SPEAKER_01: people don't want to talk about it because it's scary to admit that this is happening

SPEAKER_00: a founder that closed a 15 million dollar series a from a top tier vc and then a half year later they plan to return the cash to investors you add that clod will displace the product and erode the value this is really happening most people are not talking about it it's kind of wild it's

Chamath Palihapitiya: running a zombie company to put your nose to the grindstone at a startup for 10 years 15 years and

David Friedberg: the outcome is unknown or you get a guaranteed you know 10 20 30 million dollar package from open ai

SPEAKER_00: do you think that the companies in your portfolio that are facing the similar chasm going from the sas era to the ai era or the agentic era are going to make it probably 50 that i think might make it

SPEAKER_11: it might not be the money printing free cash flow machine that people think it's going to be hey

SPEAKER_14: everybody and welcome back to twist today is may 13th it's wednesday which means it's venture capital roundtable day i'm joined by a bevia some of my favorite people including of course my usual co-host jason calicanus jason how are you i'm well excited for today we also have jenny fielding from

SPEAKER_18: everywhere ventures jenny how's life on your end it's good i'm excited to be back it's been a while

SPEAKER_14: it has been a while if you don't know her firm everywhere ventures does essentially raises capital from a collection of about 500 founders and then sources deals from the same group portfolio companies include star cloud headway depo and others jenny good to have you here now sam slow ventures how are you doing i'm great man glad to have you here uh major report goes include next door robin hood human interest air table etc etc etc busy man and then finally we have dave mcclure from practical venture capital dave how you doing fantastic good to have you back you run a secondaries focused fund and that also buys gp and lp commits which is a big deal because we're going to start today by talking about the most important thing in the world which is news that anthropic and open ai dropped successive bombs on the spv market and if you don't know what that means and you're listening to this imagine that you can't buy shares in anthropic or open ai because you're not a dc you're not an employee so you go to somebody in a back alley behind a dumpster

SPEAKER_25: they have a couple of shares in there and they say don't worry that's got some anthropic for you here

SPEAKER_26: yeah exactly just just caught with a little bit of like you know sugar or something yeah in this case

SPEAKER_14: the fentanyl is the layered fees and it turns out that the two companies in question that have

SPEAKER_25: these great assets don't want you to trade them they want to have permission and so a lot of what

SPEAKER_31: happened to democratization of capital what happened to the little guy just stop it all over them here

SPEAKER_33: but dave i'm confused like most companies have rofers on stock transactions like this is not

SPEAKER_37: non-standard in the industry i'm actually surprised they didn't already have those limits well i think

SPEAKER_38: anthropic is picking and choosing who they want to be in their deals i think single layer

SPEAKER_40: authorized spvs are still fine uh unauthorized spvs multi-layer spvs might start to get into weird territory but there's going to be a load of lawsuits regardless that's what i want to ask about yeah i

SPEAKER_43: mean having been in the spv game uh for since its inception and nabal kind of taught me the the the industry i was the first uh actual syndicate on angel is famously because he sent me a link to it i signed up and he's like hey check this out this is what we're going to do next and then i tweeted it and he's like oh we didn't announce it yet and i tweeted my my syndicate um and so if you are doing this and you don't have permission from the founders it gets very annoying for them because now you're creating multiple ways to get on the cap table and they may not want certain people on the cap table maybe i'm an investor in uber you know and sam uh is an investor in lyft and sam is doing some backdoor thing to get access to my shitty one well i mean it's just i think that was the actual game on the field right you were i wasn't actually a investor no okay fine fine but the truth

SPEAKER_49: is it's annoying to to founders mark pincus was the first to try to say hey i'm gonna not allow this and i want it to go in an orderly fashion elon has been very strongly managing this every six months so it's kind of long overdue and it's too much of the wild west out there and people creating

SPEAKER_50: synthetic shares in companies this is both ways these companies have been using spvs to raise capital

SPEAKER_38: and create a competitive market for their shares and their employees want liquidity so like why why

SPEAKER_54: are they now saying oh it's not okay when in the past but just to push back i don't again i might be out of date because i'm now old but like look when i was at facebook used to be called facebook back in

SPEAKER_33: the day yes this was like an unbelievably tightly controlled process right like in fact the way yuri made a ton of money was by being the authorized buyer of share like i don't so when same for saka and twitter so and like by the way in that era there was a lot of concerns about the look throughs

SPEAKER_37: being like you have too many cat people on your cap table and you have to go public and so i don't what did i miss in the last decade where some companies were just letting like unhinged spvs happen like there's something i missed because to me this is the way it's always been done and most companies do have like rofers on share transactions i mean have you seen the rise in all the brokers though i mean i got five yeah but those are all scams like half of those guys are scammers like they're not real right or like i mean trust me i've actually dealt with one of them recently i won't name names

SPEAKER_63: on something and i don't think it's true that all or half of those scams some well uh sam jenny did an

SPEAKER_65: actual study of it and it turned out to be 49.7 for scammers so he rounded up but i guess jenny my

SPEAKER_69: question to you then is what did happen here did the companies just basically leave the barn door open

SPEAKER_43: and maybe they did it because they wanted there to be some liquidity that seems to me what i saw happening which was hey you know it's it's not hurting anybody let's let it rip and then jenny i

SPEAKER_73: think what happened eventually was the multi-tiered ones and then the 10 load-in fee since everybody

SPEAKER_43: wants to get into clawed open air and spacex and that's where maybe the founders were like hey that's

SPEAKER_75: our money that's our money that 10 load-in fee should be going to us that's coming off our valuation

SPEAKER_77: jason this is like lady gaga and stub hub selling tickets and like it's okay if one layer does it but

SPEAKER_40: now if like three different people are doing it and i'm not getting that money wait no that's not cool

SPEAKER_82: yeah go ahead jenny i mean in my experience um and i and not talking about some of these big guys but in the you know the larger companies that i've been in the founders are kind of busy running their business right and so they've maybe like you know kind of look the other way um for some of these their friends and friends of friends and that's how it started i think you know maybe in the last decade since sam was at facebook there's been a whole cottage industry that has literally popped up and you know is is kind of preying on this and it's taken it to a new level i get inbound from these guys being like hey you know do you want to sell star cloud do you want to buy star club like an hour later and i'm like they're not even doing targeted marketing and so you know i don't know if they're legit or not i've actually have spoken to some but i think that it's becoming quite predatory and i really wanted to talk to dave today so this all worked out on where he thinks the lawsuits are going to be and what's going to happen in the anthropic and open ai case one key

SPEAKER_85: difference about what changed that when facebook went public it was worth about a hundred billion

SPEAKER_00: dollars and today we have several companies where there used to be a lot of money that used to be a

SPEAKER_89: lot of money now it's an a round now it's no now it's like a pre-seed run for a neolab the point is i think that as these companies get bigger the prize is larger people want in more and also i think

SPEAKER_14: right now as people are afraid about the impact of ai on the job market and the economy as a whole in some cases we have some pulling data in the docket people want to own a piece of it and who wouldn't want to own a piece of the thing that might take their job so i can see the demand rising but but dave on the point about the mechanisms here so anthropic says any third party claiming to sell anthropic shares to the public whether through direct sales forward contracts tokenized securities or other mechanisms is likely engaged in fraud fraud that's their opinion that's their

SPEAKER_36: opinion i would want to go to a lawyer to i mean some of what they're saying i would say is probably

SPEAKER_94: true but some of that is probably a little bit of you know marketing and fear and and spreading fear and doubt um and and i don't think anthropic is the reference point for the entire market like it's

SPEAKER_40: it's true that there's a lot of volume going to spacex anthropic and open ai or at least was going to open ai uh but that's not you know a hundred percent of the startups in the secondary market out there and spvs are a useful vehicle for for folks to raise capital uh assuming they're done

SPEAKER_07: in an organized and authorized way yeah like a surgical scalpel is a tool and a weapon just

SPEAKER_77: depends on how you uh how you use it and where you stick it single layer spvs authorized by the company

SPEAKER_98: are probably fine yeah well the company is fine like what like what's the problem you know well

SPEAKER_38: i'm just saying that statement that they made was pretty broad and sweeping and i'm pretty sure there are spvs that anthropic authorized in the past sure if your company is missing calls then

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SPEAKER_105: going to see i think what's important now is what happens from here and what what's going to happen

SPEAKER_75: from here i think somebody alluded to it there's going to be a lot of lawsuits here um and then people are going to ask for their 10 percent load in feedback that money is already done by some promoter who promised them just pay me 10 percent give me a hundred thousand i'll let you buy a million share a million dollars worth of shares in anthropic and i won't take any carry which i guess it's a free market people can make that trade if they want but the alignment is the issue there is a lack

SPEAKER_110: of alignment completely agree you know uh a person doing spvs say like myself where i'm taking carry maybe we have a one or two percent load in fee and you know you have to pay for the you know the carta or spv solutions our firm you know those things are nobody's getting rich off of they're just paying for basic expenses but 10 then brings out these schlocky sales you know wolf of wall street types and that's i think that's the piece that's the dangerous piece because the the wolf of wall street people getting a 10 commission i know those folks like they're gonna just turn and burn they

SPEAKER_115: don't care even five percent on a 50 million dollar allocation is you know decent chunk of money

SPEAKER_117: it's great money for this weekend to pay off your bookie and go to vegas and get more in debt like

SPEAKER_43: that's the those are the characters here that are emailing all of us and somehow they get the cap table every time somebody gives them a cap table and then they start emailing you it's dysfunctional but it what it does speak to at the end of the day is uh we have a broken system in america of

SPEAKER_75: accreditation where only six percent of the country can participate in this but you know half the country

SPEAKER_43: wants to participate or 30 wants to participate and this is where uh i think what naval is doing with usvc these uh closed end funds uh could take a little of the pressure off and most importantly i had the chair of the sec on the all-in interview program a month ago they're going to create a

SPEAKER_75: sophisticated investor test the sec has been charged with this so imagine going to sec.com sophisticated investor and you take a test like a driver's license test and then you can put money into spv that would be the ultimate solution here can i can i be provocative please so i

SPEAKER_33: absolutely not i thematically agree with me i've been saying this forever like which is the yes that exactly this which is there obviously should be a test there's lots of unsophisticated investors that have a million dollars and blah blah blah and like you just take a test and then you can invest whatever the hell you want i'm a big free markets guy i get it because everybody who's driving on the road right now is safe and not going to cause look i just think it's ridiculous i'm totally with jason and this is like not a new problem where it just makes no sense that it's literally how the rich get richer is like oh let's take all the best investment opportunities and let the rich people have them like it's insane so i'm with you on that but let me play devil's advocate which is you know the the rate of what you need to be an accredited investor is actually shockingly low like it used to be high right like and the funny thing is just with inflation over the last 20 30 years it went from being like i think it's like a million dollars in like liquid net worth or income over two hundred thousand dollars a year three hundred thousand joint that was a lot of money when the rules were written and the natural law of inflation just made that not that much money like i'm not saying it's nothing right it keeps some people out but i don't think a lot of these spvs like people who aren't accredited investors don't have a ton of liquid capital they're playing with like i think these spvs are like largely accredited investors right they're supposed to be in most cases and it's not really

SPEAKER_37: it's a problem to solve it's not as big a problem as it was 10 years ago just because of inflation

SPEAKER_73: it's seven percent eight percent of the country when you're correct because of inflation you know

SPEAKER_43: doubling every 10 years you know whatever i think we're attacking but also it's jason here's the thing

SPEAKER_33: is like that's totally true and like we're in this crazy inequality era right like it's wild what's happening there's like the rich that's just what's happening that's the nature of tech ai's compounding fine but like when you start slicing out who has investable assets it's not really seven percent right because like half the company half the country owns no equities right like so really it's a lot higher percentage than people like to admit in terms of people who own equities yeah only half the country owns equities at all right and so like when we're like this is this huge problem it's like you know 30 of people are accredited investors who could possibly invest and like the people who aren't should they really be buying spacex with their ten thousand dollars like i don't know it's a narrative i love i mean i'm an investor but like it's a narrative it's like not exactly a cash flow driven

SPEAKER_38: valuation i just think we're attacking the wrong problem i mean personally i think everybody should

SPEAKER_40: have the ability to lose tons of money betting on venture capital because they already have the opportunity to lose tons of money buying a house with five to ten x leverage so like people don't

SPEAKER_137: that's not where they're losing their money yeah i mean prediction markets gambling yeah people lose money betting on real estate all the time

SPEAKER_38: the the thing that i think we're not attacking is the lack of transparency from the company side

SPEAKER_40: because like everybody talking about oh i need to be a credit investor and know what i'm doing like who's got access to company financials when they're like doing this investing people are not

SPEAKER_77: investing on balance sheets or financials they're investing on vibes like well everything to push you

SPEAKER_33: dave also like everything's just priced on vibes anyway like well it shouldn't be but that's what

SPEAKER_77: i'm saying is like you know we collectively venture capitalists and companies should be pushing for more transparency information in private markets as well as public you don't have to like disclose everything but i think it's a disservice to the industry when every company wants to be like

David Sacks: completely private with their information like if you're doing well as a company why shouldn't you want to be telling me what your revenue growth and profits are preach the whole point i absolutely agree with that and there should be a lower cost of capital available to people who want to provide that transparency right now it's the opposite we're giving people cheaper cost of capital for

SPEAKER_146: being private that's up sarbanes oxley made being public super annoying and expensive right like back

SPEAKER_33: in history and like it just is like not too far it's just like it was a terrible set of regulations right and so all of a sudden no one wants to be public what you're basically pushing for is effectively half of the public market which is like yeah let anyone buy it and like let the information be public and make it all public that's like half of take out the governance piece that's what it is like the question is like what standards like whatever after we get back from this quick

SPEAKER_69: commercial break cause for the cause jenny i want you to give us your opinion of what should happen in

SPEAKER_75: terms of accreditation and private market transactions like this but let's take a moment to just turn on our

SPEAKER_117: applaud ai readers and uh thanks to plot for supporting the podcast i use this all the time

SPEAKER_159: to uh take notes when i'm on hikes on the ranch which i did this morning jason you have two different

SPEAKER_07: types of plots one that goes on your phone one that clicks to your chest which one do you prefer

SPEAKER_51: and why hmm that's a great question uh when i'm in meetings i like this one and when i'm skiing i wear this

SPEAKER_162: one when i'm uh yeah otherwise i have it on the back of my phone i basically have both with me at all times

SPEAKER_163: double fisting as they say well skiing that's impressive i leave it on for the whole day while

SPEAKER_164: skiing and then i just talk to myself like a lunatic and then at the end of the day i get a transcript

SPEAKER_110: and action items and i say action item or blog post or notes or to-do list and then it just organizes

SPEAKER_07: it all for me give them the code alex yes plaud dot ai slash twist p-l-a-u-d dot ai slash twist use the code twist save 10 stop forgetting things be a better employee or a better boss plod get one

SPEAKER_82: all right okay jenny i run a small fund where we um our business model is spv so when i see these huge statements um you know we write small checks at the precede and then we offer you know spvs to our accredited and um wonderful lps who happen to be a community of founders so when i see these broad statements by you know the model companies it gets me a little bit nervous that there's going to be kind of broad crackdown so while i agree with you that there should be you know democratization and that there should be standards you know i also don't want that encroaching in our business model and i don't think that's necessarily fair so i don't have you know any huge insights on it but i think it was kind of overblown and as most people said here a lot of this is already baked into the docks and people

SPEAKER_105: are just getting you know kind of shafted and jenny when you uh have this small seed position and then

SPEAKER_110: the company gets big you have the right to that prorata to your syndicate right that's in your

SPEAKER_09: docs correct and then also you know we have great relationships with our founders and so we're in

SPEAKER_82: communication with them they're introducing us to their lawyers and it's all you know a very

SPEAKER_176: transparent process do you ever have a founder say hey thanks so much for supporting us early but we

SPEAKER_179: don't want you doing spvs now we want you to waive your prorata and then how do you handle it i have

SPEAKER_82: had that um it makes me quite grumpy um because quite frankly you know i was their first supporter before everyone was excited and um you know we have it in writing and you know i do believe that you have to earn your prorata and hopefully you know we do that but it happens very infrequently i would say but once in a while it really gets under my skin do you hold your ground um i have um i'd say sometimes it's it's more you know you kind of just write off the founder and you're like all right

SPEAKER_183: well this wasn't the relationship jenny don't say even if you sometimes cave you have to hold the

SPEAKER_33: line which is we never cave don't put it in the don't put it out there that you cave that is not

SPEAKER_187: what you want for us or for you yeah i'd say it's happened i've invested in 300 actual rights are

SPEAKER_189: contractual rights when you're a founder and you're moving fast and you want to close a big deal a

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SPEAKER_82: correct uh it's i've invested in 300 companies there have been three or four cases where the founder has you know come back and basically um you know tried to get us to waive our pro rata and i will tell you honestly it's sometimes it's not the founders it's the big guys the big um they will always say yeah whenever they're putting pressure on the founders and then that puts me in a position

SPEAKER_177: where you know i have to call up the you know series a or b investor and say listen um you know this probably isn't what you want to be doing so well that i mean for what it's worth that i mean this

SPEAKER_33: is like for sure in hot rounds the series a investors will always tell especially young founders yeah oh you have you have pro rata rights but seed investors will always waive them don't worry about it and i've had that conversation several times and like yeah for me it's like a complete non-starter it's like i will sue you right like i have contractual rights and then that's it um yeah so i think i think you want to be putting it out there that's doing founders yeah i will 100

SPEAKER_54: put it out there that if you sign a contract with me for pro rata rights i like to come back and try

SPEAKER_82: to renege on them yeah i will sue you i take a slightly different approach which is like you try to educate and support the founder and basically you know try to get them to push back and if that doesn't work then you call the series a investor and you say i'm never sending you any deals you know

SPEAKER_07: again yeah jenny can you explain why these major funds are pushing down so hard on c-stage

SPEAKER_00: investors to give up their pro rata rights everyone in this conversation knows but not

SPEAKER_09: everyone listening understands that dynamic yeah in a competitive round there's just not enough to go

SPEAKER_82: around right so we recently had a case where um it was a series b and there were you know three kind of leads right and it's like you can't get three people all getting their 10 percent into a round and so what the founder did was the founder came to their pre-seed investors and said hey i'm going to need you guys to sell we were like well it's not actually how this works so why don't we explain this to you uh we went back and forth a bit um and ultimately we did not but we did have some conversations with those series b investors who we supply deal flow to as you know the smallest person on the cap table and um you know it kind of all worked out so there have been a few cases where

SPEAKER_209: it hasn't but very few i just want to understand broadly though it sounds like the secondary market

SPEAKER_00: itself is not in trouble the worst actors in the spv market are over their skis and just got their

SPEAKER_07: earlobes flicked dave but the model of buying shares you know on the secondary market in general will stay as it was will hold this will not kill it um i don't think this is going to end the

SPEAKER_40: secondary market or the spv market it probably will clean up some behavior that should have been cleaned up anyway and that's probably a good thing uh i think future lawsuits might result in more regulatory

SPEAKER_94: oversight and that would be interesting to see um this is going to blow out the bad actors in the

SPEAKER_110: space uh because the people who are buying into it you know who are saying like i want to put 250k into anthropic or spacex and like yeah give me 10 and i got this synthetic thing and yada yada they're just gonna be like this isn't worth the risk i'll just wait to go public and i i think that's it's gonna put cold water on that group of people i know with there was one robotics company that was

SPEAKER_75: funded like just like crazy valuation all on spvs no vc pricing around i think it got to like 30 or 40 billion i won't say the name of it but i may may have just inadvertently said the name of it and uh yeah there was all kinds of shenanigans going on and then the founder has to worry am i losing control

SPEAKER_110: of my cap table am i losing control of the story and my valuation because if they're going out there promising stuff they don't have information rights they're telling a story to investors is that

SPEAKER_75: the story you want and that's the problem yeah there were people who were telling me the figure thing was just a wild west of all spvs they'd ever seen i don't know if that's true or not no uh dig to the

SPEAKER_82: founder but i just wanted to add you know one one thing which is i think it was anthropic they actually named some of these broker guys who are in my inbox every day and they actually named some groups i won't say here that actually aren't brokers they're just you know the back office or the container for the spv and those people had to then come out and say like listen like we you know we check all documents and like we haven't done anything you know here so i think it's

SPEAKER_38: sim decide the ceo and founder of hive wrote a very prominent net letter this morning about that

SPEAKER_82: structure right but i'm not talking about hive because they are as far as i understand a broker but i think they named sidecar or like some other folks um and you know it's just i don't think

SPEAKER_33: we should scare people away from the industry is my point well no i agree i am curious where you guys as vcs it's like who where the hell is all this money coming from because like it's an interesting thing like you know in the the the middle east is kind of like out of money right like they that is so not

SPEAKER_29: true sam you are absolutely right i don't know i heard oil prices are up you think they're out of money in this environment come on dude do the math listen let's see how it plays out in the next few

SPEAKER_33: years my my my senses is that that honeypot which has been the last few years of ridiculous amounts

SPEAKER_37: of money is like slowing and gonna stop you know vcs keep reading absolutely wrong i don't know those

SPEAKER_94: guys went into anthropic and spacex just as much as anybody else they still have a lot more money than

SPEAKER_00: i do but i think sam makes a good point that when you look at the minimum oil price for many governments and oil producing countries in the middle east it's like 100 110 120 and so even though

SPEAKER_14: oil prices have rebounded dave that does not mean they have massive surpluses that are new that are coming into their coffers so i've always thought that the big push into ai was get in early while

SPEAKER_238: we still have the capital build something that will endure and then as the oil industry slowly

SPEAKER_38: alex alex the sovereign wealth funds of qatar uae and saudi have over four trillion dollars the royals across those companies have hundreds of billions of dollars but they are not shutting

SPEAKER_245: out of the spigot they pulled out of live right they're pulling back on sports they're pulling back they're rationalizing their portfolios and i'm talking about saudi specifically i can uh i can adjudicate

SPEAKER_75: this uh officially so dave is in the middle east he's very close to it uh and sam you're absolutely correct they did get over their skis in a lot of projects neom specifically and live would be great

SPEAKER_69: examples of that where maybe they started spending a little neom for sure neom for sure and then in

SPEAKER_75: some cases uh they were maybe doing too many venture funds and didn't have um the the infrastructure in

SPEAKER_49: place maybe to manage these things properly and i think they're catching up to their spending that's what i see when i go over there is hey we need more partners we need to have more eyes on these projects

SPEAKER_110: and they're just refining their strategy so i call it like splashy cashy somebody who's made a bunch of

SPEAKER_49: money goes to the casino they just start playing a bunch of games then the next time they go they're like okay which games am i going to play where do i want to put chips down so i think this is just the natural second decade evolution of their participation in private stock stocks generally

SPEAKER_75: the um specific thing to your question sam of where the money is coming from we have seen

SPEAKER_215: an upper the upper middle class or the lower part of rich people in the united states has grown

SPEAKER_75: massively so everybody's moved up but there's a very specific group of people which is equity and owner-based middle class and when you see the charts of how that's grown it's kind of nuts and it's grown at the expense of the lower and middle middle class is the upper middle class moving

SPEAKER_154: into so it is but just to push them to connect the dots we'll go is is it is accredited investors

SPEAKER_75: yes 100 it's accredited unless they lied on their self-accreditation forms which i would say maybe you know low single digit percentage people do so mine is anecdotal but we just did a very large spv

SPEAKER_82: in a buzzy company and all the money came from palm beach so all families there um not middle east that is concentration of wealth in certain areas in this country including uh south florida and they

SPEAKER_43: all want into certain categories so their 401ks are doing really well the businesses they own whether they own a restaurant or an hvac or a finance company like the rich are getting so much richer because of the stock market and the poor are staying the same which goes to your point certainly last five years yeah of what's happening in the united states in terms of the haves and have-nots if you own equities you're running away with it if you don't own equities and you're making income

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SPEAKER_33: interesting thing about this is it's not just technology there's also this like feedback loop cycle to the market right where it would basically what's happening is like the market is going up because the market went up right and that is a real i mean that is like a classic it's interesting because on one hand that's classic bubble dynamics right it's up because it's up but on the other hand i keep going back to this thing that we as a society have decided to start storing wealth just in stories right not in cash flows right if you think about it it's like give you an example well i just say like the global clearing price if i said i have a billion dollars of free cash flow there is a global clearing price for that right based on the growth rate or whatever that we could all model and everyone globally would basically model the same way right and you come up with the value of that cash flow right none of the assets that anthropic open ai spacex all these enormous numbers the tie to business logic is basically non-existent right like in terms of valuation right it's a tie to for those for those companies yeah i agree but that's basically everything in tech right like

SPEAKER_40: i can't name the last no that's that's not true that's not true there's companies that are still

SPEAKER_31: valued on fundamentals not there's more companies being valued on vibes recently well but i'd say

SPEAKER_54: the ones that are valued on fundamentals like the movement in the stock has much more to do with the

SPEAKER_280: vibe shift around it because it's just a multiple expansion question than like revenue growth right

SPEAKER_36: but this is my point is that i think you know we're we're leaving fundamentals behind when we should

SPEAKER_40: absolutely be paying attention to fundamentals and in our podcast every week we focus on valuation corner

SPEAKER_77: and we analyze companies and there are some that are way crazy out there and there are others that

SPEAKER_283: example palantir comes to mind well i would say you got ahead of itself yeah kind of crazy well i would

SPEAKER_131: but this is just my basic point of feedback cycles is like if you were a like being a fundamentals if

SPEAKER_33: you're a value investor over the last decade you're screwed right you've made like no money right whereas if you're a vibes investor you are like crushing it right like until you're not i agree with you i

SPEAKER_287: struggle with this i'm not saying that the vibes investing is right in general i'm not a vibes investor and i'm not an anthropic or opening but if you look at the public mag seven you know five of

SPEAKER_77: those seven maybe six of those seven aren't crazy on fundamentals tesla is a little bit crazy on the

SPEAKER_40: fundamentals but the other ones are not they're you know you know 20 to 25 pe maybe jenny are we uh are we

SPEAKER_42: massively ahead of our skis as you know in terms of the public markets and the valuation of these

SPEAKER_75: companies and how they're being valued and will we return to maybe a scale at some point where we

SPEAKER_292: actually weigh them and say what is the free cash flow from this company i think it depends if there's

SPEAKER_82: other asset classes to go in right um a couple years ago everyone was very excited about credit um you know that turned out not to be a great place and so they're just looking for you know interesting opportunities so right now the stock market's crushing i think what we're here all interested in is what's going to happen you know as these companies go public and more liquidity kind of starts coming back so that's that's the question i'm more interested in is like it's really hard to raise capital right now as a you know pre-seed investor but i think you know the floodgates

SPEAKER_75: are going to open with these other ones here is uh the share of families in each class 1979 2001 2024 and what you're looking at here really is the lower middle class going from 24 to 15 the core middle class going from 35 to 30 and then the upper middle class went from 10 to 31 and then rich

SPEAKER_49: people went from 0.3 of our society it went up 10x since 1979 so you have tripling of the upper middle class and 10xing of the rich what's kind of interesting though is this chart says that the poor

SPEAKER_299: and lower middle class are declining yes like i guess the question is what's the basis of how you

SPEAKER_07: define these buckets yeah what are the what are the bands here for income or wealth jason yeah let me

SPEAKER_08: look it up while we uh continue the conversation but on the point about excess and liquidity uh jenny

SPEAKER_00: make a really good point this week uh we saw firvo energy go public venture backed we're seeing service go public venture backed a little bit of liquidity there jenny do those two ipos drive any meaningful amount of liquidity through venture or are they relatively sideshows as we wait for

SPEAKER_82: the big three spacex anthropic and opening my understanding of lps is that um you know they kind of work on you know sentiment and vibes and not necessarily reality so i think seeing a few things gives them hope and we start i mean we can literally track this like the amount of inbound we get from lps and how fast they kind of get back to us based on some of these ipos so i don't think that move the needle necessarily but i think there's a lot of anticipation of some bigger ones and i think those will move the needle but we're actually seeing a lot more inbound we'll see there

SPEAKER_32: might not be though i mean this is the problem i mean i have this on a personal level right like

SPEAKER_33: which is uh you know i have a relatively small relative slice of like the spacex you know thing and i'm excited i mean like you know that'll be a great return for me personally just from a pa perspective but it's a really interesting question about whether you sell and redistribute back into

SPEAKER_183: other things or not right and it's not clear right and i'll give you the two but if you were an

SPEAKER_184: institution and that was really your job and you were waiting i don't know but no i mean i i talked

SPEAKER_183: to a lot we have a lot of institutional piece and there's a similar question which is like the the

SPEAKER_33: there's a really big difference between institutions that pay taxes and then those that don't right so if you're a tax-free institution you can reallocate for free that actually makes sense you maybe take something but if you have to pay taxes you're paying 40 taxes 50 tax we'll call it 40 in california it is so expensive to redistribute and on the flip side you know we are living in this new feudal age of like effectively these like fiefdoms where number go up because number go up and everyone has to buy spacex and so it's actually really unclear i understand historically how this will work but

SPEAKER_280: it's really unclear to me how this redistribution is going to work on these ipos dave what do you think

SPEAKER_40: uh just to get to some numbers here on the cerebrus ipo projected flow it's going to be probably between four and a half to five billion dollars back to investors that's meaningful capital uh might be the only ipo we see before spacex and after that because spacex is going to take

SPEAKER_94: up a lot of the available capital in the market and maybe anthropic and others might before the end of the year uh but you know i think our numbers are way out of whack because we're focusing on anthropic you know spacex and open the eye being these massively large ipos um venture capital doesn't

SPEAKER_40: need that big an ipo to have meaningful paydays like it's still fine to have billion dollar ipos

SPEAKER_75: uh i think sam sam brings up a really good point which is if you are a family office right and you've got 20 allocated to venture and you've got i don't know 40 in equities you're eventually if if your

SPEAKER_43: pipeline is your vc firms you know and you're in founders fund or you're in sequoia and your vc fund is delivering you spacex shares or delivering you you know whatsapp facebook shares via the whatsapp and instagram acquisitions and then you had sold those previously uh book the gain and then you

SPEAKER_75: wound up buying them in the public market like it's just not tax efficient so you might as well just sit on them forever and then you know this does create a redistribution issue i think sam's correct there and then it's going to really matter the company if you're if it's an elon musk company because of the elon premium that he's created the future so many times now that's like a venture investment and a public investment if you look at tesla's valuation now it's not a car company anymore it's going to be remembered as optimus the company will only be remembered they will nobody's going to remember robo taxi or cars i predict they're going to remember optimus because that thing's going to sell a billion units and they're going to charge by the hour for that product it's got unlimited upside and if he figures that piece out or data centers in space

SPEAKER_05: for spacex this is like uh unknown cap unknown tam these tams could could break people's brains in

SPEAKER_75: terms of how big they are so you basically have no choice but to hold it i think forever if it's like

SPEAKER_54: spacex or tesla which becomes self-fulfilling because everyone's holding forever the number go

SPEAKER_33: up and like this becomes an interesting disconnect of what's going on which is if you believe the future is a future a feudalism 2.0 where you have a few hyper winners that have the cost of capital zero they have all the things right and ai is fundamentally a compounder then like it's just an incredibly different configuration of the venture landscape and like what you want to allocate to than what we've seen for the last 20 years where the whole story was software helps insurgents beat big guys you know i've been saying this for a while that ai is just a strict benefit to like the winners effectively like cheap cost of capital these are like the things that matter but i just think we have to come to terms with the fact that like the venture capital the next 20 years is just going to be massively different than it was the last 20 years right what do you

SPEAKER_117: think jenny how is it going to be different do you just take your fund when you raise your 50 million

SPEAKER_05: put it into a mag 7 index and then slowly draw down from it and i mean i know this sounds ridiculous but in a sense you know that's what these crossover funds do they yeah we've been

SPEAKER_82: seeing that for years i mean people are getting really grumpy when all those funds were putting money into bitcoin and solana and the lps were like screw you i could do that too why are you charging me a fee so i'm not sure that's the future of venture capital but getting back to like the trickle down i would say maybe i'll amend my answer you know a slight bit that some of these you know although it may not be enough to transform the liquidity issue i mean a small investor like us we're we're not in some of those names you mentioned but you know what the folks that put money into us are and i don't mean the lps like you know the benchmarks the foundations they all put money into early stage funds and so then i have more money that i can deploy to early stage founders so i actually think that it would be very healthy for the cycle even those small ones i mean obviously

SPEAKER_319: you know the bigger ones would be even better but um i'm pretty excited i think we need to temper

SPEAKER_36: our enthusiasm for tech and vibes and the potential for investing in companies that are going to have

SPEAKER_40: big outcomes with the strict valuation fundamentals that are still required like you know when my son was 16 uh over the summer during covid i i sat down with him every week we said hey let's go take a look at a public company i'll give you a hundred bucks you can go buy it on robin hood but i want you to explain to me like why it's a good buy let's talk about revenue growth and profits let's talk about balance sheets and capital and like know whether you're investing on fundamentals or whether you're investing on vibes and it was okay if you wanted to invest on vibes but i was like you know why the are you investing in this company when p multiples are way out of whack and this one's a reasonable the same is true for venture we can't just say like hey everything is going to be a hundred x two thousand x you know sort of outcome and throw valuation out the window you know early stage valuation entry points still matter and and fundamentals still matter like i don't want to invest i don't give my money to vcs who think that it's all vibes and not based on fundamentals

David Sacks: fuck that i want you to understand the numbers of the companies you're investing in i want you understand your portfolio model i want you to understand whether like makes sense to do follow on investments or not at new prices math i still fucking matters of course like dave i'm like you

SPEAKER_183: like look i like we're incredibly cheap at slow ventures like we don't do well we are because it's okay to not be cheap no we're cheap we're cheap motherfuckers right i don't know this is like and we are allowed to say that like twist okay good and like you know it's like you look at cash flow

SPEAKER_33: based deals it's like it was reported by the ft and a bunch of others that you know only fans just did a transaction valuing at a three billion dollar valuation financially that's a steal right like

SPEAKER_154: it's yeah because what is their what is their earnings i mean they make four or five hundred million in profit a year yeah i i shouldn't comment but the point is like i know you were trying to

SPEAKER_33: buy it the um the um the point is only that like yes there's always going to be a financial clearing price to things based on growth and fundamentals but in the last like five to ten years the people who have done well have not done that at all right and the question is what happens to the industry because of that like you know one tweet from elon about space data centers makes your company worth a billion dollars right on vibes right in the market you know versus like if you go triple triple double double on a software company right now truly no a round investor cares

Chamath Palihapitiya: right which is insane like it's such a great business it could be a money printing machine

SPEAKER_43: i you know at some point free cash flow is going to matter to people and i think it's going to be this time next year after these companies get out then there are going to be institutional investors who are going to start looking at anthropic and open ai and they're going to take out their abacus their spreadsheet whatever their back of the envelope and they're going to just go hey math

SPEAKER_75: doesn't math you're losing this much money on every transaction when does this become a free cash flow machine when does the j curve and how do i know this i watched it with uber up close and personal the the entire narrative of uber and ride sharing was it can never make money it will lose money

SPEAKER_110: forever it's going to constantly go down that j curve it's never recovering and then i was on cnbc

SPEAKER_336: famously one time and i just said to one of them like would you pay would you stop taking uber if it was

SPEAKER_110: three dollars more a ride and they were like no and i was like okay who would and they're like the bottom three percent of users like okay great you fired your bottom ten percent of users and then you

SPEAKER_49: became wildly profitable and that's exactly what happened but it took a changing of the guard and the changing of the cap table for that to happen and that's about to happen for spacex anthropic open ai

SPEAKER_33: and cerebris they're all going to start getting weighed unless it doesn't because the retail investor base of your upper middle class jason is big enough and vibey enough right that it's a gme situation right where it's like it actually hasn't happened right reality at all no i don't think sam's right

SPEAKER_179: i think that we've we've hit the top i think we've hit the top to a certain extent why do you think

SPEAKER_343: why do you think elon's making a 30 retail allocation in the ipo because is a total exception

SPEAKER_43: and i think it will get filled the question is when i agree with you what other stocks are going to go

David Friedberg: down where is that money going to come from is that coming from somebody's 401k

SPEAKER_110: from a vanguard fund is it coming from their cash on hand is it a second home that they sell to buy

SPEAKER_115: more spaces where is that incremental money coming from if elon gets his way it's going to come out of the nasdaq 100 and eventually out of the s p 500 yep correct yes and that so that's my point is

SPEAKER_75: is this rebalancing over the next year is going to be vibes now get on get your shares and then a

SPEAKER_110: year from now people are going to start weighing these things and saying well i think what i could

SPEAKER_37: imagine jason is that people i mean this has already happened in some places where people are you know on the margin pulling out of mag 7 and going to chips in various places like it but like i could imagine that the pe's on some of the mag 7 become so attractive that people just can't help

SPEAKER_77: themselves right and like these on the mag 7 are are actually not crazy like you know again meta 20

SPEAKER_354: alphabet at under 20 microsoft amazon next year apple about 30. tesla's the only one that's really out of

SPEAKER_214: range there right because it's a meme stock yeah but if you buy into those companies you get allocation

SPEAKER_14: to the other private firms you care about because they're all investors next up jenny you said something that i thought was absolutely fascinating you told the story that i don't think i've ever heard told

SPEAKER_00: before uh you said that you heard about a founder that closed a 15 million series a from a top tier vc and then a half year later they plan to return the cash to investors you add that claude will displace the product and i wrote the value this is really happening most people are not talking about it it's kind of wild tell me more about this story and how common it is first of all i think people

SPEAKER_01: don't want to talk about it because it's scary to admit that this is happening and it doesn't

SPEAKER_82: really serve their interests of raising capital from lps or telling the narrative you know that silicon valley is healthy and everything's good now i'll preface this by saying like i'm long-term bullish i will keep on investing in startups and i'm very excited but i think people have underestimated the impact um and this isn't just about so in this case it was a founder he'd raised about 15 million series a and um he'd been working in the legal tech space but not um i mean this wasn't just like an application layer this was a deeply technical second third time founder who you know thought that he had a really interesting data moat um and was working very um you know hand in hand with a few firms to kind of um pilot this and and design it um and he wasn't saying that just because you know claude released their um you know their mcp connector that he was going out of business but what i think is interesting is that these savvy founders are basically taking a long view kind of looking back and not saying what's happening today but like where am i going to be in five years and where are these models going to be in five years and i think that's what scared him and that kind of freaked me out and then when i started telling some of my you know my peers at other firms they all seem to have stories about this uh maybe this one seems extreme although it is is quite true um i think it's a real it's a real thing and it's a threat and like we're not talking about it i don't think that serves our founders i think we need to have more you know open conversation about what you know moats can be and not moats today right i mean i think everyone has a theory on you know

SPEAKER_01: what's interesting today but five and ten years out i think it's moats i think it's also just like

SPEAKER_32: what people want to work on in this moment like to to run a company and build a company like you need

SPEAKER_37: two things like one is you need a great business and the second is you need to care right and like the great business part i couldn't agree with you more about like we spent a lot of time like what's a mo how do you really think about that long term but like we've also we had one founder this is years ago now one founding team was excellent founding team like couldn't be better group of people doing a thing and um they called up and they said look ai is about to happen this like oh this is the llm moment and we've studied this our whole lives and we're building this company and candidly like we really need to work on this like this is like what we've trained for in the moment we're waiting for and they're like so we're effectively returning capital and gonna go

SPEAKER_33: take senior positions at open ai good for them like to have that like perspective which is like this is my life you know this is my next decade and if the world is changing so fast and things change

SPEAKER_280: and like all of a sudden like i just emotionally have to do something like i respect that yeah i

SPEAKER_82: think there's opportunity costs especially for seasoned founders and in this case it was that it just seemed quite extreme um they just raised the money they just you know convinced a top

SPEAKER_33: i just think i mean it's funny if if for instance if jenny and you and i are talking i am extremely serious about prorata rights like hear me now startup world like yeah or not i would say like i'm crazy about that but actually the founder comes to me and raises money and like six months later is like we're wrong and like by the way our opportunity costs like the really expensive thing especially early is your time and effort it's not the money right like you're like i'm gonna return money because like i this is not it's better for everyone like they're not gonna win at a thing

SPEAKER_37: they're not super passionate about right the world changes fast i candidly would rather have the money back and redeploy it if that's the situation i mean i'll just take the other side in that you

SPEAKER_82: know you're betting on people at the pre-seed and you're betting on them to figure it out and i'd rather not get my money back but have them try a few different things and try to you know skate where the puck is going i get it and i think you have to just be fast in this market you know um i was talking to someone that runs a kind of quasi consulting ai consulting business but there's they've productized some of it and they said our team you know rips everything out every two weeks and

SPEAKER_183: starts again i get it it's just like ultimately like it's like it's running a zombie company as

SPEAKER_33: a great person in a moment where the world is changing so fast is like it's like the worst feeling you could possibly have like there's this amazing thing going on and you're boxed out of it because i'd like rather just fix that and like life is long i think whether i'm investing in an

SPEAKER_40: entrepreneur or another fund manager i want them to feel like they've got an edge and have conviction and passion for what they're doing and so if they've lost that then sure i don't want them

SPEAKER_94: doing it either but i want to invest in people who think they can still figure it out all right we got

SPEAKER_367: to drop sam off sam thanks for coming on the pod and we'll see you next time thank you hi he's got a

SPEAKER_43: high um um hot take per minute so we we allow him to leave early check out his podcast more or less

SPEAKER_371: everybody has to have a podcast now so gotta have more or less i gotta have a podcast you need to control

SPEAKER_20: your media channel he's gotta go beat up those founders who didn't give him pro rata he read

SPEAKER_268: somebody just said oh my god uh we're challenging you on this he's getting on the phone with his uh attorneys you know if a family gets to the point jenny where they're like um i just can't do it yeah

SPEAKER_376: i'm not living my real life i kind of feel like it's uh like one of these kids who uh goes and does ayahuasca or they go to burning man and they they they do lsd or something they come back and they're like i'm living a lie i need to go be a yoga instructor i need to start a surf camp in wherever i'm just

SPEAKER_380: like you know okay godspeed godspeed i mean everybody has somebody in their circle who came back from burning man and their brain was broken and whatever they were doing is over like they left

SPEAKER_384: their spouse they left their city and they're in kawai living their best life mazel or they came back

SPEAKER_43: with a great vision for new startup and i'm like great i want to give them but it is frustrating jenny i always think to myself like i always say the founders what are your three other ideas i have

SPEAKER_375: another idea we've already got the capital here we bet on you what else i'd be curious um if you're

SPEAKER_82: seeing this too jason around first time versus second time founders we're finding that the first time founders will just like you know put their nose down and just like try to get through and burn the money potentially but they're going to try to find something the passion maybe the ego and the second and third time founders who've had a lot of success or some success it's just opportunity cost and in this case it felt like a team very seasoned very technical had a lot of success and they just said you know what like it's not going to work it's a function of how great those

SPEAKER_43: offers were i've seen some of these offers and to put your nose to the grindstone at a startup

David Friedberg: for 10 years 15 years and the outcome is unknown or you get a guaranteed you know 10 20 30 million dollar package from open ai and you know it's going to 10x from here so it's really a 300 million and there's a secondary market as we talked about on the first thing and i could just start selling my shares immediately you know i i told somebody recently they were like 99 of my net worth is in

SPEAKER_110: one of these companies and i just said sell it all and put it in index funds like or sell at least half of it put it in index funds go buy yourself you know a house and a ski house like by the way that's the advice i gave myself which is just keep building that foundation that's rock solid with the speculative

SPEAKER_75: stuff and get yourself diversified and out of these because if these companies are trading at

SPEAKER_110: 30 40 50 times revenue okay there's a chance that they'll catch up and their earnings will get there there's also a significant chance that open source and other products win a big part of this and tokens

SPEAKER_49: just are the the fastest declining commodity in the world are tokens like the cost of a token is plummeting because more data centers better energy photonics between the chips language models that are more efficient open source distributed computing tau subnets that are you know racing to the bottom so if these things keep going down i'm not going to give myself a clip like you only ever need a 10 megabyte hard drive obviously people are just going to keep using a phenomenal amount of tokens but it just may not be the most profitable business what if the business looks like a bandwidth provider what if the business looks more like a hard drive provider and it's a commodity business

SPEAKER_189: that braces to the bottom it just it might not be the money printing free cash flow machine that

SPEAKER_13: people think it's going to be that's a possibility if it's not though then what is because if ai

SPEAKER_07: really does subsume a number of industries like we're seeing progress on the legal field from anthropic they just dropped smb products and if they don't make money jason then who does the hardware

SPEAKER_110: the energy company the data center the application layer the person running a law firm that needs many people and charges you know the same amount of money but or they charge 20 less but the cost to deliver the products 40 less and their margins went up like there's a lot of permutations of this

SPEAKER_75: and anybody who says they know exactly which one works and where the value gets captured it's just

SPEAKER_40: not telling the truth right jason i think you pointed out a good um you know i think for a lot of founders and actually for vcs this happens later too is you're concentrated in a single asset you don't have access to diversification or liquidity but that's literally why the secondary market exists but you help with that go ahead and give a plug yeah i mean it's well i'm just saying i did the same thing you know five or six years ago when i was looking to sell a piece of my carry and my first two funds at 500 which had become very concentrated in a couple of winners and i wanted to take a little bit off the table and buy a house yeah i i think that's the the big reason the secondary market exists uh at least for founders and employees who are selling is there's a hundred thousand people in the bay area who own one to ten million dollars worth of equity it's probably ten thousand people in the bay area who own ten to fifty million dollars worth of equity and they can't afford to buy a house in the bay area that costs three four five million dollars can't even qualify for the loan you know to buy a house and i think that's why you're seeing more of these tender offers and a lot of companies providing you know regular liquidity programs is to give them an outlet because you know ipos are taking 15 years now the employee investing schedule happens you know in a third of the time

SPEAKER_82: it takes for a company to go public so i think that's great but i also think like you know these companies like intercom you know that have to reinvent themselves and they're pushing true are very inspiring as well and if you find a founder like that who's just gritty as hell and wants to you know then become an ai native company after all these years like i think that's pretty awesome

SPEAKER_77: and i was an early investor at intercom and owen coming back and figuring out finn was amazing

SPEAKER_00: amazing right that doesn't always happen yeah there was a lot of commentary on the how much money does it cost to be kind of set in san francisco conversation open ai had a tender offer for employees last year turns out 600 investors for 600 employees sold stock 6.6 billion dollars which led to this tweet from uh shruti from arrayvc that went incredibly viral she says the people who sold their roughly 10 million will still be quote sf brokey 50 in taxes three four million in cash for a house probably needs another million of um improvements at least with one or two million kids on the way nanny's 100k a year daycare is 45k a year camps extracurricular 30 to 100 000 tesla 50k they will still be at the office 996 and not going to enjoy any of this only have money to hike and camp um if 10 million dollars they'll be just fine thank you yes there's a high class problem

SPEAKER_422: there yeah and that's certainly for those folks just one secondary that they did so they have a lot more

SPEAKER_25: upset yeah i don't think the perspective though she got dunked on a little bit but i don't think

SPEAKER_14: the perspective is that that far off when everyone looks up to mere billionaires now is like a second class compared to the 100 billionaires and possibly compared to the first trillionaire i think people's expectations have really changed and i don't think it's the right time for technology to become richer in a visible way given how ai is pulling right now it seems to be a mistake well first of all get out

SPEAKER_43: of the big get out of the bay area yeah by the way like in austin yeah uh by the way you can buy an acre of land for 100k 20 miles outside the city and so you want to buy like your 10 acres for a million

SPEAKER_431: bucks like and people have no idea how big 10 acres is like it's a lot of space go buy your 10 acres

David Sacks: austin and austin and mayam are great places to move after you've made money but there's a ton of

SPEAKER_40: people who are still here in the bay area who are making money in spite of the high taxes and the high cost of living because they're making a lot of money working for the company totally fine to make

SPEAKER_436: it there and then when you're ready for your second or third company if if you're doing your second or

SPEAKER_75: third company and you've got a crew like basing yourself in austin is such an unlock which is why you

SPEAKER_439: see so many people saying like yeah why not put my company here and if i move my team there they save

SPEAKER_110: on the state tax so that's a whatever it is 10 12 14 raise then their cost of living goes down a third so now they're at a 50 raise uh and your net your 100k nanny goes down well that's in the cost of living

SPEAKER_442: these are life optimization strategies after you've made money or you're running your second

SPEAKER_08: company nannies don't go down to price that much if you leave the bay area just let it just just

SPEAKER_447: well i thought that was the one thing about her tweet that i was like 100k for a nanny no i i think

SPEAKER_38: keith ray boys was going to be mayor of miami for a few years but he decided to come back is he back

SPEAKER_43: in the bay i thought he was in new york most of the time yeah well i'm just saying that yeah a lot

SPEAKER_101: of people came back to the bay area to either make make money or invest in people who are here

SPEAKER_82: yeah absolutely yeah i just think like it's an entrepreneurship about zigging when other people zag so if like you have to live in pack heights and you have to send your kid to alpha school and you have to do all these things then like you're gonna have to pay the price but otherwise you have

SPEAKER_09: to get scrappy and move to austin or wherever and i think you can do really well i think new york

SPEAKER_419: and the bay area are still great places to build companies i mean i run a phone called everywhere

SPEAKER_261: venture so in the name folks what is this story about um the company rebranding uh oh intercom

SPEAKER_456: yeah we we kind of skipped over that but tell us about that i think it's what jenny brought it up

SPEAKER_00: so intercom is a company that early in the ai era said we are going to re-architect our firm around building an agent and they said it early enough jason that people were a little bit like maybe is the

SPEAKER_14: technology there yet is it going to be there and as they worked on their customer service agent called finn and saw real success with it they've talked about this kind of over the last jenny helped me out here a year and a half two years they just announced this and they're going to rebrand the whole company finn and intercom will then be a sub brand of it they're still going to work on the core intercom product uh they said in a blog post that intercom 2.0 just came out and they're going to invest more in it but the company is clearly moving in the agentic fashion and what i think really matters here is

SPEAKER_00: this is not just a new product it's not just a new name they stress that they have changed how they

SPEAKER_14: price how they build etc so they've really done a full architect re-architected the company and they've made it through so when jenny was talking about well they're starting to make it

SPEAKER_82: through i mean i think we all have portfolio companies that are series c and beyond and they have to go through this chasm right now i have probably five or six that are you know late stage and they have to transform and like some of them will work long term and some won't but i thought this was like a great story and i mean intercom customer service you think that would be the first thing to be displaced so i kind of love that it was a bold statement the founder coming back and i'm i'm rooting for them i'm not an investor do you think that the companies in your portfolio

SPEAKER_00: that are facing the similar chasm going from the sas era to the ai era or the agentic era are going

SPEAKER_07: to make it like 50 of them 80 how many make that jump the ones that move fast and took action when they

SPEAKER_18: didn't want to they had to fire their executive team because they weren't ai native they had to change

SPEAKER_82: their pricing from sas to usage base that was hard so i think in my portfolio it's probably 50 percent that i think might make it because they were very decisive they had great leadership and they had vision um and it was painful right they didn't want to fire those people that took them

SPEAKER_18: two years to recruit but they did and so i think that's that's the key jason something in your portfolio

SPEAKER_89: are people taking the medicine yeah to get across them there's um there's an interesting story about

SPEAKER_261: zoom info which helps you find leads right and sales team use these what was like one of the first

SPEAKER_43: thing people did when they saw open claw when they see co-work they're like find me 10 leads find me you know everybody who the first thing i did with open claw was i was like take these 100 the top 100 pockets tell me who the advertisers are then go put those leads into our sas product which is pipe drive and then tell me if they're in there already and when was the last contact date it did that beautifully and it was like okay that's an sdr job of you know 30 40k you know offshore work from

SPEAKER_110: home or a 60 70 80k in the united states work from over in a city you know in austin or in phoenix so zoom info is like the perfect example of a company that's going to have a heck of a time that's like private equity home company as i think it's a private equity company or a public one it's that's public so they're getting their ass handed to them they're going to need to cut half the staff they're going to need to take an air approach but we have a company lead iq um which was nipping at

SPEAKER_49: zoom infos heels has a figures in revenue go to lead iq.com their home page is here's ai here's our ai solution to the same problem as opposed to you know here's our sas software for the same problem so accelerate revenue with ai driven data so they're like here's the next person you should

SPEAKER_110: talk to here's why you should talk to them but this is going to require a totally different company and i remember talking to the founder may and she was like okay we have these you know offers to get acquired they're not quite where we want them to be we're still growing but ai you know and ai first companies are super dangerous and i was like there's really only one choice so um if you don't believe

SPEAKER_43: in your ability and you just want to get off the train and you know accept you know uh you know what might be to you i don't know the bronze medal uh or like a participation trophy or do you want to go

SPEAKER_110: for the gold if you want to go for the gold then you have to skate to where the puck is going while dealing with a board of directors who wants the number to go up and is and that really is the problem you have you might have somebody like jenny or myself who's like yeah uh we don't care about a little revenue destruction and shaking up the the management team in order to get to the future because

SPEAKER_43: we invested at whatever evaluation the later stage folks are like wait a second you know we were supposed to you know double double triple triple triple double double double and then exit and this

SPEAKER_75: is going to be incredible and salesforce was going to buy us and hubspot was going to buy us those folks are the ones who are over their skis so the real dynamic is the board issue 100 and and

SPEAKER_69: it's just unfixable and you i've had to have these conversations multiple times with the late stage

SPEAKER_75: board members just say leave the board sell your shares back to the company at a discount or just leave the board and we'll we'll take it from here you know and you'll see if you get a return or not right off

SPEAKER_110: the investment whatever you got to do um but yeah it just becomes untenable what did they say when you

SPEAKER_49: told them i mean it's always the late stage folks always want to believe that they're the early stage investors and they have that gestalt and they have that passion for you know a a blank whiteboard they want to have that passion for a blank sheet of paper and we're gonna come up with a product this weekend let's do a hackathon at the company we'll break into five teams come up with five different product ideas and one of them you know evan williams will say oh jack your version this twitter thing is what we're going to put all our eggs in that basket let's go they want to believe

SPEAKER_110: they're that but their lps are not that they're all peas if they're late stage like that are looking

SPEAKER_49: for five year term you know returns on investment as opposed to ours which might be okay with 10 to 15 years so time horizon is everything right and you just can't make unnatural um company pivots are not

SPEAKER_82: very talented no why we don't we don't take board seats so we can be you know the whisper in the founder's ear and you know the voice of reason and they don't feel nervous about it i think it's

SPEAKER_07: a real advantage i think the difference between vcs and late stage private market investors that are not

SPEAKER_89: quite pe is the divide that jason just outlined like are you willing to do revenue destruction or do you have to have this steady rise so are you modeling or are you believing yeah i mean and go to

SPEAKER_43: uh grin.co this is another sas era company that we incubated did fantastic and if you scroll down on their page you'll see their gia product gia um and uh yeah go keep going down so this is like their existing product and then they're like and by the way if you're done with that affiliate product to manage influencers here's gia the ai that lets your team focus on relationships not the busy work and what happens over time is you have the existing product the paradigm is shifted here's the new

SPEAKER_110: product and you're trying to service both of these revenue lines and educate your market on hey the new product's going to be more effective and man it's just it's hard to sell two different products concurrently i saw this with google right now they released a google book yesterday and i tweeted

SPEAKER_349: like what's the difference between this and the chromebook and people are like oh well it's android

SPEAKER_43: but it's built on chrome but it's got the google and i'm like yeah but my chromebook had the ability to load these apps and it's like yeah we don't know it's just the people's perception is they want

SPEAKER_110: a gemini google book they don't want a chrome book chrome means browser google gemini book means like

SPEAKER_336: new ai book it's essentially the same thing uh it's a it's an apple neo laptop competitor it's a

SPEAKER_209: less than 500 laptop yeah here's uh here's an important picture of google announcing the google book

SPEAKER_05: recently yeah i mean it's it is really hard it is really hard running a legacy business that's printing

SPEAKER_75: money that's growing that has constituents internally on the board hey it's not to make it work what who

SPEAKER_494: did satya made that pivot work that's a really late stage pivot yeah i mean it's just it's it's it's

SPEAKER_492: just hard you're going to be having you have to have i can tell you exactly how to say it the only

SPEAKER_336: people can figure this out is people with a high tolerance for ambiguity okay like a jedi knight give

SPEAKER_499: people more about ambiguity in this case jason ambiguity about what's going to happen or ambiguity

SPEAKER_49: about which tolerance i'll give you like the idea of a tolerance for ambiguity taiwan is a proud nation that's part of the incredible china story and we respect taiwan and china this was the strategic ambiguity that the world gave china and taiwan for the last 30 or 40 years and it's worked chef's kiss

SPEAKER_51: you don't need to challenge so far so far it's worked pretty damn well now you're talking out of

SPEAKER_49: both sides of your mouth right is it a lie or is it you're holding space you know to use the work term you know um our company uh intercom is loved and super helpful and has is a catalyst for growth in over 10 000 enterprises and our new product finn is the future of customer engagement like okay wait as

SPEAKER_38: soon as they realized that fun that finn was working and becoming the future of the company

SPEAKER_506: they decided to go all in on that and just recently but they didn't fire their customers for intercom

SPEAKER_117: and people can still log into their intercom attack accounts now if you want to understand somebody who

SPEAKER_43: burns the boats elon said tesla model s and x there's a hundred left you can buy one of the hundred

SPEAKER_371: to end the run my wife bought one of the model x's god bless her you know she had one of the i had the the first signature model s she has one of the last model x's and he's like i those are loved cars

SPEAKER_43: but they have to die so optimists can live and they're retooling those like there are burn the boat founders they're very rare most people in elon shoes would have been like absolutely we're going to put these on a paste rollout you can still buy your model s will incrementally improve it they wouldn't have the boldness to say that business is nothing compared to the upside of optimus so you're

SPEAKER_18: basically saying that google doesn't have that agility anymore only a founder can do that it's

SPEAKER_69: founder authority that allows you to kill products um what a company like google does is they just let

SPEAKER_110: it taper off they just let it taper taper taper taper and then someday you wake up and they're like yeah

SPEAKER_75: the nest is the google thermostat took them like 10 years to have the boldness to say you know or drop

SPEAKER_514: cams are now google cams or the chromebook is now the google book like it's just there's somebody

SPEAKER_110: internally fighting there's there's two camps internally fighting for each product and then the

SPEAKER_516: ceo wants to be magnanimous and you know she he they them it says yeah you know okay you made a great

SPEAKER_292: argument so yeah uh let's launch that new product on this date and we'll do uh we'll do a uh uh we'll we'll keep supporting that other product yeah i mean i don't think you can you can count them out though

SPEAKER_18: right i mean they came back with gemini after you know they could have been ahead and did a phenomenal

SPEAKER_75: job and i actually love that product so and i made a huge bet on it i bought google at 100 a share when everybody said it's over and all the searches are going to check because i was like wait a second yeah i watched them after mahalo take all the little innovations we were doing at mahalo and put them onto the google home page when it was 10 blue links and i was like there's nothing stopping them

SPEAKER_110: from putting the ai answer at the top of the page they did that with the one box so what if they put the ai answer at the top which is exactly what they did i'd seen them do that my whole career they would put flight information up there they would put their local information up there they would put the one box the sports score what's to stop them from putting the ai answer they did it and their revenue went up yeah very successful yeah it just took them how long did that take them

SPEAKER_18: two years well to make them until they felt like they were going gonna be outrun pretty quickly

SPEAKER_116: they had to feel the pressure and and then who who actually made the decision right they had a founder come back the founder had to come back and put down i was going to say that that was

SPEAKER_115: founder authority part when somebody came in and did that yeah yeah there's only somebody said

SPEAKER_503: enough the decision's been made we're going ai first i think there's only so many steve jobs who

SPEAKER_38: can make you know company changing pivots and make that work and yeah sometimes if they're no

SPEAKER_529: longer there that pivot might not be as easy to pull off which is i think why tim cook is retiring is they're at a crucible moment as ruloff would say at sequoia it's like a crucible moment for for

SPEAKER_49: apple are they going to play a role in this next universe are they going to leverage their massive hardware footprint or not i think they put a guy in charge who worked on the chips and the is an engineer for a reason their future is local models running on massively powerful apple

SPEAKER_529: silicon with 128 gigs 256 gigs of ram on your laptop and you're going to pay four thousand dollars

SPEAKER_89: for the privilege i hope so all my macs are constantly out of ram i wish someone would fix

SPEAKER_14: that bottleneck all right listen before we go jason i want to get to a question from the nodi gang that was submitted before we even went live today where you get taking questions from our awesome nodi gang group chat over on x if you want to join there'll be a link in the show notes um but from goldilocksville uh jason how should i manage a meeting with large venture capital firms in new

SPEAKER_00: york city without losing credibility as both a newbie and someone who's still determining who to build the company with i apparently need a co-founder so they're looking for some general

SPEAKER_73: advice talking to new york i mean if you somehow got a meeting without your co-founder in a very nascent company you should just own uh the state of your company hey it's great to meet with you fred wilson

SPEAKER_110: i've been reading your blog and i heard your recent podcast um i need really three pieces of advice from you here's my vision here's our progress number one do i need a co-founder or should i just go to

SPEAKER_69: building a founding team should i raise a friends and family round or should i go directly to seed and you know we have this b2b or b2c function i'm leaning towards b2b because that seems to be where i

SPEAKER_110: can get the flywheel going and uh you know that what are your thoughts on these three questions now if you come in and you say it the way i just say it i'm owning the state of my business i'm self-aware i'm

SPEAKER_43: confident and i have questions for you i know that you're a wealth of knowledge you did all these dot com era companies you did cosmo you did uh you know um twitter i have specific questions for you

SPEAKER_75: so you're just basically kung fu-ing it you're saying to the person you know uh here's where i'm

SPEAKER_110: at here's my problems you might have solutions for me i want to make the most of this meeting and i need to get this information out of your brain which then makes the person realize oh this person is good at collecting information and listening uh they're a sponge if i back them they're going to suck more information out of other people's brains as opposed to they're an arrogant 21 year old who's

SPEAKER_75: telling me like i'm gonna miss the boat i miss being an arrogant 21 year old that was delusional

SPEAKER_164: like a little bit that's okay no life grinds that out of you slowly what do you say jenny you you

SPEAKER_82: were nodding i think a little bit i was um you know i've actually personally changed my tune on the solo founder so it used to be something i ran two companies um i had co-founders i actually had a founder breakup and i know how awful that can be but i think for the first you know five years of my investing career i always said you know you need a co-founder mostly because it's a lonely road and you need a thought partner but i have really changed my tune on that i think solo founders that have great foundational teams and support can be great um and very successful and so i guess my advice is i wouldn't really bring it up you know i would just run it as if things are going smoothly i would talk about the momentum in the business rather than the traction right so you don't have to worry about that you don't have metrics that you're super early especially if you're talking to you know an early stage investor but just talk about all the progress that you and potentially you know your founding team have made so that's how i would approach it all right friends this has been another

SPEAKER_89: amazing venture capital roundtable we're doing this nearly every single wednesday so if you want to hear it from the vcs who are writing the checks come to us on wednesdays jason this is my favorite

SPEAKER_08: one so far i mean this is the based candid group i like this one a lot absolutely uh jenny thank you

SPEAKER_89: so much for coming the url is everywhere.vc and for dave it's close it's practicalvc.com please get

SPEAKER_27: together figure out your tlds harmonize them it's gonna i'm gonna forget those i'm all wrong can we can we

SPEAKER_541: plug something before we we wrap up here yes of course jenny add me to your syndicate oh yeah for

SPEAKER_94: sure uh well before i plug my other stuff i want to say jenny is an amazing vc and invests all over the place and i would plug her as you know investing in her fund thank you dave um but i would say for

SPEAKER_40: folks who are interested in learning more about secondary trading places is our podcast every week we cover news and secondary we do a valuation corner pro who's your co-host aman virgie my paypal

SPEAKER_38: uh colleague from way back he's good he's a little spicy he's a lot smarter than i am and he actually spicy i was going classes yeah and then a brief plug for a company we just invested in uh not a

SPEAKER_40: secondary we invested in a company called equity b that provides employee option financing uh you may not know this but a ton of options go unused on exercise because the employees can't afford to exercise their options before they leave companies uh so equity helps people finance the purchase of their employee stock options so they can still keep some upside when they need to leave the company

SPEAKER_307: tel aviv based uh they were but now they're palo alto based got it i remember i think i heard this

SPEAKER_552: pitch great job and we're actually running an spv oh i don't know if that's legal uh but if folks are

SPEAKER_554: interested uh jason i'll drop you an email yes i mean send me that deal memo i'll read it absolutely

SPEAKER_77: will do and i'll see you at liquidity summit oh yes you're coming awesome great yeah liquidity is

SPEAKER_43: going to be nuts this year i liquidity was my original angel summit i renamed it liquidity did it

SPEAKER_69: for a year the all-in guys did me a favor and showed up when we taped an episode there for the last few years and then chamop was like i like this event can we buy it and i was like it's just for

SPEAKER_75: angel investors and early stage folks it's like well what if it was for everybody and i was like okay so we took the price from five thousand dollars a ticket and i would just break even on it

SPEAKER_179: and then we doubled the price and we tripled the attendance from you know 150 people to 500

SPEAKER_268: and we took over the town of yonville so the budget the revenue everything year over year or year over

SPEAKER_110: 18 months went like 10x uh triple and it is going to be absolutely nuts we said no i think everybody who got a spot there we said no to three or four other people who applied this is applying to buy

SPEAKER_75: a ten thousand dollar ticket it's it is uh pretty what a privilege well i mean the amount of money we're spending is crazy like we literally took over the town of yonville for the entire uh duration it's

SPEAKER_110: going to be nuts and people are coming in from around the world and i have like speaking of people

SPEAKER_49: in the middle east i have people like hey i met you when you were over here i run this sovereign wealth fund i applied for a ticket i didn't get in is there any way you can get me in and i'm like

SPEAKER_566: ah we need a bigger boat like though i think you should have let in the people with sovereign wealth

SPEAKER_569: funds you know tell them to buy the next town over the problem is it's everybody comes at the last

SPEAKER_73: minute and then there's like you know four besties each one gets 30 requests 40 requests for last minute tickets 40 requests i'm four besties 160 seats we're out of seats it's a physical limitation

SPEAKER_82: and that's that little town can't handle it but that's so great i think next year we play off game problems absolutely so jason you know the last time i was on a you know platform with you was at your launch festival in um fort mason and your producer uh jacob sent me the clip and i was like oh my god that

SPEAKER_578: was 10 years ago and holy yeah and that was such a great event i loved that venue it was so you know

SPEAKER_261: i did that event i had started tech crunch 50 with my friend and then we broke up or i should say he

SPEAKER_43: kicked me out and screwed me uh and i was like okay i'll just do my own i'll do launch fast and he went on to rename it disrupt um and it was the best thing that ever happened to me because i got away from somebody who was a bit toxic uh but i was able to uh do it the way i wanted to which was i used to do it

SPEAKER_75: anybody could get a free ticket if they were a founder they had to fill out a form we had 15 000 people at the peak uh register and then you had six seven thousand people there and the audience size

SPEAKER_110: was like the number of seats was 2000 we had like video rooms to watch it so i brought it back this year

SPEAKER_75: and we had launch festival in san francisco only 400 seats free for founders i sold like 30 tickets uh you know for vcs or whatever and sit in the front row and we really had a great time making it intimate again yeah so i'm gonna do it again and i'm gonna do it twice a year and i'm gonna make

SPEAKER_49: it themed so launch your company for free and i had done it jenny as a reaction to demo demo was charging

SPEAKER_110: twenty thousand dollars to be on stage they would then charge you five or ten thousand dollars to be coached so they had like a mandatory coaching product and then you had to buy tickets and then

SPEAKER_49: you had to buy a booth it was do you remember those days i mean i just remember being on that stage

SPEAKER_82: and looking in the audience and there were thousands of founders there when i got off the stage it wasn't like a line of 10 people it was like hundreds of people it was like so exciting and that venue was

SPEAKER_43: just amazing so well they made it impossible for me the unions then attacked me for using non-union spaces started banging on the doors and protesting it because i used robotic cameras and i was like i'll never do an event in san francisco again and here i am i did one recently but i think i'm going to move it to like the peninsula because san francisco is just too hard they make it way too hard to do

SPEAKER_585: anything but you were at the early ones dave you were you were uh at everything back in the day

SPEAKER_586: you were admonishing me to uh take my ipad off the stage yes we had we had a showdown since he was

SPEAKER_587: using his ipad i was like these guys have 90 seconds please pay attention to them i was doing

SPEAKER_589: due diligence on the company you have adhd my friend you have adhd yes i am your ritalin i am

SPEAKER_395: your human version of ritalin i think everyone here has has at least add i'll just throw in my

SPEAKER_89: historical context i was in high late high school during the tech orange 40 tech and 50 days jason and uh you guys got me drunk enough that i threw up on the wall outside the venue as a baby so

SPEAKER_594: there it goes there you go i got you drunk enough yes i put it that story that story wins

SPEAKER_600: you win you win at tech ranch 40. all right all right everybody we'll see you next time bye bye

SPEAKER_602: thanks for watching this week in startups if you liked this episode check out more if you're a startup founder founder university cohort 13 kicks off this fall it's a 12-week program that provides guidance on building your product launching to real customers and pitching to investors top startups receive 25 000 or 125 000 in investment apply now at founder dot university slash twist already have traction the launch accelerator invests 125 000 and connects you with 500 plus investors to help you raise your next round apply at launch accelerator dot co if you're an accredited investor looking to gain access to quality deal flow apply for jason's angel syndicate at the syndicate dot com we find two to three deals a month and check out this week in ai jason's experts only roundtable with top ai founders and operators every week find it this week in ai dot ai check out the twist ticker our daily newsletter at this week in startups dot com slash ticker thanks again to our sponsors for making today's show possible follow the show on instagram follow the show on x dot com this week in startups publishes three days a week monday wednesday and friday at 5 p.m central time you can submit an audio or video file question by emailing it to this week in dot com