What It Takes to Build a Startup | Andrew Chen & Matt Perault

18:27Matt Perault:Yeah, it's policy brief. Let's do it. And so I'd love to like understand more about how the companies you work with think about policy issues. This is something that we we obviously do to some extent, but you're like living and breathing the founder side of it on a daily basis. And we've tried to kind of channel the concept in different ways. Like we recently wrote this piece called Greens from a Garage about what it looks like from a policy perspective. If a couple of people go into a garage to build the next great tech tool in California, what is the regulatory landscape that they have to deal with?

18:59Matt Perault:and it was a really helpful exercise because often policy teams, legal teams will think about just incremental burden. Like if we pass, there's a new law that's been proposed. What happens if we pass this new law? How at the risk or not is it going to be? How helpful is it going to be? And I think the insight that the head of our state team, Kevin, had when we were thinking about this piece is like it's not just the incremental burden. It's all the things that a founder has to face from the moment they're building with the technology. So like in California, that doesn't just mean SB 53, which was passed last year.

19:35Matt Perault:It means all these data provenance requirements from the session before. It means privacy law in California that was passed several years before. It's all cumulative. And the moment that you start building the tool, you have to comply with all these things. And so really the policy picture is the composite of all those things. It's not any individual one of them. So I'm curious what you, like when you're at the stage, like you're literally at the, like we just met in the coffee shop where, you know, we're in the garage, we're roommates, we're, you know, we're in the shared Waymo on the way to the A6CZ office.

20:08Matt Perault:At that phase, how do the people that you work with think about policy issues?

20:12Andrew Chen:For these founders, they are so mission focused, right? To just make their company, make their product. I mean, it's not even a company at that point. It's like they might even think of it as a project or as a product. You know, there's no company because it's just the two guys or gals like trying to make things work. And so for them from a policy perspective, look, I think every obstacle that is put in front of them along the way for them to just prove that their initial product can even work just adds friction, you know, for the most part. So I think most of the founders, when you talk to them, they really see all that stuff as like, oh, wow, I've incorporated, I'm doing this thing, I'm hiring these people.

20:55Andrew Chen:okay, you get the stack of paperwork this big. And a lot of these laws, a lot of the paperwork is designed for companies that are much, much larger than them, right? And have the ability to comply because they have teams of lawyers and teams of people, experts that are in there. And of course, we as A16Z try to help them. But for most of these folks, all they're trying to do is they're just trying to get going at all and to survive as a business. And so generally, their interaction on kind of the regulatory side of the world is usually negative because these are things that actually create protections often for either big tech or for other parts of the industry that they end up trying to disrupt.

21:47Andrew Chen:So I'd say that's kind of one major part. The other part is that for many of these founders, they just don't have time to participate, right? They don't, like these guys like don't have, you know, they don't have lobbyists. They don't have, you know, they're not involved in the political process. They're not really represented in all these ways because frankly, they just don't have time. You know, they may not even have time to shower or to, you know, like have a nice dinner for themselves. They're working, you know, that hard, much less to do things that are kind of sit outside, you know, they're kind of just day-to-day of just survival, you know, at that point.

22:28Matt Perault:And that's a compounding thing. I mean, I think that's a dynamic that we encounter all the time because we, you know, we show up, we represent little tech, but we're not, or I'm not a founder. And so when we show up, people are like, well, we'd rather talk to the startup. We don't want to talk to the investor in the startup. But the challenge is the, like, as you're saying, like the startups are not showering, working 100 hour weeks, like doing there. They're not going to go and like make the drive to Sacramento or the flight to Washington or flight to Brussels and represent what it's like for them to try to build under the in the current regulatory environment.

23:05That's right.

23:06Andrew Chen:Yeah, well, and their timeline, a two-person startup's timeline, not only is it not a year, like you may not know if you have a company in a year, right? It may not even be six months. It may not even be three months. You might be working on really small time schedules. And so to make the investment, to fly to one of these places and to kind of be involved, I do think it's really hard to carve out time and do it, which is why I think both it's really important to have some mechanism to represent these people because, you know, like these are the future job creators, like these are the companies that are going to be employing folks and driving, you know, continuing America's, you know, success on the technology, you know, field.

23:51Andrew Chen:But also, you know, on top of that, you know, the folks that maybe do show up and, you know, in all these places and do advocate for tech, you get a very skewed view because you don't hear from little tech, but you might hear a lot from big tech. You might hear a lot about, a lot from the industries that are getting disrupted and very little from the 30-year-olds that are spending night and day trying to make that happen.

24:23Matt Perault:So sometimes we actually get hostile reactions from policymakers when we raise that point. Like they'll say, well, all of industry agrees on this. And when they say all of industry, what they mean is big tech companies, or sometimes it might be big financial services companies, like large organizations. And they say, you have a different view and we need you to get on board. And we'll say in the policy conversation, like it's sort of by design, at least some percent of the time. Like there's lots of time where we agree with big tech companies, but we'll like when we disagree, we'll say like it's by design, we're representing a different part of the ecosystem.

24:53Matt Perault:So of course we don't agree on everything.

24:55Andrew Chen:That's right. That's right. Absolutely. Absolutely. Yeah. It's just from an ROI, time ROI standpoint, it just doesn't make any sense. I think there's also a really unique thing because these teams are so small and they're kind of at their inception, which is they get to pick where they start the company from, right? And, you know, I was, you know, I moved to the Bay Area in 2007. And in 2007, the world revolved around, you know, Palo Alto and Mountain View and kind of the peninsula, you know, what we think of as Silicon Valley. But, you know, I think folks, I think, are familiar with this now that we saw a, you know, whole scale migration of the startup, the center of the startup ecosystem being from the peninsula to San Francisco proper.

25:43Andrew Chen:And then, you know, subsequently, we've seen it now spread where, you know, New York is one of now one of the huge, you know, startup hubs that's emerged. And, you know, all the over the last couple years, all the major venture capital firms and had opened offices in, you know, in various places in London and in Europe. There's been there's been other kind of, you know, major hubs that are created. And so I think there is also an interesting thing where that almost becomes part of one of the most important choices that you can make as a startup, which is where are you going to plant roots? Where are you going to hire people from?

26:19Andrew Chen:Where are you going to do that? And if you end up working on an AI company and you know from day one that there's going to be a bunch of extra rules about how you can use AI, you know, the two guys, two gals, you know, startup, you know, they're very mobile. You know, they can pick and choose where they want to go. And they do. And so, and historically, the Bay Area has benefited from that mobility. I think there's some interesting stats about how nearly 50 % of venture-backed startups are first-generation immigrants, for example, people who relocate in order to do it. And I bet you if you were to say, okay, well, the other 50%, how many of them are actually native San Franciscans versus people who move here?

27:06Andrew Chen:The answer would be it's probably approaching 100 % at that point. I think the important note there is the Bay Area has certainly benefited from this. It's not certain that it'll last forever. it's not certain that, you know, that California will always be the best place to start companies. And so I think it's important for us to preserve this ecosystem because it is very, very special. It is something that is like unique, not just in the world, but even within the US, you know, in order to have this fertile of an ecosystem for startups and new technology.

27:38Matt Perault:Are you hearing founders talk about regulatory issues as one factor that they consider and where they end up citing the business?

27:45Andrew Chen:Yeah, I think that it is sometimes indirect. I think, for example, just, you know, like cost of living is a great, you know, is a really simple one. Or if you're building a deep tech company, if you're building the next generation of manufacturing, you have to go somewhere where people are building, you know, building large, that there's large scale lab and warehouse space at reasonable prices. And so I think you're seeing these pockets like El Segundo in LA. You're seeing, you know, folks building things in Texas for many of those, you know, reasons. I think the Bay Area has hugely benefited from just the AI wave, you know, really centered here.

28:30Andrew Chen:So I think that's really extended the life of the CETO system in a big way. A lot of people have been coming back to the Bay Area since the sort of COVID dispersal. and then I do think that the ability for another indirect force is that the startups have to really move where there's investors it turns out it's a lot easier to code and it's a lot easier to get your first dollar revenue and it's a lot easier to hire your first employee, you can kind of do that anywhere but actually getting capital to really scale your business requires the ability for investors to be there so I think that's why when you look around the world, a lot of the biggest startup hubs happen to be kind of where you have great universities co-located with customers, co-located with investors, kind of all in one spot.

29:20Andrew Chen:And I wonder and I worry about things like, you know, the wealth tax that are currently under discussion in its ability to potentially relocate a bunch of family offices and investors that are currently contributing in a big way and moving them to other geographies as one of the potential, you know, negatives for sort of, you know, making the Silicon Valley thing like less dynamic and less powerful as a result.

29:47Matt Perault:So we've been talking a lot about the one-to-one relationships that you've developed as part of the Speedrun program, but you've also been really invested in trying to create ecosystems through the TechWeek program. What was the idea behind that program?

30:00Andrew Chen:So we started Tech Week and it's a program that sits in our team here within the Speedrun umbrella. And what Tech Week really does is it's really a celebration of startups and technology and progress in all the major cities. And so we host it in San Francisco, we host it in LA, we host it in New York. And for the first time this year, we're actually hosting it in Boston as well.

30:26Matt Perault:How do you discover a founder before they know if they're a founder?

30:30Andrew Chen:Well, we just feel like if you're a type of person with certain kinds of work experience, certain resume, and you're finding yourself attending a bunch of startup events, you know, like the probability of you starting something, like you're probably startup curious, but you're probably going to get there like sometime in the next few years. So that's what we found, which has been fantastic.

30:56Matt Perault:Our policy, is policy showing up at Tech Weeks? Like are you seeing it in the various different local ecosystems that you're tapping into?

31:04Andrew Chen:Yeah, so we would love to do more. It's definitely exciting to see more and more of an ecosystem around policy. So for example, I think across all of the Tech Weeks last year, we had 4 ,000 attendees attending various policy-related events. And that includes over a thousand folks from government, over a thousand policy professionals. And then oftentimes we've had events where, you know, local government will come together. So I know, you know, whether that's, you know, in the mayor's office or, you know, folks that work on the national sphere. We also have had a bunch of the consulates, you know, involved as well because, you know, they're all very interested in kind of building that bridge between their countries.

31:51Andrew Chen:and particularly the San Francisco system. So the British consulate's been super involved on tons of stuff. And then many other countries as well. So yeah, it's been great to have that as a burgeoning part of the Tech Week ecosystem.

32:10Matt Perault:So if you see a local policymaker or a representative from a consulate or member of Congress at a Tech Week event and you're chatting with them on the sidelines, What would you relay to them about the realities of building a competitive company, given what you know about what the early, early stage really looks like? Yeah, yeah.

32:29Andrew Chen:Well, I think I think I'd say a couple of things. I think the first is to just have them, you know, understand that it's a choice whether or not each state or each city wants to have startups or not. And if you want to have startups, you have to do things to make it conducive to having startups. And there's a long list of things that might be involved in there. And it's not just for the founders, it's for the angel investors, it's for the employees, it's for all these things that surround that whole group. The second thing is, as we were just talking about a couple of minutes ago, I think a lot of policymakers are not having real conversations with little tech.

33:19Andrew Chen:You know, it takes a little, there's a little bit more friction. You have to kind of put in a little bit more time into it. But again, you know, if we want to have, if we decide, you know, hey, we want to have more startups in America, we want more innovation in America, or we're talking about that kind of at the city level, So, you know, we have to figure out, like, what are the things that we can unblock for a lot of these companies? And those things change. You know, a software company will tell you something different than an AI-native company, which will tell you something different than a hardware company and a robotics company.

33:51Andrew Chen:You know, it's very dynamic. You know, one year, you know, for example, this year, we are seeing way more robotics companies than in any year past. And they have very different needs compared to, you know, they have supply chain needs. They have, you know, real estate needs. They have a different set of investors. They have potentially a different set of partners. And so, you know, we have to actually, you know, dig into that in a real way. And then maybe, you know, thirdly, to just maybe talk our book, I think working with folks like A16Z and other venture capital firms and other ecosystem kind of players, you know, what we can do is we can certainly help open the door to creating those conversations.

34:38Andrew Chen:And so, you know, like open offer to the policy folks that are, that are other, you know, listening to this, anybody that wants to come and, you know, spend time with five or 10 really curated, you know, little tech startups that are, you know, two, three people and just kind of hear like, okay, what do you, what do you need to be successful? Like, like, we're very happy to arrange that. Also, a lot of these companies are very interested to, to, you know, like certain sectors are, are particularly interested in, in, in partnering, you know, with government. So I think, I think that's all great.

35:07Matt Perault:I'm a policy person who's interested in doing that. I'm actually coming up to talk to a speedrun, talk to a speedrun cohort next week. So I'm looking forward to it. It's been fun doing that in the past because like you said, you really see in those conversations, like when you talk through various different policy issues, sometimes they're not that relevant necessarily to people in the room. And then others really are. We've had conversations in the past where we're talking about various different policy initiatives that are moving. And then you see like a panic look on someone's face where they're like, I'm building.

35:33Matt Perault:I'm building in a way that I think I'm building into a use case that might face regulatory headwinds. But I think the use case is really compelling. I don't think policymakers understand what we're trying to do. And so it's like interesting to see that delta. And we've engaged with the speedrun team in the past to make sure policymakers also appreciate that delta.

35:53Andrew Chen:Yes, I think that's right. And I think it's, you know, it's such it is a wonderful thing to spend time with these teams because they're often, you know, very much young people. We have a lot of folks that are in their early 20s. I think we even have a team that's all 18 and 19-year-olds, for example, in the current batch who decided to forego college and instead start their dream company. We also have folks that are co-founders of billion-dollar companies that are now in the current batch of speedrun as well. But because these guys are all getting started, the conversations are so genuine. They're just full of optimism.

36:30Andrew Chen:They're so fun to talk. They're all on the cutting edge. They're not at a point where they are at the risk of hitting into a lot of laws and hitting into a lot of different things. It's often just a really fantastic set of conversations just based on where these guys are.

36:53Matt Perault:Andrew, thanks so much for joining the AI Policy Brief. Awesome.

36:56Andrew Chen:Thank you for having me.

37:00Matt Perault:Thanks for listening to this episode of the A16Z Podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or review and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts and Spotify. Follow us on X at A16Z and subscribe to our Substack at A16Z.substack.com. Thanks again for listening and I'll see you in the next episode. As a reminder, the content here is for informational purposes only. should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund.

37:39Matt Perault:Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see A16Z.com forward slash disclosures.

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