the ticket, you know, we'll do that. One thing I noticed is that really appealed a lot to investors, right? So investors were like, ooh, Java, a website, fantastic. You know, Java's hot, website's hot, Fred's hot, the mix is hot. Let's back Fred. You know, so like Sequoia Capital took term sheet, Fred, you know, like well, come on by. You know, and then uh so I I w you know it was looking really good, and then all of a sudden Microsoft put put this thing like we will not no longer support Java. It was sort of like Java became hot to Arctic fridge overnight. Literally within three days, you said the word Java and it was like How far were you in that process for the Java project?

SPEAKER_00 22:22

I mean at the very end.

SPEAKER_01 22:24

You know, like we we got we're just about ready to relo launch our thing. We had the term sheet, we had um uh I forget the guy's name at Sequoia, who was just literally coming by, and he came by and he was like, this doesn't feel right. And then he goes, Fred, what about the uh Microsoft stuff? And I'm like, eh, don't worry about that. And he's like, I'm worried. And uh yeah, and then and then it sort of all fell apart really quick. And then I was like, oh, this thing is simple. And then I sort of think, maybe Microsoft will invest. I got invited up to Microsoft, and they're like, No, we have this new thing that we want you to build on. I'm like, you invited me up here to tell me to rebuild on this new language that you had, and they're like, Yeah. And I'm like, oh God. And then I called my lawyer and I said, Okay, we're gonna have to declare chapter 11 or five or whatever. Uh, how do we do that? And then the lawyer goes, Um, Fred, you can't do that. And I go, Why not? She goes, Because I'm an investor in your company. I don't want to I put 50 grand in this thing. I don't want to lose it.

SPEAKER_00 23:29

How much have you raised total at this point for that company?

Vignette Lifeline and Big Outcome

Luck Versus Timing

SPEAKER_01 23:32

Uh like three million. And uh she said, she's like, uh, yeah, you can't do that. And I'm like, well, you got any bright ideas? And and she's like, Yeah, I do. Why? My husband works at vignette. Have you heard of vignette? And I go, Yeah, I know vignette, but it's what what does it have to do with what we're doing? She goes, Well, they're very interested in Java. Like, really? And she goes, Yeah, why don't you I'll get a meeting between you and Ross, the head of vignette, and you can pitch them on your idea. So I'm like, okay. And I just sort of told everybody, like, yeah, yeah, you probably gonna go home, probably not gonna get any more pay paychecks. So it's kind of over. And then I said, you know what? Uh, what remember I told you Friday about not going home and not getting a paycheck? Actually, I'd like you to go back to the office and hang up because Ross is gonna come by the office and I want everybody to look busy. And so Ross came by and he, you know, he's like, Look, Fred, this thing's great. I love this thing, Texas guy, you know, and he's like, Fred, this is great. Uh, come back. You got we you gotta come down to Texas. We gotta talk, we gotta talk uh turkey here in Texas. And I'm like, okay, I'll fly down to Texas and talk to you. And he goes, I hope you will let's eat some large animals in Texas and shoot some guns and stuff. And I'm like, you don't mind moving to Texas, do you? I'm like, no, no, no, not at all. I'm I s I espouse your Texas values, sir. And so I was like, okay, Texas it is. Uh I'm gonna be moving to Texas. And then he's like, Fred, how much shit, how much, how much money you got sunk into this turkey? And I'm like, well, three million. And he's like, All right, tell you what, I don't have three million dollars and don't have it, but I got some stock worth three million. So how about that? I'll just pay you the three million of stock and we'll call it a day. And I go, Ross, you got yourself a deal. Got yourself a deal. We're gonna we're gonna we're gonna do this thing, and he's like, Great, great. What was that company? I mean yeah, what what what was what what did they do? Well, I'll tell you the crazy thing. That company So I sold my shares to him, right? So what that company did is right now building a website is three people click a button. Building a corporate website in nineteen ninety eight involves hiring a company like Sapiens or uh n name it, you know, and they're using this complicated thing called vignette, which is basically like WordPress. Okay, this is a predecessor, except it it would cost about half a million dollars just to license the the software to build the website. So these guys had it made, right? So they were just they had all these corporate website clients and they'd all use vignette. And uh so so, anyways, vignette ended up being the number one stock on Nasdaq in 1998. You can check it out. Number one performing stock on Nasdaq. It hit a$10 billion valuation. You know,$10 billion. And uh, you know, it was an amazing ride. And so, you know, it's sort of like here's an example of I kind of had was the company successful? No, the company was not. Was the outcome successful? Yeah, it was really successful, right? It would have been been ten times more successful if I held all my vignette shares up to the ride, right? Because I got knowing me, I'm like, the minute this thing IPO'd, M Morgan Stanley launched this thing and IPO'd it with a cell rating. I'm like, how can you do that? Mary Meeker was the analyst and she's like, I'm initiating this thing with a cell rating. I'm like, how can I never heard of a company taking another company public and issuing a cell rating, but they did. And and on top of it, she was completely wrong because the thing split three times after that and it became the number one stock.

SPEAKER_00 27:35

What do you attribute that magic to where the company's dying? You're literally calling to close it down, the lawyer calling happens to have the person that will lead you to this financial exit for ever all the investors in you. Is that luck? Is that your personal magic? Like what is that thing and does it follow you around your whole career?

SPEAKER_01 27:59

I would say it's luck, but it sort of I'm a math guy, and what's the chance of you know rolling six on a dice ten times in a row? Right, pretty, pretty low, right? So I would say it's not, you know, Sarah Lacey had this book called Once You're Lucky, Twice You're Smart, or something like that. But uh, you know, you have to persevere. Um, but often these what ends up becoming really the great exit or whatever has nothing to do with your product. It really has a lot to do with your timing, much more than the product. Timing is everything. That's I would say the the fundamental thing. Like timing is absolutely everything. So, you know, in this particular case, Java was hot. I had some Java stuff. Was my product a perfect product market fit? No. But it was a perfect product market fit for vignette. You know, vignette could say, okay, we bought this thing for not much. We got a team of people that really knew Java. We could use that to increase our market cap quite a bit, right? And to build our story. And so you have to look at it from the point of view of the acquirer, right? What are they getting? And you know, I kind of think that this acquiring thing might be kind of on its way out. So this is this is sort of a, you know, this is what it was. But there's no straight lines, right? Everything, everything you're kind of going in these direct directions, and you have to kind of go with the flow and weave, and but you have to see an opening and you have to go for the opening. You know, that's what I think. And uh I think if you think too narrowly, like, I'm gonna do this, somebody's gonna do this. I did my series A. Who's gonna do my series B? You know, that's too linear, and I think the the world is not that linear. You know, you the world is there's some weird thing that happens, and you just jump on that. That's what I think.

SPEAKER_00 29:57

Well, how is your psyche during these cycles? You know, the moment that you put that uh Mitty software in the computer and it burnt the guy's computer. Yeah. You know, was that were you down that day? Did did it invigorate you to just make it better? And it's it's a good thing.

SPEAKER_01 30:13

Well, I'd say one of one of the things that, you know, I was here's a story. When once I was trading, and you know, uh my mother was visiting me and I was in Paris at the time, and she goes, I I go, Oh, I just lost a million dollars. And my mother goes, You don't seem too upset. And I go, not really, no, you know, I not really. And and so she's like, I could never do what you're doing because it would just drive me crazy. And I'm like, Well, it doesn't drive me crazy, it's just a number, right? And so I think that's kind of you know, a little bit my secret is like I don't take it too personally. Even if it's you know, even if it fried the guy's computer, I'm like, eh. Yeah, you know, sorry, sorry, you know, a little bit. I mean, you can't, you gotta laugh at yourself a little bit on these startups because, you know, we're not this is not like brain, you know, open heart surgery where the guy's gonna die either. Like, you know, your startup's not that important, the money's not that important, the results not that important. And, you know, I think we can all we always think of ourselves as as you know, like the the world's gonna be looking at what I'm doing. The world doesn't care. Yeah, the world really doesn't care. And so, you know, I think that if you have more of that attitude, I think it'll help you out in life.

Dotcom Wave And Iwin

SPEAKER_00 31:36

Did you catch more of those waves? So you caught the Windows wave, you caught the Java wave, whether can you correlate all the rest of the startups to more waves?

Crash And Quick Merger

SPEAKER_01 31:44

Or so I think one of the things that I've been very good at is in general knowing relatively what where what are the big trends that you want to get involved in and hopping on the trend. So the next big trend for me was consumer internet, and that was like '99. And you know, I just kind of exited vignette, and I was sort of like, hmm, what will I do now? And everybody's doing these dot-com companies. I met this other angel investor, prominent angel investor in the in Silicon Valley, and we were sort of going, he goes, I want to show you some companies. Maybe you'll find them interesting, maybe not. So we were like, went to this one company and it was right above a deli. And I go, This is a above a deli. And he goes, Yeah, above a deli in Pacific Heights. We walk up the stairs, and this guy is like sitting there, like this little, very much like Eric Bachman, you know, like Silicon Valley, like six guys like in a room. And I'm like, uh, so what do you guys got? And he goes, Well, we got a prize site, and people play games and they can win these prizes. And I go, You got a lot of people? And the guy goes, Yeah, we're the uh 25th site on the internet right now. And I go, You, this deli, this site, you guys are the 25th largest site on the internet. And he goes, Yeah. Wanna see the metrics? Here, here, here. And I'm like looking at it and going, you guys have a pretty good little thing. So people are going on these things to play games. What do you what can they win? He goes, they can win the cruise. And I go, how many people win the cruise? He goes, one. They go, how many people you got playing? He goes, 10 million. And I'm like, and I go, I like those odds, man. I'm gonna invest in this company. And then so I I I tried to invest in this company, and um, and then they were like, you know, we don't really need your investment, Fred, because we're making money. And I'm like, hmm, that I like even more. You just now I really want to invest in you. And so they were like, so then I was like, you know what? If you don't invest in me, I'm gonna build a competitor. You and the guy goes, Go ahead, go ahead, right ahead, go right ahead. It's a free world. And I said, Great. So I did. I built a competitor, ultimately made a bigger site than them, uh, and and had it here. And in LA, we were the largest software company in LA at the time. It was called IWin. We had about 150 people here in LA, and we had 30 million um uh registered users, right, for our site. And we were profitable. We were doing about three million dollars a month in revenue and about two and a half million in cost. And so that was our business, and we started and we got there in a year. So from start to finish in a year, right? And we were about to go public, right, with first Boston, and then 2000 hit, March of 2000, and we were doing we were doing a series E or something, and uh first Boston said, well, just we just want you to do this one series e. It's gonna be very simple, formality, but just gives us a little bit more skin in the game, you know. So we're gonna we're gonna make a million from this fees from the series E. And I'm going, yeah, I can't hurt in an extra five million. It'll take probably an afternoon or something. Then we went around Silicon Valley and nobody wanted to write the track. And I was like, whoa, whoa, what happened here? You know, and what happened was the entire ecosystem was about to implode, right? And we just sort of got a little bit of a s it was like February of 2000. We just sort of like, ooh, something's wrong here, and this something's feeling wrong, and then I and then uh then March of 2000 hit, and I'm it's like, yeah, you know what? Uh I'm gonna get the hell out of Dodge. So I'm like, how do I get out of this company like quickly? So I I knew all my competitors, and I just started calling them up one by one and say, You want to merge? And uh say, Well, what come on by? And this company uproar said, Come on by, come on by. And I walked and I said, uh, I I flew to New York, sat down, within one hour, I had my deal. One hour.

SPEAKER_00 35:43

How'd that conversation go?

SPEAKER_01 35:45

I said, Listen, you have a hundred million dollar market cap, and you're doing about three million dollars a month in revenue. I'm doing about three million dollars a month, but more profitable, I'm profitable, you're not. How about we do 50-50 merge? The guy goes, No, Fred, no, no, we're not gonna do that because see, we have$100 million in cash, you have$30 million in cash. So I'll do it 50-50 enterprise value. And I go, done. That was it. And he goes, Okay, great, we'll paper it up. Next day I called back up, called my board, and it said, we've sold the company. They're like, What?

SPEAKER_00 36:23

How'd that end up long term?

SPEAKER_01 36:26

Ended up great. Um, ended up great, and uh, you know, they sold it to Vivendi Universal. Everybody made a lot of money. Vivendi bought Blizzard, so it was a big, it was a big deal in, you know, in the in the kind of game space, but we all made money. Everybody made money. Seems to be a theme. Yeah. I mean, you you know, that's why we're in this thing, is to make money. Just not personally and for everybody else, you know.

SPEAKER_00 36:52

So it worked out. Did you find that with all these startups, like how close to the sun did you come each time? Like how close to dying did these companies come? Was it consistent? Were you just so used to it? Or was it here and consistent?

SPEAKER_01 37:08

Consistent. Every one of these companies has a near-death experience. You know, absolutely. I told you about the near-death experience for the uh for um you know, I mean, Matisse never really had a near-death experience. It had one when Bruce Fraser gave us the one one mouse out of five. That was a near-death. We we really thought that was it. Uh, you know, and then uh the the vignette thing, that was that was absolutely very close to near death. And uh, you know, the tag roll sale to to uh to uh Viacom, you know, that one, the near death was we did our deal, but it took six months to close the long form agreement. And during that period, Viacom came back and they were like, we're gonna pay you half as much and we're gonna change the terms and we're gonna do this. I thought the deal was not gonna happen. So I think it can really I think most of you guys who will who do woot who will have exits will probably have near heart attacks before you get exits. I think that that's to be expected.

Golden Age Of AI

SPEAKER_00 38:20

What other advice do you have to founders on this subject, you know, in terms of like what gets entrepreneurs through those and allows them to keep going before they quit?

SPEAKER_01 38:29

I like to think that some of my stuff applies now, but it's a different world, right? So we're in a we were when I was doing most of my startups, there wasn't so much competition. There wasn't there weren't places like this or we work or these incubators and stuff all over the world. Very few people doing startups. On the other hand, the barriers to creating a startup were much harder, right? You needed to just getting a website built, you needed to have somebody to do your IT and to host your racks and all this stuff. So, you know, it's it's a different world now. There's probably more opportunity, much more opportunity now, right, than there ever has been. So we are arguably you know in the golden age of tech. You know, and I think it really started two and a half years ago with ChatGPT, right? Like the way I look at it is there was everything everything was a blur until AI. And AI is the really the only tech thing that mattered. That's you know, we're gonna look back and Yeah, the PC, who cares? You know, the internet, who cares, you know? I hate to say it but Bitcoin, who cares? You know what I mean? But like because I'm a big Bitcoiner, but you know, I think that the the big invention of humanity, not just in the last hundred years, but the big invention of humanity is machines thinking, right? And so, you know, we we are now in this world where two and a half years ago the machine woke up and it said, hello, you know, and that's that's the new world we're living in. And so I think that offers way more opportunity than ever before, both working with the machine, figuring out how that machine will impact the rest of humanity. Most important thing is to spend all your time on AI right now. It's like that's it. That that is the only thing to spend your time on. And I think there's gonna be amazing outcomes for people who get it right fast.

SPEAKER_00 40:30

Aaron Powell, what about all the founders that have been working on their project for several years? Do they look at AI as this new threat where someone's gonna be able to recreate what they've built, or do they look at it like a copilot where they need to just figure out how to enhance whatever they're working on through these new threats?

SPEAKER_01 40:45

Yeah, they they better figure out. I think a lot of people, including myself, were like, okay, this is gonna be a winner-take all, and maybe Google's gonna win it, right? Because Google's got the most servers, the most PhDs, etc., right? I no longer think that. I actually think AI is going to be actually small teams could build amazing shit in AI, right? So, and I think we've seen that with Deep Seek, right? And that that's just you know the poster child of that, right? But also, I think if you think about, you know, surgical, let's just say uh you're talking about doing surgery, right? Is the top AI, is Chat GPT gonna be doing the surgeries? Probably unlikely, you know. It's probably gonna be the Mayo Clinic's AI, you know, that's gonna be that's gonna be built around surgery and built around medicine and everything else that's gonna be amazing at doing that, right? So I think, you know, I think there's gonna be a great AI around gaming, around factory automation, about everything legal writing, everything, right? Um so I'm I'm much more of the opinion now that AI is gonna be much more of a uh lots of entrepreneurial, smaller efforts that are very focused on specific use cases, and they're gonna kill it. That's what I think.

AI Use Cases And Demos

SPEAKER_00 42:11

Aaron Powell Are there any specific areas of AI that you're most excited about that are a reflection of what's happening the most right now?

Bitcoin And Tokenization

SPEAKER_01 42:19

I don't think so, because I think that what AI is, is it's a very general thing, right? So it's not there's there's not like elements of AI. AI c applies to everything right now. It's kind of what I was saying earlier to you, I think, is that there's two things where I think you really realize. I think when the first most people when they look at AI, they go, Well, cute parlor trick, you know. Oh, I can make an image, that's cool. I can write I can write a poem, that's cool. You know, I can make a Twitter thing. Oh, maybe I'll make my marketing plan in AI, you know. That's sort of the parlor trick level, like, oh, that's that's cute, right? I think the two things where you realize it's not just cute are um number one, coding. Right. When you're when you've seen something like Windsurf, right, with Claude 3.7, and you look at that and you're like, and uh, you know, I'm sitting there, I I'm no longer, you know, I used to be a very, very good coder a long time ago, you know, but that those years are long over, right? But I sat down with Windsurf and I built a beautiful data-driven website, deployed it, okay, and uh, you know, and it works, right? And I did that in I don't know, eight hours, you know, start to finish. I did it alone, not with somebody, you know, mentoring me to do this, do that. You know, and then I was showing my friend Ben, our mutual friend Ben, and he was like, Wait a second, the how did you do that? And I'm like, Well, the AI said you know you want to go to this supra net database and then use this Postgres database and then uh you know do this. And then go to Netlifly and then set up you know, it did everything for it basically instructed me every single step of the way. And, you know, then I've got this site. So I think that was the first aha moment, like, ooh, okay, this is no longer at the game level anymore. This is like a serious, this is like way beyond teams of humans. And then I think the other example of this is self-driving cars. So we bought recently a uh a Tesla, you know, with self full self-driving. And I think when you see, when you get in, whether it's a Tesla or a Waymo, uh you know, you realize, wow, this thing does a better job at driving than than a human does. So uh, you know, I th to me it's just inevitable now that in the next five years, AI is gonna take over everything. And the getting on in advance of that curve is gonna be enormous, right? And it's gonna be enormously profitable. You just have to find where you can figure out how to get apply that AI in whatever vertical that you happen to know, you know, how can you possibly use that AI? And I think that's gonna be unbelievable.

SPEAKER_00 45:11

I can't not ask you about crypto and Bitcoin. I mean, you're a sort of a top voice on in Twitter around the Bitcoin topic. Words of wisdom for a group of entrepreneurs and a group of listeners online about what's happening in the financial space and how you're seeing Bitcoin evolve over the next 10, 20, 30 years.

SPEAKER_01 45:31

So, first of all, I would rank AI here in terms of like the impact to the world, internet here, and Bitcoin in the middle. Okay. So I think Bitcoin is that important, right? It's it's such an important idea. Uh, and once you really understand how amazing and how important Bitcoin is, um, it really is it is bigger than the internet. And why do I say that? It is it's not even a technology, it's it's really something different. It's it's the idea that you can create value, digital value, digital scarcity, and that you can take that value with you wherever you go. It's just a it's a mind-blowing idea, okay? Now, you may not like the Trump government, but with Bitcoin, you could go to Costa Rica and take your wealth with you. You may not like the Costa Rican government or the Russian government, but you can take your Bitcoin with you from Russia to Turkey or from Turkey to anywhere you want, right? So the ability to have portable value is something that's just mind-blowing, right? And I think all of us, we have been conditioned to think of real estate, for example, as a place to store our value, right? You you want to own your home, you want to have a second home, you know, Airbnbs and so on, right? Or you want to own stocks. But what if you could just own money itself? You know, you could own something that never goes down in value, really, over the long term. It never goes down. And that's it. It's just a one-stop decision. Just buy Bitcoin, hold Bitcoin. And so I think Bitcoin is just an unbelievable invention, right? Because it's the invention of it will change literally the entire economics of the entire planet, right? So I, you know, I discovered a Bitcoin a while ago. I just became kind of like an advocate of Bitcoin. I think it's it's fantastic. I think broader speaking, broad broader than Bitcoin, there's a whole ecosystem that's developing now around tokenization of everything, right? And you know, in 2017, and this is I think some advice for entrepreneurs, right? So in 2017, we had this first wave of ICOs. And everybody, especially Bitcoiners of my ilk, were were the kind of guys who say, crypto bad, bitcoin good, right? That's we always say that, right? But I would say that we're about to see a new wave of crypto. New wave of crypto. And this is going to be fueled by people using stable coins for everything, right? And why do you want to use those stable coins? Why can't, you know, I just bought a uh cappuccino here. Why couldn't I have could I've could I've used cap well Visa works pretty well for that. For the cappuccino, it worked okay. It doesn't work so well for digital goods, right? For buying digital goods online. And I think that the we are exactly at this point where the amount of digital goods that we buy is gonna start booming. It's just gonna explode. It is exploding, right? And whether it's an AI subscription or any of the things that you guys are building, you kind of want to sell it so I can buy it with a token, right? A stable coin. It could be Solana, it could be Bitcoin, it could be wrapped bitcoin, it could be something like that, right? But the tokenization of everything is really important. And also the tokenization of whatever project you're doing is really important. So I really am of the opinion that tokens are better than equity now. So I uh I, you know, as an investor, and I am investing, right? So if you guys have a great idea or something, you know, you'll have to hit me up today after the thing, but you know, you uh my my emails are open. You can just you know go go to me and say, hey, I saw you at Kent or whatever, right? Uh I I'm much more interested in putting money into tokens than I am into equity. And I really think that we are into this golden age where these tokens are going to be booming right again. And I think the 2017, the the learning that all that was a scam and everything, that's a little bit like saying WebVAN didn't work back in 1999. But guess what? Amazon Fresh is working great now, right? So the learnings of this are not really good. You know, I think uh and I think Bitcoiners often confuse the fact that Bitcoin good does not necessarily mean that all crypto bad, right? So I am in favor of crypto. I'm a crypto maximalist, actually, now I think all crypto's good. Sure, a lot of them will go to zero, a lot of a lot of them will go bad, right? And I'll just say somebody's like, are you gonna talk about meme coins? I'll do I will talk a little bit about meme coins, okay? So I did these three things called meme, three shows called meme tank, right? I just said, you know what, everybody hates meme coins so much, I'm just gonna do a show called Meme Tank. And I said, you know, we'll see. You know, this is you know, again, I think I don't take myself too seriously, as you can tell. So I said, like, yeah, fine, I'll go and I'll do it, I'll do it like Shark Tank, right? And I'll just go, hey, got a meme coin, I'll buy it. Right. So the first guy who shows up said, Yeah, Prad, uh, I go, what do you got to sell? And so uh uh one of my uh my other shark was uh Isabel Foxenduke. She's a uh uh a bit coiner from uh Puerto Rico, right? And so she was like, So uh this guy, Bob, goes, Okay, I got this coin called Odin Dog. Okay, it's the first coin on Odin.fun, which is like pump.fun. And it just said been released, and so I'm like usual Fred. Like, sounds good. Great. Uh okay, how much uh how much Odin dog do you want to sell? I guess. Well, let's see, it's worth uh$10,000 now. So I'll sell half of it to you guys for five grand. So we did. So I bought$2,500 worth of Odin Dog for$2,500. I bought$2,500 for whatever half the Odin, a quarter of the Odin Dog supply. Well, I got you know, it took me a while to get the tokens as I needed to get the special wallet and everything. I just got the tokens. It's worth$90,000. Okay. This was last 30 days, right? So I got$90,000 worth of this coin called Odin Dog. And then Bob calls, he goes, I hope you're not gonna sell it like day one. I know you, Fred, you're probably just gonna dump this thing. I go, no, I you know, I'll keep the dog, keep him, keep him alive a little bit. And but you know, this is the kind of thing, you know, I I I I jumped in the stupid meme thing. I said, I'll take a chance. Like I, you know, I'll risk 2005, I'll I'll risk a little bit of money on these stupid memes. And guess what? This thing pays off 20x. Did you catch the wave, right? As it yeah, I mean, I caught it and the wave crashed, and like, no, there is no more meme. But, you know, I here's the thing. There's gonna be the next wave, right? So, you know, these things are not like if you sort of look at, and I guess you know, Mateo's here, so you know, like the Bitcoiners are we're all they're all looking at the negative, like it's going down, it's gonna everything's gonna go down, it's all gone. My I have a more optimistic view. My view is probably probably most of them will go up, but I've down, but I bet you some of them really go up. You know, a lot most dot-coms went down, but we also had Amazon, you know what I mean? So you don't knock them too much, you know what I mean? And so um, you know, most of these main coins didn't well, but Shiba Inu and Dogecoin are doing great, right? In fact, Dogecoin has outperformed Bitcoin for the last eight years, five years, three. Dogecoin's done phenomenal. So it's it's it's not good to be too much opus day maniacal. You have to have an open mind. And uh, you know, I am really bullish on the intersection of blockchains and projects and consumer stuff and things that people find fun. I think people, you know, there's you know, back to I'll just finish up by saying, you know, Matisse, why did Matisse work? Because people had a computer, they bought these computers, they bought them for their kids. That's what they did. They bought these computers for the they're like, got, hey, honey, we gotta get a PC. Like, sure, yeah, we gotta get a PC for Johnny. Yeah, Johnny's going to school, so Johnny might need a PC, it'll make him smarter. They get the PC and they're like, what do we get, what do we put on our PC? There's an app to balance the checkbook, and there's Microsoft Olympics. Okay, both of them suck. And then they're like, well, there's this paint program called Matisse. Okay, well, buy that. Johnny will become Van Gogh. Yeah, you know, so they you know that's that's kind of the people are kind of dumb, you know. And so, and so, you know, that's now you've got these people like, I got the wallet, I got the Solana wallet, I added some Solana to my wallet, honey. Yeah, well, what am I gonna do with it? I don't know. Pump.fun, there's some tokens there. You want to buy some? I mean, that's it. That's the mentality.

Closing Thoughts

SPEAKER_00 55:10

And so I think that's where we have to, that's where we're going. If you got value from this conversation, make sure to subscribe so you don't miss future episodes. This podcast is about sitting down with people who've actually built things and unpacking the mindset, decisions, and moments that make the difference. Thanks for being here. Thanks for listening, and I'll see you next time.