E278: What Separates the Top 1% of GPs
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How did DoNotPay grow into a profitable, dividend‑paying AI consumer company?
Joshua, I've been very excited to chat. Welcome to the How to Invest podcast.
Thank you so much for having me. So tell me where Do Not Pay sits as a business today. So Do Not Pay has been around for a while. I like to think of Do Not Pay as an AI consumer champion. And what I mean by that is we've helped millions of people fight back against big companies and the government. The very first use case 10 years ago, I started it as a freshman in college, was helping people get out a parking ticket. And today we have over 100 areas of consumer issues that we help people with, such as getting people refunds, canceling subscription, all of the areas where big companies know that people don't have the time to fight back. So Do Not Pay is a subscription business. Consumers pay us on a monthly basis, and then they get access to all of our services.
And we have hundreds of thousands of customers, and it's a very small team of only 14 people at this point. We are venture-backed, so it's a Series B company. But given the scale of the business and the efficiency, we're actually profitable. So about a year and a half ago, we started doing dividends for our shareholders. And we were one of the first VC-backed companies to do that. And interestingly, one of my friends in Silicon Valley said, a company like Google would never pay a dividend. You shouldn't pay a dividend. And we paid our dividend. And actually, I think a few months later, Google paid their first ever dividend. So very exciting. And I still run it every day. And I also do a lot of exciting investing, which I'm excited to discuss with you.
When we last chatted, you said that a company should exist to make money, which sounds extremely non-controversial. But in reality, you see venture capital plowing billions of dollars into companies before they get profitable. To your point, Google just recently started paying dividends. Why do you have this paradoxical belief? And isn't that in friction of growth and market share and all these other things that startups should ascertain?
I arrived in the US and Stanford in 2015. And at that time, Snapchat was the big winner and the big inspiration for everyone. And of course, we all watch the social network. And so all of these social media companies kind of perpetuated this myth that it's okay for companies to continually lose money for a long period of time. And then you saw Uber and other companies like that do the same. And... I think really it is a myth because Facebook at the Series A was profitable. And a lot of the best businesses actually do. And I'm seeing this now with companies that I was the kind of first believer in now doing quite well. They're actually great businesses. And so I think it's more of a myth than people realize about whether you should be losing too much money.
And it's best to have a good business.
What about network effects and economies of scale and all these things that you're supposed to gain as a venture-backed startup, which is the reason you lose money as you're gaining these scale economies?
I think that for network effects, particularly with social networks and marketplaces, it makes sense to go a little longer with scaling. For enterprise software businesses, at least on a gross profit basis, they should be profitable.
You're also a solo GP investing out of your fourth fund at Browder Capital. Tell me about the story of how you became a venture capitalist.
So I started my business by accident because I got a lot of parking tickets and I similarly became an investor by accident. So three and a half years into Stanford, I took a program called the Thiel Fellowship. where they, I'm sure many of your listeners are familiar with the Teal Fellowship, but the summary is that they pay top 1% young entrepreneurs between the ages of, say, 16 and 22. It used to be $100,000. Now it's $200,000 to take a two-year break from college and start a business. And I'd already started my company, Do Not Pay, but it was more of a project during college, and I wanted to make it a serious business.
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Chapters
5 chapters
1
How did DoNotPay grow into a profitable, dividend‑paying AI consumer company?
0:00–4:11
2
Why does Joshua argue profitability can beat endless growth for startups?
4:11–11:28
3
How did Joshua transition from founder to solo GP and what kicked off his investing career?
11:28–19:16
4
How does Joshua identify and become the 'first believer' for pre‑pre‑seed founders?
19:16–30:37
5
What does 'one big decision a year' mean and how has it guided Joshua's investing choices?
30:37–32:02
Speakers
2 identifiedMore from How I Invest with David Weisburd
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