Building in a bear market (Recorded Live Session)


The term, “bear market” refers to one in which a fall in the share prices leads to a higher probability of selling. The speaker initiates the session by throwing light on the determining  factors that have begun to affect early stage founders in a broad macro environment. Founders possessing a small number of stocks,have been negatively affected by factors such as inflation, high cost spiking and several other things happening in the market.

Building despite the VC funding slowdown

The speaker indulges into this case further by bringing into light the concept of crossover investors. These are people who started their business by investing primarily in public companies and eventually made a lot of money by investing  in late stage tech companies. Over the last few years, a lot of these business people have invested  in public as well as late stage private ventures.  What is the benefit of such a mechanism, according to the speaker, is that while it may lead to some losses when the market may slow down, it will definitely give one opportunities for gains when the market may expand. This is referred to as the valuations of plus million and the phenomenon of the ripple effect.

The speaker addresses the dichotomy as to whether one should invest in companies in a series or try to focus more on companies that are a bit shorter.  Investors like Yale and Stanford, for example have also witnessed huge declines in the private as well as the public sphere. Therefore, rises a concern as to whether all the venture funds that have money should deploy their capital more deliberately? According to the moderator, however, the market is still very healthy for this since  there  are a lot of people with capital, it is the part of the market that moves around the least.

The moderator further highlights the reality that we're in a point where the quality of the business model and quality of attraction matters more than top line growth. Secondly, what has become really important is to incorporate everything that happened during COVID and transforming it into the narrative of your company.  During the pandemic, there were certain type of companies like the digital and zoom alternatives that were absolutely exploding. Hence,  the big question in venture land was what was going to remain from the Covid time and what was not?


The moderator concludes by listing out a couple of ideas that had inspired his thinking from the games industry

Firstly, game designers often talk about a kind of a game loop within the experiences that they're crafting, that make them really fun.

Secondly, the reason why games are so interesting is because they are never dependent on advertising. In fact, there prevails a view according to which the decision to monetize the internet using advertising is an original sin of the internet.

Thirdly, games are super interesting also from an interface perspective because they are 3D and synchronous. They are meant to be a metaphorical representation of Meatspace. And from this emerges a world of feeds, scrolling, photos and a social network that is a 3D environment with avatars and very different interfaces.

Access the complete transcript here 👇

This meeting is being recorded, Hey everyone, Good morning, Good morning. Where are y'all calling in from? Who's calling in for the most interesting place. Studio city, California. Not too interesting, but literally probably the closest to me of anybody here. I'm down the street from you Brett. Oh, nice, nice. Welcome. And Francisco California looks like chino is calling in from Norway with, with, with the, the lights Mexico city as we speak guys about this right now. It's happened. Yeah, it's amazing. Like, Yeah, I RL conferences in the in Meatspace as we call it. Um, I was always people who traveled before this, you know, and like it was always amazing to see like people, you know, traveling from from halfway around the world. Yeah. To attend to attend a little conference in san Francisco. I was always great. Actually, I see, I see Owie in here. Um, Ali was in the second launch house and we actually had one of those situations where Ali is now co founder. Initially just our roommate in Launch House came from, was it Serbia Philip came from Serbia or something like a few days before the whole event started. So, um pretty crazy stuff. one out of three. We surpassed Now we can say in in presentations and conversations we can save hundreds, hundreds of people attended. That's allowed. Right, is that? That's hundreds, hundreds of people, Mhm. I'm definitely seeing at least from the from the friendly faces. A lot of founders in here, anybody any non founders want to kind of quickly share what they, what they're up to, what what, why they're interested in this or or even just I'm happy to. My name is Jillian, I actually have a marketing agency for founders, so I sit in a lot of this stuff for my clients. Great lot of, lot of spinning happening right now. Huh? Pretty much sweet. Mm hmm. Anybody else I can go really quickly? Uh my name is addie, I mean she's learning product manager at preamble. So we work in the ai ethics space and I've been pretty interested in launch house and kind of, you know, like on twitter been following a lot of like the recent cohorts and kind of seems like an interesting event. So I just wanted to like listen in and see um just, you know, personally in discussion. Sweet, welcome. Welcome. Glad you're here. Um we we've had actually, we're gonna hack house cohort and we had a machine learning engineer from amazon who would just convert it into becoming a founder and and uh crypto founder, so definitely love the love the space. Um Sweet. Okay, so I don't know if we have any housekeeping before we get started, do you think is there anything we should cover? Um yeah, only thing is if you haven't already joined the discord, please do. We're gonna have so much to debrief, I'm sure after this conversation today and everything from last week to um, the link is in the reminder emails to just join discord. We want to see you there, introduce yourself for sure. Yeah. One other thing uh, launch as members in this, in this chat right now, please dm Alexis your teeth addresses because we just had the sickest drop in launch as history. NFC membership cards. Super swanky. Their merit based. You can't just a pin to them. They like our actual utility. We're going to start getting cool stuff. Um, and they're just, I designed them myself. Really, really great. So definitely drop your wreath addresses. Um, Sweet, Okay, so I'm really excited about today. So, um, as you all know, this is building the bear market, we are in a bear market. Maybe not by technical standards. We'll get into like, the actual uh nitty gritty about the exactly what the deal is right now very soon. But um, just to recap, uh, last week, we had Michelle from Sequoia, who's focused on crypto, um, come in and talk about how she thinks things are going to start playing out in her space. Obviously, Sequoia's famous for their uh, their R. I. P. Good times and a lot of you maybe crypto founders are thinking about crypto, but today, I'm Uh not only kind of a, you know, incredible thoughtful person in, uh, general investing and, and startups and has been around for quite some time, but he is actually our lead investor for our last round. So, um, I don't know if there's an applause, but maybe like a little snap or something. I don't know. How does it, how does it work on zoom? I don't know how people do it. Yes. We're gonna need, we're gonna need more zoom features to do to do applause Thank you. Thank you. Thank you for the kind intro. And I would expect nothing less since I, I let your, your last round. So sweet. Okay, so, uh, we got to start very high level, um, want to talk about what you think is happening like, you know, both from a broad macro environment. Just, you know, kind of a quick summary for, you know, people who are a little bit less plugged in as well as like how you see that affecting kind of the most important things for early stage founders. Yeah, yeah, definitely. Well, um, so the, so I, I think that this is a whole thing that is for founders who do not have a ton of stocks, like in the, in the public markets. I think it's kind of taken folks by by some surprise, but if you like own own some, you know, stocks beyond Gamestop and coin base, then, um, then you'll, you'll have seen kind of a really broad thing that started to happen actually in december where because of, you know, all all the reasons that we know about, which is um you know because of inflation because of high, you know, a bunch of high cost spiking but tons, tons of different things happening in the market. We started to see just the public markets like really overheat. And then now there's basically been a domino effect almost in slow motion. Uh that is now starting to hit the early early stage seed and series a um you know, companies, although like to be honest, you know, I'm like thankfully, you know, red flight within the most of the companies that we interact with for lunch house it's like it seems like things are mostly unaffected right now but like it's but it got it's like a slow motion down no effect. And so I just want to describe what that looks like. Um So there's the concept of these crossover investors and these are folks that basically are like the Co two's and Tigers and all those folks in the world and what they do is they invest. Um Initially like all these guys actually got their business started investing primarily in public companies and they made a lot of money in particular in late stage like tech companies. And so all of a sudden a ton of them got very very interested to say, well you know, we're we're we're we're we're now we spend all our time investing in late stage tech companies. Um Let's actually go a little bit earlier and invest in late stage private tech companies and let's invest before the I. P. O. Okay well why do that? Well because companies are taking so much longer to I. P. O. We can talk about the reasons for that later, but they have taken longer and longer and longer. I. P. O. Like the company like Airbnb or Uber or whatever. And so rather than being able to invest early and then ride that wave up um if we only invest in public then it's it's just it's just you know there's there's lots of of an upside there. And so over the last um you know really uh like a lot of these guys in that that investment in public also now start to invest a lot in late stage private. And so these guys are really interesting because they started to really um spend a lot of time doing early stage. You know looking at early stage companies tracking companies that were Um you know we would have you know considered to be purely venture capital beds. Um and and and and to do more and more on that. And many of you guys have read in the news about a lot of this phenomenon happening. Okay. So imagine you're one of these crossover investors and you have a whole bunch Okay. And then the other half of your portfolio is like late stage private companies. And by the way, um you've been investing in like these like high flying, fast growing, um you know, on demand companies and fintech companies and you're you've been valuing them over at over a billion dollars What should I do with my late stage venture portfolio? And like what you do is you you slow down also, right? And there's a whole bunch of reasons for why you might slow down, but like that's what happened. So, I'm actually gonna show you guys a quick graph. This is just some internal analysis to you guys. You know, take a look at it, you guys can see, right? Um and so what this is, this is like monthly deal volume of kind of later stage firms. This is serious C and higher. Right? So think of this as kind of like And so you kind of see folks, kind of later stage investors, they're going and they're investing, you know, and pretty nice set of companies and then starting in january, there was a bunch and then boom february huge decrease, March april like even more of a decrease. And so what's happening is um if you think about the like macro at the at the latest stage, right? This is sort of about the, you know, valuations of of plus million. Um all of a sudden there's there's maybe like like uh you know less than half of the investments that were happening last year are happening today. That's a big that's a really big contraction. And there's like this ripple effect. Okay so now we're gonna talk about domino's because now it's like okay holy ship now if million than what that means is um you know when you're looking like should you should you invest in companies a series a evaluation or like you do you try to focus more on companies that are a little bit shorter. So that's kind of like one dynamic that's just generally happening is just everyone being nervous watching what's happening to the to the later stage companies that's one thing, the other thing that's happening is um if you are a limited partner, so VCS and angel investors and everybody, you know, you can imagine they all have, they, you know, they, they have investors to, we have investors, like some, some of the, you know, we, we have folks like, um, Yale and stanford and, um, you know, some big, big, you know, big insurance companies and so on as our investors. And when you look at, when you look, when you think about those folks, well, they've also seen huge declines, declines in, you know, public as well. And because a bunch of dynamics, um, you know, they all decided that are maybe going to slow down on the amount of investing into the startup sector that they're doing And so then all the venture funds that have money are now thinking a little bit more about, okay, should we deploy our capital a little bit more deliberately? And instead of everyone raising, you know, right? I mean like those are, those are the kinds of conversations conversations that are happening. Um, so that, that is like the macro situation now, the question is for many of you will be, um, you know, on the punchline is, well, what happens to a seed company, a pre seed company or a series a company? And the answer is so far? Like I think the market is still very healthy for this, There's still a lot of people with capital, it's the part of the market that moves around the least. the reality is um you're probably unaffected because you could probably do one more round or maybe two more rounds if you're like kind of a pre seed company without running into this traffic jam situation that's happening um you know, at the at the at the late stage. Um And so because of that, like I'm not that worried about, you know, most of the people in this room, um not not that worried about that, but I think all of you have to now be kind of a little bit more deliberate and a world where maybe you're spending a lot of money to get growth and you're going to raise in the next six months or something like that, You might be like, okay, should we stretch this out anyway, there's a lot more to talk about their, but let me let me just stop their bread and who? Mhm. Sweet. Yeah, that's a great primer. Um So I think one big question a lot of folks have is like um you know, I think the comments around preceding seed is extremely helpful. Um I think a lot of folks are wondering how long is this going to last and like to how like what is the extent, you know, we see a lot of folks on VC twitter saying hey like you know it can go, it can get way worse than this, this is like the dot com crash um is this a massive, massive correction or is this kind of reversion to the mean post pre covid? Right, so so I think that there's, there's, there's two points of view on this which is, you know, I gave you kind of the bare version of this which is oh my God, if you have to raise money it's gonna be really hard and you have to be exceptional and all those things and the higher the valuation, the more of a more of an issue there, that's all, that's all true. Um I think that the head fake on all this is like, in the movie, the big short, you know, everything that happened there and the reality is right around then was also when of course, you know the android and the iphone and the whole new platform came out and as a result we also saw in those intervening years um Airbnb and Uber and instagram and you know, stripe and all these amazing companies that all came in through that through that time. And by the way, all those companies were able to get funded. All of these companies were able to um, you know, be successful um, in many ways when I talked to founders that were, that started companies during that time, what they remember is, oh man, it was so much easier to hire people like that's fantastic. It was much easier to execute and there was like a lot less noise, you had fewer employees that we're putting to start their own companies. You know, you have all these like really good dynamics that made the talent side much better if your thing was working. So I think that's, that's kind of, you know, the big thing I would, I would, you know, caution against kind of being too bearish, you know, on, on all of this and like like I said, I want to just repeat again that I think proceed proceed series a the, it's still, you know, I think relatively unaffected a good team and a good company is still gonna be able to do that and then of course, you know, we're talking in wide generalities here but I think I would also say that like market by market, it's also, you know very different. I think the web three market continues to be very healthy. You have a lot of companies and a lot of people that are chasing use cases on top of the various protocols and things that they're building. And so because of that, there's still, you know, the way the way that, you know, they're sitting like a lot of money and so the way for them to, um, you know, many, many companies to basically be able to build their way out of this is to, um, you know, help fund and finance and partner in a big way. And so we're continuing to see that the new sector that I'm focused on quite a bit, which I will talk more about, which is this new games, fun games, someone, um, you know, there's a lot of secular trends and gaming that are still extremely popular. It tends to be that games are a little bit more recession proof that and then some of the other sectors and so, um, you know, because it's true, kind of the cheapest dollar per hour kind of thing, um, entertainment for consumers so that, you know, that works really well. So I think in general, um, it's, it's very sector specific and so yes, like think about the macro and think about be prudent, but I also think it's important to be to, to map all of this like tech twitter advice into, um, you know, your own particular situation, other like, so I know like, you know, there's a wide range of kind of investor sentiment, um, about this. And I'm sure founders in this room regardless of stage will inevitably be pitching, you know, focus on the extremely bearish and when they're, when they're fundraising, are there certain metrics or like language or things that like, are important to kind of mention or even like you were talking about sectors saying like, okay, gaming, crypto, uh, these are unaffected. Um, you know, are there certain things that like, they, they should be focused on or think about talking about in the context of their business or in the context of the market to kind of ease fears and stuff like that. Yeah, I think, I think we're just, we're in a point where the quality of the business model and quality of attraction matters more than, you know, top line growth. Um, you know, for many, many years, um, you know, during over the last, you know, past, I would always benchmark and say like, hey, you know, really, really show that, you know, and by the way, if you have to spend a little bit more money in order to show it, then go for it. On the other hand, now, I'm kind of like, well, actually really efficient, coming up right. And um, and so I think that's one, you know, that's one really big part, I think the second part is um the why now question, you know, I think I think becomes really important and I think, you know, we have to incorporate everything that's happened with with Covid and having everything that's happened um into into the narrative of your company, there's a period of time, many of you guys may know where it was basically impossible to fundraise for like a travel startup, right? I mean it's, it just doesn't make any sense like what are you gonna do? Like, you know, get funded and then and then there's, you know, what, what are you gonna do with with, with, with the travel startup? Um you know, versus like now it's like, oh there's much more of a thing around around travel um and you know, and and that makes a lot more sense, you know, a lot of the reason why I think I'm spending a ton of time in sort of games and metaverse and so on is because when you, one of the, one of the really interesting calculations as a, as a consumer that you can do is you sort of take like a movie ticket. I just saw Top Gun yesterday was amazing. Everyone should watch it. Um But if you take like a movie ticket and you're like, okay, well you know, Um uh you know, for that versus, if I go to a concert that's even more expensive and then by the way, if I go to like a, like a warriors game, then that's like exorbitant and, and you compare that to things like um you know, like uh you know, games and you're like, okay, boom, like actually um it's, it's fantastic that you can play, you know, it's like Diablo immortal which just came out this weekend. Um last week is like, it's free to play, you can play it for free. And so um incorporating things like that into your story I think are really important. Um you know, and all this, but like look like I said, I, I just want to re emphasize that, I think for now seed and pre seed I think are relatively untouched, you know, from all of this. So I think there's a lot of anxiety. Um but I think the big companies are gonna are still going to break free. Yeah, I remember in, during Covid, it was like, there were certain types of companies that were absolutely exploding. It was like the digital, uh, you know, zoom alternatives and and things like that. And the big, the big question in venture land was like, is this is this forever or is this like a new paradigm suddenly like everything is all aecom worse is now the main way people shopped, sorry, like even after Covid, it's gonna stay that way. We're adopting new habits. Um, and then we're kind of like in this correction. Um, and, and so I think the question is like, folks are kind of going the opposite direction out like, oh, people may want to be and not do some of these things like, where do you see like that? Like what is maybe like a better questions? Like what was, what is going to remain from Covid the Covid time and what was, what is not? Um, no, I think we're just going to go straight to the report. Yeah. So I think on, on, on, on, on covid, you're, you're right. I mean, I think there was a ton of work around, um, uh, you know, kind of anything that was sort of like virtualizing social experiences and building communities and all that. And I think what we're seeing is a lot of those, a lot of those ideas and, you know, ideas that investors such as myself funded are seeing that those companies don't need to evolve as well as, as we're kind of, you know, going back to, to normal. Um, so I, you know, without, without trying to, um, you know, predict, I think all the, all the, you know, all the aspects of that, you know, funny enough bread. I think like, we're basically going from this weird time of black covid to now, maybe a weird time of life, you know, consumer like sentiment being really negative and, and then, you know, and we'll see what happens, you know, and then we're going to have like my, a bunch of presidential campaigning coming up, like starting probably next year. Like, I mean there's going to be like a lot of like things that are, that are, that are going to be changing, you know, over time. But I think, look, I think, I think, uh, it's, it's so easy to try and generalize by sector, but I really think it comes down to the, to the company ultimately, like the things that still get us to take a meeting and for us to, you know, look through, um, you know, these acts or end up being things that either are showing real traction and its attraction in the numbers or it's like traction in social media and we can, you know, people are just talking about it or it's um, you know, really amazing teams and I think still for like seed and series a, you know, it still comes down to those as the, as the fundamentals. So, um, I would love for you to say like, you know, there's a lot of advice out there and I think you shared a little bit, um, here already, but I think, um, one thing that we try to focus on with sprints is like, um, basically providing like the most amount of information in the shortest amount duration possible and making sure that it's incredibly actionable. And so like if you were to maybe even you're just re summa summarizing stuff you've already mentioned. But like if you were to tell, like, let's say pre seed and seed and then a series a plus founder to do one or two things, um, you know, what would those things be, especially if they're different from, uh, what, what's normal? Yeah. And I'm gonna share a quick tweet also that the is a little bit older, just about just about traction. So this is like, uh, yeah, so basically like, like what? So, so the first thing I think is ultimately going back to like, quality attraction. Um, you know, like I, I, I've listed out a bunch of the metrics that, um, someone like me and someone who's like a later stage investor, like a series a series B um, kind of post traction investor is gonna, is gonna focus on, and I think like, this is kind of how ultimately how you assess quality. Um, and so, so number one, I think, I think we, you know, I think if anything like that's that's the fundamental thing, right? Like that's that's the, that's the fundamentals that's gonna get, you know, an investor excited. Um, and so, uh, so I think being calibrating where you are relative to other companies and products and being able to speak, um, you know, at length about about the quality of your attraction, I think is important. That's number one Number two is, I think it's a lot of time time game, right? At this point it's like if if, you know the last thing you want to do is try and pull off an aggressive fund fund raise in the next month, you know, over the next, you know, three months, I think, becoming more flexible about um, you know, your runway um buying yourself time to sort of, you know, build into like, you know, the thing, I think that that is especially, you know, and I think most of the group here is probably see precedes. You don't have to worry about it, but like if you're a Series A or Series B company and you you raise that an aggressive Well, the bar has just been raised substantially in order to figure out like how do you know, to get to get your next round going. And so because of that, you have to really make sure that um you have the time to pull off the initiatives that you're trying to do. Um so, so I think, I think that's, you know, that's that's really a big part and then I think the third, I would say from a purely just fundraising perspective would just be um being really good about like your process and the structure of how you do your fundraise, if you are gonna go out there and do it, you know, maybe in the past you would have said, oh, I'm just going to talk to like my three firms that I know really closely, it's like, okay, well now maybe you have to be organized and like pitch more firms, um, I often recommend to, um, to the ceos that I work with, um, you know, to my colleagues that, Um, you know what they should be doing is they should spend, you know, kind of networking with investors and it doesn't have to be like in the background being like, hey, let me tell you about the company, but you can be like, hey, I'm not fundraising, but we'd love to learn more about your firm and like blah, blah, blah when you get inbounds and that, that, that's the kind of thing that in a more of a bear market you might, you might do versus um, you know, when it's more of a bull market people tend to hold their cards really closely and only only have, you know, investor conversations when things are happening, etcetera, etcetera. So I think, I mean, those are, those are all different pieces, it would be selling, um, is there any any like kind of like war stories or things that you think of, when you're like, wow, this is a, I really like amazing kind of example or in inspirational example of like how an early stage founder traverse a past recession or bear market or anything like that. Yeah. Right. That's no, that's great. That's great. That's that's a really good question. Um you know, I think uh so this particular thing, right? I mean it's only been, I think two months when like, you know, that venture sentiment has been negative. And so honestly, I think it's extremely new. Like this whole thing is all extremely new. And so I would say like there has, there haven't been any like crazy things that are happening, especially in the seed pre seed series, a kind of a stage, what we've seen so far is like, you know, once you get into late stage we've seen now, like people have been pulling term sheets, they've been, you know, you handshake on one valuation and then it gets renegotiated down. but we've started to see some of the more um you know, financial type investors um start to pull that off. And so I think, I think, I think we're definitely, you know, these war stories are definitely starting starting to happen and I think where, you know, it depends on how, how long this reality is going to be in. Yeah, so um I want to turn the topic to all these kind of new funds and specifically the gaming funds. So there's been a lot, a lot of like fresh powder, which is kind of like a, f you to the bear market and announces this. Um talk to me about the gaming fund. I mean obviously you're super bullish on gaming in general over the long term, even in the context of the bear market. Like, yeah, what's the, what's the thesis? How do you, how are you guys thinking about it? Um and when I joined, one of the things I did was I talked before I accepted the offer, I talked to a bunch of people who would quit BC and I was like, why, why have you quit BC? Like what's the deal? And um and you know what they said was they said, well, like, look, um you know the reason why um why BC is so hard to consumer BC. So like, you know, like nothing's going on in consumer BC. So you're gonna have to, you're gonna, you're gonna end up being really, really like board right? Or whatever that that was, that was a claim. And so when I came into the firm um I was like, okay, cool, I'm gonna do the normal stuff, I'm gonna do social apps, I'm gonna do marketplaces, I end up investing in the clubhouse and sub stack and, you know, a bunch of bunch of cool companies. Um and then I was like, well, you know, I should develop like a minor, like as you develop kind of like a, like an area that might be countercyclical too consumer more broadly that um it's just a completely different thing and I explored a bunch of different miners, but the one that actually got me the most excited was I realized that as a firm we had not invested at that time in um, you know, roadblocks, which we eventually, you know, ended up doing an investment in. Um but we had an investment in niantic or discord or twitch or a couple of these. And I was kind of like, oh man, there's like those are some of the biggest, why aren't we in them? And so what I realized was like, maybe there's an opportunity to, you know, rethink games. And I also went and I looked at a bunch of e sports teams because that was something that everyone was investing in at the time and I wasn't super excited about those, but um, the more, the more, you know, the more I talk to, the sports teams, the more I just wanted to invest in riot games, the more I was like, oh man, I just wish I could have a piece of like League of Legends, right? I could have a piece of like Fortnite, like that's what I want. Um because if you own that, like, that's actually the thing that generates all the value for, you could build a whole ecosystem around that. And so eventually we, um, you know, I started investing in games companies and um, We ended up hiring a bunch of key people, Jonathan Lai who's from riot and tencent. Um, and then we hire some other folks that are, that are, you know, from ea, and James, my colleague James Schwartzman, we started a bunch of important key, uh, infrastructure companies in, in games. And so we're like, this is, this is awesome. Like, let's just go, let's go raise a fund and uh, and, and bright, I wish I could take credit for the timing. But we started, we started uh, like late last year working on it and we got it done like, kind of t one of of the year before anything happened. And it was like, you know, just ended up being, um, you know, really fantastic kind of thing. And, and, and if you guys think, you know, your founder fundraising is, is tough, it's like, you know, we have to make it back, we had to pitch, you know, we could be, and you would like present your back and then we did a whole series of dinners on the east coast and everything's anyways very it was a super interesting is my first time doing it. It was a really interesting experience. But yeah I mean the thesis of it ultimately is that games are the next evolution of social networks. Um If you guys all remember like like I'm in my late thirties and so everyone's gonna have a different touch point for this. But like when I was a teenager the social network was like AOL instant messenger and like I. C. Q. And like all that stuff and then everyone eventually moved over to like live Journal. Everyone moved over like Zynga, everyone moved over to my space and then there was like facebook and then now but it's like every generation just like moves on and so and then it's like now it's like Snapchat and like you know Tiktok and like instagram. Um And so every generation doesn't use the generation, the previous generation of social apps, they think that that's like for boomers basically right? And like keep going. Like they are they have like an ipad with face time going with all their friends and that they are in Minecraft together or they're in roadblocks together and they're talking and then they're like playing at the same time that's that is their social network and so um extrapolating from that like we really you know I think that there is going to be one day a you know one billion monthly active user games platform that is going to effectively function as the world's largest um You know sort of games like oriented social networks kind of very platform kind of thing. And we're not gonna we may not even call it a game but like people will use it as their core social experience. So um anyway so that that's you know bred that's kind of like the the origin story behind it and as well as the you know kind of the core thesis for for what we're doing. So I obviously have to ask like you know the the Crypto World went crazy very recently, we're still going crazy about metaverse. Digital digital goods and all that stuff. Um Obviously games are the oldest instance creation of kind of digital purchases goods. How do you how are you thinking about like this space in that context? Yeah. No that's right. I mean I think um you know as much as I actually went back and reread uh Snow Crash recently which is neal Stephenson's book that queens, the term metaverse, It's an awesome book, you guys should all read it if you haven't um And one of the things that you realize is like yeah I mean you know World of Warcraft and and you know and and Pub G. And fortnight like these are the closest things to you know metaverse that um that we that we as have created as as uh you know human civilization so far and the people that are best able to create the metaverse are the people who have been building building these experiences now. The thing that like I think What where that makes Web three really exciting is what the metaverse is is it's you know what proportion of your time is spent in Meatspace versus in you know digital space and um during covid of course we all we all went digital right? But but for a lot of people you know if you think about And in a case like that it's like well and then but once you invent like You know telegraphs and telephones then you know maybe it's like okay well in digital you know space and then now we have zoom and be happy whatever like I would actually save me for me personally I probably spend like and like they're going to be people that basically Grow up and you know they live and work all in digital space and it's going to be moment for what we all do of just spending, you know an incredible amount of time, you know digital and so the question I want to ask everybody right is if works with you, you know digitally right? Where we thought of a sort of digital nomads like maybe that's going to be extremely mainstream you know coming up. Um and the way that you buy things you know your assets are all digital in the form of Web three then do you actually want like a single point of failure like do you want like Activision to like own all that stuff? Like is that is that too much? Like in the real world? Like we basically had to like fight the british government, you know the british monarchy to develop like a set of rights so that we could like own property and you know and and have have you know taxation and representation and all this other stuff and is it too much to have like Individual game companies basically own all of your assets and your livelihood if you end up spending both your work and your leisure time in in this world. And I think like that is the thing that is probably is the most exciting to be about Web three, which is that um it provides a common baseline for the rules and um you know the, you know, quote unquote laws and rights. Um you know that that the users have such that you can actually, you know like working that and and that's why um you know, funny enough like if you if you look at all these virtual goods that are out there, There isn't a single virtual gun in right? Because like who knows if that's going to be ephemeral or what or whatever versus And like that is like a huge interesting innovation because it tells you the trust level that's been developed, you know, they're so, so I'm super excited about this transition. I think it's gonna, it's it's one of these things that's a little bit like a business model thing is going from like Going to best buy and buying box games to free to play, This, you know, Web three might be at one level of business model innovation, but I do think it ultimately changes the gameplay and the player experience, you know, for all of this. Um, so, so yeah, so we're spending probably like half of our studio investments are our Web three related at this point, and we see a lot of the best Game designers and developers in the ecosystem also going to Web three. So we're super, super exciting. Um, I wanna, so I'm gonna leave time for questions, but I want to ask one quick question uh, on top of that, as people are putting their questions in the chat. Um, obviously there's a lot of non gaming founders in the world, but you know, I personally believe that gaming, uh, is that you can learn a lot from gaming in terms of how to build really great, especially consumer products. Are there any sort of like principles or things that you've seen? Uh, you know, other founders take non found non gaming founders take from gaming. talking about Gamification and badges and things like that, But is there anything more substantial? The stuff that you've seen stick recently, like how could how could a non dreaming founder apply those principles, apply all these ideas? Yeah, well, I think, um, I think that the, there's a couple, um, you know, really big things that have inspired me from the games industry, into my own thinking and and let me, let me, you know, let me describe a couple of them that I think are, you know, that are important. The first is when you talk to game designers, um, they often will talk about kind of these like game loops within the experiences that they're crafting, that make it really fun, right? Like at the end of the day when you look at Fortnite, you are, you know, pointing and clicking and shooting, right? Like that's what you're doing. That is like the one second experience. Um, you know that you have and that has to feel really satisfying, right? So your weapon has to recoil in a certain way, Your gun has to be a certain color. You know, if you hit, if you hit someone, it's got to be like really cool and dynamic. And then the question is, okay, well that's if that's the one second experience, what's the one minute experience? What's the five minute experience? What's the, what's the attendant experience all the way up to? Like why do you come back every week? Like why do you come back like every month? And so that's really shaped the way honestly that um, you know, I ended up reading about and talking to a lot of people one of the things when I talked to game designers that was super interesting was that they would talk about that. And then I would think a lot about, oh, like that's what instagram is. Like I post a photo on instagram people send me like, you know, I followed some of the back, you know, I like some of their stuff, they post more photos, I post more photos and then there's that loop that's like happening right? And like same with chat and by the way, like same with um you know, like many of these kinds of, you know, products where there's these feedback loops that are happening at one second, you know, one minute, one hour, one week, you know, type intervals that are like bringing you back. And so I think that's one like really important way to like model the way that that you think there's a guy named dan Cook and he writes a blog called Lost Garden and just uh you know, paste this in to chat. Um to me. It's like it's he he writes such a great um and he writes such a great uh you know uh blog that like talks a lot about game design. There's also another one um book by um Raph Koster. It's called Theory of Fun, which I think is really interesting one as well. And I think it's it's really changed my view of like how how do you think about engagement? So I think that's one that's one piece I'm gonna put out there. Um The second part is, look, I mean the reason why games are so interesting is, you know, from the monetization and business model perspective is they never dependent on advertising, right? And we have, there's there's a view which, which I often side and agree with that for all of us building digital products that the decision to monetize the internet using advertising is sort of the original sin of the internet. It's the thing that causes, you know, like all these like newspaper articles to be like super like, you know, spammy like titles and you know, everyone's like focused on controversial, you know, like all these new feeds, our algorithmic lee determined so that you get as much engagement out of people and you know, you make the products as addictive and it's like all these things were built on the idea that advertising is like the business model and I think we've figured out that there's a lot of like potential downstream effects that as a society we're still like grappling with on the flip side. I think what's interesting in games is that they have their own issues like, you know, like games have their own issues of course. Um but they've always tried to figure out how to monetize by just charging customers. Um and I think what that means is they have gone so far in terms of thinking about virtual goods and like avatars and like why would you pay, you know, like for for something like League of Legends, like many of you guys if you haven't played lead, you may you may you may not know this, but all the money that's made by league, which is, you know, billion plus per year in revenue. High margin revenue is based on like cosmetic items. It doesn't alter the gameplay. Right? Same with, same with Fortnite, right? These are these are purely cosmetic. And so how do you, how do you make billions of dollars? Um you know, on purely cosmetic things, like we've never tried, like twitter has never tried to say, hey, if you want to set a custom background and you want to do this and you want to do that, like you have to pay X dollars. They've never tried that, right? Because advertising became the predominant model. And so I think we're going to see a lot of really interesting experimentation as people do that. And of course Web three kind of extend that even further where everyone's thinking about, Okay, yeah, so the concept of virtual land is the concept of token gated communities. Is there the concept of um avatars and can I monetize that in in um you know, a big way. I think those are always rocky. Um and then the last single mention is, you know, games are super interesting just from an interface perspective because they are they are three D. They are synchronous. Um They are they are meant to be kind of a metaphorical representation of Meatspace. And so because of that, Um, you know, right now, we're used to a world of like feeds and scrolling and photos and everything. And I think, um, you know, your social network is a three D environment with avatars and your friends and that all of the products that we're building right now, that were based on effectively like, you know, facebook's original like view of like profiles and photos and connections and feeds that all that's going to get, you know, reinvented because people are going to be used to very different, uh, you know, very, very different interfaces. you know, it's like we can come up with new stuff now. Yeah, I totally agree. By the way, make sure that your buttons have a funny name, like the like or the tweet or the whatever in order to succeed in a in a in startups. So glad we're glad we've evolved from that. Yes, let's um let's turn it over to some questions. So uh I've been looking over at the feed right now, but Olivia, do you have any good questions? You see? Yes. So there's a few that are in discord cash. Do you want to come up first and just admit yourself and start chatting? Yeah, sure. And you love to see you again, totally enjoying this book. Uh and we met in uh in greater Club in san Francisco. Um so my question is around uh you know, we are creating a social um factory social uh sort of like linkedin for victory, but given the nature of factory were used on their own data, do you think we can reach the network fact negative effects? Yeah. Well I think, I think the good part about Web three is that the design of like network effects are just built into Web three like at their at their court, right? Like whether you're talking about like Bitcoin or theorem or whatever, It's like, well why do you think Bitcoin is value? You know, why why do I think it's valuable because I think it's valuable to Brett? Right, and it's just it's very self referential in terms of how it works. And so I think what's been interesting is um as people have been figuring out how to engage, you know with it. Um you end up with saying, okay, well yeah, maybe you put the user data, you know, onto the Blockchain, but then it's like, well can you get other developers, you know, like at the core of network effects is why is it if more people use this, it becomes more valuable? Why does it become the dominant way that in your case, you know, putting you putting user data on on Blockchain, the more the more there is then why does, why does the whole, you know, why does it become more valuable? And it's either because there's other developers that then build on top of it, that's one version, there's another version where because it's aggregated in a certain way, you know, it works out. Um but you know, like, like you could argue for instance that, you know, it's kind of amazing that Wikipedia has network effects. Um even though all of Wikipedia's content is just free, it just turns out that the more content you put into Wikipedia, the more editors it creates, the more people want to keep contributing content, the more famous it becomes and you just get this like very circular thing. So I think the fact that like um that Blockchain data is, is sort of public and available for people um could be, could be life user generated content. One of the major advantages as opposed to disadvantages. Nice. Uh Dhruv you want to step on stage, Hey Drew, Hey Andrew, Hey bread, thank you so much. Um I just had a couple of questions. So the first question that I had was how relevant do you think our game streaming platform is going to be in the coming future? Uh do you think they will merge with the likes of Tiktok and instagram or do you think they sort of have a separate forum of their own like, which is commanding at the moment? And how, what, what's the scope that you see? These platforms will have in a decentralized sort of an environment. So I think, um, I think uh, so on the first question, there was, um, as many of you guys know, Microsoft had, you know, built X cloud and um, and also um, google built stadia and there's all these like game streaming platforms that everyone is very excited about and like I think that that is mostly like in a lull right now and I think mostly people are, the technology is cool, but like there's not, I think people never found really like what's the, what's the killer news case that if you build a cloud, kind of streaming first game, uh, like what is the new gameplay and the new experiences that you can create that, you know, didn't, didn't that you can allow before and for the phone books that didn't follow basically it's like instead of having a console or like downloading the game on your computer, you can basically just open a web browser and like off you go. And so, um ethic actually, recently, you know, they have a version of Fortnite that's going to stream in your browser and that's to get, get around all of the Apple, you know, as you guys know that they're in a big fight with Apple right now. So it's like one of the ways to circumvent apple's, so maybe that'll be a killer use case scenarios for all these companies. So I'm less excited about that. And what I'm more excited about is we're in a world where video and sharing a video and um, is now like kind of the predominant like media format that everyone is excited about and video games are really, really interesting because there's sort of a video first like medium where it's so easy. Like I remember I had for my, for the book that I, that I wrote, The Cold Start Problem, I published last year, one of the interviews in the book, I remember talking to Emmett shear, who's the Ceo and co founder of twitch And I was like, well, you know, it wasn't inevitable that twitch ended up with video games. Was there, were there, was there something else that could have done? And he was like, well the reason why video games make such a great sense is because in games it's one of the easiest ways to create hours and hours of nice looking contact, you know, it's, it's just so easy versus if you try to like film yourself or, you know, on a backdrop, It's like, oh man, it's so hard to keep people's attention. And so I do think that like there's something really magical between this link of like the proliferation of instagram stories and like Tiktok short form video and like youtube and a sink and you know, also the thing we're doing now zoom and like all of that and like gaming together I think is really interesting. And I think we've yet to see games that are really built for streaming and sharing, um, in a big way, like people in social will think a lot about like, hey, I'm going to build an app and like why is it that this thing is terrible when I talked to games people that's not typically how they think. Um, and so they're more, they're thinking about the artistry of it. They're thinking about, you know, the amazing world they're going to build and think about the characters. They're not thinking as much about if I play this game, why am I incentivized to stream this on? Um, you know, twitch or to make Tiktok videos? But I think that's all coming. I think that's all inevitable and it's all coming. So I'm excited about that. Yeah. The thing I think about is like, it feels like social media technology kind of approximates reality and the games are kind of the logical next step after live video. Um, to get closer to simulate the simulation as Elon musk would say. Um, so we'll wrap up with one final obvious question. Um, a lot of founders in the room, what's the best way to get a hold of you or reach out or anything like that? How do you, how do you want to be contacted? The best thing you can do is you should contact Brett, Brett will filter all inquiries and send him on his phone number is, yeah, okay. I mean, literally the easiest way is, um, is just, you can email me, Um, so that's easy. Um, I will tell you that, like, generally if, if you are building something and you haven't, um, you know, you haven't, it's in, it's early, it's like pre product or, you know, it doesn't have a lot of traction yet. Um, you know, what I would tell you is it can help us, uh, if you come in through somebody who already is an investor in your company or already is vouching for what you're doing, um, that can help get our attention. We're just in a world where there's so many founders with great products, but are on sides or you haven't launched yet that it ends up being really hard to, to, you know, filter through all of them. And so we try to use, you know, kind of various signals to help us kind of prioritize all those opportunities. And so I would say that that that is why actually to be honest, whatever bret sends me something to look at, like I will actually at it. And so you should actually email bret. Yes, email me. Uh you can join Launch House and uh Andrew stops by all the time, actually online in the metaverse and in person, so um if you enjoyed this conversation, you want to have another uh definitely join, join up. So we've got one last session tomorrow, it's going to be a casual kickback reflections. We're gonna share our playbook for building in the bear market, but thanks everybody from coming, this was awesome. Um And uh Ceo tomorrow. Thanks Andrew awesome. Thanks everyone Leader, the recording has stopped. Yeah, I got a call right now, do you have any questions about Launch House? Mhm.


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