February 5, 2016
Ep. #2, Feat. Accel’s Vas Natarajan
Tom and Vas talk about how much money founders should raise and when, how to transition from individual developers to enterprise customers, ...
In the latest episode of Venture Confidential, Peter is joined by Hampus Jakobsson. Hampus discusses how he got into investing, and reveals the factors he considers when deciding where to invest.
Hampus also shares his “parent-teenager” approach to managing angel investing, and includes some useful tips for staying focused and spending time in the right areas using “rigid external frames.”
About the Guests
Hampus Jakobsson is an entrepreneur and angel investor from Nordic Makers. Hampus co-founded TAT which was acquired by Blackberry. Hampus also ran M&A EMEA for Blackberry and has invested in over 60 companies.
Peter Chapman: I'm your host, Peter Chapman, and today, I'm joined by Hampus Jakobsson, one of the angel investors with Nordic Makers. In this episode, we talk about his relationships with entrepreneurs, how he manages his time, and bias in investing. Hope you enjoy it. Hampus, welcome to Venture Confidential.
Hampus Jakobsson: Thank you, thanks for having me.
Peter: Where are you right now?
Hampus: I'm in Sweden. I am in a city called Malmo, which is the third largest city in Sweden, which is 300,000 people. So it's a tiny hamlet by American standards, and not even a speck by Chinese standards. And it's super close to Copenhagen, so, we jokingly call Malmo the Brooklyn of Copenhagen, because there's a bridge, and Copenhagen is kind of the capital for us.
Peter: I love that, is it also infested with expensive coffee shops?
Hampus:Absolutely. We have the trickle-down economy from the upstairs here too. Shops and stuff.
Peter: Well, we'll talk more about what it's like investing out of Sweden, but I'd love to start with you, and how you got into venture.
Hampus: Yes, so it's actually really weird. I think there are two parts of getting into venture. One is how the heck did you get the money to get into venture, and the other part is, so now, when you have the money, why do you spend it all on something as volatile as startups? And I think that the first answer is, I'm a computer scientist. When I was in school, when I was in university, I really wanted to do applied knowledge.
I spent all my time doing math, I love doing theoretical stuff, but I really want to do hands-on work. So the first summer in university, I just lied and said it was a mandatory internship in Swedish universities and I had to do this internship at a French firm doing cryptography and implementing stuff for them. And they replied, "yeah, sure. Do you know A11 assembler?" And I was like, "yeah, naturally." Which, I'd never seen then.
I'd seen other assemblers, but not A11, and not of course to that level, and this was a professional thing. So it was a lot of work learning that very quickly. And then I kept doing that. I worked one summer in Paris, one summer in London, one summer in Munich in Germany. And when I got back, I really felt like every time I went back to university, I met with all my friends I'd done different things with. And we'd done a lot of digital art.
One of the companies I worked at in London was a digital arts company, and we built these amazing art installations. And with my friends, back since we were 17, we built art installations with Play Stations and Xboxes, but of course, maybe Xbox didn't exist back then, but you know what I mean. The Segas and the Amigas and the PC's. There's a pretty wild scene here in the Nordic called the demo scene.
And when I worked for that company, I got back, and I was like guys, "hey, I got paid to do this. And we built this art installation for Channel 4, and they paid like $100,000 for that. So that's a crazy amount of money. So we should do that!" And one thing led to another, and randomly, a friend of mine ended up talking to somebody who allowed us to build an art installation, we got really well-paid.
And so we said "hey, let's start a company. Let's start a corporation so we actually don't lose all the money, so we can keep the VAT and buy computers for all the money." Because "hey, we're 20. So we want to buy computers, that's what we want, gear." So we started that, and then, we just wanted not to be employed. That was the business plan. We learn self-development and not to work for the man.
And, one thing randomly led to another, and then one day, an old friend of ours called us up who worked at Sony, and wanted help. And we did exactly the same thing that I did when I was with my first company, the French one. We were like, "yeah, we'll figure it out!" And we figured it out, and then we started working with them, and then one thing led to another and we started working Samsung, and then with Motorola, and then with Nokia.
And then Google called us and we ended up designing Android for them.
And in 2010, we were in 13% of all the world's phones shipped in 2010, and we were paid royalty per device.
And on top of that, the Google project was a time and material project. Completely crazy and out of nowhere, Blackberry appeared and said, "hey guys, we want to acquire you." And we didn't really want to be acquired. We were this crazy beast of 180 people, like a design tech shop that has a product, and it's really messy with really no hierarchy and remote working.
Nowadays, we are very modern. We have ping pong tables and stuff, but back in 2010 it was a bit nascent. But they were very adamant, "we want to acquire you", and yes, six weeks later, they paid us $150 million and acquired us. And we didn't have any venture capitalists because, of course, who would invest in the crazy thing of six guys wanting to self-develop and not be employed by the man?
So we never even tried, really. So that was how I ended up there, and then I ended up spending two years running M&A for Blackberry. And that was amazing because I got on the other side of the table. And what I learned mostly from that, is that most of us entrepreneurs are really bad at communicating what the value of our product really is. Then, the second thing we're really bad at is understanding how a big company looks at this product, and understanding that there are more problems at a big company than just what your product can solve.
It's a complex thing. But I really learned those things coming from the other side. I really understood that many companies I met talked about "lossless peer-to-peer protocol with full duplex blah-blah-blah", and I just asked them, "okay, what does that do for us?" And I realized how many times I've done that pitch. And I realized that we seldom really reformulate our pitches to actually what it means, but we say technically how we solve it.
And then after that, I started another company, and built that and didn't raise money and that didn't work out so I folded out and sold off the assets. And then I started an angel group after that. So getting now into why I got into venture. When I was at the first company I started, in the last years, I started building our innovation unit and trying to figure out a way to get a lot more people to come up with products and ideas within the company, because we're 180 people.
We had all the big manufacturers in the world. Again, more than 10% of the world's phones shipped by us, so we were massively impactful, but we had a problem of creating new stuff.
And since I was part of the team that designed Android for Google, I had seen Android early on, and I was afraid that the world was going to change. So I realized we've got to figure out new stuff, quickly. Because the world that we're in is going to rift apart and become something new.
So we tried figuring that out. And I happened to bump into this guy. There were a couple of really good conferences in Malmo, but one really good developer conference. And I bumped into this curly-haired young guy at the conference who was speaking, and we had some similar ideas. So we started talking there, and I was like, " yeah, I liked that guy, he had really interesting ideas."
I took his card, he had this new idea. He was writing a book. And that was Eric Reeves. So we were standing there discussing lean startup, because essentially that was what we were trying to do. We were trying to prototype a way to prototype technology, to prototype user experience, but to prototype business models. And in that, one of the biggest headaches I had, and I'm coming to why I started investing, is "how do I find people to test this model on?"
So I started testing it internally, but the problem is, there were only so many people who were willing to walk through hell and fire of being an entrepreneur. So the biggest reason of churn we had in the process I created, were people who just said, well this is not important enough for me. I won't do that.
Peter: Sorry, what was the thing you were testing here?
Hampus: So what we did is, somebody would come into the innovation unit that I built, and say "last night I got this really great idea, we should test this out." And we had a process to bring the idea from the "lightbulb" to something that a customer was willing to buy and use and the technology worked. We built a process, which today is lean startup, it's prototyping, it's nothing new today.
But back then it was crazy just thinking about changing the process to sell, design, build. That was crazy, especially in telecomms, which is an infrastructure world. It's the same with hardware today. Before Kickstarter, people had blueprints before they even thought about the user. That's all changed. So we started within that process. And the problem I had was that most of the people who came to me, when they'd pitch the ideas and I'd put their idea to pressure, they just were like, "oh okay, this seems really hard. I don't want to do this anymore, because I can't work that much, or I'm not willing to do that, or I can't call people I don't know."
So then I asked myself, how can I find people who have a relentless drive and will try ideas? So I started instating the nascent startup community. And actually, honestly, 2010, Malmo was not the biggest. We had some really big IT companies. We actually have the biggest open source per capita in the world, because Linux is a lot of living stuff here. ARUM is here, Ericsson is here, a lot of open source people, but not a lot of startups.
So I just try to look for the ones I could find and started testing these models with them, and "advise" them without knowing anything about what I did. And then what happened is that I just sat in front of one of them and he started talking and he really realized that this experiment he was running was an amazing idea. But the problem was, he needed $30,000 or something to actually try that seriously.
And we realized, both of us, sitting there saying, so how do you get somebody who gets what you're trying to do, it's super early and really intangible, it's really hard to understand, to give you $30,000? We're just sitting there back and forth, somebody who trusts you, somebody who believes in your experiment. We were testing different ideas with people we knew with money. And I realized, "hey, I can give you $30,000. So I'll give you $30,000, and how do we do this?"
And he was like, "I can give you shares back?" And I was like, "yeah! Yeah, sure, we could do that!" Like really reinventing the wheel in the most idiotic way. And I'm like, "what's the valuation and everything?" I guess what have some prototype of a convertible note, which is ridiculous. So we just did that, and then I loved that because I really learned a lot from that experience.
And the amazing thing is, at the end of the day, I'm really driven by learning. I'm not at all interested in making money. I don't want to invest in things that will totally fail and lose the money because then it's probably not going to be interesting for anybody. But I want to invest in stuff that is economically sustainable so it can grow and make a huge impact and can make money for itself later.
It doesn't have to be cash flow positive immediately. Not giving money to an NGO who just spends it. But otherwise, what
I like investing in stuff that is close enough to me that I feel I can contribute and add value to them. But far away enough from me that I haven't done exactly that.
Like when I did the exit in my company, I met a company who said "hey, we're a Norwegian company, we're building this user interface framework and you guys, you ruled the world of interface frameworks. I'd love you to invest." And I just felt, "I know the playbook of this. I do not want to do that one more time." It just feels awful. And so in the beginning, I invested a bit wider.
I was doing a lot more different things, I did some marketplaces, I did some really cool FinTech stuff, I did content plays. I did a lot of different things. And then I learnt that I don't get that much of enjoyment of stuff that is just too far away. So for me, it just ended up being better and better focus. And I think it's just like with anything.
In the beginning I believe that you have to first explore and then exploit.
Sounds very much like an explorer motto, in the beginning you just try stuff. And then I was very much like people first. And the only rule I had was that I would be slightly more biased in investing in women, just because there are just fewer women in tech. So I just felt, if I'm on the fence, if it's a woman, I'm okay with it. If I'm on the fence with a man, I'm not going to do it.
And that was the only rule I had in the beginning. Everything was just pure emotional. So that's the short story, I made money from building a startup that just went all too well. And then I started investing because I was super curious. And now, it's become another thing.
Peter: You said you really narrowed on your focus. What is that area of focus for you?
Hampus: Yeah, sorry. Narrow in the sense that anybody can explain Chinese food, until they go to China and realize that Chinese food is a palate of food. So, I think when I talk to you, I would say I still have a very wide focus. So I do technology investments, software technology investments that can scale. That can mean a lot of things. But that means I don't invest in movies, I don't invest in content, I prefer being able to invest in marketplaces, which is still a very, very wide thing.
And everything that you're doing, pretty much, could be stuff that I would be interested in. But of course, then, it ends up being other criteria. Another criteria of mine is, I enjoy investing in stuff where it should be done, which means I don't invest in Ad Tech for example. Because I just feel like we don't need yet another Ad Tech thing. It's not that it's broken. I can understand it is broken from an internal, arbitrage or theres money left on the table, but who cares.
But I really like to feel like, "oh, that's a problem that we should, as a humanity, solve." And it doesn't have to be for cancer. It could just be like, "oh, that's the problem. I know somebody is in pain for that." But then, it's a lot of other people. If I meet somebody I really like, I have a hard time not investing.
Peter: What are some examples of problems we should solve that you've invested in?
Hampus: So the problem is I've invested in 68 companies. Which means that I invest in a lot of different areas. I invested in Clue. Clue is a Femtech company. It's a period tracker which is pretty amazing. And the amazing thing is that if I told you I have built this technology which is a performance improvement technology, that allows you to figure out exactly what to do when, when to take tests, when to run, when to do negotiation with your boss, whatever, and offers 20% improvement or more.
And then I was like, there's only one caveat. It only works 51% of the population. And you were like, that's okay, that's pretty amazing. And then my next sentence is, it's women. Then most investors are like, oh, shit. It's only women, that's too bad. But when I met them, I was like, wow this is amazing! Most guys don't understand how big this thing is, but we've all gone through puberty.
And what puberty is, is just a sea of hormones, which 51% of the population experience on a 28-day cycle. So, what if you could, when you were in your puberty as you were a guy, what if you could measure what's going on? That would be amazing. Well, most people have that, but they're not getting help with that. So that's definitely one company that I was super in love with them, I invested in them.
But I invest in just a wide range of companies. I was thinking of kind of fun companies, I invested in an account called Castle. It's a cyber security company that figures out account takeover technology. So it figures out if somebody is trying to take over your account and steal your account. I wish there were just a massive amount of cyber security companies. And the only place on earth we really see those are in Israel.
But they're actually not in most other places, there are not that many other good cyber security companies. It's kind of like saying, "which of your kids do you love the most", it's kind of hard. But I recently invested in a dream injection company. I believe that's going to be a super interesting thing in the future because right now, they can actually only manage subtraction.
So they only subtract dreams, which means that you dreamless, which is amazing for people with PTSD. Because you just don't have nightmares. But then the problem, what they're planning to do is being able to add dreams. So you can, for example, I have this important match to go to tomorrow, so then you inject a dream and you're going to be a lot more focused in your game tomorrow, which I think is a super cool idea and I really like it.
Peter: How do we sign up for dream injection?
Hampus: Yeah, right now, sadly, it's only dream subtraction. But they're actually launching pretty soon. They're launching their stuff and people can try them out.
I am really interested in trying to figure out stuff that changes behavior. But I think most companies that are trying to change behavior, they're doing it to-do list style. And I think that's not what I'm after.
Right now, I'm really interested in heart reaction monitors and figuring out when we can reconnect that because you can see that depression, you can see that in sleep issues. And right now, there are companies that are starting to build monitors that you can use so you can get the data. And I think that it's a level where we were with 23 and Me. You get the data, but you don't know what to do with it.
And I think that still, within genome technology, it's still kind of like that. You get data, but then what? And I think that's when I'm looking to see that the companies are applying that in ways that I actually believe in. And I think we're going to see a lot of those super-nuanced health tech which are interesting. Then of course, I am super interested in decentralization technologies. I actually develop our tools too, in part because of my background.
Peter: What's your take on this flurry of ICO's that we see happening?
Hampus: Yeah. The good thing about it is that Coinbase and all of these have a pretty horrible user interface, which means that the people who have invested and have a lot of Bitcoin, that can participate in ICO's, they are geeks who got rich because they were early in Bitcoin.
Peter: Actually, let's take a step back here, because I just realized, we're diving deep into jargon. So maybe before we start talking about ICO's and new blockchain technology, you could tell our listeners what an ICO is, why new blockchain technologies are exciting right now.
Peter: Yeah, so what I think is exciting about blockchains is that, back in the day, a mystical person invented Bitcoin. And then after that, there was a next technology called Ethereum. And to explain it, I think there are two fundamental things. Bitcoin is kind of like a Harry Potter book. And anybody who says "hey, I want a Harry Potter book." So you get the Harry Potter book. And what happens with this is that anytime anybody's writing anything in a book, it appears in all the books simultaneously, because it's a magical Harry Potter book.
And now, there's a short period of time when you need consensus that people say "it's okay that you wrote this before the ink dries." And if it's not okay, then it's going to be rejected. But if it's okay, the ink will stay in the book, and it's going to stay there forever, and everybody will have it in their book. And the magical thing about that is like, if I give you money, you know where the money came from. If I sell you a house, you know the providence of it and everything like that.
That's just the basics of Bitcoin. And then another thing with Bitcoin is that there's a scarcity in it. There's not an infinite amount, which just makes Bitcoin the perfect replacement for gold, essentially. I am not super into that because I think, "okay cool, we have an asset that we can trade." Who cares. What I like about Ethereum, like the protocols, is two things. First of all, it's as if this Harry Potter book had a little foreword that, every time you wrote in the book, you had to read this thing in the front. And you had to follow the instructions, like a little recipe.
So now I give you this house, and if I'm a student, you'll have to give it 20% cheaper, and 10%, you give to the universal basic income to this organization. And when I write in the book, everybody looks, it's okay, and then the signature goes through, and then the law is the law. We do what it says in the foreword because of this particular blockchain. So Ethereum is essentially the book, and there's a place where you can write the foreword.
And then people that build different applications on top of this, which are essentially just different forewords, and they call these different blockchains different things. It's Maker or Gnosis or whatever, and it's just like different forewords. So that's kind of the basics of it. And the amazing thing that the Harry Potter books with the foreword, the Ethereums create, is that the value is the protocol, and not essentially only in the app.
And the reason I love that, and the way to think about that is, what if back in the day, when SNTP and TCP IP and everything was created, what if the money went, somewhat at least, to the people who created that so they could create new infrastructure for our world? But no, it didn't. Like Google and Twitter and everything is built on these technologies, and the people who built them, not only didn't they get anything, but they have a hard time funding themselves.
Linus Torvalds, who did Linux, worked different daytime jobs to be able to write the most prolific operating system in the world. So now, the question is can we make sure that the actual protocol gets more money than the actual app? And the way that's solved today, is that when you create this books, like you and I decide we are going to create a new book that does something. Let's say we create an option program book. So we create a book to figure out option schemes for employees, because we didn't like the government's way of doing this. We want a program that, when the company's later sold, you get part of the cake, and we have this ledger that says "owns" what.
And when we do this, we build this, in the beginning we realize, "okay, we're doing it during nighttime, but then we start working more and more and we need some kind of salary." So what we do then, is we start selling coins. We say, "does anybody want to buy 100 of these coins for like, $100,000?" Because in the future, these coins are going to be useful, because in the future, when people want to do option programs, they're going to try to buy these coins from you.
And if these people believe in the idea that we're creating this, they're going to rise in the future. These coins are going to be worth more than they are now. Because in the future, everybody wants to buy these coins because it's an awesome idea. If they think we're an awesome team. So suddenly, people will give us money, and the weird thing, us, we can kind of be an open source project, and that's what I think is so fascinating about it.
And then what people do now is they build these things where they do initial coin offerings. And the word ICO is really like from IPO, individual public offerings, but suddenly when people say instead of saying "oh, we need some cash, let's figure out if somebody can do $100,000" they say, "hey, what we're building is worth $150 million, and somebody can buy 1/3 for $50 million."
And people look at us and look at our advisers and then say, "whoa, the guy who built Ethereum is our advisor, hey, this is going to be amazing!" And they give us $50 million. And we're two dudes in a shed. So, ICO's, I think it's a bit of a bubble. I think most people are abusing it super heavily right now. I think there are a lot of ICO's that are well kept, but it's definitely a crazy thing.
The crazy thing about ICO's is that it is completely unregulated.
When you talk to people who participate in ICO's or any kind of pre-sales or anything, they find it on Reddit, that's the biggest place to find it. That's the "Bloomberg terminal" of blockchains, which is pretty crazy. And then, the way you buy them is because you need Bitcoin usually, or Ethereum. And what you do is you just transfer your Bitcoin or Ethereum to a certain address and you get this new token back.
The good thing in this, the silver lining, is that we're not having retirement money from old people or kids saving this way, or like a housing bubble or anything. What's happening is some people are actually really rich on Bitcoin, because they were just early on believing it. And when Ethereum came along, they just rolled over, and Ethereum did 800X, so like "whoa, they were crazy rich." And then suddenly, somebody created a protocol to share storage or share processing power or voting.
And they were like, "yeah, I'll give them $1 million. Because the $1 million I have is monopoly money anyway. I spent $1,000 to get Bitcoin and now that's worth $20 million, so hey, why not?" And the good part of that story is, I think, what if in a world where developers could pay other developers, and that happens a few places in the world, but it's super rare.
And the problem is that when it happens, like in the Valley when you have the Twitter and the Facebooks and the Googles and everything, they usually acquire these people, and have them work for you for two years and give you posh titles and posh jobs and food, which means you'll never leave. But in this world, it's as if a developer, who's a smart developer who knows tech, somebody says, "yeah I love what they're doing, I'll give them $1 million because I don't really have this $1 million anyway." And the good thing also, for taxation reasons, if they wanted the $1 million in bucks, they'd have to tax the crazy shit out of it.
Which means they have this monopoly money, why not invest it?
The only real silver lining of ICO's right now is that we have developers funding developers.
And right now, like the last three months, we're starting to get a lot of people and speculation looking at this and going, "whoa, 800X? Who's at 800X? So let's throw money at this." And I think we're going to see some people that shouldn't be playing with fire, playing with fire. And the good thing is that the people I see playing with fire now, it's the first category, the people who got rich on Bitcoin. That's okay because that's not real money. And the second category are like, the Wall Street 30-year-olds, the HENRE's, the higher earners, not rich yet, as I learned it's called. So yeah, they've got the money. It's not sad if they would lose $100,000, because come on, they play with this money anyway. So I'm not sad about it yet. I think we're going to see some of these things crash. And then I think it's going to recalibrate itself.
Peter: Have you bought any of these early protocols?
Hampus: No, actually, the only thing I personally invest in is Ethereum.
Peter: Oh, great.
Hampus: And the reason I actually do that, and I might participate in some of the app coins, or other protocols, but the reason I do Ethereum is that for me, my logic in this is that, what if I could have given $10,000 to SNTP in 1970? And I wouldn't have gotten my money back, because the protocol was thin instead of fat. As it is today, the value would have come with it. With Gmail or whatever, or Outlook. But I get an email every 30 seconds.
It's like, I should have paid for that before. Now I'm not paying for it. So I could have just paid $10,000 a long time ago, and for the rest of my life, I could have used this amazing service which I love, which is email. And I think we see the same thing with a lot of technologies. You and I are using technologies right now that are invented by other people and we're not paying anything for them, or maybe paying $10 a month or something.
And the people who deliver the technology to us aren't even the people who invented it. So
I think that we should be paying further down the stack earlier, because those are the people who are inventing things.
I mean, Tim Berners-Lee, Sir Tim Berners-Lee. He got paid by the queen, and he gets to go and speak at conferences and he's super famous. But there are a lot of people who did amazing things who are not Tim Berners-Lee. Who are not famous, who are not making money, and who are people who have built the operating system we use, who are completely unknowns.
Peter: Sure. I want to shift gears and talk more about you as an investor and the relationship you have with founders you work with. I know that you work with a whole bunch of founders and you've heard quite a bit about this. I was particularly moved by this article you wrote about time management. That's something I'm trying to get better at, I'm curious, so I say yes to a lot of things and I want to be more disciplined. But all of you folks that I've invested in, you should be asking me for more. Tell me a little bit about what good asks from your founders look like.
Hampus: Really good asks in general. I view that, and I don't mean this in any patronizing way, I think it's super important to say that, and I'm going to try to repeat it so that you can't edit it out. But I really view myself as a parent of teenagers. I don't have teenage kids but, I've been a teenager, actually. I don't know if you have, but I tried that for a while. And the thing is,
I think that being an angel investor is kind of like being a parent of a teenager. You have no idea what they're doing. When you ask them what they're doing, it's like, "I'm out," and you ask, "when are you coming back", they say, "later". And when they call you, they're like, "Dad, I'm stuck, I need money". And actually, when you need the money is, "now". And when you meet them, they're usually emotionally crushed because their girlfriend left them, also known as their co-founder.
Peter: I love that.
Hampus: It's kind of very much like parenting a teenager. And I think that what I really try is, I really tell people, I think as any parent of teenagers would tell them, is like, " tell me stuff in advance. If you're thinking about a worry, just tell me." And I think it's something I really try to help them with, because the difference between being a parent of a teenager and an angel investor is that it's not in my DNA.
If you have kids, you build them for 15 years, so the investment is crazy high. You're just somebody I gave $20,000. So if you fail, it's okay, I'm not going to be mad at you. It's monopoly money, it's okay.
I really tell them, it doesn't matter if you fail. It matters to me if you lie.
So don't lie to me, please, because that's just irritating, it just makes it hard for me. Keep me in the loop, that's a lot easier. And then the other thing I really try to tell them to make things easier is to tell them, I am an angel, but I'm actually an entrepreneur. I used to be a developer, I try new stuff constantly, and I have no clue what I'm doing. So, I'm not your parent. I'm your colleague.
When I give you advice, it's not as if I even try to think that I know it. I tell you my opinion off the top off my head. And I really tell you, yeah, this might be it, but I don't know. Because, you think about this like 20 hours a day. And I've thought about it for two minutes. So how do you even believe my advice could be useful? At the same time, as an external person, I can give amazing advice, because I know myself.
If I've spent 20 hours a day thinking about something, and I can't explain it to somebody, that's the problem. A lot of times when I meet the founders or CEO's I invest in, I ask them, "so what are your biggest problems right now, what's the bottleneck, can you explain the problem we're trying to solve? Like I know we're trying, so explain it to me as if you didn't know me". And we'd walk through it and I say like, "what's the most important stuff right now?"
And they're saying this and that, and I'm saying what are you up to now, what keeps you up at night? And that conversation then goes into them going, yeah, now I want to talk about this topic or something. But with this background info, I can then say, you just said that between now and Christmas, we need to add another $40,000 MRR, because otherwise we will probably not close an A round, because we need, as you said, around $70,000 MRR to close.
I think that sounds good. $70,000 MRR would definitely feel like we do a proper A round on my guess. I can think of some people to ask. So now you're suddenly talking about the new web page. Do you think the web page will increase commercial results? And they're like no, it's just our logo's super old and everything looks really bad and we should change our name.
You're like yeah, okay, that might be it. But can we just go back to what you just talked about? You were super panicky about this increasing MRR. And they're like yeah, now that you mention it. But what do you think of our web page? And then I tell them, my web page, both the companies I run, they looked horrible. And that didn't matter. And then I tell them on companies I invest in who are amazing, when you go to their web page, there's not even info.
And I tell them all these stories that I've experienced myself, anything from products I bought, people I invested in, companies, and just try to give them anecdotal evidence. And of course, the world of anecdote is not data. But I don't think there is data. When you get to like $100,000 MRR, or even like $50,000, I think there's some playbook stuff.
I would say between zero and $5,000 MRR, there's as much playbook as trying to teach anybody to be an artist.
It's like, yeah, be gritty, work hard, be customer-facing, be super serious about whatever you're doing, stuff which is meaningless advice in one sense. And a lot of times, what I try to do with people is just get them to focus. So I met a company I invest in the other day, and they were bragging about how they rented this office because they think they're going to grow fast, and they're super happy because they rented out the office, so now their rent is free.
And I was like, yeah, that's cool. And they started talking about this a lot. And after a while I was like, I'm just going to ask, what is the rent? And they told me the rent. And I was like, what are your salaries? And they said their salaries. How much time do you think you spent on this? And they're like, oh, 10 hours maximum. I'm like, seriously? You've made the place amazing, it's like all these signs, now you've spent this hour talking about them.
I think you spend probably like 10 hours a week on this. So let's calculate what that's worth, just in time lost. And when we did this, they said yeah, we still make more money. Yeah but now let's talk about the opportunity lost by spending 10 hours on something you shouldn't. And then they were sitting like, shit. We shouldn't have cared. No, exactly, you shouldn't have cared. And I think that's the thing which is just so hard. I do the mistake constantly, myself.
Sometimes I write a blog post, and I sit there trying to fix one sentence, and I send it to some friend for review. And the friend says, "I don't get what you're trying to say." It doesn't have any structure. And then I realize, I'm sitting there, myopically trying to figure out that it's going to rhyme or be allegorical or whatever smart stuff, but I haven't actually thought about how the whole thing works.
Peter: This is really interesting to me. It sounds like a lot of the coaching you do is around making sure that founders are focused on the bigger picture, that they're allocating their time appropriately. And it's something that we all struggle with, like I certainly struggle with this as a venture capitalist. How do I know when I should be doing a broad scan of the industry and when should be down really deep in a particular company or problem? What are some tools that you use to make sure you're spending your time on the right places?
Hampus: Me personally, or helping founders?
Peter: No you, Hampus.
Hampus: So the way I do it, is that I would say that I'm old. I'm 38, so internet age, I'm old. It's crazy. But I think that what's happened the last 10 years for me is I think that I realized I have to, and this sounds completely meaningless. I'm a Stoic, I'm very much a Stoic and I've always just didn't know I was a Stoic, I didn't know that there was a book about it. Stoics were actually written before I was born, so not that old, but I didn't read them until five, six years ago.
Peter: Could you give us just a couple of sentences on what Stoic philosophy means?
Hampus: Yeah, exactly. So a lot of people think being a Stoic means that you just don't feel pain, or endure pain. It has nothing to do with that.
Being a Stoic is really understanding that the obstacle is the way. I think that understanding that if you're given a headache, a problem, that is an opportunity in itself.
Two different examples. So you're trying to build this gaming company, and you have this hard problem of trying to communicate to each other all because you're distributed. So you start using IRC, which really doesn't work really well for you. You hate it, and then you're building a UI for that, it works really well, and then you realize your game kind of sucks because you spent all your time building this chat protocol, and then you fold it. And you realize all the folks around you wanted IRC, and then you realize suddenly one day, you're a slack.
So that is the obstacle that you had, was actually the solution to finding something amazing. So that is a time when something that could have been your biggest problem, like how many developer tool companies don't we know that try and build a product, and then when they try to build that product they had to build a small framework to figure out something, and then they realize this framework we built, that is the amazing thing. Let's go and do that.
So the obstacle was actually the way for them. And the other way, is let's say you're funding something that actually doesn't lead to something amazing, then it is really personal growth. Let's say you have kids, for example. So a lot of founders are like, you can't have kids, it's impossible. The thing is, kids are an amazing tool because kids pitch restraints. That means you have to prioritize your time. So you have to look at it as like, okay, somebody's getting me up at 6:30 in the morning.
I hate when you listen to the Tim Ferriss podcast and he asks, so what's your morning routine? Like, I have kids. My morning routine is like, "I get to get kids to school, that's my morning routine. I don't do meditations in the morning, no way. I would have loved to go out on the beach and jog or whatever, but that's no way." But anyway, I think that in a sense, the second part of the obstacle is that it's just framing.
It's just like if you're stuck on the highway on the 101 and realize, fuck, I hate being stuck on the highway, or you can just say, "hey, let's listen to that podcast and have a great excuse to be late at work." And I think that's framing. The most important thing for me is not complaining about stuff. So for me there only like three alternatives when I find a problem. It's solve it, ignore it, or accept it. And there's nothing else. Because if something's irritating, that's the only three things I can actually do. And the most common thing that people do is whine about it.
Peter: So, hold on. I feel like we're a victim of this very thing we're talking about. I asked you, how do you find focus? And I got an answer about Stoicism.
Hampus: So exactly! But then when I was trying to answer that, you asked me so what is a Stoic. So how do I find focus? I think that I find focus by leading and being who I really am. And really allowing myself to just say, "okay, I am a very logical beast. I'm very logical, I love routines". But the thing is, within those routines and with also that logic,
I am highly stochastical, and super emotional and super impulsive. But I love frames on the outside.
So what I've learned for me is I've built routines on the outside, like I have a framework which I am crazy rigid about. I'm not like Tim Ferris, but do you know what I mean? I wake up this hour, I have a go-to-bed alarm in the evening that goes off, and I'm supposed to go to bed an hour after that alarm goes off. It goes off, and then I'm like, "okay, I need to start getting to bed". And I can be at a party, and it's a great party and my go-to-bed alarm goes off and I can snooze it once, maybe. But then it's like, I've got to leave, sorry.
Peter: What time does the alarm go off?
Hampus: It goes off at 11:00 p.m. so I have to go to bed at 12:00, so it's not that early. But it's still very important because sometimes I can find myself in a gnarly problem and I can get stuck in it. And the alarm goes off and I'm like, shit, it's 11:00 p.m. and I wanted to watch whatever, and I was like, "not tonight, I guess." It's not just like, let's put it on. I'm like no, I'm sorry, the alarm just went off.
So that's one thing, and then within that thing, I allow myself to be totally free. So for example, what I do is I have meetings with myself for shitloads of stuff. Like when I ran a startup, I have a monthly meeting with a team, which was called, "What Is Going to Kill Us." And we'd do a three-hour meeting with beer, but we talked about what would kill us, and we're not allowed to talk about solutions.
So let's just talk about what would kill us and worry about that and get everything out. And what was amazing about that meeting was that everybody who was pessimistic, they finally found that everybody listened to them. And what is amazing is that the optimistic guys and gals, they were able to actually think about, creatively, "okay what would kill us?"
Spend three hours in that, just writing and blogging and whatever, summing up. And then after, we got back, and we were like, "you know the thing you said yesterday? I thought about that. What on earth are we doing to mitigate that? Are we doing anything because that, actually I thought about that last night. And it sounds like it's kind of probable, actually. Like it could happen."
Solutions tomorrow. But just looking in a meeting at what's going to kill us, made us so calm for the rest of the month because we knew that we were going to have that meeting. So if you're the pessimistic developer on the team that feels like, nobody listens to me, just write a note in Evernote or Google Drive or whatever you're using, and you know that Friday next week, we're going to talk about it, and you don't have to be like, "nobody listens to me!"
I am Cassandra, nobody can hear me, we're going to die! So I do a lot of these meetings. For example, I have a meeting with myself once a month that says, hang out with a friend all day. And I spend a whole day with a friend doing what that friend usually does. When they're off, so not like if they work. I don't work with them. For example, when I worked really hard, I had a meeting with myself every Wednesday evening that said, a dinner with a friend. And I didn't know who, I just had to figure out who. And my only rule was, not with a colleague.
Because otherwise it's a work meeting. So, just forcing myself to do all these things. But when I'm in the moment, I don't have any rules for myself. So, I'm the guy that just says this horribly blunt stuff to people. I met a woman at a party a couple months ago who had completely burned out and crashed. Like, work-related. And I'm a very curious person. So I asked her, what made you burn out? And she was like, I just worked too much, I guess.
And I'm like, "well okay, what are you going to do next?" And she was like, "I really don't want to talk about that." Because that was what stressed her out. And I was like, I don't want to be unempathetic, but what stresses you out about talking about it? I really want to know. And it got to the end when she almost slapped me in the face. And I felt like, yeah, I mean I didn't do this to hurt you, I'm not a bad person.
But I won't put limits on myself to think about what other people think about me. Because I just want to say what I think right now. And I wrote her a long email after I found her email address because I found a friend at the party who had her email address. I wrote her a long email afterward, apologizing that I might have harped on her thing. Because I wanted to make sure that she was fine about it. But in the moment, I just want to ask what I spontaneously wanted to ask.
That, I think, was a huge thing for me. I want to be kind to people, and I want to ask them why, until they tell me to stop. So I'm like a five-year-old.
Peter: Yeah, so I want to make sure we're getting this, you said a couple things that were interesting. You said one of my techniques is, I allow myself to be myself. And it sounds like another technique for finding focus is you establish a structure, and you're rigid about the structure but you're relaxed about what happens within the structure.
Hampus: Yeah, exactly. And then actually another thing I realized is, when I want to learn something, because I know myself, I know that I'm good at the first 20%. So like you can tell me about how to write symbols for ballet, and I could probably spend the first minutes of making you feel that I probably know this shit. And I don't know. I have a book about it, I haven't read it. Somebody gave me a book about it. But I can probably stuff up, so like, the first 20%, I can make it up.
But the problem is, for me, doing the last 80%. Like, I just don't do it. I just feel like eh, it's enough, if it's not something I'm super interested in. So what I do, then, is I write blog posts or record podcasts about it. And I do what's usually called the Feynman technique. I decide that I have to explain it to you, or to everybody. Because my core belief is that me in the future is going to be as stupid and unaware about the subject as anyone else is right now. So I will not remember what I thought just now, in just three days. So I write a blog post so you get it. Because if you get it, I can read the same blog post in three days and go, "wow, this is smart, oh I wrote it, wow!"
Because I know that in the moment, I am like a five-year-old. So I've spent a lot of time learning a subject and crafting a blog post about it and trying to summarize everything I've learned in a really easy, readable way, so that I actually learned it, so that I don't have to end up faking it. Because I know myself, I know that I'm good at faking it, and so far I have to force myself to do the last mile.
Peter: What's something you're trying to get better at?
Hampus: The thing I struggle about the most is probably temperance. And actually, recently I realized, I went to an improv session. I want to do more improv because I really love it, but it's hard to find a good one that fits in time and everything else. But I realized when I did an improv that I'm extremely judgmental. And I don't consider myself a judgmental person at all. I consider myself very accepting of everybody. Like, I don't care, gender, race, ethnicity, if you hate people or not, I'm like, that's fine, you probably have your reasons.
But when I did this improv exercise, I realized how, in the back of my head, I heard this thing going, "oh, she just said it wrong, he just said it wrong, why'd he do that?" And I was like, "what the fuck am I doing? I should just be in the moment, enjoy this." And that was when I realized that I really got to work with this, but I've got to find way to work with it. Because in my day job, I don't consider myself judgmental, but I definitely am, of course. And biased, and everything.
So that's definitely one that I've got to figure out. But another thing is temperance. I really feel like I have a lot of tolerance for people, but I can't stand when people are just wasting resources, time, or storing garbage, or not eating your food, or not appreciating the moment. You go to an amazing restaurant, like a local, small family restaurant, it's super cool food. And the other person is eating super sloppily, doesn't care, doesn't even taste it.
And I'm like, what are you doing? You're almost in these people's home, and you're eating as if you're eating at McDonald's! And that can frustrate me because they're wasting life. So that's something where I just have to figure out a way to work with that and not get frustrated, or just tell people to shut the fuck up and fix it. And that's an internal struggle in me. How much I should just be, " it's their thing." And how much I should just tell them, "you just don't do that."
Peter: Is this an obstacle to you as an investor?
Hampus: Where it hits me as an investor, is in I think that I have an issue with bias as an investor, and I'm trying to figure out a way to work with that. And I think this is definitely one of those, where when I listen to somebody's idea, I can just think, oh, they're probably doing this the wrong way. And maybe they're not at all, but I'm just trying to overcome my bias and understanding.
Because otherwise there's a huge risk. I'm a super cheap AI, I'm a very bad machine learning algorithm. I've been around for 38 years, so I have some nice patterns that my brain is trying to run. But the problem is that any machine learning algorithm, if I run this data and run with similar data constantly, I just over-optimize the function and get to do the same thing more. And if I was a capitalist, that might have been amazing, because then I would specialize and be super amazing at investing in 30-year-old white male out of Stanford building Ad Tech.
I would be amazing at it. I know exactly what a 30-year-old white man from Stanford means when he says something. But the problem with that is, I'm not exploit, I'm explore. I want to learn. So I really enjoy being like, "okay I don't give a shit what this person's saying. How can I appreciate what they're saying? How can I learn, how can I get into what they're doing?" And that is definitely something else as an investor, I think I missed out on a lot of other stuff, because my pattern recognition just says, "eh", and then I'm just like, "hey, is it because my pattern recognition says it's off, or is it because it's truly off?"
Peter: Okay, so I want to walk through this more explicitly. It echoes a conversation I had a couple of weeks ago about bias, investing, and how a lot of people have this prototypical image of what an entrepreneur looks like, and often, people who don't fit that image have a harder time raising capital. And you're talking about this related thing, you're saying "hey, I'm judgmental, I'm sort of quick to group people, maybe, and it gets in the way because sometimes, the pattern matching prevents me from seeing opportunity." Is that a fair summary of what you're going for?
Hampus: I absolutely think that's very true.
Peter: So, how do you get out of this? How do you allow yourself to both exploit your own experience and leverage your own gut while making sure that you remain open to stuff that is foreign to you but still worth exploring?
Hampus: I really like the idea of running your brain in debug mode. So I think that I really like that thing, I'm just trying to be meta- at what I'm doing. And the problem is that I'm just trying to be in the now. If I'm trying to be in the now, being in debug mode doesn't really sound like being in the now. So in the programming analogy, I just set up asserts. If I find my brain saying something, I'm like stop, let's check what's going on here. Instead of just being in debug mode, because I don't want to be checking every variable constantly, everything. I just want to set up asserts.
It's like when my brain says, "I don't think she knows what she's doing," and they're like what, "I just said she and not knowing? Is this because it's a woman who said this? Or is it because the person doesn't know what they're saying?" And then I'm like, "hey, maybe it's a communication thing." And I'm like, okay, "can you explain one more time? Sorry, I'm not following this. I don't get it." She explains it again and I'm like, " she's really good at it, but I don't follow."
So the problem is at my end. So I can see she is good at it but I can't get it. So I've got to figure out how to get it. And then just ask her to explain it different ways and explain the typical customer, explain why they would buy it, explain what the customer's alternative is. And suddenly I'm like, "oh shoot, now I get it! God damn, how can I lose it, I'm so stupid." And sometimes, when you ask those questions, you just hear them mumbling and you realize, okay, they don't know it either, so I was right. So I think that one of the rules for me.
There is a Stoic saying "you cannot learn what you already think you know."
So that's the problem, if I think I know this, my pattern recognition is going to be tenfold. But if I just tell myself I actually don't know what they're saying, and I think that's a huge problem for a lot of investors. When I built my first company, I started my first company in 2001, that is pre-YouTube. That is pre-Facebook, that is pre-Twitter. So the first five years I built the company, social media didn't exist.
Which means that so much of my learnings came from another world, which means that if I'm advising somebody on influencer marketing, I don't know the shit what I'm talking about. So I just have to tell myself, I don't know this. But what I do know, is this same analogy as a parent to teenagers. I might not want to crave going to Stanford and do my studies because that was not an option for me. What I want to spend my money on was whatever, in the '60's was a car.
But I know is what it feels like earning something which is expensive. So I can talk to my teenager and say, "hey, I guess this is really important for you." We set up planning goals, what would happen if you miss it, what's the reason you want to do this? And the same thing with influencer marketing. It's like, okay, I don't know what this is. But I can get back to, "so what are the goals so this can pan?"
Do you want to get more people to buy the product, do you want to improve retention, do you want to reduce churn? I'm not following. And then when they go, brand-building, I'm like, "okay, what's the purpose of that brand-building?" And the good thing about being in the moment is I'm a five-year-old, I can just ask why until they just say, are you stupid? And I'm like, I guess I am, but I'll just continue asking until I get it.
And that's just admitting that I don't know. And that just makes a huge difference, just saying, I'm not following. And the good thing is, I really start by preempting the conversation by saying, "I'm probably stupid, I'm not really following." And them feeling that it's not like I'm complaining. And of course the important thing is, if you're sitting checking email and you're saying that, you're not listening, you're being rude. But if you're fully attentive and trying to listen to them, and you're saying that, that actually means something.
Peter: Awesome. Thank you so much for joining us today.
Hampus: Thank you very much.
Peter: Where can our listeners find you?
Hampus: So places to find me is the internet. Surprisingly, I'm kidding. But my blogs at hajak.se I have @hajak on Twitter. I don't really care about Facebook, I don't care about LinkedIn. So if people connect with me on LinkedIn, I'm not going to care. If people connect me with me on Facebook, I'm not going to care. And I do a podcast now, I'm trying to do a podcast on the future of governance, which I'm very interested in. Governance is anything from self-governance to self-governing organizations to launching technologies, which people can find under hajak.se and then they can find a link here. My email is everywhere on the internet, so if you email me, I will try to reply.
Peter: Awesome, alright. Well, thank you so much. I realize it's late in Malmo. I hope to see you again soon.