The Startup Ideas Podcast - Special: DAOing a Twitter Board Seat

Episode Date: December 1, 2021

Jack Dorsey stepping down has created a pivotal moment in Twitter's history. Where do things go from here? Hosts Greg Isenberg (@gregisenberg) and Sahil Bloom (@sahilbloom) provide their takes on what can make Twitter take off. Part of the plan: they recommend giving the power to the people via a DAO.Want more community? Learn more here: http://trwih.comSPECIAL THANKS TO OUR SPONSORSCAPCHASEhttps://www.capchase.com/roomToday’s show is sponsored by Capchase.Capchase is a new financing option for fast-growing startups. They are offering Where It Happens listeners .25% off their first draw, preferred onboarding, and more. Their main product Capchase Grow lets you tap into your future revenue today, meaning you can reinvest in your business faster. We love what they are offering to business owners.To learn more go to capchase.com/roomMERCURYhttps://mercury.com/partner/rwihIf you’re a founder, Mercury is the banking product you need.Mercury offers FDIC-insured bank accounts, virtual & physical debit cards, international & domestic wires that are free to send, 3-click payment flows, and more. We personally use Mercury for our business banking with the podcast and Sahil is an investor.Get started in minutes from anywhere.

Welcome back to the Where It Happens podcast where we give you a seat at the table for the future of business. I'm here with Greg. We've got a special episode for you today. Welcome. We're going to be talking about Twitter, the CEO change, what it means, and maybe a little Web 3 angle to go create some change at Twitter. Looking forward to it, stay tuned. You're going to love it. I hate banking. Most banking products suck. So when I was starting all these new businesses and going on this new adventure, I turned to murder. Mercury. Mercury is banking for founders by founders. They make everything so easy and a beautiful, elegant design. There's free wires, virtual and physical debit cards. They even have a raising platform where they will connect you with other investors out in the ecosystem. Have you tried Mercury? I have. And let's be honest, when you log into traditional banking websites and apps, it's hideous. When I go into Mercury, it's like a walk in the park. So I love you. using it, it feels fresh, and I can't use anything else. You should definitely check it out at mercury.com. It will completely change the game for your banking experience.

I guarantee it. Capchase is the financing solution for fast-growing startups. Their main product, Capchase Grow, allows you to tap into future revenue today so that you can reinvest in your business and scale more quickly. There's not a lot of paperwork, and it's easy to set up and get started on. You don't have to waste time with fundraise. and there's no dilution ever. To get started today, go to capchaste.com slash room.

Capchase scales with you, allows you to grow faster. Go get it today. So from time to time, we're going to have to do just because of some pressing thing that has happened a special episode. Just jump on 15, 20, 25 minutes max and just go jam on something that has just recently happened that we feel like we needed to talk about

because it's very pressing and it matters. You're all trying to figure it out we're trying to figure it out, so we're just going to jump on in jam. Today is one of those times. And it's going to be the first time we do it, but we're going to be talking about Twitter CEO change. New CEO, big news, Parag. Agarwal. Agarwal.

Yeah, getting announced. Yeah, Jack stepped down. He was the founder and CEO, right? And then he left, I think, right? Then he came back, interim CEO, and then CEO again. Yep. And then he was CEOing two publicly traded companies, Square and Twitter, which is like pretty odd. I don't know if there's anyone else who does that.

And then all of a sudden we wake up and this former CTO, Parag Agarwal, is now the CEO. And I know you have spent a lot of time thinking about Twitter. You were on CNBC, you know, last week talking about. about it. So curious what you think about it. Yeah. I've been following this for a while. So I think it's a really interesting situation. You have basically like you need to to understand this move and to understand what it means for the business and for the stock. I think you need to kind of go back in time a little bit. So obviously you mentioned it. Jack was founder and CEO left, came back, was running this alongside Square, has a lot more control over Square. So that's one piece of context.

Square. I think he has majority voting control, a lot more equity value sitting in it. Twitter has become, yeah, it's been around for a really long time. Can we talk about that for a second? Yeah. So like, does Jack even care about, like, does he care about the equity value? Because I don't think he I think he cares about the control. I think the control matters. I think to him, like, if you go on, if you look at what Jack cares about now, it's like web theory and crypto and Bitcoin specifically. Yeah. And I just feel like he probably just didn't want to run a social networking website app anymore. Yeah, and it's become increasingly a political headache, right? So Twitter has become more and more cumbersome.

It's not probably like the fun, early stage startup tech company that it once was. Square still has that very entrepreneurial aspect. They're doing a lot of cool things in Bitcoin. They're doing a lot of cool things in Web 3 and crypto. So I agree with you. I mean, I think it's become a headache. So there's probably some piece of it that's motivated by that. He really did want to step.

down. But I think the really interesting thing to talk about here is like the impact of the activist investor that has been involved. So Elliott management came in. I think it was like in 2020, basically put out a letter saying Jack had to step down, had to focus on Square, they should let someone just focus on Twitter. Because it is weird. Running two big public companies as CEO, they felt like it was being mismanaged as a result. So they came in, they said that. The compromise that Twitter reached with these guys. it was Silver Lake and Elliott Management, was take two board seats, we'll focus more on growth, we'll focus more on revenue optimization, and basically that was kind of like a truce at the time.

Fast forward to today, you're in a world where Twitter really hasn't made a ton of progress on the revenue optimization, especially around direct response advertising. So for people that don't know in the social networking world, Facebook Snap, all these other players, direct response advertising is like the highest. ad platform you can have. And that's all about generating a direct response. So that's like you get an ad, you click on it to buy whatever the thing is. It requires really good targeting and it's really good profit margins. Twitter has historically had a just abysmal ad stack and really very poor direct response advertising split. So for most platforms it's like, I think

8020 direct response versus brand advertising. Twitter is like the opposite. It's 20% direct response. And they've never been able to make a platform. that is better for direct response advertising. Although to their, like I will say that Twitter does monetize better than Snap and Discord. On a per user basis. On a per user basis. Yeah. Yeah.

So we've got to give them some credit. Yeah. Well, and they've improved. They've improved to some extent. I'm actually, I mean, you saw me, I talked about it on CMBC. I'm actually bullish on what the long term is. I know you're not quite as bullish on Twitter. But my view around all of this is what happened was,

he kept getting pressure. Now suddenly he's like stepping down. There's some rumors floating around. You know, Ben Thompson talked about it in his newsletter today. There's some rumors floating around that basically like some of the board or somebody leaked it to CNBC who broke the news at like just before market open. Stock spiked at the market open like up 10% or something like that. Then it got announced two hours later that Paragagagawa, the CTO, who's been around

for all of the challenges that Twitter had, was taking on the CEO role. and the stock closed down 2%. So there was this massive swing, and then today, again, it's down several points. And so clearly the market is not responding very well to what the future looks like, because I think the hope was that the future for Twitter was going to look very different than the past,

that they were going to focus a lot more on driving direct response, driving more signal through the platform, increasing the revenue potential, driving more growth. And I think the general response now is that maybe that's not going to happen, and maybe there's an environment where, you know, we're not going to see that in the same way. I think I got to say I was surprised that, like, Parag was the choice. I actually thought it was going to be Kavon, who is the chief product officer who...

Stanford classmate of mine. Oh, I didn't realize that. Yeah. Yeah. Do you know him personally? No, I don't know him very well personally, but yeah. Yeah. I know him well, and he's awesome, and he's a great product person.

and interesting that they chose someone technical to be the CEO. That was just kind of an interesting. It is interesting, and I think it's part of the market response, right? The product side is their huge potential angle. Because Twitter, for me, like, if you imagine what the bold case for Twitter looks like, like how does Twitter become a $200 stock or $150 stock? It's by being the super app of the knowledge creator economy, the information creator economy.

It is today the central point of discovery. for anyone that's in that world of knowledge creators. It's the place where you're generating the most discovery for new people coming in. It's where you're engaging the most. And then you're using it to funnel people into your paid things. But now Twitter is starting to roll out products where you can start to monetize with a review newsletter. You can do the super follows. The Twitter blue, like you can create more engaging content, keep people on the platform, longer form things.

And so the product angle, what you just brought up of like Kvon running more things, is pretty interesting for them as a place. Because as you have better products, as you have more engaging products, what that does on the revenue side is it allows more signal to be drawn out of the platform, which enables advertisers to actually target more effectively. That drives up direct response and suddenly you're able to actually monetize the users more. There's more engaging content, which means there's more user growth. And so that's a pretty exciting thing too. Twitter's just so frustrating for me because I'm like it's two to three product features away from being like a $200 billion company. Right?

And when you open up the app, yes, they launch like, okay, they launch spaces, they launch super follows, they launch blue, but it's like, these are, actually I'll give them credit to, on spaces, like that actually was really well executed, but the app basically feels the same. Yeah. Like it basically is the same app. And when you think of like, you know, Instagram, Facebook even, companies like that, like, they're TikTok, like they're constantly innovating. So I just, I can't be, I'm not really bullish, you know, if we're saying, am I bearish or bullish?

Like, I love Twitter. Yeah. There's like, it's so obvious what they could be doing. They could be like professional social networking kind of vibe, like more towards like a LinkedIn experience. They could, I know they're doing some Web 3 stuff, but they can be like really, really taking a bet there. But I just, I mean, if I just look at the last 10 years and just, just. see what they've shipped. They're just, the velocity isn't there. But now the velocity sort of is there, right? It definitely, for the first nine years of that 10 year period. Do you have Twitter

blue? I do have Twitter blue. And like, what do you think of that product? I like the ability to undo tweets. It doesn't feel like a huge advancement. I like the ad-free reading that comes with it through articles. But beyond that, I mean, it's not a huge advancement, but I think a lot of people are using it. I got to change the color of my app icon. That was the other thing. I mean, I honestly look at Twitter Blue and I'm like, are you serious? Like, is this a joke? But it doesn't matter. Like, to me, it's less about what they've actually launched and more about the fact that they're actually launching things.

That's where my head is at. I'm like, at least they're showing things. Can we raise the bar for Twitter? Yes. Can we raise the bar for Twitter? Like, our bar is so low for this company. No other company we would have this bar, this, this. low. Yeah.

This is, I totally agree with you. This is like, it's reminding me of this framework. Ben Thompson just talked about it and it's an old Mark Andresen framework, which is so good around this, which is like the whole product market fit framework. And Andreessen had talked about way back in the day how there was like two eras of a company. There's before product market fit and after product market fit. And Ben Thompson, I thought, talked about it really well and he said basically Twitter in some sense, like hit product market fit two. quickly and then had no incentive to continue grinding away at it to find new nuances and make changes quickly. And so it hit this struggle point of like it literally was the perfect product

from the get-go. And especially for that era, they hit it so quickly and people loved it so much, the like micro-blogging for breaking news, quick things, that they never had that grind of like having to keep innovating and adapting compared to a snap who like had some product market fit but hadn't really figured out the business and kept innovating very, very quickly because they had this constant urge to continue to find new product market fit and new segments. Twitter never had that. So suddenly it lost its entrepreneurial urge very early in its trajectory, and now it's trying to restart it, and it's pretty difficult to do, as you're saying.

Yeah, it's difficult to do, and it requires organizational change. It requires, like, you know, new people, new energy. and I don't know enough about what's going on inside Twitter, you know, if they have the right people. And I don't know if this CTO is going to be, you know, the person for it. If he's product-oriented and he's got that energy, then, like, I'm maybe a little bit bullish to neutral. But if he is not product-oriented,

No, I don't think so. I mean, I'm kind of in the neutral to bearish on Twitter right now. Stock is what, 42? Well, let's close out with that on this. So make your prediction of the future. One year from today, so today is November 30th. One year from today, the stock is currently trading at $43.55 as we sit here. Basically, over the life of the stock, it's where it was when it went public.

I think it went public at like 40, and it's absolutely. 43. It kind of had the huge troth. Donald Trump breathed some life back into it. It spiked, hit 60 plus in, you know, earlier part of 2021. Now it's down at 43. One year from today and five years from today. Where do you have the stock and why? One year. Not financial advice. Not financial advice. One year from today, it's trading at 43.59 right now. Yeah. 4358. All right. I give it 58-43. one year from now. Okay. So, you know, it gets a bump.

Okay. But I think it gets a bump because social gets a bump, not because Twitter is, you know, releasing tons of stuff. So lags behind the stock performance of Snap and Facebook? I think Facebook outperforms Twitter. Okay. And then five years from now, I think it's exactly where we are today. It's like 43, 57 or whatever.

Like Twitter is one of those. those companies that I think just ends up kind of coasting, you know, and unless, unless this guy is the savior. But yeah, that's my gun on it. Okay. You? I'm going to go on the other end of the spectrum here. I've got Twitter 100 plus a year from now. Again, not financial advice. A hundred plus. I think there's 100% upside from here. And five years from now, I've got it at 200. So do you think it outperforms or underperforms Facebook or meta? I think it outperforms all of the other social platforms.

That's my hot take. I think there's so much untapped potential here. And people want it to be amazing. People haven't left. In the 10 years of this product being pretty bad and not innovating, people are there. And now all of a sudden they're starting to be glimmers of it being slightly more engaged. and people are hyped on it, not the stock yet. But the business, I actually think,

like I think there's a separation of business in stock here, and I think the business is going to start showing a bunch of potential, and the stock might follow. And so, like, that's why I think it's going to be, I think it's going to be a $200 billion company. What's the market cap right now? Let's look. Market cap today is $34 billion.

I think this could be a $200 billion company. It seems ridiculous. If only we can create a Twitter Dow and buy the company, make it community-owned. and actually run the ship like it should be run, run the ship like it should be run, then I think you're right. We could create a Dow to buy a board seat so that we would have influence. How much is a board seat?

I don't know. I wonder if we formed a Dow and made enough noise around it, if we could convince them to give us a board seat as the Dow. As a community, right? It would be kind of interesting. Why is it, think about this, why is it that the community, the Twitter community, doesn't have a seat on the board. It's almost ridiculous.

It's kind of a fascinating idea. Why don't we actually, we should go into the community after this, and I want to talk about this. Packing McCormick hit me up. My boy, after you see this drop, let's talk about doing this. We form a Dow to take a,

I know he's a Twitter Bull, too, by the way, because I've talked to him about this before, but we form a Dow to go take a Twitter board seat. And we position it to them. We go talk to Brett Taylor, the new chairman of the board. He was a Stanford grad, by the old. and someone I think very highly of.

We get at least get a seat in the room and have a discussion with them of the community should own one of the board seats. Totally. And we form a Dow, raise enough money to go do it, and we take a board seat to drive Twitter in the right direction. I mean, if Constitution Dow could raise $40 million in a week, could we raise $400 million in a month?

Do you think, I don't even know if we need $400 million. We might be able to do it with a lot less and convince them that it's worth doing and we can show enough support by raising some amount of money to go do it. and go take the board seat and see if we can create some change around the product. All right. I think it's pretty interesting.

Cool. All right. Twitter Dow, we are going to buy a Twitter board seat. That's the takeaway from today. Really enjoyed doing this first special episode and I hope you learned something from it. If you're interested in getting involved in the Twitter board seat Dow, hit us up in the community, TRWIH.com to join. And we look forward to seeing you there. See ya.

Capchase is the financing solution. for fast-growing startups. Their main product, Capchase Grow, allows you to tap into future revenue today so that you can reinvest in your business and scale more quickly. There's not a lot of paperwork, and it's easy to set up and get started on. You don't have to waste time with fundraising, and there's no dilution ever. To get started today, go to Capchase.com slash room. Capchase scales with you allows you to grow faster.

Go get it today. I hate banking. Most banking products suck. So when I was starting all these new businesses and going on this new adventure, I turned to Mercury. Mercury is banking for founders by founders. They make everything so easy and a beautiful, elegant design. There's free wires, virtual and physical debit cards.

They even have a raising platform where they will connect you with other investors out in the ecosystem. Have you tried Mercury? I have. And let's be honest, when you log into traditional banking websites and apps, it's hideous. When I go into Mercury, it's like a walk in the park. So I love using it. It feels fresh and I can't use anything else. You should definitely check it out at mercury.com. It will completely change the game for your banking experience. I guarantee it. Join our free community at TRWIH.com.