Tech Startups and Raising Money with Dan Levine (Vercel, Sentry, Mux…)

I think even if they're not going well, they would they would say, you know, he's pretty supportive, that he's pretty positive, and, you know, we we kind of get to an honest place about how the company JS going. And this is really important. And and from then on, especially, I've been very privileged. Like, I have some companies that are doing extremely well.

than I can take, Wes I'll do three investments a year. Personally, Excel will do more than that, but but still commensurately fewer.

amount for a seed stage investor to a lead seed investor down is 10 to 15% or so. At the series a, it used to be the case that you could get into the mid twenties. Nowadays, more and more, it's anything from 10 to maybe 25% hitting up other investors for for that? Wes? Yeah. Typically. I mean, I always tell people and this is something I learned having gone through YC and the deal on the other side. You know, investors are interestingly their own worst enemy frequently. I think it's a healthy thing as a founder people who ping them, especially if those people are builders and are like, here's a link to a thing I built, you know, or here's, like, maybe in some of those rare instances, you could raise kind of what a traditional series a, and this is all changing, but you could raise maybe 6 to $15,000,000 a Scott above for just getting started with a project, and you can do that. And then the last thing that's becoming more common, and there's, like, inflation of these rounds. Like, I always tell people when Vercel started in 1983, we were a series a firm. And the reason we called them series a's was I swear to Node, it was the first letter of the alphabet.

firm suggestions? And, like, also, I guess, what are some of those early indications that, like, it's not going well?

which is really valuable. But, basically, what I can do but the downside of that is, like, a company is just getting started. They have a great Yarn, and, like, I I I sometimes lack a pulse. And I, you know, it's I have to get better. I have to be, like, builders, much to their detriment for venture capitalists. Then things like YC came along, and it was, like, you know, Drew from Dropbox who just built with just an idea.

And it's not for everyone to be clear, but I think it's for a lot of people. And one of the advantages JS you can kind of think of them as, like, having productized Okay. And I probably, at this point in my career, would like to own, like, 12 and a half to 50%. And one reason I don't typically own more we do care about the appropriate liquidity at the appropriate time.

my feedback when I was at Dropbox from, like, you know, my

is the other big thing I look at. And I think about the market as two things.

but you wanna have a small set of beliefs and that's okay. But I I like to have a good wedge where you can kind of you can learn a little bit about how they take feedback, how they think about the market, how they think about their first customers at a very, like, loose level, but it's all benefited by here's a wedge.

preference is you could be dumb and lazy, So you should you should even as an investor, if you think you have a proprietary advantage, you really wanna treat it like there's a liquid market and you have competition. And I think the best way to mimic that is a founder should do that. Now I also think a founder should say, is there a person I prefer? Is there are there good enough terms? It stands to reason the best terms aren't always from the best investor, much less the best investor for your company. So you wanna be mindful of that. And if everyone behaves accordingly, I think a good investor offering great terms

are are you really

and Wind Surfers getting acquired for $3,000,000,000.

that tier three, you know, far away, whatever, will get automated.

you know, our job is to invest in great companies. So we're always looking for great companies. And one of the things I always think about is it's like a marketplace. So I think there's, like, watching this who are wondering about what it's like to raise money, and they'll ask. And now you just look like a jerk.

So, you know, I I have I hold myself liable for how big can this be and and why.

but you could almost think in the reverse. I'm, like, watching podcasts like this to think about how to, like, raise equity.

Yeah. And the founders could just go join. So so as an investor, the the rest of the cap table doesn't have a whole lot of They just walk away from the business. They can just walk away and then take a jump. So so that's always one downside. I do think, you know, I think many founders, and it depends on anything about this, but they they feel an obligation. They say we've raised money. We wanna try and get you money back, so we'd like to do it.

was that. Okay. And so there's a few and you're like, well, you build Kubernetes. Like, people You kinda know the people. You know, they have a track record. That's right. And and that's even even amongst people you know Node the track record, that's that's more rare for a variety of reasons, but it it does happen. The second one, which is maybe, like, the second and third are the more common ones. One is what's now called a seed round. We would think about this as our check is something like 1 to $4,000,000.

we try and find great people and back them, and, we invest primarily at the seed industry today. That's where I spend my time. Excel's a pretty big firm, and we invest at a bunch of different stages. But, we're most notable for things like I think if you create a liquid Yarn venture capital as an asset class doesn't perform that Wes, in my opinion. So it's not like venture capitalists broadly are getting some great deal. Right? If they were, you you you see these massive out performances of the of the asset

they come to you and say,

So those would be high MLS for sick picks that I think are are are fun.

There's a lot of problems and a lot of things that go wrong, but overwhelmingly, it's pretty great. And, people should remember that, and you should try and make somebody else's day great so they feel that way too. Totally. Same. Beautiful. Well, I think that's a great way to end it. Thanks so much for coming on. I appreciate it, and, have a good one. Thank you guys so much. I hope I could invite you back someday.

Yeah.

the two ways that you get liquidity or two high level ways are an m and a I mean, a merger acquisition, so you get bought or the company goes public. Within the m and a is, I think, higher risk than in in prior categories. And so those things lead me to believe over long periods of time, I'm still optimistic. But in the short and medium term, I think it will be challenging, You won't have a board seat. We often use something called a YC safe that YC worked on and honestly consulted with us so much as wonderful, but they they get the line share of the credit. You kind of are like that is a very typical round. So those companies, I think, you still probably Yarn, like, a real relatively well known founder. You've gotten pretty far with your, like, initial prototype or your wedge. There's some variable that makes you a little bit, you know, but it shouldn't raise money from venture capitalists.

sustainable differentiation.

was a CAD tool for a while and then kind of pivoted. Oh, really? Figma took a while to do well. Airtable took a while to do well. Notion, I think I think they have a famous blog post that describe, like, going to Kyoto and, like, coating in their underwear or something. I can't remember what it Wes. But, you know so I think companies frequently take I should never forget that I thought you were worth it.

I don't think about it too much. I think about building a great business. And then I will say, and this is important, if I think there's a great business.

Node? Actually, my favorite first investor of ours from that I remember is Wes were the first investors in Macromedia, the creators of Flash back then. Really? Oh, wow. I did miniature golf in the eighth you know, like, seventh and eighth grade, during whatever class, but Shockwave Golf.

So I I think I do a pretty good job of being like, I'm trying to give you honest feedback that's best for you.

it's something that I can't necessarily bootstrap.

tend to tell my companies So it doesn't have equity value. And that's still a wonderful company, tier three, like, customer support. Like, you might outsource things to a faraway country and it would go well.

is they can be kind of unintentionally or intentionally infantilizing.

We're typically buying 10 to 15%.

But a lot of people might not know, like, what is that next step of I have built this side project, and I think I wanna make it bigger, but

when you raise venture capital, And it's because they don't have to. Right? Like, a bootstrap founder kind of has to. There's no choice. And sometimes that stress can be too much. You might wanna have some buffer. But you can imagine if you have too much buffer, My overwhelming And I and I think the key JS, like, I just wanna preserve that that honesty. But there's not Mhmm. When we do, like, firm pushes,

What's happening there? And and, like, do you get your money back in that case?

Is that right? Yeah. The summer of o eight. And then I got my my first job ever JS, like, an engineer working on Crunchbase, which was owned by TechCrunch at the time and then started a company called Chartia that did database analytics and went through iCombinator, I helped with a little bit of early hiring, but, honestly, David and Chris already knew a bunch of the great early people, you know, Armin. And, like, their folks that they knew well and hired, so I didn't have to help too much there.

And my job is to help and be supportive, but it's not really to tell them what to do. So that was one good example. The second one that's funnier and lighter weight was when maybe some customer introductions. But Century, I probably did god. I should really ask David this because Century, I feel like I don't have a great answer for. I probably didn't do that much beyond the capital early on. And then over time, there was this this I think early on, it was, like, really helping them believe in their vision for investing in particular in product engineering, You know, you're lawyers, and we would tell you should probably check with us, and we should sign off because otherwise, you create kind of some some litigation risk for yourself. Another example would be you can't necessarily issue yourself a ton of shares.

stressful. Mhmm. It's not because I'm, you know, I'm not doing anything actively. It's just that I'm not providing, think almost certainly not. You know, I'll tell you the criteria I think about when I invest in a company at any stage really. I I say two and a half things, and a half is mostly because it just matters a lot less.

I take it really seriously, but it also means it's it's easier for an investor and a board member than almost anyone else And I pride myself on this for good and bad. Like, I'm willing to if people ask me for my advice, I always tell them you don't have to take it, but I I push back. If I I if I disagree, I disagree.

that has lots of component parts coming together to form something greater than the whole, but it's also an incredible brand that people love. Yeah. And that's a lot of the value of it, and they should never forget it. So become a call being an obvious president. Right? ChatChippy has some brand value, So in my, you know, seat in Silicon Valley, like, I think if you're just getting started, I I think there's three high level types of rounds that are 9095% is there weekly calls or whatever? You're obviously not working in the business, and and often people come to you for advice. You just said, like, sometimes you'll have a bit of buffer room. It really different. It's very bespoke. Different founders need different things. I mean, if I use just I'll just use Century Scott and Vercel with some examples. So Century was the first investment I let it excel.

to sell and work, on a process for that, but it's hard to sell a whole large company for, like, you know, billions of dollars. There's very few buyers for that, but there are some.

it actually is. Like, obviously, you bring money to the table. There's there's probably a lot of connections that you can introduce people as well.

and pay it forward.

management stuff that I think is relevant there. And when I invest in a company, And I think you see that in some of the the market activity. And, again, that could work, it's the best. Like, I'm a big fan of the world.

But, like like, what does it look like if someone were to raise money? How Wes,

more money than others might pay because they've they've used strategic value in the asset they're buying. It might be an adjacency to them. It could be vertical integration. It could be a new category that they can cross sell. So that's typical of and then there's also m and a by, like, you know, private equity owned businesses Wes, like, private equity firms have bought up companies and they've rolled them together already, and they could also be acquirers of companies. And that that's becoming more common, but those are both still acquisitions. That's that is the end goal. I mean, I'm always very sober about this. Wes we represent a bunch of wonderful people who give us money, and so we do have a commitment to them to get liquidity, But I really like having the option just in case.

Welcome to Syntax. You wanna raise a bunch of money?

they're kind of stuck coming to us, But, like, I think having more some no matter how shallow the exponential curve is, some curve where you grow the team. It could be slowly, it could be small, but you're still growing the team.

feedback approach. And the event that YC has versus somebody like me is, you know, they'll accept I haven't talked to Gary recently, but I think they probably accept a little over 600 companies a year. Wow. Wow. So they have a much wider net, which in some way translates to they can go a little, they can conceptually take more risk, which might mean earlier, might more mean on people who are less well known bad investing Right? You really wanna have multiple options, and there's there's actually a lot of good reasons for this. A lot of investors think they want Nate Herman, who's amazing. I knew a little bit from Dropbox. We had mutual friends, and I referred him to the company.

this is usually like a Microsoft or Google or or a phase where Meta is Wes they're paying really excited to be here more. And, I'm I'm pumped to try and do my Wes. Although, I never promise results. I've been telling my wife I might grow hair pnpm for years. I haven't come through, so I have a pretty good week to play men. Don't be alarmed.

It's just, Todd, the founder, is incredible, and he just cares too much about chocolate in a way that is, I think, amazing and magical. And if if you guys are ever in San Francisco, come on by. We'll go get some chocolate. But I love to enjoy chocolate. And then the other one I would say that's a personal one is, there's a new pizza place opening in the Lower Sanity called Jewel in San Francisco called Jewel's Pizza. It's awesome. Their soft opening, I think, is May or sorry. They're I think they're Wes May 20 is the opening, so they'll just been open when this airs. And the pizza there is amazing.

HR performance reviews. And and even now, I think I'm really bad at celebrating the upside. I just take this very long view of building companies and building things, and it it actually works well with my job, but I would do it anyways. And so Like, we are not a form of finance that makes its money, to lose sight of, like, your customers and your audience, your community when you have more cushion. But I'd also say, and you guys have done this, like, it's scary to be bootstrapped sometimes.

There's all kinds of wonderful businesses, including in the software space, that shouldn't raise your venture capitalists. And I think, one, venture capitalists should know that and should make sure to inform people that. And, two, like, I think founders and creators should be like, do I really wanna go for it? Because, definitely, our model is most Yeah. Based on these big outcomes. Yeah. Who who doesn't need VC? Sorry, Scott. I keep I keep jumping in here right now. I know. Node many questions.

And I actually don't expect most founders to have any sense if it can be really big.

rights. We mostly have what are called defensive rights, which is we kinda have the right to stop a company from the worst case scenarios doing things that would basically harm us unilaterally. So an example would be, you know, you can't necessarily, as the CEO of the company, like, pay yourself a massively exorbitant salary can offer them first, and a and a founder can take them. And that's wonderful. I have no issues with that, but everyone should kinda be on best behavior. And the reason that this all works in my industry is and and, you know, this isn't always what you hear on things like Hacker News or something, and and there's definitely

I know, man. You.

and we don't think we'll be replaced by AI, which I'm skeptical. But anyway, so here's the team. And within the team, there's four things. The first piece is, do I like this person? You know, a lot of my job JS, hopefully, I'm gonna be working closely with them. I'm gonna want them to succeed.

I work at a place called Excel, which has been around for upfront. There's a Scott.

I think it's Sanity. Like, in my job as Excel, obviously, I I represent Excel, but I do I'm on the board of these companies, and I think it's important that I try and be

you'll know he's he's invested in Vercel and Sentry and Mux and Scale AI and whole bunch of other ones. He's a really cool guy, and I thought, let's have him on and talk to him about how to raise money. You're listening to this podcast. You probably have had ideas for things you want to build.

You're too fast.

I've got all kinds of questions and whatnot. It's really interesting to me. I'm glad we had you on. The last part of the show we have is

And then the company this is a good example. I don't make decisions. The company will come to the board and say, you know, we'd like to give some I can tell them it might go well soon, but I don't tell them it's going really well when it's not going really well. Mhmm. And in fact, this is like I mentioned, you know, you wanna be supportive in downtimes. I'm I'm honestly, the money really takes care of itself. So that that really is how I think about it. But tactically, in hindsight, worry about the half so much. That's basically given time and money. Like, what why haven't you accomplished more? The first two things overwhelming are the team. And I'm a metric capitalist. We love to hear ourselves talk. We love to be on podcast, so we have some.

So there's the the revenue footprint of these companies is actually high, and they grow very fast. So that's good. Two downsides, I would say. The first JS, in line with this brand differentiation, people seem to switch between the providers And it's nice. Right? Like, the paper quality is great, and the wrapping is Node. And yeah. It was great. Yeah. They sent it to me for specifically I think founders are the most important thing. I think they get to make the decisions.

They don't really care about giving investors their money back. Right? Especially in an an acquihire situation, In AI, people presume they'll be high margins, And that actually does happen. You Node, our first investment in a company called Heptia, which is from the creators of Kubernetes, you would need for your thing? So this is the weirder part of the answer that I I, I foreshadow, which JS, again, it it's a marketplace.

mindful of of all the shareholders. People, drastically alter their business in a negative way because they took venture capital. Now they're they're beholden to that. Like, how much influence is there really? And I I Wes, do multiple investors then complicate that anymore? And and yeah. Yeah. How does that all go? It's a good question. I mean, I think one of the reasons founders are such an interesting group of people is it's like a crazy thing to do. I mean, you guys did this. Right? Like, it it feels insane to kind of start working on this project and try monetize and spend less time on more obvious ways you can make money. And to keep doing that is quite intense. I think so that it's less lonely and it's not all on you. And, you know, I think my view of the world is double double there's two JS double edged double edged, two sided, which is And I typically say two things. The first thing I say is, you know, we don't really care about that.

because you we could give you $4,000,000. You could decide your salary should be $2,000,000 a year. And That was on my list of questions.

And then Shameless Plugs for this audience. I mean, I think you mentioned, but, like, Vercel, Century, Mux, you mostly just wanna be in a situation where, like, the founder talks to about that moment. But it's important. You you are agreeing to this partnership, It's not a right, in my opinion, and that's not how our investments are are are structured. So but more suddenly, I'll give you examples of, like, things that happen with venture capital that are subtle and complicated We're the first investors in Atlassian.

I probably have the luxury, although it makes me feel more useless of, of ESLint Node closing executive candidates and convincing people, like, this is a great company. I believe in it. So should you. Yeah. Wes, so, like, you're watching a a company and there's And I think for the most part it's interesting. I think in the cases where it's not going as well as everyone would dream, I think those founders probably feel

oh god. Mopub sold to Twitter, actually. Now x, I guess, but then Twitter. And then we have a bunch of founders who warp or team members who are engineers, to counterbalance that and encourage David and the team to be more authentic.

something that, I mean, we were celebrating something my my wife had done at some point. It was a couple years ago, so forgive me. I forget why. But it just arrived, and it Wes, like, from the mugs, folks. Congratulations

it always helps. You know, a lot of the the companies that I work with are people I've known for a couple years. It doesn't mean you can't ping me out of out of nowhere, but, like, you might have to get to know me a little bit because it raises my confidence longer than people think. So I'm, like, very patient. And the founders of Mux, John, one of the founders of Mux, he basically I guess he described it to somebody else as on a certain timeline. I think the venture capital investment timeline is one of the longer investment timelines, like, in the world, but it's still not forever. I mean, Berkshire Hathaway owns businesses longer than we do. Right? I mean, and and certain family businesses and family, whatever, are are longer shareholders than venture firms, but There's a lot of churn, the the company, to the investors.

okay. So so sick picks. So I I'll I'll go non tech. I, like, love craft things where people care, like, too much for the details.

what you're investing in. Obviously, AI space is is absolutely wild right now. You know, you see Cursors worth $9,000,000,000

to to your wife, Courtney. I was just like, wow. This is the darn nicest thing. This is the best thing. Amazing. Yeah. Yeah. We love the chocolates. More nice things. And, yeah, chocolate's great. And, also, be be enjoy life like a like a kid. You know? Like, have some chocolate. Have some pizza. Go watch a movie. You know? Like, And, again, even then, like, we we we did the new brand. And Guillermo Wes running it by me.

Yeah. It's kind of a baffling thing that, like, a SaaS company, you can expect it to have, like, 80% margins where people pay you annually upfront.

can be flighty.

you know, this veneer or this fake thing of, like, oh, we made a decision.

and they, like, said your the investors made them do it. And I replied on the Hacker News comment. I was like, I think I'm the relevant investor, and I wasn't even consulted on the change.

then Excel, then Dropbox, then Excel. And in Excel, we're a venture firm. You know? So exactly like you said. I mean, I always tell people, is the proclivity of people to pay

I didn't. Wait. You gotta tell me about it, and I'll do it really quick, though. Alright. A sick pick is a product, a service, a chocolate bar, literally anything in your life,

often can put too much pressure on companies at the worst moments.

It's first of all, it's really hard to tell when it's not going well. I know that sounds like a weird thing to say, but I'm, like, a big student of the history of invest of of technology companies and, like, you know, Airbnb famously had a difficult couple Yarn. And, you know, again, like, the the I think Vercel is in a credible company, but the early on period of Zeit, like, it it took longer than what people think of. Like, the you Node, even, like, Cursor, which is everyone's darling now, and I think we already see something happening. And and importantly, like, all of the quality scores for some parts of that are going up. So not tier one. Not like, I'm calling my bank. It's an emergency. I want somebody in my time zone right now who speaks my language natively. That, I don't necessarily Node, will be automated in the short term. Long term, maybe. But is I really care about your initial insertion or wedge.

the market clearing you'd probably rather talk to smaller

You know? And Damon from Century was in the middle of, of America, like, working on Wow stuff, like World of Warcraft add ons and and tools.

Right? And they they iterate. That's, like, the reality of how companies kind of develop.

but I think there's more risk than usual in the ecosystem right now. Beautiful.

Yeah. Totally.

then the I'm willing to just believe the gross margin will get to normal software. Mhmm. You Node? Or I'm willing to overlook the churn.

And so I think if a company But on the consumer side, I think chatGPT has a very large lead from a revenue traction perspective.

And I also wanna be telling people, like, you should work for this person. And I think that's, like, a really sacred important thing. I I really wanna like the person. You know? I I'm not thinking it right every time, but You know the investors kind of smaller founders.

But, you know, we need to have a a say to an extent, and we should never have a say in a in a a penalizing way. We should be reasonable about it, but we should have a say to make sure that, like, it's not egregious for the most part and that there's a discussion about it. I mean, that's that's, like, an agreement you make when you raise venture capital. Right? The same is true for, like, selling the company. Like, we typically have the ability to stop a sale of the company. And, again, this is usually a bad place to be. I I've never exercised, like, a block on selling a company, and I'm sure it could happen, though. And I've I've seen it sort of good, but you know, there are some founders who then raise capital and maybe have some regrets on how much they've sold. You know, I tend to feel like those founders have done pretty well for themselves. Mhmm. I get why that happens, and there could be some buyers and Wes. But, mostly, it's been okay. And so I I think it's kind of an economic clearing act, and it works out pretty well. There's definitely And and by the way, I think it's I think it's wonderful. Like, I I probably would have disagreed, and I've I've David and I try this a Scott, but it's his company. It's it's it's the people who run Century. They're running the company, and my job is to support them. I'm not some expert on license changing or the community,

as as a developer, how do you go out and raise money? What does that even look like?

you know, and I would make way more money. Like, I I kind of acknowledge that I don't have high confidence in my advice. Right? Yeah. But as a result, it's also it's lonelier for a founder. I think sometimes when you're a founder and you're stressed out and it's difficult, you kinda wanna have somebody else tell you what to do challenges with venture capital sometimes. But or some capital intensive business that needs to buy, like, a machine, which is wonderful, by the way. You know, our job is to find, then the investors are like, we're not gonna do the deal.

So my name JS Dan.

What's your thought on on the space right now? Is it is it really worth all this money, or are people getting all hyped up?

and for some nuanced reasons. Because I do think a lot of I think venture capitalists broadly are quite bad at their job, many of them, because there's just a few small ones who are quite good and make lots of money, and then most of them are quite bad. Yeah. And I think they are look warp looking for an excuse to a ESLint cool thing. And so that, unfortunately, combined with these other variables means And then and then somehow, we kept screwing this up on a on a rigorous process. But the last thing is this pre seed or friends and family. This would be, like, where your lead check might be less than a million dollars, and you're just trying to get going.

I think you JS an investor, you you wanna, again, you wanna be like a trusted source of feedback. People don't have to take your feedback, and helped them close some sales. And I even would test out the tool and and play around with it. So scale, I did I did quite a bit in the early days. And and, But this the hard part about them is they're very shallow sometimes. Right? They look really shallow for a while. But if it's, like, if it starts to work, it really works. So the first is I really believe in that, and I try to be honest but also supportive and and make sure people know that. I I'm also, to this point, honest. Like, I Maybe you are more of a sales driven business, an enterprise sales driven business, and it tends to be the case where you hire salespeople, you start paying them, you have to ramp and train them, they sell, and then you're gonna pay, paycheck for your customers. And so that tends to be that has a working capital problem, So it's kind of a market clearing thing, and I think some founders do bootstrap companies, which is wonderful. And that's a great thing, and that should always exist. And, frankly, I think there should be more of that personally.

It's a great question, and this is, like, one of those weird things. So I mentioned, like, at the seed stage, we typically do 1 to $4,000,000, a tool, like, on the bus to like, the Chinatown bus between Yarn and Boston, I think, because the original Dropbox story JS like, it works.

You don't want a production application out there that, well, you have no visibility into in case something is blowing up, and you might not even know it. So head on over to century.i0/syntax.

human reasoning or or more human reasoning than we have in the state of the art into software, actually. So that's how I tend to think about it. So I'm very bullish on overall.

to have like, to create a market.

the greatest companies of all time require I think at a high level over long periods of time, I think AI is likely to lead to increases in productivity for people. But I think it's, like, very nonlinear, and I actually think there's a lot of, like, you know, asleep at the wheel problems. I mean, I I always joke, like, Century gets to experience some of this. There's probably lower quality code going in the code base at a higher velocity. Right? that's the range. And the the the right outcome, though, is the one that makes the most sense for the company.

is the stuff that allows us to control chips that Yarn, like, the that are approaching the limits of physics. Like, chip technology blows my mind. Yeah. And, like, networking technology blows on it. Like, we can transmit information around the globe almost instantly.

Mhmm. Right? Like, I I you know, you might sell equity and and and take on capital, and I am actually, like, looking to take on equity and sell capital. I mean, that's, like, my whole job. So it it really is a marketplace that it's it fascinates me to Deno Node, and, hopefully, you get to help invest in some companies that change the world. Yeah. Wes your path, you know, coming through tech, is that a a common path for people who wind up becoming investors in tech? So I take that seriously. And I think over time, if you do well, you really build a trust, a relationship that can be really valuable in in critical times. So I think that was a big part of it. And then, you know, Vercel went through this period of again, a lot of it JS, like, belief. Like, Next. Js has to be going for a couple Yarn before I invested can be a little complicated. So, you know, the upper bound of ownership in a company in traditional VC is probably in the the thirties somewhere, and you don't wanna get too far beyond that. You you can own more than that, but it it's it's it gets complicated.

taken over by AI, equity value And that means we get a lot of the upside, and so it's very expensive and might be the fault of venture capital. And they all stem from the same thing, which is intrinsically at some level, software companies are remarkably efficient businesses.

Not always. I'd say not most of the time. I mean, it's just a typical acquirer.

Right? Like, it's like, really, the business is it's real estate. So, like, The companies where they're doing less well, like, I want the best thing for Vercel and my investors, and I want the best thing for the investors Bos the company. And, obviously, one of the largest investors in the company is the founder.

I don't know. I think, and we at Vercel try and buy 10 to 15%.

as an investor Node password, incredibly valuable companies and businesses without ever raising outside capital. I, like, think everyone should at least strongly consider that, especially in software. But we would agree, sometimes in software, you need to hire a lot of people

Yeah. That that was what I was gonna ask next JS, like like, how involved not doesn't have to be tech related, that you just absolutely love and you'd like to to recommend to someone pnpm. And then a a shameless plug is just whatever you'd like to plug to the audience. Can I have multiple sick picks? As I think the record is Node. So, yes, Darcy has, the most. Yeah. Darcy. I need to

Right? It's just like, why do you like that? Why do you like Coke? Because it's Coke. That Yeah. Self referential nature can be I think a way investors can make a lot of mistakes is over rotating towards, like, we have to IPO or we have to be sold. You Node, especially in being sold, like,

You wanna give us a quick rundown of of who you are and what you do? Yeah.

My job might be, you know, you're you're in the thick of it, and I can provide like, I can kind of rotate the problem a little bit. But I'm, like, very heartened. I think founders it's, Deno really believes in exponential curves and compounding, and, like, that's, like, the only thing he believes.

I think it's great if a founder can do it too, but it's not required. And then the second thing, which I think is really valuable for your audience, and this is, like, a largely learned from something like Y Combinator, wanted to try different things. And I probably could have done more to is where venture capital really causes distortions and problems. Right? And and it's easier but, yeah, I I think it works itself out. And I don't think many people where it goes well have regrets. Even people where it doesn't go well, they probably have fewer regrets than they maybe realized at that time, you know, versus a debt provider or something like that. Yeah. I mean, you hear the cliche often that, like, oh, this this company had to pivot or,

Awesome. Well, that that was super informative. I'm I could talk to you all day long. It's,

like, in the scientific sense, like, little stimulus to, like, make sure they're thinking.

I can't, like you can't breach covenants. I can't foreclose on your business, And especially for people who build things, like, the greatest thing you have is you can build it. So you don't have to have it done. It doesn't have to be perfect. It doesn't even have to have a lot of users.

founders are really smart. I think one of the big mistakes that investors make, and I'm sure I've made,

And what is navigating that this

making more

Okay. The the you know, if you wanna just raise 300 k, we're probably not Yep. That's, like, mind blowing. So those are the two things that I really invest ESLint, and somebody has to wanna buy it. You know? So that's not true. And the same is true with the IPO market, by the way. Like, you know, Node the IPO market right now is a little more idiosyncratic in some sense than it's been over the last twenty, thirty, forty years. So it's a little different, which makes things maybe a little more challenging. Although I think I'm optimistic that'll change. But those are the two large outcomes.

we do Wes. It's very positive Vercel when we do well.

Linear. I should say my my, my wonderful partner is at Linear, so it's especially biased. Excel's an investor. She's there. Linear's great. But, honestly, the only thing I would say that's, like, weird is, like, I just am a big believer in people being nice and being optimistic. So, like, do go do something nice for somebody around you. You know? Go go make their day. It's one of the reasons I love the chocolate and pizza JS, like, people are delighted.

like, a you you see this a lot where, like, a business, like, purchases a company and then the they shut it down and the founders go work at at that company.

they have gotten Sanity, and they value it, In the short term, I think the interesting thing is going on are so one, over long periods of time for the most Yarn, and that's much better than debt and better than other forms of finance that exist.

they actually respond to inbound quite a bit because, again, like, we would like to venture capital backed companies can make more investments in parallel, where while we can't make you do anything, we can stop certain things, and you should be careful. So in that sense but what do we not have? We're not debt holders.

Yeah. I have some good I have some good stories about that, but maybe I haven't checked if I can share them. And then the other side where where the buyer one or turn capital investors, I think that's wonderful. I really do appreciate that. I think it's a nice thing to do. I think it's good for the world, and I think the same is true of their employees and all that stuff. But, you know, there's some balance there, right, of, like, what's going on. And it's not the job of the acquiring company to be like, yeah, the business isn't going particularly well. It's also not on them to say Wes have to pay for your business that isn't going Wes, and mostly wanna hire you, and we think you wanna work here. I got a couple more questions just about, like, the the space right now. You know? Like, what, So, you know, I think I think there are places like that where you can apply and get more of a transactional the company that survives towards, like, the t t one or t two moment had, like, a pretty good t zero.

Century, Mux, and a bunch of wonderful companies.

Zite rebranded to Vercel.

where you have lower cost of labor, but that support quality is lower. I I would say it's very likely that that gets So that that I think it's pretty common and becoming more so, which I think is really good.

the brand, and being themselves. And then I probably went through a period where I feel like I did less well. I don't think I ever discouraged them from doing that, but I think there were other voices around the table who It's really hard. I mean so it shouldn't be that hard. That's always a bummer. I think the first thing is, and I can say this, and I think every investor should, like, email me. I'm dan at excel. I respond to all the emails I get as best I can. I I do my best. Probably mention that you you listen to on syntax and and that's how you you've heard about it. But, so I think investors are typically on, like, the terms we use.

Yeah. Yeah. And Hacker is coming here. And somebody was like, they did it because the Vercel their investor Vercel made them do it. Excel. I was like, no way. I was like Yeah.

you know, that goes wrong sometimes. So that's a good example where I think venture capital was helpful, but it's it's it's not a panacea. It's not perfect every instance. And but it the subtle ones are the harder ones. They're like the venture capitalists may just do it. Typically, what happens there is venture capitalists might offer advice. I think many venture capitalists

they had to

But, typically, when people talk to us at Vercel because we're a larger firm, and this is much to my chagrin, they think of us more at least in the seed, the 1 to $4,000,000.

So Armin, you know, the creator of Flask, was working on, like, PHP form. So investors good investors know that. And as a result, they take quite seriously And so it works against the investors. Sometimes the investors do things like, well, I can offer, like, really bad terms. And what I always tell people is, no. Like, these people probably know somebody else,

part, like, what piece of a company do you typically get for let's say you put up $5,000,000

some categories don't make use of that for one reason or another. Like, one example is, like, there's some businesses that are just more physical.

you know, I often I give a lot of disclaimers before I offer my advice. I always tell people my favorite thing I tell people is, you know, if I had such good ideas with such high confidence, I'd start companies myself, you know, and that's the point. Mhmm. But oftentimes, they don't hold themselves accountable to those investments enough.

Right? You could issue a lot of new equity, which would dilute our shareholdings. Mhmm. And then you could give it to yourself or your friends or even your employees, which could be really well intentioned.

You know? And I'd like, we've seen the original Dropbox post on Hacker News. I'm sure whoever's like, wait. This is just our thing. I can do this myself. But it turns out It's just a great company.

Mhmm. Or 10 to 20% more realistically and I think they figured out more often than not. And I'm usually just kinda very lightly giving, But, you know, it's for totally different reasons, there's a rebrand.

We got Dan Levine on today, and he's a VC. He's invested in What do you do to

Mhmm. It's not that fun, by the way. You know? I don't I don't think all the founders I work with always appreciate it, but I am just trying my best on behalf of the company. So You know? Node, like, you made the decision, and I think you're great at it, and I believe in you. But Yeah. And if you want to see all of the errors in your application, Yeah. I I think there's about there's a lot of different archetypes. Right? So I think the archetype that everyone hears about that is kind of less ideal for builders, I think, but there's lots of wonderful people. A lot of people come from the world of finance. Right? In some sense, venture capital is like it's it's like private in fact, JS a a subset of private equity to, like, make it as scary as possible. Like, that that's actually what it is. And for them, it's like this really fun job. Like, I always tell people it's the best job on the buy side. What does that mean? Well, like, you get to go live in the Bay Area and, like, wear a vest instead of a suit, you know, and, like, you know, you invest in these companies, but, like, you don't actually have to run the company. Right? They kinda run themselves. You don't have to do that much work after you invest. And, like and it could go pretty Wes, so you feel excited about it. So that's one way of of thinking about it, and I think you I feel from the finance background. And I work with some of those people, and they're wonderful. Sometimes there's a lack of empathy, And if the margin ends up being endemically lower, If I don't think you're smart enough to do this, like, largely on your own, I really should probably not be investing in you. Right? I'm investing millions of dollars. And if I do,

Yeah. And what what about the the acquihire

if in hindsight, it's gone very well. You know, we can invest relatively small amounts of money and make prodigious sums because we own equity, because we're so focused on the upside. So I think those are the two parameters of, like, our place in in the financial world. And so if you're a founder of, for instance, you can build a software company that doesn't require outside capital, is become a passive investor, Going public at large scale tends to be a little easier because there's many, many investors, basically.

life's too short for me to invest in people I don't like. Yeah. So I like them. The second two things Yarn, are you capable of hard work, and are you capable of intelligence? But and then I say, but if you really wanna do it, it's fine JS long as it's within reason. And then one of the funnier things that happens is every once in a while we do that, invest. Yeah. And one of the cool things about this industry is a lot of the great investments feel like they come out of nowhere. They feel like they're often from, like, people who are younger than you would wanna entrust with millions of dollars or from backgrounds that are more irregular than other investment roles. Yeah. We're not like the local bank trying to help out the local restaurant And we don't believe it or not, venture capitalists have very few You know, I think a long time ago, venture capitalists probably wildly underestimated And I'm like, but what if somebody competes with you and offers a lower price? The first business leader there, I got named Matt Park, who's incredible, who became the COO at Scale and ran all the operations for the business, was a really good friend who I, like, convinced to move back from New York where his wife was doing her residency one year early to come back to the Bay Area and join this really small company. I helped them with some customer introductions, So I would proffer, and I'm not this is not meant to be negative about anything. I think there's a lot of wonderful tools. I would say the frontier models have are more and more similar in terms of their capabilities and quality.

Along that ESLint to going public, is that the eventual ideal end goal, or is it just What's the exit strategy for these these companies? Is it just to make money? Is it to be acquired? Is it to go public?

I kinda think that's on me. Mhmm. You Node? Like, I have to be able to tell some story. Like, I have the luxury of a nonreal job. I don't do everything all day. Like, I'm not actually writing code or dealing with HR issues in my company. It's easy to have, like, vision. You know what I'm saying? It's easy to be like, I have ideas.

Again, we've been using this tool for a long time, and it totally rules. Alright.

that I, like, think you're a good founder and could be great. I don't make that many investment. But the second way is you can bootstrap that confidence by having somebody who knows me say incredible things about you. You know? I think that, goes a long way. And then lastly, like, you know, I work in Excel, and those are the two first things that I recommend, those first two ideas. But the other thing you can do is there's wonderful things like Y Combinator out there Wes they have, like, a more strict application process. You know? And I went through YC. We back lots of YC companies.

intrinsically Go delight somebody and, and I don't like the first two things, I probably messed something up. You know? I'm I'm on the take. You might be my drug dealer or something. Something. So Yeah. Don't Maybe you have some friends you worked with at a company. Maybe your friends literally and or family broadly are willing to believe in you because you believe in it so much. And on the one hand, it's a very scary thing to raise money for those people for a new idea, and you should be careful and take it seriously. Right? The other thing could be as great opportunity for them. So those are three different amounts.

this process in a way that is built for the this constituency, this audience.

I think venture capitalists could do a lot to be more empathetic. I mean, there's a huge crisis there. But for the most part, venture firms don't make companies do things. Now they can in certain circumstances older circumstances. If if you have enough investment that you've raised from outsiders, they can, if the group of investors agrees on something,

Nice. And then someone who's got, like, an idea of, like, chat GPT for dogs,

you to have no market, and and that can be nice if, like, you know what you want. But investors tend to take too much time and be slow. And I think in particular, builders are kind of like, why is this person? There's, like, not much here to evaluate. What are we doing here? so the demand is a good thing. The excess demand is a good thing. The ability for people to move around makes that revenue a little bit less value. And then the last thing that I think is really interesting that we're still not yet at is and I haven't taken a board seat that if we if we own 25% of the c stage, then we might be the largest shareholder, it's because I believe in them. It's because I it's, like, one of the most important things.

I try and keep it tangible, but I think most companies that I work with, and that creates, like, a marginally complicated dynamic for a variety of kind of, like, reasons I won't go into unless you guys really wanted it. And so I think that's the appropriate

people, individuals, angels, and things like that. But Yeah. Yeah. And and are people going like like, say, they come to you for $4,000,000, are they also

I think maybe the most valuable thing I'd I'd I don't know. We should ask David. It would be a good response. But, I mostly, like, I actually think I I helped give him the confidence to do that. And then the same thing's hiring and stuff. Like, even now with Vercel, they just hire a wonderful COO, Deno DeWitt, who'd worked at Stripe and Google before then. And I have to know Jean personally and and can help. And their their previous CRO, Telmar, who's now at Cursor, is an old friend of mine, and I got to be able to be helpful there. And so, yeah, you you help on hiring and stuff. But it does change. When I was younger, it was more sweat equity, like helping and grinding and being positive and trying my best and believing it before others did. And now encouraged him to believe in himself more. And I think the mistakes I made with Century were sometimes not more often than they do others, like consumer services or developer tools.

Mhmm. So it's a good example where I actually think that business will clear at some margin. I don't think it'll be 99%. I think that's crazy. And I think it's much more variable than people think.

So you kinda have to believe it can come from everywhere. Like, I was actually just talking with Guillermo from Vercel. I'm like, you know, he first started working on MooTools JS, like, a teenager in Argentina.

I think most people know the deal they're walking into, but it doesn't mean you won't change your mind later. So that's one thing. The other thing is that it like, I think all things are challenging. Like, venture capital probably corrupts incidentally. I don't mean that in, like, some evil way. It's kind of like it's kind of like you're the average of your friends from, like, what you care about and whatever you're you're like, are you well read or not? Well, if your friends are a smart group of friends, you might do more of it. If your friends are are JavaScript developers, you probably spend more time in JavaScript. If you're venture capitalist and venture backed companies, you might all of a sudden raise your view of what you need to do. And I do think venture capitalists things on the edge that aren't perfect, and you you hear about those more. Right? Of course, those painful moments. But, business model. We've never seen anything quite like it in the world. It's better than drilling for oil. I mean, anything you think is a good business, this is basically better. And so, interestingly, when you raise venture capital, you're basically saying there's an upfront investment that we wanna make to try and, over long periods of time, make that compound at a faster rate. That's kind of the the implicit agreement you're making. But there's a lot of places you can invest that are very inefficient. It turns out it's hard to invest millions of dollars appropriately in building a business. Right? It's really hard. And I'm sure you guys have thought about in your early days of Sanity Syntax before the acquisition. Like, okay. What would we invest in for it to grow faster? And you you obviously were right a lot, but I'm sure there are things you tried that didn't work out, and that's totally normal. So and Zite was going, but they were kind of two separate things ish. One was a Docker thing, Lambda, and then there was and then there was Next. Js. You know, people were doing pretty simple stuff with Next. Js, but I I think I helped give Guillermo the confidence to make the call to be like, we're gonna become more and more the Next. Js company, and we'll do static hosting and then grow. Yeah. So it's really his vision in everything he did, but, just like I think a company JS always trying to seek out what's really going on with this fitness function with its customers, It's a crazy thing to start a company. It's an incredible thing to, like, build software that lots of people use. Like, it's really hard.

So there's more churn. There's more movement. And you would think It was like Lifesavers brand. And I don't know if you guys remember this or anything. I do. Yeah. Oh, yeah. I was like, why is this Lifesavers brand? And it was very unclear to me. So that's why that was an Vercel investment in the nineties. And then more recently, like, the February, we were the first investors, a series a investors in Facebook.

We're the, we're investors in Linear. We were in Dropbox, Slack. And then I personally have I've had the total privilege of getting to work with the teams at Scale, Vercel, the their alternative is just to hire the people.

encouraging him enough to be a true believer. I think there Yarn moments where I could have done better there, but you kinda help with the early team, a little bit of hiring, The half is basically if you've been working on this for, like, ten years and you've spent a hundred million dollars

for a company. What what percentage of or how does it even work?

you know, cheering for you. It's a big deal. Look. It's really Yarn. And I I'm worse at that.

And I've been on both sides of these kinds of transactions. I I think it's, like, a great thing to do. I really appreciate it. I don't always, you know, demand I don't demand it really at all. I I basically ask nicely, if possible. If I'm the investor, I say it'd be great. Like, you know, we believe in you. We'd love to work with you guys on that stuff, but, like, you know, like, we would love it if you could try.

But David and and Chris and I, we warp, like, we felt like you guys could do a great job with more capital on some kind of what we felt was straightforward stuff. And thankfully, we were right, but, like, and be consistent about them.

you sold equity.

generally speaking, like, small teams, maybe one person, two people teams who are building software, which and I love software. It's, like, made my entire life, but, like, it's quite intangible.

can go public and should go public, then I do think it's my job to encourage that on behalf of not just Vercel, but also, like, all the other shareholders. You know? I think for employees, ex employees, and things like that, that's kind of the agreement everyone came to when they joined the company and took options and stuff. So They, I think, like knowing what the wedge is. But it can be a really small, innocuous wedge, But so when it's going bad, like, or badly, I I think I'm I'm pretty upfront. I'm like, you know, I think we probably would have expected at some level to go better or, you know, you're starting to run low on money. We have to start thinking about what we need to do if if we're gonna run out of capital.

some of those companies that I work with the c stage will go on to raise capital from other people, and they might raise enough capital that, It's a brand. And I love I'm a huge fan of Stripe. I really am, and I don't think it's a strictly commodity. But Stripe is a incredible business but you probably JS a business want flexibility. It's a good thing for the company to be able to go to new investors and existing investors. Right? Mhmm. So you you we don't need to own too much in that sense. And then also someday, you know, this is a luxury problem if we go public or something like that. Having heavy concentration of ownership at a business, of the finance that gets done.

Oh, yeah. Absolutely.

forty two years. And my background before this was I was actually pretty interested in math, and that's what I did most of my undergrad in, and then got into software engineering because I worked at this one place, and they're like, you're really good at math, but, like, you have to do something with it. So you learn you need to learn the right software. So that's how I got into programming. And then the next summer, I did a bunch of web development stuff back in the summer of o eight.

You can't just switch between Century and and, like, our competitors. And and, like, there's a whole install process for now. I mean, maybe someday with AI, that'll change. But but in a lot of the cases of these tools, you can and people do.

So, you know, you have to you have to be monitoring what's going on a little bit, and it's not as naively obvious as we'll think. But but I do long term believe the world will get more productive because of things like AI. If for no other reason I'm a huge believer in software. People ask what I invest in. I say software and networks, and what I mean is, like, literally then you might, like, kind of a little bit lose what I call the fitness function, like the feedback cycle with your customers. Yeah. And so that's, like, the subtle, nefarious way that I think venture capital really hurts companies. That's not usually what you hear people complain about. People usually complain about more aggressive versions that were a little more obvious, but I actually think, in general,

So someone listening to this podcast, especially with all the AI stuff going on right now, people have ideas. And and being a developer, one of the coolest things is is you can make yours. You can make you can build stuff. Right? You can just go ahead and and build stuff, which is really cool.

So I think, again, the demand side looks surprisingly good, I would say, although demand And for a satisfying way of thinking about that, that's unsatisfying to some, but I think it's realistic. It's like, why do people prefer Coca Cola above other Sugarwaters? JS a typical series a dilution, I would think. And I I might be wrong on this. I hadn't, like, looked at the the official stats, but that's kinda my my gut sense. And then I think there's a cap on the how much ownership you eventually want in the business. You know? If we own so much of a business, a couple things are true. The first is if the business needs capital, and that's worth something even if there isn't necessarily hopefully, I earn the right that founders ask me for advice, and they may or may not take it. But it's a privilege.

The the second two, the c, the 1 to $4,000,000 from a lead investor versus, you know, 500 k to a million or something for a lead investor, those are probably the two we see the most commonly. And it's really what the market will bear, which is the annoying part about it. And even worse, you kinda have to have a sense in advance of which one you wanna go for. Mhmm. Because they're kind of like, they're kind of like both local maximas, and there's, like, a little bit of a challenge in between.

I'm sorry. I'm so bored.

that I'm very honest and supportive with them for the most part.

a a high fidelity mock up even of how I'm thinking about the world. So the first is ping people. The second thing would be, you know, if you know somebody who knows an investor,

sick picks and shameless plugs. I don't know if you came prepared with either of those.

whole thing of raising money? And then what can you do with that money? And and and how does this this whole world work? So welcome, Dan. Thanks so much for coming on. Thank you so much for having me. I've been a big fan long time listener, first time caller, I think is the right phrasing here. But,

I do think I mentioned software has these, like, 80 plus percent margins in SaaS. And there's not a good reason why. Like, you could argue it should be competed away, but it is the current thing, and it's kind of settled there, and it's great.

A lot of people naively say they'll automate that and then, you know, all this labor cost that you save, the customer will get half of it and the supplier of AI would get half of it. And then we can have, like, a 99% gross margin business with tons of revenue.

but, again, it pales in comparison to the founders who do way more. I can't stress enough. Like, I I I don't wanna I don't want people to walk away from this thinking I do a lot. I think I do a very small amount, and mostly, I try not to screw things up. But you are slowly granting these things your reputation and, like, who you are, and that becomes more impactful. And then with Vercel, You know, I I can't really be fired so much in my job, which is a crazy thing.

I really think, like, the world of founders. They're like the I think there are many ways that the sun that our world revolves around, I briefly am one, but not a very good one. There are a lot of people who are former operators of companies. So, like, you know, if you thought about my partners, like, one of my partners found a company called LateIQ, which sold to Salesforce. Another found a company called Mopub,

an early ish indicator that the company is going to fail. At what point are

I think a lot of it was just being, like, a person to build like, building a relationship with Guillermo.

So I think about that as, like, a regret I have. For scale, which was my next investment where I took a board seat, you know, the first engineer there,

Yeah.

for one, it didn't grow that much. And two, you pay out all the revenue in the law firm to the lawyers as a partner.

which can be covered by venture capital. So there are a lot of businesses that I think don't necessarily need venture capital, but I think that's where the market bears JS there's enough businesses where it's worth it because of the This is why I'm a bad at Uber. I'm gonna give you the the right the answer I would give you, which is gonna get maybe, like, a little weird. So feel free to, like, raise a hand and be like, you're do you're going too deep. Okay. So so they come to me, and should they have a business plan you asked? I personally And, you know, it's not not easy to grow a team, and you ought to can have unfair advantage there. So the team is the first piece, and those are the four dimensions. And then the market for AI tools.

But I also think in some sense, and I feel bad about this, like, I I make it more It's like it's like really useful just in case we need it. Yeah. The last thing on the team is can you recruit other people? Typically, commodity like behavior switching between models. And then also the margin structure

I've got this idea. Do do you do you have to have it, like, a business plan in place, or is it just a conversation? And

Yeah. There's a lot of things that don't need VC. Like, I I do think one way to think about it is the good news about venture capital as compared to other forms of financing is its equity.

compensation to a lot of times my company's coming in and say, we like to, like, acquire this company, but we we do wanna the founders come to them and say the founder of the the target company says, we'd like to get some money for our cap table.

If things go really well, And Hacker News, in their in the change of license, which originally was to the BSL, I think, And then the the next thing I say to the company, that's the acquirer, the company I work is, then just hire them. I don't under like like, this was like a a nice like, it's it's all, like, subtle. You're trying to figure out the right balance of being kind to those people or not. And I love when found when I when founders of companies ESLint to one of my businesses, characteristics of the financing. Like, honestly and I I I you know, different people have different views of this.

So the first one, which I'll I'll put aside pretty quickly because I think it's less relevant to this audience JS maybe you're a repeat founder. You're the builder of a very popular open source project.

I mean, this is a a wild process I mean, first of all, there's different types of IPOs selling different amounts, and and some public companies have more trading volume than others Yarn more public or more like what's other. But in the in the m and a world, you're either selling to what's called, like, a strategic acquirer, and this is somebody who typically, like, you know, You know, this is a good example of, like, I bought land and the land is still like, that doesn't need to be software in that so much to, like, improve the things that I'm holding or whatever. There's certain types realistic can benefit. But some, though, are limited by by, like, human reasoning. There are certain categories that I think humanity gets in the way of it maybe being approaching software. Basically, if you imagine software like this vortex that ESLint sucking everything in. And so, I think AI will bring certain categories that right now are bottlenecked on you know, that people can have from that background. But there's a lot of people who are former founders.

resolution on your Wes, your initial insertion to the market JS really valuable, and it's something that I think builders tend to like. They've for their their own purposes, like, do I wanna commit my life to this?

and on that, like, how much how much money should somebody like that be raising for their initial, I guess, like, a seed?

multiple you'd apply to revenue should be lower. So I'll give you my favorite example of this. And I I think this is gonna work out for everyone, but if you like, one use case is, like, automating And, one of my favorite things and I'm a personal investor, so I'm I'm I'm really using company time poorly. I love dandelion chocolate. I love gifting dandelion chocolate.

really well that you're exactly on the margin because you can But within the team, The first JS, can this be really big? Yeah. So that's that's kind of the high level we do. And, You know? Like, price obviously at a high level matters, but, like, we're really trying to build, like, these huge companies. And in fact, that's a good example of the kind of company that really shouldn't spend time with venture capitalists. They're wonderful business. My father was a, started a a small successful law firm, you know, that did tens of millions of revenue. But, of course, but there's not an obvious reason why that's the case. And right now, at least frequently these categories, the margin structure is much lower.

Yeah. You know what? I actually had this dandelion chocolate sent to me, I believe, by the Mux folks. I I believe. I I think I think it sounds right. I think it sounds right. I I It stands money.

the thing that's most surprising to me academic answers. So what I'm saying is that so first of all, people

a bazillion different companies. Probably,

Yeah. And so in that sense, it's cheap to the downside. If things don't go as planned, it's very cheap.

to, like, try to be honest.

Mhmm. You know? You're really talented. You can do it. So my job isn't to tell you what to do.

And he was like, what do you think it's a good what what do you think? It doesn't matter what I think. Like, you know, I I I'm I think it's a privilege that, It it's a good so, I mean, one of the things I think my partners would would probably vouch for is it sounds weird to say this. I think if you do our job really well,

That's great.

that's a great place to be. I mean, that was at last year, and GitHub did this for a while. Braintree, Qualtrics is an incredible company. ServiceNow was started was bootstrapped largely until they ever raised capital. And these companies built You Node, starting a company JS kind of an emotional roller coaster.

But I think, It's hard. It's so stressful. And you're competing with companies JS well as capital and stuff. You're like, oh god. Like, if I just had a little cushion, that should make a difference. And it does. That was Century. You know, when I invested in Century, it it didn't need capital.

cause problems. But, no, I think it's I think it's usually more subtle reasons that venture capital causes problems for companies. Like, what's so, I mean, I'll give you two examples that are like or three I'll give you three examples. Two that are very funny and personal, pnpm people can check because these are public with me. And then I'll give you, like, a more generic example. So famously, like, Century changed its license. Right? And this is the thing people know about.

That's great. And how do you decide how much money

you'll want to check out Sentry at sentry.i0/syntax.

And in the m and a market, you have to have a buyer. So you Sanity And so I don't

Going back to the, like, the money

hopefully, because they believe it will someday be worth something.

technically there, and then they sold to, sometimes annoying, but realistic.

It's hard to tell. I have a lot of unsatisfying