Sajith Pai: 776 is a differentiated VC fund in that it approaches venture from the perspective of a tech company, building and deploying tools that are usually found more in the portfolio companies of VCs than VC funds themselves. They have a platform they call Cerebro, which is the operating software or platform they use to run 776 (named after the year 776 BCE when the original Greek Olympic Games were founded). The first product (or feature set) in Cerebro was enabling introductions for founders – this came as the number one requirement from founder side – by adding all of the contacts of the investors at 776 into a database and enabling a search function, and automated messaging, to remove dependency on VCs to do the intro. The second product was a semi-automated way of distributing and amplifying content by the VC fund and investors, for their founders, who didn’t have such distribution. Rethinking the VC fund as a product co aimed at tools for founders, with investing on the side, or ‘tech company that deploys capital’, was an interesting perspective that emerged from the podcast episode. Another interesting strand was the discussion on YC (Alexis cofounded Reddit which was in the very first batch of YC) and accelerators, and their relevance in today’s age, and why the new accelerator is a company formation platform (like South Park Commons which they mention in the podcast, or Entrepreneur First).
776 is a tech company that deploys venture capital
Alexis: “…what happens if we take much of the approach of building a technology company and apply that to VC? So, what if we say all the time, we’re a tech company that deploys venture capital. What does that mean? I’m the product guy. Obviously, Reddit is the first thing I designed, but I spent all my time or a lot of my time thinking about and designing product to run all parts of our firm. That’s Cerebro and Katelin Holloway is the people expert who spends a disproportionate amount of her time thinking about how we build a performance culture and how we create an environment for our founders so that they can be incredibly successful.”
“not everyone likes a scoreboard. I’ve always been on the sales side and the business side in addition to the product side where you just have metrics. Either you have 30 day retention, you have lead conversion rates and dollars generated in a quarter, you cannot escape numbers and data. And it was always so wild to me in building Initialized that somehow that isn’t a part of the culture of venture and so we wanted 776 to be a firm that had that front and centre.”
“Gosh, I thought I was in fundraising mode right now. Why am I not spending nearly as many hours as I would’ve expected to be? But then it goes a step further, which is, okay, let’s just look in the portfolio. Every investor segments out their portfolio based on say sort of rocketship like the folks who are doing really well, high conviction, going to return the fund all the way down to the ones that are adrift. Now you’re looking at your portfolio. Where did you spend your last two weeks or your last month or your last quarter? Are you spending it in the right parts of the portfolio based on their segmentation? The only way you can tell is if you are tracking it. And if you are having those hard sometimes conversations among the team to say, Hey, hold on we said we expected to spend 50% of our time with founders that are in this section. We had 10% last quarter. What happened? Or it’s hard enough, and I’m speaking for myself here. These are the tools I wanted my whole career because I want to know, my God, this founder is taking up a disproportionate amount of time relative to others. “
776’s Founder Tool Stack
Alexis: “…the first bit of software Paul (Graham at YC) built was allowing people to schedule office hours with founders, and that was when I was a partner. So, I was on that side of, I saw helpful, it was sort of a rudimentary CRM took those learnings into Initialized. And as we built that firm, we wanted to build that software and we built a sort of V2, I’d say sort of the next iteration of that, basically a CRM. But the thing that I realised was it wasn’t until I queried the database and saw just how disproportionate the amount of work was where I was like, holy cow. I had no idea just how much time I was spending with our founders relative to other folks. But then also as a manager, how do you develop a performance culture? How do you give feedback? How do you do this stuff if you don’t know where folks are spending time? And this was where there’s no way you build a multi-billion dollar company not having that kind of performance culture. “
“But when we think about then the tools we built for our founders, I went to all the billion-dollar CEOs that I had seeded and I said, what were the things that were most valuable that I did for you over the last 7, 8, 9 years?
And I took that list. And then any good product designer, I just re-sorted it based on of mention and ease of building. And the number one thing was network and intros. They said, Alexis, your network is unmatched. Your ability to land successful intros is unparalleled. That was amazing. And I’m sitting here going, okay, well what is that? That’s a database and letting you search my brain, a database is way better than actually getting on a phone and being like, Hey, Alexis, do you know someone at Twitter database is good for those queries? My brain terrible at it. So, that was the first product in the Cerebro. It was just simply a network search. And that was pulling my personal CRM, which I obsessively kept for most of my career. That was about 35, probably 35 – 40,000 contacts and then another 15-20 (thousand?) from LinkedIn that I aggressively exported and put those together, make ’em searchable, click a button, request an intro, draught the email & boom. So, that was the first version back in 2020. And again, it was just based on talking to my customers and not just any but the best ones.
It’s a power law business. So, when two dozen billion-dollar company CEOs who I seeded say that this is important, that’s who I’m building for. And we’ve expanded from that to the point now where once a company gets in our CRM through an email, through an intro, through a LinkedIn message, who knows we have software to handle that flow. So, the deal flow, everything through the pitch meeting, how we’re feedback, excuse me, ranking rating. This is to exercise the muscles of partners and folks on the team to just get better. And I’ll tell you a specific way we do that because intuition is so important in early stage. I think this is all software, if pitch company becomes Portco, then six months after the pitch we ask everyone who’s in that meeting, the same sort of characteristic questions about the founders.
So, effective Communicator is one of the ones that we rank one to five and we ask them, we don’t show them how they ranked them six months earlier, but we ask them again and then they rank them and put a little context and then we show them how they decided based on those initial pitch meetings. And what’s fun there is you’re now, once you’re six months into a founder, you actually kind of know what you got. And you could have someone who is amazing at a pitch and they’re great in a pitch setting, but terrible at communicating to you as investors, maybe problems communicating with their co-founders.
We know that’s an important attribute of a great CEO, being able to speak clearly and thoughtfully and with conviction. But intuition is how you can tell even in those handful of pitch meetings that like, yeah, it’s there, but I asked the right question, I get this slightly defensive answer. And that’s a tell that you probably struggle outside of this pitch, but how do you learn that unless you get it wrong? And then you can catch yourself six months later to be like, oh my God, I got this so wrong. “
“in the last year, we’ve started building more and more tools to help scale the things that matter most to our founders. And the biggest one, which is where you’re driving, you’re in the right direction here, is on distribution where, it’s useful that we have millions of followers across my channels, my teams and the firms. But for an early-stage company, being able to use that to say, Hey, we just launched a new version of our app and here’s the cool stuff check it out. Or, Hey, we just landed this big deal. Hey, check it out. Amplifying the content they want us to talk about is very valuable because you’re talking about millions of impressions for free, for minimal work. So, we built out this amplified tool, which is essentially like a ghost writing tool, not too dissimilar from a typeflea (?) or Hootsuite back in the day so that founders can draft tweet storms, LinkedIn posts, IG posts, all this that then get approved, edited, and approved by us and then shoved out on our accounts on their schedule. So, we have our own content team, they’re using these tools to create the actual 776 content that we’re putting out in the world. But then a founder can wake up at two in the morning and be like, oh, right, we’re launching here tomorrow make sure to please amplify it. “
Erik: “Cerebro is from what you said is it’s a tool for your founders to get access to your network and your distribution in a systemized, efficient, effective way. And also for them and you to track the work that you were doing, the response time so that they have the confidence that you’ll get back to them, that you’ll be helpful. They know exactly what you’re doing for them, also your portfolio, and then it’s also an internal tool for you to be able to run your firm better to learn from your decisions to learn how your team is operating “
Alexis: “For the last AGM, we do all our AGMs async. I recorded it, it was pretty crisp, but a 22-minute demo, so that’s probably the most boring thing I could do right now. But this is an example of the quarterly investor update or founder investor update that our founders get. Cool. And it’s just whether it’s intros, one-to-one intros at scale, that’s our campaign tool, social posts through the amplified tool and then all the other stuff every VC does of events and workshops and all that stuff. It’s an operating system for a VC fund.
…if we look at the roadmap right now, two-thirds of it is founder tooling….We didn’t have a community three years ago. We didn’t exist. Now that three years have gone by, we’re super intentional because we’re remote first, we’re super intentional. We bring people away from their homes to come in person. It’s a high-quality event and our team does an amazing job making sure it’s worth everyone’s time…And now that we’ve started to intentionally build this community, that’s been one area where folks have really asked for more to just better know how to connect with one another. On the one hand is as simple as messaging, I reproduced a type of very similar to Reddit forum called the Agora, which is for one to many community stuff that’s nothing as the Reddit guy, that’s nothing new. But thinking about, okay, how do we create more serendipity as our founder community gets bigger that allow for these high value moments to happen between our founders. “
“all the other humans who are there are either on the team of 776 in the founder community or allies of the firm. So, it’s all good. It’s high-quality humans. You go to WeWork, Reddit had a New York WeWork office right after I came back and I got us out of there as soon as possible because the more time you spent there, the worse the company was going to do just because it didn’t attract high-performing founders. And imagine that you have this Cerebro app now is also your key card to get into your 776 Agora. So, if you’re in town, if I’m travelling to LA, if anyone on the team is, now, you have a place to go where you know can work and it’s going to be worth the time of being there because all the other humans are similarly motivated to just be doing dope stuff. So, there are interesting ways we can start to layer on now that we have the scale of community and founders are asking us for this, I’m not trying to start another WeWork, but I’m trying to think through, for a firm that doesn’t have offices, I do think there is value to coming together as long as it counts. And so how do we build that in a way that makes sense with technology and our culture? So, get ready for Agora’s, IRL. Maybe next year.”
On the relevance of accelerators and why precompany building is the better model
Erik: “I think the precompany is the way to compete. YC going sort of upmarket. They used to maybe take people who were just talented in idea, but as they got so competitive, they can now have the luxury of waiting and the in-between phase before people have a company idea or maybe even before they’ve left their job. If you can add a lot of value there, maybe help them find a co-founder or help them find their idea or just create a supportive community that helps them leave their company. So, things like what South Park Commons is doing, the negative one space is the place to play. And the question is basically that I haven’t figured out yet is how do you get paid for the risk you take because you’re going earlier and there’s more risk, and maybe that leads to incubations, like what you’re thinking about in a more narrowly scoped way. So, those are the ideas I’m wrestling with.”