The Next VC Frontier & Inside Silicon Valley w/ Sam Lessin, GP at Slow Ventures & Co-Founder of Fin

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October 14, 2021

On this week’s episode I chatted with Sam Lessin, Co-Founder of Fin and General Partner at Slow Ventures.

Sam is, in the truest sense, a Silicon Valley insider. He’s a part of the Harvard tech mafia, friends with Zuckerberg and has built a few different tech startups.

Beyond all of that, he is an extremely deep and abstract thinker. I’ve always been a fan of listening to and learning from him.

During our chat we discussed how he sees the VC model changing (he has some strong opinions on this which are great), the evolution of media and its business models, the differences between US and China government strategies towards tech and a whole lot more. Enjoy.

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Transcript

MPD: Welcome Sam. Thanks for being here today.

Sam Lessin: Thanks for having me.

MPD: All right. Uh, let's start off. I always think it's helpful to get people a little background on your primary focus these days before we kind of dive into other stuff. Would you give a little color on slow ventures?

Sam Lessin: Sure. So as low as a firm that, um, you know, a few friends and I got together and put together, I guess I like about eight years ago now.

Um, that does seed stage investing. Uh, you know, it's kind of a, there's actually, I think there's at this point several firms that kind of have a similar history to this, but when we did it was a little bit more. Yeah. Which is initially it just basically Dan, a few friends, we put together some cash into a common vehicle.

A lot of us were doing our own, uh, angel investing anyway. And so we kind of like created a vehicle that we were investing out of. And there was pretty casual, a few million bucks. And then, you know, um, after I left Facebook, uh, Kevin Colleran, who's one of the other GPS that, Hey, let's make this a real firm.

Right. And so we, you know, we raised the $65 million fall and then $145 million fund. And then. About a half, a billion dollars to this point that we've deployed into early stage companies. Um, we're hyper generalist. So, you know, we've done everything from brands like Casper and, you know, Albers. We were seed investors into things like Robin hood and slack and Postmates, like kind of tech core stuff.

And then, you know, we've also done a ton of crypto. And so I, I took, uh, a few million dollars into the. Crypto investing, you know, out of the fund, starting in like 20 16, 17 has become a major focus. So, you know, we're hardcore generalist.

MPD: Why is it called slow? That seems to be antithetical that most of the venture,

Sam Lessin: I mean, look, there's a bunch of stories for this.

You can get into, I mean, one version of the story. There was a, there was a great restaurant called SWOT club. We liked, um, you know, in San Francisco. Um, we also just like, you know, the, the more high, high, high minded version is, we like to point out that, you know, a lot of these things, they are supposed to be overnight successes, start out really slowly and take a long time to ramp.

So we think about it that way. I think there's another version, which is just like, candidly, it's just funny to name a venture fund slow. Um, that's actually what I assumed it was, there's some level. You know, we, we joke that one of the core firm values, we did like a values exercise. One of the core firm values we came up with was the poo emoji.

Um, like we think you can't take yourself too seriously. Um, so we've always, we've always joked. We actually now have a, a growth fund, which isn't officially called slogan. But we liked the idea of the, a find

MPD: you should have named it that why does

Sam Lessin: is this low growth fund so damn close, right? It's not quite actually named slow growth, but that's kind of the joke is, you know, you gotta have a little fun.

MPD: That's amazing. Um, so what, what's your for people listening who are entrepreneurs, what's the firm's pitch to founders?

Like why take your money?

Sam Lessin: Um, cause we're good. I mean, I think like. Our, um, we don't like to pitch the way some other, like, we're not your babysitters, you know, like some people, like we're going to have you all these services for you, and I'm going to handhold you through the entrepreneurial journey and like candidly having been entrepreneurs and built companies, we've had all kinds of bullshit, like entrepreneurship, like super lonely.

It's super hard. We'll never know your business as well as you will. Right. But, you know, there are a few places where we think we can be uniquely helpful, um, in moments like one and we loved being available on text messenger, right? So like our view is like Texas, when you need us, like, we're not on your board.

We don't wanna like get up in your business. We want to be super collaborative, but you know, there's places where we can be helpful from a product perspective. We've seen a lot of companies we've dealt a lot of companies actually like, you know, people have questions about how do we recruit this role? Or like, what do I do strategically here?

Like, we're really good at that. Um, and then I think a little more formally, you know, a lot of our LP is not all of them, but several of our significant LPs are kind of like the best series a investors in the world. Um, and you know, the reality is there's only one thing that kills seed companies, which is running out of money.

Um, and so we're, I think we've gotten pretty darn good at when we work with companies, helping them identify quickly, not all of the things they have to build, right. Cause you have to build tons of things to make your company successful, but what's going to matter. And the answer to. For the next series, I've put the series eight funnels.

What do you really have to get to hit that? And then making sure that we're actually socializing the companies and helping them talk to you, not just, you know, anyone or the, the name of the right people, um, that they should be talking to you about the next round. And I think, you know, you know, we take that pretty seriously.

Like as a partnership, we basically do rolling calls with every major series, a investor in Silicon valley every few weeks. Understand our portfolio talking about what's next talk of what they're looking for, what metrics look like. So we can really guide people through that very critical period. That makes sense.

That makes

MPD: tons of sense. Um, you're at an interesting place because you're kind of at the nexus of a lot of different dimensions of the tech ecosystem, VC via slow you're out of Facebook. Um, you're an entrepreneur and I know you for a long time now. I know you to be a very big abstract. I would love to hear your perspective on the current state of venture capital and how you see it evolving.

Sam Lessin: That's interesting. So I just wrote the thing I like to do a lot as of right. And, you know, I just wrote, my wife founded a publication called V information. This is a subscription only publication covers the tech industry super deep. And I think super well. Um, and, uh, I wrote a kind of long essays, probably the thing that ended up getting, going most viral over it written recently about kind of what I was talking about, like the end of software VC, um, and comparing a little bit to earlier cycles where, you know, venture capital, um, it's kind of like a thing that comes episodically in, in, in new industries.

If you think about it, like no industry should remain depending on venture capital for. Because if you think about it, venture capital is literally the most expensive money in the world, right? Like, you know, there's, you know, it's available to early stage companies, but the price is really high. Right. You know, and that's how venture capital is such a great financial business, if you're good at it.

Right. Because you're basically selling the most expensive commodity money. Now. So what happens is, is you start out, you have a new business idea and you thesis, maybe it's SAS or cloud, or like whatever area you want to talk about. Crypto. Certainly, you know, I think going through this and initially I was like, well, these are really interesting ideas, but this shit's crazy.

Like, I don't want to invest in this, so you can even call it people like me. And I'm like, wow, that's actually awesome. Here's some very expensive money. Let's go explore. But once those models get figured out, I was like, oh yeah, I know how to value this. I know what the metrics are. We all want to play in it.

Then over time, you know, industries grow out of VC. And I think that's kind of happening in software right now where like the reason you see all these huge mega funds coming in. You know, the leveraged buyout, asset managers getting into doing, you know, growth rounds. It's like everyone kind of understands the model.

They know how good the businesses are and the money gets priced accordingly. So all of a sudden the super expensive venture capital money is just like money. Like you can get, you know, you have a good software idea, you can get it from anywhere. Right. So my view is that one of the, I mean, what's happening right now is preventers at a point where there's a bunch of stuff that used to be software venture capital of Silicon.

Yeah. Which is really not venture capital anymore. Right. And then the real venture capitalists, some people will say, great, that's awesome. I made a shit load of money as a VC. Now I'm going to be an asset manager and that's fine. I'll just raise a hundred times more money and play against the east coast firms.

You know, I think the real people who like VC like me, we just go find Wilder, new shit, the back. Right. And like, that's kind of what I think we're in the cycle of right now. I mean, you know, crypto has been for sure, you know, you know, and I am a big long-term bull. You know, we've done unbelievably well backing early-stage protocols from four years ago.

You know, we were, you know, seed investors in Solano, which is, you know, a 3000 expert turns for us right now. Right? So like that was in an era when no one was doing that. That's kind of become more mainstream. It's no one has got a business, you know, we're still looking for new opportunities in crypto, but then even going into other stuff that people won't back yet.

So I kind of get excited about you talking about the future. I personally am looking for things generally, which no one else wants to fund. Um, and I think that that EDC in general will be pushed away from the software stuff, but it's grown up on or been defined by, by the last 20 years. Do you

MPD: think that will apply to the super early stage or just growth?

I wonder that some of the firms you're talking about, I agree there they're crowding and we're never, I've never seen a convergence of private equity and venture capital, um, in the same industry until the last three, four or five years. But the private equity guys, I don't know if they understand how to invest in companies pre-cash flow

Sam Lessin: preoperative metrics.

I think so. I, you know, I said in that article and I stand by the fact, I think seed is relatively more protected than series a on beyond once you're at an a, like, it's just a numbers game at this point. Right. Um, even there's a lot of company building left to do. Um, I think seed is relatively protected, but here's what's happening is it's kind of like, um, everyone's main course is someone else's appetite.

Right. Um, and so what's happening in some ways is there's a lot of companies that are coming in and saying, oh, that's cute. I can write. It used to be like, oh, well, like I'm a growth investor, but whatever. All right. HX, like, who cares? I don't care if I make money on it or not, but like, it's just a way to like, get an active.

And now you have a bunch of series a firms saying, oh, well, we'll write C checks. Why not? Like cares? It's just marketing for us. Right? Candidly, we do this. Like we, we do angle checks at up to a quarter million dollars. We know, we're not trying to actually make our fund on that. Right. Like that's kind of like to be in the industry and be supportive and helpful.

But so because of that dynamic, I think seed is impacted although less, um, is what I.

MPD: What other sectors are you interested that you think are kind of outside the domain of more traditional capital sources or you look, you mentioned crypto, you looking at space, but also is out there. Yeah.

Sam Lessin: I mean, we actually, well, we have done some space stuff.

You know, we were seed investors. I put a check in day Astra, which just went public through its back. And like, it was, you know, a space company. So we will do stuff like that. That's a little Wilder. I mean, th you're going to laugh at this because you've heard me pitch this 20 years ago, but. There's a few Wilder opportunities.

We're looking at. Some of them are kind of in the crypto space broadly, but you know, aren't mainstream yet. And like the world Dow Dows and things like that, but I'm pretty excited about, and the other space and until you'll laugh at is we started directly backing humans. Um, so investing in people rather than companies.

Um, and, um, we're doing this in the creator space. We're doing this with entrepreneurs, you know, we backed some great entrepreneurs, not. We're just like, look, we'll buy 5% of whatever you do for the next 30 years. Right. And like, how does that work structure? Like you explain that. So there's two different structures we've created.

Um, one's kind of more entrepreneurial organized or focused. The other is kind of more creator oriented. Um, the entrepreneur ones, like you basically just secret. Right. And then you kind of sign an agreement that says, look, anything you do will be owned by the C Corp. Right. And you're the biggest shareholder.

And then what am I already investors? And I think it has some huge advantages, um, actually for entrepreneurs, for some entrepreneurs, especially the ones who are going to be prolific over the longterm, because it allows them in theory, to do things like skip their seed rounds, right. And own more of their businesses.

Like all of a sudden, if you have a hold co that we've helped find. Well, you can turn out companies effectively, almost like an incubator, but you don't have to do seed financing anymore. Then you get to own more of your companies skip right to A's, right? Because you can go longer right on your own balance sheet.

And I think that's a very successful strategy that is going to emerge and will, by the way, anyone who's listening. If you are doing this, give us a call. And then on the creator side, you know, I'm a big believer, you know, historically the way a brand was built is you start a product, you know, pet rock, whatever I don't care about.

It gets really big to be like, oh my God, it's a great brand. We love this brand. Does this awesome stuff for us. And the brain is like, cool. Now I can do more stuff, but Amazon's a good example. Like grow up as a bookseller, get to do you earn the right to do more and more products, but the brand comes after.

With all these platforms, Instagram, YouTube, whatever, what you're seeing is all these creators start incredible brands with huge loyalty and know products and then layer products in later. Right. And the thing is, these guys are all completely cashflow bound pretty much. Right. And so we're very interested in financing creators broadly.

We've done some investments in companies that do this, like use creative, you know, things like that. But we're also literally directly saying like, we have a structure where we'll. You know, we bought an investment company. That's like an LLC tach broadly to you, right. We built legal docs around this and we basically say, look, w you know, we we'll just give you no strings attached, you know, money.

Um, and we want a small slice, right. Of whatever you produce over the next period, equity, you know, cashflow, et cetera. Um, so it's early, but we've now done this and we're doing this a few times and like, we're going to do more of it. And we're building a fund around that as well. Um, What's

MPD: the largest check you've written into.

Sam Lessin: Uh, $1.5 million. Got it

MPD: out and raise the funding for this.

Sam Lessin: We basically have like a fun running where we've kind of committed capital to this strategy, but it's not like it's kind of like our slow growth fund, right? Well, actually not quite there actually isn't at least technically all legal entities.

So this is slow people

MPD: fund.

Sam Lessin: Is that the, I mean, it's called, we're calling it a creator fund because we're not that good at naming, but the, um, but yeah, so we're, we're doing, I mean, I think there's a lot to do in that space broadly and there's a bunch of reasons. Yeah, we did a bunch of ISA world investing.

We really believe in effectively equity financing for people broadly. Right. And there was a lot of slices at that that are going to be very interesting, but, you know, I wouldn't, you know, um, I seen some, they will probably be growth equity for people, right. And these types of brands, but like, you know, this is the type of thing we talked about, weirder stuff like that.

Stuff is stuff I get infested in, um, that, you know, I'm not, when we're doing these deals, we're not competing. With some other funds because no one else is doing this. We're competing with like, is this a good deal? That is awesome for everyone. Right. Um,

MPD: now you're focusing on slow these days, but I know you had started a company recently.

I meant it's not that recent anymore. Uh, do you want to give a quick overview of Fen?

Sam Lessin: Um, things are great. And so, so when I left Facebook, uh, I was very conflicted about whether I wanted to be an operator or an investor as I have always been because the grass is always greener when you're operating.

When you're operating, like, I, God, this is fucking hard. Like investing is that can be broad or whatever, you know, when you're investing, you're like, well, this is cool and really interesting ideas, but I don't really do anything. And like that has its own challenges. And so I kind of tried to have my cake.

I did have my cake and eat it too. We started doing investing, you know, with Ben's and building a fund and. You know, I was, um, um, I adore Andrew Cortinez, one, the two co-founders of Venmo. I love Akron as well. Um, you know, I had been their first investor and help them find their first institutional capital and like in the early days of that.

And so Cotina was also kind of finishing up his corporate gig, having sold Venmo. And we said we got to start something together. And so we started a company thin, you know, when we started with saying, look, we're really interested. Not at that time, everyone was obsessed with like, oh my God, like, AI's perfect.

We're going to have these AI assistants, blah, blah, blah. And we're like, we know this technology, this is complete bullshit. Right. But, but we are interested in how AI and machine learning can augment human processes. And so we ended up saying, well, it'd be cool to build is like her, like a Siri as a superseded.

And just Nixon humans, like, see if we can figure out how to do that. And the idea was, well, we'll build all the technology from the ground up ourselves, nothing off the shelf. And let's just figure out the problem space. And we built a pretty cool assistant business. Um, this has been tried a few times really hard, um, but we did a pretty good job when we got to gross margin, positive and growing and lots of loyal customers.

But we, in the process of doing that actually figured out what we found was even better business, which is. Instrumenting knowledge work. Uh, you know, so if you're working in a factory, everything is instrumented, right? If you are working in front of you by instrument, I mean, you know, understanding per task exactly how each person's completing something, right?

What clicks are they doing? What are they focusing on? What knowledge base pages are they using? Like what is their workflow in knowledge based situations to complete tasks. And then how do you optimize it? There's this whole world, as, as I'm sure, you know, like RPA and like all this type of stuff going on, robotic processing for me, you know, how do you do, but in the end of the day, I mean, I did start my career at Bain and like, and so you have a clean, big data set of like, what's actually happening.

It's super hard to know like what the automated, how what's the pay off of it. And so we've built a pretty good. Uh, we built basically this instrumentation suite that we first we needed for ourselves and we had a hundred people doing these tasks. We were like, I don't, we don't have to fix this or improve it because we don't know what they're doing.

So we better figure that out. So the classic story, I actually am proud that I, um, I, I don't consider myself a real engineer, but I did actually build the first version of this plugin. Right. Um, myself and a hackathon, because I really want to understand the workflow of some of the agents. And we realized there's an incredible business because, you know, You know, huge companies, Airbnb is, you know, uh, you know, a big customer, people like that, like that, um, have huge knowledge work teams, right?

Doing customer service, things like that. And like, Having them understand what's actually happening so they can scientifically improve the processes is a very important missing piece. Right. And so

MPD: just to make sure I understand it now, so it's looking at what the knowledge workers are doing, creating essentially patterns around what the routines and work is, so that a third party management can look at it and in turn

Sam Lessin: dials.

Yeah. We can understand as well and like, and understand, you know, exactly how to improve a process, you know, where gaps are, but basically say like, look, I'm just. Create a full data set time and motion studies, you know, every second of every day, every single person on this 10,000 person team is doing per task.

And then I'm going to start pulling insights and where I can optimize where I can make a process better, which knowledge-based pages are broken, you know, where, when mistakes are made, why? Right. Um, scientifically and then continuously monitor and drive that. And so longly, it was, it became a pretty good business, great business.

We think it's gonna be a huge company like, you know, um, but we kinda got to the point where, you know, Katina and I are. I think pretty good, zero to one guys, but we're not necessarily the best one to two guys in the enterprise SAS world. Um, you've ever seen, like, we're not, we're smart, but like we're not the best.

And so we, we found the best, which is, you know, Evan, Komack, who's the CEO of that brought them in, have kind of set the company up for success. And you know, we're, we're both still involved, but, but he's driving the ship

MPD: now for people looking at these spaces, right? You picked one of the hardest. Roads to go doing the personal automation.

When the V one offense, the assistant, the personalized assistant, that's really hard technology to build because there's number of applications at building a real, her totally are infinite. How much of it was manual in the beginning. And I asked this for the perspective of someone listening is considering a kind of a machine learning or extremely complex technologies, a venture.

What is the right balance for manual versus automation? When you get started? To set yourself up for success and, you

Sam Lessin: know, proper Terminator. So what I'd say is, um, one core Jean and I did this, we did this pretty eyes wide open, having both founded and sold companies successfully and kind of being in a financially secure place and being young and hungry and knowing what we were doing.

Right. And like what I, the reason I mentioned that is like, don't start this. Right. We did this super hard. When I saw

MPD: this, I was like, wow,

Sam Lessin: did that again? Like not to, like, we did that on purpose. Cause we were like interested in the problem set area. And like, we're like, look, the only way to actually figure this out is to just like actually start doing it and put pedal to the metal and like we'll figure out.

We know, we know it's interesting. We know we'll figure out cool stuff, but like again, like we also did everything custom. Like we built all our own software. You're like, well, that's a dumb decision if you're a startup most of the time, except for that was kind of the point, right? The point was like, okay.

Can we think about this end to end and build in the right infrastructure as part of it, that puts us in a very different place. And so I think it's not a great way to be an entrepreneur. Like we were doing it having from a place of a lot of safety, uh, and you know, like, like wanting to take something on like that, cause we felt uniquely positioned to try.

Um, so the first thing that he was like, don't do that. Right. Um, If you are going to do it right. Having said that you shouldn't do it. And knowing that you shouldn't listen to seed investor and you could do whatever you want. Right. What I say is like, um, you know, look, we, we started out like completely manual.

Like literally we would play this like game where like, you know, one of us would pretend to be asking questions and the other person would literally start off being like, how would I complete this? And like, what software would I want? And then how would I speed it up? And then, you know, things like that, I do think that that's basically the best approach to most automation.

Is like just, you know, you literally like play a game, like where you, you know, with, uh, with that kind of masked man behind the scene, you know, the wizard of Oz style, and then you figure out how to chip away at the problems. And we have invested in a lot of businesses, we would jokingly call them AI or artificial artificial intelligence, um, with like AI, with AI, you know, we've invested in.

Um, uh, like we've invested in some wealth management companies, we invest in a lot of things that like fit this pattern because we think we understand it at this point, which is like, okay, like, which of these businesses, none of which can be as broad as Finn was, but like are good places to build these types of like, semi-automated more efficient human in the loop services effectively versus things that are just like fool's errand.

Um,

MPD: yeah. Fascinating because there's a place for this. Right. And especially good entrepreneurs who not to chip away at the, uh, at the club. Yeah, I did. The thing that,

Sam Lessin: the thing I'd say though, is you also have to, I think know yourself, um, which is I think, and this is one thing I think coaching and I didn't like fully internalize when we started the fitness system business is, you know, there's an enormous difference between software and service entrepreneurs.

They're both really valuable and you can make a lot, you can create a lot of value and build very good companies, building services. Software, but I think the leadership required for them is very different. Right. And so there are certain, like, I think that's one thing that, like, we kind of came to, I mean, say the primary reason for the way we've pivoted, but like a part of it, for sure.

Which was like, we kind of realized we were like deeply software people. Right. Um, and like services are just, I find them brutal. That doesn't mean that like they're not important and it doesn't mean that like, you can't build a great service businesses, but like from a personal emotional standpoint, I find services brutal, um, in a way that I, and I liked software, right?

MPD: You mean in terms of dealing with the humans and the customer,

Sam Lessin: it's kinda like my wife's business, you know, my wife in town, the information, if it's a journalism business, like they have to make their product every day. Right? Like they can't write a day off. Like there's no, like, okay, well we solve that and now we're done.

It's like, oh my God, like we delivered something. Now we have to deliver it again tomorrow. Right. And I just, you know, You know, it's who you are. I think you just have to know yourself a little bit and like, I'm not, I don't like delivering things every day. Like I like really delivering deeply sometimes, and then like not delivering anything for awhile.

MPD: Love that. So I'm glad you mentioned the information because ever since I've known you back when you were at PO uh, the company you sold to Facebook, you had been obsessed with paywalls. That was a Sam lesson special always. Yeah, I did that low and behold, the wife has launched a very successful paywall media site.

Can you tell us a little bit about the information?

Sam Lessin: Sure. So, yeah, I mean, you hear a point about obsession with paywalls. I mean, When Amazon first released like a payment platform, API is the first thing I did was I built a company called laterally real, literally back in the day, which was basically sub stack in 2008.

Right. Or whatever it was, you know, you can, um, you know, write a newsletter and put a price on it. And we'll like, you know, collect the subscription fees for you and, you know, email this address and we'll distribute it to you over subscribed. Right. Very simple. Did really well, and it's time like that, who really quickly, we were like, oh, there's something here.

But like I got distracted with other businesses and Facebook and things like that. So that kind of thing petered out, although it was cool to see substantial, eventually come back around to it. Um, yeah, look the information. I mean, you know, my wife was a longtime wall street journal reporter, um, had written a huge number of articles for the wall street journal, you know, very hard worker, um, you know, by the tech industry, you know, in, in that, in, in an era.<