Ep 164: Feelings Check-In with Maya Bakhai, founder of Spice Capital, on everything you wanted to know about the venture capital business but were too afraid to ask

[00:00] The Feelings Check-In is a podcast for people who love to listen to two women overshare about the challenges of building a business, navigating careers in tech, and trying to have a personal life. I'm Natasha Hoskins. I'm Dina Burke. And this is Boys Club. Wait, is it just Boys Club? It's just Boys Club. The Boys Club podcast? No. No. [00:21] Just boys club. [00:22] - We have such a great episode. I just had a great time. - I had a really great time too. We had Maya Bakai on, she is the founder [00:32] of Spice Capital [00:34] There may be some other title that happens when you have your own venture fund. Solo GP of Spice Capital, which is a venture fund. [00:42] and everything you wanted to know about how the venture business works but were too afraid to ask, we got you covered. We got you covered. And she also left no prisoners. [00:52] She really said it as it is. She did. She shot it straight. I loved it. I was like, man, I don't know that I would have... [01:01] The... the... [01:03] I don't even want to say this. The balls. I don't know. What's another way of saying it? [01:07] Like, I've never said that before. I don't know why. [01:12] gumption there you go there you go the gumption to just shoot it straight like that everyone was catching strays left and right crazy but it was great and learned a lot like i feel like i have a good understanding of venture businesses and then after listening to her i was like whoa i have a [01:27] to this and also her just thesis and perspective i just really like her she's a great person she's also a friend and so i feel i must disclose that and she lives with one of my in the building of one of my other very best friends stephanie western do you know that oh they live in the same building on the same floor that's a uh

[01:45] uh famed building there's a couple other people a couple other people it's rent stabilized so once you get in that building you don't leave that building yeah um and at some point maya is going to come work out with steph and i steph and i work out on thursday mornings in this building if other people live there you're welcome to come [02:02] anyway it's a great episode you'll learn a lot about venture capital you'll learn a lot about spice capital and hope you enjoy it [02:10] Thank you. [02:12] Hey, Natasha. So a question we get asked a lot is, what do you look for in a crypto platform? So let's talk about it. Well, Dina, I look for a secure, no fuss platform that I can dive into right away. That's why I love today's sponsor, Kraken. If you're waiting for the right time to get into crypto, Kraken makes it super easy and intuitive to get started. Plus, if you get stuck, they have an award-winning client support team that's available 24-7, along with a bunch of educational guides, articles, and videos to help you along the way. If you're ready to check out [02:41] On today's show, we have Maya Bakai, who is the founder and sole general partner at Spice Capital, an early stage fund investing across themes of blockchain, applied AI, and the creator economy. [03:06] Maya, welcome to the show. [03:08] Hi, thank you for having me. I'm excited to be here. Maya, so excited to have you. Okay, I want to start with a real softball. Can you give a one-on-one on venture businesses, how they work, how someone like you gets paid as the person who's running it and going for it, and then sort of like what the models are for venture capital businesses?

[03:28] Yes, happy to. Okay, so... [03:30] Let's see. I think a lot of people don't know, even I didn't know when I was younger, that VCs are actually... [03:36] It's a firm. It's not their money. So in 99% of the cases, [03:41] when you meet someone who's a VC, it's not like they're independently-- I mean, they can be independently wealthy, but it's not like it's all of their money that they're going and then putting it into startups. It's usually-- if it's their own fund, it's a fraction of their money. [03:54] So they're not really all in the way the founders are, [03:58] or they're managing money on behalf of a group of individuals that could be [04:03] individuals like all of us could be investors in a fund like Spice Capital. It could be endowments. So it could be like Harvard if you want. It could be nonprofits. [04:13] like the church actually invests in VC funds. I just learned that. Oh, wow. Yeah, we love that. We love that. [04:21] And yeah, or it could be, [04:24] other funds that want access to deal flow. So really it's a financial service. So as far, you know, [04:30] A lot of times in venture, people act like the VC is just like a founder, but really it is a finance function. They are managing money and they have a fiduciary to outside investors. And so, yeah. [04:42] The firm is a group of a bunch of investors, they call it the LP, and the way they make money is [04:49] Well, usually they'll say, OK, I'm going to raise a bunch of money. They'll go pitch everyone. They'll pitch Harvard Endowment and say, look, I'm going to go deploy this. I'm the VC firm into a bunch of startups. And here's our

[05:00] strategy, here's our edge, you know, we're only going to do this stage of investing and we got you covered on all pre-seed or we got you covered on all fintech or all crypto. And they say that to their investors, they collect the money and then the way they get paid is twofold. So [05:15] on the one side and it's called colloquially it's called two and 20 that's the word and it's the two stands for two percent management fee and the 20 stands for 20 carried interest this we're going deep now but i feel like it's no i love it it's great no one talks about it and it's like so [05:33] So the 2% is where it gets a little grifty. And so you get 2% every single year as a management fee to cover your overhead. So let's say you had a billion dollar fund from some of the names we read about. They're getting paid $200. [05:49] million dollars over the course of 10 years, so 20% of the total fund size for overhead. So that includes [05:56] partners salaries, associate salaries, travel. I mean, that's why you see so many events. That's why you see them like launching full media businesses within their firm. It's like, where is this coming from? It's from that management fee. Everything is drawn from there. And so the 2% is actually, and this is something I did not know [06:13] really comes down to 20%. So whenever you hear in the news like, XYZ VC firm raised a $5 billion fund, [06:20] you should know in your head that 20% of that is getting pocketed regardless of the outcomes. They can invest in all trash, but they're still [06:28] going to get that money. And so let me just ask a clarifying question because so it's two, the two actually is two per year.

[06:37] and a 10 year fund, which is how it reaches 20% total. Yeah. Yeah. So a lot of times you hear two and 20 and you think, okay, they're getting paid 2% and then 20% of carried interest, which means the profit. So after the money's returned, 20% of all profits [06:52] come back to the firm that raised the money. But yeah, the reality is it's 2% annualized over 10 years. So it's actually 20%. And so for every dollar that's put into a venture capital firm, [07:05] In the beginning, only 80% of it is really invested. The other 20 is put aside. And so that's important, I think, because that really tells you right there. If you follow the money, it tells you what the real incentives are of [07:18] 99% of VCs, really 99%, it is collecting that AUM. Because let's say, I mean, if you think about it just objectively, if I'm joining a company or joining a VC firm as a, and this is my job or livelihood, I'm not an owner. [07:33] I'm incentivized to raise as big of a fund as possible because that's guaranteed. 20% of that is guaranteed to come into the pocket, right? So your incentive as a VC firm is to gather as much AUM as possible. It's actually, you have less of an incentive to be returns driven, ironically. And that's something that the bigger you are with scale, that's what ends up happening. You become an asset manager. Okay. And then that second 20% is? Yeah. So the second 20%, sorry, is called carried interest. [08:03] is essentially you get paid 20% of the profits. [08:07] So if the fund, let's say the fund is $100 million, or we'll make it easier, let's say the fund is $1 million, to make the math easy,

[08:17] and they invest in 10 companies and one of the companies becomes Coinbase. And that $1 million fund all of a sudden [08:25] is worth... [08:26] $100 million, so it 100x's the fund, the fund manager gets to keep 20% of the profits. So if from $1 million to $100 million, of that they take $99 million and they keep 20% of $99 million of all profits. So... [08:44] Okay. Yeah, it's pretty cool. [08:47] It's very cool. Very cool. When it's a Coinbase, it's very cool. Very cool when it works. And so let's talk a little bit about like the time horizon and scale of that. So my understanding of maybe venture capital. [09:01] 10 years ago, or even maybe a little bit longer than that, was they were always sort of 10-year time horizons where you would raise a fund and then you would deploy that capital. And the expectation would be that there would be a return on that capital over the course of 10 years. I feel like that has gotten exponentially faster over the past years. [09:19] let's call it five years, where it became faster and faster in the cycles of funds raising their next fund and the returns on the fund. And then there was like crazy IPOs. I'm curious where you feel like the timescales are today. And if you agree with that hypothesis that it's sort of evolved over the past years. [09:35] 10, 15 years. Yeah. I think what's also interesting, didn't know this before starting my own fund is, [09:41] when you the time horizon of the fund is over 10 years, which means if you collect money from an investor, let's say you guys are my investors.

[09:49] at your time you're expecting to have some sort of return like wherever you are so if it's gone to zero you're you want you're expecting to start getting back some of that money the timescale hasn't really wait sorry if it's gone to zero getting back that say more about that i mean this is the craziest part there's no real the only downside there i mean obviously the investors money goes to zero so there's very much a risk it can go to zero but [10:12] me as the VC firm, I already got paid my management fee. What I won't get is 20% of the profits because there were no profits. But like that's the part that's a little bit [10:23] Dicey where and why I'm saying and grifty is I'm using that word is like, what if you that it's such a long time horizon that no one actually knows if you're good at investing for 10 years. So like no one's coming to collect for a very long time. The only time they'll come to collect is if you need to raise another fund in the interim. And so going back, Natasha, to your question about the timescale. So. [10:46] When I started, so my fund was like peak ZERP is when I started my fund one. And at that time, the going consensus was, [10:53] raise a new VC firm every two to three years. So every two to three years, you raise a new fund. So not only do you just have all the different payment structures we talked about, you're stacking those payments. So you have, if you have three funds running, [11:05] over the course of six years, and each one's $100 million. [11:09] you're getting $20 million from each of those funds. And it's all under the same holdco. I know, must be nice. I'm not here to be queer. I wouldn't be sharing all of this if I was there. I'd be on an island.

[11:24] And so... [11:26] The reason why is like even when you pitch, what you're really saying is, [11:30] you spend the first three to four years of the fund actually investing. And so for us, like we started in 2021 and, [11:38] For the first three years, we deployed into almost 50 different startups. And then the second half of the fund life, you're kind of just waiting for them to cook. So you're waiting for them to mature. You know, a bunch of them will fail. You're trying to help where you can. You're trying to put more capital in. Like you're using your network to increase the enterprise value of that company to your best of ability. But you're really only deploying for the first couple of years. And so as a result, what people do is once they've deployed their fund and now it's just [12:08] it takes, you know, seven, eight, nine, 10 years for a company to get to real scale that we read about in the news. While they're deploying, they'll go raise another fund and keep that. So there's always a continuous batch of new investments that they're making. So that's really the time horizon in the design. [12:24] What if, and this might be kind of tactical, but what if there's an event that [12:30] Well, first of all, what are the events that a startup can have that would precipitate that 20% return? It would be an acquisition or an IPO. [12:39] in blockchain, like if there's a token launch, if somebody launches a token and [12:44] that returns my fund. I mean, I've seen it with people that invested in Solana early, like there are many folks that had 20, 30 million dollar funds and they put [12:51] million dollar position in Solana and it

[12:54] that million dollar position was worth like $50 million. Okay. So essentially now they've returned their entire fund. So first you have to make, it depends on everyone's documents, but the standard documents you can change it are, first you have to make your investors whole. So as soon as you clear out your, [13:12] It's called return. When people say we want something to return the fund, what they mean is if your fund size is $20 million, you want one investment to be able to return the entire fund to be worth it. [13:23] the size of your fund at the time of exit. And at that point, everything from then on is profit. [13:29] and you keep 20% of them. [13:31] Got it. So [13:33] the time horizon in traditional... [13:36] venture investing [13:37] in Zurp era that 10 years [13:40] was a standard but that gets compressed considerably with crypto potentially [13:46] Does that create? [13:47] Any other weird like side effects? So it doesn't necessarily [13:52] This might be too minute. The time horizons are still the same, but the time to exit is faster. So the fund legal structure will still exist for 10 years. But the investors that are participating in the funds maybe have an expectation that the cycles move a little bit faster. So they're expecting that if they're investing in a fund that has exposure to blockchain in years, [14:13] three to four, you know, we've seen this, we've all seen projects start and within three years, launch a token, right? And so they're expecting in years three or four, after the token vest, whatnot, to start earning some of their money back. So

[14:26] I think that's also why blockchain funds have been able to raise so much. Like there's multiple billion dollar plus [14:35] crypto funds specifically, even in a time when everyone was like, oh, my God, tech tech is dead or the stock market is crashing. Crypto is still able to raise a lot. It's because the investors, when they look across everything they could allocate into, they're like, wait a second. If I put it into blockchain, I don't know what the fund manager is doing, but I'll get my money back in three years. That's amazing versus 10. It becomes very lucrative. And so. [14:59] I think if you have an understanding of the blockchain market and you are in VC, I think you would be remiss not to participate because it's like... [15:09] an earlier return. You also are incentivized to do that. You get [15:13] you got start earning part of the profits as soon as you can get the money back. Yeah. So that I think that's why VC or crypto VC has been able to raise so much and it looks so ridiculous. But it's really just like, oh, this we're just moving money around really quickly. It's easy. It's an easy sell. That makes a ton of sense. OK. [15:29] I want to move to sort of the current sentiment around venture capital. So there's a lot of chatter recently about venture funds and venture funding. Twenty twenty one. We saw really frothy market, big checks, huge valuations. And then over the course of the last few years, it feels like that has really sort of course corrected. And I read recently in twenty twenty three VC saw thirty five. [15:52] year over year decrease from an already declining investment year in 2022. There's sort of the sentiment that maybe venture capital is like imploding on itself as a business model. Where do you think we are today as someone who's running their own fund? And then also, where do you think we'll be in five, 10 years as funds are starting to need to return or show themselves?

[16:12] Totally. So, yeah, I think it's helpful that you asked the question earlier about how does VC work and what's a business model, because if you think about it, what started to happen was the cost of capital was really low. Number one, in zero interest rate, it's easy. It's like a cheaper environment. [16:27] It's easy to get a dollar. You can borrow a dollar for free effectively. And so cost of capital is very low, which means when cost of capital is low, if you can get free money and put it in the riskiest thing possible and essentially take your [16:40] zero interest loan, [16:42] turn it into you know new money it's very tempting and so everyone did that like everyone went risk on as we know like this is nothing new it's been talked about so much okay if i'm being honest i think a lot of the issues are actually the vcs fault and so they were incentivized to keep raising bigger and bigger funds because it was cheap because they weren't nobody actually came to see their returns for multiple years the stock market was ripping and so people kept saying [17:12] company that was going public would have like crush it, crush their IPO. And so people kept trying to go earlier and earlier. They're like, let's invest in pre-IPO. Let's invest in series B. Let's invest in series A. Let's invest in C. So everyone wanted exposure to VC because they wanted to get in before things popped off. Because if you looked at the stock market, everything was up and to the right. So, so many people across the world were like trying to allocate as fast as possible into venture, into tech, because that was the only thing really taking off, right?

[17:42] especially right after COVID. And so what ended up happening is you have these fund managers who [17:47] all of a sudden are like, oh my God, so much investor interest. Even me, when I was starting my fund one, some of the biggest institutional investors in the world, like trillion dollar asset managers were coming to me to be like, can we invest in your fund? And I was saying no at that time because I'm like, [18:04] This isn't aligned at all. I'm a very small fund. [18:07] But everyone wanted to be as early as possible. And like, I'm sure you guys saw this in crypto. OK, so because of that, what ended up happening is so many people raised funds like there were too many funds raised. And there's really if you think about it. [18:20] If there's too many funds raised, what started happening was [18:23] people would fund copycats of the same business. So it'd be like Coinbase takes off and then you see like 30 other Coinbase companies [18:31] copycats like Coinbase is already the market leader. And then you would see 20 other Coinbase copycats being funded or like Uniswap, for example. And there's so many like copycats of Uniswap, right? There was like pancake swap, this swap, whatever. And you see people just funding the same thing because it's a lazy way to deploy capital. It's what they tell their investors and they have the capital. So if you're raising funds, like remember I told you earlier, you have to every three, four years, like show you're deploying so you can raise another fund and collect more

[19:01] People were lazy and put it into copycats. And so as a result, you have like so many duplicate businesses that don't actually need to exist, but they only were minted because the VCs wanted more management fee and needed something to invest into. And so then- I love these hot, you're coming in hot on venture capitalists. I love it. [19:31] I'm saying him, it's usually a guy. You never see this for a woman. I know a female founder who also went to MIT and people would question her and be like, we don't think you're technical. Classic. [19:43] We won't even go there. But yes, what ends up happening is all these people were getting funded with that had no business idea. It was kind of the VC's fault because they wanted to say they were early too and they wanted a chance at like the gold rush. And then you see what happens when there's a correction. And the way the correction really happened is it started in the public equity. So as soon as interest rates increased, [20:04] cost of capital now goes up and revenue multiples, it used to be like 100 times revenue in [20:11] in private markets and sometimes even in the public market so if you look at the valuation of companies in the stock market tech companies let's say they're trading at 100 times revenue all of a sudden over the course like slowly of three to four months you saw that compress so now they're actually not trading at 100 times every now it's 80 now it's 50 now it's 30 and most vcs don't pay attention to public markets so number one a lot of this could have been avoided a lot of the

[20:41] actually like just [20:43] called like looked at the news or looked at the stock market and weren't in their own bubble so that was number one like there it was almost like eight or nine months before [20:52] you started seeing all the drama in [20:54] tech Twitter that things were happening in the public market that you could look to. So that was step one of the unraveling. Step two is, okay, now if the IPO price is at a way lower valuation than we thought, in the public markets, you can't price the company the same way. Same thing started happening in crypto. There was a point where every single token launch would like at minimum go to a billion dollar market cap. Like that's what everyone used to say, like, oh, it's just easy, get to a billion dollar market cap. And the valuations are higher. Now, all of a sudden, [21:24] million. So now if you're a VC and you have to deploy [21:28] And the entry valuation, like your entry valuation can't be $100 million anymore. It needs to be lower because if that's if you're IPO-ing effectively at $100 million, it's [21:39] and you're investing at $100 million, that's a flat investment. No one's making money. You slowly see it trickle down first from public equities, then into late stage growth, then into kind of early stage in venture, which I would say is like a stage before. And then you see that trickle down all the way to the founders, where the net new founders coming up with actually new ideas. [21:59] got the brunt of it that we're trying to raise and have been trying to raise over the past two years, where the VC funds now, all of a sudden, they're in year three of their fund that they raised in the hype cycle. [22:11] They're like looking at their books like, oh my goodness, everything I...

[22:15] invested, I underwrote to a scenario where a billion dollars was the baseline. And that's not reality, like all the multiples have shrunk. And so. [22:24] That's why you see the VC funds like the phase one with all the VCs just stopped giving term sheets. They were like, we want to like figure out what's going on. We're scared to make any new investments like let's go fix the investments we already did and like try to mark them down. See if they can be sold off, like see what the actual value of our portfolio is. So that was phase one. [22:44] So that's why you saw a lot of term sheets get pulled. [22:47] I think phase two was actually first was like planning, then was actually executing, doing bridge rounds on the companies that are doing well, like figuring out M&A in the portfolio, planning out how they were going to raise their next fund. What's the story they're going to tell their investors because they made shitty investments over the past few years? And then phase three is where we are now, where I do actually think that a lot of people... [23:09] have kind of cleaned up their books, accepted defeat, and are now thinking about, okay, what do we fund from here on out? [23:18] Now, then you have to predict the macro looking forward and say, [23:23] Okay, we are seeing a recovery across all risk assets. We are seeing... [23:29] it seems like interest rates are changing. And so [23:33] We learned our lesson from, you know, overfunding startups. So let's restart, but let's restart with a more healthy makeup. And the challenge with that is the class of founders that started their companies in 2021 or even I would say like from 2019 onwards that were used to having an idea and just kind of getting free money.

[23:55] They are so accustomed to that that it's very difficult for them [23:59] to be metrics driven all of a sudden. And it's really not their fault. Like if you are 24 and you've been in or 27, you've been in the startup space for the past five years since you graduated college, you have been taught that it's grow, grow, grow at all costs, like keep telling a story, keep raising more money, figure out monetization later. It's a very weird rug pull for all of a sudden you're [24:21] VCs to be like, oh, well, we expect you to be profitable, have millions of dollars in revenue, and you're [24:27] by the time you raise your series A, where just a year ago you weren't saying that. And so I think [24:33] Some of the shock is, yes, people are pulling back, but I do feel there's definitely enough money being raised by VC funds. I think the standard has just gone higher or it feels higher, but I don't actually think the standards are that much higher. They were just a little bit out of control before. And so it's more of just a wake up call of founders being like, wait, we actually have to build a business. We actually have to make money. Like, [24:58] I thought it was free. And there is a batch of folks. They're like, what the fuck is this? [25:02] Yeah, they're like, you have to build a business on Twitter. What? [25:07] And so I think that's the harder wake up call. And so there are tons of founders that this is actually their time to shine because they've always been profitable. They've always known how to make money. They just didn't want to play the hype game. And it's their time to shine for sure right now. And they just had a leg up. And all the folks that had a hard time raising that didn't get the free money of the Zurb era are going to be really successful right now because they're not feeling this

[25:31] I mean, they've always had to operate that way. And so like, honestly, women, [25:35] people of color all the folks that are underfunded are crushing it right now if you look at some of the best [25:40] the biggest successes, it's been like the it's been the things that nobody's wanted to fund like [25:45] black owned beauty brands are popping off and nobody wanted to fund those. They're like, we hate CPG. It's so rough. They're making hundreds of millions of dollars. Like, it's just funny the categories that are doing well. It's like the most... [25:57] It's the most, they used to call it like uninvestable categories are all doing well. We're going to take a quick break and we'll be right back. [26:05] It's time for a more open, inclusive, and transparent financial system. A system that serves nearly everyone, everywhere, all the time. That's why we love today's sponsor, Kraken. Kraken is a crypto platform that provides a super simple on-ramp to the world of crypto with a 24-7 support team. Crypto transcends physical and imaginary borders. No matter where you are, you can send funds easily and quickly to almost any part of the world. Plus, forget about waiting times and waiting lines. You can send, receive, and trade crypto anywhere near instantly. [26:34] I want to hear more about Spice Capital, given the... [26:50] picture you just painted what are you looking at and excited about right now [26:55] Yeah, there's two things you have to do when you run your own fund. When you're pitching investors, I realized they're not actually visionary, like the people that are investing in me, right? They're paying me to have some vision of the future or some imagination of what the future could look like. So you actually have to pitch them what's hot today because they're reading Wall Street Journal, seeing a headline and then emailing me and being like, did you invest in this category?

[27:19] And that sounds terrible. Yeah, which is super annoying. And like what they don't know is if I'm investing in it today, like I've already missed the boat. Like that's my thing. If it's like open AI in the headlines, like sorry. Anyways, but that's like the psychology that drives all of I mean, that's why we have public markets. Like it is that human psychology which drives all of it. [27:49] and you have to throw in the buzzwords. If you look on my website, [27:53] AI and creator economy and blockchain. But what I really try to think about is [27:59] What are the next batch of categories? Like what are things that are not considered buzzwords right now that will be buzzwords one day? And so that's kind of the whole ethos of Spice Capital. It's like go find domain experts, subject matter experts who really know their industry well. [28:15] who have a vision of what the category could look like. I would fund those types of founders all day over, hey, I just dropped out of Stanford, [28:24] I'm really smart and I want five million dollars to go figure out [28:28] a new idea and I'm really good at shipping. I don't think that model works. For me, that's not the archetype I like to work with. So our focus and the categories we're excited about are really the categories that [28:40] I would say there's no market map around yet today. And so I'll give some examples. Like one theme that I'm exploring right now is that the new wave of religion. And so I,

[28:51] Everyone in the West, in my opinion, you know, we're not as religious. We might have been raised religious, but we've all become quite individualistic. And as a result, what happens, you see people gravitating towards [29:04] buzzwords like community and you see people doing forms of like what I would call religion but they're characterized as health and wellness so like meditation even like the bathhouses like even that's a subculture that really is just about people coming together yoga and you kind of saw wave one of it was yoga and meditation and wave two as we're getting more and more esoteric like there was a study that one in four Americans believe in mysticism and so all of a sudden now [29:34] astrology, tarot, you see a lot of, I'm sure like, I have a lot of friends that now see psychics. I'm like, wait, what? But it's not so different than going to your priest and then being like, God will figure it out. You know, like God has a plan. It's very similar. It's like you're looking for guidance. And so we invested in like a tarot card marketplace company three years ago, which feels insane three years ago. But now looking at the kind of the landscape in a post pandemic world, people are [30:04] like they're just craving answers. They feel lost. There's like a spiritual nature that it's it's replacing a spiritual void. And so we try to do what industry [30:13] I don't because I'm triggered. Yeah, of course. It reminds me of like my early days. Well, there's this one scene that you don't remind me of this person at all. He's a horrible person and a terrible character, but he goes on an ayahuasca trip.

[30:28] and [30:28] at the end of his trip, he like turns to the guy that he dragged along with him. And he was like, we got to figure out a way to monetize this. I was like, it's like a little bit. That's me. That's literally me. Yeah, I go to Dime Square and I'm like, what can I monetize? [30:45] I love it. No, but I totally see that trend and like it kind of even falls into like the run club stuff and like all of this sort of like pickleball obsession, like people are looking. And I even went to a talk this weekend that was about tech, but [30:57] And everybody was like, what was your... [30:59] what was your read on the talk? And I was like, wow, this talk reminded me so much of church. Like there's a real like, even in like the tech community here in New York, there's sort of this experience of the industry that feels almost like religious to people where it's like their deep belief system and sense of belonging and purpose is coming from the industry that they work in. And I think it sort of speaks to what you're talking to as well. Totally. And like we now are on our phones all the time. We're drawn into our work. Our identity. I mean, everyone's anti-institution, anti-establishment, but then- [31:29] they're like saying that, but then they're buying into a different institution. Like the crypto people are buying into a different philosophy and that's like, [31:36] That's another branded institution like all around Bitcoin or [31:42] You know, degrees of layers and degrees away from Bitcoin as like your God, which is horrifying, but scary. Dark. I know. So we try to do things like that. So, I mean, there's a why for every category I've listed on my website, like the creator economy. Again, like that's the buzzword people can understand.

[32:00] The average Joe... [32:01] investor can understand. But what I'm really seeing there is, OK, there's a new batch of people [32:06] You guys are a great example, and a lot of our friends were – [32:10] They are literally, I mean, I think of creator economy as the new small business. And so it's folks that are... [32:16] making five four five six seven figures online as a side hustle sometimes as their main career in something that they're just passionate about something they know and i would think that a lot of us if we were [32:28] you know if we were our age 30 years ago 40 years ago we might be creating a small business a brick and mortar concept and now we're just doing a digital version of that so it's like a digital small business so think of how big like this the smb industry is a trillion dollar industry [32:44] I'm sure everyone saw OnlyFans as doing like whatever, $8 billion a year in revenue, making at the same scale as some of these AI companies, which is insane and more actually. [32:55] And... [32:57] What what happens to all that income, like when all of a sudden somebody is doing something out of passion and they have an Internet business and it's generating. [33:05] a lot of money, how do you professionalize them? So when I think of creator economy, it's like, how do you professionalize [33:12] this new class of income coming in? Is it now, you know, you have a new batch of folks that they don't have finance degrees. And so they don't have, you know, a banker, they don't understand how to optimize their taxes. They don't understand all these small things. They don't understand expense management. Like, how do you simplify all that so the person can do what they're really good at? That's what I think about creator economy. And then within applied AI, I

[33:38] There's a big bias around or it's easier for VCs to invest in infrastructure. That's the easiest thing to do because. [33:44] I mean, you see it in crypto, right? It's like, yeah, let's build more infra. Let's build more infra. It's an easy place to park money because your bet is, hey, I don't care what actually gets built on it. It's like oil. I'm going to get a cut of everything so long as the industry grows. It requires more taste to pick an application and say, hey, this team is really good at building product. This team really understands a specific problem that will use the technology to then solve a specific subset or a specific set of problems for a group. And that group will continue to grow. [34:14] application layer investing is much harder. I enjoy doing that because I think every time there's a new platform shift, like, you know, when blockchain came to market now with all the AI stuff, there's an opportunity for like 100x better user experience. And it's usually folks that come from industry or have some sort of [34:34] customer insight that end up building it and it's usually the folks that don't get funded quite easily from other investors and so i thought it was pretty funny when [34:43] you know, when OpenAI came out, like the immediate reaction of all the investors was first to go fund clones of ChatGPT. So that was like the first thing, like, let's go raise as much money as possible and park it into other LLMs, which going back to the beginning. Why would you do that if you're a VC fund? It's because you can raise four billion dollars to invest in these like massive rounds and you get paid the management fee on it. So like that was phase one. And then you would see blog posts coming out right after like.

[35:11] Any chat GPT rapper is a scam. Like chat GPT rappers are uninvestable. That was the narrative. And I was like, okay, just the fact that people were saying that, I'm like, I want to go look at chat GPT rappers. And then when you look at chat GPT rappers, my insight was, [35:26] holy shit, this is amazing because you can essentially build an application layer and your underlying tech keeps getting better. Like you have free R&D. In what world do you have free R&D? Like your costs are the same. If anything, the costs, the models are getting commoditized. So the prices are getting cheaper. And so you can build a front end and have the best back end that keeps getting more and more efficient and cheaper and better. That's amazing. That's a technology [35:56] not funding it. And I had to really think about like, [35:58] Why is that? And then I thought more about the financial incentive. And so we made a kind of like a stamp of, hey, we're actually going to fund application layer businesses where nobody else wants to. [36:08] And then sure enough, like 12 months later, a year later, I see blog posts that are like, [36:14] LLM clones are dead, application layers where you could be investing. And so a lot of what we do at Spice is like, [36:20] To be really good at early stage, I not only have to believe in a founder early, I also have to time the category zeitgeist and the category zeitgeist with the investors. Because likely if something is not hot amongst other investors, the price is better. My entry price is better. I have no competition on most of the deals I'm doing. Nobody else wants to invest. I can convince them all day. I don't have to worry. It's more about really supporting the founders and being that first believer. And then what you want is over time for the category to be known.

[36:50] application layer means in AI and people to be like, oh, I know what that means. Or you want people, you want it to become a buzzword. You want creator economy to become a buzzword over time. Like that's when I am slowly exiting the position. [37:03] yeah [37:04] Wow. Maya, if I got to say, if I had any money to deploy, I would put it right in Spice Capital. Agreed. Wholeheartedly. Oh my God. Thank you so much for coming. This was so great. I feel like I could talk to you for literally hours about this. Totally. Totally. Incredible. Yeah. Thank you so much for your time. Thank you for having me. I think I went a little bit off the rails. I'm very passionate. No one ever asked me about these things. And I feel like I've had to learn it all from zero. Like I didn't really know much going into it. And so [37:34] really fun to share these things because I think people don't know. [37:37] If you follow the money, you'll always have a better sense of how any industry works, like the game of any industry. You just follow the money. [37:44] I learned so much. Thank you so much, Maya. Thank you for having me. [37:47] *outro music*