“The way that I've been flipping it… when [as a black woman] you have to be twice as good to get half as much, it means you *get* to be twice as good.”
Sarah Kunst, managing director of Cleo Capital, is an investor and entrepreneur who has worked at Apple, Red Bull, Chanel & Mohr Davidow Ventures. She is also a contributing editor at Marie Claire Magazine. She founded LA Dodgers backed Proday and has served as a senior advisor at Bumble where she focused on their corporate VC arm Bumble Fund and on the board of the Michigan State University Foundation endowment.
Growing up middle class in a 300-person Michigan town, it was understood that to go out and achieve more would require hard work. Early career positions offered exposure to tech heavy hitters like the Winklevoss twins and Jack Dorsey. Insatiable curiosity in their work and the Silicon Valley industry eventually provided the opportunity to break through as an emerging fund manager, raising a $3.5M venture fund in 2018. “That was the second largest, first time fund by a black woman, VC in America ever. Three and a half million, I'm not misspeaking.”
A career founded by building out early stage companies has seen multiple projects, even in the time of COVID. This includes identifying individuals out of work and bringing them together to generate ideas before ultimately launching them into companies. Diversity is key in these companies’ success. “We know that diversity drives better results… because they're going to be able to see around corners a lot better if everybody has a slightly different perspective on where the corner is.”
LISTEN AND SUBSCRIBE
SPEAKER
Sarah Kunst
Managing Director
Cleo Capital
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie: (00:07)
Hello, everyone. Welcome back to SALT Talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum at the intersection of finance technology and public policy. And we're on the back half of a great SALT Talks double-header today after a great SALT Talk this morning with former Florida, Governor Jeb Bush, and we're very excited for this afternoon SALT Talk as well. Our SALT Talks are a digital interview series that we launched during this work from home period with leading investors, creators, and thinkers. And what we're really trying to do during these SALT Talks is replicate the experience that we provided our global SALT conference series, which our guests today attended our most recent international conference in Abu Dhabi in 2019 and was extremely impressive. So we're very excited to have her back on SALT Talks, but what we're really trying to do is provide a platform for what we think are big, important ideas that are shaping the future as well as to provide our audience a window into the mind of subject matter experts.
John Darsie: (01:03)
And we're very excited today to welcome Sarah Kunst to SALT Talks. Sarah is the founder and managing director of Cleo Capital, which is a venture capital firm that she founded. She's also an investor and an entrepreneur. She's worked at some of the world's leading companies across different sectors, including Apple, Red Bull, Chanel, and previously at Mohr Davidow Ventures. She also started her career briefly as a scout at Sequoia, one of the leading venture capital firms in the world. In addition to being a contributing editor at Marie Claire Magazine, she previously founded a Los Angeles Dodgers backed startup called Proday, and has served as a senior advisor at Bumble where she focused on their corporate VC arm at the Bumble Fund. She also serves on the board of the Michigan State University Foundation endowment, and Michigan State is her alma mater. So she followed sort of a non-traditional path into venture capital, which I'm sure we'll talk about.
John Darsie: (01:55)
Kunst has been named a future innovator by Vanity Fair, Forbes Magazine 30 under 30 and a top 25 innovator in tech by Cool Hunting. She has been recognized for her work in Business Insider as a 30 under 30 woman in tech and a top African-American in tech and PitchBook and top black VC to watch. And she was also honored as a top woman in STEM by Create & Cultivate and Marie Claire Magazine named her a young gun to watch. She has written for TechCrunch, Forbes, The Wall Street journal, Fortune, Entrepreneur.com and Marc Andreessen named her as one of his 59 Unknown Rock Stars in Tech, which he came out with a couple of years ago. Just a reminder, if you have any questions for Sarah during today's SALT Talk, you can enter them in the Q and a box at the bottom of your video screen and hosting today's talk is Anthony Scaramucci, the founder and managing partner of SkyBridge Capital, a global alternative investment firm. Anthony is also the chairman of SALT. And with that, I'll turn it over to Anthony for the interview.
Anthony Scaramucci: (02:55)
Well, the only thing I can think of Sarah is I'm so happy that I wasn't competing with you for my spot at Harvard Law School in 1989. My resume sucked, I would have never gotten in up against this. I mean, this is incredibly impressive. So congratulations and really honored to have you here.
Sarah Kunst: (03:13)
Thank you.
Anthony Scaramucci: (03:15)
So I'm a little bit of the same mundane repetitive questions sometimes, but I always find this part of our talk fascinating. Tell us something about where you grew up, how you got raised, what you were thinking about as a kid and how you ended up doing what you're doing. What was the process that led you to where you are today?
Sarah Kunst: (03:38)
Yeah. Well, I mean like most venture capital investors, my first two jobs were on a firm. So grew up in a town in Michigan of 300 people and we used to ride our bikes through the irrigation because we didn't have fancy backyard pools, which turns out was probably not the best thing because it wasn't exactly organic farming. But I'm still here and my skin didn't fall off. So came from this tiny town and always had an eye towards... when I was young, I would just read constantly. I would go to the library and I would just pick an aisle and read my way through it and then read my way through the next aisle and read every magazine I could find.
Sarah Kunst: (04:17)
And as soon as somebody gave me the internet, I started playing around and learning how to code a little bit and was always just deeply curious, and had parents who were always really supportive of it, but made it clear to me that, Hey, we're nice, middle-class people and if you want more, you're going to have to work really hard. And so I always grew up with a ton of curiosity and a ton of understanding that if I wanted it I'd have to work for it. So I did not inherit $400 million from my dad, like your former employer. So I had to start somewhere.
Anthony Scaramucci: (04:50)
Hold on. It was 421 million, I think. No, I'm just kidding.
Sarah Kunst: (04:54)
I know I didn't even inherit the 21 million. So I started there and I worked at KFC in high school, which I still am trying to get on their board now because I think I'd be the only board member who actually worked there. And after high school went to Michigan State and I started working in tech because I needed to work. So worked at Apple, as a campus rep and that sort of opened my eyes to there's a whole business and marketing side of business. I was an advertising major in the tech industry. And the consumer internet was just starting to explode or you remember the day we got Facebook. And so those seeds were laid early. Went to New York after college. It was 2008, I worked in marketing at Chanel, which was a great job. I got amazing discounts, but it turns out 2008 was not exactly the right time to be in luxury marketing, so that didn't work well.
Sarah Kunst: (05:43)
And when that sort of started hearing names like Madoff and Bear Stearns falling, it became clear that that luxury was not going to be the place to be and I jumped over to the tech side. I ended up working for the Winklevoss twins, at a media startup they had at the time and got to get a really kind of front row seat to what was going on in the tech world. That was kind of post Facebook lawsuit, pre Bitcoin. I was incredibly early in crypto but I did not savour or mind nearly enough. But I have an email from 2011 where I said, I'm telling all my Tinder dates about Bitcoin, which is really kind of the email of an era.
Sarah Kunst: (06:29)
And I was in, and once I was in the tech world, I saw how innovative it was, how fast moving, candidly how fast you could make and lose a bunch of money. And I was hooked and worked in startups for several years, ended up as a venture capitalist at a big fund. Started a company, raised some money, lost some money. And when I was thinking about what to do next a few years ago, I'd become a general or a limited partner investing in venture funds at Michigan State University. And I just saw this hole in the market where early stage investors, especially who looked like me just didn't really exist. And I said, well, I have all this experience. I have a ton of passion for helping founders. Why don't I go start a fund? So I did it.
Anthony Scaramucci: (07:10)
Well, first of all, congratulations it's an amazing story. And I think it's all that we have a lot of young people that listen to these talks. And I think it's a lesson for them that you have to think very boldly and you have to be willing to take on the risks that you've been able to take on. So congratulations for all of that. Before I go to the next question though, tell me about Bitcoin for a second, your opinion of Bitcoin. What's your opinion... and I'm an old fogy, so I don't really understand it. We had the Winklevoss twins at our conference. I thought they did a magnificent job of explaining it, but put it in your words, do you like Bitcoin as an investment, do you see a future for that digital currency? And if so, why? And if not, why not?
Sarah Kunst: (07:50)
Yeah. I mean, I think if you want to day trade cryptocurrencies, you still certainly can, there are other cryptocurrencies that are maybe better than Bitcoin because there's more fluctuation. But the reality is that the world is only getting more digital and when you look at sort of Tyler Langlois, once described it to me, as Bitcoin is gold with wings. So it's sort of the ultimate hedge, it's your ultimate bug out bag but you can access it from anywhere. And we see that when you watch the amount of crypto that's been purchased by people in places like China, Venezuela, there's a huge understanding of that.
Sarah Kunst: (08:25)
But then the other thing is that as the world gets more digital, as there's less trust in our day-to-day lives, the ability to have a distributed ledger that allows us to, I don't have to trust you to take money from you because there was sort of the ultimate escrow in crypto, if done correctly. And so I think that will all cash go away and will all credit go away and will people only use crypto? I doubt it in the next 10, 20 years. But do I think that cryptocurrency which far predates Bitcoin is here to stay and has a real relevant place and the blockchain is a distributed ledger and kind of source of truth, have a place in our very digital and very kind of fake news world moving forward? Absolutely, I do.
Anthony Scaramucci: (09:14)
Okay. Well, good to know. I got to do some more homework on it personally. I'm obviously well behind everybody else. Silicon Valley, Wall Street, not just Silicon Valley, Wall Street, but many areas of our economy struggle with diversity and it's not just race, it's also gender. So you are a young black woman working in the industry. How hard was it for you to break in and what's the experience been like for you and how do we make it better? Because we obviously have to make it better. So how are we going to make it better?
Sarah Kunst: (09:46)
Yeah. I think that getting in wasn't particularly hard partially because the way I did it was such a side door, that it was a little Trojan horse ask. And I won't pretend that was my master plan, the website I worked out for the Winklevoss twins, that kind of got me into tech, was a nightlife website called Guest of a Guest. And so I wasn't coming into Google saying, I'm going to be your lead engineer. I was for years, just kind of a PR and biz-dev girl floating around New York. But the difference is that I would meet these people via Jack Dorsey, Garrett Camp, the Winklevoss twins, some of the early Facebook team, all of these people who went on to become huge tech names.
Sarah Kunst: (10:30)
And I wasn't just interested in going to a party with them. I would literally sit them down and ask them, one of the richest tech billionaires in the world before he became that. I remember when Nate was trying to hit on me. And I said explain to me what a down round is, which is when you raise a round of capital at a lower valuation than last round. And the poor guy was like, I'm half drunk and trying to hit on this girl and she's making me explain finance concepts. And it was like five years before I ended up in venture capital.
Anthony Scaramucci: (10:56)
Was he able to explain it half drunk?
Sarah Kunst: (10:59)
He did an okay job, but he's also never had a down round. So I guess it's partially that he didn't have the firsthand knowledge.
Anthony Scaramucci: (11:04)
John and I didn't know this, so I'm going to keep interrupting. Did you give him the Heisman or karate chop at the Adam's Apple? What did you give him?
Sarah Kunst: (11:11)
I let him walk me home. I shook his hand good night. And I went into my doorman building and said, don't let that man inside.
Anthony Scaramucci: (11:17)
All right. Good for you. We'll be teaching diversity training and combat skills and all that [crosstalk 00:11:25].
Sarah Kunst: (11:24)
Exactly.
Anthony Scaramucci: (11:25)
Good for you.
Sarah Kunst: (11:26)
So for me there was a lot of that to get in, but then once I was in, there was certainly a place, especially when I went out to Silicon Valley where you really ran into that glass ceiling. And it was clear that if you thought that you had an equal seat at the table, you were wrong. New York historically has been a much better place for female founders. I think it's a better place for diverse founders, but the reality is the real money in our industry is in Silicon Valley. And if you've following along some of the sagas on Twitter recently, Silicon Valley is still not great at diversity.
Sarah Kunst: (11:58)
And so for me, it was looking at that and saying, nowhere is great at diversity in America. So if we're going to go into investment banking, even female teachers are paid less than male teachers. Even though we think of it as a female profession, does that make sense? So what I decided to do was just sort of figure out a way in, and make friends, make allies and just keep going. And I raised a three and a half million dollar venture fund in 2018. That was the second largest, first time fund by a black woman, VC in America ever. Three and a half million, I'm not misspeaking.
Anthony Scaramucci: (12:33)
Well, good for you. I think there's something that you're doing. If you don't mind me saying, and I want you to react to it is you're pushing ahead despite the obstacles, you're not becoming overly sensitized to the obstacles, you recognize the injustice of them, but you've got your four-wheel drive moving over them irregardless of them, is that fair to say?
Sarah Kunst: (12:55)
Yeah. I mean, I think that there's nothing else you can do. What am I going to do? Just curl up in a ball and die. I have to do something to make money. I have to do something to build my career. And I still think that out of every industry, tech's one of the only industries where anyone can become a billionaire in five years. You can't just pop up from a state school or a college dropout and go make a bunch of money on Wall Street because you can't get through the door. There's such a high barrier of credentialism. And so I still think tech is the best place. It's just that even the best place in a country like America is still pretty crappy.
Anthony Scaramucci: (13:33)
But there's something very admirable value, this is my observation of your career. And when you spoke at SALT and things that you're doing, you don't have a chip on your shoulder, at least you don't appear to have a chip on your shoulder. When I was told the early part of my career, I'm not going to mention the firm or the name of the person, but they told me that I should be really landscaping their property as opposed to working inside the organization with them. And the person just literally flat out said that to me. And I was probably less emotionally mature than you are Sarah. And I got upset about that and it really bothered me.
Anthony Scaramucci: (14:06)
And so, of course I overcame it and I said, you know what? I got to go start my own business because this way I'll be able to have a better control of my destiny without those biases and prejudices. So have you done that? How have you managed because many people listen, the injustice is there. It's subjectively there many people get very upset about the injustice. And I'm not saying you're not upset about it, but you seem like you don't have that chip on your shoulder, which I think is a very healthy thing. I wish when I was your age, I didn't have it, frankly. And so how are you doing that?
Sarah Kunst: (14:39)
Yeah. One, shout out to my therapist, we spend a lot of time on this stuff because it is frustrating.
Anthony Scaramucci: (14:46)
We need to get a referral to the therapist. So just remember, when SALT Talk's over, I want the therapist's number. I know I'm not going to get the same therapist, but a comparable one, but go ahead, keep going.
Sarah Kunst: (14:55)
I like it. So, that's certainly a huge part of it, but I think I've had this conversation a lot with startup founders. And there's a scene in the black community. And I think other communities, marginalized communities have the same sort of ethos where you have to be twice as good to get half as much. And it's just deeply unfair when you think about that. But the way that I've been flipping it recently when I'm talking to founders, because that is still largely the case is, when you have to be twice as good to get half as much, it means you get to be twice as good. And so there is no one, you guys know a lot of emerging fund managers.
Sarah Kunst: (15:31)
There are very few emerging fund managers kind of White dudes who sort of showed up and ask a couple of people for money. And they got it because they went to the right school or grew up in the right neighborhood, who I would not be happy to go toe to toe with and look at my contacts, my track record, my network, what my founders think of me, my reach, my press presence, all of that stuff. There are very few people that I wouldn't win.
Sarah Kunst: (15:56)
And so if I have been forced to be this good, but I also am this good, great, I'm this good. And so to me constantly being angry about the way the world is, doesn't get you nearly as far. And then the last point I'll make is, in history class, in fourth grade or whatever, you have to write a report about the time of history that you would have most liked to live in. For me, it's literally every day, because even with what's going on in our world, our government, our everything, Black women have never had more rights than we have right now. We've never had more capital. We've never had more freedom. We've never had more autonomy. We've never had more potential. And that's on one hand, just deeply sad. But on the other hand it's, how lucky am I that I'm born now and not 80 years ago?
Anthony Scaramucci: (16:46)
Well, I mean, I'll add something to that, which I think is a very excellent perspective on your part, but you're also a pioneer and a role model for the future. And so, I did a lot of work in the gay community related to marriage equality and some of the people said to me, it was rough for me 30 or 40 years ago. It's easier for this generation. Maybe it is, or it isn't, I'll let the generation make the comment themselves. But the good news is those people felt rewarded by the work that they had done, that they were making it easier for future generations. So, God bless you for all of that. John is dying to ask questions. And I'm trying to big for John right now, I'm trying to put [crosstalk 00:17:30].
John Darsie: (17:30)
I'm just hoping that by the end of this talk I'm still employed. I stumble over reading the intro every time we do this show. And Sarah is obviously so intelligent and eloquent that I'm just hoping I don't get fired after we get done with the SALT Talk.
Anthony Scaramucci: (17:44)
You're not getting fired. I know that's why you have all the sympathy, baby pictures up there on the wall. He usually has this really big waspy bookcase that he's trying to impress people with. But now we're going with baby pictures. So maybe he does feel like he's getting fired, but don't worry. You're not getting fired. So two more questions, then we're going to turn it over to Mr. Darsie. Your startup, you worked in different stages at places, Apple, Red Bull, Chanel. How were those companies different and how are those companies similar? And I'm just wondering about the ethos of a successful business culture. Are there elements in each of these businesses, even though they're in very different sides of the economy, are there similarities in these businesses or not?
Sarah Kunst: (18:32)
Yeah, I mean, absolutely. So to speak specifically about Apple, Red Bull, Chanel, I worked at all of them by the time I was 24. And there's two kinds of common threads, Red Bull and Chanel are both largely privately owned. And not necessarily by the original founders, but they're still very tightly held. And then Apple, I worked there in college and so it was sort of right at the end of the Steve Jobs era. And that, well, a public company was so driven by his vision and the striving, those companies are... Apple's amazing on margins, really all of them are good, solid, fundamental businesses, but they're really marketing machines. Chanel is selling you things you can buy a 1000 other places, as is Apple, as is Red Bull.
Sarah Kunst: (19:21)
The reason that you're choosing them. And the reason that they're all category leaders is because they understand something about product in marketing that in just a drive for excellence in those areas that very few companies, either one, understand and two, are willing to double down on. And it's that consistent sort of, excellence is a practice. And you have to set a bar for yourself that's so high. And then anything that doesn't meet it, you have to reject and you can't rest on your laurels. And so I think when you look at why and how these companies, particularly Chanel and Apple have managed to continue to just so out perform their peers. A friend of mine said, retail's in a free-fall with COVID and Chanel increased their handbag prices by $1,500 because they do that every year.
Sarah Kunst: (20:12)
So the best time to buy a Chanel bag is always today because next year it's going to be, the prices only go higher and they can do that because of the excellence and because of the brand integrity. And so it 100% sort of shaped the way that I view the importance of brand and legacy and reputation and integrity. Because if you have those as a company, you can keep thriving even when nobody else is. And if you don't, as soon as there's a downturn or a hiccup, you're going to be done for it.
Anthony Scaramucci: (20:42)
Makes total sense to me. I think it's again, another insight, somebody down on their dumps, they got fired from a job. Let's say they said something stupid on the job. And they got unceremoniously fired after 11 days maybe, something like that. What would you recommend to that person down in the dumps, that's been blown out of a situation?
Sarah Kunst: (21:07)
I used to be the queen of trying to fix things. Something would go wrong and like, how do we fix it? How do we salvage it? How do we fix it? And now I generally have, it's almost like falling knives, should you try to catch a falling knife? No. You'll end up stabbed, you'll let it fall. And so, I remind myself of this consistently when things fall apart, let them fall and that's not everything. That's not, I'm never going to pay rent again, whatever. That's, if you're doing your best and you're showing up and you're putting kind of Goodwill and good faith into something, and it's still not working and you do kind of the reasonable amount of work to make it work. And it just won't work. Then stop and consider that maybe you let it fall apart. And then the next thing, the next act, the next whatever is going to be 10 times better.
Sarah Kunst: (21:55)
And I think we intrinsically know this in maybe our dating relationships. How many of us have spent way too long? And then we are like, Oh my God, I should've dumped that person a long time ago when they first did X. And I'm so much happier with the new person, but we don't always translate that into our work lives or even things like with COVID. If you're trying to salvage the before, if you guys were trying to pack us all into, an Abu Dhabi conference room right now, this wouldn't work nearly as well as the talk series, which has maybe opened up a whole new way to reach people.
Anthony Scaramucci: (22:27)
I agree. So your message is try to go with the flow and evolve as you go. Don't worry about the fall. I think it's a good message. Okay. So I'm going to turn it over to Mr. Darsie. Go ahead John. We've got tons of questions for you, and it's really great to have you on Sarah.
Sarah Kunst: (22:47)
Thank you. Great to chat.
John Darsie: (22:48)
So Sarah, you worked as a scout at Sequoia briefly, and you worked for a couple of other venture capital firms. First of all, for people on the call who might not be familiar with the role of a scout in Silicon Valley, could you explain what that means? And then also, I know during the pandemic, it's very interesting we talked about this in our pre-call the other day, you started a fellowship program for people who have been laid off during the pandemic, which I think is ingenious, because what you have is so many talented people that have been laid off because of things purely out of their control. But if you're a company looking to hire tech talent right now, it's actually a great time to be hiring because of all these talented people who are now out there on the street, talk about what you did with that fellowship. And what motivated you to do that, after you just explain to people what a scout does.
Sarah Kunst: (23:34)
Yeah. So scout investing is an esoteric little area of venture investing. And it started, kind of 2008, 2009 when Facebook blew onto the scene, and if you were in college then, or you were kind of right around that 17 to 23 year old age range in the call, 2005, you were very aware of Facebook. If you weren't, you had no idea that it existed. And if you've seen the movie, The Social Network, you kind of see some of that play out where all these big venture funds are like, wait, what is this thing? And by the time they knew about it, in an ideal world, as a VC, you own maybe 20% of a company at the first round of funding. And you want to buy that for maybe a half a million, a million bucks.
Sarah Kunst: (24:17)
If the company has grown to millions of users, and that seems percent of the company is going to cost you astronomically more. And so scout investing came out of the insight that the rise of the consumer internet meant that VCs couldn't see every single company on day one anymore, or day zero. But that, because they invested in all these startups, they had this long tail of people who weren't yet personally liquid. They're not rich, they're coming out of college, they're joining a startup, they're making a little bit of money, but they have this massive network. And they know which of their really smart friends are starting companies and going to work for companies. And so scout investing is basically angel investing on somebody else's dime. So when I was a scout at Sequoia, I was angel investing. Just like many of you might, the difference is I hadn't worked in finance first. So I couldn't just go into my bank account. I was going into Sequoia's bank account, which is much bigger, so it's much better.
Sarah Kunst: (25:11)
Bu that's what scout investing is. And over the life of, since scout investing has been introduced, there's been amazing returns. Jason Calacanis, who's a pretty high profile angel investor. He invested in Uber and Twitter through a scout vehicle. So it wasn't his own capital. He was making a little bit on the back end once the money came back. But those early dollars that turned into in the case of Uber or a 50,000 X return. A lot of that ended up going to Sequoia. And so it's a great deal for Sequoia, and it's a great deal for Jason because investing other people's money when you don't have any, is far better than not investing at all. And so I was a part of Sequoia's program and loved it so much that it's even a part of my fund now.
John Darsie: (25:57)
Fantastic. And talk about Chrysalis for a minute. So I thought that was a brilliant idea to take all of this great tech talent that has been laid off as a result of the pandemic, again, because of things beyond their control and bring them all together to help incubate new startups and to help each other find new jobs and things like that. Talk about that program, why you launched it, what the result was and what it taught you about the industry.
Sarah Kunst: (26:22)
Yeah. So, I remember in 2008, early 2009 just the world, all of a sudden fell apart. New grad, working, and all of a sudden my friends who hadn't yet gotten jobs, there were no jobs to be had. And people who worked at companies they were downsizing and when I went to switch jobs, the landscape could not have been more different than then what I would intern in New York in 2006 and money grew on trees. And so seeing that, I ended up at a startup and I ended up at a startup partially because the bigger obvious companies to move to weren't hiring. And I'm so happy that I ended up on that path instead of saying, Hey, I'm kind of done at Chanel maybe I'll go to Louis Vuitton. And then just being on this other rollercoaster that took me in a very fancy, but totally different direction that I don't think was the right path.
Sarah Kunst: (27:16)
So fast forward to the spring, when in one month tech lost 30,000 jobs. So companies like Lyft, Airbnb, there's layouts everywhere. There's hiring freezes, sales teams for almost everybody were just slashed. And it reminded me so much of that 2008 moment and some of the world's richest venture capitalists, would go on Twitter and say okay, it's time to build. And then everyone's like, great. What do we build? How, and they're like, I don't know, I'm on my yacht. It's time to build, you go figure it out. And I looked at that and I was like, I don't have a yacht yet, but I know how to build. And I know how to hold space for people to come together. And I know how it feels to be like, Oh my gosh, my entire plan, my entire life, my salary, everything just got blown up. What does this mean about me? Not understanding that it has nothing to do with you and it has everything to do with macro economic circumstances far outside of your control.
Sarah Kunst: (28:13)
And so I thought, I can't give these people money. I can't fix a pandemic. But what I can do is create a space, we largely use Slack and we created a space and Tech Crunch wrote about us. We had 100 of applicants, we ended up accepting a few over 100 people. We had everybody from a CFO of a publicly traded company to literal rocket science PhDs, tons of tech workers across all different disciplines, all different geographies. We had people from Israel. We had tons of people from America, people from all over the world. And so we all came together and I said, okay, guys, you got to just start generating ideas.
Sarah Kunst: (28:51)
Because these are all people who are deeply successful in their careers and they were great at building startups for maybe Series A on, but that zero to one. That idea of space, it's not hard to do well, but if you've never had to do it before, then you just truly don't understand it. So we literally, I just made them start using their idea muscle. Every day, without fail you had to log into Slack and share five ideas, they can be terrible ideas. They could be great ideas. They could have something to do with tech. They could have nothing to do with tech. You just had to start throwing out ideas and talking with other people about ideas. Then after a couple of weeks, they started to spend more time with each other, chatting, getting to know people, doing little calls around ideas and teams started to form.
Sarah Kunst: (29:36)
And then we took them through the Google kind of sprint process design sprint of bringing an idea into the world quickly, they started testing ideas> By the end of the six week program, we had over 20 projects that have been started over 10 of them are actual companies. They're C Corps, they are incorporated. We've had multiple companies get into accelerators. We've had a lot of people get jobs through networking in the program. Some have gone into venture capital now themselves. And we have people who are earning money and revenue for their companies. And these are all people who came into the program with no thought in their mind, March 1st or even March 31st of 2020 that they were going to get laid off and become a startup founder.
John Darsie: (30:25)
Well, that's incredible. It's great to hear. Something that we try to do at SALT, as well as make mutual introductions and to incubate the type of idea generation that you did in such a short time post pandemic. And congratulations on building that out so quickly. I want to talk about investment trends for a minute and your fund, Cleo capital you're invested, I think in 20 plus different startups, what types of investment themes were you focused on pre pandemic? Do you still believe in all of those themes and are there any new themes or acceleration of different trends that you've identified as a result of the pandemic that you're particularly excited about putting money to work in those channels?
Sarah Kunst: (31:06)
Karen Levy from boxes is one of my investors and he sat on Twitter and I deeply agree with it that what we're seeing right now during COVID is the acceleration of seven years worth of digital transformation for companies happen in a number of months. And will there ever be offices again? Of course there will be, when the pandemic end, they all do eventually. But will it ever be okay to say, no, you can't call in on video for this. Even if you have a really good reason to no, you can't possibly do this job remote. No, the only way we can get work done is by all being in person 40 or 60 hours a week. I think those days are over. And when you think about it, what are work hours 9:00 to 5:00? Why is it eight hours? Well, because there's 24 hours in the day and Henry Ford needed three shifts to make Model T's around the clock. That was 1905. So now we're 105 years later and some random guy's, random idea to maximize output of factories is still what governs our day to day, the majority of our lives.
Sarah Kunst: (32:17)
And so I think that acceleration is somewhat permanent. I think that very few investors, venture investors are investing in companies now that are strictly around COVID because pandemics don't last forever. Companies, I invest at pre-seed right which means that most of my companies are at least 10 years away from selling our IPO. And there may be only a few years away from going public via SPAC, but we're still not there. And so the idea that I want to invest in companies that are building for the moment instead of building for the next decade is just not going to be accurate. So that being said, I think the other sort of pandemic in this country, that's coming to stark relief this year of racism and social injustice has also accelerated some trends where people are saying, Hey, AI. It's always a joke every year or so some new fancy organization releases an AI bot on the internet and says, Hey Twitter is going to train it.
Sarah Kunst: (33:20)
But then 24 hours, the bot is basically a deeply racist, sexist, homicidal maniac. And that is without fail because when you just learn from Twitter or when you just learn from people in the world, you realize the lowest common denominator is really low. So is a company that does AI for good. Suddenly feel more relevant, post the protest this summer? Yeah, I think so. But it was always relevant. It's just that nobody was focused on that. Does the bot for pandemic detection? Is that going to be interesting if it also works for other, social health issues, public health issues? Sure. If it literally only works for the very specific strain of SARS-CoV-2 then that's probably not going to be very relevant in even three or four years.
John Darsie: (34:09)
So I want to talk about seed stage investing for a little bit. Late stage venture investing growth capital is, I wouldn't say straight forward, but you have a data set. You have a company history to go off of, and you can do it in a more robotic way in terms of identifying companies that are still private. But if it basically shown, promise that they're going to be a successful company. Seed stage investing, and there's a lot more art to it, I would guess than there is science where you're having to identify certain character traits and founders, you're having to evaluate different ideas. What are the prevailing characteristics that you look for in companies and in people that you're investing in at a very early stage?
Sarah Kunst: (34:51)
You're absolutely right. With a later stage company, you're sort of looking at historical performance and guessing that the future results are going to hold relatively. And it's almost more like private equity at a really early stage. With startups, it's basically going into a hospital nursery and looking at babies and guessing which ones are going to be successful adults. And so it is a lot more nebulous. And when you think about that analogy, what you want to know is less about the baby's height or weight or whatever, responsiveness to light. What you want to know is one of the baby's parents like? What environment is this baby going to be raised in? And it's kind of the same as startups where you're around saying, is this founder coachable? Who else is on the team? What does the market look like? Who have they found to get around them as advisors? How do they?
Sarah Kunst: (35:47)
It's a lot of kind of blue sky questions and sort of feeling through, is this founder going to be responsive when a pandemic hits, when a new legislation hits, when Google decides to get into their space or are they going to be super dogmatic and say here's the path I'm following the path no matter what. And you're like, okay, but the bridge ahead of you is out. So are you sure you don't want to take a different path? You're going to fall through and they're like, no, no, I'm good. This is the path. So I look for kind of, I would say a lot of neuro-plasticity. I want people who are learners, who take advice, who take other people's opinions, who think fast, who are nimble. And for me, that also means, we know that diversity drives better results. So I also want to see a diverse team and that doesn't mean 10 people who look like me around the table. It means a diverse team because they're going to be able to see around corners a lot better if everybody has a slightly different perspective on where the corner is.
John Darsie: (36:48)
So we have a question from one of our viewers about scouting. So a lot of what you described as scouting is that as a young person or somebody from a unique background, you might have special insights into different companies that are being launched that might not be on the radar of the top tier private equity for venture capital firms. Our question is about international scouting. So you came to SALT Abu Dhabi in 2019, you were at Milken Abu Dhabi as well. And I know you attend a lot of events and you speak at a lot of events and you're obviously a great speaker. What do you see as the opportunity internationally? In terms of scouting startups, do you see sort of a rise in entrepreneurship and some markets that aren't traditional hubs for entrepreneurship, whether it be in Africa, the middle East Asia, and are you looking to get involved in any of those markets?
Sarah Kunst: (37:40)
Yeah, I mean, absolutely. I think that you'd have to really not be able to read the tea leaves. You'd have to have never gone to a world history class in your life to think that Silicon Valley will always be the hub of innovation. We also know if we're being totally honest with ourselves, even our president knows that China's sort of the new hub of innovation right now. Silicon Valley still has a massive edge but there's a lot more neck and neck there. And very few startups, very few unicorns in Silicon Valley, China, or anywhere else in the world, aren't getting a ton of their engineering talent from India, from Russia, from former USSR countries. And so there is innovation everywhere. Estonia is a country of 3 million people. And most of you couldn't find it on a map if I gave you 100 bucks. But Skype came out of there and now it's this massive powerhouse. They have the most advanced government in the world.
Sarah Kunst: (38:37)
So innovation, I am not at all the person who coined this, but talent is equally distributed and opportunities aren't. And I think that the same way, John, you and I kind of came up in an era where maybe for our parents' generation, the idea that China would be an economic powerhouse was crazy. But then for us, it feels weird to think that that wasn't always the case. I think that our children and certainly our grandchildren someday are going to be like, what do you guys mean you didn't think that Africa was going to be a massive powerhouse? What do you mean you didn't think the middle East would be a massive powerhouse? When you look at the populations of the world, a lot of Asia is aging out. And a lot of Europe, the average age is getting a lot younger. Meanwhile, in places like Turkey, you have the majority of the population is under the age of 25. And in most of Africa, that's the case.
Sarah Kunst: (39:28)
And so there's so much more one, just more people and more ability to innovate because, the smartphone penetration in the U.S. is so high, but you can go to countries where they're just getting started with those things. And so there is a worldwide sort of, I think moment that we are quickly moving towards just a lot more innovation. And I think that if you are not aggressively looking at your strategy to get allocations, to get capital in some of those markets and to fund people from those markets and to help support people who sort of come here for education or jobs like boomerang back and start companies there, wherever there is. You are missing the boat by so far, and it's not a boat. It's the fanciest out in the world because this will be the trillion dollar opportunity, in the next 20 years. And as I think I've said before, I really like yachts.
John Darsie: (40:27)
There you go. I think you do these long-term seed stage investments. So I'm timing it out as price, six or seven years until you have your yacht. I'll be coming to you around then.
Sarah Kunst: (40:37)
That's [crosstalk 00:40:37] more than five years from being a billionaire in my industry.
John Darsie: (40:41)
There you go. So I wish you'd told me about Bitcoin in 2011 on Tinder.
Sarah Kunst: (40:46)
Where were you on Tinder?
Anthony Scaramucci: (40:49)
Why don't you take your pictures down and give it up ad go join Sarah. Okay. I can see where this is going Darsie.
John Darsie: (40:55)
Maybe, but on that theme of international entrepreneurship and technology development, we have an interesting SALT Talk coming up in a couple of weeks with a guy named David Halpert. His fund is called Prince Street, but he coined this term called digital decolonization, where it's basically the idea that all of these countries, rather than allowing Google and Facebook and Apple to come in and swallow their tech industries domestically, there's sort of a tech nationalism that's on the rise where these governments are looking to provide a platform for companies domestically to be successful. And so Google, for example, just bought a large stake for many billions of dollars in reliance industries in India is an example of that.
John Darsie: (41:36)
And it'll be fascinating, you and I have traveled a lot internationally, and it's just so exciting to do our SALT conferences abroad and to travel and talk to people in these different places. Because like you said, the demographics in places like Southeast Asia are exploding in a very positive way. And in 20 years, like you said looking back at some of these things, it's going to seem obvious. But right now people aren't necessarily as focused on it as they should be.
Sarah Kunst: (42:01)
Yeah, I absolutely agree. And my thought, if I were sort of talking to some of these countries concerned about the digital decolonization issue and I think that India and China provided a pretty good groundwork for this. I think that there's something to be said for letting these big companies come in and train your workforces and build up connectivity and sort of get people to understand that you always want to learn on somebody else's dime. The startup work I did for the Winklevoss twins, it was probably some of the worst sloppiest work I'll do in my life. Sorry, Cameron and Tyler, because I was 23 and learning. And I would have much rather learned on their dime than learning now, when I'm having to run my own shop and pay myself my own salary. So, I think some of that happens in this digital decolonization where these countries are hopefully letting these companies in really learning from them, but keeping an escape patch so that they can also say, Marie Kondo style, thank you for your service, you no longer bring me joy. Goodbye. We're going to start our own, whatever it is.
John Darsie: (43:09)
All right. Well, Sarah, it's been a pleasure having you on. Anthony, do you have a final word for Sarah? You're ready to replace me now? Two minutes later.
Anthony Scaramucci: (43:21)
No, I just want to say to her, if I ever get fired again, because anything can happen in my life. I'm calling you for the referral to a therapist. I'm going to ask you for a job, Sarah, what else can I do in a situation like this?
Sarah Kunst: (43:33)
You can always come be my intern.
Anthony Scaramucci: (43:35)
Say it again.
Sarah Kunst: (43:36)
You can always come be my intern.
Anthony Scaramucci: (43:38)
Okay, great. I would look forward to that. Okay. At some point that may be a better job than what I got now. So you never know, you never know what's going to happen, Sarah. But I want to congratulate you on what you're doing and your courage. But more than anything, I want to congratulate you on your attitude and your spirit. And so may that take you as far as you want to go, Sarah. God bless you. Thank you for joining us today.
Sarah Kunst: (44:02)
Thank you.