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Marvin Liao Shares Insights on Investing and Developing an Edge in Startup Ecosystems

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Episode Summary:

In this fascinating episode of the podcast, our hosts Cheryl Mack and Maxine Minter welcome venture capital trailblazer Marvin Liao to discuss the multifaceted experience of early-stage investing, the evolution of global startup ecosystems, and the profound lessons learned from economic cycles in the tech industry. The conversation kicks off with an insightful foray into Marvin’s background, including his initial foray into the startup world, his tenure at Yahoo, angel investing experiences, and his defining years with 500 Startups. Marvin delves into the intricate dynamics of venture capital, sharing his hands-on approach to international investing and offering a candid perspective on navigating competitive markets during downturns. With an emphasis on founder qualities, market-fit, and the significance of geographies like the US for ambitious startups, Marvin provides a remarkable guide for those looking to excel in the unpredictable venture capital terrain. As the dialogue unfolds, Marvin’s strategic prowess and astute observations reveal practical strategies for both investors and entrepreneurs looking to leverage opportunities within the constantly shifting sands of the tech landscape.

Key Takeaways:

  • Successful early-stage investing requires engaging with uncool ventures before they gain popularity, often necessitating courage to oppose the crowd.
  • The true test of an investor is how one navigates downturns, emphasizing resilience and adhering to personal investment theses rather than market sentiment.
  • The US remains a central hub for ambitious startup founders due to its unmatched network effects and competitive ecosystem that fosters excellence.
  • Marvin advocates a founder-first investment philosophy, prioritizing the drive, capacity to learn, and responsiveness of founders over all else.
  • Cultural capital, such as an appreciation for science fiction, is considered crucial for anyone investing in technology’s future, as it helps shape one’s vision for innovation.

Notable Quotes:

  • “No chips on shoulders leads to chips in pockets.” – Marvin quotes Josh Wolf to describe the motivation needed for successful entrepreneurship.
  • “How you do anything is how you do everything.” – A philosophy Marvin adheres to when assessing founder diligence and reliability.
  • “Steel sharpens steel.” – On the importance of founders being present in high-impact ecosystems to push themselves to their limits and grow.

Resources:

  • Marvin Liao’s personal ventures and insights can be followed through his LinkedIn profile.
  • Reference to Lux Capital and Josh Wolf’s investment philosophy might be of interest to listeners who wish to explore further.

Transcript:

This transcript has been A.I. generated.

0:00:00 – (Cheryl Mack): Okay.

0:00:00 – (Cheryl Mack): Three, two, one. Hey, I’m Cheryl.

0:00:04 – (Maxine Minter): I’m Maxine.

0:00:05 – (Cheryl Mack): This is first cheque part of day one, the network dedicated to founders, operators and investors.

0:00:09 – (Maxine Minter): If you want to be a better early stage investor, this is the show for you.

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0:00:12 – (Cheryl Mack): So TLDR, if you don’t want to suck at investing, listen up.

0:00:25 – (Maxine Minter): I am so excited for this episode with Marvin Lau. He is just like an OG of the US, especially Bay Area ecosystem. He’s also had like the most amazing multi jurisdictional experience, even just looking at his cv, but kind of underneath that cv as well. He’s done some incredible things across like almost every geo in the entire world and has been at the confront of a lot of startup ecosystem development. So I just am so jazzed to ask him all the questions about being on that journey.

0:00:59 – (Cheryl Mack): Yeah, he has been in so many different startup jurisdictions. He’s actually known as the asian Jason Bourne because he has been to all of the different countries and goes, yeah, he goes into some amazing places, discovers great alpha. He’s also invested in like 400 companies according to like him, his LinkedIn, which I have questions about because I’m like, did you invest in 400 companies directly or is this indirectly through startup?

0:01:30 – (Cheryl Mack): 500 startups? So I’m excited about that. And he’s also a book collector, so I’m making a prediction right now that his first investment might have been in a book.

0:01:40 – (Maxine Minter): I can’t wait. I’m so excited to welcome him to.

0:01:43 – (Cheryl Mack): Talk to the Asian Dejan born. So Marvin, we’re so excited to have you on the podcast today. You are one of my favorite people to listen to. I cannot believe how many, how many, like, talks you’ve done. And it’s still just great quality every time. So really excited to jump in the first question we usually ask our guests. And I’m excited to hear your answer because I have a little bit of a prediction.

0:02:11 – (Cheryl Mack): Is what was the first thing you ever invested in?

0:02:14 – (Marvin Liao): Oh, yeah, you sent the questions to me. So I had to think about this. What was the first thing I invested in? I mean, stocks, of course, and my education. Right. Just like learning. I’ve invested a lot of money and time into books, whether it’s about history or like investing and about business. I’m a history, you know, sort of. I have a degree in history, not in business. And so I spent pretty much two, three years basically like buying and reading as many business magazines and books as I possibly could, actually. Two to three years, you know, long story of just like I had a chip on my shoulder because all my friends were like, in business and they kind of laughed at me. Like, what do you know about business? And, yeah, show them. Show them.

0:02:54 – (Maxine Minter): Yeah, you sure did. I actually, one of the incredible things, as we were kind of prepping this, and Gerald was like, oh, should have Marvin on the podcast because he is incredible in terms of your vantage point across ecosystems. And I don’t think that there’s a startup ecosystem in the world you haven’t been active in. That a fair, fair thing to say.

0:03:12 – (Marvin Liao): Yeah, I mean, I would say there’s probably a couple, there’s a couple folks I would say are pretty active in general, but, like, in general, like, yeah, I spend probably more than your typical silicon valley person. There’s maybe three or four other people I can really point to where it’s like, okay, like, I run into these people, but most of the time I usually, it’s usually just me.

0:03:29 – (Maxine Minter): Yeah, it’s wild. So I’d love to understand that arc from you, kind of. How did you, because you were in the Bay Area exposed to startups in 2014, which was way before a lot.

0:03:39 – (Marvin Liao): Of folks were even thinking the word startup, actually 99. So I actually moved to the Bay Area for joining a startup back in 99. So 25, yeah, 25 years. So actually, I say my second gig in the Bay Area was actually at a startup that raised about $65 million before it imploded. And so I had exposure to stars back in like 99, which was a very different era and epoch. And so maybe, you know, I don’t know how much of sort of the background that folks got, but I’m sort of this random weird beast where I’m canadian, but taiwanese immigrant parents moved to the US when I was like 24.

0:04:19 – (Marvin Liao): And what I did is I joined a startup, didn’t work out very well, so I actually ended up being working as an executive at a big tech company called Yahoo. Back in the day used to be a very, very important company. And so I ran a lot of the international expansion. So that’s sort of how I got a lot of exposure to the ecosystems. And then after I left Yahoo, I took two years off angel investing in boards before I became a VC.

0:04:42 – (Marvin Liao): And so that’s sort of like how I kind of, I was sort of this weird mongrel of sort of like startup person, big tech executive in VC. And then I ran a gaming holding company, as I mentioned to you, sort of, we had 18 gaming companies split between Germany and Ukraine and the US. And I did that for about two years. And I was investing on the side as well. Too, through a rolling called diaspora.

0:05:03 – (Maxine Minter): How cool.

0:05:03 – (Marvin Liao): So that’s sort of the big background of just. Yeah, so I do, I do a bunch of different things now. I’m more, I do mainly investing now, especially, you know, since the war in Ukraine sort of kicked off. But people like me are fairly normal in San Francisco. Like, it seems like very exotic, like in, I’m in Canada right now, so it’s very exotic in like the smaller ecosystems. But like, people like me are kind of a dime a dozen.

0:05:25 – (Marvin Liao): There’s so many of us.

0:05:26 – (Cheryl Mack): I would not say that you’re a dime a dozen, Marvin, just for the record.

0:05:31 – (Marvin Liao): I mean, just this profile, right? This profile seems like very strange, but like here it’s very, very normal. You see a lot of people who are like founders and then they do the start thing, they join Google, they lead, they do the VC thing. It’s just like the trajectories of careers are just much wider, I think, in a place like SFA area.

0:05:49 – (Cheryl Mack): I think that’s true probably, but I think still being at the, like, you were there for the early days of 500 startups, right? Like when you were part of that and, you know, starting to grow, like the first couple cohorts and seeing those companies come through, that still must have been a fairly unique perspective. Like, there weren’t many people involved in 500 from the beginning, right?

0:06:08 – (Marvin Liao): Yeah. And we were probably sub 30 people worldwide. And, yeah, it was interesting watching us sort of like go from sort of like nowhere to sort of being sort of like near number two sort of to YC and then of course, having everything implode in 2017 and kind of like fall back again. You learn so much on the way down, right? Like, probably you will learn way more on the way down than on the way up of like, you know, all the key lessons that stick in my head in my career is like, you know, we went from, at the startup, we, I was employee number 18. We went from 18 to 150 in six months. And then we went, like, we, we fired like about 50 people, like six months later on because of the downturn.

0:06:46 – (Marvin Liao): And so everything you learn going down that way, you know, I was at Yahoo when doing the rise from 2800 people to just at our peak with probably 20,000 people and then watching the company just decline, like after like six or seven years, but just learn so much along the way, right? And same thing at 500, just like watching sort of a company rise very, very fast and then sort of go through this turn, there’s just so many things you learn on both sides and how to, you know, how you bear with the cycles, right? The good and the bad.

0:07:14 – (Marvin Liao): And I think this is one of the challenges that a lot of startup founders and a lot of, even investors, a lot of VC’s, like, they’ve never seen a downturn before. And so, like, you know, of course, when 2022 happened, like, everyone freaked out, right? And I guess for me, I’m like, oh, this is my fifth downturn. Like, whatever, right? Like, this is what you do. And let’s just, like, it sucks, but, like, you sort of, like, have a playbook to sort of, like, operate from.

0:07:36 – (Marvin Liao): And, you know, and I tell people we’re like, okay, yeah, it sucks. Like, great, you have to fire, like, 20% of your staff. Like, it’s not that bad. Like, you know, when in 2001, like, it was 99% of the ecosystem died, right? Like, 99% of the companies died. And, like, every company was laying off people where it’s like, we had companies laying off like, 90% of people. So, like, it’s not that bad. You can survive that, right? Like, you know, you can survive this.

0:08:01 – (Cheryl Mack): As downturns go, this one’s not so bad.

0:08:04 – (Marvin Liao): Yes. I mean, you know, it was, it was, I’m not going to say it was easy, but, like, I would say these last year and a half where I’m like, it was way worse in 2001. I’m just like, it’s like, companies are still hiring, you know, people, big companies are still actually going and using, like, buying SaaS software in general. So, like, it wasn’t the complete sort of like, decimation, like, like what happened back in 2001 or 2001, 2002.

0:08:27 – (Marvin Liao): So I think you take a lot of lessons from those downturns. It’s not fun going through them, but kind of once you survive one or two of them, you’re like, yeah, okay, I can figure this out. Right? Like, it sucks, but just get through it, right? Let’s go through the cycles.

0:08:39 – (Cheryl Mack): I’m sure you have a playbook for, like, companies, but what about a playbook for investors?

0:08:44 – (Maxine Minter): My brain went to exactly the same thing.

0:08:46 – (Cheryl Mack): Yeah, like, what about investors? What do we do during downturns?

0:08:49 – (Maxine Minter): Teach us your secrets.

0:08:50 – (Marvin Liao): Oh, I mean, you know, it’s been so interesting because, like, you see so much bad behavior for investors because they just panic. And, you know, this idea of, like, founder friendliness of just like, boy, that’s disappeared pretty fast in the last, like.

0:09:04 – (Cheryl Mack): Year and a half out the window.

0:09:06 – (Marvin Liao): Just, it’s almost this overreaction, right? And so you’re starting to see, like, just weird terms. Show up again and you’re like, I’ve seen this, seen this movie before. And, and so your job, I think, as an investor is to sort of try to be sort of like very calm, right? So when a founder is like too high, you knock them down a bit, right. But when they’re too low, your job is to raise them up a bit. And that’s kind of all I spent. I feel like I spent like most of 2022 and 2023, just like having these conversations, like, okay, it’s not that bad.

0:09:34 – (Marvin Liao): Let’s go and let’s look through your cost structure. Let’s go figure out, like, where we really are, right, and what are the things we can actually do. Should we go raise another round if we can? Or maybe we cut your cost structure a lot more. Like, let me show you, show me just who’s on your team. And I just start asking some questions where it’s like, do you really need this role? Right? And, okay, assume, you know, you need this role.

0:09:54 – (Marvin Liao): Is this the right person for it? And so just like just asking these basic questions sort of get them thinking and hopefully helping them kind of figure out how to survive, right? And I’m like, it’s not always going to be like this. Your goal is to basically, the job is to survive until the cycle turns back.

0:10:09 – (Maxine Minter): I wonder, especially because you watch those new count five downturns and recoveries as well, what goes up has gone down. Sorry, what has gone down has gone back up. On the other side, theres some theory that the reason that recessions are getting easier over time is we are getting better collectively at properly investing those cycles, at appropriately buffering economies as they go through those cycles.

0:10:34 – (Maxine Minter): We seem to be moving through recessions much faster, even for a lot of jurisdictions. This wasnt a recession correction. We never found a particularly low bottom and then we kept going. So as you’re kind of reflecting on those five cycles, what are you building for the next one? How are you thinking about prepping and maximizing opportunity through the next correction? Because it will come.

0:10:59 – (Marvin Liao): I mean, the way I think about sort of like VC, right? Like the way you make money is you have to do stuff that’s like uncool before it becomes cool, right? So for example, like a good measure is just like when you, and I’ll explain this a little bit more. But this is how I think about it, where I think the mistake I made going into 2021, which is sort of the hype cycle, right, and peak of the hype cycle, I came off a really massive high. In 2020, I had a bunch of exits, I had a bunch of companies, like, just do really, really well. In 2020, I’m like, I’m a great investor.

0:11:27 – (Marvin Liao): And then I just went nuts. Like investing in 2021 when valuations were much higher, the arrogance level, founders were higher. Just like, just a lot of stupidity happened on the investor side, too. And I just did so many bad deals in 2021. I say this openly, I just did so many bad deals in 2021, I’m quite embarrassed about. And now looking back on this, where I’m just like, oh, now sort of like, last 2022 was pretty tough, 2023 was pretty rough, but just the quality level of just sort of, you saw a lot of investors and a lot of LP’s pulled back, too.

0:11:59 – (Marvin Liao): A lot of them just kind of dropped out. And I’m like, wow, now is actually the best time to be doing this, right? Because fundraising is tough, so only the hardcore sort of survive. And that’s kind of what I’ve seen where just the quality level, the businesses I’ve seen coming in the door, the quality level, the founders, the investors that stay, you’ll see a lot of funds shut down in Silicon Valley. Like, 45% of funds are actually inactive last year. Wow. As an example. Right? But they don’t tell anybody that. But 45% of funds are inactive. And you’re going to see, you see, I saw a lot of investors basically kind of quiet quit over the last two years, and I’m expecting a lot more this year.

0:12:35 – (Marvin Liao): But for me, I’m just like, wow, this is the best time to be investing. The level of the founders and the dedication, the level of commitment, knowing that exits aren’t looking very good right now. And I think that’s changing very quickly. But in general, exits aren’t looking good right now. Downstream capital Series A, graduation rates went from one in four to one in ten. And I think that’s going to get even tougher, at least for most of this year. So when you’re a founder now in early stage, why do pre seed seed? You’re pretty committed.

0:13:01 – (Marvin Liao): And I think I see that sort of, like, level of dedication. I see sort of like this commitment. And I’m abs, I tell people, like, I’m absolutely convinced that the deals I’ve done last year and this year will remake my reputation for the next, like, ten years. I’m like, I’m that convinced. That’s awesome enough that I’m actually investing, like I said, investing a lot of my own money now, too. So it’s just like this is a you. You need to be doing stuff when it’s uncomfortable and everyone tells you what you’re doing is wrong. And other VC’s look at your deals and go, if most of your vc’s look at your deals like, oh, that’s a good deal, then you’re probably doing something wrong.

0:13:34 – (Maxine Minter): I love that heuristic and I think it’s something that the Bay Area gets so much better than in Australia. We are still a much more kind of immature ecosystem in that respect because we are, you know, we are relatively new. We’re having our first fund ones on this kind of third generation of BC in Australia coming to an end and starting to pay back. So that kind of relative to the Bay Area will be relatively immature.

0:13:56 – (Maxine Minter): But I’m so excited to normalize that dynamic which as an investor, if you are truly investing in VC, you should be investing in stuff that you have to be ready to look like an idiot. And if everyone is like cool, that looks like a great deal. Its probably not a good sign for the overall kind of innovation that youre investing behind. I love that.

0:14:16 – (Marvin Liao): Yeah, I mean, all my best deals that I did when I was at 500, the ones that had exits and the ones that are worth several billion now, they were very controversial. Like I got so much pushback but just, you know, you’re just like, wow, like this is such an interesting business. Like I pushed this into doing a lot of b two b stuff when business to consumer was like the sexy thing to do. Got so much pushback. But like that, that has returned in spades. And so that, that is my heuristic. So I went very early into defense tech. So defense tech is sort of like, it feels like it’s sort of like the thing now, right?

0:14:48 – (Marvin Liao): But like I started investing back in 2022 because there’s sort of, I guess these insights and things I had, you know, because of my involvement with Ukraine and things and I’m taiwanese so you kind of see these things now. And, you know, defense tech is like one of the hottest areas right now in Silicon Valley. Right? Like this year, but it took like a couple of years.

0:15:05 – (Cheryl Mack): Defense tech, so hot right now.

0:15:07 – (Marvin Liao): Yeah, like it’s, but it’s so interesting. And, you know, like I almost joke, like defense is kind of like ESG, right? Like great. I care about climate and stuff, but it’s like you don’t think, like, I have friends of mine, startup friends and investor friends of mine, Ukraine, where it’s like you don’t even think about ESG stuff when you have rockets flying over your head. Right. So. And going for you and your family. So you’re like, defense is ESG, and we’ve taken it for granted and I’m glad we’ve kind of woken up to this. And so I’m super excited about the space, but a lot of fun. Still can’t, can’t invest in defense tech right now.

0:15:37 – (Maxine Minter): Yeah.

0:15:37 – (Cheryl Mack): Oh, true. It’s like in the bucket of like, oh, we can’t do that because of the, like, ethical nature of like, well, what about weapons?

0:15:46 – (Marvin Liao): So dumb. So dumb.

0:15:48 – (Cheryl Mack): Yeah, we actually, we do have one fund here that is purely defense tech, but it is focused on weapons. So questionable whether that’s the right approach as well. Um, I’m so curious though, like, with your investments at 500, were you investing personally or like, through the fund and. Cause I’ve got like 400 investments through the fund?

0:16:05 – (Marvin Liao): Yeah, through the fund.

0:16:06 – (Cheryl Mack): Okay, so you invest in the fund and then, and then deploy that capital. What were some of the things that you saw going through that, like, seeing that many companies? Wow, just must have been crazy for you.

0:16:18 – (Marvin Liao): Yeah, I mean, we were doing 70, 80, I was probably doing 70, 80 deals a year. Right. And so, you know, it’s one of those things where just like my first year, like, as an angel investor, I was a terrible angel investor. Like, so I came out of Yahoo. I did all right at Yahoo. And so I did like about eight angel deals, like all write offs. And then I did my 1st 70 deals. I had like one winner out of that. It was Shippo. Well, Shippo prediction IO did pretty good. But except for that, like, yeah, like two winners out of like 70. I should have been fired at any other place.

0:16:46 – (Marvin Liao): But all my winners, I think that large sample set, you need a large sample set to understand. If you look at most angels, they do twelve deals and they’re like, okay. As I know, for most portfolios, should be doing 25 to 35 deals. That’s enough to have enough spectrum. Particular early stage, I was very, very lucky to be able to do so many deals there. I did 414 in the six years I was there. All my winners came in year two and year three.

0:17:10 – (Maxine Minter): That’s super interesting. How do you think about that when you’re thinking about that kind of on ramp for investors? When they’re first starting to become angel investors, they’re first starting to work out how to invest in this space. One methodology, if coverage is part of it, is investing via syndicates or investing into a fund. So you get to see more. And I think you now invest across all of those, right? Like, you invest in some funds, you are a fund manager yourself in the, and you do some directs.

0:17:37 – (Marvin Liao): Yep.

0:17:37 – (Maxine Minter): But when you think about sequencing and getting exposure, how do you think about investing as an LP versus going direct when you’re first learning?

0:17:44 – (Marvin Liao): I mean, if I was to do this now, like, knowing what I know right now, right. I would not have done those direct deals myself. Because you don’t know. You just don’t know anything, right. You don’t know what the standard is. You don’t know what’s good. You don’t know what’s not good. I probably either would have done angelist syndicates, right? Like finding a good lead where it’s like, okay, whatever deals they see, at least I can go and have an understand, have a basic understanding and write small checks into these things so at least I can see what’s good or not and have a little bit of skin in the game. Versus sort of what I do was like, oh, I’m so smart, I know what I’m doing. And then I was just a total wash, right? But you do, I have to say, I’m the investor I am right now because I lost my own money. Right. So on the other hand, if you treat it as tuition is probably helpful, but, like, if you, if you, if you’re a little bit smaller, much smarter than I was, I think you either invest in a fund or you invest in these angel list syndicates, and then you kind of, you see a bunch of deals, so you can understand what the standard is.

0:18:36 – (Marvin Liao): But for the record, there are a lot of crappy fund managers out there and a lot of crappy syndicate leads. So you also need to kind of pick very carefully. And I have friends of mine who run funds and I’m like, man, you should, you should not run a fund like, you’re a great operator, but, like, you do not know how to invest and, but, yeah, I’ve done now ten LP checks into different VC funds. I’ll probably do another five or six more this year.

0:18:58 – (Marvin Liao): So I love emerging fund managers because they’re just hungrier.

0:19:01 – (Maxine Minter): Right?

0:19:01 – (Marvin Liao): But I’ve worked with most people, I knew these people from before. So you’re like, okay, I know this person’s a good investor, so I know they’re not going to piss this money away.

0:19:09 – (Maxine Minter): Right. I think what jumps out to me when I see the kind of trajectory of your career is like finding your edge or finding your informational advantage. Like you mentioned there when you experienced you were in Ukraine, and then you kind of watched very firsthand that conflict emerging and then really realize the importance of defence tech. I think about the number of countries you have invested across.

0:19:34 – (Maxine Minter): How do you think about getting an informational edge, getting kind of an opportunity to really understand how to invest that new ecosystem. How do you develop your thesis as you expand internationally?

0:19:45 – (Marvin Liao): Yeah, okay, so that’s a great question. I mean, I invest a lot of time, money and energy into just self education. Right. Whether it’s like reading a lot of books, podcasts. I spend a lot of money on classes in general, whether it’s like copywriting or other things, but also even like investing stuff. So, for example, like, I’ve joined a bunch of masterminds with others, like VC folks. I go to capital Camp, which is an amazing event, but it’s not cheap either. So I go to these type of events where you kind of get exposure.

0:20:15 – (Cheryl Mack): Capital camp, that sounds great. What is capital camp?

0:20:19 – (Marvin Liao): Yes, it’s the best event. Like it’s. You should look it up. Yeah, I think. I think it’s actually the best event. So I’ve gone for four years in a row. It’s one of my favorite events. But super smart people, it’s a very high buy in, but that kind of filters out kind of the riff raff in general. And everyone’s a dedicated investor, not necessarily just VC, but just like, you know, could be private equity, could be personal holding company, could be, you know, like hedge funds. There’s a lot of real estate folks, but just like, everyone’s just like very 99% of the people are just super high quality.

0:20:49 – (Marvin Liao): And so just every conversation you have is just really about getting good at the art of investing and understanding. I was like, oh, that’s what private equity does. Just to understand sort of what they do and how they look at stuff. It’s very helpful. And a lot of them are global investors too. So it’s just you get a very, very good spectrum of the investing landscape in general. But anyway, so the point, to answer your question, I would say I kind of follow where my curiosity goes.

0:21:14 – (Marvin Liao): And so you kind of go down these rabbit holes. I travel a lot, so that’s helpful. And, you know, I speak at a lot of conferences, but I do invest a lot of time and energy. So it’s like, you know, having the prepared mind. But just to say that I have a plan where it’s okay, I just think like it’s. I kind of joke. I’ve kind of forced gump of Silicon Valley where I just kind of go where the same. I have no grand plan or strategy. Like, I’m the worst person to ask for, like, career advice because I’m like, I just kind of ended up doing this because, like, I thought this was interesting and it wasn’t. I wasn’t always chasing, you know, it wasn’t always about chasing the money. It was more of just like, kind of scratching an itch, right? It’s just like, oh, this is really interesting. So I want to go and dig in a little bit more. So you kind of read the literature on it. You sign up a bunch of newsletters, you take some classes on it, you read some books and talk to a bunch of people that you have access to, whether on the family, office side or friends of yours investing in that area. Just have these conversations and you, you kind of develop your own sort of, like, point of view and thesis.

0:22:11 – (Maxine Minter): I think there’s so much to be said for the prepared mind.

0:22:13 – (Cheryl Mack): Yeah, like, I love that. Just, I cannot understand how you consume knowledge like that. It’s just like, I think as investors, we kind of need to be that type of, like, knowledge consuming machines in order to understand anything you want to get into.

0:22:28 – (Marvin Liao): You have to love it. You really have to love this game to really sort of like, like, I want to do this for the rest of my life, right? Like, literally for the next however long that is. Like, I literally want to do this for the rest of my life. And, you know, I knew I said this publicly back in 2019. This is, I was like, leaving 500. I’m like, man, there’s been so many new VC’s coming to this business.

0:22:48 – (Marvin Liao): And, you know, the universal thing was like, these are all very, very smart people, but they were all coming in for the wrong reason. And most of these people are out of the business now, right? Or in the midst of leaving the business because one of the big things I noticed was like, wow, like, none of these people, yeah, they worked at, like, on a stripe or whatever company, right? Like, and there are some good investors come out of stripe, right? But for the record, there’s some, like, Ray tonsic and a bunch of other people who are, like, incredible.

0:23:11 – (Marvin Liao): But, like, just in general, it strikes me not an example, like Salesforce, other places like that, and these great operators who have just come in because they’re like, oh, the new gold rush of VC. But then when you ask them questions where it’s like, hey, what’s your favorite science fiction book? Like, none of the red science fiction. And I’m like, how can you be investing in the future of, like, technology without, like, really, like, loving another liking, like, loving anime, loving science fiction, right? Like, not having read this stuff. Like, because that’s actually how you determine sort of, like, the point of view or sort of like, where the world is going. You’re investing on that thesis of, I think this is what the world is going to look like, right? And, like, you’ve never read, like, neuromancer. You’ve never read, like, you know, from, from William Gibson or you’ve never read, like, any of the Neil Stevenson stuff like Diamond Age or Snow Crash, which is like these classics, right, that really informed the beginning of the Internet.

0:24:00 – (Marvin Liao): And I’m like, how could you not? I don’t know, it’s weird. Or three body problem is another great science fiction book, right? Like, that book is, like, mind blowing. And it’s just like, to not love that because that’s, they portray a picture of society in the future driven by technology, and it’s just like, how can you not? I don’t know. It’s just weird. And so most of them did not last that. And that’s. I’ve seen that most of them not lasted.

0:24:21 – (Cheryl Mack): So is that a heuristic? You have, Marvin, to go into a new fund? Like, you’re like, if you don’t read anime, then I’m not investing in your funds.

0:24:30 – (Marvin Liao): I mean, they have to have some point of view, right? So, for example, I have a friend, you know, I haven’t invested yet, but I’m looking at this like, she’s going very, very hard to focus just on consumer early stage. Consumer super smart is invested. You know, she’s a spin out from other budget funds and. But she has a strong point of view and has a good idea sort of what’s happening and, like, what young people are doing.

0:24:51 – (Marvin Liao): It’s fascinating. I’m like, okay, like, that’s the right thing. Like, you’re developing and, yes, you like science fiction is helpful. How can you not like science fiction and be in this business?

0:25:00 – (Cheryl Mack): All right, we have a new book list, Maxine.

0:25:03 – (Maxine Minter): Yeah, yeah, I am. I think it’s right, though, right? Like, I think you actually have to form a point of view and be opinionated in this business, and you have to form a point of view far before other people necessarily form that point of view before you. And that is something that I see, especially early stage investors and early fund managers. There is actually quite a few incentives in the wrong direction there.

0:25:28 – (Maxine Minter): There are incentives that encourage you to want to crowd obvious deals that make you want to follow on behind fun managers or known brand names to help you validate when you’re at that earlier stage. And so the mental model where you’re comfortable to be out there kind of flapping in the wind and write ideally in the future, I think is really important. Has that been something that is natural to you, or is it been something that you’ve cultivated over time?

0:25:55 – (Marvin Liao): I feel like it’s something I cultivate over time because in the beginning you go with the crowd because, like, oh, well, sequoia is in this deal, so it must be good. And those have turned to be terrible, frankly. Ultimately, and this is not my quote, I just learned these two terms. I found them really interesting. This guy, Chris Dixit, he’s an incredible investor, great angel investor. He runs a crypto finder for, for Andreessen Horowitz. And I think one of the smartest guys, like, in Silicon Valley, well, he’s, I think he’s on New York now, but, like, between Silicon Valley and New York and really, really great angel investor before he became a VC and he had this great term which I hope your listeners will find helpful.

0:26:34 – (Marvin Liao): It’s like there’s really two ways of investing. It’s the heat seeking or truffle hunting. Right? Like heat seeking, which is like, oh, this is a super hot deal, and you fight your way into that, right? And sometimes you have to do that as a VC, and that’s how you sharpen yourself. Right. It’s like, can I, you know, can I find deals and can I win them, right. And then can I help, right. The other way, which is sort of more truffle hunting. Truffle hunting is like you’re finding deals off the beaten track, right? Like getting into them before, sort of like whether it’s a demographic, whether it’s a geography, whether it’s a sector or space or business model that is, like, hardly unsexy and that nobody wants to touch. And then, of course, it becomes cool later on. Right.

0:27:13 – (Marvin Liao): And I found myself sort of like, I veer more toward the truffle hunting than I do for sort of the heat seeking. But it’s such a great framework to think about this because I think a lot of VC’s kind of get confused and ultimately sort of like, that’s really the only two types of deals there are, and both work. Right. Like, you can do both really well, but they’re very different, you know, as we tell our startup founders, like, they’re very, very different. Go to market emotions.

0:27:36 – (Marvin Liao): Right. And so you kind of have to understand your game. And for me, I prefer the truffle hunting because it’s just like way more interesting. I don’t have to fight as hard and you’re not in these like really sort of like heated environments, right. Because like you’re literally fighting to get into these like super, super sexy hot deals. And yeah, you have to do it every once in a while, but like, I prefer not to.

0:27:58 – (Maxine Minter): That is a fascinating framework.

0:28:00 – (Cheryl Mack): I think that gives a name to what I’ve seen in the australian ecosystem over the last like six to twelve months because I have talked to different VC’s, some of which have said, like it, like things are hot and we are fighting our way into deals. And then I’ve talked to other VC’s who were like, yeah, we’re getting great deal flow and like the valuations are like somewhat reasonable and, you know, we’re, it’s like sober investing now.

0:28:23 – (Cheryl Mack): And I think that actually has come out the latest cut through venture report, which is this report on the australian ecosystem that shows that the number of deals at the smaller end of town, like sub 25, 20 mil, I think has decreased to the lowest levels in the last five years, which I think shows that like there are more and more people fighting for those bigger and those bigger hot deals and those deals are getting bigger for that reason.

0:28:47 – (Cheryl Mack): And that’s exactly what’s happening in Australia at the moment.

0:28:49 – (Marvin Liao): Yeah, those are, that’s AI deals. That’s AI deals in Silicon Valley right now. Like, this is why you see these. Like, I don’t understand how you can do like a $75 million pre seed, right, in AI. Like, it makes no sense to me.

0:29:00 – (Cheryl Mack): Right? Yeah, we just had our largest pre seed into a company. It was like, or no, we had our largest series a and our largest seed deal, I think the largest c deal was like 12 million. And the largest series a, one we just did, was like, I can’t remember the number, but it was in the high millions, you know, mark my words.

0:29:19 – (Marvin Liao): I don’t want to be a hater, but like, I’ve never seen these deals work out. Like, they just never work out. I’m just very skeptical because I think, I know I’ve had that with portfolio companies over raise, like raised a big sort of like seed or big a, they just get bloated and just like, so they end up wasting that money. I see very few companies have the discipline to be able to use that money well.

0:29:41 – (Marvin Liao): And I just, in general, I’ve never seen the cash cannon strategy work well in early stage or later stage. Like as we’ve seen in general. And so I do think that’s one of the bad habits that we’ve learned, you know, in the startup land from like 2012 onwards. I say 2012, 2014 onwards where it’s just like, this wasn’t like if you actually look back of sort of all the really, really amazing companies, whether it’s like, okay, this is not an amazing company but a very successful company. Like you look at Salesforce, you look at Google or you look at Yahoo and eBay, like these are highly, even Amazon, like, even back in the day they were very capital efficient companies. Microsoft, like all these big giants, most of them were highly capitally efficient and they’d even use most of the VC money they raised. Right. I think lot of people are using Uber as example and I think that’s a horrible example because they only became profitable like in the last like year or something after like bleeding for like over ten years. Right. And even then the profitability is kind of like, eh, like it’s not like Google level profitability. So I do think there’s, we’ve learned, I worry that a lot of the VC’s and a lot of the founders kind of learned the wrong lesson from this last cycle.

0:30:47 – (Maxine Minter): I think that’s true. I actually, the most impressive management team I have seen today did this methodology which wowed me at the time, and then I’ve just been kind of sharing with as many people as possible who are in the situation that they happen to be timing the market so well that they are in a kind of cash cannon circumstance. And so what this team did, they’re repeat founders in the healthcare space, both of them really high intelligence, high credibility individuals, and really kind of generatively motivated. That is, they are really excited to create something in the world. It wasn’t about wealth creation for them. It didn’t come from place of Creed.

0:31:25 – (Maxine Minter): And they raised in 2020, maybe early 2021, and they essentially raised what would have been like a fat pre seed and seed together. So they had something like five or six years Runway because they were building in AI at the time. And one of the CEO’s had the good sense to be like cool, fascinating. That’s a really helpful de risk that’s going in a cash balance over there. I’m putting it to the side and I am morally committing, we’re not touching it until we hit these milestones. So I’m operating like I just raised a like cash type pre seed.

0:31:58 – (Marvin Liao): Yeah.

0:31:58 – (Maxine Minter): And then he operated appropriately. He hit the milestones earlier than he had created for himself and then he unlocked that next ranch of funding for himself. So he essentially kind of constructed a fundraising dynamic for himself to hit certain milestones. And they just raised an astronomical amount of money from some of the best funds in the World around Series B. For a period there, they were putting $10 million on a quarter of revenue. Like, they’re really in kind of rapid scale, but it’s just really impressive team. Really, really impressive team. And I think that kind of foresight to be, like, great.

0:32:31 – (Maxine Minter): We are going to make high hay while the sunshine, but we’re not going to let that bloat our incentives. We’re not going to let that kind of bloat the way we operate, I think, is a beautiful methodology, but they are so rare.

0:32:41 – (Cheryl Mack): Right.

0:32:41 – (Maxine Minter): He’s literally the only person I saw do that in 2020 to 2021.

0:32:45 – (Marvin Liao): Super rare. Yeah, you do see it every once in a while, but like, yeah, it’s not that common because most folks just spend it.

0:32:50 – (Maxine Minter): Yeah, but that’s the incentive.

0:32:52 – (Marvin Liao): Right.

0:32:52 – (Cheryl Mack): Well, because everyone thinks whatever is happening now is going to keep happening. So, like, why not spend it now so that we go and get the next raise and we can. We can continue this trend. But the reality is that cycles happen. Right. We’ve now been through, as you said, five, and we kind of have a sense of, like, it’s going to go up and down and you need to. You need to buffer the downs.

0:33:11 – (Marvin Liao): Yeah, I mean, I do think it’s a nature of the beast because I think as founders, as a founder of a star, you have to be like, almost like a little bit like naively optimistic. Otherwise you wouldn’t do this. Like, you knew actually how hard it was. You would, they would never start it.

0:33:26 – (Cheryl Mack): Not too delusional, but like, slightly delusion.

0:33:28 – (Marvin Liao): Delusional. Yeah, just. Just that. Right. Balance. That’s tough. Yeah, right. That is tough. It just is so hard. And, and so the reality is this last four or five years, at least, I can only speak for Silicon Valley. I do think it wrecked Silicon Valley. Both sort of like the worker class. There’s a whole bunch of senior execs. They’re just, like, burned out. And so I do think we’re seeing this sort of, like, just the thing that makes Silicon Valley work, that I think makes the US work really well, is Silicon Valley is built on sort of like the blood of the young and the naive. And so we saw big wave of, like, young people coming in these last, like, three, four years. So we’ve seen almost a complete turnover, actually, of the ecosystem.

0:34:11 – (Marvin Liao): And that, to me, is just like, so you see this energy, right? And everyone’s questioning everything. It’s a really good dynamic. And so as an investor, and I would say an old dog over there, like, it’s so hard to stay relevant, right? Because they’re like, what’s this 500 thing? Most. A lot of these founders don’t even know what 500 is, right? Or they know what Mark Andreessen. Like, they know a couple of the big names, but just in general, which is like the turnover just so fast.

0:34:33 – (Marvin Liao): And so what was like, cool, like five years ago? It’s just like, I don’t even know this person. And so just like staying relevant and stuff. There’s a lot of people with money who are very irrelevant in Silicon Valley, right?

0:34:44 – (Maxine Minter): Yeah. I remember at the beginning of 2021 when, like, Gen Z started to be the dominant face I would see around the bay. And it was this quite a harrowing moment, actually, to be like, oh, I am no longer part of the generation that is like the dominant person in this, in the area. Also, because so many people left, those like kind of mid career folks. Yeah, they left during COVID or, and or graduating to like, you know, having kids or whatever.

0:35:10 – (Maxine Minter): And so you would be hanging around. It would just be like deep Gen Z. I definitely started wearing wider pants, that’s for sure.

0:35:17 – (Marvin Liao): It’s, um, it’s trippy. And, you know, whatever people said about like, sf, like this last year, it’s booming. There’s so many events going on. You go to cafes. It is really 100% for someone who invested globally. My thesis has actually changed a lot. I don’t know if I’ve been. This is probably the first time I guess I’ve talked about this publicly. Well, no, I talked about it publicly in Europe, which didn’t make me overly popular.

0:35:43 – (Marvin Liao): But one of the insights I actually had in the last year where this idea of remote work and every ecosystem is going to grow equally. I’ve actually come around to the view where I’m like, I don’t think that’s true anymore. That despite all the problems, us is a mess. I love the US, but us is a complete disaster and mess. But one of the things I see is that the three major ecosystems in the US, so whether it’s like New York, LA, San Francisco Bay, or particularly, like, the analogy is like, it’s like a Microsoft product, right? The UX is absolutely awful, but like, the network effects are so powerful that just like, sucks you in, you can’t leave.

0:36:17 – (Marvin Liao): And I’m just seeing the network effects are so strong where it’s just like, I actually think that we are stealing talent away from Europe, from Canada. If you’re a top tier founder, like, I’ve only really kind of started seeing this in the last like six to nine months. Like, I was talking to friends of mine, like VC friends of mine in Canada, VC friends of mine in Europe, and they’re complaining about how terrible deal flow has been this year.

0:36:42 – (Marvin Liao): And I thought about, like, that’s weird. Like, my deal flow has just gotten way better. And I’m like, wait a minute, like they’re all just coming to San Francisco, New York. Like they’re just coming directly. They’re not staying back home because, and the more and more I thought about like this, this totally makes sense because if you are an awesome founder, you want to be with other awesome founders. So steel, sharp and steel.

0:37:01 – (Marvin Liao): And so I’m just seeing all the best founders from Europe, they’re just flying directly. Like, I’m not going to raise locally. These folks suck. They don’t know what they’re doing. So you’re starting to see like we’re just sucking in so many new people, or people come in for like four months leaving, then they raise the money, then they get their zero one and they’re moving over. I’m seeing a lot of that.

0:37:18 – (Marvin Liao): I’m definitely seeing a lot of that.

0:37:19 – (Maxine Minter): 100%, which makes sense, 100% for the people in the back.

0:37:24 – (Cheryl Mack): One of the things that I think is awesome about both of you though is that you have this perspective of helping companies expand to the US. And I think from that approach it’s like, well, if you’re going to support companies to go global, then having them take advantage of that network effect that does suck people in is really important. So I mean, I’m curious to hear from both of you how you approach that and what is what that’s looked like for each of you.

0:37:48 – (Marvin Liao): I mean, the big part of it, like, to be frank, right? Like you hear this from VC. Like, oh, like we do all these things for founders. The real is that most VC’s do nothing for founders, right? Like your job is just basically just sort of like not waste their time and make sure the check clears and be there if you, if you can be helpful. At the end of the day, your job is just really there as a trusted advisor.

0:38:06 – (Marvin Liao): And so where I spend a lot of time on go to market stuff ultimately for any new sort of like market entry, right, in this case the US. Like if the founders aren’t prepared to move over here, I actually won’t invest in them now, because most of these, you know, most of these have to be driven by founders. I’ve never even a series B or Series C company where from, from some other country where it’s like, I want to go to the US and the founder ever spends time here and they hire a team or a GM to go and do this. I’ve never seen it work out. I’ve actually literally never seen it work out because I think everything they learned back home, the playbooks that I have back home, just don’t work in the US. It’s just such a different and much more competitive market in general.

0:38:41 – (Marvin Liao): And so a big part of it has to be founder driven. And so that, you know, we didn’t do that. We didn’t care about that before, but about a year and a half ago, we looked at our portfolio and we saw, like, the thing that actually made all, and so we focus on european founders, focusing on the US from pre seed. All the teams that didn’t move over here, they just don’t grow as quickly versus, like, the teams that show up over here.

0:39:01 – (Marvin Liao): And the great thing about it, when they show up over here, you don’t have to spend that much time with them because, like, the network that they end up building here of other great founders, they just kind of sponge off each other. And so the conversations I have with founders based in the SFA area who’ve moved here, versus conversations I have with founders, like, living somewhere else, such a different level where we can have, like, it’s like, advanced stuff you have with, like, the folks, because, like, they just get it by being in the air, right? It really is true.

0:39:26 – (Marvin Liao): The events, other founder friends, and they just pick up these things and, and I found myself going, like, why am I having explained this basic stuff to you? Right? Like, you should know this, right? And, like, no, how would you know this? You’re not, you don’t spend any time here. So I just, I think as I get older, I’m just lazier. I’m just like, I used to be able to do that and I was happy doing that. Now I just, I don’t want to do that because to me, it’s also self selection where just, like, you have to sacrifice and commit, right? Like, if you want, you said you want to go big.

0:39:52 – (Marvin Liao): How are you going to go big? Like, living in whatever country in Europe or Canada, just like, you just can’t because you’re not surrounded by excellence. I 100%, at least, I don’t know. That’s, yeah, I don’t know. Yeah, right. So that’s my take.

0:40:05 – (Maxine Minter): Because we just focus on pre seed. We do a lot of that encouragement at the very earliest stage. Right? Like our house view is that spending time in the US building your company for the US from day one is the best way to do it, as opposed to kind of scaling to a certain level of scale culture, go to market sophistication, et cetera, and then trying to copy and paste that into the US, it’s really, really hard. At least that’s my view. So I have seen it over and over and over again.

0:40:31 – (Maxine Minter): Right. The founders who move to the US kind of within six months to nine months of raising their pre seed, the feedback I get constantly is like, I wish I did this previously. I am like the ecosystem here. The kind of incidental interactions that you get is so different. It is just like the classic application of the economics principle of spillover. Knowledge is one of those materials that can duplicate by sharing, by being in an ecosystem like New York, like LA, like San Francisco, where there is just that depth of spillover expertise in the ecosystem, they just accelerated at an unholy rate. Also, the ecosystem of support around them is so much higher as well, normalizing. As you said, steel sharpens steel. So I think for me, I think of one of the highest leverage things that I can do is just finding the kind of person that maximizes opportunity out of a resource rich system and then trying as hard as they can to get them to step into that resource rich system as fast as possible.

0:41:30 – (Maxine Minter): If I can nail those two things, then that is where I think I add the most value to the teams that we work for. And it’s actually just so wonderful to hear. It’s exactly the same as you’re thinking. Cross border between Europe and the US, because I definitely see it. Australia to the US and the best founders. I know they’re really hungry to be in the US, they’re really hungry to be in the ecosystems where it’s going to push them all the way to the edge of their knowledge and help them develop and help them move faster.

0:41:58 – (Maxine Minter): And today they are all looking at the US. They’re not looking for anywhere else that will help them do that, which I think is the biggest validation that the ecosystem is not going anywhere.

0:42:06 – (Marvin Liao): It’s just, you know, it’s something I see over and over and over again. Because I do think, like, I’ll be the first to say, like, I love the US, but it’s a crap hole, right? But at the same time, like, it’s the best place for business. And so there is. To me, it’s just like if you’re willing to sort of give up your awesome lifestyle in Europe, in Australia, in Canada, to move over here, that means you’re going all in on the business.

0:42:28 – (Marvin Liao): And that means, like, actually there’s not a guarantee of success, but it increases success of that business, right? And the magnitude of success of the business. And so it actually really, really matters. And so now any founder that’s not willing to move to the US, I won’t. I actually won’t invest in them. That’s a core part of our sort of thesis.

0:42:46 – (Cheryl Mack): Just to be like, Devil’s advocate, though, Australia has three plus companies that are worth like $30 billion, plus canva, Atlassian, Air, Wall X. These are companies that built from Australia, never actually moved like the founders ever moved to the US, particularly not in the early days. Now they’ve expanded, but they certainly took that approach of like, copy, you know, grow here and then land and expand in other countries.

0:43:13 – (Cheryl Mack): And like, UK doesn’t have that. I don’t know many other countries outside of the US that have, you know, more than 330 billion dollars companies. So, like, could Australia be the outlier?

0:43:24 – (Marvin Liao): So here’s what I say, that it’s a great point, right? It’s, it’s not impossible. I just think it’s harder. I just think it’s much harder, that’s all. Maybe, maybe I’ll put another, another example to sort of like throw that. Throw this out there. Just sort of growing and scaling of whatnot, where you have a pool of three companies, which is not nothing, it’s actually pretty impressive, but it’s still limited when you think about the overall ecosystem and when you think about sort of like the investor base, when you think about the scaling.

0:43:52 – (Marvin Liao): So there’s analogy I use all the time. Sort of like, there’s three stages of companies. Stage one, which is commando phase. Stage two, which is the inventory phase, which is a scaling phase, right? Post product market scaling phase. And sort of like phase three, which is sort of like the IBM, HP, Google phase, right? Like the policeman police person phase. And so they’re very, very different. And so when you look at the size of these companies, where it’s like, okay, great. It’s not just evaluation, but even the size of the companies where if you look at how many folks have, like somebody like me, I’ve worked at a bunch of, like, you know, 30, you know, 20, 30,000 person companies, right? Like, there’s lots of us.

0:44:26 – (Marvin Liao): And so you see a lot of people who are able to sort of take these different sort of like, skills work at different scales. There’s so many of these folks in New York and in La and San Francisco. There’s not that many in Europe and there’s not that many Australia. So that pool of being able to sort of like scale is very, very limited. And so I would let my counterpoint to that where it’s like, yes, absolutely. That there, you know, like, there are some exceptions to the rule doesn’t mean and there could be another three more right, the next couple of years. But I think it’s just harder in general versus sort of like look at how many, like, look at the magnitude of the, of the size of the companies that continue to show up like every quarter in the SFA area. Like, wow.

0:45:05 – (Marvin Liao): So, you know what I mean? And being around that sort of, there’s a pool that sort of like drags people up with that. And so I don’t know, I just think it’s just harder. Not impossible, but it’s just harder.

0:45:15 – (Cheryl Mack): Yeah, fair, fair point.

0:45:17 – (Maxine Minter): Yeah, I would totally agree. I think the nuance I would add to that is like, what does moving somewhere look like even these days? What I have seen from a lot of founders who have built successful companies from Australia is they still spend an enormous amount of time in the other places that they’re building in. And so I don’t know if Europe is the same, if you’ve noticed the same dynamic, but for the successful founders that are building, they still have enough time in those places that do drag them up, that help them sharpen their steel, that they can get the benefits of both worlds. Right?

0:45:50 – (Maxine Minter): All of those examples, canva, Airwallex, Atlassian, all three of them built hybrid approaches. They were actually not full time in any one place or the other. They were much more fluid. At least my thesis is like, we don’t need to be binary about it, we can be much more fluid. But the focus is like, seek excellence and find the place that makes you the most excellent at the thing that you do, which I think for a while will be one of those three cities.

0:46:16 – (Marvin Liao): That’s a really, really great point. And I’ll give you examples from my own portfolio company. So it’s not just a hybrid. So what happens is I think the management team needs to be there and sales and marketing needs to be in the US. But what I’ve seen, that the model has worked very well. So this is not a portfolio company, but talk desk as an example, or Uipath right. Uipath is Romanian based in New York.

0:46:36 – (Marvin Liao): Everyone thinks american company, they have like several thousand people work in Romania because of engineering. Right? So they keep the back office in engineering. Ericall, which is actually a portfolio company of mine based in New York, they have 200 people, sales, marketing, front office, 300, 400 people in Paris of another company called Manychat. Right? So they had originals based in Russia. Not anymore. So most of the staff, they have a front office management team, leadership team, sales and marketing in the US SFA area, I think they moved recently, but most of the back office, like 200, 300 people in Armenia.

0:47:06 – (Marvin Liao): So that model works. And so I do. I’m a believer in general, but the head sort of like office and the key leadership team needs to be in the US. But that doesn’t mean that there are no good spillover effects for the home country because it does raise a talent pool and there’s a lot of this crossover. So it’s never a loss in the long run. It’s sort of, we all benefit. But in general, I do think sort of, especially as they’re scaling up, it’s very, very important to be in the US. So that’s a great point.

0:47:32 – (Maxine Minter): So when you’re looking for those teams, when they can sit across those two ecosystems, when you’re thinking about the kind of person who can like, thrive in a Europe and thrive in America or build a company in kind of across a couple of places, how do you think about finding excellence in places where they haven’t yet had the benefit of being polished in a place like SF or New York?

0:47:55 – (Marvin Liao): Yeah, that’s tough. I mean, a lot of it’s just sort of your job in preceding seed is trying to see sort of like what they’re. Do they have the drive? Right? Do they have the learning capacity? You know, are they coachable but not too coachable? Right? You know, that combination, like, can they scale? Right? When I say scale, just like, are they learning machines? And a big part of it just sort of a very, very simple thing, just because I just have a very large data sample set. Like, every founder I meet is like, how does this founder compare against my top ten percentile of founders that I’ve invested in? Right? Like the dans of Firestorm labs. Right? Or the Laura’s a Shippo, the Olivier bear call. Or like Edo of like rapid API? Like, how does this founder actually match up against them?

0:48:38 – (Marvin Liao): And, you know, every time I’ve broken that rule of just like, well, they’re not as good. Right? Like, and I’m like, well, they’re my top 25 percentile. It never works out. And so it’s just having that data sample set of just, like, this is what an awesome founder like is. You know, like, the traits, right. It just sort of, like, reminds me of aspects of it sort of almost your gut, the capacity, all that other stuff is just like.

0:49:01 – (Marvin Liao): It has almost always never, you know, when I’ve broken that rule, it’s never worked out. And when I follow that rule, something good comes out of that. Almost always.

0:49:10 – (Maxine Minter): I am so intrigued to hear how you think about, like, founder versus market. Then in those circumstances. Like, when you made a company and they’re chasing something that you’re like, that is so cool, that will be huge. Like, you can really get behind the idea, but the founder doesn’t meet that bar. It seems implied in that then you just.

0:49:29 – (Cheryl Mack): You wouldn’t invest.

0:49:30 – (Maxine Minter): You back. Founder, not market.

0:49:32 – (Marvin Liao): So I would say, all things being equal, I think both are important, right? The market and the founder is important. But if I had to have, you know, if you put a gun to my head and go, you got to pick one. I pick founder any day because they usually end up pivoting into some market or something. They almost always end up pivoting in general. And so does this founder have the capacity to go and figure this out? Right. Have they really thought a lot?

0:49:53 – (Marvin Liao): Have they gone through the idea maze of really thinking about this problem and the solution may or may not be the right solution, but at least it’s very clear that they thought about it, but it’s tough. And the other part, which I’ve also, I think, been public about saying where I’m, like, I’m looking for founders, like, immigrant founders. I’m looking for founders that are, like, kind of broken, like me, right? Like, driven in, like, really broken. Like, crappy family life. Like, just a mess because you have chips on, you know, like, I.

0:50:21 – (Marvin Liao): My favorite quote is probably from one of the best deep tech investors, guy named Josh Wolf. I don’t know him, but I’m a big fan of his work. He runs, like, lux Capital. He has this great quote that I, like, think about all the time. It’s like, no chips on shoulders leads to chips in pockets, and it’s, like, so true.

0:50:40 – (Maxine Minter): I love that. That’s so good.

0:50:43 – (Marvin Liao): But it’s so good, right? Like, it’s just, like, it’s so true.

0:50:46 – (Cheryl Mack): Yeah.

0:50:46 – (Marvin Liao): And so, like, every founder that I invested in had something to prove, right? Like, you know, like I said, kind of broken. Something a little bit broken inside, like me, right? Like, I’m never going to stop doing this, right. Because I always feel like whatever you get to, you’re like, what’s the next thing? And. And you kind of want people like that.

0:51:02 – (Maxine Minter): Yeah, 100%.

0:51:04 – (Cheryl Mack): I’m like, I’m so curious because for us, who, you know, I don’t get to spend a lot of time in the US anymore since I moved to Australia. So, like, for, for you, in terms of the type of, like, ten x founders that you’ve seen, like, your top 1%, what are those characteristics that you, like, anchor on?

0:51:23 – (Marvin Liao): Like I said, very clearly, they thought a lot about the problem. Very, like, the idea maze, right? Like, they just very clearly just spent a lot of time thinking about this. A lot of them are just like, wow, this person is just, like, relentless. And there’s a level of just sort of, like, questioning as well, too, right? Like, they don’t just take everything that you say and they’re not afraid of pushing back politely. Like, not rudely, but, like, politely where I’d be like, yeah, I don’t agree with this. Like, why? And they’ll push back, like, here’s, here’s, here’s where I disagree, brother. Do it in a very rational way.

0:51:57 – (Marvin Liao): That tends to be fairly universal. Founders who know it all founders tend not to do so well versus somebody who’s just like, who does think about sort of what you say, and they usually come back and people who are actually responsive, like, little simple things, because this is maybe not always a great heuristic. You got to put all these things together. But, for example, founders who are just like, hey, I’ll get back to you. I don’t know the answer for this, but I’ll get back to you by tomorrow. And they literally do that right away.

0:52:23 – (Marvin Liao): The response is just like, you ping them. It’s just like, even some of my founders, like, like, Laura, for example, I text her, she runs a multibillion dollar company now, right? And I text her, and there’s, like, literally response right away. I’m like, aren’t you running a company? But it’s just like, the best founders and the best investors just, like, just have their shit together.

0:52:41 – (Cheryl Mack): Get your shit together.

0:52:43 – (Marvin Liao): I think it’s so important, right? Like, it’s so important. Just like, if you, like, how you do anything is how you do everything. And so maybe it’s not fair to judge on these little small things, but I’m like, wow, if you can’t even, like, if you don’t say what you do and do what you say, like, just like, how good really are you? And so these little small things of just like, being in the place, like, bay area, where it’s like, you’ll find out very quickly, like, where you fit right, for better or for worse. And what the standards are, if you don’t figure that out, like, you just get churned out of the ecosystem. And I think that’s a good thing.

0:53:11 – (Maxine Minter): Absolutely. Yeah. It’s making me, I’m so excited to be back there in a couple of months.

0:53:16 – (Marvin Liao): Yeah, let me know. I’ll be around. We’ll get coffee.

0:53:19 – (Cheryl Mack): I wish we could keep talking, but we are coming to the end of our sequence here. Marvin, you’ve been amazing. Maxi, would you like to ask our last question?

0:53:28 – (Maxine Minter): Oh, I would love to. So the question that we ask everyone at the end of the fabulous conversation like this is, what is the biggest big honors moment for you? A moment where you felt really brave in the thing that you did not?

0:53:41 – (Marvin Liao): It was really brave. But, you know, I’d say the big thing, which is, I guess, somewhat controversial looking back, wasn’t so controversial was, you know, I left a very, very high paying, prestigious, sort of like executive role at Yahoo to just take two years off. You know, I’d done all right over there, so it wasn’t a money thing, but it’s just like, and people like, my parents are flabbergasted, like, did you get fired? And I’m like, no, I didn’t get fired. And like, why would you leave this job and what’s your plans? I’m like, I have no plans. I took two years off and that’s that sort of rewiring of my brain. I took a lot of classes. I started angel investing. I traveled and did all the things I wanted to do.

0:54:21 – (Marvin Liao): I started mentoring a lot of startup accelerators that put me into the career VC. Looking back in retrospect, as Steve Jobs used to say, I hate it when a Silicon Valley person is like, well, Steve Jobs used to say this, but it’s such a great quote. You connect the dots looking backwards. You don’t connect the dots looking forwards. And so I didn’t have any plan. And I think that was what was exciting and scary at the same time.

0:54:45 – (Marvin Liao): But that allowed me to rewire my entire brain and really kind of relearn about sort of the whole world around me, particularly Silicon valley, particular startup world. So all of a sudden, you’re kind of coming out of a big corporate job and going into this world and like, wow, there’s all this innovation, there’s all these, like, super smart people. There’s just beginning this wave of these things and, and just being able to see that and all of a sudden that was kind of led me into VC. And so, yeah, I guess, like, yeah, looking back was very clear, but back then was just like, wow, that was a big move. I literally had, like, no plan.

0:55:18 – (Marvin Liao): And it was a fast way where you find out very quickly who your friends are and who are your friends, right? Because I was a senior executive and so of course I was known as the Yahoo guy. How do you redefine your own sort of identity, right. And your own relevance in an ecosystem like that. Right. Because that’s the first thing, the first two months was like, what am I going to tell people about who I am and what I do when I see them at a party? Right.

0:55:43 – (Cheryl Mack): How do you answer the question? What do you do?

0:55:45 – (Marvin Liao): Yeah. And so forcing yourself to sort of like, to reinvent yourself, that was helpful. That was a great thing to do. So now I’m just like, I’m Marvin. Yes, I do vc investing and stuff, but like, I do a whole bunch of other stuff. I’m not so tied to that identity like many people in the US are, which I think is really dangerous.

0:56:02 – (Cheryl Mack): Wow, that’s incredible.

0:56:04 – (Maxine Minter): Absolutely. I love that.

0:56:06 – (Cheryl Mack): I’m going to quote you now. I have so many quotes from you.

0:56:08 – (Marvin Liao): Feel free to use it.

0:56:09 – (Cheryl Mack): I’m going to be like, in the next podcast. I do. I’m going to be, well, I have to quote Marvin.

0:56:15 – (Marvin Liao): Which I’m usually quoting somebody else, so.

0:56:17 – (Maxine Minter): Perfect. We pass it down the chain. Thank you so much, Marvin. This has been incredible.

0:56:22 – (Marvin Liao): No, thanks for having me. This is fun.

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