Sam Yagan of Corazon Capital on AI's transformative impact on consumer tech and the importance of product-market fit

Put out an article that says the Aremis Moonbase project is legally dubious. Okay.

Payne says, "Oh no, someone call the moon police."

Oh, well, we have our next guest in the reream waiting room. Let me tell you about MongoDB first. MongoDB, what's the only thing faster than the AI market? Your business on MongoDB. Don't just build it, own the data platform that powers it. And without further ado, we have Sam from Coror Zone. Welcome to the stream. Thank you so much for taking time. How you doing?

All right.

Great, great setup here. Great mic, great background,

great polo. Nailed it across the board.

But we'll let we'll let you introduce.

I don't look like you guys.

Well, white market's up. White, so we're all in white.

We're Yeah, we're happy. Uh, how are you doing? Uh, please introduce yourself and and and the group, the fund.

Hi. Uh, I'm Sam Jagen, co-founder of Corzone Capital. uh spent most of my life as a founder uh Sparknotes, OKCid uh involved with Tinder, Grinder. So, you know, hopefully got you through school and hopefully got you some dates and now uh investing in the future of consumer AI.

Do do you want to focus on the dating market with this fund? Do you think that there's opportunities for new platforms in AI? Yeah, I mean the the the biggest question I have for you is are you surprised that we're, you know, a few years into the AI boom and when you look at the top 25 chart in the app store, it's still like pretty much just LLMs and incumbent, you know, consumer products.

Yeah.

Yeah. That that that's going to change. I think uh the entire consumer stack is going to get rebuilt.

Uh that I think the incumbents uh most of the consumer incumbents are at risk. Yeah,

I do think dating is a pretty protected category because you need liquidity. The big the big apps are always the big apps. Yeah. But I think for almost everything else, I I think the way we message each other, I think the way we uh connect with each other, I think the way we find jobs, the way we find

uh friends, I think all that's going to change and it's going to be AI powered

at the same time. Wait, so on a relative basis, isn't there maybe counterintuitively more opportunity if you're building in consumer AI? If you go into something that needs a liquidity pool like the dating market and you can maybe use AI or just come up with a unique wedge, get over the cold start problem, get some liquidity on the platform and then maybe you're better positioned because you can't be fast followed by a copycat that's just like cloning all your features because they won't have liquidity but you do. I

if you can get past the cold start problem, that's right. But I actually think in in the case of dating, I think the incumbents are much better positioned okay uh to leverage AI. But I think there are lots of other places where um and I'm surprised so many VCs are running from consumer right now, but I think AI is going to change transform the way consumers interact with technology in a way that um you know has never happened since the dawn of the internet itself.

Yeah. So talk about some opportunities.

Yeah. Well, I mean I wanted to ask like what are what are you actually looking for in an early stage consumer founder? Because it's very rare, you know, your case you've had like multiple big hits. Uh it's hard enough to have uh one uh in my consumer, you know, the random consumer tech investments that I've made uh doesn't matter if I'm investing uh uh you know, pre-product or after they've gotten to a million users, they usually end up as zeros. So, it's a it's it's an absolutely brutal game.

Welcome to venture capital. Well, well, and and and I would just say like this like, you know, the handful of zeros that I've had have like, you know, concentrated uh concentrated in consumer.

Yeah. Uh I do think consumer tends to be much more variable than uh B2B businesses. Uh you tend to either get find product market fit and find a way to scale or you don't. It's very hard to end up I think in the middle range in consumer businesses, which I think is why it's so attractive as a venture capital investment. If you can get them right, you get them really right. And that's what we're looking for. You asked about founders. I think AI founders are no different from um you previous types of founders. Um in the early stage, we're really looking for founders who understand the the process of finding product market fit. That's all that matters in the early stage. And I actually think AI can be a little bit deceptive that way because uh you can get the first few users to adopt because people are so curious right now. But I don't think that means you've necessarily found product market fit that's scalable um in the way that it used to be much harder to get that first million users. And I think it's a little easier to do that now.

Totally. Yeah. The the uh just in just this year I've seen uh like the exciting kind of one aspect of why now is I think exciting to make a consumer fund is you're just seeing like thous you know a thousandx the number of apps. I'm I'm uh talking to a family friend later today that's like you know built built their own uh built their own app, right? They're very excited about it. They want to they want to get my feedback. And I just think there's so many people that were kind of gated by not having access to engineering talent or didn't know how to code themselves and now they're building apps. So I think like the bar the bar is going to go up um pretty dramatically. Um I wanted to ask like do you think there is room uh for like taking like the capital intensivity of deep tech and bringing it to consumer and I'm specifically asking because of like Tik Tok. Tik Tok spent how many billions of dollars on customer acquisition. They had a product with product market fit. They did some interesting things around kind of juicing engagement from from at least uh my my point of view, but then they also spent like hundreds of millions or billions of dollars on acquiring users. Is that something that you think uh you think you'll see in the fund in in some kind of breakout companies? Yeah, I think that's a that's a great and very nuanced point that you make, which is are AI companies going to be more effective at acquiring customers or not.

And I think AI hasn't really, you know, your your example earlier about an AI based dating app, you just kind of assumed you'd get over the cold start problem, but you didn't really explain how you were going to do that. Um, and so I don't think um, I don't think other than there's a little bit more word of mouth early on because people are so curious about any new AI app. I don't think any, you know, they've really figured out how to leverage AI differently to scale these apps. And so, um, I do think your point about bringing some of the capital intensivity, um, I do think that'll all be reduced, but I don't know if it's going to be reduced on the marketing side specifically, for sure on the engineering side.

Okay. So, yeah. Does that change anything about the investment strategy? When I hear 100 million fund, I I have some conception of the type the type of checks at various stages that you might write. But do you think there will be anything about running a $100 million fund in 2026 that will be different if I just look at the size of checks and and spaces that you're occupying versus, you know, 5 10 years ago?

Yeah.

I think people are going to have to spend a lot less of that early capital building the infrastructure.

Yeah. getting the code written. I mean, when I started SparkNotes, we had to go lease servers and plug them in in, you know, colo facilities back in the 1900s. Yeah. Right now, you just, you know, you're going to be able to get you're gonna get your app into the app store so much cheaper. And the real the the real separation among founders is going to be can you really figure out product market fit. It's not going to be about writing the code. It's not going to be about doing the marketing. It's about can you actually build a product that consumers love. And that's really what we know how to underwrite here at Corazone and what we've what I've done throughout my career.

Yeah. consumers love and has positive unit economics because we're seeing this whole other dynamic right now where there's products that people love but if they were actually charging uh as much you know I'm thinking like image image and video uh gen products where you know if you actually price it the way you would need to to be building a business

you know would would the demand still be there

and and if you think about you know when the internet started the beauty was that everything became free to publish and so you had all the the the first business model that came out was like spark notes, just take Cliff's notes and make it free. And and tons and tons of companies did that. And now you actually have marginal cost associated with, you know, the tokens and and the and the um the AI that you're using. And so now all of a sudden, uh for the first time, you have cost of goods sold in a consumer tech business, which has really never happened before. And so that's what one thing that founders aren't necessarily thinking about so much is what the endunit economics are. But I don't worry about that early stage. I worry about let's make let's make a product people love and let's figure out the business model later. What have you learned about pivoting?

That all the best founders have to pivot multiple times. Um it's, you know, it's very rare that you hit the product on the on the head, you know, the very first time you do it.

Um and I think that's why

any any memorable any memorable pivots, you know, across your founder journey?

Uh yeah, I mean we, you know, the original idea for Spark Notes was a humor site that was very much like The Onion. probably probably older than you. Yeah, it was called the spark.com. In fact, the corporate name for sparknotes was the spark.com. It was a humor site. Um and then we kind of realized that that was

we made a website for humor.

Jokes. I love the onion and I love spark.

Yeah. So, we basically tried to knock off the onion first. Uh we realized that was a really crappy business to be in and then uh we pivoted to do study guides and that ended up being the business.

How did you think this is an odd question? I'm not trying to be aggressive because I I loved uh Spark Notes. It helped me through the high school. Um, but how did you think about like the moral implications of potentially like helping you cheat? Because we just went through this like moral reckoning in Silicon Valley last year around Clue, this company that was like very very, you know, in the marketing like cheat on everything, very aggressive about that. I don't remember Spark Notes ever marketing to me as like cheat. It was very much like supplemental, additional. Sometimes, you know, I'd read the Spark Notes chapter instead of the full chapter if I was running late or late on sleep or wanted to hang out with some friends. But how did you process like the tradeoff or like the impact of that business?

That's such a funny question. Um,

here's the thing. People who want to cheat are going to cheat.

Yeah.

And so what we focus on is let's make the best product both for the people who want to get A's because they're doing the work and if you're going to cheat,

you might as well actually learn something in the process. And so we we didn't give you the paper that you could turn in. We gave you the best path to learn the material. And honestly, you know, if you didn't read Romeo and Juliet, but read the Spark Note, you probably understood the book.

Yeah. Yeah. Yeah.

And so that's probably better rather than And I think Cliff's Notes never really did that. Cliffnotes was always about just trying to get you through and we really tried to make sure that you learned what you were doing.

Yeah. Yeah. Did you ever did you ever think about uh like deliberately how you position it in the marketing because you clearly had that philosophy but you could have had the the choice to like you know fly every college campus with like cheat and like maybe that would draw people's attention. Did you ever think about like click baiting rage baiting any of that?

No. No. In fact our appro our approach was the opposite which is try to actually get the teachers to recommend us as the preferred study guide. So there were a bunch of teachers who would write us and say hey I've told my students you can't use cliffnotes but you can use sparknotes. Interesting.

And then now all of a sudden you've got the teachers endorsing you because you've made the better product. Um and so what seems like a cheating product gets repositioned as a study aid. And that's really what we wanted.

Yeah. And now teachers

look there are moral there are moral questions. There are moral questions in every business. I mean business.

How do you think about investing in in anything kind of education focused when it feels like LLMs are just naturally quite good at that? But still there's possibilities to build you know harnesses and stuff. the application layer.

No, no. I I actually think uh I I think AI is going to transform the way we the way we learn. For sure. There's a company we're invested in called Brilliant. Um which is um an AI the native AI tutor. And um you know, in the 1900s, you had a graphing calculator. You know, that was your like uh you know, to get through high school. And I think the next generation of kids, you're going to have your personalized AI tutor uh that's going to get you through school. And you know, we're funding that in our fund.

Yeah. Yeah. It's very funny. I completely agree with your intuition that like oh AI has already solved education but then you look at like Andre Carpathy is building something in that space which is just like fascinating because like he has the most insight and has worked at OpenAI and Tesla like

I wonder I wonder if there's I wonder if there's actual like an AI hardware device specifically for learning because like think about the ch like if a kid is sitting there and they're like trying to use their phone to learn

but I could ask it about anything

but then you're getting a push notification from your friends right you There's potentially some of these AI hardware devices that have flopped because they were trying to replace the phone or maybe replacing it in the wrong context and you should be thinking like what is the next TI84 that every student has

they're actually you know learning.

That's cool.

Cool.

Well, congratulations on the fund raise. We want to ring the gong for you.

It would be an honor.

Great stuff.

Great stuff. Uh we'll hopefully get uh many of your founders on in the in the coming weeks, months and years.

And we'll talk to you soon.

Great. Thanks, guys.

Have a good rest of your day. We'll talk to you later.

Um

deep into the fourth hour.

Deep into the fourth hour.

We got a 1 hour countdown.

We're we're we're coming up on 1 hour 1 minute 14 seconds until the launch. Um uh we have an interesting post from Andrew Reid uh sharing on the 50th anniversary of Apple the investment memo. This is the victory lap of all victory laps for a venture capitalist. Uh writing $600,000 into uh into

on a real piece of paper

on a piece of paper. And uh there are some handwritten notes on here. Uh it said will be tough to do this deal. Small amount minuscule high price second position. uh CMS wants to guarantee it's a very interesting document proposed financing structure 600k to a and 660k to agens and company eight 480 to one venture investor invitees venrock

Julian Julian Weisser says 600k buys 10% very rich deal like I'm used to buying 60% fork

it's actually a crazy crazy lore uh well uh if you need something to do uh it's not out yet, but maybe tomorrow if he needs some kill some time. Uh Donald has made a documentary about a bunch of friends of the show. Uh Will Dew and Riley Walls and the and the creators of the J mail suite. Uh it's an attempt to capture what it feels like to be a young person in San Francisco right now. He's dropping that tomorrow, so you can go check it out.

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Why do you want to be here? Why do you love space? Why do you love being a part of history?

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Glad I warned everyone.

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