Vested Capital
Vested Capital

Episode 8 · 3 months ago

(EP8): Elizabeth Yin Founder & General Partner At Hustle Fund, Founder LaunchBit Sold To BuySellAds.com

ABOUT THIS EPISODE

Elizabeth Yin is the co-founder and General Partner of a venture capital firm that, and I quote from their website, invests in "hilariously early startups".

Hustle Fund typically invests $25,000 as a starting point into startups that have yet to show any revenues. Instead, they look for traction in other ways, which Elizabeth explains in this interview.

We also go back in time looking at Elizabeth's own history as an entrepreneur, starting a company called LaunchBit, an advertising network, which was eventually acquired by BuySellAds.com.

Elizabeth and her company LaunchBit were graduates from the 500 Startups accelerator program. After selling her company, she returned to 500 Startups as an Entrepreneur in residence and later a partner.

This was her entry point into the world of venture capital. Elizabeth explains what she liked about the 500 Startups methodology -- a global perspective, any person can be a founder -- and how that informed her own strategy when forming Hustle Fund.

If you're considering raising money for your startup this podcast is definitely worth listening to. Elizabeth breaks down what she looks for in an investment and some strategies for early stage companies based on her own experiences as a founder.

Enjoy the podcast.

Yaro

Podcast: https://www.yaro.blog/pod/
Blog: https://www.yaro.blog/

Hello, this is yaro and welcome tovested capital episode number eight featuring my guests, elizabeth yin, thegeneral partner at hustle fund, messed capital is a podcast about how peoplemake money, build capital and then put their capital to work. I interview.Startup founders, who've, enjoy big exits angel investors, venturecapitalist, a like elizabeth crypto and stock traders, reestit investors andleaders in tech. In today's podcast. We gonna go back in time with elizabeth asshe shares her early entrepreneur story, which includes getting starred in sanfrancisco with a side hustle agency business with a friend of hers, whichthen connected her with a very famous tony, who recently passed away. Youmight know who that is just from that little bit of clue, but she was bychance connected with him and if he spent a few days in his start up, whichwas eventually sold for several hundred millions dollars, and that was aninfide tial experience for elizabeth to see what the start up life was like. Wethen go forward with elizabeth's story as she starts. What would become hermost successful and well known business known as lunch bit, which is in theadvertising space and launch pit, was actually acquired by by sell adscomb'sand fourteen interesting enough. The by cell adds founder todd. Garland wasactually on my podcast, i'm going to resurface that episode coming up soon,so you can have a listen to that. So after elizabeth sold launch bit to bysel ad, she left very quickly. In fact, almost straight away, she was able toleave and then go and start for her plan was to go and start anothercompany, but he ended up actually becoming involved with five hundredstartups, which is an accelerator you might have heard of it kind of anincubator accelerator. They put some money into startups in return for asmall amount of capital, and they also put them through an accelerated programwhich, at the end they do a pitch with the goal of raising more funding.Elizabeth actually went through that program with launch bit, which is howshe first got exposed to five hundred startups, but that actually was herdoorway to become a venture capitalist. So that experience led her to work withfive hundred startups and then rise to the point where she became a partnerfor several years there, which means she was actually one of the people whowas partaking in the vesting capital part. So, basically, the investmentsthat five hundred start up state in companies elizabeth had a share of thatinvestment by the nature of her role as a partner. A letter explain how thatall works. If you knew to this, but the most important thing that experienceled her to then start her own fund called hustle plan, which is currentlyin charge of as the general partner she's been doing, that since twothousand and seventeen and elizabeth goes into detail of what hustle fund ishow it's different from other venture capital firms, it's very early stageand probably the most early stage, venture capital firm, i've actuallyever heard of their pre revenue. So they invest in companies before thosecompanies even have money coming in, and she explains her philosophy andstrategy around why they do that and what they instead look for in a companythey invest in. So if you've ever thought about raising funds, a hustlefund might be one of the firms you might look into. This is a greatopportunity to hear the leader of that fund explained what they actually lookfor. So if you want ever pick to them, you'll hear elizabeth, explain. Youknow what what's a check list of what you need to make that a positiveoutcome for yourself. They generally put in a small check about twenty fivethousand dollar investment initially, but they go in more to the companiesthey like and the companies that are successful. I think it's a reallyinteresting model and i actually got some unique insights into thestrategies who uses, which i think will help me in my own experience as anangel investor. So i really enjoyed it when elizabeth was talking about hustlefun. I had a few issues with my recording at the very end of this, buthopefully the editing cleaned it all up. So you'll get pretty much a hundredpercent of the interview, and i just want to thank elizabeth for sharing hertime and sharing her story. I think this is really exciting and you'regoing to enjoy it. Once again before i hit the play button on that interviewwith elizabeth i'm going to mention my own company, which is called in boxduncome, it's a email management service for basically entrepreneurs orsmall teams, where you need someone to manage customer service where thatmeans handling your email or your support tickets. We also do socialmedia in boxes, but predominantly we are stepping into entrepreneurs inboxes and taking away that task from you. So we handle your email. We applyto your messages, we build a system, we build a knowledge base and we take offyour play as much of that email as we can so maybe there's only five percentor ten percent of the message is that only you can deal with the eight ninetypercent. Ninety five percent is handled by us, the inbox managers. We aresigning to you if that sounds like something you would benefit from headto in box donec, and you can hear and read all about our services all right.Let's dive in now t with the interview...

...with elizabeth in here. We go hello.This is yaro and welcome to another exciting podcast. Today, i'm lookingforward to talking to elizabeth an elizabeth going to say a low straightaway. Thank you for joining me. Thank you for having me, so i know a bitabout your background. I honestly mostly know you for your current, yourfun hustle fun. I see on twitter a lot you're, definitely doing something alittle different there. I think i'm not even sure we may have even had a semipitch conversation at one point about one of my startups. I wasn't sure if iwas you are not, but we can bring that up later on, but i am intrusted in inso many of the things you're doing, but can we just give the audience a summaryof what is hustle fund and what might make it different from another v c firmthat people are probably more used to, certainly so, i think, for hustle fundat a high level. Our mission is to really help with essentially threethings. I think you know there are a lot of hustlers so to speak out there alot of great entrepreneurs in the world, but when you think about the resourcesthey need, which is, namely capital, networks and knowledge, it isn't reallydistributed well world wide. The best entrepreneurs don't necessarily getthose three things, and so that our mission at hulse fund is actually tofurther those three things for all entrepreneurs, and then also you know,for the very best. Entrepreneurs also make sure that they can have access tothose resources. So we have a v c fund as part of the larger hustle fondorganization, and the v c fund is a precede software fund, and so we investretraction, that's what i mean by preceed and we invest relativelyglobally these days. Okay, so when you say precede and pre traction you'retalking about generally, like could be a team or a person just with an idea.They have a customer, yet maybe not even a website or an apia. They justcome to you with an idea. Is that correct? Well, we like people to havedone something, because anybody can have thought of an idea yesterday thati would say so for most companies we invest in, they do have some semblanceof a product. Now it could be a concierge product or some sort ofmanual product. It could be a product that you can put together in one hourusing a bunch of forms, so it doesn't necessarily need to be a product thatyou have spent the last three months building out. The point is we wantpeople to have given thought to their customer development and reallyprioritize d? Risking, you know customer acquisition. So what is thething that you're going to do if its product? Well? What is the simplestproduct that you can put out there to start testing or in some cases nobodyhas a product yet, but they have a weight list or maybe they've done somepre sales and there's no product. So that's kind of the stage where we playwhere you are really thinking about. How do you do risk sort of all a leanstart up the customer acquisition component and we like to see peoplehave start to have done that? Okay, so there's definitely more than just anidea there there's something going on behind the scenes now. I know they donelike the website and what i've read about you before your typical checksize is sort of that twenty five thousand dollar mark, which i am been doing, some angel investingmyself and that's kind of the sort of price point, maybe a little bit less,sometimes as well, but that's the ball park. What is the difference betweensay, a hustle fund? Twenty five thousand dollar check versus anindividual angel investor. Twenty five thousand dollar check, and do theynecessarily come at the same time like? Where does it fit in the chronology ofa start? Up yeah, we very often invest alongside other angels. So actually ido think that a good way to look at hustle fund is as an angel. I think youknow from a legal perspective. Our money does come in the form of a fundfrom other people, but i think we are very angel asking many ways you know somany operator angels can be helpful with advice and network and that kindof thing and similarly for hustle fund. You know we run programs like we havesomething called redwood school which is free to our portfolio, and it's webring in a number of mentors who can tactically give advice to our portfoliocompanies on things like outbound sales or legen or or whatever. So we do tryto provide more than just money. We've also done so many introductions from afundraising perspective to other investors to help you round up moremoney than the twenty five k. So we we see ourselves not just as a twenty fivek check and- and i would say that probably most of our entrepreneurswould say that as well, that the bigger value at are these other things m yeah.I think that might be the key difference where an angel wouldpotentially just here's your money. Good luck, keep me in touch where youmight be stepping in and actually supporting helping. You do moreintroductions, you know, connections and so on. I'd love to talk more aboutthat process, but i do want to know how the elizabeth background connects toall of this as well, obviously, to get into this world. It usually results insomeone having had an entrepreneur experience to begin with, possibly aninvesting experience as well. I know your background in terms of your linkedin profile. Obviously you were a google product manager, and that was the sortof i i wouldn't say super early days at...

...google, but certainly early days earlyenough days. I love to ask a little bit about that. If it's there's a story toshare there, of course, but even before that, can we go back? Are you born andraised in the bay area or someone else? Okay, so original bay did you grow upthen, and maybe this is cliche but seeing entrepreneurship everywhere, andthat was something you thought you'd obviously get into, or maybe tech mightbe, the other. You know not to say, as an entrepreneur founder, but certainlyworking for a tech company is that what everyone in the bay who grows up therethinks about, or is there other options in the bay yeah for sure? I thinkdefinitely time in place has had a huge influence in my life. My parents werenot in tech and they were not entrepreneur. So you know where i gotmy influence on. That was definitely and growing up here. In fact, actuallysomething very distinct happened to me in high school, my freshman year ofhigh school, my best friend jennifer asked me if i wanted to help her cousintony with his start up during winter break, i mean they're, just helpingthem do little things here and there, and i didn't, have anything going on,and so i said, okay sure, and so we took the cal train up to san francisco.We went to his office, and that was where i got my first taste of what astart it was. It was like tony and all of his friends and they were kind ofdoing all these things and they could eat all the pizza they wanted in theworld and it was the dream, and so that's when i knew that i wanted tostart a company, and this was in one thousand nine hundred and ninety six.So the start of the rise of the com boom around here now i never eventhought very deeply about how to start up made money. How does this all work,but two years later, that you know affer mentioned tony, actually ended upselling his company to microsoft for hundreds of millions of dollars, so hewas quite successful and many of you may actually better know him as thelate tony. She who was the co of zappo. So i was very fortunate, very early onin life to be able to, i don't know, run into somebody who would become sortof a lifelong mentor or at least up until last year. So you know thingslike that had a big impact on on my life and he would later have a bigimpact on my startup career as well. Continued from that and his cousinactually was my co founder at launch bit. Oh, i didn't know that well, yeahtony has had a lot of influence. I've spoken to another entrepreneurs whoseem to have connected with them at some point, maybe just for the sake ofconnecting the dots with tony in your early life. What did you take away fromhim as a founder like because that would have potentially influenced howyou saw yourself becoming a founder as well with her certain traits orattitudes, or anything work ethic that you took away from seeing what he didand how he did it? Well, i think, like many entrepreneurs, tony certainlyworked really hard, but i think there are a couple of things that he diddifferently from many people. So one is, he really thought outside of the boxlike you know, i think a lot of entrepreneurs think outside of the box,because that's kind of what you have to do almost by definition, to be anentree to be scrappy and make things work. But you know he was very early in,for example, geography like and what i mean by that is, you know, zappo was insan francisco and he quickly realized well from a business perspective. Thismakes no sense. I can't afford to hire people for customer service here andthere are much better people, talent, wise who do customer service elsewhere,so who's very early in deciding to move the whole company to henderson innevada near las vegas, and i think that's just a decision that most peoplewould not have made at that point in time like this is twenty years ago whenhe made that decision and only now are people starting to say that you canbuild a big company outside of silicon valley, and so you know that sort of ithink one example of many like he later made a second decision in a similarvein for i appose in deciding to move the company to downtown las vegas. Alot of people thought he was crazy, whereas, like you already havesomething that is working in henderson and at the time downtown las vegas wasjust honestly really unsafe and had a lot to be desired. So people justthought he was not, but i think even fast forward now. If anybody has beento downtown las vegas in the last couple of years, people will see.Actually, it's he's really changed the place quite a bit, and you know i thinkit's pretty incredible. His ability to kind of you know see through some of what otherpeople might consider. Nutty he's definitely made a mark on vegas. Iknow that in fact, the few entrepreneurs i have heard connectedwith tones seem to be connected with vegas as well, so there's definitely alink there. Could you take us far with your own story, so you meet tony. Yousee that lifestyle as a start up found, you see the potential big exit as well.Now that that's exciting you have his cousin as a potential co founder and itwas the late s, so that was a crazy time. I start my first website in thattime frame, obviously because...

...everything was going on at that time.What were you thinking in terms of your first business or your first attempt atdoing a start up? Well so because that was very inspiring actually jenniferand i started building website together in high school around that time afteryou know spending a couple of days with tony, and so you know we just builtwebsite and sort of like an agency type of model. Not you know it wasn't. Itwas not a product business by any means, but we just worked on a lot of websitein our computer lab at school and and that's what we spend a lot of our timedoing during those those years. So what happened after that? So youkind of, were, i guess, sounds like a side hustle, maybe or an agencybusiness where you can make a living from it. Did that eventually turn intosomething else? Or did you just you know, give it up when a new idea camealong yeah, i was just sort of a little side hustle, we were still high schoolstudents, so you know we didn't really take that anywhere and then it's funnybecause like to me in some sense the com bust feels like it never happened,because i was so sheltered from it. You know i graduated from high school intwo thousand and i went to college in late two sand, which was when the busthappened. So i was in school for the next four years in college and you knowmeanwhile, all around me literally all around me, because i was still in thebay area in college. Like everything was just shutting down, you would seeheadlines in the paper saying any it. Jobs are going to india, and you knowthe internet is dead and all this other stuff, which obviously all of us findlaughable today, but i was sheltered during that whole period of time. Wheni emerged from college and graduating two thousand and four, i wouldn't saythat everything had come back, but the tech economy had started recovering. Atleast what did you study in college? I studied electrical engineering, okay,so you graduate what was the plan upon graduation? Well, i think, to someextent, though, you know a big, i guess fear was getting a job and maybe that'sa fear for everybody, but i think even more so having gone to college duringthat era and part of why i studied engineering was i thought that ifcomputer science is dead, maybe i should do something that's a little bitmore flexible or broad, but as it would turn out actually through a sort ofmeandering path, i ended up getting a job actually in tokyo, and i did iguess you could call it sales or marketing engineering out there aftergraduation, okay, so a bit of travel experience is well i'd, better, be alot of fun. How long were you in tokio before i was in tokyo for about a yearor so? Actually the way that this came about was just also very unexpected. Iactually originally thought. Oh maybe i might like to go to business schoolright after graduation, and so i wanted to see a couple of campuses in boston,but i didn't really have the money to pay, for you know a trip to go out toboston. So i entered this contest and the prize for the contest was free,plane tickets to go to their conference in boston. Anyway, i won this contest,and so i got you know a free flight to boston, but in order to get myreimbursement, i needed to go to this conference, which had a large job there,and this job far was not just any job fair as a job. Far for the it was thelargest job there for jobs in japan and it tiled in boston every year. Okay didnot know that yeah and if getting a job on the spot, i didn't get into anybusiness goal, and so that's how i ended up there. So you could say that iwasn't really looking to take this job per se, but it was certainly anadventure for about a year. Okay. Now, when this google come into this,because i were hitting close to the years, you worked at google. So did youcome back from japan and then look for another job, or are you still workingin the same company? Well, so then the thing about that job is that i wasn'treally qualified for that job either. So i got there in october and prettymuch by the end of october or early november. They pulled me aside andpretty much fired me. They said you know this isn't working out. Yourjapanese is not that good and so you're going to have to leave, and so theysaid you can stick around for about a year. You know we can kind of put youin the back and you can you know, do some power porn presentations for o? Idon't want you talking customers, so that's how my job ended up. So i neededto find something else, and so i re applied to business school that fall. Isubmitted the same essays and in letters of recommendation and testcores and everything, because i had no time to redo anything and this time idid get in so i did. I went to business school for a couple of years and thenafter that took a job, a gogol. Okay, so tell me about google life. Changingexperience really boring somewhere in the middle of it was like. Google hadamazing people, and maybe they still have a maiden people to this day. Ithink they hired when i was there incedibley well, the bar was so high.Everybody was very sharp. I thought...

...quite highly of my colleagues andobviously the environment has a lot of perks as well like the food, at leastback then was amazing, but i felt like even back then, and this was in twothousand and seven- they was quite big already as a company. I think therewere over twenty thousand people who work there at that time and even biggerstill today, but i think you know back then i just felt like wow. This is.This is really big. I am not sure this is really quite theright environment for me, and so i left because i wanted to start my owncompany, which is almost the opposite of a really big company, to start yourown company by yourself, and i decided to leave in late two thousand and eight,and so from a timing perspective. I had thought. Okay, i'm going to turn inmy resignation in a couple of weeks and next thing. I know you read tech crunchand there's this there's this article rest in piece good times so where saquiessentially sent out this email to all of their. I don't know founders orsomebody saying we're going to bed down the hatches, we're not investing in newcompanies and all of that and i paused and thought for a moment. Maybe ishouldn't do this start up thing. Maybe i should wait it out, but then ithought if i waited out what sign am i looking for like what am i waiting for,so i decided to take the plugs and leave at the time we thinking you needinvestment. I can understand, obviously, like you said, secos band down thehatches and- and i do remember that actually going out and a lot of newsaround the the lack of capital at a time, but you had had the experiencemay be. Obviously it was in your teenage years but running a companythat i'm assuming your agency did not need, invest capital right, so you knewit's possible to start a side house so that maybe i could turn into a bench ofback company down the track, but were you sort of thinking from the beginning?No, no. I want to do a pino day, one fine investors and grow like that. Sothis is a great question because i think i'm reflecting back. I didn'treally understand what venture capital was. I also didn't understand whoshould raise it and what for and why and what timing and all? I didn'tunderstand any of that, but you know i think that ethos around here is: oh,that's what you should do, so i think that's kind of how i got you know inthat train of thought, but i mean i think i was actually just not able toraise any capital for those first couple of years and it was a good thing,because i also had no idea what i was doing either and i actually had savedup a fair bit of money in preparation to do this, like i was working ingoogle and pretty much saving everything and because i'm from the bayarea, this may be really privilege, but i just crashed with my parents thatwhole time, so i wasn't spending any money that i was making a google,except for maybe on taxes right, because i was just at home, eatinggoogle food i'd like to work, so i didn't even have a car. I didn't haveany expenses really, so i was in good shape, but i think the venture capitalstory is just very confusing. Hmm. It is interesting giving what you do today.No doubt advising certain you know early stage companies should they takeinvestment or not you kind of went through it a little bit yeah. I couldimagine, though you would have been your own kind of capital sources.Obviously save me so much money from google with almost no expenses. Sothat's amazing. What is the idea that what were you thinking and how did youcome up with the idea for this, this business that you worked on for twoyears? It sounds like without financial backing, but did you have a co found oranything like that? So i had a lot of meandering ideas, and that was, i think,problem number one like i just knew i wanted to be in business for myselfthere wasn't a particular problem i was trying to solve and i think inretrospect people should really have a problem. They want to solve or anaudience that they want to solve for certainly before they try to raise anyventure money, and so we had a lot of different things at this time. I wasworking with a friend from school, not jennifer, but somebody else, and youknow we had to grow a co browsing tool like just you could shop with somebodyelse, and we had all these other. You know side project things, so it was notvery buttoned up. There were a lot of explorations and a lot of learning atthis point in time. Okay and the end result, i'm assuming eventually it waslaunch bit- is that right that was a lot later, and so anyway,that criarde decided that he didn't want to do startups. So he left, okayand then later at some point i arm twisted my friend jennifer and to hey.You know you're finishing up grad school. Why don't we work on a companytogether and we, you know, just ended up actually building out an ad network,so there were just like a lot of side projects in there with different peopleand and different angles, and at some point we were even doing like you know:affiliate marketing, selling, all kinds of other stuff. Okay, we we probablywere in possibly crossing path digitally at that time, because that'swhen i was doing pillian marketing blogging early day, podcast ing as well-and i this is funny too. I actually had an idea for an ad network. At the timei, which was kind of similar to what by...

...cell adds, ended up being the companythat acquired your company. We had todd on the podcast many years ago. I thinkfour years ago i had taught on the show, i'm not sure if he was the person you,yet you did work with okay, let tell you more about that. Okay, awesome, butso tell me a little bit more about so what is launch bit, and is it like that?You said you had an ad network. Is that kind of like the genesis of what becameblanche bit so at some point? After all of this floundering eric rees rode ablog article that i really feel changed. My life like if you had to pick outpivotal points in your start up journey meeting tony was one reading ericreese's blog article was probably the second one, and so essentially thearticle was the gist of what later would become his book lean start up,which many people here have read, and i realized oh we're doing everything allwrong. We're just like building out all these things, but we're not actuallyfiguring out if people want to pay for anything or whatever and just spendinga lot of time building and that the number one problem for most startups ormost software startups, i should say, is: do you have a product that peoplewant and they're willing to pay for, like the customer quisitive like? Doesthat make sense and does it work out, and it was as funny as it sounds,because it sounds so stupid saying this a lot, but it was really an a hammoment for me because i realized oh we've been doing this all wrong like weneed to kind of change our mentality and do risk more before buildinganything. So i think the long of the short of it is when jennifer and i weredoing customer development on some ideas that would help marketers weended up. Actually, i guess you could say stumbling into this ad net work foremail, because in talking with a lot of marketers, a lot of people felt likewell, it's you know. Actually, one of the best performing channels overgetting is an email taking out email sponsorship and what not. But there areall these challenges abc and i have to go and find these newsletters and dothese negotiations and all this stuff and send the money and whatever sothat's how we actually ended up building out launch bid. It was it waskind of after you know, having lots and lots of conversations with markers.Okay. What is hate did launch bit do? Was it like a two sided market placewhere you would find the news letters and they bid the supply? And then youhave you know the buyers who want to place ads in these newsletters is thatkind of a rough summary yeah. So our first version of it was exactly thatand i guess you could say it's like the by cell ads version for email as achannel for what they were doing with blogs. Eventually, though we were doing,i guess you could say remnant for people in your audience are familiarwith ads, like you know, sometimes, when publishers cannot sell their adslot, you'll still see ads in there anyway, and those backup ads are payingless. So once we had a publisher base on both sides, then we were able toalso introduce remnant ads where we would pay in a cost per click basis toour publishers as well, so we had both actually okay. So was this the firstkind of like you said: you'd studied eric rese's sort of initial articleabout the lean methodology and having an mv and that's sort of customercentric, or even i mean getting a sale. You know making some money centric formof a start up. It is funny you say that because i can think back to my ownthought process as an ongere neur and i think you get a bit distorted.Sometimes, if you're reading a lot of press about aventura companies, youstart to think that you don't need a customer. That's not your goal. It'sreally just about having an idea getting some backers and then growing,not sure what you're growing and might just be your team. But you know you'reworking on something which isn't necessarily generating revenue byactually making sales. So was that kind of condes explain that initial versionof an ad network was that the first time you really built, i guess acompany that actually had customers and your pro proving idea. Basically,besides the agency, i realized the idis you would have had to about customersmore or less, and i think the additional thing i would add here is:we started getting customers from day one without building anything, so wedidn't have a website. In the beginning, we didn't have payments. We wereliterally manually brokering, like an agency, add placements in publishers,so we would go to our marketer friends and acquaintances and say: hey. Do youwant to buy ads in these publications? It's this price et ce people would sendus their copy and email. They pay. Peld me money to my personal paypal account.That's how we tested the initial version, so it was very jinky, but itworked and we started making money that way and then we started building outthings once we hit bottle nex. So, for example, it's point people said i'mgetting really frustrated and annoyed by having to send you all this copy.You know it's just really annoying for the formatting and whatever. So that'swhen we started buildingout interfaces,...

...and so it first is. Okay, here's a formyou can uplook copy here. Okay, now we have payments, you don't have to paypony money anymore, and so we just started adding things from a techorproduct perspective once we knew that that was what we needed to build infact, so our initial version was very much like a two side of market placewith set pricing, but eventually we had dynamic pricing on a cost per clickmodel, and you know with an auction. Even a d and building out a fullfledged at auction is its complex and google has a lot of people spendingmany hours working on this right. So there are many variations you can do onthat. We didn't want to build anything on day one if we were going to have toscrap it. So on day one when we were testing our p model, we had a form andit had an input box for people's bids. But when you bid nothing actuallyreally happened like it would just send us an email saying: oh yaro has sent usthis bid of a dollar per click, and my co founder would then based on the bidmanually on her note pad just like readjust the number of impressions youwould get in the back like on the back end, and so it was annoying whenmarketers would change their clicks or their sp bids like every few hours likei'm not getting in a dollar any more. I want to bid like five dollars orwhatever yeah, but that's how we tested it, and then we decide to go whole hogon that once we noticed actually marketers really like that interesting.So it sounds very manual. Obviously what you're doing there i mean thefront interface looks like a sass that it's really not and the bigger you get.That's just not going to be sustainable, obviously right so i'm trying tovisualize to. But this is a dynamic market place. So you have to actuallydeliver the ad at some point as well, and then there's like a cost per clickbasis. You have to then go back and figure out how many clicks wereactually generated from the it sounds like a lot of manual paper work. Canyou fast forward? How does that turn into an actual sass? I guess is myquestion in terms of a company yeah. Well, i mean, i think, with sortof running with this philosophy of all right. First, you d risk manually, andthen you start building out. So once we figured out market is really like thecaspar click model and here's why i mean i think it's very intuitive, butwhen we were charging a flat feed, let's say you know to get into arosnetwork or publication. A couple of things happen: one. The pricing doesn'twork for everybody, it only works for some advertisers and sometimes you getthose advertises, and sometimes you don't and the other thing is peoplestart to skirt you right in a market place model so now that it's muchbetter to go directly to you with your pricing. If you know this is where iwant to be, and so to kind of solve. For these two problems than cost forclick works better to fill. The extra remnant like you as a publisher stillwant to get the flat feet because that's premium pricing, but usually, ifyou can't fill it like, there's literally nobody who wants to buy it.It's a waste of your ads lot unless you're running your own ads andparallel. So we can fill it for you at these high c pss and based on how muchpeople bid and then based on the engagement of the bids. We can optimizethat revenue for you, and so that's why that works and that's why face book andgoogle and all have a cep model, because it's more efficient foreveryone when you can't get sort of those premium advertisers, so we wereable to quickly validate that and then so we just started building out. Youknow the components to reduce friction again. So initially it was all right.Let's build out tracking. That was the first thing, because we need a trackingfor all of them in north to charge advertises right like you got fifty oneclicks, and this is what you bid. So here's your bill, and once we did thatwe also needed to you, know, make sure that we were tracking engagement. Sothat way we were also optimize. Who actually is the best ad. So justbecause you bid a thousand dollars per click. If you get no clicks, that's nothelpful versus somebody who made bid only fifty cents for click, but ifeverybody's clicking, that might be way more money right, so we had to startfiguring out okay, how to optimize for engagement to maximize revenue, and soall these things we started just building them as they came in the orderof what was most necessary and what sort of a nice to have okay, and isthis the time when you actually get investors for the company yeah? So wegot investors. So we went through the five hundred startups acceleratorprogram and we got investors more or less right after demo day with theoriginal version of the ad net work, we had already started making money justby collecting manuel payments through my papal account, and that was on theflat fee model, and that was enough to get you in the fontan. I start ups andthen you went from there now you actually became partner. Five hundredstartups too, is that sort of the introduction to that world for you, aswell as initially as a participant yeah. So later i did, but that is how i gotto know them actually by being a company that went through one of theirearliest batches. Okay, so take us through that, so you participate inflave hundred startups complete the program you get their initial backing b,but you also go through a pitch day as...

...part of the five on and start upsprocess you pitch, then you follow up with potential investors, and hopefullyyou get your seat around. Out of that is everything i'm saying what happenedwith you guys with lunch? Misriyah? Okay, so you exit it, you get yourfunding, you build a team, i'm guessing as well, and then you're, trying tolike systematize a new software to take these manual processes and turn into anactual assass. I'm assuming you were the first engineer is that right forthe company yeah. So what ended up happening was mybusiness partner or my co founder jennifer, who is also technical? Wedecided we would divide and conquer, so she built out product and i went andsold that okay, oh ay, so you didn't use your engineering size so much andthat on o take us through with launch bit to the point where it actuallygetting to the acquisition. The sale of the company was that a situation whereyou were looking for that or someone knocked on your door or you're actuallylooking to you know, raise bark capital thatsometimes can initiate an acquisition as well. What was the time line forthat yeah? I guess kind of all of the above, so one because we had been inthis space, obviously attracted sort of the attention of some of the other ad,not works, including by cell ads. So that's actually how i got into no toddjust by being in the in market, whom i think you mentioned was on your showshould say. Tug garland is his last time in the case, you're wondering cometalking, yehoudis lads- and so i got to you know, got to know him over theyears and then actually at some point by sallads, became a partner. So inthis world i think just going back and explaining a little bit again with it cost per click model. You canmake extra money when there's extra adam en tory. Otherwise you don't getanything in that that space is lost right well, to get more of that. Whatad no works often do is they often will partner with other ad, not work. Soit's funny a lot of people think ad networks are very competitive with eachother and to some extent there is some competition, but there's also a lot of cooperation,because somebody always has face that's unfilled, and so we started pardnerwith them to fill their extra space and doing a revenue share that way. Sothat's actually how we really got to know each other. I think, even from abusiness perspective through that partnership and then fast forward a bit.So i think at this point in time like i was trying to raise more money honestly,i couldn't raise really anything more or at least not at the terms that i washoping for and meanwhile we had been just sort of casually discussing whatsomething more strategic might look like with biset, and so that's kind ofhow the two happened more or less in parallel, and we ended up beingacquired by by cell ads in two thousand and fourteen okay. So sounds like thesituation meant that you weren't looking at an acquisition where you'regetting you know, lifetime retirement money out of that transaction. But doyou stay on lisele ads after that running lunch bit for a while or or didyou exit when it exited? I actually when it exited so the way acquisitionskind of work is like people, you know want product or team, or your customerlist, or whatever some permutation and depending on how strategic it is orwhatever by selas, wanted the product they wanted it to be as part of theirfamily suite and they ran it for about four years and there are pieces of itthat are still integrated with their system today, but they didn't want us.They had. You know better ad sales people than me, and you know they hadtheir own processes right, because they can sell ads as an additional productalongside their other at so they didn't need other people, and so we left theteam left, and this was actually something that we wanted. My co founderreally wanted the autonomy to be able to either start something new or dosomething else or whatever, and so that was something that was really importantto us, so she actually put together not for thisacquisition, but all these years had put together a large google dock to hercredit like actually spelling out every single thing you needed to do to runour business, and so we just handed that over and we had a two week periodthat was negotiated in there with bisel ads, where we would be there to kind ofhelp hand hold them in on boarding them on to this day one they read the book,they were like. Okay, we've done everything just by reading this book,so we don't think we'll need you for the next. You know whatever wame wow,that is the fastest tenga, like an actual exit eg that i've ever heard of,i think most of the time is at least some kind of handover period, butcredit to jennifer for the best stop, never written by the sounds of thingsthere. So you're out you're, free correctly, if i'm wrong but like i saidyou didn't, have retirement money, so you're still thinking what your yournext bet. What happened next yeah, so i really wanted to figure out okay. Whatshould my next business be like many entrepreneurs and i think in particularafter having gone through all this like one of the soul searching moments forme, was it's not enough for me to find...

...a problem where you can make money, ithink for me. I really want a problem that i would want to continue workingon and serve that audience for the next thirty years, like basically that wouldbe my last business i didn't want to like have a business where i would sellagain, so i was doing a lot of soul searchingtrying to figure that out. I went to mentor at five hundred startups whereinitial i started out there as an eir and then one thing lent to the next,and i was actually really fun being there, and so i actually got sucked inand then ended up running their accelerator program there for severalbatches and becoming a partner there. That was not the path i had intended onand i never thought about venture never wanted to go to venture, but it wasjust actually so fun and i really love their mission. So that's how i ended upthere. Okay, i've always been curious. When someone becomes a partner at anincubator, slaps early stage, bat investment firm, like five hundredstartups or yce or whatever partner to me, infers some sense of you're on thecat table through the five hundred startups entity. Can you may be explainwhatever i don't know what you're allowed to talk about in terms of that?But what does happen when you become a partner yeah, so accelerators also havetheir own funds. So you do get carry in those funds now, obviously you don'tget carry in all the funds. Only you know kind of when you're there andthere are just like actually vesting for startups. There is vesting whetherit's a a vcuum accelerator, for you know people who stay at funds oraccelerators as well. So i was there for about three years, so i had youknow three years of vesting, but vestings on funds are typically likeseven years, so you know. I think that unless you're with a v c funder, anaccelerator for call it a decade or more and or unless the fun reallyknocks it out and you're being there for one to two years makes difference.I think in the end, it's it's not actually quite the same as if you endup at a unicorn start up and you're early, and you vest for one or twoyears. It's not quite the same because think about it, like a fund isdiversified across many winners and and luthers to so just want to get my headaround it here so help the audience to so. If you stayed, let's say if fivehundred startups four or ten years, so you start you become a partner and theday you become a partner. That means you have a percentage ownership of thefund. That is five hundred startups right, which is the fun that's payingout the hundred thousand dollars, whatever it is per start up to get sixor seven percent or whatever it is through the accelerated program andthen any follow on investment. That might happen as new rounds are raised.I don't know how far i went to starps goes, but at a bad minimum you're. Inwith that initial, you know six percent, then sometimes seven, eight nine yearslater has those few winners start exiting the fund is returned, the carryis returned and then you have a percentage of whatever that is as apartner based on the time frame viewer a partner in the fun. Does that kind ofsummarize it right yeah? So if we walk through this pretty quickly andconcretely, let's say you have a ten million dollar fund and let's say inten years, let's just say for easy numbers: the fund is a two x fund, someaning it returns twenty million in total. So what happens? First? Is theinvestors in the fun get their money back the ten million, and then the tenmillion of profit is usually shared with an eighty percent twenty percentmodel, meaning the investors get eighty percent and the managers of the fundget twenty percent. So in this case, with this scenario, there would be startwo million two million left for the team, the managing team and then on topof that, there's a percentage of how it's divided up amongst the team. And so let's say that you are tenpercent owner on that. Then you get two hundred thousand, but that is alsosubject to vesting how long you have vested for so, if you've, only bestedhalf the time now you're talking about you get a hundred thousand okay, youcan see that this starts to shrink more and more most of it goes to theinvestors of the fun, which i think rightly it should be, but i think evenamongst the team, you know there you get some percentage and then, dependingon how much you vested a percentage of that yeah, it really requires someunicorns and some big results for you to even get a reasonable outcome sinceit's so many slices of the pie happening there. Okay, so take usforward your exit, your partnership from five hundred startups, is thatwhat connects you to hustle find what you do today yeah. So i left in twothousand and seventeen if five undered startups, a number of things happenedthere, but i think in parallel. I was also starting to think about startingmy own fund and in particular you know. I think i love the five hundred startups ethos.It's actually verya similar to what we...

...believe at hustle fund as well, whichis you know they were investing globally in all kinds of founders,working all kinds of things like they. You know they very much, i would say,were some at the forefront of you know this idea that entrepreneurs can comefrom anywhere and can look like anyone and that's very much what we believe athostile fund as well. But i think one of the things that i really wanted todo was i wanted to invest quite early, so that may sound funny because you maysay: well, they were an accelerator weren't, they quite early, and i thinkat that time, actually in two thousand and seventeen or thereabouts a lot ofaccelerators, not just five hundred but also yce and tech stars. A lot ocompanies going into these programs had a fair bit of traction. It was notuncommon for a company to have already gotten to about ten thousand dollarsper ment in revenue at any of these programs at any of the top program, andthis makes sense because, as these programs have developed a brand, theywould attract great companies, including companies that were not onlygreat but also had great traction, and- and so, if you could pick, companieslike a lot of them picked later stage companies. Well i really wanted to beable to solve, for preceed is what i call it. Companies that didn't have anytraction back that was cut more or less the kind of company we had an launchbed. We had. We went into vivinsati with very very limited revenue, and ifelt like there was sort of this huge gap and others had noticed it as welllike. I think somebody whom i consider to be both a mentor and a peer of mineis charles hudson, who runs a prec, fun called precursor, and he had justgotten into the market around that time before i took the leap, and i thoughtthat was really clever. There was just this dirt here where people were stuck,entrepreneurs were stuck and all these firms that had made a name by you knowinvesting in napkin based ideas had vacated the space like felicias used toinvest that early now, i would say: they're squarely a series, a fund, soonce you get success, you vacate the earliest stages. So at that point intime in the market i would say there were, there was kind of more or lessnobody and charles was just getting started. Okay, so to make this makesense to everyone. Obviously, there's a need for funding for early stage atthat early early stage before they have necessarily got traction. But what'sthe reason for you to do that because, currently at wrong, that's possibly thesingle riskiest time to make an investment, because it's completelyunproven, you're, probably basing it on the founders, which you know earlystage is all was based on the bounders. But at least with traction. You can seethat they're getting somewhere and i know a lot of people who have greatideas who might be researching doing things, but at the end of the day theynever even start a company out of it. So why do this? And what's in it, forfor you, as as a firm, that's a great question. So there are a couple ofthings i noticed while up five hundred startups, which is why i thought thatthis is even a good idea, because many people thought this is a horrible idealike. Why would you want to invest in companies without any revenue traction?So one? Is i notice that companies with traction at the seed stage it didn'tnecessarily mean that they had product market fit or even were on their way toproduct market fit just because you have one customer who's, paying you alot. It doesn't mean that it's repeatable or just because you wereable to get these other people in an agency like way which may be fine inthe beginning. It doesn't mean it's repeatable and yet i think, for most vc firms. In some sense, they were paying up in valuation for thattraction, and especially since we were starting to see pressure on seedvaluations rising, but on the flip side at that time precede. Actually, youknow pretty much had no investors at that time and so valuations were actually quite low. Now,obviously, the world has changed a little bit today, but visions werequite low, but to me the risk is actually the same between preceed andseed, namely they both have the same risk of there's no product market fit,and it's unclear if there is going to be product market pit. So if the riskis the same because i would argue that product market fit is the number onemost important risk that everyone needs to consider, it's actually notexecution or founder risk. It is product market it risk which is a lotof lokas to whether you stumble into an idea that actually can get productmarket it. Then, then i would much rather take the earlier company, whichis you know, could have a valuation of two to three x lower or put another wayyour multiple. If it goes well could be two to three x higher, so it is in some sense, easier to getthe economics to work out you're, taking the same level of risk for ahigher potential multiple. So that's what i saw and then the second thing isin running the accelerator. We felt like we had a model that could alsohelp with this, and this very much goes to what we're working on at hustle fund,which is we we actually try to make a decision within forty eight hours ofspeaking with an entrepreneur for...

...twenty five k and that allows us to getcapital in their entrepreneurs can start raising. We start helping themraise more money et ce, but i allows us to start working with the entrepreneursand in some cases where it's a good fit both ways. We may decide to invest moremoney, and this is something that we learned kind of from the acceleratorfive minter starters, which is, i realized, i didn't, learn very muchabout companies and hearing them pitch me, but once they came into the programand we could start to work with each other and interact with each other. Ilearned a lot and so to me. Actually i felt like that is a lot moreinformative than than hearing somebody pitch and it's also more informativefor the start up like they know who they're getting so for twenty five kdecision. It's easy on both sides like whether to get that deal done or not.Hmm, that's really interesting, like you're, almost doing a prequalification investment at twenty five k fast. So then you can then do thatsort of quality time with them to really see if they're worth furtherinvestment and throughout this process, you're getting in at the lowest likelyvaluation they will have. Can you clarify now? You said like obviouslybiatius right now, as we are talking, are definitely a lot higher than whatthey have been. I know i'm part of like a couple of syndicates, taste, cohansand arlen hamilton and a few others on angel list. Just three years, it's gonefrom three million dollar raise to a nine million dollar raise at that firstsort of valuation that i'm putting in what are you experiencing? We like whatare you putting in now when you put in that initial twenty five k: what's theevaluation yeah we're actually still staying quite disciplined aroundvaluation, but people always ask me: well what numbers are we talking about?I think it varies a lot on geography, but i would say our median tends to bebetween call it three and six million post money, but we've also done dealson either end of that, so the bulk are probably in there. But that being said,i think we actually ran the numbers with our applicant pool in terms ofwhat valuation people are asking for and it's very biforked what we found isfor a lot of the hottest deals. They are getting these higher valuationsthan in two thousand and twenty, and then they are also closing faster andraising more money. But that being said, it's not everybody. There are still alot of companies that really struggle to get funding, and so so there is amuch larger range this year than what we saw last year, at least in our dayinteresting. So so the last five minutes here i know you got to run off.What is the criteria like if there's a listener here thinking you know what iwould like to pitch to hustle fun? What would be what would be the bestpresentation to do for you their best foot forward in terms of qualifying,because i know we're kind of alluding to it here, but we're not like you justsaid you said the greatest risk is product market fit risk, that's hard todem, that's impossible to demonstrate before you've had any customers right.So how? How do we impress you at hustle fund yeah? So actually, i think very similarto how we drest launch bit. That actually is the most impressive to me.Having had a lot of other flounderings before, which is you know, can you get people on a weight list?Even if you have no product, can you pre sell? That's even stronger we'vehad some companies have no product, but they pre sold already, or can you startto sell? Well, concur ging, a product, so maybe you don't have like, like isaid you know our manual form fields, something like that. Can you do thatfor your business and start attracting interest or start actually beengenerating sales? So that's the kind of scrappy thinkingthat we are looking for, like people who are very focused on the fact thatone i know i need to de risk whether this is really actually a problem thatpeople are willing to pay for. So what are the things i can do to focus onthat? That's kind of the line of thinking and to you know what are thesmall experiments? I can start to do whether they're little ad test or youknow, have a little event and get people to sign up or whatever. What arethose things that you're doing? Okay interesting? So it's kind of like areyou action orientated you're doing things to at least experiment notnecessary talking about just having an agency client, so you can show thatyou're doing five ten sand a month, you're actually looking to scale usersthrough action, but not necessarily financial. Yet so that's that's aninteresting inside last couple of minutes elizabeth. What is the futurehere we? Where do you hope, because i know it's kind of early days. You saidit's like a seven year sort of typical life cycle you're getting in superearly, so that really might push to ten years. With a lot of your investments,you started in august two thend seventeen. If i'm reading your linkedin right, that means you're only a kind of your for at best with your first few.Where does this go? No, where what's happening next yeah so for the broaderhustle fund organization, as i youu...

...know started mentioning at thebeginning of this, we have plans to you know change. I think how started becaussistance work along those three things: capital, knowledge and networks, and sowe continue to launch other funds that are unrelated to the v c fun and run byother people to be clear and other programs there can, you know, pushthings along with those things. So, for example, we launched angel squadearlier this year. My calling brian nichols launched. It ran it or runs it.I should say- and he you know manages that- and that is a program foraspiring angel investors who don't know anything and may not have a lot ofcapital, our minimums or a thousand dollar investment, and it allows themto learn more about angel. Investing, also allows them to invest a long side,us etc and to introduce more capital into startit system. So we're trying toattack this problem from many different angles and the v c fond news is one andthat's the one that i'm focused on, but for the broader org you'll see a lotcoming out from us. Okay, so it sounds like it's about reaching as many peopleas or quality people around the world, who are entrepreneurs as you can andsupporting them as best you can definitely, okay, so website addresseselizabeth work. Where do you want to send people yeah? If people want toapply, they can just go to hustle fund, not vs. We do actually read everyapplication and get back to people. Fifteen percent of our portfoliocompanies actually came in completely cold just from there. So that's oneplace, and then i think the other is just on twitter. We publish a lot ofcontent tactical content on variety of different aspects of building yourbusiness mostly focus around fundraising and tactical customerquisite. Okay, thank you for sharing the time. Thank you. I hope you enjoyedthat interview with elizabeth in. I found her story interesting andespecially found what she's doing in hustle fund compelling. I love hearingthat strategy that unique angle. They look for in terms of pre revenuecompanies that they invest in as an angel investor myself, i'm generallylooking for companies that have some traction. At least you know tenthousand a month as a kind of starting point, so to hear how she choosescompanies that have no traction yet was actually quite eye opening for me. So imight even consider adjusting my own strategy a little bit and look for someof the characteristics she talked about in the companies they put money in as away to sort of pre qualify and get that first introduction that firstexperience with the founders and their idea and what they're doing but yeahgreat to hear from elizabeth. I hope you enjoyed the story as much as i didgoing to leave this with the usual request. If you have yet to subscribeto best the capital, you should do so because you're going to get moreinterviews like this, i've got more start up. Interviews coming up. I'vegot more interviews with people like elizabeth who are both entrepreneurs,but now in the world of investment capital, whether it's through angel,investing or venture, investing or both, but also got interviews with somepeople. Doing amazing things in real estate poker, great grading to usecoming up and i'm excited to share with you so to make sure you do not miss outon any of those interviews. You have to subscribe open up whatever app you're,currently using maybe you're listening to this right now on an ap and click,the plus button or the subscribe button or the follow button. Whatever is therelevant button in that app for you and you'll then make sure you get all myepisodes as i release them. You also get to see all the back catalog ofamazing interviews that you can dive into whenever you need some newinspiration or ideas or just entertainment, while you're travelingor exercising or doing what you do with your life. Also, if you found thisparticular episode relevant, perhaps something you're doing or maybe there'sa friend or a potential business partner- hey, maybe you just wantsomeone who might need to pitch to someone like elizabeth to hear thisstory. Please share the podcast with them, send them to vested capitalepisode number eight and i've got so many de main names for this. You can goto invested capital, podcast com, you can go to yaro, do v c, that's garol,dot, v, c, bested, capital or venture capitalist depends how you want to seeit both those two redirect to my podcast home page, all my blog, whereall the episodes are there or just tell your friend, to go to their podcast appand do a search for vested capital or my name. Yaro y, a r o and my showshould show up and they can look for episode. Number eight with elizabeth,an okay, that's it! My name is yaro and i will speak to you on the next episode.

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