When it comes to investing in startups, most venture capital firms say they go “early.” But Elizabeth Yin, Co-Founder and General Partner of Hustle Fund, takes it a step further. She calls their approach “hilariously early.”
Elizabeth’s path to becoming one of the most active pre-seed investors in the world started with a serendipitous introduction during her teenage years. As a high schooler in the late 1990s, she got a behind-the-scenes look at Tony Hsieh’s first startup, LinkExchange, which later sold to Microsoft for over $200 million. That experience sparked her lifelong interest in startups and shaped her entrepreneurial ambitions.
But it wasn’t a straight path into venture. Elizabeth worked at Google before taking the leap into entrepreneurship. Her first two years as a founder were filled with pivots, mistakes, and painful lessons about customer acquisition. Eventually, she co-founded LaunchBit, an email ad network, which was later acquired by BuySellAds. Along the way, she learned the importance of validating demand early—through presales and scrappy experiments—before investing heavily in building product.
From Founder to Investor
After LaunchBit’s exit, Elizabeth found herself mentoring and angel investing at 500 Global, where she eventually ran the accelerator. Over several batches, she wrote more than 200 investment checks. That experience gave her a unique vantage point: she had lived the founder’s struggle and now had front-row visibility into what it took for early-stage startups to succeed.
By 2017, she and co-founder Eric Bahn launched Hustle Fund with a mission to support founders at the stage where they themselves wished they had more help—the very beginning. While most firms calling themselves “early-stage” still expect traction, Hustle Fund stepped in earlier: often pre-revenue, sometimes even pre-product.
Building Hustle Fund’s Approach
Since its inception, Hustle Fund has raised multiple funds and built a reputation for investing in a high volume of startups—about 250 per fund. Critics sometimes call this “spray and pray,” but Elizabeth explains the logic: at the pre-seed stage, there’s little data and huge uncertainty. The best way to reliably capture outlier returns is to make more bets, while still maintaining a clear thesis on valuation discipline and founder-market fit.
Key to Hustle Fund’s strategy are a few principles:
Valuation Sensitivity: The vast majority of startup exits are below $1 billion. Entering at reasonable valuations increases the odds of a meaningful multiple.
Go-to-Market Obsession: Elizabeth looks for founders with a sharp sense of how they’ll acquire and retain customers, even before revenue.
Founder-Market Fit: Experience in the problem space and early customer connections matter more than perfect pitches.
Community and Brand: Beyond writing checks, Hustle Fund amplifies its impact through events like Camp Hustle, tactical guides, and affiliated Angel Squad, a program that has introduced 2,500+ operators to angel investing.
Scaling with Process and Technology
With more than 600 portfolio companies across four funds, Hustle Fund has also become a case study in scaling venture operations. Elizabeth emphasizes the importance of documentation, automation, and no-code tools like Airtable, Zapier, and Process Street to manage onboarding, contracts, and portfolio data. The firm is even experimenting with AI to streamline decision-making—though Elizabeth admits that intuition, timing, and founder assessment will always require a human touch.
Looking Ahead
Elizabeth believes the future of venture will rely less on technical defensibility and more on distribution, customer experience, and retention. She’s not afraid to back so-called “wrappers” built on top of existing AI models if they deliver real customer value. Ultimately, she argues, startups are businesses—not research labs—and the best businesses win with execution, not just technology.
Key Takeaways from Elizabeth Yin
Don’t wait for perfect timing—start where you are, even in downturns.
Validate with presales and real demand before building too much product.
At pre-seed, more shots on goal increase the chances of finding an outlier.
Focus on valuation discipline to improve exit multiples.
Build community and content alongside capital to stay top-of-mind.
Use systems, automation, and documentation to scale without drowning.
Elizabeth Yin’s story is a reminder that venture capital doesn’t have to be mysterious or inaccessible. By betting hilariously early, Hustle Fund is rewriting the playbook on how founders get their first break—and how investors can create meaningful impact from day zero.
👂🎧 Watch, listen, and follow on your favorite platform: https://tr.ee/S2ayrbx_fL
🙏 Join the conversation on your favorite social network: https://linktr.ee/theignitepodcast
Chapters:
00:52 Early inspiration: Tony Hsieh and the dot-com boom
03:30 Surviving the dot-com crash and landing at Google
05:28 First startup struggles, pivots, and hard lessons
07:42 Building LaunchBit with presales and scrappy tests
10:12 The “Wizard of Oz” approach to validating features
11:32 How partnerships led to LaunchBit’s acquisition
12:47 The power of documentation and short handoffs
14:32 Exploring new industries and discovering angel investing
16:51 Running 500 Global’s accelerator and writing 200+ checks
17:45 Founding Hustle Fund to back founders “hilariously early”
19:34 Choosing a fund model over an accelerator model
21:42 Raising Fund I: challenges, lessons, and differentiation
26:32 Investor-market fit and building a unique brand
28:49 Why Hustle Fund focuses on valuation sensitivity
33:06 Portfolio strategy: 250 startups per fund
35:54 Why high-volume investing works at pre-seed
37:29 Evaluating founders, ideas, and the “why now” factor
41:23 Building community through Camp Hustle and events
44:29 Angel Squad: democratizing angel investing
47:51 Scaling portfolio management with automation and no-code
49:32 The role of AI in venture decision-making
52:13 Defensibility in AI startups and founder-market fit
53:53 Closing thoughts and reflections
Transcript
Brian Bell (00:01:02): Hey, everyone, welcome back to the Ignite podcast. Today, we’re thrilled to have Elizabeth Yen on the mic. She’s the co-founder and general partner at Hustle Fund. We’ve been longtime admirers and collaborators. It’s a pre-seed VC that writes hilariously early checks and shares no BS tactical startup advice. Thanks for coming on, Elizabeth.
Elizabeth Yin (00:01:20): Yeah, thanks for having me, Brian. Big fan of what you guys do as well, so...
Brian Bell (00:01:24): Yes. No, it’s been a long time coming. I mean, I’ve been admiring you guys from afar. And we finally met at the conference, the East Meets West conference in Hawaii. We’re just sitting there on a panel together and we’re in like in a small room taking pitches.
Elizabeth Yin (00:01:38): That’s right.
Brian Bell (00:01:39): And yeah, I was like, oh, wow, it’s Elizabeth. I’ve been meaning to meet you. So, yeah. Well, let’s talk about how you got here. I mean, you’ve built lots of stuff. You’ve invested in hundreds of startups, but maybe you could give us your origin story. Where did it all begin?
Elizabeth Yin (00:01:52): Yeah. So I’m originally from the San Francisco Bay area, grew up during the dot-com boom. So that has all largely shaped me. It’s not like my family’s in tech or was in tech or they were not entrepreneurs. So I think time and place definitely has had a huge influence on me. And, um, actually, fun, fun story. So the way I got into all of this actually was in ninth grade when my best friend in high school, her cousin, Tony, was starting a company that year. It was 1996. And my friend asked me, oh, well, do you want to go and help him out with his startup? And I didn’t know what a startup was and I wasn’t really sure how we could help. But I also had nothing to do during winter break. So we went to his office and what I loved about that place is one you could eat all the pizza you wanted it was the dream and two here was tony and a bunch of his friends just like kind of doing everything and it was really chaotic but also really magical I never knew that work could be like that. It seemed so fun. So I knew from that day on that I wanted to do that when I grew up. And I think fast forward, I didn’t think about how they made money or how that would go. But years later, Tony sold that company for a purported over $200 million to Microsoft. The company was called Link Exchange. But I think he’s better known for being one of the early angel investors in a little shoe company called Zappos, which sold to Amazon for about a billion dollars. And Tony was the longtime CEO there as well. So the late Tony Hsieh is this person in this story. So that’s the sort of serendipity that I could not have imagined.
Brian Bell (00:03:34): Wow. Yeah. I mean, how lucky to watch a master work on a startup. I mean, every kid should get that opportunity. I wonder how we would, you know, foster that a little bit more. There’s something like that. You know, 20,000 pre-seed fundings every year is the data that I saw recently. And, you know, there’s lots of kids that could be, you know, lots of teenagers and college students that should be interning every summer or every winter break in this case at startups and learning like how to apply technology and business to problems. And, you know, we’ll probably get more entrepreneurs that way.
Elizabeth Yin (00:04:11): Yeah. Well, you know, it might be possible, right, Brian? Like with all with all these digital twins and whatnot, you could have a mentor, a personalized mentor for everybody. Yeah.
Brian Bell (00:04:21): Right. Yeah. So what happened next? So you continue on through college, graduate and you’re like, OK, I’m definitely doing a startup.
Elizabeth Yin (00:04:27): Yeah, so I had to kind of put those dreams on hold. So as many of you all know, like, you know, I graduated from high school. I graduated from high school in 2000. And what happened next, we all know, in late 2000 was the dot-com crash. And things were not very rosy for startups for the next several years, actually. And in fact, every headline around here in the Bay Area said, you know, oh, no, software is dead. The Internet is dead. Everything is just dead. Forget about it. So I think long story short, I didn’t go into startups actually for quite a while. I took some, you know, big company jobs, moved around. And then many years later in late 2008, when I was working my cushy job at Google and things were starting to crash again, I decided actually now is the time that I want to do this. And I think even though I knew the economy was crashing, in fact, Sequoia had sent out a memo to all of their portfolio companies, rest in peace, good times, as was purported in TechCrunch, that no one would get any funding going forward for quite a while. I decided I wanted to make the leap anyway because I wasn’t quite sure what I would be waiting for when things got better. So I decided to leave my job and start a company because I felt like I needed to be in an environment that was entrepreneurial and small and I could have more autonomy. And I didn’t feel like I had that at Google. I love the people, but I didn’t feel like I had that at Google at all. So that’s what I did next in taking the plunge. And of course, there’s like a multi-year time span in between. But that was, I think, the beginning of my true entrepreneur journey.
Brian Bell (00:06:08): So you’re lucky enough early in your career to land a job at an amazing company and have those experiences. You know, you kind of yearn for, you know, starting your own startup and starting your own thing. What was that and what was the idea and did you pivot and what was the kind of aha moment there? Yeah.
Elizabeth Yin (00:06:23): I pivoted a lot. In fact, I made every mistake in the book those first two years. Those first two years in particular were so hard, mostly because I didn’t know what I was doing. I know you’re going to have Eric Reese on here soon, but he was a real inspiration to me. But I think when I started that journey, I hadn’t even, I mean, there was no lean startup. He hadn’t even started blogging. It wasn’t until a couple of years later when he started blogging that I had this aha moment of My gosh, the thing we need to do is we need to kind of de-risk our concept by selling upfront, like doing some pre-sales before we even build anything. Because the first two years of my entrepreneurship journey was largely just building a bunch of things that nobody wanted. And that really marked my time. But it also gave me a sense of just how hard customer acquisition was. it is really, really hard to get customers. And I think that has largely shaped my thinking as an investor as well. I mean, the thing that I really hone in on is go to market. How are you going to get your customers, et cetera? And the founders we tend to back are the ones who have really, you know, focused on that and really care a lot about that. So, but in any event, at this point in my life, I tried everything. I tried doing affiliate sites, everything from bridesmaids dresses to nutraceuticals. My co-founder and I, who was actually the same person from high school, who was cousins with Tony, like she and I tried all kinds of commerce sites before eventually building out essentially an ad network for email. And we landed on that because a lot of marketers told us that they were getting good buys in email lists, but there wasn’t really an automated way to do so. So that’s what we ended up building out over the course of the next several years.
Brian Bell (00:08:02): Well, I had no idea that you worked in ad tech. We share that commonality as well. I, you know, I came out of marketing demand gen teams in Silicon Valley and I worked at Rocket Fuel Unicorn ad tech. Yeah. Yeah. So I was pretty deep in it. And it’s hard to get out of ad tech once you’re in it because it’s so complex and there’s so much to know, you know?
Elizabeth Yin (00:08:18): So complex. In fact, someone should write a book on how ads work.
Brian Bell (00:08:22): Yeah. No, I think I have one on my shelf, actually. It’s really complex, but it’s all, you know, it’s 10 years ago. And so was this launch bit or is that a different startup?
Brian Bell (00:08:30): yeah this is launch bit wow and then so a few years go by how did what was the outcome what did you learn and yeah what was that story so the way that we ended up
Elizabeth Yin (00:08:39): deciding to do launch bit actually was after we read eric reese’s materials on essentially the early thesis around you need to find product market fit and the way to get there is by doing as little as possible to de-risk the idea instead of building building building on this particular idea what we decided to do instead was let’s just go and pre-sell some ads
Brian Bell (00:09:00): I’m not sure Venmo existed yet.
Elizabeth Yin (00:09:02): started asking marketers to PayPal me money just to my personal account, and then ended up starting to build things when it was needed actually to remove bottlenecks. So the very first thing we built actually wasn’t even a website. The very first thing that we built was a very rudimentary analytics tool because marketers asked, well, how do I know if these ads are effective? I don’t know how many people are looking at it. I don’t know how many people are clicking on it. And so that was the very first thing that we built. And then from there, we just kept on building to remove bottlenecks. But I think in the beginning, it was extremely manual. We would send both our advertisers and our publishers email communications that you would expect a platform to do on any modern ad network. So that was how we started it. And that was actually how we continued. As we scaled and people started requesting features, we would test those features very quickly as well. So, for example, somebody once asked us to build out a bidding system because initially we were just charging flat fees. And a lot of people said, oh, this flat fee is too expensive for my product. I can’t afford it. It doesn’t make sense for my buys. And so we didn’t want to build out this whole bidding system if no one was going to use it. And so the very first version of the bidding system was just a couple of input boxes where you could input the price that you want to pay per click and you could hit submit. But it went nowhere. And just in the back, my co-founder would receive these emails saying that so-and-so has changed his or her bid. And my co-founder would just like kind of manually adjust like
Brian Bell (00:10:37): Yeah, there was no bitter process. It was just kind of like, it’s $10. That’s what I’ll pay. And then you try to clear that.
Elizabeth Yin (00:10:44): It was all fake doors. Wizard of Oz.
Brian Bell (00:10:48): Yeah, we’re Wizard of Oz-ing a platform here.
Elizabeth Yin (00:10:51): Yeah, exactly. So, you know, with this Wizard of Oz thing... There are a lot of marketers who would constantly change their bids, and my co-founder would constantly be manually changing things. But that’s how we would test features, just by manually having this Wizard of Oz type of interface. And then in the end, after we scaled that up a bit, actually, one of our partners, Buy Sell Ads, we had been working with them to get more inventory along the way. And so through that partnership, we got to know their team. They got to know how much they could make through a partnership with us. And over time, we started discussing what an acquisition might look like. And so that’s actually how that happened. They ended up buying a Launchbit in part because of this initial partnership that we had forged in order to get more ad inventory as we were growing this company.
Brian Bell (00:11:44): Interesting strategy for founders to hear that story, because you often wonder sometimes as a founder, you know, should I partner here? Like, should I build? Should I buy? Should I partner? Right. And this is a really good example where the partnership kind of paid off a bit. Right.
Elizabeth Yin (00:11:59): Yeah. And I would say that this was not deliberate. We partnered because we needed the ad inventory. We did not partner because we were looking for an acquisition or thinking it could lead to one. But I think in hindsight, what that led to was getting to know the people and not only getting to know the people, but getting to know what both sides could do. And I think that, you know, in helping some of our portfolio companies now go through their M&A processes, when you’re approaching people completely out of the blue, they don’t know you, they don’t know your product, they don’t know if you can actually deliver. It’s a lot harder. It’s a lot harder to get that interest because they don’t know anything about you. And that, I think, is something that people don’t really think about. I don’t know if I would necessarily say partner in preparation for an acquisition, but I would say getting to know people in the ecosystem is extremely helpful towards an M&A process.
Brian Bell (00:12:56): Yeah, and we’ll get to how Hustle Fund does that now, but I want to kind of get there through the chronology of your background. And then so you sell this company, you probably stick around for a year or two, helping to integrate the company into the larger company. And then what happens?
Elizabeth Yin (00:13:12): So actually, we had a very short, I guess, handcuffed sort of agreement, but it was even shorter yet. My co-founder, Jennifer, to her credit, actually was and is very good at documenting things. Every single thing that we did to run the company at Launchbit, she put together in this very long Word doc. It was extremely long. And so by the time we got to this point, we said, day one, here’s the handbook. Try to figure it out from the handbook. And certainly if you have questions, you know, we’re here. That was the agreement. But within the first three days, I would say, they were like, we actually got it. Everything is in here. So we didn’t actually do anything because they could figure it all out. And that really is to our credit of documentation. And that was actually when I saw the power of documentation. I have to admit, I’m not very good at documentation, but it is something that we do a lot at Hustle Fun now because I’ve just seen the power of it. Basically, a good document is one where you can hand somebody the playbook and they can run with it and you’re not needed anymore. And I think most companies don’t operate in that way, but that is 100% how I would operate any company today.
Brian Bell (00:14:29): Yeah, when I worked at Microsoft, we had massive playbooks, right? And half of the employees there are contractors, right? And so you hire these folks to execute the playbook and the level of documentation is off the charts there. Here’s the playbook and just go follow, you know, pay by numbers. And so, yeah, you didn’t stick around that long. What happened next?
Elizabeth Yin (00:14:49): And so I started figuring out what I wanted to do next. Actually, I had wanted to start another company, but I had been so heads down in the ads world. I didn’t actually really, I didn’t have any good ideas. I didn’t really know what was going on in the world. And at this time, which was, call it late 2015, some interesting new areas were cropping up. I didn’t know what Bitcoin was. I didn’t know what drones were. I didn’t know what VR and AR were. And some of those things didn’t quite pan out and maybe still aren’t panning out like as industries. But at that time, that was when they first cropped up. And so I really wanted to learn and kind of figure out what was interesting in the startup world. I also knew I didn’t want to build another ads company, which is unfortunate because I think people compound their knowledge by specializing in something. But just philosophically, it was not of interest to me. I did not want my tombstone to say, hey, she was an ad leader. So
Brian Bell (00:15:43): I had the same experience, that existential crisis of five or six years into ad tech. I’m like, is this what I’m going to do for the rest of my career?
Elizabeth Yin (00:15:51): Yeah, I know, right? It’s an interesting world. And so in that process of exploring different areas, I decided to start mentoring and doing some light angel investing. Initially in some friends’ companies to help them avoid some of the mistakes I had made, but then eventually started mentoring at the 500 Global Accelerator Program, which is the program that I went through with LaunchBit. One thing led to the next. I got more and more sucked in. In fact, actually, their accelerator manager decided to leave to start a fund. And so they asked me to run it. And so I got really sucked into it and was their accelerator manager for several batches and wrote 200 investment checks out of their fund. So that really taught me a lot about investing. And that’s how I got onto this side of the fence. I never thought that I wanted to do that. But when I really thought deeply about what is that problem I want to work on for the next 30 years? It ended up being like, I actually really like this environment. I understand early stage. I’ve faced all these problems myself. I enjoy helping other people with these issues. And that’s actually that next startup that I ended up starting years later ended up being Hustle Fund.
Brian Bell (00:17:00): That’s amazing. So how long were you at 500?
Elizabeth Yin (00:17:05): I was there until mid 2017. So basically from call at the end of 2014, when I started hanging around to to mid 2017. Yeah.
Brian Bell (00:17:14): So a few years. And if I recall correctly, I mean, 500, the name 500 really comes from, you know, we’re going to do 500 startups per fund. Right. I think that was the origin. Right. Something like that.
Elizabeth Yin (00:17:26): I think so. And I’m not entirely sure myself, even though I’ve known those folks for a long time. They also wear a lot of hats. And so, you know, Dave McClure, who started that fund also previously was, you know, had this nomenclature of 500 hats. So but nonetheless, they invest in they have invested in way more than 500 startups at this point.
Brian Bell (00:17:46): Yeah. So what kind of what was the impetus of Hustle Fund? What’s the kind of the origin story there?
Elizabeth Yin (00:17:53): Yeah. So I think for Hustle Fund, I started Hustle Fund in mid 2017 with my longtime friend and colleague, Eric Bond. We’ve known each other since college, actually. So since 2000. And so now it’s been, what, 25 years or so. And along the way, we’ve collaborated on a number of things, including jump-starting a company. We’ve done a lot of angel investing together. So we knew we wanted to start a business together. And in particular, I think the thing that we are most interested in coming back to mission is we realize in our own startup journeys there wasn’t really a place to go that could come in and kind of be there like super early. I think there are a lot of early stage funds or funds that say they invest early. But even so, at least in 2017, most of the funds I knew who invested early invested when you had maybe 10K a month in revenue, which is early, but not that early from a founder.
Brian Bell (00:18:51): It’s not hilariously early.
Elizabeth Yin (00:18:53): Yeah, it’s not hilariously early.
Brian Bell (00:18:56): Not pre-revenue, which reminds me, I just saw one today that I think you’ll like, and it’s hilariously early, but I think it’s a great team. And I did invest in the notary one that you sent over. So thanks for that. Yeah.
Elizabeth Yin (00:19:07): That’s great.
Brian Bell (00:19:08): Yeah. That was a good one.
Elizabeth Yin (00:19:09): Thank you.
Brian Bell (00:19:10): Those guys are not hilariously early. They were crushing it on revenue.
Elizabeth Yin (00:19:13): No, they’re not that hilarious.
Brian Bell (00:19:16): So it’s interesting. There’s like this gap in the market kind of that you saw between accelerators and pre-seed investors, right?
Elizabeth Yin (00:19:22): I wouldn’t even say at the 500 accelerator, we were looking for traction. We were looking for 10K a month, roughly speaking.
Brian Bell (00:19:28): Yeah. So why didn’t, you know, when you started Hustle Fund, you probably toyed with the idea because of your background of just doing another accelerator. Why did you choose to do a fund instead of the accelerator?
Elizabeth Yin (00:19:40): I felt like the accelerator landscape was already pretty crowded. And, you know, I think it goes without saying everyone on here has heard of Y Combinator and certainly Techstars and 500 Global and then many others, right?
Brian Bell (00:19:54): Yeah. Plug and play. And there’s a bunch of niche ones, vertical ones now.
Elizabeth Yin (00:19:57): I mean, all of those.
Brian Bell (00:20:00): So many.
Elizabeth Yin (00:20:02): So many. So I didn’t feel like building a new accelerator and trying to build the brand for a new accelerator was the way to go. I just felt like people would pick like three other accelerators before us. Like no one’s ever heard of us. It was not the right timing to do an accelerator. And when people do an accelerator, they typically only do one. They only do a couple of accelerators if things are not working super well. So I wanted to build a fund because I felt like people often take money from multiple funds and we felt like we could fit in there alongside with others. And so that’s why we did it as a fund. But we do do some programming at Hustle Funds beyond the capital. I wouldn’t say it’s an accelerator or accelerator level, but we do a little bit as well.
Brian Bell (00:20:48): That’s where we share a lot of the same vision, I think. You know, when I got started, I toyed with the idea of doing an accelerator. I was like, ah, you know, there’s, yeah, dime a dozen. There’s so many of those and I’m not going to stand out. But there is this like pre-seed opportunity. And I bet back in 2017, that term didn’t even exist yet. It was just all seed, right?
Elizabeth Yin (00:21:06): Yeah, it was all seed. In fact, there were very few people in what I would call true pre-seed. Charles Hudson, whom I considered to be a mentor of mine, gave me great advice then. But I would say that his fund and maybe a couple of others, Notation Capital and maybe one or two others, were the only pre-seed funds at that time. Certainly there are more now, but in 2017, it was not a thing.
Brian Bell (00:21:34): Yeah. And so let’s talk about the first fund. How did that fundraise go? Do you remember who you did the fund admin for? How large was it? How many checks did you write? All that stuff.
Elizabeth Yin (00:21:43): Yeah, it was an $11.5 million fund.
Brian Bell (00:21:47): That’s pretty sizable.
Elizabeth Yin (00:21:51): There were many points along the way where we thought it would land at maybe $3 million or so.
Brian Bell (00:21:58): Yeah. Same. My first close I did for my first fund. I had a little rolling fund on AngelList. I was like, really my fund one, fund zero.
Elizabeth Yin (00:22:06): Oh, okay.
Brian Bell (00:22:07): But I closed in the fall of 2022, my first 10-year fund. And half of my commits fell out.
Elizabeth Yin (00:22:12): Oh my gosh.
Elizabeth Yin (00:22:14): Yeah, that was a time.
Brian Bell (00:22:15): That was a very difficult time to be closing your first fund. Anyway, great time to be an investor.
Elizabeth Yin (00:22:22): Big props to you for getting it done. I know that it has been a hard road for fund managers these last few years. In 2017, I think it was certainly easier than in, let’s call it 2023, but it still is always hard to raise a first fund. So I’d say the first, call it two or three million, came from Friendly’s. People who knew us for a long time, they didn’t necessarily know what we could do investing wise but invested because of Eric and me just that’s it like they like us they knew us and they wanted us to steward their money.
Brian Bell (00:23:03): Yeah you had quite the track record though I mean 200 checks over the previous three or four years you had some stuff you could point out like here are the checks I wrote and here are the markups and here’s our the track record so to speak right.
Elizabeth Yin (00:23:13): Yeah, see, this is where I think a lot of emerging fund managers think it’s about track record. And we did have some, but admittedly, it takes so long for some of those companies to become super huge that we didn’t have that back then. I’ll give you an example. One of our hits at 500, this company called Majuri, it’s a jewelry company originally based in Canada, but they have huge presence in the U.S., you know, billion dollar valuation now but back then not at all so it really takes a long time for a company to grow and we didn’t have companies in sort of that echelon even Webflow which was one of Eric’s angel investments again billion dollar valuation now but back a long time yeah not anywhere close so.
Brian Bell (00:24:04): Because we all see the headlines in TechCrunch. We’re like, oh, look, like this company came out of nowhere and is a billion dollar company in 18 months. And that’s why it’s in TechCrunch, you know, on the main page when you load it, because it’s so exceptional.
Elizabeth Yin (00:24:17): But, you know,
Brian Bell (00:24:18): like to your point, it takes five, seven, 10, 12 years for some of these companies to get to that valuation.
Elizabeth Yin (00:24:26): 100%. And so anyway, so we didn’t have track record. But I think even that alone, you know, I know so many fund managers who actually have strong track records coming out of their old firms because they were at their old firms for a long time and there was enough time to see that maturity of their companies. But even so, the pushback is always, well, you had that track record because you were at another firm, or you had that track record because you were an angel investor at this other company, when you were working at this other company and people wanted to approach you because you were at that other company. Now you’re at this new brand that nobody has heard of. How are people going to go to you? So all of that track record you had doesn’t count. And I’ve heard that so many times from an LP. So this is why it’s so hard. Like I even know people who were basically, you know, just shy of the Midas list, really struggled to raise a fun one as well.
Brian Bell (00:25:17): Yeah, I mean, it’s such an accomplishment to go from zero to one. You’re basically like a founder and you’re going zero to one.
Elizabeth Yin (00:25:24): Yeah, you’re raising your pre-seed.
Brian Bell (00:25:25): Yeah, you’re raising your pre-seed. What was the thesis from the beginning? Like what was the original? Do you remember?
Elizabeth Yin (00:25:32): Well, so that’s the other thing. Our fund one deck was also just awful. And by awful, I mean it wasn’t differentiated. This is the thing that I wish more founders, whether they’re fund manager founders or product founders, thought more about is this differentiation and and it’s hard because you don’t know what other decks investors are seeing but our first iteration of our deck basically said hey we’re Eric and Elizabeth these are cool backgrounds and these are companies we’ve invested in and this is our thesis and, you know, we’re going pre-seed, which is kind of unique, et cetera. And LPs would look at that and say, yeah, you and everyone else, like there are a lot of teams or it’s two people in a garage. They have a cool track record. They went to these schools, they worked at these cool places and they have a couple of hits like, yeah, get in line. That was more or less the reaction because it’s too generic. It’s too general. And we are generalists. So,
Brian Bell (00:26:28): So that’s another thing to kind of tease out that, you know, any emerging managers listening, raising their fund one, raise a general fund one. That’s what I did. It sounds like what you did. And it’s really, really hard. Go niche, you know, and try to tie your fundraising strategy into your niche.
Elizabeth Yin (00:26:47): Well, I think you can go niche as a generalist, but you have to find the niche. So I think... Along the way, I was talking with Jason Lemkin in this fundraise process, and he showed me his deck for Saster. And that was sort of the aha moment, which his deck basically said, hey, I’m Jason Lemkin. This is my cool background. And by the way, I run the largest SaaS community ever. We do X number of events a year with Y number of attendees and Z number of people on our email newsletter, etc. And this is the brand we’ve built. Really, it was a go-to-market story about how he can repeatedly get the best SaaS founders because of his community. And that was sort of the aha moment. So actually, we changed our deck to be more about that. Now, obviously, we didn’t have the same numbers that he did. But we did talk about whatever brand we had and whatever activities we were doing to hone that brand over time. Certainly now, you know, we’re on fund four. And that is pretty much all we talk about in our deck. Like, what is that unique moat that you have? And so I think, you know, we’re still generalists. I even think, you know, I don’t think it’s a bad thing to be a generalist. But if anyone’s raising a fund one as a generalist firm, you have to find that thing that makes you unique.
Brian Bell (00:28:06): Yeah. What is the investor market fit here? And it should all interlock with your thesis and your niche and your strategy and how you fundraise and how you invest. How has, you know, Fund4, incredible. How has the thesis shifted over the years? You know, you’re eight, nine years into this now on Fund4.
Elizabeth Yin (00:28:25): It is largely the same, but there are a couple of differences. So we’re still focused on pre-seed, still generalist, still largely picks and shovels, things that can make money right out of the gates. We are valuation sensitive. We invest globally. All of that has stayed the same.
Brian Bell (00:28:40): I want to tease apart that valuation sensitivity because it’s something I struggle with, right? As a fellow pre-seed investor, because sometimes you meet this amazing team. They’re on their third startup together. They know what they have, right? Or they’re coming out of YC. I mean, with 20, 30, 40 caps, right? Tell us why the valuation sensitivity is important to you.
Elizabeth Yin (00:28:59): Well, we have made exceptions, certainly if you’re a successful serial entrepreneur, and especially if we backed you before and we know what you can do, that takes some risk off the table. And that is partly where valuation comes in, right? If it’s more de-risk, then you can afford to pay up a little bit more. But I would say in large part, we have looked at the data and a couple of thoughts. In general, yes, like if your company hits it out of the park and you get a 10,000x, it really doesn’t matter what valuation you came in at. The vast majority of companies don’t. And so how can we make something win or have a higher probability of winning? And it really comes down to like, what is the multiple that we’re expecting when we invest in a company? And it’s much easier to get to, let’s say, 100x, which is what we’re looking for with lower valuations, because the vast majority of exits are under a billion dollars. And so can we make it work? Now, there are, of course, exceptions that we make, but in large part, that’s how we think about it. It’s kind of that underwriting of those multiples that are more probabilistic, I suppose.
Brian Bell (00:30:04): I looked up this data actually, and I’d love to know kind of your rough estimate too, is the average B2B software company, which is mostly what I do. I do some other stuff too, but mostly it’s, you know, enterprise B2B software stuff takes nine years to exit and exits for $249 million. That’s the average. So, I mean, that’s, I mean, that’s your thing right there. So like, if you invest at a three cap, you can roughly get a hundred X. Now let’s ignore dilution for now, but, but if you’re investing at a, you know, like a 30 cap, now you’re talking about like a 10 X maybe.
Elizabeth Yin (00:30:31): Right.
Brian Bell (00:30:32): That’s a huge difference.
Elizabeth Yin (00:30:33): That’s exactly it. That’s exactly it. And so that’s why it matters a lot. Now, of course, there are plenty of investors who will say, well, I’m not looking for the $200 million exits or the $500 million exits. I’m looking for the $50 billion exits. That’s just a different game. And, you know, I respect that everyone’s got a different strategy and you can win in a lot of strategies, but that’s just not the strategy that I grew up in. And by I grew up in, I mean, 500 Global is, as an accelerator, even more valuation sensitive than we are. So that was the game I was playing there. And it’s kind of the game I’ve carried over forever.
Brian Bell (00:31:07): To Hustle Fund it’s a good game. I mean if you stop and think about it right for 125k I get five or seven percent of the company even if it exits for 10 or 15 million eventually uh assuming they didn’t stack up a bunch of lick pref on the cap table you’re sitting on a 10x return right there for like a like a pretty bad exit.
Elizabeth Yin (00:31:27): Well that’s why it pays to be like a top accelerator like YC is just generating cash.
Brian Bell (00:31:33): Yeah, I heard their funds are, I don’t know if I know the stats for sure, but I heard anecdotally that there’s three funds basically at YC. There’s the really early fund, the 125K fund that nobody can get into, right? It’s all just their friends. It’s all like PG and his friends, right? And that fund is cranking like 25, 30X DPI.
Elizabeth Yin (00:31:55): I’m sure, yep.
Brian Bell (00:31:55): Right?
Elizabeth Yin (00:31:55): I actually think their earlier funds were higher than that, like 200X.
Brian Bell (00:31:59): Yeah. That’s insane. Yeah. And then and then they have the MFN funds and I heard the MFN funds now the 375k are on track to do you know 10 to 12x dpi which for the audience who may not know what that means that means next your money and after all the fees and all the carry and all that and that puts you in the top probably like one percent anything above like a 10x yep yeah next is great.
Brian Bell (00:32:24): Yeah. Anyway, so you’re also a high volume investor like me. Right. And I have my my reasons for that. And I’ve written about it and talk a lot about it. But I’d love to hear why you guys are, you know, you guys invest in how many of fun now.
Elizabeth Yin (00:32:38): About 250 per fund.
Brian Bell (00:32:41): That’s a lot. So a lot of LPs would go, well, those guys are just like spraying, praying, you know, like they don’t know what they’re doing. Right. So walk us through kind of the logic of 250 a fund.
Elizabeth Yin (00:32:52): Yeah. So we are cut from the same cloth and that’s also why we share a lot of the same companies. Right. But I think for everyone here, it is really interesting. I didn’t, you know, I didn’t know anything about this world until I got to 500 Global. And what they showed me through their numbers is essentially this, like the more shots on goal, the more likely you’re going to score. And when you do score because of power law, like, you above and beyond, you know, do really well compared to the losses. So for example, if you have... Let’s just say, I don’t know, 10,000 companies and 9,000 of them go to zero. But, you know, your remaining 1,000 or so go to whatever, 1,000x. Like, you don’t care. You don’t care that you had—
Brian Bell (00:33:46): Yeah, you hit one Google and it goes 400,000x.
Elizabeth Yin (00:33:49): Right.
Brian Bell (00:33:50): You just paid.
Elizabeth Yin (00:33:52): You don’t care.
Brian Bell (00:33:52): Even though you have 10,000 companies, like, you just, like, have a 400x fund or whatever that math is.
Elizabeth Yin (00:33:55): Yeah. And so it’s this idea that your downside is capped, but your upside is, who knows, it’s infinite. So that’s the idea. And so the more shots you’re taking, and you should be able to actually increase your multiples, assuming you’re picking well. And this is actually why YC increased their batch sizes. Now, there are a couple of caveats. Certainly, if you’re just investing in every company that comes your way, there’s going to be diminishing returns. So you still have to have great deal flow. And per your great deal flow, then this large portfolio construction works. And the second thing is you also have to be able to have the processes, technology, and people to be able to handle this volume. Which is, I think, the other problem that folks tend to have and something that we certainly have worked through over the years. So those are kind of the two caveats to this. But other than that, like theoretically, this strategy is the one that people should be using to, I don’t want to say guarantee results, but—
Brian Bell (00:34:57): Especially in the pre-seed, right? Like if you’re in pre-seed, if you’re writing Series B checks, by all means, write $20 million checks and sit on boards and do 15 or 20 a fund. But if you’re in pre-seed, there’s 20,000 companies every year that get pre-seed funding and like 1%, I think is the math, that turned into a billion dollar outcomes or more over time. So that’s 200 companies a year. So I think logically, yeah, you’d want to invest in lots of companies that you feel like have a good shot.
Elizabeth Yin (00:35:23): Well, so that’s a great call out, Brian, because, yes, this applies only to pre-seed because the multiples can be so high. If we’re talking about Series B, actually, you know, your multiples start to diminish. The other thing about Series B and why a lot of LPs, investors and funds, like concentrated portfolios, is historically in the old days, the VCs that were around were investing in companies that clearly had product market fit and I would classify as Series B companies. And so when it’s so obvious that something’s working, the level of risk is very low and it’s just a matter of like can you get into those deals. And so your failure rate is low and therefore your upside, if you’re getting 20X or 30X, that’s incredible at Series B. You don’t care about that. So that’s not a spray and pray strategy. You don’t use that in the late stages when somebody has product market fit. If a company, if you’re playing in the stage where there’s no product market fit, this is when this strategy applies. So it’s kind of two different games. Like one is a game of concentration. Can you get in? And things won’t go to zero, but like, can you get in? And then on the other end, like the game that we’re playing, yes, you can get in. It’s a matter of, can you pick the right companies? And if the answer is no, because there’s no data in any of them, then you should be investing in a lot of companies.
Brian Bell (00:36:42): Yeah, I love that. So would you say, hilariously early, are you guys, what’s the mix of, you know, pre-product market fit and post-product market fit now in the 250 companies per fund?
Elizabeth Yin (00:36:53): Nobody has product market fit. I would say that most companies don’t have product market fit until about Series B, maybe Series A. But even so, most of the companies we’re investing in are even pre-revenue. Certainly, the last company that we shared has a fair bit of revenue, but that’s a little bit of an anomaly. We very much go in pre-revenue because we are looking for, I guess, the best valuation that we can get, really.
Brian Bell (00:37:16): So you’re kind of assessing the team’s really important here, the timing, the market pull and those other things. What are you looking for in those startups where it’s like an easy yes for you when you see it? You’re like, yep, that’s an easy yes. Let’s write the check.
Elizabeth Yin (00:37:28): I think while many things matter, it comes down to two things for me. One is the founding team and then the other is the ideas on the founding team. Like how is the team thinking about go to market? What are they already executing on with regard to go to market? Even if they’re not generating revenue, they should have a very clear understanding of the problem. They should be in talks with potential customers. Maybe they’ve even signed LOIs or done some pre-sales, et cetera. And in large part, a lot of the founders we back, they tend to have deep experience with that problem themselves, either because they’ve worked in that industry or somehow know a lot about that thing. So that’s on the team side. On the idea side, which actually these days I think is more important, frankly speaking, is it’s so crowded these days, the whole startup landscape, starting a company like everybody and their mother is doing an idea. Well, finding a good idea actually is really hard. And I don’t think anybody can just pivot into a good idea. So the idea matters a lot. Like we actually end up passing on a lot of great teams, but are not working on ideas that we think are, quote, good. And so what makes for a good idea? I think one thing we think a lot about that I used to think was an annoying VC question is this question of why now? And the reason why I think it’s important is in a landscape that’s so competitive, you would expect every obvious opportunity that is actually a good business idea to be taken. So the only ones left would be the ones that are newer, that are not clearly good ideas now. They may be bad ideas now, but in the next five years will be great ideas. So it’s kind of like surfing. You don’t want to be on the wave too early or too late. You want to be on it just as it’s coming up. And so we’re looking at what ideas are just coming up where it’s actually not a great idea right now, but it will quickly be a great idea and finding the right team to kind of do that. That’s what we’re looking for.
Brian Bell (00:39:17): That’s really interesting.
Elizabeth Yin (00:39:18): So articulate what those things are. And then sometimes like a couple of the companies we share, it doesn’t fit that for whatever reason, maybe because the industry is so archaic. They could have done this idea three years ago, but somebody missed somewhere. So sometimes, you know, we’re not just doing sort of these wave ideas, but I would say in large part, that’s how we think about it.
Brian Bell (00:39:36): It’s really fascinating. Do you ever run across like the perfect idea and an OK team and make that bet? Or does it have to be right time, right idea at the right time and the right team?
Elizabeth Yin (00:39:45): It has to be the right idea, right timing and right team. But I think because it’s so early, you don’t know, know whether it’s the right team unless you have known them from before. And we’re backing a lot of founders we only just met. So, of course, people can surprise you either way. They may seem, you know, OK, and then they turn out to be great executors, but, you know, awful pitchers or something. I love those kinds of teams. Or the opposite, like they were great at their pitch, but then they’re just OK at executing. And that’s always a disappointment. So I don’t know. You don’t really know who’s a great team if you don’t work with them.
Brian Bell (00:40:26): Yeah. So you guys also run an awesome event called Camp Hustle that I finally attended this year. I think it was maybe the third or fourth year you guys have done it.
Elizabeth Yin (00:40:34): Yeah.
Brian Bell (00:40:35): I wanted to go previous years and I wasn’t able to do it. So I was glad I was able to go this year. How do these events and not to mention the content that you guys create with your tactical guides amplify your impact and beyond just writing checks?
Elizabeth Yin (00:40:46): Yeah, I think... It goes back to this idea of go to market. So we have a few different things that we do for our go to market. In terms of our funnel, the most common funnel for how we see our deal flow is we’re top of mind for somebody. It could be our founders. It could be a friend. It could be whoever. But usually because they saw a tweet that we tweeted or they read an article that we posted or something like that. Which is why I think it’s really important to stay top of mind, because if we stay top of mind, then people refer us stuff. And so that’s our common sort of funnel, so to speak. For events, it’s more about actually amplifying what we’re about. So events are not very scalable at all, although we do do 30 to 40 of them a year. And most of them are free founder events. But it is a way for people to go to an event. They meet other amazing people and have a genuinely good time. Maybe they learn some things, build a couple of good connections. If people walk away thinking, I had a great time and got a lot of value out of that Hustle Fund event, that goes even further, even if only 100 people were at that event. And so... I think it really is about vibes at the event. So we kind of have different strategies for different things. It’s not a good sort of lead gen event or anything like that. And events, frankly speaking, are quite costly, but it is worthwhile from a sort of vibes or brand perspective. That’s our branding, brand marketing, I suppose.
Brian Bell (00:42:19): Yeah. Well, and I like the vibes, right? You know, Camp Hustle, it’s at this really cool little campground down in the Sierra Mountains. And it’s great. Or Santa Cruz Mountains. And it’s just a really cool vibe. And everybody’s really just relaxed. And I took that kind of inspiration and kind of borrowed a bit. And I’m creating my own little event called Club Ignite, which is in Cancun. I don’t know if you saw it, but it’s just like a place to come hang out. And with like-minded people, founders, LPs, VCs. But there’s no programming.
Elizabeth Yin (00:42:52): Yeah. It’s just activities. I think that’s great.
Brian Bell (00:42:54): Just activities, just hanging out.
Elizabeth Yin (00:42:56): That’s what the ecosystem needs. I feel like, you know, VC traditionally has been very stuffy.
Brian Bell (00:43:03): Right.
Elizabeth Yin (00:43:05): But I mean, you know, there are so many genuinely good people and real people. And I think that that needs to be highlighted more.
Brian Bell (00:43:16): Yeah. And you also have Angel Squad. So maybe you could tell us what that is for the audience, listeners who don’t know what that is. And how does that interact with HustleFund, if at all?
Elizabeth Yin (00:43:25): Yeah, so we have an adjacent group. They actually are a separate entity run by a separate management team called Angel Squad. And it’s basically, if we were to re-envision what an angel group is like, that’s what it is. So we’ve had over 2,500 people go through Angel Squad. It’s global. A lot of the content is done online. The group meets every Wednesday. And then there are also in-person local chapters as well. As you can imagine, the Bay Area has the three biggest chapters, San Francisco, East Bay, and Peninsula. But there are plenty of cities that are well represented in Angel Squad as well. Yeah, and I think the other component is a lot of people think angel investing requires a lot of money. But one of the things I was surprised to learn when I was running my startup is that a number of my friends were, quote, angel investing with $1,000 here and there. But what it allowed them to do was, number one, network really well, both with other founders and but also with other investors, like nobody asks, like, how much did you angel invest in that company? But by saying you’re an angel investor, it’s an easier way to network with other angel investors for your own company. So I did notice the benefits to doing this, not only for the companies that receive these small checks, they could get some help from actual operators. But also for the operators themselves, putting in these small checks, it was a good way for them to network. So that is a big part of squad. Like most people are not writing huge checks. Angel squad.
Brian Bell (00:44:57): That’s how I got started on Team McKnight, you know, five or six years ago. It was a bunch of thousand, two thousand dollar checks and syndicates, you know, and and that’s that’s a great way to get started. If you’re an investor, put your money where your mouth is, throw some money around and you’ll make a lot of mistakes. I can’t believe some of the stuff I invested in when I got started.
Elizabeth Yin (00:45:13): I know, me too.
Brian Bell (00:45:14): Uncapped safes, no MFN, you know, like just you’re gonna make a lot of mistakes.
Elizabeth Yin (00:45:19): And I think it just takes a lot of reps. And so if you’re gonna make a lot of mistakes, it means you need to be writing a lot of checks. And if, you know, most people don’t have millions of dollars to throw at this. So if you’re writing $1,000 checks here and there, like a professional can write 50 to 100 checks across five years with 50 to $100,000. You know, that could be, anywhere between $5,000 and $10,000 per year, which is, you know, could be some professional’s bonus for that year. It’s pretty doable if you are, you know, not in that super rich category, but you are a professional, you know, I guess, person.
Brian Bell (00:45:59): How do you, do you guys reserve in fund four any cash for follow-ons or do you guys do SBBs for those or?
Elizabeth Yin (00:46:06): We do SPVs through Angel Squad for follow-on, but we do do about 20% of our fund in what I would call seed. So we invest at pre-seed. Our focus is pre-seed, but about 20% of the time we’ll invest in seed with the fund. Yeah.
Brian Bell (00:46:22): You guys, like, I’d love to learn this because I’m starting to hit, you know, some of these limits and I’m building a lot of AI and automation and stuff to throw at the portfolio management problem. But I’d love to know how you guys tackle this. Like, how big is the portfolio? What have you guys learned in managing a large portfolio? Asking for a friend.
Elizabeth Yin (00:46:39): Yeah, yeah. Oh, my gosh. So through people, tech and processes, that’s how we’re able to do it. So we have a couple of folks whom we work with who are essentially no code engineers to try to streamline a lot of things. Everything from the moment we invest, like we use Process Street and have it set up such that with a few clicks, we’re able to, you know, get items from the founders, like checklist items about their incorporation docs, shareholder agreements, et cetera.
Brian Bell (00:47:06): Name of that platform is Process Street?
Elizabeth Yin (00:47:08): Yeah.
Brian Bell (00:47:08): Okay, interesting.
Elizabeth Yin (00:47:10): And then we just configure it to our workflow. And then they also, we use the API for DocuSign to send out the safe and our side letter, et cetera. And that comes back. So that we’re not manually every single time going into DocuSign and sending out safes, et cetera. We’re not manually inputting all this data. Like it gets carried through on our air table records etc once a company becomes a portfolio company and they send their investor updates that gets attached to that record and so we do use a fair bit of you know zapier and a bunch of tools connected to that in order to make it work and we have over 600 portfolio companies across all four funds now that’s.
Brian Bell (00:47:51): That’s insane you know i have 230 240. And I also use Airtable and lots of, you know, a lot of automation and stuff like that. Even with that, it’s a lot.
Brian Bell (00:48:01): So looking ahead, you know, what’s kind of what are you guys looking forward to in the next five or 10 years? What’s kind of your vision for the future? What are you excited about?
Elizabeth Yin (00:48:12): Yeah, I think this is probably not a five or 10 year thing, but in the very near future, we’re just kind of working on continuing to hone the wheel, so to speak. I think there’s a lot that we’ve built in processes, but we want to we always want to do more. And I think that we can automate a lot more. So, for example, we’ve started using AI to train on our own data. It’s very rudimentary. It’s not making any investment decisions right now. But right now it is attempting to recommend whether or not to do a deal. And we actually do have semi-automated systems right now. When a company applies, about 50% of companies actually get auto-rejected right now based on how, like what founders are asking for, you know? So I think there’s that.
Brian Bell (00:48:59): I do the same. I use Airtable. They fill a form out. They drop some docs, answer some questions. And then Airtable has this really great AI built into it. And, you know, I did through some prompting and backtesting. I’m like, okay, if it’s this, this, and this, just send a rejection, you know?
Elizabeth Yin (00:49:15): And so I think so that that’s good. But like then, you know, removing more or honing in more on what is interesting, I think, is the name in the game that we’re looking forward to. And that’s still a hard problem. Like you can filter out obvious things, but honing in on what is actually awesome, I think, is hard.
Brian Bell (00:49:35): This is something I want to tease out that’s really important about AI and ML because I built a lot of AI, you know, and I know how like every startup is like a snowflake, right? And there’s something unique about it and it’s hard for machine learning to tell what’s unique, right? Yeah, it’s like a good team, blah, blah, blah. It’s like the timing thing that you said is really important. It’s really hard to train a model to know That it’s the right time to invest in a company. It’s the right idea at the right time. That’s something that’s very subjective. And you only get that after making 600 investments and hundreds more before that at another firm. Like you just get a little bit of pattern recognition on this stuff. And it’s hard to train that subjectivity, I think, in AI.
Elizabeth Yin (00:50:20): Yep.
Brian Bell (00:50:22): And so there’s always going to be, I think, a little bit of that in our industry. No matter how powerful the AI gets, it’s still, it takes a human touch and intuition, I think.
Elizabeth Yin (00:50:32): Yeah. Yeah, I think there are a lot of nuances that are hard to figure out. But that being said, I think there’s still some low-hanging fruit that we can work on. So that’s a big area that I’m excited about.
Brian Bell (00:50:46): Yeah. So we had a couple of audience questions because I posted on the socials. Hey, Elizabeth is coming on. You have any questions for Amran Sheik? He has a podcast. He’s cool guy. He said, how do you separate real defensibility and AI like distribution, adoption or proprietary data from startups just stitching APIs together and calling it innovation?
Elizabeth Yin (00:51:03): Okay, this is going to be controversial, but to some extent, I actually don’t care. I’ll give you an example. We have a number of portfolio companies that are generating so much revenue that’s based on not their own language models, but, you know, are essentially what everyone would call a wrapper. And that’s a dirty word, supposedly. But you know what? Actually, I don’t think that’s a bad thing because ultimately you’re running a business. You’re not building a research lab. So I think in doing so, it always comes back to fundamentals, right? Like how are you going to get your customers? Why do they stay retained, et cetera? And some of those moats, so to speak, don’t have anything to do with technology. It could be your user experience or user interface is better, easier to understand. It could be that you have business lock in with the workflow that they’re going through, whatever it may be. So I actually don’t think it matters. And this is why I think the next generation of, I guess, internet startups are going to be, in large part, even less technical. And it’s going to be even more about distribution and figuring those things out, go-to-market and retention.
Brian Bell (00:52:09): I love that. Chad Lasowski, I don’t know if I said that right, said, when assessing a team, when does founder market fit a bigger part of the overall decision to invest?
Elizabeth Yin (00:52:19): Very important especially in this day and age. I think let’s say for example we’re looking at verticalized software. If the founder has no experience in that vertical, that’s going to be really hard versus, let’s say, a founder who has lived and breathed this problem every day at his or her last job and has all the connections to first customers. That’s a really strong signal for me and really good founder market fit. So I actually think the founder market fit part is really, really important these days. And even for horizontal ideas like developer tools or prosumer, even though in theory a lot of people could build a cool new, I don’t know, productivity tool, I think there are certain qualities that teams need to have to be able to be in that landscape today, such as being really, really fast to ship product because there’s a lot of competition. You need to almost be faster than if you’re building in a vertical, I would say. And so that’s like a limited subset of engineers and product people who can do that. And then also like really good design, for example, like if you are building for designers, like your product has to be well designed compared to if you’re selling into a different industry. So there are different like qualities you need to have as a founding team for different ideas. And that matters a lot to me.
Brian Bell (00:53:35): Yeah. Well, this has been an amazing conversation. We didn’t even get to the wrap up rapid fire questions, which means that the conversation just was flowing. Thanks so much for coming on. Really enjoyed it.
Elizabeth Yin (00:53:45): Yeah. No, thank you, Brian. Really appreciate you.
