This Week in Startups
00:34:13 · Jason Calacanis
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00:35:43 · Jake Newfield
[00:35:43] S2: Question I get over and over again, Jason, is why the heck would one of these AI labs be paying for your product? You guys are a startup. At the time they started paying for us, we're a two person startup, barely any funding. So why don't they just build it themselves? This is a critical path issue for them. And the reason I give I have two answers to that. One is kind of the theoretical philosophical answer, which is for the same reason that these AI labs don't want to build their own data lake and they use Databricks for the data lake, the same reason they don't want to build their own single sign on product, they use Okta or something. Whether you're talking about Google and AI Lab, whatever, just because a company is big and successful doesn't mean they want to build everything under the sun, because that takes resources away from core stuff that they're building, which in the case of the labs is LLMs. What do these labs care about? They care about building the best LLMs. They don't want to get into the real estate business or building data pipelines for Bazel data. So that's the philosophy of it. It's strategic misalignment for them to build it themselves. But then there's the reality of it, which is that they are paying us. So beyond me saying, hey, I think this is what they should do and might do because of these reasons, that's philosophical. The reality is we get the wire every month, which validates
00:36:56 · Jason Calacanis, Jake Newfield
[00:36:56] S0: that Yes. All right, listen. This is one of the great lessons of entrepreneurship. When you get a lighthouse customer, you lean into it and you say it upfront. Always start with what's strongest. You want to build credibility. Investors, Jake, you know this, are very busy. They see a lot of companies. The issue for investors now is not that there is no companies to pick from, it's they have a limited amount of time and the signal to noise ratio is absurd. It's absurd for me. And I have typically 10 associates, researchers and analysts working for me at any given time. I overstaff my programs with the revenue from the media company in some cases or other things so that I can spend more time with founders and find these great companies. But if you start with, hey, we hit our first quarter million in revenue, and we have a Lighthouse customer. We have a second Lighthouse customer. Now you're immediately going to get the meeting. Period, full stop. Lighthouse customer, if the investor invests at your stage, if the investor invests in your category, like, you know, marketplace, software, dev tools, whatever it happens to be, you're just getting the meeting. What founders then do is they try to do everything else to try to get the meeting. Sometimes you wanna do less in your pitch and spend more time on just getting a great customer and having that customer speak for you. Now, you don't have a testimonial from that customer yet, right? Do you have like a quote from them? [00:38:35] S2: I don't, yet. I will.
00:38:37 · Jason Calacanis
[00:38:37] S0: So that's the, like, the next piece is like, you get a quote from them and they explain why they're using the product and you put that into the pitch. And don't take it from us, take it from McDonald's. McDonald's said, Hey, before this, we were screwed. Now all of our problems are solved, you know, whatever it happens to be. And you can just ask your customer, hey, would you write this like a Yelp review? That's how I kind of say it to them. Hey, can you write a review of the Launch Accelerator? Jake, I'll ask you to do this when you graduate, if we did a good job. Hey, can you write us like a Yelp like review? It could be one sentence, it could be 10, but, you know, something in that range between one and ten sentences of, you know, what we meant to you. It could be casual. And so this is a perfect pitch because you have the Lighthouse customer. It's not because you do fancy graphics. It looks good. It's not because you're the greatest presenter in the world. You're a strong presenter. You're confident. You're crisp. You have all those qualities. But it's... It really is about that lighthouse customer. So I guess then my question becomes, can that lighthouse customer pull in another ship to your port, and can you get customers two and three? And how close are we with customers two and three? They don't have to be as good as the lighthouse customer, but that would be then what some investors might say to you is, This is really impressive. We really want to see what happens when you have the next two 6 figure customers, 5 figure customers per year. So how are you doing with that?
00:40:01 · Jake Newfield, Jason Calacanis, Lon Harris
[00:40:01] S2: Yeah, we're working on that. Perfect. I think we're close. [00:40:05] S0: I mean, just incredible job. Tell me candidly, what has the reception been pre having a Lighthouse customer post having a Lighthouse customer? [00:40:16] S2: Yeah, definitely helps a lot. Everything you said, Jason, it validates what we're doing and the pain we're solving, and I think every investor is scared, rightfully so, that startups are building something which tomorrow could get eaten up by one of these labs. As an investor, I think it's a scary time to be VC because there's no moat anymore, or not the same way they used to be. So an open AI anthropic tomorrow could go create something that one of your startups has, and the investor loses all their money. And so for us to be able to say, hey, not only are they not creating what we've built, but they're paying us for it, I think it shows investors that we're doing something valuable enough that if the companies that everyone's scared of, if they're paying us to do something, I think it's a good signal that we're doing something unique and valuable. [00:41:07] S1: Jason, unpack this a little bit for us in terms of moats, like how would you answer a question for an investor like that?
00:41:14 · Jason Calacanis
[00:41:14] S0: Yeah. Well, as Jake said, you know, for investors, they're a little scared. Hey. I have no moats, etcetera. I think the new moat is that you're relentless and that people trust you, and that would fall under brand. So we should have a new focus on brand today. I'm doing this myself. And so what is uniquely human about Jake? He's Jake. What can he do to make Hermetiq, you know, be indispensable? It's that he's thinking about what the customer needs before they even know they need it. He is looking and studying them and saying, how could I make this experience even better? If you go to a truly great restaurant and they get to know you, you come in, your drink lands before you order it. They let you know, hey, Jake, Al, when I go to Boa, you know, steak house here in Austin, they say, would you like, the Alaskan king crabs? And would you like your West Home New York strip medium rare? They've put that note into their system, and they send the same waiter over each time, whether that waiter is in that section or not. And they know I like a certain booth. So nine times out of 10, I get my booth, and they kinda customize to... Makes me feel good, impresses the guest. That kind of hospitality is a moat. Most people would say, Oh, that's not a real moat. It's not a technical moat. How you make that customer feel, Jake, and how they feel you're being attentive towards them means everything. And if you're charging a fair price, which you are, and it's making them more efficient, then they're going go, Well, there's no reason for us to do this. I could start my own... I'll give you an example. I like the chicory coffee. You know, Cafe Du Monde? You may have gone?