The Pomp Podcast - #455 Kate Clark and Amir Efrati on the Technology Industry

Episode Date: December 18, 2020

Kate Clark is a reporter for The Information, covering venture capital and startups, with a specific interest in fintech. Amir Efrati is the Executive Editor of The Information, which he helped to launch in 2013. In this conversation, we discuss The Information’s 50 Most Promising Startups, the 2020 biggest VC winners, who is leaving SF and why, and then we discuss Sequoia, A16Z, Cameo, Bunch, and Stripe. ======================= Smart investors know being early is critical to success in crypto. CoinList is where early adopters invest in, earn, and trade the best new crypto assets before they list on other exchanges. Try CoinList Pro and be first to trade on network launch. Sign up via coinlist.co/pomp and earn $10 in BTC after you trade $100. ======================= Crypto.com is the only all-in-one platform that allows you to BUY / SELL / STORE / EARN / LOAN / INVEST crypto all from one place. Join over 1 million users currently using the Crypto.com app. Download and earn $50 USD using my code ‘pomp2020’, or use the link https://platinum.crypto.com/r/pomp2020 when you sign up for one of their metal cards today. ======================= Pomp writes a daily letter to over 90,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Amir Efrati is the executive editor of The Information, which he helped launch in 2013. Kate Clark is a reporter for The Information, covering venture capital and startups with a specific interest in fintech. In this conversation, we discuss The Information's 50 most promising startups, the 2020 biggest VC winners, who is leaving San Francisco and why, and then we discuss Sequoia, Andreessen, Cameo, Bunch, and Stripe. I really enjoyed this conversation with both Amir and Kate. I hope you do as well. Before we get into this episode though, I want to quickly talk

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that I write a daily letter to over 95,000 investors about business technology and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. All right, let's get into this episode. I hope you guys enjoy this one. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek digital or more concrete capital management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy,

but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got two special guests today. I've got Kate Namir here. Thank you guys so much for doing this. Yeah, thanks for having us. Good to be here. Absolutely. Let's just kind of go through both of your backgrounds. Maybe Kate, we'll start with you. Kind of what did you do before you got to the information and then what do you focus on there? Yeah, so I've been at the information for almost a year now. And before that, I was a reporter at TechCrunch where I covered startups and venture capital. I'm on the same beat at the information covering a lot of early stage startups, covering a lot of FinTech, covering all the venture capital

funds awesome and amir so i uh was for nine years at the wall street journal covered all sorts of things uh including white collar crime and then later technology um not that there's a lot of overlap but um then uh helped to to start this this publication the information um which is led by jessica lesson um who was a colleague of mine at the journal and we worked really closely together. So I still work for her. I started to work for her when we launched the company in 2013 and off to the races. Awesome. And so you guys recently put out this list, the 50 most promising startups. Maybe let's just talk through kind of why focus on a list and then what was kind of the criteria and how did the list come together?

So we wanted to focus on more under the radar startups. There are plenty of companies that are getting wildly high valuations very, very quickly in their life. And then others that are choosing to take a different route and maybe not raise as much money, probably because they're really good businesses to begin with and they don't need the money. But there are plenty of young companies that we wanted to spotlight in really important areas that perhaps just don't get enough light. And for me personally, just speaking personally, There are a lot of examples in the kind of enterprise artificial intelligence realm, essentially companies that are helping companies, other companies make better use of their data or prepare that data for machine learning models to process them and improve different aspects of the businesses that they operate. So there's just a lot of action, a tremendous amount of action. And we wanted to focus on companies that have raised about $100 million or less. In some cases, very, very little. Zapier in enterprise software, Zapier is our favorite there.

they've only raised 1.5 million in equity and debt. And they are definitely one of the most interesting enterprise software companies in the world. And very few people have heard of them because they just stay super low. And then in some cases, you have companies that have raised a lot more than that. So we extended our parameters for this list of the most promising startups to companies that have launched 3 years or less. So companies that were founded three years or less. So that's how we did it. And really, we just get a lot of really good response when we focus on metrics of these companies, how startups are actually performing. A lot of very young startups get attention, but we don't really know what their growth rates are,

what their revenue is, what are the challenges that they face. And we just really wanted to hone in on that. We get a really good response when we do it. And so is it fair to say that the $100 million in capital raised mark and the three-year mark, that was your attempt to define a startup? Because it seems like when WeWork was like $15 billion at one point, it would be like startup WeWork. And it was kind of hard to see where does startup end? And do you become like a real company? I don't think anyone really knows where startup ends. I think for me, I still consider companies pre-IPO fair game if you're like a startups reporter.

But yeah, I think our goal is there's so much noise in the market right now, I think more than ever, even during during the pandemic when you would think startups wouldn't be doing as well. And so we thought if we spent a couple of months looking through hundreds of companies, we could probably come up with a list and confidently say these are the startups that are actually truly startups early in their lives that we think that our audience should be paying attention to. Got it. And Kate, you've obviously focused a lot on FinTech. There's a number of FinTech companies on the list. What are you seeing there? Are there any specific companies that stick out to you as companies that people should be aware of and paying attention to as we go into 2021? Yeah. I mean, all the companies that we put on the FinTech list, I think is about eight, are amazing companies. I'll say it was really difficult to narrow it down because every company right now is a FinTech company in some way. And it's kind of the joke that the FinTech

investors will say is like every company is a fintech company so like how could you shoot how can you choose just five or ten um and i tried to pick you know companies that sort of represented the ecosystem which is um diverse in terms of like companies that are and what they're doing whether they're helping small businesses whether they're creating a virtual card whether it's something like robin hood and one of the companies on this list actually is called trade republic and it is very similar to Robinhood. It is essentially Robinhood targeting the European market. It's already doing phenomenally well and, you know, growing really, really fast. So I would say my big takeaway was, you know, the fintech market is enormous right now. There's more money than

ever has been going into that category, going into it from venture capitalists. And I think that there are just so many different problems that these entrepreneurs are trying to solve. And hopefully they're not, you know, competing with Stripe, which is the monster that pretty, pretty difficult to defeat right now. Absolutely. Amir, obviously, when you look at from the investor standpoint, kind of who the big winners on the list are, Andreessen and Sequoia both kind of lead the list in terms of their number of their portfolio companies on there. I think Sequoia had eight and Andreessen had seven. Is this a product of the best get the best deal flow and therefore that should be expected? Or is this just them proving this is why they're the best is because they're finding companies that either others can't get into or they're picking the right winners?

Well, it should be mentioned that a few of those from Sequoia are actually from Sequoia Capital China. So we had a part of this list, about 10 or 11 companies are based in China. And I think Sequoia Capital China was in three of them. um andreessen was actually more interesting uh andreessen horowitz is more interesting in in the in the grand scheme of things here because um they yeah they invested in some of the companies that are that are based here and they they don't have like a like a you know chinese cousin or chinese version so it was it was andreessen horowitz proper and you know they they really stick out because they have a couple of partners uh one of them is named martin casado probably be great to

have on the pod, who really focus on enterprise software, but with a machine learning bet. And they really understand how there's this ecosystem springing up of different tools to help data scientists or machine learning experts make their companies better. And they've been investing in this area for years. And there are some other firms that invest a little bit in the earlier stage, like Data Collective is one, or Costanoa Ventures is another, that also do this. And so Andreessen, in this case, has really kind of been ahead of the curve in many respects. So I can probably pull up some of the companies that they invested in that are on our list. But yeah, they really seem to have the kind of AI space, which I realize is very hyped up.

And we're not talking about general artificial intelligence or anything like that. We're talking about much more basic uses of machine learning that can actually make a difference to companies that are not named Google or Facebook or Amazon and so on. I think also, oh, sorry. I was just going to say another takeaway for me seeing Sequoia and Andreessen on this list so much is just these firms have gotten really aggressive at seed and series A at a really early stage. And we've talked about that a lot.

And you're seeing it pay off. These firms obviously have the best deal flow because they have the best reputations. They're not new to this. So I think that was interesting to see. I mean, they're clearly in the best companies already. They don't just do those big rounds, those growth stage investments. Absolutely. Two of the companies that were on the list that I thought would just be fun to talk about. One is Cameo and the other is Bunch. With Cameo, we've had Steven on the podcast and it seems like they've really kind of gone from what I think a lot of people looked at as almost like a toy at first. Right. It was like, what do you mean you're going to pay for these videos to now all of a sudden he's on Twitter talking about like we're going to help people monetize their time and do it with the most famous people in the world. How do you guys evaluate that type of business and how much of that is, hey, they're just getting started versus they're already a pretty big company. They've raised a lot of money and we're kind of seeing what they'll look like in that final state. Well, we were surprised to hear that their gross sales are going to hit $100 million in 2020. And that means that they are going to take in, on a net revenue basis, $25 million. That did surprise us. We didn't realize it was that big.

However, another company that came up, which is a very unusual company whose founder you should also have on is only fans. And there is going to be a merge here because, uh, only fans is also monetizing people's time. And they have a long tail of people, including, you know, people in the adult entertainment industry, of course, um, who, who are doing that cameo started with, you know, uh, mainly kind of B B list, C list celebrities. Um, some of whom are lovely people, some of whom are criminals, um, you know, from, from the tiger King. Um, and they, uh, yeah, they, they, there's definitely going to be an overlap here and you're right. It's one of those companies that at first you think it's kind of like jokey and cute. And then, you know, over time,

uh, and then, you know, certainly somebody like, like Steve realizes what, what's happening and what, what the possibilities are. So we, we definitely like it. Um, we, we, we think it has a lot of potential. But OnlyFans gross sales this year, I think are going to be $2 billion. So that's really going to be the big fish in this market of monetizing people's time. So I think Cameo is very, very focused on OnlyFans. And there's, of course, room for multiple companies to exist in this area. Yeah, I think we'll see Cameo. I mean, the company's only worth $300 million. I say only because that's a valuation that actually surprises me i think they'll be north of like 1.2 billion probably in a matter of weeks because

they're probably in the middle of fundraising because everyone is um so that'll be interesting to see kind of who which investors go after cameo and make it into their next round absolutely and then what about a bunch in terms of kind of a different type of business but what are the thoughts there that was a much simpler calculation i think you know you have this service called discord for hardcore gamers right to talk to one another bunch is and it's a very young company i think like launched like three years ago that's just a community-based chat service for mobile games so it's the mobile game version of discord and you know games in the pandemic period i mean it's uh you know my colleague tom talks a lot about it just such a such a good business um and

And this is obviously one of the areas that's just taken off. And Bunch has just benefited from that tremendously. So I don't think that was one of the companies, one of the few companies I don't think we had revenue data for. For the 50 companies that we wrote about, I think we had revenue data or growth data on at least 40, 42, 43 of them. and um we we did not have uh revenue for for bunch but um i actually think they may be pre-revenue let's see um yeah i think that that was that was probably the case i don't think they've monetized yet so that was that was an issue but their their user base um is is growing tremendously and uh i think it's just a you know tom my colleague tom dutton just calls it a no-brainer

And the plan is that they're going to generate revenue through in-app purchases, kind of customize the experience that people have with the app and add features in terms of how they chat with one another. And then eventually the company is looking to do kind of branded content and events in the app. But it's really just a bet on mobile gaming taking off. And that's a great bet to make. Absolutely. Some of these decisions were a lot easier than others. I think that's probably a good example of one. And there are a couple on my fintech category that were more straightforward.

But I think especially when you see some of these that were just accelerated so much by the pandemic and a bunch clearly, you know, people playing more games, people looking for that social interaction. That company, I imagine, I didn't do the reporting on this company, but I imagine has grown quite a bit during COVID. So that coupled with the fact, you know, that Discord has done so well, I think makes it a pretty obvious choice. Yeah. One of the things that stuck out, and Amir, you mentioned it earlier, is that about 20% of the list is in China. And so there's been tons of debate on Twitter, obviously, of like, you know, what founders and investors are leaving and leaving San Francisco, moving to San Francisco, who's going to L.A., Miami, Austin. You know, we can go around the world, almost Tulum, right? The whole nine yards. Talk to me both about just like geography in general.

Should people read into the fact that there's 20 percent of list on from China? And does that play into some of this more like mobile type of workforce, just given covid and the lack of need to go to an office? or kind of how do these things all relate to each other it's two separate thoughts and kate kate can talk about the the kind of u.s side of this we've always been focused on china we have a four-person team in hong kong that focuses on chinese companies and there are a lot of very good reasons to do that it set us up very well for the rise of bite dance which runs tiktok which is just a version of a of you know a service that they already have in china that's massive And we cover all the biggest companies there, Alibaba and up-and-comers like Pinduoduo, which is another huge e-commerce player.

But on the startup side, we're also able to follow all of the trends that oftentimes they start in China and then they end up around the world, especially when it comes to innovative business models. You think about, you know, monetizing video. That is something that companies in China did very well, you know, much earlier than companies in the West did. And it's really similar with every other type of business. What's interesting right now, with respect to the Chinese companies on our list of the top 50 most promising startups, is that a lot of them are enterprise businesses. They are not consumer businesses. The action in China right now in the earlier stages of venture investment have very little to do with consumer startups. There are some kind of direct-to-consumer startups in the commerce area, people who are going direct and selling makeup or selling other goods. But a lot of the action is in things like robotics or marketplaces that help companies find designers to help them create ads or branding. Um, there's, there's, you know, certainly a category of company that is using advanced forms of machine learning to diagnose various illnesses, um, you know, looking at, uh, you know, looking at, you know, x-rays or, or other, uh, health data and, and coming up

with, um, you know, coming up with a better idea of, of what's actually wrong, finding some patterns. And then industrial robots is really the core area that we focused on in this list. So many companies are developing robots for various purposes, whether they're aiding warehouses and making warehouses more efficient, or they are actually aiding in the testing of new drugs or vaccines in the case of COVID-19. So, there's just a lot of action there. But Kate can talk a little bit about what's happening in the Bay Area, which is definitely, as you pointed out, the hottest topic on Twitter. And I think we take a little bit of a more measured view. But when I was hearing about people like Drew Houston, who runs Dropbox, leaving the Bay Area, it's hard not to take notice. It's not just because people are looking for tax shelters

or states like Florida and Texas that don't have state income tax. It's definitely a bigger issue that has taken off during COVID, but Kate can talk a lot more to that. Yeah, I mean, half of our list was San Francisco Bay Area companies, but I don't think that that's any indicator

that San Francisco is going to be any, is going to be less important in the future. Like we don't know yet because people are leaving now. So if we do this list in four years, we'll have a better sense of like, okay, how significant is the Bay Area? But I think it's undeniable at this point that the debate is fair. You know, early in the pandemic, when I was asking questions about, you know, people abandoning San Francisco, I got a lot of responses that were like, no, they're not going anywhere. Why would you ask that? Or this comes up every year. It's not a story. And now it's clearly a story and people are talking about it. Yes, on Twitter, but also offline and people are moving to, for some reason, Miami and Austin have really, well, because of obviously tax purposes, but Miami and Austin have really become the hotspots. And I think every day you see more people doing it. And I know I've spoken to people who don't want to share online that they're doing it, but they are moving.

Um, so I mean, I think it'll impact the San Francisco Bay Area. I think what will happen is most companies that are very, very, very early will still want to build in Bay Area because there are just higher density of entrepreneurs and investors. And I do think that will probably stay true. But I think anyone that is experienced or later stage in their company, you know, somebody that sold a company and just is well connected, there's probably not going to be a big reason for them to be in the Bay Area long term. And I think that's kind of what a lot of people that I'm talking to are agreeing on. Yeah. And what's so interesting, I think, is there's obviously the tax conversation. There's like a weather conversation, if you will, as I look in, it's snowing out here in New York and it's not snowing in San Francisco. But also, it seems to be like there's a critical mass conversation as well, right? It's like, yes, some people in the early part of this adoption cycle might have moved for

taxes or because of COVID or whatever. But now, like, where's the tipping point? Right. Like how many people have to move to Austin or have to move to a Miami before it becomes like that's just the same thing as moving to San Francisco five or 10 years ago? Right. Because it's just like this critical mass. Any thoughts there? Is it a number of people? Is it certain types of people? Like if all the VCs move, then all the companies move or vice versa? Like, how do you just think about like what makes this a sustainable trend versus maybe just something that's happening during COVID? I mean, I think it's a hard question to answer. And I don't know, because we haven't really seen it happen. In the past, you know, we've seen conversations about second tier hubs, you know, you have Seattle, you have Atlanta, but we've never seen those companies reach a point of maturation that, you know, comes in close to the Bay Area. I suspect just because of the history of San Francisco, you may never really have something comparable. But you know, if you imagine a scenario in which every key investor is no longer in the Bay Area, there may be less

of an appetite amongst founders to move here. But then, you know, you still have these accelerator programs that in theory will probably go back to in person that are connected. And there are a lot of people who actually like San Francisco a lot and don't want to move. So I guess I have a hard time really imagining a scenario where there is this huge tipping point of enough people being in austin texas which is so different from san francisco that it really becomes like some replacement of sf but that's kind of just my personal take it's got great barbecue and cheap beers though so you know that's their selling point that's a hot summer i think it's important to talk about the distribution of employees and how that's going to change and there are there

have been companies zapier actually the company i mentioned earlier and and for people who don't know. It's a little bit difficult to explain, but it's basically software that helps make the connections between different types of applications so that they can talk to each other. So if you want to automatically save every email attachment you get to Dropbox, or you want to send all of your human resources forms to DocuSign, Zapier helps you do that. So they're pretty critical, under the hood type of service. They started in 2011. They are one of the oldest companies on our list. They have always been... The 3 founders are based in the Bay Area. They all moved out here and they were actually part of the Y Combinator accelerator. But they have hired people in a

distributed fashion. They don't have an office. I don't think they've ever paid rent. So there are going to be more companies like that and cameo you mentioned steven earlier they have become officially a fully distributed company permanently so they are planning to just you know hire people remotely from here on out now not every business can do that if you're in the robotics realm and you need people in a you know specific area if you're developing autonomous vehicles or whatever it is yeah you need like a group that's together there's no you can't replicate that virtually very easily. So we're just going to see a lot more of that. And companies have a lot of incentive to do it. It's much cheaper to do it this way. You can run a company much more efficiently and

be much more profitable faster if you do it this way. So I think that's actually a bigger driver of what we're all talking about here. There isn't a cheaper way to do business than there ever was. So I think that's really going to drive it. People see what's possible now. Some of that will continue. We don't know how much will continue, but definitely some. Well, I think what you're saying is as those companies scale too, and they really do need to hire a lot of employees, that's really when you need to go elsewhere. But I think maybe the really early days and going through Y Combinator, raising your first round, may be where San Francisco is still a really significant and important ecosystem. But yeah, as it gets more and more expensive, why not go elsewhere or go fully remote? Absolutely. And in terms of, if we kind of think of from the investor seat, there's two things that I think are happening, right? One is obviously there's this move from, hey, I want to meet people in person, warm intros, all that kind of stuff. To now there's this more like digital first world making investments across Zoom.

I think that that's like pretty well documented. And most investors, while maybe they thought that was going to be a big deal, seem to kind of have made the transition just fine. But also, there's been a whole bunch of, I'll call it gyrations in valuations, because it seems like certain sectors are seeing an explosion in valuations, and maybe other sectors that are becoming less hot are not. And so, how do you guys think through this comparison between public markets and private market valuations? We were joking before we were recording this on the day that DoorDash just went public, and literally, if you refresh the page every 20 minutes, they've added billions of dollars of market cap. So how do you just think of like that valuation component in the private markets and compared to the public markets? I mean, both are both both are incredibly robust. Robust is a great is a great word to use there.

Yeah. So, I mean, you know, as we all know, public markets do help determine private market valuations. And you're seeing both reached kind of insane levels. I mean, I just was talking to a seed investor before this call who said, if you are an alum of Robinhood, Stripe, or any other Airbnb, perhaps, you're going to get a valuation of $30 million to $100 million with no product or hardly an idea. And even if you are somebody, he said, that's somewhat experienced, but maybe not an alum of one of those companies, you're still going to command a pretty high valuation. So that's what we're seeing from Seed all the way to pre-IPO, which is, I mean, Stripe is reportedly raising at $100 billion valuation. I don't know. I think it's hard to imagine that it's going to persist through 2021 like this. But with that said, I think it will. So I'm really curious to see where valuations go next year. But yeah, I would just say both are really crazy right now.

It's confusing. There, of course, the macroeconomic issues here where interest rates and inflation play into what's happening in the public markets. Um, but I think because of what has happened, especially with companies like Google and Facebook and Apple and Amazon, I think a lot of the assumptions a decade ago that all of us in the press and, and many investors and many operators had about how big these companies could be with the core businesses that they had were just way off. they ended up having markets that were much, much, much bigger. And you have some similar arguments being made now, especially with regard to enterprise software, cloud software,

cloud infrastructure. People like Aaron Levy, the CEO of Vox, who's an excellent tweeter, if you don't follow him already, talks about this all the time. And I think there's definitely some truth to that. But what's different about the private markets in tech versus the public is also just a very limited group of companies that have traction that you can invest in. And there is an incredible willingness right now on the part of a lot of the money that's chasing private tech deals to just be out of the money for a while in the sense of putting money into work at these companies at a supremely high valuation and just not worrying about it for a while, even if it seems like too high of a price, hoping that it will work itself out. there's just so much money chasing so few deals. And maybe that's what you're seeing with DoorDash right now. People just want to park their money somewhere. And it seems like a good spot.

But we wrote this story, not to belabor the point, but we wrote this story about the 100X Club, which is the software startups that have these incredible valuations despite little to no revenue, especially in the cloud-based software world. Companies like Loom, which is a video communications tool and postman and and and some others i mean even notion you know with the productivity software app that that you probably have heard of um has a has a pretty lofty lofty valuation um and and yeah i just think it's a really unique period of time and uh i you know i don't think any of us can say whether it's ridiculous or not i think doordash at 72 billion dollar valuation, that requires a lot of profits to make sense. And I don't know that they're close

to showing us those profits. So as you guys think about the winners of 2020, I've seen that you've published a couple of pieces just around the venture capital returns. And some of them were company-specific. So I think Airbnb, I saw one where you went back and said who invested when and who's going to profit the most. But also just for the year 2020, how do you guys think about the big winners, and it seems like Andreessen and Founders Fund and Sequoia, again, kind of come up in conversation there. But just what are the thoughts and kind of how do you see that? Yeah, I mean, we just did a piece on the VC winners, and it's very clearly this year, Founders Fund and Sequoia. So it's the usual suspects. It's not surprising, but it is amazing

to see these firms kind of like landing on top with, in Sequoia's case, a 20% state in multiple of these multi-billion dollar IPOs. We calculated at least, I think, around $15 billion in returns, and that's not including the way that these companies are popping day one. And I'd have to be updating that story every minute to, in real time, tell you what Sequoia's returns are. But yeah, I mean, I guess it wasn't surprising to see who we did see on that list. It also included GGB Capital and some others that had just really lucrative early stakes. But again, I think the lesson is just this multi-stage strategy. You can see it play out in real time for Sequoia.

They've gotten a lot more aggressive early stage. They've even gotten, you know, they're getting more aggressive across all stages. And that's how they're really maintaining such huge stakes. And again, just getting in early, that's really the most important. And if you can get the seed and Airbnb, you're, you know, you're going to make a lot of money. Absolutely. Amir, anything to add? Yeah. I mean,

we pointed out that they had a chance to lead the series C deal for Airbnb on top of the other rounds that they led, but they were acting too slowly and Brian Chesky at Airbnb got, got pissed off and went with, went with founders fund. So that definitely cost them, cost them a bit. But just to hammer home this point that Kate made, venture firms or private tech investors are going earlier and earlier and earlier and paying more and more and more in terms of prices and increasing

the sizes of the rounds and you know tiger uh tiger global is um is one of the firms that kate's written about um a lot that it's being super aggressive another is co2 management like hedge fund that also does a lot of private tech investing you know they're actually very um very competitive with one another and they are chasing early stage deals like crazy because they, they want to get into the next, you know, Airbnb or what have you, or, or Snowflake as soon as possible. Um, and that's just, that's having a massive, massive impact on the private stage. Which is crazy because those are multi-billion dollar hedge funds turned venture capital funds that are like, I mean, they're literally going after $3 million financings and, and, and not

even if they're not necessarily winning. I mean, sometimes they are of course, but Co2 is one that we've seen, I believe, more active than ever. Maybe they were just as active last year, but before that, not at all. And in these super, super tiny early stage rounds and initially, it was confusing to see so much of that. But I think we understand when we see these IPOs and we see these stories come to an end for these... Not necessarily an end, but kind of, we can understand why seed is as competitive as it is now. Absolutely. And it also feels like there's this belief, you know, take the hedge funds, for example, like they have all the public market data. They should be able to see things that venture capital funds might not see or, you know, hey, if I'm going to buy the company on the IPO, why don't I try to buy it in the round before?

And you saw, you know, Fidelity and a bunch of these people doing that. And then they just kind of work their way down. It is surprising, though, to see the three million dollar kind of seed round. Right. To to imagine that a multibillion dollar hedge fund is competing at that stage. But again, if you get in at that stage, then you kind of have an option on, you know, information and, you know, kind of first rights or at least first look at a lot of things that happen to the company from there. I want to end talking about Stripe. It's come up a couple of times in conversation. They seem to, one, have built like the elephant in the room.

But two, they also seem to be bucking the trend and not interested in going public at all. I saw today somebody tweeting, calling SPACs SPAC PO now, which is just the most recent way to get into the public markets. But it seems like Stripe has no interest in that. They're raising money that's been reported at very high valuation. How do you guys see that business? And is this kind of a once-in-a-generation company that we can expect one day to be in kind of the conversation with Apple and Amazon and others? Or how do you look at this? Yeah, I think so.

I think it's a once-in-a-generation company, and I think Patrick and John Coulson's line that they've been giving out lately is just that they're in the first inning, and they don't want to go public as such an early-stage company. I mean, they're incredibly mature. They have, what, like a dozen well-developed products and compete with everyone in the fintech ecosystem, but they do have a lot of access to capital. And I imagine that there are many, many investors who are going to continue to be willing to give them those pre-IPO dollars. And eventually, I imagine they will go public. I mean, we saw Palantir was, what, 20 years old when they finally IPO'd this year? Stripe is, I think, pushing 10. I think they recently turned 10. We may not see them go public for five or six years.

I think it probably will be sooner, but I'm not holding my breath. I think they're taking their sweet time. They know they have many, many options. It depends on how many of their employees they let sell stock and kind of relieve some of that pressure through secondary sales and others. And Kate, I'd be remiss if I didn't mention your excellent story about Stripe also being a fantastic venture investor in and of itself, which I think matters here too, right? Yeah, I mean, it shows you how incredibly mature this company is. I mean, they're at the point where they're essentially a corporate venture capital fund, yet, like we discussed earlier, kind of still a startup, right? Like, we don't really know what they are. They've kind of created their own category. And I don't know if investors are readily admitting it, but they are beating out venture firms, big ones, for deals in fintech companies and in companies founded by Stripe alums. And I know there are many deals I don't know about. There are many I do know about. I think they are just very active. And I don't see why we're going to see them slow down. I know John Coulson recently did an interview where he said they plan to continue doing investments and their goal is to grow the GDP of the Internet, which is a very broad statement that I don't, you know, could really mean a lot. So I think we may even see them become a little bit more generalist outside of fintech. Patrick and John Colson also angel invest too.

We saw them do Roam, which was that note-taking app that has gotten a lot of attention. And they valued that company at $200 million. And that was a company that just launched its product. So yeah, it's really interesting for me, I think, to see a company like this behave like a venture capitalist and do so many things at once. Absolutely. I want to leave the listeners with 2021 predictions, if you will. Is there one thing that both of you either believe is going to happen in 2021 or are paying attention to as something that other people could learn a lot from watching? I can speak to things like mobility and autonomous vehicles, for instance.

You mentioned SPACs earlier, and I think we've already seen a couple of LIDAR sensor developers go public in that way, Belladine and Luminar. Belladine's revenue was shrinking when it went public. Luminar does not have revenue, and their SPACs both did very well, relatively speaking. So Luminar is worth $2 billion on paper now. So yeah, this is a pretty unique period of time. And I think that for especially some of the weaker players in autonomous vehicles that are trying to develop prototypes that work, you will see some of those go out next year as SPACs and try to tell a story. whether it's in automating semi-trailer trucks or small little sidewalk robots, or even passenger vehicles, which obviously, there's not a huge market for Uber-type services, but it will come back and they will try to make their case. So I think you'll see a lot of that. For those of your listeners who have Teslas or care about Tesla, which I imagine is a lot of

of them. This whole, quote unquote, full self-driving bent by Elon is, I think, a pretty misleading type of marketing to do because these cars are not ever going to be fully self-driving if the person who is behind the wheel is actually responsible for the behavior of the car. So that is something that I'm focused on. There's this beta out for people to test this full self-driving software on city streets, as opposed to, uh, highways where, uh, Tesla autopilot features were, you know, automated steering and braking were first launched. Now they're trying to do it on city streets. So those are some of the things that, that, that I'm watching, uh, in particular. Um, yeah, I definitely have some, my editor recently told me that my 2021 predictions

were not very interesting. And that is because I suspect a lot of what's happening now is going to continue. I think we saw record investment. We saw record fundraising. I think we're going to see it again. We saw these sectors be accelerated by COVID, ed tech, remote work, software, financial services. I think we're going to see that continue. The only thing I have to offer that's maybe a little bit more unique is I think we will see perhaps a record year of fintech exits. I mean, we do know Robinhood is planning, I think, a Q1 IPO. There's others like Chime that are IPO ready. And I know that there are FinTech companies that are very interested in going the SPAC route and, you know, Ribbit Capital, which is amongst the best FinTech firms, has their own

SPAC. So I think we'll see a lot there. But otherwise, I really think even getting a vaccine and even say the second half of next year is like normal. I still think, you know, even pre-COVID, the venture capital ecosystem, the startup ecosystem was doing phenomenally well. So I just suspect that it'll continue in that direction. Absolutely. That's fantastic. Uh, I ask everyone the same two questions before I end it. Uh, the first is what is the most important book that either of you have read in our lives? Yeah. Um, I know, I know I've got a good question. When a mirror starts looking off in space and scratching the back of his head, I'm like, all right. I'm like staring at my bookshelf right now because it's right in front of me.

oh man i could say my favorite book of 2020 okay um educated which is i don't yeah do you guys know i can't think of the author's name but um polina was telling me about this she said it's fantastic yeah phenomenal phenomenal read about um a woman growing up in in idaho in an incredibly conservative and religious uh family and kind of her journey out of that um a lot of amazing lessons gosh i i probably have to say the autobiography of malcolm x is still at the top of the list for me after all these years um i i still think about it a lot the journey of that that man in particular and all the twists and turns it took so i i think that's still number one for me it's a very difficult yeah it's a very good question i should have been prepared for it

but i need like a week to think about that so in a week i'll send you an email all right second one's easy uh easier and more fun one aliens are you a believer or non-believer i believe in life on other planets like yeah yeah okay one thousand percent not like the green alien that you see of course yes absolutely believe in but somewhere out there there are there's other intelligent life yes somewhere yes yes awesome where can i send people to uh to find you guys on the internet or find out more about your work at the information just www.theinformation.com yeah and i'm at kate clark tweets on twitter awesome all right guys thank you so much to get in the future thanks so much thanks for having us