SPEAKER_00: Okay, everybody, we have a huge show for you today. First up, Bolt CEO Ryan Breslau is back in the news again. Today he's talking about stock options, which will break down the arguments on

SPEAKER_03: both sides. Then we're going to briefly cover, there are so many, by the way, and so many Twitter dunks. Then we will briefly cover NVIDIA's ARM acquisition falling through and whether that is

SPEAKER_05: another big SoftBank bet that might need a repricing. And finally, Molly's going to interview

SPEAKER_00: Craig Zingerlein from Growth University. This is one of the companies in our accelerator currently. We're going to be sharing with you a couple of those companies so you can get to know them early. It's going to be a great episode. Stick with us.

SPEAKER_07: This Week in Startups is brought to you by OpenPhone. As a startup founder, a lot of mistakes are easy to roll back, but using your personal cell phone as your company number isn't one of them. OpenPhone makes it easy to get business phone numbers for you and your team right on top of your existing devices. Visit openphone.co slash twist to get 20% off your first six months. Real Good Foods is modernizing frozen foods and has become one of the fastest growing food brands in the U.S. Everything Real Good Foods makes is low in carbs, high in protein, and made from real food ingredients. Go to realgoodfoods.com and use code TWIST for $15 off. And Our Crowd helps you invest in pre-IPO companies alongside professional VCs. If you're interested in investing, you can join Our Crowd for free at O-U-R-C-R-O-W-D.com slash TWIST.

SPEAKER_03: All right, we're back. We are so grateful to Ryan Breslow for his continuing contribution to the content of our show. Of course, we are referring to Bolt CEO Ryan Breslow, who rocketed himself into the news recently by taking on the Stripe and PayPal Mafia, outing, breaking that story to the whole entire world, then maybe like stepping down as CEO. And I think maybe he's got like a new company that he's trying to build and then blew up the internet, at least BC internet yesterday, by tweeting about how he wants to innovate on Bolt's stock option program, which he believes is designed to be more employee friendly. And I feel like this is a good chance to get some of Jason's knowledge in here on how this stuff normally works before we get to sort of like what he's trying to do in his weird, can I just say very

Jason Calacanis: telemarketing sounding tweet thread?

SPEAKER_14: Yeah, he's kind of selling this stuff hard right now. But we do appreciate the content. We've talked about

SPEAKER_16: the issue of stock options. I mean, he's kind of like the fourth producer here. Thank you. He really is. He really

SPEAKER_19: gives us like a story a week. It's great. I didn't have like obvious headline today until boom. Yeah, thanks.

SPEAKER_20: Great. So there's a there's a there's a lot to unpack here. So for people who are new to stock

David Friedberg: options, when you go work for a startup, you get paid very well, typically, unless it's in the bootstrapping phase when there's no money, but and those people get a lot of stock, they bootstrap, they may maybe take no salary for six to 12 months while they try to raise money. Or they might take a small draw if it's, you know, the

SPEAKER_23: company has been funded, you know, with 100k or something by friends and family or the founders. So when

David Friedberg: you start hiring employees, you make something called an ESOP, ESOP employee stock option plan, when you create an ESOP, there are standards for an ESOP. So when a board starts having board meetings, at

SPEAKER_26: your startup, a VC joins the board, a seed fund joins the board, yet you want to retain talent, they're coming for the adventure of a startup, to have great responsibilities and be a leader in a company that's starting with just 10 people. And there's some lottery tickets given out those lottery tickets are called stock options. If you were lucky enough to work out Google, Apple, Facebook, Twitter, etc. Those those lottery tickets paid off. My friend Chamath, Polly Hoppatia was a venture capitalist had worked at AOL. And the way he became Chamath was he got the lottery ticket of Facebook stock options, right? So how does it work? You're granted a certain number of shares from this ESOP and ESOP is typically 10% of the shares of a company taken out of the founder shares. So the two founders own 80%, they sell 20% to angels, then a venture round comes along, they dilute another 20%, maybe they get down to 70 or so percent, and then they give 10% of their shares to the employees, typically, or sometimes those shares can be added, and everybody takes the 10% dilution at the same time. Generally speaking, Molly, the VCs who are buying 10% of the company, do not want to add the stock option for the next day and go down to 9%. Seems kind of unfair, right? So usually it comes out of the founder shares. And it can be refreshed over time, the company gets bigger, they might add, you know, 5% more shares, 2% more

SPEAKER_23: shares. An employee vests those shares over four years, if they leave the company, they have to do something called exercise, which means they have to buy the shares, because when you're getting the shares, they're not just gifted to you in big companies like Facebook or Google, they might give you our issues restricted stock units, they actually just gift you the shares, you pay tax on them. And they're literally just giving you the shares, they show up in your E trade account or Robinhood account or Morgan Stanley. Yeah, and you pay tax on them, you get $100 share, you pay some tax

SPEAKER_26: on it. And I think those get treated as income. Now, if you have stock options, the option to buy them,

SPEAKER_23: there's a strike price of a penny a share. At the seed round, it's $1. At the C, the series A, it's three. And let's say at the series B, it's five. Or let's say it's even 10. You had a strike price of a, you know, a

SPEAKER_26: penny for it. That means you were given that with the option to buy the share for a penny. If you sell it at the $5 price,

David Friedberg: you have a gain of $4.99, yada, yada. If you what he's talking about here in his tweet storm, then that's all fine.

SPEAKER_02: Right. When people that's the way it works. It's the way it currently works, generally, currently, and there's some iterations, which we'll get to. There are some iterations. The number one iteration is the exercise window. Typically, when you leave a company, whether you leave or you're

SPEAKER_26: fired involuntary or voluntary, that doesn't affect your share. So you don't get to take them away because they fired you. So maybe let's say you did all four years and on day one of year five, you left now you got four years worth of stock options, let's say they're now worth $1,000,000, you hit the jackpot, it's a lottery ticket. You have to exercise them, which means you have to pay whatever that strike price was. Now, if it was $1,000, you know, you may have to come up with and you had a million of these or 10 million of the shares, whatever it happens to be, or you would have to

SPEAKER_23: pay that money to the company to buy your shares. But these are illiquid shares. So you're basically paying, let's say it was $10,000 to actually exercise your shares, you pay them, but you

David Friedberg: can't sell them. In other words, you come out of pocket for them. And so sometimes people come out of pocket with them. Other times people just let them expire. Because you have 30 to 90 days,

SPEAKER_23: depending on how they set them up. Typically, I think 90 is 60 to 90 is the standard. So you have

SPEAKER_26: a little bit of time to get the money together to sell other equities or whatever. And you have to make that determination. A lot of companies are now making the exercise window three, five or 10 years. In other words, if you came to the company, you got a full 10 years at any point to exercise them. If the company goes public, you would just get issued your shares. If the company were to sell, they would give you the difference between the two. But what he's saying here is he points out that some executives do something funky, big executives who are joining the company later, they if they're sophisticated, they're already millionaires, they may want to get capital long term capital gains, long term capital gains is when you sell shares that are older than a year old, and you may want to start your tax treatment when you buy those shares. So they'll do something called an early exercise. So let's say it did cost $10,000 sometimes, or it may be across 100,000, the company will give that CEO, the $100,000 in a loan to buy it. But they don't actually give them the $100,000. It's just done with paperwork. And they will give a loan to buy those shares. Now that loan is collateralized by that individual, the CEOs, you know, home, whatever. If the company goes out of business, it's probably no recourse. In other words, they're not going to go try and get it from

SPEAKER_00: you. And that usually doesn't happen. But then you on a personal basis, and the company has on their books, this loan, it's hard to manage, it's a bunch of paperwork, typically less 1000 2000 bucks to do the paperwork for this. And you do it for senior, senior executives, who want to be able to early

SPEAKER_43: exercise their shares, to get better tax treatment down the road, he's saying partly, we should say,

Jason Calacanis: you know, it's, it's, it's, yes, so that they can get better tax treatment down the road, we should also clarify that when you're talking about those early executives, it's usually a very large amount of stock, right? It's a big chunk of options compared to what you might be giving your everyday

SPEAKER_26: employees. It could be $10 million in shares for a company like bolts, if they were going to hire a

SPEAKER_25: CEO, CEO might get one to 5% of the company in chairs. So let's say it was a $500 million company,

SPEAKER_26: they give them a $25 million options package to stick around for four or five years, you know, for a world class CEO, that's not crazy. Because they could start their own company or join an earlier stage company, get 10%, or start the company themselves and get 70%. So boards are dealing with competing offers, or if it's somebody that senior, they could get a senior vice president job at a Google or Facebook for a couple million dollars in options a year, right? So you have to compete for those elite employees who have been to the dance before and done this. So yeah, they, that's why they do it. And so he kind of took that and was like, Hey, everybody should have everything. Problem is, if you can't afford the 10,000 or $5,000 to exercise your options, should you really be taking out loans? And then these loans really do affect the balance sheets of people personally, I think you'd have to disclose this if you were going to go buy your first home or something. And I'm not sure you would get canceled for that. But you would also the company has to,

SPEAKER_54: my understanding is the company has to keep track of all these and it's a liability for the company.

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Jason Calacanis: today. Let's back up to what he's proposing because we have jumped ahead to analyzing the

SPEAKER_03: proposal. So his problem statement, basically, is that there is this issue where an employee leaves and they might not have the money to come up with the cash to exercise the option one. And that two,

Jason Calacanis: it's not fair that executives at companies get this treatment, this loan upfront and this ability to you know, reap the tax benefits of their options right from the jump. So he is proposing that at bolts, they're going to fix this by allowing every employee, if I understand this correctly, to get

SPEAKER_03: this early exercise option, which is in fact, a loan from the company that allows employees to exercise their options earlier. If though, and this is the drawback, and he says as many times throughout

Jason Calacanis: his tweet thread, if the options end up underwater, when the employee go wants to leave, they're still personally on the hook for the loan. Yep. Right.

SPEAKER_26: I guess the company could theoretically forgive the loan. I think that's what would happen in that situation. And there are some things in law that, you know, like our liabilities, or there could be edge cases, but they don't normally happen. So in the course of, you know, these things happening, a board would typically if somebody left, they were underwater, they might just forgive the loan or something like that. But it's, he does point out it's a liability. I'm not saying it's bad that he is offering this to folks. Like I wouldn't say it's bad. There might be somebody who has enough money that they feel comfortable taking this, maybe it's their

David Friedberg: second or third time at the rodeo. But this is largely solved by giving a longer, you know, window to exercise, right? So people don't lose it. And if you're affluent, you could always just buy the shares, right? As somebody else pointed out, you could just give RSUs to people and pay their taxes, which is what the Google's and

SPEAKER_68: Facebook's of the world do. So anyway, he's kind of a dumb question. Sure. Maybe it's not that

SPEAKER_70: there are no dumb questions when it comes to tax law and stock options.

SPEAKER_03: It's wildly complex. Stock options are something that you are given at a company either to incentivize them to stay there because you are paying them less than market rate, you know, and you're like, That used to be why. That used to be why. But now it's sort of like, you know, it's an added bonus or whatever. And it engenders your loyalty and potentially becomes a golden handcuffs thing. But like, if you leave, isn't that just on you? Yeah, I mean, like, I don't understand why these companies are buying or bending over backwards to make sure that company that employees who leave, yes, have the option to

SPEAKER_02: buy their shares for like 10 years.

SPEAKER_26: Yeah. So the reason is, you would want to imagine yourself in a situation where you hired somebody did a great job for four years, but they moved to another state, they retired, they started a family. Do you want to penalize them for four great years of service they gave you? Or do you want them to keep their lottery ticket that they can cash in later? If the ponies happen to, you know, you know, win place or show. So it's a it's a loyalty to the employee to let them, you know, get the win and then build goodwill people who didn't do this or sharky about these kinds of things, then the employees leave, they tell other people, hey, yeah, that founder, the board, you know, they're horrible people, you know, I don't have my options. What options in these lottery tickets really do is they perpetuate the dream of Silicon Valley. 80 90% of startups fail one in 10, one in five, maybe these options become worth something. That's kind of part of the dream of what we do in tech and in startups. It's our value proposition, you want to go to Netflix, you know, today in 2022, you get safety, security, RSUs, you want to go to Netflix in 1980, 99, or 2002, you get massive unknowns, hard work, more opportunity and

SPEAKER_85: these lottery tickets. So I think you want to be loyal to folks and give them that opportunity to

SPEAKER_87: still win the lottery. When people hear those stories about the receptionist or the chef or the artist at Google or Facebook, making 10 million or $50 million.

SPEAKER_00: One group of people, small minded people think, oh, that wasn't worth it. And then the savvy folks say, yeah, but that got everybody to buy into what we're doing here. And the company became worth a trillion dollars. Who cares if somebody who didn't deserve it, who, or ostensibly didn't deserve it, who deserves anything, right? Like, does the chef deserve it for coming in and working 12 hours a day?

SPEAKER_87: Does the receptionist or does the sales person who was, uh, not a great contributor, but still stuck it

SPEAKER_43: out for three years and became worth 10 million. Are they worth it? I don't know. Right.

SPEAKER_03: He, so Ryan acknowledges that it is interesting because one of the things he points out is that some companies have stopped, like they tried to mitigate this issue by extending that window,

SPEAKER_11: uh, window. And then some have stopped, which he then hashtags the mob, the mob.

SPEAKER_26: Uh, so there was somebody from Y Combinator who was pushing this as a, a theory, uh, like we should do extend the windows. I think actually Sam Altman was very public about saying,

SPEAKER_94: well, he's saying the mob actually pushed to then shorten the windows again. And so

SPEAKER_03: maybe they actually from a 16 Z blogged that he, in 2016, he blogged that quote, a 10 year exercise window is really a direct wealth transfer from the employees who choose to remain at the company and build future shareholder value to former employees who are no longer contributing to building the business and its ultimate value.

SPEAKER_26: Yeah. That's a, that's somebody who pulls the ladder up behind them. That's nonsense. Um, if you put the time in, you earn the shares, it's not a trade on everybody else. You weren't there and

SPEAKER_03: you sign the D the terms of the deal or you got the shares, you should get to buy them. Okay. I think so. Yeah. Well, then Ryan is trying to then avoid that, but let's go back to this personal risk question,

Jason Calacanis: because again, it doesn't like, he's not, he, he really does think he's doing this really forward thinking thing for employees, his employees, it seems, um, in his telemarketing thread.

SPEAKER_101: Yeah. Again, I don't, I don't doubt his intent at all.

SPEAKER_03: I do not know. Um, but when a thread is that sort of like promotional about how great it all is, it's, it starts to feel like, is it so great though? I'm not really sure. And what our producers have widely, wisely pointed out is that it feels like there's a specific risk for both employees here that they could end up underwater.

SPEAKER_26: Yeah. Again, I don't think the company is going to be, um, chasing those loans if they do them. So it's probably, uh, a theoretical and maybe there could be like, if you go to get other loans, depending on the size of this could come up as a liability. Again, if you, let's say you were going to get a down payment on a house or you're trying to get a second mortgage or a home equity line, I'm not sure. Um, because again, usually people who are not yet wealthy don't do these kind of funky loans or margin loans or these kinds of loans. This is kind of like when you've got enough cheddar that you could actually pay the loan. If the worst case scenario happened, it wouldn't be fun, but it would be, you know, it wouldn't be the risk of ruin. So I think that's the issue here is like, do you want to have a loan hanging out there? Um, that could be called, right? Um, the loan could be called theoretically. So, you know, it's rich people have an affluent people who have their stack already think differently. Like this quote from Scott above to go back to that for a second

SPEAKER_87: of like, oh, the people who work four years versus people who work 10 years. Well, you could say the same thing about people who own Microsoft shares who don't work at the company. Are they a drag? If I

SPEAKER_00: own Apple shares, am I a drag? Am I a drag on Uber or Robin hook? Cause I own shares publicly? No,

SPEAKER_03: I'm a supporter. He's not talking about people who own shares down the road. He's talking about the exercise window. Like, should you allow people who no longer work there the option to exercise and buy that 10 years later? I'm not arguing that it sounds a little stingy in the way that he phrased it. I'm just clarifying that he means the window specifically. Here's the stupid thing

SPEAKER_87: about Scott's comment. The people who are working their past four years, five through 10, they get more options for continuing to stay there. And the people who leave that startup and go to another one, get options in the next startup. Everybody gets some options. You know, generally

SPEAKER_26: speaking, unless it's a company like MailChimp that said, or I think 37 signals, we just said, we're just going to pay you higher than market rate. We're gonna give bonuses instead. And so you get

SPEAKER_00: the cash now. And for people who would like an extra 20k a year, that's a better option for you. So again,

SPEAKER_114: Ryan, thanks for bringing up a topic that we've all rehashed endless times. And

SPEAKER_87: a virtue signal. He's becoming annoying. Because it's like, it's like somebody who just discovered startups being like, Hey, guys, do you know, there's an option window? And there's an issue

SPEAKER_00: around this? It's like, yeah, I've been in this board meeting 50 times when we talked about it. Like, yes, we all know about this issue. We've all hashed it out, dude. And he's like, I have a new

SPEAKER_45: idea. And it's like, No, you don't. He's like, the annoying,

SPEAKER_01: Ryan, the next generation has to learn the lessons all over again. He's the annoying kid in the back

SPEAKER_00: of like a screenwriting, like class. And he's like, have you guys seen Pulp Fiction? And we're

SPEAKER_87: like, yes. Did you guys ever see Savage Samurai? Yes. We don't curse always. Yes. We all know how

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SPEAKER_111: follow real good foods on social. Jeff Richards, a partner at GGB and a guest on Angel season four,

SPEAKER_03: episode nine replied to Ryan with the following for what it's worth. Almost every private company in Silicon Valley did this in the nineties, which I do remember. He says it was an absolute disaster. Employees spent years paying back loans for worthless stock tax bills for merely exercising, et cetera. I'm not in the mob, but unfortunately lived through it firsthand as a founder.

SPEAKER_122: Yeah. There are tax issues too. Yeah. When you exercise these.

SPEAKER_03: I mean, I remember people getting hit with that, with the AMT, the alternative minimums tax back in the nineties on options that appeared to be worth more than they were worth. And I mean, it was like, it really came close to ruining some people. And then Ryan, because this is what the next generation always does responded and said over half of our employees chose this. Plus I would strongly encourage my family and friends to choose this, but BC says it didn't work in the nineties. So it's a disaster. BC Twitter pumps the tweet. This is why BC run companies are never able to make strides

SPEAKER_02: for employees. Again, you know, he's just, he's the Robin hood of CEOs. If you're not Ryan,

SPEAKER_26: if you're so like precious and amazing, like take the 25% of the company you own and distribute it amongst your employees and, and keep 5%. If not STF. Yeah. I mean, really with the virtue signaling

SPEAKER_36: every day, it's like, I, I was like, I invited him to come on the pod. I was like, this would be an

David Friedberg: interesting discussion with the mob stuff. Now it's like, please somebody else have them as a guest because I'm finding Ryan increasingly like virtue signaling and annoying. And it's just the way he presents it. Like you could present this as a question, right? You could say, is this a good idea? Yeah. Or here's what we're doing. I'm looking for some feedback. Now he's kind of gone full bore that everybody's an idiot except for him. Yes. And I think that's probably like, he's overplaying

SPEAKER_03: his hand. Um, and I mean, look, it's the kind of thing you can do when you're retired, right from your fortune 100 company that you built from the ground up and you, but I mean, eventually Ryan is going to have to raise again. One assumes and bolt has already raised at many

Jason Calacanis: multiples. If I understand that correctly, as a high multiple 61 X and 103, 80, 183 X price to sales and might be looking at a down round. He's ahead of his skis right now, for sure. He's ahead of his

SPEAKER_136: skis. That's a good, a lot of companies are who raised in the last two years. So it's not unique to him

SPEAKER_03: in fairness. Yeah. I mean, it is very true that BC Twitter was not having it. including you. Well, it's more like, gosh, you know, when you literally, you have this conversation

SPEAKER_26: 50 times with 10 different sets of lawyers from all the top people and you literally come down to the same, you know, dead ends, which is the IRS and tax law. If you get something of value, you have to pay your taxes and this whole dream of not having to pay your tax or pay less taxes. Like when you're focused on this kind of stuff, like the tax optimization stuff, it kind of tells me you're not focused on the core business. That's the red flag for me all the time. Like if there's really only one thing you can do to pay less taxes and, you know, there's really like a small subset of things,

SPEAKER_36: move to a low tax state, you know, create trusts, I guess.

SPEAKER_01: Also, I mean, honestly, like, I'm not trying to be

SPEAKER_19: pay your taxes over here, but pay your freaking taxes or pay your taxes. Yeah. I mean, like,

SPEAKER_36: every time I pay taxes, it's like, I'm like, Oh my God, I, you know, like when I paid my first seven figure tax bill, you know, you're like, Oh, I can't believe I'm paying this. And then you're like, Oh, but I get the rest. All right. You know, it's not the end of the world, right? Like,

SPEAKER_02: you could just kind of, I mean, I, I like the person who was like, issue them RSEs and pay their taxes.

SPEAKER_03: Yeah, that would actually be better. That's better than sticking your employees with a loan. It's funny because yesterday on the show, I talked about buy now, pay later. Yeah. And I was reading this and I was like, this is the buy now, pay later of employee stock option plans. And it seems like you're going to end up in all the same trouble that you're going to end up with. Like, if you can't

SPEAKER_26: afford it. Yeah. You shouldn't have it. You know, it's, it's like people taking margin loans against their crypto or trading on margin on Robin hood. Like, listen, I, I'm fine with people getting educated about these things and doing it in a small way. Like if they had a margin loan for 25% of their bitcoins value, you know, whatever the high watermark of the last two or three down returns were. Okay. But this other way where you're, you know, leveraging up two, three, four or five X on some

SPEAKER_33: funky exchange on a, you know, island somewhere in, you know, a sunny location with very few laws. Like, yeah, no, be careful folks. Well, and when they wash out and they lose everything,

SPEAKER_45: it only helps hedge funds. Right. So like at the end of the day, this loan scheme, if people can't afford to pay it back, it's not, it's not going to help them. Like, I'm going to say another thing.

SPEAKER_87: Like if you like to gamble, like you don't need to take a margin loan on your 25 dime bet on the jets. It's like, I have a $25,000 bet on the jets this Sunday. Like you've already got a huge problem in your life that you bet on the jets. Now you're like, I'm going to margin loan my jets.

Jason Calacanis: That's what the real problem here is the team you're betting on.

SPEAKER_87: Not I'm just talking about the teams that have perennially have the worst luck. You know, like if I don't bet on the Knicks, like being a Knick fan is enough suffering that you don't need to add gambling on top of it. If I went to gamble, I gamble on the warriors where like, at least, you

SPEAKER_00: know, they pull miracles, you know, on a regular basis, not the Knicks who are just dream killers

SPEAKER_26: and the jets. I mean, when I grew up in Brooklyn, there were bookies. And if, uh, already wanted to take your bet, you just tell them that I would watch guys, give me two dimes on the jets. Give me, you know, give me five on whatever the giants. And you were on essentially margin. Um, if you didn't pay, there was a big 5% a week. So if you put a $5,000 bet, you, and you didn't pay, you just paid 500 bucks a week in interest. Wow. 10%, maybe the vague, right? And you still have to pay back the principal. So, you know, this got a little hairy for folks. If you're now, as we know, sports betting and wagering is becoming legal in the United States,

SPEAKER_00: yada, yada. I'm totally pro that people should be able to do what they want with their money, Vegas or bet on sports. It's fine. It's entertaining. If you've got a problem,

SPEAKER_87: make a phone call, get help, uh, yada, yada. But you, when you use these fantasy sports sites or your betting, you have to have a deposit for a reason. Yep. Because gamblers do get ahead of their

SPEAKER_107: sneeze and they do something called chase it. You don't want to be chasing it.

SPEAKER_03: Huh? I think, uh, chase, it seems like a good segue actually to our NVIDIA.

SPEAKER_19: And this is why I don't gamble Molly, except I'm like, your gambling rules, if I'm being honest, are a little bit all over the place here.

SPEAKER_87: Someone found a way to gamble. That is a net positive for the planet and for humanity. Bet on entrepreneurs, kind of a rigged game. If you have good access, you're only need to hit one every a hundred or 200 investments. The odds are basically stacked in your favor. That's why I was like, you know, if you were in my book angel, I was like, you know, it's kind of like I'm playing in a, uh, a card game where I get all the aces and kings and you don't like that's deal flow, right? When you have great deal flow, whether you're at YC

SPEAKER_00: or the mob or Andreessen or Sequoia, kind of like somebody who's like, here's all the aces and kings from the deck, go ahead and place your bets because people come to you first. Yeah. All right. Segway.

SPEAKER_03: Um, chasing things. NVIDIA has been chasing a big chip merger for a long time in this case with arm and it seems to have backfired and this, this deal fell apart a few days ago. Um, but what is interesting about it, I think to us is that it's yet another soft bank story. So soft bank acquired arm in 2016 pivoted the business by making this big bet on internet of things devices. So they just made like smaller and smaller chips to go into connected devices that in homes, uh, started to ignore the money printing markets and it seems to have backfired. Now this deal with NVIDIA and arm fell apart over antitrust concerns. Um, and arm is sort of out in the cold and soft bank is trying to figure out what to do with them. So this is a little bit of a yes, no IPO story. I think as we dig a little deeper, but what's interesting about it is that it was intended always to develop

Jason Calacanis: architecture for chips and processors and semiconductors. They don't manufacture chips themselves. They just designed the architecture IPO in 1998. Uh, Apple used to own about 15% of the company. And then in 2016 software soft bank acquired arm for $32 billion because, you know, masa was

SPEAKER_03: super into the IOT thing. He was like, this is definitely going to work. And then I think he took them private now, like, who knows what happens? Who knows what? And I guess the question becomes sort of like, is this a whiff for soft bank? Was it just a miss? And now they're going to have to eat this $32 billion acquisition acquisition on some level. I mean, leaving aside what this means for Nvidia,

Jason Calacanis: it's just a super interesting to me, soft bank and arm story. Yeah. And I guess Nvidia was going to buy them. Yep. Nvidia was going to acquire them. Uh, and they wanted to, they wanted to buy

SPEAKER_03: them for $40 billion in cash and stock, meaning by the way, that arms valuation would have gone up

Jason Calacanis: only $8 billion since soft bank acquired it in 2016. Nvidia has been crushing it lately, $650 billion company at stock prices up about 70% over the last five, five years. And they wanted to become a chip powerhouse with this, but they spent 18 months trying to get this deal done. And it was

SPEAKER_26: just a huge antitrust, you know? Yeah. I mean, this is, um, one of the high stakes problems that we're going to see more of if you don't have the save of acquisitions and mergers available to companies when they stumble, then, uh, you know, they could go into kind of a debt spiral or not that I'm saying they're going to go into a debt spiral, but you, you're taking a major option off the table for an exit. So now they have to go public, but who's going to want to buy the stock in a company that's in decline or sideways. So what do you do? You then would have to manage it for profits and maybe cut staff and cut investment and then try to make profits off of it to try to make your money back. It's, you see how this becomes a quick debt spiral because you need investment capital in order to, um, you know, compete. And it's, it's an arms race out there. No pun intended. No pun intended. Uh, with these chip manufacturers and you see Apple making their own and yeah, uh, you know, this is not going to be pretty, uh, but you know, SoftBank can afford a couple of flops and these things are always a matter of price. So if the price gets low enough, somebody could snap it up or if the price is low enough, there could be some sort of a buyout that occurs. And so we saw that actually with WeWork, right? Sometimes you just got to take the medicine and reprice an asset. We start with Peloton, reprice the asset. Now, all of a sudden Peloton starts rising again because they repriced it. They reset everybody's expectation. Investors get wiped out. Uh, so, uh, you know, we'll see with this one, but I think the higher order, more interesting thing for me here is, you know, SoftBank swings for the fences. Sometimes they win a couple of billions, sometimes they lose a couple of billions, sometimes make tens of billions. They'll be fine. Um, because they're playing the game slightly differently. They're doing this lately, late, late, late stage, you know, try to make a couple of billion dollars, but on a percentage basis, it might not be, you know, as juicy as being a series A investor or something. Um, but yeah, if we're going to block mergers and acquisitions, if the company is in

SPEAKER_23: decline, then you have to start thinking about the employees of that company and the survival of that company may be taking away a landing strip for that company. Who's going to buy it now? It's too expensive for most people to buy. Uh, you know, what is Facebook going to buy it and start making chips or something like who's going to buy this thing? Uh, if not another chip manufacturer or

SPEAKER_85: another provider of who's going to use these chips in some way to get an advantage. So like if Peloton,

SPEAKER_54: Peloton small enough that an acquisition is tiny as a fraction of, you know, Amazon's capital or Apple's

SPEAKER_85: market cap, and it's not like they're going to own all fitness equipment. So it's a little bit easier to get through, but yeah, this is going to be a challenging one and it could be painful for the

SPEAKER_45: company if they can't find a suitor. Yep. Um, well, we on that note are going to get to my quick

SPEAKER_03: interview with Craig Zingerline, someone who has yet to even suffer through, has yet to even imagine having issues that are, that come up when you get acquired, you know, by SoftBank for $32 billion. Craig Zingerline from Growth University is a member. We're doing these quick interviews, just so you are aware you'll hear, I think one a week for the next seven, five weeks, five weeks. Yeah. Um, quick interviews with people who are currently in our accelerator cohort, which is cohort number 24. Craig founded Growth University and is a three time accelerator vet.

SPEAKER_00: Yeah. And went with a red tricycle. And then with his marketing company and now with growth

SPEAKER_157: university. Votion was his company. Yeah. Yeah. Um, which is very cool. Yeah. He's trying to,

SPEAKER_45: he is trying to do much like we're very aligned. He's trying to grow the entrepreneur universe and

SPEAKER_209: help more businesses succeed more shots on goal. Yeah. And you know, if you look at what trips up most

SPEAKER_00: startups, uh, you know, after they get product market fit and they've got a product that people, actually get some value from what separates companies at that point, there's another starting line, which is how good are you at growth? You go to market strategy, acquiring new customers and and those techniques. And that's what he's focusing on is teaching people how to learn how to grow their startups. So I'm really excited to hear your interview mom. Yeah. Here he is. Craig Zingerline.

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SPEAKER_71: So our launch accelerator recently started its 24th cohort and I'm going to sit down with some of the

SPEAKER_211: founders once a week and dig quickly into their business. It's going to feel quick to you about 10 or 15 minutes, probably not to them because we're making them give a whole series of two minute pitches. Uh, with some regularity. We're starting though, uh, with Craig Zingerlein of growth university, who is a three time launch accelerator visitor with three separate companies. In fact, uh, Craig goes all the way back to accelerator cohort number one, but he's now in cohort number 24 with growth university. Let me start here. Seems like our accelerator totally works.

SPEAKER_214: Your accelerator is awesome. Um, yeah, You keep coming back. Oh, I keep coming back. I will continue to keep coming back as long as I'm invited. Um, but no, it's fantastic. We're in week, I believe seven now of the 24th cohort. Um, and I've seen the evolution of the, of the platform just grow over the last few years and was lucky

SPEAKER_215: enough to be in the first, first and third cohorts. And it's just, it's amazing how, um, how helpful the accelerator. So the startups come in and it's like an unfair advantage.

SPEAKER_211: Awesome. Well, we're not here to brag about our accelerator that much. Let's, um,

SPEAKER_193: brag about your company. Tell us what you're doing with growth university.

SPEAKER_214: Yeah. So, um, we have honed in on the fact that most startups fail and trying to unpack, uh, first of all, why do so many startups fail and where are their pain points along the startup journey? What's preventing them from growing? And what we've built is a platform that allows us to go really deep with founders in terms of understanding what's working and what's not working from a metric standpoint and providing training programs and mentorship to help bridge the gap for founders who maybe don't have a full-blown marketing team yet. Or if you've got a marketing team to allow us to get in and start to unpack what's happening with your metrics. So that ultimately

SPEAKER_211: you grow. And so you break this approach, right? With founders into five components, we could maybe

SPEAKER_03: call them OKRs or something along those lines. Tell us about, uh, those five sort of key factors to

SPEAKER_214: success. Yeah. So I had done a ton of customer discovery before starting this. And what I, what I learned over those, those calls and engagements was that number one, many startups and founders don't understand what metrics they're actually going for. So we call this kind of metric and goal setting. Number two, once they understand what metrics are actually important for their business, they don't really yet know how to do customer acquisition. Even at some level of scale, they may not have a diversified channel view on how to do that. Number three, uh, they often will struggle with kind of how to what we call activate users or kind of move them through that buyer journey so that they become customers. Number four is once they get people in the door, can you retain them? Can you keep them around? And number five, how do you increase the velocity of your learning

SPEAKER_215: as a startup? I think as a founder, that speed to learning is really critical. We do that through

SPEAKER_211: experimentation. So those are kind of five buckets. How does this play out in practice? How does this sort of manual approach, um, turn into a business? Yeah. So we had started my original program that I put

SPEAKER_215: out there was, uh, it was a six week, just super deep dive into growth. So I would spend basically a week on each of those five topics. And there was actually a sixth one that kind of lives in between acquisition and activation. And so the way that I turned this into a business was that I built content that was kind of startup stage and type agnostic and what I thought was applicable to founders who were truly trying to learn the components of each of those five areas. And I, and I built a long form series of content for that, that originally was developed through a weekly live cohort style teaching, and then eventually morphed into both of that in an on-demand set of playbooks. And then we kind of grew from there. So each of those five pillars now, or those five components have sub programs within them for founders to go deeper into. Okay. And then how do you make money? We're a subscription business. So we charge on a membership model. So our founders come in and based on what their needs are, they can get access to our on-demand programs for right now it's $149 a month. And then if they, uh, if they want a higher level of access with a little bit of that mentorship that I was talking about before with our team, where we can help you really get into the weeds with some of the metrics that you may want to influence, then those plans are a lot more expensive. And it kind of goes up from there and behind the scenes, what we've been doing is we've been building an underlying platform because what we also found was that there was no standardization from startup to startup to startup. We see dozens and dozens of startups, and they're all using different tools in different ways to track their metrics. So we've standardized that whole process. So we've got a set of spreadsheets right now, but we're building the product version of that for

SPEAKER_211: the, for the future, for them to use. And then tell us, uh, give us some of your key metrics.

SPEAKER_215: You are post revenue. You're making money. Yeah. So we, we will cross 20,000 in monthly recurring revenue in February. We have been growing about 25% month over month. We started the subscription business in January of 2021. And so I had run a couple, uh, just one off courses before that. But when we got through those, we realized that this is a subscription model. Founders wanted more context. They wanted more info. So I kept building more programs. Uh, we've had really incredible retention so far, but yeah, we're mostly monetizing on the membership side and that's been going really

SPEAKER_211: well. How did you, you'd sort of mentioned in passing that you were doing a lot of founder mentorship. I wonder how you got into that and then what, you know, prompted you to want to start, you know, a full on curriculum and educational program here.

SPEAKER_215: So I was an operator in, in a number of different startups, including two that had gone through the launch accelerator and a whole bunch of others. And these were any, anything from a bootstrapped startup where cash is kind of really constrained to, uh, you know, I ran millions of dollars in, in marketing budget per month that at another startup. And as an operator, I saw that the same themes were holding up pretty much at every company that I had been at in terms of inflection points, where the business starts to kind of lose momentum. Um, and so what do you do in those situations? You have to kind of, you know, if you don't have a process, you're going to reinvent the wheel. So that was my first exposure to, to the problem. And then what I started to do was I realized that I just needed to have a lot more context than just my own experience working within companies. And so I actually joined a platform called growth mentor, and I did about 200 free calls, 15 minute calls, 30 minute calls from 2017 through now. I still do these where I just get on with a founder and, and they, they literally just tell me all their pain points with their startup. And I was able to quantify all of those pain points into, I mean, I take notes on these calls. I started to see the same themes and that was when I realized, okay, well, there's, there's something here. And, and in fact, I've always been super passionate about helping startups, but I wanted to go out on my own again and run a business that had scale potential. And I thought this could be the model. Um, and that's what we've been digging into.

SPEAKER_211: Wow. That's, I mean, I would imagine that you would meet plenty of people in the world who are like, I don't care if 80 to 90% of startups fail, as long as mine wins. That's right. And so it seems very admirable that what you really want is for everybody to win here.

SPEAKER_215: Yeah. What, I mean, the aspirational vision or goal is that if we can just decrease the percentage of startups that fail globally, even by a fraction of 1% a year, there will be hundreds of thousands of additional startups that succeed. So if we can be part of that mission with them, then we will also win.

SPEAKER_03: And talk about the net good of that, where we get a good economy, there are jobs available to

SPEAKER_215: lots of people. Absolutely. I mean, the startup sector employs so many people and even the periphery around it employs so many people and the services. We don't have to talk about that a lot of obviously, like high growth startups and the word service kind of do a mix. However, the service industries that are attached and adjacent to these startups is a, is a major part of the ecosystem economically globally, actually. So we want more entrepreneurs taking on risk. We want more entrepreneurs to do it, but they also need a playbook. And that's what we're trying to provide.

SPEAKER_211: All right. Last question. We're going to ask all of our accelerator cohorts, the same question. I know you've been asked this question throughout our program and will continue to be, what is your path to a hundred million dollars?

SPEAKER_215: So we have a plan to go both enterprise as well as deeper within startups. So we're going to sell multiple seat options. And we're also selling access to the platform as we go along with an additional line of productized service model. And if you look at our customer lifetime value right now, it's at about $5,000 actually for the latest cohort of users that we brought in,

SPEAKER_214: in, uh, in January. And we think we can double that. So we get to 10,000 LTV, uh, you know, 10,000 plus, uh, regular users. And that's our pathway.

SPEAKER_03: Craig Zingerlang is a three-time launch founder and founder of growth university. Thanks so much. Good luck.

SPEAKER_231: Thank you so much, Molly. That was fun.