SPEAKER_00: I mean, what it comes down to is we actually build things here and pretty much everyone else in trucking, trying to make EVs is mostly in the business of buying things out of a catalog and then selling it to other people. Imagine if when you bought a Silverado, GM like went across the street and bought all the engines from Ford. It would be really tough for GM to compete with Ford's pricing at that point. Right. And like that would make no sense. This is the only place in the United States where a truck OEM is building their own battery modules and battery packs.

SPEAKER_03: This week in startups is brought to you by NetSuite. The business landscape is very chaotic right now. That's why you need NetSuite by Oracle. If your revenues are at least in the seven figures, download the free ebook, Navigating Global Trade, Three Insights for Leaders at netsuite.com slash twist. Retool. Bridge the gap between AI demos and business impact with technology that's designed for developers and built for the enterprise. Visit retool.com slash twist and try it out today. And dot tech. Say it without saying it. Head to get.tech slash twist or your favorite registrar to get a

SPEAKER_04: clean, sharp dot tech domain today. Hello and welcome back to this week in startups. My name is Alex Wilhelm. I'm your host and I'm joined today by my comrade in arms. It's Mr. Lon Harris.

SPEAKER_06: Hey, everybody. How you doing, baby? Doing great. Did not did not really think about how I was going to be on camera this week. So it's a little bit of a wild hair situation, but we're working with it.

SPEAKER_08: Well, I actually did not do my usual hair trim before this morning. So we're going casual Monday,

SPEAKER_07: I feel like today. But let's start with just the opening news of the day, which is that stock market hit an all time high today, both the S&P and the NASDAQ. And so I think it's time for some champagne and caviar. But no, it really is an all time high today. So if you are in the equities market in any capacity, it's a good day for you. Also, Lon, a critical upswing for market comps. So a lot of companies want to list, want to go out and get public. The higher the public markets are, the easier it is for them to defend private market valuations, the more enticing a new listing might be to investors. So overall, a pretty bullish sign as we go into, I guess what we're going to call the second half of the year's IPO cycle. And there's one name in particular, Lon,

SPEAKER_10: that's driving the most attention. So tell me just a little bit about Figma.

SPEAKER_06: So Figma, of course, design unicorn, it's the vibe coding, it's the web design, it's that incredibly

SPEAKER_13: hot sector of startups that we talk about, I feel like just about every day. So Figma's in that range, they price to an initial IPO range of about $25 to $28 per share. Rencap calculates that at the midpoint of that range, their fully diluted market cap, somewhere in the $15.9 billion range. Now, that is less than Adobe wanted to buy the company for just a few years ago. So it's sort of a mixed

SPEAKER_06: signal there, but it's above the $12.5 billion tender price that Figma allowed shareholders to cash out in just last year in 2024.

SPEAKER_08: Yeah. So I think it's overall a pretty strong number to start. I think Adobe was overpaying for

SPEAKER_07: the company to take it off the table. Overpaying is a way of saying premium in more, you know, normal English. But whenever you buy a company and take it off the table, you have to pay for some of its future growth ahead of time. You see this in every, you know, major public market transaction and so forth. Yeah. Figma was a hot company. Adobe won today because, well, it's crushing the game. And I would say eroding a good chunk of Adobe's market share today and also long-term cash flows. Next up on the docket, we have Polymarket. Polymarket is a place where you can place bets on what's going on in and around the world. Everything from Bitcoin prices to who will be the next president of pick a nation that's having an election. Well, you can make a wager on it. And we like Polymarket here at Twist and Lon and I have picked an excellent market for everyone today. It's entitled, what will Trump say during his AI speech on July 23rd? Lon, let's give people some context here. Trump's talking about AI on the 23rd.

SPEAKER_17: Yeah, we've got a co-branded event on Wednesday of this week. It is both an all-in podcast meetup.

SPEAKER_13: For those of you who just watched this show, all-in is a separate show that Jason hosts with his besties, Chamath Pali-Hapitiya, David Sachs, and David Friedberg. Very popular podcast. More popular than this one. I don't know why, but it is. So they're hosting a big event this week, co-hosting it with the White House. Of course, David Sachs also, in addition to being an all-in co-host, our AI and crypto czar here in the US. So Trump is going to discuss some aspect of AI during this same event, which is being co-hosted by the All-In podcast. And we're debating what are the specific things, phrases, words that Trump will say during this big speech. The number one, 95% chance that Trump is going to say AI or artificial intelligence at least five times. I think that's pretty reasonable. What do you think, Alex?

SPEAKER_19: I think that's incredibly reasonable. That's kind of one of those, like,

SPEAKER_07: they're selling dollars for 95 cents moments. There's a 65% chance, according to Pali Market, that he'll say million, billion, or trillion, any one of those words, at least 15 times. And we love this the most, Lon. There's an 81% chance of just over four out of five that he'll say China at least seven times. He'll probably say it again.

SPEAKER_13: Yeah. He'll probably say it like this, China.

SPEAKER_22: He's never learned how to say the name of that country.

SPEAKER_13: That's how he says it. He just said, like, it's very important that you hear him say China. You got to hear how he pronounces it. Yes.

SPEAKER_07: I also thought this one. Oh, go ahead. Go ahead. 61% chance of mentioning NVIDIA, OpenAI, 57%. Biden, 79%. And I would say the chance of him saying Biden in a pejorative fashion would be 100% as a subset. Yeah. President Xi, 60%. And then there's some weird ones down there, like drill, baby, drill, 38% and so forth. But I appreciate the Pali Market folks having a good time.

SPEAKER_13: Yeah. I think it's interesting that there are, like, other unrelated phrases, because that is, that is a thing that Trump does. Like he, he doesn't necessarily stay entirely on topic. If he's thinking about drilling during the speech, he might like that in another context with a different politician, that would be a bad wager, I think. But in this case, I feel like you got a shot at it. I feel like, why not? You know, let it ride.

SPEAKER_07: You know what? I now have to tune in. So I'm curious to see who's right and who's wrong. But that's the power of prediction markets. You can really have a lot of fun with them. And it's not just zero day options on volatile equities. It's also, will Trump say hell more than two times during the speech? Well, tune in and we'll find out.

SPEAKER_13: I will say, if I was going to participate in this particular market, which is not a huge trade volume, we should say only 53K on the, on the board sort of so far. If I was going to pick any

SPEAKER_06: one of these options, I think I would go Biden. I think 79% Biden, that's the smart money on this table. I feel like I'm very, I feel very confident he's going to say the name Biden at

SPEAKER_31: least once. Well, if you make that wager and lose your shirt, you can send all of your complaints

SPEAKER_34: to Lon Harris. This is not investment advice. This is not investment advice. Sounded like investment advice to me. I said very specifically, it's what I was going to do. We're not going to end

SPEAKER_07: with a joke because that's not what we do. No, that's not what we do here. We're going to end with a very sober ending point. Now let's talk to some founders and some twist 500 companies. Lon, we have three interviews for you today. First up is Harbinger, a company that is building EV chassis for the midsize commercial market. Now that sounds a little boring to you. Just keep in mind that not all of the cars out there that we need to electrify are sports cars, hot rods, and SUVs. There's an enormous amount of commercial vehicles out there that bring you your Amazon packages that deliver bread to your store, et cetera, that really could use an upgrade. And we've seen companies like Rivian work with Amazon on electrifying their fleets. Well, what Harbinger does is just makes the chassis. And it turns out, as I learned during my chat with the company, that is actually pretty standard to sell essentially a steering wheel and a battery pack and some wheels and some brakes. And then everyone else kind of builds their top on top of that skateboard looking thing. It's a really interesting company. I think it's going after an enormous market, tens of billions of dollars, super smart, quick product velocity. Just love it. That's going to be a treat. Then we're going to talk to Post Hog, the company that you may recall recently raised a large round, not from Sequoia, not from Kleiner, but from Stripe, the well-known unicorn in the payment space. So what is a SaaS company doing raising from Stripe? Well, it all kind of boils down to how cool their website is. And I bring up that not to say just, hey, web design matters, but Post Hog is actually a company lawn that is breaking pretty much every single rule of thumb that we talk about in startup land at once. They cut prices, they avoid vendor lock-in, they work in open source. They're just kind of flipping every single thing on its head and it's crushing. So I was really excited to get them on the show. Great interview. Great time. If you're a founder, you're especially going to love that one. And then today we're going to wrap up with one of my favorite companies, I think in the entire world, which is Alpaca Markets. I covered them on back in the COVID era, FinTech boom, back when they were just getting started and their pitch was simple. Everyone wants to trade. This is back during the meme stock Robinhood kind of glow up days. And they built a white label service that allows other companies to offer essentially equities trading to their customers. And they went a little quieter during the post 2021 collapse. But as it turned out, and as I learned, they were just busy growing and building and are doing fantastically well. So a bit of a full circle moment for me, but another great 5700 company. And with that, Lon, I think we can just dive right in. Yeah, let's do it. Harbinger. All right. Harbinger, ladies and gentlemen, let's go.

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SPEAKER_04: electric vehicles, what comes to mind? You probably think about consumer vehicles like maybe a car from

SPEAKER_42: Tesla or the latest supercar from BYD. If you're a big EV fan, you might recall that Rivian was building some of its own vans that are out there in the world in a partnership with Amazon, but there are other companies working on EV chassis that are absolutely interesting and they're taking on segments of the market that you might not be familiar with, but that doesn't mean they aren't changing the world. One of these companies is called Harbinger and I wanted to learn more about what it's building and why and how it's doing it here in the United States. So please join me in welcoming to the show. It's John Harris, the co-founder and CEO of Harbinger. John, hey, how you doing? Good, Alex. Great to be here. You win for the world's best background. You are currently in your manufacturing facility down in Southern California, yeah? That's right. This is Harbinger's

SPEAKER_43: headquarters and behind me is our battery module manufacturing line. If you want to prove that

SPEAKER_42: you're not building vaporware, I think putting your camera inside the manufacturing facility with people walking around doing things is about as good as it gets. And we're going to get to all that, but I want to start kind of at the beginning. Like I said in the intro, people are familiar with EVs, maybe even in a commercial setting. You guys, however, are building EV chassis for the medium duty commercial segment. So just for starters, what is that kind of market area and why did you guys choose that as the place to bring your EV technology to market? Yeah, so medium duty is a low volume,

SPEAKER_00: high mix segment. It's only about 350,000 vehicles a year sold in the U.S. And that's about half the number of F-150s sold a year. So the big challenge for big OEMs is that, you know, they have these huge bureaucracies, huge, huge workforces. And when they want to develop a new product, they've got to develop a new product for a segment of five, 10, 15 million units a year. And so this segment has just sort of sat here with nothing new since it was easier to make new vehicles, which was 30 or 40 years ago.

SPEAKER_49: So it's ripe time to go about this. Now, what you're not building is an entire vehicle. You're building

SPEAKER_42: what you guys call an electric vehicle stripped chassis. So for folks out there who are not as familiar with that part of things, how does that differ from the consumer EV buying experience,

SPEAKER_46: for example? So when you buy a medium duty vehicle, you're buying really something from two

SPEAKER_00: different companies. You're buying a chassis from one company. And that's really the, what I think of as the vehicle part. So you've got this vehicle thing, and it's a flat skateboard. And then you've got some application specific outfit on top. And that could be the RV body, the delivery vehicle body, but it's something that sits on top of that skateboard. And it's something that tends to be

SPEAKER_02: really, really customized. And it ends up looking a lot more like a home building company that does

SPEAKER_42: the top half. The historical analogy here is old school coach building, right? I mean, back in the day, you would have your car built on top of a chassis from the manufacturer. And that's why people had wild car designs. When was this? Back in the 20s or whatever. But that has persisted in the medium duty segment. So essentially, you guys provide the batteries, the drivetrain, the steering, the brakes, and so forth. And then if UPS wants a slightly different enclosure on top of it, that's up to them. Okay, that makes a lot of sense to me. And just to be clear, though, this is the norm for your segment. You're not breaking with standard operating procedure on this. Right. This is how every medium

SPEAKER_00: duty vehicle in the US is sold. So we're not trying to get the customers to do something new and

SPEAKER_42: crazy. Okay, so one of the things that I was very excited about when I discovered Harbinger was your guys set of values. You guys talk about delivering on a cleaner planet, just reducing pollution in and around communities, things that resonate with me as someone who lives in an urban area with small children. So I care a lot about, you know, clean air and that sort of thing. But you guys also discuss quite a lot about how you want to be kind of price parity or have price parity with diesel vehicles. And so I'm trying to kind of sort out what is what is the main goal of the company? Is it to to improve the planet a bit or just to make better vehicles? What's the driving pulse behind Harbinger? Well, it's both of those things. And I

SPEAKER_00: think you can't have one without the other. Something a lot of climate companies really struggle to understand. If you don't have revenue, you're not making an impact. Like that's it. And you're not going to have revenue for any meaningful length of time in automotive, unless you're selling a product at the right price. The right price for a truck is the current price of a truck. The fact that we want to sell you an electric vehicle doesn't make that vehicle worth two or three or five times more money to the end user. And that sounds extremely obvious. But that is completely like heretical thinking in trucks. If you go and look at an electric truck from Freightliner, you're going to find that it is 2.5 times more expensive than a diesel truck. And then, you know, people wonder why they're not selling. Well, it's because businesses probably

SPEAKER_42: would like to help the climate on the margins, but they're probably more worried about their actual margins in the meantime. So essentially, you're saying that reaching price parity with diesel vehicles is one in the same with the company's overall let's have a cleaner planet push. Because if you don't have a commercially viable EV, then you're not going to sell any no one uses them, whatever. So that raises an interesting point, which is how have you managed to build these skateboards as you call them at a price point that is competitive? Because if other EV trucks in the market are two and a half times as expensive, I presume you found some way around enormous cost

SPEAKER_00: creep and how you build these things. I mean, what it comes down to is we actually build things here. And pretty much everyone else in trucking trying to make EVs is mostly in the business of buying things out of a catalog and then selling it to other people. And imagine if when you bought a Silverado, GM like went across the street and bought all the engines from Ford. It would be really tough for GM to compete with Ford's pricing at that point, right? And like, that would make no sense. This is the only place in the United States where a truck OEM is building their own battery modules and battery packs in-house under our own control. So, you know, we buy cells, which is a commodity. They come in at that end and at that end, battery packs exit and go into the vehicle production line. And that's fundamentally how the automotive industry was built a hundred years ago. That's why it's called the Ford Motor Company. They actually have the ability to make motors there. It's not called the Ford Seats and Windows Company, because no one really cares if you can make seats and windows. But people care a lot if you can make motors.

SPEAKER_42: So essentially, if you purchase all the components and stick them together, you're always paying someone else's margin along the way. And that adds up to a relatively high, you know, cost of materials. Okay. I guess the next question is why aren't other companies that build EV trucks for the

SPEAKER_65: medium duty segment following in your footsteps? Is it just simply harder to do your own battery

SPEAKER_00: module and sell, you know, uh, agglomeration in-house? It's certainly harder. Um, I would say there's, there's the difficulty and there's, there's a greater difficulty that I usually refer

SPEAKER_02: to as poverty of the spirit. Um, there's a lot of poverty of the spirit in automotive these days.

SPEAKER_42: Okay. I can't let you just say that and not explain it in more detail. So tell me, tell me why everyone at GM and Ford and so forth have, um, have very poor spirits today.

SPEAKER_53: I'm not so much looking at GM and Ford, to be honest, because this isn't a big segment for them. You know, Ford has shown us with the F-150 that

SPEAKER_00: they can build something that's pretty compelling. They struggle to make money at it, but like, that's a good product. You know, people enjoy F-150 lightings. They're not building stuff in this segment because this segment is a routing error to those companies. Ford makes 4 million vehicles a year. This whole segment is sub 400,000. The product that we're building here today, the strip chassis that market is actually dominated by Ford and it's about 0.2% of Ford's production. It's not Ford's fault. Like if Ford was paying more attention to this segment, yeah, you would probably have to go back and say, Ford, what are you doing? Go pay more attention to F-150 lightings. Like they're making the right call.

SPEAKER_78: Yeah.

SPEAKER_00: I'm more talking about poverty, the spirit with the big truck OEMs, you know, electrification in trucks makes 10 times more sense than electrification of passenger cars because these vehicles consume just staggering amounts of fuel and maintenance. So there's real cost savings opportunities here.

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SPEAKER_85: more. That's R-E-T-O-O-L dot com slash twist to learn more. I mean, that makes perfect sense to me.

SPEAKER_65: My question though is you found a niche where there isn't an enormous amount of volume and there's an

SPEAKER_42: enormous amount of strong competition sounds like on the EV side of things. So it makes a lot of sense to build a company there, but are you capped effectively by just how many of these vehicles are sold per year? And does that put a ceiling on what Harbinger is building? I think a little bit,

SPEAKER_00: yes. You know, we're never going to build 5 million vehicles a year here. And to be honest, we're fine with that. I've worked at plenty of places that have higher volume like that. Yeah. A market that is that big is too attractive. Everyone comes in and says, oh, we want to sell that too. And naturally it erodes your margins. I don't know if you've ever worked at a business where they have like a 5% operating margin. It sucks. It's the sort of place where like the coffee machine has a cup next to it. And you've got to like put a quarter in when you get a cup of coffee. I don't want to work at a place like that. I don't want to build a place like that. So this is a segment that it's not that big, but structurally it's basically impossible for people like Ford or GM to come into this segment. It's just too small. We can do it

SPEAKER_60: because we're a startup. We're small. We're pretty nimble. And we've done this a bunch of times before,

SPEAKER_04: so we can do it more cost-effectively. Yeah. Now I don't mean to say that what you

SPEAKER_42: guys are building is small because you guys noted in May of last year. So just over a year ago that you had at the time $400 million in binding pre-orders. So there's quite a lot of dollar value to these and elsewhere on your site, you guys said that just to pick one of your examples, your model S524, which is a class five 158 inch strip chassis with 140 kilowatt hour battery has an MSRP of 103,000. So these are not low cost items. There's quite a lot of revenue to be had here. Does the margin profile of what Harbinger builds match competing companies margins? Because I'm not sure how lucrative the traditional OEM side of the medium duty segment is today.

SPEAKER_00: So that's probably my favorite part about this segment. This segment, because it's hard to access and it's small, the margin potential is much, much higher. This is a segment where costs have been going up just outrageously fast. If we look at what we consider the benchmark product in this segment, it's Freightliner's MT55. MT55. That product has been going up by about 15% a year in cost for the last four years. Yeah. That's wild. Right. Compounding. Compounding. Yes. Wow. And when we started the company, we thought that we had to make a product and sell it for about $50,000. Okay. And we basically designed the cost structure of the company around selling at $50,000. And we said like, Oh, this is interesting. We can probably build this business with like a 20% margin. And since then that product has gone up to about $85,000 in four years. Our cost structure has gone up a little bit, but not by that much. So this market over the last four years has gotten much more exciting. I think when we look at margin profile, just because the cost of diesel vehicles has gotten way more expensive and that shows no signs of slowing down.

SPEAKER_69: What is pushing up the cost of diesel vehicles today? Because I presume it's inputs, labor,

SPEAKER_00: maybe tariffs? It's mostly rising input costs across a multi-tier supply chain. Got it. You know, when your labor costs go up by 30 or 40%, which happened last year at big OEMs

SPEAKER_61: in the UAW negotiations, that's bad. But when that happens at tier one and tier two and tier three and

SPEAKER_00: the OEM, it all stacks, right? And then all those companies have to make some margin. So their costs are all going to get compounded. Tariffs have the same effect at an OEM. You know, when we import cells, we pay a tariff because now we pay tariff on everything. But you know, if I have to pay a 10% tariff on $20,000, that's a lot better than me paying a 10% tariff on 60 or $70,000. And that's kind of what everyone else is doing. So those tariffs are having that same compounding effect across

SPEAKER_65: supply chains at large OEMs. I see. I want to talk a little bit about

SPEAKER_42: just manufacturing, because again, one thing that I liked about your company was just how much it's here. And as you know, we're literally in the factory right now. How much of your components, products are US built? And I know it's slightly a fuzzy term, but maybe the right way to ask you, John, is just how much of your skateboards are really US kind of produced and manufactured or manufactured and assembled? Answer that in the intelligent way, given that I just butchered the

SPEAKER_00: question. So our vehicles are 100% US built and assembled. So the factory I'm sitting in here has three production lines. Right behind me, you can see the battery module and battery pack production line behind that. And you can see some of the white structure there. That's a overhead crane in the next line. That's the chassis line. And behind that is our motor winding line and drive unit production line. So all the content is built here. The batteries, the electric motors, the cabling systems, the complete chassis. So the second part of your question, I think, is really what portion of this is US content? Yeah. So it's about 50% right now, which by automotive standards, I would say is good. By EV standards is really, really high. Most people have a ton of content from China. And then there's an important corollary to that question, which is how much content do you have

SPEAKER_02: from China? Yeah. And for us, it's under 20% now, which is pretty exciting. How far could that number

SPEAKER_65: go down if you wanted it to in the next handful of years? I think it probably goes down to somewhere

SPEAKER_00: between five and 10%. It's possible to get to zero, but it's sort of self-defeating. The biggest reason that we don't have such low Chinese content is just because we're building stuff here. The battery pack in an EV is about half the cost. So if you are everyone else in trucking and you're buying battery packs from cattle, there you go. You're at 50% Chinese content right off the bat. As long as you're not doing that, 20% is pretty tolerable. We'd like it to go down a little bit more to just

SPEAKER_108: continue to reduce geopolitical risk. Yeah. I mean, that's a material problem

SPEAKER_42: right now. And I think everyone has been watching the headlines, has been perplexed by the back and forth. And I think with a lack of clarity, reducing your risk is just the very reasonable thing to do. So that absolutely attracts me. I want to talk about growth. So clearly, you found something that people want because you had so many buying pre-orders last year. You just expanded into a hybrid EV chassis, adding even more range to your product line. So how did the company do last year? What's

SPEAKER_112: growth looking like this year? Maybe what's your revenue target for 2025? So right now we're building

SPEAKER_00: strip chassis. We started delivering those actual production units just at the start of this year. So this is our first year of commercial revenue. I hesitate to give predictions with the level of insane volatility we have right now, but something in the $100 million ballpark, I think is on the table for this year for us. Last year, we were delivering vehicles, but they were pre-production vehicles. So this segment is really defined by durability and uptime. So we actually built three generations of vehicles before we started delivering any to customers and ran them through years and years of validation testing. We were delivering those last year to customers to put into trials, but not actually as full deliveries. From here, we're looking at primarily expanding within this segment. So we'll stay within class four through six for the next couple of years, but we'll add a cab. So now we build strip chassis. We'll move into cab chassis, which is a broader portion of the market. We're also starting to get pretty exciting traction in our components business. Interesting. So a lot of people have realized that bringing in huge portions of your vehicle from overseas is probably bad. Buying half the vehicle from a Chinese SOE is probably bad. And so they're starting to look around and say like, hey, where can we buy compelling battery packs and drive units and HV systems?

SPEAKER_42: And SOE is a state-owned enterprise, kind of a public company over in China owned by the state, or at least has a large state influence in it. Correct. Yeah. So the components business is super interesting because we were talking earlier about poverty of spirit and people not doing things, and here you are doing them. So does that become, do you think in time, a material portion of the harbinger business?

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SPEAKER_60: I think it becomes material. I would expect it to always be less. I think it would always

SPEAKER_00: be a smaller portion than the vehicles. My expectation is that the components business can potentially be higher volume, but it's lower margin. So we want to keep that balanced. If you have a buyer who's paying a ton of margin on components, that's like a temporary win, because inevitably that means they're going to not have a compelling product at the end user, and so eventually they will go out of business. So effectively you can't have too much markup

SPEAKER_42: on components because then the end result will be uncompetitive and then you're just selling a little bit and then they die. Okay. Exactly. That makes sense to me. Now, on the price point, you guys have an interesting, it's called the IRA Risk-Free Guarantee, the Inflation Reduction Act. And essentially, whether or not you guys say the IRA's 45 watt credits stay or vanish, you guys will kind of make that good. And we don't need to get into the technical details, but policies have changed in the last couple of weeks as we sit here together. So I'm curious, has anything in the recent government spending bills, regulations, and tax credits created a material headwind for Harbinger? Or are you guys going to be able to navigate the new kind of fiscal climate

SPEAKER_53: here in the United States without a lot of disruption? I think it's a little soon to say,

SPEAKER_00: but so far, I think we expected that the IRA credits would be a bigger tailwind and it really wasn't. So I don't know that it's that much of a headwind, it's just kind of a return to neutral. Ever since the election, most of the customers immediately said, like, we don't think these tax credits are real. They are real still until September 30th. $40,000 seems like a real amount of money to me. But it's been clear all year that customers are not really valuing those credits. So the withdrawal of those credits, I think it has a fairly low impact.

SPEAKER_42: Okay. Well, that's great. I was worried because I was thinking to myself, like, here's a cool company that's raising money, moving up the products, getting out into market. It would be terrible if the rug was pulled out from underneath you at kind of the last minute when you were hitting your stride and starting to get commercial traction. So I'm really glad that that's not the case. But I want to flip it around. You and I are both fans of electrification of both commercial fleets, and I'm also a fan of personal EVs, just because I think they're a great way to approach the market. What should we be doing as a nation to more quickly transition our various fleets of vehicles towards EVs, towards cleaner energy and so forth that we're not doing? So what can we do to go faster?

SPEAKER_00: We have two goals, which are in many cases competing. We want to encourage more electrification and we want to encourage more domestic manufacturing. Those are both valid, important goals. And 45W, you kind of had to pick one or the other because it was purely encouraging electrification and it didn't have enough defensive US manufacturing because a lot of that money was just going back out the door to CATL. You know, what we should be doing is we should go back to a similar tax credit, but we should make it much more targeted and say we want electrification, but really only if you're

SPEAKER_65: you're supporting US manufacturing. That seems incredibly common sense to me. So I'm not shocked that it didn't make it through a budget reconciliation bill in the United States Congress.

SPEAKER_137: But yeah, we wouldn't want any common sense. Just before I let you go, John,

SPEAKER_138: you guys are doing a lot in the United States. It seems possible. You previously worked at Andrel. I

SPEAKER_42: mean, is American manufacturing coming back at a real pace here or am I just seeing a couple of

SPEAKER_139: highlights around the nation that make me feel excited, but might not be indicative of actual

SPEAKER_00: progress? I think American manufacturing is coming back, but people need to better understand what manufacturing means. Manufacturing is what's happening here behind me. Like we're, we're taking parts and we're making battery modules, but we're not like, this isn't a steel mill. We're not turning iron ore into steel. We're in a great position where we get to do the things that have the highest value add and the lowest health and safety risk. There seems to be a lot of government angst around like, my God, we're not making enough steel. And I just, I don't know why we want to do that. It's, it's not a job that people want to have. It's, I mean, the government is also unhappy that we're not mining more coal, which is another kind of a death sentence of a job. So I guess we shouldn't be surprised, but you know, the work that we're doing here, the work that we were doing in Andrel, that's super high value add work that doesn't have to involve like how manufacturing was designed in

SPEAKER_02: the 19 or defined in the 1920s in the children's book. Yes. Well, I think you're a vision for the

SPEAKER_42: future, which I can see it. I'm watching literally your staff go back and forth. No one is running. No one is on fire and everything seems to be going quite well. So it's a future that I can get behind and totally support. John, where can people find you on the great internet? And also,

SPEAKER_43: what is a job you are struggling to hire for? HarbingerMotors.com, as well as all your common social channels, LinkedIn, Twitter, Instagram, et cetera. We're generally hiring for a lot of

SPEAKER_00: positions. At the moment, we're doing a big expansion of our sales team. So if you're someone who has experience selling trucks, selling capital equipment, we'd love to talk to you.

SPEAKER_42: All right. Well, thank you for coming on. And when you guys eventually do break into the small consumer electronic truck segment, which I'm sure you'll do down the road to make me happy, we'll have you back on. But in the meantime, John, thank you so much. And keep building here in the

SPEAKER_149: States. Sounds great. It's great to be on Alex. Thanks. Hey, everybody. Welcome back to Twist. Today, I have an amazing Twist 500 interview for you with a company we have talked about on the show recently. But first, I have to rewind the clock. Often when we talk about up and coming startups that are out there changing the world, they're backed by well-known venture capital companies. You're Andreessen Horowitz's, your indexes, your Sequoias. Sometimes, though, an investor steps up to the plate that we don't expect. And in the case of PostHog, they raised a large round from Stripe. Yes, the well-known payments unicorn. That caught my attention. I then dug into the company and discovered that it is one of the coolest firms out there today, one of the best startups, I think, in the world. So please join me in welcoming co-founder, Mr. James Hawkins. James, how you doing? Hey, very well, thank you. So you guys raised $70 million from Stripe at an announced $920 million valuation. Before we dive deep into product analytics and open source and pricing plans,

SPEAKER_152: how the hell did that deal come together? It all started with Twitter. So basically,

SPEAKER_154: a while ago, I think it was in 2023, Patrick Collison liked our website and said he thought it was cool on the internet. And then things really spiraled. So here we are, $70 million later. We've been very, very efficient. We're a product-led company. We've been averaging like a two-month CAC payback period, for example, for an awful long time. I think we had gotten kind of complacent, where I'd say, hey, we can pretty easily grow pretty fast. And we didn't really know how to spend money. And it kind of took us until about our fifth year of existence to really know, actually, we can increase our growth rate by spending more. And we want to trade off a little bit of efficiency for more speed, basically. So yeah, like change of attitude, like being around the right people at the right time and having a cool website with three ingredients.

SPEAKER_156: Oh, I love that. This is just evidence that design actually really does matter. And it

SPEAKER_149: totally got me. I've never read so many corporate blogs in a succession on purpose than when I was on the PostDog site. All right, let's start with what you guys do. Now, when PostDog was initially put together, product analytics was the product remit, and it had an open source core. You guys have expanded greatly in the intervening years. So tell me and everyone listening what PostDog builds today.

SPEAKER_159: Sure. So PostDog provides customer infrastructure. We simply aim to ship every single product that relates to customer data. So we have about 14 products that relate to mainly kind of product

SPEAKER_154: engineering, or growth engineering use cases like product analytics, obviously, but like a whole list of other tools that are adjacent like session replay, error tracking, feature flag, experimentation, data warehouse, this goes on and on. And what we're trying to do is instead of integrating a bunch of tools together, we're like, no, we are literally just going to freaking provide all of them. And so there's perfect first party data. And as AI has come crashing in, and to then just automate everything. And very long term, I'm hoping we provide business autonomy,

SPEAKER_156: it's kind of the end game for us. Go ahead and define business autonomy for me.

SPEAKER_154: We want to automate every process that happens across every major function that relates to a customer. And so then product, like product autonomy would be a subset. This is like, hey, today, you tell cursor or windsurf or whatever, like, hey, this is the thing I would like you to build for me, please, you wait 10 minutes, it comes back, you have to do it a bunch of times. But you're still deciding what to build as an engineer, based on maybe what a product manager told you, based on your own knowledge of your customers, whatever your process might be. We are trying to get to a state where we've built AI already, that's like chapter data, as you can expect, we're starting to get to the bit where you can do things with it. Like, hey, these are actually the things you should work on. And then longer term, I suspect it'll be like, hey, you fire up cursor in the morning or whatever else. It's like, here are the 10 things that have been built overnight, based on a really deep understanding of customers. It's like multi dimensional, like it's not just just the data you get from event tracking of just the data you have from errors. It's really every color to understand the painting. Basically, I actually, I think it is going to be possible to build a better product manager than a human product manager with better understanding from just how effective the models now are really enabling this when you have this wide range of data. So when we started the company, everyone was like, enjoy the good old days when it's two idiots and no one else to worry about. And now we're like over 100 people. But it's getting, we've had the complete opposite experience. It's gotten much more fun as we've gotten kind of further along. And I think partly that's thanks to the changes in the tech landscape too.

SPEAKER_161: So just to kind of adjust that down, you guys started with product analytics,

SPEAKER_149: have expanded to essentially anything you might need for product related work. You've added AI in now. And then it sounded like you're describing essentially some sort of AI agent backend that's going to take on tasks for people that are building products. How did you get from working with your co-founder at a financial technology company to founding this to then building essentially

SPEAKER_162: AI driven business automation? It's quite the leap. What was the initial spark?

SPEAKER_151: My last job, I wound up as the VP of sales for the first time in my life. And I was selling

SPEAKER_154: compliance software to large banks for millions of dollars. I would wear suits in inappropriately hot climates. And I would be going up into skyscrapers, trying to get people to buy stuff for a couple of million dollars. And I just had this feeling that this approach we're taking feels like it won't, it doesn't feel like the future, it feels like the past. And I could see vendors starting to put enterprise software that had been more focused on the end user, basically, where the go to market is in enterprises like, oh, 200 developers insist on using GitHub. And now the procurement team has to buy it, even though they don't really want to, for example. And so I could sort of feel this. So my co-founder, my co-founder was quite simply the fastest engineer I'd ever met and the best, in my opinion, kind of therefore.

SPEAKER_149: So this actually brings me to the open source point, because going back to the history of the company, you guys discussed how having an open source posture of building and releasing software helped you get early attention to the company. I've often heard about open source as a great business model, less as a promotional technique, but was the open source starting point critical to

SPEAKER_166: finding that product market fit that early?

SPEAKER_159: Daniel Zeiss- Yes, I think it was a constraint that we faced was there's already a bunch of competition in, there's a massive amount of competition for what we're

SPEAKER_154: building, like in product analytics. I think at the time, there were probably three companies doing 100 million run rate or more. Like there's like Amplitude, Mixpanel, Heap have all been pretty successful to some degree or another. And so we can't do cloud, that's off the table already. And we kind of, I am technical enough to be dangerous, I would say. So I've got like a bit of a developer background beforehand. My co-founder is extremely technical. But he can do the other, he's very on the commercial side as well. But we kind of felt that we really want to build this for developers. And what's the ideal thing for a developer? And we kind of we started talking to a bunch of more technical people about their analytics that we discovered a lot of companies were building self building a lot of things to keep the data inside their infrastructure. So we set off on a real zig before we then zagged across, actually, we can do cloud if we get multi product at the same time. And so we had this very windy journey. But one of the quotes we had early that I've understood later from Ali Raghani, who's on our board, who was the person that ran the continuity fund at YC, when that existed back in the day. And he said, when you get bigger, you can kind of see around corners. And I'm like, what does that mean? So now I know what it means. It was like, actually, once we have lots of users, we can figure out what to build properly. And so postdocs never felt like we've never kind of descended down from the hillside and gone, you know what, this is the future, it's going to be this, this, this, this, this. But the reason that we have a strategy is working now is because we had the wrong strategy, but we spotted some things that were working haphazardly along the way, and then kind of iterated our way across to something that worked great. So it's been very chaotic looking journey from a product perspective, I'd say.

SPEAKER_149: You guys decided what to build in your roadmap in part based on customer and user reactions via upvotes essentially of certain elements of what you're planning. Have any of those ever led you astray? Or is that how you see around corners kind of on a day to day basis?

SPEAKER_159: Yeah, it's a love, hate, it's an input into the process. And it has, I think we,

SPEAKER_154: sometimes it can be painful, but right now it's painful, we want to build a CRM support platform, we want to do what we're doing with products for the entire stack, the tools for sales, marketing, and support teams too, because it's saying customers they're dealing with the same data. And so we're like our top feature on our roadmap is like product tours, which, or like we shipped an error product recently has been really popular. And now we're getting asked for like a logging we kind of know full well, like these are going to be lots of users asking for them, they'll make a bunch of money, they'll grow quickly. And we don't really want to build them, we want to build like, so well, if we can get a CRM being adopted by developers before anyone else exists, in like a YC company, for example, we can build comics 10 times larger. And so like, okay, we'll like to get from this maximum to the next one, we have to walk down the dip, which is what we're experimenting with. And we can always go backwards and up the hill, if we don't like it. And so yeah, we kind of currently we're in a mode of like lifting the fog of war, where it's like, okay, let's just see like, actually, how wide we can get away with here. Is it as wide as we believe it is? And that's what we're validating currently.

SPEAKER_149: So it sounds like there's not one single answer. It's constantly listening to users looking at the market, making decisions, and then also seeing what actually generates revenue for the business, and then try quadrangling between those elements.

SPEAKER_154: Yeah, the constant I would say has just been quick to do these things. And just getting them out and seeing what happens. It's also a little bit based on the engineers we have, like if they are excited to work on something, like if I'm super excited, or like there's an engineer postdoc who's super excited, we'll build it literally three or four times as quickly. And yeah, it is really, it's very much an art form, I would say for us, we tried to put frameworks in place for this. But they haven't felt optimal when we've actually executed them and stuff. So yeah, the core thing really is like, we just are very willing to embrace a little bit of chaos here. And then we'll watch intently what happens. And we're trying to reduce the cost of errors that we won't spend a year trying to ship new products. So for example, we don't really target very top-end enterprises hard, like we have a bunch of them as customers. But our bread and butter is signing up like hundreds of thousands of companies that are a little bit smaller. And that sort of means that you can target releases, you can be more nimble, because it's not like we have two massive enterprises breathing down our neck to achieve some roadmap item. We're like, we don't offer any roadmap updates to customers. We don't have any deadlines internally. There are no, there's no coordination, which, or the whole company is designed around engineering velocity, basically, which is actually the thing that really does matter to us more than anything, because we kind of assume that we'll be wrong a lot. And so for quick, we'll find good stuff

SPEAKER_176: and bad stuff pretty fast. That's really interesting. On the going to wide point, the first thing that struck me when I was getting to know Postdoc was just simply how many different products you guys have. It is a wide number of things, and I presume it's going to go up. Is there an upper maximum to the number of individual things you can have in the market and maintain

SPEAKER_149: well and host and support as a business? And are you getting close to that point? Or is there a lot

SPEAKER_176: more room for you guys just to keep building new stuff that people ask for?

SPEAKER_150: It's worth a million times better than you expect. Like it doesn't, like you said,

SPEAKER_154: like what are the number one, like what are the most painful parts of a business? Managing like 14 products at once, whatever it is, depending on what defines a product, it's just not on the list. And these products will support tens of thousands of customers. We're just not finding it hard to do that well. We hire engineers who literally decide what to build, but they don't have product managers determining the roadmap. So I think because we're willing to let go of control, we hire people that we frame as product engineers internally has made it feel ultra scalable that way around. There are certainly other issues with having a lot of breath. Like we have a big debate at the moment about when we create a platform team. For example, we'd be really hesitant because we're worrying about creating coordination between teams or suddenly having to meetings and stuff. So yeah, it's not always easy, I would say, but it does feel to me like we could, like our goal is like 50 plus products minimum, potentially a couple of hours, depending how we get on. But I think it's going to be very possible to do that. And there is Preston, like AWS, for example, has hundreds of products. Oh, absolutely. They are a little bit bigger than us. But even like, we actually looked at Wycombinator, we're like, well, they have 250, whatever, like roughly 250 companies in a batch with only 500 people shipping them or whatever. And there's 250 totally distinct businesses being managed and optimized for certain extent. And so we're looking at kind of how YC is structured initially, and like, why are people so productive in the batch? And then we're also looking at AWS as like a very late stage example of this. So we think, and we think AI is massively accelerating this too, which is like needless. We already thought this was happening, like open source software is more available. It's getting quicker to develop stuff anyway. So we already felt like software is going to get kind of commoditized. And yeah, I think AI is putting it from the gas here. And we're like, well, like rather than hiding from this stuff, like going into enterprise, we should just drive that change because it's better for users. We're circling something interesting here,

SPEAKER_156: which is with very small teams, nimble engineering, and a lack of centralized road mapping,

SPEAKER_149: you can move very quickly and build stuff that a lot of people want to use. I'm actually familiar with several other companies in the product analytics space. I've been talking to Amplitude since before they went public. So I have a little bit of insight into them and their market and their growth and so forth. I'm just kind of blown away by, by how much you've managed to barge into markets that are filled with, you know, incumbent companies, often public with lots of money and time and history behind them. And you're able to grab, to grab market share. What makes that possible? Is it that their products are just too enterprise focused, or is it you're just engineering velocity that allows you to show up to so many different parties and walk out with a punch bowl? I think a standard playbook that I

SPEAKER_159: think is getting outdated now is you build a product, you get a little bit traction and you

SPEAKER_154: build like a 10K a month business. You go raise like your seed round, you do a series A and then you're like, man, and then you start getting serious. You're like, okay, I need to keep up my rate of revenue growth. How do I do this? And like, I think the easiest, like most intuitively possible way of doing that is I need to add more sales people and go up market because the order values will could jump like 10X or something. And it's like, and we're kind of more competent at this stage and can handle these enterprises and whatever. And we built companies of all fast forward. And it's like, you know, after 20 years of SAS and like VC coming in here, and it's like, cool, there's not what I would turn like fragile mess of tools in enterprise. And so I think our opportunity is like, well, we think it was harder, but we won't grow as fast if we like we could right now just go, Hey, we're just going to pull on salespeople that are very enterprise focused, we're going to really up market, we're not going to invest in and wider, we'll just invest in depth of each product. And we'll take a little toolkit we've already built up market, and we probably get to 100 million quicker if we did that. But I don't think we'll continue to compound. And so we've just sort of been willing to like, yeah, we're gonna lean into engineering boss, but everything else will do some really counterintuitive things there. But it's kind of almost a constraint of going, well, if we went on market, we're just going to lose, like, we're never going to beat Datadog today at enterprise sales or something.

SPEAKER_182: A data paradigm, really?

SPEAKER_154: Yeah, and I'm like engineers exist first, like they exist when there's two of you starting the startup from scratch. So if we just go with engineers, we're upstream of every single piece of software that company will ever use. And so if we can just offer it all, then they'll buy all of it if we're the best vendor. And then we keep doing a good job of looking after people. So there's a few factors that I think that have meant that we're successful. If I've been harsh on myself, it's because we can't invent something. We've struggled to be, I haven't been good enough for a product to invent something totally box fresh that has zero competition or whatever, like maybe that would be better if I could do it, but I haven't been able to. We're now getting to the point where we are starting to innovate, and it's proving a lot of fun. But I've had the chance to now hang out with lots of people and learn stuff and spend time with my co-founders doing the same thing. And now we're getting a little bit more competent at like actual, whatever term, actual innovation. But yeah, that's kind of why it's a bunch of things at once. But the main one is like, we've sort of been forced into being different around else because the market is so saturated, which has worked out really well. Like I think conceptually, it's easier to do about a job of something that already exists than it is to completely invent something from scratch. And so we're merely doing about what we think is a better job of something

SPEAKER_156: that already is out there. So you mentioned getting to 100 million, I presume you mean ARR by that point. And you said that if you had gone perhaps upmarket originally, like the usual SaaS playbook,

SPEAKER_149: you might have gotten to that milestone faster, but you will get there. You also said that you're compounding, which I think shows that if you have a wide base early as those customers grow, they'll grow with you, which makes a lot of sense to me. But you also do some things that do decrease your revenue, which is an interesting thing that I don't often see. One thing you do, you have side hustle insurance. So if someone blows through usage caps, you don't take their entire house. You guys have done actual price cuts, which harkens back to the AWS days of your back when they actually cut prices, if people were kind of think back that far. So I guess my question is, how do you balance between what I very politely call extreme customer friendliness, and the need as a business to

SPEAKER_176: keep the growth coming because you do have backers and you do have people that are expecting a certain

SPEAKER_154: return from you? The core one, I mean, the core tenant of our finance that I think it serves really well and our core principle is don't need to make ensure that we don't need to fundraise, basically, which means that we can take a long term view on stuff. So we don't have to rely on, we don't have the dependency on like, Oh, God, like if revenue dips and up to fundraise at the same time, we have to explain it to everyone, we'll lose momentum, it'll be hard to do that. But when you don't really care, because you're like, well, I just kind of fundamentally, we're running the business sufficient enough that we can just get profitability, whatever, we can take move, make moves like this, because we think they have a lot of upside. If we screw them up, it's like, oh, it's like, it always just knocked us back a couple of months, it still doesn't matter. Like just go back ourselves that we'll be able to get it back. Yeah, just not feeling desperate is unlike, and that's partly why we've raised is there's a huge psychological effect of having the ability to take lots of long term views on things and including like, it comes out and also like the marketing channels you pick, for example. And all the ones that are like really the work better in the short run, like paid ads or something are worse for you in the long run, because they're really saturated. So yeah, I think it's, you just can't be burning a huge amount, you have to fund a pretty efficient business to get away with moves like this, so that you can run yourselves in a good financial spot, you have to be able to fundraise in some way, shape or form, I treat finance is kind of like, our revenue growth is almost like a constraint on the business or something, you're pretty quick, but like, we will sacrifice it for more. Like, again, immensely, it's like, well, if we cut your pricing today, you'll keep using this, you'll probably use this more, you'll retain better. You'll probably tell your friends more often about us. And then eventually, you'll buy another 25, like in my head, I'm like, you're gonna buy 20 more products, or we'll have 20 more to sell you. So it's like, doesn't matter, you're like at 2% of your total spend with us over the next 10 years, for example, so like, we should really optimize for that. And that's how we're thinking about these types of changes. I would have said that they don't make our revenue look in the short run, but they have like that change increased our revenue growth rate, which was so counterintuitive, but basically, retention went up, usage went up, and growth went up massively, which offset the difference, you're gonna be cut pricing for a whole existing customer base for two biggest products, for example, by like an average of 60% or something.

SPEAKER_156: What was the total hit to your revenue from that decision in the absolute short term, like day two? What was the?

SPEAKER_154: I don't know what it was, runway wise, but yeah, it was our two biggest products, and it was 60% average decrease in spend for all of them. I think it like almost half the, it like half the average order value of customers signing up, but we tripled the number of customers signing up.

SPEAKER_45: That's, that's, that's what I was gonna ask. What was the impact of it? You know, day three?

SPEAKER_154: Yeah, it was skewed towards customers, which had a lower, that higher margin, because it was towards the bottom end of our revenue scale, which actually means the revenue impact was like unnoticeable. Sorry, the margin impact was unnoticeable in our numbers. So we make a lot of margin on the bottom end of our pricing scale and like much less further up. It was after like a long meeting where we were debating doing some ridiculously complicated, like let's do a reverse trial where if you put your credit card in and this and then this and this and this, then you downgrade them. But in this, I'm like, man, this feels like peak midwit meme. If you've seen that where this pricing thing is so freaking, it's like, we're just trying to get around the fact we should be making it cheaper if we want to win. And I think the other thing is we concluded was, because we're efficient, we grow inbound, we don't have to pay for a sales team, we have super low cap payback periods, like I think we can actually sustain in a pricing battle quite well, because of this. And so we can kind of afford it in a way that like if we were very dependent on high overhead to acquire the next customer and so on, we will fundamentally higher operating costs, we can't cross sell it as easily if you just have one product. So we kind of felt well from first principles, we would win if we did a pricing war. And so we're happy to like, can't start undercutting our

SPEAKER_138: competition? Yeah. Okay. So last question for me is this, I thought the core trick of postdoc was

SPEAKER_149: going to be open source because I'm a big advocate believer in open source software companies in general. But listening to you talk about how the company has approached the market and learned and grown, it seems like your lack of burn has provided the most flexibility for postdoc to choose its own path. So is that right? And then also is do you think that's a viable strategy that other startups should

SPEAKER_154: emulate? Yeah, I think that has been an incredibly important part of our journey. It's I think it's that and the other one that's worked has been the whole reason we're multi-products, we found this alternate path, like we built a successful, like not venture scarcity, we're building a reasonably successful growing business off the back of self-hosting where we're just chanting self-hosting customers, we're making money off this thing. It's just doesn't feel like the business that we could be doesn't have the best business we could possibly build. Like it's all right, like we're growing fine. But we're spending, we're doing so much support, we don't think this is a great experience from a lot of our customers who are like, because we have to provide a lot of support, they have to deal with lots of support requests all the way around as well. And then like, and some customers are self-hosting for no reason. And we're like, man, if we just like, why don't you just host it for them? Lo and behold, we haven't got a cloud product. Fast forward, you're like, wait, the cloud customers are way happier than the self-hosted ones. And yet loads of people are using it. And I don't know why they're signing up our cloud products. It's just like kind of worse than our competitors ones. But it was like, well, it's because it's a different audience. And like, because our branding, and we got away with like a lot of branding and developer just by being really good at handling developers and knowing how to run a company for them, meant that even though products were like very similar, ours was even worse at that stage, and we just got enough traction that then we could lean in. And the other ingredient that was very important was the whole reason we're multi-product is because we let our engineers decide what to build. And one of our engineers randomly built the next, not randomly, like he had reasons for it, but he decided to build session replay as a second product. And it was just popular immediately. And like users had kind of asked for it in our repo. And then went, Oh, hang on, I can see how this works out. Now, if we stay like a little bit more down market, we can get much wider, much quicker than everyone else. Because we don't have to pay for sales team, all our money, we can just put into engineering. So we can have more engineers, a much bigger engineering team than a normal company at this stage. So actually we do have a lot of engineering bandwidth, because we're not losing money elsewhere. So yeah, having like kind of like, low financial desperation or whatever, and it has made it super easy to do cool stuff like this. And it also like now our marketing works like that too. Like if there, we can just do like really weird brand marketing stuff that sometimes like you mentioned, you put something on Twitter, and you get more exposure than if you'd spent half when we also do the billboards, but like you get more views than if you spent like half a million bucks on billboards, for example, in one tweet that you spent 25 seconds to write. All right, we have a newsletter we're building up to 75,000 subscribers. And that's like, it's new, it's not been going on for very long, but it's like really climbing quickly. And we're like, well, this is not going to help us in this year or next year, like, but in five years, this might be this is probably the most important thing we could possibly do in marketing if it works. And we can sort of see that we're trending into that sort of direction. So we're just continuing to invest in it. And now when we hire candidates and stuff, it's like, cool, we have inbound only recruitment, because people already know who we are, they're like learning from us. And we've managed to get that thought leadership, because we're just willing to invest in stuff that is going to suck on a spreadsheet for a long time, basically. So yeah, that's been very important because it's made us the key is to like maintain urgency when you don't have like crippling fear of death coming. But yeah, like low, you have something that's much better than I'm about to repeat, basically. No, you're all good. I really appreciate it. And

SPEAKER_149: if folks if folks want to learn more, it's posthog.com. And James, where can they find you online?

SPEAKER_159: Probably Twitter is the best place. James406.

SPEAKER_149: I want to get into why that's your username, because we don't have time. But thank you so much for coming on, James. And when you hit product 20, come back on the show and tell me what the next

SPEAKER_151: four or five were. Cool, I will do. Thanks so much. Thanks, James.

SPEAKER_04: Hey, everybody. Welcome back to Twist. This is Alex. And we have another Twist 500 interview for

SPEAKER_149: you today. This one comes with a little bit of history. I first met Alpaca back when they were a small company raising their first funding rounds. And now here we are a half decade later, the company is scaling and growing, recently raised more money and has a really interesting

SPEAKER_195: perspective and take on building fintech in 2025. So please join me in welcoming to the show. It's Yoshi from Alpaca. Yoshi, how you doing, man? Great. It's been great. Like it's been a long time, Alex. It's great to be here. It's I ask that because it's 430 in the morning in Kyoto where you are,

SPEAKER_149: and Yoshi got up way before dawn to come record with us today. And we're very thankful for that. It's Saturday where he is. So Yoshi gets 10 founder points. All right. So it's been a minute since we've talked. So I'm out of date, Yoshi. Why don't you just tell me and the folks

SPEAKER_200: listening what Alpaca does today? Yes. Alpaca is a brokerage infrastructure company and then also FINRA SEC registered self-clearing broker dealer. You know, it sounds pretty boring, but what we do is that we built embedded brokerage product that a lot of fintech applications

SPEAKER_202: and then broker dealers and banks all over the world can embed and add investing and wealth services to their end customers. So the way that I, I've always thought about

SPEAKER_149: this is if you have an application that has a financial bent to it and you want to expand your product offering, you go over to Alpaca, plug into your API or sign a contract, and then you can offer equities, trading options, trading, and a number of other wealth related services to your product.

SPEAKER_58: It's kind of a white labeled solution, Yoshi. Is that fair? Yes, that is correct. You know,

SPEAKER_200: we take care of all the mid office, back office, all the compliance requirements on our side, and that also the reporting as well, and everything comes through the API. So the, you know, developers and businesses don't have to worry about backend stuff. It's interesting because when we used to

SPEAKER_195: talk about APIs, kind of back when Twilio was blowing up, we would talk about abstracting complexity

SPEAKER_149: away and then offered a single developer hook that provides a complex service. That's very easy. And it's, I think Alpaca is just a really good example about how that still works because people still want to use API delivered products. It's not all AI today. You know, there is still money to be made, but that's actually where I wanted to start. Cause I was going back through my coverage of your guys's, I think 2020 and 2021 era funding rounds. And you and I were going back and forth on how Alpaca made money. And one thing you told me if memory serves at the time, Yoshi was that you guys weren't charging much directly for the service, but we're instead splitting payment for order flow revenues generated by into user trading. So I'm just curious if you could give me an update on how the company makes money today. And if you're still doing that revenue split on order flow payments.

SPEAKER_200: Sure. Um, so at the end of the day, uh, our business that we do, even though we say this is a brokerage API or brokerage infrastructure at the end of the day type of the businesses is the, uh, securities clearing and securities custody business. And, you know, since we are membership of DTCC, this is the really, uh, you know, core semi-governmental, uh, you know, entity that actually has all the custody of the securities. So we are membership member of that, which means that, you know, we take care of all the end customers, uh, cash and securities on our, on our book on the custody. The business model becomes, uh, nothing trivial. Uh, it has been something that existed for a long time. So, uh, all of those clearing firms makes money over the transactions, uh, interest, uh, as the kind of main things and the inside of the transaction revenue, uh, there's, uh, you know, as you mentioned, payment for order flow specifically for the, uh, United States, uh, stocks, equities trading and options trading, there are certain market maker model that connects to the, uh, bunch of the exchanges that exist in the United States. And then they create, uh, you know, model that pays back some of the, uh, rebates that was, uh, not rebates, the money that's been built between the bid and offer price, uh, to be offered back to the broker dealers like ourselves, which we can, uh, you know, split, uh, to the, uh, partner broker dealers that we work with.

SPEAKER_212: All right. Now, one thing I did notice that you guys have, uh, somewhat recently become

SPEAKER_149: a fully self clearing broker dealer. I kind of know what that means. I'm pretty familiar with market making, but it might help just to hear it from you about why it's important that Alpaca is now a self clearing broker dealer. And also if you could just tell folks listening who aren't as familiar what a market maker is and why they matter. Yes. When someone buys, for example, uh,

SPEAKER_200: Nvidia stocks, uh, the things happens as the, uh, uh, the trade is executed, uh, which trade execution means that we're basically deciding the price when this, you know, person a, uh, buys Nvidia stock at what price. And then after that price is decided, actual exchange of the Nvidia stocks with the cash that person pays, that process is basically called trade clearing. So in terms of the, you know, the first one trade clearing, uh, like companies like us who are behind the scene, um, we, uh, there are, uh, multiple layers of the businesses actually, uh, that's, uh, built up on this financial industry, industry system, because maybe while you're interacting with your app or businesses may not have the full integration into the, like, you know, deepest core of the, you know, booking records, which is the DTCC. The fine finance services is like, it's always relying on each other. So you outsource these licenses, you outsource these functions. It's really, um, you know, connected to everywhere. So with that said, us being at the, uh, very much one-stop shop, having all the licenses and membership,

SPEAKER_202: it reduces, uh, the fees that we have to charge because we're not outsourcing anything to anyone.

SPEAKER_216: Does it, does it also allow for tighter spreads when you offer a price for a particular equity?

SPEAKER_200: So in terms of the tighter spreads, uh, it becomes more of the, uh, yes, exactly. Definitely. Because like, you know, when we are, uh, pricing back to our partner brokers, which, uh, who is going to, uh, basically charge back to the end customers, the fee that we are getting charged from those systems become the, the, the, basically the lowest in the industry, because if you own everything in terms of the licenses and then also the systems, and also this is, this is an interesting part. Most of the financial services company, like most of them, they outsource the system because they are not tech companies. So they don't build stuff, which means it creates a lot of overhead, the unit expense, which we don't have. So we can offer the tightest price, basically, uh, logically speaking.

SPEAKER_212: And just to clear up an acronym, the DT, uh, DTCC is the Depository Trust and Clearing Corporation.

SPEAKER_199: That is correct. Yes.

SPEAKER_149: And you said you were a member of it. Does that mean you guys have like an, an equity stake

SPEAKER_200: or is it a partnership? How does that work? Yeah. So it's not like an equity or partnership, but there's, uh, so much, so much like, you know, application process that you have to file. Uh, so the DTCC basically, uh, allows us to be a member, same as like, you know, being a bank, becoming a bank or becoming a broker dealer, you have to prove, and you have to show that you have all the, you know, compliance ready. You have all the, you know, risk rate, you know, risk system ready. You have all the right people ready and you have enough capital ready. So the DTCC welcomes you

SPEAKER_202: as the, uh, uh, the direct member that's connected to the DTCC system.

SPEAKER_149: All right. So what I loved about Alpaca at the time, back in the day, was that everyone wanted to have a broader suite of financial services. Once they got customers in all these fintech companies wanted to offer more stuff to them because the more stuff they could offer, the more money they could make made perfect sense to me. Time passes. Yeah. The, this, the COVID era, uh, what I call the savings and investing boom, you know, kind of like the early meme stock era and Robinhood blowing up and so forth. We're now pretty far past that. So I'm curious if you could just give me, um, a bit of a,

SPEAKER_62: an overview of the last couple of years of adding new customers from you guys and how they're adding end users. Just what's it been like in the last two or three years? Yeah. So surprisingly, and you know,

SPEAKER_200: thanks to the, our, you know, teams, uh, working really hard, uh, we've been more than doubling, uh, revenue, uh, last several years. Uh, I always, uh, you know, do admire what the, you know, Vlad and Beju did, uh, uh, in the Robinhood, you know, obviously it's, uh, always, uh, being talked about and, you know, paid attention to, but you know, they have been always kind of, um, uh, making a way, creating new things, like, you know, like, you know, really focused on like what comes next. I think like, you know, there is a definitely the maturity that's happening for the B2C fintech applications. Uh, you know, maturity means that adding a lot more, uh, service verticals. Uh, and then I think like the winners are more becoming a winning, uh, players and to becoming more of the

SPEAKER_226: enterprises. So having, uh, becoming more invincible in terms of the market. So, uh, that's,

SPEAKER_149: Yoshi, can I, can I jump in? So are you saying that because the upstart companies from a few years ago are becoming the incumbents? Yes. It's a good time for Alpaca to be out there helping to power a lot of these companies, because essentially your customers are maturing and becoming the new

SPEAKER_200: leaders. Yeah, definitely. And then like, you know, we, I think like, you know, the reason why I wanted to bring up the example of the Robinhood is that there is always a continuous innovation on the B2C products. And then like, you know, uh, the players who are good continue to, uh, uh, add new things to continue to grow. So that's the kind of, uh, the proof point that I see from the Robinhood and that the second thing is that by looking at the Robinhood, there are like many other following Robinhood types of applications, uh, not only in the United States, but also outside the United States, that's, or maybe a few years, uh, behind or five years behind or seven years behind, which means that the growth curve is happening in a very different diverse for that diversified way in terms of the revenue assets under custody growth. And that's our built on top of us. So like, you know, we see that growth, like, you know, very diversified. So like, that's why we see like very constant growth of our revenue and assets under custody, uh, regardless of the, uh,

SPEAKER_149: despite of the, uh, situations that we see. So Robinhood does very well for itself. I just pulled up a stock chart. It's currently worth $64 billion, which is more than an anthropic shout out. And people around the world have seen this and got, oh, we need to build the Robinhood for Malaysia and the Robinhood for Nigeria, et cetera. And they're a little bit behind the initial Robinhood curve, but if the curve still goes up, you guys at Alpaca, if you're serving those people do very well. Okay. Is, is part of the demand for Alpaca services, the fact that people really want access

SPEAKER_200: to us equities in particular? Yes. Um, so 65% of the market cap, uh, of the, uh, whole, uh, whole equity markets in the world is United States, uh, us stock market. Yeah. And then, you know, obviously I don't have exact stats, but like, you know, computers people use in terms of that Mac Mac or windows or Google, or even open AI or whatever. I think it has like much, much, uh, higher penetration, which means that like an 8.5 billion people, uh, on this earth probably has thought about the United States listed companies the most. So I think that is the reason why we started from the offering the U S stocks. And then that has been our core asset classes.

SPEAKER_216: Uh, but last year you guys added quite a lot. I was going back through your 2024 recap,

SPEAKER_149: and also looking at your original blog posts, things like options, high yield savings accounts, IRAs,

SPEAKER_195: fractional shares. Yeah. The thing that I'm, that I'm struggling with is what's left to add. I mean,

SPEAKER_111: do you remember when robo advising was a big deal? Everyone's talking about wealth front and the other one that I now forget. Yeah. That's now table stakes. So, so Yoshi, how much more stuff is there

SPEAKER_195: for Alpaca to build that's like net new in a, in a feature sense? Yeah. Yep. So I, I think like,

SPEAKER_200: you know, it probably goes back to again, uh, you know, how the Robinhood is adding stuff as well. Right. Uh, and, and then a lot of companies in the world, even in the FinTech companies, but also big companies whose are launching bunch of digital banks and digital arms are looking at what the Robinhood is doing because like, you know, they are best at growing the customers best growing the businesses. So, uh, you know, again, like it's, it's not only about the, uh, you know, stocks and options. Uh, there's, uh, you know, the, those saving accounts products and even fixed income products. There's like money market sweep. Uh, and then, uh, of course there's a prediction markets, uh, and then, uh, uh, investment advisor products. And this is really showing the, uh, shift of the money, uh, from just spec, speculation and trading into the more, the longterm, uh, saving and wealth management. So I think it's now coming back to the core thesis of the money is coming from the boomers to the new generation and how we supposed to cover more of the cash. And then that's again, happening everywhere in the world, but there's always three years, five years, seven years, 10 years behind so that we just need to keep building those infrastructure for them to make sure that they can do what they need to do. Like Robinhood has been doing in the United States.

SPEAKER_242: So essentially Robinhood is not just the millennial brokerage of choice. It is an indication of new

SPEAKER_65: generations of humans demanding different services than their parents effectively back to the boomers

SPEAKER_149: point. That sounds pretty bullish for Alpaca. Cause it means that the companies you're serving that are offering your equities and other trading services to their customers have a lot of growth ahead of them. So I guess the question then becomes amongst your more mature customer set, people you've had for a couple of years that are not new, are they still growing very quickly or as quickly as your, your more recent customer additions? Yes, yes, definitely. Like, you know,

SPEAKER_200: the growth curve of the existing customers are higher. Uh, uh, and then, uh, you know, uh, those guys, uh, those guys like, and so we work with the 220 applications in the, uh, uh, 40 different countries that, you know, that's like, you know, the benefits of the, uh, big banks, um, uh, having the new, uh, new offering, which, you know, we serve the infrastructure for as well. Definitely the, uh, first, uh, first period of the growth is really high because you can cross sell it. I think that's another thing that we have been seeing is that, you know, we now work, uh, a lot more enterprise customers, including legacy banks and then legacy, uh, uh, uh, incumbents, broker dealers, because like, they're also fighting against competing against new fintech, uh, players and they have to like, you know, make sure that they have to grow against the new competitors that's coming up. So we're

SPEAKER_149: serving both, uh, segments. I was kind of working my way on the feature point to ask about stable coins, because I feel like everyone's been, been yapping about them and people want to have access to them. They're not a trading thing as much as equities. They're aren't really an investment that you hold forever, like money market or bonds or so forth,

SPEAKER_195: but do stable quits come into the alpaca world at all? I'm just not sure if they have a fit, but I, I, I just wanted to ask. Definitely. Like, you know,

SPEAKER_200: stable coins do come into the play, uh, because, uh, in terms of the money movements, uh, you know, we have to deal with, uh, you know, traditional rails, uh, of like, you know, moving money around, for example, uh, customer in the Saudi Arabia buys, uh, you know, the, uh, Microsoft stocks, and then it comes to the United States because in order to purchase the stocks, the money has to move. So there's a bunch of the, uh, correspondent banks and all those payment rails. So when that stable coins happen, uh, definitely like, you know, the money movements faster, even though we have to own, own ramp it off ramp it. Uh, but there's definitely the, uh, future there in my opinion. So, um, we do definitely follow very, very closely, uh, what's happening there to make sure that we can provide the best service for our partners. Would you consider

SPEAKER_149: building your own Alpaca USD coin just for your own internal settlements? Because to me, thinking about the example of someone purchasing Microsoft stock in Saudi Arabia, that is far away geographically. It's far away in currency terms. It's, it's not close. And so if I was, if I was you, and this is maybe ignorant, I would think having my own in-house stable coin would allow me to effectively take money from my right hand and give it to my left

SPEAKER_65: and skip all those borders and other sticky issues. Is that how it would work or am I oversimplifying to the point of stupidity? I think like, you know, there are multiple,

SPEAKER_200: um, takes the, how the future will be, uh, in terms of stable coins. I think some people say that, uh, it's going to be predominantly, uh, you know, two or few, uh, stable coins. I wouldn't say even use the word of a stable coins. It's going to be with a stable dollar, uh, in my opinion as a concept. And some people think about, uh, building the infrastructure so that, uh, so many people can build a bunch of the stable us dollar, like one money, uh, by Brian. Um, I think there are multiple futures possibility, but, but what I think is that, um, you know, both of them are actually right. Uh, I kind of think about it, uh, more of like ETF, right? So like, if you see like, you know, Bitcoin ETFs, there are a bunch of them and there's, uh, uh, uh, and then like, you know, in order to create better experiences, we need to lower the, uh, uh, entry hurdle. So we need to create the infrastructure for that, uh, EDF, those stable coins to be built, uh, built, made, uh, easily. So I think like, you know, both things have to be happening at the same time, but for alpaca side, we haven't really decided in a way we're definitely like looking at it. Uh, what, what is the future, but like our focus and priority is to solve the problem. So like if the existing, uh, environment, uh, allows us to solve the problem faster, cheaper, quicker, we'll take that route. If it doesn't,

SPEAKER_65: we have to build our own. So it really just comes down to how good is the offering out there and could we do better internally? Okay. Well, when you do make that decision, let me know. Cause I

SPEAKER_149: want to ask you with that question again, once you've made it, because I think it'll be illustrative for other, well, I'm just thinking about other founders who might be thinking along similar lines and you guys are, I mean, you're a series C company, you're pretty mature, you're well-established. And so I think there's probably a good lesson there for when you make that choice. On that theme of talking to other founders, when we were talking back in 21, fintech was the hottest thing. We were joking before the show that it was, you know, the AI of its time. And then there was, you know, Zerp ended, everyone freaked out. Suddenly startups had to be profitable. It was all very strange for a while. And now with circle eToro, you know, chimes, fintech feels very hot again. So you've gone through a period of time in which your company was out of fashion. What changed operationally for you because fintech lost its luster and any tips for founders out

SPEAKER_65: there who might be building today in a market that is considered less sexy than AI?

SPEAKER_200: Yeah. I think market cycle always happens. The concept that I always like to think about is the, you know, Bridgewater's Ray Dalio continues to talk about short-term debt cycle and the long-term debt cycle. So I want to always like, you know, the kind of step back to see what's really happening in the world in the bird-eye view so that I don't freak out, even though I'm freaking out every moment about revenue and growth and client and all the things. So my team members probably say, what are you talking about, Yoshi? But, but I think like, you know, for, uh, definitely like, there's always a cycle. And I think what really important is that, uh, we have to, um, uh, in my opinion, react as quickly as possible to what's happening in the world, because it's impossible to predict the futures. But what we can do is that we can react as quick as possible to what's happening with, uh, uh, uh, to, to beat out our emotional barriers or whatever that's stops you from acting. So I think that's one key component, I think. And the second component is that these things actually allow us to grow and mature us, uh, extremely in a good way, uh, to be very strong and very organized of how we run the company. So, uh, I, I always think about those two things as the benefits going through the multiple market cycles. So essentially because you had to go

SPEAKER_65: through a period of time in which investors were no longer showing up in a car with just briefcases

SPEAKER_149: full of thousand dollar bills, you had to become a more mature company. I think about cash a bit more seriously. And so now that, you know, Fintech back at it, I mean, your series C was, I know, announced this year actually happened last year, but with these IPOs, I presume you'll have more investor interest and so forth. Now you are much more stable and just healthy company. Like, uh, is it my read of what you're saying?

SPEAKER_200: Yes, yes, definitely. Like, and I think in addition to the healthy, uh, it's more predictable as a business and then more visible and transparent as the business. And I think that's what it matters in my opinion, because if there's a visibility and transparency of what we are doing, we can, we can, uh, like we have a many choices, what levers that you pull to, uh, expect certain outcomes. And now, uh, it's a very nuanced and balanced situation that, uh, and I think that's really the, uh, you know, role of the CEO that, uh, we have to navigate which direction, which nuances

SPEAKER_226: that we have to be taking at that moment. Yeah. You have to steer the ship and not

SPEAKER_149: worry about the little waves, but keep an eye on the, on the bigger waves. All right. Oh, one last question usually before I let you go and either go back to bed or have a very early breakfast. We haven't seen these FinTech IPOs and it's gotten me very excited because I love an S1, you know, and I would put Alpaca in the not going public this year, but maybe the back half of 26 or something, because, you know, you've been doubling for a long enough time now you're getting big, but at the same time, there's also been a kind of an uptick in M and A. So I'm just curious from your chair, are more people reaching out kind of testing the waters to see if Alpaca wants to

SPEAKER_195: exit early. What's it like out there for a founder of a, of a mature and healthy FinTech startup?

SPEAKER_200: Yes. Uh, definitely like a lot of, uh, inquiries and the conversation that, you know, we receive. Uh, and then I think, um, it's one thing is that FinTech getting the traction, but also, uh, multiple, uh, industries of the FinTech are, uh, uh, getting traction and the getting more capital also in the, uh, in the U S of course, like, you know, Robin is adding more products and, uh, you know, becoming even mature and like in the brand name. And, and I don't think that's only the case, only in the United States. Like if we look at the Europe, there's like, you know, of course, Revolut and Monzo and N26 and Klarna and, you know, all those guys are also becoming even more winners and adding new things. Uh, so that means that those, uh, companies are even, uh, uh, growing faster. So there's a more cash and like, you know, opportunities they're looking for. So, um, in addition to the FinTech as a general, as an industry, but also like each of the key players are also becoming bigger. So I think like, you know, they're also like looking at the opportunities, how they can also grow faster. So I think like, you know, this trend will continue. And, uh, uh, you know, of course, like I I'm friends, I try to be friends with everyone to try to understand what's happening in the world. So I'd love to be talking with as many people as possible always.

SPEAKER_195: All right. Well, uh, you heard it here first, no buying alpaca until they go public. I want to

SPEAKER_149: see the gosh darn documents, Yoshi. Thank you so much. Let me know when you're done with the stable coin choice. And also I want to talk to you again at the end of the year, just to go over the growth rate and the metrics to see how, uh, it all wraps up because I suspect it's going to be quite good. Thank you very much. And, uh, it's alpaca dot markets. Yeah. Yes. That is correct. Alpaca dot

SPEAKER_195: markets. All right. Thank you very much, man. Talk to you soon. Thank you, Alex.