#284 The Future of Tech Funding: Angel Insights and VC Shifts with Andrew Ryan

0:00:02 - Mehmet
Hello and welcome back to any episodes of the CTO show with Mehmet. Today, I'm very pleased joining me Andrew Ryan. Andrew, thank you very much for making it on the show today, despite the time difference. So first of all, again, thank you for being here. The way I love to do it, I keep it to my guests to introduce themselves, because I believe no one can introduce himself or herself better than themselves. So the floor is yours. 

0:00:26 - Andrew
Yeah, thanks Andrew Ryan, founder and CEO of New Chip Afterlabs. Been part of the startups for the last decade. I've advised hundreds of companies. Yeah, now I'm into AI and everything going on in the world. So everything's changing minute by minute, day by day. 

0:00:44 - Mehmet
So, yeah, Cool, yeah, to your point. Whenever I have guests who are going to speak about AI, I think I should release this as fast as possible, because if I keep the episode more than two weeks it might be irrelevant at some point. But, Andrew, really you have a very rich career, I would say. But the question that came to my mind is why you choose to be in an area which is can we call it close to fintech. Is it like kind of a fintech what you're doing now? 

0:01:26 - Andrew
Yeah, well, I built an app company. Equity crowdfunding came out around 2016. And I built an app company around that because there were so many platforms launching. Everyone in their mother was launching a platform to help you raise money and there were just too many of them, and so I built an aggregator app then to basically plug it into one place where you go and find all the investments. You can compare whether you're investing in this brewery or that app. And I built that. We got to a couple hundred thousand users, over 100 million invested through the app. 

So it was highly successful and the industry kind of had a stalemate right. It took us like a decade just to get that, passed the laws for that, and then crypto kind of blew up and kind of entered our space and then everything really slowed down. The regulators just said, hey, let's take a pause on this and let's sit on it for 20 more years before we do anything else, and that's kind of where it stayed. I mean, equity crowdfunding is still a great way to raise capital, but it's kind of stagnated in terms of regulations. Nothing really changed. The amounts went up like $100,000. You can go from raising $1 million to like $1.2 million, but it's not much different. So built that app, sold that app to another company and then moved into helping more companies and startups with Astrolabs after that. So yeah, that's it. It was relative to I guess they asked the question it was relative to FinTech, in that I started in FinTech and when you're good at something, you tend to just do something similar in that space. 

0:03:10 - Mehmet
And so, yeah, indeed, now I'm speaking about this and fundraising, andrew. Still, we are reading the report from last year and we've seen like it was kind of a dry year, desert year, all the things, and it's been a global thing actually. So how are your expectations for this year? And usually I keep expectations and trends and predictions till the end of the episode, but I wanted to start from here, because we just mentioned about fundraising. So what are you seeing in this space, and do we expect 2024 to be better than 2023? 

0:03:49 - Andrew
No, not at all. So CrunchBase just released their report. I mean, I've been saying this since last year Fundraising is down. It's the worst it's been in five years. So we're back to like 2016, 2017 levels, and even then, when you look at the aggregate data, the number of companies getting funded is much less. There's a lot more companies that they're buying for the same amount of capital. I mean, there's whole swaths of like AI 1.0 that came out right and all of a sudden, chat, gpt and perplexing a few others just through. All those like all these companies got wasted, like all that money just got thrown away because they got surpassed. Everybody was building something that now it's all open and now they're surpassed. Now there's a new wave of AI starting to try, and so the tech industry is just moving so fast now, and if you can't iterate fast, you die, and so I think that capital still exists and in 2024, companies will still raise money, but the competition is harder than ever. There's more competition than you've ever seen. 

The economy is a dire place. I don't care what your politics are. I think that the world economy is just not. It's going to take a while to recover. We're in a recovery phase, at least for the next three or four years. I mean, tech is going to be in a, you know, it's just going to take time, and so I predict next year fundraising to be about stagnant to what it was in Q4. And so at about it was 50% down last year. I imagine it'll probably be about another 20% down this next year. 

0:05:24 - Mehmet
So so, andrew, what are founders doing these days instead? Because, are they bootstrapping? Are they going to crowdfunding? Or are they coming to people like yourself, like angel investors? What's going in this space? 

0:05:42 - Andrew
Well. So I think what's happened is it's just a reset. I mean, you see resets every 10, 15, 15. 15 years in general, I mean, tech industries is pretty new. Vc is still pretty new, and so when you look at it like that, we're just going back to where we were before. Everyone and their mother had a VC fund. I mean there's just we hit peak VC, there's so many VC funds and everyone was in it and there's so many LPs, and now we're back to where we were and they're early 2000s, post-tech bubble. And I think that, you know, nobody wants to admit it lively. This is just. It was another bubble. 

I mean, there's a lot of people that are on the, the public stock sphere, not the private sphere, and you know, I think that people are going to equity crowdfunding. That's a big one, but the valuations are too high. I mean, I was talking to equity crowdfunding company just the other day and they, you know, hit me up there like we want to do a hundred and forty million valuation, hundred and forty million. I was like y'all have, you know, $20,000 in revenue. You can't do it. It doesn't even hit their mind. I'm happy to help you, but you know, and they always look to another company that raised at a higher valuation, but they don't know that company has $3 million in revenue. Right, they just don't. They don't correlate these items. And when you go to the crowd with that, the crowd's smart, there's leaders in the crowd that there's angel investors or VCs, and they will give you. You know, if you go out there looking for something that doesn't exist, like a hundred forty million valuation with $20,000 revenue, you're just gonna get hit, right. And so you gotta, you gotta have expectations right within the realm of reality. You got to go in with fair valuations for everybody, right? Just because the crowd, the crowd doesn't want to pay more, they need to pay what everyone else is paying, right, the same valuations. So VCs exists and they're doing it, they're deploying capital. 

But I mean, you know every like, all of you we got to a point where your cousin was giving you crypto advice, your barista was giving you crypto advice and your barista also ran a venture fund, like that's where we were peak tech and just not there anymore. And so a lot of those funds are closing down. Even big funds are closing down, and you know, it's all like when people have this idea that VCs hold on to the capital. They don't keep any money Like they. 

Really, the way VCs work is they have LPs, they call for capital calls and so you know, if the LPs don't give you the money, then you got to close down your fund. And there's a lot of funds that aren't saying that right now because you know their LPs are saying, hey, we don't want to give you any more money and we're out, right, and even though it's not in their contract, what are you gonna do If you send them an email? They don't want to send you money. You can't make investments. And if you can't, you know feasibly get them the money return, because right now is actually a great time to invest. It really is a good time to invest because you're gonna get really cheap valuations. 

So if you have capital and you know you got dry powders, they say people say VCs have dry powder. They don't have dry powder. They have to call and ask for dry powder. Right, it's a very big difference. Angel investors have dry powder, they have real money they can invest, and so angel investors are getting really good valuations again. It's why angel investors always beat VCs Angel investors on their record. Right, they have a much better IRR than VCs Hands down always, always have, always will, because they get in early, they get in fair valuations, they get realistic valuations and that gives them returns, whereas VCs it's kind of a you know a measuring contest in some capacities of, oh I got him here, oh, let's get the valuation pushed up right, and it really became this unregulated mess. I think in terms of you know a lot of peacocking and trying to express, oh, my company had this valuation, oh, I'm gonna do this, and then they were using that to raise money for the next fund and it just didn't work. It led to the bubble. 

0:09:25 - Mehmet
Yeah, actually I was, you know, also reading a book the other day about VCs and it seems like you know the thing that founders I don't want to say mistakenly, because I don't think they do mistakes very easy but you know they think that the only way for them to grow super fast is to go to AVC and, you know, follow what they see here and there, oh, like, we've got like series A, series B, d, e, whatever. And then you know things gonna go. Just this morning, before I start the recording, I've seen you know an opposite thing, where a company, they return the money to VCs and you know they, unfortunately they fired some of their staff and even the CEO has to step down and said you know what we're gonna go back to do a. You know the bootstrapping option and maybe you know seek for for angel investors if we need it down the road. So I think, andrew, what happened? Is it that pitchcom? Yes, it was pitchcom, yeah, yeah, correct. 

So so you know, and this is like it triggered something in my mind, and even you know myself, because part of the things I like to do in 2023 is to help connecting founders with investors. But you know, I become skeptical, I would say because you don't want to throw someone into the fire, right? So because you know and you can tell us about this experience, andrew, also as well like it's not like easy to be controlled by someone all the time, and you know, like like what are some of the things that they will lose from founders perspective when they get money from VCs. Because I think this is, people talk about all the good things but few people talk about, you know, the I'm not saying negative, but I would say that disadvantages. 

0:11:21 - Andrew
Yeah, and one thing to add that I didn't hit on was that you know founders are moving to profitability and so you know I was. I was being really negative on the on the bubble side, but really that puts people back where they need to be. I mean something I've been teaching for years. I've been pushing for years. As you know, every founder I've ever talked to I say push for profitability, even if you're getting VCs like be profitable, be a profitable business, so you don't have to do things right, focus on revenue generation. The founder I was just talking to yesterday he was. He was like well, shouldn't I put this money into raising money? I said, no, you're doing. You just broke even. Put more money into driving more revenue, because if you have more profit, then like it's not, like you know it's not going to be a negative, it's really highly positive. I mean, if you broke, even last month, let, instead of putting $100,000 into this equity crowdfunding raise, let's put that money into more advertising, growth and drive revenue to your business, because that's what investors really want to see, and then they kind of get lost in that. So, but to your point, I think that I think that founders they just you know there's so many VCs that aren't honest and they kind of come in and they're just telling you oh, I'll help with this, I'll help with that. And then one either they don't help with anything, they kind of just give you the money and go stop. I've had that experience myself. They're too busy. They actually sometimes VCs will invest in you because they don't want to add value, because they're so busy and they kind of want to enjoy their life and they're like okay, this founder gets it, they're smart, they're really capable and they just do that. Like VCs will say they don't do that, but they do that, right, they just they give you the money and then they just go enjoy their time in the Cayman Islands, traveling, going to crypto conferences and talking about their portfolio, right, like that's. That's what a lot of you know I call those show voters. 

And then two there's the VCs that actually add value, but they only invest in a couple of companies a year or two a year, because they can't add value to all of them, right? So it's really small amount of companies they get to invest in, and accelerators used to be like that. But they also are trying to compete with each other and the YC is saying way around. So they got two. And then, because COVID happened, they got everybody move remote and so they really weren't adding as much value as they used to either. And then three, there's the VCs that they're younger VCs, they're maybe on their first fund or two, and then they act really irresponsible and so when something happens, they crush the founders, they fire the CEO. 

I mean, my last company was torn apart because VC comes in and it's really my fault. I actually am one of the founders that always retain all control. I managed to control whatever I could. I had voting power right. Unless you give someone power, they really can't mess with things. And it's one of those situations where I gave a VC power because I put them on the board or sort of establishing a better board. 

And next thing, you know they really tear the company apart. They do everything they can to. You know when they because they see the market like we do, when they see a way to try to get themselves money back and or make themselves money, they just become selfish and that's just human nature in many ways. But it can really destroy a company when you know VC on one hand says oh, we trust you, we're going to work with you. And then, when you know you're going through a troubling time, the economy is going down, you know your companies are blowing up left and right I mean we saw that 10 fold because we were an accelerator and VC comes in and says, okay, well, I want to get my you know $100,000 back, $200,000 back, and so I'm going to burn this whole thing down to try to get my money back. And it really hurts a lot of people. And so you got to be careful, especially with first time VCs, because they will and they can cause a lot of mayhem, a lot of chaos. 

And I learned the hard way I mean I preached this, but you know I learned the hard way of you know keeping your investors separate from your team. Don't let them interact with the team, because guess what, that's how you're going to end up with a coup. That's a number of situations where you know the grass is always greener on the other side. And if the team has that mentality especially when you're going through this economy right now, where you know I don't know a CEO that hasn't done a layoff like layoffs are just happening. It's just the nature of the beast when you're in the peak bubble and it pops, you're going to have to do layoffs and you lose a lot of trust from your people, because these young people today, you know, gen Z, malinos, they haven't seen this before. They're, you know, gen X and boomers. They know all about it. They've seen the great recession and all these other things that they've just lived through it. But you know, they don't know. And so to them the olive branch that comes out, the person promising all these you know other things, saying, oh, we won't do these things, oh, no more layoff. Like you know, it just doesn't exist but it's going to cause chaos and mayhem. 

We saw that with Sam Altman. Poor Sam, you know, literally, you know, didn't do anything. I mean, it's really the fact he made a lot of money and, as far as I know, I mean he didn't invent AGI, I mean it just, you know. And people on the board got like a little twisted and they got afraid. And the next thing, you know, instead of talking to him, they just ran him out of business. Right, and he won in the end because he'd made enough people, enough money and there was enough money on the investment that they couldn't lose it. Right, and it was a great product. 

I mean, we're seeing this with, you know, chat, gpt, there's that, what's it called? Mid-journey, mid-journey, god, it's run on Discord. Amazing product. Just no funding needed at all, just running off of revenue. Right, I think we're in the age now where people can focus on revenue-based businesses. I think that the VC era of Uber's and the unprofitable business models is over. I think that we actually live in a world now where we can find out ways to make profitable business models. Ai is helping us with that, whereas before, I mean, you know, we were just burning billions of dollars and we saw the results. 

What happens when Uber runs out of VC funding, right? Okay, well, now Uber's 50 bucks to go a couple blocks. It's 50 bucks to deliver a burrito. That's four or five dollars, right, like it's unsustainable. I mean, nobody wants to pay that, people don't want to live for those wages, and so it's just falling apart, right? I don't know when the last time. 

I don't know if you'll have Uber in Dubai, but in Texas, you know, if you want to go literally like a mile, it's 50 bucks. Right, it doesn't make sense. I'm in Vietnam right now and you know, their version of Uber is called Grab and as Grab is in Central Asia right now and they're doing the same thing, they're just pumping money and the company is losing money left and right. It's not making anyone money, but they're having to pump money and just to get it to work they believe is a sustainable way, but eventually it's going to go to the same way. Like you know, it just doesn't make sense. I'm paying $3 to go across the city, right, in a nice car, right? It's not, not sustainable. I did the same thing with Alibaba. And what is it? Dd Kuaidu, when I was in China, it's like four bucks. Right, the prices are going to have to go up, right, it's not possible. 

0:18:19 - Mehmet
Yeah, so they are claiming they are kind of doing kind of diversification. You know so they are not relying on one business model only. So that's why, you see, and by the way to your point, uber actually acquired the biggest competition it's called Kareem across the Middle East region. So that's actually, they are owned by Uber and you know these guys, they became like a super app. They do everything. You know, like it's not only taxis, or you know, like you know car healing, it's also like groceries, food delivery, fintech. So it's like the concept of super app, and I think sorry. 

0:19:03 - Andrew
It's like WeChat in China. 

0:19:05 - Mehmet
Exactly. 

It's like WeChat and you know even Twitter or X. Now even Elon Musk. He's thinking about having you know this concept of the super app and even he want people to upload their videos, their podcasts. You know everything to become you know on single platform Because and this is something I keep repeating, andrew it's a very crowded market and if you cannot do kind of value adding, you're going to end up with a situation like this. Now, before I jump on these business models, one thing because you mentioned that I know you did it also as well. So you mentioned the accelerators couple of times Now. 

Accelerators in the US and in the West, usually you know they were very common. Why a combinator is one of the famous. Of course, starting, I think, a couple of years back, we start to see these same concepts applied here in the region. But one thing that people they don't find them fair is that, for example, I know for a fact why combinator, I think they write a check of 100 K but they ask for seven to 10 percent equity and people find this not fair. Now, asking someone who did that you know from your perspective, like is the accelerator model still valid in 2024 and beyond? Or also like it needs to have a reshuffle and revamp to make it more, I would say, attractable for both the people who fund these accelerators and for the founders. 

0:20:41 - Andrew
Yeah, I think that it has to change. I mean, people will say that the deals I gave were unfail right. They'll say, why, combinator? I think anyone that's been in the industry, like you know, you'll see, like Sam Altman's and the successful CEOs, and you'll see people that have done this two or three times, they've made a bunch of money, and they'll say, oh, accelerators aren't fair and you know this is you shouldn't do this, right. But you can only say that from a position of having used it, done it and made millions of dollars. And I think that's just a founder issue. Never, I've never done this. Once they're seen it once. 

Founders are rarely, if ever, grateful for you know, it's just a personality difference for the investors that gave them money and for what they've done. And because I think founders believe that you know you got your equity and you got your percentage and then you kind of have to be on forever. I mean some of the first companies I went through in our accelerator, you know they literally still call me to this day and if I don't give them extra value and I don't give them like 10 hours of time, I mean they're pissed and they're like you know, they see it as almost like you're chained to them forever and they expect you to really be a part of the mission. I think the idea is that if you're a shareholder in some capacity that you are you have to be involved in the company and I think that you know there's so many angels that just want to prefer to be passive investors, and founders even preach be a passive investor, right, and they try to make it sound better than it is. But you know, when they really need you, they call you and they want that help and they expect you to be there. And accelerators just today they've grown so big. If you run a small regional accelerator, you're going to do well. If you have to expand out and you got to compete, you got to be an SF and you're, you know, competing with the YC. It's difficult Because you really the accelerator model is not for companies and CEOs that have been CEOs for a while. But the problem is the Twitter sphere. Is everybody right? So everybody wants to weigh in and do stuff. Twitter is for you. 

Graduated from Caltech, you know whatever right and you're in. You know a new MedTech company and you're focused on MedTech and we're going to help you. You know, build this MedTech business or we're going to help you build this. You know, comp side, ai right, whatever like. Wherever your industry and sector is, wherever you know your college, they're usually around a great college and they recruit from there. But they're helping first time founders because they're they're bringing the like for one as a mentor. We're helping you know those companies, helping the best mentors connect to the best companies, because you know you're not going to be the creepy guy walking around on college campus trying to find, you know, new people right, like, and so I think that's a value prop still. 

But for founders that have already built companies and done this for years and they've been in the industry for years, I don't think YC is is is valuable. I don't think Accelerator is valuable. I mean we, when we ran, we we really found from years of working with founders that there's always something that founders are going to be well rounded on and there's always like some rough edges. So even founders that have, you know, built companies and raised capital multiple times over always have some weak area and we were able to usually pivot our program to help you know those founders, you know, get over that. But at the end of the day, you know a founder will be happy, excited and love you, for you know, two months after graduation and then eight months later, if you're still not adding value, then they're going to hate you and that's just. That's every accelerator, that's every investor. 

I don't know how to change that, that dichotomy, because if you go to China, you buy many places in the world, people are always like really there's a gratitude for their investors, especially because there's a lot less capital deployment in these areas and availability compared to the US, and there's this kind of egocentric US Western philosophy on it. I don't know what it is. The founders, just they want you to provide value forever and you know, as an accelerator, as a investor of EC, like, if you invest in too many, you're not going to be able to do that, and so it really it naturally kind of either constrains, the like the best investors have really constrained portfolios. They really are adding value to everybody. They can and they actually can't invest in more because they can't add value to more, right, and whereas the investors that are seen as the worst, even if they're deploying the most capital and they have some of the best returns, well, they're not as available and they can't be. And you know the people that are available are venture associates or analysts that have no experience in tech. They don't know what they're doing, they're giving terrible advice and so that's you know. The industry really hit that peak last year where everyone had a venture fund, everyone the mother was an adventure fund and a venture associate, all this stuff. And everybody was preaching stuff Because I think it happened because post COVID there were so many MBAs I mean I had Harvard, I had UT, I had, you know, all these programs, yale just email and just give it out in MBAs We'll waive the GMATs, everything. 

You just pay the money. If you've got the cash, we got the MBA. And so I mean many people in my industry, in the tech side, lost all respect for MBAs from that period of time. So anyone that had an MBA during COVID and kind of beyond the programs became just cash businesses and you know diploma bills and sadly to say, you know that's just what it was. I mean I got the emails literally, you got the money, we got the MBA right. Like, oh, you want executive MBA, just send us the money, right. 

And I think that I mean many people in high positions saw that, felt that, and we got those and then all of a sudden, those became no value to us and so the market got like just became flooded with MBAs. So many MBAs they were just pumping them out like candy during COVID. So then those MBAs, they couldn't get jobs on Wall Street, so they started, they went into tech, right, they started accelerators, they went and worked everywhere they could. Now they're all tech gurus and now they all, you know, are experts selling their courses. Right, they're all kind of doing their thing. 

And I just think that we're in, you know, we hit peak tech, peak MBA right, and now it's time for a reset, right? I mean, people are getting tired of Harvard, getting tired of Ivy Leaks. Right, we really need to focus down on, you know, what made us a great country, what made the economy work, and we need to get back to the basics right Of profitability, quality and, you know, not everyone can go to Harvard, not everyone can be an MBA right, like it's. You know, I guess you'd say that capitalism we hit peak capitalism in a way. I hate to say that where, you know, everyone just became so profit oriented and so self-indulgent and making money that we stopped adding value to the system. 

And when you stop adding value to the system, inflation happens, economy sinks right, and you know we just have to have a mental reset of how do we add value? And yeah, I still don't think we're adding value. I think that AI is just a supplemented value in many ways, and you know the enslavery of AI and machines and you know it's. Those are great podcasts I was listening to last night. They were saying you know, humans are the slaves and the Amazon warehouse work in 16 hour days and AI is out making art and that is doing what we thought we'd be doing. We thought we would be the ones enslaving robots and putting them in the warehouses and making art when, in reality, ai is making better art than us. 

0:27:45 - Mehmet
That's funny enough, and I'm not sure if you have seen this also, andrew, because you mentioned about how many MBAs we start to see and people not related to tech who started to appear in the tech scene. Another thing that I noticed, and it's it's I don't know lucky or are you lucky for me. I think it's lucky because you know it allowed me to see things from different perspective. So because now the place where I am in, like you know, the UAE, saudi Arabia, like these countries are now emerging, I would say, hubs for technologies, you know, and a lot of startups trying to get up from here. So what started to happen? All of a sudden, we start to see these people that came out of nowhere and you know, sorry if I'm saying this, I'm not saying you are nothing but and everyone started to give advice and, you know, became like you know, the analysts and people who became, you know, and they start to talk. Even you know what's irritated me to your point, when, if they stay in the field that they came from and they put their two cents, let's say, around things. You know, all my respect, but all of a sudden, you see people not related to tech and speaking about AI and we can do the LLM, hey, hey, hey, hey, one second. You know, like, give me a break. Like, from where do you get this? And what they started to do. They start to build these communities that they're claiming that, hey, we can connect VCs to founders, and then they started to do all these meetups and events and all this and, at the end of the day, it's like as like one of my friends, if he would listen to this episode, he would love this. It's a fugazi. You know like, like it's nothing, it's just you know. 

You know we got these people who probably, as you said, during COVID, they had nothing to do, so they had to go study something and because they got the money and they don't add value, they just what they do, they do shows. You know, they purely do shows. And how much I see of these, so good news, it was peak during 2023, the beginning, two to three quarters by the end of Q4,. I start to see a decline of seeing these people, because I figured out that, because, again, the region is still small and you know people, so people figured out, okay, it was something not real right? So it was like a bubble where people claiming they understand the whole you know startup thing. 

And I'm telling people, guys, like it's not something you can grab it from one day. And this is why I want to ask you, andrew, because you've done this couple of times before so when we talk about a startup and you said like it should have you know the profit generation and adding value, but to scale, you know, and having you know really significant revenue milestones, what do you think are the key factors that would contribute to success? And this is what actually would allow even people to come to them and say, hey, we're interested in your startup, we want you to scale. Here's our money. So what do you think are these factors that they need to have? 

0:30:57 - Andrew
I mean, I think today people look for a real path and actually legitimate projections to getting to profitability and not just break even, but actually being a profitable business right, and they want to see it faster than ever. They want to see it. I don't want to see 36 months to profitability, we want to see it. How can you use AI, how can you use this tech? What are you pitching me on and how are you actually going to achieve that Right? And what have you done in the past projection wise and have you actually achieved those projections? Because I think three things that we talked about just now but we mentioned, you know, about the Fugazis, right? 

I think crypto created this kind of a lot. Crypto opened the gates for everyone to kind of come into tech and everybody to become an expert on something. I mean, crypto didn't really pan out. Those people needed jobs and so they pivoted to something else and it created this mentality in tech where everyone was chasing the coattails of the money, like the money seemed to be over here, and so it's. Let's go over here to these mountains, let's go to this, let's go to that right. And, like you know, he added you know, was it Bitcoin, iced Tea and all these other things, right. And when that didn't pan out, the next thing was AI, and so you know there's so much quality going to AI, but it's actually it's a much higher level of entry. I mean there's. You know, you really have to know your game, and I started taking new coding classes to pick up some of the new AI coding languages because you know it's just moving so fast I can't keep up, right, and I have to become a better engineer, and it's just one of those things that if you're not that, you really can't pitch it, you can't sell it, because crypto I mean people could bullshit all day long, right, you can't do that in AI, right, I will say that as much as I spend maybe two hours a day on it, I still can't keep up. Like it is just moving so fast, right, and that's just part of the reality of how fast the systems can improve and innovate. Now is they're just beating humans, and so that's number two and number three. 

I was just going to say that I think that, to get to your point on milestones, right, one is the profitability side of everything there, but you have to be able to show that you can do something with the capital and you have to. You know, have this not? I guess you say you can't have the expectation that you're going to live on venture capital forever. It's almost like the companies that VC has kind of shied away from back a couple of years, back where you know, here's my one round, here's how much I need. This is where we're going to get to profitability and this is, you know, we can survive this and we can weather the storm. Right, it's. 

You're really looking at it as like a singular investment versus I'm expected to raise four or five rounds right, you really have to be and in raise capital every six to eight months. It's just not seen as acceptable anymore. I mean, and investors, we're not looking for that. I'm looking for the company that you know that investors weren't looking for, you know, four or five years ago, which is okay, great, you have this path, you have this trajectory. Using all this new technology today, you're able to get to this profitability faster and you can innovate faster. 

And you know the money you might need would be to outpace your competition, not to keep you from going under. Right, because, like investors became this lifeline of just calling for money constantly to keep the business afloat and make up for mistakes, and I think that the tolerance for that is not as high as it was, and so the tolerance for new founders is not very high. So you know, there's already there's a ton of CEOs that have started companies and have been successful and had failures, and we're at peak CEO. There's just too many CEOs out there, and so you know, I think that if you want to be a CEO today and you want to start a business, I think it's going to be very difficult, I think that it's just not going to be the same as it was, and I think that you're better off probably going and learning from a CEO, email them and say, hey, I want to be your chief of staff, I want to be your assistant, I want to be something in your company and just work for them. For, you know, a year or two years we're back to them. 

Like you know, we're not the same age, but I, you know, I grew up as still as an older millennial where you have to work years in a role. Right, when I was in the military, you'd spend years before you got promoted, right, that's just how it was. There's this idea today, with how fast. Startups are moving and the peak startup bubble like people like if I don't get a promotion every three to six months, I'm a failure. And that's how people felt. Like if I'm not the senior VP product manager at Amazon of 300 product managers right, we saw that just totally flop Amazon. Like go up, all the product managers People are making, you know, 24 years old, $400,000. All of them got fired, right, like it was just it's over and so you know. 

0:35:34 - Mehmet
Yeah. Now, andrew, like I know that you had a, I would say a story following the. You know what happened last year with Silicon Valley Bank, so can you like just share with us. You know how, you know you converted this whole style situation, I would say, to an opportunity. 

0:36:00 - Andrew
Yeah, it's interesting. So right now we're. You know our company, silicon Valley Bank, blew up and you know we I was calling for the going back to 20, 22, 2021,. I saw the market coming down, I saw issues coming into the market and I really pushed to make cuts. But when your your revenue is going so high and everything is going so well, you're literally the, even if you have all the power in the world, it's an echo chamber because everyone around you saying it's only going to go up, it's only going to go up. Your investors are pushing for higher growth, more growth, more growth. Take on more capital so you can grow more. 

Right, and I honestly should have pushed back more. I really should have just made that stand and then I should have heard a lot of people's feelings by just saying, hey, we're not going to grow more, and that's the thing that founders should be doing. Again, you know, be willing to fight tooth and nail today because that market might not exist anymore. Your industry segment, you know you might. You know one, you might be outcompeted, which is a challenge. So I know that's a big fear in everyone's mind. But two, you know when you, when you see your customers changing, when you see dynamics changing in the market, you might have to have more capital to figure things out and you can't be just operating off of just pure profit either. So like raise I know that's contrary to what I just said, but you have to be really caught in the market. You have to be really cognizant of capital in the bank and how much you're raising and just spending all that money on growth Because growth is expensive to grow. 

You know the average cost of a salesperson in all business have sales. That's just a fact, right, and so the average cost of a salesperson to train and build up is over $100,000. And you're not making money off. They're an investment. It's the same thing with any employee. They're an investment. You're not making money off of them until, like usually you know at least a year I'd put it about 12 to 16 months is to get a real ROI out of any employee you hire right. 

And so you know this rapid scaling, rapid hire, rapid fire. You're actually just burning a ton of capital and a ton of time and a ton of. You know your investment and that. And you can only do that with significant VC and when that closes up, you can't do it anymore. You got to really invest holistically, and so on our end, we grew way too fast and by the time you get to a certain point where you can't even control growth anymore, and because layoffs become regulated, you can't just fire everybody. You can't do that. You have to do 60-day notices. You got to do severance packages, all these regulations around it that first time founders don't know, right, hell, even I wasn't aware of all the regulations, even new regulations that came out during COVID. It just made it really difficult to scale the business down. And so by the time you're able to scale it down, you're looking at several months versus just overnight. Done, you know, and if we'd done that, we would still be around in business. 

But the thing that became this, I think my big mistake was you know everyone was pushing back. I kept saying you know we tried to cut whatever we could, and so you end up with death by 1,000 cuts where you're making cuts every couple of months. And then you know your people, like we're supposed to be the highlight of the industry, right, running an accelerator or anything else. And when you see that, you know investors just stop taking calls from startup founders. Right, and we saw that in a lot in the end of Q3, q4, where a lot of VCs just kind of shut up shop, they just saying, hey, we're not taking any investments right now or we're only looking for this, like everybody really tightened their buttocks a lot. And so I think that you know what happened on our end. Right was, you know, investor comes in, people try to do stuff, and then you know you really don't see it coming until it's there. And then you really got to spend a lot of time winning back and rebuilding. 

And on our end we had a massive portfolio of warrants, investments, and so now that's being sold through an investment bank, peak Tech, and so they're, you know we're selling like a billion dollars worth of equities. It's not the best time to be selling right now, but either way, we're selling it and we only owe like 5 million bucks. But it's going to be a massive turnaround. You know the investors get some money back, but the challenge is and it turns into a positive weird moment for employees and everyone else is, investors are limited to 1x liquidation, so they only get 1x out of it and the rest of it goes to the employees and stockholders, of which, you know I'm 80%, my co-founders are, you know the rest of the chunk out of that and the other employees. 

So it actually ends up, you know, in a place where, like I tell founders, based on your equity percentage, if you sell the company early on for 40 million, you're going to get a you know like 30 million bucks because you own most of the company. If you sell it for 150 million later, you're still going to get around the same amount of money, usually because your dilution is so high. And so it's just, it's just really it's more of a, you know a metal on your chest for what you did and how much money you made your investors versus how much you made yourself. And that's kind of where we are today is that you know I'm gonna do everything I can to make my investors back money on it. But the people that ran the coup and they actually kind of screwed themselves out a little bit because in the day, the shareholders and you know, but we're not making as much money as they would have if we sold the company for a couple hundred million probably and versus, you know, some of the investors that screw the other investors over. 

Well, like I said, it's it's it's never a major movement or anything like this. It's one of those challenges of Usually a minority power. I mean, you saw, in the same altruistic, it was one guy that just kind of flipped everybody and then everybody, of course, fixed it afterwards and so it's same. On our end is a handful of employees and investor and, like you know, no matter how much protection you have in place, you really can't fix it. People try to move fast and you know to live in the environment of Silicon Valley. 

Bank just exploded. We're looking at other banks Maybe exploding, startups are exploding, right, it was this massive, you know, oh shit. Moment where, you know, I've been preaching it for a while, some people have been preaching it, and then all of a sudden it happens. Right. It's like. It's like when? When Wall Street I can't even imagine when Wall Street crashed, you know, in the Great Depression, but I got an ounce of that when that happened, because we saw it in tech, where these seeds were just shutting up shop. They were just closing down for a month, two months, and then they're just that's it, right. And then you saw the rest of 2023 where, you know it, just layoff after layoff after layoff, company bankruptcy after bankruptcy I mean it's about 600 companies went bankrupt last year Just massive. And you know companies even with a significant you know nest eggs where they could last for you know, a year or two years and actually write it out they just said, hey, we're gonna close up and distribute the money because we can't compete anymore. You know, we are like the only way we could have succeeded is that we raised you know this X amount of money and this is a big thing I've seen is you know that they saw that the modelist wasn't gonna work and so they said, hey, let's close up shop. And so, you know, on our end, we would probably still have had the business if, if, if I had Pushed ahead of time and a founder really think was like and pitchcom did the right thing, like if I've done what pitchcom had done, which is, you know, literally cut down 90% of the employees in Q4 of 2022, versus trying to save everybody and, you know, try to balance it out and make all the numbers work. If I'd done that Plus, I was tired. 

I've been CEO for seven years to COVID and being a CEO of CEOs is even harder. Right, where I'm literally having, you know, my phone number is on blast for Helping CEOs to the problems. I mean, I had a heart attack a couple years back because during COVID, for months I was just helping companies stay in business. I mean literally for about three months straight I was nonstop on the phone 24 seven, helping companies do layoffs, all the hard stuff they didn't know how to do and how to like, figure out how to finagle their, you know, push taxes off To keep enough capital to keep the lights on to make it through COVID. And then once the you know, there was no one. There was a lot of Grifters trying to cheat people out of their money for the COVID relief funding, like that and just not helping. And so we were doing it All for free. I mean just literally on the phone with hundreds of companies just do it whatever. 

Right, and it took a toll on me, right I I'd already been through couple years in the startup side. I put too much time in. I think that that's I have to think that. You know, I hate to be that guy that preaches that because I'm usually the hustle king. I've just told people hustle. But you, really, I Don't think it should be a pride thing anymore for founders to say I don't pay myself anything, I don't take on capital and I don't take care of my health, and I think there's been this massive swing, the other way, of founders that are going on wellness retreats every weekend, work in 20 hour a week, four hour work week that's all bullshit, right? Sorry, I don't know, you can curse your show, but that's that's BS. Right, you still have to work very, very hard, but you know you don't need to work 120 hours a week, right? That's just not possible, sustainable for years. And so what you have to do is you have to, as a founder, think and and about yourself. And so if you can't, if you can't put your oxygen mask on first, you can't save the person next to you and ultimately, that's. 

You know, I would have had more energy I mean, I've had a sabbatical year this year and so I would have had more energy if I if I'd done the right thing in terms of what was wrong for others, but it was right for me as a business leader was cut down. Two thirds did what pitch calm did, and you know everything there. We'd still be in business Today, right, but it would have been the hard thing and at the time it wasn't as respected pitch calm. They got tons of accolades for doing it because you know they're like that. They manage you to this point to do it. 

But at the height of everything growing, when everyone was really attacking and going after anyone, that said the economy was gonna go down, everyone was so afraid, right when there's this massive fear and panic around the economy going down to be the one yelling fire. Right when there's a fire, people attack that person and they're kind of it. So you know it might not even work. Then I saw many founders and many CEOs who were saying, hey, this stuff's not going well and people just going. You know you're full of it, right? I mean my own team would tell me that right, and so I think that you know it's. It's important to look at today and and to learn from it, but also to know that the the way things are going. 

Just as a founder, you have to be critical of everything. You have to take care of yourself first, and we wouldn't have been in the scenario if I put myself first, if I paid myself first. I mean, you know, in the last two months I was paying. You know all my savings going to pay employees right, and the reality it's business and you know the loyalty you get from that is not very much, because if someone else comes in with some Money, well, you can lose everything you got. You can lose your, your scalp, even, right, if you don't have the capital to cover your own cost, to cover your own legal, and you know, the end of the day, everyone's gonna be like, and I'm not saying, pay yourself half a million dollars, but don't do like I did, where you pay yourself, you know, like 75k a year, bear living expenses in Austin, right? Or you know, first couple years I didn't pay myself anything so I could pay my employees and I think that's. You know, it wouldn't have been much more difficult at all to raise the extra money to pay myself more. 

I'm just, I'm an engineer and so I put so much time into, okay, how can I take this dollar and make it into $10, right. And so I'd rather, you know, live on peanut butter and jelly and, and you know, and then to pay myself money. Then when I know I'm gonna go, I'm not gonna live on peanut butter and jelly if I pay myself, I'm gonna go eat sushi, right, that's just my, my fix is ice cream and sushi, right. So Whereas you know, you kind of have this hustle mentality of you got to live on the floor and do like that and Elon preaches it now, everyone preaches it, right, but I just don't think that's as necessary anymore. I mean, it's necessary financially now because you can't live that expensive life in this new economy and the inflation. 

But as a founder, you just have to take care of yourself physically, mentally, financially, and I've just seen so many founders in this last year lose Everything because they didn't do that and they couldn't fight the coup. I mean, sam Elma couldn't fight the coup. He's a billionaire, right and so, and everyone thinks they can do better than you, every single person that works for you, Every single investor, until you give them the reins, give them the reins for three days and they say, oh, I can't do this. You know this is not, I can't go raising money and I can't. I mean I tried doing that when our stuff. I said, great, you want, you've been in a director here, you want to take over, right for three days. 

No, I can't do it, right, I don't have the capital raise like I would. Just, you know, you close it down, right, of course you don't. You don't like, you don't know what it's like till you're in it, and until you're in it, you don't know. You need to put your own things like. Everyone can judge you from afar, right, but they can't sit in the seat and and run a company and put their own money in and pay the bills themselves, especially when you're a company doing you know Two million a month, right, and you have a you know a million plus in Expenses. They can't cover that and nobody everybody thinks they want to until they have the reality right. They think the CEO just makes decisions, 90% of it saying no, as Bezos said, 90% no right, because otherwise you would just go off the cliff. 

0:48:45 - Mehmet
So yeah, yeah, that's. You know you mentioned many things, but the one thing is about, you know, taking care of yourself. This is very important, underrated, and this is why I tell people don't follow Blindly what you see here and there. There's a lot of fake things that you we see, especially, you know, in the age of social media. You know about how you should be behaving, about work. I'm not saying you don't have to work hard, of course you have to work hard, but you don't have to kill yourself, right? So so there's always a balance and, andro, just as as we are always almost close to the end. You mentioned a couple of times, so tell me, what are you currently doing and how AI is is playing a role with with your current activities nowadays? 

0:49:35 - Andrew
you so one I use AI in almost everything I do now, probably 80% of my daily workload. I'm picking up some AI languages, I'm getting better coding again as a CEO, and so I've spent this last you know, almost a year now on sabbatical, living overseas, living on an island, kind of getting my health back, figuring things out where I want to be, you know, and looking for my next big idea. And I've been looking in the AI sphere a lot, trying to figure out okay, where can I find a niche that I can fit in and where I can, as an engineer, add value? Right, because being just the CEO anymore is enough. You have to be a CEO that is also an engineer, that's. You know. I've always looked at the Elon, that's what you have to do. And so, yeah, I've been improving my coding abilities to get really well at it, because that's where the competition is, and so, yep, that's. I mean. 

I'm working on like two projects right now. They're still under development, nothing to be crazy excited about. I mean, one I'm really excited about, but it's not released yet, and I hate to be that person that says that, but. And the other one is just getting into the AI side and figuring out. You know where I can go with it as my coding ability gets better than to the next year. But I'm still enjoying my year off. It's my sabbatical year, you know it's. I'm waiting for investments to get sold so I can get my money out of it and then from there I plan to use my own money to start another AI tech company and, using what I've learned this last year, I mean, and I will say it's, it's. It's difficult again because it's I don't know if I touch FinTech again, fintech is just oversaturated and bloated. But you know, I'm excited for that new opportunity in the AI sphere to to one, be an engineer leader, to learn, understand, hopefully get good enough that I can actually lead it to MIM engineers, and that's that's really important for me, because I mean I hate to be that person that says that because it makes me sound like a modest tech, highly technical person, but it's just so complex. I mean, you know, and I'm excited because it's not the user interfaces that are complex, it's not the UI UX anymore. Ui UX has become super easy. It's really kind of basic. I mean we're talking about Discord or FlexIDH. I mean like it's really simple. Now there's nobody trying to make things beautiful to hide the bad features of the lack of tech anymore. It's really technical and, yeah, we're just back to that. 

Whether you're building rockets or you're, you're engineering AI, it's it's an engineer's game and I think that the users, the sales experience, isn't what it used to be either. There's not as many people that are excited to do sales and jump on and buy stuff. They're actually buying products based on usage now, not just on. I think that's a really exciting thing that I guess to go into 2024 on is that you know DocuSign. What is it? Zapier and many others are moving to this. You know price per sale model versus making you sign up for contracts that go for years because they just can't compete. It's just, you know, that was the model before, but I think the usage model is way better. I'm happy to pay more for usage than some not locking to some massive contract, because some new competitors are going to launch next month and and change Absolutely. 

0:52:43 - Mehmet
Absolutely. You know, and you know again I saw it this morning where it's up here they, they changed something that I wrote to them long time back. You should change your pricing model and I wish, like, more of these. I'm a little bit fan of NoCo tools as well, so I hope that they follow, because they don't. They I don't want, as you said, I don't want to block myself and you know, like in SaaS, usually they put for you the yearly price, usually like 20, 30% less than the monthly commitment. Yeah, I don't want to be locked in and this is why there is this huge debate now around, like SaaS models. 

I'm not saying SaaS will go away, of course not. It's like, still a good model. Subscription is is a valuable model because I can't pause it, stop it, resume it the moment I want it. This is why it make it very affordable. I would say, not from money perspective, from, I would say, convenience perspective. So I'm with you on this point and where we can follow all these progress is down the road. So where where we can find more about? 

0:53:47 - Andrew
you Twitter. Andrew Ryan ATX. On Twitter. I got a. I never used Twitter to Elon bought it. Never in years. I mean I wouldn't touch it. And now I'm on it and my followers have increased by 300X in the last week I've been engaged with. 

There's no other place you can literally engage with billionaires. I was just talking to Bill Ackman, cc Longsdale, like just actively, and it's the best networking tool in the market right now. I mean not to be a shill for Elon, right, like I really believe that Twitter is, is, is, is a play. I mean I, you know, being living out on an island just coding and learning things and reflecting, like it's a little lonely, especially when you're living in Asia. I mean it's beautiful, I mean it's cheap, beautiful, everything that. But as soon as, like, elon took over Twitter, game changing, I talked to people I've made so many new friends, networking, I mean literally connected people that are just you know I never would have talked to in the real world because they live in such different spheres and it's like clubhouse again clubhouse, you know early clubhouse, not close clubs, and so I'm excited for that. I mean I'm meeting people in the Middle East even right, and you know I never would have met unless I traveled there right, and so it's nice. 

0:54:58 - Mehmet
Yeah, and I wish if, if Elon do some something to remove this he talks about the bots I'm not talking about the boss, about these people that they keep putting these silly. You know, hook up tweets over there. 

0:55:14 - Andrew
Oh yeah, I almost never get a look at my post. I get at least four or five likes from one of those and the only the only guide you need to become I don't know what. 

0:55:25 - Mehmet
Like, oh man, like it's 2024, that doesn't. I'm not sure if someone clicked that, but you know, I don't think anyone does. 

0:55:35 - Andrew
But Elon, he's got a solution. He just he ran out of there's a new, so he's, he's, he's he's forcing users in those markets and the Philippines, places where most of the bots exist all accounts have to pay $1 a tweet. So he's he's not going to move that to the US because the US it's, you know, doesn't exist there, but basically they're in these markets and so he's testing it in the Philippines right now. I think it's Indonesia and the Philippines where I mean it's just going to kill the bot accounts, right, because they have to pay a dollar per month per bot account, have a credit card set up and it's a unique name. It just kills the bots. It's a it's a great idea. I mean I want to take credit for it, because I tweeted it at him, but I don't think he read it. I think he just came up with it on his own. 

0:56:10 - Mehmet
Yeah, I'm happy, I'm happy with even you know people. They were against changing the name to from Twitter to X. I'm happy with the name, I have no problem. I can say my experience became much better, Like I was not active but I was there, but my experience became much better since he took over. I need, I need, to give him the credit. Of course, I don't agree with everything he does, but, yes, the platform, especially when he introduced the subscription thing. Oh my God, my, my timeline became much cleaner, I would say. So I see things which are like really relevant to me, except here and there, people who put ads, you know. But again, he introduced now the X plus premium, which is, I'm thinking about it. Let's see. 

Anyway, I will make sure to put your hand. Yeah, so I'll make sure to, I'll put your hand, twitter handle or X handle in the show notes and to thank you very much for this very, very informative you know discussion today. I learned a lot and you will be following your journey. I wish you all the best. Thank you very much for your time and this is how we end each episode. So, for the audience, if you are first time passing by here, I hope you liked what you listened to or you watched. So please subscribe and tell your friends and colleagues about the show If you are one of the loyal fans. Thank you for being loyal and thank you for all your messages. Keep them coming up and I promise you always trying to get the best discussions with the best people. So thank you for your loyalty and we'll meet again very soon. Thank you, bye.