The Future of Venture Capital: Insights from Elizabeth Yin of Hustle Fund

Hi everyone, and welcome to our Venture Trailblazer series with one of my absolute favorite rebel badass hippo VCs, Elizabeth Yen, who we're gonna get to in just a minute. And I'm not gonna say anything else about her right now, 'cause we're gonna spend an hour talking about how amazing she is. So, but before that, first of all, let me tell you who I am and where you are in case you've wandered onto the wrong flight like they always do on the tarmac. My name is Sarah Lacy, and I was a journalist in Silicon Valley for several decades. I then started two companies. I then thought, you know what, I'm going to go have a nice life. But then I got pulled back in by DESEL Company to help them on their mission of changing who gets to be a VC in the world. And it's a very personal mission to me, in particular, to make the demographics of who, who is a venture capital match society at large. So, it's been super, super exciting, and that's why I'm here and part of this. So, let me tell you what that is, right? So, this is being co-hosted by Founder Institute and VC Lab. And if you don't know both organizations, it's interesting that you've made it here.

Welcome.

You probably do. If not, Founder Institute is the largest accelerator in the world by almost every metric except assets under management, which a tiny little accelerator named Y Combinator who had like Airbnb, you know, beat us on that one. But everything else, companies launch locations, blah, blah, blah, blah, blah. It's amazing. If you don't know it, check it out. And VC Lab. And if you don't know VC Lab, we essentially are the engine that helps change the face of who gets to become a venture capitalist. We've launched 60% of emerging venture capital funds globally. And I'm happy to say we just released research that showed that while 17% of all GPs among emerging fund managers, funds under $50 million, are women, of ones we've launched, it's 31%. So we are also changing the face of who gets to be a VC. We're actually now doing more research about, you about age, about LGBTQ representation. It does not stop with women. So if you've ever thought, I want to do this, I know I'd kill it, but I don't think I fit the paper doll cutout. We are starting a new cohort. I'm going to try that again. I've not yet had my comically large cup of coffee. We are starting a new cohort in September. GoVCLab.com. I'm sure Dominick will put all the stuff in the chat. So I just want more badasses like Changing the Face of VC. So if you fit that mold or don't fit that mold, please check it out.

All right.

Now to the badass who's broken the face of VC. All right. Okay. I'm going to start by reading the semi-unhinged thing that I wrote about Elizabeth for the site. Oh, I had it right in front of me. Why do I always do this? Here we go. All right. Are you ready? I don't know if you read this, Elizabeth. Let's pretend. I haven't.

I'm excited. Oh, good.

I'm so glad. Okay. I say this with all love. In another life, Elizabeth Yin could have been a cult leader. There are thousands of VCs in the world, but no one does it quite like Elizabeth's Hustle Fund, and that's by design. The firm was co-founded by Elizabeth and two friends and Silicon Valley veterans asking themselves the question, Why do the same type of dudes get disproportionate access to seed capital? You can tell why we're friends. Their answer was to write small $25,000 checks, as they say, hilariously early, to give founders who may not look like tried and true central casting founders a shot at hitting some metrics to unlock bigger rounds. Sometimes just after one quick phone call. The non-traditional approach hasn't just worked in terms of returns, it's allowed Hustle Fund to to fund a far more diverse portfolio just by giving different types of founders with great ideas a shot to prove themselves. It has also built a brand unlike that of any venture quote unquote firm. And I put firm in quotes because how many stuffy Sand Hill Road outfits host raucous hustle camping events, have a purple hippo mascot, or offer merch on their site like the anti-VC VC Club hoodies, not to mention promote newsletters that are quote, "So good you'll be pooping hippo rainbows." Close your eyes and try to imagine Vinod Khosla doing any of that. I will give you a moment. They are basically the Billy Madison of venture capital funds. And much like Billy Madison, have had the returns and results to allow themselves to disrupt golf/venture capital. With so much abandon. And, uh, I, I'm so happy you're here. Thank you for joining us.

Thank you, Sarah. That was probably the best intro I've ever received. So thank you so much. Well, thankfully it's recorded.

All right. So tell me, tell me everything. I wanna know every single thing that got you from, you know, 500 startups to here, from childhood to Silicon Valley, from A to B, why hippos? Uh, so let's, let's just like start at the beginning. Like, You know, I know that you've said in some interviews you didn't really set out to be a VC, which, you know, I think kind of only like American Psycho would, like, it's, you know, especially with the image they were. Fortunately, you're changing that image, but like very few people like wake up and, you know, slick their hair back and say, I'm gonna go be a VC when I'm, you know, in 40 years. So tell us how you got to this journey.

Uh, so we're gonna go off script a little bit. I'll tell you a bit of a personal story and it has to do with serendipity. And you know all the players in you know, in and around Silicon Valley for, for, you know, throughout the history. So you'll enjoy this.

300 years. This is a Zoom filter to make me look not 300 years old. That's how long I've been around.

So when I was in high school, so I grew up here in Silicon Valley and I would be the first to say that growing up here, time and place is what has shaped my career. Like really nothing else. I grew up in the, during the dot-com boom. I went to high school in the fall of 1996. And I graduated in spring of 2000. So that kind of sets the stage because that was the era where everything zoomed up, right? Like before the crash in the fall of 2000. And during that time, in the fall of 1996, when I went to my freshman year of high school, my best friend asked me if I wanted to help out her cousin Tony with his startup. I had no idea what a startup was, and startups were not a big thing yet at that time. Um, but I also was not doing anything during winter break.

I feel like I know where this story might be going.

Yeah, so we, we decided to help out. Honestly, we were not really any help, but, um, we took the Caltrain up to San Francisco that December, you know, during our winter break, and we got to this like nondescript office and, um, you know, there was nobody there because it was 9 AM or whatever.

And was this office on Van Ness?

I think so. Um, actually, no, I think it was somewhere else before Van Ness. But anyway, it was honestly a little bit dodgy, the whole, the whole thing, and especially as high school students. But we got there and finally somebody let us in, and you walk in and there's like pizza boxes everywhere on the floor, and just, it's, it's honestly a mess. But what I loved was there were all these of like young people in their early 20s who were— they were all friends and they were all like so excited to be there at work. And they were doing kind of everything, everything from meeting with important-looking people who are coming in and out of this office in suits, to working on their website, to just whatever needed to be done. And it was like the first time I had ever thought that work could look like that because My impression of work at that time was that work is just very, very buttoned up, very professional, very, you know, suits if you're a professional worker. So anyway, fast forward, I think you know where this is going. I had no idea how this business made money or anything like that. I was a high schooler, kind of clueless, but I knew I loved that environment. It was the dream, and you could eat all the pizza you wanted. And fast forward, this company sold to Microsoft for a couple hundred million bucks. And that company was, you know, acquired. And then this, this cousin, my friend's cousin Tony, later ended up becoming an angel investor and CEO of Zappos, which was later acquired by Amazon for whatever, near a billion dollars or thereabouts.

I broke the story. 1.1 billion. I remember.

So there you go. You know better than anyone else. So, um, anyway, this person, this cousin, this friend's cousin, was the late Tony Hsieh. And it was, you know, starting from that experience, um, he had tremendous impact on my life, um, during his short life. And, um, everything from, you know, that one experience in high school all the way to much later when I was starting my company But the point is, you know, sometimes just life takes you where things take you because of the environment you're in. And I would say that very much was the case for me and how I got into all of this in the first place. I'll pause there because I just threw a lot at people.

I love that so much. And I have known Tony since about probably not very much longer after you were working in that office. And, and yet, and I love that you, you brought that up because I think so many people, you know, know, know the image of the see the very sad end of Tony's life, but don't know that person that he was that we all loved and were so inspired by for so much of his journey. Before we move much on to your story much more, because I know when you come into an industry, those first people you meet really set the tone for, you know, if you stay in the industry, they may set the tone for leaving, but if you stay in the industry, they really set the tone for like, here's how I'm gonna conduct myself. This is what it means to succeed. Like, I can tell you as a journalist, Everything I learned from my very first editor, who was like Ed Asner from The Mary Tyler Moore Show, my first newsroom when I was 19 years old, and it shaped me for decades. What are some of the things you learned from working with Tony and Alfred that you think have been enduring? Because in some ways Silicon Valley feels like it's gotten away from some of those values.

Yeah. So actually the number one thing that I think Tony did differently than most other iconic whatever, leaders, entrepreneurs, whatever, is he was not afraid to do things totally differently. Like, in many of his decisions, I think people initially thought he was absolutely nuts or crazy. Like, for example, when he moved Zappos to Henderson, that made no sense to a lot of people at the time, but it made a lot of sense if, like, from a first principles perspective, is like, all right, we have very low margins on the shoe business. We got to make it work, got to reduce the cost of living. You know, let's move to someplace that is less expensive and also where people really care about customer service. And so from a first principles perspective, that made total sense. But from a narrative perspective, people are like, why would you move your tech startup to Henderson? It— that does so. So he was not afraid to go against the grain and that kind of permeated in everything he did. I mean, I think Perhaps some people thought he was nuts on some things like bringing in the llamas or whatever. But, you know, like he, he really actually was very good at doing that. And I think a lot of people actually are not because, you know, some of what you alluded to, Sarah, around whether it's getting funding or pattern matching in VC very much is tied to this point where it's like no one ever fires McKinsey, right? Like no one ever fires a VC for backing a certain profile who graduated from, let's say, MIT or Stanford, right? Like, but I think being not afraid to go against the grain is how you make money. And we can get to this point in more detail later, but that is something that I think Tony did exceptionally well. He was not afraid to look nuts.

Not afraid to look nuts. And I would say most of the top venture capitalists now are. And I understand he's not a venture capitalist, but like, you know, like they, you know, they, well, and let's reframe that because some of them are doing outrageous things on a political level that I might call nuts. But most of them in that sense, like, you know, again, they're not, they're not riding a llama. They're not, they're, you know, they're, they're not doing some of those things. And I think it comes down to this like idea of like having, having nothing to lose. And one of the things that was, you know, in some sense, taken to a tragic extreme with Tony was he maintained that. But often in Silicon Valley, you get to a level, especially as a VC, you— I've seen this cycle after cycle. You start with these small, scrappy funds. You know, Kirsten Green did this. Josh Kopelman did this. Jeff Clavier did this. You come in and recreate a category like institutional seed, and you do it so well that the next thing you know, you're a $300 million, $500 million, $600 million fund and you've totally changed what got you there. And so, you know, I want to make sure that we get to Hustle Fund because I think fund size and check size is something people are only talking about at the big end of the barbell right now. And it is so important to talk about at the small end of the barbell. But before we get there, so what happened from then to like, you were like hooked, But you were probably still not like, I'm going to be, go work at Sequoia.

Oh, I was not hooked on VC at that point. I was hooked on starting a business. I knew from, you know, 1996 onwards that I wanted to be an entrepreneur. And, but I mean, I think fast forward, like, you know, I went to college and that was when the bust happened in late 2000 onwards of the next, you know, couple to several years. And so after graduation, you know, I, had bills to pay. I worked at big companies and, and, and so, and I went to business school as well. And so I kind of strayed away from that dream for a bit. But in late 2008, I decided to leave my cushy job at Google. Now this, I made this decision 2 weeks before— my timing is awful— 2 weeks before Sequoia posted that article, Rest in Peace Good Times, or sent out that memo, I should say, that was picked up by TechCrunch. Basically, that letter to their entrepreneurs said, "Batten down the hatches. No one is getting funded. We are not funding anyone new. We're reserving all of our capital for our existing portfolio companies." I took a pause after reading that article and decided, "Yep, I'm still going to do it anyway because I do not know." If I were to wait on leaving Google and starting a company, I don't know what I would be waiting for. Like, what would be the moment that would be better? I don't know. So let's just go ahead and do this. So I took the plunge, left Google in November 2008, and frankly speaking, really meandered and flailed for the next 2 years. I, um, I like, I just had no idea how to start a company. I was throwing a lot of spaghetti at the wall. Like I ran affiliate websites for all kinds of things, everything from wedding dresses, bridesmaids' dresses, to nutraceuticals, to random stuff. We built all kinds of websites, like, you know, we really got just a lot of hard learnings on how do you do customer acquisition really in those first couple of years. And, and that I think actually has shaped a lot of my thinking now as an investor, because I actually think customer acquisition is probably one of the hardest things you you'll have to do in your business.

Yeah, I mean, as a founder, I'm not sure I ever really nailed that, so you've done better than me. Um, and so, and so you had along the way, you did find success as, as an entrepreneur. I mean, you had some exits, and then, um, you know, you kind of hit this point where you were between things, from what I understand. And you've talked in other interviews about this idea of like What's going to be my life's work? And I love thinking of it that way because I feel like in Silicon Valley, so often, you know, there's so many good things about this freedom to fail. There's so many good things about being a serial entrepreneur. There's so many good things about having all these lives and iterations and building all these things. But if you look at some of the people we idolize as the great founders, they've had a life's work. Like, we don't think about next. We maybe think about Pixar with Steve Jobs. But really, he wasn't running it day to day. He saw it and he didn't have something to do. But like, we think about Apple, you know, we think about Amazon with Jeff Bezos, maybe the phallic rocket, but really Amazon. So like, you know, talk about like what went into that and why was that life's work going to be around venture capital?

Yeah. So setting some context, I ended up building out an ad company over the course of, you know, like once I kind of figured out what to do after all those affiliate sites. And I sold that company in 2014. It was a relatively modest exit, but it was great for me to kind of understand a lot of things. And in particular, on the philosophical end of things, it allowed me to realize that actually I didn't really care that much about ads. You know, I like— when you go to your grave, like, did I want, you know, somebody to write on my tombstone, like, She trailblazed ads. No, like, so it made me think like, number one, I did want to get that home run just from perhaps an ego perspective. I wanted to kind of build that, not necessarily because I wanted people to say I'm running a unicorn company, but for my own self, I wanted to be able to build something big. And then, and then secondly, I didn't, I wanted to be in something that I cared a lot about, something that I would like myself to be remembered by, even if no one else remembered me. Like, I wanted to be able to say, yes, like, I changed that, you know, at the end of my life. So something I could be excited about for not only 5 to 10 years, but like 10, 20, 30, 40 years, or however long I have the privilege to be here. So, um, I did a lot of sort of soul searching and I did a lot of mentorship and I started mentoring at the 500 Global Accelerator program. And then around the time I started doing that, their accelerator manager actually left and decided to start his own fund. So they asked me to do that and I ran their accelerator for several batches. And all the while, I think my, my idea in doing that was partly to give back, but also partly to understand what was happening in the world because I was so heads down in ads. I had no idea at that time there were all kinds of things coming up like Bitcoin and drones and AR/VR. And some of those things took off and some of those things didn't. But I had no idea what any of these new things were. And I wanted to understand what was happening in the world. But I realized during my time there that I, I wasn't really seeing any ideas or getting any inspiration on things that I truly cared that much about, that I could care about for years on end or decades on end until at some point it hit me like, actually, The thing I cared about, I was in it. Like, I loved helping early-stage founders and I loved investing super early. And it's such a kick to be like the first investor. That's a weird ego trip, but it is so fun. And so I realized I loved all of that. And also I understood the problems very well, either firsthand or from all of the founders that I was backing at that point. You know, it's hard to access capital. It's hard to get your first customers, you know, things like that. It's hard to do your first hire. It's hard to do like a lot of your first things. And I realized that there were not many VCs who were funding companies pre-revenue. And so that's, that's when, you know, Eric and I, my business partner, decided to, to, to, you know, start thinking about Hustle Fund.

So tell me about the partnership dynamics because, you know, hearkening back to the conversation about Tony, one of the reasons that they were able to build so much is for a long time Tony and Alfred Lin were business partners and they balanced each other so well. And if anyone knows Alfred Lin, AKA number 1 on the Midas list, I think now, like, you look at him and you're like, this guy hung out with llamas? Like, they seem so different. But like, as someone who spent my 20s doing shots with both of them, embarrassingly, like, I, you know, like, they, they, it worked. And so tell me about, um, y'all's dynamic and why you knew this was, I don't know if you're the Tony or the Alfred, or maybe you don't wanna be either of those, But why was that that person for you?

They are really a special duo, like, and incredible. I've admired how that works for many years because, and this is actually something that I thought very deeply about, you know, in the partnership for Hustle Fund. I think as a first-time founder, you're a little bit more flippant, like, let's just pick a friend or pick someone who has a complementary skill set. But really, you have to think about all of the above, right? Like, who has the complementary skill set? How do you fight? Like, how do you argue? How do you resolve things? You know, how do you— like, culturally, are you aligned? Like, all these things. Eric is like, from, from, for running a VC business. So this is different from running like a tech business. Eric is very complementary to me. And for anybody who has met him, he's like, this social guy, very warm, makes like— is just everyone like feels so good after hanging out with him. I'm much more of the let's cut to the chase, and especially in conveying bad news, I think I'm much more direct and transparent. Eric is transparent too, but somehow he can give you the worst news ever and you walk away feeling amazing. So Eric is like the touchy-feely guy, and I'm much more of the I don't know, hardened engineer. And I am an engineer by background. So, so I think it works really well because like, you know, we had this complementary of like sort of this touchy-feely, but also like the logical numbers. And, and that works, I think, really well for a VC business because it is a people business. You need people who are great with people, especially from my own personal experience in working with a lot of VCs. Like a lot of VCs, just frankly speaking, don't have great EQ.

It's a services business. I mean, you're selling money. You're literally all selling the same commodity. This is what so many people miss about this asset class, I think.

Yes. And so that, that was— and, and we had worked together as well, and that had worked out well. Um, so that, that's, that's how we decided to go into business. And we've been in business for about 8 years. And, uh, it, you know, it's great. Like, we know how to fight and like move on.

Knowing how to fight is crucial. And it's funny, my business partner throughout all of my companies is Paul Carr. And in fact, we're so good at fighting that we went from business partner to life partners. So we just were like, this works.

This— we should—

let's just— you know what, we get along, we fight well, let's just make a permanent life merger here. Um, so probably not your path with him, or even him. Um, uh, so Anyway, let's— okay, so let's get to this issue of fund size because, you know, as I said, it's, you know, it's something that there's a lot of conversations about now. And a lot of that's because, frankly, like, AI has changed things on both ends. AI has made it so that if you are investing in AI, you need gargantuan fund sizes. And so it's allowed these fund sizes on this end of the barbell to get bigger and bigger and bigger, which a lot of people like because you get fees, you get a lot of incentives to do it. And when you have something that can be that big of an outcome, I think defense spending also fits into this. You can finally justify having that much under management. I would argue some of those things are really not really venture firms anymore. The middle has kind of been hollowed out. And then we have the small end of the barbell. And, you know, a lot of those for the first time we're seeing, you know, funds much smaller than yours. Like, you know, with what we're doing with VC Lab, people are launching million-dollar fund sizes. They're launching $6 million fund sizes. They're rapidly building like incredible outcomes. They're squeezing $100,000 checks into oversubscribed rounds that no one else can get in. Like there's this strategy to a small check size that like, I don't wish I was still a journalist because that was a terrible life. But if I was, this is all I'd be writing about because I think it's the thing no one is talking about. And you got this well before a lot of people. So what— how did you think about fund size? How did you think about construction of what you wanted to build?

Well, thank you. I don't think it was strategic, but I think sometimes, you know, when you're an emerging fund manager and perhaps for some of the folks in VC Lab, you have to start small. You have to start somewhere and then kind of work up. The question is, when you're able to work up though, like, where do you go? And for us, to your point, actually staying relatively small is important because we have seen that once you get to be super big, you're playing a different game and you're playing a different game that you didn't make money in before. So people largely, frankly speaking, do it for the fees, as you mentioned. Because it just is so easy, right? Like, you actually don't need to do anything. You just collect the fees when you have a big fund. For us, it's hustle fund, though, because this is very mission-driven. Obviously, we are gunning for high returns, but we always want to be very aligned with our LPs. Like, we're in it to make money with the fund and not collect fees. So we will not exceed more than $50 million on our pre-seed fund ever. And, and that is by design because we believe that there's only so much you can put into a pre-revenue startup such that founders will be able to efficiently use the money. Because when you first start out as a founder, you actually have no idea what you're doing and you're experimenting with a bunch of things. So, you know, plunking in a $5 million check makes no sense pre-revenue, in my personal opinion. So, you know, to that end, I think that You know, we have stayed small, but the only reason we've been able to make it work, Sarah, is that actually we have other business lines at Hustle Fund. So this is sort of the dilemma that many VCs have. Like, not only is it easy to collect fees if you can raise a bigger fund, but also you can hire more support staff if you have a bigger fund and more fees. How do you stay small when you collect so few fees and hire people and you're pulling your hair out because now you have all these portfolio companies calling you and you have LPs calling you and you're like one person. I think that that's just really hard. And so for us at Hustle Fund, we actually have multiple business lines run by other people. And we have, you know, like, for example, we have an Angel Squad, which is a 2,000-person angel group. And so these are 2,000 angel members worldwide. They're amazing. It is a large community, though. And so it is run by its own general manager, Brian Nichols. And his team, and we collaborate with them in that we run our SPVs for co-investing at later stages with them, etc. And we have sort of this symbiotic relationship. But, you know, they have membership dues as part of their business line that helps to support these additional team members. So that's an example of one business line. So this is how we're able to actually have nearly 30 people at Hustle Fund. Even though we are a small fund, it isn't the management fees of our fund that's supporting those people.

Is that more than Benchmark has?

They have 30 people? Yeah. So, so I guess all of that is to say, like, you don't need to rely on fees, but you do have to get creative. Like, how are you going to support a larger team to help your portfolio companies?

So beyond just Angel Squad, tell us what some of the other ways that you've structured this fund to not be like other funds. And I'm sure some of this is just y'all's personality. I'm sure some of it is the type of environment you want to be in every day. But, you know, just to be a tiny bit of a cynical journalist, it's also like really good marketing because it's like, it's one, I mean, every VC on earth for the end of time has said, we put the founder first. Every VC on earth has said, we're your first believers. Every CF VC on earth has said, You know, we believe in the founder, not the idea, or we're going to roll up our sleeves and get in the trench. Like, they literally all use the same metaphors, for goodness sake. So like, I think some of the ways you build your fund and the things you do are really savvy marketing to show like, no, we are that weird, we are that different. And I think one of the things, having been a founder, There's, there's an, you often, the people on your board are not gonna be the person you call with bad news.

Yeah.

And you usually have like one investor who's the person you can be really honest with, cuz that's the game. And it's not that you're withholding information, but it's like, there's, there is always a true version of the story. That's the bull case and the bear case at any given time. And both are true. And I, I think. Your brand makes people think, well, like these guys aren't gonna be assholes. So like how much of that was constructed versus a happy accident?

No, it is very deliberate by design. So let's unpack this. Having been a founder and every VC told me, oh, we invest early, but the reality is they don't actually invest early. And that, frankly speaking, was super annoying to me.

Especially in women, I will say, by the way, the number of times As a woman and every other female founder I know, especially women of color, I've heard, "But you're just too early for us," when they have like 7 figures of revenue. It is often code for, "You are just too not white male enough for me." And so, you know, like I've heard that, I get it.

So that, but actually to me that yelled opportunity because we like in most of the investments we do, The companies are pre-revenue. It isn't pre-nothing, just to be clear. Like, people still have to build a fully fledged product before they get to us. We don't— we don't invest at the idea stage. Um, so there's this sort of sweet spot between you've done your customer development, you've built, and then there's revenue. We're kind of in between the you've built and there's revenue. You have to have done something here. Um, so that's where we are in terms of the early scale. But I would say that most VCs still are not comfortable investing pre-revenue, and I see that as opportunity. So, so from that perspective, like, yes, it's both marketing, but it's also, it is truth. And so we, we do go in early, but I think, you know, the rewards for going in early are incredible in my opinion. Like we are also fairly valuation sensitive. We're not in these rounds where it's like the, the whatever the pre-seed is at $100 million post. Like that's not us. We are, you know, we're taking a bet often on people who would not be able to get necessarily friends and family money at this stage to fund this stage. And, you know, we invest globally. So not everybody is in San Francisco who has friends who are building startups either. So this is kind of our sweet spot of like, we are kind of your rich aunt or uncle that you may or may not have.

And I mean, that's so much of what, y'all have built your reputation on is backing founders who don't fit the traditional VC mold. So if you're not fitting the mold, what specific patterns or qualities are you looking for? What are the things that you're looking for? And can you maybe walk us through an example of that?

So there are basically two things we're looking for. Obviously there are many other things that matter in a business, but the two things that we, uh, kind of care the most about are, uh, Number one, everyone says they're very founder-driven, and yes, that's important as well. But what do you mean by founder-driven? Like, for us in this day and age, actually, where customer acquisition, I would argue, is one of the most important things, we are looking for people who are customer acquisition-centric. So even though you may not have any sales, what have you done on the customer acquisition front? Like, and some people actually have, you know, gotten contracts in place even before the product is finished or ready to be delivered, even if they're not making revenue. That's an extreme end of things, and we have definitely backed those founders. But I think shy of that, like, what is the level of sort of customer discovery or customer development have you done? You know, there's a whole range of how much research somebody can do. Like, we don't like the 'I'm doing internet market research.' We're— I like that you're picking up the phone, you're visiting customers, you're talking with them, you really understand their day in a life, you're friends with them. And typically founders who are in that boat, like, and are best positioned actually have, may have even worked in the industry and faced this problem firsthand. So founder market fit, I actually believe that most founders could not just start any business. People are more apt for certain businesses than others, areas that you really know and understand. And are you playing to that strength? So we care a lot about sort of, you know, do you have grit? Can you learn quickly? You know, Are you very customer-centric? What are you doing on that customer acquisition or customer development front? And like, what is your knowledge or domain, you know, knowledge of the domain or the space of the problem? That's the, that's what we're looking for from a founder perspective. What we are not looking for in contrast is like where you went to school or where you worked or something like that. Like we're not looking necessarily for the Stanford meta engineer unless your business happens to require something like that. So that's on the founder front. And then on the idea front, I actually think ideas matter a lot these days. So the problem with these days compared to the 1990s is like in the '90s, if you built something, there were very few websites, people would come. Nowadays you build something, there are 20,000 other people who built the exact same thing. Like, you know, you could just go to Replit and put together something and now you have a website, right? Like, so So I care a lot about the idea, like, how competitive is, because definitionally, if you are in a crowded space, your cost of customer acquisition is going to go up. You have to fight all these other people for mindshare or even actual dollars, like if you're spending on ads or whatever. Your cost of customer acquisition is going to go up, and every investor already has a horse in the race who's probably not you. So you have access to less capital, even if you do well, and your cost of customer acquisition is going up, that's not a great dynamic. I don't like that. And so the idea, to me, actually matters more than the founder. I know every VC says the opposite, but this is my contrarian take. I think the idea matters so, so much. Like, I would prefer, like, an awesome idea and a good founder over an awesome founder and a good idea. Sorry, did I say that right?

No, you got that right. You got it right. I love that. And, you know, for folks who are on this call or people watching this call who are going through the VC Lab program, and again, we've got a new one starting up in September if your interest is piqued, what you— I want them to go back and watch the video and watch what you just said and how you articulated it because you just said, here's what we do that no one else does. And as we've said, like, This is a services business for both your LPs and your founders in the market. And I can't tell you how many times— I could probably count on both hands as a journalist how many times I've heard someone say, have the courage to say something that is that different than the industry. But to me, if I'm an entrepreneur hearing that, an actual entrepreneur, not just the other people on Sand Hill Road that you've got to sound like, Hearing you say customer acquisition is the most important thing, hearing you say, no, your idea actually matters. It's like for the right founder, that's actually really refreshing. And there's so— why do you think so many VCs are so unwilling to go out on that limb and say something different?

I think there's a personality archetype. Most VCs today still are not, they're not former entrepreneurs. It's changing a lot. And I actually find that some of my favorite VCs to work with, they are all former entrepreneurs because they get it. But I kind of feel like you have to have had an entrepreneurial journey to not have that fear of sounding different.

All right. So, this is the question that my teenagers would love. How do you, how are you going to maintain your rebellious edge as you get more and more successful? Because while I think I'm cool, When I use Gen Alpha slang, my children would cringe. So, you know, I imagine there's some VC equivalent to that metaphor. I mean, there's got to be times where, like, you find yourself, like, there's a younger you going, Elizabeth, you used to be cool. You would have backed this. You would have gone to the camping trip. You would have, you know, karaoked all night with Tony Shay, whatever. Like, what are the ways that as you get bigger and more successful, you know, the fund is maintaining that rebellious edge? You know, it's still living those values, you know, it still backing the non-traditional founders? And like, what are the red flags if you're veering off course?

Yeah, good question. How do we become so sigma or whatever the phrase is? So I think fund size actually dictates a lot of that. Like if the moment, like one day I woke up and said, oh, let's raise a $200 million fund, I actually think it's kind of game over. Because it just works backwards into the numbers. Like right now we are writing $150,000 checks. And I think as you alluded to earlier, when we first started, you know, we were only writing $25K checks. When you're writing $25K checks into this $150K range, you can go super early. You can take lots of risk. You know, you're not, you're not ruining anybody's cap table even if you're getting in at low valuations, etc. But once you're starting to write like half a million dollar checks or higher, then that's a different game. Like all of a sudden you can't afford to take that level of risk. It's a lot more money and you have to see a lot more baked out. And now you're that person who's like, ah, you're too early. So I think it comes down like keeping the fund size small is a big one. I think the other thing is the space is rapidly changing and you have to keep learning. Like, just like how entrepreneurs have to be able to learn quickly, I actually think in this day and age VCs have to as well. That wasn't always the case in my opinion, but I think these days it is. Like, every day I am constantly trying new tools, and it's not just like trying new tools for 2 seconds. You have to really, really use them. Like, I can tell you about all the nuances of all the image generation tools more than you care about and how they are— none of them are great for creating hippos. But, you know, that's the kind of level of stuff you have to do, I think. And if you stop doing that, then I think you have to legit kind of think about, is this what I want to do? Because that is what it means to be a VC in this day and age. You have to be much more product-centric. You have to be, you know, you have to be there with the entrepreneur Because I actually think the opportunity these days is only early stage because companies are getting to profitability faster, even though these big rounds are being raised. And in part, actually, these big rounds are being raised because founders have a lot of optionality to not take the money. So, um, the deal has to be incredibly good for them to take all of that money because they're getting to profitability faster. And so therefore you have to be very aligned with the entrepreneur.

Yeah. And as these two ends get more extreme of this barbell, it's fascinating because really the way, if you were to put yourself inside a fund at this size, it is so different than what venture capital was decades ago. You feel like you are walking into a bank. Like you feel like you're in a Wall Street bank in many of these. And on the other side, it is so much crazier and scrappier and been weird and rebellious than it. It's like the two could not have been farther apart. All right. We, I wanna ask one more question and then we're gonna go to, well, God, we have like 40 questions in the Q&A. All right. You're never leaving. You live here now. Okay. No, we're gonna try to get through as many as possible and then we'll obviously have to have you back because I hogged way too much question time. Okay. So you're, and this is one reason I think that, you know, we love you so much in our organization because your mission is so similar to our mission. Um, you wanna go, you know, beyond just making money and serving your LPs. You really wanna democratize wealth through entrepreneurship. And I think we've gotten to a place in the world where people feel really cynically, that's not what Silicon Valley's about. That's not what tech is about. That really, it's about creating a class of billionaires. And that's why we exist as an ecosystem. And again, I think the media has done a disservice in only telling this story, and that's one reason the world feels that way. And so I think more stories and missions like yours are really crucial. To get out there. And, you know, we feel on the GoVC Lab side, and I'm sure the Founder Institute side as well, that, you know, the more venture capital in the world, the better place the world is because, you know, intelligence is not just— is distributed equally. And there really are only 31 cities that have anything like an even third-tier venture capital ecosystem in terms of numbers of funds. Everyone sits around and talks about too much venture capital, but the bulk of the world has no access to venture capital, which means the founders there are not starting companies, which is why as a company we believe there's room for 20,000 more venture funds to be created in the next, you know, maybe 5 to 10 years. How do we get back?

100% agree, by the way.

I mean, how do we get back to this ecosystem? Being about democratizing wealth, not concentrating wealth, which is at least perception-wise what it looks like.

100% agree. And I would just, as a side note, that is why we, one of the reasons we started Angel Squad, because as much as actually we invest in about 200 to 250 companies per fund, which may sound a lot. But that comes out to maybe a handful a month, and we see 1,000 pitches a month. So like 5 to 10 companies are getting funded out of these 1,000. I can tell you, we turned down so many businesses that I know will go on to be amazing, but that is a constraint of checks, number of checks. So we do need more capital going into this because there are a lot of great founders, and that is, you know, Angel Squad is a global group. And to your point, there are many great founders not in Silicon Valley or New York. I would say those two are probably the biggest these days and, uh, and are starting great businesses. And by the way, actually, for the same level of valuation that you may get in Silicon Valley, those teams actually have a lot of progress. So, you know, the, like, the dynamics of reward for investors is even higher in many cases. So, um, And in fact, some of our best companies are international. Um, so we have experienced that success already and are huge believers in international, but we do need more investors. And that's why we started AngelSquad. You guys have VC Lab, which I absolutely love. And hopefully by helping to get more investors, that will help jumpstart some of these ecosystems. I mean, people often ask, what is the secret to success in Silicon Valley? It's not the weather, it's not the schools, it's not the whatever you like, whatever it is. I think it's just sort of this give back culture and specifically give back with angel investing culture. You have people around here running around with $1,000 checks, $5,000 checks, was enough to just like jumpstart somebody. And that's what I think has been the secret to Silicon Valley success. Can we do that though elsewhere?

Yeah, I love that. And one of the things that we're seeing is that new emerging managers, especially in other countries, are bringing in new LPs who've never been in the ecosystem. Like, there's a whole story about emerging LPs that's just as exciting as emerging managers. So, um, I'm gonna try to blitz through questions as quickly as possible. Yeah. Here. So someone asked if, if a VC Lab has a fee. It does not. Is a completely free program. Someone also asked about the path to becoming a venture capitalist in this climate. And I will say we also have programs about, we have a, a called Venture Institute that just helps you get a job in venture capital. So if you think this is an, an industry you might wanna be in, but maybe you're not yet at the Elizabeth level, just reach out. And we have amazing, amazing people on our team who've helped launch 800 funds, like 60% of the funds in the last year. And like, we're known as being pretty honest with people. They will tell you, here's where you fit in, here's what you should do first. It's almost like getting a free career counselor. And someone who's really, really honest with you. So I would recommend checking that out. Again, Dominick is going to put the links in there. Okay. So let's see. Here's a question from Aaron. I'm sorry. I hope I'm pronouncing Aaron's name right. What are your thoughts on current AI-powered rollups for professional services? Is it better to pursue strictly software hybrid models? Without getting too far down the rabbit hole specifically on that, talk to us about where you sit on AI and where the opportunity is. And, and because it's not enough to be right in Silicon Valley, you've gotta be contrarian and right. How do you invest in something where everyone thinks it's the future? And it, oh my gosh.

Okay.

Where does it make sense?

This is like an hour-long conversation in itself, but just very quickly, my thoughts on AI. I think the opportunity's real. You see revenue at very high levels at all of these AI companies, and that's why their valuations are where they are. And basically, if you can create increased productivity, like 10x productivity or more with a company, people will pay for your product or service. So that's thought number 1. It is real. It's still early. So there's a lot of opportunity for people building companies there. Number 2, it is getting very crowded though. So a lot of VCs are like just passing on sort of follow, you know, me too kind of opportunities or whatever you want to call it. If you're building a cursor copycat, like, sorry, that's going to be tough. But can you still make money? Probably. And so this is where I think VC and entrepreneurship diverges in that there are a lot of businesses that you can bootstrap and maybe make $1 million a year. That's not going to be good enough for a VC. But is that good for you? Absolutely. Or in most cases, for most people, absolutely. So that's the second thought. Third thought is where do I think the new opportunities are? Like, I think verticalized software still doesn't have many, you know, big AI companies who have made a dent in that. And it's very sticky in people's workflows, as opposed to, let's say, a note-taker app, which people switch all the time. So that's an interesting area. If you have domain knowledge in particular verticals and have a great, you know, a great team that can work on the tech, like that could be a really powerful combination. Services, I think I actually am of the opinion that services can now be venture-backed businesses. The thing I would worry about though is, number one, you still have to really monitor your unit economics and margins. How much time is your human in the loop spending on an account versus how much is the AI doing? And what does that overall margin then look like for your sales. That's the thing I would really look at because you do, you do actually want mostly tech doing most of the work. And ideally your human in the loop is spending like just a couple of minutes checking. That's your most ideal situation.

Mm-hmm.

So great. So that's like, that's a very nuanced answer there. Yeah.

We'll have to have a whole nother hour on AI. Okay. A lot of questions in here from people. You did address founder traits. Brilliantly. In terms of tactics with pitch decks, in terms of dos and don'ts there, what do you send? What do you not send? You know, what are, what are things that people should know? What are the things that like people don't tell founders at this stage, at the stage of which they're pitching you?

Oh, wow. Okay. That's another hour-long topic.

We're now here till dinner.

So just quick plug for folks who are fundraising in our newsletter, we, that we publish weekly, the Founder Playbook. We talk a lot about the nuances of pitching, what to include, et cetera. But my, so check it out, hustlefund.vc, sign up there. But my quick 1-minute answer on this is like, when you're first sending materials to a VC, keep it very light, very short. 5 slides, problem, solution, team, anything notable about your customer acquisition, or whatever, something like that. Very light. Less is more. You're not trying to get an investment off the pitch deck. When you go into a meeting, actually, you don't always need a pitch deck. I personally find it more helpful because it helps, like, remind me what I'm supposed to say. Um, but if you go into a meeting, then you may have a longer pitch deck or whatnot. But just like keep it very short because you don't want to introduce concerns yourself. Like always be in a position to short and sweet, get the meeting, and then like field questions rather than, hey, I'm going to tell you everything under the sun. Great.

All right. I'm trying to weed through all of these and like consolidate, but Tariqa has a really, really great question, which is for a pre-seed fund, is it better to be industry-focused or a generalist. And one of the reasons I wanted to highlight this is in this research study we just did about gender and venture capital funds, we found that the women starting women-only funds are more likely to be specialists than the men. Now, that may be because they feel like they've got to have domain expertise in order to unlock money. Maybe it's a passion issue. You know, we didn't do the follow-up beyond qualitative to understand why, but there is sort of that that split in the industry. And there's that— and some LPs will tell you, I want you to be a specialist and I will build my portfolio approach. So how do you think about that?

Oh, that's an interesting data point that you mentioned. I had no idea. So here's something contrarian for people who want to be fund managers, because I hear all these new fund managers saying, oh, you know, I'm touting my track record or I don't have track record or whatever it is. Like, don't focus on your track record. Actually, ultimately raising a VC fund, which by the way is very hard. So you should know you really want to be in it. You need the level of tenacity of entrepreneur fundraising times 10 because you're raising more money than a pre-seed round or seed round from the same people as your entrepreneurs. So that's thought number 1. Thought number 2 is knowing that you want to do it, um, it's all about differentiation as well and go-to-market. Like, just like we ask our founders about differentiation of idea and go-to-market, you have to do the same with your argument, uh, as a VC. Now, the problem is there are thousands of VCs and we all have the same product, which is money. So the differentiation story is actually a lot harder than building a product. And so this is where I think sometimes verticalized funds have an easier time explaining their story about how they're different because there are fewer verticalized funds. As a generalist fund, there are many generalist funds and now you have to like weave this story of why your generalized fund is more more different than other generalized funds. But, you know, I think I got that aha moment that's all about differentiation and go-to-market, uh, from Jason Lumpkin when I was raising my first fund, because he showed me his deck. And what I realized from his deck is his deck basically said this: I run Saastr. It's this huge community of X million people who read whatever, you know, Y number of hundreds of thousands of people on my newsletter, Z number of people who attend my events. It's this large community and this is how they all refer me deals and the best SaaS deals to come to me and blah, blah, blah. It was all about his community and his ecosystem that was unique. And I realized that actually that was the crux of this. How do you tell a story about your unique and repeatable go-to-market and differentiation? So that's like the key I would really focus on.

I love that. Okay. I'm taking the last question back. So sorry guys, take my job if you wanna do this. I've got the microphone. No, there's so many great questions. I think we summarized a bunch of them and talked about a lot of them over the hour. So we talked about what it takes to be a good founder and how that might be different than the, the mold. What does it take to be a good VC, especially at the early stages? And how is that different than the mold? And don't just say you have to have entrepreneur experience because everyone has said that forever. And you know what? There's a lot of great investors who didn't, and there's a lot of real shitty ones who did. So, so what are the things where if you were the entrepreneur sitting across the table or you were the LP sitting across the table, what would be the green flags and red flags?

So I think that my answer is slightly different whether you're an existing VC or joining an an existing firm versus you're starting your own, because almost by definition, I, at least I consider every emerging fund manager to be an entrepreneur. You are starting your own business and legit, anybody starting their own business has two problems. You have to somehow keep the lights on. You have to raise money in this case, or you have, and you also have to figure out your go-to-market, your repeatable go-to-market. Those are the two things every business has to do. It doesn't matter what kind of business you're running. So I think if you're an emerging fund manager, those are the two things you have to take care of first before we talk about bedside manner of VCs and all this other stuff. Like, these are the two areas where emerging fund managers often fall by the wayside. Like, that is the difference between being in business and not being in business. But assuming you're past that and you got both of them down, then I think that if you are a VC, whether you are at an existing VC or you're, you're running your own shop, I think in terms of like bedside manner, like I would think a lot about that as a first thing. Like what is the experience you would want if you were on the other side of the table? That's like, that's the user experience part of it, right? Just like how our founders think about user experience with their customers. How do you think about your user experience with your customer? We talk a lot about that at Hustle Fund and we like, we're constantly trying to make our process more efficient or better. We've made a number of changes, but we also have a lot that we know we can improve on as well. So that user experience, I think, is really important. And most VCs don't really think about that at all.

Great. All right. This is going to be the first time in my life I've ever ended an interview on time. So, so, so final thought. Let's see, what is, what is the investment area no one's looking at now that you're excited about?

Oh, wow.

Um, in 3 minutes, 2 minutes.

I think my short answer is I am very excited actually about the sort of augmented reality glasses that there are a bunch out there, predominantly Chinese brands and Meta. I am hoping Apple will come into this race somewhat soon. And I think actually that will then spur everybody much like they did with the phone. Mm-hmm. But I think that there are so many interesting apps that can then happen just here, you know, actually even perhaps taking away from the phone in, in some cases as well.

Yeah.

So that's what I'm excited about.

That's, that's so interesting. It'll be interesting to see. It's, and, and I think, I think there are many people who just will not want Meta to win. So I think if anyone else comes in, then people will throw their weight behind it. But I remember, you know, we all made fun of Google Glass and I thought it was so stupid. And the one thing that made me think that was legitimate is I remember I was having a conversation with Sergey, like, in the back of a poker room at a conference or something. And I was like, this is so stupid. Like, do you really wear this thing? And he was like, let me tell you something. I was at the beach with my kids and they were running in the waves and I was able to record it without having my phone or going back to get my phone. And I, I can't decide if that's terrible or great because you're still putting a thing in front of your face. But I do think there's something there about like getting this, you know, away from you.

I think it could be magical. And I think it, well, talking about user experience, I mean, one of the reasons why I really want Apple to enter this is they are, you know, kings and queens of design.

Yeah.

And I think they will get the form factor right. And that will just actually push everybody else to be better. So, you know, already—

Well, and also like you're the customer with Apple. You're not the product.

Right. Yeah.

We gotta go. It's 9 o'clock. They're gonna yell at me. They don't let me run over and it's not my company, so I can't do what I want. You were incredible. We've gotta get together, not on camera and talk more. This was so much fun. Thank you to the zillions of people who joined us. This video will be posted somewhere and you need to share it with your friends who missed out. Um, and again, govc-lab.com if This is who you want to be when you grow up. Thank you, everyone, for joining. Thank you, Elizabeth.

Thank you, Sarah.