#52 - AI Teachers, Deskless Workforce & The Passion Economy with Zak Kukoff

Yesterday we asked people to do a thing, to do a thing. We asked, we told them that we would send them a, like, a GIF. I don't know what we said. Oh, I know, they could ask any question they wanted to ask and me and Sean would answer it. We'll do a Q&A, and in exchange they had to subscribe, unsubscribe, and subscribe again. We're trying to game the podcast ranking system.

I love it.

We're willing to have our, our real listeners kind kind of click farm it, but we're not just being, you know, paying somebody in the Philippines to do it. That's our line.

I'm down to do it. No, I'll do that.

Okay, well, so far that's been our line. Um, we dropped the Stu episode today. Uh, people are liking that, dude. Christians everywhere are, are hitting me up. Oh yeah, the CEO of Pray reached out. I was like, hey dude, pray.com. Yeah, because we've been, we've been talking about religious stuff for like 2 or 3— it's been a theme across a couple episodes, and we went super deep on it. I don't know if you listen to the one with Stu. And, uh, so a bunch people who are like church tech, bunch of church tech entrepreneurs reached out.

I had a rabbi email me. Really? About this podcast. Um, I also had another guy email me saying I'm out of a job and Stu's gonna replace me. And for the record, I'm great with that. Uh, I'm totally fine with that. Okay. So we have a guest here.

You want to— Yeah. What's up? Who are you?

Hey, how's it going? Um, my name is Zach Kukoff. I'm an investor at Emergence Capital. We're an early-stage enterprise SaaS fund. We're known for investing in Salesforce, Box, Yammer, Zoom, Viva, Gusto, etc., etc. Um, it's a pretty cool job to get to meet with some of the most interesting people in the world all the time. I get to be the dumbest guy in the room, although we'll see after this room at the end of the podcast how I'm feeling on that one.

Yeah, you should be the smart guy here.

So edit out all my bad jokes at the end. Just keep the good jokes in, get rid of the bad jokes.

So that portfolio is pretty badass. You said Salesforce, Zoom, Yammer, blah, blah, blah. Are those like, you guys get in that Series D and you just get the logo, or did you like actually invest before it was obvious?

Predominantly invest in Series A. I'd say we do about 85% Series A, 15% Series B. Zoom, we're the largest investor of. Veeva, we were the only—

What's Veeva?

Veeva Systems was a pharmaceutical R&D, still is a pharmaceutical R&D.

That sounds huge.

Right, and before this you worked at Flexport, and then you had your own thing.

Yeah, years and years ago, back in 2011, started a company called Tru&Today in the edtech space. And we can talk all about that because that was a very fun experience.

Ask us how we know each other.

I asked them how they know each other. Let's hear the answer. How do you guys know each other?

Don't know each other. We met downstairs. He's a funny guy on Twitter and I was like, hey, funny guy of Twitter, come on the podcast.

I think the exact response was, all right, go make me laugh.

Make me dance, dance for me.

What do you mean he's funny?

He's witty.

What do you mean I'm funny? Please.

Like funny looking?

Like, okay, I'm going to find one of your tweets that's funny.

But like you make like wisecracks.

Yeah, he's trying to make a joke.

I would say I make an expense, my own mostly. Oh, that's cool. You know, some occasionally some others too. We were talking before we started recording about the, uh, recent hot take on whether or not employers should offer equity. That was pretty fertile ground. Like, there are a lot of— the truth is Twitter is this weird engine where it rewards people for saying pretty dumb things all the time. And so I find it funny to comment on a lot of the things I think are not particularly well-reasoned that people sort of just tweet out without thinking, right? Clearly well-known or influential people who you feel like should probably know better, and yet instead just constantly say dumb stuff online.

You want to give an example?

Uh, I think that equity thing's a pretty good example.

There's—

for those who may not have seen, uh, Jason Fried of Basecamp was tweeting about the fact that employers shouldn't offer employees equity in their company, right? Which I think on the face of it, you think about like tech as a wealth creation engine, which we were talking about beforehand a little bit too, The engine of wealth creation, it's not cash comp, it's equity, right? It's the ability to be 27, 28, 30, a relatively young person, come into a startup and almost win the lottery in a serious way. It doesn't mean that everybody who joins a tech company is going to have a $5 million outcome at the end.

So what did Jason say?

Jason said people— employers shouldn't offer equity to employees.

Why?

So his take, if I'm Jason and I like Jason, he's a good guy. I don't know if we're friends, but we know each other. He basically was like, you know, what tech companies do is they sort of lowball you you on the cash side, offer you this promise of equity which most likely turns out to zero, and you're left holding a losing lottery ticket. Uh, better to just pay people, treat them well, give them great perks, give them good work-life balance. That's how you should compensate people.

Well, so that's his take. The first part of that is right. Uh, second part is wrong.

The first part you're saying that people lowball on cash and offer equity instead?

Yeah, like they don't have money.

I don't know that I—

so it's risk-adjusted, I think, right?

Like, here's what I saw. I saw a take and I forgot who said it, but I'm gonna totally rip it off, which was If you think about the number of companies hiring people and you kind of weight that by the equity offered, it's predominantly like later stage companies that are really making equity offers. And really a lot of FAANG companies are making offers, right?

Yeah, but those aren't startups.

Those aren't startups. So cut out like anything public, but even just weight private companies offering start equity. There are many, many more jobs at these later stage companies where the equity has some defined value and is unlikely to go to zero. It may not have exponential upside. It's unbounded. But it's unlikely to go to zero, and the cash comp is pretty good, or at least relative to what you would make working for a non-tech company of the same size. Definitely in early stage, you can get lowballed on cash and make it up in equity.

I think lowballs are not a good—

Yeah, that's his terminology, but you just pay less. Yeah, maybe you're making a little bit less on cash, but if you're working like a Series D startup, you're probably making a pretty good cash comp base, and you have real upside in the equity portion too. Like, I think that's the part that's missing.

His other piece was like, oh, because you have equity, hey, you got skin in the game, you should work your ass off this and your skin in the game is like whatever, 0.1% of the company. And he's saying that's not actually having skin in the game. So that was his take. He triggered everybody, which I think is his goal with 90% of these, right? It's like to trigger Silicon Valley and then therefore stand out as the contrast, the anti-Silicon Valley. That's the brand.

It's a good—

and he plays it like a fiddle. It's awesome.

So let's talk about— this is related—

your Flexport.

No, before that, he said he raised money. I want to— and he said it turned into nothing.

But, but the Flexport one is actually the perfect example. You worked at Flexport, which was a— which was a hot startup.

200? I don't know.

Okay. So you joined at 200. How did you think about your cash versus equity? What was the equation you did in your head?

I mean, I think it actually does help to back up a little bit to my startup first, and then we can kind of come back to Flexport. So think about my startup. I started really early. It was 2011. I was 16. Oh. And it wasn't like, to be clear, like, this was not, yeah, this was like, I'm still fairly young. I was really young then. I didn't know I didn't know to a large extent. And so I sort of stumbled into startups. You wanna contrast for a minute, I think the Flexport approach was pretty well reasoned versus my startup when literally it was a science fair project that I ended up raising some money and going to Techstars for, right? Like, I had no idea what was going on. I was frantically kind of paddling.

Did you drop out?

So I actually left my sophomore year of high school early. I like took AP tests. I was like, peace, I'm out of here. And I spent the like 3 months in Boulder, Colorado for Techstars, back when Techstars was like 2 locations or 3 locations, or there was like Boulder, Boston, Seattle.

How old are you?

I'm 25 now. So I was young then, I'm still pretty young now, like I think so at least. And so that was like very much not well considered. It wasn't like I was thinking about this move and I was like, oh, I've evaluated all the options, my opportunity space, and I'm going just for the one that I think has the highest upside in learning or value or whatever. It was one of these situations where I fell into it. It became a really steep growth curve, but I couldn't have predicted that at the outset versus Flexport where I was—

How much did you raise for that one?

Uh, we raised about $250,000. $50K.

So we didn't raise a ton of money. And it went out of business?

Yeah, it went out of business.

Did you ever make revenue?

We made some revenue and we had some, actually some partnerships that went in, but the challenge was I was 16 and my two co-founders were 17. They—

Yeah, so like who's gonna take you seriously?

Well, actually we—

It's like funded via allowance.

Yeah. It was my lemonade stand that spun into this. No, and we raised a little bit of money, but the challenge was we actually had some investor interest and one of my co-founders had just gotten into Stanford. His parents said to him, if you stop, take time off from Stanford to go to a startup, that's it, we're disowning you. Like, we're cold shoulder froze.

Is he Asian?

Yeah, the guy, he was Asian. I grew up in an immigrant house.

All my Asian friends, their parents say the same exact thing.

If you take time off to do a startup, that's it. My folks were pretty supportive, but at that point, if you're losing one of the two co-founders of a company, your fundraising prospects, it's tough, pretty good to not great. And still, by the way, I was 17 at that point, so I was still really really young by, you know, by relation. That's kind of one end of the extreme.

The other— we have these guys who work out here, Andy and Alice, and they have a company that makes— I won't reveal it, but yeah, good, great company. Yeah, a great business to own. And their parents were like, when are you gonna go back to being a consultant? They both have Chinese parents, like from China. And so I've learned all about the Asian culture this way.

It's this like very, you know, my parents are both, I guess, second generation. Their parents were immigrants. Immigrants, right? And there's very— from Italy on one side and from Eastern Europe and Argentina on the other side. And so it's this very like traditional immigrant mentality, which is, which is, by the way, been the right— like, if you were to pick a choice for the vast majority of time in America, the better wealth creation tool was to go to college, go to grad school, become a white-collar professional. That was the successful path for a long time. It's only recently that kind of playing the startup lottery, for lack of a better term, has been the successful choice. And so for these, my immigrant grandparents, their attitude was they're gonna work hard. You know, my great-grandfather was a factory worker in Argentina, right? And he worked his ass off so that my mother and grandmother could be school teachers so that in their minds I could go get, you know, a PhD or an MD or whatever, become a professional. And clearly that's not necessarily happening, but that was like, that was the life plan for immigrant families in this country for generations was Every generation, one more level of educational attainment, which correlates with one more level of professional success. And only recently has that been decoupled.

Mm-hmm.

Totally. And then so, so you'd go to, you go to Flexport. So you were saying, have that experience. Cool. You're now 17, 18.

Yeah. So yeah, did the startup like 17, 18, decided to go to college. Um, went to NYU, really special program there called Gallatin where you basically make up your own major. And so the whole school is, uh, it's like Build-A-Bear University is what I used to joke about, but it's really like you can do independent study, you can do work study, you can do classes. Sort of like hodgepodge this program together.

That's cool.

And then while I was there, I was helping run Dorm Room Fund, which is First Down Capital's college university fund. It's about a million dollars a year. Actually, it might be more than that. I'm not sure now, but a million dollar a year vehicle just for investing at pre-seed for student founders.

Is this shit a good idea, investing in these young-ass kids?

I think— how's Dorm Room Fund? Dorm Room Fund's been around for a while. How has it done?

Fucking horrible idea.

Well, we have the experiment ran. What happened?

The experiment ran and it was a pretty successful experiment.

What came out of it?

What was, uh—

I mean, there have been some— listen, there have been some pretty big hits and there have been some pretty big misses. You know, I think about a big hit like FiscalNote's done pretty well at a dorm room fund. Bevy, the beverage company, has done pretty well at dorm room fund.

Brooklyn Inn. Wait, those guys were—

Yeah, student founders. Yeah, Brooklyn Inn, the linens company. I'm sure I'm gonna get probably railed on Twitter after for not having come up with the whole portfolio, but I'm sure there are more that I can't think of. And on the misses side, you have like Lily AI, which is the other— if you guys remember Lily Drones.

Yeah.

Oh yeah, they like raised, uh, huge failure. Yeah, they raised like, I don't know, $30 million. I can't remember the exact number. They raised a bunch, then kind of flamed out. And that's the, the counter side too, is you can have people who— and I remember it when I was one— who are inexperienced founders, don't know how to manage.

And what's the, what's the one out of Berkeley? There's another, uh, there's a Berkeley-specific fund Jeremy runs.

Yeah, the House. Yeah, Jeremy's great.

And the Peter Thiel thing, dude, I'm down. Like, yeah, if you're like old enough to be an adult and start something. But I also think that you should just be getting drunk and like hooking up with people and Yeah, get drunk and kiss some people.

Yeah, that's our fellowship, the Sam and Sean Fellowship. I mean, live a little booze and kissing.

Like, that's what the dream was, the goal. I don't know if there was—

and then give it— then give it up, go keto and start intermittent fasting after that.

Yeah, that's the life plan at 5 AM. Yeah, like a little bit later, but stay up until 5 AM.

I mean, listen, there's like an important socialization element of college which helps you learn emotional maturity and learn how to deal with people. And it's tough if you don't have that. I don't know when you make it up. Certainly don't make it up by moving straight out here and working really hard early.

Oh, plus you don't make friends, dude. You don't make friends after you graduate. Your friends are who you met in college, and then the rest are just— you just go to work and then you go home and you're like, wait, where do people make friends after that? It's no more friends.

I'm like Uncle Rico. Like, I think of college, I'm like, oh, I would kill to go back.

Yeah, give it all up.

Yeah, for sure.

Like Sean, who produces the podcast, he's always like, oh well, you know, you know, he's like 20, 21. He's like, well, you have, you know, experience, you have capital, you have this network, you have— I'm like, dude, I would give all of it up just to be right back where you are in your position right now. Like, I'll trade you if we can do some Freaky Friday thing.

We, we remember that young guy. Oh, you were there. We met a young guy at our meetup and he was like 21 and he flew up.

I'm like, wow.

So like, if I was If I was 18 and I lived and I went to NYU, I would be not being the door— I would only do the dorm room fun if it helped me meet girls. I mean, if you're in SoHo, uh, and you're 18, that's the dream.

NYU is a really fun college to go to, and certainly, uh, had a really fun time there. But here's the flip side of it, right? Like, I, I see the other side of this, which is it does feel today like there are compounding effects, both reputationally and professionally, So working and exposing yourself to like some kind of real tangible ownership of work really early. And the earlier you can do that, whether it's like a startup or working for a large company in a significant role or building some reputation, even if it's just tweeting dumb jokes on Twitter, like that compounds over time. And if you wait 5 years, you can, you can both have fun and build compounding professional returns at the same time. It's sort of the argument I would make here, right? You can do—

Yeah, you can do both for sure.

For sure.

You can do both.

By the way, it's not as fun as just doing the fun. It's not as successful as just doing the success. But a lot of folks try to walk that.

But you'll end up way ahead of the curve because most people are just having fun and not doing anything that like builds their sort of like career foundation. Ironically, when you're in college. Okay, so you, you do all this stuff. And by the way, when you said Emergence, you really emphasized the C at the end of it. Is it because people think it's Emergent Capital?

I think people— there's a couple of things. One, people think it's Emergence Capital. People think it's like Emerge Capital. I've heard like 5 or 6 different issues with the name. The other thing is our website is emcap.com. Like, when I first joined, I'd say, oh, it's MCAP. And people were like, oh, the letter M and then the, you know, C-A-P. I probably—

yeah, you need to rebrand.

Not up to me. I probably had like 6 months of emails I didn't get because people were like, oh, this jerk gave me like a wrong email address at that party.

Yeah, it's bouncing.

I was screaming MCAP on the top of my lungs. People were like, oh yeah, like Zach MCAP. MCAP.

Right.

So if it were up to me, it'd be a different URL.

All right, so let's get to some of your ideas. Yeah. Also, I promise you're a funny guy and I found a tweet from you. Oh, okay. So Bird— did you hear about this? Bird launched Bird Pay.

Yeah.

Bird scooters launched Bird Pay. Zach comes in on Twitter, says, when you make scooters but then you see 4 fintech companies get acquired in 1 week, you make this pivot.

You gotta put a laugh track in afterwards so it sounds like—

turns out tweets aren't that funny when you read them out loud later in public.

It was like, die. No one could hear it, but the room was dying.

How big is the fund?

Yeah, but I have a half a billion dollar fund.

And how— what size checks do you write?

It's a good question. Uh, we are less constrained by individual check size. And so just from our perspective—

just come on, give me the answer.

This is the answer. This is the real answer. I've been here about a year and a half now, and I've seen us do everything from like $2 million up to like $15 million. Okay, there's my answer.

So when you're coming from this perspective, are you going to come from this— these ideas of you think that wealth creation is in raising money or in owning all of it?

It's a tough— I don't know that the dichotomy really makes a lot of sense from where I'm sitting, but I'm also gonna have my own—

yeah, it is a false dichotomy. I agree with you, but my own book.

Yeah, I'm gonna throw out some bullets. You sent me some bullet points beforehand, uh, I just, I don't know what they are. I don't know what they mean yet. I just have the headline. So perfect, deskless workforce.

What is that? Yeah, so that's one area we think a lot about at Emergence. And so, um, think about like where do venture capitalists invest, right? Think about what are the biases that VCs have. Most VCs invest in things that are pretty easy for them to find, like things that are around them. And so if I think about like every VC I know, where are their investments? It's You know, it's SaaS tools for white-collar workers. It's social, consumer social tools. It's like CPG products that have like really pretty subway ads in New York. That's kind of the areas.

Coastal elite people.

100%. Like yuppies who like have disposable income.

Right.

You get it really quickly. You see it. You know it.

It's like, oh, I viscerally understand this.

Like people who listen to this shit.

Right. Anybody listening to this shit.

Yeah. All you yuppies out there.

Can you give me an example?

Of a company that sells that category?

No, what you're thinking about.

So like an example of a company that does it was like a RigUp or something like that. Or like whatever, Earnin or something like that.

Like Upkeep is one of ours too, which is down in LA, which is like facilities management. Like any company selling software to a bit— like we have another one, Drishti.

So what's one that you think could exist that doesn't?

Got it, got it, got it. I think there's a lot of innovation still in manufacturing itself. Like, if you think about the line of manufacturing, we have one bet that helps people learn how to do artisanal manufacturing better. So like, there's a lot of manufacturing that's just put slot A into portion B and it's sort of rote over and over again. There's a lot of manufacturing that's human-driven, whereas you actually have to know some skill to build the thing right. And so we have a bet in that space. When you think about like the rest of a warehouse or a the rest of the factory beyond just the line itself, optimizing how everyone moves, optimizing where you store things, optimizing the actual process and workflow. I think there's a huge opportunity there still. I was in the edtech back in the day. I think there's a lot of opportunity still in edtech. That's a huge one that's considered—

Can you go back, go back to this first one? Yeah. What's an example of a factory who would use this?

So you can think about— okay, I know you guys have a lot of like Fulfilled by Amazon guys in the show, right? You can think about any factory in like Shenzhen, that's making a bunch of tools, if they could have like a 5% more efficient factory, that's probably creating some real gross margin if that doesn't exist before. It probably gives them some leverage on labor costs they didn't have before. So any factory that's making commodities probably wants to optimize their ability to work quicker because the pricing is an area where they can't really increase the cost.

Who's the leader in the space now?

A lot of this is Bluefield. A lot of this— there's not anybody making software for it today. It's like I have a factory manager who might have a clipboard who walks around and says like, okay, step 1 is do this thing, step 2 is do that thing, and they're on foot saying, hey, make sure you're doing this at this time, teaching a process. And so the question is, in the same way that like Salesforce for sales managers created optimization and workflow for those folks to understand the actual levers of their business, is there like a similar opportunity in manufacturing where you can kind of sit at this higher level and do that as well?

Industry would you start at? This is interesting to me.

That's a good question.

So, so while you think about that for a sec, so there's one, which is what he's talking about, which is a software tool for to manage the actual work that's being done. Uh, then there's all the like sort of robotics and automation that's going into these factories to improve them. So like, for example, I was looking at a video of this, um, printing factory. So basically they print, uh, you know, if you're wearing, you know, none of us in this room are wearing a pattern, but like, okay, Adam's wearing a striped shirt, so that fabric has to get printed. And basically it gets printed on these like, you know, football field yards of fabric. And then they literally have a guy and the guy's job, there's a machine that unspools it really fast and he's just looking for defects. So he's just staring at it, not blinking. And he's just looking, where was this? Does the, does the, do all the stripes look right? In, in China. And so I was just thinking like, this is something that a camera with computer vision does way better than a human who's gotta stand there and be like, is there any defect? Is there a defect? It's like QA, right? Quality control. You know, this guy's literally just staring at this thing as it unspools the whole roll, and then he's like, yep, look good. Or if he sees something, he has to hit the button, rewind the spool, be like, oh no, it was fine. Sorry, continue.

You see that shit all the time. Have you seen on the— remember, did you ever watch that TV show How It's Made? Yeah, I love that show. And you see it all the time, like when they're making candy and shit in Hershey's, right? They're just like staring at it.

You have a Twitter account, Machine Pics?

No.

Great. It's the same thing. It's How It's Made, just on Twitter. It's phenomenal.

Machine pics.

You can scroll through and see like thousands of really cool examples of machines you never thought about. So I think that's like one opportunity. The other thing is if you particularly think about like really high margin goods, I think about an iPhone for a minute, right? Like iPhone has a big margin attached to it. Every component Apple has like some presumably upsell they're paying that manufacturer for. That's the kind of situation where that might be humans who still do a lot of that work because it's, it's too much finesse for a robot to do effectively. It's not the, stare at this like thing unblinking for 5 hours until your eyes give out. Right.

Peel this, put it on the backside, put it back together and push it forward.

Delicate work in a lot of ways. And so people do that and it's expensive to have people. People are hard. And by the way, people get tired. They're not optimal. There's a lot of challenges. You have a company that's built on human labor. And so if you can help people be better at their jobs, A, you can ideally uplevel them to more intellectual roles, but also B, you can increase the output of the whole factory entirely. So you're not thinking about a collection of individuals, but you for the first time can look at an entire system at once. So that distinction makes sense, right?

What else?

What else we got? Can we scroll down a little bit?

Uh, so, so your stuff's at the top right now. So, uh, passion economy.

Yeah, I think there's— oh yeah, this is kind of something I'm thinking a lot about. Um, and this is a term that Andreessen Horowitz—

dude, you're speaking my, my language. These are all boring-ass topics.

I love boring. Listen, maybe this will have like 5 listeners, but I love boring stuff.

No, people like that. We talk about that a lot.

That's my go. I mean, listen, Emergence, everything we do is boring.

It makes way more money.

Yeah, that's magic.

That's the kind of like, that's the dream scenario because then you can really walk that tightrope of raising money and still owning a ton of your business.

How much did they raise?

Uh, we put in $7. I don't know. I think they only in total raised like $10 and then went public on that, which is obscenely capital efficient.

That's crazy. I haven't even heard of this.

What's their market cap?

Ooh, I want to say it's like $20 billion now. What the fuck?

Fuck, I feel like I know of all the cool shit.

This is like, honestly, it's not— Sam's upset at himself. How could I let this get by me?

What do they make? Uh, sorry, say again?

What do they make?

In like revenue or in the products? Yeah, it's— think about like everything Salesforce is for sales managers. It's a CRM or CRM-esque tool just for pharmaceutical companies. So like for research, for clinical trials, for managing new drug development pipelines, like all this kind of wonky bulky, gorpy stuff that no one from the outside looks at that is hugely lucrative.

Did the founders work in— they had to have worked in that industry.

Yeah, it's a good question. Uh, I believe— actually, you know, stuff off my head, but I believe, uh, one was from the industry, and I believe one maybe even came from Salesforce or had some Salesforce background beforehand too.

Because how do you even find that that's a problem that you have to make?

I mean, it's how— it's always helpful when you can come from the industry you're tackling, because not only do you know like where all the boring, gorpy stuff that's public visible is, you also know which of those are good business ideas. There's a lot of boring stuff that is impossible to go after or not possible unless you have millions of dollars to burn, which is less attractive. So this idea of like passion economy, think about for a minute, all right, there's like a long tail of people who are building really small businesses.

Some cases like— Podcasters.

Podcasters are a great example of that, right? Podcasters, newsletter writers are kind of the classic examples. Anybody who's on Patreon, like there's a huge long tail of these folks.

Streamers, YouTubers.

Anybody on Twitch, right?

Writers.

OnlyFans, right? There's literally a huge tail of these people, and today there's a lot of work that they're— there's some software that's starting to be developed to make their jobs easier. So I don't know what you guys use to distribute this podcast, but like Substack for newsletters is kind of a classic example of this, right? Patreon for creatives in general.

I think that's a horrible business.

I like the you call it Patreon as well.

Yeah, I call it Patreon.

It's nice. It's nice.

Patreon. Like a Patreon.

Patreon.

You know, I feel like that makes a lot of sense. I'm learning in real life.

Welcome to the Passion Economy.

Yeah, the Passion Economy is so—

That's the password to get in.

What features?

Probably like some of those are saying, like invoicing is a kind of classic one where you can just collect cash flow, build margins, and cash flow back out. Document generation is a really good one. So if you're an attorney and every, you know, week you have a new client who comes in and they have to submit the same like 5 pieces of information. Maybe some of them use DocuSign, but DocuSign is expensive. If you're like a 2-man, you know, a law firm in like Idaho, you're not gonna spend $1,000 a month on a DocuSign subscription so you can have your 4 clients a month fill out a form, right? And so it's the generation of the form, it's filling it in. Again, these are like boring features. This is not a tech problem that needs to be solved, but there's a massive distribution opportunity in the long Right.

Here, let me— can I chime in on this? Yeah, go for it. Okay, so I'm a co-owner in a small software company that makes $50,000, $60,000, $70,000 a month, and it's a checklist software. Um, we try— so here's what we did.

Yeah, checklist as in like to-do list.

I mean, do you know the guys at Tiny?

He's my friend. Yeah.

Okay. Okay, so that's— I'm telling you things you already know, but that's a great model.

Yeah, that's what we did. We bought a company for single-digit hundreds of thousands of dollars, triple or quadruple the prices. I mean, we're talking like $2.99 a month to like $8.99 a month. No big deal. Then what we tried to do was we learned that selling things that are $8 a month is really hard. Yeah. And so what we did was we looked at who uses us and we went to—

Hard in what way? What do you mean by that?

Uh, it costs, it's really hard to acquire customers. So you can't spend on, if you're acquiring someone for a $5 a month product, that means it's $60 a year. And it's really hard to spend money on advertising to get a customer probably for $60 a year. You could blog and build a brand, but that's a little bit harder for guys like me who are just buying companies that only make money and not like making it like a personality-driven thing.

And by the way, it's hard too, because you can't invest in customer success then too. So every time you churn somebody, there's like, there's not a mechanism in place. At least you correct me if I'm wrong, but I don't see often mechanisms in place that capture those folks in a profitable way if you're selling $10 a month software.

Yeah. It only works if like you're Buffer and you could like put your face behind it and you'd be like, oh, this is, I buy it because this guy, I follow this guy on Twitter. For us, we were just buying them. It was just a cash cow. It still is a miniature. And so, So what we did was we looked at which industries use it the most. And for some reason, this one company that was a dentist had a lot of their customers on it. And so we, our vision was let's talk to them and build something for them where they, any job that has a to-do list, let's build something just for them and see if we can do like a dentist to-do list. Yeah. And we did it. And it, and, and what we found was it was really hard to go after these small businesses cuz even then when we raised prices, it was prohibitively expensive to go after these small to medium-sized customers. Yeah. It was very expensive and very hard. And so my opinion with that is that an idea like that, that goes after these people only makes sense if you're gonna, if you have an interesting way to get your product into their hands.

That's exactly right. Well, Chad, this is not a tech problem, it's a distribution problem. I think you said it really well.

Kylie Kardjener. Kylie Kardjener.

What's that girl's name?

Kylie Jenner.

Dude, it doesn't matter what the fuck she sells, it's gonna crush it.

You're right. She has a huge distribution channel she owns, but this is relationship with millions and millions of people. And by the way, that's what I think about my startup back in 2011. We fell into the trap you just said a second ago. We built a really great product. They've spent so much time and effort on product and we had no idea how to distribute it to this long tail of like schools and teachers we're trying to sell to, right?

It's like the hardest people to sell to.

Oh, impossible because the person who buys is not the person who pays. There's like a, you have this crazy cash crunch every month where it's like, oh, even though I have committed ARR, um, of, you know, $100 grand, whatever it is, $100K, I in fact have real ARR of zero because it goes through like provisioning, goes through the accounting cycle, like in the district, is you don't get the money for 6 months after they actually sign the contract. You die in that 6 months, by the way.

Yeah, this is generically, this is like what they call the SMB problem, right? And some people crack it, and when you do crack it, it works. Like even in education, I really wanna have the guys from Mystery Science on, 'cause I feel like they actually have cracked this problem. Um, or more than anybody else I've seen in that space where they said, you know, 50% of elementary schools use Mystery Science.

And there's actually—

that's an amazing penetration.

There's a calculator that you can use to do this, but you could, in my opinion, I'm going to launch another software product or I'm going to launch a software product one day. What I'm going to do is make sure, uh, that it costs enough money that I could hire a sales team. Yeah. And I think that number is the minimum would probably be 5 or 10 grand a month. Or sorry, a year.

So at our company, I didn't want to— I was like that. I was like, I'm not going to hire a sales team. And we did, and it was like putting a match on fuel.

100%.

And normally with B2B, you said something like $5K to $10K per year. That's too low because, uh, like if you're gonna actually have a sales force, right? Like a fully loaded salesperson, they're like, uh, you know, $200 grand or whatever.

So I guess what I mean is there's actually a stat that shows like the companies that achieve $100 million ARR, there's like a dead zone. So you either need loads and loads and loads of customers at a really affordable rate of like $100 a month, or you have to start minimum 5 Gs a year. Right. Um, but in order to have a sales team, I think that, uh, for software, what's the sales quota? $500,000 a year?

There's a, there's, so David Sachs, who was the founder of Yammer, uh, put out a beautiful post, uh, or maybe it was a YouTube video that says how to, how to build your sales team. And he's like, look, I didn't know this when I got into it. We started Yammer. We thought we were going to get this bottoms-up adoption. Then we needed to make money. They did actually get bottoms-up adoption, but they didn't make bottoms-up revenue. And so they got the product in and then they go to the CIO and they're like, Hey, every, you know, 20% of your employees are using this. Don't you want control over this? And so, uh, then he just walks through, he's like, look, this thing, you don't need to be, um, a genius. Like just follow the playbook. Don't try to deviate and invent your own sales system. Like playbook. And so he was, uh, so he walks through it. I don't, I don't remember off the top of my head, but he walks through it on YouTube. He's like, look, uh, here's how you calculate your comp for your salespeople. Here's how you calculate your quotas. There's these two options. You're either gonna go with this path or this path. Depends on the price of your product, and here's how you need to think about it. Uh, here's when you hire, you know, sort of a sales manager, and here's what you have. Here's how you compensate them. He literally just lays it out, and it's like, oh, this is— if you're somebody who's in that, who's, you know, building your sales organization and you kind of don't know what you're doing, just Google David Sachs YouTube how to build your sales team or whatever, and you'll find, uh, this YouTube video with like 100 views, but it's great.

Sachs is the best. He's super smart on this. He's obviously done it a bunch of times. What I think is interesting is, you know, Sam, what you said earlier, like when we come into companies, one of the first things we help them do is just triple prices. And that's the same thing if it's a $5K ARR, just there, or a $5K ACV, same thing if it's a—

Doesn't matter what it is, yeah.

Yeah.

So you literally just need to buy a product. Okay. And just change the number on Command+F, find the price. Yeah. Like Command+F dollars.

Boom.

No, it is always surprising the price elasticity of most customers. Like, if you have a good product, not even a great product, a good one, an average product, most people will pay so much more than you think.

But engineers in particular are always guilty of this.

Absolutely. And by the way, that's the same thing too. If you are even a decent marketer, buying one of these businesses is a huge opportunity for you because A, you could just jack up prices, you so aptly pointed out, and B, If you can even get like 1% more efficient at acquiring customers, between that and higher prices, you basically built yourself a substantial flywheel that can really be a multi-million dollar business.

One of the best Twitter guys to follow if you want enterprise stuff is this guy Chetan from Benchmark.

Yeah, yeah, he's great.

Just follow this guy. It's C-H-E-T-A-N and then the letter P. So Chetan P. Text him that we're plugging him on the show and I'll listen to it. Yeah, he's great. Good guy too. Literally, he'll just summarize the whole business in a tweet, and you'll learn a lot about how these enterprise businesses are structured, uh, just from following this guy on Twitter. And, um, so that's good. What are some of the sort of, uh, different, different companies you wanted to call out? So what's Guru?

Yeah, so Guru is a company that we're— I'll talk my own book— we're investors. I have two here.

I listed one like that phrase, talk my own book. I gotta start using that.

I love— listen, any opportunity I can, uh, 25 He's talking to some fucking 25.

Look at this guy.

Okay. So, no, it's all good.

Here's what I'll say.

How the hell do you do that?

Well, here's the idea. You can listen to— almost everything is quantifiable. So you can listen to a conversation. If I'm talking to you and you're a prospect, and I'm trying to get you to buy my product, maybe you have an objection that you bring up. You say, "Oh, it's too expensive," or, "Oh, we use this thing, it doesn't integrate with whatever." and I flub it, I have no idea how to handle that objection, and the call goes really poorly, and you're like, I'm never gonna work for this company, the end, we're done. The idea of like a lot of these businesses is you can hear what does the top-ranked salesperson do, uh, that like, how do they handle objection really well? And no sales coach or sales manager can sit in on every sales call in your business and actually understand the way that you respond to every objection. But an AI tool can paste it in on every call in your business.

Is that any good?

So what's the—

so that's the broad concept. Guru.

What's the URL?

Yeah, Guru, it's— what's the—

it's not git.guru. No, it is git.guru. Oh, it is git.guru.

Yeah, but I was describing as like the thesis broadly.

You should use that to teach dudes how to meet girls.

I mean, Sam's really in this like, you know, college days, enjoy, you know.

My thing with business is like the best products either help people get laid made, helps them make money, or that's probably it actually.

Made, paid, laid. That's the—

what is it?

Made, paid, or laid.

What's made?

Famous. So fame, money, or get laid.

There. Okay. There's a phrase for it. And so when I hear GetGuru, I think, okay, cool, you're going to teach companies how to get more sales. Love it. Yeah. But like, I just think that all this is like an early stage thing and it's like on the cutting edge. I just think that the set— the sector sex industry is at the forefront of everything interesting.

Yeah, so the internet listens to you have sex. What? It listens to you have sex and then it tells you some tips.

Maybe you want to last a little longer.

Let's cut that part out.

Like video streaming, uh, the DVD.

Yeah, yeah, that's true.

It was all porn. I think that Oculus, if they let the porn guys get a hold of it, it's gonna make it way better. That's what I would do with this if I was just like—

I mean, no, it's true. Listen, you can think about a lot of consumer applications. Obviously, the sex industry is a big one. Another one's like the, the example I always think about is you want to learn to play guitar, right? You're kind of limited because, A, you're going to learn from whoever the local guitarist who can teach you is, and maybe they're not a very good teacher, or maybe they're frankly not a very good guitar player. And so at some point, you're going to hit a wall where you can't learn anything more from them. But if instead you could learn from an AI that's been trained on all the best guitar performances in history and all the best teachers in the world, Wouldn't you learn better and faster how to be a good guitarist? Ideally, by the way, who knows?

Here's an idea that's like that, that is working.

Elsa AI.

Are you familiar? Yeah. Elsa. So correct me if I'm wrong, cuz I only know the surface level. Elsa is basically for English language learning. So there's a lot of people, you know, especially in Asia who really desperately wanna learn English. And so else what Elsa is, they don't wanna just learn English to read it. They wanna speak it. Right. Like if I, if I wanna learn English just because I wanna speak English. And so what they do is, yeah, they have you, you speak into the mic of your phone and it basically corrects your pronunciation. Yeah. So it's like a really smart insight. Like my mom's, you know, her insecurity with her English when she was, you know, first moving to America was not, do I know the vocabulary, but does it sound right?

Do I?

Yeah.

Because there's, I, I don't know, know the exact number, but there's in the hundreds of millions of people who are trying to learn English at any given time.. And this is a sort of novel take that I think resonates because pronunciation is so important and so hard to come by.

Awesome. Yeah. That's a really good example. And so you could imagine like basically infinite applications of the same type of tech and Guru was one of them.

So how do you build this Guru? Like if I'm building this, if I wanna start this from scratch, what do I have to do?

Yeah. It's a hard business to build cuz what you need is a dataset to learn from. And what you need is not just the dataset to learn from, that's not static, but one that continually evolves over time. So an example of Guru, they do kind of the, the sales example I just talked through. That's similar work but for customer success. So you could think about it sits in your knowledge base, becomes your knowledge base, and as your customer success or customer support agents are responding to inquiries, it actually knows what they need to say back and the content from your knowledge base they need to reference, and then brings it up to them in real time. So they're spending 5 minutes searching for an article in Jira that was written 10 years ago that may or may not describe the actual scenario they're dealing with.

So they'll like read your email?

It sits, it will, it sits alongside, like usually it's, it's, yeah, it could be email, it could be customer chat. Like it sits alongside the method of interaction.

But your companies or all companies?

Ah, good question. So it, it sits in the, uh, in your company. Internal.

Yeah.

Internal. It's internal.

So that would only work then if you had a huge—

You need, you, you need repository of of like a corpus of data.

That's pretty cool. It's an enterprise tool.

It's a lot. So then if I wanted to start one of these companies, I would look at something that has a lot of information. So what are other examples you think? So we have another language is a great one.

So like for example, you, you need a, you need a big, you need training data. Uh, so, so the tools for this have all become pretty democratized. So like Google and whatnot, Facebook, they've basically open sourced a lot of their ML stuff, their models and whatnot. So now, you know, people on our team, um,, you know, who are, let's call like, uh, they're not PhD in machine learning or AI, right? Yeah. They're just like engineers, capable, smart engineers. They are able to, in a couple weeks, take stuff that's off the shelf, ML tools that are off the shelf, customize it for this application. Like when we did it at Bebo, we wanted to say, hey, watch this per— watch this video game stream. So watch a video, um, game video and tell us what's happening when somebody gets a kill, when they win, when they lose, when they die, whatever. Right. And we were able to train a computer vision system within, I don't know, 2 months to be able to detect in real time what's happening in a game as if somebody was watching it. And then we used it to score esports and do like refereeing and scorekeeping and all this. We automated esports, which is like a goofy application of it, but it was so easy given where the tools are. So for example, if you had a corpus of data, like, I don't know, like all the YouTube videos that are out there for like some topic. Like, or whatever. You can train, you can train your systems off of either data that you have or just public data that's out there, books and whatnot. Just depends what you're, what the applications you're trying to do. Yeah. So for language learning, you, you need a whole bunch of people who are speaking and then you have to go in and label it and correct it and say, okay, when this person said this thing that was incorrect, here's what it should be. That's hard. But, but once you build that dataset, you can sort of get the flywheel going.

That's great.

And that's where the opportunity is the opportunity is having either a unique dataset or a unique take on that dataset. Like the challenge, the reason why it can be hard to build this kind of business is you have to have some set of data that everybody in the world doesn't have because as you said, the tools to make use of the data are publicly available. And so whether it's like, we have another one in our portfolio called Textio, which is similar, it's kind of the same idea for job posts, right? The idea is if you're writing a job post.

Yeah, I saw this, yeah.

So you might have seen it.

Yeah. You write a job post and it tells you how to make it better, how to make your job post better.

So it started like that, and now what it does is you can just say, I wanna hire a junior web designer.

Oh, and it writes it.

And it writes the whole thing for you.

So you don't have to know how to use the editor. That's so smart.

Right?

And so they— What most people do anyways is just go copy their competitor's job postings. Exactly. And use it anyways.

So—

Wanna hear another thing that, that you could do is, um, I think Axios is doing this and now I understand a little bit why. So Axios, um, you know, they're like us, or I guess we're like them. They started first and they have a bunch to newsletters. And what they've— what they're doing is they're building this technology that optimizes your newsletter, your internal company newsletter, for best practices. So if you're fucking Salesforce or Morgan Stanley, be more concise, right?

Yeah.

And you're the head of HR and you need to make sure that all 10,000 of your employees understand this new policy.

It—

I'm a believer in that. If Dude, if Grammarly can be as big as it is, yeah, that shows how much people care about the quality and the sort of looking smart and being smart in their writing. And so if you can help people be more concise, dude, look at how much I'm talking. Geez. Imagine if I could be more concise. That would be amazing.

That is actually really smart.

I, that's what I would do.

That's one of the better ideas that's come out of this podcast.

I would build that if someone wants to build that content.

Yeah, you should build that.

I think that is a great idea and I would charge.

Forget the AI, just Mailchimp for internal companies that has the feedback loop.

What you can do is you can crawl all the most successful emails of all time. Which is, there's data sets for that. Like for example, my company, I have, how many fucking emails have we sent? We've probably sent. Half a billion emails. I could, I could, I have all that saved on SendGrid. Fuck, I would work with SendGrid and be like, hey, let's talk about this.

And that's really smart because again, you have that proprietary data set that nobody else has if they haven't built out years and years and years of emails that are so much—

how big a check do you write?

Yeah, let's talk offline.

Yeah, you can be in that book of business.

I'll talk my book for you.

Let's talk book, bro.

So quick. Just check this out. At my company, we've created all these sales training things and I've written all these long blog posts and I'm like, no one's gonna fucking read this, dude.

I send your How to Write Better, your writer guide. What's it called? Your copy guide or your writing guide? I don't know. I sent that to people on my team for many years.

I've been doing that.

Really? Yeah. You also have this tweet that I love. That's basically, I don't think you didn't do this, but you stole it from somebody. I think it's like, um, it's like a paragraph and it's like, look at these sentences. Oh, it's every sentence has 5 words.

So I've been preaching that shit forever. It's how to make your writing sick.

So that is something where you can just do a Grammarly style analysis over the, over somebody's email and be like, hey, suggestion, break it up this way because now look how punchy your email is.

Because a lot of people don't risk, there's, so here I'll tell you, there's a science to this, which is keep sentences below 25 words. Average paragraph, you want to be 3 or 4 sentences. Mm-hmm. You need to vary up your, your language in a certain way. If there's a comma, put a period in instead.

Um, no, no adjectives or no adverbs.

No adverbs. Like, there is totally math behind this.

Yeah, I mean, I would love to get better at it because, again, it's not— I also think it's not a skill you get from talking. You can talk a lot and be a terrible writer because none of these rules are obvious, or at least to me they're not obvious because I'm not a writer, right?

And you have— you're not— realistically, most people, even when they read this, like, oh yeah, that's cool, that paragraph is better. Uh, how do I— yeah, how do I use it to get better?

I wanna buy that company and deploy it in this way and make way more money.

Yeah. Hemingway should be built into your email client. It should be built in, right? That's the problem with Hemingway is it's a separate standalone app.

You gotta check out Textio because that's where they live now. You can stick and stick.

He's got talking his book already.

I'm talking my book constantly.

I can't help myself.

So far, this is the most, this is gonna be the most lucrative episode for me personally. I've never done.

And this is like the great founder fit for you is like, I like helping people We'll send better email. Uh, okay. Anything else that we should talk about before we go? We, we're sort of over time.

I think we are.

Yeah. We're, we're, we're, we are, we are at the hour. Um, anything else that you loved?

Nah, listen, these are all really good.

One of his notes says a microwave that doesn't beep at the end.

That's mine.

That's mine. I wish, I wish I was smart enough to buy that.

So, so I wish I was smart enough to buy that. So I stole this from my, my homie Farza and his Instagram. Story yesterday. He goes, guys, I got it. A microwave that doesn't beep at the fucking end. Cause it is so annoying when your microwave just starts beeping at the end. Just a silent guy, Farza.

So he has smoke more weed.

It is.

Push a button, you spin up your homeschool, it's compliant in your state, and it sets you up to, for success in 2 minutes. And so like the idea a lot. We're gonna bring him in. We'll do an office hour.

How much, uh, money has he raised?

Yeah.

Uh, it's gonna be a lucrative episode for me too.

Just from his, uh, couple friend, uh, friends and family.

He's raised some, uh, some, some money. The only problem is you gotta deal with, are you homeschooled? No. All right. You gotta deal with fucking people who are homeschooled. Wait, wait.

I like how you checked if he said yes. What were you, what were you He would have still said it.

But I don't want to deal with like, no disrespect to people who are homeschooled, but like, that'd be dope if we just had a huge homeschooled audience.

It's like, you know, we're writing into the—

if parents are just having their kids listen to this.

Deal with vegans, right? Like, I'm not against veganism, I just don't want to like hang— it's like, I love going to an improv show, I just don't want to hang out with a bunch of nerds who do improv, you know what I mean?

I like how Sam, just at the end of the episode, was like, empties the clip of like, you know, controversial opinions. Hold on, before we go. All right, where should people find you? How do they follow you?

Follow me on Twitter. I'm @ZCK, so it's nice and short.

ZCK.

ZCK.

It's a good handle.

Yeah, it's a good handle. When did you join Twitter?

I don't know, like 2010.

When he was 14. Yeah, that was— First business?

Boom, it was my embryo that joined Twitter for me. Got the good handle. And honestly, I mean, listen, you DM me. That's how we got in touch. And I love when people DM me if you're starting a great business, particularly if lives in the spaces we're talking about, I would love to hear from you.

All right, thanks for coming, thanks for listening. Just remember, don't shake anyone's hand, coronavirus is out there.

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