He Raised $26M Betting on Probabilities, Not Guesses

Nic Baird was on track to become one of the best sailors in the world. He walked away to make a statistical bet on startups, and built Koah Labs, the ad monetization platform for AI tools, raising $26M along the way.

In this interview, Nic opens up about:

• The decision framework he learned from competitive sailing: how to make the biggest bets of your life when you don't have all the information
• Why starting a company is a "high variability, low risk" move, even if you fail
• How self-doubt loses to your environment, not your willpower, and the community that finally made him believe he could build
• Why he bet on ads when every VC in 2024 was preaching that subscriptions were the only future for AI
• The real bottleneck for AI agents: not the technology, but how long human trust takes to catch up

Watch to see how a world-class sailor used probability and expected value to walk away from going pro, and bet on building instead.

I'm Nic Baird, I'm the CEO of Koah Labs. Koah Labs is basically the ad monetization platform for AI tools. We've raised $26 million to date. We're reaching now single-digit millions of users, and growing very, very quickly.

A lot of people say you shouldn't start a company, that it's a bad economic decision, and all these things. But I like to think of things in terms of variability vs risk, and starting a company is a high variable thing. I actually think it's a low risk scenario. Why? Because you learn so much being a founder of a company. You will become a more valuable asset to a company later and be able to make more money later, whether you fail or succeed.

Sailing was by far the most important priority, and where I was spending almost all of my time. Of course, sailing is many things. It's also cruising through the Caribbean and having a cocktail on the back of a nice big yacht. But the type of sailing that I do is closer to NASCAR or Formula 1, fast, high-performance racing. Growing up with my dad doing that as a profession, by the time I got to college I was able to go compete at the Youth World Championships in two different classes in two different years, and finished third and fourth respectively. I had won three national championships by the time I got to college.

Chess is theoretically a solved game. You can play it perfectly. In poker, there are too many confounding variables, and you're operating under too much uncertain information. That means you could play quote-unquote perfectly in poker and still lose, because there's uncertainty. There's a variable of randomness, a variable of chance.

In sailing, you have these decisions all the time. When you're sailing in a sea breeze environment, as we can call it: the land heats up faster than water, so you get a sea breeze. That's what happens in the San Francisco Bay Area all the time, for example. The San Joaquin Valley is 100 degrees, and the Pacific Ocean temperature is 60 degrees. That temperature differential is partly what creates such a powerful sea breeze, and why it's so windy in San Francisco in the summertime. When you know those things, you can start to predict: as the land heats up, typically when it reaches this temperature differential under these pressure circumstances, that's when we expect the sea breeze to come in, and we usually expect it to come in from a certain direction. So you can position yourself well to be prepared for that to happen.

That is a great proxy for how the best decisions are made, for your own career, for your own life, for a business. You have to make a statistical bet. You have to say, I think it's most likely this thing will happen. And then, depending on how confident you are, that's how much you invest in that thing.

So you're saying you're 80% confident it's going to rain today. It's not really expensive to carry around an umbrella, so you're going to bring one. I'm betting it's going to rain, and if it doesn't, the decision I've made to bring an umbrella isn't that harmful. Whereas if it's a 10% chance of rain, you'd weigh the trade-off: yeah, 10% maybe I get a little wet, but I don't really want to carry an umbrella around. I think that's inconvenient. That's a very low stakes example of doing this.

The high stakes example of doing this is I was actually saying no to sailing opportunities and professional opportunities to go get paid to race, because I was too curious about what was happening in startup land. The ambition in me was saying, great, I could become the best sailor in the world. Is that as important as becoming the 100th best business person in the world? No, it is not.

If there was a 1% chance that you could make a trillion dollars, 1% of a trillion dollars is still 10 billion dollars. Thumbs up, I'll go after that. Whereas if you say I have a 100% chance of making a million dollars, people would say, well, go to the million dollars. But the expected value is actually much better if you go after the low chance but high reward. That's the way I like to think about a lot of decisions in my life, and also within the business, and then of course within sailing too, which is where that article came from.

And after all that, I thought, I've got to get back to where the builders are, the people who are creating things, and find a very talent dense community. So I sought out an in-person San Francisco-based opportunity, and originally I thought I was going to go work for a startup, like a series B or series C startup. But I was lucky enough to discover South Park Commons (SPC), a community of founders basically, and a venture capital firm that backs them.

The answer to when I wanted to build stuff by myself has been pretty much since I was a child. The question was why didn't I? You can be critical about a lot of things, lack of agency and things like that, but the reality, to be totally honest, is I had a lot of doubt in whether or not I could. My experience at SPC, and being able to have exposure to people who were great builders and having them teach me how to do that, how to run that process, how to build things on my own, was the first moment I realized that I actually was capable of building things on my own. I knew somewhere in my brain that I was capable of it, but I hadn't actually understood it or seen that path until I was able to meet the people at SPC who were really, really amazing at being able to make things come to life.

I usually think about this as two different forces. You have the driving force behind building: curiosity, excitement, wanting to do something for somebody else, wanting to solve problems. And then there's the pulling-back force of doubt, friction, and the difficulty of building the thing. What I like to try to think about is how you can either increase that driving force, which is hard to do but possible. If you're really in love with somebody and you don't know how to cook, but they love home-cooked meals, you're going to learn how to cook because you want to make that person happy. That motivation to learn how to cook was never there before.

So this is the classic advice: find customers who are asking you for things. If you have a group of people you're building for, and those people are asking you for things and are excited about what you're doing, that's an incredibly motivating force. It will basically pull ideas out of you as a person, because you won't be sitting around thinking about whether you could build this or not. You're just trying to solve the problem and get there as quickly as possible.

On the other side, it's how do you reduce the friction to building. Some of this is mental, getting the patterns and the encouragement from the community and from others to say, hey, you can do it. And some of it is also tooling and things like that. I think now, more than ever, the friction to actually go out and build things is getting less and less, and that's a great place to be.

Mike, Herrick, and I all met at South Park Commons together. They were the fastest builders I had ever seen. Every month they shipped a new thing, and I was always curious to learn what they were working on. Eventually, I was around long enough that they just asked me to jump in at the next hackathon, and help them think of something a little more ambitious. We did that, had a lot of fun, and decided to start a company together.

So what I would say is focus on the motivating factors. That's a really important part of it, and the environment you're in. And this is going to be a theme throughout all the decisions I've made in the past and the things I've focused on: being around the right people is incredibly important. Being around people who are also builders, who are also putting things out into the world, who are also curiosity-driven, and who are encouraging of that type of behavior, is one of the most important things you can do.

Well, I have to give most of the credit to my co-founder Mike, who actually had the idea for the sort of AdSense for AI a year before we ended up actually building the product. The reason it wasn't built a year before is because the market was way too early to need this. Everyone in the industry was pushing towards subscription, because that was the precedent ChatGPT was setting. This was 2024, TC Disrupt, and some consumer VCs were basically preaching to the market that the way AI was going to monetize primarily was going to be subscription.

The general sentiment amongst at least most consumer VCs was, ads are dead. There are articles you can read about it: ads are dead, the whole ad model of the internet is going away, we're all going to pay for things now because it's so useful, and people know exactly what they want. My personality is one where I just love to battle. So when I heard that, I was like, "Oh, fuck yeah," because I don't mind taking the contrarian opinion.

But now, if you have 10,000 users with an AI app, especially if you're doing a good job and they're engaged and excited, you're paying thousands of dollars a month, because inference cost tokens are very expensive. This is why so many people are pushing for subscriptions, since subscriptions are able to cover that cost, but it's actually not a scalable solution.

For example, a good friend of ours was building a tool for parents to tell stories to their kids, so their kids could visualize what was going on. They were taking AI and allowing the parent to describe different stories, and the AI would generate the images and videos around what that story was. The engagement was incredible, and this person was getting fan mail: people saying, for the first time I'm really connecting with my kids, and this is so fun, and they love it.

But he was losing tens of thousands of dollars a month as a bootstrapped founder. It's not sustainable. Despite the fact that he had a subscription in place, it wasn't something people were actually willing or able to pay for. Ultimately, he ended up shutting down the business and getting a job at some B2B SaaS company, which made us really sad.

We were built to solve the problem of how to allow the developer of the AI experience, the generative experience, to create a sustainable revenue source, so they can grow as large as they want to without risking that losing-money period of time where inference costs are higher than their revenues.

At the same time, that's not 100% of my energy. There are still moments of doubt that come up. But I think the main thing there, in terms of the doubt, is that the doubt gets erased when you have customers who are asking for the thing.

So, back to the motivating factor: what's pulling these ideas out of you, what's encouraging you to build? When you have customers telling you every day, please give this to us, we really want to see somebody innovate here, we're willing to pay you to develop this product, you realize that while somebody who is seeing the market as a whole, and seeing the trends, is probably seeing something accurate today, when you get to talk to the customers who are the ones driving what the products will look like in 6 to 12 months, you actually have a more accurate picture of where things will be 12 months from now. That was the thing that allowed us to erase most of the moments of doubt that came up from that.

People think that ads by default suck, and are terrible for the user experience, and everything about them is bad. We actually ran a test last week where we showed fewer ads. We capped the frequency at which we were showing ads, and asked, what happens if we only show a tenth the number of ads we were showing before? But we also measured the user base.

What we actually saw is when we capped the number of ads we were showing, the user engagement organically on the app went down. People churned more often when we stopped showing ads. It's an indication that the ads we're serving are very high quality, and actually encourage the user to spend more time on the app they're actually in, which could indicate the ads themselves are a great experience.

An example of this would be sailing in San Francisco Bay. It's windy, there are wind shifts and things like that, but there's also a lot of current. If you know the local current patterns, you might have information no one else has, which might make what you're doing look really stupid until it pays off. Then people go, how did that person know that? And you knew it because you'd seen it before, you have experience there, you've tried that thing, you're local in the space. So again, back to what we were hearing and seeing from customers: we knew something the market did not at that time, and we were confident in that information.

It was Agentic, a professional social network. The idea was that in the same way actors or athletes have agents who go out into the world to represent them and find them opportunities, why can't everyone have an agent for themselves, to go out and proactively find the best opportunities for them. Said, "Hey, there are certain people within your network you could talk to that would really unlock certain things you're trying to figure out."

We spent several months building that product before pivoting to Koah as it is today, realizing that while we were getting some strong engagement, we had no idea how to monetize.

Interestingly, at the time, what we learned was that people were still very cautious about sharing that type of information with an agent. That concept, sharing access to email, or access to personal information, or the ability to go out and talk to people on someone's behalf, the industry wasn't ready for that type of agentic behavior yet. So we ended up seeing a lot of skepticism, and not enough usage to commit to that product long term. As a result, we pivoted away from it.

Consumer behavior and user adoption are lagging the technology quite a bit. The future is here, it's just not equally distributed. For example, would you let an agent buy a car? Probably not. But would you let an agent buy a pair of socks? Maybe, because the consequences are pretty low. So what does that mean? It means the trust is only at a very low level of consequence.

But we think that over time, both user behavior and the technology will increase to the point where we actually will start feeling like an agent could manage my investment portfolio. That's something we could imagine happening in the future, because eventually we think agents might be able to prove themselves to be better at doing that than humans. Early adopters have to see them prove it out, we have to see them build case studies, we have to see the rest of the world skeptically try it for the first time, realize it works, and then adopt it themselves. While the technology is moving at absolutely incredible speeds, human brains still take a couple of years to get used to a thing. I think all we can do, and where we are as a business, is position ourselves to be ready to react to the market when it's there.