The Rise of a Dealmaker: The Emil Michael Story at Uber | EP 37 | Aarthi and Sriram

And that first time you tried Uber was magic. And you push a button on your phone and like a car showed up.

Yes.

And now we don't think about how magical that was. When you have the best idea, you find the best idea you've ever seen and you've ever been involved in, you go all the way as fast as you can go.

You had such a compressed window and skeptics all around and cynics all around. How do you do it?

And I was very deliberate. I make deals that should happen happen when they wouldn't otherwise happen. I make them happen faster.

Mm-hmm.

And I make deals that shouldn't happen not happen and not happen faster.

Faster.

The moment you have misalignment or Blows up, right? So you need perfect alignment from LPs to VCs to founders to execs to employees to customers. Like, you need back and forth.

I'd like to build something that's more important than Uber because Uber was very— is very important to the world. Satisfaction you get out of building something that changes the world for the good, right? You stop drunk driving, it's easier to have jobs, to live in the suburbs. So many benefits of that. To build something as important like that in the next phase of my career would be something that that I'm aiming at.

Hello everyone. Today we have a very, very special guest. This is somebody we've been excited to have on our show for a very long time. Needs no introduction, but I prepared an intro because I did not wanna mess this one up. He's a very special friend of ours. Emil Michael is an investor and strategic advisor to many high-growth startups. He was a chief business officer at Uber during its period of exponential growth. He was responsible for a bunch of it, and at some point it was considered the most valuable startup in the world. He's held leadership positions at Telme Networks, which was acquired by Microsoft, at Klout. He also worked at the Office of the Secretary of Defense under the Obama administration. Today he advises founders on fundraising, M&A, corporate strategy, culture, global expansion, and building out their exec teams, all topics that our listeners, our audiences really deeply care about. He was born in Egypt, and he has degrees from both Harvard and Stanford. To us, Emil is the embodiment of the American dream. We often talk about how outsiders can make it to being insiders. It's one of the core themes of our show. And to us, Emil, you are truly the embodiment of that. So we're so awesomely fortunate to have you here. Welcome.

Thank you. Thank you. It's great to be on your show. You guys are becoming celebrities around the world, so I'm getting a little piece of that today. Uh, on your podcast. So thanks for having me.

Oh gosh, come on. Like, that intro Aarti did does not begin to do justice to everything you accomplished. Okay, so we're going to start you off easy, right, with a softball question. So, uh, suffice it to say, right, like, you're incredibly accomplished, but a lot of people in the last few years would have known you for your time at Uber. Um, and if folks are not familiar with Uber or Emil or the times happened there, go Google. There's a lot of fun stuff which happened, but Here's a softball question to start you off. If you could go back in time and have a do-over of all of your time at Uber, starting from the very first moment you opened the app or met Travis, what are the themes or the things you would be like, would absolutely change nothing, do absolutely the same? And what are the things that are like, or people or situations where you're like, might've done that a little differently? Easy question.

Yeah, yeah, it's pretty, you know, I've obviously thought about that a lot in the last 5 years or so. Because that company has so much potential. I mean, it literally might have had the best product-market fit of all times. Everyone in the world wanted to push a button and get a ride, and that first time you tried Uber was magic. Like, you— because it was, this is, you know, 2010, and you push a button on your phone and like a car showed up.

Yeah.

And now we don't think about how magical that was. Um, so when I met Travis in 2010, I was like, shit, this is a black car service for rich people. How big can it be? And then I saw UberX and that was sort of the democratization of this. Everyone could do it. Everyone could afford it. And if you live in San Francisco like we did and you guys do, taxi system just doesn't work. It just doesn't work.

Yeah.

You know, so you drove to the airport and you parked your car there for a 10-day trip. You know, that's what you did.

Yeah.

So having— so seeing that magic is— that's why I joined Travis. And we thought similarly about, this is the best idea any of us have ever been involved in. So when you have the best idea, you find the best idea you've ever seen and you've ever been involved in, you go all the way as fast as you can go because other people are gonna figure out that this is a great idea too.

Yes.

And I think some of our strategy is playing over today in that the fast expansion all over the world, including China, including Russia, including all these places, was because of the theory that it was going to be a winner-take-most market. And what you're seeing today with Uber and Lyft in the US, you're seeing that dynamic play out—

Play out.

—10 years later in an interest rate environment that's actually where it's harder to raise money. So we were wrong about the timing, but right about, I think, the business strategy. So what would I have done differently? You know, I think a couple of things. So number one, we would have gone into Instacart's business right around when Instacart did. So you'd have had 3 legs to the stool. You would have had rides, food delivery, and groceries. And those 2, those 3 categories, think about what people spend their money on besides rent.

Yes.

It's those 3 things, right? And, you know, and eating out and so on. And eating out could even be tied to rides in some way. The second thing we would have done is the company was growing 300%, 400%, 500% a year.

Yeah.

But the infrastructure of the company wasn't growing that fast. So imagine the average age of the company, of the employee, was 25.

Wow.

And they were in far-flung places all over the world, in like the 3rd city in Indonesia, with enormous budgets.

Yes.

And no manager training and no sort of understanding of, of how to do this because no one had ever seen this kind of growth before. So getting more control over that and understanding how do you do company building, not business building, those are 2 different concepts, I would have done differently. And I think, you know, had we done that, the company sort of would have, would have made it through the tough parts of 2017 in a much better spot.

I think at the heart of this is, for me, uh, the relationship between you and Travis, because I think the tech industry is full of stories about the, you know, the founder who brings in the CEO archetype, the head of business archetype, the adult archetype, and it often blows up. When I think about success cases, I think about Mark and Sheryl. I think about you and Travis. It's almost like a romance in a different way. You kind of have to figure something out. What do you think made you and Travis work when often these pairings often don't work out?

I would— it's a great question. Um, I— a couple of things. So I think we're only a few years apart in age, so it wasn't like I was this gray hair coming in to teach him stuff, right? But we, we both had been through tough times as a startup. We both lived through bubble number 1 and bubble number 2 as entrepreneurs and people who started tech companies. So we had the grit. We both had the same level of grit. and determination. Because we'd never— neither of us had been in an idea like this. He had that music streaming service and sort of a content management company. I had TELME, which ended up being, you know, somewhat of a success in cloud, which was a tough business, you know, if it was a business at all. And so we had sort of some of these similar experiences and desires to win, a little bit of a chip on your shoulder, desire to win. And then we also saw the world a little bit the same, which was this notion of the best answer wins. And that means that no matter how many levels you are above the junior product manager, if they're right, they're right. Let's celebrate no matter where the idea came from in the organization. It's not about hierarchy. And maybe we've just been in startups too long, so we just thought that way. But big companies don't think that way.

Right.

They don't work that way at all. The best idea, if it comes through the wrong person, it won't get done.

Yep.

Right? So those were some of the things. And then I guess the last thing is, I, it was one of these philosophies that you could say is right or wrong. It's like we disagreed in private and in public it was, it was support. So it's like this notion called disagree and commit. Like, I may disagree with you, but I'm going to commit because this decision was made to doing the best I can with this decision.

Yep.

Doing that in private sometimes helps because you can have a more frank conversation. So a CEO running a big company like that needs a consigliere, needs someone they can talk to. and have some vulnerability with and talk about problems and not worry about demotivating people or whatever happens downstream. So that's how we developed a camaraderie that really was important for the company's success.

It's so unique because I remember my era with Facebook at Mark and Sheryl. They were very different personalities, very different in age group than I think you and Travis. But at that era, I'm not sure how things were after I left, but It was always clear that there was no daylight between them. Like mom and dad, you know, not this kind of gender, but you know, if people can pick up very quickly if there is some tension or ego or somebody wants more of the limelight or somebody's slightly insecure about the limelight the other person's getting, people very quickly pick up on that. But with Mark and Sheryl, it was always like, this person's job is X, this person's job is Y. They don't always agree, but they're gonna always put up a united front, which was so key for so many years at Facebook.

It's, it's almost the only way to operate in a high-growth environment.

Right.

Because everyone's moving so fast that they're looking for— and no one's ever done— like, most people have never done this before because they're mostly young people in these companies.

Yeah.

And if they see a seam, it's disconcerting.

Yes.

It's like, well, who do I listen to? Who's right? Whose side am I on? You know, and, and that's really, you know, a secret to success in business is partnering someone who you completely trust, who you have ground rules on how you operate together and how, um, and you show united front even when you disagree. But disagreeing is still important. You have to, you have to disagree because why else have a partner if you can't disagree, right?

Yeah.

The other, I think, you know, one of the things about Uber is so much happened in such a short period of time. It's like, I kind of sometimes think like, uh, you know, you folks had like multiple startup worth of experiences compressed within maybe a 3, 4-year timeframe. Uh, and for a lot of founders watching this, you know, there are sometimes in the class of, I have product-market fit and I have like a Series A, Series B company, uh, and now I have some decisions. I need to expand, maybe expand into an adjacent category or expand internationally. Um, and these things are hard.

And even like internal to the company, right? Like you have decisions, um, where you've come to a stage where you no longer have to think about Are people willing to pay for this? Like, you're beyond that point, but should you uplevel your exec team? How do you deal with crossroads at every point of the business? Like, do you have a framework? When you talk to founders now, what do you tell them about different phases of the business itself?

I know it sounds sort of contemporary, but it does kind of matter if you're in a bull or bear market, right?

Right, right.

To some degree. Yeah. If you're in a bull market and you could raise money and take experiments and do adjacencies and launch in places that you may or may not succeed in, but you want to take a shot, you can do that in those scenarios. So you're— the crossroads aren't that perpendicular, you know? Yeah, yeah, yeah. But you get in a market environment where, you know, it's not that easy. It's not that clear. You just have to take more calculated bets.

Bets.

And my only, my only kind of caveat to this sort of bear market thesis is if you're a great founder, if you're Parker Conrad and you're Rippling and you know you can raise money and you know you can do these things because even in a bigger market, people are betting on you and your business model, you know, you could still make some of these aggressive choices. But I guess it all comes back to a realistic understanding of how good is your product market fit? What market environment are we in? And what are the risks on these? What's the risk level on these bets? Are these nuts bets? Like, we're going to go launch food delivery in Tibet? Or are they— we're going to launch ridesharing in Moscow? Those are 2 different levels of bets. So that calculation is the framework, in my view.

So this is actually super interesting, because I think we can take this and apply this to maybe some interesting ones from Uber's history. So 2 things, which is operating in China. So Uber had a— Very interesting time in China, you know, which is going there, showing up, really no permission. And then there's obviously an interesting partnership, etc., with Didi. And the second one is autonomous driving and auto, with maybe very different outcomes. So can we talk us through, like, you know, those are big, dramatic, large deals, decisions that were made. And our founders may not be facing magnitude, but it's in a similar spirit. So walk us through the thinking and some of the dynamics, and maybe some of the stories around both.

Yeah. So maybe let's, let's start with China. China is my, one of my favorite, um, sort of areas of responsibility I had at Uber because it was, it was so audacious.

Yes, exactly. Because nobody did that. No startup, no company, not even big established companies had any presence in China. Nobody wanted to touch it because there's just all kinds of complexities there.

Right. So Facebook was banned. Twitter was banned. Google was essentially thrown out.

Yeah.

So all the big tech companies had been banned or tried and failed and so on. So this notion of we're going to go into China and not in just like Beijing, we're going to go into 40 cities in China.

Right.

And, you know, was very audacious. Right. And we're going to do that with this. And there's a strong local competitor.

Yeah.

And they merged. The 2, the Uber and Lyft of China merged, Didi and Kwadi, and they merged. And so now everyone thought it's over.

Yeah.

Is it going to be a Chinese monopoly? And here comes Travis and I going, okay, well, let's give this a shot. It's not a sensitive area. Social network is sensitive for the Chinese government. So that's why Facebook and these things, there's a reason where they were like flatly denied access to that market. We were kind of in the middle. We still know location. We still know payment. We still know things about if people are gathering, you know, in Chinese government offices.

Yeah, exactly. I mean, you're like, you have different set of sensitivity there. Did you ever worry at any point being like, we're gonna get shut down? Like, you know, the government is going to be like, pack up and go home. Like, you don't have any business being here.

Constantly. And I constantly was worried about that. And we were pouring hundreds of millions of dollars into them. It was hair-raising. Um, but we hired an amazing local team. We learned there was 2 things going on. You hire people who understand how the government works. You kind of get advanced notice from the government in China on some things. Like when Didi didn't listen to them about not going public. There was notice. It just wasn't heeded. So we were listening. Our ears were always to the ground, and we didn't hear any signs. But if we did hear anything, we were sort of jump— quick jump on it. But most— second most importantly, and people don't think about this, if you're a mayor of a big Chinese city, do you want a transportation monopoly? Hell no.

No.

You don't care American, Chinese. You have KPIs as a Chinese mayor. Your KPIs are to give great jobs, Food, water, infrastructure, get people around the city. So for them, they were like, well, this is great. Uber and Didi are competing. They're giving great, great cheap rides. They compete on price. That sounds great. So you had this like local support, which was very sort of unusual for us that kept us there long enough so that we could do a deal and merge with the Chinese company Didi.

Why, why did you do the deal with Didi?

So, so I dragged Travis over the finish line on this one. And then, so this is where we were like, you know, we had different views on this. I was more conservative because I was looking at the balance sheet going down by $100 million a month. Right. So I was raising billions of dollars on one side and then spending hundreds of millions per month all over the world, but $100 million per month in China.

Yeah.

You know, on subsidies and all these things. Yeah. I just saw an end to that. So what happened was we raised $3.5 billion from the Saudis in May 2016. I'll remember, I'll never forget the day that I was like, send me the wire sort of confirmation when it goes into our bank account. It was the largest check any tech company ever received.

If we walk into your living room, would we find it like framed on, as like art?

You might, you might. And the next day I called my counterpart at DeeDee, Jean Lu. And I said, we're, we're, we're ready to spend this all in China. We raised this money for China. And that brought her to the table because they thought they were like, these guys are serious. You know, you show them that you're serious and everyone gets more reasonable all of a sudden.

Yeah. Wait, wait. I want to really unpack this a bit because there is so much colorful kind of personalities and situations around this. So just to unpack it, one, you're doing this. And correct me if I'm wrong, without maybe at the time Travis being fully bought in with China. And I think it's safe to say either the person running Didi, incredibly famous, well-known local figure, of course lots of kind of cultural barriers between you and the team. So walk us through how it happened, because I think you were kind of playing this kind of interesting tightrope act between multiple parties working across cultures.

And it's like Not only did I have a cultural difference with Jean, but she was extremely upset at me because I hired her cousin at Uber China. And her cousin was a lawyer at Fenwick and West that had a small office in Beijing. And I met her and she was great.

Yeah.

And I hired her not because she was Jean's cousin, but because she was awesome.

Yeah.

But imagine this family dinner now of these 2 deaf competitors. So I had to also overcome a a personal sort of grudge about that. But it was so incredibly difficult because we had this spending, this actual spending going on, threatened spending to come. All investors in both companies, remember there's Western investors in Didi, right? This was DST and, you know, SoftBank and Tiger.

Yeah.

Looking and going, oh my gosh, you guys are all burning all of our money. You're lighting it on fire. The whole investor angle. They're freaking out. And so it became an act of like, okay, I'm going— I'm gonna bring back a deal that Travis can't say no to, 'cause it's gonna be a good deal.

Yeah.

It's going to be— it's gonna be a great deal.

Yeah.

It's gonna be fair. So I had to get that from Jean. And so I had to both convince her that we were serious, which we were, but also show that we were gonna be— we were serious about this. I was a deal closer. So every time I made her a commitment, like, I'm going to get you an answer on this issue tonight, or it was 4 in the morning, I called her. You know, I was on WeChat all the time. I was like living up to commitment to build trust so that she knew she had a partner on the other side who could get things done. And she did the same thing for me. And that's what good deal people do. You show that you can get shit done and you prove it with small actions so that no one believes they're getting gamed.

Yeah.

And eventually we got past the mistrust and we did a deal from beginning to end. A cross-border $7 billion merger was done in 60 days from zero to $7 billion.

You know, the previous part, until you said the 60 days, you made it seem like this was like a multi-quarter journey of like, you know, eventually winning her support, the team support, all of that. But you had such a compressed window and There's skeptics all around and cynics all around. How do you do it?

So, I used to say this about being in a startup. When your company's small, you're running a tribe. It's a tribe. A lot of people think like you, they act like you, they're motivated as you. When your company gets big and has all these other stakeholders, it's a civilization. And civilizations, there's a reason they can't move as fast, is because they have to build consensus. And so, the deal chops I'd been working on for 20 years, I was, you know, in my 40s at the time, was like this careful balancing of interests and information distribution and communication at the right moments to the right parties to bring everyone along. And it could have fallen apart at any time, but I was very deliberate about all the stakeholders and how— when I updated Travis and what— where I told him the deal was and what I was telling Jean. It was like an orchestra. It was an orchestra.

Yeah.

Right? And I was the conductor trying to, like, get it all to be a symphony that people wanted to hear.

I think at the heart of this is 2 people building trust, and you and Gene building trust, and 2 people maybe who don't maybe have the reason to previously, right? Like, you're competition, you're across borders, all these rumors, you don't know who's maybe doing what to each other. Um, how do you— how do you kind of like get this other person to be like, well, I'm actually going to do this? Especially when, you know, you're not in the same country, you don't have the same social cultural context at all.

I And I tell entrepreneurs this all the time, don't be afraid to, to, to put yourself out there first. So before the 60-day period started, every time I went to Beijing, I'd say, Jean, can I come to your office? I would go to her office. I would go on my own without an entourage, and she could bring in whoever she wanted to a meeting. I just showed that I was, I was in the game every day.

Right.

I was never going to quit and seeing if— because I wanted to know if that moment ever came, She knew that I was reliable and I would come in every time. And I didn't play the ego games. I went to see her. I went to her, you know, she wanted to pick dinner, I went to wherever she was going. So I put the extra effort in. And I think for entrepreneurs today, especially in a bear market where mergers should happen more, Yeah. You should know, you should know your partners in a time when you don't want or need a deal so that if you do, You have the basis of a relationship. They know that you respect them because you've made the effort to respect them. And so my job in a lot of ways in Uber and beyond China was like making sure we always preserved optionality. So I built relationships with all of our competitors all over the world. I spent time with all of them. I went to see them and I just, I just tried to ego down, business up, right? That instinct.

I love it because, you know, in some way, you know, I'm a VC and we often negotiate founders and you The way I think about it, it's it's an infinite game. It's a long-running game. You know, a founder who you don't want to work with today, maybe you want to invest in a later round, or maybe you want to invest in their next company, or you might want to invest in their roommate's company. So so much of what you're doing is you are trying to. Of course, you kind of have to preserve strength, and you have to do the right thing. And sometimes deals don't work out for any number of reasons. But you want to act in good faith. You want to be professional, decent, and be able to always kind of get up, get on a call, and they'll be like, "Well, I don't agree with this person." And they're kind of a fierce negotiator, but I kind of like the guy or girl or whatever.

And you always need that. You do. And, and, you know, I always picked up the phone when an investor called who was freaking out about the money we're spending in China. I just didn't duck things, right? It was leaning into hard problems, leaning into building relationships, leaning in to taking the first step without seeming weak. And frankly, if you do it enough, like, you don't seem weak. You seem confident. You're like, wow, this guy came to my office in the middle of Beijing. Oh, yeah. You know, 3 times in the last few You must know something I don't.

This is a segue I was waiting for because I've known you for a while, but I wanted to get this right. We were doing some homework, so I asked a lot of people. Every single person said some version of, Emil is the best business mind, dealmaker, negotiator, business development person that exists in Silicon Valley, across the board. I'm not blowing hot air. I think it's a common perception. So, what I would love to do is if you had to teach somebody who's never negotiated a deal before, like, how do you approach the construct of a deal?

You know, I took a negotiation class once. I don't know, I think it was in law school at Stanford. And they teach you these concepts like BATNA, your best alternative to a negotiated agreement. And the reason it's all wrong is because There's no behavioral economics being applied to it. And so the thing about negotiations is that it's— there's a behavioral element to every one of them because you're dealing with humans on the other side. And if it was easy, people would just like do spreadsheets, send across like a bidding thing, and like they'd be done. Like, what? You know, you just like, you know, do a deal because the numbers show you should, right?

Yeah.

But there's a ton of reasons for someone's motivation to do— to give you a provision in a deal that's important to you versus not. Are they getting promoted? You know, are they trying to get promoted? Did they have a bad quarter? Are they worried strategically about their position in the market? What's their competitive landscape look like? So if I were to start from scratch with someone who's like, I'd never done it before, I'm your, you know, I'm a business development associate on your team.

Mm-hmm.

I'd say, okay, well, like, let's say, let's start with like, what's the strategy? Okay, that's like strategy's X, where you need a partnership with American Express, let's say, just as an example.

Yeah.

I'd say, okay, well, why do they want a partnership with us? Right? So what, why, why, what are they walking around thinking about with regard to our company? Right? And like, just be unbiased about it. And most of the time when you're a small company, it's like they don't think about your company.

Yeah, exactly.

So then you're like, okay, how do I make— so then your strategy is actually one step first, like, how do I make them care, right? And then you start out with— then you're like, well, I make them care by finding someone there who might care. So I draw an org chart. My first thing on any deals, I draw an org chart. What is this company?

That's great.

You know, who sits where in the org and what do they do? And let me find out everyone on my network who knows someone on this org chart. And let's start with the people. Yeah. And start about where they sit. And then let me go find someone who cares, or I can make care.

Yeah.

And then, then, okay, let's say you get them to care. Now, now, you know, when you have their salesmanship and all that involved, now you have to, you have to like position what you want in a way that makes a difference for them.

Yeah.

And, you know, the more senior you go, the more small things don't matter to them. So you have this, this sort of conflict between You may want something small with them, but, and you may think it's best to go senior, but they actually care less about that, right?

You literally don't exist to them.

Oh yeah, I tell people this all the time. Like if they want something from a big tech company, they'll be like, oh, I'm gonna mail Zuck. I'm like, don't do that, right? Go grab a drink with the PM who runs that feature. You're gonna get heard because Zuck is just gonna ignore you or email it to somebody or nobody's gonna do it. Okay. So I think I love the homework and the prepared mindset, right? The other thing I think you talked about, and I'm interested, is setting the scene, right? Where do you do the meeting? Observing everything. So talk to us about how you gather intelligence, like once you are like just physically in the room.

If you're in the game, what happens from there?

A couple of ideas that have worked for me over time. I always like to have another person in the room. on my side, whether they're speaking or not. So when the meeting's done, I could say, did you see the same thing I saw? Did you see something different than I saw? Did you see a facial expression when I was making this pitch that I didn't see?

Yeah.

So they have full visibility into the body language of what the other side has said. And even I'm, I don't mind taking the notes. It's not about someone carrying your bags and senior, junior, just another set of eyes and ears listening to what I heard. That's number one. Number 2, body language matters a lot. Again, it's back to this behavioral economics thing. Like how many times have you walked into a room to do a deal and then, you know, the person doesn't wanna be there. Their boss just told them to go.

Yeah.

Oh yeah. Yeah. Right.

I mean, and it's not just deals. You look at interviews, you look at so many of these meetings of people where you can tell in the first 3 minutes that this is not gonna go well. And you're just spending the rest of the time going through this kabuki dance Of just making this whole thing go terribly, and then you walk away, which you knew all up front already.

Actually, you know, I want to— it's super interesting to hear the 2-people dynamic because often, and sometimes I find this, when you're one-on-one, you can kind of create intimacy and a shared, like, hey, we are in this together. And the moment you have another person, it shifts the chemistry, right? A little. Because you're like, for example, talking to you and Emil, like, for example, Like if I was meeting you and we'd make fun, I'm like, hey, we are immigrants and we have kids and we bond and we kind of have a thing and maybe have a shared bit of gossip. But the moment there's somebody else, it shifts the dynamic slightly. And sometimes I, you know, I'm like, I think there are pros and cons. How do you think about that?

I think there, like, look, there's some exceptions to this practice, but it has some other values too. The thing I tried to do on my team as a leader was work with everyone on my team on some project once a year. So they got access to me and how I did things. They felt they saw things that I was doing at that level that maybe they were 5 years away from being able to do themselves. So there was an advantage to just having them along anyway, right? And yes, are there sensitive conversations that happen one-on-one or sort of camaraderie-building ones? Sure. But just as a practice, it's like I just found the additional information I get from the, from the, the, them hearing and listening to what I'm seeing, plus the learning ends up over like, you know, 7 or 8 times out of 10 outweighing the one-on-one camaraderie building. Because you know what? The one-on-one camaraderie building is all the same. Family, weather, where do you live? It's all the same. Yeah. Yeah. And then it's like, where'd you go to college? You know, sports? Football? You know, it's all, it's all those things. You repeat them in every meeting.

Yeah. Well, we hate the same people in tech. Oh yes, we bond over that. Uh, uh, okay. Maybe that's for a different episode, but, uh, okay. All right. So now, okay, you have 2 people in a meeting. What's next?

Yeah. So then, so let's take one of these examples I just gave you. It's like, this person doesn't want to be in the room, right? So you're now hopefully emotionally intelligent about this. So now you've got a game time decision. Are you going to go through the motions or are you going to just throw a bomb in the meeting to change it, to see if you could change the dynamic? Yeah. And you know, so things I would do, for example, I'd say like, wow, You look like you'd definitely rather be someone else. What do you want to talk about?

Has it worked? Has it ever shifted the dynamic?

All the time. All the time. Because you're making someone laugh, they're like, yeah, man, I don't want to be here. And maybe it's, you know, they had a tough weekend at home because they were taking care of the kids. Who knows?

I'm gonna try that. I'm gonna try that, right? Like, oh my God, that takes some balls. To actually suddenly be like, hey, I'm going to go out on a limb.

Call out the thing. I think so. Here's what I've seen. Like, you know, I've watched a lot of your content before on negotiation and your tips there. And, you know, before, like a while ago, I had my own startup and I had to go talk to this big e-commerce retailer. And I was in the room. I'd never done anything like this before. I had no business being there. I'm like this, like, like small potatoes for them, like a rounding error. And I did every mistake, like just watching all of your episodes and content. I did not put together an org chart. I did not read the room right. My body language was terrible. I didn't have another person with me. There was no like wingman, wingwoman, whoever. And I knew going in, in one of the meetings that it was just going to go horribly, but I kind of like put up this brave face and just did the presentation. And I was like, Why the fuck did I do that? I should have just like cut my losses and moved away from the whole thing. We eventually ended up partnering, but for a completely different set of reasons, nothing to do with this. But I made every mistake in this, and every time I see you say it, I'm in my mind, I'm like, damn it, that's what I would have done differently. That's the thing that was so messed up.

I, I, I love the bomb threat. I want to steal this actually. Um, somebody's gonna find it in an episode. You know, I actually picked up a milder version of this trick, well, tactic from Cheryl, who about if the meeting wasn't going to her liking, what she would do is she'd be like, okay, let's take a break here. When we walk out of this room, what are you folks going to say about us? You're going to be like, well, those bozos, or are you going to like it? And such a great way to kind of like shift the energy or the narrative. Well, let's all follow up and I'll email you and we'll set up a thing, blah, blah, blah. It'll totally shift the kind of the narrative of the meeting. And I was like, I want to steal that technique.

It's totally smart. And that's a, that's a brilliant technique for like getting signal earlier rather than later. This thing is going to work or not, because part of dealmaking is actually not doing, not spending time on deals that shouldn't happen. Yeah. Right. So, so when Cheryl did that, it's a great tactic because if they're like, you know what, actually we just don't see it here, you know, XYZ here happening here. Yeah. Instead of telling you 3 months from now when you burn an analyst's time or, you know, your time for You know, 40 hours over 3 months, you get like zero. You get all those hours back. Yeah, right. And you get, you get to go do something else.

So I guess then question for you, you know, you come off as a very persistent person.

And is that a polite way of saying Emil is known as one of the toughest negotiators in Silicon Valley?

Pretty. I love, you know, good, big persistence.

He's smiling now, but it's because he's not like, you know, he's taking a break between companies. Otherwise he's like scary.

No, but, um, when do you know when to give up? You know, giving up is hard for some people. Like, you know, being gritty is like, if it's a part of your identity and what you're really proud of, when do you know when to walk away?

I gotta address your first thing about I'm a tough negotiator or whatever. I'm scary. I, I would say this, what I, what I, what I endeavor to be when people say the one of the best deal guys is actually I make deals that should happen happen when they wouldn't otherwise happen. I make them happen faster. Mm-hmm. And I make deals that shouldn't happen not happen and not happen faster.

Faster.

Right. So it's actually getting to yes or no faster than the next guy or gal and not screwing it up over some dumb mistake. Um, but back to your— now I forget the question.

Oh, when, when do you give up?

I mean, and we're about to see a lot of this in startup plans. Yeah. There's an exist— there you go. When you have some existential stuff going on, You know, there is, there is a lot more stick-to-itiveness that you have to have. And when you're saving a company or you're, you know, you're, you're, you're doing it in a way that you might not have if it was sort of a nice-to-have or sort of, you know, there were other people you could do the deal with and there's the personal dynamic, didn't that work or whatever. So when you know, I guess when you know to quit is when your survival is not dependent on it.

Yeah.

And if the time spent is going to be, when you risk adjust it, is going to be worth more than the reward, right? And that's a— I walk in with calculus all the time running in my brain with deals, like 100% of the time I'm adjusting the calculus. Is this worth it? Is it worth the time? Is it worth whatever else I might be doing? So you can actually win deals with a lot of time, but sometimes like the effort itself is more costly than the benefits.

Yeah.

It's a running calculus. It's like a running Excel spread deal spreadsheet.

To me, I feel like the best dealmakers are often unemotional. Like when you say calculus, I think the, the people who are not good at like making the deals happen and when it falls apart, and it's not critique on like any one person, it's usually because the emotion clouds the whole thing and they can't run the math or they get totally distracted by who said what in what meeting, like what happened there. And their like ego comes into play. Or they feel like they could do better, deserve better. How do you deal with that? Like, it, it feels like a natural part of human existence.

I mean, it is so now, and this is, but this is part of sort of my behavioral economics point of view on negotiation, which is, is it is not preordained that, you know, this deal should happen even though all the economics point to it. Yep. Because of these dynamics. So, right. It's adjusting around them. to try to make them happen or, or, or not. And if you are in control of your emotions, you have an advantage over people who are not in control of their emotions. That means it still might mean that their emotions are so strong they're going to kill the deal, but you've given it the best shot forward. You can't change people. Yeah. Um, but you could try to organize a process that takes account of how they, how they work.

I think one thing you've been known to do well, uh, is, uh, When you're— I think when you're in a big tech company, you're in a position of power. When you're in a deal, you often have this balance of— often a deal is about when do you share which bit of information to which party.

Mm-hmm.

And I think there is a balance between projecting strength, right, and being humble. And it's— and these things seem in conflict, but I think you've done a— you're renowned to have done a great job of it. I can't tell you how many deals I've seen totally messed up by a Facebook or a Google Because they will come and be like, hey, we are the, you know, the big appendages in town and, you know, we're gonna do whatever, and just blow up a deal just from that attitude. So how do you both project like strength, resolve, but also humility, friendliness, all that?

Yeah, I call it riding the confidence-humility line. Like, that's the line, that line of being confident but humble. is, is, is what you're aiming at. That's the ideal, right? Because everyone likes someone who's humble, but also everyone likes someone who's confident. No one likes people who are arrogant and no one likes people— Who are not confident. Yeah. Right. So, so who lack confidence in what they're doing. So it's this, those are the 2 things you want to project. Yep. Right. And if you do that well, one marker of that, how I, how I do the sort of, did I do that well, is the relationships I have with people from who are on the other side of the table from me years afterwards, right? So Jean Liu and I, we got— we have a laugh every time we talk or whatever because, you know, we had— we walked this line together. The people at Amex, AT&T, all the people I did deals with throughout my career, I have a camaraderie with them because I've tried to walk this line and, you know, I mostly got it right. But I think the projecting strength thing, I'll tell you this on your— on Google, like I don't know if I should say this. Well, I'll say it and you can decide whether we should keep it in the episode, but I hated doing business with Google. Hated it.

Why?

Because they would Bigfoot any company and every company, no matter what. So I would have like an account manager for Google Maps screaming at me over the phone about, you know, was I like a freight company? And I was like, I'm not a freight company, man. I'm just, Trying to buy your maps. And he's like, you have to decide if you're afraid. You know, I was like, and you know, would it, would, you know, do those kinds of things. So I never, I was really resistant from hiring anyone who worked in Google Biz Dev. I was resistant to doing any deals with them because they had so much power and they acted like it.

Oh gosh. Yeah. This triggers, by the way, we are on YouTube. This video's gonna get killed on the YouTube algorithm because of this. But, but, uh, I, so I, you know, a couple years ago I had left Facebook, and somebody I was working with at the time ran into a very junior down the stack Facebook person who did the exact same thing. They were like, we can crush you, dominate you, bow down to us, you know, or the business equal thereof, and it was gonna blow up. I called up the Facebook person, I was like, hey man, I'm an ex-employee, I know exactly where you folks stand. You're blowing something up really good, and it actually blew up. This is so common, and to be honest, it actually happens more in the junior levels because you'll never see this behavior From a Cheryl or an Eric Schmidt, I mean, they will if they have you, you know. You'll know it. They will know it. You'll know it, right? Like, but they will do it in a polite way. They never they never have to say it outright, and it's often like. But this is so true of a lot of the big tech well several big tech junior BD people.

I will say this: I found dealing with Facebook way easier than dealing with Google when I was at Uber. Yeah. You know, I worked with they was working with David Marcus on Messenger. Oh yeah, Marcus.

Dan Rose, Marcus, all those guys are amazing.

Yeah. Yeah. And then, but, but Google was especially hard and, and I made a pact to my— I told myself, I was like, I'm never gonna do that to a small company. So when small companies will come to Uber to do business with us or to do a partnership or need to get bought, I always call the entrepreneur back. Always, always responded, you know, was exceedingly polite because I didn't want people to not wanna approach us because we got that reputation.

I often thought of it, and I know less about BD but more about product management as such. I often thought, you know, companies like Facebook had, you know, good set of people on that side of things, on the business product side of things, because they really had to fight. Uh, like nothing was like given to them right off the bat. And every point percentage of like user growth, everything was like a claw up every day of like getting into a boardroom and figuring out where, like what happened. Did internet get shut off in this country? Like what went, you know, you have like the problems.

Yeah.

problems that you have. Victory was never taken for granted. And to this day, Facebook comes from this mindset of just extreme paranoia. Um, and that, I think it starts with Zuck and, uh, trickles downwards. And so this company is so fucking big and everybody acts like an underdog. Everyone's like, oh my God, we are gonna die tomorrow.

Yeah.

And, and I, I kind of like that. I like people who are like cut from that because, uh, it, you need to have that like grit and ability to be able to like always stay a bit humble. and feel like you're an underdog that is like up against a big, big beast?

Yeah, look, Google's literally the greatest money machine of all times.

Yeah.

And so, they didn't have to do any of— I guess, look, I'm not trying to discount what they built. It's an amazing company. The acquisitions they did were amazing, like all the things. But I'm saying they just came from a different place than Facebook did. Facebook whiffed on mobile. The IPO was tough. Like, there was a lot of hard stuff there. So, the grit that filtered down through the org Oh yeah.

I wanna, you know, since that's a masterclass in negotiation, this is awesome. I wanna ask you one thing, which I think a lot of people run into, which is, uh, I think often people fall in this trap where somebody wants X and the other person wants X plus something or X minus something, right? You're negotiating, most simply you're negotiating a paycheck, right? Your comp or a valuation. And I think the master negotiators or dealmakers find a way around when people are like, I want one number, you want different number. And this is right. And how do you handle when it just comes down to, I want more, I want less. How do you even avoid getting that? How do you handle that?

Like you said, if you're thinking holistically about a deal, there's often other levels that can make up for value points. So you have this, there is this notion, again, let's say you work at X company and you're like, I need to bring home a million-dollar deal, or I don't make President's Club for my sales org, right? So you're like, I'm now on their side of this, you're like, how do I get this person a million bucks. You're like, okay, well, maybe I could split it into chunks. Maybe I could put performance criteria on there, but the headline's still a million dollars, right? It's sort of how do you change some of the other things in the deal? Because again, part of the behavioral economics is like, what is most important to this person? It's like, they have to hit this number. You find that out, then you could organize around that. So finding out their hierarchy of needs—

I love it.

Allows you the flexibility, right?

All right, I'm going to make the— a very interesting segue here from this point, which is the optics of something, the headline versus the underlying thing, which is one of the topics I think you and I and us have been talking about in private, is we no longer live in a zero-rate environment. A lot of folks need to be, you know, thinking about down rounds, uh, layoffs, M&A. We're going to get into all of that, but maybe the one interesting segue is A lot of founders are often tempted to, well, I want the headline valuation, but with structure, which I think is a version of exactly what you're just talking about. So, when you talk to a founder or when you're on the other side, how do you advise founders on valuation versus structure and how to think about it?

In this environment.

In this environment, post-zero rate interest.

Take what I said about negotiations and It does not apply to raising money in this environment. We're in a— you've heard me say this, Arti, before. It's like we're not in a world of FOMO anymore by investors. It's JOMO, joy of missing out, right? So they're happy to miss out, right? Because anything that smells bad in the deal, they're like, I'm out, I'm out, you know?

Yeah.

So it's different. So I do think when you come to this structure versus headline thing, the problem with structure is that the next 3 rounds you do are likely to be structured because no one ever goes backwards on structure, right? And so the only reason to do the headline round with structure is if it's literally your last round.

Mm-hmm.

It's literally your last round because you don't have to raise anymore. So you don't— you're not gonna be piling structure on structure. And like, look, and this is complex, so there's no perfect answers here. Sometimes headline valuations matter to employees. They matter for momentum. They matter. Like there is, again, a human cost to, to, to doing down rounds.

Yeah.

That is non-zero. Right. So it is again, a calculus of what's right now. Very few companies now that actually need to raise money can confidently go, this is the last round I'll ever raise. So it's more likely than not. that you should be just doing a down round, calculate the anti-dilution protection, and keep your cap table clean so that you can do it. And the reality is things were overvalued. Multiples have changed. It's no— there's no shame in your game, right? That's just how it is.

Oh yeah. By the way, for folks who are not deep into VC, when you think of what structure is, it's basically how people can get that money back. Uh, you know, who gets money back before anybody else. Google party pass-through. Uh, there's a lot of fun stuff that, you know, which can go on. But maybe I think this is, you know, we live in a bear market. We live in, uh, we live in like, you know, March 2023 or February 2023. Uh, what advice do you have for founders who might have raised Series B, Series C at some really strong valuation and now maybe don't have product-market fit? They can try to figure out what they want. What advice do you find yourself giving often?

Yeah, so different categories. So the companies that have way more cash than they need Because they were lucky or smart enough to have raised money at the end of '21.

Yeah.

And I like have this massive cash balance. They have a little bit more flexibility. You know, I still think they should be cutting costs, like, so like, you know, still doing the optimization thing because it's good discipline, it's good muscle memory. And, you know, you, if you haven't found product-market fit, but you have the pile of cash, you still have to go find it. And you don't know how long that's going to take. Right. But it's, Still not, it's not a 5-alarm fire, right? Because they have the cash and there's a lot of companies out there with insane cash balances that they never would have had. They won't have going forward in a new bear market. Then there's the middle company, which kind of has product-market fit, kind of has enough cash for like a year, year and a half. They better start front-loading some of these optimizations on the cost side, you know, now.

Right now, yeah.

So that they're not more dramatic later. And no matter how many times I tell a first-time entrepreneur, trust me, this layoff is not going to be big enough.

Yeah.

It's just—

What is big enough? Like, how much cash should you have in your balance sheet?

I don't know if I have a one-size-fits-all question, but I, I worry about the companies that are in this pseudo product-market fit era that have less than 12, 18 months of cash.

Yeah.

Because that's not a lot of time to like find it.

Yep.

And then scale.

Execute on it. And remember, even if you have a good business right now, you're not going to get good terms. So you kind of want the Fed to stop raising rates for everyone to come back and have product-market fit and have an efficient structure so that if it takes another quarter or 2, you can survive without freaking out.

So you're looking at like, give yourself about 2 years of runway for you to be able to get to that spot-ish. I think at least 18. 18.

I think it is because I think 12 months, I think in my mind is a fire alarm fire because first of all, if you're at 12 months, It takes 2, 3 months for even the— well, unless you have Emil Michael raising money for you, it takes at least a few months to start the process for the money to hit your bank account.

Yeah.

And by the way, if you're going to shut down the company, that takes several months also. So when somebody says 12 months, I'm like, chop 4 or 5 months off of that. That's the actual amount of time you have. And then you're in like, well, 6 months and your company's going to die. And then you're— then stuff's getting real.

Totally. And, and the absolute characteristic that's, that's 100% true right now, deals are taking, even for good companies, 2 to 4 times longer than they did before. So what was 30 to 60 days is now looking like 90 to 120 days, even for good, just to raise money. Because how many more partner meetings now?

Yeah.

You have to get more people in a partnership on board because individual partners don't wanna take as much risk as they were taking Before. They want more consensus. They want more data, deeper due diligence. There's, you know, some, some investors right now are just totally risk-off. They're like zero. So filling your top of funnel is harder and takes more time. So you're totally right that 12 months is sort of getting to that 5-alarm fire situation.

Now on the optimization side, uh, I mean, I always talk about like, you know, when somebody's laid off, it's tough, it's hard. You know, we're always super empathetic. We had people around us, you know, we've been through, and especially As immigrants, we understand the kind of the, you know, if you're on a visa, all of that. But when a founder, you know, I— one of our theories is for the last few years before this environment, Silicon Valley has gotten soft and, you know, grew exponentially, often the large tech companies, but also maybe some of the, you know, companies who didn't have the Google ad business to rely on or, uh, the Facebook business to rely on. So I am curious to get your sense of Silicon Valley as kind of behavior and the playbook and companies were running over the last few years. And how it may be shifting or you think it should shift now.

The Great Reset.

Yeah.

I mean, do we need to be hardcore? Do we need to be hardcore, Emil?

It is over. It is this notion of being able to have not only, you know, more people than you need, but then the salaries and sort of benefits and stock-based comp and all those things being at an elevated place because there was so much competition for talent.

Yeah.

Those things have all kind of unraveled at once a little bit, right? So we're starting from a different point now. And if you as a, as a leader are not adapting quick enough, and I don't think they are, I don't think on average these companies are adapting, even though like, oh, Elon Musk proved that you could do things with 80% less people. That's not translating down that fast. I don't think, like a little bit, but it's just, it's not all the way there.

It's too slow. It's too slow. Trust me. People want to, but yeah, it's too slow. It's good. Yeah.

And then you, then you get in this 1, 2, 3 layoffs closer to cash out date, more likely to do a down round, more likely to do structure. All these things cascade down. So I am trying to give folks a reality check, especially if they've never been through it before, that these things just get all reset every 10 years or so. You know, we have a reset in the tech markets for different reasons each time, and there's different answers each time.

Yeah.

to what to do. But in this, in this thing, you gotta be hardcore about it. The remote work thing gives, gives you an opportunity to hire people in different geographies that have much like, not the $500,000 product manager, the $200,000 product manager in Chicago, you know, and what is the difference between them? Like there's, there's some real hard trade-offs and yes, I'm not trying to ignore the human tragedy of it because that's real. But, but the, But also failing is real. And when you fail, you're not just failing, you know, yourself, you're failing all the employees who remain, all the investors, your family if they were angels. So like, you know, there is long-term benefits to having a company that's right, the right size.

Some of these companies grew 90%, 100% over the last 2, 3 years. So even though you see the layoffs, uh, if you look at the actual math, they're actually just back to sometimes the numbers from a year ago. It's, you know, so It's not as dramatic as it may sound. What do you think is happening at some of the inner circles of these big tech companies? And what do you think is gonna happen at, you know, we don't have to talk about anyone, or maybe we can, but like in terms of like right-sizing these companies?

I am surprised. Well, so number one, it's just not existential for Google or Facebook to cut more. It just isn't, right? It's just not. So let me, if I, I'm totally making assumptions here. So why did Zuckerberg, give this like efficiency, efficiency, efficiency earnings call last time is because he wanted his stock to go up. Why? Because he wants employees to be motivated and everyone's down in the dumps when the stock's half the price it was a year ago. So like he wants to do it by showing efficiency, but he's only going to do it to the extent he needs to because it's not existential. So like you're just not facing the same kind of things that mid-cap companies are facing.

Actually, can I disagree with you? I have no inside information, but But from my experience with Mark and knowing nothing about what he actually wants to do now, my theory is whenever he says something, it's often meant for his employees first. I think the message is one of like— I'm translating here. We have gotten soft and it's time to buckle up. This means, hey, a lot of you who are directors or managers, M1, M2, you got to roll up your sleeves, you got to write code, you got to write the expect, uh, you know, less promos, you know, times are going to be tougher. And I often, I think what Mark often tries to do is try and send a message inside. And sometimes the best way to overtalk, who knows, but I think, but I think it's often about like, hey, you can't just expect a promo and a bigger org.

I don't think you both are disagreeing though. I think what Emil's like trying to say is like, sure, you can send a message internally, but how much do you really need to cut if you're a Facebook or a Google? Like you still do have the money printing machine in the basement. Unlike a lot of these other startups who have the perks and the culture and the benefits of a Facebook and a Google, but can no longer afford to do so. Right.

That's the difference. Most companies are not Facebook and Google. Yeah. And they don't need a cafeteria with the fast, like, you know, a Michelin star chef or what, you know, those things.

Yeah. Free kombucha. Yeah.

Free kombucha, massage therapy, you know, and look, let's take I'll take Snap as an example. The company's got some real challenges. It's not a money printing machine. And if you're Evan, like you're gonna take whatever rightsizing you do way more serious, you know, go much closer to, you know, to a real change in headcount than you are if you're Mark Zuckerberg, I think.

So what do you think is gonna happen with these set of startups, like the Series C-ish kind of companies that have started doing layoffs But general consensus seems to be it's nowhere near enough. So are we gonna see more of these? Are we gonna see in like 18 months or 12 months companies just like declaring bankruptcy? Like what do you think's gonna happen?

I think that there are a few companies that are gonna get it and they're gonna make it. And there are a few companies that are gonna get it too late and not make it. And there's gonna, that's like Q3, Q4 this year where the money you raised last quarter of '21. Yeah. Now you're, now you're talking, you're 2 years past our 2-year conceptual point. Yeah. Right. So they're gonna sort of run outta options and no one wants to fund a falling knife. So like you said, Sriram, you gotta back away from the end date to be 6 months before, 9 months before. Yeah. To make decisions. Yeah. So that you don't get in that spot. Right. So you're gonna, you're gonna see some pain out there and then you're gonna see a lot of companies on the merger market and then the acquirers are gonna take advantage of that in price.

One interesting subcategory, I think, of these companies is very unusual, uh, uh, just given the dynamics of the fundraising market before, is I think that a lot of Series C, Series B style companies do have runway for years but zero product-market fit.

Yeah.

Uh, and I think it's a— and I think one of the challenges, like, if you're a founder, like, you can run this company till kingdom come, but you're— nobody using your stuff. Like, part of it, if you're a SaaS company, there's like, you know, not enough budget for people to go buy you, etc., etc. What advice do you give those founders? Because they're nowhere close to facing the existential urgency of some of these other folks.

Yeah, that's so hard on that one. Because one of the other things that I've observed is that, and this has always been true, private-to-private tech mergers are hard. Like mergers, I'm not talking buying a small company. If you're, you know, private Uber, I'm talking about like a substantial acquisition. Everyone thinks their stock's worth more than they know it is, who's gonna be CEO, all these things. I do think in these scenarios, sort of thinking about merging with someone where you bring your cash to the table and your expertise, and maybe it's a more interesting project that now has more chance for product-market fit. It's a broader enterprise suite when you put 2 things together.

Yeah.

It's taking some of what you've built and adding it to some other effort that makes it closer to product-market fit. Market fit is something I would think about. And I tell the entrepreneur, do you really wanna be running a zombie for 5, 7 years?

Right.

If you don't have a great idea, that's okay.

Right.

Like, that's fine. Let's like make, like, let's do your best to this. And then when you come with, when you have a great idea, people will finance you on the next one.

Yeah.

Because you did the smart thing with this one.

Yeah.

Yeah.

So basically you're saying return money if it's not working out right now, just wind it down, cut your losses.

Or find a partner that, that, that you could, you can merge these companies together with low ego.

Yeah.

Which is really hard to do.

Easier said than done.

But, I think psychologically, what if they've taken a bunch of money off the table in secondary? What happens then?

Man, that's just a whole new world. No, it's about back to the hardcore thing.

Yeah.

Across every company I've been, I've ever worked at as a startup, 4 of them, I'm never taking a dime in secondary.

Yeah.

And, for me and Travis, it was a signal that we are not going to, we're not gonna eat our dinner until you eat yours.

Right.

Right.

Yeah.

We gotta make sure there's enough food on the table so we can all eat.

And I think we talked about this, right? I don't particularly even blame the founders for taking secondary off the table because, you know, the market incentivized them to be like, hey, there's money here. Do you wanna take it? It's like there in front of you. Pick up anything you want.

I think Stuart particularly, like, if they're handing out cookies, you take a cookie.

Yeah, totally. So this is not a criticism. It's more just like time. The game on the field's changed.

Right, exactly. So now the downstream effects, we are seeing that. So what happens in that case where the founder's taken money The company is like, eh, okay, like not really product market fit, but maybe, or maybe early signs, but not enough runway. Have 2, 3 years-ish left. What happens then?

I just, the giving back cash is just a hard, I've seen it so few times. Yeah. Yeah. That's why I keep bringing up this, is there a merger partner? Is there like, can you kind of combine with another private company? Yeah. So that, you know, the VC firms, like, do they really want the cash back? I don't know. You tell me. Do you want 40% of your cash back, or do you want to roll it into something that has a, you know, higher chance of success?

I think it's— I think it's so dependent on, I would say, like, is the founder still committed? You know, do they still want to do this, or are they burnt out? Um, and sometimes only they know the answer to those questions. Uh, and look, every VC firm is so different, right? Only like, you know, and I think our firm kind of has, you know, a certain— like, we really kind of like back the founder in so many things. But I think it really comes down to, you know, what the founder really wants to do, which also— I think the secondary thing, I know it's controversial, but I see it playing a lot of ways. I think the very easy metaphor people say, well, somebody takes a lot of money and they're off like living in the South of France or something— that's not actually always the case. I think often, I think what happens when people get wealthy is that it just amplifies their personalities in in all directions. Like Zuckerberg, you know, used to like drive a Toyota Camry, and he, you know, he'd be happy to drive it.

No, no, no, I completely disagree.

No, but I think there's a different phenomenon which sometimes happens, which is founders then feel like they should take bigger swings. And, and, uh, and I think it's— I think it amplifies your personality.

Oh, you can say that's all fine, but I think what you're trying to If I wake up tomorrow $50 million richer, I don't know if I will have the hunger and the drive that I had yesterday. I, it just is not going to—

I totally disagree.

I, no, I just think, you know, you're gonna have it. This is a disservice to investors. It's a disservice to employees. This is like this whole taking secondary off the table and being like, it doesn't really impact the founders. The hungry founders always work. That is not true. You're going to have to align incentives for the employees, for the people working on this, for the investors putting in money, all on the same side.

I think that's right. Nobody's disagreeing. I would say the core principle I've learned about in VC is the moment you have misalignment of incentives, shit blows up. So you need perfect alignment from LPs to VCs to founders to execs to employees to customers. You need back and forth. And, uh, often people—

what do you think, man?

It's such a hard thing because I, you know, this is where definitely I'm old school in this way, um, where it's just, you know, it just, it propelled me personally to not have the resources. Like, that was my experience. Maybe it's the immigrant scarcity ethic, or it's like, if I'm— I can punish myself, I'll work harder, right? But I'm, you know, that's me. And I don't, I feel I don't wanna apply that same sort of motivations, you know, sort of hierarchy to other people. So I do think, you know, there are extremes, like someone taking multiple hundreds of millions of dollars off the table. It's like, I can't imagine a scenario that's gonna turn out well.

Yeah.

Right. But, you know, if someone's like their third startup, their 40s, they have a kid and they're taking $5 million out and, You know, and, and they're doing it responsibly and whatever. Like, yeah, okay, that's, you know, you, you can, you know, you can't be against some things like that because they actually— that might motivate them more. So yeah.

Or sometimes it's like, you know, they're multiple years in and, you know, if they're just stressed about, hey, either the mortgage or kids, especially later on. I actually want to go back to something interesting you're talking about, which is mergers and acquisitions, which is we are seeing almost nothing happening in the market. Now, the easy answer is everything happening with kind of the regulatory overhang. Um, but is it due to that? Part of that? Is a lot more else going on? How are things going to change?

For the big guys, yes, it's— that's definitely Lina Khan and the FTC. Um, and, you know, the prime example of that is, is Facebook trying to buy this like metaverse. Yeah. $30 million. Yeah. company, and they had to sue and win in the courts for 3 years. They probably spent more on legal fees than they did on the company.

Company.

That sort of stuff has a chilling effect, which I really think is bad for the country, bad for business, and so on. But when you're talking mid-market, a company like PayPal, or pick your company that's not sort of in the crosshairs of the regulator, they're just not buying stuff. You know, and even like, I'm much more upset about the private-to-private deals. Like lots of competitors should merge. They just should because, you know, private-to-private, you have a better shot being bigger, better shot with runway, cutting SG&A, you know, improving runway. Don't throw money away on subsidies. There should be more of that. Now, those are hard deals to do because of social issues. Who's running them? You know, the social issues predominate in that.

Yeah.

But people are gonna regret not merging with their competitors.

Yeah.

You know, when, when the— when this clock strikes 12 at the end of this year, early next year.

Oh yeah. Oh yeah. I think the reverse of the Stewart Butterfield, like, take a cookie is sometimes when the music stops, like, you want to be one of the first people to get a chair because if somebody else gets a chair before you, you're in trouble. Yeah. Don't be—

don't try to be the last one.

It's somewhat related but slightly different. What makes a good founder? You've worked with a bunch of them in the past. What are the attributes, you think?

So beyond ambition, I do think it's— there is a sort of a— there's a grit component here, right? And there's a, you know, you could get knocked down and keep coming. You can try something and fail and keep coming back. And that grit, that hardcore grit, I do feel like there's a little less of this in some of the founders sort of on average. Today because they haven't been through '09, they haven't been through '01.

Yeah.

So I feel like this class of founders that are going through this great time now, they're going to be sort of the bosses on the next, on the next one because they'll be like, okay, I know how to navigate this.

I have the battle scars to show.

I like it because I thought you're going to be like, well, we had it tough in our day, we climbed it. You're like, no, no, no, like, you know, the next batch is going to be even worse.

Yeah.

Actually, how much of it do you, you know, when I look about, when I think about your I think of you, I think of the Patoj brothers. There is kind of this set of folks, I think, who kind of came up the ranks and, you know, really dominate large parts of tech together. Um, how much of it do you think was you being an immigrant and wanting to make it? Because we are immigrants and, uh, you know, very different kind of stages of life and career. A lot of the folks who listen to this are immigrants, are watching from India. Kind of curious, like, if you kind of had to— with, you know, it's hard to do this objectively, but unpack what got you here. How much of it is being an immigrant, or what was it?

Yeah, and then I'd add Alfred Lin to that list. Like, we're literally all in the same class in school. Yeah. Um, and, and, you know, 2 things happened then. One, if you graduated in 1994, the internet and tech business was just getting going. So it was the first time you're like, I don't have to be a banker or consultant, I could do something in tech. Yeah, right. Yeah. Um, and so there was a moment that we kind of got lucky from And all 4 of those people I just mentioned, Hadi, Ali, me, you know, Weber, were immigrants. But David Weiden was also in that same class at Coastal Ventures. So immigrants and non-immigrants. But, you know, I think that our parents— I don't know what yours did— would have been more thrilled if I was a doctor.

Oh, yeah.

Or a lawyer. So I went to law school. I'd love those years back. Yeah. And all these things. But I guess when you start, when you talk to your parents, they like, they had so little. you're like a little bit more like, what do I have to lose by taking this risk?

Exactly. And, you know, there's a point where you're like, I'm already going to be disappointing, you know, by talking about tech. But really, if it works out, it's all upside because I have nothing to lose here. Because, you know, my parents were like accountants and, you know, that's kind of what they did until the day they retired. And for 30, 40 years, this is the one thing they did. Anything that was not that and could give me like career mobility was already an upside.

Yeah, but they didn't get it, did they?

They wanted us to be stable. We were like, we grew up in a 2-bedroom apartment with our parents telling us how lucky we were. So like, it's all upside down.

Okay, great. Yeah. I mean, I think my parents were like, okay, she's not a doctor. She's not a lawyer. She's not anything that is like what we'd call respectable. Okay, computers. Oh man, that's disappointing. What are they going to do with computers? And my dad at some point was like, Like, do they do like gaming stuff? Like, what's what's the thing with this thing? Like, why do you have to get this box? And I feel like they use like stuff like greeting card design. Like literally one day he was like, "They design greeting cards on computers, don't they?" And I'm like, "I guess." Also, they really didn't understand.

For example, when we quit Microsoft, they were like, "Microsoft was such a known brand." Bill Gates and they were like, "Why are you quitting Microsoft? You can retire in this place." But they didn't understand.

They were shocked. They were like, "When I switch on my computer, I see the Microsoft logo." And you have to go quit that job. Like, what are you gonna do?

You know what? Your parents didn't know that Microsoft ten years later was going to launch ChatGPT with Bing. They were ahead of their time. They were like, so maybe again, big fast forward.

The other thing is no hobbies. I don't know if your parents had hobbies. My parents didn't have hobbies. All work. That was the hobby. What is yeah?

What what is a hobby? Like these the people like these days and they're like, "What do you do to unwind?" I'm like, "What do you mean?

Where is the time to unwind?" I think the fact. The fact that we had fun with computers is very suspicious. Okay, but it's interesting. So I want to kind of go from your background as kind of young, kind of a teenager, etc., to now you're a parent, we are parents, right? Like, how much do you think being a parent, uh, changed the way you operate, or has it at all?

It certainly has, but I'm not doing a full-time sort of job with the intensity of Uber. But if I try to put myself back in that mindset and try and do both together, I'm like, whoa, it's hard. It's hard. It is hard, um, to do both very well. Like, I feel like I'm a good dad now, good husband, because I have time. Yeah. And I have control of my schedule. And the stakes of what I do, investing, advising, are just much different than if you're operating a company. But, um, but, you know, so, so it makes me want to travel less. Like, you know, those things that I was talking about, negotiation, when I do I just go take the initiative and go see someone. Like maybe I'd probably do that a little less now because, you know, the trade-offs are, you have actual trade-offs. It's not just you and your wife or you and yourself.

Yeah.

Well, once somebody, a friend of mine told me this before I became a parent and look, people are amazing whether they choose to be parents or not, or whether they can be or not. They said, if you become a parent, sometimes often you turn out to read people emotionally slightly better because when you come home, you're getting this huge range of emotions all the time. And sometimes, by the way, the negotiating tactics you use with a VP, you have to use with your 2-year-old at the same time. And, and I've— I know there's an empirical thing that I've seen, and again, people, you know, a lot of people are amazing managers without ever being a parent, where it makes you a slightly different nuance and judgment of human emotionality. And of course, the time commitment part as well. Okay, I want to take a slightly different direction. So you're very interesting, your background, because a lot of folks in Silicon Valley have never worked in the government have already had like kind of a service component to what they are doing. Um, and you have— that's number one. Second, it seems like now, you know, our firm is doing American dynamism. You know, there's a war going on in the Ukraine, there's a sense of patriotism, there's a sense of, uh, you know, global instability back in the mix. Kind of maybe one place to start off here is what did you learn From your time in the White House, you went to Afghanistan, you went to foreign countries. What did you learn that may not be obvious to our folks in tech who are listening?

One of the biggest lessons I learned when I did this, what was called the White House Fellowship, and the idea was to take people from non-government like business, medicine, you know, the military, healthcare, and then put them into government at the top level. So they attached you to a cabinet secretary So the idea was like, you don't have to work your way up the bureaucracy. You could do this. And the idea was you go back to your industry and take that public service ethic with you and try to spread it amongst your peers. Um, and so the things I learned there were just, you know, there are competent bureaucrats in DC. There actually are. Like, there's some really good, loyal, smart, hardworking people.

Mm-hmm.

And so, and I'm, you know, I'm much more skeptical of government, just my, just my starting point.

Mm-hmm.

So that changed my point. It didn't make me say that Department of Motor Vehicles is competent. It made me just say that there are pockets of the government where there are extremely professional people.

Mm-hmm.

And thank God for it. Thank God for that. Right.

Yeah.

And sort of that changed. And the second thing is they really, like, we're in a different world now where it used to be an honor to be a scientist at Los Alamos Labs.

Yeah.

Or NASA.

Yeah.

It was a true honor and we've made it such that those are not— it's much more interesting to be a scientist at Anduril or, you know, pick your other company. So there's a flight of talent outside that's gone to industry, and therefore it's our responsibility in industry to support the government. So when employees get mad at Google or Microsoft for not giving the government software or access to cloud, I'm like, that's just crazy town.

Mm-hmm.

That is— that for me is sort of you know, a really red flag if someone believes that they shouldn't be. This government that's doing, you know, created the system that we're all benefiting from, and that we've taken the best talent in the world in business, not being able to sell them software, like sell them for money software, is kind of insane to me.

Yeah.

You know, a lot of our listeners on this show, they're founders, aspiring founders. Yeah. And a lot of them are going to look at this and look at this environment, this market, and they are, some of them might have gotten laid off. Is this a good time to start a company? What do you think?

This AI sort of craze we're going through right now.

Yeah.

Like you and everyone else, I'm trying to think through like, what are the business opportunities here?

Right, right.

Is this like, you know, TellMe Networks was a speech recognition software company that ended up just being like, you know, became Siri, became, it became sort of Alexa and all these things, but it became a component technology.

Right.

That in and of itself wasn't a business.

Right.

So what in the AI category is going to be a business you could build moats around and make real money? I don't know. I'm thinking about that. So if you're an entrepreneur thinking about that and you have an idea, I'd love to hear it because I don't know. But beyond that, I feel like we're still in— and I hate to sound like some pontificator on Twitter, but I don't know where the platform shift we're going through now. It feels like the delivery You know, logistics stuff sort of all competed out.

Yeah.

You know, there's a lot of the mobile era and apps competed out. Social networks have sort of like, yes, TikTok has innovated, but that's now 5 years old. So I know, so if you're going to start a company, I hope it's a good idea because I think, I think there's going to be more choosiness by investors on good ideas and by employees. They're like, I'm going to take another risk after my stock just went down 90%. I'm going to be more Oh man, absolutely.

Okay, this has been amazing. And, you know, uh, we could go on for hours and hours, but maybe kind of like wrap this all up. Uh, I— we like to ask this question to a lot of the folks who come on the show, which is, let's say we're looking back upon this decades in the future in some sentient AI up in the cloud, and you're looking back upon all of your career, right? What would you want your legacy to be? What would you want to say Emil Michael What should be a Wikipedia headline?

I guess what I hope, and I feel like with medical science, we all have a shot at living till we're 100, if you're our age. So, like, we got, you know, the arc of our career is just much longer than it was from the generations previous. We've got a lot more shots. We have a lot more shots at goal for that one Wikipedia headline.

Yeah, true.

I'd like to, I'd like To figure out, I'd like to have something. I'd like to have built something that's more important than Uber because Uber was very, is very important to the world. It's changed the way people live, live and play, live, work, play.

Yep.

And the satisfaction you get out of building something that changes the world for the good, right? You stop drunk driving, you got people who are doing Go, it's easier to have jobs, to live in the suburbs. So many benefits of that. To build something as important like that in the next phase of my career would be something that that I'm aiming at.

That is such a high bar, Emil. It's a high bar.

But what else? What else are we gonna do? 40, 50 years ago.

I think what they will learn from not just well this episode, but everything is like I would not bet against Emil. But Emil, this is such a masterclass in so many things, and I just want to say you know just having gotten to know Emil a little bit over the last couple of years, Emil is such a warm, amazing. Amazing, generous human being. Maybe a tough negotiator, but just a wonderful, wonderful person. Scary. Scary. Like we should be like Silicon Valley's scariest negotiator. Like get some views that way. But you know, Emil, this was such a treat. You're such a treat. This is amazing. Thank you so, so much for doing this with us.