SPEAKER_00: okay everybody we've got an awesome show for you today acquired it's ben gilbert and david rosenthal are on the program we go super deep on what we're seeing in the venture capital market we cover a bunch of the crypto vc stuff and how token investments should happen we also break down some crazy stats from pitch books q2 us venture monitor we dive into amazon and their incredible businesses and it turns out ben has been doing some j trading himself and he tells me about two really interesting companies and then i make a snap decision do i j trade live on the air with ben SPEAKER_01: gilbert find out today on the show this week in startups is brought to you by in brokers startup insurance program helps startups secure the most important types of insurance at a lower cost and with less hassle save up to 20 off of traditional insurance today at in broker.com slash twist while you're there get an extra 10 off using offer code twist dell for startups provides key solutions for all your startup needs a dedicated tech advisor will get to know your business goals and deliver customized solutions for rapid tech enablement with top business class pcs and accessories apply for dell for startups and get an additional 10 off all dell latitude products at dell.com slash twist and zapier is the easiest way to automate your work see for yourself why teams at airtable dropbox hubspot zendesk and thousands of other companies use zapier every day to automate their businesses try zapier for free today at zapier.com slash twist all right so here we go i love having SPEAKER_03: the boys on to talk shop and as you know uh they have a great podcast called acquire go ahead and SPEAKER_05: search for that david is running kindergarten ventures and i am an lp that's right david where am i at what's my moik what's my what's the irr am i 5x my cash on cash on my 10x cash on cash daddy needs SPEAKER_07: a new tesla what do you got for me well we raised the fund in um q1 2022 so q1 202 markups are not as SPEAKER_11: as forthcoming as they were last year but wait a second i i was getting reports from my funds in 2021 to 2022 that they were up 4x uh of course none of them liquidated any of it SPEAKER_17: right so it's sort of david telling you it's early days it's only a quarter and a half in SPEAKER_18: you know but uh we you probably got the email we've got three spvs open right now so deals are SPEAKER_23: happening all right now wait a second spvs are open but you're not saying which one so you're good you didn't 506c it you're 506b right now i too have four or five spvs open right now these are special purpose vehicles well no because then it would be 506c right we'd be publicly racing for those companies and they would have to then certify that everybody was accredited but if you do it privately so we can say that we do spvs on a regular basis you just don't want to uncloak SPEAKER_33: which ones they are what is the reaction been to your first couple of spvs there given it's the summer so people are busy and given the market is a little scary right now we had a little up and down and ukraine and six dollar gas and scary inflation prints and biden is asleep at the SPEAKER_05: wheel all this kind of stuff making people pretty scared taiwan but how has the reaction been to SPEAKER_35: spvs with angels and lps shockingly good uh yes uh now part of that might be we launched them last week and i feel like you guys been talking about this on all and i feel like we've been bouncing SPEAKER_36: around the bottom i'm starting to see signs of life people are like hey wait a minute i gotta put money somewhere market buys this week i mean public market bonds this week you're j training SPEAKER_38: yeah yeah yeah i i i like that coining that phrase by the way that's all nick that's all producer SPEAKER_40: nick but so what is i want to go back to david but let's define that term first what is j trading SPEAKER_23: so j trading is the act of learning public market trading from your audience so this is not investment SPEAKER_05: advice my goal with j trading is to learn i have a couple of goals but number one is to become a top quartile cop 10 percent public market investor to really understand how to identify lasting companies with great products great talent the same way we do in the private markets now why do i want to do that i believe that one informs the other and that to be that this is kind of like learning plo if you're a texas hold'em player you learn a new poker game it's different but some things are the same the ranking of the hands is the same right okay this is you know a full house this is a flush this is a straight okay they have different values but the frequency of them is different and there's a lot of nuance so that's what i'm trying to do is and if you look at bill gurley he started as a public market analyst and then did private if you look at masayoshi son we'll talk about softbank today he does public he does privates so i believe and now you look at sequoia our boy rule off is now got the sequoia fund and they are going to be managing public market equities i think this is the future and i have struggled candidly with when do i distribute these public shares that are coming in lucky enough to have uber go public SPEAKER_33: desktop metal robin hood a bunch of different things and should i be selling before they go public in that mezzanine kind of round should i be selling when they hit a billion dollars 10 billion SPEAKER_05: dollars when should i be selling when should i be liquidating when should i be holding uh and you know i have to uh you know do that and so as a goal the other goal was to learn from the public SPEAKER_33: maybe come up with some theories as to what might work and to just publicly do those and learn from SPEAKER_05: the audience in public as a goal i'm going to put a million or two million dollars into this and i'd like to 5x in 10 years so i set a very aggressive goal which is what i have done or well listen without making any future statements past statements let's just say i've had funds that have been in the top SPEAKER_46: top top top that's what you expect from your private market investing i would say my private SPEAKER_05: market investing you know net net net i'm hoping i'm a 5x cash on cash fund manager that's my SPEAKER_50: aspiration and you know i have hit that so um that's my those are all my goals are you keeping SPEAKER_05: a like publicly public portfolio anyway yes if you go to jtrading.com uh you can see the four trades SPEAKER_53: producing you're the best jay trading or jay jay jay oh getting the domain name was SPEAKER_57: looks like a maybe here on a looks like a notion page so there are my four trades i've made them in SPEAKER_08: the last month i'm putting the dates i'm putting the amounts uh i share them but um i did stitch fix SPEAKER_38: all right i am gonna write a scraper after this to make sure that nothing ever gets removed from SPEAKER_58: this table and uh i talk about it on the pod i've been making the trades live on the pod using robin hood so while i'm doing it i'll be like hey molly hold on a second and then the big tip off is i put my grandpa glasses on because robin hood uses like a negative seven font size they're like oh yeah we know that you're 23 years old so we're gonna make the font size so small that you can't be the SPEAKER_08: oldest user on robin hood you could be buying amazon or you could be buying americon you know some they're like what do you mean you don't want leverage exactly that's always the funny part i'm like i'm putting like hundreds of thousands of dollars into this account and they're like would you like leverage i'm like no no let's pump the brakes there but um so i'm making the trades SPEAKER_05: live on the air based on us talking about earnings reports etc and you know i'm trying to find some SPEAKER_33: some theories here but you made some trades public trades are you doing them publicly or not SPEAKER_69: i'm not but i maybe i should maybe we should turn this into like an acquired community thing david where SPEAKER_17: everyone posts there and we they're you know yeah we should get bentrading.com davidtrading.com SPEAKER_69: go for it i mean follow we're live dude you can't say domains on the air we gotta go rush and buy those SPEAKER_78: now oh yeah such an idiot you just now you cost you it's gonna cost you five grand for that domain SPEAKER_80: i know it's brutal all right but anyway so you're making some trades tell me what your recent trades SPEAKER_69: were uh a super boring stuff i'm like great back in on big tech so okay me too uh can i i think we can say things we're buying on air there's no reason yeah i mean this is not investment advice SPEAKER_33: this is what you're buying it's not investment advice but you can say why you bought it after SPEAKER_41: after you bought it yeah you're not manipulating the market you're saying your thesis of why you SPEAKER_85: bought it uh i mean unless you have inside information which you should in which case i shouldn't be buying anyway unless it's no private companies when everything is based on information SPEAKER_69: private information so there you go i bought more tsmc i think it's the most important company in the world i think uh the geopolitical volatility is creating uh price suppression on a business that is only doing better and more important than it's ever done and uh you you can accuse me after our episode of being a tsmc permable but i i think like it takes government scale effort to try to rival tsmc and even if the government were to plow 50 to 100 billion over a 15 to 20 year period you have a chance of being able to rival them so i think it's like one of the most unbelievably protected moats like literal you know ocean moat uh around the the company of all time all right so five years ago trading at SPEAKER_05: like 45 bucks in 30 40 bucks in 2017 peaking uh in 2021 uh about 136 dollars i think that's when pelosi SPEAKER_11: sold her position and then uh we got and dogged all the way down to 77 dollars and now we're at 85 bucks SPEAKER_33: market cap 421 billion this obviously is uh in taiwan it's taiwan semiconductor manufacturing corporation SPEAKER_97: so the geopolitical risk is making people nervous it totally should it is totally a possibility that SPEAKER_69: um large kinetic military moves get made to that could wipe this company off the face of the earth i mean there's terrible things that could happen as collateral damage i do think it is too important to everyone it's almost like a cold war situation for anyone to to want to make a move but i am not a geopolitical strategist i am just comfortable with that risk in making this so mutually assured SPEAKER_101: destruction destruction is like part of your thesis here is like for the world we can't have tsmc SPEAKER_69: get annihilated yeah i mean that's part of the thesis i also am like a 10 to 20 year sam is the ticker yeah yes on all this stuff like i i didn't from all the stuff that i bought in 2019 to 2021 i sold a de minimis amount of it and so i kind of look at everything as forever holds and so to me this is like uh i'm not sure what it will do in the next year but do i think it will stay very important in SPEAKER_05: the next decade totally which makes me that was a boring trader of all time well i too am trading with SPEAKER_110: a 10-year fine grade companies hold them but i want them to outperform the market and i do like some downside protection right like this is not going anywhere kind of company and that's why i've been buying amazon disney took a little flyer with uh warner brothers uh discovery because i like zaslov and i have some pieces there but tsm uh seems like a very good bet i like your bet on tsm SPEAKER_38: anything else you're buying now well so i've been looking at anything that was up north of like a 70 80x SPEAKER_69: price to sales and if it's come back to earth then it becomes interesting to me so like uh uh for the first time which is very funny considering the how bullish so many people were for so long shopify was a really interesting buying opportunity right now or or in the last couple weeks and so i'm for the first time a shopify shareholder because i was kicking myself for the longest time that i wasn't i think massive secular tailwind with empowering people to be their own e-commerce merchants there will totally be an amazon that eats an enormous amount of e-commerce and then there will be the shopify merchants that that have a gigantic amount of the rest and i think that will continue for a long time do i think it will continue at the rate that it it was during the pandemic probably not but again 10 year bet but like just to give you a number on that that their peak price to sales was 72x and i think this week they're trading somewhere around an 8x i mean it's just a very interesting time to be looking at anything that was unbelievably speculative and now SPEAKER_05: is trading at or near fundamentals i like both of these bets a lot um i had not even considered if i'm being totally honest even though we talk about it all the time tsm but do you know what the price to sales ratio there is and for people who don't know price to sales is the price the SPEAKER_33: valuation of the company versus their sales so i do they had a billion in sales they're only 7x wow SPEAKER_38: yeah they never got too crazy i mean their their their highest was maybe 12 or 13x in in the madness SPEAKER_05: got it look at shopify they were at a hundred and seventy six dollars was their high um and they're now trading at 36.50 and the low is 29.72 i like that trade too i'm going to quickly explain one of the SPEAKER_00: crucial types of insurance that every founder of every startup needs to understand it's called cyber insurance it's a you know it's a little cyberpunk name what it basically means is hacks you got to be covered in case you get hacked and in these crazy times you want to be protected so if you don't have business insurance you have failed one of the first steps of being a great founder and startups should look no further than in broker this is the insurance company i use their technology will save you time and money their prices are up to 20 percent lower and you get better coverage than the incumbents you can go from sign up to quote and purchase in just 10 minutes when you work with in broker you're not dealing with large low incumbents no your sign up is going to take just days not weeks and the process is so transparent there is no opaque pricing everything's easy breezy lemon squeezy i use it myself a lot of my startups use it and you can instantly buy custom built insurance for startups by going to imbroker.com slash twist that's e-m-b-r-o-k-e-r.com slash twist and when you're there you're gonna get an extra 10 off by using my code twist ben i'm curious SPEAKER_22: did you consider asml versus tsmc or doing a blended bid on both of them as lots of folks in the chat have SPEAKER_38: been asking it's cool having this chat here as we go i know it is uh i am also a uh long time asml SPEAKER_22: holder but i did not buy more this week interesting and asml for folks who don't know is um the like they make the photolithography like 200 million dollar plus per machine oh wow one of the very very core components that go into modern semiconductor manufacturing and they are actually based in the netherlands spin out of philips um dutch company back in the day and so people talk about asml and tsmc like very they're very jointly tied at the hip and intel actually uh you know this probably a decade ago made a strategic bet not to go with asml technology and it was a hundred percent the wrong bet and it was a big part of tsmc surpassing intel inside the chip industry this SPEAKER_40: is like a very interesting rabbit hole but the everyone was really bullish on ultra the what is SPEAKER_69: it uv ultraviolet photolithography the the extreme ultraviolet lithography and so a bunch of companies SPEAKER_40: including intel funded asml they bought like a third of it or something as a consortium of chip companies to kind of like further the development of this technology and after four or five years it wasn't bearing fruit so intel got out and sold its shares in asml and then and itself strategically SPEAKER_38: moved away to use a different fapping process and it ended up being that it just took five six seven SPEAKER_69: years for it to become the the just a lot of r d to become the future basically i've been looking to SPEAKER_11: make some trades trade number one we just did a j trade j trade is in j trade alert David Friedberg: oh wow we're doing live j trades now folks wait this wasn't investment advice this was not investment advice but i took it his own research i did my own research my research was you're smart so i just SPEAKER_50: dropped 59 dimes uh 700 shares of tsm are in thanks to our friends at robin hood not sponsoring this yet vlad i don't know maybe you want to sponsor i was one of your early angels i don't know maybe sponsor the show uh and then a second trade just came in j trade alert oh wow oh we bought a little shop a SPEAKER_138: little shoppy poo thousand shares what happened who bought these i didn't know anytime anybody mentions SPEAKER_11: the ticker single a symbol on the show and they're smiling we just put a bio so that's our vision SPEAKER_143: based computer vision based on robin hood on your phone i just did it on robin on my phone while SPEAKER_05: we're talking and yeah it settles a trade immediately that's correct i don't care if SPEAKER_08: somebody paid for my payment for order flow i like getting a free trade wow wow i don't put this SPEAKER_11: i'm putting a million dollars maybe two million into this we get some carry on that uh no uh but if it SPEAKER_153: goes down you'll be hearing from me if it goes up i'll buy you guys some omakase can i share it so SPEAKER_38: here's a here's sort of a fun way for our friends uh thanks to our friends at bessemer who put this together if you go to cloudindex.bvp.com for anybody wondering like where can i get investment ideas in the you know yes reasonably large sass world so they create this pretty interesting thing called the cloud index and it's very interesting to look at the like you can very clearly see the run-up and just getting absolutely smashed from emerging cloud companies recently uh notably still above the a bunch of benchmarks from 2013 when it started but if you click the companies tab and you sort by ev to annualized revenue uh this gives you effectively a price to sales thing and so you can look and see okay what companies are still trading at an incredible premium your snowflakes your cloud flares your git labs your atlassians crowd strikes and then you can see companies completely on the opposite side of the spectrum SPEAKER_40: and so if you're looking to do the thing that i did with shopify you can basically look and see okay who's trading at a pretty low multiple right now and then you look over at their growth rate and if someone is still growing quickly and has high gross margins that's an interesting place to SPEAKER_38: then start your research and dig deeper on the company read their financials and try to understand what are what's going on in this company that why is the market pricing it so low when at least at a very high level and you know blunt instrument fundamentals seem solid we're looking at twilio SPEAKER_33: this is a perfect example they're trading at 3.4 times wow is that the right number there yes this SPEAKER_69: is actually one that i was curious about that i have on my list crushed destroyed and and their SPEAKER_38: growth has meaningfully slowed so there's part of it i mean so much of this is about what's going to happen over the next 30 years with this company which is why people massively over index on what happened to growth in the last quarter or two because if that trend of slowing growth continues obviously you your cash flows in the future don't look great for many many years but if it's a blip then you know this is a or should i should say a blip in slow growth then it could be an underpriced asset does the value of these companies take out their debt good question i'm not sure how they SPEAKER_05: compile this so that's another thing i'm learning is like the amount of debt some of these companies have versus how much cash they have so i was like oh snap looks interesting right now i really think evan spiegel so when i'm a private market investor i think about the team you know the founder essentially the team around them i think about the product i think about the customers right if i'm really confident in the founders i think it's a beautiful product and solves a real need in the world and delights people and the customers if they're really happy and they're spending money great that seems like a good bet to make in private markets but when it's public SPEAKER_08: now you got the growth rate you got debt you got competition i mean you got a lot of other things that can be super acute and it turns out i was like oh they got they're sitting off 5 billion in cash or something and then somebody was like hey dip where do you think they got the cash from they got SPEAKER_23: 5 billion in debt i was like so they drew down the cash they've got cash in a bank account they're SPEAKER_32: accruing interest on the debt i'm assuming very low interest so that's good in an inflationary market SPEAKER_05: i guess so i was like oh because i was like what's the value of the company minus the cash and doing my little you know game there of like hey if you bought back all your shares at this price and used your treasury to buy your shares then what's the actual value of the company so that's what i would look at with these two is like what's the debt load they're carrying versus their cash position this is why i think robin hood's in a great position they're sitting on so much cash it's bonkers like tons and tons of cash but yeah that is a good way to look at it i do think there's like a i saw i heard somebody say it was somebody famous was on cnbc it might have been howard marx and he was uh talking about you know you have to look in places other people aren't looking if you SPEAKER_128: want to find that out which is not this this is where everyone's looking well is everybody looking SPEAKER_00: at the dogs list or are they looking at the winner's list i would argue maybe people are looking SPEAKER_05: at the winner's list and saying just what's the safest bet here yeah and i've been looking at specs so i've been thinking okay wait a second the whole all specs are now being painted with one brush SPEAKER_57: no product market they've thrown the baby out with the bath water there are totally good companies in SPEAKER_23: there there must be great companies in there i know we have desktop metals in there it's a great company even buzzfeed i was looking at was like trading at like 250 at 250 million dollar or 300 SPEAKER_05: million dollar valuation with three or four hundred million in revenue now they were had the risk of SPEAKER_110: ruin with you know not a lot of cash in the bank so i was like oh this is a really scary company i don't know if i want to catch the knife here but i was like you know i always liked open door keith robois company i always liked that model and people have been telling me open uh is an interesting one to look at i always like joeby i think flying cars are going to be a thing SPEAKER_05: yep i think somebody's going to figure that out i think joeby's getting murdered and uh now since i started j trading the interesting thing is boys i am getting a lot of inbound SPEAKER_85: it turns out people have positions and now they see me as a proxy i i wasn't sure about this dynamic but i realized this is like a and you're like no i just pump robin hood for myself i'm not pumping SPEAKER_05: exactly so this is like a pump kind of thing where now people are telling me hey you should get in on SPEAKER_11: this here's the story and i'm like ah this is exactly what happens in private markets we incubate SPEAKER_00: a company we angel invest in it you know kindergarten puts a little chippy poo in yep uh you know band maybe makes a little bit of a bigger bet and then we're like hey sequoia SPEAKER_89: hey benchmark did you ever hear of this company really great founder and we send that email i'm getting those from public markets now and so this is my little parallel you know how do these SPEAKER_11: markets work in parallel what are the themes that happen in both of them and so looking in a pile SPEAKER_47: to you is it hedge funds randos randos i had a ceo of a publicly traded company email me today SPEAKER_05: oh that's not good i don't know if this is a real email or not but i'll read it on the air hey jason i'm ceo of a publicly traded company and i've put together a presentation for you to consider SPEAKER_11: my company beep as a j trade i'm a long time twist supporter all the way to an all-in listener beep class of beep i took my company public last year in beep foreign location and we are listing in the u.s in beep here's the pitch video youtube link hope this helps with the education process SPEAKER_177: and becoming a public market investor thanks beep huh that's actually she or he did it did his SPEAKER_07: research on you and that's a that's a you know usually you get these pitches and they're just like SPEAKER_05: no this was there's some of that stake here so this is what i and yeah he didn't he didn't put a discount code in there so i'm not getting the shares at a discount i don't know use the promo code SPEAKER_182: beep to get 20. actually that's what long-term stock exchanges do right that's eric reese's company SPEAKER_00: yeah that's right share for a year you get a little discounty poo which actually by the way we did um SPEAKER_18: we just did this huge episode on walmart that was a key part of their strategy was associates had it could buy stock at like a 15 discount what and um home depot uh adopted the same strategy too SPEAKER_133: and it was huge it became the model for like all employee espp programs in silicon valley we think SPEAKER_22: about like oh employees you know get options you just get gifted at those companies they're like you you can buy the stock you you buy with your own money you get a discount though for buying it with your own money and you can do it with pre-tax dollars and then you're like you know you've got skin in the SPEAKER_05: game like i uh did you ever read i love capitalism by ken langone he was the co-founder but it sounds SPEAKER_101: right up my alley co-founder of the home depot really good book oh yeah we gotta do home depot SPEAKER_05: at some point home depot is fascinating to me i wanted uber to do this travis was going to do this with uber airbnb wanted to do it it just becomes incredibly complicated because you you can't have SPEAKER_08: that many shareholders on a cap table you know and you've essentially become a public company remember that like facebook was having that happen and then those people can come to your SPEAKER_197: offices and review your books under delaware law yeah yeah so that's these companies were public SPEAKER_08: when they did it yeah so when you're public it's one thing when you're private it's another SPEAKER_00: i just got a new dell laptop and it is awesome this thing is a monster it's high powered i can play windows video games that people have been telling me about because i'm into real-time strategy i've got a giant monitor and it is so snappy i'm looking at all dell monitors here i got my new dell laptop if you're a founder you need dell and you need to apply for dell for startups here's why you're going to get access to a team of expert it advisors and these experts are going to give you custom solutions to make your tech stack world class and they're going to give you access to capital for building out your tech stack they're going to give you great discounts and we love dell i give every employee who joins me here the beautiful 39 inch ultra sharp curved monitor and here at the ski house i bought a monitor so when nick and presh come up here to work they have they can plug their dell laptop in boom easy breezy lemon squeezy they're up and running with a giant monitor here's your call to action apply for dell for startups today and get an additional 10 off all dell latitude laptops those are the award-winning ones that everybody loves there's also the alien wearing ones that i love just head to dell.com twist dell.com twist that's dell.com twist thank you to dell and the team over there for making great products and supporting startups i think this is the thing when SPEAKER_110: we look at securities law uh and we look at what's happening in crypto i'm very happy uh about the sec finally engaging with the crypto i want to know your opinions and saying hey we think these SPEAKER_05: are securities and you need to clean this up i too believe they're securities but i do believe they could have they need to give specific guidance on this maybe a little more up front as opposed to in the review mirror with enforcement but also maybe we can think about this as a group and say well maybe employees should be a carve out to be able to buy shares in company and shouldn't count against the limit they should be able to buy a certain class of shares that don't give them like complete SPEAKER_11: information rights like a major investor and if as long as they buy under five thousand dollars a year or ten percent of their salary it's totally fine so they can do up to ten percent of their salary SPEAKER_05: based on or their whatever their taxes were for the average of the last two years they can do ten percent of that twenty percent of that so you don't have the risk of ruin there as much but then uber drivers airbnb drivers i don't know whatever company you and i invest in we all invest in they could offer that to people so i'm doing this on inside.com we did an equity crowd funding on republic and we did one on seed invest i have all those emails there are a lot of our SPEAKER_97: readers putting in a hundred dollars two hundred dollars five hundred dollars on average we're going to put a top hat next to their names at inside.com on their profile pages and when you SPEAKER_43: over the top hat it's going to say investor in inside.com and i think that's kind of like the fun SPEAKER_05: of it is that you could have you know public you could be have investors what what is your take uh david on all this crypto stuff going down i know you were crypto curious i don't know if you SPEAKER_208: ever consummated what is your i know you're crypto curious we actually just did i think this is our most recent episode in the main acquired feed anthony we had this awesome interview with um this guy SPEAKER_22: anthony gonzalez he was my business school classmate at stanford he's a congressman so he's in the house he just has the most amazing incredible story played in the nfl played at ohio state played in the nfl caught touchdowns from peyton manning uh got hurt and went to business school with me SPEAKER_07: uh started was coo of a startup uh and then ran for congress and has been in congress for the past few SPEAKER_40: years as a punchline is he's on the house financial services committee regulating crypto SPEAKER_197: what and robin hood and like all of this yeah wow so we spent this whole episode talking SPEAKER_217: with him about this and what is what is his thought on it does he feel their securities does SPEAKER_05: he feel the rules need to change rapidly from you know the 1920s we intentionally didn't get into the SPEAKER_38: like is it a security is it not discussion because there's so much gray area there and so many different SPEAKER_40: cryptocurrencies are for different purposes and there's a lot of nuance but the thing that we did get super explicit on is congress wants to start with stable coin regulation and basically say okay we understand stable coins we don't understand everything else yet but we understand stable coins and we understand there's there's asset backed stable coins and then there's algorithmically SPEAKER_38: stabilized stable coins and at least for the asset backed ones which is effectively like reserve SPEAKER_69: banking like hey we've got a bunch of dollars in a in a big warehouse somewhere and so um you know you can you can trust that this stable coin this usdc or something like it is actually backed by us SPEAKER_38: dollars they're they want to create the first clear set of regulations around stable coins first SPEAKER_40: and the idea is and he sort of quoted bill clinton here from the early internet days first do no harm SPEAKER_38: so we know that there's innovation happening we don't want to squash it we want to understand it and then we want to figure out where there's grift so we need to stop the grift and then where people SPEAKER_40: are not innovating fast enough because they're afraid they're going to go to jail and create a clear set of guidelines just around that and they're starting with stable coins and going to move from there SPEAKER_05: interesting at the pace they're going that's not going to be fast enough because they seem to take 10 years to make any decision for 20 and they really need to get to more like a 10 month 20 month cycle here it can't be 10 20 years because the industry um is decided they're just going to yolo and go for SPEAKER_224: it and this puts them in a dangerous position does it not david it does but i i agree with his SPEAKER_223: his uh philosophy of of first new do no harm like his point is that like the even though obviously SPEAKER_22: there's grift going on and like obviously stuff is happening like it would be more of a cost to the country and to innovation in the long run if congress were to take a heavy hand now wow then SPEAKER_07: to take a light hand which like was not what i expected to hear a i didn't know yeah i gotta listen SPEAKER_110: to this because they also have a lot of commissioners right like people have different uh like we had hester on this pod like people have different positions and they have different SPEAKER_22: amounts of influence but yeah he made that point too that like in congress that's that's his view as one of the leading members of the house financial services committee in congress but SPEAKER_07: the executive branch in the white house has their own view and then the commissioners have their own SPEAKER_217: view as well it's fascinating i i'm really interested to see where they wind up with all this SPEAKER_33: now do you think their security has been a lot of these feel like securities to me i have no opinion SPEAKER_69: on this because i don't actually know enough about what is a security what's not and and they is a dumb SPEAKER_38: question here too and not to say your question's dumb but like yeah cryptocurrency to call all cryptocurrencies the same thing is such a like one instrument approach like should a stable coin that's goal is not to appreciate in value be considered a security if bitcoin which i hold purely as a store SPEAKER_40: of value or perhaps an investment hoping it does appreciate should those be treated the same way probably not just because they happen to run on the same rails they're like totally different asset SPEAKER_123: types so i and ethan soul or a whole nother is a different class yeah the but the cost of no SPEAKER_69: regulation or slow regulation as you're pointing out jason is that like the most innovative companies will get built elsewhere which is bad for america i mean you get sam bankman free building in hong kong and the bahamas and as anthony points out he was basically born on stanford's campus and somehow that happened outside of silicon valley so it's about finding that this howey test is very SPEAKER_217: interesting to me that's the one i guess the the supreme court established four-part test an SPEAKER_05: investment of money okay check that's all of it in a common enterprise okay great there's a bunch of people doing something with these coins with the expectation of profit you said right there like maybe it's a store of value for you not a profit i mean you're happy to have bitcoin make a profit but maybe it's a store of value and certainly stable coins are not with the expectation of profit SPEAKER_110: so you take out number three and to be derived from the work the efforts of others well that's pretty clear you know unless you're a developer in the ecosystem we're building with the actual tokens you're probably riding on the backs of somebody else's effort hopefully that's where i think this is going to be a super problem now venture capitalists clearing their positions SPEAKER_111: uh early this is another controversial point so go ahead ben and alienate 20 of our colleagues SPEAKER_69: well i mean maybe five percent i don't know maybe i'm already saying so what what you're referring to SPEAKER_38: is the fact that when venture investor the common way to invest in crypto startups is to participate in something that looks like a safe and then have something that looks like a side letter give you the opportunity to have a pro rata proportion of tokens when they happen and the sort of handshake agreement is we believe we the company believe that this company over time becomes worthless and that the value is in the ecosystem so that all the value that created by this company ecosystem accrues to take token holders and not to equity shareholders and maybe it's also to equity shareholders but the real appreciation we believe will be in these tokens and of course that deal is cut before the tokens are even created and so there's sort of a token presale that then happens for those with the option to get tokens at a very low price who are the equity investors again this is like not all of them but this is fairly typical right now um and was typical in the run-up and so what you have is venture investors having the opportunity to invest at a very low price with a very low lockup period call it one year two year if that um and uh and then the ability to get liquid trading these tokens to the public for you know the the very first time SPEAKER_40: that the public has the ability to offer them so you can get kind of very rapid profits from participating in a you know early note or warrant or token presale and then cashing out when public SPEAKER_05: has the ability to get as ben describes it david how is this different than having uber airbnb go public in year three as a private company and the vcs and the angels liquidate their position SPEAKER_22: how is it different than that well i think a fundamental difference is if you're going public SPEAKER_07: there is as a as a equity there is regulation about how you can do that what information you have to disclose how trading can happen all of all of that there's regulations involved in going public yeah you know i mean at a minimum like information reporting you know auditing all of these things those are pretty important if you i think if you're going to have a publicly traded security now like SPEAKER_22: is there a middle ground here probably i think we have gotten you know to build girly's point for many years now like it's gotten so onerous to go public in the traditional markets that SPEAKER_07: companies have you know delayed and delayed and delayed or just said like i'm not gonna do it and that's not good so i think there's probably a middle ground here between you know the crypto world where like there's nothing and then the traditional equity markets where there's like so SPEAKER_22: much you know it's millions of dollars to prepare to go public in years ben what is the middle ground SPEAKER_05: if you if you could make wave a magic wand if i can so allow consumers to do what they want with their money but have some reasonable protections and disclosures what would it be i think what i would SPEAKER_38: the thing that feels wrong is early investors cashing out and and generating a huge return before a users of the service have generated value from using the service and b the company or dao or entity or token holders have managed to capture some of that value created for users by using the service and so i don't quite know how you would like legislate hey it can't be pre-product and pre-monetization so that's why you set some time-based cliff but that to me feels like spiritually what you're trying to to um do is reward people who got in pre-product and pre-revenue and you know pre-profits um but then once those things are happening allow them to cash out and unfortunately anything that's going well is always going to be trading at some ludicrously high multiple of value created or value captured so you know you can always circumvent if if we were to put this into law SPEAKER_69: you could always circumvent it and be like well they they got their first dollar out and uh people SPEAKER_38: are valuing this thing at 20 billion dollars now so great time to get out so so i don't know it's SPEAKER_120: i think that's why there's not regulation around this i think one thing that to me at least is important like is just the sunlight aspect of this like whether a company needs to be profitable like SPEAKER_22: i do think like that should be on individual people to make their own decisions about like do i want to invest in a something highly speculative versus not but i think one thing that is functions very well about the public markets is the reporting and access requirements like quarterly audited financials are a requirement and quarterly earnings calls like anybody can listen in SPEAKER_123: and hear the management team talk about the past quarter and get access to hearing from the horse's SPEAKER_05: mouth every quarter so if they had to do that and a lawyer had to be present an accountant had to be present and the management team had to be present they had to talk about their results now there's a lot more skin in the game isn't there then there's a board of directors they've got skin in the game SPEAKER_00: they have to get insurance there's like two or three apps that myself and my team cannot live without one of those apps is the app to rule them all the glue between all apps it's called zapier and it will make you happier this is the simplest no code way to connect your apps you ever edit something like in a google sheet and you're like wouldn't it be great if something that came into this google sheet would be sent to the slack room or my pipe drive i put somebody's client in there or i do a zoom call and i want it to be saved to my google drive all these kind of crazy ideas right well you can do that with zapier and anybody can do it you don't need a developer and this is what the no code or low code movement is all about you can literally mock up and make a fully running business without hiring developers today in fact i did it recently every time somebody edits in our database of companies we're meeting with for investment it sends a little update to my slack and tells me hey somebody added a new company where this company's going to its second round because i really care about when a company makes it to the second round with my team so i can just get an alert of those second rounds that's the great magic of zapier it will make you so much happier see for yourself why teams at air table dropbox hubspot zendesk my company's inside and launch this week in startups love zapier try today for free zapier.com twist just go to z-a-p-i-e-r.com twist and tell me about the recipes and all the SPEAKER_205: different connections you make and maybe i'll talk about here on the uh ad read live on this week in SPEAKER_38: startups which of course that's a lot of burden i mean going that's why going public sucks i i was just thinking about i'll put a link in the in the chat here and maybe producer nick can uh can put it up i found in doing the research for our 1972 uh for our walmart episode their 1972 annual report and this thing is like i don't know 10 12 pages and you look at an annual report right now and it's like 180 pages and it's mostly disclosures and saying the same thing over again and it was such a delight to SPEAKER_40: to like read this report which is like here's what we think is important about the company here's what you should understand if you're investing here's what went well here's what didn't the pro like the paragraphs are clearly written by sam walton the ceo it gives a five-year financial summary like you're showing right now and and no more information like it gives the important stuff and nothing else SPEAKER_47: four of the pages are pictures and their contact information so it's actually net net seven pages um SPEAKER_08: um yeah i think some more much more than that though i yeah i have the easiest solution here you you uh drive a car you get a license uh you buy a gun in a lot of states you get a license SPEAKER_261: uh you drive a taxi you get a taxi license you want to be a real estate broker you get a real estate SPEAKER_226: license you want to buy speculative assets private market assets you get a license it's four hours for the SPEAKER_05: course it's a 50 question test and then you put a cap on how much you can invest in private companies SPEAKER_89: per year based on a percentage of your income if the company doesn't check that information or maybe SPEAKER_11: the company doesn't check that you're certified then it's on them if the company does it does check SPEAKER_05: your life just like if you you know rent a car to somebody you don't get their driver's license like okay i'm renting you a car and i didn't get your driver's license that's on me if you crash the car SPEAKER_43: then this crypto company could say you know hey hey uh non-accredited investor can you show me your you know it's putting your license number i'll check that you have a license great this is you boom uh and that's i think going to solve the entire problem and this is a problem you've thought SPEAKER_69: about for some time not just in the crypto front but you know in helping to pioneer a lot of the crowdfunding stuff so i like this is one thing when you throw out an idea i take it very seriously because i think you you've just analyzed this from a lot of angles i have 10 000 people in the SPEAKER_08: syndicate.com you know like i've done 265 deals i think now spvs i've done more than any individual SPEAKER_110: angel clearly and like i've been doing it for 10 years a couple unicorns in there like i know what SPEAKER_05: i'm doing in this regard and really it's people don't mind losing money we've never had anybody upset about losing money uh what people get upset about is like i guess if they didn't get updates from the investors so to your point david like i didn't even know what happened to my money like that's kind of a bummer that's why we put in our contracts with our founders hey we'll give monthly updates SPEAKER_110: we'll give quarterly updates whatever you know the stage of the company we might ask for quarterly if it's year five of the company we might ask for monthly updates in the first two years and be happy if we get six you know get in every other month you know the average investment is i think six or seven k to this day so the fallout is very small and so that's another great thing you know if people are making small bets and they are diversified but of course we can only allow accredited investors um so i think test would be great because then if you think about the sec's high ground they'd be like okay you took the test you answered the questions about diversification SPEAKER_226: and then you put every single dollar you have into a monkey ape nft okay were you diversified no okay and then we in there we talk about intrinsic value earnings revenue uh and debt and and these basic things uh what were the earnings of the nft you bought oh zero okay well okay what was the top line SPEAKER_38: revenue okay it's a zero okay and you okay basically has never been an income producing asset like what SPEAKER_05: are the earnings of the mona lisa uh picasso and masterworks would disagree like these things have produced massive wealth for people right art is a great asset class in fact oh sure but not for the SPEAKER_40: income these have been a terrible wealth not for the dividends that they spit off every year no no no SPEAKER_05: but okay so and then but you would have okay one of these things traded before right so if it's a so great there's your punch-up okay this is a non-gen revenue generating asset great point actually i misunderstood your point and so based on that how long have these traded hands how long have they been in existence how many other picassos are there in the world you know and you could have a whole series on how often have they traded per year you know and you have a whole history of picasso's trading since he was uh alive speaking of trading pitchbook released its u.s venture monitor for q2 last month here are some of the interesting uh stats and takeaways our producers found and some charts to SPEAKER_110: back them up the biggest takeaway obviously vc exit value has completely collapsed from the major peak in 2021 q2 vc exit value people selling out here look at that fall off so here it is a crazy fall off q2 vc exit value was 13.1 billion down 63 percent quarter over quarter uh 35 billion or so in q1 but this is down 95 year of a year from 267 billion in q2 of 2021 when tons of companies were going public and SPEAKER_05: companies are getting bought there's a lowest exit value since q4 of 2016 uh almost six years ago SPEAKER_110: makes sense like 2016 to 2021 would be the top of the market those are companies that were invested in 2008 to 2015 let's say so but it is a messy chart and really like q2 2019 was so high it must be based SPEAKER_05: on a single transaction i'm guessing there was some huge that's when all those ipos was that the summer of SPEAKER_40: ipos that's uber pinterest slack lift pinterest postmates it was that first wave in q2 2019 witness acquired growth right there in that quarter too yeah well i mean when you look at these what you're SPEAKER_05: really looking at i think is the ipo ipo window right and ipo window being closed ipo window being open and now the ipo window is closed again since that is the largest way that vcs still to this date SPEAKER_289: get liquidity mna is like fine but like you you're big winners are you're never going to make your money in mna they're doing public companies yeah exactly but they went sack went public first right SPEAKER_205: so there were two opportunities uh one was forced and the other one you had the option uh to sell SPEAKER_110: total deal volume aka total dollars invested was 62 billion down 24 quarter over quarter that's SPEAKER_111: quarter of a quarter not year over year heads down 23 year over year 81 billion a year ago in q2 two so things are coming down significantly if you take out 2020 the covid quarter total dollars invested was actually up 73 percent from q2 of 2019. that's actually pretty interesting makes sense to SPEAKER_120: me because funds raised so much money yes during 2020 and 2021 yeah you cut me off at the past there SPEAKER_205: it's so obvious what's happening here is that you just had a lot of fun formation right and so still SPEAKER_05: being deployed total number of deals closed also down 24 percent uh quarter over quarter makes sense 20 down 21 year over year 3374 deals were uh known to have closed take out the covet outlier again total deals were up seven percent from q2 2019 so if you take out these crazy peaks you know you get a decent you know you would normalize that curve i guess right any other takeaways from those i'm curious SPEAKER_22: what are you we talked about this a little bit at the top of the show but what are you what are SPEAKER_07: you seeing in the private markets jason because i'm seeing like signs of light like last quarter SPEAKER_38: was just flat lined from my perspective there is one more chart in this pitch book as it relates SPEAKER_294: to this oh see let me just get that out yeah q2c deals down but not as impacted as later stage q2 SPEAKER_05: seed volume yeah was 3.9 billion down 35 quarter of a quarter from 6 billion in q1 and q1 was actually a big which is weird so why would when the market was crashing seed deals go way up i don't understand SPEAKER_38: here's my take on this and david you asked the question what are you seeing in the market at seed so at psl ventures and at pioneer square labs our studio what we do is we create companies and we invest in pre-seed and seed companies and so like this is what i'm seeing all day this chart matches exactly my experience which is deal count and pace of like uh pace of making new investments is basically identical but obviously the dollars per deal are lower and the valuations are lower not that much lower i mean they're like call it 30 percent lower and you're losing the crazy outlier ones that were raising at these ridiculous valuations but that's only the top you know five percent anyway so the in the sort of meat of the curve you're getting basically the same number of companies raising rounds at slightly smaller valuations uh and they're slightly smaller SPEAKER_40: round sizes but nothing like what was happening in growth yeah i i would say that's directionally SPEAKER_05: correct the days of the 25 million dollar pre-product market fit or pre-product launch valuations are gone SPEAKER_43: unless it's a seasoned entrepreneur we're back down to six to fifteen million dollars you know for uh an mvp or you know product that's been in market for under a year that those are the SPEAKER_05: prices i'm seeing i'm seeing a ton of people who came to me in q1 and they were raising and we keep a database of all this now we're doing about 70 meetings a week my team um 60 70 first round meetings a week so we're on quite a pace there and yeah we're just seeing uh a lot of companies that SPEAKER_43: couldn't raise in q1 come back to us with new valuation expectations and i would say they are SPEAKER_38: considerably different maybe 50 percent different which is a great sign of for that entrepreneur and for that company like i i i have a number of companies that have grown significantly from their last round but are opening up their last round and to me that is a really positive sign of either one of those cases where you've your intrinsic value has grown but you're keeping the valuation the same or where you're coming back at a lower valuation what that means to me is i actually want to build this thing this is actually my life's work and is important to me and i wasn't SPEAKER_93: doing this just because there was free money everywhere like i kind of love when someone does SPEAKER_05: that it shows a certain maturity david that the founder can say i recognize the world has changed to ben's point and i am fine with a flat round or if i thought you know i saw my contemporaries get 25 million rounds and i wanted to try for 30 i don't care i just need to get a million dollars in if it's for 10 of my company or five percent or three percent i just need to get that money in to build this is going to be a legendary company is that directionally what you're seeing as well david SPEAKER_208: yeah i think the other thing that i'm starting to see now was the best performing companies that SPEAKER_22: were invested in or that i knew kind of all of last year they were just raising raising raising opportunities to ground or i want to top up i want to get some extra cash going into this market they all kind of market checked and just like the answers they got were like yeah you may be a great company but we're just closed for business right now like we're just not deploying capital period and this is kind of like mid-stage growth that i'm talking about now a lot of those companies are coming back to market and getting different answers and i think some of those investors are like well i can't just sit here and do nothing and for these companies that are actually you know performing really well and now we've got some you know quarter quarter and a half of data performing through this different market environment maybe i actually do want to own some of this company and if it's at a price that has not gone up since the last time or maybe i want to own some more i'm starting to see that happening again which i think that's like a really encouraging sign of life to me in the markets where SPEAKER_38: things were just flat before if that keeps up that says okay 2001 2002 2003 is not happening but that SPEAKER_69: that this is like a the recovery happened much faster than the four-year protracted you know dot-com SPEAKER_32: rubble i have a theory on this ben my theory is since we now have a group of people SPEAKER_05: in the tech and internet industry that have been through two down cycles it's kind of like we are uh war hardened and we know what this is about it's almost like if you've been in an emergency SPEAKER_11: situation before i used to work on an ambulance like the first time you come to a car crash holy cow it is like your adrenaline goes crazy and you start sweating and your heart starts going crazy SPEAKER_05: and you rush up there and you see what the condition of the individuals are SPEAKER_89: and then the next time your heart goes up but you're not like debilitated in your fear or anxiety SPEAKER_11: and then i would work with these you know folks and we would pull up to the car crash they would look at it before we even knew the condition of the patients they knew what bags to grab okay this is going to be trauma this is going to be stabilization like SPEAKER_00: it would the the the i don't want to say robotic but you would get into business mode yeah and my first call on the ambulance uh i'll never forget it it was wednesday night before thanksgiving SPEAKER_110: 1990 or 1991 i was 19 or 20 years old it's literally around my birthday so i was 20 21. we get to tj SPEAKER_226: bentley's irish bar club stabbing it's 1am guy stabbed we go i kid you not he's covered in blood on the ground the guy says to me the guy on the ambulance that it was running the bus he called the bus he said get the mass pants i said i'm sorry the mass pants he said get the mass pants okay i run i'm SPEAKER_05: digging under the ambulance into the things to pull out what's called the mast pants m-a-s-t these are pants that are like a blood pressure cuff they said when we trained in them they said don't worry you'll never use these we're in brooklyn you're five minutes away from a hospital but these are for your time first call they said these are for when you're losing so much blood that we put these on your legs pump them up to push the blood out of your legs into your uh you know organs so you stay SPEAKER_00: alive because we need that blood because we have no blood i'm like oh my god and then the guy says you know help me cut this jacket off and we gotta you know find the wound everything so i take my shears SPEAKER_50: i go up the side of the guy's jacket he goes oh my members only jacket i remember like it was yesterday the guy running the ambulance leans down puts his hand on the guy's shoulder said hey fella you got bigger problems than your members only jacket because he's an italian guy guy's got the SPEAKER_00: hairiest chest you've ever seen he's wearing a sweater under his sweater and i look and when i say i almost fainted i see the hair bubble up oh the blood is pumping out of his chest through his chest hairs this big hairy gorilla of an italian guy who is concerned about his members only jacket which by the way is covered in blood that was my first call and the level what i remember from this SPEAKER_11: is just how calm everybody was except for me that's what i'm seeing now all the venture folks are like yeah we've been here this is how it's going to happen here's your sequoia deck r.i.p good times here's what you have to do here's david sachs let me go over the sequoia deck everyone's playing their SPEAKER_40: part in a play that they know sort of they've rehearsed it's just like hey we're all pros at SPEAKER_11: this and we just literally i went through everybody in my portfolio i said okay what's your burn you're not going to raise your next round at the at an up round you have your burns too high your revenue is too low you're doing four different business models what's your one business model if you could only do frank sleutman one thing for the next year which would it be let's do that uh cut everybody else and they're like okay i'll do a riff 10 i'm like riff 30 40 50 is what you need to be doing because if you're cutting these three other projects you don't need those people focus on SPEAKER_05: one project get this burn from 150 down to 50. now it's not two million to fund this company for a year you know if you're only burning 50 a month it's 600 you can just go to your existing investors and they'll give you the money and you'll look more mature and my god so many people in the portfolio just did it because they were hearing it from all angles they were hearing it on your pod my pod all in this weekend startups from sequoia from their venture cups that's my theory of why this is we're processing this so fast interestingly so that's different than last time too oh you know SPEAKER_22: there was no all i mean there was a this week in startups last time but you weren't nearly as big as SPEAKER_18: you are now there wasn't i wasn't an investor yeah there wasn't the all sequoia you remember the rip good times that was a secret meeting they were so pissed that it got out and now they just release it SPEAKER_17: on medium like yeah here you go there's so much more public knowledge i will say there's a baby SPEAKER_38: bathwater situation here too though where the everyone so quickly jumped to like cut burn layoffs that like a lot of companies that were not negatively impacted at all in this environment and had lots of capital or at or near profitability or had a long runway like as a board member and an investor with psl i had to go talk to some of our companies and be like hey this doesn't apply to you like you're still in go mode i mean you're not like don't do anything like assuming the environment hasn't changed because it has changed but like do not do layoffs do not slow down keep leaning in SPEAKER_56: yeah that that is hard to do when everybody around you has made the riff and you're like wait why am SPEAKER_05: i different it's like because you're profitable i don't know uh but you know what even those riffs if they're just 10 if you just look at them as a reorg hey we just got rid of the weakest people in the company we got rid of the redundancies you know and we're making different investments now i don't worry about that as much as the person who's just like yeah you know we're going 100 miles an hour towards a brick wall but you know somebody's going to take those bricks down SPEAKER_08: for us it's like yeah there's nobody you're just going right into that wall i talked to so many SPEAKER_40: founders and executives during covid after the like april may 2020 riffs that were like yeah we needed to SPEAKER_38: do that and our vc sold us to do that but also like god there there were five percent of the company that shouldn't have been here anyway so you know always yeah always oh that is a steady SPEAKER_58: state and once you cut those five percent then you're looking okay let's say you had a hundred people and you get rid of five everybody's like yeah thank god now you're down to 95 people you know SPEAKER_226: what happens people are like what about those four you know when you're the ceo people are like you SPEAKER_05: know we got rid of those five but frankly you know the 96 person compared to this person that you like for whatever reason they're a good culture person they're not doing anything and they're overpaid SPEAKER_00: we could hire two people for the sales team for what that person's getting in business development who doesn't even show up for work and he's in italy the whole time no offense you know to anybody in SPEAKER_334: italy that sounds like jimoth he's not in business development i mean the way he is but yeah that's SPEAKER_22: when they like um amazon caught so much flack for this for so long remember that new york times article about the workplace culture there and whatnot but like 2015 that was ridiculous that story that was really but yeah they do the stack ranking and then like the target is you know 10 attrition a year i don't know if what i'm sure that's not the official policy anymore but like jack welch SPEAKER_43: originally a jack welch thing yeah kind of college thing competitive colleges did that with stack ranker grades i think that's where it makes sense i don't know if you guys watch masayoshi-san's SPEAKER_05: presentation i covered it yesterday in the show did you actually watch the video no i haven't yet SPEAKER_40: i read all like the transcript and a bunch of quotes and stuff but you watch the video i watched the whole SPEAKER_05: video on double speed and then i went back and i've watched another half of it again just some like great spot spots it is chef's kiss in terms of like one of the greatest investors of all time reflecting after like losing a battle and he literally you know evokes like shogun era battles to describe what he's going through having to retreat twice and he literally said when we were SPEAKER_69: turning out big profits i became somewhat delirious and looking back at myself now i am quite embarrassed and remorseful of course translated but yes i don't buy it i think it's ridiculous i think SPEAKER_05: he only i think there was only one leak in the game you know when you look up this chart i'll pull up the chart here for people who are not watching we had a chart of their net income quarterly and i think this is like the value of all their investments right and this is in japanese yen and you see the last two quarters like it just got crushed but uh oh no they had the the better chart of this is the SPEAKER_345: there was a line chart nick if you were it crashes down to zero where it crashes down to like basically SPEAKER_05: zero it's their total accumulated returns you know when you look at those returns what would have happened if his philosophy david was i'm going to sell when our winners are up 30 40 percent i'm going to sell 10 and then when we go up another 30 40 i'm going to sell another 10 this is the chart is incredible we see the massive gains did you do this with robinhood and that ipo i didn't this is a regret for me i i held robinhood and if i had paired i would have uh you know greatly increased the returns for my first fund i did do this i did pair uber i did pair some other names that i can't talk about and so my philosophy has always been when i hit that like 25 50 100 x if an opportunity for secondary emerges sure i'll trim our position and here's the thing if you sell 10 or 20 you're not going to have regret there was a famous early investor in uber um i don't know if it ever became public if you guys heard of it you can feel free to say it i'm not going to say the name when uber was hitting a four billion dollar valuation they were an early investor they started clearing their position they cleared i think more than half of their position at four billion now we were in at four million remember five million so this seemed like a genius thing to do and travis told everybody don't sell i don't want anybody selling he was very clear with us and he SPEAKER_138: he had a thousand i want to say he how could you not want to say well there was a little dilution that SPEAKER_05: occurred so maybe it was more like 500 but anyway yeah it's a very tough thing now i didn't sell at that point i think i sold my first year i said 30 or 40 billion but travis i talked to travis he said don't sell do not sell we're friends don't sell and i said you know i got this thing like you know jake SPEAKER_50: out don't sell i said okay i won't sell but home to the y no summer house we'll wait on the summer house we're gonna wait maybe get a bigger summer house you know maybe instead of a timeshare we get SPEAKER_355: the whole thing anyway you got that nice wood behind you there exactly you guys ski you gotta SPEAKER_50: come out we'll do a live episode three months later there was a 10 million all around and man that person's lps was like what are you not in communication with the founder like i mean SPEAKER_05: people were happy to get a huge return but this is like one of the great mistakes i mean this is up there with like is it true that sequoia sold their apple steak at the ipo yeah yeah that was like that SPEAKER_22: was a big one right i think that you know the thing is though with masa and like like he is i genuinely do believe people can change but people only change when they want to change and like masa like we've seen this behavior so many times and it's what works for him like because he's lived this exact same thing 20 years ago and he came out of it with alibaba and like and and not selling in that and now is you know like that washed away everything else so like i gotta imagine he's thinking the same SPEAKER_40: thing here did you see the second quote that uh preet put in the acquired slack this morning david oh no it's so the second one is now this from masa now seems like the perfect time to invest when the SPEAKER_233: stock market is down so much and i have the urge to do so but if i act on it we could suffer a blow SPEAKER_38: that would be irreversible and that is unacceptable and wow you can feel wow does he actually believe SPEAKER_288: that or does he feel like he has to say i don't know i feel like you can feel the wistfulness like SPEAKER_38: he wants to be in go mode but he also doesn't want to run softbank into the ground and so that is that's like the classic that's the reason this is so much harder than it than it sounds to buy the dip or you know to to the exact opposite to not go nuts on the way up when it seems to be working SPEAKER_05: this is a great observation ben you need to have dry powder for these moments in time and if you went all in you got no chips you can't play the next tournament you got to sit it out and he's so wounded right now that he doesn't want to have to retreat a third or fourth time uh and then people like us are like hmm equity seem low maybe i'll start placing some bets and here we are and there was SPEAKER_89: another really great quote where he was like listen it was very bubbly times that we were investing in and i was like not exactly accurate we created a bubble based on our investments you created a bubble SPEAKER_11: literally so in terms of awareness like i think masa has to understand like when you take we work i think from 10 to 44 billion was that the jump that he made like you created that bubble SPEAKER_05: he created the bubble with uber which wasn't that bad but you know he gave them the extra 10 billion at the end there it wasn't a situation no it wasn't i mean that would have he would have to have valued it at like uh 200 billion for that to happen which there were people who were pushing him telling him SPEAKER_43: he wasn't giving us a big enough premium wow yeah they were people were like this is undervalued public about it wow you know and that's a price that is i think the 60 billion dollar prices and maybe SPEAKER_32: uber's right around 60 billion right now uh any other notes from his presentation that you gleaned from it or any thoughts on his impact on the industry i mean it's interesting that they're SPEAKER_233: fully out of uber now they fully liquidated that position yeah that's what caused the downward SPEAKER_05: pressure by the way somebody had whispered that to me like hey what's going on with uber why does why does it not go up when everybody's says like all the analysts are saying it's a 40 a 45 stock again a 60 stock they're putting all these great price targets on it and it was down at 22. 19 i think SPEAKER_99: is where it bounced to wow not that i was looking four times a day but i think that was all because he SPEAKER_205: was clearing his position and it had to get absorbed a large one of the big lessons for me of the past SPEAKER_22: both on the up and down in the past few years is that like these things are markets you know like you can do all the fundamental analysis you want but selling pressure and buying pressure is what moves SPEAKER_05: stock prices it really does and then having dry powder gives you the ability to take advantage of SPEAKER_11: those discrepancies right so you know when i fully deploy the j cal port the j trading portfolio i'm SPEAKER_05: i might be not i might be like oh spotify is on sale it's trading at three times sales right let's say it crashes 50 from here you know ben and i would be like oh we should buy a little more dollar cost average it to a 4.5 sales right but if there's some big hedge fund that's liquidating SPEAKER_38: their position over the next few weeks after you buy it is certainly not going up even if intrinsic values going up and earnings call is good and all that stuff that at the end of the day the intrinsic value of the company and and your own analysis informs what you believe this company is worth in the long run and it will do crazy in the meantime i mean it's the warren buffett quote it is the in the long run the stock market is a weighing machine and in the short term it is a voting machine SPEAKER_141: and right now masa has been voting uber down down down down and then you have to make your own SPEAKER_22: decision on what i think the weight of the nuance that i've kind of like come to in the last couple years it's not so much that it's a voting machine it's well votes get cast but that doesn't necessarily reflect people's thoughts or opinions like softbank like masa had to be liquidating if he knew this quarter he would have no choice yeah right and like a lot of hedge funds get put find themselves in similar positions like they actually believe in the position but for whatever reason they're facing SPEAKER_308: redemptions or you know something's happening there's a short squeeze whatever upset lps which SPEAKER_38: is obvious that's why sequoia liquidated apple at ipo it was a tax related thing where they SPEAKER_05: yep oh god so brutal well i mean we're famous on the all in podcast for saying ride your winners and somebody was like oh so you should ride your winners into the ground and i was like well you know my position has always been sell some idiot insurance and then ride if it's truly a winning company ride it from there so you have you've locked in some level of returns and then you're playing with the house's money hopefully and that's i'm sticking with that as my guiding principle and then in terms of public markets you know it is something i'm learning which is a lot of times these prices because people can vote every day every second of every day crypto you can vote every second of every day you know public markets you can vote most seconds of most days um because you have that vibrancy in the market that liquidity in the market it could get disconnected from reality and emotion can take over in a way that it doesn't in private companies and private companies are locked up you know the ceo may not let you sell you might not have a buyer you're not sitting there looking at the price every day and that's a feature not a bug i like that feature and i'm trying to have that feature discipline like right after i bought this warner it's great brothers disney zaslav had his big you know meeting about what his plans were and i thought this is like SPEAKER_43: water brothers discovery sorry not disney um that would be a deal that would be a deal SPEAKER_08: that's an emergency i don't know if that i don't know if lena khan is going to do that i think lena khan right now is filing so they they can't buy the x-men she's she's putting an action against them SPEAKER_389: them having spider-man back in the avengers that's how that's how cynical and bitter she is that would be great if she blocked a superhero character for coming back to marvel so great SPEAKER_22: i feel spider-man is bringing too much value to the end question though you asked uh a few minutes ago and it was in that in the um outline for today what do we think about the impact of softbank and masa uh over the past few years i think i i think it's good like i think i'm glad it happened because i think masa instigated all of this like if masa hadn't raised the vision fund and started doing all this i don't think the you know tigers and kotus would exist but it would it wouldn't be the same and perhaps more importantly though like i don't think the sequoia fund would exist i don't think sequoia would have their you know 12 billion dollar fund and like yeah like the counter side of this argument is like wow now there's just way too much capital in the ecosystem but i do think entrepreneurs will use this capital in good ways and there's a whole there's not you know benchmark is the one firm that that didn't change through all this but all the other partners sorry you need square ventures you need square mentioned yeah but you used to be right usb benchmark they didn't change and they may be they may be right in the long run but um but i think it's probably a good thing for the ecosystem SPEAKER_05: that sequoia has a 12 billion dollar fund now i think so too you know that is one of the things that kept happening up front ventures i think mark seuss was trying to keep his funds at a reasonable SPEAKER_43: size one of the things that happened was bill gurley uh sequoia to a lesser extent um started getting SPEAKER_05: i don't want to say bullied but you know they would put all this time into a company and then they get to year seven and masayoshi son comes in masayoshi thank you for all this work yep yeah thank you now i'm going to cause you know a big upheaval on the board i'm going to put tons of money in here in some cases it's great in some cases it's a problem you know an uber it was great and we work it was problematic and um door dash was great door dash was great i mean the same thing happened with um yuri milner before or in between masa so yuri milner took masa's book you know and kind of SPEAKER_110: innovated on that with uh also with his bed on facebook right and still with dst so i i do agree that net net is a great thing i think i gotta reach out to masa because i'm doing so much early stage i think he can get his he can wet his beak and get his itch scratched if he were to give me like that's right he says he wants 300 million dollars to deploy an early stage you guys should have masa as a bestie SPEAKER_205: guestie ah it'd be incredible he's the best i had lunch with masa twice one-on-one i've had two one-on-one lunches with us i gotta reach out to him when i go to japan for skiing at hokkaido would SPEAKER_415: he need an interpreter to uh no probably i spoke to him without a pod good question i don't know i SPEAKER_50: think when he gives the soft no i don't think so i think he would just talk yeah but maybe SPEAKER_05: quickly amazon is searching for a fourth pillar i've been buying some amazon because my lord uh i think they're having a heck of a year i love the one medical acquisition i love the i robot acquisition SPEAKER_38: i love what they're doing with amazon video you love them being enormously free cash flow negative for the first time in history have you looked at their free cash flow chart it is like all right i'm gonna while you're talking i gotta pull this up and producer nick can can put it in 23 billion SPEAKER_419: dollars less free cash flow year over year you too for the record i love it too and it's for all the SPEAKER_38: right reasons but uh it like it's very interesting to talk about like amazon's doing so well and then look at this free cash flow chart and be like holy god so where did all that money go distribution centers SPEAKER_05: data centers yep got it so they're investing in hardcore infrastructure that creates a massive mode SPEAKER_422: yep yeah i'm here for it sounds good to me for it yeah yeah or you could have paid taxes SPEAKER_419: right i like it yeah i mean there was a lot of commentators saying like amazon is the only company in the world that investors trust enough to have to be 23 billion dollars less cash flow than last year and have like a positive earnings report yeah the stock goes up right aws is a juggernaut SPEAKER_05: prime is a juggernaut what else and the advertising business is now a juggernaut oh the advertising SPEAKER_07: business is like it's like a close to 50 billion dollar revenue run rate oh man i can't wait do it we're hopefully within a week just okay i'll just spoil it i'll just spoil it the uh so we're dropping a huge episode gonna be multiple episodes on amazon but the first one's coming out very soon wow we recorded for six and a half hours uh episode and a half hours my lord you geeked out crazy so SPEAKER_11: if you were what are you most impressed with today today as of today what is the most impressive for SPEAKER_05: you and then what do you think will be the most important 10 years from now so prime advertising SPEAKER_99: cloud retail or either the commerce business i guess those are four different and i guess you could SPEAKER_35: say prime and the retail business are the same things i'm most impressed with equally today uh are the SPEAKER_251: back end one and one a got it back in infrastructure and all of the moats around it for both the retail SPEAKER_123: business and aws like amazon owns 96 airplanes name me another company right that owns 96 747s uh SPEAKER_110: they didn't buy fedex they didn't buy fedex they didn't buy ups they didn't want to deal with lena con and i trust so they're like yeah we'll just buy our own planes and we'll buy our own trucks and cars SPEAKER_40: not to mention it's nice to outsource like it's a genius move not owning ups because it basically means SPEAKER_69: that they don't have to carry that truck load the whole year when they don't need it but then at the SPEAKER_233: holidays when they do need a little bit more capacity they can ramp them up without it being on their SPEAKER_208: balance sheet yep they have 200 000 trucks it's great like that's unreal uh just starting so which SPEAKER_444: is your one which is your 1a then which infrastructure are you more impressed by today actually we don't SPEAKER_22: yet have the um this is going to be our next episode on amazon but i think i will end up being more impressed with the infrastructure for aws uh just simply because like it is the internet and like a few months ago i think it's just maybe the past quarter earnings people were like oh aws growth you know it's very impressive but it's slower than azure and and google and i was like yeah because it's like six times the size of azure it's not like you know it's huge numbers and it's still growing almost as fast like and that's like the capex the infrastructure that goes into that into literally SPEAKER_38: powering the internet like is crazy here's what happened so in 2014 uh jeff bezos published in the letter this quote where he said i believe that aws is market size unconstrained i think aws was doing like five ish billion in revenue in revenue at that point david do you know what it is today uh 76 billion today the entire cloud as a market that if you look at amazon google and microsoft is SPEAKER_40: a 120 billion dollar market that didn't exist 10 years ago 15 years ago growing over 30 percent just between those three companies so amazon because they were before microsoft and google in this and really SPEAKER_38: pioneering it by three four five years they basically discovered a new public utility and were able to have it inside of their for-profit corporation and have unbelievably good margins on SPEAKER_07: it like oh there's this amazing quote from eric schmidt in the everything store this is so good eric schmidt of course the former ceo of google he's like the book guys figured out technology and then ran circles he didn't say this but ran circles around google for years it is pretty crazy SPEAKER_56: that microsoft and google didn't win this if i told you 20 years ago who would own cloud computing rank SPEAKER_08: amazon the bookstore microsoft you know and google you'd be like well yeah microsoft's the incumbent but google's i'd probably say google then microsoft then amazon right like that would be your running SPEAKER_110: order of the pillars uh ben what what what are your one and two for the pillars today and tomorrow SPEAKER_141: advertising is a juggernaut at this point it's a 40 billion dollar business on its own that's a hundred SPEAKER_38: percent margin but i think it's hard for me to like uh have adoration for it because i feel like any business of sufficient scale with consumer traffic can eventually bolt on a 100 margin for free advertising business and so it's like great that they discovered it and found a way to work it in but you sort of should have expected them to to be able to figure that out to me aws was a market that they invented and so was the amazon.com retail business i'm most impressed by aws because very few companies invent a second multi-hundred billion dollar market ever like companies don't do that they have their initial insight and most companies die with that initial insight but very few turn that initial insight into a multi-billion dollar opportunity for customers and shareholders amazon did that twice and like the the goat list for that is like apple with the iphone microsoft figuring out office after windows or windows after dos like that these are the companies that have managed to do it just a few times it's a very short list so to me aws is the really impressive thing that they were able to figure out that next thing that late in the company's life i mean this Chamath Palihapitiya: started over 10 years after the company was founded yeah i'm gonna go aws then the ad business uh i think SPEAKER_05: they could take the retail business and i don't know if you saw they are reportedly deprecating amazon basics and the house brands uh this seems very wise to me because of antitrust okay so lena con's like oh you know there's one vector here you know you're making your own cables and you're reportedly studying everybody so like okay yeah no more amazon basics then yeah anchor you got the business it's yours oh and by the way there's 10 other people competing with you and now to win you've got to SPEAKER_69: give us your advertising yeah like we're going to win one way or another heads i tails heads i win SPEAKER_07: tails you lose can i tell one quick little thing that like almost nobody knows about amazon the advertising business oh yeah so bezos was a seed investor in google and there's a whole crazy story behind it but this is well like he got what was going on and why google eviscerated ebay and everything SPEAKER_22: like before anybody and that among a bunch of things led to building the advertising business SPEAKER_233: it's extremely likely that jeff bezos made a billion dollars of financial return on his google investment or or potentially a lot more depending on when he sold but like jeff would have been a billionaire if amazon went to zero just from the google investment that takes the edge off doesn't it boys SPEAKER_110: all right listen uh i so i'm going with uh the ad business as my number two but i do like one medical and i do like the robotics business they're just firing on all cylinders that's why i SPEAKER_38: j traded it all right listen and we we've got the the image so nick if you want to put that up this is just how much amazon has been investing the last few quarters i mean you can call this a a miss forecast on demand you could be like wow they really screwed up and they're over building and they were assuming covid would run forever but i don't know this to me looks like moat it's moat yeah i SPEAKER_05: mean it's not like they can't stop buying the stuff because i did see that they started selling they stopped work on six different tower buildings where like build the outside don't do the inside we'll figure it out later and then i had some companies that were looking for warehouse space now like amazon bought everything they're like oh now amazon's selling a bunch of stuff so there is something SPEAKER_07: going on where they might have pumped the brakes they're keeping the ownership but i think they're leasing it and i wouldn't be surprised three four years from now if they're like yeah we're taking SPEAKER_05: that back well yeah very good right so i think if even if you buy too much infrastructure when you've got a business like this it allows you because you have the dry powder to make a couple of mistakes on the margin but you know uh hold a lot of real estate or hold a lot of optionality everybody follow SPEAKER_110: ben he's gilbert g-i-l-b-e-r-t on the twitter everybody follow david d-j-r-o-s-e-n-t do a search for acquired uh subscribe they do a great job over there a lot of good like deep features about companies i love listening to them if you uh want to start a company or be ceo of one of the great pioneer square labs companies go uh just dm gilbert he's looking for ceos and management teams and if you got a startup kindergarten ventures maybe they put in 25 50 100k and you get david and his big brain SPEAKER_38: working on your startup thanks boys jason that's true david and i are looking to deal together SPEAKER_69: right now kindergarten ventures and psl ventures may make your best here so loop me in loop me in SPEAKER_468: let's do it i don't want to say a three-way i don't want anybody in the audience to get sick but SPEAKER_38: what's your call to action what where should uh what's interesting for folks to reach out to you i SPEAKER_110: know if they listen to the show they know oh right oh we oh you got yeah so uh my call to action jason at calacanis.com for life i'm looking for companies with 10k in revenue a month uh and that have great ceos and have a couple of customers and uh you know uh then put a 500k to three million SPEAKER_111: dollars into the company help you grow it that's it you can listen to this week in startups the end i'm SPEAKER_110: jason on twitter i'm jason on instagram and uh jtrading.com that is some valuable real estate on it yeah sorry to jason jason statham uh yeah but what's the what's the highest dollar amount SPEAKER_120: you've ever gotten offered for one of your handles you know it's usually like some influencer kids SPEAKER_43: and they'll offer 50k or 100k or something and i'm like you obviously have not done any research like SPEAKER_365: understand like how impressive it is to somebody in the tech industry when you tell them your instagram and your twitter is jason like it's doesn't really get much better than that so SPEAKER_50: sorry i can't help you all right everybody we'll see you next time bye bye