20VC: How I Lost a $125M Deal with Yahoo by Being Too Honest, The M&A Meeting with Steve Jobs That Did Not Go Well and How U2's Bono Saved The Day For One Tech Startup with Ali Partovi, CEO @ Neo

Welcome back. This is 20VC with me, Harry Stebbings. And today we have a show that was literally 4 years in the making, but we made it happen and it's a great one. So with that, I'm thrilled to welcome Ali Partovi, CEO at Neo, a mentorship community and communal VC fund that announced their new $150 million fund late last year on the back of early hits from Fund 1, including Vanta and Cowsheet. As an angel, Ali also made personal investments in— check this out— Dropbox, Uber, Airbnb, Facebook, Convoy, and more. Such an incredible angel portfolio there. And prior to investing, Ali founded 2 companies, The first, LinkExchange, which he sold to Microsoft for $265 million in 1998, and the second, iLike, which was acquired by MySpace in 2009. I'd also want to say a huge thank you to Tara Kekalshe and Alfred Lin at Sequoia for some fantastic question suggestions today. I really did so appreciate that. But before we move into the show today, from websites and online stores to marketing tools and analytics, Squarespace is the all-in-one platform to build a beautiful online presence and run your business. Now, there are 3 things for me that really stood out about why I love Squarespace. First, mobile optimized Optimized websites. All websites are optimized for mobile with Squarespace, so content automatically adjusts so your site looks great no matter what device it's on. Pretty awesome. Second, email campaigns. Squarespace makes it super easy to grow and engage your audience with Squarespace email campaigns. Say what? No other provider needed? That is so great. And finally, SEO tools. Squarespace takes the guesswork out of SEO, so you'll get found in search by more people more often. And if that wasn't good enough, go to squarespace.com/20vc for a free trial When you're ready to launch, use the offer code 20VC to save 10% off your first purchase of a website or a domain name. Speaking of game-changing products there with Squarespace, you really think spending time on building and maintaining your data infrastructure is worthwhile? No, your time is better spent on data analysis, and Mozart Data helps you achieve this with their out-of-the-box modern data stack for startups. Set up your data stack in under an hour with no engineering. Companies like Rippling, Tempo, and Modern Treasury have used Mozart Data to delay hiring data engineers and empower teams to own and access their data without relying on engineers. You'll get the tools you need, including a data warehouse, ETL, and transformation tools to centralize data from all of your sources, clean it, and prepare it for analysis. There's no easier way to get faster, more accurate insights and facilitate a data-driven culture. Go to mozartdata.com/20vc to get 15% off. And last but by no means least, AngelList has been a key partner for me in managing my investments. I love using the AngelList platform because it abstracts away the complexity and operational burden of fund management. So whether you're running SPVs, a traditional venture fund like me, or even a rolling fund, AngelList has you covered. And I'm also super excited about their new product, AngelList Stack, which is purpose-built for founders. With AngelList Stack, you can create a fundraising-ready startup in just a few clicks. AngelList handles your company's incorporation, banking, cap table, and fundraising processes all in a single place. This allows founders to focus on building. If you're a founder, you can launch your company at stack.angelist.com/20 Whether you're a founder or a funder, you're in great hands with AngelList. But time for me to shut up now, so I'm thrilled to hand over to Ali Partovi, CEO at Neo. 3, 2, 1, 0.

You have now arrived at your destination.

Ali, my friend, I've been so looking forward to this one. I heard so many great things, especially from Alfred Lim before the show. So thank you so much for joining me today, Ali.

My pleasure. It's such a pleasure to be here.

I would love to start today with a little bit of storytelling though, in the way that, you know, bluntly, it was a different route into tech So tell me, how did you make your move from operating into the world of venture and most recently come to found Neo?

Yeah, so Neo is a— I call it a mentorship community. It's a diverse mentorship community and VC fund. Our mission is to identify America's most promising CS students and help them become tomorrow's tech leaders. I'd say I started Neo because I wish existed when I was a college student, and it's also what I wish existed when I was a young founder. When I was 24, the most important lesson I learned as a founder was the importance of people. I realized that the people we hired made the difference. difference between success and failure. And the first 5 or 10 are most important because they hire the next 50 to 100. And in particular, I also learned the importance of betting on young people. It's funny you mentioned Alfred, because at my first startup, Alfred was a part-time accountant. He was a friend of ours from college. In the first year or so, I was kind of anti-Alfred. The other co-founders knew him better and they're like, this guy's brilliant. And I was like, why are we having somebody who is a PhD student at Stanford at the time, part-time? My co-founders were suggesting we should make him our CFO. And I was like, what are you talking about? He's our age. We should have somebody older with more experience as our CFO. Why would we bet on somebody so young who's never done that before? And so for about a year, Alfred reported to me and I was trying to find someone with more experience to manage him. That was so wrong. Such a mistake. It's because I didn't realize the importance of betting on young people and that talent is more important than experience. I mean, they're both important, but if you have to choose, I would always rather bet on a brilliant, hardworking young person and their potential to grow than somebody who has the resume and the experience, but may not have the energy or the brilliance. And we made Alfred our CFO. That definitely began one of the best phases of our company and definitely contributed to our success.

Just interrupt there and ask you, you said there about the importance of people, especially in the first 5 to 10. And you said this in a tweet the other day about the importance of that and why you better wait for someone amazing than hire someone decent. And a lot of people responded saying, that's quite a luxury actually, Hari, and we just need to put bums on seats and get people in their positions. And good is actually better than perfect. Do you agree with that? And is there a Is there a stage of company where you don't need the best and good is better than perfect?

I agree with your original tweet. There have been painful periods. It takes pain. It takes sacrifice. It means you have to pull more all-nighters. It means your smaller team needs to work harder until you find the right people. And so of course there's a point at which you might need to make a compromise. But I've always found that if you're interviewing someone and you're like, ah, they're not quite right, you'll soon find they were actually terrible. You know, if flaws reveal themselves within the first hour or 2, there's bigger issues there. I would sooner hold out for someone that you feel like this person is perfect. I would also agree that this is a luxury. At some point you might have to say, we can't do this anymore. We are, you know, we need more sleep, we need somebody. But certainly with— I'm thinking back to early days of Dropbox, they specifically faced this. It was like 6 people for the longest time. You know, my brother and I as advisors kept pressuring them, don't just hire anybody, keep your hiring bar as high as possible, you know, hire superstars. And it was harder. It took more than a year to convince Aditya Agarwal to join as head of engineering, for example. It wasn't easy. It wasn't without sacrifice, but I would say worth it.

Can I ask, you mentioned Dropbox there. You had an incredible experience with Dropbox as an investor, as an advisor, really with the front row seat. What were some of the big takeaways and how did it impact your mindset, do you think, Ali?

Well, you know, I'd say that the common arc from my own first startup and what I was saying about Alfred and through various angel investments to Dropbox has to do with people. I remember actually the first founder that I mentored after selling my own company was my twin brother Hadi. This is 20 years ago. He was starting his first startup and he said, what are the 3 top pieces of advice that I would give him? as a young founder. And Hadi always liked things in threes. So I thought about it and I said, number one, hire the best people. Number 2, hire the best people. Number 3, hire the best people. And when we were investors in Dropbox, well, Hadi gave the same advice to young Mark Zuckerberg at Facebook that we were early advisors to, but also gave the same advice to Drew and Dropbox. I'd say pretty much every time we met with them, what we spoke about were people, whether hiring or coaching them through firing their first person. Beyond that, we started giving an annual talk at Dropbox on the importance of hiring, on techniques for recruiting. Just as we'd given Facebook this advice, gave them the advice of building an intern program and hiring younger people than themselves. Dropbox did a lot of innovation in terms of their intern program. For example, they had a parents weekend where they would invite the parents of the interns to come just so that they would feel comfortable. Oh, my child is not working for some ragtag effort that might disappear. This is a legit company. And so they'd feel good about their child joining full-time. And I would give an annual talk at parents weekend, you know, help these parents feel comfortable about their child So

can I interrupt you? And you say about hiring the best people there, and I totally agree with you, no doubt. The thing I find a little bit interesting is when founders rely on VCs to provide them with candidates for roles and really lean on VCs for hiring. I'm like, bluntly, the best founders hire themselves. The Collisons fucking killed it on hiring. You know many of the great founders who've done the same. It almost frustrates me. Like, how do you feel about that? And like, I know Neo obviously are great at hiring. Yeah, they're great at hiring. But like, do you really think the other VCs are?

It's an interesting question to pose to me. So I would say it is my fucking job. So I am happy to be leaned on for that. But I would agree at the same time, most VCs are not good at that. And regardless, I don't want anyone, including myself, to be a crutch. I think of it more as an augment, teaching founders best practices, you know, so that they become independently strong at it. And, you know, the best companies, you know, pick up, build their own muscles, need less and less help over time. Any investor or mentor or advisor is going to have some sort of exponential decay in how helpful they can be, because hopefully the founders and their executive team over time become greater than we are. And I would say for me, as an investor and as a mentor, the true joy of being a mentor and an investor is to see somebody younger than yourself grow to be stronger than you and bigger than you and more successful than you. And I've had the extreme pleasure and privilege of having seen that multiple times with many companies like some of the ones I just mentioned.

You know, one thing I struggle with when it comes to talent detection, generally, I think I'm good. But one thing I struggle is you can have a great salesperson and they can sell you so well, Ali, on the vision. I could sell the shit out of you, yeah? And I could be very shallow in terms of what's behind the scenes. My point being, especially in an engineering-first world where they're less charismatic most often, bluntly, and less salesy, how do you think about talent detection when it's not as obvious as I think it used to be, actually?

I'll say one of the things that for me was a truly formative point in my career was when I was a 24-year-old founder, we were struggling with how to evaluate candidates and in particular candidates older than ourselves. We were trying to hire a VP of sales and a VP of engineering, and we were 24 and we'd get a candidate who was 34 and their resume just looked intimidating. We'd have 5 candidates and they all looked great. We had really, you know, we just weren't sophisticated about how do you tell whether someone's better than someone else. And our lead investor was Sequoia, and Mike Moritz was on our board and would come multiple times a week to our office and join us in these interviews. So I'd interview the candidate and Tony would interview the candidate, and then Mike would interview the candidate, and then we would debrief afterwards. And I learned so much from Mike. He would eviscerate these candidates where I'd be like, yeah, they seemed good. And he'd be like, absolutely not. And I realized there was a skill that I didn't possess.

What was that skill?

This ability to evaluate people. And Mike would often within 15 minutes develop a strong opinion about candidates that I'd spend an hour and really have kind of no clue. And I started realizing there were other people older than myself who had this instinct almost like, you know, it wasn't what questions they asked. They would just in 10 or 15 minutes develop a sense of that person's great, we should hire them. And I just felt like there was some occult magic that I lacked at that point. I decided I wanted to dedicate my life to acquiring that skill. And I would very much say that my whole arc and Neo has been in pursuit of this ability of finding, identifying brilliant people, trying to surround myself with people smarter than myself. And it stemmed from that. I guess to your question about VCs, it's not just sourcing candidates, it's also helping you evaluate candidates, younger founders in particular. particular can need help with that. And lastly, helping close candidates. In almost all my portfolio companies, if I didn't source their early recruits, I certainly helped close them. At companies like Vanta, Kalshi, Coprocure, I think not a single person they hired was without a phone call, at least from me, to help convince them to join the company, you know, in the first 10 or so people they hired. So that is still part of what I'd say is my job, even if I'm not sourcing the candidates.

I do want to go back to, you know, you mentioned Alfred, and I want to go back to LinkExchange, and I want to start with our first story of the day. And I decided to take it chronologically here. I thought it'd probably be a little bit easier. But when we think about this story with Alfred, LinkExchange, 1995, what happened? How did you lose a $125 million deal by being too honest, Ali?

Yeah, so this is a story that I just tweeted about last month after almost 20 years. I was 25. It's very interesting because the timeframe we're talking about was exactly the time that I was realizing as a 25-year-old that betting on startups is all about betting on people. And I had told myself I want to develop this super skill. And so as head of biz dev for our company, I was trying to find other startups not just based on their technology, but trying to evaluate their people, finding other startups for us to partner with. I found this incredible startup with just truly what felt like magic. This company, ViaWeb, whose CEO, Paul Graham, I could tell from within the first conversation was brilliant and his other folks were also brilliant and I really wanted to partner with them. And then at the same time, Yahoo wanted to partner with us. So we were trying to acquire ViaWeb and we had reached sort of a handshake, rough handshake agreement like we had. You know, it wasn't a solid agreement, but we had reached an understanding. Yeah, we could do this. And then we received a term sheet from Yahoo for them to acquire my company. It was a $125 million acquisition, which was enough to make me, you know, as a 25-year-old, very wealthy. It's much more money than I had ever expected in my life, but more importantly, to make many of our employees very wealthy. So we accepted the term sheet. We started ghosting the ViaWeb guys. So, which is, you know, Paul Graham was writing saying, so what's the next step? And because we were under exclusivity with Yahoo, I couldn't respond to him and say, what's going on? And then on the eve of the acquisition, I had drinks with Jerry Yang. You know, in my mind, this deal is done. What's next? I was telling him, as soon as Yahoo finishes acquiring us together, I know what we need to do together is go acquire this other company, ViaWeb, which was amazing. And Jerry, I remember clearly saying, oh, ViaWeb, the company in Boston, we looked at them and our guys said there were some issues. Their people aren't that great. And I said, Jerry, you're making a total mistake. We'd had some drinks at the time and I probably was, you know, not filtering myself well enough because of the alcohol. ViaWeb's people are incredible. And I said, they're better than our people, far better. I don't remember exactly, but I was really vehemently arguing for how brilliant these guys, Paul and Trevor and RDM at ViaWeb were. And a couple of days later, we learned that Yahoo was no longer acquiring us. There was an accounting problem. And that was, you know, the statement was like, hey, we can't use this accounting method that we had hoped to use. But I kept wondering, could it be because of what I said to Jerry over drinks? And then I immediately called back Paul Graham to be like, okay, let's go back to the other deal, you know, make sure that hadn't fallen through. And then Paul started ghosting me. He's not responding for weeks. And then we read in the press that Yahoo had acquired ViaWeb, which was, you know, amazing. I was like, oh my gosh. And my roommates who also worked for our startup have never let me forget about it.

What would you have done differently? And is there a takeaway for founders there other than maybe don't have a margarita?

I would agree. Do not drink when you're having major business discussions. It's interesting because I've asked myself, at some level I would have done the same. Like, I think that the exuberance I had seeing something wonderful and talking I never want to become such a cynic that I suppress that. But I think what I would perhaps say, the common theme of all of my mistakes, I'd say, in business are impatience. In hindsight, I could have waited, you know, 3 or 4 days and then tell Jerry what I really thought after our deal was closed. And by the way, it might not have made a difference. The accounting thing might have been the real reason. But I think one of the things as a younger, both as a founder and probably as an investor, has been one of my flaws has been impatience. So that's perhaps one learning. But I would say that the other learning that I was 100% right on was the evaluating of these people. These people truly were geniuses. And obviously with what Paul and gang have accomplished since, if anything, I would say it was Yahoo's loss not to keep them longer.

You said you thought about it a lot. You know, I think one thing that plagues investors is FOMO. How do you think about FOMO and regret as an investor today? I'm intrigued.

So it's interesting. Yeah, FOMO is— it can really be a misleading thing, right? It can be both a reason to make good decisions or a reason to make mistakes. I have generally tried as much as I can as an investor To try to find my own compass, to try not to focus on who else is doing what and what if I miss out. And rather, in terms of whether it's a good investment, find my own reasons. And also in terms of convincing them to take our money, try to win based on our merits. I should start by saying I'm extremely confident about what NIO brings to the table. When we invest in a company, we don't just invest capital, we help build the company. And by that I mean we help build their engineering team, which is the engine that creates everything. And for most of our successful portfolio companies, we sourced something like half their early engineers. In some cases more than half. Because I have that confidence, I don't tend to get as worried about losing deals. And if there's— I certainly do lose deals, but I often feel like, you know what, if they didn't see the value in what we offer, maybe it's not that big a loss to us either. Maybe they don't actually need that help. It could often mean they don't realize how hard hiring is. And if somebody hasn't reached that realization yet, they might not actually be as strong a founder. And when they do, we might get a second bite at the apple.

I agree. When I lose a deal, I just think they're pricks. Now I want to go though to a second Let's move on to the second story now, which is 2008. I think many of us in the tech ecosystem have idolized, you know, the wonders of Steve Jobs for many years. You met with Steve and you met with Apple in 2008. Take me to this story, Ali.

Yeah, I mean, this story is— has been one of the most, I'd say, traumatic things that I have clung to in my life. For starters, our startup was struggling. iLike in 2008 was— we had built amazing technology, we had great adoption, but there were some major strategic headwinds or obstacles. On one side by the record labels and on the other side by the Facebook platform that we had built all our features on top of. And so we were fairly desperate. And I think what I would say is we were trying to hide that in hopes that we could sell the company. And I'd say the underlying thing that I'm ashamed of was how much essentially it was intentional deceit that we didn't want the world to know how many weaknesses we had. We were hoping somebody would buy the company before they realized what we knew, which was that we were fucked. And anyway, so we were pretty good at doing PR and showing the positives. You know, we had engagement from consumers. We had a lot of celebrities involved with iLike. So, you know, we were putting up a good fight or a good front. And so after a year of relationship building, Apple finally expressed interest in acquiring us. And my contact there was Eddy Cue, who I think is a wonderful man. He was the champion for the deal. We gave a terrific presentation to Steve, and Steve Jobs was someone that all 3 of my co-founders and I idolized. I mean, a chance to meet with him was like a lifetime achievement. So this was somebody I had worshiped since I was in middle school. It went extremely well. He said, I like you guys. I like what you've built. I like how you are arguing back. I like how you talk and how you think about things. We want to acquire you guys. I'll leave the details to Eddie here. Right then, my mistake was impatience again. I keep thinking back that if I had just done nothing, things would probably have been fine. Being the CEO, I felt like, oh, my job is to negotiate a really great deal here. I was too eager to find out what type of dollars might we be talking about. And so I asked Steve, before you leave, what range are you thinking? And he threw out a number that was way below what we had hoped for. Basically, we had raised money 2 years earlier for $50 million, and he offered to acquire the company for $50 million. So basically no change in valuation since our pre-launch fundraise. And so my heart sank and I was trying to figure out how to move this up. So when I said to him, Steve, I think we're worth 3 times that. And then I made the ultimate mistake, which is I changed my posture and I said, Steve, actually, I know we're worth 3 times that. And at that moment, I was definitely trying to posture that we had another offer, Whether it was in the language I used or the tone of voice, he totally saw it. He stared at me and called me out on my bullshit and did so fairly harshly. He was like, you're lying. I don't remember all the details, but he left the room. It took a few more weeks for the deal to completely fall apart, but it was very clear to me that at that instant, with that one word difference, the deal had fallen apart. And I have relived that experience so many times since then.

Question for you there. We're always told, and founders are always told, when negotiating, you need leverage and you need to appear like you're willing to walk away. to appear like you have options. They're not the only ones at the table. You kind of did that. So I guess my question is, did you not follow the advice that we give so many, which is like appear like you have leverage and have a position of power and strength? Like when I listened to that, I'm like, it could have created FOMO for him where he did bid up. How do you think about that?

I would agree that you should bring leverage and strength to a deal. And this applies not just to selling your company, obviously applies to fundraising. If you're raising your next round, you should be strong. But there's a big difference between being strong And being misleading. One thing I learned and I've passed on to other founders is you can show strength without implying anything that's not true, especially if you're negotiating with somebody who has more experience. If you overplay your hand, they will know it. In my case, I don't know how many deals I had done at that point, but certainly not as many as Steve Jobs. And most founders have not gone through as many fundraisings as the VC has, obviously, right? As a VC, we see whatever, multiple deals a week. And so you can tell when somebody is overplaying their hand. Now, to be strong without misleading, all you need to do to say, I won't accept that. You don't need to say why. You don't need to make implications for I have a better offer or I don't. If you simply say we won't do it for less than X, that's strength. You can say that. Don't manufacture false information or false implications as to what else. If I had said to Steve merely, we wouldn't take a deal less than $150 million, that would have been just as strong without having the implication of something untrue. The other element I'd say though is humility, which is you can be strong while also showing humility. That again requires a lot of nuance, but I think that one of the things I find that young founders who are trying to have leverage, like you said, also are trying to make the other party feel like they are the weaker or the loser, or, you know, to try to make it explicitly feel like a defeat. That's not going to help anyone. You know, that's just creating unnecessary antagonism rather than making them feel like a partner and feel like feel good for winning. You know, relationships often can last longer than any one transaction. This experience gave me a lot of the humility that I bring to investing today. You know, I find that a lot of VCs, most VCs, I think. exhibit a lot of hubris. They're often trying to prove they're the smartest person in the room. I'm most comfortable when I'm not the smartest person in the room. And my goal is really to figure out if the other person is smarter than I am, rather than trying to poke holes in their business idea. I'm trying to figure out, is this person the next Bill Gates or the next Mark Zuckerberg? And if they are, let me just step out of the way and not mess it up. Just try to support them to achieve their potential.

Ali, I think that's desperately unfair. I think most VCs are incredibly humble people. I will say I was—

my When I use the word hubris, I'm thinking of myself when I was 26. I don't mean to make it seem like I'm better than anyone else. It's that some of my biggest misses had to do with cases where I knew the person was brilliant, but I thought I was smarter. And so I didn't invest in something that in hindsight, I should have invested in.

My friend, you've teed me up there. What's one or two of those misses which really comes to mind?

I mean, I have so many. Some of the seminal ones I would say were where I truly knew the person and I knew they are a genius. These are like the stupidest misses. So at my first startup, LinkExchange, we had this brilliant contractor who was younger than us. So I was 25, Max Levchin was 22. And when we sold our company, he left to start PayPal. We all knew Max was like just a whole next level brilliance. I mean, when he walked into the office, people would speak in hushed tones. Oh my gosh, it's Max Levchin. And the original PayPal idea, actually, I think it was called Confinity or some other weird name. It was almost a joke. It was this app for Palm Pilots to zap money using infrared. It almost felt like an episode of Silicon Valley. Like, that's not a business. Come on. Who's going to be zapping money via infrared from one PalmPilot device to the other? In hindsight, though, investing in PayPal was not about the original business idea. It was about investing in Max Levchin. That was one miss. And same timeframe, one of my smartest friends from Harvard, Craig Silverstein, was probably the top guy in our CS program. He and my brother and I were probably always vying for which of us is the best coder in the Harvard class of '94 in computer science. And it was probably After, I think in 1999, he was leaving his Stanford PhD program to join a new startup. And I felt like I am so much ahead of this guy. Like while he's been languishing in academia, I have built a startup and sold it. And I'm the most successful person from our class now. Clearly I'm better. And what is this startup he's joining as CTO and first employee of this new Google startup with his PhD friends? It's surely not going to make it. And so I didn't engage when I learned about this company. That one was definitely a big miss. Clearly remember I remember having this hubris that this guy who I knew was a genius, I had this feeling like, oh, they don't have a business plan. How are they possibly going to beat the search engine greats like Yahoo? And yeah, so I didn't invest in that. I didn't invest in Airbnb the first time I met Brian. Brian was hustling because Airbnb was— this was pretty early on. I was at lunch with somebody else. I was having lunch with a Wall Street Journal reporter, Rob Guth, and Brian was at the table next to us. And Brian was like, I'm sorry, did I hear you say you're an angel investor? And sort of jumped into our conversation. Let me tell you about my startup, Airbnb. And I was kind of annoyed, like, dude, I'm trying to talk to somebody else here. This is an important conversation with a journalist. But I was really impressed with him. I thought he was smart. I loved the concept, but I didn't follow up, you know, missed out on an early, early-stage Airbnb investment. I did correct my mistake. Brian and gang were very generous to let me invest later on at a much, much higher valuation.

I do want to finish with a quickfire though on a third and final story. You mentioned the greats of Google there. Switching tacks to different greats, but Jimmy Iovine, Bono, fucking love Bono. But take me to this story. What happened there and how did it go down?

First of all, I also love Bono, truly one of the most wonderful humans, I think, in history. He was the hero of the story in that he came and helped save me from— Essentially, I bungled negotiation with one of the most powerful people in the music industry, which was— My startup was in the music industry. One part that I'm proud of with this story is that I've always been on the side of creators, whether it's my first company was about helping small businesses. The second company I like was about helping musicians. In some ways, I would say what I do at NEO today is helping founders in this negotiation. Jimmy Iovine, you know, the music industry was very much with its back against the wall in 2007, 2008 era, and they were like a wounded tiger lashing out at anyone. Not only was it outright war between the music industry and the tech companies, but also there was a cold war going on between the music industry and their own bands because bands who had signed record contracts decades ago were jockeying to figure out in the new internet era who owns the digital rights. And so U2 was one of Jimmy's largest bands, presumably partners, but they were also actually kind of in a war as to who has the rights to their digital presence. We were on the side of helping the band, and as a result, we became the front in this war. U2 posted an amazing video on our service that was the release of a new song and was kind of the tip of the spear for a new album launch. And this video is very It was very personal for me because it was a video I recorded when I met Bono and, you know, pitched him on this idea of releasing videos via the internet as a way of promoting their music. And all of this was innovative at the time. And what happened, this video had an immense, amazing fan reaction. Within a day, thousands of comments were posted. In fact, we printed them out and sent this ream of paper to the band to say, hey, the response to your song is longer than the Bible, because the song had a bunch of biblical references in it. So the response from fans was amazing. And then we got a call We got a call from Universal Music, from Jimmy Iovine, saying we have to take it down. We had 24 hours or else they would sue us and also remove all their music from our service. I have relived this story quite a few times as well because I wish we had not folded. I wish we had stayed strong, basically told them to go fuck themselves. That would have risked our entire company. One of our board members shared my view. The other ones didn't. And my co-founders and I argued late into the night and we ultimately decided for this half flinch where we kept the video up, but we removed the music recording part. Which was the wonderful part of it. So it ended up being an interview with Bono that then stopped when the music began. You know, that choice enabled us to survive as a company and it was, you know, to keep going for 2 more years. But the big learning for me is that I think success in tech requires maintaining courage no matter how terrified you are. And I think sometimes you have to go all in, even if you feel you have a losing hand. The path that I would say I took a lot as a founder back then, and I see a lot of of young founders taking it these days is to look for ways to de-risk or look for ways to live another day. Obviously, very human, you know, natural inclination. But I think unfortunately, if you're a founder, you've chosen the path of risk, and you have to kind of stay strong and not shy away from fear and from risk.

Yeah, I totally get you. I think another big challenge that I see now is actually for tier 1 multi-stage firms when they invest at the B or the C, say, you your seed investors in that company suddenly turn very risk sensitive because they're like, oh, this is our winner. Sequoia have done the B and the C. This is our winner. Just like protect it, protect it. And they lose the upside maximization because it's been done by a tier 1 multi-stage firm and it's that potential breakout. I find that a really interesting dilemma.

Yeah. You know, I think just one of the, I'd say across whatever your role is on whatever the stage is, one of the hardest things in business is overcoming fear. You know, fear is such a natural human sentiment, whether It's the fear of investing in something and losing my money or the fear of missing out, as we talked about earlier. Or if you're a founder, the fear that something you've built could fall apart. I'm not saying you should do stupid things to hurt what you've built, but very often people feel this fear of uncertainty. It's, you know, it's not danger, but just I don't know the outcome. It could be good, it could be bad, and I'm afraid. And I think you generally need to learn to face that fear and go forward with it. You know, I've actually tried to convince myself to always choose the most terrifying path because it's usually the path that is the best path. And somewhere in my heart, I know it. But, you know, there's like these fears that prevent you from taking it.

So, I'm with you. How do you think about biting off more than you can chew? And what I mean by that is like often you're fearful of, blimey, that's an ambitious goal, or that's a big stretch. And it may be right, and you may be pushing yourself to reach a level that you can hit, but it's just ambitious. What's the difference between that and, whoa, whoa, whoa, Ali, we don't even have product 1 nailed yet. Don't talk to me about product 2 and 3. What's that balance?

Yeah, it's interesting. I think in poker you talk about playing tight and aggressive. You know, don't bet on too many hands, but when you bet, bet big. And I'd say the same thing applies both as an investor and as a founder. How it applies as a founder is focus. Don't do too many things. Don't diversify. Pick one thing and go all in on it. I think that there is a— there's a natural tendency as a CEO to want to do many things, either because of fear, like, oh, I don't want to put all my eggs in one basket. I want to have multiple products or multiple revenue streams or so on. And I'd say fuck that. Put all your eggs in one basket. If you are a CEO, diversification should not be at all what you do. You should be 100% concentrated on one thing. Or it could be out of curiosity and creativity. CEOs are often very, you know, founders are so creative, they're always thinking of new ideas and want to pursue them. Again, you need to resist that and stay focused. So I guess I would say don't spread wide, but pick the thing you're going to do and go all in and bet big on it. Yeah. In terms of biting off more than you can chew, you know, if you've chosen to be a founder, you've chosen the life You've chosen the life of taking incredibly audacious, ambitious swings. And I'd say I would never hold yourself back because something is too audacious or too ambitious, but I would trim back if what you're doing is diversifying prematurely.

One final one before the quickfire. You mentioned there about concentration of time and efforts. We see founders today raising funds when they are also building companies. Now, I'm going to get killed for this, but fuck it. I don't mind a founder's angel investing at all, I think that's great. It's your own money and you can do what you want with your own money. But when you take money from an investor, that is a responsibility, just like it is for me when I raise money from LPs. For you to then go and raise money for a separate fund on the side to spend time investing someone else's money, having taken my money invested in your company, I have a problem with that. How do you feel about founders raising funds on the side?

I mean, I think I agree with you for a few reasons. First of all, I can barely do one thing well, let alone do multiple things well. I'm deeply skeptical of somebody who is CEO of a startup being able to also run anything else. Now, there are obviously some very inspiring exceptions. Elon Musk is simultaneously running multiple companies, or Jack Dorsey. But not counting these superhumans, generally I would say do one thing really well. And if you're the CEO of a company, don't also start a fund. So on both sides, right? Like to be a VC is hard work. And lastly, I would say if you are a great angel investor as a founder, you can probably make more money just in angel investing. Why would you want to dilute your possibilities by taking on other money. I would agree with you. I don't think it makes sense. I think founders angel investing is really great. One aspect of it that I do like is that I've always thought of it as a lifecycle, that today's founders are tomorrow's investors. I think it's nice to help everyone realize that, you know, investors aren't some kind of evil species or different species. They are just a different life stage of the same species. You know, we all believe we're all in the same game of building amazing companies. We're just, you know, playing different roles in the ecosystem.

I do want to move into a quickfire round, Ali. So I say a short statement and then you hit me with your immediate thoughts. Does that sound okay?

Sure.

Okay, so tell me, what's the favorite book and why?

The book Sapiens. I know it's probably everybody's, you know, this is several years old. My friend Erica Drazen bought me a copy and my brother Hadi raved about it, and I think it's a wonderful book.

Okay, biggest strength and biggest weakness. What are yours?

So I'd say my biggest strength is, well, helping recruit and inspiring others to take more risk, inspiring others to dream bigger, to reach for higher higher goals and often to join startups or to start startups or to take bigger risks with their startups. Biggest weakness? I have too many. Timeliness is something I struggle with, but also delegating. I'm not too much of a micromanager, and I need to be better at learning how to let go.

What would you most like to change about the world of venture today, Ali? If

there was one thing I would change, it's the us versus them attitude between founders and VCs. It's— I touched on this just earlier. I think It's just false. You know, it's an unhealthy, false implication that these are 2 different species or that the goal of raising a company is to defeat the VCs. The VC is the partner in building an incredible company and serving customers. And there's a shared goal is much bigger.

Preemptive rounds. When should founders take them? When should they leave them?

So I'm of the old school that letting your existing investors invest more is the best way to build a company, not just to serve your old investors. It signals to everybody else what a great relationship you have and makes people want to invest. But I would say you should always have competitive valuations. So you should have a sense of what you could get from new investors and price accordingly. So the existing investor should pay the fair market value.

Final one. What's the company you're most excited about that isn't already a household name, but you think will be in the next coming years?

An investment of mine that I'm super excited about, and I don't know if this will ever be a household name because it's a B2B type business, but it's a company called Coprocure. I think it has the potential to be— could be the largest Female-led company of all time, I think. Its founder Mari Reed is amazing, and the CTO is amazing. And they are disrupting a two trillion dollar market, which is the boring, lame market of government procurement. But they're doing it in an incredibly innovative way that is spreading virally, and I'm super excited about them.

Ali, listen, I've absolutely loved this. I love the integration of stories, lessons. This has been such a joy for me. So thank you so much for being so. Thank you,

Harry. It's been great to be on the show.

What a hero, and what an incredible set of stories there. I absolutely love the retelling of those 3, and, uh, my word, yeah, they are some to remember. I do want to say a huge thank you to Ali for giving up the time today. I so enjoyed doing that. If you'd like to see more from us, of course you can on 20minutebc.com. We always love to see you there. But before we leave you today, from websites and online stores to marketing tools and analytics, Squarespace is the all-in-one platform to build a beautiful online presence and run your business. Now, there are 3 things for me that really stood out about why I love Squarespace. First, mobile optimized websites. All websites are optimized for mobile with Squarespace, so content automatically adjusts so your site looks great no matter what device it's on. Pretty awesome. Second, email campaigns. Squarespace makes it super easy to grow and engage your audience with Squarespace email campaigns. Say what? No other provider needed? That is so great. And finally, SEO tools. Squarespace takes the guesswork out of SEO, so you'll get found in search by more people more often. And if that wasn't good enough, go to squarespace.com/20vc for a free trial, and when you're ready to launch, use the offer code 20VC to save 10% off your first purchase of a website or a domain name. And speaking of game-changing products there with Squarespace, you really think spending time on building and maintaining your data infrastructure is worthwhile? No, your time is better spent on data analysis, and Mozart Data helps you achieve this with their out-of-the-box modern data stack for startups. Set up your data stack in under an hour with no engineering. Companies like Rippling, Tempo, and Modern Treasury have used Mozart Data to delay hiring data engineers and empower teams to own and access their data without relying on engineers. You'll get the tools you need, including a data warehouse, ETL, and transformation tools to centralize data from all of your sources, clean it, and prepare it for analysis. There's no easier way to get faster, more accurate insights and facilitate a data-driven culture. Go to mozartdata.com/20vc to get 15% off. And last but by no means least, AngelList has been a key partner for me in managing my investments. I love using the AngelList platform because it abstracts away all the complexity and operational burden of fund management. So whether you're running SPVs, a traditional venture fund like me, or even a rolling fund, AngelList has you covered. And I'm also super excited about their new product, AngelList Stack, which is purpose-built for founders. With AngelList Stack, you can create a fundraising-ready startup in just a few clicks. AngelList handles your company's incorporation, banking, cap table, and fundraising processes all in a single place. This allows founders to focus on building. If you're a founder, you can launch your company at stack.angelist.com/20vc. Whether you're a founder or a funder, you're in great hands with AngelList. As always, I so appreciate all your support, and I cannot wait to bring you a set of exceptional episodes this coming week.