I could have talked with Mike for many more hours.. about building Science, building consumer brands, NFTs, social networks, parenting and much more.
Worth a listen even if just for inspiration on building better social networks for our children.
Mike Jones is with me today. Mike, I feel like everyone in LA knows you, but for listeners not in LA.
Mike is one of the founders and CEO of Science. Science is a startup studio and early stage venture fund and Mike is known for being extremely strategic and operationally savvy. Mike has been a founder multiple times, was the CEO of MySpace, and has been on a number of important boards, like Dollar Shave Club, Good Reads, and many others.
So, if I understand correctly, at Science you now have a hundred million dollar fund as well as a studio where you're creating companies.
Science actually has kind of three legs to our strategy. So we have a venture fund and a studio, and that really is what we're known for as kind of our flagship investment product. And it works with 30 different entrepreneurs, typically every year, on helping them develop and build their businesses.
Some portion of those get invested in by the venture fund, and then we go on for a fairly long time, you know, involvement, so that's the venture fund arm. The second component, our strategy, is we have a blockchain fund that was one of the first reg D tokenized funds.
That's both an equity fund and an actively traded fund. So, it has a bunch of active trading strategies that we deploy within the crypto space. And then the third piece is we have a late stage SPAC practice. That right now has one spec live, two more have been filed, and we're actively seeking our kind of target for our first spec.
That's cool. I'm going to come back to that. I have a spec as well. So I'm going to ask you all my questions about it.
What have been, you know, when you thought about setting up science and over the years, how it's evolved, like what have been some of the interesting strategic decisions and different.
Um, yeah, I'm kind of looking for like advice, advice for other people who might want to do something similar.
You know, first off I think that we realized that like, all that really matters is the quality of the founder. And there are certain personality types, I think that lend to great founders. Um, and so first off is like putting capital or putting time, because in many cases we're investing a lot of time and resources behind a great founder, typically produces great results.
And sometimes we put capital and time behind a great strategy with an okay founder. It doesn't. Great great results. So like, it's really a founder led story and, a lot of people are like, well, that's really true for like seed and series day, but then series B, you can kind of like get away.
And the reality is all the way through the late stages of companies. We look out from the stack, they're all founder led stories. I mean, they just really are. And even when you're thinking about taking a company into the public market and showcasing it, the hedge fund investors or large public mutual funds, It's still a founder story, And so it doesn't have to be the founder, but it has to be a management story. It has to be the CEO story. So the quality of those individuals matter a lot to us and how they approach the world. And it doesn't have anything in my mind to do with like their educational background or what job they had.
It's really around what they're doing, why they're doing it, how they're approaching it, how they see the world. And, you know, and I think overall by years of investing and working with people that it always comes down to people.
I am surprised that it's not a metrics discussion when you're at that leader stage, looking at spec targets, that sort of thing.
I mean, I think the valuation is a metric target for sure. And how you price it, how you think about growth. But the person you're trusting to like drive that growth or drive those metrics is going to be a A founder led, discussion. So, you know,
fundamentally it's founders, it's founder driven.
I mean, we definitely spent a lot of time in that the new share of the finances and how the public markets are going to view it and what are the market comps and how we value these businesses, but still like what gets me excited talking to a visionary founder that has a world changing perspective on what they want to do and seeing if we can lend some sort of value capital strategy to that.
staying on that, like anything else? Okay. So there's a visionary founder. Any other like common traits or founders you can talk about that have stood out?
um, I mean, there are certainly traits. Like, I really like curious people. I'm a very curious person. I like people that are seeking to learn. I find that people think they know everything. They're not probably going to be a great founder and the great founders realize they don't know everything and they look to learn it from others.
They look to hire people that know things. Um, but they don't try to consolidate knowledge. And if they're trying to consolidate knowledge, it's out?
of fear. And typically if you're just going to produce growth, right? So I liked curious people that are open. They may, you know, that they're not worried about their title.
They're not worried about their, their, you know, their salary. They're, they're seeking a big vision and they want to go up to that vision and they want to surround themselves with people that are going to help execute that vision. And that's their primary driving force. And, you know, if that goes well, they're rewarded handsomely for that journey.
Right. The second thing I've noticed, like there's certain businesses and business markets and strategies that frankly are just like, Pushing rocks up Hills, we talk about it as like, using a butter knife to cut through marble, like you can spend a lot of time on that strategy, but it just, not going to cut, you know, like, and it may have nothing to do with the founder.
It may have nothing to do with, um, the capital, like it really has to do with the fact that the market isn't ready for it. There's too many difficult barriers, et cetera. And so we, you know, we do often sometimes, sometimes you find there are very visionary founders. That are trying a business strategy that just that no matter how much time it capital they put into it, it's just not going to execute.
And the best founders I find, um, try something else. Right. And they don't get so wedded to their original concept. They might still say within the same market or the same framework for the same purpose, but maybe they do it a different approach and boom, maybe they find growth. Right. And it's one of those things that you see as a venture capitalist, because we get to see a business that goes from zero to a million dollars a month within a very short amount of time.
Meanwhile, we also see businesses that go from zero to a hundred thousand dollars a month, over a very long period of time. And, and as a founder, you don't typically get that view. And so it's really helpful to actually ask your, you know, ask your investors or ask your advisors. Can I see a, a growth chart of one of your early investments that really to explosive, because part of it is your internal belief that that stuff can happen, you know?
And I remember like, Hearing early days of some company that went from zero to X and I just didn't believe it. I was like, oh, that's impossible. No one could ever do that. This is when I was like operating businesses. And then I started seeing, the data to prove that they went from zero to X. And then suddenly I realized if I wasn't going from zero to X, I was really underperforming what was possible, but it was a big piece is having those boundaries to understand what's actually possible.
And sometimes. You know, media skews that in a, both a positive and negative light. So the more I feel like we can expose founders to what's possible, the more they'll elevate their goals, what they're trying to achieve.
Yeah. And I see some businesses brilliantly run that are pushing the rock up the hill and it's not for what they're doing. Um, how do you. No. If you knew it'd be easy, but how do you know founders can go the distance? Like I see some people who really can scale and some who I think can scale, but it's, it's hard.
Yeah, Well, I mean, I think it goes back to that purpose driven question of like, why are they the person to take on this mission? Is there a personal reason that just driving them into that purpose and that's for multiple reasons, like one is. Listen, like startups are hard journeys. Like it's going to be difficult.
Every fundraiser's a challenge. I mean, like for every multi-billion dollar outcome, trust me, there's multiple times in that journey where the company almost probably didn't exist. Um, but the other part of it is that you, you, you need somebody with purpose. Otherwise they can be really easily distracted.
They can be recruited the way that can be bought away from that sector. They might give up, like there has to be a bigger purpose because startups are difficult.
Yeah, it's such a fine line that, because essentially you said they got distracted by something else, and yet at the same time, you don't want them pushing a rock up the hill and you actually want them to be able to pivot their way into, you know, it's a fine line.
It's true. Yeah. You want them curious about new things, but you don't want them abandoning their vision for some other brands of things now, but I mean, on the early stage, It's hyper possible that they decided to go into a different direction, as long as they take us on that journey. That's totally fine. You know, if they decide to go a different direction because they learned something and they're going to shut their previous company down and just start something new because they just want to reset everything.
That's that's not great, right.
Like it's not great from an investor perspective, especially at the early moments when you're really back to the individual.
yeah, really interesting. Um, any other great example, founders that stand out, um, worth talking about.
I mean, especially being an Ella, you can't not recognize Evan Spiegel and his genius behind snap. I mean, I was fortunate enough to spend time with them at the very beginning and then kind of early through the journey and, you know, it's like, I was just coming off the back of. you know, fighting Facebook through the MySpace lens, which was such a difficult battle. and like I would have never guessed at that point, that snap would become what it became, you know, and not only, and, and what's even amazing now. And now for me, it's so clear how snap is completely different actually than Facebook, Instagram, WhatsApp, et cetera. Like they're, they, I really do feel like they're fundamentally following different strategies.
Um, For good and bad candidly, but snap to me feels like an incredibly innovative company. And, even the early days when everybody was criticizing Evan's management ability, his vision held right. And he had conviction that vision and he had lots of time when he could have sold the company. He left the company, walked away with more money than he could ever need for the rest of his life.
And yet he still had conviction to build that. And, um, he feels to me like a, like an incredible founder and, and, uh, and I have a lot of respect for them over there.
and you have unique perspective, you know, coming off of my space. Just tell me a little bit more about how you see those strategies really diverging. It's an interesting topic. I'll come back to science.
Um, I would argue that the, the disappearing nature of the message is both good and bad. if you go to my 16 year old daughter's snap account, there's hours of, you know, daily content showing the. Intimate personal lives of these individuals. In addition to all the one-on-one conversations that are happening through snap and snap is their primary messaging platform.
Like there's definitely times my daughter seems very frustrated that these messages disappear and there's times that I'm sure she's really happy about it, but in all cases, this is the channel. Right.
And then. The other thing that I'm really surprised by is because the network is so tight with kind of friends like real friends, then the kind of story product becomes a really intimate view of that friendship.
Versus, you know, if you think about the graph on top of Instagram, it's really a broadcast graph. In many cases, it's almost more like Twitter. I might put some pictures up there, but I assume they're basically public photos of other people that I may or may not be super close with. Have a period of my life.
Whereas think on the snap graph, especially for teams, it's a much more intimate view of people at my school, people in my circle. So I think there are fundamental graphs are really different and thus their use cases are different and that's the quality of content and information coming there is higher because it's more personally relevant.
Hmm. Where do you think these social networks are gonna continue to evolve? And what do you think is coming up new? That might be exciting.
you know, the good thing is that, you know, all of us on the early days of building social products have effectively connected the world and the bad part is we've also effectively connected the world. Right. And so like, I've been watching these use cases particularly happening in junior high.
Right. And like the junior high use case that, you know, makes me sick to my stomach is somebody bully somebody over text message. They record the text message as the video, and then they post it to their snap account to extend the bullying to the entire school that's following their Snapchat count, which means that like you're doing a bad deal to somebody and feeling proud or cool because that bad deed is now magnified in immediately accessible to your entire peer group, which means that I would assume in all cases, bullying is an absolute all time high.
And the use of, you know, negative language and downtalk among children is an absolute all time high. I'm unsure how to correct that. Like it's not, it's not, I mean, yes, snap facilitates the platform, but overall I think the digital communication systems we've developed have created a lack of empathy between individuals.
It's one thing when you, and I can see each other through zoom and, and feel empathetic to each other and learn about our lives. But it's another thing when you're really just broadcasting information, sending snap picks, doing text messages, et cetera. I think it just, it decreases. Empathy, because you don't really see the person's face of what happens when you trash them through a group text, or when you decide to FaceTime them and trick them into something.
And suddenly there's a video of it. So I'm, I'm talking to a lot of schools around it. Um, I'm unsure the solution to it. Um, but I do think that there's this negative counterbalance. And when we think about the future of social. There needs to be empathy being brought back into these conversations. So these kind of one-way push conversations that are really what's happening.
These broadcast conversations. Um, I don't think are probably mentally helpful for most people. And I don't think society will be able to get off them. I don't think we're going to look at this as a mental health crisis and all decide to stop using social media. We'll become better. Informed will inform our children's more, but still it's, it's impossible to avoid because the world is connected through it.
And so the one thing I asked myself is how do you bring empathy back into those platforms?
Interesting. And do you think, you know, things change because we're in the metaverse or we're all have more real-time audio or do you think, you know, different technologies almost, or platforms will change the empathy equation at all?
I think somebody will, I think it'll be through something we don't expect. you know, I remember talking to the snap team early days about, um, in this case, Uh, or they were talking, I was asking them, Hey, every time somebody texts me through snap, why do you, why do you send me a text message that says somebody is typing to you?
And then you send me another text message. You mean another notification? That's like, your message has arrived. And I don't remember who it was. We can credit to Evan, but somebody there basically said something to the tune of. Well, imagine you're in a classroom and you really liked this girl and you see she's writing a note.
And you see that note is being passed through the classroom to you. You get this moment of anticipation of, oh my gosh. Like this girl I'm excited about is sending me a note and there's this, this moment. And then I opened the note, right? And they're like, we're trying to replicate that feeling of like, something's coming for you from somebody you care about and you really want to see what it is, right.
I really loved the fact that when they collectively were talking about their platform, they were bring human emotion into the communication side of it versus like, I just sent you a text. You know, so what I think to myself is, okay, we can broadcast to here on this podcast, like we have a global empathy problem.
Like kids are lacking empathy and they're brutal to each other through these digital platforms. And they're doing it for popularity because if you slam somebody through a text message and you broadcast on snap, you get more snap rewards. Right. So the question I pose to everybody is how do you bring empathy back to those?
And I'm sure somebody will come up with something on how to do it. I think it's really needed. I can't imagine what it's going to be the same way that I couldn't have imagined that sending a preemptive notification would have brought back that anticipation of a positive message, but somebody will figure it out and they'll bring empathy back.
And then I think we'll have a healthier communication platform.
Fascinating. I could keep talking about it, but, um, yeah, it's interesting. So it was really, you know, I asked about the tech, but it's almost, you know, you're giving, answering with the emotion, which is interesting. but they're kind of hand in hand. The tech enables different, uh, human experiences.
Yeah, I think that's right. I mean in a world where, when you and I meet up in person, we have millions of micro-expressions on how we're communicating with each other beyond like pheromones and all the other components that go into two people standing next to each other, and actually having a conversation.
We have to rebuild that digitally. Like if, if the digital communication platform is our primary platform, it can't just be texting on the screen. It's got to have these other nuances, right. We, we started with emoticons and smileys, and that was kind of a first piece of how do I bring some, some level of expression, facial expression, feeling into it that isn't communicated with words, but it's got to go beyond that.
There has to be a bigger component to it and it can't effectively always be video. Yes, this is a. You know, a, a comprehensive, you know, experience of us actually seeing each other's faces, but there has to be other ways that that happens. And I'm, I'm, I mean, you're an immigrant, you know, somebody listen to the podcast has a idea of how to do it.
I mean, you're going to talk to them because I think it's
That's great. I was also going to ask you about content and I think these are kind of hand in hand topics. Cause we're getting a lot of our content, our news through these platforms. So maybe I'll just jump into that. And you were investor in mammoth media. Hello, society. FameBit so you've, got this great view of gen Z and we're all doing love to hear about
Um, well, I mean, we, yeah, we, we take a. Okay. Broadly, you know, there are certain formats that we've all become accustomed to that are all being deprecated, right? So whether it's the 30 minute sitcom or the 30 minute newscast or the 5:00 PM, you know, weather or it's newspapers would have been all these formats, obviously being destroyed.
And one thing that I find through a lot of formats that I consume content is it's like 80% filler and 20% value. Right. And like the, the exact example is like how many times have you picked up a book? And it's a 400 page book in a way it's about a half a pound, but there's really 80 pages that matter.
But there's all these other pages, 320 pages that make sure it.
weighs a half pound because you don't want to buy a 100 pound 20 page book, 80 page book because that's not worth your $20 or your $15, $10. Right. I think media generally has been like that. You know, it's like, you know, you think back to the classic, news stories where the like amazing headline that takes 30 seconds to describe could actually be the entire story, but they want to give you the headlines you get through the commercials.
So then you watch the 45 second summary of the story for the beauty of the digital platforms. What I get excited about is how do I get. Those components of knowledge and a much more efficient fashion, right. Where I don't. I like, and I'm happy to pay for it at times, I'll watch ads for it. Like I'm not worried about the compensation level.
I want the efficiency because I want more knowledge to be ingested into my brain. I want to learn more or to be more connected what's going on, but I don't want to do it through. A half an hour news broadcast. I don't want to do it through a four page article. I want more efficient ways. And so if you think about a lot of our overarching thesis investing yes.
Part of it's distribution, how do you get this content out through Snapchat and Tik TOK influencers and Facebook and Pinterest? Yes. We focus on the distribution side, who are the paper boys up today that are just shifting the news to these platforms. But the second piece is also what is the media format that gives me that, that genuine quality consumption experience.
It isn't just a bunch of other fluff rolled in, in order to drive.
sure. And I think we've seen a lot of that with the, radish fiction. and do you think, you know, who's going to be creating that content in a sense, right? Like, am I going to get it from Kara Swisher instead of the newscasters? I mean, I guess she is, but whatever.
But no at a hundred, right? Like I want it from the experts. Like, that's my personal belief. Like I'm not interested in somebody summarizing the experts. I just like the experts, And whether, so it's like, even if you think about it, there's really three layers. There's the broadcast entity. you know, the media company that's distributing the news.
There's the reporter that summarizing the news. And then there's the expert. That's actually has the news. I definitely respect certain reporters. Like obviously I love Kara and I love him the way that she looks at the news. So I'm always interested in her opinion, but in my mind, she is the expert because she's just so well-read.
And so in-depth in what she does. And she gets, she gets access to the best people with the most cutting edge, thinking on the topics she's exploring. So she is the expert. I want to hear from whether she's inside this platform that pump from, I really don't care. Now she might need to be inside of a platform in order to appropriately monetize her business.
But still what I don't want is six pages when it can be done in the half a page. Right. I still want the format to be efficient. Right?
And you alluded to influence it a little bit. Do you think, do you sort of have advice for companies trying to navigate this space and how to work with people who have followings or get followings?
Well, I think the there's an, you know, there, there's a bunch of changing moments right now within that space. Right? So first off is where the removal of essentially retargeting through the IDFA changes, apple changes, Facebook, Google, et cetera. that's completely changed the way people market and. Many companies will not survive that change.
They will not, you know, companies on very thin margin with very tight narrow conversion funnels will not be able to survive the change. And you know, what, what a lot of companies are doing in order to counterbalance that and degree more reach is like, let's, let's just pay people that are. You know, powering this information all through the social platforms and certain cases, if it's targeted appropriately, that's totally fine.
Right? Like, I mean, brands have been using influencers, whether you consider them actors or hosts or reporters, whatever, for a very long period of time. Um, so there's, I don't lose any risk of doing that, but. But the way you approach them, the way you compensated it, the way you measured success is completely different than targeted advertising.
So we've certainly seen brands lose a lot of money. They're just pouring money into broad-based influencers with zero ability to control how they're talking, what they're talking about and the audience it goes to. But there are agencies we invest in many of them that are new region agencies that are focused on distribution.
And like we have one called creator creator Lee right now, which is basically at division of mammoth. And they have the largest network right now, as far as we're, we've seen on both tech talk and snap, and they do an incredible job of bringing those brands forward and building out that organic presence.
But you know, many companies don't do an effective job at it, but I think it's an important platform because that's where people are. And you want to reach those people and you need a way to compliment your paid media strategy.
Okay. Good. Makes sense to me. Um, okay, Let's stay on brands, but zoom out a bit. Uh, we seen this huge flood of D to C brands. Why is that? And how do you think things will continue to change in D to C?
I think it's
the beauty of the DTC story, is that. Brands now can really showcase their values directly to the consumer. And they're not wrapped within a shelf or a mall.
They're very specific. And what that means to me is, um, and I look at kind of the behaviors of our youthful consumers, and I look at the behaviors of my kids.
Right. And, you know, I think that they do value purpose-driven brands. Right. And I think they do like the idea of buying. Sometimes use versus new because of the positive environmental impact.
as many people know, we have a brand called liquid death, which is a aluminum, canned water brand.
That's, taking on the plastic industry and being very bold plastic is, and I don't know about you, but every time I opened plastic packaging or plastic containers, I feel guilty every single time now because I'm just like, oh my God, am I one of these. Guys now throwing this essentially into the ocean because I bought a disposable container and I feel like garbage.
Totally. I'm embarrassed by my plastic cups. Uh, do you have any additional thoughts or insights on what it means to be an authentic brand?
I mean, if you think about it, most brands are like, I make this product to make money.
That's why I make this product. and, if I wasn't making enough money, I really wouldn't make this product for you. whereas I think the thesis of an authentic brand is I make this product because I believe it's the right thing to do. And it has a purpose. I also do need to make money, but there's other ways that can also make money, but I've chosen to make it this way.
And maybe I've chosen different materials that. Lower my margins a little bit, or I've chosen her to do a slower shipping process because it's a better carbon footprint for us collectively, but I've made some choices that relate to why I'm doing this versus just pure profit maximization,
And do you have any thoughts on where we are from a brand investing point of view?
I think the pandemic put a lot of, growth behind these businesses because suddenly, you know, those people that were hold outs on ordering online and certain brands said they couldn't go to their corner store and thus they were ordering online.
And so it kind of moved direct to consumer e-commerce forward by 10 years. I mean, as far as the growth ratio goes, I mean a lot, a big, massive boost. And I think those customers got used to it. And beyond that immense amount of cardboard, we probably all consumed. And the guilt you have whenever you put out your recycling.
Um, you know, I think people probably say doing this stuff. So, um, I think it makes it really favorable. I think the hard part is, you know, you need brands with real traction and, you know, if you have a brand that's kind of growing, it probably may not get funded. Like, you know, now when we look at the metrics of the consumer brands, they're explosive, right.
We're looking for. 10 to 20 to 30% month over month growth at certain times. I mean, astronomical numbers is what we expect. And when you don't have that, you know, you have to realize like the pitch we saw before you did. And so, you know, I see a lot of companies that are good companies that'll build good businesses, but they don't have that explicit growth.
And they're, they end up in a bit of a difficult time with funding.
Yeah, I understand. Let me go back to science for a second. your fund. How much of your fund invest in companies that have sort of grown up within science?
I mean, the majority of our fund is for companies that grown up within science?
It's where, you know, we have, you know, our fingerprints over the DNA of the business. We have a really intimate relationship with the founders. We're very involved in the strategy of the company. We really know them. We really trust them.
and we, we backed them up, right. And we're there in the good times, in the bad times, we're there to basically support them through that entire journey. And it's a very long relationship. And that, that feels more meaningful to me. Like when I was an individual angel cutting checks in the companies, he was fine, but like I rarely had.
Influence over the strategy. And I found that like, I would get a call five years later, that was either a good call or a bad call. And the reality is like, my involvement had very little to do. I got much more excited about helping founders, you know, grow and build their businesses and using our collective wisdom and strategies that we've seen across the firm to help them grow.
And so the majority of our capital is dedicated the companies that really work within our studio environments and have good connectivity within our team. So we're looking for a deeper relationship than typically capital. And when that works. I think we built fantastic businesses.
great. Um, let me think of where I was going with that, uh, uh, um, w uh, Yeah. I mean, so when you're working with these companies, like let's take a brand. I know you don't just do brand building, but you know, for a brand that maybe starts as DTC, what do you coach them? in terms of both sort of strategy and operations, like when do they go from D to C into wholesale?
Um, well, normally, you know, I guess for on that question, particular, when are you going to need to see into wholesale? if you're not successful at DDC and you think there's a wholesale business, you should probably go there. Or if you see your DTC slowing, you might go into wholesale?
or, maybe we can pick on liquid desk case when you have a product that, that both, I know I'm going to need in the future, but sometimes I just need to absolutely right now, and I want your product.
Don't make it hard for me to get it right. So if I decide, like I like liquid death, I like what they stand for. I like the environmental component and I absolutely loved the quality of their water. Yes. I want it in my fridge, but if I'm at a seven 11, I also just want it there. Right. So there are certain products that people's consumption patterns are pretty well forecasted in the future.
Whereas then maybe wholesale and retail, isn't that important, but there's certain products like water where it's like, if I just need it, I just absolutely need it. And I absolutely need it right now. So. We worked through them on those strategies. There's also a lot of finance to be considered in this stuff because the moment you just have to wholesale and retail and you kind of have a different financial profile, how you buy inventory when you ship, how you find receivables and the complexity of the operation versus just pure D to C, um, which, you know, at the original days up until the Unilever acquisition, you know, draw dollar shape, it was pure D to C.
Like there really was no wholesale retail component to that business.
Do you have any advice on navigating those business model changes that that occur because of the distribution changes?
Hmm. Um, any, any advice on that, like as your business drastically changes, as you said, and you're, you're figuring out a whole different model, I guess when you're going into retail,
My main advice.
is, if we collectively had a product or service or marketplace, we were selling. We might have a brainstorming session and come up with 30 different growth channels could be doc. It could be partnerships. It's affiliate. No it's network sales, it's MLM, it's retail. We could come up with all these ideas on how we're going to drive growth.
my main recommendation is. Try everything as fast as you can and find whatever looks like it's going to work and then go really deep on that one. So I do find people that are like, they're so sure that this is the right growth path and they invest everything in the growth path just to be wrong.
So our typical strategy is like spend very little, but spend it on a lot of different things. And when something shows, shows, promise to spend deep, to really, really absorb the channel and, you know, you can definitely also fail by spending a little bit and getting a little bit of traction in all the channels, but not one that's clearly strong and also realize like organic is always your best indicator.
Right? So if you, if you put it out there and suddenly you have people repeat buying it and they're looking for they're seeking it, that's, that's the number one. Strong validator, which is like, you have a quality of product and a brand or service that people really connect to and they want it. And they're telling you, and they're telling the retailers and they're telling their partners, they want to buy or use this product or service.
That's really what you're looking for. Right. And if you're forcing it and you can't get that, it's going to be a harder journey.
Hm. got it. great. wow. So great. So Yeah, that makes sense. Um, so, and I did, that was a kind of operational specific question, but like I did ask people, what do you, what do you make Jones do? And they said, well, he's very strategic. He helps on the strategic stuff. Where do you tend to lean in what sort of strategic questions?
You know, I spent a lot of time to understand it because the customer is like why the customer is connecting to this, why the customer isn't connecting to the good or service or product or app or whatever. Um, Retention is always our number one indicator on pretty much every one of our investments.
What is retention? How do we measure it? What's the right way to look at it. Why aren't people retained? Why are they not retained? Um, we spent a lot of time there, but I think that if I can understand why the customer is or is not purchasing, I can spend a lot of time with the founder and work through how we positioned the business.
Either solve that or correct it or better broadcast its value or market it differently, or find a different audience segment. And if we find that we touch something like liquid death, where suddenly there's. And immense community. That's rising up in support of this business, getting tattoos on this, on their, you know, their skin because they love the brand so much suddenly you're like, oh wow.
We know who the customer is. Let's just expand. Let's grow. Let's go. Right. But in other cases, we spend a lot of time trying to understand where are those customers? How do we reach them? But where's the cost to reach them. And then evaluating, is this the right business to be in or not?
Hmm. Do you have any advice, like if, if the pretension isn't there or like helping people understand that better, like almost like tactics or way they can understand why their retention isn't what it should be.
well, talk, talking to customers is your easiest solution, right? Like, and it's, I mean, as simple as like the CEO should talk, the customer have a conversation of why they use it, why they didn't use it. Did they ever tell a friend, but one thing that's a hundred percent true is I've never seen retention correct itself.
So I've talked to people that are like, well, I have bad retention, but I just need to spend more in marketing. It's like, no, you, you have a sieve and no matter how much water you're pouring into that sieve. All the water's going to flow out. Like you have crappy retention and I've normally never. If you need to change retention substantially, you need to make substantial changes to the business.
Like I've not seen minor tweaks in a pricing strategy or product marketing, you know, tactic. Create substantial changes of retention. So if we have retention problems, it's almost, if we have substantial retention problems, it's almost easier to start over. Like let's just, let's just wipe the slate clean.
Let's think about it again. Let's go interview the customers let's understand the problem, but. It's not like we just need to redesign the checkout page. Like it's gotta be done. And so sometimes when we look at businesses that have substantial retention problems and I've talked to the founders and they're telling me, oh, we just don't have enough audience.
Oh, we just need to update the Shopify plug and it's going to, you know, and that's untrue. Like I've never seen that correct itself potentially is very hard to fix.
great. And so a little bit on science, a little bit more on science. Is it true? You have a huge team in Bangalore also like a, is it a tech team or? Yeah.
Yeah, we do. you know, early days I was really fortunate to meet, like world-class CTO, who had graduated from Carnegie Mellon. We worked together on building a lot of things because one thing I wanted was, I wanted a light, a low cost, quick. development option for my portfolio companies to be able to utilize if they needed to spend a prototypes or initially get products up. and I didn't want to have to have them go through the six months recruiting exercise of finding an engineering team in the U S that's definitely costly and time. Yeah. Intensive. over time, that relationship that started with one person grew up into many people. We eventually funded him as a company called spring roll spring roll.
Now the majority of their work is. Yeah, I think, I think I could be wrong on this, but I believe the majority of their work is through science portfolio companies. you know, in my opinion, like best of breed outsourcing firm that I trust. And And currently we set up the whole office facility that was originally branded science, but now it's branded spring roll in Bangalore.
They have, over a hundred people, I think working, probably close to 200 at this point, um, across a variety of our different projects and, and also across other projects. So I'll refer them to friends. We'll refer them to other portfolio companies, other VCs that need them, but I trust them. I've done a lot of outsourcing in my past, and I really wanted a, a partnership.
Relationship with an outsourcing firm, not just like a, a contractual relationship. This has worked really effectively for me. Um, and, uh, and we continue to be a big supporter of the business. We don't own the company. We own a part of the company as an investor, but they truly are independent business and a, and a pretty fantastic one.
and some of the reason I ask, well, it's interesting to know. Um, What you're up to, but also I feel like a lot of VCs right now are interested in building out their own sort of studio operations and it's tempting. Right. I understand the appeal, but, um, I'm curious if you think, look, you can just enter that lightly or, you know what you've seen maybe work or not work.
Yeah. I mean, it's not a, it's not a casual entry, you know, and also, um, You know, you need often, it's a different skillset than, than traditional VCs. Um, but you know, for us, it was a, it's how we started. We really started as a studio. Then we built a fund on the back of the studio, so we could capitalize the businesses more efficiently and get greater ownership over time.
You know, I think it's, it's hard because you fall in love with your own projects, which is challenging, right? And sometimes can have, you know, create bad decision-making, which we have to be very cautious about. We very much are. You also have to have a very specific and structured relationship between the studio and the fund to protect the interest of your LPs, because we are all fundamentally in the business of making money for other people.
And we are successful when other people make more money than us candidly. Right. That's the structure of a venture fund. And so. You have to make sure that it's completely transparent and we've seen studio venture fund operations. I would agree with that. I would argue is completely full of conflict And in some cases you have more challenges that things are successful versus failures with studios. So, um, you know, there's a, there's a lot of considerations with it, but because you have so many operators and ex CEOs that have become venture, we're natural builders, you know?
And so sometimes we see opportunities in the build. Right. And, and I, and I, I applaud that. That's okay.
yeah. I want to build some stuff. Um, so I do. so we talked a little bit about, you know, kind of your, your seed and your studio stuff, but we touched on. Specs. I also, uh, have a spec and, you know, I'm curious, like what, w w what do you think have been some of the lessons learned? What are some of the misconceptions out there about specs right now?
um, so I mean, when we decided to go into specs, it was a vehicle we were familiar with. we already have full-time LP relations, Um, and then we have a really deep internal legal and finance team that spent a lot of time on regulation and new plans um, within, uh, within a woman that works, works on our core team. And we went out immediately and hired, um, another woman that had worked for me in news Corp. To handle all of our late state's back and potential SPB investments.
So we created a dedicated team around it that works with our core back office and source and groups. So, um, the first office, it's not a light amount of work. It's, it's complicated work and is not venture work. It is a sec filings and tax and regulation and regulatory work. And then you get to the actual deal sourcing.
Right. And so it's not something that I think you can just do on the side. Like if you're going to do it. I would argue ethically, you need a dedicated team. They need to be focused on it, and it's not going to be a casual experience. That's the first thing. Second is like, you have to do it perfect. Like you can't breach lines.
You can't go. And just spec one of your own portfolio companies and assume the STC isn't going to come after you, or you'll end up with a class action lawsuit. So it's, you know, you, you have to go into it with the right intentions. And our intention was to build a late stage practice. Of investing in the companies that were pre IPO through the SPAC vehicle and maybe in the future through other vehicles, that was our goal.
We have a dedicated team on it. Um, and then we have a really deep internal legal and finance team that spent a lot of time on regulation and new plans to make sure that we're doing it the right way. So I think people that are like, oh, I'm just gonna do one spec. We'll just do it on the side. I think that's a big misnomer.
I think it becomes way too complicated. And the risk now is extremely high. There's a lot of lawsuits. If you do it wrong at all. You're going to get sued. It's going to be a big pain in your butt and whatever upside you think you're gonna get will probably be washed away. So, um, so we take it pretty seriously.
We have a dedicated team on it. And then when we're going out to talk to companies, You know, the, the reality is we're talking to a lot of companies, but a lot of them just aren't ready, you know? And so you talk to these businesses where you're like, well, yeah, financially, you're at the size. We like, but when we look at your team and we look at your financial structure or how you're handling finance, and we look at like the executives and how you present and your storyline, your differentiation.
We just don't think it's going to work in the public markets. and a lot of companies are surprised by that. They're like, wait, what do you mean? Like, I'm big enough. I should just do this. But you know, I think the companies, on the other hand, they have to really be ready to go public. I mean, they're going public.
They're just going public at different wait. That's a faster way with different projections on how they marketed the street, but it's still, there are a public company and they have to be ready for what that means. So, um, it's, this is not a casual kind of journey, either both on the sponsor side and on the target side.
Uh, but when you find that right match where I think you have the right sponsor and the right target, and you can put the company in the public markets investor to realize strong gains from it, that's really exciting. And that's what we want to do. Yep.
And so did you work with a sponsor partner or you have, you have an underwriter and you are the Y you science are the sponsor.
That's right. We're the sponsor.
I mean, it's a separate entity as a different carrier structure, and obviously we have somebody leading it or multiple people that are leading it that we brought into the team. But Yeah. we are the sponsor group.
Yeah. Got it. Um, and so you're looking for target. Great. And you know, with crypto, because that was the other piece that you mentioned, right. Is your, is your crypto fund? Um, you know, how do you stay on top of everything? Uh, crypto wise, like it's moving so quickly. There's so many day trader you know, people looking at this, you know, how do you, how do you follow all that?
Well, luckily, you know, we have teams to follow that?
I don't have to follow all of it. Like I get the benefit of working with like incredible experts that bring the, the, you know, that I can learn from. Um, so, uh, so I, I rely on that team to stay on top of it. Um, you know, our crypto strategy started as an equity strategy and we've made equity investments. So on the equity side, like. We went deep into kind of FinTech products, registered banks, trading platforms, and those have been really good for us. Um, the, the other thing we found with that. You know, randomly betting on, you know, token projects was not great for us.
Like, it just felt like we couldn't evaluate the management teams. It was really difficult to evaluate the validity of the project. And then as you would imagine, many of those projects in 2016, 17, et cetera, really never came to fruition. Right. So I think we got some bullets there. Um, our fund itself holds Bitcoin ether, which has been highly favorable for us, which is great.
And then what we did develop as an active trade strategy. So knowing that it was going to be very difficult for us to kind of pick winners in the low to mid tier token pool, we developed a trading strategy. The trading strategy has been very lucrative for us too. And, um, and so, you know, I stay on top of it.
I think that the protocols happening around the fire are probably one of the more exciting things we've seen, just because they do go back through your personal history of. Getting a mortgage, getting a credit card and going through any process of obtaining debt in America, it's very complicated and expensive.
Um, five provides a different, a different platform for it. And I think it's pretty exciting. I think there still is a long period of time though, especially in the U S when these next generation financial technologies powered by crypto will truly be accepted within standard practice. You know, like, is there a day coming forth where.
I can, you know, load in an NSP that represents the title of my home. See how much equity value I have in borrow 30, 40% within three clicks in 45 seconds against the value of my home. That's going to take some time. Should it be able to do that? Absolutely. There's no reason why I shouldn't have an NFC that represents out of my house.
There's no reason I can't lock them into a DP contract and there's no reason why somebody can't look at the average comps, put a value on it and extend me 20% of my equity value in the house. And then pull that out immediately through a stable coin, turn into cash and do whatever I want with it. That a hundred percent I should be able to do.
But then you think about the state by state and the federal laws that it would require in order to get there. That's going to be long journey here.
Wow. So that's like taking all my real world assets, representing them in NFTs. What do you think might be on the more near term horizon?
Okay. Um, well we have, you know, I think there is a, one of our companies. is working on a huge NFT release within the millennial community, specifically targeted at social platforms. It's going to be a massive release. I think it could be the biggest, kind of Eve creation event ever.
I think it'll introduce a youthful audience into what it is to trade digital assets, not crypto, but tradable assets, and FTE assets. So I think that we're creeping towards it. You know, what's funny is we built a bunch of technologies and different blockchains. We found them to be very cumbersome, very difficult to build in.
and for some of the products we made was very difficult for the consumers to understand the benefit of using blockchain, which meant that in our studio projects, from the blockchain world, we never got mass consumer adoption. It was really frustrating to be candid. Like, you know, we're such big believers, but consumers didn't care and it was hard to build.
I think the funny thing about entities as over-hyped or under hyped, whoever one of your perspective is it might be the first. True consumer usage of a token. Um, that's not just financial speculation. Yes. There's bedding. Yes. There's financial trading. Yes. There's currency movements. Fine. But like, I don't know about you, but when crypto kitties came out or originally when we saw crypto punks, which were like years ago, I was like, okay, like pennies for me was the first time I'm like, somebody is actually doing something with this thing.
I mean, it's still complicated and not a mask. And. You know, difficult and, but something's being done like, so I'm actually doing something, right. So whenever I, so I feel like we're getting closer to those use cases where a lot of people could be doing something. They may not even know it's touching the blockchain, but it is, and there's a purpose for it.
And it makes sense. So we're, I think we're getting closer to those moments, but to my point, like my car title is not on there. My mortgage isn't on there. I can't, fractionalize my credit card debt. Like there's a bunch of things that we do to get there, but it's almost like we need to build the banks first and the banks have to be able to hold crypto appropriately and they have to have the right federal regulations then consumers, like there's still like financial infrastructure that needs to be built before.
I think those real world purposes get on there and I think they do. It'll be awesome.
that's great. Um,
yeah, I think it'll be awesome. I do agree. It's a ways out. So, um, anything else on science, maybe I'll move into, you know, more about Mike Jones, the person, but anything else on science we really need to cover liquid death. Seems like it's amazing. I see it everywhere, but that's also, cause I see Peter fam everywhere.
That's been great. Like, um, they're a fun brand and, and I love their mission and I'm really happy to be part of them, but, and again, that's a very genuine team, so I'm excited play versus continues to be great for us. You know, prey.com. Hello me, we're going to call it car blip. That's doing kind of a compass of cars strategy that I love.
Like, listen, I love our portfolio. You know, like I'm, I'm fortunate enough that, you know, I kind of have a green light red light, you know, methodology of like, Companies that are companies that when I think about, I see a lot of upside and I'm excited about their doing and then companies that want to look at them, I feel like they still need strategy.
They're still trying to find attraction. Most of our portfolios and the green light stays for me right now. So, you know, whether it's off-limits cereal or, uh, you know, lambs, you know, protective wear, like we, I find excitement when I get on the weekly calls with our CEOs hearing about what they're working on, what that next launch is, And I kind of think of it as like these strategies that we talked about the Christmas presence, right? Like we have a strategy. We don't know quite how it's going to work out. We're going to try it. We're going to unwrap it. And we're going to see if it gives us a gift. Right. And you know, I'd say right now, like we're in a fortunate place.
Like there's a lot of Christmas presents sitting under our tree, you know? And like, as the weeks go by and we open up those presents, we see what kind of preach results or not. And if there's no Christmas presents under the tree, we've got a problem. Right. It means that we're not trying new things. it's not, we're not trying new strategies.
So, you know, I, I'm looking for Christmas presents everyday right now. And, and I'm, and I'm always excited to jump on slack and see from the portfolio companies what's working and what's not, and if it's not working, it's still a great present because it means that we cross something off the list that could, that we thought might work.
It's not going to work. So, um, so it's, it's pretty, pretty fun.
it's such a cool job, right? Such a cool job. Um, okay. Moving into Mike Jones, Mike. So you're, you're in the mix. You were the CEO of my space. You're friends with Chamath. I don't know where you are, but you're in the mix. Right.
So, you know, how do you, how do you stay grounded there? Um, you know, how do you do work-life balance?
So what, what do you see? And what's in the mix right now.
Listen. I think that, you know, working from home has changed that mix, you know, like, um, I feel I was all, I always prioritize my family. You know, w with my work, those were my two core priorities. I'm not like a, let's go to the bar on a Friday night. I don't like get together with people and watch football games.
Like I spend time with my family and I work fucking hard, right. Like that's the game and his family work. And I love it. And I don't want to change anything about that. Um, during the, during the pandemic, I found even I had, I, it was even better because what I found was that. 45 minute commute from Malibu each way was gone.
Suddenly I had more time with family and I had more time to work. Right. Which was just like, even better for me. Um, which is great. And I also found that just in the wake of efficiency. You know, back to I, I, my, my days are very heavily scheduled even at the time when I think about things is a very heavily scheduled time.
And so I find that, you know, we're working remote is more efficient because there's just more time to connect with people directly versus all the, in between times of those half an hour blocks. And I'm typically going through each day. So I found it to be greater efficiency. Um, you know, I started spending a lot, like.
Getting rid of the commute. The one that I added is I added in a lot of physical sport. And so, um, I started cycling regularly and I cycle a lot and I find it's actually by my most productive thinking time on strategy, how to work with companies, how to move them forward, new ways to approach whatever problem we're thinking about.
So I spent a lot of time on the bike these days and I absolutely love it and it's super hard and I challenged myself on it and it's difficult and it's not easy for me. And, um, but it's been a really proactive, like addition to my life. So right now I say my entire. Bag is, you know, working super hard spending time with the family and then cycling a few days a week.
Um, and that's a pretty nice workout. No.
Okay, well, what, what, what are you thinking about when you're cycling? What about when you're pushing yourself on the bike?
I mean, normally I lose myself and the companies, you know, I think about their success. I think about the success I want to drive for them. I think about the founders, I think about emotional state of the founders, how I can support them. I think about strategies. Um, and this is across everything from crypto to stack to whatever, but I do a lot of just visualization of where I want to spend time.
And I find that at the end of a ride, like I've got a page of notes. On things that I want to try and things I think that they should try or consider or do. Um, and, and the insights that I may have found, or problems that I might have discovered are opportunities. And so for me, that's actually really really important time I structured into my days.
Um, and I think it's actually probably my most productive thinking.
that's really interesting. Um, uh, who should we be watching in LA? Who who's, who are you looking at for inspiration and interesting thoughts right now?
Um, that's a good question. I don't know how to answer that. I mean, I do a lot, I mean, think about this. Like I do a lot of reading on new things and FTS, DFI strategy, a bunch of stuff. Obviously, within crypto, I read a lot about brands, distribution, city laws. I read about, I read about retailers, retailer strategies, marketplaces.
I wouldn't say it's like one person, right Like there's not one person I'm like, oh, I, you know, I want all their knowledge, like. There's a lot of knowledge I want to take in. I look for a lot of different sources. I pick it up on everyplace from Twitter to Flipboard, to Google feed reader or whatever. Like I'm looking at all are in places to basically pull in my news, but I think feed reader's gone.
What am I using now? Like, I guess I'm using, I'm using Feedly right for all. For news aggregation. So, you know, but there's not like one source, right. I'm looking for next generation thinking. I think it comes from all over the place. And to be honest, like I'm more interested in the 24 year old crypto strategist or the 28 year old buyer that just took a big role at Walmart, more so than like, What basis is thinking about, you know what I mean? like this stablish people are established and they have different motivations for what they do, and they want to go to space and that's super exciting and obviously applaud them for everything they built. But the thinking I'm looking for as coming from new experts, people with a different perspective on life, you know, and I'd love to honestly hear from teenagers of what they're thinking about and how they feel about the technologies platforms that brands are connecting to.
I mean, I remember my daughter years ago, talking to me about Depop. And I was like, what's Depop I don't get it. I don't see it. Boom, de pop, you know, billion dollar plus exit from Etsy. Right. Um, so it's like, I want to find what's next. And when I'm looking for what's next, I'm typically talking to young people.
Hmm. What, what are you talking? Uh, last question would be, what advice are you giving to your children or what are you hearing from your children right now?
um, you know, I think that they, I think that, you know, my children have an interesting upbringing because in Malibu they really dealt with the Woolsey fire. Right. And that was a really big moment for them. And obviously we had it back with the homes. It was a massive disruptor to the school beyond just the emotional carnage of a bunch of their friends, losing their homes.
And, and then the overall sadness that came post-fire and then. We kind of got past that and then boom COVID right. And so they've had a very different experience where I think for the last three, three plus years, my kids have not had a normal school year. They've had big disruptions. Right. Um, so, you know, I think that they're highly resilient because of that, which is, which is great and exciting.
Um, I do. I, I I've learned, especially because of the lack of emotion happening on, on digital communications to be, you know, really cautious digital exposure, especially for my twelve-year-old. Um, you know, I, I think all of us that were architects underestimated the impact of that. So I, I talked with him a lot about that.
What their friends are using, how the communication is going, what's happening? What are they seeing? And it's pretty much all bad news just to be candid. Like it's not good news. The schools are totally unprepared. there's a health class, but there's not a digital health class. And at this point I'm more worried about kids becoming depressed off of Snapchat than I am for them getting pregnant.
You know? So, um, there's lacking education in this new digital world, but I think a lot about, but I talk a lot about with the kids. Um, in addition to that, I spend time with them thinking about businesses. They often get involved in our companies. I think the best gift that I can help them do right now, as far as the future goes is just trying to find the things that they like.
And don't like to do. Like, I don't need them to pick a career right now?
but I think we need to check stuff off the list, things that they definitely don't like doing that they don't want to spend the time doing. It's something that I'm passionate about. So at least when they enter into college there, they have a narrower set of things that they focus in on.
And then, you know, like many things, Michael has 📍 defined them, find what they love to do and empower them to do it and give them whatever resources and skills I can to help them Uh, but we're still in that phase of figuring out what they love to do. And so, um, I think that's all, all parents' goal is like, figure out what your kids love to do and make sure they get to do it as much as they can and, and support them on that journey. Yeah,
Yeah, that's great. Well, um, I mean, it was great chatting with you. Good luck with the parental journey as well as the company journey. It sounds like it's all going well, Mike, thanks for coming on the show.
No problem. Thanks for having me.
It's great. Well, awesome. I will let you go off to your next thing, but Mike, you are a fantastic guest.
You're really great.
Anytime you want. Happy to always talk.
Oh, my gosh, you're such a weld. I could have just asked you a hundred more questions and I let you go off to your life. And that was a great hour. Thank you.
No problem. All right. Take care.
Okay. Take care. You too. Bye.
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