Inspired with Alexa von Tobel
00:09:03 · Kevin Ryan
[00:09:03] S0: Well, first of all, it's it's all about investing capital, and it's not always the right thing to do. So there are probably many companies right now that are spending way too much money, and they don't have a big enough market. They're not gonna win. It's not a good use of capital. So it's not categorically true that everyone should do well. You know, if you are expanding, it's because you're using capital effectively. You're hiring a salesperson who makes 200,000 because he's gonna... He or she's gonna produce 800,000 in sales. If you're doing that, it's a good idea. Know, there are also moments where they don't pay off, and you're wasting money. So, you know, each... I have companies today in the portfolio that I don't think should expand very, very, very quickly because the product market fit is not good enough. That capital would not be well used. And I have others that need to go faster. They need to grab that moment right now. I have one company that probably cost them $50,000 to sign up a big customer, but it will cost them in the long term, 200,000 to switch a customer off a competitor. It's just so much more difficult. When the market is new, it's much easier to get in. I want them to go very, very quickly. But then a lot of it is execution and making decisions on the fly, having the resources, investing in recruiting, knowing you can move quickly, because you have to get good people. You can't... Anyone can hire people. It's hard to get good people. And so you've gotta strike that balance. You're basically a race car driver that needs to go very, very fast, but not too fast. If you go too fast, you explode, and you you don't make the turn. If you go too slowly, there are five cars ahead of you, you're in trouble. It's a very careful balance.
00:10:44 · Alexa von Tobel
[00:10:44] S2: Kevin, as someone who has... And you just said something which is you gotta know it when you see it. Like, product market fit is there. As someone who's cofounded, you know, successfully, at least half a dozen, but really more of, like, a dozen companies and across so many different categories. Gilt Group was ecommerce shopping. Zola is a registry site. MongoDB is a data giant and cloud giant and a digital media company and business, etcetera. And you've context shifted a lot. Mhmm. What is the moment? What do you look for when you're like? This is a great idea. I'm gonna do it. Like, just give us the sense of what that looks like because I feel like I've witnessed some of it by knowing you so well. But how would you articulate the, like, the the the... What what data, what feeling, what is it that all of sudden you're like, I will build this. Let's go build this.
00:11:40 · Kevin Ryan
[00:11:40] S0: Yeah. And look. Let's let's not forget that you also get it wrong. So you're... I have a lot of successful companies, but I also have a number of companies we started that that failed after a year or two because the product ultimately was not quite compelling enough. And so the bet you're making is really on product market fit. Is there an opportunity? Do you have a vision for a product that is fundamentally different than what is out there? So Business Insider is an example, was fundamentally different than the Wall Street Journal or Business Week. We were punchier, faster, online only, and there was an opening for that, and we were at the right time. Gilt did a $175,000,000 in revenue in year two, which is insane. No company's ever done that. Because there was no way to buy these fashion labels at a discount at that time online, and we were able to get the inventory to do that. By the way, that market sort of went away. You know, we did get it right, but it got worse over time, which is why Gilt was not as successful as it should have been or could have been maybe because there were too many other competitors out there that were doing similar things. I didn't like the dynamic, so then we sold it for $250,000,000. And then Saks sold that business for $5,000,000 a couple years later. So, yeah, I'm always just thinking about where is the market going? Where is the country going? You know, you mentioned Transcend, which is a psychedelic company trying to treat PTSD. You know, that's a a huge opportunity, something that we were ahead of the game five years ago and focusing on. We have taken a compound through phase one and phase two trials. The results are extraordinary. It's an unsolved problem. You know, I feel good about product market fit there. So... Yeah. But but, you know, it's a humbling space. You and I are invested in a lot of companies, and we think... When we invest, we think they're all gonna work. And the truth is a high percentage, you know, maybe half ultimately don't really work that well despite the fact that we're all... Think we're we're kind of good at this. So it does feel like being a baseball player where someone's like, oh my god. You're a really good hitter in the major leagues. And you're like, yeah. I get one hit out of every three times. So it feels like there's a lot of failure along the way.
00:13:52 · Alexa von Tobel
[00:13:52] S2: But I think you have a personality where the failure doesn't drag you down. I think you you sort of you recognize the landscape. Our job is 40 to 50% will go to zero. Yeah. And you're looking for that one MongoDB worth tens of billions of dollars, and one of those makes you pretty successful in your life. And and I think that outlook of yours is extremely strong. Kevin, if you had. Two pieces of business advice that everyone listening could learn from you that kind of applied no matter what. When it comes to building and scaling a successful company and getting it right. Just what would those be? Because I feel like you have you have truly... You're like a guy who's tasted everything.
00:14:39 · Kevin Ryan, Alexa von Tobel
[00:14:39] S0: I don't think my advice is very helpful because the thing about building a startup is it's more about execution. It's a bit like a... If you said, why is LeBron James good? I know what he does. He just... He drives and he shoots and he makes it. So there's no secret. He just does it better than other people. So if I said to you, know, make sure that that senior team is incredibly good, every company you and I see, they think their team is good. And the truth is they're not that great. Right? You can't... Not everyone... Not every CTO is in the top 2% of CTOs. There is a big, big difference. Everyone thinks, oh, I know this guy. He's an engineer. He can be the CTO. Is he... Like, when we started Mongo, you know, the... Our CTO, Eliot Horowitz, who was quite young, was the most brilliant engineer out of the 700 engineers at DoubleClick. And so that's credible. You know? But if I ask you a a... Someone coming in, is your guy really the best out of 700 in a large company? Generally, the answer is no. They're good. They're not that good. [00:15:48] S2: We talk about this a lot, which is like people don't really know what point 1% talent looks like. [00:15:52] S0: Yeah. [00:15:53] S2: You can say that's point... That's top 3% talent, but you're not looking for top 3%. You're looking for top 1%.
00:15:53 · Alexa von Tobel, Kevin Ryan
[00:15:53] S2: You can say that's point... That's top 3% talent, but you're not looking for top 3%. You're looking for top 1%. [00:15:59] S0: And there aren't that many, And you realize it when you launch a company that... And it has to do with talent, to do with drive, it has to do with some intangibles. They have to be able to recruit. I have a company right now that is hiring senior AI talent, and they just had two people turn them down because they said, look, I make $10,000,000 a year at OpenAI or Google, which is a staggering number. So I'm not gonna take your salary offer for 500,000. You know, being able to persuade people to take big pay cuts and to believe in the vision is hard. It's hard. And the best CEOs can do that. [00:16:38] S2: Yeah. You're right. I always say the best CEOs will success into existence Mhmm. Even when they don't necessarily have the ingredients. Yeah. Kevin, I'm so excited to talk about the future with you because you have been somebody in my life where I'd always come back, hey, Kevin, I wanna get your opinion on this. What do you think? There is so much happening in the world right now, and we'll talk more about New York City tech specifically. But I would love just to step back and say, what are the things you're most excited about? What are you seeing? And if you had to give us like a category or two that you're really diving deep into, what are they?