SPEAKER_00: apple would rather buy apple they want to invest in themselves and i think nvidia buying nvidia is going to be absolute chaos that's the reason like it could continue to be a momentum stock if this the percentage growth stops but the earnings get better in other words they can keep selling these things these h100s for the the same price or higher SPEAKER_01: and they don't have competition and more gets thrown to the bottom line SPEAKER_04: that's a crazy setup there's two ways to increase earnings per share you make the earnings go up or you make the amount of shares less and if you're doing both you're apple yep reduce the denominator right that's math baby a big setup for them it's math baby it's all math SPEAKER_12: this week in startups is brought to you by crowdbotics great ideas can change the world and crowdbotics is the fastest way to turn those ideas into code get a free scoping session for your next big app idea at crowdbotics.com twist open phone brings your team's business calls texts and contacts into one delightful app that works anywhere get 20 off your first six months at open phone.com twist and fitbod tired of doing the same workouts at the gym fitbod will build you personalized workouts that help you progress with every set get 25 off your subscription or try out the app for free when you sign up now at fitbod.me slash twist all right everybody it's SPEAKER_15: time for the news yes this week in startups since molly left the program we uh been doing a lot of interviews and so i wanted to bring back news get more news going here now uh we're not going to do woke news we're not going to argue about trump i'm going to talk just about the news just no juliani no SPEAKER_18: juliani today no juliani mugshot throw that in oh god and my favorite is michael rapaport just is SPEAKER_19: going insane on social media red flag um anyway there's important tech news nvidia just dropped SPEAKER_00: the mother of all earnings reports obliterated everything and i thought i'd have producer nick SPEAKER_21: who's very famous from the all-in podcast come on he does a great job uh now that he's been producing this week and startups for a couple years and all in for a couple years but with me for four or five SPEAKER_00: years he's just great at doing the news you guys love him uh so here he is nick calacanis great SPEAKER_24: feels like a stretch but i appreciate that yes i appreciate that what's that i said great feels like a stretch but i appreciate that oh no you're great at it okay well we'll see how positive feedback SPEAKER_00: nick is of course my nephew uh my brother josh's son firefighter and uh he worked at um people don't know but he worked at mlb he was editing the world series before i poached him from mlb to come work SPEAKER_30: with me a true talent uh bo baby all right let's get into it what's on the docket for today for this SPEAKER_32: week in startups so today we're going to talk about nvidia obviously how could you not we're going to SPEAKER_34: talk about arm filing its f1 not s1 it's an f1 uh to go public on the nasdaq we're going to do and do a super deep dive into arm and some potentially major red flags about that business and its relationship with china um we're going to talk about accelerators and jason going uh what is that company that you SPEAKER_37: threatened with a machine gun 10 years ago that was karetsu karetsu yeah jason's going karetsu for SPEAKER_35: him on some got an ak-47 i think that video has been uh that's been deleted off youtube i believe that SPEAKER_34: video uh we're going to talk about yeah i think so i can't find it we're going to talk about what the hell is going on with our guy ryan breslow and to wrap maybe my favorite topic ever and maybe my favorite person ever we're going to talk about the greatest bag secure of all time anywhere in SPEAKER_40: anything ever number one bag secure of all time i won't this is the best bag secure i i think since SPEAKER_00: adam newman i think it's him and adam newman are neck and neck this one might be better all right let's get to it nvidia nvidia nvidia uh they just obliterated their q2 earnings queued up SPEAKER_34: for us so just anecdotally to me and i'm i don't know you can answer this too jason this has felt like the most anticipated earnings report in a good way in a positive way since zoom in 2020 when everybody went remote and they were like oh my god 350 growth and it was crazy um and the reason why is last quarter nvidia reported pretty good earnings but what made people go crazy in last quarter's earnings report was that they projected 11 billion dollars revenue this quarter which would have SPEAKER_04: been 52 percent quarter over quarter growth that was four billion dollars more order over SPEAKER_15: quarter quarter is the key here yes we're not saying year over year a high growth company in the stock market is 20 30 year over year 50 year over year would be el fuego snowflake smashing snowflake SPEAKER_51: smashing 50 quarter over quarter just simply does not happen that's like a series startup right yeah SPEAKER_00: well i mean even then you know they're they tend to be doubling revenue year over year sometimes tripling SPEAKER_59: this is an unbelievable um uh idea here is to go 50 percent quarter over quarter but let's get into it SPEAKER_32: so last quarter when they reported this crazy projection the stock immediately jumped 25 percent uh from 305 to 380 a share earlier today before they reported it was trading at 470 so it's still going SPEAKER_34: up and this growth is sort of being priced in because everybody's kind of feeling like oh my god they're going to smash these so 11 billion dollar was the number they said they reported 13.5 billion dollars of revenue up 101 year over year up 88 quarter over quarter well over the highest analyst SPEAKER_61: estimates of 11.2 billion dollars unbelievable yeah okay and this is because this really impressive SPEAKER_15: company that made graphic cards that call of duty nerds would install on their computers to get the extra frame rate so they could go 120 frames a second while playing call of duty at the highest resolution SPEAKER_00: possible on their gaming monitors all of that then led to ai jobs being done on gpus instead of cpus and a100s h100s all of these now are becoming essentially the infrastructure of the ai boom and every company feels an existential crisis nick that if they don't get this infrastructure set up uh and start doing large jobs on it uh they might be outrun by microsoft and open ai or you know claude or bard and so if you have hundreds of billions of dollars or hundreds of millions of dollars laying around as apple google you know pick your company amazon you're going to just start buying these and SPEAKER_30: putting them into infrastructure twitter etc and not to mention startups and so we saw all these SPEAKER_64: startups and the venture community backed startups so you've got a customer base i go a step further SPEAKER_60: unlimited d products you said every company i would say every entity we're seeing sovereign wealth SPEAKER_34: funds governments everybody's getting in on this right now uk is buying 100 million dollars worth of gpus uh i think uh abu dhabi and the uae and the saudi all said that they're going to buy and they're SPEAKER_00: building their own llms this is like serious yeah and that doesn't even bring uh the issues around china which we'll put aside for now them wanting to buy these and and the question i have in all of this because i don't think they're giving out granular information on when these orders and the money SPEAKER_30: is being recognized so if microsoft let's say for the azure cloud and google cloud and and aws each buy you know a billion dollars let's say they put a billion dollar order in when does that revenue get SPEAKER_15: recognized does it get recognized you know monthly as they deliver each one or if each one costs a hundred thousand dollars or fifty thousand dollars do they as they deliver them they get the money SPEAKER_00: which means the money we're seeing drop in this quarter that was just reported would have been SPEAKER_70: money orders from last years ago yeah or or or or maybe a year ago who knows so then what does that SPEAKER_00: mean for future quarters and i don't think we have the insight into that of how they do revenue SPEAKER_01: recognition and uh you know if somebody is an analyst on this and they can you know provide some clarity on that i think that's going to be the next most interesting thing to try to understand here SPEAKER_64: all right we all know the one thing that separates great startups from the good ones is product velocity what does it mean product velocity fancy term right here you got your product and your velocity speed the speed in which your product improves so can you ship updates can you release new features can you do bug fixes can you iterate on the interface can you solve problems for your customers and can you do it quickly because you're not alone you have competitors and your customers have choices they may fit solve their problems by writing their own custom code or they might use your solution this is what startups are about how fast can you get that product velocity going and so you know how are you how do you supercharge it everybody says okay yeah we want to go faster but you got to go faster intelligently and crowdbotics is going to help you do that they're your cto as a service basically they provide you with the most optimal architecture to get your product to market as fast as possible you'll have access to an on-demand product manager and developer talent and they will help get your app into production 10 times faster than conventional development crowdbotics can work with your in-house dev team or you can just have them work independently and you own all the ip you own all the source code let the folks at crowdbotics supercharge your product velocity today no more waiting get a free build plan at crowdbotics.com twist that's a 4.99 value just for the twist listeners you get that for free that's c-r-o-w-d-b-o-t-i-c-s.com twist for a free build plan the run-up happened SPEAKER_60: already i don't think the stock went crazy on this news no about up between five to ten percent it hit SPEAKER_34: like nine and a half percent then it came down to seven then it came kind of down to five so you know have you ever read that that like i think it's a reddit post about uh on like wall SPEAKER_35: street bets about how everything has been priced in it's like your birth was pressing your father SPEAKER_30: was priced somebody put that somebody put that in here it's all priced in right uh and so we see that all the time the hype was there i was on fox yesterday a fox business this week and they were asking me once i thought n video was a buy and i was like well i wouldn't be buying it unless you've got a 10 year window here and i do think competition is coming for this company whenever you show this much revenue this much growth you know you got to think intel arm you know and new entrance into the market everybody's looking at this tsmc everybody's saying hey wait a second is what they're doing so unique that we can't replicate it or make something better and so you're going to see r d budgets go into this and this is where competition and capitalism is at its finest a company discovers SPEAKER_00: an incredible opportunity and let's face it this is an opportunity they didn't expect nvidia was SPEAKER_21: trading and the biggest most exciting thing about nvidia two years ago was not video games and not ai two years ago the most exciting thing about nvidia was cryptocurrency and that these were being used SPEAKER_00: for bitcoin and mining now that's over and so everybody thought oh my god nvidia after crypto SPEAKER_60: collapsed uh what's the future of nvidia and coreweave a company that is now has some crazy billion SPEAKER_04: dollar valuation which all they do is they purchase and then rent out nvidia gpus was originally a SPEAKER_34: crypto mining company that was offering like mining gpus as a service now it's ai gpus as a service the SPEAKER_00: smartest pivot of all time potentially so this is the theory of inducing traffic if you build you know a four-lane highway uh you're going to get a certain amount of traffic and a certain amount of you know SPEAKER_30: delays and you expand it to six you would think like oh it's going to reduce 50 the delays and then all of a sudden the delays stay the same and then sometimes you get longer why people see a big beautiful 405 freeway in la or the 10 freeway or whatever it is and they're like oh i should go take a ride to san diego i should just zip down the 405 and check it out so you can induce traffic what's happening here is i think these chips had so much power and they're sitting around they induced developers they induced technologists to come up with a use case crypto was a use case ai vr ar and of course now ai being the ultimate use case so this is incredibly exciting for the industry SPEAKER_00: this is the you know i think the path out of the the last bubble i think this will be the path out of less bubble because all of this infrastructure is going to be built out and just like dark fiber which i'll explain in a second i think there's going to be an over capacity soon and when there's all this extra capacity the cost of this computing is going to get collapse nvidia is going to have all kinds of challenges and at the same time you can mark my words in two years you take this clip other entrants are going to come in everybody's going to have bought all of these and the software SPEAKER_30: is going to be optimized and then the relays between the software and how you stack these things into supercomputers that's all going to advance when that all advances we're going to have a glut of compute this is exactly what happened during the dot-com era everybody started laying fiber and they went so crazy investing in fiber that they over invested then that fiber became like free and there was so much bandwidth available that youtube and netflix and all of those emerged same thing happened with storage storage became uh you know incredible you had you know really great not kind of like moore's law but you had good advances in storage and the cost went down manufacturing figured it out and then all of a sudden flicker offered free storage and then you had google unlimited storage of photos yeah we take for it you know we take for granted unlimited cloud storage uh and we very very rarely pay for it i think the only storage i'm paying for right now personally SPEAKER_00: is my apple icloud and it's for my family and it's like cost nothing and it's whatever tons of storage in the cloud so i think in two years you might see a glut of this compute other competitors come on board and then that means people are going to be throwing jobs at these things that they wouldn't have they SPEAKER_32: wouldn't do right now because it's too expensive so you are subscribing to the sell the news theory SPEAKER_00: on nvidia absolutely totally i think this this can go up there can you know when momentum stocks happen people can lose their minds so that doesn't mean the momentum is stopping here but i do think if you were looking at this as a five-year hold or something like i think there's going to be some SPEAKER_01: up and downs here i think they could you know you could have you know somebody like open ai or aws or whoever google say okay we got enough and you could have folks who we have enough compute right now to SPEAKER_30: for the jobs we have and we'll see but i think a lot of these language models people are starting to run them on their laptops they're running them on alternative hardware and it might be that the software SPEAKER_21: becomes sophisticated enough that the idea that you would buy 500 million of this to run you know some SPEAKER_98: language model on it or smaller tighter models become in vogue that need less compute entirely right SPEAKER_00: yep and constraint drives innovation so the constraint of bandwidth led to all the jpeg and gif compression the video compression we see today was because we did not have fiber to people's homes we didn't have star links we didn't have gigabit connections at home so they spent all this time trying to um you know uh compress data now it's like you probably don't have to compress it people are like send me 4k to from netflix uncompressed i want to get every beautiful pixel right right uh so the idea of why why SPEAKER_32: compress it if i have all this extra bandwidth all right so just to finish up on nvidia so 6.1 billion dollars in net income in q2 up 843 year over year up 203 quarter over quarter and then just in terms of SPEAKER_34: forward looking nvidia is expecting revenue of 16 billion dollars in q3 plus or minus two percent that would be 18 and a half percent quarter over quarter growth from this quarter and 2.7 massively year over SPEAKER_103: year yes slowing but still a big number on a big number but on big numbers right these are big numbers SPEAKER_01: folks uh so and hardware if they and there's a hardware yes heart and the thing that i find SPEAKER_30: fascinating is that they're able to deliver hardware and scale the demand the fact that they can get if they can ship these things i wonder if we're going to be sitting here six months or a year from now and people say i gave you a billion dollars you took my cash because you could like what pers what are the deal terms here like if you don't you have to pay in full i have a feeling you have to pay in full for this and then get your your you know uh product a year from now that i do not know sort of like you know i'm sure of it because why wouldn't they take your full deposit you know like if you have a car if you're if you're selling ferraris you put your full deposit down and they give you a fari nick i'm not kidding you two or three years later and they sit on your four hundred thousand dollars that's how it works you don't pay when on delivery you pay now if you want the spot i'm guaranteeing they're SPEAKER_00: taking the money now you might have people complaining like hey where's my where's my product the fact that they can deliver these is absolutely stunning and what do you do with all this free cash flow that's the big question this is a lot of money sitting around so are they going to start SPEAKER_108: buying companies and you know what's the plan with all that well we know they've been investing SPEAKER_32: in a bunch of companies right they've been investing in a ton of ai companies with some we mentioned this the last time i was on with some little side deals where hey we invest in you SPEAKER_34: but also you're getting a ton of gpus they just did that with inflection right they they gave them like 20 000 gpus they also invested in the company we don't know how much of the mix of that is actual equity versus just getting gpus um they also nvidia's board approved 25 billion dollars in share buybacks which is about six times higher than what they were currently allotted so i think very smartly the board David Friedberg: is like let's get this going this is going to turn into if they if they start putting this money towards stock buybacks uh this company is going to start to look like apple and right now this is SPEAKER_01: fascinating to me but if you if you if you look at them the the largest market cap companies in the world uh you can pull this up on the screen there apple 2.8 trillion dollars microsoft 2.4 saudi uh aramco um selling oil above two trillion dollars i kind of take that one out because that's just SPEAKER_30: like you know here's somebody with a pile of diamonds it's not an actual company as such in my mind it's just a natural resource fourth company alphabet aka google 1.6 amazon 1.4 ish and then right behind about 1.2 ish uh 1.1 actually nvidia bigger than berkshire hathaway the next one drops off at 776 billion um SPEAKER_76: they're going to pass amazon will they pass alphabet i mean if they start buying back SPEAKER_35: that sounds that sounds insane going up that sounds insane what you're saying that nvidia is going to be more than alphabet potentially in like a couple quarters that's crazy i mean that's pretty SPEAKER_21: crazy uh and what i love about looking at this uh market cap chart and this is where like the guys on all in give me a hard time that i'm so pro-american and i'm an american exceptionalist you know saudi arab is the number uh saudi aramco is number three for their natural resources take that out of the list what's the next largest company what's the next largest company that's non-us lvmh viva la france SPEAKER_01: uh 450 billion dollars lvmh congratulations is that a massive upset that the next largest is a french SPEAKER_00: company isn't that surprising yeah and then who who's next my favorite ozempic maker novo uh nordic SPEAKER_01: nordic nordic nordisk how do you pronounce that nordic nordic 425 billion that's sword after that 10 cents in china number 20. so you know of the top 20 one two three uh oh i've got tsmc four or five SPEAKER_30: you know we're 15 of them you know 16 of them just tells you everything you need to know about capitalism unconstrained uh capitalism with the greatest entrepreneurs in the world and remember we shared that chart on all in of income disparity and the different lines and this is the result of it is that we get to lead the world in having the largest market cap companies uh and that's why nvidia is here nvidia you can't have these kind of companies in china you simply can't because they would get so big xi jinping would see it as a threat right uh and so congratulations to the nvidia team congratulations to america and congratulations to humanity because i think all this compute the SPEAKER_21: problems we're to wind up solving are going to be a lot more than hey can you write me a blog post or can you you know write some code faster for me or make me an app i i think we're going to start to SPEAKER_00: all this uh infrastructure that's being built it's going to be very similar to the internet SPEAKER_125: where we we couldn't predict what would happen couldn't predict what would happen can i ask you SPEAKER_34: a question and it's going to be pretty amazing yeah sure so how much of this year's sort of big tech mega cap tech stock run up right everybody's up big um i think as of last month seven tech companies amazon apple google meta microsoft nvidia and tesla made up 55 of the nasdaq's gains in 2023 how much of that was just a wild like over correction on the downside in 2022 because for big tech almost all of big tech is still relatively high growth and massively profitable so you know some big tech companies being down 20 30 meta even more last year was that just like SPEAKER_66: an over correction on the downside due to people being nervous that we were going into a serious SPEAKER_125: recession yes it was how bad those companies looked going into a recession because their spending was SPEAKER_00: out of whack with the opportunity and as i correctly predicted and i got a little bit laughed at by a couple of besties i said well listen if you just cut costs and you get more efficient um wouldn't the earnings then stay the same couldn't you or yeah the earnings issue by just you know laying some SPEAKER_21: people off or cutting investment r d whatever and that's exactly what meta did they said let's not spend as much on these you know crazy headsets and let's just get rid of 10 20 000 people and people forget the layoffs we are now i mean the layoffs happened so fast so furious in 2022 and you haven't seen as many of them you were seeing them in media they're hitting other parts SPEAKER_30: of the industry um and this is why i think we had a rolling recession which i've never seen in my lifetime SPEAKER_125: the recessions usually hit boom two or three quarters of chaos this one was like we're still in SPEAKER_30: it it feels like and it's six quarters now we're in the seventh quarter of recession but we didn't have negative gdp for two quarters but each industry got its ass kicked and it was like a rolling thing tech yeah banks media and i think real estate's next i don't know who else hasn't been taken uh you know to the woodshed but i think each company got its chance oh i think it's retail is getting taken to the woodshed right now right the low-end retail is getting absolutely destroyed this week so everybody's taking the medicine and you're right it was an overcorrection the magnificent seven are amazing and if they control costs and buy back their shares that's the setup for money printing machines and it creates a virtual cycle okay i cut 20 000 employees i saved all this money the company's more efficient we are more profitable we're more innovative okay let's buy back some shares we don't have anything to do with the money lena con won't let us buy anything okay you know what lena cons can't stop us from buying our own shares and that's what apple does you know the biggest purchases apple has made are like beats by tray the largest company in the world does not buy big companies they could have SPEAKER_05: bought tesla they could buy all kinds of interesting companies they they could they could buy disney there's still speculation about that disney would be nothing for them to buy that would rather buy apple SPEAKER_59: easy apple would rather buy apple they want to invest in themselves and i think nvidia buying nvidia SPEAKER_00: is going to be absolute chaos that's the reason like it could continue to be a momentum stock if this the percentage growth stops but the earnings get better in other words they can keep selling these SPEAKER_01: things these h100s for the the same price or higher and they don't have competition and more gets thrown to the bottom line that's a crazy setup there's two ways to increase earnings per share SPEAKER_04: you make the earnings go up or you make the amount of shares less and if you're doing both your apple SPEAKER_07: reduce the denominator right that's math baby a big setup for them it's math baby it's all math SPEAKER_137: are you still using your personal phone number for your startup it's 2023 it's time to stop it is a huge SPEAKER_139: mistake that founders make why you're just getting started with your company and you don't think about phone numbers as being an important part of the ip collection of your startup with open phone you can totally solve this problem they've rethought everything about a modern business phone and how it should work it's super easy you just download the app on your phone or your desktop and you pick a number and you're done and you do it for just such a low price it's so affordable and think about it if you have your sales team using their personal phone numbers a salesperson leaves and goes to a competitor you don't have any insight into what phone calls occurred what people's phone numbers are that's your company's database and if you allow the sales team to run them up or the customer support team it's just unprofessional be professional use open phone and we use it for things like event communication so we get one phone number but it can go to multiple people like a round robin thing we have a shared phone number do that for customer support and open phone is rated number one on g2 for customer satisfaction and you know i trust g2's ratings open phone it's ready it's affordable starts at just 13 bucks a month but twist listeners can get 20 off any plan for the first six months at openphone.com twist and if you have existing numbers with another service no problem easy peasy lemon squeezy open phone will port them over at no cost head to openphone.com twist to start your free trial and get 20 off all right you want to talk about arm yeah i mean arm is a very SPEAKER_125: complex one i searched them off went absolutely crazy i don't know what the difference between f1 and s1 is so it's very simple foreign company yeah you got it f is for foreign company got it all SPEAKER_60: right i don't know if it actually stands for foreign but yeah f1 is foreign companies listing on us exchanges arm is a uk-based company obviously do you know arms history by the way jason are you familiar SPEAKER_34: with i'm not tell me so they were founded in 1990 actually as a joint venture between apple a company called acorn computers and a company called vlsi technology they went public on the london stock exchange and the nasdaq in 1998. obviously we all know softbank acquired arm and for 32 billion dollars in 2016 and then in 2020 softbank was going to sell arm to nvidia for 40 billion nvidia agreed to the deal but that was called off in february 2022 to a bunch of regulatory pressures um and can you just imagine if nvidia not only had like a complete stranglehold on the gpu market but they also were owned arm and had 99 of uh smartphone chip designs too crazy well and the other thing if you just SPEAKER_00: think about what would have happened with masayoshi sans position he would have owned nvidia oh yeah the bottom so i think that might have been a three or four x so whatever he's going to get out of it SPEAKER_01: going public now it could have been a yum yum and that just shows you how hard it is to be a capital allocator oh my god you know i got offered 30 bucks a share for robin hood right before the ipo SPEAKER_30: and i was like you know what i think this is a company for the ages i want to keep it the market corrects and you know we distribute at 11 a share now other trades i made selling in secondary we sold shares of some companies at a billion that then became worth 300 million so you just never know it's very hard to clear positions uh you know in an optimal way yeah what i learned is they said how did you get rich or how did you get great returns for your lps and your fund selling too early selling too early yeah is is uh what happens but this is going to be very interesting because their revenue is going down um basically sideways essentially basically flat going public when things are flat you say well why would you go public when it's fine when i stay private and SPEAKER_125: fix that well we all know why that's happening uh masayoshi's son needs liquidity he needs to get a return who does he need to give the money to the saudis who gave him the money for the vision fund so this pays off the vision fund softbank the corporation bought the vision funds investment in SPEAKER_34: arm 25 25 of it 25 of it so that gave the saudis some of their money billion dollar valuation by the way which is higher than their ipo target valuation is that sketchy at all to you by the way SPEAKER_00: or no i think when that trade was made it is definitely inside dealing and the question is SPEAKER_30: like will the the people who are shareholders of softbank you complain about that and follow a lawsuit yeah so softbank the corporate entity buying out the vision fund yeah that is uh uh the the SPEAKER_01: definition of a conflicted transaction so there's a term it's conflicted transactions they have to go SPEAKER_30: through a level of scrutiny um and yeah they can wind up in lawsuits anytime you have them and so but you know like we say here in silicon valley no conflict no interest conflicts are kind of the reason people do deals and so this pays off the saudis and so companies are going to get pushed out public because they have no choice and that's what's happening here you would much rather keep this SPEAKER_59: private for a couple years and make it grow 10 year over year clean it up have an ai strategy it would be better timing yeah they mentioned that go ahead sorry no as i say that might be the opportunity SPEAKER_01: to buy the shares is that now this is low expectations are low what is their ai strategy and if you believe in the management team and you believe in their ability to produce new products which i don't know i don't know enough about arm to know if they can make new competitive products and SPEAKER_165: what the track record is at competition but if they can make competitive products SPEAKER_34: then maybe this is the time to buy yeah they mentioned in their f1 that um they are trying SPEAKER_32: to differentiate because it arm is 99 of all smartphones are built with arms chip architecture SPEAKER_34: right two of their major customers are apple and qualcomm qualcomm makes chips for samsung they make chips for google pixel so they dominate the smartphone market but they actually don't make any infrastructure for gpus so they are not in ai at all aside from cpus so arm basically said they're pivoting into building chip architecture for cpus that can be used for ai and for cloud computing and it's been pushing pretty hard into cloud computing over the last couple years they also mentioned that in their f1 that amazon and alibaba both use arm-based chips in their cloud data centers so it seems like they are saying we are not just smartphones and by the way the reason that the revenue was down slightly is because they are so concentrated in the smartphone market that when smartphone sales are down like they were globally the last year arms revenue basically reflects that so they're kind of just like a proxy for the smartphone sales and in globally in a way yeah in a way and i predicted i i SPEAKER_00: thought like they had to get tim cook out of apple like five or six years ago because i predicted smartphones sales would slow down when they got to like iphone 10 because i was like i can't tell the SPEAKER_01: difference between eight nine and ten and i'm their like tip of the spear customer i would buy the s you know i'd buy the intermediate model i loved smartphones so much and this is the first time this cycle you SPEAKER_30: know i think i have an iphone i don't even know i have to think it through i have an iphone 13 iphone 15 is coming out right and i don't even care i now have gotten to the point where like a grandma or your auntie or uncle who has like a five-year-old phone i'm like well it works and i really don't see the need to upgrade and it turns out during a recession i think a lot of young people or people who are on budgets are like why would i upgrade and i used to make fun of people who had you know two or three generational phones you've been in the meetings when i've said that like upgrade that phone i have don't come to a meeting with a founder with a four you know with a iphone 4 when the iphone 9 is out like are you crazy you look like an idiot um now i'm kind of like yeah i'm gonna i'll skip i basically skipped the 14. the first time in the history of the iphone i skipped a gen um yeah i i'm actually more interested in the laptops i i i'm upgrading my laptop every year because the m1 the m2 is so impressive and i just love i just love this macbook air i had an m2 you know macbook pro but i'm like this this m2 where i had the m1 and i was like i had the m1 with the big screen i was like it's heavy this lightweight macbook air is delicious yeah um i'm getting a new SPEAKER_05: this is a this is a challenging situation what are you getting uh i'm i want i'm gonna get a uh two SPEAKER_146: terabyte ssd m2 ultra i think um because we have an extra macbook capacity right now that we're going SPEAKER_60: to send back and we're getting a ton of credits for it so it's only going to be like i mean for you what is that going to cost three grand for the best one no it's like 4 500 for the best one but with SPEAKER_34: the credits that we have to allocate towards it it'll be about two grand i think yeah i see i think you SPEAKER_99: should go right to the 4 500 one i'll be honest because your time yeah if you are doing edit oh you are so you're you're literally buying a 4 500 laptop yeah yeah but it'll cost us 2 100 after the SPEAKER_21: trading credits got it right but i'll tell you why i think if i mean i know i sound like a lunatic right now but nick does a lot of video editing and if that gets the show out two or three hours early SPEAKER_01: whether it's this weekend startups are all in it's worth a 4 500 laptop versus a 2 000 one and then SPEAKER_99: your time is precious this thing's going to save you an hour a week or two hours a week what do you SPEAKER_146: think i don't know i have no idea i have to try it first i don't know on the old export yeah yeah SPEAKER_139: on the export yeah hour hour if it saves you two hours that means they get a hundred more hours of SPEAKER_165: nick a year or 50 hours more that's like getting one week out of you a year yeah that's incredible SPEAKER_32: yeah that'd be great all right let me let me finish up with some arm stuff so they have okay they have a really unique business model which i i don't know that a lot of people know about SPEAKER_34: they make money in two ways they have licensing fees where customers pay arm to license their design blueprints that was about 40 of revenue last quarter and then they have royalties so they actually take a percentage of revenue on everything sold using its uh chips that use its design infrastructure 60 of revenue last quarter but in their f1 they noted some like major major red flags and one of them is they have a huge dependence on china and this is a little conflating so i'm going to try and explain it really simply so in the f1 they note that their top three customers right now account for 44 of its revenue and i think this makes a lot of sense right smartphone chip giants like apple and qualcomm are known as major arm customers so you'd think that they'd be making up a majority of it because the smartphone market doesn't have that many major competitors but it goes a little bit deeper than that arms single largest customer is an entity called arm china this is an independent entity that has exclusive rights to distribute arm to distribute arms technology in china and last year arm china accounted for 24 one quarter of arms total revenue during its most recent fiscal year so can you explain like the risks of having one whale customer like that SPEAKER_00: it's a huge risk um when you have that what you have to do is quickly try to increase your customer base so that the percentage goes down so who knows who knows what this has been over time and the way to SPEAKER_30: do that would be to have arm india arm singapore whatever other large markets there are so you can have this in um saas software sometimes somebody just buys a lot of your software um and the real challenge is they will someday wake up and say well for 24 of their revenue um is there a better way to do this and SPEAKER_00: when you think of arm you know they produce this architecture like a blueprint if you want to think about it that way of like here's how to build a chip okay there's an open source version of it what arm is doing is proprietary and what they're building is called an isa uh instruction set architecture is SPEAKER_139: like wonky term for it there's an open source instruction set architectural risk risc dash v SPEAKER_00: so imagine open source you know uh mongodb or some open source database versus oracle so the question is SPEAKER_21: and i don't know if they put open source uh isas as a risk factor in their f1 i gotta get used to saying that SPEAKER_01: um but i think that's another one and so let's say you're um this arm china well what if you start SPEAKER_30: using risk and they say you know what we're going to make 10 of our chips with this risk architecture that's open source and free okay so the 24 take 10 of that that's too poor 2.4 headwind of lost revenue and then if they keep you know expanding you you keep losing revenue you know uh so this is a um it's a it's a challenging business and it's a dogfight and that's what makes capitalism great SPEAKER_203: all right you know i've been on a health kick over the past year and you know i care about data-driven solutions and if you listen to this podcast i bet you do too so let me tell you about fitbot this is a data-driven workout app that blends machine learning with exercise science fitbot creates custom dynamic workouts programs based on your fitness goals your experience and most interestingly to me the available equipment let's say you got a bunch of kettlebells or let's say you're at some you know sparse gym at a hotel or you're on vacation you got nothing well fit mod will maximize your fitness gains by varying the intensity and the volume between your sessions and leverage the equipment you have or don't have as the case may be you can customize the length of your workout what muscles you want to target and so much more so let's say you want to get a 30-minute workout in and i want to do chest triceps and abs but i'm staying at an airbnb there's no equipment fitbot can create a perfectly optimized workout for me based on these parameters and it will do it for you too check it out it's amazing the design of this app is extraordinary i was able to invest in it that's how impressed i was with it fitbot takes the guest workout of fitness just open the app and start making progress you deserve it get 25 off your football subscription or try out the app for free when you sign up now at fitbod.me twist that's f-i-t-b-o-d dot m-e slash twist for 25 off can we go a little deeper on arm china SPEAKER_206: for a second so all businesses in china by the way are red flags it gets a little crazy yeah it gets a little SPEAKER_146: crazy specifically so yeah arm china is owned by a couple of different entities acetone limited is one SPEAKER_34: of them that is an entity that's controlled and created by soft bank it owns 48 of arm china and SPEAKER_66: arm the original arm holds a 10 non-voting interest in acetone which represents a 4.8 non-voting share in SPEAKER_34: arm china so they own like a very small amount of it and they don't control it yeah 52 a majority stake of arm china is owned by a chinese private equity firm called uh hopu hopu h-o-p-u and quote other chinese parties so just the long story short arm doesn't have any material control of arm china furthermore arm noted its relationship with arm china as a significant risk in its f1 let me read you some of these quotes jason and you just respond to them as you would any as an investor would quote sure this is from the f1 in the past we have had issues obtaining timely and accurate information from arm china we believe the underlying problems causing our past inability to obtain such information have been resolved but we can provide no assurances that our access to arm china's records will not be inhibited again in the future quote number two in the past we have received late payments from arm china and have had to expend company resources to obtain payments from them quote number three arm china furia it's my best advice you got the b on your head um arm china has possession of and this is the money one arm china has possession of or access to certain material ip and customer data pursuant to the ipla ipla stands for intellectual property license agreement and other commercial arrangements with us us being arm although arm china is contractually obligated to protect this ip and data we are limited in our ability to monitor or influence the manner in which arm china protects our ip and data from theft loss or misuse does this sound like a a safe relationship with SPEAKER_21: a company that makes up 25 of your revenue this is doing business in a frontier market uh and uh you know or a banana republic you know pick what phrase you want to use uh you know third world might get you canceled uh but it's a lawless place and this is why you know as crazy as it feels in the united states sometimes you see sam bankman freed you see elizabeth holmes and you're like oh my god SPEAKER_01: capitalism is out of control and the socialists you know arms of you know podcasts like tech won't save us they kind of lose their minds oh my god capitalism united states out of control elizabeth holmes SPEAKER_30: ftx sam bankman freed these are minor and those people go to jail now you stress you know contrast that to china and how do you know the accounting's correct and when you say 52 is owned by other SPEAKER_76: parties might that be the ccb the communist party which party i mean it sounds like a heck of a party SPEAKER_66: i'd like to be invited to it i think it was 17 17 of arm china is owned by other chinese parties 35 SPEAKER_157: was the chinese company firm at the end of the day like putin's russia or xi jinping's china SPEAKER_00: it's owned by the state everything's owned by the state and the state can at any point in time tell you you no longer own it or you own half of it just like in saudi arabia in the kingdom there was a renegotiation with the different families came together and hey guess what you don't have the esplanade jobs you only get two no-show jobs and we're taking over the concrete it's just like dealing with the mob and what you have here is like some honesty because if you're in the west you must be honest about this now you could say oh my god you know this back collapsed or this stock had fraud or this company was you know investing the clients deposits all kinds of crazy stuff can happen with bernie madoff and ron whatever but capitalism in the united states we saw that chart we showed of like hey we're 15 16 of the top 20 it's because we have a rule set and at the end of the day even though you might disagree with a call here or there you kind of get the sense that the system is SPEAKER_30: not rigged in the united states what this tells you is the system in china is absolutely rigged if you want to play that game you better have access you better be ready to lose the money and you better have access to some people in in the military in a really nice military outfit you know with a lot of those badges on it um you need to have some of those generals in your corner when i started going to china 15 20 years ago i remember them telling me like you have to have like if you were in a gaming company you needed to have a certain general on your board because gaming was somehow when you had a gaming company incorporated you had to check in with the military and so you had to have some kind of military connection it was very strange SPEAKER_00: uh so be careful and this is why i think you know sequoia is no longer operating there i think they made the right move the united states is decoupling the rules over there are crazy the accounting could be completely fraudulent and they could be selling more of your chips out of the back of the factory SPEAKER_21: than the front uh and that's just the nature of business in a corrupt environment and i would also that doesn't mean there's not corruption in the united states it's just the percentage of SPEAKER_34: corruption corruption i'd also add that arm makes chip designs and that is now a major national defense issue for every country in the world it's even more high it would be different if this was like a SPEAKER_60: software company or whatever this is like legit national defense problems and this customer just happens to be located in china generally accepted as the biggest adversary of the west yep i don't know SPEAKER_66: it just seems like a a major risk that um there were some articles about it this morning that i SPEAKER_227: noticed i was like oh my god that's crazy i'm not a big fan i'm not a big fan of um doing business in SPEAKER_21: china um and i but i do think we the path forward should be for our societies to collaborate on you know important problems in the world and for us to do trade but i think we got i know people think SPEAKER_00: china got the better of us i think we kind of got the better of china um because we got all these low priced apple phones and apple's an american company and so i think we won and i think we'll continue to SPEAKER_99: win and and authoritarian countries are only as good as the psychological state of their dictator SPEAKER_32: all right you want to talk about some accelerators that might be predatory or might not be well you SPEAKER_125: know this yeah this is an interesting situation that's bubbled up yet again everybody has issues with accelerators um both the you know people talking about the the valuations of people coming out of SPEAKER_01: legitimate uh accelerators like y combinator or our accelerator and then what y combinator or launch you know what price we pay so maybe just i could start off with just explaining why accelerators exist SPEAKER_30: there are a ton of companies accelerators allow those companies uh the best ones to be selected from the overall pool of startup ideas and then uh be mentored sharpen their blades get better at what they're SPEAKER_21: doing and help them network raise money and get advice typically occurs over 12 weeks our accelerator SPEAKER_00: we expand it to 14 weeks get a couple extra weeks in there to introduce people to stuff and get product SPEAKER_21: market fit um and they get a heck of a deal 100k for six percent in the case of launch accelerator y combinator gets seven percent for 125. great deal uh that would be a valuation of about 1.7 million dollars when you graduate from our accelerator you might be raising money at six to fifteen if you graduate from yc you might be raising money at eight to twenty five right um they bring a thousand investors together SPEAKER_00: they hype things up they put high pressure on folks um but essentially what the people coming to y commerce demo day or ours are doing is saying hey jcal can you sort through all this stuff diligence it and tell us what the best one percent is that's all we're doing we're sorting through the one percent you know who else does that harvard stanford any college um you know what does that like uh colleges when they do it with basketball players right you you sort through them or those combines etc sorting mentoring and presenting that inventory of greatness has real value in the world so that's why it exists people opt into it they get money they give some equity and it all works SPEAKER_30: out now the problem is some people don't have money to invest and they look at the long tail the people who didn't get into the top accelerators one percent of people get into 1.5 percent of people get into y combinator very similar for us what happens the other you know let's say there's five great accelerators and we take up seven eight percent of the inventory what about the other ninety percent SPEAKER_00: the ninety percent uh either then bootstrap quit uh raise a seed fund friends and family any of those SPEAKER_172: possibilities or they go to let's say the long tail of accelerators and those long tail of accelerators SPEAKER_00: know that those people might be desperate they also might be naive first time founder they don't understand what the equity in their company's worth um giving up six or seven percent that's a that's a decent chunk of equity but it's not going to kill the company giving up ten percent SPEAKER_21: giving up twenty percent thirty percent that can cause all kinds of problems down the road because SPEAKER_01: the the founders have given up too much so i'll stop there um and you know um you can ask me questions or tee up the next piece of this puzzle yeah why don't you talk about that's why accelerators SPEAKER_00: exist and if you're a second or third time founder you skip the accelerator portion typically because you might be able to fund the 100k to get started yourself or you might be able to go right to a seed round of 500k or two million dollars because you got i think every every year on yc demo day SPEAKER_178: you always uh sort of laugh about how many people are complaining about yc valuations yes um do you want SPEAKER_00: to explain kind of your thoughts on that yeah so i have run an accelerator and we've learned a lot about what yc does i have my own spin on it i like to do seven companies we've done 29 cohorts of seven SPEAKER_21: because i like to know each one and make it very intimate we're not trying to scale the way they are SPEAKER_00: um but if you don't want to do the work of running the accelerator and you don't want to have your own proprietary deal flow in other words you do the work to go find companies outside of the y SPEAKER_30: combinator ecosystem then um you're choosing to have somebody go to the orchard pick the apples polish them put them in you know cellophane and paper wrap and you ever see those gorgeous you know trays of apples in japan where they give you six apples for forty dollars and you're like these are that seven dollars an apple and you're like yes but it sounds fantastic if you just say japanese fruit like literally there are 200 boxes of strawberries and there's 10 strawberries in it but this is a guy who literally throws away all the you know makes strawberry jam out of 98 and then makes the sweetest one sells them in the market pears etc if you want to have somebody do all the work SPEAKER_00: for you you pay a higher price let alone if you want somebody to build it make an apple pie and then let alone if you want somebody to make an apple pie at 11 you know uh madison park or gramercy tavern SPEAKER_01: now those apples now cost a lot of money you're paying 22 for this apple dessert or something you SPEAKER_30: get the idea so um what i always tell people is if you don't like the valuation start your own accelerator or get your own deal flow only one percent of companies are going there 99 of unicorns don't go to y combinator so and y combinator is like a tiny fraction of the overall market cap of publicly traded companies like coinbase airbnb are the two big hits congratulations these are amazing companies but you know google facebook you know there's more companies that don't go there than do is basically say that's not a dick to them how could how they don't have a hundred percent of companies and most great companies are done by serial founders who don't need the money and wouldn't go to an accelerator so yc is amazing but people complaining about the valuations can't have a choice like we invested in three companies um that are incredibly promising at five six and eight SPEAKER_01: million dollars in the last month put those three numbers together five six and eight you get 19 million SPEAKER_00: uh we own significant portions of each of those companies we paid a fifth of the price for companies that are coming out of yc that have less traction so it doesn't take us that much work to go find them we have a lot of deal flow um so it's just lazy vcs have made a business showing up at demo day over paying for startups and saying well we bet on yc startups you know uh so but they don't have to do any work what work is it nick think about it i go and i watch two days worth of demos i meet with companies for two weeks i make five investments and then i off for the next six months and then do it SPEAKER_21: again that's literally how some people ran their venture firms and they're wondering they overpaid SPEAKER_00: by 10x or 5x the entry price matters in seed investing so these nincompoops who are running their first time funds or dentists or whatever are paying 20 times as much for the same apples 10 times as much for the same apples five times they just can't possibly make a return and that's on SPEAKER_30: them i don't blame the founders for getting the highest valuation possible um there are some downstream effects if you raise too much money and i've explained this because i was defending gary here's what happened do you understand that piece of it of the the orchard analogy it makes total sense to me yes yeah so here's the next piece people point out if you raise money at too high a valuation you can get caught in the valuation trap how does that work i raised three i raised five million dollars in a seed round at a 25 million dollar valuation i don't get product market fit i run through that SPEAKER_21: money now the company is not worth 25 million i have to raise another 5 million okay now i have a SPEAKER_00: company that's broken people are only willing to invest in it at 10 or 15 and most people don't want to have that uncomfortable conversation of a down round the previous investors getting screwed all that kind of stuff makes sense it does now here's the thing if you look at it from the SPEAKER_05: founders perspective well 80 of startups fail so the default state is i'll raise that 25 million i'll only dilute if i raise two and a half million ten percent and i got 80 a chance of failure so that's SPEAKER_00: probably what's going to happen or if i do get product market fit um i'll raise at the same valuation SPEAKER_21: in other words i could have diluted 20 or 30 percent in the seed round but i only did 10 and now i'm raising at 25 anyway because i got to 2 million in revenue and i got 15 times revenue i got a million in revenue i got 25 times revenue as a valuation great and then there's this third possibility SPEAKER_30: which is i was a tweener i got some things done but i didn't get true product market fit but that might be 10 of the cases so in 90 of cases you did the right thing and that's what founders are betting on when they go for those sky high valuations um and who can blame them and if you're a lazy investor SPEAKER_00: and you outsource your diligence to yc it's going to come at a cost right and sometimes the cost gets a little high and that's what people are complaining about my best advice to founders raise money from the best investors at a reasonable valuation don't go for sky high valuations because then you get SPEAKER_01: unsophisticated investors you get the dentists and nothing more dentists but i'm saying that in like a um you know like a term of art here like the dentist crowd means people who don't do professional investing they don't do investing for a living they don't add any value besides you know giving you SPEAKER_271: veneers so that that's what you you want to get the best investors and the best investors are SPEAKER_00: going to want a reasonable price they don't mind paying a high price but they want a reasonable price so if your startup just launched you've been you don't have any traction you have no revenue 10 million 12 million 14 million that's a fine valuation raise a million dilute 10 you're fine that's my best advice better to dilute 10 raise a million then raise 2 million dilute 10 and have SPEAKER_99: bad investors because you don't need that much money at the start yeah do you want to talk about SPEAKER_32: this fulcrum uh venture accelerator or no you don't even want to yeah so this one you know i told i SPEAKER_99: was getting so upset by this that people started sending me even worse predatory ones so there was SPEAKER_30: some you know um venture firm or not venture firm an accelerator asking for 2.5 of people's companies for free i won't say the name of the accelerator um and then they would put more money in in a note that just strikes me the wrong way asking for 2.5 of free equity to let you live in SPEAKER_21: a hacker house i hate that i'm not going to mention the specific firm i'm talking about but i will meet with that founder at some point of that accelerator and hear him out um he's blocking me on twitter but SPEAKER_00: he's got a pretty good reputation um but i don't think taking 2.5 in exchange for room and board even if you're investing in an as well is a fair trade that's sort of the early uh ehrlich bachman model SPEAKER_90: right it's literally the early bachman model except in his he was taking 20 or something you know room SPEAKER_21: and board for 2.5 equity no bueno because if you're valuing your company at 10 or 20 million that's 250k SPEAKER_00: or 500k 250k 500k down payment on an apartment that's not three months room and board so let's just be clear here the equity has value if you're a self-respecting founder do not give away 2.5 for free then people say oh well what about an advisor advisors should be two-year deals 25 50 basis points maybe 75 even a full point with an outline of exactly what that advisor is going SPEAKER_30: to do for you all the specifics and it should invest over two years in 24 payments of equity and then either party can cancel it if the person is not doing what an advisor should do that's the proper structure so i'd say one-fifth of what they're asking for for four time for eight times as long so don't give me room and board help me find customers help me hire developers help me meet other investors whatever an advisor should do i have no problem with people taking 25 50 basis points as an advisor over two years in fact i i'm i don't know if i encourage it but it's kind of standard in SPEAKER_21: the valley and i was an advisor to a couple companies in fact calm when i invested i got like a little tiny amount like i don't know it was like 25 basis points or 10 basis points as an advisor SPEAKER_00: some people got advisor shares in uber their advisor shares were huge compared to their dollar SPEAKER_21: amount put in um so this one people started telling me about yeah can we before we even get to this or SPEAKER_32: even maybe we don't even need to talk about it but i think it would be good to like can we try and SPEAKER_60: codify some red flags that uh are signs for founders that an accelerator might not be in your best SPEAKER_00: interest to join absolutely so if they're high pressure tactics that's really bad they should say here's what we offer if you're interested let us know this is the date um that we need to know by but if they're emailing you every day they're texting you at night hey we need you to sign and they're putting high pressure on you and you say well my lawyer read the documents i have some concerns about this and they can't answer them not good if they can't give you 10 founders who went to the program and say nice things about you not good um and so that's what you're looking for free equity SPEAKER_30: never never give away free equity equity in exchange for advisors is okay um and then the amount of equity and the valuation so you know uh when you raise a friends and family around it's typically a million dollars like if you're literally raising from your aunt and uncle you take 50k for them and they get you know this tiny amount um you know five percent or something that's a lot of equity company but you're kind of happy to do it because it's your aunt and uncle and you like to see them be rich and you know they took this crazy risk when you had the literally a back of a napkin here's my crazy idea can i get 25k for 2.5 that's probably the right valuation six or seven percent for an SPEAKER_00: accelerator for 100k 150k that's fine when you start to see anything get into double digits that's not good so no double digits no free equity with the exception of advisors as discussed and no high pressure tactics and you got to have references and then i think you'll do fine what about charging cash to join that is predatory that's when you know you've got a true scumbag on your hands think about this um you are an accelerator you're supposed to help the person grow the company you're supposed to be an investor in that company you're supposed to be aligned with them that the shares in the company go up and that you are in it for 10 years to ask that startup to give you their precious dollars that they could put into hiring their first employee or you know doing a marketing campaign or you know setting up their servers or incorporating that is the most scumbag behavior in the world now if you were to charge for a course i don't have that i don't think it's the end of the world SPEAKER_01: um we charge 500 to come to founder university if you come to all 12 weeks we charge your card back 500 so we just do that so people don't burn a spot um and 94 of people actually uh finish the program and i think 90 or so ask for their money back or or we actually can return the charge some of them we SPEAKER_30: can't return the charge because they they don't accept it back or they ghost us um so you know if you SPEAKER_59: took a course i don't think taking a course on how to build a startup for 500 or a thousand dollars is SPEAKER_106: the end of the world but for an accelerator to take equity and charge you that's the truest scumbag move SPEAKER_30: i've ever seen and certainly i'm going to take a percentage of money i raise for you in your seed round like i'll take five percent of it being a broker dealer like that true scumbag move or pay SPEAKER_125: us five thousand dollars to present at our you know forum uh to meet investors like karetsu forum was doing and that's when i attacked karetsu 12 years ago famously and caused a brouhaha in the industry SPEAKER_00: and stopped this payola i stopped the payola uh in the industry this was standard practice nick that they would charge them and i destroyed that company and i destroyed all the people paying for it if you if karetsu forum ever contacts you and asked you to give him five grand to pitch you email SPEAKER_01: jason at calacanis.com and you let me do the hard work which is what i did here with the you know somebody told me this company wanted to charge like six thousand dollars to go to accelerator and then get a bunch of money from you and i just i called them out uh on it i think it's just ridiculous and then they wanted free equity just not cool not cool all right that's good that's good advice SPEAKER_32: six thousand dollars yes they charge six thousand dollars they did mention in one of the things that if you're not satisfied we'll give you the money back so i don't know bag yeah i think but that is a SPEAKER_00: lot six thousand is a lot it's i i mean that that's what you know what would happen like somebody who's in our circle of our extended family who doesn't know how silicon valley works would be like oh yeah they they told me they knew all these people and they had like sequoia came to one of their events or they had you know somebody was here and i just thought well that's how the system works SPEAKER_30: they convinced me that's how the system works now the founder since i tweeted that told me you know he emailed me and said he was really disappointed he's a big fan and all this stuff and i told him like i think it's a scam he's like well i don't think it's a scam and i said well you can not think it's a scam here's what i would encourage you to do raise a fund put money into the companies like the rest of us are doing don't charge six thousand dollars don't take a salary and do what i did be an advisor to them and take 25 basis points but don't charge people six thousand it's a scumbag move it's a scam uh you want to sue me for my personal opinion feel free uh i i'm allowed to have my opinion i think it's a scam to charge founders and i think it's the lowest thing you can do SPEAKER_32: boom all right you want to do one quick fun story to end on oh is there a fun story yeah SPEAKER_60: let's do it yeah there is a fun story so um in your opinion jason um you this can be an athlete this can be a criminal it can be a founder it can be anybody in the world who do you think is the SPEAKER_311: biggest bag secure of all time in your opinion hmm well in the nba would be ben simmons um today yes right he secured a huge bag he doesn't play basketball anymore pretty good because SPEAKER_00: his feelings were hurt he won't put the ball in the basket yeah like literally refused in a playoff game to put the ball in the basket with a clear layup yep you and i would have you and i non-nba SPEAKER_219: players would have taken that shot yeah i would like to think so hopefully i don't know i can't promise i would have made it but i would have taken it for sure you would have taken the shot so that's SPEAKER_34: the bag holder in the nba i can't think of a bigger bag okay can i can i uh provide one person perhaps give me one um mr johnny bouferat the greatest bag secure legally i think of all time of course okay do you know who are you familiar with mr johnny bouferat no tell me he is the ceo and founder of a little startup called hoppin who you might remember once SPEAKER_146: oh no i don't think he was i think you spoke with him a couple times but i don't think he was on the SPEAKER_07: podcast i spoke with him a couple times because i wanted the software yeah it's pretty amazing so SPEAKER_34: the reason that this is in the news is because uh pandemic era startup darling hoppin just sold SPEAKER_60: off its virtual events and sessions units to ring central and johnny bouferat stepped down as ceo and he's leaving the company um but just to give a little explainer on hoppin uh they were one of those startups in the pandemic era or i guess companies in the pandemic era that got a crazy tailwind from lockdown similar to clubhouse similar to zoom it was founded in 2019 i think this is funny SPEAKER_34: because it's just like so it's such a perfect storm isn't june 2019 the perfect time to start a virtual events business if you know covet is going to happen in february 2020 because it gives you just enough time to get a product built and have a little bit of a head start six months right before SPEAKER_76: covet hits it's like it's like it's like perfect well i mean maybe he was maybe he's the person SPEAKER_35: he was working at the wuhan lab before he started shopping we leaked it so he started this company SPEAKER_30: on the side to do it's like huh if you couldn't leave your house but you still wanted to do business you'd still have to have trade shows so i'll leave the covid virus anyway but yeah what did you think SPEAKER_00: about the software you used it right so i i looked at the software and here's what the software did we're on zoom right now and instead of having like a zoom call you would get on the zoom call you'd be in a waiting room which would be a lobby and we'd all be in the lobby talking and then it would say hey there's four sessions going on right now and then there's a trade show area and you have a little interface and you'd say oh i want to go to the one of these four speaking slots i go to the thing and i could hear somebody pitch their product or hear a panel discussion or i could leave and then i go to a room and this would be a room for i don't know uh you know some law firm and the law firm has a room and they're sitting there waiting for you you come in ding dong you talk to them and it's their trade show booth so imagine you look at an overhead you see 100 trade show boots it's kind of a brilliant idea people tried this in vr actually i got pitched on this a thousand times with a company called SPEAKER_30: second life and other ones where you would walk your avatar around like playing a video game and you could do the stuff but with everybody having a great headset having a great camera the time was right to do virtual trade shows the problem was the cost i started doing some of these remember i did like an nft event i did a bunch of like little webinars with n inside and i would get a thousand people to show up for the webinar it was crazy but they wanted to charge us like ten SPEAKER_14: dollars per user uh per day or something and i was like i'm not giving you thirty thousand dollars i could give zoom 500 bucks a month to the event yes per attendee or they would negotiate SPEAKER_15: a 250 000 license a year unlimited so they started putting getting these licenses for 20k a month 250 a SPEAKER_30: year and that's where they started printing money so they went from zero in revenue to a million a month in revenue to two million a month in revenue because all these big companies were like what do we do we have a trade show next week and they're like i don't know is there a trade show platform was like yeah that's hopping great use hopping and all of the um webinar features weren't yet in zoom now zoom has an app store you can there's zoom webinars now and you can kind of do these things on zoom webinars but it was like a skin on top of zoom to do multiple zoom rooms at a time yeah it SPEAKER_00: was a clever idea um so just to give you yeah just 500 bucks a month i would have paid for right SPEAKER_60: just to give you some metrics on it um it must have had sick performance because it hop and raised a SPEAKER_34: billion dollars over four rounds in 14 months between june 2020 and august 2021 its peak valuation was 7.8 billion dollars in a 450 million series d which had closed in august 2021 two years ago exactly the round was led by altimeter and arena holdings and at this time hop and had a hundred thousand SPEAKER_04: business customers and 17 million user signups so they must have been generating some serious revenue if they were trying to charge you that much and they had a hundred thousand businesses using it David Friedberg: i think tens of millions of they went from zero to tens of millions of revenue is my guess yeah SPEAKER_34: so probably overnight right so i would say the firms are paying like a hundred two hundred three hundred x revenue multiple on evaluation probably something like that yeah well let's let's do the David Friedberg: math how many customers did they say they have a hundred thousand business customers at the time SPEAKER_99: okay a hundred thousand okay a hundred thousand at ten dollars is a million a hundred dollars is ten million a thousand dollars is a hundred million and ten thousand dollars is a billion uh so i'm guessing SPEAKER_30: that people were paying thousands of dollars for the software per year yeah so it probably got to a hundred it probably got to nine figures in revenue very quickly yeah which probably meant you know brad gerstrom is a very sophisticated investor looked at it and i don't think he put that much money SPEAKER_01: into it it might have been like a 20 or 30 million dollar check i don't think it was like hundreds of SPEAKER_30: millions but they probably looked at and said hey year one zero year two a hundred million year three 300 million this is going to be the next snowflake it's going to be the next zoom right you know let's get in here um everybody's going to need to buy this and now nobody needs to buy it or like one percent of companies need to buy it just like a peloton oh i can't go outside i can't go to the gym SPEAKER_00: i have to get a peloton so 40 bucks a month two thousand three thousand for the bike i'm going to do it i have no choice so getting back to johnny yeah why he is the greatest bag secure of all time SPEAKER_60: is during hoppins valuation run-up and i don't know how anyone allowed this to happen but maybe you can SPEAKER_34: explain it johnny bouferat cashed out 200 million dollars worth of his shares in secondary 200 million and just last week hoppin announced it was selling its events business to ring central for an initial purchase price of 15 million dollars after being valued at 7.8 billion uh two years ago exactly SPEAKER_348: yep and johnny bouferat cashed out 200 million 200 million dollars 200 million you remember you remember SPEAKER_34: it's incredible okay can we guys has brian chesky cashed out 200 million dollars of airbnb stock does anyone know like that is an insane number i don't think in the private markets they did do you remember SPEAKER_21: stefan from um do you remember stefan from saturday night live yeah bill haters character right yeah SPEAKER_352: yeah yeah haters great character this this startup story has everything it has secondary for the Chamath Palihapitiya: founder it has zerp race environment it has sass and it has a billion dollar valuation and lockdowns SPEAKER_356: it literally is like the it's the greatest startup story ever he has everything the guy secured the bag SPEAKER_358: legally apparently all good like he just this is legal it's all good when you johnny brother my god Chamath Palihapitiya: this is amazing somewhere doh kwan is like huh what did i do wrong doh kwan you should have just done SPEAKER_15: an events business bro come on well i mean this is why the clubhouse guys what they were they were at four billion yeah when they were at four billion i would have just sold the company it's year two of the twitter offered to buy it for four billion they said no i would have been out yeah give me the four billion there's no way i'm not taking that deal i'm done boom yeah trees do not grow to the moon folks SPEAKER_30: so i think you know uh here's the thing about the legality of this trade if people are wondering when you're a sophisticated investor there's a term qualified purchaser you have five million dollars in liquid assets when you start getting into this rarefied air which is like less than one percent SPEAKER_15: of people in the country or entities in the country you are sophisticated you have the top law firms and representation in the world you do deals like this all the time you put a hundred million into this a SPEAKER_30: billion into that you make trades there is no way for you to say you don't understand the trade SPEAKER_21: you're not grandma by who somebody told to buy luna or to buy an nft in florida and it's your first crypto trade and you've never bought an equity before and you got a 401k and you own half your house like okay yeah we get it you're unsophisticated somebody took it for granted you can't say you know SPEAKER_371: uh somebody from a hedge fund got taken advantage of here now if there were things that were not true SPEAKER_21: and you sold secondary which there's been a couple of lawsuits around that SPEAKER_01: um including one of our favorite people i believe uh you know i skipped that one for time purposes but SPEAKER_324: if you want to go there we can go there well that's right i mean there is a lawsuit with breslau right uh there is yeah there is there it's it's not a lawsuit yet it's a it's a probe it's a probe SPEAKER_21: oh there's a probe probe okay not a lawsuit well ryan breslau remember our friend of our pod here SPEAKER_01: uh from the payment startup bolt um he um he's uh has been subpoenaed reportedly by the sec for SPEAKER_99: corporate wrongdoing including possible securities fraud um i guess he had a 30 million personal loan SPEAKER_30: and he defaulted on it listen you want to talk about red flags no founder should be taking more than 10 million out of a startup 20 million maybe before it goes public it's just not necessary folks the secondary does not need to flow that violently 200 million johnny bufra 200 million that is insane SPEAKER_99: it's 10x anything logical it's 10x logical if your company became worth billions of dollars SPEAKER_30: um and it was had 100 million in revenue which this company probably did 10 million sure 20 million maybe you start getting into 30 40 million you're like well why don't you just wait for the ipo what are we doing um like it's a really negative signal and so what why would bolt ever give a loan SPEAKER_18: of 30 million dollars to a founder that is a recipe for disaster i believe jp morgan gave him the loan SPEAKER_222: and he defaulted on it and then bolt forgave the loan and three bolt board members were like we're not doing this this is ridiculous and then breslau kicked them off the board reportedly reportedly all SPEAKER_05: reportedly allegedly allegedly well here's the thing if you if you're a board member and somebody is SPEAKER_00: doing this kind of um alleged kind of uh financial engineering this is like you you as a board member are like i i don't want to go to jail i don't want to lose lps over this i i took some retirement SPEAKER_21: funds money gave it to this person and they did this kind of these kind of transactions you're not going to get that retirement funds money again it could be a career ender for a SPEAKER_30: venture capitalist so when and venture capitalists are sophisticated and they're cutthroat at times sharp elbowed whatever um very simple very simple like don't do crazy stuff this is like this apparently if if half of this is true it's like deranged insane behavior and i i would have gotten off that board immediately just to not have the potential downstream lawsuits and you're gonna get SPEAKER_14: deposed and just craziness so have you ever dealt with like personal loan shenanigans with founders SPEAKER_30: like forgiving loans for themselves or not the personal loan stuff um that very rarely comes up um the thing i've seen that is in this area is the founder finds an investor who they vibe with the SPEAKER_125: investors like i want to win this deal so i'll invest 10 million but in my term sheet i'm going to put SPEAKER_00: that you get 10 percent more equity in your company so i want to give a grant to the founder now the SPEAKER_21: founder owns 50 of the company so why do they need to go to 60 50 is plenty you know larry and sergey own like nine ten percent when they exited so what why do you need to get 10 now in the series a SPEAKER_00: series b well it's the vc is buying the deal so there's five vcs who throw in term sheets and the fifth one says you know what i want to win this deal the founder controls the company or has some you know exerted influence over the company i'll offer them like a stock refresh grant and what i always say is let's handle that after we close this deal let's have good hygiene let's not mix two different conflicts the equity for the founder or the equity for the ceo if they happen to be the founder should be a compensation committee on the board decision that's what i was told by like the top i don't want to say which firm but you know think ernst and young price works good but the top people are like for hygiene have that separate do that with a comp committee when you're doing a SPEAKER_125: financial transaction selling shares in the company then do that but you don't want to mix the SPEAKER_21: two it's because it looks like a hygiene it looks like a bribe you use the bribe word i said conflicted you know and like depending on what perspective you're looking at it from if you're right the SPEAKER_30: cynical take would be this looks like a bribe yeah and i don't disagree with the cynical take um but what i the way i say it to founders because i never want to i don't want to say to like the new investor and the founder like why are you bribing it's like it's too accusatory what i say is let's have great financial hygiene let's not get ourselves into a downstream legal issue and that's not saying i'm going to bring up the legal issues that there could be a downstream issue in the future somebody could sue let's have good hygiene let's separate these two issues let's listen to the accountants and the lawyers and do this properly and that's what i do and then you know what i'll be totally honest i don't win that battle every time i don't uh because in in private markets i don't want to say it's the wild west but it's kind of like the wild west if people want to be cowboys it's the wild west you you're basically it's basically the f if the founder wants to go cowboy now you're in the wild west and everybody's shooting their guns off and it's crazy and you got to get the sheriff and it's just a different type of it's it's kind of lawless and what you're what you're trying to do is make sure that everybody involved in the company who's in leadership are not cowboys that everybody's just trying to be in sync and do things properly right SPEAKER_01: and be jedis you know have a code be samurai you know you can still want to win but anyway shout out ryan brusselo fan of the pod former friend of the pod i hope it works out for you with the sec SPEAKER_321: also raising a venture fund uh or trying to um yeah okay with the potential sec investigation yeah SPEAKER_34: and he wants to raise a venture i mean listen i i am not an lp you're making that up but that's not true how could you i don't know jason as if you were approached to be an lp in this fund and this is the same guy who made like 1400 tweet threads about how stripe is a mafia would you want to be an SPEAKER_399: lp in this person's fund would you want to be involved with this person no no of course not you SPEAKER_00: you're trying to reduce risk lps are super conservative i'm raising money from lps the fact that i have two podcasts where i speak my mind it's a benefit in some ways but you know i i'll tell you the truth i'll tell you one story i said uh um on cnbc once like i had an lp who was lined up SPEAKER_01: and there's an investment committee and um they were looking at us and then they said you know we're going to politely decline to be in launch fund and i said you know can i ask and they got the back SPEAKER_30: channel was i had said like listen i i think trump is like a bit deranged and i think it's like an actual risk if he becomes president and this person got super offended because they were a donator to trump and they said they called the president deranged or whatever and i was like well his i was describing his behavior being deranged like we we need to have stability in the country not like this kind of craziness you remember the first year of trump he was doing all that trolling stuff and i SPEAKER_189: was like yeah i really don't honestly i was in college i i was not paying attention to politics SPEAKER_15: i mean he was basically causing he was causing all the chaos he's causing now he was causing in SPEAKER_30: year one of his you know reign of terror on the country where he was just like trolling people constantly and you know people are at airports and like people are afraid about like they're doing protests in the streets over immigration i was like you know his job as the commander-in-chief is to communicate well and and to not create chaos i said this is deranged like tone it down so the stock market and you know commerce can occur don't don't make it crazy where people anyway the lp passed right so i have to deal with that now i don't have an sec investigation nor do did i take on yc and call them the mafia nor did i get ousted and fire three of my board members you you look if any of that's true SPEAKER_00: all the all those allegations are true any combination of that would eliminate 99 of lps in the world like 99.9 of lps i think i can't imagine because i the lps are conservative they're SPEAKER_108: super conservative um so yeah i i thought you were joking when you said he raised that he was trying to SPEAKER_407: raise a venture fund no axios shout out axios good scoop oh access great scoop yeah credit to axios SPEAKER_19: not credit to the other oh hey wait can i say uh not credit to the other group that constantly complains about me not crediting them and then they do a good job too they do a good job too the other Chamath Palihapitiya: ones i love them i just don't like the fact that they are like attacking me when i give them credit and they're like you didn't give us enough credit yeah whatever um shout out i will want to say before SPEAKER_376: we wrap breslow uh yeah so according to the axios article this is how oh no uh breslow's fund which SPEAKER_60: he's calling family is being pitched i'm just going to read this this is not dr seuss this is not a tongue twister this is how axios quoted this fund as being pitched as the first explicitly founder first SPEAKER_222: fund since founders fund the first explicitly founder first fund since founders fund like that SPEAKER_34: is how that like what are you trying to get that's terrible i'm like reading it i'm like what what did SPEAKER_90: that say i thought i thought my brain was short circuiting yeah that doesn't make any sense um SPEAKER_157: yeah that's terrible branding i i think the new peter teal ryan breslow yeah and i don't think so um here's what i would say um uh there's a there's a a really great business SPEAKER_00: movie that um lon is going to do remember lon and i did our um business breakdowns that was your SPEAKER_157: idea great job yeah yeah sure idea so business breakdowns we did um i want to do another business breakdown i think there's a seminal business movie and it's one of the best pieces of advice i ever got SPEAKER_00: and i toned it down when somebody gave me this piece of advice and you know gave it to me i think it was rulo who i was riding kind of high at one point actually hey uh jaco yeah he said to me um i never get high on your own supply and i said fair point fair point uh and that movie the seminal business movie studied in all business schools is scarface oh and i think breslow somebody needs to pull SPEAKER_99: breslow aside if i was his like friend if i was his bestie i'd say listen i think you gotta like never SPEAKER_01: get high on your own supply like why don't we tone it down why don't you build another company SPEAKER_30: that people love that solves a problem in the world and just do some podcasts and be super humble and say you learned a lot and uh you really want to put it to use in the next company and you're really happy to put your own money to work and you really love your team and you're really focused on solving this problem for humanity like that's the tone when you f up like this that's the tone you got to come out with yeah when you have this kind of track record is you got to just come out be super humble hey i'm trying my best and it was it was after i sold weblogs inc i was kind of like oh i can do it again and i just decided to move to listen you know we got lucky on weblogs inc we SPEAKER_59: hit the timing perfectly brian was an incredible partner i can't believe that peter rojas and ryan block did such a good job with engage if i didn't have those guys behind me still kicking by the way SPEAKER_15: right you'll gadget yeah of course crazy you can't kill the number one that was the number one blog in the world people like oh you have the number one business podcast in the world i'm like yeah i also SPEAKER_30: had the number one i've had number one before it's not like a new thing so anyway shout out to uh SPEAKER_106: ryan breslau uh for salute salute and salute to our our mount rushmore bag holder uh our bag SPEAKER_435: secure johnny buffarat my man congratulations enjoy that 200 million jersey crew or is he with SPEAKER_218: the brooklyn crew i don't know the guy seems like he he's definitely from stat island no he's from SPEAKER_437: what he's australia born australia born born in australia what what is he i mean he cleared with taxes SPEAKER_157: he cleared a buck 20. i don't know what buck he cleared a buck 30. where is he with that buck 30 right SPEAKER_32: now what is he doing all of his social media i hope he goes off the grid and enjoys that money go to melbourne live life baby build a house hamilton island with sundays hamilton island it out man SPEAKER_440: for sure get a jet maybe johnny if you need a wingman by the way uh yeah totally we're in i'm i'm here SPEAKER_99: let's go find a music festival somewhere and when we're we're we're with you pull up the g650 let's go uh we salute you all right we'll see you all next time on this week's service bye bye