David Senra - Adam Foroughi, AppLovin

Episode Date: May 3, 2026

Chapters (00:00:00) The $6B Buyback That Made $60B (00:02:15) Borrowing Money To Buy Back Stock At A Discount (00:05:02) Why VCs Passed On AppLovin In 2012 (00:09:00) From App Discovery To Ad Platform (00:14:45) Beating Google's AdMob With Performance Marketing (00:19:30) No Board For Six Years (00:30:12) The China Deal That Almost Blew Up (00:37:45) The Convertible Note Pivot And KKR (00:46:30) Buying Gaming Studios To Get Data (00:51:45) Losing Trust With Game Developers (00:58:20) The 2022 Crash And How He Kept His Team (01:02:00) Building An Hyper Competent & Efficient Company (01:07:25) Why Every New Hire Needs His Approval (01:19:06) The Axon 2 Inflection Point (01:21:15) One Great Engineer Now Beats A Hundred Learn more about your ad choices. Visit megaphone.fm/adchoices

Tell me about these billions of dollars of stock buybacked. So let me give you a little bit of context on when we went public and why this became a pretty big opportunity. We went public in COVID in April 20, 21. Company was worth about $28 billion. Went up to $40 billion for six months. We're all excited. Stock goes down from there literally every day for all of 22. We got to a floor of, I think, like $3.8 billion.

We went from $115 a share to $9 a share. So you're running a business, and the whole world is telling you, your business is trash. Like, what do you do? At the same time, interestingly, we went out with $700 million of EBITDA in 21. We did a billion dollars plus of EBITDA in 22. So like fast growth executing on the business. Yet public market investors were telling us business is terrible. Like, and it was what it was. Why did they think the business was terrible? It is a tough space to understand. First of all, like we're in advertising and we're in gaming and those are two tough places to be in the public markets. The other challenge was that we went out in COVID and there

were just way too many IPOs. And once you learn the public markets, which I've learned a lot more as we've been public for now four years, you need really big investors to start buying shares in companies early on because you have your private company investors trying to sell shares. So on the one hand, you have this imbalance. You've got a flood of shares that are going to come to the market. And with all the COVID IPOs, the big funds, the companies like Fidelity, BlackRock, et cetera, they weren't doing as much research on any new IPO because they couldn't tell the difference. They were just too much hitting the market. So we ended up with a cab table that didn't have support.

And then shares started selling into the market, stock crumbles. You start going down every day. People look at the company and go, this company is something wrong with this company. Like what's happening? And it's really hard to look past the stock price and go, let me look at the fundamentals and try to assess what's going on. And you're out there. It's like catching a falling knife.

Like, what do you do as an investor? So we were thrown out. It's easy to go, like, we're down 92% hang it up, like, what are we going to do? Start getting reactive, defensive. Instead of that, what we ended up doing was going two things. One is the whole world doesn't like our shares. So if no one's going to buy our shares, why don't we just start buying our own shares? And so we kicked off a really successful buyback.

The company at the bottom was worth $3.8 billion market cap, and we were generating over a billion dollars of EBITDA. So you think about the cash flow to market cap. It was about one fifth that we were generating every single year. Well, in theory, we could buy back 20% of the shares of the company just in the next year if we really believed in the path we were on. So we kicked that off. But we did it a little bit differently than what most companies do. Most companies go out and say, I'm going to buy shares from the public markets and just take shares back.

But you don't know who's on the other side of that trade. On the other hand, we knew that we had a cap table where about 50% of the shares were going to sell at some point over the coming years. We had private equity investors that owned roughly 50% of the shares of the company alongside some other founders that were no longer there. So instead of going to the public, we went to the shareholders that we knew we're going to sell and got them to agree to sell back to us over time.

And so for the following 18 months, we ended up deploying somewhere around $6 billion of buybacks of our own capital, and we levered some to buy back shares in the company. And over time, that ended up creating somewhere in the neighborhood of $50,60 billion of actual proceeds from the buyback, one of the more successful buybacks

in the history of companies. You bought back around $6 billion. You made about $60 billion on that $6 billion. Where did you get the, you said some of it came from earnings of the company, and then you went in. We levered as well. Where did you borrow the money from?

So as a private company. Is anybody telling you at the time, you're nuts for borrowing, you're down $3.8 billion market cap, right? Explain like how you were thinking, the difference between how you were thinking about the company versus, you know, the world telling you about your business,

because there had to be a lot of people around you saying, what the hell's wrong with you? You've got to be nuts going into debt to buy back your stocks of this shitty company. I mean, look, a lot of times, like, people like to be conservative when it comes to cash. And so one, to lever up is scary to people, but then two, to lever up to buy your own shares.

When everyone's telling you your company is a piece of shit, that's really scary to do. I never believed in saving cash per rainy day. I feel like I'm a big believer in what we're building. I believe in where we're going. So if I believe in the future and we're a really high cash generated business, we should always be buying back our shares. So at a bottom point where the valuation became that juicy, there's no reason to be afraid of it. And the good news is, I mean, I don't have a lot of experience with boards, and we can talk about that in a bit.

But our board was very supportive because it's not rocket science. You look at a multiple of five times gas flow and you go, okay, why don't we just buy all the shares, buy as much as you possibly can? And so because it was so cheap and we had a lot of conviction on our future growth prospects, we just hit it and hit it as hard as we could. Explain what you mean about you didn't have a lot of experience of boards? When we first started the business, I went out and talked to BCs to raise capital and I got turned down by all the top VCs. So $1 million, over $4 million valuation at some point in spring 2012. Wait, that was your first. All rejected.

That's what I pitched. I would have given up a corner of the company for a million bucks. Would have been a big payday for those VCs. And they said no. And they said no. Because again, we're in advertising and we're in games. And it was a tough pitch. And this is my third business.

What years is this, though? Because I think people, 2012. Because people hearing you say we're in advertising games. Now those are some of the most profitable businesses in the world. What was it happening in 2012, though? What was challenging for VCs back then was, well, Google and Facebook and Amazon are in the space. And so why would some goofy name little company that's trying to develop something be able to compete with the giants. I think the sort of failure in the logic is, is my third business in advertising.

I already had successes over a decade before in advertising. So it's a failure on seeing who's the founder. So bet on the person, a million over four million to get 25% of the company. It's a pretty good due. And then understanding that the space itself in mobile gaming and mobile apps at the time was nascent. It hadn't become as big as it is today by any stretch of the imagination. So you had this like, well, where we got sort of lucky is we bet on that space, but this, gaming space on mobile that became massive now was very little back then. And so those were misses on the VC side. Your previous advertising business was desktop-based.

Yeah. So the advantage that you had here starting this other company, which is App Lovin, right, is you saw the shift from traffic from desktop to mobile at the very beginning. Yeah. We sort of got lucky in that too. We had built a business on social media in 2005 in advertising with a few other guys. And then in 2008 had another one. And so when you're on desktop and you're in social and then the mobile app store launches and you start seeing your traffic shifting really quickly, but nobody's talking about it.

It's a huge data advantage on a market. And so what ended up happening was in 2010, I had sold those two prior businesses with others and just went over to Palo Alto and said, mobile's going to be big. I don't know what we're going to do on mobile, but mobile's going to be big. Funny enough, because we had had quite a bit of economic success, I didn't want to do advertising again. Advertising is a tough deal. Why? It's just really hard to get excited about being an advertising person for 20 years. Now I'm sort of life commitment to it and I'm pretty good at it.

But at the time, I was like, look, we succeeded in advertising. Go try directed consumer something. And so why wouldn't we? And why would you want to go from B to Director of Consumer? The grass is always greener and everything. And so it felt to me like I'd already conquered advertising. What do I need to do it again? And there's so far off reality because I've obviously proven you can build a much bigger advertising business

than I imagined at the time. But I felt like it's tough. You're dealing with the client on the other side. And when you're in an advertising business or any B2B business, you're trained. The client's always right. So you're on the other side of that trade. If you own the consumer, well, then you own your destiny. And so I felt like it would be a lot more fun to build a consumer business.

And we tried. We built in 2011, we launched a dating app and a fashion app. It looked terrible. So a married guy is building a dating app. And every time I see you, you're in the same clothes. Yeah, you made a joke about that earlier. I have like four outfits. Zero fashion sense.

And I was married at the time. Two terrible ideas. Pretender, though. And the fashion app we launched right around on Pinterest launched, and they were down the block from us. So there was obviously opportunity in those markets. We were not the right teams to do it. Well, you just wanted to have an app

because you saw everything's shifting there? Yeah, I wanted to have an app because I wanted to own the audience before we got into anything else. And so actually, like that transitionally that goes to, the third app we launched was the first version of App 11. It was an App Discovery app. And this was, I think it was in late summer to fall 2011. You and I would go connect on this app, App 11.

And it would tell you, Hey, Adam's playing words of friends. You should go play words of friends with them. And that was the entirety of the app. It was just an app recommendation app. The app itself stunk, but when you got that push, the response rate was through the roof. Everyone who was on that app was going and downloading other things.

So we're like, okay, well, there's potentially this app store's going to be bigger than people realized. There's going to be a ton of content. This app stinks, but this recommendation I'll go is really cool. And so that's what really turned into what we became, which is we took that recommendation I'll go and just launched it eventually as an advertising platform on other app. One of the things I love most about the conversations I have with Adam is how focused he is on making the best possible product he can for his customers. Obsess over customers is a maxim that is repeated by Jeff Bezos, and you definitely see that with Adam.

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building great things for your customers. Get started today by going to ramp.com. You said you had two other advertising businesses. You sold them. So now you're going to try to go direct to consumer. You're going to build these apps, the precursor to Ab 11. Were you already rich at the time? I was rich enough to not need more money in my mind. Unfortunately, money that the line on that always goes higher as you get richer. But I felt like if I didn't make another dollar, I'd be fine. So I was bootstrapping this business for the first year and a half while we were just tinkering with things. Were you bootchrapping because you wanted to bootstrap or bootchrapping because the VCs would not take 25?

No, it's predated that. I didn't believe in selling to investors an idea that I wasn't confident. So I figured if I'm out there with this team and we're just playing around and trying to find a fit, during that point in time where I'm going to pivot a bunch, I don't want to deal with investors. So we actually set it up as an LLC early on. And the nice thing is you put a million dollars into an LLC. you lose a million dollars, you get back 500 grand.

So we had a tax-sufficient way to bootstrap against whatever earnings we had elsewhere. So we did it. And we covered the cost of the engineers at the time, did that for the year and a half until we landed on product market fit. I didn't go to BC's until I knew we were going to be an advertising business.

Were the other two companies you started before this? Did you also bootstrap those or you raised money for that too? One had investors. And these were both that I've had co-founders at all three businesses, But the first one had investors and I was a junior co-founder. The second one I was a co-founder at, we had just bootstrapped because we'd launched an advertising business on social media and it was profitable right away. Okay.

So now you have this idea. You have this app recommendation app. What happens next? So nobody's using the app, which shocking. People use apps with hot people in them. And this was an app of apps. But we realized if you're going to download at a really high rate based on a recommendation, we can send you. Well, we don't need distribution on the app. Why don't we just go distribute

our technology inside all these other apps that are coming into existence? So not rocket science back then. We just realized let's go build an advertising platform around this construct. And so we did that. We hired a team to build what's called this software development kit, but just code that someone can put in their app to access an advertising platform. And we launched that in March of 2012. So scrap the app, Discovery app, Apple 11 became this ad. network. Now you're back to ads. Right back to ads. But like it was interesting, I mean, full circle one, I didn't like to lose. And when we did direct to consumer, it's like, I have no idea what I'm doing. The not into dating, not into fashion, all true. We had no idea how to

to market a direct to consumer business. And we didn't know what we were looking for. The product stunk. So it was really difficult to lose. And then second, when we saw how powerful these recommendations were and knew that this market was going to be big, there's no reason to shy away from ads. At that point, we're just like, let's go. And we packaged up the tech, put it live, and then from that moment that we got into market, business started ground really quick. How did you find distribution for it? These other app developers were desperate for money. At the time, I mean, it's like 2012, the app store was full of calendar apps, fart button, flashlights, and the beginning of games. You had Candy Crush, Clash of Clash, and some simpler games.

at the time. Not many, though. And these developers needed money. And so I just went on and said, look, you've got a million users on this calendar app. We'll pay you 10 grand a day. Just put our ad platform in there. It was up to us to make it spread on it. What was their alternative? Like, if they don't go with you, what else could they, what other decision could they make at the time? At the time, Google had bought this company ad mob in 2008 for, I think it was nearly a billion dollars, huge transaction back then. And so that was the alternative. Go with Google's ad platform I go with this new ad platform. Since they had bought it in 2008, when we started in 2012, there wasn't a lot of innovation

there. So when we went to market, it was easy for us to go out compete Google at that point in time. How? They'd first come to market with a product that was built for brands. And most advertising businesses are built for brands. That's where the big money is in advertising. So people get in their mind that we're just going to go take money from brands, create a spread, place ads, off you go.

That's what the ad mob business was back then. It's a lot different today. When we went into market, we didn't want to sell the brand. So it was never a consideration for me. I mean, we can talk about it, but it was like a one-week consideration. It is a tough thing to sell. I went over to New York early days. Everyone told us we should worry about brands too and try to talk to some agencies,

and it's brutal. You're trying to convince someone to give you access to part of a budget, and then proving that their dollars were well spent is completely hand-wavy. There's nothing scientific about it. You're placing their ads. You're trying to get a cut of their budget. And the biggest cut goes to the folks that are whining and dining the client the most. And I don't want to be in that business.

I want to be in the business of no sales, high value product. And so what was different about us to AdMob was we went to the developers themselves. We said, look, on the one hand, like, allow us to place our ads inside your app. On the other hand, you need more users for your calendar app or for your game or for your fart button or whatever it was. run an ad on our platform, and we'll get you users on the other side. So the very, very beginning was, and this is always held true, if our customers are able to buy on a performance basis, and we can define what that means in a little bit, but if they're able to buy on a performance basis, their business is getting better because the ads are well spent.

And if you spend your money well on ads and on the other side, you can monetize and create a spread, they become effectively a company that can arbitrage our platform, then they could scale their business and so we built tools for the developer instead of building tools for the brand and that really served as well at that point that's a really interesting insight and so there was no other alternative for the game developer at the time or the app developer rather that there was no other platform like yours doing what you were doing there were a couple other companies that were just starting to exist too it was interesting because they had your same idea though at the exact same time a few of us had the exact same idea so you independent of one another totally independent and it's also

funny. The same VCs that rejected me put a lot of money into those companies. And that was very motivational. We had it as a goal to put those companies out of business. Why do you think the VCs turned you down when you had two successful advertising businesses before? And yet they're funding the competitor viewers that has the same exact idea without the previous success in that. I mean, look, I'm terrible at sales. So maybe it's that. But maybe it was that this market was a little bit further along at that point in time. Like, I think VCs tend to look at a market. and they have to really have high conviction in it. And you had in early 2012, things were just starting to form

and we were just getting to market with their product. By the time these other companies were raising in later 2012 and 2013, it was pretty clear. This thing was going to grow pretty quickly. And then our revenue ramp at the point in time when we launched in 2012 from March to November when we did our, we did an angel round and we marked our own money in and that was it. What do you mean that was it? So we raised four.

over $25 million pre as a convertible note to comment in November. The business by that point in time had gotten a million dollar a month run rate. So we went from launch to a million dollar a month run rate and profitable in a matter of eight months. How much profit do you think you were making on a monthly basis out of that million? Barely. It was a little bit profitable. But I mean back then nowadays, like ARR ramps are astounding. And as are valuations.

back then to build a business in mobile and have it go from zero to $12 million run rate, and that sort of amount of time was really phenomenal. And so once we did that, it was easy to recruit investors in November. I mean, it's like, okay, looks pretty good. It was more around for a few folks that I had just known for a while and a few other folks that I thought could be helpful to the business and to mark my own dollar soon. And so we did that round in November. And then we didn't raise another round.

So back to the board point, and we did raise another round, those more liquidity later. But back to the board point, I didn't have a board in this business until 2018. Six years later. Yeah, six years later when we actually closed a round from KKR and I can talk about like what went into actually. Oh, this story's wild. We're definitely into that. It was a messy path.

I would say like pros and cons to not having a board. The pro was I made every decision. On every shareholder certificate, it was literally my signature as the president, the vice president, everything. It was like the, I think I had three or four signatures on all the share certificates. And so I can make all the decisions for the business. And it all flowed through me. That was nice. On the other hand, I ended up making some mistakes, especially in the capital markets and raising capital,

that I wouldn't have made if I had had a board and people who had understood a lot of the things that I ended up navigating poorly. Can you give us some examples of that? Yeah. So in 2014 and 15, we were going to. growing really, really quickly. And we got to a point where, so 2015, we call it some period, I think it was about three, three and a half years post launch. We were going to do about $50 million to be it that roughly. That's a pretty big ramp up again. Back then, like, this is, I was, I was wealthy enough, but the rest of my team wasn't. And so this is a really quick ramp up for

a business. We don't have a lot of people. We were just growing really quickly. We started getting interest from other tech companies to buy us. And so got as big as an offer for $600 million cash. From Snapchat? No. I don't talk about the companies on the other side. But there's a reason why I like running my own business. It's tough for me to imagine being at the company on the other side. And the companies that we were engaging with might have been even tougher for me to imagine being an employee. And so at this point in time, the business was really all roads ran through me as a really hands-up. on executive. And the challenge with that was we were still growing 100% year over year. So when you're going and trying to do a deal and someone pushes a term sheet towards you

and goes, like, there's a lot of zero, $600 million. You're like, it is a big number, like all cash, like life changing for a lot of people on the team. The problem is between the time of seeing that number and getting to a deal, your business has grown a ton. And I'm a finance person. I would have had a number. I would have done the deal out, but it was not that number. and so I ended up walking away from it. What was the number? It was quite a bit higher. It had to be around a billion dollars at that point in time.

Still only 400 million. Yeah, it wasn't that much. I mean, in hindsight, obviously. Did you imagine if you would have made that mistake? What's your market cap today? 140 billion or hopefully. It would have left a lot of money on the table. Now, look, most businesses when they sell, they lose the opportunity to keep innovating.

And so had we done it there, we made, none of us would have known what this could have become. So it was a little fortuitous that I had. enough conviction to not take an offer in that. I want to go back to the mistakes you're making without like where you're just saying the mistakes in the capital market so you think you could have avoided if you had a board. I want to go back to that. But I want to take a small tangent because Rath, who maybe you should explain who that is. He sent me a bunch of notes on you. And the reason it just came in mind because he remembers getting an email. I think he actually sent me the copy from the email where you're like, I'm pretty sure we can,

build a billion-dollar business here, gosh. And then, like, a few months later, it's like, maybe it could be a $10 billion business. It wasn't a few months later, but, but, so he... Can you describe who Raff is, though? Because he's a crazy story. So he's a high school dropout. He started working for me in my old company when he was 16. He's worked for you or with you for over half his life.

He'll turn 34 this year. So, yeah, he's worked alongside me for about 18 years. And so, I mean, I consider him little brother, like, co-founder, or her. person at the company he's made a huge difference. And when we started here, he ended up, he was the first business hire

alongside this other guy at the time. Didn't he try to like hire you first? Yeah, he tried to hire me for some business he was working on and I laughed in his face. But he was how old? At that point in time.

He was like 19, right? Yeah, he was 19. And then you tell him, I'm not working for you, your business is shit. This is the story I've heard. And I spun it to like, I got to get an opportunity for you though.

And he shut that down and came over. But he was great. For the first six months, he lived in the office. And we're in downtown Palo Alto. But that's not like a figure of speech. He had a bunk bag. No, he actually lived in the office.

He had a bunk bed in the office. I can't remember where he showered. I think we had a dingy shower. But one day, someone tried to break into the office at middle of the night. We caught him on video. It was hilarious. But I think that was it. He was like, all right, it's been six months.

I got to get the hell out of here. But he was 24 hours of that. What his super skill is, is he strikes skills and does them better than almost anyone. And he can sit down with you and have a conversation today. Fifteen years later, he'll remember every word in that conversation. I forget what I did yesterday. So as a counterparty to me, he was great. And so he ran our business development efforts and he was really helpful in it. Now he runs marketing and growth marketing. That's why you guys ended up intersecting. But we ended up with like just this group of people that almost were outcasts from other places. Like one of the things

that I always looked at for hiring were find people who have a chip on their shoulder, someone who has a reason to push hard. And I had that myself, and we can talk about that if you care, but that was always what drove me. I had a reason to be driven. And so I always looked for that in people. And you have this kid who's high school dropout like anywhere else. He's not getting the job with big tech, but skills that smoke everyone else when it comes to selling, charisma not through the roof. And so seeing that, I knew, bring that person in, empower that person, and they're going to be hungry and they're going to push and they're going to push harder than others. And that was a formula we always say. And even today, like, so he goes from high school

dropout to a billionaire today. Dude, I can call him at like 11 o'clock at night on a Sunday and he'll pick up. Like he's still very, very hungry and pushing it. He still talks to advertisers who laugh and go, dude, you ask me for an extra $5,000 a day. You're a fucking billionaire. What are you Yeah, like all of us are that way. I mean, but again, it comes back to you got to have a chip on your shoulder. There has to be a reason because it's easy to go. I have a lot of money. I'm not going to take that conversation.

But that's not how I was thinking. I was watching this new documentary on Rupert Murdoch and like the crazy shit that's going on his family. It's on Netflix right now. And they said that he had a boulder on his shoulder. And he's been holding a grudge for like 45 years about these people that destroyed his dad's media company. And I was like, I don't even have any grudges, but I don't know if I could hold it for me. for almost five decades.

Yeah, sometimes you don't forget where you came from. I mean, mine was that my family was uprooted out of Iran. We ended up coming here when I was four, but my dad had one of the most successful real estate development companies in the country. So he was loaded, very successful back in the thousands of people worked for him. And we got booted out of our country. And so growing up, I could just tell a big part of him was lost, and he wasn't whole. And so I felt this obligation.

And it didn't kick in for me until later. But I always felt this obligation that I got to do whatever I can to prove that I can have the utmost success because he gave everything up to bring us over. So that's never gone away. I still think to this day, one, this notion that like you can reach a point of success. Like, I don't know what that is, but it's a moving target. Nowhere near that moving target. And two, always got to be pressing. And so I always looked for people on the team that had some reason to have a grudge or a chip on their shoulder or something that would motivate them.

If they didn't have that in life was really easy, those were not people that I was gonna introduce to the company. Yeah, you strike me as a person that kind of wakes up, maybe paranoid a little every day. I feel like most successful people are. I mean, there is a long time, and I don't know, I don't know if I'm past this yet or not,

probably not. I'd wake up every morning and go, I gotta check stats. Are we going bankrupt today, or are we still doing well? And it's like, certainly like at the scale we're operating out, we're probably not going bankrupt, but like you check to make sure, like lights are still on, things are still working. And like, I have,

I wake up at the exact same time every day. I do the same exact morning routine every day. I check the same stats. And it just gets me to go. This is a recurring theme on this show. Does anybody accuse you of being autistic? Sometimes. I mean, my wife will accuse me of that.

But I think, you know, it's more popular these days. I don't know that I'm autistic, but I can look people in the eye when I talk most of the time. But I... Although I didn't think Brian Armstrong from Coinbase was and everybody that knows them is like sending me messages. He's definitely autistic, but he's got a great personality. He's a great storyteller.

He's not the, like, super antisocial autistic. Yeah, I mean, if you knew me 25 years ago, I'd be deemed a lot more anti-social autistic than now. I've learned, I think a lot of good founders can follow patterns and figure out how to do things. There was a point in time where I never would have sat in this chair across from you. I would have been too nervous. It'd be dripping sweat.

Like, my first interview out of college, I walked in with a suit and, like, I literally walked out, just stretched. It looked like I got out of a rainstorm. So there was a point. my life where I was a lot different when having communication as a requirement, now I know that it's just a requirement to do on the job, so I got to do it well. And so I think a lot of people, whether it's autism or like just figuring out how to functionally be appropriate on the things that are necessary to get forward, people who do well in these types of roles have to solve that.

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So let's go back to the mistakes you thought you were making, go back to 2015 before. So the not taking the big offer was a bonus for me because if we had a board of investors, I may have faced pressure to take the offer. And so being able to make my own call on that was like, okay, this is great. Like I don't actually have that pressure.

The downside was the second you say no, and parts of your team know that you turn down that much money and they can run the math and go, would have made this much. You ended up with a lot of pressure to do something. So this was late 2015 and I used to be a finance background. I was a derivatives trader out of school. And so I understood multiples. I understood capital market arbitrage. And late 2015, what was going on in the markets was that you had China investors buying a lot of U.S. tech companies because the Chinese capital markets had just opened up.

The market over there, their NASDAQ is A shares back then, was ripping. And so you have these investors coming in and saying, I'm going to deploy China capital into a U.S. company and then go list that U.S. company in China, make a big spread, call it a day. And so I went out to talk to some of these investors and ended up announcing, I think it was some point in 2016, I don't remember our exact date, but I announced a private equity investment in the company, a billion dollars over $1.4 billion valuation. So fast forward less than a year.

Who's this investment coming from? The Chinese company. China based and Orient Han Tai Capital was the name. And this was like a small team. I met four guys, really good guys like Yangan China, got along. So I liked them and they came in, they invested. What's the state of the business at the time they're investing?

We're still growing 100% year over year. I think at the time, part of the dollars were based on us doing 85 million of EBITDA in 2000. 16. And so like deal structure was like if you can knock this, if you can beat this number, you get full value. Now, the structure of the deal was a little interesting. It was to clear out most of the cap table. My shares mostly would remain. Anyone else who want a role could. And then we take the company public in China. Now I don't speak a, I speak five words of Mandarin. Wouldn't have been a great China public company CEO. They thought I'd be charismatic and appear

well, but no communication, probably not a good idea. The other thing I didn't know, and this is where board would have been helpful is at the same time President Trump had just been elected to his first term. And so this was actually fall to going in a winner of 2016. So President Trump had just been elected. Geopolitical climate was getting worse. China, U.S., there was a lot of suspicion around, like, what are these Chinese companies doing, buying all these U.S. tech companies? I felt like it's just an arbitrage. It's like, whatever, people were trying to make money. Who cares? I didn't even know what a state-owned business was at the point in time. It turned out, like, and, and, and, you know, we announced a deal, you still have to go through regulatory,

and we're doing a cross-border transaction. And the regulatory body that governs cross-border transactions is a committee called Sipheus. And so this committee exists to go, is there a national security threat with this foreign money coming into the U.S. to invest in a U.S. company? I even know what this was. But I announced this deal, people think he got rich,

everyone's congratulating you, and I'm like, okay, well, what do I have to do now? What's the next step? It turned out the next step was you've got to go to D.C. and you've got to convince this committee that's made up of like every government agency. There was NSA, CIA, FTC, DOJ, like everyone was in the right. Why? Is it just because it's China? Because it's China for one.

And because at this point, we're a large-scale data platform. We're sitting on a lot of mobile devices. And I'm like, okay, what do we know about people? People are like solitary games? Like, who cares? But like, I guess like the belief would be that if someone nefarious gets access to your technology, they could do worse things with the, data than what we had access to. And so that was the general idea. But I marched into D.C.

And I'm like, I don't know what I'm doing. I hire a law firm, no board. No one's, no one's guiding me. Everyone's just like, oh, billion dollars, get the cash, call it a day. On the other side, I got this Chinese investor who these poor guys that I was working with seem like great guys. They get their billion dollars out of China. So I'm like, okay, you're doing your part. Like, my ready to go. But we walked into D.C. and it was just icy. It was cold. I mean, first of all, like, I'm a Persian CEO, and then at the time, CTO had just transitioned to be one of our first engineers, this Russian guy. So I'm like, this Persian guy and this Russian guy. We're selling to a Chinese company.

Sell him to a Chinese company with like four Chinese investors. I'm like, this might not go off. And so the first meeting was like the government agency stole is like, get the Chinese people out of the room. Like, let's talk to just you guys. And so we go through this process. And I just realized, like, this took the better part of, I think it was over a full year, actually, of just going back and forth with D.C., like trying to navigate this process with our lawyers. And there's just like, this is just not going to work. There's no way we're going to get over the finish line.

And I don't want to be made an example of with trying to do a Chinese deal, getting blown up. One of the regulators specifically saying to you, like, what are they voicing, what are their concerns that they're voicing? Are they, like, trying to couch it? They don't voice concerns, but I'm pretty good at. reading a room and it's like when you give them a lot of information you're talking about people playing solitaire and on the other side they're taking a bunch of notes and really asking you questions that have nothing to do with solitaire you start realizing what the concern is which is in the wrong hands as a platform that's as large as ours it could become something that's that's

that's risk and so but they'll never specifically say it they won't specifically say that that's what they're that's what they're trying to assess it for now we're they're selling 70% right this is a company that I've had full control over. And so you have this Chinese party that turned out to be a state-owned, partially state-owned private equity fund. Again, I didn't even know what that meant, but it turns out to be partially state-owned. And they're going to invest this money into us, and they're going to get 70% control. So what could they do with that control?

Whatever they want to. I mean, it's very hard, right? Like, it's not like there are engineers on the front lines, but can they exert pressure on an American to then go against Americans best interests? That becomes the concern, right? like what can they do for that kind of money? These are things I had no, I wasn't aware of whatsoever. So again, I had no one to turn to.

There's no one to talk to about this stuff. So not having a board, you're going through this. And I'm like, okay, well, had I had a board, I probably wouldn't have made this mistake. I would have saved some time. And there would have been plenty of alternative means to get liquidity to the team. I just thought good valuation, good number, a billion dollars cash, and I still retain my own ownership and run the business forward.

So we go forward and the business was doing really well. For this one year plus period, we couldn't issue options. Everything was frozen. We weren't really hiring people. Yet the business doubled together. We got to like, I think it was 2017, you're talking about, well over $100 million. If you would tell we cleared whatever numbers we told them, everything's healing well. If I had a board, they'd say, just rip up the deal.

This is a mess. Walk away. Your business is worth much more than the $1.4 billion valuation now. On the other hand, I've always felt like if anyone bets on me, especially as someone who's like just always had a you're not going to bet on me mentality and i'm going to prove to you how wrong you are i feel like if anyone bets on me he takes an investment or a business got to be loyal the other way and so these four guys bet on us they made an investment and or thought they were making an investment and so i didn't want to leave them hanging i also didn't know what happens to a group of

people from china that take a billion dollars offshore and then the deal blows up like what happens to the money what happens to those people so i didn't want to deal with any of that and so i ended up a way to get them a deal that then we could unravel later. We ended up doing it so that instead of their billion dollars being an equity investment for 70% where they would get control, which is what triggers this scrutiny, we ended up pivoting it to a billion dollar convertible note that if on conversion we pay them back the money plus interest, they would get 10% of the business. So under 10% there's no control and then they can come along for the ride.

We did that deal. We dividend it out a billion dollars to shareholders. Think of it as like a liquidity around pre-IPO. I knew that like, okay, we're going to get the money in my team's hands. No one's selling their shares. But now I'm stuck with this massive convertible debt that I've got to go en route. And so I called a few private equity funds. One of them was KKR.

And that's what brought me to KKR as an investor in the business. Their partner, Harold Chen, and his team looked at the company. I think he would tell you, he got an email that came across his desk that said, this goofy name company, App Levin, is looking to raise some private equity. My evaluation looks good. And he would have said, like, just based on the name, I wouldn't have invested and ran for it the other way. But his team rolled up their sleeves. They started looking and then Harold rolled up his sleeves started looking. And we all realized, this is a good idea, bring in traditional U.S. capital, get some debt, clear out the Chinese convertible debt, give them their ownership

off we go, cleaning cap table. And so we did that. I believe it was in the summer of 2018. and we had to build the first board that I'd ever been part of. We had myself, Eduardo Vivas, who's Raff's older brother, and then Harold Chandan's three-person more. Where are your co-founders at this time? Because Appleaven had, it was founded by three people, correct? Yeah. So one of my co-founders, this guy John Krasnack, was in charge of technology. He's CTO or not?

He was CTO originally. So he built a really good team. So I would say, like, a really good manager's job is build a really good team and eventually get replaced. And the first engineer that was the lead engineer at the time, this guy, Basel-Sheikin, just became so good that in 2016, we swapped him into the CTO role. And John then at that point was transitioning out. Out of the company completely? Yeah. And so, like, I've always had this belief that, like, a lot of people get complacent with the leaders that they have.

And those leaders, if they're not at that moment as good for the role as someone underneath, that person underneath is going to leave and start a new business. So like you owe it to every single person and you owe it to your company to make sure the best person is in the right role at any given time. And actually this like fast forwarding to just last week, we just announced Basel is going to shift gears to a different role in the business. And one of the people that he'd hired who's built a whole bunch of our new technology and now runs the team is going to transition at CTO. So the same thing happened again. Okay. So this always happens that every role I've seen is if we were complacent and said your VP because he's been here 10 years, the person. underneath who's been here two years.

It's just much better and we're not getting into that BP role is going to leave. I don't want to lose the best talent. I want at any given moment the best talent in the most important roles. And so we always do that trade. And if you don't do that trade, it's really depressing because you end up with these really long tenured people who end up in all these really important seats, but all your fresh blood is churning despite having more upside. You could have given them room to grow and you could have transitioned.

And so we do that every chance we can get. And then the other co-founder was a head of product type person. And I think you transitioned out. It was about three, four years ago. And really, like, what changed over time for both of them and then, like, I think just generally, like a lot of the people that were early at the business, when you go through this transitional period of, like, private, fast growth, small team to we're going to go public, we're going to be a bigger company.

It changes what people, the types of people that you may need for that next chapter. And so there was just transition on the team across the team. the board where we were constantly changing those like 50, 100 person type company people who really wanted to hustle with no structure to people that could actually continue to hustle with less structure than what most public companies have, but more than a 50% startup. You have a lot of very interesting ideas on retention of talent, proving every single hire. What happens, like how you actually retain a culture of A players? Because you have a couple hundred people.

I think 98% of your EBITOs comes from like 400 people now, something like that. Yeah, that's right. So we'll get to that in one second. But I need to understand that. So go back, you almost, you almost sold the business for $600 million. Right? Again, we're talking about a business. That is almost.

You are 400 million off. Having discussions. Having discussions. So how much of the business did you sell to the Chinese then? Did I understand you sold them 10% for a billion? So the way it worked. So actually, like, I sort of calculated to my ownership today. Okay.

After the convertible note round, we diluted about 50 to 55% until today. So if I took, I own about, I'd say about 12% of the company. I owned back then about 24, 25%. So that dilution is all the dilution we've had between the convertible note, conversion to the Chinese, pay out the Chinese, convert them to 10% equity, bring in KKR, eventually go public. There's nothing between the KKR and the IPO. Nothing else. So again, the IPO, if I recall, was about, I think we sold about like 7, 8% flip.

So which is really low and probably a mistake. in hindsight. Why? You want to sell more float. If anything, like, you need float to like lower volatility, even one of the more volatile companies. If you push up valuation to where you're round, and IPO is just like a series D, series E for us, those are series B. But you end up doing the IPO, and we did $2 billion, I think, over $28 billion valuation. Too low float makes you more volatile. And if the valuation is lower and you can do a 10 to 15% float, you end up attracting better investors who can end up being long term with you. If you push the valuation where you can't fill a bigger round, you end up with more volatility and less blue chip investors. And you're

signing up for just a much more volatile time in the public markets, which we saw. So after you do this deal with KTR, was there a chance that you were going to look for another choir or did you know, okay, the likely outcome here is we're going to IPO? No. Since then, I don't think I've had a single acquisition discussion with anyone. And by that point in time, I'd realize, well, first, First of all, we paid a billion dollar dividend, right? And so everyone was much wealthier than when they started Me Too. It's more money than I know what to do with. So we were past the point of worrying about liquidity, and we were much more in the mode of

like, okay, let's run this long and see what we can do at that point. Is this when I'm reading the email where you're like, okay, I thought, I think six years in, maybe this can be a billion dollar company. Now you're thinking, oh, it could be a $10 billion. Yeah. So, you know, every level that we've gone up, I voice something aspirational. but I got to believe it to voice it. And so when we first, when we were ripping like 2012, 13, 14,

I think I first said, like, we're going to be a billion-dollar company in 2014. When we did the Chinese round and we announced it, I didn't know in all hands where I said, look, like, we're still growing super quickly. We just did a print over a billion-dollar valuation. This is going to be a $10 billion business, period. Like, now we have to do the work to get there and we had a plan.

And when we went public, there was some point in time. I mean, first, like, we were down like 15% day one. And I was like, buckle up. One, it's going to be volatile. Investors, like, don't tend to like our story. Apparently, I suck at selling it to investors. But beyond that, it was, look, this shit motivates me. Like, I love it when people tell us we suck.

They tell us we suck. Let's prove them wrong. The business is going to be much bigger. We got a plan to get to $100 billion. So I laid that out. You said that when? This was after we went IPO, stock drop, like 15%. I was trying to rally the troops, but I also believed it.

I had a plan to grow the business now. So let's say the market caps around, what, $25 billion? So it's a four-act. So it sounds reasonable. When we went to under $4 billion, I was like, shit. Like 25 acts are a lot further away. Like people who are working on the business, we believe there's a path to a trillion dollar outcome.

And we don't set time. It's just that this business can be as big as what you would need to be a trillion dollar business. And we actually just did a comp plan to some of the key people that is built on triggers to give them much bigger payouts, but the highest one is a trillion dollars. So at every moment in time, if I believe in a future plan and, in, think that it could get to that big, I want to voice that to my team because I know that at least my past, they've seen that if I voiced something big and I'm still working my butt off,

they fall up and eventually we'll get to a good place. In between the deal for KKR and IPO, there's what three years? What's the time frame? So we closed the deal of 2018. Yeah, we went public in April 2021. So it was about three and a half. What does the business consist of at that point? It changed a lot. So when we first started, we grew really quickly and we cleared over $100 million V-Bit down. We had a very simple algorithm. And advertising business, the algorithm is key if you're doing performance ads. So our very early algorithm was if you play a solitaire and you play a poker game,

people who play solitaire and poker also play these games. And it just pushed you games. And you'd see game, game, game, game, eventually you download off a simple algorithm like that. What we realized as really machine learning technologies evolved and Facebook built this fantastic platform. Over the 2010s, once they got their mobile marketing platform out, they really did turn ads into content. What does turning ads into content mean to? If you have a very powerful algorithm on showing users' ads that are really good for them, the consumer is going to discover products that they want to buy through the ads. And when you can do that, you can show people an endless

amount of ads. They don't care about the ads that they're seeing. They're not disruptive. They're actually something that they can engage with. And what I saw was, and I inferred, that the, that they're their algorithm was way more potent than what we had at the time. And obviously the simple like rules-based algorithm wasn't going to cut it. And so in 2018, we started realizing we've got to upgrade to machine learning capability. Other companies are doing it. Facebook's way ahead of us. In order to do that, we need data.

And the data that we had were games that people were playing. The data that Facebook had, of course, they had the social graph, but they're pixeled on most of the websites in the world. Advertiser data is very, very important. in predicting an advertiser relevant outcome. So by that, I mean like, if you're a consumer and you're on 40 different sites and you're browsing for different products

and you buy four in the last year, that's a very good data set to predict what are you actually interested in? And if you don't have that visibility. Which Facebook has and you don't? Facebook had, we didn't. And so if we were gonna go build a much more robust model, it's very hard to just do it with solitaire and poker data

and whatever else, other games we had in the system. We needed to advertise the data. Now, in this case for us, it was inside mobile games, what are you actually spending on? If we could get that data, we could train a model that was a lot more powerful than what we had. What you buy is very much predictive of what you'll buy next. And so that was critical for us to go get our hands on that data. We were unable to convince advertisers to share that data with us. Even though they were sharing it with Facebook and Google, they would not share it with us. We were just the small startup, even though a billion dollar company, just this other company in the space that didn't have a need for the data because we didn't yet have the model. So in order to solve a that problem early on, I went out and then we just kicked off buying some gaming studios. So actually like the business from KKR investment to IPO ended up looking wildly different than an advertising business because we ended up with like 14, 15 different game studios across all categories of gaming that we ended up owning so that we can not only understand

what the game developer needs from a marketing platform and a modernization platform, but also use their data insider model. And so we bought the studios, we launched our first Axon one model all that Axon name is the name of our advertising model. The first one was more traditional machine learning, but huge upgrade over the first system. And revenue growth started happening really quickly once you brought that to market, but we couldn't do it without owning these studios ourselves

and being able to feed data into the model of the trade data. How long from the idea of we were going to essentially, like you're vertically integrating, right? And so now you're buying gaming studios. These gaming studios all own a bunch of different games, I assume, and they're producing. And so now you have the data of what people are doing inside the games, right?

So the idea of like, how long from the time you had that day until you start buying your first gaming studio? We moved really quick. We have an idea and we just go. And so one of the nice things that KKR was they were actually supportive in this. It wasn't like, let's start analyzing like what it is we're doing. It's like, Adam's got an idea.

Let's go behind them and we just made this investment. So we got to believe he knows what he's doing. And so it was idea to first acquisition almost right away. It was we have a studio to go by. It was a studio called People Fun. And then we were building up our own studio internally too. and everyone was supportive because the logic was really, really sound. Now, the fear and why a bigger board might have said,

hey, we don't want to do this is we're platform servicing gaming companies. And everything I've done in my career is be transparent all the time. Like your reputation and trust can break down at any moment if you violate trust on the other side of things. And so I'm a very transparent person. And we end up in this space where we're servicing the gaming clients. And we're now going, we're going to compete with you. And so in their mind, it was, okay, the ad platform is becoming now vertically integrated competitor.

And the proof for this was Amazon does this all the time, right? Like, why wouldn't the distribution platform build their own brands? In our case, it was build the brands to get data. It's very hard if you're a client on the other side and you see this to believe that they're still, they've still got your best interests in mind. And so that would have been the reason you wouldn't choose to do something like this. You could make the case to them that what you actually want to. was not the economics of the game.

You want the data because you still saw that the advertising business was better than the gaming business. That was what ended up over time. So like the, did you think it might have changed? There was a moment in time where a lot of people stopped trusting us in the space because our games were growing really quickly.

We were feeding their data into our model. And so the early adopters of our acts on one platform were our own games. So then you start seeing our games growing. On the one hand, you had companies that go, you're competing with us who just chose not to work with us, said fine. That's not only logical.

it's okay because we made this bet and we're going to live with it and it's really good for our business potentially. On the other hand, you had smaller businesses, small to medium size, inside gaming. They just need any win they can get. And so we ended up with these companies that then said, okay, your own studios are sharing your model data. We're going to share your model data and help us grow our business. Yeah, because if I'm them, like, I know your product works because you're using it to grow your own games. Yes and no, right? Like you go, that's great, but then if I feed you data, that's helping your own games, so am I fueling a competitor to become better? Oh, because you could just clone their game.

That's what the concern would be, right? It's like, you're using my data that effectively get into the space and compete with me. Now, you have to know who's on the other side of it. One other interesting data point about me is, growing up I played games, but as an adult, I hate games. I don't spend a minute playing games. So, like, it wasn't like...

Wait, are you, eight games? I mean, it just consumes time. It's addictive. Like, for me, myself, like, I don't have the patience to, like, get good at games. So, therefore, I suck at games, and I don't like sucking at things, so I don't play games.

You talk to these game developers, and what they had to really realize is like the company run through me can't be a game developer. I don't even care about the game content. I cared about the data and I cared about the distribution platform. So once they started realizing, okay, they're never going to be a good game developer. This is clearly a strategy. It's a means to an end. It started changing things.

Who is telling them that story, though? I know a lot of the game developers in the space. A lot of us are now quite close. And over time, like over the last decade, a lot of us have grown up in this industry together. So we've become close. So it just required a dinner. a lunch, sit down, ask me whatever question you want. I'll say in hindsight, the mistake I made is,

I'm very transparent when I sit down with people and they start asking me questions, but I didn't convey to the community of game developers directly and explicitly. We're getting in a gaming business and here's why. And so people started finding out on their own and then thinking there was some malicious intent when there never was. But then once they sat down with me, it was like, okay, now we can overcome that and like get down to business. How are we going to grow your business?

And so as a company, we've always had a belief that if our clients are improving their business, we're good to go. I mean, the mobile gaming space, there's very little VC funding. A lot of these companies are bootstrap businesses. The founders are the key people. The founders are the marketers. Most of the companies who work with, they're not even in the States. They're in Europe and Asia. And so these types of businesses, they need partners that are there to help them.

And for a moment's time, because I was not proactive in talking about what, is our strategy. I broke trust down. Then we got back together, sat down with the companies in the space. And trust comes back really quickly when you realize it's a communication error, not a desire to deceive. We ended up going forward. And all of these companies over from when we launched Axe on one model in 2020 to today, they all work with us in much, much bigger scale. And our platforms become the dominant one in gaming. We're probably, I don't know how big, but maybe even almost the over 50% of the marketing dollars in the space go back to our platform because the developers on the other side are seeing the best returns that they've ever seen in their

existence on the dollars that they're spending on a platform so their businesses are growing really healthy rates it's been powered by this desire to but from us to build this technology the way we did and and interest from them to trust us as the platform to do right by them and that evolved over the last few years but it's gotten to a really great place So you sold off the gaming studios? Aligned with the fact that we were never going to be good at gaming. We got to a place where the business had grown so much that every advertiser in mobile gaming was now starting to connect into our models and work with us the right way.

Once we got to that point, we realized we don't need these studios. A headache, it's a distraction. As you said, our core team on advertising is only 400 people. Well, to run studios is a huge lift. You need a lot of headcount. There were 1,500-plus people on those businesses and it was distributed over the world. So we got to a place where we said, we just can't manage this. It's not in our DNA.

We don't know what's going on. We're not paying attention to it. And we ended up selling it off to this company who's founder. I've known a very long time. It's a great guy. This company, Triple Dot, out of the UK. They bought the whole thing. And that was important to us.

We didn't want to go through and say, we own 15 studios. We're going to sell off one at a time just to make a profit. So instead, we just priced it down enough to make it enticing to a company like Triple Dot to just take the whole thing off our hand. And we did that. I believe it was about a year ago. So how many years did you have to own these gaming studios? From beginning to end, I want to say five years, roughly.

Adam is one of the most focused and intense founders I've ever met. As you're seeing during this conversation, Adam is driven to build a great product that serves as customers, relentlessly improve that product over time and win. And that is exactly what Adam and his team has done with their advertising platform, Axon. Axon connects you to over a billion potential new customers in mobile games. Axon allows you to capture undivided attention. Axon's ads are full-screen

videos that are watched for an average of 35 seconds, retention that blows other ad platforms out of the water. You can launch on Axon in minutes. You set the goal and Axon achieves it. No complex setup, no expertise needed. And Axon scales quickly. They can put your ads in front of over a billion potential customers. Other businesses have seen immediate results, scale to hundreds of thousands of dollars to spend per day, and increase their revenue by millions. So you want to get started quickly before all of your competitors are on Axon. And you can do that by going to axon.com. A.I.

forward slash Senra. That is axon. dot AI forward slash Senra. You have to have one of the craziest, like, employee to market cap ratios. So how are you able to run a $150 billion company that's making, what, a couple billion a year in cash flow? More than that now, quite a bit. Yeah.

I mean, run rate-wise, I think Q1 we made, or I guess Q4, what we just announced in Q1 was, I think it was $1.3 billion in cash just in a single quarter. Okay, so $5 billion or there, a little bit more per year with $350 to 400 employees in the main business. Yeah. How are you able to do that? A couple things happened. When we tanked in 2022. Why did you tank in 2022?

This is one in the stock. It stock collapsed 92%. Okay, because you went public in 21. In 21, saw collapses in 22. That's when we ended up under $4 billion marks. A couple things. One is I needed to make sure I retained my team. By team, I don't mean like everyone on the team.

There are certain people that are just doing functions and are replaceable. There's certain people that are critical to a business. And like, you really need them in with you for the long haul. And so what I realized was when building a business, you feel like everyone should be a shareholder. I was like one of those the founders that was like, you're the janitor and you should get shares in my business. When we went public and we faced this volatility, we started hearing from, or at least I started hearing from a lot of people like, man, we're way down on our equity this year. Our comp is way lower. Are you going to throw us up?

Are you going to give us stock on the other side? And super frustrating for me because you think about the trade on the other end of it, well, when the stock goes up, are you going to give your shares back to me? Like, you're not going to do that, right? You're going to be happy and you're going to get overpaid. And so we had these four-year grants that we distributed to everyone on the team. What I realized was it's unfair for me to judge because some people just need compensation. If you're getting paid $150,000 a year and $50,000 of it was an equity that goes down by 90%. Now you're at $105,000 a year.

You might not be able to pay your bills. Like you really dependent on that equity. On the other hand, if you're a critical engineer and you're paid a million dollars a year and your $600,000 of stock-based compensation goes down to $100,000. hundred grand, still getting paid 500k a year, like, okay, there's enough money to make ends meet and to write out the volatility. And so what we did at the low point for the team was go, some people were just going to put on cash compensation. Everybody at the company can buy shares in the business, but we don't need to force that decision for people that have lower total compensation.

So they can just go cash compensation. We then said, who are the people that are like critical to the business? Your key engineers are your key product people. Again, we don't want to do brand advertising whatsoever so like this wasn't mostly the business people or sales team because we don't even have much of that this was core product and engineering if they build a really good product they build a really good model we're going to be able to scale the business and so we took it down to a little over a hundred people that we give equity to in the business and why this was important was it forced me to go who are the people to matter like who are who am i really in this with for the long term and we had more people at that point in time we really slimmed down the business to the

core group of people and the support around them. But it was important for me to get it to that point. Because to your point of having A players, A players don't like to work with B, C, Ds. I mean, D's, you're going to just burn your A's out. But like anything that's worse than an A player on the team and you're distracting your best for working with those types of people and like trying to bring them up to speed is a huge loss because eventually you end up churning out your A's. So I had to not only understand who are the key people.

I had to go through this period of time where in 23, I think it was about 23 or 24, even though the business was ripping, we were firing a ton of people. We let go about 40% of the team. I think it was 24. The business grew nearly 100% year over year and we fired about 40% of the team because I wanted to distill it down to these eight players. I wanted to get it to a place where fresh blood, key people, key roles, they're getting equity. They've got a lot of upside, support around them, and then we're lean and mean organization. go into more of this thing, because it sounds like it's going over several years from 22 to 23 to 24. We're only talking about the ads business.

We're not talking about gaming studios. We're not talking about the other, you own like a SaaS company that I think has another. Yeah, not talking about those. Let's just focus on this. So now you're, you know, 350 to 400 of them today. What were you back then? So we were more. Yeah, I'd say probably close to double that.

And so this guy, Giovanni, who just started his CTO, he joined. And he joined in November 22. and he's responsible for him and Basel that, the CTO I talked about. They basically together worked on the Axon 2 model, really Giovanni led it and then built out the team and he runs the team. Now, the reason I raised his name is he came in and he started asking me interesting but difficult questions. Questions like, why do we have this person?

Why do we have this team? Why do we have like these processes? And as a business, you sort of go, when I first started, I didn't want any process. I have almost a no meaning rule. Like, I wanted everything to be as highly efficient as possible. But over a decade plus, you inherit some process. You go public, you're told you need these processes. You need these people.

Well, you get someone in who's fresh blood, who's really hungry, insanely high-a-kew person. I mean, one of the smartest people I've ever met, much smarter than I am. And he's grilling me with this question every day. Like, why is this person in this role? Why is this person here? Like, how come this person is a BP to this person,

and the person underneath that person is much better than the BP? So I kept getting these questions, and I was like, either I'm going to have to address these questions or I'm going to risk losing talent like this person, the other people that are talented like it. In doing that, we ended up going, I changed my philosophy to culture and how a company is structured. You start a business, you have culture, you have cultural values,

and like you hope those hold true forever. Well, the world's changing really quickly, and the world of technology is changing and companies are evolving. If you just consider it static where your culture from day one is going to hold true over time. I think it's a mistake. So what we did is I took his questions to heart and said, at every moment in time,

we've got to rethink our culture for what the world has today. And you started having LMs at that point in time, and a lot of automation was coming. And we also had a business where we had these key contributors that are killers, and then we had support around them, but we had a lot of bloated process. Even we did, despite the low headcount to revenue, because of 10 plus years of operating,

and just the way it was. And so I re-challenged it and said, if I was starting the business today, what would I start it with? What is it going to look like? What is it going to be automated away in a year or two years? How am I going to get Giovanni to stop asking me why and just be excited about his role

because everywhere he looks, there's a super capable person around. And so I went in and just said, we're going to kick off a whole bunch of cuts all over the board. And we're going to do it in this hope of getting leaner, but more importantly, keeping eight people from getting contaminated. so that those eight people can be retained,

feel like the organization is theirs. And we ended up turning over a lot of tenured people that were here for a long time. We ended up turning over people whose roles, I felt like we're eventually gonna get automated by LLMs. And if we felt that way about their role, I wasn't gonna keep them in a dead end job. I want people to go and do whatever is best for them.

And usually professional and personal growth leads into what's best for them. And if we didn't have that, we were gonna move on from it. And so we just leaned everything up and it ended up working really well for us. That's excellent. Do you think there's a certain size, like a limit to how many, if you want to, if you're running a company, you want a team of all A players? Yeah. Do you think there's

an upper bound to how many employees you have? You have two types of employees. You need some support functions, right? Like at the end of the day, as a public company, like not everyone can be like an A player because they're not in roles to innovate. So let's say there's some people that is doing roles to keep the lights on. That's just a requirement. So set that aside. Then you've got like your core people, especially product and engineering. We expect our engineers to be product people, so we don't have much of a product org. So let's call it core engineering.

We expect them to be eight people. Now, to have a team of eight players, you've got to be able to recognize a player. So I know that Giovanni is an A plus player. I know that he has no tolerance for anything that's not an A player. So he goes, and he's very quick to go, you're either cutting it or you're not on my team,

but you've got to be at this level or you're out. And so putting people in these leadership roles that require that level of talent, talent allows me to have confidence that because they're impatient, they're not going to enable talent that's not qualified in these key roles. And so you're always turning over people that don't meet your need and you're going as lean as possible. Now, when you have an A player, you don't want to cut those people. Those people are super powerful, especially as we go forward and you're going to need lean teams that know how to use AI. Your best people know how to use AI better than your mediocre

people. And it's not by some sort of linear function. It's much greater than that. And so our team is constructed to have leaders who are A players or A plus players who can see the A players underneath and who have no patience for anything that's not and are very willing to fire on site. If they feel like you're not cutting it, this role is not one that you're passionate about. And most of our people, because we're lean are very smart, but sometimes being smart is not enough. You've got to be really into building what we want to build.

And you're not cut out for it. You get a really good severance and you go off along your way. So this leads me to another thing that I find. and remarkable about you, that even to this day, if anybody wants to hire anybody in the company, they have to get an approval directly from you. So this was a funny one. And the reason this came up is there's a period of time

we went to turnover in HR and I took over the HR organization. And I saw that same period before we did the cuts, we'd become bloated. And I was like, why is the head count so high? Why does it keep going up? Well, it turned out every time we let someone go or someone quit, there was automatically just a new job placement that went up. It was a job placement as a quote unquote backfill.

So I had a wrong. role, this role disappears, I'm going to automatically rehire, which means there's no way your headcount can go down. Your headcount's only going up because you're still inevitably hiring other roles too. Now, what bug me about that was we had hundreds of job postings. And in order to hire and train and get value out of a new employee, you're talking about six to 12 months process. What happens in the period of time when that person quits and you don't have that person? Why do you need a backfill if you can survive without that person, without anyone in that role for some period of time? You probably don't. But it feels better to say, I want the head.

And so I took it over and I said, look, convince me that you need the person. So we went from somewhere in the neighborhood of hundreds of new hires that we're doing a year, or at least attempting to do a year in the tens because people were so spooked about trying to convince me that they need the role. They wouldn't come to me. And like, now it's like, if they come to me, I know that they're desperate. It's everything's going to break down around me. People are working so much that they're, they really need this extra. hire. Okay, you'll make it. I really think what's remarkable is you just took this insight that

everybody agrees on, right? That the value of your company is just the talent, the level of talent that you have, your employees, your team, you only want to work with eight players. There is some kind of upper bound to it. I remember the reason I asked you the question earlier is because like Steve Jobs said that he had only ever seen one company in his entire history and his entire experience that was all full of eight players. He says it was Pixar. He said, but they had 400 employees. and at the time Apple had like 3,000. So he says, of course, I have 3,000 employees. They can't all be A players.

But what's remarkable is everybody agrees on it, but no one actually does the difficult job of making sure that you don't alienate these A players and essentially surrounding them with Bs and Cs and other less talented people because you jump to the right conclusion. They're going to lead. And in many cases, they'll just go start their own company.

Yeah, the challenge, I mean, like you see it in the software world today. The challenge that a lot of companies have now is bloated workforce and the talent It's mostly mediocre. So what's the solution? You can't just fire people. If you fire half the people and everyone was not an A player, you're just left with half mediocre. And so what do you actually do?

Where we were lucky is that I've always felt I'm a cheerleader for the folks on the team. And like for a long time, I was making a lot of the decisions on the team. And I ran product and I was hands on. But I still try to direct people and surround myself with people smarter than me. And I always felt like pretty reasonable IQ. I'm not exceptionally high IQ. I just see really, I see how. patterns and problems really well and I can typically like understand what that problem is and try to propose a solution and move forward. And if I'm wrong, I can pivot quickly and get to a good answer. And so maybe that was the skill that I had, but paired with that, I was always humble enough to know that when you hire, you always want to upgrade yourself. You want to hire better than yourself. It's something that you're not as good as. Like the raft discussion earlier where he's exceptional at BD. Well, I don't remember the conversations I had a day ago, five days ago, five years ago. So I needed someone like that.

exceptional talent in a function could upgrade me. And so I can go, he's much better than me at that. And so what's important in that is that I took the humble approach to upgrade at every level and then be the cheerleader for these people and give them whatever they need to succeed. And that hasn't changed since we started the business. And I think it's very challenging to maintain that because a lot of times when you're building a business, you start hiring these executives.

And these executives come in and they're trained to hire Empire build and they build up these teams. And all of a sudden, train leaves the station. You had this core group of eight people. And all of a sudden, you surrounded them with these professional managers and workforce gets bloated. And those really good people that you used to love working with, they get disillusioned. They churn out.

And what you're left with is a miserable place. That function has held true at a lot of businesses. And because I was so controlling and hands on, I never let it happen. To this day, we don't have a CRO. We're not a business. I mean, anywhere you look advertising business, who doesn't have a CRO? We don't have a CRO. We don't have a CEO.

We have today this the C-suite is myself, the CFO, the CTO, and we have a general counsel. That's it. And so you look at the structure of the business. I made sure that we didn't alienate a people when we found them. And I made sure that they had a perfect environment to grow, develop, and contribute so that they feel good. And if you give them a place to feel good and take ownership and learn as they go, really smart people love working with really smart people.

So we've now spent many hours talking about the way you think about building your business. The way I would describe it, if I had to distill it down to just handful of words, I would say it's like ruthless efficiency and like hyper competence. Is this in response? Because it's not common, especially in the startup VC world where it's just like they just throw money to everything. They have thousands of people or over hire and everything else. Is your like ruthless efficiency and hyper competence in response to something or is just how you've always been? Maybe we got lucky in the VC's telling us. Because when VCs tell you, yes, they want to put more money to work.

So it's always like you took your round, use around, hire more people, get to the next level, don't worry about making money. When we started, I mean, we worry about making money. I don't want to put more money into the business. I had made enough not to worry about money, but I didn't make that much. And so we wanted to be profitable. And then once we started getting profitable, what I realized is one of the most important things when I hire and work with someone is I want them to believe that at any given time, they're in the best role of

for them anywhere on the planet. And so I define best role as massive growth opportunity, professionally and personally. I think really good jobs where people become passionate and love their work, give them an ability to grow. If you take that away, then they should leave. And a lot of times people get complacent and stick around, but in theory, you should just force them out.

And so what that means is to give very smart people room to grow, you've got to maintain lean and efficient. If you don't, those smart people get bogged down with process, with other people. And I've also found a common characteristic of really smart people is they don't want to deal with other people. They just want to get shit done.

And if in the middle of them getting stuff done, they're stuck with dealing with other people, they're gonna eventually get burned out in the bill. And so because of this pattern recognition, where I knew what would retain this type of talent, I never wanted to waiver from the belief that we gotta give very smart people, plenty of room to own and operate however they want,

which is in their own world, highly efficient, limited on process, and that kept us laying. I'm curious what happened to your better funded competitors that started either around the same time or after years. The reason I asked, because I talked to Michael Dell about this, you know, there's a million people doing what he was trying to do. And in many cases, they were doing it in the same city that he was trying to do. All better funded than him.

Some had raised, you know, I think over $100 million. He smoked every single one of them. Yeah. What happened to these competitors you mentioned earlier? I mean, we're in a big market. So a couple are, one of them is public today. up and more will eventually be public, but no one's even remotely close to the scale

that we operate at. And the private ones, like I said, the ones of the VCs that funded, either sold for very little or are gone. And very common would be raise money, hire a bunch of people. And along the way, I've always gotten the, you have a huge opportunity you're doing really well. Why aren't you hiring people?

We have big business opportunity in front of us right now. We're, as we go forward, we're really expanding the platform that we operate in, outside of gaming to service companies of any time to come advertise on our platform. Well, most people look at that and go, naturally, why aren't you hiring a Salesforce? Why aren't you hiring a CRO? Why aren't you hitting it hard?

And because the reason I don't is that now with AI tools, one person who's really good can be as powerful as 10, 20, 50, 100 people. And so why would I go hire in advance of that versus go find those single individuals who can be really good who understand how to deploy agents to tackle jobs that many people would have done before? And so I've stuck to this view with high conviction because I've seen companies do exactly that, hiring into opportunity, dilute their IQ, and then you're stuck with a mess. And how do you unravel a mess? If you lose those eight people, there's no way to do it. You're just host. You know if your axon model is good or not immediately, right?

Because you're like essentially in the business of selling revenue, I think, is the way you put it, right? Yeah. So explain when you knew it was working the way it is now and what was happening before. What was the model before that? Yeah, I mean, so where we are today is, and this is where we wanted to get to, which is the product has to be good enough to sell itself. Otherwise, if we're begging for business, we don't have a good advertising solution that's scalable. We don't have the salespeople to go beg for business.

And so what does that mean? Well, if you're a game developer today and you plug into our platform, you're going to spend $1,000, you're going to know with certainty you made more than $1,000 on that spent. You may have a business model that says, I want to break even on that $1,000 in a year, and by year five, I know I'm going to make $5,000, and so you put the $1,000 in, you got $1,000 back in a year, and year five, you're at $5,000.

You may have a shorter cycle. You might break even on the $1,000 and 30 days, and then by six months out, you made $2,000, $3,000. Whatever your business model allows, you're going to be able to price into our system and generate more money from the dollar spent than what you put into the system.

Now, what's important about that approach is that they become an arbitraiser. The only constraint on them scaling in our system is the money that they have in their bank account. Because if you tell someone, you're certain to make more money than what you put in, you're going to know it. Our reporting is going to tell you. Otherwise, you're not going to scale. They'll put as much as they have in their banking out.

And we will drive as much scale as we can before that arbitrage breaks out. When we took the e-commerce business to the market and e-commerce is us accessing a billion plus people playing games, but instead of just showing them game ads, we now show them e-commerce ads. This category started growing really quickly, too. We took the exact same approach. Give them revenue for the dollars that they spend, make it measurable, make sure that they know they're making money. They're going to scale.

And if you do that, and what I call performance marketing is that make the advertiser and arbitraiser. Very few people define performance marketing as that and very few companies of Facebook's done a fantastic job of it. Google part of their business says this. This is entirely what we're focused on. If they're making money, they're going to spend. And so the models themselves, when we go and create different iterations of the models, we're not a, we're not in the large language model.

So there's no consumer interface. We don't need to go. This is Axon 221, 2, 2, 2, 2, 2, 2.3. But every time our research scientists go and improve the model, the goal is, can you drive more spend to the advertiser at their return on ad spend goals? So are they making more revenue? And are they getting more reach? And the large language model gets more accurate. You prompt it.

You're going to get a better output. And so, and obviously the use cases go up. If we get more accurate, the prompt effectively is advertiser has all the budget and has these goals. And can we deliver more accuracy for them? Can we get them more scale? Can we get them more spent? So we're constantly doing iterations on our work and doing tests in our experiment framework to try to extract more value.

More value is get the advertiser. We get wealthier. They get wealthier. I remember seeing a graph, this like inflection point. the business itself inflected big time in I think it was April, 2003 when we rolled out axon two. The axon one model, I mean,

the first version, like I told you, was just a rules-based system. Axon-1 was more traditional machine learning. Axon-2 was a deep learning model. Much more complex, much higher ability to create these predictions of value for advertisers. So it went from the point of like,

no ability to do what this value proposition was that I had in my mind, which is turn the advertiser into an arbitration. to an arbitrage marketer. To axon one, they can get there, but they have to spend a lot of money. The model has to learn. They have to do a lot of manual labor to get to that point. To axon to, any advertiser you can just plug in,

get going, spend money, get revenue on the other side and make a spread. When you have that product and it's very, very scalable, the business can grow a lot. And so we went from, I think it was April, 2023 was when the stock was nine, 10, 11 bucks. So we peaked, it was price. six months ago or so, it's $750.

So the valuation learned from under $4 billion to peak of $250 billion. Now, we've come down some since, but the business is still doing phenomenally well. And the only way we could have grown like that on market cap was if the business fundamentals grew as well alongside it. And it truly did. Our growth has been phenomenal over the last three years because of the Axon 2 model was so powerful in delivering this kind of value for advertisers. When somebody might have heard you say, hey, you know, we're not, we don't have

have like specific market cap goals, but we do have a plan in place for some of the key players for compensation that goes all the way up to like a trillion dollar market cap might sound a little crazy. But not, it seems like you just have a ton of tailwinds, like AI tailwinds for the specific business, not only the actual, what the product is,

but you're like ruthless efficiency and hyper-competence with only, like having a small team of a players. Obviously, you have somebody who gets it. It could be, it's not one employee. You don't really have 400 employees. You could have, you know, them doing the work of 4,000. Yeah.

Explain like how. just even the last like three or four years, how AI has transformed the way you're running the business and the impact on the business. I mean, for sure, like the tools that are available, and I'd say like, as we've all seen, there's been breakaway speed on the potency of these technologies over the last few months.

You've got small teams can do much, much more. So it's huge. I mean, we over, I think it was about a year and a half ago, over 80% of our code was LLM written, and now it's much higher than that. And so you've got the ability for the LLM paired with really exceptional engineers to create more output. And this isn't like, if you lived in a world of B players,

your 1x engineer might be 2x more efficient, but your 10x engineer might be 100x more efficient. Not only can they go out and accelerate the rate of speed that they can create experiments and improvements on machine learning models, the LM can also process all of the research in the space. These are research oriented sectors, open source, but five years ago, as humans couldn't have gone

and read all the research and understood it. Now, very smart people who understand math and research can go use the LLM, care with it to create the future experiments off all the resources out there, not believing they're missing anything because the LLM is scraping everything at. So massive amount of potential for efficiency gains, and we're built on a deep learning model. So as these technologies get more powerful, the predictive value goes up. Now, what does that mean? Well, for us in our business, on one hand, we have billion users who are playing games, billion plus users who are playing games every single day. day around the world. In the US is over 150 million, only adults. So penetration into the world is high. The power user who plays games is not the same 21 year old who's on Instagram for six

hours a day. The power user is playing casual games, Candy Crush for two, three hours a day as an example, is more of like a middle age person who has more time and is just getting relaxation here. That's the framework. So we have this really good audience, a billion plus, good amount of time spent, and they're willing to watch an ad, and they're willing to watch an ad for a long time. Our average ad is over 35 seconds long. It's like a television commercial on the mobile device. So the framework is really good.

What we show in that ad is only going to get much better as the technologies get better, and we service more customers. And if you think about a couple years ago on our platform, we only serve gaming ads. We used to take a user and say, game, game, game, game.

If you weren't in the business of switching games, that's a pretty bad ad format to show you. Well, now as we've gotten into product ads for e-commerce businesses, and it really, as we go forward, it'll be for any kind of business in the world. The diversity will go up. The technology is already capable to do it. And then the value to the end consumer will go up. And that whole thing I said earlier of the ad becomes more like content.

The hope we have is that we can get the local laundromat discovered by someone playing a game because we serve a really good ad to someone who needs their clothes wash. If that happens and we get to that level of scale, this business is going to be much, much bigger than it is today. And the opportunity for us to really impact economic growth for businesses that are small to medium size is going to be much bigger than it is today. So you go from gaming to e-commerce.

You literally just, my next question was going to be like, well, what other kind of businesses do you want to expand out to? You really believe that you can do this for every single segment? When you have this many people who are playing games and they're middle-aged, the only limit is the technology for targeting and the customer on the other side. And I fundamentally believe the biggest opportunity we have as a business is help the small to medium-sized businesses. We don't have a sales force.

So eventually we'll get the large enterprises because they're going to come to a platform as big as ours. But we're not out there selling them. We want to help those small to medium-sized businesses. What made us really successful in gaming was going to the companies that really didn't have much support at most of the other businesses and going, look, you're 10 people. Let's work together. Let us grow your business. There's a company that recently exited out at Turkey and mobile gaming. that I believe was like 10, 15 people and sold for a billion dollars.

They sold under one year from launch for a billion dollars. Almost all of their business growth on the marketing and monetization side was built on our platform. And they had a fantastic game that was super innovative around that. But because our platforms built for this, we were able to help a company like that. And that makes us feel really good. So if we can translate that into these other categories, to the local laundromat or to the company that spins up a Shopify store and is selling lipstick and has some cool spin, on selling lipstick and they launch on our platform, they can really ramp up, we'll feel really good about ourselves.

Is this targeted for like direct to consumer? Do you think you'll be doing this B2B as well? Eventually, we hope to tackle the consumer market and the enterprise market. There's no reason not to. Because again, on the other side, if you have billion users and their adults, they have jobs as well.

If we get to the point where our technology can do the targeting across every consumer category, I'm pretty sure it's gonna have no limit when it comes to the enterprise side as well. Like the way you run the business, this conversation had no fat on it. Thanks very much for making the time, Adam. This is awesome.

Yeah, thanks for having me. This was really cool. I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review. And make sure you listen to my other podcast founders. For almost a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through founders.