How do you get a $100M offer without running a process?

Episode 89 - Benjamin Chiang Transcript Jason: Everyone, welcome back to Fundraising Demystified. Today I'm excited to bring us the former head of China for Uber who took it from zero to 50 million weekly rides. Also the founder of Forma who sold this company to Snap. Uh, welcome to the show Open. Ben: Thanks, Jason. Thanks for having me. Jason: Now I'm excited to have you on the show today. Uh, your background's super impressive and yeah, from what I can understand and what I know about you, you know how to do growth. I would love for you to share the backstory of your early days at Uber and what you did to basically take it to the scale that it was, and ultimately selling that division of Uber for 7 billion. Ben: Yeah. Um, so Uber, um, by the time it entered China, um, it was working in US and I think in Europe at the time already. So, um, there was a little bit less of product market fit issue. I. 'cause we knew that people wanted to order cars through their [00:01:00] smartphones. Um, that did not exist in in China yet. So I was the first employee for Uber China. Actually three of us started on the same day. And uh, the idea was can we bring something that seems to work in other markets and bring it to China? At the time, a lot of tech companies that tried to enter China, um, you know. I think at this point it's well known that most of 'em did not succeed. And so of course there were many doubters, uh, for Uber as well. And kind of it was, it was actually three years from like kind of cradle to the grave there actually. And the first year we had a small team working insanely hard and basically nothing was working. I. We were working like 80 hours a week. We were going to bars, handing out flyers, um, negotiating with taxi and limousine companies and car rental companies to get cars. And at the end of the first year, I think we were still doing something like a hundred trips a week. I don't remember exactly how much, but it was just very, very few. Um, and um, in the second year, we went from zero to, I think like 40 [00:02:00] million trips a week. And that was crazy. And the wheels were like falling off. And then in the third year, I think we were like 40 to 50 million. It was like pretty much like flat. And that, you know, that's actually kind of what led to our exit of China. Um, so that's kind of like, it was kind of like three completely different stories. And I think that kind of encapsulates the idea of like, when you don't have product market fit, you can try really hard and nothing is working. Uh, it wasn't for lack of trying. We tried really, really hard and then when we found something, it just like. It a Jason: Oh, what was that something? What? Like that, that's such a massive inflation. What was, what was the something. Ben: Yeah. So, um, we knew from, um, the US that like Uber X was the big unlock for supply, right? So initially Uber started with Uber Black. There was like really nice black, um, black cars, like town cars and like SUVs. And very, very expensive. Um, and that was working pretty well. And then the huge unlock is when they added UberX, which was peer-to-peer. So regular people like [00:03:00] you and I could, um, drive on Uber, right? And so it was a supply constraint problem for a really long time. There weren't enough drivers. And so when anybody could become a driver, you know, there was just way more. Um, supply on the market and there was a key thing that we always wanted was like the four minute ETA is like we could get to somebody within four minutes, and that was kind of like the sweet spot for a magical experience. Um, so in China, because of regulations, we, we also started with something like Uber Black went with rental car companies, limousine companies, and there also was not very much supply. The, the thing is we weren't sure how to do the peer-to-peer thing for a very long time. Um, I still remember there was a guy on my team who found this like obscure document from the Ministry of Transport. So it was an official Chinese, uh, government document that said we recommend ride sharing during the spring festival, which is, um, their like new year. 'cause um, I mean everybody goes back to their like old hometown and there's like crazy traffic. So they are suggesting, um, ride sharing but not for profit.[00:04:00] So he's like, what if we tried that? What if we said, Hey, we, um, recommend nonprofit ride sharing, um, to get around town, you know, beyond just spring festival. And so there was this kind of Ministry of Transport document. It was not like a law or anything, it was just like a, an opinion. But we did have some, like a little bit of, uh, of a, of a shield. And I still remember, like everybody up my chain hated it. And there was a call and, and Travis, who was the CEO at the time, uh, was on a call and he was the only guy who was like, man, this seems kind of interesting. Why don't we try it? And everybody else hated it. And I was in Beijing and we had three other cities. Nobody else wanted to try it. And so we just did an experiment in Beijing and it just completely took off. And then obviously very quickly we, um, brought it to the other cities and our competitors, uh, eventually copied Jason: How many things do you think you tried? Like how many like different channels do you think you tried before you had that one big explosion. Ben: Well, I mean, at the, at the end of the first year, at that time, maybe we had like 10 or 12 employees full time. [00:05:00] Probably all working like 80 hours a week. I don't know how you like count distinct different things, but we tried a lot of offline stuff, a lot of online stuff, uh, online ads, offline ads, uh, going through schools, you know, handing out flyers. Um. Partnering with, uh, like BD partnerships, um, with big companies like Samsung or whatever, and like little companies that are just local companies. I don't know. I think we've turned, we turned over a lot of stones, um, most of which did not move the needle. Um, so yeah, we tried a lot of stuff. Jason: And, and so outta curiosity, like you, you're basically doing, you know, venture, you were in finance, you know, prior to, to this role. Like how did you make that, that leap and, and get into that position to, to make such a massive impact? I. Ben: Um, that's a good question. I, I think there are a lot of young people who are in VC who al always are like, oh, I wanna join a startup and, you know, actually get my hands dirty. Um, [00:06:00] and uh, and I think a lot do right? And so I'm certainly not the only one to have made that transition. Um, there are others who just never, never make the transition and that that's fine as well. I think one thing that Uber was very good at was they were very good at getting people who are not from startups, um, who are like smart and motivated and willing to learn. Um, Uber kind of had a system like Travis had a way to convince smart people to like figure stuff out, and he really, really prioritized problem solvers. Um, and less about experience. Like he famously hated MBAs. I mean, I mean, he, he hired tons of MBAs as well, but like, it was just a way of him talking about it to be like, I don't really care what your background and experience is. I care about your willingness to learn and try stuff and keep trying. And I think that was one of his superpowers. He, he, we hired so many people from banking, private equity, venture capital, um, consulting, who had no prior. Um, operational experience. [00:07:00] And to be honest, not everybody worked out, but a lot, um, did, and Travis was willing to give. Um, I mean, Travis has a lot of, uh, well-documented, uh, shortcomings. Um, he has also a lot of, uh, strengths, I think also pretty well-documented strengths as well. And one of 'em was uh, was always willing to give somebody a chance. Like when I joined Uber, I was pretty junior, right. Um, on the call there were like, really, we hired really senior people in China, like a VP from Tencent. He was the GM of Shanghai. I was not even the GM of Beijing yet. Um, I got promoted after, after, uh, we did this test. Um, and so everybody hated it and they even said it on the call. They're like, this is a terrible idea. And Travis was like, I don't even know if it's a good idea. He's, he wasn't like, I'm gonna go bat for Ben, right? He's like, okay, you can do this other thing in Shanghai doing this other thing in Guang. Um, and, and we'll see. So, um, I think that type of mentality from the founder was very good. It gave people. The courage to speak up and have ideas, even if they're like really junior. [00:08:00] Um, or, or if they were senior too, right? I mean, senior people also had some good ideas, but, uh, so I think, yeah, we had the culture of giving people a chance and letting the best idea, um, win and not be too focused about, you know, pedigree or, um, experience. So, um, so yeah, I, I think, I think Travis gets the credit for that. Jason: Well, you know, brought of great people and great. People executed. Uh, so taking that experience from VC Land to operating experience at probably one of the highest levels at, at Uber, what led you to form, and for the audience sake, tell, tell 'em a little bit about what form is or was. Ben: former was, uh, um, an attempt to solve the photo. Clothing try-on problem, which is, uh, a pretty old problem since like Clueless, uh, came out in the nineties and probably before then. Uh, everybody's wanted to try on different clothes, uh, virtually. And uh, every couple years there's [00:09:00] a new technology breakthrough and everybody's like, well, now we can really solve it. And, uh, that one for us was deep learning. Um, and deep learning did help a lot, but it actually did not fully solve the problem. Um, so we can actually talk about that later if, if you're actually interested. But, um, the idea was this is a very big market, you know, really strong need. Um, there was this new technology wave that we were surfing and we're like, yeah, we can use the new technology to attack this great big market. Right? And that was, um, the kind of idea, um. I mean, spoiler. It was, it was, it's still not solved to this day. So, um, so we did not solve it. Um, but, but your original question was, how do I get there? I, I was not a born founder. I think there are born founders. I, I think Travis, that Uber is one. Um, there's, I mean, there's a lot of famous born founders like Zuck or, or, uh, Bezos or something, um, where you can't really imagine them working for other people for, um, or at least for very long. Um, I was not, so I started my first company, I think in my early thirties. I had to take a, um, it took me a lot of time to get the [00:10:00] confidence and interest. Um, my route was kind of weird, you know, I'm an immigrant child, so I was supposed to go to med school and like settled on engineering, um, didn't even occur to me to start a company. Um, so it just took me a little bit longer, um, to like get there. Um, but I think through the Uber experience, I started to build more confidence and realize that like some of these awesome companies that you hear about or see, um, they are indeed awesome. But there are, um, a lot of things that are like lucky. And I think there are a lot of things that you can do if you are put in those, um, situations. So, um, I was also very lucky to be part of Uber. Um. You know, certainly in China from, from ground zero. And so I built a lot of confidence like, oh, I can do a lot of this stuff that looks like magic. But if you're spending like 60 hours a week doing something for like months, um, you know, you can do a lot. So that, that was one of the things that took me some time to like experience myself. I didn't have that like built in confidence, um, from like [00:11:00] birth or whatever. Um, but through the experience, um, at Uber, I was like, oh, I think I can do it. Um, and I think a really important part is I think I'd enjoy doing it, which I did not know, uh, before that. Jason: Well, you ended up raising about 7 million from like founder fund, GSR. Like, and then you got acquired by Snap. So I know you kind of downplayed what you did at format in terms of like, you didn't solve the problem, but it sounds like you had an outcome. Um, you know, walk, walk us through that journey of like setting the, the tone for raising money and how you ran that process. I. Ben: Actually now I'm, I think I realize I misremembered. I, I think we raised 13 million. We raised, uh, seven, seven and a half million in the second round. And like five, five and change in the first. Sorry, that was, uh, I already, I forgot about that. So, uh, so, um, the company I would say from a financial perspective was pretty successful. We raised two rounds of financing from great investors. We sold the company for over a hundred million bucks. It was three and a half years. [00:12:00] So, uh. Everybody made money, um, investors, uh, employees. So, you know, it's a pretty happy story, I guess, um, from, from that perspective. I would say though, from a product and technology perspective, we did not solve either. So from my perspective, we more or less failed. Um, and, and so if, if I've actually taken a step back and my co-founder and I spent a lot of time thinking about like, how much credit do you get as a founder? Uh uh, or do you actually like earn yourself and. The short answer is not a lot. Uh, there's just like so much luck in, um, building companies. Um, you know, of course you need to have some level of like effort and intelligence and, you know, decision making. Um, but there is so much luck. Like, we sold our company six months before, uh, J Pal started raising interest rates, which Jason: Peak of market. Ben: no idea, right? Like, I have no clue. Um, I would say we should get a little bit of credit in terms of like intuiting that, like the value, the value that they were gonna, [00:13:00] um, buy us for was much higher than, uh, what we thought we could raise for, or what our company was worth at the time. So I kind of like had some intuition that this was, this, this deal was too good to like pass up and like keep going. Um, so I think that's where we get like a tiny little bit of credit, but most of the credit is still like we were in a zero interest rate environment. You know, snap stock was. Sky high as were a lot of stocks. Um, yeah. So Jason: But like, like I, I know you, you know, again, downplaying what you achieved on the tech side, but you still were able to convince some pretty impressive investors that this was worth making a bet on. And, and it sounds like everyone came out on top, but, you know, how did you get that money? Like what, you raised two rounds, what was the narrative? What was your process? Ben: Hmm. That's a good question. So the first round was led by GSRA firm that I, um, met a long time ago. Back when I was a vc, I was on [00:14:00] boards with, uh, with Richard from GSR. We already really liked each other. Um, he tried to recruit me many times to his companies, um, to GSR itself, to be a VC. Again. He was the primary backer of dv, which was, uh, our primary competitor at Uber, China. Um, they tried to poach me many times to leave Uber to China to go to Didi, um, which financially speaking would've been the better move, uh, in retrospect. But, uh, it's neither here nor there anyway, so I had a deep relationship with GSR already, and so they were like, it was kind of a package deal of like, me coming in with the co my co-founders, they were looking for a CEO. They hadn't had a CTO already. Um, and so that was like relatively. That was like relationship based, which, um, for better or for worse, a lot of these things are. Um, and then the second round was from Founder's Fund. Um, so Scott Nolan was one of my classmates at Bain, um, which was my first job outta college. And Keith Turbo, uh, actually invested in [00:15:00] another clothing try-on company, uh, I think a couple years before ours. And, um, I still remember the pitch to, to Keith. I, I was like, well. We don't like even the clothing creation we were just doing from a single photo. 'cause I think the last co company they were doing 3D scanning on like all the clothes. And he is like, this is like, kills any margin. And we're just like, no, we just take a single photo from like an e-commerce site that already exists and we created it into a clothing trial. So he was like, oh man, this is like half the equation just solved. Um, so I still remember, uh, that, and he is like, and he called his friends Scott, his co or whatever, his colleague Scott, who knew me. And so that came together very quickly. As well. So in both cases it happened to be like relationship based, which, yeah, I don't know. I think it's kind of annoying for a lot of people, including myself. Um, but you know, sometimes you do need to have some of these relationships, um, in place. But I would say it was like a lot of stuff was getting funded. We had a very, very strong team and, um, the market need was like very [00:16:00] acute. And, uh, commercially speaking, like clothing is a great market to be in. Very lucrative, very high margins, a lot of waste. Um. So it was a good market, strong team, tech wave, um, great economic conditions. So I would say the degree, the, the degree of difficulty wasn't very, very high for that one. Um, whereas like in this environment, I think, I mean, depending on what you're doing, like it, it could be much harder to put, put, pull something together. Jason: I think the, the lesson here for, for our listeners is the idea of just like catch the wave. You know, don't fight, don't fight the wave. Catch the wave and you know, it doesn't always work out, but it's a lot easier to. Ben: That's, uh, so after our company and, and my co-founder and I talked about so much about how much credit do we get, and we found out, we, we decided that it was not very much. I bought myself and, and my co-founder both have a giant, reprint of Duko Moku, who was like the first, um, guy who popularized surfing in Hawaii. It's like I, I, I just literally [00:17:00] right next to me, I see, I look at it every single day. It's a giant poster, and he has one right next to his desk. And we're like, you have to be surfing the waves. Like you can build your surfboard all you want, right? And then you can build the best surfboard in the world, and there's just no waves. Like, what are you, what are you doing? Right? So, um, Jason: Uh, it's so simple, but it is, it's so hard for so many founders to realize that, and to be, and I've run into so many founders to get frustrated, like, oh, no one's investing in us. It's like, are you on a, are you on a wave? Are you catching a wave? Are you like the shiny object, you know, that everyone's chasing or. Are you going against the grain? Are you kinda like building in something? And you know, again, there's all kinds of stories of those ones working out, but there's a lot more stories of people catching the wave and having a successful outcome. Um, I feel like some founders are masochists and love, love pain. Ben: but you do hear stories about founders who are just like contrarian and then it all worked out. But like, that's, that's pretty hard, right? If you're paddling where nobody's paddling Yeah. A wave could pop up there. Right. And you may, you might be a genius and spotted things 10 years in advance, but there's just so much risk. Right? And [00:18:00] like, even if, even if you're right, if you're too early, it's also if you're also gonna lose money. Um, so, and there's a lot of different types of waves, right? There's like. Fundraising waves. There's like technology waves, there's product waves or just distribution waves. So there are multiple different waves that you can surf. Um, so you, you gotta have something, you gotta have some, um, kind of win in your back or whatever, whatever the analogy is. Some like wave pushing you. Um, and, and I think another thing also, uh, as a founder myself, I could say it's, it's very hard to chase waves as well as a founder because you like the wave might be really short-lived. So that, that's another reason to like not just chase waves. 'cause if you just paddle over there and that wave just like, kind of like dies, you're like, well I just like killed myself paddling over here. And then the wave died and then I'm like, then I have to like paddle over to this other wave and then that one might die. And then you can kind of be like a dog chasing or tail, um, at some point. So it is pretty hard. Jason: No, that's good. That's good. Uh, good kind of check, uh, uh, for anyone to kinda be looking at what. What [00:19:00] ways or what target markets they, they wanna pursue. And also some are so crowded, it's like, you're gonna get knocked off away, you know? So Ben: yeah, that's a good point. Everybody, if everybody's there, I don't know, like, are you gonna be able to outs surf I mean, probably Jason: be pretty good. That'd be a pretty good surfer. Ben: yeah, you gotta, you better be pretty good. Jason: Um, well let's, let's, let's transition to the, the SNAP acquisition. Uh, you know, so three year run. But how did Snap get into the picture? Were they following you all along? Were there other contenders looking at acquiring you? Did you run a process, hire bankers? What was the experience? Ben: that's a great question. So they actually reached out to us pretty early on. I, I still remember, uh, he wasn't even one of our investors, but one of my good friends and, and now our investor in my new company, but, uh, Dustin, that wonder was like, Hey, would you like to talk to my friend at Snap? He's interested in what you're working on. I usually don't really like to talk to people outside of the company. I find that to be distracting. I don't even know why. I was like, yeah, sure, I'll just meet Chris. And he introduced me to a couple of the, um, BD folks at Snap. They're like, oh, this is super [00:20:00] exciting. We wanna do this too. You can build a lens. Within Snapchat, we have this API, I think they were trying to do like developer relations, so they were trying to get developers to build new lenses, but then like, uh, it was kind of hard to work together, uh, with them. We were a very, very small company. We didn't have anybody to like manage this. Relationship. And, um, they, we were just one of, I dunno, hundreds of developers that they talked to. So we were kind of going back and forth for like a while and we ended up ne never doing anything, um, uh, together, but we at least had the relationship. And, um, I subsequently found out that they were trying to do exact same thing for a long time with a much bigger team. And we were way farther ahead. Uh, we had like, I think four researchers and they had I think something a couple dozen. I don't know exactly how many were like dedicated to this. Um. And I think basically they were trying to, uh, uh, learn about us, compete with us. And it took 18 months, but eventually they actually just acquired us. So I don't know exactly what the, like discussion was, but my guess is it was some version of [00:21:00] like, Hey, this team is way smaller and way ahead of us. What's going on? And then the team internally was probably like, no, we can, like, we can beat them. And then they're like, okay, let's, like, let's do it. And then, you know, 12 months pass. And we're even farther ahead and they're like, okay, what's going on here? We have to pay a premium to acquire, um, a stronger team. Um, and uh, anyway, that's my version. I don't, I don't know if that's actually what happened Jason: Did you just take the inbound offer and, and move forward? Did you guys bring any other. Ben: us many, many times and I kept saying no. And they were like, oh, what's your number? And stuff like that. And I guess maybe from their perspective, I was playing hardball. From my perspective, I was like, no, I, I don't wanna sell. It's only been three years. It's too soon. And at some point, um, yeah, their, their offer was, uh, Jason: So. Ben: To be fair. Yeah. Yeah. To be fair, if our company was doing way better, I would've turned it down. Right? Maybe, maybe it would've worse, but it's not like our company was doing very. It's not like our product was killing it, Jason: Well, it's probably good that it wasn't, because you wouldn't have sold then the market would've tanked. Ben: Yeah. I would've said, I would've said no. And then the market would've tanked and would've had [00:22:00] to fundraise, you know, with like zero or little revenue. So, um, that's where, that's where we're like, there's just so much luck. Right. And anyway, so our company wasn't like crushing it. Right. And um, yeah, and I still Jason: You did play hard to get, which is is something I talk to founders often is like, if you have the means to walk away, your valuation goes up so much. Ben: That, that, that, that's a really important point, is another thing that we do deserve some credit for is we were extremely frugal. And when, uh, we were acquired, we actually had like, I think 18 more months of runway. So we were not in any dire position at all, So we, we had like, there was, there was no, like we, we had some leverage, right? As a smaller company, you don't have that much leverage, but I had the leverage of saying, oh, I'm just continue operating, right? So go ahead, keep burning whatever, 50 engineers, researchers worth of. You know, salaries to lose to us, right? I can just keep going for 12 or 18 months. I have a really small team. My burn's really low. Um, I found that to be really, really [00:23:00] helpful. If you have no alternatives and you're like, man, I'm gonna not make payroll and like next month. I mean, some people like that, like the pressure makes, makes you do some, some cool stuff, but you're not in a very good negotiating position. And whether they know it or not, they'll like, they can sense, um, that, so we always had the walkaway, um, like leverage. Well, we don't need to sell. So, um, I think that helped a lot. Jason: No, that's Martin. And, and basically you didn't, you didn't run a competitive process. You didn't bring any other parties to the table. Snap was basically desperate. Ben: hotly debated. And we brought in some like m and a consultants, um, which I don't know if that's a good idea or not. Um, but they felt like you need, you need acquirers who fall in love with you. So just like going around, like going on a bunch of dates, um. They thought like it was a waste of time. Especially, they're like, you, you need leverage, right? But your leverage is just to keep operating as a independent company. So they're like, that's, that's leverage enough. Um, but if you're gonna go, like, try to talk to Facebook and Amazon and Shopify and whatever, it's gonna take you a bunch of time and then you're gonna tell everybody your story and you might piss [00:24:00] off the, the one party who already loves you. So we decided not to run a process. Um, I don't know in retrospect if that was the right, I mean, it was unknowable if that was the right call or not. Um. Jason: Well, Ben: the process and I took more time, Jason: it was time. Yeah, you would've, you would've probably killed six months and then the market would've collapse. And so it was actually probably the best advice and. Ben: Uh, yeah. I mean, I mean, all, it's unknowable. Maybe that would've multiple bidders I sold for 200 million. I don't know, but we'll never know. Jason: They, everyone made money. So, you know, it wasn't a bad decision, but, um, I think it's fascinating. Ben: even on your throwaway comment of everybody made money, not all the investors were supportive or happy about the acquisition, Jason: Yeah. They, they didn't, they didn't get their, they didn't return the fund, you know, so. Ben: are great, but like, I mean, not, I mean, I had such a good experience with my investors, so I, I don't want to, I don't mean this negatively at all. It's just a cold, hard fact that like, for founders fund making like a three or four x in like a year, the IRR is great, but like, [00:25:00] dude, that doesn't Jason: They don't care. Yeah. It doesn't mean the needle. Yeah, it's, we talk founders don't understand that Matt, like the founders like, oh this is great, but like to investors like, sucks. Ben: No, I, I totally understand and I totally understand it. Um, but o Founders Fund was always so, so, so supportive and, and great. So, I mean, I had such a good experience with them. Um, I can't say that's the case with all investors, but, oh, the other thing is when I, when I sold the company, I was like, oh, man, like everybody made money. Like, good job. We're like lucky. And, and then we were a little good, a lot lucky. And then not even all of our team and the investors were like, happy. I was like, man, this is crazy. It's like you do all this work. Like, not like I got into this for people to be like, oh, thank you, Ben, or anything. But I didn't expect like people to be like angry at me for like, not making enough money. And I was like, this is crazy. Like, I'm sorry you didn't make even more money. Um, but yeah, don't get into this thinking that people are going to like, oh, thank you so much. Jason: You're my savior. You're amazing, man. Ben: I, Jason: Yeah. Ben: people, I don't think founders are, but I mean, I was a little bit on the negative side to be like, what the, I [00:26:00] can't believe people are complaining to me it's like crazy. Jason: Yeah, I've, I've seen that we, you know, we had a deal blow up back in my day with, um, an acquisition because our, our board got agreed like, no, we, billionaire bust. We're like, that's not in the cards anymore, guys. Like, billionaire bust is, I don't wanna bust, Ben: Yeah. Jason: bust sucks. It doesn't mean anything to you in your check, but, uh, me, it means a lot more. Uh, yeah. So, yeah, that, I totally feel you there. Um, but speaking of the money side of things, we were talking offline a little bit about your QSPS over optimization. Um, so lemme just warm this up for the audience if they're not familiar. So, QS PS Qualified stock Business or Qualified Sale Business Stock. Ben: so Jason: Um, oh yeah, yeah. Qualified small business stock. That's what it's. Ben: Right. Jason: Um, basically a way to get up to 10 million tax free, and there's all kinds of like structures, uh, in the sale of your stock. If you've had it for five years, it's a corporation. There's other criteria, um, but basically tax free [00:27:00] proceeds up to 10 mil. So walk us through what you, what you did there and what you learned. Ben: So it's a, it's a program designed to encourage entrepreneurship, right? Which is, you know, I think maybe not everybody supports it, but I think pretty well supported. Um, you know, America is very entrepreneurial. I think it's. The idea is to encourage people to start small businesses and incentivize it, which is great. And so when we sold to Snap, I think our company was about three and a half years old. And so for QSPS to be eligible, you have to hold for five years, um, which also makes sense. So you don't just do like a quick flip. Um, and so we're like, okay, cool. So then it's only been three and a half years, but you can just hold onto, 'cause we did a, a, a stock swap and so we're, we're like, okay, we just hold on to Snap stock for just 18 months and then, um, you can sell the SNAP stock or whatever and it'll all be tax, tax free. Like, okay, cool. Like 18 months is not that long. Um, I don't know. Like we got paid like other money. We got paid like cash and like we were, we had jobs and stuff. Um, so we're like, we're, we're fine with money for now. The savings is pretty significant, so let's [00:28:00] just hold on to Snap stock now. In that time, uh, j Powell, uh, increased interest rates as he should have, probably even, um, earlier than that. And, uh, the stock market started to tank, right? And, um, when that happened, the smaller caps, uh, were hit harder and I think snap uh, well initially it ran up like another 30 or 40% and I was like, oh my God, this is like, even better deal. And then it dropped like peak to trough. I think it's like 90 some percent. Um, uh. In terms of their share price. And it just felt like so fast that like, I didn't even have time to react. Um, I mean, I guess I did, but I did not have time to react. And basically I just rode the rollercoaster all the way down. Um, so I did, I, uh, I saved money on taxes, uh, which I just succeeded in that goal. And I just lost like a way more money in the stock, uh, dropping. Um. So I, I don't know exactly what the learning is here because if the stock like went up even more than like, man would've been [00:29:00] great and I would've kicked myself for, um, paying the taxes, um, early. But, um, but yeah, I mean, I've tried to tell myself not to live my life doing like tax optimization, which is why I still live in California, for example. Um, but that was like pretty, that seemed like a easy thing. I had like a 30, 40% cushion, um, on the, on the tax basis and then just dropped so much. So, yeah, that, that, that kind of sucked. But anyway, I'm, I'm already a very lucky person in life. Uh, that part, I don't know. Um, not the luckiest, Jason: I, I guess it goes down the famous thing, like a burden hand. You know, just like if you got it, just take it and, and run with it. And, you know, I would, I made the same decision if I was in the same, Ben: had some birds in the hand, right. We got paid some cash upfront Jason: that's. Ben: we had RSUs that we were selling. So, I mean, I still, like, we're still very lucky. We still made, um, um, money. Um, yeah. But yeah. But anyway. I Jason: Yeah, no, it's still. Ben: what the learning is for, for other founders, but, um, like we, we, we even looked into like hedging and like [00:30:00] buying like other products or options or something. And, and if that gets found out, then um, that could be like tax evasion. There's like really strong, uh, penalties Jason: A two year call option or something. Uh. Ben: like that. Or trying to do, yeah. Uh, and so we looked into a lot of that type of stuff. Um. Because I, I mean, yeah, those seemed like it was too bad if, you know something bad happened, so we ended up doing nothing and then, yeah, it was just, it was, didn't work out. Jason: Well, that's fair. Um, and yeah, I, I think it's a fascinating story. Just again, like, you know, every, and again, every situation's always different with every deal. Like there's no, it's very often it's very rare that, uh, the similar deals occur, like in these steps. Ben: and this is why I almost never give advice because like I barely even understand what happened to me. And much less can I understand somebody else's situation. So I, I can, I share stories like this. I love sharing stories with, with Jason, um, with you and your audience. Like stories is great. Um, [00:31:00] but this is not advice, at least not for me. Jason: Well, so the acquisition a couple years ago, you know, you stayed a little, how long did you stay at Snap? Ben: So I was, I had it, I was supposed to do like a four year vesting, but um, the stock dropped so much. Uh, the, the, the remainder was like not very much, uh, anyway, and the AI wave, this generation of the AI wave, which was, you know, transformer based was so exciting. Um, and I was working on at Snap, uh, a little bit as well, um, that my co-founder and I just got the age and we're just like, oh, we gotta jump in the water now to the surfing analogy. We're like, well, we're kind of on this like cruise ship. Snap is not the biggest cruise ship, but it's, it is kind of a cruise ship and it's pretty fun. And we're like looking at a bunch of other, like surfers surfing. We're like, ah, that's pretty, we're like criticizing them, right? Like, oh, that surfer kind of sucks. This surfer looks kind of cool, but we're just like sitting on our boat, right? Um, like, eventually we couldn't resist. And so we just like, we're like, we gotta get in the water. I don't know what's gonna happen. We need to feel the waves and we need it intuit. Like what's direction we can go in and at the very, very, very least, it'll be more fun. [00:32:00] Um. yeah, so we left after I think like two and a half years or so, um, uh, at, at Snap. Jason: So walk us through what you're doing now. Ben: So we, we raised money saying that, Hey, we're gonna do something based on this new generation of, uh, uh, AI technology like generative ai. We do not have a specific idea we wanna commit to yet. So we have, uh, multiple ideas that we're gonna build. Um, but building is much cheaper now. So we're gonna build multiple products. So our first product was, uh. Like AI dating app called lar, which was a PR like darling for a while. Um, but that was, we built that in two months and we were like just testing, um, like testing stuff. Um, we actually brought it in A-A-A-C-E-O for that, o one of the first PMs of Tinder to be the CEO. Um, and, and we basically gave him almost all the equity. Uh, but then he ended up designing, he didn't wanna be a founder, which another lesson is like, you can Jason: Yeah. Ben: somebody to be a founder. Um, so we ended up having to shut that down, which is fine. Um, and we also built a second story [00:33:00] called Voice Story, which was much more personal. Um, it was like a voice journal. So I'm a journaler, uh, like most people probably journal way less, uh, than I would like. And the idea was I could just like talk to, um, um, this journal that, uh, it would be purpose built for journaling purposes and it would like encapsulate every story with like an image and like a summary, et cetera, and that you could like talk to, um. So that was a very cool product that, that I really liked. Um, and then we had a small number of users who really, really liked it as well. Um, and we ran into the same problem that, you know, frankly every product run runs into our service. It's how do you get distribution and like marketing? And I think that's like the hardest part in the, you know, in its yeah. World where there's just like so much content out there is how do you break through? And so we're like, um. We tried, like influencers and ads, those worked as expected. There was not really any alpha there. So we, we had this thought like many founders [00:34:00] probably do, which is let's control our own destiny and build our own TikTok channels so that we can, uh, reach our audience directly. And let's tell the stories of like our top users of how they're using Boy Story and like, you know. Maybe it can be relatable to other people, et cetera. And, uh, that kinda worked, right? So we started doing that and then, um, it was working and then, uh, we actually realized the TikTok videos started doing really, really well. And like every day we're like, oh, what about this TikTok channel? And what about this other one? And then we just kept doing them. And, you know, one thing led to another, and at this point I think we've launched like 300 channels. I think we actively operate something like 50 channels. Um, we posted like 15,000 videos. We've done like, I think 200 million total views, uh, I think like 65 million in the last week. So that gives you a sense, like a third of 'em are in the last week. So the, the, the growth is like exponential. Uh, like there's gonna be some ceiling on this. Like I'm not expecting this to continue going exponential forever. Um, doesn't feel like the ceiling is very close. Um, so everything we do is [00:35:00] like AI generated. Um, and there's a lot of like. Terrible stuff that's AI generated. Um, most stuff is actually pretty hard to do, uh, but there are certain pockets that are, uh, like pretty high quality and good enough. And I think over time, you know, there'll be more and more, uh, types of videos that are better. Um, but yeah, so yeah, our whole thing is like scalable content that is good enough quality, um, to meet the demand. Um. Jason: So I wanna take a step back. After you left Snap, you and your co-founder basically are like, we're gonna do something in ai. And you mentioned very quietly that you raised money. Can you talk about that? Like you raised money? Basically just a team. Team only and a. Ben: so, so Dustin that Wonder, uh, was the guy who introduced me to, to Krish at Snap. So he was the guy who initially, uh, connected me to the, eventually the company that acquired us. Um, he was also an advisor to my company. He had done like a. Kind of a fashion startup, uh, long time before [00:36:00] for actually, so he had some, um, some learnings for us. I just liked Austin. I was an investor in his fund, uh, as well. So anyway, we, we also had a relationship, uh, built over time and he was like, you know, every month while while at Snap was like, well, anytime you leave, you know, I gotta check free. So, uh, I really appreciated that. And as part of fundraising, I think most founders know, getting that first check in is like the most critical. You need to have somebody, uh. You investors are herd animals, uh, for a good reason or most are herd animals for good reason. Um, so once you have like someone who's willing to take a bet on you, it's much, much easier to get all the other, um, investors on board. So I always really appreciated that from, from Dustin. And so I took his money. I didn't do, I didn't go around and fundraise. Um, I brought in like. Uh, I think everybody in, uh, this company was an investor, or at least a shareholder in, um, my first company, I guess, [00:37:00] except like some snap people, I guess they weren't shareholders, but, um, but they were all just kind of like friendlies. Um, so I mean, that's one of the benefits of being a repeat founder is you have made money for some people. So I didn't really have to go out and, uh, fundraise. Um. Now I'm like, since then I've had to go out and fundraise and, and gone, gone through the, uh, the painful process of doing road shows and getting, uh, turned down by, uh, pretty much everybody. Um, Jason: Well, let's talk about that. Uh, so, so how much did you raise out the get go, and then what's kind of been the recent story? Ben: we've raised a little over 2 million and the idea was I actually had an offer for like 10 million, uh, you know, right off the bat, um, I felt like. With ai, we didn't need to have too much money. And, and inevitably, if you have a lot of money, you'll, you'll spend it. And we're like insanely frugal. I, I still remember my VC in my last company was like, you're the most frugal CEO in my entire portfolio. I was like, is that a compliment or criticism anyway? Um. Either way. I was like, I don't need the dilution. [00:38:00] I don't wanna, like, we don't even have the idea yet. This feels like beyond what we need. And it was also a new VC that I didn't know very well. Uh, so anyway, we were like, look, we only need a couple million bucks. Uh, the founders won't take salary and then we only need like two or three other employees, um, that we already know very well. Our whole team is like from our first company and, and Snap. Um, and so we didn't need to, uh, uh, raise a lot of money. Um. I think there's pros and cons of that. So I think the pros of, it's like we've been very, very, very capital efficient. We haven't not, we have not overhired, we've, uh, been forced to make difficult decisions like shutting down products that we should. Um, I don't think that there's anything that we wanted to do that we couldn't do. Um, so I don't think we're like undercapitalized, but I mean. We still are feeling the heat, right? Like there's, you have like a year's worth of, of, uh, runway left and it starts, you start to be like, okay, I kind of need to raise money soon-ish, right? Maybe not like today, but in the next six months you probably wanna raise money. Um, [00:39:00] so yeah, so the way I like raise money now is I try to like talk to investors and ask them for intros and advice and then hopefully one of them, um, is like, well this is so exciting that I wanna lead your, your round. Of financing. I would say now, uh, there's certain pockets of, of, um, startups that are very easy to raise money. Um, I think consumer is very hard. And so, um, like not only do you need to have traction, you need to have like real revenues. And so that's very different than with my, my last company and certainly since like, kind of the Web 2.0 era where, you know, you just get high balls first and then worry about money later. Um. And the reality is there are so many startups that have really real revenues that, like, if I were an investor, I would also be like, well, I'm looking at companies with 10 million revenue, like every day. Like, why would I invest in your company that looks cool, but like, has literally zero revenue? Um, yeah, I'm just gonna go do the other company that has 10 million revenue. um, so it Jason: And that's an interesting perspective. Like so many [00:40:00] founders don't realize it's like, it's not that you're a bad investment, it's just there's better investments. Yeah, Ben: Or perceived to be. It's not, we don't know if it's better, but Jason: yeah. Sure. Yeah. Perceived to be, it's, it's an easier, safer bet to go with the company that has more traction or whatever the criteria might be. And um, you know, just so many founders just don't know what's happening on the other side. Have they never been an investor? They don't really know. How much deal flow they see 150 deals month like, and you're just one of those. So you have to be the best of the 150 to get a check in some cases. Ben: Right, right. I don't know how much you wanna get into like the vc uh, inside baseball stuff. I mean, I don't know how interesting that is, but there's a lot of weird stuff going on, um, that everybody is acting, um, at least in their minds, rationally, let's put it that way. So, to, to your mind maybe like, they're like, ah, why are they doing this other stupid company? But there is some reason, right. Jason: I wanna know. Yeah. What's your, what's your inside baseball look? Ben: I just think like VCs, like, like most, [00:41:00] um, people or work or people who work, uh, their number one priority for almost all VCs is to, is to keep their job right. And now making money is a way to keep your job. But another, but like, making money is hard, right? So it's easier to just, to, for most people just to follow what other people, what other investors and like smart investors are investing in. Um. Yeah. I mean, investors don't know either, right? Like almost, I mean, Keith was, is one of the best investors of all time. And he would say all the time, like, I don't know, right? He would say like, this is my opinion and but you should decide. I'm not, I'm not on the ground. I'm not in the arena. He would say that all the time. And this guy's one of the best investors of all time, right? So, so like, investors don't know, right? They also don't know. So what are they doing? They're using heuristics, they're looking at trends. Um, they're like trying to assess the founder, uh, quality. But anyway, like the, I think the VCs. Like they're, they're, a lot of them are in the a UM game, right? 'cause they get guaranteed fees for raising more money. So what, what do, what do you wanna do? You wanna invest a billion dollars in open AI or whatever [00:42:00] Johnny i's, like IO startup or whatever. 'cause you can deploy a billion dollars at a time. You collect two and 20 or whatever. You get 2% guaranteed, right? From your LPs. And then you get the upside of 20% if you, if, if you make money. So everybody's trying to kill themselves, trying to get into open AI and like SpaceX and whatever these like big companies are. Um, and then there's very few who wanna like, take a risk on, um, a smaller company. And, and, and now like the reality is there hasn't been that much money made in consumer in the last like 10 years or so. Like, TikTok is probably the, like the last big one that's not even a US company. Um, so there's just not that much money, right? And so, yeah, like can you make money? Like as a founder, I don't feel like there's any reason why consumer. Well, there are reasons, like distribution's pretty hard, but I still feel like, uh, consumers still can produce big outcomes. But from an investor's perspective, you know, in the last 10 years they haven't made much money and a bunch of people made money on SaaS. So guess what? They're probably gonna deploy a lot more money in, like enterprise SaaS, um, stuff. So anyway, I, I can go on forever about this, but [00:43:00] I mean, I, for me, it's like I want to work on things that when I wake up, I feel excited to do it. Um, nothing, nothing personally against SaaS or, or anything else, but like, I don't find that to be very fun for myself and I feel like life is short. So, um, like consumer to me is fun. And then, uh, you know, hopefully, I, I actually think that actually increases the likelihood of us making money is if we're having fun, then uh, we're gonna be more, more motivated to work and we're gonna be able to find, um. Interesting things that other people who don't think it, it's, you know, as fun, um, might not be able to find. Whereas if I try to do SaaS, I don't find it that fun. What are the chances that I'm gonna just like outcompete another person who actually really enjoys SaaS, like I'm probably not gonna be able to to be done. So, um, Jason: It's one of the most important things to have conversations with founders all the time. It's like, what, what do you really want as a founder? And like so many people, you know, don't recognize that key motivation factor of like, you know, what actually brings you joy to go out and hustle and [00:44:00] basically suffer every day. You gotta have to have, uh, a mission. Ben: Yeah. So, um, and it's very hard, right? So, and I think it's. Uh, I mean, just in general too, right? Not just for founders. I think in the world now, we're, we're moving somewhere in the spectrum from scarcity over to abundance in general. Obviously there's many, um, examples of scarcity, but when we start moving towards abundance, knowing what you want becomes the hardest part. Right? And that's why everybody's just scrolling Instagram, because I don't know what I want. Instagram is a pretty good job, just like showing me stuff I kind of like, um, I do it too, right? Um, because trying to figure out what you want is very Jason: Instagram, Ben: sorry. Jason: I had to delete Instagram 'cause it's, it's too good. Ben: it's crazy. It's, yeah, because it's so easy. It's like, do I sit here and try to think really hard what I want and take accountability for wanting it? Or do I just like go through this Instagram feed, which is like, pretty good, right? Or TikTok, right. Um, and, you know, nine, nine times outta a hundred, it's easier just to go, you know, flip through something. So, um. I think that's a hard question to answer for [00:45:00] everybody, but if you can find out what you want, I think that is the superpower, because you're gonna do it for longer. It's not original. A lot of people have talked about this, right? But you, you're gonna be able to go for longer than other people who, um, don't have as much fun. Doing it. And in the game of startups, I think survival is like number one, right? You gotta survive, you gotta keep going. Um, and if you're having fun, then even better, right? 'cause then you're able to play around. And that's where actually a lot of the interesting things, uh, come about is when you mess around and do something that may seem silly or whimsical to others, but you like, take it seriously, um, and have fun doing it. I think that actually increases the likelihood of you actually having the outcome, um, that you want. So Jason: That's valuable. Uh, I appreciate that perspective. Um, and just for, you know, to, to wrap things up here, you know, what would be the kind of parting advice to, to founders out there that are, I'd say in consumer, you know, to be specific, I. Looking to to raise capital Ben: Figure out distribution. No, I mean, everybody [00:46:00] knows that, uh. I don't like to give, give advice, but I, one thing that I would, I think is pretty universal is, uh, think about what you want and enjoy doing. And if you're able to find that and stick to it, I think any outcome will be fine. Like, I actually think you're Jason: as. Ben: right. Jason: Have real expectation. Don't always shoot for the billion dollar outcome and that, you know, you can have millions, you can have good outcome, but um, Ben: But yeah. Yeah. Right. Um, yeah, I would say if, if the thing that you want is to have a billion dollar company, I don't know. I think it's like pretty hard to, I think that's too hard to want because there's too Jason: yeah. Ben: factors that, um, I, I think like, think about what you wanna do every day, and that way if your company becomes a billion dollars, that's great. In fact, I think it's more likely that your company will become a billion dollars. But even if your company doesn't become a billion dollars and becomes a hundred million or 10 million or just completely fails. Personally, I would say I'm not gonna regret that if like every day I woke up and had a good time for five years and let's [00:47:00] say I was unlucky or I was not very good and the whole thing just like crashed and cratered to zero, but I worked really hard and had a fun time doing it, I, I don't think I'd regret it. And I, if you, if it flip it around and be like, I chased a billion dollar, what I thought was a billion dollar opportunity, but every day I woke up and I hated my life. Even if I got there, I'd be like, wait, now I have a a billion dollar company and I hate, I've hated my last five years of my, my life is short, right? I don't wanna hate my life for five years. Um, and then most likely you're not gonna make it. Jason: Yeah. Ben: gonna make it. And so you're gonna hate your life and your company's probably gonna be dead because you hated your life. Um, that just seems like a miserable way to live. So, um, Jason: I will second that. No, that's impressive. Um, so I guess from here, what would be very interesting for the audience, 'cause you just kind of dropped a very interesting note that you got to 65 million views. You're pumping out AI video content that's like I. In that, you know, Goldilocks stage of efficient with ai, if it's still good. Um, what, what's the URL? Like, what's the, or the, uh. Ben: [00:48:00] man. I, I like, I. I'm not trying to be dodgy. I don't know how to say this. I have like 50, I actually have 300 channels. I have 50 of them that I'm operating. So there's no one, uh, centralized thing. And it's very foreign to me as well. It's like confusing to me, like, how do I describe this other people? How do I even like get people to support me? I don't even know how to do that. So I, so I'm, I'm, I'm like, actually not trying to dodge your question. This is actually a problem that we have is how do we get people to watch, uh, our videos more? The answer is, I dunno. Uh, I'm working on it. Jason: Eh, we did get you in the upw. You know, it's, it's been one week and you exploded with gross, so, you know, won't put you in the hot seat yet, but if we do figure out a way to share a link between this recording and the posting, we'll put in the description for people to check out and, you know, reverse engineer how you figured this out. Um. Ben: appreciate, uh, that maybe I'll give you a couple of our bigger channels that people can just look at and then you can, when you see it, you'll be like, this is crazy. But then. [00:49:00] Look at the view count and look at the, look at the metrics. Like it's a hundred percent genuine, no purchase likes or views or anything. And it's ongoing. It's not like we're not just doing like one-off. Uh, of course we love viral hits, of course, uh, like anybody else, but our whole goal is to have like ongoing channels and, and IP and characters that, um, people like. So, um, I can share some of those links, Jason: I, I'd be personally interested in checking that out as well. So, um, maybe after, after the call you can shoot those over. Um, but. Uh, and what would be the best way for someone to learn more about you? Would it be like LinkedIn, email? Ben: Cool. I'm, uh, yeah, I guess LinkedIn. Um, I guess I'm not very public out there. Um, that's intentional. Um, yeah. I, I, I feel like I don't, I don't, I, I don't like to give advice. Um, I don't, you know, because I. don't know anything. So, so yeah, I guess, uh, LinkedIn would probably be, [00:50:00] uh, the best way. I mean, I guess I exist on, on Twitter, uh, as well, but I, I'm not very active. Jason: Fair. Ben: but if somebody like, finds somebody to introduce me to them, I'm, I'm generally pretty open to meet founders. I love encouraging founders. I don't like to give advice, but I love to encourage. Founders tell 'em to keep going, try to help them find, um, joy and things that help them keep going. I think that's like the biggest thing that I can do, um, that if I can, I can pass on like a tiny little bit to other founders is, you know, help them find a little joy in what they're doing. That would be, um, that's what I've always appreciated from, from other founders. Um, so if I can do that, that would be great. Jason: No. Appreciate all the guys, the stories and, uh, for coming on the show, Ben, and look forward to getting this out to our audience. Ben: Awesome. Thanks Jason. Jason: Bye.