🎧🍌 How the Top US Angel Investor Operates | Ed Lando, Founder of Pareto Holdings

A playbook for incubating companies, benefits of concentration vs diversification, how to start angel investing, high vs low PR investing strategies, and how to hire your first employees

Ed Lando is the most active angel investor in the world according to Crunchbase data.

He’s the Co-founder of Pareto Holdings, where he’s been an early investor in over 25 unicorns and started + incubated over 10 companies.

We get into how Ed first got started angel investing, how he built up deal flow, why he’s historically kept a low profile, and why he hasn’t raised outside capital.

We also talk concentration vs diversification, why there’s many ways to build successful companies, advice on hiring your first employees, and his playbook for incubating companies at Pareto, which is where he focuses most of his time.

Let me know what you think of this conversation!

👉 Stream on Apple and Spotify

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Timestamps to jump in:

• 2:51 Getting into angel investing

• 3:58 Debating high vs low PR strategies

• 8:27 How to start building deal flow when angel investing

• 10:00 Pareto: first investor in people leaving school or their job

• 12:05 Evolving from angel to fund

• 14:57 Why Ed didn’t raise outside capital

• 20:33 Concentration vs diversification

• 28:29 Investing in non-sexy categories

• 32:50 There’s no one right way to build a company

• 36:03 When to go against traditional wisdom

• 39:36 Lessons from his anti-portfolio

• 45:59 Ed’s close relationship with his parents

• 49:04 How we’re using AI

• 54:04 Incubating companies

• 58:38 Investing beyond spreadsheets and DCF models

• 1:05:49 How to trust your intuition investing

•  1:09:47 How to move fast

• 1:14:24 What most people get wrong when incubating companies

• 1:18:40 How to hire your first employee

• 1:26:27 Navigating hype when building and investing

• 1:29:59 Venture math and the Power Law

• 1:35:33 How Ed and Pareto’s strategy might break

• 1:38:45 Differences between the US and Europe

Referenced:

• Pareto Holdings

• Top Angels in the US

• Misfit Market

• Catalina Crunch

• Zamp

• Magnus Carlsen on Joe Rogan

Find Ed on X / Twitter and LinkedIn.

Check out his blog.

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👉 Find on Apple, Spotify, and YouTube

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Transcript - (read on Rev)

Find transcripts of all prior episodes here.

Turner Novak:

Ed, how's it going? Welcome to the show.

Ed Lando:

Good to see you.

Turner Novak:

Yeah, excited to do this. So I think this kind of came up. You were featured in one of my friends', he did this report on the most active angel investors in the world. Lenny Rachitsky, he put it out, we'll link it in the description for people. And you were number one. So I think that's probably where, for a lot of people, that's the first time that kind of came across you. What's kind of the story with all the angel investing?

Ed Lando:

Yeah, thanks for having me. So the story is, I've been building startups since I was 18. I got into college. I grew up in France. I got into college, I went to Penn, and I taught myself how to build websites and apps, because I wanted to build my own things, and because engineers would not respect me and my friends if we didn't know how to build our own things. Built some things, got into YC when I was a senior in college, and went through that. Was a lot of fun. Built a couple companies even before that when I was an undergrad. But had a few smart people already around me that I wanted to bet on. And so, quite early on, just starting small bets on them. And then it compounds. Usually, hopefully, it's sort of like having customers, where if people enjoy working with you, they refer other folks. And I found that impressive people tend to know other impressive people, and I found that's a great way, it's been a great way to meet, at least some of the best investments I've made.

Turner Novak:

Yeah, that's fair. I think when you think about most VCs, people probably think that they're super loud and active. You think of A16Z approach, like a media company. You've kind of done the opposite, and it sounds, maybe you just explained why, but can you just talk through why historically you just haven't done much PR and how you think about it?

Ed Lando:

Yeah, I've had this discussion many times with a few good friends, and I think there's been this debate about whether or not to be loud or to be quiet. There's some people, obviously if you go on Twitter/X...

Turner Novak:

I'm guilty.

Ed Lando:

There's some people, and I'm sure it yields a lot of great things. And even when Lenny sort of did that feature, I didn't expect it. It came out of nowhere, and definitely I got a bunch of great opportunities out of it. So that's why, doing a few more of these. But yeah, over the years, I've never really focused on doing PR or having news, and I don't know how newsworthy it is to invest in companies.

Turner Novak:

Yeah, exactly.

Ed Lando:

But I've also found that the best folks that I've met have been from someone who I know who sometimes says, "Gosh, this person is the most impressive, relentless person that I know. I would bet on them no matter what." And it does work, I guess when you get more marketing or PR, it sort of helps. But often, this sort of compounding has worked in itself, where I backed a lot of companies now with Pareto, and so we just get an interesting sort of base there.

Turner Novak:

Yeah, that makes sense. For me, I kind of accidentally became an influencer. I was just trying to get a job in VC eight years ago, and it's kind of turned into what it is today.

Ed Lando:

It's the beard.

Turner Novak:

Yeah, and I think the thing that is interesting about it is, it's not like somebody says, "Oh, just because Ed had a good tweet, I'm going to reach out to him or I'm going to let him invest in my company." But if you were to say to somebody else, like, "Oh, hey, you should meet my friend, Turner. He's really good at this stuff. Check out his Twitter or listen to his podcast," then a founder might be like, "Oh, yeah, this guy seems pretty legit." It just kind of makes you easier to introduce to people, but you still got to do the work of actually contributing, or maybe at a minimum not messing up the company when you invest.

Ed Lando:

Totally. No, and this debate is still ongoing, and there's many examples of people who are very successful who are quiet, and obviously several of them, even you or I might not have heard of them, but there's some people who have no internet presence and who have been part of incredible companies. And there's some people who are very, very loud, and the latter sometimes, obviously, get access to great opportunities because they're top of mind. So I'm sort of tending towards the being a little bit louder. It might be worth it these days.

Turner Novak:

Yeah, I think it just depends, what are you good at? If you're a really good writer, you should probably put your writing out there. If you're writing something internally to your team, or there's some new model like Claude Sonnet 3.8 comes out, or whatever they're going to name the next one, and you have a good, interesting breakdown or take about it, or you tried it out, and no one's really written about it yet and you throw it out there on the internet, a lot of people will see it. And you did that anyways, to your team or in the group chat or with friends. It's like, just throw it up online and it might be helpful for people, and it builds your brand, your reputation, however you want to think about it.

Ed Lando:

Totally. And it's funny you say that. One of the selfish reasons why I want to do a few more of these is that I love to write and I'd love for more people to read what I have to say. So, we'll see.

Turner Novak:

What are you going to be writing on? Substack, or...

Ed Lando:

I have a Substack, and also I'm slowly becoming a LinkedIn influencer, which is my major claim to fame. But I think it doesn't matter. I repost the same thing everywhere. I've never been that good at optimizing it. But as far as what I like to write about, it's sort of a mix of thoughts and musing on startups, but then also, frankly, musings on life. When I was an undergrad, apart from working on apps and websites, I actually thought that I wanted to be a novelist. And I just love to write. I love reading, I love philosophy, I love thinking about the world. So, trying to share those things.

Turner Novak:

We'll throw out links for people to find you in the description. They can read along. So this is probably a question that would come up if somebody is more attuned to the, oh, you need to be loud to get deal flow. What have you found works best in terms of having inbound deal flow come in? Or maybe it's outbound deal flow, when you're more quiet? I think you kind of got into it a little bit, but can you just talk through how that would work?

Ed Lando:

Yeah, I would think about it as far as the beginning of a process, where let's say you're just starting off investing. Just simply asking yourself, who are some of the most impressive people I know, from where I studied, where I worked? Who do I believe in? Let me try to find a way to work with them or back them if they're building something. And then usually, if you do a couple of those, again, at some point those people will meet other people who they find interesting, or they will hire other people who work there for a little bit, and then those people will leave and do their own thing.

And so, I very much believe, and we can talk about hiring later, because we spend a lot of time building companies these days, but I very much believe it's a similar approach. It's sort of like, you go to the people you know well, versus let me go paying folks. Of course, there's a lot of investors who do the strategy of paying people on LinkedIn or paying people on X and sort of sniping people who are interesting in reaching out to them with an interesting message. That can work, for sure. One of my first good investments, by the way, was I read about this French team that was building a consumer mobile app.

Turner Novak:

I know where you're going with this. Yeah.

Ed Lando:

Oh yeah, I have a story there. But I was writing for the Huffington Post, whatever that meant, but I was proud of it. This was in college. And I reached out to them, I was like, "Hey, I want to cover you guys in the Huffington Post." And I used that as an excuse to meet up with them, and I ended up investing in them. So I do believe in a little bit of the hunting, too.

Turner Novak:

What do you find yourself investing in today? I think I saw that you tweeted, or it was a LinkedIn post, can't remember which one, but you said you're doing a couple a week at this point. So what are you looking for on the investing side, and what's interesting to you right now?

Ed Lando:

Yeah, what is interesting to me in the investing side is very industry agnostic. I just want to back impressive people who are dropping out of school or who are quitting their jobs, and ideally, I want to be the first investor in those people, and that's what we want to do with Pareto. So we're chatting, we're going to a lot of campuses, we're chatting on people who are graduating or dropping out of school, or fairly young folks, who it's their first startups, and then also folks who are leaving their jobs. And I think partly it's because I definitely also take part in rounds that are a little bit more established and with people who've already proven themselves out, and that's the sort of more consensus bucket of what we do. But I find that compared to other investors out there, this is a more unique thing for me and for the Pareto team to do.

Turner Novak:

Yeah, I feel like it's more gratifying to back someone, the very first investor and they crush it, and you're like... It's just kind of fun. It's way more fun to me.

Ed Lando:

It's fun and you feel more useful. One example that comes to mind, I've developed a really great relationship with this guy Kian, who runs Nucleus. Nucleus Genomics, it's a cool company, Kian, 23 and Me. We met him through a mutual friend and we sort of co-led the seed with him at the pre-seed. And Kian at the time was an undergrad at Penn, and he has great family, but his parents, I think, as immigrant parents, didn't want him to sort of leave school and do this. And we offered him funding while he was still in school, and that allowed him to drop out, and our friend who co-led this with us shared, I think there was a story, even footage of Kian's reaction when he heard the news on his security camera or something at home.

Turner Novak:

Oh, no way.

Ed Lando:

Just screaming and joy. And so I think, when you can actually be the first person who bets on people, you're definitely much more memorable than, hey, this top fund is leading a round of seed. Do you want to put in $50K? I think that's great, and you can still make money that way, but you're less useful in that way.

Turner Novak:

Yeah. So then, how did you make the transition from, it's kind of your, I don't know, "angel investing," if you want to describe it that way. You still kind of are an angel, I guess, but you have kind of a fully fledged fund and strategy. Just how did that whole transition happen over the past 10 years? And maybe a way to frame it is for you or advice for somebody else trying to do it?

Ed Lando:

Yeah. Yeah, so we're very, we have a strange approach where we don't really have a fund. A couple years ago, I was at like 450 investments or so. This was really just me as an angel. And it started becoming too much for one person to sort of take care of, even helping people with intro, signing docs.

Turner Novak:

Yeah, just doing the K-1s, like the taxes.

Ed Lando:

Anything. Yes, it was becoming overwhelming. It was not enjoyable. I was having panic attacks. We could talk about that, but it was not pleasant. And I became friends with someone in New York who sort of started investing in some companies with me, and then we were like, hey, why don't we put some capital together in a structure, that we named Pareto.

The name essentially was from the idea that I'm obsessed with, which is that of power law in a sense, where... We can go into that later, but you can back a thousand companies and it's really one, hopefully you hit one Google, and one will return a thousand times over. You could do well with, let's say, 100, but you will do incredibly well with one. We decided to pull together some capital into one vehicle, which allowed us to hire one or two people to start, and to simply just have a little bit more leverage.

And so Pareto, I worked with that partner for a couple years. Now it's back to being just me sort of funding Pareto. So Pareto is a super angel vehicle, if you will, that I fill up once in a while. And we have a couple people working with us, two great folks, Ben and Jules, and together we cover a lot of ground. We are in almost 1,000 companies to date. We are not passive. We're not waiting for people to ping us. We're sort of actively hunting. We're essentially the first investors.

We've pre-seeded almost 200 companies, and we actively helped them raise more money. In Nucleus's case, we put in a six figure check to start, and then we helped them raise a couple million dollars seed round. I think they raised a couple million from Founders Fund, and then they raised a series A from a 776. They've raised more than $20 million. We were the first investors. Kian's an amazing guy. I think we were definitely important to his trajectory, and we're trying to find more people like that where we're the first to back them.

Turner Novak:

Yeah, I remember that. Talk about anti-portfolio. I know we were talking with a little bit earlier. That one's in my anti-portfolio.

Ed Lando:

Well, it's doing great, but it's never over until it's over. But yeah, we've missed a ton of things too, so no worries there. By definition, the world economy is pretty big, so...

Turner Novak:

It sounds like, you kind of structured this thing and you set up this, okay, this is a dedicated strategy, but you didn't go and raise a more traditional fund like everyone else. What was your thinking about keeping this a little more under the radar, your own thing, versus the more traditional model that people will do?

Ed Lando:

It's a luxury too, right? It's because partly, I've also helped start some other things and have been able to sell some shares along the way, and so recycle some capital there and have some capital to invest into companies. So it's a luxury. Obviously, if you can invest your capital, there's a lot of benefits to that, versus I think the downside, by the way, even if you have some capital to invest and so on, is that we've often felt more capital limited than other funds. Every day these days, you're reading about a new $600 million fund that closed or a new billion-dollar fund that closed. We're not there yet. Maybe we'll be one day. But there are many cases where, with Ben and Jules we're like, we wish that we could put more money into this company. Even in cases where we put $100K, we wish that we could have done $500K or whatever it is, or a million dollars, but we have an active strategy right now of when some of our investments get a little bit further along, we sometimes sell a part of our stake, even if we believe a lot in the company, because it allows us to have money to invest into other companies.

But so, it's not even a deliberate strategy thing, it's more about I'm a very impatient person, and over the years some really nice people have been like, "Edward, you should meet this LP or that LP." And I've met with some of them and I've actually liked some of them, but I found their process to be too annoying to go and try to raise a fund, for now at least. And I've also found that there are, a lot of them, not all of them, a lot of their questions are not that interesting. Essentially, if you go to a lot of LPs for early stage, invest in early stage funds, if you say, "Hey, we're only investing in agriculture tech companies that use robotics with an AI thesis in the United Kingdom," they'll be like, "Cool, that's a very specific thesis. Let's run that by our..."

Turner Novak:

Investment committee.

Ed Lando:

We can sort of sound not dumb by pitching that, or these days, all these AI funds or crypto funds, but if you tell them, "You should back me because I have good taste in people and because I will sort of work harder and help them more," they can't sound smart to their investors. So frankly, the requirements to sort of raise a fund early on were frustrating, and so I decided to take this route. And now it's getting to the point where we have enough compounding internally that it's unclear whether we will ever need external capital, but we'll see.

Turner Novak:

Yeah. So then, what was your decision making then on, you took your entire net worth and just put it all into this extremely risky and illiquid asset class that... I mean, I'm sure 99.9... Maybe most listeners would be like, "Oh, yeah, this makes sense." But most people in the world would be like, "That's crazy." What was just the thinking process of doing that?

Ed Lando:

Yeah, and by the way, I don't even know if this disclaimer is useful or necessary, but obviously this is not investment advice.

Turner Novak:

Okay, yeah, true, true.

Ed Lando:

It's not investment advice. But look, in my case, I've always been a little bit crazy risk-seeking, for better or for worse. And so I have often over the last few years had a, let's say, liquid to illiquid ratio personally of one to several hundreds.

Turner Novak:

Fair. Yeah.

Ed Lando:

That is essentially what my internal finances look like with our stuff. I think, sure, it is risky. Obviously we invest in a lot of companies, and so it's sort of across a lot of different people. And it's just like, this is what I do. I don't really do other types of investing. I don't really do public markets investing. I don't really do real estate investing. I don't think I understand that, or I've never really looked into it. I went to Warden, I took some of those classes. I'm sure I'd be like okay at it if I tried to do it, but I don't think I have an edge there.

I like making early bets on people and having an intuitive sense for people, and I think I'm good at it, and we'll see. It's been about 10 years, but it seems to be working, and hopefully it will keep working. And frankly, I think that people like Ben and Jules are also really good and have become a lot better. So I've had the luck of attracting some great folks. And I'm not that worried about it. But yeah, I would say 90-plus percent, 95% or more of what I have is invested into what we're investing in, and also in what we're building, which we can talk about later. And I sleep very well at night thinking about that. There are other things that keep me up, but not that.

Turner Novak:

Yeah, that's fair. I mean, for the record, I'm in a similar boat. Pretty much the vast majority of my net worth is literally in all my banana funds. And I mean, my wife is always like, "Are we okay? Is that a good idea?" And I'm like...

Ed Lando:

It sounds like you have a great wife.

Turner Novak:

Yeah, I mean, she's awesome, and she's on board with it. She trusts me with it and everything. But a rational thing would be, be a little bit more diversified. In the past, I've owned real estate, but when I made the jump into venture, I literally sold, I had two houses. I had one I lived in and a rental. Sold it, cashed out and went all in. Which I mean, I feel like you have to do that if you're going to be in this business or this realm. You kind of got to be risk-seeking and you got to believe in yourself, and I don't know, that's all you can really do.

Ed Lando:

Yeah, I think the traditional wisdom, there's been so many books written about money and making money, and there's been a lot of podcasts and everyone has an opinion, and obviously there's some people who are really great at it, Berkshire Hathaway and others, and you can kind of learn from those. It seems like diversification doesn't actually work that well, and it seems like the people who actually do very well tend to initially make it from one or two big things. And then over time, again, with this sort of pre-seed type model, you don't have to pre-seed that many Ubers or Googles to return everything 1,000X over, hence the power law idea.

But yeah, it seems like it's actually worth it to concentrate your bets. And what we're doing a little bit more of occasionally is writing slightly larger checks. So we've done a couple seven-figure checks into things when we really know people well and when we have a very strong point of view. So we'll see if it pans out. I have no idea. But it's worth a try.

Turner Novak:

Yeah. I mean, I think there is a thread of truth to that, because seen studies where this is public market stuff, where relatively liquid assets and mature businesses or whatever, they say, if you have a public stock portfolio of 20 companies, that is, you get pretty much like 95% of the benefits of diversification, and as you keep getting more and more diversified, it doesn't really give you that much, but then you limit your upside because you miss out on the big winner, sort of. It's the same thing you see in venture, but I do think because the way that we're investing in companies that basically burn a shit-ton of capital, and the whole point is they're super risky and they'll likely not work, you kind of got to say, okay, maybe 20 is not enough. Maybe you should expand the scope a little bit. Is 30 a good number and that's the bar, or 30 per year, or per vintage, or however you want to think about it. I mean, I do think that, and then to your point, you're right, you get one thing. If you have 5% of your portfolio in something and that one position is 100X, that will 5X the whole portfolio.

Ed Lando:

Yes. Yes, yes. No, the math is really interesting, and I think about this a lot, and again, not investment advice, but let's say if you compare public markets to private markets, and let's say you have hypothetically, so 20 public stocks, 20 public positions, and let's say you have $2 million to invest in total, and so you put $100K into each one of them. And unless, in some cases you've had crazy streaks over the last few years with Nvidia and other companies going to behaving like crazy private market companies. But usually... I mean, there's been exceptions, but usually in public markets, you don't really get 100X, 1,000X type of things. You have gotten many anomalies recently because the markets have been crazy, but usually you don't get those things.

So if you do hit a winner in public markets, and let's say you get a 5X, which could be great, you 5X $100K, which is awesome, and then on the rest, maybe you get plus or minus five or 10% for each one of them, or whatever it is, the net effect on your $2 million invested is not going to be that much, right? Versus let's say you put $100K times 20, into 20 different companies, and you buy sort of a significant stake early on because you're sort of pre-seeding the company.

Turner Novak:

Yeah, they're starting the business and you own 5% of it.

Ed Lando:

Right. So let's say a couple, several of them fail, because that happens. Some of them do well. We find that several of them, will do a 5X or a 10X or something like that, so you'll actually make more money already than you've invested, and it just takes a lot of time. That's the problem. And then let's say you get very lucky because one in 20 chances to find an outlier is pretty amazing odds. But let's say you get very lucky and you hit a mega outlier and you kind of, 100X, right? You sort end up with a $10 million position there just with that one thing, with dilution and other things like that. So these sort of power law effects in venture, or for this early stage thing, are very powerful, where you can, I guess in a sense, you can both diversify and have very sort of large concentrated positions.

Turner Novak:

The one way I think about it too, when explaining to people, they'd be like, oh, just how awesome would it have been to just invest in Nvidia when he was starting the company? Just go meet him earlier. It's obviously very much easier said than done. But yeah, that's basically what you're doing. You're just going and meeting people when they're starting generational businesses, and you benefit from it.

Ed Lando:

Hopefully. And then the crazy part about Nvidia or about other companies like that, and even Amazon, is that some of those companies went public pretty early. And so if you had actually just bought those companies when they went public, you would have captured most of the upside. And then you, of course, have stories of amazing investors like Masa at SoftBank, who I think is incredible and has a lot of ups and downs, who I believe there's an interview where he sort of jokes with Jensen Huang about having sold a lot of his position in Nvidia at the wrong moment.

And so you have, the life of a great company is decades, and so for better or for worse, you're going to have moments where you're going to buy and sell probably along the way, and I think it's impossible to time it perfectly. So in my case, already, it has been the case that I have looked like an idiot for selling something. So I backed someone early and then I sold something and I made some money, but then there was another 10X or 100X afterwards. So that will inevitably happen more.

Turner Novak:

You had 100X once after you sold?

Ed Lando:

Yeah, there's a company that I backed super early where... I mean, I have a couple of those, but where I bought, I think, 10% quite early, and I sold some, and it, I think, locked in essentially at 25X or 30X already, which is pretty great, and we invested some of that into other companies. So who knows, if you compare the compounding there. But that company then went on to appreciate another 10X, and then maybe now another 5-10X. So we'll see. We'll see. It happens, and you never know if you're right or wrong until the true end value of the company, because we'll see. Yeah.

Turner Novak:

I mean, at least it's your own money. You're staying in the game. You keep going. I mean, I feel like you think differently when it's your own capital versus someone else, and whether that's you're riskier sometimes, you're a little bit more risk averse because you're like...

Ed Lando:

Well, no, and look, I was chatting with an accountant friend of mine recently who was telling me that there's a lot of VCs at top funds who no matter what every year, if they have the interest of their carry and the fund for the good years, they'll make a couple tens of millions of dollars just based on the management fee and the carry and everything regardless of their performance.

Turner Novak:

You don't have that luxury, you got to actually make money.

Ed Lando:

In their case, I don't know if they care about cashing the thing and making a thousand X or whatever it is. I think they don't mind overpaying for the series A or series B and only getting a couple X because they'll get into the brand name and then they'll keep attracting more LP money and then they'll keep fees off of that. It is in many cases, a different game.

Turner Novak:

I feel like the game, maybe the game that you're playing is backing good founders and maybe the game that other people maybe fall into is attracting capital, like attracting LP capital.

Ed Lando:

Exactly. I think the game exactly is backing good founders, actually being good partner to them and making money by actually making good investments, which is an interesting comparison to some of these other models.

Turner Novak:

I think at this point, I forget if you mentioned this, if I read it somewhere, but you backed like 25 unicorns at this point. Is that the number?

Ed Lando:

Something like that, yes, but I think that number, a lot of numbers are misleading in general. For example, I could have bought my way into 25-unit unicorns at a $500 million valuation for each one of them and then say that I backed. A lot of those I actually did back very early, it's the seed stage. Then the second thing is that's not the only thing that matters. In certain cases, me and then Pareto, we've gotten into companies where very early and we're now marked up, I don't know, a hundred x or 200 x and the company is not even, well, a hundred x, the company is not even like a unicorn yet. In some cases, our best multiples are actually not in companies that are unicorns because we got in so early.

Turner Novak:

Interesting. I think that can be the beauty of investing in out of favor categories. Like CBG for example, I know you have this one company, is it called Catalina Crunch? Is that how you pronounce it? Is this an example of that?

Ed Lando:

It's an example, yeah. Very good friend of mine. I was friends with him back in the day. We overlapped a little bit in school and I've always found him to be brilliant. Several of the other people who knew him were most impressive person of our year, worked as a quant researcher at AQR, really good at math. Used to be a national chess champion, and he initially wanted to start an auto insurance company. Back in the day, I was even like we were hacking in some websites together. I thought I was maybe going to start a company with him, but he was doing the auto insurance thing. He needed to raise a couple of million for it as a first-time founder, which was a lot of money, I don't know, eight years ago, compared to some of these AI raises, but it was a lot of money eight years ago.

He's brilliant, but he wasn't the most vivacious fundraiser. He doesn't like overselling, and so was not able to pool his capital together. Then he just had a total of 180 and decided to work on something that he cared even more about, which is he happens to be diabetic and he could not find cereal or cookies or snacks that he could really enjoy, and so he decided to start his own brand of keto cereal and he started baking his own cereal in his tiny little kitchen in the lower east side of New York. Then he needed a little bit of money for it, and a lot of the people he'd been talking to are like, "Okay, look, we could have invested in a quant from AQR to do an auto insurance company. I guess that narrative would make sense to our LPs. It makes sense, whatever the story, but you making cereal, what's the connection there?"

Again, not to toot our horn too much, but I was just like, "This is the same person. I'm investing in the same person." I had the luck of teaming up with him early, got to invest in a very low valuation, and the company is doing north of a hundred million in revenue today, profitable. He's built it into this thing you can find in every corner store. I think it's just the beginning, but he's a beast, and that's an example of a lot of these things that people say have some truth to them, even though they sound banal. It's an example, you're just backing a person. I know several people who are very intelligent people and who are VCs, and they're very clear of VCs markets, but they still passed in some great seed investments because the companies looked very different from one month to another, and it changes shape and then they miss the opportunity. Yes, that's one example where being an angel in something early on can actually yield incredible returns even if it's not like an uber sized company.

Turner Novak:

Well, even in CPG, if you listen to a way that most early-stage investors will talk about CPG and why it's so hard, it's the math, it is the numbers. The numbers are really hard to get right, whether it's the CAC or your logistics costs, whatever, and he's a math genius. He's good at understanding numbers and he's going to go and tackle this category. Obviously, you almost need some taste and some design and maybe some other skills there, but that's the part that a lot of people get tripped up on is the math on those businesses.

Ed Lando:

You're right, and actually, maybe the fact that he is a math genius, to use your terms, probably has helped him think about it as an actual business. They did a great job expanding with retail instead of spending too much money acquiring customers online. He's always been super rational in looking at all this stuff. For a while, some of the early folks who invested were a little bit impatient with him being like, "Come on, you should move faster. There's other players who are spending more online growing faster." It didn't matter. His strategy worked. That's another topic we could talk about. I have seen some really smart people build companies in different ways and not all of which I initially agreed with, and so I've learned that there are many ways to skin a cat.

Turner Novak:

Yeah, I mean that's a good topic to dig into. I guess I'm not really sure what you're referring to, but any other examples that you're thinking of that you've seen?

Ed Lando:

Yes, I think that I tend to bias, well, I try to be perhaps less and less opinionated as I go, but I tend to bias towards a certain way of building a company. I spend 95% of my time these days helping build stuff, not investing. We can talk about that at some point, but I like the speed and getting traction quickly. A couple of the things I've been part of have grown really fast almost from day one and have gotten traction immediately. Then there's another company that I've been involved with for five plus years now, five and a half years, like a B2B software company, which is slowly compounding and starting to add a lot of new users every day.

I think there's a shot that it could be the next Figma, but I have pulled my hair out a lot over the last few years because I've been like, "Why can't we grow faster?" It's been a difficult product to build and it's not a trivial way to acquire customers. As opposed to, I was a kind of early investor in Misfits Market, like a grocery company, online grocery company. I helped get it off the ground with my friend Abhi who runs it, and that one grew really fast.

Turner Novak:

You said it was 18 months to get to a hundred million revenue run rate or something?

Ed Lando:

Something like that, yeah. That was an example of if you think that every company needs to look like that, you might be right in some cases, but there are other models out there that would not align with that, including some of these complicated software companies and including some deep tech companies, which I believe OpenAI took a very long time until it got that crazy traction when they released ChatGPT. They don't all look similar. I think there's some principles that are universal across them though.

Turner Novak:

I think even Facebook, if you go back to the early days of Facebook, it wasn't the fastest growing social network. They did a lot of things that you might say, I mean, it's probably why they succeeded, but at the time it's like, why are you only letting college kids join and only kids at Harvard? Then I think they just limited, it's like, you need to be in high school, a high school too. They limited the growth, but today, it's like you'd be bragging if you said you invested in Facebook back then, but it didn't look obvious at the time. They were making really intentional product and company building and growth and all those different decisions that ended up playing out into, I don't know, is it a trillion-dollar company now? Something like that.

Ed Lando:

It's is, yeah. It's one of them. You're right, for every company I've found, that I've seen, there's obvious things that you do along the way that are surprising.

Turner Novak:

Have you found any maybe ways to suss that out or how have you decided? We talked a little bit about investing, we're going to talk more about building companies and incubating stuff. Have you found anything that you've been able to pick up on or when do you decide, oh, this might seem like a bad decision from the outside, but internally, I think we're going to do this because of a specific thing? We might be growing slower. I mean that's usually the thing. It's like, oh, it's slower growth, but it's maybe the better decision long term.

Ed Lando:

It's a good question. I mean, I have much more of an opinion on the things that we're building. When we invest or when I invest, I'm a lot dumber, less sophisticated, and I'm like, "I like this person. I like this team. I have a good feeling about them. Sure, let me be the first investor." That's usually how we operate. I think being naive and a little low dumb has worked. In fact, if we ever talk about the companies we passed on, we probably should've been dumber and said yes to more.

Turner Novak:

Maybe that's a good segue. We were talking a little bit about anti portfolio.

Ed Lando:

On the building thing, it just depends. We're actually building something fun and social right now. One of the main product people that we have on this new company is very opinionated because this product was very much his brainchild. There's certain things that we could do to try to grow faster, like have you invite your whole address book and force you to invite people in order to use it and stuff like that. The very reason why we're doing it for which we're doing this product is against that, and so we're trying to do things that are not an experience that we wouldn't want because we're building this product as a counter to a lot of the other social things out there that we don't like.

Turner Novak:

Would you think about this as a growth first retention? Maybe going back to the Catalina Crunch, he was growing slower, but he was building a good product that people are going to keep using and building customer affinity or something like that, or defensibility better margins?

Ed Lando:

I think he would be better at answering that question than me. Again, I'm just a useless investor in the company. He's actually built the company. My understanding was that you can spend a lot of money sometimes to acquire people online. Sometimes it works. It's gotten more competitive. It depends on the channels. It's unclear the quality of those cohorts and the retention. Then also, it got more competitive. I think that in ecommerce, you could acquire people for a lot cheaper in the early 2010s when some of these companies were scaling, some of these golden days of ecommerce, especially in New York. The mattress companies, whatever, if they were selling a mattress for $1,000 online, they could acquire a customer for a couple of hundred dollars. If you literally immediately pay back your CAC and then you reinvest it, unless there's a lot of returns, you're getting paid back on day one and you're more than paid back on day one, and then you can just reinvest it into more Facebook.

Turner Novak:

That sounds like a VC's wet dream right there. That sounds incredible.

Ed Lando:

It was, right, but then of course, other people, whether it's in that category or others, other people figured out that you can find another product and just sell it online. We tried to do that with my friend. We were selling candles online and sheets and stuff like that, but it just becomes more commoditized to source these products. You can hire a cool Brooklyn agency and make a slap a cool brand onto it, run Facebook ads, and then it becomes more commoditized. Then it's the definition of perfect competition. You have to find other channels through which to grow, including retail.

Turner Novak:

Do you have any common patterns or mistakes that you found yourself making reasons that maybe you could talk about specific examples in the portfolio, in the anti-portfolio?

Ed Lando:

Yes, there's a couple that come to mind. I don't obsess over them that much. I think thankfully, I have not passed on the next Google yet, or maybe I haven't. I just don't know. Well, now I just say yes to everything, so we're not passing anything anymore. Just joking. There's a couple I passed early on OpenSea, and I remember meeting one or two of the founders at a coffee shop in person in New York, and I didn't understand what the hell they were talking about and what an NFT was.

Turner Novak:

I don't think you're alone there. I think a lot of people may still don't get NFTs.

Ed Lando:

I think they were raising of somewhere, I don't know, 10 or eight or 12 or $14 million valuation or something. At its peak so far, I think the company was worth 10 billion, at least in private markets. What is that, a thousand X? I think if you look at the background of the team, they're super impressive people. If I had just adhered to what I say, which is you just back on people, back people, even if you don't fully understand what they're doing, especially if you're writing a small check, I probably would've been an investor in that company, or there was another company I've met with early on, Headway, in the mental health space.

Turner Novak:

I've heard of it, yeah.

Ed Lando:

I think they mostly focus on B2B mental health now, and they've done really well.

Turner Novak:

It's like software for therapists and stuff.

Ed Lando:

Frankly, I'm not even sure anymore. I'll look it up after. I met with a founder in person. Again, I think these in-person ones are tough because I was like, you get more information than from a phone call. If you think that you're good at reading people, this proves for that thing. Met with him in person. I remember we walked around, I think Union Square or something, and smart founder from Stanford. He wasn't the most loud, aggressive person, which is maybe what I was filtering for, sort of force of nature, obvious aggressive person. He was a little bit more subtle. For some reason, I did not invest. That company I think is a couple of billion-dollar company.

There's other examples there. I mean I think that a non-obvious pass, not quite a company, but its whole, like back when crypto was taking off and I was living in San Francisco, there were some friends of mine who were early investors in Ethereum or Bitcoin. I did not pay that much attention to those things because I was in the mindset of I'm looking for people, I need to invest in people. I wasn't looking for, I need to buy this coin and that coin is actually the company. That is certainly a couple of hundred X, at least, that I did not participate in. Perhaps one last example is I think I did a good job in San Francisco, even back in the day of making my way in the same room as people and meeting people.

I met with Olaf from Polychain early on, and I believe if I remember correctly, that I had the opportunity to invest in the GP of that fund, which again, in my mind I'm like, "I'm not in the business of investing the GP of a fund. I'm in the business of investing in companies early on." I think that, that GP would probably be a couple of hundred x at least, if not more. I think just what I learned from it, I don't know if you were going to ask that, is keeping an open mind about what exactly the interesting opportunities are, because not everything looks the same and to hammer everything looks like a nail. Then also paying attention to the strange things that are happening in the world and where the very nerdy, intelligent people are spending time, if that makes sense. I think I've learned to do that a little bit more.

Turner Novak:

I mean, that does make sense, and I definitely would've asked that. I think you answered it pretty well. One interesting thing you said is you said the phone call or the Zoom call versus in-person, and you said that can throw you off. I feel like most people will say, "Oh, meeting in-person is better," but it sounds like maybe.

Ed Lando:

No, I think it's better. I was more criticizing myself there where I met them in person so I could have, if I had done a 10-minute call with one of these companies, maybe it'd be easier to forgive. I didn't get the full thing. In both of these cases, I met with them in person, and so clearly my in-person radar was off. That is the thing usually that I trust the most. My friends, my close friends and the people I work with know that I rely on intuition for a lot of my decisions, investing, building, life decisions. I find usually my intuition is correct, but in those cases, something was wrong, and so interesting to calibrate the model.

Turner Novak:

Yeah, okay. That's fair then.

Ed Lando:

Might be too much information, but I think you can always learn a lot from your parents, essentially. My dad is a journalist, and so he's a very, very cerebral person, very nerdy in a charming way. He can spend hours writing without interruption, just entirely focused and can spend hours painting. Very talented in many disciplines. My mom is very, very different and very impressive in her own way. She's extremely intuitive and a very good social creature. If she's in a room, she can be the energy in the room, read everyone, charm everyone, and she immediately likes, dislikes, trusts, doesn't trust people. I've certainly inherited that from her, and I've inherited, I think the love of writing and intellectual curiosity from my dad. I think even my parents sometimes have been wrong in some of their analyses and I think perhaps less wrong than me, but I think I have noticed that in myself that even your strength once in a while can be off by a little bit.

Turner Novak:

Yeah, that makes sense. Actually, Ben, on your team was telling me that you have a pretty unique relationship with your parents where I think you teach a class or you'll go to speak in a class or panels, conferences, and your parents actually come and watch. That's pretty incredible. Is that true?

Ed Lando:

Yeah, we're very close. I'm very lucky in that way. They had me a little bit older. My mom had me when she was 42 and my dad was 52 when he had me, so they had me later in their lives. For my mom, she never knew she was going to have a child. I was her first and only child, and so I think she valued that a lot. Quickly, she actually was an entrepreneur as well, but she retired pretty quickly and decided to focus on spending time with me, which was amazing for me. My dad as well, had a lot of flexibility in what he was doing, was already retired. When I was six for example, they took me for a year out of school around the world. We've traveled to 70 countries together and I have half siblings on my dad's side who I'm close to.

I was essentially brought up as an only child in a sense, and they taught me school during that year and it was certainly great. I'm very close with them. They like startups and entrepreneurship a lot and they will sometimes come to some of these talks that we give on campuses. Then sometimes as well, we're building a couple new companies right now. My dad in particular loves to come hang out at the office. We have an office in Paris and just hang out with the team, see what they're doing when they're tinkering with AI. He's obsessed with AI. He keeps recommending new books to me.

Turner Novak:

Oh, that's cool.

Ed Lando:

Yeah, so we have a great relationship,

Turner Novak:

Man, that's awesome. He's probably, you said he had you when he was 52. I'm assuming you got to be at least 30. I'm assuming your dad is in his 80s, just hanging out at the startup office.

Ed Lando:

I'm 30. My father is incredibly intellectually voracious. I think he reads almost a book a day and he's much, much better read than me. He's often the one saying, "Edward, you have to read." The other day, he was like, "I just finished the book from the founder of Deep Mind on AI." He's like, "You have to read this book." I'm like, "Okay, dad, I will. I need to answer these 300 emails, but I will." He keeps telling me, because the next day.

Turner Novak:

Yeah, he's got to do one.

Ed Lando:

"I just listened to this two-hour podcast by this person on tech, on robotics. You should read about it." "Okay, I haven't got into your book, but sounds good." He's just like an absolute, he devours content and so yeah, he's very impressive.

Turner Novak:

Well, if he's listening right now, I'd just like to say hi, thanks for listening.

Ed Lando:

I hope he is. Hi dad, and I will read the books that you recommend.

Turner Novak:

Maybe what you could do is you could ChatGPT him, you could use AI to summarize the stuff. That could be the thing.

Ed Lando:

Yes, although I refuse. I think AI is actually very cool and useful, but I refuse to use AI to write because I love to write, and I don't think that it'll write better than me, but maybe I'll be wrong.

Turner Novak:

I'm kind of in a similar position with it where, I don't know, I don't really know how to explain my relationship with AI. We've had, I think the two guests before this, we've had a guy named Mike Murchison at Ada. It's like this AI-powered customer service product. The idea is it's like an AI agent that just lives in your Slack and your email and all your customer support channels. It's like a team member. Like I said, a true AI agent that's on your customer support team and you work with it.

Ed Lando:

We invested in one of those, which hopefully, is better and which you should use instead. Yes, just like that.

Turner Novak:

We had a really interesting conversation just about all these different ways he's seeing AI is changing software. It's all super interesting and I do get it, but I'm also, specifically with the writing, I'm definitely the person who I enjoy writing. It feels like it's hard to give it up to someone else to do it, and you feel like you're still better than it, if that makes sense. I feel like there's some areas where like coding, I feel like it's an objective thing. I feel like if there's a specific thing, you must follow a rule and there's the structure and you just know when the AI does it and it just matches your bar, but for these qualitative things, maybe writing.

Ed Lando:

We're working on a robotics company right now, which I'm very excited about, and people, like a lot of the general public has a bleak, dystopian view on automation, like the robots are coming, they're going to take our jobs and all that. I have a lot of respect for people who do difficult jobs in general. I think that there's some people, the way they do their jobs is better than any automation. A lot of people for some tough jobs don't really like them that much. For example, one example is I find, I don't know if you've ever had a case where you're in a car and you're in an Uber or something and your driver is not very good, they're not paying attention, they're texting.

Turner Novak:

Trading stocks.

Ed Lando:

In some cases, they're trading stocks or they're watching a movie on an iPad. I can understand that, that's a very tough job. In a couple of cases, I just politely ask them, "Hey, do you mind? I don't feel safe. Can you please focus on driving?" That happens, and I get like, I'm like, "They shouldn't do that job because they don't seem to be enjoying it. I shouldn't be in that car because it's dangerous. I would rather be driven by a Waymo." There are other cases where the driver is so good at what they do that they really care. They give you incredible customer service. They drive really well. I like it when they drive a little aggressively. You know what I mean? I think, wow. Legally, obviously, but just good European driving. I grew up driving in Paris, so like aggressive. Not just decisive, aggressive.

I think you've probably had a driver like that. I think those are better than machines driving, which will sometimes, I was just in San Francisco, sorry to go on a rant on this, but my friend picked me up in Waymo and we were going to dinner. The Waymo took another five minutes because it did a right, right, right around something that made no sense when it should have done something else. I don't want to live in a dystopian world where the machine is governing me in every way. The point is I think automation can replace a lot of jobs that people don't like having and that are dangerous and unpleasant and that there will be companies that will help people retrain and find other jobs that are better. I think in some cases when people really love their craft, I'm pretty bullish that machines will not replace them or will only augment what they do.

Turner Novak:

I think the augmenting what they do is like, humans will always need to do something and it will be, I mean, if you just think about the way that AI is changing the world, it's usually just like it makes our existing software better. If you go back to the 1940s, when you talked earlier about an accountant, the accountant would by hand do your books and do your taxes. It's like, you probably want your accountant using software, using a computer and using the internet to deliver it and submit it and not by hand. It's the same thing. It's like, okay, well, it's just the next wave of software is just smart software that just helps your accountant do better and more work, it's like they should be using it.

Ed Lando:

Funny you say that. It sounds like you're almost plugging this, but we're actually building an accounting AI company with the French team.

Turner Novak:

Oh, interesting. Okay, so maybe that's a good transition. You've indicated this, you've been dropping the hints all throughout the whole episode. I feel like we're like an hour in here and we're like, all right, we're going to finally start talking about this." You've built a bunch of companies and now at this point it sounds like you're building a ton kind of all at the same time, incubating them. So what's the accounting or the accounting AI company in France?

Ed Lando:

I wouldn't say a ton. I have played around over the years with starting new things and I've sort of tried to figure out what is the correct number to start where we can do a really good job and build things that are successful. I think we started, I've already helped start more than a dozen companies over the last 10 years and unfortunately they've not all been successful, but have learned about, I think, the right number and perhaps improving the areas that we go into and how we assemble the teams and all that stuff. But the general overview, is we have part of our team in Paris, as mentioned, I'm proudly French. Ben, who introduced us, who put us on a thread, who invests with me is in Paris, so is Jules, and Ben also loves building and we've had success helping start a couple software companies over the last few years.

We helped start a sales tax company called Zamp, which is a much better version of Avalara because we were using Avalara at some of other companies and we could not believe that they were worth eight and a half billion dollars when the product didn't really work and it wasn't a good experience. We decided to build better version. The initial product was built by this engineering team that we have in Paris that is amazing and they're great at engineering, at product and all that stuff. So we have a couple of other areas that we're building stuff in right now. Boring and yet exciting B2B software stuff that is fairly early on just in cool areas like certain industries that we think deserve a little bit more automation. We're doing sort of a software to improve the workflow of accountants and not that much to say about it at this point, but we're building a couple new things there.

And then as alluded to earlier, we're also building a couple of deep tech companies, which I find very exciting. We've been working in a robotics company for the last year and a half with the founder of... I teamed up with the founder of Bear Robotics, which is pretty much a unicorn at this point. We became friends about two years ago and we're building essentially, in our opinion, a smarter version of the humanoid robot, which applies to certain verticals like warehouse automation, backend automation for QSR restaurants and things like that.

Turner Novak:

How do you balance just having so many things? It sounds like maybe there's four things, five things, just how do you think about just balancing it all?

Ed Lando:

Well, number one, I'm not yet married and I don't yet have children, so I think that helps.

Turner Novak:

There you go.

Ed Lando:

And essentially, I wake up, I work out, I work, and I do it again. Sometimes I'll have a nice glass of wine because I like wine.

Turner Novak:

Do you sleep? You didn't mention sleeping.

Ed Lando:

Yes, I do sleep.

Turner Novak:

Okay, that's good.

Ed Lando:

But we do have some pretty crazy hours at Grado. But no, I think that we, essentially, the answer is we have, people say this, but in our case I think it's true, we have a very, very good team and they work super hard and it's almost like we're all, I think, quite close. And Ben for example, helps lead several of these new software ones, and in the robotics case, Bren is sort of the brilliant roboticist who knows how to build them. And we have other great people on our team like Annie and folks in the US. So it's the right folks on our team and then sort of assembling great downing teams for these companies that we build.

And the other answer is when I speak to people, I feel very lucky with what we do, but when I speak to people who are maybe in some cases in more traditional jobs and kind of bored of them, corporate jobs, it doesn't feel like work. And a lot of these interactions I have with people are on iMessage and I don't really use Slack that much, and we just sort of enjoy what we're working on. And so obviously some things are stressful as usual when building a business, but it's just a continuation of the day. It doesn't feel like work, and so it doesn't really stop.

Turner Novak:

Yeah, I mean that's definitely the advice I always give people. Is like you should be trying to do things that don't feel like work, as cliche as that is. But it just makes it more fun and makes your life more interesting. I've had jobs where it's like you have the bullshit meetings, like you have five recurring meetings every week for an hour at these specific times, and you don't do anything in them and they're just not... Your job is you're in charge of a spreadsheet, that is your whole job is updating a spreadsheet,

Ed Lando:

It's performative. We actually have another company for spreadsheet automation.

Turner Novak:

Amazing.

Ed Lando:

But no, you're right. And one of my biggest fears, I loved where I went to school, I'm very grateful for Penn, and I went to you Wharton Undergrad and it's an amazing school. But one of my fears there was when I was 18, I had just got into campus and one of the first things that my friends down the hall told me is like, "Oh, there's an on-campus recruiting session for banking if you want to come to get an internship for next summer." And I was like, "Okay, what do I have to do?" And they're like, "You got to put on a suit." So I was like, "Okay." I put on a suit and I went there and there was some banker from, I forget, one of the big banks who was like, "So do you want to do investment banking or do you want to do private wealth management or whatever?" And I was like, "I have no idea what any of this stuff is. I'm 18, I just landed here from Paris. I don't know what you were talking about."

But in some of these classes I found them very interesting like finance and stuff like that. But in others I was just like, "I don't want to update spreadsheets as my job." And as an investor also, I don't want my only point of view on companies to be the result of a DCF model. I'm sure some people can do great discounted sort of evaluations of companies and do an amazing job. I don't see what the edge is of one person versus another in that. I think that I wanted to do something where you can actually... It's a luxury. I feel very grateful. And not everyone has this luxury, but I want it to do something where being a unique individual, you can express your unique self. I think that that is the ultimate goal of having a job, it's to not be replaceable.

Turner Novak:

Yeah, that's interesting. And to your point about DCFs, I think you need to know what the DCF looks like or will compute, but it's not going to be any different than anyone else's, right? You just need to generally know, oh, this is what it's roughly going to look like. And to our job is probably like, oh, we just met the guy or the girl who's going to build a company that's going to produce this DCF in 10 years. We met them and believed in them before anyone else and the DCF will be built in 10 years when there's actually something there that a DCF can be built on.

Ed Lando:

Exactly. It'll be built eventually when there's actually a business and a lot of people know how to cut and chop and analyze a business, but not many people can just make it happen. There's one thing, side note I'll say is, I don't know if you saw it. I watched parts of the Magnus Carlsen podcast on Joe Rogan, which I thought was really cool, because I like chess, and you could say chess is a lot about memorization and you learn openings and it's not that original and it's similar to doing a discounted cashflow model of sort of a company or writing software. What's that unique about the thing? But in some cases, understanding the rules a little bit is the sort of pre-requirement for being able to innovate on those things. So Magnus Carlsen understands all the rules and he's able to then innovate with these sort of novelty type things that only he can do because he's sort of a grand of those things. So anyways, that's a counterpoint for going through some of the more boring stuff initially.

Turner Novak:

Yeah, I like that way of thinking about it, because if you know all the rules, you can know when to bend the rules and know when other people will or won't know how to adjust to the rules or how they'll react to the rules, what it tells them to do.

Ed Lando:

It's like a remix. In order to do the remix, you need to take the original song.

Turner Novak:

Oh, nice. I like that. Well, I'll listen to that. That sounds like... I don't listen to a ton of podcasts honestly, as somebody who has one, and that's actually why I started. It was just like, I thought it would be kind of interesting, you just get to meet people. Maybe you would've agreed to talk to me for two hours and record a... But you just record the conversation and you just ask people stuff that you're interested about, you can learn things. And it's not like, oh, I have to... I guess because it's a podcast. I do put out an episode every week and I try to be disciplined about it and plan stuff out, but it's kind like you can just kind of do whatever you want. You can just have whoever I want on it.

Ed Lando:

But I'm sure it's a lot of work. Actually, my dad encouraged me. He says, "You should launch a podcast." And I was like, "It's a lot of work and I actually think you're doing a great job at it." I don't think I would be as good or have the time to do it. So to be done well, everything requires a lot of work.

Turner Novak:

Yeah, I think it's kind of interesting. You got to find ways to the point about bending the rules, the rules are the current meme or thing in VC or tech would be everyone has a podcast and none of them are very good, right? So it's like, "Okay, well what if you just try to make a really good podcast and then you kind of break through the noise." So that was kind of my thinking, I guess. TBD, I mean, I'm working on it.

Ed Lando:

To your point, I think everything looks from the outside. There's a lot of people in the world and, I mean, there's a lot, but there's not that many categories of opportunities and startups and venture capital are one, but everything can look like a red ocean if you just look at it from far away. But then very few people actually do what they do well. And so yeah, I think again, when you invest in a company and you actually like the person you're investing in and you actually sort of believe in what they're doing and it's not about who else is investing and the social proof and the dynamics of the round and they're going to raise their cap two days later because of that, but you like the person, you're betting them and they're going to build a business. So I think there's a lot of secret places to be uncovered underneath the sort of veneer of red ocean and perfect competition.

Turner Novak:

One framing that I use for investing, I don't know if this is true for you, but I think about would I work for this person? Like if I was just looking for a job, would I take a job at this person's startup? Would I be their first employee or would I be a co-founder or something like that because that hits the lens of like, okay, they've got to hire. Do I think they'll be able to convince talented, smart, ambitious people to work with them, but also I'm betting my entire net worth and my salary on getting paid and compensated by this person. So then it kind of guide, do I think it will work? Do I think they're a good founder? Would I enjoy or would people enjoy working with them? Do I think it's going to be a good investment? That's kind of a rough framing that I use to kind of... It's not perfect and you think of other stuff too, but-

Ed Lando:

No, essentially by investing in it, you're in some way allocating part of your resources here, in some way kind of working for them or with them, and then they'll ask you to do things to help. So I think that it's a good magnet, it's a good filter.

Turner Novak:

Yeah. You mentioned before you guys move really fast and move quick on things. I think that's something that everyone likes to think that they do or wants to do better, and maybe some people move too fast and do it wrong, I'm not sure. But how do you think through doing that correctly? Like how do you move fast and be good at it?

Ed Lando:

I think first of all, my first answer is it's not as high stakes for the check sizes that we're writing where if, we're investing in a couple of companies per week, some of the investments are 25 to 50,000, some of them are low six figures. So it's not trivial, but we're not writing a $50 million check or a hundred million check into a company. And so we definitely make mistakes, but the cost of being wrong is lesser in a sense. And again, sort of the cost of, I guess, omission is greater also than the cost of commission. And so we can't say yes to everything and actually, people are surprised, given our volume, that we sort of say no to 98%, 99% of the things we see. We see a lot of things. But yeah, I think it's just a gut feeling type of thing where I've had tens of thousands of conversations at this point and I think Jules, well, Ben has had thousands or at this point and so has Jules, and we don't think that much.

I think it's more kind of a visceral thing. That's our pitch. If we ever raise from LP’s it's like we don't think that much. It's more like “yeah, we got to do it.” And for example, the other day Ben and Jules were pinging me, they're like, "Edward, you have to jump on a call with this person." They met this person. I think Jules did a great job hunting him, literally pinging him over and over and over until he answered and then Jules talked to him, it was like, "Talk to us." And yeah, he's great at that. And then he's like, "Edward, you got to talk to him." And they didn't really tell me that much about it and sometimes he does send me sort of a write-up and so on, but I just got on a call, video call with him and I was like, "I get it." I was just like, "I get it. He's got this sort killer energy that we're looking for." And again, it sounds very naive, but that was the diligence, I believe. And so we’re investing in him, we just felt it.

I do think what I love about it's that it is a very intuitive thing. I think some people are probably more intuitive for people than others, and some people have a greater innate ability, let's say with numbers or stuff like that. I think TBD, whether we're great at what we do, again, we're patting ourselves on the shoulder a lot, but this is kind our approach. We definitely feel things and I think it's an interesting way to look at the world and at companies.

Turner Novak:

It sounds like trusting your intuition on that's a good way to move faster is just you don't question yourself.

Ed Lando:

A little bit. A little bit. But we trust our intuition a good amount. Another example, I obviously will not name, will not name. But recently Ben pinged me about another company or founder and was like, "I think this person's very impressive. They say they have a lot of traction but unclear." He's like, "Can you talk to him because I have an impression? I don't want to tell you too much, I don't want to bias you." And I said, "Okay." And so I got on the phone with him and 10 minutes in or five minutes in, I messaged Ben and I was like, "This person is a charlatan." And I was like, "I think this person is a charlatan." And Ben was like, "I know what you mean. And I also had the same kind of impression, but I'm not a hundred percent sure."

And so there are a few cases like that because you talk to companies early on, they're like, "We have a team or team of one or two or three. We've got this cool product." Maybe in some cases, "We've got traction or contracts with this or that." And you're like, "We're not sure." And so then the question is what do we do? But I just revert back to just trust your intuition.

Turner Novak:

So then how would you do it on the building side? Obviously, you've got to make fast decisions if you're working on so many things. Do you have a framework or just a process you go through or just a thinking of, okay, the way that you act fast move with haste and speed on the execution side?

Ed Lando:

Yeah, well thankfully on the building side, I found that, and, again, we'll see we end up being as successful as we hope we will be. But so we've helped start Misfits is already kind of a couple billion company at this point and it's done great, and that's in great part due to Abhi who's running it, who's done the hard work. But thankfully I'd gotten to be a part of that and it's been amazing. And then there's a couple other companies that I've been involved with early on or help start, like Zamp is doing really well. It looks like it's in an awesome trajectory. The robotics company Kinesis is doing really well. We have others that are doing well. And so when we've helped start a payments company, I helped start a company called Goody in the gifting space that I actually ran for a year and a half, which is doing really well.

We're building a new healthcare company right now. So all these are different areas, but I find that it's the same thing. It's just always the same thing, which is you try to have a pretty clear thought, opinion on an opportunity, and then you have an initial set of people, someone usually leading product or engineering and people helping with operations and making sure that the ship runs smoothly. And then at some point, not always immediately, but at some point a great force driving the thing forward as the CEO. And then you have to attract other people beyond that that have good chemistry with this initial set of, let's say, three to five people and that work well and hard and that are self-motivated. And then you got to get some resources and then you got to make some progress towards whatever your metrics are or whatever your goals are. And then you probably have to get more resources. And it's essentially kind of like, it's the same thing.

And it is a funny thing where there's sort of a couple different types of founders or CEOs, I think, and there's a few good books on this, but there's the operator CEO, who's almost like a COO in a sense and that person is in every detail, and often CEOs should be in every detail, but that person's in every detail, understands every line item. How much am I paying for this? What's the exact sort of contribution margin for that and so on. And there's kind of like the capital allocator CEO. And the capital allocator CEO is kind like the investor minded CEO who might be a little bit more out of the weeds or a little bit more in the cloud, but understands, "Okay, we need a theme for this, person for that, we need resources for that. We need to allocate some of our resources here." Anyways, the point is I think it's a lot about just attracting some really good people early that have good chemistry working together and working with urgency towards something.

Turner Novak:

Yeah, it sounds like having a good plan of attack or you need to know the steps or the goals or milestones, you need to go to just the couple most important things. It sounds like maybe that's something you're hitting at too.

Ed Lando:

Yeah, I mean I think, look, if we talk in a couple of years and we've started three or five-billion-dollar companies, maybe I can come on another episode and I can lecture people and sort of-

Turner Novak:

Break it all down.

Ed Lando:

... I can act like I know everything. I think right now we have a couple of things that are doing pretty well and that have some good momentum. And again, what I'm surmising is that it's a lot of the same thing. It's just like =you want to build a company in insurance space. Sometimes we know a lot about the opportunity, sometimes we don't. Sometimes we know about it because it's like we were using the sales tax software, it sucked. So we started Zamp. Sometimes we're like, "We love automation. We think there's something incredible to do in automation. Let's team up with someone who really knows robots like Bren, can you see?"

And then Bren's an amazing engineer. He's great at attracting talent. I've helped build a couple of companies and there's always the same motions of building a company. Cool, this robotic company is going to need customers. We need someone to help lead sales. We need to close some warehouses. We need to get some sort of pilot signs signed. We need to have people help implement this robotic solution at the warehouses. We need to hire more engineers. We need to work on the product. We need to know what product we want to build by next week or in three weeks. We need to go raise some more money. So it's a lot of the same motions no matter what company you're working on. And obviously, investing in a lot of companies influences how we look at building companies and building companies influences how we look at investing in companies.

Turner Novak:

Yeah, good feedback loop. Are there any things that you see people get wrong often? Maybe it's lessons you've learned personally or through investing stuff? Just maybe specifically on the building or the incubating side, if somebody were to ask you like, "What advice do you have for being incubated companies?" Is there common pitfalls you see people run into or maybe that you've ran into a couple times?

Ed Lando:

I think, well, by the way, a lot of people want to incubate companies. It's really hard. Like everything that people want to do well, it's really hard and unclear. We'll see if we're successful at it.

Turner Novak:

So yeah, maybe that's an interesting way to start the question or the answer too is why should you or shouldn't you do it?

Ed Lando:

I don't think it's that good of a strategy to incubate companies because I think it's already really hard to build one company well, and I have gotten so much criticism from investors for this model that we've done for a long time of we don't believe you can attract the best talent, we don't believe that you can do this or how do you allocate your time or whatever it is. I think the results will speak for themselves. Like our goal is to build a couple of largest companies in the world, if we do that, then we'll have been right. But clearly some people who are amazing and who everyone knows, whether it be Musk or others, have helped build several of the largest companies out there. Often they've started with one big success and then that big success has given them know-how, resources, ability to attract talent, ability to attract more resources from investors.

So I still think the dominant strategy for someone starting off is pick something, pick an idea that you have a pretty strong opinion about where you have some sort of specific understanding that most people don't have and where ideally you can get traction pretty fast. Go get traction, execute, succeed, sell your company or IPO either, or run it forever, if you happen to have stumbled into a Facebook or something, and then either hang out and become an angel investor because you've already made money and it's painful to build a company or then go do the incubating thing. But I think almost no one can incubate things because it's really hard.

Turner Novak:

So you should probably only do it if you really know what you're doing it sounds like or if you've kind of gone through the motions quite a bit.

Ed Lando:

I know a lot of VCs that manage billions of dollars that say, "Hey, we want to incubate stuff, or maybe we can team up on one of them." And they're like, "We could start off this company with $5 million or 10." And I'm like, "Jesus, that's more than what we've started any of our companies with. That sounds amazing."

Turner Novak:

Yeah, that's like what we deploy in a year or two-year period.

Ed Lando:

Yeah, but a couple of times I'd sort of explored it with them and they're so dogmatic with their way of looking at which type of talent would be the right caliber for the founding team. And they're like, "Oh, if you want to build in this space, we have to get someone who used to work at ex-VP of something at this." Of course that has to be the right CEO for that. It's just dogma. It's like the right ex-VP of this is now the perfect CEO for this new company instead of, frankly, a lot of the best people that I've worked with have come out of nowhere. They were not the best, they were not the ex-VP of whatever. There were just very hungry self-taught folks who probably had a couple years of work experience somewhere very intense and brutal where they sort of learned how to work 100-hour weeks, who were very smart and who figure it out.

Rohit at Zamp like came from Insight and came from private equity and was awarded undergrad and dual degree engineering, and he wasn't the ex-VP of something something at Avalara. We ended up hiring several of those people there and people from other competitive companies. But to end up my rant, whether you're investing or building, most people think that greatness has to come from a pedigree place of like of course, you have to hire your founding team from this thing. And those are the rounds that become oversubscribed very fast. And a lot of the greatest companies are anomalies and they come from, who knows?

Turner Novak:

Yeah. Well, so it sounds like the importance of the people and the team, it's kind of like shone through the whole conversation. What would you recommend like if I'm a founder, maybe I'm a couple founders, we're three people, two people, whatever, solo founder, whatever. I'm trying to hire my first 5 to 10 employees. Can you just maybe talk through how you would approach that yourself and just what you would think through and how you would do it also?

Ed Lando:

Yeah. I've done this 15 times now, and actually it gets harder after a while. So the way you start, if it's like your first company, I think it's easier because you have hopefully a bunch of friends from school, from back home, hopefully if you went to a good school or from your previous job, if you worked somewhere with smart people, and you're like, and often I ask people this, I'm like, "Who would you want to hire who you know who's a good friend of yours?"

Turner Novak:

Yeah, I feel like everyone has this.

Ed Lando:

"Sarah from this thing and Mike from this thing are like beasts. Of course I would want them, they would be my first phone call." I'm like, "Cool. Then go bring them on." And usually it's like your roommates or your best friends from this or the person you worked with that company, and those are your first five people on your team, or first three to five. And then you make some progress, maybe you raise a little bit of money, and then so you become a little bit more real, you have a website, maybe you have a couple customers, you raise a little bit of money and then you go paying fancy industry person. So if you're building software for, I don't know, give me an example. You're building software for something.

Turner Novak:

Accountants or-

Ed Lando:

You'd be like, "Well, okay, maybe someone from QuickBooks would be good or Intuit, right? Great. So how about the VP of product from there?" And if it's just you, first time entrepreneur would be hard to hire the VP of product at QuickBooks and unclear whether you'd want them. But start out by hiring your roommate or teaming up with your roommate, teaming up with Bob from your previous job or Jane or whatever it is. And then get a little bit of money, get a little bit of traction, and have maybe the VP of product at the fancy company give you advice and then check in with them once in a while. And then two months later they're like, "Wow, you made a lot of progress and what you're doing sounds exciting and you've closed some investor capital and I'm tired of working at a huge company. Fine, I'll join you as head of product at your startup."

And then you get the head of product of the fancy company that joins you. And then that person usually has worked with a bunch of other great people and then you essentially get them to maybe recommend some folks because it's great to hire teams versus only individuals. And then you compound from there. But usually you don't start with the fancy person. You start with people that you know and trust and who you've known for a long time who are willing to grind with you.

Turner Novak:

So you do recommend the fancy person eventually once you get there?

Ed Lando:

I recommend the sort of industry person as higher number, higher as five through 10. But for the first couple of people, I recommend your good friends who you like to grind with and who you want to be in the trenches with.

Turner Novak:

Okay. How would you suss out somebody who is coming from a bigger company and figuring out would they be good employee number five at this grind it out, start it up?

Ed Lando:

I think the most important thing is to make sure that they don't want to be only a manager, and that they're okay still being an individual contributor. If someone thinks I have 15 years of experience or 18 years of experience, I'm too fancy to do the work myself, but I want to lead a team and I want to hire people and tell them what to do, I don't think they're good for a startup. I think that the best people for a startup, they might have a really good resume like that person, but they'll get their hands dirty and then they will build out a team.

So an example is we just hired an amazing head of BD at the robotics company, and that person previously was at another company for seven years where he helped lead them from couple million of ARR to a couple hundred million of ARR. And when he joined our startup, which is now 18 people, but when he joined, he was like, I wanted to find out. I was like, how quickly would you want to build out a team to give you leverage and so on? And he was like, "Oh no, we don't need that right now." He's like, "I can build a pipeline. I can do a lot of these conversations myself, close some deals and then we'll close some more money, we'll close some deals and then we'll build out a team under them."

So it's really this of, if you've seen one of my favorite movies like Troy, you want like Achilles to take the beach with his soldiers and you want Achilles to be like sitting at the back of the boat being like, "You guys storm the beach, I'll sit here." You want that sort of initial senior hire to do the fighting themselves, alongside the soldiers, and then they can scale. But that's how you earn the respect and also that's how you hire someone who's not essentially useless because hiring someone who's just a manager initially is not useful. And frankly, it might never be useful.

Turner Novak:

Yeah, and it's such like a suck of capital. Like let's say you've raised 3 million bucks and you got to pay them 300 grand a year, all in just like the cost of salary, benefits, sales tax, like their computer, rent for the building or whatever. That's like 10% of your capital. You put 10% of your balance sheet on a bad hire, that can kill you.

Ed Lando:

It totally can kill you. And then of course, they'll attract other people who are not that good. But I would challenge you to say like, take any successful company, very successful company. Give me an example where the hires number 100 to 200 are better than hires number zero to 100 or even zero to like 20. And in some great cases, there's some great companies where hires, the team was still amazing at higher number like 800, but then like almost every company becomes kind of diluted in a lame way when they get to a thousand hires because they just bring on people who are more bureaucratic, and so it is something to be allergic to, I think. Otherwise, they up looking like a sort of large government agency or something.

Turner Novak:

Okay, that's fair. You tweeted the other day, you tweeted, "I love AI." What's the story with that?

Ed Lando:

Oh, that was just a little nod or wink to one of my best friends, Reilly Opelka, who's one of the best American tennis players. He's become very good friend. He's invested in several of the companies that we're building, and he actually kind of looks a little bit like Erlich Bachman from Silicon Valley. He's definitely a handsomer or a taller-

Turner Novak:

Erlich. Okay.

Ed Lando:

I mean, he's got the big beard. He's like a handsome or taller version, but when he was injured, he literally did a trip to San Francisco and met with some robotics companies. And this is a guy, he's a seven-foot tall tennis player, used to be like number 17 in the world, and he would go into these startup offices to meet with them and talk about AI and robotics, and he would sort of like opine on their product strategy and so on. And the whole time, he was making fun of himself knowing that he doesn't really have much of a background to be able to comment on this. But interestingly, his thoughts and opinions are actually always very sharp and valid, but he loves making fun of himself. And often, he'll call me up and talk about startups. And of course, neither of us find anything as exciting as AI. AI of course, is the most exciting thing in the world, as we know from all the investment activity going on there.

Turner Novak:

Yeah. I feel like maybe there's like a little bit of humor in that response or-

Ed Lando:

Yeah, yeah, of course. I actually think AI is cool, but at any point in time, I think that the crowd gets excited about something and the number of rational deals that are getting done around, or the excitement around this, and then there was the last thing before that and the last thing before that, it's very funny, so yes.

Turner Novak:

So how do you navigate that? Do you have an immediate allergic reaction to whatever the current thing is? Or how do you approach that and just like thinking about as a founder, I mean maybe it's good to build something, it's hot, but as an investor, maybe you want to invest before it's hot. How do you manage that?

Ed Lando:

Well, as a founder, we try to build like two types of things. We try to build some things that I would say fall into a little bit the consensus bucket where we're like, "You know what? There's a bunch of players out there. It's a hot category, but we think we can out-execute because we work harder and we're more intense and we're better at raising money, so let's just go and out-execute people and kind of some of these obvious ideas, like the accounting AI thing that we're going to do and some of these other things, it's not a huge secret, but the devil will be in the details and we think they're large categories and we can out-execute people.

But then there's other. I also love the non-consensus things, and I think the non-consensus things or like skating to where the puck is going to be is where you can essentially become legendary, right? I think to OpenAI's credit, when they started working on OpenAI, people were not talking about it as much, right? And right now, I don't know when that was, like 2015 or something, but right now, there's the equivalent in other industries. And so for those, it's like things that we find interesting and that we care about. Like for example, I've always cared a lot about the, quote, unquote, "longevity space," however you call that. And ever since I was in college, I've known that I wanted to do stuff in that space. And I've, over the years, read a lot of books, met a lot of people, and I followed. Over the last two years, there's been a lot more tension around Brian Johnson and some Netflix shows around various longevity things, and everyone these days is doing sauna and coal plunge and fasting and being careful about what they eat and all that stuff.

But I've been sort of interested in that area for a while. And we've invested in some pretty intense deep tech companies that are trying to help us live longer through maybe replacing different parts of your body that are falling apart and stuff like that. And I think they're not really getting much attention right now because they're very nascent and a lot of people don't like to think about it or have not started thinking about it. But the people who are leading those companies are some of the most impressive folks that I've met. And it is possible that in a couple of years, they will already be able to show something and people might be like, "Oh, I can get a brand new organ or other part of my body or something as it's failing." Sure, sounds good. I would like that.

There might be a whole craze around like deep tech bio companies, but the correct moments to do the non-consensus thing was earlier on. So I think whether you're building or investing, we definitely participate in some of the hype things, but sometimes we think the hype is correct. It's almost like that quadrant of the quadrant of like consensus, non-consensus, right and wrong. Obviously ideally, you're never wrong, but then you can either be consensus right or non-consensus right. And so several good companies I've invested in were kind of hype early on and I got to participate and it was great and we did well, but several of the best investments I've made and most legendary things I've been a part of, were initially non-consensus.

Turner Novak:

Yeah, I think you go back. I did a presentation to my college, I presented to a finance class like what is venture capital? And I was looking at some old data. And like Amazon raised a million bucks at, I think it was 5 million posts money or something in 1995 in like videos. A million bucks at 10 million posts or something. Facebook was 500K or something at-

Ed Lando:

500 for 10%, so five posts, yeah.

Turner Novak:

Yeah. But then you go back, it's not like Facebook was like a shitty company or a shitty asset. Like they had a couple million users at that point, I'm pretty sure. Maybe it was like desktop only, but there was a lot of noise around social networks and it wasn't the fastest or the most attractive or best-looking social product or social network at the time, but it ended up being right, but it was non-consensus at the time.

Ed Lando:

And look, without taking too much particular shots at people, like you hear about let's say several of the founding employees of OpenAI who leave and who start new companies, and those companies get backed immediately a couple billion or a couple tens of billion valuation. I don't know. I'm sure, I can imagine what the discussion was, which is like this is an infinite TAM. That's what was said in the room. It's an infinite TAM.

Turner Novak:

Yes. That's the most dangerous word.

Ed Lando:

Infinite tam. There will be multi-trillion dollar industry here with these sort of infrastructure AI companies. Even if we're doing it at 20 billion or 30 billion with no product or no traction, we still have at least a 100X and like this is the company, it's the last company, whatever, so we'll 100X our investment. That's probably the discussion that went in the room. I personally prefer investing in a company at a two cap and doing a 1,000X on that with my own capital, but that's my way of investing. So we'll see. But that's what happens when you don't manage billions of dollars of other people money.

Turner Novak:

Yeah, different incentives. You play different games.

Ed Lando:

I mean, I will say even one day, if and when we manage billions of dollars don't think we will invest in a particularly frothy way like this.

Turner Novak:

I feel like your strategy does have to change, though. If you look at Berkshire, like Warren Buffett, I think he's classically said, like, "If you put him back and you only had a million dollars, he could put up 50% returns a year." Because at this point, in order to move the needle, he has to invest in like one of the hundred largest assets in the world kind of a thing. So it definitely, it changes what your opportunities set looks like as your capital base goes up.

Ed Lando:

It does. It does, yes. Because if you have, let's say a billion dollars, and if you have a billion dollars and let's say you put in 100K into a company and you were right and you back them early and it becomes $10 million, which is amazing, it doesn't really move the needle that much, which is kind of a problem.

Turner Novak:

Yeah, you'd have to do that 100 times to return the fund.

Ed Lando:

You have to put more capital to work essentially, then.

Turner Novak:

And if you're investing 100K at a time, you have to do that like, I don't know, 10 times a day to like invest the whole billion and like-

Ed Lando:

But the part that I disagree with large funds is that there's always this trim of putting more capital to work because of what we said. However, let's say you buy 7 or 10% of the next trillion-dollar company today. Even if you only, quote, unquote, put to work 200K. Who cares? You have capital, so you actually maintain your ownership throughout every funding round and you end up with 7 or 10% of a multi-hundred billion or a trillion dollar company. Are your investors not going to be happy that you might have to deploy more capital to prove that you have to deploy more capital? But the answer to the thing is, I think this model that we're doing actually scales to managing billions of dollars because of the power law, because of like you essentially get 1,000X or 10,000X or more, so it can actually still work even if you keep investing small amount of money in a lot of different companies.

But to give one example to support the disruption of the model. One of the other people that I really admire is Bernard Arnault in France. And I admire of course, that he managed to succeed in an environment that's very difficult for businesses, like it's not at all as friendly as the US. But the way that he started is he found that asset, a distressed asset with Dior and Dior was part of essentially like was bundled with a couple of other assets and he took Dior, brought it back to life, got rid of the other assets. It started spinning up, it started creating cashflow, and then he got another one. And then, he realized that if you had another luxury brand, there were economies of scale because you could share back in operation, share marketing, share other things, and then there was more cashflow and you got another one, another one. Today, that group is worth couple hundred billion. It's one of the most valuable or the most valuable private, or-

Turner Novak:

I think it's public.

Ed Lando:

Sorry, public companies in Europe, but he still loans like a big piece of it. And today, I forget exactly the price... Originally, I think it was like somewhere between 50 and a hundred million, but today a target of that size would be too small to be interesting to them. And so that is sort of disruption at work where if you wanted to create the new LVMH, you could probably find a great asset in that price range for 50 to a hundred million that they could not be interested in because it wouldn't make sense for them. So thankfully, there's still always a way to disrupt incumbents.

Turner Novak:

Yeah, you're almost doing like bottoms up disruption to venture capital. You're going at the very bottom of the market, the first check in, the smallest valuation, like cheapest, lowest end of the market per se, and then you can move up. But I think another interesting thing is I've heard Sam Altman's actually said going back the YC days, like he wishes he could back 10,000 companies a year at YC because it opens up the opportunity of entrepreneurship. And if you're investing at a super low entry point, you have just a ton of companies like that, and you just increase the basket size, you have a higher hit rate, like you get more things that hit in the portfolio, and if you have reasonable entry points, it works. And even like a single check hit 2, 3, 4 million posts in somebody that no one else believes in can return the whole fund or more. And you're doing it so many times that you will have a couple of those and it will continue to return the entire pool.

Ed Lando:

Exactly. I think the model works at scale. I think the part that breaks actually sooner than the economic model, like even if you're managing billions of dollars, I think the model works and you can do really well or even probably tens of billions. But I think that what breaks is the brand and the attention to detail, and I'm not commenting on anyone in particular, but I'm saying if we get to the point where we have thousands of pre-seeds where we are actually the first investors, and I think we will get there, but I think the hardest part will be how do we continue to be a brand that people love and want to work with as like they're the best, like when they decide on you they're the best.

And actually someone who's done a really good job at that is Sequoia, because whenever they invest in something, people freak out and everyone wants to invest in that company. But if you go to Crunchbase, Sequoia has thousands of investments. They have thousands of investments, but they're louder about the bigger ones. But a seed round-type of thing from Sequoia, there's been a good amount, I think, I forget the latest, but I remember it was like 1,500 or 2,000 investments or something like that. It's like that's still a good amount of companies and they have a really good success rate, but they've managed to not really dilute their brand in doing so, which is fascinating.

Turner Novak:

Yeah, that's actually pretty interesting because someone could just say, "Oh, I know Ed and Pareto, like they invest in anything that moves." But that doesn't mean anything to me as to somebody else, but you got to uphold that, keep that high bar, quality of the brand. It's like, oh, that actually means a lot.

Ed Lando:

The truth is, I said earlier, is we pass on almost everything, but we are very active and we hunt a lot of things and we get introduced a lot of people. So our quality bar is very high and I would say higher than all these accelerators and pre-seed funds and all that out there, but we just happen to see a lot of things. So you can actually probably make volume and quality work in the long term at scale.

Turner Novak:

Interesting. Yeah, I think it'll be cool to just see how it evolves for you guys because it's like probably one of the more interesting approaches anyone has, so I'm excited for it.

Ed Lando:

Well, maybe we'll do another one in a year or two and we'll see how it's going.

Turner Novak:

One thing you mentioned that I thought was kind of interesting, you've kind of hinted at like US versus Europe. What have you kind of found differences? Sounds like you've built companies in both of them, whether it's on the operating environment, opportunity set, just how do you think about US versus Europe?

Ed Lando:

Yeah. Well, so I'm a little bit of both. I'm partly French, I'm also partly Canadian. I'm now also American, which I'm very proud of. So I'm a third, a third, a third. And part of our team is in the US, part of our team is in Europe, and some of the cliches in fact, are not true. And in fact, they're kind of reversed where several of the people we work with in Paris in building companies and in investing work harder than a lot of the Americans that I know. Obviously everyone works really hard on the Pareto team, but some of the French people on our team are some of the hardest working people that we know. And they don't even do any of the stuff that people in the US do. They don't work out, they don't spend any time doing all that stuff. They're just at the office smoking cigarettes and taking zins or something and just working.

Turner Novak:

And just working, yeah.

Ed Lando:

They don't do any of the wellness sauna, working out stuff, they're just grinding. And so it's very interesting. But as far as the market, we definitely invest in some European companies and we're finding some really cool people there. And same thing, we can find them at low prices. And so that's exciting and we're going to double down on that. I would say on the building side, we're building American companies. It just so happens that a lot of our products and engineering teams are in Europe, and so same thing. There's some very, very talented people there. They're less expensive in comparison, and they tend to also be very hardworking, very loyal, so that's my general insight. And I definitely think that the markets are not exactly the same in the way that consumers behave. For example, like French people spend a lot less money on eCommerce, you know?

Turner Novak:

Oh, do they really?

Ed Lando:

Yeah. Well, also they have less money on average. But Americans will be like, "Cool. New coat for my dog. Subscription every month."

Turner Novak:

A new coat for the dog.

Ed Lando:

Like a different coat every month with like $150 per month. Sure, I'll try it. I'll sign up. And you could probably build like a $50 million revenue business on that pretty fast in the US.

Turner Novak:

Yeah, I could see like an influencer launching that. Like a dog, some like cute girl, like hot girl with a dog, yeah.

Ed Lando:

Exactly. But in France and Europe, people spend way less money online. They have less money, they spend less money. People will be way more careful about that, so eCommerce is just trickier for that stuff. But we tend to build businesses. It's funny because I focus on France because I grew up there. France, I think last I checked, is like around 70 million people, something like that. I forget exactly. I should know. But Sweden is smaller. And Sweden, it's a trickier thing because everyone in Sweden speaks Swedish, which is not very common at all. And French is still like a pretty common language in the world. So if you're a French entrepreneur, you're still kind of tempted to build for France because France is still a pretty big economy, and a lot of them launched there and then they're like, "Let's build for Europe."

But of course, building for Europe is not exactly the same thing because there's like different regulations for each country and it's hard. So it's a pretty fragmented, highly regulated type of one market after the other versus in the US... My point about Sweden was they've had to build abroad immediately because the domestic market is not that interesting. Versus in France, a lot of people still build for France because the domestic market is pretty big. But we don't do that. We only build US companies.

Turner Novak:

Yeah, I've definitely heard that analogy before, is the people in like Denmark or whatever or in insert random small, like it's unique language or something, you're kind of forced to go global quickly. I definitely see that.

Ed Lando:

If obviously people want to find me, they can find me on X, Edward Lando, and also I'm trying to write more and more. I love to write, and maybe one day I'll publish a novel. So if you want to subscribe to my Substack, it's also Edward Lando and it's linked in my LinkedIn. And usually also, I post what I write on LinkedIn, so maybe LinkedIn is the best thing. But yeah, thanks for having me. And again, I would say among the people listening, my favorite time to meet people, it's not when people say, "I have a term sheet for around," and we're looking for angels. I don't find that very interesting. We still do that, but I don't find it interesting. It's when they're like, "I'm just getting started and I haven't really raised any money, or I'm looking for a co-founder, or I'm even looking for an idea." That is the time where we thrive because we can help people find ideas. We sometimes build companies with them. We're sometimes their first investors. That's when we're more useful and more differentiated than a lot of the people out there.

Turner Novak:

Yeah, all the things you mentioned, we'll throw them in the description and people can reach out if it sounds interesting.

Ed Lando:

Cool. Yeah, this was awesome. I really enjoyed the conversation.

Turner Novak:

Yeah, this was a lot of fun. Thanks for doing it.

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