One of my favorite podcasts, recently discovered, is StartUp, by Alex Blumberg, former producer at This American Life. The podcast chronicles the story of starting Gimlet Media, Alex’s new business aimed at creating a network of story-narrative podcasts. “StartUp”, documenting their own story, is Gimlet’s first production, and what’s interesting about this podcast is that Alex records almost all of his conversations along the way, giving us uniquely inside access into the creation of their company.
In the first few episodes, we follow Alex as he searches for $1.5 million dollars in venture capital, to cover the costs he anticipates in reaching their goal of producing six podcasts in two years.
From his days at NPR, he’d come to meet famed venture capitalist Chris Sacca, and pitches him on Gimlet. His first pitch completely flops, but after some coaching, Alex manages to convince Chris’s partner Matt Mazzeo, and Lowercase Capital makes a $100,000 investment in Gimlet, on a $10 million valuation.
This story interested me from two angles. First, as a business owner myself, I’ve always pondered the option of taking investment to help fund some of the ideas we’ve had. How would it change things? What would life be like with an investor on board?
And second, I came to virtually know Chris Sacca on several occasions through the Tim Ferriss podcast. Chris had always struck me as a smart, friendly and down-to-earth guy. In addition to an astoundingly impressive record as an investor, he seemed to me the kind of person I’d just like to hang out with. So I imagined that if I ever took on an investor, someone like Chris would be at the top of the list.
With that as background, the most recent episode of StartUp was particularly eye-opening, as I got insight into what it would actually be like having an investor like Chris Sacca on board!
So Alex is on a catch-up call with Chris, going over some highlights, and is obviously feeling really proud about what he and his co-founder have achieved so far. He then asks how Chris is feeling about his investment, and we get to hear Chris’s recorded response.
Chris replies (and I’m editing this down for brevity):
(Long pause…) So you can edit out this dramatically long pause. I feel like I don’t have enough information yet. My biggest concern isn’t with the stats. I get these half-assed emails from you that are basically trumpeting the few things that are going right. Apart from that, the only updates I get are from the podcast episodes themselves. That’s the challenge for me.
Chris then talks about his discomfort in hearing an episode revealing discord among the startup’s staff, and insists that kind of news need to get to him directly.
Alex responds by recalling an email exchange he’d had with Chris in the past, in which Chris insisted on him doing certain things, concluding with Alex feeling like, “Get off my back.”
Sure, part of that is, “Hey, I’m heads down; give me some room”. But part of it is the investor being informed, included and relied upon.
We then get to hear Chris’s surprising response to the episode in which Alex and his co-founder talked about the success they’ve had so far, how things are ahead of schedule, and how they’re going to reach profitability much sooner than expected:
I hear you on the radio talking about how soon you’re going to be cash-flow positive. That’s usually a bad move for an early-stage company. I have strong opinions about that. Everybody I know who pushes for cash-flow positivity that early, stops growing at the rate they should, and gets so anchored by this idea that “we need to make money”, that they no longer feel the freedom to take chances and spend the money they need, to get to the size they need.
You’re not trying to build a little profitable lifestyle business. You’re trying to build a huge-scale media business. That means you’re likely to lose money for a long time.
Alex then asks what exactly a “lifestyle business” is, and Chris responds with a tinge of disdain in his voice:
A lifestyle business is a business that likely is not growing, or is growing at a really modest clip. It is making money such that the people working there are living comfortably, they’re drawing reasonable salaries for their time, and the pace is reasonable enough that they can take long vacations.
Alex responds that a lifestyle business sounds pretty good, to which Chris replies:
Except when you’re using my money. You’ve said that instead of taking some money out of savings, and build a little podcast show, and hiring a sales guy to go sell some ads, instead you have definitely signed up for the huge media empire building quest here. You’re Rupert Murdoch now. You’re gonna need a 187 foot yacht before you’re satisfied.
Chris goes on to describe the other founders he knows, and highlights that people like the founder of Uber, when deciding to do something, will stop at nothing, and will achieve that thing at any cost:
When you talk about ambition and drive and hustle and single-mindedness and obsession, the reality is that as I look at our portfolio of companies, I don’t have any founders or CEOs that I would consider to be “normal” people in any way. There’s something very different about all of them. All of them have seen a problem that needed solving, and all of them had the confidence to take the harder path, to eschew all the easy stuff they could have had otherwise, and take the hard way in fixing it.
This is fascinating insight into the, I suppose unsurprising, mindset of many venture capital investors. They’re not looking for a profitable business; instead, they’re looking for growth that provides the opportunity for a 100x exit. And their expectation is that you, the founder, will work to achieve that at any cost. And since their investment also brings the expectation of participation and inclusion in the running of the business, any company owner considering taking on investment would be well advised to make sure at the outset that everyone’s on the same page in terms of objectives.
Finally, it’s also worth noting that not all investors in Gimlet shared the mindset of Chris Sacca. We also discover that Marco Arment—of Tumblr, Instapaper and Overcast fame—is also an investor in Gimlet at a participation of $150,000. In interviews with Marco, he encourages Alex to forget about the ambitions of the other investors, focus on what he’s good at, and above all, listen more to his wife!