SPEAKER_00: Getting back to our discussion of where the industry is, I think we are at the turning point right now because private equity is coming in and trying to buy positions. We had somebody offer to buy one of our positions in our first fund at some discount to the last round, which was only 20%. Now, most of the discounts I've been seeing have been in the 50%, 75%, just bottom feeders. But this one, if we sold our position in this fund, that would return 1.5X the fund. We really believe in this company, but that fund's already at 1.2X, I think, 1.1X. So we add 1.5 to it. Now we've got a 2.6 or 7X fund with still some holdings in it. Maybe this is something we should consider for our LPs. Would be great to get that firm to, you know, DPI actually returned, not on paper, because that one on paper was kind of right around 4.95X. So my job is to get those two numbers to, you know, meet as best I can.

SPEAKER_06: I haven't had to think about an exit for a long time.

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SPEAKER_00: All right, everybody. Welcome to This Week in Startups. I am your co-host, Jason Calacanis. With me is my co-host, Alex Wilhelm.

SPEAKER_12: He is Alex on x.com slash Alex. I am x.com slash Jason. Talk to us over there.

SPEAKER_13: He's got a really great newsletter called Cautious Optimism. And you can go to... CautiousOptimism.news. He does a really good job. So go pay for his newsletter.

SPEAKER_12: And today we've got a full docket. And for the first time we're going to have, as we've gone back to doing a live show twice a week, Monday and Wednesdays at 1 p.m. Eastern, 10 a.m. Pacific, 12 p.m. Texas Central Time. And I'm really excited about today's live guests on the program because I think this is

SPEAKER_03: the most controversial demo of 2024.

SPEAKER_18: Controversial is the word I'm using.

SPEAKER_19: Yeah, I think in retrospect, the Rabbit R1's CES era demo, it wasn't controversial at the time. It was exciting. People were, you know, oh my gosh, maybe they've actually come up with something here that's so new. What is a large action model? You know, you remember the whole conversation. And then that kind of petered out and it became infamous, if you will. But this, I do think it's controversial from the jump.

SPEAKER_00: Right, so that might've been the highest profile launch along with ChatGPT 01 maybe, which I

SPEAKER_12: think was named after 01 Visas. I saw that on the Twitter that somebody said that they named it after 01 Visas.

SPEAKER_06: But let's get started here. Let's talk a little bit.

SPEAKER_25: Maybe we can just start by you teeing up this demo that came out, I think Wednesday or Thursday last week.

SPEAKER_19: Yes. So two folks from Harvard, Anfu Nguyen and Kane Ardafio, put together a demo of some hardware that brings together AI technologies. And the second generation of Meta's AR glasses, we've put together a cut for you. So let's take a look and see what they put together.

SPEAKER_29: And then when you pick your jaws up off the floor, we'll talk about it. We built glasses that let you identify anybody on the street.

SPEAKER_30: The information Atul collects from just a photo of your face is staggering. Cambridge Community Foundation. Oh, hi ma'am. Wait, are you a Betsy b****? Yes. Oh, okay. I think I met you through the Cambridge Community Foundation, right? Yeah. Yeah, yeah. It's great to meet you. I'm Kane.

SPEAKER_33: Here's how it works. We stream the video from the glasses straight to Instagram and have a computer program monitor

SPEAKER_34: the stream. We use AI to detect when we're looking at someone's face. Then we scour the internet to find more pictures of that person. Finally, we use data sources like online articles and voter registration databases to figure out their name, phone number, home address, and relatives' names. And it's all fed back to an app we wrote on our phone.

SPEAKER_36: Okay. So there it is, folks. The application I've always thought would be the killer app for augmented reality, which

SPEAKER_13: is you put on your pair of glasses, like my serial killer glasses I'm wearing today, and above somebody's head, I might see above and around Alex's face, I don't know, mutual

SPEAKER_39: friends we have. I wasn't thinking home address, that creepy, but maybe the LinkedIn page if it's public. But here, a pretty great demonstration, something that's been possible for a while, but what's truly unique here is not the facial recognition. It's the back end going and, you know, combining facial recognition with sources of data, which

SPEAKER_12: I think is kind of what LLMs bring to the party. Right, Alex?

SPEAKER_40: Yeah.

SPEAKER_19: So the guys put together a doc and we'll have them on in just a second. And they talked about how what they've done now is just possible because of not only LLMs, but their ability to process huge amounts of data very quickly. So this is a really fun hybrid of hardware hacking, if you will, and also just intelligent, putting together of different bits of software to make a much greater whole. And I think this is going to inspire a lot of folks to build. But Jason, why don't we have the guys on? Okay. All right. Well, please welcome to the show, everybody. It's Anfu Nguyen and Cain Ardafio. Anfu, if you're curious, is from Nebraska and Vietnam, and he's working on human augmentation over at Harvard and Cain is from Indiana and is working on a physics major. Guys, welcome to the show. Nice to meet you guys. Thanks for having us.

SPEAKER_00: All right. So tell me how many days, weeks, hours, months did you work on this project and what was the inspiration behind it?

SPEAKER_47: Yeah. So it was actually pretty quick to code it since we've been coding for a while. It's been coding for like nine years, but it took about like four days to make the code work. And then we spent the rest of the time making the video as well as also writing up the write-up on how we did it, as well as the things you can do to like erase your information off of these websites so that the tool becomes completely ineffective. And that was like a big part of our campaign is to raise awareness of it and also like solve the problem immediately. But yeah.

SPEAKER_36: And what was the inspiration behind the project?

SPEAKER_49: Me and Anfu have been working in like this area for a while. There's a couple of different areas it touches. One is on like the augmented reality side. Like we started the like augmented reality club at Harvard. We happened to, we have like a bunch of headsets, like these glasses, you know, like kind of in our possession. And then another part is like the open source intelligence part where, you know, taking fairly like innocuous data and being able to extract way more information out of it, like home address, like going from name to home address, phone number relatives, that type of thing. And then the third component that we have a lot of familiarity with are LLMs. Um, you know, every college student is like familiar with like ChatGPT and knowing, having familiarity with that tool allowed us to enter.

SPEAKER_00: So, so Cain, you're telling me you were able to form a club that the chess and the dungeons

SPEAKER_06: and dragons club could make fun of a nerdier club. Oh, then magic.

SPEAKER_51: The gathering at Harvard, there is an augmented reality club at Harvard.

SPEAKER_53: Yes. Yeah. Yeah. We were, we were the bottom of the barrel.

SPEAKER_54: So, I mean, this is a level of geek and nerd dork that I am here for. I would join that club immediately.

SPEAKER_58: I want to stand up for the nerds here because I was once in knitting club. I just want to throw that out there. And also I've played a lot of D and D and so let's not, we don't need to get feisty amongst the nerds.

SPEAKER_12: Jason, I am bonding here.

SPEAKER_65: I, there was nothing more exciting for me than like Sundays when I knew we were going to play dungeons and dragons in the afternoon, I counted the hours when I was 12.

SPEAKER_12: But anyway, this, um, caught some virality to it because you made, not only did you build the technology, you decided to go out into the real world and kind of, um, be a little cheeky, a little fun with it and, um, kind of do what we call in the broadcasting business

SPEAKER_39: man on the street, which is when, you know, a journalist just talks to random people. You do a little street work. Tell me about the inspiration behind that and who actually did that? Because that takes, uh, some bravery to go try this thing in the real world. And we saw a couple of clips of it. Did anybody get really upset at you or figure out that they didn't know you and that you were scamming them or you were using technology to kind of, you know, stalk them, creep on them?

SPEAKER_47: Um, yeah, so I guess part of the inspiration for doing this was to show people that this tech was real. It is happening in the real world. It's all public data. And this could happen to anyone at any given time already. We're just raising a lot of it. We also, uh, made the decision to do a more wholesome prank where we would go up to them and say like, oh, I'm a big fan of your work. I've read all your stuff. Like, this is great. Um, just kind of flatter them, make their day. Right. And then have them go on with their day. And then, um, most of the other ones, we just went around Harvard yard, meeting random people, uh, like who go to Harvard and then like trying to get to know them.

SPEAKER_48: Basically, the big thing that we believe in is like taking technology outside of just

SPEAKER_49: like research labs and like computer science classes at Harvard and like putting it in like a presentable way and like really putting it in the real world, seeing how it really

SPEAKER_69: works on, you know, literally like the subway guys, but be honest with me was just, just a way for you to meet chicks.

SPEAKER_72: No, no, no, no, but this wasn't to meet girls like Zuckerberg created the book face. Yeah.

SPEAKER_02: Because he, he said he couldn't meet girls. He wasn't very good. He was a little intimidated. It seems like you guys have a little bit of game, so I don't think you need this tool.

SPEAKER_74: Yeah. Hopefully we don't need this school.

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SPEAKER_49: Like, honestly, it's more like for like networking. Like, oh, there's this like, you know, super cool, like business person that I met.

SPEAKER_70: You know, what are they deep? All right. I like it. Alex, you're with us?

SPEAKER_58: Yeah. I'm curious about you guys being so white hat about this. Because often when we see in technology, someone goes, hey, I built a thing. And then they show it off and they give it away.

SPEAKER_19: And then people go out there and the explosions follow. In this case, though, you guys seem to be very privacy conscious from the beginning. Very politely. Why are you being so responsible about this when you have what is essentially the coolest demo out in the world right now? It just feels very wholesome.

SPEAKER_47: Oh, yeah. Thank you. I mean, we, we like this originally started as a side project. We just hack on things. We're not really privacy researchers or anything. But as we started like showing more people and developing it further, we realized how dangerous this actually could be. Like we talked amongst each other and definitely didn't like we decided not to open source it, no publishing of the code to anything. And we just want the extra steps so that if this did go big, then people could protect themselves. Like I wouldn't want to release a technology where people would just feel unsafe, even in their home and in public. That's kind of why we decided to take a more awareness.

SPEAKER_58: So the other side of that question, though, is you did show it off and you have provided a little bit of information about how it was put together. You guys said that this system leverages the ability of LM's understanding process and you put together different features to kind of make it work. Did you leave enough breadcrumbs for folks to quickly follow in your footsteps and make their own homebrew doxing goggles?

SPEAKER_49: Yeah. So, I mean, we definitely, this is kind of like a calculation on our part to see like, yes, we, you know, we kind of showed like what parts of it, um, it was kind of built out of, but a lot of that was just because in order for us to tell people how to protect themselves, some of like the core machinery, like you have to be aware of, for example, like, you know, we use like the PMI's reverse image switch engine for people to know how to protect themselves. They need to know that exists. Um, and our calculation is that maybe, you know, a few people might kind of try to reverse engineer what we did, but I think a lot more people, maybe like tens of thousands of people will now protect themselves.

SPEAKER_90: Yeah. No, I think that's super fair. Yeah. I was going to say that I think is a long tradition in people figuring out if a lock, like a master lock is easy to pick and they share it. And then people go, oh my God, you just taught everybody how to pick a master lock.

SPEAKER_12: It's like, no, we taught non-criminals how easy it is for criminals who already have this information to do it.

SPEAKER_39: And the strategy, which you used here, public databases, et cetera, facial recognition. This is what scammers have been doing for a decade now online. They will wait till somebody is on vacation, sharing their photos in Greece, and then go rob their house. Very simple to do. Um, or look for people wearing certain watches and it's just going to be exacerbated. You could, you could build a tool that looks for certain extremely expensive watches on Instagram, find those people, find their addresses, make a list, and then give it to a criminal gang, which by the way, if we can just brainstorm that right here, that's happening already. And so this is just a great gift you've given to folks. We see this in confidence scams all the time, but there are a lot of positive uses to this, especially if people opt into it.

SPEAKER_36: And so you seem very entrepreneurial. Are you two considering entrepreneurship as a career path?

SPEAKER_47: Yeah. I mean, I started in high school and, um, yeah, we've been doing startups for basically our whole lives. Right.

SPEAKER_94: And what are you, 19 and 20 years old? We're 21.

SPEAKER_93: Oh, you're 21. Oh, wow. You're aging out. Yeah, yeah, yeah. Okay.

SPEAKER_98: So when do you graduate? Uh, I'm a genius. So I graduated in two years. Uh, I'm in one and a half. So about the same.

SPEAKER_101: Yeah.

SPEAKER_100: Oh, got it. Okay.

SPEAKER_13: Well, you seem incredibly bright. So how about I give you 125 K, uh, and incubate your company, build whatever you want. And, uh, you can do it while you finish school or you can just quit school and just go do it.

SPEAKER_103: If you're serious, that'd be awesome. Okay.

SPEAKER_13: Great. As long as you, I mean, you guys got into Harvard from assuming that you don't have some crazy criminal records and that you're morally and ethically, uh, you know, like

SPEAKER_06: good people, but we'll, we'll, we'll close the deal after we get off online here, but what's the reaction been? This obviously went viral in a way maybe you didn't expect.

SPEAKER_00: And then that means people on campus know about it. And you've I'm assuming became, uh, you know, higher profile on campus. I'm assuming some journalists called and maybe even some investment venture capitalists like myself called. So what's been the reaction? What's the most interesting feedback you've gotten in any famous people or venture

SPEAKER_25: capitalists or the school come knocking and say, Hey, this was interesting, but maybe don't take it any further. What's the reaction been?

SPEAKER_49: So it's been like really interesting. I think from like, just, you know, students and like, you know, our peers, we've received a lot of different feedback, everything from like, Oh, this is like the greatest invention, like, where can I buy it? Like, this is like the greatest invention I've ever seen to people saying like, okay, you know, maybe this technology shouldn't even exist. Like, you know, don't even build it to begin with. Um, so it's been just like very interesting seeing like all of the like polarization. And then there's obviously a lot of people in the middle. Um, and, uh, yeah, I mean, uh, like meta and like a cup and Pemise and like a couple of the other companies involved, like have responded to journalists. Um, but nobody, like none of like the institutional bodies have really reached out to us. So mostly just like our peers and media. Sure.

SPEAKER_47: Yeah. And, uh, we've been talking to a lot of press. We got a lot of inbound from people interested in it as well for networking. I guess the interesting one is like a couple magicians reached out to us for like, uh, to use magic trick, right? Because if you didn't know this tool existed, you'd be like, uh, does your name rhyme with this or something like that? Like, that'd be crazy. Right.

SPEAKER_12: Like, well, and you know, it's interesting about that particular scam, the clairvoyant scam or the fortune teller scam is they will be looking at you, trying to read you and you come in and you give your credit card at the front. Somebody might at the front desk, once they get your name and they know it, go start doing internet searches.

SPEAKER_39: The person might have an earpiece in like a hearing aid, and they might be feeding them some information and they do that. But the, the way that trick originally worked, my understanding of it is I would say, so you

SPEAKER_44: grew up in your, your Asian, your Vietnamese or Korean. And I'm sensing, oh, Vietnamese, cuz you smiled, right?

SPEAKER_39: So you're Vietnamese and your parents came here. Now, if I knew the history of Vietnam or like, if you know the history of say Iran, if you meet anybody who's Persian in America, if you say, oh, did your parents come here in 1978? It's a little, they say, yeah, how did you know that? Well, that was when the revolution was, that's when everybody came here, 77, 78 and oh, you're Persian, so you're Persian Jewish. And well, those are the 99% of the people who left Iran or the Persian Jewish people because it became an Islamic state. So that's the sort of thinking. And they also know the top 10 careers. They know the top 10 names, so they can kind of play this kind of game here. You just close that loop. So that's very interesting.

SPEAKER_116: What are your majors now in college? What are you majoring in here at the Harvard university?

SPEAKER_114: Yeah. I study physics, uh, I'm sweet self-design concentration. It's called human augmentation.

SPEAKER_47: Human, there's a, there's a, is that a computer science?

SPEAKER_85: Uh, it's under the science department. Yeah. But it's like you design your own like curriculum and name and stuff. Yeah.

SPEAKER_44: Got it. So human augmentation is your passion.

SPEAKER_120: Yes.

SPEAKER_44: Got it.

SPEAKER_13: Well, um, if there was a, an idea you had in human augmentation, that's just not practical today, but that you could build, what would it be? You know, like if you could do something that maybe it doesn't feel like technology is ready to do in the next five years, but would be pretty game changing. What would it be?

SPEAKER_47: I've been thinking a lot about like new interfaces, um, to interact with AI. And I've built like five, six different major projects that were months long related to this, um, like smart glasses that listen to your conversation and help you get longer, short, short-term memory or, uh, ID quicker, um, be more creative, um, or like define any word. And it's just like, it just works with you and has all the context to like give you that intelligence.

SPEAKER_85: Um, so I'm very interested in that. And I think there's a lot to do with that in the next five, 10 years.

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SPEAKER_130: A lot of those lessons from science fiction films. You watch a lot of science fiction?

SPEAKER_122: I actually don't watch any movies, but I'm mostly building stuff.

SPEAKER_90: Two hours will take a little bit of time, but there's this very famous franchise, Matrix,

SPEAKER_38: where they do essentially like a neural link type jam and Yano Reeves goes, I know Kung Fu. You might know the clip from TikTok more than the movie. You've seen the clip on TikTok.

SPEAKER_92: Have you guys watched a full movie? Have you ever, have you sat and watched a two hour movie?

SPEAKER_49: I mean, I didn't watch the social network. You did? Yeah, yeah, yeah. Because I thought it was pretty interesting. There's that, there's kind of a fascination on campus with like Mark Zuckerberg, like any like entrepreneurship minded Harvard student, a lot of them really aspire to be like him. Not me, but like it's, yeah, it's a thing.

SPEAKER_38: That's fascinating. Yeah. I met him like the first year he was in Silicon Valley.

SPEAKER_00: He was incredibly awkward and everybody just thought like this kid's weird, but he's incredibly focused and he's really good at copying stuff and then making it faster and better.

SPEAKER_12: He didn't have like his own ideas as much as he like saw hot or not, or he saw friendster

SPEAKER_00: and he saw my space. And those services were crashing constantly because at that time, the web 20 years ago, just really wasn't good with real time feeds. The idea of taking a database of feeds and like stitching it together was like a query that might take a long time, et cetera. And servers were very hard when they, when things went viral, the things would crash. And so what Zuckerberg did was he just looked at friendster and my space and said, if I make this clean and fast and stable, I wonder if it worked better.

SPEAKER_49: And it did crazy, like how, like, for example, this project, this is probably like one of the like shortest projects me and Anthony have ever worked on. Like most of the things I build, it's like months of like toiling and, you know, spending like, you know, a bunch of hours and money working on it. And this was just like a couple day hack. Um, and it got like a lot more, you know, traction with the real world. So it's really interesting the way it works.

SPEAKER_13: It's important lesson for founders, um, which is a lot of times what you think the world wants and what they do want, like, it's just very different, you know, and, uh, you, you have to like, just keep trying different things and move on to the next one if they don't work. But yeah, keep, I encourage you both to just keep building stuff. Each time you build something, you learn something, right? Yeah. And a lot of times it's a second or a third effort that actually works. AR is very early, uh, right now.

SPEAKER_12: What, when do you think it will in your estimation become mainstream? Like you started this AR club. Did anybody show up? Are people interested in it?

SPEAKER_155: Do you personally, it's just the two of you, isn't it? It's a club of two. It was a pretty cool club, actually. Like a lot of people wanted to come see the tech.

SPEAKER_47: Like we had all the newest headsets. Um, and we ran like a big conference with like 150 something people came and like, packed ons, like a bunch of big company sponsors came. Um, yeah, I mean, like we, I, I think like the curves for hardware, especially like a lithium battery, like dense power density is going to take quite a while for this stuff to really like become just a normal looking pair of glasses for all the functionality that people generally want.

SPEAKER_114: Um, so I think it'll be much longer than when we originally started XR club, um, what our timeline was, but yeah, I don't know if Cain has thought, but I'm curious about the cost

SPEAKER_160: guys. What was the actual cost for this headset that you built that we just saw in the demo from start to finish?

SPEAKER_47: Uh, we actually just use like the meta Ray-Bans, uh, off the shelf headset. It's like 300 bucks, you know, it's incredibly cheap.

SPEAKER_162: They're like almost from normal glasses. Like you probably can like barely even tell over the zoom call.

SPEAKER_05: So, and when those are recording, does a light go on to let people know that it's recording? Yep.

SPEAKER_49: Yeah. There's an indicator. There's like a white light that pops up. Um, and it's usually pretty obvious that it's, it's recording.

SPEAKER_100: Yeah. It should be red. I think they made a design decision to make it white, to like, and make it less scary.

SPEAKER_00: It should be red. It should blink. I think that's going to be the societal norm. The genius of this Alex, I think is off the shelf, these things stream to Instagram and then you pulled up the Instagram stream and just grabbed frames from it, or I guess the

SPEAKER_06: language model can take a clip from it or can it watch it in real time?

SPEAKER_49: Oh, um, in our case, we just have a bot that's running like no language model, no fancy AI, just like, you know, uh, bot that just takes screenshots of every, like, you know, frame.

SPEAKER_116: Perfect. Oh. So you have all the frames going in and doing the facial recognition part.

SPEAKER_00: Now in some places in the world, they're anticipating this. So in the EU, there are some particularly gnarly laws. Did you start thinking about some of those? Uh, and, and did you start researching that piece to it? Like where would this actually be applicable in the world?

SPEAKER_47: Yeah, we did, we, we did see that Europe had a ban on real time facial recognition. It's not, it's not the case here. Um, at least in most of the U S yeah. We just wanted to show the demo to see like, even if it was like illegal, I think like this tech is just straight up publicly accessible and publicly usable.

SPEAKER_90: So, yeah, that's the important part.

SPEAKER_13: Um, and this is how scams occur. There's so many of these scams, people are now taking, uh, anybody who's got an hour of video or audio and making clones of people. And there have been a couple of attempts to, um, have limited partners, the people who give

SPEAKER_65: money to venture capitalists of spoofing, limited partners, calling venture capital firms and changing their routing information.

SPEAKER_39: So, Hey, can you change my routing information? And this is where I want my Uber shares and my Facebook shares to go crazy. Didn't work, but we did get a notice, uh, my family office from a venture firm that somebody had tried this. And so that was last year. Who knows how good it is this year, but there was also a report of people doing these type of, um, scams in what's called, um, pig slaughtering, pig butchering, pig butchering. And that's when you, uh, a confidence scam, where you have a woman connect with a guy, they become amorous. She starts sharing all her amazing trades. They send the pig to make trades on a fake exchange. They have them win a bunch of small trades.

SPEAKER_13: So they turn a thousand into 2000, they turn 400 into 1200. And after like doing that four or five times, then they set them up for the big one. Hey, you should put $20,000 on this one. It's it's, I think it's gonna go 10 X.

SPEAKER_18: And then the entire crypto exchange is fake. Wow.

SPEAKER_182: That is so much work to steal money.

SPEAKER_183: I feel like it's just so much easier to make money versus stealing.

SPEAKER_45: Like that's, that's a lot of effort, Jason. I mean, not if you're in a boiler room, you know, in Vietnam, which I think is where

SPEAKER_06: these are occurring and some other folks. And then they, um, they get them eventually to send tether because they're like, oh yeah, no tether is like this legit thing.

SPEAKER_185: And then they send the tethers and they move on to the next, uh, person.

SPEAKER_58: Yeah. So, so Mark Bowen, uh, says that this is obviously scary, but the workflow is incredible. And he sees the use case here, a potential one being imagine you're going into an emergency room full of patients, and then you automatically get their chart history, allowing you to triage more efficiently. And that's similar and way more useful than my idea, which was, I just want people's names

SPEAKER_19: over their heads because I'm terrible with names. And I would be such a better friend and just like person in my neighborhood if I just had names. So to me, like, there's so much that could be good here and could be scary, Jason.

SPEAKER_159: And I just think it goes to show that the risk here is not really the AI models. It's the, uh, lax data privacy rules in the United States.

SPEAKER_13: All right, gentlemen, if you want to start the company, uh, it's a 48 hour offer. You have my contact information. Contact me. We do a zoom call. If you want to go for it, I'm here for it. I got 125.

SPEAKER_123: Okay.

SPEAKER_187: Anytime we'll follow up with you. Okay. Great.

SPEAKER_13: You can have like the world's greatest investor, world's greatest angel investor is your first investor. And, uh, let's see if you can make a product out of this or something around it. I'm willing to take the bet.

SPEAKER_191: All right. Well done boys. Get back to work.

SPEAKER_12: Uh, you know, and remember what my grandfather told me. Keep your focus on the books, not the babes. Yes. We'll do it.

SPEAKER_191: Gentlemen, stay focused on those grades. Okay. Wrap it up cleanly here. And you guys weren't involved in any of these nonsensical protests. Were you last year? Are you staying focused?

SPEAKER_13: Nope. Yeah. Yeah.

SPEAKER_197: Just, just in the books.

SPEAKER_13: Okay. Good. All right. No, no, dude, you don't need to be out there protesting. Just let's get this degree finished up and make your parents proud. All right. Well done. Yeah.

SPEAKER_200: All right. Great meeting you Jason. Take care guys. Thanks guys.

SPEAKER_75: Cheers. Cheers. We've been doing two news programs here on this week and startups every Monday, every Wednesday, and there's just so much happening in startups, the economy, venture capital globally. All of these things are critical for you to know as an entrepreneur because they impact your business, right? They impact the partnerships you're going to make, fundraising. And the Washington Post is an incredible place to get coverage of not just politics and the environment, but really business and technology from a real global perspective. And that's what I love about it. I need to understand these issues deeply. The Post is no longer just a newspaper. They have apps, they've got podcasts, they have newsletters, and you're going to deepen your understanding, you're going to be more worldly, and that's going to inform how you build your company and how you run it. So here's what I want you to do. You're on the go. You got a pair of headphones? The Post will read you the articles. I've been doing this. I've been walking around the ranch. I'll just listen to a Washington Post article. Amazing. I multitask and I get smarter and I get more worldly. And then when I go to a business meeting, I can speak on important issues. Go get a Washington Post subscription right now so you can come across as smart and intelligent

SPEAKER_126: and informed WashingtonPost.com slash twist. You're going to subscribe for just 50 cents a week in your first year.

SPEAKER_75: That's 80% off their typical offer. And it's a steal. So WashingtonPost.com slash twist.

SPEAKER_39: Go subscribe today for just 50 cents per week for your first year.

SPEAKER_208: I love meeting people who are very early in their careers and are just very intelligent and just like, it's big founder energy, but like, do you ever just feel slightly old?

David Friedberg: Slightly. You put their ages together. That's less than my age and almost exactly yours.

SPEAKER_58: Yeah. Yeah. But on the other hand, we're optimistic though. I mean, how much do we read about like the youth these days can't read. And then those two guys are just doing successive hacking projects. Like awesome.

SPEAKER_213: That was great. I like having a live guest.

SPEAKER_00: We're going to try to have more live guests. Uh, come on. It's got a certain energy to it. I want to get some callers too. I want to do a little call in show. Like at the end, have a couple of callers come in live. I would love that. Surprises with the question.

SPEAKER_107: Uh, you know, like, uh, sports radio.

SPEAKER_57: Yeah. But you know, won't come on the show. Jason quite a lot of initialized capital, because as it turns out, that wasn't very nice.

SPEAKER_19: You go for the segways. Um, initialized capital is trimming down. This fits neatly under our venture trims down, uh, coverage. That's a theme we've been talking about. Also last week we talked about CRV returning 275 million out of a $500 million fund. And so initialized said, Jason, in a blog post from Brett that when initialized started out, we were small and scrappy, comma, comma, comma. Over time we found success and grew, but we lost a step time to get back to basics. We're structuring our team, smaller team. This feels like an echo we've heard from the smallest companies all the way up to Amazon and back down again, Jason. Yeah.

SPEAKER_116: I think what happens in a firm and that firm has had both of its founders leave.

SPEAKER_39: Alexis left. I think him and Gary had some sort of falling out. I don't know the details of it, but there was some sort of falling out as partners do. Sometimes people get divorced. No big deal. Just take care of the kids. In this case, that'd be the LPs and the, and the, um, startups. Um, Gary ran it. Then Gary left to go take a bigger opportunity. Y Combinator a little bit controversial, I guess, to leave initialized to go do that. But it seemed like they had some, you know, nice talent and a deep bench there. But we do have a situation where the venture game is changing. There is a cataclysmic creative destruction occurring because of the lack of distributions and because of Zerp and the overhang of all of these very large rounds.

SPEAKER_00: So we have so many unicorns in the twist 500. We're over a hundred companies now in our twist 500.com listing of the top 500 private companies. And so, you know, if it's not working, sometimes you have to shake things up and sometimes shaking

SPEAKER_03: things up means changing, uh, you know, key players and maybe players who got you there.

SPEAKER_00: So my Knicks, uh, as you all know, I'm like diehard Knicks fans.

SPEAKER_06: We have a player named Julius Randle, who kind of led the resurgence in New York when Kevin Durant, uh, wouldn't come to New York with Kyrie Irving. They went to the Nets and we got this weird consolation prize. A player named Julius Randle, who then created a winning culture in New York. And we just traded him for Carl Anthony Towns, who is a much better, more decorated all-star

SPEAKER_13: player who fits better with the team. The whole Knicks community for the past week, including myself, have been doing call-in shows

SPEAKER_39: and trying to reconcile that the team got better objectively, massively better while saying goodbye to two players who we love. And I think that's probably what's happening here. You know, some changes have to be made to make the company work better, to make the firm work better. And, uh, hopefully we can have Brett on the pod. I invited him to come on Wednesday. Hopefully he's around and we can get Brett to come on the pod and talk about it because

SPEAKER_90: this is, um, probably a mature, thoughtful decision, but people lose their jobs or people get traded.

SPEAKER_39: They go to other firms and, um, you know, that's just the nature of it. And one of the most important things to understand as an entrepreneur or somebody leading a firm is sometimes change is the right decision. And it doesn't necessarily matter what change you're making. I know this sounds like very strange because when you're a worker bee working for a company, you see change and you're trying to figure out how, why did they decide to make this change? Why did they go, you know, from remote to back to the office? Why did they go from, you know, seven departments to four or from three layers of management to two? And what happens is sometimes just shaking things up and changing the organizational structure allows you to, um, build a better product. And it's like, some people might call it change for change stakes or people just screwing with the system.

SPEAKER_03: But almost overwhelmingly. When somebody leaves a company, even somebody great, you get a better person. It's a very weird phenomenon. Cause you're like, wait a second, that person was amazing in that position. Then that person goes on to do better things. And you're like, wait a second, that person is doing something better. And the firm did something better. How's that possible? It's a very simple, very simple equation. The firm learned so much from that person. Let's call the person, John. John did a great job. The firm leveled up and then you get some fresh eyes on it with Jane. Jane comes to the firm and the firm became better at hiring because John did such a good job setting up the foundation that Jane was able to build on it. And John went on to another adventure, recharged his battery, took those lessons and did something better with their career.

SPEAKER_00: And so when I see these changes being a weathered vet of the clone wars, I'm like, yep, I get it.

SPEAKER_06: But I understand how other people see these things, you know, a journalist, a rank and file employee, another company, whoever it is. And they're like looking at the tea leaves saying, what is it? But what's your take? Yeah.

SPEAKER_19: Well, I, I really appreciate the talk about change, because if you just say, make some changes change for change sake, people get very, very defensive. Like, oh, you know, why would you do that? That's a little bit aggressive. What if you change the wrong thing? The flip side is a team that's been in place long enough doing the same kind of work will eventually form patterns that become so ossified. They can't really adapt or change. And I've worked at several companies that I've had pretty long histories. And so I've seen this in action. And sometimes. Calcification. Calcification. Just break something. And then everyone will run around with their hair on fire. And then you'll probably find four or five other things that weren't super efficient when you do that. Great if you could be targeted. But if you can't find anything, grab a pipe, wrench it out. You'll figure out where everything's broken. And so I do like that. In the case of initialized though, Jason, last two funds, both raised December of 2021, 530 million for the main fund, 170 for the opportunity fund. No new form D filings that I can find said they made 14 investments this year. Doesn't sound like they're out of cash.

SPEAKER_12: It's my read. 14 investments on average, a series, a firm like that seed to series, a firm.

SPEAKER_39: We put it at four or 5 million per they've deployed 75 of the 500, 170. No way to know because you would deploy that opportunity fund in a very unique opportunity. This fund had their previous fund had coin base in it. Coin base at the level they did. It was a career making investment in the way Uber Robin hood were for me. That was one of the great investments of all time of the last cycle. There's only been maybe two or three companies in the last cycle that had extraordinary returns. Uber, Airbnb, coin base think are the three that when LPs look at them, stripe would be another, but that hasn't been liquefied yet. So stripe would be up there as well.

Chamath Palihapitiya: Basically anything 50, a hundred billion would be it.

SPEAKER_13: And if you were to look at that entire cohort, one of them is worth 150 billion, happens to be the one I was the third investor in.

SPEAKER_116: That's why this firm did so well. When you have that behind you, some big bets like that. Yeah. It really does give you momentum.

SPEAKER_13: And I think that's why Alex was, Alexis was able to do his own firm. Sorry. And I think that's probably why Y Combinator hired Gary Tan is because he's a good picker.

SPEAKER_39: Yeah. But I think the LPs and initialized now have to think, okay, what we have to reevaluate this firm from first principles again.

SPEAKER_19: I wonder if that's why they did this now, because it has been a couple of years, not a odd time for them to be out fundraising. If they are, I don't know. But let's say you want to go out there. Maybe your last fund isn't showing as much juice as you want. Shake up the partner list, maybe lower the overall burn at the company, cut half a point off your fees for per AM. I can see some, some action there leading to a new fundraise. And if you're going to change the chapter, rip the whole last one out and throw it, don't do it half measures. And this seems to be a pretty top to bottom clean up.

SPEAKER_00: Yeah. After we talked about, um, CRV giving money back, somebody pointed out last year that founders fund had given back half their very large billion dollar fund. Oh, yes. Uh, and I remember talking to Brian singer about that, uh, Brian Singerman, sorry.

SPEAKER_39: And he, you know, um, I think it's a very mature thing after Zerp to realize these companies don't need as much money. We're not up against Masayoshi-san and SoftBank. We're not up against the tigers and the whoever coming in and dumping these large rounds, not taking board seats. So what is the setup here? I believe these will be the next, the next two vintages of, you know, if you consider a vintage three to four year investment period, I think we might have three world-class vintages

SPEAKER_13: coming up one we're in and we're like, you know, like right in the middle of it. And then the next two, um, could be some of the greatest vintages of our lifetime.

SPEAKER_19: Okay. That's a really great way to bridge into what we're talking about next, because there was a fascinating article in the financial times. I have been critical Jason, uh, of unicorns and there've been too many of them and then raising too much money. But one thing I've never really doubted is that there are some really amazing companies in the current unicorn crop, and we're going to see some great outcomes. So I, I sound negative occasionally, but I'm actually not the FT though pointed out, um, that according to Bain and companies scale insurgent, uh, demarcation, which is 10 billion in annual revenue and a billion in operating cashflow. Only two companies they say in the last 20 years have been built that meet that threshold. And they are meta and Uber. Now I, one, I'm fascinated by that as a threshold for having quote, quote, made it. I want to get your take on that, but also I think the list is too small. First of all, scale insurgent, 10 billion in revenue, billion in operating cashflow.

SPEAKER_208: How important do you think those metrics are for deciding the true winners?

SPEAKER_90: Yeah. There's this expression that, um, you know, the markets are a voting system and then they're

SPEAKER_13: a scale and you know, because you were obsessed with S1, you did a great job on an S1 and cautious optimism today. Um, and, uh, the bogey, you know, like what you need to hit to IPO. I've been told is a billion in revenue. Now, now we're starting to see some people with less, you know, tee up, but that's what I was told.

SPEAKER_00: A lot of banks are telling founders. It's not true, but that is what they're looking for. But to have an enduring company, I do think that those are two interesting numbers to look at, because you do have to hit a certain amount of hash flow to be a real business. You cannot be a money losing business forever. Amazon learned this at some point, Amazon had to stop the breakeven train. People gave them runway for a decade or more when they saw that nice top line growth.

SPEAKER_06: But eventually they needed to say, we're going to have some cash build up here. And Tesla as well, Tesla was invest, invest, invest. And then all of a sudden the J curve turned around and I don't know if they have 30 or 40 billion dollars in the bank, man. It's a lot. It's a lot. And so the J curve can be violent, you know, in both directions, you know, and Uber's and

SPEAKER_25: Tesla would be probably the two best examples I can think of.

SPEAKER_246: Oh yeah. Because Uber's cash burn for years was astronomical. And then Dara took over and some changes were made operationally.

SPEAKER_19: Things got a little bit less cash consumptive and now it just kicks off cash. And the, the thing is you mentioned, um, Amazon, you mentioned Tesla. Those are companies that the same analysis put in the 1990 to 2003 bucket.

SPEAKER_28: And it said six companies met those requirements that came out of that era. Okay. I can tell you them.

SPEAKER_185: Uh, okay. Google is, uh, in that. Yep. Uh, Google's in it. Um, NVIDIA was probably launched around that time or slightly after. I don't know their founding date.

SPEAKER_274: Ah, uh, well, we know. 93. So yes. Uh, is Salesforce in that group?

SPEAKER_160: Do they have a billion dollars in trailing cashflow?

SPEAKER_252: I'd have to check their metrics. I would think so. Yeah.

SPEAKER_77: Money printing companies, companies that are just compounded. Are they all tech companies or are there non-techs in that list?

SPEAKER_278: I believe this is an all tech list. All tech list, all tech list.

SPEAKER_13: Uh, okay. So apple was already formed. Microsoft was already formed. Apple was already formed. Um, you can't count the YouTube because like above my Google may have Google on the list already. Meta came after that. That was 2004 founding. I believe. Tesla was 2001 or two founding, I guess. Uh, okay. So Salesforce would, by the way, fit.

SPEAKER_284: It's a, it did 900 million operating cashflow last quarter and 9.3 billion in revenue. Okay. There you go.

SPEAKER_28: Um, did they not mention the names? Cause I'm just rattling them off. They mentioned, uh, just Tesla, Amazon, and alphabet.

SPEAKER_19: So you and I are, are hunting and pecking, but the, the thing that's more interesting, Jason is they said there's only two in the last 20 years, meta and Uber. And I don't think that's true. I did a little digging for us, Airbnb founded 2008. So more recently.

SPEAKER_13: Just became profitable. Yeah. They kind of be getting close to a billion in cash.

SPEAKER_19: I mean, they have a billion in trailing free cashflow. And in last quarter, they had 2.75 billion revenue, putting them above a $10 billion yearly run rate.

SPEAKER_290: So looks like FT made a little mistake. Pooh and Alex fact-checked you.

SPEAKER_06: So somebody send this clip to the F E editors. Oh, I'm not done.

SPEAKER_19: Strike. So founded 2010, processed over 10, uh, a trillion dollars last year, 3% cut. That's 30 billion gross revenue. And the company said it was robustly cashflow positive in 2023. Sounds pretty close to me. Yeah. Coinbase not profitable. Uh, I see Coinbase is the only one that I didn't think of when I was prepping for this show.

SPEAKER_252: I will find out for us live cause I know where their earnings are. This is why Alex is amazing. He just can just get this answer for me.

SPEAKER_39: Cause the thing with Coinbase is they get these incredible custodial fees. And there's a lot of corporate people who park their Bitcoin there and have them manage it for them. Like this is corporate thing. And I think they get paid a small percentage of just as a custodial fee, which I think is just all margin for them.

SPEAKER_294: I think that's all profitable. I gotta think that's throwing a ton of money to the bottom line.

SPEAKER_208: Yeah. So their revenue is north of a billion, um, per quarter as of, you know, Q1 could do this year. And they're not 10 yet. Yeah.

SPEAKER_19: No, no. So I think they're gonna miss on this on the scale side, but then if you look at their free cashflow for the last six months, it was, um, 895.7 million, sorry, net cash operating activities last six months. So profitable enough, not big enough, but there's the Shopify, I think also meets, meets the standards.

SPEAKER_299: Yeah, Shopify should meet this.

SPEAKER_159: I think this is too harsh on the last couple of generations of tech companies. There are more big names than people give. Um, wait, why am I gassing you up so much?

SPEAKER_19: No, I like it. I was about to say like VCs deserve more credit.

SPEAKER_15: And that almost came out of my mouth. I mean, here's the thing.

SPEAKER_39: The entrepreneurs deserve the credit, uh, the VCs and the capital structure and the LPs deserve the credit for taking the risk. Uh, but what it does prove is the power law.

SPEAKER_00: And I think getting back to our discussion of where the industry is, I think we are at the turning point right now because private equity is coming in and trying to buy positions. And then I invited you to sit in our investment team room since you're launching, you know, employee technically, and, uh, you get to see some of the investment stuff we're doing

SPEAKER_13: under our NDA, uh, and confidentiality agreements.

SPEAKER_00: Um, we had somebody offered to buy one of our positions in our first fund at, you know, some discount to the last round, which was only 20%. Now, most of the discounts I've been seeing have been in the 50%, 75%, just bottom feeders. And of course we don't even respond to those secondary ones, but this one, which one of my associates, uh, researchers, you know, told me about this weekend on Sunday and today's Monday. And I said, Hey, that would be, if we sold our position in this fund, that would return 1.5 X the fund. We really believe in this company, but that funds are already at 1.2 X. I think 1.1 X. So we add 1.5 to it. Now we've got a 2.6 or seven X fund with still some holdings in it. Maybe this is something we should consider for our LPs. Would be great to get that firm to, you know, DPI actually returned not on paper. Cause that one on paper was kind of right around 4.95 X. So my job is to get those two numbers to, you know, meet as best I can.

SPEAKER_06: So I haven't had to think about an exit for a long time. Yeah.

SPEAKER_16: So I I'm questioning that from the fund management perspective, do you go to your LPs and say, Hey guys, listen, we got this offer.

SPEAKER_19: I don't think we should take it. Let's say it's a 25% discount to put a random number on it. Let's say discount, but you're like, I think we should hold, I could return all your money. Plus do you do that? Or do you just make the decision yourself?

SPEAKER_45: That's that's literally a major part of the job. The reason the LPs hire you is to make those decisions.

SPEAKER_39: So they don't have to. Got it. They're looking at cash in cash out right now in that fund cash in a dollar.

SPEAKER_12: You're at a buck and a buck 20. Now you're cashing for a dollar. Is that two, two 50, two 60 feeling pretty good. Now, do we hold on to try to get you back to, to have this investment double again?

SPEAKER_39: And now, you know, give you a three 50 or $4. And that's where greed, you know, and discipline, you know, become the factors that they're hoping that my Harry helps me to make a good decision. And this is where the understanding, the psychology of your general partners is important because some general partners, maybe they need the liquidity, maybe the 20% on that.

SPEAKER_13: Let's just, you know, say, let's just say it was a, I'm going to just pick a random number. Sure. 10 million dollars. Sure.

SPEAKER_00: So if they have 25% carry, they say, okay, we're above the threshold. I get 2.5 million. Do I want 2.5 million dollars this year? The five partners want 500 K each or three partners want seven 50 each, whatever it is.

SPEAKER_13: And then the rest of the team gets to chop up a, you know, a couple of hundred grand for their, for their troubles. Maybe. Or if the person's like, I've already got a hundred million or $200 million sitting over here. Yeah. 500 K doesn't do anything for me. Let's go for the gold.

SPEAKER_00: I'd rather, you know, have, you know, and, and so the, this is why boards can become complex.

SPEAKER_03: Cause you need to have the individual's net worth and how much this matters to them.

SPEAKER_00: Just like when Zuckerberg got an offer for a billion dollars from Yahoo. Peter Thiel said, don't take it. Zuckerberg's like, well, I don't have any money. My dad is his dad, a dentist or a doctor or something. If I remember correctly.

SPEAKER_219: Yeah. Yeah. He's a, I think he's a general practitioner or something, a dentist, orthodontist. I can't remember.

SPEAKER_13: So, you know, I got a son of a middle-class upper middle-class, you know, person, you know, who went to Harvard and.

SPEAKER_00: You know, he owns 70% of the company is going to get $700 million to not take it,

SPEAKER_39: but he's now worth 200 million. Yeah. So he literally held on and became worth 250 times that offer.

SPEAKER_00: And this is the really hard thing. Um, so, you know, looking at this situation, perhaps the best thing for us to do is sell

SPEAKER_06: half our position or a third of our position. And then, you know, let the rest, um, and just RLP has got a nice little check.

SPEAKER_25: Oh yeah. Now we're at 1.7, you know, consistently drip, drip, drip. And this is why, you know, we have to get the single and double M and a world going because maybe in the same situation, instead of a secondary offer coming in at 20% discount,

SPEAKER_06: we would have a proper offer from. You know, sales force or some giant software company who wants to buy another software

SPEAKER_25: company say, you know what? I'll give you, you know, three times what you paid in the last round.

SPEAKER_19: I'm really curious now about the connection between exit timings and total DPI returns based on the GP or, you know, venture partners, net worth. Cause I'd be, I'd be curious to know if holding periods are simply longer, if they're wealthier. And the, the other version of this is a realtor data in the old data sets that I saw realtors that were listing their own house left on the market longer to get a higher offer than the business customers because they were getting a hundred percent of the, of the, of the gains

SPEAKER_208: when they held onto their own house, but only a fraction of a fraction. If they held your house longer for a higher price.

SPEAKER_12: So incentives matter. Yeah. Incentive show me an incentive. I'll show you an outcome. And the reason they do that is because they know it only takes one buyer. Yeah. Only takes one buyer.

SPEAKER_39: And this is something for entrepreneurs to know as well, you know, think of a sale that was like an extraordinary sale. WhatsApp 20 billion dollars to Facebook. It only took one frisky entrepreneur, Zuckerberg, a bold entrepreneur to do something crazy like that. And he told his board, I bought WhatsApp. He just told them, um, I bought WhatsApp. I just went for a walk with Jan and I bought it. That's, you know, baller. Uh, and you know, if it was Microsoft, let's say, or if it was, you know, I don't know, Apple under Tim cook that we don't have to be a very long board conversation, you know,

SPEAKER_13: like Iger trying to buy Twitter at Disney, you know, which eventually he didn't do. That was like a year or two of conversations. Should we buy Twitter? Really interesting.

SPEAKER_19: You know, founder mode's great because it gives one person the steering wheel. The other part of founder mode is that if you give the wrong person the steering wheel, you may end up towards a cliff. But going back to our point about change and about how things get ossified, the thing that I actually have liked about the idea of founder mode is the ability to go. I know that's how we have been doing things, but what if we just didn't? And that is the hardest, I think muscle for a company to maintain.

SPEAKER_246: And I think that's why we're seeing companies from small to large try to retool themselves so they can actually move again.

SPEAKER_19: Now, uh, before we sign off for today, twist 500, we have a couple of new members that I want to throw on. One is the company you brought up, which is Snyk S N Y K. It's not saying it's Snit and it is a cybersecurity company. And it fits under a couple of things we've been talking about. One sovereignty at the table. I think they raised some money from an overseas sovereign wealth fund. And I do want to put together a cybersecurity theme for us. I haven't gotten the name down, but I think this fits underneath that. What's really fun about this company is because of some of where it's based and so forth, we actually got its information. And I think it shows a very interesting picture of how some of the things we've been talking about on the show can yield better financial results. So Jason, I'm going to bore you with a, um, an income statement here.

SPEAKER_06: And pronounce the name of the company. Cause the spelling's crazy. Snyk. Snyk. S N Y K. So the Y is an I. Snyk. And no C. S N Y K.

SPEAKER_19: If it's not Snyk, I will buy someone at the company lunch for butchering their branding all over the show, but I don't know how else you pronounce that. Sure.

SPEAKER_00: Um, and, uh, this is a cybersecurity company.

SPEAKER_25: Um, and we're looking here at their, uh, P and L here, their financial statements. Looks like turnover fancy word for revenue in thousands of dollars for the year ended, uh, December 31st, 2023. So they're on a calendar year, $220 million up from 147 million the year before.

SPEAKER_57: Yeah, just over 50%, uh, revenue growth of memory serves.

SPEAKER_19: And that is a number that I think we should hold onto because if you look at the company's administrative expenses, which in the U S we would call operating costs, the company spent less money this year than it did last year. This goes back to our theme about static team size and in general, getting more out of people. And so Jason 50% growth, more or less a reduction in costs, a dramatic curtailment in their losses. This company looks like it is going to be in reasonable shape to go public.

SPEAKER_246: And it did, I think, begin to work on its perspectives earlier this year. Now, the other thing.

SPEAKER_45: So we're seeing the J curve to just do a callback. The J curve, Hey, you're investing, you're losing money.

SPEAKER_39: The, the total losses in this business keep increasing, but then the losses are slowing down because the revenue is increasing. So here they dropped their spend in administrative expenses.

SPEAKER_00: We're going to think that's like where the head count is 10% while growing 50%. This is like a good recipe for lowering, uh, the loss and then eventually becoming a money printing machine.

SPEAKER_39: If they do this again, if they grew 50% and cut costs, another 10% static team size, um, they would be right there. Right?

SPEAKER_246: Yeah, absolutely.

SPEAKER_19: The thing though, that I'll say is looking at this, I think it just goes to show how much work some companies needed to do to shift from the Zerp mindset into now kind of what we expect from companies that do want to list because the company had in 2022, 147 million in revenue and their loss for the year was like $267 million. That means they were spending, uh, over 400 against 147. That's a pretty.

SPEAKER_12: They were losing $20 million a month. They were losing $5 million a week. So let that sink in.

SPEAKER_39: That's nearly a million dollars a day. Yeah, that would be right. A million dollars per business day. Yeah.

SPEAKER_13: I mean, there's 365 days in a year, 267 million in losses. Yeah.

SPEAKER_19: Yeah. And now it's down to just $500,000 a day, but the point is their revenue is, is scaling faster. So this is a company in transition looking to list. And that's why I think it's a good twist 500 entry, lots of venture capital, multi-billion dollar valuation. So I'll put it on the list.

SPEAKER_257: Awesome.

SPEAKER_19: And then I got one more really quick before, before we go, um, the company called Nym, N Y N M. Sorry. And this company, the moment I heard about it, uh, during the production meeting today, I was all in because it's doing automated medical coding. And if you have a spouse that works in the healthcare space, you know, how big of a market this is. Jason also a company called Epic does medical systems. They're huge, tons of spend here. However, you heard about this and you went boring. So I'm very curious why this company, which I think rules didn't, uh, didn't Russell.

SPEAKER_39: I mean, this is one of the great things about entrepreneurship. I will meet founders sometimes and they were building something that would make me wake up every morning and want to commit seppuku.

SPEAKER_116: I, I literally met a founder yesterday when I was at Austin city limits.

SPEAKER_13: Thanks to my friend, uh, Josh from capital factory for inviting me. My daughter had a great time. My wife had a great time. Got to see chapel roan. And it was the largest large audience for Austin city limits in history. There were like close to a hundred thousand people listening to pink pony club.

SPEAKER_12: It was epic. And the interesting thing about, I got a little inside information is that they had booked

SPEAKER_06: her last year before she broke out.

SPEAKER_13: Oh, no way. So they had booked her at, I don't want to be more exact here. Cause I got some, what I think is inside information.

SPEAKER_12: It could be secondhand, but I think they booked her at like maybe one seventh of her current price, but she honored that contract. So they call this, uh, like planting seeds or something like that.

SPEAKER_00: They, they make these bets. It's almost like being an investor. So, you know, they will make people, the offers a year out. And then some number of them, you know, pop out and become, you know, really giant acts. And I was talking to guys that, well, why do you think that happens? It's like, yeah, you know, we don't really exactly know, but you know, it's like, you know, it just happens. It always happens in music. And I said, do you want to know when it happened?

SPEAKER_06: He's like, hit me. And I was like, tick tock. I was like, chapel Rhone is the queen of tick tock. And tick tock with their algorithm. It doesn't have to spread like YouTube does where people subscribe and views and thumbs up and

SPEAKER_00: comments feed the algorithm. And, you know, you, you hear from a friend about Mr. Beast or, you know, whatever tick tock.

SPEAKER_39: You do. Nobody goes to their subscribe page on tick tock. It's the for you feed. So the for you feed, the algorithm has, I think accelerated pop stars, Ascension. And the person said, oh my God, that's exactly right. Cause you know, just like six months ago, she was, and I don't know if any of this is true.

SPEAKER_13: So like people speculating around a table, um, after a couple of cocktails in the VIP lounge at,

SPEAKER_39: Austin city limits, but they were, it was very interesting on a technological basis because and an, and an arbitrage basis, she had dates. She had set with very small venues, like 600 people, a thousand people. You can cancel those. She has canceled some shows recently. Or so I think either she's upgrading or moving those shows over. To larger theaters, larger venues. And they said, you know, what they did do for chaperone at this event was she was on like a secondary stage, but because she had ascended so much, she was the second to closing act. Tyler was the closing act. Tyler came out after everybody left every chaperone and was like, I just want to give a shout out to chapel. She's amazing because she basically became the de facto headliner, even though I'm sure on a price basis and on a stage basis and a billing basis, she was second or third, uh, and maybe even

SPEAKER_359: further than Tyler, Tyler, the creator. Yes. Tyler, who's fantastic. Huge fan. Yes.

SPEAKER_00: Um, and so, you know, we've got to see his set. He, he also crushed it, but you know, it was like, I don't know, 70 to a hundred thousand people for chaperone and, you know, maybe 20% left after chaperone to see him, but it's still

SPEAKER_362: 50, 60,000 people watching him and he crushed it. Yeah.

SPEAKER_58: The TikTok effect that was so real and it even actually, um, dribbles down into more niche genres. So there's a band called bad omens and bad omens if you're into metal core is a big deal.

SPEAKER_19: They got really big off of TikTok. And so suddenly everyone was like, oh, bad omens tickets went from like $20, like 160. Their tours sold out instantly. You know, it was just, it was insane to see the same motions, but so far away from pop. So far away from country, all the way into people shouting at you metal. You know, it's, it's, I love it.

SPEAKER_208: I love to see more eyes on cool stuff and chaperone's fantastic. So you got to give her points here.

SPEAKER_36: I'll just want to share with you.

SPEAKER_39: We made an investment in chef reactions, who has 3.6 million followers. And I fell in love with this guy. Just asked him if he would pursue this full time. And so I literally, as an experiment gave him 25K, which I like to do as my first bet on really crazy ideas. And I said, Hey, if you quit your job and you do this full time, I'll give you 25K. This lunatic does it. Then he comes to our accelerator. I put another 125K in. He is making, you know, a multiple of his salary. Now has two employees full time, including himself. And all he does is reactions to people making food. Seems like a very, you know, small concept, but this one has 8.3 million views. Yeah. And he will give a live reaction.

SPEAKER_00: Now, this person, I don't have the sound on that you're seeing. I don't want to get dinged with anything, but this person's put a non-safe tray on heat

SPEAKER_06: and melting like 20 sticks of butter in it. And then he does his whole reaction to this. And he's just like, how terrible is this dish? And then he rates it and says, if you would try it. Anyway, I think this person is amazing. And I think that there's going to be an entire genre of these people, niche people who then

SPEAKER_00: go on to do great things.

SPEAKER_39: He's had every major Thermador, Headley and Bennett that make the beautiful aprons that you see on the bear. Just to give you, uh, like an idea of where he's gone with this business. Chef reactions, uh, have Headley Bennett crossover. And his joke is like, would you try it on a scale of what he tried on a scale of one to 10 that's like actually built into the apron and you can like sort of switch it around. And here he is like as a spokesperson and, um, you know, he's got a little thing there that says work faster. Cause that's one of his big things. And, uh, he came to our, uh, liquidity, like formerly known as angel summit event in Napa. I think you met him and he went to, um, the Michelin store restaurant, uh, uh, French laundry. Yeah.

SPEAKER_116: They're all huge fans of his. They gave him his own custom menu when he went in there and he had this extraordinary experience.

SPEAKER_39: And so what I love about these businesses, when you look at direct to consumer businesses, Warby Parker, eight sleep, et cetera. You have to have a really unique product in order to make those business work. Businesses work. Now, normal mattress companies, maybe they can't make it work. Eight sleep is like, that's a whole different level of like. Sleep optimization for quantify itself. They figured it out, but you know, you have to spend a lot of money on distribution. Mr. Beast feastables, no money spent on distribution. Chef reactions, no money spent on distribution zero.

SPEAKER_13: So he's got a new product coming out. I won't say what it is, but it's a really cool product and he's going to sell it direct.

SPEAKER_39: And I think this will be one of our great companies of all time. And I'm looking for more influencers who have low millions, but who do not know how to build a business or have never done entrepreneurship to come to Founder University. We're doing our ninth cohort. Go to founder.university, or you can DM me anytime. I'm at Jason on Twitter X, at Jason on Instagram.

SPEAKER_13: And just email me, Jason at calacanis.com, my email for life. I'm always looking to meet more founders and do more crazy investments like this at the precede year zero, before you would ever go to Y Combinator or Techstars or Launch Accelerator.

SPEAKER_39: Year zero investments, you're not even incorporated yet.

SPEAKER_252: Hit me up.

SPEAKER_19: I love that story because one, I now better understand the thesis behind the chef reactions bet that you made, but also I really wish that when I was playing poker and he was sitting roughly three inches behind me and I was too busy to, I'm like, oh, it's that chef guy. Okay. And then I just kind of kept playing cards. I should have just stopped and spent time with them. We got to wrap Jason really quickly though, in the twist 500 vein, I'm going to add names. I think it's really important, but also there's so many cool companies out there. So some more names that I'm looking at to add, I'll tell you about it next time we chat, but ExoWatt, Fervo Energy, Polymarket, we all know, Kobold Metals and Merge API, who I'm trying to get on the show. So there's so much going on. It's very exciting. More live news, everybody coming your way.

SPEAKER_39: All right, everybody. This has been another amazing episode of This Week in Startups.

SPEAKER_00: That's my guy, Alex Wilhelm. Please go pay a Hyundai for PautiousOptimism.news. It's fantastic. And, uh, I'm Jason. Uh, we founded a temporary office in Austin. Now I'm just looking for an event space.

SPEAKER_25: And, uh, if you have a building for sale, that would be a good place for me to do podcasts out of and have small events. Austin at launch.co. Just share the building with me and I'll see you all next time on This Week in Startups. Bye-bye. See ya.