Making the perfect backpack. Craft in the age of AI.

[00:00:00]

Opening

If you haven't solved the fundamental thing, then you're not there yet. You need to care about the craft still, right? If, if we were trying to recreate 1930s Paris for the AI maker, what? What are the conditions?

Every single time I use it, I'm like, I want to hug the person who invented this thing.

Creativity is contagious in that environment.

Backpacks and Craft

Fraser Kelton: I love American capitalism.

Nabeel Hyatt: That's, that's gotta be the opening. You only get slightly better dish soap that solves all your problems through the wonders of market forces. Bad segue, but you know, when we originally started this podcast, the idea was that we were gonna try and talk about products every week or month or however, how often we do this thing, and we haven't talked about that many products. I have a product I played with last night in AI that I think we should talk about the next time.

But I'm gonna leave that as like a [00:01:00] cliffhanger 'cause I wanna spend more time with it and actually think about it and then we'll talk about it more the next time. But I have to tell you that I don't know if you, are you like a total bag person? How many backpacks do you own? I found the perfect backpack, Fraser.

That's what I'm trying to tell you.

Fraser Kelton: I see. No

Nabeel Hyatt: Finally.

Fraser Kelton: Of course I care about the backpack, and then my backpack was stolen. Somebody snatched and grabbed it out of the back of our car in San

Nabeel Hyatt: Stuck.

Fraser Kelton: and. I made the, anyway, I'm very interested because I made the mistake of buying a replacement backpack right

Nabeel Hyatt: No.

Fraser Kelton: and I haven't swapped it

Nabeel Hyatt: No. So so, so maybe there's three waves of backpacks. I'm gonna call this wave three because we often name things 'cause that's what we do. There's all backpacks up until the beginning of , Kickstarter, I. Then there was this Kickstarter wave of , how do I get people interested?

And this is like the peak design backpacks and things like that of like about whatever it was like eight years ago, nine years ago. And I certainly owned a peak backpack and like every other backpack in that era, they all have one thing wrong with them or two things wrong with them that drive you crazy.

And, and that's what's so interesting about this is a product category, is that [00:02:00] you're talking about a horizontal use case, everybody has slightly different uses. And there's like, it's so red ocean. Like we're so in that like what kind of, what does the zipper feel like? Like this is not moonshot.

This is like fine craft at the edge of utility, daily utility, but also design and I'm wearing it. It's like I love the category for intellectual Anyway, the backpack is the boundary Errant pro.

Fraser Kelton: All right, let me look at this up. Boundary err

Nabeel Hyatt: Yes. I think, yeah. Boundary errant pro.

Fraser Kelton: Okay. Okay,

Nabeel Hyatt: And, and and let me just tell you why this is the best backpack ever. So first of all, like shout out to to, to sar who's a general partner at CRV. I've known for a long time who tuned me into boundary, the brand, although not this particular backpack. What's great about this backpack is that I can't, we're, we're in so late stage backpack design land that there's no one thing I can say that will help you understand this, because it is a million tiny little [00:03:00] decisions that go into making this right.

But I'll show you a couple, you know, our, our intrepid listeners will not be able to see it.

It has a front pocket, top pocket, easy zip for your laptop bag. Right then inside of the laptop bag, just as importantly, there is a laptop sleeve called the, I think it's called something like the home working sleeve or something like that, for, which is like,

i'm work from home today. So you just pull out the sleeve and the sleeve has just the laptop and , you know, your basic pens and like little bits of things inside of it. It there's a little clip on the back of that sleeve so that when you slide it into the backpack, it hooks onto the inside of the backpack so it doesn't drop too far down into the backpack.

And, and that is that thing I just said right there. There are 30 of those, like that little tiny like. Little tiny love is like everywhere in the backpack when you, when you go to open up the zipper [00:04:00] in the front. Your hand instantly moves to the bottom of the backpack because you wanna hold it while you're holding the zipper on the other side.

And when your hand moves down there, there's a little tiny handle for your thumb. While you pull the zipper up. It is, it is. It is a, it is crazy. I like, I had it for two weeks and I was still finding tiny little things that are like, oh, I, now I understand why they put that there, and so and so forth. I like to, like, this is the end game of a backpack that has clearly been designed by Reddit like this.

Clearly this team was sitting in Reddit, slack backpacks for like a year and a half, just combing through every little comment that every single person had about a backpack and then found a way to like sculpt it into like the perfect form. So this is, this is the last backpack.

It's amazing. It fits in Also importantly for me, it fits in A-D-S-L-R camera. So there's a little side pocket on the right hand side that's a quick open pocket for you to stuff a camera in when you're on the [00:05:00] road. But that whole. Pocket slides out so I don't have to have it in there every day with the weight.

Anyway, it, it is everything you want. I, the thing that made me excited was obviously like I finally have a backpack that at least for a month I'm gonna be super satisfied with until I find something else. And then I just think about all the time and work and energy. It probably went. Into combing Reddit for two years to get all of this information to internalize all of the needs of all these customers.

And I'm a one track mind. So my, my brain went to like, wow. How much easier is that to do with ai?

AI's potential role in product refinement and customer research

Nabeel Hyatt: Like how, how much better are all of our kind of late stage craft polish, you know, products if, if a person loves enough and cares enough to look into them, like. How much easier is it gonna be to make truly excellent products where like every little edge case has been thought through?

When we can gather those edge cases, like in mass?

Fraser Kelton: Yep. [00:06:00] Amazingly so I think the one thing that you said at the end there that really resonated is you need to care about the craft still. So, yeah. It's another case where you can't outsource it to the ai but you're going to have somebody who cares deeply is going to have an entirely new tool, sitting shotgun with them as they think about, what did you call it?

Like the little, the thumb pedestal for when you're zipping up The bag is just, it's just there.

Nabeel Hyatt: It's beautiful there. There's there's a every article from maybe like a week and a half ago from this guy named Michael Taylor on every called AI Focus groups. And he's a founder of a company called Rally, which does like synthetic focus groups.

There's companies like Listen labs that do this not as virtual customer research, but actually as like real customer research where they go out and call a bunch of people get them on video, get their inputs on a product, and then kind of like use AI to to aggregate the responses back and so on and so forth.

And [00:07:00] all those feel like, like crazy SUPERPOWERED tools in this new, in this new era. But, but again, again, like the loop, the end of the loop is not. I think when, when Michael was talking about it, his end of the loop was like, you know, we're gonna use all this stuff because eventually we go through these, you know, these three step processes where we're gonna be able to role play real customers, crowdsource instance, virtual reality surveys, get synthetic focus groups together, and then like at the end it's gonna be like self-improving ads.

And I think that's probably will exist. It's fine. The, the, the more interesting thing for me is. Using all that corpus of data and then applying human judgment at the end to figure out how to fit that all together into some, some new and better product that hasn't existed before.

Fraser Kelton: One of the interesting things is that, like we talk about marketing as like this, this singular thing, and the, the, I think the, every article was talking about a lot about like marketing communications. Like, does this slogan resonate? Does this thing

Nabeel Hyatt: Mm-hmm.

Fraser Kelton: And, and the, the example that you had. [00:08:00] Which by the way, like Reddit is an amazing resource. If you're not using it and you love products and you like want, you want to find the thumb pedestal equivalent for any product you're using. It is remarkable. But that, that is like product, product marketing,

Nabeel Hyatt: Yeah,

Fraser Kelton: right? That, that, that's like figuring out what, what to build and how to build it.

Nabeel Hyatt: it's customer research.

Fraser Kelton: Customer research and that, that's like an important distinction to, to carve out. I, this is totally an aside, but I went down a deep rabbit hole of, of insane respect for the consumer packaged good companies and their product marketing prowess.

Nabeel Hyatt: Why is that?

Fraser Kelton: oh, like the, the story of the Mr.

The Down Power Wash Dish Spray?

Fraser Kelton: Clean Magic Eraser is

Nabeel Hyatt: Hmm.

Fraser Kelton: You know, I, I actually think that. I think that that skill is the most important thing for anybody building early stage product is like the ability to like actually look at your users and actually read qualitative feedback, see how they're using it and infer like, [00:09:00] oh, you're trying to do this, but you need like that little thumb thing below the zipper, and

Nabeel Hyatt: just, I just had a vision of Fraser. If he was, if, Fraser was a think influencer, then, then we would get the, you know, what founders can learn from Mr. Clean 10 tips.

Fraser Kelton: Oh no. You know, I, I gotta tell you, one of my favorite, one of my new favorite consumer packaged good products. And, and I wanna find the guy. 'cause I, I, in my imaginary world, there's like a LinkedIn version. For people who work at like p and g and Unilever

Nabeel Hyatt: Yeah,

Fraser Kelton: they're like, I invented this piece, or I invented that piece, and I wanna find the person who came up with the down power wash dish spray.

Have you ever used this?

Nabeel Hyatt: what are you talking about?

Fraser Kelton: Oh my goodness. You, you go I am going to order you one on Amazon. It is going to change your life at your kitchen sink. And we will do another episode on it. It is like the best product that I've, I've experienced, and again, it's somebody who watched how people. Interact with soap at their [00:10:00] kitchen sink came up with a product that is like so delightful.

Every single time I use it, I'm like, I want to hug the person who invented this thing.

Consumer packaged goods and the importance of user research

Fraser Kelton: It is so great. But that is a skill, right? These consumer packaged good companies are famous for doing. Consumer research where they get people in and they're like, they're so good at understanding I don't know. do a whole show on this. 'cause the story of the Swiffer is also equally amazing. Is like what people, what like little annoyance and paper cut do they have in their lives and how can we improve that? I. Is is such, it's like at the heart of CPG and what you talked about with your bag is, is really that it's product research.

It's like, how do I, how, how do I find the little touches that people need and can simplify their life with this product?

Nabeel Hyatt: Do you know the, the Kitchen Tools Oxo, the Oxo Kitchen Tools Company? Yeah. So everything at, at, at Oxo in the initial 15 years of their run, I don't know what it is now, was designed by a guy named Sam Farber at Smart Design in New [00:11:00] York.

And actually when I was in college my senior year, we took a big trip there and did like a day session where we were learning basically about how. Smart design went through this process, and it was a lot of this okay, what do I actually do with a measuring cup, right? I'm gonna watch people with a measuring cup.

They pour it into a bowl, and then they like hunch down and try and look sideways at the measuring cup to figure out whether it's it's hit one liter or not. That's dumb. Like, can we fix that? Why do they, why do they have to hunch down? And it's, it's kind of like, it's that thing that founders really have to do, which is just.

We are as humans, we quickly habituate to the environment around us. And a lot about being a founder and really good at product is just like upping your irritation threshold. Like is it really that bad to kneel down to look at whether it's hit one liter or not? It's not that bad, but it'd be better if you fixed it and, and so like, let yourself be annoyed by that for a second.

And so I think [00:12:00] the internalization of that is that of course you still have to watch human behavior. In order to pick up on those things, and I remember that day really strongly. It was really interesting going by. They had all these fake kitchens set up and they had a bunch of people trying to make things, and then they had people watching those so and so forth.

But the gathering of that data was very bespoke and it was very slow. And very manual. The, the discovery process, the design process is still there, but the gathering of that data is still very, very slow. And that's a situation where I think it'd be very, very interesting. And you can imagine even a bunch of people making stuff in kitchens, cameras looking at them, computer vision against that, and then asking like, when did people slow down?

When did people hunch? Like, we can now use those tools in order to drive information out of that to make good product decisions.

Fraser Kelton: This is why I, well, other than my like deep, deep love for the Don power wash, like go buy one. Other than that, like, the reason that I took us down this rabbit hole is I actually think that that teasing apart [00:13:00] what has to happen in that type of marketing. the insights that lead to your bag is, is likely a real AI problem. it's, it's, I would be shocked like, it, it's not, it's not like synthetic audience groups. It's not. not any of these other things because I've been in the bowels of Reddit, like reading about, you know, running shorts and you're like, oh yeah. Like that is a nuisance.

Nabeel Hyatt: is a thing. Yeah.

Fraser Kelton: and like I think the, one of the amazing things about LLMs is like, you can, you can easily get the, the P 50 answer on anything

Nabeel Hyatt: Right.

Fraser Kelton: and, and you can like, kind of bump it outta there. But the, the nice thing about Reddit is like, you, you filter down with, with a lot of taste and intuition as the con, as like the person who, who is either building or consuming or like researching, I guess is maybe the, the way to say it is like, you're like, no, that's not relevant to me. That's not relevant to me.

That's not relevant to me. Oh, this person's comment right here is [00:14:00] gold.

Nabeel Hyatt: Yep.

Fraser Kelton: And I think, I think that LLMs can help with that, but I think it's, it's not like the, I, I think it's the unobvious answer. Like I, I don't think the answer is to go and get like a panel of people from any of those panel companies and ask them 16 questions or even try to like validate them. I'd be shocked.

Nabeel Hyatt: Yeah, you're saying there's still product taste needed at the end of that cycle. There's things that help the front of that cycle, which would be gathering things from Reddit. It'd be hard to imagine that the standard cha chacha PT or claud answer is gonna get you to that.

Fraser Kelton: Yeah, but I think like, well, listen, this is not, I'm not, I'm not profound ever, but certainly not in this case. Like, the qualities of the product are going to matter significantly here in terms of what it actually can get you. And I like, we, we've seen a bunch where it, it, it goes and it qualifies the panelists that it then goes and asks the survey questions from, or like the research that it grabs it from,

Nabeel Hyatt: Yeah.

Fraser Kelton: that might be good for certain use cases.

It's certainly not going to be useful for your backpack. You're going to end up with like, [00:15:00] I don't know, a mundane, you're going with like a Jan Sport.

Nabeel Hyatt: The memory of, of, of spending time in smart design during that time period reminds me of actually something I've been trying to think about for AI a lot right now, which is what are the, I. Ecosystem by which these decisions are made. Like you, you, you're trying to get into founder mode, which is really this like highly sensitive, almost like irritated mode.

And another way of putting it is like the, the kind of lyrical, poetic version of of, of putting it as like, how do you cultivate a garden of creativity?

Creating environments that foster creativity and innovation

Nabeel Hyatt: Like how do you, how do you get an environment in which you are going to be thinking about these kinds of things? And a lot of it involves. A lot of other people you know, who are trying to get you into that mental state.

I, I think about an artist has. Is, you know, the myth of the artist is that the artist is like going off into the French countryside and painting for two weeks [00:16:00] and then bringing back their masterpiece. The reality of most really great product work and really great art and really great creativity is that, you know, it's a little bit like the I don't know if you read Creativity Incorporated, but it's a little bit like the Pixar Brain Trust thing, right?

It is. It is the fact that you're at Smart Design in the late nineties, early two thousands, and there's a bunch of other designers around you. That you are trying to like, that know enough to know the problem you're trying to solve and are trying to hold you to account to do great work. You know, it is it is Paris in the 1930s with Picasso and Matisse who are like, like egging each other on It is, it is that kind of thing.

And, and it's interesting. I, I guess there's a world where. That's the idea of what an incubator is as well in this current environment. Except that I think the idea of most incubators today, that output is not, did you make good product this week? It's like, what did you do to grow this week? Do you have your 10% week over week growth?

Fraser Kelton: right.

Nabeel Hyatt: And I, and, [00:17:00] and it strikes me not just that AI can help on the front end of that creative cycle saying, you know, input metrics, Hey, gather me more customer data. Make me feel about that. But like. You know what is an AI wrapper, but simply saying that the problem you're gonna solve is going to be because of your own intuition, not because you built a better model, not because you have some technical, like that's what an AI wrapper is really trying to say.

Fraser Kelton: No, that's, I mean, that's why it's pretty bad at writing great copy for like, if you wanna write tight, tight marketing copy. It's not very good at that.

Nabeel Hyatt: Yeah. Yeah. What do you think would be, this is a very human answer question, not a very AI question, but if we could design an environment for. The proverbial brain trust of AI product makers. If, if we were trying to recreate 1930s Paris for the AI maker, what, what are the conditions of great, I, I think about that environment.

I think about there are these little moments in [00:18:00] history and time where like the stars align and you get like incredible outputs. You know, I think about. The seventies with independent film, with Martin Scorsese and, and that whole crew. I think about not that far from there. The rise of rock and roll in the US and it, it's, again, it's not that, it's not that they were, you know, suddenly, like, again, like the, the myth, the myth of the individual genius.

It's also not that they were left on their own. Like they're still a, you know, in that, in that. Formula of taxi driver era and all that stuff. Like there's still a studio is distribution. It's commercial, it's not non-commercial. I think about the very early, you know apple computer computing days the kind of rise of the home brew computer club and that kind of area in the valley as a similar feeling.

If we were trying to nudge outside of Spark, if we're trying to nudge this environment to feel more like that, our whole startup ecosystem we have to live in every single day. What are the conditions you think we're trying to strive for? Unfair question off the top [00:19:00] of my head, but I'm, I'm, I'm, I'm curious.

Fraser Kelton: I, I feel like it's, it's related to things that we've talked about a bunch over the past couple years. I. In the sense of like, the, the industrialization of like, here's your growth metrics, like all of that stuff. You, you need to hit this by date X and this by date y rings out

Nabeel Hyatt: It brings that out. Yeah.

Fraser Kelton: Yeah. And so, so then like I think it's the inverse of that is, is like the easy answer. I, I. I don't know. The, the most creative people that I've worked with have been individuals who have over-indexed on caring about understanding the problem. Right is, is so that, that's the next place where my mind goes is like, how, what's an environment that helps you? Helps give leverage to people to like, have empathy in a really deep way for the, the problems that they're trying to work on and try to solve. And like, I, I, sorry, I'm also just thinking about like how lovely your, your [00:20:00] comment was where all of the computer vision today and stuff, if you just have, have individuals using their, their

Nabeel Hyatt: Yeah.

Fraser Kelton: and somebody like. Somebody has to bend in a weird way, like, that's such a great signal in a, and AI's gonna get that all of the

Nabeel Hyatt: Or, or let's talk about, let's, let's do a screen record and where does the person pause? Where are they confused? Where do they take more time? Like that? That's a great input into, into try and figure things out. Yeah. I, I think, I think those inputs to help solve problems helps you have to care about the problem.

I think about this a lot when a bunch of there was a funny comment on, on Twitter this week from somebody, I'm sorry, I don't remember who, who was saying, you know, all these VCs get really excited about these pe rollups of like long tail service industries and just wait until they, like, do you want to spend, I.

10 years worrying about some weird niche, boring corner of the economy. And if you do, awesome, but like, you can't just do it casually. It's not like [00:21:00] lather AI sauce on some service thing and you're done. No, you're gonna have to get, get really, really into it. If I think about those brain trust scenarios in my life, I think they've always involved.

They've always been fleeting. I've had them rarely I think peer feedback. It is really important. You know, I think, I think I, I have a quote, it's in my head forever, which is Brock, when he was talking about working with Picasso, like had a quote that was like, we were like two mountaineers roped together.

It it's just this, like, you know, and, and they're very different styles. They're not exactly copying each other. It's just this like, you know, if you fall, I fall, like, and so it's not to say that. You don't put pressure on the situation. You need pressure on the situation. It's just pressure for greatness.

Not short term, like what did you do, you know, today kind of thing. It's like, did you, did you do your best work? I think there's a lot about partial oversight as well. Like if I were to really analyze it, so it's, it's like peer [00:22:00] feedback. And then, and then, but you have the final call is probably the last bit.

A measure of autonomy, you know, in that Pixar brain trust situation. Like it's a bunch of pure directors that every week are looking at your dailies and are kind of giving you feedback. You still got the, you know, the, the, the call, like people will pour their soul into something when they feel like they have true ownership over it.

So you can't, as soon as you flip that away from true ownership, then you're, then you're, you're, you're, you're done. Yeah, it,

Fraser Kelton: the, the things that you were dancing around there is like exceptionally high trust.

Nabeel Hyatt: yeah.

Fraser Kelton: deep, deep, deep respect.

Nabeel Hyatt: Yep.

Fraser Kelton: this is a big one. Like this is why it's hard as things. Scale is like a, a, a, aligned incentives.

Nabeel Hyatt: Yep.

Fraser Kelton: You know, and, and I think then there's like all of those things that contribute to environments where there's like intellectual honesty.

There's like all of the other kind of like secondary effects that need to be present for, pushing through to something. That's great.

Nabeel Hyatt: It, [00:23:00] it's, it's, the good thing about when that works is it's kind of that, the thing that's so great about it is it's, it's creativity is contagious in that environment. Like if you put in enough passionate, quirky, brilliant people together under strong. Lights of performance that they kind of like, you know, they, they work off of each other and you get something better out of the backside of it.

And I, I'm sure that there are startups where that's happening inside of executive teams. Like I've certainly had that inside of executive teams, but you're not really cross pollinating across the industry very well right now in a time period where that probably happens. I'm sure there might be a hacker house that's probably gonna tweet and say, this is what we're trying to build.

And, and and maybe there are and I should go spend more time there, but I.

Fraser Kelton: I, I think, I think the other thing is like, at, at the core of all of these things are exceptionally talented leaders and exceptional humans.

Nabeel Hyatt: Yeah.

Fraser Kelton: on the, on the axes that matter, like the, the Pixar founders go over to Disney animation when that had been struggling for Leia, you know, a generation, and

Nabeel Hyatt: Yeah.

Fraser Kelton: it.

Right? [00:24:00] And, and

Nabeel Hyatt: Oh, but that I, that's the opposite example, right? That the great example there was like. We will always loop back to it's the founder, it's team, team, team, team, team. And what Ed was trying to prove when he took over Disney animation was like, here are a bunch of people that you thought were middling.

And it was not that they were middling, it's that the conditions of the environment in which they were working was wrong. And I can change the con, I can change the conditions of the environment and, and you will now think these people are amazing. And all I did was move some chairs around, change the way we structure meetings, change feedback cycles, change who's accountable for whom, and then suddenly like great things come outta the other side.

Fraser Kelton: That proves, that proves it. Right?

Nabeel Hyatt: Yeah.

Fraser Kelton: leader who then creates the culture for these people.

Nabeel Hyatt: Yeah.

Fraser Kelton: absolutely. Know, I when, when I think they call it the blip or something like that, when, when Sam and Greg were gone for like the weekend, there were people who during that moment were like, Greg's, Greg's a, I don't know.

He was difficult to work [00:25:00] with. And all these anonymous people, like,

Nabeel Hyatt: Good riddance kind of thing. Yeah.

Fraser Kelton: yeah. Right. And, and it's so hilarious because the most, like, first of all, great people, but also like the most technically talented people who just created the most profound things. All, all wanted to work with Greg. And when you talk to them now, like the reason that they're still there is because he's still there and like the. The culture that he creates. And so I, I believe, like, I believe that the ED moving over is like, I don't know. That means that that means that this can actually be created what you want. You just have to find the right dynamic and the right person.

Nabeel Hyatt: Yeah,

Fraser Kelton: I I have a question for you. I have a venture.

I'm, I'm, I'm getting my feet under me. New venture. Question about the world and the industry.

Nabeel Hyatt: let's do it.

Fraser Kelton: It is going to be hard for me to say much these two startup opportunities were like in, in the bullseye zone for you. And, and for Spark overall.

Nabeel Hyatt: Over the last couple weeks. Yeah, yeah. Yeah.

Fraser Kelton: over the past couple weeks there's been two things and [00:26:00] I've been. reflecting on it and trying to like, make sense of it and just like respect it at the same time for you.

And I, I want to lay out the situation and then just like you, you tell me, you tell me why that's the outcome and, and what, what I can learn from it. Two teams come in. You have long history, I think with one, maybe shorter history with, with the other.

Nabeel Hyatt: Yeah.

Fraser Kelton: They're early stage companies. I would describe firmly both founders as being nabeel type founders.

Like they're, they're, they're clearly high taste, high product founders who like, are, are quirky and weird in the, in the best possible way. Early stats look great.

Nabeel Hyatt: Yeah.

Fraser Kelton: the founders are even like, honest with where the blemishes are, and they talk about the plan for how they want to fix it, and you listen to it and you're like, oh, there's like, that's, that's the 1% answer.

Like there's, it would be hard to even have a better answer than that.

Nabeel Hyatt: Yeah

Fraser Kelton: [00:27:00] right,

Nabeel Hyatt: and I passed. We passed

Fraser Kelton: both

Nabeel Hyatt: yeah, we passed on both. We passed on both.

Fraser Kelton: we? Yeah. But it was, it was deep soul searching, excruciatingly hard moments. And

Nabeel Hyatt: I was snippy with my kids. I was sleepless at night. I was, yeah, it was, it was stressful.

Fraser Kelton: why, like, why is that the outcome? Why is that the outcome? And, and what's the lesson for me and others who are early in their careers at this game?

Nabeel Hyatt: So I, I, I don't, first of all, I'd say that it depends on how you want to invest, and I think of. Venture as a experience in self-actualization more than anything else. Like you have to be the best version of venture is one where the partner is allowed to be themselves because let's be honest, like, you know, giving [00:28:00] people money is a commodity business and nobody really knows what's gonna work or not work for five to seven years.

And so, you know, you, you the best version of you having a. Feeling of taste of the market is gonna be if you're kind of listening to yourself and your teammates and kind of working together on finding that thing. I say all that to say, I think there's plenty of other investors that are successful investors that are peers of mine that I like, that maybe would've done both deals.

Like there's just different ways of doing things. R and R Star has always been product and. I think that's probably how I would try to answer this question. There's another firm where the North Star is just people and they probably would've liked both of these people and they probably would've done both of these deals.

There's another North Star where it's market and these were both markets you kind of liked and so with some momentum, and so you do both of these deals. I think even each of those being first priority will lead you to just like wildly different [00:29:00] portfolios, wildly different sets of companies you're working with.

All with pluses and minuses. It's not that there's one way for me, this current age, if there's a defining trait, it's the fog of war. Of not knowing what exactly the right answer is, because the answer is constantly changing. Even if you think you have the right hook. The question is what's gonna happen next with the models?

What's gonna happen next with become competition? What's gonna happen next with your market? And if you navigate that through the arc of a founder, then you just try and find a founder you trust who seems good and you do good work, and you just like bet on them and you see if they're gonna figure it out.

I think that's viable. I can't, I can't do that. One, I think that would lead you in this current environment to do deals that are only people you've known for incredibly long periods of time.

Fraser Kelton: Mm-hmm.

Nabeel Hyatt: And I love betting on new people. Or it would lead you to bet on only people with the strong like [00:30:00] resume.

Like let's go get the. You know, third time founder exited for a billion dollars is doing the new thing and blah, blah, blah, blah. And I don't wanna do that either. I, I don't think actually those people, in many ways, those people have liabilities in this current environment. I think it's very hard to have fresh thinking in a new environment if you've, if you've been at Google for 20 years or whatever, pick your other like thing.

So I think for me, these were really close because they're people that had some amount of product traction. And they're really great founders that I wanted to work with, but they hadn't found actually the thing, like the product. In both cases you kind of narrowed in on a bunch of problems that startups have, but that's fine.

Every startup has risks. But in this situation, in both those situations, you kind of, we kind of like, as you navigated the product, you figured out what would need to be true about this product to really scale and be wonderful and durable. And that thing hadn't been solved [00:31:00] yet, so it solved lots of other things, which had gotten them a little bit of traction and a lot of people, a little love and so on and so forth.

But like the thing that was actually the thing you would've solved if you were starting on a whiteboard in the beginning and saying, Hey, we're trying to create X, y, z thing in this category. What's the core, core thing we really need to solve to have like a a, a hit here? And in both cases, the product had not solved that thing yet.

And by the way, the founders didn't disagree. In what case? We had a great, like, like they were transparent about it to their, to their own credit. We had conversations about it might solve it in three months, you know?

Fraser Kelton: May, may, maybe then let me like maybe push past that. So I agree with everything

Nabeel Hyatt: okay.

Fraser Kelton: said and it's, it's I, I just need to

Nabeel Hyatt: I.

Fraser Kelton: for, for everyone that I. I think on all of the criteria that that matter, we don't, we certainly don't have like a, a matrix for like, how did they do

Nabeel Hyatt: No,

Fraser Kelton: and how did they do on

Nabeel Hyatt: no.

Fraser Kelton: But on all the criteria that matter, I

Nabeel Hyatt: These are good companies.

Fraser Kelton: both were [00:32:00] good to Excellent on

Nabeel Hyatt: Yeah. Yeah.

Fraser Kelton: Good to,

Nabeel Hyatt: of green check marks. I.

Fraser Kelton: That's right. And, and I've certainly sat through conversations where we're like, Hey, listen, they don't have the thing.

Nabeel Hyatt: Mm.

Fraser Kelton: But we're going to make the investment for these reasons. What, like, this was good to exceptional on every single criteria. I would be surprised if they're not good to great companies.

Nabeel Hyatt: Yeah.

Fraser Kelton: The, you just made a face. So like what? I think

Nabeel Hyatt: I look,

Fraser Kelton: still like, are they exceptional companies?

Nabeel Hyatt: I just think about the, think about the advice that, that, that we would give to a founder going out to raise their next round. So forget me evaluating for a second. The advice that commonly give to a founder going out to raise next round is that founders navigate through fundraising.

Especially when they get lots of feedback from different VCs that are like, I'm passing 'cause of X and I'm passing 'cause of y. And they go into this kind of like [00:33:00] risk mitigation mode where they're trying to make sure there's no blemishes on their, on their deck and in their, and in their company.

They're trying to make sure it's all green marks all the way down. It's completely. I can say understandable behavior, I've certainly fallen into that behavior. As a founder, it's completely the wrong behavior. When you're going to raise especially early stage what you'd need is not a company without any risks.

You need a company that, that has identified the main and core risk to adorable business and has a big, massive green check mark there. And and ideally, the other way of wording this, the parlance way of wording this, is you're not trying to find a way. For them to have no reason to say no. You're trying to find the reason why they have to say yes.

And both of these companies, you know, in the navigation of the product you identified, what was the one thing that would be the reason you have to say yes. And in both cases, those companies had not solved that one thing to their own [00:34:00] credit. They agreed.

And there, there are other situations. This is partially because of the environment that we're in. This is true, I don't think this is true across all companies. There's a lot of like B2B SaaS enterprise startups that are a pure execution plays that are about green check marks all the way down, you know Hashim from Greylock.

Famously like says he is like never lost money in an investment. And as you well know, like that's like, like that would be hell for me. Like I, I would, I would, I would hate that 'cause it would be a sign that it was operating in markets that were just math. And it would also be a sign that I personally wasn't investing in creative risk enough with the founders that, that we were working with.

I. Without, you're not taking moonshots, like you're not taking real creative risk. So similarly, if you're in an environment where you don't fully know what the answer is and you're operating at the far edge of creative [00:35:00] risk, then the real question is whether it's an enterprise company or a consumer company, or a frontier tech company, whatever it is.

Then the just question is like, have you actually gotten to the root of like, what is the thing they really have to solve and, and then have they solved it? So that doesn't mean they didn't have revenue, doesn't mean some customers aren't interested and intrigued. Didn't mean you found some go-to-market formula that got you the edge against somebody else for a couple of months.

The importance of solving fundamental problems in startups

Nabeel Hyatt: But if you haven't solved the fundamental thing then you're not there yet. And look, I I have been kind of wrong about that. Like I.

Fraser Kelton: Of course.

Nabeel Hyatt: Yeah, look, I've been wrong about this before. I, I, like every, I've got my fomo, like, you know, jeans that sometimes crop up. I've got my anti-portfolio list of things that were missed.

You can't be doing venture for a long time without doing that. And I'm not saying that those companies won't come back around, you know cruise and Discord. Were companies that, I met those founders and I felt like the thing quite wasn't, wasn't quite there yet, knew them quite well, and then started to exhibit itself later and I had to scrape and [00:36:00] claw and run back at them and pay a higher price.

And it's, it's okay. It's okay.

Fraser Kelton: I mean, that last part just reiterates how much of this role is, is, is about humanity, right? Like you, you deal with those conversations when you don't think they have the thing with like the, the gravity that it deserves and the humanity that it deserves, and you set yourself up well for. That set yourself up.

That's such a bad term. 'cause that makes it sound quite transactional. Like I, I've heard your stories. Like you, you kept having, I think, like weekly walks with one of those founders.

Nabeel Hyatt: Mm-hmm.

Fraser Kelton: And then you, you like came back famously to the partnership and you're like, I think, I think now they actually have got it.

Like I,

Nabeel Hyatt: Yeah.

Fraser Kelton: Followed this arc over the past three months and I think they've got it.

Nabeel Hyatt: Yep.

Fraser Kelton: Yeah.

Nabeel Hyatt: But there's enough times where I've just seen a, a, an amazing and wonderful group of people come together to solve the problem. And the problem just doesn't get solved. Like it's, it's, you know, [00:37:00] sometimes it's a Petri dish of humans and they're intellect and creativity and the talent come together and like, just, that's why I ask these questions about, you know, this, this brain trusty, you know, what's the creative environment I want people to be in?

That's why I'm asking all of these questions. 'cause I think it's the right lens with which to look at our ecosystem, which is like, what are the environments we're creating for people? How are we helping nudge the environment we're gonna be spending the rest of our careers in to be healthy environments where these things are are going to have breakthroughs, not because the breakthroughs will always happen, but because this is the kind of soil in which most breakthroughs do get a chance to happen, right?

Fraser Kelton: It's also the fun part.

Nabeel Hyatt: It is, it is. I'm now talking myself into starting some kind of hacker house or incubator or something as we're on this call.

Microsoft Teams as a signal about founders

Fraser Kelton: I, I, I had, I had something happen to me yesterday that happens maybe once every three months, and I need to, I need to ask you, is there, is there anything worse in the world of venture [00:38:00] when you think that this company looks amazing? And the founder on the other side says, I'll send over the invite, and in comes an invite for Microsoft Teams.

Nabeel Hyatt: Did it come from a Yahoo email address?

Fraser Kelton: no, no, no, no, no, no. Like there was better taste than that, but I, like, oh, for, oh, for six, where like, you get on the call. As soon as that comes in, I should just, like, I should just politely decline. Like I, I, this is not going to work out. Let's save each other, the 40, the 40 minutes.

Nabeel Hyatt: My gosh, that is just unbelievably pretentious of you. Fraser, what are you talking about?

Fraser Kelton: I.

Nabeel Hyatt: You're just noticing a pattern. You are saying, you're not saying it's causation. You're saying there's a strong correlation between inbound Microsoft teams invite and the meeting not going well.

Fraser Kelton: Whoa, listen, like what do you have to believe? What do you, honestly, I, I didn't intend to go [00:39:00] down this, this hole, but like, what do you have to believe for that not to be an exceptionally bad signal about the founder that you're just about to get on a call with

Nabeel Hyatt: Oh, no, no. Let's ask it differently. What market would the founder need to be playing in that that is a positive sign and you're like, yep, that's good founder market fit.

Fraser Kelton: Oh, interesting. 'cause I, I, well,

Nabeel Hyatt: I.

Fraser Kelton: had a founder who this most recent one, I'm gonna have plausible deniability on, on another one. I made a comment that I'm like, oh, Microsoft Teams, here we go. And he, his, his argument was that he deals with customers where

Nabeel Hyatt: Yeah. Yeah,

Fraser Kelton: i'm not prepared to give 'em a pass because I think you. If you really have empathy for this sale, that's

Nabeel Hyatt: yeah.

Fraser Kelton: Bring in teams when you're dealing with that company. But why are you

Nabeel Hyatt: Why is that your default elsewhere?

Fraser Kelton: is that your default?

But I think your, your question's actually more interesting because there is a founder who thinks that there's nothing wrong with team.

Nabeel Hyatt: [00:40:00] And and like, and that's fine because of what they're doing.

Fraser Kelton: for that market. I, I that's, I I'm going to, I'm, you know, I'm gonna go out on a lemon. That is not an appeal deal. So like, I don't

Nabeel Hyatt: It's not an ideal deal.

Fraser Kelton: that's not an,

Nabeel Hyatt: I don't know what that market is. I'm sure some other VC is doing a great job investing in that market.

Ok, last thing about the Boundary Backpack, another small, little wonderful thing is they sell so, you know, you, you shouldn't have your car keys in your pocket.

You end up trying to toss it into your bag , and now you're digging in and trying to find your fingers hitting the bottom. And now it's the, so they sell a key chain. key chain has a little magnet at the edge of it. And then

Fraser Kelton: Oh,

Nabeel Hyatt: when you drop in your keys into the top, it just goes and you know exactly where they are when you open it back up again. It's like.

Fraser Kelton: the, the, that's so great. That's so great. I love it. I love it.

Nabeel Hyatt: And you know that there's some guy you were just talking this [00:41:00] ago, there's some guy who probably mentioned that in Reddit like three years ago, and, and, and then like helped design this backpack three years later.

Fraser Kelton: Nice. Nice.

Okay. That is a great spot to close , I think we should be done.

Nabeel Hyatt: Excellent.