Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy, where I interview entrepreneurs about how they built their businesses for an audience of entrepreneurs. And one of the cool things about living in San Francisco is how many people I get to meet when I go to dinner and all the different conversations that I get to be a part of.
And a friend of mine invited me over to his house for dinner. And admittedly said, I just want you to help keep the conversation going, bring out what’s interesting and people and I did. And at dinner, he interrupts me to make sure that everybody around the table knew that one of the guys who was sitting at the table was an early investor in Uber.
And I bring this up because this is kind of a common thing that people will at dinner, make sure that you know, what their friends invested in or what they invested in. And it’s impressive. Um, But it also is something that many people don’t have access to that if you’re busy working, you just don’t have the time and capacity to build the relationships, to get access, to, to opportunities like those kinds of investments.
And that’s where today’s guest comes in. Uh, John Medved is the founder and CEO of our crowd. They are the world’s largest online venture platform. That he, this specifically the way that he describes it, the world’s largest online venture platform that you don’t know of yet. And I, I feel like we do know about it as people who are listening to Mixergy.
I don’t think that we know enough about how it works, because as much as I’ve known about you, John, I just felt like. In talking to you before, I didn’t realize how much you do to help fund, um, companies and also to help vet them. So we’re going to find out about that today. I’m also going to find out a little bit about your background.
I don’t know who you are. Um, I also want to know how you started a venture firm early in your career. When all I could see that you did before was, uh, you were VP of sales. And then if we could talk openly about some of the. The vision that you had at a company called BringGo and some of the challenges that you had seen that vision, because Ringo could have been YouTube could have been Facebook.
I’d like to do that too. And we could do it all. Thanks to a phenomenal sponsor it’s HostGator, but I’ll tell you later why you should go to HostGator first, John Natavia here.
Jon: Okay. Dear Andrew. Thank you.
Andrew: Let’s let’s understand how our crowd works by looking at a simple, single, um, company that you funded beyond me. I, I heard that you said we are going to support this vegetarian meat option after you tried it at a barbecue.
Jon: Absolutely. I, I, uh, actually tracked it down. Cause I had heard they were the, by far the best, uh, plant-based burgers in the world. And I was with my family. In Jackson hole and, uh, uh, actually went to the market and the guy says, Hey, you’re in luck. They’re in stock. And I walked down to the, uh, uh, freezer, uh, corner where they were and I grabbed three packages and that was it.
I took them out. And took them home and then served them up for my kids. And they went wild. Now I keep kosher. So we haven’t had cheeseburgers in my house ever. I mean, with my kids,
Andrew: Because meat and dairy do not go together in
Jon: That’s right. And in kosher, all of a sudden my kids were introduced to the delights of cheeseburgers. So when this came up as a potential investment for us, um, and there were questions about the valuation because we got in before the IPO.
But at about a billion dollar valuation price because of our grout, we don’t just do angel deals. We do deals through all stages of investment. And I remember that there was a, you know, sort of a rather heated discussion at our investment committee about, uh, because we vet and decide ourselves on every deal that will go up on our platform.
Andrew: Let me pause right there. That’s that’s something, I didn’t know. My assumption was our crowd allowance. Just about anyone to just list themselves on your, look at the look you’re giving me, as I said, list themselves on your site. And if they want to raise money, I mean, you do a little bit of vetting, I assume, but not a lot.
If they want to raise money, we could, we could contribute money and we get a share of the business. No, you’re shaking your head wildly. No.
Jon: I know, completely wrong. Exactly the opposite. Basically, we do a venture screen ourselves on every deal that we put on the platform. We actually deploy our own camera. As a GP, uh, and we set up SPVs, there’s a special purpose vehicles, which are essentially single company venture funds to back them. And, and we, our acceptance ratio of deals that we look at is about one to 2%.
So an unfortunately I wish we could do more deals, but we look at a hundred deals to find one or two. So that it’s a completely different thing. So anyway, bottom line is we, we had a drop drown, uh, drag out fight, you know, over this pricing. And beyond me, luckily I won with the conviction because I had tasted the thing.
And, uh, ultimately we had a, uh, five X plus on that investment. And, uh, it happened pretty quickly because that was the best performing IPO of 2009.
Andrew: Don, can you say how much our crowd put into the business and how much individual investors on your site and put in.
Jon: a $6 million, uh, con you know, uh, participation in the beyond meat round that
Andrew: Does that mean our crowd put in 6 million or that people on the
Jon: know, the, a SPV and, uh, our proportion of that. It ranges as according to a formula, but it’s typically between three and 5%, which is a pretty healthy GP stake. And most venture funds GPS will put anywhere from one to 5% of the total
Andrew: Oh, so you said you put in 3% and then that means that the 97% that’s left, goes to people who come to your site who see an offer who see a company that they want to back. And then they invest in. And I assume as long as they’re accredited, they could invest.
Jon: That’s great. Uh, you have to be accredited, meaning you have to have the asset test, which is a million dollars of assets outside of your primary house or $200,000 annual income,
Andrew: Um,
Jon: 14 million households. By the way in America, meet that test according to estimates.
Andrew: I have to say, I would have assumed even more.
Jon: It’s because of the house. If you, you know, in other words, you probably assume more that people have a net, you know, because of housing prices where they are, but you have to subtract, uh, the house
Andrew: Okay. I guess I assumed more because I live in San Francisco and it feels like.
Jon: yeah. Of those 14 million, at least 10% are in the bay area. That’s for sure.
Andrew: Okay. I wonder how much of a view not being known and the details not being known has to do with the fact that you’re outside the bay area. You’re all the way in the middle east, that you are not hanging out the parties that we’re in. You’re not part of the conversation. And I have another theory that another part of it is a company like angel list works with individual investors that they turn into fund managers, essentially, and then they all become promoters.
And so the fact that you’re not here. And that you don’t have all these people who are basically scouting out and promoting you, is that it?
Jon: Yeah, that might be part of it. But look at, first of all, it’s changing right now. Uh, we’re over, uh, well over a hundred thousand registered members on our site and, uh, Our investors are. Pretty exciting group of people. A lot of family offices, a lot of, you know, serious people, a lot of people in the valley, but, um, uh, it’s very, we’re very different than angel lists because when, and by the way, I think when Nevada is built and this team is spectacular and we’re huge fans and friends of ours Angeles, but, uh, our, our crowd is different.
Our crowd basically, uh, democratizes more traditional venture. Okay. Uh, we are not, you know, backing angels. So for sure example, we don’t buy common shares by and large. We buy preferred shares. Okay. And that means you get preemptive rights, the right to participate in future rounds, we get anti-dilution protection.
Um, we get all the benefits and the insider kind of, uh, Share structure that that venture funds get, we, uh, will invest big checks. So when I talk about $6 million, that’s not an outlier, right? There are many companies that will invest 10, $20 million over time and we backed off. Companies over and over again.
So you’ll see companies where we start with like a million or $2 million check and we’ll grow a position to be 20 million and ultimately own a venture stake, which is typically 10% as much as 20 or even 25% of a company. We sit on boards. Okay. We actually have board seats and almost half of them. Total portfolio, which is a again like venture capitalists.
And what we do is we also provide a huge amount of added value. Whereas a site like angel list is providing a forum for angels to raise money. We’re based. We have a whole department doing business development. We work with a thousand multinationals to introduce them to our companies. We raise money. Uh, outside of our platform by introducing our company’s other venture capital funds, we get our companies in the press and the value add really is where you compete today for getting deal flow.
Right? In other words, there’s a ton of money out there, right? Everybody can raise money, some, not everybody, but a lot of people who are skilled can raise money, uh, from different sources. But what. What really distinguishes you and gets you into the deal is what you can manage to do in terms of bringing value to the entrepreneur.
And that’s where we, I think have a, a special edge.
Andrew: The dream of crowd investing has always been that all the people who invest then become big cheerleaders, supporters, promoters, and customers of the companies that they invest in. Is that happening?
Jon: Yeah. Big time and it, but it’s not. Cheering and posting to social media and things like that. It’s introducing your cousin who just graduated from MIT so we can get a job and, and help and, you know, data science. It’s basically, uh, talking to your neighbor who works for CNN, getting a, you know, an appearance for the company there it’s, uh, bringing them to your, you know, classmate, who’s a GP, you know, uh, Andreessen or whatnot.
And it’s, it’s remarkable how the network. The effect of the people that we have, who are mobilized by us. And we’re building this into the platform. The other thing which people don’t realize is we have 50 programmers working for the company. We’re now up to 240 people at our
Andrew: the companies that you invest in
Jon: No, no, they, they, they build the platform.
Andrew: and what happens on the platform? How, how has the platform enabling investors to support the company?
Jon: So there’s an introductions feature, right? You know, if you look at our website, you’ll see that, uh, uh, you know, you are being called upon by the companies to make introductions for certain requirements. They have, we are sourcing deals from our investors. It turns out that probably. Best source of deal flow.
Two best sources are entrepreneurs who have worked with us and we’ve had 47 exits so far. So a lot of them are successful and they’ll bring us other entrepreneurs. But the other source is the investors themselves who all of a sudden say, Hey, wait a minute. I know these guys I’ve worked with them on investing.
Um, I’d love to, you know, get them into my deal. And, uh, so for example, right now we’re doing a deal. And, um, in the valley, a company called Zipline where we’re actually leading the transaction. It’s a company, uh, doing, uh, going after Amazon, uh, go and, uh, sort of the next generation of, of frictionless shopping.
And it’s a spectacular valley. Okay, uh, backed by, uh, Jim Shynaman and the guys at Maven ventures. Jim gave zoom its name, and, you know, we were introduced to the company by Jim by sort of a, you know, pedigreed Silicon valley, uh, venture capitalist said, Hey, we’re looking for, uh, an outfit to lead this next round.
And it turns out that we’re doing.
Andrew: All right. Let me understand how it started. You guys founded, uh, were founded in 2012. That’s the same year that the jobs act. Went into effect, right? That’s that’s the Obama act that enabled more people to invest. Right.
Jon: Yeah. So look, the, uh, the problem. Was always viewed as that. You know, I remember when I started talking to friends in 2012 about this idea, because again, one of the things which I think many people who are not entrepreneurs get wrong, they think if you have a good idea, you should be quiet about it because someone will steal it.
And I feel exactly the opposite. The more you talk, the more you can refine and that’s how you start companies. So, but a lot of people that were in the know when I would talk about, they said, You know, I’ll take you kosher food to Leavenworth, cause you’re going to jail. Okay. You can’t, you can’t, you know, Hawk, these companies, you know, online, that’s not going to work.
Okay.
Andrew: because, um, promoting investment opportunities was dangerous.
Jon: Well, it turns out that there was, it was illegal to do public solicitation. Okay. There was something called reg D 5 0 6 B all this regulatory stuff, which said that, you know, yes, you could bring it. Um, to the attention of a preexisting relationship and investment opportunity, you know, and you have to have PPMS and all that stuff.
And so that’s how we started, but it turns out that the jobs act created a 5 0 6 C, which allowed people to do public solicitation. So today I can put a billboard up on one-on-one. TV ads today up on Bloomberg and CNBC, you can, you know, we’re getting a lot of investors who are, so we’re allowed today to actually talk about these opportunities and that’s been a huge game.
Andrew: W w was that what allowed you to start this business? Is it that that happened and that’s what led you to start our
Jon: No, no. The public’s station was something that, that was sort of essentially pointed to in the jobs act, but it took about two and a half or three years if I’m not mistaken for the actual regs to be promulgated by the sec, but there were no action letters issued for both. Uh, angel list and, uh, funders club by the sec.
And that means that, uh, you’re allowed to do what, you know, all of us do, which is, you know, put this up online. And then we ask them as that include us. They said, look, you know, take a look at the, uh, at, at, at, at these no action letters and, and we’d been fine and we’re.
Andrew: it, but so you saw that this was coming, you said I’m going to jump on this and I’m going to open up investing in pre IPO companies to in private companies to more people. The first company that you backed was,
Jon: Um, a company called consumer physics.
Andrew: okay? What was that?
Jon: The, this is a company that, um, proposed to make the world’s smallest spectrometer. Okay. Spectrometers are things that like you use to Google matter. Okay. Tell you how many calories are in your steak or how much fat content or how much sugar is in your berries. And, um, the idea behind that company was to create a little chip that would go into your cell phone, that we would all walk around Googling it.
It was a great idea. And, uh,
Andrew: Not literally Googling, but using it to under, or maybe yes. Googling. You mean it would tell us what’s in our food and then it would go get data from the internet to
Jon: and internet. Yeah. And by the way that vision is, is someday going to be realized in cell phones. The problem was that while we built this incredibly tiny spectrometer, uh, after $50 million was invested after we put the $300,000 of seed money and millions of more dollars of our own money, we couldn’t get.
Small enough to go into the phone or cheap enough to go into the phone. So that was our first investment, but because we manage these things and help the companies, when all the other VCs who were on the table took off and ran, we stayed together. We went on. Partner and repositioned the company as an ag tech company, who today is the leading, uh, agritech company using spectrometry in the field to basically measure corn soybeans, animal feed.
Driscoll’s using it for berries. Okay. Doing 2 million tests a year, et cetera. And that company is off to the races.
Andrew: I see the, I see their website right now. It’s not a small thing that goes in your phone. Now they’re selling like a big cup that
Jon: well, it’s not so big. It’s like, it’s a, it’s a, you know, like one of those gulp size cups that you can then scoop up varies and get an instant test of bricks or sugar content, which Driscoll’s is now using as their exclusive, uh, quality assurance mechanism for their very sweet.
Andrew: How hard was it to get them on board to raise money with you.
Jon: Um, was that, you know, persuading them to do it with us was not that hard because not a lot of people were willing to take the adventure of believing that you can shrink a spectrometer. Okay. If you’ve seen it spectrometers like this big way, geeky sensitive piece of instrumentation that typically costs.
A hundred thousand dollars or more, and it sits on a desktop or a lab bench. And if you’d like breathe on it, the wrong way, it’s going to get out of calibration. Uh, and so when we, when we saw that most people said you’re never going to shrink that, except that I had, my first company was a fiber optic communication company.
So I knew more optics geeks and the most other venture people. And, uh, I knew a couple who said, it’s great idea. It’ll work. And so we did it.
Andrew: And so did you know the company? Did you know the founders beforehand?
Jon: No,
Andrew: No. It was just you finding a deal
Jon: They were introduced to me by one of my E early people, you know, uh, uh, who was one of my HR whispers who helped me build my team. And she said, she whispered in my ear and said to look at this company and I.
Andrew: what was the first step you took with our crowd? Was it putting a team together? Was it raising money or was it going after this company?
Jon: Um, probably all three and a little more. I mean, you have to, had to have a team, right? I needed finance and I needed legal and I needed a deal flow and I needed investor relations. I needed all that. So put together a team of, uh, early, uh, uh, partners. Uh, I needed company. Because you couldn’t really get this idea proven, unless you showed people, you know, what you were talking about here and, and I needed money.
So, you know, we did basically all three, what we did when we raised the first money for the platform is we forced the people to put $1 of equity into the company. And $1 into the companies.
Andrew: What do you mean? So, oh, so when
Jon: $1 went to the
Andrew: got it. So every time you raise money for one of the companies on the platform, you’re also raising money for our crowd and yeah.
Jon: That’s and that’s how it, that’s how it started.
Andrew: You know what I’m looking at an early version of the site. One thing that stands out is at the very top of the site, it says, why Israel, why are you open about where you, where you are in an international world? Why, why is Israel matter in the beginning? Why does it even matter today?
Jon: Well, remember that in a pre COVID world location didn’t matter. Right. In other words, there’s the famous statement of Mike Moritz back, you know, maybe several decades ago that he wouldn’t invest in something he couldn’t ride his bike to. And, uh, you know, there, there is always the sense of. Uh, and I, and I have lived here in Israel now for 40 years, I grew up in California.
I was born in San Diego and raised in LA, went to school at Berkeley, uh, and. People basically didn’t understand Israel early. And then they finally figured it out and Israel became the startup nation. And you know, a lot of excitement here, but no one knew how to access deals here. So what we sort of shamelessly used as our wedge to get, uh, initial investor interest was here’s a way for you to discover Israeli startups.
Now today, about 40% of our deals are outside of Israel. We have a very large component of deals that are not here, but Israel. For your listeners benefit has 10% of the world’s, you know, Okay. Uh, other than, uh, Silicon valley, there is no place other than Israel. This year in Israel, there will be over $20 billion invested in venture capital.
That’s up from 10 billion last year. And so the Israeli ecosystem, by the way, it’s up from 2 billion in 2014. So that’s a 10 X growth and we’re not talking 10 X for a company we’re talking 10 X for an ecosystem. So there. You know, we’re very proud to be based here, but we’re global. Just like you have global companies headquartered in the valley or proud to be part of the, as you was describing before the unique Silicon valley ecosystem.
We’re a global company proud to be part of the Israeli ecosystem, but headquartered here.
Andrew: Uh, so that’s what it was in the beginning. You were saying, I see opportunities here. There are companies that are going to be big here in Israel. I’m here. I’m going to bring them to the world. So it’s not just crowdfunding. It’s also crowdfunding this type of company in an area of the world that people don’t realize is going to be big.
And then it turns out the you’re. Right. All right. I want to know how you got started. Um, I did find out that you were, uh, that you grew up in San Diego. Let’s let’s just get a little bit of your childhood to get to know who you are. And then I want to know how you got into venture funding, because you had some really big hits in the beginning.
And as I said, I want to find out about the company that you, um, uh, that you started afterwards, but San Diego, what was it like when you were growing up? Were you entrepreneurial back then? Or were you a surfer?
Jon: Uh, my dad was a surfer. My dad was a surfer and a rocket scientist, literally working. General dynamics, you would, you know, work during the day and come out. And when I was a little kid, I would go on the boogie board and he would be on the big board and, um, lived in Pacific beach, you know, in San Diego.
And then we moved to LA where we lived in the west side of LA and I was very much part of the, uh, end of the sixties, early seventies and the, all the excitement then. And then of course I went to Berkeley, which
Andrew: But before we get into Berkeley, I lived in LA, I loved Santa Monica. It was beautiful weather, good people, but it was really also hard to work there. And San Diego even harder because of the surf culture where you and I didn’t want to
Jon: I never, I never had to work there. I left those places when I was younger. I never, you know, uh, I left San Diego when I was seven and I left LA when I was 17.
Andrew: So then as you were a teenager in LA, did you start little businesses? Were you entrepreneurial? You’ll
Jon: no, no. I was.
Andrew: Nothing.
Jon: No. I was a political kid. I ran a district office for George McGovern in 1972. I walked precincts for Bobby Kennedy. Uh, I, uh, worked for the United farm workers. Uh, you know, I, I, uh, you know, sort of bought into the sixties culture in every single way, uh, hard. And then, uh, actually came after my freshman year at Berkeley to visit Israel because that was the only place my parents would pay for me to go abroad and I didn’t have money to go elsewhere.
So I came over to Israel and I fell in love and ultimately kept on coming back and taught myself Hebrew and then moved Israel in 1980.
Andrew: And so this sales job that you had, optical communications, merit obstacle, uh, optical communications. This was in Israel nine years. The hippy becomes a salesman.
Jon: Well, no, it’s a little bit more interesting that even my father. The surfer rocket scientist comes back into my life. Uh, my dad was, uh, a really late, late father was a brilliant scientist who was a pioneer in fiber optics. And I actually also part of the astronaut scientist astronaut program for NASA when they were first thinking of going to Mars and they were going to send scientists there, believe it or not in the, uh, uh, late sixties, early seventies.
My dad came to visit me in 1982 in Israel and see how I was doing. And, uh, he asked that I accompany him to go visit some scientists up north at a place that was making missiles called Rafael today. They’re the maker of iron dome, uh, which is the anti-missile system. And I went up on this meeting with him.
Uh, I was bored to tears because this is before I phone and it was, I was done it. Wasn’t polite to sit in the meeting and open up a book. It was supposed to be the translator, but of course they spoke perfect English. And at the end of the end of this meeting where they’re talking about signal to noise ratio and harmonic distortion, and, you know, single mode, fiber, et cetera.
One of the guys turns to me and says, okay, young Medved, what are you doing with your life? And I told them, I said, it was a sort of part-time tour guide. I’m hanging out a lot in the old city of Jerusalem, eating a lot of homeless, meaning great women. And he looked at me and said, total waste, dude. You know, in Hebrew, my father couldn’t hear it.
And I was really. PO. And I looked at him and said, what do you mean? And he goes, you know, guys, like you, we got by the dozen we need are entrepreneurs. Your dad’s got fiber optics it’s way. Cool. Help him. So on the way back from north of Haifa, which is about two hours north of Jerusalem, um, I said, dad, what do you do exactly?
Explain this because I had gone to Berkeley, but I’d never taken a single. Computing or engineering or physics or math class. I studied history and my father basically at the end of the week in Israel, gave me a hundred bucks a month to stay in touch with those guys or Fs. You know, I got a friend he’ll teach you optics.
So I ultimately became a partner with my father. I raised the first money in Israel for that startup. And this was before there was a single venture capital fund here and we built that company and we sold it. So I was a little more than a salesman that was sort of his, his, his, his, uh, partner, but we sold the company to Amoco the large oil company.
And I had my first exit and that’s how I got started.
Andrew: Can I ask what you sold it for?
Jon: Uh, no, we don’t, but you know, uh, we don’t even know where he ends up dollars
Andrew: Okay. So then I understand why you go on from there to start Israel seed partners, um, Israel seed partners had a bunch of exits shopping.com, which was really big, um, sold to eBay. What’s another one answers.com. I think I interviewed the founder of answers and a
Jon: Trading him. Yeah. Trading him for 400. Yeah. These were all, we were one of the furry first venture funds in Israel. A lot of us went on to go do great things in the ecosystem, running, you know, billions of dollars of,
Andrew: would you raise from.
Jon: Um, we had a bunch of real big institutions. We had the Wellcome trust. We had IBM. Uh, we had Teutsch a bank.
We had, uh, um, uh, you know, this was now we started the B in the early days in my garage, this, because my father had always started his businesses in a garage and he was a serial entrepreneur. Um, and, uh, One of, to start in my garage and we started with $2 million. We ended up with a managing a fund of 260, which was very large seed fund.
And,
Andrew: your, your money at first, yours.
Jon: it was a no, and my partners, I had a,
Andrew: You’d already raised from institutions in the beginning, the
Jon: No, no, no, no,
Andrew: Okay. Yeah. I was going to say
Jon: Yeah, this was, this was our money, but many of my partners, the family money, you know, and, and some, uh, uh, uh, friends who had some wealth, we started with 2 million bucks and we started growing it.
Andrew: And what was the, what did you see? What would the, were you saying we’re going to invest in Israeli companies, would you saying where we see the tech is on the rise? This was 1995 before
Jon: Yeah, well, the not the nineties work 1995 was a very good year to be investing in technology. When you look.
Andrew: it just that I believe internet technology and technology in general is going to grow.
Jon: Yeah, we, we were, uh, I was an, an, uh, an investor and, uh, you know, sort of a co-founder of a company called accent, which was, uh, one of the first multilingual internet companies. And that was the year, you know, went public in 1994. It was, uh, right after Netscape. And, uh, you know, we were investing in internet companies, shopping.com.
Which we originally had called deal time, you know, was the first, you know, comparison shopping site that, you know, did very well and was ultimately bought by eBay. Um,
Andrew: money from affiliate deals. If I remember right.
Jon: it was yeah. Doing, doing great work. Um, and you know, we, we, one of our early investments in wins was in a company called Compugen, which is still around still traded billion dollar company doing bioinformatics.
Um, so we were very cutting edge. We had, uh, a bunch of exciting, uh, you know, companies. Deep tech cause where Israel’s really strong. Especially in those days, we were a little bit unusual because we did internet. Uh, but there was a lot of semiconductors and a lot of, you know, big science. Okay. Uh, you know, and, and, uh, it was fun and great.
And did that for 11 years of venture capitalist, but then wanted to go back being an entrepreneur again. Cause I really I’ve always been, you know, on both sides of my head. Both being an investor and an entrepreneur. And that’s why, you know, ultimately when I built our crowd and sort of initiated this platform, I could scratch both itches.
Okay. On the one hand. Yeah, exactly. And I love that.
Andrew: How did you guys fare during the.com bubble burst back in 2000?
Jon: Uh, it was pretty hairy. It was, you know, um, look we had, we had one company which we had, you know, sold just a couple of months before everything turned to, uh, Uh, uh, a different reality and we watch that stock go, uh, vertical. It’s sold actually the company vertical net, we won and we were making jokes about how the stock went vertical, the wrong way.
Uh, and we, uh, uh, also lost some really great companies. We had invested in a company in 1998. A couple of guys called earth noise, who you never heard of. Right. That a couple of guys came back from Thailand and wanted to post their videos online and they realized how hard it was. And they built the website.
We backed it, we got $12 million. We were the leading video sharing website. And this is the back of the day. It was 19 dot two. When the, you know, shakeup happened, all of our investors ran away and in 2002. We had to shut the company down. I think it was the next year that the guys at YouTube started their company.
Andrew: How did you personally deal with all this vulnerability so far we’ve talked about, is everything going great?
Jon: No, this was, are you kidding watching? You know, I mean, look, I have a lot of respect for those guys, but you know, you in this business, you will struggle and be. And, and, and lose. Okay. And you can lose for a variety of reasons. For example, timing now, uh, you know, after, uh, I left Israel seed in 2006, I, um, I went to go build a company called
Okay. Which was a essentially Tik TOK kind of video sharing way before its time. It was a mobile app back in the day when the only mobile app environment was Symbian and it run on the end 75 phone from Nokia. This was before there was an iPhone and there was a phenomenal idea. Basically it was, Hey, I can call you and I can call.
Any video to play on your phone when you’re picking it up. So basically you could share in real time short video clips, and it was really, it was ticked off and we got it to work, but, um, uh, we had, we struggled with it because, uh, uh, apple didn’t allow these kinds of, uh, apps to run, especially with their call control.
Finally, we got it to run on. Uh, Android. And ultimately we actually got the company public, it went public in 2010. It was described as the world’s most improbable IPO in the wall street journal. Okay. And, uh, ultimately got merged into it. Company that was chasing patents and sued Google. Luckily I wasn’t part of that.
Okay. Uh, but the stock went wild and, uh, many of my investors and myself made, uh, some real money. Uh, but, uh, I, I left. And so here’s the question. When you see things like Tik TOK, and you saying, wait, I was doing this, you know, 15 years ago. Okay. And, um, it was way cool. You can still probably find things in the way back machine, you know, on, uh, on, on the web and that’s, but that’s fine.
That’s part of the, this business timing is perhaps the most underlooked and underappreciated factor.
Andrew: Let, let me pause for a second. I want to understand I get the, the timing, but I also feel like there’s so much that Ringo had going for it. So it was founded 2006. I saw that you said ring tones are $6 billion market. So around that time, people were buying ring, ring tones. I remember going to Europe and I would see endless commercials for ringtones on TV, because if I bought a ring tone of my favorite songs, It would play whenever somebody rang me or maybe when a specific person rang me, but also the phone company would charge me for it.
And sometimes it would charge me on a subscription to get to do it. So you saw that, you said, what if we make it into video? Not just audio, why didn’t before we get into the unique creation of videos, why didn’t that alone take off? Why didn’t you say why? Didn’t just, just piggybacking off of that market work.
Jon: Well, see the, the ringtone market was a little bit sleazy, lots, and it’s sort of like for Forex before its time, you would entice them. Uh, kids who really wouldn’t know any better to sign up for these programs. And then they would just be paying and paying money.
Andrew: And they wouldn’t know it because it’s hidden in the phone bill and the phone bill is full of little things that you don’t notice. And what’s another $10 a month. You blame your phone company. If you
Jon: I, that, that part of the business never really appealed to me. I, I liked the social, the video sharing, the problem was that, uh, trying to get these video clips licensed was going to cost us.
Andrew: Um,
Jon: Tens and tens of millions of dollars, assuming we can even get them. And it never took off, you know, there, there were no video ringtones that did not become a thing because ringtones were literally just as I was forming.
Uh there was sort of dying. They had already peaked. And so what happened is yes, we were right about, sorry. We were right about the future belonging to companies like Facebook and about video sharing, big time where we write, but we were just about 10 years too early.
Andrew: This, uh, an article from 2019 Medved argues that Ringo no less than MySpace or Facebook can also be as, uh, be the profitable basis for international social network. So you right. That.
Jon: That was in 2019.
Andrew: Now excuse me, right? 2009, you were right. That Facebook was going to be profitable and your vision then was, so if I understand it, right, you started out saying we could do video ringtones, just like ringtones.
We’re going to create a video, just like audio rentals. We’re gonna create video ringtones. And then when you couldn’t license enough video, you said, what if people can point it at their TV when they’re watching a show at night, and then the next time they call their friend that this show from last night pops up and there’s a conversation.
If they’re at a party, they shoot a video at the party. And when they call their friend, their friend sees a video and now we have a conversation. That was
Jon: Exactly. Or, or like, if my, if, if, if you’re a Brit and I’m an Italian, I’m calling you and, and, and showing the fact that you just lost, you know, alive. So this was, this was, this was Tik TOK sharing. I mean, we were not just demoing it, but in the system. We had built a system that allowed you to share in real time, 10, second video clips.
Okay. You know, this was in 2006 and
Andrew: Symbian and then you also found a way to hack it into, into Android. Uh, you also said we are waiting breathlessly for the moment that apple will support video ringtones. We’re still
Jon: We waited a long time and I’d never.
Andrew: still not ha. Um, but. So that didn’t work out. You still were starting to build it up. How did you get to go public?
I’m looking at the S one. How were you able to go public with this thing that didn’t have real revenue? No profits needed.
Jon: We had $32,000 of revenue.
Andrew: So how, how did you do it? Why did you do it?
Jon: I did it because I could, and I, I wanted to raise the money, uh, and we did, and the people who actually participated made money because ultimately this company merged into something else which, uh, happened to be involved in, uh, uh, IP protection around the search patents that were critical to the world and our, my investors made money.
It was a look, a lot of luck involved there and, uh, uh, I can’t certainly take any credit for the ultimate success. The company was a success and then it failed because, uh, the, the, while they won their first round of the legal fight, it was overturned and appeals court. So, you know, luckily I didn’t have to manage any of that.
And, uh, it was a great experience by the way, because, uh, I got a chance to be a public CEO and it’s a, that’s a different kind of experience.
Andrew: how was that considering that the revenues weren’t growing was that madness? Was that tough?
Jon: It was tough, you know, but, you know, look, we had a great vision and it was sort of like public venture capital.
Andrew: And when the vision doesn’t work out in public, how do you, how do you personally handle it?
Jon: you, yeah, you.
Andrew: under smaller crisis.
Jon: Yeah, well, I I’m, I’m, I’m pretty resilient, you know, I I’m a, an optimist look. I think that, you know, in venture capital and entrepreneurship, it’s not really a good, uh, business choice for pessimists. Okay. In
Andrew: naturally optimistic. Give me, can you give me the worst day, the like John, whatever, the equivalent of John laying in bed and can’t get up and going. I can’t believe that this is the headlines I have to face today. And then what you did to get past it. What’s a difficult day for you in this.
And maybe if we can go back to Ringo and how did you get past it?
Jon: I mean, um, look, I, I think that it was difficult when we were, you know, nip and talk about whether we were going to get this thing. Public was on a road show and talking to investors and it wasn’t easy. And, uh, I had some really great, um, amazing underwriters and backers who pushed me over the, uh, the top there.
And it’s.
Andrew: Okay.
Jon: You, you have to have a certain thickness of skin. You can’t, you know, as a CEO of a public company, you can’t look at your stock price every day, you know, especially mine when it wasn’t so great in the beginning. Uh, and you know, you have to be honest with your shareholders, not just in terms of disclosure and letting them know what’s really going on, which we always did.
But, um, you know, one of the great stories about that IPO, by the way, uh, is that when I was. Uh, a kid at, at Berkeley, I left Berkeley with two incompletes in, uh, Hebrew literature. Would you believe? So? I was certain that I never graduated from college and, um, I was very careful all my life to basically.
Tell everybody that I studied at Berkeley, but I, you know, never graduated. And, uh, in 2010, we filed to go public. Um, in those days you had already to hire fact checkers would look at your bios of your team. And I got that call that a CEO, dreads getting, which is Medved. We got a problem. And I said, oh no, who is it?
He goes, you. I said, what do you mean me? She goes your degree. I said what degree? I don’t have a degree, that’s it? Why are you lying that you don’t have a degree? And I said, what are you talking to me? Like call your university. You graduated from Berkeley, you know, decades ago. Why don’t you list it? We’d have to list it.
So I called up and they said, yep, you graduated. And I went through, you know, literally about 40 years of life. Okay. Not knowing that I had actually graduated when I
Andrew: you graduate with two incompletes?
Jon: Uh, because, uh, I must’ve had enough credits, I guess
Andrew: Uh,
Jon: could add, or the people who had given me the incompletes had mercy on me. I, to this day, I have no idea.
Okay. But I’ve got my degree, my degree, my son bought me the little diploma up on my wall. It sits and. I now mentioned that I’ve got a degree. Cause I got it. I was really proud of that. I thought I was like Steve jobs and bill gates and all those other guys who were also many of them born in my period of time.
And I was, you know, self-made man without it. I agree, but I wasn’t so
Andrew: you weren’t, but so then I’m still not getting like the low of John Medved. What is the low, was there a low, is there a low at all?
Jon: No, God has been
Andrew: just doesn’t go to it. So
Jon: No.
Andrew: it. You mentioned God has been good to me. You, you live kosher life. I’m assuming that you’re, you’ve got a faith.
Jon: family. I’ve
Andrew: what gets you through it?
Jon: I’ve got, yes. Yes. I’ve got a
Andrew: your lowest moment, you say my God’s taken care of me. I have a vision for myself.
Jon: No, I’m not that, you know, look, I, I, I come home to a wife who I love. Okay. Been married for 35 years. Four unbelievably wonderful children who have produced so far, 10 amazing grandchildren. Um, they all live nearby, you know, uh, I live in a place which I think is magical. I live in, uh, in the city of Jerusalem, which is sort of.
Right between past and future. Okay. I have great friends, um, in the most wonderful career you could possibly imagine, which is being an enabler of other people’s dreams, right? Being able to, you know, help people. Build companies and they win and they lose, you know? And so if I’m upset about something yeah.
It’s because I’m overweight. Okay. It’s yeah, because I, you know, uh, uh, I don’t exercise enough or, uh, I get, you know, upset like everybody does about politics or the pandemic or whatever it is. Okay. I mean, I’m not.
Andrew: sitting around going, this is not going to work out. I think I’m in trouble here. Why am I
Jon: No, no. I always think about how do you get out of this situation? How word, where do you turn it around? Okay. I look, I, um, in many of my own companies look at my father taught me a lesson back in the early days of merit when we have, you know, um, We are, there are times when we would issue ourselves, Paychex’s with pay all the other employees and he’d say, son, give me that paycheck.
And he put it in the drawer. Because we had no money to cover it at the bank. Okay. My mother had to actually, uh, she was divorced from my father at the time, but she actually put her house up as collateral so we could keep the company going. Okay. So, you know, I’ve, I’ve had my moments when, you know, I call it my, you know, my ample gut-check.
Okay. When you have to realize that it’s this, this is money time. Okay. I’ve been, you know, in certain companies weeks away from, you know, uh, absolute disaster. Okay. And, and when you invest in as many companies I have in my career, and that’s, I think now, uh, something, you know, north of 400, uh, companies, you have failures, you have phenomenal.
Andrew: what gets you, what gets you through those moments? Is it just the belief that this is part of life?
Jon: It’s it’s, it’s part of the process. In other words, this, this doesn’t work without failure. You’ve got to learn from failure. You got to accept failure as part of this process. If you have this sort of Pollyannish vision that Hey, startups are wonderful, everything goes up. They always win. It doesn’t work that way.
Okay. And then on the other hand, you know, failure is not the end of your life. And you know, most venture capitalists know that a second time entrepreneurs, that a failure is a better investment choice than the first timer. Who’s never done anything.
Andrew: I wonder also if it’s that you’re not spending much. Tell me if this is too personal for me to notice. I’m looking over your shoulder. You’ve got a wonderful bookcase jam packed with books that bookcase looks like a college student wouldn’t want it. Like maybe they put it outside and you picked it up.
Jon: Really cool. Wonderful. What a year? This cost
Andrew: a real word? Maybe it’s just not coming across.
Jon: yeah, that’s that’s that’s like beautiful hardwood, man.
Andrew: All right. I expect
Jon: My wife better not hear this podcast because she’ll be.
Andrew: Then blame apples, blame apples, webcam, then. Sorry. All right. Okay. So I’m on our crowd right now. If I wanted to invest, the thing that I need to do is go to the top and look for, and just hit the invest button. And is there something knowing me, you know, me, I’m more like software entrepreneur. I do love that beyond me, dude.
Once I tasted it, I gave it to my kids. They’d been lifelong vegetarians. They had it. They fell in love right away.
Jon: So, first of all, then if you like beyond me, you should do B on milk, which is a company called ripple foods who are
Andrew: a look at that. Yes,
Jon: you are making a plant-based, uh, milk, alternative product line.
Andrew: it’s oversubscribed. Can I invest in it?
Jon: Uh, yep. And get on the waiting list. We’re trying to get more allocation. Uh, we are, we are, we are way over subscribed on that one.
That’s very popular. We led the last round in ripple with Google ventures. Uh, our crowd and Google ventures did the, the lead of the last round. And we’re, we’re putting in and this one more than $10 million, uh, and, uh, um, It’s uh, it’s, it’s, it’s pretty exciting. I mean, this is, uh, a company that competes with Oakley wholly of course, is the darling of wall street.
Uh, except it’s not, uh, the round isn’t priced at the same multiples, uh, of, of, of Oatley. And we think the product’s better, it’s less calories, less fat, less sugar, and a lot more protein and tastes better. And, uh, I like, you know, betting on a fast follower competitor with a better.
Andrew: Can I taste it somewhere here. Maybe I
Jon: Absolutely. It’s in stores everywhere.
You can’t taste it on my, on my website. You can go down to the court in the bay area just by ripple. Let me know. I’d love it if you, if you
Andrew: find it. I’m down for that stuff. What about, um, there’s our crown community fund three. What’s that?
Jon: Okay. So we have a, um, that’s a continuity. It’s like an opportunity fund. So, uh, any time that we have a company on the platform who is now getting a subsequent upground led by a bonafide financial investor, not a strategic investor, then that. Jumps. Okay. It’s a rule-based fund so that, you know, you basically get rid of, uh, infant mortality and you’re, you’re basically, it’s like a winners fund and that does vary.
And we, we, we have 27 funds on our crowd. We have our crowd 50, which is a 50 company index. Our minimums on funds are $50,000. And, um, you know, that, that divide.
Andrew: put in $50,000 minimum into this fund. And all this fund does is says, what are the winners that are raising another round? We had our crowd get to participate.
Jon: And that’s like, that’s the continuity fund. The, the index fund. We’ll give you an index of different stages and sectors $1,000 in 50 companies. And then we have, you know, other funds where you can invest in rebel, which is a cool early stage fund out of Silicon valley. Uh, investing in Y Combinator companies, you can invest
Andrew: rebel it’s on this platform. I didn’t know that. I don’t see it in the list. Maybe I need to log in. I’ve got a log in account. I just didn’t log in on this
Jon: Yeah. Yeah. Um, there’s, uh, uh, you know, we’ve, we’ve invested in a whole series of funds, uh, you know, uh, us venture partners, uh, you know, we’re doing glee LOTE now, which is a great fund out of Israel, uh, focusing on cybersecurity, prequel named at one of the 10 best. So, you know, at our crowd, we’re basically trying to democratize the access to the.
Companies directly where you can select a company, invest 10 grand or. To funds. And the problem with most people in funds is that, you know, you find a fun, you’d like, you know, get ready to write a multi-million dollar check, right? Because the minimums and most good funds, you know, maybe they’ll let you in for two or 3 million, but let’s say you want to invest 50 grand good luck with that.
That’s not happening. Except that what we do is that. Go in and say, look, we’re going to, uh, out, you know, aggregate a 5 million, 10 million, $20 million beast and be a single LP, but we’re going to have hundreds of people inside, you know, our, uh, partnership and that’s, that’s how it works.
Andrew: All right. I’m going to make sure that I’m logged in. I’ll go hit that invest button. I appreciate you being on here. I don’t know if you notice it, but I said I was going to do an ad for host Gator. You even get to do it. Cause I got so wrapped up in the fricking conversation, but that’s okay. Uh, my sponsors know they’re either a part of the conversation.
If it fits it naturally or they’re not at all. And I just make up for it another time, John, I really appreciate you being on here. The website for anyone who wants to go check it out is R crowd.com. and I guess I’ll, I’ll be on there now.
Jon: It was great spending time with your Andrew. Thank you.
Andrew: Thank you. Bye.