That's great. Yeah. I'd love to hear about it. Demand. I think demand is super iconic in LA and there was a time that every startup founder you met with somehow connected to demand but yeah, so you got to go and what was the original idea and how did it evolve?

So the original idea stemmed from some of the things that I had seen in the media business. And the telecom industry actually, prior to that. As the the telecom industry started to deregulate you know, we went through this pretty big consolidation phase in radio and cable and satellite in the yellow pages.

And as I started looking at the growth of the internet and companies that were growing off the back of Google, Specifically, it sort of dawned on me that there was going to be another opportunity to aggregate media. And this new form of media was basically in the form of websites.

 So that was really the original idea. And we ended up putting together a couple of assets to start the company. It was yhat.com. So one web. There was a portfolio of domain names, which in my view at that time, a domain name was just a media asset. I mean, people were navigating to it organically. It was being monetized by Google.

So it was the , same thing as going to a website. Then we had a registrar business as part of it too. And the registrar business was a business called so it was those three assets collectively that we use to form the foundation for.

Hm. can you catch me up some on the journey there?

Yeah. How was Sandy? We have,

mean, it was like, it was a great, such a fun time. We had such a great team, you know, Richard Rosenblatt was my co-founder and partner and he is such a dynamic entrepreneur. , And then as we kept building the company, we bought, , things like hotkeys, which was founded by then a small time entrepreneur named Michael blend. Who's now a big time entrepreneur. And We just amassed this incredible level of talent. And I think it was one of the early companies.

 You know, we raised $120 million to start the company. So it was one where it was a big idea married with a lot of capital. And I think it really opened a lot of people's eyes in terms of what's possible. And so when I see the success that people who were part of demand media have had subsequently. All of us kind of learn together, or actually you can have a big idea and you can fund it with a lot of capital. And, more often than not, we also have this real culture of profitability. I mean, the business was profitable, you know, EBITDA positive really since inception

And I think a lot of the entrepreneurs around that ecosystem have done well because they understand that it's important to make money as well as have a big idea.

a lot of success, it was never a straight line of success.

Never is. But at one point the domain name part of the business was working really well. And another part of the media business was working really well. And we had a lot of success all the way through our IPO. And then, you know, we pin, an air pocket , in the form of a Google algo change that really, , impacted the performance as a public company.

And then it was, it was a little hard to recover once that happened, but , the lessons and the learning and the experience was fantastic. And again, that, ecosystem of people, I won't play it. I think we had a thousand employees. You know, mean? You think about the executive team where we had people like Joanne Bradford or, you know, Erika Nardini, who's now had a lot of success at the CEO of Barstool.

it's a tremendous resource for us at three L frankly, you know, to have that kind of reach and experience and entrepreneurs who, we all things to one another and,talk pretty regularly.

It's pretty special.

And I believe you're not very media focused at three L today, but given that experience, I'm curious when you think about the business models and content and media today.

Well, we do very little media, actually very little ad supported, businesses at 3m. We've done a lot of consumer. Oriented kind of commerce businesses. You mentioned a couple, I think at the outset, like goPuff Roman daily harvest, et cetera, and then some infrastructure businesses, some, some enterprise and SMB software companies.

In many cases, they're B to C models where you've got a subscription revenue stream and probably a payments revenue stream, but then potentially the ability to?

build a consumer marketplace off of the back of that sustainable profitable value. Asset. I think , I reflect back on what we learned at demand media, it was all about ecosystem coming together and , how the building blocks sort of layered on top of one another.

So it was, you know, are you driving audience via paid models and which of the paid models are using and is it organic? And if it's organic, how important is SEO and what's, what are you doing to do that? And ultimately, All of those techniques matter in terms of being able to build successful companies, but you've got to have something that really is somewhat transformative from a consumer experience standpoint. That's really , in some ways what it comes down to. And I think there's some good lessons, even at demand where we had, , a content engine, some people call it a content farm. I'm sure. I always thought that term, I guess in hindsight, it's not a big deal, but I was always sort of offended by the term content farm.

Cause we really put a lot of thought and effort. The content we were making and how much we cared about it. but we also had This one property cracked.com, which was a comedy property and the team there had very different editorial model and it wasn't about volume of content. It was really the opposite.

It was only or 10 posts or pieces a day. It was very high engagement. And ultimately that business was sold for very significant amount more than we paid for it. And so. Again, there's just a lot of learnings, a lot of lessons that came from building that company over 10 years.

Hmm. And so one of the main lessons was that you have to have some transformative experience or.

Yeah. I think the winning businesses are ones that definitely have something that just does change the consumer experience. And again, it's harder to do that immediate, which is. We haven't been spending that much time there as an investor, but there have been, I mean, if you just look at, the successful businesses, I mean, I put, Barstool in that category had something different and unique.

I mean, they had a founder who had a specific voice, but then they've also really translated that into a commerce engine a betting standpoint that worked really well. it's just building an ad supported media business, try to create an audience. You can do it, It's just, it's been harder as an investor to see where the outsize returns are going to be

 And then, did Google pull the rug out from under you? Or like, How did that go

 I mean, they changed their. So of course they have every right to do. And where that hurt us was we had a core dependency on one brand, which was really the e-health brand. We had others that were successful, livestrong.com others, but he had was very dependent on the algorithm.

And When they changed the algorithm, I mean, you have really suffered.

Hm

It was a very profitable. know, So when, on the way up as revenue was scaling, margins were expanding and we were generating a lot of cashflow, but of course, when that reverses itself it's equally as painful.

 Of course we were all up in arms at the time and Google has a lot of power as you know, they the most. The partner , there's always a lot of conflicts, I'd say just in the success that they've had.

You know, it's also one of the stocks , that I tell my daughters and tell anybody, , who is listening,

I think about companies that just have tremendous long-term potential because of , the levers that they can pull at any given time.

 Yeah. Any other lessons from demand that have directly affected your approach today at three L a that you think might be worth talking about?

yeahUh, I mean, there's so many, many

How about MNA? Cause MNA was a big part of what you were doing. Was it. Yes. And a lot about integration. which I think have helped a number of our portfolio companies. And we have one in particular that really reminds me of early days of demand media, which is company called , , which which is acquiring Amazon businesses.

And that Was a market that we got into early. and. Yeah. Ultimately, You know, if you build an M and a engine, at some point, you have to figure out how to operate those businesses.

Well, not only well, better than the founders were doing it, because ultimately value creation is a form of sustainable long-term growth. And if people are looking at acquired revenue as a metric of growth, just like when we have the Google algorithm unwell, If you're buying businesses , they stop growing organically, you create a huge anchor on your P and L and it.

will really drag you down.

and So I think, you know, in the Amazon ecosystem today, I mean, I'm seeing a couple of businesses that are acquiring at a pace that I just don't know if it's sustainable. And so we've tried to take a very measured and said, we're going to grow fast. We're going to make sure we're focused on organic.

We're going to have a couple of different levers for growth, and we're going to be very smart and thoughtful about the deals we do and the way we integrate these assets.

And so how do you counsel someone like a goji who's acquiring business? How do you counsel them on the integration part?

Well, I, you know, fortunately, you've got a founder there who bootstrapped the business with his own money. you know, he thinks about it as if it's his own money.

 In some ways, maybe the business errs on the side of being at times a little too cautious, but that's okay because we have a long-term horizon for a business like that.

So, we've seen, there are a number of companies that are sort of doing this roll up strategy. I think you were saying one problem they can run into is moving too quickly, perhaps. , what are your thoughts on the strategy overall and, what pitfalls do you see?

 Well, I think for any sort of acquisitions, you're always looking for two things. You're not only looking for. margin expansion, right? we saving? Are we cutting costs? Is there a way to make the business more efficient? Because we have a platform that allows it to run better, but are there, revenue synergies too?

And you know, back in the day, , one of the things that investors loved about demand media model was that we could acquire websites. And part of the revenue synergy was was, and you may remember this, but you know, , the whole Google rev share model, where there was a tiered set. Where, if you were at a certain scale, maybe you how you are a 50, 50 revenue partner, but if you are AOL at the time, I think you were 80 to 90%. So as you built up more scale, you are incrementally dropping revenue to the bottom line. With the Amazon ecosystem, it's not quite that linear. But are lots of areas for revenue optimization, as well as some cost savings.

And I think that's why investors have really gravitated to them.

Hm.

insane. How much capital has flowed into that business? I think we made one of the first investments which was 2018. I mean, that long ago. And there have been billions of dollars globally that have now poured into this ecosystem.

Well, I didn't really realize it was billions already going into this strategy. Let's stay in commerce for a second. And you have a lot of investments in commerce.

Do you want to talk about how you see the future of commerce playing out Well, one of the themes, we focus on some core themes within three L and local delivery. And logistics was one that we leaned into pretty early when we invested in goPuff where we let around in, I think it was our second investment in the fund in

was the valuation when you invested?

Uh, It was about a hundred and say, hi, 170, 170 million

Amazing. And it's what it's like 15 billion, I don't know.

Yeah. And that was most recent around. It was led by Blackstone

So, you know, you've got really sophisticated, smart investors now, who I think are now seeing what we saw a couple of years ago. And it kind of gets back to that consumer experience that I was talking about, which was when we met Rodney Kira in 2017, they had figured out a model where they could deliver in 30 minutes or less.

And what was really core to that model was actually owning inventory. Which now we use the term dark store, I guess, to describe , what they're doing, but it's really a reason. I mean, it was sort of caught up the world of DoorDash and Postmates and all of the other delivery businesses, but there was a fundamental difference, which we saw which got us really excited about it.

it was the fact that they controlled that user experience. And so they could deliver in 30 minutes or less, by the way, if they were stocked out of something, they could substitute or replace a product. And. It was just a far superior consumer experience than anything we had. Seen. And they, you know, they launched it originally in Philadelphia.

The other thing we loved about that company at the time was that they actually launched in New York and then pulled out of New York because they lost money early. And they weren't sure, I think if the model was going to work at the time in New York, and there's been a lot of learnings between now and then they've recently launched in New York and I think it's going to be incredibly successful.

But it was just another kind of DNA element of things that we love in companies that we back, which is founders really understood the unit economics they bootstrap the company. I think first money that was invested was their own money that they raised from selling furniture a friend's failed startup.

I think they raised 50 grand and that's how they funded it.

Wow.

So. They understood the value of what they were delivering to consumers and,, you know, ultimately it's, become this now global phenomenon. Again, there are now billions of dollars that have been invested globally into this model. And we participated as well.

By the way,, we, saw that, we have an insight earlier than others. And , we invested in a company called flashing post in Germany, which was. Uh, For a billion euros. And then we invested in Denzo, which is the goPuff of India. So We'll try to follow that theme globally.

and is the theme instant delivery or like logistics that compete with Amazon?

I think there is this infrastructure in this , part of the internet, consumer ecosystem where there's infrastructure being built and that infrastructure is local delivery infrastructure. So it really is transformed. In some cases it's transport. Existing locations fire BevMo in California, and that comes with a whole host of things that go puff can do better than BevMo was doing on its own. and I used to love them now. I mean, you know, in LA for a long time and used to love going there, but it's much better when BevMo comes to you. And so, you know, if you can control that whole experience, the math should work. One of the insights that makes the math work.

There is also you know, goPuff makes money because money on the wholesale retail spread. And then there's sort of.

advertising and marketing opportunity, which is incredibly high margin, which is really, if you look at Amazon's business, I mean, I think the Amazon's doing now $30 billion a year through their ad business.

that is incredibly.

I think I knew that Amazon was. 30 billion in their ads business, but still it's pretty incredible. Um, and so does goPuff have that same opportunity or are they already doing it? same opportunity to doing it. Um, And again, it's because they control the ecosystem.

Did goPuff were they like college students or something? I mean, you just told that story that they got 50 K selling furniture and now they're requiring BevMo.

Yes, they were recently graduated from Drexel

Wow.

They're amazing. I mean, they have hired exceptionally well, and I think continued to upgrade their team whenever they have the chance. That was one of the things that they've done extraordinarily well.

Yeah. but it's interesting to me. So other investors might not have liked it because they actually had physical inventory and everyone was going to door dash model

Correct.

, it's interesting how much, like a sort of small business model change can make a huge difference, right?

always, always the most subtle changes and for us, it was really is the consumer experience

but how much do you think that companies can iterate or do you believe that at some scale, like it's just much harder to change if your business model started one way, can you iterate into the right model? really, that's why we're all in the business of backing, growth stage companies, because we love painting against sleeping comments.

Hm.

They don't want to be sleepy and comments, but it's really hard when you have that ecosystem and that infrastructure that you've created over 10 or 15 years.

To change how you do things.

Yeah. I mean, I just also find even startups sometimes have trouble changing business models, even fast moving non-incumbents

Yeah. I think that's true. I mean, we all become wedded to our own ideas

Yeah.

I want to be right. let's talk about a couple other exciting ones. maybe I choose avant stay because it's a big LA company, which is exciting. Tell me what you saw in them and what they're doing.

Yeah. they are. And I think it's a really exciting company. Sean Bruner is a terrific operator entrepreneur. We've backed a lot of first-time founders. I

Hm

one of the things we've done pretty well. That first time founders and Sean um, we had spent a lot of time looking at the real estate sort of prop tech market in general.

And have a bit of a thesis. And again, in some ways it goes back to the demand story, but, you know, demand was, what I would call a adjacent company, Google is the platform. And so if you can invest directly in the platform, we like to think about businesses that are. Going to benefit from the platform's growth Platforms that obviously we've all witnessed the success of as Airbnb. And so we started thinking about, well, what are the businesses that are going to be built off the back of Airbnb? , and saw some early signs that there were these emerging hospitality companies, brands, hotel chains that were going to be created because they were doing something differently.

 Avant stay is, one of those And the market you can sort of look at it and bifurcated into business travel, which is there's companies like Saunder that really were early emerging leaders there. And then we looked at group and family and I have , three daughters, two in college, and I know it was always a real. to with the family. Cause you're always looking at hotels and your default is hotels. There's really no Airbnb experience. And then you're trying to find adjacent rooms you know, then those don't really work out and it's just becomes a pain in the product experiences and right.

And so what state. Identified early was group and family travel was really underserved market in hospitality. And Airbnb was enabling this new class of companies to emerge that could create a different guest experience, And so the model is it started off as being basically let's rent properties on a short-term basis, and then let's lease them out, using Airbnb as the book. And the business has grown substantially since we invest. think I'm talking out of school to say it's also north of a hundred million in revenue And if you think about what's happened PropTech around this ecosystem, With companies like Picasso and other businesses that are innovating with different offerings, avant stay as a platform can do a lot of things.

 And I think they're going to be one of the enduring hospitality brands. it's going to be a very big.

explain, like, why wouldn't I just sort of use Airbnb for this? My

Many cases. Now you go to Airbnb and you do a search for a certain property, a certain size, certain characteristics. And what you're starting to see is the listing. The professional listings done by people like avant stay, give it a little bit of an advantage, right. When you're doing it.

And so again, it's back to even the old, world, Google SEO days. And then once you do that, you deliver a great guest experience, The guests now we'll come back to you directly and they're starting to see it.

It's real solid increase in direct bookings, right? being so dependent on Google dependency, you know, people would often just go back to Google, right? but with Airbnb, the great thing about that platform we can use it as a way to generate new customer relationships.

But if we do a really good job, we maintain those customer relationships going on.

Interesting. Are there other platform or platform adjacent things like, can you keep going on this analogy? Like, are there other sort of non-obvious platforms, like we all know Amazon Shopify,

other

in some cases, you know, again, they weren't obvious a couple of years ago, Amazon, you know, this whole Amazon ecosystem roll up. This Shopify is another platform that people are looking at. Salesforce, I mean, any of these big, massive companies, there are ecosystems that are created around them.

And oftentimes what is presented in that case are. real estate sort of a different exception because of the amount of capital that you can deploy there. But oftentimes you're starting to see smaller companies that emerge that make money, the profitable, and then you can see this sort of, you know, roll up opportunity.

 Interesting. Yeah. You do think with a real, roll up sort of mindset, it seems like.

Yeah. it's the whole hammer and nail analogy, you know, it looks like a nail,

Yeah. Well, margin expansion is cost savings, right? Those are the same sorts of words, right?

That's right? Yeah.

 grow mean you? And it's great to have a company that has multiple levers for growth. I mean, obviously organic growth is the most highly valued form of growth. Let me pick a company. You can grow organically at 30 plus percent a year forever.

that's a great company.

But, you know, oftentimes if bureau starts to slow, you might want to have other tools at your disposal And that's where MNA becomes a really valuable tool.

Do you have any other good advice on M and a on, either the acquiring or the acquired side? I think the thing I would come back to is are you creating something that is ultimately a better consumer experience? A better customer experience. Doesn't have to be consumer, maybe it's an enterprise customer, but acquisition leading to something that will enhance the experience of the users.

And if it does, that's usually something we're spending time on. it's just financial engineering, it really is. Several things you should be looking at , from a finance standpoint, you know, just like you might look at, raising debt as opposed to equity. You know, there are lots of things to do to engineer, better returns for investors and founders. but I get most excited about ones where they're transformative from a customer standpoint. the goPuff BevMo example is one that I just think is a terrific. Idea,

Yeah.It's better when BevMo comes to me.

Betterman BevMo comes to you.

I love it. how about when you're investing? uh, I'm an early stage investor. How much for you is gut feel or is it like you're digging in on the financials and you want to understand, you know, how are the margins, how do they change over time?

What are you looking for?

We are equity investors. So for us, it really starts with the unit economics , and the cohorts. understanding how business is performing, how long it might take it to get to profitability, how much capital is going to require to get there. That's a huge part of what we do.

But the thing that I think we've gotten really good at. , as a team and, you know, my partner, Dave layer, who's also a legendary, but somewhat secretive LA investor. He is really good. I think that sort of focusing on the big picture, can these companies become really big companies and if you get that right, if you do that way , you're, going to generate great returns for your investors.

And so again, goPuff had a great set of economics, but it was also competing in a massive industry in the convenience store market, in the U S. And so we knew that with good execution, it could be a really big company. Avant stay, same thing could build a nice profitable business if they just stay in their lane and have one product off. But there's a lot of things that are happening in PropTech. And if you have a team that is innovative, to create a really big company, , but if you only have the idea without the unit economics, that's when I start to get a little, it starts to get a little harder for me

And what was Dave doing before this? Uh, when the two of you came together?

Well, Dave's actually his career. He's had a very successful run as a fund manager, public private investing.

But it was early internet investor. And he's also an entrepreneur. He started a company called safe and fair food company because his kids have food allergies. and he's also been advising some companies, . I think he was one of the first investors Omaze, which is another, very successful LA company that raised money recently at a great price. I think he maybe would even call himself go anywhere investor and you can find interesting ideas in different markets and geographies and product categories.

And so just a good fester.

Yeah, no, I mean, it's something I think about is how much of our investments should be sort of fairway. We like vertical SAS, or should you be investing in 3d printed rockets, right? Like.

Yeah, of course that as nice reference to relativity space, which is one of, Dave's investments which is uh,, massively successful LA company and one that just has tremendous potential, and for those of your audience who don't know, I mean, relativity is a technology company.

That's 3d printing their own rockets. And the business model is one where , they're getting paid to deliver payloads into space. And they already have, a significant amount of contracts. And I think are launching their first rocket. And again, this is all information, but I think it started scheduled for early next year. But that was one where there was another of theme or thesis that was, if you were paying attention around that company, the value of the 3d printing technology in a broader aerospace defense manufacturing landscape is incredibly valuable. , so I think Dave kind of. that. that was one of the reasons why he really leaned into that, deal. And we made a small investment, from the fondant that have subsequently increased our investment along the way.

Hmm,

That's great. A lot of good LA companies. let me stay on this diligence question though. So I think Amazon once told me something like he was writing a hundred page diligence memo or something you know, how can you stay competitive and react to what's going on in the market, which is it's hard to have the time to do all the diligence you might want.

Yeah, the pace is accelerated. What Gives us a bit of a competitive advantage and other, maybe other firms would feel the same way as because of the size of the team that we've had. And we have a team in New York and a team in Los Angeles. able to look at a lot of companies and form a point of view on sectors before we're meeting some of these companies.

And so once you know what good looks. You can make a decision relatively quickly. You still have to do at work. Right. We still do the modeling. We still do, you know, all the benchmarking and we still do the a hundred page decks. They just get done.. Parts of them are already

Hmm. yeah, I mean, is it a lot harder you know, are you seeing more competition for deals than you used to.

I mean, I've been doing this a long time, many, you know, I remember the late nineties, we were always saying there's too much capital chasing, too few deals. I mean, yes, valuations are high and things are moving very quickly, but we haven't seen this caliber. of Management matched with the size of this opportunity ever. So probably one of the best times to be investing in technology right now. We're good at what we do. We. No, what sort of a three L deal looks like?

And by the way, we think our model is pretty flexible too, because we lead most of the deals that we do, but not all. And so we can be a good syndicate member. And we've got some flexibility from a size standpoint. as you said, at the outset, we typically invest 10 million to 35. And that was one of the ideas that spawn the creation of three L, which was, there are a lot of companies who are raising or would raise 15 to 20, but because of the fund sizes, they've grown.

So large that the check size minimums for some of the top tier growth equity firms are now 50 75 plus. And so solve for what's right for the companies. And oftentimes it is a $25 million round before they do the a hundred million dollar. And they can get a little bit further you know, manage their dilution a little bit better.

 what sort of advice are you giving these companies when they're maybe raising their 5,000 million dollar round, or just when you're sitting on boards, what sort of person are you selling? What's sort of board member. Are you

 Yeah. I don't know. I'm I try to be a good listener.

. I try never to create work for mass routines. I know some people say, oh, have you thought about this? Can you give me a read on this? Or what's, you know, what's going on here? And, , I try to ask the right questions at the right time without

Hmm.

Trying to be a good sounding board to try to always be Sounds simple, but it's one of those things that just bugs me if people are late.

I think it's a good sign of respect. Okay. So you're on time and you listen.

 Yeah. And I try to just provide some perspective and I had a company that had that sort of rocket ship. And through a successful IPO. Sorry, I've done it as a founder. And there are a lot of, things that learn through that experience that will always be relevant.

So, uh, transitioning to the personal questions. Sean, who are you, um, how does your family describe you?

a really good question. How does my family,

Do you have siblings?

I have two older brothers.

 goofy one

And then my wife, of course Dierdre O'Neill so, gosh, I dunno. That's a good question. You'd have to ask them. I mean, fun , , maybe pretty even keel,

you know, not, not prone to uh, emotional swings one way or the other. I sort of have an engineering brain, I suppose.

And do you think that you've gotten more even keel from going through your own entrepreneurial experience? And it's like, well, Google didn't change their algorithm on me today.

Yeah.

I mean, it definitely, it's a lot. Good things happen that you don't expect you can pay.

You could be like, oh shit, what am I do now? Or you can say, okay, let me just, let me take a minute to internalize what just happened here. And now let's just focus our energy on what we're going to do about it.

 Um, okay. One more person. When you were a linebacker at Princeton where you not playing for.

Yes.

Yes.

I've been really enjoying asking people what's going on in your head when you're playing competitive sports.

Uh, the great thing about playing competitive sports is that's all it's going through your head.

Yeah.

it's environment now, especially with the pandemic and from home is there's so many distractions and it's really hard to focus. And the thing I love about playing sports.

 is that.

Laser-focused on that task. So I try to get into that mindset too, when I'm working. And sometimes I do, and I'm really, I can feel like I'm really in the zone, but Yeah.

playing sports is just a great way to you're only focused on the task in front of you.

Sean. Congratulations on all that. You've built. Thank you so much for coming on the podcast today.

Thanks for having. It was really fun.