SPEAKER_00: okay everybody we've got an amazing show for you today my friend mark souster uh who is an investor talks about the pivot he is doing at his venture firm really fascinating stuff and we talk about a range of topics this is one of those guests who's been on the program now six times this was his sixth appearance and he's going to be on every six to 12 months because like keith SPEAKER_01: roboi or some other folks we have in rotation he's just that good he's just that good you're going to literally wish we had done two hours instead of the one hour but i'm going to talk to you about robin hood's earnings and amazon going into big box retail stick with us this week in SPEAKER_03: startups is brought to you by linkedin marketing to redeem a 100 linkedin ad credit and launch your first campaign go to linkedin.com slash this week in startups twilio runs an amazing program for startups that includes a 500 getting started credit access to webinars made exclusive for startups three thousand dollars in sendgrid credits and full support via their twilio startups team sign up now at twilio startups dot com slash twist and fiverr business is a modern workplace for the digital world their team of dedicated business success managers help match you with the best freelancers for your team right now you can sign up for fiverr business free for the first year and save 10 on your purchase with promo code jason that's f-i-v-e-r-r dot com slash business and use SPEAKER_00: promo code jason all right first up in our news rundown before we get to our interview robin hood doubled their revenue year over year but their stock is down almost 10 percent due to warnings of a trading slowdown full disclosure slash flex i was one of the early angel investors in robin hood before SPEAKER_01: they even launched the product so i still have all my shares haven't sold one don't plan on selling any of my shares i will distribute my shares to my lps in my fund but i'm long the company i think they can get to 100 million accounts and that has never been done before at least to the best of my ability if you know of any finance company with 100 billion people in the united states i'm sorry 100 million SPEAKER_00: people in the united states let me know so um robin hood announced these q2 earnings yesterday after the bell as is the case with earnings reports and this was their first quarterly earnings report as a public company i talked about the s1 and their ipo on previous episodes but before we get into the earnings let's quickly recap what a crazy ride it's been actually uh in the short period of time since robin hood went public as you know they let their own users have access to their members uh have access to their ipo shares which was very cool and that's a trend i hope to see more companies do you know whether it's spotify going public or imagine netflix when they went public giving shares to their subscribers or giving first access to those shares to the subscribers really cool idea the ipo went out at 38 a share in late july and um yeah it was a pretty wild ride i i don't really care about the stock price in the short term just to be clear a lot of people have been asking me to comment on that they've been trying to hand me on cnbc to comment on it you know if you're holding a a a share in a company for a decade you really don't care about the the day-to-day stock price you're just concerned SPEAKER_13: about the growth of the core product profitability the management team and that kind of stuff which SPEAKER_00: is all excellent so on the first day of trading it went down 10 percent oh my god everybody's such a failure this is so terrible this company is horrible and i just look at it going like uh that's not the number to watch like how many accounts do they have and how many assets do they have under management there four days after going public something happened where it rocketed up to seven dollars a share and then my phone is going off the hook hey will you come on cnbc or my podcast for friends of mine or lps oh my god it's 70 a share so you get the highs you get the lows as an investor and i try to even that out and i just try to think in decades if i like the company so uh now it's been around like that 50 share um price from what i understand i don't check it incessantly SPEAKER_01: um and uh today i dropped to 45 and that represents a 42 billion dollar market cap which seems like for me pretty fair market capitalization uh some people might argue it's high some people might argue you know this is going to be a trillion dollar company so you have to get in now it seems reasonable to me um but what do i know i'm an early stage investor so let's talk about the q2 breakdown they had uh SPEAKER_00: revenue of 565 million dollars which is up 131 percent year over year q2 revenue from crypto trading alone was 233 million dollars which is up wait for it 46 x year over year from 5 million q2 of 2020 SPEAKER_01: when they started so this is super interesting obviously crypto is a major space so what's happening here i have a thesis you tell me if you think it's right or wrong i think people are fleeing from the rogue exchanges out there in the world and they would like to be with ua us-based companies that they can trust so again you have all these fugazi weird offshore uh questionable places you can trade crypto wouldn't you rather be on coinbase or robinhood and have that security of a publicly traded u.s company i think you would and so it might not be that there's so many more people interested in crypto i'm sure there are people who are interested in crypto but it might be people saying you know what i want to trade crypto on robinhood not on you know some offshore or no shore or floating um place you know for trading cryptocurrency so over 60 percent of cumulative net funded accounts SPEAKER_23: traded crypto in q2 over 60 percent of cumulative net funded accounts traded crypto in q2 so funded SPEAKER_00: accounts and cumulative so all of their accounts so that means people are this is becoming a real thing so if there were 22.5 million cumulative accounts and 60 percent of them uh were in fact trading crypto that means they have uh six million plus six million is 12 million and then you know a little bit over 12 million people on the platform trading crypto already that alone is notable and uh they first introduced crypto trading in 2018 robin hood's 2021 first half revenue was 1 billion dollars over 1 billion which is uh almost 3x year over year so that is a high growth company you know when you see companies growing 10 20 30 year over year you start getting past 20 or 30 percent you're and hey this is pretty fast growing pretty great uh tripling is like a whole different level a whole different uh ball game so uh here's the key robin hood warned investors that their q3 results may be negatively impacted by a trading slowdown in other words in the summer people might not be trading as much and this was supposed to be the end of the lockdowns so july august september is q3 maybe people are trading less because they're going out more and they have the delta variant so who knows this could be headwinds this could be tailwinds uh this these are choppy waters obviously the the pandemic ending and then delta beginning really means nobody knows exactly what's going to happen except that i'm at peace with it because we've seen what a lockdown does and society can survive a lockdown and if we go back and and we see what the vaccine can do and how quickly they made it they can make another vaccine so i believe that we can get through covid whether it's here for 10 years or two i hope it's here for two and i hope we get past this and people get their vaccines because we could squash it and there won't be more variants so please if you're listening to me consider doing some research on the vaccine if you're hesitant just do some research make your own decision talk to a doctor look online maybe look SPEAKER_01: at the statistics yourself and think for yourself i'm not going to tell you to get it or not get it i mean if you were my friend i would tell you yeah absolutely get it save your life but i understand that the people who haven't gotten the vaccine by this time are likely to have some strong feelings about it so i'm not going to pile on here and tell you you're an idiot or you're stupid you you probably have some reasons that you feel strong conviction about maybe talk to those with doctors because maybe you had those strong convictions before we broke a billion people right and maybe those strong convictions you know uh maybe you would change your decision in light of new information and part of that new information might be just looking at who's in the hospital and who's dying it really is a pandemic now of the unvaccinated and you're going to have to make that risk assessment for yourself i made the risk assessment for myself i understand you might make a different one so that's just a little psa here to people who are either anti-vax or concerned about vax i'm not going to insult you and call you an idiot or stupid uh i'm going to just ask you to look at the new information that's in front of you let's get back to robin hood so the there are really two numbers that SPEAKER_29: i think matter in these businesses the assets under custody a uc so no matter which financial services SPEAKER_00: group we're looking at i think that's a key statistic why is that important well you could have a lot of you know accounts that have a hundred dollars in them that may not be uh as powerful as having a smaller number of accounts with a larger amount of money and this is fairly obvious right assets under custody auc grew over 3x to 102 billion in q2 2021 compared with 33 billion in the second quarter of 2020. so let's take a pause there that is serious growth 33 billion and then we're here a year later 102 billion will we be here next year saying 300 billion in assets under management and then 900 billion and then 2.7 billion uh i mean actually trillion right so it would be at 2.7 trillion dollars under management robin hood ended the quarter with 22.5 million net cumulative funded accounts which is 130 year over year growth to put that in perspective uh as of december 31st 2020 SPEAKER_23: they had 12.5 million funded accounts which is almost doubled in six months to 22.5 million and SPEAKER_01: if you go back even further when i had vlad on episode 7 36 of this week in startups uh that was back in 2017 robin hood only had 2 million total accounts and there is you know a very interesting moment as i go into my second decade of investing i'm now learning about being a shareholder of the companies you know i invested in before they had their products launched as public companies and one of the things i did when investing in companies and even building my own companies i envisioned a world where the product was 10 times bigger and the customer base was 10 times bigger then i envisioned 10 times more revenue and customers and then 10 times more and then 10 times more so i would do this little powers of 10 exercise in my mind and when i met robin hood they had zero and when they had a hundred thousand you know it's like oh what if they have a million when they have a million or what if they have 10 million we have 10 million now i'm thinking hey what if they have 100 million which SPEAKER_00: is what i just said to you earlier it's very easy for journalists who um you know tend to be a little bit negative on uh financial companies and tech companies right now because of the power they've accumulated we'll put that aside i talked about it um i think yesterday uh in relation to superhuman pausing for a second do you think a company that 10x from 100 000 to a million then 10x for a million to 100 to from a million to 10 million and then doubled to 22 million in six months do you think they're not going to get to 100 million i had these discussions on cnbc over and over and over again with the naysayers about netflix and then disney plus and you look at those services i believe we're moving to a world in which these global brands and i do believe they're going to be global will have billions of users we saw it with free services like facebook instagram whatsapp chrome google search very few brands actually have a billion plus users we can actually almost count them on two hands yeah let's do that right now google search i think gmail is over a billion chrome SPEAKER_32: android ios facebook whatsapp instagram i believe instagram is over a billion i'm not counting the chinese SPEAKER_00: based companies so there's eight products from you know a handful of companies that have over a billion is it possible that netflix a paid service will get to a billion that is possible why wouldn't it be SPEAKER_01: possible you know if there's over seven billion people on the planet one in seven seems quite reasonable now you have to have a bit of an imagination here you have to be able to think globally you have to be able to have seen what i saw in my career which is when i came into the industry there were zero users using web browsers there wasn't a web browser mark hadn't created netscape yet and mosaic hadn't been created so um you need to look at the arc of history it's pretty clear to me 10x maybe even 100x is a possibility uh for companies like robin hood airbnb uber go right down the line because we saw it happen with the previous generation of outliers google amazon and facebook right now linkedin is going to give you a hundred dollar credit for your first ad campaign i'm telling you the call to action up front so good linkedin.com slash this week in startups to get that hundred dollar credit towards your first ad campaign if you want to get a group of people who are receptive and who are doing business they're doing business on linkedin right when you market on linkedin your message reaches people who are ready to engage with your business this means your ad campaign will work as hard as it can as soon as you launch it need more evidence to use linkedin marketing well over 78 of b2b marketers rate linkedin as the most effective social media platform SPEAKER_46: for reaching objectives because there are over 62 million decision makers on linkedin you know that and they mean business linkedin equals business business equals linkedin it's that simple folks and here's how linkedin marketing stands out they have the tools for brand building or lead generation you can pick you can target professionals down to their job title company name and location and you can engage folks you already know based on previous site visits or outreach right you can do that retargeting thing so do business where business is done get a hundy get a hundred dollar ad credit right now go to linkedin.com slash this week in startups once again for a hundy linkedin.com slash this week in startups no spaces no dashes linkedin.com slash this week in startups terms and conditions apply SPEAKER_50: because they're giving you a hundy so here is another interesting piece of information uh from the SPEAKER_00: earnings uh report and it's a quote a funded account is a robin hood account into which the account user makes an initial deposit or money transfer of any amount during the relevant period which account is designed to provide a customer with access to any and all the products offered on our platform so what i like about this is i it seems to me and i again i don't have inside information i was a seed investor i put a small amount of money into the company that became a large amount of money uh thankfully um it's good to get a win the it takes a lot of pressure off i'll be honest as an investor because man this being an angel investor can be super humbling i mean i everybody knows my wins but you don't see all the losses every robin hood equals 99 zero not 99 zeros 85 zeros and 14 you know one to 50 x so it's nice to see that there i believe here is my interpretation of it uh reading it and you can correct me if i'm wrong uh on email or you can dm me on twitter or instagram feels to me like they're trying to be very intellectually honest about what's an account which is great there are some folks like i think we discussed this with next door who considered an user uh anybody who opened an email i felt that was like um i'm not gonna say unethical i felt that was you know maybe bending the truth a little bit you know if i get an email from you know the gap i don't shop at the gap but if i get an email from you know whatever company i i don't want that to be counted as a user so always be very questioning when you look at these um definitions if you're a public market uh investor okay quick story here i've talked about for a long time that amazon is going to open stores and they did sort of the quick checkouts but there's something happening here that is much deeper today the wall street journal reported that amazon is planning on opening department store style physical locations in the us that's right department stores the news came as amazon passed walmart as the world's largest retail seller outside of china and that was just reported in the new york times this week the latest information from e-marketer which doesn't do their own research i think they accumulate other people so we'll have to see who the source of this is shows that amazon will account for 41.4 of all us e-commerce sales in 2021 whereas walmart will account for only 7.2 percent and it says here in their notes yeah we're going to have to check on the e-marketer research because my understanding when and you can leave this in the program we should always be careful with e-marketer because they were using other people's information but maybe this is their proprietary information so we want to make sure we give proper credit uh leave that in the show i just want to i want you to know how the sausage is made here um so the wall street journal notes people familiar with the matter in quotes believe amazon exists is expanding into physical locations to help grow sales in areas like apparel home items electronics and other similar areas kind of makes sense right if you're going to do something like this clothes or something that you know it's one of the final things people like to go to stores for and home items too right so uh it's a great move by amazon i think because brick and mortar could not possibly be more uh compromised during the pandemic they're probably buying up spaces uh for pennies on the dollar there is a very simple way to look at this if amazon was challenging walmart but with a different product and then walmart added amazon's product that is a competitive threat to amazon because then walmart can do things amazon can't do what walmart can do is what's called bricks and clicks uh you may have been experienced in this i went to the everlane store now i haven't shopped at everlane a long time but i needed a white belt and i was trying to find a white pair of sneakers happened to walk by one on south congress when i was in uh austin for a wedding i was like oh there's an everlane store and then the next one was little lemon and the next one was some other online store i can't remember the name of it um but i think lululemon i'm not sure if they started as a as a as a retail brand but there were a number of brands on south congress that were online brands that now had opened up retail stores they asked me for my email and those purchases were synced with my online account now if i were to buy this this shirt you know and know it's a size SPEAKER_01: you know three or whatever or nine and a half in shoes now i know that for that brand i'm going to be able to match that size same account i can order with at home and all of my billing and my ordering and my returns can happen however i like them to like them to if i'm at a wedding and i need to pick something up today i can go to the store use my same account if i go home and i love the shoes and i want to buy two more pairs in different colors same size same account log in order them i forgot what shoe it was i forgot the model boom i can do that and nike is amazing and wonderful for online ordering so is page and vince those are two other male brands that have men's clothing that i like page p-a-i-g-e i think they started in uh women's and then there's one called vince v-i-n-n-c-e they make great t-shirts so shout out to those folks for stuff i like so wall street reported the size of amazon's department stores SPEAKER_00: will be smaller than ones we see from nordstrom and bloomingdales those were about a hundred thousand square feet amazon scaled on approach 30 000 square feet according to the story by the way amazon already has 600 retail locations that's because they bought whole foods and they have 506 whole food locations if they don't uh do what walmart's doing walmart gets an advantage and amazon does not want them to have an advantage so uh they also did this pilot program of the 17 amazon fresh grocery stores they've got 22 of these amazon go stores um you know based on our our quick research here those are the uh cashier less ones they've been testing and then i've been in one of these they have these four star stores i think i was one in la with five more coming soon these are four thousand square feet they're kind of tweeners uh and that feels like the size of like a lot of like you know local towns where you have a you know a main street feels like a main street store and they basically have toys and books and home goods devices it's great for them to sell their uh hardware prices like echo um or their kindles and that kind of stuff but it's a really nice experience because they've kind of skimmed the cream cream and it's a nice browsing experience um and i guess they have 20 us SPEAKER_01: bookstores so i'm thinking amazon basics amazon essentials will all be in these stores and when they SPEAKER_00: go to break up amazon now amazon can just point and say listen walmart's doing what we're doing walmart doesn't allow third-party sellers we do maybe you got to break up walmart right it's basically checkmate the only thing that really uh you know the ftc and and the government department of justice whoever winds up uh going after amazon to break them up the only real case they're going to have is amazon web services versus you know amazon uh the retailer and so i think it would be logical for them to break those two up because it will unlock more shareholder value so um two really interesting stories today and now let's get on to our amazing interview twilio is the cloud communication platform SPEAKER_71: used by uber airbnb shopify and many others not that you need any more names i mean think about that uber airbnb shopify basically as good as it gets you may have heard of them in the news back in november of SPEAKER_46: 2020 when they announced their 3.2 billion dollar acquisition of segment one of the world's leading customer data platforms everybody knows segment if you're in the industry well twilio provides you the building blocks to add messaging voice and video in your web and mobile applications they are rooted in startup culture and they are here to help you on that journey twilio gives you the power to build communication apps easily so you can spend more time focusing on what counts your customers engage and delight your users while scaling globally all from one api-powered platform from sms to voice to whatsapp to email thanks to that send grid acquisition and founder ceo jeff lawson has been on this program multiple times i think the last time was episode 967 back in 2019 let's book them again and here's what you're gonna get from twilio startup program access to webinars made exclusively for startups and full support via the twilio startups team a 500 getting started credit and three thousand dollars in send grid credits sign up now twilio startups.com twist twilio t-w-i-l-i-o startups.com slash twist so go get the bag right now thirty five hundred dollars in credits are waiting there for you just take them twilio startups.com twist all right next up on the program is SPEAKER_44: five time show guest friend of the pod mark souster is back with us for his sixth appearance uh mark and i have been friends forever literally he was on episode 25 in november of 20 of 2009 episode 279 in 2012 429 in 2014 episode 674 in september of 2016 episode 1121 in october of 2020 and we've decided that SPEAKER_76: he is in the rarefied air of being so good on the pod i learned so much we have such a great conversation that he's just a yearly guest going forward mark i've decided with the pod on five days a week now four or five days a week it's no longer this week in startups it's like today in startups i'm literally SPEAKER_78: doing this show every day now because we sold the ads out you remember when i started so so i have to SPEAKER_80: tell you that i i was thinking about this jason and i think it's an incredibly smart strategy and i don't SPEAKER_82: mean in terms of a media business or in terms of you know building an audience but i was thinking about you and donald trump and i i i know uh it's i shouldn't invoke you and donald trump in the same sentence but let me talk about one thing i think donald trump really did well and learned from which is speaking at audiences and he was in front of crowds in front of big crowds all the time and he would try out lines and then he would get a sense of what the audience thought and how they reacted and what they cared about from their reactions so i thought you know i was thinking about this i went running this morning and i was thinking you know what what do i think jason is uniquely good at and you by doing this show have stayed really close to the zeitgeist of both what entrepreneurs care about and what your audience cares about and i thought a better metaphor than SPEAKER_84: donald trump would be um steve martin or chris rock because it's the same thing you don't go straight SPEAKER_82: and have a great comedy show like you're performing you're performing people are laughing they're not laughing they they like this bit you try out that bit but you just get much better and i think the same is true not just with your show but really about what makes you unique as an investor because you're SPEAKER_88: you have your fingers on the zeitgeist and i remember when i did your show this week in venture capital a decade ago yes i forgot about that it was and it was great for me jason because i was i just constantly felt in the zeitgeist of the conversations and i missed doing it okay we'll start it back up SPEAKER_91: then okay there you go you just committed we'll start to show up again i mean it's a joke but it's SPEAKER_44: possible uh you know it's it's it i have to say thank you for the kind words it has been the great joy of my life doing this podcast and i agree the zeitgeist is the reason i do it uh instead of going to lunch with people i substituted this right and i would just take out one lunch a week and do the speaking startups and then it became two and then three and now we're basically doing four or five i SPEAKER_76: mean the ads are sold out till november and now my team is like hey what about a sunday show and i'm like yeah sure we could do a sunday show let's come up with an idea and it's getting it's so much easier to do mark now because of covid everybody like yourself has a quality setup at home and zoom has gotten so good and the microphones have gotten so good and people know how to plug in an ethernet cable and people also know how to talk virtually and they're more comfortable having a conversation like this i used to do a go to meeting or you know a skype call and nine times out of ten we'd have to cancel the show uh because they couldn't get it up and running now it's like this is my fifth call of SPEAKER_94: the day i know how to do it jake how we're good um reflecting back to you uh something i took from you uh as a friend is years ago uh you wrote a blog post and i remember fred wilson had written one SPEAKER_44: before you about your yearly trips and how you looked at how long uh you have left with your sons you have two kids i believe two boys yeah two boys and uh your sons were getting older i think they were 10 and 11 at the time you may have written this he said hey i got six left with one i got five SPEAKER_98: left with another and then they're off to school got to make every summer count well here i am i'm SPEAKER_76: in italy i did a two-week trip with my kids last year or two years ago before covid we had done SPEAKER_94: australia and i'm just looking at this with my 11 year old going okay 11 12 13 14 15 16 i got sick and with the five years old i obviously got a little bit more um i actually sent them home because i had to start school and my wife was like you should stay a week and do that book thing uh and i was like wow the greatest wife ever so thanks to my wife but i'm i'm i'm here still uh at a i'm at a secluded beach town in italy i won't say which one writing my next book uh awesome it's been great SPEAKER_76: so let me start the conversation with you you and i have lived through the start of a super cycle 2009 when i became a sequoia scout um upfront ventures at the time was called grp grp yes i think you were a couple years into the job you had been an entrepreneur before that yeah and you and i were investing in companies for four or five million and if there was the term unicorn did not exist the iphone was a very new device was on the second version perhaps um and now here we are it's 2021 it's about 13 years later maybe give or take 12 13 years later what do you make of what we're seeing in terms of the outcomes uh for the companies we invested in back then at the start of the super cycle i'll call it a super cycle um for lack of a better term and is this sustainable and does it make you nervous what do you think about this because you you sold maker for a billion dollars that seemed crazy at the time now it seems like oh probably sold too early yeah now we have uh SPEAKER_104: goat uh sneakerhead marketplace we were the earliest institutional investor there it's uh public publicly SPEAKER_82: released knowledge that it's worth 3.7 billion dollars and uh yeah and but what's crazier is the volume of business that they do we it was staggering i know in the earliest days eddie and daishin and the board member from up front uh who was a large part of why goat was successful in the early days uh greg bettinelli you know the biggest resistance they got from investors was how big of a market could this really be there was a quote-unquote tam problem total addressable market problem and i think that's the thing the imagination of so many investors which is that things are niches i remember years SPEAKER_105: ago looking at a business called crunchyroll yes crunchyroll yeah it was a japanese media company SPEAKER_111: and um it's like a netflix right if i were to describe it japanese content and asian content SPEAKER_105: yeah and it what it was um particularly good at was taking what we you and i might consider a niche SPEAKER_82: let's say like anime and it was making it available to international audiences and particularly in the us and it turns out that in the world of the internet what we have is scale and what we thought of as a niche like if i launched a store a hundred years ago in minneapolis and i launched an anime store i'm not gonna i'm not gonna have that many customers there aren't that many and there's not enough anime uh fans in minneapolis i picked one city uh to build a real big business but in the world of the internet with you know increasingly 4 billion people connected to this global network the communities are really large and so that was just an example of something where goat was a tam that people didn't think was huge they're selling literally billions of dollars of sneakers billions with a b then then you look at i'll tell you another weird one uh hopefully this helps people think about how markets and communities form we looked at another one called viki v-i-k-i it stood for video wiki it was created in south korea and what they were doing was they were taking south korean dramas and bringing them to the united states and other markets uh and because they were in korean and most non-korean speakers therefore couldn't have access they would launch competitions SPEAKER_88: and the competition was how quickly could the audience transcribe it into different languages and SPEAKER_82: the faster you did it and the higher quality the more a wine awards and points and i don't know little stickers you got and so they got these free groups of transcribers so think of it like wikipedia SPEAKER_88: wiki video wiki viki and it turns out there was this show i just remember it from 10 years ago called boys with flowers it was a south korean drama but there was a huge audience in the u.s of non-korean SPEAKER_116: mostly white people who would like to watch it and if you could globalize that that's a big business SPEAKER_44: it is amazing this observation uh and also coming from a korean family my wife is 100 korean um one of her uh one of my sister-in-laws one of her sister said you know jason be careful uh koreans are the italians of asia uh they have the most passion and there is a reason why everybody in asia and outside of asia now increasingly are watching south korean dramas because they are the most they have the most uh let's just say vibrance and enthusiasm for relationships and it is kind of like SPEAKER_76: game of thrones their soap operas are like game of thrones combined with the soap opera but this is a very interesting point um we have an investment in a company called soul savvy which is also in the sneaker space they recently had a very high valuation they are printing money just in essentially having a community of sneaker heads talking and discussing what's for sale on goat and whatever the other one is there's another marketplace stock x stock x and so they're sitting on there paying for monthly subscriptions to discuss sneakers and you're exactly right what we've seen over the past decade is as the tools went to scale people realized like one little niche could sustain it i couldn't get anybody to invest in com and alex and michael told me after i did the the seed round uh you know we were going to shut the company down i said actually didn't know that that's good information thank god you didn't tell me at the time because i might not have made the investment she goes he said literally 50 investments 50 investors said no you were the 50 first well that's a pretty SPEAKER_122: great feeling jason tell me the name of the sneaker company sneakerhead company uh it's called soul SPEAKER_80: savvy s-o-l-e-s-a-v-y so let me say this because i want to use this as an example of what i think of SPEAKER_105: the most important defensible strategy on the internet is um i when i work with our portfolio SPEAKER_82: companies i often am saying this which is the only truly defensible strategy in my mind is community wow and that's why marketplaces can be so big and so successful and i want to give you a couple examples but the reason i want to tell you first which is if you launch a widget let's say a hardware product that you're selling uh i don't know i see it looks like you have an apple watch there you launch a watch and you want to be better than other people you might be first to market you might be first to the market with ring doorbell you know we were the first you know big institutional investor there um but in the end uh you're never going to have better purchasing power more engineers more leverage more ability to sustain losses than amazon google apple you know everybody uh at scale yeah and so SPEAKER_88: long term it's really hard to form differentiation when you're in a valuable market except if you have SPEAKER_82: community because if you are the place where everybody goes it's really hard to get all those people to migrate on mass somewhere else so the example i would give you from ring the brilliant move that jamie and his team made uh also a guy named mike trotten uh mark trotten rally we're sorry about that mark mark trotten made was to create these ring networks so think of it as neighborhood watch so everyone in your community could opt in you don't have to be part of it but if you opt in you can see other crime happening in your neighborhood you can see each other's doorbells or you could see eclipse you can choose to publish into the neighborhood watch an event you don't auto publish everything you can publish an event let's say that someone came and stole your amazon package let's SPEAKER_88: say that someone broke into your car and you have that video you can publish that event so your neighbors are alerted to if you see this person near your house be aware they broke into my car yesterday right SPEAKER_82: and i know there's some controversy that people find over that but i find it to be uh a modern version of neighborhood watch and i think it's highly productive uh you know with with controls but let me say this jason which is now you take a local area let's say wherever you live and if you can now go to best buy or amazon and buy a product for 30 percent cheaper are you going to or 12 new features are you going to buy that or are you going to buy the thing that everyone in SPEAKER_88: your neighborhood's already using because that's the place you share so that is the most important part i SPEAKER_136: think of sustainable differentiation and defensive defensibility communities never heard anybody say SPEAKER_00: it that way i think it's a very profound insight as well listen as a founder you know sometimes finishing a project is way way way harder than starting it starting is easy finishing is hard shiny new ideas are great you have them all the time and sometimes you and your team don't have enough bandwidth to finish the mission and that's where fiverr comes in they fix the issue by creating fiverr business f-i-v-e-r-r fiverr business will get you access to an all-star team of freelancers plus all the tools and support you need to easily integrate them into your existing workflow there's no more guessing there's no more interviews fiverr's team of dedicated business success managers will help match you with the best talent for your team in other words they got a manager of the talent over there doing what i was doing how brilliant is that and you will be able to save and share your favorite freelancers for future projects all in one simple dashboard we love it here we've hired a bunch of researchers to find local people to invite to our event boom fiber got it done for us they deliver us the goods the event was a success stop wasting time searching for talent and just leave it to fiverr business they do a great job right now you can sign up for free that's right free for the first year and you save 10 on your purchase of the fiverr business with the promo code jason that's right the promo code is jason just go to fiverr.com business and use the promo code jason to get 10 off f-i-v-e-r-r dot com slash SPEAKER_72: business let's just tackle this head on the only people who wouldn't want to stop criminals SPEAKER_76: and would have a problem with what ring is doing is virtue signaling dips on twitter i'm going to say it you don't have to say it because i know you're connected to ring and we both know jv simon who doesn't want to stop amazon packages from being bought and if you're saying the issue is privacy there is no expectation of privacy on public streets you cannot have an expectation of privacy privacy on my porch or on a public street you're in public that's why it's in public the uh it's crazy that people have i mean it's mind-bogglingly stupid that we give so much attention the press and social SPEAKER_80: media to these people complaining about stopping crime so the preponderance of benefit is overwhelmingly SPEAKER_82: with the community that benefits from crime reduction uh every great invention has negative externalities and i think it's okay as a society to acknowledge those i'll give you examples of a negative externality of something like ring existing racial profiling sure you know if everyone starts SPEAKER_80: saying hey i saw a black guy in my neighborhood and that becomes shorthand for hey that must be a criminal that's not good right so we i think it's good for us to have our ears attuned to the downside SPEAKER_82: i think it's it's good for us to have our ears attuned to could someone a company i trust amazon but could a company like amazon over time use cameras use devices in our house to listen spy have surveillance could the government use this as a way to then surveil audiences like the chinese with the uyghurs and you know whatnot so i think we need to have our our antenna attuned to it so i'm leave aside virtue signaling i'm okay with the super left uh wanting to challenge the societal uh negative externalities of this even though for the most part i don't agree with them because i think it just keeps us honest SPEAKER_149: about the things that could go wrong and forces us to be more thoughtful about it you could that is SPEAKER_44: certainly an uh something to highlight for example i recently had a company that scans license plates for communities and it turns out when they put a license plate scanner in crime plummets the same way SPEAKER_76: when ring doorbells hit a certain critical mass crime plumbers in a neighborhood would you rather to your point at the end of the day would you rather have lawlessness or more police or would you rather decrease crime by having the presence of cameras well if it's on the street and any everybody's SPEAKER_94: got a camera in their pocket that cat's out of the bag everything's being recorded the cats out of the SPEAKER_80: bag is a good way of phrasing it because we are going to have cameras we are going to have other devices we're going to have microphones we're going to continue our technology so we need to just continue SPEAKER_105: to have the debate about what are the boundaries but i tend to overwhelmingly side with um using these tools for safety and security and um and you know just being attuned to the negative externalities SPEAKER_94: you know i challenged the the founder of this company with the license plate over and over again about like hey where's the downside and i was like hey you know what if uh somebody flock safety um uh garrett langley episode 1249 for those of you who might be interested in watching it and i was like so can you know i get into this flock database and search it and i don't know stalk an x or just by my neighbor and i was like no the police have it they have 30 days the largest you know they can set it but the the most anybody's ever set it to is 90 days and then you know they can save a license plate if it's been involved in a crime but we don't actually take a picture of the person in the car we just send the license plate this license plate has a warrant associated with it or whatever and they say we saw this license plate in this neighborhood they give to the cops they said specifically we didn't put the picture of the people in the car because we didn't want to have any racial profiling issues i was like wow that is incredibly thoughtful i said what happens to the data after 30 days like it's destroyed forever and i was like well that is also very thoughtful so i i to your point you could have the debate and then find a thoughtful answer of course that seems to be have been lost you know in the trump era of extremes let me let me uh slight pivot on our SPEAKER_82: conversation because i could spend the whole thing talking about uh security and other stuff that we SPEAKER_105: looked at and are aware of that some of which is scary but um you asked about the mega trend of say 2009 to today and one thing i might talk about is what i think it means for venture capital yes dramatically SPEAKER_82: it has changed dramatically and i want to talk about it in terms of how it's changing up front ventures so my own firm and i think that venture capitalists historically uh didn't change that much they like to kind of keep things how it was and um you know there wasn't a lot of innovation but right now we know that with markets capital markets changing so much we have to innovate we have to constantly SPEAKER_105: evolve and um i think the best observation about venture capital came to me about eight years ago from scott cooper and andreessen horowitz i think he's one of the best thinkers about the market he's written a book um i won't google it right now i can't remember the name of it but he's written a book SPEAKER_82: about the venture capital industry it's very good people should read it um and he said to me at a conference he said the industry is going to bifurcate you're going to end up with the mega vcs let's call them the goldman sachs of venture capital or the black black rock of venture capital and then on the other end you're going to end up with niche and little small people who own some neighborhood whether it's video or payments or physical security cyber security physical products whatever and people in the middle are going to kind of get caught and he was just pointing to for example the investment banking world you know where that exactly happened and i didn't really believe him eight years ago but i love when smart people challenge me with ideas so i always kind of held that idea in my mind and it's pretty obvious to me he was right now and i've seen it now for a few years but how does it manifest for people who don't SPEAKER_44: know the entrant of tiger and some of these later stage funds and then the ascension of sequoia having many funds and drees and having many funds and the size and the scale of those funds how does that SPEAKER_166: manifest it for a firm like yours that does series a as it's bread and butter well you know in 2009 SPEAKER_82: which is where you started the conversation i could wait and get a whole bunch of data on how a founder was doing how their customers were doing uh were their repeat purchases were they expanding sales um you know were they winning or losing deals and i could track it for three to six months SPEAKER_105: and if it was trending well i could write a three million dollar check for you know whatever call SPEAKER_82: it twenty percent 17 to 22 percent uh depending on competition and and how well they were doing um and you know i could take my time um and that was considered in a round and i would take a board seed and i would be active and i would work with them on building the executive team and product strategy and pricing and then help them raise their 15 million dollar round which was a b round well now seed rounds are three million dollars some seed rounds are five million dollars a rounds are kind of 15 million dollars some are 20 million dollars crazy you know in 2009 you know you would fund deals at a seven eight pre now you know that same deal is probably 25 pre 30 pre um so it's changed a lot so you if you want to be an a round investor in how the market defines it today you've got to be writing 10 15 million dollar checks out of the gate and you've got to be paying 40 pre SPEAKER_88: or higher the good news is that back then billion dollar outcomes were rare now there's many so SPEAKER_105: rare we didn't even have a term for it yeah and alienly uh coined the term unicorn um and SPEAKER_82: you know unicorn being something so rare that it it doesn't really exist um you know now it's kind of a funny term for it that everyone uses and doesn't stop to think why do we call it unicorns SPEAKER_88: uh thank you alien lee but now 10 billion dollars is not crazy if you look look at um okta look at twilio look at the i mean 50 billion dollar and up companies that you know every day i could call my family members they've never heard of octa or twilio right like and so we're creating these tens of billions of dollars of outcomes so companies are able to pay 40 50 60 pre SPEAKER_82: build a portfolio as long as some of their companies become worth five billion dollars and up now i've decided that we're not we upfront ventures are not going to chase that market because that market is i think for people who want to raise billion dollar funds so what i'm doing instead is exactly what we've been doing for 25 years we still want to be your first institutional capital partner we still want to take boards we still want to help you with the hard work of the early days of a company but i have to be willing to take an earlier risk i can't get all the signals from your customers so i have to be better at talent scouting better at knowing who's coming to market better at kind of persuading you to leave your job better at understanding founder market fit not product market fit and i got to take an earlier bet but i'm still writing a three and a half million dollar check i'm just committing earlier and then i'm helping you go raise 20 million dollars behind me and we've been very successful at that so i think we are largely becoming a seed fund of front ventures that's incredible we're in the same business SPEAKER_88: yeah but but i think of you now kind of more as a pre-seed or super angel you know in a way it's SPEAKER_82: just that the markets have changed and become more micro focused but the the one thing i want to differentiate between up front and uh maybe a traditional seed fund is we are seed slash a and what i mean is i'll write the three and a half million dollar check by the way that's the amount i wrote into density one of the companies you and i are on the board together with yeah i did the same SPEAKER_126: with the series a when they now we would call it a seed right you know i put in 400 k when it was a SPEAKER_76: five million dollar company you put in three million when it was a 10 or 15 million 11 11 pre i think 11 pre so now you look at that relationship i am actually doing what you did but i'm still referred to as an angel or seed investor i'm a unique weird bird but yeah you're basically dipping down and saying you know what i would take it at the stage jason made the bet pre-product market fit less customers SPEAKER_94: less you know uh proven but pay the higher price and then act like a vc so bring that level of professionalism and board structure and growth and tee it up for the series so when i say seed slash a SPEAKER_82: i wrote three and a half million dollars in that round but when founders fund came in behind us SPEAKER_88: and wrote a big check i wrote another four million dollar check yes so instead of writing three and a SPEAKER_82: half and tapping out i write three and a half and then four and by the way then when they weren't SPEAKER_88: ready for a b round you'll remember this i wrote a four million dollar check when no one else would SPEAKER_82: i remember that yeah it's big time and then suddenly we got this really great investor kleiner perkins came in with a really big check and kleiner i think really plays the traditional a round what now is an a round because they don't mind writing a 15 to 20 million the new a for this conversation right now now here's the other thing about that that sat with me from scott cooper which is i then went out and raised three growth funds so i have a barbell strategy i want to be seed and late stage but i don't want to compete in a and b and so here's what i've done with my growth funds is i can put 50 million dollars into a deal i have several deals where we are tens of millions of dollars in and this won't be a surprise to you it's goat appeal bird uh you know companies like thredUP uh fabfit fund it's like these companies that have become major winners that i can then move a lot SPEAKER_00: of money into um and that would be what would that 50 million dollars represent from your growth fund pro rata or like super pro rata if we were to look at it because you own 13 say you own 12 of a company SPEAKER_76: now they're raising a 2 billion 50 million is but you know whatever two and a half percent so is it SPEAKER_01: like keeping up with your pro rata or does it sometimes make it super pro rata how do you think SPEAKER_202: about that it's often less than pro rata if you can believe that it's crazy yeah it's often less SPEAKER_82: than pro rata so let me define for you my strategy just in case anyone else is wondering you know about evolving their own strategies investors that is are a fund our seed slash a fund um we aspire to get 10 million dollars in before our growth will participate so we don't want to the seed fund lps to feel like they're being crowded out by this other SPEAKER_136: money okay right so we aspire to get 10 million dollars in i actually have to get approval if i'm gonna do less than 10 million before my growth fund comes in what um what's the size of that but what's SPEAKER_208: the size of that fund the the a fund or the seed now seed they kind of 300 million yes got around 300 SPEAKER_211: million so some have been 280 some have been 380 how many names in that fund how many unique names do SPEAKER_214: you think uh in terms of portfolio yeah how many companies would be 38 per fund got it perfect SPEAKER_105: 38 per fund and we we really religiously try to target getting 38 i think that's the right right SPEAKER_82: amount of distribution for us in terms of risk um and then uh the growth fund does not lead rounds it does not price rounds so what we're aspiring to do is write 15 to 20 million dollar checks on average i can write more as i've already identified but 15 to 20 million on average as part of a 50 to 75 or greater million dollar round in which there's a lead who prices in which i still believe there's minimum 3x return from here usually 5x or greater is what we try to underwrite too and there's sort of safety in numbers of the dollars because if i'm writing 15 out of 100 they now have all the other capital all the other participants at the table who have are also priced it with the expectation of at least 3x returns and it's later in what you call the j curve so you know the j curve of investing is you start writing a bunch of checks and you get fees so your returns are actually negative for a period of time until your companies get marked up at which point you have returns at least on paper SPEAKER_44: this is why people say the third fourth and fifth year of investing are particularly challenging for a venture fund or an investor because you feel like i'm a schmuck i started with 300 million now my portfolio is worth 150 and you still have to wait for that maker density fat fit fund to come out and all of a sudden now you're back above water but it's known and it's expected yes and it's it's slightly new SPEAKER_82: a tiny bit nuanced different than that jason which is if i committed to him if i have a 300 million dollar fund again just for listeners to learn if i have a 300 million dollar fund right i'm generally only investing 40 of that in first checks okay so a good deal of that is reserve but also in that 300 million dollar fund are my fees so i commit to investing 100 of the fund how do you invest 100 to 300 million SPEAKER_219: when some of it is fees 30 million of its fees so you're negative 30 right the way you do it is SPEAKER_220: recycling so in year three four five six when we sell companies we take some of those dollars and SPEAKER_82: instead of returning them we reinvest them but we reinvest them with no fees and so you have the SPEAKER_76: ability to do that with 10 of the fund i guess is the typical number every fund is is different um SPEAKER_82: we have the right to recycle up to i believe it's 115 to invest up to 115 without approval of the fund now lps want you to be 100 or greater they actually want it if you didn't recycle and continue to invest some funds do 85 of their fund invested and so this model of recycling and getting your dollars up is how you get 300 invested but let's take your one two and three it's not that i've written off 50 of my fund it's that i might have a hundred percent of my fund at 1x they haven't been marked up yet and i might have charged three and a half million dollars in fees so by default i'm lower than 1x capital i'm underwater um and then as i get to a house you get a mortgage you're paying SPEAKER_225: interest and then you decide to redo the kitchen sure underwater and maybe the house grows in value SPEAKER_44: over the next five years and then at some point you're above water yes now what a lot of people SPEAKER_105: don't realize uh in this world where we actually charge fees is we actually have to pay those fees David Friedberg: back yeah it's not free money it's not free money and i know a lot of people think it is it's not SPEAKER_82: free money you have to pay it back so if i have a fund that's 300 million and i return 600 million in total let's say i did 2x gross which is not great but you know it is what it is and so you know that's 300 million in gain 20 of that is 60 million dollars right so there's good carry on that um but i gotta pay back all my expenses so let's say the expenses were 40 million over the life of the fund okay well my gain is really 20 million not 60. and so those expenses have to be paid back so SPEAKER_232: it's you know it's a now you have five partners dividing 20 instead of five partners dividing 60 SPEAKER_136: exactly 10 year period so so keeping your face down is not such a bad thing keeping fees down SPEAKER_44: and you know what it's very interesting you mentioned this i have very small my first one was 10 i recycled one so it was about 11. second one was 10. i i was racing so fast with fund 10 i didn't realize they i deployed all of it and i still had fees left but i was like okay i'm just going to deploy it i moved on to the next fund i didn't take the fees because i was like i don't want to what do i need the fees for i don't need it yeah because i was so smart by the way then your irrs go up exactly so i think that's uh let's explain that to the audience because people love to hear about this inside baseball stuff this is turning out to be a great episode so your internal rate of return yeah is the average amount you returned each year uh on a percentage basis so let me tell SPEAKER_88: you the four measures that matter in venture the first is called moic multiple on invested capital SPEAKER_82: some people call that gross returns so that is i raised a 300 million dollar fund i returned 600 SPEAKER_237: million dollars that's a 2x moic okay multiple on invested capital cash on cash basically cash on cash SPEAKER_236: now the thing that lps care more about is called tvb tvpi total value per invested capital that's net of SPEAKER_82: fees okay so net of fees net of carry so that's the net return so if an lp gives you let's say you have a 300 million dollar fund and they're 30 million of it or 10 and they give you 30 million dollars they don't care that you generated 60 million total for them in gross value they care well what do i get back right so if they get back 45 they only had a 50 gain not 100 gain so the tvpi subtracts SPEAKER_225: out now some that's true cash in cash out for the lp that is exactly it cash and cash out which is SPEAKER_94: interesting i'm an lp in a very notable fund i wouldn't say which one and one of the most famous investors just said to me at some point just don't worry about any of these numbers in the reports jason SPEAKER_100: how much cash did you put in how much cash did you get back yeah that's all that matters yeah SPEAKER_82: ultimately that's all that matters but there are some interim ways to judge a fund which i'll which i'll describe but so moik is gross tvpi is net and the thing about tvpi is um that is your paper gains that is what your companies are worth on paper and that's what your lps are measuring now if i do a deal if SPEAKER_236: let's say i do 38 deals and one suddenly gets marked up to 20 billion dollars well my tvpi like might look amazing but people need to scrutinize that and say well did sequoia invest at 20 billion dollars or was it a strategic or some weird investor that just paid that price and you know is not necessarily a good indication of long-term value so there's tvpi and then there's the true measure and the true SPEAKER_82: measure is dpi dpi stands for distribution per invested capital that's cash in cash out that's your distributions so if i have a fund that's 300 million and i have actually returned 200 million of that well let's say that my total amount that i got including fees was 300 million my uh distributions SPEAKER_105: of that 200 million i have a 66 dpi and dpi is am i sending cash back or is this just you marking everything up on paper and then the last thing is irr and irr measures how fast are you sending the SPEAKER_82: money back so if i take 300 million and i return it in one year say if i return 600 million in one year my ir is going to look great if i take 300 million and i return 600 million in 20 years my ir is not so great so internal rate of return is how fast do you deploy the capital and i'll tell you one last thing that increasingly i think people are going to start measuring is called pme and pme SPEAKER_105: stands for public market equivalence so now i say okay my irrs are let's say 25 that's a very good SPEAKER_82: ir you make 25 amazing yeah yeah um you know let's say it's 25 so i have several funds north of 25 i have some that are north of 40 percent um and i have some that are less than 25 and uh what i would say to you is um what investors want to know is what if i took those dollars at every point that you invested in instead of investing in you i invested in the public market index how would that have performed and so if i write five million dollar check each quarter into companies over let's say 12 quarters and instead i had written that five million dollars into the stock market at that time how would that compare to your return so that's called pme a public market that's fascinating yeah is that becoming SPEAKER_88: uh more prevalent for force no but more sophisticated uh lps and more sophisticated vcs start to think SPEAKER_82: about pme and we've all always calculated that um and i find it a very helpful benchmark to judge SPEAKER_105: should you be giving me money or should you be putting your money in a nasdaq or a you know s p SPEAKER_76: index we always hear the public markets have done seven percent historically you're you know every year but if we're in a super cycle and amazon doubles in one year and disney triples over or doubles in you SPEAKER_98: know every three years whatever it is well they're getting a pretty good ir as well they might SPEAKER_88: if you're if you're a public market investor you have something that you don't if you're investing in venture capitals you have liquidity you know you could double amazon and take your earnings home SPEAKER_105: in one year whenever you want yeah whereas in venture capital you say listen i love disney but SPEAKER_232: i think they hit their peak i want to put it into amazon now last last insider baseball thing for SPEAKER_105: you sure and this is something almost no vcs know and i know that almost no lps know i've experienced this as i've tried to explain how the data works to people if you have a fund let's say pick a year 2015 and i deploy all my capital in 2015 and you could say is that good or is that bad i generally think SPEAKER_82: it's bad because i think spreading your investment over multiple years gives you access to different platform changes and has more diversity built into it it's called time diversity and time diversity matters if you put all your investments in 05 you missed the iphone that came in 07 if you did all of them in 07 you probably missed the app store which came whatever 18 months later and so um if you put all your video investments in 03 you missed the changes that led to youtube in 05 right so cloud storage and broadband and streaming uh streaming technologies that came out from adobe and other people and so uh time diversity matters so let's say you put 300 million dollars to work in 12 months in 2015 and let's take strategy two 100 million and 15 100 million and 16 100 million and 17. okay now let's say you measure in 2018 and you try to compare the tvpi or or the moit of those two funds well the one that deployed everything in 2015 is going to look better you know why because every one of its freaking deals are four years old whereas in the more prudent strategy 2015 2016 2017 the 2017 companies are only a year old so of course they're not marked up so you're comparing apples to oranges and so i think the conservative smart uh distributed multi-year strategy you have to understand the data set so people who are a little bit more uh cavalier about their pace of investments actually look better and therefore can go raise funds now if the markets continue up into the right and we have no corrections uh being cavalier or being uh really fast paced and and some might say bold somebody might say reckless we'll see when the outcome happens i don't know if it's bold or reckless but let's just say taking on more risk yes and that risk is rewarded in a bull market in a correcting market it is massively punished and we just haven't really had a big correction since 09. all right so SPEAKER_76: there's a great jumping off point um is this a bubble and where is the bubble right because when you have these bubbles it's not always equally distributed so yes yes and no jason which is SPEAKER_131: new would be the answer so early stage a b new way where is the bubble here i if it's okay with you SPEAKER_82: i'm going to take it up a level which is a lot of people are worried about inflation right now and i tend not to be one of them um and it depends you know look nobody really knows no one is a crystal ball the market's going to try to figure it out over time um and it depends which economists you follow i think and and i think anyone let's say right of center um you know will probably hate this but i think that the economist who has been most right over the last 10 years has been the nobel prize winning uh paul krugman and he has been saying for the last 10 years that people are overplaying inflation and if you're interested in the topic of inflation and whether you're you have right wing right of center beliefs or left of center beliefs it's worth reading him and reading his arguments um but he gives a lot of arguments on why he believes inflation right now is likely he he doesn't say absolutely but likely to be temporary in nature a lot of it driven by things like used cars and the massive boom in used cars uh prices um and so what he's saying and what makes sense to me is that we don't yet know if inflation is going to be persistent or if it's really driven by some of the things that SPEAKER_88: happened of us coming out of covet and certain materials being scarce and supply chain issues supply chain issues and and and chipsets in china and and whatnot but um lumber and a small number of SPEAKER_44: cars being available and everybody having stimulus checks to buy a new car and then there being no cars available and resale prices go up that's inflation but when the car companies catch up and the stimmy checks run out now you don't have demand so the uh i think the the one view i can tell SPEAKER_82: you that i think is generally accepted is we have asset bubbles yes and so what's what's happened is almost every asset class like name an asset class that hasn't seen massive appreciation the stock market get private markets housing markets double commodities triple check go down the line uh crypto cards crypto collectibles you know show me somewhere that hasn't had appreciation SPEAKER_236: so people who are investors who have assets who have wealth have gained dramatically and if you don't have anything to invest you haven't gained because wages haven't gone up wages going up is actually SPEAKER_279: well they they are starting to but they haven't gone up at the same time that's like that's a three SPEAKER_280: month thing with this but it's a good it's a good thing it's a good thing oh i think so too let's jump SPEAKER_208: into that um after we finish up uh inflation so i just say like i think i think government leaders SPEAKER_82: have made the decision that assets appreciating has like everything some goods and some bads it helps wealthy people it doesn't as much immediately on the first order help uh less wealthy people but but who's gaining from asset appreciation when you have the stock market up uh when you have private investments up when you have assets up you have pension funds up teachers pension fund police pension funds city budgets with taxes i mean all of a sudden budgets in california surplus exactly right in a pandemic right and so uh you know i think stability of the system is important for everybody and it's as important for wealthy people as it is for less wealthy people even if they don't fill it SPEAKER_00: the housing market is particularly crazy because it is supply constraint which obviously drives prices SPEAKER_94: up inherently especially in the place where you and i both live california where you have this crazy tax law whenever you bought your house that's your tax basis that's just dumb we have to fix that but it's politically untenable to do that and then you have this nimbyism you you can't buy new you can't build new houses and then you have a third thing happening all this asset inflation has now led to goldman sachs and other folks to back people like open door and others and i guess zillow is doing this now they're buying up all the homes so you have rich people who got asset asset uh appreciation in the stock market buying all the homes no new homes being paid and the homes going up in value and record low SPEAKER_76: mortgage rates that to me is this yeah how do you solve that problem four things it's like talk about like a perfect storm it's four waves colliding in the same direction it's a tsunami of housing crisis SPEAKER_88: the most important point there is lack of supply and if you look at what happened with um how many SPEAKER_105: homes were built leading into the bubble the crisis of 2008 2009 there was a dramatic reduction of supply SPEAKER_82: after 09 and it persisted for many years and it's going to take us a decade to catch up so we have really a supply problem and everything else there are minor problems at the edges i'm sure if you live in austin you don't appreciate that everyone from california is moving there and they're able to pay up because they made money in california housing right which well yeah at a thousand SPEAKER_232: dollars a square foot if you're coming from pacific palisades or brentwood or bel air or atherton or san SPEAKER_82: francisco seems like a bargain so we're driving up prices in idaho and colorado and texas and florida SPEAKER_149: and um you know there's winners and losers if you're selling a house you're a winner it's amazing if you're if you're selling it the real problem is lack of supply a hundred percent i mean i'm an investor SPEAKER_44: in a company called blockable and it's so obvious it's so easy to build houses in a factory and it's so easy to build modular houses and one to three bedroom studios going up to five stories they've nailed it katerra was that the name of the company that went bust from softbank they were kind of a mess they never got it done but there's other companies that are making prefab homes or mass homes SPEAKER_94: like you know built in factories and we could solve the problem and it's going to be very interesting because there are some communities that are gangbusters allowing you know the building of what they call infill units somewhere between the suburbs and the city there's a strip mall that's dilapidated or a parking lot that you don't need parking spots anymore and you could plop in a four story 20 unit and it's just a matter of if the nimbys let it happen it's just fascinating to me let's talk about the since it came up uh minimum wage we had elizabeth warren we had bernie SPEAKER_44: sanders going crazy minimum wage has to go up yada yada jeff bezos is horrible he's you know people hate him and you know he's torturing people in factories yet he's paying 15 an hour double the federal and now he's in competition and apple uber doordash walmart target and your local restaurants are in a dog fight and wages are going 20 30 40 an hour for jobs that were 10 15 and 20. discuss SPEAKER_105: well let's say a few things one is i'm going to take a interesting different leaping off point which SPEAKER_82: is i think we have a great labor shortage in the united states and around the world i think that labor shortage is going to continue for the next few decades and i think it's driven by aging SPEAKER_105: populations and lack of young people who are going to grow into these jobs so if you look at the demographics globally almost everywhere is moving into decline declining demographics it's massively it's a really big problem in japan it's a really big problem in china um it it is not as big a problem in the united states but for people who are anti-immigration they SPEAKER_82: should understand that immigration is one of our great strengths as a country it has always driven our supply of labor and and honestly cheaper labor um and that's allowed us to continue to grow and thrive and prosper and the great thing about america is historically our relative ability to integrate people we're not perfect but i lived in europe for 11 years we are much better than european countries at integration you can ask the turks who live in germany how they feel about uh SPEAKER_296: integration or the algerians in france yeah i was about to say the muslims in france are second and SPEAKER_44: third generation now and they're considered second-class citizens we have the great american melting pot here you know putting cultural appropriation and that hysteria aside because one of the great things that we were taught is that we could all be part of this amazing soup and experiment that is america when SPEAKER_105: you think about the problem we have now is we have jobs that people don't want and we have a lack of SPEAKER_82: labor and supply and so i'm very pro automation i'm very pro robotics and i think i remember years ago you invested didn't you in a company that was you know automating coffee yeah we have cafe x which you SPEAKER_94: know obviously had a heck of a time during the pandemic they reopened at sfo it's doing amazing and then SPEAKER_76: they pivoted having watched what we both saw at density hardware as a service the hardware we're not selling hardware we're selling you software you remember those meetings where me you and andrew were grinding like a thousand dollars for the product or a software license and you know god bless andrew credible entrepreneur he figured it out you and i was sitting there with him as he did and cafe x now is selling the units and the software to people so instead of them putting in a thousand of these what if dunkin donuts which is you know can't get labor for dunk the average tenure of a dunkin donuts employee is less than a year it's less than a year by the time they hire them they're gone now you go to any airport where there's dunkin donuts on the east coast SPEAKER_102: they need twice as many dunkin donuts to service people you see the lines at airports even if we SPEAKER_80: if we are like infill these yeah if we are lacking in the ability to provide jobs for people in the SPEAKER_82: united states then i can see the debate being a problem but fundamentally i don't believe a lot of people want to be making pizza making coffee filling boxes picking strawberries yeah and and so to the extent that we can automate but then we as a society have a responsibility for figuring out how to educate and retool and train people to take newer modern jobs and still have good income so it's we have SPEAKER_102: 9 million job openings maybe 10 now and you just think about that like we were wondering what would SPEAKER_76: happen with ubi right there was a group of people in our community like oh ubi that's going to be the greatest thing ever we kind of got a dry run of it and if you give people enough money and this idea that they would go to work anyway to make the incremental dollars it's like nope it and it makes total sense i think i nailed that one i was like you know you take people's motivation away and now they're sitting at home with nothing to do what is that going to do long term to a person's self-esteem i can't imagine i i stayed home and worked like an animal during the pandemic and i still felt bad i still had anxiety from what was going on in the world you have to have purpose and get out there and do some work but the robotic work you know i think it's great we invested in a chemical root ai SPEAKER_44: it's like one of these great aha moments which you gotta love when you're in the our business right and i'll get your aha moment but mine was like you know when you use computer vision and you you we look at strawberries i'm like you pick which one is the right one to pick right you figure out which one is right they're like exactly i was like oh great i'll invest like no no that's not what we're doing that's not all we're doing i was like oh what's the next piece he goes i spent 15 years working on like soft robotic hands at mit we're gonna actually pick the strawberry wow oh my god that's incredible they get bought by another company that's facts we triple our money like overnight fantastic but also sad because i would like to belong the other company's doing vertical farming so a vertical farming company is like we're gonna grow strawberries outside of boston you know like right there instead of you know farming you know training them in and putting chemicals on them we take 10 days out of the process so now you're gonna have a robot look at the strawberry patch that's vertical and pick the most ripe strawberry drop it into a bushel one of the fastest growing companies SPEAKER_80: in our portfolio is a company that uses robotics to grow worms in vertical farms as of 2022 they will SPEAKER_105: be the world's largest producer of worms and so you say well why would i care about that well um the problem in the world is one of the problems in the world is um protein sustainability and so what worms SPEAKER_82: are able to do is become a protein source for fish so in the wild about 15 of all input that a fish takes is insects but now more than 50 of fish are grown in fish farms and they were getting zero insects and so we were depleting the world's supply of things like anchovies to feed fish so they started feeding fish carbohydrates so wheat products and it turns out that fish mortality goes up because they don't all digest wheat and so they started giving um hormones and amino acids and antibiotics to then prevent uh inflammation from hormones and we were creating an industrial system similar to what we did with you know cows and chickens in this country and so this entrepreneur said i think i can solve that problem if i can grow insects at scale and so he tried 100 different types of insects it turns out some that sound like a good idea like grasshoppers crickets and the like you can't grow in really close quarters because they become cannibalistic when you do so he had to cycle through a bunch of insect types he settled on this type of worm it's called a meal worm and they could mass produce the larva but what they do is think of stack trays that go really high and robotic arms that lift the stack drop in feed drop the stack pick the next thing up in the stack and drop the feed and they go up and down then periodically they pull out a tray flip it over a sieve get all the manure out and put the worms back the manure makes about 60 percent of our total volume of what we create and we sell it as an organic fertilizer at maturation the worms are crushed you take the liquid byproduct and it becomes an input into pet food to make dry kibbles water soluble and there already are products that do that they typically come from poultry but we're a perfect substitute for that the most value is the dry cake powder and that then becomes an input for fish food and it turns out we did a three and a half year study to prove that we could reduce fish mortality and not impact the taste of fish suddenly we have so much demand we can't even produce enough worms as i said we're building the world's largest factory to produce worms now and we went from zero to a hundred million dollars in bookings in one year SPEAKER_117: fantastic that is extraordinary i mean you just think about all the problems we have SPEAKER_44: can you think about how lucky we are to be capital allocators and to work with these amazing founders i am so positive and i i know you are too about we can solve every problem if we have amazing entrepreneurs who are properly incentivized and are given the capital and if we have the will as a society to actually deploy these exciting things you know and it really is about willpower we can correct i believe SPEAKER_94: and i'm curious your answer i believe we can cure and reverse in fact global warming you would say SPEAKER_233: it's a it's a complicated topic um i i can't recommend highly enough to every reader if you care SPEAKER_82: about sustainability of the planet to read a book called collapse and it's written by one of my favorite authors in the world jared diamond and jared diamond won the pulitzer prize for his amazing book called guns germs and steel so collapse studies societies around the world that collapse and why do they collapse and like guns germs and steel he says here's the proximate causes so the proximate causes of why the west conquered the rest were guns germs and steel but he says but someone needs to ask why did the west get guns germs and steel right so that's the whole premise of that book the premise of collapse is we know the proximate cause of why society's collapse is war yep or famine yep or some sort of catastrophic event like water uh being reduced population yeah so but then he says well what causes that and he goes back upstream to say what causes why like he looked for example at rwanda and why was there genocide in rwanda and it came down to agriculture because they were subdividing the land so much and every subdivision went from father to son and it usually went to firstborn son and they would subdivide and subdivide and subdivide the land as population grew to a point where they could no longer hand out land to their offspring and they had a limitation on the number of uh acres of um farmable SPEAKER_105: land and it started leading to civil conflict so he goes back up to looking at things like agriculture SPEAKER_82: and he's and one uh thing he studied was um easter island the moais and and and why did easter island collapse so easter island went from this really religious place that had gods and norms and rules and then they over time they became cannibals and killed each other and ate each other and see what led to that and what what they did is they studied the diets of the middens of like the they studied the middens to determine the diets of what people ate and what they figured out was the first thing they do is they cut down all the trees and once they cut down all the trees they no longer had fish in their diet because they no longer could build boats to have fish oh my god so their calories were reduced and therefore their output was reduced and therefore they led to civil conflict and their entire religion was wiped out and they became cannibalistic and so anyway this book it's a wonderful book and he basically says that oh you did okay so he talks about a theory called malthusian theory which is um the more you produce in agriculture and and output uh the more population will grow to fill that that's the malthusian theory it's like induced traffic you build more roads people travel more exactly right but what what he said is you need a combination of technology but you need societal change you need people wanting to consume less and i think that's the other area and that's what gives me great hope about gen z and and people coming behind gen z is they're growing up with a culture of wanting to drive electric cars wanting to consume less wanting to have lower carbon footprint wanting to find ways to not have to import their products from around the world that has uh carbon emissions uh and wanting less and i think SPEAKER_150: that's got to be the world we live in in the future you know it's crazy um i i grew up and you SPEAKER_44: and i grew up were both gen xers where we really didn't think about this too much we saw green piece kind of over here doing you know saving the whales there was some you know activity on this was a pulse but it wasn't like today and i got the bug from my children who are absolutely militant about plastic straws because they understand it kills turtles and you know the damage it does so we have metal straws at home we have paper straws at home we do not have plastic straws when we go to a restaurant if they give us plastic straws we hand them back we ask them preemptively please do not give us plastic straws and increasingly people say to us we don't serve plastics straws sir but that five years SPEAKER_76: ago was a distinct difference and then i started getting crazy mark because i made a little bit of money and i love beverages so i start ordering topa chica and i start ordering my bunderberg diet ginger ale you know i got these bottles and cans of everything i like i'm in love of beverages then i was wait a second i'm destroying the environment with all this stuff so then i said you know what enough i love my topa chica i don't know if you drink that sparkly water so i hope you guys SPEAKER_323: are called topo chico i put it on um i put it on twitter yeah uh and i said how much i loved it on twitter SPEAKER_82: yeah for which point i started getting bombed by several people telling me that it has the worst chemical rating of virtually any uh carbonated water drink you just that's terrible bubbles people sent me the links to it and why you shouldn't drink topo chico and i can't claim to be an expert but i clicked and read the articles and it all seemed plausible to me so i'm kind of you know SPEAKER_44: what's so good about it it had so many bubbles in it it is so it's so good so here's what i did i was like i was like i love these bottles i went on to amazon they make silicone um caps that look like bottle caps like old-timey bottle caps i get the 12 pack of topo chico i after i use it then i put cold brew coffee iced tea uh or water in them and i put the rubber caps back on them and like i'm like a maniac like like i'm like some crazy environmentalist my refrigerator i you know i don't drink wine so i have a wine fridge that was installed in my house it's filled with these bottles with ice water in SPEAKER_329: them so now my girls go and they drink ice water uh from the topo chico bottles i'm just yeah my wife SPEAKER_105: went one step further which is she bought one of those um sparkling water slash coca-cola makers or SPEAKER_136: whatever i don't drink from it but she does she does it because she doesn't want to have to buy as much SPEAKER_117: plastic you don't have to carry as much i think and all of this i mean you just think about solar SPEAKER_44: you think about tesla battery packs you think about tesla's we are here we're on the cusp of it it just SPEAKER_94: requires us to focus on an innovation listen mark it's been over an hour great job today i love being in business today i love having you as a friend love having you on the pod let's just do this again in six 12 months whenever you can spare the time the audience loves it if somebody is looking now for the SPEAKER_76: new way not the new way i'm sorry the seed and they wanted to get that advantage of having mark's series a wisdom and dexterity with the new mark earlier mark coming in earlier and strong what's the best way for them to pitch you and the best stage for them to be at well listen um i still SPEAKER_82: believe that trying to find ways to get introduced to vcs is a good idea it's not i'm on twitter so i respond to tweets right like you can reach out um if you know there's the old saying you know uh you should give before you get so the best way to endear yourself to someone you want to get to know is to find something of interest to them and put information in front of them they're going to notice you so i'm very active i'm very public i don't mind interacting with people you know i'm on the road now i'm traveling i was in austin three weeks ago i was in san francisco yesterday i'm in palo alto today i'll be in dc and new york um i'm getting out there right like i'm being careful David Friedberg: you know i understand there's covid but um but i'm getting out there so i'm available um the reason you removed obesity from your risk factors you look so good i'm so happy for you i appreciate it SPEAKER_82: what's the total weight loss at this so so at peak i lost 70 pounds SPEAKER_105: right yeah right now i'm closer to 60 and i've been focusing on trying to do weight gain i'm trying SPEAKER_44: to do muscle gain rather than weight loss i watch you on the social i see you with your kids you're out there doing stuff and you used to be fat and tired and eating donuts with me at board meetings SPEAKER_102: and now look at you you felt you look great 10 years younger and your energy level and your SPEAKER_232: positivity also goes up right when you lose it i'm on the pro i'm on the journey right now but uh thank SPEAKER_169: thank you and and i and i'm happy next time i come on i can give a ton of fitness suggestions i give a SPEAKER_82: small plug to um to daily habits and the need to have daily habits i hold myself accountable with an app called streaks oh there's plenty of them out there but i have uh every day i have to do push-ups abs take my meds study french and do cardio those five things and i just track it on my phone and like if if at 10 o'clock i'm like oh i kind of want to wind down and you know sit and watch tv i'm like oh i haven't done my abs yet it just forces me to go do it right i do my abs then i watch my netflix exactly but you know so i look a bit meshugana to my wife who's like god why at 10 15 do you always SPEAKER_169: have to go do your abs i'm like because i haven't done them today right like so it's okay to have a little bit of uh neurosis over over good positive things all right listen brother it's been a great SPEAKER_53: episode and we'll see you all next time on this week at startups bye-bye