We never look at traction as like a core deciding factor for whether we're investing in the business.

Oh really?

Yeah.

I actually think like traction is extremely overrated.

That's like the number one qualifier from most people, isn't it?

Most investors.

I think here's the reason why.

If you are a strong founder, you can actually fake product market fit.

You can fake traction going up. Yeah. Like if I were starting a company tomorrow, like could I call up a bunch of insurance customers that have worked and be like, hey, give me a six figure contract. I'll do some of this stuff. And I'm like, I kind of did that during business school. Like I had a startup that I was able to go and get enough traction, like, we could, you know, had actually, like, you know, some serious AR. Now, was that company actually a good company? No, it was terrible. Like, you know, it was awful. Like, I don't even put it on my LinkedIn because I'm so embarrassed by it. That, like, the reality was, it was like, We were basically like a software dev shop, you know, and, you know, it wasn't real.

Did we have product market fit? No. Like it was a, you know, side project that I did, you know, like for business school credits that like somehow magically stumbled into some revenue. Like, you know, so as I think about that, like if you're a good salesperson, you can fake product

market fit. You can at least achieve, you know, some level of what investors would consider from a metric basis. I think the more important thing is finding your path to moat. And that's actually the thing that we focus on. Like when we're working with a company, like it's not how do we get you to a million of A or R? It's how can we give you that first demonstration of that you have a motive for the competition.

Welcome to the PEO where we explore the world's greatest startup stories. I'm our host, Turner

Novak, founder of Banana Capital. Today's guest is Rick Zulo, founder of Equal Ventures. Our conversation

gets the Equals unique approach to venture capital, thinking more like public market and private equity investors, and why traction is overrated at SEED.

Two of the best businesses that we're in today, we're basically flat for multiple years when we invested.

If I'm looking at your CACL TV ratios, as a Seed Stage investor, I'm doing it wrong.

We also talk to Eccles' thesis-driven model employing a team of product owners only investing

in three to five themes at once, and Rick's admiration of Charlie Munger.

I know very little about actual technology.

We get into who will benefit the most from AI.

I actually think in private equity and in service businesses, they will make way more money

than venture capitalists make in total revenue from those companies.

...