· 76 min read

From Idea to Launch: PreHype's System for Starting Your Next Business

From Idea to Launch: PreHype's System for Starting Your Next Business

In this episode of Learnings at Scale, Max sits down with Nicholas Thorne, General Partner at PreHype and co-founder of Audos. They discuss cold plunges and the Wim Hof method before plunging into the world of entrepreneurship, exploring PreHype's unique approach to helping experienced founders find and validate their next big idea. Nicholas shares his insights on the importance of customer validation, rapid experimentation, and how AI is creating a new and diverse cohort of modern founders.

Featured Chapter: The VC Mindset – What Founders Should Know

Max asks Nicholas for insights about how venture capitalists think. Nicholas explains that while founders might be flattered by a VC’s attention, it is a VC’s job to ask questions. VCs want information. They have already done the math to determine the return they hope to see out of their investment, and they have sold that math. Founders should be prepared to ask their own questions of VCs to ensure compatibility.

Click below to check out the featured chapter on YouTube!

Full Episode

At PreHype, Nicholas emphasizes direct customer interaction from day one and a rapid, iterative approach to product development. Nicholas also provides insights into the venture capital world, explaining the key factors that drive VC decision-making. He advises founders to think of themselves as the other buyer in the exchange, and to be as curious about a VC’s money as a VC is about their business.

Click below to check out the full episode on YouTube!

Actionable Lessons:

Episode Chapters

Quotes and Insights:

00:08:30 - "Action creates information, so you gotta go do something to create some unique piece of information with which to make a decision."

01:10:23 - “I think most venture capitalists that you meet are … insatiably curious … They want to learn about your business, so they're going to ask you questions, and frankly, you want to tell them about your business … But … think for a moment about what you could be learning … obviously the more you're talking, the less you're learning.”

01:17:22 - “…your investor's idea of their return on investment probably shouldn't make you uncomfortable if you're taking their investment.”

01:18:08 - "...venture capital investors are human beings who are running their own business, are nervous about their own business, have to raise their own funds … they need these data points..."

Expand to view full transcript

Nicholas: [00:00:00] It, it's something we definitely try to talk about is just like think for a moment about like what could you be learning, vice versa. You know, obviously the more you're talking, the less you're learning type of thing.

Max: My guest today is Nicholas Thorn, general [00:00:15] partner at PreHype and co founder at Outos.

Max: Wikipedia calls PreHype a venture development firm, but Nicholas puts it simply. They're in the business of helping people figure out What company to start next and based on their track record i'd say they're pretty good at it [00:00:30] Prehype has helped launch some very successful companies including barkbox every and for them What's really impressive about nicholas and his team is that they are builders themselves Not armchair quarterbacks and his latest venture shows just that he [00:00:45] recently co founded audos an ai Co pilot that will help you launch a company from your smartphone If that sounds too good to be true, just dm autos.

Max: ai on Instagram and see for yourself why thousands of people have already used them to start real businesses. In this [00:01:00] episode, we talk about how to get a company off the ground. Why you should be testing multiple ideas rather than just one. How action creates information. What founders should know about how VCs think.

Max: And a lot more. You know, you've, you've incubated, you have this illustrious list of [00:01:15] companies you've incubated, every BarkBox, there's like 50 others. How many hours a day do you spend in a cold plunge? You can't, I, hopefully I'm not that

Nicholas: cliche. No. Um, yeah, I've, I've [00:01:30] actually, my cold plunging is, Um, I do like to jump in like a super cold pond, but I don't do any proper cold plunging.

Nicholas: You?

Max: No, no, I How many hours a day do you spend in a cold pond? I, you know, I wish I had like three minutes, but no, I, um, [00:01:45] it was, it's kind of like a meme in the office. Yeah. Because, because I had, I had, you know, I get a lot of Huberman in my feed. Mm hmm. And so I was like, oh, like this cold plunging thing, like that's pretty cool.

Max: You know, like I would, I would get one. Yes. But. It's kind of a sore spot. 'cause the HOA in my building won't let me have a gold punch. . [00:02:00] I asked. Yeah. And it's, you know, it's the kind of thing where it's like I don't wanna violate the H OA rules on that. Yeah, no, definitely not. Then learned that the structural integrity of that ba of the balcony wasn't what I thought was Yeah.

Max: And cause a big problem. And so anyway, I'd been like coming into the office talking about, 'cause I would, you know, had all the huberman staff, like total, [00:02:15] total fanboy and I'm like, you know, a dopamine, like brain power or whatever. And then Alex just comes in one day. He's like, I ordered one and Alex got a cold punch like 90, 90 days ago or six months ago.

Max: And he's like, I swear to God, it's just like turned him into [00:02:30] Terminator. It was kind of hilarious. I'm like seeing the, the, he like flipped the switch. And then he's like, he, we, we had all of our family or not all of our family, but some of our family was in San Juan last week. Now it's had the cold punch of like, 35 degrees or whatever it's like overclocked as cold as it'll [00:02:45] go and all everyone's like, you know Like sheepishly getting this cold plunge and like kind of like jumping a toe He just like jumps in goes under, you know underwater hold hold stays underwater for like 30 seconds We're like is that safe?

Max: Is he gonna [00:03:00] die? Is he okay?

Nicholas: I mean, that's impressive. My version of that is my friend group and I got somewhere one of those things, maybe it was a Huberman thing, talked about how long can you hold your breath. And so then everyone is like doing the contest and trying to post their stats of, which is very [00:03:15] difficult to audit, of course, among a bunch of high school buddies.

Nicholas: And dangerous. Yeah, it is a little dangerous. It's the type of thing where you're like, in there, you're kind of like, Should we really be doing this? It feels like a bunch of high school numbskulls doing something they shouldn't be doing.

Max: Don't do it underwater. Yeah. I had a friend who was doing [00:03:30] that. Wim

Nicholas: Hof.

Nicholas: You ever seen the Wim Hof method?

Max: Yeah. You can go pretty, like, it's crazy when you do that. Like, even as, like, a new You see the movie

Nicholas: about the, uh, or the Netflix about the, um, these free the free diving record holder. It's a woman from Italy. I [00:03:45] mean, it's the scariest first no horror film has ever been scarier than the first five minutes of this, where they, among other things, they do this.

Nicholas: The, the Yeah, pre whatever you call the part of the movie that sometimes runs before they even show the opening credits, um, [00:04:00] they track this person going down hundreds of feet. They're grabbing a line to pull themselves down deeper and deeper and deeper. No apparatus. No assistance. And, uh, they do this epic thing on Netflix where they just have their heartbeat [00:04:15] going, and, like, the audio is just their heartbeat, which, of course, gets slower and slower and slower.

Nicholas: Until it like stops and then they turn around and it's, and you can kind of like see the panic in their face. I honestly [00:04:30] had to turn it off. I couldn't. It gave me, you knew they were. Oh my God. It was crazy. But anyway, I don't know what it's called, but it's a, It's like, cause I've understood

Max: that the, the free divers, they're like, when you, there's no sort of warning.

Max: They just, [00:04:45] like, if they get it wrong, they just, all of a sudden there's unconsciousness. Yeah, my impression from watching a bit of this, watching a bit of this,

Nicholas: yeah, and they like, they have people who try to help them, and, and this movie, something very tragic happens to the partner of the, of the record holder, uh, at, [00:05:00] under some version of like, I think he was saving her.

Nicholas: Um, from that, anyway. It's a very sad story, but. Dark. Yeah.

Max: So on that note. On that note. So, how would you, like, The, [00:05:15] the entrepreneur in residence role, assuming in a, in sort of a good place, not the underpaid associate. What, like, what is that and what, how would you describe it? And what's the difference between that and being a founder?

Nicholas: Yeah. I think at different [00:05:30] places it means different things. So I, I, what I can answer pretty clearly is what it, what it has tended to mean for us over the years. Um, which is it's, you know, first of all, that those two things are probably not particularly distinct. Right. Those, they're kind of running in parallel.

Nicholas: [00:05:45] Um, I mean, I think when you do it at a big venture firm, you're, you're in that role because they're paying you and they need to have like something and they need to have some, like, you want to have some title and that's why then you see people with executive in residence or I mean, like, you know, you're just in [00:06:00] residence.

Nicholas: So how about we just call it a resident? Because that would, by the way, from our perspective, more closely describe an analogous thing. When you think of a resident in a hospital, you think of someone who is basically doing some combination of learning on the job. [00:06:15] Um, and I think probably, you know, with the intention that, let's just say, they're going to go into private practice, that eventually they I think it probably looks fairly similar, you know, like if you're in the IR most places you're kind of studying you tend to be studying like markets and [00:06:30] customers and, um, and, and the various laws of physics and combined with the kind of arts of how do you, You know, start something and what do you want to start next and you're trying to kind of steep yourself in that topic and so I think that would look a bit like wandering the halls [00:06:45] of the hospital, you know, walking into different cases and learning about them or whatever.

Nicholas: And similarly, I think in most cases you're probably spending some amount of time in and around the existing portfolio of the organization that you're in residence with. And so you're, you know, maybe plopping in [00:07:00] to help out with something because you presumably have some skill set that you can maybe make available and that's certainly been core to it.

Nicholas: Um, you know, however, we've worked over the years is that it's very common that if someone's in, in residence in whatever format we want to call that, that, you know, it wouldn't be surprising at all for them to [00:07:15] spend a month, two months, three months doing some work for one of the companies that we started a year ago or something, because that gets them kind of engaged in the texture.

Nicholas: And I think a big part of it. And I assume this is pretty general, is if you sit down and you get [00:07:30] like a blank piece of paper, like, I'm going to start a company today, um, you know, I, I don't care how disciplined you are, like, you know, you won't fill the day with that job because you'll, you'll write like a list of things and you'll have to go do things.

Nicholas: And you use this great phrase, like, I would love to accelerate the [00:07:45] tuition on the learnings of doing this podcast. And so I'm going to do as much of it as I can as soon as possible. Well, like, let's assume that one of the things you're doing when you're starting a company Is like you're just doing things with the goal of creating information with which you can then make a new decision, right?

Nicholas: Well, that [00:08:00] information doesn't always like come back. Instantaneously. In fact, I think some of the information that comes back instantaneously, you probably should be a little bit distrustful of, right? Like, it's like the information you can get immediately is like whatever you can Google or I guess now you can, you know, ask chat GPT about, but like, okay, well that probably information that [00:08:15] everybody has.

Nicholas: Um, so you then are making a decision. Are you a better, Like judge of that information and the person next to you. I think that's a very risky thing. Um, if you go do something and this is a Brian Armstrong, the Coinbase founder talks a lot about this, or at least I've heard him talk [00:08:30] about it, but you know, in action creates information.

Nicholas: Um, so you gotta go do something to like, you know, create some unique piece of information with which to make a decision. Most of whatever we have ever done. And certainly what we've tried to encode in autos is [00:08:45] a bias towards do something so that you can create information, hopefully about the customer, like have some interaction with your customer, basically anything.

Nicholas: It almost doesn't matter. Just do something that elicits a response from the customer and then react to that and then figure out [00:09:00] what you do about that.

Max: Yeah, there's this great quote that I, I heard, I can't remember where I heard this quote, but it's something that I think a lot about often, and I definitely tell our team.

Max: It's like it's, it's easier to steer a moving boat. You know, like you can't steer. I think that's very well said. A boat standing still, you can't steer it, so. [00:09:15]

Nicholas: Yeah, I heard a version of this, um, there's a, there's an entrepreneur named Patrick Drahe who, uh, owns a bunch of cable television businesses in Europe.

Nicholas: He basically ran the John Malone, uh, cable television playbook in Europe, like a decade or two after John [00:09:30] Malone ran it here. And, um, and, uh, he then bought Sotheby's, the auction house. Um, and my wife was working there at the time, and so I, But somehow, I think it was on YouTube at some point, like listen to a town hall he did after he acquired Sotheby's.

Nicholas: [00:09:45] So you have this like cable television and internet and, you know, like pipe, uh, entrepreneur and, and CEO and billionaire who buys this like luxury asset. And so I think everyone is a little bit like, you know, who is this guy? And other than that, he speaks [00:10:00] French. Like what is his claim to luxury? But they got on and talking about how you like work.

Nicholas: And he. And he said this amazing thing and I'll butcher what exactly, but the message was, they were like, what do you want us to all take from this meeting? And he's like, the only thing I want you to do [00:10:15] is the next time you're in a meeting, just make a decision instead of waiting 30 days to make the decision.

Nicholas: Um, because the extra benefit of the 30 days, is incremental. The benefit of using the 30 days to [00:10:30] react to whatever you learn from the decision that you choose is, you know, invaluable. And I think it's just, I mean, it's, by the way, it's very difficult. Like, it is hard to live life that way. It is hard to operate that way.

Nicholas: Making those fast decisions. You just realize how often it's the, you know, [00:10:45] there's always a good reason to. Yeah, just like, you know, well, we could do this one extra thing. Um, and by the way, sometimes that is true. Like, and the reason it's difficult is because sometimes you're right. You know, like, um, I don't know, whatever the analogy is.

Nicholas: Like, your, [00:11:00] your first version probably does suck. Um, so yeah, so maybe do a second version, but probably don't do a tenth version. And where that fine line is, is, is very challenging. But, um. But you got to be creating third party information, especially in these kind of the lonely [00:11:15] business of entrepreneurship, where you can get in your head and deselect everything eventually based on, you know, realizing that there's some reason why the thing that you think should

Max: exist doesn't yet exist.

Max: Do you have any, [00:11:30] now having done this as long as you've done it, do you have any, I hate to say tricks, but Plays that you run or something in the early days to get that information faster I think back to like when we start when I when I joined Opuscope and I was like I was like, [00:11:45] what do I need to do Alex to do come build this thing with you?

Max: He's like figure out sales. Yeah, like I'd been a derivative You know, yeah, like planted my ass in a chair and just set cold emails for the first nine months I mean, sending cold email would be a pretty good way to start. But it took so long to [00:12:00] start getting those signals, you know? It was like nine months to close the first deal.

Max: And so I'm curious, like, what would you have done? Or is there anything you'd think about to get Because we sent a lot of cold emails where there's just no response. They're just going into the ether, right?

Nicholas: Yeah. Well, I mean, first it's like, go to autos. com. You can sort [00:12:15] of know. I think the, I think a lot of it is behavioral.

Nicholas: I think one of the parts I'd say is that there's a peer pressure dynamic to that. And so this is a place where I think having some sort of co founder or co founder like person, which is the role that [00:12:30] we've often played for people, is so valuable. Which is, it's, you know, easy on your own to say, well, like, I'm going to send those cold emails tomorrow because I'm going to work today on, you know, working on those things.

Nicholas: I'm going to write the copy. But if like, [00:12:45] if you've got someone next to you, who's, you know, it's a little bit like, um, Yeah. I mean, it's just good peer pressure, right? It's just like, you don't really want to be the person who says, oh, like. Whatever. And, and it's often easier when you're not the person in the seat [00:13:00] of whatever that core function is to recognize when someone's doing that and just be like, well, why don't you send like two today?

Nicholas: Yeah. You could do that. Couldn't you? And they're like, Oh yeah, I could send two. Yeah. One's better than zero. Yeah. Whatever. Right. And, um, so I think it's a place where, [00:13:15] you know, we've often tried very hard to just be the person sitting in that seat. Like, do we really have to wait for that? Because like, why don't, why don't we just try that?

Nicholas: tomorrow or today or now like how about we use this time now i mean i'm amazed by and this is partially a personal comment i i [00:13:30] definitely have the bad habit of procrastinating things And the, the, the only trick I've ever figured out there is like, if you're on a call with someone and you say, I, I've tried to catch myself.

Nicholas: If I'm like, Oh, I'll do that. You know, like, Oh yeah, sure. I'll send you an email. It's like, no, no, like, let's just do this [00:13:45] literally right now. It'll take 30 seconds. Like, just hold on. Um, so I don't know, but the, but the, but it's exhausting, I think, to like function like that, you know, to just constantly be like, Oh no, no, we could probably figure out a version of this.

Nicholas: We could exhausting for you or the people around [00:14:00] I think everybody, you know, I think it's, um, The human nature part of it is to just kind of wait a step or whatever, but I think that's where I was looking at a Henry Ford, I think, says something like, you know, there's nothing, nothing's particularly [00:14:15] difficult if you break it in a small.

Nicholas: Jobs or whatever, obviously. Yeah. That's the marketing slogan of the assembly line. Sure. Um, uh, but I think it's pretty true. You know, like, uh, atomizing your work and, and slicing it into very thin jobs. Um, [00:14:30] if, if there is something that you feel you need to do, certainly at the entrepreneurial level, which is the only job that I have any, you know, I have studied at least, um, you know, there's never a reason if, if, that the, the, the bias should [00:14:45] be.

Nicholas: If I can't do that today, not when can I do it, but what version of it can I do today? So instead of taking the task and saying, Oh, well, therefore I could, I can get that whole task done by the end of the week or by the end of the month or by the end of the thing. Instead of thinking about that, well, why don't we [00:15:00] just cut that job into smaller pieces so that you know what it is you are doing today?

Nicholas: And I think this is like, I mean, it's a whole nother, I would argue that this tends to be a, um, Um, a hallmark of a resourceful person, um, I'm very interested in, and Henrik and I spend a lot of time chatting about entrepreneurial [00:15:15] resourcefulness, and it's this kind of, um, quality that you can, I think you can develop and you can train and everyone can train on themselves.

Nicholas: And I think this is a big part of the conversation about what it means to be resourceful. But, but one of the ways I think about it is like, if you got to the end of the week with one of your employees and you gave them, and they said, how did I [00:15:30] do this week? And you said, well, you were very productive.

Nicholas: Well, you can kind of like imagine in your mind what that means. Like they did the things on their to do list pretty well. Um, if you had another employee and they got to the end of the week and you're like, and they said, how did I do today? And you said, well, you know, you were very resourceful this week.

Nicholas: It doesn't necessarily mean that [00:15:45] they like got all their. You know, stuff done, uh, it probably means that first of all, they came up with some things they added to the list. They like looked at the to do list and they were like, well, those 50 percent of things I think we can jettison, but we'll do these and then we'll add these things because these are more important.

Nicholas: And maybe they [00:16:00] made some like system for how to like keep doing those things without having to invest more time. Or, you know, there's these like certain criteria of what we could all imagine resourcefulness to be. But one of them is in the face of the thing, not getting done. You do

Max: it. That's interesting.

Max: It's, [00:16:15] you know, that's apart from figuring out how to start a podcast. One of the things that I'm probably the most important thing that I'm trying to figure out now is like recruiting and hiring. And I'm, I'm curious with that, kind of what you were just saying about [00:16:30] resourcefulness and kind of bias to action.

Max: I think I know the answer, but like if someone comes knocking on your door at PreHype and they, they want in, what are the qualities that you're looking for in that person? Then I have a follow up.

Nicholas: Yeah. You know, I think the main, [00:16:45] and we feel the same, maybe it's a crutch, but I think we feel the same way about, it's the advice we give you about when you're thinking about a business idea.

Nicholas: So like, a version of that thought process. So I've got a bunch of different ideas for companies I can start. You know, which one, which one should I [00:17:00] start? What qualities should I look for in the businesses? And our attitude is like, well, can you start all of them in some model? Maybe, you know, like, can you do something for all of the ideas that you have some real emotional connection to and so that you can gain some information, right?

Nicholas: You know, um, [00:17:15] and by the way, like trying to, from the start, like pick which of the things might be the right one, I think is just really difficult to do. So You

Max: mean when an entrepreneur

Nicholas: has like five ideas, like picking the one, I mean, sometimes you can say like, that one's [00:17:30] Objectively better. Objectively.

Nicholas: That tends to just be like it's not very well defined. Okay. But like if you define them all, if you could come out in a place where they're all defined at the same level of, you know, resolution and along the same parameters, my answer would generally be like, just [00:17:45] try. something across all of them so that you get some information, including which one do you enjoy spending the most time on?

Nicholas: Cause let's assume that this is just going to require like a ton of personal commitment and whatever. Well then like the sooner, you know which of these customers you enjoy serving or which of these solutions you enjoy working on or [00:18:00] whatever, the sooner you'll be able to know which one might you be willing to like put the extra degree of effort into.

Nicholas: But anyway, so if you apply a similar thought process to people knocking on the door and saying, you know, I want in, um, our attitude is, well, let's just find something to work on. And we have [00:18:15] over the years, you know, attempted to, I mean, you know, maybe that's not, like, you know, the only way to do it, but a big part of it has been can we find some, You know, can we create some surface area for collaboration because interviewing someone or [00:18:30] talking to them and trying to come up with like what qualities do they have or not, at least in my personal experience, is just really difficult.

Nicholas: Um, and so I'd rather come up with some way to work on something together. Some kind of like practical assessment or project. Or like, or like, um, you know, oh, we have this portfolio company [00:18:45] that, you know, we Um, and you seem to have the following experience, so you might be relevant to helping them. Like, let's, let's go spend a cycle working on that.

Nicholas: And it could be a week, it could be a month, it could be some time and we'll pay you or whatever. And so, but [00:19:00] can we come up with some way to get to know each other better? Because also it's a two way street. Like, you know, how does that person find out that when they say they want in that they really want it?

Nicholas: You know, like they don't, they don't know what, I don't know what it's like. Um, and so I think, um. [00:19:15] And so I think, you know, all of those things are part of how we try to just create opportunity for shared learning and exposure so that we can then make it, you know, decide if we're all into [00:19:30] things. That being said, once you do that, what comes through that is generally I'd say that like entrepreneurial people are, um, Agitated.

Nicholas: They like, they don't really like sit there [00:19:45] waiting for an answer. They like want, they, they, they demonstrate this quality that we're talking about. Like they, they do stuff. Probably some impatience. Yeah, there's a bit of impatience. There's a bit of um, just kind of like, Willingness to try. [00:20:00] Very rarely do you hear the words, Well, I've never done this before.

Nicholas: So I gotta, you know, do you know how to do that? That's like, that sentence. Um, which we all hear a lot. You know, it's like, oh, well, like, um, I've never done that before, so I gotta, [00:20:15] I gotta think about that. It's like, actually, that would be, that would be fine. I've never done that before. I've got to think about that as like something you might hear.

Nicholas: I've never done that before. Do you have any, Resources, like, that's a

Max: direct,

Nicholas: you know, that's a real red flag.

Max: Did you always have that attitude? [00:20:30] Like, when you're talking about this, like, you know, positive peer pressure and, and exactly that we were talking about, like, just sort of like find the way to yes.

Max: Like, do you have a, do you have a sports background or anything? I'm curious. I mean, I played

Nicholas: a lot of sports as a kid, but not in any form, formal, you know, or no, you know, not, [00:20:45] not at any level of, uh, I'm the, I'm by far the least accomplished athlete in my family, maybe is an easy way, and nothing particularly distinguished about my family's athleticism.

Nicholas: I was wondering, you're like pretty tall and you're talking about all this stuff,

Max: it's like, you know, and I, I have, cause I, you know, my, I had [00:21:00] a cycling background, so I have a lot of, and competed in that, and I have a lot of friends that are professional cyclists and like a lot of what you're describing are the, often like the soft skills or qualities that seem really common in, in athletes.

Nicholas: Well, I would say that I think that like know, [00:21:15] athlete is not a bad word for what, you know, you know, in the, in the form factor of like someone who does a lot of things well, but not perfectly. I, you know, that's, I think you see a lot of that in kind of entrepreneurship. And I think you'll see a lot of, you know, problem solving.[00:21:30]

Nicholas: It's just a version of like not feeling overwhelmed by a task. Um, and I think athletes often in like finding calm amidst, you know, like competition, et cetera, has a similar dynamic of someone who's not [00:21:45] overwhelmed by the moment, not whatever. And I think versions of entrepreneurs you see are people who, they just have an attitude of like, It's, we can do it.

Nicholas: We can figure this out. We can spend the time. Like there, there is a way. There is a path. Um, at least until proven [00:22:00] otherwise. And I think that's common to that, probably in some way, that attitude of we can win, or, you know, it's possible. Like, I can imagine myself winning this thing. Yeah. Is similar to, you know, I can imagine finding a way through this [00:22:15] problem that I'm thinking through.

Max: That makes sense. I'm, I'm curious. It's like, I really like this idea of, Sort of like there's always a next, not to put words in your mouth, but I think you would agree. Like there's, there's always some minimal next step that you could do. Right. Like, [00:22:30] and the answer is not like, oh, I need funding or I need this or I need that, like you can, you can move the ball forward in some, some, some way.

Nicholas: I agree with that. And it's, by the way, one of the reasons why. Up until a moment where you're very clear with yourself of what the [00:22:45] one thing is you want to spend time on, it's a, it's another reason why I would argue for entrepreneurial people it's not a bad thing to have a couple things going. A couple different ideas.

Nicholas: A couple of ideas, um, that you're mulling over. Yeah. And that's because if you take the view that there's [00:23:00] always something more you can do, there's always, you can push the ball forward a little bit, well then, and then look at one month of that activity, well you will therefore make progress. Right.

Nicholas: Definitionally. There's almost no chance that you will arrive at the end of that month and not have made kind of on an absolute basis progress. So the [00:23:15] question is not, did I make progress this month and therefore should I keep going or not? Because then you will always end up in the conversation of, yes, I should.

Nicholas: The question is, did I make enough progress? Well, that's really hard to judge on, like, without some point of comparison. And so one of the benefits of [00:23:30] having at least something that you're thinking about that Um, even if casually, um, as some sort of kind of mental thing, uh, but, but, or that you're actually making a bit of progress on talking to some other customers, what have you, is that you, [00:23:45] um, I think you get a much more relative, uh, Framework with which to ask the question, which did I make enough progress by doing the small chunking?

Nicholas: You mean well be no I think the small chunking means you will always make progress, right? So then that the derivative of that though is that like if you [00:24:00] are therefore judging is something worth doing Based on did I make enough like one of the ways in which you might think about? Oh, well, is this a business I should keep working on is am I making enough progress, right?

Nicholas: Is the progress fast enough is this going fast enough because that speaks to kind of slope and it speaks to momentum and these are [00:24:15] These are the things that you have to be kind of judging to decide, like, is this something I want to spend the next chapter on, a month, a year, or whatever the period of time is that you might commit.

Nicholas: Should I leave my job to do this? Should I raise capital to do this? Should I, what, these are decisions that you make based on, [00:24:30] you know, how much momentum are you generating? So, but those two things become in conflict because if you can always make a little bit of progress by, by definition, if you just slice them down, you'll always be, you'll If you don't have a point of comparison, it's [00:24:45] then very hard to make the analysis of, did I make enough progress on this idea?

Nicholas: This month, whereas if you have two things, at least you arrive and you've made progress on both of them, and you might think you're dividing your attention, so I could have been making more progress on this one thing, but what you've opened up to yourself [00:25:00] is that when you get to the end of a period of time and you look back and you try to like judge the slopes, You, you have two lines to look at and you can much more easily decide which one of these things is going fast.

Nicholas: It's

Max: a lot better to do a sort of like forward test in real life rather than just That's interesting because I feel like when you, [00:25:15] when you hear people talk about being an entrepreneur or starting a company, there's this, there's this almost like glorification of ridiculous conviction. Yeah. Which obviously works in some cases, but they'll point to like, you know, like Mark Zuckerberg or like [00:25:30] whatever.

Max: And, and obviously these are The outlier among the outliers among the outliers. And I also, what

Nicholas: I would say to that is they often come right after a period of, uh, promiscuity. Okay. Idea promiscuity. What do you mean by that? Well, that like the, that [00:25:45] the reason that the conviction and the unbelievable whatever, um, is, is probably actually another hallmark of an entrepreneur is that there's a degree of stubbornness, I think.

Nicholas: Yeah. In a lot of folks like that. Um, you know, by definition, like it, we're, we don't live in a [00:26:00] perfectly efficient market, but we live in a world where like, you know, if there's a really good idea, it's probably been tried in some capacity. So you have to kind of believe, you know, in a slightly stubborn way that you are right about something that other people are wrong about in order to try anything like [00:26:15] true.

Nicholas: And then

Max: you probably need to be careful to make sure you're not just like the donkey pushing the boulder up the hill. So

Nicholas: that you have this like willingness towards this thing. So up until a moment where. a set of signals have been put in place that certainly convinces you of this [00:26:30] fact. Um, I think it's the discipline thing to do, to your point, to like, you know, to have a point of reference.

Nicholas: And if your point of reference is other people in your Y Combinator class, I don't know, I'm making it up, or you know, you have some mentor who you really trust [00:26:45] to be able to like look at what you're doing and give you like objective feedback and you're going to listen to them, um, you know, one way in which you can kind of have that check and balance on yourself is to Um, have, be disciplined about, just be moving one other thing along for a period of time [00:27:00] along a parallel because then when the moment comes where you, one of them is, you know, you can, you can much more easily than at the, if you spend 30 days working on two things, of course, what you'll say, what anybody would say is, Oh, well, your attention was divided.

Nicholas: You could have made more progress on number one, if you had spent [00:27:15] all 30 days just on that. Well, you and I have already established that, like. You know, the, the information generated by action doesn't always come immediately. So you might find yourself in a place where, like, you spend a day doing something that creates information, but it takes a day for that information to arrive.

Nicholas: Well, so what do [00:27:30] you do on that day? Do you just, like, sit there and stare at your thumbs, or do you do something else? But if you go back and forth on these things, you get the end of 30 days. I think you'll often find that, therefore, you'll be able to judge your own personal emotional connection to something, like, do I just enjoy one of these things more [00:27:45] than the other?

Nicholas: Is one of these just easier? Like, is the, is the You're looking for a kind of suction from the market is like, do I, is the sense I'm getting of the suction stronger over here than over here? And I just think that's a very hard thing to do on an absolute basis. If you only have one thing with which to make that judgment, [00:28:00] but then, you know, when that, when you feel there's that section, um, I think where, where you see unbelievable, That doesn't mean, if there's suction, that it's easy.

Nicholas: Yeah. Like, you're still gonna have to run through walls. A lot of brick walls. And, uh, and that's, and that's then, [00:28:15] I think, when you often see that kind of unbelievable focus and dedication.

Max: How would you, I, I think a lot of what you just said is interesting because it's really help, quite helpful. So, to someone that is maybe in more, [00:28:30] like, building and isolation, you know, someone that's not in, uh, Pre hype type environment or doesn't have peers in these ways, right?

Max: Cause that's something you can do on your own. And I'm, I'm curious if there's any, any specific suggestions that come to them. Obviously, like what you guys are doing is you have this [00:28:45] community and, and that's its own thing. Like, what would you say to someone that someone, you know, wrote you an email or whatever, and they're, you know, building it on their own in Nebraska and they're Yeah.

Max: To kind of create this sort of, these, these [00:29:00] additional data points, because that's kind of what it is.

Nicholas: Well, I think it's all the more reason why that becomes important, for sure. I would say, I would say email people like me, because I, more often than not, I think You know, you find that people are pretty receptive to picking [00:29:15] up the proverbial phone and talking about that and checking back in and,

Max: um, Just start your email with, I was so impressed by your background.

Max: Yeah,

Nicholas: exactly. That got me a long way when I was in college. Yeah, that is, yeah. I wonder what, like, the, uh, how, uh, [00:29:30] How quickly people catch on to the, uh, cold email starters and like what the, what, what becomes avant garde, you know, versus I was tired.

Max: You know, I was talking to a, uh, uh, like, um, family friend the other day [00:29:45] who wanted some kind of, uh, And I was like, well, I don't know if I can give you career advice, but I can give you advice on how to, how to like reach, reach people.

Max: And I feel like one underrated thing. And then I'm, you know, now I'm like derailing this. I'll let you answer the question, but it's, it's crazy when [00:30:00] you're young, you know, when you're like 18, 19, 20, 21, how much time. People who are really high in their career will just give you, if you just come to them on the basis of asking for advice.

Max: You know, I, someone, someone, this is going to be like the episode of [00:30:15] anecdotes and quotes, but it was like, someone told me, or I read, I can't remember, it was like, if you ask for, a favor, you'll get advice. If you ask for advice, you'll get a favor. And that was probably the biggest like accelerator to my career when I was in college.

Max: Cause I went to this [00:30:30] tiny little school in Southwest Colorado that no one's ever heard of. And I just emailed all these people all day long, like, because I want to be an investment banker at the time. And so I'd email these like MDs and all this, and I was blown away by how many people would talk to me.

Max: If I did that same thing now, I would, I feel I would [00:30:45] probably get a fraction of the responses because they'd be like, oh, well, you're already, you know, you're 10 years out of school, like, you should have figured it out already, you know? Nothing worse

Nicholas: than a, uh, yeah, yeah. Yeah, I, it's, I mean, to the point, like, action creates information, like, you, the [00:31:00] cost of doing that is de minimis.

Nicholas: The value of getting one person to respond is, is enormous. And that doesn't mean you, like, spam. Everyone you can find like obviously you're, you're, there is some quality, you know, standard [00:31:15] above which, you know, you'd have to, or below which you won't have any result at all. But I, I 100 percent don't understand if you want to get an answer, why not just send the email and try it.

Nicholas: And if it, if it's you and you've [00:31:30] like, it's authentic and whatever, the world is full of story. I mean, you know, you could spend your, you could build a, like a podcast compilation of how many people, you know. We'll just talk about the unbelievable doors that have been opened for them by just from some sort of cold

Max: [00:31:45] outreach.

Max: Yeah. Yeah authors, too I got I found that like New York Times best selling authors will often reply to emails like so fast. You wouldn't believe it Yeah, because they're like, oh, yeah, you read my book. That's awesome. Yeah. Oh, you're the one yeah [00:32:00] It's interesting it's interesting with everything you've been saying I was listening to An interview that you did actually with Kylo for them and they were talking and I'm gonna I'm gonna mess up the details So correct me, but I think they were talking about In the early days [00:32:15] of for them they came into I think they said they went into Heinrich's office and they needed 25k to do something and I think the response was well, what can you do with 5k instead?

Max: And I'm curious how, how that, if I got those [00:32:30] details, right, how much of that sort of least apocryphal yet. Okay. How much of that sort of, um, approach or response is rooted in like disciplined capital allocation and how much of it is more in [00:32:45] the fact that kind of what we're talking about, right? You give the 25 K, then it's like this bigger thing that you're going to go and you might spend time, be throwing kind of good money after bad and chasing this thing where.

Max: You know what I'm saying? Like, is the concern the money or is it more about the [00:33:00] time being spent on the idea and when you constrain it then it's like you can only do so much.

Nicholas: Yeah, I mean, I think resource constraints, back to the resourcefulness point, are like, you know, everywhere. And, uh, and so, generally speaking, Just better to figure out how to operate with [00:33:15] resource constraints.

Nicholas: I think in that particular case, it's just a byproduct of some of the business model things we talked about. Like, we don't, we don't have a lot of money floating around, and it's not money that we get paid to invest. You know, one of the incentives of someone who's managing capital is to deploy that capital.

Nicholas: Um, [00:33:30] that's how you get to charge, you know, fees and potentially earn carry. And, um, and so there's a bias towards capital. Obviously, you don't want to write too many or in the wrong places, but you want to write the check. Um, that's not our model. [00:33:45] Yeah. Our model is not that. So, so probably the baseline there is just like an unavailability of resources perspective.

Nicholas: But um, but yes, I think it also reflects, uh, it is not remotely surprising to me that one would have a conversation with Henrik or [00:34:00] whoever hanging around our hoop. And if the, you know, I need X and it's like, well, Well, you know, yeah, that, that would be almost like the, the mental model being just being expressed through that form factor.

Nicholas: Well, like, what, what about, what can we do to get going with less? [00:34:15] What can we learn with less, uh, to your point, do we really need to do that whole thing or is there some part of it that we could do? Sometimes the answer is we need to do the whole thing. And sometimes you got to have the conviction to say, like, no, no, I really, I really think without all these things coming [00:34:30] together in this way, you know, that it's not, doesn't represent a fully formed, um, you know, kind of version of the experiment and whatever.

Nicholas: And then that's a matter of, are you convincing enough and are, you know, maybe it shifts your, where are you resourceful to like, are you resourceful in [00:34:45] how you aggregate those resources? You know, but, but yes, it's not surprising to me that I, I don't perfectly remember that story, but like, you know, I, I think it's, um, certainly as a way of working in a way of thinking something that is [00:35:00] pretty core to some of the mantras that we would spend a lot of time on.

Max: It's interesting with all the kind of what we've talked about so far, because Autos makes a lot of sense now. Hmm. And. I'm wondering how did, well, [00:35:15] when did you, you, you're kind of, that was your, your business? Like you, you were, you created that, was that your idea or how did, like, how did that come about?

Nicholas: Yeah. We, we, uh, we got access to GPT 3 in, [00:35:30] uh, the fall of 2020 and if you imagine that a lot of, you know, The earliest work that we would ever spend some time with someone doing is things like, okay, well, let's, let's write down a few of your ideas. Like, uh, yeah, okay, you and I sit down and you're like, I want to start a [00:35:45] podcast company.

Nicholas: Yeah. And I'm like, okay, well, like, Let's define what that is. And so we, at least over time, tried to create these, um, formats for how do you even line up a bunch of ideas on the same, like how do you define what, you have to have some [00:36:00] almost like Mad Lib, you know, template of how and under like a tweet can you describe different business ideas so that you can look at them next to each other.

Nicholas: So like the core. This is like an exercise. This is something we would spend time. Yeah, exactly. And so at the time it's probably in like a notion page. Sure. It's like, [00:36:15] So we would have a format that's like for fill in the blank customer, um, who wants to such and such, something that explains the kind of their ambitions or what they desire.

Nicholas: It sucks that fill in the blank problem statement. The solution [00:36:30] is, Such and such. And so that, you know, so for, uh, dog parents who want to treat their dog like a member of their own family, it sucks that the stuff that's available at the local pet store is [00:36:45] designed for everyone. I don't, you know, and there's no personality and it's brown and beige Yeah.

Nicholas: Um, the solution is BarkBox, a monthly, you know, box of toys and treats delivered to your door on a monthly theme, or I don't know, that butchering the thing. Um, [00:37:00] if you go through that for anything, you know, at least you are defining who's your customer, what do they want, what's stopping them from getting it, and how are you like high level planning to solve that problem.

Nicholas: You have these distinct inputs to the model. And so now you have these things. And so it was very easy. Like, [00:37:15] it didn't take a lot of, like, looking at GPT 3 to be like, well, what could it, like, do for us? So we had a version. So we called that object at the time an inkling. Like, that was an inkling for a business.

Nicholas: It was something that you could define. If you could write those little inputs, then you had an inkling. So we'd have these inklings, [00:37:30] and they'd be lined up next to each other. Um, and so then the question, so then we made a thing called like inkling, uh, roulette, I think we call it, but it was really an, or an inkling slot machine.

Nicholas: And so it's like, what happens if you just like, you know, hit the button to generate a new customer and then a new [00:37:45] desire and a new problem and a new solution. And if you just spun the thing, you'd come up with a new thing. And that was like the first thing that we did with, um, GPT three, GPT three was like cool.

Nicholas: But like, there was just, it just wasn't. You know, and so you, you, your eyes were open to [00:38:00] this was possible. You could certainly generate text and quickly and easily and for free and, and, and so we started to like mess with that and we just slowly but surely we're working more and more and more with those tools to figure out what parts of this early entrepreneurial [00:38:15] journey can you take from being things that someone has to sit down and do to being things that are at least, at least a draft is done.

Nicholas: And so we spent a lot of time talking about how do you, and it, and Will sound, I think, consistent with a lot of the things we've talked about. Like, how do you put yourself in edit mode? not in creation [00:38:30] mode. Um, creation being almost always, like, very tiring. And in this early stages, the more you can, like, remove exhaustion from the, like, emotional, intellectual exhaustion from what you're doing, the more likely it is that you can just find that little bit of progress, [00:38:45] find some action you can take and get in front of some customer and get some feedback.

Nicholas: And then that starts to be energizing. But there's a bunch of work you tend to have to do prior to that moment that, you know, It's just, yeah, I guess like tiring, and it tends to be the difference often between trying [00:39:00] something and not. And so we were just kind of of this view of like, if you could have a draft done with very little input, um, more often than not have the machine guess at, like, well, what Is this the problem?

Nicholas: No, that's not the problem. The problem is X. Okay, great. [00:39:15] But like, that's an easier form factor for most people to think in, um, that you could just start to like, you know, I, it's, it's, it's kind of, um, trite, but like, You know, the generative AI in our business is generating like momentum. [00:39:30] It's just generating the early little, you know, steps that need to get done in order to make progress.

Nicholas: But, um, and so, yeah, autos has been this thing that we've just been slowly but surely making, um, to initially just to serve our own entrepreneur, you know, so that. [00:39:45] Rather than give you a notion template that was blank. Well, wouldn't it be better if you had something you could kind of talk to? Tell it, tell it your ideas, and then it would at least like fill that document out for you.

Nicholas: For example, that's probably what was like the V0 of this thing, and it wasn't called that at the [00:40:00] time, and we weren't sure.

Nicholas: It's been, you know, a number of years in reality in the making, um, but all kind of like building towards just, you know, same thing. Take these every little step of this process that has to get done. [00:40:15] And try to just see, can you have a machine, you know, at least propose, um, the content more often than not.

Max: Yeah, I mean, it's, it's pretty impressive. I mean, I, uh, for anyone that doesn't, isn't familiar with Autosetup, to hear [00:40:30] kind of the elevator pitch, but it was kind of crazy, sort of IRL example. Yesterday I was interviewing Kylo for the podcast, like I said, and, and they were telling me about this sort of, AI thing that they're working on.

Max: And I was like, so how did you, [00:40:45] how did you go about doing that? How'd you make that? You know, you're not a computer scientist to my knowledge. They were like, Oh, auto. So it's not the, as a kind of built to like lead into your description, it's not this sort of, you know, elementary [00:41:00] thing. Kylo is a seasoned operator, right?

Max: And they're there using it. So I'm, you know, how do you describe it when someone asks what doesn't require

Nicholas: that, importantly. But, but, you know, but, but I think it's something that a lot of people will find interesting because it, it asks some very specific questions. It [00:41:15] proposes some very specific kind of answers to those questions.

Nicholas: And then it starts to, like, just do stuff. And it's a little bit putting you in this, again, in this framework of, like, Unless you, if you just keep responding, it'll, for quite a while, keep doing stuff, uh, that is just inching you ever closer to [00:41:30] putting something in front of a customer that you had not put in front of them yesterday, type of thing, um, getting some sort of customer feedback.

Nicholas: And, and preferably feedback from a stranger who fits your customer profile. And um, so the elevator pitch, I mean, [00:41:45] Autos is a kind of family of AI co pilots for entrepreneurs. Um, It is, you interact with it initially and primarily in Instagram of all things. Um, and so you DM with our Instagram account and it responds to you.

Nicholas: And the first thing it does is it asks [00:42:00] you to name the customer you'd like to serve. And you can make up the name of someone if you don't have that person readily in mind. But we can come back to like why we think that's a good idea. Interesting starting point. And then it, the first thing it attempts to do in chat is, is kind of frame up your inkling back to that.

Nicholas: [00:42:15] Right. Thing. So figure out what is this, that this customer wants, what's stopping them from getting it. And it proposes a number of solutions in order to kind of in conversation arrive at like a, a version of that form factor. It then very quickly moves on to say, okay, well give me a second. I'm going to go make, to go make Some [00:42:30] slides and it generates a 14 or 15 slide presentation in which it attempts to kind of like take the inkling and flesh it out and think about it and play it back to you as the entrepreneur.

Nicholas: And this is really designed to [00:42:45] as like the human readable version of, um, what we call a customer delight plan, but of a business plan. It's something that, um, At least, uh, tries to, with the inkling as the starting point, think about, okay, well, like, what's the context? What's the [00:43:00] macro context in which this customer problem exists?

Nicholas: What really is that problem and how could we dissect it across a couple of different dimensions so that we really understand it well. Um, what then is the solution and it will send off some agents to, you know, design a logo [00:43:15] and it's a starting point. And, uh, it picks some typography so that it has a bit of brand feel and pick a color palette and apply that color palette everywhere.

Nicholas: Um, and then it moves on to, that presentation at least, moves on to talk about the solution, talk about, you know, kind of go through a user journey of, [00:43:30] How might this person be kind of, you know, onboarded to this system? What would be the kind of moment of delight for them? Um, and then through to what are therefore the benefits of the solution?

Nicholas: How much might someone pay for it? It does a bit of Google searching to find how many people are out there that fit this profile. And [00:43:45] therefore, if you take like the price point assumption multiplied by that number of people, how big roughly is this opportunity? And then down to like, what's like a to do list of things that we might be able to do to make a bit of progress?

Nicholas: Thanks. The person is then asked like, okay, what do you, what'd you think of that effectively? [00:44:00] Uh, more often than not, they're like, well, it's, it's a cool start, but like, I've got some fixes to it. And so then they get given a little. Uh, web interface where they can go in and they can play with the logo and the name and these things and then they can rewrite the elevator pitch because the reality is that it's the whole deck is really kind of summarized [00:44:15] by 12 sentences which are basically the headers for each of the slides effectively.

Max: And does this come from like a framework or playbook that you guys have figured out over the years? This is all the stuff that we've done,

Nicholas: you know, that fits the exact framework that we would have ever, um, worked on ourselves. And we for a long time have run a, [00:44:30] uh, a consulting business where we've helped, you know, The Fortune 500 come up with new business ideas, and this was in large part the way that we worked through framing those up.

Nicholas: And, um, and that's really just, I mean, and we do all that for free, [00:44:45] and we do it because that's how the, like, The AI can ingest the information sufficiently so as to be able to actually, like, make progress and have a conversation about this idea. It's like, we almost view it as, like, until the moment where you've gone back and [00:45:00] forth with it on that plan and on, like, the key inputs, most importantly, to that plan.

Nicholas: Like, you haven't even been able to describe a business idea sufficiently to figure out what to do about it, right? I mean, like, if you and I just sat down and had a conversation, you say, I've got this idea for this podcast. Like, I've got this idea for this podcast. Well, like I'd have [00:45:15] to ask you five or six or seven or eight or nine or ten questions about, you know, like what, why does that, why do you, what, how did you even arrive at this?

Nicholas: Um, how do you think about, you know, that solution and like, where could you take it? And that's really just me trying to like map out this thing so I can even have a view of what [00:45:30] that is. And so that's really what we're doing up until that moment. Um, and then the thing we'll do two things. One is it will give you a link where you can take an interview as if you are the customer.

Nicholas: Okay. And so in many cases, the entrepreneur is, could be the potential customer because [00:45:45] they're starting this business based on some problem they've observed in their own life, and they have the problem, and so they're trying to solve that problem, and so that's easy. In other cases, they're, we ask them to take it from the perspective of the customer so that they can, we can just go in more depth about.

Nicholas: Obviously, we've [00:46:00] basically gotten three pieces of input from the, from the entrepreneur at this point about what the customer problem is, like we need more. Um, And so we have an AI that talks to you or you can type with it and you fill out this customer interview. And if you want to, you can take this little link that we've given you and you can send it [00:46:15] to a couple of other people that fit this profile and the AI will synthesize all the feedback it gets.

Nicholas: It'll transcribe that feedback and it'll put it in one place. And so what that's really solving is that most of the time what we've observed is that when someone wants to start something, they do have two or three people in their life who fit the profile of a [00:46:30] potential customer. And so. It would, wouldn't it be nice to have like an easy, asynchronous, so you don't have to schedule something with some of your friend who's busy and you don't really want to impose upon them, but they are willing to take some time to give you some of their thoughts.

Nicholas: Um, how do we just really easily capture that? Uh, information as quickly as [00:46:45] possible and then synthesize it into kind of like a product roadmap. Something that says, here's what was discussed. Here's what seemed to be like the key features that would be most interesting. And then the second thing I would do, and this is I think what probably Kylo talked about yesterday, um, with you is [00:47:00] we will then, and this is kind of meta, our AI will make you an AI that you can use to talk to your customers.

Nicholas: And so we call that an auto mate. And your mate is something that. You know, is, is informed by this conversation that, [00:47:15] you know, our co pilot has had with you. It under, it's been given a version of your business idea and, uh, and the goal of it is really to have you have a effectively a landing page that, um, instead of just talking, if you, [00:47:30] if you like landing pages to date as things that talk, they just write stuff and they talk at you as the customer and then you can kind of decide whether you want to engage with it.

Nicholas: Like what would happen if this was a landing page that could. listen and respond. And, uh, and so if you reimagine a landing page in [00:47:45] a very conversational format, that's effectively what we have in our Instagram bot, and that's what we give people to, in order to talk to their customers. Um, one of the main goals of it, and the reason that it's probably differentiated from a landing page is it also can be [00:48:00] trained effectively.

Nicholas: It can be given extra skills. And so it can be given, uh, Um, tools that it can deploy on behalf of the customers. And so, for example, in our case, that tool is that it can write slides. Um, and so what the AI will continue to do is basically try to figure out [00:48:15] what is our co pilot with you in conversation.

Nicholas: We'll try to figure out what is it something that your mate can do for your customer to offer them a benefit so that the first experience that they have with you is not, um, hey, come tell me all about yourself and then I'll like let you know when I, when I'm ready to [00:48:30] launch. Yeah. Which is like what these wait lists.

Nicholas: Style landing page would probably traditionally have done, um, which is fine. Uh, but instead, like in our case, it's like, let's talk and then I'll, I'll give you these slides. Like I'll give you this benefit. And then if you want to keep talking, you know, then we [00:48:45] can move on to the things that I, for example, charge money for if I know how to do those things.

Nicholas: But if I haven't figured out how to do those things yet, at least I will have built trust and rapport and. And, um, you know, uh, maybe just a little bit of relationship with you and have like made the first investment in the [00:49:00] relationship capital of this relationship between you, the entrepreneur and the customer.

Nicholas: And then that's something that we have found over time to be the building block for all sorts of things, including that it's your first distribution channel, um, through which you can then, as you go through the process of [00:49:15] developing whatever product or service or solution it is that you want to develop that you can deliver.

Nicholas: And so, um, Um, that's what Kylo had, had made is gone through this process and had their own AI that they were going to use to start talking to their customers. Um, and so, you know, that's [00:49:30] really a big part of the business that at this moment we're in. And then there's lots of really interesting things that come downstream of that, which is basically like our experience has been that if you as an entrepreneur can go get some people to, you know, talk to, and in this case [00:49:45] you can talk to them by way of this AI that you've.

Nicholas: infused with your own idea and way of talking and tone of voice and ideas and, and ideas of how to serve that customer. Um, you get these first data points of like, do people kind of like me? [00:50:00] Right. And do I like them? Yeah. Um, and, uh, and then the downstream of that is, you know, that you're kind of, now you're in default, I'm not going to call it alive because it still requires investment and love and, but like, Now you have a thing, and it can talk to your customers, and it can try to, like, [00:50:15] serve them.

Nicholas: Well, like, you'reyou're in business, kind of. Like, byby some baseline definition, you are now out there, you are in business, and, um, and we then try to help support those folks through capital and network and all the things that we traditionally would have done. done. But, [00:50:30] um, but that's really the place where we've kind of led to.

Nicholas: And it's just amazingly exciting. We have this very diverse, I guess I'm going to call it, but because both it is diverse, it's men, it's women, it's old people, young people, um, geographically diverse. It's [00:50:45] all over the world. It is, Um, uh, it's racially diverse, you know, it's everything diverse, um, and, and most importantly, the ideas and that they are working on and the customers that they want to serve are diverse, which is what's, you know, totally exciting to us is like, you [00:51:00] know, if you put up a, the equivalent of a form and you say, well, like, what customer do you think, you You'd like to serve what you're hoping, of course, is that you learn about lots of different or what certainly like selfishly what I was always hoping is like we would learn about lots of different customer [00:51:15] types and needs and what their problems are and why that problem exists.

Nicholas: And, um, you know, that's been totally true. I mean, people are working on everything from yesterday. I saw someone who helps lawyers find after class class action [00:51:30] lawsuit. Find people who are who deserve to be paid. Yeah. And I guess there must be something about the lawyer's business model that is, you know, incentivized to make sure that the payouts get delivered.

Nicholas: But a lot of the people who have been the victims of something or whatever, They have no idea. They don't know. And so how do you find those people? [00:51:45] Finding people

Max: to just, hey, do you want some money? This

Nicholas: is the customer, in this case it's a lawyer, and how do they find the money? I have no idea if that's a big market, a big business, whatever.

Nicholas: It's not a zero market. Yeah, it's a business. And it's just like fascinating to hear someone talk about what the [00:52:00] problems with that are, how you go about it, what could technology do to maybe make that easier to find customers or deliver value. I mean, it's just fascinating. Yeah,

Max: I think it's so cool on so many levels.

Max: I mean, that's something Alex and I talked about. always for years that I mean, our business is bootstrapped. We're not in the sort of [00:52:15] VC orbit or whatever. And the thing that's always struck us as interesting is there's often this feeling like if you're going to start a business, it has to be this billion dollar unicorn.

Max: And I remember my first exposure to a lot of this stuff. I had an internship in like lower middle market MNA [00:52:30] and like, you know, the guy, the blue collar guy that walked in there that had started a janitorial company whose clients were Schlumberger and all these other huge companies. And he's, he's about to go get, go get a 25 million check.

Max: I, he, he's doing just fine. You know, he doesn't, he doesn't think you need [00:52:45] to start a billion dollar unicorn. Yeah. Uh, and so it's. And he owns a hundred percent of it. Yeah. And so. And if

Nicholas: it's sold for 10 million, he would actually get all 10 million of it. And he would feel pretty good about that too.

Max: Exactly. No one would be mad at him for selling it. Well, I mean, well, I'm presuming. But anyway, uh, you know, [00:53:00] I. I think that this is, it's like such a breath of fresh air talking to you about AI, because I think that there's a lot of AI fear out there, you know? And I've had a few, kind of the opposite perspective that like, okay, [00:53:15] maybe it's going to go full Skynet and, you know, we're going to all be like slaves to the machine.

Max: But I, I, I don't think so. I think that on the other hand, there's this, It's this incredible equalizer, right? I mean, a couple of years ago, if you wanted to start a business [00:53:30] of any kind on the internet and you didn't have any kind of programming prowess or any of these other specific hard skills. It would be like a non starter.

Max: So it's kind of, it's cool how these tools can just make it accessible to really anybody with an idea and [00:53:45] a little bit of sort of resourcefulness. And if you're, if you're comfortable sharing, I'm curious, how many businesses have been started on Autos so far? And how long have you guys been running it?

Max: You

Nicholas: know, we've only been at a version of like Autos being Autos for, you know, [00:54:00] Um, and I don't know that we've like gone public or whatever with what's actually coming through it quite yet. So I probably, you know, dimmer on some of that, but you know, we have thousands of plans that we see bare minimum, right?

Nicholas: [00:54:15] And so like, just think about that from my perspective, I've gone from like a few plans a year to thousands in the first couple of months of the year. Um, and, uh, and then we have, you know, Let's call it hundreds of these mates that have been made and, you know, the pipeline of these [00:54:30] things is now we're starting to have people, um, you know, in real numbers who are, you know, have thousands of their own conversations going on.

Nicholas: So, you know, the A. I. That R. A. I. Has made them is now conducting, you know, thousands of conversations, um, and soon tens of [00:54:45] thousands. Um, And so that's just fascinating, right? Yeah. Um, it's, it's a, it's like a really profoundly different thing for us to be engaged in. Um, but you know, the, if the core [00:55:00] job has always been how do we help an entrepreneur start a thing, start their next business, but, but therefore, the first step of that to slice that down is like, you know, collide them with some customers.

Nicholas: get them in front of some people, get them talking to [00:55:15] some customers. You know, the scale at which we're doing that is, you know, incalculably larger. Like orders of magnitude. That's it. Larger than whatever we did. And, uh, and that's like, it's just super exciting.

Max: Are there, you mentioned the company that is [00:55:30] doing this sort of like outreach for people that haven't found these class actions or haven't received their class action payments.

Max: Are there any other standouts? I mean, I'd imagine with thousands, how do you even go through them? That was literally a pitch

Nicholas: yesterday. Yeah. Um. . And so, you know, the, I'll say, I'll say it's an interesting part of [00:55:45] this business and, and, and, and a reason I'll like obfuscate a little bit, um, is that we don't, and maybe we'll get there very soon where people are like really out there.

Nicholas: I think a lot of these things are things, at least, you know, at, let's call it month four of doing this. So [00:56:00] run your playbook forward. And we've been getting a lot better about what it is that we're actually doing along the way there. Um, but yeah, we have a. DJ who wants to teach people music production. So if you're, if you're getting into DJ, but you want to start producing your own music, how do you do that?

Nicholas: And so he has a, [00:56:15] a way of doing that. And, and he's, he's using these tools to kind of like go find these people. And, um, well, that's like a, a thing that came a couple months ago and he's just now kind of, I think his stuff has been roughly ready for a while, but like he himself, I mean, entrepreneurially, like sometimes [00:56:30] back to the point, like it takes a lot to like put yourself out that next step.

Nicholas: And so. I think one of the things we're creating for people is a environment in which they feel safe advancing something without it necessarily yet having been like their thing that they're telling the world that [00:56:45] we're, we're doing. And so I don't know when the moment is going to come where we have enough of those move over, but I don't really feel that almost like the permission to share a lot about what people are doing.

Nicholas: In some respects, I think a lot of folks are, you know, doing it. I mean, we have a woman in Alabama, uh, who's [00:57:00] terrific. I mean, I think she's probably 70 plus. Um, she's very into, uh, self organization and, and, um, you know, like, um, organizing your home and your life and your calendar. And she's gone and built like a thousand followers on Instagram [00:57:15] as part of pushing her tooling out to folks.

Nicholas: Um, and I, I say that, I, and, and I'm, I'm drawing my, you know, I'm, I'm getting things out of my brain where people have done these things where they start to show themselves as wanting to be. But I think we're, we live [00:57:30] for a number of months with people actually, where they're advancing their thing and they're tinkering with it and they're getting a feel for it.

Nicholas: And we're putting little bits of, you know, pressure on things. And I think we'll get, continue to get faster and faster with how we deploy tools to help people get over this hump. But there is a component [00:57:45] where, and I think it's important that almost like people feel this, where they don't have to have, you know, they can go through these first steps and not immediately, Like be on our web page as like, yeah, you know, this is a thing.

Nicholas: Um, like I, I think it's okay for people to try these things [00:58:00] almost in. a little bit of anonymity, you know, get some feedback. Well, it's like you said it earlier, like

Max: have 10 ideas or whatever. And like try a few of

Nicholas: them and not yet like say to everyone, you know, this is my thing, you know. Um, and I think that's a part of what actually that's that, that, [00:58:15] um, cushion and that, you know, You know, uh, you know, kind of force field is something that we actually, that I think people enjoy about.

Nicholas: They, they are interacting in relative anonymity for a period of time. And their business can go start having conversations with customers without them [00:58:30] having to have said to all their friends, like, this is the thing I'm doing next. Yeah, that makes sense. Or even that I'm trying to do next. And I think that's, uh, you know, at least I, I, it resonates with me.

Nicholas: Like, I have plenty of business ideas that I'm not going to like, you know, Tell you even about, yeah, because I think they feel kind of [00:58:45] dumb and I kind of want the safe space to like, Try them without, you know, yet saying to you like, here's an idea, Max, you know?

Max: Alex and I call it the skunk works. We probably spend like three, that's probably the best, the best part of our working, you know, working together.

Max: We probably spend five hours a week just talking about all these, [00:59:00] we'll call them either skunk works or harebrained ideas. So often I'll get like a text from Alex at 10 o'clock at night, I'll be like, I got a harebrained idea, remind me when I come in tomorrow. Exactly. And it's like everything from how we're going to start a, you know, San Juan cold plunge company to like.

Nicholas: I mean, that seems like a winner.

Max: Yeah. [00:59:15] Yeah. Um. I hope this isn't too much of a hard pivot in the conversation, but, uh, Yeah, I was trying to, you know, we're, we're, we're, we're getting close to out of time. And I want to, I had a couple of things I wanted to ask you cause the, when I, when I slacked you and asked if you'd do this podcast with me, I had a [00:59:30] specific question.

Max: Um, and, and so for a little bit of context, you know, you obviously have this like incredible background of helping these companies from really like early stage, get traction and get, off up and running and [00:59:45] helping people understand like, what do you need to do to get to that next stage? Um, and I had been talking to someone who I respect very much and they're, they're actually working on starting a venture studio.

Max: It was in this case. Um, and so I thought, you know, [01:00:00] given pre hype is in this position where you're, you know, as you've pointed out, you guys are not a VC, but I don't know, would you call it VC adjacent or, you know, I'm sure there's, there's some kind of in the orbit. Yeah. Um, the, I, I had, as part of the prep [01:00:15] for the show and what I was kind of trying to do is just ask smart people who I respect, what are you trying to learn about?

Max: Um, and so I messaged you because he basically told me that the things he was trying to learn about were, what was it? 360 degree view into how VCs [01:00:30] think, which is a little broad. Um, but really trying to understand how you think about building a business from an arm's length. And I don't know if you would describe it that way, build it, because that, you know, takes some credit or, or whatever.

Max: But, how, you know

Nicholas: Specifically, I [01:00:45] can, I can react very strongly to that one. Okay, yeah, so I'm curious your reaction. I don't, I mean, that's not, sorry. That definitely works, and there are exceptions that prove the rule. That is certainly not our model. Um, we

Max: The building of business from an arm's length.

Nicholas: Like, you know, our, we are so massively oriented towards the fact that like a [01:01:00] founder has to be like emotionally, intellectually and otherwise, you know, engaged and committed and that attempting to puppeteer and all these words that you might, you know, start to think that it just gives me the creeps to be on.

Nicholas: And I get like, it makes [01:01:15] me nervous, feel sick to my stomach because like of how much hard work there is to be done. And if someone's not emotionally, uh, you know, super connected to that, um, and so, and therefore everything. And I'm in my view is in support of that person. And so if that's what business building a business from an arm's length is, [01:01:30] is just being supportive to someone, um, you know, then, then I think that that's just really a challenge from a marketing perspective because show me a founder that really, um, is someone you'd want to spend time with who wants to have their, you know, be the client of [01:01:45] someone building their business from an arm's length.

Nicholas: So anyway, that that's overreacting and I'm sure that's not what's, you know, in the, In that kind of, um, meant by the question, um, but, you know, our view is, and part of the reason that, you know, we view, [01:02:00] we can either kind of a couple times a year with people that we've gotten to know really well, help them start a company, or we have to be able to provide like a and software that, you know, can, that, that looks much more like a scaled offering, um, and, [01:02:15] and charges, if you will, accordingly.

Nicholas: Um, I have a very hard time with stuff in the middle. Like, yeah, either this needs to be someone that I feel like, you know, I'd invite to my wedding. Right. Almost. Uh, or, or someone that has like a normal looking, you know, widely distributed [01:02:30] customer relationship. Uh, that, that stuff in the middle. Um, I don't know how you do that.

Max: How do you know then if you're You're supporting these businesses and you want to be very careful not to sort of step into this puppeteer [01:02:45] position. You don't have a choice to, but yeah. Yeah. How do you, how do you find, I'd imagine that that can sometimes be a muddy distinction. Like you want to help like that, you know, caring parent or whatever, but you also don't want to be the overburdensome person.

Max: Yeah. I

Nicholas: think, [01:03:00] well, I think it's a big, like a trust thing. I think, you know, the word we've often used for that role in particular is like, you know, it's more caddy than coach. Um, and what, when you think about what the, I mean, I don't play a lot of golf, but, um, what at least I [01:03:15] imagine that the people are talking about on the TV when they're whispering to each other is, you know, that for the most part, the, the golfer's golfing and making the decisions and whatever.

Nicholas: And what are they checking in on? They're checking in on, Maybe try this club. Distance and, and what do you think and [01:03:30] whatever. And every once in a while there's a moment, I assume, when the, when the caddy walks over and the guy says, you know, or the gal says, give me the nine iron and, or, you know, maybe that's not that, you know, I'm going to lay up.

Nicholas: And they say, I really think you should, you know, pull out a bigger club [01:03:45] here and go for it. And there are other moments where they're like, give me the, you know, five iron, I'm going for it. And they say, well, hold on a second, you sure you don't want to lay up. Um, on the margin, I think like that's a lot of like what the, what that relationship looks like.

Nicholas: [01:04:00] Um, and, but, but that requires that people have developed a lot of trust over time. And that's why all the more reason why we, you know, when I say like, you know, anytime we've been able to have the really good fortune to try to start a company with someone, I feel like it's because we've known them [01:04:15] for a very long time, um, and, and, and gotten to know them through creating these, you know, work projects that we.

Nicholas: Right. You know, do together and create, you know, common ground around and, and, um, and those have taken lots of different forms over the year, but that's always been pretty [01:04:30] core is like how do we have something that we're working on together so that when this moment arrives that, you know, we are all understand each other and, and there's a, there can be that relationship.

Max: So I'm curious in this kind of playing that role of the caddy, if, [01:04:45] if one of one, an entrepreneur in residence or a founder that you're supporting comes into your office, uh, and you know, they've been building this business and maybe they have some traction or whatever, whatever it may be in this specific situation and they, they want to, they're thinking about [01:05:00] raising venture capital and they want to know like, okay, Are How are the VCs going to think about it?

Max: How should I be thinking about it? What are you, what are you telling them in that position?

Nicholas: Yeah, um, [01:05:15] Well, I'll give you a bunch of crappy analogies that probably arrive. You know, like, the first is, um, You know, think hard about what type of vehicle you are creating. Uh, you know, Because the capital that you are going to go try to get is fuel, [01:05:30] and you need to make sure you buy the right fuel for the vehicle you're making.

Nicholas: You getyou're building Falcon 9 or whatever, you need rocket fuel, and if you're building a G 5, you need jet fuel, and if you're building a Ferrari, you need whatever you put in a Ferrari. Right. Um, [01:05:45] and by the way, you could build a Ferrari, but if you put jet fuel in it, you'll fuck it up. Um, and you'll ruin it, and that'll be really too bad, because a Ferrari was probably a pretty cool thing to have.

Nicholas: So First of all, it's like, you know, obvious, but like, you know, [01:06:00] the capital is a means to an end. It's fuel for your, whatever you are driving or you're trying to push forward. Um, be thoughtful about like, is this the right type of fuel? Venture capital as a form of fuel has a very specific set of characteristics to it.

Nicholas: It is high performance in certain [01:06:15] ways and it is really like, you know, fucks up the Ferrari, um, if it's put in the wrong place. And so that's like a part of the conversation is like, and that's hard, right? Because rarely do you know enough about the business to know, um, there are some like [01:06:30] kind of high level things like, is your business zero marginal cost?

Nicholas: Is it truly? Um, something that can scale near infinitely, uh, given the right resources. The closer that, and software, by the way, is a business that looks a lot like that. And [01:06:45] so the closer that, I think what you've seen through the venture cycles, the closer that a business kind of hues to that baseline dynamic, the more applicable venture capital can be.

Nicholas: And I think what you see in the, in the cycles is that like when venture capitalists are [01:07:00] feeling aggressive and risk on, they. They tend to, you know, put money into things that, where the zero marginal cost dynamics are a little less clear and, um, or where they're kind of squinting their eyes to something.

Nicholas: Uh, and when they're a little bit more conservative, they start to kind of, you know, go [01:07:15] back to their knitting. Um, but it's no surprising. They got more columns in the model. It shouldn't probably be too surprising that, you know, venture capital and software slash, you know, information technology, um, came about at the same time.

Nicholas: Right. These are bedfellows and, and so I think that's an important thing to [01:07:30] kind of keep an eye on. So that's kind of one. Two is as best as possible to remind people that like they're the buyer of this resource that is capital.

Nicholas: That's a hard thing to wrap your head [01:07:45] around because I think obviously you're going to go try to sell, like, so, so is the other person. Um, so you've got kind of two buyers in, in the, in, in the exchange. Do you

Max: mean that in the sense that the VCs need to raise capital and also the founders need to raise capital?

Max: I was going to say, I was

Nicholas: going to say the VCs are buying stock [01:08:00] in a company. So they think of themselves as a buyer, right? They think they're sitting there. I'm going to, I'm going to buy stock in this company. Yeah. Do I want stock in this company? Uh, if so, why? And so they're undertaking a conversation, and they would like to therefore be sold.

Nicholas: I mean, you know, they need [01:08:15] to, technically speaking, be sold to. You are the seller of that stock, and so you need to explain to them why the stock is valuable. But also, at the same time, if you're an entrepreneur, you are buying a [01:08:30] commodity, which is money. You need money. And so, how are you going to buy it?

Nicholas: You're going to issue shares in your company. Right. Um, the more that you can have at least both sides of that equation in your mind, I think the more effective [01:08:45] entrepreneurs tend to be in trying to figure out, well, like, from whom should I buy this money? Why am I buying it from you versus so and so? Is it because you're the only money available to me?

Nicholas: If that's true and I need the money, then, then that's, then that's my option. This is kind of VC founder fit. Yeah, I guess [01:09:00] so. Exactly. Exactly. Um. Um, and what price am I willing to pay for that money, um, and, and is my own estimation of like the, the, the value of my currency, i. e. my stock too high or too low, or should I pay a higher price to get higher quality [01:09:15] money, uh, should I get, pay a higher price to get money from a person that, you know, I really like and trust or is more aligned to me.

Nicholas: So I think it just. Yeah. And, and, and, but bare minimum, if you take the attitude that I, as an entrepreneur, am at least like a, [01:09:30] an even party in this conversation, I am buying something from you, the investor, you know, you might ask questions like, well, like what, what, what's different about your money? Like, why should I buy your money?

Nicholas: Is your money better? It's certainly not [01:09:45] greener or worth more, technically speaking. So, um, it's the same from that perspective. So, um. But, you know, like oftentimes if you then get into that conversation, it's like, well, our money is really good because we're really good at getting people to the next round.

Nicholas: [01:10:00] Sure. So if you raise seed capital from Investor X, a pretty good question is like, well, what percentage of your companies have raised the next round? And what role did, would you say you played in that? And can I talk to a few of them? Those would all be like normal questions that [01:10:15] you'd ask if you were buying something from someone, right?

Max: So there should be this kind of interview going both ways. It's not

Nicholas: It's very hard to do. And by the way, I think most venture capitalists that you meet are really good at, at, not because they don't want to talk about it, but because they're [01:10:30] insatiably curious, right? They want to learn about your business.

Nicholas: So they're going to ask you a question. And frankly, you want to tell them about your business. So you're going to spend a lot of time on the conversation talking about your business. But I think it's something we definitely try to talk about is just like, think for a moment about like, what could you be learning vice [01:10:45] versa?

Nicholas: You know, obviously the more you're talking, the less you're learning type of thing.

Max: Is there anything, I'm sure that you probably have a lot of peers that are VCs. Is there, is there anything that you've found that maybe, how do I put this, [01:11:00] something that founders don't maybe often know or understand about the way that VCs think and are approaching it?

Max: Yeah, I wish I could like

Nicholas: say that I had the perfect answer to that question because I try to figure that out all the time. Um, I mean, you know, first of all, I think [01:11:15] A might like on a, as a, as a kind of general point, my experience with most VCs is they're extremely nice people. Um, they, they, they are very curious.

Nicholas: They want to learn about your business, by the way, that sometimes comes out in like a [01:11:30] bad behavior that is not purposeful, which is like, they will keep talking to you. For as long as basically you will talk to them because on the margin it's high optionality to them. Right. They just want information.

Nicholas: Not because they're like, oh, I'm going to like, [01:11:45] you know, mostly pimp this person for information that I can use. But it's because that's like their, that's their business and they're curious and they're smart. They're probably interested in it. And they're interested and they just want to learn and, um, and so, you know, but that can create a dynamic where the entrepreneur hears that as, oh, this person asked me so many great questions.[01:12:00]

Nicholas: You're like, yeah, but that's their job, and they're really good at that, and they're learning a lot. So I get what they're getting out of this trade, you know? I think a big part of it, and maybe this is less true at the kind of pre seed, seed stage, although it's not irrelevant, is [01:12:15] they have pitched something, to your point, they have sold someone on something.

Nicholas: So they have sold an LP on their strategy, and they have a certain number of checks that they can write out of their fund. [01:12:30] And they need to kind of like, they have some math that they've done, which is like, we're going to write this many checks. We're going to own this much of these companies. And, you know, on a representative, ten of them, we, you know, we want and expect that a couple of them are going to, you know, [01:12:45] you know, return the fund and, and, and generate a attractive return on capital.

Nicholas: And the rest are probably going to, you know, go to zero.

Max: Return the fund, meaning that this is where all the returns are going to come from. The

Nicholas: single company, like, well, it's put simply, like, let's say you wanted to have a fund that returned [01:13:00] three times your, the, you know, money that came from the LP into the, into the venture fund.

Nicholas: Um, by the way, that's like minimal performance and the good ones do way better than that. But let's just say you want it three times. Well, like Um, [01:13:15] more likely the way that you get to three times is that you have three out of ten investments, let's call it, and you make ten investments. You have three that return, you know, the entire value of the fund.

Nicholas: So your tiny investment, you know, your one tenth of your fund, let's say you, you made only ten [01:13:30] investments out of a fund, um, well, that means, and let's say they were evenly distributed, well, ten percent of the fund goes into each of the, your investments, um, well, if you had to get the entire value of the fund, that means that each one of those ten percent stakes needs the ten X.

Nicholas: in value in [01:13:45] order to return that, the value of the fund. Right. And then if you do that three times, then you get three, a three times fund, right? Because you've, three of your investments have generated 10X returns, which would get you there. So, but, but whether that's the math, I mean, most [01:14:00] of the time it's more than that, it's more complicated than that.

Nicholas: But like the point is, they're running a very simple analysis and this is where often there's, you know, pretty big mismatch, which is like, they're just basically asking a question of, could this business. 10X, or, [01:14:15] or for businesses that are making even smaller, more distributed, have more bets in their portfolio, they might have to do 20X, 30X, 40X, 50X.

Nicholas: So they're making an analysis of like, can this do that? That's a very high bar. Yeah. Like for an, for an investment to be something that has a, [01:14:30] for example, 10 percent chance of 10Xing. Like if you hold yourself to that as an entrepreneur, You know, that's not what most people, like most entrepreneurs are not going to the conversation of, does this business have a 10 percent chance [01:14:45] of 10x ing from here?

Max: And a lot of great businesses, I mean, have never done that. Don't even sniff it. Yeah, exactly.

Nicholas: And so I think that's a place where there's a lot of mismatch. And if you just think about how big does a business need to be, okay, so now what did a, you know, like if you just take round numbers, let's say that each one of those [01:15:00] investments was, 2 million.

Nicholas: So I have a 2 million investment through which I buy a stake in a company, and I have to turn that 2 million if I'm the investor into 20 million. So I have to 10x that thing. Well, let's say I put 2 million in. In today's market, if you're an entrepreneur, like walking out the door, a lot of [01:15:15] people think, Oh, well, I'll raise 2 million on, I don't know, 10 million valuation.

Nicholas: So that thing's going to buy me something in the, in the range of 20%. Okay, so 20 percent of the company has to be worth 20 million, but it's going to be diluted. So maybe that 20 [01:15:30] percent is more like, you know, worth like 15%. And so to get, you know, 20 million out of that, I'm going to have to sell the company for over 150 million or something like that.

Nicholas: Well, again, If you think about what a business, what's required from [01:15:45] like a just a pure market dynamic to support a business, and that's small by the way, like that's the smallest end of this range you could possibly do. Most people don't buy that big a stake at that stage, most people don't, whatever, but just play the math through.

Nicholas: If you think about how big a market has to be [01:16:00] to support the creation of a business. It's even that big. Well it has to be multiples of that because you're probably not going to capture 100 percent of the market. You're certainly not going to capture all the margin of that market and all these different things.

Nicholas: And so the market and the reason why everyone jokes about [01:16:15] TAM and all these things and there's a lot of, you know, technically speaking analysis done, it's part of it is like kind of the hand waving laughable analysis of early stage, you know, venture capital. But most of it is actually just like trying to think, like trying to imagine, is there enough?

Nicholas: [01:16:30] And because often the markets are new. So it's like, is there enough here? Yeah. Is there actually like a big enough space here to support an outcome that in turn justifies, you know, that one of my positions as an investor is going to go into a thing and do I [01:16:45] rate the probability that it could, you know, 10 X or 20 X or whatever high enough to make it work.

Nicholas: And so anyway, that's just to say that there, there is math that has been sold. And so among the buying questions that you might ask to just understand it is how many investments do you make out of this? What's the average [01:17:00] position you try to acquire? What are your kind of like, you know, okay, if I do the math that suggests each one of these needs to 20x.

Nicholas: So, okay, at least you're starting like engage in a, in a conversation that you might engage with if you were making a trade with someone where you kind of like understand where they're coming [01:17:15] from and they understand where you're coming

Max: from. It makes a lot of intuitive sense. Like you want your, you want your, uh, How do I put it, like, your investor's idea of their return on investment probably shouldn't make you uncomfortable if you're taking their investment.

Max: Yeah, at

Nicholas: [01:17:30] least you kind of just like know where they're coming from. And uh, and, and then there's obviously the, the, a version of that also, which is like rarely do they expect, they, their expectation is that that's going to take quite a long time for you to get to that moment, right? In order to get to that moment, [01:17:45] you.

Nicholas: They will probably want to or need to raise another fund before that. So now they need some intermediate term checkpoint on how you're doing. Right. In order to, even if they weren't necessary for the business, in order to understand. They need a mark. So they need a mark. Um, [01:18:00] again, most folks aren't going to, like, let marks, the desire to have marks get in the way of building a good business.

Nicholas: Like, there's nothing about this. I guess my point is that your venture capital investors are human beings who are running their own business. are nervous about their own business, have to raise [01:18:15] their own funds, um, they need these data points, and so, yes, it's going to come to a place where, like, if the option on the margin is raise more money or not, for example, um, well, you know, raising that next bit of money has real value, potentially, to, [01:18:30] uh, to your investor.

Nicholas: So you just want to kind of be, at the very least, eyes wide open about that. And by the way, most businesses that are going to achieve that level of incremental scale have to get more fuel in the tank. Um, so there's an assumption that you're inclined towards [01:18:45] raising the next round, and the next round, and the next round, because very few Um, businesses have, have gone through this path and not done those things.

Nicholas: Um, you know, like the Zapiers of the world, which I think have raised extremely little money across very few rounds are like, you know, one in a [01:19:00] million in terms of outcomes. So, so that's where if you go back to that fuel point and what type of fuel you're buying and what are the expectations that come with that fuel and are you, you know, even just like emotionally ready that that's like the definition of success for that path.

Max: It's interesting. [01:19:15] I want to, I want to keep asking you questions, but we're rapidly running out of time. I'm the, the new podcaster here. I'm like, how do I land this plane? How do I land this plane? You got another

Nicholas: one. You got someone else in the waiting room.

Max: But, um,

Nicholas: you're a doctor that's got to kick people

Max: out.

Max: I hope it doesn't feel that [01:19:30] way. No. Uh, I guess, you know, to kind of wrap things up, did I, I understood that you're writing a book or releasing a

Nicholas: book? We are writing a book. We are, yeah, we're, we're, we're somewhere in the, between writing and releasing, um, Henrik and I. Um, yeah, we've created a book called Me, My Customer and AI.[01:19:45]

Nicholas: Um, it started as a collection of, of essays drawn both from essays that we'd written over the past few years, as well as some new stuff that we've written as part of, you know, bringing autos more closely to market and, and into market. Um, Um, [01:20:00] we're deciding quite where between collection of essays and like proper book, um, we will be.

Nicholas: And so, um, TBD exactly the release of that, but it should be in the coming months. And it's all about this notion that, um, you know, [01:20:15] at bare minimum that if you can use AI to stay close to your customer, to talk to your customer, to create and then scale the intimacy of your customer relationships, that, that is at least a path for how you use AI to your benefit as an entrepreneur.

Nicholas: Bye.

Max: Do you know where we'll be able to find it, [01:20:30] or is that still TBD? You know, we have

Nicholas: it. I'll send you a website that you can put into your link, where we have at least an initial taste of it and a place to sign up. But that's still TBD. I mean, it'll be on Amazon and everywhere.

Max: And where else can people find you?

Nicholas: You know, um, well, in the spirit of emailing [01:20:45] people, I'm nicholas at prehype. com, and so please feel free to email me, and I do a halfway decent job of that. And then, uh, I'm on Twitter and LinkedIn, Twitter at ThornNY, and I don't know where I am in LinkedIn, but you know how to find me.

Max: Yeah. Well, thanks for coming on the show, Nicholas.

Max: [01:21:00] I appreciate it. And putting up with my, uh. And thank you for this delicious, uh,

Nicholas: bag of cold brew. Yes.