E236: How the Top 0.1% Founders Build AI Companies

Speaker 1 HF0 is a new way to build companies. What makes you think that companies need a new way to build?

Speaker 2 A couple of things are true. One,

Speaker 2 with AI, the competition has just intensified so much.

Speaker 2 And

Speaker 2 what you need to be willing to do, what you need to be willing to sacrifice as a founder to win, is just the bars way high.

Speaker 2 The second is that it's not really a new way of company building. It's the way that some of the most generational companies have done it early on.
So Facebook had their house in Palo Alto.

Speaker 2 More recently, Devin and their Cognition, they had their house in Atherton.

Speaker 2 And I think really we're just the first folks to figure out how to productize this way of company building, which happens to be incredibly relevant in the age of AI.

Speaker 2 This like residency format where you and your team are all in.

Speaker 2 This is, I think, when you look forward five, 10, 20 years, this is just what it's going to take as a composition continues to grow.

Speaker 1 So you're now in your 11th batch. So tell me about your 11th batch.

Speaker 2 Yes, we still only work with 10 teams at a time. And this batch is crazy.
To give you a sense, one team walked in on day one of the batch with 7 mil ARR already coming in.

Speaker 2 Another team walked in the first morning, the batch, they already had a term sheet for 10 on 100 for their Series A. And so just to give you a sense of like the quality of teams that are joining EHF0,

Speaker 2 a lot of these teams are repeat founders.

Speaker 2 Many of them have built billion dollar companies before grew their previous startups, 100 million plus annualized revenue, or they're just like actually already breaking out.

Speaker 2 They've already raised the seed. They've already raised the series A.

Speaker 2 And those are the companies that realize the importance of this way of company building where you pretty much subtract everything from your life so you can just build.

Speaker 2 And they realize they need to get every edge they can get.

Speaker 2 So I'd say, well, HF0 is really helpful for startups who are at that zero to one.

Speaker 2 The startups it's most helpful for actually startups that already have a semblance of product market fit and know that they're going to have tons of competition and need to run as fast as they've ever run.

Speaker 2 So we're taking, you know, already the most productive human beings in the world, the most productive founders who have isolated their life and their productivity and everything to get like as much leverage as possible and then realize that with HF0, they could get even more.

Speaker 1 And HF0 is based on this principle of addition through subtraction, that your value is actually taking away things from founders' lives. Double click on that.
What exactly are we we taking away?

Speaker 2 I wouldn't even call it addition through subtraction. I'll just call it subtraction.
So pretty much in HF0, it's a residency. So you actually move into the residency.

Speaker 2 And that's really important because what it allows us to do is it allows us to witness you in like a deep way.

Speaker 2 It allows us to essentially watch how you're spending your time, what's ending up interrupting your flow, what is taking up mental space for you that isn't the most important thing in your business.

Speaker 2 And we have this kind of mantra at HF0 where we say the most insidious distraction isn't, you know, a conference or networking or this or that.

Speaker 2 It's actually the second most important thing in your business.

Speaker 2 And so by moving into the residency, we can end up witnessing how much of your time and how much of your energy is going not just to the mundane things of life that might interrupt you, but second, third, fourth, fifth, sixth, seventh, eighth, ninth most important thing in your business.

Speaker 2 And what we find is like a lot of the best founders, they're incredible at doing a lot, right?

Speaker 2 And so they're crushing it on all those things, but actually what we're able to help you do in the residency is subtract even number seven, eight, and nine, even all the way up to number two, even all the way up to what you thought was the most important thing in your business.

Speaker 2 And then through this kind of line of self-inquiry, when you ask yourself, is this the most important thing I could be doing for the business right now?

Speaker 2 You get to that most, what you thought was the most important thing. And in that space where we've subtracted everything else out, you ask yourself that question and you realize, hmm,

Speaker 2 maybe this isn't the most important thing. right now, but I don't know what is.

Speaker 2 And then in that space, that is when you have realizations. That's when you have breakthroughs at a far higher rate than you would otherwise.

Speaker 2 It's so easy to keep yourself busy with the things that are important in your business, but aren't the most important thing.

Speaker 2 And only in that space, when you've kind of had this recursive subtraction that we help you do, do you increase the rate of realizations considerably?

Speaker 2 And this is why so many founders say they're able to make a year, two years of progress in the 12 weeks of HF0, is that really at the end of the day, in an early stage startup,

Speaker 2 you know, this isn't a perfect frame, but there's really two two things. There's your rate of realizations, and then there's your ability to grind on those realizations.

Speaker 2 And now with AI, your ability to have a realization and then act on it is faster than ever. Right.

Speaker 2 And so if you have clarity, if you have a realization about your business, about your customer, about the way that you sell the product, you can then go act that out way faster in the world.

Speaker 2 And where it might have been where you have a realization, then you need to run a two-month experiment.

Speaker 2 Now you have a realization and you might be able to run an experiment in two weeks or an HF0, or you might be able to run that experiment in two days and then have the next realization that you're acting on.

Speaker 2 And so actually, the speed at which you can build a company in this day and age of AI is just unbounded.

Speaker 2 It's really only bounded by your rate of realizations, because then if you're effective at leveraging AI, you can almost have the AI grind on your behalf and then be testing the next thing in your business.

Speaker 1 Said another way in the age of AI,

Speaker 1 the most valuable thing for a startup founder to be doing is to be thinking and working about the next problem to solve.

Speaker 1 And steady state for most founders are having a lot of distractions that keep them from some would call flow, others would call it deep thinking.

Speaker 1 Give me very practically, so HF0, what are the one, two, three, or four things that they subtract from founders' lives that make them have the ability to be in flow and think more deeply?

Speaker 2 I would say these aren't really distractions.

Speaker 2 It's actually like convincing you as a founder, giving you like the clarity to see that this thing that you're spending so much of your time and energy on actually isn't the most important thing in your business.

Speaker 2 That's like the biggest thing. It's we take care of, you know, now we have a list of maybe 150 mundane things of life that could be an interruption here or there.

Speaker 2 But I think the truth is, and at least our hypothesis is that there's this compounding return to uninterrupted flow state.

Speaker 2 And that where even the most productive founders in the world get their day down to the place where there's, you know, maybe three, four or five interruptions a day to their flow.

Speaker 2 At HF0, our goal is to get that to zero or one interruptions per day.

Speaker 2 And so our belief is that literally like any context switching, like it could even be ordering DoorDash, ordering Uber Eats, like even having to think about

Speaker 2 what you're going to go eat can interrupt this compounding return. of your flow state.
And I know that sounds trivial, but actually the biggest wins aren't even that.

Speaker 2 There aren't these mundane things. It's actually getting you to to stop context switching to that, you know, second, third, or fourth most important thing in your business.

Speaker 2 So it doesn't look like a distraction. It feels like something that's really important.
In fact, it is.

Speaker 2 But for the 12 weeks of HFCO, you're actually suspending yourself into this framework where you're explicitly not going to do the fourth most important thing in your business.

Speaker 2 And it might be scary not to do that because you're like, I need to do that for the business to function.

Speaker 2 But in the space that you create, when you stop doing, you know, let's say that you're a company that's doing both enterprise sales and then also a PLG emotion.

Speaker 2 When you stop doing one of those two and you go all in on the one that you actually think is the most important thing, you get way more leverage out of your time because there's nowhere to escape.

Speaker 2 And I think this is the like human nature aspect of this.

Speaker 2 The best founders are all like super productive.

Speaker 2 It's not like they're dilly dallying around, but they're incredible at escaping into the third most important thing in their business when the first most important thing in their business might lead to them realizing that the business doesn't work or that they actually need to change what the business is.

Speaker 2 And I think all of us have this tendency, like a lot of founders probably listening to this thinking,

Speaker 2 like, oh, I would never, you know, do that. I would always face the challenge.
I only have like limited reserves to like face really hard, kind of open-ended challenges in this way.

Speaker 2 And then when you're in this HF0 format and we're able to witness you with such clarity, we're able to essentially call you out on something where you might say, no, this is the most important thing, but we've already seen pretty clearly how big it is.

Speaker 2 I think there's this other, like, we don't know exactly what it is. If we could tell you, that would be the best.

Speaker 2 We don't know exactly what it is, but we're like, there's something over here that's not that thing. That's actually the biggest thing holding your business back.

Speaker 2 And even if you grind unlimited on that thing, you're still not going to get fully where you're trying to go.

Speaker 2 And so that's more of what it looks like.

Speaker 2 It's this

Speaker 2 kind of line of self-inquiry that we're assisting you in and figuring out what the most important lever is in your business. And then once we find that, startups just like take off.

Speaker 2 We had a team in the last batch. They came in at like 500K annualized revenue.
They ended up figuring out this most important thing, this one lever, and they grinded on that nonstop.

Speaker 2 They broke 20 mil annualized by demo day 12 weeks later. And like every batch, this is happening.

Speaker 2 So if you can come in and just like fully lean into the kind of framework that we have for company building and this and this residency, it's the amount of leverage that you get in 12 weeks is crazy.

Speaker 2 We're just consistently every batch, even though we only work with 10 teams, every batch we're having teams that are having this sort of like crazy AI breakout revenue that everyone's been talking about.

Speaker 2 And I think we're the only folks who have really figured out how to do it in a repeated way.

Speaker 1 There's something deep psychological about what you're saying, which is people avoid the number one thing.

Speaker 1 They distract themselves, which is interesting because in many ways, founders are the most effective, the most effective group of people on the planet, you could argue, are founders.

Speaker 2 Some people disagree with that, but they're certainly in the top 1%.

Speaker 2 And even they're avoiding the main issues.

Speaker 1 It's such a human thing that even the most productive humans humans have to do that.

Speaker 1 And what's upstream of that, I think they're avoiding it for two reasons. One is

Speaker 1 they don't have enough psychological safety.

Speaker 1 In other words, if they had a billion dollars and they had a burn rate of a million dollars per year, they would be more empowered to look at whether they should be building this business because they'd have another 999.

Speaker 2 But would they? Would they go or would they not have as much pressure? Would they actually be working on number 10, 11, 12, 13, 14, 15, 16? I actually, I don't know.

Speaker 1 Is there a golden ratio there? So you bring up a really interesting point. Is there a golden ratio of the right amount of pressure somebody should feel in order to work on the most important tasks?

Speaker 2 I'm not sure. The best founders are all just so intrinsically motivated that as long as they don't get distracted by the ideas you might have if you had like way too much funding, I think

Speaker 2 the funding actually doesn't make that much of a difference. And right now with AI, like the funding isn't the bottleneck.
The cash isn't the bottleneck.

Speaker 2 When you're in an early stage startup, and even like some of the, a lot of the teams we back are you have one, two, plus mil annualized revenue, like yeah, cash isn't really your bottleneck, your ability to have realizations and then and then act on them in your business.

Speaker 2 Like with AI, it's just so cheap to act on so many of these realizations. Um, you don't need to hire a bunch of people.

Speaker 2 And so, you know, I saw Sam Altman recently on TBPN, and I think he's incredible at doing this at stopping doing the fifth, sixth, seventh most important thing and focusing on the first most important thing.

Speaker 2 Um, I think it was Jordi asked him, you know, how do you decide where to devote compute to, um, to Sora versus to research, to this, to that.

Speaker 2 And he said, I'm not even spending my time thinking about where to devote compute to anymore. All of my time is spent finding more compute.

Speaker 2 And so when I heard that, I'm like, that's such a good example of this, where Sam has realized he could have gotten, you know, the second most important thing in the business, very important at Open AI, deciding where compute is allocated.

Speaker 2 He could have been spending all his time thinking about that, right?

Speaker 2 But then Sam's incredible at this move of like, let me stop doing that. Let me delegate that.

Speaker 2 And then let me go after kind of the even bigger lever, which is just let me break out of that game and just like, how do I just find us more compute?

Speaker 2 And then like within that problem, later on in the interview, he says, you know, really, it's, it's not even like the chips right now. It's like just energy.
Where do I find my next gigawatt?

Speaker 2 And so that's where you really get these AI companies that are just breaking out like crazy. And I think some folks have individually figured this out.
And then we've really productized this formula.

Speaker 2 And I think that's why more and more investors, after they already do the seed round or the series A of the company, are actually starting to send their startups to HF0.

Speaker 2 And so a lot of people have been asking, like, who do you all feel like you compete with? And I actually don't, I feel like we're actually incredibly collaborative.

Speaker 2 You know, we take 5% upfront or if a team doesn't need the cash at all, we only take 3% of the company.

Speaker 2 And so even if they've already raised their round, we still have an incredible product at a very fair price, but no one else is really offering founders.

Speaker 2 And it's really this way of company building in the age of AI that's producing so many of these companies that have breakout revenue. And it's this constantly,

Speaker 2 this essentially this recursive subtraction, where you're constantly subtracting things out to focus on the highest leveraged thing.

Speaker 2 And then you're leveraging AI to then go act on that realization as quickly as humanly possible.

Speaker 1 I want to double-click on the example that you pointed out with Sam Allman. It's so good.
There's a couple of things I want to unpack there.

Speaker 1 One is him allocating compute within OpenAI could actually have pretty dramatic changes, 20, 30, 40%.

Speaker 1 But he's focused on compute itself because that could have a 10x. And then even that's not enough.
He's going to the energy.

Speaker 1 If you could create, if you can invest in nuclear and get US policy to change, then that could be 100x.

Speaker 1 So, yes, he's giving up 40% on the micro, but he's giving essentially capturing whatever that is, 60x on the macro. That's such a good example for that reason.

Speaker 1 Also, it's such a great crystallization of what you guys do because he's that's actually his number two issue: is how to allocate compute.

Speaker 1 You guys focus on five through 10, but it even works at the most extreme counterexample, which is between one and two. That trade-off could be an order of magnitude.

Speaker 2 That's why we say the most insidious distraction is the second most important thing in your business. Founders are so good at grinding.
They're incredible.

Speaker 2 These top, I mean, to get an HF0 is incredibly difficult now. Like every single one of those founders insanely good at like grinding on whatever is at hand.

Speaker 2 And so the real key is that you're pushing on the highest leverage lever. That same example is a perfect exemplification of this.

Speaker 2 But this is why, I mean, this is why like one in three teams that join HF0 break 2 mil annualized revenue in 12 weeks.

Speaker 2 This is why every batch we have a team going from 500K to 20 mil annualized or from 1.8 mil annualized coming into 10 mil annualized, because you got to be focused on those 10x levers nowadays.

Speaker 2 And look, like there are other ways to build a company that aren't wrong, but if your competition is doing HF0, and they're 10xing,

Speaker 2 that's going to be a challenge. And that's where we're getting to in the cycle where the competition is just

Speaker 2 intensified so much. Where if you're not thinking in this 10X way, if you're not thinking in this 100x way, someone else is.
And they're going to smoke you. They're going to just blow right by you.

Speaker 1 And just to give you some of our secrets to Sauce at Waste for Capital, me and my business partner, we meet on the weekends to handle this, what we call game selection. What game are we playing?

Speaker 1 What is the number one thing we could be doing? Because on the weekends, you have more energy. You want to be focused your highest energy resources at your highest energy task.

Speaker 1 One of the reasons I'm assuming

Speaker 1 people avoid the number one problem is because it's the most difficult problem.

Speaker 1 And they go for the slightly less difficult, or else I guess by nature, they would be doing working on the number one problem.

Speaker 2 I think this whole thing is bottlenecked by realizations. And then these,

Speaker 2 it's a very subtle thing.

Speaker 2 These realizations are also,

Speaker 2 you need to be talking to your customer, getting the truth about the market. That's one aspect of it.
But then you're right in that there's some fear.

Speaker 2 um that's also covering it but it's it's much more subtle than that um

Speaker 2 and so

Speaker 2 that's where I think this subtraction where you're not even there's nowhere to run to, and you actually can end up as a founder just sitting and thinking-not forever, you can't just like spend like you know, two years thinking, but but when you actually just kind of roll up with this recursive subtraction, there's nowhere to run from that fear.

Speaker 2 Often, that's where it's sitting. And it's often because it's a realization that might mean that your business doesn't work, that you need to go like

Speaker 2 grind in some direction where you might realize that this like picture that you got excited about and attached to of like the story of a certain business needs to shift. And like that's painful.

Speaker 2 That you actually, and we see it all the time in HF0 that you know might you might have a team of eight to 12 people and actually you need to let half of those people go because they're not the right fit for the direction that company actually needs to head.

Speaker 2 And so it's these chiropractic adjustments to the company that are

Speaker 2 often quite painful.

Speaker 2 Yeah.

Speaker 2 And

Speaker 1 you're on your 11th batch, presumably over 100 companies. What percentage of the time, I'm guessing it's zero, but what percentage of the time can you not pivot into something?

Speaker 2 The smartest founders, there's just so much greenfield.

Speaker 2 There's so much opportunity in this age of AI that like, even if in the middle of the batch, they realize they need to start from scratch, some of like the teams that really take off like almost completely adjust course.

Speaker 2 But now we've gotten so selective that, you know, more and more of the teams already know the direction that they're headed coming in. They're already kind of like Seed Series A companies.

Speaker 2 But you can just move so quickly now. You know, like you see these companies who are like, you know, zero to 10 million, zero to 30 million, zero to 100 million in like a few months.

Speaker 2 Those opportunities still exist right now and they're like ripe for the taking.

Speaker 2 If you have clarity of mind, you're having a high rate of realizations, you can like really take off right now, even if you have to change course in the middle of the batch.

Speaker 1 David Deutsch famously

Speaker 1 in his book, Beginning of Infinity, says that there's an infinite amount of innovation because innovation innovates on itself.

Speaker 1 The odds of

Speaker 1 a founder and a strong team not finding an area to pursue with enough forethought or close to zero.

Speaker 2 I mean, a lot of the mistakes I've made as an investor are passing on founders who seemed exceptional, but the direction they're heading didn't quite make sense to me.

Speaker 2 And then a lot of those founders that I passed on for that reason in the past ended up building incredible companies.

Speaker 2 So that's like, you know, something I've just learned over and over again the hard way that, you know, at least for us and the way that we invest on the spectrum of like thesis driven to people driven, we want to be completely people driven and back the best founders to founders that we think could be, you know, the public C,

Speaker 2 public company CEOs of this AI age.

Speaker 2 And I've just seen that play out so many times now.

Speaker 2 And I do think there's, there's this like

Speaker 2 relatively infinite green field right now, where even if the models stopped improving, there's actually just so many applications that haven't been commercialized yet that people haven't quite figured out.

Speaker 2 The area under the curve leading up to AGI. Like I know a lot of people are like, oh, once there's AGI, is that just going to wipe everything out?

Speaker 2 Like in our, you know, in our internal memos and stuff, we we talk about that. That's, you know, there's, there's some truth to that.

Speaker 2 But the area under the curve leading up to that point is just going to be the most dense period of like value creation ever known to mankind. I mean, really, I think exponential in a way.

Speaker 2 And I'm, I'm so excited to, to be a part of that. I think so much of what we're doing right now in Silicon Valley or so much of what we're doing at HF Zero.
is bringing that to the world.

Speaker 2 How do we take this like incredible innovation, like you're mentioning and innovate upon it? There's just so much that we can bring to the 78 billion people of the world in terms of value from this.

Speaker 2 And I'm actually, you know, a lot of people give OpenAI shit for not being a nonprofit anymore and this and that and the other thing and not being open source.

Speaker 2 But like, if Sam hadn't done it this way, all this like AI stuff might be like stuck in enterprise contracts that Google was like doling out and had some like long certification process for.

Speaker 2 And, you know, maybe we would have had safer AGI when it came around. That's a fair point.

Speaker 2 But the way that it's playing out now and because of the path that OpenAI charted,

Speaker 2 we really have this opportunity to bring the value of this technology to everyone in the world.

Speaker 1 You use this term, the compound return of flow state.

Speaker 2 So flow was a term popularized by Mikel.

Speaker 1 I can't pronounce his last name, very difficult last name in his book, Flow. And it's this idea that once you start working on something, at some point you're in this flow.

Speaker 1 It's kind of like being in the zone in basketball and everything's clicking you're moving fast

Speaker 2 and you've taken this to the next level you believe in the compound return of flow state give me an example of that and what what does that mean exactly so so the clear examples of this are actually when you need to build hard technical things so when you need to build something that's like really hard in software it might be scoped out to take like six months two years to build out but if you could actually I mean, I experienced this in my own CS classes when I was first starting to code.

Speaker 2 If you actually can like isolate yourself away where there's literally nothing else going on in your life other than building that thing and then you have uninterrupted flow state where like and i'm saying uninrupted flow state really at hf0 our goal is like we think the most productive people get it down to three to five interruptions a day we want to get it to zero to one interruption per day if you can stitch together multiple days where the context of a system is just fully loaded in your brain and nothing has pierced that and you can end up you know, you code until you go to sleep, then you wake up and you're back coding, and there's just nothing that interrupts that flow.

Speaker 2 We've seen founders in two weeks build the system that they thought was going to take them six months or a year plus. And these are already the best engineers in the world.

Speaker 2 These are like crazy cracked engineers.

Speaker 2 And they just like, they come out of the basement of HF Zero and they pop their head up and they're like, I haven't seen, I haven't seen outside for, I don't even know how long.

Speaker 2 I haven't even been up from the basement. I've just been like.
sleeping down there, but it works.

Speaker 2 And then they show you and you're like, what the fuck? And it's almost like they got like a beam from some alien civilization or something that just like delivered this code to

Speaker 2 them. But really, it's that they were able to stay in an uninterrupted flow for like two weeks straight.
Those are really special. And

Speaker 2 it takes a lot, like even within HF0, it takes a lot to be able to do that. For example, like Open Router started, it's a company that started in HF0.
Alex Tala did the batch as co-founder.

Speaker 2 Lewis couldn't get a visa at first. So then he came in a later batch and then ended up essentially like joining that batch when we essentially did two batches.

Speaker 2 Lewis was just like in, he was just so cheery. He was just in such a deep flow state for like a week or two in the basement at HF0.

Speaker 2 And

Speaker 2 they had like a lot of scaling challenges because things were growing so quickly.

Speaker 2 And then he came up and he still hits us up sometimes and is like, hey, can I just come back to the house and work out of the basement? And like, I don't even need a room.

Speaker 2 I'll just, I'll just sleep down there and just like be in constant.

Speaker 2 And I think just so many of the

Speaker 2 top technical founders, they've tasted this before. They've experienced this before, especially early in their careers, especially when they were getting their first company off the ground.

Speaker 2 And it's something that as a builder, you just like yearn for.

Speaker 2 Because

Speaker 2 people talk, oh, is 10x engineer real? Is 100x engineer?

Speaker 2 And those engineers, like, what's happening is they're dropping into this deep of a flow with these compounding returns where like usually in like some continuous flow, they're like.

Speaker 2 birthing you know their life's work i almost call it you know it doesn't have to be religious in any way but it's almost like the holy Spirit is flowing through their fingertips.

Speaker 2 They've almost, as a human, gotten out of the way and they've tapped into something greater than themselves and that's flowing through here.

Speaker 2 But then if you're interrupted, you lose connection with that, you know?

Speaker 2 And it's not the same. You can still code, you can still build, you're still really smart.
But when you're tapped into this like other thing that's flowing through you,

Speaker 2 that's where there's like infinite energy and that's where you can build 100x faster than you can any other way.

Speaker 2 And so we actually had one of the

Speaker 2 heads of one of the top endowments.

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Speaker 2 When you heard my last podcast, he asked me to grab breakfast. And before I could even sit down, he said, you know, Dave, I get what y'all are doing because I'm a jazz musician.

Speaker 2 And in jazz, you know, the best solos, they don't come from, you know, just years and years of preparation. They actually come from this other place.

Speaker 2 And what y'all have done with HF0 is you created the conditions where

Speaker 2 people are able to tap into that other place, wherever that is for them, and not get interrupted, not get broken from that other place.

Speaker 2 They're actually able to, in the 12 weeks, stay in connection with that other place and be building from that place longer than ever in their life.

Speaker 2 And I almost, I also think of it kind of like surfing in a way. Like you surf, you stand up, you're up for like two seconds.
maybe seven seconds, maybe 12 seconds. It's great.

Speaker 2 And then every once in a while, I still remember I was like in Taiwan, every once in a while, you catch a wave that like never ends.

Speaker 2 And it feels like that one wave, if you added up all the waves that you'd surfed for the past like three years, it wouldn't even add up

Speaker 2 to the joy and the pleasure and the amount of time that you got to spend on that one really long wave. And so I think.

Speaker 2 Similar to how surfers are all chasing that wave that I'm talking about, that I could think of that one wave for me, I think the best hackers are chasing that almost wave wave of connection to their flow.

Speaker 2 And that's why they love HFZero so much, because we're able to create the conditions where just we've pretty much productized being able to drop into that zone of your life where really where people birth.

Speaker 2 That's that is where I believe people birth their lives work from.

Speaker 1 And I hear you on the wave, surfing that wave, just like

Speaker 2 I either in solo or with my business partner, we might have three, four hours of just this epic flow. Why does flow compound from day to day?

Speaker 2 Why does this two-week process work versus 14-day spread over two years?

Speaker 1 If you could theoretically do that, would it add up to the same? Or is there this compounding from day to day? And why is that?

Speaker 2 It's not even close.

Speaker 2 It's because like when you're, I don't know how much software you've written, but when you're building software, you have like this whole system, like this context loaded in your brain.

Speaker 2 And it's like building up over time. And when you have that full context loaded, it's so much easier to build on top of.
It's so much easier to add things. It's so much easier to get things to work.

Speaker 2 And then when you have to reload that context every time, I mean, I experienced this when I go back to, you you know, we have like an internal HF0 app that I've built, that I've picked up over and over again over time.

Speaker 2 Like that first two days that I spent building it, you know, the type of thing that would have taken me 10 minutes to build then with all that context loaded might take me like two hours to build now.

Speaker 2 It's really like an order of magnitude difference. And so that's, that's the key.
I'm

Speaker 2 curious how it translates to things beyond software, but I think it probably translates maybe even more there. But certainly in software,

Speaker 2 it's just so critical to have that continuous context.

Speaker 1 I've done some Ruby on Rails apps, but I'm by no, no definition a software engineer on any level.

Speaker 1 The way that I'm thinking, the way that I would put what you're saying is you're in the shower, you're thinking about something, and this brilliant idea came up in your head and you need to go and write it down.

Speaker 1 If you wrote down 10% of it and then later in a week tried to write another 10%, it would not be as brilliant as it was when that lightning struck.

Speaker 2 That's such a good analogy for it because like, but to write down these types of shower thoughts, these types of realizations, you actually can't write them down that quickly.

Speaker 2 You end up needing to like maybe spend four days straight acting on writing that.

Speaker 2 And then if you lose connection with that, that realization, and that's when I'm talking about these realizations where then you need to grind on them, like that's exactly what I'm talking about.

Speaker 2 You have this thing that you're in connection to. I call it like, you know, you have your felt sense of the thing.

Speaker 2 And then if you're able to just like actually write it all out while you're still in connection with that felt sense of it, it's it's not even just that it's faster, David.

Speaker 2 It's that actually the quality of it is way higher.

Speaker 2 Like, you and when you talk about building like a delightful experience for the user, that actually inspires delight.

Speaker 2 They actually, you know, so many of these AI tools that they use once, they use twice, they maybe like buy the contract, but they don't end up fully using.

Speaker 2 Then, the best AI tools become part of your workflow and you can ever imagine going without them. Um,

Speaker 2 we've gotten incredible at filtering for this. Like, this is one of the biggest things things we look for.
We have had almost probably almost 40,000 teams now start the application for HF0.

Speaker 2 And so we're having to go, we only back like 10 teams at a time. We had to go through like a ton.

Speaker 2 Really what we like have gotten world class at filtering for is the quality of AI revenue because you can actually look in and see before you have churn numbers and retention numbers to look at because the company is breaking out so quickly, there's these ways, these usage patterns.

Speaker 2 There's these ways that the customer is using these AI products that just tell you so much about how entrenched it actually is going to end up being in their workflow versus being like the next thing that they just have, that they're just trying out.

Speaker 2 And an example of this is chat, right? So, like, you know, some AI products, if someone's using it like 10 times a day, that's like, holy shit, that's incredible.

Speaker 2 It's the best usage pattern we've seen for that type of product. For chat, for example, people do tons of messages to Chat GPT every day.

Speaker 2 And

Speaker 2 if they're sending 10 messages, even if they're sending like 10 messages a day, if they're even sending like 100 messages a week for chat, that's actually not that much.

Speaker 2 And so we've gotten like really dialed into seeing the kind of deltas across like different AI interfaces and stuff of what are actually the usage patterns where someone's really using something versus like, like they're actually just having fun chatting to a chat bot and they're like testing it out.

Speaker 2 And it looks like a lot of usage, but it isn't. And when you're tapped into this felt sensor, that's where I think.

Speaker 2 founders in this age of AI are able to make the types of experiences that just become entrenched in not just someone's workflow, but it's really almost like an extension of someone's being.

Speaker 2 So similar to how our cell phones have become almost an extension of ourselves as humans, some of these, you know, Chat GPT for a lot of people has become almost like an extension of their brain.

Speaker 2 I have a friend who's like researching how the existence of chat GPT and LLMs changes the way our brains fire.

Speaker 2 And it's actually that entrenched when it's done well, is that instead of going to reach for this coworker,

Speaker 2 we go reach for this AI tool when it's actually entrenched. And so that's

Speaker 2 the types of things that you can create only from this really deep place of both empathy with your user and of like a felt sense of what needs to be brought out.

Speaker 1 To use another metaphysical word, I would say those products have soul.

Speaker 2 The product that I thought about was superhuman.

Speaker 1 I don't know what it is, but you could tell they're trying to solve my problem.

Speaker 1 And it's just fundamentally different than somebody putting up a list of specs and somebody executing technically on these specs without really having empathy with the user.

Speaker 2 Yeah. And trust with the user is just so critical.
I mean, like, there's constantly going to be people saying, you know, you're using superhuman.

Speaker 2 Oh, should you check out like this new tool, that new tool, this, that, the other thing.

Speaker 2 You know, Fixer is one of our top companies right now, and they have the best AI email tool. And people are constantly, oh, why don't you know to their customers? Why don't you go try that email tool?

Speaker 2 Why don't you? But people just trust Fixer because they know that the way that it's being built is, you know, those founders spent seven years before this building the best PA agency in the UK.

Speaker 2 And they have like years and years and years of training data as an advantage over everyone and empathy with the user over anyone who's competing with them.

Speaker 2 And of course, there were so many competitors in the space and they're just dominating everyone. And it's because of this.
And then another part of it is because their users trust them.

Speaker 2 And instead of constantly switching tools, they're just like, no, Fixer is going to keep delivering the delightful experience that I need.

Speaker 1 The gold standard for this is obviously joining HF0, being in the basement and going into monk mode within the program.

Speaker 1 For those looking to implement HF0 light into their life, what are some practical steps that they could do in order to have more flow in their life?

Speaker 2 The exciting thing is that there's not just HF0 now. There's a lot of other residencies that are starting to emerge.

Speaker 2 And I really think it's going to end up being the whole next wave of early stage venture.

Speaker 2 I think like residencies, this format of company building could end up eating like 40% of all of early stage um because it's just it's actually the product that founders need at that stage you don't really need that much cash in the beginning to get off the ground then look you know if you're training your own model at series b series c or like later on in your frontier lab yeah you need tons of compute but actually in the beginning with ai now your costs are lower than ever you need less cash than ever and so i'm actually in el segundo right now uh at a residency called desipolis and it's incredible There's residencies that are starting up in New York.

Speaker 2 There's residencies that are starting up in Europe. And these, I really believe these residencies are going to sweep the entire globe.

Speaker 2 And it's really going to change the nature of the way that we do startups.

Speaker 2 And it sounds like this crazy thing, like, really, how many founders are actually going to like move into a residency when they're starting up?

Speaker 2 I was asking myself the same question two years ago, but now, you know, 60% of the teams we back have kids.

Speaker 2 So founders who have kids are choosing to do these residencies than like actually the the set of founders that could be you know enforced into this residents who have company building.

Speaker 2 I think actually it's like any founder who's who's sufficiently serious about winning is going to end up turning to these residencies.

Speaker 2 So, you know, to answer your question, I think they should probably look for their neighborhood residency.

Speaker 2 The craziest thing about these residencies, too, is at the end of HF0, the main feedback we get from more than 50% of the teams is that they actually want more.

Speaker 2 In the beginning, when I'm selling a founder on 12 weeks of HF0, they're like, whoa, that's a lot. I'm going to leave my partner and leave my family.

Speaker 2 and leave my really nice apartment because they're a repeat unicorn founder or whatever for 12 weeks like and you know at first they're like no way and then we talk to them and they meet other founders who have done it, and then they end up joining.

Speaker 2 But then at the end, they actually want more. That's the crazy thing about this product.

Speaker 2 So I think what you're actually going to see is founders doing multiple of these residencies where they might do Shipless and El Tegundo. Then they might come do HF0

Speaker 2 in San Francisco. I think some founders might even do like two or three of these.

Speaker 2 And they might be able to just skip pre-seed and seed entirely and get to that escape velocity of $10 plus annualized revenue.

Speaker 2 They might be able to skip Series A, go all the way to Series B with these residencies. And it's going to be such like an equity efficient way for them to to get off the ground.

Speaker 2 So that's, that's one side of the answer is like, actually,

Speaker 2 I'm thinking a lot about, you know, how, how I make sure that we're a responsible steward of this whole residency movement that I think is going to be incredibly disruptive to early stage venture.

Speaker 2 Now, the second is like,

Speaker 2 setting this up in your own life. A lot of the top founders who join HF Zero have actually done this as much as they can in their own life.
The one thing I'll say is it takes a lot of work.

Speaker 2 to set this up. It's way more work than people expect.
People like, oh, you could just pay someone to do your food. Oh, you can just pay someone to do your laundry.

Speaker 2 But to actually get the number of interruptions down in your day is like really, really difficult.

Speaker 2 Because even if you like, pay a laundry service to come pick up your laundry, that two minutes, that five minutes of even having to go figure out the handoff, like you just stopped the compounding return of your uninterrupted flow.

Speaker 2 Um,

Speaker 2 and so

Speaker 2 if I were a young founder and I was trying to figure out how to do like HF0 light, what I would do is I would probably find one of those Adam Newman buildings where the workspace is in the same building as my apartment.

Speaker 2 I would probably try to find one specifically that has a Chipotle and a Starbucks downstairs.

Speaker 2 And I would get like a dialed in flow where I'm getting food, getting coffee, getting to my workspace without losing the context in my brain.

Speaker 2 That where I almost can do it on autopilot, where the order, I might even build like a little like AI workflow that just sends up the exact like burrito that I want, somehow has the instructions that it communicates to the person delivering it.

Speaker 2 or that I walk down and it's like already there and I grab it and I'm just still thinking about the problem I'm solving. It's like so valuable to keep that flow uninterrupted.

Speaker 2 And so, I would like dial in these processes to like an insane degree. Um,

Speaker 2 yeah, and pretty much that the biggest thing that we do at HF0 though is actually just auto, like by living with the founders, we're able to like witness what's actually happening.

Speaker 2 And so, as much as you could do that on yourself, that would be really valuable.

Speaker 2 But what I might do is actually hire a friend or ask your partner, hey, can you just like watch how I work for a day or two? Um, and them note every single time you're interrupted from your flow.

Speaker 2 And like for most people, if they haven't already optimized this, it's not about two hours here or an hour there. Most of these interruptions are two minutes or five minutes or maybe even 30 seconds.

Speaker 2 But the cost of it's just like so high and it like pains me. I mean, I tell the founders on our, we start every HF0 batch with a founder retreat where we really set the container.

Speaker 2 And the container is what makes residencies different than just like a hacker house is that a residency has a container, a period of time with a clear start and end where things are different.

Speaker 2 And that's where you get so much of the value of this. Our container starts with this founder retreat that's really special.

Speaker 2 And one of the things I do, one of the first things I say is I look at everyone I talk about, you know, like, this is my life's work to be building this face, this residency, this thing called HF0.

Speaker 2 And the thing that I, that makes me come alive about it is when I see someone. in such a deep flow where it almost is as if the Holy Spirit is flowing through their fingertips into code.

Speaker 2 And if you interrupt someone who's in that flow, oh my God, there's like not many things that make me angry, but that is like the one thing that would make me like furious.

Speaker 2 And so like, this is like the thing I'm probably best in the world at.

Speaker 2 And that like, you know, I think one way of finding like what startup you should build is figuring out what really frustrates you.

Speaker 2 Like when there's like a brilliant engineer and they're just like in their zone and something interrupts them, like, help me, God, like, that's like.

Speaker 2 In that moment, I want to just smite like whatever is interrupting their flow.

Speaker 2 And so I think like, that's why the the level of like attention to detail and the kind of craftsmanship we've brought into HF0 is there is like everyone on my team feels that same way.

Speaker 2 And like I've been able to bring on some folks who are who even feel this even more than myself. And so the level of attention.

Speaker 2 So if you can find a friend who feels that way for you, who cares about you that much, where they want to see you in flow and like anything that tries to interrupt your flow, they would almost like smite.

Speaker 2 I would try to find a friend like that and get them to audit a day or two in your life and then try to figure out how to remove and defend yourself from as many of those distractions as possible.

Speaker 2 Many of those, I didn't want to call them distractions, interruptions, because they might be like the third most important thing in your business, right? So labeling them as a distract.

Speaker 2 When I think of distractions, I think of you know, like silly, silly things,

Speaker 2 but they actually might be really important, but you're actually, you know, they're noticing that you're switching to doing that thing versus just like, it's just, it's like a 10x difference when you don't let yourself do anything else except for the one most important thing.

Speaker 1 And this is such an important thing. Alex Tremosi, who's been on my podcast a couple of times, he talks about this concept of the woman in the red dress, which is you're focused on something.

Speaker 1 Then it's from the Matrix movie. They see the woman in the red dress.
And then Neo turns to Morpheus. And Morpheus is like, look again.

Speaker 1 It's somebody pointing a, it's an agent pointing a gun to their head. And sure, it's, you could grasp this on so many levels.
So the first level is if you're doing HF0,

Speaker 1 don't go start another startup, even though it could make you money in 20 years or whatever. It's there, there's like a, there's a macro side to it.

Speaker 1 But then the more deeper you go the more nuanced these distractions might be it might be the sam allman one is just such a good example it could just be yes this could improve your efficiency 30 40 but here you're getting 10x and here you're getting 100x so this small strategic change within the same business that you've been working on for a decade that is the woman in the red dress these like small minor

Speaker 1 distractions and and the the second aspect that i would say is the way that i would crystallize what you're saying is if you have a competitor that's you're neck and neck you start a startup and you want to completely torpedo that second competitor, get them to hire somebody that will tap their top engineer on the shoulder four times a day.

Speaker 2 The end for like every company, they hire some non-technical person who ends up knocking their SAR engineer out of the zone.

Speaker 1 Who is, by the way, the nicest, sweetest, most, most well-intentioned person on the planet. And yet they'll terfu.

Speaker 2 That's, that's really, that's really it. And I mean, this is the thing, right? And AI right now is so competitive.

Speaker 2 The teams that do this residency way of company building, the cognitions of the world, the Facebooks of of the world that choose to like bring their team and go all in in this way, that's just what it takes now.

Speaker 2 Jensen talks about this all the time. Like, what are you willing to sacrifice? How much are you willing to suffer to win? Like,

Speaker 2 it's, it's not, you know, 10 years ago, there was competition. It's a whole other level now.

Speaker 2 And with how many people are being enfranchised to build now and getting into vibe coding and all this stuff, and like that being like the gateway drug for them, learning how to build, like, there's about to be like 100x the number of people enfranchised into building startups.

Speaker 2 And like the teams that are, you know, if you have two teams competing, the team that does HF0 or that sets up this almost like monastic monastic aesthetic way of being for them and their team, those are the teams that are going to win.

Speaker 2 And we even like think this so much that we're actually thinking, like, instead of scaling up the number of teams at HF0, we're just going to hold, you know, 10 teams per batch, which we've had since the beginning, we're actually going to offer to extend HF0 for teams.

Speaker 2 So if a team does the 12 weeks and they're crushing it, instead of like leaving HF0,

Speaker 2 they might be able to just move a few doors down to a house that's just for them and their own startup. That's like their own team's house.
And we just keep running HF0 for them.

Speaker 2 And they just pretty much never have to leave that state of flow and our belief is like what well one it seems like founders are willing to give a little bit more equity for this but even separate from that it just makes our companies better because like like look even if you're sequoia you shouldn't be able to pick this well the results that we're getting are insane from hf0 our first three batches are already greater than like 10x myc just a few years in and like teams are just like one in three teams breaking two mil annualized revenue in 12 weeks like what what the hell and so what's actually happening is that this way of company building is superior this way of company building is the way that i think pretty much everyone in 20 years will be building companies.

Speaker 2 And right now it's just 10 teams at a time, but there's going to be this whole residency wave of people figuring out how to take this product we've developed at HF0.

Speaker 2 And really that startups of like every age have developed themselves for their own company

Speaker 2 and offer this to more and more founders. There are literally tens of thousands of founders who want, founders are starting to realize.
that this is the case, right?

Speaker 2 I think a lot of investors still don't get it. They're like, oh, this residency thing.
Like, oh, that's cute.

Speaker 2 But founders are realizing it because they're seeing their friends just zoom by them when they drop into these residencies. And so I think it's going to change the entire shape of early stage venture.

Speaker 2 I think it's going to change the entire shape of what it means to build a startup.

Speaker 2 And really, for the folks who want to build the generational companies of this period, this is just what it's going to look like.

Speaker 1 Just to add a little bit more of a practical point, I recently did this. I was really influenced by our last conversation and we restructured.

Speaker 1 We do recordings now on the same day every week, week, two days every week, and the rest of the time we could spend in flow.

Speaker 2 I also did a time audit. I looked on my calendar, which is step one.

Speaker 1 I think you would probably say the step two would be what's not on your calendar, which is probably the most distraction.

Speaker 2 That's when you need the friends or a camera or something.

Speaker 1 So, there are some

Speaker 1 Pareto aspects to it that you could do where you might not have an HF0 at your disposal, but you could think about if I take this to be a truth that you do your best work when you do it uninterrupted, How do I box in uninterrupted time to, A, in your business, figure out what the most important task is?

Speaker 1 Because this applies to any business, this kind of 80-20 rule.

Speaker 2 What is the 20% of thing I should be working on?

Speaker 1 And B, how do I then work on solving this number one problem? Because I actually think most of these number one problems in businesses across the board oftentimes are some of the hardest problems.

Speaker 1 They're not just the ones that the founders are ignoring, because otherwise they would be working on that number one problem.

Speaker 1 I think there's at least a correlation between how difficult something is and how important it is when it remains undone.

Speaker 2 Well, they say like, your job as CEO is to hire the smartest people you can to solve the problems in your business.

Speaker 2 And then, what you're left doing as CEO is either doing the shit that no one else wants to do or the shit that the smartest people that you could hire couldn't figure out. Right.

Speaker 2 And so, so, I think that's

Speaker 2 the

Speaker 1 truth here: it's the

Speaker 2 most important thing is usually like not that fun. It usually involves a lot of suffering, usually involves a lot of grinding, and it usually involves facing the truth in a way that's

Speaker 2 painful.

Speaker 1 Well, Dave, this has been an an absolute masterclass. You did not disappoint.
What would you like our listeners, GPs, LPs to know about HF0?

Speaker 1 And what's the best way for them to get in contact with you?

Speaker 2 So my email is dave at hf0.com. And the biggest thing I would say is that you probably should be sending your companies to HF0,

Speaker 2 especially the one like you've already backed a company, you already have equity in that company and you want them to win.

Speaker 2 And they're building, especially if they're building an AI, it's going to be more competitive than ever and that HF0 gives them a huge edge.

Speaker 2 So if you want your company to be one of those that goes from like 2 million to 20 million annualized in 12 weeks, you should be sending them to HF0.

Speaker 2 And of course, it can be very hard for them to get in, but definitely shoot me an email and let me know. And we'd love to meet them.
We meet 100 teams every batch that we fly out to meet in person.

Speaker 2 We only pick 10, but we'd love to talk to any teams that you think are really incredible, especially that you've already backed. Most of the teams we back have already raised their Cedar Series A.

Speaker 2 And they're joining HF0 because they want to get an edge over their competitors.

Speaker 1 Well, Dave, really appreciate you jumping on, everything that you're doing. Looking forward to sitting down soon.
After between batches, I don't want to interrupt your flow.

Speaker 2 Yeah, we're right in the middle of it this batch, and it's crazy. Like seven of the 10 teams this batch, we're in the middle are just growing exponentially.

Speaker 2 It's like, you know, seven out of 10 is insane. And like, I'm not just saying growing, like growing exponentially.
I went to demo dinner this Monday.

Speaker 2 We have demo dinner every Monday during HF0 and everyone shows their progress.

Speaker 2 And like, holy shit, just the quality of teams that we've been able to get and then the speed at which you can build an AI just keeps getting faster and faster and faster.

Speaker 2 This demo day that we're having first week of December, it's already like the demo day is already filled and there's like 80 investors, 80 GPs on the waitlist. This demo day is going to be insane.

Speaker 2 People are going to be like, what the fuck? Like, how are so many startups growing this quickly? Like, what are y'all drinking there at HF Zero?

Speaker 1 And we do have special water.

Speaker 2 We do.

Speaker 1 Awesome. Well, thanks so much, Dave.
And talk soon.

Speaker 2 Take care.

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