Why would you IPO in Australia before the NASDAQ?

You're one of the co-founders of Life 360 that took it public not only once but twice. >> Co-founder. Technically, I bought out a co-founder. I borrowed 2x my net worth. We're on the verge of begging people to just put in money so we can survive. Every fund on Sand Hill Road said, "No, this is never going to get big. Kids are not going to have smartphones. This will never go mainstream." But now everybody wants it. >> How are you managing the narrative around Life 360? You know, going into that series A with I'll let you months of cash. If we did the classic mistake that a lot of founders do when they get hordes of cash suddenly showing up at their door, which is I always tell founders, when you genuinely feel you have a champion within a venture firm, you're on the right track and just do whatever they say. We will make the most intros to the best VCs you will ever get from anybody on your capital. That's our promise. We will get you funded. >> Welcome to the show everyone. Uh today we have itar Novc with us. uh co- well bought the co-founder out of life uh 360 and uh you know took it public twice and is now the you know managing partner at recursive ventures. Uh and tomorrow let's let's just jump right in. Let's pick up where you left off in that story of you buying out the uh the co-founder of life 360 in was it 2012 2013 when that happened? >> Yeah, you nailed it. >> And uh you made that decision. Why? Oh, okay. That's a good one. So, I was actually a VC on Sanduel Road and I saw Live 360 early on around 2010 and like the company was not very well understood at the time. Uh, let's just say that pretty much everybody I knew on Sand Hill Road where I was working was like, "Yeah, we don't know about this one." And I did all the diligence work. I was a senior associate then working at a firm called Morintire Ventures, which was a pretty good firm back then. I did a diligence and especially you spend a lot of time looking at their customer acquisition and sort of activation life cycle and what I saw was pretty pretty crazy. This thing had life 360 had crazy top of the funnel demand. Now they had a lot of issues with the rest of the life cycle was activation retaining users and obviously it was very early in terms of monetization. There was none of it. Um but but I saw the potential like in consumer um services online services when you see there's a top of funnel demand you know there's a there so I started helping the company uh unofficially is like uh you know advising them helping with some stuff and then at some point around 2012 uh Chris Holes who's the kind of original CEO founder of the company said we really need a VP of product you you understand everything that we're doing um is sort of through your life cycle analysis and and we really need somebody like you who can help like you know institutionalize how we think of our product and take it to the next level and at that point in time I kind of already made the decision that I should leave venture and that's like a whole different conversation and why didn't I like I I left venture right I I kind of knew that there's no ladder up for me in venture at that point in time and that I had to go for one big swing luckily uh there was another you know co-founder early on in the life 360 journey and him and and the CEO Chris did not get along. Um, and he wanted it out. His wife uh is a dentist and she wanted to open a dentistry and she was like, "Yeah, who cares about this startup that's going nowhere?" Like this this this stock, this equity is worth nothing basically uh or not a whole lot. Um so, you know, I was presented with the opportunity to buy out this ex-coounder who basically left and I didn't think twice. It was like, okay, it's a really simple uh equation here. If this is going to be, you know, if it's going to hit it out of the park, like I believe it could because it has the potential and if I step in, I can maybe, you know, help um solve some of the the challenges in the business. Uh then, you know, obviously that would be, you know, that would be an amazing opportunity. And if it doesn't, then yeah, I've lost all of my net worth, which I put all into the company and then borrowed more to be able to to to buy more, right? Um I'll, you know, I'll bounce back on my feet. Like I'm in Silicon Valley and I'm a VC, right? I'll I'll figure it out. I'll figure out another job and I'll, you know, I kind of like >> Can I just stop that? How did you borrow double your net worth? How did you How did you do that? >> Friends and family mostly. Got >> it. So you could you convince them that come along with this journey? Like did you was it a loan and they get like the upside and the shares like how did you structure that for your friends and family? >> Yeah, it was it was a loan just a loan and >> just like whatever interest and if and you know not was it seven years later when you took it public you like paid them off or something or >> No, no, I actually paid them off uh pretty quickly like I I I don't want to be I I don't like being in debt unless it's a very very low interest debt. um you know like I have a mortgage because you know it's great to have mortgage 3% rate which is what we had which what we had back in uh 2021 2022 but otherwise you know if if if I have capital why would I take on debt um so I paid off most of it pretty quickly >> but but anyway so um yeah so it was a big swing uh it obviously paid off because life 360 is now an 8 billion uh publicly traded NASDAQ company and uh I I kind of I kind of of when it's the right time and obviously you got to be careful with this. I kind of love to recommend folks to sometimes swing for the fences. Like if you're in the right stage in your career, if you're the right in the right stage professionally, if you know that you're on solid grounds and if something doesn't work, then you know fine, you'll just, you know, you'll find that the next thing you'll figure out the next thing. But you want to make a big swing that you know that maybe has a low probability of working out. But if it does, it will completely transform, you know, your professional life and maybe even your personal life. then I don't think that's a bad idea, especially if you do it kind of earlier in your career. >> Is that what you look for in founders now? The ones that are making the big swing that like I guess jump into what you do at recursive now like how do you make those decisions on the founders that you back today? >> Yeah, absolutely. I'd say two things on that. First of all, if you are trying to raise money from VCs and building a VC backable company, you are swinging for the face fences, baby. like it's you you you're you're playing a game where the odds are against you. We know that at the preede stage 98 99% of companies fail and you're doing it for the 1% of you building a multi-billion dollar business and that is by definition swinging to for the fences. Um but I think you're also kind of alluding to something a little bit different that I think is very important. You also have to have that the right mindset uh of like you know being able to swing for the fences every day for the next 1015 years, right? Because as as you go through the life cycle for the growth of the company, there are so many different challenges and you got to you got to meet them head on head on like you got to be really you got to evolve with the company to be able to go uh through all the way and that's definitely one thing that I'm I'm looking forward with founders. Well, it's uh we'll unpack it a little bit more down in the show, but I think that's something that you being someone in your position because you have a unique position. You you saw the opportunity of life 360, you you created and you know the value ultimately in growing the business, but as a you had a VC mindset when making the bet to jump into that role and take that opportunity. So, you have that vision of, you know, kind of recognizing what are the leading indicators that might actually, you know, turn it turn it into an outcome. But let's go back to to Life 360. Um, in those early days, you you bought in um, you know, relatively early, uh, or low valuation when you made that decision, you know, maybe not as much. Like, what were the stats back then? And then, you know, what were you first focused on when you took on that that risk and that liability? >> I think it's probably fair to say that when I joined, I was sort of the adult supervision. I mean, uh, Chris and Alex, who are the two founders, were um, they were in their 20s. Um Chris specifically uh who's a brilliant brilliant person and you know I work with um still today uh even at recursive ventures this was his first job I mean he did an internship over the summer in Goldman but it's that it's not that he's worked anywhere else. Um Alex Harrow who's the other co-founder that was like his first job straight out of college. So again, both founders are kind of inexperienced as uh business leaders, but obviously very very bright and technical and product oriented, which is great. Um there wasn't really an exec team when I joined. I mean, we we tried to hire a a VP of marketing like kind of close to the time that I was hired, but that didn't work out. So this kind of you know, the three of us and there were maybe like five people, seven people. We were in this like almost like an apartment kind of building. It was it was very small. was very early. It was generally preceded C stage. Um so lots to build and when I say build, it's not just building the product. It's also building the culture. It's building you know uh our identity like who we are, what do we stand for, what are our values, like what's important in this company and um and there was a lot that went into that and a lot of that is still today in life 360 you know the the kind of big uh publicly traded company. So in that journey and kind of when you really started to hit like breakout velocity kind of walk us through what what was breakout velocity for you guys? When did it happen and what was kind of the precursor to it? >> I got to say that there was never a moment we were where we were like oh my gosh this is breakout maybe when ADT invested. I'll talk about that in a bit but like it was a grind. It was a it was a slo. Um I mean we we should talk about the fact that you know at some point we were two months away from running out of capital and basically every fund on Senhill road said no I still have a list of 70 of them 7070 funds were like no this is stupid this is never going to get big kids are not going to have smartphones that was one of the reasons why they said no um you know uh uh tracking is has bad connotations this will never go mainstream privacy is going to prevail and it's going to be like we've had all sorts of reasons that were proven to be wrong over the years. But uh again, you know, at some point I remember in our I think it was uh series A something. There was a point in time we were two months away from running out of cash and uh and we we were like on the verge of begging people to just put in money so we can survive. This happens a lot like founders in this situation like what was your demeanor like when you you knew you had two months of runway and you're in this you're in the begging state. Everyone says oh you got to come from a position of strength so you can negotiate and get the right terms and like how are you managing your demeanor? How are you managing like the the narrative around live 360, you know, going into that series A with only two months of cash? I think being in that situation with your back against the wall, that's the moment that helps define kind of the true founders who never give up, who would, you know, like that challenge that uh almost lifethreatening uh situation that you're in. The key question there is that does that does that really empower you to go harder, right? and and and try to raise that money and try to make a dent in your business now when you know even at the face of like high probability of failure versus basically break and say okay this is not working like what you know what do I do and and that true grit of like seeing death in the eye again again and I've seen that several times as a founder not just at life 360 uh and in some situations I've you know also lost the company um and kind of being able to deal with it and actually work harder and and stronger to try to get out of it is one of the things that you know helps characterize true entrepreneurs versus people who are maybe less equipped to deal with with with the ups and downs of startups. It is it is I always like to say you know amongst like postexitive founders when you meet another know post exit founder you immediately know that they chewed on glass and ate for for a long enough period of time to like deliver an outcome uh because it's it's just always pain all the time in most cases. Um so when it was you know what kind of was the breakout like what solved that problem? What solved the series A problem? Two months of cash. What did you how'd you get out of it? we were able to so uh it was an interesting situation that we were at. We had multiple corporate investors like strategic investors who were like, "Yeah, you know, if we figure something out on funding, we're probably going to participate." Uh, we didn't know to what tune. We're just trying to raise, I think, 8 million bucks at that time or seven. Um, and but obviously the the corporate VCs, the strategic investors, they didn't know how to price this. They didn't want to lead the round. So, they're like, "Just get us a, you know, a credible VC that will sign off on this thing with with a valuation and terms because we don't know how to do that." So at some point um I remember it was it was it was a crazy conversation. We called up uh one of my friends was at a firm called DCM uh which is which sort of a a leading Silicon Valley Asian um related uh VC uh pretty sizable and they had a a small fund called the Android fund that was really the the investors there were very interested in mobile. a lot of them were carriers or um uh folks who were involved uh in in mobile um from Asia. It was it was a relatively small fund. Um so basically we convinced them to put $2 million and what ended up being a $17 million round. So they led with the two $2 million and a $17 million round at the end. They were kind of the lead. they priced it because what happened is once we got that breakthrough and we got them to agree to do the mill 2 million and they were pretty reluctant and I think that $2 million investment was it ended up being uh you know very impactful for them uh obviously over the years as life 360 became public but um after they came in like all the tides uh changed it was like okay now now everybody wants and we ended up you know going out for eight and like raising 17 at the end so it was interesting how ally just flipped from like, "Oh gosh, we're going to potentially shut down in like 7 to 8 weeks." Like, "Oh wow, we have more capital than we thought we'd ever had." >> How much work was it convincing that Android fund? Like, how how hard was that that pitch? >> That wasn't the hardest. I think uh funny enough, DCM at that time, the Android fight was a smaller afterfought for them. They were much more focused on the on the main fund. So, I think part of what we were actually telling them is like, "No, we got this. You don't have to worry. This is not going to suck a lot of your time, like this is a good bet and we'll work with your mobile LP partners to like, you know, take life 360 to Asia." Um, and I think it's going to be very interesting for your LPs. And they're like, "Okay, you know, it's a small check, small bet. Let's just do it." >> All right. Well, you Well, you you knew what triggered their needs. Like, you knew what would matter to them and you kind of positioned it. Not just we're awesome, please invest. you positioned it in a way that was aligned with their interest. >> And to be fair, we had a champion in there. Uh I won't I won't start naming people. We had a champion in there who walked us through this. He was like, "Hey, like here's like the internal politics inside my fund. Here's what you should say and here's what you shouldn't say." And I always tell founders when you generally feel you have a champion within a venture firm, you're on the right track. and just do whatever they say because they know what's happening in those Monday morning meetings with with all the partners and you you not really sitting there and sometimes you'll be shocked to hear like what they're talking about because it could be completely off from what you're thinking. >> Oh yeah. Like uh you know having a partner or associate pitch your business in one of those meetings and just like completely miss them or you know people interpret the complete opposite of what you want them to. Um, but no, I think that's that's super valuable experience to share. And I think it's it's good for founders to realize that even when you're on the brink. Um, you just have to keep pushing and work those connections and just not be relentless and not give up. Um, so you raise the A and then every money just floods in because at least people that promised to say they would follow actually followed which is nice. Uh, and you over um you oversubscribed. Um, so what was the velocity of the business thereafter? Like what were the key decisions after that A round? because that's a pretty pivotal moment for you. It's a lot of validation for a company to get a series A. Um what were some of the key decisions that you were focused on in the business that helped ensure kind of the subsequent rounds? >> Yeah, so I I have to say that even after we raised that round, it was not overnight success. There are a lot and actually there was another round that came after that with ADT, the home security company, leading a $50 million round. And these two rounds were pretty close to each other. They're like a year or two apart. Um, so at that point we were probably fair to say overfunded, right? Like to the point that we weren't exactly sure what to do with all this capital and that could be a very dangerous um situation to be in. Um, and I think we made a lot of mistakes back then. We didn't make a lot of mistakes back. Uh, it was it wasn't clear-cut. Uh, one of the challenges with life for 60 is uh that it is basically a platform that attracts a lot of consumers, right? families and and more recently teenagers and seniors and like you know any platform you have a lot of opportunities. You can you can like build up build up a lot of monetizable businesses on top of all this audience that you have. And we really didn't know what was the best thing to focus on, right? And some of it is like yeah you can do you can do the work you can you can research you can understand what the market size is. you can understand where the competitive landscape is, but it doesn't necessarily fully apply to uh your audience and kind of the only way to know is really to test it, right? Like check it out, figure out is there demand? Can will people pay? How would they what would be the right product? What would be the right positioning? So I think at that time we we just we were great at growth hacking and figuring out how to like get the numbers going and doing the very basic rudimentary not rudimentary but very basic like here's an awesome location sharing product. What we didn't know is how to take it to the next level to start spinning high quality products on top of that right we had to develop that muscle and we I don't think we had that back in 2014 20 2015 so it was a combination of building the right team that is really really understands uh marketing product design right um and and and other like you know sort of infrastructure piece like analytics uh what's working not so that was one piece. The second mind piece was was really like you know shifting the mindset right around quality because the biggest thing with I feel with consumer services is you can't put something halfass out there like the the bar for consumers is just so high like right so what happens is you have to spend a lot of time on perfecting your user experience your technology like it's got to work well and like consumers have zero patients for bugs, for issues, for shitty experiences. They just they just don't care. Just walk away, right? Um and you don't even they don't even tell you why. They just like uninstalled, right? Um so we had to h make this cultural shift inside the organization to like quality first. Like no, you're not releasing to you're not putting anything out there that you're not proud of. you're not releasing anything that you're not gonna run want to run and go show your grandma and say this is amazing look at what I've built right uh so that was that that was also a kind of a multi-year process and the last thing I would say is I think we did the the classic mistake that a lot of founders do when they get you know hordes of cash suddenly showing up at their door which is we we overhired and we weren't focused enough on hiring A+ players because you want to hire fast you want to move fast you're like okay this person is going to do just fine. We'll let them in and you know if it doesn't work out, we'll let them go after six months, but let's give them let's give them a try. Let's let's let's see if this works. Or like, oh wow, we've got this team member that was amazing at the seed stage. They're a great individual contributor. They know how to hack through the thing that they're supposed to do, but now you try to integrate them into a bigger company and into a bigger system and it doesn't really work out. So they're a great, you know, preseason seed stage employee, but they're not really great at a series A, series B when you're scaling up and you have 100 employees, right? and we would still give them a second and third and fourth chance without understanding that it's actually both bad for them and it's bad for us because they're not really operating in the stage that they operate best in, right? Um so kind of going through those transitions and both culture and people is well yeah it's painful, right? Um so I think we did a lot of mistakes there and that's also why we burned through a lot of that cash with some improvements but not enough. not enough >> and you know with that cash you know some of the things that you guys did is you started making acquisitions um I think a little bit later um but you know to kind of transition to to that topic you're going through all these growing pains which is very common um you know when you have that much cash come in but you you still live to raise cash raised hundreds of millions um you know when did you know growing through acquisition or making acquisitions start to come on the radar for you guys. >> Yeah. So, um I think it my time and I don't think we've done acquisitions since I left. I think we've done eight I want to say eight acquisitions. And it's interesting because the first seven up until tile, which was 2020, 2021 were really talent acquisitions. And I I don't see talent acquisitions as acquisitions like typically you know how the market sees them because we're not buying a product. We were not buying a revenue line. It wasn't a a a business at least most of them. There was one exception uh called Couple. There was another exception called Geobic. Um but um the idea was always like, oh wow, we think this team is unbelievably unbelievable. The founders, the the core team members are just going to be an amazing addition to our talent and they understand our users and what our company needs. So I mean honestly like talent acquisitions are way easier than a full-on you know business uh acquisition and integration and like all the post-acquisition activities. We were really focused like the methodology that I developed over time with the management team was really about how do we incorporate this amazing team into our business and making sure that you know we've got every everybody where they're supposed to be where they're making the most impact we are giving them um sort of the right uh constellation to win as you know uh folks who are joining live 360 and you know honestly are like compensating them so they would be interested enough to keep bringing their A+ A+ game into life 360. So I think doing those talent acquisitions is kind of is easier than doing a full-blown integration with them. >> But I guess you know what kind of spot that like were you doing partnerships with them? Were you just like monitoring them? I know you I think you invested in at least one tile in maybe independently of of live 360. when it came to, you know, that first one and, you know, did you have a shortage in the team somewhere? You like what kind of went through your mind when the idea of making that first acquisition came came to be? >> Well, uh, interestingly enough, we're always set on keeping in touch and kind of tracking everybody. Everybody in our space, you wanted to know what's going on, right? So, I would just like call up people and say, "Hey, what's up? Hey, what's going with your business? How can we help?" We're always trying to help other folks in the family and safety and peace of mind spaces, right, that were uh kind of uh closer to us. Um you know, I was one of the first investors in tile. This was in 2014. We ended up acquiring the business in 2021. So it show you the the kind of the uh you know, the longevity like how much time we spent building a relationship with the tile folks, understanding their product and understanding how a life 360 tile integration could look like. Uh similarly I was one of the first investors in in Placer AI which is a unicorn that is in deep partnership with life 360 these days and again we've been building a a great relationship since 2015 2016. So that was really core to actually my job at Life 360 uh over the years is like really uh building this kind of um uh you know multiple relationships across Corpdev and Bisdev with all the companies that we could potentially either partner or acquire down the line, right? And we were systematic in um in getting those relationships going. It's like, okay, you know, quarterly touch points. Hey, what's going on with your business? It could just turn into a cool, you know, conversation about what you your last trip to Australia, right? It doesn't doesn't have to be always a business thing, but just building the relationship, building a healthy relationship, and building trust with those folks. And then some of those um ended up being partnerships or even launching products together. Some of these other ones turned out to be talent acquisitions, right? It was always a mix of where could we where's the win-win? Where's the win-win for both sides, right? And when we saw that win-win and we shared the vision about, you know, the upside for both sides, we we we were bold. We would go to our board and say, "Look, we want to do this deal." Like, yeah, there's a million reasons why not to, but here's how we mitigate them, and here's like this is the downside risk, and we understand it. uh and we're walking into this with our eyes wide open, but we still think we should do this and kind of semi-related is we always had a like to a certain degree control of the board. Um there was early on in the life 360 journey it was it wasn't necessarily intentional but um it just between not having very strong lead investors to having a bunch of folks who were with us for many many years and really believed in the vision and believed in Chris and the team uh we you know early on could pull off almost anything that we wanted within the realm of reason right and that helped us um and it's funny I'll just tell you a story I I I acquired this company couple I think it was 2015 2016 and like the the the the CEO founder of that company he just left life 360 he was there for 10 years like you can't that's the best talent acquisition that you can ever imagine like this person who was acquired as CEO of a company uh ended up staying 10 years at life 360 leading product efforts that's amazing right so that was very that talent acquisition was you know very well worth it right for the So some advice for for founders that are listening that you know might be a path for them uh either to buy and or sell an acquire like what are the what's the profile you look for like obviously you build a relationship you build trust but you know what kind of attributes did you kind of screen for when it came to doing these aqua hires? >> We're always very product focused. Um, if we didn't believe that the people that we're talking with have significant product chops, they understand what the right user experience is, they built something that that that they're proud of and rightfully so, like this, you know, they built an awesome product, then we were always like less excited about partnering with them, right? Because for us, we knew it was always product first. Um, and um, you know, as the company scaled, we're also looking for people that could be leaders, right? that that others other would follow whether it's in the technical side or on the product business side. uh you know and we we also felt that if we were building this ecosystem of of founders that we work with and we acqui and we partner with them over time our employees would also look at that and say wow this is great like we're building the life for 60 mafia right of like and and it actually became that it it became the life for 60 mafia and there's still all those people that we work with very closely and we fund and we you know um and and and we back and we partner with and I think That's a lot of our employees want to see that that they're like this is going to be this life 360 family. I'm going to be part of this. >> Real quick, if you're a founder doing over 5 million in revenue and want to know what the best $100 million plus founders are doing to fuel their growth, then make sure to subscribe to our $100 million exits newsletter. Get the playbooks that are proven on how to fund, grow, and sell your business. I'll even give you a curated list of investors that want to invest in your business. It's totally free. All you have to do is click that link down below, subscribe, do it now. I promise it's worth it. You won't regret it. You got nothing to lose. Go ahead, subscribe now. Back at the show. When it comes to I would say buy side M&A and you know, you have these relationships, you're doing the diligence, but you bought a couple businesses, you know, not just the the talent. Like how are you structuring these deals? Like what are you uh you looking at? What's kind of like the timeline from when you not for when you meet them, but when you like kind of realize that this might be the path is an acquisition. What's the timeline on something like that? >> Yeah, I think when we were said and doing the deals, we made them happen really quickly. uh because the uncertainty um like for us if we know that these specific people are going to you know go into these positions that we have into the company obviously we wanted to fill those positions and we know as founders ourselves the kind of you know complications that it brings to the other side right it's like what do you tell your investors what do you tell your employees like some of them might come over postacquisition others might not right so how do you deal with with that. I think actually when you have conviction moving fast, doing it fast and like giving like having certainty around how this thing is going to look quickly is key. If you let it linger, people are going to lose motivation. Um so when we we were set on doing it, we just went ahead and doing it and and did it. There's a huge stark difference between what I call a talent acquisition, which is basically, you know, sunsetting whatever product this other company has and really focusing on bringing the talent over and making that talent successful and buying a product that you actually want to integrate or, you know, manage as a standalone product in parallel to our main product. Huge difference, huge difference in in in postacquisition integration. Huge difference in in kind of what we want to see. So I would say, you know, in talented acquisitions, it's really about the talent. It's about where are the people, the founders, the founding team, uh, that we're acquiring is just a great fit culturally. We got roles for them, roles that could be impactful. Those roles are actually a good fit for their skill set and where they want to be in their career. And and we we want to see a lot of that overlap happening when it comes to product acquisition like a business. I mean, we bought Tile at $100 million of revenue. That's a significant business, right? um then it's a whole different ballgame. You really have to understand how you're going to manage this thing. Um and at least you know historically what life 360 has done with tile which is the only sort of significant scale business is like yeah we got to have a road map of how this integrates into our core product. Like if we don't understand that down to the numbers, down to the user experience, down to who's going to do what with a lot of clarity, we shouldn't be doing this at all like to begin with, right? Because we know that um you know, half of the M&A deals go wrong, right? They don't work out. So you need to do everything that you can to make sure it's in the right half, not not um if it's a product that you want to kind of keep running standalone, like not integrate your product, I you know, we haven't really done that. Um I think and I I I often recommend founders not to do that because it's like okay, you're splitting your company into two. Where's the synergies? Like what do you know about this other business? this other P. Um, so it could sometimes work like a completely different product line, but I do feel like there could be better opportunities for the capital if that's if that's the case. >> Yeah. Now, I know a couple companies that, you know, got stuck in what they were doing and just try to buy their way out of the situation and, you know, didn't have a real sound strategy and, you know, ultimately causes either the M&A deal to go bad andor the whole company to go bad. Uh, and so it definitely happens out there where it doesn't work out to be an 8 billion IPO company. >> Uh, I think M&A has to be bite-sized for you. Like if you're a 20 people company and you're buying another 20 people company, beware. So that typically doesn't work. >> Yeah. No, I think that that's good. That's good advice. Uh bite-size. I like that. Um you know, unless it's a full-blown merger, which who knows that Yeah, mergers, you know, scare the crap out of me. Uh you when it comes to who's going to be in charge and all that kind of stuff, um and merging of teams and whatnot. But um when it comes to All right. So you made these acquisitions like Tile $100 million acquisition. >> Well revenue >> doing$und00 million in revenue >> million dollar to buy the business. But yes. >> Yeah. Um and like when it came to structuring the deal like you know how did you think about aligning incentives? We'll move the kind of talent acquisitions aside because that sounds pretty straightforward. But for like the business buying ones like are you looking at majority equity earnouts performance or just straight cash? like how did you guys think about those uh kind of more the business app product acquisitions? Yeah. So, uh, our philosophy, uh, back then, uh, and I think what is in many ways the right philosophy for, um, for companies that are like scale up, growth stage is it really starts with the product integration like what can we do with this new product, right? Where are the touch points? What are the integration points? What is where does this thing move the needle? Does it move the needle on acquiring new customers? Does it move the needle on on like retaining them? are you going to you'll be able to increase your customer's willingness to pay it really I think for us in many ways the acquisition stems from that product integration and then and this is where it gets interesting we would marry the kind of upside that we're looking for from the product integration into the outcomes for the acquired company both the investors and the employees moving over right so this thing is like yeah I mean obviously we see the value here and we're going to spend some money to make sure that this thing goes through nicely and everybody's happy to get going, but a lot of the upside has to be with like how are we going to perform against the one two three year integration plan, right? And and the delivery of that is uh you know it's mixed between somebody who owns it on the life 360 side and obviously the founders of of the company getting acquired, right? like they have to deliver. And if they don't deliver right, uh they're both in in a bad spot. Um the person from the inside inside Life 360 is probably not going to be in a super bad spot financially or they're not going to be able to like they're not I don't know if they'll have their jobs, but but but at least they're not going to lose a bunch of money. the folks getting acquired if they don't deliver then the majority of the value in the acquisition might not come through right so that was that was even in talent acquisitions not just in product business acquisitions that was always a northstar for us of like yeah well you you're going to have retention bonuses here and it's it will take a year or two or four for you to feel fully realize the value of this thing and you have to deliver No, I think it's uh important to have those performance structures and just align incentives when it's a company buying a company and bringing those resources in. Um without that carrot, we'll call it, it can be very difficult to motivate teams after the acquisition because I got my cash money. I'm on my way. Um so let's talk about the the IPO process. So why did you IPO in Australia? >> Let's start there. >> So first I love Australia. I love Aussies. But putting that aside for a second, we were at an interesting time in the company's journey back then. Uh we were between 30 to $40 million of revenue, which is obviously significant, but not significant enough to IPO in the NASDAQ, uh which was the ultimate goal. And um we we we were at a point in time where a couple of interesting things happened. First of all, we raised a lot of money from strategic investors, you know, companies like ADT and Samsung and Verizon and All State and American Family and I can keep going. They had 11 strategic investors at that time and some of them were in and around the board um as observers. Some of them were um they had all sorts of you know veto rights that belong to you know uh preferred equity holders and so on and so forth. And it became a little bit hectic right we started getting u interest like acquisition interest from various different parties. some of them were competitive or potentially competitive with uh existing investors and we just felt like there's some degree of freedom that we don't have in this business right that that's like because of some of those strategic partners we might have been blocked from doing some of the things that we wanted to do. So that was one thing. The second thing is we're really in a position where we had uh multiple offers on the table. We had an offer to buy the company by a private equity firm. Uh we had another offer to buy the company by uh a bigger, you know, sort of antiquated uh uh player here in in in the Bay Area. And um and we're like, okay, so we already have at that point in time, I think we have 150 or $170 million of preference in our preference stack. And this is something that founders don't always think of early early on in their journey, but it starts adding up. So, we were kind of looking at our preference stack, like the founders, and saying, gosh, like, yeah, if this thing goes up into the ride and all goes well and we sell it for a billion dollars or we IPO or whatnot, um, great, you know, we'll make money. But if something bad happens and there was always a risk of like you know Apple trying to maybe shut us down back then it was um or like other other types of risks to the business um which some of them actually happen later on by the way but we're able to mitigate then what happens if we do a fire cell for 100 million bucks or 150 or 20 million bucks we're going to walk away after 10 15 years with nothing because of the preference stack. So IPO is very compelling in that sense because it transforms all preferred equity to common equity. Everybody's equal. Everybody you there's no no preference stack. So that's the second thing. And the third thing is and this is this is not intuitive and I don't I don't recommend this to most companies but we actually were up for the challenge. We were like we think we're mature enough to be to operate like a public company. Like we don't know if we have the level of predictability that you need to have, but we'll set we'll set the right we'll set the stage. Like we'll explain to investors that this is high-risk, high growth business, right? That we're not going to be in the green anytime soon. This will be in the red because we're investing in growth. And we're just going to be very honest with with investors. Um and we went and we did a pre-IPO. It was a $40 million preIPO to start getting, you know, crossover investors to support us in case we want to do the the IPO. And it was very wellreceived. Like we found a few great partners. Some of them, many of them are still significant life for 60 shareholders. The IPO was the preipo was 2018. So we're seven years in and these guys are still holding. We're like, "Yeah, we get it. We understand the strategy. This is high risk. this is what you know we want to do with a certain portion of our fund and um and we also had a good connection one of our early uh one actually the first angel investor in life 360 is a gentleman uh called James uh from Cortona Capital uh he he's from Sydney and he knew he was an ex-banker he knew the entire sort of industry on the ground um and he was able to really open up a lot of those doors for us so we actually started spending time there and we you know we end up saying yeah this this could be an interesting choice and then we started working on the on the IPO itself with credit Swiss and and and a few other folks and we saw that the valuation we're going to get in this IPO that also flatten flattens all the preferred shares is actually better than the acquisitions offers that that we have. So that's the time that's the moment we decided to go all in on that option and uh and we made it work. What what's kind of So, you know, we'll skip ahead. You obviously went public on NASDAQ and your stock is close to like 34x since going public last year, which awesome. Uh, you know, not a lot of IPOs uh can say that in recent times. Um, but for you know, again, choosing Australia, you made the case like there's there's other public markets you could have gone to. Uh, why did you choose Australia? >> Yeah. So first of all again we had uh boots on the ground uh in the form of existing investors who knew the market extremely well. one two is at that time and still to a certain degree today uh the ASX the Australian stock exchange a little bit like um the AIM but differently and then there's one exchange in in Canada that I know does the same was actually encouraging high growth uh companies to to come over if they were too small for the NASDAQ which we were so they were really encouraging us um and and we also realized that It's a small market. Leosex is a small market, but that could actually work to our favor because we could cover it very effectively with analyst coverage and like really meeting all the main fundies. That's that's how they call themselves down there pretty effectively, pretty efficiently. It's also a very concentrated market. So like you're in the NASDAQ, yeah, you're obviously dealing with with Wall Street analysts and Wall Street investment firms, but there's a lot of global uh you know engagement there. in the ASX it's really very local to city and Melbourne right so you just hop between city and airborne and you meet everybody that you want backing you in like a week so kind of very efficient um and that's why we we felt it's it's a good fit for us >> oh good insights um and then obviously it goes public um and then you then go public in the NASDAQ like what what was kind of the moment where the I think you left or you're an adviser at that point you know what was kind of the decision factor that kind of said like now we're ready for the NASDAQ and also given the turmoil that's happened over the last couple years kind of like timing and everything like that you know why did you ch why did you choose 2024 um as the right time to go on the NASDAQ? >> I mean the company always wanted to complete a NASDAQ IPO after the the ASX IPO. It was always in the cards like always something that people thought about but obviously you got to get to you know critical scale. Uh, so with $40 million of recurring revenue, that's not really NASDAQ material yet. Um, and I think even though some bankers were suggesting that, you know, if you hit the $100 million mark, the $150 million mark, you're good to go in the NASDAQ, we felt that we have to have more scale than that. And you know after the tal acquisition where we brought in another $100 million of revenue u tile revenue we were already at you know I think it was over 250 at that time uh because we kept growing uh organically very effectively and we brought tile at least 200 if not 250 when that kind of chart to the NASDAQ IPO was was you know um that path was being charted. Um but then of course like any IPO it really it really depends on the market right and the 2021 IPO window we were just too small we just did the tal acquisition it wasn't ready 2022 was when the IPO market shut down 2023 was a no-go for anybody right in this world 360 was scaling so in 2024 when we had enough scale I think it was close to $3 million of revenue revenue at that point which again is is much more than what the the kind of the the bar was for the bankers and also the being able to con to continue to show maturity as a public company. I mean in 2024 when life for 60 IPO on NASDAQ it was already public in the ASX for 5 years already filing quarterly reports already you know behaving and operating successfully as a public company right so kind of being able to show investors that you are operating at that level for an extended period of time obviously uh like was able to portray the company as a much more mature company at the time of NASDAQ IPO and all these things came together with the timing with the markets and it was It was a green light. We were ready to go. >> Were you there to ring the bell? >> What? >> Were you there to ring the bell? >> Yeah. Yeah. Front row. >> How was that? >> Uh, it was fun. I was I was uh shocked how well orchestrated and produced this thing is. Like there they always pick one or two IPOs of the day that are like fully produced A to Z and and Life 360 was was one of them. Uh I think that was the one. And we did the whole like time square activation thing as well. It was awesome. It was it was a great experience. And when I did it, I was like, hm, this is this is so great, but I'll never do this again. It's like the front row. You know, even if I back a company that goes public, they're going to have me somewhere in the back there. And this is a once in a-lifetime opportunity, at least for me. I don't know a lot of founders that IPO their companies uh twice, but I'm I'm sure there's a few. >> No, it's uh it's got to be a pretty satisfying feeling. Well, so you you've had this amazing success, this amazing run, which again, you had your fire moments where things, you know, aren't easy. Like it sounds all up into the right, but like these were all very tactical and tough decisions that you made throughout the journey here, but you know, now that you're you're running recursive ventures and you technically been doing it for a while. Looks like you you know, you started it um it was like at more angel investing that kind of turned into a fund. Was that kind of how it came to be? >> No, this is interesting. So, so first of all, I've been investing since 2010 and I was investing the whole time I was at Life 360. And some of it was actually, uh, with many of my life 360 partners. So, uh, in 2014, while I was early at Life 360, I formed the first fund, Recursive Ventures One, which was super tiny. It was a million-dollar fund. Uh, but most of the backers were actually folks that were Life 360 investors. And a bunch of the the the thesis was larix is going to create an ecosystem uh with companies like tile and companies like Zen drive and and and companies like Plaster which all ended up being either you know acquisition targets or um or or business partners and uh that was what got me going on the Karen strategy that we have in recursive ventures for over a decade right then in 2018 I formed another fund uh while I was at life 360 a bigger fund uh which syndicates end up being an 8.5 million dollar um sort of uh vehicle um and and and kind of kept going but you know with more capital and doubling down on winners. So I was investing the whole time and part of the sourcing and part of the um sort of the opportunity was embedded into life 360 to a certain degree not all of it right there was always that little bit of motivation and the other motivation was really you know so that life 360 family like extended family that we talked about like if we know we have a star employee who's leaving life 360 and starting a company hell yeah we want to back them like this this is great you know we know they're going to do they have high potential and they have, you know, a chance to succeed. So, uh, so we want to be able to do that and, uh, and, you know, and have that legacy, right? Um, as a company of of supporting our our family, right? Um, and you know, over time it just grew and grew and became more successful to the point that it no longer made sense for recursive ventures to be, you know, something that I do on the sidelines or something that I do part of the time to help live life 360, but you know, most of the time to, you know, support founders. And I decided it was the right time to spin out and basically build this as an independent institutional great fund. And uh I think you're you're on fund three now or fund four. >> Fun three. Correct. >> Fun three. And um you know with the fund now and your full focus on you know what kind of are you still you know in most cases VC is about you know relationships backing to people you know but like what what's kind of been your your focus and your edge you know as you've stepped aside from life 360 and focusing only on your >> absolutely. So, uh, what I've done and and actually I should say that, um, Le Recursive Ventures is a is a founder GPE firm. So, it's I'm I'm the sole GP, but I have multiple folks um, helping me out in this fund, including Chris Holes, who's the now uh, executive chairman of Life 360, and uh, one other person called Constantine, who's one of the best angel investors in history that I've been working with for over 15 years. Just for the record, Constantine is one of the first investors in Tesla before Elon. So um among among 20 any of 20 other Brazilian >> paid off if he held >> that in and Canva that in Canva you also did Canva as a very early backer. Um so um so even though you know it's I'm I'm the only GP it's it's it's a team it's a team effort and it takes a village to do what we do today at Recursive Ventures. Um but you know what what what I would say is we've done extremely well over the years with data and AI focus investments. Uh a lot of my more recent track record I heard from 2016 2017 onwards is data and AI uh B2B businesses um some B toc but mostly B2B and because we had significant because I had significant on uh hands-on experience being part of the data mafia if you will in the US doing data deals spinning up uh and investing and integrating data companies and as a derivative of that AI where we built significant AI inside life 360 to do things like crash detection and response with a lot of data obviously. Um me and my team were just very very well positioned when this whole Chad GPT thing broke out in 2022. Obviously this is a new kind of AI. It kind of leaprogs the AI that we had before the sort of NLP and and machine learning and and computer vision that was dominant in the 2010 to 2022 era. So generative AI accelerates all that and provides many new capabilities. But we had a very good understanding of AI and data and generative AI when it came out. So I was and it was actually happened at the same time I was leaving life for 60 and I just saw an opportunity of a lifetime. I was like wow there's going to be trillions of dollars of value going that were going to be created with these generated AI tools. I got to just like jump in, leave my cushy job at life 360 as a sea level where you can imagine how much money I was making. Obviously, it was a lot uh and with a fast growing company that's doing well. I just have to leave that comfort zone and and go all in on backing this next generation of AI companies. Um because I, you know, I truly believe that's the right thing to do. And that's that's what we're doing today very successfully. >> Yeah. you caught the caught the mobile wave and now you're uh you know diving into the the AI uh way and when you look at companies that you you're seeing tons of companies come across your desk uh you know countless founders pitching you asking you to to get involved like what kind of trends are you seeing like what's what's the the shiny object that everyone's kind of looking at right now and what what's kind of fading away you know because I'm seeing things just like kind of turn over very quickly in terms of what's hot and then not hot. Yeah, the velocity the velocity is insane and the group think and piling on on deals is even more insane uh in AI specifically. So this is this is very interesting times to be in. So I'll just I'll just say a couple of things here that I'm seeing in the market which some could be obvious to some of our listeners, some might not. Um I've been saying it for two years so some things have really turned out that way. So the first thing is we've had a massive massive wave of investment in infrastructure LLMs and sort of the uh the stack required to build and deploy LLM based solutions. I would say we've overinvested in that space. Uh and this is all the way from like Nvidia market cap to Google spending I don't know hundred billion dollars a year on on like chipsets and on chips right and so on and so forth. And even at the LLM level, like for me, LLMs are they're getting commoditized. Like I don't think there's a big difference here now between like an OpenAI, GPT 405, whatever, and and a cloud. I mean, obviously there's like details around this LM does that better and but at the end of the day, it's it's getting commoditized, right? And really where the value is is at the application layer. It's the last mile. It's the it's the it's the it's the workflow, it's the use cases, it's the value that you actually bring to end users and consumers, right? And I think up until a year ago, the venture community has completely missed that. They were just like piling on on like open AAI rounds. And um surprisingly, the application layer, which every research that goes in depth would show that that's where the majority of value creation is going to happen, was kind of looked at more like SAS companies, right? And I don't think that's the case. I think what's going to happen at the application layer is that it's going to rewrite SAS which is you know a trillion dollar plus business um in many ways and it's going to create all those completely new use cases that we haven't even thought about and it's all going to happen in the next 5 to 10 years and it's going to build on top of the infrastructure that we spent we over spent on exactly like what happened in 999 2000s we were like overspending on infrastructure for networking and the web and then it took another 10 years more for web van to actually show up in the form of uh of Instacart, right? Um so I think I think we're going to see something very similar but condensed in timelines. It's not going to take 15 years, it's going to take five, right? Um so I've been focused on investing only at the application layer since I started this fund in 2022 both consumer and B2B but more with a with an either B2B. Um so that's the first thing. The second thing is we've gone through this evolution of like, oh wow, free rappers are never going to are are never going to work to like, okay, here's all the ways that we can win even though we're a rapper to like, oh gosh, f rappers are actually great as long as you can grow fast enough. And I think that's another big mistake that's happening now in the market where VCs are just flocking to whoever has like crazy month over month or quarter overquarter growth in revenue, but they're not looking at the mode. They're not focused on defendability. They're not focused on understanding what happens when the 10 the 10 incumbents see this thing when it's like $50 million of revenue and they want a piece and the hundred other startups that are going to get funded when they're like, "Oh, I want to get this business, right? I want to go after this business and I'll take market share." And I think VCs are kind of turning a blind eye. They're not they're not thinking about the commoditization and what lack of mode means. If you don't have mode or defendability, you're not going to create a multi-billion dollar business. Just just, you know, that's what history teaches us. So, um, that's why at Recursive Ventures, we're very very focused on our thesis of AI mode, which is really, uh, which is really about what are the key differences in this business that, you know, so the key question I ask CEOs is like, okay, you're ahead now, explain to me exactly why you're going to be ahead five years from now, right? Um, so mode is key and a lot of VCs ignore that. Um, >> founders ignore it too. Founders don't pay attention enough to it. >> Well, you got to find the right balance because as a founder on one end, yes, you have to grow because if you don't grow, you're clearly, you know, dead in the water. But at the same time, you also have to think about the long term. And that long term is you have to invest in actively creating a moat or you're going to get disrupted by the hundred other startups that it's going to copy what you did overnight with vibe coding and that's pretty dangerous. Let me let me ask you this question like if you are a founder and you have the choice to invest in you know trying to hit that month overmonth growth metric or maybe not grow as fast but have a more defendable moat that then you know hypothetically you put more money into and it'll be you know better like do you want to see the the companies making the month-over-month growth metric like the sexiest thing and then they'll get the money and then they'll figure out the moat or do you think it's better for them to maybe not be explosive ive you know 100% month of month growth uh but have a defendable uh moat at that earlier stage and that kind of like call it pre- series A >> the the advice I typically give founders is to prioritize hitting their month over month growth metrics first because I think if that's almost like a prerequisite if you can't show that you are I mean look at early stage startups there are only two things in that getting the product market fit and having enough capital to get the product market fit surviving until you get the product market fit if you can do the ladder which is getting capital you're you're just going to die right when your money when you don't have money in the bank you're just going to like the company's going to die so I think you do have to hit your growth metrics or some you know or get at least close to that but then the trick is how do you use that momentum that velocity to invest in your mold and what happens with a lot of teams that I'm seeing especially younger founders these days is just they they hit they hit the growth metrics and they're just like cheering and they're excited and they lose sight of the mode and then the music stops. Because the thing with not having a defendability or or mode is I don't know when the music stops. It could stop at the beginning. It it could stop after you go public, but it will stop at some point because you don't have a mode. So, it's kind of short-term thinking versus long-term thinking. You got to meet the short-term uh metrics and criteria that be a fundable business. But, you know, then you have to really think about how you allocate time and and resources to to invest in the long term. >> What do you want founders to know about recursive? >> That when you hit up recursive, you're going to get me. You're not going to get some associate. Uh I'm going to be there for you supporting your business. me and my two partners, they're more on the support side. Um, and you're going to get serial entrepreneurs who have taken companies from nothing to public, have been in your shoes, have raised every single round. That's the first thing. And the second thing is we do one thing at Recursive Ventures and we do it extremely well. We've done it for over 50 companies. We get we help you get your series A done, your seed in series A. That's our superpower. We get you funded. We know how to build the right narrative. We know how to figure out what the right the right KPIs are. We will make the most intros to the best VCs you will ever get from anybody and you're capable. That's our promise. We will get you funded and at the same time we're going to get out of the way where we're not needed. It's up to you to figure out what the business is. It's up to you to figure out what the pop market fit is. We're not going to be able to do that be for you because we're not in your shoes. It's your business. You run it. You know best. You know your industry best. But with us, we're going to give you as much funding as you need to really, you know, realize your dream. Um, probably better than most other preceeded funds you're going to talk with. >> But how do they get your attention? >> Yeah, that always comes up. Um, >> you like the dream the dream VC I always want, but how do I how do I get the right to >> make you actually want to look at my whatever I'm building? So between me, Constantine Utmer, who's one of my venture partners, and Chris Holes, who's another venture partner, we have backed over 300, I dare to say over 400 companies over the last 20 years. 400 companies. The best way to get to us is to get an introduction from a founder that we backed before who knows you and knows us and can vouch for you. That's by far the best way. That's, you know, that's one that I mean, we get three to five of these a day, but those are the deals that we jump on um heads on and and dig in and try to find ways to be helpful. Um, second best is to get a warm introduction for somebody who knows you or knows us not as well, but are still like, "Hey, this is a great person. I met them. Maybe I like overlap with them a little bit. I think they're great. You should talk to them." That's also great. Cold calling doesn't work, guys. So, just just like >> And when it comes to um I'm always curious with like kind of preeds, do you do seed or only preede? >> We mostly lead preede rounds, but we also participate in seed rounds. >> When it comes to um price, how important is price for you coming into the round? It's important but we put in the right perspective. I'll give you an example. Uh twothirds of our deals in recursive ventures are with successful repeat serial entrepreneurs. And we we believe that experienced repeat entrepreneurs derisk the business by two to 3x. I have some data backing this but honestly it's more of a theory. It's anecdotal, right? That's also what we see in our portfolio. So if we come across a successful repeated entrepreneur and they demand a higher valuation or the market lends them that higher valuation which which happens you know there's competition out there yeah we would pay up because again our math adds up to like okay 2x the valuation 3x the d-risk that's a good deal right um so we're less valuation sensitive than other firms right if if it's if it's really the appropriate setting, right? Um if if that's not the case and we are making a bet on a less experienced team or there's a lot of hands-on work that we have to do, then we kind of want to make sure that that valuation really fits our model where we can see 100 plus x return if this one works out. So that's where you see lower valuations. And and you know, I get this often like how frosty like how how crazy is the market on valuations these days? I'd say it's pretty crazy, but it's not that different from 2020, 2021. Like back then, the valuations were also off the charts. >> Well, and they were spread across a lot worse companies. I think the valuations that we're seeing or at least higher quality and fewer companies, but still high valuations, at least kind of my take. >> Yeah, it's definitely the we're definitely in the have and have not sort of era in AI. If you're a hot team coming up with OpenAI and you've got like a great story to tell you, you know, the valuations are going to be insane. And if you're just another team that's building a thin wrapper in legal or whatnot, you're you're likely to even get funded at this point. Um, so there's really the have and have nots, but there's a lot of great founders and companies in the middle, which again, we we think the valuations are reasonable. Like I think um in Q2 we looked at the average entry valuation for us it was and most of our deals are Bay Area deals. So Silicon Valley it is more expensive. Um great people are probably in the 12.5 $13 million post money range at the entry point. It's not low but it still fits our model and we can still get a 100 plus X outcome with that kind of entry price. >> That's not too bad. Well, it's this has been a phenomenal conversation from buying uh your kind of position into a company at, you know, kind of this stage zero, stage one, and then taking it all the way to public and and then now backing some of the best founders in AI. Um, for for founders that just want to learn more about you, your portfolio, uh, where should they go? >> LinkedIn. Follow me on LinkedIn. I write daily and I write about and I write about startup antiatterns. both are uh very helpful for founders who are starting VC back companies. Just follow me on LinkedIn. >> Beautiful. We'll make sure to leave that in the link below and you know, thank you for coming on the show. Really appreciate the time that we had today. >> Thanks, Jason. It was great. And thanks for all our listeners. >> If you were inspired by today's episode, then go ahead, watch this next episode. Promise it's worth it. And if you really enjoyed this last episode and you want to connect with the guest I had on today, make sure to leave a comment down below telling me why you would like an intro to this guest and I'll make it