Ed Sim 9:34
New York, particularly in New York, right? Because everyone that started venture capital New York at the time came from the PE banking world, where they had spreadsheets and they relied on financial models. And the people in the Valley had always relied on, who are the founders? How technical are they? What’s the vision? How big is the opportunity? The only thing they really cared about when it came to money was, you know, how long will the cash last, right? Everything else was really related to how big can this be? And that was a different way of investing. And that’s when I met Bob lust and Bob was the only angel. He was the vice chairman of Smith Barney at the time. He literally was one the only angels on the East Coast. He put a significant amount of his money into every startup out there too.
Steve Brotman 10:14
Learn, right?
Ed Sim 10:16
I remember that, yeah. And he’s like, Ed, let’s, let’s start Dawn Treader and bring a Silicon Valley approach to investing in New York. Be First, be early. Find the people you know, building new markets and shooting for the stars. And that was it.
Steve Brotman 10:31
How did you originally meet Wesson? What was there? What was the genesis, a lot, how did that happen?
Ed Sim 10:37
I met him when he was at Smith Barney. He was head of the investment bank, and I had invested in another company previous to that. I don’t know if you remember air media, Mr David Rose, yep. And, and that was kind of a darling at the time. It was like it had this little device that took information. It took the wireless paging network connected to your PC and got you, you know, real time information. Stock quotes your email updates, etc, and says Smith Barney was doing a placement. And that’s how I met Bob. And then Bob and I became friendly with one another. We started trading, deal flow, and it went from there.
Steve Brotman 11:12
And just Dave Rose was like, this close to being Blackberry, right? Yeah, right. Absolutely. Could have just —
Ed Sim 11:26
Wow, amazing stories, right? It’s kind of like, yeah —
Steve Brotman 11:29
How did you grow up playing lax?
Ed Sim 11:33
I did yep, in Baltimore, my parents had emigrated from Korea. When you’re in Baltimore, you know, eventually, the only thing you do, everyone plays lacrosse, right? So I learned how to play lacrosse, and I started a very young age.
Steve Brotman 11:48
And that’s, that’s how you ended up in the Northeast.
Ed Sim 11:51
Yep, I got, you know, my high school team was one of the top in the country, won the state in the country, and then I got recruited. I didn’t play. I didn’t play to get recruited, just starting, recruited by a lot of the IVs and other team one programs. And ended up changing my life, kind of moving to the northeast, and then never moved back.
Steve Brotman 12:10
So I asked, because how does that color like your vision in terms of like, as you’re evaluating companies or startup entrepreneurs. Does that ever enter your consciousness, like this person’s an athlete or they are? Do you want to be an athlete? Does that ever do that? Or not so much?
Ed Sim 12:28
You know what? It’s not the fact whether you’re a d1 athlete or not. I think the question really is, as I’ve gotten older, is it that thing that you’re absolutely passionate and a specialist in, and how much time, like, what are you an expert in? Whatever that is, is it robotics? And you just spend all your waking hours obsessed with it. So I think for me, Steve was like the grit. I could be honest with you, it’s like I had a lot of catching up to do, because people started before me, and I just, I outworked people right and then, and that kind of put me on the map. And, you know, and you know one thing about sports, it’s like real time decision making. You screw up, you gotta wipe out your memory. Move on. You. You lose your spot, you’re not a starter anymore. Then what do you do? You’re gonna sulk about it. You can come back. And so I think the whole grit aspect is probably one of the most important things, as you know. I mean, how many times you get turned down, how many times you almost got a business doing this, right? So that to me, just understanding that and what it’s like, and that’s more of a real time voting machine, but in the long run, that, to me, is probably one of the biggest determinants of success for founders, for investors starting their own funds, like alpha and bolstered right? I know that you and I both talked about how hard it was to raise capital for both of our things, because we’re unique and novel and different.
Steve Brotman 13:34
Yeah, it’s that. It’s that true grit, um, you know, and just sheer belief in the sector, right? And with inception and investing, you know, how did you, how did you get that conviction? It sounds like you start out with Angel Investing, and then you work with, with Dawn Treader, then you had that realization that there was just a gap in the market that sounds like, almost like a little cliche, right?
Ed Sim 14:05
Yeah, it’s funny. It’s basically like, first of all, that’s what I enjoy the most. There’s something just kind of magical about meeting a founder with an idea and no product and just kind of on paper, and just kind of getting involved with them at the very beginning. And you know, that emotional journey, and that journey that you go on, you know, you build some bonds, you have some ups and downs. You know, lots of ups, lots of downs, but that relationship you build with founders of the years, to me is kind of what keeps me going and to see something and to believe that, hey, like to be that first true believer and to move with conviction. I don’t know if that’s just what gets me excited. And so that’s what I love doing. I know that some people love looking at numbers, some people love looking at metrics, some people love doing that. But I just love meeting founders that are kind of crazy, slightly wacky, willing to put their everything on the line to go do something. I mean, like, let’s talk about Rob Locascio. Do you remember when we first met him? Because both of us kind of did that initial round together? Yeah, he was in a loft. He had those Mac Peters hanging off the thing, and he had been playing credit card roulette. He had maxed out eight different credit cards and kept kind of balancing one from the other. But people like that, you know, those are the people that are going to create value. And it’s so exciting when I mean how excited. Where he went, not for us, but for Rob, when he went public, right? When he is kind of at NASDAQ, right? And, you know, that’s like that moment, to kind of recreate that moment every time in a new category, with new people, and watch how they change their lives, to meet their parents, right? Remember being Rob’s parents? Yeah, I don’t know. That’s what I love doing. And that’s kind of, yeah. Is there a gap in the market? Yeah, I think there’s a gap in the market. I think people don’t really want to touch things. They want to see a product. They want to touch things. They don’t call customers. But I think in the enterprise space, over time, there’s only so many things you can do right? You can provide developer tooling to write software faster and deliver that right? You can mod you can monitor this stuff to keep the lights up. 24/7, you can secure it, you can store the data, and then you have applications that touch the end user, either internally to make employees more productive, or externally to sell more or to manage customer relationships.
Steve Brotman 16:07
That’s it. And finding someone who’s really passionate about that is actually really hard about that type of stuff, to the point I have to tell you a story about Rob. And he reminded me, he reminded me, not a couple years ago about this. Is that how we actually met? He cold, emailed me his business plan, and I somehow I like, call them back or email them and say, listen, I’d love to look at your plan. I was living in Hoboken at the time with my wife, and my computer was like, frozen up, or I had viruses on it or something. And I was like, Rob, I’m sorry. I’d love to look at this, but you know, my computer screwed up. You know what he did? He sent his tech guy over to my house in Hoboken to fix my computer so I could read his business plan. That’s, that’s, that’s grit, that’s like going through walls to make that happen. But to find someone who’s that obsessed with infrastructure software that requires some tricks, but, but also, there’s sort of a dark side too. I mean, did you read, did you watch the Uber series on Netflix? I did not. Okay, Bill Gurley said, you know, there’s two types of, you know, he started out saying there’s two types of founders. There’s, at first, I thought there was only, you know, founders that walked on water and they developed, they, they, they actually were God, God like because they actually created miracles and proven miracles, and then later in his career is like, well, there’s this other sort of, other type of founder that, you know, sort of more, more cultish, with would, would not so pure intentions. And then he, you know, when he was asked, sort of by the end of his career, what did he think the split was, and he thought, he basically said, look, at least in the in the show, he said, I think they’re all, you know, they’re all cult leaders, in a way. What do you think about that? Do you think that’s, you think that’s accurate? Do you think that’s like 50-50, you think it’s, do you think, do you think it’s just who you pick, or what’s your what’s your experience been?
Ed Sim 18:33
For me, I don’t even think in those terms, frankly, right? I think, in very simple terms, I think there’s two kinds of founders, in my opinion, there are those that are all “steak”, and those that are all “sizzle”. And I say steak meaning that they actually have so much substance, because we only fund highly technical founders who code, who build shit. Because when you’re doing Inception investing, you don’t outsource that stuff. You need to live the problem. You need to solve it. You’re gonna code it yourself. Rob coded himself. Coded himself, right? I mean, that’s kind of what you do. And so I say that steak meaning that there is so much substance to what they’re building, you know, and how they’re doing it. But, you know, the sizzle founder is the one that can sell and market anything. They can sell ice to Eskimos. And you know, those founders too. But then you have to think back and say, Where’s the steak? And obviously, I think in a team, you got to have a little bit of both. You can’t just have all steak, because you’re not going to be able to sell to anyone. You’re not going to be able to tell a story and get people excited to hire anyone, to get an investor excited. But if you’re all sizzle, and people kind of say, Okay, let’s walk through the you know, how you’re going to code this kind of who are the first engineers you’re going to hire? And you don’t have that behind you, that’s going to fail too. So I think about in those different ways. Because I think when you start putting founders on a pedestal, it creates a lot of problems, right? So I don’t even think about those ways. It’s like, I think about it as people. We’re people. Steve, you’re a person. I’m a person. This founder of person, like, I look at my portfolio, like, Guy pajani, like, he’s a very interesting guy. Like, we funded his first company, Blaze, you know, which he sold, Akamai, and it was a nice return. It wasn’t kind of the, you know, retire return. And then he started to sneak right, and our MPs came back to us. He had this uncanny ability to take complicated ideas explained very simply to the right person, but then go dive down multiple areas deep if he had to go. Practical. So he had a very unique kind of skill set, and he also had this vision. And so what I like to say, though, is, like, guy never thought of himself as a personality. He just was a guy, and his company right now is probably poised to go public at some point in time. The next, you know, in the future, the last round they raised was at 7.4 billion. I’m still on the board. So I’ve been on that board from the very beginning of the journey, when he, you know, at inception, when he was itering on the idea. But he’s not a cult figure. He’s a friend, he’s a person. So I don’t know, I think Bill is a legend, but I just don’t like to think about, you know, those storytelling Silicon Valley terms. I think about just really people looking in the eye, building that relationship. That’s ultimately what keeps things going, and why founders come back to certain investors, and why certain investors gravitate to other founders, and why other employees leave their companies to join people again and again and again?
Steve Brotman 21:05
Yeah, no, I think, I think 90% of entrepreneurs are exactly like you said, you mentioned, and there’s this, there’s, there’s definitely this sort of other section, I think he’s talking more about, as as founders develop much greater scale and wealth, how some of that that might come out, which you and I probably don’t spend as much time with, but, you know, it’s a whole other conversation, I think, but, but that’s a really good way to Look at it, I think, in terms of, like infrastructure, like, when, when you said, Hey, I really want to just focus on infrastructure. You know, I think your typical VC is like, that’s so that’s so niche, so small. It’s one thing to do, Inception, investing. It’s a whole other thing to pick another vertical and be like, Oh, I’m just going to focus on infrastructure, right? Yeah, that’s pretty novel. So, like, what was up with that? How did that come out?
Ed Sim 22:03
Yeah, look, I started spending time through Bob. I started meeting IT executives. I keep Bobby The CEOs. But then say, Hey, Bob, let me meet the IT executives. So I started meeting IT executives, some of the largest, you know, Fortune 500 and they had a need like, hey, what early stage startups do you have? There’s this new thing called microservices coming out. There’s a new thing called, you know, Amazon, EC two, and this cloud thing. And, you know, blah, blah, blah, blah, blah. And by the way, I was just more listening to the problems of what they were thinking about. It wasn’t like they’re going to give me an idea to build a company, right? Because it goes back to the Henry Ford question. If I asked my customers what they wanted. They’d want a faster horse. And, you know, I kept taking these problem ideas right, and saying, Okay, how do I have the founder who actually is not even building the car, but the flying car, but how does he make it feel like a, you know, a faster horse to the existing customer with an upgrade path and and so for me, infrastructure was exciting because, and even with a live person, in my opinion, that was a horizontal play. And, you know, like during the Gold Rush, who made money Levi’s jeans, people that sold pickaxes and all the other stuff. So the infrastructure providers, I just felt like there is a comfort in being an arms merchant to being the person, you know, in any war, delivering value up and down the chain. And perhaps maybe the upside wouldn’t be as big as that one massive consumer company that you saw, but you could build a pretty big business. And frankly, I don’t think anyone really cared about infra, because what happened was we’d fund these infra companies, and you go downstream or upstream, whatever you call it, the next round VCs, we’re like, yeah, the only info companies you’re gonna ever fund are in Silicon Valley. Why would I find like, you know, sneak was in London and Israel, you know, at the time, right? People wanted guys to move in the early rounds. We didn’t give him his first three rounds before he got his round done. And so, you know, our big ID was in, you know, New York and Israel. And that was like, data security, data in for play. People were like, Why are you in New York, you know, and so, but eventually became hot when people saw the first IPO, you know, of some of these companies that went out, like the data dogs as well, and all these other ones, right? Or the hashi corps and the gitlabs, I mean, that was the era it all, all of a sudden went from not very cool to a backwater investment area to, like, the coolest, hottest sector, because people saw the same thing, and then it got overfunded, and, you know, and now, you know, we’ll kind of see when the dust settles, what’s what’s next, right as you layer on AI, and either incumbents take advantage of it or you create net new opportunities. But yeah, so that was kind of the thesis. And once again, I think as an investor, you’ve got to genuinely enjoy whatever you’re doing. And I just love geeking out in security or, I mean, probably 30% of both starts investments aren’t security. And we’ve got three companies that have surpassed 100 million of ARR and that are, and others that are well, well past that, right? And these are companies we invested in at inception was just an idea. And, you know, no code, so you have to love it. And I and my team love understanding, bugging security holes or plugging in, you know, creating new tools, tools for devs to build faster. And then it does extend, by the way, I would say, not just infra, but I like horizontal plays versus vertical play. So, for example, even a superhuman we had partnered with Rahul at a fun one, and then we were his very first check in fund two, when Rahul what started to. Pretty human, and we wrote multiple checks into that business as well. He was reinventing email. That’s a horizontal play. It’s not like it’s a vertical play. So anyway, I figured horizontal infra, you could build some big businesses. But, you know, there were some challenges in the early days.
Steve Brotman 25:28
You know, with the product, like they, you know, going back to live person, it was pretty obvious. You could kind of see the value in the business. Yes, you could increase revenue and and you could also see reduced costs because chat, instead of voice chat, you could talk to five different people from inception you could see that.
Ed Sim 25:49
Yeah, yeah. And Steve, you know what I call that by the way? I think investors and you tell me, you know, you saw the same thing that I did. Are too enamored with Tam, okay? Like, there’s no Gardner report at the time. Steve, when we invested on chat, he was creating a completely new way of doing things. You know what I call it? I call it intuitive. Tam, this is intuitive. Tim, you just laid out the intuitive Tim story. Like we don’t need to write down how big the market is. You just laid out, if this works, it’s fucking massive. I’ll give you another example. Guy had this idea, I’m going to create developer friendly security. And you’re like, What the fuck is developer friendly security? He goes, Look, every time an engineer builds something, got to throw it over the wall. And they’re security engineers. I’ll be two of them, and they’re literally looking at 100 different kinds of updates and it takes a month to update it. What if I could, literally, as developers of coding, try to figure out all the vulnerabilities in the open source packages like, I’m like, well, that’s not very good, because if you found vulnerabilities, they would rather not know they existed than have to go fix it. He goes, No, no, I’ll find them and I’ll fix it for them. I’m like, Holy shit, wow. Okay, so now when you throw over the wall, the application gets, you know, thrown out, you don’t have to wait in the queue anymore. You’ve actually already fixed it and solved most of the stuff. So software delivery gets faster. Well, guess what? There wasn’t a market for it. There are other people like varicode and others like they were analyzing code, but they found problems. They didn’t fix it, they didn’t do the pull request, they didn’t do all that little insight that has created a $7.4 billion company, of which they’ve expanded and everything else and created a category called secdevops. I’ll give you another example of intuitive Tam. We’re working with this founder, Ian Swanson. I’d known him for 10 or 15 years, and we tried to sell a company to him, the data infospace. He built one of the first ml ops companies called Data science.com, and as a data and for a kind of provider, fast forward, he ended up selling the company to Oracle, and it was kind of the data and for provider at Oracle eventually went to AWS and started running go to market for sagemaker and all their AI and ML. I met, reconnected with Ian on October 21st and we were at a conference at the lobby conference, just chatting about AI and security, and he was laying out this framework for why, you know, we’re going to have to secure ML and AI. This is obviously a year before chatgpt. And I texted him, like, let’s walk out of the room. So we spent another hour and a half together. I grabbed my other partner, Ellen, and by that time, we’re like, we got to do something. Let’s do something together. So by January or February of 2022, we led an investment in Ian and Badar and D’s company called Protect AI to build a holistic platform to secure, at the time, secure ML and AI, right? Because there was no AI at the time, it was more ML models. And the reason why we did that was because he saw the largest customers that were selling, they were selling from AWS. The most sophisticated ones were saying, I have zero visibility into how many models are running, where the data is coming from, how secure it all is. And so he created the concept of this thing called an ML bomb, or an AI bomb, an AI bill of materials. And so now he’s got five different kinds of products, kind of wedges to kind of come in. He’s a leading kind of, quote, unquote, AI security vendor out there. And you know where an investment thesis was? It was a 10 million Inception round, because a very successful founder previously, it was basically like, let’s make sure he doesn’t run on money in three years, because within three years, there’ll be some seminal moment in which there’ll be some ml or AI hack that comes in and does major damage. Maybe a credit card algorithm gets screwed up on the front end or something. We didn’t know when that was coming, but we did know that he could find the first 10 or 20 customers over a period of time. And once again, the intuitive team at that time was like, how many AI models and ML models in production? How many are making decisions about hiring people on credit cards and all these things. A lot. Who’s building this up around it? No one. And so that was another intuitive tampster. And guess what? We raised a $37 million round last year, and they’re off to the races now. So once again, to your point, there’s no Gartner model, there’s no nothing. There’s no market map. I like to joke with them, saying, if it’s a market map, it is too late for us. I don’t want to be on a market map. So that’s how I think about it. And I know you think about it very similar when we were doing some of these early-stage deals.
Steve Brotman 30:03
In terms of like cybersecurity, I’ve been warming to cybersecurity, yeah, and they’ve made a couple jabs at it over the. Years. It’s a little harder, you know, to like Intuit, because in a lot of ways, it’s a fear sale, right? It’s like, well, what happens if you get hacked and lose billions of dollars? Well, how about you pay me ten million and I’ll sell you some software to protect against that risk. So it’s harder , it’s a harder time. How do you, how do you think about that intuitively? Tam, I mean, it’s a little bit of a curveball question, but how do you think about that, like, in terms of, like, identifying the need.
Ed Sim 30:49
All right, so, so I’ll start with 30,001st of all, cybersecurity, to me, is a gift that keeps on giving. Sadly, I mean, let me give you an example. The budget, I think at JP Morgan, is a billion dollars for cyber that includes software and people, and yet it increases every year by five to 6% no matter what. And guess what? You know, they need to protect their assets. It’s basically a nation state kind of risky thing. Nation state actors are attacking them. So when I think about intuitive Tam, there are a couple of things, whenever there is a new technology that creates a new attack vector, whether it’s the internet checkpoint and IDS came around, whether it’s the cloud right now, there’s cloud security of the Wiz, developer tooling, right sneak devsecops, privacy and data big ID, big data security. Right around that secure security scorecard created this whole concept of, since everyone is SaaS based and everyone connects to one another, you’re only as secure as your least secure vendor. So how to create scoring to make sure that you can monitor 10,000 vendors at once? And so I think about it in an intuitive way. Tim is like, what is the next big technology that’s going to take hold? Is that a new attack vector? Can existing comments latch on? Or can you create a new category around that? And so AI security, by the way, we did that in partnership with the insider discussions in late 21 but we did that in January 2220 22 AI was not on the radar, to be clear. Yes, you know, until we had the chat GBT moment, October, November of 2022 that was not on the radar. So, that’s kind of what we have to do. And there’s another category around that. So that one is just kind of new attack vectors, thinking about new things and novel, new things. And by the way, I do think that with AI, the hackers have the advantage. Now, it’s always easier to play offense in his defense, because defense, you’re reacting, right? So they’re, they’re always, you know, they’re offensive right now, the threats from, you know, fake videos, from fake emails, all those things, to me, it’s amazing. I mean, Steve, soon there’s gonna be a podcast of you saying stuff that is not Steve, but it’s actually, it’s actually someone else masters you, right?
Steve Brotman 32:58
I heard a story when I was at an annual meeting, and I hate to even share the idea, but they faked a voice, a voice information of a wire.
Ed Sim 33:10
Yeah, I have a company right now that is in stealth that actually, I don’t know if you read about it, but there’s been a couple instances, particularly like in particularly like in Hong Kong, where, let’s say, four people got on a Zoom, and three of them did real time masking themselves of their video and the voice and wire worn out. But the point is that there’s always a new vector. Guess what? That is, top of mind, and top of sight. For a lot of CISOs, they’re afraid that the net new based on new technologies, and the other would be reinventing existing categories and doing it 10 times better. So I have a company called Dope Security, Dope.Security, which is bringing out a new way to do endpoint security, which puts all the intelligence back on the endpoint device, versus Round Tripping to the cloud. So it’s three to four times faster. It’s more secure, because your data is not getting shipped to some random cloud somewhere else that you don’t know. It’s all on your device, processed and encrypted, and it’s much cheaper because you don’t have the whole cloud infrastructure. And then on top of that, what he’s done is layered on the superhuman like interface, which is absolutely gorgeous and beautiful to treat security professionals like first class citizens. So the software feels like you’re using a consumer software, and so you add those things together. Now he’s added this new CASB neural net kind of product. So reinvention of things, but doing it way, way better is another area that is always kind of ripe for opportunity.
Steve Brotman 34:49
Interesting. So I see what you’re saying about cybersecurity being the gift that just keeps on giving. But a lot of these cybersecurity companies kind of fell into a trap. You probably know what the trap is, but it’s called point solutions. Yeah, become a great point solution for that one itty bitty thing. How do you think about that? Because by definition and Inception investing, you’re investing in points, right? Just by, just by, you know, they can’t be a platform right out of the box.
Ed Sim 35:03
Yeah, I’ll give you Well, I mean, you always have to, I like to tell founders.
Steve Brotman 35:09
So here with the problem, actually, why a point is problematic, and how that. Yeah.
Ed Sim 35:15
Well, well, yeah. Look at the end of the day, when you have a new attack factor, it’s always going to be a point solution, right? You’re not going to, it’s not going to be part. There’s this whole kind of one throat to choke idea like Palo Alto network says, Buy everything from me. Crowds, right? Buy everything from me. Well, guess what? When you talk to some of the largest banks, they do not want to have everything from Palo Alto Networks. So imagine this, if you want to be more secure, a hybrid system is more secure than a one, a system that covers everything, right, if you know what I mean. So I think in cybersecurity, in a weird way, there is consolidation of certain things, right? Because it just saves money and all the other stuff. But you’re never going to have one vendor selling into one large organization, because the risk, the cybersecurity risk from being hacked from one vendor, you know, and having everything taken is much higher than when you have 10 different vendors that you’re using. That doesn’t mean you want 100 vendors, either. So when I look at it, it’s like when you have to start narrow, you have to solve a fundamental problem that someone has to your point right, which is kind of a very focused thing. But at the same time, in order to get investors excited, you have to say, Okay, if things go right three years from now, what’s next? What are the adjacencies? How big? And then, by the way, give me the five year vision. So I like to say that the best founders, and it might be not just one, it could be the co-founders too. They have an ability to zoom in on the day to day life of an end user and tell me exactly how they’re going to make that end user’s life 10 to 100 times better than what they’re already doing manually or with existing software they have. So they have to have user empathy at the same time, they have to understand where the budget dollars are, and to tell the story of, yes, I’m going to zoom in and change your life and make it better, but let me zoom out and tell you how big this can be. And I said, you know that that, that, that you need both. But if I have someone that tells me, Hey, Steve, let me wave my hand to tell you, AI, security is a big market. That’s not gonna get me excited, right? You have to dive, dive into that. What product are you starting with, and why? And then where do you go from there, and why is the user care? Then you make some phone calls, right? You call some cis you call some of your buddies. You figure that out, right? You talk to some engineers, but you have to have the ability to have user M theme zoom in, but also zoom out and tell a big story and so, and I’ll give you another example, just it’s not in cyber But yesterday, we had a portfolio company that we funded over seven years ago at inception, called Clay, clay.com they announced 62 million of total funding, I think a 46 million Series B at a 500 million valuation. The thing is, we funded it seven years ago. That is in June. I checked in June of 2017 just two founders and an idea. Did you know that they didn’t officially put their product on Product Hunt until June of 2022, and then it’s, it’s June of 24 now, and we just closed, you know, at a $500 million round. And they’re now a case study in open AI’s website, open ai.com/clay and what they’ve done is they initially started out with a dev tool to create these programmable, live functions you could share. Then that turned into a more programmable air table. And guess what? Its air table is pretty good at what they do. And even if you can actually sell a more programmable one, it’s tough sledding, right? It’s a horizontal sheet. You have spreadsheets, you have an air table. But what they found was that they’re like, people kept asking, like, Hey, can you keep adding more data sources for sales prospecting? So they started adding data sources for sales prospecting. Now they think they have 80 different data sources primed in there into this spreadsheet- like format, and they started using it to go outbound on their own. And like, holy shit, this is working. And they started adding this whole workflow around, you know, kind of outbound, around research and prospecting, then going outbound. And then people like, Hey, can you actually send the email for me. So, yeah, they use AI to write the email. So you and I could say, Hey, Steve, let’s go find let’s just use a live press exam. Let’s go find everyone that uses Zendesk software right now on LinkedIn. Let’s figure out how long they’ve been using it. You know, let’s see if they’ve written some notes about it. Let’s actually create an outbound campaign tailored to them and send them an email, right? So that thing has grown like wildfire. And if you look at the OpenAI website, it’ll say that each of the last two years has grown 10x year over year revenue. But to your point, we start out with this horizontal thing, and it’s very hard to sell and kind of maneuver and everything else. It’s not, not to say can’t be done, but it’s much harder. We went down to this prospecting kind of route to start with, and then we added this full thing. So now we’re more of a full suite to help, kind of the whole outbound function to go after zoom, info and Apollo, and we just struck gold. I mean, this thing is, I mean, I’ve never seen anything grow this fast, this quickly in the last two years, but it took a long time, right? So it’s like a fine wine I like to say, you know, and so I’m gonna write about my newsletter tomorrow, but that’s an interesting story, right? No one people had it left for dead, but they kept iterating and iterating and iterating in their product with a very small team. And so I think that goes back to your earlier point. Is like. Like, you know, how do you kind of get to market? How do you sell? And, you know, how do you actually start? The point, product was research, and now it’s this full outbound suite.
Steve Brotman 40:26
Talking about your newsletter. So, how’d that begin? How’d that start? And like, how do you find the time to write it?
Ed Sim 40:34
Yeah, so, so the newsletter is at www.whatshotit.vc. I’ve been doing it for over seven years. And before that, you know, Steve, I know you did some blogging the day I started blogging, like back in late 2003 October of 2003 so I have a blog called BeyondVC.com. Beyond VC. I was going to say there’s old notes on there. Still exists. I haven’t updated at all. And so how this started was, I just enjoy writing. I just started taking notes. I’m like, oh, you know what? Why don’t I just publish the notes to myself based on these little links of things that I’ve seen or people talk about during the week. So that what’s hot works is really, I try to share kind of interesting tidbits from Twitter or LinkedIn or what people send me around, and I put a little comment on it, and it’s in three sections, scaling startups and about founder mindset and just scaling businesses, etc, could be and then enterprise tech just kind of what’s happening on the enterprise side, what’s happening on the buyer side, what’s happening in cybersecurity, whatever. And then market just kind of what’s happening on the IPO side and multiples. And then usually, on top of that, I write my own kind of opinion aid preamble of certain topics, you know, how to raise capital, or what’s the sentiment of late-stage VCs, trying to give people an insider’s knowledge of kind of what’s happening in the world based on what I’ve done during the week or conversations that I’ve had. And obviously I try to mask, you know, kind of the who’s but it. Just want to give people some insider baseball.
Steve Brotman 42:04
You sit down on Saturday morning and say, like, I’m gonna have to, you can the week, and I’m gonna just, like, compile it all on Saturday.
Ed Sim 42:12
Yeah, I save all the clips, you know, save all the links and whatever. And if I have time, I might put 10 to 15 minutes a day just grabbing one or two clips or articles and write a comment on it. But the preamble is, Saturday morning, I sit down like, oh, what’s top of mind today? Like, what do I reflect on this week? And I’m like, What did I do? What happened this past week? And I’ve done it without fail, sickness, vacations or whatever, straight for seven plus years. I’m on issue 500 now, and the discipline around it, I think is great, and I think it just helps me crystallize my thoughts. I think I have become a better communicator. You know, when I write about it, and people tell and reach out to me say, Hey, I got questions and this or that or that. And so I do it for me, actually, to make myself smarter.
Steve Brotman 42:54
How do you like you? You had COVID a couple weeks ago? How do you like it? Blast through it, like it’s the last thing you want to do. I wouldn’t have known, because I kept on getting your newsletter.
Ed Sim 43:04
So, I had a COVID fog there. So it might not have been the most coherent thing that I had ever written, but I just got up and I did it. And this goes back to my earlier point of grip. It’s just kind of like there’s nothing special. Like, I think Tom Brady said there’s nothing special about what he does. He just knows how it works, everyone. Tom Brady said, I just saw you in the newsletter a few weeks ago, and I really appreciate it. And I’m not a big Tom Brady fan because I’m a Ravens fan and kicked my ass many times. But the point is, the point is I can appreciate he’s like, there’s nothing special about me. I just did. I got up in the morning when no one else wanted to do stuff, and I really just kind of thought that it was something that I brought from the sports world or whatever. I wasn’t like the most talented person, but I put a lot of work in, like I go in and lift weights and run before practice, you know, and I and so, and it works. It actually works. A, you got, you enjoy it. And then be at work. So I just get up there and do it, and my mind gets sharper. I learn things, and then what it’s become is that, like, when I meet some founders, sometimes like, Oh, I’ve been reading your newsletter. I didn’t know that was even you for two years writing that, and then it gives me a leg up. And I’m trying to get it when I’m competing on a deal, Steven, it helps, because if they feel like they know my voice, like I’m just being honest. I’m brutally honest, I’m very direct, and hopefully that comes out in the newsletter. I’m not, I don’t BS.
Steve Brotman 44:21
I think so. I think it’s very clear you’re writing it. It’s not someone else writing it.
Ed Sim 44:25
It’s not an AI bot.
Steve Brotman 44:26
Like, hey, I thought Elliot cribbing the notes that he took from you, that he heard you say, or something. This is not a bot. Yeah, that’s really remarkable. Um, let’s zoom out a little bit more. So, like, we’ve been talking about some pretty detailed stuff, um, you know, a few weeks ago we talked about AI, um, you know how it’s sort of becoming infused in everything you want to share a little bit more. And is there anything that’s sort of like non obvious that you think isn’t really out there about AI that not a lot of folks are getting.
Ed Sim 45:04
I don’t think there’s anything non-obvious. But look, Steve, you and I’ve been around the block long enough to remember their, you know, their internet funds, their Java funds. They were, yeah, XYZ, they’re mobile.
Steve Brotman 45:14
I always get it. Get worried when I see one of those ones, right? Well, I don’t get worried. I get worried for the people working there. Yeah, right.
Ed Sim 45:21
I mean, think about it. It’s a technology, right? And AI is an amazing tech, by the way, we had this AI moment back in 2016-2017 the only reason why AI is even doing well right now is because there was a prior AI moment, which was more ML oriented. It was, right? This whole data science team built the data infrastructure, etc, etc. And, in fact, I think Jimmy from Netty, at the time at IBM, uh, had created this thing called Watson’s law, you know, whatever, uh, she’ll have AI and will have aI embedded right now. That was like in 2017-2018 now, or seven years later. And Watson’s kind of like, you know, you know, Yeah, who knows what it is anymore, but, but we’ve got this new technology again, way too early, and, and all I can tell you is this, I’m not an AI investor, but I’d say that 90% of the existing portfolio companies, the founders are using AI, some are using more than others, right? Even, like clay for example, which I had mentioned earlier, is a case study on open AI now, when we funded it as an AI company, no superhuman case study on open AI now, and their AI is all over the place. But was that an AI company? No, they’re solving a fundamental problem, reimagining you know how to make you know email, professionals, people using email, you know, better and faster and superhuman like, right? So that’s the kind of way I think about what problem are you solving, how you’re doing it goes back to first principles when it comes to AI. Yeah, there might be some things like aI security, right, that, but when we funded AI, it was ML and AI security, because we weren’t sure where the AI really was, but now it’s more AI security. So I don’t know. I just and every founder we meet now, I’d say 90% of them have a story to tell. They’re solving a problem. And of course, it’s like, I can solve it better, faster, cheaper, with this AI thing kind of embedded, right? And so I can’t give you a crystal ball answer, because there’s no one, no one’s going to tell you that every incumbent is going to win, and no one and one’s going to tell you every strap is going to win, but you just have to get into the battlefield. You got to write some checks. You got to get involved. And in certain cases, incumbents will win. Certain cases, straps will win. But one thing I can tell you is this, is that I think that if you assume things like this is the intuitive part, if you assume certain things will be true, then you have to ask yourself, what’s next? And I’ll give you an example. This is kind of second order thinking. Is that okay? If you talk to enterprises across the board, they’ll say they get 20 to 30% productivity from copilots, from coding co-pilots and coding co-pilots because it’s a pretty structured problem. Same with customer support. I think those are the two best areas of that work. So let’s assume that. So if you have coding pilots, co pilots, and there’s still hundreds of millions of dollars of more money being spent, and open AI, I think is going to launch their own as well, and everyone’s going to have their own, and there’s going to be dozens more coming out. Question: then if there’s more code written, what happens next? Well, a couple of things. One is the thing that sneaks to and you could probably call them an incumbent. Well, we bought an AI or ML deep learning company three or three or four years ago. We were sitting on the biggest database of vulnerabilities and fixes ever. And you know what we’re doing, we’re doing auto fixing. So we just say two things. One is, before you run the AI and the code, you want to remove all the vulnerabilities so that when you’re creating new code, it’s actually clean clean code. Then two is, is, with all that code being written, you actually need AI to keep up with AI, right? You’ve got to actually, you know. And then the third thing we’re saying is that, do you want the fox guarding the hen house? Like, what does that mean? Well, do you want this same model generating the code also doing your security? Well, that doesn’t seem to make sense either, right? Because they would have generated secure code in the first place. So that’s an example. How about this? More code being written. There’s more code to review. How do you use AI to review code? Faster, more code written. Who’s going to do the tests? So those are the second order things. I will not put a dime into any copilot stuff right now, on the coding side, I mean, there can be some people that are going to make a shit ton of money, and there’s money, and there’s, there’s gonna be even more money vaporized too. But I’m thinking about what’s next, and can you build a business around that, or is one of the existing kind of incumbents going to come in and just eat your lunch, because they have such a big footprint? And all I can say is that you have to, there’s nuances in every category. It comes to the founder, and also, I think what comes down to what I’ve seen, even in a superhuman, is how valuable the user interface is. It’s not the AI, right? You can swap in open AI or cloud or whatever, but man, have you seen, if you could look at some of the videos that they have, the usage is cranking, the inbounds cranking, because it’s how native and how special it feels. So the UI aspect and how you embed these things and make it easy for people to understand, I think there’s an advantage there. And you know, it’s hard to do until you use it. You just have to use it and feel it, and you’re like, holy shit. Like, this feels magical to me. And the founders that can actually do that and capture that, I think also have an opportunity as well.
Steve Brotman 50:13
Yeah, I was going. To ask you about as we’re getting the end of this podcast, you know, you’re, you’re, you know, if you had any advice for GPS starting out, but frankly, this whole podcast, I think, is, is great advice for GPS starting out, you know, just in terms of the focus and intent and desire.
Ed Sim 50:35
Yeah, I have one thing to say, though, like, you know, Steven, you would know this, is that it’s not like when you and I started our fund, we came from a tier one fund with, yeah, largest endowments and institutional peace sitting around so that when we left, we already had instant money, like we had a scrapping claw every dollar we had, right? And so if you’re one of those founders that is not well known in the world. I’ll tell you a couple of things. The journey’s gonna be long. Two is you better be freaking pick something that you’re passionate about, like, just like you think of yourself as a founder. For me, it happened to be Inception investing. For Steve, it happened to be kind of coming on the pro ratas of others, and kind of looking at some later stage stuff. But pick a swim lane that you actually know, that you love, enjoy, and will always do. And for me, it was also enterprise infrastructure and reimagining enterprise software. Third thing is talk to your wife or your partner, life partner, or whoever, and even your kids, because you’re gonna get your ass handed to you for the first three or four years. Like we had a hard time raising capital from 2010 until like 2018 or 2019 until fund four at the end, but yet, we kept going, we kept talking to founders, we kept partnering, we kept being passionate. And so it’s a long journey, but if you outwork people, if you love what you’re doing, if you care deeply, people will know. They’ll see it. The founders will see it, right? Those are the people that matter, and the investors will see it. May take some time to prove yourself, because it does, Steve, take a long time to even figure out if you’re good or not. And I’d say that I still have a long time to figure out if I’m good or not. I judge myself very harshly, and I got a lot more work to do, right? So, if you have that chip in your shoulder and you keep going and you love what you’re doing, and your partner is behind it, I think you have a very good shot to go out and do something and make a dent.
Steve Brotman 52:15
Yeah, talking about a long way to go. So where, what’s, uh, bolts, do you ask? You ask your entrepreneurs what their five year vision is. I flip that back to you. Is that, is there a vision for where are you going to do with bold start is, is this, I’d say the vision?
Ed Sim 52:32
Yeah, that’s a great question. I think the vision that we have is kind of like, now it’s me and Elliot, kind of were there at the very beginning. Then we added Shelmick and Ellen. So there’s four of us now. Show me has been with us for four years. Ellen probably two and a half. And it takes a long time to kind of, you know, be a good adventure. So I think our job is to really have the best four person team that we have. We don’t want to deviate from our swim lane. There’s a swim lane we have. It’s called Inception investing. It’s collaborating with founders well before they start their companies, technical founders in the enterprise space, and we wouldn’t be there from the very beginning when they incorporate with that lead check. So then have to wait six months, raising capital already to help them pre sell their initial hires. So they’re hidden out of the gate very fast, so six to eight people are already going and speed matters, right? So we don’t want to deviate from that. And so for us, that means we’re going to be boutique size. It’s going to be pretty much the same size funds for the next as long as we continue being successful and finding great founders, that’s what we’re going to do.
Steve Brotman 53:31
That’s what we love, benchmark versus Andreessen or inside or —
Ed Sim 53:35
Yeah, that’s what we love doing. We’re not asset managers. We are. We want to help founders build faster, get there faster. That’s why I have the team that I have, show Mick and Ellen, are deeply passionate about building a firm and building that and owning that, and they’re happy being that. You know what I mean? They don’t want to, you know, we’re not going public. I’m not going to, you know, look, we do have some opportunity funds that are really, really important to us, just because we are still on the boards of these companies from the very beginning, from inception until exit. And so we do have unique insight. We do have very good relationships with the founders. We can get super pro rata in lots of cases. And we do want to take advantage of that situation when we can, to make sure that we’re monetizing the time that we spend to an extent, but those are only for existing portfolio companies. It’s not like we’re chasing new things that we missed.
Steve Brotman 54:26
Awesome. It’s just and I learned something every time I talk to you. Likewise. Steve, so great to reconnect and be your great friend and partner. So thank you so much.
Ed Sim 54:27
Likewise today.
Steve Brotman 54:28
And let’s catch up again soon.
Ed Sim 54:46
Yeah, man, look, I really feel kind of strange. I already can. I can zoom back and imagine that first meeting when you’re at one building, the business cranking away, and I don’t know, man, it’s just we’re still at it, which means we love what we do. So I think that’s very important.
Steve Brotman 55:02
Been a fun run, and hopefully we’ll be doing it for the next, you know, 15 to 20 years. Right.
Ed Sim 55:06
Fingers crossed. Talk soo, man.
Steve Brotman 55:10
Talk to you soon. Thanks. Bye.
Outro 55:15
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