- Duration: 66 min
- Platform: zoom
- Source: Read.ai 01J602RYDVMVCXDSHAJC5WKM3B (https://app.read.ai/analytics/meetings/01J602RYDVMVCXDSHAJC5WKM3B)
Transcript
Ben Ornstein: Yo, what’s up, man? How you doing? Ben Ornstein: Pretty good. How are you doing? [Michael Houck]: I was just thinking about how crazy it is that, like, I feel like we’re doing so many different things together now. And we literally met just because of the podcast that you were doing. Ben Ornstein: I thought about that the other day when I was explaining, like, you know, that I was working with you. And it’s so cool. I was I was like, holy crap, we’re doing like 12 different things. But I absolutely love it. [Michael Houck]: Dude, I’m glad. Look, as long as it’s stuff that you’re genuinely interested in, and that’s like, exciting you, like, that’s what I want. So I want to make sure that with everyone that I work with, my goal is always to sort of align my goals with the work along with their interests. And so as much as I can do that, that’s what I want to kind of be able to provide. Ben Ornstein: 100% feel like everything has worked out really well. I knew that AI stuff in the beginning was going to be a challenge because I had had almost zero exposure to it, but it was it was great to like get my hands dirty in with that, but like, Even even still, I think it’s it’s been great. [Michael Houck]: Yeah. I mean, I still think there might be something there for us to come back to at some point, but there’s just like very low hanging fruit opportunities in front of us right now. That makes sense to prioritize. So I’m glad, man. Um, I mean, podcast seems, I mean, now we’re launching soon, but all this stuff beforehand has been really good. So, um, and I love that you’re just taking over the case study process and, um, the quality of the ones you put together have been really good. So yeah, I mean, I’m loving it. It’s great. Ben Ornstein: Yeah, no, the case studies have been fun. I’ve really enjoyed them. And, uh, like I spoke with my friend Keith from bus ride the other day, I had heard stories that I had never heard before. Like how he got through COVID was absolutely nuts. And I hadn’t heard the stories. So, um, yeah, no, amazing, amazing stuff. [Michael Houck]: Yeah. We want to be able to get that like unique, like, I think you said it like content that’s not available to founders anywhere else in the internet. Like that’s the goal. So, Um, all right, cool. Well, I guess on the launch house stuff, I’ll just throw it to you. Like walk me through it. Like you, like you would with any kind of guests, basically. Ben Ornstein: A hundred percent. Yeah. Well, I think a great place to start then would be if you could introduce yourself and a launch house. [Michael Houck]: Yeah. So, I’m Michael Houck. I founded Lunch House in the summer of 2020 after getting laid off at Airbnb as part of the COVID layoffs. I was the product manager for Airbnb Plus. Before that, had been part of the early team at Uber Eats, a small part of growing that business across, you know, when I joined, it was only a few cities in the US and a couple in Canada and then nationally, I think. But Yeah, Launch House came out of an idea where, well, I guess concisely, Launch House was a membership club for startup founders built around a one month long co-living experience where we put 20 plus founders in a big house together and ran programming for them to help their startups and also help them become better founders, learn from us, learn from each other, and bring in a lot of great guests and speakers and things like that. We ended up also raising a venture fund where we started investing in the startups. Not all the startups, but some of the startups. And we ran the programming for a little over two years. It started when I was sort of nomading around during COVID. Booked an Airbnb in Tulum sort of with no plan, just got a bunch of founders to come together and convince them to live with me during the pandemic, uh, instead of staying in their apartments. And we got a lot of attention because it was very contrarian at the time, right? People were staying in their apartments cooped up and here we were in a big mansion in Tulum, you know, doing hackathons and, and things that no one else was able to really, really do at the time. So, um, Yeah, we got a lot of attention because that we got a lot of media haters because of that as well. Some people were resentful of that. But no, I mean, two of the people who were in that first house were interested in the project and they ended up becoming my co founders. [Michael Houck]: And yeah, I mean, we were on a crazy journey and helped a lot of great founders and met a lot of amazing people. So that was a that’s sort of where it where it came from You know, we were We were featured in a full write-up in TechCrunch and also an article in the New York Times within like one month of existing, which was crazy. I was in a parking lot of a McDonald’s in Tulum in the pouring rain doing an interview on the phone with the New York Times reporter. So it was a little crazy because we had no company. There was not even like a corporate entity at the time yet. I’m going off on a tangent, but that’s, yeah, that’s where it came from Ben Ornstein: That’s wild. You mentioned the word journey, and I mean, there’s a million directions we could go there. But I think for us, the fundraising journey is probably really interesting to dive into. What can you give about the different rounds? Can you talk about valuations and any of the detail you can provide there? [Michael Houck]: Yeah, so when we got back after two months in Tulum, our first two cohorts, we decided to get a mansion in LA. In Beverly Hills, which we knew would be expensive. And we had more great founders who wanted to join. So we thought it’d be a good time to raise some money. [Michael Houck]: And we went out, we talked to a few investors. A lot of them were like, you have nothing. It’s too early. There’s nothing here. This is not even a venture scalable business, whatever. [Michael Houck]: One fund who we talked to said no. But then I emailed them afterwards with like some revised thoughts and they changed their mind and they sent us an offer to invest. But it was at terms that I think were either equal or maybe actually a little worse than YC’s terms. And we didn’t think that that fairly valued where we were at at the time. So we actually said no. This was like November of 2020. And then in December, we had another guy who wanted to sort of become a fourth co-founder and also invest on like a loan to help us get the house that we wanted. Um, but we said no to that too. Uh, that was a case where actually both my co-founders wanted to say yes. And I had to force them to say no, which, you know, thankful we did that. Cause we would’ve given up like 10% of the company for a loan, which would’ve been terrible. Um, but We ended up self funding the house. We just put 210 K I think of our money into that. So we basically still funded a pre-seed. Um, and then we ran the house for, uh, about three, four months in LA and we were cashflow break, even basically, uh, someone’s a little above someone’s a little below. Uh, but we built up a lot of momentum and branding around the, around the business. So, um, in, I think it was March of 2021. Um, my co-founder Brett had gotten in touch with Bology by doing like a course that Bology had run or something. Um, and Bology put in 25 K as like our first investor, um, at, uh, like evaluation that, that made sense. Um, And then we use that like that stamp of credibility of this, you know, very, very smart forward thinking guy about, you know, launch house could become a network state for entrepreneurs. Right. We use that to go out and raise an actual we call it a seed. It probably was really somewhere between a precede and a seed. We raised about three million at 20 million valuation. [Michael Houck]: And that was pretty quick. I would say it took under a month. [Michael Houck]: Biology’s check came in, I think, beginning of March. And then we had a term sheet for a lead by like the first or second day of April. So not too long. Ben Ornstein: And then were there any other, you know, was that the end of the funding journey? [Michael Houck]: Oh, sorry. Ben Ornstein: Luckily, I know it’s not so. [Michael Houck]: Yeah, no. So then from there, we use that money to hire some folks, small teams, it wasn’t just the three of us. And we had one other guy I think was working with us at that point. We use that to hire some other folks and also expand to New York. So we had a by the end of August, early September, I think we had a townhouse in Chelsea in New York as well that we had signed a medium term lease on. Because we had enough demand. We had a bunch of people who wanted to do this program who met our sort of bar for high quality founders, good ideas, could bring other people into the network, maybe two. [Michael Houck]: And so yeah, so we hired a guy here in New York to sort of be our GM-ish type role of New York. And we got a house set up for him to sort of manage. And then We had started bringing over some really high profile guests to the LA house in particular. And Andrew Chen was one of those guys, you know, he’s general partner Andreessen. He got in touch with us, we got in touch with him. I think he was actually one of our first Twitter followers back like a year earlier. So he’d known about it for a while. And he came over to talk and was just blown away by the energy. And I think he said to my co-founder, he was like, yeah, this is like the same, like early YC in-person type energy. And so he saw that as an opportunity. We had kind of shared with him plans to build a year long membership structure, as well as a venture fund, eventually raise a venture fund. And the structure of the fund was going to be unique so that the majority of the actual profits from the fund would funnel into the main Launch House Inc entity rather than go to us as like the general partners of the fund. That was really appealing because that means that the upside on Launch House Inc is way bigger than it would be with, you know, just like a normal membership type business. It could be more of like the returns on a fund. If you bring quality people into the membership, then you can have like YC style revenue growth over the long run. Um, so he was excited about that. And in September, I think it was the last day of September of that year, 2021. Um, there’s my wedding day, actually. Um, I’m on the flight on the tarmac that night about to take off for my honeymoon with my wife. And I get a call from my co-founder Brett and he’s like, Hey, I know you’ve been busy all day, but Andrew just said he wants to do a series a So we didn’t even go out and have to like do a full pitch or anything like that we just built a relationship with this guy over a few months and He was interested Shared vision for sort of the decentralized like on Valley, you know at the time everyone’s moving out of SF I think now a lot of people moving back to SF but back then everyone was everyone’s leaving So Yeah, so I mean, we negotiated while I was on my honeymoon, basically, and a little bit after that on like the due diligence stuff, but he ended up putting in 10 million. And then we kept the round small. We got some other like strategic folks involved. [Michael Houck]: And yeah, ended up closing around 12 million, might’ve been exactly 12 at an 85 million valuation. Ben Ornstein: Wow. That’s wild. That must’ve been a crazy day when you had to leave for your honeymoon. Wow. What a day. [UNKNOWN_SPEAKER]: Yeah. [Michael Houck]: Insane day. And then we actually kept it kind of under wraps. We didn’t announce till February, because it was sort of end of the year and bad time to announce a fundraiser. So we waited till February to do that. Ben Ornstein: Mark, one thing we talk about later or touch on is advice for founders. And one thing I could ask right now is, you developed relationships with investors without necessarily asking for money at all. How did you kind of generate that relationship? It sounds like it was pretty organic. Like he was just interested in launch house. But if that wasn’t the case for others, how can someone develop a relationship with investors without kind of like asking them for money directly? [Michael Houck]: Yeah, I mean, look, the best answer is what we did, right? The best answer is just be doing something that is interesting to investors, right? If you want to go down the venture route, these people are going to be your gatekeepers for step changes in the company’s trajectory by putting in millions of dollars all at once, right? So if that’s the path you want to go, then you have to sort of understand what they’re looking at. And you have to both do the work, but also just position your company in a way that sort of is attractive to them. Um, so we were able to do that very successfully. Uh, my co-founders and I were all good storytellers. Um, and so, and we also sort of, I think, saw where the market was, was going to some degree and had an understanding of the investor side of things because we’d all worked in, you know, my friend, my cop, sorry, helicopter going by. [Michael Houck]: Um, my co-founder Jacob had raised money for his last company before, uh, my co-founder Brett and I both had worked in big tech. So we sort of understood how, how things worked. Um, but yeah, I guess like if you’re looking to build relationships with investors, obviously number one thing you can do is just do something that’s interesting to them. The number two thing you can do is just help them add value to them. Right. So. You know, whether that’s curating interesting deal flow and showing that you’re sort of at the vanguard of, you know, where some sectors are going, some niches are going, emerging markets, things like that. If you have access to things that they don’t, they’ll sort of also assume that you have access to knowledge that they want. And so that can mean that if you come up with an idea, they’re more likely to be willing to, you know, explore it with you. Um, And then the, I think the third way would be just like by, you know, talking about your perspectives online in a way that is coherent, well-written and resonates. Right. And so it’s way easier for someone to trust how you think and that you’ll be a good custodian of a company. If you demonstrate how you think and put it out there for kind of the public to see if they can go on your Twitter feed and see posts that are original, insightful, interesting. [Michael Houck]: They’re going to be way more likely to consider you a founder who is de-risked to some degree, right? Because every startup investment is so risky for them. They’re looking for reasons to say yes, but they’re hyper aware of any potential reason to say no. And so. [Michael Houck]: The less risky you can appear, the more attractive you’ll be because everything they operate in is this world of insanely high risk. Ben Ornstein: Yeah, no, that’s awesome. That’s great advice. And going back to the fundraising journey, you raised this capital, right? You got this $15 million from A16Z, or is it $15 in total? [Michael Houck]: Oh, sorry. Okay. So, um, just to be super clear, we raised the $3 million, like seed ish round. Then we raised the 12 million series a of which 10 came from a C and Z. And then I should also note the, the venture funds. I didn’t talk about that earlier. So in January of, I guess that would be 22 January, 2022, we, um, filed, uh, to raise a fund, uh, we filed for up to 10 million. We weren’t sure how much we were actually gonna raise. It was our first time raising a venture fund. We thought up to 10 will feel good managing. And then throughout that year, we basically, I’d say like really six months of the year, the first six months, we went out, we talked to a bunch of folks and we ended up raising somewhere around seven, maybe like 7.5 million for the fund. And for that, we had folks like, you know, even, uh, even some really, really high caliber folks in like crypto and the creator economy and also traditional Silicon Valley involved. Um, Andrew put in money personally, other people from Andreessen invested as well. Um, we had, uh, a lot of, a lot of good people involved in that. And so from that, then we invested in over 50 startups, most of which came through our programs, but we also had access to a lot of deal flow of people who weren’t able to go co-live for a month at a time with other founders. So yeah, that was the sort of last piece of fundraising history for the company. Ben Ornstein: Awesome. No, that’s helpful. And so you raise all this money part, part of it is for the venture fund, but part of it’s going to be for some sort of growth on your end. So, you know, what, what did you plan to use that money for ahead of time? [Michael Houck]: Yeah. So the, the goal with the money was basically to build our membership program. Right. So we, um, we had revenue coming in on a one-time basis from, co-living experience. We were charging like a few hundred, sorry, a few thousand dollars for this one month experience that we did. But we also wanted people to be engaged beyond that in like a broader community. So we were exploring some digital options. We were exploring like shorter term retreats around the world. Like we did one in Aspen. We did one in Lisbon. We did one in Miami. [Michael Houck]: And basically just making the membership valuable for people all year round so that they could we could build up a recurring revenue base that’s predictable and build a real business around that. [Michael Houck]: So yeah, to do that, we needed to hire people. To do that, we needed to sort of invest in some big partnerships. We partnered with Coinbase, we partnered with Solana, we partnered with Polygon, all these really big names in the crypto space in particular. And we were in conversations for some big ones, some more traditional startup ecosystem, really big ones too. [Michael Houck]: And those require manpower. You have to fund people who are going to manage those partnerships and execute them once they’re actually set up. So a lot of that, but really just delivering value to our members all year round so that they would stick around and not just sort of dip into the community and then dip out. Ben Ornstein: Got it. Another interesting thing to probably look at is, you know, when you’re deciding which investors you want in your company, outside of the obvious and like Biology and Andrew Chen and A16Z having the brand names, outside of that, like how did you decide which investors would be a good fit? [Michael Houck]: We were pretty strategic about it because we had a lot of offers for capital at the time. And honestly, in retrospect, we probably should have taken more, And we were, I think I in particular, but all of us, but I in particular probably was like, no, let’s keep it, let’s keep it smaller. We’re already at sort of a high valuation. I don’t want to make it sort of too crazy in terms of like, you know, dilution and things like that. [Michael Houck]: So yes, we kept it tight, but for the other folks, we knew we wanted sort of three buckets of people. We wanted people who brought credibility in the startup world, right? So A16Z obviously checked that box for us and some of the other folks like Biology did as well. We wanted people who gave us like an entryway into the entertainment world. So we had early on when we were back into Loom, We’d been talking with Netflix and Amazon and a few other places about doing like a reality show based on launch house and we actually ended up choosing to build a venture backed company instead of choosing a reality show so that was like a very big road early on. [Michael Houck]: But we knew that we had this like media angle, right? Like my Twitter was growing, growing like crazy. Our home screen newsletter, which is like, you know, weekly, multiple times a week, like tech news newsletter was growing like crazy. We had my personal newsletter later on as well. [Michael Houck]: And we started to do some YouTube stuff as well. And basically, you know, we just saw time and time again that people were hungry for this kind of like, you know, angle on media where it’s, it’s, it’s startups, it’s like super legit work, business building, all that stuff. But it’s also sort of done with an edge and like a little, a little funny, a little self deprecating maybe, but not in like a negative way. And just sort of like poking fun at the cliches of the startup industry while also building really cool stuff. So that really resonated with people. And we wanted to continue investing more there as well. So we brought in like Michael Ovitz who runs CAA, right? He’s like the OG in the creative arts space in Hollywood. We brought in also people in the crypto space because crypto was like the hottest niche at the time, sort of like AI is right now. And we knew based on what we had seen early on that following the hype of whatever’s hot right now. We never wanted to give ourselves entirely to a trend because we knew trends are passing, right? But we did want to sort of show that the people who were all in on that trend that, hey, this is a place for you, right? So at the time that was crypto, that meant we brought in Ryan from Bankless was an investor. Mike Dudas was an investor. [Michael Houck]: and more folks too. So those are really the three buckets that we wanted to hit at the time. I think if we would be building Launch House now, you know, maybe still some crypto stuff, but probably more in the AI world now. Ben Ornstein: Those are some big names, especially Michael Ovitz. That’s very impressive. Bankless back at the time was a huge brand name. You know, how did you get in touch with these investors? [Michael Houck]: Good question. [Michael Houck]: I think we got introduced to Michael by Andrew at Andreessen. For what it’s worth, Andreessen is like a grade A 100 out of 100 fund. They go above and beyond. They have people on their team who have insane experience with every set of problems you can possibly encounter, and they’re totally willing to jump in randomly and help you out with them. [Michael Houck]: Growth people. People, marketing people, product people, everything. They’ve got it on there. Yeah. Can’t say enough good things about them. But for other folks, we had built up a Twitter following. I think our Launch House Twitter account had either 20 or 30,000 followers, and we’re putting out content all the time. My Twitter was also putting out content all the time. [Michael Houck]: And people just knew who we were because of that. And so then when we would ask for somebody’s email or DM them, we’d get a response. Our trajectory was rising so quickly that people were like, oh, this is a call that I should take because I don’t know how big this is going to become. [UNKNOWN_SPEAKER]: Wow. Ben Ornstein: You self-funded in the early days, which was kind of interesting. Usually, when someone does that, it’s a very small amount of capital. There were three, so you were able to put, I’m sure, more in than normal. But I assume there was some sort of cold outreach, or in the early days, there had to have been some outreach from your end. Now, how many people did you reach out to? What subset of those people turned into meetings and finally investment at the end? [Michael Houck]: Yeah, so self-funding history, I put in 25K to book the Tulum house and then logistics around that first month. We used the money from that to book the second house in Tulum. And then we got back to LA, my two co-founders were totally on board. And so we just all sort of went in on the big house. Shout out to my co-founder, Jacob, for being able to put up the biggest chunk of that amount. But yeah, when I mentioned that we had the first term sheet or the first offer, basically it wasn’t a full term sheet, but the first offer that we rejected, we had reached out to just our own like personal investor networks because we all had strong investor networks, right? From just being in Silicon Valley and Jacob from having fundraised for his last company before this, like we had that core group of people we had some level of trust with that would consider backing us, we thought. And so I would say we probably messaged, I don’t know, like 50 to a hundred people, maybe somewhere in there. Of which, you know, probably 10 turned into meetings. And again, this is when we had like nothing, right? We had no recurring revenue. We had run a co-limping experiment for two months in Tulum, that was it. [Michael Houck]: And then, yeah, we got the one offer from that, or like the one and a half, I guess you count the other guy as being like kind of a half an offer. [Michael Houck]: When we went back to really fundraise in the spring, I would say we reached out to about the same amount of investors, maybe a little bit more, maybe closer to a hundred. [Michael Houck]: And of which we probably had like 20 meetings, I think. [Michael Houck]: And the majority of those people put some form of a check into the company. And then when we did the series A, honestly, we reached out to like 10 people less, I don’t know. [Michael Houck]: And I think like all of them except one or two put money in, um, might’ve been all of them, but I don’t, I don’t fully remember, but the fund was a lot harder. Uh, the fund was because we didn’t have a network in the LP world, right? We had a network in like the GP world, but not the LP world. And so, uh, building relationships with those folks took longer and met, we met with a bunch of people. Um, and I think like a roughly. I don’t know, maybe a little under half of them put money in. I don’t know what the exact number was though. Ben Ornstein: So just to clarify, when you were fundraising, were these two separate entities or are they all under the launch house entity that you would like collect cash for? [Michael Houck]: Yeah. So the fund is actually like a constellation of three different entities. Um, and the main one of those is, um, technically under Launch House Inc. So Launch House Inc is effectively a holding company. [Michael Houck]: And yeah, then we invest out of the main fund entity from there. Ben Ornstein: I was just curious. And so you were talking about in the early days, you had nothing. And so to get some of these impressive investors must have had a pretty compelling pitch, especially with the caliber of investors that you were able to to get on board. What did you emphasize in your pitch? [Michael Houck]: Yeah, I mean, look, we can’t deny the fact that the market was very different in 2021 it is today. Right. We were able to raise two rounds of capital from super legit people within six months because our trajectory was just super, super hot, right? The main things we emphasized were, hey, there are a lot of really, really good people interested in what we’re doing in terms of like members, right? People want to come do this experience that we’re providing for them. We’ve managed to build the network effect, the center of gravity where we’re getting referrals and it’s all happening. Like the network is there. And I think that’s probably the hardest part of a business like that. Like Soho House is cool because other people say it’s cool, right? Launch House was cool because the founders who were going there were doing cool stuff and telling their friends. [Michael Houck]: I think at one point someone posted a meme on Twitter, which was like a Wes Anderson thing where there were like four different characters from one of his movies. And it was like, you know, there was like YC tech stars on deck and Launch House. And like Launch House was like the one dressed in like the futuristic garb, like looking super cool. Um, so it’s just, it had that, that it factor to it, that not a lot of things are able to able to get that was number one. And we, but we didn’t emphasize that in the pitch. Like people sort of already knew that. Right. So we emphasized in the pitch was we are a super legit founding team that has great credentials. Uh, ironically, two of us were first time founders. Um, I’d run an agency before, but that was like years ago and it was much on a smaller scale. Um, but Yeah, as far as like venture back, two of us were first-time founders and the other one had just taken a company to series eight, hadn’t like, you know, hadn’t gone on and had an exit from it or anything like that. So despite that, we were able to sort of position ourselves as like super legit founders with a great network of people who can come in, trusted operators, so to speak. So we emphasize that. We emphasize the long-term opportunity around the fund. We were really excited about that. And so were the investors, and then particularly in the first raise, the seed round. We talked a lot about like the future of education, um, and how we need more people building companies rather than doing like theoretical work and launch house could be a place that we start with this co-living experience. Then eventually we kind of go down market to have a broader educational funnel, um, to find the best founders earlier on sort of like, um, there’s top like European soccer teams have like the junior clubs. Right. Um, we liked that model. Um, we thought media was the way to do that. And then sort of the big trend that we were hopping on at the time was community in the age of a distributed decentralized Silicon Valley, right? If everyone’s not in SF, they need to have founder community. You know, YC is the institution for the Bay area. The global startup community needs a new institution for this new remote work type age. We think Launch House provides the experience that is going to build that, that sense of community. So that was, that was the pitch. Ben Ornstein: That is compelling. That’s exciting, especially during like a frothy market. I could see that doing quite well. Ben Ornstein: And so, as I just mentioned, frothy market. So you probably didn’t have too much trouble closing investors, but you probably applied some sort of tactic to drive urgency among investors. How did you, if you did this, how did you do it and how did you like get them to close the round? [Michael Houck]: It’s funny because with we tried to do it a little bit with both rounds with the Series A round, it was totally legit because I was like, We only want this much come. We only want this much capital in the round. We don’t want a big pool investor. We don’t want to party round. We have a 16 Z. That’s the that’s the partner we want and getting to start with that. I mean like hey, we’re closing this round once our due diligence process with them is done. That was a really, really strong indicated to other investors that like, Hey, you’re going to meet these guys and you’re going to like them or you’re not. Um, and if they liked us, then they wrote a check. Um, so that, that one was easy, um, because it was, it was super legit. Like we actually had this real, you know, timeline of saying, Hey, when a 16 Z is ready to put their money in, that’s when we’re going to sort of end the, end the round. Um, and then, uh, the first round, the seed round, um, We, again, very different market. It was really easy back then to sort of make the case that the round will close soon because you’re doing something interesting and other investors are going to see that as well. And they already are seeing it. I think having the biology stamp of approval sort of made other investors realize that That that this would be a hot round and it was the round was was fast so. [Michael Houck]: I think yeah, back then we. We sort of were like, yeah, we think this is going to be a hot round and we want you involved later in the second round. It was like, hey, we’re only keeping it open for this amount of time. The second way is way better. It’s like more. I think straight up, but If I was trying to drive urgency, I mean, today I wouldn’t really try to drive urgency that much. I’d focus more on the relationship and just finding the right sort of partner in a different market today. But if you’re looking to drive urgency, I would just say having a real deadline that’s not like a, hey, I think this is going to happen. Investors can see through that stuff. And especially when the market’s in their favor, it actually might work against you to try and do that today. Ben Ornstein: Yeah, that was going to be my follow-up. I was going to be like, if it wasn’t a frothy market, how would you know? So that’s perfect. And so in retrospect, you make it sound like it was one, two, three, cash came in, that’s what it was. But I’m sure there were challenges that came up along the way. What sort of, what were the biggest challenges that came up during the fundraising process? [Michael Houck]: I mean, saying no to the first offer was really hard. That was like, it’s not really, it wasn’t really a challenge, but I would say like, you know, we were, we were so early with something. It was like not even zero to one, it was like zero to like right? And here we were asking for money just because we had a good network and we were capable operators. [Michael Houck]: And when we finally got something there, we were like, all right, this is how we’re gonna make this company a real thing, right? Not just a one-off experience until we’re gonna make it a real company. [Michael Houck]: And so saying no to that was, was really challenging because we knew it meant that our only option really was to put a bunch of our own money on the line and take a big gulp and buckle up and hope it works. Um, so that was like a more of a psychological challenge. Like, are we really that committed? Um, as far as like actually raising the two rounds that we did. [Michael Houck]: I think for some people, they didn’t see it as a venture scale business. They didn’t maybe believe that we would be able to have the successful fund down the road, or maybe they wanted their capital back faster than that. They’re like, oh, fund returns as your long-term model, that’s more than five years down the road. That’s like 10 plus years down the road, right? So maybe they had LP pressure to get that capital back faster. That’s fair. [Michael Houck]: And then just getting people to sort of believe in the membership model when we didn’t have a membership model, right? We were like, we nailed the one-time experience. We haven’t done anything in the recurring experience yet, but we want you to invest at the valuation that reflects basically that we will be able to nail the membership model. So again, I wouldn’t do that in today’s market, but we were striking while the iron was hot and we knew we could pull it off. So we went for it. Ben Ornstein: You took advantage, absolutely. Before going into sort of like the more advice section, you’ve already told some pretty cool stories, but is there anything else, any other stories back from the Launch House days that you think founders might find interesting or any unique other stories? [Michael Houck]: About fundraising or just in general? Ben Ornstein: Mostly related to fundraising, yeah. [Michael Houck]: I think. [Michael Houck]: I talk about how to announce a fundraise. Um, so our announcement of the series, a, we knew it was going to be a big deal because asics is the biggest brand name in venture, right? Andrew Chen high profile partner at the firm. Um, and our business was something that a lot of people out there really, really loved. And also a lot of people in a polarized way were like, this sucks. Why would anyone ever put a seed round into this in the first place? Who are these good jokers making this business? There was a lot of that on Twitter. And so we knew it was going to be a big deal having the big brand name involved. And so, basically we worked with the Andreessen team to, and they were super helpful for this, to just drive as much attention towards like one thing as possible, right? So we wrote a Twitter thread and in that we included links out to like a blog post, a way to sign up or reply to join. [Michael Houck]: and some other stuff in there as well. We had a video also from the guy from Silicon Valley talking about investing in launch houses, kind of funny. And we did a massive background push of attention to that. So it’s actually kind of similar to what I do with Megaphone now, trying to drive attention to posts. Basically timing an email blast the night before and then when the tweet goes live to your whole sort of network to tell them to go comment on it and engage with it. [Michael Houck]: And also just like not having competing places for them to go right. Everyone goes to the Twitter post. That’s what we that’s we told people. And then just hitting up other people kind of in the moment too and having them go engage with it. So driving that sort of attention really made the announcement blow up. [Michael Houck]: And it just from that moment on our whole brand was like, At another level like, It was fun getting the company to that point, and after that point it was like, OK, this is everyone took us really seriously after that, and so it was valuable. [Michael Houck]: Other interesting fundraising stories. I don’t know. I guess the first term sheet turning that term sheet with the first offer. Turning that down is a good story. [Michael Houck]: Not taking the other guy’s money, the lone guy’s money is a good story. I don’t think there’s anything huge else. [Michael Houck]: Yeah, I don’t think so. Maybe some stuff about the fund like, At one point. [Michael Houck]: There’s a picture of my co-founder, Brett, at some house with Charlie Munger and Scooter Braun and Andrew Chen, just like talking about the fund. [Michael Houck]: Yeah, very funny. And like, I don’t think Scooter, I think, was going to invest, but then, you know, the whole company sort of changed. So he didn’t. But Charlie, Charlie did not invest, unfortunately. But Andrew did. So it was OK. Ben Ornstein: Charlie Munger investment in Launch House, that would be funny. [Michael Houck]: He liked it, he liked it, but he didn’t, he didn’t like it enough to invest. Ben Ornstein: Ah, that’s unfortunate. At least your co-founder got the picture of them. That’s cool. Ben Ornstein: And so, yeah, as I mentioned, like the next sort of little section here is on advice or reflection. You know, you’ve already mentioned some great fundraising advice for founders. Is there anything else you’d want to mention? [Michael Houck]: I mean, they should read my newsletter. I talk about it all the time. Ben Ornstein: I’ve never heard of that. [Michael Houck]: But no, from a watch out specifically, what would I say? [Michael Houck]: Yeah, look, I mean, just trust your gut. Like, again, going back to that first offer that we had, like, that was one of the hardest decisions we had to make in the whole history of the company. And we made the right call. Because if we would have taken those terms, we would have had less capital than we ended up putting in ourselves, first of all. And second, we would have already given up equity that we hoped one day would be super valuable. So that’s one thing. But the other thing, on the other side of it, I would say is don’t be stingy with the equity. Don’t be stingy worrying about dilution too much. We would have been way better positioned to sort of weather the PR storm that we found ourselves in if we, a year earlier, had made it a huge party round Series A where, you know, instead of giving up like 10% of the company, we gave up 20 like you normally do and had, you know, 25 million in the bank instead of, well, 25, in 25 the bank instead of whatever we had. [Michael Houck]: Um, I would say like, if you can get capital and you’re going to venture out, unless the terms are really just bad, then just take it. And then you have it to use. Um, because you don’t get that many of those opportunities and things can always change. Um, see anything else? [Michael Houck]: Yeah, look, I would say like, even in a market like this, you have to go in with confidence, right? Like Obviously we felt super confident what we were doing, maybe to the point of delusion, maybe you have to do that. Um, but even in a market that’s more relationship based like it is right now, you have to, you have to be confident in what you’re doing because if you’re not, no one else is going to be like, why would they believe in it if you’re not the most confident person in the world walking in there? Um, and then, Yeah, I guess the last point on that would be just like, you know, what we did with building relationships, like we had people ready to go when we went out to raise because, and we got a lead basically without pitching. Right. Because we had spent a few months sort of like letting them know how we think and where we think things are going. Um, so in my opinion, if I were raising again for something new, I wouldn’t pitch at all. I would, even if I had no network, even if I had no network, I would go out and focus on spending time with investors, learning what they’re excited about, learning what they’re looking for, and seeing how that lines up with, or if that lines up with what I see as exciting. It’s time consuming to do that. I get founders time is super valuable, but it’s way easier to raise money from somebody who trusts how you think. Than it is to get someone on a call after they see a deck, answer their questions for 30 minutes, and then hope they give you millions of dollars. It’s way easier to do it with a friend, basically. Ben Ornstein: That’s awesome advice. Yeah, I’ve heard the don’t actually pitch. That’s a pretty common one. [Michael Houck]: Yeah, don’t pitch at all, if you can avoid it. If you can, yeah. Ben Ornstein: That’s awesome. And you already talked very highly of Andrew Chanity, 16Z. Feel free to dive in deeper or talk about other investors when I ask the question of, you know, who’s an investor you’d recommend founders work with? [Michael Houck]: Yeah, I mean, I’d recommend Andrew all day long. He got into the trenches with us when things went totally off the rails, spent hours with us on calls advising us. He brought in other people, both from the firm and outside the firm. He spared, you know, no sort of time expense to help us navigate the tough times. So, can’t recommend him enough. Two other folks I’d give a shout out to. One is Jesse Middleton at Flybridge. He was our lead for the seed round. And same kind of thing. He’s a community guy, so he understands sort of what we were building. But he really goes above and beyond when you need him to also. He was also in the trenches with us during the tough times. [Michael Houck]: and provided a lot of kind of unique insight into our market because we worked pretty early on and so saw how communities evolve. So we recommend him. And the last person is probably Brian Truong from Graph Ventures, another one of our early backers. [Michael Houck]: Just very good, clear communicator and always willing to hop on a call, grab lunch, chat, and genuinely helpful with his network too. So yeah, all three of those I would recommend time and time again. Ben Ornstein: That’s amazing. And I think I know a resource you might recommend to founders. But yeah, you know, what what resources would you recommend? [Michael Houck]: Okay, so yeah, obviously, I have to mention what we do, right? My newsletter, the podcast we’re launching, the case study library that this is going to be a part of, I think all of it’s amazing. But outside of that, I’ll send you some blogs and stuff that I personally like, [Michael Houck]: Yeah, there’s not that many podcasts or things like that that I listen to. [Michael Houck]: I can send you the Twitter thread that I wrote, or I guess I can send you the LinkedIn posts that I wrote with a bunch of books I recommend to founders and things like that. But yeah, we can just link out some of that stuff in this one. Ben Ornstein: Perfect. And last question. Do you have any hot takes regarding the fundraising process? [Michael Houck]: Oh, you’re throwing the hot take one in there. I like it. [Michael Houck]: Oh, I’ve started asking. Yep. [Michael Houck]: I mean, I don’t know if it’s a hot take, but like I, you know, I’m building a new company now. We’re sort of a holding company where we have these like different entities within it. I’ve had offers to bring on capital for one of those for, for megaphone in particular, I turned them down. And to me, like the bootstrapping experience has been, been very different, obviously, the venture experience in ways that I think a lot of people talk about, right, like it’s ventures way faster, it’s way sort of, you know, you have more options to play capital and test things out. So you can be more, more liberal with sort of what you test and experiment. Unlike with bootstrap, where every dollar sort of counts, I built this business from literally putting 10k into it after launch house fell apart with the newsletter. And then we got sponsored for the newsletter. You use that to start megaphone, uh, pay engineers. And then I’ve used the megaphone revenue to fund other things since then too. So, um, It’s a very different experience financially, but I would say the hot take is that I actually think that being a bootstrap founder better prepares you to be a startup founder in general than the venture. Um, because like, If I had bootstrapped this company before raising venture for launch house, I think that we would have known a lot of things for launch house way faster. [Michael Houck]: And I think the opposite is true too, but in like a less practical way. Let me see if I can explain that better. [Michael Houck]: I feel like with the venture route, you’re sort of moving so fast that you’re just sort of fumbling around trying to find if something works, right? And it’s not always true, right? Maybe you have a very clear sort of thesis, but we did have a clear thesis, but we still were moving so fast that it’s just like, we were just grabbing onto things that worked and seeing how much they worked and then either abandoning them or not. [Michael Houck]: I don’t think that prepared me to build a company. I think that prepared me to build a venture backed company. I think building a bootstrap company prepares you to build a company in general. And then you can apply that to either a bootstrap route or a venture route. So if I were recommending to somebody like what to, what to do, I would say bootstrap company first, maybe sell it and then use what you’ve learned about building a business, apply that to the venture route. And you’re going to look way more attractive to investors, not just because you’ve had an exit, but also because of the way you speak about building a company and how you prioritize things and how you think about spending each dollar and things like that. So yeah, my hot take would be if you’re super young, like probably build a bootstrap company before you worry about going the venture route. Ben Ornstein: Amazing. Well, that is all the questions I have for you today. [Michael Houck]: Cool, man. Send it over whenever, no rush. I’ll take a look, but I’m glad we got this one in. It’ll be good. Ben Ornstein: Yeah, absolutely. My, my top priority, because I know I was looking at the dates is I got to do more research on Brendan Rogers. I started that earlier this week. Yes, because you’ve had Yeah, so over the weekend, the rest of today, I will hopefully, hopefully finish up before Monday. I know I’ve got time, but yeah, yeah, it’s fine. [Michael Houck]: I know it’s like, it’s like end of next week, middle end of next week or something. Think Thursday, but Yeah, that works. And I need to give you comments on a bunch of the other ones, because you’ve already gotten ahead of, like, I mean, the Hunter one and the Poojan one. We’re waiting for Poojan to get back to us. Zayd will be scheduled for September 2nd. So we’re back on with him. And then I’m going to push Arjun to schedule a time soon, too. Ben Ornstein: Cool. Yeah, I’m looking at the CRM. And then Andrew. And then, right, then we’ve got the September 9, 10, and 11. Luckily, the Scott one’s done. Although already. Yeah, the classy. I mean, there’s probably going to be some things we can change, but largely that one’s done, which is good. Ben Ornstein: And then I’m I’m excited for you to do the one with Ali. I loved chatting with him. [Michael Houck]: He was awesome. Yeah, he’s really good. Him and Zaid are both like these like super scrappy guys who just like they just get it. You know, they just get what being a founder is all about. So I love the mix of like the cameo guy and the Tyler and then these like lesser known guys who are just going to blow people out of the water with their approach. Ben Ornstein: 100% and like a guy like Keith who my friend like to talk about because no one not a lot of people they’ve done 15. They’ve raised 15 million which I didn’t realize it was that much, but he has amazing tactical advice. So down the road he’ll be another great guest again. [Michael Houck]: Yeah, yeah, yeah, let’s definitely get him in there. Um, we can do that, um, you know, maybe in like next month or October or something like that. He sounds great. Ben Ornstein: For sure. [UNKNOWN_SPEAKER]: Yeah. Ben Ornstein: Yeah. Ben Ornstein: Anything else you want to chat about while we’re, while we’re here? [Michael Houck]: Um, I don’t think so. I mean, maybe the video is stuff a little bit. Um, so I’m talking to Max to see how he sees himself looping into this too. It’s like building a whole new process sort of as we set it up, which is tough, but Basically, our agreement with this agency is that they will do the podcast for us each week, and also they will do clips from the podcast, like two clips from the podcast, animated and made cool. And then also they will do up to five TikTok-style videos for us. [Michael Houck]: So I’m doing a lot of- Sorry, is that up to five per week? [Michael Houck]: Yeah, yeah, up to five per week. Yeah, cool. Volume is can be pretty high. [Michael Houck]: I’m trying to do a lot of research, a lot of stuff I’ve sent you some more stuff to just about like, what this process is like, because I’m so used to the process of like, writing a Twitter thread, right? Like I have that down, I know exactly my workflow. This is totally new for me. So I’m just trying to digest as much of it as possible. And I’m going to loop you and Max sort of into where you guys make sense to fit into that process. So, um, it might change, but, um, next week will be our first week sort of trying this out. Ben Ornstein: Cool. Yeah. I’ll give one quick piece of advice that I listened to from Greg Eisenberg. One way for him to find cool ideas for, well, for him, it’s businesses to build, but easily it can be applied to content to write about. Have you heard of gummy search? [Michael Houck]: I’ve heard of it. I haven’t used it, but I’ve heard of it. Ben Ornstein: It’s pretty great. I was losing, I was using it earlier actually to find research on, um, on like ghostwriting, for example. So what it does is it, it, it has some sort of integration or something with Read.AI and it finds all the different sub like threads. Um, and it summarizes what’s being talked about. You can pay for like the premium for like AI to digest all of that. I am not doing that currently, but you can see all of the topics organized in specific audiences based on keywords. And so it’s really helpful as one place to be able to find, I don’t know if it’s just Read.AI, but that’s the one that I’ve used it for. Yeah. [Michael Houck]: Looks like it’s just read it also looks like it’s pretty decently priced. Let’s let’s let’s use it for for research. But honestly, I think that the best place for research is going to be on TikTok and Instagram reels already. Like I, I’ve never really used TikTok because I didn’t want spyware on my phone. [Michael Houck]: But no, but I’m starting to just like, let myself be a TikTok drone and just like consume and see how it responds to me swiping at different times and see what I get and really studying like how people make the videos that I like, Um, so I think that like, we can learn about what people are generally talking about with, with something like this. I think it’s cool. We should do that. But I think that like the best way to stand out is this is what the guy said in the script writing video. He was like, he was like, the reason you should spend time on TikTok or YouTube in his case, is because you can see what other people are saying about the topic so that you can say something different. So I think that’s going to be the most important thing for us, like having a unique perspective on that platform. Ben Ornstein: Yeah, no, so also I started with Read.AI and then I went to the actual platforms. So far I’ve done TikTok and YouTube Shorts. Within the past year, I did two approaches. Within 2024, like What about the content that’s relevant to ghostwriting from our perspective? Like what should be said from us as offering a ghostwriting service? What’s relevant there? Because there’s a ton of content about ghostwriting. What’s also interesting about it is ghostwriting specifically is ghostwriting a lot of people talk about like rap songs being ghost wrote so like so there’s it’s even harder to find really good ghostwriting content in terms of like social media ghostwriting and hiring someone to do that there’s a massive and I said this during the AI faceless days when we were looking at that stuff there’s a massive opportunity in that niche for us to create content to just get people to understand the value of having a ghostwriter and paying for it and what it gives you. So there are, and I already wrote down some ideas for that because we’re going to be able to crush that niche, even though you said you have the least legitimacy to talk about it. I still, there’s so much opportunity in that space. [Michael Houck]: Yeah. The thing is we need to make sure that I mean, it sounds like you’re already on this, but we need to make sure that if we do go straight and content, first of all, we need to pick, do we want to focus on startup content, which we’ve built majority of the business around to go straight and sort of tangentially can be related to, or do we want to make ghostwriting content? And we can’t do both in the same account, right? We need to create a new account for both. If we want to do both. Ben Ornstein: Right, right, right. [Michael Houck]: If we do do ghostwriting, we need to make sure the content is for like, why you should hire a ghostwriter or like what example and ghostwriting save you not like, Here’s how to become a ghostwriter. Ben Ornstein: No, exactly. That’s that’s exactly what I was saying. Like there there’s opportunity for us to say, because again, it has to be relevant to us. So in terms of exactly what you just said. So that’s that’s what I’ve been focusing on. It’s like, yeah, we can make content on how to be a ghostwriter, but that doesn’t matter to our our super hyper niche reason for why we’d be talking about ghostwriter. So, no, I understand that. [Michael Houck]: And I think we should even do it like, um, we can even make more specific stuff like, you know, uh, why, like, like start the intersection of startup founders, hiring a ghostwriter versus like someone else. Cause that’s our bread and butter. And then also like videos on, Oh, here’s why you should have a ghostwritten newsletter. Here’s why you should have a ghostwritten LinkedIn account. Right. Like, yeah. [Michael Houck]: Those will be good. Yeah. [Michael Houck]: So yeah, I do think we should explore that. I think we need to maybe do it on a different account than like my personal account. Max made the point that like we have all this stuff built around your personal brand and for startup founders. So we should do both because the ghostwriting thing is the highest revenue opportunity for us. But we need to be careful about the brand equity we’ve already built on the startup founder side in general. Right. I got to think through that over the weekend, sort of how that plays together. But I do see us doing content in both sort of ways. What I would say to you is that when you’re doing research, look at it through like two lenses. Lens number one is like the macro, right? So you’re saying like, what’s happened in 2024? What formats have become more popular through 2024 versus less popular? And also what topics that people talked about and how that’s changed. Throughout the year, right? And the other cycle is like the immediate news cycle, right? Like what’s like the current thing in the startup niche or the ghostwriting niche? What are people reacting to right now? We can just put something together quickly about like, you know, I wrote the newsletter piece about friend.com, right? At the launch of that, that would have been a perfect like Kane Calloway style half screen video. For, for tick tock. So we need the, we need to understand the macro environment that we’re playing in for the niche. And we also need to understand what people are talking about right now. So that’s, that’s what I would say. Ben Ornstein: Cool. Yep. Now I’ll keep all that in mind. That’s that’ll be good. And then, so after I’m done with ghostwriting, I’ll go into like fundraising. So startup fundraising and then kind of like social media growth. So, so I’ll go into like those three, I think. [Michael Houck]: Yeah, I think I think that makes sense. For growth, it should probably be like, here’s how to grow your startup with whatever. Right. And we can also do cold email. We know a lot about that. It can speak to us as we start up growth in general, but we want to be specific. So maybe we should nudge down. I don’t know, man, we’re going to experimenting. This is a this is a whole new world. Ben Ornstein: It’s a lot. It’s going to be fun. As you said, experimenting. We’ll see. We’ll see what sticks and we’ll see, you know, the processes that we create to do this. [Michael Houck]: I’m gonna, I’m gonna try to reach out to some friends who have like, you know, millions of followers on TikTok or Instagram or whatever. And just like, I’ll put us, I’ll invite Max too. I’ll put us all on a call with him and just like, or them, cause there’ll be different people and just have them like, you know, maybe we prepare some questions and then just have them brain dump. Um, so we can get to speak faster. Ben Ornstein: That’d be amazing. Yeah. That’d be super helpful. Uh, it’s the same reason why we’re doing the case studies, speak with the people who have done it, you know, There’s a small chance that I could get Josh Richards, which would be great. Oh, wow. Yeah, that’d be great. [Michael Houck]: We know each other from the Launch House days, but it’s been a while. Ben Ornstein: He’s crushing it, really. At this point, anything he does will crush it. [Michael Houck]: Right. He’s set for life, basically. Okay. Cool, man. I’ll get back to you on that stuff. But yeah, let’s keep doing the research for now. Sounds like you’re on the right track with it. Ben Ornstein: Sounds good. Will do. [UNKNOWN_SPEAKER]: Cool.