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Hey everybody, hey everybody, I’m Jason Calacanis, this is This Week in Startups.
Two hundred ninety-one episodes is all it took me to get Chris Sacca, investor/entrepreneur/supporter on the program. This is gonna be one of the best episodes ever, he’s a really brilliant guy, and funny and charming, and all those other great things. And he’s also very powerful. He’s got a huge fund. Stick with us. It’s going to be one of the best episodes ever, guaranteed!
Hey everybody, hey everybody, it’s This Week in Startups. I think you know what the show is about. We’ve been doing it for two hundred ninety-one episodes. Every week I drag my sorry ass in here, and I interview another great entrepreneur, or an investor, or an investor/entrepreneur. And we discuss what’s going on the world of people who are trying to put a dent in the universe. Trying to push the human race forward. Trying to build products and services that make the world a little bit better. Maybe even create some God-damn jobs in this country, haa! What a great idea that would be!
And today’s going to be one of the best episodes ever. A very good friend of mine, and a great-great investor, and all-around really interesting considered guy. Chris Sacca is with us, and I’ll introduce him in a minute.
But before I do, I want to just thank my friends at Hiscox Small Business Insurance. These guys are great. I’ve known them for a long time. I’ve used their products..
Essentially, when you start a small company, you’ve got a lot of things in mind. You’ve gotta outsource stuff, right? You’ve gotta get help from people out there who can provide products and services they keep you focused on building product. Like MailChimp, right? That was one of the companies that does that. And we have these kind of people on the company all the time. SquareSpace, GoToMeeting, MailChimp, all kinds of great companies.
Hiscox is another one of those great companies that I can just totally tell you, just use them. How does it work? You go to their site, and you get small business insurance. What’s small business insurance? Well you’ll know when you get sued as a small business–And by the way, there’s a bunch of whack-jobs out there who are going to sue you for anything. And you’re like, “Oh, well I’m right!”
It doesn’t matter if you’re right. It matters if you can defend yourself. And these legal bills are insane.
So go take a look here, look, here’s Hiscox. The sign-up form is super easy. You say, hey, this is my business. My business is based in California, and it’s IT Consulting, whatever the case may be. And then you choose what products you want, general liability or business owners policy. You know, the standard stuff. And if you don’t understand what that, they’ll explain it, or the website explains it. And you put in your information, like “what’s your email address” and “your telephone number”. I think you can do that. Answer a couple of simple questions. You know, “What is your ownership structure? “Is an individual, sole proprietor, etc.?” “How many employees do you have?”
“Do you supply/manufacture/distribute tangible goods?” Like, do you make a physical product, all that stuff.
And then, “What’s your estimate for payroll expenses. And then BOOM! You’ve got a customized quote, to pay annually for three hundred fifty bucks, or twenty-nine bucks a month. And what your occurance limit, you know, how much are you covered for.
And it’s super easy, and you’ve got to just get this basic coverage set up because you want to be able to sleep at night as an entrepreneur. And trust me, I have done so many companies now over twenty years an entrepreneur, a half dozen. And I have had people send me legal letters over such nonsense, that that would really take two or three episodes for me to go over all the legal stuff that I’ve had to go through in my life. And it’s total nonsense. And you need to have this insurance so that you can sleep at night as an entreprenuer and stay focused on what’s important, which is building great products.
Thank you Hiscox for making a great product, designed for startups. That’s all they do! They made this product for startups. It’s made for startups. It works for startups. And you can follow them @HiscoxSmallBiz. And please thank them. If you haven’t started your company yet, it’s your giri, it’s your humble honor, it’s your duty, to thank the sponsors of this program for providing free content for two hundred ninety-one episodes. Thank @HiscoxSmallBiz.
Hey, Chris Sacca is on the program and he started Lowercase Capital in 2007. He was doing a bunch of special stuff for Larry and Sergey over at Google, and he was an attorney back in the day at Fenwick and West. Worked on Obama’s 2008 campaign. Involved with the Tony Hawk foundation and LiveStrong, and Charity Water. Was on the Forbs Midus list in 2011. Youngest people… blah blah blah blah blah! Anyway, he’s a big important person who it’s very hard to get a meeting with. And he invests in a lot of companies… Welcome to the program, Chris Sacca.
Chris Sacca: Hey man, I just want to say, this is no setup, I just typed down the name of Hiscox just yesterday… I hit up a guy trying to find some insurance. I realized, I need some insurance. I literally didn’t know where to go, and I googled, and it’s just a bunch of _____ responses.
Jason Calacanis: There’s ten bucks!! It’s gonna be a good day for the swear jar!
Chris Sacca: We talked about this earlier… I’m just gonna break out a credit card…
Jason Calacanis: Somebody get me my Square, quick!
Chris Sacca: Can you go ahead and just swipe that?
Jason Calacanis: What, you’re rolling with the Virgin America card? Where’s the black card? Don’t you have it?
Chris Sacca: Why are going to show the number to your entire audience?
Jason Calacanis: I put my finger over it, ok? No but this is a Virgin America card.
Chris Sacca: It’s a Virgin America card, yeah.
Jason Calacanis: Yeah, because, isn’t that a great airline? What a great airline.
Chris Sacca: It’s an amazing airline, and they let you use your miles whenever you want to use your miles. Anyway, that said…
Jason Calacanis: That’s $10 in the swear jar.
Chris Sacca: _____.
Jason Calacanis: That’s $20.
Chris Sacca: Yeah, but I don’t know if the swear jar applies when I’m plugging your sponsors. I think we need a ruling on that.
Jason Calacanis: Alright, we’ll go 50/50 on that. I’ll give you 50/50. 2 for 1.
Chris Sacca: Anyway, it was a reallly really kind introduction. Thanks man. I’ve been a fan of yours for a long time, and so it’s cool to sid down.
Jason Calacanis: Yeah, thanks for coming. So, what is it that you do on a day-to-day basis right now, because i know that you’ve been, obviously you worked at google previously, and you were an attorney before that. But you were very active as an angel investor, and then it seemed like you sort of went underground a little bit. And I know you were very involved in these funds around Twitter. What does Chris Sacca do on a day-to-day basis?
Chris Sacca: You know, I think there was a phase of my career where, in order to be a player in this industry, I had to be out in front of a camera, writing, tweeting, out there all the time. What I ended up finding out was that, instead of mo money, mo problems; it was like mo ink, mo problems. The more publicity I got, the more it was a distraction from doing my job. Appearing in every conference, every panel discussion, every speaking opportunity, and getting out there wasn’t actually serving my companies, it wasn’t serving my dealflow, it wasn’t serving my investors. I mean, when I really did some analysis, and I actually did some concrete analysis to figure out where the companies that it i’d made money investing in, where they came from in my pipeline. None of them came through the email address on my site. None of them came from a handshake at the end of, you know like after a talk, etc.. They all came through a trusted network of folks, and so what I did was, a couple years ago I just re-spun my whole game, and I said, you know what I need to do? I need to stop spending time on the ego-driven forward-facing shit, and instead I need to keep it real and double back down on the relationships that matter to me. And so I need to get closer to the other investors I really trust and like, and spend more time, and really break bread with them. I need to get closer to the entrepreneurs that I’ve already invested in and that I have a good track record with, whose judgement I trust. And if I build really strong, true relationships there, than all this other stuff I want to happen will happen.
Jason Calacanis: Right, and getting on the map is kind of important, I mean, becoming a brand. But after you become the brand, it’s diminishing returns.
Chris Sacca: Yeah, I mean loo,k part of how i became the brand isn’t just showing up and spouting my mouth off at TechCrunch or Launch or something like that. Part of it is just being helpful, right. If you develop a reputation as being helpful, as having some impact, as adding something to a company, then that goes a long way.
Jason Calacanis: Much further than the press, and in fact, the press you got was probably because entrepreneurs and other people were saying, this is a helpful guy.
Chris Sacca: Just, trying to be helpful. I mean there are multiple layers of ecosystem where you can be helpful. Helpful to entrepreneurs, helpful to other investors, helpful to the press, helpful to service providers, helpful to users. There are multiple layers, so it’s not just being helpful to entrepreneurs themselves. But, if you develop that rep as like, when you get involved in something, it’s worth more than when you’re not there, then the stuff all falls into place.
Jason Calacanis: Especially in a world, I would suppose, where money seems to be everywhere.
Chris Sacca: There’s a lot of money right now. Way too much. Beaucoup.
Jason Calacanis: Yeah, and when you have this much money in the space, what are the unintended consequences?
Chris Sacca: I think the quality filter is just way off right now, i think a lot of crap is getting funded. I didn’t have to pay to say crap, right?
Jason Calacanis: No, crap, you can say that all day long, that’s a freebie.
Chris Sacca: I don’t think I’ve said that word in a long time, actually.
Jason Calacanis: We’re changing your vocabulary apparently, because of the swear jar, apparently.
Chris Sacca: You are, because of this jar. I’m watching my credit care there and I’m like SHIT.
Jason Calacanis: You’re only at $30. You can afford it.
Chris Sacca: So yeah, there’s a lot of garbage getting funded right now. That’s for certain. Number two, there a lot of guys who think they should be founders who aren’t. Who are finding it very easy to get money and it’s, it’s skewing the distribution of talent across the startup land.
Jason Calacanis: So, what does it mean to be a founder in your book? What is the thing that they lack, that you are looking for as an investor, and that troubles you about, oh my god, Ycombinator, as an example, putting out two-hundred-fifty companies a year. It does feel like maybe that’s double or triple the number it should. And
and it does feel, and I’ve heard from many people that, maybe the quality of Ycombinator is going down. I don’t know if you feel that way. I don’t have any evidence, or anything like that, but that is what intelligent people are saying, not publicly, but they’re saying privately.
Chris Sacca: I have a couple of opinions on it. Let me answer your first question. I think the truly disruptive founders have a different gene. I think about a guy like Evan Williams. When I sit down and spend time with Evan, you know we, we both have reputations as being risk-takers, etc., but when we go heart-to-heart and start talking about how we view situations, like I’m doing risk analysis. I’m like, there’s a pretty good likelihood I’m gonna succeed here, but the failure is still in view. And I’m weighing the outcome there, right? Evan doesn’t see that failure is a possibility. He’s not naive to it. It just doesn’t enter into his calculus. Instead, Evan looks ahead and says, “the world would be much cooler if this thing gets built.” And, even though some of the things he builds, like Odeo, may might not get there. Even when he goes to build the next thing, again the failure option just isn’t part of his math.
Jason Calacanis: It’s almost like those people who free climb, they climb a mountain, without ropes, and they just never experience fear the way a normal human might.
Chris Sacca: That’s a really interesting way of putting it. Yet, they just don’t doubt the outcome for themselves, even though some of them ultimately fall. It still doesn’t enter into the calculus the next time they go, and i think if you really look around the room and think, who were the truly disruptive, who are the guys who changed the game? That’s just not part of the calculus.
Jason Calacanis: Right, Elon Musk would be a perfect example. He always said to me, people overestimate the downside risk. Another way of saying what you’re saying.
Chris Sacca: Yeah, I think Elon Musk is one of the most under-appreciated entrepreneurs of this generation.
And I think, part of it is just he’s not an attention hog, and so he doesn’t get as magazine covers as a lot of guys. But, that guy, I mean, come on, going after big problems. Like he goes after, at scale, in such a daring way, it’s unbelievable.
Jason Calacanis: Mars. Electric cars.
Chris Sacca. It makes a lot of the stuff the rest of us monkey around with seem so small.
Jason Calacanis: So, that is one thing in the founder gene. This sort of, disregard for failure, this sort of fearlessness maybe would be a good word.
Chris Sacca: Yeah I find sometimes, one of the biggest challenges with my companies is I have to spend
some time with them saying like, but how can this be bigger. Like, how can this be a hundred times bigger than now? And when I have to do that, I worry sometimes about that founding team, if i’m the one asking that question. Like, that should be… Get in a room with Travis Kalanick, and I feel old, and I feel slow, and i feel cautious.
Jason Calacanis: Right, you’re talking about the founder of Uber, which we’re both investors in.
Chris Sacca: Yeah, Travis is an unreasonably fast-moving person, you know, which is perfect for Uber, right. I mean, Travis will show you the expansion plan and it makes me nervous in the board meeting, and I’m like oh my god, no, really! And, yet he just crushes it. He executes on it. He realizes he has hired the best people in the world to go out and execute on this stuff. Guys like Ryan Graves, to go and make that stuff happen. Again, Travis has a different gene and I do. I look at that and I’m like, “Oh my god, the wheels could fall off.
Jason Calacanis: A race car drive gene. It’s like the speed gene.
Chris Sacca: Yeah, and so, it’s a different kind of person, and I worry that it’s become easy enough for other founders that we’ve lost that filter a little bit where people are calling themselves a founder who are really
kind of good at getting some stuff done or they’re good at managing and they’re good at sales, but they’re not crazy.
Jason Calacanis: Right, they don’t have the relentless of, from what you said, fearlessness, scalability and speed.
Chris Sacca: If you spent time with Kevin Systrom, a year ago… a year and a half ago…
Jason Calacanis: Founder of Instagram.
Chris Sacca: Founder of Instagram. You would get up from that conversation, and be like, “I’m not bullish on photos… I don’t even really understand filters… But I have no doubt this is going to be a billion dollar company.” He had that kind of gravitas, and that kind of belief in the ultimate destiny of what Instagram was gonna be, that you just wanted to be involved. Even if all rational analysis said, “photos have been done and tried a bunch of times”… I’d already sold PhotoBucket in that space before, I’m like, “How could I strike it rich twice in photos?”
Jason Calacanis: Yeah, that was a three-hundred million dollars sale, right?
Chris Sacca: Yeah, it’s a tough space to make more money in, and so… But kevin system was just magnetic in that, just look into his eyes, and there was no doubt he is going to succeed with this company.
Jason Calacanis: So there’s a certain maniacal-ness to these founders, I guess… in this sort of space. But, it has gotten easier to be a founder, and isn’t, I guess, this to the sort of cognitive dissonance. Should it be easy to be a founder? Or, has it become too easy?
Chris Sacca: I think there’s a difference between the right founders who are now on empowered, versus the wrong people becoming founders.
Jason Calacanis: Got it.
Chris Sacca: So I think when you take a guy like Kevin Systrom, Founder of Instagram, and he no longer has to spend all those days wrangling with lawyers to try and figure out how to actually execute on a financing round. When he no longer has to worry about how to build a datacenter, and host all his own equipment and stuff like that, move all his own servers, and when he can actually just focus on getting ____ done.
Jason Calacanis: DING!
Chris Sacca: Just put it on my tab.
Jason Calacanis: We got it, I love it.
Chris Sacca: I’ll up it to twenty if you match it and send it to Charity Water, by the way.
Jason Calacanis: Done! So now we’re at eighty, and that means I’m in for eighty.
Chris Sacca: You’re in for eighty too.
Jason Calacanis: _____! Ding, a hundred! There we go. A hundred for charity water, ok. Hold on, see, I don’t… You run with this credit card, man. You have to be a true gambler like Jcal and just have hundies… You know like I’m always running with like five dimes in my pocket, cause I’ve gotta get to Chamath’s poker game tomorrow night. I’m like one minute away from a poker game where I could snap off ten, twenty dimes.
Chris Sacca: Dude, when I left the house I literally said to my wife, he’s gonna be so disappointed I just don’t have a bankroll. I mean…
Jason Calacanis: Why do you not have a knot, man? You need to have a knot to roll proper. You’ve got the shirt.
Chris Sacca: I have a duct-tape wallet with like seven bucks in it and a few receipts.
Jason Calacanis: No, always have a knot. It’s a manly thing. You have to always have a knot. Ok, so lets get back to this very important conversation.
Chris Sacca: So, here’s what happens. The founders who deserve to be founders, the founders who have the stuff… Now have a lot of stuff out of the way… So they can be in the business of executing. You remember back from the last bubble…
Jason Calacanis: Oh, my god.
Chris Sacca: You’d have a bunch of MBAs, a bunch of lawyers, you had to write a sixty-page business plan.
Jason Calacanis: It was very douchey. Very douchey.
Chris Sacca: Well, what it was is the engineers are locked in a closet because they couldn’t get a chance actually code anything because it was too expensive to write code. Before you could write code, you needed to have proprietary equipment, and a bunch of money. To get that money you had to go pitch VCs. VCs spoke banker. And so you had to have an MBA, write a sixty-page business plan, take it to a VC. The VCs were ex-bankers, because their job was to take your thing, polish it up, put lipstick on the pig, polish the turd, and take it out to a bank. Remember back then, it was all dominated by the street.
Jason Calacanis: Yeah.
Chris Sacca: And so the guys who were running this whole thing were businessy douches. They had nothing to do with actually building any stuff.
Jason Calacanis: Very douchey.
Chris Sacca: Thank god it all came crumbling down. All the MBAs took their U-Hauls one-way out.
Jason Calacanis: And they did cause the the problem in March/April of 2000.
Chris Sacca: There’s no doubt about that.
Jason Calacanis: Those are all the bankers, you know, just polishing the stuff up, putting it out the door to get fees.
Chris Sacca: Do you remember how bad it was up there? You couldn’t get a U-Haul out of San Francisco because they’d all gone one way back to other people’s houses. Like back to where their parents lived. I mean, _____ got bad.
Jason Calacanis: DING! We’re at $120.
Chris Sacca: So, what happened in the end was that this sea change happened. And I give credit to guys like Paul Graham for making that a reality. He realized that we’ve got this incredible layer of engineering and technical talent, who right now feel disenfranchised from the start-up and company building process. Because all the language and the vocabulary had been built by the douches. And so, with them out of the way, he realized, we can empower, we can standardize documents, we can teach people the vocabulary of this. We can start to integrate the elements of design into the consumer-facing product, we can bring in all the infrastructure, we can host stuff, thanks to Amazon and Google and these guys, you know virtually, and before you know it, you’ve empowered this new class of entrepreneur. What happens though is, along the way that’s been great to accelerate the success of the guys who deserve to be there. And it’s awful for all these people who think they should be there and are just posers. That’s where…
Jason Calacanis: Posers are just in over their head. I mean, some of them sincerely believe and are giving it a sincere shot. There’s a poser contingent. But then there’s people just in over their heads.
Chris Sacca: No doubt.
Jason Calacanis: And that when the bumps come, they’re just not gonna have the wherewithal.
Chris Sacca: Or frankly, there’s just a lot of lifestyle businesses getting built. There’s a lot of stuff that solves a problem, it’s making a little bit of money, great good for you. But it’s not gonna do the multiple that’s going to get an investor excited, or that’s gonna get a bunch of future employees excited, and so, that can be a challenge sometimes too.
Jason Calacanis: You just rattled off the A list of companies. Instagram. Uber. Twitter. How did you close each of those deals. How did you wind up being an investor in that cohort. There are other investors out there, who would kill their grandparents to get that, you know, investor list.
Chris Sacca: What do you call that when you kill grandparents.
Jason Calacanis: I don’t know. It’s grandparents-a-cide.
Chris Sacca: Alright, if somebody could send that in that would be helpful.
Jason Calacanis: Yeah, please tweet that. But I’m serious. I mean you rattle off these incredible list of people you’ve invested in. These other VCs can’t get in on those deals. How did you get in so early on so many deals like that?
Chris Sacca: So you want to know how I found Twitter?
Jason Calacanis: Please.
Chris Sacca: Evan Williams, who’s been a buddy of mine for awhile… It was a product I was using, I was an early user, but Evan Williams called me up and said, “Hey, I’m just closing up the round for this company, I’ve got you down for twenty-five. Twenty-five ok? Great, twenty-five.” Hung up the phone. And I said to myself, “____, I don’t have twenty-five thousand dollars. Like, it would be incredibly incredibly irresponsible for me to take the little bit of money I had at the time and put twenty-five thousand dollars in this company.
Jason Calacanis: What timeframe is this? Is this 2006?
Chris Sacca: So this is 2007, I think, that I actually did that. Now, I’d worked at Google, but if you know my full biography, I had lost a metric ____ ton of money in the spring of 2000. And…
Jason Calacanis: $160. Keep a running tab please.
Chris Sacca: I lost a lot of money in the spring of 2000, it took me all the way back to 2005.
Jason Calacanis: How did you lose all that money?
Chris Sacca: A trading problem.
Jason Calacanis: Oops.
Chris Sacca: Yeah i had a big, big levered trade that went upside down.
Jason Calacanis: You had to work your way out of it?
Chris Sacca: It would be incredibly, incredibly irresponsible for me to take the, the little bit of money I
had at that time for 25,000 dollars in that company.
Jason Calacanis: And what time frame was this…2006?
Chris Sacca: So this is 2007 I think they actually did that…Now I worked with Google but if you know my
full biography, I lost a metric tone of money in the spring of 2000.
Jason Calacanis: $160.. Keep a running tab please…
Chris Sacca: I lost a lot of money in the spring of 2000…It took me all the way back to 2005
Jason Calacanis: How did you lose all that money?
Chris Sacca: A trading problem…yeah…yeah I had a big, big leveraged trade that went upside down and..
Jason Calacanis: Oh my god…and you had to work your way out of it?
Chris Sacca: Yeah, it left me million of dollars in the whole in my own name…
Jason Calacanis: And you have to carry your way out of there… with your Google shares? With google
Chris Sacca: Google helped, Speedera, my old company, helped…I was..dude..I was moonlighting on
craigslist doing anything I could do for money.
Jason Calacanis: Wow…
Chris Sacca: I was…doing voiceover work.
Jason Calacanis: I think we ought to leave it at that, because, we may get into a…
Chris Sacca: That’s This Week In Sex Workers.
Jason Calacanis: Yeah, I think erotic services was still up at that time.
Chris Sacca: I literally was just all up and down..
Jason Calacanis: Hey, whatʼs that like to be negative a couple mil. I have never been there…
Chris Sacca: Yeah, so, I didnʼt realize we can go there in this interview, but.. …Let me back up
to give some context for that… So, I went to school…um…letʼs go all the way back… Starting in sixth
grade I went to University of Buffalo to do math… So couple of nights a week while everybody
else was being normal I was up there with older people doing math… Loved math… but… by the time I
got to 11th grade in high school.. I had done some graduate level math, and I was just burning
It was hard… to have a normal childhood and do math all the time. So, I had this, like, math rejection
phase, where I was like…”no more math”, and I applied to the one school in the country–top
school–that had no math or science in its curriculum…The school of Foreign Service at
So i thought maybe I would be a spy or a diplomat some day….
Jason Calacanis: Love it…
Chris Sacca: I had a great four years there. I studied abroad, lived in Latin America, Europe, but when I was living in Spain, Netscape went public, and I just kept being drawn back into computers, and to math. I remember emailing from the campus, in the school I attended to…there are 160,000 students and there was one computer lab and I would wait in the line for 2 hours to use the computer to email back to the States.
I just couldnʼt resist it, so I came back, and I wanted to get involved, and I didnʼt know any VCs, I grew up without any money. And so, I basically applied to law school, got in, and then used the student loans to try and start a company.
Jason Calacanis: Wow..
Chris Sacca: The company didnʼt go very well, mostly because I was this hubristic douche who didnʼt want to admit that I needed help doing it.
So I almost spent all the money. The school is like, “Hey where’s your tuition money?” and I’m like “Oh, I must have lost those checks…”
I was able to buy a little time with those guys, while trying to to build this company. It went nowhere. But, I had enough left that I started trading it, basically.
Jason Calacanis: Wow.
Chris Sacca: So this is 1998 timeframe, and thats a pretty good time frame to be a trader because if you put any money in the market…
Jason Calacanis: Yeah, you won.
Chris Sacca: You’re gonna get more back than you put in, right?
Jason Calacanis: It was a good couple of years…
Chris Sacca: I picked a couple of stocks, that were just out-performing everything. You know how it works, when things are going up, you’re a genius… and, when things are going down it’s because you’re unlucky. And when you turn it around later as you grow up and you’re an old guy like two of us, you realize, things are going up because you’re lucky, and when things are going down it’s because you ____’d up. So, it took me awhile to put that math together…but back then,
Jason Calacanis: Attribution theory.
Chris Sacca: I happened to pick a couple of good stocks, that went on just massive like 40x runs. They were, you know, pink sheet stocks, that just went on big, big runs over the course of like 2 years. And there was a rule–there is a rule still–thatʼs called Reg T. It’s a regulation that says you can be 50% levered. So if you got $1000 in your account, you can buy $2000 worth of stock. That rule hadn’t been built into the software of these online trading platforms yet, so if you had $1000 in your account, you could buy $10,000,000 worth of stock.
And, it would trigger a margin call for $9,999,000… You know, whatever. But, you own that stock in the meantime. So, if the stock went up, boom, all the upside you collected. And if the stock went down, it was on your name. So
Jason Calacanis: So when the margin call happens you just pay it down.
Chris Sacca: You pay it down 7 days later.
Jason Calacanis: Right. So you basically are placing a bet, saying holy cow, this better be a good seven trading
days, or else I am flying without a net.
Chris Sacca: Right.
Jason Calacanis: Itʼs basically taking a million dollars off a bookie and then betting it on the horses
Chris Sacca: At a crazy vig..
Jason Calacanis: At a crazy vig and hoping in seven days it turns out right.
Chris Sacca: Right.
Jason Calacanis: Right I love it. Wow, thatʼs some gambling…
Chris Cacca: It worked out…You know I turned… 10-20 grand into twelve million dollars… in 18 months, and so…
Jason Calacanis: Wow, this is a book, kid.
Chris Sacca: Here is the thing…No one ever pulled me aside and said, “Do you know how much ___en money twelve million dollars is?”
Jason Calacanis: Hey dumbass, cash out, leave the chips!
Chris Sacca: Get that off the table, right.
Jason Calacanis: Sweep!
Chris Sacca: Instead, because that graph, always tells you when it is going up, it’s because you are a genius. And by the way, all my buddies–I grew up in a blue collar town, north of Buffalo–my buddies started investing in stock.
Jason Calacanis: Which one, I lived in New York…
Chris Sacca: Lock Port, New York, on the Erie canal.
Jason Calacanis: I don’t know that one. Wow, that is obscure.
Chris Sacca: It is a small town.
Jason Calacanis: I mean, I have been to Buffalo. but…
Chris Sacca: My buddies were like, limo drivers, and bartenders, and pharmaceutical reps, they’re all buying the stock too, and itʼs trading up and they’re buying boats…
Jason Calacanis: When we get back from commercial, I want to hear, how you worked your way out of this..
Chris Sacca: Ok letʼs do it.
Jason Calacanis: But, lets go to commercial, and talk about. something I love, Stamps.com. Itʼs really hard to do these segways sometimes. But, Stamps.com is a great service. Why you are wasting time going to the post ofﬁce? The post ofﬁce provides great services, and Stamps.com provides a great product. I’ve used it for a decade, at home and at different companies, and it just works. You can buy and print stamps from home. And they give you
a scale, and that scale allows you to not waste money. So you can just simply weigh something. I always put like 5-6 extra stamps on something, I didnʼt want to get kicked back, and you’d always waste money, Stamps.com pays for itself in the extra savings. And by the way, what the US post ofﬁce offers, in terms of priority mail, whatʼs called media mail, and bulk mail, and some of these other really interesting products they crush the cost of those other competitors. That you know, you see the the brown truck, and the red, white, and blue truck. I don’t know if I’m allowed to mention the competitors, but I think you can fill in the gaps there. If you look online, I was reading something on consumerist, like they put Priority Mail, against some of these other overnight stuff, and it was a fraction of the cost and the same god damn service. Stamps.com is amazing. I have used it for a long time, and they get me my highest endorsements. You can just simply go to Stamps.com and click on the microphone, and after you have clicked on the microphone, itʼs very simple, you use the code TWIST, This Week in Startups, and these guys at stamps.com, and gals, I really do appreciate, you providing–I mean, look at this incredible story we are hearing from Chris Sacca. I mean, having him in the program–it takes whole bunch of people… Here is the microphone on the top right hand corner, let me do my little zooming trick–there it is, and click on that and put in TWIST and we are gonna be golden. And, you are gonna get a free, no-risk, four week trial, and a free digital scale, and up to 55 dollars in postage. We wouldnʼt be able to do these incredible interviews without your support.
Thank you so much, Stamps.com. Everybody thank @stampscom on your Twitter account. What a great company, and what a great service. We are very lucky on this program, we are sold out for months and months in advance. There is a backlog of people who wants to advertise. And, you know what, we pick only the products and services that myself and my team use and love. And it makes my job very simple, and it makes stopping to pause and talk about these things just effortless and easy. Because, you guys are gonna get value out of the products I talk about. And I really do appreciate the team–Jason Demont, who is been working for us now for a while, and he is ﬁnding all these great partners for us based on the list of products I use. So, thanks again Jason Demont and Stamps.com.
Go to Stamps.com, click on the microphone, use the code TWIST, and thank @stampscom on your twitter account.
OK, so when we left our hero, you had 12 million dollars in the bank account, and you are about to screw it up.
Chris Sacca: Lets just do this in the next 120 seconds. Iʼm fully levered, I’m in just 2 stocks, Iʼm literally tonsils deep into these stocks.
Jason Calacanis: Yeah.
Chris Sacca: The market unwinds, and..
Jason Calacanis: I think that’s the ﬁrst time we’ve had “tonsils deep”….
Chris Sacca: Thatʼs not swear jar material, I mean itʼs PG-13, but.
Jason Calacanis: Itʼs pretty bad. I may have to bleep that.
Chris Sacca: The market unwinds, and within a couple of weeks, basically, I find myself way underwater.
Just way, way underwater. I owe four million dollars in my own name, Iʼm not behind an LLC on this. It’s just in my own name.
Jason Calacanis: Did you puke?
Chris Sacca: No, here’s the thing, there becomes, there is a level where amounts are so big they almost feel ﬁctional. It might be easier to owe four million dollars than it is to owe $50,000.
Jason Calacanis: Yeah
Chris Sacca: And I also, I didnʼt have any kids, I didnʼt have a house, I was sleeping on my buddy’s couch, in Park City Utah, while ostensibly attending law school, but really co-managing a record store. It was so virtual. That was more money than I ever thought I would make in my lifetime, and so I owed that. Eventually I came out to the valley, I had been a law student, I did well in law school, by never going to any one of the classes and just taking exams, I came out to the valley, the guys at Fenwick and West were nice enough to give a job…
Jason Calacanis: That’s a top tier law ﬁrm. Did they know you were four million in debt?
Chris Sacca: No, they knew I was a loose cannon, but they didnʼt I was four million in debt, so there I was, during the day working for them, and at night, writing business plans, pre-planning companies…
Jason Calacanis: What is e-trade, or whoever this thing is with, what do they do? Do they come to you and say you owe us four million? Or a law suit starts? How does that get resolved?
Chris Sacca: Yeah, it is all of the above. So there are collection agencies, like there are people, Iʼm sure a lot of your listeners have been hounded by the collection agencies before, itʼs nasty.
Jason Calacanis: Yeah.
Chris Sacca: But, I worked out payment plans, and I started grinding on it. I mean, imagine like a mortgage for the biggest house you can imagine that you will never get to own.
Jason Calacanis: $20,000 dollars per month to get even.. for twenty years.
Chris Sacca: I didnʼt want to go bankrupt, because I really, actually it was more than that to it because interest rates were lot higher then, you know what I mean?
Jason Calacanis: Yeah, 10% interest rate..
Chris Sacca: I didnʼt want to declare bankruptcy because I thought it would get in the way of a future career,
so I had to earn it out.
Jason Calacanis: Wow, crazy.
Chris Sacca: So i did. But along the way, I get a job as a lawyer, things are going well, 4 days before September 11, my law ﬁrm, ﬁres me, and bunch of other people, it ‘s just a massive layoff, bloodletting, because the economy was falling apart. For like four days I have job prospects, and then September 11th happens. And, it obviously cast my woes in a much lighter note, because everybody else is..
Jason Calacanis: People are dying…
Chris Sacca: The economy grinds to a halt, and so I have to go out and hustle. And so I started going to every networking event I could ﬁnd in Silicon valley. And, I mean not just the Churchill Club, I mean Indus Entrepreneurs, The Chinese Software Professionals Association..
Jason Calacanis: You were going to every SIG, every special interest group…
Chris Sacca: The World Internet Forum, all of them. And I canʼt afford to pay for these things, because I have no money, so I’m sneaking in the kitchen, because I speak Spanish…
Jason Calacanis: You’re punk rocking it.
Chris Sacca: And I have a business card that just says, Chris Sacca, Attorney at Law and Business Guy, and I’m giving it to people, and you know, a mentor of mine said, if somebody makes eye contact with you, go in, they want to talk to you. I don’t know if that’s bull___ or not, but I went in anyway. So, all told, people would be like, “Oh, you sound like a good kid, things will work out for you.” And they’d pat me on my back, and Iʼm like, “You donʼt understand, Iʼm living a ____ing hobble in Foster City, and I need to make rent, or Iʼm moving back to Buffalo, New York. You have no idea how desperate I am to make a couplebucks.”
Jason Calacanis: And It is kinda hard to make these four million dollars payments on a bartenderʼs salary.
Chris Sacca: Yeah. So, Iʼm scraping anything I can. And, ultimately what i did was, I just re-branded myself. I created a thing called The Salinger Group. It just sounded mnemonic and familiar, and I had my now wife, Crystal, who has been my close friend forever, I had her design a business card for me that looked awesome.
Jason Calacanis: How did you wind up with such a great woman if you are a complete fraud up until this point, what a train wreck?
Chris Sacca: I know, some people yes, some people are attracted to disaster. But, she built me this business card, I had this great site. thesalingergroup.com isn’t up anymore, but you can go to internet archive, you know the wayback machine, you’ll notice that the site says lot of nothing. It has no address or phone number, but it says a lot of bullshit. Because I needed to cover any angles that I was going to make any money on. I just went out with this business card now, and I just said “we” instead of “I” and people were like, “Oh yeah, The Salanger Group, I’ve heard of you guys, you guys do good work” And so before you know it, cha-ching! Iʼm getting rung up, people were hiring me as consultant and they’re giving me equity in their company. It became a real thing, and I started actually building a real business.
Jason Calacanis: Fake it til you make it.
Chris Sacca: Yeah, yeah, I embodied that at that time. In fact, The Salinger Group was so successful that a bunch
of my buddies who had lost their job during that time, when they had gaps in their resume, you know… They’re like, “Hey buddy, can I say I worked at The Salinger Group?” And Iʼm like, “Yeah, sure just tell me what your responsibilities were.”
Jason Calacanis: Iʼll endorse that on…
Chris Sacca: And, it was funny, everyone kind of fit The Salinger Group to just make, to stay within their career trajectory.
Jason Calacanis: So where did you work? Oh, you worked in the Hong Kong ofﬁce…
Chris Sacca: Yeah, can I say I did health care consulting, yeah sure buddy itʼs all good.
Jason Calacanis: So you put on your website, the health care practice.
Chris Sacca: Yeah go into your LinkedIn database now or you are own hiring, you know whoever’s listening right now, on your company, and I bet you got some Salinger Group employees there.
Jason Calacanis: And you want The Salinger Group people.
Chris Sacca: I bet they’re hustlers.
Jason Calacanis: If you’re willing to ﬁctionalize a management consulting group, you’re good.
Chris Sacca: I ended working to a company called Speedera. It was an amazing experience, I held a bunch of different executive roles there, learned a ton, I think strangely enough we donʼt give people credit for this, but I learned inﬁnitely more working in a small company that you’ve never heard of than I did at Google. You know which was..
Jason Calacanis: Of course.
Chris Sacca: Which was what Iʼm known for, etc.. But, at a small company we are all sitting in one room, so even if I
wasnʼt the CFO, I heard every single one of his conversations, and on certain days the CFO needed help, I would have to pinch hit. If we were running behind on the quarter, and we needed to make our number in order to make the board meetings, everybody is working the phones. If you are closer to the door, you are the receptionist. If we’re moving data centers that night, everyone’s staying late, we’re getting some beers, and everyone’s gonna learn to how to conﬁgure a server.
I came away with this generalist knowledge. Thatʼs what made me lethal as a startup advisor, etc. Google was a fantastic experience, and I feel really lucky to be an alum of that company, but it was actually working at Speedera that made me lethal.
Jason Calacanis: So tell me, what was Speederaʼs business?
Chris Sacca: We were a CDM. We competed with Akamai.
Jason Calacanis: Sure.
Chris Sacca: Most of our business was surviving lawsuits from Akamai. They sued us almost a dozen times, and we counter-sued. It was nasty, and ultimately they bought us.
Jason Calacanis: So letʼs hear… How did you get at Google, how did you get there. And, because, you had a very high-level position at Google, explain what your position was.
Chris Sacca: That’s true and it isn’t.
Jason Calacanis: Well, high proﬁle.
Chris Sacca: High profile. I got hired because they were looking for someone who did speciﬁcally what I and like three other people on the planet were doing at that time.
Jason Calacanis: What The Salinger Group did basically?
Chris Sacca: In fact, I continued to use The Salinger Group once I ended up with Google. The Salinger Group might belong to Google actually, I canʼt remember if we did that.
Jason Calacanis: It was an acu-hire.
Chris Sacca: But, they were looking for somebody who was a business guy and a lawyer who also knew about internet transit and data centers, and that was me. There were only like a few of us. When i was hired they said, “Here’s the thing, we need inﬁnitely more datacenters space than we have right now, so you and this other guy Eric Asnapius are gonna go ﬁnd it, and here is your big ass budget, go ﬁnd these deals and go negotiate them and sign them, and just tell us when we’re ready to move in servers.
So we just went around the world and took down datacenter space. And what was funny was needed
to be quiet because we didnʼt want Microsoft to know how big our business was at the time, they were very paranoid that Microsoft would try and crush Google, if they knew how much money was in search. So, we did use front-companies to do this.
I travelled around, The Salinger Group was one of the companies I used, actually. And we would build these little LLCs, Larry Paige actually taught me how to make Google-proof names, for entities. So one thatʼs been written about since was Design LLC. If you try and look up design LLC, itʼs obviously a hard thing to google for. Everything else has been already called as blah blah Design LLC. So we would do these entities in those
names and span the globe, taking down…
Jason Calacanis: Group, LLC.
Chris Sacca: Exactly, services. Take down all this datacenter space, build new datacenters, negotiate power and tax treaties along the way, and so within the company Ericis and I, and couple of others, developed a reputation as being good negotiators, and we won a founder’s award early on in the company–one of the ﬁrst founderʼs awards, because the scale of what we were working with, if we did right we could save 400 million dollars. And so it was from there that I got pulled into other stuff.
Eric asked me to start working on some negotiations and stuff he was working on. The M&A group, David Drummond, who I reported to, was pulling me into more M&A stuff, and then Google is one of these places where if you hustled, you could just show up in other peopleʼs meetings, and if you were helpful, they wouldnʼt really ask why you were there, and so I took advantage of that.
Jason Calacanis: So you would see on somebodyʼs calendar that this important person is coming in for this
important project, and you just go?
Chris Sacca: It wasnʼt even about “this important person”. I’d be like, “Oh, these guys are thinking about a new type of ad formatt, these guys are working on you know building hollywood relationships or something, Iʼm gonna go in there and volunteer my services. I’ve got some opinions on this, and maybe I can make something happen.
Jason Calacanis: So it was just the ultimate hustle, punk rock kinda…
Chris Sacca: It was hustle, it was like, do it now, submit your expense reports later, and hope they get approved. I would often, like, pay my own way to a conference and then hopefully come back with enough traction that I could go to my Boss and be like, “I tell you what, it was worth it man, look at what I got done.”
Jason Calacanis: Look, look… Will you cover my tab.
Chris Sacca: Yeah, thatʼs legit. And so, along the way, I did make it back to zero, I did put together a little bankroll to do some angel investments. My ﬁrst angel investment, actually, was in Photobucket, that was a credit card check, I didnʼt actually have the cash to make that deal.
Jason Calacanis: Credit card check.
Chris Sacca: Yeah, I was still working with Google but I knew that company was going to happen, and I knew I
could have some impact there. Their business, despite being photos, was actually a lot of like Speederaʼs. It was more about hosting and infrastructure management. And, so I wrote that check. That paid off really well.
My second investment was Twitter. And, you know, because it was 25k and it was so material, I just started showing up at the company, because I needed that 25k someday. So, you know, I donʼt think Jack really necessarily wanted me there. But I just kept inviting myself over and being like, “Alright, what can I do?”
Jason Calacanis: How can I help?
Chris Sacca: And you know along the way I realized, I could be helpful. I think each of us doesnʼt give
ourselves enough credit for how helpful we can be.
Working at Google, I was surrounded by smartest advertising people in the world all the time. And so YC companies would ask me, like “Oh, you’re a Google guy, we need you for the ads expertise.” I was like, “Oh shit, I donʼt actually know that much about ads.” But, the reality is, because Iʼve been working at Google and generally paying attention to Ads, I would ﬁnd myself in a room with a startup, and be like, “Actually, in this room I know the most about ads.” So I’ll have some insight, I can be helpful. I would never hold myself out as an ad expert, but in
certain situations depending on the context, you might be the most helpful guy there. So, thatʼs what I started doing, just hanging out and trying to provide some value. And I did that before I asked anybody for equity back. Before I asked anybody to go ahead and give me shares, etc.. I just added some value ﬁrst. And that ended up working for me. Before you knew it, I kind of had a portfolio, of angel and advisory stuff.
I didnʼt set out thinking I would do this forever, but I realized I was good at it and people liked me for doing it.
Jason Calacanis: And, now you have, you were so good at that, you took over at some point, the secondary
market for Twitter shares I read, or, what does that mean and how does that work?
Chris Sacca: There was an evolution, I ﬁrst raised a little tiny 8.5 million dollar fund, and that was just a broad-based fund that kind of invested across the startup market generally. And, there was really the fun stuff in that portfolio.
Jason Calacanis: And how did you get a fund like that get started? Just go to people like Larry and Sergey, whoever, people who are billionaires who you know, and say, “Hey, can you give me some money to invest, Iʼm a smart cat.”
Chris Sacca: A little bit, Larry and Sergey are not investors of mine, but other folks that you know probably are. So, itʼs a little bit of that.
Jason Calacanis: High net worth individuals.
Chris Sacca: Yeah, no institution really wants to write a check to a brand new kid like that. There was one group called Industry Ventures, that I had known back from my Speedera days, that took a chance on me, in fact they encouraged me to raise my ﬁrst fund, so Hans Swildens and Mike Gridley over there made that happen for me. But for the most part, it was people with whom I’d built real relationships along the way, people who I’d travel with, who I’d helped along the way, who when I sent them my Pitch deck, thatʼs the scariest thing youʼll ever do, by the way, the ﬁrst time you try to raise money. Because, by the way, raising money for a company is actually even easier than raising money for a fund, when you’re the only guy. Because, they’re making a judgement on you. Raising money for a company, they’re making a judgement on you and the product.
Jason Calacanis: The market.
Chris Sacca: Yeah, and you’re never raising money alone, you got a team there, raising money for a solo fund, they’re just like, “Is Chris a douche, or will he give me back more money than I gave him?”
Jason Calacanis: Right.
Chris Sacca: So, then Iʼm gonna write this check.
Jason Calacanis: Douche or no douche.
Chris Sacca: Yeah, so you send that PPM out, the Private Placement Memorandum, and then you just go
get drunk, and you’re like, “Ohhh, I hope this comes back.”
Jason Calacanis: Right.
Chris Sacca: When people send you money, itʼs just, mind blowing.
So I raised that fund, it went really well. I raised a couple of other small funds that were just to buy Twitter shares.
Jason Calacanis: And this is when Twitter is a nine ﬁgure company valuation-wise.
Chris Sacca: This is like 2008.
Jason Calacanis: So itʼs like a hundred million dollar company, not an eight billion dollar company as reports say it is worth today.
Chris Sacca: What had happened was, people, you know, who had left twitter early, you know, had some shares lying around, wanted to buy a house, needed some down payment money, would say “Hey do you want to buy $200,000 worth of Twitter shares?” And, I was like, “Yeah, sure.” And so I’d buy two-hundred grand. but ultimately I got to the point where I depleted my entire checking account on twitter shares.
Jason Calacanis: Wow.
Chris Sacca: You know I left google worth like a million, million and half dollars, max. I donʼt know the exact amount, but it was… No complaints, but I wasn’t bankrolled for life.
Jason Calacanis: It wasn’t set for life.
Chris Sacca: I actually had less money than any reasonable angel investor should ever, ever have, so..
Jason Calacanis: So again, faking it til you make it.
Chris Sacca: Not even faking it.
Jason Calacanis: Scrapping it together?
Chris Sacca: Maybe it’s just being stupid, or crazy, you know what I mean? Maybe itʼs just believing that
Iʼm gonna get more back…
Jason Calacanis: Arrogance, maybe? Or just Naivety?
Chris Sacca: it might be the thing I was talking about with Ev, but not for building product, instead
Jason Calacanis: Ah, so you seem to have this gene when it comes to money that it doesnʼt cause the
anxiety that it would cause a normal person.
Chris Sacca: Might be that. Might be that.
Jason Calacanis: Itʼs like, big numbers donʼt scare you. And is that because of google, like checkbook for
all these datacenters that did that to you?
Chris Sacca: No.
Jason Calacanis: It did pre-date that with your gambling on the market.
Chris Sacca: No, I think one of the things, big numbers donʼt scare me because I also donʼt spend the
Jason Calacanis: Maybe it’s the math thing.
Chris Sacca: It could be, I donʼt know. Weʼll do that. Do I owe you money now, too? Is this like a
Jason Calacanis: No, it could be though I mean how much of entrepreneurship and angel investing you think
is managing your own psychology?
Chris Sacca: 100%
Jason Calacanis: 100
Chris Sacca: A hundred percent. It is all managing your own psychology, like and how I interact with people. I mean, I have such a deep sense of loyalty. I mean one of the reasons why you and I get along is we kind of grew up in similar neighborhoods, with similar people.
Jason Calacanis: Yeah, loyalty is everything.
Chris Sacca: And, if I feel even be mildly betrayed, I’ll river quay the ____ out of a bridge. Like I will just,
Jason Calacanis: Yeah, you’re gonna burn the bridge.
Chris Sacca: I ﬁre the TNT and just go nuts, right. I mean, I just can’t help myself, like I grew up… some of my closest friends are still the guys literally from my block, and I just grew up with like a code of loyalty, and so when that gets betrayed I go bananas. I wish I didnʼt do that, actually.
Jason Calacanis: And in the valley there is a very big facade, is there not, of sort of “dude”. Like, “Hey we’re all dudes, we’re in this together.” But it is a little faux in some cases. But some people are like, “Hey, we’re dudes, we’re buds, we’re in this together”. But, then when it comes to money, or an exit, or whoʼs gonna withhold their vote to sell the company, or whoʼs gonna force a sale, all of a sudden people arenʼt as “dude” and as “bro” as they put themselves out there to be, true or false.
Chris Sacca: True, let me, Iʼm just gonna ask for something.
Jason Calacanis: Go.
Chris Sacca: I need like an IT guy, I need someone who can both transfer… I got lowercasecapital.com
domain, and I want to like move my life over there, and I need somebody help me do it.
Jason Calacanis: Sure we can get that.
Chris Sacca: And number two, I need somebody to just tune up my wordpress site a little bit.
Jason Calacanis: We got that. We’ve got tons of people like that.
Chris Sacca: Because I’ve got this blogpost coming on exactly that. And it’s tentatively titled, “It’s All Fun and Games Until Somebody Raises a Series B”.
I actually believe that in first couple rounds, we do live up to that. We are all collaborative. We are all on the
same page, etc.. And then this thing happens to the series B.
Jason Calacanis: What is it?
Chris Sacca: It’s the divergence of interests. So, in the beginning… When I invest in you as a seed investor, you and I are both on the same scorecard. We both are going for it, and we both get rich at the same time. And we both have same goal, we both see the same multiple, etc., etc.. We’re on the same page. When a guy comes in on the series B, that guy is not looking to sell the company 6-9 months from now, when a reasonable offer comes in. Right, that guy…
Jason Calacanis: He is long.
Chris Sacca: He needs another 10x from there. And so, I as an angel investor, have different scorecard, you as the founder have a different score card, and so we’ve got this divergence of interests that keep happening over and over again.
Jason Calacanis: The B people need to win, here. And as an angel investor, maybe you just need to get to here. And there is this big gap between winning.
Chris Sacca: You know, and I think angel investors for most part have been pretty flexible about that; not bailing on companies early, not trying to force exits etc., But, even as a proxy for the founder, there are very amazing exits for companies, where if you sell a company for a hundred million bucks.
Jason Calacanis: Founder owns 40%, an angel investor owns 5%.
Chris Sacca: Holy cow..
Jason Calacanis: Real Money.
Chris Sacca: But it’s very easy for a VC, who’s already got fifty million dollars in the bank to be like, “F that, lets go for it man. Lets push for the binary outcome.
Jason Calacanis: Swing for the fences! And the binary outcome means to a lay person?
Chris Sacca: Either a billion dollars or zero dollars, one or the other.
Jason Calacanis: They want the grand slam.
Chris Sacca: But the funny thing about VCs is,they have all got portfolio theory, they’ve all got a lot of irons in the fire. And so its really easy to push an individual entrepreneur to “go for it, go for it, go for it”. But it’s because if that thing ___s the bed, it doesn’t matter because they’ve got a whole pile of other things that might work out for them.
Jason Calacanis: They have a mutual fund, and the entrepreneur has picked one stock.
Chris Sacca: Exactly, and so I think sometimes, it gets a little disingenuous, and the political in-fighting etc. I’ve got companies that are well into their C’s and D’s, where it’s ugly. Like, the boardroom isn’t fun. There’s early
investors fighting with later investors, fighting with founders, fighting with new managerial CEOs. It can get nasty.
Jason Calacanis: Can VCs get away with this nonsense now? Because it feels like entrepreneurs and founders are getting so empowered that your reputation matters. So if you piss off an Ev Williams now or a Travis
Kalanick, you are not gonna get that opportunity when they do the next company. And people remember, right, because founders are maniacal people being one I can say that. And that if you were to just in any way cross them, they’ll write you off the list forever, and they’re gonna tell everybody they associate with,hey that VC is persona non grata, not a good idea. So, has VC behavior gotten better in the last decade, or worse?
Chris Sacca: it’s gotten better, but it’s still pretty ugly and here is the thing. What you just said, if you had bet me money 10 years ago about the state of politics today, I would have been like well, of course, the internet will take all ____ out of politics, and we’ll have a much more fact-based political discourse. The truth will float to the top.
Jason Calacanis: Right, why we have the systems.
Chris Sacca: We can point to sites that will be unbiased
Jason Calacanis: Yeah, Truth.com will you tell exactly what the truth is and who you can vote for.
Chris Sacca: And what happened, instead it’s metastasized and it’s just amazing how many lies there are out
there. And so, I think the funny thing is, as much as I believe that VC behavior has generally improved, there is a cult of personality around a VC that has evolved as well and so the VCs have their own voice and can put their own spin on it tell their own story, and ultimately they have results that can speak for themselves. If you screw over Evan Williams, Evan Williams is certainly gonna counsel other entrepreneurs, “Hey, don’t take money from this guy.”
Jason Calacanis: Right, but if you are Mike Arrington, you could be writing up, or MG, or whoever it is high profile person… they can just say, here’s my side of the story.
Chris Sacca: Yeah, or that investor though, they still get the Twitter logo on their site, they have a bunch of other companies, they have got a great return.
Jason Calacanis: So it doesn’t matter.
Chris Sacca. They look like they’ve got the Midus touch, and they’re like, ahh, maybe I’ll suck it up to work with so-and-so if they’re interested.
Jason Calacanis: Yeah.
Chris Sacca: So, I’m not sure…
Jason Calacanis: So maybe the reputation, yeah…
Chris Sacca: I’m not sure, it’s still, it’s to play out. I mean we, in the Haycon Analysis, we would think that all this stuff would converge on us all getting better, us all getting along, and that transparency would win. I’m not sure how it happens because I see. I see investors doing really awful ____ still..
Jason Calacanis: And they still get rewarded by getting to invest in great companies.
Chris Sacca: They do, and I think a lot of that is like founders you know believe that the brand of the investor helps visibility of their company, there is a cycle.
Jason Calacanis: So they’re willing to make some tradeoffs.
Chris Sacca: Yeah, I mean you ask, so I got into Twitter because Ev pulled me in. I was already a user on the product. I was already a believer, but I would not have made that first bet, had Ev not pulled me in. But the later bets I made, you know where I raised multiple funds that invest just in Twitter, I’ll take credit for those. By then, I kind of got it, and was like ok I’m doubling back down in. Uber, I was there in the earlier days of that company coming together, and when Garette Camp and Travis Kalanick put their heads together on something, it’s just like blank check, just do it.
Jason Calacanis: Yeah, tell me about Garette Camp, because he seems to be getting no credit for the formation of this company.
Chris Sacca: He is a quiet Canadian, as are most Canadians.
Jason Calacanis: The founder stumbleupon.
Chris Saca: I mean stumbleupon is a biggest traffic mover short of Twitter, I think.
Jason Calacanis: Yeah, the referral traffic is just sick.
Chris Sacca: It’s just amazing, I mean, and I wish I were an investor in that company, Iʼm not. But that guy comes up with an idea every week. And whatʼs cool about Garette is he, comes up with an idea over drinks, and later in that night when he goes home he hires a contract programmer to start working on it. Thatʼs just amazing, like he’s hacking stuff up all the time. Just a really really a gifted entrepreneur, and so Uber was a kind of thing were, I
remember some of the initial brain storms, when Garette basically rented out his own Lexus, you know put it out there so his friends could use the app and pulled out his car and got a couple other cars on the system, and they found Ryan Graves who’s an amazing hustler to be the ﬁrst GM, and then Travis did kind of the Evan Williams into twitter thing, where he was like helping out, but it was so compelling the founder in him is like, I just gotta get closer I gotta get closer, I gotta do this.
Jason Calacanis: It just took over.
Chris Sacca: It just took over, it was just, you know at that time he was advising a bunch of companies and Uber started to dominate his life, and he was like I gotta get into this.
Jason Calacanis: I’ve got to ask you the hard question. Twitter–and I know you donʼt speak for the company–has gone on a strategy, some would say, of screwing over the developers who helped build it. And, itʼs hard to disagree that the developer relationships seem to have been bungled there. It seems like it was not executed perfectly. How do you reconcile it? Whatʼs your take on it?
Chris Sacca: Yeah, so I deﬁnitely donʼt speak for the company, and Iʼll tell you, Twitter has had three CEOs now,
each of whom, I feel like have been the right CEO for that phase of the company.
Jason Calacanis: Ev, Jack, Dick Costolo
Chris Sacca: Yeah, and
Jason Calacanis: In that order,
Chris Sacca: No. Jack, Ev and Dick. And each of them are a lot smarter than I am. And, by the way, thatʼs something I look for in a company is that I donʼt want to have all your ideas. If your investor has all your ideas you are screwed.
Jason Calacanis: Yeah, thatʼs a big problem. And this is from the guy who was doing graduate math in 6th grade.
Chris Sacca: In fact, Ev sometimes uses me as a contra-indicator. Like, if I think something is totally ____d. He’s like, “Good, ok, Sacca hates it, letʼs do it.” I mean I have a really bad history of making product calls with Ev. Itʼs just amazing…
Jason Calacanis: “He’s like, “What do you think? Oh, you hate it. Perfect, go!”
Chris Sacca: I generally think of myself as a pretty good product person but not with Ev, it’s amazing, I am a
contra-indicator for sure. So, that’s number 1, and when I sit down with Dick, Iʼm a very large shareholder in the company, I spend a lot of time using the product, thinking about the product, and I’m very close to the employees, but when I sit down with Dick and Michael Sippy who runs product there–on the consumer side–I have conﬁdence in the decisions they’re making.
They see more of the future of that product than I do. And, the same with Jack, and the same with Ev, who are still very involved in the product decisions there. And so, I feel really lucky to have smart people like that. I throw ideas over the fence, if one in ten of them are something other than complete _____, I feel lucky.
That said, I think people sometimes overestimate how big the developer community is, or how many people are in this community, with respect to this company. I mean, I kind of MC’d the Chirp conference a long time ago, and it was really well attended. That was a couple of years ago, and Evan, who was CEO at the time, said then, “Hey, donʼt build Twitter clients.”
Jason Calacanis: It was very clear, and he said, “We have to have our own clients, because when your mom logs in, or your cousin who never uses the internet, and they type in Twitter and they see 17 different clients, it befuddles them.
Chris Sacca: Yeah, and I remember Ev asking me for my opinion, “Hey, should we buy up a couple of big
clients?” You know, and at that time it wasnʼt driven by we needed to compete with these guys or anything, it’s just that there’s so much of this experience that needs to be consistent. There’s so much of this experience that needs to be end-to-end.
Jason Calacanis: Yeah.
Chris Sacca: And I know people laugh because one app doesnʼt have the same logo, you know one app still has the hair on the logo, and the other one, and there’s stuff that would be great if they were the same, and, there’s a lot of room in to go on consistency, but you get that, at the core of this there has to be a platform for everyday users to use this, remember this is hundreds of millions of people now. Across multiple countries, across multiple platforms and so it has to work.
Jason Calacanis: And he did lot of signaling, but I guess you can never do enough.
Chris Sacca: I don’t think you can ever do enough, I do believe the Twitter has been made more valuable
by the people outside of the company. I think sometimes a little too much credit is given to individual ideas and contributions, like the problem with product like Twitter is that it’s so simple, that people donʼt recognize how powerful its simplicity is, and how hard it is to get to simple. Somewhere on my business card it says, what the hell does it say, “Simple is easy to use, hard to make, and hard to charge for.” You know, whereas complex is hard to
use, but itʼs easy to make and easy to charge for. The beauty of Twitter is all the stuff that’s not there, and thatʼs not an accident. Thatʼs Ev and Jack, and Biz and Goldman and Dick spending years on trying to pull a bunch of ____ out of there, and letting the simplicity speak for itself. And, so I love what the developer community has done for Twitter, and a lot of people are continuing to build a ton of value on it, thatʼs why we got the DataSifts and the Nips
of the world all building on top of it.
Jason Calacanis: It seems like they are trying to organize a little bit more or…
Chris Sacca: Yeah, I mean look I, I also think I forget what the real number is, like, Ask Rya Sarver, but it’s single digit percentage of tweets that come from the third party clients and stuff like that, itʼs just not as big a part of the eco system as you think.
Jason Calacanis: But they are very vocal.
Chris Sacca: Yeah, I’ve done developer relations, you know, at Google, etc., and they have a right to be vocal like developers make a lot of ____ happen.
Jason Calacanis: Let me ask the other hard question, Iʼve heard that the revenue is much greater than the
people think, and that the revenue is really starting to come together at Twitter. Does twitter have a revenue problem or do you think that they are going to surprise people?
Chris Sacca: Iʼm a buyer of the stocks, is what Iʼl say.
Jason Calacanis: Right, which is a pretty good indicator that theyʼre solving this. All you hear is the Twitter
revenue problem, twitter revenue problem, But youʼre buying the stock.
Chris Sacca: Anyone who ever says that, I’m like, “Sell me any shares you have.” If you are worried about Twitterʼs
business miles, sell me the shares. But you look at, Zappos just released some data, about the likelyhood that a Tweet converts, and I think it is 33x Pinterest, and like another 5x Facebook, I mean, Facebook is a friend platform and twitter is a commercial platform.
Jason Calacanis: What you mean about that? Explain.
Chris Sacca: Well, Facebook has, I mean a lot of people have said this in lot of different ways, but Facebook is who you used to know and Twitter is who you want to know. Twitter is a place where people go to get ___ done. To follow the things they’re interested in, to engage with the brands they care about, to take succinct cues from folks that they know or care about, about what they should be doing, about what they should be clicking through and
buying. Itʼs a massive commerce engine, youʼve got my Virgin America Visa card up there, but if you talk to the folks at Virgin America, theyʼll say like four out of the ﬁve biggest sale days ever result of twitter promotions. You know, when you’ve got engagement rates on the Twitter system is 6-8%, Vs., you know our engagement rates are on traditional display ads.
Jason Calacanis: And what they are on Facebook.
Chris Sacca: .06%, you know.
Jason Calacanis: And Facebook’s is a fraction of that.
Chris Sacca: 25 to 100 times better than traditional platforms, and so If Twitter has any problem, itʼs that the advertisers want more access to the platform than Twitter has salespeople handle right now. I mean, Adam Bain is amazing, he has built a great organization over there..
Jason Calacanis: Former Myspace, right.
Chris Sacca: Yeah, like Fox News Club, I forgot.
Jason Calacanis: He was an LA cat who moved up there.
Chris Sacca: He is amazing, I actually closed that deal, at the Roosevelt Hotel in LA.
Jason Calacanis: Really.
Chris Sacca: Yeah.
Jason Calacanis: At what hour?
Chris Sacca: No, it was mid-day actually, it was midday beers, but I just said, I mean he gets it, he has understood, they value this thing, and itʼs funny because the way Twitter makes money isnʼt predicated on any like shady, like in the background personalization trying to ﬁgure out who you are stuff, Twitter is out in the open. You told us what you are interested in, so now we are going to show you stuff that your friends and the people you are interested also think is interesting, and if it resonates we’ll put it in front of you.
Jason Calacanis: Which means practically, what?
Chris Sacca: Which means, practically, you wonʼt see promoted Tweets unless they are related to the stuff you have told Twitter explicitly that you’re interested in.
Jason Calacanis: So I like Star Bucks and Virgin America, so Iʼll see promoters tweet for those companies..
Chris Sacca: Or companies that are related to those companies.
Jason Calacanis: So I like Coffee Bean, and I like Delta.
Chris Sacca: You might see Blue Bottle, right. So you might see Blue Bottle, but Blue Bottle wonʼt just show up, it’ll only show up if @TonySphere who you follow is also into it, and @Kevin Rose is also into it, those guys will kind of… So now this thing’s resonant. It’s been re-tweeted, it’s been faved, thatʼs shows us its quality ___. Lets float it to the top and put in front of somebody, and thatʼs why you see such high engagement rates on those ads, without that stuff, you know, you just throw up that ___ display in front of somebody and you’re like, “uhh”, and then they put the shady, “So and so also likes this”. You know, and it’s just like… it gets ugly in some of these other platforms.
Jason Calacanis: Yeah and so, when you look at the space now, you are slowing down on angel investing, I mean at some point you said you were taking a pause, but I think it was a year ago, so what should great entrepreneurs think of Chris Sacca, you know when they are starting their company, should they be calling you or not.
Chris Sacca: First of all, no, phones are broken, never call me, under any circumstances.
Jason Calacanis: No phone calls, right. But should they be trying to get to you? Or, are you saying publicly that you are not an angel investing, so that you only get the people who are willing to hustle their way to you.
Chris Sacca: First of all, I donʼt angel invest, I write bigger checks, all told, Iʼve got over a billion dollars under management, so…
Jason Calacanis: You have a billion dollars under management.
Chris Sacca: So the Lowercase funds are big.
Jason Calacanis: Does the public know that? Is that the ﬁrst time you’re saying publicly, because I didnʼt even know that
Chris Sacca: There is SEC ﬁlings out there.
Jason Calacanis: You have a billion dollars in funds
Chris Sacca: Uh ha.
Jason Calacanis: What are those funds? What are you doing with those?
Chris Sacca: By the way, am I not supposed to smile, I heard somebody told me, donʼt smile on this show because thatʼs big tell?
Jason Calacanis: I’m Sicilian, there’s nineteen ways a Sicilian knows if you’re lying. Thatʼs True Romance.
Chris Sacca: No, there’s SEC ﬁlings out there to back that up.
Jason Calacanis: So these funds are buying secondary market shares of Twitter, obviously some of them,
Chris Sacca: A lot of stuff, I do a lot of stuff, and Iʼm opportunistic, if I see something that other people arenʼt doing, I go there, and right now Iʼm focused on two funds primarily, one is called the Lowercase Spur. It’s a thirty-five million dollar early stage fund, itʼs my bread and butter, it writes half-a-million dollar checks to awesome startup companies. I also have a fund that I donʼt think I have told the world about. So thins might be an exclusive…
Jason Calacanis: Tell me.
Chris Sacca: But, itʼs called Lowercase Stampede, and Stampede is investing in the intersection between tech and content.
Jason Calacanis: Oh, thatʼs my company.
Chris Sacca: I wrote a whole thesis on it, but put simply this space makes sense ﬁnally. You know, I think a lot of guys were early here, a lot of VCs just went through lot of money and trying to back content, but you started this show by showing like TV quality production that is all managed just outside on a couple of desks out there, right, I mean this whole thing is broadcast quality.
Jason Calacanis: Itʼs $75,000 in equipment, $100,000 dollars in equipment, that would just ten years ago cost
two or three million.
Chris Sacca: Yeah, and itʼs managed by couple of people, itʼs broadcast quality.
Jason Calacanis: It’s managed by couple of kids with 2-3 years of experience in the space.
Chris Sacca: And you got sponsors who are paying you TV money to be here now.
Jason Calacanis: Yeah, $3000 an ad.
Chris Sacca: And youʼve got real audiences at scale now.
Jason Calacanis: 100,000 downloads.
Chris Sacca: So when you put all that stuff together, that just never happened before, in internet video, and now these things start making money.
Jason Calacanis: This show makes a half million dollars a year. I’m not afraid to say it.
Chris Sacca: And traditional Silicon Valley VCs… have always been afraid of doing this stuff, because..
Jason Calacanis: Yeah, content is scary, why?
Chris Sacca: Well because everyone got their ass kicked in content due to rights issues, they havenʼt reset and realized, this is all digitally native content, there is no record labels to negotiate with here.
Jason Calacanis: And there’s a library being built.
Chris Sacca: And, back in Hollywood, there is a lot of status quo that people want to defend, and people donʼt think in the startup model as much, and so there is this gap where there is a lot of really valuable stuff that’s just not getting done.
Jason Calacanis: Interesting, as a VC, what gives you this ability as an investor to look at that place with fresh eyes, and not be corrupted I mean, why donʼt other VCs see this yet. Do you think they are gonna ﬁgure it out?
Chris Sacca: One thing was, Iʼve been in Hollywood for a while, just never told anybody, so Iʼve had investments in the area for quite sometime. That taught me the studio system, taught me the network system, taught me the label system, the agencies.
Jason Calacanis: Broke broke broke. You mentioned labels, you mentioned music, I mean you mentioned TV.
Chris Sacca: These investments are all panned out really well.
Jason Calacanis: Right, but what about the.
Chris Sacca: They taught me the model.
Jason Calacanis: But in those traditional businesses, they all seem to be stuck, or they are confused, and they
have to protect their legacy is your thesis?
Chris Sacca: My introduction to the space always came from–by the way, do we have a ﬁxed amount of time, because this…
Jason Calacanis: No, it goes as long as I say.
Chris Sacca: Sweet, I love this.
Jason Calacanis: If you think about it, we are talking about entertainment, I can break the model here.
Chris Sacca: Yeah.
Jason Calacanis: If I think that this is a two hour show, and it’s gonna be a two-parter, I can do that.
Chris Sacca: Dude, you’re Stern.
Jason Calacanis: I am stern.
Chris Sacca: Alright, what does that make me?
Jason Calacanis: That makes you Baba Bui.
Chris Sacca: Hahaha
Jason Calacanis: No,It makes you one of the great guests of all time, it makes you like, Iʼm trying to think who the great Stern guests have been over the years, but you being honest, and as I always tell…
Chris Sacca: As long as I’m not Eric.
Jason Calacanis: Yeah, Eric, the actor. High-pitch Eric?
Chris Sacca: So look..
Jason Calacanis: Who’s high pitch Eric, who is high pitch? You can always tell a Stern fan because they know the great characters. Who is high pitch?
Chris Sacca: By the way, I re-tweeted this the other day. Somewhere on YouTube is the full uncut version of Howard Stern on September 11th.
Jason Calacanis: Itʼs incredible, I was listening to Howard Stern that day.
Chris Sacca: That’s amazing audio.
Jason Calacanis: I used to wake up to him at 6am in New York, and I heard him say, “some schmuck just put
his biplane, his little plane into the twin towers, he didnʼt know.
Chris Sacca: No.
Jason Calacanis: And then he all of a sudden it clicks, we’re under attack. Robin Quiver says, “we’re under attack.” Itʼs one of the great seminal pieces of radio ever recorded.
Chris Sacca: To see the evolution that, Iʼm kind of joking around about it, to all of a sudden realizing life is changed forever.
Jason Calacanis: And we’re at war.
Chris Sacca: Yeah, thatʼs just an amazing piece of radio.
Jason Calacanis: Itʼs unbelievable, yeah. Look it up.
Chris Sacca: So my involvement here started because Google didnʼt have an entertainment business, but we had a lot of insights into entertainment, so I would get invited down to speak at the all hands of the agencies, or the labels, or the networks, and it was great because I got to speak the truth because no matter who I offended, we didnʼt have deals with them at that time, right, like if my Yahoo counterpart had been invited there, They would be like, oh God, I canʼt piss off Lloyd Bron, because we’ve got a bunch of studio deals, and these are all Terry’s old friends. We were such outsiders, I could come in and speak the truth.
Jason Calacanis: Right.
Chris Sacca: Talk about what was broken about their model.
Jason Calacanis: Yeah.
Chris Sacca: And I wasnʼt offending anybody, and I didnʼt have to defend my comments on the paper later, and I
didnʼt get called into Ericʼs ofﬁce and hit over the head with a shoe.
And so I had this amazing, unique ticket to come in and meet everybody. And be the outsider and learn the model a little bit. And as a result, Iʼve been here. I just never really announced it. And so now I ﬁnally have some feet on the ground, Iʼm actually…
Jason Calacanis: Is it announced, the amount the fund is, Stampede? Or do you keep that quiet?
Chris Sacca: Itʼs like a 20 million dollar fund.
Jason Calacanis: Got it
Chris Sacca: Itʼs just doing small check stuff. I have an afﬁliate thatʼs a 500 million dollar fund when
we do bigger stuff, thatʼs not my money.
Jason Calacanis: Got it.
Chris Sacca: So, Iʼve got some pretty fancy partners, but my little thing is just doing. So I have done
investments in awesome companies like the Big Frame.
Jason Calacanis: Sure.
Chris Sacca: I got involved with the VHX guys, who are doing paid for downloads, they did the Aziz Ansari special, that kind of stuff. Brian Orgard and the guys at Chill. So, those are the kind of investments we’ve been doing there. And some stuff we haven’t talked about yet. And, itʼs just great. The math on that stuff makes sense now.
Jason Calacanis: What is the impact of Kickstarter is on the entertainment business? Are you an investor?
Chris Sacca: Yeah, Iʼm a big investor in Kickstarter.
Jason Calacanis: You are. How it is that every time I mention a great company, you are an investor.
Chris Sacca: Dude, that one was amazing.
Jason Calacanis: How did you get into that, and can I buy a couple of shares?
Chris Sacca: The funny thing about the Kickstarter was..
Jason Calacanis: I love what Kickstarter is doing.
Chris Sacca: When I saw that opportunity, and Perry invited me in, and I really learned to respect that guy a lot, and even more so now that I’ve had a chance to work with him. When I got invited to invest in Kickstarter, I saw it and I was like, this is the thing that will make the world a better place, but I donʼt know if itʼs actually going to be an amazing business, so I invested personal money in it, and when I created my fund I didnʼt actually put it in my fund, I tried, when I put my ﬁrst fund together, in order to make it easier to fundraise, I cherry-picked a few of my best angel investments, and I put them in there, as like, a little bit of bait, you know, so
Jason Calacanis: Yeah, luck here…
Chris Sacca: These are examples like the kind of thing that we all invest in, if you want to be exposed to them, come invest with me. Kickstarter was like, this is the kind of the thing that will change the world, but I donʼt know if it’s ever gonna make a red cent, so i donʼt necessarily want to put it in there.
Jason Calacanis: Right, Oh boy.
Chris Sacca: And, the valuation of that company is out of control, that little tiny investment is worth millions of
dollars. I feel grateful and lucky, but that thing about those two guys, about Perry and Yancey, is they run that company for the longest, longest term. We are in that company for 20 years. There would be no liquidity, that thing makes money and no one is looking for the exits. They’ve made everyone there to commit to never sell their shares, that is the longest-term investment I have in my portfolio. And you can see that they play long ball with the decisions they make and the community they are trying to build, they play long ball.
Jason Calacanis: It doesnʼt seem like that they are taking the fraction of what could they take.
Chris Sacca: They could take a lot more money etc, they are playing a long, long, long ball.
Jason Calacanis: Which makes them a dangerous, dangerous company.
Chris Sacca: Sure, I mean, There. There is a great example of people who think differently than you and I do. They are playing the longest game possible. When an entrepreneur looks to you and says, “Hey look, Iʼm drawing salary off this thing thatʼs worth 100ʼs of millions of dollars, you know, presumably, and I donʼt ever want to sell it, etc., content to just draw salary off it and continue to just impact the world and turn it all upside down. And so you need to promise me, too, that you are never gonna push this thing to go public, or to get bought. Thatʼs like, thatʼs amazing, that doesnʼt show up on my scale. I invest in things to ultimately to get more than my money back.
Jason Calacanis: Right.
Chris Sacca: And I had to do a little soul searching and sign up to that idea like ok, letʼs really, really do
Jason Calacanis: Scott Heifferman of Meetup.com is a similar guy.
Chris Sacca: Same,I mean,
Jason Calacanis: You are an investor in that too?
Chris Sacca: No Iʼm not, Scott is not a normal person, he is an amazing person.
Jason Calacanis: He is not normal, both Yancey and Scott have been on the program, both not normal
Chris Sacca: Yeah.
Jason Calacanis: There are some people building lifestyle businesses, and then there are people building lifestyle businesses that are going to be crushing and huge.
Chris Sacca: I mean Scott’s got hundreds of thousands of people meeting up every week, and itʼs kind of amazing.
Jason Calacanis: And I’ve got the chat room looking at your funds, they’re ﬁnding your funds in SCs, thirty million for this, 20 million for that…
The conversation between Jason and Chris was too amazing for just one episode. Part 2 will be available soon. Stay tuned!