John Corcoran: 15:03
Beautiful mind style, just up on the wall.
Mike Ghaffary: 15:05
Exactly. Or I get The Wire, the television show on HBO.
John Corcoran: 15:08
Yeah.
Mike Ghaffary: 15:09
You have all the people connections out.
John Corcoran: 15:10
Yeah.
Mike Ghaffary: 15:10
And then, you know, like, who’s your champion? Who’s the actual decider, right? Who are your allies and advocates? Who are your information sources who are not even involved in the decision? Right. Who’s skeptical? You’re mapping every single person out and trying to figure out their roles and how they might relate, and just spending as much time there as possible. And then we had a little bit of an anti-sell strategy for that one too, where we said, look you don’t need to partner with us, but be careful who you partner with. Like if you should maybe just build it yourself? And here’s what we did : we had actually 100 slide presentations and showed them how they could build it themselves. And they were like, oh wow, this is so hard. Like, we need you guys to do this.
John Corcoran: 15:49
Oh, because you wanted to show them how difficult it would be to build.
Mike Ghaffary: 15:52
But we’re like, it’s okay. But we literally mapped it out for them. We gave them the clear blueprint of exactly how they could do it and do it right.
John Corcoran: 15:59
And why wouldn’t they?
Mike Ghaffary: 16:01
We showed them under the hood. Some people hide what’s under the hood. Yeah. Oh, I have this, you know, magic over here. We showed them exactly how to copy us, but it was so complex, they were like, well, we really need this guy.
John Corcoran: 16:11
So they could have. But, I mean, you don’t, you don’t. Meta doesn’t strike me as a company that would be intimidated by something being too complex. Like they probably could throw enough engineering resources at it. But no, but this was.
Mike Ghaffary: 16:23
Figuring that out wasn’t core to what they wanted to do.
John Corcoran: 16:25
Got it? Got it. Makes sense. Makes sense.
Mike Ghaffary: 16:27
It’s something core that’s a different story. You’re probably not going to partner with them on something core anyway.
John Corcoran: 16:31
Got it. Good distinction. Any other lessons on the business development strategy around that. You said there were three different things that you might have mentioned.
Mike Ghaffary: 16:39
So number one was this, you know, mapping out the organization, knowing the champion, the decider, all these things, the influencers. Number two is, you know, having a specific target. It’s not one size fits all. Like in this case it was the anti SEL strategy work for us. But for others every situation is going to be different. Number three a big thing I say is if you’re not making a good friend after every, you know, big BD partnership, you’re probably doing it wrong. So I really like that I have lifelong friends from every major BD partnership I’ve done because it really gets personal and you really dig in and really get to know on a human level, like, who are these people? What do they care about? What are they trying to accomplish? And if your partnership is not especially for these deep strategic partnerships, if it’s not going to really help them accomplish their goals, then it’s you’re waste of time for both of you.
John Corcoran: 17:30
Yeah.
Mike Ghaffary: 17:31
I did the same thing with Yelp and Apple and a bunch of others. Yelp. Yeah.
John Corcoran: 17:34
Let’s talk, let’s talk, let’s talk about that one, because after that you go to Yelp and Eat24 and you’re there for I don’t remember the exact trajectory of the Yelp period when it became big. I remember Yelp, I think I discovered Yelp around 2006, 2007 or something like that early.
Mike Ghaffary: 17:52
But yeah, I founded oh four and started gaining traction around that, like 050607. But that was the early period. Yeah, it really got put on the map around 2012. Like the IPO timeline. People really got it.
John Corcoran: 18:04
Excited. So your pre IPO then you.
Mike Ghaffary: 18:06
Yeah I was the founder of Yelp I knew from before he started actually.
John Corcoran: 18:11
And I also was in the PayPal mafia wasn’t he. He was.
Mike Ghaffary: 18:14
PayPal Mafia. He was VP of engineering at PayPal. Worked for Max Levchin. Max was the chairman of our board. The idea for Yelp came up, actually at a birthday lunch in the Ferry Building for Max and Jeremy. The founder came up with the idea. I was like, why isn’t there a site like this? So yeah, so PayPal Mafia and and then I wrote Yelp’s first sales contract with the first customer back in the day, because I was a business school section mate of the founder, Jeremy and friend. And then I was also going to law school. And so he was like, oh, you know, you’re my legal friend, can you help with this contract? So I helped him. I was like, I’m not a real lawyer yet, but I can help you. So I helped him out and he tried to recruit me from early on, actually in the Stitcher days, but I thought Yelp was, like, too big because it was, I think, 20 people. And I was like, I’m gonna do my own startup. And luckily I got a second bite of the apple. He’s like, hey, you should have come a long time ago. So it was still a pretty small company when I joined, and I was there for kind of hypergrowth from, you know, small revenue to billions in revenue was very exciting. Wow. Period.
John Corcoran: 19:17
Wow, what a crazy thing.
Mike Ghaffary: 19:17
Along with my partners. Now Yelp, Jeff Doneger, who’s the original COO from Yelp, who took it from 0 to 1 billion and our original CFO who took it public and a VP of ops are all on our team.
John Corcoran: 19:29
And these are the folks that you’re working with now, which I’ll get to in a second. But eventually you eventually become CEO of Yelp. Eat24. So explain to those who don’t know what Eat24 was and how you had to grow personally as you worked into that role.
Mike Ghaffary: 19:45
So look, prior to Yelp, I’d managed small teams, right. And then at Yelp, I built this great business and corporate development team, starting with, you know, one person who’s still there, Peter Curzon, still the VP of business development now, but he came up as an associate all the way a couple years out of college. And, you know, we built a 510. So basically I managed teams of up to maybe 20 people, but I never managed hundreds. And then Eat24 and I was the vice president of business and corporate development, did all of our M&A and partnerships for five years at first, and then we partnered with this small company, Eat24. When we met them, there were a handful of people. I don’t know if there were a million in revenue or less when we started partnering with them or met them, but eventually we acquired them. They were doing online food delivery, and we realized there was a big opportunity for having online food delivery happening right on the Yelp platform. First, we partnered with a few folks, but Eat24 ran circles around all the partners, including Grubhub, who we tried to partner with. Eat24 just executed everybody.
So when they had interest from others in getting acquired, I told them, no, you better talk to us like we really want to buy you. So we bought the company. It was 150 people and 150 million in gross transaction volume, and they asked me to be CEO of this subsidiary. Both Yelp asked me, but also the founder of Eat24 said, hey, I’m not a corporate guy. I knew, you know, he knew his kind of shtick. And he was like, hey, if you don’t take it as a bad signal, but I’m out. I’ll stay for however long you need me, but I want to hand it over to somebody. And I think it should be you, because I knew the business really well. And I said, okay, I guess both sides are asking me. I’m going to take this plunge. And I had to do a ton of personal growth, like managing 150 people. By the way, over two years. We grew revenue to, you know, we grew employees to 500 people, like over three X and revenue to an 800 million or 750 million run rate. That’s gross revenue, not net revenue. And then our net was like a, you know, a percentage on that. So, you know, we grew revenue even faster. So that was a very hard thing to do. There were all kinds of people issues and management stuff had to figure out and manage teams and managers and managers and what the right layers are.
John Corcoran: 21:54
A totally different animal from everything else, right? Yeah.
Mike Ghaffary: 21:56
I came up with this theory of MVP. I call it minimum viable bureaucracy. How to like what the processes are you need, but not a penny or ounce more of extra bureaucracy. Right? Bureaucracy is the word people use to describe it when it’s gotten out of hand. And you think of it like the government or these large organizations, but you do need some management, right? So like, how do you do that? Perfectly sized management and communication layers. And I was very fortunate to have a guy who just joined as a CEO of ironclad. He was CEO of DocuSign. He kind of mentored me for free. I had a free CEO coach in addition to obviously the Yelp CEO and other people on the board were all helpful. But to have like a third party coach that normally would pay a lot of money. This one CEO I knew through non-profit work. He said, hey Mike, I’m in between CEO jobs and I can. He’d been CEO three times. He said, if you just come to my condo and like, we can meet at a coffee shop somewhere. And he fortunately lived a block away from our office. So it all just stars aligned. And and so I learned a lot about managing these teams and, you know, building up your lieutenants, all kinds of stuff that I work with founders on now as they hopefully achieve that hyper scale from going from one, 1 or 2 founders to 10 to 100, and then, you know, beyond 100 to 500.
John Corcoran: 23:11
And as you look back on this period of time in your career, do you think that you enjoyed this period of time or did you or did you find that, you know, you were sucked into a corporate behemoth and. Yeah, no, it sounds like you enjoyed it.
Mike Ghaffary: 23:25
I loved it, and especially the Yelp time. You know, I was there for seven years. It was my longest professional experience for a reason that I really enjoyed it. I will say that Eat24 piece in particular was Trial by Fire, so I absolutely loved it. But I also probably aged quite a bit. I have, you know, I already had a lot of respect for what startup CEOs did, but then I thought, okay, it gets bigger and you scale your team and everything’s just kind of running and it works. And then I realized just how hard it is to manage hundreds of people effectively. Right. Anyone can just manage them. But how do you actually then grow five x in two years and do that stuff? And it’s really, really hard. There’s a reason I could have then tried to be a career CEO. There’s a reason I didn’t go back to that. I think I probably if I had to do operating again, it would probably be more, you know, SVP, biz dev Corp, dev kind of stuff I was doing managing those lean and mean teams, just kind of more like running a venture capital firm, which I kind of enjoy. I think that side of it, more than that, large team management in the long run, but at the time it was an incredible opportunity to experience.
John Corcoran: 24:28
Yeah. So you actually after that go back into the venture capital world, which you’d spend a little bit of time earlier in your career. And was that a deliberate decision or were you ready for a break from the startup world at that point? You probably yeah. Let’s see. This is 2018. We have kids around the same age, so you probably have kids by this point.
Mike Ghaffary: 24:47
Yeah, yeah, I had two small kids. It was 2017 when I first started, you know, seriously considering venture capital, the thing is, yeah, I went to Summit Partners after business school because I fell in love with the idea of VC and investing, and that’s kind of what I wanted to do when I grew up and when I went to do with my life. But I thought, you know what? The best investors I found are actually former founder operators who know how to build companies. So that’s the kind of VC I want to be, right. I want to actually talk to a founder and say, hey, I’ve been there. And by the way, I do that on a near daily basis now. So it’s really been helpful for me to say, I’ve been in your shoes. I know just this morning I was having a conversation with the founder like this. And so I’m not just making it up as I go along or saying, well, I’ve been on the other side of the table and I’ve observed and so so I went. I thought I was only going to be a founder operator after Summit Partners, maybe for like 3 to 5 years and then jump into VC. But I just had such a good time, you know, and largely because of Yelp too, that I stayed for ten years. So it was kind of long overdue. And VCs had been recruiting me for a while. And so when I finally took the plunge, I knew I was going to VC. I kind of had thought about it for a long time, and it felt long overdue.
John Corcoran: 25:52
And you specialize in AI and also marketplaces, which Yelp is a marketplace. So you’ve been involved in Fair and some of these other businesses, but you also have other companies like Cloudkitchens you’ve been involved in and Strava. So it sounds like you’ve kind of taken interest in various different ones.
Mike Ghaffary: 26:12
Yeah. So at first and it is similar to, you know, my personal investing background, we’re pretty generalist across the kind of AI software marketplaces stack mostly on we. I was going to say most of the non hardware and non like pharmaceuticals. But we even have a hatch baby in the portfolio. That’s a hardware driven super successful you know company that’s grown to a real scale. So we’re pretty open minded. But I have typically gravitated to something in those three you know software. Now I increasingly and then marketplaces tend to fall in those buckets. Cloud kitchen was a pick and shovel play as I saw what was going on in the food delivery marketplaces. I realized there was an opportunity there. The founder, before Travis Kalanick actually took the CEO role, he was an advisor to.
John Corcoran: 27:04
Former founder of Uber who got Uber space. So this guy, he’s got involved in that company.
Mike Ghaffary: 27:11
Yeah, he’s the CEO now. But Diego Berdakin, the original founder, pitched me on the idea while I was still at Yelp. Eat24. And I said, hey, it sounds really hard. If you could build this, I would love to, you know, partner with you at Yelp, maybe invest. And then sure enough, once I was at Social Capital, he really did it. And he knew our team there. And so that was a great investment. And then Travis came on as CEO and ended up growing much bigger. So that’s become a very large company for wholesale, which you mentioned is obviously very big on the marketplace side, superhuman, Strava. There’s a bunch I’ve been able to get involved with early, and then a bunch of really exciting ones in the burst portfolio we can talk about also.
John Corcoran: 27:47
Yeah. And it’s interesting you specialize in marketplaces because marketplaces are notoriously hard to establish. Yeah. So I’m wondering what the secret sauce is. You know, when you look at different marketplaces, there’s so many marketplaces. How many marketplaces do we know that we’ve never heard of or that fizzle out because it’s so difficult to gain traction. But why do you think that you like that space?
Mike Ghaffary: 28:14
Yeah. Well, first of all, it’s worth saying out loud marketplaces have been pretty quiet. I think marketplaces often require some sort of platform shift or innovation to really take off. So with web 1.0, there was this big marketplace boom. And then there was this second wave of web 2.0 that also got a bunch of fueled by mobile. And so Uber, Lyft, DoorDash, Airbnb, like some of those Uber didn’t even exist pre mobile and DoorDash. Right. Airbnb and Yelp kind of did but then really rode the mobile coattails and wave. So marketplaces kind of need that fuel I think because it changes the paradigm. Uber said, oh, now you’ve got a phone, everyone’s got this computer in their hands and GPS, and it unlocks these new models. Then I think it slowed down because all the ideas were tried. Everybody picked over a lot of it, and we still see some, but it became less frequent, like fair, wholesale, B2B and other marketplaces then maybe took off. But now with AI you have such a big revolution that not only is there a SaaS and software revolution that you know, we’re a big part of with companies like Offer Fit, right? That I led the series A and that just announced it was being acquired recently. But you also have I think marketplaces are going to come, but frankly, it’s been kind of quiet. I’m waiting now for the next resurgence, but I’m definitely putting it out there. So marketplaces, marketplace founders who somehow found these new tailwinds, whether related to AI or otherwise, hopefully would come find me.
John Corcoran: 29:38
And let’s talk about the AI for job creation idea, because you did a keynote at an event we both attended recently. Yeah. And I thought it was so contrarian. Right. Everyone else is talking about job losses. You’re talking about job creation.
Mike Ghaffary: 29:52
Absolutely. Well, one you know, the slide I walked through at that presentation was just data on the industrial revolution. You know, steam powered, you know, revolution. And then there was electrification and then web 1.0. And in each of these there’s headlines and a bunch of fear. The cycle is actually predictable. Everyone’s like, oh, we’re going to lose all these jobs. And there is job displacement. And I don’t want to minimize that. I actually take that very seriously. There’s also been, as the accelerationist, you know, kind of will argue, a lot of job creation with every tech shift and every new wave and boom of technology. The problem is, what do you do in the transition period? How do you create jobs for these people who are later in their career or just got trained for one thing, and that thing becomes irrelevant, and it’s hard to predict when it’s moving and the challenge, the cycle time has gotten so much faster. So now with AI, it feels like maybe it’s happening so quickly and people are concerned, right?
John Corcoran: 30:47
What do you skill people on if that’s going to be irrelevant two years from now?
Mike Ghaffary: 30:51
Yeah, it’s hard, but I would say that actually the playbook is out there. There was a book I encourage everyone to read, averaged over by Tyler Cowen, that was actually written right before this AI boom in the ChatGPT big launch, but he kind of correctly predicted everything and talked about a lot of it. And there are all these skilled jobs where you’re working with AI. So that’s step one is to find a way that you can work with AI and you can be a huge asset. Someone was just asking me about what to do yesterday for their young college grad kid and they’re like, oh, is the job market cooked? And is my economics major college grad going to be able to do anything? I was like, no, not at all. If he’s an economics major, why don’t you have him just go learn all the latest AI tools for econometrics, have them know how to run AI and cloud and Gemini and everything all in parallel, and come up with the latest economic data and then walk into an interview saying, I will actually make sure that you guys can use AI most effectively. That’s why I had all those software jobs in college, because I learned all the latest internet tools and I said, hey, I can create a dynamic, data driven website for you. And I know the database tools and I know you know the ASP windows architecture, but I also know ColdFusion and this other stuff and SQL.
And if you can learn all those tools for AI, you’re super valuable on the job market at a young age as well at any point in your career. In addition, I’m interested in startups that are using AI for other kinds of job creation. I talked about AI to help people learn new trades. We’re going to have a big boom for electricians and HVAC and all this stuff to underpin all these data centers that AI needs. So there’s a bunch of just hands on if you don’t like tech and, and, you know, using software or whatever. There’s also all these skilled trades for you that are now opening up. Right. So can you build startups to help people learn those or get accredited in those? And anyway, there’s so many opportunities. You just have to be willing to look ahead a little bit at the puck and embrace the shifting landscape and try to ask friends and other people and read online, watch talks like this to understand where the puck might be going.
John Corcoran: 32:47
Yeah. And what are you consuming? Where do you get it all. Where do you study? You know.
Yeah. Get all your information. Yeah.
Mike Ghaffary: 32:54
Yeah. I mean, it’s a variety of sources. I feel like I’m, you know, bombarded with a bunch of sources. I’ll give you a plug. Actually, my sister is one of the leading AI journalists. She does it at Bloomberg. So her, you know, same last name. You can look her up. She’s a great source for AI information. There’s a lot of other AI I newsletters, but hers on Bloomberg I really like. There’s a bunch of publications I follow, I do this, I get a morning digest every morning of all the VC and tech deals. There’s one like Connie Loizos from TechCrunch does this strictly VC one Dan Primack Axios has one that’s really popular too. I go on social media, so on LinkedIn and Twitter, there’s a bunch of information and accounts I follow there. People are emailing me things all the time, and unfortunately I just have a large network. So I gather a bunch of information kind of on and off the record. People are sending me stuff, and then I try to do a good job of disseminating that out and talking about it when I hear interesting kind of, you know, so there’s traditional media economists, Wall Street Journal, all those sources, but then all these newer media kind of formats to podcasts is another big source. I’m trying to always stay up to date on. What are the newest podcasts that might, you know, have interesting trends?
John Corcoran: 34:04
And now you’ve joined forces with your Yelp team. A lot of the folks that you worked with back then, you were an advisor to Burst Capital and you’ve joined back up with them. And you have this theme around Main Street AI and software intersection with Main Street. Explain what that is exactly.
Mike Ghaffary: 34:21
Yeah. So one insight we had is if you take Main Street and SMB and define it broadly. So right away when people hear Main Street, they think of stores like a lot of these storefronts that are on Yelp, like restaurants and retail and local businesses. And there’s also, you know, there’s all kinds of blue collar businesses. They might not even have a shop, right? So we talked about your local electrician and plumber and HVAC and then even white collar. There’s a doctor , a dentist and a lawyer. These are all categories on Yelp. These are all I would call Main Street businesses that people need to go to. Not large, you know, tech behemoths like Google but part of our basic block and tackle economy and these mainstream businesses, if you look up the stats are actually 46% of US private employment and 44% of US GDP. It’s a huge part of our economy, Main Street. But I would say that software sometimes can neglect it, I think when software has jumped on it. So we talked about DoorDash, Lyft, Uber, not to mention Yelp. It’s been very successful. And so now I and the new startups need to, I think, pay attention to Main Street. And we’re excited to fund those businesses given we have a deep expertise and background there. That’s a big category for us. So like owner com is one that started doing software and AI for local businesses, you know, restaurants starting and then branching out from there. They just raised you know we came in very early before the series A they just raised $120 million series C at $1 billion valuation. So they’re one of these unicorns now. And I think there’s lots of opportunity there if people just look at, you know, cloud kitchens we talked about in that Main Street theme as well.
John Corcoran: 35:53
Yeah. Yeah. Mike this has been great. I want to wrap up. And I’m a big fan of gratitude. So I’m a big fan of both expressing gratitude. I’m grateful to you for sharing your wisdom here today, and also giving my guests a little bit of space at the end here to Acknowledge. You know, the relationships, the people that have been helpful for them. You know, sometimes people default and they mention their family. But I love to hear stories about peers, contemporaries, maybe LPs in your fund. Maybe it’s you mentioned that mentor the CEO coach that you had. Who would you want to acknowledge?
Mike Ghaffary: 36:27
Yeah. So I’ll say that there’s a long list. So it’s always tough. So first thank you for having me on. This has been fun. This is great I really you know speaking of peers, my partners you know, so Jeff Doniger, CEO of Yelp originally, who’s now general partner and founder of burst. I work with him really closely. He, you know, mentor turned, you know, partner and peer. And Co-investor have been really influential for me, as well as Rob Krulwich, my partner, and Wendy Lim. They’re amazing. But also all the partners I’ve had, you know, so my partners from Canvas Ventures, Rebecca Lynn, Paul Shore, Gary Little, my partners from Social capital, you know, peers and and my whole team at Yelp. Anyway, it’s going to start sounding like an Oscar speech because there’s so many people. Yeah, there’s my family and all my friends. So again, it’s hard to know where to start. I’ve been so fortunate just to have so many people work closely. You know, Harrison Lieberfarb, the newest partner at canvas who who’s worked so closely with me is so many people who’ve been influential. And then, by the way, there’s all the founders I’ve invested in. So as an investor, ultimately you’re working with these founders and that. So, you know, I mentioned Offit George who just, you know, had that successful outcome there, but there’s so many other companies, all the companies I mentioned today, plus so many other founders, it’s tough to even go through them all. But as much time as you’ll give me, I’m happy to go.
John Corcoran: 37:57
No. That’s great. And the funny thing is, Mike and I. So we live in the same town, our kids are friends, and I get to see you on the bike path because I bike to work and you are constantly on the phone with someone. And now I’m going to picture you’re going to be talking to one of those people you just mentioned.
Mike Ghaffary: 38:10
Oh yeah.
John Corcoran: 38:11
Mentoring them through something. You’ve even given me tips on how to get a headset that will work with all the wind on.
Mike Ghaffary: 38:20
Oh, I actually have a special wind setup. A guy in Sweden made one for a while and sold it, but it’s not very profitable. It’s a commodity product. Yeah. So no one’s selling them anymore. So I had to learn how to do a homegrown version. I can actually get you set up.
John Corcoran: 38:30
That’s great. That’s great. Mike. Where can people go to learn more about you, connect with you and learn more about Burst Capital?
Mike Ghaffary: 38:37
Oh yeah, go to burst.vc/. That’s our website. So that’s a bunch of information. You can also follow me on LinkedIn under my name as well as Twitter and Mike and yeah look forward to hearing from you guys.
John Corcoran: 38:48
Thank you so much. It’s a pleasure.
Mike Ghaffary: 38:49
Thank you very much.
Outro: 38:53
Thanks for listening to the Smart Business Revolution Podcast. We’ll see you again next time and be sure to click subscribe to get future episodes.