Intelligent Data: Empowering Ai Development With Lucy Guo

0:00I took money from people in the end because I realized how useful people could be just in terms of introductions, etc. They're very incentive aligned to help the company grow. How much more successful would you be if you had lunch once a week with insanely successful entrepreneurs who shared their biggest secrets on how they think and achieve success? Grab your seat at the table because this is Business Lunch with Roland Frazier and Ryan Dice.

0:29Welcome to another episode of Business Lunch. And today's a snackable episode with Roland where he's going to get into some more tactical strategies that you can start using to live a rich and happy life. If this is the first snackable episode you're hearing, I'd encourage you to go back and listen to some of the other episodes that Roland has put out. And if you want to get notified every time we release a new episode, go to the new businesslunchpodcast.com website, and we'll send you detailed notes along with every episode. That's businesslunchpodcast.com, www.businesslunchpodcast.com. And you can sign up for the free email newsletter where you'll be able to get all the highlights and resources from the episodes.

1:04Thank you for coming out and being with us today. Really appreciate that. Yeah, thanks for having me. And I heard that a lot of you guys are hungover. So thanks for being here. These are the people that really want to be here. That's great. So you've had a pretty cool entrepreneurial journey in not a lot of time. It's pretty impressive. Would you kind of just give us the genesis? I know you interned at Facebook and then you were the first female designer at Snap, right? Yeah. And a lot of other cool things. but just to kind of give us the overview of the entrepreneurial journey to date. Yeah, definitely.

1:40So I was always an entrepreneur growing up, I believe. Like in kindergarten, I was selling Pokemon cards and colored pencils for money. I actually got sent to the principal's office and got threatened to get kicked out of kindergarten. And you're like, I'm selling Pokemon cards. Yeah, exactly. And then around second grade, I started learning to code. So I was making bots and then just like using these bots to get rare items and Neopets on like the actual site. And in reselling them on forums for like thousands of dollars, I figured out how to make a PayPal account via like a Visa debit card. And you didn't really have to verify anything back then.

2:13So I didn't have a big account. I had like money sitting on PayPal, which I could use to spend on sites like eBay. And then just started making a bunch of like internet marketing tools, made one of the first Twitter bots out there that would just like auto follow and unfollow people and targeted internet marketers who would spend quite a lot of money on it. And then, yeah, I got into hackathons in college. And that's when I discovered the startup world and that there were things that were even bigger than these like mini websites I was creating. So I started diving into that and then decided to drop out of college and pursue my like bigger entrepreneurship journey.

2:48I like it. I like it. And so how in terms of going to Facebook, what was that like and what were you doing there in the end? Yeah. So I was doing iOS engineering and worked on Messenger. And then afterwards, I decided I wanted to start my own company. So I'd actually got the Teal Fellowship. And the deal was that, like, I could do the Teal Fellowship if I left Facebook. So for people that don't know, it was called 20 under 20 back then. And Peter Teal was giving kids$100 ,000 to drop out of school and pursue their dreams because he wanted to make a point that you didn't need college. That's pretty cool.

3:20And then how do you feel about that? Are you happy with that choice? You've done okay? Yeah, I'm very happy with that choice. I actually think everyone that pursued the Teal Fellowship ended up doing incredibly well. and I think it's because they got a head start in life. Like they entered Silicon Valley when they're like 18, 19 years old, were able to network with other like incredibly smart people. And realistically, they just got like a three-year head start with tons of resources. So, and you self-educated on coding or did you go through courses or training? Yeah, so I self-educated myself when I was younger, but I did study computer science at Carnegie Mellon.

3:52How important do you think it is to code these days? I think the future is actually no code, personally. There's a lot of no-code tools out there right now. You can use Airtable, et cetera, to just hack things together. And you're even seeing design software where you can press a button and it'll essentially code the site for you. That being said, I think that knowing how to code is important or understanding the fundamentals because realistically, the best sites today and the best apps today, you still need a team of engineers. And you will know how much you should be spending on creating an app, what the actual time frame should be, et cetera, if you know how to code.

4:32Like if you are just a business person and you are hiring a team of engineers, you're going to get ripped off. Yeah? Yeah. So how do you do that? I mean, you partner with a coder, I guess. How does the person who wants to go and develop some software app or something like that build a team without getting ripped off? Yeah. So if you wanted to actually learn how to code, there's a lot of online resources that are free out there. I think App Academy is like one of the best out there. if you wanted to like actually dive into coding yourself. Otherwise, I would highly recommend finding someone technical to partner up with.

5:06Like students from MIT will gladly do it. And you, I think, was it at Quora that you met your partner for scale? Yes. Would you tell us a little bit about that story and then how that came to be? So we were just both young dropouts, essentially. Well, he hadn't dropped out or gone to college yet. You got paid to drop out, so that's okay. Yeah, I got paid to drop out. he was a tech lead there and we were just like okay we're the youngest people at this company we're like crushing it we would just have lunch together every single day and we're like yeah let's start a company together one day and then I was at Snap and I was just getting bored working on projects on the side every weekend so I hit him up and I'm like okay now I want to do a company Y Combinator applications are coming up we should just do it so we were just coding random things during winter break or something and then applied to YC.

5:55And we applied with several different ideas, which neither of we didn't work on any of the ideas we actually applied with. But they ended up accepting us because of our history. So Scale AI went through Y Combinator? Yes. What did you think of that? Well, actually, first, would you tell everybody just in case they don't know what is Y Combinator? And then why did you choose that route? And would you do it again? Yeah, so Y Combinator is probably the best accelerator program in the world. Twitch came out of it. Dropbox came out of it, et cetera. They created several unicorns. I enjoyed the experience.

6:27I think that if you're a B2B company, it gives you an unfair advantage because it's just like you can sell to all the other YC companies. Right. And it's just like ongoing, infinite network of companies that have funding that can spend on your product. So if you are a B2B company that has a product that's useful for any company out there, it's a no-brainer to do. Would I do it again? The answer is actually no on my end. That's because it's a lot of dilution. They take a large percentage. What is the percentage they take? I think it's new now. It used to be 120 for 7%. They have a new deal where they invest$500 ,000.

7:07But a portion of it is on an uncapped note, which is good and bad in a lot of ways. Technically, you get more of the money for less dilution, but they're doing that because they want to spend more money. squeeze into your next round and get more ownership. Yeah. Yeah. How did, um, how did the partnership come about, uh, for scale and then, uh, and, and evolve? Yeah. So, uh, I like, we just decided to be co-founders and then started, we got an OIC and then I ended up raising some money in Los Angeles too. Um, from this guy, Paige Craig, he coined the term Silicon Beach and then we just started building.

7:44Yeah. And, and, uh, when you're talking about going into a business like that, a lot of people, I think, have challenges with, well, how do we know who gets what percentage and work that out? And then how do we work together? We were both so early. We were both technical. We were very complimentary. So it was just very 50-50. And I'd actually highly suggest it be 50-50 for anyone that's just starting out. I think the only exception is if you've already raised money, right? Like if you've already raised money and then you bring on someone, then it's absolutely fair to give them a lower percentage.

8:12And it's just like what capacity they are joining you in. Like if you're adding them as a co-founder post fundraising, what's typical is 10 % or like a CTO, et cetera. If you're hiring like an engineer, I would say be equity generous, give them like one through 5 % for your first engineer, depending on like how much you've raised. And would you, and is that typically done through options? Do you find that's kind of the best way or yeah yeah okay and you've done a lot of fundraising you you had written a uh an article on it and it couldn't pull it up which is got me totally hanging because it was like i wrote this long thing on exactly how you do fundraising would you share with us how would you go about doing that if you didn't have any connections right now yeah so um we just created major fomo what I did was I looked at friends who knew investors and asked them to send the investor, like hype me up essentially, right?

9:09And say like, you have to meet Lucy Beauvoir, or I'll send affordable to them. And then they forward it to the investor and then we get intro'd. But like once it's hyped up, I align all the meetings all at once. Start off with like the investors that I care less about that I view as like a practice round because like they're going to ask questions and then I can like reform my pitch and then have all the like bigger investors that can write larger checks in the end and then um kind of just say like oh yeah like i'm really busy because i actually have like all these other meetings or i'm going to be on sandhill road um these dates so like it's best to meet at this time and then like suddenly they know that you're talking to other investors without you saying who exactly you're talking to which you don't actually want to reveal because they will back channel so if you're like oh i'm talking to like this person at sequoia and then they end up past they like it will cost other investors to pass versus like if you leave it like uphanging, like everyone's going to try to figure it out.

10:00But that creates insane FOMO. And like, there's not one person they go to where like, if they end up passing on you, like they know. So when you have the conversations with the investors, how do you prep for that? What do you do to get ready for that conversation, including, do you show them a deck? Do you show them a demo, a wireframe? What do you do? Yeah. So in general, I like to send the materials beforehand. I think that having a naturally flowing conversation is much better because you want to get the investors talking because once they're talking more than you, they are already convinced and they're convincing themselves to invest versus like if you walk through a deck during an investor meeting, like you're doing most of the talking and they're probably falling asleep.

10:42Right. Yeah. Yeah. So, so you ask them questions or like, how do you get them talking more? Honestly, like I just let them talk and I I don't interrupt until there's silence. Okay. And then I'll follow up with maybe a question or a point that I know that they'll like based off what they said. Okay. Now, so there's all these different structures for raising money, too. You could sell direct equity. You can do a safe. You can do convertible notes. Do you have one of those things that you think works better than the other? Yeah, I think safes are the best way to go for your first round of funding because it's cheap.

11:16You don't really need to use lawyers because the YCSAFE is just so standard. And it's fast, right? Would you give everybody just an outline of what a safe is and kind of how that works? So safe is like a promise for future equity, essentially, when the round converts into a priced round. Yeah, awesome. And then when you're doing those pitches, do you already have your team together? Or do you try to raise money so that you have enough to attract a team to say that I'm funded now, so don't worry. You can come over here and... I always think it's really sketchy when someone puts together like a deck of their team.

11:50when the team isn't actually full-time or hired. I think it's a really big red flag for investors. Whenever I've raised, I've just been like, hey, I'm a solo founder or hey, I'm a co-founder. Okay. And when you're talking to people who are going to be on the team, what kinds of questions do you think is really good to ask to be sure that you're getting the right people? In general, I think I want to see what their work ethic is like. Obviously, if I'm like interviewing an engineer, I'll give them engineering questions. If I'm interviewing a marketer, I figure out just how good they are. I'll do like reference checks with 10 other people.

12:20That being said, I don't look for like all perfect reference checks. I do think that like a lot of people are just very polarizing. So I see like, are there at least some good reference checks? But I try to like evaluate their skill set and like whether they're willing to grind the first like two years, let's say. Because I think work-life balance is incredibly difficult to have your first like two years while you're trying to like build up the company. Yeah. And as far as finding those people, do you like search firms? What do you think about using a professional search firm or recruiter? I do not because I generally think the best talent, the second they even mention they're going to quit, they already have like 10 companies on them, right?

12:59So they're not going to have to even need to use a search firm. The best people you're going to get are you convince them to drop out of college. You convince them to quit their job where they're already excelling at. How do you find those people if you're sitting out here and don't know how to find those people? um one way I found those people was I figured out like every single student at like Stanford MIT etc back in the day when Facebook was popular and then I added um their email to like my Facebook accounts I can access these like student groups and I would just post job listings and colleges I didn't go to um and I've done a lot of like technical interviewing and I just knew like which colleges I thought had the best engineers so I like targeted those colleges but I would say like really infiltrating student groups and infiltrating like great companies so I would like go to lunch at certain companies like Stripe etc and like just make friends with every single person and kind of figure out from there who is like there for four years etc thinking about leaving if you really wanted a good cold you can go on LinkedIn and like look at who's been four years at a certain company or three years even because they're about to like, their golden handcuffs are almost gone because almost every company has like a standard one year cliff for your best.

14:17Can anybody go to lunch at Stripe or do we have to know somebody? We have to know somebody. Who should we call? No, I'm just kidding. So you also have gotten into venture investing yourself through back in capital. Yes. Can you tell us a little bit about how that came about and how it works? Yeah. So it came about because I was just like, okay, I've done everything from like founding the company product engineering etc i want to try venture right uh also my like lead investor um excel for a series a was like hey like we want to just give you some money to like play around and do venture with and like you'll get the carry etc so i did that and i was doing a really good job so i ended up just raising a fund and then um investing in early stage company so i focused on pre-seed and seed i think that's my specialty like i like betting on people versus traction because sometimes there's traction but like there's an upper limit like tam right how do you vet the investments that it's going to yeah so my thesis is invest in technical people because if you have a team of like let's say an engineer and a designer they never need to hire a single person they have like indefinite runway to continuously pivot so as long as they persevere and never give up um they will probably figure out something like i have a very good friend who I met in the Teal Fellowship back in 2014 and he's been pivoting and finally raised a giant round like this month and like finally figured it out because he never gave up because he was technically like he could just live off ramen for the rest of his life that's great yeah and and for the fun do you like some of the tools like AngelList provides for people for fun so that all the back end is taken care of or do you think it's better to have your own team or what are your thoughts yes I've done those like fun one that used AngelList and fun two I had my own team I would do AngelList again yeah it's a lot of work yeah it's easy yeah and um and then as far as picking did you have someone to kind of do the ops for the fund or are you doing everything um back when we were on AngelList I was just doing everything because AngelList was essentially the ops and then for fun two we hired someone to help out with some of the ops okay yeah and um for one of the things that you have What are some of the companies you've invested in with Backend?

16:26And is that fund still open? It's still open. It's not open like you can't invest in it anymore, but we are still doubling down on current investments. So Ramp is probably our big winner, like multiple billions, maybe$7 billion,$8 billion in the last round. And we invested in paid. Ramp is a credit card for companies, essentially. So it helps you save money and figures out where you can save. And then we invested in paid, which is like compensation, transparency, so you know how much to pay others. that is also like a unicorn right now. How much to pay others? Yeah. So like, it's like, okay, so like you're an engineer, right?

17:00Like you're a series B company hiring an engineer of this status. Like how much are other companies offering like similar profiles? Okay. Main Street, which finds you savings on companies, which is awesome. Yeah. Just a bunch of random companies. We invested in Crossman at a great valuation. This is actually a company that we like essentially incubated because we started our own thing similar to Y Combinator, except like our thing was we provide housing. We give you less money, but we take less equity. They just raised a$70 million valuation, I believe. And that was it's like a MoonPay competitor on Salana.

17:38If somebody wants to get into investing, whether it's through funds or trying to get into those rounds, what do you think is the best route for them? yeah so if you know people obviously a fund is less risk and you get management fees so let's say you raise like a billion dollar fund you're getting like 20 percent of management fees essentially so that's like 200 million for you to manage the fund but also pay yourself right that's a lot of money um i personally think that if you're well connected spvs make the most sense so you find out a company in like a series d that might ipo soon so you have like a shorter time frame on liquidity, you get a large allocation because they're already raising, like, let's say tens of millions or hundreds of millions.

18:17So it's not hard to get like a one to two million dollar allocation. And then you run an SPV on it, you charge management fees and carry on it, and you can run through like as many of these as you want. That's great. What are some of the best companies you think that present opportunities to invest in right now? Not specific companies, but like categorically. Categories, I would say like AI is super hot and Web3 is still super hot. And what does Web3 mean to you? Because you hear that thrown around a whole lot. Yeah, I think it's decentralization and just ownership of your fans. I think it's cutting out the middlemen because, for example, credit card processors, right?

18:54They can charge a lot of money. And if you can cut that out, then suddenly, woo-hoo, everything is great. Escrow services, if you can cut that out, then you suddenly save a ton of fees also. Who's doing that right right now? Who's doing that right right now? I actually don't think there are many Web3 companies. companies are like web 3 isn't popular yet because everyone is trying to take this like very web 3 approach that web 2 users don't understand um for example like in the creator economy a lot of people are doing social tokens and like you can buy your favorite creators tokens and stake them etc and like people are like i don't understand what that means right um and it's hard we got all these accounts up and yeah not easy right yeah like i think who's doing it right would be actually like probably pretty big brands like bilge and gabbana just launched an nft but this nft is tied to utility so like they are throwing parties around the world you get invited to their exclusive fashion shows they have like vacation trips to take you on you get exclusive merchandise because you own this nft so like for a lot of people that's like easy to understand um i think royal is really interesting so they're like a music nft platform where like Like, artists can sell a percentage of their songs, and then their fans can earn royalties on it, which also makes sense.

20:08It's like, okay, like, you're betting on the artist, essentially, right? Does that tap into, like, ASCAP and BMI and all those royalty organizations? Do they connect those? I believe so, yeah. Okay, cool. And then I would say, like, even the Monkees, like, Bored Ape Yacht Club is doing it right in the sense that they are throwing parties around the world and having big performers like Snoop Dogg. I personally had friends that really wanted to go to a board ape party during NFT week and buy an ape that cost$200 ,000 just to go to this party. That's funny. But they kind of hold their value, right?

20:40Yeah. I like view it as a more expensive Soho house. That's funny. What about the crash in crypto right now? What do you see happening with that? Is that going to adjust? I think crypto is always cyclical. I think it's going to go back up eventually because there is a lot of reasons why Web3 and blockchain technologies are useful. Yeah. You have a new venture that I think you started in April. And I was a little confused because I saw Moment some places and I saw Passes some places. Yeah. So basically, there's another company called Moment and they own the trademark. So we were forced to rebrand.

21:15But I like Passes because it immediately tells you the utility and you don't think about it as NFTs. and we're taking an approach of like not even mentioning NFTs on a platform because I think that like a lot of people are turned off by the idea because there's so many people that did projects that were essentially rug pulls. Like they launched an art piece, they sold it, and then they disappeared. And it's just like a random piece of art that you can do nothing with that's not even like a nice piece of art. So for us, we're like, okay, let's tie it to Utility. Like it's going to give you merchandise access, live events, digital membership to exclusive content and just call it like fan club memberships and that's something that like everyone can easily grasp and we just have all the benefits of web three without like people knowing it's web three so so because there wasn't a lot i i uh i joined the wait list but uh but there's not a lot about it can you tell us like like what is it if you were if you're pitching that if these are your investors and you're pitching passes yeah so uh essentially like it's just a paid exclusive membership club.

22:16So let's say I am like Miley Cyrus. Someone can buy my NFT, which is essentially a pass. And you have to have it pre-created or does it mint there? Or how does that work? Yeah, so it mints on the site. So you just press a button and we'll mint one. Different membership tiers. And depending on what membership tier you have, you get different access to different perks. So on the baseline, let's say exclusive content. So behind the scenes footage, et cetera. You can message me and DM me. And if you want to tip me in crypto, you can or in dollars. But it's beneficial to be crypto because like let's say I had a super fan, right?

22:51And they really wanted to get to me. They could tip a million dollars and then I'll notice them. And then the cool thing about NFTs is that it's interoperable. So if I wanted to offer like a meet and greet, I can use another website like TicketFairy token proof. And instead of a meet and greet specifically for my NFT holders, I can do merch drops specifically for them. And the great thing is I get like way more data on my fans. Like let's say these passes were tied to tickets to my concert. Traditionally, if a person were buying a ticket to every single one of my concert, I might think they're a super fan, but I wouldn't actually know if they attended or not.

23:24Because they could be reselling the tickets and scalping. Now, if they're like selling the passes, I know exactly who they're selling it to. And I know they're a ticket scalper. But on top of that, like normally Ticketmaster would take the fees, right? I could set a 10 % royalty fee on my passes. So every time it transferred, now it's not Ticketmaster taking the fees. I'm getting the money back. So that's a lot more money for me. What's also cool is I can see every other thing that's happening in their wallet. So I can see, okay, they have a bunch of Elenium NFTs. So for whatever reason, my fans are also Elenium fans.

23:56So I can do a collab with Elenium. Or, wow, they're spending a lot of money on this one eyelash brand. I should create my own eyelash brand. That's pretty cool. Yeah, it makes everything super transparent. And this is data that they just didn't have before. What is the, like if you were designing, if you were consulting with someone about designing the ideal NFT, what would you advise them to do in terms of utility and smart contracts and all that kind of stuff? Yeah, so in terms of utility, I think they should definitely tie it to in real life events somehow. In person events. Yeah, I think that's easier to swallow because people are willing to already pay for tickets to in-person events.

24:38I think sites like Patreon, OnlyFans, et cetera, are making it make more sense to tie it to a digital membership as well. But, like, if you can have both, that's awesome, right? I would also just say merchandise drops because it's, like, BoardAid, Yacht Club merchandise drops just sell out instantly. And, like, you have a skateboard that, like, you could have bought on a merch shop for$100 that's now selling for thousands of dollars and people are still buying it. Right. there's just like an indefinite amount of things you can do. Like I would probably tie it to like maybe a lifetime discount to something.

25:10So then it holds value for life as well. So it's like, okay, you own this NFT, like you get like 50 % off McDonald's for life. If you're like a big McDonald's fan, like that NFT is going to resell for a ton. I think Achela actually did a really good job of this where they sold NFTs that gave you like essentially lifetime artist guest passes. and now those nfts are going for a million dollars or so uh and every time it resells Coachella is probably getting like 100 200k kickback so they're like making money indefinitely for it and the crazy thing is it was priced at the point where you could buy artist guest passes for life and it wouldn't add up to the cost of nft but i think that like people like the flex they like the art and like it's just an easier concept to swallow in their head like oh i get lifetime passes and to them also like maybe they'll even make money on the nft by reselling it as it gains value in the future, right?

25:58So like then the total cost is either$0 or profitable to them, which has actually already happened with the people who have resold it. Meanwhile, Coachella is just making tons of money from like the initial sale and the royalty fees. So, and the only thing I'm concerned about there is so like you sell it now you're getting paid as they resell. Yeah. But what happens when you're fully at capacity? And so let's, let's say that, let's say that we did it for an event here. So we have only so many seats that we can do. When we have sold the full amount of seats, now other people are selling that and we're making money off the resales, but we can't really issue any new things because we're out of capacity.

26:37But you're not issuing new seats because when they resell it, they're giving up their seats. Right. But that's it, right? You just, you kind of say, okay, when I'm calculating, what is this going to be worth? Is this a good thing to do? You need to think about, okay, well, I can sell this many. And obviously you can sell as many board apes, I guess, as you want, right? Yeah. But so is it good for places that would have physical limitations like that? No. So like what you would do for this is let's say there's like 5 ,000 seats, right? You just sell 5 ,000 NFTs and if you resell, then you're getting all the royalty fees and ticket resales.

27:10But like you're still only have 5 ,000 tickets, right? So like 5 ,000 passes and it's only going to just 5 ,000 people. Right. What I would do, though, personally, would be have some VIP access. So it's like 100 is the VIP, and they get different perks, and that's super limited. Or just offer some NFTs that get you first rights to access. Imagine if you had an NFT that for life, you got to buy tickets to Burning Man. You got first access to Burning Man. People get stressed about Burning Man. like they would pay just to even be able to like have first access to buy right the normal pass right that's that's really cool who would you say are the competitors to passes um i i would say the closest competitors right now are actually web2 platforms so it'd be like patreon only fans etc ticket master um ticket master yes but we're not totally focused on ticketing like at the moment we'd rather them plug into other websites like ticket fairy or token proof to handle ticketing because nfts are interoperable which is interesting like they could take the nfp and like take it to any other platform they want like for now we just want to focus on the like exclusive digital content and we'll help creators plug into the right platforms to offer merch drops to offer like ticketing etc how do you keep track of um what is because that's such a changing world, everything in Web3.