How two straight guys bought Grindr and made $2B

- October 13, 2025 (5 months ago) • 01:15:16

Transcript

Start Time	Speaker	Text
00:00	MFM	How are you doing 100 million in revenue and 45 million in profit with a 1.8‑star rating? We look at this, and we just see opportunity.
00:15	Sam Parr	Basically, how we got here was Sean and I were talking about Grindr last month and how there was this amazing story behind it. We found out that you were the two guys who bought it, took it public, and made it a home run. Sean is good friends with James Currier. Rick, I've had a bunch of run-ins with you early on in my career, and the same with you, Jeff. We were like, "We gotta get these guys on," because you've been a little bit behind the scenes. You don't talk that much — you're just kind of quietly behind the scenes — but you've had some major successes. I thought it would be cool to give you a platform and tell the story, because I don't think you guys have told a lot of these stories publicly, maybe ever. Have you?
00:51	MFM	Not a lot. No—we've done a couple here or there, but no, we have not been out there publicly and talked about what we did at Grindr. We're happy to do that today. </FormattedResponse>
01:01	Shaan Puri	So, let's do story time. How did you two guys end up owning Grindr? What is the story of Grindr before you, how did you get involved, and what happened afterwards? I want to hear the Grindr story.
01:12	MFM	Grindr was created/founded by a guy named Joel Simkhai about 15 years ago. Joel is a gay man who wanted the ability to create an app to find other gay men, GPS-enabled—kinda like Uber. Uber really became viable once the iPhone became ubiquitous and people could see where they were; that proximity made the idea work well. So he created Grindr. Grindr took off, and he ended up selling it to a Chinese company called Kunlun. A few years later, CFIUS (Committee on Foreign Investment in the United States) forced the sale of Grindr. They were worried that the data Grindr was collecting could be used in harmful ways by the Chinese ownership.
01:59	Shaan Puri	Was that first sale a big sale? Like, was Grindr considered a big success at the time? I know some of the dating apps traded for not that much money early on.
02:08	MFM	Yeah, so, I believe Sam—sorry, I mean Joel—sold it for I want to say $260,000,000.
02:15	Shaan Puri	Okay.
02:15	MFM	So it was a great sale, and he owned 90% of the company. Very few others had equity, so he did very, very well. And then Cipheus forced the sale, right?
02:25	MFM	So, was that true?
02:26	Sam Parr	What were the Chinese using it for? What did that mean? I think I read there that the accusation was that they were straight men—they were blackmailing straight men who are on Grindr.
02:36	MFM	I think it's hypothetically true that if you have the servers located in China and you're the Chinese government and you wanted to watch, it's sort of like—if you know the answer to the question, "Can you use Grindr backwards?"—then, if you know that you have users in the White House who are gay and using the app, you can figure out who users are and you can track where they are. You could say, for example, the president's about to leave the White House because people on his forward team who happen to use the app are active on it. With the Ukraine war, we heard that soldiers on both sides were using the app to meet each other between battles. People have also talked about Olympians being outed in the village. Work was done at Grindr to help avoid these extreme cases. I think there is a possibility for abuse, and there are certainly people who are closeted or not openly discussed in politics, in the military, and in high positions who—hypothetically—if the Chinese government wanted to, and they had access to the information, they could exploit that information and potentially use it to blackmail our politicians.
03:41	Sam Parr	Okay, so that's like a real... That sounds very reasonable. Why was a sale forced?
03:47	Shaan Puri	So, when they "force a sale," what does that mean? Like, there's an auction one day—how does that work?
03:51	MFM	Give the company one year. You have one year to sell to a U.S. ownership group. If you do not, the government will take control of the business. During that year, the CFIUS group (the Committee on Foreign Investment in the United States)—which is partly comprised of U.S. intelligence officials and elected officials and administrators, like members of Congress—steps into the company. They put in place the digital and administrative processes to monitor the company during the year and to mandate the sale. So yeah, it is a mandated sale.
04:24	Sam Parr	"Did you just learn about that in the news? Or... because you guys weren't... I mean, was this a pretty level-up deal for y'all?"
04:34	Shaan Puri	Is that where you bought it, or did you buy it after that? Did somebody else buy it, then you bought it?
04:37	MFM	No, we bought it because — again, CFIUS was forcing the sale. They had a certain timeline to sell the company, and there were all the typical buyers you think about. There was always someone super conservative on the investment committee who said, "I can't be associated with gay sex; I can't do this deal." We also looked at raising money from some folks in the Middle East; they could not be associated with gay sex or gay dating. That really took a lot of the typical buyers out of the process. We were lucky enough to partner with another PE firm and actually buy the company. In the end, it came down to three buyers who put in legitimate bids, and we were fortunate to partner with the other PE firm and buy it.
05:21	MFM	Let me just—what Rick was talking about: there's this weird thing where companies that had helped Tinder go through all of its systems were fine working with Tinder, but when it came to Grindr they were like, "Oh, we don't want to touch that one." I didn't understand the extent of the sort of latent homophobia that, at the time, infected the whole process. We really benefited from that homophobic behavior because you had this incredible company: it was growing like crazy, it was incredibly profitable, and the users loved the product. It checked every box of what you would want in private equity and what you would love as a product person. The more we studied the company and the product, the more we realized, "This thing is just an amazing business; it's an amazing product." Joel really hit on something that met the market's needs. It was dominant in its market position. The people looking to buy it had seen it go through lots of sale processes. We had heard Playboy had tried to buy it, and there were all these people over the years who tried but couldn't come up with the financing, couldn't make the deal work, or couldn't get the banks to work with them to get the deal done. So it ended up with three pretty nontraditional private equity firms going after it—ours being one of them. As Sam said, it was a step up for us. We had not done a deal that was in the hundreds of millions of dollars prior to that; we had done deals in the tens of millions. But when it came time to raise the money for the deal, we raised it very quickly. When we did find people who would listen to us and hear about the business, people loved the fact that we had uncovered this glitch in the system—that this homophobic thing had kept the price down and made the deal available to newcomers to the space. The operator piece was the other thing people loved. They were like, "I can't believe you guys have done diligence where you actually have a roadmap for the product, a roadmap for security, a roadmap for trust and safety, the moderation." We had done all that work to understand what the real challenges were for the business.
07:19	Shaan Puri	Hey, let's take a quick break for a message from our sponsor, HubSpot, who's making this episode possible. Listen: if you're trying to build something big — and I'm talking about a $100 million or a billion-dollar company — one of the most important things is to focus on the market. Where is the opportunity? You are like a surfer on a surfboard, trying to find the biggest, best wave possible for you to ride. Well, HubSpot has put together a cheat sheet that studies and reverse-engineers what's working today. They're looking at the top-performing industries you could be targeting, the funding routes that work best, and the growth strategies the fastest-growing companies are using. So if you want a one-pager — a cheat sheet on the big-company playbook — you can get it right now. Just either scan the QR code that you see on the screen or click the link in the description below. All right, back to the show. So, roughly, what'd you guys buy it for, and what do you think it would have been had it not — let's just say — been a straight dating app? Like, what do you think the same business, with the same metrics and everything else, would have been worth — how much of a discount or premium do you think it ended up at?
08:17	MFM	"Rick, I think 50% off at least, right? The deal was for $600,000,006.50—or something."
08:21	MFM	Yeah. We—well, I mean, on a basis, we weren't really that far off market. So we bought it for about $600,000,000. It was doing less than $50,000,000—about $45,000,000 of EBITDA when we bought the company. So, you know, call that kind of 12–13x EBITDA, and the market was probably trading at more like 20x for the public companies. But there's a private-company discount, so we bought it for under market for sure. It was really just the lack of competition in the process that allowed us to get that discount.
08:57	MFM	This is such an interesting story. We learned so much in this process. There were other pieces to it. Normally I would say that private equity firms don't want to touch a deal or investors don't want a company that has more than one problem. Grindr did have a bunch of problems. It had a very public problem with privacy and data — at least a perceived problem — because they were being sued for selling users' HIV data by governments in Europe and in the U.S. It also had this issue with the Chinese ownership, which was a thorny problem and involved CFIUS. This is one of the only cases ever where CFIUS had actually retroactively unwound a deal. CFIUS had denied deals with foreign buyers before, but they had never retroactively unwound one. What they're trying to do with TikTok today would be the second one after Grindr. In addition, Grindr had a PR problem, and it had this sort of latent homophobic problem — people just not wanting to touch the property. So it had a series of problems. None of those issues bothered us at all. We were so in love with the business and the product and how much the customers love the business, and we saw so much potential. There was customer frustration for sure, but they had been sloppy on a lot of product work, customer care, and modeling. They had made mistakes — not awful mistakes, but typical mistakes that small businesses make when growth gets ahead of them and they fall behind the ball. Because Rick and I had both worked at large companies in addition to startups, we understood the complexity of that jump: moving from about 5 million users to 20 million users brings a lot of complexity — the legal things, the accounting, and all the other operational differences between those stages of a business.
10:34	MFM	We also looked at some metrics that were shocking, which was the App Store rating. Jeff, was it 1.8?
10:42	MFM	Yeah. 1.18. And remember, one star is the minimum, so it's really 0.8 — that was the rating on the app.
10:49	Sam Parr	"Well... was that horrible? I think your Glassdoor reviews were pretty horrible... you had..."
10:53	MFM	All the management rating was 19%.
10:56	MFM	I'd never seen anything that low before. I was like, "Woo!"
10:59	MFM	[Opening phrase unintelligible] How are you doing $100,000,000 in revenue and $45,000,000 in profit with a 1.8‑star rating? We looked at this and we just saw opportunity. We realized this company is severely under‑managed — clearly, from the Glassdoor rating. Iconic brands, strong, stable cash flow, but we knew there was a lot of cleanup to do once we got in.
11:24	Shaan Puri	And you guys had already had success, right? You sold Tickle for $100,000,000 or so. So it's not like this was your only option — you didn't have to do this. You could be doing a lot of different things in life, and you signed up for a big swing — the biggest swing you'd taken — and with a lot of hairy problems. We were like, "Oh, it didn't bother me," but I want you to take me in the room. Before we get to the turnaround and what happened and how you guys did it, I just want to go back. I've been in situations like that before, and I remember feeling like, "Man, nobody really talks about this." I've read a lot of business books, I've heard a lot of business podcasts, but right now I feel pretty "naked and afraid." I don't really know if I'm making the wrong move or the right move because I'm doing a swing that's bigger than I've ever done. I'm in the room, it's unclear, there's still fog of war... the story hasn't played out yet. We don't know exactly what's going to happen.
12:15	MFM	It was much worse than we thought, too, when we got into Grindr. Remember, COVID hit in March — the deal was halfway closed and users dropped 20% or 30%. It's a location-based, physical meet-on-site product; COVID hit and everyone was locked at home. We had plans to basically live at least part-time in LA, moving from Tampa, so it got worse. When we got there and started reading through all the actual data for the business, we were like, "This is much worse." Over the two and a half years, I gained 25 pounds; my cholesterol went up 30%. I didn't see my kids... it was...
12:51	Sam Parr	You said this in the document: "So this is Jeff writing: 'For me, I've become distrustful of times that feel too good, and equally, I am skeptical of moments that feel too low. So today I'm simply more emotionally level than I was in my twenties, in part because I don't trust highs or lows, and that has helped me focus and persist when others might quit or get sidetracked.'"
13:16	MFM	Yeah, yeah. I think that it's probably true for both of us.
13:18	Sam Parr	"I want to ask some details about the deal. You said you raised $600 million. I'm curious: is buying a company for $1 million, $10 million, $100 million, and $1 billion at all similar? Are each of those amounts similar? Is one harder or one easier? And of that $600 million, how much of it was y'all's money?"
13:39	MFM	Yeah, I can take that. So, the deal structure: the $600 million—there's about $200 million of equity that went in. Some of that was our personal money, but most of it was outside money that we raised. There was $200 million of debt; Fortress was our debt provider. Then there was another $200 million that was due, basically an earn-out upon the exit. Right—so really, with Grindr only $200 million of equity went into the deal. We can fast-forward, or we can talk later about where the exit came out, but it ended up being a very, very good return on the equity of only $200 million going in.
14:19	Shaan Puri	And when you raise that money, do you guys—as the kind of GP/operator types—end up owning 20% of the company, or 50%, or 80%? Because you've raised, you know, a certain amount of equity and a certain amount of debt. Where do you... what do you target? What do you try to land at in a deal like that?
14:35	MFM	Well, we worked with another PE [private equity] firm. The way it ended up being structured was that they brought in a lot of the equity. We had the debt that we had brought in from Fortress; they brought in most of the equity. We had our piece of that, but because Jeff and I ran the company, we had a slug of equity related to our roles — Jeff as CEO and me as COO. To answer on the economics of the deal, from a high level: we took Grindr public for $2,000,000,000 ($2 billion) on the New York Stock Exchange, two and a half years after we bought the company. As I mentioned, as part of the deal structure — that earn-out — the first $200,000,000 went back to the original owner (the owner we bought it from). That leaves you $1.8 billion, with $200,000,000 of equity going in, because the debt stayed on the business. So we basically created a 9x return on that $200,000,000 — that's about $1,600,000,000 ($1.6 billion) of value created when you subtract out the original capital. Typically, you'd have a 20% carry on that.
15:48	Shaan Puri	"That's amazing. What—was there any—obviously you did a lot of cleanup, you implemented best practices, you executed a product roadmap and marched in that direction, so we don't have to go into all those details. But I'm just curious: was there any moment, key insight, or fun strategic moment that happened that actually helped you build that value?"
16:07	MFM	Well, there were some things that surprised us. When we first got in there, we knew we were going to have to do a lot of cleanup. We also knew that talent was going to be an issue, but we didn't know how bad it was. Culturally, unfortunately, the Chinese had really... they ruled by fear. It was this black box: nobody knew what was going on. There were five people who had equity and who really had any kind of vision or knowledge of what was happening. Then we looked at the engineering team. Jeff can speak to this more than I can, and we realized they weren't that good. They were not committed to the company and definitely were not committed to the community that we served. We ended up having to fire about 70% of the staff, mostly the engineering team. We didn't expect it to go that deep, but when we got in there and realized how badly the tech stack had decayed, we realized that we needed to do a kind of three-part, serial process. The first part was "reset the talent." The second was "fix the tech stack." The third—where it got to be fun, and where Jeff really shines—was "rebuild the product and start to drive revenue."
17:21	Sam Parr	"Was a large percentage of your staff gay?"
17:25	MFM	Of those, we kept a very high percentage. </FormattedResponse>
17:29	Sam Parr	Was it weird... because, I mean, there's obviously cultural things going on here — two non-gay guys are now buying Grindr. And then, you know, it'd be like me owning Ebony magazine. There's a clear... I don't know. Could I trust this guy? He's not part of the community.
17:50	MFM	I would say this was the biggest— we sort of smile about it— but I learned so much. I went in trying my best to understand the users' needs. You're lucky to work in a product where customers give you constant feedback. I'd already talked to hundreds of customers during the diligence process. We had read through thousands and thousands of customer-care issues. I had been on Reddit forums, going through every single post about the company. I would copy and paste posts into a document, asking, "What's this issue? Why is this happening?" When we arrived, many of the employees left from Joel's original team had incredible knowledge, but they didn't have scale. They had not scaled before, so they didn't always know, for example, how moderation changes when you have customers in 193 countries — when you're moderating in multiple languages and handling issues at that level. I had encountered this at Yahoo, so I knew what to do when you have users in 190 countries. I was able to bring on engineers from Yahoo who knew scale right away. I think the best hire we made was the head of Global Privacy and Safety from Yahoo, who happened to be a gay man who had retired from Yahoo. I'd known him — he'd been there for 18 years. I called him and said, "I need you to help me on this company." He asked, "What's the company?" I said, "Grindr." He said, "I'm coming out of retirement. I'm going to help you. I'm going to do something for the community myself." He just said, "I'll do it for the community." We were being sued at that.
19:27	MFM	By 13 attorneys general in the US over privacy and data leakage — something the company had not done, but everyone believed the company had done. It was funny: something the company did that actually saved 10,000+ lives a year was being sued for this feature, which is "What's your HIV status?" and it's listed on your profile. That's certainly an important thing to know before you meet someone. He said, "I'll do this." He got on the very first call with the 13 attorneys general. They said, "Shane, is that you?" He's like, "Yeah, it's me; I now work at..." They said, "You work at Grindr," because he'd met and known them all from when he was at Yahoo. We constantly dealt with all sorts of issues at Yahoo, and I'd learned about and dealt with the CIA, the NSA, the FBI, and every possible law-enforcement agency when I was working at Yahoo running Mail. Essentially, 12 of the 13 attorneys general basically said, "We're good — Shane's there, it's run by professionals, we understand." So simply the upgrade of talent almost started to resolve problems right away. It caused tension inside the company because the same straight guys that came in were putting in people — they were like, "They're just putting in their lackeys everywhere." By the time Rick and I left, 70% of the hires in the company were minority hires. Basically, we were hiring people from the LGBTQ community or hiring people who were involved in DEI — which is not something many people talk about anymore — but we had the most amazing ability to recruit, and it was a superpower for the business because we were able to pull talent from incredible places. They believed in the mission of the company. We actually used the mission of the business and the impact it was having. I don't think people understand the extent to which Grindr makes a difference in the gay community or the LGBTQ community globally. Most of the information you're going to get on sexual education about gay sex or trans people — outside of English — comes from Grindr. Grindr publishes its safety and anal-sex information in 57 languages. When you need to know about trans healthcare and need to find a doctor who will give you vaccines, and you're a trans person in India, that database is funded and built by Grindr. Those things the company does — it creates a mission, it creates all this incredible impact — but it also is something Tinder will never do. Tinder won't save lives nearly at the rate that Grindr does simply by educating people about safety. You can imagine: if you're a closeted trans person or a closeted gay guy growing up, and you haven't been able to talk to your family or your community about what's going on in your life, being able to find community on Grindr and access that information in a very uncensored way was valuable.
22:18	Shaan Puri	You know what I think is cool about you guys is that you're OG Silicon Valley—true and true, right? Like the big kind of tech eras: Web 1.0, 2.0, etc. You guys were there. Even your near misses were basically correct. Whether it was iDrive before Dropbox, or, you know, Rick—you were doing BranchOut, which was kind of like LinkedIn—you were so close to the big exit and the big reward of getting that thesis right. But then you guys sort of switched and played your own game. You're not just a venture firm only focused on venture-backed startups; you went into private equity, which is so different from most of your friends in Silicon Valley. Can you talk a little bit about that? Specifically, if there are other people who are kind of similar—I've put myself in this bucket. I thought I was a smart guy, working hard, but I was playing a game in Silicon Valley where it's feast or famine: either I'm going to make a billion dollars or pretty much zero. I was grinding super hard and really felt like I was running around with a bottle trying to catch lightning. As soon as I switched to more bootstrap businesses or private equity—buying chunks of businesses that were already working and just growing them—I realized, "Oh my God, this is so much easier." What was I doing before, and why was I so brainwashed by the movies and TechCrunch and Twitter and what the VCs thought were cool? I really should have played my own game a little earlier. Can you talk to that—talk to that person—or, you know, how you think about this?
23:56	MFM	Yeah, Rick, don't you think one of the most common questions we get from our friends is, "Can you tell me more about what you guys are doing? Because secretly I think I'd like to do that too..."? Now, the way...
24:04	Sam Parr	You guys describe it. It certainly sounds easier than starting a company. I don't know if—oh.
24:09	MFM	The first thing: whenever somebody comes and says, "I want to be an entrepreneur," I'm like, "Good God—why?" You clearly have never done one before. All it does is cause stress, gray hair, and you don't see your family. Being an entrepreneur is so hard. I love it, but I fear it. The thing that's most scary about being an entrepreneur is the lack of control over time. You don't know how long the company will take to get from initiation to success; it could take 12 years, 15 years. It's not that it's going to take 100 hours a week—I'm not so scared of 100 hours a week. I enjoy the work, even though I'm quite the man of leisure nowadays. I don't fear the work; I just don't love the inability to control what my next decade will be like. With private equity, you get a little bit less uncertainty. The time frames definitely come way down. We don't go into a deal that's going to take 10 years with private equity—the math just doesn't work.
25:10	MFM	Yeah. Right now, I think most of our friend group—Jeff and I—are either venture capitalists or operators/entrepreneurs. As we looked at having a foot in both worlds, Jeff and I have both done over 50 angel investments, and I’ve got 13 unicorns out of that. So it’s definitely worked. The reality is I met with a thousand companies to find the 50 I really liked, and some of those worked out. But our friends in venture capital... it’s so crowded. They’re all chasing the same AI deals at inflated valuations, and it’s such a long process to make any money. Some of these funds can take 10–12 years before the partners are making a lot of money once they start stacking funds. That’s great and all, but when you’re 50, do you really want to go start a venture fund that’s highly competitive? That didn’t make sense. As Jeff said, starting companies—which we’ve both done five of—is just so hard. You’ve got to raise money. You have the cold start problem: how do you get the flywheel going? It’s really hard. Private equity is a little bit of both. We can take the best of what we know about running companies and combine that with our investing experience to try to multiply the money. We found this middle ground. For us, we’re not looking to raise a big private equity fund; we really just do SPVs. We find deals we like, where we think we can add value, and you don’t have the long timeline. That was a good place for us.
26:50	Shaan Puri	And if somebody's not going to go buy a $600 million company like Grindr, there are other midsize ways to play this game — to go get a win. And again, unlike a startup, you're not playing the product–market fit risk game, where most of the time you're just building something for which there is no market appetite. It doesn't matter how hard you work or how well the product works; if there was no market need for it, you lose.
27:13	MFM	Yeah, I think we could segment private equity a little bit for you.
27:16	Shaan Puri	But not even like—I don't want that kind of industry, top-down. I'm more like: if I'm a guy, what would I be looking up? Who would I be calling? What kind of deal would I be trying to do? What business would you not try to buy, and what business would you try to buy?
27:28	MFM	A few ways you can source. One is to use your own network. There are lots of businesses that are profitable, and for whatever reason the founders or owners often want to retire, finally cash out, are exhausted, or co‑founders want to break apart. So there's that. It could also be that we talk to our venture capitalist friends and say, "In your portfolio you must have companies that are successful but not venture businesses anymore. They're not going to go public; they're not going to break out. They're growing at 10% or 20% a year." All of them have it, and some of these brands are amazing. So Grindr is a home run because it's a dominant market player — healthy business, profitable, etc. Usually these are not the first player; it's the second or third player in that space and they have challenges. They're having trouble recruiting talent at the same level they were earlier. This AI thing's going to be tough, so there are some challenges coming to the business. But the founders are motivated; I think he or she will work with you, or the founding team will. We generally look for deals where the founding team wants to stick around, or at least part of them. When we did JibJab, Greg left, but his CFO became the CEO, and he's an amazing operator. We don't want to have to take over the whole business — we're looking to partner with the existing team that's there. The other thing that's nice about an SPV [special purpose vehicle] is, Sean, you might know a couple businesses and say, "I kind of get these businesses a little bit; I know some friends that really get them." With an SPV you can partner — we sort of put together the perfect mix of players. When we did Grindr, our friend Sam Jagan had been the chairman of Match Group; he had been the founder of a dating service that got bought by Match. He knew the space inside and out. He had been CEO. So we partnered with Sam. He really brought us credibility when we were raising money from the family offices, and he taught us a lot. He had a great network — we recruited from his network into Grindr. That helped us balance out: we weren't just bringing people in that I knew from Yahoo and Google and other startups; we were bringing people in from Sam's network that had been at Tinder, Match Group, and others.
29:36	Sam Parr	You're almost making it sound like... a big scheme. > "Hey, guys — here's the deal. This is happening in front of all of our eyes. China has to sell this. Let's get all of our homies, let's throw in a little bit of cash, and let's do this thing. Like, no one else wants it — let's do it." You make it sound like it was a party.
29:51	MFM	We were on a call yesterday to talk about a deal. I called them about a deal that had come across my plate and I said, "Don't you think if we put X and Y on this deal..." They're like, "They know this space so well — they'll be able to evaluate the tech and really help us put together an amazing product plan." The first three or four key hires are going to really set the tone for this business if we can acquire it. We benefit from the size of our network — from meeting all these entrepreneurs over the years. In particular, entrepreneurs who have had successful outcomes have amazing networks. They often are waiting for something to do that's a big, fun challenge. We're always trying to figure out who's that one operator we know who needs the chance to become CEO or president, or who's that person who can give us the unique insight into an industry to help us connect the dots. The other strategy, Sean, is to take small companies, bundle them up together, and make them big. When you're looking for deals, most of the companies that will come across your plate for PE deals are not profitable, or they're not profitable enough to make the economics of private equity really work well. That can be really disappointing. Another thing is entrepreneurs have been told over the years things like, "My competitor three years ago, when we were all growing at 60% a year, sold for [blank] — X multiple on growth." And I'm like, "No. Private equity — we give them our equation. We can give you a spreadsheet: here's how we're going to price you. It's this times this times this." They're like, "No, but this SaaS business did them." We're like, "Oh, yeah — SaaS businesses are multiples on revenue; consumer businesses are multiples on EBITDA." They're like, "What?" I'm like, "I'm not— I don't do the math; this is just how the math works out." Private equity in general doesn't like consumer businesses as much because revenue often comes from advertising or other sources they don't understand. There are these small mistakes or glitches in how private equity works in the small- and mid-market — sometimes up to the big ones — that allow us to do deals. But even then, remember: Rick said he talked to 1,000 companies to invest in 50 — a one-in-20 hit rate. Private equity is similar. You'll initially look at 20-something deals, then look hard at five, and then the close rate on a private equity deal — if it's a good deal and it's worth doing — is only about one in three. The hardest part about doing private equity without a fund is that, unlike being an angel investor, Rick and I could easily do 10 investments a year as angel investors. We get enough flow; we meet enough great teams; VCs will reach out to us and say, "You help us on this deal — you know the space; can you invest in it and advise the CEO?" Those deals come in fairly high quantity. In private equity, deals are smaller and you have a lot more work to find businesses to buy. The founding team or the investors don't always know they need to sell or want to sell, so you have to talk them through it. It's a different set of skills. There is a longer time between deals, and we say "no" more often. In private equity, the risk has to be really low because you're working on a deal and, when we are a small team without a full fund, you have to make the deal work. It has to pay — at least 1x or 2x. So we spend a lot of time on risk reduction, which is different from entrepreneurship or angel investing. When we're angel investing (or even a bit later), you're always thinking about the multiple on the one-in-10 success rate because you're going to have a larger portfolio. In private equity, we're doing all the math on downside scenarios. We do very little math on what could happen on the upside; it's mostly, "What could go wrong?" That approach feels wrong at first but becomes enlightening over time — like being a chief risk officer instead of a chief investment officer. Really thinking about risk differently and understanding how to mitigate it has made me a much better entrepreneur, if slightly more cynical.
33:39	Sam Parr	> "Were you guys—because when I think of Jeff, you talked about being a product guy. When I think of Rick... I think you had maybe a consulting background, but you kind of morphed into growth marketing and also product, and you're just a very traditional Silicon Valley CEO. I don't think that has the skill set of looking at Excel, running the math, and doing the numbers. But is it just not that challenging, or did you have to acquire that skill?"
34:06	MFM	Sam can't believe it hasn't come up yet, but Rick has an HBS degree.
34:12	MFM	No, Sam. My background is finance. Early on, I started my career in corporate development — M&A and corporate finance. Then I went to HBS [Harvard Business School], and that's where I met James Courier. Sean — to your earlier call-out of James — we started Tickle together, and I was CFO there for seven years. So a lot of what Jeff is talking about really is my background: being able to look at the company and assess the risks. Private equity can't take zeros; in angel investing, you can take a lot of zeros, and that's okay.
34:45	MFM	I, on the other hand, am like a numbskull. I have to look up the acronyms in private equity, which are just basic accounting acronyms. I literally have to have them. I'm always like EBITDA — "earnings..." I always forget one of the letters. So I'm the opposite. When I was at Yahoo and I was in charge of billions of dollars of revenue and profit, I still was doing it. I was always like, "What's that one mean again?" And they're like, "That's the profit part." I'm like, "I knew it. I knew that part. That's fine. Got it."
35:11	Shaan Puri	I got it.</FormattedResponse>
35:11	Sam Parr	And then Rick's like, "Jeff, just put this vest on and shut up, yeah."
35:15	MFM	Yeah. He literally—he just, he just... actually, Rick and I have chats going on, usually during meetings, so that he can tell me what all the acronyms mean. Or I'll be like, "That part's bad, right?" He goes, "Yeah, yeah. You don't want those things."
35:27	MFM	Sean, but earlier to your question: I have a thesis that's kind of barbelled, which is in the private equity deals. I think JibJab is interesting and Grindr is interesting for different reasons. On JibJab, we had to come in quickly. The company was doing about $5,000,000 of EBITDA and we bought it for $20,000,000 — so four times EBITDA, which is a low multiple. Greg needed to sell it quickly, and that's where we came in. We were able to put $15,000,000 of debt on that, so really we only put $5,000,000 of equity in. Just to use round numbers: if you had five partners and each put in $1,000,000 — if you had the ability to put $1,000,000 in — you own 20% of the business, right? With JibJab it was throwing off so much cash that we paid down the debt in about three years. We then did a refi where we recapped the company and borrowed another $15,000,000, and ended up buying out half the investors with that. We've already repaid all of that and now we're just cash-flowing the business, so my...
36:32	MFM	There's that: if you had a chunk of money—$1 million—you could go and buy one of these companies and get 20%. Now, with Grindr, that same check that we put into JibJab does not get you much of a $600 million business. But we talked about the carry—the carry of 20% on more than $1.5 billion of value created is a very big number. With Grindr it was so big that Jeff and I ran it. With JibJab, we have someone else running it. So you could do multiple of these smaller companies and just be a board member—more passive—and create a portfolio. Or, when you do find the Grindr and you're an operator like Jeff and I, that's when you're like, "No, no, we gotta go all in and run this thing."
37:18	MFM	And you could do a blend, right? You could centralize business operations, marketing, customer care, and those things, and buy a bunch of different businesses—more like IAC. Right? You could do the private equity / IAC model. We have friends whose focus is, "I want to buy these." By the way, that can work incredibly well. Bending Spoons out of Italy has an amazing business of buying individual apps, then using a common set of back-end pieces and engineers. They can reduce the cost by 70%–80% on a business and grow it because they're really good at the game of how to grow businesses and do subscriptions.
37:55	Shaan Puri	"So let's play a game, Rick. Let's say I'm your nephew and I call you and I'm like, 'Uncle Rick, I wanna get into this business. I'm looking at a bookkeeping business, there's a commercial brokerage business, and then there's AI. I gotta think about... is that gonna wipe out a business? Or is there a business I can go in and bring AI that's gonna make it way better? That seems like something I should think about. What should I do, Uncle Rick? Give me — I get, like, generally what I'm supposed to do, but give me a place to look. What's a rock I should go look under? What's a type of business that you think is a good one to go look at right now?'"
38:28	MFM	So I'd answer it in two different ways. The areas I'm most interested in right now are AI and crypto. But I don't know if my nephew has any real expertise or any kind of moat around the ability to go in and do something in either of those categories, right?
38:48	Shaan Puri	"Let's assume the nephew can buy Bitcoin and can use AI. He's just not going to build anything in crypto or build the new AI thing."
38:55	MFM	Right, so then those are probably not the categories that I would steer him into, because you really have to know your stuff or you're just not going to be able to compete. So it would probably be: let's go find an existing business with stable cash flow that has... We love recurring revenue — even consumer recurring revenue. Subscription-based revenue is great. Let's go find something that's stable where the owner is ready to exit [sell] and where you can put some debt on the business. If you can do that — if you can add debt to the business — you get in at a reasonable entry multiple and have some thesis, some way that you are confident you're going to be able to, let's say, double revenue in the next three to five years and then get out at a higher multiple. I can do the math and show you why that's a 5–10x: the debt, the reasonable multiple, the increase in EBITDA, and the higher multiple on the way out — it's a 5–10x. That's, that's advice.
39:54	Sam Parr	And how conservative are you when you're thinking of the upside? For example, you're saying... the big—there are two big "ifs" here. There's buying it at a low price, which is one problem. And then there's a second problem: you just said, "Can I grow user base or revenue?" That's very challenging.
40:10	MFM	Yeah, so the two things there would be: one, to ensure the cash flow is stable — that you're going to be able to repay the debt, right? Otherwise you lose the whole business, and that's a disaster. Second, if you don't have a solid thesis on how you're going to increase revenue, you shouldn't be in that company. Jeff and I, looking at Grindr, knew what we would need to do to double revenue in two and a half years. We took Grindr from $100 million in revenue to $200 million in revenue when we took it public.
40:42	Sam Parr	"And what was your thesis for doubling?"
40:44	MFM	Well, I mean, some of it — Jeff should jump in here — but some of it was really just upgrading from where the company was at the time. Again, the talent was terrible, the tech was decaying, and they hadn't launched any new products in a long time. So we knew if we could clean up those three areas and then apply the Tinder playbook — which Matt, you know, Match had done great with, and Grindr had not applied any of that — we're like, if we just do these things alone, we should be up 50%. If we do them really well, 100%.
41:18	MFM	Yeah. We went deep — we went down to a low level, examined individual screens, and found they weren't even using the right buy buttons. There were just patterns we know that work. For example, you can improve conversions, reduce uninstall rates by about 10%, or increase your SEO by [X%]. They didn't have a web version for Grindr, which we knew would be important. They also weren't using the equivalent of the "Boost" feature (like Tinder's Boost), and we knew that feature would matter. They were underpricing in certain markets and overpricing in others. They weren't doing any pricing strategy at all — they were using uniform pricing everywhere. That playbook allowed us to put together a plan that could probably produce a threefold increase in revenue, and all we needed was to double revenue in that time frame. In the same way you'd approach risk reduction, we created initiatives with different expected returns — some that were good for ~10%, some for ~40%, etc. When we finished that list, we had high confidence we could grow the business. Our first year was really hard because there was more disruption than we expected. Then COVID hit, which dropped the business by 30% overnight. It later recovered, but we still roughly hit our numbers — we came in almost on target, within $1 million of each quarterly goal. By the way, that performance included removing advertising from the product (they've reintroduced it since). We knew users hated the advertising and it was causing problems, so we wanted to remove most of it. We were intentionally cutting revenue in some areas while growing revenue in others: increasing retention, raising prices for certain customers, etc. Some customers were price-insensitive because they were getting disproportionate value from the product.
42:52	Shaan Puri	In the doc you guys sent over before the episode, you talked about the opportunity in health that you see — kind of certain health trends, or where, as an entrepreneur, your "spidey sense" would start tingling. Can you describe what you're seeing and what you think... [question trails off]
43:06	MFM	Opportunity is this: I think for Rick and for me, those areas of disruption coming from crypto and AI — that's really our investment thesis on venture. For private equity, those represent high disruption points which can transform a space. They can disrupt a space, take big players and make them weak players and vice versa. So there are plays in private equity for these, but there's a lot of unknown that makes private equity more dangerous for the next couple years, because businesses that have been very stable for a long time have become potentially unstable from disruption. On the investment side, that's the perfect time to invest, right? Even though people are saying there's a bubble right now. If you take a macro view of the next decade: will there be more disruption, more wealth generated over the next decade regardless of whether individual company prices are overvalued in the short term? It's kind of like: was Amazon overpriced in 2000? Sure. But over the next twenty years, it was underpriced. As an investor, AI does some things really well. It does things well when there's a lot of documentation, and there's a lot of documentation in legal, engineering, and medical. Those spaces are high value, tons of money being spent, and there's high need. Consumers desperately need better results from medical; they desperately need better results in engineering. Engineering costs are incredibly high for building high-quality software and safe software that can't be hacked. So as you look at these areas, that's why I think they're ripe for disruption. It's not an unknown thing — if you talk to major VCs they'll tell you, "Yeah, these are the areas we see." Entertainment is one I think of as well. I think the downside of entertainment is there's a sort of insiderness and protection of IP, and the legal structure of the entertainment industry has always made it a little delayed in adopting or seeing disruption. We see it in the long run; we tend not to see it as quickly. That's why Napster didn't work, and why what Spotify later did had effectively been done already but just didn't happen because of some of the pieces. I do like those spaces. That said, as we were talking earlier about private equity, it's what makes me a little nervous when I'm looking at deals. There was other disruption on the consumer side when Facebook lost its ability to see data because Apple changed its rules in iOS 14 [Apple privacy update]. That broke so many small businesses — it literally just broke businesses. They could acquire customers before, and they could no longer acquire customers. What was framed as "we're going to fight back against Facebook" — it really was an action that Apple took that hurt so many small and medium-sized businesses. On the consumer side, the repercussions of the inability to acquire customers at a reasonable price have destroyed many businesses, and it's made private equity interesting in this space. Now, where do you get consumers? Where can you acquire customers when acquiring customers through advertising on Google and Facebook/Meta platforms is just so wildly expensive?
46:10	Sam Parr	And what about this agency AI thing?
46:12	MFM	I've been working with a number of entrepreneurs. We were trying to figure out how to do businesses that involved AI, and I kept asking: how does this work if we can't talk to the old internet? If we can't talk to TripAdvisor, Ticketmaster, or NBA.com, how exactly does the world transform where I have an agent that helps me plan my weekend or my trip to New York City? There were companies building agents inside websites. I don't like the theory that there will be a million LLMs out there—every time I go to a website I have to talk to an agent, simply replacing clicking on buttons with talking to an agent. I assume the world will instead end up with a smaller number of agents that act on behalf of consumers, going out and doing work that fundamentally changes the internet. That doesn't mean if you have a website today that sells tickets or bicycles it will disappear. It's just that customers won't necessarily type in specialized.com or trek.com and do things the traditional way. They'll talk to an agent and say things like, "I need a bike. I want a mountain bike. I'm doing all these things that I want you to evaluate." The agent might respond, "Okay, I picked these four bikes," and the consumer might say, "That one looks good. Can I get a good deal on that?" The agent would then go and do it. There is no way for the world to do that connecting right now—take the old world of commerce and connect it with this new world of agents—without an intermediate layer. Companies are building things like Mariner and Operator from OpenAI and Google that attempt to surf the web on behalf of consumers and click buttons. It is not efficient, and Mariner and Operator are the first to tell you it's not efficient. What aigency.ai is, is just the glue between the two. What happens is when an OpenAI agent comes to a website—like a travel website or a luggage website—it will surf every page looking for the request of the consumer. It can take ten minutes. With ours, we redirect that traffic to an interim agent that doesn't intend to ever talk to consumers. It's not an agent that's going to make you feel good about yourself; it just talks to an agent that talks to other agents. So agents are how we can retroactively build and connect the Web 2.0 world with this new agent-driven layer.
48:27	MFM	I wanted to connect the commerce world and allow it to talk to this new, AI-enabled world. I had learned a while ago that many of the ideas I have for startups require a step I assumed would be there, but I didn't know who was going to do it. This time, I wanted to be one of the people who worked on those interim steps because I think those create incredible value. We see it over and over again: the teams building data centers and the teams building the layers that strap on top of these LLMs [large language models]. You guys talked to the founder of Replit for the AI coding—it's really sitting on top of LLM engines. A lot of the value is being created in this middleware stage that's necessary to put these two pieces together. So that's what agency is. It's an attempt to take these older businesses that could experience incredible disruption and help them understand what's happening in the AI world and transform their current business. Everyone's not going to be able to hire AI engineers — it's just not possible. There are too few of them. You need a system that glues the two together. So that's agency.
49:33	Sam Parr	That someone was Sean. I had Tim Ferriss on the other day, and we were talking about...
49:39	MFM	In prep, yeah. Was watching through it, yeah.
49:41	Sam Parr	Dude, the top comment was like, "Oh, three Silicon Valley rich guys just discovered hobbies." They were making fun of us for talking about something so obvious. It's sort of funny because you guys are Web 1.0 OGs — like Rick [unclear]. When I was just getting going, that was the north star: this guy's got 35 million users in a year. You were, in my mind, kind of the poster child for "raise a lot of money, go big, and buy a lottery ticket and hopefully it pays off." But now what you're doing doesn't seem like a lottery ticket at all. It seems like you've reduced risk as much as possible. If you were 25 now, Rick, do you think you would have gone the bootstrapping, running a cash-flow business? Or do you think—are you happy with the results of what you did, kind of buying lottery tickets?
50:31	MFM	I don't think that Jeff and I would have been necessarily good at PE at 25. I think Grindr worked because we could apply 25 years of experience to it, so I don't think... yeah. I think the right call was to get that experience at 25. I think that's when James and I founded Tickle—I think I was about 25—and, you know, get all that experience, build that network. I've seen the movie a thousand times; I know how it ends, and then apply all of that to the bigger opportunity. So yeah, I wasn't ready back then at 25.
51:07	MFM	Yeah, and I think that the risk—I think it's great to go big. But I do think there's a reason that entrepreneurs in their 20s — we say freshmen and seniors — make all the money in the venture business, in the entrepreneur business. You either don't know the rules, so you go into your business and break a bunch of rules without knowing, or you know all the rules and you build a business that takes advantage of the weaknesses of a market because of those rules. It's the sophomores and juniors who kind of mess stuff up. As an investor, I see this: a director or senior director coming out of Meta or Google — they have incredible experience and now they're ready to do a startup. Then you have entrepreneurs who drop out of college, or some of the groups Y Combinator focuses on, who are really scrappy. We see a lot of amazing disruption there. And then people who have spent 20 years in the industry — the risk for that startup may look lower, but the outcomes can be incredible. Like Salesforce.com: industry experts saw the trend of moving to the cloud from on-prem apps like Oracle. It felt revolutionary at the time, but it was also somewhat obvious — and still an incredible amount of value was created. I think value gets created at both ends. It's true—we're experienced, so we tend to be more senior, and the kinds of things we do look lower risk. It's more about wiring together pieces of the world that need to be wired together, but it can create a tremendous amount of value. There's still a huge amount of disruption in there. When I was young, doing my very first startup on online storage, people used to tell me, "No one will store anything online." I remember thinking: this was before the word "cloud" was invented. The word "sideload" — we invented that during the project. We just didn't have the vocabulary to talk about storing stuff in the cloud. So I love the disruption on both sides. As an angel, I like to find the men and women in their twenties who are finding big, disruptive ideas — I'd love to invest in those. But my network also gives me access to incredibly experienced entrepreneurs who know this market just needs a specific piece to disrupt it, and I can put that piece in place.
53:23	Shaan Puri	Well, one of the other fun things about being in the game for so long is that you've probably met a lot of the main characters today, back at their superhero origin story. So, like, I don't know—Elon [Elon Musk], or—you guys were pre-YC—Paul Graham, Sam Altman, whoever: the players who've gone on to do really interesting things. Zuck [Mark Zuckerberg] early on... Are there any cool stories? Who were these people? What were they like?
53:51	MFM	I did my first deal with Travis from Uber. I did my first deal with Travis when I had iDrive. He started a company called Scour; he was out of UCLA with five guys. So Jason Drogh and Travis—they did Scour. I did iDrive. I had the largest collection of MP3s in the world on my file system. They had the largest video and music search engine ever built. We put the two together. It was unbelievable. It was the most incredible thing. Travis was an incredibly difficult guy to do business with back then—cutting, strong, and willing to throw elbows. His team was really talented and their tech was awesome. So yeah, I got to know Travis when he was 24 or 25 and...
54:34	Sam Parr	"Did he have the F factor, then?"
54:35	MFM	Listen — I've met so many of these guys that you and I know now to be billionaires when they were very, very young. Zobny was started in the same dorm room as Dropbox with Drew. My founders of Zobny — that I did and sold to Yahoo — that was started with Drew. They both were Y Combinator, I think classes two and three. Jack Dorsey — I knew him when it was Odeo and spent time with him while Twitter was failing. I was trying to buy it for $19,000,000 at Yahoo. We've met all these people; they are roughly the same people. Some of them have become personas and characters that are sort of surreal. But when you spend time with them, they're the same. When I read about them online, I'm like... I sometimes aspire to be like them. I always tell my kids: if I become a billionaire, make sure I am incredibly interesting. The role of billionaires in the 1920s was to entertain society through eccentric contributions, naming universities after themselves, and doing things for the public good — not destroying the government or doing all these other things. You're supposed to entertain and keep people happy and add social good by building things that will survive generations, whether it's universities, parks, or similar institutions. I admire my friends who have had success. But the most intelligent or most talented friends are not my richest friends. The correlation between success and talent is not nearly the overlap you would think. We rewrite the origin stories of so many of these companies. I talked with Brian when he was getting Airbnb started. One of the VCs called and said, "I'm trying to invest in the startup called Airbnb." I spoke with Brian and we talked through what he would look for in his first investor and why he liked that investor. Hearing from him, the investor seemed like an interesting guy and had interesting things to say. I loved Airbnb — I was one of the very first Airbnb hosts. But I didn't hang up the phone and go, "Holy shit — perfect, that guy has it." No. I hung up and said, "Guy's a little bit hard to talk to on the phone." Nothing against that — I just... I loved Airbnb as a business, but I didn't think he was the right person. I hear VCs talk about this all the time. They're like, "When I met with this entrepreneur I knew..." And I'm like, Jack Dorsey is incredibly thoughtful, but not incredibly well liked when he was young — not by his co-founders, not by his investors. But he turned out to be an incredible entrepreneur.
57:07	Sam Parr	To do, Square, and to do... it's incredible.
57:09	MFM	An incredible entrepreneur, but was not. I didn't walk away from my meetings with Ev and Jack and Biz and those guys and say, "Jack's the guy." I just was like, "Jack's a curious fella — smart and fun to talk to, but curious." I do accept what Paul Graham says, which is — and I think others have said this — "people who accomplish things in startups historically have a trail of accomplishments." So they were among the best at things they did. Now, the things they had a chance to do along the way might have been a lemonade stand, but you'll see this thing, like, people will... For me, I sold raffle tickets for my school for something we were raising money for. I didn't beat the other kids at the school in selling raffle tickets by, like, 7%. I beat them by 700%. I destroyed every record ever done in selling raffle tickets for my school. I remember when the principal goes and...
58:09	Sam Parr	"$777 of sale, you know."
58:11	MFM	The person that had me.
58:11	Sam Parr	"Was like 64 ticket sales, and..." </FormattedResponse>
58:14	MFM	I sold about 700‑something, and they're just like, "I don't know." So you tend to see this record of accomplishment in all the things they did. Now, some of the things they may have done early on in life... they might have come from a small town that didn't have opportunities to do big things, so... </FormattedResponse>
58:30	Shaan Puri	The best example of this, I would say, is if you read Paul Graham — he wrote an essay a long time ago about the five founders who kind of stood out to him. It was the people who had already done it: Larry and Sergey, Bill Gates... he said number five was Sam Altman. It's like this guy who had done Loopt and, I think, sold it for about $40 million — not anywhere near the accomplishments of Bill Gates, Larry, and Sergey. He says, "I remember when we first met him. I realized, 'Oh, this is what it would have been like to meet Bill Gates at 18.'" This was like ten years before Sam Altman became a household name. So it's very interesting to me when people sort of have it — what is it? I think as an investor you want to be able to recognize it as often as you can. I think that's a very profitable skill. As an entrepreneur, you can actually develop it. You can start to steal pieces of other people's games. If you notice that somebody's really good at doing something, or you realize, "I thought I was good at this, now I know there's actually more room to grow," great — you're going to keep working at that. It sort of resets the... </FormattedResponse>
59:34	MFM	I think Paul is sort of unique in his ability to put really complex ideas into simple ones and turn those into actions. Y Combinator had such incredible success in identifying the right founders in its first three or four classes — that was really remarkable. They're now doing, like, six or seven hundred companies per class. They'll probably, through the numbers, say that they're identifying these things, but it had not been quite the persistent system that it was in those first, like, four to ten. They were doing Boston and the Valley — he and Jessica were going back and forth between Boston and the Valley. That was probably the best hit rate. Ron Conway's hit rate for SV Angel in one was unbelievable. He had something like a 100x multiple on SV Angel One. SV Angel Two has been good — I mean, it's a good fund; Three is good, and Four is... but SV Angel One was incredible. Lots of people say they have these incredible skills for identifying talent. I think, in general, it's a historical thing — we rewrite. But you do meet some entrepreneurs who are competitive or ambitious in a way that being a sociopath and being a good entrepreneur—the circle comes very close to touching. I realized that somewhere along...
01:00:50	Sam Parr	The line: "I love doing startups, but I just don't have..."
01:00:53	MFM	The sociopath gene in me... I would say there's a level of success among entrepreneurs that may require a level of, sort of, drive or competitiveness that maybe is so far out on the uniqueness thing.
01:01:09	Sam Parr	Yeah, when I hear about y'all's success, I mean that's— that's something I aspire to. I aspire to achieve what you've achieved, and you seem pretty genuine. I've known Rick; I've known of you for many years, and I... you seem like a... you seem like a pretty...
01:01:26	MFM	If our first startups had been wildly more successful—if iDrive had been bought, if someone had offered me $275,000,000 for iDrive when I was in 2000, and I had said, "I'm raising it $400,000,000, you know, screw it"—it would have changed me. I would be a different person. I would probably be the most annoying person you've ever dealt with today because I would have built wealth early in my career. My first startup being a huge success would have created a different sample for me. I remember something a very smart VC I worked with told me: > "The smartest people in the Valley are probably right about 30% of the time, and normal smart people in the Valley are right about 10% of the time." The sample size for those in the 30% is that they're right so much more than the smart people around them that, in their own minds, they're basically right 100% of the time. They're actually wrong 70% of the time, but their internal sample makes them feel like they're always right—relative to their peers. We all tend to discount our failures enough that we mostly see a small selection of failures and successes. I think that's the problem with this concept: smart people are probably still only right about 10% of the time with their ideas, work, and effort. If luck corresponds with that talent and you get enough shots at it, then things happen. If you want to be an entrepreneur and be successful, commit yourself to 20 years. Be an entrepreneur for 20 years—do four or five startups—because the amount of luck that has to overlap (externalities and internal factors) to create that success is huge. When success happens on someone's first startup, we typically ascribe it to genius. We say, "That's genius." Probably half of those cases are truly unique talent; the other half are just luck—the wheel stopped when their number came up on the very first try. That early success then multiplies: raising money becomes easier, access to talent becomes easier, and you learn a ton earlier in the process of building a big company. There is something to—had the [dot-com bust] happened three months later—I would have sold my company for hundreds of millions of dollars, and things would have been different. Maybe I would have had more conventional success today, in terms of what people praise. But I've had great success. I'm super happy. I love what I do. I get to work on hard problems. I think about this a lot.
01:03:48	Sam Parr	I don't see myself having this, but the way you describe it—I’m like, that sounds amazing. You sort of have projects. I think Sean tends to do this quite well: he finds a project, he gets in, and it ends up being quite successful. You guys have done that where every three or five years it seems like there's a new thing. If you look at your LinkedIn, it's very clearly chapters. Whereas what I tend to like is multi-decades on the same thing. The way you're describing your life now—that sounds pretty amazing; that sounds pretty fun. Can you speak to that? Because you also said, "PE doesn't work for ten years," and I'm like, oh—Ted, it doesn't even work for ten years; it works for only four years. That sounds amazing.
01:04:35	MFM	No — I think there's an evolution, so that's probably why it looks like on a resume it's every three to five years. What I've tried to do is find people that I really respect. Sean, to your earlier question about finding those people early, I can give three examples. One would be James Courier, who was my classmate at HBS. We grew up four miles from each other in New Hampshire and never knew each other until business school. He was someone who stood out as one of the brightest among all the students there, which is a high bar. James is one of my best friends. Jeff is one of my closest friends as well — a brilliant product mind. Another is Naval Ravakant. I met Naval 20 years ago, and I give him a lot of credit: he was the guy who got me into angel investing and gave me a lot of good advice around that 15+ years ago, and got me into crypto 11 years ago. I saw him as a really, really big brain. All three of those guys — I love hanging out with them. They're all good people, and I've done things in my career with all three that have been really meaningful. For me, I need to add value. With Jeff and James in particular, both are high-level, big-vision guys and need an operator to make sure execution gets done. That's where I've been able to add my value: finding these guys I want to spend my time with and whom I have a ton of respect for. I think that's a good life philosophy. The five people you hang out with the most tend to take on their thinking, their mannerisms, and the things they say. So really think hard about: who do I want to spend my time with? For me, I've been blessed to find several people like Jeff and James in particular to run companies with, and I'm blessed that I can bring something.
01:06:36	Sam Parr	What was pre-guru Naval like? You know, when he was a guru in the making?
01:06:42	MFM	It is funny now to see how he's blown up, and it's actually funny. I'll go back to Naval, but there's a woman, Mel Robbins, who now is a huge podcaster.
01:06:51	MFM	Yeah.
01:06:51	MFM	She worked for us. She was our head of marketing at...
01:06:54	Sam Parr	No way, really.
01:06:55	MFM	James and I founded Tickle in this crappy, basement-level office in Cambridge, Massachusetts. She [Mel Robbins] was our head of marketing. My wife was listening to her podcast the other day and I recognized the voice. I said, "Is that Mel Robbins?" My wife replied, "Yeah, yeah—she's huge." I'm like, Mel was our director of marketing in 1999. I had no idea that she blew up, so it's awesome to see that success for her.
01:07:19	Sam Parr	"Would you have predicted that?"
01:07:21	MFM	No, no. I mean, she had a big personality and everything, but who— I mean... to that, she's gotten so big. No, but she's... she's awesome. She's amazing. We had a crazy team in the early days at Tickle. Naval has continued. I mean, Naval was always really cerebral, incredibly smart—one of the smartest guys in Silicon Valley, and that's a very high bar. But he's definitely gone more of the guru thing. I still see Naval all the time, and I have a ton of respect for him. He's definitely gone more into philosophy and really, you know, become this guru. It's awesome to see. But he was someone who, in the early days, inspired me in those two areas: angel investing and crypto, which continue to be, you know, an important part of my career.
01:08:03	Shaan Puri	What was the light-bulb moment for you with crypto? And then, I guess, did anything change over time?
01:08:08	MFM	Yeah, with crypto... I remember the early days. Bitcoin was trading under a thousand dollars, and I said to Naval, "So how big does this get?" He said— I asked, "What's the price of Bitcoin?" He said, "a million." I said, "A million? It's only at, like, you know, $800." I asked, "When?" He said, "before we die." I was like, "Before we die?" He's like, "I don't know when, but it will be a million dollars before we die." I should've bought more. I bought some; I should've bought more. So I love the way he can look out decades and be right.
01:08:40	Sam Parr	Dude, that's awesome.
01:08:41	Shaan Puri	Did he give you a—why did he tell you what the thesis did? Did it click for you right away? Because I remember it took me, like, seven smart people telling me about Bitcoin before my dumbass could figure out, "Alright, this maybe is worth doing." And really, even then, it's not even because I actually understood what they were saying. I was just like, "Okay, that's too many smart people saying that this is a thing for me to just not participate."
01:09:04	Sam Parr	And, by the way, it's happening right now. If a million is true, that means it is still true that we are foolish for not being... all in, or whatever it is.
01:09:13	Shaan Puri	Yeah, but you know... at some point I started to wrap my head around it. Oh—okay, I understand why this makes sense now. My friend literally sent me a PDF he had written: a five-page piece in which he wrote, "If Warren Buffett—if I use Warren Buffett's own investment framework to look at Bitcoin, here's the case." I read that, and that was the day it clicked for me.
01:09:36	MFM	Yeah, no, I think Naval saw that early. I think he saw the disruption in being able to move money — very much what stablecoins are doing now — but he saw that in the early days of Bitcoin as both a "store of value" and a "transfer of value." I think he was probably also looking at the non-inflationary aspect: you've got a fixed supply and the ability for anyone to buy Bitcoin no matter where they are in the world. So I think there are a lot of things that he saw in the early days before most. </FormattedResponse>
01:10:08	Shaan Puri	Were you part of James' crew of "one currency to rule them all" when James was brainstorming this?
01:10:13	MFM	James, yeah — we talked about it a lot. Obviously it never went anywhere, but I was part of those discussions. You know, any of these things are just so hard to get off the ground, and Bitcoin was that one incredibly unique technical challenge that was solved and changed the world.
01:10:32	Shaan Puri	Right.
01:10:33	MFM	Sean, I wrote this presentation for Yahoo in 2006. It was about what I called the emotional adoption curve and how angry customers were the biggest predictor of disruption for these embedded spaces. Instead, people—entrepreneurs—tend to focus on delighting customers, making customers happy. I said we should focus more on pain, frustration, and anger. It's the negative emotions that drive behavior changes, not the positive emotions. At the end I asked: if this is true, what are the industries most likely to be disrupted? The internet is a form of democratization that gives consumers power to overthrow the chains that hold them back and make them upset. I literally said: > "Finance and money — it's a weird thing. It's controlled; it's opaque. They can't understand it. They don't understand what's going on." The next one was health care, especially in the U.S. Disruption has to happen here; the customer is getting such a raw deal. It's so bad for the consumer—they're so angry and it has so much power over them. This disruption has come to entertainment. I was like, it's confusing to consumers: they have to pay these cable bills and they don't understand—this is just going to drive them crazy. This was before Voice over IP had taken over, so I'd written about telephony. One was coming: finance included, like credit cards and all the other things that consumers were...
01:11:51	Sam Parr	But did you walk the walk when Bitcoin—when you first heard about Bitcoin?
01:11:54	MFM	"No. Yes and no. I'll have a good story on how I screwed up on the Bitcoin one. But the last one, by the way, was the government: that the customers have anxiety and they have frustration with government and government services and things like that. I'm not a libertarian, but I can still see that there's angst, anxiety, and frustration. Social networks add sort of gas to that fire. No — it's not always good. Just because the consumer's angry doesn't mean that we end up with a delightful solution at the end; it can be a worse solution. The abuse of control at the top, typically in monopolies or oligarchy-type businesses or industries, causes angry customers. Those are the most ripe for disruption. They're often hard to disrupt. But the power of the Internet — and what James recognized — was that many people with currency... what the Internet has done in the most easy-to-disrupt industries will eventually happen when you network voices together and they can multiply. That will eventually lead to disruption in these bigger, harder-to-crack spaces. So we're seeing now: the Internet's been around for 25 years, and all the manifestations of it and all those things that come together. It's slowly ticking away and sort of disrupting these industries that we thought couldn't be disrupted. Currencies and governments are closely tied together. But no — I obviously didn't totally see it, because I bought crypto over the years. I always buy things I can't afford to inspire myself to work harder, and I bought a Porsche at one."
01:13:20	MFM	That I couldn't afford, and I went to sell it. The guy offered [unclear: "2,008" or something], and he offered me Bitcoin. Like... I don't know — it was well under a thousand bucks. It was like, I don't even know, a hundred dollars or something. He was offering me Bitcoin; he said, "I'll pay you in Bitcoin." I was like, "Nah — you should pay me in cash. I gotta pay the bills still." But, you know, had I taken the Bitcoin for that, it was like the $372,000,000 Porsche. I did the math at one point of what that Porsche would be worth today if I had just taken the Bitcoin for it.
01:13:51	Sam Parr	Dude, you guys are awesome. It's fun to talk to you because I think you're like one generation above us, but we share a lot of attributes that we both admire. You've been in the game; you've been very, very consistent. You also seem to be having a lot of fun. You've done some serious stuff, but you've taken it in an almost lighthearted way that I appreciate. It seems like fun is part of the conversation, and I really respect that.
01:14:20	MFM	The hell of that.
01:14:22	MFM	You gotta—you gotta find the right people to do this with, because it's hard. Whether it's PE, venture, or starting a company, find people you respect and that you really want to spend those hours with. Jeff is clearly one of those people for me. Jeff keeps me laughing all day—he's hilarious—but he's also, as you've heard today, incredibly insightful and so good at what he does. So go find... go find your partner if you're going to do this stuff, because it's hard.
01:14:52	Sam Parr	"That's awesome. Well, we appreciate you guys so much."
01:14:54	Shaan Puri	"Yeah, thanks for coming on, guys."
01:14:55	Sam Parr	Yeah, thank you. That's it.

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How two straight guys bought Grindr and made $2B

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