This podcast is about an angel investor and now venture capitalist with an amazing story and track record. It’s with Cyan Banister. Cyan is a partner at Founders Fund. At Founders Fund, Cyan focuses on heavily regulated industries, marketplaces, SaaS and businesses that help people find meaningful work.
And she has an interesting childhood that can teach us all about resilience and the importance of making things happen in life.
Here are some more thing we talk about:
-Hear about Cyan growing up. She grew up on a Navajo reservation in Arizona.
-Hear about some of Cyan’s trying times growing up.
-How did Cyan become one of the first investors in Uber?
-Why did Cyan start Zivity?
-After so much success as an angel investor, who join Founders Fund as a VC?
-What does Cyan do in her spare time?
Dave Kruse: Hey everyone. Welcome to another episode of Flyover Labs and today we get to talk to Cyan Banister. And Cyan is a Partner at the Founders Fund and we probably should all know the Founders Fund, which was founded by Peter Thiel, and at Founders Fund Cyan focuses on heavy regulated industries, market places, SaaS businesses and business that help people find meaningful work. So that’s quite an interesting variety. And before Founders Fund she founded Zivity which is – and she can probably describe it better than I can, but it’s a site where photographers and models connect with financial bankers and yeah it may have changed over the years, and she has also been a prolific Angel Investor and she invested in a number of companies, including Uber and SpaceX, which is not too shabby. So I’m excited to learn more about Cyan’s background, Zivity and what she is doing now. So thanks for joining us today.
Cyan Banister: Absolutely! Thank you for having me.
Dave Kruse: Definitely. So can you tell us a little bit about your background? You know where did you grow up and how do you eventually get to where you are?
Cyan Banister: Sure. Yeah, so I grew up in Arizona. I was born in Tucson and so I don’t really remember Tucson that much, but I was raised in the four corners area of a Navajo Reservation, and so definitely a flyover place. Very few people visit there and you know it’s not like a top destination for tourists, but I grew up there and then I also was in Flagstaff, Arizona, Phoenix. I got into the tech world when I was an adult and a young adult in Phoenix and pretty much everything that was cool and happening in technology was happening in you know Silicon Valley and if I wanted to be a part of this, I felt like I had to pack up everything I had and put it in my car and make the journey less, and I did that and everybody said your dreams will come true in Craigslist and they did. I got my first job on Craigslist, sold my car on Craigslist, got my first space to live on Craigslist and basically from there I started out working you know. And I worked at various ISPs, Internet Service Providers, if anyone doesn’t know what that is, and worked at a couple of startups and you know eventually worked my way up from being Assistant Administrator and Network Engineer, Automation Engineer and into Management and eventually from Management into being an Entrepreneur where I started Zivity which you talked about and your description of it is accurate. The photography is pin up photography which is a little controversial, but we were kind of like a kick starter in Patreon before they existed. We were ahead of our time and it’s still around today and it hasn’t changed much actually. And around the time that I started Zivity, I also started getting into angel investing, because I had worked at a company called IronPort that was sold to Cisco in 2007, and I didn’t know what to do with the money that I had made and my husband at that time also was an angel investor and I say was, because he’s not that active right now. But he started mentoring me and teaching me you know where and how to deploy capital and I couldn’t ask for a better mentor to be honest with you. He is also from a flyover state. He is from Missouri.
Dave Kruse: Oh! No wonder, okay.
Cyan Banister: Yeah, so he is from Missouri, and we turned it into a family business and it was a lot of fun. Yeah, we did that for a decade together, yeah and at some point it’s mostly just because of me, not because of us. We worked really well together. I decided to get off the couch which was our home office and I wanted to be a part of a team again and that is why I joined Founders Found and that’s where I am now.
Dave Kruse: Nice. Thanks for that overview. All right, a couple of questions. One is, you mentioned a Navajo Reservation that you grew up on.
Cyan Banister: Yeah.
Dave Kruse: So I actually spent two weeks at a Navajo Reservation in college, but kind of in the area…
Cyan Banister: Really? What parts? What part?
Dave Kruse: Well, you know it was in Arizona, but I don’t know the exact location in Arizona. But I should have – yeah, I can look that up, but yeah it was awesome.
Cyan Banister: Okay, because the Navajo Reservation is so big. It’s like probably more than a quarter of the states, yeah, so it’s…
Dave Kruse: Yeah, so I don’t know exactly where. But yeah, so how did you end up down there? What were you doing?
Cyan Banister: Sure. So my mom is a teacher and my grandparents are teachers and it started with my grandparents. My grandparents were natives to Oklahoma and they started out their teaching careers after they got out of college in a one room classroom. They taught together in that same one room classroom and at some point they got attached to that. Some of the highest wages being paid in the nation were around the Navajo Reservation and that they really, really needed help with educators because there were so many children that weren’t receiving an education and there was a huge push, and that’s controversial by the way, because the government rounded up children against their parents will to send them to school. So historically that’s very controversial, but my grandparents thought that as a huge opportunity and you know they thought it would be a really fun journey to leave everything in Oklahoma and come to Arizona, and at that time the first school that they thought in – actually the first and last. They retired there. It was in Chinle, Arizona which is next to Canyon de Chelly and they thought there for well over 30 year and retired there. That’s where my mom was raised and she was actually born in Oklahoma. They had her in Oklahoma and then came back. We have a long family history between Arizona and Oklahoma. So my mom grew up in that environment and she went to school at the University of Arizona and then she, when she graduated she started teaching as well and so she followed her parent’s footsteps and that’s how we ended up there and I was raised there.
Dave Kruse: Interesting! Wow! Yeah, I mean it was a wonderful experience. Definitely well with Madison it was very green, but where we were it was really dry. So it was a wonderful experience, but definitely eye-opening.
Cyan Banister: Oh! It’s very dry. I recommend that anybody if they can to go there, because you can’t believe you’re in America and these things where you are like, I’m in America, Wow! This is crazy, because there is a language you never hear, you know Navajo language which ended up being very, very important if you read about the Navajo code talkers who helped – you know stated in their language that nobody understood. But you know when you’re on the reservation people speak in Navajo off the radio and they speak in Navajo sometimes in the stores. It’s a dying language, but at the same time the tribe works really, really hard to keep it alive and to their credit it’s a beautiful language. It sounds a lot like – probably like mandarin, Chinese a little bit, maybe Mongolian, but it’s a gorgeous beautiful language and you know I wouldn’t trade my experience there that I had for the world. I think it was just incredibly magical. Yeah, anyway I could go on forever. I’m starting to ramble now.
Dave Kruse: No, I love it. That’s our second podcast – no.
Cyan Banister: Yeah.
Dave Kruse: But that would be awesome to talk more about that, because yeah I mean they – we’ll stop after that, but its just – I mean my experience is very little compared to yours, but you know it’s just interesting.
Cyan Banister: Oh! I could spend a whole hour talking just about growing up in Northern Arizona. But like you said, it’s a whole other topic.
Dave Kruse: Well yeah, but I mean, it kind of determines who you are now and maybe some of your grittiness and I don’t know, and yeah, but you know it is just still interesting learning about their religion and their customs and like you said, it’s like almost a different country and that it goes across. A huge population that you just never really think about.
Cyan Banister: Yeah, it’s remarkable actually. But hopefully people will get a chance to go there and see it firsthand.
Dave Kruse: Yeah, definitely. So one of my questions, so you know we – because it seems like you get into a lot of things. So you must be pretty curious now. Were you pretty curious as a kid and was there a lot – you know what did you do on the Navajo Reservation? Was there a lot to play with or a lot of outdoors?
Cyan Banister: Yeah, so I grew up in a teacher compound, basically in a town called Fort Defiance and Fort Defiance used to be a military complex that they converted into – they are basically army barracks, but they were converted into places where teachers could live and then they had a similar compound for doctors. So if you were not Navajo, you most likely lived in one of these places and because your parents were doctors or teachers. And one of the things they hoped for is that you know Navajo people will go and get degrees in either you know education or in medicine and then come back to the reservation. But what they found is a lot of people leave and that they don’t return, which is why they have these huge recruiting efforts to bring people in. And so a lot of my playmates were in that compound and so the rest of the kids that I have had friends at school bused in from sometimes hours away to get to school. They’ve added more school districts in five other places, so it’s probably not as terrible as when I was younger. But you know I was with children who had to get up at five in the morning to get to school and then would have two hours to return home. Many of the kids I went to school with didn’t have running water or electricity. They lived in what’s called a Hogan, which is a log sort of structure that has a door and you know I think two windows and a hole, opening in the top and with a dirt floor with a central sort of stove in the middle. And so many kids that I went to school with had that. We didn’t have televisions for quite some time. We had – the only television we had was syndicated television from Chicago, which kind of worked my view of sort of the outside world of what modern living was like, which again probably is another whole hour podcast of my view of world as it relates to Chicago and then we also had PDS. So I watched a lot of Doctor Who? And things like that and then eventually we got cable and cable television really changed everything, because people could see MTV and we could see how the rest of the world was and how different we were from them. So like what radio songs were popular in the rest of the nation were not popular on the reservation. The TV show was the same thing. Like we were so disconnected from the rest of the world that we had no idea what was going on and there was something magical about that, because you know I played in the mud, you know everything was a toy. You know it’s not like – we did not have Toys‘R’Us you know. We had sticks and stones and hammers and nails and you know that’s it, and we made best of what you could do with those things. So I spent lots of hours being bored, but I think that boredom is a portal to creativity and so I always like to tell people I am never bored, but it’s really not actually true now that I think about it, but you know it’s just that when I start to get bored I start day dreaming and thinking of stuff to do and then eventually you are not bored right. I started my first business, if you can call it a business, when I was about – I want to say like eight years old, seven or eight years old. My grandparents sent us a freezer full of pecans from Oklahoma. They grew pecan trees and we had so many pecans we couldn’t make enough pies or cookies or whatever to eat all these pecans. So I got the bright idea of going from door to door to sell the pecans without my mum knowing, to generate my secret source of income and she just thought we were plowing through the pond. So it’s not a real business, because I didn’t understand the cost of good right. So but I had my suitcase. I went door to door and I learned how to sell pecans and how to price them, which was actually a really interesting lesson in that experience and then at some point I sold candy bars and you know I always tried to figure out how to make money from you know my community and how to make a living as a kid and that was something that was you know very interesting to me. You know the other thing is that every day was a new day and that’s kind of my motto in life, was ‘everyday is a new day, every possibility is open’ and just sort of the power of positive thinking, so every single day I would wake up and I would wipe away the previous day and I would say today is the day I do X, Y and Z and maybe I would accomplish the things that I would try. Anyway I dropped out of school, eventually moved to Flagstaff, Arizona. I dropped out of school when I was 15 and started working and living on my own. So that was a big jump.
Dave Kruse: Why is that? Why?
Cyan Banister: It’s kind of personal, but basically my mom and I – my mom and I didn’t get along, but I’m going to shorten and condense it to that. But I started working and I ended up working in mostly food service and retail to start out with. Those were the jobs that were available and I tried to go to school the best I could, but ended up just having to ultimately leave, because I couldn’t juggle all of the things and pay rent and that sort of stuff. And then at some point I had you know a brief thing with homelessness and that was interesting and it taught me how to be very resilient. I basically made necklaces to survive and that was really…
Dave Kruse: Where did you stay?
Cyan Banister: Under bridges, in the backs of people’s houses and their yards, abandoned buildings.
Dave Kruse: How long did you do that for?
Cyan Banister: This was three to four months on the streets and then at some point I hitch hiked to New Mexico and stayed in a commune.
Dave Kruse: Wow!
Cyan Banister: Through the winter and then eventually – you know this actually is before. I’m getting the timeline kind of mixed up, but this is before I lived on my own from my mom. So kind of going back in time and then eventually I was on my own. So this was around the time that I was 14, early 15 that I did this and lived in a commune for a while. I eventually tucked my tail in and went back to my mom’s house and then eventually lived on my home. So yeah, the homelessness was really interesting, because you know it was like how do you bring yourself out of that you know, and I made necklaces and all of that sort of stuff. Eventually I got a little bit more career experience and getting hired at different businesses got easier and easier and I worked in retail and until at some point somebody told me that I could work at this fire protection place and I don’t really have a sprinkler head above you, but I used to help with that business. I was called an expediter, so I would help deliver pipe and stuff like that and I also did like administrative services for the front office and that was my first sort of partially set down job. So I was really excited about being able to sit in a chair at a desk in front of a computer. I thought that was the coolest thing ever. And then at some point a friend of mine said, well you know you should really work in dial-up tech support and I was like, oh! I’m not technical. I don’t have the experience for that and he said ‘I could teach you in one night’ and so he did and that forever changed my life, because I went and did an interview. I got a job doing dial-up tech support and basically it’s where I am now.
Dave Kruse: Wow! Well, that’s another whole podcast right there.
Cyan Banister: Yeah.
Dave Kruse: I have like a million questions, but oh my goodness! I did not know all that about you and your childhood. When you were homeless on your own, were you scared like or it was a pretty good community?
Cyan Banister: No, not really. I probably should have been more scared than I was. Part of it was sometimes when your homeless you find a community and I was part of a community of punk rock kids. Some who were out there for lifestyle reasons, because they romanticized the lifestyle and some were out there similarly to me, because they had really bad home situations and so you know we took care of each other and its one of these things where sometimes you can fall into a bad community of people. I just happened to be extraordinary lucky and fall into a good group of people and you know that worked out for each other and treated each other like family. So I wasn’t scared. In my life it was a big adventure. Part of the thing that started to wear on me though was like when you need to shower and take care of those sorts of needs. You know homeless people like to shower, it’s just they can’t and so lots of times when you see homeless people on the street and you are like wow! That person’s soo big, they would probably prefer not to be that way and so that was the one thing that got kind of on my nerves after a while and I would just take showers in fountains.
Dave Kruse: Oh my goodness! So and we can go onto more of your professional career too, but this is interesting too, but one other thing was, you know after you did that, like starting a company and all of the other stuff, it probably seems kind of not easy, but it’s like you know you had a little some obstacles early on that a lot of us don’t have and you know create probably some type of resiliency. You know I was curious you know if you were talking to the other kids right now and most of them are going to probably have a normal side and let’s say they are at home, like how do you create that same type of resilience without having to do your same type of experience?
Cyan Banister: Sure. Yeah, I mean one of the things that I realized, this is when I got older is was my life was hard, but there was people whose lives were even harder, right. So when I start looking around the world and I look at you know peoples living conditions in other countries, even our own country, I can find so many people whose lives were far more challenging than mine and they were able to persevere, and I think you know even though I had my challenges every child doesn’t have a check to completely challenge for your life. So I think resilience is an interesting thing. I think part of it is parenting style. So one thing I am concerned about is how hands on we are with our children and how much we cuddle them. Whereas when I was a kid I was left to my own devices and so probably too much to my own devices compared to other kids, but at the same time you know I was a free range child and because of that I had a really strong sense of self and what I wanted out of the world and I spent a lot of time thinking about who I was and what I wanted to be. And so I think if I have advice for kids is to try to talk to their parents into backing off a little bit, in a constructive way hopefully, but just you know give me space to figure out who I am going to be and what I want to be and room to make mistakes and you know so I can learn from them. I often read these stories about parents going into interviews and talking to you know job prospects or going into universities and helping them with you know getting into a university and just being overly and too involved in their child’s life and they get onto adulthood, which is frankly quite scary to me. And so I think you’re not neglecting your child. It is you give them room to figure that all out. So I guess that would be my biggest piece of advice is just to try to talk to your parents about you know space.
Dave Kruse: Yeah, that’s good. Yes, I have a daughter and I always think about the same thing, about trying to give her space, but it’s hard.
Cyan Banister: Its hard, it’s hard because we live in a world also where we’re getting the child protective services called on you if you leave your kid in the car. You know I got left in the car constantly with the windows rolled down, right and so it wasn’t soaring hot and I wasn’t a baby. But you know my mom was doing shopping and I was you know 10 years old, eight years old or whatever and she used to leave me in the car and no one was concerned about me being kidnapped. But today we have this real stranger danger fear of the unknown and part of it has to do with media and social media and blowing things out of proportion and you know the sense of danger that’s really not, I believe is real as it is perceived and so I think kids just need more space. I am really worried about them.
Dave Kruse: Yeah, yeah, all right that’s podcast number three. So now that we are like two-thirds away through and I think I have asked about two questions. No, this is awesome. So let’s see, so all right, well let’s talk a little bit more about your professional world right now even though what we’re talking about probably more interesting.
Cyan Banister: Sure.
Dave Kruse: So, let’s see, where to begin? So I was curious with the timeline with Zivity and when you started Angel Investing. Did you start both those around the same time or when did you start?
Cyan Banister: Yeah, roughly around the same time. My cadence was much slower when I was running Zivity and David A, you know Scott wasn’t and so a lot of times when he was evaluating a deal he would bring it in to our house, to our couch office and we would discuss it and so I got a lot of exposure then. But the only thing is that Zivity really opened a lot of doors for me in a really unusual way and so I started getting invited to all these conferences and getting exposed to the networks that we weren’t exposed to and you know that’s one of the ways that I figured out to do the investment was because I got invited to a conference and if I wasn’t working on something interesting, maybe that wouldn’t have happened.
Dave Kruse: Interesting. Yeah, which goes along with this. It’s just you never know where things are going to end up, so just keep working hard and accepting the opportunities.
Cyan Banister: Yeah.
Dave Kruse: So Uber, when did you invest in Uber? What round was it?
Cyan Banister: So it wasn’t the seed, seed stage, the friends and family round, but it was the round after that. Very early. So it was the only one where it wasn’t Garrett Camp and Travis and etcetera. So they had like some ultra seed round and it was like a seed two round. That is something kind of exciting these days.
Dave Kruse: How much did they raise in that round?
Cyan Banister: A few million. It wasn’t that much.
Dave Kruse: Well, nice work. So yeah, so why in the world did you invest in that? Yeah, now of course it’s obvious. But at that time what made you write the cheque?
Cyan Banister: So it’s a combination of luck and pattern recognition, right. So my driver that drove me to the airport, his name is Roger. I had a private driver and he would tell me every single time – he’s not a full time private driver. He was just basically a delivery driver I would hire on contract. Anyways so – I sound so pretentious; I have a driver. Anyways so, I was with him – I had chartered basically this car to take me to the airport and my driver Roger said, ‘you know I found this company that I think that you would really like, and I am not an investor, but if I was I would invest in this company and its called Uber Cabs.’ And I said, ‘well how does it work?’ And he said, ‘well you know how you schedule cars to the airport and it costs you a hundred and some dollars to go to airport. Well, now you can just summon me on this app and I show up and you don’t have to schedule me in advance.’ And I was like, ‘well that’s pretty cool and my books-to-market facture that’ and most people don’t want to pay $100 to go to the airport and I’m like I’m surely an outlier. And you think yeah, but the prices are cheaper and you know it actually cuts down on our overhead. And I said, ‘well how many drivers are there?’ and he was like ‘just me and like one other person.’ And I am like ‘okay, give me the information for this founder’ and he gave me basically a business card for Ryan Graves which I used to say that it had a Wisconsin phone number on it, but it was Chicago. So it had a Chicago phone number on it. I got to get my historical facts correct here and I remember looking at his card and saying, like there’s something that doesn’t add up here for us, for our thesis of investing you know in Silicon Valley companies in our backyard, which is something we did. I am expanding my view on that by the way which we can talk about. But just didn’t fit what we believed in and so we just sort of put it aside, well like this is kind of odd, neat idea. But the pattern recognition part comes in where Scott and I had been thinking about having long discussions about the Taxi industry, and the Medallion system and what a racket that whole thing was and just how dissatisfied we were with the taxi industry and so it was something that was kind of top of mind for us anyway. And so to fast-forward, my driver brings it up to me again we still don’t call, and he keeps pestering me about it. I go to this conference and I meet Travis for the first time and I through to myself, you know he was on the bench he wasn’t actively pitching over at this event. He was basically in-between jobs but he had this gravitas about him that’s hard to describe. And as an investor I like to file people away as interesting and watch what that person does, you know keep like a mental file, so I immediately filed him away and then I didn’t think about him again until I went to another industry event when he was pitching Uber Cabs to a small group of investors. And that’s when I emailed Scott and said, ‘you know what I think this guy might end up being the CEO of this company and we should invest.’ And so there is something about the combination of the gravitas of Travis fighting a highly regulated industry that we had already thought about that made sense. Other than that, nothing else thought the business made sense. Because there is this, you know Ryan Graves was the CEO and here is this guy pitching this company at this event, but he is not the CEO and it was just all kind of strange. But anyway, so we ended up meeting with Ryan Graves and he thankfully allowed us in, because most of the other investors were friends of Garrett’s and Travis’s and his and we were one of the only outsiders.
Dave Kruse: Wow! And hopeful you gave a nice tip to your driver for the continued pestering.
Cyan Banister: Yes, so – yes, I defiantly, yeah I owe him a lot.
Dave Kruse: That’s right. Interesting! That’s a pretty good story and so at the same time around – well, I know it was right around – a little before that you probably started Zivity. I was just curious you know why you started Zivity, like what attracted you to kind of that business model and photography and…
Cyan Banister: Sure, yeah it was very different time back then to just give people and ideas of what the world was like them. MySpace was the number one social networking site not Facebook. And Friendster was sort of drizzling and dying out. And MySpace was built around this one too many audience platform, sort of like what Twitter is today, that the most compelling content on MySpace and most compelling profiles were models and women who were trying to make a living modeling. And there were boundaries put on these profiles due to advertising of what they could put on their pages or not, so they were heavily content leased. And so when I looked at that I thought, well there’s a huge opportunity here. This is an underserved market and this is still a type of content that people are willing to pay for in a way in this, you know a content has to be free and advertising driven. I thought there could be a subscription model made here and I didn’t see anybody really try anything around subscription models in social networking sites, but there was one competitor that existed at that time and I am now great friends with the founders and that I looked to, to try to figure out like how to figure out my business model, because you know I wanted to be very different, compelling in different ways than them. But the core of the business is micro financing and funding content and a patronage site much like a spoilage earlier kick starter or you know Patreon, however you want to say it, and so basically fan support, models and photographers by, for lack of a better term, tipping today the word is called ‘backing.’ Back when we started that was not an industry norm and the term backing didn’t exist, so we called it ‘voting,’ because we couldn’t figure out what to call it. So there’s a problem with the term ‘voting.’ ‘Voting’ implied that its free and you go into it the one time. So that was a strange action for a lot of our members. So like it wouldn’t be, how am I voting, right? So anyway, Zivity is still around and its more of a lifestyle business at this point. I am very passionate about it, but it’s a small business and you know it operates off cash flow and you know like I think it’s neat.
Dave Kruse: Nice. It’s one of those businesses that actually makes money.
Cyan Banister: Yes, but it also – it’s a challenging business because it barely makes any money.
Dave Kruse: Fair enough.
Cyan Banister: Part of it is we’ve been shipped away at by you know – we’ve been around 10 years and things have changed so radically and we’ve been shipped away by social networking sites like Google itself with the image search with Twitter, Facebook and now Patreon is pretty much leading our lives. So I am not sure how much longer we can survive. But I think it’s been a beautiful run and I think we’ve actually changed the world, at least in that sector in positive ways for good. So that part I am really excited about.
Dave Kruse: Got you, okay, all right. So, all right let’s talk. We’ve got a few minutes left and a lot of questions. We won’t get too long, that’s okay, but if there is anything you can…
Cyan Banister: You can just have me back.
Dave Kruse: That’s right, that’s right, good. Yeah, I think we have at least two more podcasts queued up for – no. So all right, so I am curious about the Founders Fund and you know why you decided to join. I mean you said you wanted to get off the couch and go work with the team and stuff, which makes sense, but how did you get connected to them and why did you choose them over some other VC firms? I mean because you have quite a track record with Angel Investing. I’m guess there have been some other firms interested.
Cyan Banister: Yeah, there have been other firms that are interested and mostly its actually been a lot about the high net worth individuals who wanted me to deploy their money for them, so they would be the only LP, and to be honest with you I was already operating a fund, basically a sizable fund level vehicle with my husband and so it didn’t really make a lot of economic sense for me to be investing peoples’ money and however, I’ve had you know a 10 year plus relationship at Founders Fund and I co-invested with them and I’ve gotten to know a lot about how they think about the world and the types of investments that they do and that’s what really appealed to me, was if I’m going to spend my time investing, you know I would rather have a bigger impact. So Angel Investing does have a big impact, because you can help someone go from zero to something, but at the same time you know learning about growth stage funding, learning about later stage funding is appealing to me, because I like to understand the full stack and the full spectrum of investing, and – but you know I am here to do some of our early stage investing because of my track record and to help us get exposure to early stage deals and you know provide my unique sort of perspective on that. So I am still doing early stage investing, but at the same time you know getting – dipping my feet in waters is like an area that’s kind of uncomfortable for me. Like once you start deploying check sizes of 500K and above, it’s definitely nerve racking.
Dave Kruse: I bet.
Cyan Banister: So it’s not easy to do internally, externally, etcetera. So that’s what I am here to do and then hopefully make our LPs a lot of money, and for people who don’t know what an LP is, it’s a Limited Partner. I invest other peoples’ money and I also invest my own alongside of it.
Dave Kruse: Well, that’s nice, okay. And what – since starting next – when did you start? Isn’t it about a year or so? When did you start at the Founder’s Fund?
Cyan Banister: I think it’s been about a year and there months.
Dave Kruse: Okay, and what have you learned since joining there that either surprised you or made you a better investor you think?
Cyan Banister: Oh gosh! What have I learned?
Dave Kruse: Maybe nothing.
Cyan Banister: I can only say a lot, actually a lot. I don’t know how to pin point one thing actually. But consensus based investing is very different than conviction based investing. Now we encourage you to have – to follow your gut and to have convections, but the same time you know there are rules around how funds are structured and how you explain capital and it involves a team sport and it’s not a solo sport. So as an Angle investor I was solo or you know at the most I had to talk to Scott. I had a lot of freedom to whatever I wanted and here I still have a lot of freedom compared to other funds, which is one of the reasons I like Founders Fund, but at the same time, not a solo activity. And so that part was really interesting to learn and navigate and I think I am just starting to hit my stride a year into it. It took about a year to figure out how a lot of this stuff works and maybe some other venture fund managers, it took them a lot less time because maybe they are quicker studies than me. But you know to really understand some of the intricacies of how this works and how the other firms work and who are the players and all this sort of stuff, it actually took me about this long to really feel like I’m not an imposter. So I suffer from imposter syndrome and for the first like six months I was like ‘what have I done? You know I am way out of my element.’
Dave Kruse: Really? But you made so many investments. Yeah, what do you mean like how stuff works? Like just getting to know the players and how deals actually get done or I’m curious…
Cyan Banister: Yeah I mean – so early stages so different. Like you have these party rounds where 10 to 12 investors, maybe less, put together capital and then that entrepreneur either succeeds or fails on that capital and goes on to raise their next round. By the time they are raising their next round, we also are not part of that process anymore and other than signing paperwork or you know if there is any that we need to approve of anything etcetera. But as a company which was in growth, the angels are kind of left behind and we are off doing our next thing and hopefully get updates from the company and hopefully things are up into the right and doing well. But you know it’s very different in the later stage, because then you have to really evaluate a company based on metrics and a company based on traction and all sorts of things that really don’t exist when you’re doing seed early stage investing, because you are looking at people and your confiction around whether or not that person can solve this particular problem that they are facing, right. So later stages, that in addition to a bunch of other stuff and then the other thing is that you are competing. So as the allocations get bigger you are competing with other firms. When you are an angel investor, it’s not as competitive. You know its oh sure! We’ve got room for 15 of you at the check phase of whatever amount. At the later stage it’s like we’ve got room for one or two and so you’ve got to really prove that your valuable to the founder. That you bring a lot of expertise and there’s a lot of expertise I don’t have. You know like for example someone looking for somebody in the hospitality space. I have never run a hotel chain, I have never run a chain of restaurants, you know things like that, so I would not be that useful and so I’ve got to try to figure out other ways of providing values to entrepreneurs beyond just capital. So there is a lot of yes, money is all green, you can get it from anywhere, but at the same time people want the extraordinary additive to their business and so that’s the area that I try to figure out.
Dave Kruse: Got you, that makes sense. And so – I mean when you look at the Series A or Series B, I mean are there always – I mean you look in the median like oh! There’s so many companies that are going to fund it and its just all over the place, but is it really only so many really good investments that a lot of people want to get into, a lot of VCs want to get into and are those. Are there a number of potential investments out there that – I don’t know what I’m trying to say. What I am trying to figure out is…
Cyan Banister: I think I understand the question, yeah. I think – so there’s a lot of companies out there that are definitely tracking well, that probably deserve to be in the Series A category that don’t make it for a variety of reasons.
Dave Kruse: Okay.
Cyan Banister: One could be because of sort of the outlook of the world at a certain time, right. So the market can become bearish and bullish on a dime and so then they go out and try to raise money, but the goal post for Series A just moved and they are like, well now we are looking for companies that make this amount of revenue that have these metrics. Maybe five weeks ago we would have been your company when we were looking for something else. That’s the hardest thing if the goalpost moves right, constantly and so sometimes you know entrepreneurs are toiling away and they feel they have brought their company to a good place to go out into the market and discover that you know it’s just not there. Partially it’s because a lot of the funds have very different things they are looking for. Like a seed stage fund maybe looking for certain types of returns, but a mature fund such as Founders Fund who has been – you know we’re now on our sixth fund, $1.3 billion. Think about what it takes to return $1.3 billion in capital. You got to have power walls, you have to have outliers. So we’re searching for companies that have huge potential and that’s hard to do and there’s only so many of those. So if you think about how many companies are worth $10 billion, how many are there? Not that many.
Dave Kruse: Yeah right, and how many newly created $10 million companies are every year?
Cyan Banister: Right. So think about how many billion dollar companies we would have to have to return the fund, you know and then its suppose to get hard. You know can’t anymore. So being able to bat that well is really hard. You know one of our partners sure just made them, I think number five on the minus list, on the Forbes minus list and he had the second largest venture back exit of all time and the largest biotech exit that was venture back the whole time and you know how do we top that? How do we get another one like that? I mean that’s something that we have to think about and that’s really, really hard. So the bigger your fund size gets, the harder it gets.
Dave Kruse: Its intimidating, but also exciting.
Cyan Banister: Yeah, absolutely.
Dave Kruse: Interesting! All right, well we’re out of time. I have like many more questions, but maybe like you said, another time. I know you’re busy, although I do want to ask. Yeah, I have just different questions, but on a personal level I am always curious, you know what do you like to do when you’re not working? Is there anything you like to do, anything that makes you happy, relieves some stress?
Cyan Banister: You know the thing that makes me the happiest is to sit and day dream and invent new company ideas. I know it sounds weird, but it integrates really well for my work life.
Dave Kruse: I understand that.
Cyan Banister: So I have a file that I keep of myself, of ideas that I come up with and then sometimes I sit and I day dream and I iterate on those ideas and I try to think of all the possible ways that you could make this product and when it existed how amazing it would be and then I hope to run into an entrepreneur that’s making it, because then I am like ah-ah! I found you and I can give you capital and you can go make it, because I don’t want to be an operator. I learned my lesson. I don’t want to do that ever again.
Dave Kruse: No, that’s a great pastime. So would you ever go approach an entrepreneur if maybe with the like the industry experience or at least just good experience saying ‘hey, you know would you want to raise a small seed and test this idea, then you know I’ll be there.’ Kind of more like also it’s the incubator role with that.
Cyan Banister: Yeah, that’s not my style. I think that that works for other investors and that’s an approach that I’ve seen the people take, but you know one of the things about Founders Fund and which meshes with what I believe is we want Founders to wake up in the morning with the idea and we’re backing them and so convincing them to do something is kind of against what we believe in, right, because then we’re getting into a role where we’re telling people what to do and it’s not authentic, it doesn’t come from an organically authentic place. So it’s very difficult for us to try to guide people to the place. So instead I just search for someone to come up with an idea that I thought about for a long time or we’ve thought about for a long time and then it appears. That’s what we call proactive investing. We also are just reactives. So you can never predict, not never, you can rarely predict where the next big thing is going to come from. So you have to be pretty open to sectors, you know that’s how we got into biotech. We certainly were not a biotech firm. We were not known for it. It’s just because Brian woke up one day and said, I am not doing consumer internet anymore. I am just going to focus on biotech. So I think that’s where the next big thing might be and then I’m glad he was right.
Dave Kruse: Interesting! And before we leave, one. You mentioned at the beginning or near the beginning that we could maybe talk about later is like something about investment thesis or it was related to like geography or something. Do you remember?
Cyan Banister: Oh yeah, yeah.
Dave Kruse: Just to touch on that.
Cyan Banister: So I used to only invest in Silicon Valley based companies with a few outliers and every time I veered from that course I lost everything that I invested in those companies, mostly just because – not because they are bad entrepreneurs, but I wasn’t able to provide the network and the various infrastructure for them that I can here in Silicon Valley. Like if someone calls me here and says I need help with X, Y or Z or introduce to this person, you know it’s a network I can help with that you know and if it’s in New York or Florida or something like that, I just don’t even know who to talk to there. So we have expanded our thinking on that, mostly because of the cost of living in the bay area is soo high and our capital doesn’t go as far anymore. So when we give a company $200,000 and advice them one full time employee, that’s kind of ridiculous where you know you might be able to do it in Texas or Florida and advice them four full time employees or maybe three and also improve that city and that location in a drastically amazing way when the start up sprouts up there and then they can employ people locally, as well as bring talent into that area. So we started thinking about looking abroad. We don’t see one specific city sort of sprouting out. Maybe Seattle seems to be drawing a lot of engineering talent, but there is nothing that really sticks out as like that’s the city that we need to deploy as much capital as possible into. It seems to be popping up all over the place and we’re seeing opportunities all over the United States, all over the world and there is no like the next Silicon Valley. So I can’t tell you what it is, because we haven’t seen it.
Dave Kruse: Interesting. Well of course being in Madison, Wisconsin we appreciate that new philosophy, so…
Cyan Banister: Yes, yes. Well, we’re looking everywhere.
Dave Kruse: All right. Well, I’ll sort of be listening. We have a pretty sweet company, we’ll reach out.
Cyan Banister: Yes, please reach out to me.
Dave Kruse: All right, well and – well God, I really want to ask what’s one of your favorite companies right now that you’re looking at or invested in? Do you have a few more minutes and then…
Cyan Banister: Sure. I have so many favorite companies. It’s like asking what your favorite child is, right, but I’ll talk about one that I just did that I’m really excited about.
Dave Kruse: Perfect.
Cyan Banister: It’s called Contraline. It comes out of the University of Virginia and it’s a guy named Kevin. Basically it’s a non-surgical, gel based vasectomy solution that aims to be reversible. So it’s currently not reversible, but the angle is that it will be. So the nice thing about this is people for a family complete, get vasectomies and they are usually over the age of 40, maybe 35, but usually 40. Now people who are younger can actually have reproductive control over their choices, you know potentially by the time they are 18 and I think that’s a huge shift in how we think about birth control. For one its non-invasive really. I mean you may think okay, well an injection is invasive, but compared to surgery and also its non-promotal, which means that you know your partner, STD is still a concern, but if you have a partner that is a long term partner, that partner may not have to take hormonal birth control which could really change people’s life and people have to take hormonal birth control for medical reasons, but a lot of people don’t and we prefer not to. So I think this will really change the landscape of that side of fertility, which I think is really neat.
Dave Kruse: Yeah, that’s pretty amazing. How far along are they in the FDA process?
Cyan Banister: Yeah, they have enabled trials currently, so they are still the ways. There are probably four to five years before you could buy it and it will be a basically administered VI urologist at first using an ultrasound procedure and you can probably opt for getting put to sleep if you’re afraid of needles.
Dave Kruse: Maybe I will.
Cyan Banister: Or maybe laughing gas or whatever is available. It will be just like going to the dentist.
Dave Kruse: That’s right.
Cyan Banister: So that is an investment that I am extraordinarily excited about.
Dave Kruse: Wow! Yeah, that just changes the whole perception on well, that whole area.
Cyan Banister: Yep.
Dave Kruse: Interesting, all right. Well that’s a good way to stop.
Cyan Banister: All right, awesome.
Dave Kruse: A good way to end this podcast. But Cyan, I really appreciate you sharing about growing up and what you are doing now and yeah, it’s pretty sweet. So I really appreciate your time and thoughts.
Cyan Banister: Absolutely and thanks for doing the show. I appreciate it.
Dave Kruse: Definitely. And thanks everyone for listening to another episode of Flyover Labs. As always, I greatly appreciate it and we’ll see you next time. Bye everyone. Bye Cyan.