20VC Tyler Willis on How To Be Innovative With Customer Acquisition and The Future Of Innovation

Summary Notes


In this episode of "20 minutes VC," host Harry Stebings interviews renowned angel investor Tyler Willis, following a recommendation from Ariel Zuckerberg at Kleiner Perkins. Willis shares his journey from a startup acquired by Oracle to becoming an influential seed-stage investor with successes like Lyft, Patreon, and Change.org. He stresses the importance of a diverse portfolio, betting on people, and the potential for significant appreciation in investments. Willis highlights the importance of believing in founders, learning from mentors, and starting slow in angel investing. He discusses customer acquisition strategies, his preference for founders with unique market insights, and his recent investment in L., a company making sexual health products with women in mind. Throughout the conversation, Willis maintains an optimistic view on innovation and the future, despite prevalent negativity, and emphasizes the importance of long-term commitment in angel investing.

Summary Notes

Introduction to Tyler Willis

  • Tyler Willis is recognized as an outstanding angel investor.
  • He has made seed investments in companies that have raised subsequent rounds from major venture capital firms.
  • His portfolio includes successful companies like Lyft, Patreon, and Change.org.

"Tyler is probably one of the best angel investors round and he's invested in seed stage companies that have gone on to raise from the likes of Index, Founders Fund, Costler Ventures and others."

The quote introduces Tyler Willis as a highly regarded angel investor with a track record of early-stage investments that have successfully raised additional funds from prominent VC firms.

Tyler's Investment Philosophy

  • Tyler Willis believes in building a diverse investment portfolio.
  • He emphasizes the importance of not putting all one's eggs in one basket in the context of angel investing.
  • His first investment was in a deep tech, pre-product, pre-market company, driven by belief in the founder.

"The kind of idea of having all your eggs in one basket when it comes to angel investing is kind of universally thought of as a bad idea."

This quote reflects Tyler's view on the risk management strategy in angel investing, which discourages concentrating investments in a single venture.

Tyler's Success Stories

  • Tyler invested in Patreon, LoungeBuddy, and Shoppad, all of which have been successful.
  • These companies have raised significant funding rounds and have made a substantial impact in their respective markets.

"So over the next year, I invested in Patreon, which helps creators earn like millions of dollars a month from donations from their fans lounge buddy, which helps people find airport lounges and read reviews about them, and then now even lets casual travelers book day passes to airport lounges and Shopad, which has become a huge force in the Shopify ecosystem."

The quote details Tyler's early investments in Patreon, LoungeBuddy, and Shoppad, highlighting their growth and the value they provide in their markets.

Investor Specialization vs. Diversification

  • Tyler prefers a diverse portfolio, especially during the learning phase of his investing career.
  • He believes in the value of learning from a variety of sectors and stages.
  • Tyler acknowledges that some investors may find success with a specialized focus.

"Personally, I prefer a diverse portfolio, especially as you're learning something new."

This quote encapsulates Tyler's preference for diversification in investing, which he sees as beneficial for gaining broad experience and knowledge.

Role of Valuation in Investment Decisions

  • Tyler focuses on the potential for significant appreciation in investments, rather than seeking discounts or deals.
  • He looks for investments that can offer a return of at least ten times, particularly at the seed stage.
  • Tyler subscribes to the idea that the best investors often lose money but make substantial returns on a few successful bets.

"The rule of thumb here is you want to have at least a ten x path for the winners."

The quote explains Tyler's investment criterion that each potential investment should have the capacity to return at least ten times the initial investment to account for the inherent risks in angel investing.

Tyler's Relationship with Ariel Zuckerberg

  • The episode with Ariel Zuckerberg mentioned that she learned about angel investing from Tyler Willis.
  • Tyler's insights and experience have been influential in shaping the investment strategies of others.

"And following from our episode with Ariel Zuckerberg at Kleiner Perkins on Monday, where Ariel stated that she learned all she knows about angel investing from the man himself, Tyler Willis."

This quote connects Tyler Willis with Ariel Zuckerberg and suggests that his investment approach has been educational and influential for other investors in the field.## Essential Qualities of a Startup and Founder Pre-Investment

  • The investor's role is supportive, providing advice and feedback, but the entrepreneur does the majority of the work.
  • Angel investors and VCs can be valuable but cannot significantly alter a startup's trajectory, especially if not on the board or involved in management.
  • Belief in the entrepreneur is critical before investing.
  • Investors are looking for founders with potential for rapid learning and success, not necessarily a polished appearance.
  • A personal heuristic used is the temptation to work for the founder, indicating high quality and investment-worthiness.

"I have to really believe in the person before I invest."

This quote emphasizes the importance of the investor's confidence in the entrepreneur's abilities and potential before committing to an investment.

"I am looking for somebody who makes me feel like there's a little Bit of a likelihood that this person's going to learn real fast or going to do real well."

The investor seeks founders with the potential to learn quickly and succeed, rather than those who are already fully polished and accomplished.

"Am I tempted to go work for this person?"

The speaker uses the desire to work for the founder as an informal test to gauge the founder's quality and the investment's potential value.

Customer Acquisition and Funnel Optimization

  • Customer acquisition success often comes from intense focus on the problem and running numerous experiments.
  • Companies that excel in growth tend to prioritize customer acquisition and embed it into their core DNA.
  • Founders should be obsessed with growth, and teams should have systems to prioritize and expedite growth experiments.
  • MVPs (Minimum Viable Products) can be applied to growth strategies to test ideas quickly.
  • Growth work is unglamorous and requires persistence, akin to playing poker and waiting for a successful hand.

"Customer acquisition problems tend to be about really being able to sit down and think about a single problem with a massive amount of focus and then just to run lots and lots of experiments."

This quote highlights the need for intense focus and experimentation in solving customer acquisition challenges.

"It's not something where you go, I'm going to hire a growth hacker, and they can figure it out, but it's instead something where the founder is obsessed with growth."

The speaker suggests that successful customer acquisition is driven by a founder's obsession with growth, rather than delegating the task to a specialist.

"You can do mvps in growth experiments where you can say, hey, we've got this really great idea for something that would take us eight weeks to build and then three weeks to deploy. Can we do a version of that that only takes a week and see if it actually resonates with customers?"

This quote explains how MVPs can be used in growth experiments to quickly test and validate ideas with customers.

Founder Types Preferred for Investment

  • The speaker prefers to invest in founders who have unique insights into their market.
  • A bias exists towards founders who are exceptionally intelligent and high-energy thinkers.
  • The speaker admits to potentially missing good investments due to this bias towards "high octane" individuals.

"I do have a founder type that I invest in. I want to invest in people who are uniquely insightful in the market that they're in."

This quote reveals the speaker's preference for founders with unique market insights, which is a key criterion for their investment decisions.

"I tend to have a bias for people when I sit down and go, holy cow, that person is just very high iq and very high octane in terms of his thinking, his or her thinking."

The investor expresses a strong preference for investing in highly intelligent and energetic thinkers.

Founders and Domain Experience

  • The speaker believes that the dichotomy between valuing domain experience and seeing it as a hindrance is false.
  • There are talented individuals with domain expertise, and experience can be beneficial in various ways.

"I think it's a false dichotomy."

By stating this, the speaker challenges the notion that domain experience is either wholly beneficial or detrimental, suggesting that it can vary depending on the individual.## Domain Expertise in Entrepreneurship

  • Domain expertise is not always necessary for entrepreneurial success.
  • Young entrepreneurs without experience can struggle with enterprise problems.
  • Investors should seek outliers rather than focusing on domain expertise alone.
  • Aaron Levy's success with Box despite lacking enterprise knowledge is highlighted.

At the same point, Aaron Levy didn't know anything about the enterprise before he started box and that worked out brilliantly well.

This quote exemplifies that lack of domain expertise does not preclude entrepreneurial success, using Aaron Levy's success with Box as a case study.

So what you're looking for is outliers.

The relevance of this quote is to emphasize the investor's role in identifying exceptional individuals or companies that can succeed against the odds, rather than following conventional wisdom about domain expertise.

Angel Investing Strategies

  • Starting slow in angel investing is beneficial.
  • The initial years of angel investing are compared to business school.
  • Seeking mentorship and learning from experienced investors is critical.
  • The likelihood of early investments failing is acknowledged, but not absolute.

Yeah, there's a few things, one of which is probably it's good to start slow.

This quote suggests that new angel investors should approach their investment activities with caution and patience, treating the early years as a learning experience.

It's a business that's learned by experience.

This quote underscores the importance of hands-on experience and mentorship in becoming a successful investor, as well as the inherent risks involved in the process.

Future of Innovation and Public Perception

  • The world is improving, with declines in crime and poverty.
  • Increased focus on solving societal problems is driven by media attention.
  • The "sunlight paradox" describes how highlighting problems can create a perception that the world is worsening.
  • Innovation is progressing, but the increase in noise makes it seem otherwise.
  • There is concern that the volume of trivial ventures overshadows significant innovations.

Part of the reason all those things are moving in the right direction is because society is focusing on solving those problems more directly.

This quote explains that societal improvements are partly due to a concerted effort to address major issues, suggesting a positive trend in global development.

You get this kind of sunlight paradox, which is the way you cure darkness, is by shining light on it.

The "sunlight paradox" mentioned here illustrates how increased awareness of problems can lead to solutions, but also to a negative perception of the state of the world.

But we got 1000 x the number of stupid photo sharing apps or kind of stupid gimmicky kind of toy looking things.

This quote reflects on the proliferation of less impactful startups and the potential overshadowing of truly innovative ventures, indicating a challenge in the innovation landscape.## Perception of Innovation

  • Public perception often focuses on trivial or negative aspects of new ventures, overshadowing significant innovations.
  • The noise created by less deserving stories can blind people to meaningful advancements, such as improvements in nuclear reactor technology.

"They don't see the fact that, hey, somebody's inventing a better form of nuclear reactor, right? They don't see that because they're blinded by the increase in noise."

This quote highlights the issue that significant technological advancements are often overlooked due to the public's preoccupation with less deserving or negative stories.

Favorite Books and Their Impact

  • The speaker references "The Innovator's Dilemma" for its importance in frequent reference.
  • "East of Eden" is mentioned for its personal impact and the theme of choice in life.
  • "Foundation" by Asimov and "Accelerando" by Strauss are noted as standouts on the speaker's bookcase.

"Favorite book is, in terms of frequent reference is probably innovators dilemma. [...] east of Eden is probably one of the most impactful books I read when I was like 18 or 19."

The speaker values "The Innovator's Dilemma" for its insights into business and innovation, while "East of Eden" had a significant personal impact on their understanding of choice and life's direction.

Respected Investors

  • Naval Ravikant is admired for his investment strategy and support for founders.
  • Sam Altman is respected for his individual investments and leadership at Y Combinator.
  • Gus Tai from Trinity Ventures is appreciated for his traditional VC approach and conviction in investment choices.

"I really like naval. [...] I have a lot of respect for Sam Altman, [...] Gus high at Trinity is a guy that I've developed a lot of respect for over the last, call it, five years."

This quote expresses admiration for different investors, highlighting Naval's broad investment approach, Sam Altman's dual roles, and Gus Tai's traditional, conviction-driven VC methodology.

Preferred Blogs and Newsletters

  • Mattermark Daily and The Information are favored for their reporting quality.
  • The Information is particularly noted for being underrated.

"I really like Mattermark daily. [...] I really like the information."

The speaker endorses Mattermark Daily and The Information for their high-quality reporting, suggesting that The Information deserves more recognition than it currently receives.

Most Used and Infatuating Apps

  • Omni is most intriguing for its simple concept and challenging execution.
  • Lyft, Casts, Slack, and Delectable are among the most used apps.
  • Delectable is highlighted for its educational value on wine.

"My guess is omni, which is basically store your stuff. [...] Maybe kind of funny one is delectable. I'm not a wine drinker by any stretch of the imagination, but I try to learn about things I don't know about."

The speaker is infatuated with Omni for its innovative storage service and enjoys using Delectable to learn about wine, despite not being a wine drinker.

Recent Investments and Market Opportunities

  • The speaker recently invested in a sexual health product company focused on women.
  • They believe in the founder's ability to learn and adapt quickly.
  • There is a recognition of underserved markets, particularly for women and people of color, which presents investment opportunities.

"One recent investment that I made that I'm very excited about is a company called l thisisel.com. [...] These massive companies that just, frankly weren't building products with women in mind and weren't building products with people of color in mind."

This quote reflects the speaker's investment strategy, focusing on a company with an impactful mission and a capable founder, addressing an underserved market that large companies have overlooked.

Acknowledgments and Upcoming Shows

  • The speaker expresses gratitude for the opportunity to share insights on the show.
  • Harry Stebbings promotes upcoming episodes and encourages listeners to subscribe to the newsletter.

"Well, Tyler, thank you so much for coming on the show today. [...] Thanks so much, as always, for your incredible support, and we look so forward to bringing you an incredible episode with Niccolo de Maci."

These quotes are closing remarks thanking Tyler for his participation and promoting future episodes, highlighting the show's continuous engagement with its audience.

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