Lloyd Danzig: Founder & Managing Partner, Sharp Alpha Advisors

02:04

Dave Almy

Lloyd, let's get some context on your history and your interest in sports and gaming because they represent the focus for you in sharp alpha. So if you can distill down your experiences with sports and gaming, you were the March Madness bracket creator, weren't you?

02:24

Lloyd Danzig

In short, yes. I was a particularly early adopter as a season long fantasy baseball commissioner.

02:31

Dave Almy

Okay. That was the start of it.

02:32

Lloyd Danzig

baseball rotisserie league in: 2001

03:00

Dave Almy

There are people right now who are just going, I don't even know half of what he's talking about.

03:04

Lloyd Danzig

I mean, in: 2001

03:49

Lloyd Danzig

And things in some respects have changed quite a bit today. But the underlying thing that drew me to it then and draws me to it today is the same, which is the competition and camaraderie that competition breeds. With your friends. You're playing against them, you're talking a little trash, you're reminiscing about the time you almost beat them, they almost beat you. You develop these inside jokes, this shared knowledge and history together. When I was twelve years old, I mean, there was no uber either. So our dads had to drive us to the draft and they sat with us and oversaw and dad, lean over.

04:22

Dave Almy

Your shoulder, go, oh, and don't pick a.

04:24

Lloyd Danzig

Of course. And then when the kids would go away to summer camp or whatever we would do during the summer, the dads would all run the fantasy teams for July and August.

04:34

Dave Almy

That's kind of interesting, though, because then it's not really even just a camaraderie with your friends. It's a real father son kind of thing, too. So you really saw the connectivity of the whole.

04:41

Lloyd Danzig

I grew up in the Bronx. My dad is from the Bronx. We grew up going to Yankees games together. Many, many of my greatest memories are all, and look, fortunately I was a kid when the Yankees won four World Series in five years.

04:53

Dave Almy

Let's not talk about that.

04:54

Lloyd Danzig

So I will say I grew up thinking, this is just how sports fandom works. Your team just wins the championship and there's a parade every year. This is great. This is the best. Didn't turn out so much that way. Yankees are hot this year, but was sad to see the Knicks exit the playoffs early. But anyway, that same competition camaraderie friendship, social connection. That's what hooked me back then. Made me want to be entrepreneurial enough to take the motivation and all the organizational headaches that come from being the organizer.

05:23

Dave Almy

And did you always have a facility with the numbers part of the piece? Like that kind of piece always came easy to you?

05:29

Lloyd Danzig

There are two answers to that question which are related. Yes, math was always my thing. I do remember I had an SAT tutor come over, an SAT math tutor. And halfway through the session, he went to my mom and said, look, this is a waste of time. I'm never coming back, but can I stay and ask Lloyd for 30 minutes how he would do these questions so I could tell my other.

05:52

Dave Almy

This is not a conversation that happened in the Almie household.

05:55

Lloyd Danzig

So math, you know, more so, like, reading, history, art, terrible. I'm the least artistic, you know, person you'll ever find. Can't draw a circle for the life of me. Math numbers, definitely, those are my thing. But on top of that, or relatedly, I have been fascinated, I truly fascinated from a young age in the business model of a sportsbook or casino, because every other type of business on earth, you make pizza. You know how much the ingredients cost, you know how much your employees and rent cost, you know how much you're charging. And at any given time, you go into any pizza shop and you say you're selling those slices for $3. How much are you making on those slices? And the answer is known. Every business, every widget maker, every service industry on earth.

06:37

Lloyd Danzig

But you go to a casino and say, how much is the casino going to make on this one roulette spin or this one blackjack hand or this one sports bet? And they don't know because the answer is not known. All they know and rely on is the law of large numbers and statistics that over time, enough people playing. And to me, the concept that there are these businesses that rely on math, on statistics, on the law of large numbers, like, that's the coolest thing ever. And so that really endeared me to the space. And of course, you know, just being a baseball data nerd and keeping track of all the situations, you kind of.

07:11

Dave Almy

Married these two things. This, the love of the science, the love of the math, the love of the camaraderie associated with this. But then how did the piece associated with casinos get on your radar? Was this something that you explored as a young person saying, I really want to try to get involved. This is interesting. Or what was the exposure to sports?

07:30

Lloyd Danzig

I wish I could say it was like this deliberate path that I took. And, in fact, I wish, in retrospect, I had been turned on to what I'm doing now earlier. And I was in every position to do so. I went to UPenn undergrad and the business school at what I think was a golden era for sports education. Scott Rosner, who now runs Columbia's entire sports business program, taught business of sports. Andrew Brandt, who was VP of the Green Bay packers, and NFL media insider. He taught sports law.

07:58

Dave Almy

Great insights.

07:59

Lloyd Danzig

And Ken Shropshire, who literally wrote the book on sports negotiations, taught to negotiations. And I took all those classes, and they were my favorite classes, but I took them for fun.

08:08

Dave Almy

Yeah.

08:09

Lloyd Danzig

I really, truly never thought it would. I think at the time, I thought the only job in sports was basically sports agent. I don't know if I even knew there was.

08:15

Dave Almy

I can either play or I can represent, right?

08:17

Lloyd Danzig

Or maybe I could be, like, a ticket sales person. And that's. That's. That's about it. I had a traditional kind of standard Wall street finance career post. Post college. And so you go to Blackrock. Right. So I went to undergraduate business school, went to Blackrock. Great firm. Cannot recommend it highly enough. Worked at a few others.

08:34

Dave Almy

They're doing okay.

08:35

Lloyd Danzig

They're doing okay. Over 10 trillion in assets under management. Largest asset manager in the world, last time I checked. Moved to some smaller shops and was on some trading desks. I went back to school. I went to Columbia full time, graduate school, to study computer science.

08:48

Dave Almy

So you left the investment side of it. Go right back and focus.

08:52

Lloyd Danzig

t I noticed in, I don't know,: 2013

09:10

Dave Almy

Yeah, there was no book, but you were beginning to see the context for which.

09:13

Lloyd Danzig

Totally. And at Blackrock, even I saw the quant team who had their same. Were on the same floor as us. They were doubling in size every month, and our team was staying the same. And you could just tell all the smartest people I knew from Wharton and Columbia that wanted to make the most money possible. They were all doing the same thing, quantitative fun. So it makes you peak your interest when all the smartest people you know are suddenly working on something new. And I had a math background, or at least I had a proclivity for numbers, but I really, and it's on me.

09:46

Lloyd Danzig

I did not take advantage as an undergraduate in the opportunity to get a good formal computer science background, theory of computer science, the history of computers, theory behind, you know, why do you use different data structures to store different types of data in different ways? And then a, you know, sort of coding 101 that you get as kind of like an undergraduate computer science degree. And while, you know, you can use the Internet for that, and certainly there's a lot of great resources. I really was interested in quantitative finance, went back to get a degree in computer science, data science, to pair with financial services background, and took a job briefly at a really large advertising agency doing data science for Samsung. And the plan was to use that as a stepping stone.

10:29

Lloyd Danzig

And in May of: 2018

10:50

Dave Almy

The story starts, and it starts to.

10:51

Lloyd Danzig

,: 2018

11:22

Dave Almy

And alarm bells go off in your head.

11:24

Lloyd Danzig

And I say, I know this customer base better than anyone in the world.

11:30

Dave Almy

So it's fascinating to me. Right? So this is like two rivers flowing down, separate from one another. And all of a sudden there's this confluence where you have this fundamental understanding of God. This is where the camaraderie is. This is really fascinating to me. You saw where the numbers go, and then this legalization happens. And so you find this opportunity to take a look at these two pretty monumental things in your life and say, here it is.

11:58

Lloyd Danzig

Absolutely. And the more specific insight that I had at the time was that if you collective you, me specifically as a customer, like participating in sports betting and fantasy sports, not for the financial return, but for the social emotional return, well, that can be a very lucrative business to be in. Because if you are in a business where your customers don't expect a financial return. You can have really nice, juicy margins because you're delivering them something intangible in your right. And it turns out if you can do that well, everybody wins because the customers, they come away with more happiness per dollar than they could get elsewhere, and you come away with more dollars per unit of happiness than you could derive elsewhere. And it's a nice, harmonious relationship.

12:39

Lloyd Danzig

Obviously, there can be darker sides of gaming and gambling problems, but the role that gaming has played in my life is one that I thought, with technological innovation, it could play in others. And I started looking around at opportunities and ended up being part of a small group that helped launch a company in New York called Simplebet that while it hasn't been finalized, there are now rumors that DraftKings is buying the remaining 85% of the company that they don't own for $170 million.

13:07

Dave Almy

So was that informal, that look at simple bet just to try to get.

13:11

Lloyd Danzig

Your toe in the water? I totally randomly was reached out to by a recruiter who said, I'm working with a sports betting startup that needs data scientists. Do you want to interview as a data scientist? And I took a call, which was originally going to be them giving me highly technical data science and machine learning related questions. And almost immediately, I went to. It was a one bedroom apartment on West 31st street in New York. At the time, that was the company's headquarters. The CEO, who, by the way, is a teal fellow, who got the Peter Thiel scholarship to drop out of Columbia to take money to start a company, he would sleep in the bedroom, and the few people that worked for the company worked in the living room. I mean, it really was as great as a startup.

13:56

Lloyd Danzig

And immediately on both sides, it was clear that there was an opportunity for me to do a lot more than data science there. So I ended up, I did pretty much all of the fundraising for the seed in series a. I built the materials, I built the financial model.

14:12

Dave Almy

I personally pulled it. I mean, you were. You were in.

14:15

Lloyd Danzig

he founder of this company in: 2018

14:38

Dave Almy

The conversation is so hot. Like, there's fire departments going by right now.

14:41

Lloyd Danzig

Exactly right. They are coming to put out this fire. And were talking about how much growth there was going to be in sports betting. We talked about how when we looked at other established sports betting markets, the products that existed were very unimpressive to us. They were not what we would want to use as lifelong gamers, gamblers, fantasy sports players. We thought about, okay, what products would we want to use? And then what infrastructure would have to exist to make those products come to fruition. And then went to every big. DraftKings and Fanduel were not nearly as big at the time. Our bigger european and asian counterparts. We went to every company and we got laughed out of the offices of every single one. Most of them wouldn't even take the call.

15:23

Lloyd Danzig

And there were a parade of international industry experts who would say, I have been a part of the real money gaming industry for 30 years. You guys are just naive and don't realize that you think you're enthusiastic, but because you're new to the space, is.

15:37

Dave Almy

That a hard thing? I mean, does doubt start to creep in? Did you have real belief in.

15:42

Lloyd Danzig

Oh, my God. I mean, I believed that there would be people who wanted the products that we had in mind, and I believed that there would need to better infrastructure to cause those to exist. But those things can be true without it being an amazing multi hundred million dollar business. There are lots of things that are cool or fun to work on or people get use out of, but that you can't build into a large venture scale business. And I remember thinking, all right, maybe this is a cool idea, but it's just a much smaller market than I had in mind when people you thought maybe calibrate. Maybe I didn't calibrate right.

16:20

Lloyd Danzig

Maybe it's actually, you know, their whole view was, every time sports betting's legalized in any country, there's all these enthusiastic young people who think they're going to change the way sports betting has been done for hundreds of years. And they come out with all these ideas and none of them work. And I've seen this happen a million times. And so I'm not going to get excited about your project, and I'm not gonna introduce you to this person, and we're not gonna take a commercial agreement. And I mean, and this is such a theme for me, definitely is recognizing, in retrospect, how I should have had more confidence in my instincts. And even when people twice my age and a thousand times my net worth with certainty tell me something is wrong.

17:01

Lloyd Danzig

You can't use someone else's map of the world to navigate your own map. They're giving you advice based on the few snippets of information you gave. You're in the trenches day to day. They don't have all that information. They're not seeing the racer here.

17:13

Dave Almy

And there's a lot of their decision making on 30 years of history, not 30 years of future.

17:18

Lloyd Danzig

Sure. Now they are saying, look, I'm a pattern recognizer. I was here when the UK legalized sports betting and Australia, and those are both english speaking, similarly cultured places as the US. You're not talking about eastern Europe and Southeast Asia, and we've seen this. They were so confident every time, every real money gaming market it opens, people think they have ideas for new sports betting products. They don't realize that their enthusiasm is just naivete. Today or tomorrow or someday soon, hopefully. And again, not reporting on any non public information, that the rumors are swirling.

17:54

Dave Almy

And you gotta break new information.

17:57

Lloyd Danzig

If I had some, I would, and I hope that this breaks and closes soon. But it looks like DraftKings will acquire simple bet and a deal worth about $200 million. And perhaps more gratifyingly, every sports betting company on earth today is scrambling to offer the products that we came up with and were laughed out of the offices when pitching about six years ago.

18:19

Dave Almy

That is a certain feed up on the desk moment there, of course.

18:21

Lloyd Danzig

And there's something nice about that. And more importantly, in venture capital, you're looking for outlier outcomes, you're looking for extreme outcomes. And to do that, you generally have to pick ideas that don't sound so smart now, but only will sound good in retrospect. And if you take that kind of approach, many of them are going to end up being embarrassing, not so good ideas. And those are going to reveal themselves to be bad ideas way before the one good idea, you know, in retrospect, ten years later, manifests itself as such.

18:54

Dave Almy

Can you talk a little bit about, when we first talked, you used the phrase competitive energy.

19:00

Lloyd Danzig

Sure.

19:01

Dave Almy

And that really struck home with me, particularly when you think about it in the context like you just mentioned. You saw legalized betting in England, you saw legalized betting in Australia, and you had people who were established in those markets telling you, like, that's not going to work, don't do that, or whatever, going to laugh you out of the room. You talk about having a fundamental understanding of this particular market, the United States, and how people engaged with gaming and gambling products. Can you speak to that for a minute? The distance between those cultures and how this market is in that particular regard?

19:35

Lloyd Danzig

What you find is that knowledge has this fractal like nature to it. When you're zoomed out, it seems very smooth around the edges. But as you zoom in one of the edges of knowledge on a particular topic, you realize it's filled with all these gaps. And once you start to understand and explore those gaps, it starts to become so obvious to you how things will be in the future or why they are not that way. And if you're really lucky, you will find further fractal buds that you can keep exploring and getting deeper and deeper. And that, I think, certainly is something, to some extent, that happened here. Competitive entertainment is a phrase that I use and define as any form of entertainment. Where winning matters, where outcomes matter, where rooting for something is the primary source of enjoyment.

20:23

Lloyd Danzig

And what I found first in sports betting, but have now extrapolated out elsewhere, is that we just have. And I've thought a lot about why. I haven't quite landed on why, but we in the US have a different socio cultural orientation toward gambling, toward sports betting, toward risk taking, toward competitive entertainment than anywhere else in the world. I would say you go to the nicest, most expensive high end sportsbook in the nicest neighborhood in London, and what you will find is something that is kind of like if you've been to an off track horse bedding parlor here in the US. Or some people describe it either as sort of like a post office type location, or I heard one person describe it as the physical manifestation of a spreadsheet.

21:08

Dave Almy

You make it sound so glamorous.

21:09

Lloyd Danzig

It's a transactional location. They don't intend it to be glamorous. It is a place to get in, place your bet as efficiently as possible and get out.

21:19

Dave Almy

The perfect word is transactional.

21:20

Lloyd Danzig

Transactional. That is what it is designed as. And that is the same in Australia and anywhere else in Europe and in any of these mature gaming markets.

21:28

Dave Almy

It is not the way it is.

21:29

Lloyd Danzig

Here in Las Vegas. At a sportsbook, the odds are one of the least important facets of the entire customer experience. I don't mean that they can take away the odds. I meant whether someone is favored by five points or seven points or nine points is irrelevant to the experience of almost every guest there. They are there to see and be seen. It's a social environment, it's a party. It's a cool place to watch a game, even if you're not betting. And I think that is a beautiful microcosm for how differently things like sports betting sit in our culture than others. I've thought a lot about why I don't have a real thesis yet. I suspect it has to do with the risk taking, entrepreneurial nature of the US where, you know, depending on who you talk to, we idolize billionaires here.

22:12

Lloyd Danzig

There's no amount of money you could make that would be too much, at least in some people's eyes.

22:17

Dave Almy

Right.

22:17

Lloyd Danzig

And so american dream, entrepreneurship, and perhaps that is some of the risk on behavior that then becomes more socially appropriate, because it's very socially appropriate to be hustling, to be entrepreneurial, to be trying to make it big. I don't know yet. Don't quote me on that. I'm still thinking a lot about why this is.

22:38

Dave Almy

Of course, I'm quoting you on this. Talk a little bit about how sharp alpha first started to come together in your mind. I mean, you have the experience with the first investment, trying to move that along. But when did you always have an entrepreneurial streak? Was this something that was in you or was it more just like, oh, look what happened type of thing?

22:57

Lloyd Danzig

This is a great question. I don't know if I've really talked about this extensively anywhere. Always had an entrepreneurial streak. Yes. As young as I can remember, family would come over to the house for holidays. I would go in the backyard, I'd pick up rocks. I'd organize them, and I'd have a rock sale. You know, $1 rocks, $2 rocks. You know, buy two, get one free for the aunts and uncles and grandparents and, you know, you name any age. I'll tell you some funny entrepreneurial thing I was doing most recently prior to heading into this world as a side hustle. When I was working, I forgot which job I was at the time. And this will show my age, perhaps. I had a bachelor and bachelorette party planning business for celebrities and influencers.

23:37

Lloyd Danzig

So I did a few NBA players, bachelor parties, some cool stuff. It was a lot of fun.

23:42

Dave Almy

That's a whole nother. We'll have to do volume two.

23:44

Lloyd Danzig

Definitely. So did I have an entrepreneurial itch? Yes. Did I then recognize a big opportunity also? Yes. And I went to two different mentors of mine. If I'm good at anything in the world, it is surrounding myself with good people and knowing how to learn from them. I'm not particularly smart. I just figure out good people and when to ask them for the right advice. Have been lucky to have some just amazing mentors. So I went to one particular mentor, a guy named Larry, who's a successful hedge fund manager. He has a very specialty niche strategy that he is the king of. And his focus on specialization is something that always resonated with me. And he's just a guy who is so accomplished that his belief in me was always a really important factor.

24:31

Lloyd Danzig

And I went to him and said, look, I'm seeing this huge opportunity in the intersection of sports and gaming and entertainment and technology. But I remember saying I want to just be like a connector. I want to get the right people in the room together. And if they end up doing a deal that's successful, I can get a piece of it. I feel like that's what I'd be good at and how I could monetize this opportunity. And I guess that kind of is like being a banker, consultant, advisor, broker, depending on how you think about it.

24:59

Lloyd Danzig

And Larry, to his credit, and again, it's from where he comes from, said to me, look, Lloyd, based on how I think of you and what I know your aspirations are, if you want to make a name for yourself, and you've never come to me before in 20 whatever years and said you had a lot of conviction on something. If this is that thing, you can't make a name for yourself by just playing a sort of picks and shovels role and matchmaking. You need to be willing to put your name down and say, I think this is the right bet to make.

25:25

Lloyd Danzig

Because if you can do that and you can become a person who makes bets that work out as investments over time, that just unlocks a completely different career trajectory, lifestyle, it gets you in a different type of set of rooms and just, it's just a totally different trajectory than not to say I have plenty of friends who are very successful as bankers, brokers, consultants and advisors. And that was a big conversation. And then I went to another mentor of mine, someone whose advice I always treasure so much. I won't say too much about him because he keeps a bit of a low profile.

25:57

Lloyd Danzig

His name is John, but he is actually the protagonist of one of the best selling business books of all time, written by an author who has written many business books that became blockbuster movies that I'm sure everyone listening to this has heard. I don't believe this particular book has become a movie yet. And his name is not John in the book. They change it to something so people don't always realize it's him. And he has a big time role in, I'll just call it the emerging technology sphere today. And I went and had lunch with him at a diner in midtown Manhattan.

26:30

Lloyd Danzig

And I told him what Larry said, and I explained that I still was feeling just very hesitant about the amount of vulnerability and courage and confidence that it took to not only put your name on a company and launch it, but then to make investments, early stage investments, where you won't know if they're successful for many years. And there's a ton of hidden information, missing information. And I was concerned about how hard that must be to make a bet and have all your investors wanting to know how that bet is working out, but not being able to tell them, you know, for a longer period of time.

27:07

Lloyd Danzig

And I won't get into specifically, but that conversation I remember so distinctly, I really left feeling like he gave me permission, which is a weird word, but permission to fail, not to defraud people, not to be dishonest. But he really conveyed to me that if you believe in this and you do it with transparency and honesty and integrity, I can't guarantee you that every investment or any of the investments will work out. But I guarantee you that everyone will appreciate that you put your best foot forward and you'll live to fight another day, raise another fund, do something else.

27:38

Dave Almy

And you had belief.

27:39

Lloyd Danzig

I did. But I didn't have, until that conversation, the permission or courage to fail, I would say. And so I'll have to make sure John in particular hears us talking about this, because he gets so much credit for finding the right combination of words that made me leave that diner that morning saying, okay, you know what? I am going to do this. Because as long as I treat everyone well and I'm honest and transparent, it's okay if it doesn't work out as a screaming success.

28:08

Dave Almy

You had permission to fail.

28:11

Lloyd Danzig

Absolutely. And that is the answer to how did this become not just two rivers intersecting and an idea and conviction, but how did it go from that to what now looks like a very deliberate and established firm, but certainly was anything from it five or six years ago?

28:26

Dave Almy

Can you, for those people who may not be as familiar with finance and venture and the companies like Sharp Alpha, can you give a 30,000 foot view of the company, the focus of it, and what it is you're doing today?

28:41

Lloyd Danzig

So we do a few different things, but primarily our bread and butter as a venture capital firm is we write one to $2 million seed checks into early stage companies, usually software companies building in the sports, gaming and entertainment industries, podcasts, any, by any chance. We generally do not do media companies. We do have one that is particularly successful. But all jokes aside, no, we really do. Software investing is our focus. We have capital reserved so that if the company is doing well. We then put actually a much larger check in later on, and we usually take a very active role. Companies that benefit from introduction and access to the sports teams, leagues and media companies, and sportsbooks, or domain expertise in building products, gamification, fan engagement, access to regulatory and legal expertise that is specific to the industry. All those kind of things.

29:39

Lloyd Danzig

Those are the types of companies that we look for. Cause we wanna invest where we have an edge. There's lots of great places and ways to make money. I don't have an edge in most of those places right now. I have an edge in early stage seed series, a sports, gaming and entertainment software companies. And so that's what.

29:55

Dave Almy

But niche is important, right?

29:56

Lloyd Danzig

Of course, yeah.

29:56

Dave Almy

Particularly for companies like Sharp Alpha, which are carving out this particular place to become known in that industry, and one that has clearly established a ton of potential. I mean, you clearly understood earlier than most. So that's where the value came from.

30:10

Lloyd Danzig

It definitely.

30:11

Dave Almy

And that idea of niche is really important for that particular industry. Building out that expertise.

30:14

Lloyd Danzig

I got that very much from Larry, the first mentor. And again, I don't want to give him too much publicity. He might not want, but he has a very niche specialty hedge fund strategy, but he's the king of it. Anyone you ask about, oh, who's the best at trading these type of shares of these type of companies? They'll tell you guys name right away. And that, I think, really rubbed off. And it was critical because, look, we're sitting here right now. Andreessen Horowitz's office is down the road over there. Kleiner Perkins's office is down the road over there. Why would any investor, a limited partner is the name for an investor in a venture capital firm. Why would any limited partner give me money to pursue the same strategy as Andreessen, who has perfected it? In a generalist sense?

30:54

Dave Almy

They've got it nailed.

30:54

Lloyd Danzig

They got it down. They wouldn't, they wouldn't. They would be smart to. If I had a specific niche and a specific strategy where I can deploy an edge, and if they are bullish on that, it's hard for me to raise money from someone who thinks sports, gaming and entertainment are going nowhere. I can't convince them of that if they don't think that it has a viable future.

31:15

Dave Almy

But you got to be at the place where people who were thinking about that and recognize the opportunity as you did have a place to.

31:22

Lloyd Danzig

Absolutely. One of the biggest things I have come to appreciate is just the importance of, and every b, two b salesperson will know this, but others will not have. Think about it as much. The importance of qualifying your leads and just qualifying how you spend your time. You could spend all day, every day toiling away and feeling like you're busy without actually making progress. If you're not careful to think about the impact of the things that you're working on that day and how you're.

31:48

Dave Almy

Spending your time, can you talk a little bit? Having now had some success, you've exploited the niche. You've started to invest in a bunch of companies that fit the sports and entertainment from the online gaming piece. How have you seen the companies coming to you? Focus their approaches to what they're asking from you or what they're pitching to you? Where are you starting to see new opportunities that appeal to you? Or what are the ones that are feeling like this hits the strategy so well that your antenna starts to go up.

32:20

Lloyd Danzig

I could sit here as of the day of recording, and we can do this in a few minutes. And I can think about over the last two weeks, thematically, what was the common thread among the most interesting companies that I spoke to, but that might not be the same thing by the time this is recorded and released and by two weeks from now. And so the most honest answer that I can give, which is an indirect answer to your question, is that we are almost anti buzzword. If you're trying to invest really early, by the time a buzzword exists, it might be too late again. If you're Andreessen or Kleiner Perkins, and you can write $100 million checks into late stage rounds, you can wait until a buzzword exists.

33:05

Lloyd Danzig

But if you're trying to invest one to $2 million to own 10% of a company, when it's really just a couple of guys and a pitch deck, you know, it's a slightly different just dynamic.

33:15

Dave Almy

So by the time artificial intelligence blockchain makes it to your desk, it's too late, potentially.

33:21

Lloyd Danzig

I hate to make a hard, sweeping comment like that, because we look at all of that and, you know, within the world of sports, for example, you know, blockchain and AI, those are so broad. But let's say tokenized fantasy sports, where you have an NFT that corresponds to a player, and by owning that NFT, you can play that player that week and all the benefits of blockchain, make sure that no one else has that player. And there's a limited amount and there's provable fairness and things like that. Tokenized fantasy sports is something I would say got at some point to be a buzzword and was indicative that all right, so rare and dapper labs, you know, they're already multibillion dollar companies. If I'm now seeing a 26th tokenized fantasy sports deal, that probably means it's too late and too saturated.

34:07

Lloyd Danzig

I would be hesitant to blockchain or.

34:09

Dave Almy

AI in a sweeping those are Dave Almi non technical buzzwords.

34:14

Lloyd Danzig

Absolutely. Fair enough. So to finish indirectly answering your question, what I look for, I obviously, and I've explained some here and can get into more I and we have a firm have a way of viewing the world. We have trends that we look at. We think sports viewership will be different in five years compared to now in certain ways. And those are not bullish or bearish statements. They're just the way we view the world. There's ways of entrepreneurs working with investors that we think are right. They're not necessarily right for everyone, but they're right for us. So we're always screening for people who view the world the same way, who are building into the tailwinds that we believe in.

34:51

Lloyd Danzig

But what I really want is an entrepreneur who tells me what the buzzword is going to be and why it exists and why everyone is so stupid for not realizing it, and why they are uniquely positioned to know that this thing is going to become a buzzword. That's what we look for more than any specific theme or category I could.

35:10

Dave Almy

Ever tell you, and this is something you brought up previously, too, is the idea of great idea versus great people. Right? Because you can look at the market and you can think of where it's going to be headed, and you can have people come to you with an idea that you think is going to exploit that. But so much also relies on the people who are going to be realizing that vision or realizing that concept or idea. Can you speak to that balance between great idea, great people and where you fall on the side of the fulcrum for that?

35:40

Lloyd Danzig

Sure. I don't think there's anyone on earth who wouldn't agree in principle to the statement that, you know, you should invest in amazing founders, and at the early stage, you need to back the right people. I don't think there's anyone, including myself five years ago, who would disagree with or dispute that at all. But I do think that people who haven't spent a lot of time making bets on early ideas, whether that's in venture capital or if you're at a large organization and you're the one signing off on budget, there's many ways outside of venture capital that you could be in such a position. I very much underestimated and failed to initially internalize really how important it was and what it meant.

36:20

Lloyd Danzig

And you might, or your listeners might have heard people say things like an a founder can outweigh a b idea product tam opportunity timing, but not the other way around. A B founder will never bring an a idea product opportunity to a venture scale return again, something that intellectually I would have agreed with. I would have marked true on a true or false quiz, too.

36:43

Dave Almy

Then the practice of it.

36:45

Lloyd Danzig

But the practice of it, and the reasons I would give for you now as to why I am so much more founder focused are not even different from the reasons I would have given you five years ago. So they're the obvious things, I think. No tech company has the same product on their IPO day as in their initial pitch deck. Netflix used to deliver DVD's in the mail. If people listening even know what DVD's or mail are. Facebook never had ads. That was not the point. And so you know that the market is going to pull some sort of product out of the business, and you need to bet on the people who will navigate.

37:19

Lloyd Danzig

I think I probably just didn't realize truly how hard it is to take an idea from your mind, build it in real life, and then get people to buy into that and do all the crazy things you need to do to survive ten years later to have a successful outcome. To summarize all of this, we now, at the end of our diligence process, we do all our financial modeling and our underwriting and our due diligence, and we bring in lawyers and experts and everything you might imagine. And then we say to ourselves, is this a founder or a management team? If it's co founders whose future earnings we want to own a stake in, regardless of what they're pitching us today. And if the answer is no, the deal does not get done.

37:58

Lloyd Danzig

It does not matter how good all of that other work was and how many people are saying, yes, that is the test. And I have only every day, grown more and more ardent about following that type of mentality. So we'll check back in five years if I have reverted to the mean at all. But I do not expect that to be my case.

38:17

Dave Almy

Five year check in. I mean, there has to be a couple people out there who are listening to this conversation, who are thinking, you know, oh, geez, I love sports, and I got what I think is a great idea. I'd love a chance to get in front of Loida to pitch something and I'm not going to give you his number right now, so don't think that's going to happen. But as were talking previously, you know, sports can be that real double edged sword. It's great because it motivates you and you're excited about and it's fun to be around. But sometimes that passion can blind people a little bit.

38:51

Dave Almy

So I'm wondering if you have advice for people who are thinking about not even just online gaming and those kinds of things, but the broader idea of being a founder, of being an entrepreneur and taking a product, a technology product in particular, to get investment backing. What advice do you have for those people out there who are listening to this?

39:13

Lloyd Danzig

Before I answer, I just want to comment on part of your question. I think it's a really interesting point that some people don't quite appreciate. If you're the NBA or the NFL head office, for example, you know that people will take a pay cut to work for you so that their email address is@NFL.com and they get the perks of getting free tickets and saying they work for the NFL because you turned.

39:32

Dave Almy

Down the NBA job to be in data science, didn't you?

39:35

Lloyd Danzig

Good memory. I can't even, I don't even remember talking about that with you.

39:38

Dave Almy

Yes, I know everything, Lloyd.

39:39

Lloyd Danzig

I was just, for the interest of listeners, I was very heavily and briefly considering a machine learning data science role in house at the NBA. And they certainly have a team now that does this, that is monitoring all the data related to betting. Where are the referees? What are the referees tweeting? Who's complaining? And who might be, I don't know, fixing games, challenging integrity free. So it's a really cool algorithmic data science group at the NBA designed to protect the integrity of the sport. So if you're the NBA, you know that people will take pay cuts. The NBA's business cards are so cool. They're skinny. They're like the actual NBA logo, but in a business card form. And people love that because of that, they pay lower guaranteed salaries than someone of equal experience would get at an investment bank or consulting firm.

40:30

Lloyd Danzig

But they also probably get ten times the number of applications. And it's the same thing with startups. There's a huge benefit that people will take as payment, the enjoyment they get from working something they're passionate on about. But it also means there's a lot more noise that you have to separate out the signal from. I think my answer on this question is they're related, is I've used this phrasing a lot, be the type of founder that someone wants to own a future stake in, regardless of what you are building. That is a great idea. Now, how do you do that? That's complicated. I did hear Warren Buffett apparently used to give this great advice when he'd talk at schools, and he would say, think of your five friends who you would most want to own or future stake in their earnings.

41:16

Lloyd Danzig

What are their common traits? And how can you be most like those five people? I thought, that's a good Warren Buffett exercise. And then secondly, and this will pull from Marc Andreessen, quoting comedian Steve Martin, meaning in very different ways, the same thing, which is be so good they can't ignore you. People get so tripped up on, like, how can I network my way to the right person to convince them that there's urgency, that they need to put money into my deal now and then use that money to propel myself in the media and hire the right people and get to the next level of success. And there are a few people out there, very few. But there are a few people out there who are just these amazing choreographers that just bend the world to their will.

41:59

Lloyd Danzig

And even without traction in a product, like, they get everyone to buy in, and then the buy in is what produces the success. But that is when I say that it's the exception, not the rule, I mean, that's the understatement of the century for the overwhelming majority of entrepreneurs. If you just built a good product or a good business, and it's making money and people are downloading it, and there's positive app store reviews, and people are requesting new features, and if you're a b, two b company enterprise clients are coming to you to upsize their contracts. Everything else will take care of itself, the fundraising will take care of itself, hiring will take care of itself. And so I love the be so good they can't ignore you.

42:37

Lloyd Danzig

Whether you're a stand up comedian, you know, an entrepreneur or otherwise, it's not a trick, but it really is. The only shortcut, if you would call it a shortcut, is just build a great company that people want to use, that people want to pay for, and everything else will take care of itself. The best way to raise venture capital is to not need it in the first place, frankly.

42:55

Dave Almy

So, as we begin to wrap up here, I know you have close investments into 30 companies right around there right now, and I know you love them all equally, but I'm wondering if there's a couple of standouts or ones that you're particularly excited about that you feel like are going to be what people are talking about in the coming months or years.

43:20

Lloyd Danzig

I will. I'll probably just start by naming the most recent deal that we've announced, because it also happens to be one that I am most excited about, and it's a great time to be doing deals, and the trajectory this company took, it has been incredible. We are investors in a company that only recently came out of stealth mode called C 15 Studio. C 15 Studio is a sports focused sports specialized platform that provides the best sports leagues in the world with the turnkey ability to launch a specific type of streaming channel called a fast channel. Fast stands for free, ad supported streaming television, and it is different from Netflix, for example, where you pay a subscription, or Hulu, where you pay a subscription, or maybe you watch some ads. Those are subscription video on demand and advertising video on demand.

44:11

Lloyd Danzig

As it suggests, fast channels are good old fashioned linear television from the old days. What's old is new again, but on streaming, yeah. So you go to your roku, you have a bunch of channels. There's no on demand, there's commercials. You scroll through the channels, you see what's on channel a, maybe change to channel b. You can see a tv guide. At the end of 30 minutes, you see the next, again, good old fashioned linear television, but on streaming, and tangentially. One of the benefits from a business perspective to fast versus good old fashioned cable is that cable tv, everyone sees the same ad all the time when you're delivering that same content, but digitally, everyone can get different ads, and so advertisers are willing to pay more because you can target ads in a way you can't on tv.

44:56

Lloyd Danzig

So given that a lot of the RSNs are failing or upside down or who knows what their future is, given that there are just all these huge secular shifts toward streaming, watching on mobile, watching on OTT, and that now all the teams and leagues really want to have a direct to consumer relationship, they want to own it directly. Many, if not all of the top sports properties in the world are racing to launch fast channels that you can watch without a credit card, without an email, anywhere in the world. And NBA, NFL, MLB, I think the.

45:27

Dave Almy

Suns are one of the first teams to do it.

45:29

Lloyd Danzig

ears ago, and I think there's: 1943

46:09

Lloyd Danzig

And I don't want to say it's all thanks to c 15 studio, because if Formula one didn't have the sport and the content in the first place, there'd be nothing to do or watch c 15 studios. That takes all the content, all the video footage, puts it into a 24 hours channel, programmatically sells all of the different ad spots, makes sure that there are things on 24 hours a day, distributes it to Pluto TV and all of that. If you're Liberty Media or Formula one, all you do is, you know, export some video files, you know, once a week or once a day or once a month and everything else gets taken care of. So I think you'll see a lot more fast channels.

46:41

Lloyd Danzig

You'll see every sports team and league want to have their own Roku app or their own mobile app, whatever it is. And you'll see many of them select C 15 studio as the leading turnkey provider that just takes care of everything. It's always fun when I can turn on a tv or a computer and turn on this channel. One of the reasons I'm so excited is that one of the hardest things about doing a deal with, let's say, a Formula one, it has nothing to do with technology. It has to do with just commercial savviness and business development prowess and patience and the ability to navigate a massive, potentially bureaucratic organization. And the founders that we bet on here, this was really a bet on them more than anything else.

47:30

Lloyd Danzig

We were so impressed by how they handled the early Formula one and Pluto TV and Amazon negotiations. They punched and way above their weight. If you're a pre launch stealth mode startup and you can get Liberty Media or Formula One to take you seriously and to pick up the phone, right, to pick up the phone, let alone to then get a term sheet and turn that to a long form contract and everything involved with that, it gave us the confidence to make a bet. And we did it alongside some other great sports tech, sports media investors that bring complimentary value, adds to the table.

48:07

Lloyd Danzig

And that's one of the things we really like to do, is be around the table with other great investors where when we all combine forces, really de risk the investment that we're making and use the cap table not as a point of differentiation, because the differentiation has to come for the company, but just as a little bit of a leg up, a little bit of a boost, a little bit of a shortcut to get the right people in the right rooms at the right time.

48:31

Dave Almy

Lloyd Dantzic, he is the founder of Sharp Alpha. Amen. This has been a great conversation. It's been a lot of fun. But now I got to do something that you're not ready for. Just a lightning round.

48:43

Lloyd Danzig

Oh, boy. Fair.

48:45

Dave Almy

This is a series of questions. I have not revealed them to you.

48:48

Lloyd Danzig

No.

48:49

Dave Almy

They are going to come out of your blind side. So I just hope you're ready for these. Shall we get to it?

48:54

Lloyd Danzig

Let's do it.

48:55

Dave Almy

All right.

48:56

Lloyd Danzig

I.

48:56

Dave Almy

You're also part of a nonprofit that's focused on the ethical development of artificial intelligence. My question is, how terrified of AI should I be?

49:06

Lloyd Danzig

Your fear should be directly proportional to your optimism.

49:12

Dave Almy

That's a complex answer for the lightning round, Lloyd.

49:15

Lloyd Danzig

The only reason that AI is worth fearing is because it is so capable and so compelling to use for so many good things. If it was not, you know, it would be easy to outlaw and throw in the trash. And so I think you should have a view on the power AI will have and that power can, you know, both be a positive or negative.

49:32

Dave Almy

What's the best sports bet you've ever played?

49:35

Lloyd Danzig

Oh, I will say on the notion this is a recency bias, but during the NCAA tournament, a couple of the group of same friends that I've been doing fantasy baseball with since I was twelve years old, were watching March Madness, and we did a parlay of all the underdogs that night to be the first teams to score ten points. And so the last game of the night was the Grand Canyon University antelopes. Twelve versus five seed. I didn't even know there was a Grand Canyon university. I didn't know there were the antelopes. Go lopes. Go lopes, baby. And we hit that bet and were all like, you know, just jumping and rooting for it and hugging each other.

50:14

Dave Almy

Where else can you get that excited.

50:16

Lloyd Danzig

About ten points scored, right? And that rooting for that first, attend the Grand Canyon university antelopes, I got more happiness per dollar risk than anything else I've spent money on recently.

50:27

Dave Almy

Okay, as established, you're a big New York sports fan.

50:29

Lloyd Danzig

Oh, yeah.

50:29

Dave Almy

All right. Which team would you wish a championship on first Knicks. I know it's not gonna be the Mets, the Jets, or the Rangers?

50:39

Lloyd Danzig

Oh, my God. I. The jets are. I mean, look, the Yankees have won 27 World Series, and, you know, I mentioned four and five years when I was a kid, so they're hot. Judge is looking great. It's going to be a good year for the Yankees. Being a Jets fan has been one of the most painful and traumatic experiences of my entire life.

51:00

Dave Almy

I'm sorry that people can't see this on video because a pallor just hit.

51:04

Lloyd Danzig

And so they deserve it. I deserve. We deserve it. I want to go tailgate for the Super Bowl. I want to be there. I don't have much hope. We didn't get past the third or fourth snap last year before Rogers went down. So, you know, perpetually pessimistic. But, man, that's the easy answer.

51:22

Dave Almy

If I told you the only time I won my March Madness bracket was when I selected which mascot would defeat the other one in battle, what would your response be?

51:32

Lloyd Danzig

I would say that makes perfect sense. The odds of getting a perfect bracket or getting the best bracket in a large group are so low that above a certain size of other bracket participants, your only hope is to have an outlier bracket that no one else is likely to have.

51:51

Dave Almy

Because what happens? Nothing beats a blue devil. Back in those days. I mean, blue devil's gonna beat everything you can't like. It's a magical creature.

51:57

Lloyd Danzig

I will. So, look, there also is a bit of a, it's not a perfect correlation, but, you know, I went to Upenn, the Quakers, a pacifist, you know, puritan type that is like the least intimidating mascot that exists. And I think you should bet against the Quakers every time. You'd be probably smart to not put upenn in your march madness bracket.

52:18

Dave Almy

Lloyd Danzig, thanks for the time, Dave.

52:20

Lloyd Danzig

This was a pleasure.