The Real Secret to Selling Anything with Investor/Exited Founder Tom McLeod | Seed to Harvest Ep 93

If we were going to sell drugs, we'd move to Miami. And if we're going to do this tech thing for real, we got to go to— we got to go to the Bay Area. I have a friend, he used to tell me, like, the best salespeople in the world sell the easiest thing to sell. We end up having the number 2 photography app for about 6 months behind Instagram. We create the largest companion app to a game called League of Legends. I started a company called Omni, which was the first, like, true venture-backed startup that I did. I want to build— I want to build Dropbox for real things. And he was like, What the— what?

What?

Like, really kind of, kind of absurd to go from like Tom McLeod, co-founder and COO of a 13-person org a year and a half ago to maybe the fastest growing tech startup in history.

Tom McLeod, welcome to the show. I'm super excited to have you on Seed to Harvest today and share more of your story, both as a founder and a very creative investor. Welcome to the show.

Thanks for having me. Excited to talk about— I have very little prep here, so I'm just letting you guide us out.

Guide the discussion. So one of the reasons I was really excited to have you on the show is we were on this like group trip together, and anytime anyone would bring up any creative industry, you had a backstory of how you had created or discovered some sort of financing. And it was fascinating. Because I feel like there are very few people taking such a creative approach to investing. And I think a lot of that is informed from your founder lens. So I was thinking maybe we could start at the beginning, kind of like your— the first business you started. Yeah, let's start at the beginning if that works for you.

Yeah, the like 20 years in 2 minutes sort of situation type thing.

Yeah, exactly. Just a brief intro.

For sure. I mean, I think there's like 3 types of founders, so I'll preface it with that, right? You know, certainly in like the venture-backed tech world, there's sort of the like, uh, autist savant, technical, et cetera, right? So you've got the like, I can build something because I can see the future and I wanna manipulate it and bend it to my will. I'm not very good at speaking to people, but I'm really good at speaking this product code thing. It needs to exist.

Yeah.

You know, like the, the I manifest thought into reality folks. Those are the, you know, the Elons, the Gateses, the whatever. And they're who a lot of people are comped against, even if that's not— it's so far outlier and unlikely that it's hard to think about that. Then you kind of have the like 6'2, I played lacrosse at top 20, maybe Ivy MBA.

Yeah.

I have a really cool case study in my you know, 5th year of college, Van Wilder-esque guys, largely guys that are just like, I've got a business, it exists in an Excel sheet and I'm gonna operate that. And if I have to pivot, I will change cell number, you know, A10 to the new business.

Yeah.

And that is a formula and there's a format for those. And then you kind of have the like hustler t-shirt sales, probably sold drugs, maybe sold bootleg CDs, maybe were club promoters, like that folks, which tend to be like sales, market vision, hiring type folks. I'm firmly on that side of the veritable spectrum.

Wow.

Okay. And so, when I think about things, you know, when I was really young, I sold like snap bracelets to kids before they got banned. Wait, those got banned? Yeah, when I was a kid, they got banned because the metal was so thin that kids were slicing their wrists with them. Yes, this podcast got real dark real quick. But so I was, so at one point I was selling illegal snap bracelets and I would partner with a friend who could do bubble letters, which was like a cool thing in, let's call it 1993, really dating myself here. And, you know, we would sell like snap bracelets to people and then There was like an era where like card collecting got really popular in my school and like basketball cards, whatever, Magic: The Gathering cards. And I would get, I figured out that you could buy a 9-card sleeve for a binder for 15 cents, but they sold the 1-card sleeves for 10 cents. So I would buy the 9s and I would cut them with X-Acto knives and then sell the 9s for 5 cents at my school. So it was like— 15 cents to buy the sheet, but I could get them for 45 cents and I was still undercutting the store by 5. So I was like the game in town for selling single card, um, you know, single card card sleeves.

Mm-hmm.

Bunch of random stuff beyond that. Started like a little landscaping business when I was a kid. It was always something. I was always shooting for something, uh, somewhat independent. In college, I'd had a cable modem really young in my house. So I learned about the Napsters and the LimeWires and all of that. And I had, Pretty big music, like music collections of MP3s way back when. And one of the ways I would make ends meet in college is I was just selling bootleg CDs. I had like a giant CD burner tower and was figuring that out. And that actually eventually led to me having a degree in audio engineering with a computer science minor.

Wait, I was gonna ask, cuz I saw that in your background and you had also started a record studio after that, right?

Yeah.

Yeah.

I mean, my degree was engineering, like was specifically audio engineering. I didn't know my university even had audio engineering when I went there. So I was in like the communication, the School of Communications studying basically like technical communications with this idea that if I learned how to record in like a CNN broadcast, that I could find my way into recording music, et cetera.

Wow.

And one day I was playing basketball And there was this guy, uh, what did we call him? Oh, he called himself Precise. That was his name. I don't know his real name, but he always called himself Precise. And he had a giant hard drive with him every time he would come to the basketball court. And one day I was finally like, dude, why do you carry a big giant external hard drive with you? And he was like, oh, these are my masters. Like, I work at the—

Whoa, he would carry his masters with him all the time?

Yeah, because this is 2002 and like you had big giant external hard drives because you couldn't use the hard drives in the studio because those were common shared. So you always had to bring yours with you every time you wanted to work on the projects you were working on. And yeah, so he was doing that and I finally was like, what do you mean? And he was like, oh, you know, I'm an audio engineering degree. I work at the music studio on campus. I was like, what? I left basketball sweaty, went with him, saw the whole studio. Next day, switched my major and there was like, you know, 17 kids in the major and we all knew each other really well. Out of college, I had started working with artists in the area. Mostly I was at American in DC and mostly working with like kids from Howard who were, you know, focused on the music majors there, larger creative arts school, producers out of there, rappers out of there. And Wow. Ended up getting enough traction that a friend, a friend of mine and his family helped invest in a small studio to take it, to make it more real. So I was running a studio, recording people, also running the record label out of it. And I did that for probably like 4 years out of college.

That's incredible. I— damn, that's so sick. I— yeah, wait, and then I guess. Yeah.

How did I end up here?

Yeah. How'd you end up here?

Yeah.

So that's the 20 years in 2 minutes.

No, that was 20 years ago in 2 minutes. Now I can give you the how I got here in the back minute of the 10 minutes I've taken already. Um, yeah. So that's also probably the worst time in history to start a record label and music studio. If you look back on, let's call it '05 to '09. Spotify shows up, SoundCloud shows up, the price of recording drops into the ground, digital distribution becomes huge. No one cares about labels anymore. It's all about singles constantly feeding the system. And I found myself in this position where I was running like an '80s, '90s style record label and an early 2000s style studio. And all people really wanted was just like more songs recorded quickly and cheaply as fast as possible. So end up doing MySpace pages. For all the artists as well as that became a huge part of the business and just building their websites. And one day realized we're making so much more money doing websites, I should probably just be a website designer. Um, let go of, let all the artists out of their contracts and, um, yeah, dove in on that.

Damn, was that hard to—

Yeah, I guess miserable. We had like a 3,000 square foot warehouse that had like a basketball hoop in it. And, you know, a music studio where all of my friends worked and were a part of it. And then suddenly I was alone in a giant empty warehouse with a green carpet making MySpace pages. It was—

Damn.

It was not great.

It's kind of like that scene in the movie where you have to, like, grow up and you're, like, following the money and you're like—

Definitely, definitely the scene in the movie where you have to grow up. For sure. For sure. Yeah, I mean, I think that's the founder journey though, right? It's like, I always tell other— I always tell founders, it's like, you're gonna get punched a lot. It's just kind of a nonstop beating. Very rarely do you start something, it just works. Like, truly almost never. And every time you get more success, you actually take sort of a, like another beating. Like it's now you have to open up a new box and that box has something that hits you and there's a new error or a new thing or scale changes things. And the goal is just—

Expectations grow too. Like you might, you might be—

Every new level unlocks new.

And then it's like, oh, okay. It's not like just about like binary. Can I do this or can I not? It's like, can I be the best at this? Can I like excel in the like highest levels of it?

Yeah, because everything you're doing, even if you're the first, you won't be the last, right? Someone will come fast, someone will follow you. There'll be another opportunity to have a challenger. No matter what you do is going to have a clone or an opportunity for someone to come and try to take your market share. It's just any, especially if you're doing anything on the frontier, if you're like, I want to build something new, there's always going to be that.

Mm-hmm.

And my, my thing is always just like, you can survive the body blows, just don't get knocked out.

Mm-hmm.

Right? So like, just don't hit, don't get hit in the face. Like figure out how to bob and weave until you get it. And this was the first time I think I felt that I was like, all right, I took all the body blows. I did all the hard things. All these artists are off on their own and now I'm a web designer. Okay, next phase of my life. Um, what ended up happening is almost all the people that we were doing websites for, by the end, it's like I'm doing websites for law firms and restaurants and coffee shops. And you find this point where they all want to change their websites and everything at that time is really heavy. So it's early WordPress, early Joomla, Drupal. It takes about 12 hours to make a small business website, but it takes like 10 hours more to install stuff back then for these folks that really just want to make one change every now and then. They want to change, you know, add a new partner to the law firm, update the weekly specials. It's just, they don't need a whole platform for constant content management. Yeah. I'd had my first class of my first year about 9 years earlier had made the website for the record label. And now he was managing an interactive firm in Bethesda, which is right outside of DC. And I go to him and I'm like, hey, I think there's this room in the market to build sort of a super light content management system that just easily changes the files, nothing heavy, really quick integration. And he agrees, he thinks this is a good idea. So he actually hires me to chop the website for the state of New York. So it's like ilovenewyork.com. By day, I'm like doing, you know, cutting the images so they fit into the tables. This is, you know, 2009. And at night we build a startup. We like build this product. And then when we have it and we're ready to launch, he leaves his job and we end up in the back of another startup that's well-funded, renting a closet from them to launch our product, just the two of us. That's awesome. It's early Twitter days and no one knows what's good on Twitter yet. Like no one knows how to properly use Twitter. And what we end up doing is any person that says they're a web designer, anyone that mentions web design, anyone that says content management system, I just message them right publicly on Twitter and say, hey, love it if you tried this thing I'm building, it could be great for you. Back then there was no Twitter etiquette. No one thought it was weird. There was no real brands on Twitter. And you'd get these big think pieces about, you know, like they would write little Twitter threads before we even knew what threading was about, oh, look at these, this company and how cool this guy is, like reaching out. So we basically manually got the first like 10,000 users just by talking to them on Twitter. Eventually that business becomes pretty good. We get about 100,000 people using the software, about 30,000 of them paying us $19 a month. I'm like 24 with one partner and we don't know what we're doing. We have no business degrees. And I end up going to this conference called Summit Series. And I end up meeting a bunch of soon-to-be extremely successful people. I have dinner that night. The first night it's dinner and it's, the dinner table is me, Drew Houston from Dropbox, James Lindenbaum from Heroku, Matt from Scribd. Just this whole little crew of people. Everyone's building, no one's huge yet. And they're all in the Bay Area. They're all in San Francisco. And they kind of are like, you should move out here. You've got something interesting, blah, blah, blah. So I go back and I'm like, we need to move. Like, we need to find out if we can compete in the majors. You know, if like, I tell my co-founder, I'm like, I was like, if we were doing, if we were going to be bankers, like we'd want to be the best bankers. So we'd move to New York, right? We'd need to know if we could play. Like if we were, if we were going to make pizza or whatever, we'd either go to Chicago or like we'd figure this out.

Yeah.

And I was like, if we were going to sell drugs, we'd move to Miami. Like we would know. Like you need to know if you're the Yankees, right? You need to go and find out how well you are. And I was like, and if we're gonna do this tech thing for real, we gotta go to, we gotta go to the Bay Area. And we do, we move there. Um, instead of what we should have done, which is we had 100,000 customers and Squarespace and Wix had just been announced and we should have just gone to Sequoia and been like, we have a quarter million in monthly cash flows and you should give us a bunch of money to turn this into Squarespace or Wix.

Mm-hmm.

Um, we said the iPhone App Store has launched, let's make iPhone apps. So we just cash flow ourselves. And at this point, we had a third partner off the balance sheet of PageLime. And we launched about 17 iPhone apps in 3 years.

Wow.

Of which 11 fail absolutely miserably. 4 do well enough to almost be annoying. And then 2 end up doing in the tens of millions of users range. We end up having the number 2 photography app for about 6 months behind Instagram. And we have, in 2014, we create the largest companion app to a game called League of Legends, which in 2014 was the biggest game in the world. And we end up selling that to Tencent, who owns the largest majority, I believe, of Riot, who makes League of Legends.

Wow.

And that was the first—

sorry, we're just gonna like skip over that. How did the acquisition with Tencent go?

How did that go? Well, um, I mean, it was a good thing, right? I mean, we ended up basically at that time, there was a lot of media around League of Legends. There was something called LoLKing, which was a stats page. There were all these different businesses that were providing missing features into the ecosystem for the community around the 40 million daily actives of League of Legends. And, you know, we had a couple million of them on our mobile app. Internally at Riot, they were building a competitor to us. And the way Riot works, which is a really interesting company, is they allow— at that time, anyone at the company was allowed to play League of Legends as long as they wanted during the day.

That's awesome.

as part of their job.

Wow.

Because they felt like playing the game with the ability to change and make the game better would simply mean that any frustration you had as a player, you would then translate into, I gotta go fix it because I can, and I can tell the people that. So they had this really cool culture around that. And what that meant was a lot of the employees were using our app because we had the biggest companion app to the game. And they started incubating an internal competitor to what we built that was gonna be the first-party one. And their 10, 12-person engineering team they had on it, when they were looking at it, they couldn't get any of the people in the company to switch to the internal one and not just use ours.

That's awesome.

So they couldn't keep the pace. It's a, it's a good example of just like where you have agency as a startup when you're young and quick and fast and you can just, you know, out— you can truly just outbuild people, um, if you don't sleep and all those different things. Noting I'm not the hustle porn all-star king, but there is some edge to being fast and agile, right? And so we always assumed that they pinged Tencent about it and Tencent was working on this roll-up of all the media properties and they rolled us into kind of a roll-up with about 5 other brands and apps and websites in the space.

Did you fly somewhere to meet them? Did they meet you in SF?

Like, It almost all happened. You know, this wasn't a— this was a 2-person, 100% no-fund, privately owned LLC, right?

Yeah.

We largely did the negotiation and it was an asset sale, right? It was an app we had made under the auspices of a company. So there's not a ton that has to happen here. There's no board. There's just like, hey, we really think your product is cool. We'd like to add it to this thing. How many users do you have? What is it making in revenue? We'd love to put a number on that. They put a number, we counted a number, they put a number, we counted a number, we got to a number. We had a month transition of assets and moved on.

Wow.

Pretty smooth when you own everything. Something to, something to, a thing to talk about for founders out there. It's smoother when you have control for sure. And at the same time, we were sunsetting the Pageline product, not because it wasn't still doing well. We just were, it was a distraction. And so we sold that to the largest competitor, which had come out a few years after us. And they basically, they were still in it. They had the momentum to want to keep building that product and expand it. So we did that. And at that point, my co-founder and I split very amicably. We'd been friends for years, still very close friends. He wanted to start a AAA game studio. Like he wanted to build a game studio.

Wow.

And he sat with me. I remember it was like the Battery had opened and we went, we meant to meet at the Battery in SF, which is like a very, Mid-10s. Classic San Francisco story. You know, Michael Burch is somewhere in the wings, whatever. And he was like, I've got this great idea. I want to start this like AAA game studio. I think we have it. Let's switch roles this time. You know, you'll be like the CMO, I'll be the CEO, and let's go to market with it. And I was like, I've got this great idea. I want to build Dropbox for real things. And he was like, what the what?

What?

And I was like, yeah, remember when we moved? We didn't have enough room in our tiny apartments and yada, yada, yada. I think we can solve it now. Like we can do a whole thing. And he was like, that sounds real, real hard. And I want to do this game thing. And I was like, well, I want to do this. And I was like, are we breaking up? And he was like, yeah, but do we still love each other? I was like, yeah. And he went and did that. And he actually had a, I believe, a $90 million exit about a month, about a year and a half ago. Um, uh, to NetEase, um, which is basically the largest Tencent competitor, ironically enough. So he's basically dominated Japanese or, you know, Japanese-Chinese gaming company, uh, Asian gaming companies. He's now participated in multiple M&A there. And I started a company called Omni, which was the first like true venture-backed startup, um, that I did, um, with the idea that—

I guess like, how is the transition from being like bootstrap, doing your own thing to becoming like a venture-backed founder? Do you feel like you got more context on it moving to SF and were kind of like more in the flow? Like, how did those first conversations with investors go?

Definitely got more context. Still had no idea what I was doing, right? Because, yeah, again, if you take those 3 archetypes, the one that knows the most what they're doing there is that that middle business school one, right? Like they know the game and they're probably choosing to be a founder because they're not choosing to be an investor in some of those certain, like they've, they've spent enough time to understand the game and funds and what you are to them and what it looks like. And the savants, they get scouted like LeBron, right? Like they get found early and they get pulled out and they get nurtured. And they get put into YC and they get a lot of chances and they get EIR positions. The like, the like scrappy ones, we just get thrown to the fire, right? And I think we're, and I think we get, we're almost like a flyer on the portfolio. The portfolio is like, this guy, maybe he's got it. Who knows? Like this girl, maybe she's got it. Who knows? And you don't get a ton of coddling in that scenario. What I did have was a really good advisor. Because at that point, my network had started to grow and I knew some great people. It was this guy, Aaron Battalion. who was the original founder and technical founder of LivingSocial. He'd also built that in DC, ironically enough, and moved to the Bay Area. So he had known the path, the journey, real straight shooter. And he was ending his tenure there and ended up at Lightspeed about 2 years later, ironically enough. And what he told me was, you're a good founder, you've made money, but you've never made anyone else money.

Hmm.

And so you check some boxes and he literally was like, he was like, you're, you're non-technical. That's a demerit. You've built things before. That's a plus. At that point, I think pretty bluntly, there was some like clear understanding of pattern matching. And he was like, you're not a white male engineer from Stanford. So that's 4 lowers for you in terms of the pattern match that they were looking for. Though you are a male, I guess. however that plays out. And I'm just being super open on how like, that's like, that's how the world definitely worked back then. And he's like, and since you never made anyone money, you're just kind of a, they don't, they're not going to know what to do with you. So you're going to really have to crush the ability to sell the vision. And what he did is he functionally told me to go to DC and I went on like a DC roadshow of DC-based venture investors that he knew.

Yeah.

With the sole task of they're all going to say no because they have no idea how to invest in this type of product. Like they don't know how to do consumer tech at all. But they also are on an island. He's like, if you go and do this in Silicon Valley right now, if you go and do this on Sand Hill Road and they all say no and 90 days later you're still out pitching, everyone's going to know that you're the guy who can't raise the money.

Yeah.

Like, it's gonna be on the breeze. I'd be like—

Yeah, that's fire advice.

It was great advice. It was incredible advice. And so, and he made the intros too. Like, he set up the calls. Like, he was like, go meet with these guys and whatnot. And it's totally true. I would go into these meetings in Reston, Virginia with folks that, you know, they invest in, you know, defense tech startups for better dolphins with faster lasers on their heads, or, or maybe it's faster dolphins with better lasers on their heads. Um, you know, and they're like, I'm like, yeah, I wanna change the way humans think about ownership at scale. And they're like, uh, okay. I had one guy ask me, quote, I don't know exactly what you're talking about, but does this remove my safety deposit box? And I was like, sure, you could use this as that, but probably not for that. It's like more about your skis. And he's like, well, my house is 8,500 square feet in Potomac.

Fair enough.

And I'm like, well, we're not for you really. It's for the, you know, it's for the 26-year-olds with 5 roommates in New York and San Francisco that don't have a place to put their boogie board and wetsuits. And he's like, oh, is that a big market? You know, it's just a thing. And probably 20 nos in a row, maybe 30 nos. You know, I stopped counting when it just got so abrasive.

Yeah.

One of them messaged me after the meeting and, you know, I'm probably 3 weeks out there at this point and goes, I don't think this is good for our fund, but I would like to write a personal check. I think it's a really good idea. And, you know, every one of these I'm iterating. Like every single time I do a pitch, I'm like, this resonated, this didn't, switch this part earlier. They liked the idea of the big number, throw the big numbers earlier. Like I kept refining and refining and I call Aaron and I'm like, hey, this guy, I got someone that wants to invest. And he's like, you can come back. Is basically—

You can come home now.

He's like, you can return to California now. That is like, wait, so how long was How long was that roadshow? Probably like 3 weeks.

Oh, okay.

Yeah, I mean, which, you know—

That's really fire advice. Do you think that would work? Yeah, you think that would work still now? Like if you're in that like scrappy founder, like third bucket, would you recommend that for other founders? Or do you think that the world is no longer as much of an island as it once was?

The world is less of an island. There's significantly more pools of capital, period. I do think there are isolated buckets by genre or thesis that you could still probably play in more so than location, which is interesting. Though people's time is significantly more limited because of the sheer volume of stuff that everyone sees now, that it might not be as easy to just be like, hey, I'm going to come to your off-thesis fund and pitch you this completely thing that this obscure thing that you have nothing to do about.

Yeah.

Back then there was just less startups. And certainly in that area, there was probably less to talk about. So they would take a flyer on some random consumer thing just to get market research data on their own, you know, broader portfolios and things. It's a little trickier to do that now. What I do think you could do right now is if you can get into a network of, you know, angels or, you know, super friendlies, there's also so many more, you know, little accelerators and incubators and things now all over and use that to just be like, my number one goal of here is not to figure out how to build my business. It's how to pitch my business. And really spend a lot of time on that. I think that's still incredibly valuable advice. Because, yeah, I mean, this is, this is probably later down in the conversation, but like, I just, seed pitching is, it's just a bet on the person. I mean, it is truly, it's like you can, you can gut check the idea pretty quick. After that, if it passes the gut check, it is simply, is this the person?

Yeah.

There's no data. It's all gut feels, you know, it's all vibes.

In our group chat, everyone was like talking about this yesterday. Is there like foundational value behind the company? So I was like, that's kind of like part of venture, but the other part is just being able to have the risk tolerance to make a flyer bet on someone that you think might be able to do this, and they should have a pretty compelling product.

Yeah.

compelling reason why. But at the end of the day, it's like that.

And I think this is a thing that founders should also realize pretty early on. The seed stage bet is a relationship bet as well as a bet on the company. You know, the likelihood of a person that can bring something to reality, bringing another thing to reality That might be the thing that actually makes the return is simply higher than the first person doing it. And never, like, if you, if you invest in someone and they don't win, but you saw that they were able to hire 15 people of high caliber, they went 0 to 1, they launched something, they iterated a few times and timing was off. Having been the person that they called on, that you put money into, that you supported, The next idea they have will be so much more advanced in terms of its ability to know if it'll work, where it will be, how the system is, the ability to hire, that you're actually playing a multi-round game. I think if you're in the seed investment, in the investment range, which is multi-rounds with the right founders are how you really win long-term, right? And that's in a lot of data that comes from it. But yeah, so I come back to Come back to the Bay Area and end up raising from just some really good seed stage folks, a few angels, and we get, we get to moving and don't know anything. I raised on a series of staggered convertible notes. So there was like a, there's like a, a $150K note on a $4 million cap. And then there's like a $400K note on a $6 million. And then there's like a And like, well, by the time it's done, there's like 7 series of convertible notes at different caps before we ever get to a real, like, true, like the true Series A hits. And I would highly recommend people not do that for future reference because your cap table then looks like Series A 1 through 7 with an incredibly weird preference stack and waterfall of who gets what when. And you have 7 levels of weird dilution that occur. And it's pretty much a nightmare. So just go out and raise your seed from 2 good people. And yeah, that worked out, built a product, got it to market and ran Omni for quite a while. I mean, we ran it for about 7 years, ended up with a couple pivots, built the original product, incredibly high net promoter score. Users loved it and ended up at this spot in about 2019 where no matter what we did, we weren't gonna be able to change this pure economics of the cost of moving a van with people along the road. Which for folks that don't know, Omni was a service where if you hit a button on your phone, we would show up and take away your tent, your sleeping bag, your skis. We'd photograph every single item and you could then say, you know, I want to go camping this weekend, bring back my tent and my canteen. Or Paige could borrow my tent and my canteen when I'm not using it. Or Aaron could rent it and I could make money off it Airbnb style, and we would handle all of that. So it basically went from, you know, public storage is this giant black hole of things to almost like a human 3PL. And what could you integrate into that layer? What's the data around ownership? If you wanted, if you had a handbag stored, could you give access to Poshmark or The RealReal and then flip it directly through a marketplace? Could you put your sneakers on StockX? A lot of great stuff there, a lot of meat, very wide. But largely at the core, it was an arbitrage play on the cost of storage with this cost center around the cost of movement. And what we needed at some point was self-driving cars to get there. But manufactured an exit on that one too. We had raised this sort of insane crypto round in 2016 that ended up putting us on a very different trajectory where we had 19 crypto payments engineers building out payments rails for all the peer-to-peer stuff and found a home at Coinbase for the team and exited that in 2019, about 3 months before the pandemic took everything out. And that was a run.

That was a run. Wow. That is wild. Um, okay. I also wanna ask, how did you start or get involved with Motoring Coffee? Because I would, I, yeah, I feel like that is one of the, well, it's always funny because I feel like someone will mention something in the group chat and then you'll be like, oh, I like own part of that. Or like, I helped start that. Um, yeah. So how did you get involved with Motoring Coffee and kind of what?

Yeah, so definitely didn't start Motoring Coffee. Um, It's a perfect example of like the right founder for the right business and where that sort of comes together. And I, after the pandemic, we left San Francisco and moved to LA. And I had started another company called Archive and a lot of things were happening there and started doing a few more angel investments and things on that side. And one day I drive like a, an M3 BMW, which is like, you know, kind of like a— it's like a good middle-aged dad midlife crisis car, but not the Ferrari. Like, I can still put the car seats in the back. That was at least how I justified it to my wife. But like, it's a, it's a car that people who like cars would drive, right?

Yeah.

And there's a gas station in front of the motoring club, and I was getting gas, and there was this guy taking a photo of a bright yellow Porsche. Like a bright yellow Porsche. And I very snarkily just go to this guy, hey, I can take a picture of you and your girlfriend if you want. And he turned out to be this like super nice guy and was like, no, no, no, no, I— and he was British, so I'm gonna attempt to not do a bad British accent. He was like, no, no, I want to take a picture of it with the club in the background. Like with this. And I was like, man, that's not a What do you mean the club? Like, that's a coffee shop. And he's like, no, it's a, it's a car club. I was like, man, that is a coffee shop. Like, people are getting coffee there. And he was like, no, come on.

Do you—

I thought you remember because like you have this like car and like this type of car our members have. And I was like, man, I don't know what you're talking about. What's a membership to a coffee shop? And he's like, come with me. And so we just leave our cars at the gas station. We walk across the street. And he takes me in the back and there's a whole like coworking area and all the cool cars are back there. And I've, I'm like, this is amazing. I've literally always wanted this in my life. And it so happened the founder and CEO was just sitting in the middle of the area that time. And he just introduced me and I'm like, how do I become a member? And he's like, well, you got to do a tour and blah, blah, blah. I was like, I just did the tour, man. I'm super sold. Let's make it happen. And he was like, tell me about what your time with cars. And I was like, wow, this is how— at the end, he's like, you're in. And I was like, yeah. And so I became a member. And in January of 2013, I turned 40 and I decided to do my birthday party at the club. And so I had a bunch of people. My wife said I married myself. Um, I had probably like 130 people come. Uh, I got, I had like, there was like a roast where like friends roasted me, a whole thing.

Nice.

Um, but a lot of friends saw the space during that time. Next week, the owner put out this little email talking about he was, he had found a location, was hoping to expand to San Francisco and would love if He could find some like-minded investors. So I was like, that's awesome. I'd love to be a part. Shoot me the numbers. And I ended up writing a very small, just like personal check, but I'm looking at it and I'm like, what if we could do a bunch of these? Like, what if we could go a little harder? What if we could, what if you had real money? And he's like, I'd be down to learn about that. And so I called my friend Ryan, who was the original first hire at Uber, original CEO of Uber. And we had been next door neighbors in SF for 13, well, probably 9 years before he moved to Hawaii. And we had done a little work together at his company, Saltwater, at the top of the pandemic when he was just starting it. And I was like, man, this would be exactly the type of thing that you've always said you wanted to invest in and I love, and we could help a lot without having to be the owners. And we figured out a great deal there where we ended up becoming one of the largest minority shareholders outside of the founder. We can help with it. They have capital to expand. They did it. They fully opened San Francisco. It's doing extremely well.

Amazing. It's down the road for me.

Yeah, it's right. It's down there in like Cow Hollow Union area. And now we're on the path to like, what does it look like? And one of the theses we have at Saltwater, which I eventually joined post-Archive, which is the last company I worked on, was can you invest in There's a hole between venture and private equity where there are strong operators who shouldn't be pushed into building outsized return expectation businesses because it will probably kill those businesses. But they also shouldn't be acquired and kicked out to create maximum efficiencies. There's like a layer of growth stage capital that is about a specific type of growth, which is, hey, Can we get this to 10, not 100? Hey, could this be a, you know, could this be a $50 million business cash flowing $8 to $10 million every year? And that's fine. Like there's a world where that is fine. And that's kind of where we focused a lot of our thoughts is on just sort of cash flowing businesses at the intersection of community, culture, and identity. And the motoring club, it was like the thing that ironed that thesis out for Ryan and I in our heads. It was, Kind of a perfect storm of those 3 things, which is like where we like to play.

Wait, I love that. That is so interesting. What are like some of the other interesting businesses that you feel like are at the intersection, either like in your portfolio or outside?

Oh, I mean, there's lots of businesses at that intersection. I think generally like music festivals exist in that intersection. Art fairs exist at that intersection. A lot of things that are broadly, you know, places or things that people can experience, like bits to atoms, but in terms of like the atoms being somewhat tied to your personal fulfillment, not just like bits to atoms in the DoorDash of it all.

Yeah.

And I think there's quite a few of those that exist. I also think there's just this interesting layer around communities at the moment. There's lots of them. There's ones that you and I are members of. There's things like Summit Series and Dialogue and Post-Exit Founders. And for everyone I named, there's 70 I don't know all around the world, all around the country that people are getting a lot of value from. And there should be some connective tissue around all these kind of semi-planned communities.

Mm-hmm.

And one of the things we kind of watched during like the crypto peak era of the last peak era, at least, was, you know, the Discordification of the, you know, economic incentives of a token-based group, right? And so you had tons of people in Discord, you had friends with benefits kind of grow into a bit of a cultural staple.

Oh yeah.

You had Boys Club with Natasha over there and Danielle build like a pretty incredible community that are gonna survive outside of the crypto of it all, because they actually connected a bunch of like-minded people. I think you also found things like just being able to have bought something or have something being a bad way to start community, right? You know, the CryptoPunks, Bored Apes of it all, not really being a true community. They're really an economically aligned financial group. And so where do those things all play together and where do those things come together is kind of what we're looking at. And I think of it as just like, I think the, I think the world is going to turn into almost like, it's like the subredditization of humanity.

Oh yeah, like people like bonded around like not necessarily niche but like different interests and things.

Totally.

You can go super deep on like, yeah. Oh, I guess like what are, what are some of the areas of interest that you have that have brought you super deep? I feel like art is definitely one, music.

Yeah, I mean, obviously I have background in music, so music definitely will always be a part of that, you know, on the creator side. I think as I've looked at my life, um, at this, this relative midpoint, um, uh, and I, and I, what was that?

Bought the M3.

Bought the M3, got the 2 kids, got the wife, got a house with a front yard. You know, it's very, very suburban dad vibes. I think I realized that as much as I was or have been a CEO, I think what I've always really was, was a producer. And that's what I was in the music side. I was never front of house. I never was making the music. I never wanted to be a rapper. I never wanted to be a singer. Never wanted to be a guitarist. I really wanted those people to be incredible and to make great stuff. And I think as a CEO, some of my flaws were that I would be incredibly, I would hire incredibly good people that I would delegate almost everything to because as a, like my producer nature is like here.

Yeah.

Like, you're incredible. How do I get the, how do I maximize you at all times? And while I'm incredibly good at zero to one, and I'll toot my own horn about that, it's like I've done this enough that I've built enough businesses. I've made enough things reality. I've hired enough people to think I'm in the upper whatever percentile of people to take an idea and make it real. Where I always start to run into problems is this like 13 to 30 people transition before you have to be a big company. And in hindsight, that's kind of where my production skills end as well. It's like I can get that first album amazing, that first thing. But when it's time to become, you know, Lady Gaga or it's time to become Adele, You know, it's, you should probably get the people that know how to deal with that scale. And, and, and I never historically stepped back early enough in that process. What I like about the new frameworks and where we're working on now is just like this format for investing basically is like you, my job is producer. My job is like, I've got enough aligned capital that you want to listen to me. I've got enough historical context. To hopefully be viably beneficial to your business, or we shouldn't do this deal at all. And instead of being the guy that, that you have that gets the call at 2 AM when the water main breaks, I'm the guy you call with, hey, the water main broke at 2 AM. I handled it, but I'd love some thoughts on what we do next because that can't ever happen again. Like, that's where I, I should sit.

Yeah.

And that's sort of what I'm focusing the next, you know, the next 20 years of of business operations entrepreneurship on is producer at scale across many different sectors.

Do you feel like the style of investing is also more suited to founders who fall into that category as well? Like more producer founders that want to get a company to very solid scale, but not like hyperscale massive. Yeah.

I mean, when you deal with hyperscale massive companies, there's investors personally in a few of those. And the best thing I can do there is just maximize my network for intros, right? Like those folks that are really good at that, they have a pretty good grasp on their business. They know it way better than I will ever be able to. They're seeing challenges that I never experienced, but things that they will still need is like, hey, do you know the CEO of Athletic Greens, or, you know, like, they'll need something for enterprise sales, or they'll need someone that can unblock a door, in which case, like, my job becomes like, who can I get to that can unblock you from this current problem? And that's where the value is. On the smaller companies, it is significantly more tactical. I can, in a lot of those cases, legitimately add real Active firepower towards their, their current situation. And in some of those cases, I've literally seen the problems before. And I like that my focus is on that. The focus is on deep dives to help maximize superstar talent into things. And part of the things I like hang my hat on right now is like, remember the movie Good Luck Chuck? Is this a terrible reference?

I haven't seen it.

No, not many people did.

Okay. Okay. That makes sense.

Good Luck Chuck was a Dane Cook movie. I'm pretty sure it was Dane Cook, where after dating him, the next partner would always get married.

Oh, yes, yes, yes, yes.

So he became this guy where everyone would do that. And when I look, you know, my last 2 COOs have built very large venture-backed businesses. One is the COO of Cursor now, for instance, right?

Like, really?

Kind of absurd to go from like Tom McLeod, co-founder and COO of a 13-person org a year and a half ago to maybe the fastest growing tech startup in history. There's been 9 venture-backed startups out of senior leadership from companies I've started. I'm an investor in at least 7 of them. I had an EA, Lauren, who's a friend at this point, who's now the EA for the president of the Marlins, ironically enough.

Wow.

Same thing almost. You know, like I'm the business Good Luck Chuck, who once told me, she was like, you know what, the biggest problem is you hire founders. You caucus with founders so much that the people that you want to be around are flight risks, not for being poached, but for building their own things.

Yeah.

And you can't even get upset about it because you see so much of yourself in them and you want them to do it so badly. That, that your retention is never, are we building something exciting? It's always exciting. It's always interesting. You always build a great system. And she's been with me. She was with me for 3 companies, basically. She's like, it's always, they then get the desire to build the thing that they've always wanted. And you're competing against the, you know, the, the, the quality of talent you're hiring, uh, for their own agency. And I reflected on that numerous nights. I'm like, huh, that's a really good point. Uh, maybe things would be different if I just found workers, but who wants to just work with workers? I don't know.

Yeah. Different things. Wow. That is really cool. Um, well, I guess I feel like we're at the part of the episode where I usually ask, like, do you, or what's, what is top of mind for you? And is there anything that you want to have a conversation with me about on, on the pod?

Oh, uh, that's a great question. I don't know, what are you looking at right now? Do you wake up every morning and you're just like, yeah, venture, this is the thing I want to do forever?

Yeah. And I feel like one of the things that's been interesting since I moved to SF a year ago is like really understanding the nuances better. And I think I can't tell if it's like I'm closer to it or also the world has shifted since I started investing, but there's like a a very specific delineation that I'm seeing between localized pre-seed and very competitive seed rounds.

Interesting.

That's been really interesting. And we invest across both stages. So I think one of the things I've been thinking about a lot is like the dichotomy of that. And if I'm honest with myself, I feel like the competitive seed is where I'm feeling more drawn. And so thinking through scaling the business, I think I need to go hire some incredible people to build out the pre-seed side of things because I do think it is more localized. It's usually a lot of relationships with investors in different locations. And then also this theory of if you think about it in terms of a manager or producer, do you want to break talent or do you want to work with like the best in the business that might already be established talent from a founder perspective. Because I think that, yeah, that's just been like something that's interesting to me is like, I want to do both, but they're like different strategies to develop. So yeah, that like dichotomy has been interesting.

Where do you feel like that stretches you professionally? Are you like figuring that out will— what's ending?

Will unlock everything.

Yeah.

Um, uh, I guess I'm just like grappling with it. Like, what does that mean? What does that mean for me? What does that mean for Behind Genius? Um, should I make any changes to what I'm doing because of that? Is it something that other people are seeing? Because I feel like they're in SF. I meet a lot more people who are more in like the competitive seed world, and that's like the world they know. And it's not like they're not breaking talent, they're winning deals. And those are, you know, different. I think like when I first got into venture, Will from Slow Ventures was basically like, you're— you have like 4 different elements of being an investor, which would be like, first is seeing, second is analyzing, third is winning, and fourth is supporting. And as an investor, you kind of have to choose what you're gonna be super spiky at because you're just not gonna be the best at all 4 of those. Yeah.

And then adding onto that, like, which do you think you're the best at of those 4?

That's a good question. I think I'm getting way better at winning.

Yeah.

That is like, that is like, like I played competitive soccer my whole life. Like, uh, it was something that I always loved. Like, I'm quite a competitive person and, um, I think That when I started reading about venture and like TechCrunch, I was like, oh, like I want to like one day be investing in these companies that are the you know the defining like generational companies. So I think that, but I also think we have like quite a unique sourcing method that's grown over time because my hypothesis was always a lot of venture firms struggle to build a brand online, and a lot of times it's because they don't. Need one necessarily. Like if they have strong networks from specific companies or investment firms that they've worked at, maybe they have like enough in their existing network. But for me, like coming in, I was kind of like in your third bucket. I was like, okay, I didn't go to like an Ivy League school. I, yeah, I just like didn't come from a traditional route. So I was like, let me build like a big audience in like venture Twitter. And then that led to like 50% of our Fund 1 LPs, like a bunch of investments in our fund. And being like extremely online allowed me to see a lot of things that people wouldn't see or didn't see early enough. Um, yeah, so I think the like seeing interesting things because there's almost like a, a city online like and that's like a specific geo. I feel like a lot of people like don't talk about that enough, but Twitter almost like exists in its own like geo where there are all these founders that are like Twitter native and they might be in other cities, but they mentally caucus in that type of founder. So I think that is like when people talk about investing in geos, I feel like they kind of don't clock that.

I mean, that's an interesting parallel, right? I mean, you found the same thing I found 15 years prior. Which is, you know, at least at some level, the ability to reach people where they are without having to physically be where they are is an absolute game changer for the ability to like market yourself, your product, your ideas, whatever it is that you have. You did that on the venture side. I did that, you know, on the like SaaS sales side, but it still works and it's hard to, it'd be hard to dislodge that skillset, I think.

Yeah.

Once it's in there, you know, it becomes a, it becomes a pretty core part of you.

Yeah. Oh, I think it was hilarious cuz I would like go back and like look at my previous DMs and I would just like DM founders of like billion-dollar companies, be like, huge fan of your work. And they would most of the time reply, like, I'm not like asking for anything. I'd just be like, what's up? And I would like show my friends, they'd be like, you're literally just like saying this to some Found, like, I don't know, like incredibly successful person. And I was like, well, yeah, why not? Like, yeah, I think it, like, I don't know, I love a cold email. They always make great stories.

Yeah, for sure. Yeah. I mean, my partner at Saltwater is arguably the most valuable tweet of all time, right? I mean, the claim to fame there is that he messaged Travis and replied to him, Travis saying, I need a CEO. for this new rideshare idea I have and flew out, you know, like 24 hours later and became the CEO and first hire at Uber, right? Like, there are these through lines of these moments. I think the takeaway from all of them is simply just like, you know, it's like closed mouth, don't get fed type stuff. Like, you gotta kind of put it out there. I think you gotta put it out there as founders. I think you gotta put it out there as investors.

Mm-hmm.

You gotta put it out there on almost every level if you wanna continue to climb to whatever that next level is. And, and I think there's something for everyone in that spot, right? Like no matter what your, you know, what your station is, where you start, where you're, what you, you know, what your socioeconomic class is, you can kind of find your way into things if you just keep, you keep going there. Um, and again, that does kind of probably lean more into that third bucket of people. So like I could talk my way into a nightclub people.

Yeah.

But, you know, I generally believe that the vast majority of things on this planet at this point are sales.

Yeah.

Like, like sales is kind of, you know, there was a time when it was probably VoTech type, you know, hard skills. And we might even be going back to that on, on some percentage of, of, of work in a post-AI, like post-AGI world. But at the end of the day, it's like, if you can sell yourself or a dream or a product, Like, that's all hiring is. Like, hiring is just sales. Sales is just sales. Investing and like raising money is sales. And so figuring those things out in an authentic manner is pretty important. And I have a friend, he was the former head of GTM for OpenAI, right? So like big sales, big company, one of the biggest companies in the world now. And He used to tell me, he was just like, yeah, you know, like the best salespeople in the world sell the easiest thing to sell.

Yeah.

And, you know, they don't sell the hard thing because that's not how salespeople work. Like, yeah. And the easiest thing to sell is something you believe in. So sell, so, you know, believe you can't sell a product you don't believe in. You can't sell a company you don't believe in. You can't sell yourself if you don't believe in it. So you kind of got to do that work, the work to believe in what you say, the work to believe in what you're doing, the work to believe in yourself. And then As you get the belief levels up, as you create faith around products, personas, people, vision, then you become superlative at hiring, pitching your product, raising money, bringing yourself in, and just food for thought on people on the journey.

Yeah, I love that. Cool. Okay, last question. What are you reading or listening to that has been really interesting lately?

Oh, um, I made this new friend. I was at a conference the other day and made this new friend, Kate Bowler. She wrote this book, Everything Happens for a Reason and Other Lies I've Loved, which that subtitle is like, other lies I've loved. It just hits you, um, really, really hard. Really interesting person, multiple PhDs, historian at Duke University.

Ooh.

comes from a unique ethno-religious background. So she's a Mennonite, which more prevalent in Canada and Russia, Germany than in the US, but, you know, a particular religious sect. And it's a story of sort of learning, like basically almost dying of colon rectal cancer while having a child and what it took to overcome that. The amount of like how to deal with family structures business, her job, her career. And now seeing her now as this like multiple published author, 8 New York Times bestsellers. She has a very successful podcast. She still teaches. She still does all these things. Um, and it's, it's pretty inspirational. So I'd throw, throw a little plug in for, uh, Everything Happens for a Reason. It's also like 250 pages. You can knock it out in, in a, in a weekend beach vacation. Um, yeah, that's a good one.

Actually, I feel like you might like this book. It's called We Tell Ourselves Stories.

Ooh.

It's about Joan Didion and the American Dream Machine by Elizabeth Robinson.

Love Joan Didion.

Me too. Uh, but it's an amazing book. It's like all about the intersection of, um, uh, Basically how Joan wrote about culture changing, the intersection of like her own mental health issues and how like in all of her writing there's like a through line of like the center will not hold. Like there is like this element of like things are falling apart and I don't know where or when they will combust.

Do you think that?

I don't think I— no, I don't. I feel like there's like a When I read a lot of Joan Didion, I start to believe it more. Her words color my mind. But I think when I take a break, I maintain a more optimistic stance. But it's really interesting because this whole biography is written from the lens of how her insights into the Hollywoodification of everything. So how we told stories about politicians or public figures, Yeah. And I think it's really interesting too, like in a more like influencer-centric world, how that also plays out is like now you can have an inside track on all of these things that you would've never known about prior to there being like niche social media influencers about them.

For sure.

For sure. And how that impacts basically like the medium and the message. So then Like, once you get to a mature version of the story, then there become people who like come in and know how to tell the story, but they might not have like the substance behind it, which I thought was quite interesting.

That's great.

Anyways, great. Pretty good book.

I will read said book. Thank you.

Cool. Well, Tom, thank you so much for coming on. I really appreciate it. This was a great Podcast, and I am excited for our listeners to hear it.

Me too. Listeners, reach out. Happy to talk.

Oh yeah. Where, where should people reach out to you?

Um, yeah, for some reason I feel like Instagram's better for me than Twitter, but I'm on Twitter, obviously, uh, on Instagram, and you could always just email me at tom@saltwater.com, which is cool. Pretty easy to remember.

I'll put it in the show notes. Awesome. Well, Tom, thank you so much for coming on.

Thank you so much.

Yeah, of course.