Dave McClure on Network & City States with James of Ârc

I ran the first four funds which was about 2,000 companies. Partner co-founder Christine has run another 2,000 companies or so. 2% of those don't suck. It turns out about one out of every 500 companies we would get a Canva, a Solana, a GitLab, a Talkdesk and those could be 500 to 1,000 maybe even 2,000x and that was not expected. Fair amount of experience in messing up a lot of things and some experience in things going correctly. We are terrible people. You should not trust us at all. We don't add any value. We inflate our numbers. We're really not any better at picking winners than most of you are. You all suck, too, by the way. But 20 years ago, I was looking at where to buy a private island. You know, wartime CEO, get your ass in gear. Like, move up your ticket. Get out of here. And I was like, 'Yes, sir. You're right. Yes, absolutely. Make sure gravity works.' And then start building rocket ships on top of that. But I had nothing.

Not probably some interaction with Brent Hoberman and the rest of you all.

Sure. I am an escaped hillbilly from West Virginia. I ended up in California in late 80s early 90s. Originally I was a software developer and then an entrepreneur and then started doing angel investing. Got to work at PayPal in some of the early years with some pretty amazing folks and like a lot of folks there got into investing and then gradually ended up moving into venture capital first with Founders Fund with Sean Parker and Peter Thiel and then started a firm called 500 Startups about 15 years ago and like the name suggests we did a lot of early stage investments in probably about 70 or 80 countries around the world and helped set up a bunch of small funds in different places around the world. And did that for many years and that was actually a lot of work and a lot of travel and now I'm old and lazy and boring and I do a lot of late-stage investing in secondaries, mostly in companies doing say $50 million in revenue or more and we provide liquidity to people who are early investors or employees at companies and also investors in funds.

When I was there I ran the first four funds which was about 2,000 companies and then since then my former partner co-founder Christine has run another 2,000 companies or so.

Yeah, and that works, right? The portfolio effect works, right? Well, yes and no. I guess to kind of give you a basic set of numbers, probably about 70% of those investments fail mostly or completely. Those fail fast and half of those fail slow. We might get a little bit of money back on those but generally those are zeros. About 20% of the portfolio you probably make around 2 to 3x, maybe a little bit more if you're lucky. Maybe about 10% of the portfolios you make decent wins that are 10 to 20x outcomes. Those are probably like hundred million dollar exits. And then about in our experience about 2% would go public or get large enough to be called unicorns. Hopefully those get to exits. And those were maybe like 50 to 100x outcomes and that's where probably most of the majority of the returns come from. But it also turned out that along the way we found about one out of every 500 companies we would get a Canva, a Solana, a GitLab, a Talkdesk and those could be 500 to 1,000 maybe even 2,000x and that was not expected. You probably only see that in very very large portfolios that people like YC or Techstars or Antler or maybe a few other folks have experience with. But in general the idea that we were trying to do was to, you know, most startups fail, a very few number of startups succeed at scale and so we wanted to have large portfolios to have a better chance of those large outcomes and that generally worked. We tried to do that not just in Silicon Valley but lots of places around the world and that also has seemed to work at least in some places. And then we also tried to help a lot of people get small funds started and so had a fair amount of experience in messing up a lot of things and some experience in things going correctly.

It was very straightforward. I was a customer. I had done fairly well with the carried interest in my first two funds but they were still illiquid and I was looking to buy a house, put some money into the new company, pay for some kids going to college. And so it turns out it's not so easy to sell carried interest in a fund. That's a very small number of people who would consider that type of transaction. Long story short, was able to go through that, take some money off the table, but the terms were very favorable to the other side and I thought, wow, these guys are getting a great deal. Maybe I can figure out how to do that and be on the other side of that transaction. And so we started looking at how to structure and buy pieces of funds or pieces of companies that are maybe only five years or less away from an exit. And so one of the challenges with venture capital is occasionally it works but it sure takes a long time. Companies now going public are typically taking close to 15 years. And median revenue required for companies to go public in the last year or so has probably been about 800 million. You don't see too many companies going public for less than 400 or 500 million at least in the states. So that has really lengthened the time frame for investors to get money back. And as a result you have a very large amount of capital that's illiquid and some people are not super patient. You know, large institutional investors, pension funds, they're more patient, but a lot of individuals, family offices, corporate investors might want money back in less than 10 years. And so we're seeing a really increasing amount of capital in secondary market. Some of that is in very large funds, some of that in medium-sized funds, some of like us are smaller funds.

Not too much. I mean we have positions in Canva and SpaceX in our portfolio but those are from work that I did at Founders Fund and 500 from many years back. The market is very concentrated in a small number of big companies. So like the public markets where you see Magnificent 7 which are a pretty substantial amount of the overall market in the private markets OpenAI, SpaceX, ByteDance, Anthropic, probably a few others that are in that 200 billion to 500 billion size. Five companies make up probably a trillion to a trillion and a half dollars of an overall maybe three trillion dollar market. But there's still another thousand companies that make up maybe the next trillion dollars of capital. And that's probably more where we play. Those top 10 to 30 companies are in extremely high demand. Those prices are not usually cheap. In fact, would argue they're very expensive. And sometimes they're not even available except through multi-layered vehicles and you may not even know if the things you're investing in actually have access to the underlying security. So the secondary market is very opaque. We're trying to, you know, help educate people about what's going on in the secondary market, bring more fundamental valuation analysis to that market. But that's really kind of boring. It makes money, but it's not the most exciting stuff that people are interested in here.

We buy typically 1 to 3 million maybe 1 to 5 million tickets. Usually from early employees or founders in a company or early investors in a company, sometimes also from early investors in a fund. Usually if it's a company we're looking at companies doing 50 to 100 million in revenue or more. If it's a fund, it's usually funds that are seven to 10 years old or more where at least one of the companies fits that profile.

The real question is discount to what? Because usually most of the marks these days are and there are a lot of companies that are based on valuations from 2020 and 2021 which are not real marks. So notoriously VCs are pretty terrific liars. We are terrible people. You should not trust us at all. We don't add any value. We inflate our numbers. We're really not any better at picking winners than most of you are. You all suck too, by the way, but just to be clear. So, like just, you know, a level of humility is probably required, but not often common among VCs. So, anyway, I make fun of the asset class and I tell people it's the shittiest asset class ever, but I really am a big fan of when venture capital works, it can do amazing things. So I'm a small investor in about 40 or 50 other small VC funds. I try and help a lot of people get into the business and, you know, some of them are successful. But it is a very challenging asset class that takes a long time and you know you hear mostly the good and positive stories about venture. You don't often hear all the not so great stories about venture. So 500 was an experiment in trying to make that a little bit more predictable through large portfolios. Practical Venture Capital which is the name of my firm that's kind of a joke because it's actually not practical at all. We try and make venture capital a little bit shorter time path to liquidity. So you can think about what we do as kind of like cutting, you know, the investment horizon of a fund or company in half and buying the back half. Hopefully at a discount and I would say we typically buy stuff probably at 30 to 70% discounts to the listed price, but hopefully that's more like 20 to 40% discount to the actual value. And then we're still really looking for compounding in the range of 30 to 50% for a few years. So we are trying to get basically about a 3x return in 5 years. If it's only 2x that's not terrible. That's kind of roughly a 15 to 25% IRR if you think about that investment term. That's correct. But it's a little less risky than early stage venture capital. But we still mess it up occasionally and there's still mistakes.

Yeah, when was the time? I'm trying to remember the first time I think I thought about owning my own private island was probably between the ages of 8 to 10. At least 20 years ago, I was looking at where to buy a private island. And at the time, I think Nicaragua and Lake Titicaca, which is the world's largest freshwater lake, was where I was thinking about. The governance in Nicaragua probably maybe not the best place to be looking for that. And I somewhat randomly fell into working with microfinance in India and other places. As a result of that, I got involved with an organization called Unitus which has done some amazing work particularly in India but in other places and that organization spawned even though it was a nonprofit it did a combination of for-profit investing in both debt and equity and later spawned a couple of other venture capital firms that were also doing impact related work and there's still a couple of those that operate today. But I think it's always been interesting looking at emerging markets, the growth of emerging markets. I've always had a particular interest in, you know, what people today call the global south, but that's probably South Asia, Southeast Asia, Africa, Latin America, and the Middle East. That's probably, you know, maybe at least a third, if not half the world's population. It's more young population, and it's a growing population. And so a lot of the thesis behind 500 and even before that I was looking at where is growth happening in the world and you know will Silicon Valley replicate in other places and we see sort of similar growth and I think that is true although we're seeing a little bit of a reconcentration back in Silicon Valley at the moment. But the idea of sort of real estate if you look at asset classes the several large asset classes around the world are real estate, equities, fixed income, cash and cash equivalents and then alternatives. People talk about alternatives a lot but they're really tiny compared to those others which are hundred trillion or more asset classes. Alternatives in total is maybe 15 to 20 trillion dollars including private equity, hedge funds and venture capital which is a piece of private equity used to be only maybe 1 trillion now it's probably three or four trillion depending on how you look at it. That sounds big but again, public equities is probably over hundred trillion, fixed income maybe about the same, real estate it's probably I don't know 200 trillion actually debt and fixed income might be in that same range as well. So a lot of people who are investors in the world have very conservative investments. Used to be sort of 60/40 in sort of equities and fixed income, but you know, housing, real estate, whether that's your own home or housing that you invest in, is still a pretty big asset class that most people around the world are familiar with. And it's somewhat volatile, but not crazy volatile. Maybe in certain areas it is, but you know, most people probably think about real estate appreciating at on the low end between 3 to 5% per year. Maybe on the high end 5 to 10% per year. So it's kind of in that range of maybe the same as fixed income on the low end, maybe equities on the high end. Venture capital people think about as needing to be in the 15 to 20% IRR range. Does it really hit that? Most at zero, right? Yeah. Well, the story is that venture capital in the average case performs well, but in the median case performs like crap. And what that really means is four out of five VCs suck and one out of five VCs is amazing. Probably more because they're lucky, not good, but they will tell you that they're amazing. And so, you know, it's almost always a hit-based game that is somewhat unpredictable. And we of course try and convince you that it is predictable and it's because we're really great stock pickers or because we really help the companies. I generally feel like that's usually not the case. It's the entrepreneurs that are amazing, not us. But this idea of that, you know, venture capital is generally a highly volatile, illiquid asset class that can occasionally perform well and real estate is a more predictable, steady, not so risky asset class that performs predictably. And so if you could merge those two, you might be able to get the best aspects of both. Ideally that would be more liquidity and more predictability. And so the example that I started thinking about was how can you use venture capital to drive occupancy in commercial real estate. And you might be able to do that by investing let's say half of your money in the real estate and the other half in a venture fund or even a fund of funds. And the basic idea is to take either the fund of funds or the funds to invest in funds in companies that occupy the building. And so what that might look like is let's say I had a $25 million fund of funds and I agreed to invest $5 million into each of five VC funds. They each had a floor of the building in exchange for that $5 million investment in the fund. I wanted them to maybe sign a five-year lease or longer that might pay anywhere from a quarter million to a million dollars a year. And then they in turn would take the money that they invest in startups and do short-term leases with the companies they invest in. And so they might write 50 to $250,000 checks in exchange for those companies co-locating in the building for six to 12 months. And so you can kind of almost take the dial on the amount of money that you're investing in these funds and companies and fill the building. And then from a real estate perspective, if you have a high occupancy building, hopefully with talented people and eventually hopefully with companies that are functional and working, you've got a great real estate investment. And then if you're lucky and maybe good, you might actually make money in the venture capital fund as well. And so the idea there would be I take a reasonably low-cost commercial real estate building. I fill it with smart people and companies and funds. Maybe I can double the value of that real estate in five years, generate a return on the real estate, and then hopefully in the next 5 to 10 years, I generate returns with the companies and funds. And so by mixing those two asset classes together, I get a little bit predictability, steady return from the real estate side, but I'm sort of juicing that return with occupancy from the venture side. And then if I'm lucky with the venture outcomes, I see those returns in more of a 10 to 15 year time frame. And maybe those also perform, maybe they don't. But at the very least, I've got functional real estate. Hopefully out of my large number of investments I get maybe a small number of companies that are functional. So again using that math that I talked about before if I make a hundred investments maybe I at least get five companies that get to maybe 10 million in revenue 100 people or more as employees and those might be your anchor tenants for that building. And then you build the residential real estate around that to fill the employees and you build services companies to support that community and you kind of have this MVP that's maybe in the range of say 500 to 5,000 people and you know a small maybe not village but at least neighborhood.

Great point. So from the company standpoint I would guess probably between 10 to 20% of their spend is on commercial real estate. For employees it varies but on the low end 10 to 20% on the high end 50% especially if you're in Silicon Valley and probably 50% or more of the company's spend is on the employees right so overall picture is probably 30 cents on the dollar every dollar that you're investing is going into commercial or residential real estate maybe even 50 cents in the dollar. So if you sort of think about it like hey I'm spending a dollar and half of it goes to stuff well maybe half of that half doesn't go to stuff because it's going to real estate and maybe the other half that works, another half of that goes to real estate. And so you kind of are getting maybe an extra 0.5x back on your return. Again, if you own all the real estate.

They would typically raise 10x the amount of capital that we would put in some in the thousands. In our accelerator companies we would typically do 50 to 200k investments for the seed stage investments maybe a similar check but they were probably raising a half a million to 2 million. Yeah. So overall we were probably around 10 20% of the capital they would raise in that first round. But longer term they would raise a lot more.

So this was kind of the realization was kind of messed up when we started 500 because we had this beautiful building in downtown Mountain View. We actually got the top floor of like a 12-story building. It's kind of weird. I don't know why they had zoned it generally speaking to be not more than like four or five stories, but for one period of time they built this really tall building. So again, I can tell you a story about getting into that space that's kind of crazy, but we had an unobstructed view, 360-degree view of like 30 miles in every direction. Everybody who ever came up to that office was like, 'Holy crap this is like amazing psychology, like positive impact.' You're looking out the windows at like Mount Diablo in the distance, you know, the Golden Gate Bridge on a clear day or the Bay Bridge probably San Jose. And then, you know, the Mountain View was the name of the city. And it was really beautiful. It was amazing. But we would run, you know, 40, 50 companies a year through that space. Sorry, twice a year through that space and then another hundred up in San Francisco as well. 5 years later, the landlord jacked the rent up on us 2x. And I was like, crap I created that like I should have owned the space before we started investing in all those companies. I would have benefited from that economic I was really doing economic development with my investment dollars. I just wasn't recapturing the impact on the real estate. Right? So that was a very real oh crap moment for me where I was like god I should own the real estate. Right? And so that was kind of the beginning of this whole story. And then I was trying to think about solving problems in venture capital because you know the asset class is illiquid for such a long period of time like how can I manufacture a liquidity event that happens in more like 5 to seven years instead of 10 to 15. Like, oh well, I can just put half the money in real estate, drive a bunch of startups into the real estate, real estate goes up in value, sell that, and then I get a return from that, and then the venture happens. And then I was like, okay, but I'm really not doing venture. I'm kind of doing real estate. And that was when I sort of like took the, oh, I really need to flip this around. And it's almost like, you're not doing the real estate as a hack for the venture capital. You're doing venture capital as a hack for the real estate. And that was like that. Okay, that's it. That's what makes sense. Yeah. And I had this conversation with Balaji about probably four or five years ago. Kind of crazy little story actually when COVID broke out, Balaji and I were talking about where the hell to go. And I had been like figuring out places like okay Japan, Korea, Taiwan, Hong Kong, Singapore were the places to consider. They'd all dealt with SARS in some form 10 years earlier. They were probably a lot more rational. And I started narrowing it down like, 'Okay, it's probably Taiwan or Singapore for various reasons.' Like, 'Hey, Balaji, I think we should go to Singapore.' And like, you know, he's like, 'Yeah, Dave, you should really like pull your kids out of school and get ready because this is going to like not be good.' And we were like, you know, probably two crazy people talking about this. This is like really as early as like January or February of that year. And I was like, 'Okay, I think I'm going to Singapore.' And then like two weeks later, he calls me up and goes, 'The Eagle has landed.' And I'm like, 'What? What the hell are you talking about?' He's like, 'I'm here.' I'm like, 'You're what? You're there?' Like he had uprooted three kids under the age of five from Austin and jumped to Singapore faster than I did. And I was like I thought I was planning ahead and then he's like giving me crap like Dave, you know, wartime CEO, get your ass in gear, like move up your ticket, get out of here. And I was like, yes, sir, you're right. Yes, absolutely. Right. Because I was like, how do I get my cat and my dog over and everything? And he's like, what kind, you know? Anyway, long story short, I changed my tickets. I got here one week before, sorry, here Singapore one week before they shut down the country and I ended up like chatting with Balaji live and like holy crap we actually did it. We moved to you know blue zone, green zone, whatever it was called. 3 months later things calmed down. I moved back. He stayed and started working on all this stuff. But like we had a really fascinating conversation about like how do you build the network state in a real place and what are the drivers for that? And so that was kind of the essence of all this stuff. I haven't been brave enough to jump in and do this myself, but I've been trying to model out what it looks like. And I really think, you know, even though building network states and everything is fantastic, starting your MVP with a country probably isn't the best idea. And even a city is tough, even a neighborhood is tough. Like, okay, let's start with a building. Can we do a building as our MVP first? Here we are. And, you know, you guys are actually doing it. And I do think it's somewhere between 25,000 to 100,000 square feet. I'm sorry, I don't know what the metric equivalent is for that, but like enough. We had one floor, 10,000 square feet, about 100 people rotate through every 6 months. And I think if you had like five of those floors, maybe 10 of those floors, you know, again, with maybe 50 to 100 companies per year per floor, maybe 200 to 500 companies over a 5-year period, you're starting to get enough diversification where, yeah, at least a few of these are going to get to minimum critical mass and survivability. And so what you're really doing is you're just doing economic development to fill capacity for your real estate. And this is what real estate developers do all the time. Yes. Mostly with debt and existing businesses that are already at scale. And so you have to kind of attract those people to come with you. And I was like, what if you didn't have to attract them? What if you just started with the money and the investments in the companies and they were just like intentional about starting with you and they committed and maybe we get them to commit by giving them some money and them signing a lease. Yeah. And so that felt like a more doable MVP.

But we got to do the plumbing and the foundation and sort of the playbook. I tell people it's like, hey, make sure gravity works and then start building rocket ships on top of that. But, you know, somebody's got to do the foundational elements like, hey, what's the unified field theory for physics and gravity? And let's build buildings that don't fall over.

Yeah. Yeah. Yeah. But it would be great if you know we had all that plumbing and foundation that works and it wasn't just based on the largesse of billionaires or of people who happen to run a monarchy or benevolent dictators. You don't have too many, you don't have too many royal families in Qatar or UAE. And those aren't always the most, sorry who's watching. Sometimes those don't sustain right and so you kind of want to prove the actual systems work stand on their own and that you could do this anywhere. But I think everything that you guys are doing here is attractive and sort of it makes it work so it's not just the real estate and the capital and the people it's also the services and the food and health care and everything else around that. Yeah maybe two layers on top of that model is again if you can just look at this coupling of venture and real estate across an existing piece of infrastructure like San Francisco, right? Or you can look at that as a new zone and it's sort of in potentially right those are the two extremes, right? The most expensive concentrated real estate and the most barren low-cost real estate. Which and I were having this conversation earlier today. I think that you probably don't want to be at either two ends of those extremes. What you want to do is look at functional sort of community societies and move one layer away from functional to slightly dysfunctional where the real estate is maybe lower cost and then fix that, right? And so what that might look like is in San Francisco right now, we have an issue where some parts of San Francisco are not super great. Frontier Tower, I don't know if you guys are familiar with that experiment. They did that in a really rough part of the city. For those of you familiar with the city, it's right on Sixth and Market. Not to put it too bluntly, but it's crack house central kind of. Yeah. Straight out. I go right. I told the guys like, 'Wow, you guys are really arbitraging your real estate costs for sure.' Like I bet you could get that for a song. I don't know if I would choose to do it there, but like if you're the the metaphor is probably like buying the cheapest house on the richest block in town is probably a good bet, right? And so if you can find a lower cost piece of real estate next to higher value real estate and then arbitrage it up to a par with everything else, that's a good experiment. If you can find a neighborhood that's approximate to San Francisco that maybe isn't as expensive as San Francisco and sort of make it cool, I think that works. The experiment you're doing here is like, hey, Johor is low-cost real estate. We're not too far from Singapore. Yeah. Okay, maybe that works, you know, with the right environment. So, I think what you want to do is don't try and do the absolute hardest thing. And again, you know, God bless Eric Bremen and Prospera. They are doing really, really hard work. They are down there. Some of that more challenging now because of the government's sort of change of perspective. And I think, you know, it's a big thing that people are trying to do. Like the experiment we're trying to do is not simple to like build a whole new society. So, and you start realizing as a technologist, you're like, 'Oh, okay. Well, we'll figure it out. It's not that hard.' But no, wait. You're talking about financial systems and education systems and health care systems and security systems and like all kinds of stuff that has to work for people to want to be there. It's not trivial, right? And even though we crap all over like, hey, San Francisco is kind of messed up and these other places are messed up. Like there's a lot of things that work, it still works. Most and so you're like, oh, first principles aren't where I can rebuild that from scratch. Yeah, think about that for a second. Like it's not just trivial like the California Forever folks in Solano County, they're going for a big ass experiment with a lot of money. But they're trying to do a lot. As are other cities, I really think that like we have to sort of go back to almost lean startup principles like what is basic MVP that you can do where you already have some of that foundation in place, right? And then as you solve those problems, okay, now choose a little bit harder, okay, and a little bit harder, but it's really difficult to build a country from scratch. And so you know again you can choose your environment of choice which is semi-functional. You know I'm always a fan of like cheat code wherever possible right so if you can cut corners and find a way to hack the system and get there faster like yes do it you know don't do everything yourself you know so wherever you can find that cheat code to get there faster better I do think it's an easier path because you're doing so much else. Like that's the thing is you know I know from building 500 like hard things are hard and they take a while. Like I can't tell you the amount of effort it took to like do 2,000 companies in 70 countries with a lot of people and like everybody telling you you're crazy. That's not going to work. It's just you know sticking through all that is not trivial. You know, you have to be missionary for yourself and for others, but you know, you don't want to convince people to jump into the Gulf Stream and not get to Hawaii. Like, that's the thing is you want to get to Hawaii, right? And you know, maybe jumping in the Gulf Stream is not as good as like, hey, let's just jump in the river and go down the river a little bit. And so I think you got to balance the missionary zeal and the visionary stuff with the I got to get the first base, right?

You got to make they work. The elevators need to work enough to get up and down. Like it's the minutest things that you think are like, 'Oh, that's not a' like if your internet connectivity is shaky or the elevators are a little slower than you would like, people won't come to your house. Like it's the most trivial user experience things that need to work or at least enough of them need to work. Like what is critical is often overlooked.

You know, you just got to balance, right? You do want missionary dreamers to kind of get started, but then you want to connect to the rest of the world also because you do want a big tent.

Oh crap that was Stone Soup for sure. Do you guys know Stone Soup? No, that's over my head. I don't know. Yeah. So, like, you know, I want to make soup. All I've got is a stone. I need to go find a few friends who've got, you know, meat and plants and spices. And you kind of got to sell your stone pretty well if you want to go get the other people who got all the real ingredients. So, I'm trying to remember how that all happened. I don't know if you guys know, gentleman named Nishan Wong is a friend of mine who we used to work together at PayPal. He was at one point CEO of Reddit for a little while. He's doing a company out in Hawaii called Terra Formation whose goal is to plant a trillion trees. We'll see if that happens. Nishan's a really smart person. When I was at PayPal, he's one of our best engineers. He went on to be one of the founding engineers at Facebook. He trained a lot of staff at Facebook. He then trained a lot of staff at Quora. And I was like, 'Okay, I want to co-locate wherever Nishan's going to be.' And Nishan was like, 'Hey, there's this building on downtown Castro Street in Mountain View.' And so we looked at it. And again, this was kind of like stupid. The top floor of the building, for some reason, I think Red Hat Software was in it. And they were like getting out of that space to have like a cheaper bill. And I was like, 'Holy crap we're going to get the top floor of the most beautiful building in all of downtown Mountain View.' And I had nothing. I had not raised money yet. 10,000 square feet is a big space. And like I was like we were like three people, right? I was like, 'Oh, this is an amazing space.' And Nishan and another gentleman, Charles Hudson, were with me at the time like, 'Dave, you're nuts. Like this is way too much space. You're never going to be able to get this.' I talked to the real estate guy and they were trying to sell. This was like in a tough real estate market. And I was like, 'Oh yeah, we're just about to close our fund. It's going to be like tomorrow, next week.' And so I'm negotiating with this guy to close the space. And I was like three, four months late in getting the fund closed. I was like trying to hold this guy off like for as long as possible. We finally got our first closing of the fund done. I tell people I kind of like wrote the deposit for the building, licked the side of the building, said it's mine, and we wrote three checks to our first companies the first day we did that closing. We wrote 30 checks in the next week. Wow. And the law firm that was working us for that time like they hadn't seen anybody do 30 investments in a month let alone in a week and we kind of continued that pace and it was just like the wildest ride after that but like it was and I you know we got to building and then we weren't a functional you know we hadn't figured out the model of like investing in companies charging them a program fee and covering our ass until like about almost a year later. So, we were probably half a million dollars in the hole before we figured out the economics. This is again entrepreneurs like jump off a building before and they build the plane on the way down, you know? I think Reid was one of the people like, 'Yeah, jump off and figure out the parachute.' Don't do that. Try and figure out somebody else who's like doing that and watch. But again, it was a forcing function to like get the fund together. I had to like convince my LPs, hey, I need you to sign this letter so I can get this building. I need the building so I can do the fund. We had to end up creating a loan from the funds and management company to cover some of our other expenses. It felt like a house of cards for years. Like it was really insane. And so eventually to get to some large wins and some large exits that started happening maybe five to seven years in. It's like taking a deep breath for a second like holy crap it actually is working. 15 years later, like one of our investments in a company called Canva, we made a $100,000 investment in like an email cap. It's probably going to return 200 to $250 million. It's already turned more than 100 million. It does not happen very often, but every once in a while it really works. And you know, thank God I was able to get lucky and do that. Now, I'm not telling you about the ones that I missed in Uber and TransferWise and Carta and Zapier and how I messed up all of those. But, you know.

I was really scared that I was a shitty VC and I was like, I need lots of shots on goals. Yeah. These guys think they're amazing. They're going to like find winners in like 20 30 companies. I need like 300 companies. Yeah. And so it really was like a model based on me thinking I was not very good and I had to compensate, you know, with math.

Well, I mean, yeah. I mean, I wasn't a complete idiot about some of it, but it was just very different thinking than it's scary because everybody else is doing it one way and you're doing it. I had people laugh in my face because of the name 500. I say I'm from 500. Haha. Like, no, no, really, that actually is it. And it's I mean, this is the entrepreneurial experience, right? You're just like, you have to believe something that other people don't believe, but you also have to not believe your own crap. And like you got to keep it real while you're dreaming. You got to keep it real. You know, making payroll is not a dream. It's a real thing.