Jeff Morris Jr. was employee 50 at Tinder, where he ran revenue while it became the top grossing app in the world.
Today, heâs the founder of Chapter One, a venture firm that runs more like a product team.
Fresh off raising a $64M fund, we get into why he never formally announced it, how the venture market is changing, why round labels mean nothing today, living in LA and investing outside the Bay Area, and a nuanced conversation around when and how to pivot (and why you should pivot HARD).
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Timestamps to jump in:
0:00 Publishing IC notes every week
3:48 Do round names matter anymore?
8:20 Putting a big check into Erebor's $2B round
11:40 Why deep tech went from instant pass to preferred in 3 years
15:32 When deep tech companies should raise debt
19:03 Should this company raise $1M or $100M?
23:25 You have two days to say yes
25:58 Sourcing software he built at Tinder
28:05 Their crypto book hit 22x, then the market turned
30:58 Paradigm, SendCutSend, and re-founding a firm
33:35 If you're going to pivot, re-found the company
37:21 Flex's wedge was too illegible to fund
40:13 When should you actually pivot?
42:47 Zaarly, the Uber for everything
45:17 Moving to Kansas City with a bag of clothes
47:25 Delivering flowers door-to-door
51:31 Raising a $64M Fund 3 and not announcing it
56:33 Joining Tinder as employee 50
57:35 The push notification that took down Tinder
1:00:59 Why you shouldnât start a dating app
1:04:18 Consumer got too predictable
1:09:00 Why consumer AI economics look worse than enterprise
1:13:02 Launching Chapter One from his Tinder desk
1:15:08 50 experiments per fund cycle
1:16:11 Product Club, the world's smallest accelerator
1:19:05 Evolving portfolio construction between funds
1:21:25 Why picking rates have fallen
1:24:41 Smaller funds can invest in illegible categories
1:27:27 Zero Fund 1 returners were in the Bay Area
1:29:16 Don't compete with Sequoia at Seed
1:32:01 His grandfather built Mervyn's
Find Jeff on X / Twitter and LinkedIn and check out Chapter One.
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Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Jeff, welcome to the show.
Jeff Morris Jr:
Great to be here.
Turner Novak:
You guys publish these kind of internal IC meeting minutes that you do inside of Chapter One. So what is that? What have you guys been talking about lately inside the firm?
Jeff Morris Jr:
Yeah. Basically, we have investment committees, like every firm, once a week. We found those are probably our best conversations, and we talk about everything behind the scenes in venture. I was like, âIf we record these notes and publish them, I think people will find them to be really interesting.â And so we just started to do that every week. Investment committees at venture firms are when the partners get together.
I had this idea, if we just capture everything we do all day long, and you kinda do this in venture through Granola and everything else. Thereâs a lot of really interesting topics that come up every week. So rather than having a content strategy, itâs like, letâs just record everything we talk about all day long and then share that publicly.
Itâs kind of an extension of building in public, which is obviously a thing in operating, but venture as well. And if you as a venture firm can be more open around what youâre thinking and doing all day long, people do find that interesting. Itâs just that venture firms are very... Well, historically, theyâve been very kind of private, right?
Turner Novak:
Youâre kind of automating the building in public, where youâre just taking the conversations and itâs synthesizing all the stuff for you.
Jeff Morris Jr:
Pretty much, yeah.
Turner Novak:
What have been some of the interesting things from the past couple weeks, the things that have been the most... I mean, you could probably go whatâs been like the most liked post about these.
Jeff Morris Jr:
Yeah. I think the firm topics, firm building, get a lot of reactions from other VCs and LPs. When weâre talking about portfolio construction, that seems to get a lot of interest. Everyone loves to talk about the seed market right now and whatâs seed versus growth. Itâs the thing people love.
Turner Novak:
Pre-seed, seed, Series A, growth, thatâs all.
Jeff Morris Jr:
People just love to talk about round definitions and, you know, should emerging managers be doing things that arenât pre-seed or seed. Those topics, I think, âcause everybodyâs at home like, âShit, should we be adjusting our strategy?â And I think thatâs just become more of a thing. So those are popular.
Then I wish we could name companies and actual... We try to anonymize everything, so itâs not as obvious about who weâre talking about.
Turner Novak:
Yeah, âcause I noticed youâll say something like you have some questions about it, and you donât wanna say anything thatâs not positive about a founder. Trying to promote really hard. You donât wanna put anyone on the spot.
Jeff Morris Jr:
Yeah. I think Sequoiaâs had this philosophy for a long time, like never, never disparage or talk poorly about a founder.
Turner Novak:
Yeah. Building a company is super hard, and the last thing you need is some random VC just chirping away at the obvious thing.
Jeff Morris Jr:
Yeah, we would never nag or speak poorly about anyone building a company, âcause itâs so hard. Some VCs use that for marketing, and I think itâs entirely the wrong strategy.
Turner Novak:
Really?
Jeff Morris Jr:
Why? Like, why would you do that? If someoneâs building a company, itâs their lifeâs work, and the least you can do is not talk shit about them online. Totally support them.
Turner Novak:
And so the interesting thing you brought up was the evolution of all these different rounds and namings, sizes. What is your current thinking about that? And maybe thereâs not a concrete answer to that, but whatâs been kinda top of mind in all that, the evolution of all these different rounds and stuff?
Jeff Morris Jr:
Yeah, I think weâve had to evolve our model to not think of ourselves as being a pure seed fund.
Turner Novak:
Thatâs how you started initially?
Jeff Morris Jr:
We did. Thatâs where most new managers start. You have a smaller fund till you... And you wanna pitch some version of, âHey, we can grow up to lead or co-lead,â until you show ownership, and the only way to do that is to be a pre-seed fund.
Turner Novak:
Just âcause the amounts of capital that theyâre raising are smallest, that boxes into whatâs likely going to be a small fund. Thatâs a pretty easy, simple pitch to package up and pitch the strategy to people.
Jeff Morris Jr:
Yeah, and I think a lot of LPs want seed exposure. Historically itâs like, hey, especially if youâre a fund of funds, youâre probably pitching a very concentrated seed strategy. And you want your managers to fit within those buckets.
And I think whatâs happening now in venture is those buckets literally donât mean anything anymore, because Sequoia this morning did a seed round. I think it was a $60 million seed round, right? And so first round of capital... And this is happening every single day. Literally every single day you read a... $60 million actually sounds like a small seed round.
Turner Novak:
Yeah, that would probably be below average right now.
Jeff Morris Jr:
So, $60 million, I donât mean valuation. I mean the amount of capital put into the company was $60 million.
And so why do we have pre-seed or seed labels anymore when youâre really just talking about valuation and amount of capital thatâs been raised? So our thinking is to stick with whatâs like an earlier stage model, but then to have at least a percentage of our portfolio that we can be really flexible with.
And so if we meet the next Elon Musk or whatever, when theyâre a known quantity, should we partner with them and become part of their journeys? Definitely.
Turner Novak:
âCause you met with Palmer and Erebor. I know you guys invested in that first round when they first started it, but that was not your classic down the fairway pre-seed round.
Jeff Morris Jr:
That was not. So we did Erebor, the $2 billion round. We put a large percentage of one of our funds into that. We actually got to know Owen, the CEO, but obviously Palmer is a big part of the company. You were really pounding the tables to do that deal.
If we had said at IC like, âNo, we canât do that deal, weâre a seed fund,â then we wouldâve just eliminated a big part of the market, and Erebor is, in five months, one of the fastest growing banks of all time. I said, âWhy would you not put 5 or 10% of your fund into that company?â It just kind of makes sense relative to just doing all really early stage investing.
Turner Novak:
When you say really early stage investing, what does that mean today? Because some of these definitions are all over the place. Weâve got, you know, quote unquote âseed rounds,â âinception roundsâ that are the size of a Series C historically sometimes.
Jeff Morris Jr:
Yeah. That would be a more classic... The earliest is a pre-seed round, so weâve done $7.5 million post in the current fund. Defense founder.
Turner Novak:
That was the valuation of the company?
Jeff Morris Jr:
Yeah. He was raising like $750k, so selling 10% of the company at the pre-seed, and thatâs historically what venture kind of looked like, right?
Turner Novak:
Yeah, thatâs when someone says pre-seed, thatâs what they think of. You raise a million dollars, and youâre selling about 10% of the company. Something like that.
Jeff Morris Jr:
Exactly. And that deal still happens. Itâs just youâre probably... Itâs probably a first-time founder. Thereâs probably something actually wrong with the pitch, like for some reason itâs just such a... Maybe itâs the market or the way itâs being communicated, but thereâs a founder whoâs talented whoâs not telling the story of the company in a way that would make sense to most firms.
Turner Novak:
Yeah. My favorite way to kind of define this is, like, legible to capital.
Jeff Morris Jr:
Yes.
Turner Novak:
I hate that weâve kind of come to this, but itâs a good way to think about it. Is it legible to capital? This big pool of capital, these allocators, theyâre doing their meetings, and itâs like, does this pitch make sense to them? Will they shift some chips over to make a bet on this thing or whatever?
Jeff Morris Jr:
Yeah, the legibility thing is such a... That became a thing like a year ago. Legible, illegible. I actually think it describes it pretty well.
Turner Novak:
Yeah, itâs such a great way to describe it, but Iâm also like, âI fucking hate that weâre calling it thatâ at the same time. I donât know.
Jeff Morris Jr:
Yeah, âcause there are categories too that are just illegible.
Turner Novak:
CPG.
Jeff Morris Jr:
CPG, or marketplaces, consumer. Categories that historically have had great outcomes today are just not interesting to most of the market.
Turner Novak:
Itâs so fascinating though, but it does change. Even as recently as three years ago, deep tech hardware was just a hard no. Like I donât even care what youâre doing, who the founder is, the market, etc. Itâs just we donât do that. And there was an instant pass from every investor.
But itâs kind of evolved to a point now where in some cases people prefer that. They donât do software. We need a physical component to this thing.
Jeff Morris Jr:
Yeah. I think my theory on that is that a lot of investors have just gotten wrecked by their AI investments from 2022 to 2025.
Turner Novak:
So theyâve gotten wrecked?
Jeff Morris Jr:
Yeah, just like you invested in ten vertical AI companies and nine out of the ten just got destroyed by Claude or OpenAI.
And so youâre like, âOh, this software stuff, itâs really hard. Maybe Iâll go do physical world.â And hard tech and deep tech havenât gotten easier. Itâs just that is the last place that it seems the big labs wonât come in and just disrupt your company two months after you do the seed investment.
Thereâs also, to be fair, a lot of really interesting things being built in deep tech. I think the culture and zeitgeist of national interest and the American dynamism theme is really, at least in the tech community, become not only accepted but embraced, where two or three years ago that theme was still pretty new and for a variety of reasons wasnât the thing that people wanted to invest in. Or not all VCs. Now itâs like everyone wants to be an American dynamism investor.
Turner Novak:
Yeah. Well, I think it ultimately just comes down to how fast will customers adopt the product, and then how efficiently can you make them adopt it? In what size will they adopt it? And how efficiently and fast can you serve the product, whether thatâs software or hardware.
And if you think about a lot of those things, like a drone company, for example, the customers are more willing to pay for it faster. The supply chains, weâve solved it. We can get them to them faster, and thereâs more of a need for it, so itâs more efficient to sell it. The CAC, the customer acquisition, is more efficient, faster, etc.
So just when you look at it as a spreadsheet, the spreadsheet looks better, and thatâs mostly with your classic multi-stage fund. Itâs literally just a spreadsheet. What does the spreadsheet look like to them? Do they like what the spreadsheet tells them?
And so I think thatâs ultimately what drives a lot of these sectors coming in and out of favor, where theyâre looking at whatâs the exit multiple on this thing? What do the public markets think about this thing? And I feel like thatâs kind of the danger then when it comes to, if you raise too much money, you kind of make it difficult to hit the next target that gets you closer to the public markets.
Thatâs the danger. You have to always be thinking about, can you hit the milestones going from round to round, and how heated, how hot it is, what the next round looks like, what the exit looks like, whether thatâs just public or you sell the company, etc.
But yeah, a lot of those multi-stage firms are just thinking about that stuff. What are they deploying capital into? And theyâre really just like, âWhat does the good spreadsheet look like at the end of the day?â Itâs a very un-romanticized thing, but also kind of true.
Jeff Morris Jr:
Yeah, I mean, I think a lot of deep tech and hard tech is more financial engineering in some ways.
Turner Novak:
What do you think about raising debt? Should you, and having sort of a capital strategy as a deep tech company, do you need to be more intentional about that?
Jeff Morris Jr:
Yeah, I think debt is obviously at some point a great idea for deep tech companies. The question is if you see a pre-seed or seed founder and theyâre saying, âHey, weâre gonna raise one or two rounds of seed capital, and then weâll do that going forward,â I think thatâs a... If you look at the history of great deep tech companies, itâs a combination of equity and debt.
Turner Novak:
And the debt usually funds some kind of inventory or CapEx, like building physical world.
Jeff Morris Jr:
Itâs like a physical build-out of factories. But by that point youâve raised a lot of capital, you have some contracts or real things that the credit provider can actually underwrite.
Itâs actually why we love Erebor, because their specific market, one of them, is to really underwrite deep tech companies and do that from a builder perspective, being Palmer and team have built, and they understand the nuances of building a deep tech company. So can they be a better lending partner than J.P. Morgan to the nuclear founder? Their feeling is that they can do that. But it takes time to get to the point where you can raise debt.
Turner Novak:
Talking about this evolution of stages in venture, should you still be calling these pre-seed, seed, Series A, or do you think of them more as just the amount of capital that youâve raised? How do you guys think about this internally? Like, âHey, these guys are raising a pre-seed round, a seed round,â or do you say, âPalmerâs new bank, theyâre raising hundreds of millions of dollarsâ? How do you internally talk through this stuff?
Jeff Morris Jr:
We still call them pre-seed or seed because I think it gives us a better view of how the founder views the company, if that makes sense.
If a founder is raising a pre-seed at a seven and a half million dollar post, they have a very different view on the path to company building than the founder who comes in and raises the billion dollar seed round. And our underwriting modelâs different because you assume different dilution in those two scenarios.
The pre-seed founder is likely gonna have much more dilution along the way, although both will have a lot of dilution. Itâs a pretty intuitive thing where you kind of understand what the framing of the company is based on the capital theyâre raising, the amount theyâre raising.
But sometimes weâll meet a founder who thinks theyâre the next Elon, and we can kinda tell the $20 million seed round might not happen, but we like the founder. Those are actually interesting conversations, âcause itâs like, âHey, we like you, we just donât think that the $20 million seed round is the best strategy right now. Would you work with us in a more traditional seed structure?â And sometimes those founders do come back and say, âYeah, I agree with you, thatâs a good idea.â
Turner Novak:
How do you figure out that specific example of thinking through a situation where should this company be raising hundreds of millions of dollars, or should they just raise a million? Whether you pull the trigger and actually invest, or youâre just looking at it in a situation, again, this is just, this is the right thing to do, this is the wrong thing to do.
Jeff Morris Jr:
Yeah, I think it obviously depends a lot on the business and the category. But a big thing we think about is just what are the milestones you need to actually raise the next round of capital.
And if youâre raising at a multi-billion dollar valuation as a seed deal, especially if the markets do turn in the other direction, that could be fatal to your company. Because no founder ever wants to raise a flat round or a down round right after their seed round.
Turner Novak:
Yeah. Those are the hardest things to do.
Jeff Morris Jr:
Theyâre incredibly hard, and so you have to just have an honest conversation with the team and the founder on what success looks like to get to the next round of financing. And sometimes thatâs also good alignment between you and the founder as to whether youâd be good partners, how they respond to that feedback.
Turner Novak:
Whatâs been one of the biggest changes to the venture industry since you kind of started Chapter One? Or maybe when you got in, âcause you actually did some angel investing before that.
Jeff Morris Jr:
Yeah. I mean, the industry feels very... It felt like a cottage industry even back in 2019, where I used to be able to call you or call our ten pre-seed emerging manager friends, and we kind of knew everything that was going on in the market. At least I felt like you could kind of have a feel for, âHey, this roundâs in progress. Thatâs the hot round of the week.â
And now thereâs just so much capital and so many different firms and so many more companies, itâs almost impossible to have that kind of industry-wide perspective. So itâs just gotten bigger.
Turner Novak:
So do you still try to pay attention, or have you just accepted that weâre not gonna, quote unquote, âsee everythingâ and thatâs okay?
Jeff Morris Jr:
Yeah, I think we had to become very comfortable with not seeing everything. Maybe in 2021 or â22 weâre like, âHey...â Itâs mostly a choice for how we wanted to grow the firm, where we want to be a bit more concentrated, a bit more lead or co-lead focused.
If you wanna just run an access strategy, itâs totally possible, and there are firms that do that really well. Firms that see everything would be like... I guess the angel sees almost every deal, I think, because theyâve been great partners and great friends around the industry to so many different firms, where theyâre not seen as being competitive.
But there have been some firms who are access, now theyâre doing more lead, and then their whole network changes too. So Iâve actually just been amazed. Somebody told me, actually Scott Belsky told me, one of the things that he didnât love about being at a venture firm was just how his group of collaborators changed. Literally the people you came into venture with who were your friends became competitors at some point.
Turner Novak:
Because youâre both now trying to get that lead ticket versus youâre each more of an angel.
Jeff Morris Jr:
Exactly. And he told me that in like 2020, and I didnât... You know when someone gives you advice and you understand what they mean?
Turner Novak:
Youâre kinda like, âAh, I donât know if I need to do that.â
Jeff Morris Jr:
Yeah, and then you actually become the wise person who experiences it. Thatâs happened to me so many times. But I look back on that conversation, Iâm like, âMy friends have definitely changed in venture over the past six or seven years.â
Weâll still... Those people are still my friends. Weâll go grab coffee. But weâre not calling each other and doing business like we used to.
Turner Novak:
How did you adjust? âCause now youâre doing more of what you do in the early, early stage stuff, like 10% ownership. So how did you adjust the strategy and your thinking?
Jeff Morris Jr:
Yeah. I think it was a bunch of things, but one was being more thematic in what we do so we can presumably get to a founder, a company, before the rest of the market. Thatâs been a big thing. Being insanely aggressive on our own sourcing strategies, so we see parts of the market that other firms maybe donât. And then saying yes a lot more quickly.
Turner Novak:
Oh, really?
Jeff Morris Jr:
You used to kinda meet a founder and youâd call and be like, âHey, what do you think?â Kind of comparing notes.
Turner Novak:
Comparing notes.
Jeff Morris Jr:
And now if you meet that founder and you love them, you have to say yes almost within... I donât wanna sound like weâre moving too fast, but you have to say yes within a couple days at this point, or else the deal just kinda gets away, in most cases.
Turner Novak:
When you talk about updating sourcing strategy, every VC has to keep this stuff as proprietary as they can. But any examples of how youâve maybe figured that out? For anybody whoâs trying to figure out how to get better at sourcing, any examples of something thatâs maybe worked? You donât have to spill all your secrets.
Jeff Morris Jr:
Yeah. I mean, we do a lot of data-driven sourcing, so Jamesin, my other GP, has been a data scientist her entire career. We build a ton of software internally, which has been true since I started Chapter One.
So when I started the firm, I was still operating on Tinder, and I built a piece of software that did different scraping of the internet, and Iâd wake up to it every morning. And itâs just because I didnât have time to call founders all day. I literally had a full-time job.
So it was a way for me to compete without having to be a VC all day long, and thatâs kind of bled into our DNA. And then for me, the big thing too, maybe like two years ago, Iâve really leaned into geography as a big advantage. So six out of our last eight investments that Iâve led have been local to Los Angeles, as an example. Which is funny, âcause I grew up in the Bay Area and started my career in San Francisco, and Iâve actually tried to not be an LA VC publicly, because I find the more you brand yourself in different directions, it kind of boxes you in.
So if youâre like, âHey, Iâm only investing in Los Angeles,â or, âIâm only investing in deep tech or fintech.â I do my best to not have any labels, but I think if you were to label me today, itâd be just pretty focused on whatâs going on in Los Angeles.
Turner Novak:
I didnât even know that.
Jeff Morris Jr:
Yeah. I havenât talked about it very much.
Turner Novak:
Because I feel like sometimes though you have been more thematic, but you are kind of trying to stay general. How do you... Did you mess that up at all? Or were you too thematic at any point? Or how do you think about staying general while now youâre kind of, it sounds like maybe very recently, all in on AI? How does that go?
Jeff Morris Jr:
I think in 2021, at the start of our fund two, our crypto portfolio was marked at like a 22x.
Turner Novak:
Okay. Thatâs crazy.
Jeff Morris Jr:
And the whole world was shifting towards people building crypto companies. And so we kind of were like, âHey, should we just focus on that?â
And then we raised the fund in 2021, then the markets turned in like 2022, and very quickly weâre like, âNo, letâs not only do that.â But I think that was probably our biggest moment, weâre like, âHey, we donât need to brand ourselves as being any specific type of firm.â Weâre never gonna be a deep tech firm, weâre never gonna be a SaaS fund.
And if you look at the best franchises, I would argue all of them are generalists. You could look at some firms that are more thematic or thesis driven, so USV is very thesis driven, but theyâre all kind of generalists, right? And so this idea is how do you evolve with whatâs happening in the world to be relevant in any given vintage.
And so actually Iâve seen a lot of firms that have probably over-rotated being AI firms over the past three or four years.
Turner Novak:
Yeah, for sure.
Jeff Morris Jr:
Again, that could be a good go to market, but at some point you have to evolve. So I actually think of building venture firms a lot like, if youâre building a company and you had a go to market, maybe going to market with a message or a theme is helpful, and at some point if you have success, itâs like, okay, you need to expand your business lines so you have new themes or new focus areas. And normally you do that through getting a win in an area.
So if youâre feeling stuck by being an AI investor today, if you were to go do a great deal outside of... Say you did a great nuclear deal, and they go, âThat guyâs a nuclear investor now.â
Basically you have to get a win within those categories, and then you have to hire great people in those areas. So if you feel like, âHey, I really wanna do something new as a venture firm,â the best way to do that is to hire somebody whoâs not at your firm. Or if you feel like you can learn quickly enough, but mostly Iâm just hiring someone who has a great network or point of view within a market.
Turner Novak:
What you just described reminds me of Paradigm, good example, where historically everyone kinda thought of them as a crypto firm. They had one vocal moment where like, âHey, weâre not just doing crypto anymore.â And then they went out and they invested in SendCutSend. Itâs literally a machine shop, essentially a CNC machine shop manufacturing company. And they co-invested, I think led a round with Sequoia, and they branded themselves as like, âHey, weâre not just doing crypto. This is the complete opposite. Itâs a manufacturing company.â
Jeff Morris Jr:
Yeah, that was actually a big moment where people were like, âWow, Paradigmâs really doing things outside of crypto,â âcause itâs not even adjacent. This isnât a fintech company that has stablecoins and theyâre calling it a non-crypto investment.
Turner Novak:
But I think you mentioned you think that a lot of crypto firms kinda did that, where they sort of waded into the waters and did some âfintech,â quote unquote, to kind of make it acceptable to start expanding outside.
Jeff Morris Jr:
Yeah, I think thatâs whatâs happening today actually, where you have a lot of branded crypto funds that are doing more fintech. And thatâs because there is an overlap between whatâs happening in crypto and fintech.
But I think also, for some of them, itâs culturally really hard to go do a manufacturing deal because thatâs so far from where the firm started, right? The DNA. Where Paradigm actually had a moment maybe two years ago where they changed their website to be more generalist language.
Turner Novak:
I remember this.
Jeff Morris Jr:
It became a Twitter thing.
Turner Novak:
It was like a meme.
Jeff Morris Jr:
It was a huge thing.
Turner Novak:
Yeah, people were just like, âThis is the biggest day in crypto Twitter in years.â
Jeff Morris Jr:
Yeah. I mean, I think a lot of people felt like it kind of made their thesis and positions less accepted to the LP community. Because itâs like, hey, you have the name brand crypto firm, and theyâre pivoting. Where does that leave everybody else?
But with the SendCutSend deal, I actually think that that was the right strategy for Paradigm, to just say, âHey, weâre gonna completely broaden the firm.â And if youâre going to pivot away from being crypto only in their case, why not completely refound the firm?
Turner Novak:
Itâs like the opposite of crypto. If you map this thing out, manufacturing company and crypto, completely opposite ends of the spectrum.
Jeff Morris Jr:
And I think thereâs a lot of companies who do a similar thing. Theyâll do a soft pivot or an adjacent pivot thatâs one deviation away from what theyâre currently doing, when actually probably the right thing, if youâre going to pivot, is to actually refound the company. And that might mean doing something thatâs radically different from what youâre doing today.
And I think the mistake that people make when theyâre pivoting, it could be their company, their venture firm, their careers, is not being bold enough about what that new direction might be. Because I think itâs primarily because itâs almost like an admission that what you were doing before is wrong, which might not be the case.
It might just be what you were doing before is no longer the right strategy going forward. So in Paradigmâs case, maybe it was the right choice to be a crypto-only fund from 2017 to 2026. Iâm sure there were moments where itâs a good choice, bad choice, whatever.
But youâre not underwriting your historical decision-making. Youâre taking a forward-looking view on what is happening in the world and how you should position your firm or your company, and thatâs what I think people get wrong.
Turner Novak:
Thereâs actually an academic research paper on this that talks about having one single pivot being a greater predictor of success for a startup than no pivots or a bunch of pivots.
And I think the practical reason that becomes true is you start working on something, and then you come across the big problem while youâre working on a different problem, and youâre like, âOh, we need to adjust our product and company strategy around this new thing that we discovered.â
So an example, Iâm just trying to back into how this could be true, like with Slack, right? They were working on a game, built this internal chat platform to run the company on where they were building this game, and then the game failed, and itâs like, wait a minute, we have kind of built this other thing. Itâs not gaming anymore, itâs a chat platform, but letâs do that.
Or maybe an example, I donât think this would show up in this research paper specifically, but with Facebook, when they went all in on mobile initially, right? It was initially a desktop website, and you realize, oh, mobile is actually the big opportunity here.
And I think thatâs practically how this plays out, where youâre working on something that you thought was the big thing, but then you come across an even bigger problem. And because youâre so accustomed to solving and identifying this need for customers, you actually find the big issue. I dunno.
Jeff Morris Jr:
Yeah, I agree. I think especially in the past six years, think about when we started our venture funds, it was pre-COVID. There was basically the end of mobile, as we mentioned, you had cloud, you had maybe some interesting things happening in bottom-up SaaS.
But think about how much has changed in the world back then, and imagine if you as an investor hadnât evolved your strategy to where the world is today. And I think the same is true for founders. That pivoting moment, proving you can do that stuff once, I think gives you the confidence to do it again and again and again.
I think pivotâs almost the wrong word. Itâs just iterating and trying to find new markets or new products that can expand what youâre doing today. And actually we havenât talked yet about Flex. Weâre both investors in Flex, right? I think it took them two or three years to really find the big market and find product market fit.
Turner Novak:
And initially it was really niche software, fintech software for construction.
Jeff Morris Jr:
Exactly.
Turner Novak:
You could say that what a lot of guys said was like, âAh, itâs too niche, it wonât work, not big enough TAM for us,â kind of a thing.
Jeff Morris Jr:
Yeah, and I think thatâs what most investors get wrong with these initial... So you need a wedge, right, to go to market. In that case, the wedge was so specific and niche, I think it was so illegible to the venture market. Very few people want to fund that idea. But in going that niche, I think he was able to get closer to a set of customers, which gave him the idea to expand what they were doing.
Turner Novak:
Yeah. Iâve been trying to reverse post success, try to figure out why it kind of worked. A lot of people had started these sort of online lending companies where you get a loan or whatever, and itâs kind of interesting with Flexâs positioning. It was a credit card, so itâs still a loan, but itâs something you used every day to run your business, versus you go to this website, you get a loan, you refinance your bad debt onto this new platform, and then you just kinda stop using it and you never log back in.
You maybe make some payments, you maybe donât. Maybe the loan defaults, maybe it doesnât. But as the lending company, if you wanna re-underwrite another loan, you gotta figure out how do you get another loan, right? And maybe youâre running ads, etc. But with Flex, itâs just a credit card that you used every day.
So youâre always re-topping up the loan balance. Youâre always lending them more money. So itâs kind of interesting, and no one had really done that before in that specific vertical in credit either. So he takes whatâs traditionally a graveyard of lending to small businesses, where the economics donât make any sense, âcause you gotta reacquire these customers over and over again for all these different loans, and youâre typically lending to a bad customer.
Youâre bidding on keywords like, âI need a loan.â Thatâs probably not a person you want to loan to, right?
Jeff Morris Jr:
Yeah, there are two keywords that you say which automatically create the venture fire alarms of a pitch. Itâs lending, so most VCs hate lending companies. And then most VCs hate anything thatâs an SMB go-to-market. And so they had two of those within a single pitch.
And itâs so funny. There are these words that VCs dislike in a pitch, which automatically becomes a no at investment committee. And then as a founder, if you tweak one of those keywords, then suddenly you become fundable, right?
Turner Novak:
Then how do you know when to... When should you be pivoting if youâre working on something? And is it acceptable? What if you are building a consumer thing, like a DC fashion brand, T-shirts, but then all of a sudden youâre making developer software or something? Thatâs a complete 180. Is that okay to do? Do you find founders... Is it hard to say that and come to terms with that?
Jeff Morris Jr:
Yeah, I think probably in the last five years Iâve had more phone calls with founders around the âshould I pivotâ conversation. And the one thing that Iâve heard 100% of the time is, âI didnât know that I could have this conversation with my investors.â
Turner Novak:
Like you didnât know you were allowed to change what you were doing as a founder.
Jeff Morris Jr:
I think it was seen as a sign of weakness, or maybe youâre worried, are we losing faith in the company? Does this mean we wonât be able to raise the next round? Whatever it is.
But on those calls I always say you should consider pivoting the company if itâs at all a thought in the back of your mind. And most of the time the conversation starts with youâre getting the same investor update for two quarters in a row, âcause hey, none of the metrics are moving, small iterations on the idea, and thereâs nothing thatâs gonna profoundly change the business from where it is today.
And so I think more investors should have that conversation. One, it creates a lot of trust with you and the team, where, hey, we can actually have a real conversation. But most of the time theyâre really excited to have that conversation with you. And I think in probably every single case they have ended up pivoting the company, almost all of them. And that just shows that the team knows already that they need to pivot. They just havenât been able to come to terms with that, either internally or with their investors.
We care about the fact that every month that youâre spending time on the wrong idea is a bad use of dollars, and also your time as a founder. And especially right now, when you have so many things that you can build, you should not waste any time. You should go work on really important problems and try and find those problems, as opposed to just being stubborn about the thing that you pitched in your pitch deck.
Turner Novak:
Yeah. And I think you had an experience with this with a company that you were working at, I think it was one of your first jobs in tech, where it took you a while to figure out, hey, maybe this isnât working, maybe we should pivot.
Jeff Morris Jr:
Yeah. I worked at a marketplace called Zaarly. It was a Craigslist competitor. We basically tried to be like Uber for everything, so you could request any service or product on your phone, and people in your community would... So it could be like, I need a ride to the airport, I need a place to stay. So a meta marketplace.
Turner Novak:
It was all those $100 billion companies just all in one, like Airbnb, Uber, etc.
Jeff Morris Jr:
Yeah. We would host parties in San Francisco, and I remember Max Mullen from Instacart was at one of the parties, and he was telling us about Instacart, and weâre like, âOh, we do grocery deliveries.â Or we had a startup beef. It was more on our side. Weâre like, âWeâre gonna beat Uber, right?â Iâm sure they werenât thinking about us at all, but in our minds, we were competing with all of them.
And anyways, it became clear after a year that that strategy of trying to compete in every market... By the way, we also launched nationally on day one. So a non-local, completely horizontal marketplace wasnât a good idea. But we never really fully pivoted the company. We ended up trying home services, but it was still adjacent to what we were doing.
Within like two years I knew the company probably wasnât going to succeed at the level we wanted to. But I stuck around because I did love the people, and kept convincing myself if we get this new feature out, we ship this new thing, itâll solve all of our problems.
And I think you can get caught in that mindset at a company, as either a founder or an employee, where you know in your heart that the core assumption or the foundation of the company is probably not the right idea. But itâs really hard to pivot.
And so my advice to anybody is, when you discover that that idea is not gonna work, and youâve obviously tested a bunch of different versions of whatever your pitch is, to then pivot the company and do so aggressively. With the same intentionality and speed that you founded the company, do that same thing for the pivot. As opposed to kinda soft pivoting.
Turner Novak:
I think the interesting arc with Zaarly too is you grew up in the Bay Area. You had lived in LA for school, you went to school at UCLA, and then you kinda moved back to SF. But you left. Everyoneâs trying to move to the Bay Area. Zaarly was in Kansas City, right?
Jeff Morris Jr:
Yeah, exactly.
Turner Novak:
How did that process go? I think you had a pretty quick interview turnaround.
Jeff Morris Jr:
Yeah, I saw the company on Twitter, which is what I was doing at the time, mostly just meeting people on Twitter. And then they put out a job posting for a growth marketer.
I DMâd the founder and then we got on a call the next day with the team, and they said, âYou need to move to Kansas City tomorrow because we have all these other people who want the job.â And I left San Francisco and moved to Kansas City without even knowing if it was Kansas City, Missouri or Kansas City, Kansas. I didnât actually know the difference between the two. To me, Kansas City was just a place.
And so I went there with just one bag of clothes, and I didnât have a place to live, and just moved from San Francisco. My friends thought I was absolutely crazy, because it was like, âWhy are you leaving the tech ecosystem to go work in the Midwest at some company?â
Turner Novak:
Why were they in Kansas City? Thatâs just super random.
Jeff Morris Jr:
So the founder lived there, and part of the idea was we were gonna focus on the Midwest as some of our... But really the team lived there. The company came together so quickly in terms of getting funded that it just didnât make sense to be anywhere else at that time.
They ended up moving. I ended up moving back to San Francisco with the company eventually. We were all there for about six months, and it was a pretty intense time. But again, I think the experience taught me that you can do crazy things, pivot your career, literally leave a city and go to Kansas City to start your tech career. That seemed like a crazy idea at the time.
Turner Novak:
And you were doing door-to-door sales for Zaarly. Whatâs the story with that?
Jeff Morris Jr:
Yeah. So I think Jamesin mentioned she might. She did say that, my partner at Chapter One.
So I was doing growth, and the story there is we did this Valentineâs Day campaign where we were subsidizing the cost, but you could buy flowers and get them hand delivered to your door for like $30. Itâs basically marketing and we charge a nominal amount.
So we launched this in San Francisco, New York, and Kansas City, and I found people to deliver the flowers in San Francisco and New York, and then realized, âI donât have enough people in Kansas City.â So I flew there, and I was driving through Kansas and Missouri, and I just delivered all the flowers myself.
Turner Novak:
Okay.
Jeff Morris Jr:
But the idea was, I think at the time I just learned how to do things that were very unsexy and to have fun with it. So that moment I was like, âThis is awesome.â Iâm in Kansas driving flowers to people. Theyâre all happy, and Iâm listening to good music or whatever.
I see a lot of employees at venture firms and companies who just wanna go straight to the top. And I just remember, man, I was delivering flowers. You have to do some of that really grindy grunt work. And back to the founders who will win, I think they all do a certain amount of grindy work and have fun with it. You can actually have fun doing that stuff if you just change your mindset and think about, âHey, this is a fun day in Kansas City.â
Turner Novak:
And you mentioned that now is the most fun youâve ever had in venture. Why is it fun? And why is that such a bold thing to say? Do a lot of people not have fun?
Jeff Morris Jr:
Well, I think for me itâs fun because thereâs so many things happening at once. And so if you love... At the heart of why I think most VCs got into tech would be, and maybe this is too romantic, but you love technology, right? A very basic statement. I love technology, I love seeing new things happening in the world that Iâve never seen before. And today thatâs happening more so than any point in my career, across probably ten different huge industries.
It could be defense, manufacturing, robotics, energy, AI, fintech, you can name all the categories. Where I felt like when I started in venture maybe seven years ago, it was kind of like, hey, weâre in this post mobile cloud world. Thereâs a lot of bottoms up software. Thereâs some weird things happening in crypto and fintech, maybe some cool new ideas in bio. But there wasnât this explosion of possibilities at the same exact moment in time, and thatâs all happening today.
So if you actually love the grind of doing this job and waking up every day and finding new companies, it should be the best time in your career. I think people can get jaded by the industry, just being so deep in the weeds. Theyâre saying, âHey, this doesnât look like venture anymore because everythingâs so financialized,â and, âHey, that round, thatâs not a seed round. Thatâs a billion dollar...â
Turner Novak:
Thatâs like an IPO round.
Jeff Morris Jr:
Yeah, and you can get way too lost in why you think thatâs not a good idea, or why thatâs not the industry you grew up in, to just stop and say, âHey, thereâs some really cool shit happening right now, and I wanna go find that company.â And so thatâs, I think, whatâs going on.
Turner Novak:
Talking about something else I saw you say, you kind of offhand mentioned, âOh yeah, we raised our third fund recently.â I guess this is the announcement of the fund. But you didnât even say anything. So did you raise a new fund recently? What happened?
Jeff Morris Jr:
Yeah, we raised our third fund, and we havenât announced it yet. Although I did just write it on a random... It might have even been a Twitter reply.
Turner Novak:
It was just like a random comment. Youâre like, âI guess this is the announcement.â
Jeff Morris Jr:
Well, I do that because I truly think that nobody cares. I think that everybody is so self-involved with what they have going on in their firm. Itâs like, weâre gonna do the best and biggest announcement, and the whole worldâs gonna care. And you can spend...
Turner Novak:
A launch video, influencers, quote tweets.
Jeff Morris Jr:
Totally, all that stuff. And if I was building a company, like a real company...
Turner Novak:
I would. Could be valuable.
Jeff Morris Jr:
But I think VCs tend to overthink how much other people care about what theyâre doing. Itâs not a big deal. If you compare the fund size we raised to the billion dollar seed round, itâs like small peanuts, right? And so the idea, I think, was just like, âHey, letâs just keep doing the work, and if someone wants to cover our fundraising announcement, thatâs awesome, but letâs not spend too much time on sharing this message with the world.â
Turner Novak:
Thatâs fair. If thereâs like 30 seconds on the message, what was the fund like? Have you thought through what youâd actually say if someone was like, âWhatâs the new thing youâd announce?â
Jeff Morris Jr:
Yeah. Well, itâs fund three, and so itâs just doing the same thing weâve been doing for the past couple years with a slightly bigger fund.
We raised $64 million for this fund, and we have a small team still, great group of people who are doing primarily early-stage investing. But itâs across a bunch of different categories. I mentioned Iâm very much focused on whatâs happening in LA, so that tends to be a bit more on the deep tech side.
Jamesin is in London.
Turner Novak:
Oh, I didnât realize she was in London.
Jeff Morris Jr:
Yeah. And so she tends to do things that look more like AI. And then we still both do a lot within financial services. And so I think the big message is that weâre not going to do a big announcement.
But it is nice. I think why people do announcements is to tell the market, âHey, we have capital. You should come pitch us.â
Turner Novak:
Well, I think part of the announcement too is, for you and me, I might just tweet something. I have a couple tweets on my phone right now that have hundreds of likes on them, and 100,000 views and whatever. Itâs just like another day.
But for some people, an announcement of a new fund is a notable thing to get attention around what theyâre doing, so you kind of announce it as thatâs the thing to remind people that we exist. And I think some of my fund announcement posts have not done that well when Iâve done them.
Jeff Morris Jr:
Yeah. I think you and I both kind of lived in the Twitter world for a very long time. For better or worse. I think for better.
Turner Novak:
Mental health has maybe struggled a little bit, like the phone addiction or whatever, social media addiction.
Jeff Morris Jr:
Totally. And so I think maybe because of that, we just view a fund announcement as being like another tweet or content, as opposed to something that needs to be...
Turner Novak:
Like a tentpole, this big strategy, like social strategy or whatever. Content strategy.
Jeff Morris Jr:
Yeah. Where people are probably more interested in investment committee, right? And just like, âHey, what were you guys bullshitting about today at IC?â So I think thatâs part of it.
Turner Novak:
Did you expect it to do that well when you first posted it?
Jeff Morris Jr:
Like the IC?
Turner Novak:
Yeah, did you think people would care, or didnât know?
Jeff Morris Jr:
I normally, and you probably do, have a pretty good idea of what content people... I think inside baseball content is always really kinda juicy. People wanna know whatâs going on behind the scenes at a venture firm or a company. And so if you share more of that and take that to almost the logical extreme, I think youâll get more views.
So if we wanted to open source... Literally, the most viral version of this would be, what if we just live streamed our investment committee? That would probably get more views. We canât do that for a bunch of different reasons, but you have to figure out what the line is on, okay, we want to publish content thatâs interesting, that will get traction, but obviously we canât share everything.
Turner Novak:
Yeah. Thatâs fair. And actually, so I wanted to ask you, after Zaarly, I donât know if it was immediately, but soon after, you moved back to LA, and you started working at Tinder.
Jeff Morris Jr:
Thatâs right. So I moved at some point from Kansas City to New York to San Francisco with the company, Zaarly, at the time.
And then in 2015, I was debating whether I wanted to start a company or join a company, and luckily I got a phone call around that time, âcause the company ideas we were exploring were, in retrospect, not the best ideas. But to join Tinder as employee 50, and kinda be like the second product person on the team.
And so I moved to LA thinking it was gonna be a really short couple years, just because I was like, go there, Tinderâs kind of a crazy company, whatâs this dating app? But moved back to San Francisco after, and I just ended up... Yeah, Iâm still here.
Turner Novak:
Oh, yeah, weâre still in LA. And I think you added like $30 million in revenue from one feature, like your first week or something like that. Whatâs the story?
Jeff Morris Jr:
Well, my first week, basically Tinder had no ability to send a push notification at the time.
Turner Novak:
You couldnât send push notifications?
Jeff Morris Jr:
We as a company, if we wanted to send a push notification, could not send... The transaction notifications, so you have a message or you have a like, those kinds of things. But we as a company could not send a push notification.
Turner Novak:
Just like, âHey, check out Tinder. Open it up.â
Jeff Morris Jr:
Yeah, exactly.
Turner Novak:
Okay. Was that an Apple thing, or you had not built the infrastructure?
Jeff Morris Jr:
The company just had not invested the resources in building it. And so basically within a week, I came in, theyâre like, âCan you help us figure out how to send push notifications?â I was like, âOkay.â
But then I was like, you know what? If I send our first push notification to 40 million people, I guarantee you weâre gonna have a big day.
And so at the time, they gave me a CSV file of the mobile IDs to send out the notification. Literally exported a single file that lived on my hard drive at the time. It was something you would never do as a public company. We werenât public at the time. And we figured out how to send a push notification.
And so this was announcing a feature called Super Like at the time, which...
Turner Novak:
Thatâs one you pay for, right?
Jeff Morris Jr:
You pay for that. But we sent the notification, so we had to figure out how to get it translated into...
Turner Novak:
What, different languages?
Jeff Morris Jr:
40 different languages or whatever. And then had to figure out a bunch of things. One of the things I figured out quickly was that you should rate limit the notifications, âcause our servers werenât able to handle it. If we just sent 40 million people the same notification at once, Tinder would go down. The servers wouldnât... And I ended up doing that by accident once or twice. We took down Tinder.
But yeah, we sent that out, and we had our highest daily active day ever, so we had the most DAUs ever. That was within my first, I wanna say, two or three weeks, not first week.
But everyoneâs like, âJeff is a smart guy. He knows how to...â
Turner Novak:
Send push notifications.
Jeff Morris Jr:
It was amazing. I was like, literally I can be a hero at this company. And so then from that they put me in charge of revenue, and we ended up becoming the top grossing app in the world, for many years. And so then I became the revenue guy at the top grossing app, and I think that really...
Turner Novak:
Does help build your brand, right?
Jeff Morris Jr:
Yeah, definitely. We were one of the fastest growing consumer companies at that time, and definitely the largest within the dating space. But if youâre one of the key people at a company thatâs growing that quickly, and youâre being vocal online about what youâre doing, people will take interest in your career, and that happened for me at the time.
Turner Novak:
Yeah. I wanna talk more about what happened next, but I know you get asked a lot about starting a dating app. Iâm assuming every pitch, every pre-seed, theyâre raising money to start a dating app. So how do those conversations usually go, and what do you usually help people think through, and is it a good idea, a bad idea?
Jeff Morris Jr:
Yeah, luckily I used to get pitched a lot more dating apps, not as many anymore. But when I was leaving the company, whenever you leave a company, people think of you as being a certain category. So a lot of people thought of me as being a consumer investor, and then a subcategory was dating.
Turner Novak:
I probably did do that. Be like, âI met this cool dating app. What do you think?â
Jeff Morris Jr:
Oh, I got so many. And the mistake that almost every founder made was pitching a slight tweak on the swiping model. Which is, you have a stack of profiles and you swipe right or left on them. And it was always like, âNo, weâre gonna add this restriction or this feature, or weâll build it for some different audience.â
And people just need to be shown something thatâs a totally new form factor or a very new experience, or theyâre just not gonna care. Itâs kind of back to the content conversation earlier. I think people just donât tend to have a lot of attention for anything anymore. And so if youâre gonna build a dating app or a new product, consumer product especially, it needs to just shock people.
Turner Novak:
âCause no one cares. If itâs just a little bit different than something else, Iâve already seen this before. This isnât that interesting.
Jeff Morris Jr:
Nobody cares and nobody wants to download a new app. And so thereâs also just app fatigue. There are some exceptions. I think Polymarket and Kalshi have become obviously huge because they help people presumably make money or bet. A lot of people donât make money using those products, but...
Turner Novak:
Hey, the data. They put out data that says their users are profitable, is what they say.
Jeff Morris Jr:
But I think anything finance or trading is the exception. If youâre building a consumer social product, people really need to see something new, and most products Iâve seen dating wise have been not new enough.
And so categorically, I donât take dating pitches at all. Most of the time Iâll just say it would be a better use of your time to... And I also donât really wanna give a ton of feedback, because Iâve seen too much. The person who builds the next great dating app will probably be someone who is so naive to how hard it is that they just do it and it catches fire.
And my feedback would generally be to not start a new dating app on the whole. Although we havenât shared it publicly, but weâve kinda got involved in incubating something thatâs in the relationship space. Yeah, that was a really rare reason why we did that.
Turner Novak:
And do you still pay attention to whatâs happening in the consumer technology landscape? Are you still kind of interested? Do you think more people should be building and investing in there, or no?
Jeff Morris Jr:
Yeah. I think Josh Elman rejoining a16z is kind of the mindset Iâm in, which is, âHey, there should be some really cool new consumer products with AI as the foundation that emerge in the next three to five years.â Within the current fund weâre investing in, there should be some really cool consumer products that come to market.
Version one of consumer AI has been way too predictable, where itâs been a lot of, âHey, weâre gonna take the same activity feed that is on Instagram and just put generative content in there.â And people just love it âcause people love watching the AI version of what Instagram is.
And in most cases thatâs just not gonna work, because if you focus on the same form factor, then the content needs to compete on just how fun and interesting is this? And most AI content, at least consumed in a single feed, if you just show people all AI content, will become really boring pretty quickly.
But what weâre seeing in consumer now, which is pretty exciting, I think probably the best design space would just be how we use context and memory to create better experiences that are more intelligent and more predictive and personalized. And thatâs starting to happen. Weâre starting to see a lot of that.
A lot of the products that I use are just things weâve built primarily for work reasons. But itâd be like giving agents, or any AI tool, complete access to everything thatâs happening in your life and in your firm, and helping them have that context to create really cool products. Intelligence is a pretty big unlock to how you would design a product for consumers today versus five years ago.
Turner Novak:
Anyone whoâs done that well? Good examples so people kinda know what youâre talking about.
Jeff Morris Jr:
Yeah, I think there have been a couple of SMS-based products that are trying to do this. Poke was the most recent example of hinting at what this is, which is, âHey, youâre gonna give us access to your email account, all your tools in your life, and weâre gonna create as much context as possible, as quickly as possible.â
And so in that case, by giving someone access to your email, they know where you travel, what airline you use, who you talk to all day long, types of things that youâre thinking about, what you subscribe to. And then they can start to just automate different things in your life pretty quickly.
I think thatâs probably in the shape of what things might look like. Where I think sometimes founders get things wrong is assuming that people wanna automate everything in their lives.
Turner Novak:
A lot of people like the humanity of shopping. Some people like just scrolling, or walking around the mall and trying on clothes.
Jeff Morris Jr:
Totally. Actually, I think about this a lot. Shopping is entertainment, right? And itâs very visual, itâs very personal. You as the human want to almost feel like youâre the curator too.
Jeff Morris Jr:
âCause if you have good style, you want that to be your choice. I see a lot of founders building agentic e-commerce products, and I think for the most part theyâre not understanding that piece of psychology.
Travelâs actually a pretty good one too, where some people just really love to plan trips, right? And not all trips. Business travel, people donât care as much about as planning the next epic trip for your family. But I think thereâs a broad stroke thatâs applied to these categories where weâre gonna try and do everything and ignore the entertainment aspect, which we know is true for a lot of things we do in our lives.
Turner Novak:
Yeah, I feel like itâs been tough in consumer, because when you think about this purely from the spreadsheet side of how valuable and how profitable is this thing. On the consumer side, you think of the canonical ChatGPT, where somebodyâs using ChatGPT as almost like glorified Google. Itâs like better Google basically, and/or like a therapist. And youâre maybe not even paying for it, and if you do, you maybe pay $30 a month or something like that. And you have to go acquire all the users.
Versus on the other side, on the enterprise side, you can land Google as a customer, and you have thousands of underlying employees who use it, and itâs a $50 million contract. And the math of that business is so much better.
And on the consumer side too, the inference cost historically has been insane, to where the customers are unprofitable. OpenAI has been public about this. Itâs hard to make money and be profitable as a consumer business. So hopefully that starts to flip.
Jeff Morris Jr:
Yeah. I think, look, a lot of people are gonna try, and again, as Claude and OpenAI kill more and more enterprise companies, the logical next place founders would spend time would be doing things in consumer. And so I actually think probably one of the most underrated themes is the simplicity of network effects, which we seem to forget. And I think with AI today you can build network effects potentially faster than before in consumer businesses.
Turner Novak:
Have you seen it happen yet? Or why do you think it could happen?
Jeff Morris Jr:
I think it could happen much faster for a lot of reasons. One is you can just build software much faster. So if you identified a segment or a market, you can really go more aggressively after those customers.
And then two, itâs a little bit more nuanced. Non-human web traffic is going to become such a bigger piece of the internet than humans, and there are network effects with how agents interact with each other and the decisions they make as to what products they choose to use. And so a non-consumer version of this would be, Supabase has great network effects within agents spinning up databases, and itâs this whole new category of company building on the enterprise side.
But building products that really appeal to the non-human customer, I think, is gonna be a really interesting place to spend time too.
Turner Novak:
And you think that the existing database company that is not built for agents, theyâre not positioned to capture that market in a lot of cases? And not just in database, but a lot of these human-made products are not custom-tailored towards agent needs, or something like that?
Jeff Morris Jr:
Well, I think in Supabaseâs case, they were built for humans, but the product position and the experience was based on reducing friction and simplifying the integration time to set up a database.
Turner Novak:
Which is what an agent wants.
Jeff Morris Jr:
The same framework applies to agents. So itâs almost like the bottoms-up companies that really leaned into AI over the past three or four years are in a pretty good position. If you just look at web traffic as a whole, and if you look at their growth, a lot of itâs been due to agentic enterprise software decisions.
Turner Novak:
Theyâre just calling things. Theyâre looking things up.
Jeff Morris Jr:
Yeah. But weâll see. I think that this is, again, why itâs so interesting to be a venture investor right now. Thereâs just so much going on.
Turner Novak:
And when you first got transitioned into venture, you started posting about what you were doing at Tinder, lessons, started investing, sort of branching off as a product-driven investor. How did you kinda transition from working at Tinder to today youâve got Chapter One? What was that arc?
Jeff Morris Jr:
Yeah. So, well, it was just me at the time, but launched the firm from my desk, still at Tinder. And a lot of the reasons why I was getting on cap tables as an operator was âcause people needed help with pushing applications, product. Very simple things.
At the company I was product, growth and monetization, and so the shape of what I wanted to do was build a firm that was very product driven. And I did the Silicon Valley interview tour where I talked to different venture firms about do I join them or start Chapter One.
Turner Novak:
What were some of those conversations like? What were your biggest takeaways?
Jeff Morris Jr:
I think the pace at which a lot of them moved was much slower than I liked across all aspects. Hiring was a really simple one, where thereâs this lag between the first conversation and the second conversation, and at a lot of venture firms it can take a while.
And on the other side I kind of understand why, because when youâre hiring an investor you really wanna get to know them as a person, why they do what they do, how they think. But at the time I was like, âYou know what? I know how to move quickly. Iâve been moving quickly for the past ten years as an operator. I just wanna get going.â
And I wanted to find people who moved at the pace Iâd expect at an engineering organization or product organization, and people who were really hungry to do that. And then the second part was I wanted people who were really iterative in terms of how they approach their work.
I think my career as a product person was very much like, here are 50 experiments. I donât always know whatâs gonna work, but Iâm just gonna try them all and kinda follow the customer.
And I think in many ways how weâve built Chapter One is similar. Weâre gonna launch 50 different experiments within a fund cycle and most of them wonât work. Most of them will actually probably be a really bad idea.
Turner Novak:
Really?
Jeff Morris Jr:
Well, weâre very okay with that failure rate, and then we need to kind of follow the things that are working. And so I think thatâs been a staple of our firm. We donât overthink anything on the experiment side. Weâre like, âIf you have a good idea, letâs test it,â almost like you would at a product org.
And so I actually think our LPs have followed us on that journey and understand it. But if youâre just watching outside in, you might think itâs all a bit random.
Turner Novak:
You said some of them have failed spectacularly, so Iâm curious, worst thing that you tried, or just didnât work, or embarrassing, whatever. Whatâs been the worst experiment that you guys ever ran?
Jeff Morris Jr:
Thatâs a great... I donât think anythingâs been the worst. Itâs just that they werenât the thing that was gonna get us the next...
Turner Novak:
It just didnât do anything. It ended up kind of being a waste of time?
Jeff Morris Jr:
Yeah. I wouldnât call it a waste of time at all, but in fund one we launched an accelerator called Product Club.
Turner Novak:
Oh, I remember that. Didnât you do demo days for that too?
Jeff Morris Jr:
We did a demo day, yeah.
Turner Novak:
I did some of the demo days.
Jeff Morris Jr:
And it was actually hugely gratifying. The idea was to build the worldâs smallest accelerator.
Turner Novak:
There were only a couple companies, right?
Jeff Morris Jr:
Three per batch. So itâs almost like ridiculously small batches.
Turner Novak:
Yeah. It was interesting for me because there are a lot of accelerators with like 50 companies, and theyâre like, âHey, weâve got our demo day. Hereâs a list of all the companies.â And thereâs like 50 of them, and your eyes just sort of... I just donât even know where to start. Itâs gonna take me a full day to go through this. But if you just give me two that youâre like, âHey, these are the best onesâ...
Jeff Morris Jr:
Then youâll pay attention.
Turner Novak:
Yeah. So itâs kinda nice that there were three. I remember each one I was like, âOh, this makes sense.â I actually remember two of them. One of them was Metafy, the coaching one.
Jeff Morris Jr:
Metafy, yeah.
Turner Novak:
One of them was a Brazilian Yellow Pages.
Jeff Morris Jr:
Yes. Oh, this is impressive.
Turner Novak:
I canât remember the third one.
Jeff Morris Jr:
Spline was the third one.
Turner Novak:
Oh, yeah. And I actually did meet the Spline founder too. Alejandro.
Jeff Morris Jr:
Yeah. So that was more like, âHey, do we wanna really commit ourselves to doing it?â I think the lesson was, to be an accelerator you have to probably only be an accelerator. Or, if youâre a smaller firm, we only have so much time and capital, people, money, everything else.
And so itâs more of like, âHey, do we think this is really gonna be our thing?â And we moved on. It was great. It was a ton of fun. I think Spline and Metafy were standout companies. And you became really close to the founders, so itâs almost like that experience showed me why I wanted to do a bit more concentrated investing work. Because I was helping Alejandro with literally everything you can imagine at the time, and almost thought of him as being a teammate.
Where a lot of the fund one investments, you do a 50K check or 100K check, and itâs just kinda how it works. You get the founder updates, but you donât necessarily have deep involvement with the companies.
Turner Novak:
Yeah. And then you guys have evolved that model. So how many companies did you invest in out of the first fund?
Jeff Morris Jr:
Itâs 56, so close to 60 companies, yeah.
Turner Novak:
Okay. I think I did 64. The advice I got was actually from David Lee at SV Angel. He was kind of running it for a couple funds, and he told me, âHey, do a diversified fund. Youâre gonna make a bunch of mistakes, and youâre gonna do a bunch of dumb things. Just make sure you get a lot of shots on goal so that the ones that work... and the things that donât work donât sink you. Do a diversified fund with a lot of smaller checks.â
And looking back, he was right, 100%. And then with the second fund, I went more concentrated, because I basically took all the lessons I learned and was like, âOkay, if I just chop off the companies I wouldnât have invested in with these lessons Iâve kinda learned, Iâm at like 25 companies.â And that was the second fund.
What was it like for you?
Jeff Morris Jr:
It was a little bit the same. Iâd say the main difference is we actually still have a large number of companies. Our goal is to have really concentrated positions in a small set of companies, but to get there, weâre not precious about how we get there.
Weâll probably invest in close to 60 companies per fund. Our entry point on those, or the initial check size, can vary quite a bit, and then we kind of funnel it into can we really get 20 core positions. And thatâs ownership dollars deployed.
Turner Novak:
Percentage of the fund kind of thing.
Jeff Morris Jr:
Yeah, can we concentrate our dollars in a smaller set of companies? But weâre totally okay with the number of companies being large, and thatâs just about can we be close enough to the teams and the founders to, one, just know whatâs working, and then two, earn the right to get more capital in those companies that are starting to work.
And then I think a lot of this is just a response to whatâs happening in the market, right? That strategy I just described might be very different in three or four years, because venture might look a lot different. And so again, I think you have to be very open-minded about whatâs happening in the industry.
I would say right now itâs much, much harder to pick a winning company at the seed than it was five years ago, is my theory.
Turner Novak:
So whatâs changed?
Jeff Morris Jr:
Just the number of companies and ideas that come to market, and then the pace at which those same companies can be disrupted.
Actually, when I started the firm, I went and spent time with Mike Maples at Floodgate. Heâs super generous, gave us access to all their historical data and some data from other firms who gave him permission to share. It gave us the picking rates from the best firms, and you could kind of back into your own math on what your portfolio size should look like.
Iâd be willing to bet that data, while directionally useful today, is not as relevant, because my idea is that the picking rates have gone down quite a bit across the board.
Turner Novak:
Oh, you think so? Maybe, what is picking rate? If somebody is listening to this and is like, âWhat does that mean?â And then how has it kinda changed over time? What was it, and what do you think it is?
Jeff Morris Jr:
Yeah. So picking rate is just what percentage of companies you invest in end up becoming fund-returning investments. So does it return 1x?
Turner Novak:
At least 1x of the entire pool of capital that youâre investing out of?
Jeff Morris Jr:
Yeah. And the picking rates historically for some of the best venture firms, Iâm talking the best of the best, Sequoia, USV, etc., the general range between those firms would be anywhere between four and seven percent.
And so you can kinda model it in. Again, I donât know if this is their picking rate today, but if a tier one fund has a four percent chance of returning the fund on an investment, they need to have 25 companies in their portfolio to just return the fund.
Turner Novak:
To have a single one return the whole fund.
Jeff Morris Jr:
And so then you have to ask yourself as a newer manager, âAre the companies that Iâm seeing as good as the best firms in the world?â For most people, obviously, the answerâs no. And so you would have to construct a portfolio to probably have more companies, because you have to have more shots on goal.
But I think literally every investor I talk to thinks that theyâre...
Turner Novak:
Above average.
Jeff Morris Jr:
Exactly.
Turner Novak:
Yeah. Everybody does. Thatâs true.
Jeff Morris Jr:
They source better companies, or they have better judgment. And I think thereâs a self-awareness that comes by saying, âHey, we donât know. We have a feeling weâre fishing in the right ponds, but we canât say for a fact that our companies are better than the best firm in the world.â And I know a huge number of companies that we think will return the fund wonât, so maybe we need to have a bigger portfolio size.
So I guess what Iâm saying in long form is I think bigger portfolios are, in most cases, a really good strategy.
Turner Novak:
And so does that mean you should just have a bigger fund? Should you raise a $100 million first fund to kind of get going, so you have enough money to work with? Or what do you usually see people do, and how do those conversations go when somebody asks, âHey Jeff, Iâm starting to start my own firm. What should I do?â
Jeff Morris Jr:
I think you just wanna get in business, and so you could be in business with a $3 million fund or a $5 million fund. The mistake I see too many people make is coming out to market with a fund thatâs just way too big.
And then in regards to check size, if you raise a $100 million fund and you were doing $1 million checks, if you were to raise a $10 million fund, you would just adjust the strategy proportionally to have $100,000 investments in the same number of companies. But I think smaller funds can be fantastic.
You can also do things that are more illegible. As an example, if you were doing a smaller fund, say you did a $10 million fund, you could actually make the case that CPG is a great category to invest in. You could totally make that case, because the $500 million exit for a smaller fund is a fantastic outcome. Where the bigger the fund size gets, itâs almost like the more legible the categories need to be, because there needs to be the trillion-dollar opportunity, which only exists within a couple of categories today, theoretically.
Turner Novak:
Yeah, you need to make the next Anthropic, I guess.
Jeff Morris Jr:
You do. And so then your aperture narrows.
Turner Novak:
So then why are more small funds not investing in CPG? Or insert other illegible category.
Jeff Morris Jr:
I think itâs just âcause theyâre trying to do exactly what the big firms are doing. And also, try raising money for a CPG fund right now. So theyâre following the big funds, and then theyâre also in the categories they think they can invest in to raise the next venture fund.
Turner Novak:
Yeah, thatâs the trick of threading that needle. You kind of have to invest in hot categories because those will raise follow-on capital, which keeps you in business. And a lot of times you kind of have to raise money from downstream investors.
One strategy that people use is a fund of funds. You invest in a seed fund, and you wanna participate in the Series Bâs of those companies. So you want them investing in specific categories that will raise Series B rounds that work for your fund also. So probably not CPG or some of those other categories.
Jeff Morris Jr:
Yeah, agree. I think this all comes down to the manager needing to get in business, and to do that, most of the time they need to invest in categories that the LP community wants to fund. And itâs a hard thing to do. Itâs very hard to be original as an investor.
Turner Novak:
How do you do it? How do you keep yourself maybe as divorced from the FOMO as you can, and as creative as you can?
Jeff Morris Jr:
Yeah, I mean, I would say Iâm not totally divorced from it. Iâm on Twitter like everybody else. But thereâs one thing Iâve done which is intentional, which is I live outside of Silicon Valley full time. And so thereâs a distance between whatâs happening in San Francisco that creates, I guess, original thought. Although I go up there all the time.
Turner Novak:
Youâre still in it. You can be in and out of the bubble.
Jeff Morris Jr:
Youâre in and out, so I can go in and out. But I think also just being a newer fund, we need to be more creative to compete. If I look at our fund one returning companies, none of them were in the Bay Area. One was in Singapore, one was in New York, and one was in Miami.
And then if I look at fund two, our likely fund returning investments, two of them were companies in Canada. And then fund three I think probably will, again, probably be maybe one in Los Angeles, just based on how things are. And so I think as a newer fund, you need to look outside of the bubble.
I actually really admire firms that can go into San Francisco as newer funds and just compete head-to-head. Extremely hard to do. Probably two or three of them can actually do it, but there are a few of them who have done a really great job.
Turner Novak:
And you deliberately try to avoid doing that in a sense? Going to San Francisco, going head-to-head in the consensus hot rounds that would require you to go head-to-head.
Jeff Morris Jr:
Iâd say we can do that occasionally. Well, it depends on who weâre going head-to-head against, but for the most part thatâs just not what we tend to do, because those rounds end up just being huge rounds. Again, we donât do that many of these mega seed rounds. We have invested in many neo labs.
But I think on the whole, the best strategy for a newer manager would be to not try to compete head-to-head, unless you actually can do that repeatedly and thatâs the firmâs goal. Iâd say for 99% of new funds, you should not try and compete with Sequoia or Benchmark on a seed deal.
Turner Novak:
Yeah. Itâs probably figuring out what are you the best at, and just doing what youâre the best at. Whether you have network in this thing, you help with this thing, you have experience with this thing, you gravitate to these specific types of founders and markets. Just figure out what that is. And you can actually probably compete and go head-to-head if that Venn diagram overlaps in that middle.
Jeff Morris Jr:
Yeah, totally. It could just be like, weâre gonna really focus on day one company creation and doing more pre-seed investing. We just did a pre-seed defense company in LA, and we talked about it earlier. We did it at like a $7.5 million post, and then they ended up raising... The last one was like $60 million from well-known Bay Area firms.
And so thereâs an art to being early, but still being in categories that you know will be fundable in the near term. And I think putting yourself in a position to see founders earlier than other firms and say yes faster is probably the simplest way to do that.
Turner Novak:
Do you have a favorite founder, CEO, business, historical person from history that youâve gotten a lot of inspiration from? Whether itâs an investor, could be an athlete, anyone you get inspiration from or that youâve learned a lot from?
Jeff Morris Jr:
Yeah, I would say my grandfather is probably my favorite businessman of all time.
Turner Novak:
Okay. Whoâs your grandfather? Did he start a store or something? Was he a retailer?
Jeff Morris Jr:
Yeah, he was a retailer. His name was Mervin Morris, and he started Mervynâs, which became a public company.
Turner Novak:
Mervynâs?
Jeff Morris Jr:
Yeah. I donât know if youâve ever heard of that department store.
Turner Novak:
I donât think so. What did they sell, or what was their differentiation in the market?
Jeff Morris Jr:
So he served in the military. He actually never was deployed. He grew up in a... His family was based in Delano, California, and owned the local store. There was a single store in Delano that everybody...
Turner Novak:
Like a general store?
Jeff Morris Jr:
A general store. And so he got to the Army, and he was really good at retailing, and so they put him in charge of... This was in Arkansas, and they put him in charge of the baseâs store. And he got back from being in Arkansas and was like, âEverybodyâs gonna be coming back from the war, and theyâre all gonna need clothes for themselves and their family.â
And so he just started a store that became the store that... The idea was to build a store that everybody in your family could go shop at, so a kinda family-oriented department store.
Turner Novak:
But it was kind of for veterans, or not specifically?
Jeff Morris Jr:
No, he just had that insight. It could be for anybody, but it was kinda like, âHey, thereâs not a single place where everybody, your kids and you, can go to.â So today it would be like Target or Kohlâs or something.
Turner Novak:
Back in the day it was just a department store specifically for women or men or something like that? Or for adults?
Jeff Morris Jr:
It was more adults, and the pricing wasnât as affordable, too. So it was also, these people arenât gonna have huge amounts of money to spend on clothes, so building an affordable family-first retailer in California was the core idea.
He grinded his way to his one store. He took out loans just to open the store. His family was very poor, like dirt poor, and ended up building a public company.
So I got to see him and spend a lot of time with him. He lived till he was 101, and I was very close to him, and he taught me a lot about business. He also taught me... A lot of his employees were very close to him, and a lot of their families were close to him. So he was also just someone who people loved in the company. He treated people really well.
And so being around that from a young age was pretty informative and cool.
Turner Novak:
And he lived to be 101?
Jeff Morris Jr:
He did, yeah. He stopped going to the office when he was 96. And he ate really well. Heâs like Brian Johnson before Brian Johnson.
Turner Novak:
I was gonna say, Brian Johnson would love this guy. Heâs the original Brian Johnson.
Jeff Morris Jr:
He had a heart condition that he discovered in his early 40s. Mightâve been late 30s. So he just started eating really well, and he was obsessed with cardio and going to the doctors. All these things that you read about now that have become industries. But he took care of himself. And then I think going to work was pretty helpful. He never let his mind go.
Turner Novak:
Never, yeah. Well, itâs been a lot of fun. Thanks for coming on the show.
Jeff Morris Jr:
This was great. Thank you.
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