Hey, it's Eric Newcomer.
This week I'm talking to Myel Gave, the CEO of Techstars of former e-commerce, entrepreneur,
and the former chief operating officer of Softbank Back.
Real estate company Compass, Myel has a great vantage point into early stage startups across
the world.
So we had a great conversation, I think, I really enjoy it.
Here's the episode.
Thank you so much for coming on the show, I really appreciate it.
It's a great pleasure.
Very excited to be here.
I feel like you really get to see the full startup universe, Techstars covers so many startups.
Can you just give me a sense, like just so people really get this expansive startups you
see?
Like, how many portfolio companies you have now, or how do you think about sort of the reach
of Techstars?
Yes, absolutely.
So Techstars has been in business for 16 years now, and we have 3,600 portfolios
companies.
So companies we invested in at some point or another during these 16 years.
And we have 3,600 and counting.
We have a couple of investment in the making as we're speaking.
So if you ask me again tomorrow, there will be a few more in our portfolio.
And we do that all around the world.
So we have invested in companies from 60 different countries, 60, and so we invest pre-seed.
We invest exclusively really early stage.
And you have to have some relationship to Tech because of the scale that it gives you.
But other than that, like we're really invested across the board from FinTech to Hellstack,
to PropTech, to like, you name it, we usually have it.
You've been at Techstars like two and a half years now.
I mean, we met like, I think on the conference circuit, you love to talk about what the
Aspen Airport you flagged me down.
I think after like brainstorm.
I think at the time I was at ozone, and but you and I we had already talked before.
Right, right, right.
And so you were like.
Now isn't the information it, yeah.
And then I came to your office when you were a compass.
So anyway, we've seen each other around the world for a long time now.
And you sort of like went to Techstars during the pandemic, right?
I mean, it was about the same time I think I quip Bloomberg to start the newsletter.
So I mean, a big job change in the pandemic and Techstars, I think for like, the incubator
accelerator world, you know, the pandemic was like a real sort of like, how do we react
moment?
What was the main thing you wanted to change?
I mean, it was sort of the reach or sort of the type of entrepreneur you attracted or
like coming in, like, what was sort of your top priority?
I wanted Techstars to become the best and largest pre-seed investor in the world.
I thought that there was a lot of, again, really good building blocks.
The fundamentals were there.
And it was also an opportunity to scale it further, streamline it, strengthen it, provide
more value to entrepreneurs, help them get better terms, better exit, better evaluation.
And that's a, look, that's a long process.
The VC industry works in very, very long cycle.
Right.
It's not like you arrive and then three months later things change.
So that was the idea of taking this great company to like a whole different level, where
I mean, to start when I would talk about Techstars, people would actually know who we are and
what we do.
And I remember announcing that I was joining Techstars to my network and a few people,
including venture capitalists from Silicon Valley will remain unnamed, saying, why are
you joining a nonprofit?
And my answer was, this is not a nonprofit.
This is an investment business and a pretty good one at that is just, they never really
positioned themselves as an investment business.
And so part of the work was to change internally and externally the image of Techstars to say,
we are a very large pre-seed investors.
And by the way, as per CrunchBase, we a few months ago, we officially became the largest
pre-seed investor in the world.
So.
We have a lot of friendly people, a lot of friendly people.
Just a sort of like quick facts, like what is the best return so far for like Techstars?
We have some really cool company that I like very much.
So company is like, and I don't know how many of them you know, but like company like
channelises, they've met the, okay, so they met headlines not long ago because they
provide blockchain data and analysis to governments, banks, and businesses around the globe.
And when things like FTX happen, and it's only the most famous, but there's been multiple
situations where figuring out what is happening in the blockchain crypto world has been pretty
critical for a lot of institution, channelises is usually the company that calls.
That's a super high markup, what, 8 billion, something.
Yeah, the company, I think the last valuation was 7.3, but they had a peak above that.
So that's one of them.
One that I like very much, it's called Remittly, they're a mobile payment service that enable
users to make person-to-person international money transfers.
So that's the tagline.
What they do is that they allow to a large extent immigrants from all around the world to
send money in a safe and cheap way to their families and to the people who need it.
And so that's a six billion dollar company that went through IPO in 2021, because that
was the year I joined, so 2021.
And I think that this is a company, it was a mission, which I think is amazing.
Can I have a third one, because I love specific companies.
So the one that I find fascinating, and again, we're talking about billion dollar plus
company.
We can also talk about smaller companies, because with 3600 companies in our portfolio,
we've got a bunch, but the one that I like a lot among our billion dollar plus company
is a company called Zepline.
Oh, yeah.
Of course.
And most people, when they know about Zepline, they mostly think about either if they know
what they're doing.
Frozen Africa, right?
Exactly.
Drones in Africa.
And what they do is that they design and they manufacture these drones, and then they
operate them to deliver vital medical products.
And it's a three billion dollar company.
They did a successful phone raising in April of this year.
And again, what they're doing really makes a lot of sense for the world, and at the risk
of using a Silicon Valley sentence, like to make the world a better place.
But the reason why it matters so much is because I deeply believe, and so is my team, that
big money comes from solving big problems.
And big problems usually are found in things that make the world a better place, not always,
but it does help.
So that's my three billion dollar plus favorite company, but we got quite a few others.
So I could keep going.
Then are there standard terms for tech stars, like if I'm an entrepreneur, like, which
I expect from you all in terms of money and ownership?
Yeah, absolutely.
We have standard terms in their public.
So it's $20,000 plus $100,000 convertible note.
And depending on the conversion of the note, we end up on average with about 8% of the
capital in the company.
And basically what we provide to founders is the capital, obviously, but there is what
we call the tech stars formula.
So it's the 120K that I've just mentioned.
It's the programmers themselves.
Our accelerator programs are very intense.
It's small class, very small class.
It's 10 to 15 companies.
It's very hands-on.
You have the tech stars team.
These are tech stars employee dedicated to that particular program.
These tend to be people who are former entrepreneurs themselves.
And during this program, it's like six days a week.
It's very intense.
I mean, can I have a second job or do a bunch of other stuff on the side like it's full
time.
And it's not rare for an entrepreneur at the end of the program to be like, hey, I'd
love to take a holiday.
It's like that you call to go and phone raise now.
So there's the program itself.
Then there's all the services afterwards.
Because once you graduate from the program, we have a series of services from helping
you to phone raise, to connecting you with more mentors, more alumni.
We have a large group of corporate partners, companies like Audi or ABNM Row or JPMorke
or ECOLAB and eBay.
We've just announced a partnership with eBay.
And so connecting them with the corporate partner does matter.
And then last but not least, as I say, we have a huge network.
And so even after you graduate from the program, you can always leverage that network, which
is truly global because we've been running actually the programs all around the world.
And we invested in 60 plus countries.
Like recently, I was talking to a portfolio company of ours who is trying to figure
how to enter Japan.
And guess what?
We have a really good relationship with the Minister of Economy in Japan.
We have run multiple programs in Japan and we have a pretty robust mentor bench in Japan.
And so it was literally a phone call.
It's like, yeah, sure, no problem.
Let me connect you to X.
And we can do that in a lot of countries around the world.
So you have this global view, pre-seed companies.
Yeah, I'm just curious, given that, to get your sense of the market right now.
Because I feel like, I've said this so many times, but it keeps being true.
Like, AI feels so hot.
And then there's a downturn in a lot of other places.
But there has still been this sort of hot seed environment because the late stage investors
want to invest in something.
And then the last point I would observe is just the public, the big tech stocks have
been back up.
So I don't know.
What is your read on the funding environment right now?
Because I imagine when you invest in a pre-seed company, you want to make sure that there's
some path to them fundraising, a series A down the road.
How do you think about the environment?
So complex question was a lot of different elements of answer.
So let's start with the VC environment.
So the VC, there's a consolidation ongoing.
It's not visible yet.
And in my view, the worst is to come because...
In terms of VC firms shutting down, you're...
Yes.
Yeah.
Exactly.
Emerging GP, not being able to raise their next fund.
And in the venture world, they don't shut down.
It's like in the operating company world where a company goes bankrupt and like literally
fire people, close the door and then that's it.
In the VC world, it's more like they move into zombie mode.
Right.
You're still managing your last fund, but we're not raising anymore.
Makes it so hard for a reporter to call the end.
It is.
Well, okay, maybe they let it slip one year.
Does that mean they're never raising it again or does that mean they're going to try
again next year?
Exactly.
It's a very slow, slow debt.
So this is definitely happening.
And then you combine that to the fact that a lot of venture firms have not yet taken the
full write down on their valuation, which by the way, creates an even bigger, it compounds
the problem because a lot of institutional LPs have public and private portfolio.
And the public portfolios have obviously, the public market I've obviously taken the
write down.
I mean, valuation have drawn dramatic.
What I've always heard is you want to be in the red when everyone else is falling.
Everybody else is falling.
You want to mark it down and it's like, okay, it was a brutal period.
But if you drag it out and you are in denial and you say, oh, man, these companies are still
good.
And then you have to mark them down.
Yes.
Yeah.
Then you look bad when everybody else is at least starting to rebound.
And that's no, no LPs like that.
But they're not, I don't think they're in denial.
I think the VCs are basically for a lot of them fundraising because you also have to remember.
We came from a period where it was not abnormal for a venture firm to raise every two years,
sometimes every year.
And so a lot of the firms are now out in the market fundraising.
And if you take a significant write down, then suddenly your performance on paper doesn't
look great.
And so it creates a problem for you.
So it's not like they are in denial as you think that they're trying to keep the appearances.
Yes.
And the LPs know that the institutional LP know that so there's like the double effect.
The first one is most institutional LPs are overexposed to VC because the VC haven't
taken the write down that the public market has.
So there's like a denominator effect.
And then the second reason is the LPs know when they look at the GP they invested in that
some of them have not taken the full write down.
And they're like, OK, maybe we're going to wait to see where all of that lands.
And so this environment, very tricky at the moment.
And I think what we're observing is a complete change of the guard, a complete reorganization
of the venture space.
And it's not over.
I guess it's probably another couple of years who knows I don't have a great crystal ball
on this thing.
But there is something happening.
And at the outcome of that change, we're most likely going to see very different players
really influencing the markets.
OK, so that's the VC piece of it.
And that means, you know, I would extrapolate over time less, less money available, right?
Less easy money available.
So the way we talk to our portfolio companies, because we have, you know, a little over
15,000 investors who have made an investment in the texture portfolio companies we've been
connected with.
So we talk to a lot of these people like we are a deal flow to the VC industry.
We're not really a VC ourselves.
And what we tell our portfolio companies is it's not that there is no money.
There absolutely is some money.
It's just it's harder to get because the VC are going back to some fundamentals like you
should probably do the diligence before you give a check of a few million dollars to
a company, you know, world's thought.
You are going to have to show a clear past your profitability.
It doesn't mean that you have to be profitable, but it has to be clear and credible.
Not like, you know, the hockey stick that makes you profitable in your 10 if like all the
planets align and you have no competition.
And so that by definition makes it a lot harder to create compelling cases.
And then in a lot of cases, the VC will now ask even at an early stage to see some traction.
But if you combine that, like we have companies that have raised recently very good round
at seed and series A level, but they had again, like they had like a good track recorder,
clear past to profitability, a great product market fit.
I think if I had to summarize gone are the times where you could go and raise five,
ten, fifteen million dollars based on the napkin and a barely put together MVP, that's
not happening anymore, unless you're in AI.
And that's a different.
Exactly.
That's a different thing.
Right.
There's a certain strain of founder, you know, the not let's, I mean, everybody's becoming
the AI founder now.
But, you know, some of the founders think, oh, the gloom and doom has been oversold,
you know, VCs want to get better terms.
So it's like in VCs interest to emphasize like how bad things are.
I don't know.
What do you say to that?
I said that the valuation that we saw in 2021, 2022 didn't make a lot of sense.
Right.
And I think we're seeing a recalibration of the market.
We also say that to our portfolio companies.
If you are being offered a down round, you probably should accept it because most likely,
and obviously it's always on the case by case basis, but most likely, you last valuation
was probably a little inflated and the new valuation that you're getting is probably
closer to reality.
And so yes, it looks like a down round, but maybe the way you should look at it is your
previous round was it out of the ordinary around and this is the normal round.
So it's not a down round technically, it's just a normal round.
How do you think about like going after spaces like, I mean, to some degree, I mean, I think
you were just saying before we started recording that you're in the business of like searching
for Black Swan events.
Does that mean like you're going deep in AI now or it's like, oh, man, the foundation
models have already been funded or how do you think about?
There's so many portfolio companies targeting sectors.
The way we think about it is by practices.
So we have 15 practices.
So again, like space and defense, we're one of the most active and not the most active
investor in the world in space and defense, health stack.
We've invested in health stack really early on and we have a really strong practice there
and we have partner like United Health Care in that program.
And so again, 15 practices, some of them are industry related.
Like the two I've just mentioned, some of them are horizontal practices.
So things like AI or things like blockchain would be in what we call horizontal practices,
meaning there's not an AI industry.
There is an AI capabilities that is now being implemented across industries.
And AI is nothing new.
I think what has changes or thanks to chat GPT and the fact that it was so easy to understand,
not my mother understand what AI means.
So do VCs, it's as a result of that.
There is suddenly like the next formal of like, oh, AI is the next thing that is going
to change everything.
And by the way, I do agree that AI is actually a once in a lifetime evolution from a tech
perspective.
So it's not too diminished, the impact of AI.
But like AI powered business, I've been in business for a really long time.
And we've invested in AI powered business for, I don't know, 10, 15 years.
Like it's nothing completely brand new.
So the people who are discovering AI right now, I don't know, from a VC perspective,
it's like, yeah, there's a lot of things happening, but they were a lot of things happening
two years ago as well.
I mean, you just announced this eBay partnership.
And you obviously have sort of a background in e-commerce.
I'm curious sort of what the plan is there.
And you know, are you bullish on e-commerce today?
Some of the Warby Parker type investments, they feel like some investors have sort of
fallen out on direct to consumer, sort of thinking that it's harder to build like a
venture scale business.
So yeah, what opportunity do you see in e-commerce right now for startups?
So obviously I can't speak for eBay.
They will have to have their own view and their own opinion.
I'm just going to talk about it from Texture's point of view.
And from my point of view, because as you mentioned, I come from e-commerce and I've spent
quite a lot of time in that industry, I think people can choose often e-commerce with
direct to consumer.
It's like, oh, how can we create the next, whatever, Amazon or the next Warby Parker?
I mean, Amazon is not exactly direct to consumer, but you know what I mean?
Like the, basically people are associating customers exactly like with a brand that creates
a product and that then goes and sell it to the consumer, whether they are the one producing
that brand or whether like Amazon, they aggregate all the people brands and then sell it.
And it's not to say that there's no innovation there.
Maybe there are some brand and some product that they're not properly sold to consumer.
There's also, we have to remember, we have a very US centric view of the world.
There's a lot of other countries around the world who may not have the e-commerce landscape
that we have in the US or we have in Europe.
But to me, that is like a tiny little piece of e-commerce.
There is everything related to digital marketing, especially with AI now and all the content
noise that is about to come away, thanks to that or because of that.
And the fact that Facebook is not the marketing platform that it used to be, like digital
marketing in itself, there's a whole world in there that needs to be reinvented.
Payment, we talked about blockchain, there is like a whole universe of how do you do payment
for e-commerce in a better way, especially outside of the United States, especially
in countries where the banking system is not as robust, actually not, and I'm saying
it out loud, the banking system robust in the US, there's a problem.
But you know what I mean.
So payment, there's a ton of things to do, infrastructure, the e-commerce requires a very
capex intensive business, warehouses, distribution system, supply chain, so everything related
to supply chain.
We felt it during COVID where all the supply chains got disrupted, and not just between
China and the West, but like globally, supply chain got disrupted, created a ton of questions
around like how do we create a new supply chain, more robust, more resilient, cheaper, faster,
that's e-commerce.
And then I'll give you one last one, which is big, it's everything related to the environmental
impact.
So, what I want to say about e-commerce is not necessarily the most friendly way of selling
things to people.
Think about the amount of cardboard that we are using, thanks to Amazon.
Think about all the goods that are being shipped from one side of the planet to another
side of the planet and then between warehouses.
And so there's a whole world around how do you do supply chain.
And again, like these are four topics, but I can keep going.
There's so many things that can be improving e-commerce.
What can you say about the eBay partnership?
That we're very excited.
You just said there's something, but you haven't really said like what, I assume they'll
work with some of your companies, or?
Yes, yes.
The idea is that we run the program for three months together.
There's going to be eBay executive coming into the program and, you know, sharing their
knowledge, sharing their problem, sharing feedback on the company's ideas that we selected.
And to me, that's the power of the partnership we have with so many of these corporate or
government partner.
Like, if your space startup, like, we partner with NASA, like, you probably should come
and talk to us.
If you're in the food tech or agrit tech business, we have a partnership with Aikolab, which
is, if you live, feel like that's a big deal.
Like, if you are interested in the future of mobility, we have a partnership with Audi,
autonomous car and all of that, like, you probably should also talk to us.
If you are interested in alternative energy, we have a big investment hub in Oslo with
a company called Equinor.
And so that's everything related to alternative energies.
And I can keep going.
I'm going to stop here.
But it's just like this partner, bringing an incredible amount of knowledge, including
what are the things that are not working and that they would love for a startup to solve.
And then they open their door to their labs, to their sales team, to, like, it's just,
it takes the start of to a whole different level.
And for the corporate partner or the government agency, it's just it's an opportunity to get
plugged right into innovation and see what's coming that could potentially help your business,
but that could also disrupt your business.
I want to take stock of, like, the, do you, do you call yourselves an accelerator incubator
first of all?
I feel like people will never know what to say.
So we call ourselves a preset investor, but joke apart, we call ourselves a preset investor
and the accelerator.
So the term that we use is accelerator is really a mean to an end.
It's just it's under the premise or the idea or the conviction actually based on the data
that if you at the preset level, if you just give money to startups, you may as well go
to the casino and play roulette.
That is about the same chance of winning.
And the reason is that at the preset level, most companies that you are going to be investing
in and they are exceptions, but most companies that you are going to be investing in, they're
going to pivot, they're going to change what they want to work on.
They're going to realize that what they were working on is not exactly that.
A lot of them are first time founders.
They're going to change their team because they started with one team and they're going
to finish with another one.
There's so many things that can change that you basically at the preset level, if you really
want to increase your chances of getting somewhere with the company, you have to support
them.
You have to be wisdom in the trenches and go through the ups and downs of what it is
to be an entrepreneur because it's so hard to be an entrepreneur.
It's always been hard, but like right now, it's particularly hard.
And so it's really about this idea that just giving money is not enough.
You need to provide support, you need to provide guidance, you need to provide mentorship,
you need to provide connection, you need to provide all of that.
And that's the reason why the accelerator program, plus all the services after the program
come into play.
So how do you think of Techstars relative to Y-combinator?
I mean, obviously, they're the Jaguar-Nah in the room.
Are you trying to sell to the same founder?
How much do you see them as sort of a direct competitor?
How do you think about YC?
I think YC is an amazing business.
I've always recognized that they've done a lot of really interesting stuff and starting
with they've built an incredible brand, like the simple fact that even though Techstars
and YC started an accelerator program at the same time, the fact that the world associate
the world accelerator was YC tells you a lot about what they've been able to do.
And look, I'm a very competitive person, but at the same time, I want to give credit
where credit is due.
I think they've done a pretty fantastic job.
They've also done a pretty fantastic job in building a relationship with Silicon Valley.
We operate in 16 countries.
So we invest in 60 plus countries, but we have physical offices in 16, 1, 6.
Until very recently, we were not in Silicon Valley, which is problematic.
I think YC has done a very strong job at that.
Yeah, there was a second where I mean, it's almost your advantage that they're very focused
on their presence in Mountain View in California.
Like for a second, they were during the pandemic sort of flirting with going all remote, which
would have brought more of a direct competition.
The way I think about it is we've done an analysis when I joined, because we're a business.
I was like, okay, can we talk about our target addressable market and apply to us the
same thing that we're applying to our portfolio companies when we select them and when we help
them grow?
And so I was like, okay, what's the target addressable market?
Like how many founders do we think could be backed every year by a pre-seed investor?
And we've done a ton of analysis and I give you the bottom line.
It was like this probably every year, depending on how you look at it, between 70,000 and
100,000 entrepreneurs who would be worse looking at and potentially back at the pre-seed level.
And a lot of them are not VC backable right now, which is by the way why we don't consider
ourselves a VC.
We're really considering ourselves as the deal flow to the venture world.
And a lot of these entrepreneurs that I've just put in that target addressable market,
actually they don't even know that the VC world exists.
They don't even know how to access it.
When they know it exists, they don't know how to access it.
And so we look at that target addressable market and we're like, okay, again, 70 to 100,000
entrepreneurs every year that could potentially benefit from an accelerator program and from
pre-seed investment.
And so if you look at that, the fact that there is a few well-known big accelerators out
there that make a few hundred investment a year, we're not even scratching the surface.
That's an interesting way to look at it.
But the counter to that is, I mean, I'm going to make them number up, whereas you've
done an analysis, but in a vintage year, they're probably like, what, 50 or something that
have some huge exit that justifies the investment or how many companies you think there are
a year that like end up producing this sort of exit that would justify the model rather
that.
So I think the premise of your question is flowed.
If you're asking me how many are making an exit right now, yeah, you're probably right.
I think the number is a little higher, but not by much.
My question back at you is how many should have, like why is it that until not that long
ago, most of the high valuation, I mean, actually, so I don't know why I would say not that
long ago.
Until today, why is there a premium in companies that are in Silicon Valley?
Why?
Like objectively, why?
Because it's not like the company that is being created in New York or Boston or Atlanta
have less of an addressable market.
So they have lower exit, lower valuation based on the fact that they're not based in Silicon
Valley.
And I'm just only talking about the US.
Now, let's talk about the rest of the world.
Let's talk about Europe where valuation are way behind where they are in the US.
Let's talk about Latam and Africa that the venture world is just discovering.
To me, what your question points at is the fundamental problem in the system that we created
a system where there's only a few companies that are going to have a shot that's being
given the money, the contact, the support, the valuation.
And by the way, because that universe is so tiny, then you see crazy valuation that
are not justified by any multiple.
And so again, my question back at you is, what if the valuation on this very tiny pool
was going down a little bit and the money was flowing more freely across more companies
because the world would benefit from having a hell of a lot more companies being supported,
rewarded and invested by venture capital?
Right.
I mean, what I'm hearing, I think the limit of my question is it sort of reflects like
a zero sum world where nothing has been done to create new companies where it's like
ideally, you're like expanding that number by, you know, giving them sort of more access.
But I mean, I do think there is sometimes this tooling world where there's this elite
cadre of founders who like many of them have started company before and like, I mean,
a lot of the top, forget like accelerators, but a lot of the top seed funds sort of can
think that way where it's like, you got to see them all, you got to, you know, you pick
among them, but like the list is not so, so long.
And then that's how you win.
And then I think there's this sort of the opposite view, which you're saying, which is
you can sort of create winners if anything, Silicon Valley is over invested in itself,
like there are people from all over the world that could create, create companies.
Yeah.
I mean, those are sort of, we see both investing methods.
I mean, in terms of, yeah, I don't know, expanding outside of Silicon Valley, I mean,
Europe, like I wrote a lot about, and there was a lot of excitement.
I think in this sort of, even in the elitist worlds of venture capital where it's like,
oh, hop in and UI path, you know, we're both so high flying that everyone's like, oh,
we need to do the Silicon Valley playbook over there.
And then those companies have come back to Earth.
I'm curious, like, yeah, I mean, I don't know.
How do you take stock on sort of the European tech market there and the appetite?
Yeah.
So it's related to a bigger macroeconomic question, which is valuation to your large extent
are supported by the VC environment.
So it's a bit of a chicken and egg situation.
In other words, if, and I know that not everybody is going to agree with me, but that's fine.
They can pick me on social media and continue that conversation.
I think if the VC environment, if the funding environment in Europe was significantly more
robust than it is,
we would be seeing there is a different valuation, but it's not.
I think the US has created, and again, we're not going to go down history lane, but like,
there is a whole history of creating the venture capital world the way we know it in the US,
which is significantly better than other solutions that have been pursued in Europe,
light alone in the rest of the world.
And so in general, they're in Europe significantly less VC's with significantly smaller fund.
Europe doesn't have pension fund or very few pension fund that the way it exists in the US,
pension fund have to a large extent contributed to the allocation of large chunk of money to VC.
And so you combine all of that with the fact that the European market is still very fragmented,
both in terms of legislation, banking system and language, and it makes the market more difficult
for a company to scale in.
And so you have the perfect combination that makes valuation lower, objectively lower than in the US.
Changing gears lately, but I think touching on some of the same themes.
You wrote, trampled by Unicorn, big tech's empathy problem and how to fix it several years ago now.
Can you give us sort of first like what, you know, a quick snapshot of what your core argument was there?
And then I'd like to just like take stock on if you've seen anything change.
Yeah. So my core argument, there was two arguments.
The first one was, I think tech companies have forgotten empathy as a key pillar.
And empathy is really understanding the impact with corporate empathy, not individual empathy.
Corporate empathy is really about understanding the impact of your decision on the stakeholders around you.
Not just your employees and your users, but just in general, like the world around you.
And that's a shortcoming that is going to keep creating problems over and over again.
So that was the first thesis.
And I was talking about why is that?
And how do we fix that internally?
Like how do we create more corporate empathy?
Again, not in the nonprofit, like Kumbaya around the campfire way, but more in terms of like, hey,
empathy is a way to think about the impact that you're going to have and how you keep your business
from making mistakes that are going to alienate a certain number of stakeholders.
So that was thesis number one, thesis number two, slightly more unpopular.
But I'm going to blame it on my European roots.
It was around the idea that the reason why Western societies have, in my opinion,
thrived over the centuries is because we found, with different ways of doing it,
different models across the Atlantic, but we have found a pretty good balance
between entrepreneurial innovation and democratically elected regulators.
And it's not perfect.
Like there's back-end force and the pendulum sometimes swing a little too far one way
and then it swings a little too far the all the way.
And again, the US has created an environment which is objectively different from Europe.
But if you take a step back in both cases, what you're really seeing is a decently good balance
between the two where there's enough innovation to drive things forward.
But there's also government that have been democratically elected for a certain vision
of society, for a certain set of rules, values, whatever you want to call it,
and that are counter-balancing like the unbridled innovation.
Right.
So I started with that and what I talked about in the book is how tech living areas
and big tech companies in particular push the pendulum way too far in terms of
we don't want any regulation, we should be able to do whatever we want.
And that's because we're making the world a better place.
And my whole, a few chapters in the book were about that.
We're about the fact that the pendulum went way too far and I am not.
I'm certainly not advocating for the top down regulation on everything.
But the idea that the industry would self-regulate is not at all justified by 20 centuries of history.
Like there's not a single industry that self-regulated why on earth do we think
that the tech industry is going to regulate itself?
So that was the thesis.
It's interesting.
I mean, I guess to help bring it to the current moment for you in some ways.
I feel like there has been this recognition in Congress that they were too slow on social media
and that with AI, they need to sort of move much quicker.
I mean, it's for the listener, you're sort of scratching your face on that one.
I mean, I'm curious, apply what you wrote to what you think is happening in AI
and like why you would like to see or what you see happening.
So let me start with the positive.
I think the positive is that there has been a recognition that's a true recognition.
Like it's now a really big only agenda that taking innovation and tech disruption is here to stay.
When well used, it is a formidable driver of progress and improvement of standards of living.
And so all of that is really great.
When not run that well, we have some problems and we probably should be looking at it.
And that to me is a huge difference than what he was even five, let's say seven years ago.
I remember being at a dinner table in Silicon Valley and talking about the fact that I found this idea
of self-regulation problematic to say the least and the people around the table looking at me
like I was a communist.
Yeah, nobody is looking at Valley once here.
So I think the positive is that I think the challenge that I have is the current conversation on AI is
one, I am not sure that every political person involved in this conversation is really up to speed
on the technical aspects of AI, even at a pretty basic level.
And that terrifies me because there is something even worse than no legislation.
It's legislation based on something that doesn't exist or that is completely the opposite of what you think it is.
Because then that creates additional negative effects.
So I'm quite concerned based on what I heard so far about the ability of our politicians
again, across the Atlantic to be like BAN-CHAG-U-B-T, right?
Yeah, that's insane.
That's what I'm talking about.
Right, I know.
Like that, I don't know.
I definitely, I used to be more like pro tech regulation, more like oh excited about Elizabeth Warren.
I mean, first of all, I find like Mark Andrewsson's recent argument that the companies that are going to benefit most from AI
regulation are the incumbent, big players who can do all sort of whatever verification protocols.
And then some ways it's just a barrier to startups and it creates the sort of protectionism.
I'm very sympathetic to that argument that like any regulation on AI is going to end up being pretty hostile
to startups and startups are the very companies that society should be cheering for.
But it doesn't necessarily have to be.
I think, to me, the false choice that is being put in front of us is like regulation or no regulation.
And like all in regulation, like let's create a super agency and let's audit every single algorithm.
I'd be curious to understand how the hell they're planning to do that.
But okay, like let's do either that or let's do nothing.
And what about trying a few things?
One of the things that was very fascinating to me talking to my tech friends over the years is
it is totally acceptable in the tech world to make mistakes.
This is literally called A-B-Testing.
Like to test one thing, it works great.
That's fine. We'll try the next thing.
But somehow my tech friends were expecting the government to get it right from the get go.
Like when GDPR came in and I know it's a very controversial topic in the US.
But when GDPR came out, like I can't remember how many conversations I had with people who were like,
and this is not perfect, and this is not perfect, and this is not perfect.
I'm like, okay, yeah, it's not perfect.
But the idea that we want to figure out how companies are using data and make sure that there's a
modicum of privacy. And again, I'm overly simplifying it.
That doesn't seem completely crazy to me.
And so back to your question, I am certainly not advocating all hands on deck,
top-down legislation. And as I've just said, like the idea of having some kind of super
agency that would owe you to every single algorithm, like, I'm not, first of all, I don't see how
it's working practically. And then I'm not sure that we have now enough knowledge to regulate AI
in that way. But I don't buy either the idea that you shouldn't do anything.
You should just let companies do whatever they want, because we have multiple examples
of companies, tech and non-tech, which, when left, completely alone with our regulation,
didn't necessarily drive humanity to the best output possible.
And certainly, I think the beauty of democracy is that regular people should get
to set sort of the rules that they want to live by, and it's not just sort of these oligarchic
type companies. So simply that I got on some level. But then you can sort of make like a capitalist
style argument, which I think you're getting at, which is there are a lot of countries
that can compete with different types of regulation and sort of see which ones work and create
better societies, and then other countries can sort of learn from what works and what doesn't.
We've talked about the regulation piece. These sort of, I don't know, voluntary empathy piece.
I mean, anecdotally, it feels like in some ways there's almost been like a turn again,
sir, like you sort of see, you know, with like the all-ins of the world sort of a bristling at
the idea, you know, almost like a rebellion from being told to, I don't know, be nicer. I don't
know. I'm curious what your view of this, you know, Elon and Mark Zuckerberg are
want to fight with each other. I know, empathy is a broad concept, but I don't know. I just
sort of a tonal thing in the air. Yes. So I think it's because there is a confusion on the
definition of empathy. Yeah. Empathy is not sympathy, and it's not PDE, and it's not a weakness.
And keep saying to people, and especially when the book came out, it's like you can fire people
with empathy. Like you can fire a lot of people with empathy. What it means is just that you are
going to be thinking, really thinking about the impact that it has, and you're going to try to
mitigate it as much as possible. It doesn't change the fact that you are still going to make that
decision and implement it, because you should still fight for the interest of the business.
Look, I don't know Elon Musk. I have never met him. So obviously the image that I have of him
comes from his regular tweeting and all the articles that I could read. So I'm going to caveat
that by saying maybe he's a lovely man. I have no idea. I think my argument about empathy is
could he have done everything that he's done with just a little more thinking about how to reduce
the impact on people's life that he's letting go on making the communication a little more human,
on making people feel more valuable? I think most people understand that tough business decision
have to be made. I think it then just become a lot of question about how are they being communicated?
How are they being treated? What is being said to them? So again, I don't know him as I say he's
maybe a lovely man in private. It's just I think too many people confuse empathy. He seems so mean.
He seems to be. Yeah, it's just so mean. It's like why anyway. I don't know. Yeah, it's why would you
choose? I mean, you know, again, I called comment on him specifically. I don't know, but I think
the conversation I've had over the years was don't confuse empathy with sympathy and with weakness.
I actually believe that an empathetic person is a stronger person because they can understand
better how people around them are going to react to what they're doing, what they're saying,
the decision they're making, and as a result of that, they see around the corner a way to describe
empathy again from a corporate perspective in a more basic term is empathy allows you to see around
the corner of what's coming. Who wouldn't want that? And then yeah, you can go to war, you can
fire people, you can restructure your entire company, you can cut it into pieces like it's not
I think there was a confusion on, you know, I covered Uber so closely and you know, Travis
Calonak, like just could not seem to really understand what he was doing that upset people so much.
It was terrible and apologize. And yeah, just those things I mean, ultimately got pushed out
because of it's some point misunderstanding sort of your customers when the public mood is just
that's exactly what I'm talking about. I think this is a perfect example. This is not questioning
whether or not Uber strategy was good or bad. I think it's about questioning whether more empathy
in understanding the impact of some decisions on the drivers, on local communities, on employees,
understanding that impact better in advance would have helped Uber be even more successful than
they are today. You were what the chief operating officer compass, right? I mean, a company that raised
a ton of money from Softbank, you probably know the number, like now that you're an investor,
you know, spent so much time on the operator side, like I don't know what, how do you make sense of
like the Softbank strategy? Are you still close to that world or I'm curious like having seen sort
of the massive amounts of money if you think that era is ever going to come back or how you would
take stock of it? I mean, history always comes back. I don't also literally comes back. I mean,
he was in the dot com. Maybe I'll get to do it again, you know. Yeah, I'm old enough to remember
the time where everything was a bad growth that we went through the phase where I'm talking about
industry wide, not just specifically Softbank, like industry wide, then it was all about profitability,
then forget about profitability. Let's go back to top line. So it's cycle. I wish I could tell you
that's it. That's the moment in history where we finally go. Now we're responsible.
Interest are responsible. Exactly. Like valuations are now normal. Like people are going to do
proper due diligence. Like the whole thing. I maybe I'm cynical, but I just think that like,
no, like I don't know how long it's going to take. But at some point, someone, whether it's
Softbank or someone else, is going to figure out the next thing that will allow them to convince
LP that they can deploy a lot of money. I mean, we talk about Softbank is the same thing with
Tiger. Like they frankly, 18, 24 months ago, they turned the VC industry upside down by
increasing valuation and changing due diligence timing. And so it's a cycle. It's going to come.
It's a kind of deal piece. Like why? Why? Do you have a sense of like, why do they let them
do these? I mean, some of it, I guess, is sovereign wealth where it's like a very
black. Yes. Some of it is. So again, I can't come in specifically on Softbank and Tiger,
because I was not in the room when these conversations were happening. I think, again,
I'm going to take the positive hat and then output of slightly less positive hats on it.
The positive view on that is the world woke up pension phones, sovereign phones,
family offices woke up to the fact that there was this unbelievable source of innovation
that was working on some of the biggest problem in the world, or sometimes not really
transforming problem, but still solving day-to-day challenges for a large chunk of the population.
And that there was an opportunity to serve that wave, support this innovation, make it bigger
faster. And so for me, on the positive front, there's been an awakening to venture capital
and to the fact that there was this massive flow of innovation coming and the opportunity
to support them. I think like everything else, the human race tends to be a race made of
excess, like we're very excessive species in every way, by the way, like good and bad. And so I
think like, you know, we, like they woke up to ventures, suddenly it was like, oh my god,
look at all these billion dollar companies, like I should be on it. There's a little bit of
phomo, and then there's the little bit of like, we, again, as a species, we like to dream,
we like to think about how we're going to make the world so much better and so different.
Like we write science fiction books to help us think about how the world could be different.
And so I think that happened. And then it become almost like a self-fulfilling prophecy,
because as long as the money kept flowing, you could see this valuation go up and up and up and up.
And the only thing that would stop you was like, like if you didn't have any more money,
or if you believe that we were about to reach the peak, but every time someone say,
oh, we're about to reach the peak, there was another something happening, another company going
public at a crazy valuation. And so suddenly you would have LP be like, god damn it, maybe I missed
that. Like, what do I do to not miss the next one? And so I think it's just that dynamic that
led us to very. Very excitable enthusiastic species. Yeah.
There was a time where it felt like nothing could go wrong. That valuation in VC would keep going
up and up. And why, and I, some of the conversation we had with institutional LPs of the last 12 months
was almost like them realizing that venture is a highly volatile investment asset class.
And one that is certainly not providing any guarantee in terms of return. And it was like,
almost like this aha moment around like, oh, wait, actually, yeah, venture can be really volatile.
It's like, yeah, it can. Risk capital. Well, this was so great. Thank you so much for coming
on the show. It was blessed. My pleasure. Always. Great. All right. Thank you.
Thanks so much. I'm Eric Newcomer. That was my conversation with my Al Gave, CEO of tech
stars. Shout out to Tommy Heron, our audio editor, Riley Cancel, and my chief of staff,
a young Chomsky for the theme music. You can follow us on YouTube. We appreciate your reviews
on Apple podcasts. And of course, most important. Subscribe. You've got my pain subscriber.
To the substack at newcomer.co. Thanks so much.