SPEAKER_00: All right, everybody. Welcome. It is Monday. Jason's back from Japan. He's mostly awake, we think, and put together a great show. He got it together for a great show.

SPEAKER_01: I don't know what time it is, but, uh, I'm a little jet lagged. I got back from Japan. Great trip. And, uh, I saw this new story. I didn't get to talk to Molly about it. So I thought we should talk about this FT story about Sequoia leaving citizens bored, uh, after electing to not participate in a pay to play around. So we'll talk all about the dynamics and we'll

SPEAKER_04: speculate for 20 minutes or so on what the heck is going on there. We just, you should just know that going in. Yeah. Then we're going to talk about the IPO window,

SPEAKER_08: maybe opening back up again in 2023 after a pretty moribund 22 Instacart and soft bank owned arm are

Jason Calacanis: both gearing up to go public. We're going to do a little compare and contrast and break down those

SPEAKER_11: two businesses. Yeah. And, uh, very interesting to see Instacart and their numbers, which were leaked

SPEAKER_01: perhaps, but there seem to be doing good. They seem to have, uh, right. And the ship as it were, and then dapper labs has a duo of stories. We're going to catch up on the action by the Southern district of New York, a very serious office, uh, that doesn't take actions lightly and they tend to take things to the mat. And so they are, uh, in a lawsuit with dapper labs over the selling of NFTs. And then another story in the block describes some anonymous current and

SPEAKER_12: former employees who are not happy with the CEO over spending lavish spending, maybe, or marketing

SPEAKER_17: expenses. What's the difference rolling on PJs while you fire. The little guy is always going to get you. It's always going to get you some anonymous quotes in some sort of newspaper somewhere. Yeah.

SPEAKER_19: Find out going to be a great show. Stick with us. This week in startups is brought to you by Squarespace. Turn your idea into a new website. Go to squarespace.com slash twist for a free trial.

SPEAKER_22: When you're ready to launch, use offer code twist to save 10% off your first purchase of a website or domain. Contra is a commission free marketplace for freelancers and independent creators. Get $500 off your first hire at contra.com slash twist and Revelo looking to affordably scale your product development with global tech talent in us time zones, hire vetted remote developers in Latin America with Revelo. Get 20% off for the first three months at Revelo.com slash twist. All right. Welcome

SPEAKER_27: back, everybody. It's a Monday. I'm back. Are you sure it's a Monday? Do you know what day it is?

SPEAKER_32: Well, I left Tokyo at 5pm and I got back at 9am and I slept two hours on the plane. Then I slept like

SPEAKER_33: three hours when I got home and then I stayed up all night and I don't know what time it is right now what we're taping. But I'm hoping that this jet lag is easier coming this way. When I when I went to Japan, I got there at 10pm, which was 5am our time. And then I went cat skiing the next day. I did the most challenging skiing, physical activity I've done in 20 years. So that was dumb, but

SPEAKER_36: amazing. Did it make it worse? Or did it I feel like it would make it better in the way where then that night you would just sleep and you just sort of wipe out the existence of the previous time zone?

SPEAKER_33: No, you know, it's just as a mental game. If I had thought this through a little bit more, I would have added a day or two of rest and on the sentence and just chilling for the first two days I got there not immediately tried to do to ski the abandoned ski resort while driving up to the top and cat skiing. It was it was it was crazy. I did something that was incredibly challenging. That's awesome. I think

SPEAKER_46: they're having that kind of skiing. In Tahoe right now, too. He might as well just paradoxically,

SPEAKER_33: I left helicopter up there and like do it all over again. I literally left and I let a family use the house because it was our ski week. And they're like, Oh, yeah, it's a record ski records. No, in Tahoe. And I was like, Oh, wow. So I leave to go find the powder and it dumps powder, like in record amounts. But we have, thank God, California has the most I think this is the record or second snowpack

SPEAKER_31: depth in the history of recording.

SPEAKER_50: I think so too. Yeah, we're like, we're the I think we're like there. I mean, before this lag, because there was another storm that just came in on Saturday, I think we were at like, slightly dry

SPEAKER_36: for most of like, I think we might have kicked the drought kind of situation.

SPEAKER_54: Yeah, we did. Yeah. Yeah. Great. The drought seems seems to be like, yeah, it goes for like six,

SPEAKER_56: seven, eight years out here. It's horrific. And then we have these incredible monsoons, and then it overflows, and we don't capture any of it. I was just thinking that we, California has a

SPEAKER_32: very laissez faire attitude towards water that we could do a better job in. All the water just runs off

SPEAKER_33: into the ocean here. They don't capture anything.

SPEAKER_08: It's going to happen when this all the snow melts, it's going to run off. And then meanwhile, the Colorado River is still legit empty. Like we literally need all this water. Anyway,

SPEAKER_60: anyway, let's talk about some of it. Anyway, something to think about.

SPEAKER_62: Wouldn't it? Yeah, just it's an idea. Just throwing that out there. We need it to live.

SPEAKER_32: The problem in California, when I lived in Santa Monica, Southern California, all of the you know, be bone dry for 100 days, then it rains, and all the oil and garbage will have built up in the streets, you know, and gone down the sewers, then the water comes and it flushes it

SPEAKER_33: all directly into the ocean. So instead of capturing any of that, the garbage, the water, they're just like, Yeah, it doesn't rain here that much. So we just might as well just let it run off into the ocean, like they could capture that and the garbage. So yeah, it would be better. Yeah, humans can. Hey, there was a lot of news when I was gone. And one story stuck out to me because a lot of founders had questions about it. And maybe we could talk about that one as we kick off here.

SPEAKER_17: Yeah, let's do it. So last month, Sequoia left the board of its portfolio company citizen, otherwise known as the app that scares the crap out of you. Because every time you wake up in the morning, you have 10 citizen notifications, and none of them are ever good. And maybe that's just maybe that's just Oakland. Anyway, Sequoia left the board of citizen after declining to participate in a pay to play round. Mm hmm. Which there's a lot going on in that sentence. But let's sort of unpack it one one by one. Why this matters is that these crammed down rounds have apparently been happening frequently in this new environment. And maybe this is a good time for you to start by explaining what a pay to play round is and how it happens.

SPEAKER_32: Sure. Yeah, if you're raising money, you went to an accelerator, your valuation was 2 million, you just see around your valuation was 8 million, 6 million, whatever, you raise a series A 30 million posts, and then your series B at 100 million, okay, the company then doesn't get proper product market fit, it's spending too much money. It anticipates since, hey, those four fundraisings

SPEAKER_33: I just described happened easy peasy lemon squeezy, in the height of the boom market, you know, founders expect, okay, I'll just do a series B and double the valuation, it'd be great. Maybe I'll even sell

SPEAKER_83: some shares to the new investors. And buy an apartment. So then you find an environment where people re value the company, they say how much revenue you got and how much you're burning. And it turns out, let's just make a number appear if they had a million dollars in revenue, people are valuing it at 100 times revenue in the last round, the new investors say a million dollars in revenue, okay, 10 times that for 10 million to me, the person as well, they raised our last round in 100 million, and nobody can agree. And then some people might have the ability

SPEAKER_33: to block some valuations. Now, citizen, I just made up an example of a composite based on what we've seen, that pretty much tracked the last five years of the bubble, they were valued at 447 million.

SPEAKER_83: So this could have been, you know, really expensive. And then nobody wants to invest, maybe the company's burning a ton of money. So nobody sees a way to fix this. And then somebody comes along and says, I would invest, you know, if I saw the company, and you laid off all these people, and you got to, you know, 30 people, and you had 3 million in revenue, and you know, there's a chance for this to get to break even in a year or two, and then be profitable, I would do it, but I would only do it at this valuation. And now if that valuation was 20 million, and the company had

SPEAKER_33: raised 50, the math doesn't work out, right, you have more, basically debt on the books, more capital put in than you do room to invest. So they say, Okay, move all of the existing investors to

SPEAKER_83: common, and the board would have to vote on this. And they get 20% of the new company, they lose their preferred shares, they get 20% of the company, there's no longer a preference stack, so they don't get their 50 million dollars out first. And then anybody who wants to can participate in this

SPEAKER_33: new round. So to keep any reasonable amount of ownership, you have to put money in. And if you don't put money in, you're going to be washed out, recapitalized as a way to say this. So the round is paid to play, you pay, or you basically are going to lose a bunch of equity.

SPEAKER_83: And it's kind of cutthroat. I think we've had many conversations where people just say, I don't,

SPEAKER_33: I really would not want to be the person who suggests the pay to play around, or offers it because it creates a lot of bad feelings. And here we are, lots of bad feelings.

SPEAKER_00: This round in the case of citizens specifically, which was, which I think you mentioned most recently,

SPEAKER_17: valued at $447 million had an equity conversion rate of 10 to 1, meaning that the shares of those who did not participate in the current funding round would be reduced to a 10th of their previous value. Sure. So you have these bad feelings, and then you have this kind of larger question of the signal that it sent. So in this case, Sequoia refused to participate. Sequoia had led

SPEAKER_00: Citizen Series A in 2017. Chose. Elected.

SPEAKER_44: Elected. Elected. Yeah, I mean. Well, as opposed to refused. You know, refused is a little bit charged.

SPEAKER_32: Right. You know, when you're making, the way an investor should make this is they should value it based on the current market.

SPEAKER_33: Yep. And they should elect. They should choose to invest or not based on the best interests of their LPs. Sequoia elected. Refusing makes it seem like it was an obligation, like they had to. They don't have to. So I'm guessing the press used that word maybe. Refused.

SPEAKER_17: They declined to participate. They elected not to. Like, sure. Mike Vernal left the board. Okay. Big statement. Yep. Refused. The press did use that word per Nick, who is updating our notes in real time. I guess the question. So then one of the people close to Citizen said Sequoia's decision was ruthless. It's very possible that Citizen itself like may have people close to Citizen use the word refuse. And that as its earliest backer, it had abandoned the company in its hour of need. I wonder how much of that is an attempt to counter the signal that gets sent. Yeah. In the case of Sequoia electing not to participate and then leaving the board.

SPEAKER_32: Yeah. So lots of bad feelings all around. And if you are the VC, you do not comment, right? Because there's no upside here.

SPEAKER_33: Yeah. It could be. We don't know. If the company was run terribly, the founders did a terrible job.

SPEAKER_32: It could be they didn't take anybody's advice. It could be they spent money like ridiculously and weren't focused, right? And Sequoia might have looked at it and said, you know what? This company is not being run well. It did not manage its finances properly. It did not have a path to profitability. We can't put bad money after good. We made a good investment in something that was very promising. And then in the execution stage, it wasn't very, they proved to us that they can't build a robust, profitable business. So as an investor,

SPEAKER_33: can you imagine coming out and saying that? It's like, you can't come out and say bad things. It's like saying bad things about your ex situation, right? Like, is there any upside in that? Like people get divorced and you can look at this like a divorce, like you really, is it going to go out and bad mouth your ex spouse to other people? It's really not a good idea. So I think that's probably what

SPEAKER_00: happened here. I mean, it seems like a lose lose for citizen. Like, it seems like a lose lose for a company that

SPEAKER_17: is in need of a fundraise, finds itself in a situation where they are participating in a pay to play, round. And then you have a major investor who led one of your rounds, elect not to participate and leave your board. And there's no whether they say anything or not, it's hard for that not to be a signal, right?

SPEAKER_32: That's why the market typically happened quietly. Right. And usually people say nice things about each other if it does come out. And so let's look at a couple of other logical things here. And I know people know I'm affiliated with Sequoia, they've invested in one of my companies and I was a

SPEAKER_103: Sequoia Scout. And so does Sequoia have money?

SPEAKER_109: A little bit $80 billion under assets under management, I believe they have about $80 billion.

SPEAKER_111: Does Sequoia know how to build large, meaningful companies in the world? Right?

SPEAKER_33: Have they participated in building companies for the ages and know how to operate these businesses? Yeah, better than anybody, you could argue. So this is a group of people who have a ton of money,

SPEAKER_32: a ton of knowledge, and they elected to not participate in this funding round, which was a

SPEAKER_33: distressed funding. It is the job of the founders, you know, in consultation with the board to not get themselves into this kind of situation, right? Again, not to super blame the founders. But if

SPEAKER_32: something doesn't work out, and somebody who has an unlimited amount of capital, and a lot of knowledge and chops in the space, elects to not participate, it signals to me that maybe the company was not being operated at peak operational excellence, let's you know, just to be kind,

SPEAKER_33: that's my that's what my gut tells me. And, you know, they still have a small ownership percentage,

SPEAKER_32: but somebody leaked this, because they were hurt. Right? Definitely. Sequoia would never leak it.

SPEAKER_61: I can't imagine why they would. Yeah, exactly. What's the upside, right? It would be right.

SPEAKER_118: What's the upside? Hey, everybody, we're back with another show us your space contest, in partnership with our friends at Squarespace. We did this last year. It was a huge hit. Here's how it works. We're going to give one twist listener $1,000 in Squarespace credits, but we're doing it vertical specific this time. If you run any kind of an ecommerce related business, it could be a DTC brand, a consumer marketplace, a consumer subscription service, online course, you get the idea. Head to showusyourspace.com. That's it. And that's going to redirect you to one of my tweets from at Jason. Reply to the tweet with a short video, an image, a link, a gif, whatever that shows off your ecommerce site on Squarespace. Then the team is going to pick a winner, and we're going to give them $1,000 in a Squarespace gift card. That's right. If you want to be an entrepreneur, you want to start a side project, a hustle, Squarespace is how you do it. On Squarespace, you can build or sell anything. We love it here at launch. We use it for a demo day, countless other projects, and the features are amazing. They've got templates, analytics, inventory management, APIs, everything. And it's optimized for mobile. It's going to look great on an iPhone, an Android phone. Everything just looks perfect. And you can even sell courses directly inside of Squarespace and keep the 15% that other platforms are taking. Listen, it's your money. Keep it. Here's your call to action. It's so simple. Head to squarespace.com slash twist to start your free trial. And when you're ready to launch, use the offer code twist to save 10% off your first purchase

SPEAKER_15: of a website or domain. When you look at this dispassionately from just the kind of external

SPEAKER_17: reading, Sequoia does not appear to be the bad guy here, right? Like Sequoia appears to be a firm

SPEAKER_42: that made a decision in the best interest of its LPs. It's basically how you're supposed to make every

SPEAKER_83: decision. You're supposed to look at every decision and say, will this return capital? Now,

SPEAKER_33: as an investor, you also want to have a heart, sure. But when it comes to writing the check and making the bet, you have to then make a dispassionate trade. Very hard to do in venture capital, because as we see in venture capital, as opposed to me J trading Facebook and being like, I can,

SPEAKER_32: I'm criticizing Zuckerberg's behavior over here and I made the trade. It's a public thing. I'm not like, I haven't seen Zuckerberg in person in, I don't know, seven, eight years, you know, like,

SPEAKER_33: I have no relationship to Zuckerberg. I can make a dispassionate trade. I didn't spend five, six, seven years with the company trying to build it, and then make a dispassionate trade. Right. And, you know, the press is going to, you know, this is a juicy story that doesn't come out. So there is what they call palace intrigue here, big money intrigue, like, Oh, Sequoia, biggest name in venture capital. Oh, this startup is a very polarizing startup. You remember, I think they had put a bounty out at one point. We covered that story. I think you might

SPEAKER_17: think so. I interviewed the founder on marketplace back in the day and about this idea of like, incenting people to run to crime scenes. And I mean, it's been, it's been pretty controversial.

SPEAKER_48: It also makes me wonder about the firms that force the pay to play scheme. Yeah.

SPEAKER_17: Um, is that also a smart business? Is it kind of like, can our, should we, what should we tell founders about how there's probably going to be more rescues like that headed their way in a tough funding environment?

SPEAKER_32: We, um, without going into specifics, we did one of these during this down market, there was an asset still had a lot of value, uh, was damaged. Founders wanted to try to keep it alive. And, you know, it was a very modest ask. And it was literally like investing in a friends and family around see around to put in a very small amount of money for a larger amount of capital in a business

SPEAKER_33: that was valued at 10 times what we invested in that. And I thought, Hmm, should I do this or not? And I had, uh, I thought about loyalty to the founders, etc. And then I thought about our LPs, and I balanced it, you know, okay, I trust these founders. I got some, you know, experience with them. And I think it's a good trade. Now, anybody who doesn't participate in it is going to get crammed down, but they would have had a zero otherwise. And so when the person who's doing the crammed down round says, Hey, I'm putting the offer out here, I realize this price is not what anybody else paid for it. Therefore, you can come in alongside me, you can pay to play. So I'm not excluding you from this. That's why the the play part is put in there. This way, it's back on the original investors, you're choosing not to invest at this new valuation, you had the chance. So that you bought shares at a dollar. Now they're worth 10 cents, you liked them at a dollar, but you won't participate in 10 cents. Okay, you made your choice. And I choose to buy them at 10 cents. It's just that when it's a private company, there's a lot of fields, there's a lot of feelings. This also is like, this might have also been now that you bring up the that you know, the discussion on marketplace with like, how people were a little uneasy with the startup, this might have just been a convenient time to disengage from a startup that was just a little too spicy. Maybe right? Like, maybe Sequoia didn't or other investors didn't like this idea of the bounties or the sending people to crime scenes and just said, you know what, we invested in this because we thought it was an interesting concept originally, but you know, it didn't pan out. And they're doing things that are a little too aggro

SPEAKER_17: for us to be associated with. When the founder Andrew Fram was also on twist episode 1117, he mentioned they were going to try to build some kind of quote vigilante protection service,

SPEAKER_138: where people in high crime areas could pay a monthly fee to essentially have a security guard escort them from place to place. I mean, Uber for security guards is a brilliant idea.

SPEAKER_32: That exists to a certain extent. You're like, actually, I'm in. Now, if you said, hey, wouldn't it be great if during a high crime time, you could click a button, or if you were an individual who's a public person and needed security on demand, you could click a button and for 40 bucks an hour have somebody sit outside your house for a night like that sounds like a

SPEAKER_36: Batman as a service we have I mean, my neighborhood has like a lot of neighborhoods that have some kind of an

SPEAKER_80: HOA have private security that's like becoming more and more common where you just sort of pull your money and you pay for somebody to patrol. It is a huge turn uncommon. Yeah, I'm putting cameras up

SPEAKER_32: we had the license plate reading company that small towns are doing license plate reading companies.

SPEAKER_33: So it reads all license plates that come into your area, a little bit of privacy concern there. But

SPEAKER_32: you know, it dumps the data every 30 days or something and you know, hey, this license plate hasn't been in the neighborhood before. Okay, yeah, it's a delivery truck. Who cares? It's an Uber. Oh, you know, it's a unmarked van that's beaten up and it's sitting on the side of the road somewhere idling. Okay, could be a reason. But we should send somebody out there to check it out. Oh, yeah, somebody's living in their van. Okay, good to know. Oh, somebody's, you know, lost. Great. Broken down car, you know, whatever it is. So, yeah, they seem like spicy founders. I'll be honest.

SPEAKER_17: Oh, 100% spicy founders. I wonder the extent to which we're going to start to see I mean, spicy founders have had it a perfectly good run, right for a long time, like spicy founders isn't always a problem. In fact, often it is considered a feature, not a bug. But I wonder the extent to which we're going to start to see, you know, for various reasons that range from spicy founders to simply just pirate making the the pirate fire. Here's the thing about being a pirate, you better

SPEAKER_40: Is it going to get more successful? But just on the point of pirates, because otherwise you get

SPEAKER_157: killed by the other pirates. Exactly. If you want to be a pirate, you got to be successful at that job.

SPEAKER_32: And so, you know, citizen successful, I don't know that they made a they ever found a business model that worked. I think they were trying to figure it out. And it's a free product. And they got to vigilante as a service. Like, you know, it sounds like they have a subscription. They have like a

SPEAKER_160: premium product that they always try to get me to sign up for whenever I open it. So would it be worth

SPEAKER_17: it? I don't know. But generally, as we like get deeper into this downturn, I do wonder about this, like quantitative versus qualitative and having to set the feelings aside and be a little more ruthless,

SPEAKER_08: which is part of the industry and always has been like it's finance at the end of the day,

SPEAKER_17: finance with relationships. But I because there are so many founders who had a really easy time raising, who have not seen a downturn, and we're talking about funds, not just Sequoia, but funds that feel like they have unlimited capital. Like I do wonder if we're going to see more publicly hurt feelings like this has been a business conducted in private for a long time. But you wonder how much of it's going to come out as, as these firms start to make harder and harder decisions.

SPEAKER_132: Yeah, it tends to come out, you have dribs and drabs of stuff, you know, the, there's an incentive

SPEAKER_32: to be magnanimous. In these situations, if you're the investor, you never want to say something bad about a founder, because that other founders like, Oh, well, if it doesn't work out, you're gonna say something bad about me, or vice versa. So for these founders, if they did leak this, I don't know that they did, but kind of feels like it would be a leak from that side. Or it could be a an angel investor who is aware of this talk to the founders and leaked it on their behalf. Anything's possible here. So I don't want to speculate more than speculating every possible more than we already have 20 minutes,

SPEAKER_167: every possible permutation of this. But I'm speculating for the help of the founders listening,

SPEAKER_32: like, yeah, if it doesn't work out, you can just quietly, you know, have your opinion about the other person. If somebody asks you, Hey, should I have them as an investor, you can say it didn't work out for me. But you might have a different experience, or say nothing. And that that really is, I think how Silicon Valley works. I you don't hear people badmouthing

SPEAKER_83: people, it's very subtle here. And you want to keep optionality. What if the citizen founders,

SPEAKER_32: one of the citizen founders, their next business is Uber or Airbnb, you know, so you want to keep good relations and vice versa. What if they come up with a great idea that Sequoia is going to back them again, keep keep everything friendly, enemies accumulate as these companies go out of business, you got to just try to be kind to everybody on the way out. It's hard enough, you know, you get these stories once in a while, the press loves these stories. I'm not saying they shouldn't cover them either. But the press loves these stories. These are, you know, they don't happen often. And, but I wouldn't read too much into it. Like, you have to make the right trade as an investor for your LPs. And remember, they had FTX remember Sequoia invested in FTX, and they had written that blog post that was effusive about how great Sam Bankman Freed was. VCs are on high alert right now. Oh, God, if you backed their nose, if you backed FTX, you're on high alert. And you can't have those kind of things back to back. So maybe they saw like, Oh, this could have had this could have other issues. Like, what if they do vigilante as a service, and somebody gets killed, and then Sequoia back vigilante as a service, they may have been trying to unwind this for a while, they may have been asking the founder, Hey, please don't do crazy things. Like vigilante as a service, we, you know, it, it blows

SPEAKER_174: back on us kind of situation. Yeah.

SPEAKER_176: So, so much to speculate about so much, but far, far be it from us. Far be it from us. 25 minutes.

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SPEAKER_15: C O N T R A.com slash twist. We are going to potentially get the opportunity to speculate in

SPEAKER_17: public about publicly traded companies that we've had many questions about because it looks like the IPO window might be opening back up. Here we go. After a quiet 2022 Instacart and the really dishy one soft bank owned arm are both reportedly gearing up to go public this year. Of course, big deal. There were basically IPOs in 2022. There were 181, which was down 82.5% from 2021. When there were over 1000 IPOs, that was an all time high. But it looks like at least so far, of course, you know, Stripe remains the outstanding question. But so far, it looks like we're going to see two major IPOs

Jason Calacanis: in Instacart and arm. So we can break them both down here.

SPEAKER_174: Yeah, I mean, Instacart took that huge valuation cut if you remember. Yeah, we talked about that on the

SPEAKER_157: show. 75%. 75%. And then they've been talking, I guess, about their results publicly. They had a leak.

SPEAKER_17: Oh, it was a leak. Okay. But it's the kind of leak that makes you think they're talking about it publicly as they like raise attention for their IPO. You know, that does happen, especially since it's good news and not bad news. In the case of Instacart. Yeah, good news league is like, hey,

SPEAKER_04: hey, Valleywag, you're never gonna believe it. I'm raving you some 50%.

SPEAKER_196: What has happened that Wall Street Journal is the new Valleywag? Bless. Yeah.

SPEAKER_17: Yeah, they did leak that, or somebody leaked, sorry, that in q4 2022, far be it from us to speculate, but someone leaked. Revenue was up more than- CFO. Not Instacfo at AOL.com.

SPEAKER_202: Oh, no, I accidentally said that. Oops.

SPEAKER_00: Well, nice. Revenue was up more than 50%, even though order volume only grew 16% because

SPEAKER_17: Instacart turned on advertising in the app. Boom, instant money machine. We have seen this happen with a bunch of consumer tech businesses, Amazon, Uber, and now Instacart. Yes. Reportedly, gross profit was up more than 80%. And for the full year 2022, Instacart revenue increased 39% to $2.5 billion. So at a $10 billion valuation, which is what they cut the internal valuation to back in 2022, Instacart would only be trading at 4x 2022 revenue.

SPEAKER_32: Okay, great. Seems reasonable. Yeah, there's a lot of headwinds against this business,

SPEAKER_11: lots of competitors. Amazon, Uber's doing delivery of groceries now. I think DoorDash is doing delivery

SPEAKER_206: of groceries now too. And so those services work really well. They have large networks of buyers,

SPEAKER_32: I have to say, and I'm not just saying this as a team Uber still, but I've been using the Uber grocery product. And it's faster. And we have Instacart too. And we were Instacart and good eggs only.

SPEAKER_11: And now Uber has taken a decent chunk of that because it's just so much faster.

SPEAKER_08: This kind of feels like, I remember saying this when GoPro was about to go public, that like, you better just go ahead, go ahead and do that now. Like, now's your shot, go public,

SPEAKER_17: raise that money. Yep. And then, you know, chunk along. But I don't know that there's going to for all of the reasons you just mentioned, I don't know that there's going to be a better window for

SPEAKER_08: Instacart than there is now because it is hard to pinpoint the differentiator like they've got, I like that Instacart has a lot of stores, a lot, and it's easy to choose from them.

SPEAKER_36: I don't find the shopping to be particularly high quality. That's probably regional. Right? It

SPEAKER_32: depends on where you are. The issue really with these services is, you know, unlike Amazon, where

SPEAKER_212: I've never gotten a mistake. Yeah, every Instacart order has three mistakes, two mistakes, and you're just like, I'm going to deal with it. It's like a meme. It is sort of a joke like, Oh, what did I get

SPEAKER_02: from Instacart? Nine pounds of sugar? Whoops, you know, or it's, you know, it's and for me, it's just

SPEAKER_132: something subtle, like, I like a certain type of Greek yogurt, and they substituted the brand,

SPEAKER_214: I absolutely hate, you know, and I'm just like, right, you know, now I got to eat the yogurt, you know, you start getting your first world vibe on where you're just outraged that like,

SPEAKER_97: the Greek yogurt that you love is now you're getting the one that's not as thick as the

SPEAKER_17: and everything that they've done. I mean, ironically, everything they've done to try to mitigate the mistakes just as work. So like, you have to go in and you have to select which things to substitute with which not. And then you have to communicate constantly. Like, I will

SPEAKER_218: Oh, my God. Oh, my God, they call, they text. They're like, it's like going shopping with a

SPEAKER_101: teenager. It's now going to take three times as long. What about this? I just, what about this? I just, exactly. I just check to not no subs, no substitutions. That's it. Yeah. And it makes

SPEAKER_17: everything super easy. So then you and then when you're going through that experience, and you're mad about it, then you feel like such a first word a world a hole. Yes, that I just then

SPEAKER_08: have just started to go to the store. I'm like, you know what, I'm just gonna go to the store. And that's bad for Instacart. Like they don't they want me to sit there and have a first world experience.

SPEAKER_32: But I don't. There is something nice about going to the store and perusing the aisles and seeing what's there. Sometimes I had that experience, you know, when I go up to Lake Tahoe, and I'm in the mountains, there's no Instacart. And it's quite nice for me for a change of pace to do my own shopping, as opposed to, you know, having it delivered to my doorstep. But I do think this advertising business is a very interesting wrinkle. If you think about hitting scale with these businesses, and then you are Frito-Lay, or you are Budweiser or Engel Waffles, something you know that you, they always give you that, oh, do you want to add this to your order? And it's like,

SPEAKER_214: do I want to add Eggo waffles? Of course I do. Like he doesn't like those. Oh, it works like a charm. So are you going to advertise on television, and then hope that your Eggo waffle or your

SPEAKER_32: Frosted Flake commercial, your Budweiser commercial incents me to actually buy that product? Or would you like to have the Google search version of that product, which is, hey, when somebody's at the checkout counter, would you like somebody to say, Eggo waffles and dangle them above your cart?

SPEAKER_227: Right? Like, that's literally what they're doing away from me. I know. They're like,

Chamath Palihapitiya: and if it happened above the last bag, here's your Eggos, just say it, say the word, click, boop.

SPEAKER_17: Well, it's just like an end cap. I mean, it's, you know, it's, it's like having the promotional part of the grocery store. And I always buy the stupid cake cookies with the pink frosting that are disgusting. Like this is brilliant. Like in terms of integrating advertising, there's almost no better way to put advertising to turn it on than in a place where people are already shopping and are just like, oh, okay, sure, fine. I mean, I'll go through those stupid, it's like, Instagram, it's like three screens. And I'm just like, yeah, I want one of those and some of that and give me

SPEAKER_40: this and they get me on Uber Eats. Like when I'm ordering food, they're like, hey, side of guacamole or,

SPEAKER_97: you know, do you want flan? And I'm like, yeah, well, I'm fine. I'm not supposed to eat it, but I do want it. And like, this is, I think smart revenue. It's what brand CPG advertisers have always coveted, you know, the checkout, and they've never had access to it. And because you can't fit

SPEAKER_11: that much in the candy bars at the checkout, right? You can't put a bunch of products there. They have

SPEAKER_17: like, magazines and candy. So it is funny, now that you mentioned it, like, I'm picturing in the store aisles, those, those last aisles that are crammed, they're crammed with stuff. I mean, it's like, there's the magazines, and then there's candy. And then there's like a row of chiclets, and then this and that, I mean, you can almost feel the desperation of the bidding on the checkout aisle. And now it's like digital checkout aisle, where it's just like, recommendation, recommendation, recommendation, right? I mean, it's really actually, you could imagine that becoming a huge part of it, you could imagine that, imagine that, especially in a competitive environment,

SPEAKER_00: being the thing that keeps you might be the business, and maybe it becomes the business,

SPEAKER_101: maybe it actually is the business, maybe Amazon's business, ultimately, is people buying ads, and

SPEAKER_237: breaking even on the delivery of it. Yeah, it might even that might actually be the business.

SPEAKER_32: Like, we don't really need to make money off of your order, we break even on it. But we have this advertising moment at the end that just is so coveted. We make money off that. Finding great

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SPEAKER_00: SoftBank bought ARM when it was public, right? So ARM is a fascinating company. It is a chip,

SPEAKER_17: it's British, and it's a chip design company, meaning that it doesn't actually manufacture its own chips. It's actually quite clever. It's like the lowest, you know, capital intensive way to do this. They create this chip architecture and license it, license its chip blueprint technology, basically. And then they take a royalty on products that are sold using that technology. So once you build the chip using ARM's blueprint, they charge you for the blueprint, and then they charge you a royalty fee every time you build and sell one of those chips. And so in 2021, ARM reportedly generated $2.7 billion in revenue. The licensing and the royalty revenue were somewhat close to even. The licensing revenue has been growing a lot faster. But ARM was founded in 1990 as a joint venture between Apple, Acorn Computers and VLSI Technology. In 1998, it went public on the NASDAQ and London Stock Exchange. But then in 2016, it was bought by SoftBank for $32 billion with, this was reported in 2020, the intent always just to sell it to somebody like Nvidia. So in 2020, Nvidia reached a deal to buy ARM from SoftBank for $40 billion in stock and cash and SoftBank would get a 10% stake in Nvidia. I mean, this would have been a blockbuster, like just an absolutely absurd deal. Nvidia becomes basically the king of the world. However, in February 2022, after more than a year of regulatory scrutiny, the acquisition was cancelled. And Nvidia kind of had to go back to the drawing board in some ways, but they remained pretty strong. And then SoftBank is looking to take ARM public. Everybody was like, Oh, God, something really ate it on that deal.

SPEAKER_12: Yeah, I always knew ARM because when you when I was back in my PC era, back in the day, you had a choice to buy an Intel PC or an ARM PC, the ARM ones were cheaper and more powerful, way more bang for the buck, it seemed and then Intel did like, Oh, the Intel design, you know, Intel inside campaign, the jingle,

SPEAKER_32: and really said, Hey, you know, we were the better ones, but it was kind of like a Coke and a Pepsi kind of

SPEAKER_11: thing. Or maybe RC Cola and Coke might be a better analogy. But they also do all of the smaller chips

SPEAKER_32: for wearables and smartphones and that kind of stuff. So I think that was their big innovation as well.

SPEAKER_08: That's why they were kind of an Intel killer, because you recall Intel has been had is still

SPEAKER_17: like arm eight Intel's lunch by building mobile chip designs. And Intel never really cracked the mobile market, I think still has not cracked the mobile market, which has been a big question for them. So then the theory was that if Nvidia had inquired arm had acquired arm, and this I think was sort of SoftBank's plan all along and acquiring it and taking it private. Nvidia would then control the market for GPUs, which of course, are the key to AI processing, to they've become really big for autonomous driving development, huge for crypto mining. And then they also would have had access

SPEAKER_167: to all of this sort of mobile chip development, just stepping back from arm. And, you know,

SPEAKER_11: wish them a great IPO. Congratulations. And I hope masa makes a bundle of money and gets back in the

SPEAKER_160: game. I know he's got to be clear, we're expecting papers and like April ish, I have to say, I have

SPEAKER_12: uh, stepping back. I am very impressed at how fast the chips act went through. And I've been given that

SPEAKER_32: a lot of thought. Have we ever seen a bipartisan bill like this to subsidize businesses go through this quickly? I mean, the great financial crisis in that that would be one where they did the bail out of all the banks or whatever, right? But that was a bailout, not an incentive. Yeah, yeah. So it's kind of different, right? That was a cute it wasn't like, so then you see this chips and science act. And we started hearing about this like a couple years ago in 2021, maybe it starts bubbling up and then it's

SPEAKER_259: like, boom, it's in effect, and boom, everybody's building factories and like these incentives are going, it's

SPEAKER_11: big, right? 52 billion or something. It's like this giant thing and roughly 280 billion to boost domestic research according to Wikipedia. And I was wondering why, why is this going? Why is this train going so

SPEAKER_97: fast? You know? Oh, China. Yeah, exactly. And why exactly are they so concerned about chips in China? And then all of this stuff with the lab big theory comes out. And I was like, ah, they really think, I think what was happening is, people really think the relationship with China over this lab league thing was going to come out and be like really hairy, and gnarly, and this Taiwan situation, and all of this craziness going on, we didn't want to be caught short with not having chips.

SPEAKER_265: Is it too tinfoil hat? I'm admitting it's a tinfoil hat kind of moment.

SPEAKER_08: I know. I'm like, Well, or, or we got into a trade war with China. There were like lots and lots

SPEAKER_17: and lots of tariffs. Yeah, there was there were threats to withhold. And we do not have domestic manufacturing of semiconductors like we don't have it. Now, to be clear, a lot happens in China. If there's a tinfoil hat, it's more really maybe about China invading Taiwan, because Taiwan Semiconductor manufacturing company, best name ever. I love a literal name. TSMC.

SPEAKER_22: What do they do? Where are they?

SPEAKER_61: They just do they make anything? I mean, it's the best. It's just the greatest manufacturing company.

SPEAKER_272: Oh, the biggest manufacturing. Yeah, but it's literally

SPEAKER_07: it's a manufacturing company. Literally, we make stuff. Taiwan Semiconductor manufacturing. Like, it's so great.

SPEAKER_06: They're manufacturing company that delivers to you. And then during COVID

SPEAKER_08: unrelated to labs or anything, we just couldn't get it. If you can't get chips,

SPEAKER_17: there is no car thing that you can build. There are no cars. There are no computers. There are no phones. There are no watches. Yeah, there are no appliances. There's nothing. I mean, I actually think the speed with which we moved was the actual internalizing of the national security

SPEAKER_00: risk here. Yeah, you can't build a bomb for God's sake. You need a lot of bombs. Turns out

SPEAKER_44: you need a lot of chips in those bombs. There's still nothing that we spend more money on than bombs.

SPEAKER_32: I yeah, I don't know if we manufacture those ourselves. I'd be interested in following those

SPEAKER_285: backwards like because they probably have all kinds of chips in them. There's one set of chips,

SPEAKER_97: a zillion of them. So you know, we're the you know, they're like, wait, who makes our bombs?

SPEAKER_32: Do we need to onshore this? Well, and the components in them right there? Who knows what components are used for the equipment around the bomb? You know, the truck that drives the bomb somewhere that the missile silo, you know, the computer monitors and computers that are in the

David Friedberg: missile silo. If we find out we're making our missiles in China, that's going to be amazing. I don't think we're making them there. But is it possible that there are components inside of,

SPEAKER_285: you know, definitely aspects that come from Taiwan? It's possible, probably 100%.

SPEAKER_17: Yeah, so like they all we don't have there are no, there are hardly and maybe like Micron does some has a foundry in the US.

SPEAKER_97: We didn't see when we were away for these two weeks, we didn't get to talk about the

SPEAKER_11: that's why I see I really wanted to talk to you about the lab leak theory with a report that came out that maybe, you know, more people are leaning towards it's a possibility. We didn't get to like,

SPEAKER_17: two out of seven federal agencies, one like moderate and one with low confidence. Yeah, we should definitely run with that, though.

SPEAKER_32: I mean, it does feel like the chances of there being two research facilities in the world that

SPEAKER_56: do this and one of them was where the outbreak is just geographically peculiar.

SPEAKER_17: I find it. I think I tweeted something to the effect that that it was very interesting that all of a sudden there was just a ton of like heavily misrepresent because that report did come out from the DOE moderate. They said they had moderate confidence in the idea that it could be a lab leak. I think the FBI is still at low confidence and every other federal agency so far. Yeah, and we don't know what they're gonna come up with eventually. But so far is like, nah, what market? I'm going with Jon Stewart. However, we might find out more information. It was just weird that there was that and then the massively misrepresented mask thing in the same week. That doesn't it's like, like I want to get to truth, ground truth. But that doesn't feel like we're going it feels like now we're just going to go all the way in the other direction and then get to ignore the fact that like millions, you know, so many excess people died in the US and didn't have to.

SPEAKER_285: It's, this is going to be a messy one to unpack. It really is super messy to unpack. I just hope we can objectively

SPEAKER_08: look at it. We need a commission. Like we need a COVID commission, like the 911 commission, like the Watergate commission, like we need a truly bipartisan commission, because people are crazy.

SPEAKER_44: I mean, this seems like something that should be a real focus just because it's going to happen

SPEAKER_315: again. Right? Yeah.

SPEAKER_08: So wouldn't it be good to be like a giant bummer, but it's probably already brewing with like bird flu right now. Evidently it's like in minks and makes have a respiratory system that's like the same as humans. You know what we should do is we should study that.

SPEAKER_317: I don't like it. Hey, here's an idea. We should study that. You know what we should do is we should study not only that,

SPEAKER_227: but what it could evolve into just so we're prepared for the next version. So we could like literally use science to study where that is going.

SPEAKER_157: Oh, no, no, don't do that.

SPEAKER_320: Wait, wait, wait, wait. Like we could be prepared for it?

SPEAKER_227: Well, we could just involve it, you know, we could just give it like a gain of function. We could like add to the functionality of whatever we find and then you just do like some, you know, add some functions to it. Like see if you made it more robust, what would happen?

SPEAKER_323: We do do that. We definitely are. We do that. We do that.

SPEAKER_109: Do it. I have a really good idea. I think that's why we don't talk about lab league stuff because we're like, we also have labs. We don't want to talk about lab league. We have all the labs. We're all doing the same stuff.

SPEAKER_97: Just do it on an island, like Plum Island. Have you ever heard of it? It's a mile and a half off the coast of Long Island.

SPEAKER_325: And, uh, That feels close.

SPEAKER_101: It's it's yes. Can you go further? It's a mile and a half. Like, I think it was like three blocks to the wet market,

SPEAKER_157: outside of the Wuhan COVID library, COVID, uh, laboratory. So a mile and a half of water. It's a start at least. It's a start. If you're going to do.

SPEAKER_329: It's better than blocks. Better than blocks.

SPEAKER_283: I wonder where we're doing it. I wonder where our labs are.

SPEAKER_101: No, Plum Island. Plum Island Animal Disease Center. That is where it's happening? Yeah. This is a whole, like, if you want to go super tinfoil hat, you can go down the Plum Island tinfoil hat.

SPEAKER_97: Where this is where they study foreign animal diseases on livestock on an island off of Long Island.

SPEAKER_109: It's kind of like what we were talking about at the beginning of the show.

SPEAKER_36: Yeah. There's stuff that you just want to be cool about.

SPEAKER_333: Yeah.

SPEAKER_36: Because if you don't, you get into a mutually assured destruction loop.

SPEAKER_17: And like, you can bet that whatever China's doing, we're doing. For sure. Yeah. And so you don't want to, you know, it's like, you don't want to get too high horsey about stuff.

SPEAKER_109: I mean, we probably funded it too.

SPEAKER_339: So we probably funded it. Yeah.

SPEAKER_11: So, I mean, I, I, I would be fine with just taking ownership of it and moving on. That has that for an idea. Like we all just take ownership of it and do better.

SPEAKER_343: But Plum Island, if you put those people looking to go down like an area 51 rabbit hole, may I suggest

SPEAKER_346: Plum Island. I'm sure there's a Joe Rogan episode with somebody who is just asking questions.

SPEAKER_343: I love it. Let's go.

SPEAKER_157: I used to love that series that Leonard Nimoy used to do in search of. Do you remember in search of?

SPEAKER_348: Oh yeah. In search of.

SPEAKER_44: I forgot about that show. Leonard. Oh, I gotta look this up.

SPEAKER_351: So there was a show called in search of, uh, and they did 144 episodes, it seems. And Leonard Nimoy hosted it in search of Bigfoot.

SPEAKER_352: Oh my God. This was like, OG conspiracy theory stuff. Lock, this monster, all the classics, all the classics.

SPEAKER_351: But to have Leonard Nimoy do the voiceover was just amazing.

SPEAKER_355: This is incredible. I want to go back and like, watch all of these, the outer space connection.

SPEAKER_08: So great. I'll tell you, man, you could have a really fun afternoon with a weed gummy in that show, ancient aliens. Oh, no.

SPEAKER_46: On the history channel. Oh, the history channel has the history of aliens. The history channel has a show called the ancient aliens.

SPEAKER_17: And it's always the same wackadoodle guy who's like really tan and has this big mullet and is draw is pointing out how like ancient relics all have the same alien designs. Yes. There it is. There it is. Aliens. It's just, I'm just saying.

SPEAKER_44: Put the hat on. For balloons. And go crazy. Oh, they're probably, they're gotta be aliens. Any crypto craziness as we round third base here?

SPEAKER_12: Always seems like it's like always good to round the show off with the latest in crypto nonsense. Yeah.

SPEAKER_368: Yeah. This is a good one. What is it in? This is a good one. When and how?

SPEAKER_255: Like how many Thanksgivings have to be hijacked by crypto discussions and your crypto cousin.

SPEAKER_368: I want Thanksgiving reparations from the crypto industry is what I want. For sure. Just please. Yeah. I want payback. Give me my time back. I want my time back.

SPEAKER_369: Just can I get back those nine hours.

SPEAKER_17: Dapper Labs CEO Roham Gary Goslu was reportedly Dapper Labs, by the way, is the maker of NBA Top Shot. Yeah, very successful. Crypto Kitties and the Flow blockchain. So like big, big games that everybody knows. They've done really great stuff too.

SPEAKER_206: Like the, that NBA Top Shot was very successful with.

SPEAKER_17: Yeah, definitely. And in fact, Dapper Labs has raised money from A16Z, KOTU, Bond, which is Mary Meeker, NBA players like Kevin Durant, Klay Thompson, Josh Hart. There's a little note here that says, go Knicks. Oh, okay. I don't know what that's about. And other athletes.

SPEAKER_145: We've got a nine game winning streak right now. The Knicks are playing better than they have since I was in my 20s and Patrick Ewing was on the Knicks. So Josh Hart, I don't know. He is the good.

SPEAKER_17: Side notes galore. Um, anyway, so it appears that obviously the NFT and the crypto space have been completely hammered over the past year or so. And again, circling all the way back up to the top, feelings are coming out in the press. Now, 11 anonymous current and former Dapper Labs employees are speaking out against its CEO. Uh oh.

SPEAKER_201: Yeah. You had me. Once it was double digits. I'm like, oh, no, I've been through this. 11. When you get to double digits, uh oh.

SPEAKER_382: That's not good. It's not two.

SPEAKER_383: It's not good.

SPEAKER_00: It's not three people.

SPEAKER_383: It really is not. Yeah.

SPEAKER_17: So in March 2022, Dapper Labs raised $250 million at a $7.6 billion valuation led by KOTU. At its peak, the NBA Top Shot collection generated $224 million in sales in the month of February 2021. But then of course, so $224 million in February 2021.

SPEAKER_138: Those sales fell to $2.8 million last month.

SPEAKER_11: Okay. That's total sales, which they get a percentage of. So if their take rate was the standard 20 or 30% that you see, or 20 or 30% for like a really uh, elite marketplace, like app store marketplace.

SPEAKER_390: Right. Right.

SPEAKER_11: But let's just give them the benefit of the downside 30%, like a really high one. That means they made a million dollars or so. $900K, whatever.

SPEAKER_17: So yeah.

SPEAKER_11: Down from 90.

SPEAKER_17: And when you look at this, you know, monthly trading volumes declining 95% through 2022.

SPEAKER_08: Sure. However, apparently, none of that ongoing decline stopped Roham from rolling on private jets,

SPEAKER_17: renting mansions at up to $300,000 a month, and just generally living the dream. He would routinely apparently rent these mansions. Private jets had become one of his priciest expenditures. The trips would cost between $60,000 and $100,000 per flight when not renting a mansion. I'm just quoting from the article because it's just a corker. When not renting a mansion, the CEO often booked five star hotel suites that would sometimes cost as much as $30,000 a night, according to one person who's familiar with the matter.

SPEAKER_00: Wait, he did this on the company or his own personal? Oh, yeah, he would. This is the most amazing thing.

SPEAKER_17: He considered these big ticket expenses integral to his strategy of cozying up to celebrities, and so they would be listed as marketing expenses.

SPEAKER_174: Oh, yeah. So, okay. Let's pause for a second on this. Marketing. Yeah.

SPEAKER_32: There is an instance where if you were at CES and you rented a suite to invite people by who are buyers of your product, and you'd want that suite to be impressive. Right? We've all been to those suites at CES. Absolutely.

SPEAKER_17: Where you throw a South by Southwest party. Right now there are massive marketing budgets being thrown at South by Southwest.

SPEAKER_12: Now, so if it was in fact that you rented a $10,000 or $30,000 suite one night, if 100 people came to it, and these were 100 buyers, and there was some sort of justification, okay,

SPEAKER_32: one night in the suite, two nights in the suite to set it up, and it's got a business expense, that would be valid marketing.

SPEAKER_11: So, you know, just so we steel man, straw man, whatever, uh, steel man, uh, of course, but

SPEAKER_32: flying on a private jet, if you were flying Kevin Durant to a speaking gig,

SPEAKER_97: to sell things, okay. If you're flying yourself, no bueno, not necessary.

SPEAKER_12: So you have to look at each one of these independently. This is why, as the CEO of a company, they, they, they nail a lot of CEOs on personal expense. Mm hmm. This is why you got to make it bulletproof.

SPEAKER_32: Right? Like it's not the suite you're staying in. Mm hmm. The marketing department rented it. So I'm just giving a little advice here. And it was approved and it was thoughtful. And you had the sales that occurred because of it. Right. I've had this happen in companies. You track your, you track your ROI. Yeah. You track the ROI of it. And it was driven by the marketing department. So if the CEO is doing stuff like this unilaterally, and it's for their room, where they're staying, that's not good. Yeah. If the marketing department did it. So if you were on the board of this company, how you evaluate, or for people who are, you know, thinking about doing something like this, just, you have to be thoughtful. If you have Cheryl, if you own a hundred percent of the company, do whatever you want. As long as it's within the tax law and the tax law would be totally fine with you having a party or marketing through a party, but not for your travel expenses. If it was personal, and then there's just the optics.

SPEAKER_412: So once you have to explain optics, that's when you get yourself in trouble too.

SPEAKER_08: Yeah, it's a very, to me, this also feels like an interesting case of what happens when you

SPEAKER_17: get too much money, which I think we've talked about. Um, there is, let's see, in a statement Dapper said, quote, the notion that, oh, so anyway, that this two things about this one, a lot of money came flowing into this company. And I suspect that there was no small amount of keeping up with the Joneses here, as they kind of say in their statement, they're like, we have and will continue to spend money on high impact events. Our business is rooted in entertainment and sports. You have a CEO with, you know, has a huge amount of funding and is at some point having up to, you know, $60 million in trading volume in a single month. And it's like, this is what we have to project because this is the pool that we're swimming in. It does make you I mean, it is an interesting governance question, because it does feel like there were a lot of really, again, very, very well respected investors, presumably on their board. The upper lab has five board members and three observers. So himself, maybe a relative.

Jason Calacanis: But and the observers are Chris Dixon of a 16Z Dan Rose from KOTU and Fred Wilson.

SPEAKER_101: These are legit investors, like the marketing expenses here could be completely justified. Or if he was doing this alone, solo. Yeah, they would be abusive. And he could get fired for it. I think he seems like a smart cat. And I'm going to go with these are expensive things to do. And they have bad optics. But uh, especially if you had to lay off a bunch of people. So those people who got laid off who are trying to dunk on him, I guess, or whatever. Yeah, sure. That doesn't look bad that you spent

SPEAKER_11: money on private jets. Yeah, of course. And that private jet equals somebody's salary or something

SPEAKER_412: who got laid off, you can you can kind of make all the jumps here. But if that private jet was for

SPEAKER_101: Kevin Durant and Steph Curry, right, to go to a speaking gig and sell those NFTs that sold a quarter

SPEAKER_11: billion dollars. Yeah, 250 million worth of quarter billion dollars worth of NFTs, then it was worth it.

SPEAKER_17: Also, it sounds like he was just a real jerk internally. Like, it sounds like as things started to decline, I mean, you know, when you look at why 11 people are speaking to the press, it's also that there became this really bullying culture, lots and lots of micromanagement. Yeah, that he would publicly shame people on stat on slack or screaming employees during video calls, screaming, etc, etc. As the market went down, he became harder to work with, it sounds like.

SPEAKER_101: But just on this thing, what are the 11 employees hoping to get out of this? Is this just a slam piece? Or is it like, are they in a lawsuit? I don't know? Yeah.

SPEAKER_419: Yeah, they're just going public with it. They're just going public. It's not a lawsuit.

SPEAKER_101: It's not as part of a lawsuit, because you know, something unfair happened to them. There's no

SPEAKER_11: unfair labor practices here kind of situation.

SPEAKER_17: We have no, there's no lawsuit, like maybe yet. I don't know, right? Who knows? Maybe people are contemplating right now. It's just, it's just, it's just, it is a slam piece in the block, potentially related to who knows, layoffs, most likely there's, there's kind of a lot of again, we're have we have a whole story arc here, starting at the top and ending here, like, we can enter a lot of slam pieces about media layoffs right now, like we can just anticipate that there's going to be a lot of this because there's a lot of disgruntlement.

SPEAKER_12: Yeah. When you're reading these things, I think always asking what the press is going

SPEAKER_32: to cover interesting stories, especially if people there's conflict, right? Conflict equals drama conflict. Sometimes there's something important. And if somebody was spending a sugar ton of money, that's also notable. You have to look at it and say, are these anonymous and are, is there a point to this? Are they trying to get them fired? Is there a lawsuit in this case?

SPEAKER_11: I guess they just got a bunch of people who were laid off to talk about it.

SPEAKER_17: It said current, they are anonymous, but it was 11 current and former employees, including both staffers who left at their own volition and those who did not.

SPEAKER_430: Got it. I would like to see that number broken down. Yeah.

SPEAKER_17: So that is exactly what Nick predicted that you would say.

SPEAKER_44: Well, I mean, is it one person who still works there and like 10 who got laid out, you know? Yeah. And it's just one of the problem with any, I am so, I feel like we've gotten into a dysfunctional

SPEAKER_12: usage of unnamed sources now, where I think like the unnamed sources kind of understand they get to be unnamed. So they have this in their back pocket as like, well, if I'm mistreated, at least I can be an unnamed source in a story and get my revenge. And if the person was fired for cause, or if they left on their own volition, or if they're still there, all that matters. And then what the motivation is here,

SPEAKER_32: you know, sometimes this could come from an investor who's not happy, could come from a competing company. Who knows? I mean, I think it's a,

SPEAKER_17: it is an interesting question of what recourse, if any people have when they work for a private company and they feel that governance is failing. Like, so a generous interpretation of the people who are being quoted here is that they were like, this is terrible and people need to know about it. And we came here for equity and that equity is going to be wiped out by this banana spending. And we feel like, you know, the investors don't know what's happening and we're trying to raise the

SPEAKER_36: alarm.

SPEAKER_32: Yeah. If they were leaking that he was burning the money, uh, stupidly, I could understand that. Yeah.

SPEAKER_36: But that is what they leaked. I mean, they also said that he was a jerk, but they were, but primarily this was about the spending habits, the story, at least.

SPEAKER_32: You know, in on boards of companies at this level, they present a plan, the plan, just so people understand if it's compensation, there's a compensation committee, the compensation committee looks at everybody's compensation. So there's like a safeguard there. When it comes to T and E travel and entertainment or marketing expenses, the board would rarely double click on that. They would not say, Oh, tell us what I see. We have $3 million in marketing spend this year. Can you break that down for us? Right? They would just look at, okay, what is the marketing as a percentage of revenue? Okay, we had 300 million in revenue, we spent 30 million on marketing. Great. 10%. That seems in line, we'll trust you to spend it however you want. Now, in this case, if that 30 million was spent on a lot of private jets and parties, and that worked for the company, that's all

SPEAKER_132: the board is going to look at just so people are aware of like, what happens really important insight. Exactly. Yeah. Now they might. If they sort of report like to say what's up, and then they

SPEAKER_32: say, Okay, we spent 30 million on marketing, 6 million on parties, 24 million on cost per click ads, and they'd say, Okay, so 20% of marketing was on events, and 80% was on cost per click trackable advertising. Okay, that seems reasonable. You know, so, who knows, we don't have enough information. But just so you know, the boards here are going to look at top line level items, they're not looking at people's expenses, you have to have a certain amount of trust with the management team. And if they want to go spend a sure ton of money on, you know, expensive dinners,

SPEAKER_441: as long as on a percentage basis, it falls in line, that's okay.

SPEAKER_17: There was a there was a note saying to that they have a strong, well, the CEO told investors in which in a document obtained by the block, which announced that Dapper was laying 20% of its employees off the CEO told investors, they aim to improve efficiency and that the company is in a quote, strong cash position with no outstanding debt. Again, that's the top that to that top line

SPEAKER_255: point. Exactly. Yeah. So this is like, so what this speaks to Molly is like, what you're seeing

SPEAKER_12: internally could seem wasteful and crazy, right? What VCC is big picture. So you're looking at the micro and saying, I can't believe that we're spending this much money on catering lunch or this event or ferrying this celebrity around on a private jet or whatever. And the board is just like, you know what, YOLO, if the top line revenue is growing, the valuations growing, and this is a percentage of revenue, it's when it gets off that people start going, huh, wait a second.

SPEAKER_00: I mean, you can see why someone would be asking these questions now, when trading volume has declined 95%.

SPEAKER_12: In a year. When I have other shareholders in my company. I am just unbelievably cautious,

SPEAKER_11: maybe even to the point of paranoid about expenses. When you own your own company, which I do, when the case of launching this week in startups, I don't have shareholders in those companies. Yeah,

SPEAKER_12: I can buy myself a business class ticket, or, you know, entertain at a Warriors game or buy an expensive dinner, I don't have anybody to answer to. But when I do anything at inside, as an example, I when I have shareholders in that company, man, I am not flying business class, I am, I would

SPEAKER_97: actually literally pay as a CEO, the difference between economy plus and business myself. And I've done that kind of stuff many times. So my advice to founders is, when it comes to your personal travel expenses, the real flex is to use miles and stay at the W. And, you know, to, because you set an example for everybody in the company. And once some people in the company see you find first class and staying at expensive hotels, they're like, Oh, wait a second. You know, we have shareholders,

SPEAKER_454: and then this kind of stuff happens. So be paranoid.

SPEAKER_36: And then finally, I think the other really, really interesting part about this is this lawsuit,

SPEAKER_17: primarily because you have a judge here. So Dapper Labs motion to have this lawsuit dismiss the one in which they're being sued over whether they sold these top shot NFTs as unregistered securities. The judge Victor Marrero of the Southern District of New York denied the request and then published

SPEAKER_00: Oh, this is SDNY. Mm hmm. And this, I think that this particular, the piece of writing here in denying

SPEAKER_17: this request, I sets the conversation about liability, I think, in a whole new direction. And it's fascinating. It's a 64 page opinion that went through the four part Howey test and how it relates to Dapper Labs. The Howey test, of course, determines that something is a security when it meets four conditions. First, an investment of money. Second, in a common enterprise. Third, with the expectation of profit. Check. And fourth, to be derived from the efforts of others. The judge did not say

SPEAKER_00: outright that these NFTs were securities, but he did say they fulfilled three of the four parts.

SPEAKER_460: That's what I did, the first three, to me makes sense. Right. And that what's also very interesting is

SPEAKER_17: that it might be a security because of this fundamental reason. And I think this is fascinating, because Dapper Labs owns and operates the flow blockchain, the private blockchain where NBA top shots are traded. And since that blockchains success is tied to the success of Dapper Labs itself. That's why it might be a security. The judge noted that if NBA top shots were traded on a public blockchain, like Bitcoin, that then maybe they wouldn't be and I think that is such a nuanced,

SPEAKER_419: crucial judge actually getting reading going forward, this judge really gets it.

SPEAKER_12: This Howey test, you know, is for securities typically not collectibles. And so the collectibles industry is always like, Oh, just training, you know, baseball cards. Literally, that's what top shot is. It's the digital version of baseball cards and baseball cards go up in value and people buy them as an investment, right? Yeah. So it is an investment of money. It is a common enterprise.

SPEAKER_32: People do have the expectation of profit. And then this last one to be derived from the efforts of

SPEAKER_12: others. Okay, well, when it's a company like Google, yeah, people are working at Google, and you're collecting the profits of others. Here, after the card is minted, using the baseball card analogy, after the baseball card is minted, is very little effort in a baseball card or a comic for the

SPEAKER_11: efforts of others, you might be able to argue like, I don't know if they if Marvel really invests in Iron Man a whole bunch, maybe that would make it, you know, more valuable, I guess. So when they do,

SPEAKER_12: what do they call it when an NFT like the board apes mutates, or they do a drop, right? They add to the value of the NFT, you know, when they do that, they'll like mutate the NFT, and they'll give you

SPEAKER_32: like a free NFT as part of it. When they do those kind of things, that feels like driving from the

SPEAKER_11: effort of others. So that also could be a rub here is that if you do the thing that people find valuable about NFTs, which is those mutations and stuff, that would be one. But here, it's the

SPEAKER_469: maintaining of the blockchain, the effort to maintain it.

SPEAKER_17: Right. I mean, that's one of the I think the three things and exactly and then the fact that it'd be like if you sold baseball cards, but then you also like the, you know, the analog version or something if you sold baseball cards, but then the only place that you could ever sell, or resell or buy those cards was at your own auction that you ran, right? That's different from like, I just sell a top shot, you know, I could sell baseball card out in the world and like, buy it on eBay, sell it on eBay, sell it anywhere, sell it privately. But if all of the then, and then that auction house, the privately owned one takes a cut every time you do something, then the only reason for those cards to have value is to enrich my private blockchain, and therefore you have potentially a security, it's just a really like, good job, the judge people are catching on we talked about with the crypto roundtable a couple weeks ago, how, like, it seemed like Gary Gensler, it seems like the scalpels are coming out, like regulators and judges and legal system is starting to figure out how to scalpel out the parts that are

SPEAKER_11: no good. Yeah. It's nuanced. It's certainly nuanced. And I, nobody thinks that Dapper Labs is a bad actor.

SPEAKER_169: In fact, quite the opposite, they seem to be doing things in a thoughtful way.

SPEAKER_368: I would argue that 11 former and current employees think that they might be a bad actor.

SPEAKER_160: Okay. And this judge sure suggests that in fact, they might be a bad actor.

SPEAKER_324: I'm just gonna say it's not no one. It's not zero.

SPEAKER_476: How many employees that have like 3000 employees at that place? I bet

SPEAKER_454: probably over 1000 at the peak 600. Okay, so 11 of 600. Statistically valid, I guess, 1%, 2%. Yeah,

SPEAKER_12: it's valid. So that it's a real number. It's not to that's why when I said gets a double digits,

SPEAKER_454: might have a pattern going on here. Yeah, it's just there's no lawsuits. So there's no crime going on here. He made people feel bad. He was a jerk. And he spent money on well, there there is there's

SPEAKER_36: not a lawsuit from the employees. There's a lot of the first story. Back to the block story. The

SPEAKER_08: second one. Yeah, he's in trouble. Yeah. Anyway, it's like, listen, when the market goes down.

SPEAKER_329: This is these are the things that will happen. This is the kind of like, knives come out.

SPEAKER_486: The knives. Yeah, exactly. Oh, yeah, that's the yeah, that's the glass on your knives out. Yeah.

SPEAKER_01: Knives come out. Who knows what the truth is here? Like, it's probably a little bit of a little bit of truth in each side for former employees who were closely with

SPEAKER_11: the CEO said even as the bear market set in Gary goes Lou appeared to be more concerned with generating hype by celebrity partnerships than he did building new products, running developers,

SPEAKER_74: utilize dappers blockchain. That's a strategy.

SPEAKER_17: Yeah, question more to come. I'm sure I'm certain that this is not the last knives out story that you will hear. I would be very careful with that. Uh, Southern District of New York. That is,

SPEAKER_160: I would look out for that. And I definitely no joke. I'm mentally bookmarking this public versus private blockchain conversation for the next time Sonny and Benny are on because I think that's a

SPEAKER_488: really interesting wrinkle. I think they Yeah, just need to make it. They should make it public. Yeah,

SPEAKER_01: they has a tough one. I wonder what their thinking is there of why it needs to be Oh, probably because they need to have controls. So here's where this is where it gets dicey. If you want more controls to have more consumer protection, right? Then you're doing securities law, if you give less controls to who not break the securities law, then the public has no recourse. Like when somebody loses their Bitcoin wallet, right? So right, this is the or something this won't be as valuable, you can

SPEAKER_160: make it more valuable by minting it on your own blockchain and controlling every aspect of it. Yeah, aka sort of security. Yeah, my understanding though, is you could sell them on other blockchains.

SPEAKER_44: I'm sure you could sell them on other blockchains. I would just imagine that the

SPEAKER_32: The flow is controlled by them. Yes. I mean, if we're having a hard time thinking about what the right thing to do here is, like, I could see the SEC in Southern District also being like, huh?

SPEAKER_17: I think it's just like, we're gonna don't you feel like what's really going to happen is we're just moving to a universe where NFTs have to have utility, they cannot just exist to trade and be a collectible because that's always going to become some that's some sort of a It's to make money, like fundamentally, it's it's an investment with an expectation of profit in a common enterprise. It would you know, you know, like the you just keep coming back to that every time, like maybe your NFT should just be a concert ticket. And then we can avoid all that super like

SPEAKER_97: what happens in art, you know, it's long been known that some people use art as a way to,

SPEAKER_32: you know, collecting of art is seems to be a very, uh, it seems like the IRS and people who buy art are well aware of the nuances in buying and selling art and taxes, and the gains on them and inheritances or it seems, I don't want to say a loophole.

SPEAKER_502: But a loophole.

SPEAKER_161: Well, it's not a common enterprise. There are lots and lots of artists, right? Like, I guess maybe that's

SPEAKER_504: the difference. Yeah, test, I guess.

SPEAKER_101: Yeah. And then there is the value in of owning it. So I own this

SPEAKER_12: thing because I love it. It has nothing to do with taxes or money or donations. So I bought this for 30 million and I got a donation for 30 million when I donated it to MoMA. And right, you know,

SPEAKER_17: whatever. Sure, just like we see that any asset of value can and will be arbitraged and exploited. And then the question is, at what point do you hit all four ticks and then you're doing it to make money, right? Like, you could argue that all the behavior you described about art is as a result of art being an underlying asset that has value, but it was not necessarily created to be an investment with an expectation of profit. It was art. Yeah. But if an NFT was created specifically to be an investment vehicle with an expectation of profit that would then flow back to the flow blockchain

SPEAKER_257: and on and on and on. Yeah, it's, you know, it's tricky.

SPEAKER_145: Well, then the people buying the art from a free port, you remember that whole thing? So you have to

SPEAKER_12: pay taxes on it. Yeah, I mean, then there's like the donations of it. I just every time I talk to a rich

Chamath Palihapitiya: person about art, my head starts spinning because they're doing so many different moves with their

SPEAKER_97: art that I'm like, this can't be illegal. What's going on? What ex why exactly is all this effort going into art? It feels like more effort than the art is worth. Like, I mean, and then there's the

SPEAKER_01: wash trading. Well, the wash trading that occurred in NFTs is definitely a real thing. Like when people were flipping them and then you come in and you're the 18th buyer of this, but in fact, you're the first

SPEAKER_11: buyer of it. That 17 people came before you were just running it up to create a wash or they were

SPEAKER_514: also you, they were your 17 wallet. Sure. Yeah, exactly. You armed it up yourself. And now you're

SPEAKER_428: trying to find somebody to buy half the price that you pushed it up to. If there's money to be made,

SPEAKER_17: people are gonna figure out how to make that money. I mean, at the end of the day, like that's

SPEAKER_174: never not been true. The utility of NFTs is the key here. If they have some utility, that would be good. More utility would be good. Yeah. We'll see. All right, everybody. Thanks for tuning in.

SPEAKER_315: We're back. Oh, and hey, the climate show is back. Tell everybody what's happening tomorrow.

SPEAKER_17: Yep. First edition of the Tuesday climate show. We're gonna break down some climate news. And then I'm focusing at least in the beginning here on some climate unicorns. So I'm talking to Arcadia, one of the first climate unicorns with climate founder, they're doing community solar, and all this kind of speaking of arbitrage, all this kind of energy arbitrage that's just making tons of money. Then on Wednesday, another amazing angel interview. It's just like a boom,

SPEAKER_61: boom, boom kind of week. All right, everybody, we will see you tomorrow. Bye-bye. Bye-bye.