turner novak / banana capital

0:00Turner Novak: If you're a series A stage company, you're not getting Wall Street Journal articles. You're probably not even getting on most other tech podcasts, honestly. Usually the state of today is like unless you're raising like$100 million, just no one gives a shit, honestly. It's not really notable for anyone. So if you've raised$3 million, no one's going to cover what you're doing. Every portfolio company that's come on is just like, yeah, it helps us hire like the whole team. If I was doing seed investing and I was starting over, the interest of my time would just be marketing. I think it's like one of those things where I actually think you should lean into like the non-investing stuff because it actually helps.

0:33How has it been transitioning to in-person podcasting? I'm also curious how your branding has elevated as a natural effect of that. I feel like you've really shifted from ex-posting memes, which has also been like super engaging, to this real platform that people come to. What's been that adjustment?

0:53Turner Novak: I mean, you just have to take it really intentionally. Yeah. It's like a lot of people will do a check the box activity when it comes to anything, not just having a podcast. But my thinking was at a high level, you might say there's too many VC podcasts, right? Every VC has podcasts, so there's too many, therefore shouldn't do it. But then you just ask, what are some good ones that you listen to consistently? And then there's actually not really. So the opportunity is kind of like, we'll just do a good one, right? Issues here said than done, I guess. but the thinking was if you make it really good and really interesting people listen and watch tune in there's also an element of the reason i started doing it was to meet more people and talk to more people and so um yeah i had a guest earlier today that came on the pod and i had met him at dinner 10 months ago or something and was like oh this would be cool to have him on the podcast so i just kind of like kept in touch talked about it then we just hung out for two and a half hours earlier today.

1:47Turner Novak: And if I were to just go up to the CEO founder of a company that was doing 5 billion in revenue, just be like, hey, can I pick your brain for two and a half hours? Right? Not a strong sell. No. Why? No. Why would I let you pick my brain for two and a half hours? But if you have like a platform to be able to do it, and then that's an excuse to also hang out, you then can basically say, hey, one of my portfolio companies, the founder really wants to meet you, they think they can save you a bunch of money on this, or they can speed up your this, or you can use in whatever capacity. Or so for, I would say for customers, for your own portfolio companies, helps them in terms of potentially getting acquired, having them then come on the show, and then builds a platform for them to then potentially have people try the product.

2:30Turner Novak: People maybe want to work there. Maybe there's investors that are kind of watching. I have cases of all these where some portfolio companies, they use it in all of their onboarding. They use it in all their outreach or follow-ups in the interview process. If you're a series A stage company, you're not getting Wall Street Journal articles. You're probably not even getting on most other tech podcasts, honestly. Usually the state of today is like, unless you're raising like a hundred million dollars, just no one gives a shit, honestly. It's not really notable for anyone. So if you've raised three million bucks, no one's going to cover what you're doing.

3:03Turner Novak: It builds a platform for them to then use in a lot of different things. I think it adds legitimacy too, because consistent listeners of the show, you know, you have the CEO of a public company, you have a VC, like well-known fund that has 10 IPOs, some random seed stage company no one's ever heard of, but seems interesting enough. Another public company, CEOs, you kind of like weave them in. And then all of a sudden it's like, oh, that random seed stage company, it's actually pretty cool. And then for them, they can actually go out to the next thing and say, looking to go on more podcasts, here's why I went on Turner's and it just lends more credibility to them being able to go and do more press.

3:37Turner Novak: But I mean, it also became a business really where I'm making a lot of money from people that want to sponsor the show. And so in some ways, it's going to have better quality product of like meeting people in person in that case too. It always turns out better. But then the sponsors, you want to increase the reach, increase the legitimacy of the production so things look good for them. And then, yeah, it gives you like a little bit more money to invest in making it grow and bigger. And that's also like kind of like a business. I didn't really think I would have a media company per se ever. But yeah, I mean, I kind of have like a little media business, I guess.

4:14So I'm also curious because you're a very selfless and giving person. You're talking about how the platform and the podcast helps your founders. But like, how has that helped you in terms of fundraising and being a fund manager since the growth of the platform?

4:28Turner Novak: Oh, yeah. I think it definitely helps. I actually have not really invested in guests that have come on the show. It's usually I invest and then they come on later. Oh, after. Okay. Yeah. I mean, actually, I probably should. Like, it's come up multiple times of invest a couple million bucks on some of the later stage companies. I think it probably makes sense to do that. I just, like, haven't done it yet. I think it's kind of low-hanging fruit to do. And I've had people tell me I should do it. and I agree, I'm not prioritizing it at the moment. Yeah, but I think it makes a lot of sense. One of the biggest things has been with a portfolio company, I have multiple that have come on the show and it literally just helps them hire every candidate.

5:10Turner Novak: It's either they come in through after listening or they're using it as collateral or a recruiter reaches out and they're just like, I don't want to talk. And then they follow up, just watch this. And then they're like, find them in kind of a thing. Most of the founders who come on, it helps them hire the whole team. Any good, serious candidate is going to go out and listen to all the stuff that's out there. If you're going to bet your career on your entire earnings, your livelihood, and your family on one stream of income, you're going to figure out as much as you can. A lot of cases, it's like a Series A, Series B company.

5:43There might be one interview, like a shitty YouTube, Zoom call type, bad audio quality thing that you did when you were a PM at Uber or something.

5:53Turner Novak: right that's what's what that's what they're looking at an hour and a half of just trying to convince people to come work for you really at the end of the day so that's been i think a super valuable feedback from basically every portfolio company that's come on it's just like yeah it helps us hire like the whole team so that in itself has been super valuable but then also yeah just being able to meet people and a couple people that have invested in the fund after coming on the show i probably need to push that more go down the list of people that have that have been on the show. There's just like a ton of value to it.

6:23I think the last time we had you on, we talked a lot about your origin story, like how you've gotten to where you are and how it was just a series of obvious decisions that you made for your life that you kind of created for yourself.

6:38Turner Novak: Yeah. And less about the platform that you're building and like how you're building it and where you want it to go. Because at some point, even in the past six, eight months, it's grown where you punch way above your weight. And so now it's like, okay, where do you want this to go? Where do you see this going? And at what point will the fund and the platform and the two businesses that you're building, what takes priority? I think the answer, people would say, oh, that's bad. The media stuff actually takes priority. And that's because that's what differentiates me as an investor. And that's how it's actually helpful for people.

7:13Turner Novak: All the content is structured around setting up the fund, setting up to be able to invest and help companies. So I honestly, I feel like I've had this conversation a couple of people. Like that's bad. Like that's the wrong answer. And I'm like, you can think that, but I disagree. I think you should prioritize the thing that makes you the best, what you can be the best at. Should I go and do a bunch of community events? Should I hire a recruiter to do in-house recruiting? Should I hire a bunch of data analysts, build some data sourcing, AI tools internally to be AI superpower VC or something? Some people actually do that and And it's probably like the right move.

7:46Turner Novak: And a lot of people do try to start a podcast. Like a lot of VCs try to do content like it doesn't work. And a lot of people try all these other different things that don't work. And I think especially if you're trying to meet founders that not everyone kind of knows about, you probably should be doing a lot of marketing and should be doing a lot of content. And I could call it not, I could not call it content and just call it like VC marketing or something. And it's the same thing, really. So it would just be less effective. I've talked to a couple people, super successful investors. If I was doing seed investing and I was starting over, 50 % of my time would just be marketing.

8:19Turner Novak: I think it's like one of those things where I actually think you should lean into like the non-investing stuff because it actually helps. A lot of people, they spend their time working their network, working the group chats, going to events. The guest head on last week of my podcast was a guy. He's been on the Midas list like 18 times. Posting that, everyone sees it. That's working a network, right? Like I could, like with a portfolio company, I could spend a day introducing them to all these customers or can just like record a podcast, put it online. And like two years later, it's still doing that.

8:46Turner Novak: Yeah. So it's just the most valuable thing I can do in terms of like how it helps because it helps me. It helps portfolio. It helps the guests. It helps my LPs because they make more money. When I go back and look at all the data from like all the companies I've invested in, the ones who were specifically, I want to come on the show. The more serious they took it, the better it worked for them. Also, those companies have all outperformed. It's kind of like interesting realization where I should just lean into it more. There's a lot of ways to kind of do and get media. And it's like a pretty good one and pretty effective.

9:20Turner Novak: And then also realistic for me and the founders. Why would I just not do it? So I do see myself as an investor. The night I met my wife, we were like talking and it was like, what do you want to do with your life? I was like, I want to start an investment firm one day. It's like, why the fuck would you tell me that? And like a first date. that's kind of weird. That was kind of like what I always been thinking about. And so this is just a way to differentiate and kind of do it. So how special that you have that story. You're going to look back at that. That's a good bit. Yeah. And then on the portfolio side of things.

9:54So there's all the media, everything you've been doing there, focusing on that. How is this now playing back in? What are things you've been more interested in on the portfolio, on the fund side, the investment side? Where's your brain been on all of that?

10:05Turner Novak: Probably the biggest thing I disagree with with the market is a lot of people are like, oh, outcomes are bigger. You're a seed fund. It's okay to be doing a$2 billion post-money pre-launch round. It's just the market. You have to make money. I get it. The world is changing and the outcomes are way bigger. But that$2 billion post-money round, there's just as many. They raised$2 million and then they get to that point later. I think with a lot of these things, you have like a small slice of the portfolio that's what I consider a series A, which is 50 or 100 million post money round. I just don't really think it makes sense to be participating in these really crazy, very large rounds.

10:44Turner Novak: If you're A16Z, like you kind of have to. And that's why we see they'll put like 5%, 10 % of the fund in Adam Neumann, whatever type thing. There's capital providers for that. Yeah. As somebody who, you know, I have a$10 million fund. Why am I giving a million dollars? is a part of this$300 million round that is kind of like I'm kind of a rounding error. Yeah, and I think you want to be able to, anyone who is an investor, you want to be able to kind of graduate over time. Every single fund that's doing these later stage things started with a smaller fund. I get the inclination to kind of do all that.

11:19Turner Novak: But yeah, for me, it's like, you need to be able to justify 100x change in share price, which is probably 200 to 500x change in valuation, depending on the dilution. And so I usually try to stay as close to 10 million post money as I can. I have one company in my fund too. They closed the Series A that returned half the fund just from the Series A. If it's a billion-dollar company, it will probably like 3x return the fund. And that's the starting line for a lot of these. Then the math goes, okay, a lot of people then say, oh, you need to be a$100 billion company. If that becomes a$100 billion company, it's like a 300x fund, which would be amazing and doesn't really happen.

11:56Turner Novak: You have to get extremely lucky. but you at least position yourself to be lucky versus oh shit we need this company to literally become the next anthropic yeah so i can like give people their money back right i wonder if you're able to keep this mindset not being an sf we were just up there last week and there is you know that hype mentality that's going on and so everybody's like well that's what the price is and so you have to pay that price and that's that and yes sure that is true in some cases and then also you may be able to be a bit physically removed from that and then also mentally removed from that and is seeming to help you.

12:30Turner Novak: Yeah, I mean, people in San Francisco were telling me in 2021 that I have a coffee, there's a boba tea, you're going to get an NFT with each of those purchases, and it's going to be tradable. So they're not always right about this stuff. It feels inevitable. We're going to hit a wall on a lot of the AI stuff. It has to be like 100x more power in data center capacity. It's probably not going to happen. There's extreme political resistance to this, and the solution right now is put it in space, which it's a good idea, a good solution, but every single great technology goes through a bubble where we get too excited and things kind of crash and ai is both super early we're also in a little bit of a hysteria in a bubble right now you're just gravitating to what is currently growing the fastest i think people kind of forget a lot of this stuff i mean you could probably look back on this in a couple years and i'm kind of making myself look like an idiot but there was also some truth to like the the wall that you kind of always hit with this stuff so i just don't think you should be like getting yourself too extended.

13:24Turner Novak: I guess like you're, you have like a portfolio of out of the money call options. So if any one of them gets in the money, you make a ton of money for the rest of the portfolio. What other people seem to be doing is a portfolio of in the money call options, which means if things go really, really well, you actually don't make that much on it. The whole portfolio is basically set on market highs and it pulls back. You lose it all. Part of that's kind of the point of venture capital is like you're taking a lot of risk, but I think you need to take appropriate risk. The general mindset right now seems to be that things are just going to keep going up.

13:56Turner Novak: And if you don't escape the permanent underclass in the next 12 months, you're going to be poor forever. I just think it a little bit ridiculous. Being in the San Francisco bubble can kind of change your mind. So I think a lot of the technology is all going to change the world in a lot of ways. But I think there's gravity. You have to know where you're at in the cycle and understand. Well, in conversations with LPs, do you find that they are on a certain side of this conversation? It's too expensive. It's too cheap. But like, we need to be more in AI. You need to be playing bigger. Yeah, I think it's - Do you find that a hard narrative?

14:29Turner Novak: If your job is to raise money, if your business is around raising money and collecting management fees, you always think things can go higher. Mm-hmm. So it depends on the LP you're talking to. Most of my LPs are people who care about making money, thinking rational about this. if it's an LP who they need you to get markups in the next 12 months so that they can raise their next fund, it's just like less exciting. I'm not like a bearish in saying like it's a bubble that's going to pop because I actually don't know if it will pop. I truly don't know. You should be positioned to even if it does pop, you're still okay.

15:02In 2021, when I was investing my first fund,

15:06Turner Novak: the average seed round is like 100 million post money. And you're like, oh, this is insane. Well, I'm investing at 50 million post money. that's pretty reasonable, 50 % lower. But then when you really step back, you're like, probably should have been 10 or 15. Even in the hysteria, on a relative basis, you feel like you're making the right decision. But when you really step back on an absolute basis, you're like, yeah, 2021 is going to be a rough vintage, even if you did act rationally during it. So I think you always have to keep in mind that five years from now, whether we do build all the AI data center capacity or if all the big labs go bankrupt because they defaulted on all their stuff, that you're still okay.

15:45Turner Novak: So you probably want to think about not being too concentrated in things that are exposed to that. You have a diversified portfolio of a lot of risk in a lot of different areas. So in theory, you should have an interesting CPG company. Maybe you should have something in South America because for whatever reason, maybe it's AI or not AI related. Maybe you're like a little bit in defense, making sure that you're not fully exposed because like the whole thing is a lot of risk. And then I guess there's other ways to think about it where maybe a fund is only the Latin America defense fund, right? That's not really what I'm doing.

16:17Turner Novak: 99 % of my net worth is in my own funds. I'm trying to make a lot of money. So that's what I think about. Kind of coming back to like 2021, I thought I was doing a good job in 2021 because on a relative basis, wasn't investing in crypto and Web3. They all had real products. Very little fraud was committed in the portfolio, you know, compared to the - Very little. It is relative to the rest of the vintage. Yeah, and then you're just like, shit, but I still messed up in all these different ways. So I think you just have to have a lens of the whole pitch to LPs if you're investing in venture, I think is you should be able to say with a stray face, here's how I can return 10x.

16:52Turner Novak: People will argue and say 5x, and that's not going to beat the public market. You really should go for 10. There should be like a path to saying like, hey, if there is really a$20 billion company that we back super early, you're going to make like 73x times your capital. I don't think you can guarantee that. But the math potentially supports that if things go right versus the, hey, we're going to get a 2x if that happens. That's really, really hard, I think. Similar thread. We don't know how AI is going to change. And you can't really predict what's going to happen in the future. But you can have principles.

17:20And that's come because you've talked to so many people and you build your own theses on the world. But I'm curious, like, where do you see content going? Because it's also changing as rapidly. The younger generations are only getting younger.

17:33Turner Novak: You mean in relative to us? we're going to play. Hey, hey. But like, where do you see content going here on out? Clip farming has become really popular over the past six months. The next six months, I think long form media is probably not where it's going to be super hot. Which side are you on? Like, do you think it's going to be even shorter content? Or do you think people are going to go back and want just intentional long form conversations, kind of like a Joe Rogan podcast? I think people want all of it, honestly. The thing you got to think about is what do people do when they go on their computer or go on their phone?

18:08Turner Novak: They probably open a social media app or they open YouTube. Maybe they're looking at their email. That will probably change a little bit. I think email is probably going to look different because there's too much AI slop now in email. I actually think the biggest change with content distribution might be like in B2B specifically. I can't speak of what the 14-year-olds are doing. The way email works is probably going to change. A big part of this is you have to figure out what are the algorithms pushing and you have to be positioned. You can be optimized for long form, for clips or whatever. And the platformers might be like, for whatever reason, we don't like clips because they're too short and people bounce.

18:43Turner Novak: So we're just like not prioritizing short form content. You need to figure out what are the algorithms actually pushing because that's what's going to matter. If you open YouTube, you can do text posts on YouTube. I don't know if you guys knew that. Like a Facebook status or like a tweet type thing on YouTube. And they might start to push that. So you just need to be able to need to know I should probably get the content strategy adjusted towards that. I think one thing with shorts in general, short form content is it's a good way to feed into the LLMs. I think that's like another benefit of the podcast.

19:10Turner Novak: I guess I probably forgot to mention, but just generally speaking, you get ingrained into it. Because like a lot of the models are trained on YouTube content and then also on podcasts and social posts. If you're putting a lot out there, you'll go into the LLMs. I don't think like clipping will probably go down, probably get more important. and you'll probably see more brands doing it because it feeds the LLMs. And so good for me, good for guests. The way I kind of see it is like content formats have all evolved over time. When you think about going back to the beginning of human history, the first kind of content or story was stories at the fire, people dancing, doing rituals or like telling the story of the tribe.

19:46Turner Novak: And then we learned like writing and wrote stuff down. That was a content format. The printing press literally mass produced written content. And then the radio with black and white TV, with color TV, with like the internet, and even then now with like AI generated content. If it's good, people will just kind of watch it. It's in the same sense if somebody sat you down and told you a story in front of the fire and it was good, you'd listen, right? Maybe AI can figure that out for you and help you come up with the story to tell, scripting something, coming up with ideas, editing, ordering your video, your audio.

20:19Turner Novak: I don't think people open TikTok and everything is AI because you kind of, you want this connection and you want to have like a reason that you're kind of there just kind of like shared humanity so ai generated content is just like another form of of content in terms of like how everything evolves it's basically just figuring out what people want to see what people spend time on the algorithms will will push things so the latest thing linkedin is doing collab posts you know how on instagram you can do a collab with someone and it shows up on those feeds i think linkedin is doing that i should do that like when i what every clip from the podcast i post on linkedin is going to be a collab post with the with the guest because linkedin is trying to grow that feature so they will just give you an extra boost you should just do those things zuck controls the internet don't don't fight them like just just like ride whatever he's doing because i could come up with some like great thing and zuck doesn't think it should show to people and like i'm like all right fine And we've got Zuck, Elon, and then Microsoft controls and Google basically controls the internet, what people see.

21:24I mean, the delivery method, yes. But what I'm hearing you saying is like the content you still want to have control over. And at the end of the day, humans want to feel connected. And so the content needs to be real and have a core to it and be connected and increase conversations and humanity. And yeah, the algorithms will drive what gets to certain people. But the core of the content still needs to be you.

21:46Turner Novak: Yeah, like people, they're going to decide pretty quickly, am I going to keep watching or listening to this? Is it AI, a sketch, highly produced? It's just like, was it interesting? Did they care about it? And there's almost like counter positioning almost too. I feel like a trend on YouTube is like lo-fi, low edited. Even the thumbnail is just white with some text. You might be like, whoa, I'm going to click on this because I don't see this. That's what worked with me with memes a while back. Startup and tech Twitter was so dry and boring. And it was just like people being humbled to announce and thrilled to be partnered with, you know, whatever.

22:20Turner Novak: And then some guy made me making fun of Tiger Global for plowing$100 million in this remote work SaaS company or whatever. And you're just like, oh, that's kind of funny. And so it's just like counterposition the current kind of meta. And it was like a launch videos. We went through that era. And it was because Twitter was prioritizing videos. When you quote post a tweet in the feed, it's like another separate post. So you post a video which is juiced, and then you have everyone quote it, makes entirely new feed, feeds the algorithm like a new post that all separately can hit the algorithm and make the underlying one even more powerful.

22:55Turner Novak: And that's just a function of the Twitter algorithm was promoting that stuff. So it made sense to lean into it. What happened was with a lot of those, I think Friend and Cluely were like two of the ones, people would get really pissed off about these things. People were talking about it and dunking on it and saying this is dystopian. this startup's like a giant dumpster fire, like whatever they were saying at the time. And it just juiced the underlying content based on how the algorithms worked. I think the founders kind of like understood this. You essentially create content for the algorithms really at the end of the day.

23:25Turner Novak: So I think that should be part of the strategy. You can write a substack. You post links to the substack as the post. No one will read it because the algorithms don't want to see that. It's basically what do people actually want to see? Yeah, they want to keep them in the... Yeah. I mean, that's really what you have to figure out. Like with TikTok, TikTok shop, they want people to buy. So if you just like make a video, coffee, you can buy the thing. Objectively, that video is slightly worse than a different one you made. But it has the opportunity. Yeah. So I think you really have to think about that when you're making content.

23:56Turner Novak: How do you benefit from the algorithms at the end of the day? You kind of have to like really understand what goes into all this stuff and why people want it. Everything's always constantly changing, right? Like in the algorithms of that content. You got to stay on top of it. One firm that I think did this really well was Founders Fund. You think of back 10 years ago. I have been in some videos back in the day. Oh, you've been in some Founders Fund videos? Well, I mean, just generally, not even just their videos, but their positioning. So when you think of what was Silicon Valley like in 2016, Obama was president.

24:26Turner Novak: Silicon Valley was very liberal, and that's about 50 % of the population. You're about 50-50 on both of these sides. Founders Fund became what American dynamism is today. and it was like the only one there yeah so you think about that like it's roughly split 50 50 but they are unclaimed there's no one else that's kind of competing with them i mean it kind of in a way incubated pirate wires kind of in a way that became tbpn i think they did a very good job with the content positioning of their marketing today it's like very crowded most new actually most new funds are very like american dynamism founders fund coded so there's probably an opening now on the other side to be like whatever the opposite is.

25:04Turner Novak: I have no idea what the opposite is but like it's not going to be me. I don't want to do that. Yeah, but I do think you need to think about what's like the market always swing. The Overton window is always changing. There's always an opportunity to kind of like make counter it, make a new lane, take like old things and just bring them back. Market's right for novel ideas. For sure, every day. Cool. Let's go eat. cool let's do it thanks for having me on the show alright thanks again for coming Turner it was a lot of fun coming back yeah coming back just to come back so we're doing something right