20VC: Why SaaS is Dead | Why AI First Companies Will Win | We are in the Middle of a Cold War for AI Talent | Why Europe is F******* and We Need to Stop Whining with Daniel Khachab, Co-Founder @ Choco

25:47If you go to London though, we've got deep mind. We have Facebook, we have Cambridge, we have Oxford, and we have some amazing educational and large. We're better for AI. Why aren't you here? Yes, on the foundational layer completely agree, but I think on the application layer, there's just so much to learn. It's fairly new and we all start from zero like the race on since 2023. foundation layer models that has been going on for a while and you need those institutions that you just mentioned but on the application layer, where it's like how do I integrate with that API foundation layer? How do I do prompt engineering?

26:22How do I design such a product? Those things are new and you got an upskill and we are on that race. How many machine learning engineers do you have? Broadstrokes. 15 to 18. 15 to 18. And there in Munich, in Berlin doing it. Where would you most be persuaded to go to? So when I started to actually entertain the thought was when I realized that in Europe we might be at a disadvantage We got access as an example We got access to the advanced voice API from OpMay Fart OpMay I last as a continent Applay I or Appalem Intelligence It's gonna be launched last in Europe Trust me, I tried to work around it It's fucking hard to work around it if European citizen And let's continue.

27:04Close to 100 % if you go on the infrastructure part, close to 100 % of all GPUs are built in Taiwan. Obviously for geopolitical reasons, everyone is trying to do risk Taiwan. So where these factories gonna be built? I don't see them. I see for example, the UAE wanting to support a hundreds of billions to create them there. I see the US like literally, the White House probably one and a half months ago, they issued like this paper in which they urged the military to find real estate so they can build these stuff. And then we can continue like, we're going to need a lot of energy to it as well for those data centers.

27:41People are investing into that energy production in the US, in the Middle East. I don't see that in Europe. And to me it's like, hey, in Europe, today, we're not producing your chips, we're not producing the energy. We don't have the foundational layer models. So in that sense, these countries that don't possess those three elements are not really sovereign countries when that comes to AI. And if we believe that AI is truly as revolutionary of a technology like electricity was, when it was first introduced, then we're not sovereign as a country in first place. So your question, where would we go?

28:14First of all, we would need to go to a country that has AI so verenity. Okay, so first off, I actually interviewed Des trainer quite recently from Intercom. I actually had like an internal Intercom event. And he was like, I'm not going to do that, I think, because I suck at it in my Irish accent. But he was like essentially for most of Europe, AI is just shut off. Like he's like Facebook, they just won't entertain putting any of the AI products in Europe because of the regulatory lack of clarity. And so it's like, boop, you don't get AI. Sorry, bad luck. Is that true? I mean, I'm not sure if we're not going to get it, I think we're just going to get it last.

28:50It's just going to take longer. And it's hard. And then you said there's foundation models, there's obviously chips and there's energy with the three factors. Okay. So if we just go through them, I'm a European, you're a European, you're in Germany, I'm in London. I want to stay a European. So one by one, chips. What can we do that would make you happy and make us not lost? Yeah. So I think, you know, very interesting example, a German government wanted to fund Intel to put a chip production plant in Germany. I forgot if it's 10 or 20 billion, which is obviously too little but it's a great start.

29:25And because obviously the problem is that Intel is having, they said, okay, no, sorry, we won't do it. So someone is offering them 10, 20, 20, 20, 20 billion and they say, no, sorry, we want to, first of all, Intel is the wrong company to fund. So the first step you ask me is like, put it to the right company, put it to Simon, Simon, Simon, Simon, Conduct, I put it to a new video. People that can actually produce GPUs, GPUs, have a need to make it fairly, so that them to come and what those companies need is obviously energy, they need the government support and they need a lot of clean water and actually we can provide that in Europe.

29:54That's one, we need to bring them here. Electricity obviously, or energy is obviously like a way bigger challenge in particular of the shift to renewables, to meet an unsolved problem, and also see an ethical problem there, because it should be like from a giant perspective, should we go back to nuclear for it? Do you think we should get back to nuclear? I'm personally not a big fan of nuclear, just because I think it puts a lot of responsibility and future generation for problems that we haven't solved yet. That might be the only way. So we've got chips like investing the right winner back them, build them here, energy, hard problem, TBD.

30:29Happy to have a TBD. We can't have solutions to all of them. And then foundation models. Why is foundation models all of us? Because we have a structural issue here. And that is where the talent gap, how are we going to bring the right level of talent to build, not to build a foundational model, but to build a competitive foundational model. A model that can compete with up May I, that can compete with Android, that can compete with an Nvidia, with X with Lama, and how do we get this kind of talent? And where is that founder in Europe that is willing to commit a lifetime to build such a company?

30:59I naively posit. Well, we have deep mind and we have actually huge amounts of long resources in Paris, and incredible AI centers in Paris. We absolutely can stand up a team, and founder wise, respectfully, I'm with you. I think the quality of European founders is much worse than US will get into that. But we only need one sample. Yes, absolutely. We don't need 50. We need one. Yeah. And so I disagree with you. We could do a foundation model. I mean, I mean, Mistral, I think Mistral is proving that we can. Yeah. Yeah. Exactly. They just don't have anywhere near enough money. Yeah. I agree with you.

31:34I think just it's structural because it feels a bit more like, like, like you need the right person at the right time who actually is willing to take the risk, whereas I think it's more in your control to provide energy and to bring a chip manufacturer. I completely agree, but I think we actually have it in our control to solve the challenge shortage, which is why I'm so fucking visceral against the UK government right now, despite being in the UK. Whereas, I increase in capital gains tax, does not make entrepreneurs want to build in your business, is in your country. Before you've said to me that regulatory is like this casual that we use in Europe, for like, oh, that's why we haven't actually achieved.

32:10Now, actually this is a bit of an excuse for, I think it was laziness or lack of work. Yeah. What do you mean by that? So I think when we look at keynotes about tech in Europe, there's always three things that I'm getting mentioned. First, on the con side is, we don't have enough capital. Second, on the con side is with too much regulation. And third, on the pro side is, we actually have enough engineering talent that is being produced by our universities and stuff. And I believe that, but today I have to say, you know, a couple years into our journey, there's not enough capital. Okay. And yes, when we start the Choco, there was 2018, there was no way to raise 20 million, even just 20 million euros in Germany.

32:49It just did not exist. That kind of fun, that you could raise. One, you could raise five, maybe 10, 20 just did not exist. But what existed and what still exists today is five times a day a direct plane to London, a two times a day a direct plane to JFK. And if you're willing to do a layover, you can get several times a day to San Francisco. And those funds in the US, in the UK, they're happy to invest in Germany as long as you're growing fast enough. So to me, it's like, are we now going to hide away between, oh my God, we don't have enough domestic capital? Or are we just going to say, fuck it, I want to build a great company and I'm going to get on the plane?

33:25First, I think we do have enough domestic capital now. Like the amount of incredible and not incredible funds in Europe. There are too many. I think there's too much money for too little good entrepreneurs. So I think we do and then we have the globalization of capital. So right, tick agreed funding is not the problem. Regulatory. Yeah. So Regulatory look that there's certain heavily regulated industries and I don't know them very well But I'm sure eventually that disadvantage but that doesn't hold for example for most of SARS and also neither for most of marketplaces What about the fragmentation of countries and the different regulatory provisions come with each different the jurisdiction.

34:00Hey, try to start a FinTech in the US. You've got 52 different states from some of them in the different license as well. I agree. And that's why $15 billion is the biggest with time. And we have a $45 billion company with Ravallu. Interesting argument. But you know, you know, what I thought is that so far, example about Germany, many people complain about the notarization of everything. And then it's probably 20 to 30 hours of extra work for any funding round that you do. And I think it's unnecessary and it's a burden. But I think, you know, you know, Mark Zuckerberg, would you have said, oh no, sorry, I can't build Facebook here because my lawyer has to do 20 to 30 hours of extra work to go to the notary.

34:36Like, fuck no. That guy would have found a way. Like Elon Musk built in Germany, the home of car manufacturing right next to the capital, right next to the expel airport, a factory to produce cars. He made that happen. So I'm like, okay, if We have truly great entrepreneurs that yes, okay, there are obstacles and yes, okay, maybe the funding one is gone, then you have regulatory, but truly great founders will just be stoic about it. They will like, okay, that's a situation how they'll work around it. And let's fucking go. That's what we need to just do, pragmatism. Like we cannot always hold back and look for this kind of excuse, just make it happen.

35:13Like it's possible. And to you upon the revolution, it's proven, then the alien is proven, then Spotify is proven, and we're going to have more companies prove that it is possible. And so I think we should just stop whining and get pragmatic about it. And then look, I don't think European regulation is great. I think it's horrible. I think governments are utterly incompetent. That is the case. But that should not hold us back for building great companies. And we should not even waste like one second complaining about it. Hopefully it's going to get fixed and maybe we can voice our ideas how to fix it.

35:41But it should never hold us back. So would you be long or short on your moving forwards? state was cruel, we have to be short government. It's just, yeah. If you were being as ambitious as you could be for your business, yeah. Why are you not in America or the UAE? So we are in America. And in fact, America is our largest market from a revenue perspective. And we also invest most of our money in America. And fairly recently, we're also in the UAE. And we recently opened an office there. And do they give you credits for opening offices? They certainly give us some sort of support, yes, but not in terms of money, more like in terms of visas and stuff like that and cooperation.

36:23So how I feel is when I look at, okay, so we got US, we got Europe, and then we got let's say Middle East. And so this output for you of markets. And then how I look at it is that, okay, we got US, that's the large software market on the planet. And if you want to globally, you got to win the US, and that's kind of where the loss come from. Then you have the Middle East, in particular UAE and Saudi. And it's like, these are just very fast growing economies, very ambitious economies, very little legacy, which is obviously for SARS to your point, the implementation is so hard, usually because of legacy, but they have very little legacy.

36:56And they want to be the best. But they want to show the world we can do something great and they're actually, I don't know, fantastic trajectory. So that's kind of the growth market. And then you have Europe. And Europe is just that almost like post -competitive, robust market in which you can grow and if you have the US dollars because you're active in the US, you can likely build a great business out of Europe. It's kind of like that more like stagnant kind of thing in the middle. So I think you need to think portfolio and you got it diversified. Do you live in the US now? No, I used to live pre -COVID.

37:29Talk to me about COVID. COVID you have, I mean, did you a restaurant platform in your I'll hate that description, but like, we saw a rachael on the end of the day. What happens? So, so COVID, we're about to turn two years old, like 18 months live, probably up to 300, 400 million and your life's GMV growing very fast, having a good time, and then COVID hits. And I was in New York back then, I'm like, I'm not gonna do COVID in my shoebox, I pop it in New York, I'm gonna go back to Berlin. And there's a direct flight from New York to to Berlin at seven hour flight. I bought that plane. I still remember I opened my phone, I checked looker and I see RGV and it's a Sunday and I I land Monday morning 7 a .m.

38:11Berlin on the runway I put out my phone, I checked looker 98 % of RG miss just gone and lockdown hits and our business just gone. It vanished overnight. Lockdowns everywhere, a lot of uncertainty in the market and it was a tough time and I started smoking, smoked two packs a day, got a beard like this, got gray hair, lost my humor, was horrible, was tough, and also because was such a big break from like, hey, you know, which is growing, working hard, product market fit, okay, stop, not only stop, but go to negative, like lose your business essentially. How did you communicate that to team and to investors?

38:51I think two things. The first thing I did was I googled best books on crisis management. And I think the best book is, it's kind of a biography about Ernest Shackleton and he's that guy who took a boat and he wanted to be the first one on the South Pole, he tried three times, failed all the three times, but he never lost a man. And it's a fantastic book. And there's a couple of lessons in there. And one of the lessons is like, never lose your humor. Like if you use your humor, you lose your sanity and you're going to lose your clear thinking. never change your values like stay true to them. And so I think that was really the first step going to the team.

39:31Hey guys, look, we don't appreciate the situation, but that's how it is. And we got to make the best out of it. And we hope everyone has sufficient toilet paper. And there was a time back then. And then the second thing, you know, stay true to your values. And at that point, one of our values really got really part of our culture that is always play offense. And so I think, you know, when COVID hit, And when you lose 98 % of your GMV and it's a very first week of of it, you know, no one knows what's happening. Like, are we all gonna die? Is it gonna be gone into weeks? No one knows. It's very easy to play defense and say, okay, like, look, we're gonna hibernate now, we're gonna do mass layers, we're gonna preserve around where we're gonna preserve cash, we wait until it's all over and then we pump it up again.

40:13That's a defensive move. And we just say, no, like, what do I have to do to play offense? And that was really We formed a team for our company because there was always one country in Europe, there was always one state in the US which was not in lockdown. And our Spain team moved to Florida because you can do sales speaking Spanish in Miami, probably better actually than English. And Miami became our best city launch to that date. And our France team, the first California in Texas and the German team I think went out to Texas. And we always had to leave Shanghai for 14 days. So we always went to Dominican Republic, waited 14 days and then we ended the US.

40:50And so we've been growing through and we changed and our go to market from like a field sales approach, we're in a product optimized for field sales approach to a product optimized for like a sales approach. And then to a product let go of approach. And so we just said, okay, like, look, let's be stoic about the situation. That's how it is. And let's just change. We didn't do a layoffs. We burned a bunch of cash in that period 100 % sure. But hey, we stayed true to our values. We kept playing our fans, we kept our human positivity. and that once the curtain of COVID lifted, like we were just ahead of the competition who may have chosen to hibernate.

41:20When was your most recent round? Was beginning of 2023. Got you. What price was the round? 1 .1 billion. 1 .1 billion. Did you feel that is high now? I think we have a generation of companies that are growing into valuations. 100%. Do you regret raising it at 1 .1 billion? All the valuation. Mm. You know, those elements of it, that are a great elements, whether that don't regret, I think what I don't regret is that someone once told me if you can take the cash and if your father's not a billionaire then you should take it and why is because more cash increases your probability of like an outcome of your achieving your mission and everything everything that you do has to be increased.

42:01But do you buy that? I don't buy that. I think it increases distractions. It reduces capital efficiency. It gives you more runway which does not increase execution speed. And so he would come to the downsides. So I think everything you say is true. However, we also outlived something like COVID because we were doing this strategy. We also kind of came, I don't want to say smooth sailing. We had our tough patch, certainly during the high interest rate area, but also through that we came because we took the money. Now the real downside to me is that it said one billion mark because once we come unicorn and people think, oh, we made it.

42:38We're great now. kind of people get less hungry. And then you get applications of people who look for a safe space to work. It's like, no, fuck it. We're not safe. Like we're a tyrosk. We're going to work our butts off with the tech risks. It's going to be chaos and you're going to need to thrive in it and it's going to be a lot of change. We're not a little change company now just because we cross. And also, like who the fuck wants to be a rainbow colored pony? Like, I don't want to be a unicorn. Just that cultural component is, and I remember we made the mistake and And we did a unicorn party.

43:07I wish you would have never done it. And then we had like flags. And then I realized what had changed in people and then like two weeks later, I told everyone, remove those flags in all of our offices and trash them. We're not done. That's definitely what I regret. Why did you let that party happen? Like straight away there, I'm like, oh, like, you know, we closed the 400 million fund. We did not have a celebrate, right, Jenna? Yeah. I had a walk and then dinner with my mom. Yeah. And I think that's a fantastic mindset. You know, Dan Rose, one of our board members at Coat You. And he told me once I met him the first time in Flesher again after Coat, he told me you were the only company I would portfolio that suffered from Coat.

43:45All of the others went bonkers. Food delivery and click on my shirt at that point in time. And many other companies just had so much growth and so much equity value was built. Our equity value was destroyed because of Coat. Like we just came out of a really, really tough patch. We were working 17 hours a day. Again, it started smoking and it's just it's been been tough for most of our people and We probably also did party just because like okay like it's over we survived So I think it's partly isn't excuse how it's the party Yeah, and hindsight wouldn't do it again when you look back at your management through COVID is there anything that you would change?

44:22So the very first week again in New York and in one of our angel investors because Daniel Grafie told me, you know, to just be close to the team. Like, and most of our team was in Berlin, so I said, I go back to Berlin. I arrived Monday morning, and we were like, like, what are we supposed to do? Like, food distribution, I'm not working, restaurants are closed, like, what, and so we said, okay, first week of COVID, everyone gets a week off. And he said, okay, my be great, everyone can adjust the new situation, like the opposite was the case. Like, purpose was gone. So, I think that was a mistake.

44:51It certainly helped us to regroup and then to actually play offense and to give a lot of purpose to the team thereafter. but I think that week was not appreciated and we should probably have thought about this earlier. People need purpose, I totally agree with that. 100 % do you believe a tool in what life balance? No, I think it's bullshit. You know what I always tell our people is like, like we have to be 100 % presence and 100 % intense. So when you're at work, I expect you to be 100 % here. Not on Instagram, not with your head somewhere else, but like 100 % present of all of your intensity.

45:23But when you're at home, I expect the same that you give 10 % at work to be 10 % and I think that's that's way more important because like work life balance is like Yeah, you know, I'm gonna work every day until like you know seven p .m I would push that I would say even at home. I don't want you to be a hundred percent at home I'm really sorry the by nature of like our business if we are gonna be the best fund in the world Yeah, we're gonna have to do extraordinary things Yeah, I'm a hundred percent and look I think that's always phases where it's gonna expect it from you And yet you might get that Sunday morning call like that and you got to be ready for it But if that Sunday morning call doesn't happen like be present because otherwise you're gonna burn out and your partner's gonna complain You're gonna leave 100 % totally agree with that like like you need to be ready for more any given moment in time How much cash if you raise so far?

46:08Are 330 million 330 million. Yeah, what's your single biggest lesson on fundraising? Mine is like fundamentally no one will give you money the first time they meet you This is for funds in particular the big problem with managers is they're like oh, I'm fundraising and they expect people to give them money. My biggest check in this fund was $40 million and they've known me for eight years, never invested before. Yeah, look what I tell to our team is that fundraising is several step process. And step one is you need to bring a fantastic group of people together. Step two is you need to work on a mission and on a strategy that's, that makes sense and those people have to create it.

46:49Step three is you've got to work, but of step four is you're gonna look how well you're doing and you put this on an ugly slide, it's idly, it's just a couple of graphs. And step five is you just hand those slides out and that's a fundraising process. So yes, there's many of things within the fundraising process that you can do good and many things that you can do bad but fundamentally, if the graph is going up and to the right, you're going to raise money. And if not, it's going to be fucking hard. So the best way to fund is just make your company do well. And then I think, you know, for like first time founders or like when you raise the first couple of rounds is like, you know, like don't back for money.

47:24Like the investor's job is to invest, not to not invest. Like understand. And also what is the psyche of a VC? Psychically VC is like, hey, I have a portfolio. And everyone knows, 9 % of my portfolio are going to be right. They're going to fail. That's normal. That's accepted in the venture world. What is not accepted is if you meet the entrepreneur and you decide not to invest, you're negative portfolio if you missed the deal. So naturally, the investor is to enhance to be the certain extent for more driven. So, you know, in the end of the day, cash income modesty, the dollar is green. Your company's singular.

47:58And yes, you're also reliant on the investor, but like, don't back. Like, it has to be a conversation eyesight. Don't be arrogant either. But like, meet on eyesight, you have an asset, and other person eventually wants once that asset. And by the way, you cannot choose any investor. You probably can only choose one or two, maybe three per around to your point on upside. The thing founders don't often articulate best is like, how's this a $10 billion company? And I think we're almost trained not to in Europe because it's arrogant or it's too idealistic or it's, but I have to see a billion dollar revenue business.

48:30You know, I love that you said idealistic because it ties us back to previous points like Wybillen. I think Billen is a very idealistic city, maybe the most idealistic city in Europe. And I think I found it to a certain extent has to be idealistic and has to put a great vision because in the end of the day, like our vision for example is, it's an able to sustainable food system and that's very important for the globe from, for many respects. But I'm like, okay, like, you know, we went through a COVID, that has been tough, and then it's the high interest rate period, and then it's late, that AI pivot.

48:59And every company has to go through such things. Yesterday I watched an early interview of Steve Jobs and he said, you wait 90 days of money left. And so like, what is going to make you stand in front of your team, not in front of the investment, but in front of your team and authentically say, hey guys, we need to work extra hard now because it's really, really important that we achieve our mission. If dad is not like a compelling vision and you're going to have a hard time doing it authentically, when you have dad, and this is what you have to voice to the investor, and then I don't think you need to put a number behind it.

49:30It just needs to sound compelling, it needs to sound large, need to sound long term. And I think, you know, long term is another component like we spoke about, okay, like Europe and regulation and extra capital and stuff like that. Like, we need more long -term commitment as well. Like, we need, far no to say, I'm gonna invest 15 to 20 years. I'm gonna commit this now, substantial part of my life, the best years of my life, to make this happen. I'm not gonna give the fuck up. I'm not gonna do, I'm gonna win. I'm gonna push through. And I think the investor needs to notice. And you need to, I think this, you need to articulate.

50:02Like, what is this? This is a company that we're gonna try to increase, is having his fast and sell it, it's a, it's a, it's a IPO, leave the company and make holidays on the Bahamas. So it's like, are we going to build a generational company? And by the way, that's what we need to Europe, generational companies. There's a very sad moment for me in a Jensen Hawaiian TV where they said, would you do this again? And he just, no, if I knew how hard it was, I wouldn't do it again. Respectfully, Daniel, you know, you're in a great place now with the Asian, but with COVID, with the transition, with everything that we've been through, would you do it again?

50:36I asked myself this question often. There were, there were years when I said, would I, would say, fuck no? And there, there years where I said, like, yeah, and I think that you've got to be realistic about, like, it's going to be tough. And every cell in your body has to tell you to start and build that company. If, if one cell in your mind in your body is telling you, yeah, maybe then don't do it. But if every cell tells you to do it, then And I think, you know, people say, you know, some people jump in the pool and they get out and they're still dry. And I think a real founders is wet before they even jump into the pool.

51:11It has to be part of you. And then I think you might do it again. I remember when I was one as fundraising, it was tough time fundraising. A couple of years ago, and my friend who started calm Alex Will said to me, Harry, you don't get it, dude. Entrepreneurship is about getting punched in the face, time and time again, and going, give me more. And you have to enjoy that. Not be okay with it. You have to like, actually seek it out. Like almost this masochism of like, yeah, I'll take it. A hundred percent. And I think there's many parallels. So when I was younger, I was a group in the Alps and it was a ski instructor because that was just like, the kind of the job that like 16 year olds would do where I grew up.

51:51And what I saw very early on is like the kids that fell all the time, they learned the fastest. And like, you know, everyone falls for the first time. That they're just part of the process. But then it's like the ones that I win around, and I don't want to fall again, I'm blah, but then it's not going to learn. But if you're willing to fall again, and again, those are the kids that make it, and that would become great racers. Can I ask you a final one, which is, you said you raised 330, whatever it is. What did you spend on that you wish you hadn't spent on first? Yeah. So at some point, we had a team with really great people in there.

52:25So there's not that people's fault. It's more like my fault and it was a special project team and it's kind of like okay Like here's our core business and here's special projects him figure out great things And once they're great bring it back to the core and then the course gonna scale it And I think today I'm convinced that that's the wrong way to think about company building actually this AI Would be another example like we could give it back to a special project kind of skunk works kind of team You figure out AI and then then you give it back so that doesn't work and the reason is that if the core of your company doesn't have the skills and capabilities to innovate.

52:55Then you have a problem in the first place. Like you core needs to be able to innovate. You know, get it there. So Skunkworks team might just be an excuse to not being able to do it in your code. That's one, two. Let's say your special project seem figure something out and it's fantastic. And then you give it to other people and you say, what day did it is fantastic? Now can you please like productize it and vote it? Like I want that person who figures it out. I want all to allow this person to own it, to be the responsible individual for it, to scale it, to build it together with debt. That is much more motivating, right?

53:25Yeah, I think debt understanding that likely, if you have a special project, seeing something is not well in your core, which should not have spent money on debt. Which is the worst market fee? Spain, next level fragmented. To give you an example, the average restaurant in the US, in Germany, orders from four and a half different suppliers. Yeah, so say one for fish and one for meat and one for drinks and so on. In France, we had nine. much more special, I think, a focus on food and so on and so forth. In Spain, we're 18. And likely you need a different product for that, right? Because so the distributors, they're smaller, so does it justify a sales cycle.

54:01You need probably more like a self -unbordant kind of product -like growth kind of thing. And so that's why I think the market is challenging. In other hand, Spain has many other advantages. It's one of the very few economies in Europe that are actually probably growing in GDP. Obviously, access to talent is okay. People want to move to Barcelona. It's an easy sell. What did you not find on 3D Equipment? What did you not spend on the US you had spent on? So we were lucky we found product market fit for first product a very early on in probably even actually before we started coding to be fair Because we just did a trillion iterations just on design So it we're probably marketed early on and then we went out to the market and it was growing and then we launched like Berlin and Germany and France and the US and so on and so forth and city by city and was working well And I think, you know, something working is actually very rare.

54:49And so once you have something that's working, like you got to go all in, like I wish you would have, you know, spent double the amount of money, have tripled the amount of money probably in the first 24 months of our company and just go big because... What would that have allowed a land grab on distributes? For sure, a land grab, I think more importantly, it would just have created a larger brand within the industry. When everyone is raising a lot of money around you, the space got very hot very quickly. Some people say you've got to raise two, you've got to compete, others say the money will dry up.

55:21What matters is actually not getting involved in the frenzy and playing your own game. Which one makes sense? You know, I'm not sure if it's an either or, like I'm not saying you should like just triple your burn, I say you should triple your burn, and something's working really well. with within the constraints of good economics and capital efficiency. But once you figure that complete thing out, not only the product market fit, but also a go -to market of good economics, then just go as fast as possible because that's when you actually will attract copycats. It needs to be the complete thing.

55:55And then we can also answer this question in isolation like we also need to look at the competitor situation. And the competitive situation... Do you think you had good competitors? Yeah, I think we still have good competitors. Which comparison do you most respect? So early on, certainly a company it was called RECKIE. And I just think that a fantastic product for restaurants probably still have. And we were directly competing in Paris and Chicago, New York, Berlin, everywhere. It was like a multi -frontier war if you want. I think we just sat down and analyzed the strength and weakness and just made a plan on how to win and execute on it.

56:34And I think actually it's fantastic that we had a good competitor. And actually a competitor that at that point was probably already 10 times larger than us. We had maybe raised two million, that raised 20 million. That was very fertile ground for us to start. I always say be grateful for your competitors. 100 % 100 % and it makes you better, but it's also like it's a simplest motivational tool. Right? It's like, you know, when you second, when you, when you third, like, what's the goal? Here's the number one. The goal is get a bit above the number one. It's as simple as that. Now, once you're the number one, okay, what's the goal now?

57:07Stay number one is a bit defensive, right? So like, you don't even need to go from like winning to like dominating how do you define it? And suddenly things become a bit unclear. Like, you essentially always pushing forward and excellent stuff like that. But you also need to create a common enemy. Yes. To a certain extent, right? Because I think a common enemy, an extrinsic motivation, if you want, so works. But I still believe what works better is an intrinsic motivation. It's like like we are here to achieve our mission. That's why we're here. You know, by the way, Lions don't lose sleep over sheep.

57:39Like we need to focus on what we are doing. And not focus on winning against competition, but like at achieving our mission and doing it as fast as possible. And so I think that intrinsic motivation still has to be number one. You know, I'd rather think like the kind of the extrinsic one, like the competition, the market, that has to be like a far too. Lions don't do sleep over sheep. I love that. I haven't had that before. Listen, I've loved doing this. I want to do a quick fire with you. So I say a short statement, you give me your immediate thoughts. So what do you believe that most around you disbelieve?

58:08I do believe only AI first companies will win. And by AI first, I mean that a majority of your total revenue or of your new revenue has to come from an AI product. Why? Because you're going to be more cap of the efficient. You can provide more user value with just faster adoption curve. And on top of that, kind of using AI internally. So revenues kind of more externality product, but using it internally to get more productive to automate things. It's just gonna be the required status quo. A company with a social media account won't become a social media company. It's just a requirement of an Instagram account, just to hold a status quo of a company.

58:49And we, companies that automate a neural process with AI. We don't call them AI enabled. We just call them a company in the future. I know your revenue growth has scaled immensely. If I'm allowed to ask, what's your revenue? I think we're in a very competitive situation, so I don't think we like talking about it, but I can tell you our GMV since this AI transition grew tremendously, I think it took us with kind of like the two years of COVID break, it took us probably five years to get to one and a half billion ish and it took us then less than it at another billion. That is insane though, when you look back to that flight and you look back to the thinking reminding you of that looker.

59:25Yeah, yeah, but like 300 and it's like that was the great and then it got short and now to be at two and a half. Yeah, it's been wild. It's good to have the really shit times because it keeps you level on what truly shit can be. Yeah, and I don't want to miss it. I always tell our people kind of like, hey, you know, running a company is like, you You know, we need to cross a jungle, okay? And then we're here and then there's the jungle. We need to go to the other side. And we have different jobs. And some people need to cook and some people need to carry and some people need to build tents. And sometimes, you know, it's fantastic.

59:57You're like on the top of a mountain. And the sun is rising and the birds are tripping. It's just beautiful. And sometimes it's just raining for three days. It's cold. We're all wet. We hungry. Don't find food. And right then, middle of the night, we do cross a river full of piranhas and crocodiles. And we're like, fuck, but when we're all old and gray And we look back the cooler stories actually, hey mate, remember when we used to head to cross the river and the middle of the night full of piranhas and crocodiles. Like that's actually what makes it, what makes a great experience. You can be CEO of another company for a day, which company would judge be CEO?

1:00:31One on the inspiring side and one of the, okay, what the heck is actually going on side. And I think, I mean, Pixar, just because of the talent density and kind of like this creative work, which is very far from what we do, we look more like B2B and you know, hardcore efficiency, like I think that will be a fantastic environment to experience that. I think kind of under what the fuck is going on, so it's like the German rail system, like Deutsche Bahn, it's like what the heck are those guys doing every single day, 300 ,000 people? Why would they do it? So a couple of examples. So last year, 2023, it was like this big bonus, Okay, like bonus payments to their executives, but to every single employee, a Deutsche Bahn, if they were to get more on time, more puncture.

1:01:16And so it did not only like miss that goal of getting more puncture, not like only get half more puncture, no, no, they went negative, 9 % negative, 100 % of the bonuses paid out. So like, okay, like what the heck is going on in that, and it's getting worse by the day. What are they doing? Like French, and I believe even Italian railways system doesn't let German trains anymore enter their countries because they're just too fucking late all the time. What's up? Sorry guys. So how does function master company be? I'll give you an example. Also, what precedent do you set that you missed the gold and still pay it?

1:01:47Yeah. Exactly. And like significant bonus, I know someone there, not very senior, fairly junior, I would even say. And a guy bought a small wooden boat of that bonus. Like the fuck, great year for him though. Is this a government funded rowing? Yeah, mostly. Wow. Wow. Yeah, it's horrible. This is where, if you're in the US, and if we were asking for generational companies, don't laugh, you'd have someone who'd say, I'm gonna build another way. Deutsche Bahn ist shit. They are completely lacking the profit incentive that terribly run. The next European Elon Musk would go, I can do it better. Yeah, and I think for example, FlixBus is doing right there.

1:02:24There's FlixTrain kind of thing, and it's obviously challenging. We got the need to use the infrastructure of the competitor. There will be an interesting thing for a day. It's like, okay, how dysfunctional can it get? I choose Palantir, like just appearing to Ayan Global conflict and be like, what's going on? Fair enough. I mean, I thought Taiwan seemed to be conducted very interesting as well in the video, obviously. What statement in startups has said most that is most BS? One thing I thought about, so I heard the story about Jeff Bezos, okay? And so there are some in the US and then they want to build something and I can't figure it out.

1:02:55But there's a company in Paris and they figured it out. And I think they're on a plane in Tushikago. And then Jeff says, okay, let's just let's fly to Paris now like right up now and all of the Exes go like okay the fuck I thought we're going to Chicago and so I think many people would call this bias for action, but I think also many people would describe this as impulsiveness. So actually so depending on outcome it's either bias for action or impulsiveness. So you judge afterwards. And so I think you just you just gotta have that Pulsiveness bias for action no matter how how you want to call it and then afterwards you judge and you gotta be willing to make those mistakes.

1:03:31What if you changed your mind on in the last 12 months? I think one thing that became very clear is that, to me, great companies, at least from headcount perspective, get smaller and not bigger. And the reason is that you have to automate as much as possible and with AI, that is fairly possible. And I 100 % do believe in kind of this thing about, will you have like the one person unicorn? Might not be a one person, might be a 10 person unicorn, but I do believe that will happen. I believe it's actually possible probably today if the right ten people. Daniel, final one. What question are you not ever asked by investors, by team members, by media?

1:04:07Do you think you should be asked? I think in the end of the day, the most important question is like, why are you doing that? Right? Because from an investor, you can ask them, what are you doing and how are you doing it? And why is it the great market? But why are you, as a person, why are you willing to commit? And are you willing to commit actually 15, 20? Yes, to that and I think that needs to be a fantastic answer to it and is it okay to do it for money? The short answer is no. It's just too hard. It's not worth it. Money is a symptom of you building a great company But if you thrive on competition if that's what gets you off the win is everything Yeah, 100 % and like I think being competitive is fantastic And I love being competitive and I want to build the best at what we do, but I want to be the best.

1:04:56I want to be the best in hiring. I want to be the best in competitive strategy. I want to build the best in product. I want to be the best in adopting new technology such as AI quick. I want to be the best in engineering. The best in international expansion and sales in so many things. I want to be the best and I think kind of like It's a symptom of all of these inputs that you have to give. And so I think if we're just chasing the symptom, then naturally your headspace already diverted from what you should actually focus on, which is like, be the best at that one particular thing. And then it will follow.

1:05:38It will follow. But I do also believe, there's a certain responsibility that we should all have. And let's think about San Francisco and Silicon Valley. Like there's this fucking Kell train, which is a garden shed on rails going from San Francisco to all of these You know nice towns in Silicon Valley at Willy and at every stop you have a hundred billion plus company If not by now a trillion dollar plus company and that train sucks And if you take the road like the road also sucks But you need need need to have a car for it and so and homelessness is not there It's it's absolutely next level and so why doesn't this get fixed?

1:06:18We have the best foundational layer models on AI on the planet coming out of that little piece of land. We got great fantastic companies out there in every different vertical coming out of that piece of land. And so, but none of it seems to have increased the average life quality if you want so of the population. None of it. Like it's literally going south. Do you ever think, am I doing something big enough? It's like you could reinvent how a million Germans get to work every day, 10 million Germans, 20 million, how fundamentally children learn with respect. Do you ever think, am I doing big enough?

1:06:57I have one life. Look, I think about it every single day. There's not a night where I don't think about it. Now, one of the symptoms of our work is this massively decreased food wastage as an example. and food waste is to have to make the drivers come on the side of climate change and of inequality, particularly developing countries and so on. So I think it's contributing to that. Do I think I'll be going fast enough every single day? But do I think that it fundamentally needs a different economic model? Yes. We've been essentially transitioning through three different generations of companies.

1:07:28And generation one is like, what I do is completely disconnected to what's good for society or for the environment. So I might be an old company and end of the year, I have a profit, and then I plan some trees through it fantastic, but by no means I'm incentivized to actually do that, and if business is bad, that's the first thing I'm going to cut. So that's generation one. Generation two is I actually recognize that every single human being in every organization has such every company has first a negative impact, and I'm going to strive to go for zero impact. And that's already fantastic and very few companies actually managed to achieve that.

1:08:03And now I think we're approaching generation three of companies in which every unit of economic success is in direct correlation to a unit of success for economy and to the planet by the very foundation mechanics of the business model. So as an example, let's say Amazon, if every single box that they would ship magically agree would be grown. Fantastic, because every single box that they ship the revenue goes up, it's economic success and then magically that should be grown. Now imagine you have a software with every single unit that you sell, maybe there's going to be a little less carbon emissions, maybe there's whatever cost of housing is going to go down just a tiny bit.

1:08:43In direct correlation, you cannot break that correlation. And I think that is a fantastic business and I call these third generation companies. And I think that is actually the only way how to scale positive impact. Do you eat meat? Sometimes, yes. I come from a butcher's family. But hey, you know, same day, like, I think it's very important to put our focus on the highest levels. What do I mean? So, how much in the general population? How much mind space goes to EVs, electric cars? Everyone's talking about it's a sexy thing. It's like, you know, 0 to 100 and less than 3. It's cool. How much goes to food waste?

1:09:20Yeah, a bit. But not as much as it. So, what's the difference in impact? reducing food waste and I'm not saying alternative foods. I'm not saying eat less meat. I'm just saying don't produce that waste. That's the only thing. It has 5X to impact as if all cars would be gone. Not electrified but gone. 5X in terms of carbon dioxide emissions. But it's sexier to talk about cars. And so that's why I think we have to stay methodical and we can't be taking away emotionally because we love the environment and then so much like we have to stay methodical and think Where are our highest levels? And I think we got to focus on those.

1:09:57Daniel, listen, I've so loved doing this. You have been an amazing guy. The guests that I love are ones where there's a real opinion. Where we can have a conversation, and it's like, you have a point, and you're ready to make it. The worst when you sit on the fence. It's amazing how many people come on a podcast and sit on the fence. You've been fantastic. So thank you so much, and I love doing this, man. Harry was really, really cool. Thank you so much for doing it, and I'd appreciate it. If you want to watch the full episode you can watch it on YouTube by searching for 20VC, that's 20VC on YouTube.

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