20VC Why The Best Entrepreneurs Are Cockroaches, What Everyone Underestimates About Customer Acquisition & What You Don't But Need To Know About Payback Periods with Josh Buckley, Founder & Chairman @ Mino Games

In this episode of "20 Minutes VC," host Harry Stebbings interviews Josh Buckley, a prolific angel investor and the founder and chairman of Mino Games. Buckley, who manages a $50 million early-stage fund, has an impressive portfolio including Clearbit, Rippling, Boom Supersonic, and others. Starting as a self-taught coder at age 12, Buckley sold his first game for six figures as a teenager and went on to raise $40 million for Mino Games. Despite facing challenges like relocating his company to Montreal for financial viability, Buckley's determination has been key to his success. Stebbings and Buckley discuss the importance of survival in business, the impact of capital oversupply, the nuances of customer acquisition costs, and the value of diverse advice. They also touch on the benefits of angel investing alongside operating a company and the future ambitions for Mino Games.

• Harry Stebbings expresses admiration for Josh Buckley's angel portfolio.
• Josh Buckley is highlighted as a top-tier guest and a dear friend of Harry Stebbings.
• Buckley manages a $50 million early-stage fund and has a notable portfolio including Clearbit, Rippling, Boom Supersonic, and others.
• Josh Buckley is also the founder and chairman of Mino Games, a gaming studio with significant annual revenue and funding.

"Now, Josh manages a 50 million early stage fund and as angel has built a portfolio that includes the likes of Clearbit where he's also chairman, Rippling, Boom, Supersonic, lattice embark and many more incredible companies. Josh is also the founder and chairman at Mino Games, the gaming studio. He scaled 20 million in annual revenue and raising 40 million in funding for the company."

The quote outlines Josh Buckley's professional achievements, including managing a large early-stage fund and founding a successful gaming studio, highlighting his influence in the tech and gaming industries.

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• Josh Buckley shares his journey from Kent, UK, to becoming a leading angel investor and gaming company chairman in the US.
• He started coding at age 12, creating his own games by 15, and sold a game for six figures while still a teenager.
• Buckley's early success with angel investing, including being the first investor in Daily Booth, raised his ambition and introduced him to the Silicon Valley network.
• He skipped college, joined Y Combinator at a young age, and founded Mino Games, which has seen substantial growth and success.

"So around the age of twelve I actually taught myself to code and I started doing different types of projects." "I made a virtual world, which was basically a clone of another game I was pretty addicted to." "I went straight to Y combinator, and I think around the time I was one of the youngest people to get in."

These quotes narrate the beginning of Josh Buckley's entrepreneurial journey, from self-taught coding to creating a successful virtual world game and his strategic move to join Y Combinator, underscoring his early talent and ambition.

• Josh Buckley uses the analogy of cockroaches to describe the resilience of the best entrepreneurs.
• He emphasizes the importance of survival in business and relates it to his experiences with Mino Games.
• Despite external perceptions of constant success, Buckley shares the internal challenges and the necessity to persist through difficulties.

"I think at least the number one rule of success, at least I take with business, is you just need to survive first to get there."

The quote captures the essence of Buckley's philosophy on entrepreneurship, stressing the critical need for resilience and survival to achieve long-term success in business.## Trough of Sorrow

• The company experienced a significant setback with a game launch failure, leading to financial strain.
• They faced a decision to either return remaining funds to investors or persevere with the project.
• The decision was made to move the company out of San Francisco due to high costs and lack of investor interest.
• A relocation to Montreal was chosen for its lower cost of living, talent pool, and government tax credits.
• The transition involved closing the San Francisco studio and relocating or finding new jobs for the team.

"So we went through this period, which y combinator terms as the trough of sorrow, and it was a really, really hard time."

This quote highlights the difficult period the company went through, known in startup culture as the "trough of sorrow," which often describes a low point after the initial excitement of starting a venture.

"Ultimately, we decided to commit to building our studio somewhere else."

This quote signifies the pivotal decision to relocate the studio as a strategic move to keep the company viable.

• Josh Buckley was in his mid-twenties during the company's critical period, bearing significant responsibility.
• He credits a supportive network and taking one step at a time for managing the pressure.
• The Winston Churchill quote "If you're going through hell, keep going" resonated with his experience.

"I think the one thing I realized was that you just can't stop. You just need to kind of keep putting 1ft in front of the other."

Josh emphasizes the importance of perseverance through difficult times, drawing from Churchill's wisdom on pushing forward through adversity.

• The company faced a cold investor market due to poor performance of similar companies like Zynga.
• They decided to focus on achieving breakout growth without significant external capital.
• Once the company validated a successful game, they raised $30 million in debt to scale the business.
• The current strategy involves aggressive growth and rapid hiring to capitalize on the market.

"We had to be a lot more scrappy, had to be relentlessly resourceful, as Graham says, and get to a stage where essentially the business breakout growth."

This quote discusses the necessity of being resourceful and strategic in achieving business growth without relying heavily on external funding.

• Josh agrees with Bill Gurley that there is an oversupply of capital, making it a challenging time for investors.
• He suggests that struggling to make payroll can teach discipline and ensure focus on the core business.
• Capital is viewed as fuel, but it is essential to have a solid business direction and foundation.

"I think it teaches a certain level of discipline that can really help and also hone in the fact that you need to nail your business."

Josh reflects on the value of financial struggles in teaching discipline and the importance of having a strong business model.

• Josh advises his investments to be aware of the current funding environment and the uncertainty of future fundraising.
• He emphasizes the need for a business engine that supports an aggressive funding strategy.

"So if you're taking in a strategy which is aggressive on the funding side, which can often be very valid, you need to be aware that you need investors to support you tomorrow, and you need a business engine that actually supports that strategy."

This advice highlights the importance of considering long-term investor support and having a robust business strategy when pursuing aggressive funding.

• Josh believes that people underestimate how quickly CAC saturates and how it changes over time.
• He discusses the internal saturation of CAC and the compounding market-wide CPMs (cost per thousand impressions).
• The perspective is that the cheapest performance marketing is always "today," and there are no secrets to reducing CAC.

"The way we view it is the cheapest marketing you can do in performance marketing is today and always today."

This quote encapsulates the company's view on performance marketing costs and the urgency of capitalizing on current marketing opportunities.

• There is frustration over the expectation for startups to provide reliable CAC and LTV (lifetime value) metrics at early stages.
• The debate is whether such metrics are helpful in understanding a founder's mentality or if they place undue focus on uncertain figures.

"It really frustrates me how precede investors will ask startups, what's your CAC, what's your LTV? And expect predictable, reliable, data driven responses back."

This quote expresses concern over the expectation for early-stage startups to have concrete CAC and LTV metrics, which may not yet be stable or predictable.## Early-Stage Investment Metrics

• Investing in pre-seed or early seed stages requires a nuanced understanding of business metrics.
• Data around Customer Acquisition Cost (CAC) and Lifetime Value (LTV) is often unreliable at this stage.
• It is important to know how entrepreneurs think about these metrics, despite their potential inaccuracies.
• Investors should be aware that numbers can be skewed and should heavily caveat early-stage metrics.

"I would agree with you that both the data around CAC and LTV is far too early at the precede stage."

This quote highlights the unreliability of CAC and LTV data in the pre-seed stage, emphasizing the need for investors to take early-stage metrics with caution.

• Successful marketing is likened to venture capital investing, where a variety of channels are tested before doubling down on the most successful one.
• Channel diversity is crucial, especially when growth strategy involves paid marketing.
• Overreliance on a few channels is risky due to the increasing cost of digital advertising over time.
• Spreading marketing efforts across multiple platforms can mitigate risks associated with updates to advertising algorithms.

"I think it's really important to spread your bets because there's a huge amount of risk being tied to having your business growth being tied to this one platform or two platforms."

This quote underscores the importance of not relying heavily on one or two marketing channels, as doing so can increase the risk to business growth due to changes in advertising costs.

• The ideal scenario is a business that does not rely on CAC, growing organically through virality or word of mouth.
• Paid acquisition should ideally complement organic growth.
• Businesses that are profitable on the first purchase can recycle capital efficiently, leading to rapid growth.
• Payback periods for customer acquisition may increase with larger spending due to the saturation of the most relevant customer base.

"Their payback period is less than a month, so they're able to just recycle a small amount of capital and quickly grow into a bigger business."

This quote illustrates the advantage of a short payback period in customer acquisition, allowing for rapid reinvestment and business growth.

• As advertising spend increases, the payback period tends to lengthen.
• The most relevant customers are targeted first, and subsequent customers are less likely to convert.
• Strategies to counteract increasing payback periods include improving LTV and optimizing ad creatives and targeting.
• Doubling the payback period for every $5 million spent is a rough benchmark observed across different markets.

"The reason why your payback period grows as you spend more is essentially that you're exhausting the most relevant people or customers for your business."

This quote explains why payback periods increase with advertising spend, due to the diminishing returns of targeting less relevant customers.

• Being an angel investor provides a broader perspective on business strategy and ambition levels.
• Viewing one's own company through an investor lens can be beneficial for long-term planning.
• Time management and focus are critical challenges when balancing operating a company and investing in others.
• Generally, it is advised against splitting focus between running a company and angel investing until a solid team and executive layer are in place.

"I think being angel investor over the last six or seven years has really helped me shift to have a high level, 50,000 foot perspective around my strategy and business."

This quote conveys the value of the experience gained from angel investing in enhancing strategic thinking and ambition for one's own business.

• Early investment decisions were often based on intuition and the strength of the founders' market fit.
• Surprising success has been found with intuitive investing, particularly with founders who are deeply knowledgeable about their markets.
• The trend that "hot" deals translate into the best companies is not necessarily true; many successful companies struggled to raise initial funding.
• Investing should be driven by the founder's capabilities rather than market hype.

"I really just have followed my intuition with founders early on and just looked for people that had a strong fit with their market and understood their market inside out."

This quote emphasizes the importance of trusting one's intuition when investing in founders who possess a deep understanding of their market.

• Advice in Silicon Valley is abundant but should be approached with skepticism.
• Context is crucial; advice is often based on individual experiences and may not be universally applicable.
• Inverting advice can be a useful exercise to test its validity.
• Entrepreneurs should critically assess advice and apply it selectively based on their unique situations.

"So advice alone is just completely contextual. It's like a sample size of one person's personal experience of what worked or didn't work for them."

This quote highlights the contextual nature of advice and suggests that entrepreneurs should critically evaluate advice rather than accepting it at face value.## Contextual Application of Advice

• Importance of understanding the context surrounding advice.
• Recognizing the source's perspective and reasons for their viewpoint.
• Analogy of knowledge as layers in an onion, emphasizing depth and interconnectedness.

"But in general, I think it's important to basically take as much advice as you can in, but really bring it with context."

This quote highlights the necessity of contextualizing advice to ensure it aligns with one's unique circumstances and goals.

• Experimenting with the opposite of given advice to explore outcomes.
• Analyzing the impact of unconventional strategies through examples.

"It's a super interesting experiment to completely invert the advice and then see the outcome and how it translates in terms of examples."

This quote suggests that inverting advice can be a method to test its validity and potentially discover innovative approaches.

• Alex at Clearbit exemplifies non-conventional approaches.
• Unconventional decisions in hiring, fundraising, and company culture.
• Emphasis on profitability over aggressive growth strategies.

"And many of them would be considered pretty unconventional in Silicon Valley."

This quote explains that unconventional strategies can be successful, as evidenced by the practices at Clearbit, which differ from typical Silicon Valley norms.

• A friendly revenue bet made between Josh Buckley and Alex at Clearbit.
• The bet served as motivation for business milestones.
• Willingness to engage in future bets for motivation.

"And it was extremely motivating to get our game launched last year."

This quote reveals how friendly competition and personal bets can serve as a motivational tool in business.

• "Poor Charlie's Almanac" by Charlie Munger as a favorite book.
• Influence on the love of learning and mental models.
• Understanding the compounding nature of knowledge.

"It really drove for me a love of learning, a love of mental models, and really taught me about the compounding nature of knowledge."

This quote identifies the book as a catalyst for a lifelong pursuit of knowledge and understanding of complex concepts.

• Determination and relentlessness as a key strength.
• Struggle with unattainable self-expectations as a weakness.
• Desire to manage expectations to reduce unnecessary pressure.

"I think probably on the weakness side, I think I probably have unattainable expectations of myself and I think that can lead to pressure on myself and those around me to an extent that's probably unnecessary."

This quote acknowledges the personal challenge of setting realistic goals and the impact of high expectations on oneself and others.

• Tendency to focus on the next goal without appreciating current achievements.
• Recognition of the importance of celebrating small wins for team morale.
• Aspiration to become more appreciative of accomplishments.

"I'm always thinking about what's next, some form of hedonic adaptation, where as soon as I've met the goal, it's always onto the next one."

This quote discusses the challenge of taking time to appreciate success in a goal-driven mindset, which is common among entrepreneurs.

• Games as a challenging business with valuable lessons for other industries.
• Consumer mechanics in games influencing broader business trends.
• Skills from gaming applicable to merchandising, data science, and incentive design.

"There's so many disciplines that you need to master to succeed in games I think would really translate well into other business and we're actually seeing so happen."

This quote emphasizes the transferable skills and knowledge gained from success in the gaming industry to other business ventures.

• Desire for more diversity of thought in Silicon Valley.
• The homogeneous nature of the tech hub as a limitation.
• Belief that diversity would benefit the valley's innovation and culture.

"When I'm in Silicon Valley, it feels like a very homogeneous echo chamber where people kind of think the same dress, the same value, the same things."

This quote criticizes the lack of diverse perspectives in Silicon Valley and suggests that increased diversity could lead to greater innovation.

• The effectiveness of a regular, monthly cadence for investor updates.
• Importance of including key numbers, trends, goals, and business highlights.
• Value in maintaining clear and direct communication with investors.

"They really kind of keep it on a rigid schedule."

This quote advises on the best practices for investor updates, emphasizing consistency and clarity in communication.

• Minnow's goal to bring daily joy to a large audience.
• Plans to continue working with founders and investing in new ventures.
• Personal aspiration to balance achievements with the joy of the journey.

"That's what drives us and gets us up every day."

This quote outlines the long-term vision and daily motivation behind Minnow's business strategy and Josh Buckley's personal goals.

• Acknowledgement of Josh Buckley's status as a special early-stage investor.
• Anticipation for the future developments in Josh's career and ventures.
• Invitation to follow Josh Buckley on social media for insights and updates.

"He really is such a special early stage investor and very excited to see the times ahead there with Josh and the new fund."

This quote reflects on Josh Buckley's achievements and potential in the venture capital industry, highlighting his influence and future prospects.