20VC Alexis Ohanian on Why Now Was The Right Time To Start Seven Seven Six, The 2 Very Distinct Types of Deals In Venture & The Unbundling of Social in 2021

Abstract

Abstract

In a candid conversation on "20 Minutes VC" with host Harry Stebbings, Alexis Ohanian, founder of Reddit and venture firm Seven Seven Six, discusses his entrepreneurial journey, from a pivotal moment at a Waffle House that diverted him from law school to co-founding Reddit. He reflects on his venture capital experiences, including his time at Initialized Capital, and shares insights on his new venture firm's approach, emphasizing the importance of supporting founders and seeking out diverse perspectives to uncover the best ideas. Ohanian also touches on the personal impact of fatherhood on his work ethic and investment philosophy, and his investment in Dispo, a photo-sharing app promoting authentic and present experiences.

Summary Notes

Introduction of Alexis Ohanian

  • Harry Stebbings introduces Alexis Ohanian, highlighting his accomplishments.
  • Alexis is the founder of seven seven six, a new early stage firm.
  • Alexis previously co-founded Initialized Capital and Reddit.
  • Harry thanks PG at YC and Gary Tan for their question suggestions.
  • Harry also discusses Lattice, Zoom, and Carter, thanking them for their services and support.

"Founder of a billion dollar company, founder of a leading early stage firm, and now founding another early stage firm. Yes, I'm thrilled to welcome Alexis Ohanian back to the hot seat today."

This quote introduces Alexis Ohanian, emphasizing his success in founding companies and venture capital firms.

Alexis Ohanian's Career Journey and Influence of Waffle House

  • Alexis Ohanian shares his transition from a potential law career to founding Reddit.
  • A pivotal moment at a Waffle House led him to abandon the LSAT and pursue entrepreneurship.
  • His angel investing evolved into venture investing, leading to Initialized Capital and seven seven six.

"Waffle House really is the reason I'm here before you, because otherwise I would just be some immigration lawyer and you would definitely not have me on your podcast."

Alexis credits Waffle House for his decision to leave law behind, a choice that significantly altered his career path.

Reflective Decision to Leave Initialized Capital

  • Alexis reflects on the events of 2020, including the murder of George Floyd, influencing his career decisions.
  • He stepped down from Reddit's board, advocating for a black director replacement and policy changes.
  • Alexis wanted to create a legacy that would make his daughter proud, leading to his departure from Initialized.

"I realized I wanted to spend the next 15-20... really intentionally building and making sure that when I have that future conversation with my daughter about what I do for a living and why I do it, that she's really, really proud of me."

This quote highlights Alexis's desire to build a meaningful and impactful career for the sake of his daughter's pride.

The Creation of Seven Seven Six

  • Alexis discusses the challenges of reconciling his vision with Gary Tan's at Initialized.
  • He respects Gary's work but felt the need to pursue his own vision without compromise.
  • Seven seven six represents a fresh start, with both Alexis and Gary supporting each other's separate ventures.

"It was either signing up for another couple of decades of working together to try to reconcile my vision and his as some kind of compromised thing... I have too much respect for Gary, professionally and personally, to not really honor that and decide to make the hard call for us to sort of split the firm and go our separate ways."

Alexis explains the difficult decision to leave Initialized Capital to honor both his and Gary's distinct visions.

Vision for Seven Seven Six

  • Alexis and Gary shared a belief in backing companies making advancements without repeating past mistakes.
  • Reflecting on Initialized, Alexis wants to carry over successful strategies to seven seven six.
  • He is focused on building seven seven six with a clear vision from the start.

"Of the reasons why Gary and I did such great work together is that we both really believed that the best companies are the ones that make great advancements without repeating great mistakes."

This quote reflects the shared philosophy between Alexis and Gary that shaped their investment strategies and will continue to influence Alexis's approach with seven seven six.

Venture Capital and Service Orientation

  • Venture capital (VC) is increasingly about service and maintaining a high net promoter score.
  • VCs are in the business of serving founders and ensuring their success.
  • Individual reputations are becoming more significant than firm brands, similar to trends in other industries, such as journalism with Substack.
  • Supporting founders is crucial for the success and sustainability of a VC firm.
  • Founder support not only helps the founders but also enhances the VC firm’s own success and deal flow.

"at doing this job well is about service. I think most vcs don't realize that they're in the net promoter score business, and that is really what matters most."

This quote highlights the importance of service in venture capital and the need for VCs to focus on their reputation and relationships with founders.

"supporting our founders really was the best thing to do for the business."

Supporting founders is emphasized as a key strategy for a successful venture capital firm, benefiting both the founders and the firm's bottom line.

Personal Branding and Reputation

  • Personal branding and reputation are crucial in the venture capital industry.
  • Alexis Ohanian is recognized by various identities, including being Serena Williams' husband and co-founder of Reddit.
  • Ohanian aspires to be known for making the right decisions and setting a higher standard in an industry with low expectations.
  • He values being available and helpful to founders, emphasizing personal connection and support.

"I hope my reputation is one where I've not always made the right decisions. But I'm trying really hard to be on the right side of history across a lot of issues."

Alexis Ohanian reflects on his desire for a reputation based on striving to make ethically sound decisions and contributing positively to historical progress.

"I hope the reputation that I have with the founders is one that they know two in the morning, they can text, that they know whether it's a small problem or a huge one, that we can be the first call and that we can actually do something about it and actually help them in an outsized way."

Ohanian expresses his commitment to being accessible and supportive to founders, indicating a personal approach to his professional relationships.

Intentionality and Firm Identity

  • The name of Alexis Ohanian's firm, Seven Seven Six (776), is inspired by the year of the first Olympic games.
  • The story of the first Olympic race winner, a cook, is used as an allegory for tech industry potential and upward mobility.
  • Ohanian stresses the importance of being aware of blind spots and striving for inclusivity and diversity in the VC industry.
  • There's an emphasis on the need for intentionality from the outset of establishing a VC firm.

"So it is really making sure from Day one in this that we have that top of mind and doing the work to hold ourselves accountable, and doing the work, hopefully, to make the industry more accountable."

Ohanian discusses the importance of setting intentional goals for inclusivity and accountability in the venture capital industry from the start.

"The advantage to having something that is a blank canvas from Day one is that you get to set all of that in a way that's just very different from trying to change something that is existing."

He highlights the benefit of starting a new venture with a clear vision, which allows for establishing firm values and goals without the constraints of pre-existing structures.

Relationship to Money and Happiness

  • Alexis Ohanian reflects on the diminishing returns of wealth in relation to happiness.
  • He acknowledges the initial excitement of financial success but recognizes the persistent dissatisfaction that can accompany wealth.
  • Ohanian suggests that beyond a certain financial threshold, additional wealth does not significantly increase happiness.

"there's been plenty of great studies that show the drop off of Marginal wealth over a certain point, like additional wealth over a certain point, doesn't bring the same kind of happiness that it does earlier."

This quote points to research indicating that after a certain level of wealth is reached, the correlation between additional wealth and increased happiness weakens.

"I've watched people who have acquired tremendous wealth, certainly beyond what I have, and still be among some of the most dissatisfied, unhappy people."

Ohanian observes that even individuals with significant wealth can be unhappy, suggesting that money alone does not guarantee happiness.

Economic Disparity and Universal Basic Income

  • Alexis Ohanian discusses the increasing economic disparity in the recovery from financial downturns.
  • He mentions the concept of a K-shaped recovery, where those with assets continue to accrue value while others suffer.
  • Ohanian suggests that conversations about ensuring a basic standard of living are necessary.
  • He advocates for concepts like universal basic income as a potential solution to the existential threat to democracy posed by economic inequality.

"There is no doubt a huge difference there when it comes to happiness and whatnot. I think that's something we need to be having more of a conversation about in this country as we're seeing this case, shaped recovery, I guess it's being called now, where people who do have assets are continuing to see even more value accretion and people who don't are really being hurt by unemployment and everything else we're having."

This quote highlights the stark contrast in the economic recovery process for different segments of the population and suggests the need for a broader societal discussion on the issue.

Perspective on Wealth and Personal Values

  • Alexis Ohanian shares a personal story about his mother's terminal illness and how it shaped his perspective on wealth and life priorities.
  • He emphasizes the importance of relationships and experiences over material possessions.
  • Ohanian reflects on how this experience prevented him from falling into the trappings of wealth and instead focused on what truly matters.

"My mom is dying, and there is nothing I can do about it. And even after we sold, right, I mean, it was the first phone call I made, and she was so happy. And all she wanted was a donation to her favorite nonprofit that showed me crystal clear just what mattered."

The quote conveys a profound personal experience that taught Ohanian the relative unimportance of wealth in the face of life's ultimate challenges, and the significance of giving and relationships.

Parenthood and Professional Efficiency

  • Becoming a father has made Alexis Ohanian more efficient in his roles as a manager and investor.
  • Parenthood has heightened his awareness of the value of time, leading to improved time management and organization.
  • He now evaluates investments through the lens of being a role model for his daughter, seeking to invest in meaningful ventures.

"It has already made me a much more efficient manager and investor, because when you have a child, I thought I was good at time management and organization. You have to be a ninja."

Ohanian describes how fatherhood has drastically improved his efficiency and focus, both in his personal and professional life, likening the required organization to that of a "ninja."

Investment Philosophy and Founder Potential

  • Alexis Ohanian describes two types of venture deals: "intelligence test" deals and "contentious" deals.
  • He expresses a preference for contentious deals that involve uncertain markets but offer massive upside potential.
  • Ohanian's investment decisions are influenced by his belief in a founder's vision and capability, drawing from his own experience of being supported by investors who believed in him.

"The kind of investments that make me feel like I'm really earning my money and really advancing things and pushing things forward are the ones that did not seem obvious."

This quote underscores Ohanian's investment strategy, where he finds value and fulfillment in backing ventures that are not immediately apparent as successful but have the potential to drive significant progress.

Early Encounters with Influencers

  • Alexis Ohanian recounts his interaction with Paul Graham, co-founder of Y Combinator, and how it validated his entrepreneurial aspirations.
  • Graham's enthusiasm for Ohanian's pitch provided a significant confidence boost and reinforced his commitment to his startup venture.
  • Ohanian's experience illustrates the impact that support from established figures in the industry can have on emerging entrepreneurs.

"This was the first person, other than my parents, who had given just total excitement in response to the pitch."

The quote captures the pivotal moment when Ohanian received external validation from an industry expert, which was a turning point in his entrepreneurial journey.

Validation of Support

  • Alexis Ohanian expresses gratification that someone outside of his immediate family believes in what they are building.
  • The support from an external party serves as a strong motivator and validator for their work.

So I was thrilled that someone who had no know who is not my parent had no reason to just blindly support us. I wouldn't say blindly supported us, but at least believed in what we were building.

This quote highlights the importance of external validation for entrepreneurs, which can be a significant source of motivation and reassurance that they are on the right path.

Quick Fire Round

  • Harry Stebbings introduces a quick fire round where he will make short statements and Alexis will respond with immediate thoughts.

So I'm thrilled that we managed to get that one. I do want to move into my favorite though, Alexis, which is a quick firearm.

Harry Stebbings is signaling a shift in the conversation to a rapid-response segment designed to elicit spontaneous insights from Alexis Ohanian.

Favorite Book Recommendation

  • Alexis Ohanian's favorite book is "Super Forecasting," which he finds applicable to his work and plans to integrate its concepts into his software at Seven Seven Six.

My favorite book and why? Oh, you know, the one I just read, super forecasting. I think it applies interestingly to the work we do.

Ohanian believes that the principles of "Super Forecasting" are relevant to his professional endeavors and is considering incorporating them into his business practices.

Importance of Online Communities

  • Alexis asserts that online communities can be more significant to people than offline ones and that these virtual relationships can be as real and sometimes stronger.
  • He has been advocating this viewpoint for 15 years, aligning with his vision for Reddit.

Online communities matter more to people than offline ones. And the relationships that people make [...] are just as real as offline ones.

This quote emphasizes Alexis Ohanian's long-standing belief in the power and authenticity of online communities, a concept that has shaped his approach to building platforms like Reddit.

Unbundling of Social Networks

  • Alexis Ohanian observes the current trend of social networks becoming unbundled.
  • He mentions interacting with Gen Z founders who are creating better and healthier systems.

We're already seeing it, absolutely. And I'm talking to founders every day, Gen Z founders who are [...] actively building better platforms, better systems, healthier systems.

The quote indicates that Ohanian is witnessing a shift in the social media landscape, where new entrepreneurs are developing innovative and improved platforms.

Diversity in Venture Capital

  • Alexis desires greater diversity in venture capital to uncover and support the best ideas and founders.
  • He views this not just as a social justice issue but as a matter of maximizing potential and profit within capitalism.

I would like to see more people doing this job who don't look like you and me, Harry, because I want to make more money.

Ohanian articulates his perspective that diversity in venture capital is essential for tapping into a broader range of ideas and opportunities, ultimately leading to better financial outcomes.

Unsung Hero in the Industry

  • Alexis Ohanian highlights Jewel Melanie Burke as an unsung hero in the industry.
  • He praises her accomplishments as a founder, CEO, and venture fund starter.

Jewel is just like extremely talented founder, CEO, sold her company, got a gig at Google, runs one of their big programs for helping founders, and has started her own venture fund herself.

The quote serves to acknowledge Jewel Melanie Burke's achievements and contributions to the tech industry, which Ohanian feels deserve more recognition.

Investment in Dispo

  • Alexis invested in Dispo because of its high engagement numbers and its approach to creating a healthier photo-sharing experience.
  • He appreciates Dispo's functionality, which encourages living in the moment rather than being absorbed in phone screens.

Dispo [...] means a generation is spending time together [...] But they're not trapped in their phones all night, editing, photoshopping, coming up with the perfect caption, they're actually going back to living in the moment.

Ohanian explains his rationale for investing in Dispo, highlighting the app's unique approach to social media that promotes real-world interactions and reduces the pressure of instant online presentation.

Acknowledgment and Gratitude

  • Harry Stebbings expresses gratitude to Alexis Ohanian for his support and advice.
  • He looks forward to potential future collaborations between their ventures.

And I just want to say huge thank you to him for always being there and for always being there to advise me and help me so Alexis, you are the man.

Harry Stebbings thanks Alexis Ohanian for his ongoing support and mentorship, indicating a strong professional relationship and mutual respect.

Advertising and Endorsements

  • Harry Stebbings concludes the episode with endorsements for various companies and platforms like Latice, Zoom, and Carter.
  • He emphasizes the importance of people management, communication, and equity management in the business world.

The most important part of a company is people, and that's where Latice comes in [...] communication is just the most important thing and there's nothing like meeting face to face, and there's nothing like Zoom to make that happen [...] more than 800,000 employees and shareholders now use Carter to manage hundreds of billions of dollars in equity.

These quotes serve as promotional endorsements for Latice, Zoom, and Carter, highlighting their value in enhancing company operations, team communication, and equity management.

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