This Week in Startups - Art Basel recap (Beeple, JUUL, Cathie Wood) + reacting to Better.com’s leaked layoffs clip | E1341

Episode Date: December 9, 2021

All news today. Jason recaps his Art Basel experience (1:55), meeting Beeple, being ultra candid with the JUUL CEO (6:58) and interviewing Cathie Wood & Tiffany Zhong about crypto at 500 Global's Pre-Money conference (17:23). Then, he breaks down the Better.com CEO's 900-person layoff over Zoom (31:36). Forbes Article mentioned: https://www.forbes.com/sites/kerryadolan/2021/12/03/investor-cathie-wood-on-bitcoin-why-she-sold-stocks-in-china-and-what-her-firm-is-buying-now/

Hey, everybody, I am back from Art Basel in Miami, NFT, Basel, and I have a ton of fun stories about meeting people, interviewing Kathy Wood. I had a Larry David moment with the CEO of Jewel, the Vapor Company. I had to do an apology for that. You're going to get to hear one of the first and only apologies here on this week in startups. And then I'm going to break down how to lay people off and how not to. And the absolute dereliction of duty by what I'll say is the, worst CEO of the year for 2021. I hate to give my predictions now, but he's certainly in the running.

The CEO of Better.com laid off 900 people on an absolutely deranged Zoom call. And apparently he's got a track record of treating people horribly. Today's show is me talking about leadership, what I've learned and how to treat people, which hopefully I've gotten better and better out of my career. And just what an absolute terrible leader, the CEO of Better is. We're going to break it down. in detail on today's episode of this week and startup stick with us. This week in Startups is brought to you by Mbroker's Startup Insurance Program helps startup secure the most important types of insurance

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AI-driven growth is not just about technology. It's about organizational transformation. Join more than 45,000 people worldwide who are driving results with data IQ. Visit d-a-t-a-I-U.com. All right, everybody. Welcome to another episode of This Week in Startups. Your boy, Jake. Cal is back from NFT Basel, which is a conference based upon Art Basel, which is where rich,

old people go to buy young people's incredibly expensive art, but has now been co-opted by the crypto space. Imagine the coolest party in New York City in 1984. And Andy Warhol and Basquiat and staying just everybody cool in the world. Jim Jarmish, Spike Lee, and David Bowie are hanging out, looking at art, and then the most annoying group of nerds come in and start telling you about how the decentralized imaginary money is going to change everything. It was literally like that. But it was a fun time, I have to say, and I'm coming around to aspects of the crypto space, but I've got anecdotes

from my four days in Miami. It was great to get out. I was a little panicked about going, but I was able to hop a ride with a friend. I know that lowered my concerns about getting the Omicron. I'm going to have a hard time with this work because everybody kept calling it Omicron, and that's stuck in my head. It's Omicron.

But obviously, it seems like that isn't as much of a concern. And knock on wood, I took my COVID tests. I did not get COVID while I was there. I only went outside, my personal belief, is that COVID spreads most on indoor spaces. And you just stay out of indoor spaces. So I didn't do any indoor spaces. A bunch of art outside.

Restaurants, I sit outside. I don't sit inside in restaurants anymore. It's a large crowd of people. And then I think when people are talking a lot. So that's why I think we don't see these huge spreads on planes. We see the spreading at churches, home parties, places, and even in quiet places, like movie there. So that's my personal belief.

I didn't get it. But mind did I have a number of crazy moments at Art, Basel, Crypto. I went down there because I was speaking at the pre-money event and I was supposed to be interviewed with Adrian Grenier by Eric Newcomer. The people who are running this conference, they literally changed the entire schedule without telling me the night before or whatever. So they were like, we don't have anybody interviewed Kathy Wood. Would you do that? And I'm like, oh my God, that requires getting up really early and I'd rather be interviewed with my friend, Adrian Grenier, name drop. Then they changed the literal schedule and they don't tell me. And I'm like,

wait, I'm not being interviewed anymore and I'm interviewing Kathy Wood and I'm like, guys, what's going on here? And they're like, ah, yes, we had some changes. And I'm like, I think I want to tell the people who are the speakers who were impacted. Like, what if I didn't show up or whatever? Anyway, putting it all aside, I'm no prima donna. I roll the punches. And I interviewed Kathy Wood. Turned out she was a great, great interview. I can't wait to have her on the show. She said she'd come on the show. And she is brilliant. Kathy Wood is very smart. She is also fearless and we'll talk about any subject.

I don't know if anybody has a copy of my interview with Kathy Wood. If you were in the audience and you did it covertly, can you please send it to me, Jason at calicanus.com or email producers at this week and start up.com. We will not rat you out for covertly doing it. We will thank you and I will send you an ember mug or my favorite anchor battery pack or give you a shout out, you know, like readweet your company or something. I'll owe you a favor if somebody happens to have this video. I don't know if the 500 startups people have it,

where now they're called 500 Global. But speaking of cool, kid walks up to me at a party. Hey, how you doing? I was with a couple of high profile of my friends. He said, hey, what do you do? He says, oh, my name is Mike. You're an artist. He makes NFTs.

I was like, oh, that's great. What kind of NFTs do you make? He's a pop culture. I said, oh, that's great. You know, good luck. Have you had any of these? And, you know, have you sold any? How's it gone?

He said, yeah, you know, I sold a big one. you know, and I said, oh, that's very cool. Like, what was it? And it was people. And so I hung out with people. I hung out with them two nights because we had such a good time hanging out one night. We hung out the other night. Really great guy.

Super creative, super fun. And that was a blast. And it's just great to see somebody. He's from Wisconsin. He's like a salt of the earth, cool guy, you know, kind of nerdy, but very funny, very engaging. And we had a good time. So shout out to my new friend, Mike Beeple. We're going to have him on the show, too.

Great artists, great fun. And then I went on a boat. I hung out with my friend David Sacks on a boat. I had a little bit of another, I had a couple of Larry David moments, if I'm being honest. They asked me, like, can we get you some champagne? And I said, is it Vuf Klico? And the one was like, does it matter? I was like, to me?

And they come back, it is Vub Kleeko. I don't like drink. People know that, but I do like Vov Kliqo for some reason. It's got like a very dry taste. I kind of like it. It's almost like a kombucha to me. And so I drink far too much Wolf-Clico this weekend. And I don't, I never drink.

I must have had five or six Wolf-Clicos a day. And I think they sponsored the event. But anyway, having had a couple of these Vov-Clikos, I was introduced to somebody. And I had a very socially awkward moment. As you know, I do the news every day on this program. And I read a lot. And so I meet somebody and say, oh, hey, you know, Jake out, what's up? you know, we're talking and, you know, podcasts, blah, blah, blah.

What do you do? Well, I'm the CEO of Jewel. It's the CEO of Jewel. Like the Jewel, the, and he goes, yeah, like the vaporized Jewel. I said, you're the CEO of Jew. And you guys know I always said, I'm pretty candid. And it could have been the Vuv. I'm blaming it on the Vov, but I just said to him, can I ask you a question?

Unfortunately, he was with his wife, so this is really awkward, but I said, how do you sleep at night? looked at me like I was crazy. And I said, like, you guys were making like peanut colada flavors and you're marketing this to children. And like a whole generation that was not interested in smoking is now pounding these jewels. Like, how do you sleep at night? And the guy says, well, I was brought in to save the company. I've only been there for two years. And, you know, we don't make pinocotta flavor.

They said, you don't make peanut colada flavor. He said, we've never made peanut collata flavor. He said, okay, I was just using an example, peanut collata. You made like 20 different flavors. So, yeah, yeah, we made like 20 different flavors. I was like, and you marketed it to kids. And they said, we don't market it to kids. I said, no, I've read the story.

I've talked about it on my podcast. I've seen the ads of young people who look like they're in a Benetton ad, all of the different diversity that's beautiful in the world, five or six different young people with blue. blueberry and whatever flavors you have. And the wife is getting increasingly upset. This guy seems like he's been through it before. And I said to him, I said, you know, the only way to save the,

the only way to fix a company jewel is to shut it down or to make it prescription, which would then crater your revenue. Like, if you guys honestly believe that this isn't designed to induce new people to smoke, then you would make it a subscription product. And it would be you go to your doctor and say, say, I want to stop smoking, and they would give you a prescription to suck nicotine with vapors and oils and whatever horrible stuff is in a vape pen that gives your popcorn lung and all this terrible stuff. So it's obviously a very tense moment. And there's really no way

for me to unwind what I've said. And I'm in my mind going, oh, no. Jason, you got to stop, J-Calc. This isn't an interview of this, you know. And I was nicer to forever for Nicola than I am in this one and this is why I don't drink because, you know, if you think I'm candid on this pod, you know, you put four of cliques in me. It's a whole different level of candidness. If you don't have business insurance, you failed one of the first steps of being a world-class founder. Well, startups should look no further than my friends at Embroker. Their technology will save you time and money and the prices are up to 20% lower than the slow incumbents. You can go from sign up to quote and purchase in just 10 minutes. And when you work with Embroker,

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It makes it super easy. They're world-class. Just they do a great job. So thanks to Inbroker. Inbroker.com slash twist. You just code twist and you get 10% off. Okay, let's get back to this great episode. So this is turning into a this week in Startups interview at this party.

And I'm trying to stop myself. I'm trying so hard. But I'm so pissed off about Jewel and the stories I read. I read every feature story. You guys know how I'm on Twitter constantly. I read everything and get my hands on. And I just remember all these kids who are addicted to it at schools and these people selling all their shares

and making so much money. And I said to him, I said, can I answer you a question? KC. Crosswave. I believe that was his name. I said, KC., can I answer? What do you do before this? And I kid you not.

I wasn't exactly drunk. I was tipsy. You know, we'll talk about four or five five weeks or over six or seven hours. I wasn't like bombed or anything. But there was just a little tipsy in me and it's very rare. I mean, I'd probably get tipsy one time,

but one time a year. on average in my life. I've probably been tipsy, no more than once a year on average on my life, maybe less. And he says, I worked in tobacco for 16 or 17 years. And I put my hands in my hand and I, the question is forming. When you're in interview, the question forms in your head. And I say to the guy, did you make a lot of money at least? And I'm asking this question like a box or throwing out a jab. Like just, it's like a little jab, knowing that I've got, like,

if I can just get him to try to block the jab, I got the knockout punch coming next. And this is why, like, I should be not interviewing people that I absolutely hate or detest because brings like some Irish out of me and he takes the bait. He says, I did well.

I did very well. Yes. And I said to him, I said, could you not have thought about something to do with the last 20 years of your life that was not so damaging to our children and society? And his wife, you just like, and I just was so angry that this person could come out to a party and be proud of their work that I just said to him, I'm sorry, I can't sit here and be in your presence because I'm, absolutely disgusted with your entire career and what you've chosen to do with your life. And I got up and walked away. And my friend who happened to witness this said, well, that was awesome, dude, but that was a little intense even for you. Then I realized he's like a friend of a friend, like one of my very close friends.

And the guy is in fact trying to theoretically solve problems. I mean, maybe he is trying to solve problems over there. I don't know. And so this is a public apology, a mea copa. If, in fact, Casey is a good actor, I don't know that he is or he isn't. I'd like to apologize on behalf of Vuvclico for misrepresenting their brand, for my friends who were at the party, to his wife, to him for making such an uncomfortable situation for all of us. Here's a clip of Casey. So despite companies' attempts to address public concerns about their marketing, we know that youth,

continue to be targeted. In guidance published just last month, the FDA stated that e-cigarettes, quote, continue to be marketed to minors through a wide variety of media and technology. Mr. Crossway, in your testimony, you state that Jewel has, quote, halted our broadcast, print, and digital product advertising. Do you believe that the e-cigarette industry should be subject to the same advertising restrictions as combustible cigarettes? if not, why not?

Congressman, I share your concern about youth getting access to evasion. Should they be held under the same standards as cigarettes? I took the steps in the company because I felt it was critical to limit any sort of awareness to tools like we were using. They're addictive products. Should they be held to the same standards

as smoking cigarettes? I think the FDA is going to have complete oversight over marketing practices. I chose to take the steps we did because I felt significant action needed to happen to address this issue. All right. I don't know if that answer was pretty good.

I mean, it's pretty easy for any of us to say yes. Yes, of course they should be held in the same standard. They're terrible for you. Nobody should be ingesting anything into their lungs. So I guess when you see an executive like that acting squirrely, I guess would be the most generous way. It's probably because they have super massive liability. And if he's been there for only two or three years and he's trying to clean the thing up,

I don't know. I think there's really only one way to do it, which is to just make these products, you know, get shipped from your doctor with a prescription. I just watched Dopesick. And if you want to understand this sort of mentality, the corporate executives, who will do whatever it takes to print money, watch the incredible, incredible, film, a series on Hulu, worth paying for Hulu. One of my top five picks of the year is DopSick, starring two of my absolute. favorite actors. My friend Peter Sarsgaard, shoutout center of the world, and Michael Keaton, one of the great actors, my favorite performance by him, not Batman, founder, about Ray Kroc, great entrepreneurial story. And watch Topsock. And, you know, we get a lot of heat here in the tech

industry for our products. And then you have people running amok, whether it's OxyContin or Jewel, doing serious, physical damage. And I wonder if we, we, as a society are holding the right people accountable here. Yeah, Facebook's super damaging. Perhaps we want to start with the OxyCodden and the Jules. End of rant. I did get to interview Kathy Wood on Tiffany Zong. This was a very bizarre pairing by the conference producers of PreMoney, who, as I said, I don't want to say they bait and switched me, but they just changed the whole schedule and what I was going to work on when I was at that conference. But actually, it turned out pretty good. So they put Kathy Wood, who managed

is $65 billion with a young executive Tiffany Zahn, who is running her first company, which is backed by Alexis O'Hanian. And it's a product to create, and we should have her on the program in six months, producers. Her product is essentially a platform, like a message board platform that allows you, think of it like Reddit, but in order to get into the certain subreddit, or this group, you have to show your NFT. So it's going to be a platform for NFT holders to then have their chat space and then eventually maybe a wallet or the or maybe open seeability. But think about how when an NFT project happens, you need to have a social club there. And we had a really actually good talk.

It was a little bit hard because she's doing something very narrow, it was very early in her career. And then you have Kathy Wood, who has, you know, got decades of managing tens of billions of dollars. Have Apple's new privacy updates impacted your attribution from paid ads? I bet it has. Well, good news. The folks at disruptive advertising can help you.

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symbol. And we had a really vibrant conversation. People said it was a little edgy. I don't think it was. She is a full contact, absolutely opinionated, fantastic interview. When she comes on this weekend service and she said she would. I think she'll be a top five to ten guests of the year pretty easily. Thankfully, if Forbes writer in attendance, Carrie Dolan did write a great recap article. We'll put that in the show notes. We pulled some quotes about this interview. Wood said she she'd been, quote, hearing that Bitcoin is so yesterday, I think that's a big mistake. Look at what's going on in El Salvador. I asked her, hey, do you believe that dictator is doing this for a good reason? Do you think he's a bad actor? Because most people, when they talk about the El Salvador

president, make good note of the fact that he's a bit of an authoritarian and actually refers to himself as a democratic dictator, I think kind of poking fun at it. And I think he's a very bad actor who's using Bitcoin as a way to enrich himself, I suspect, and to get a very bad actor. He's get attention for his country, but that's just me speculating. She replied that El Salvador is quote, giving $30 in each Chivo account, digital wallets created for El Salvador citizens. Prechivo, only 1.2 million people had bank accounts, now 3 million out of 4 million eligible people in El Salvador have banking services. So that's absolutely fantastic that he's getting everybody online. I asked her, hey, listen, most tech doesn't last more than a decade, sometimes two. Why would Bitcoin last

longer than that. And that's not because I believe that. You have to understand when I ask questions on this show or on All In, I will ask provocative questions that are the counter to what that person's believes so that they can put up their best defense of their position. And I sometimes say the cynical reply or the cynical counter argument to your argument would be. But you can be sure when I'm asking people, you know, to explain what an acronym is, 97 times out of 100. I probably know it. I'm doing it for the benefit of the audience.

I was asking that one for the benefit of the audience because I really wanted to hear her thesis. And she said, this is the most secure blockchain technology out there. What's going on right now would have been Rupert Mundell, he's a Nobel Prize winning a stream, to introduce a global monetary system, not under anyone's control. Look at Turkey.

The Turkish people have lost half their purchasing power since February. Wouldn't it be nice to have a little Bitcoin? And she's absolutely right about that. And then I asked her about holding Chinese stocks. And most people when you talk about China today, certainly a year ago, did not want to talk about China because we were in full engagement mode, you know, over the last 20 years since Bill Clinton, Bush, into Obama, Trump, and now on to Biden, the approach to China has been, hey, if we engage them, they will trend towards human rights and it will make our two countries so entwined that will reduce the chances of World War III. very hard for these two countries to go to war if we're making iPhones there, you know, and selling them to Americans, and, you know, they are importing something from our country. They don't report that much.

They do steal a heck of a lot. Wood said, we own very, very few stocks in China because they're unpredictable. They are grappling with what most governments are grappling with, the gap between the rich and the poor. That's a really great insight from Kathy. I replied, I think the Mad King is circling the wagons because he feels threatened. and then the audience was like, and I said, because they were kind of confused,

and I said, I'm talking about Xi Jinping when I refer to the Mad King. I don't know that he's gone mad, but the behavior, certainly from the outside, looks like somebody who is very nervous and acting not in the best interest of a democracy or a vibrant capitalistic market.

He's acting like somebody who is either scared of losing control and wants to get it back. And Wood's response is, I think it's to the best. benefit of the U.S. if China isolates itself. They are less likely to become the global superpower. This is exactly the answer I've been trying to get from people on this program who are afraid to say it, but this is the truth. What China has done in wanting to delist stocks or move them from our stock exchanges to Hong Kong, which is happening with D.D., if you look at the D.D. case,

the reason is on the New York Stock Exchange and on the Western Stock Exchange changes, you have to answer the question, are you controlled by the government in any way? Does the government have access? The Chinese are saying, we don't want to share data with the U.S. markets. It's actually not true what the Chinese are saying. You find this hard to believe, but they're being dishonest about something. It's really because they don't want the companies to have to answer the question that the government is, in fact, running these companies, and or has significant control over them, which obviously they do. I mean, look what happened to Jack Ma and aunt. Look what happened to the Bight Dan CEO over and over. the greatest CEOs and minds and entrepreneurs in China are electing to work on poetry and oil

painting shockingly at the peak of their entrepreneurial careers. It's because they're scared and they were getting too high profile and that was a threat. The authorities there and I think our point is, hey, they don't want really rich people in China and really poor people. So their approach to the fact that equities and companies grow very quickly, which is a good thing, is let's not allow individuals who create these amazing companies to benefit from that to this level. Let's take their money. They build it and then we take control over it and we redistribute that well. They're literally, it would be the equivalent of just taking Amazon, making an estate run service and saying, you know what, Amazon should really be more like the post office. It should be more like the military. It's core infrastructure and the executives

that company make far too much money. We'll just redistribute that to everybody else. So if you are, in fact, in our country and you believe in wealth redistribution, there's an example of it happening. And I encourage you to move to China or to Saudi Arabia, Korea, or another authoritarian country, Russia, and you can experience this for yourself. What it's like to live in a society where the authoritarian powers can literally take your business from you, your life's work, and then redistribute it. If you really believe in that,

if you're a Bernie bro, if you're Elizabeth Warren, Stan, absolutely move to one of those countries and experience what it's like to have wealth taken from the people who created it and you get to experience it being redistributed. You also will get to experience a million Uyghurs in a concentration camp being tortured, rape, and sterilized.

and people selling books being tortured and disappearing for two or three months. Look up Hong Kong booksellers and you can read those human rights abuses taking places in those places. She also talked about how she is deploying capital and investing. I thought this is a great part of the conversation. She said she was buying it to companies like Robin Hood, which I obviously am a shareholder of. Thank you for believing in the company. I believe in it as well. And companies that enable digital wallets.

Here's the quote. We're looking for the digital wallet, Coinbase Squares, Cash app, PayPal's Van Mo, less so. I am a shareholder of Square through an LP and a fund that invested in Square, so I was lucky to get some shares. And I also have a tiny, tiny, tiny, tiny fraction of Coinbase shares, again, from being an LP in another fund. So having been an LP in various venture funds, I'm starting to trickle in little distributions of shares of companies that I didn't directly invest in. And so I own like a couple of hundred shares of Coinbase and maybe close to seven figures worth of Where's Cash app. So I'm definitely deep into the success of Square. And I think that company is amazing.

So I'm sure to make sure there's full disclosure here that I stumbled into some shares of it, even though I was an indirect investor. Here's the quote, most analysts are focused on banks, which we think are being hollowed out by defy and digital wallets. Can't disagree with her. I mean, if you look at young people, young people are going to spend more time in their Robin Hood account, their coin-based account, et cetera, than they are in their Bank of America or Morgan Stanley account.

Wealthfront falls into that. if it's phone first, easy to use, quick, cheap, free, amazing. I asked you about Rivian. I said, speaking of fraud, should a company that sold zero cards would be worth $150 billion. I didn't mention the company because it just was a theoretical question. What's answer was, investing is about the future. It's not fraud.

It's perhaps a misvaluation. I agree with her. It's potentially fraud, though, when you do see the misvaluation occur. And so I think misvaluation is a red flag of potential fraud. or, you know, future failure. So it could be either of those two things. I don't call that fraud at all. We called out Nicola.

We knew what blank, Trevor Milton was saying, was wrong. We knew that there was trouble. So it's a great discussion. I had a great time. And Miami was good to get out. And I did find the location. I found three locations that are totally suitable for the All-In Summit. The All-In Summit will happen in all likelihood in April.

We're trying to find a date. I got the cost and everything dialed in, getting a conference producer to work with me and my team. And we will have 200 to 300 people. It'll be a very expensive ticket price, but we will share the videos, etc. And we'll probably have some event that's live and opened up to everybody. But we want to do like a small event for the top, top, top people in the world. And I'm working on a creative format for how the content will flow for six hours a day, three in the morning, three in the afternoon, and then everything else will be networking.

So the All In Summit, you can sign up for that at the All In website. So if you go to Summit. Dot all-in Podcast.co, Summit.orghumid.com. You can sign up to be notified by email. It's just going to be two days. Ticket price will probably be very expensive, like, $5,000 to $8,000, something like that, because it's going to include, like, fancy dinner. dinners and we're going to do it like top top like the TED conference. But like I said,

we'll have a couple of scholarships that will come out. Don't email me. Don't ask about it. We're going to do that at the end when we have like some number of tickets that will be available for scholarship. I'll explain it later. But don't email me now because I don't know how we're going to do that. And each bestie, there's four of us. We'll interview two people or so, maybe three. So four times two is eight. That would be a day's programming. So I guess it's going to be four. So four times four, 16, eight people a day. And those 16 are going to be the most iconoclastic most interesting, challenging interviews in the world is what we're going for. People who are making the biggest impact in the world.

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That's D-A-T-A-I-U.com to learn more. All right, last week, better.com CEO Vishal Garg laid off 900 employees, 9% of the company, on a Zoom call, and the video went viral on TikTok. I'm going to break down the video for you piece by piece and what a train wreck this is, how to do it properly, and what we can infer from this viral moment,

because it is very telling. So, before we get into the video, I got to set the stage here. Better claims to offer cheaper and faster mortgages and homeowner insurance products. Okay, it's better. I get it. They do this by eliminating the origination fees and commissions

and they do use software. Okay, great. Seems like a reasonable concept. In May, better.com agreed to go public, via a SPAC, you guessed it, correct, with Aurora, A-U-R-O-R-A acquisition corp, I don't know who is running that SPAC, which individuals. The SPAC was backed by a $1.5 billion pipe from SoftBank, Marci Yoshi-San's company, investment vehicle. A pipe is a private investment in a public entity. In other words, it's like a venture capitalist directly investing in a company,

except you do it in a public company. So the pipe. The types tend to get paired with SPACs. So a SPAC is a merger, technically, a special purpose acquisition corporation. You take a company. You take the SPAC, which has some money in it, and some shareholders. You merge them. And then the company takes over the shell company, essentially, that's already public. And voila, they're public.

But there's no offering of new shares unless you do a pipe. So they had a pipe there. The deal gave better a $6.9 billion valuations, according to our research here. And according to better SPAC presentation, 2020's revenue was $876 million. 2021 was expected to grow greater than 50% to $1.3 billion. They have about 10,000 employees. You divide $1.3 billion back of the envelope math here, which we did. It's about $130,000 of revenue per employee.

That's respectable. That's not profits. Obviously, they could be investing. It could cost them a lot of money to get each customer. So their CAQ, customer acquisition costs could be very high. We don't know how profitable they are here. But that's a large number of employees, but still respectable amount of revenue per employee. And obviously, if it doubles, triples, you know, you can have a very highly profitable business.

According to Bloomberg last week, Better amended the terms of its original SPAC deal under the new arrangement, the $1.5 billion pipe would be split into two separate investments. Okay, so a re-trade occurred from SoftBank. The first 750, $750 million, that is, would be a bridge financing. And Better would receive that immediately. That's a sign that things maybe, if you need that bridge, aren't so good, potentially. The other 750 million would be replaced by, quote, a more structured convertible note. A convertible note is a loan that converts at a certain valuation in the future or a discount to whatever the valuation is.

So they probably didn't have faith because the SPAC market has been struggling. Why has the SPAC market been struggling? SPAC market has been struggling because so many SPACs were created after TchMoth pioneered the space, my bestie, that a lot of people. came in and they just picked any company willy-nilly and just tried to get them public because maybe they could ride the wave. And so this is late stage bubble kind of moment, I believe, when people are spacking companies that aren't that strong or perhaps don't have products in market. I've talked ad nauseum on this program about Nicola, which is now proven

of fraud. Fisker, which I suspect will be a zero. It's my guess. I don't know if there's any fraud there. Rivian, Lucid, I think just got a notice from the SEC about their SPAC. That doesn't mean anything. The SEC regularly asks questions. I would guess nine out of 10 or 95 times out of 100 when the SEC wants information. It's just because they want to make sure there's nothing wrong. They're a watchdog, right? So kind of like getting audited by the IRS. So when you see an SEC asking for information, it doesn't mean it's an investigation yet. It's a request for information. So as a journalist, you want to pump the brakes and not make a sensational headline. Of course, people do. So I would give Lucid the benefit of the doubt. It's when the Justice Department or somebody like that then files an investigation and, you know, things start to roll in a different direction, right? But when you do see these valuations get disconnected from reality, which Alucid, Rivian, Fisker, and Nicola all are totally disconnected from reality.

You start to worry. And when SPACs, SPAC companies, and these mergers happen with companies that don't have revenue, don't have customers, you should be concerned. I said this years ago. somebody's got to pull the clip from when the SPAC stuff started. If you're investing in a company before it goes public, that's Jason's Razor, not Occam's Razor, Jason's Razor, Jason's Razor, Jason's Razor says, company's worth more than a billion dollars and they don't have customers yet and they don't

have a product in market. It's either a fraud or it's a potential failure in most cases, not all. So with that caveat, the new deal needs to be approved by regulators for better and the SPAC is now on hold. So when the market gets shaken up, everybody always has. me what happens to private companies? Well, it takes a little while for it to trickle down to the private company level, but it does hit the people who are about to go public or who are late stage. And typically what happens is a retrade. The valuations aren't holding up in the public market.

Therefore, everybody who's pre-public retrades changes the terms of the deal and you see things like this happen. This is all very important to understand what happens next. And soft bank restructuring is probably because they want to keep the deal. They believe in the company. you just don't believe in the price. So if they don't longer believe in the price, and they had to give a certain price to win the deal, right? They wanted to win that deal. They gave a great price. Softbank is knowing for paying top dollar and, you know, going long and they have big, big funds, you know, like $100 billion funds. In fact, $50 billion, $100 billion funds. They're really trying to double their revenue. So SoftBank retrades for two reasons. They want to keep

the deal. So they put the $750 in. They probably put that in at a different price. So maybe a lower price because they know the SPAC's not doing so good. And then the 750 could be at a floating price. It could say 750 at whatever the trading prices, you know, for the first 10 days or something, they can come up with all kinds of devices. And if they buy the shares and they go down, they can get extra shares, there's all kinds of ways to make sure they don't get screwed with that investment. And here's why it's important. The layoffs happened one day after the stack was restructured and put on hold. In other words, the founder was spooked and probably wondering about their runway and revenue.

So let's get into the clips. I'm going to try to take this very clinically. It was done terribly. This is the opposite of how you should do any type of layoff. In person, in small groups, is typically how these are done. Do them in this method and blame it on the pandemic. Means you really, whoever the HR person is and the CEO of this company should probably be fired for being knuckleheads.

Let's get into it. We're going to do three parts here. The intro, the message, and the wrap up. I'll break down each portion individually. I've had to do layoffs before. It is brutal. People will cry. People will get upset.

And even if you give them four weeks, eight weeks, three months of severance, if you take care of their health care for a couple of months, pay for their COBRA, whatever it is, whatever the standard practices. Even with that, it's tough because you might love your coworkers. You might love the job. You have to have a lot of empathy here.

And nobody likes to be rejected. Nobody likes to work really hard. And then get this news out of nowhere. And so this was a rush job, and the execution was amongst the worst I've seen. Clip number one, 35 seconds. I'll see you on the other side. I come to you with not great news. The market has changed, as you know, so that hopefully we can continue.

It was my decision, and I wanted you to hear from me. It's been a really, really challenging decision to make. This is the second time in my career I'm doing this, and I do not, do not want to to do this. I hope to be stronger. Okay. This is off to a very bizarre start. He's made it about himself. He cried, it's never easy to do this. He's had to do this.

This is, he's not impacted by this. He's a billionaire, apparently, because of this great company that he's built, or a good company. And already he's starting out that he doesn't want to do this, but it's existential, and it's all about him. this would have been better done if each manager went to their group and said we are in the process of downsizing the company 9%. Our group has been impacted. We're going to have ESS to take 25% of our team size down. This is never easy. We are going to make sure everybody in the company has a safe landing. We're going to work on helping you find another job. Ultimately, this is on management that we didn't do our job and plan properly. So the blame falls on every manager, including myself.

Let's say I was running the customer support group. We got ahead of our skis, the market conditions changes, but no excuses. And we are going to make sure everybody is taking care of. We really appreciate your contribution and we apologize for not doing our jobs better. It's 100% on us. Instead, he made this about his emotions, right? It's very weird. Also, the cadence of him talking and the fact that the CEO is doing it is very weird.

Almost like he's trying to score points for his own suffering. And again, making it about himself is just bizarre. And talking about the last time he cried and he hopes to be stronger, I mean, who's coaching this person? Like, it's not about you, dummy. It's not about you. It's about the person who has to go to their spouse and their three kids three weeks before Christmas and say, hey, mommy or daddy is out of work. And I got to find another job.

and I got 30 days worth of severance and I got 90 days worth of Cobra but we're going to be okay I'm going to find a job in that time period yada yada and of course we're in a time where anybody who's working for this company if you were able to get a job at better.com given the number of jobs that are open

you can be sure that there is there's a job shortage for information workers right now they're all going to get jobs so there is some reality here that this is not like the factory plant closing in a one-horse town and those folks are going to have to pick up their family and move to it on location. These are knowledge workers who are going to find instant jobs. If anything, this is going to, as is the case with most knowledge workers, when they get a nice

severance package, a lot of the people who still have the jobs are like, can I get that? And that is actually the better best practice is to say, hey, we're going to do layoffs. They're going to happen in the next 30 days. If you would like to take this package, you can talk to HR. You can email them and the package is going to be this many days and this much severance. And we're going to vest your shares for a year. And we're going to give you five years to option those shares because you don't want people who are being laid off. You're no fault to learn to have to execute their shares. They're very technical thing. But if you have to execute your shares, you might have to come out of pocket for $10,000 to buy your $10,000 for $1,000 each. And now

you're leaving. You're getting your last check for $7K. And you got to come out of pocket for $10,000 or lose the upside that this guy promised you, it kind of sucks. Let's go to the second clip. This one's 48 seconds. We are laying off about 15% for reasons, efficiency, and performances, and productivity. If you're on this call, you are part of the unlucky group. F-you, dude. That is being laid off.

Your employment here is terminated, effective immediately. Are you fucking kidding me? What does this mean for what's next? You're going to get an email from... MHR and AskHR at Better.com to your personal email address. Regarding the details of your severance and your benefits. For all U.S. employees, we're providing four weeks of severance, one month of full benefits, and two months of COBRA for which we will pay the premium.

So three months total benefits if you elect for COBRA. Okay. Again, you do this in smaller groups. You would do this in a more humane way. you would give people the ability to opt into it so the pain was lessened. You would take responsibility. None of that's happening here. And you also have this very bizarre, effective immediately, determined, effective immediately.

You don't have to speak to people that way. People should be able to say goodbye. I mean, if it's through no fault of their own, like, listen, if you're firing somebody because they stole something from you, I had some dipshit steal, like, one of our databases and we caught them. Yeah, that person's getting walked to the door if you steal like a database on your way out and you're going to get like the hammer of like Thor is going to come down a part of your head

from a law firm if you steal data from your employer which is really dumb thing to do. But this delivery is robotic and callous and the effect of immediately is just done terribly. This is not the person you send out there to do it. It's just his approach is like this faux sadness in his voice or maybe it's real. I mean, but either way, his delivery is terrible.

It's cold, it's callous. It's 1,500 people or 900, whatever, it's 900 people at the same time. It's just all kinds of bad in terms of the delivery. And here's the wrap up 28 seconds. I'll see you on the other side. Thank you for each and every one of yours individual contributions to better. I wish the news was different. I wish we were thriving enthusiastically as we were at the beginning of this year.

But that's not the case. And I am sure you will leave us in your next endeavor. I wish you all the best of luck. Thank you for everything you've done for better. Yeah, if you were actually thankful for everything they'd done for better, you would have done a better job at sharing this news and planning it. Again, the wrap-up is cold and callous. These people work for you.

It deserves more than 90 seconds or three minutes. It deserves a conversation. It deserves a conversation amongst each unit together and a little bit more of an explanation. This was done in a very acerbic. cutthroat mechanical way, and it lacked humanity. And it could be, some people are just not good at speaking like humans. We all have friends who are a bit robotic. Not pointing anybody out here, Sacks, Bremer.

But, you know, in moments like this, this is where humanity shines or doesn't. And in this case, it's the latter. It's worth noting this is not the first time, Praschall Garg, has attracted bad press as the CEO. of better. Typically, if people show you who they are, you should believe them. In 2020, Garg had an email leak to Forbes. We called employees dumb dolphins. Quote from the leaked email, you are too damn slow, cap blocks on. We're a bunch of dumb dolphins cap blocks on. And dumb dolphins get caught in nets and eaten by sharks. So stop it. This is all caps. So stop it,

stop it, stop it right now. You are embarrassing me. This is a bad. Wolf of Wall Street parody here. I mean, this is not inspiring. It's not intelligent. This is a, hey, we can do better. This is, I'm better than you and you're dumb. Let me ask a question here. Who's stupider? The person who hired a dumb dolphin or the person who's calling his employees a dumb dolphin. If they are in fact dumb dolphins and you're correct, well, then you're a goddamn idiot for hiring them. That's your responsibility, dummy. And if you make the wrong hire, you don't berate people and call them dumb dolphins in an email. So how stupid is this guy that he has the gall to attack the employees that he hired and to put in an email? You moron. You don't talk to people

like this. If you're going to talk to people, you would take an individual and the way you would give the speeches. I hired you all because of your incredible potential. and I have not done my job to give you the tools to support you and I haven't given you the clarity apparently of what it's going to take for us to win. For us to win, we have to consistently get better. And that includes me. If you have ways for me to do my job,

but 5% better a week, I'm all ears. You can email me, you can email me from an anonymous account, I'll take any feedback, create a burner Yahoo account, and email me everything I'm doing that I could do better. Now, as for what y'all could be doing better, let me tell you, I don't see the attention to detail in the selecting of our, I'm just going to pick if it's a sales team and you're giving them the speech, I don't see the attention to detail in selecting great targets to sell our product. I feel our materials have not gotten demonstrably better.

And I see a lot of people putting in a small amount of effort in customer success. And so I'd like a plan from everybody. Any idea you have on how to increase customer success and to get better leads. Because we're good at selling, but we suck at customer success. So we're losing great customers in. And I'll be honest, we need to pick and define our ideal customer profiles. So we're going to have two off-site meetings. One's occurring in 10 days on Friday.

The other one's going to occur two Fridays from then. I want everybody to put the thinking caps on and I want this company to be successful. And I want to see you all become millionaires. And if I haven't given you the tools you need, and that's on me. And if you haven't done your jobs and you do have the tools, well, that's on you. So I'd like everybody to have a candid discussion about how we can all get this done. Because I want to see everybody here get really rich. And I want this company to be really fucking successful.

So let's do it. That's how you give a speech. That's how you do it. You're candid and you're looking at the process, but you're not attacking the people. what's the point of telling somebody they're stupid? If they're stupid, you should have fired them, you should never hired them, that's on you. If the job's not getting done,

well, it's you and the manager who set the goals, set the resources, and do the hiring. So get a big mirror out, dummy. Michelle, it's time for you to go to coaching and perhaps therapy. And to get a mirror out and to look in that mirror and say, who's the real idiot here? The person who hired people and called them idiots,

or the people who maybe just don't have a good leader. You're a terrible leader. I can tell you that. And if I was on your board, I would have the board fire you for that email and for that performance. Those are unacceptable performances as the CEO. That's just bad leadership. You're unfit to lead.

Now, maybe you have control over your board, but anybody who's working at this company, I should leave immediately. Because I can tell you from just these two instances is that this person is not a leader you should be part of. This person, in all likelihood, will repeat these same mistakes. Because for somebody to change, they need to want to change, and they need to take deliberate action to change.

I don't see that in this individual. According to the Forbes article, in a company-wide call after the layoffs was announced the CEO told all remaining employees that better should have done the layoffs months ago. Okay, fine. If you have to do layoffs, yeah, you could have always done them earlier. He also warned that their productivity was being monitored. What?

A product company is being monitored? Okay, I know about this. There is a movement with remote work to monitor employees, computers, to know how much time. This person, now there's a third one. There's a third piece of evidence that if you work at better, if you were my cousin, my brother, or my friend, and you worked at this company, and I'd say, look, the guy doesn't know how to do a layoff properly. This guy called his own employees that he hired dumb dolphins. It's not even clever.

He's trying to be clever. Dumb dolphins get caught in. The metaphor is dumb. You can't even come up with a good metaphor. Bisham. You can't come up with a decent metaphor? Dolphins get in cotton. Dolphins are brilliant.

You ever meet a dumb dolphin? That doesn't exist. Dolphins mess with sharks. They mess with great whites. Dolphins talk to each other. They're in packs. They're brilliant. Terrible metaphor.

There's no such thing. It's an oxymoron, a dumb dolphin. just based on this person's ability to give a motivational speech or come up with a halfway decent metaphor, I would not work for him. And nor should you. You're a better employee.

Get the hell out of there as quick as possible. Start your exit. And if you really want to stick it to somebody like this who treats as people this poorly, the best thing for you to do is to take what you learned, take your education, don't steal any documents,

and start a competing company. because this person is not loyal to you. There's obviously a huge opportunity here. If there's 20 of you and you're really smart, get in your own private slack room. If you've been laid off, create a revenge startup. And go take this person on on the field.

That's what I would do. If you all got laid off, create a revenge startup and stick it to this guy. Now, we had three examples of this person being horrible. But wait, there's more. And this just gets so much worse. Here are some comments from the CEO made on blind.

Blind is apparently a place where you can verify that you have an email address at Google.com or at FB.com, whatever it is, and then post anonymously. It's like an anonymous message board like Glass Door, but you know the person is actually working at the company. Some comments were left on blind. Email me directly and we'll pay you to leave early so we don't sit here waiting for you to show up with your end of the work that needs to be done and then get left holding the bag. I also allege that

250 of the laid-off employees were only working two hours per day. Quote from blind. They were stealing from you and stealing from our customers who pay the bills and pay our bills get educated. So I guess he has monitoring software on computers, which is a thing now. If you get sent in a laptop from your employer with everything pre-installed,

you can be sure they have monitoring software so you should not do... I mean, you shouldn't do that work anyway. But don't do personal shopping. Don't go on social media unless that's your actual job. Do not reach that are not directly related. Just don't screw around when you're at work. Assume that it's being recorded. The two companies I run, we don't record people's stuff.

If people are stealing from us, you know, by not doing their job, it's my, I take it in a small company as it's my fault for not putting managers in place who are monitoring the work product of people. But, I mean, in this day and age, do we need to put monitoring software? What I tell people is, you need to be available to do a huddle between work hours, put in eight hours plus a day, and we're good. do 40, 50, 60 hours a week, whatever you think is the right amount

to move the ball forward for the company. But I trust you. That's how you have to approach it with remote workers. You've got to trust people and hire the best people you can. But yeah, I mean, it's possible people were logged in for two hours a day and pretending they were working the other hours a day or they were, I don't know, like surfing the web and doing Instagram or TikTok on their work computers.

It's possible. But still, why are you on blind, like backchanneling this? That is a private conversation between HR and those individuals. If you catch people doing that, you fire them. It's really that simple. That's not a public discussion you should be having. You handle this stuff privately. Is there an HR person who works at this goddamn company?

Who's the HR person here? I mean, they got to get fired immediately. The whole HR department needs to go. Garg confirmed that he was behind the posts after being questioned by a reporter from Fortune magazine. Garst stood by his comments on blind and asked by the Fortune reporter. He said, quote, I think they could have been phrased differently, but honestly, the sentiment is there. This person's a narcissist. It's my professional opinion.

I work with Founders for a living. A person's not fit to lead. It's a narcissist and has delusions of grandeur. Which is, you know, being a narcissist and having delusions of grandeur can be great for taking on like big, big, difficult problems in the world. A little delusion sprinkled in there is good. But when it messes with your humanity and how you treat your own team members, how you treat the lowest, paid person with the most menial job in your organization is how

you're defined as a leader. Let me say that again. How you treat the person working in the mailroom or cleaning the garbage cans, that defines you as a leader. That's what defines you as a leader. And you can see it. And the great leaders,

they stop, they talk to the security guard, they know the security guard's name when they're coming in the back door to get into their secret CEO office. They say, how's it going, Bob? when they go to the, you know, gym, they know the person at the front desk's name, that's great leadership, right? When you look at all of humanity

and you're rooting for them and you're treating them as individuals, that's great leadership. That's the opposite of this person. What it's particularly disturbing about this is, you know, it touches on a lot of things about SPACs and remote work, sure, we can geek out about on that. But who in their right mind would buy this stock

with this person as the leader? I mean, I don't mean to unload on this guy, but this person is not fit to lead. And if you're not fit to lead, then who on earth would want to own equity in a company run by this moron? Period. End of story. I mean, really, this person is not fit to lead.

There is something to be said for the efficiency of companies in the new remote era. There is a discussion going on in the back channels that during remote work, When people leave, do you actually see when one person leaves a group of 10, performance go up or down? If they were the weakest person in the group, performance goes up because everybody's not wasting their time with the weakest person in the group. That's why cutting the bottom 10% is some people's idea of a management best practice. It's not my idea of a best practice.

I think it's quite possible you could have five people playing perfectly, perfectly chef's kiss. Don't get rid of anybody. That's what I have at this weekend startups right now. There's no dead weight. There's no dead weight in my companies that I know of. It's my job to know. And my coworkers and my leaders and my company will tell me dead weight. This person's not keeping up with everybody.

So there is this concept, Jack Welch, you know, put everybody on a bell curve, cut the weakest people so you get a chance to replace them. And there is something to be said about that, whether you're running a sports team or your unit in your company. So your unit is the sales team and you cut the weakest salesperson who's not hitting their targets, that opens up a seat for somebody who might beat their targets. So you do have to keep that in mind. But that occurs in the group with that manager and you want to enable that manager to make that decision. You don't want to just unload on your entire workforce like this

because it just creates toxicity. This is a toxic person. Vashal is toxic. Nobody wants to work for a toxic leader. I've had to lay people off and it sucked. And I did regret not doing more earlier in a dot-com era and I was 27, 28 years old and I apologized. I put it on myself. I just showed people the books. Look, we were doing 500,000, you know, in the November issue of the magazine, and we did 300,000, you know, and now people wouldn't even pay their bills from two episodes ago. We're running out of money. And I run my companies with a year, a year of payroll in the bank, because I never want to have to go through this. And I tell everybody on my team, let's be frugal, but not cheap.

Let's not get ahead of our skis. If we're spending $100k a month, we should have $1.2 million in the bank. If we're spending $200k a month, we should have $2.4 million in the bank. You always want to keep enough cash in the bank, and maybe that means you're not, your growth rate isn't as high as it could be if you kept six months in the bank.

But I like the idea that employees know that if something goes wrong, we have time to fix it. Now, that doesn't mean layoffs aren't going to occur, but it means you can do them properly. because I had to do this at Mahalo as well when the Panda update hit and I had, we went from literally a $10 million run rate

on Google AdSense down to like 12% of that. Like I literally did $1 million and I was spending at 75 employees. I mean, it was getting expensive. You know, we were breaking even or losing $50K a month or something like that. We had a lot of money. But I had to lay people off. It was no choice.

And you just gave everybody as good a deal as I can. And I think different companies can give different deals. When you're a tiny company, you can give people two weeks. Hopefully you give them some notice before that to start looking. Maybe you let people opt into it. So you know, you try to give two weeks in a small company. A medium-sized company gives a month. This is a big company. No reason they couldn't give in two months. This person obviously had a lot of resentment built up for the team that he built. And that's another tell. If you are resenting the team that you have, well, then you've got to come in and you got to reorganize. This person probably should

have done a reorg amount of layoff. And the reorg should have occurred like this. You know, we got to be able to have more revenue per employee. We need to be at 150K,000k, 160K per employee for us to have enough runway. Therefore, I've looked at all the departments. I looked at the performance of each department. Look at the number of people in each department. We need to have more people in product, more people in sales, less people in marketing, less people in HR, less people in operations. Therefore, these groups have to cut 25 percent. We're We're going to have a meeting about cutting those 25%. And we're going to do it very thoughtfully.

And you could just tell everybody we're doing a reorg, right? A reorg, pretty simple. There is another crazy thing that's happening right now, which is the public markets are in a bit of turmoil because of the new variant of the pandemic. You're listening to this as an archival performance 20 years from now. The pandemic had its next big Omicron after Delta. we don't know. Week four or five of this being out there.

Seems like it's not going to be less deadly, but certainly it's going to be more contagious. Could be the end of the pandemic. But who knows? Things could keep happening. And so in uncertain times, it's even more important for leaders to be more considered

and to run their companies with a steady hand. They're looking at you in your company, if you're running a company, they're looking at you and they're looking for the steady hand. So you have to not lose you're cool or act like an idiot on a Zoom call. It's been a great show.

If you have ideas for the show, email producers at this week and startup.com.