Silicon Valley investor and entrepreneur Tikhon Bernstam is on the road to Thailand for Techsauce Summit and took a moment to talk to us.

Tikhon Bernstam is the co-founder behind Scribd, the world's largest document sharing site and a top 250 most visited site on the internet, and Parse that sold for $85m to Facebook in 2013. Currently he is a full-time startup investor. He has invested in over 90 companies, including Cruise ($1B to General Motors after a $10M cap seed round), Optimizely, Reddit, Tilt, Checkr, Gusto, Collective Health, Headspace, Lendup, Hightower, Shift, and One Medical. Tikhon is now the managing director of a fund that writes that funds promising pre Series A companies in Silicon Valley. In 2012, Business Insider named Bernstam one of the top 15 CEOs to watch.

Have you been to Bangkok before?

Tikhon Bernstam: Yea, a couple years ago with Justin Kan, Daniel Kan and some other guys for fun.

The nerdy hangover, eh?

TB: Haha, no.. But I loved Bangkok because I met a bunch of interesting entrepreneurs who had moved there.

What differences between Bangkok and Silicon Valley did you notice?

It was really interesting to see that there was a lot of focus on B2B startups and B2B apps. But in the States you have people trying to do Instagram for Cats or Instagram for Your Mom’s Cats and other pure consumer focused plays. In the Valley you can make things that no one needs and raise money until it implodes. But in Southeast Asia you have to build stuff that people will actually pay money for and that will add value.

Also, there are local constraints that will set a condition of what you will build. Internationally, where funding may be difficult to raise, you’re forced to earn money right away. So it’s harder to make a Facebook in an environment that doesn’t have endless runway. It’s not a bad thing. A lot of folks outside of the States think of business plans and monetization right away.

Silicon Valley has constraints too. For example, it’s hard to hire top engineers-- too much money and competing for same people and giants with giant budgets.

What do you prefer, investing or building?

Well, as an investor I have more time! But I prefer building startups. Investing is not as rewarding because, while you get to hop in and help others with dreams and goals, you don’t get the single minded focus that produces the most interesting things.

On Investing

As an investor, what do you look for in promising startups?

Before building Scribd, we built 11 things that didn’t work. What we had was perseverance.

So the first thing I look for in a startup are people that won’t give up. Look at AirBnB, in the early days they got rejected, couldn’t get funding, so they repackaged Cheerios as Obamaos, and sold that to raise some money. It’s the people and the perseverance.

Is it easy to identify ‘perseverance?’

I look for people who have a maniacal focus on their business so if you ask them if they want to go to Dubai for a fully paid vacation they say no.

The best founders won’t tolerate distractions. They feel backed into a corner that they must succeed, and will do whatever it takes to get there. It’s not about being the first to market. Google was not the first search engine, Facebook not the first social network. There were public companies doing what they were doing before them, but these companies had founders that were just manically obsessed with being better.

Any other signs of what makes a good founder?

Small things like getting back on emails quickly. This is correlated with successful founders.

I also like solo founders, though most do not. Drew was working on Dropbox a long time before Arash joined him. A solo founder has advantages. For example, they can give more equity. So they can give half of their equity to first 10 or 20 people who join. It also gets rid of the freeloader problem, if something fails everyone points at each other – success has many fathers but failure is an orphan. I like founders who are generous.

On Building

What’s the secret sauce for building a billion dollar company?

It’s better to go into a crowded market with garbage products and build something that is 10x better than the existing than to go into a market too early. Many investors would disagree with me. So many people I meet complain that they are too late, that they are not the first to the market.

The formula for success? Find a huge growing market and look at products in that space and know the shortcomings of existing products. Then make something better than anything else in that space, like Dropbox founder Drew did. Other ways: you can go super niche, or third way is to build something 10x cheaper. AWS are launching products that are way cheaper.

Also focus. Solving a core problem for a small group of people. Founders want to solve great things.

How do you know it’s the right moment to sell?

Lots of folks sell too early and investors are on the wrong side of this of this equation. Everyone wanted Zuckerberg to sell for $1billion, but Peter Thiel didn’t think he should. Instagram shouldn’t have sold. Investors have different incentives than founders. So investors, depending on where they are in the cycle aren’t necessarily thinking of the best thing for founders. Don’t listen to investors when to sell or employees either. You should do it when you think it will take many years to make the value of that company.

And what about the right seller?

People don’t think about this enough and often try to go to the highest bidder but culture fit and management are important. I know plenty of unhappy people didn’t think enough about the golden handcuffs. They have all that money in the bank, drive nicer cars, but they are dramatically less happy, sitting there for years in a job you don’t like. It’s what Zuck said – “If I sold I would probably just take the money to make another social network that wouldn’t be as good, so I’ll just stick to this one.”

How did you exit Parse to Zuckerberg?

The co-founder of Scribd went to college with Zuckerberg. We had a lot of offers but Facebook made the most sense. We thought there was a good culture fit – hackerish ethos. The just wanted to see more and better apps. They cared about what we did, we respected the management. We got lucky.

It’s important to consider of added value.  When Google bought Youtube, everyone hated on that deal at the time! But with Google’s resources it was able to afford to build it in a way that increased its overall market cap. But it’s not always obvious. If Apple bought Dropbox that would have been a steal. For Parse, Facebook was able to monetize users. The sum was greater than the parts.

How to you feel about it being closed down?

I feel okay because I think the way we shut down was really well done. We gave everyone a year to get off the platform. There are companies that just do Parse hosting. One of the best roll-downs.

So what will be the next thing  you build?

I’m personally interested in making cellular and data connections that don’t suck. At fb and semantic my friends complain that wifi sucks, they don’t know what is wrong with it. They can’t get data working. It’s 2016! How do we still have these problems? I think there is a lot of room to improve. We are still using old models from 80s, wired with Ethernet cables. But when you think of new age of wireless.

We're young managers ourselves. Any recommended reading on management?

Andy Grove’s High Input Management, and the 1 Minute Manager – funny and to the point. I think any driven person can manage and can acknowledge that they don’t like management.  Interestingly, Google has 2 career tracks so you don’t need to only think about being VIP of engineers but also can excel as a chief architecture- an individual contributor.

And lastly, what pisses you off the most in your industry?

Employees are mistreated in general in tech. They take sub market salaries where they have to pay money when they want to leave for equity they are supposed to be earning in lieu of the salary they just take a pay. Then the asset is illiquid and there is no common stock to sell it. So in general employees get too little equity. I think startups who capitalize on this and optimize for success. Founders should give up more equity and worth more.

Thanks so much Tikhon, We feel like we could ask your advice and opinions forever! Can’t wait to see you in Bangkok!

Summary of the fireside chat with Tikhon at Techsauce Summit

https://techsauce.co/en/interviews-en/tikhon-bernstam-answers-5-burning-questions-about-parses-legendary-85m-exit-to-facebook/