Finding the right investment can sometimes be difficult, while finding a sleeper hit investment that grows into something like Ring can seem impossible. M13 is known for investing in early-stage, disruptive tech companies that revolutionize consumers everyday life. But how can investors at any stage learn how to spot a tech unicorn like Ring? How can investors tell the difference between what’s good and what’s too good to be true?
Yahoo Finance Executive Editor Brian Sozzi is joined by M13 Co-Founder Carter Reum to give insight into finding success in calculated investments, spotting liars in business, AI in the labor force, and much more.
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This post was written by Nicholas Jacobino
Video Transcript
Hey there, my investing, curious friends.
Welcome to opening bid.
I’m Brian Sazi.
Yahoo Finance’s executive editor.
Thanks for joining us either on youtube, Yahoo Finance, Spotify, iheartmedia, Pandora or Amazon Music.
If you are loving opening bid, hit us with those likes and fire off your questions at hot takes to me on X at Brian Sazi and at Yahoo Finance, we are here to help and listen now to make some money and make you a lot smarter.
Joining me today is N 13 co founder, Rem.
Uh his company has made early investments in some of America’s most well known businesses such as Lyft Pintos and Bonobos.
He’s a father of two young Children and married to OG businesswoman Paris Hilton.
Good to see you in person.
How are you?
Can I just say thank you for answering your emails.
Like is that one of your just secrets to success?
Somebody emails you of credibility and you reply right back.
Yeah.
You know, I was telling someone the other day to me like life is so simple.
You gotta have a vision.
You got to be able to recruit a world class team and you got to execute it when I see you pop in my inbox.
I respond.
I, I appreciate that.
So you, I, I don’t even know where to begin, but I’m going to start here.
You have managed to seed eight unicorn companies.
Is that right?
Eight unicorns in the seed five in the series?
A?
But who’s counting, Brian?
No, I, I’m total between seed and series A.
So I’ve had a good run.
OK. How do you get on a good run?
Yeah, I think, you know, like when you’re doing early stage venture, there’s so many different dimensions.
At the end of the day, it comes down to pattern recognition, right?
You, it’s kind of Malcolm Gladwell outlier.
You just see certain things that lead you to believe that this company could have a shot, right?
The, the typical unicorn rate is 1 to 2%.
So you gotta find a company that’s an outlier.
Uh It’s funny, I, I wrote a book a few years ago called Shortcut Your Start Up and I actually talk about how you have a greater likelihood you or I to be an NBA basketball player than a unicorn founder, which is crazy, right?
So I, I’m gonna be an NBA ba.
Are you gonna be a unicorn founder?
And that’s tough for me to say because I like to think I, I achieve in everything.
So when these companies came to you in their early days, they’re founders, they’re jacked up, they’re feeling it, what was their pitch to you?
And how do you, how do you spot BS?
Yeah, there’s a lot of BS.
So you throw that out the window, I think, like, the way I kind of think about every founder is, is, do they have a high winds above replacement for that idea?
Like, are they, do they have a skill set or a point of view or past experience that makes them unique to be able to take on this idea?
And then, you know, trying to think about what’s the world going to look like in five or 10 years.
One thing I always talk about is I want to, I want founders who, as I say, have a microscope in one eye and a telescope in the other eye.
So what I mean by that is a microscope in one eye means looking at the day to day executing, building the team, things like that.
But in today’s world, that’s just moving so fast.
You got to have that telescope in the other eye to try to understand where the world’s going to go five years from now 10 years ago.
And so I wish it was easier than that of just going.
Oh, maybe I will be a unicorn founder, maybe I will come to you.
I would love that.
What if I come to you?
And I want to go into some of the companies you you invested in early early on.
What should my pitch be, how do I get your money?
Yeah, I mean, I think it has to be, you know, where is the world going?
Is there a big time?
Right.
Is the total addressable market big, um, you know, what’s different now than even 678 years ago?
Is there’s so much competition, right?
When I seated ring doorbell, Jamie Simonoff was the first person to come up with the idea for a wireless doorbell.
Now there’s hundreds.
It is pretty awesome.
I mean, can you imagine life without it?
No, I mean, all those great moments of looking at who’s looking back at your ring door and talking to the U PC, somebody like stealing packages or like a puppy going like this right up to your camera pirates.
You know, it’s, it’s always painful when you see that and, you know, you can’t do anything.
You’re stuck at work podcast like, hey, pull my package back.
So, um, you know, but when we see that he was the only one with the idea.
Now there’s hundreds, if not thousands of them, right?
And so at the end of the day, what I look for most in, in founders now is, can they inspire?
And I think that’s why you’d be a good founder is that you have to inspire in two ways.
You have to inspire great people to join your Jersey.
Can they recruit great people?
But that just comes down to inspiring and can they inspire vcs to believe in the vision to give them money.
Because I think what people have learned in this recessionary environment is that having the ability to wake up every day and innovate and having the capital to do that.
It is actually not a right.
It’s a privilege.
It’s hard.
Now, did you just call me inspiring?
You are inspiring.
I wanna make sure that wasn’t lost and I appreciate that love man.
So what, what three founders came to you early on that impressed the hell out of you.
And what, what did they do?
You know?
It’s hard.
I mean, like Jamie Siminoff from Ring who were just talking about clearly a very special founder, obviously ended up selling that business to Amazon for over a billion dollars.
In his case, he was just a tinker, right?
So at the time, he just said, I’m going to tinker with a bunch of ideas and when I find the one I’m going to double down on it.
And so I just kind of love this idea that he was going to eventually figure it out.
He had built some technology companies before.
When you think about people like pel from class pash, just the vision she had the space she knew disrupting fitness.
It seemed like a place that needed to be disrupted.
So it’s hard.
There’s never any pattern necessarily across everyone.
But again, when you’ve done it enough times, right?
You go with your gut.
But what your gut really is is seeing the pattern subconsciously in a way you’re going, man.
This person reminds me of this founder or this business model and where they could get to or things like that.
Um So it’s hard how, how have you and this, I guess this 1 may apply to life in general.
But how do you spot BS?
How do you know someone doesn’t have the numbers, the concepts or it’s just a crappy person.
Yeah, I would say I read this book when I was growing up because I was a social psych major from Columbia and it was how to tell if somebody is lying.
And I remember it was like, don’t ask if you think someone lied to you and they went to the movies, um, don’t say to them, oh, what did you think of the movie?
Try to throw something at them and then watch their eyes?
So if I thought you were lying about, you told me you went to the movies last night.
All I would tell you is, oh my God.
I heard that movie theater caught on fire last night.
Right.
And in that minute, right, you’ll go shoot.
Did it catch on fire?
What do you mean?
You know, and you’ll be able to tell.
So, like I was talking to a founder the other day and he mentioned a very famous kind of tech executive.
I said, oh, cool.
So if I call that person, what would they say about you?
And in that minute before they even open up their mouth, I know if they’re like, oh, shoot, he actually knows that famous guy or in this case the founder said, oh, yeah, no problem.
Definitely call about me like, ok.
Right.
And so I think there’s those little subtle things but, you know, you also just got to do the work.
Right.
We spend a lot of times getting to know companies, weeks diving into their numbers and what’s that process like?
Yeah, I mean, at M 13, we write 20 page memos and everything we start from.
What are the indicators of success for this company?
Every company has a different force ranking of what the indicators of success are.
Then we say like what can’t we be wrong about?
Right?
It could be, hey, we have a thesis that this is a company that people just love and it’s going to be product led marketing.
So we need to go do customer calls and make sure that’s the case sometimes it’s hey, can this business scale to the unit economic scale, right?
Like VC si think were famous years ago for saying, oh, don’t worry about it.
If they ever make money, we’ll just build the company more money, they could just lose money, feeding them more money.
And that works back then doesn’t work today, right?
And so you know, there used to be this famous slide in every pitch deck that was like here’s the economics today and then here’s the economics at scale.
The problem is they just never got to scale.
So we do a lot of what I call cocktail napkin math.
Right?
Uh How big is the market?
How many customers do you need to get?
What’s the average revenue per customer?
What is that penetration rate?
Like me personally, I’d rather back a company that needs to get 0.001 of the addressable market than someone that has to go disrupt.
You think about Uber, they disrupted an entire market much more difficult, albeit more lucrative, much more challenging.
So there’s just a lot of nuances of that stuff to make sure you’re right about the things you need to be right about because this is early and it’s going to be a five or 10 year journey.
Did you?
You’re five years old, young Carter Ream.
Did you want to become a VC investor?
I don’t think what I knew, knew what that was.
I just grew up in a town of 1000 people on a dirt road.
I was just dreaming of concrete one town over.
Um Yeah, exactly.
I started my career after Columbia at Goldman Sachs as an investment banker.
I was in the deal team that took KKR public and uh you know, that was just great training.
Goldman teaches you how to work hard, uh how to be analytical, how to get up to speed on a new company or a new market.
And then after that, my brother and I started and sold a company over the course of a decade.
And it was through that, what I realized was um I was a better operator because I was an investor and I was a better investor than I was an operator, which is kind of why we built this model at M 13 where for every investor at the firm, we have three times as many full time operators to kind of help our founders.
How did you find out your core competency?
Because I think I talked to, you know, I talked to founders.
Uh well, look, I even look at Elon Musk, I mean, the guy’s running multiple businesses.
How do you know, how did you identify?
This is what you wanted to do and you were going to be good at it?
Yeah, it’s funny.
I, I remember when I was working at Goldman and I told my dad, I wanted to stay at Goldman and he said, sounds great.
Except do you think uh when you distill down what your superpower is?
Do you think that Goldman is the best place for you?
And what he was saying, what he said to me at the time was like, you seem smart but everyone at Goldman is smart.
Yeah.
Yeah.
Um And then uh it was kind of like he said, I think your EQ is what separates you from others, but you can’t use that in investment banking.
You should think about a place you can use that.
So, um yeah, I think, you know, with 13, what was fun was since we had built and sold a company and then we started this from scratch.
We really were able to zoom out and go.
Ok, what are we great at?
And then we also asked ourselves, what does a venture firm need to look like from the decades to come?
Which is different than the decades prior at the end of the day, what we decided what we thought we were uh our superpower was overused term, but it is a nice um was as angel investors so often because we are former operators.
I could talk to a founder and really quickly distill down how to accelerate their business or how to remove a roadblock.
And as I say, in life, you don’t need to be an expert in everything.
You just need to know an expert in everything so often.
So often I say, oh, you’re having this problem.
I know who to call and I would text someone to do that.
And so we thought to ourselves, how do we do this at scale and how do we really try to help the companies that we invest in?
Because it’s hard, I imagine with what you do, trust is very important, you have to trust the founder, but the founder has to trust you.
How do you go upon building trust?
Yeah, I’m very proud.
I was looking it up yesterday.
We have a founder mps of 78 which means that we’re doing something, right?
And when I think about what it is is it starts from the minute we invest in a founder, we just explained to them.
We just want to be their sixth man.
We’re just here to support.
Hold, hold that thought, sir.
If you’re watching on our streaming platforms, we’re heading for a quick break.
Everyone else.
Stay with us.
We are still rocking our 24 minutes today as usual uh Carter.
So e every day we come in here to Yahoo Finance and we, we’re talking about stocks and, and markets.
And if there’s anything that has been consistent over the past year, people are obsessed with A IA I, this A I that is that the next big thing in your world or you’re already past A I thinking about, I don’t know, 2030 robots.
Yeah.
Well, I mean, it’s good that we’re doing this podcast podcast before you’re replaced by, I’m just kidding.
Uh Not taking this guy.
You don’t think you’re replaceable by A I, I am I, I, come on.
No, no, no.
Um You know, I think like clearly A I is a technological revolution.
We’ve had this before, things like the internet, things like the mobile phone, which basically put a superhuman in uh supercomputer in everyone’s pocket, things like cloud computing.
So I’m of the belief it’s going to effectively change everything.
We’ve had A I for a long time.
It’s just for most of us it seems like it came out of nowhere but companies like Google and Open A, I had been working on this for 10 years.
If you think about at the end of the day A I is just better pattern recognition.
The reason you won’t be replaced by A I is thank you.
You have exactly.
I know that was reassuring was right.
You have the ability to make better contextualized decisions versus A I’s pattern recognition.
I think, you know, right now everyone’s talking about the technology, but I would encourage people to think about the implications of it.
Right.
The technology is amazing, but that’s the first ripple, the second, the third, the fourth ripple of how it’s going to, you know, open up new business models, things like that.
If you think about all these great companies we have today, Airbnb, Uber, Lyft, they were there because of the iphone.
It wasn’t that they just took things that had done in the past.
They thought they could think about it differently.
And so in A I it will disrupt so much.
But again, right now we’re like, isn’t that cool?
I can say I buy me some flowers.
That seems cool today, but it’s really what’s gonna happen that second and that third ripple and I think the hardest part is for any investor is knowing where to get the best, you know, risk and probability adjusted outcome.
Just investing in A I doesn’t work, right.
If you invested in the internet, if you invest in a company called Amazon or Netflix, you did really did.
Ok. Now, if you invested in pets.com or our having said that our valuations on A I companies, are they overheated?
I covered one unnamed IP 02 weeks.
So I’m not gonna say who it is promising company A I company doing something in the cloud.
Great.
Sounded great on paper.
They’re not making any money and it’s unclear when they will make any money at all.
Overheated would be a nice way to put it right.
Everyone looks at open A I and goes, oh my gosh, that’s gonna be a trillion dollar company.
So I’ll pay whatever I think, you know, so often in VC people say it’s just about picking great founders and great companies and I’m part of the contrarian view that says, yes, that’s part of it.
And I’ve done that historically very well.
But you also, you know, have to have other skills, right?
You make your money when you buy, when not when you sell, right.
Entry point valuation matters.
You have to know when a company is showing early signs of success and you have to try to buy more of that company.
You need to know when to sell those positions.
And so um you know, this is one of these cycles where people get excited and then VC Land are willing to pay any price to invest in these companies.
But that doesn’t work, right, whether it’s a video in the public markets or in the private markets traditionally, that has not been a successful story.
So where are you investing?
Yeah.
So you know, we think about A I as a horizontal technology.
So we invest in the future work, commerce, health and money.
I think what’s interesting about A I is you can invest in A I disruptors, but you can also benefit from A I in companies that are existing, right?
So this company I mentioned Pietra, they launched an A I feature that unlocked three or four X growth, but it’s in the ecom enablement business on the other side of the spectrum.
We invested in a father son duo the first time we ever invested in a father, son.
But you know, the son was at mckenzie, the father is one of the pre eminent A I experts in health care.
So one guy knows his numbers and I I mean that sounds like that’s a dream team.
Great.
And and they basically right, that company called Care now is basically using A I for earlier disease detection, working with health care systems and pharma companies.
So I think there’s a lot of different ways to benefit from the shift of technology, right?
Same way historically, you could invest in Amazon or you could invest in companies that benefited from the ability to use the internet.
Right.
There’s two different ways.
I think what is very interesting, I would love your take is I believe a I, the challenge is going to be, you’re going to have the innovators fighting each other, but you also have the big corporate guys in the game.
I think they’re going to buy them all.
I think you’re going to have Microsoft Google buy a lot of these early stage companies pay whatever they want, they have the cash to do it and then further consolidate their position and put them even more in dominating positions over the next 2030 years.
And what do you think about the Doj in that context?
Well, I would r I will punt that back to you because what if they buy these companies in the early stages before, before they, they don’t look like big businesses and they take them in their uh in their wings and I don’t know, 10 years from now and now they’re giant companies inside of a giant Microsoft controlling the world that be all doom and gloom.
But no, I mean, I think that’s the challenge is that you have some very well, you know, it’s like when a kid comes in, he’s like, I have better A I than Google.
I was like, factually not accurate.
It’s just impossible for you to have better A I than Google who spent 10 billion plus or Microsoft.
And so that’s why I think it’s that we’ve never seen an adoption curve this fast.
Everyone’s heard the numbers on open A I and all these other A I, but we’re never going to see this much competition.
So many dollars are going at it.
Big guys innovators.
And I think I would tend to agree with you.
I think the big guys are just going to get bigger and stronger because this is kind of classic fly wheel.
What, what, what type of investor are you?
Um Hopefully they say thoughtful, so patient.
Yeah, I I it’s funny, I was interviewing Shane Battier at our uh conference yesterday and I was talking about he and I both believe in this concept that you just have to do the right thing, things long enough and it might not seem like it moves the needle, but a lot of decisions, day to day compounded over a lot of time too, right?
And so I’m always talking to founders and I try to project this as an investor.
I say just respect the process.
You know, everyone sees a bonfire and they go, oh my God, that’s so cool.
But what they fail to realize with these 13 companies that I’ve been with or a bonfire, it’s spark by spark by spark by spark.
And one day you get a bonfire and you go, oh my God.
Isn’t that cool.
You see Ring, but it was just brick by brick.
And so I just tell people just these little things compound over longer periods of time and that’s how you went.
Nothing in this world is perfect.
What did, what did you learn from your worst investing experience?
Uh I learned if it’s not a hell.
Yeah, it’s a hell no.
Right.
As an investor, right?
If you, there are times where I was debating investments and every time I’ve debated, it’s been a bad investment in the end.
And every time I just couldn’t get that investment out of my head after I’m meeting that founder, I’ve had better success.
If you weren’t a VC, what would you be doing?
Oh, that’s a good question.
I was a heck of an investment banker but uh I’m just glad I’m a sports guy.
I mean, do you g do you have time for any of this stuff?
No, no, I got, you know, I’m 13, we have 47 people now.
So, you know, it’s uh I gotta get back to me on that one tweet at me.
So full and fair disclosure.
Um You know, I’m an honest guy.
I originally reached out to, you know, try to talk to your wife.
This was the, this was the uh fascinating part.
So I reached out to her team.
I was, went back, I was doing some work maybe 20 minutes later.
What it was like, I’ll check my emails.
Uh, it was, you, you cut right through the fluff in the crap.
But, I mean, is that normal, is that just one way?
Do you just believe that in order to get stuff done you just need to, like, push things away and just like, focus in.
Oh, first of all, you know, don’t be humble, Brian.
I saw your name and I was like, oh, heck yeah, I’m gonna respond.
But, yeah, my, my wife’s uh media company 1111 is a billion dollar plus company.
And part of what I Paris Hilton, Paris, Hilton paris’ Media company 1111.
And part of why she’s been so successful three years since founding that company is like you said, she just removed the friction.
She made things more efficient.
She has 25 people internally.
And this is a great example again, in everything you do all day long, you think to yourself, what’s the roi?
I saw your name.
I saw Yahoo Finance.
I said that’s worth an email.
That’s a pretty good roi.
Thank you.
And then I knew we’d get along famously once we met.
So what I I, you, you’re married to Paris and I think uh a lot of folks in my generation grew up watching her talk to us about her brand.
What is it today and having, I mean, you, you’re married to her, what, what’s your secret to success?
You know?
Have you been able to, I mean, do you study her like that or I don’t, I have no, I don’t know what you should do a podcast and study her.
She heard a podcast the other day where Shaq’s daughter said that Shaq had his daughter when she was in high school, study Paris Hilton and said she’s the blueprint.
I want you to study up and she was talking about it on a podcast.
Uh, you know, at the end of the day, I’m just another proud husband.
I think I have the greatest wife out there.
And the two cute, cutest little kiddos.
Thank goodness they look like their mama.
The cut is all get up.
But, you know, I think, you know, Paris has always been about content, commerce and community, you know, just to give a sense, her products alone have done 4 billion in revenue the last decade and that was with A B it wasn’t obvious.
Um And I think if you really think about her career, it’s been defined as being future thinking and not being afraid to take risks, right?
So every one told her she was going to ruin her life because she signed up to do this show.
That was a reality TV show turned out it did not ruin her life.
She was the, you know, OG of social media.
And you think about where that came from, it came from her grandfather, the founder of Hilton who understood customer service.
And she said, oh, how cool is this now, I can communicate with my fans all over the world.
You think about it.
She was, you know, tweeting.
It’s been well documented in 2017 about E thee and having dinner with the founders in Berlin.
She had filmed herself in her documentary in 2018 calling, talking about the metaverse and how she wanted to do a nightclub.
Again.
She’s just always been two steps ahead and she never sets herself up in a position to fail, but she’s always willing to take risks, you know, and the other day she turned over when she’s giving me a kiss in the morning, she’s like, I hope my legacy is for all the advocacy work and the impact she’s having.
And so it’s been a fun transition to say, she obviously recognizes the business success she’s had, but she realizes through kind of everything she’s been doing changing state laws and federal legislation that like this idea that she can leave the world better and her case a little more sparkly than she found.
It is pretty awesome.
All right.
Well, thanks for being a long time Yahoo finance supporter.
We originally caught up with you in 2019 when we were still launching our amazing video programming here, Carter Ream.
Good to see you in person.
I will be staying in touch for sure.
Thanks.
All right.
That’s it.
That’s it for the latest opening bid.
