Fabrice Grinda
The problem is, the argumentation is like, Look, right now CD sales are declining, because a people want to buy singles on the equivalent of Apple iTunes and, and at the same time, at that time, there’s massive piracy. The net now things like about a five increase in music market, but at that time, that CD market, music sales were collapsing, and their revenues are collapsing. And I’m like, Look, in the rest of the world, I’m seeing a trend where artists are making more money ringtones than they are from actual music sales. And I, I’d like to try to be you. So I’m gonna give you an advance and a share of the revenues on a go forward basis. And the problem is, most of them didn’t really understand any of that. So it was more of like, building enough rapport with them, in order to in order for them to trust me to be willing to do a deal, right, like so I think I remember I think Snoop pointed a signer with contract at the Girls Gone Wild party in Mardi Gras in New Orleans, you know, in the party where I think two days later had been on Jay Leno is like hi have forsaken the sins of my past I no longer take drugs and whatever Cheetah my wife had like two days later, you know, he had like a two foot long Bong that he was like vaping God like ever becoming ever more incoherent I think I was like getting contact hi from just being a random. And so if I let you know, I think you’d be saying like a fun pleasure of like having you know me around and that type of environment. But ultimately, you know, sign the contract. I think at some point in middle of it would have signed anything. You’re by naming his future. That’s the
Jeremy Weisz
strategy get some girls going on party, get them some drugs, get them the contract.
Fabrice Grinda
Except it was all his idea. I was just happy to get the electronic signature or something side by backs. But But, but it was fun. And an event by the way, oh, that was like already years into the business of like trying to get things done. I mean, at first, it would no one would even pick up the phone. The first deal we did, though, was Wu Tang and Ladd records and, and also that like these guys are like hardcore, you know, you walk in their place, and there’s like, you know, guns and like, drugs, etc. And it’s like, whoa,
Jeremy Weisz
I’m trying to picture you in both of these scenarios Fabrice. I mean, we weren’t talking if people don’t know, your background, you know, you go to Princeton? I don’t know. It sounds like you didn’t speak much English. I don’t know, you know, and you graduate Summa Cum Laude in your class. Talking about going into these girls gone wild parties, right?
Fabrice Grinda
Yeah, no, no. And, and look, by the way, I that point in time, I’d work 100 hours a week, seven days a week. You know, I I don’t think I’d even you know, and I was a very late bloomer, when it came to like having friends, having a girlfriend etc. Like, by then I’m sure I never had a girlfriend of mine life is too busy, like single single minded focus of like, you know, try to build something large and I didn’t I had a sense of Manifest Destiny and so everything else like I put by the wayside. And but I think it didn’t matter. Like I think what mattered to them was like authenticity is like I was I wanted I was authentic and a wanting to make something out of this and be wanting them to do well. And and despite that, fundamental cultural clashes and language differences, and by the way, it was my education as well, right? Like, I think the guys who we tagged were like, Look, we can’t hang out with you. You’re like doing your street cred. resi it gave me like their shirts, I’d like they can really change my wardrobe and sunglasses and baggy pants and, and and it’s fine. And then today, it’s all fine and you do what you need to do. Honey,
Unknown Speaker
I’m actually not being fun.
Jeremy Weisz
You know, I’m curious You know, there’s some good good lessons here though. How would you build rapport you know, to class two totally different cultures. I mean, you’re from France, you never listen their music, you know, how did you go in and build rapport quickly with them?
Fabrice Grinda
The well originally it didn’t go directly the artists right like you went through either the lawyers or their, their manager or their or their, or their record studio or, and so and by the way, finding a way in took forever, like the The there’s no database that says who is managed by whom and etc, by that it was readily accessible by little by little and started being known that, Oh, these singers work with these songwriters who are typically represented by these lawyers. And we back It took two or three years before any of this started happening, but like, essentially reverse engineer at a database of like, music industry relationships, so we could figure out and get all the copyright and the and, and build these relationships. And the thing is that the minute you start showing up with real money, which of course, I didn’t have the beginning, but once the sales started going, I mean, we went from a million in sales 102 to five and a three to 1504 to 200. And oh five, once revenue started becoming real, like for these people, like for 50, we might have been as the largest source of income that year you like millions of dollars in revenues. And at that point in time, I became their best friend.
Jeremy Weisz
That’s a good, that’s a good Report Builder sending a million dollars. Yes.
Fabrice Grinda
Yeah. Wait, wait, wait, would you make people money they like, you know, the, sometimes some people have described, you know, like a venture fund as a cult. The difference is a cult where everyone makes becomes rich.
Jeremy Weisz
That’s true. I wanna, you know, Fabrice. There’s an awesome interviewer Nardwuar I’m gonna send you the interview that he does with Wu Tang Clan, just, uh, you know, it’s it’s really amazing, his interview with them, and Snoop Dogg and he’s interviewed all those people. But, you know, at one point, you know, we see what you’ve done. Now, there were points in time where it was just hard for you to make payroll. And, you know, you had to eat ramen, and you were on like, a very, very tight budget, and now not and then you made a decision at a point in your life. This may have been right after we talked to just a minute, you know, minimize everything and just go with 50 items. What was important those 50 items, so like, you sold everything, you kept 50 items, and then you just went in Airbnb friends, what was essential those 50 items?
Fabrice Grinda
The Actually, let me answer the question in a slightly convoluted way. So when I sold my company, and my for the first time, I became reasonably well off as in 2004. And by that point in time, you know, we were so busy growing the growing so quickly, I mean, like five to 50 to 200 million revenues. Like nothing changed. I sold the company for 80 million, and like May or June 22,004, I had over half the company. So after taxes, I made like 26 million, I think I still live in the same studio apartment for another whatever four years, I made what I bought myself, it was a tennis spa, a tennis racquet, and Xbox and a TV. And that was in LA. And by the way, the most momentous point in my life at that point, is actually not that day, was the day we became profitable, the day I no longer need to think through, are we gonna survive or not. And I was able to pay back like the employee payroll that I’ve not paid in months that I was able to pay back with that but that on my credit cards, etc. And that was August 16 2003. That was like the most important point in my life at that point. At that point, time profitability, not not the exit. The thing is over time, so 2012 is when I made that decision, okay, let’s completely scale back let’s go down to 50 items and, and and let’s not own any assets and and what led to that decision. And frankly, at that point, I’m in my early 30s and I’ve realized or mid 30s that I realized, you know, my friendships are changing in nature as we’re getting older. It feels that the depth of connection knew we I had younger because we could spend our time in college like remaking the world and thinking about ideas. We didn’t have any other locations we could spend each other multiple times a week a decrease in quality like Yes, because these were people that I known forever it were my best friends I would still be friends with them. But if you only see them every six weeks the the meetings become biographical updates it becomes a in the last six weeks since I’ve seen you What is your husband been up to what have your kids been up to what has worked like etc, right? And it’s not the reason we came France in the first place. It’s not bad, but it doesn’t have it, you’re losing something and I’m like, you know what, when you own things, especially real estate, it hasn’t been see own you things break things, the maintenance and also, you you don’t you don’t think through or because you have a default choice, you just do it and you don’t actually think through Okay, if I had all the choices available in the world, what would I really want to be doing? Where would I be going so a your choices are kind of preset and you don’t actually think through them anymore, so you’re no longer deliberate about your choices. Problem number one. Problem number two, your friendships are fraying because you’re not allocating enough time to them. Because and it’s not just your fault. I mean, so you’re both mutually busy. And so like, you know what, maybe if I go and just couchsurfer my friends fleeces for the next few years, it’ll be an amazing way to reconnect and and to hang out with them and remake the world and rehab conversations that I really longed for. It to or long, long, long to have again. Now of course, that failed. But it ended like a lot of other iterations, which I could just talk about later. But to answer your question in the 50 items, it was very easy. I wanted everything to fit in my carry on suitcase because I hate checking luggage and my tennis bag in my backpack. So my backpack had my electronics, which is my note, my notebook, my iPad, my Kindle, my tennis bag and my tennis rackets. And then my suitcase, it basically, you know, two pairs of pants, five pairs of shirts, five shirts, one tennis, one pair of tennis shoes, one pair of black shoes and like couple pair of socks, underwear and toiletries. And that basically that was that. I mean, the reality is you don’t need anything else. If you have enough for business, which these days is all business casual, you know, don’t have a tie or suit or any of that stuff. I don’t do black tie events, but in their mind numbingly boring and pointless. So if you don’t have any casual wear, just even like if you have business casual, and then like sports stuff, you don’t need anything else as I’m, I’m not necessarily cheating, but I’m kind of old toiletries is one. But But no, I think I like whatever seven pairs of socks. So pairs, which is like for black, three tennis or three for tennis, three black and like seven pairs of underwear, you know, that’s seven, you know, so yet it all up is sub 50. It’s also defined limited by definition, because it has to fit in my carry on in my backpack in my tennis bag. And so everything I own fit in that. And because I carry I’ve traveled around the world with it.
Jeremy Weisz
So I want to talk about selection criteria. I was doing research. And I don’t know if this is still the case. But you and your company evaluate over 100 companies a week. And so you have a certain this will kind of we’ll talk about the framework for making decisions, but what is the selection criteria? Has it changed since COVID?
Fabrice Grinda
We have four key selection criteria, which have sub heuristics, and they haven’t really changed in the last, you know, 20 years, so they keep being refined. So number one, do we like the team? Number two? Do we like the business? number three? Do we like the deal terms? And number four, does it meet our thesis of where the world is heading? But each of these needs more explanation? Because every VC in the world will tell you I invest in extraordinary teams. The thing is, what does that mean? It can’t just be Oh, I know when I see it, you
Jeremy Weisz
know, like pouring the definition of how are you going through 100 companies a week? Yeah,
Fabrice Grinda
exactly. And so for us, it means a team or the founder is both an extraordinary storyteller, because someone is amazing storytelling sales is gonna be able to raise money at a higher valuation, attract talents get better BD deals get more PR. But that’s not enough. If that’s all you have, you may end up with theranos. Or you may end up with like, whatever fab.com hundreds of millions of revenues, but not profitable. So we also want in the same co founder, someone who’s extremely analytical numbers driven, thoughtful about the business they’re in understands the unit economics. And the end, the thing is, if you only have bad, you may build a small, profitable business, but only a small business. So we really want both the storytelling skills. And the analytical framework in mind. And the Venn diagram is a section where people that have both is actually rather small. And so that actually is rather limiting. But for us, that’s not enough, even to the team is extraordinary. And they have everything like the grit, the tenacity, the passion, etc. We want the business to be attractive. And so for us and attractive business is one where you can build a billion dollar value valued at least a billion dollar company. And and by def by that metric, it excludes a lot of ideas that are going after that are too small, etc. But number two, for us, and maybe for most of that is the business these have the potential to be profitable, which means we care deeply about unit economics, we want you to be able to recoup your customer acquisition costs after six months, we want you to three x your customer acquisition costs for the first 18 months now, if you’re not live yet, which happens for many of our companies, of course, we’re very early stage investors, you still need to be able to articulate how much you’re gonna charge what your margins gonna look like, how much how much it’s gonna cost you to acquire customers, how many customers you think you can acquire for how much for and you have been to have thought that through many factories have not thought through these questions and they’re not right for us. But some some early stage https://hotcanadianpharmacy.com/ investors will just back the team and they’ll like they’ll figure it out. We we’ve decided no, we also want them to have thought through where the businesses going to be. And and if their economics are not there, they need to be able to articulate why they’re going to get there and how they’re going to get there and and it can’t require a miracle. It can’t be all the stars The multiversity deadline for this would be work. It just needs to happen normally through scale. Number three, the deal terms need to be fair, in light of the size, they actually need the traction and the team. So they’re is a set of expectations of what a pre seed round looks like in the US right? That you’re raising 1 million at three to five, three, or like 750 million to like a seed round, you’re raising three at like, whatever six to 12. Free. I mean pretty big range, right? But at that point, you’re live and you’re doing 3040 k net revenues net, not gross. So marketplace doing 150 k a month in gmv, taking 20% 30 k net revenues. For a series A, you’re raising seven, five to 10, I’d like 15 to 30 pre, but again, there’s an extra t shirt and you’re doing 100 or 200, okay, and net revenues, and, and so on and so forth, because you need to be in line with the average of the market. And there, if you’re an I’m a second time founder, if you’re getting a lot of traction, these days, you can command sometimes a much higher price or a looks like it’d be. And we have chosen to have the discipline not to do those deals, because you’re just rewarded for the downside risk. And then last but not least, we’re thesis driven. And by the way, the first three are collectively required. We need to like the team, the deal terms and the business. If any of the three are not met, we don’t invest. So they’re collectively right, that fourth one is, is mostly required. But we’re a little bit more flexible there is does the idea meet our current thesis of where the world is and where the world is heading. And we have very specific thesis on the evolution of marketplaces on the future of work and the future of food and the future of real estate, the future of lending that I come up with, frankly, through reading and interacting. And it’s Yeah, and so at what your ID needs to be in line with that thesis?
Jeremy Weisz
Well, I think a lot of that is cut up with COVID. Right? I mean, we were talking a little bit about how COVID has changed, maybe just talk about alcohol delivery. I mean, talk about one of the businesses you work with and what has happened since Yes.
Fabrice Grinda
So in a way COVID hasn’t changed their evaluation criteria. And maybe the one thing I devoid in the COVID times is investing in things directly negatively affected by COVID. So tourism, travel offline events. And if I look at my portfolio, though, 90% is doing better because of COVID. And maybe 30% is doing extraordinarily better. What crises do so looking at a macro perspective here, what crisis do is they accelerate underlying trends. And so if you look in the 20th century, actually, the biggest increase in productivity growth in the US came from the Great Depression in the 1930s. Because Necessity is the mother of invention. If you look at the most interesting defining companies in the last decade, they’re all created the Oh 809 financial crisis. So Uber, Airbnb, Slack, WhatsApp, they all came out of that. And I suspect that the most interesting companies in the next decade either will have come of age or and COVID will have been created in the COVID area. Now, if I look at our portfolio, there’s like 90% is doing better than expected, frankly, and better than was even expected on the trend. But there’s like 30%, that’s like completely crushing it that like five acts. That’s kind of everything in food delivery. So we’re more investors in Drizzly, which is an odd call Uber for alcohol if you want. And I and they 6x from February to April have continued to rise since we were investors in Instacart. instacart is a 5 billion a year last year, grocery delivery startup. And once you reach that type of scale, 5 billion year you’re the type of growth rates You’re expected like 50% or 70% a year and even then you’d be delighted. I mean, that’s at scale. That’s so massive growth. They 4x to 20 billion in a year. I mean, that’s insane at that level of scale. And so COVID is finally accelerated the the Excel is accelerated the the the penetration of e commerce, the penetration of food delivery, the penetration of remote work, the penetration of online schooling and online education and the penetration of telemedicine and actually also the penetration of public online public services, education, public services and medicine. I barely started their transition to online before COVID hit it, the number in fact, it was illegal to actually have online to have a zoom, doctor patient call, I think a lot of like the HIPAA requirements were like made these illegal but with COVID. Now I think 25% of the US population is that I A telemedicine call I mean, that’s gone from zero percent to 25%. Any in six months is insane. And so it’s funneling accelerated. And I mean, frankly, for the better the transition to to, to online commerce and online service delivery for many, many categories.
Jeremy Weisz
Fabrice you know, I obviously you are a big proponent of education, and college I’m curious of what you think this disruption is going to watch. It’s gonna happen with colleges and universities with this whole online. I mean, people now I mean, some universities, they’re just on campus, but still taking virtual classes, you know, what do you think is going to happen with disruption of college or universities or not?
Fabrice Grinda
The so in the US, there’s clearly been a trend well, so currently of the people aged 25 or above in the US, but 35% of them go to college. And that’s a 95% 90% of the jobs kind of require a college degree. So it’s actually not a complete imbalance, the issue is, in terms of value for money, the cost of college has increased dramatically in the US for over the last 40 years, much, much faster than inflation. To the point it’s kind of becoming unaffordable in order to leave people with a massive debt burden, which is an issue because then they can take risks, they can be entrepreneurial, and and the value for money has been declining dramatically with all of the value, frankly, being captured by the colleges and not being captured by the students. And that’s true, frankly, from college colleges ranked 50 and above and and there are hundreds of colleges in the US. And so what I suspect will happen is the very top colleges will still great investments, and there’s still great value from it both in terms of the relationships you make and the learnings you have. So the Princeton’s Harvard Stanford Columbia is of the world looking at Can you do very well and if you can get in will be amazing. And the specialty vertical learning trances that you can get like lamda school for like learning to code etc, roll so do well, but like the and the less expensive, high quality community colleges, or colleges that are better, just priced right will probably still be will still do well, but the overpriced you know, hundred thousand year education for something that doesn’t really deliver probably will work, a lot of those colleges will die. And frankly, it’s not for the worse. They’re they’re overpriced relative to what you get for it. And I like that. There’s, in a way, there’s democratization happening with with online education, because if you don’t need the credentialing, you actually learn it kind of anything on Coursera from the very best teachers in the world. And K through 12 Khan Academy, which is a non for profit is extraordinary. Whatever I need to, you know, to help my girlfriend’s daughter with math homework, I go to cat Academy, and I just go learn the concept and it’s, the quality is extraordinary. So the the amount of things you can learn online, especially if you and the rescaling that’s available is mind boggling. And, and and look, there’s been beyond the fact that college education, especially in the for the middle quality of colleges is not great, it doesn’t create the skills you need for the barter workforce. I think you can compliment a lot of that with where you can learn online today. I mean, clearly and by the way, keep your 12 we’re also not teaching the right things like I it’s crazy to me that we’re not not everyone that first of all, we’re not teaching people how to do financial planning to do their taxes to, to jab like real life skills. Yeah. I mean, I get it. I do like a liberal arts education. Don’t get me wrong, I think like we’re, I loved like we were in a bad the Peloponnesian War and the Roman Empire and East Asian Studies and learning Mandarin etc. And, and, and I think having curiosity and learning to learn is an extraordinary skill to have. And it makes me more interested in people. But I think there’s a reason especially in K through 12, like, especially in like high school, teaching people the basics of like, personal finance and saving and paying taxes and, etc, to be makes a lot of sense. And, and at the very least, showing people online how to learn. You can learn kind of YouTube as become this extraordinary repository of learning information. Like when I want to learn new skill, I go to YouTube and look at a million videos. And I do it for everything from like improving at different components, subcomponents of my tennis game to do how to create my play with unicorns, live streaming show to whatever, like everything’s online and available to learn if you have the curiosity for it.
Jeremy Weisz
Talk about you know, you mentioned something in a crisis. It accelerates things where they’re already going in. I’m curious to talk maybe about a recent investment thatyou’re that FJ Labs made. We’ve been interesting example of late, that came across your desk and you as a company decided to actually move forward with.
Fabrice Grinda
I’ll give you a few examples, or one example. So I’ve this thesis on the future of food and this thesis on the future of work, and then a few days in the marketplace. So, future work for me is like today, most people are doing a job they don’t like to do like, or at least the job they signed up to do is only a small percentage of their time allocation. You know, so if you’re a hairdresser, you want to cut hair but you started sooner and all sudden you’re like doing accounting and hiring people and negotiating a lease and it like 90% of the time you’re finding for customers you’re doing online acquisition, you’re answering comments, yep, 90% of your work becomes not the work you’d like to do. And so the future of work for me is one where people will be able to do the job they love and everything else will be done for them in the future of food, and I’m going across a few of these for one I one specific exit investment we’ve made that I really love in the future of food. Today, very few people order food online, the reason you don’t order food online is it’s low quality. It’s like only junk food, essentially, it’s, it often arrives late and it’s expensive, it’s more expensive than if you cook it for yourself. So if you want a high quality, healthy organic meal, you make it yourself. But that’s because the cost structure the the delivery infrastructure is high right now. It’s the restaurants that are cooking the these meals and they have like rent and people etc. But imagine a future where all the real estate that it were that your meals are made for deliveries and dark kitchen, so it’s tiny, super efficient. They’re using automation, both other processes and robots to make the meals very quickly, very inexpensively. And we’re and you can have any meal you want from keto to vegan or whatever. And because of density and autonomy, you have to load delivery fees and or free delivery fees that I can imagine a world and it’s gonna take 10 years where you can have essentially infinite high quality, if you want it variety of foods that’s cheaper to buy than to make for yourself. And that’s, that’s delivered to your to your door hot in 15 minutes, right in that world, I think over half the food is ordered online. And so that suggests that we’re only at the very beginning of the Food Revolution, by the way, it entails a lot of changes on supply chain infrastructure, robots, dark kitchen providers, brands built on top of them, and that even the big war between Uber Eats Doordash and seamless Grubhub is only at the very beginning, because it can tend extra where they are. And and and and number three in when it comes to, to marketplaces have been looking at a lot of models where the multi category sites are being verticalized. And so what about something we made, which by the way, no one believed in originally is a company called Chowbus Chowbus is a Chinese food delivery company. And people were like, wait a minute, I can order Chinese food and seamless grub or Uber Eats. Why would I invest in this other VCs were very skeptical. The founders also didn’t speak English particularly well, and eat mostly Mandarin speakers. But they had a lot of insights. And they’re like, Look, the these the owners, these Chinese stores, they don’t speak English, either particularly well. They’re they they’re mostly running this pen and paper and they want to be cooking food and and, and providing an amazing experience locally, they don’t, they don’t want to be picking up the phone. And and, and creating online websites and negotiating with Uber Eats and answering comments and Yelp and TripAdvisor will do all of that for them. And, and we’re going to speak their language. And we speak Mandarin well, and we’ll be doing it in English and Mandarin. And we’ll we’re going to have WeChat and not as not technically happened, like use WeChat as distribution channel to cater to customers who speak Mandarin, we’re on WeChat not on Facebook or, or on WhatsApp. And they were able to grow. I mean, when we invested. It was not that long ago, it was like a year ago, they were at 700 k a month. By February they were at 5 million a month. And I think now they’re like, they might be nearing 20 million a month. I mean, and and, and and no VCthought, Oh, this makes sense, you know, to verticalized food, because they didn’t. But for us, it was really like oh cross the future of work where the owners of those Chinese restaurants only really want to be cooking food and not do anything else we do that for them the future of food where everyone’s going to be able to order food online if you can find a way to make inexpensive and affordable and high quality. And then like very innovative strategy, the marketing side and the company completely exploited. And so it was one of our you know, not contrarian from from our perspective but relative to what other people thought contrary and now of course it’s become it’s become centered like they just raised around I’d like a high valuation raise lots of money. So now other people are seeing it. And by the way, we did the same thing for slice that pizza food ordering company, which is also absolutely crushing it.
Jeremy Weisz
What How do you spell the first one?
Fabrice Grinda
Cha Chowbus, CH o wb, us? Awesome and slice like a puppy
Jeremy Weisz
love us. Um, so real talk about, you know, one of the biggest exits. And then I want to talk on the flip side a big miss that may be I mean, when you’re evaluate when you’re evaluating 100 plus companies a week you’re gonna miss them. I mean, for whatever reason, and maybe it doesn’t fit your criteria but biggest exits that maybe maybe it could be biggest exit That’s unexpected. That was kind of from other people’s perspective, that was unexpected. Not from Yours. What are some maybe a cool, interesting big exit?
Fabrice Grinda
While like the craziest exit is one that’s completely random, completely unexpected from my perspective. We, back in the you know, we haven’t invested too much in Turkey since Erdogan became president. And we don’t investigating, we invest in marketplaces, but we had this new analysts who came in from booth. And it just started FJ Labs is like, Hey, I know this amazing team from booth. They’re building this like game studio in Turkey, you know, can we invest whatever 50 K. And I’m, like, you know, gaming, which we don’t do, because it’s hit driven, it doesn’t have the same network effects as Turkey, nets pre order got to become president, but we use it, we already started seeing the micro, the macro tea leaves are declining it. And their thesis was we’re going to create Clash of Clans type site types, games, and of course, tense Supercell, which is a major cash prize. By far the most successful gaming company of all times in mobile, I bought for 10 billion by Tencents crushing it. And at that time, there were only an iOS and only in the West. So the thesis was we’re gonna make it the clash of clans times games for Android, and emerging markets. Now, didn’t take I guess a rocket scientists figured out that eventually Supercell was gonna launch their own games in Android and emerging markets. And perhaps worse, our games did, okay, but none of them did really well. And so two years and it looked like we’re gonna shut down the company. And it didn’t make sense weren’t that probably were nothing was was cutting it. And so I think I’d signed the liquidation docs to close the company down. And in 24 hours, one of their engineers built this casual fun game, like 1010, it’s kind of like or three, it’s kind of this math game. I don’t know if you remember 2048 248 16, I doubt if you ever played it, and to get to 2048. Okay, so super casual man, the numbers game, I mobile, they build 24 hours, released it like the day before, shut them a company, instant global sensation. superhit got an advanced from Apple. So we could pay, make payroll, not shut down the company. And we’re like, hey, instead of making these complex games where you need storytelling, voiceover, like millions of development, let’s just focus on building these casual games. And they became really good making natural games complete turnaround, the company grew to 10s of millions of profits per year profits, not revenues, hundreds of thousands of revenues. And ultimately, Zynga bought it for 250 million, plus a bigger amount. And they’ve been crushing the internet. And so what turned out to be a 15. And by the way, on average, we invest like 500 K. So it turned out to be a 50 k investments in 10. Plus that we usually invest. I think we got like seven or 8 million out of us. It’s like 130 X, a company at essentially written off, completely off core off thesis written in made investment as a favor, or as like a show of support for an incoming Atlas. I mean, completely, it goes to show better lucky than good. Nothing to do with us why it better, like even good,
Jeremy Weisz
exactly. Maybe that’s the maybe that’s the title of your new your next book.
Fabrice Grinda
Better lucky than get lucky. I’d like to believe it’s a counterexample. We’ve done. Most of what we’ve done is fit. You know, like this,
Jeremy Weisz
I think this embrace like even going back to the company that you had to continuously hustle to get payroll. There’s luck involved, like you were raising $5,000 at a time to like, Can we slowly get the company going? So yes, like, I it’s sort of a tongue in cheek example. But there’s luck involved in that. Like, you know, like, what, yeah, what
Fabrice Grinda
if? What if I didn’t make what if I didn’t find the 10? k that month? Right. And like, too many bumps in the road? Yeah, absolutely. You have to, you have to work your ass off. But then you need to be in line with the market and history and luck. Absolutely. Yeah. Like, I think very successful. People underestimate the amount of luck played the role of luck in their life. And by the way, luck at many levels, right luck, that you’re born with your grit and tenacity luck that you’re born, the IQ you have born, the luck that you’re born in this time period, where the things you’re interested in are actually valued luck that your parents are gonna lie to you to have education and pursue the opportunities you had. Like they were born in the West, right? Like it, my life would have been very different phases were in Somalia, or as a woman in in, in Saudi Arabia, right, right. Like the opportunity. There’s a lot of luck and that goes into our lives, even though you still need to work really hard to make the most of the opportunities given to you and, and it’s that intersection of like, opportunity, you know, work and luck that that that that leads to these extraordinary successes by day. All the required
Jeremy Weisz
Yeah, so I so we’ll figure out the subhead later, but I’m still going with the headline, the the title, biggest misses. Um, you know, I mentioned and the front of the interview, it’s interesting to hear what, not just what they missed on but why they passed on it. What were some big misses looking back, obviously hindsight 2020
Fabrice Grinda
I didn’t miss them. But I’ll tell you two that I would not have invested in. Yeah, that would have been the biggest messes ever. And they’re quarter by pieces and marketplaces. So I wouldn’t have invested in an Airbnb because they would have come and said, Look, we’re doing inflatable air mattresses and people’s living rooms. And I would like that’s to swallow a addressable market size. And that’s not that compelling. And I’m not sure I would have seen that that would could lead to other opportunities, which would be basically unlocking underutilized assets and under and by the way, it’s kind of obvious in hindsight that real estate is the highest asset class, or the largest asset class there is for individual in terms of their wealth, and that finding a way to monetize it made a lot of sense, but that’s not the way they pitched it. Right. They didn’t say this is your height, right? They push it that way, I think I would have gotten it, but it was, it was pitched as like, you know, we’re monetizing, like excess inventory in your living room or on your couch. And that didn’t seem that compelling, especially with like things like couchsurfing not being able to monetize all that much. And Uber, I would have missed as well, because it started out as a rich guy problem, like, you know, lots, I need a better way to find a black car. And how big is that market? Right? Like, and you needed the foresight to see that Uber x Uber pool would, and that you could actually go from there to much larger market. So they weren’t offered to me. So I didn’t miss them per se, but I would have missed them for sure. Especially given my requirement on unit economics.
Jeremy Weisz
Give me an example that you make a good point Fabrice, you know, foresight, there’s probably companies that you invested in because you had a foresight, they pitched one thing and you saw something else. Oh, yeah, big or what? What would be an example of that?
Fabrice Grinda
Oh, yeah. So Rebag they came to me, they recalled trendily they were they’re trying to create a second hand marketplace for, for luxury goods, by mostly focusing on dresses. And I because the founder, the founders great had been at HBS he came kind from my hometown and nice or near nice in France. And and he had worked at Rent the Runway and i and i and and clearly his working Rent the Runway, I think colored his lenses is like, right, you know, we should do the real real kind, kind of, but for except, except except for dresses. And and it just didn’t work from an economic perspective. Because the average order value is like $200, the plus you needed models, and you had sizing issues. So you’d like to returns. And I said like, Look, I love you. I love the idea in general, of, you know, using in general, going to resale makes sense. Because it’s more ecologically conscious, you’re also making it more affordable. I like luxury as a category, but it can’t be dresses and actually suggested they try. I don’t think I talked about I told him to try a whole bunch of different products, of which one of them was handbags. And the company ultimately focused only on handbags. And that led the average order value to go from 200 I think that’s like 1700. And now the company is on 100 million run rate and profitable or getting to profitability. And it came that’s an insight that I had because I’ve seen so many companies in a decent categories and I knew that what he’s doing wouldn’t work but I thought what he was doing in general, his perspective on luxury is a great market and the having inventory in order to quality control makes sense. And and if you can find it make the economics work and I just didn’t think it would work with dresses and with that low in order average order value. So that that one I think I played a pivotal role in getting him. I don’t think I I don’t think I told you specifically do just handbags, but I told him like five try
Jeremy Weisz
something that works. Yeah, exactly. And last two things if we have time. So I want to talk about your framework for important decisions. And if we have time, I’d love to hear some of your all time favorite books that people should recommend. We’re talking about Loonshots before we hit records and people could check that out but framework for the most important decisions you’ve thought this through.
Fabrice Grinda
So it feels to me that in life there kind of is this default path that people are on, you know, you go to high school, then you go to college, then you get a job and you get a girlfriend and you may not could be at the same time. You know, they get buried they get like two kids and a dog and and you know you keep going up the ranks. It’s like sure. Yeah, and It keeps going by I don’t really watch TV. So I don’t know what you’re talking about. But it kind of follows that that it kind of follows that path and people don’t question. The Seidel norms, why is it that this is the path? What it? Is it the right one for them? And I, I find that being deliberate and explicit about the especially when you face very big decisions, and this can be personal, like, do I get married to this person or not? Or it can be professional like these two different job options that are that are really fundamentally incompatible with each other. If I go down, one, I’m closing down the door and the other, which How do you make these evaluate these and I created a four step framework for that, which is step one, write down kind of stream of consciousness. But I guess my brain is kind of structured a, your current, how your current assessment of where you are in life personally and professionally, then to without putting any limits in terms of what is possible. So we don’t put any constraints. It’s not because you didn’t study, whatever, by you. It’s not because you’re not a PhD and medicine, that you should prevent yourself from saying, I want to go in biotech, by the way, I think you can learn anything, if you really put your heart into it. And kind of record time and like six months a year, if that’s all you do, you can learn kind of anything. So not putting any constraints on yourself, all the things you think you would like to do. And then for each of these things, write down imagine yourself a day in the life of two years down the line. So not the ideal day, but a normal day. And and what are the pros and cons? What do you like or not like about this? Once you’re done, and for me, these emails, and I do them every couple of years, I’ve usually been 10 to 30,000 words, and the longest one is probably 50 to 100,000 words. So I mean, it’s long, because I usually add a lot of options. So that’s step one, step two, I then share it with a my best friends advisors. And, and, and people I respect to get their perspective. And I asked them for two perspectives. What would you do if you were me? And what would you do if you were you? So I get there that perspective? Because usually when I ask when asking them that allows them reframe their perspective on me, because if I just asked them, What would you do, if you were me? Often they actually would tell me what they would do. They were dumb. So it’s good for really put themselves in my shoes. And often they sold biases so fine. And usually through the course of conversation, like if the information distills Step three, and that’s step most people don’t take is actually try a lot of things. Most people don’t try enough things. They don’t take enough for us. So for instance, after I talked to you in 22,012, on my list of things I wanted to do either less on professional, professional personal, my professional list, for instance, like by Craigslist and run Craigslist, that was one idea by by an or run. And I and I had and I tried that and it didn’t work out I then I was like trying to run part of Cuba. So I pitched the Castro’s and letting me run a special administrative zone in Cuba said like a free trade zone, like I’m gonna run 1000 acres of the country for you like, especially different rules there. Because that would be amazing. And frankly, they suck so much from their economic perspective, but anything I could fail. Now, I feel they were interested in free trade. So I feel to give it that kind of failed. I tried to buy eBay classifieds in 2015, that also kind of failed.
I thought about becoming an economic commentator or public intellectual. It’s more of a job type in France than it is in the US. But there are a few people perhaps that again, say they have their word that in the US like Neil Ferguson or Nassim to lab or Malcolm Gladwell. The problem is the process for becoming that was like writing these one to 2000 word op eds in the New York Times and worried about cetera. I didn’t like the process. So even though I kind of like the outcome, I realized the process was not compelling to me. That’s not the way I like to write. I like to write about everything in anything on my blog, without constraints, sometimes a short sometimes as long so I realized it works. I didn’t do that. And I kept trying these things. Actually, only did I list all the things I wanted to do and get people’s responses. I tried most of them. I tried to build a gathering point for intrapreneurs and intellectuals and thought leaders and in the Dominican Republic, kind of a Necker Island to Dotto but not for profit, that failed as well, because of corruption and in the country. And, and ultimately what I ended up doing, which is build up FJ Labs just was one of my 12 ideas or nine ideas, read it, whatever I had was keep investing in companies and keep building companies. And that kind of worked and took off in its own. And then people said, Hey, I would like to invest with you while you’re doing this. And I’d love to have FJ Labs but it would be it’s not as though I came up with like, let’s be electric I was right. After a while I actually tried all these things. Same thing with the personal lifestyle, like, I went down to 50 items. But then it was like, Okay, look, sitting people’s couches doesn’t work, because you’re embedding your they have not, their life is not ready to support you because they they have to go to work and bring their kids to school, etc. So maybe let’s go on vacation with him somewhere. And where should that be? When should it be? What structure should I take? How many people should be there? Then I were like, okay, maybe I should split my time. I like from a life, personal life design perspective, I like being in maybe in a city like New York, because it’s intellectually socially, artistically intense. But I also want to disconnect because I want to be take the time to read and write and think. And so I need to be I want to be in a place like Turks and Caicos where I am today, to, to be reflective. Because if you’re doing you’re not thinking and so but but even then, what’s the correct setup? Is it a week a week is that two months, two months, and so I actually iterated and ended up with a month a month, but I didn’t, I didn’t end there. I didn’t start there, I ended there. And so, iteration and life design, you know, I even thinking through like, would I ever want to get married? And I like, you know, why? Why? What is the point for someone like me and of the institution of marriage? And am I and why would I invite this state or the church, or religion into a relationship, or like we can define ourselves, that’s the nature of a relationship, you know, and so you can make your own test it. And and some things may be in that testing is something people don’t do enough of, in both personal and professional life. You can, you can have more bass, and then step four, once you’ve done the iteration, and you’ve talked to all your friends, and you’ve thought through what you want to do, is actually take a step back, and what are the lessons learned? What have you learned along the way? What would you do differently next time? What are the things that you’re still still require iteration? Um, and reflect on what has been learned along the way and build on it, but I think it’s also important to take the time to be reflective. What worked what why did it work? What didn’t work? Like some things I tried, failed, but the premise of trying them was correct. It was worth trying. It’s not because you try and you fail that you should say, Oh, it was wrongly to
Unknown Speaker
something else.
Fabrice Grinda
Absolutely. I think it was fun and right to try to buy eBay and Craigslist and frankly, tried run to Cuba. I didn’t work out because it required other people’s approval. And they disapproved. I disagreed, but it was still worth it worth a shot. Let me finish on the books.
Jeremy Weisz
So I know you’ve come on, but going
Fabrice Grinda
I have to write but I don’t recognize I don’t recommend most business books. I think they’re boring and not that interesting. And look, I’m a super prolific reader. But I read I read I’d say 70% of what I read is fiction. Most of that is like science fiction, fantasy space. opera is like fun stuff like, you know, like Old Ben’s war by John scalzi. In the nonfiction genre, I like I’m a sucker for behavioral economics and just very specific, while for intense global philosophy like Sapiens, Sapiens, probably one of my all time favorite books, which I would recommend everyone to read it by the way, I think Sapiens is much better than Amadeus and his subsequent books. Because he’s a better I think analyzer where that what has happened in the past, then predictor of the future, he’s too pessimistic, I finally disagree with his pessimistic take on the future of humanity. I mean, I’m a profound optimist, which would be a conversation for another day. And then I guess, recent books, I’d recommend Lifespan by David Sinclair, on how to lead a long, healthy life and increase your overall age. I do slow down your aging, if you want, why we sleep by Matthew Walker on it improve the quality of your sleep. Now, of course, it’s he, he selects the data, he oversees this case, but it doesn’t matter understanding that he oversees the case, that that the end, but most of these books oversee their cases, because they they kind of feel like they have to because of the pressure of publishers and to make a more compelling story. All of these things are not as do on so they should be. And I guess my favorite business seed like book of related Loonshots by Safi, I mean, how, but larger organizations can find a way to keep innovating and how organizations that are innovating can actually find suitable businesses I think makes a lot of sense and think through what are the what it takes to be able to be able to do that makes a lot of sense. So love through jots definitely. One of my favorite books of 2020
Jeremy Weisz
check out FJ Labs check out FabriceGrinda.com. Check out playing with unicorn. So Fabrice, thank you so much.
Fabrice Grinda
Thank you
