Levels and Awesome People Ventures

In this episode of Founders and Funding, host Alex Norman interviews Levels CEO Sam Corcos and investor Julia of Awesome People Ventures as part of his podcast’s ongoing goal to demystify the fundraising process. Sam explains the perks of being a veteran founder, the importance of getting in front of investors early on, and why honesty is always the best policy.

How Levels can help solve decades of misinformation

When Sam started testing Levels himself, he realized the true problem isn’t ignorance about diet, it’s the need to overcome misinformation.

I was looking at healthcare, trying to understand what was causing a lot of these problems, I had a conversation with Josh who is somebody that I kept up with pretty regularly. He was working on a project related to glucose monitoring from a personal experience that he had had. We spent some time thinking about his idea. I wasn’t thinking about it as a company at the time. I used it myself and realized how wrong a lot of the choices that I was making were for my health. My standard breakfast of oatmeal and orange juice turns out to be, it was the source of a lot of my lifestyle problems. My mid-day energy crash was really just caused by my breakfast. And my whole life I thought oatmeal and orange juice was the healthy thing. And it turns out it’s just loaded with sugar. And when I started working on this, I thought that the problem we were solving was ignorance. And I’m increasingly convinced that we’re actually solving many decades of intentional misinformation. That makes it a much harder problem to solve, but this is the first time – using biowearables – it’s really the first time that you can now know how the food you eat affects you.

The perks of being a 4x founder

Levels is not Sam’s first rodeo. Perhaps the most helpful headstart he had was the network of friends and investors that he’s built up over time.

The benefit of being a fourth-time founder, who has a lot of friends who are investors is it was not very hard to raise our initial capital. We raised about a million in our first couple months and it was really just an email of me asking all my friends who were angel investors. And then that went pretty easily. And then the team was pretty small at that time. I think it was maybe six people. We had five co-founders and I think we brought on one, maybe two other people at that time. The nice thing is that basically everyone on team is technical. So, there was not a lot of overhead of hiring engineers and managing all of us.

Pitch your idea now, not later

Getting in front of investors can be nerve-wracking, but the feedback they can provide on your V1 idea can save you months of false starts.

I have a friend who started a company in the insurance space and he had this grand idea and he spent a year working on the pitch before he was finally ready to go to investors and have the confidence. And on his very first pitch, the investor stopped him halfway through and said, all right, well, what’s your distribution? Oh, I’ve got that slide right here, distribution. He’s like, this is a terrible idea. These are all the reasons why this is not going to work. What you should be doing is this, here are the five companies that tried this strategy and failed, and he’s taking notes furiously. And he’s like, I should’ve just done that on day one. That would have saved me a lot of time to just get that perspective.

Engage investors often

There’s no such thing as a “quota” of investor time that you can use up. If you’re smart about what you ask, you can engage investors consistently.

The biggest thing that’s just an incorrect assumption is that a lot of founders, they feel like you only get a certain number of chips. I don’t want to use my chip with this investor to ask for this thing. I think that is exactly the opposite of what actually happens. It’s more like if you make active use of your investors and you’re not being annoying, but you engage them in a way where they can add value. You actually get more chips. So, just being very specific about your ask. I tend to think about investor asks in such a way that I try to frame it so that it takes less than five minutes, ideally less than a minute for them to execute upon. And so I will go through my list of people who have invested and I will look at each one and think about something that we need. I keep a list of asks of things that we need in the company, just as a snippet. And I’ll go through and say, oh, you know what? Julia might be able to help with this problem. And I’ll send her a very specific request of like, Julia, can you introduce me to two people within the healthcare technology space who you think can give us some information on managing health data, because I’m pretty sure Julia knows at least two people who can do that.

Invest in the hiring process

Many teams don’t put the time and effort into hiring that it deserves.

One of the things that’s generally underappreciated is how much time it takes to find really good people. I advise a couple of startups who are just run by friends of mine, mostly informally, but some of them insist on giving me equity anyway. So, I guess I’m a formal advisor, but one of the things that I found is pretty consistent is that Sequoia actually published something on this, not too long ago, that their best companies for each hire, they make, they spend an average of 90 hours of company time, for every single hire that they make. And when I talked to a lot of these first-time founders who are looking for technical talent or looking for people on the team, they are usually willing to commit like three hours to finding that person. And it feels like a lot. And it’s emotionally taxing to put yourself out there and get rejected all the time by people. So, people tend to mentally inflate how much time is actually being spent on hiring and recruiting. But I think the answer is you just have to put in a lot more work.

Putting value on an idea is difficult

The earlier your company is, the harder it is to accept term sheets and know your value.

Something I spent a lot of time thinking about during my year off is basically fundraising from first principles and understanding the information asymmetry between investors and founders. One of the biggest aspects of information asymmetry is around price discovery. And when you’re a founder, you get a term sheet it’s like, we’ll put in X amount of dollars at Y valuation. And you’re like, I don’t know, is that reasonable? And if you only have one or two term sheets, your sample size is very, very small in terms of being able to know what’s reasonable and what’s not. And a lot of these prices are really quite arbitrary in the very early stage. Once you get into the later stage, you’re looking at multiples of revenue or you’re looking at some metrics. You’re looking at churn. You have some better sense of it, but when you’re early, early, you’re basically just selling the team and the idea. And so what is that worth? It’s a very, very hard thing to discover.

Market dynamics determine price

When you are well informed about your market and what it’s telling you, you can negotiate with investors more confidently.

A number of funds came with term sheets that were below our latest safe. And I could confidently say, I’m highly confident that you’re underpricing this company because I already have offers. I already have raised more than this amount of money at higher than this valuation. So, I’m highly confident that you were undervaluing this company and having that data and being able to show them, because it really is just a market dynamic that determines price. So, being able to show that the market is actually saying something different than what you were saying. It gives a lot of leverage in that discussion.

The regulatory environment is a different ballgame

Levels is purposefully in the realm of a general wellness product, versus a software medical device, due to the regulatory requirements.

The regulatory environment doesn’t affect us that much, because we’re a general wellness product, which we’re very intentionally staying within. I’ve talked to a number of other people who started digital health companies. And once you cross that threshold into a regulated product, like a software as a medical device, it adds a lot of complexity. We will probably end up there at some point, but I want to make sure our goal as a company is to maximize development velocity. That’s just the way that I think about company building. If I had a north star for company building, it is how do you maximize development philosophy? And so adding a regulatory layer really does not help that.

The benefit of a waitlist

Scaling in a controlled way allows Levels to set up their business model in the right way before they increase the number of active users.

I want to make sure that we’re growing in a way that’s much more intentional, to make sure that we’re growing in such a way that we have enough engineering capacity put towards member experience and feature and product iteration that we can continue to improve the product over time. I would also say that it’s similar for the sort of scaling considerations where you do have to scale proactively, but you don’t want to put too many resources in scaling too early. And so being able to control it through a wait-list gives you a lot of leverage in terms of how you can do that and making sure that you’ve explored the entire surface area. If you go to market too early with a very big number of customers, once you’re the size that we are, we can make fundamental changes to our business model and maybe upset some people and it doesn’t make any difference. And that’s okay. You just have to be able to take that risk. Once we’re at 100,000 active users, you basically you’ve made your bed. You can’t change it now. So, making sure that we understand fundamentally what it is we’re doing before, we really go big as important.

Be transparent with investors

When you are honest and up front about your plans for the company, you will attract the right investor set that will support you in your goals.

One of the other aspects is just being really transparent with your investors. One of the conversations that I had early on with the people that we had on our short list to actually raise our seed round is I told them pretty explicitly if we do clinical trials, if we find out that what we’re doing is not efficacious, I’m going to shut down the company. There’s a fiduciary responsibility to make money, but I will certainly do my best to do that. But if it turns out we’re not actually helping people, I’m going to shut down the company or find some other way to solve that problem. And a lot of investors, they balked at that and they kind of self-selected out of the process and that’s great. That was the whole point. Other ones really understood that.

Alex Norman: Thank you for joining us this Friday for our Founders and Funding. If we haven’t met before I’m Alex Norman, I’m the co-founder of TechTO. I’m an operator with two exits. Did a bit of professional services, and I’m an active investor as the head of Canada for AngelList and a partner for N49P. Thank you for joining us at Founders and Funding. We host this to demystify the fundraising process and the relationship between investors and founders. We get to the unvarnished truth by getting guests from both sides of a deal to talk about the relationship, how they knew each other in the background. Today I’m super excited to feature Sam, the co-founder and CEO of Levels and Julia, the founder of Awesome People Ventures. Before we welcome to the stage, I’d like to tell you a some rules of engagement. First, if you haven’t found it yet, on a side of the screen, there’s a chat and a Q&A bar.

Alex Norman: You can put basically questions in the Q&A section, and we’ll try to weave into this conversation. Secondly, there’s an emoji, [inaudible 00:00:55], where you can choose to react to the conversation and provide some feedback without providing some written words. And finally, you can stay after the main event to network with the community. We’ll get into that a bit more after the fireside chat. And if you enjoy what you’re hearing, please share some of the tips and quotes on social media using the hashtag TechTO. Now let’s get started. We’d love to have Julia and Sam come to the stage, please. Hey, Julia. Hey, Sam. Thanks for your patience. We’re using a new technology. So, sometimes we have some technical difficulties, but we’re up on stage now. I’d love Julia, just to start with you. Could you just give us sort of a bit of a background on how you – give us a five-minute overview or two-minute overview of how you started Awesome People Ventures.

Julia Lipton: Yeah, sure. So, before I started Awesome People Ventures, I used to run growth and revenue teams, and I realized through that process, my favorite thing about running that org was actually my relationship with the founders. And it wasn’t that I fundamentally loved user acquisition or retention or cohort analysis or building teams. It was none of this stuff. It was actually just helping founders make their dreams a reality. And so after I realized that I started doing more advising and advising led to angel investing and eventually angel investing led into the fund, which is now Awesome People Ventures.

Alex Norman: Cool. And I’ll want to know a bit more about Awesome People Ventures in the minute. But before that, Sam, you’re a serial entrepreneur, like to hear a bit about your path before Levels. I feel like I spent all day on that, but let’s just a high-level synopses and maybe we’ll poke at it a little bit later.

Sam Corcos: Yes, sir. I’ve been a software developer for most of my career or leading engineering teams. I’ve been technical co-founder most other companies I was involved with. My last company CarDash was a YC company in automotive repair, but really software. All of the projects that I worked on, it often confuses people because they seem like they’re so disconnected. But on the software side, they’re all basically the same project. So, learning from customers, building interfaces, scaling back ends, it’s all basically the same project.

Alex Norman: Can’t you say all startups within the same project?

Sam Corcos: Yeah, in many ways.

Alex Norman: So, I love it. You have a framework about customer development, getting the feedback and scaling up. I’m sure we’ll get into that a bit in Levels. So, Julia, love to hear about your thesis behind Awesome People Ventures. I also know you have Awesome People Lists. So, it seems like you liked like working with founders, you like surrounding yourself. What is your approach to finding companies and talk a bit about your thesis that you’re investing in?

Julia Lipton: I think it’s changed a lot over time. So, before Awesome People Ventures I did a nutrition coaching startup called Rise. And that was acquired by One Medical where I launched, ran their telemedicine practice. And so that’s one of the reasons why Sam and I got connected, because all my friends know that anything in the nutrition diet, food space I want to hear about. But in terms of the thesis, I really believe we’re still at the dark ages of healthcare. If you look just on a timeline, it wasn’t a little over a 100 years ago, we were using leaches as a best practice in hospitals. And so we still have so far to go. Even if you look at the Moderna vaccine and like that is a huge, huge milestone in healthcare and the next 1, 2, 5, 10 years, I think we’re going to see the entire system change.

Julia Lipton: And so I’m really, really passionate about this evolution of healthcare and healthcare expanding beyond the traditional Western medicine system, because I think a lot of the innovations happen slightly outside of that with Levels being one example. So, health and wellness is one huge area that I’m passionate about and informs that investment thesis. I also started Digital Nomading and kind of blazing my own trail and doing like a very different lifestyle design starting about four years ago. And so that led me to be a really, really early believer in remote work, the creator economy solopreneurship. And so that’s also what I invest against. And so you can think about my thesis as really just a reflection of the things that I’m personally interested in. And then I get to spend time learning about those things and meeting with the best people working on solving those problems.

Alex Norman: That’s exciting. If you’re passionate about it, I’m sure you bring the passion to your founders. And when do you invest, how early?

Julia Lipton: It really depends. So, I’ve done some pre-seed pre-product pre-revenue idea all the way up to, we did an anti-aging drug discovery company at series B. And so we’re increasingly between the fund and the ever-growing syndicate doing all stages. The core fund is just pre-seed and seed and the syndicate starting to write larger follow on cheques. And even for new companies that we meet later on.

Alex Norman: Great. And to sort of jumped a Sam. So, Sam, you talked about how all your companies are similar, but between CarDash and Levels, you took a year off. Did that contribute to you starting Levels and what was the Genesis behind idea of Levels?

Sam Corcos: Yeah, in fact, funny similarly to Julia, I spent a lot of time, I guess, as what’s called as a Digital Nomad. I’ve been working remotely since at least 2013, and Levels was actually started fully remote, which at the time, which was pre COVID was pretty controversial. And a lot of funds explicitly passed on us, because we were remote, which is kind of ironic in retrospect, but it was largely just informed by my own experience as a software developer, being remote, having more control over your schedule, being asynchronous really leads to a lot more productivity. It was during the course of my year off. I spent a lot of time thinking about what it is that I actually cared about. It was interesting time of reflection, where I had this recognition that I was spending the overwhelming majority of my time working on things that I kind of stumbled into.

Sam Corcos: And I’d probably spent cumulatively 10 hours of my life thinking about what I actually want to do, which is just like this massive disparity in terms of how my time was spent. And so I took a year off to think about that. I actually spent the first three months deeply studying theology, which was a whole nother conversation we can have. I spent several months studying network theory, just a lot of different topics that I was interested in. And I came up with a list of a number of things. I narrowed it down to five things that I knew that I wanted to positively impact in some way. I noticed that a lot of them had a theme, which was, I worry a lot about systems that are effectively, as an outcome, lead to caste systems where education being one of them. You get put on the failure track or the success track.

Sam Corcos: And it’s very hard to get out of it. The criminal justice system was another one where the recidivism rate in the US, which is the rate at which somebody who is released from prison ends up back in prison within three to five years, depending on the definition is, it’s atrociously high in the US. By some estimates it’s 60 to 70%. Basically, if you end up in prison, you will probably spend the rest of your life in and out of prison. Also, your children are more likely than not to go to prison. So, it’s really like a multi-generational punishment of criminal justice. So, I found a lot of these topics that I spent a lot of time thinking about. And one of them is also healthcare, where it’s a system where the treatment is incredibly unevenly distributed for not very good reasons. It’s also getting worse. It’s getting more expensive and the quality is going down. And there probably are not good reasons for that. So, I spent a lot of time thinking about how to solve that.

Alex Norman: And then, so how’d you go from there? So, you had a bunch of different ideas and a bunch of different interests, and then going to Levels, which tackles, it’s what I call proactive … It’s almost like the quantified self. So, what was the leap from the thoughts into the Genesis, to the idea for Levels?

Sam Corcos: Yeah, I was really, during that year, I was searching for leverage points on these types of problems. Like in criminal justice, it seemed like the only solution is legislation, which is an incredibly blunt and difficult instrument. And it would take a very, very long time to make any progress. And even then it’s debatable whether you’d be able to make progress. When I was looking at healthcare, trying to understand what was causing a lot of these problems, I had a conversation with Josh who is somebody that I kept up with pretty regularly. He was working on a project related to glucose monitoring from a personal experience that he had had. We spent some time thinking about his idea. I wasn’t thinking about it as a company at the time. I used it myself and realized how wrong a lot of the choices that I was making were for my health. My standard breakfast of oatmeal and orange juice turns out to be, it was the source of a lot of my lifestyle problems.

Sam Corcos: My mid-day energy crash was really just caused by my breakfast. And my whole life I thought oatmeal and orange juice was the healthy thing. And it turns out it’s just loaded with sugar. And when I started working on this, I thought that the problem we were solving was ignorance. And I’m increasingly convinced that we’re actually solving many decades of intentional misinformation. That makes it a much harder problem to solve, but this is the first time – using biowearables – it’s really the first time that you can now know how the food you eat affects you. And when I realized that that was a leverage point in giving people the ability to have transparency into their choices, that was when I realized that this might actually be giving people agency over their choices and that this might be a leverage point to solving one of these problems.

Alex Norman: Interesting. And then Julia, you mentioned friends or contacts put you in touch. So, how early on this journey was it? And what’d you think of when you met Sam?

Julia Lipton: I met Sam. I don’t remember exactly when it was, but it was six months before I invested. I know that. And it was very, very, very early, like they were shipping, and this was true for quite some time, they were shipping Abbott devices to people and there wasn’t a lot. And so as far as I was concerned, they’d built a doctor prescription network to just ship Abbott devices directly to consumers, because you need a prescription to get one. So, I met them then, and one of the big points of pushback that I had that I kept telling Sam is I wasn’t sure, I’m obsessed with companies with like the company has to own the magic moment. And so when you scan, you were seeing the reader in the Abbott app. And so I wasn’t convinced at the time that you could build a brand around glucose monitoring for consumers that own the magic moment.

Julia Lipton: And so Sam did an incredible job. There was no brand, there was new branding people on this team. I had no reason to believe that they could build a consumer brand in Sam just month after month did exactly what he said he was going to do and ended up hiring an excellent branding agency, built the incredible brand that you see today, ended up hiring more engineers, shipping an app, proving that they could add meaningful value in their app beyond the core Abbott product. And really start to build the foundation of a bio data insights platform. And so after about six months of just seeing him crush it, I was like, okay, sign me up.

Alex Norman: Awesome. I actually want to take a step back. Because I realized most everyone here is basically in Canada. I don’t think Levels’ available. You have employees in Canada, but I don’t think Levels’ available here. So, for people that don’t know, let’s explain what actually Levels is.

Sam Corcos: Yeah, sure. Yeah, we’re not available in Canada yet. We’re working on it. There’s really no specific reason why we can’t. It’s more like regulatory and logistics there. Man, I’ve never worked in healthcare before. Julia can probably relate to some of the stuff, but I really underestimated how complicated a lot of these laws are when you go international. There are countries where any health data for their citizens, you have to air gap their data and create separate databases and an entirely separate company just to service them. Even though at the end of the day, it’s basically exactly the same thing. But anyway.

Alex Norman: For people that don’t know, explain what Levels is.

Sam Corcos: Yeah, Levels, we use bio wearables to … It’s really the next generation of wearables. So, where you’re able to measure molecular concentration in your body in real time and show you how your choices affect you. We’re really focused on diet and nutrition, because that’s really the best leverage point. And we’re starting with glucose monitors, which are currently off the shelf available products for, they have historically been used for diabetes management. And this is for using the same type of tools, but for proactive health.

Alex Norman: And then, so you met Julia six months before she invested you. It sounds like you were just shipping it. You’re constantly proving saying you’re doing what you’re going to say you do. So, first question, did you have any capital at that point? Because I imagine it seems like Julia was a pretty early investor. So, how’d you afford to hire a team? How’d you go about knowing what to do, especially when like the core hardware product wasn’t yours?

Sam Corcos: Yeah. I mean the benefit of being a fourth time founder, who has a lot of friends who are investors is it was not very hard to raise our initial capital. We raised about a million in our first couple months and it was really just an email of me asking all my friends who were angel investors. And then that went pretty easily. And then the team was pretty small at that time. I think it was maybe six people. We had five co-founders and I think we brought on one, maybe two other people at that time. The nice thing is that basically everyone on team is technical. So, there was not a lot of overhead of hiring engineers and managing all of us.

Sam Corcos: There were, I’m actually in the process of writing a blog post, as Julia knows. I religiously keep track of my time. And I know how I spent basically every 15-minute increment for the first two years of Levels. So, I’ll be publishing something on that soon, but there were three very distinct moments when I was doing a lot of the engineering. And the having people who can contribute on basically every aspect of the company has been super, super helpful.

Alex Norman: So, quick question, you raised a million dollars and you’re a YC alum. And especially once you’re outside the valley, there’s a lot of mystification of YC. So, first of all, why didn’t you guys just go back into YC and how did you decide who to take cheques. And tell us a bit about that. And then also why you … first that, then I have a couple of questions related to that.

Sam Corcos: Yeah. I mean, we decided not to go through Y Combinator. The value of Y Combinator is sort of like the network and once you’ve already been through it, you already have access to it. And I don’t think we would’ve gotten as much marginal benefit. If it was effectively costless then sure. But they take a pretty significant chunk of the company for very little capital. So, if you can do it otherwise, and you already have all of the benefits, then we decided not to do it. What was the other question?

Alex Norman: Sorry, I didn’t give it to you. I was holding it back. So, you raise this million dollars and then people like Julia come around but you build a relationship. So, how do you decide who to invest time with? And especially if they were writing a cheque, because that sounds like you’re very guarded with your time if you’re measuring every 15 minutes. So, imagine that Julia, other potential investors, how do you look about building that relationship? How do you choose where to invest time? What was important to you?

Sam Corcos: Yeah. I mean, one of the big things is I thought a lot about people who have perspectives that I did not have. This is a word of advice I gave to my friend, Josh Steinman who’s now starting a cybersecurity company is talk to angels and investors early and often, because especially those who understand the space. And Julia was one of the people who’s been in the space for long enough to really know what a lot of the problems we will probably run into. I have a friend who started a company in the insurance space and he had this grand idea and he spent a year working on the pitch before he was finally ready to go to investors and have the confidence. And on his very first pitch, the investor stopped him halfway through and said, all right, well, what’s your distribution?

Sam Corcos: Oh, I’ve got that slide right here, distribution. He’s like, this is a terrible idea. These are all the reasons why this is not going to work. What you should be doing is this, here are the five companies that tried this strategy and failed, and he’s taking notes furiously. And he’s like, I should’ve just done that on day one. That would have saved me a lot of time to just get that perspective. So, Julia had a lot of really good feedback on all of the things that are potential failure modes.

Sam Corcos: And I took a lot of notes from those calls. Similarly, a lot of the other people who I talked to were people that just had a lot of perspective and could add a lot of value to that. I also think of it. This is sort of downstream of the time I spent studying network theory, thinking about network access. The finding people who give us access to what are called disparate networks, where like having one entry point in pro sports is very different than having zero, having one entry point in apparel. You never know when you’re going to need that person. And they might know somebody else who knows somebody. So, just thinking about networks in terms of how you get access to new networks was something that I thought a lot about. I could spend the next hour talking about network theory, if you want.

Alex Norman: I might call you back because I think everyone reads about it, they don’t understand it, especially with there’s a network of access. I love what you’re saying about having that one person that goes going from zero to one is huge. So, Julia, flipping it back to you. In the six months you talked about, at the beginning, you were worried about that magic moment. So, did they actually impress that or there just the execution of shipping it, was that what impressed you? So, what got you comfortable here?

Julia Lipton: Yeah. I mean, I think a lot of it was just execution. Sometimes you meet these teams that you’re like, there’s something different about this team. Mike Maples sometimes call some like radioactive dinosaurs or no radioactive thunder lizards. Sorry, Mike, if you’re watching this. And it’s like, you’re watching these eggs, this is just not normal. And if you think about the sort of team that goes on to create a billion dollar company, there’s something internally that’s magical about that organization and the people running it.

Julia Lipton: And so I think a lot of it was just being like this team is next level. And then just very few founders can set a goal and consistently deliver against that goal, especially when they have no idea how they’re going to get from point A to point B. But Sam consistently would be like, I’m going to go figure it out and he’d go figure it out. And so there was that. Do I think the magic moment? I mean, to be honest, I think we can always make all the products more magical, but I did start to develop more conviction that the app itself would be meaningfully more valuable than just the Abbott app.

Alex Norman: Interesting. And from sense, it seems like again, Sam says, okay, explain how he looks at potential investors, potential network effects. Were you consciously helping values or network you brought to the table? How do you think about investing in the relationship before something happens?

Speaker 4: [inaudible 00:21:59] need a place to download Discord.

Julia Lipton: So sweet.

Alex Norman: Sorry. Yeah, my son just said, he’s downloading Discord on my phone.

Julia Lipton: Oh, heck yes. I want to know what apps and games your son is playing with.

Alex Norman: I’ll send you a follow up message.

Julia Lipton: Hottest chips. Was I consciously trying to add that? I mean, it’s interesting because in most of the companies that I get involved with, and this is like a perfect case, I’m not actively like, shit I need to earn 10 points of value. It’s like, no, I honest to God want this thing to work. And if there’s any way that I can help make it work more than down. So, if it’s sharing any info I have or making any intros, whether that’s angel investors or part-time talent, whatever it might be, it’s not super prescriptive.

Julia Lipton: Probably a argument to be made for I should be doing a better job with like tracking, understanding how value creation stacks up. And I think that’s something operationally we’re going to get a lot better at [crosstalk 00:23:06] transition the Awesome People model to some creative value creation, distribution stuff within the community. So, we’re going to have to develop that capability ASAP anyway, but it wasn’t super intentional as much as like this was a team I really liked, a space I really liked. If there was any way that I could help, regardless of investing, I was super down.

Alex Norman: So, first of all, I want to get back to what this value creating going forward, because that sounds pretty interesting. We can get back to that later. Second of all, it sounds like what I’m seeing here is you’re excited about what you’re solving. You’re excited about the people you’re working. You’re just going to naturally spend time and add value is what I’m hearing.

Julia Lipton: Yeah.

Alex Norman: Cool.

Sam Corcos: We also asked a lot of Julia and pretty much all of our investors are pretty aggressive about asking for things.

Alex Norman: So, give us an example of the ask. Because I think a lot of first year, again, you’re a fourth time founder, you went to YC. I think lots of first time founders are kind of shy and they don’t know what to ask. So, give us an example of how you, for lack of better word, leverage your investors.

Sam Corcos: Yeah. I think the biggest thing that’s just an incorrect assumption is that a lot of founders, they feel like you only get a certain number of chips. I don’t want to use my chip with this investor to ask for this thing. I think that is exactly the opposite of what actually happens. It’s more like if you make active use of your investors and you’re not being annoying, but you engage them in a way where they can add value. You actually get more chips. So, just being very specific about your ask. I tend to think about investor asks in such a way that I try to frame it so that it takes less than five minutes, ideally less than a minute for them to execute upon. And so I will go through my list of people who have invested and I will look at each one and think about something that we need.

Sam Corcos: I keep a list of asks of things that we need in the company, just as a snippet. And I’ll go through and say, oh, you know what? Julia might be able to help with this problem. And I’ll send her a very specific request of like, Julia, can you introduce me to two people within the healthcare technology space who you think can give us some information on managing health data, because I’m pretty sure Julia knows at least two people who can do that. And for her, she probably knows these people off the top of her head and she’ll just make the intro immediately. And that was one specific ask that I had for a number of our investors. And we ended up talking to about 10 people and it was tremendously helpful in thinking through how to manage health data. It’s very different than ways in which you have to manage other types of data.

Sam Corcos: So, just being very specific and concise. You have to think about it. It’s much like building a product. You have to think about it from the perspective of the person who is consuming it. How do you make it really easy for them to execute on it? If you give them a big wall of text with a whole bunch of things, they’re probably just going to get frustrated and probably not respond. If you make it really easy for them to help you, they generally will want to.

Alex Norman: I love that, targeted, specific and time boxed. So, it’s not like, hey, what do you think of healthcare financing right now? I love that. And it sounds very … actually I’m going to steal it and share it with all Founders. It’s some of the best advice I’ve ever heard. Before I get to my next question. We have a question from the audience. Erica is it’s asking, she’s an ed tech founder. She comes back from an ed tech space. She wants to go raise angel investing in September. It sounds like she needs a CTO and someone with technical skills to join her team. So, I guess her ask is how do you find the right CTO? I don’t know if you have any advice here, being from a technical background.

Sam Corcos: [inaudible 00:27:03].

Alex Norman: Yeah.

Sam Corcos: Yeah. I mean, I’ve historically been that person.

Alex Norman: The health people found you or convinced you to join them.

Sam Corcos: I mean, it was mostly through talking to people. I think one of the things that’s generally underappreciated is how much time it takes to find really good people. I advise a couple of startups who are just run by friends of mine, mostly informally, but some of them insist on giving me equity anyway. So, I guess I’m a formal advisor, but one of the things that I found is pretty consistent is that Sequoia actually published something on this, not too long ago, that their best companies for each hire, they make, they spend an average of 90 hours of company time, for every single hire that they make. And when I talked to a lot of these first-time founders who are looking for technical talent or looking for people on the team, they are usually willing to commit like three hours to finding that person.

Sam Corcos: And it feels like a lot. And it’s emotionally taxing to put yourself out there and get rejected all the time by people. So, people tend to mentally inflate how much time is actually being spent on hiring and recruiting. But I think the answer is you just have to put in a lot more work, like ask friends for introductions to people. People who aren’t even necessarily looking. But it’s also a network question, which is like engineers tend to know other engineers. And so talk to people that you know, who are engineers. Ask for introductions to other engineers. And it’s like, look, I’m not really, whether they’re looking for a job or not. I don’t really care. I just want to talk to people about my idea and see if I can get one step closer to finding the right person. It’s a tremendous effort.

Sam Corcos: We have five co-founders at Levels and these are, I’ve known David for six, seven years before starting the company. I knew Josh for at least three or four years before starting the company. These are relationships that I invested a tremendous amount of time in. I didn’t expect that it would become something that started a company, but oftentimes you have to spend many, many tens of hours to find a single person and it can be draining to do that, but that’s the only way to do it.

Alex Norman: Yeah, no shortcuts. Julia, so now let’s get fast forward. You guys met six months later, Julia decides to invest, was around coming together. How did that happen? And how did you make sure that both you, Julia participated and basically that round came together?

Julia Lipton: So, Sam at the time was famously stacking safes. So, there was no formal [inaudible 00:29:53].

Alex Norman: Did you approve that or just I love to hear both invest, actually let’s talk about stacking safes and then I want to hear about how you complete the answer, but what’s it positive and negative of stacking safes. I’d love to hear both from the founder and the investor side.

Sam Corcos: Yeah, go ahead, Julia.

Julia Lipton: Go for it.

Sam Corcos: I mean, the positive from the company perspective is the biggest thing I thought a lot about, this is actually something I spent a lot of time thinking about during my year off is basically fundraising from first principles and understanding the information asymmetry between investors and founders. One of the biggest aspects of information asymmetry is around price discovery. And when you’re a founder, you get a term sheet it’s like, we’ll put in X amount of dollars at Y valuation. And you’re like, I don’t know, is that reasonable? And if you only have one or two term sheets, your sample size is very, very small in terms of being able to know what’s reasonable and what’s not. And a lot of these prices are really quite arbitrary in the very early stage. Once you get into the later stage, you’re looking at multiples of revenue or you’re looking at some metrics. You’re looking at churn. You have some better sense of it, but when you’re early, early, you’re basically just selling the team and the idea.

Sam Corcos: And so what is that worth? It’s a very, very hard thing to discover. So, stacking safes is it’s not something that I would necessarily recommend to everybody, but as a mechanism for price discovery it’s quite helpful, which is we have a dilution goal for every target. So, a 10% dilution goal at a $10 million valuation, then another 5% at 12 million. And we would try to get people to invest on that valuation. And we worked our way up until I think 25 or 30, I think it was 30. And then we tried it at 50 and nobody invested at 50. I was like, okay, it’s probably somewhere between 30 and 50 is probably the number.

Sam Corcos: And that was really helpful in negotiations for our price round, for our seed, where I could very confidently come into the conversation, a number of funds came with term sheets that were below our latest safe. And I could confidently say, I’m highly confident that you’re underpricing this company because I already have offers. I already have raised more than this amount of money at higher than this valuation. So, I’m highly confident that you were undervaluing this company and having that data and being able to show them, because it really is just a market dynamic that determines price. So, being able to show that the market is actually saying something different than what you were saying. It gives a lot of leverage in that discussion.

Alex Norman: Julia, the investor perspective here.

Julia Lipton: I mean, Sam executed it brilliantly. A lot of founders get themselves into trouble because they don’t realize how much dilution they’re taking. So, at one point, this was after I invested and I realized that they were continuing to stack safes. I think I emailed Sam and was like, Hey Sam, I’m a little worried about your dilution. What’s your plan here? And he sent me back the spreadsheet and this doc with the plan.

Julia Lipton: And so I think founders, as long as they really understand what they’re doing, it can be really valuable for all the reasons Sam just described. I think there’s other advantages as well, which include bringing in more angels more frequently, as opposed to it being a big to-do every time you go out fundraising. If you meet someone who wants to invest and wants to participate today, you have the flexibility to loop them into the company and then add them to your list of people who you can ping every week. And so I think there are a lot of advantages to it. You just have to be really, really disciplined to make sure that you aren’t taking on too much dilution, both for yourself as a team, but also leaving enough space. So, when you do want a lead, they can hit their ownership targets as well.

Alex Norman: And so now going back to your story, so he was stacking safes. And so you just turn around after six months and say, okay, I’m in?

Julia Lipton: Basically. [crosstalk 00:33:58] at the time. Because I remember, I think that’s about what happened. And then I remember pinging a16z and being like, I think you guys should do this deal. And this was when I was out like a 12 and we don’t think so. And then they did it a year later.

Alex Norman: And so did you facilitate that introduction? Because I know you have a couple of a16z partners on your SLPs.

Julia Lipton: We do. I don’t know who ultimately facilitated that introduction. I definitely pinged them about it multiple times. I don’t know who was the first. [crosstalk 00:34:35]. Right, because you had him as an angel originally.

Sam Corcos: I think it was Ale Resnik was the one who put us in touch with Jeff specifically, but we had a whole strategy around getting like every possible partner at Andreessen aware of us so that by the time it came around, they knew who we were.

Alex Norman: They had no choice.

Sam Corcos: Exactly.

Alex Norman: And how did your relationship change after investment? Sounds like you had a pretty good between you and Julia or between the two of you. It sounds like you already were talking frequently. Julia was helping you out. You were pinging her anyway. So, did anything change other than you now had an economic stake in this?

Sam Corcos: I don’t think so. Not really.

Alex Norman: Interesting. And how’s it, I got fast forward, so a16z leads, I guess it was the seed round or A round. I never know any more what round anything is.

Sam Corcos: [crosstalk 00:35:24] is a seed round, so there’s no board seed.

Alex Norman: So, the seed round, how’s your relationship changed with the non lead investors like Julia or other angels around the table?

Sam Corcos: It doesn’t change very much. I think it’s more like we were at a stage in the company where things were less. I don’t know if desperate is the right word, but there were fewer things that we need on a weekly basis. So, I still asked for things pretty regularly, but they’re much more specific. The surface area of what is needed is better understood. And we have a really strong team that can solve a lot of the problems. I think there were certainly times in the company where nobody knew how to do anything.

Sam Corcos: So, it was like, Casey, my co-founder, she was a surgeon before starting this company. She’s a doctor from Stanford. And now she’s running content and SEO. So, it’s like, how do we do that? And then we have to ask people and we have to learn as much as we can. Josh was the lead life support systems engineer at Space X, and now he’s doing podcasts and running operations. It’s like, okay, how do we do those things? So, now that we have people who are specific in most of these roles, it’s a little bit less, we’re leaning less heavily on the investors than we have before, but we still make regular requests from them.

Alex Norman: Yeah. That’s awesome. And I like navigate … I have a few questions about your business I’d like to get into. So, one is you are dealing with health tech, you’re dealing with devices and software. And I’ve noticed you’ve got a wait-list. So, when I look at it from that side, I wonder is the wait-list driven for customer development, is it basically because you have to worry about regulatory implications of what you’re doing. So, two questions, how’s the regulatory framework impact what you can and can’t do. And then two, why this, I guess, called the superhuman wait-list approach?

Sam Corcos: Yeah. The regulatory environment doesn’t affect us that much, because we’re a general wellness product, which we’re very intentionally staying within. I’ve talked to a number of other people who started digital health companies. And once you cross that threshold into a regulated product, like a software as a medical device, it adds a lot of complexity. We will probably end up there at some point, but I want to make sure our goal as a company is to maximize development velocity. That’s just the way that I think about company building. If I had a north star for company building, it is how do you maximize development philosophy? And so adding a regulatory layer really does not help that.

Alex Norman: Doesn’t speed things up?

Sam Corcos: No, not in the least. So, the regulatory stuff is not that complicated. You just have to know what the boundaries are. The digital health group of FDA is actually very, very capable. This is possible that there’s just different aspects of FDA. But if you check out on their website, digital health, FDA, and you read their guidance, it’s actually extremely clear and easy to understand what the boundaries are, what you can and can’t do. There are a lot of good examples. I read probably 300 pages of legislation and guidance, and I completely understood what it is we cannot do and what the boundaries are there. So, if you’re in digital health, you should just read the FDA guidance. It’s pretty great. The other question was around what was the other question around?

Alex Norman: The wait-list.

Sam Corcos: Yeah, it’s really more, it’s more about the velocity than it is anything else. I want to make sure that we keep focused on member experience and ways in which we can … I would define velocity as the rate at which you deliver features that improve your members’ experience. So, it’s both speed and direction. You can’t just ship things very quickly if they’re not improving the experience of your members. So, I have experienced the failure mode, where if you grow too quickly, you can find yourself in a situation where all of your engineering resources get sucked up into growth. You’re building internal tools. You’re dealing with scaling and database issues. You’re dealing with infrastructure problems and you’ve got to stop iterating. There’s actually a company that I know pretty well from the inside. That on paper is doing very well. They’re growing super fast.

Sam Corcos: They’re more than a billion dollar company now, but they haven’t launched a meaningful feature in like a year. And they see everything on the inside as like, oh yeah, it’s going great. We’re growing. I see it as the first stages of death of a company, because they don’t have capacity to continue to develop their product. So, I want to make sure that we’re growing in a way that’s much more intentional, to make sure that we’re growing in such a way that we have enough engineering capacity put towards member experience and feature and product iteration that we can continue to improve the product over time. I would also say that it’s similar for the sort of scaling considerations where you do have to scale proactively, but you don’t want to put too many resources in scaling too early.

Sam Corcos: And so being able to control it through a wait-list gives you a lot of leverage in terms of how you can do that and making sure that you’ve explored the entire surface area. If you go to market too early with a very big number of customers, once you’re the size that we are, we can make fundamental changes to our business model and maybe upset some people and it doesn’t make any difference. And that’s okay. You just have to be able to take that risk. Once we’re a 100,000 active users, you basically you’ve made your bed. You can’t change it now. So, making sure that we understand fundamentally what it is we’re doing before, we really go big as important.

Alex Norman: So, I’m going to ask you Julia, about this, as investors, everyone likes to see growth, right? And it’s like, everyone wants to be clubhouse in January where it’s gone through, I don’t know how many active users it was. So, from an outside in, when you hear someone like Sam explain what he’s doing. Are you comfortable with that? How do you think about that? What’s the approach there from an investor perspective?

Julia Lipton: Yeah. I mean, I think about everything on a ten-year timeline. And so I think that approach makes a lot of sense. I’ve been reflecting on this a lot lately, because I just sent out my most recent LP update. And I see all my friends’ LP updates as well. And I was reflecting that we’re tracked by IRR and multiples. And I was reflecting that my best companies in my portfolio. Well, the companies that I’m most optimistic about in my portfolio today, many of them have not raised full one rounds yet, and they are slower and they’re more deliberate.

Julia Lipton: They’re slower in fundraising. They’re extremely fast at shipping and that’s what we’re focused on. And so I think there’s a lot of hype and there’s a lot of desire to stack these markups and celebrate these markups. But I mean, my first startup I ever did, I was the first business hire employee number two behind the first engineer. And at one point it was valued at $700 million and came crashing down to zero. And so I have no, I really just care is this thing a good business? Will this thing actually return real value. Our next startup on paper looked like it was doing great. We were able to hit that monthly growth rate. It looked good on the inside. I was certain we did not have product market fit. And that was a terrifying feeling to live with.

Alex Norman: [inaudible 00:43:28], go on.

Julia Lipton: I was going to say, I’m just way more concerned about business fundamentals, team building, business building than I am about markups at this stage.

Alex Norman: I love that alignment here, because I tend to agree with you. There’s a lot of hype right now, a lot of quick IRR, but a long run. This is about the exit on building a sustainable business. So, just go create a line material. I’m it gets me excited when I see investors and founders thinking alike.

Sam Corcos: Yeah, I think one of the other aspects is just being really transparent with your investors. One of the conversations that I had early on with the people that we had on our short list to actually raise our seed round is I told them pretty explicitly. If we do clinical trials, if we find out that what we’re doing is not efficacious, I’m going to shut down the company. There’s a fiduciary responsibility to make money, but I will certainly do my best to do that. But if it turns out we’re not actually helping people, I’m going to shut down the company or find some other way to solve that problem. And a lot of investors, they balked at that and they kind of self-selected out of the process and that’s great. That was the whole point. Other ones really understood that.

Sam Corcos: Like, yeah. I mean, that’s why we’re in this business is to solve these problems. So, getting alignment there. And similarly, if you show, if you’re transparent with your investors and you show them like, these are the challenges that we’re facing, this is how we’re addressing them. And you’re just really honest with both the good and the bad of like something that our investors know is that we still haven’t spent any money on marketing. We’re very focused on product development and we’ve had a lot of traction.

Sam Corcos: We have a lot of people on the wait-list, but that’s not through really effort on marketing. We made our first marketing hire a couple of months ago. We’re very focused on bringing on engineers, on building the product. The people like it. It’s the build something people want mentality of just, if you make a really great product and you give it to people who like it, they’re going to tell other people. And that’s great. That’s the whole point. So, I think that really helps a lot with building confidence in investors is just saying, this is our strategy. It’s been the same strategy, we’re executing against it. Things that are not going well. We’re not going to hide them from you. Just being really honest the whole way through.

Alex Norman: Great, two last questions, because I know we’re getting up on time. One is picking up on a transparency. You shared one of your investor update emails to me, that notion page. And honestly, I’ve got about 30 or 40 investments now. And I think maybe only one other person does something like that. So, that must take a lot of time. It’s a lot of transparency and a lot of insight. Why do you do it? What’s the benefit from it?

Sam Corcos: It takes me about four hours a month, maybe less. So, it’s really not a lot. Every person on the team writes their update. And I think this last month, it probably took me two hours to write it just because people on the team are getting better at filling it in themselves. So, it really doesn’t take a lot of my time. It’s really something that gives transparency both inside the company. Everyone on the team receives those as well. So, they know where every piece of the company stands.

Sam Corcos: I think that it’s an important thing of celebrating the small wins and recognizing milestones. We also do a weekly team all hands, the Friday forum, which we share with our investors as well. They can see every week what it’s like inside the company and what it is we worked on and just, it can feel somewhat isolating. This largely comes from personal experience as an engineer when you don’t know what the marketing team is doing or what the team is doing or what the operations team is doing, you sort of put it in a box and you don’t need to know that, just work on your thing. And so it adds a lot of value to everyone on the team just to know and have visibility into that beyond just investors.

Alex Norman: It’s awesome. Julia, I have to check, how many investor updates you get like this?

Julia Lipton: Sam’s is definitely the most thorough. There’s a couple things that I’ve taught my other founders based on Sam, which may or may not have been good ideas on my part because now they all do his ask system. Oh, man, I really created a mess for myself in my [inaudible 00:48:06]. The ask system, the updates is a forcing function for your team and communication. And that level of transparency. So, one of the ways that I think Sam has beautifully executed expectations is in his updates for like literally over a year. It might even still be there. It’s like, we are not focused on growth. We are still focused on product. And so at that point as an investor, you don’t even have the right to ask about it. We’re like, he’s just like shut that shit down. And so I think if everyone is quite literally on the same page, as a founder, you can save yourself a lot of headache and get a lot of leverage because you don’t have communication latency.

Alex Norman: Awesome. Two Glasgow questions. One is take a step back. If there’s a company that doesn’t exist right now, I could, if you talk to founders here or any company you’d like to see come into existence, what company would it be like? Just high-level description for both Sam and Julia. I’d love to hear what you love to see someone create.

Sam Corcos: I’ve got a whole list. I’d like to see something in the knowledge management section would be good. There are a lot of features of Notion that are great. There are a lot of things that it’s lacking. There are a lot of things in Rome that are great. There are a lot of things that it’s lacking. There are so many different knowledge management tools that have parts of different aspects that are good thoughts, but miss so many of the things that would make them great. That’s one. Something related to calendaring to make calendars more useful would be great. I spent a lot of time in my calendar and it’s quite inefficient. I would say as a side note, Calendly has been one of the best investments that I’ve, I don’t, I’m not an investor in the company, I’m an investor in terms of being a customer of their product. And it’s been one of the best time investments I’ve ever made. So, highly recommend that one. I don’t know, I could go on for a long time. I have a whole list.

Alex Norman: Maybe you can just send me the list and I’ll distribute them to our community.

Sam Corcos: Sure.

Alex Norman: Julia.

Julia Lipton: A lot of the things I’m most interested in now are a little bit more moon shotty and deep techie, but I’m really interested in something that’s the equivalent of the continuous glucose monitor, but for monitoring everything related to adrenal gland health and hormone production. And when I say hormone production, I don’t necessarily mean fertility. I mean basically like what is happening in your adrenal gland at any point in time and therefore, how are you managing your mood and how you physically feel? I’m really interested in that. I’m really interested in everything around cellular aging and not again like how you physically look aging, but what is causing certain things in the body to break down and in what order and why. So, there’s a whole group of bio and med tech startups that could be built against that. I think yes, like Sam, I could go on for a very, very long time.

Alex Norman: I’d love, again, once again, I’d love to get your list. Last quick question. If anyone listening to this podcast or watching a YouTube video wants get in touch with you, what’s the best way they can contact you?

Sam Corcos: Twitter. On Twitter I’m @SamCorcos.

Alex Norman: Okay.

Julia Lipton: I’m Twitter @JuliaLipton.

Alex Norman: Very easy Twitter handles. So, thank you both so much for your time today. I love this conversation. I’m super excited to see a Level available in Canada, have to get on your wait-list or maybe a how to get around that wait-list. And Julia, I hope we can find some health tech companies to send your way from Canada, because I love those moonshot ideas. Thank you both so much for your time. If you’re still around and you enjoyed today’s show, be sure to subscribe to our newsletter where we highlight some amazing companies, people news from the clean tech ecosystem. And we’ve also got some exciting shows coming up for you. We got Founders and Funding next week. It’s featuring the most recent cohort of companies from Acceleprise, which is a B2B focused accelerator in Toronto. We’re going to feature companies, we’re going to talk about how to think about scaling. Jonah Midanik, who is basically the guy that runs it in Toronto is going to basically help us have that conversation.

Alex Norman: If you can’t join us live to listen to our episodes or want to listen to previous episodes. You can find Founders and Funding on podcasts available wherever you listen to podcasts. Finally, on June 14th at night, we have our next TechTO together. We have Neil, the founder and CEO of Geotab, who is probably the biggest private tech company in Canada you’ve never heard of. They have mid nine figure revenues. And we have Chris, the Waterloo engineer, who was a founder of Kik and is now founder and CEO of Substack to come chat about his founders journey. So, make sure you join us on June 14th to hear two different founder journeys. And thank you for joining us today. If you want to stick around for networking, we’ll put it up live and you can meet other people in the community till 2:15. Have a great Friday. Enjoy the great summer weather. Thank you for joining us.