Movers & Shakers S2E2: The Modern Method of Targeted Digital Advertising, a Crypto Bear Perspective and More with Zach Coelius, Co-Founder of Triggit and Coelius Capital

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Welcome back to another episode of The Room Podcast special series, Movers and Shakers. Today we sit down with Zach Koulias, a 5-time entrepreneur and current investor at Koulias Capital. Zach spent his early years in Minnesota before moving out here to California after undergrad in the hopes of striking gold. One of the most unique first business experiences we've heard of. Zach shared about starting a trading valuable pins company at the 1996 Atlanta Olympics. Over the next 10 years, his startups varied greatly in their product, but consistently brought together him and his sister Susan as co-founders. In 2005, they started Triggit, an early ad tech company that made a big bet on quote, real-time bidding. To set the stage for you, this is the year after Google's IPO and paid advertisements didn't even allow dynamic personalization personalization for each user. Zach dives into the lessons learned through this experience and what the ad tech landscape looks like today. Zach made the transition to investing around 2017, and one unique component about his strategy is to open the door to invest through his angel syndicates. Currently, there are over 4,000 members in his angel investor community. In today's episode of The Room Podcast, we explore insights and themes such as having an Olympic-level entrepreneurship energy, the truth behind digital privacy, and a contrarian crypto perspective. Let's open the door. Zach, thank you so much for joining us today in The Room.

My pleasure. It's fun to be here.

We always like to start at the beginning with our guests. Curious about where you grew up and how this shaped your view of the world.

I was born and raised in Minnesota, grew up there, and I escaped shortly after grad school and moved out here, drove my car across the country. Slept on a buddy's couch for a month, went to Burning Man, started crashing tech conferences to pretend like I was supposed to be here, trying to meet people and learn how to find a job and just stumbled and bumbled my way into what has been this amazing tech boom for the last almost 20 years now. So it's been a pretty wild ride.

It seems like you were excited to be in the Valley post your Minnesotan roots. Did you always think you were going to be an entrepreneur?

I like to joke I've never had a real job, which is both true and funny. But yeah, I started my first sort of thing when I was 16, and then that was a business originally I started, but then my sister and I, her joining, it became like a real business, and we took that to 5 Olympics, and it's like a whole crazy story there. And then the next thing I did, we bought up some old houses and fixed them up and sold them in the property bubble flipping. And then she and I started the very first online voter registration and absentee ballot solution. So tools to help people vote over the internet back in 2002. So we raised a bunch of money from Pew Trusts and we built a bunch of technology and we went out in the market back when that was a new thing. And then my last company we started in '05. I've always been an entrepreneur. At one point I thought I was going to be a lawyer. Best thing I ever did, not becoming a lawyer. I've always been deeply fascinated by finance. So for a little while I thought I would go join the unwashed hordes on Wall Street, but thankfully I didn't do that either. So yeah.

We're going to talk about that fourth startup you mentioned, but I have to double-click. Why did you go to Five Olympic? Like what's going on with the first company?

It's a funny story. So when I was 16, I used to play soccer and I was like one of those mediocre but good enough to be on the best team players. And then that year I didn't make the best team and I made the mistake of everyone at school was like, "Oh, you're not on the team. You must suck." And when you're 16 and you feel deeply insecure, I made a mistake of telling people, I was like, "Oh, I'm gonna ride my bike to Utah and hang out with my brother and go climbing all summer." And of course, like 2 hours later, the entire school was like, "Oh, you're gonna ride your bike to Utah? You're a liar. You're not gonna do that." And so I ended up, make a long story very short, ended up riding my bike from Minnesota out to Maryland and then ended up going down to Atlanta for the Olympics. And so I showed up at the Olympics, having ridden my bike cross-country. It's just a whole nother crazy wild story. And the guy I was staying with, the family I was staying with, the husband, he worked for AT&T. And AT&T was one of the sponsors of the Olympics. And so he gave me this bag of pins, AT&T Olympics, the rings, and not much to them. And at the Olympics, there's this crazy sort of dynamic around pin trading where every company, every team, every sponsor, every security organization, every media organization, everyone will make pins and then give them out to their people. And then everyone trades them back and forth. And I love markets. Very quickly I was like, oh, okay, I had these shitty pins and that's a good pin. It's like, you know, you figure out how to trade your bad pins for good pins and your good pins for some couple bad pins and you get the thing going. And so the next day I was in Centennial Park and there they have this big pin trading area. And this lady comes up to me, she's like, What are your best 2 pins? And I gave her this story about this small Secret Service division. They had a pin and then another one that was like a Belarusian media organization. And she's like, oh, those are cool. And she reaches into her fanny pack and she pulls out 10 $20 bills. It's like $200. For a 16-year-old kid, that was a lot of money. I'm like, whoa. And so I ended up making $1,000 that day doing that. And then the next day I made more and the next day I made more. And so it very quickly turned into this big cash flow generating thing. So then I went and did that at the Sydney Games and Ended up getting more into tickets there because the pin thing never took off, but I got into the ticket art business. And then Susan, my sister, joined me in Salt Lake, and then it became a much larger thing. And so by the time we went to Athens, we had 15 people working with us, and it became a big entity. It's a great excuse to go to the Olympics and make a bunch of money as a kid and run around and be in business. And yeah, it was really fun.

I was also at those Olympics, actually.

Which one? All of them?

The Atlanta Olympics.

Oh, wow.

No, not quite, but I was born in Atlanta and, uh, yeah, happened to be my first and only Olympics.

Oh, you have to go. The Olympics are the best. Like the, just like everybody at the Olympics has this amazing sense of shared love for each other. And you literally will be on the subway train and there'll be people from all over the world and everyone's talking to everyone and making friends and trading pins and, hey, go to this restaurant, go to this, and then telling stories. And it's just this magical global moment of community. That you don't get any other way. It's like really special, really fun.

I have to say, this is probably one of the more unique kind of like early entrepreneurial stories we've heard. Super cool. And so after pin trading at the Olympics and building a whole business around that, you then went into quite a few different spaces. You mentioned 2005, you founded Triggit. Tell us a little bit more about what Triggit is or was, and then more specifically, what was the What was the path to getting started with it in 2005?

When I first moved to Silicon Valley, I slept on my buddy's couch and started crashing tech conferences. And I was looking for a job because that seemed like a good idea. And so at those conferences, I didn't really want to tell people I was looking for a job because people, they don't really like the job seeker. It's hard to hang out with a job seeker because you feel awkward. And I had this idea, bad idea in retrospect, but an idea about starting a company in ad tech. And back then in 2005, nobody knew anything about ad tech, including me. I knew nothing. But no one knew anything, so it was okay. And so I started talking about it and researching it and ended up diving into it and got really into it. And then before you know it, at one of the conferences, some guy was like, "Oh, that's a good idea. I want to invest in that." And I'm like, "Oh, okay." And then someone else wanted to, and the next thing you know, like, we had investors and it was like getting started. Called my sister, who's really my partner in crime on many of these things, and I was like, "Sue, we got a company." And she's like, "Okay." She was literally surfing in Brazil, just hanging out. So she flies back and we get started and we had no idea what we were doing at all. And for a couple years we pivoted around different ad tech ideas and we tried different things and kept it really lean so we didn't burn a lot of capital and we were able to stay alive like a little cockroach. And we had zeroed in on building a piece of technology that built an ad network. We got a bunch of great investors to invest in it and looked like it might work and we were starting to grow. We had about 10,000 publishers that we're working with at this point in time. And then Lehman crashed and it was like, uh-oh, we're fucked. And because it was clear the business we had was not going to survive a multi-year sort of ice age. At that point in time, one of our investors was a guy who was one of the early inventors of this technology called real-time bidding, which is the sort of core underlying protocol for buying and selling advertising on the internet. At that point in time, it was new, clearly better, but nobody was using it. So it was at that point, 20 million impressions a day of global sort of exchange happening. And we were like, we can bet on this and it's a protocol and it has network effects. So if it takes off, I mean, we might survive. Otherwise we're dead and we're dead anyway. So let's bet on this. So we started building technology into real-time bidding before anyone else did. And then it took off. So it went from 20 million impressions a day to now the whole internet. So billions impressions a day are auctioned off over RTB. That became the crux of the business. And then over the intervening 7 years until we sold it, we grew in, we got our butt kicked, we pivoted, we did a bunch of different things, but we, we played in that ecosystem. And it was a pretty wild ride.

I feel like many of our listeners might not be familiar with the ad tech space back in the mid-2000s. Could you tell us a little bit more about what the core kind of product was and then also what the competitive landscape looked like?

I'll give you 3. Quick answer to that. You know when you go to a website, you look at a pair of shoes, you don't buy them, and then ads for those shoes follow you around the internet? Yeah, that's us. We were part of that creation. And now it's much, much more complicated than that. But like when the ads are personalized to you, we were part of that sort of revolution in ads. So previous to that, the ads were largely bought and sold by hand. So literally if you wanted to buy ads on thenewyorktimes.com, you'd call 'em up, a salesperson would interact with you, you'd send them a piece of paper called the IO, and it was just this huge, very inefficient process. And when you have millions of websites on the internet, that doesn't really work very well and it's highly irrelevant 'cause you go there and the ads are not relevant to you. And for the years from the dot-com crash, from 2000 all the way through 2008, a lot of people in ad tech were trying to figure out how to build an underlying technology that would enable high-scale personalization so that ads could be relevant to the user. And because when you make the ads relevant to the user, they're much, much more effective. People click on stuff and buy more stuff. And as a result, they're worth more. And then the publishers make more money so they can invest in more journalists or more videographers or whatever it is. So there's this sort of nice ecosystem that happens when you make ads more relevant. So you go to the New York Times, you're there, you show up. In the background, what's happening now is the New York Times will literally call out to their partner. So maybe Google, and they'll say, hey Google, what ads do you have for me? And then Google will look at the cookie that they have on your browser and they'll be like, oh, this is user number 123. And then user number 123, here's what we know about her. She just looked at these shoes. Oh, and she's also in the market to buy a BMW, and she looked for a hotel in Istanbul. The advertisers— now it's anonymous, your name's not associated with it, but all that information exists in these databases. Then they'll have a little auction, and so the Istanbul hotel will bid a certain amount, the shoes will bid a certain amount, and the BMW dealership will bid a certain amount. And then the winner of that auction will be the one that serves you the relevant ad on the page. And all that literally happens in a fraction of a second as the page is loading. As you're like hitting that button and it's loading in the background, there's this giant auction. And so as you can imagine from a technical perspective, executing that at massive scale is very hard and doing it very rapidly is very hard. And so that's what we did. We were one of the pieces of technology that facilitated that.

Undoubtedly changed the face of commerce and how consumers interact online. My wallet has felt many pain from those ads and It's cool to also see many years later as e-commerce is booming, and I know your tech wasn't specific to e-commerce, but kind of that theme of personalization is still something that brands are trying to crack. So it's cool to hear the genesis of that.

I think on one hand, for some people who don't understand how the technology works, it's creepy and it's scary and they're afraid about the privacy and like they get grumpy about it. But on the other hand, at the end of the day, when things are more relevant, they're more useful to you, the consumer. And whether it's a paid advertisement or whether it's When you go to a website and you're looking to buy something and they're able to bring more useful information and relevance to you because they know more about you, in general, it creates a better experience for everybody.

You're touching on a topic that I think has been at the forefront of conversation for many brands, recent privacy changes like Google and Apple have put in place. I'm curious what your take on that is.

My take is very cynical because I've been in the room for many of those conversations and watched. We were one of the companies that helped Facebook go from non-personalized advertising. We helped them build the personalized advertising stack that Facebook now makes all their money from. And so I've been there for a lot of those debates. And what ends up happening is there's 3 parts to it. In the beginning, there's a bunch of people at the company who's, "No, this is bad." And then everyone very quickly realizes, "Oh, but we make 10 times more money if we make them relevant." And then all of a sudden the whole company's like, "Oh, okay, let's make them more relevant. Okay, that's really good." Then all the companies will move over to this high level of personalization. Then the third step is, "Oh, we shouldn't let anyone else make money. This is ours. We should prevent all these partners from making money." let's start restricting access to that data for all of the partners that are in the ecosystem. For instance, what you've seen with Apple, Google, and Facebook is they've slowly increased the privacy except for them. So if you look at the way Apple's ad engine works, they have full access to all that information because they want to be the one that monetizes the relevance and they want to basically prevent anyone else in the ecosystem from getting access to that data for competitive reasons. Mostly at Apple, they wanted to screw Facebook. Facebook is their next big competitor for the next generation platform, which is AR and VR. And so if you can put a big dent in Facebook's ad business right before this next platform shift, you're well positioned strategically. Unfortunately, the problem is, is that for most consumers, they don't really have an awareness about how these things work. In fact, they have no idea how they work. And so they fall prey to a lot of these sort of arguments that are made in public about privacy and about, oh, we're protecting you, when in reality what's happening is it's big corporations fighting with each other about who will have more market share and who control this data to facilitate them selling products to advertisers. It's a very painful thing to watch.

If you were to start again in 2022, would you be entering into the digital marketing ad space as a founder?

I still invest in the space. I'm one of the more active investors in the ad tech ecosystem because I've spent a lot of time there. But it's a very different game now. For instance, when we started, there was 6 companies that basically were all in the same lane that got started. There was us, MediaMath, Turn, a company called The Trade Desk, a company called DataZoo, a company called Invite Media, which Google bought. So all those companies, we all started together, and then some of them did well and became $30 billion businesses, and others of us didn't do as well and had to find our way. But back then, it was a more open opportunity set. Now, the ecosystem is largely owned by these big battleships. So Google, Facebook, Amazon control the stack and control the various platforms and control the data. And so if you want to navigate in that ecosystem, it's very difficult. And building a really big business is challenging. It can be done, but it's hard. So as an entrepreneur, I don't know if I would go into the current dynamic because it's hard, but maybe. It's like, where do you find real competitive differentiation? Where do you find real value? Where do you find real sustainability? If you find it, then you have to follow it where it leads.

Where do you think this ecosystem has evolved for the actual payer of the ads? We're talking a lot about the mechanism of how ads are surfaced and the platform. But we've had the chance to speak to a number of direct-to-consumer brand founders here, and it's been a consistent topic of late, how they think about marketing given the changes in privacy. What's your perspective on anyone founding or working within marketing on the paying side?

All my companies that I'm involved with have really been hit pretty hard in the last— well, since Apple made their changes in, in the last 12 months. I think it's just really unfortunate. There are a lot of them are collateral damage at the end of the day between this fight between Facebook and Apple and Google to a certain extent. At the end of the day, they're trying to bring their products out to customers who will eventually enjoy that product and continue to buy that product, and their life will be better because they have access to it. For instance, one of the companies I'm an investor in is a company called Mudwater. They make a mushroom tea. It's an amazing product. There's a whole backstory there about how I got involved with it because I don't really invest in consumer, but the founders are amazing. It's a long story. But at the end of the day, like, the people I know that drink Mudwater, their lives have changed because they've been able to remove caffeine from their lives and all of really high-quality adaptogenic capabilities of mushrooms are brought into their lives. And, you know, the change that Apple made made it harder for MUD to tell its story. And now it has to spend a lot of its time and energy on TikTok. But at the end of the day, it's, it is what it is and there's nothing really you can do about it.

We could see these changes using the phrase like cutting your nose off to despite your face a little bit, but we'll have to see the test of time on that.

I think Apple is, they make a lot of their money in other ways. And so they don't really care for them. They're like, oh, okay, we can take a lot of money out of Facebook's pocket. We can put a little bit more in our pocket and, uh, fuck Facebook. So go for it.

Talking a lot about some investments that you've made today. You're the founding partner and investor at Coleus Capital. We've talked a lot about different types of fund construction on this podcast and the different mechanisms through which other startup VCs are investing. How is Coleus Capital structured?

I'm probably gonna be the weirdest answer to this question you ever heard. That's my guess. After we sold the company in 2015, I was wandering around like a lost, lonely, wet puppy. Didn't really know what to do with my life. And one of the companies that I had been an advisor to was a company called Branch Metrics. So I'd been there from the beginning and I'd introduced them to their seed investors and I'd been involved in their process. And so when the Series A happened, NEA was leading and I was like, hey, there's this new AngelList thing. Can I try that? And they were like, "Sure, go for it." And so I wrote the memo and I got a $200K allocation in what was a $20 million round. I was just like an afterthought for them, but they didn't really care. And I sent it out to all my friends and 24 hours later we had filled the round. And I was like, "Whoa, look at that. I'm an investor now." Like I had no idea what I was doing. Like just pure luck. A couple months later, I'm with my friend Kyle who had started Cruise. I tried to hire Kyle for many years and he was always smart enough to say no. He's really good. He was like, "Oh yeah, we just raised a round from Spark." I was like, "Oh, can I invest in that? Because Spark invested in me and I can be helpful. I'll tell you all the secrets about how to deal with Santo, who is brilliant, but he's a challenging person sometimes. I love Santo. He's amazing, but he's also hard." And he's like, "Okay, that's cool. Let's do that." So here I am doing it again, investing in Cruise. So then a year later, the Cruise exit happened and suddenly everyone thought I knew what I was doing. I was down with that. The sort of network effect started and Capital just came sloshing over in a massive way and the ball started rolling really rapidly. And so I went from the first year I deployed about $1 million, the next year I deployed a little over $3 million, and then the next year it was like $14 million. It was just like, "Wah!" And so for the first 5 years, I used AngelList for all my capital. And then I also worked with a group called Industry Ventures. They're like a big sort of fund of funds. They do a bunch of stuff. I had gone into them and This was 2017, the first LP meeting I ever had ever. And I went in and I was like talking through what I did and I'm this weird angel list guy and they're like, oh yeah, that's funny. And at the very end of it, I was like, oh, by the way, I'd written this term sheet for HelloSign to do a bridge. And then Brad from Foundry found out and called me up. He's like, oh, can we make this a B? And I was like, of course, sure. And so now I had this $4 million slug in the HelloSign B that I somehow needed to fill. And I was like, oh shit, how am I gonna do that? 'Cause angel list can't do that much capital. Now maybe it could, but back then, definitely not. So I mentioned that and they're like, oh, we used to do this thing with Saka where he would find deals, we'd go through our committee, and if we liked it, we'd fund it and then we'll give you economics. And I'm like, woo, me. So we did the Hellosign deal together. And then what ended up happening is I found some more deals and they liked them. And then when the Hellosign exit happened, they were like, oh, okay, here's some more rope, go hang yourself. So that grew and grew, and then it built into a really strong relationship. My first real fund I didn't raise until the end of last year.

I'm hearing you use a couple different terms like AngelList, SPV raising, rolling fund. How would you describe your fund?

I have 4 vehicles. So one is the AngelList Syndicate. The AngelList Syndicate is 4,000 people. Every day there's more that show up who are on the list, and I email them when I have a deal. So I sent out an email to all the folks in the AngelList Syndicate. I'm like, hey, here's the round, here's the price. I have $1 million of allocation. Who wants in? And so they individually can raise their hand and join the syndicate if they choose. Whoever wants as much as they want. So there's a whole bunch of people who write checks for $1,000, and there's people who write checks for $100,000 and everything in between. And that money all gets pooled together into a single vehicle, a special purpose vehicle, a legal entity, and then is invested, wired over to the company, and then becomes a line on the cap table. So it'll be Coleus Capital XYZ 26 or whatever. And And if and when the company exits, then the capital will be distributed back and paid out to the investors on a pro rata basis minus my 20% carry, assuming we make money. So that's vehicle 1. That's my AngelList syndicate, which is like an amazing thing for me because it's like I have 4,000 people on my team. Every day they send me deals. They help me with diligence. They're super good at pointing out when I'm being stupid. Like when I do a deal that's a bad deal, like I get, oh God, it's painful how good they are at identifying how stupid I am. And they become my friends and it's a good group. So that's vehicle 1, and I try to use them as much as possible. I call it feeding the beast because they're just great for me. Vehicle 2 is I have an AngelList rolling fund. The way a rolling fund works is AngelList basically has a new innovation, and each quarter an investor, an LP, can choose to be in the rolling fund and they can throw in $10,000 or $100,000 or whatever they want. And so every quarter I have this pool of capital that I deploy into the deals that I'm doing as I do them. And then if you're in that quarter's rolling fund, you get exposure to whatever deals I do that quarter. So this quarter I did 4 deals. And so you get your pro-rata exposure to those 4 deals. And then if you choose to be in the next quarter, you can do that. And so up to 8 quarters can basically be pooled together and effectively what they call cross-collateralized. So if one company makes 1,000x and the rest of them lose all their money, then you basically get all that economics pool together. And that's a really cool tool for me because I meet people who are like, oh, I want to be your LP. And I'm like, okay, just use a rolling fund because it's real— AngelList does all the work and it's lightweight and I don't have to deal with it. I have also a main fund, which is not announced, but it's called a $35 million vehicle with a bunch of traditional LPs. And that's my main early stage vehicle that I go find stuff from. and that's a traditional VC fund. And then I also have an opportunity vehicle with Industry Ventures where they're the sole LP. We find deals and throw it into that. In theory, it's $30 million. It could be bigger or smaller. It depends on what we feel like making it in terms of size.

You're definitely right. It is the most complicated structure we've heard and talked about on here, but thank you for walking us and our listeners through it. It's such a morphous thing, venture capital, and because it's become more and more democratized, which we're big believers in, it's actually almost become infinitely more complicated for the average person to understand. Even I sometimes don't fully understand how rolling fund dynamics work, and I work in the industry. So I think it's really helpful to hear that unpacking. You published a user manual in 2021. There was one line on it, and we'll link this, we'll link this in the, the episode. So if anyone wants to check it out, but you said, I don't invest in crypto, hard sciences, bio, chips, chemistry, or really any sector where my lack of Bayesian-based set of knowledge would be material.

Fair.

Good point. Probably no investor should be doing that. Honestly, we should probably all have that disclaimer on our websites. But curious particularly about your first indication there, crypto. Has your perspective over the past 6 months changed on this or any of these industries?

I made the very painful and unfortunate mistake of When I first looked at crypto, so the white paper came out and I think Bitcoin was like sub-a-dollar. I looked at it and I was like, oh, this shit's never going to work. Here's all the reasons why it's a dumb idea. And then now after all these years, I live with those priors and they're quite painful because it's hard for me to unpack my independent evaluation of crypto in general versus the sort of psychological pain of not having been smart enough to realize that this might work and I should put I should have put some money into it, which is what I should have done in retrospect. My smarter friends constantly make fun of me for this. For me, I still look at it today. I still really struggle with, one, seeing use cases that are actively real, so they're not financial speculation. I still haven't found anything where I'm like, oh, that's actually working and it's like really good. Now, a lot of people disagree with me on this and I can debate ad nauseam with my crypto friends, but I still feel that. Two, I believe that basically government centralized digital currencies are the future. So the RMB, like, clearly is going to be very powerful. And so for the Chinese government, like, having an RMB that adopts and copies the innovations of crypto but runs to a centralized database gives them visibility into all the money for all their people. And, you know, my crypto friends are like, well, that's not decentralized. And I'm like, yeah, and that's not how the world works. They want that power and they're not going to let you have it. So I believe that will probably be the biggest competitor to the US dollar. In the coming decade is a cryptocurrency that the Chinese government says, oh, by the way, if you want to use this for drug dealing, we don't care. If you want to use this for arms dealing, we don't care. Like, we have a real dependable digital currency that you can use anywhere in the world. You can get around any currency controls. You can avoid all the stuff that the West is trying to do through their financial sanctions. And that would be a killer app to people who want to have access to a non-dollar but easy to move monetary system, which would enable the Chinese government to truly become competitive with the US dollar as a reserve currency and potentially destabilize the whole sort of US power as a result. That's a no-brainer to me. If I'm the Chinese government, I'm absolutely doing that. And so I'm like, okay, that's going to happen. So then when that happens, you know, what happens to cryptocurrencies in that world? One, the dollar has to basically compete with that. It has to do a version of that. And I can't imagine a world where the US government says, okay, we're going to adopt a cryptocurrency. And when we do that, we're going to adopt existing cryptocurrencies where a whole bunch of people who got there early are going to become really rich instead of just rolling our own, because we could roll our own. And by the way, we're going to make it centralized too because of money laundering and all these bad things that people do, but more importantly, because it's powerful. And so then in that world, you have two centrally controlled government cryptocurrencies that are clearly at scale. And like then in that world, what does crypto look like? Uh, I don't know. And the third argument I make is all of the use cases that I've seen in crypto that are working and the killer app for crypto and the reason why it's worked so well is it gets around government controls. So if you want to basically do things that the banks won't let you do, crypto is great for that. If you want to move around money in ways that doesn't involve telling the government, crypto is great for that. There's a bunch of things you can do that are largely just evasions of government control, which are— it's a killer app for, and that's why it's done so well. But it's hard for me to understand how that becomes sustainable. But I said at the beginning, and I've been wrong for all these years. So it's really hard for me to know. But those are my arguments.

It's helpful to hear a contrarian opinion, and we wouldn't be doing our jobs right if we weren't contrarian on some things and wrong on others. So I'm excited to look back on this conversation and have you back on in 5 years, Zach, and talk about what we think.

It's going to be you being like, haha, you were a dummy. Everyone who's been, who's been the opposite of me has done way better than me. I'm not short crypto though, because I'm not that Yeah.

As we think about some spaces where you're more skeptical, if we can turn that around, what are some sectors that you're bullish on right now?

I'm just like a long-term techno bull. I look at the future and I say, okay, what does the future look like in 20 years? So in 20 years, we have autonomous cars that drive everything everywhere, which is 30,000 people a year are dying from basically human drivers in just in the US alone. Imagine the number of crippled people as a result of that. We have robots to do all the manual labor that we live in. We have AI that solves a lot of the sort of tedious work of our lives. We have VR that feels real. There's all of these things that are clearly going to happen. We'll probably have free unlimited energy. If you look at the curve, I believe we have a number of vectors that will achieve free unlimited energy. We'll have solar entities that are real and that will have the ability to expand beyond the Earth. And so when you look at those things, which I think are all guaranteed, they sound science fiction, but I think that's pretty much Unless we nuke ourselves, that's going to happen. And then you look at the work that we need to do between here and there. It's like, oh shit, that's a lot of work. That's a lot of companies that need to be built. That's a lot of incremental and revolutionary change that needs to occur in order to build the future that I am certain will exist across every sector, whether it's climate, whether it's SaaS software, whether it's autonomous vehicles, whether it's AR/VR, whether it's space, you name it. God, we have so much work to do. It's fun to watch.

From the founder perspective, Zach, what would your advice be for founders who are looking to get a yes from an institutional fund or even from an angel?

I kind of break it into 3 answers. In the beginning, traditionally the pre-seed, it's really about the founder and it's about the market and maybe a little bit about the idea, but it's really like, okay, who are you and what have you done? So unfortunately you can't really fix that problem. It's just your background is what it is. And it's what are you going after? The timing is obviously critical for that. You want to go after a market before it's established and before there's a bunch of companies that are funded already going after the market, but you don't want to do it before there's no opportunity. So that's the first area, which is dependent on a lot of things. The second area, which is where I play and where I spend all my time, is I like to say that ideas are meaningless, but validated ideas are priceless. And so what I mean by that is as you go into the market and you make contact with the market and you're like iterating around what to build and how to build it, If you're lucky, you find that first hint of product market fit. And what I mean by that is you get to the stage where you find something that's actually valuable. And what I mean by that is you can cold call a customer at 9 o'clock at night on their cell phone while they're putting their kid to bed and describe what you do in one sentence. And instead of them being like, fuck you, why'd you call me? They're like, oh my God, I want to talk to you tomorrow, but I'm putting my kid to bed. And then hang up. In the beginning, when Uber first started, it was like, Okay, you push a button on your phone and you get a car. You're like, oh my God, compared to a taxi, that's amazing. Or the dating apps, you're like, oh, you can just look at pictures and see who you like and then you can go from there. Oh, that's amazing. It's much better than going to a bar. You have these products that are truly 10x better than what came before. That's that first hint of product-market fit. And so discovering, I call it validating, that you have something that people want is the most important step in the business because then what ends up happening is that the business inverts. So in the beginning, traction and customers and revenue is really hard because you're like trying to figure out what people want. When our business, when we found it, we went from $1 million in revenue to $30 million in revenue in 12 months. It was like, oh my God, off we go. And so once you find that first sort of thing, that unlock, then all the things that were hard— traction, revenue, customers— become easy. And then everything that used to be easy— managing scale and managing your team and growing because you're growing really fast— becomes really hard. And so that's the sort of beginning of where most institutional investors like to start getting interested. And then the third step is when you have metrics. Once you find it, you start to get month-over-month growth metrics, and you can be like, okay, we grew 20% this month, and we grew 20% the next month, and we grew 20% the next month. Then any idiot with a checkbook can be like, ooh, extend the line. Okay, and then how big is the market going to be? Okay, boom. And you have 6 people bidding for your Series A, and like, it gets kind of wild. Obviously much more complicated than that, but that's the way I like to break it down. Then it becomes the most important thing is it's not about what's the answer to the general question, it's like, which sector of those 3 buckets are you in? And then, okay, now we can start to dig into like, how do you solve the problems that are common for people that are in those particular buckets when they're trying to get investors to invest in them? Because if you try to pretend like you're in bucket 3, but you're actually in bucket 1, it won't work very well. Or vice versa. There's people who are in bucket 3 who try to still pretend like they're in bucket 1. That doesn't work very well either. You really want to figure out where you are, and then it becomes much more easy to answer those questions correctly.

That's super helpful and a good way to break it down. Uh, as a founder myself and my fellow founder friends, always hearing the advice of like, it's better to raise on nothing than have a little bit of metrics that are not like the big hero numbers. And it's interesting to put that feedback in your framework. Makes a lot of sense.

Just to extend on that, I think that's It's both true and not true because if you're still exploring and you're open about the fact you're still exploring, then when you talk to investors, you can be like, look, we're still exploring, but here's some data that we have, but this is not extending the line. But the problem that I see a lot of founders get into is they start to get a little bit of metrics and a little bit of traction, and then they're like, oh, we have to extend this line. That's not necessarily true. You don't want to really jam the throttle until you find the thing that can actually go really fast and become a rocket ship. In a lot of ways, if you can know where you are in that life cycle, then you can manage the expectations of your investors and manage the story that you're telling and be honest about where you are. And I run into that a lot where a founder will be like, "Oh, here's where we are." And I'm like, "Oh, you're actually in stage 2 and you think you're in stage 3, but you're actually in stage 2. So let's go back and think about it differently." But that's hard because the founder's journey is like you're constantly getting punched in the head. It's the hardest job in the world. And, I don't miss that. It's really hard.

As we're coming up on time, we'll switch gears a little bit. We've chatted a lot about your career as a founder, as an investor, what you're excited for in the future, but we'd love to ask what's next for you, Zach, personally?

Oh, that's my favorite thing about this job is that it's just like a constant growth curve. I've been doing this for 7 years now. It's crazy. How'd that happen? And I feel like I'm in the third or fourth inning in terms of getting good at what I do professionally, because it's not only the execution of doing the job. And making the decisions and working with the LPs and there's all that stuff. But it's really the companies, like really understanding the different life cycles of the company. Like the portfolio now, we've got about half a billion in annual revenue across the companies that I'm involved in. And they're big companies now and they have big company problems and they still call me and they're like, hey, what should we do about this? And I'm like, I don't know. I've never dealt with that problem before. So I get to learn alongside them as they go through this. And we have a couple IPOs that will probably be happening in the next couple years, and that's going to be really fun. Like, I've never IPO'd a business that I was there from day zero on. Just being involved in every step of the way of these businesses, it's an amazing luck box experience. Like, it's so much fun. So it's cool. I'm like, I've got so much to learn. I could do this for a long time.

Thank you for sharing that. We're excited for you. We ask this final question to all of our podcast guests. It's our hero question. We ask that this be someone more in the professional context. That is, who is a woman in your life that has had a profound impact on yourself and your career?

This one's really easy for me. So my sister is my better half times like a thousand. And I'm good at what I'm good at, which is a very small, limited thing. And she's good at everything else. And in a lot of ways, I was lucky enough very early on in my career to find her as my partner in these businesses. And she was able to solve a lot of the core problems of the things that we did together over and over again. And And so it was like one of the luckiest things that ever happened to me. She's by far the easiest right answer for that question.

I'm going to send this to my little brothers. I don't know if they'd speak so highly about me on a podcast.

Given the load that Susan has carried in my life, I would be remiss if I didn't. She would probably teleport here, hit me upside the head and be like, yo, what the fuck? And I'd be like, oh, you're right.

Thank you so much, Zach, for joining us on The Room today. Learned a lot. Love chatting with you and excited for our listeners to hear this conversation.

Yeah, for sure.

Thank you for listening to this episode of The Room Podcast. Please like, follow, and subscribe to our newsletter, which you can find at theroompodcast.com. Get excited for next week's episode with another mover and shaker airing Tuesday, April 19th at 10 AM Eastern, 7 AM Pacific. See you in the room. Support for The Room comes from Silicon Valley Bank. Silicon Valley Bank understands these questions can keep founders up at night like Claudia. For over 35 years, Silicon Valley Bank has helped high-growth companies through scalable financial solutions, plus insights and expertise that many other banks just can't. Which could be why 50% of US-based venture-backed tech and life science companies bank with SVB. Learn more at svb.com/next. Silicon Valley Bank. Built for what's next.

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All opinions expressed by Claudia Madison and podcast guests are solely their own opinions and do not reflect the opinion of The5AC. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.