VenturusAI's instant MBA & Samantha Wong on identifying soon-to-explode startup markets | E1777

0:00it's important to look at how we'll take ChatGPT as an example, because we've been seeing all these changes throughout time now and we can see how better it is, let's say, four compared to the three version and so on and so forth. So I would expect five to be way better than four is. And if you're saying about seven, I don't even know what seven can build. We talk about building. I think if you're smart enough, you can build an AI to build an entire product for you. It just depends how you want to look at it. This Week in Startups is brought to you by Embroker's Startup Insurance Program helps startups secure the most important types of insurance at a lower cost and with less hassle.

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1:30or important and elitist and that they understand business better than founders who create these things so i am a little bit suspect however these things are actually valuable they're about any discussion about a business and analysis of a business while you're building it if you're considering building it is great because it lets you uh build a mental model and so we uh did a demo of this product and it got an incredible response from our audience so i told producer nick by the way did a great job reading the news uh just yesterday on this podcast or this week on the podcast depending on when we publish the show he uh he did a great job he'll be coming back to read more news i said hey producer nick let's get this kid on the pod uh this kid is emmanuel cucho am i pronouncing your name correct emmanuel that's yeah all right so you saw our discussion of it uh tell me everything when did you come up with this idea and how long you've been working on it would be a good place to start and why did you build it yeah sure so um i came up with the idea based on the studies you're just mentioning right um most of these things you see in the standard report are things you learn in the business school which i've been through and i realized that um would be a great benefit for everybody to be able to get this information without having to go to business school not only to learn how to do it but i think would be best if they would just be able to have at least a framework using all these answers.

3:01And because we have LLMs at our fingertips these days, I came up with the idea, why don't we build a tool that allows entrepreneurs to generate all this content in a matter of minutes and be able to go through it and try to validate their ideas before they start working on the actual product. Okay, so you have this idea. and people can pay 20 bucks a month for chat gpt 4.0 or they can use google's bard and they can go to one of the dozens of prompt sites that are out there and these prompt sites will give you all kinds of um tips on how to frame a question or instructions i would say it's probably better their prompts are basically instruction sets for chat gpt and there's a lot of different techniques and i thought this would be a great way for us to introduce the audience here at this week in startups to advanced prompt engineering because my gut tells me what you've done here is you looked at something like a swot analysis s-w-o-t swot analysis and you said how would i prompt chat gpt to analyze the strengths weaknesses opportunities and threats of this business that's SWOT.

4:18Am I correct in that you've spent 100 hours banging your head against the wall creating super prompts? 100 % I probably wouldn't say 100 hours, but probably if you think about optimizing everything to the point where it's now, we might get there. Yeah, okay. So you took 2550 hours of prompt engineering? Yeah, yeah. So explain where you started your prompts for something like SWOT. and i had given the example of um of a school that teaches you venture capital and that i don't know if you saw the episode i'm sure uh your friends must have sent it to you so i just and it gave me a really nice swot analysis what kind of prompts would you know a neophyte put in to try to you know say you might just say do a swot analysis on the following one sentence description of a business but you got more granular you probably said hey what are the strengths of this business idea tell it to me you know as if i was an mba or a business analyst at you know gartner group i don't know how you did it but so maybe talk a little bit about the evolution of your prompts what worked what didn't 100 so when we started was we i basically used every single framework that i managed to get from my business school and i just grabbed a business book and i'm like okay what do we need we have a framework already built by people that worked on this before so going back to SWOT was give me a SWOT analysis what's the output of that the output was quite brief right so going back to prompt engineering I came up with the idea hey what if I say I'm a well-versed VC in with in with over 20 years experience in SaaS products so So how would that prompt look like?

6:07And we tried that. And again, it was a bit more complex, but it was not reaching to what exactly we're looking for. And we did a bit of engineering hacking, if you want to call it, where we came up with the concept that LLMs have been trained on all these books already. And again, asking him to be a world-first VC with 20 years experience, it doesn't mean that that vc in particular whatever that instruction would mean for the for the llm would mean that he can cover everything so what we decided to do is to try to use the llm with the information we have to improve on its own prompt so we so wait a second you ask chat gpt how do i make a better prompt um the easy way yeah probably at some point to some to some degree on some aspects, not all of them.

7:03Some of them are a bit more complicated and we've been working to give them, let's say for a particular thing, I'll talk about finances. I'm like, hey, finances, I'm actually interested in the following topics. And these topics are usually things you'll get from books. Before you validate your idea, you would need some sort of financial projection. You would need to understand how much money you will initially need to spend to be able to spin it from ground up? Would you require some funding or not? All these kind of criteria, as we mentioned them from the beginning. And then we were just looking on how we can continuously improve on that.

7:42And at some point, we got to, again, you can always improve on it more and more. And I think the more time you're going to spend in improving the prompt, probably the better it's going to be. But at some point, we decided that it's good enough. And we now want to add more value for the money and be able to build on top of it. So this is probably the main reason we didn't think about building an LLM in the first place. Because we were like, there is already so many companies, like big companies doing this that have been invested. They have a lot of investment. They are investing. So you don't need to create a language model.

8:18You use ChatGPT4, I assume, or ChatGPT 3.5, or are you using some other one? We use both, 3.5 and 4. And why would you use both? Are you seeing better results where it's just for redundancy or cost or something? Technically four, it would give better results most of the time, but we also want to optimize on cost. It's important. Our goal is also to make this cheaper on the long run and be able to offer it to everyone. Our initial idea was to try to do this B2C thing, but we had a lot of companies signing up from the standard version. And when we decided to go with the advanced features, we looked into being able to put them all through JGPT4.

9:08Listen, I work with super early stage companies at launch, like literally year zero. They haven't even incorporated yet. And then we hit the Series A, people have thousands of dollars in MRR, and maybe they've only raised a couple of hundred thousand before that Series A, and they don't have their insurance set up. And in fact, we recently had a great startup that didn't have D &O, and we had to really stop everything because they were having board meetings, they were making massive decisions, there were legal issues, and they didn't have the basic D &O insurance that protects directors and officers.

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10:22What does it cost in terms of if I wanted to do one or per hundred analyses? What does it wind up costing you in GPT three, five slash four costs just roughly? Is it a dollar? Is it 10 cents? Is it one cent? It depends. First of all, it depends on a lot of criteria, right? We know that LLMs usually use some token methodology in order to charge you. And usually that it's based on how big the prompt is how big the response is going to be um and also how how complex is going to become at the beginning um was probably roughly a dollar but then we to do the complete analysis which was a lot of prompts i'm assuming yes and then we look on how we can optimize that even more without trying to affect by any means the actual prompt.

11:22The response is really important and we don't want to affect the quality of the report, but we want to be able to give this as cheap as possible. So yeah. A dollar is pretty cheap and you've got it down to less than that now. And then I just saw, is it Claude, the other one that just came out, that's one quarter of the price or one tenth of the price have you played is it claude is that the name of the one yeah claude 2 yeah yeah so claude just came out i'm assuming as a founder in the ai space you immediately went and checked it out what did uh what was your initial impression of the new claude is it called claude 2.0 or something what is it called i think it's just claude 2 i don't think to the best of your ability like yeah describe it it seems that at least from a business perspective it seems that it it can do some things a little bit better than gpt does it at the moment but this is anthropics right this is the company anthrop yes yeah uh but i think again it it all depends on on how you're going to look at the entire product on the long run and why do i say that is if you want to just build a prompt that would deliver you a certain content probably you'd be able to do it at some point with most of them because i'm again i'm using a logic assumption right now i don't have anyone in open ai or anthropics to to confirm that to me but i'm guessing we all use the same information to train all these uh lms right so yeah yeah that's a controversy in and of itself so you start this business and um i guess the criticism of some of these businesses built on chat GPT for or the criticism of businesses like this is Oh, can I just use it directly in chat GP for so you and I both know that there's a lot of accoutrement and features you can build on top of the chat GPT responses that chat GPT will never do.

13:21So maybe you could explain why you're convinced is a good business idea, and that people will want a more verticalized solution that you're creating with bells and whistles and details that maybe aren't available in chat or do you think an ai eventually is going to get so good that chat chp4 six or seven or claude six or seven or bard six or seven are going to just do a better job than any startup that gets you know builds a wrapper around the stuff that's a really valid concern and a great question i think it's it's important to look at how we'll take chat gpt gpt as an example because we've been seeing all these changes throughout time now and we can see how better it is let's say three four compared to the three version and so on and so forth so i'm i would i would expect five to be way better than four is and if you're saying about seven i don't even know what seven can build we talk about building i think if if you're smart enough you can build an ai to build an entire product for you just depends how you want to look at it but i think you get you'll get to a point where you could build they call it gpt agents probably heard about it yes explain to the audience gpt agents yeah so gpt agents would be a gpt agent would be a piece of software that would allow you to instruct gpt different different instructions based on the agent so you'd say hey i need i need a developer then you'll instruct that agent to be a developer and act as one then you'll be hey i need someone to make some research for me but then we how obviously you would need to build on top of it more things like i need information from search engines we know that at the moment that's really difficult to get so you'd build on top of that to be able to allow the agent to be able to get that information from you from a search engine then feed that back into the LLM and be able to give you a better or more accurate answer.

15:20Yeah. And so this concept of role prompting is saying, hey, you're an MBA or you're a teacher at INSEED or Harvard Business School. You've studied the works of, and you give a list of the works of 10, you know, classic books uh on uh business um analyze this business through the frameworks of these 10 people you could actually start to get really interesting things going here and um that is something that is going to be really interesting you didn't feed it in um like the works of major authors or thinkers and business cases because harvard has all these case studies they take those very serious um stanford has case studies they're considered like very important ip it'll be amazing if stanford creates an ai or harvard creates an ai of all those case studies and then they say hey go through these case studies and use the what you've learned there as analysis for this but you got to assume that chat gpt sold that i think open ai probably stole all that stuff already i would not to say uh but well they did an open crawl of the web it seems i mean we'll we'll get this information from the lawsuits eventually but they clearly went out if it's answering these questions so well yeah i mean it probably went and took the full works of all of these authors and then the other thing that's happened correct me if i'm wrong here is you know on the web if there's a great book like good to great by jim collins there have been 10 000 blog posts articles summaries cliff notes etc spark notes about that book there's been 10 000 podcasts about that so So if you were to read those, those might be better than the source material because they have a level of analysis on top of them.

17:12So the truth is, even if you wanted to protect the IP of Jim Collins's works, good to great, etc. You would have all the people who have analyzed it and done fair use criticism of it, that you could just leverage that. So it's kind of interesting how this is all unfurling. You're spot on. And I think probably before we see more action on the GPT side, probably we'll see companies like Mind Journey being able to explain how they design all these images on the spot, knowing that certain prompts would actually even show you different copyrights material from where they got inspired from. And this is how everything started in the first place.

17:58When they were generating all these images, they were seeing that there are some watermarks in them. And they're like, it makes no sense. How can it be a watermark if it's generated by the AI, right? It's hilarious. Here's my favorite part. And if you missed the episode last time, I'll just share my screen here really quick. So this was when I asked the question. And I said, a school to train people to be venture capitalists. So I have a lot of people who want to come work for me for free. and i decided um i'm going to create a school to become an associate basically to get a job as an associate will be the and it's basically a kaufman fellows competitor if you know that program which is eighty thousand dollars for two years so my idea is to make this like 25k for a year full time and you come work in person with me at my new incubator maybe i'll have 10 people do it and all you do is work with me and my team directly meeting 15 companies a week sitting in on the investment team meeting and then i'll have 10 people paying me to go through 15 companies each a week that's 150 companies a week this is some like tom sawyer huck finn stuff like paint the fence that's a lot of fun you know that story are you aware of that i know there's a great story in america i think it's huck finn um he's painting a fence he's got chores to do and these kids come along and they're eating some apples and one of them's got like a toy and they call it and said what are you doing huck finn and he says uh or tom sawyer i can't remember which one and this is like an adventure novel for kids in the and so he says to the person with the apple uh yeah this is the most fun you can have on a summer day if you'd like to whitewash the fence and paint it uh it's one the cost is one apple and he says oh is it really a lot of fun he's like it's the most fun i've ever had and gives him the apple kid starts painting the fence the other kid has a toy he says yeah this is the most fun if you let me play with your toy while you're watching the fence i'll give it back to you after but you can wash the fence then all of a sudden he's sitting they're eating an apple playing with a toy and they're doing his work and the lesson there is like framing like hey you know this could be drudgery it could be a chore or it could be a lot of fun and it is actually a lot of fun to paint right so um yeah that's the story of like huck fan etc so anyway this is my idea and then here's what your report said venture capital training school comprehensive analysis feedback industry insights swot analysis and it said strengths unique business idea with limited competition in the market that's true there's really only one I can think of that actually is a school for venture capital.

20:19Yeah, Tom Sawyer by Mark Twain, not Huckman. Unique business idea with limited competition in the market. It's true. Tailored training program can address specific skill gaps in the industry. That's very true, right? You went to business school. Did they teach you anything about, you know, startups and investing in companies or evaluating business ideas? Or was it kind of like abstract? usually i guess again i speak from my experience it depends where you go to business school but i went in the uk so so which one canterbury research university cool um so we basically they start with some uh basics and usually they try to bring different people that made already companies and startups to talk about all these things and how they validated all the books or all the frameworks from the books throughout their businesses in order to achieve that great um potential to establish strong industry partnerships for internships and job placement that's true um and you know it's like really um an amazing analysis and it was tight because i'm i'm assuming you give it a very confined um give me a 10 word answer give me a 15 word answer maximum is that right that's really difficult to tell lms because we have to explain everyone that LLMs don't really understand it.

21:39Like they don't have an understanding of exactly what you mean. So sometimes if you say, can you write me a thousand words essay? He might, he might make close to that, but it doesn't mean it's going to do a thousand words. Usually we don't specify certain things, but we specify what we want to see. So in marketing strategy, we want to see this certain points, which are mentioned within our prompts. And so, uh. recommended marketing platforms game changing it was just a really great analysis but the best part was it said books to guide you along the way venture deals by my friend brad feld uh the lean startup by my friend eric reese both friends of the show and then finally angel my book and i thought that was pretty clever that so i guess at the end you say hey what book should the person read or or you say like what topics is are mentioned here and then search for further reading how'd you get that prompt so when we're building the standard the standard report i i thought it's really important people when they start any venture i would always recommend start with also a book while you build this try to read something new and what we were looking at is i basically went what the prompt does is based on the prompt we want to be able to deliver you books that are specific to that prompt you wrote so if we're gonna write um i don't know going back to what sanji was saying we artisan water from icebergs i know he mentioned ice cubes but i know that there is a company that builds that that does artisan water from icebergs they will try to feed up information about people that are uh that are basically doing things with businesses with uh water with bottling water?

23:25What does it take? Yeah. And how would you do that? And we wanted to be able to feed that as a validation of someone that actually does it. It's absolutely fascinating. If you're a SaaS or services company that stores customer data in the cloud, then you need to be SOC2 compliant, you know that from a third party, and you need that third party to close big deals. And if you want to get compliant easier and faster, you need to use Vanta, V-A-N-T-A Vanta makes it so easy for you to get and renew your SOC 2 On average, Vanta customers are SOC 2 compliant in just 2-4 weeks Compare that to 3-5 months without Vanta And Vanta can save you hundreds of hours of manual work and up to 85 % of compliance costs This is a total no-brainer And Vanta does more than just SOC 2 compliance They also automate up to 90 % compliance for GDPR, HIPAA, and more You can't afford to lose out on major customers We all know that Listen, it's a hard year.

24:22Last year was hard. You can't lose those major customers because you don't have your compliance dialed in. Just work with Vanta. Get your compliance automated and tight and tight is right. Lock down those big deals. Here's the best part. Vanta is going to give you$1 ,000 off. That's 10 hundies. Get$1 ,000 off at vanta.com slash twist. That's vanta.com slash twist for$1 ,000 off your sock tube. So you got a couple of hundred people to pay you 20 bucks a month for this already? Yes. Amazing. So you're off to the races. great how did you um just to talk about marketing here uh listen you got picked up on this week in startups i'm not sure where sunny found it but you somehow got the flywheel going here um how did you get people aware of the product and to try it how did you get those first hundred customers because the first 10 and the first hundred are the hardest of course a hundred percent when we when we built the initial standard report um there were no costs attached so you you couldn't there was no pricing model there was nothing you could have paid for everything was for free and the reason we did that is there is only as much information i can fit in within the ai but what i'm looking for is actual feedback coming from people so we looked online at different things and again i've been trying some startups before and i have some advertising experience so i just looked at the platforms that i found to be really useful for feedback and somehow we came up with the idea that reddit would be a good start okay mostly because people might be a bit more direct on reddit than other platforms and you're referring to the fact that on reddit people are brutal exactly uh trust me if you've ever been to the uh unofficial all-in uh subreddit it is disgusting and brutal uh really savage like just horrible yeah no it's it's it's a it's a difficult audience to deal with but i think that's what intrigued me i wanted to get difficult people to tell me how bad it is how stupid you are exactly uh i wanted to get that i wanted to get your photo and tell you that you're ugly and that you should shave or what do they that's what they did immediately they're like you're too fat uh and you're uh you know it's hilarious and so they they savaged you what was the best feedback you got during the savaging on your sub and which subreddit did you go to ai subreddit or startups entrepreneurship only entrepreneurship startups uh sorry entrepreneurship subreddit so there are a few of them um yeah that i tried um probably one that we got um a lot of interesting feedback was business ideas there is subreddit just for that uh where just people test things and try to get like people just come with their ideas and say hey i'm trying to test this what do you guys think and most of the time you will get actual good insights people actually spend time to to read that and and give you really really good feedback and we got a lot of feedback that we didn't expect we're gonna get right away some people were like really stoked with the product some people are like hey i can go there and replicate this and i'm like yeah i'm glad i'm that was the whole point i want i want to expose this so people can be more knowledgeable about business which was my main goal from the beginning um and uh basically we started getting i guess 20 in the first week we had like 20 signups a day which was great like i was hoping that if we hit 30 signups a day i'll be the i'll be really really happy um and we we did that for like two weeks i guess and then at some point someone on social media picked this up and i remember waking up in the morning and it we got like 500 signups in a day and i was like yeah it was was great but then what we're looking to see what we can do next because i was interested to get those people's feedback not like it's amazing they can use the product and they can test it but how they feel about it how can we get people to give us their opinions and um basically that's why we decided hey we let's open a twitter let's let's have ways for people to reach out to us like we didn't know there's a cool there's a cool business idea subreddit i see that's where you posted we just did a quick search um while you were talking and so i didn't know that subreddit exists i just joined it um but i love that idea um and then there's entrepreneurship right along wow yeah there's some good um subreddits i've been in the entrepreneurship and the startups one uh it's pretty cool yeah i mean i tried to post on some of them but as you're saying everyone is brutal there uh i i got removed several times and because i yeah because i respect everyone i obviously i was not trying to push again so when we managed to get um when we understood how every community works we then started reaching out to moderators say hey would you mind if we post this thing is this something you guys would find interesting for your community actually with business ideas at some point i even reached out to their uh to the owner and i said hey i know people are posting here ideas would you not would you think it's useful if i write the reddit bot that would pick up their ideas put it spin it into llm and then give them the report for free i'll do that for free just let me build it and um after different after some discussions they were happy for me to build that and i actually did it um so at the moment i think it should be still live there and if you write the prompt they would they would give you where do you where do you think you're going to go with this who you for their first hundred customers is it entrepreneurs you said businesses were buying it to do analysis so that's kind of cool so it's strategic business people are used buying it for their company for 20 bucks a seat per month or something how much you're charging what's your plan to roll this out so we have two uh pricing plans one is obviously the subscription that i wouldn't say most yeah most of people are using it but we have half customers that are subscribed and the other half are pay as you go so you can always just generate a standard report for free and if what you read it's useful to you you can just click on one of those other advanced features and just convert that into an advanced report and that would be just 10 bucks it's not you don't need to subscribe to anything you can just get that um and and use it as as you like uh i mean i just love the idea of also having pools around the results so if in the advanced version i'm just going to jam with you here for a minute when i look at the results i immediately had questions in each of the subsections and i had feedback to give it like i don't believe that this is correct or like you know who are the competitors to this or how would a person go about learning to be a venture capitalist right um if they didn't if the school didn't exist right But so I think there's like jumping off points where if I had a team of five people in my venture firm, or if I had a team of five people in my strategic planning group, you know, at my bigger company, a midsize company, or our innovation group at a corporation, SAP, or, you know, Salesforce had some innovation group, they could really be doing this, keeping it private, but then having comments around the results and then, you know, kind of dipping into second and third level prompts and threads so i see it as like a jumping off point you know each of those sections you could kind of keep jumping off of so i see you almost as like um a brainstorming notion or coda for business ideas that's like single purpose for that so i really thought it was interesting um and a really good start so i believe you can get this to a thousand people and i think there's corporate people who would pay you know a thousand dollars a month for corporate account$12 ,000.

32:01And I think you'll get there pretty quick. Actually, who's that you have any big customers like that who are paying 10k a year? No, not yet. And to be honest, I would need to look into all the legalities before we can manage to talk about any companies that actually use the product. What do you mean? I mean, on the show on the show here? Yeah, I'm just curious if a company yeah you should never disclose that without them getting giving explicit permission to be on exactly exactly on your customer page and give you a testimonial but i do think there's i think like giving out the free one free is great um and uh giving out one free is great um and then going from there 100 so uh going back to the advanced features you you mentioned something earlier i want to point on that you said that you're looking to some of those things and you are not sure those things are accurate.

32:54And I agree with you. I can take one of the, so on the top of the website on the navbar, there is a thing called report examples where all those reports are run by us. They are not public reports generated by any of our users or customers. None of their reports are being published anywhere. So all these reports are best for individuals to come in and kind of test the waters before to have to pay anything. And I'll take an example report here. I think two weeks ago, we did one for a 2 ,000 square meter terrain outside of Strasbourg suitable for go-kart tracking. And the beauty about that is in finances, it came up with an estimate amount of$237 ,000 to be able to open such a car team.

33:50Uh, but because, uh, I love, I love carting. I love carts and cars in general. Um, I kind of invested some time to figure out every single detail of it to the point where is it how accurate these numbers are? And it all depends on a lot of criteria such as, Hey, we talk about, let's say facility setup and construction here says it's$150 ,000, which would include the track spectator area and the snack bar. A spectator area could be like 20 people or it could be 200 people. Yes. Right? You need more specific details there, yes. Exactly. And this is where we realized that, hey, if you feed as much information as possible to the prompt, it's going to take that under consideration.

34:38So when it's going to build the financial stats, it's going to think about all these things. So when I did, again, a report where I said, hey, I know that a kilometer of tarmac could cost X amount of money in Europe, especially close to Strasbourg, because again, there's no point to bring tarmac from the US unless it's extremely cheap. We realized that it might be a bit more expensive. So in the end, the$237 ,000 was like the minimum that anyone would need if they decide to build a track, basically. Yeah, I mean, this is going to... I mean, if you think about everything MBAs do, a language model is perfectly suited for that any kind of consultant and it's going to give you ideas much faster than you can ideate it's going to give you all the corners and pockets of stuff you may not know and it's going to tell you where to look for things right and you know just even putting in a business plan and saying what did i miss could be amazing you know 100 i totally agree all right let's talk turkey here you seem pretty smart uh and i'm an angel investor, you may have heard you've raised no money for the startup.

35:49This is just like a side hustle project. Is it even incorporated? Uh, it's not a we. Alright, so you got a friend working with you on it or something? It's just a couple of you or what's the story? It's three of us. Two of us basically engineers and the other one is a marketeer does a lot of communication. Three people is great. Three co founders. Great. So here's what I'd like to do. I'd like to work with you on this product, because i think it's meaningful and it's kind of my wheelhouse help you promote it uh have you come to our accelerator i'll give you a hundred grand uh sign the paperwork today or tomorrow whenever you and to get a delaware c corporation and uh let's build this into a unicorn uh is that something might interest you a hundred percent okay great so when we get off the call uh i'll put you in touch with jackie deegan and andre and uh they'll tell you about the accelerator when the next class is happening.

36:41And as quick as we can get you going, we'll do a little mini diligence, make sure that you didn't steal the code. And you set up a company and you do IP assignments and everybody gets their equity. All the standard due diligence things you can just put into your chat or what you come up in diligence will give you a list of all the things we'll ask for. But I really love what you're doing. And I think it's really fantastic. The launch accelerator is virtual right now we do one week in person at the beginning and the end like and eventually we'll go back in person when I get the space set up in San Mateo here.

37:09But for now, I love what you're doing. I like to place bets. And I go with my gut. When I saw this, I thought the product design was exceptional, well conceived, and you've got product velocity, and you got multiple founders. And you clearly have some sort of what I'll call the x factor as a founder, I think you're pretty clever. So let's see if we can consummate this as quick as possible before this episode gets published and other people start making you offers. I need to be the first investor in companies. that's my mission i want to be the first fund in and the first fund to 10 ownership those are my two goals for our fourth venture fund uh okay i really appreciate it thank you so much we'll do a virtual handshake here pending due diligence there it is give me your virtual handshake okay wait i gotta do the other way hold on here we go virtual handshake deal no that way here we go now we're doing a virtual handshake no no you got it that was it we did the left and the right so that's our virtual handshake uh pending due diligence and you know if it's not a fit for you you decide you don't want to do it as a business of course you can back out but this is 100k bet i like to make i feel frisky right now i got launch fund for money i'm investing i'm trying to do build big businesses if you want to hear about launch fund for you listening to this podcast uh we filled up all the accredited slots uh but we do have slots for qualified purchasers and i'm spending the next two months meeting with family offices etc launch.co slash memo you can read my deal memo in fact you should read my deal memo and then you should run it through your system and see is this a good idea for i mean this is where it gets really interesting you could actually put in there uh not just an idea for businesses you could say hey what's a good idea for an investment firm you know subsection subsectors of businesses and those might have different analyses that i'm unaware of like i'm sure the the the guy the famous guy from yale um who sadly passed away the yale guy probably has like a really good framework for how to analyze venture firms and fund managers be really good to put that in uh all right listen we talked for gosh 40 minutes here i'll let you get back to it you're in spain huh yes favorite country spain and tokyo oh man i i love both those places just japan generally i haven't been years yeah just let me know i'm gonna come around this is really hot at the moment yeah i think uh maybe when it's 80 degrees not 105 uh but man i love galicia and barcelona man i actually gotta take my kids there they haven't been there yet and i want them to experience having supper at 10 p.m and drinking hot chocolate at what's that thick hot chocolate you guys do over there what's it called um it might just be called hot chocolate but you know that thick hot chocolate they make and you get it like midnight there's always old ladies going out for thick hot chocolate in barcelona in the rambla yeah i don't think they really have it here in canary it's probably because it's hot most of the time it's not as hot as there but like even in what are those um what are those like lobsters slash shrimp crustacean that have the really long claws lagostinos maybe it's not a they're kind of look like lobsters it might be langostinos really long yeah i love those when i was in galicia um you know and i went to the shore and there were all these great restaurants on the shore you know shortly from away from there and man i had the best cheese plate in my life and some of the best seafood i love spain yeah i need a speaking gig in spain somebody get a speaking gig going in spain for me please all right talk to you later uh this has been this week in startups and we'll talk soon bye if you are listening to this podcast you care about innovation right you're listening to twist this week in startups and the startup sector changes constantly but one thing does not change and that is the importance of world-class design in the past you either worked with like some old school stodgy ad agency.

40:47And boy, was that expensive. Or you go to a freelance marketplace. Okay, things can get really messy there. The work is to say hit or miss might be graceful. So let me tell you about a third choice, the better choice. It's super side. Super side is the new way to get great designs done quickly. They call it CAS, creative as a service, C-A-A-S. This is such a great idea. It's a fully managed end to end service. And it's completely hassle free. Here's how you use it. You subscribe and then you get an amazing dedicated design team built specifically for you. And you get access to a platform that makes it so easy to request designs and have them delivered quickly.

41:24Superside only hires the top 1 % of designers from around the world. And they keep them engaged because they have to work on so many different creative projects, from ad creative to landing pages, motion design, custom illustrations. It is amazing what they do over there. So you're going to save$2 ,000 a month on Superside's startup accelerator package. superside.com slash twist. That's superside.com slash twist to get too large off of your package. Well done, Superside. Next up, Blackbird Ventures' Samantha Wong gives a talk on finding and identifying up-and-coming startup markets live from Angel Summit.

42:02Thank you, everyone, and thanks, Jason, for inviting me. As you mentioned, my name is Sam Wong. I'm a general partner at Blackbird Adventures. And the title of my talk actually was changed last minute to temporarily unpopular investing in Australia and New Zealand. And after Mars talk this morning, I actually think I want to change it to be there and develop insights. That's essentially the flavor of what I'm going to talk about today. First up, why should you care about these two little islands in the Pacific? It's a very good question. I'm just coming after the guy who did Snowflake Series B.

42:36I'm just before the guy who did Hotmail. So I find myself asking that too. But I find Brad's last talk quite instructive because I would argue that investing in Australia and New Zealand over the last decade, and I think there's still some way to go in it, is the epitome of anti-consensus investing. And we'd love to explain the learnings that we've had building Blackbird over the last 11 years. So let's start with a little context. Australian and Kiwi companies over the last 20 years have built enterprise value of over$126 billion. Hands up if you recognize some of the logos on this page. And did you know that they were Australian and Kiwi founded?

43:20Well, it's a fairly knowledgeable crowd, but you're the anomaly. Most people don't know that there's all this economic activity happening in these little islands in the Pacific. And I think being underestimated or being out of the purview of where most of the investment mines are, is actually a really great strategy. And I think for a bunch of you in this room, you know, there are probably some juicy markets hidden in plain sight that you too could be taking advantage of. And that's what I'd like to encourage you to think about today. And the reason why, I believe, is that too much competition impacts returns.

43:56When there's too much capital chasing too small a set of quality companies, returns get averaged away. And this is a business about alpha. According to PitchBook, there are over 10 ,000 venture firms in the US and almost 1 ,000 seed deals done a quarter. And I actually think that's probably an underestimation. And you're going against folks like Ma, the besties. And so that's really effing hard. It's significantly less hard, I think, if you try and find a pocket that fewer people are fishing in. And that's been super successful for us, for friends of mine as well in other areas of the world, like Eastern Europe, you know, early bird, East, super successful, LATAM, Monashies, Kazakh.

44:38And there are probably other ways to think about this too, not just geographic, but also sector specific. A little bit about Blackbird. We're a firm with 7 billion in assets under management. We're 11 years old. We have about 50 staff now across Australia, New Zealand. And we're probably best known for doing the seed investments in Canva, Zoox, CultureAmp and SafetyCulture. And the thing that all of those companies have in common is that they were founded by Australians. So that's our mandate, Australians and New Zealanders, wherever in the world they might be. Basically, everything that I believe about venture is really captured in this chart.

45:18This is the performance of Blackbird Fun 1 over the first 10 years of its life. This is the power law kind of personified where the Aqua bar is the performance of Canva. Truly, you know, a power law story. But what I think is the incredible thing is that even without Canva, you take out the Aqua chart. This is still a seven times gross multiple fun, which is awesome performance. Why is that? That's weird, right? Like why would one fund like capture you know that much performance and the answer I think is a lack of competition like there is something to be said for being the only game in town or one of the only games in town at that point and so I am just kind of obsessed now about trying to harness and harvest these sorts of Fund One opportunities over and over again.

46:21The thing about being early is that you can't be too early. And Australia in the 2013 to 2015 era was just perfect. Not too early, not too late. So I want to share a few things that you might think about looking for that might indicate you're right at that point of time. So the first obviously is you have to have an undersupply of capital. This chart shows the VC deal value between 2010 and 2020. You can see in 2010, it was only$200 million of investment. 2011 went even lower to$100 million. And this includes growth stage and late stage venture investing. The curious thing though is if you were on the inside of those ecosystems right at this early era, it was getting really exciting.

47:11Atlassian had just taken, well, it didn't actually take external capital because it was highly profitable. So it was an employee secondary. Accel did a$60 million employee secondary at a 400 mil valuation in 2010. Canva was founded in 2013 and did a chunky Series A on very, very low revenue in 2015. Atlassian IPO'd, I think it was late 2015, maybe early 2016. And then obviously the word got out and deal sizes grew quite significantly. And now there are many multi-hundred million dollar funds in Australia. So the lack of capital plays out in a couple of ways that I think are quite interesting. So the first is Blackbird Fund 1 has a very low loss ratio, obviously without sacrificing returns.

48:01So we have a 20 % loss ratio in that fund, which is odd because you would expect a successful fund to have sort of 50 % to 60 % loss ratios. And that has led me to think that perhaps when you have the luxury of choice, you can pick, you can choose, you actually choose better. It's a working hypothesis at the moment. The second is entry valuations. And entry valuations, you know, do matter to performance. And in our first fund, the average valuation for a pre-seed or a seed stage company was$4.2 million. There are, however, always exceptions. Canva was pricey even then. It was an 8 mil cap for a pre-product PowerPoint stage company.

48:47And Zoox also was a pre-product, still this kind of pre-product, stage company at a 40 mil cap. So always be willing to make exceptions. So the second thing that's really important, I think, for that Goldilocks stage market is you need lighthouse companies, but none yet that are so successful that they've really attracted the hordes of global investors and attracted a lot of competition. And I think some indicia that you could look for are sort of valuations and exits that kind of seem, they're kind of successful, but they look a bit meek or meager compared to what you're used to in Silicon Valley.