On this week’s episode I chat with Jed Katz, Managing Director at Javelin Venture Partners. Javelin is a premier VC firm that has invested in a ton of successful companies including a bunch of unicorns like Master Class and Thumbtack.

Now, this episode is a bit special for me because Jed gave me my first break into VC back in 2006. He’s been a long time friend and mentor, so much so that I thanked him for all that he has done for me in the opening of my book.

Though Jed might not like it, he’s a vetern venture capitalist and entrepreneur. Before helping to start Javelin over 12 years ago, he was a successful entrepreneur that navigated the craziness of the dot com boom and bust era, eventually landing a $1 billion acquisition of his venture Move.com

During our chat we discussed how Javelin operates, the current state of the VC world, the political implications of social media, important lessons he’s learned from both the VC and entrepreneur perspective and much more. Enjoy.

Show Links

• Follow us on Twitter: @JedKatz / @javelinvp / @mpd‍
• Show Notes: Javelin Venture Partners‍
• Podcast Links: YouTube, Twitter, Facebook, LinkedIn

Transcript

MPD: Welcome Jed.

Jed Katz: [00:02:16] Damn good to see you. I don't get enough for you 

MPD: [00:02:22] if only everyone said that. Uh, so I'm going to start this off by, do you sing you? Uh, so people have a lot of color. I'm sure I'm going to miss lots of goodies. Um, but give people a little color on your background so they know why we're talking and then we'll dive in.

So Jed Katz is the managing director as one of the managing directors at javelin venture partners. For those who don't know javelin, they are a San Francisco based series, a focused venture capital fund with hundreds of millions in our management. We'll get into that a little bit. They've invested a bunch of well-known companies.

A couple of you might know our masterclass and Thumbtack, and Judd's actually wearing his Thumbtack shirt today is they announced a huge mega round, uh, as a unicorn unicorn valid evaluation. Uh, I have a particularly soft spot for Jed, which we'll probably talk about. He is one of the people who gave me my break into venture capital back in 2006.

So he's been a material part of my career and my story. Um, I actually thank him, I think at the acknowledgements, in my book, uh, before moving into VC. Chad was the co-founder and COO of rent out@amove.com to connected companies tap in during the real startup boom pack at the turn of the century. And they were real estate sites, right?

It's been awhile, uh, that not only went public, but ultimately were acquired by HomeStore for a billion dollars. So he has successful entrepreneurial experience and a long track record as a VC. Chad, what did I miss? 

Jed Katz: [00:03:48] Uh, just one correction. We were, uh, we were actually taking, moved.com public when the market fell apart.

So we kept building it for a year and ultimately merged with realtor.com uh, about a year after that. Ah, 

MPD: [00:04:00] got it. Okay. But you've for the folks listening, you've seen the journey and you experienced the boom something, that's almost, it's almost out of a psyche of the startup community, that the 2000 era, which was the topic 10 years ago still got it.

Jed Katz: [00:04:15] That's true. Uh, look, that was, that was half my career was, was building companies and it was an exciting time. And, um, you know, a part of me certainly misses that it was really fun to build something from scratch and manage a lot of people and, uh, do things that were never done before. Uh, back when there were a few experts on the internet, it was fun to be one.

MPD: [00:04:37] Well, after we covered javelin, maybe we could spend a few minutes catching up on that. Some of the things you learned. Um, so why don't we start in, do you want to give us an overview of javelin 

Jed Katz: [00:04:47] happy to, uh, javelin is wow. It's 12 years old now, amazingly, uh, we've done five funds, almost a hundred investments, and we are really a late seed early a investor.

So we're writing checks from one to 5 million. I think our average is probably closer to 4 million actually. Uh, we've gone as high as 10. Pretty rare circumstance. Um, and, uh, we'd like to be the first institutional cash in and the closest partner to a founder for a decade for however long, it takes for that company to become big and have a great exit.

Uh, we're all former founders. So we tend to invest in things that we'd want to be building if we weren't investing. And, um, I have a lot of fun, just helping founders figure things out along the way without the drama and distraction that sometimes comes with other investors. So we just problem solve and build and brainstorm and help recruit and help raise money and help make smart decisions from a strategic point of view.

Uh, and, uh, you know, with the whole crew has been together a long time. So we, we gel well here. Uh, the process is pretty efficient. We tend to act more like founders than we do, like. Most VCs and, um, uh, you know, we're, we're excited. We think the portfolio is really good. We think the, um, the relationship with our founders has been fantastic and, uh, you know, we're, we're, we're excited for the next.

MPD: [00:06:12] That's great. Can you give us a little color on the investment strategy? You can get a little real, you know, one of the challenges that entrepreneurs face is all the websites look the same, but they're not the same firms. Aren't the same. That thesis is, are different. Um, what do you guys do? What do you look for?

What are 

Jed Katz: [00:06:26] you, so I guess I could best characterize it as signal before traction. So, um, sector is actually one of the last criteria we use. Um, You know, we're, we're good at certain sectors, we do a lot of marketplaces and SAS and some consumer and some healthcare, it, some FinTech, uh, but that's not our first criteria.

We first look at the, the founders. Uh, we tend to invest, you know, again, signal before traction, when they've they've accomplished something, there's something there there's the product that's been built. There's early usage of it. People are sharing it. They're liking it. They becoming addicted to it. Or there's early customers who can get a feel for their sales cycle or their pricing, or.

How big was sinking gut, but really it comes down to do we see this amazing spark in this, in this founder or the founding team, their ability to build something that's really hard to do. And then we'll be really hard to compete with their ability to recruit and raise money and, uh, see the forest and the trees and, uh, you know, have a great relationship with the people around them, um, to have a ton of grit.

And, and are just, are a pleasure to work with very intellectually honest. Uh, and then we, we look for businesses that really have an unfair advantage early, you know, whether it's a kind of distribution, cheat sheet or a, a, a, you know, a way to, uh, uh, get a customer base that no one's been able to do before or a product that's, uh, you know, really hard to build.

Um, you know, markets have to be in the billions, uh, the mode has to be. And we want to invest in companies that are not just going to be bought someday or, or be valued someday based on some multiple of revenue, but, but really are building much more strategic value than that. So that, uh, whoever we're to ultimately acquire them, if that's the path to go down, has to have them can't imagine their competitors having them and probably can't do what they do if they didn't acquire it.

We've invested in a wide range of companies. If you look at our portfolio, it's, it's, it's kind of all over the place. Uh, but the common theme is, you know, these, these are businesses that are, are capital efficient, highly scalable with, uh, founders. We want to spend a decade working with and, uh, you know, that's obviously a two way street.

They have to really like the relationship with us and feel like they're getting a lot of value from us the whole, the whole day. 

MPD: [00:08:51] So there's in VC. Everyone knows there's a handful of different things. People invest in, right? Some people invest in teams, markets, products, barriers. That list sounds like you want it all.

What would you say the not necessarily is that the answer? What's the, when you look at a company, will you, if that, if the is incredible, but it's on the com, is that a deal for you? Or if you kind of have a gun to your head and have to make some tough choices, what's the most 

Jed Katz: [00:09:18] important, so you never get it.

You never get it all. Or maybe phrase differently. You don't have a crystal ball, so you don't know if you can get it all or not. You see some of it, you see signal for some of it that it can do. Or that, uh, you know, future innovation will likely happen. So whatever the core product is today, we'll expand into a bigger core product or, or additional products.

And, um, uh, yeah, it's hard. I mean, I think at the end of the day, the founding team is the, is the most important. I think some of our biggest mistakes in the past were where we knew the founders were winners, but couldn't convince ourselves on the business because it didn't. No, not that it didn't check one of the boxes.

It actively was against one of our core philosophies, but we still should have done it because, because the founder was so damn good and would grow and learn and adapt and, uh, you know, build something amazing through the years. And so founders definitely come first. Um, you know, there's tenants we don't like to violate.

And so, uh, We're probably more right than wrong when we, when we walk away from something, because it, it, it broke a key rule of ours. And I think, you know, the best example of that is intellectual honesty, right? If we are talking to somebody over a period of a couple of weeks, as we're getting to know them and the business, and, um, whatever they're saying is coming across as not valid, or they're kind of making it up as they go.

And they're not saying when they don't know something, they're just trying to fake it. That'll come across and that's a real turnoff for us. So I think that that's served us. Um, but, uh, you know, again, there's, there's no crystal ball. We, we, we tend to go very much with our hearts at the end of the day on if we want to spend the next decade building this business.

And, and at least one of us has to be banging their fist on the table. There has to be kind of an emotional component to this where they, they really have to do this deal. And. We tend to do those deals and we tend to walk away from the deals where one of us is banging their fist on the table saying we are not backing that, that founder for whatever reason, um, those assessments for us, 

MPD: [00:11:25] what are some of the other tenants he referenced?

Do you, I mean, do you have a list of like a 10 commandments? 

Jed Katz: [00:11:29] You guys follow? Uh, we don't, um, we have a whole list of criteria like that. I wouldn't, I wouldn't label it that the 10 commandments, but the, um, you know, just the. Again, it's kind of the earliest signal we're able to detect. So their, their ability to get people to join them early is a big one, right?

Will people bet their careers on this idea and this founding team before there's cash in the bank before you have your first customers before anything, you know, have you, have you convinced others? They want to go on this journey that they should go on this journey with you, right? That's a big one. Um, there's easy things to check off, right?

If the market size is not in the billions, it's not something we're gonna. Right. If, if scalability isn't really possible here, it's, there's just too many moving parts and there's going to be too much friction. We'll walk away. Um, we love to invest in things where it's possible to win the war before you fight the battles.

And so, you know, I think you mentioned, uh, masterclass before. Yeah. That's, that's a great example of that. Um, 

MPD: [00:12:29] what is that, that match that criteria what's most people don't know the history and the strategy there. How did they win before they started? 

Jed Katz: [00:12:36] So the bed at the time was, you know, we, we invested before they had actually released their first class, but we saw the film.

We saw the, the end production of the first class before they launched it. And it was, it was beautiful, right? Hollywood level production. It was actually the James Patterson class that we saw. And, um, the bet was that if they could get enough of these masters, usually celebrities early to film these classes.

And really some as the library would start to grow. It would become a thing that the rest of the A-plus celebrities and masters out there would want to be a part of for legacy for brand. They want to be known as the best of the best. And if you can get that flywheel going, it's going to be incredibly hard to compete with.

And so really the trick was just getting the flywheel going. Can you get those early celebrities to do it and make the production value so high that the rest of them want to do it? If you can do that, it's going to be, uh, you know, your mode is going to be drawn. And, um, you know, we, all, the other criteria was what was hit here.

We love the founders, so fun to brainstorm with, um, so willing to both take and give feedback and, uh, uh, and, and kind of endearing, I guess, is a good word as, as an entrepreneur. I mean, he was able early on to convince the initial celebrities to film classes, which was amazing to us because they hadn't even launched.

MPD: [00:14:01] So that was your, your signal is that the celebrities were saying, yes, 

Jed Katz: [00:14:05] that was one of the keys signals. We loved the model. The quality was great. Um, we, we thought there would be one winner here. We thought that if you can become a place where you can learn from the best of the best being a second place, you know, copy of this was going to be almost impossible.

And, uh, uh, you know, that was the. 

MPD: [00:14:27] It sounds like you were pretty red on that one. Hey, why pick your firm? You talk about building a team, the company with the entrepreneur. And I like that language because it's very true to you having known you for so long. It sounds a lot like you're picking co-founders and you happen to be a capital partner at this stage in your career, but you as a serial entrepreneur, it sounds like you're just kind of seriously go through launching companies again.

So 

Jed Katz: [00:14:49] you're certainly go ahead. Yeah. Why pick 

MPD: [00:14:52] your firm? Why are they, why do they choose Java? Over everybody else. 

Jed Katz: [00:14:57] So you're, you're certainly choosing partners. I wouldn't, I wouldn't call them co-founders because the companies are theirs. Right. It's, it's very important to us that it is, it is your company.

We're going to give you lots of advice and brainstorm with you, but these are your options. It's your company, your building. Um, but we're going to be your partner and we want you to have the same good relationship with us a decade from now, as you did when the, when we first invested, uh, I think you choose us because, uh, we, we have a lot of empathy for what you're going through the ups and downs and just the pure difficulty of building a highly scalable startup.

It is very, very hard. There are constant challenges that you need to work through and talk through constant need to recruit great people and raise more money, do complicated biz dev deals, et cetera. And, um, I think you choose us because we've been there. Um, you can call any of our founders, uh, whether the company has worked out really well or not.

And they should say the same thing about us, which we've been a great partner from start to finish. Um, and. You know, I think the culture of, uh, of javelin is just really just, how can we help you thrive here? Uh, we I'll end this segment with, uh, we really try to avoid drama and distraction and we, and that includes guiding you on other investors are going to come after us.

So who's ever going to lead the series B, C, D whatever. And so, um, you know, we, we will give you a lot of, you know, now 12 years of wisdom on, on who. Might be a great other partner to bring in down the road. Who's going to be super helpful. Um, give you advice based on context and, uh, um, also be super friendly and fun to work with.

MPD: [00:16:45] You know, that's a big deal because I know you guys take board seats, right? 

Jed Katz: [00:16:48] Almost always, almost 

MPD: [00:16:50] always. It's very hard. I find for some VCs to really maintain strong and healthy relationships with the founders when they're on the board in particular, because it creates. Tensions challenges, complications.

What, what has helped you guys and maybe some advice for other VCs and entrepreneurs listening to kind of keep the peace and stay human and keep those healthy relationships while you're in the pressure cooker of a boardroom? 

Jed Katz: [00:17:18] No, I think there's an attitude that we're in this together, that the challenges that come up are just problems that need to be solved.

It's you know, shouldn't be anything perfect. We should be able to give each other feedback along the way and then go out and get a beer afterwards. Um, and if, if any friction comes up, we'd like to deal with it immediately in a way that keeps everything super friendly. Uh, it's crucial. I think there's a lot of investors out there that, um, they kind of have the attitude that the entrepreneur works for them and they can boss them around a lot.

And, um, when we see that it's, it's such a turn off to us as a, as a potential candidate. I can only imagine what the entrepreneur is going through. And so we try to be kind of the opposite of that. And, um, you know, there are times when entrepreneurs do something that is frustrating to us, uh, that, you know, of course it happens all the time.

We're, we're all human and we'll just talk it out and try to give advice and try to make sure, you know, there's lessons learned for the future, but we will never do it in a way that that is us coming down hard on them. Um, you know, we really try to avoid any situation. So 

MPD: [00:18:25] your firm's a little unique and I know some stuff that, um, I think will be interesting for other VCs to learn about a lot of firms.

The natural cadence of development is maybe their first fund. Sometimes there's a lot of small checks from friends. Sometimes it's a rich uncle, that type of scenario, the second fund, they go out and they get a diversified LP base. And that's usually a pretty gauntlet cycle because you got to convince 50 or a hundred people to trust you with their money.

Which is really hard. And then there's this growth in institutions that kind of continuously back you. Now, if I'm not mistaken, javelin started out for an first number of cycle of funds, a number of them with a single LP. Those were large funds. 

Jed Katz: [00:19:07] How did that? It was a small, uh, uh, kind of extended family office.

Um, how did 

MPD: [00:19:14] that change the dynamic for the firm and building, what did you learn from that? Or would you recommend that to other folks? 

Jed Katz: [00:19:20] What'd you think? Well, yes. I mean, I think, uh, you know, it's, it's, it's hard to do, but it allowed us to focus almost a hundred percent of our time on finding and backing companies and helping them succeed.

And, uh, you know, fundraising can be all encompassing. It can take so many hours. And so, um, you know, that was a huge advantage for us over the years. And, uh, uh, you know, I think it was a big advantage to the LPs as well. Uh, because the, the, you know, the, the firm, they backed were able to spend all their time doing their job.

Right. And, uh, um, you know, obviously there's risks that's associated with that because you're, if your LP base is less diversified, um, you know, you'd better make sure you're keeping them happy along the way. Right. So, uh, but you know, but honestly it's the same risk as having a group of LPs. Right. Cause they're all gonna look at it the same way are the returns.

They are, they happy with the companies you're backing and with the, you know, the way javelin is growing as a firm, And, uh, you know, luckily it's worked out well. 

MPD: [00:20:21] So you guys have been running at this for 12 years, uh, and I'd say you've had a hell of a lot of success. What were the biggest challenges you faced for other venture, you know, would be venture, capitalists, listening, maybe something you learned about building the VC business.

People always talk about entrepreneurs and VCs, but species' species kind of our entrepreneurs are building a firm to company 

Jed Katz: [00:20:42] every year. I say, well, you don't get good at this job until, you know, you've been doing. Five years or 10 years, or now 12 years. It's like every year you learn to pattern match a little better than the year before.

Right. And, um, and you learn, you know, your network expands, you learn, uh, you know, who are good debt partners who are good series B and C and D partners who to avoid, who, um, uh, you know, what, uh, what recruiting infrastructure should you help set up? And who's a great type of VP of engineering and who isn't you learn all these things after doing it for so long.

That you didn't know in the beginning. And so in the beginning, you're really hoping to just invest in great companies and help any way you can, but, you know, the, the amount you're able to help will only increase over time. Um, the biggest advice though, I would give to younger VCs or at least, uh, earlier funds would be patients would be, um, you know, every, everyone that comes in and pitches any deal.

This sounds so good. They've worked on their pitch. It sounds exciting. They've, you know, they're pitching it. Well, it sounds awesome. Let's do it. And you got to get really good at turning down good deals and, and being patient and waiting for the great ones. Uh, and, um, it's hard to do it first because until you've seen kind of thousands of deals come through, uh, you don't really know early on.

The difference between good and great. It takes time. And so to the extent that you have a lot of patients early on and save your capital and have it ready for when that deal comes through, that just blows your mind. That's the best thing you can possibly do early on. 

MPD: [00:22:30] That's great advice. Let's flip over to your entrepreneurial journey.

Could you give a very quick. High level recap of your story. I know you, you started your first company, uh, entrepreneur journey at, uh, at business school, right? 

Jed Katz: [00:22:44] While you're at Berkeley, really fortunate to go to, uh, Berkeley for business school at a time when the web was really just beginning. So this was 94 when I entered.

And, uh, I, you know, I literally got my. Email account when I started business school and two months later I started renting out and, um, you know, I was, I just learned about the internet. I had just learned what the hell HTML was and started learning how to code and HTML 1.0. And, uh, um, My partner and I started renting out because we thought that this was a great use of the internet, right?

You're always looking for a place to live, uh, sometimes from a different city or state. And it's just really hard to do long distance. So what if you could look at photos and floor plans and ultimately virtual walkthroughs and search on, you know, narrow it down to a good apartment for you. And so we built it and, uh, It became clear in, in under a year that there was something here, you know, this was going to catch fire.

And so we started hiring people and hiring reps around the country to visit all the larger apartment buildings and inside reps. But the biggest thing we did or I did at the time was, um, was. Benefit from, uh, using rent net as the focus of all my projects in business school. So I had teams of consultants, basically free consultants helping me work through some of the stuff as we, as we tried to build this, um, almost dropped out of school.

Uh, but, um, the Dean convinced me to stay in actually, and I was able to get it done. Um, retina ultimately evolved into move.com where. Moved.com, added homes and relocation services and mortgages and all that. And became one of the two big real estate sites at the time. The other one being realtor.com. And, um, uh, again, we, we built that, um, honestly, a little too fast and added, added people.

You know, we were about 160 people when we turned it into.com and it grew to three 50 and under a year, and that's just, that's just way too fast. And so there were cultural facts, but, uh, we were also trying to take the company public at the same time. You know, it was, my head was on, it was just spinning trying to get everything done.

Uh, and then 2000, um, or, uh, what was this, uh, March of 2000 when the market fell apart and we were literally on a roadshow. And so we just kept building the business, um, which ended up being a really good thing for us because it was, uh, uh, uh, just the, this has worked well, uh, right. Yeah. You got the real 

MPD: [00:25:04] fundamentals, which is not common at the time for everyone going public.

Jed Katz: [00:25:08] And so we were able to do it. Pretty big merger with realtor.com and, uh, February of oh one about a year. Is that 

MPD: [00:25:16] correct? That was about a billion dollar transaction. Right, right. That's right. So what did you, what are some things you learned and, you know, cause you kind of are old school at this point.

Entrepreneur got some OJ entrepreneurship going on here. You know, there's probably, I don't know, you're like it either, but it's true. There's probably some lessons you learned that were different way of doing business back at the time that maybe apply today, but aren't used as commonly customer acquisition.

Anything jump to mind that you think was like a particularly, 

Jed Katz: [00:25:48] honestly the tactics are different, but the, but the, um, you know, the fundamentals will always be the same. I think the, uh, you know, as I say, We were so aggressive about, about sales and building our brand and being, um, being in front of the potential customer.

So often that when the salesperson came by to do the sale, they had, they already heard about us, knew about us, knew their competitors were using us. And honestly, it was like a hundred, almost a hundred percent hit rate for our salespeople. And so we create that 

MPD: [00:26:18] awareness. What was the, how did you suffocate people with information 

Jed Katz: [00:26:23] at the time?

It was a lot of, um, Believe it or not mailings and, uh, but really high, higher end ones. And it was, it was, um, you know, a lot of sales visits and phone calls. It was ads and all the trades, it was, um, building, it was a lot of PR, right. Just to get the industry talking about us. And really there was a bottoms up approach too.

So we would get the leasing agents to be aware and, uh, and. Move it up the chain. Uh, so that the management company is that owned, um, you know, or managed a two or 300 or 400 buildings would hear about it from so many of their leasing agents. That by the time we pitched them at the top level, they were already convinced.

Right. 

MPD: [00:27:05] Any, any thoughts on the direct mailing? I feel like that's fallen out of most people's toolkit. Yeah. I heard a stat. I don't know if it's true. 60% of dollar venture capital dollars raised are dumped into social media ads at this point. I'm sure that's wrong, but I know it's a lot. 

Jed Katz: [00:27:20] Well, look, if you're emailing no longer 

MPD: [00:27:22] relevant, is there an angle there is it under utilized 

Jed Katz: [00:27:27] amazingly, it's still a huge industry, but it, but look, if you're going to the consumer direct, then you're going to find a much better ROI online without a doubt.

And there's lots of ways to do it. In fact, one of the best ways right now is actually OTT. That's where we're getting great returns for a number of our companies. That's just, uh, it, it's more trackable. Video ads on, on video content that you're streaming, as opposed to just, uh, you know, is there a place you'd like to buy those?

Where are you guys shopping? That's so that, that's more of a question for our portfolio companies on who they're specifically using to buy those. Um, uh, so I can't really advise you there. Um, but if you're going up their businesses and especially, uh, you know, if you know who the decision maker is, And especially if it's SMBs, um, sometimes it's, it's actually harder to get them through, through whatever online thing they're doing because they're there.

Um, it's just gets noisy, right? They get so many emails and so many, so many ads in front of them every day that if you can do something different, that's more of a, a thing that pops out at them for some reason. You know, again, that's also a longer-term branding exercise. So if you can do this, uh, uh, several times, so by the time someone's trying to make the sale, it's it's in their mind, it might be a combination of offline and online.

Um, but I wouldn't do, I wouldn't do offline things that are just kind of cheap and flimsy and something. They're just going to throw away immediately. If it doesn't pop out, it's not going to be worth any money. 

MPD: [00:29:00] So you're, you were COO of that company and I've always known you to be very operational in the way you think and operate and function, or is there a particular advice you would give to the entrepreneurs listening who are in the COO seat?

Everyone's talking to the CEOs. What does a COO need to hear to kick butt 

Jed Katz: [00:29:22] the COO for the most part? Running the company, the CEO has so many other responsibilities, you know, in terms of the top recruiting and fundraising and PR and, um, you know, the strategic initiatives, the COO is doing kind of the day to day tactical making it happen.

And, um, they're gonna need great lieutenants. They're gonna need a lot of support. They're going to need great resources. They should have, um, mentors of other of other CEOs that they get together with and kind of compare notes. They need to be very detail oriented and tireless, and they have to build fantastic tools to track everything that's going on in their business.

So that software helps them be a lot more efficient. And I think you mentioned Thumbtack earlier. I mean, I'm talking in particular is so good at, at, at building tools that show them how every aspect of their business is working and what needs attention right now. And, uh, you know, if you think about Thumbtack is actually not one big marketplace, it's a million little marketplaces.

So each category in each geography is its own marketplace and, and, um, uh, to be able to, um, study what's happening in a million little marketplaces and, you know, make adjustments on the demand or supply side, uh, in, in real time and then build their future product the right way to, um, you know, improve everything.

Um, it's a, it's an immense undertaking. And, um, so the, the COO there is a guy named Jeff Grant. Who's amazing. Uh, and, uh, we spend a lot of time together just, just, just brainstorming on, on, uh, on things like that. Um, every company, especially as it gets to scale needs a fantastic, fantastic person. That's, that's watching all of that in real time.

And, uh, and just, uh, you know, operationally. Whatever CLO or something else. Go ahead. There's an interesting 

MPD: [00:31:20] derivative point in that, right? Uh, everyone, a lot of early entrepreneurs think a lot about building a product, but they don't realize that every product is two products. You've got the customer facing product, and then you've got the internal product, which is your admin dashboards, the functions.

So you can just things in customer service, anything you've seen. Is it any wisdom on the internal product? Is. Build more analytics early. Is that something you took from Thumbtack? 

Jed Katz: [00:31:47] What's the, yeah, they, so they are extremely data centric, so they build a lot of tools and they track everything. Right. I think, um, you know, a lot of our companies have gotten really, really good at that.

And I guess the advice is you want to study as much as possible, but you want to make sure that the stuff you're studying as the most relevant stuff and, uh, and not the things that are alerting you and the things you're focusing your time on and prioritize. Are the right things because you can, you can go crazy on this and you can study every last little thing forever.

And all you're doing is analyzing all the time. So you have to, you have to build tools in a way that, um, that really bring the high priority things up to the top and paint a clear picture, not just to the executive team, but really to the whole company on what's really happening with the business so that everyone understands why you're prioritizing certain things certain way.

MPD: [00:32:38] So you've taken a company public. I'm going to, you mentioned earlier your road show from 

Jed Katz: [00:32:43] about to take a public one you're in your process. 

MPD: [00:32:46] And so you, you had experienced kind of going through that dynamic and not a lot of entrepreneurs do not a lot of folks get to that point where they see that on the inside.

Also, the game's changed a lot. I mean, that was better part of 20 years ago. Have you seen what's changed on the IPO process for companies? How do you think about. 

Jed Katz: [00:33:07] So, um, we have, uh, a slew of companies that are gearing up for this over the next, um, six to 24 months. And, um, uh, you know, look, it's, it's intense.

I mean, you gotta be really organized you, your, your, your board has to be the right board for this. Um, and a diverse board is super important. The, um, uh, it has to be, the business has to be at a very predictable. Place so that there, there are no big surprises and that people know how to analyze it. You tell a clean story of what, you know, how to think about the business, how to look at the right metrics.

And you, you hit what you say you're going to hit. The biggest difference though, is, um, you know, the access to capital as a private company is so immense and especially such large amounts of money. The companies are waiting much, much longer before they go public. You know, it used to be. If you had 50 million of revenue, you could go public.

And now, like companies don't even think about it until they're doing over 200 million and a lot of companies are going when they're at like a billion and, um, it's just a different, it's just a different animal. Um, at that point you also have to be able to attract, uh, you know, much bigger, longer term investors and, and, uh, obviously tell a much bigger story of what this business is going to become, you know, in the next five or 10 years.

And why the market opportunity is still so much bigger than what you've created at this point. Um, but the biggest difference is the private capital it's it's it's, it's pretty amazing. Actually. 

MPD: [00:34:38] I wonder what the chicken and egg there on the private capital side is, uh, Barry Silbert who runs digital currency group used to run a company called second market.

I think it was bought by, uh, NYC, um, or certainly used by them. Uh, and I remember he gave a talk once. And he said that the average time to go to hit an IPO around the boom was four years. And I actually think that's where the four year vesting cycle comes for employees, but it's shifted at nine years.

Now, my understanding at the time was what delayed it was the legislation, the regulations, the government put in after the crash in 2001, 2000 2001. And I wonder if the PRI to the private capital private capital came in after. Companies couldn't go public, right? Wasn't there like this there's very tenuous valley where companies would be, you know, IPO scale of old, but not be able to go public because the cost and the process is too big.

And so they were looking for capital and raising rounds that were subscale for where they were. And then we see things like, um, tiger and SoftBank stepping in with bigger books. 

Jed Katz: [00:35:48] I think that's how it started. Right. That's certainly it was really hard to go public. Right? So that, that's how the demand side of it certainly started.

Right. The companies needed to find cash and be able to get their ducks much more aligned before they were ready to go public. With that said the investors discovered it's, you know, when you're buying companies at the IPO. Uh, it's, it's limited, you're getting an inflated, uh, uh, or at least a higher price than you want it to pay for it, perhaps.

And, um, you know, if you could get in earlier at a, at a discount to that, but you still knew you wanted it to be a PO holding the shares after they Republic. Why not aggressively find out a way to do that and figure out if you could push your way into these companies a year before or six months before they go public, if you're going to buy their stock anyways, it's almost.

Free money for you. So, um, you know, they all kind of recognize this and started approaching the companies and the companies reacted rationally and said, Hey, yes, uh, you know, higher valuation. I can, I can build more. I can, uh, be better prepared to be a public company. And I'll be a stronger company with a stronger balance sheet.

And I don't have to rush it so much. Um, it'll be less about my need for capital when I do it. And more about. Um, uh, liquidity being able to make acquisitions, having a currency, et cetera, and kind of a longer-term investor base made sense for both parties. I get it. It's just hard for, uh, no earlier stage investors like us.

Um, or I shouldn't say it's hard. I say we're, we're just in it longer. Right? So w w like you said, we used to be in a company for, you know, five to seven years now, seven years, 10 years, but the outcomes are gonna be bigger. So it's, it ends up making a lot of sense in the long run for, for everyone. And LPs have 

MPD: [00:37:37] adapted to that.

So it feels like the whole market's recalibrated 

Jed Katz: [00:37:41] have adapted that. I think, um, yeah, LPs love distributions, right? They love to know that, uh, that your early investments worked, they got bought, they went public, there was a big check coming their way. They can reallocate other things, you know, et cetera. Um, and if things are going to take three or four years longer, but be a much bigger check when it does come.

That's great when it does come, but in the three or four years of waiting for it, you know, they can grow in patient. So that's going to happen. You're going to see a lot of that. Uh, and then I think over time, the ROI is going to, uh, you know, be clear for everybody and they're going to be, they're going to be happy with that.

Let's switch 

MPD: [00:38:22] gears for a second because you have another interesting dimension as I've watched your career over the years. Uh, I know you've been involved with political campaigns in the past. If I'm not mistaken, you played a small role, but were involved in the Obama campaign a while 

Jed Katz: [00:38:37] ago. 

MPD: [00:38:39] Um, what do you make of the, you know, this kind of ties into the current political dynamic, uh, what do you make of the role of social media in society?

And I ask you, I think, particularly because. At the nexus of venture capital. So you're kind of in the business side of tech, you're looking at the political side, you're investing in it, you're affected by it. 

Jed Katz: [00:39:01] We've all watched 

MPD: [00:39:02] this social dilemma recently. What's 

Jed Katz: [00:39:04] your, what's your read on what's happening?

Yeah, it's hard to answer that question with just one hat on, right? So. Put the, take the VC hat off for a second and just put my Jed cat's hat on. It's scary. What's happening out there. It's scary how fast misinformation can travel and how many more times it gets shared than facts and how, how quickly people believe misinformation and how dangerous it is.

And, uh, You know, it keeps, it literally keeps me up at night. When you think about some of the, um, some of the things, you know, people that you would otherwise think are extremely smart, people are believing that are so clearly proven wrong. And I think the, um, the social media companies, the big ones have, have not done, um, nearly enough, if anything, it's the opposite.

They are aggressively pushing. Clear misinformation, because it just gets more clicks and more, more minutes and they make more money. And, um, you know, they're causing these things to, to, uh, become worse than they need to be. And so, um, you know, like putting my VC hat back on, I would love to, to find startups that can, can really innovate a clear solution to these things without, you know, causing some big problem with free speech.

But with. Uh, we're just figuring out a way to win, uh, figuring out a way to, to make sure facts are honored and shared more than misinformation is. And, uh, um, and in a way that, um, you know, the business models still work. So there's, there's no incentive to, to, uh, to shut that down. It's really tricky and hard.

And, uh, what would you do if you were 

MPD: [00:40:54] either running one of the big social media companies or regulating them? Yeah, it would be a potential solution here. 

Jed Katz: [00:41:02] You know, it's a tough one because, um, they're so driven by what, what makes the most money, which makes it really hard in the short term. I remember, uh, you know, when they first started solving the reputational things on search engines, you know, where somebody would put something bad up about, about someone and, you know, it would just be there and they couldn't do anything about it.

And then they realized if they put up a ton of good stuff, The bad stuff goes way to the bottom eventually. And you know, maybe that works at least, at least for some amount of time companies like, um, I don't know. I don't remember, was it reputation.com or one of them, you know, kind of started off and, uh, you know, and that was at least a tactic that, uh, you know, that worked.

Um, and, uh, so I don't, I don't know. I don't know if it's just figuring out a way to get the, um, facts to jump to the top. Uh, but it's the same thing with, with a lot of your journalists too, that we'll use headlines that, um, you know, result in more clicks and it helps the journalists, you know, promote themselves in the article, get read more, but the headline is just completely false or paints a picture that is, um, very misleading, you know, that happens all the time.

So I think, I think social media companies and journalists together have to kind of bring a little more honor to what they do and it's going to cost them a little bit of money. And so maybe there's, there's great entrepreneurs out there that can help make sure it either costs them less money or actually makes them money.

Uh, but ultimately there's going to have to be a recognition that there's, um, that making money is not the only thing that's important because of the damage. Some of the other stuff is doing to our society here. 

MPD: [00:42:47] This has been, um, a little bit of a history nerd, but misinformation has been around for centuries.

Jed Katz: [00:42:53] It's as old as it gets now, though, how fast it can travel 

MPD: [00:42:56] to the differences right now, it's, it's a tidal wave when you say the wrong thing. Um, it's interesting to see if the government figures out how to legislate this. Because usually when there's bad behavior and companies in our type of society, we're dependent on the government to actually put bumper rails up and they haven't done it yet, but I know they're trying, they're at least talking about stuff and I'm, I'm anxious because I don't know that a lot of our legislators understand that underlying issues, but some of these hearings it's terrifying.

They don't use the tools are trying to regulate 

Jed Katz: [00:43:27] the federal government can do that. I don't know if this is a problem they can solve. I think, um, who else is going to solve it? These are multinationals. Um, look, I'm hoping entrepreneurs solve it, right? I think, um, everyone knows it's a big problem. And when there are big problems, founders come out and create solutions that you and I couldn't have dreamed of, but like can catch fire.

And, um, I'm hoping that happens and I'm hoping that it happens in a way with a big, you know, social media players and even journalists notice and it changes their behavior. And, uh, um, you know, we, we we've looked at things along the way that were really clever, but are we're going to have a really hard time scaling.

And so what I, what I'd really like to discover is, is, um, a company that can help solve these problems and do it in a scalable way. 

MPD: [00:44:20] So the, the government is right now talking about putting legislation in place to try to tackle some antitrust level for big tech. They're trying to limit conflicts of interest, you know, promoting their own products, making sure the companies are a little bit more interoperable, but they're also trying to put a bit of friction in around, uh, acquisitions, uh, which is an interesting byproduct, I guess they're trying to reduce consolidation.

Jed Katz: [00:44:48] When it comes down to monopoly power. Right. And, and what happens when you have monopoly power or something close to monopoly power. And, um, you know, I, I don't like them limiting smaller acquisitions, uh, cause it, it creates too much friction and you can kill businesses along the way. If you do that, I think that's bad.

We actually, when we were doing the move.com um, merger with realtor.com, uh, we had to go through. Um, you know, HSR approval and what should have been a, you know, 30 day exercise turned into an eight month exercise because they thought we were going to be a monopoly in real estate, which is insane eight months.

And so I can only imagine what some of the bigger companies are going through, even with some smaller acquisitions. And so I think, um, That can get out of hand, uh, quickly, but what, but the theme is the right theme, which is if, if monopolies or, or, or companies that are close to being monopolies, um, start abusing their power in a way that, um, is really hurting, uh, you know, free market.

Um, then at some point they're, they're, they're, they're too big and there needs to be some controls. And you do see that with some of the big companies that, um, You know, put their own services have had of, uh, people at, uh, other businesses that are known by them in a way that, uh, you know, gives them way too much advantage.

Um, you also see it in, um, you know, we'll take Google as an example, you know, amazing company does a lot of amazing things. Uh, but if they changed their search algorithm in a way that. For whatever reason, wasn't fair. It didn't analyze a certain thing correctly, or the people that made that decision and they changed their algorithms to kind of ding somebody that's that company loses all their SEO power and they don't even know who to call.

They don't know how to, you know, reach out and appeal and provide facts and try to, you know, get, get, get somebody to talk to, to kind of overturn that algorithm change. And it takes forever to figure it out. And I think that's, that's pretty terrible cause I can, that can kill businesses overnight. And sometimes, um, you know, we've discovered over the last decade, uh, that those decisions can be made, um, you know, kind of kind of quickly, um, and kind of on, on wrong information and, uh, um, cause a lot of damage.

And eventually when you do get to the right person, it can, it can be overturned and fixed, but there's a lot of, um, Money lost in the meantime. And, uh, um, you know, it's just a scary position to be in that you can kind of flip a switch and really hurt a business without having a, uh, you know, a real, um, place for that company to be heard and talk it out first, 

MPD: [00:47:33] because back into history, when we had the trust, the large, super large companies that monopolies develop oligopolies develop one of the major tools, wasn't just regulation.

They broke up. They sliced divisions into separate businesses. Do you think there's a play here for that, that taking the big five companies and breaking them into big a hundred, you know, or medium hundred would be an inappropriate move? Or do you think that's more damage than benefit? 

Jed Katz: [00:48:00] I'd like to see that not be necessary.

So I'd like to see the companies, um, behave in a way where no one's calling for that. That's better. Um, are they going to get to a size where some version of that or. Division is necessary because it's just too much power. They probably will get there. I don't know if that's, um, you know, in the next couple of years or, or, you know, a couple of decades, but, um, it would be nice if that wasn't necessary.

MPD: [00:48:32] Chad, this has been great. Let me ask you one kind of final question here. As we get into this. You've had a long run. You've done the entrepreneur thing. You've done the venture thing and you are unfortunately an OJI at this point. What's the next 10 years gotten hold for you. 

Jed Katz: [00:48:47] I dunno. I still feel young.

We have such a great team of, of different aged people here and it's, it keeps me young, uh, startups keep me young working with founders. Um, whenever I feel like, um, you know, I, um, I'm too up there for, to properly analyze something. I call my niece who's 16 and she, she helps make us, men helps make us make the right decisions here.

Uh, uh, uh, this job is so fun. I dunno. I mean, I'll be doing this a while longer because man, there's never a boring day in this job. Is there, do you ever get bored? I can't remember ever being bored. I love it. 

MPD: [00:49:29] Jed. Thank you for everything. Thanks for being on the show today. 

Jed Katz: [00:49:32] This is great. Always a pleasure to talk to you and next time we'll have to get into how we, uh, how we originally met, because it's still one of my favorite stories.

We'll talk about that. I carefully 

MPD: [00:49:44] carved that out of the conversation today. He didn't notice. Anyway. Thanks for being here. 

Jed Katz: [00:49:48] All right. Thanks. Right.

MPD: [00:49:54] All right. That was awesome. Huge. Thanks to Jen for joining me on the pod today. I love catching up with them as always. And I really appreciate hearing his take on what's happening in the world today. If you liked what you heard, please look us up with a like, or a five-star review and feel free to share with a friend.

You can find me on Twitter at MPD, and to hear more of my conversations with innovator. Subscribe on YouTube, Facebook, or any major podcast platform. Just search for innovation with Mark Peter Davis.