Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio.
Speaker 1: This week on the podcast, I have an extra special guest.
Speaker 1: Her name is Sarah Cone. She is the founder and
Speaker 1: managing partner of Social Impact Capital, a venture capital investing
Speaker 1: with a really interesting slant, a tremendous track record which
Speaker 1: we're not allowed to discuss publicly, and a list of
Speaker 1: a list limited partners which I'm also sworn to secrecy on.
Speaker 1: But you can trust me when I say, Wow, these
Speaker 1: are some really bold faced names. UM certainly ones that
Speaker 1: anybody who tracks investing, politics, venture capital, technology would would
Speaker 1: surely recognize. Uh. Sarah has really a fascinating work history
Speaker 1: and a fascinating approach to disrupting UM the vent world
Speaker 1: of venture capital. Her approaches really to look for company
Speaker 1: is that not only are making a difference in the world,
Speaker 1: but can produce a strong internal rate of return. Her
Speaker 1: philosophy as, if you really want to impact the world,
Speaker 1: will build a billion dollar company and see how that
Speaker 1: changes how everybody lives, operates and behaves in the real world.
Speaker 1: It's really um quite fascinating. She's really charming and delightful
Speaker 1: and and really really intelligent. UM with just the world's
Speaker 1: craziest rolodex and some really interesting stories. So I think
Speaker 1: you'll find this really intriguing. I had a great time
Speaker 1: speaking with her. With no further ado, my conversation with
Speaker 1: Social Impact Capitals Sarah Cone. This is Masters in Business
Speaker 1: with very Ridholts on Bloomberg Radio. My special guest today
Speaker 1: is Sarah Cone. She is the founder of Social Impact Capital.
Speaker 1: She began her career at the VC group Omdior Network.
Speaker 1: Pierre Omdier was the founder of eBay. She was an
Speaker 1: associate at Illuminate Ventures, where she worked on B two
Speaker 1: B Software as a Service UH in Silicon Valley Venture
Speaker 1: Capital UH. In addition, she worked at the nonprofit Public
Speaker 1: Knowledge UH Group UH Tech Policy Public Policy Group. Sarah Cone,
Speaker 1: Welcome to Bloomberg. Thank you for having me. I mangled
Speaker 1: your background, but really, to state it more conversationally, you've
Speaker 1: worked at a number of the big giant tech firms
Speaker 1: right and in the early days of your career, Google
Speaker 1: and others. You've been moving in venture capital circles for
Speaker 1: a long time, and your VC social impact focuses on
Speaker 1: more than just technology. Tell us a little bit about
Speaker 1: what social impact capital does. So we are a venture
Speaker 1: capital firm, UM, but we go in as early as
Speaker 1: possible into what we call the best ideas and impact
Speaker 1: which we are we think are the company is most
Speaker 1: likely to have, you know, both make venture capital profits
Speaker 1: but also have an incredible, you know, world changing positive
Speaker 1: effect on the world. So it's both. It's not just
Speaker 1: socially responsible or impact investing for its own sake. You
Speaker 1: have limited partners and they're expecting a serious return on
Speaker 1: investment exactly. Um. I think what's pretty hilarious about my
Speaker 1: firm is that, in fact, um my LPs are sort
Speaker 1: of this who's who of capitalism and they I don't
Speaker 1: really have a single impact investor in the firm um
Speaker 1: at the moment. And they actually even have two LPs
Speaker 1: that are on the record stating how stupid they think
Speaker 1: impact investing is. So why do they give you money
Speaker 1: if they think what you do is stupid? Or are
Speaker 1: they looking past the impact side towards Well? I asked
Speaker 1: one of them one time, and I was like, why
Speaker 1: are you in this firm anyway? And he's he applied
Speaker 1: to me the performance, that's that's the interest, And well,
Speaker 1: I I know you were bound by non disclosure rules.
Speaker 1: You can't say who these people are, but I know
Speaker 1: who some of them are, and they are front page
Speaker 1: name brand investors. Is that a fair statement they are?
Speaker 1: Does that impact how you look at the world or
Speaker 1: is it it would be the same if it was
Speaker 1: just a big, faceless institution. Um, well, I have. It's
Speaker 1: sort of an internal joke at our firm because I
Speaker 1: refer to them as widows and orphans. Um. It's it's
Speaker 1: sort of a joke because of course they're you know,
Speaker 1: all sort of billionaires that are able to take on
Speaker 1: early risk in a young venture capital firm. Um. But
Speaker 1: it's aspirational because we aim, you know, to become a
Speaker 1: top tier firm that produces such great returns that I
Speaker 1: am allowed to manage the money of widows. So so so
Speaker 1: let's talk a little bit about that, because I think
Speaker 1: that's kind of interesting. There are friends and family rounds
Speaker 1: when somebody first gets an idea, and then there's the
Speaker 1: angel round and eventually you moved to big firms, A
Speaker 1: round to be around the sea round? Where is social
Speaker 1: impact in that spectrum of early to late venture investments.
Speaker 1: We are the earliest possible. Um, we like to go in.
Speaker 1: We'll do anything in the seed stage. So we'll do
Speaker 1: you know, pre see the seed stage has become even
Speaker 1: more segmented UM. So we'll do but we'll do anything
Speaker 1: in the seed stage. We'll do preseed, we'll do seed,
Speaker 1: we'll do seed extensions, UM sort of anything in the
Speaker 1: early days. And then what we do is what we
Speaker 1: specialize is is in creating these social impact companies, getting
Speaker 1: them into the place where they're real businesses, and then
Speaker 1: getting them led by top tier venture capital firms in
Speaker 1: the Series A and so far at the firm, we
Speaker 1: have an eight rate of doing that, meaning that you
Speaker 1: do a set of investment but eventually not bring in
Speaker 1: additional exactly the downstream money is, you know, from top
Speaker 1: tier firms. I love it because I get my you know,
Speaker 1: and the founders get their philanthropic business plots then funded
Speaker 1: by commercial capital because they are good businesses, and so
Speaker 1: they're able to do that. And now, how can you
Speaker 1: tell if you're so early stage, they really it's a
Speaker 1: business plan. It's a couple of founders, but typically there
Speaker 1: isn't a product, there's barely a website. Is it more
Speaker 1: idea than actual business? It definitely is. We're going in
Speaker 1: UM extremely early, and so I'm making these, you know,
Speaker 1: pretty risky bets, and um what, we spend a lot
Speaker 1: of time and diligence, We spend a lot of time
Speaker 1: with the founders, and we just do our best. But
Speaker 1: as in any venture capital portfolio, you expect a you know,
Speaker 1: a number of those to fail and then a number
Speaker 1: of them to succeed wildly and compensate for those failures.
Speaker 1: So let's talk about that distribution. Typically with a venture
Speaker 1: firm that are making let's call it a rounds, so
Speaker 1: they're a little more developed. There's it's not a finished product,
Speaker 1: but at least there's a product, some software, websites, something
Speaker 1: you can look at. Um with those sort of a rounds,
Speaker 1: typically ten or total bus another maybe they break even,
Speaker 1: t makes some money and it's a really small slice
Speaker 1: that really hits the bowl out of the park. What's
Speaker 1: it like when you're doing earlier seed stage? I would
Speaker 1: imagine the failure rate is much higher. Well at our firm,
Speaker 1: I mean, the funny thing about the venture capital industry
Speaker 1: is that you tend to there's not data published on
Speaker 1: it that is very reliable, so you tend to only
Speaker 1: know what's going on in your firm, and then sort
Speaker 1: of what you read in the media. So I've read
Speaker 1: um from on CB Insights that the failure rate for
Speaker 1: seed stage investing is that only of the follow on
Speaker 1: rounds get funding at all from seed stage deals. In
Speaker 1: our firm, we actually have a hundred percent hit rate
Speaker 1: right now. Um, but you know, it's venture capital, so
Speaker 1: you don't really know anything until seven years, ten years
Speaker 1: down the line back cycles. There's a huge lag It's
Speaker 1: It's pretty excellent though, because what it creates is this
Speaker 1: sort of uncompetite. I always describe venture capital is the
Speaker 1: only uncompetitive field in finance. Why is that? It's because
Speaker 1: they're basically no good venture capitalists in the world. So
Speaker 1: when you so by the time you learn and you
Speaker 1: actually really get the knowledge, which can you know, is
Speaker 1: seven to ten years down the line, it's this incredibly
Speaker 1: long lag time. So by the time you learn the
Speaker 1: lessons from that, all the technology has changed, all of
Speaker 1: the business models have changed, and the entire world has changed.
Speaker 1: So if you actually take those lessons and adopt them,
Speaker 1: which many venture capitalists do, then you're investing wrong in
Speaker 1: your next fund, and you see that play out over
Speaker 1: and over again. So I think that the only really
Speaker 1: good venture capitalists are the sort of intense real time
Speaker 1: learner venture capitalists. So it's sort of like looking at
Speaker 1: the light from a star. By the time the light
Speaker 1: gets to us that hey, that star could be gone
Speaker 1: from me exactly. That's the perfect way to describe it.
Speaker 1: Quite fascinating. Let's talk a little bit about um launching
Speaker 1: your own firm. You're here in New York, but you
Speaker 1: used to be out in Silicon Valley. What made you say, A,
Speaker 1: I wanna kick off my own shop and be let's
Speaker 1: leave all those people behind on the West Coast and
Speaker 1: come to New York City. Well, I started my own
Speaker 1: fund because I see this incredible arbitrage opportunity and earliest
Speaker 1: stage impact investing that I was not able to kind
Speaker 1: of concentrate on that thesis anywhere else in the world.
Speaker 1: So is it too niche, too small? Why couldn't you
Speaker 1: can't strain on that elsewhere? Well, what's wonderful is I
Speaker 1: always describe it as the you know, it's almost like
Speaker 1: an invisibility cloak because primarily no one in the world
Speaker 1: believes that impact investing can actually produce top tier returns.
Speaker 1: I keep hearing, By the way, it's political it's so yeah.
Speaker 1: I mean, I hear self indulgent luxury junk. I just
Speaker 1: completely I constantly hear this, and I constantly I'm like,
Speaker 1: vcs are like kind of always saying to me, like, Sarah,
Speaker 1: you're a great investor, you can just drop the social
Speaker 1: impact branding. Now I'm like, guys, this is what's producing
Speaker 1: their return. But I really I used to kind of
Speaker 1: annoy me, but I realized that this is actually my
Speaker 1: competitive advantage because it means that there's a ton of
Speaker 1: open ice here because no one else is, you know,
Speaker 1: coming into this field. So you know, when I'm getting
Speaker 1: better valuations than anyone else in the VC industry, when
Speaker 1: I'm getting into better companies than anyone else in the
Speaker 1: VC industry, then they're sort of baffled. They still don't
Speaker 1: understand it. Um, So this is it's a it's a
Speaker 1: fantastic competitive advantage. Bafflement is a great It really is.
Speaker 1: You know, I'm kind of intrigued by the concept of
Speaker 1: cumulative advantage, where firms that have done well attract a
Speaker 1: network of better vcs, better, better LPs, better companies. Do
Speaker 1: you see that in the social impact side or has
Speaker 1: it not yet developed that far? Where communal advantages is accruing.
Speaker 1: I think cumulative advantage is UM one of the most
Speaker 1: important things to any pc a firm period and one
Speaker 1: of our advisors for our firm, Ashby Monk, has actually
Speaker 1: written widely about this UM and we how we have
Speaker 1: thought about it at our firm is that we have
Speaker 1: an unusual structure in that it's a solo GP firm,
Speaker 1: but I work with a wide variety of venture partners
Speaker 1: and advisors that all have pretty specific domain expertise and
Speaker 1: specific institutional you know connections. What other venture firms are
Speaker 1: you working with is part of your broader network? Oh,
Speaker 1: I mean all venture It's a part of the industry
Speaker 1: that venture capital firms work with other venture capital firms.
Speaker 1: Every venture capital firm does that. I'm saying, we especially
Speaker 1: for follow up rounds, and we work with a bunch
Speaker 1: of you know kind of at our firm, we work
Speaker 1: with a bunch of academics and you know, um kind
Speaker 1: of people in industry and people out in the world.
Speaker 1: So more than just other other venture funts UM and
Speaker 1: this has been this has been an incredible accumulating advantage
Speaker 1: to us over time. What do you hear from your
Speaker 1: limited partners. Do they stay in close contact? How do
Speaker 1: you communicate with them? How often do you update that
Speaker 1: I have you know a small number of them, um
Speaker 1: that you know I'm in pretty close contact with, and
Speaker 1: then you know most of them I send quarterly updates
Speaker 1: to their people. And how do you source and find
Speaker 1: potential investments? I think that you know, we we basically
Speaker 1: scour the earth. I I, you know, will do anything
Speaker 1: to find an investment, and we look at everything. But
Speaker 1: I think most of our deals come in into primary ways.
Speaker 1: One is through the advisory board and venture partner network
Speaker 1: that I just talked about, And then the other way
Speaker 1: is that we sort of have a reputation as being
Speaker 1: good foundation builders for seed stage companies. So I got
Speaker 1: a ton of deal flow through Series A and later
Speaker 1: vcs that go, Hey, Sarah, I love this company. It's
Speaker 1: too you know early for me. You should take it,
Speaker 1: And I'm like, thanks, I'll invest in this and get
Speaker 1: it into great shape for you and pass it along
Speaker 1: when it's you know, interesting to you. What when you
Speaker 1: say pass along? What sort of resources do you pour
Speaker 1: into besides just writing a check? What else do you
Speaker 1: do to help a startup company get off the ground?
Speaker 1: And move forward. So we have these the venture partner
Speaker 1: and advisory board are this immense resource us for these
Speaker 1: people where we almost always will have the exact advice
Speaker 1: that you need for the exact problem that you have,
Speaker 1: and we sort of match it an ad hawk basis.
Speaker 1: So it's like, are you a biotech company that is
Speaker 1: wondering how to handle the FDA. Well, Linda a Vy
Speaker 1: who was the co founder of twenty three and me
Speaker 1: is on our advisory board, who knows a ton about that.
Speaker 1: So we just connect you for a call um and
Speaker 1: it's a lot better than you know, having some venture partner,
Speaker 1: I mean venture partner at a venture capital firm sort
Speaker 1: of pontificate on areas that they haven't had really really
Speaker 1: intimate familiar experience. So it's the network. What about the
Speaker 1: specific day to day of running and building a new
Speaker 1: from um. You know, we tend to sort of be
Speaker 1: hands off unless we're asked UM because we do a
Speaker 1: lot of upfront work um into our companies, so we
Speaker 1: tend to not sort of have the the the you know,
Speaker 1: we need so much help in this company. You know,
Speaker 1: we tend to only kind of invest in the companies
Speaker 1: that are pretty fully formed and then we're there to
Speaker 1: assist entrepreneurs with the best of class resources when they
Speaker 1: have trouble. UM. But other than that, we try to
Speaker 1: stand out their way of building huge companies and well,
Speaker 1: how how are the deals typically structured, what do they
Speaker 1: look like? What what does the entrepreneur give up and
Speaker 1: what do they get? So, I mean the entrepreneur gives
Speaker 1: up equity UM, and then they give up a controlling
Speaker 1: share something we usually try and target about twenty percent
Speaker 1: each share. UM. It depends a little bit on on
Speaker 1: what the metrics of the business are in the stage
Speaker 1: of the business. But we think that's a pretty you
Speaker 1: know fair We like clean, fair, middle of the road terms,
Speaker 1: and we think that works well. And how do you
Speaker 1: value a company when it's so early stage? That's UM,
Speaker 1: that's the magic UM. I actually have a PhD and
Speaker 1: applied math that sort of helps me do all of
Speaker 1: the evaluation. UM. But it's a it's one of the
Speaker 1: most questions that venture capitalists disagree on most of all
Speaker 1: in the in the profession. So with a more mature company,
Speaker 1: you have products, revenue, maybe even profits, and there's a
Speaker 1: formula to generate some multiple on that. But when it's
Speaker 1: so early stage, it feels so much squishier. How much
Speaker 1: of this is science and how much of this is art?
Speaker 1: I would say it's all art. I mean, the way
Speaker 1: to think about it is it's a discount on a
Speaker 1: future cash flow. But that's an imaginary thing. So it's
Speaker 1: a discount on your imagination. UM. And some venture capitalists
Speaker 1: are able to imagine greater scenarios and some venture capitalists
Speaker 1: have no imagination at all. So, and we haven't really
Speaker 1: talked about returns. We know you do subsequent rounds. What
Speaker 1: have the return has been like for the farm? Are
Speaker 1: you out? By the way, hedge funds I know are
Speaker 1: very much precluded from sharing return information except with their
Speaker 1: accredited UM potential investors. Are do you have similar limitations
Speaker 1: with venture I wish we could talk about our returns,
Speaker 1: but no, UM, it's the SEC frowns upon that. Under understood.
Speaker 1: Let's talk a little bit about some of the work
Speaker 1: you're doing in social impact investing, and in particular I
Speaker 1: want to ask you about defive ventures and build dot org. Um.
Speaker 1: We'll talk a little bit about about each of those. First,
Speaker 1: what was the motivation to start along a social impact
Speaker 1: access as opposed to merely doing early seed stage venture investment. Well,
Speaker 1: I love investing. I mean it's been my primary hobby
Speaker 1: in the world since I was eight. Um, but what
Speaker 1: were you investing in at eight? Well, you know public
Speaker 1: equities really, I mean yes, through through adults. But um so,
Speaker 1: I you know, back then, the stocks were in the newspaper.
Speaker 1: So I would come home from school every day and
Speaker 1: the first thing I do is get the newspaper and
Speaker 1: look at my stocks. Real um yes, but I never
Speaker 1: considered that I could go into finance as a career. Um.
Speaker 1: I didn't know any women in finance. It never even
Speaker 1: passed my mind. My what I wanted to do was,
Speaker 1: you know, to do something positive for the world, to
Speaker 1: go into public service. Um So it was quite a um,
Speaker 1: you know, great day in my life when I realized
Speaker 1: that I could actually combine those two things. And we
Speaker 1: talked about this briefly that it's neither impact first nor
Speaker 1: r o I first. It's you make the investment in
Speaker 1: a space that you might have been attracted to because
Speaker 1: of its impact component, But the investment in itself is
Speaker 1: strictly on the same metrics as any other venture investment exactly.
Speaker 1: I mean, my philosophy here is that you don't change
Speaker 1: the world by playing small games. You change the world
Speaker 1: by making billion dollar companies. And I want to encourage
Speaker 1: the sort of world change or do good our types
Speaker 1: like me to think bigger and to think more, you know,
Speaker 1: about building these huge companies that can do good. So
Speaker 1: I was going to ask you a question, but I
Speaker 1: kind of think you answered already. Typically venture investments are
Speaker 1: looking for an exit, either by going I P O
Speaker 1: or an acquisition. No different with impact investing, is that right?
Speaker 1: No different um in venture capital exits or everything. They
Speaker 1: are the returns to our LPs, so they really matter.
Speaker 1: So let's talk about those two firms. I mentioned that
Speaker 1: your adventure advisor to what is build dot org. Those
Speaker 1: are volunting. Those are actually volunteer um jobs that I
Speaker 1: do um. Build dot org teaches entrepreneurial skills to high
Speaker 1: school students and to five ventures teachers entrepreneurial skills to
Speaker 1: former inmates. So both very talent. I mean, the world
Speaker 1: is full of talented entrepreneurs, and I like to encourage
Speaker 1: all of them. I've read that venture investing is very
Speaker 1: much a relationship game. Do you do you think that
Speaker 1: is true? In venture investing as well as philanthropy. I
Speaker 1: definitely think that is true. I mean, I think that
Speaker 1: being human is a relationship game. But in particular with UM,
Speaker 1: you know, venture capital and philanthropy, you're dealing with these
Speaker 1: complex coordination problems, which is why they become social problems
Speaker 1: because they're so hard to solve. So you have to
Speaker 1: build these huge, extensive networks where you can interact with
Speaker 1: you know, the nonprofit sector, with government, with the for
Speaker 1: profit sector. UM. So we always very much concentrate on
Speaker 1: building these broad alliances between different people. And and let
Speaker 1: let me UM reference some of the work you did
Speaker 1: in in academics. You see Barkeley, you want a number
Speaker 1: of awards, the Advocacy Award for Persuasive Writing, the Jurisprunce
Speaker 1: Award for Academic Excellence. But I want to talk about
Speaker 1: your thesis Reforming Federal tax Policy to support Social Entrepreneurs
Speaker 1: that that received UM some honors as well. How does
Speaker 1: one reform federal tax policy and how does tax policy
Speaker 1: support social entrepreneurs? This is a very actually complicated tax
Speaker 1: policy question, UM, and it has to do with you know,
Speaker 1: kind of are you allowed to deploy nonprofit assets into
Speaker 1: impact investing. So if you're a nonprofit organization and you
Speaker 1: have a little spare cash, you are okay, can you
Speaker 1: put that into an social impact investing type of funds? Right,
Speaker 1: so you are allowed to deploy nonprofit money into you know,
Speaker 1: for profit businesses. Um. You know, the idea of it
Speaker 1: being a nonprofit. It is just that you can't ever
Speaker 1: take it out and buy a yacht or something. It
Speaker 1: has to kind of stay in the do good or
Speaker 1: realm as defined by the i r S. Anyway, so
Speaker 1: the i r S needs, you know, issue has issued
Speaker 1: rules around this. They're very unclear, um, and you know
Speaker 1: they kind of they kind of just make everyone nervous
Speaker 1: in this sector. So your thesis helped clarify those rules
Speaker 1: for the broader It suggested how I thought they should
Speaker 1: be clarified, and mainly that I think they do need
Speaker 1: to be clarified because no one is certain how to
Speaker 1: act in this realm and it's depressing. It. It's very
Speaker 1: important because actually the nonprofit sector is incredibly large. It
Speaker 1: is actually, you know, the nonprofit sector is actually six
Speaker 1: times larger than the entire venture capital industry. And it's
Speaker 1: a form of permanent capital as well. It is I
Speaker 1: mean well managed anyway, it should persist for forever. Exactly
Speaker 1: we think of you know, we tend to think of
Speaker 1: anything nonprofit is like, oh, they're these weak, poor, you know,
Speaker 1: cash drapped organization, but they definitely have those. But the
Speaker 1: sector as a whole is an incredibly wealthy sector. UM.
Speaker 1: And so these regulations really matter about how capital is
Speaker 1: deployed into the world. The Gates Foundation, the Go Down
Speaker 1: the List, the Bezos Foundation, the Case Found. These are giant,
Speaker 1: multibillion dollar entities and they're structured to to be UM perpetual. Yes, um,
Speaker 1: they you know, they have a large influence on how
Speaker 1: how capital is getting deployed. And the tax you know,
Speaker 1: the tax regime has a large influence. You know, the
Speaker 1: tax regime basically is controlling how that capital is getting deployed.
Speaker 1: Let's talk about some of the recent social impact type
Speaker 1: deals in the public sphere when when we look at
Speaker 1: something like Beyond Meat, that i p O has been
Speaker 1: wildly successful, far more than most of the other sorts
Speaker 1: of UM i p O s we've seen in generally, UM,
Speaker 1: at least, it's done better than most of the unicorns
Speaker 1: out there, like Uber and we work it certainly has.
Speaker 1: It was actually the best UM event. I rather, it
Speaker 1: was the best venture backed I p O in two decades. Really,
Speaker 1: so would you consider that like a social impact investment?
Speaker 1: I absolutely would. If my fund had existed, then no
Speaker 1: doubt we would be on that deal. Um. So that's
Speaker 1: the you know, that's the type of thing we're doing. Um.
Speaker 1: What else is taking place in the fake foods space?
Speaker 1: For lack of a better really, the I guess the
Speaker 1: better phrases green foods or low impact, low carbon impact foods. Um,
Speaker 1: how do you look at that space? What else is
Speaker 1: coming along there? Oh? We we're seeing a number of
Speaker 1: really exciting companies in that space. Food systems are a
Speaker 1: big problem in the world, and they're quite ripe for disruption,
Speaker 1: as venture capitalists love to say. Um. Some of the
Speaker 1: companies we have in that space are actually Wild Pets,
Speaker 1: which is a dog food company. I know we've talked
Speaker 1: about this company and you dislike it because you feed
Speaker 1: your dog steak every night. No, no, no, you can't
Speaker 1: steak us a little rich. We basically use Purina pro Plan,
Speaker 1: which is a commercially developed and then we put the
Speaker 1: Stella and Chewies toppers, and my dogs are so spoiled
Speaker 1: that despite all that delicious goodness, I'll give them a
Speaker 1: little little scrambled egg or a little something to just
Speaker 1: make it special. Well, I'm going to send you a
Speaker 1: bag of our vegan dog food, which is made from
Speaker 1: a mushroom that's actually higher protein than steak. It was
Speaker 1: developed with a veterinarian. It has all of them, you know,
Speaker 1: acids dogs need, and we have I jokingly call it
Speaker 1: our dogs Save the World thesis because it turns out
Speaker 1: that of the agriculture in the US growing neat just
Speaker 1: goes to feed dogs and cats. So we thought, you know,
Speaker 1: by replacing some of that with you know, this vegan
Speaker 1: alternative that is healthy for dogs, then you know that
Speaker 1: is a is an easier way than to ask people
Speaker 1: to give up their hamburgers and has a bigger impact.
Speaker 1: The other thing about it is that it looks like um,
Speaker 1: a vegan diet actually has longevity um effects on dogs.
Speaker 1: So we're going to be exploring that with some academics
Speaker 1: in the future. One of the dogs that actually lived
Speaker 1: the longest UM was on an all vegan and you
Speaker 1: know the when I think it was in the top
Speaker 1: four for the world's record holder of of you know,
Speaker 1: dogs that live forever. It was an incredibly long time.
Speaker 1: I think it was like a hundred and eighty five
Speaker 1: years and people years was on an all vegan diet.
Speaker 1: What's in? What's it in actual solar years? I don't
Speaker 1: really track the dog world very really well, aside from
Speaker 1: my daughter constantly begging me to get a dog. I
Speaker 1: will try vegan dog food, but from an evolutionary perspective,
Speaker 1: you know, the packs of wolves, they weren't hunting wild mushrooms.
Speaker 1: They were out hunting meat, and there seems to be
Speaker 1: a predilection towards that. Left to their own devices. Although
Speaker 1: dogs will eat grass, and we feed our dogs on
Speaker 1: occasion the stew of yams and spinach and other things
Speaker 1: carrots that are really good for their digestive system. My
Speaker 1: dogs are incredibly spoiled. Just so you know, we have
Speaker 1: a pool for the dogs. I they occasionally let me
Speaker 1: go in, but effectively the pool is there. Well, you
Speaker 1: have to tell me what they think about this dog food,
Speaker 1: because I've heard that the dogs love it. Yeah, we've
Speaker 1: you know, we did tests where we put two dog
Speaker 1: foods next to each other to see which ones the
Speaker 1: dogs would eat. Really wouldn't go to this, So yeah,
Speaker 1: all right, um, and what else? What else is in
Speaker 1: the food system space? We have another company called Endless
Speaker 1: West UM, which can molecularly manufacture foods. I'm scinated by
Speaker 1: that because I saw something not too long ago in
Speaker 1: Business Week where they were describing chicken make nuggets not
Speaker 1: from chicken, but from cells grown in a lab from
Speaker 1: a chicken. Exactly. It's the same space. It's a little
Speaker 1: bit different because that is um, they're not Endless West
Speaker 1: isn't doing proteins. That is what we call the cellular
Speaker 1: agriculture space. When you're growing a protein, that's very difficult,
Speaker 1: and we think that that technology is not really here
Speaker 1: yet in terms of cost, So we haven't gone into
Speaker 1: that space. Eventually, you got to think they Eventually, it
Speaker 1: definitely will happen, you know. I think it's still twenty
Speaker 1: years off before it's going to be you know, get
Speaker 1: down to the level. So you know, it's it's it's
Speaker 1: close on the horizon. Years people will be eating food
Speaker 1: that did not come from an animal other than a culture. Absolutely.
Speaker 1: I have tried it and it is wonderful and you
Speaker 1: cannot tell the difference. Um. The only problem is is
Speaker 1: that it's too expensive. You know, it's it's it's two
Speaker 1: tho dollars a pound to make and it shrinks up
Speaker 1: to almost nothing after Yeah, um so, but the so
Speaker 1: in other words, this is really just a efficiency and
Speaker 1: production issue. Once that is resolved and this becomes competitive
Speaker 1: price wise. Am I understanding this correctly? That sounds like
Speaker 1: this is inevitable. It's it's definitely inevitable. Yeah, it's one
Speaker 1: of those trends in the world that's quite amazing. Let's
Speaker 1: let's move away from the discussion on food systems because
Speaker 1: it's both fascinating and horrifying. Um Frank and foods, Let's
Speaker 1: talk a little bit about valuations. Um Mark and Reason
Speaker 1: suggested that valuations don't matter. You know, he said, if
Speaker 1: he would have paid double what he paid for Facebook,
Speaker 1: wouldn't remain any difference. Do you agree or disagree? Well,
Speaker 1: Mark Andrewson is completely right. I never disagree with Mark Andreason.
Speaker 1: Um so, he's completely right in that you there's you know,
Speaker 1: gonna be fifteen deals a year that you know, out
Speaker 1: of the thousands and thousands that you look at that
Speaker 1: are going to become these you know, outsized companies. As
Speaker 1: a venture capitalist. All you need to do is be
Speaker 1: in those fifteen deals, so it doesn't matter what you
Speaker 1: pay for them as a matter of practice. Um about
Speaker 1: if you look at what has actually happened in the world,
Speaker 1: the valuations of some of the biggest businesses in the
Speaker 1: world were incredibly low. So you know, Airbnb first started
Speaker 1: raising money at a one point five million dollar valuation. Yeah,
Speaker 1: Uber's valuation was at five million valuation, you know, So
Speaker 1: I almost look at it as if you're raising with
Speaker 1: two high of evaluation. It's like a negative signal um
Speaker 1: the low. I'm not sure if it's actually that the
Speaker 1: entrepreneurs are so good so they're optimizing the valuation in
Speaker 1: the seed stage for shots on the goal instead of
Speaker 1: owning a lot of the company, or if it's just
Speaker 1: that those ideas are so contrarian that no one wants
Speaker 1: them in the seed stage and they don't become obvious.
Speaker 1: So you know, kind of what we say is that
Speaker 1: in the seed stage, the wisest route to take is
Speaker 1: to optimize for shots on the goal and do a
Speaker 1: low valuation so you have more flexibility with your capital,
Speaker 1: and then every yeah, every subsequent round after that optimized
Speaker 1: for valuation. Quite quite quite fascinating. So Uber, Airbnb, we Work,
Speaker 1: Facebook all had very low I mean I don't track
Speaker 1: we work, so I'm not sure about that. But they
Speaker 1: all had surprisingly low valuations in the seed stage, and
Speaker 1: then they become these major companies, you know, peloton Um.
Speaker 1: It's the in the seed stage, they're not obvious. And furthermore,
Speaker 1: these deals robin Hood is another one, they're they're also
Speaker 1: widely shopped ump I mean Uber. I think when Uber
Speaker 1: was pitching to open rooms of angel investors um in
Speaker 1: in the seed stage? Is that unusual? Is usual? One
Speaker 1: on one? What what's the typical structure of those No,
Speaker 1: I mean it depends. I mean it sort of depends
Speaker 1: on the entrepreneurs network and and the sort of you know,
Speaker 1: the company. But it's a lot of these, a lot
Speaker 1: of the deals that become the biggest they're they're just
Speaker 1: not apparent at all at the seat stage. So um,
Speaker 1: they're out there, they're contrarian everybody who looks at it.
Speaker 1: And it's only with all of this kind of ex
Speaker 1: post factor um looking back that we we believe we
Speaker 1: believe that hindsight bias, of course, so obvious after the
Speaker 1: fact that it's going to be huge. That's right, that's
Speaker 1: that's really quite a quite interesting. Um. So I I
Speaker 1: go to these regular dinners that we host, where there's
Speaker 1: so much intellectual capital in New York. We try and,
Speaker 1: um just grab a group of random hedge fund economists,
Speaker 1: academic media people and see if there's an interesting conversation.
Speaker 1: Been to one of those I know, and it was
Speaker 1: one where I bailed. I think I was traveling. I
Speaker 1: missed it. I invited you to one and then didn't
Speaker 1: show up. I had the time of my life. Did
Speaker 1: you still? You know? Best friends with about four of
Speaker 1: the women that I met at that dinner. We we
Speaker 1: make it, you know, kind of gender blended where it's
Speaker 1: not just like eight white dudes. We don't love that.
Speaker 1: But um, you've tried to get some billionaires together for
Speaker 1: dinner on your own. How has that worked out? Oh? Well,
Speaker 1: So it's a It's an important part of our social
Speaker 1: impact capital is that we hold these Jeffersonian dinners, UM,
Speaker 1: where we bring you know, people in the world together
Speaker 1: to have honest dialogues about issues. UM. It's part of
Speaker 1: our you know, solving these complex coordination problems. So you
Speaker 1: actually have an issue to be if you say, Jeffersonian,
Speaker 1: I assume you mean a debate takes place. It's not.
Speaker 1: It's not such a debate. It's ah, you know, it's
Speaker 1: a it's an honest converse station about about real topics
Speaker 1: in an incredibly confidential forum. Um. So, you know, it
Speaker 1: gets harder and harder now in the world to actually
Speaker 1: have these forms where you can say what you think.
Speaker 1: So we try and convene those between different stakeholders, and um,
Speaker 1: this was one that was you know, I always joke
Speaker 1: about because it was a lot of billionaires and I
Speaker 1: was trying to bring them together and it was basically impossible. Um.
Speaker 1: You know, they all had different business rivalries against each other,
Speaker 1: and we're like, I won't get in the room with him.
Speaker 1: He sued my company for twenty years. And then they
Speaker 1: all had personal rivalries against each other, like I heard
Speaker 1: he went slept with my daughter. I'm never getting in
Speaker 1: the room with him. And then they all, you know,
Speaker 1: beyond that, they were all you know, they had political rivalries,
Speaker 1: like I totally disagree with what he thinks about tax policy,
Speaker 1: so I'm not going to talk to him. And at
Speaker 1: the end of it, I was like, well, you know,
Speaker 1: I finally brought it together. But at the end of it,
Speaker 1: I was like, the good thing about this dinner is
Speaker 1: that it really has impressed upon me that there is
Speaker 1: no way these people are getting in the room together
Speaker 1: to control the world. It's just there's no no trilateral commission.
Speaker 1: As a non billionaire, you definitely have this image that
Speaker 1: they all got in you know, some smoky room, you know,
Speaker 1: smoke cigars and just decide how the world is going
Speaker 1: to go. And I was like, I know firsthand now
Speaker 1: that that is completely impossible, and that's even before their
Speaker 1: impossible schedules. They're like, great, that sounds wonderful. Let's do it.
Speaker 1: I have an open lunch in you know. Yeah, that's hilarious.
Speaker 1: It's so no Illuminati running the world just it's I mean,
Speaker 1: you can never be sure, because it could have been
Speaker 1: all an elaborately coordinated plot about that, but I'm pretty sure. Hey, hey,
Speaker 1: this girl Sarah is hot on our trail. We need
Speaker 1: some ruse to throw her off. I know, let's make
Speaker 1: it impossible to do a dinner. She'll buy that, yeah,
Speaker 1: And then I I pulled it off the end, and
Speaker 1: then everyone just argued and it was incredible. And then
Speaker 1: at the end, they're like, this is this was more
Speaker 1: fun than these things usually are. What I was going
Speaker 1: to say, was it productive? If you got everybody in
Speaker 1: the room, did they have an intelligent conversation? We definitely
Speaker 1: did have a very intelligent conversation, and I I wouldn't
Speaker 1: call it necessarily so productive. Um, and that nothing really
Speaker 1: emerged in the best ideas, Like you know, things emerge
Speaker 1: out of them. But it's certainly I think, you know,
Speaker 1: gave people some understanding that they didn't have coming in.
Speaker 1: M quite quite interesting. Um. I got a bunch of
Speaker 1: questions I didn't get to. Can you stick around a bit?
Speaker 1: We have a ton more things to talk about. Absolutely,
Speaker 1: we have been speaking with Sarah Cone, founder of Social
Speaker 1: Impact Investing. If you enjoy this conversation, well be sure
Speaker 1: and come back for the podcast extras. Will we keep
Speaker 1: the tape rolling and continue discussing all things venture capital
Speaker 1: and impact related. You can find that at iTunes, Google podcast, Stitcher, Spotify, overcast,
Speaker 1: wherever your finer podcasts are sold. We love your comments,
Speaker 1: feedback and suggestions right to us at m IB podcast
Speaker 1: at Bloomberg dot net. Give us a review on Apple iTunes.
Speaker 1: Be sure to check out my weekly column on Bloomberg
Speaker 1: dot com. You can sign up from my Daily Reads
Speaker 1: at Redholts dot com. I'm Barry Dholts. You're listening to
Speaker 1: Masters in Business on Bloomberg Radio. Welcome to the podcast, Sarah.
Speaker 1: Thank you so much for doing this. We have been
Speaker 1: trying to get this together for quite a while. And um,
Speaker 1: you and I first met on Twitter, where all great
Speaker 1: venture investments begin their their lives. And um, you and
Speaker 1: I were arguing about something, but in a very polite,
Speaker 1: respectful way. We were disagreeing about something. I don't remember
Speaker 1: what it was me either. I. In fact, I frequently
Speaker 1: meet people in the world that say I was disagreeing
Speaker 1: with you on Twitter about something, and I have no recollection,
Speaker 1: and I have like I think some of this comes
Speaker 1: from years and years of blogging, back in the day
Speaker 1: when blogs had comments, and there would be this robust
Speaker 1: community associated with a blog. Um and the big picture
Speaker 1: during the financial crisis, you know, I do a blog
Speaker 1: post and I get a hundred comments and like this
Speaker 1: crazy robust conversation. But eventually tragedy of the commons rears
Speaker 1: its head and it became overran with trolls and spammers
Speaker 1: and other sorts of stuff. Who Hey, there's a crowd
Speaker 1: here that must have some value. Let me market my
Speaker 1: jump to that. Um So, I have zero tolerance for
Speaker 1: nonsense in blog comments and that's kind of carried over
Speaker 1: to Twitter. I'm I'm way too cute quick to mute
Speaker 1: people and probably too cute too quick to block people.
Speaker 1: That is the only way to use Twitter. Actually, I
Speaker 1: think Twitter is a very usable platform if you spend
Speaker 1: hours and hours curating and blocking people. Well, actually incubating
Speaker 1: a company at Social Impact Capital that we hope will
Speaker 1: solve that problem because we think it's actually the root.
Speaker 1: I mean, we have this information problem I think online
Speaker 1: now where we live in the information age, but the
Speaker 1: information that exists in the world is sort of getting
Speaker 1: worse and worse and acts. Yes exactly. So, um we
Speaker 1: are building a you know, a new social network. We
Speaker 1: call it a you know the ideas that it makes
Speaker 1: you know, our users smarter, and we are kind of
Speaker 1: partnering with what we call the offline intelligent networks, like
Speaker 1: the people that went to your dinner. Other examples are
Speaker 1: you know, milk in or WF um So, we're kind
Speaker 1: of bringing those together. So in between your meetings, offline.
Speaker 1: You can banter online um in a forum, and I
Speaker 1: think it's going to be incredibly interesting. Does that have
Speaker 1: a name yet that's public or is it still below
Speaker 1: the radar? But you will be the first to know,
Speaker 1: all right, I'm intrigued by that. So so I don't
Speaker 1: remember what we were arguing about with Twitter. I do
Speaker 1: think we discussed the soft block on Twitter, right the
Speaker 1: is it the mute? No? Alright, so the soft block.
Speaker 1: I'm going to reveal this, and this has been around
Speaker 1: for forever and I didn't invent this, but the soft
Speaker 1: block is simply, if someone is following you and you
Speaker 1: block and then immediately unblocked them, what you've effectively be
Speaker 1: effectively done is forced them to unfollow you. So then
Speaker 1: you so you block unblock them. Now they've unfollowed you,
Speaker 1: you mute them, and it's sort of like a stealth breakup.
Speaker 1: I did not know that. That is Twitter gold. I
Speaker 1: will tell you that people have have said to me
Speaker 1: it's life change, life changing, just like the only thing
Speaker 1: that's close to that. It used to be the ability
Speaker 1: to move the cursor on an iPhone by holding down
Speaker 1: the tab key, and you can now goes to the
Speaker 1: cursor where if you want. But the latest technology, which
Speaker 1: I tweeted, was you now have this ability I think
Speaker 1: it came out about a month ago, and or by
Speaker 1: the time this broadcast two months ago, that you can
Speaker 1: set your phone so that if a caller is not
Speaker 1: in your phone book, it automatically goes to voicemail, which
Speaker 1: means no more robot calls. This is why I came
Speaker 1: on the show, because I knew I was going to
Speaker 1: get this kind of life tips. Right, this is right,
Speaker 1: That's really what the show should be about, life changing technology.
Speaker 1: It's not even tech, it's technology settings. Somebody else has
Speaker 1: made a tech product that's so complicated that in order
Speaker 1: to derive value from it you need these little tweaks
Speaker 1: that suddenly Twitter is more worthwhile. And this iPhone, which
Speaker 1: is completely useless to me as a phone because of
Speaker 1: the robot calls, now is actually a fully functioning phone
Speaker 1: a decade after Steve Jobs first released it. That's now
Speaker 1: come up with a name for that, right, I get
Speaker 1: tech tweaks for geeks or something um silly like that.
Speaker 1: So there's there's a bunch I love these digressions. There's
Speaker 1: there's a bunch of questions I did not get to that.
Speaker 1: I want to work my way through. And I'm gonna
Speaker 1: give you a couple of options on some questions and
Speaker 1: if if you have a conflict or a compliance issual issue,
Speaker 1: will just wave them off. Um, early, early, early in
Speaker 1: your career, you did one off with Howard Buffett. Do
Speaker 1: you want to just discuss that really briefly or do
Speaker 1: we not want to talk about that next? That was
Speaker 1: way early in your career. Um, So such a corny question.
Speaker 1: How do you balance doing good with doing well? I'm
Speaker 1: gonna skip that. Um. It's so it's isn't it a
Speaker 1: terrible question? It really is? Um? But this is a
Speaker 1: good question. So you invest in a broad variety of areas.
Speaker 1: It's not like you have one teeny tiny niche. You're
Speaker 1: pretty pretty broad. What areas do you think are right
Speaker 1: for disruption? We've already talked about food processes. What else
Speaker 1: are you look? And social networks? What else is ripe
Speaker 1: for disruption? Well? I think as a venture capitalist, your
Speaker 1: most fundamental belief is that everything is right for disruption.
Speaker 1: So I think healthcare, you know, food systems, education, transportation, housing, water, energy,
Speaker 1: even social media is all right for disruption and my
Speaker 1: day is basically an endless stream of ideas in my
Speaker 1: inbox about how to disrupt all of these fields. Um.
Speaker 1: I joke that my inbox is pretty much the most
Speaker 1: inspiring place in the world. Really, that's quite interesting. So
Speaker 1: to feel that way about your inbox. I have an
Speaker 1: idea for a new company, but it will disrup up
Speaker 1: to venture investing. Yes, can I get capital is one
Speaker 1: of the most DISRUPTI you know, disruptible fields. Is that true?
Speaker 1: I was kidding, But is that really true? No, it
Speaker 1: definitely is true. I think, you know, I have a
Speaker 1: bunch of It's not really my field, but because you know,
Speaker 1: I think venture capital is fantastic. But certainly venture capitalists
Speaker 1: talk all the time about ideas to disrupt venture VC,
Speaker 1: disrupting vs. Well, what wasn't Andrews and Horowitz say, somewhat
Speaker 1: disruptive venture firm when they rolled out? They absolutely were.
Speaker 1: What were they doing that was so different than the
Speaker 1: Kleiner Perkins um of the world. Well, they really popularized
Speaker 1: the portfolio. Um, they really sorry, should we take that again?
Speaker 1: It's not the chime, Um, it's eleven o'clock. Yeah, I'll
Speaker 1: turn off this. So we both turned off a phone,
Speaker 1: and I forgot to turn off my other devices. Um.
Speaker 1: So I'll tell you another setting that I love. I
Speaker 1: don't know if it's on this What I want to
Speaker 1: do is, oh my god. Yeah, I didn't even know that,
Speaker 1: Oh my god until I leave this location. So now
Speaker 1: you will not get any noises until you really know
Speaker 1: how to operate this stuff. You know what it is.
Speaker 1: I'm an idiot savant with this stuff. You really should
Speaker 1: have a show just on this. No, because basically I'm done.
Speaker 1: I've given you my four biggest tricks. Now what do
Speaker 1: I do for the next two hours? Let's get to
Speaker 1: get it interspersed with the finance. So I'll tell you
Speaker 1: how I got that. I discovered that trick. Uh. By
Speaker 1: the way, I not discovered it. If it doesn't have
Speaker 1: anything to do with meat, he's not discovering. Um. I
Speaker 1: really hate whiney journalists complaining about plane delays. Um, and
Speaker 1: so I've tried really hard not to fall into that group,
Speaker 1: although it's really really challenge. I will say most of
Speaker 1: the arguments I get into on Twitter are when I'm
Speaker 1: on a plane delay, well, because you've got nothing to
Speaker 1: do with and your irritated, and it's like but I
Speaker 1: said on Twitter, God damn it, why does an Apple
Speaker 1: have a setting like I would shut my phone off
Speaker 1: to record something? Because everybody has a podcast. They all
Speaker 1: everybody in the world has this problem. They shut their
Speaker 1: ringer off to um to record a podcast, and then
Speaker 1: they leave and the ringer is off and they missed
Speaker 1: subsequent calls. Now, there is an entire subgroup of people
Speaker 1: who say, you turn your ringer on. What's sort of
Speaker 1: a monster? So I was intrigued by that. But the
Speaker 1: other group said, um, when I asked this question on Twitter, Yeah,
Speaker 1: this is a setting you could either turn your ringer
Speaker 1: off for an hour, or even better, turn your ringer
Speaker 1: off until you leave a given location. And I'm like,
Speaker 1: why didn't I know about this? And the answer is
Speaker 1: these things are so complex and so many new features
Speaker 1: come out it's impossible to keep up with. That's actually
Speaker 1: a perfect illustration of the thinking behind our social media platform.
Speaker 1: Is that what so everyone thinks that Stuart Brand said
Speaker 1: information wants to be free. It's been spread all around
Speaker 1: the internet that he said that. I feel somewhat sorry
Speaker 1: for him because he didn't actually say that. If you
Speaker 1: sort of the full quote was, you know, he said
Speaker 1: something like information wants to be expensive because the right
Speaker 1: information at the right time just changes your life, the
Speaker 1: most valuable thing in the world. On the other hand,
Speaker 1: information wants to be free because it's so easy to
Speaker 1: replicate and pass along. Now and he said, these things
Speaker 1: are going to be competing. Um, and context matters exactly. So, um.
Speaker 1: So social media is fantastic for kind of getting you
Speaker 1: the right information at the right time. Um. And so
Speaker 1: we're kind of, you know, creating the best platform in
Speaker 1: the world for that, except for the whole ambition, that
Speaker 1: whole undercoting democracy thing. We're going to try and not
Speaker 1: not do that. Not you're not going destroys that's on
Speaker 1: the mission statement. So okay, so maybe I have another
Speaker 1: technology tip. But it's just a website quote investigator dot com,
Speaker 1: which is awesome because you find out that all these
Speaker 1: quotes that you've been using your whole life are nonsense,
Speaker 1: I know, and especially Albert Einstein pretty much said nothing clever,
Speaker 1: nothing about compounding, nothing about hydrogen and stupidity, nothing about
Speaker 1: there are all these Einstein, Mark Twain, Marcus Aurolius. Go
Speaker 1: down the list of these people who you constantly see quoted. Um.
Speaker 1: It turns out that most of these quotes came about
Speaker 1: decades after they passed away, and and you can track
Speaker 1: end quote. Investigator does the genesis of these quotes based
Speaker 1: on when they first appeared in print, when they first
Speaker 1: appeared in a book, and if it's and whether or
Speaker 1: not it's in the person's body of writing, body of work.
Speaker 1: And so if something shows up fifty years after Mark
Speaker 1: Twain dies, probably not a Mark Twain quote, which is
Speaker 1: which is pretty amazing. So the public markets are fairly efficient.
Speaker 1: They do a pretty good job at figuring out what
Speaker 1: an appropriate valuation is relative to future discounted cash flow.
Speaker 1: How efficient are the private markets? How efficient are venture
Speaker 1: capital investing? Relative to what is or isn't no known?
Speaker 1: It seems more opaque then we we see in the
Speaker 1: public markets. Yeah, it's certainly more opague. Um, the information
Speaker 1: isn't public. In fact, I don't even know most of
Speaker 1: the performance of my very close friends in venture capital.
Speaker 1: So I always describe it like running a venture capital firm.
Speaker 1: I'm running Olympic race, but I don't even know what
Speaker 1: the times are of any of the people that I'm
Speaker 1: running against. Right, Um, so there's just not this information
Speaker 1: that you have in in the public markets in in
Speaker 1: private markets, and then simultaneously they just have two different
Speaker 1: incentive systems. So the private markets are basically these max auctions,
Speaker 1: and by the time you get to the public markets, um,
Speaker 1: you know, you're no longer a monopoly seller of your
Speaker 1: stock and you can't walk away to avoid setting a
Speaker 1: low price, and there are no transfer restrictions. So you're
Speaker 1: merging these two different incentive systems into each other. And
Speaker 1: I think it's like, you know, merging a car onto
Speaker 1: a high speed freeway. There's only a few drivers in
Speaker 1: the world that can really do that very well. So
Speaker 1: it's why I am incredible. I don't know, I'm not
Speaker 1: a great driver. It's why I am, um, you know,
Speaker 1: glad to be an early stage investing because by the
Speaker 1: time the companies get to that stage, you know, for me,
Speaker 1: it's like, is this going to be a hundred x
Speaker 1: on my return or a thousand X? And that's you know,
Speaker 1: my only worry there. How do you measure how impactful
Speaker 1: a given investment is? We've we've talked about how do
Speaker 1: you measure how successful something is? And that basically is
Speaker 1: the return on investment? But how can you determine whether
Speaker 1: or not something is moving the needle. So UM this
Speaker 1: was this is a this is always a big topic
Speaker 1: of debate in my firm and I when I originally
Speaker 1: started out my firm, I was dad set against UM
Speaker 1: any kind of impact investing metrics. Finally, my partner convinced
Speaker 1: me that these impact you know US US tracking and
Speaker 1: impact metric would be a good idea UM because LP
Speaker 1: has really really wanted this UM. You know, he thought
Speaker 1: for marketing the fund. He thought impact LPs would really
Speaker 1: really care about impact metrics. And I said, find one metric.
Speaker 1: It has to be something related to actually running the business.
Speaker 1: So that is what we do. UM. When we have
Speaker 1: an agree illegal agreement with our entrepreneurs when we make
Speaker 1: an investment that there's one metric they come up with it,
Speaker 1: I sort of have to approve of it because I
Speaker 1: don't want something that is not inherently related to running
Speaker 1: the business. UM. When you're an early stage startup, I
Speaker 1: always tell my entrepreneurs, because they're real do getters, always
Speaker 1: want to solve every problem at once, and I say,
Speaker 1: pick one. Solve it, like you know that by giving
Speaker 1: us your capital, we're working on all the world's problems,
Speaker 1: so you can rest assured that they are all. You know,
Speaker 1: progress is being made and all of them. You need
Speaker 1: to just get your one done. Is this for your
Speaker 1: entrepreneurs or your LPs or my LPs do not care about,
Speaker 1: you know, social impact at the moment, I'm hoping to
Speaker 1: attract some LPs into the firm that care about social impact.
Speaker 1: I would I would imagine given them, I'm looking for
Speaker 1: the right word and wokenesses in it. Given the rise
Speaker 1: of E S G investing and the push towards better
Speaker 1: governance and more diverse investing, that we would see more
Speaker 1: institutional investors into uh UM something like social impact. But
Speaker 1: you're relatively relevant to them, and I think someday will
Speaker 1: be incredibly popular with them. But in the beginning, they
Speaker 1: typically don't like to come into fund one right they
Speaker 1: have to. You have to see a three year or
Speaker 1: five year track records. I want to see you know
Speaker 1: that we can return cash to our back to our investors.
Speaker 1: Can what you do at the seed level scale. So
Speaker 1: if you get a Cowpers and some of these other
Speaker 1: giant firms, maybe a little bit of soft bank because
Speaker 1: they have more money than they know how to intelligently invest,
Speaker 1: can you scale up to tens of billions of dollars
Speaker 1: or by by nature does Early Seed have to be
Speaker 1: much smaller? No, um. That is one of the issues
Speaker 1: that I paid a lot of attention to and how
Speaker 1: I structured the firm so we can scale up to
Speaker 1: large au M and I actually have a plan for that.
Speaker 1: I feel like Elizabeth Warren, I have a plan for that.
Speaker 1: Um for everything. Yeah, too many plans, UM, but I
Speaker 1: care for all. Are you going to invest in that
Speaker 1: or or or are we going to see disruption of
Speaker 1: healthcare from the private sector instead of the political sector.
Speaker 1: I personally think that we are Americans, so we will
Speaker 1: see disruption from healthcare come from the private sector. But
Speaker 1: who knows what's going on with the Buffett Amazon Chase
Speaker 1: healthcare program that started a couple of years ago. I
Speaker 1: haven't heard anything about that. Yeah, it's right, I haven't.
Speaker 1: I haven't heard much about that either. I mean, they
Speaker 1: seem to be attracting good people, and I look forward
Speaker 1: to what they're going to do interesting. So we've seen
Speaker 1: all sorts of studies that suggest that the bulk of
Speaker 1: venture capital is Silicon Valley, New York, Boston, and then
Speaker 1: a vast waste land around the rest of the country.
Speaker 1: Steve Case is doing some some rise of the rest.
Speaker 1: They literally take bus trips to different cities to do it.
Speaker 1: But most of the rest of the country isn't seeing
Speaker 1: a lot of venture activity. What do you see across
Speaker 1: the country geographically for where entrepreneurs and venture capitalists can
Speaker 1: find each other? Yeah? Absolutely, I mean we invest all
Speaker 1: across the US, and you know some of our best
Speaker 1: performing companies are outside of the US. Where else have
Speaker 1: you invested? So not just US like New York and
Speaker 1: San Francisco, but global? What what other countries are you
Speaker 1: investing in? We even we have an investment in Africa,
Speaker 1: and we have an investment in the UK. Um London
Speaker 1: is becoming a great location for VC. Really why is
Speaker 1: that Brexit? I have no idea, really, I think it's
Speaker 1: I think it's you know, it's still a cosmopolitan city.
Speaker 1: But the engineers, you know, it's it's still somewhat livable.
Speaker 1: Brexit has depressed the prices um, so it becomes more reasonable.
Speaker 1: I wasn't kidding when the engineers the engineers salaries are,
Speaker 1: you know, they're more reason The bull done in half
Speaker 1: in half of San Francisco and New York is particularly
Speaker 1: bad because that, you know, all the fine Goldman pays
Speaker 1: enormous salaries to the engineers, so they're they're stealing all
Speaker 1: of the best talent. Doesn't that sort of vacillate depending
Speaker 1: on how well the stock market does. When the market
Speaker 1: is doing well, all these quands ends up going to
Speaker 1: Wall Street. When it's doing poorly, they go to tech
Speaker 1: company exactly. I mean, all of these are markets, so
Speaker 1: everything vacillates. So we have built, you know, a company
Speaker 1: where we can do deals anywhere. We just want to
Speaker 1: do the best deals in the world. And um, before
Speaker 1: we get to our favorite question, I just have to
Speaker 1: ask you about a magically delicious box of lucky Charms
Speaker 1: that you snuck into the White House. Can you can
Speaker 1: you explain that we did not sneak that into the
Speaker 1: White House? You are you are allowed to bring snacks
Speaker 1: into the White House, so you didn't sneak it in.
Speaker 1: You brought it in. So you do not deny I'm
Speaker 1: gonna imagine you're the water the impeachment hearings. You do
Speaker 1: not deny that you brought an authorized box of lucky
Speaker 1: Charms into the Truman lanes on the White house delicious.
Speaker 1: We had a breakfast. Um, we had a breakfast bowling session.
Speaker 1: Why well these Um, it was just it was, you
Speaker 1: know something, this was the Obama White House. Um, it
Speaker 1: was just something that we we they invited us to
Speaker 1: do because I'm a big bowler. I really like bowling,
Speaker 1: and we had some um you know, we're reaching some
Speaker 1: work with them, and it was it was a fun thing.
Speaker 1: So we invided some of our advisory board members bowing
Speaker 1: with that. So you skipped over the meaty part. What
Speaker 1: was the work you were doing for the Obama White House?
Speaker 1: Not allowed to talk about that. It's all n s
Speaker 1: A deep states. You like to work with I mean,
Speaker 1: we like to work with everyone, so you know, well
Speaker 1: we'll work with anyone who asks us. Will you know,
Speaker 1: show up anyone do anything. We're very nonpartisan. Great, that's fair.
Speaker 1: So let's let's jump to our favorite questions. One of
Speaker 1: which I changed just for you. What are you streaming,
Speaker 1: downloading or watching on TV? These days? Because I can't
Speaker 1: ask you a car question. You learned that the last time. Um,
Speaker 1: let's see and by the way, it turns out that
Speaker 1: that's a much more interesting question. It is such a
Speaker 1: good question because everybody who's over fifty has probably has
Speaker 1: a car, and lots of people under fifty, not only
Speaker 1: or under forty, not only don't they have cars. Half
Speaker 1: of them don't even have licenses. It's a fantastic question.
Speaker 1: It gives you someone's age, it gives you um there,
Speaker 1: you know, interest, social class, and it gives you how
Speaker 1: good their memory is about the car. Everybody remembers that
Speaker 1: the first car. Yeah, of course I have zero idea.
Speaker 1: I mean, I know what I know what Brando was. Sorry,
Speaker 1: you call those models. I know what model? What model is?
Speaker 1: It is a Buick, right, and that I would actually
Speaker 1: that's the make. That's the make. The model is the
Speaker 1: Buick Skylark or the This is like me inviting you
Speaker 1: on a finance show and going, what is the difference
Speaker 1: between a top and a blouse? Um? No, no, dude, right,
Speaker 1: So a blouse, I would I would be able to
Speaker 1: fake that. I would say, well, a blouse is usually
Speaker 1: a stand alone um, as opposed to a top, which
Speaker 1: is part of an outfit with a top and a bottom.
Speaker 1: Completely wrong, not but it sounds good, right, I could
Speaker 1: b s with the best of them. What is the
Speaker 1: difference between the top and a blouse. Um, usually just
Speaker 1: a top is more informal, and a blouse is more
Speaker 1: formal with buttons down. No, I don't like that. I
Speaker 1: like top is part of a set, a top and
Speaker 1: the bottom a blouse, freestanding. I'm gonna go with mine.
Speaker 1: Let you redefine there was. If I was in Ohio,
Speaker 1: I could get away with that. But here in New York,
Speaker 1: I actually have to be a reality. But I can
Speaker 1: tell you about the car I want there. You know,
Speaker 1: electric Porsche. It's so the take hand, Yes, really handsome car.
Speaker 1: Have you seen the new Ford Mustang E suv that
Speaker 1: came out yesterday? Yeah, So they basically took a Ford Mustang,
Speaker 1: which is a six or eight cylinder gasoline car. It's
Speaker 1: only been around for fifty eight years, so who cares,
Speaker 1: And they turned it into sort of an suv and
Speaker 1: and it's all all electric, competing with Um Model X
Speaker 1: and the Model three of Tesla. The interior looks like
Speaker 1: it's pure Tesla just ripped it right off of Elon
Speaker 1: musk Um. He's doing okay. Hopefully hopefully he comes out
Speaker 1: of this. I like he. You know, arguably Elon has
Speaker 1: already won everybody, definitely, right, everybody is now doing electric cars,
Speaker 1: so whether Tesla survives or not, he's already dentity. Every
Speaker 1: time Elon gets criticized on Twitter, which is quite a bit,
Speaker 1: I post the gift of him law landing the rockets,
Speaker 1: and I say, anyone that can do this deserves at
Speaker 1: least six months of criticism, free living, right, But he
Speaker 1: had that five years ago, and now that six months
Speaker 1: has a lot well lea should it should get you
Speaker 1: at least a decade. I mean, that's pretty impressive stuff.
Speaker 1: You know, mushing Solar City and with Tesla turns out
Speaker 1: to have been a mistake. But um, but you've got
Speaker 1: to give him properas were made. But you know, move fast, break,
Speaker 1: Everyone makes mistake. He is a very consequential entrepreneur and
Speaker 1: I'm fascinated by what he does, and I think people
Speaker 1: slag him way too much. I agree, and I think that,
Speaker 1: you know, I think what's great about him is that
Speaker 1: I hope he's you know, a lot of our entrepreneurs
Speaker 1: are inspired by him, and I think that he's inspiring
Speaker 1: a whole generation of young entrepreneurs to think bigger and
Speaker 1: to do bigger things in the world. The other day,
Speaker 1: I rarely flick around television anymore. I used to just
Speaker 1: sort of randomly rotate and see what's on. But I
Speaker 1: did this the other day actually, to be honest, I
Speaker 1: turned on the TV and what was on was a
Speaker 1: uh well, since the show ended, it has to be
Speaker 1: an older one. But um, a big bang episode one
Speaker 1: where it's Thanksgiving and they go to a soup kitchen
Speaker 1: to serve food and Elon Musk is on the episode
Speaker 1: cleaning dishes, and I have to tell you it, it's
Speaker 1: such a charming episode. You gotta give a guy like
Speaker 1: that props. All right, So let's get to our favorite
Speaker 1: questions that we ask all of our guests. Tell us
Speaker 1: what you're either streaming, down loading, or or watching, be
Speaker 1: it video or audio. Well I am. I am streaming
Speaker 1: Silicon Valley the Hbokay, so but I can not. I
Speaker 1: always fall asleep. I can never make it through. You know,
Speaker 1: you don't have to watch it when a broadcast, you
Speaker 1: can no I watch it. I usually I keep trying
Speaker 1: to make it through the episodes and then I fall asleep.
Speaker 1: What time starting right before bad? This is like my
Speaker 1: bad time thing I watched to tell That's what I'm
Speaker 1: suggesting is watch that the next to watch that on
Speaker 1: a Monday at eight instead of a Sunday at ten.
Speaker 1: That would be a good idea. But alright, so Silicon
Speaker 1: Valley love it. Yeah, it's atastic show. In fact, it's
Speaker 1: almost two realists and this is the last final season.
Speaker 1: I know. I'm very sad about it. Well, the only
Speaker 1: good news is when it's over, when I just hope
Speaker 1: the VC has got an exit. You know, that's a
Speaker 1: happy ending for me. Um. The whole Holy Purchase things
Speaker 1: that it was fantastic, but it is very accurate about
Speaker 1: how quickly fortunes in Silicon Valley can rise and fall,
Speaker 1: come and go very quickly. Give us another show. What
Speaker 1: else are you watching? Mm hmm, Well I'm a big
Speaker 1: West Wing fan as well. So I do you like
Speaker 1: anything has done? I do? In fact, I just saw
Speaker 1: his play to Kill a Mocking Verse, so amazing, right Badway,
Speaker 1: which was incredible with Jeff Daniels. Yeah, he was fantastic
Speaker 1: in it. The whole cast everybody was. Really he's my
Speaker 1: number one person that I would want on Twitter that
Speaker 1: isn't on Twitter. They I'm hoping that he'll come to
Speaker 1: our social media. Huh. That could be interesting. But Yeah,
Speaker 1: fantastic stuff. So if you like West Wing, you know
Speaker 1: the show he Sorkin did before West Wing was a
Speaker 1: delightful little show called sport Night and it only lasted
Speaker 1: like two and a half season, but it was really
Speaker 1: really good. You can stream that if you like that
Speaker 1: sort of fast paced, rapid dialogue, but a different context,
Speaker 1: not in the White House. It's all um, they're putting
Speaker 1: on an ESPN type show and all the characters are great.
Speaker 1: And I haven't seen it in years, but I remember
Speaker 1: really loving that show and was hugely disappointed when I
Speaker 1: was canceled. Alright, so we got Silicon Valley, got West Wing,
Speaker 1: Give me one more anything you're downloading or streaming. So
Speaker 1: Eric weinz he has a great new podcast called The Portal,
Speaker 1: which I listened to a lot. He had Pierre Till
Speaker 1: on the first episode and then Verner Hurtzog in the
Speaker 1: second episode. So that's fantastic. Really, I love getting new
Speaker 1: Uh he's my favorite new media star, and that he
Speaker 1: has these somewhat like you. He has these very you know,
Speaker 1: deep real conversations with Eric Weinstein. Oh okay, wow, this
Speaker 1: is relatively new, thoughtful and insightful conversation all right, I'm
Speaker 1: definitely checking this out. He looks vaguely familiar. This podcast
Speaker 1: does something different. All right, I'm definitely there. I'm definitely
Speaker 1: gonna check that out. Um, what's the most important thing
Speaker 1: people don't know about, Sarah Cone? Um? I think it's
Speaker 1: that my I r R is above my b M I.
Speaker 1: That is the main metric that I run my life by.
Speaker 1: So your I r R is above your b M I.
Speaker 1: And is this a metric that we see elsewhere? It's
Speaker 1: the It's the most important metric for the woman investor.
Speaker 1: So you're encouraging, though, um, either very high I r
Speaker 1: R or very low b m I. You don't want
Speaker 1: to give, not too low, not too low, So that
Speaker 1: that's kind of interesting. Mostly just high I r R.
Speaker 1: There you go. How about your mentors? Who who has
Speaker 1: guided your career? Um? In the world's venture investing? Oh well,
Speaker 1: so the person that really taught me m venture capital
Speaker 1: and this was a long time ago, um, before anyone
Speaker 1: cared about more women being in venture capital was Rob
Speaker 1: Hayes Um. And it's quite a funny story because he's
Speaker 1: a very famous venture capitalist. Now he led the seed
Speaker 1: round into Uber. He's been a long time partner at
Speaker 1: First Round Capital. He stays somewhat under the radar, but
Speaker 1: in Silicon Valley he's extremely you know, well known as
Speaker 1: as a great investor. But back then when he was
Speaker 1: my mentor, he really wasn't. He didn't quite have that profile.
Speaker 1: But I thought he was the smartest you know person
Speaker 1: investing in VC. So I basically just showed up at
Speaker 1: his doorstep at a mediaor network and said, Hi, I'm Sarah,
Speaker 1: and I'm going to learn venture capital from you. Don't worry,
Speaker 1: you don't have to pay me or anything. Um. And
Speaker 1: he said like, okay, well you seem, you know, pretty
Speaker 1: smart and hard working. Um, I guess I'll teach you
Speaker 1: venture capital, but I'm gonna pay you. Yeah. So I
Speaker 1: learned from him, and it was great because back then,
Speaker 1: you know, he he actually had the time to really
Speaker 1: teach me, you know, everything that he thought about venture capital.
Speaker 1: And now I get to go, um, yeah, I was,
Speaker 1: you know, mentored by this extremely famous um and and
Speaker 1: well known venture capitalists. So that's my advice to young
Speaker 1: people is that when you're seeking out your mentors, like
Speaker 1: seek the people that you know are going to be
Speaker 1: famous in ten years and learn from them, not the
Speaker 1: creative today. I literally wrote, I literally tweeted the other
Speaker 1: day there's there's a technical indicator that I think is
Speaker 1: just junk, the Hindenburg omen and that name was was
Speaker 1: the hint that it's junk. But I advise people the
Speaker 1: best way to use this is only follow the signals
Speaker 1: that precede big market crashes, ignore the rest of them.
Speaker 1: So you basically have the same philosophy. Go find a
Speaker 1: mentor who's going to be incredibly successful and famous, and
Speaker 1: find them ten years before they become successful, and just
Speaker 1: attach yourself exactly. And if you're going to be a
Speaker 1: good venture copitist at all, then you'll probably be pretty
Speaker 1: good at doing that. And any other vcs influenced the
Speaker 1: way you look at the world of venture investing startups,
Speaker 1: I'm really not so much influenced by other vcs. I'm
Speaker 1: I'm influenced by other areas of finance um particularly I
Speaker 1: mean hedge funds, particularly the very math heavy and research
Speaker 1: heavy hedge fund managers I love of, you know, I
Speaker 1: have a PhD in in math that I've done a
Speaker 1: lot of our portfolio construction work with and a lot
Speaker 1: of revaluation work with, and we're kind of doing some
Speaker 1: advanced work there, and then in due diligence as well.
Speaker 1: I love due diligence. I describe it as a combination
Speaker 1: of library research and financial modeling, spy work and gossip
Speaker 1: and it's basically the most fun that you could ever
Speaker 1: have trying to understand the world and every deal we do.
Speaker 1: I feel like, is this incredible sort of romp through
Speaker 1: some obscure, you know, realm of the world that I
Speaker 1: then gain a lot of knowledge about, which is what
Speaker 1: I love. So I'm I'm much more influenced by those
Speaker 1: investors rather than venture capitalists, who I like to mostly
Speaker 1: make fun of um by saying that it's and it's
Speaker 1: an industry where all the decisions are made by men's
Speaker 1: guts and the guts of their wives. And I only
Speaker 1: added that last part because I was saying that once
Speaker 1: to a very um famous and prestigious venture cap I said,
Speaker 1: you know, to this very famous and prestigious venture capital like,
Speaker 1: you know, sometimes I feel like I'm more king in
Speaker 1: an industry that's really just run by men's guts, And
Speaker 1: he was like, Sarah, that is completely untrue. You know,
Speaker 1: that is very offensive. UM My firm is also run
Speaker 1: by the gut feelings of my wife. She is an
Speaker 1: incredibly important part of my firm. And I was like, okay, well,
Speaker 1: so he kind of explains a lot. He kind of
Speaker 1: missed the point that I wasn't making a comment about gender.
Speaker 1: It was about guts. I was making a comment about
Speaker 1: gut right, talk talk about talk about missing the forest
Speaker 1: for the trees right there. Let's let's talk about books.
Speaker 1: What are some of the things you've really like to read,
Speaker 1: What do you like to recommend? Tell us what you're
Speaker 1: reading these days. Well, I have a um twenty month
Speaker 1: year old daughter, so I mainly spend my time reading
Speaker 1: to her. And there's this fantastic series of books that
Speaker 1: was written everybody poops, I'm familiar with it. It was
Speaker 1: the series of books was written by a quantum physicist
Speaker 1: and it just boils scientific principles down to baby language,
Speaker 1: so that it is it's it's like quantum computing for babies,
Speaker 1: neural networking for babies, chemistry for babies. So I read
Speaker 1: these to her every day and I have for now
Speaker 1: two years. You just solved a holiday present um issue
Speaker 1: for me. For somebody who I know who is really
Speaker 1: smart and just had a baby, and that's a perfect
Speaker 1: I'm a big fan of these books because they're the
Speaker 1: only books that are both interesting to me and her,
Speaker 1: so we love them and it works on both levels,
Speaker 1: it really does. And her her fourth word was adam, Um,
Speaker 1: so you know, so it was it's been fantastic. Um.
Speaker 1: We really love these books. So these are my favorite
Speaker 1: for babies. Yes, and my dream in life is that
Speaker 1: someone will write these about finance, so we need like
Speaker 1: monetary policy for babies, option trading for babies. It really
Speaker 1: needs to happen. What a genius idea. And the other
Speaker 1: non infant books you might want to mention, um, even
Speaker 1: if you haven't read them recently. Um, there's a book
Speaker 1: called Mating, which is a book of fiction that I
Speaker 1: love by Norman Rush and it's a it's a book about,
Speaker 1: you know, sort of the main themes of my life,
Speaker 1: which are you know, creating a better world and all
Speaker 1: the intricacies and human nous that goes on in that.
Speaker 1: I like it tell us about a time you failed
Speaker 1: and what you learned from the experience. Ah, well, this
Speaker 1: was one of the times. So I know, we have
Speaker 1: this mutual friend who's a venture capitalist. Um. Named Josh
Speaker 1: Wolfe at lux Capitalist, who is that this dinner? And
Speaker 1: so he so the one portfolio, the one company in
Speaker 1: my anti portfolio, which is the things the companies where
Speaker 1: you make a mistake and you didn't invest them. I
Speaker 1: didn't invest. He tried to get me into the seed
Speaker 1: round of this company called Citizen, and I said, you know,
Speaker 1: it's kind of a safe it's an app that's safety
Speaker 1: alert for people. I said, Josh, that is you know,
Speaker 1: it would be very important to the world, but it's
Speaker 1: completely ridiculous. No one will use it. I'm not even
Speaker 1: going to meet with the entrepreneur and waste their time.
Speaker 1: And really turned out to be completely wrong. Ten percent
Speaker 1: of New York City is now on this app. Really yea.
Speaker 1: And what does it do? It just tells you it's
Speaker 1: like safety alerts about what is going on, and then
Speaker 1: now you can also kind of take eyewitness accounts and
Speaker 1: report things to it. So you're gonna laugh about this.
Speaker 1: I know Josh pretty well and he never mentioned this
Speaker 1: company to me. But Eric Kamorrow is my chief operating
Speaker 1: officer at r w M, and she's the one who
Speaker 1: showed that app to me. And it's also a site
Speaker 1: and it shows you arrest here person with a gun.
Speaker 1: They're just all sorts of crazy things that have been
Speaker 1: filed through. They must just be scraping the information off
Speaker 1: a public source. Yeah, they definitely started with that, and
Speaker 1: they've kind of expanded from there into more things that
Speaker 1: you can do to keep the world safe as a citizen.
Speaker 1: But um so, my takeaway from that, well, first of all,
Speaker 1: aside from always listening to Josh Wolf, is that you
Speaker 1: should you should never you should never make venture investments
Speaker 1: with your gut because your gut is going to be wrong.
Speaker 1: Didn't you stay away from that? Now? But didn't you
Speaker 1: learn that from the other VCS wife, Scott I did?
Speaker 1: I mean, it's it's just amazing how all like everything
Speaker 1: just makes you like all the pressures in the industry
Speaker 1: are causing you to feel like your gut is you know,
Speaker 1: the best gut out of all the guts, and you
Speaker 1: have to constantly kind of be saying yourself, don't make
Speaker 1: gut decisions, don't make so so true story one of
Speaker 1: the things I'm gonna tell my war story, which makes
Speaker 1: the guys in my office cringe. So I began on
Speaker 1: a trading desk and eventually you learn how to listen
Speaker 1: to your own body's reactions. And I had a very
Speaker 1: identical experience to you you where I would someone would
Speaker 1: bring me a trading idea and I go, oh, that company,
Speaker 1: it's the worst. And after you miss a couple of
Speaker 1: good trades that way, you eventually figure out, oh, if
Speaker 1: my reaction is this is the worst, then most other
Speaker 1: people's reaction is this is the worst, and based on
Speaker 1: the work of gene Varma, it's probably reflected in the
Speaker 1: stock price, and now it's a good opportunity to buy it.
Speaker 1: So eventually I learned how to become more sensitive to
Speaker 1: my own reaction to something. But it took missing a
Speaker 1: lot of great opportunities to become aware of, Oh, everybody
Speaker 1: must feel this way, and therefore it's a contrarian indicator,
Speaker 1: not a don't listen to your gut. Is kind of
Speaker 1: the takeaway from that. That's an excellent way to frame it. Yes,
Speaker 1: it's it's kind of interesting. I'm fascinated by the fact
Speaker 1: that you were repulsed by a VC who did the
Speaker 1: exact same thing, and yet human nature, you couldn't help yourself.
Speaker 1: The world is full of hypocrites. I don't exempt myself.
Speaker 1: But you know, at least I'm trying to you know,
Speaker 1: that's not so much hypocritical as just the human condition.
Speaker 1: We can help but be a slave to our emotions
Speaker 1: to some degree. It's also the only one. I mean,
Speaker 1: I think more most vcs have more than one in
Speaker 1: their There's literally, wow, there's literally a cognitive bias called
Speaker 1: the bias bias that we all have a tendency to
Speaker 1: observe these biases and other people and be completely blind
Speaker 1: in our ourselfs. Like I'm always pointing pointing out to people, Oh,
Speaker 1: you're confirmation bias, and and of course I'm as guilty
Speaker 1: of it as anybody else, but we're blind to it.
Speaker 1: It's it's it's quite amazing. Um, what do you do
Speaker 1: for fun? What do you do when you're not reading
Speaker 1: quantum physics for babies to your daughter? Well, I started
Speaker 1: this social impact venture capital firm that you might have
Speaker 1: heard of. So I work a huge amount um and
Speaker 1: don't have too much time for fun. I hear it's
Speaker 1: not igislatively mandated to have hobbies, so I just don't
Speaker 1: have anything just anything like that. I pretty much just
Speaker 1: work and then take care of my baby. But I
Speaker 1: do my I take my baby um to art. We
Speaker 1: go to art galleries a lot because we live incredibly
Speaker 1: close to the art galleries and Chelsea, so it's a
Speaker 1: very convenient thing for us. Is she entertained by this?
Speaker 1: She loves it. And so I've started this Twitter account
Speaker 1: to you know, record her reactions to the art called
Speaker 1: Ada baby art critic and that's my hobby. What are
Speaker 1: her reactions to art? Well, she's had this incredibly complex
Speaker 1: language of art criticism. So when she was really little
Speaker 1: baby and she couldn't move her neck, I would sort
Speaker 1: of hold her in front of the works and then
Speaker 1: she would she would make a little sound like when
Speaker 1: she wanted to go to the next one, and sometimes
Speaker 1: she would look for hours, and I'd be like, okay,
Speaker 1: so representational contemporary and just basically go to whatever is
Speaker 1: close by, but geographic, geographic, anything, And you know, does
Speaker 1: she have a preference? Does she like? She definitely has
Speaker 1: favorite artists and they don't The disappointing thing to me
Speaker 1: is that they don't match mine. So well, that's a
Speaker 1: good thing. Yeah, I know, I say, it's good. It's
Speaker 1: good that you have your own characteristics. But what does
Speaker 1: she like? Um, she liked well. She was I always
Speaker 1: called her. She was born in the year of the
Speaker 1: month of Sai Twambly, so they were having a huge
Speaker 1: Si Twambly retrospective at um In. So we went to
Speaker 1: that every single day and she loved it. Those she
Speaker 1: would look at those for hours and hours. So I
Speaker 1: always but now she can do even better now now
Speaker 1: that she's too she's making her own works and she
Speaker 1: can even I think she can even do better work
Speaker 1: to have her tastes evolved. All they definitely they know
Speaker 1: she tends to like like so she she really she
Speaker 1: seems to really like Damian hurst Um a lot, like
Speaker 1: the Shark time. I really don't like him. I think
Speaker 1: he's kind of banal and commercial, but she loves vanal
Speaker 1: is the right word fraud um? So yeah, so we
Speaker 1: so we shop you like the urinal in the corner.
Speaker 1: She's never seen any shomp. We then there was so
Speaker 1: I love Sarah Ze and we went to the Sara
Speaker 1: Ze Show, which I loved, and she didn't like it
Speaker 1: at all. I was like, I don't, I don't know,
Speaker 1: like maybe you just don't really have good taste in
Speaker 1: art because you're just a baby, or maybe she has
Speaker 1: the purest taste in art. Have you taken her to
Speaker 1: the you know, MoMA just finished this wonderful renovation and
Speaker 1: there's a ton of twentieth century contemporary American artists, and
Speaker 1: if you like that sort of post impression. Yeah, she
Speaker 1: loves the I mean we go to the mat sometimes
Speaker 1: to MoMA. She likes, she loves Picasa. She she really
Speaker 1: likes all like. She likes a lot of the old art.
Speaker 1: And it's going to be hilarious. I'm thinking like Jackson
Speaker 1: Salek would be entertaining for a baby, or maybe Rothco,
Speaker 1: which I've evolved very much. She liked Troytin a lot, well,
Speaker 1: giant cartoons, why not in comics. Everybody likes that as
Speaker 1: a as a whatever. So then when she was a
Speaker 1: little bit older, she then would turn her head like
Speaker 1: dramatically away from the painting when she didn't want to
Speaker 1: look at it anymore. And then when she was even older,
Speaker 1: not than if she liked it, she would point. And
Speaker 1: now that she's older she can say no. So she
Speaker 1: go in front of them and the paintings and go no, no, no,
Speaker 1: that's funny, because that's what I'm like in a lot
Speaker 1: of museums. My wife, who who used to teach fashion,
Speaker 1: illustration and design is dragging around to every museum in
Speaker 1: the world and every now and then, but I don't
Speaker 1: repeat it. Usually I just look at something, go no,
Speaker 1: and onto the next. Um, what's the name of the
Speaker 1: Twitter account from your art critic? A d A baby
Speaker 1: art critic. That's hilarious hobby that now I know what
Speaker 1: you do for fun. That is a good hobby. So
Speaker 1: so let's talk about within the world of startups and
Speaker 1: venture investing, what are you most optimistic about and what
Speaker 1: do you least optimistic we're most pessimistic about. Well, I
Speaker 1: am still very optimistic about venture capital. Um. I think
Speaker 1: it's the most effective way to deploy capital that man
Speaker 1: has ever invented. And I'm incredibly excited that I am
Speaker 1: able to start deploying it to solving some of the
Speaker 1: world's most tough problems, which is this, you know, putting
Speaker 1: venture capital towards these problems has really never been tried
Speaker 1: at all at scale. So I think my fund, you know,
Speaker 1: this ability to do this is going to be incredibly exciting,
Speaker 1: and I'm excited to see what we can do in
Speaker 1: the world because we've already done so much you know,
Speaker 1: in the first three years of our existence, what I
Speaker 1: am the most pessimistic about is immigration. And I think
Speaker 1: that America's entire competitive advantage used to be, you know
Speaker 1: that all the smartest people in the world I wanted
Speaker 1: to come to America, and all the hardest working people
Speaker 1: in the world wanted to come to America. What is
Speaker 1: it fift of Silicon Valley c suite. Yeah, yeah, so
Speaker 1: it's you know, fifty five of all of America's billion
Speaker 1: dollar startups had an immigrant founder. So this is incredibly important.
Speaker 1: Immigration is incredibly important to the engine of the American economy.
Speaker 1: And I see us as a culture sort of becoming
Speaker 1: less welcoming to these people. Not very smart long term,
Speaker 1: is not very smart for you know, for for competition reasons.
Speaker 1: You know, in my opinion, if you walk a thousand
Speaker 1: miles with your child on your back and you apply,
Speaker 1: you know your you fit under American asylum laws. Come
Speaker 1: on in. You're extremely welcome in my country. So you're
Speaker 1: an American. You know, if you do that, you're an
Speaker 1: American to me. So I'm onto the assumption that the
Speaker 1: past three years is a temporary aberration and a setback,
Speaker 1: and it eventually it will revert to what the prior
Speaker 1: to d years alike. Although I could be wrong. I
Speaker 1: hope so, because we aren't an immigrant society, and one
Speaker 1: of the greatest things about America is our ability to
Speaker 1: incorporate all these ideas and differences into a tolerance. I DA.
Speaker 1: I don't think there's any country in the world that
Speaker 1: has done that as successfully as we have, and it's
Speaker 1: been a huge advantage to the economy. So to the
Speaker 1: extent that we are are turning in the opposite direction,
Speaker 1: our economy is going to get worse, and I very
Speaker 1: much worry about that. So a recent graduate comes up
Speaker 1: to you and says their interest in career um, either
Speaker 1: as a venture capitalist or in a startup. What sort
Speaker 1: of advice would you give them? Well, I tell them that,
Speaker 1: you know, I try to find out what they care
Speaker 1: about most in the world, and I say, do not
Speaker 1: compromise between that and making money, because you can do both. Um.
Speaker 1: It's the fundamental premise of my fund that you can,
Speaker 1: you know, accomplish what you most want to accomplish and
Speaker 1: make money. And if you don't do that and you
Speaker 1: just decide that you want to make money, you eventually
Speaker 1: end up incredibly old and bitter very quickly. I'm often
Speaker 1: told that I, you know, people seem to think I'm
Speaker 1: a lot younger than I am, which is always funny
Speaker 1: to me and I I think the reason is because
Speaker 1: I still have ideals and that makes you just appear
Speaker 1: incredibly young to the world. So I it's like some
Speaker 1: miracle face cream to just have ideals and continue to
Speaker 1: execute them because most people are giving those up. Huh,
Speaker 1: that that's the pressing. Um, I'm sorry, I'm meaning it's
Speaker 1: the pressing to you that most people are giving up
Speaker 1: their ideals. And our final question, what do you know
Speaker 1: about the world investing today? I want to say that again,
Speaker 1: our final question, what do you know about the world
Speaker 1: of startups and venture capital investing today that you wish
Speaker 1: you knew? Can I say twenty years ago, fifteen years ago,
Speaker 1: thirty it's not thirty years ago? No, Um, I mean
Speaker 1: I went so I'm somewhat late into the industry. So
Speaker 1: I wish that I had known that women could go
Speaker 1: into this field, because I would think they weren't allowed.
Speaker 1: I didn't that that thought didn't cross my mind, you know,
Speaker 1: because I was a child. So it's it's more that. Um.
Speaker 1: You know, it's more that if you don't see it,
Speaker 1: then it doesn't cross your mind that that's a career
Speaker 1: path for That's interesting. So I think that now there's
Speaker 1: all these incredibly amazing women that are inspirations to me
Speaker 1: and venture capital, like Marymaker, who just reached the first
Speaker 1: billion dollar venture capital fund. You know, yeah, she started
Speaker 1: on chop called bond. They just raised a huge fund.
Speaker 1: And so now it's it's extremely easy for me now
Speaker 1: to go, oh, I want to be like her. Let
Speaker 1: me man role models? How important that is? That? That's interesting?
Speaker 1: I don't I never really thought of that. Um, but
Speaker 1: I guess it a thing to think about think about
Speaker 1: because I go, why, I must have been really stupid
Speaker 1: that it never crossed my mind. But it just it
Speaker 1: literally didn't. I mean, finance was my main hobby, it
Speaker 1: was my main love in life, and it never occurred
Speaker 1: to me that it could be a career. It just
Speaker 1: just goes to show you that having role models make
Speaker 1: a big difference, and that's why these things seem to
Speaker 1: take generations to change. He and spleens um correct. A
Speaker 1: lot of the man splaining is correct. All right, Well, Sarah,
Speaker 1: thank you so much. For doing this, We have been
Speaker 1: speaking with Sarah Cone. She is the managing partner at
Speaker 1: Social Impact Capital. If you enjoy this conversation well, be
Speaker 1: sure to look Up an Inch or Down an Inch
Speaker 1: on Apple iTunes, where you can see any of our
Speaker 1: previous three hundred or so conversations that we've had over
Speaker 1: the past five plus years. We love your comments, feedback
Speaker 1: and suggestions right to us at m IB podcast at
Speaker 1: Bloomberg dot net. Check out my weekly column you can
Speaker 1: find that at Bloomberg dot com slash Opinion. Sign up
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Speaker 1: would be remiss if I did not thank the crack
Speaker 1: staff that helps me put together these conversations each week.
Speaker 1: Karlin O'Brien is our audio engineer. Michael Boyle is my producer.
Speaker 1: My holbat Nick is my head of research. I'm Barry Riholts.
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