Lessons from investing in 1,100+ network businesses - Jose Marin (FJ Labs)

Please note: The transcript is automated, meaning that there will be mistakes.

Jose Marin (FJ Labs): I think that we are just at the tip of the iceberg as you mentioned before. There is still a lot of stuff that can happen in marketplaces that has not been done. That doesn't mean that we have not seen a lot. Of course, there's been a lot of incredible valuable businesses that have been built, but there is still a lot of stuff that can happen.

Sjoerd Handgraaf (Sharetribe): Welcome to 2 sided, the marketplace podcast brought to you by Sharetribe. Hello, and welcome. I am Stewart, CMO at Sharetribe, and I am your host. Welcome to the first episode of season 3 of 2 sided, where in this season, we'll interview marketplace investors to discover what they think, makes a marketplace successful, what they look for in marketplaces, and how investors see the future of online 2 sided platforms. We're kicking off this season with a true heavy hitter in the world of marketplaces.

I'm talking today to Jose Marin, cofounder and partner of FJ Labs, a very well known fund, the number one marketplace angel investor in the world, I would say both in quality as well as quantity. At the moment, though, of recording this intro, I checked out the website, and they have 1131 startups in their portfolio. For example, Airbnb, Alibaba, AngelList, and if you're paying attention to realize that, oh, those are only the most known ones starting with the letter a. I truly don't wanna waste your time than go through the entire alphabet, but it is an incredibly impressive portfolio. We have a great conversation to get to.

And in this conversation, you'll hear Jose share how FJ Labs has built its unique investment approach together with his partner, Fabriz Grinda, how they focus on their high quality deal flow and utilize their vertical expertise. We also discussed some of the emerging trends in marketplaces that they're seeing in their portfolio, such as b to b digitalization and cross border commerce. And finally, he has some really, really valuable advice for early stage founders. I'd say, let's just get to it. So here's my conversation with Jose Marin of FJ Labs.

Hi, Jose. Welcome to the show. Great pleasure to

Jose Marin (FJ Labs): be here with you guys. Thank you for having me.

Sjoerd Handgraaf (Sharetribe): I really, really appreciate you coming here. I mentioned this already to you, but I've been attending the marketplace conference in the last couple of years. You always gave the closing keynote, which has always been super insightful. And, anyway, like, being in this space, FJ Labs, is is very well known. But before we dive into all of this, could you tell the audience a little bit about who you are and and how you, what did you do before you became a marketplace investor?

Jose Marin (FJ Labs): I've always been passionate about technology. I actually grew up pretty much everywhere, and I went to Stanford very young. I I did 2 master degrees there. And while I was at Stanford, you know, I I was very interested by technology. And, actually, frankly, as an engineer, before, always had the dream and the idea of building something and actually being at at Stanford helped me get acquainted with, you know, a lot of the tech businesses there and and, frankly, a lot of the investors, you know, which was an amazing, not that, planned step, but it turned out to be very, very good.

After the GSV, I I started my first company. I've been a serial entrepreneur that has turned into an investor by chance, but I went on to build my first company, right out of Stanford. And at that time, 24 years ago, you know, there was nothing in Latin America. We were absolute pioneers, and and and we launched a company that was building the eBay of Latin America at the time. It has evolved now, and and now it's more of an Amazon type of business for Latin America.

But, you know, we raised, over a $100,000,000 for that. But today, everybody raises a $100,000,000. But at that point in time, there was not even venture investors in the region. We raised capital from private equities, and we ended up having a very interesting battle with our competitor. Not that we that we ended up, losing, but we still did very well.

We had 30% of the market, and and we were profitable. We merged with our competitor, and then they took on the business and and and and brought it public. And, you know, today is is the largest company, in Latin America in the tech space. You know? It's it's, it's called is this OLA?

No. This is MercadoLibre. Oh, MercadoLibre. Okay. Yeah.

Okay. Today is obviously MercadoLibre, and these guys have done a phenomenal job in scaling that business. But I'm proud to say that that as an entrepreneur, we, you know, we we put our little grain of salt into, you know, building an absolutely transformational company. You know? That's, how we started.

And in parallel to that, my business partner, Fabrice, gave me the technology and an Alec auction for a and a group of friends, to start, the Remate, which is a company I was talking about. No? And since then, I know Fabrice. The relationship has been, very, very interesting and and, you know, based very much on trust. We launched the Ramate out of his servers in Sofia Antipoli.

He was building, the Iberia France. And then after that, he went on and built a company called Xyngi while we were still building the Ramate. And when he exited that, we went on to build a company that became the largest classified business in the world. The company is called OLX, and and we sold that to Naspers some years ago. And in parallel to that, we actually experimented a number of, other company builds.

We build an online travel agency in Brazil, and we and we build a a number of other things, including a mobile classified business in the US that that that eventually became let go and today is OfferUp. So, you know, very, very strong entrepreneurial heart. And, frankly, you're always very motivated by the power of, of technology in making the the life of people better. You know? And that's really what inspires a lot of what I do.

I like to think that, that the world is becoming better and better, which actually is. And I really think technology can play an absolute role in making sure that people have access to better products, better services, and better lives. So and I think that's probably the biggest inspiration.

Sjoerd Handgraaf (Sharetribe): I knew about the OLX. I had missed the other part. From the sounds of it, it sounds like it's always been, both both you and Fabrice have always been, like, around classified 2 sided platforms in one form or another. Do am I am I assuming that right? Or

Jose Marin (FJ Labs): Yeah. You are assuming this completely right. I mean, we've always been passionate about, the power of marketplaces. And, you know, we we actually have been doing this for a long time, and and we like to think that we know what we are doing, both on the building side and operational side and also on the investing side. No.

We we certainly have been very, very exposed to trends and and, you know, we like marketplaces. What I can say is that it was a very unexpected situation becoming an investor. No? And and by the fact of being a very exposed people to marketplace areas, a lot of people started to come while we were still running our businesses. People coming to us and say, hey, guys.

We want you to invest. We want you to be part of, our story. We want your expertise. And then, you know, little by little, we started to invest our own capital, and more with the idea of learning, doing something that we like, being close to the market. And the truth is that, we ended up realizing that we had incredible deal flow and that we were making incredible returns.

So then we said, ah, we should probably be more aggressive. Then we became more aggressive with our own capital up to the point where, you know, the reason I said, hey. Why we don't create a holding company that let us do what we like? And that and that's really the genesis of FJ Labs. We didn't start at FJ Labs seeking, oh, you know, we're gonna be a fund manager, and we're gonna raise capital from people.

You know, it was more like, hey. Let's have a holding company that let us invest and let us capitalize on, you know, incredible deal flow, and frankly, doing something that we really like and we enjoy. No. And and then realize that, that the opportunity was significantly bigger, no, than what we initially thought.

Sjoerd Handgraaf (Sharetribe): Yeah. Could you tell a little bit about the deal flow? Because it's not like we, like, the goal of my interview is always to uncapture a little bit like what what is your marketplace knowledge, but I think FJ Labs is such a sort of special beast because I think the the is the tagline is the world's no. This is the, angel investing adventure scale because I think you have an incredible portfolio. And I think you mentioned something like 200 plus memos per week, or maybe that's an outdated number.

Jose Marin (FJ Labs): No. No.

Sjoerd Handgraaf (Sharetribe): That's that's very dated. Yeah. And I'm bringing this up not because, like, oh, let's see how, you know, like, oh, let's look how much money this fund has or how much they're doing. But because you're so specific, it's actually a rather relevant number. So could you tell a little bit about, yeah, your deal flow and how you do that?

Yeah.

Jose Marin (FJ Labs): Let me finalize the story of how everything comes together for us becoming a fund, and then I will say how the strategy works and how we have evolved. Because as I was saying before, we started investing our own capital, and we have a lot of our personal net worth, you know, invested into into FJ, you know, several 100 of 1,000,000 of dollars. And, also, so so, you know, we didn't envision that we were gonna be raising capital from anyone at the beginning. This is the truth. Yeah.

But then we realized that we were actually not rich enough to be able to take advantage of the opportunity only with our own capital. And very gratefully, we had, you know, Telenor, that has been a very active investors through the years in marketplaces, you know, approached us and said, hey, guys. We wanna do something together, and we wanna learn from you, and we wanna participate in the upside, and we wanna work together. That was obviously very flattering for me and for Fariz. And and and also an opportunity to say, hey.

Okay. Let's test how it works. You know, investing capital from third parties together with our own money. And that's how we raised our first $50,000,000 fund. Eventually realized that if we wanted to continue to scale, it was good to have other investors.

And we started by by contacting people with whom we have very tight relationships. Frankly, in a lot of cases, friends, and very quickly moved and raised a $175,000,000 second fund, mostly made with, you know, people that, you know, that we know well and and that in a certain way, we have trust. Very, very small handpicked pool of people. And most recently, our last fund, we we raised 292,000,000, and and that was, again, with a similar thesis, you know, with people that can think long term, people that we can build relationships and can grow with us. You know, little by little, we've been, you know, scaling with a, I would say, relatively small comparatively base of LPs.

No? So now we we have an incredible setup. We we are again running an organization. You know, Fabrice and I feel that we are running a business again. It happens to be a a a business that invests capital.

No. But, but but we manage already a significant amount of assets from third parties together with our money. No. So and now some of the biggest questions and challenges we have is, how do we continue to build a firm? No.

We have a strategy that works. We have an amazing team. We have 2 other partners. We have a process and a structure. And now, you know, the the the big question is, how do we continue to think into the future?

How do we continue to create the right incentives, you know, to make sure that we retain and attract the right people? And how do we make sure that our investors come in and invest in FJ Labs with Fabrice and Jose versus investing, in Fabrice and Jose. And that's that's the point where we are today. We're gonna go back out to the market early next year, to raise our next fund. You know, we are very excited with the results and and and, frankly, the continuity and and the place where we are.

So that that kind of brings together the story of, you know, my my background together with becoming an investor. Now go going back to your question on deal flow and how we are different. The key to what we do, well, what's the VAC? Frankly, I don't think if we would not have deployed, you know, north of $150,000,000 of our own capital, we would have been able to raise the capital that we raised because what we do is very different. You know?

We we don't necessarily follow the same strategy that a lot of other venture funds follow. And the key to that is that we don't need rounds and we don't joyboards. So pretty much everyone else in the market, smaller investors, bigger investors, people from previous companies that we have backed, all of them, you know, they say, we we wanna bring these people on board. Why? Because especially for other investors, these guys are not competitors.

No. These guys, are a complement into the round. When when when when we let's say, when they write a check, you know, of 7, 8, $9,000,000, which is the average CVC in the US, and we come in with 500 k, in their eyes, he's like, well, these guys are really not moving the needle, and we're and they're bringing vertical expertise. No? So that's the reason why we generate over 200 deals inbound per week.

No? So that's actually incredibly differentiated from a lot of other investors. No? Because, you know, we don't have to go out to the market and reach out to people because we want to invest in their businesses. They actually come to us.

Yeah. And in a lot of cases, they come to us because of the, you know, because of the fact that we don't step on the feet of other investors and they see us as a compliment. No? And and and when you think specifically about the dFlow, how can we have such an incredible dFlow? I mean, it comes from 3 places.

About 1 third of the deals we get come from other investors. Now about 50% of the deals we invest in come from other investors. So this already gives you an answer of why, you know, it's so important to be a complement to the round versus being a competitor to the round. Now we have built a network effect business ourselves as well because, you know, the more investments we have, the more founders and more teams within founding businesses, you know, eventually come back to us, you know, with new projects. And, also, that's the second source of deal flow.

Pee previous we have backed over a 1000 people and a 1000 companies with other members that them on its own eventually, you know, build new companies. And also we get amazing deals. And and the the third part of it is just people that continue to come to us directly. People that know that we understand marketplaces and that we have been operative in marketplaces space for a very long time. No.

So so that's how all of that comes together. So when you put together an incredible type of deal flow because we have a differentiated strategy and we don't step on the feet of others together with an operational capacity to systematically process 200 deals per week. And you bring in the vertical expertise and know how that we have in network effect businesses. That's what gives you the arbitrage. No?

Sjoerd Handgraaf (Sharetribe): Yeah. That's the part I was sort of hinting at that. I think it's just incredible that, basically, you've built your own network in like, network effects based deal flow, which is, like, I'm not an expert, but I haven't seen that anywhere else, and it's so nicely tied into the field that you invest in that I thought. That is, like, worth bringing up. Do you have this deal flow?

And I mean, I can hear the the Stanford engineer behind what you're saying that, like, we need the systematic approach. Like, I I feel that this is, also maybe one of the differentiator. I think I read somewhere that Fabrice is still taking cold inbound on LinkedIn, etcetera. So, like, you never I think where other funds sometimes put up some what feels like an unnecessary layer of associates and processing that it feels very, like, systematic for you. But then once a deal comes in, like, could you maybe tell a little bit, especially for pre seed, like, very early product, maybe even pre product marketplace.

I don't actually know. Do you do those? How do you evaluate an opportunity? Like, what do you look for?

Jose Marin (FJ Labs): Four things that we really care about. No. And the first one is, do we like the founders? Now everybody talk about, do you like the founders? No.

It's it's very easy to say, I will like the founders or we don't like the founders. But what does that really mean? Yeah. You know? What it means, the type of founders that we look for.

We want to have people that are extremely good communicators, people that can sell the dream, not only to other investors, but also to their own team so they can attract and retain amazing people. 2nd, we look for people that have analytical structured minds. Yeah. We like to see entrepreneurs that think how much money am I putting out putting in, how much am I putting out, and how am I gonna be making money out of this? No?

That doesn't mean that amazing entrepreneurs cannot, you know, make great businesses without necessarily having that structure at the beginning. Yeah. But we like to have that structure, and we like entrepreneurs that come back and say, hey. Listen. These are my numbers.

This is the margin. This is the money we put in. These are the unit economics. So we look for a certain analytical twist into those type of founders. And Yeah.

Most important to say, people that have passion, that they are doing something that they really like and that they really care about and that they are doing it for the right reason and in a certain way that they can be relentless. Yeah. So that's the first part. We need to like the founders. Then second, we need to like the business.

Fabrice is very good in structuring information, and we have a lot of these in in Fabrice's blog and also in DevJ Labs website. But there's a number of criterias that we look into each one of those businesses that we analyze that we like to explore. No. And, you know, examples are like the competitive dynamics. You know, can can this business be a category killer?

Do we have a first mover advantage? Is the market big enough? How is how is that market growing? So, you know, some of these things are are just things that we specifically look and check into each one of the companies that we analyze. No?

So when and and that's the 2nd bucket. The 2nd bucket is is that. The 3rd bucket is the terms. Since we don't lead rounds and we don't join boards, we don't set the terms. Yeah.

So we need to be comfortable with the structure of the deal and with the terms of the deal. If we don't like it, we just don't do it. We are not the type of investor that would go in there and say, hey. You know, we need to change this. We need to change that.

We don't do that. We are easygoing. We we generally either like it and invest or don't like it and this and and don't invest. And to be very honest, we feel that this is actually not as relevant as many people think and, you know, especially as a small investor. You know, at the end, what really matters is not necessarily the rights that you have.

It's the relationship that you have with entrepreneur. So, you know, at the end, that doesn't mean we don't do the work. Of course, we do the work. We care more about, you know, the detailed relationship with entrepreneur rather than, you know, specifically what, you know, what specific right we get in the in the in the documents or not. No?

Sjoerd Handgraaf (Sharetribe): Yeah. And it's anyway hard to do at scale, I imagine. Like, if you want to go terms, like, if you invest as much and so often, as you do, you you can't get be, like, engaged in a terms battle with every like, that that seems unscalable. Yeah.

Jose Marin (FJ Labs): Yeah. No. That's correct. And and and, you know, and and and the 4th the 4th leg is we generally like to have a business that that that falls into our thesis. No?

And and that I don't say always because, you know, sometimes we do things that are out of scope for us. Very small percentage of what we do is that, but we also like to do things that can potentially bring very high alpha. Yeah. But for long as if that doesn't go well, it wouldn't affect the returns. No?

So so that's why we still do things that are out of scope, but it's a very small percentage of what we do. Yeah. The rest, we much rather have things that fall into our thesis. And we will talk more about this after, you know, where we see opportunities and how do we think about places and the trends that we are seeing in marketplaces.

Sjoerd Handgraaf (Sharetribe): Maybe we can go into that actually. Like, what are opportunities and trends that you get excited about right now, or or that you see that you have recently developed some deals in, for example?

Jose Marin (FJ Labs): Yes. I mean, there's a lot to say here. But on the first part, we we've always been quite contrarian. We like to play our cards very differently than than than maybe a lot of the other people in the market. No?

And not to say that people don't like b to b, but but we are very bullish on the b to b, digitalization. No? And and that's something that we've been doing for a while. And and and, you know, despite some of the very big complexities in making some of these businesses work, you know, we still believe there is massive opportunities. No.

And and and being more specific, there's a number of trends. No. The, marketplaces for inputs. No. A lot of large industries, are still quite obsolete, and they need to be disrupted by using technology.

Yeah. We have a number of of examples of companies that that have done a great job, you know, in building marketplaces for inputs. There's a company for the chemicals sector called NODE, that is doing great. So that's that's one of the things we look in in b two b. The The second thing I I would like to raise is, you know, SMB enablement.

Yeah. We've been seeing so many businesses that are trying to help SMBs, you know, focus in doing what they really care about rather than having to focus on everything else. Couple of examples of that, there's a company called Slice, which is a platform that helps pizzerias do everything that that is not cooking pizza. No? Yeah.

And that's a very clear trend that we've been seeing. No? There's also a couple of other trends we believe in, you know, disruption of b to b labor marketplaces. Now here, you know, we don't like businesses that that are just purely being based in arbitrage. No.

We we like businesses that can add value into the value chain. You know? And and, also, we like verticalization. No. There's there's a couple of companies who are invested in this company called Trusted Health or a company called WorkRise.

You know, that are vertical place in the b to b side. No? That that fall right into our thesis. And there's also a a very clear tendency, that we're seeing with, you know, with a moving out of China supply chain that is creating also, you know, a number of trends and opportunities, you know, in new geos Yeah. You know, to capitalize on infrastructure.

You know? And and, you know, we've invested in a large number of companies as well that play infrastructure. There's a company called Flexport or a company called, ShipBob. I mean, of course, Stripe, but but many other things that actually support, the infrastructure for marketplaces to be built. And that's what we are seeing on the b to b.

There's a number of other interesting things that are becoming a reality. Yeah. There's cross border commerce. Since I started Thermate, everybody was talking about cross border commerce. Yeah.

But it's only until recently that I think a lot of that is starting to happen. Companies in Europe actually have been pioneering a lot of this. Vinted is an amazing example. You know? And I don't know if I don't know if you know, but but but, you know, we are very close to the Vinted CEO.

Tom has worked with us for for several years before, you know, going to Vinted and making a change there. So we are very close to the business. I'm very happy to see how effective they are managing, you know, these cross border transactions. Look.

Sjoerd Handgraaf (Sharetribe): Yeah. I can think Vinted is such an amazing example because this is like, well, like you, I haven't been in as long in the marketplace game as you, but there there have been a couple of these verticals that have been sort of plowing on forever and never, like, somehow you feel that, okay, it must mature right now. And I think, like, Vinted specifically has done such an amazing job from just just just basically exploding over Europe, like, taking over country by country and just really sort of solidifying this, like, vintage fashion marketplace or whatever you want to call that one. Yeah. It's an amazing example.

So they have you have been with them from very early on?

Jose Marin (FJ Labs): Yeah. Yeah. I mean, actual no. The thing is the story of Vinted is interesting because they started with a different business model. And then when, you know, when Thomas we we we were actually in discussions with some of our friends in Insight, and they told us that they had a great company, if we could take a look to it.

And then, you know, Thomas, who was at the time working with us in building a mobile marketplace, Went there and and met them and came back and said, this is an incredible opportunity. You know? And then, you know, he came up with a whole bunch of interesting ideas that we were very storm with about how we could change the business model. You know? Yeah.

So, yes, we were involved when when he joined. That's when we got involved. But the interesting thing here, and I think there's a very big lesson here, which is how did these guys do it? These guys decided, you know, to go free in France and to build volume and then start monetizing based on value added services

Sjoerd Handgraaf (Sharetribe): Yeah.

Jose Marin (FJ Labs): Which is a very different monetization strategy than just the advertising side of it, you know, when you are making, you know, the seller pay. No? So for value added services, the take rate went up automatically mainly from about 3, 4% to 9%, which automatically made an incredible profitable margin. No? It's 3 3 times the margin straight to the bottom line.

No. So so that's what has been incredibly valuable of of of this story. But going back to the trend, the trend is we are seeing a lot of cross border, commerce. No. And and and there's another company we invested in that is that is called Ovoco.

Ovoco is a marketplace for auto parts. You know? And and and they've been doing also a lot of cross border in Europe. No. They are they are growing very nicely.

So so cross border is starting to become a reality. And that's one of the other trends I wanted to highlight. Then I mentioned some of these briefly, but there's a lot of changes in logistics infrastructure, you know, that that are powering this this cross border ecommerce. Yeah. We've seen new players emerge.

I don't know if if if you know a company called called Queens, but these guys have been doing an amazing job, by making the value chain. I mean, they they are, you know, they are consumer player, but but but they have built an incredible infrastructure that is asset asset light. Yeah. And I think there is a number of other players that are trying to replicate this for cross border. We recently invested in a company called Portless that is trying to do something like this.

This. You know, it's still very early to tell, but it is clearly a very important trend to be able to make more efficient cross border asset light infrastructure, you know, which is something that we are very excited about.

Sjoerd Handgraaf (Sharetribe): Yeah. Thanks. Yeah. So if we if we take one step back, so let's say just the marketplace area in general, like, I recall you when I was at the marketplace conference, you said that you're often asked, like, aren't all marketplace ideas already done? Like, isn't, you know, is there still opportunity here?

What do you, what do you say when someone asks you that? I think that we are just at

Jose Marin (FJ Labs): the tip of the iceberg as you mentioned before. There is still a lot of stuff that can happen in marketplaces that has not been done. That doesn't mean that we have not seen a lot. Of course, there's been a lot of incredible valuable businesses that have been built, but there is still a lot of stuff that can happen. We continue to be very, very surprised about the verticalization.

Everybody says, I know every single vertical has been built. That's not necessarily true. And there's a lot of verticals that could be built, you know, that maybe initially didn't seem to be interesting that ended up or have ended up being very interesting. No? Like a company called called River.

Yeah.

Sjoerd Handgraaf (Sharetribe): I was gonna ask you about this because I remember this from your this is a great example. I've been mentioning this also because, of course, also for Sharetribe, like, you know, our company, we provide marketplace software for founders to start a marketplace. For us, it's also quite crucial that marketplace ideas are still feasible. And could you tell a little bit about how Reverb I think this is actually a nice one to still out lie out where where people think the category didn't exist or that a big incumbent was already covering it, and then, Reverb came along and

Jose Marin (FJ Labs): it did well. Exactly. EBay one of the one of the verticals of eBay of the many verticals of products of eBay was musical instruments, out of which 80 or 90% of those were guitars. So, you know, who could think that there could be an opportunity? That that category was worth for eBay something around $1,000,000,000 at the time.

So, you know, who could think that there could be a bigger market to be unlocked by focusing on that specific vertical? And that's what River did. You know? They they focused on that specific vertical and grew the market into another $1,000,000,000 business in terms of of of GMV, you know, and and and and build a very profitable business that eventually got sold. No.

So that's a perfect example that there's still opportunities in certain verticals that people don't think about, you know, that could actually be very attractive. Going back to your question and to give a little bit more more meat, I already talked about b to b. No? And I already talk about the fact that there's so many industries that are obsolete, you know, and there's very different ways of playing that b to b side. So that's a huge opportunity why marketplaces are not over, and they're just starting.

And there's also a whole bunch of other things that we are seeing. No. As I mentioned, cross border commerce, logistics, live commerce, you know, and and, frankly, also new ways of attacking new categories. And also there is still a lot of opportunity within the marketplace space on stuff that can be built on those trends.

Sjoerd Handgraaf (Sharetribe): Imagine I'm a founder and I listen, you know, I listen to you tell me this. There's so much opportunity, and I have an idea. Like, what advice would you have for a early founder? Like, what based on, you know, like, you see you see, like, 200 companies per week. Like

Jose Marin (FJ Labs): Yeah. But I think I think a lot of the advice that we can provide comes from a lot of the mistakes that we have made. You know? So let me

Sjoerd Handgraaf (Sharetribe): But that's perfect. Yeah. Right?

Jose Marin (FJ Labs): Yeah. So let me let me try to summarize. I mean, I think there's different different segments where we can give advice. But, initially, you know, in in in in invalidation of your idea and coming up with a right idea. I mean, get inspiration from personal pain points, you know, and, you know, things that people would like to have solved that are not solved.

Yeah. Also, be thoughtful around geo arbitrage. Even though there's way less arbitrage today than when I started the Remate, there is still a lot of opportunity to do arbitrage of businesses that work somewhere that could work somewhere else. Yeah. And, frankly, these days, we're seeing much more innovation outside of the US, which means that you can get business models that are not in the US and bring them to the US.

You know, use that as part of the inspiration on the ideas. No. And and then have a disciplined approach towards proving or disproving your hypothesis as you analyze and validate your idea.

Sjoerd Handgraaf (Sharetribe): Yeah.

Jose Marin (FJ Labs): Now in terms of once you have the right idea, how do you think about, you know, building your team? Be very, very thoughtful on how you choose your partners. You know, when you are 2 or 3 people, if you make a mistake on your high on your first hire, it has tremendous impact on your organization. Yeah. If you make a mistake when you're a 100, a 150, it has impact, but it's way less.

So be very thoughtful of the way you think about the the first people that you bring into the business. Be also very thoughtful about building the right culture, you know, and the right incentives from the get go. No? You wanna make sure as an entrepreneur, at least we are, we wanna make sure that people take risks, you know, and that they know that it's okay to make mistakes because the only way to find a solution is by providing an environment where you can take risks. No?

Yeah. And don't grow too fast, too quickly. Let the business pull on you versus you preparing for something that might not come. So so, you know, feel yourself stretched. And that's from the perspective of the team.

In terms of fundraising, I think it's important that people are thoughtful around how they choose their partners again. Talk to investors early. Understand, you know, understand what are the differences of what they think, what type of things they wanna see, and and come up with your ideas and your plans and show investors that, you know, that you have a vision. And then come back to the investor and say, hey. I told you that I was gonna do this.

I did it. That's something that goes very strong, you know, with the investors. And and and for entrepreneurs that can do that is super valuable. Yeah. And then think about partners and not structure and and price.

A lot of people, we as entrepreneurs, tend to think, no. I have to raise from whomever gives me the highest price. Yeah. And that's not necessarily the smartest decision always. No.

Be thoughtful about structure. Be thoughtful about who the partner is, you know, and think about building a long term relationship. In terms of execution, it is super important at the early stages of a business to experiment with pricing. You know, pricing is one of the most important things that you can inflect revenue. You not always know how you have to price or up to where you have to price, so make sure that you test and that you iterate a lot.

Also be thoughtful and experimental with with going to market strategy. In a lot of cases, you don't know what is gonna work and what is not gonna work. So try a lot of things, you know, and make sure that you measure what you try so that you can decide what works and what doesn't work. And as you decide and see things that work, then focus on that. No.

So have the right KPI systems. And lastly, something that people forget when the markets are very bullish is capital efficiency. No? We've always been very thoughtful about unit economics, and we always like to prioritize unit economics, over exponential growth. No.

It's true that when you have a market where you can raise a lot of capital, you know, sometimes you can grow very fast, you know, at the expense of unit economics. But I think there has to be the right balance. No? And and and make sure that you don't forget as an entrepreneur that cash is king. No?

And and and make sure that you understand what your cash is, how much you are burning, you know, and manage the business, especially at the earlier stages based on on cash management. No. And do not try to fundraise or over optimize, you know, on on the amount of capital you raise. When you have the opportunity to raise rate and and buy yourself at least till 18 months, even though you have to raise at lower terms and you get more dilution, it doesn't matter. You wanna make sure that we have you have slack to be able to work, you know, when things don't work exactly as you planned them.

No?

Sjoerd Handgraaf (Sharetribe): Yeah. No. I I I appreciate it. Well, it's I I appreciate also on behalf of all founders listening that you're sharing this because indeed, like, no need to repeat mistakes others have made. I'm guessing the capital efficiency is something that has been recently more, like, upfront, let's say, since the 2022 or 2021 boom.

Right? Like, I have a feeling that there's a lot less, venture capital going around. So so so I've seen I've heard there's a lot of trouble. So so very, very welcome. Very welcome tips.

Now okay. So let's say we have all the ingredients so people know, you know, people wanna know what trends to look at, how to evaluate an idea, how to think about funding then. How how can they get in touch with FJ Labs if they have a if they would like to, get an investment?

Jose Marin (FJ Labs): We welcome everybody to reach out. You know, they can send an email to me. They can send an email to deals@fjlabs.com. Everybody's welcome to to reach out, and and what we can guarantee is that we

Sjoerd Handgraaf (Sharetribe): are very fast, and we will look at everything. Alright. Thanks, Jose, for all your time and the lessons and sharing your experience. We'll see each other hopefully at the next marketplace conference.

Jose Marin (FJ Labs): Absolutely. Thank you very much, Jorge, for having me, and, it's a great pleasure. Thank you to the audience as well.

Sjoerd Handgraaf (Sharetribe): Thank you for listening to 2 sided, the marketplace podcast. If you enjoyed this episode, don't forget to subscribe. And if you really liked it, please give us a rating or a review on Spotify, Apple Podcasts, or wherever find podcasts are downloaded. If you got inspired to build your own marketplace, go visit ww. Sharedrive.com.

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