This Week in Startups - Barclays blocks Binance, China pauses Didi downloads + Steezy CEO Evan Zhou | E1241

Episode Date: July 6, 2021

Jason covers the red flags emerging around Binance (2:34), the Chinese government's swift action against Didi relating to data privacy (16:40). Then Steezy Founder & CEO Evan Zhou joins to discuss how simple an MVP can be (27:44), growing & monetizing a consumer SaaS company (32:56) & more.

Hey, everybody, hey, everybody. Welcome to This Week in Startups. We've got a great interview for you today with one of my most successful portfolio founders. Evan Zoe is with us. He's the CEO of Steasy. It's an app that teaches you how to dance. And Steesie graduated from our launch accelerator back in 2018, part of the eighth cohort. We now have done 23 cohorts of seven companies each.

So the accelerator is doing great. And this is one of the breakout companies. You know, we expect one out of 10, one out of 20 to break out. And he's one of those. And he joins us to talk about the explosive growth in consumer subscriptions. We had great success with Com, then Fitbot, and now Steasy. This is a really interesting category. And obviously, Dance exploded because of TikTok and YouTube.

And we talk about content marketing, how to get customers through making content, as well as what happened during the pandemic where they had explosive growth. But before we get to that, two important stories for you. Governments are cracking down on Binance. you know, like finance with the B. This is an unregulated rogue cryptocurrency exchange that has a very, very shaky foundation. In fact, it's got no foundation at all. We're going to dig into that.

And maybe this is the black swan, along with Tether. People are looking at Bonance as a potential black swan for crypto. We don't know if that's the case. We're going to dig into why so many governments are banning them on this episode. And China has blocked new downloads in D.D. the Uber of China just days after their IPO. They haven't shut the service down as the press major believe in some headlines.

So we'll talk about that. Let's get to it. This week in startups is brought to you by Our Crowd helps you invest early in pre-IPO companies alongside professional VCs. If you're interested in investing, you can join Our Crowd for free at OUR, CRO, WD.com slash Twist,

brainbase. Protecting your idea should be simple. Built by founders, for founders, BrainBase File is a clean and automated trademark filing platform that gives anyone the ability to protect their idea. File now for just $169 at BrainBase.com slash Twist using code Twist and Masterworks. The first company allowing investors exposure into the Blue Chip artwork asset class. Twist listeners can skip the 30,000 person wait list by going to Masterworks.io and using promo code Twist. Governments and banks are cracking down on Binance. According to this FT article just last week, the UK announced it was banning finance from operating in their country, which led the UK Bank, Barclays, to stop supporting wires to finance yesterday, July 5th. Here's the quote,

with effect from today, Barclays intends to stop credit. and debit card payments to Binance. This is a huge piece of news. Why would Barclays say this at an email to CoinDesk, which is a pretty good site covering crypto? Well, they explained this action does not impact the ability for customers to withdraw funds from Binance. Now let's let that sink in for a second.

They don't want you putting money in there, but they're letting you take money out. That's a pretty clear statement that they think this is a house of cards. That's my interpretation. If they don't want you putting your money in there, but they do want you to still be able to take your money out. Barclays, which is a sophisticated bank, is sending a message to their customers. Now, this isn't the only thing that Binance is going through.

If you don't know what Binance is, it's a super major crypto exchange. They've processed trillions of dollars worth of trades in 2021 according to the company. And we're going to let that sink in for a second. That's according to the company. One of the top-ranked searches for Bitcoin and Crypto Trading Volume is coinmarketcap.com, which we reference and we pull up all the time, which was acquired by Binance in 2018 for a reported $400 million. Basically for a website that put together a bunch of information on how the crypto exchanges were trading. At the time of the acquisition, Binance's founder Chang Pang Zao, who is known as CZ in the industry, said, coin market cap has more users than any other product in the crypto space.

Zau said even though their money generation mechanism is not as strong as finance, they do have the users. It's a very valuable platform. It's no surprise. Then that coin market cap gives finance an exchange score of 9.9 of 10 while Coinbase is 8.8. So that's a little shade. That's a bit of a red flag. The Barclays thing, major red flag.

Now, buying independent sites with high traffic, that's been done across industries for a long time. Casper Finance, the buyout of a mattress review site. It's a little bit shady when you think about it. And look, the people running these data sites, what are their incentives, right? If they are running the site that shares the data, well, they want to make the industry look big and they want to get more players in the industry. So this is where a conflict could be happening. I would not be surprised.

I wouldn't be surprised if a lot of the volume on Binance is from what's called wash trading or painting the tape. If you don't know those terms, basically means. people who own a stock running a bit of a scam. They send each other, the stock back and forth. The suckers come along and they say, wow, look at all this volume. Look at all this is trading. And many times in crypto, I've wondered and other people have wondered, is there really that many people trading these weird cryptocurrencies? Is it a billion dollars really going through the system a day for this one crypto? Well, it could be the whales in the system, the people who got in

earlier are looking for new bagholders. This is the theory. Well, how do you get new people to buy the coins? Well, you show volume. Then this wash trading really misleads the public, and that's why it's illegal. Now, if you're running a crypto exchange virtually with no rules in no jurisdiction, well, who's checking to make sure you don't do that? That is, I think, potentially one of the things we're going to find out. And this manipulation has been studied all the time in cryptocurrency. One of the great things about cryptocurrency is that it's less regulated so you can do more interesting things with it. But the less you regulate something, the more people can run scams. If you're in a casino, the idea that the dealer would be in on, and they would be what's

called a mechanic, dealing from the bottom of the deck, giving some people ACEs, giving you two seven. That chance at a home game, very high. you know, in a legal card room very high. But in a regulated casino where there's something to lose like your license, it's harder. And the dealers are monitored with cameras. At a home game, you don't have that. So these offshore exchanges in crypto, that's like playing in a home card game run by the mob or by illegal sports books. And, you know, when I was in L.A., there were a lot of card rooms like that. And I wouldn't play in them. I played a couple times. But I knew that there was something funky going on. And then on the other side, you had home games where no,

where it was just my friends, people I know. I will only play in games with people I know. That is how I would encourage you to look at these offshore accounts that if there is something that can be done to give another person an edge, it's probably being done, which is why I also don't play online poker, because people can share cards and they can run all kinds of different scams. Now, I'm not saying that finance is a scam. But the red flags start adding up. And with Teller, the red flags have been adding up. So we investigate, we go deeper.

Now, back to Binance, it's incorporated in the Cayman Islands and it has no headquarters. That is another major red flag. Binance is in exchange that operates in many, many different jurisdictions, but is not rooted in any of them, major red flag. And so when comparing regular companies to blockchain companies at a crypto conference in 2020, finance founder CZ said the following. You have to have an entity. You have to have a headquarter. You have to have a bank account.

All of those things don't need to exist for blockchain companies. Okay, think about that. It's like, is this guy like a James Bond villain? Is he running like Spector or something? It's really weird. And then in this financial time story I referenced, which will be in the show notes, here's what they say.

While the organizational charts of most companies resemble a pyramid with a headquarters at the top and subsidiaries below, finances is more like a hydra, with semi-autonomous units operating around the world. Literally, the criminal organization in Captain America is called Hydra, and in 007, Spectra's logo is an octopus. They are running tons of different exchanges all around the world with no headquarters and no bank accounts.

Is this seem normal to anybody? Or is this the new world we want to live in? One person with no headquarters and no regulation takes all of your money. While one of the most respected banks in the world, Barclay says no more deposits, this is red flag, red flag, red flag, I mean, this is a red flag factory at this point. Okay, it's time for another Our Crowd deal of the week. Right now you can join Our Crowd's investment in Saito Reason.

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2019 and 2020, they benefited from companies IPOing like Beyond Meat, Yum, Yum, and Lemonade. And some of Our Crowd companies have been acquired by buyers like Intel, Nike, Microsoft, Oracle, and Uber. With Our Crowd, accredited investors can invest directly and easily in startups before they IPO or get bought. The investment professionals at Our Crowd have already invested hundreds of millions of dollars in over 200 companies with dozens of exits. So again, the Our Crowd account is free. just go to O-U-R-O-W-D.com slash twist, our crowd.com slash twist. And C-Z, who I'd love to have on the program and talk to him about all these red flags and have him explain, you know, why you should trust a company with no headquarters and no bank accounts with your money, with your life savings.

I mean, we've had pomp and other people who are in the crypto space say that they've got 90% of their net worth in this. I meet many crypto people who have 90 or 100% of their money in crypto. This seems really. dangerous to have your money on Binance because they have no headquarters, because they are unregulated, because, because how many riff flags do their need to be? Now, when listing a crypto on one of the exchanges in the United States, traditionally Coinbase and others have been super careful about that, Robin Hood, et cetera. I think they think a little bit and they try to be thoughtful how long as this crypto existed. Now, they still want you to make your own decisions.

Full disclosure, I have a small investment that's gotten very large in Robinhood. I'm not in Coinbase. But those are organizations that are regulated in the United States and who have deep banking relationships and are regulated. And if they make mistakes, like we've seen, they get fined. And so he just says, I'm not in charge of listings, but finance should list blank. Like, wait, you're not in charge of what gets listed. Okay. I mean, I think there's a lot of people who feel that this is how the world should work. Anybody should be able to open an exchange and anybody should be able to trade and buyer beware. And if you don't want to play in a home game that could be corrupt with a mechanic as a dealer

or people playing from the same stack of chips, you know, two different players trying to put the squeeze on you or everybody's putting the squeeze on you or the cards could be marked. You know, there are some people who feel like, you know, you're a mark and you deserve it. That's kind of the vibe I get from this guy is that, you know, if you decide to use his services, you're a mark and it's it's up to you to defend yourself. If it was me, I would take any crypto I bought on these exchanges and I would move them to either a valid exchange or to my own wallet as quick as possible. I would not trust leaving your money in Binance. That sounds like the stupidest thing you could ever do. So anybody who has a Binance account with any amount of

money on it, listen to me now. Take every single penny out of Binance and put it into your own personal wallet or take it off the exchange, you know, put it in cold storage, put it on an exchange that is based in a region where they are regulated. Absolutely, do not trade on these exchanges. And if you insist on trading on them, why would you leave any amount of money up there, get it all out of there as quick as possible is my best advice. That's what I would say to my friend, if I saw these red flags. The second I see the Barclays thing, the second I see we have no headquarters, we don't need bank accounts. All those red flags start popping up. Now, it doesn't mean it's a fraud. It doesn't mean it's a house of card. Does it mean it's a black swan? But it does mean

use your common sense. When I had friends told me they went to these poker games, they won three hands, and then they lost all their money and they had to buy in two more times and then they lost that. And they're like, yeah, I think that game was rigged. I'm like, oh, and they're like, yeah, I'm going back next week. I'm going to get my money back. I'm like, yeah, maybe you want to go play at Hollywood Park or you want to go a commerce casino where at least we pay the rake and we know how they pay their rent. Okay, here's a tweet from the awesome Twitter handle crypto well. I don't know who this person is, but they seem to be a fan of crypto and critical at the same time, something that most crypto people don't seem to have the ability to do. Be objective

and be a fan of crypto. That's where I put myself. I'm a fan of crypto, own some crypto. I think it's fine to own some crypto. Might even be advisable. But objective. He says, in March, CFTC opened a probe into Binance and CZ said, ignore the FUD, in quotes. In May, DOJ and IRS opened up probes into Binance. NCC calls it FUD. Today, UK regulators confirm that Binance can't operate in the UK. Watch for CZ's next tweet calling it FUD to lessen the impact. And there are the receipts if you're watching the YouTube video.

A tweet from Jacob King, when Binance goes down, users will slap themselves for ever trusting them. And he lists the reasons. One, created in China a few years ago. Two, no headquarters or phone number. Three, top executives are all resigning. Four, banned dozens of, banned by dozens of country, five, involved in nine giant lawsuits, six being probed by DOJR, IRS, CFTC. So, again, we're discussing it here on this week in startups, because I know a lot of

your crypto fans, and we're watching this space, like Hawks, because we saw the entire ICO space, 99 out of 100 of them collapsed, everybody lost their money. Is that what's going to happen here with these exchanges? I get the sense, that's a real possibility. That doesn't mean anything Coinbase or other crypto exchanges that are regulated and run well will have problems, but I do think that this is a serious red flag. And so on July 1st, almost on Q, CZ underscore Binance says lots of fud, lots of problems to solve, lots of opportunity.

That sounds deranged. God bless America, I guess. I may I live in that, but he got 7,500 likes on that. Wow. Just be careful out there, folks. That's all I'm saying. Be very careful. And by the way, Jeremy Allaire and the CTO of Tether are going to come on this week and startups in the next week or two. They both have committed to doing that. We will hold them to that. You will hold them to that on the Twitter. Feel free to say, looking forward to seeing you on this week in startups, and you can at mention me and at mention those companies. We're going to get to the bottom of all

of this. The investigations are not going to stop. They will only increase. and the Twist Army, please, if you have information on any of this, you know our Twitter handle, TWA startups, DM, one of our three producers, and yeah, we've got three full-time producers on the show, and we'll get on it. So keep telling us what's going on in the space. If you think there's a fraud, let's talk about it here and try to get that information out. Okay, DD's new downloads were blocked in China just days effort's IPO. Full disclosure, I invested in a ride-hailing company called Uber. God, this is going to be made into a video of me again saying I invested in Uber, but I have to say it.

And Uber owns a large percentage of D-D because they shut down their China business, or they should say they sold their China business to D-D. And Uber owns something like 15% of D-D, which, you know, hey, that's over $10 billion. What a great job, Emil and Travis did in making that deal with D-D. I mean, that's just a ton of money to get for selling your company and not having to be. work on it anymore in that region. So two days after they go public, China's internet regulator, the Central Cyberspace Affairs Commission, KAC, CAC, sounds scary, announced they would be halting new user signups on D-D while they completed a cybersecurity review of the company. So now, the press headlines would make you think they shut down the service. And I think this is super important

for everybody here to understand. You do not need to trust headlines by the press. In fact, when you read a headline, I think you should immediately say two things to yourself. One, is this hyperbolic to get you to click? And so what's the actual truth? So what are the tricks that the press uses to get you to click? Well, one of them is they use like this massive catastrophizing and being hyperbolic. They make things seem worse than they are, right? You see that with COVID. You know, the COVID, you know, Delta is surging. And they say delta variant is surging, which is true, while deaths that are a record low in cases are at a record low and vaccines are at a record high. So be careful. You have to unpack this stuff and you have to be a good media consumer headlines. I would say in even

some of the best publications are 40 to 60 percent accurate and they're 30, 40, 50 percent, 60 percent sometimes complete BS to get you to click or maybe they have an agenda and they're trying to persuade you of something. But let's go back to D.D. They did not stop and I don't want this to sound like I'm talking my own book because Uber happens to own a big chunk of this. They didn't shut off all of DD in China. That would be crazy because they have close to 500 million members over the past 12 months. If they were growing at 5% now they don't share their monthlies, but I'm just taking a guess. Maybe they're growing at 5% a month, which compounded means every 14 months or so they would double the size. So just taking a guess there. That means this would

represent, I don't know, 25 million users or so if, you know, this lasts for a month. So this is not like the company's been shut down. It means they've been told, hey, you got to fix these things. And here's the headline from CNN. China bans Didi, its biggest ride hailing service from app stores. So China bans Didi, its biggest ride hailing service. And at the end, a little bit of truth from app stores. And then the second headline from CNN, DD shares crash after China bans it from App Stores. Almost truthful. They did ban it from app stores, but everybody can still use the service. So the way to say it is, D.D. under investigation in China, new users not allowed onto the service. That would be the accurate headline. Is that going to get you clicks? No. So what they do,

even at CNN, and I don't believe CNN is fake news. I wouldn't go as far as Trump, but I will say whoever's writing these headlines is trying to get clicks. And we had this discussion with CAD Mets on this program talking about in The New York Times. you know, the writers there typically are not the ones who write the headlines. They work with editors. And in some publications like BuzzFeed or Vox, they will test five headlines on Facebook, I understand. And then whichever one performs best, that's the one they go with. So there's like a science to getting you to click. The media is about clicks. If it bleeds, it leads has existed for a long time. So never trust the headlines, folks. So obviously,

the app is still functioning regularly for most users as reported by CNBC, which I'll be on this week. Dedi said it will comply with authorities. We plan to conduct comprehensive examination of cybersecurity risks and continuously improve on our cyberstery systems and technology capacity. Shocker, a Chinese company is going to comply with government agencies. This is what you do if you are in China and you run a company. You comply with whatever the CCP tells you. And Jack Ma, as you know, lost control of and financial. He didn't actually apologize for his previous marks against a CCP yet, but he went MIA for three months from October 2020 to January 2021.

At a conference on October 24th in 2020 in Shanghai, Jack Ma had directly criticized local regulators in the state-dominated banking sector, quote, we shouldn't use the way to manage a train station to regulate an airport, Ma said, we cannot regulate the future with yesterday's means. that is the least critical thing you could say about regulators in a society, right? Like in America, we might say something a little bit more sharp edge because we have more freedoms. And then on Tuesday, November 3rd, which I think is like less than two weeks later, Chinese regulators pulled the plug on ANCROP's $34 billion IPO debut in Shanghai and Hong Kong less than 48 hours before it was set to start trading. Jack Ma then went MIA for three months before reappear.

appearing at a teacher's award ceremony. According to the Washington Post, the fact that Ma's reappearance was in a mundane setting, a teacher's speech, and not a grovelling public apology, could suggest that Ma's relation with Beijing recovered and they're on good terms. But basically, Jack Ma is the equivalent of Jeff Bezos over there.

For him to disappear like this and to have the IPO pulled and to lose control of his company, that would be the equivalent of taking Amazon and not letting it go public. and, you know, changing control of it here in the United States. And BightDance's founder recently stepped down as CEO, you know, according to Reuters, he stepped down amid Chinese regulators, tight in scrutiny of the country's biggest technology firms. So in America, you know, our politicians, they rattle their swords. And in China, they put them on your

neck and they say, do you understand, comrade, this is the way it's going to be. So you basically capitulate in China. You do not have a choice. And I think that this, This is why the United States will win the competition with China. I know that I might be laughed at for saying that, but I do think freedom and competition beats authoritarian control in the long term because who the heck wants to be the next Jack Ma? If you can have your company and control of it taken away from you. Two days into the cybersecurity review, the same government commission announced that the DD Travel app had serious violations of laws and regulations in collecting and using

personal information. The government then announced the app store to remove the D.D. app. And D.D. responded by saying it had stopped registering new users and remove its app from the stores. This is not the only time regulators have intervened at the App Store level. In December 2020, the CAC removed 105 apps, including TripAdvisor from China's App Store that were deemed illegal in a move to clean up China's internet. China has been known to use these bans to draw a quick action from companies. They do not play. In 2018, BiteDance's news aggregation app. ToTiao was temporarily removed from the app store while Chinese regulators required them to stop updating popular sections and scrub pornographic and vulgar content from news feeds according to CNN. Back in 2018,

China's radio and television administration ordered Totiou and other similar platforms to regulate user accounts and ensure they promote the core values of socialism according to CNN. Toti is still in the app store. So again, a speed bump. But when you're doing something wrong in China, according to the government, you will be stopped immediately. There is no jury.

There is no judge. There is no appeals. You're just done. Before we get to the interview, a couple of updates next door, just file to do their SPAC. And we'll unpack that tomorrow. We dug through their investor presentation,

which for SPACs, that's sort of like the S-1 and an IPO. But it's Leslie. legit because technically it's a merger. And we found some interesting data about how they're counting users, which we'll get into. I happen to love Nextdoor. And my favorite Twitter account, Best of Nextdoor, I know you guys hate it when I bring up the best of Nextdoor since it's supposed to be semi-private and you can only see your neighborhood. And technically people shouldn't be screenshoting the wacky, insane NIMB Karen and Ken stuff that's posted on there,

but I can't get enough of it. So we'll have a little best of, best of. next door tomorrow on the program. Plus, I'm going to have Morning Brews CEO Alex Lieberman on the show later this week. Plus, we're going to do a full new show on Friday. If you got any topics for me or questions for Ask Jason, just go to the Twitter handle at TWA Startups. And if you have any questions, ask jason at launch.co. Askjason at launch.com.

And we're going to get some of the tether folks on the show, as we discussed. Jeremy O'Lear from Circle, USDC, is coming on. the program. Both have agreed to do it this month in July. We'll keep them to that. And then we're going to have some of the critics of Tether on the show as well. So stick with us. Every startup in the world needs to ensure that their intellectual property is protected. IP intellectual property. You've heard the term before. You need to pause and you need to file your trademarks. I have had tons of issues, especially with names like inside and launch. People will take something I'm working on like the launch festival. No, literally launch.

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trademark now for just $169. All right, next up on the program is Evan Zoe. He is the co-founder and CEO of Stizi, S-E-E-Z-Y. They went to the launch accelerator back in the summer of 2018. And when I met Evan and his co-founder, they had a great emerging business, teaching people how to dance on a website. And since then, they have more than 10x the business.

And I'm really thrilled to have Evan on the program. Welcome to the pod. Cool. Thanks for having you, Jason. You've never been on the podcast or were you on at some point for... I've been on for like a quick little segment featuring a couple portfolios, but never full featured. So it's amazingly full circle.

You used to listen to all these amazing founders when we first started. So it's super cool. Yeah, it's not a guarantee if I invest in the cover that you're going to be on the pod. But I will say when things become undeniably fantastic for a company and they've been growing and they're in the portfolio, I tend to have them on. So here we are three or four years later. Amazing. On the pod.

Tell me, what was the impetus for starting Stizi? How did you come up with the idea and what was the first product? Yeah. It actually came up really organically. So I was before becoming a software engineer, I was actually a competitive hip hop dancer for about 10 years. I actually met my co-founder on the same dance team, a world-renowned dance team called GRV. And that's where we met.

And that's where we got a lot of our early instructors for Steezy. But even before we started online dance classes, we just wanted to build a resource for dancers online just to share out dancer like dance tips and knowledge. And that was originally just a blog. And so we launched our blog in 2014, just as a fun little side project we did on nights and weekends, because there's so many resources out there for engineering, marketing, VC, startups. But there was nothing like that for the dance world, which is something we're super passionate about. And so we launched our blog in 2014.

We got about 70,000 page views in the first two weeks just because people were so hungry for this content. And so all throughout 2014, we were just releasing more and more articles on how to learn new styles, how to dance bigger and stronger, and we were just answering a lot of questions through email and content. And at some point, we realized, you know, we were getting emails from people all over the world. And a lot of these people didn't have access to good dance classes, even though they were watching tons of dance videos on like YouTube. And I think at the time, you know, Instagram just started putting video into their platform. And so we thought, okay, for all these people that don't have the right resources, we should be building online dance classes for them. And so that's how

Were you writing the content and doing like pictures? Was that the original sort of product? Yeah, absolutely. I wrote the very first article, which was how to pick up choreography, which is just a really hard skill on its own that no one really explicitly teaches you. And I had developed my like own little systems for learning choreography along the way. And so. And this is really the great part of the entrepreneurial story.

Starting a blog cause zero dollars. Writing a blog post causes zero dollars. It's just taking whatever's in your mind. And then even making short videos. cost close to $0, depending on how much time you put into editing them. So when did it, did you first turn on subscriptions and say,

hey, we've got enough content here to charge people for this? Yeah. So we launched our very first class in 2015 after creating an MVP. We were, you know, we bought a few DSLRs and tripods. We begged our friend to teach with us. We, you know,

borrowed dance studio space from our friend after hours. And we launched that MVP in 2015, just to see if anyone would even pay for an online class. And so we launched as a pre-order. I hadn't even finished the video player yet just to like gauge demand. And we sold a couple hundred of that first class. And then I went off and finished that video player. And so all throughout 2015, we were building these single classes.

And we always knew, you know, subscription content is a great business model. How did you just sell it? Did you just put up a stripe form or credit card form? I'm curious how it actually became a product. Yeah. No code was not as popular back. then and the tools are really sparse. And so I just figured out how to, you know, code and build all of it together. So thank God for, you know, Stripe, Firebase and all

these really amazing tools that I could actually like build an app really quickly and easily. But then, you know, we always wanted to launch a subscription. And at some point, we were hearing a lot of feedback saying, you know, this is, this is a great product. And, you know, let's keep in touch once you launch your subscription. And so in 2016, we launched our subscription for $20 a month, which just 14 classes in the library, which is so, so small compared to, you know, the fact that we have a thousand classes in our library today in 17 styles. But back then, you know, we just said, hey, let's launch this subscription and then figure out the business model from there because that's the thing.

And so we launched our subscriptions in 2016, and we started releasing one new class a week. And it's pretty amazing that people were already subscribing to the product back then with just like 14 classes in the library, which kind of shows the amount of. demand there is. And so we just kept building ever since. There was a common belief that if something was free on YouTube, then you could never charge for it. I remember people telling me when we invested in Calm.com, hey, this is stupid. You can get this for free on YouTube. Why would anybody ever pay for it? And there's a free meditation podcast, there's free meditation videos on YouTube. And then you had the same thing. There were tons of dance videos. In fact, when we're at Mahalo, we had done a bunch of

hollow dance videos and done tremendously well with them. And so I obviously understood from my common experience that people would pay for it. But what was it that made you not take that common advice at the time, five, six, seven years ago and decide, I'm going to try to get people to pay for this. And what have you learned about this issue of stuff exists for free in the world, but people will pay for it? Why is that? And what will they pay for that maybe doesn't exist in the free world? Yeah. I think people are now very used to paying for high. quality content that solves their problems. And so there's so much noise out there for free now. People just want like the brand and the answer that will solve their problems. And so,

you know, for calm as an example, you know, at first it was calming your mind and now it's sleep and it solves that exact problem. And just with the explosion of dance content that's out there now, there's these people that are watching all of this dance content for free. But there's no guided experience. It's just still really hard to try to figure it out yourself. And so, people are willing to pay for things that are they're passionate about and that solves their problems and steasy at that place. And so we create really high quality content and really we're really scaling like a world-class studio experience and then pairing that with seamless technology that makes the experience

to learn 10 times better. So, for example, you know, I back in the day when I was first starting to dance, I really got inspired because of YouTube, but I was trying to copy these random dance videos or dance tutorials and they never really worked out. and it's because it wasn't catered to learning experience. And so we built these really unique features where example is, you can see yourself side by side with the video. So it acts like a virtual mirror and you can compare and contrast yourself with the instructors.

We bring on high-quality instructors that never put out free tutorials because that lowers like their brand value. And thanks to our platform, it really elevates that. And they're actually able to monetize their content. So, yeah, that's kind of where things, are headed. And now just ballpark, how many people are subscribers and you have an app out? How is the because the app world and subscriptions came along as well. And that I don't think existed or was just getting started when you got started, correct? How has that changed things? We have subscribers in

over 100 countries around the world. And only 50% of them are based in the US. So it's really exciting to see this like global and international dance community that's coming onto our platform. and things have really changed over the years. I personally was a web developer, and so I built V1 on the web, and people love learning on big screens. But now everybody's just on their mobile devices. They're watching dance content on Instagram and TikTok these days.

And so shifting to mobile first was a really big core thing for us, and we've really unlocked that in the past year. I know you sat in our board meetings and told us for a few years, mobile, mobile, mobile, and we got that done. And so mobile is now one of the right or wrong? You were absolutely right. Well, what is it about mobile that is different than the web in terms of running a business and the uptick in subscribers? Yeah.

Do you think? Everyone just spends way more time on their mobile phones. And so they're not tethered to like a desk or at home. Like they're just always on their devices. And so we just saw the majority of red traffic keep coming in from mobile devices. And so once we saw that change, we said, hey, let's flip a switch, start driving every. everything to the app store. And then also, you know, with with mobile apps, it's just so easy to get started as long as

you get like a really beautiful, seamless experience. Apple pay makes it super easy. Google pay makes it super easy to start subscribing. So it's removed the friction and people are hanging out there. And so that means if people are hanging on their phones five times more than their desktops and it's, you know, 30 less seconds or two minutes less to check out makes it super easy. I also think people like to manage their subscriptions in a central location. I know I do.

So if I'm if given the choice, if I could put my Spotify and Netflix and Disney subscriptions and Hulu subscriptions into the iTunes store, I would because I like to see them all in one place. Now I don't because I'm not allowed to. And, you know, some of those folks have incentivized us to not do that. Are you concerned about your portfolio's performance in the near future? Well, J.P. Morgan, BlackRock, and others are projecting public equity returns of just three to five percent over the next five years. Analysts that Bank of America urged investors to consider real assets as part of an inflation strategy. So where are the major players putting

their money? Endowments for Yale, Harvard, and other top asset managers are looking into alternative assets. According to Masterworks research, endowments over $1 billion are investing 55% more in alternatives on average. If you're looking for a very interesting asset class that's uncorrelated with the stock market, it's blue chip art. Masterworks.io sells shares in multi-million dollar paintings by artists like Banksy, Picasso, and Warhol. According to Masterworks, contemporary art has appreciated 14% annually from 1995 to 2020, outperforming other real assets like real estate and gold.

I just had the founder, Scott Lynn, on the program again, episode 1232 for and alternative assets roundtable and he shared some great insights around inflation appreciation more go listen to episode 12 32 masterworks. i.o is a fantastic idea and they're executing at a super high level. I think it's really genius. So sign up today at masterworks.io and if you use the code twist, you'll skip their 30,000 person wait list. See important information at masterworks.com slash disclaimer. But in terms of the video itself, you also, and this is one of the reasons I invested, had really thought about how people learn and then what the limitations of the YouTube player were or Vimeo or anybody's player for that matter.

And you had really interesting features like looping or changing dynamically the view of the dancers. Maybe you could explain the innovations you made in the video and did those innovations actually work? Yeah, absolutely. People like, you know, our customer feedback when they rate us five stars or give us 10 in an NPS score, they always cite our features and our content as, you know, the big driving factors. And so when we first started thinking about how to bring dance classes online,

because we had taken, you know, so many dance classes for years, we wanted to really try to make it feel like an in-person dance class, but, you know, scaled up online. And so, you know, for most video players, most fitness videos, they're very linear. And so they're not interactive at all. And so you just hit play and follow along for a typical workout. Whereas learning to dance is a lot more like learning an instrument. You have to practice, repeat things, get it into your muscle memory. It's just that your body is the instrument in this case. And so we started really thinking, okay, what did we really appreciate

and what did we like to do in a dance class? And how do we scale that up and bring that and pair that with technology? So with the different features, as an example, you can watch from both the front view and the back view. The front view is mirrored just as if you were looking into a mirror and learning along in a class. and then the back view, you learn along directly from the instructor. And the reason why we built that is because when I first started learning how to dance, I didn't use a mirror at all. Like, I just learned in a parking garage on college campus.

And I was really weirded out at first when I first tried using a mirror. And so I always preferred to learn from the back view versus the front view of looking into mirror. And so we built that into the product. Also, we broke down each class into easy and digestible sections. And so that wasn't really something that really existed. the dance world either. There was some loose form of structure when it came to a dance class, but dance teachers typically taught whatever they wanted. And so we broke down each class into

easy and digestible sections where you first learn the moves without any music, and they're just teaching you the actual instruction. And then you practice and repeat the choreography from slow, medium to tempo. We even force people to watch it with music so they understand the musicality of the piece. And then we finally encourage everyone to practice and try it along with each other. And so by the and we're piecing all of these sections together. So you're learning like a full piece of choreography. And then I was the person in the class that was super shameless about like, hey, can you repeat that again?

Or like, can we drill that over and over? And so that's why we're creating looping mode. People kept clicking back and trying to repeat sections over and over. And so with the looping mode, you can choose any two timestamps so you can drill, you know, maybe a footwork pattern. This is the key feature. I know when I was doing some guitar, I was trying to learn how to play some guitar things. and I was like my God, I just want to loop this.

So I was like, okay, I guess I need to download this video from YouTube, rip it, put it into the VLC player, edit it, and then hit it on loop. I'm like, this can be like, it's going to take me 15 minutes to make a looped video of this. And I was like, I'm going to play it on guitar, then have to hit rewind, hit play, jump on my guitar. It was like so annoying. And I was just like, this is, I don't know if anybody else has a solution for it, but, you know, I think the solution is obviously you use app. What impact has TikTok culture had?

Because somewhere around two years ago, people started to do all kinds of different dances on the TikTok. Has that spiked people wanting to learn about your product? And then second part, what impact did everybody staying home in the pandemic have? Because I know, Com, FitBod, other people who are teaching things, musician tone base. People had time. And then so I'm curious about those two trends and the impact they had on your business. Let's start with a pandemic one because we can go into a very deep, you know, rabbit hole on the TikTok trends. But when it comes to the- We absolutely well.

When it comes to the pandemic, you know, we 5xed our subscribers year over year between 2019 and 2020, which is absolutely incredible on the business side. You know, we feel a little bit conflicted because it was such a tough year for everyone. But I think what really kept us going was all the love letters that we were getting from our users saying like, oh, this has helped me stay sane during the pandemic. Yeah, something to do. It gave me something to express myself. And so, yeah, exactly.

Like, we have, you know, some more emotional pieces of choreography in our library. And, you know, we saw people gravitating towards those pieces a bit more and posting themselves just like as some sort of emotional outlet. And we have a really vibrant community as part of a private Facebook group. And they were just going off and connecting with each other, posting each other, like videos with each other, challenging each other. So it was really incredible to like see this vibrant, you know, community really start emerging during the pandemic, even though, you know, everyone was stuck at home.

And now that it's over? What's happening? Are people sticking around or did usage go back down? Yeah. I mean, you know, last year was such a crazy outlier. And so we'll still, you know, we're still seeing where it normalizes. But I think that's the unique thing about what we're building is, is dance is meant to be done with each other.

Dance is meant to be done socially in person. Got there's so many. entry points to learning how to dance that just exists in the world. For example, you know, you have people in Miami that are always like doing salsa dancing outside with each other. You have people going back to weddings and they want to learn, you know, fun dances for different weddings. And so there's all these different entry points I think that exist in the real world.

And so our users also are going back to the dance studio. They're like using the dance studio classes and testing themselves based on like how much they've trained during the pandemic, but then they're also still keeping Stisi as a supplement. And so I think there's a really powerful dynamic here in the future that we can tap into that really blends the online experience with the offline experience. Tell me about your instructors, how you work with instructors. Do you have full-time instructors? Do you partner with them? How does that all work? Yeah. So it really varies depending on the instructor, but we really think about our instructors

in two different ways. So the first way is how we'd launch the platform is, with dance influencers who are traveling professional dancers, and their fans across the world can maybe only learn from them one time a year at most for a lot of these people around the world. And so if the goal was to give these dance fans, you know, constant bits of training all throughout the year from these top influencers. And so we've really, you know, still doubled down into that. But we noticed that a lot of users coming onto the platform, they're just more casual dance fans that have never taken a dance class before. So about 50, percent of our new users are all brand new to dance. And so what they need is more of a guided and

curated experience with really, really great instructors. They don't care as much about the level of influence. And so we actually are growing our own dance influencers in-house kind of like a Peloton. Got it. And so we're really guiding and curating that process. And we're really training them up to be really great instructors. That gives you more consistency too, I would think, right? Because people like to, I know with me with Peloton or, you know, I just got the hydro. you kind of lock into certain instructors who you like their personality or their vibe or, you know, how they teach the class. So that makes sense to me.

Do you see yourselves more as, you know, master class or as peloton in that, you know, people, there's learning and then there's kind of like the lifestyle and, you know, sweating and getting your workout on. Because I know my wife goes to dance classes, but for her it's a workout, you know, I think maybe the two-thirds workout, one-third liking learning to dance. But it really is about the workout and the experience and the fun of it. So how do you think about that in relation to C's because the business I invested in, I think, was more like masterclass and learning.

But, you know, I know you experimented with some things over the pandemic. Tell us about that and how you think about that. Yeah. I mean, there's dance, dance has so many use cases for different people. It's for fitness. It's for emotional expression. It's for me, it was sport and skis. deal. And so I think that's...

It was competition, right? I mean, for you... Yeah, exactly. It was like a league. Yeah. Mm-hmm. Yeah. And so that's what I think it's hard to kind of really bucket dance into something, something specific. And I think the way we're really starting to think about it now, instead of being like the master class or the Peloton for dance, we're becoming the Disney of dance. And so let me, let me explain like what our thinking is now. We create really great IP dance content that dancers resonate with, starting with education, and there's some form of

like edutainment also with that. And so what we're thinking of, like, our core product with DZ Studio is actually like our version of Disney Plus, where Disney Plus is aggregating all of these different IP universes together. So they have Disney, Pixar, Marvel, Star Wars, all on one platform. And dance is so broad and diverse. Like, there's all these different dance universes out there that were aggregating on tour jazz. Yep. We recently launched ballet and jazz. There's Bollywood and Indian dancing. How did those two extensions go? And did people who were in your core audience move over and try those? Or did you

just get a whole new audience and they don't overlap? Yeah, a bit of both actually. So ballet and contemporary are actually our third and fourth largest categories on the platform, which we expanded into maybe only just a few months ago. number one of course is hip hop and popular choreography, which is the core course category in the platform. Number two is actually dance workouts. And so we started creating our new version, our own versions of dance workouts in the past year because of the pandemic.

And we saw all of our users start cross-pollinating between all the different styles. So we saw some users post that they were just like a pure hip-hop dancer and they would have never taken a ballet class before. Like they never even thought of it. But we launched our intraded ballet process. program and they started taking it and they were, we're just saying how excited they were to learn new styles of movement. And so I think, again, kind of coming back to the Disney Plus example, as we,

you know, aggregate all these different dancey universes on our one platform, there's a lot of cross-pollination that will happen between all of them. I just had an idea for us. You know, I have that X-hit channel that I did back in the Mahalo days. I still own it. It's like a cross-fitness one. I just had, I just did a partnership with the, with the folks over at FitBod, which we're obviously investors in, and it went really well.

I was just thinking we should put some of your videos and do like a little JV where we put some Steezy workouts on YouTube.com slash exit. That would be super cool. Remind me to do that after the pod. Let's sync up on that. There are over 60,000 dance studios in the U.S. I know a lot of them use your content already and subscribe. Is there some other partnership out there to do with them or some product extension there?

Have you thought about doing Steezy in the real world? You mentioned the Disney analogy. I wasn't thinking you were going to go with Disney Plus. I thought you were going to say Disneyland and Steasy World and Steaseland. Yeah, but that's the thing. I think that's why I think about us as Disney is really interesting because at our core, we create really great dance IP and that can manifest itself in a number of ways. Right now it's Disney Plus.

We do a lot of content marketing. And so we create really great YouTube videos that YouTube is starting to recommend to their algorithm. And so that's another form of dance IP. It's like smaller lowercase IP where we pair it with our current instructors on the platform to kind of bridge and do that content marketing. You're also doing some of that content marketing on TikTok I've seen. You vamp that up too. Are those two becoming real feeders yet or just getting started? Just getting started, I think it's not enough to just cut your content and post it on a different channel.

And so we were trying to do that with YouTube in the early days. And none of those ever really got picked up by that. So what does work out then? you have to create content that's native to the channel that people enjoy and so that the algorithm starts doing the work for you and starts recommending. So, for example, on YouTube, you know, we started creating these fun series kind of like game shows. So one example is three choreographers, one song where we get three choreographers, choreographing to the same song. They're all reacting to each other's rendition of it. And it's like secretly also teaching you a little bit of dance, like, as they break down the other people's choreography.

And so that's like a fun game show format. You see it work really well across YouTube in terms of like hot ones, retin link. And like there's all these different, you know, versions of YouTube game shows. That's our version and it's doing really well. And so that's very like a YouTube native thing that people are getting on YouTube. TikTok is a whole other beast. It's all about, you know, memes, participation, duetting.

And like being very, very relatable. The duetting seems really important. Have you tried any of those yet where you do a dance move and then ask somebody to do it with you? Yeah, we're starting to test that out. And so really linking like, hey, you know, learn a dance on Steezy, then start duetting us on TikTok. Like that's about to get rolled out. I think we try to be really thoughtful about how we approach each channel. If you know of Brian Balfour and Reforge, he has, instead of just product market fit, there's product market channel model fit.

And so you need... What is that? Explain it. Yeah. So product market fit is pretty straightforward. You create a product for a market. But then you also need the right channels to market that product. And so that's the product market channel.

And then there's the model, which is like the business model and monetization of your product. Brian Balfour, why product market fit isn't enough. Market product product channel fit, channel model fit. Yes. I get it. Yeah. Exactly. So when we think about, you know, the platforms that we're distributing and trying to do content marketing on,

we've got really great fit on YouTube because that's something, you know, people are very used to on YouTube. But we don't quite have the, like, right product for the channel that is TikTok. And so, again, doing some adjustments on the fly to make it really tie in with that channel, I think it's really important to be able to launch effectively. Yeah, channel model fit is really important. If you just think about podcasting, like, I can't take this. podcast and put it on TikTok. I would need, I mean, it's horizontal, it's got to be vertical and people who have a different expectation. Yeah. You really have to like talking to the camera and people

have to feel like you just did it for that. And then you have to cut it in a way that fits with the other videos and get to the point. I was like literally trying to figure out how I could take the nuggets of what I do on this podcast and translated to TikTok. If somebody knows how to do that, if there's a TikTok expert out there, somebody hit me up for sure. Have you heard of jelly snack? No. What is jelly snack? Jelly smack SMAC. They're like one of these newer companies in like the creator economy and they'll work with creators to like cut their content and translate it over to different platforms. That's interesting. So they'll teach you how to do that. That's kind of cool. Have you worked with

them yet or no? No, no, yeah. I just started getting a bunch of, you know, ad bankruptcy in my content that I consume. Absolutely. Absolutely. All right, listen, it's been great to be in business with you. You guys are hiring a couple of positions, I think. What do you? How do you? How do you? How do you? How do do you hire people? What's the culture fit? I know you guys were in person and you believed in all being in the same space. You still have that belief, I think. Or how you changed it? We've changed it a bit. We're going with the hybrid model just because we, you know, doubled our employee base in the past year. And a lot of them started being remote. You know, some had to move back home with families. And that is that is totally fine.

So we're really still figuring it out and trying to, we do a lot of really unique things. within our company to try to maintain that culture. So, for example, you know, we have a little shoe throws channel in Slack where every Friday we post in the shoe throw channel to give each other props. Because in a dance class at the end, when you want to give props to the instructor, you actually throw your shoes at them. So everyone just like reins their shoes on the instructor. So that's like a really fun thing.

And it shows a lot of appreciation. How many times when you do the shoe toss, do you put the wrong shoe back on? I mean, it's got to be a possibility. It happens. It happens. I think in the Middle East, throwing your shoe at somebody is like the greatest insult. Remember George Bush? Somebody threw their shoe at him and I ran.

Yeah, that's right, huh? At a press conference in Afghanistan or something. Yeah. It's like, not in the dance world. It's a sign of respect in the dance world and appreciation. So we do that, do that a bit. And we try to like, you know, mix in person with offline events. We also started grouping different teammates into new, new squads or crews every quarter.

And they're, they're responsible. for creating their own activities to do more off-line, like, more unstructured bonding, like, playing games with each other and stuff, and that's totally remote. And so we try to manufacture a lot of these moments, like, online, so we're still figuring out the hybrid model. But half our employees are based in L.A. Downtown L.A., cool office.

Our HQ is always going to be in L.A. because it's the dance capital of the world, but we're totally open to hiring remote employees. A big hire that we're trying to make right now is a senior software engineer. So if you know anyone, you know, dance, passion for dance isn't required. We love it. Helpful. And we have enough of it ourselves. So it always rubs off on everyone. That's a non-dance. Any celebrities get involved yet? I know there's a lot of crazy celebrities out there who are really into dance. I mean, you know, obviously if you just follow pop culture. Oh, absolutely. How do you think about celebrity? I don't think you have any celebrity investors

yet, but I know that they probably have been buzzing around. How do you think about celebrity investors. If you could have any two or three celebrity investors, who would they be? Yeah. Who's the dream cap table celebrity investor? Maybe somebody watching will get us in touch with them. Yeah. I mean, you saw our tweet the other day, right? BTS. BTS would be amazing. Yeah, we reacted to a BTS video and the BTS Army just picked it up and started sharing it all across Twitter. So they would be absolutely amazing. We're huge fans. A lot of arms. A lot of arms.

Somebody hit us up. Maybe we'll get you on the cap table. Please. But no celebrity investors yet. And I think that's a big thing that I'm starting to think about is like what are their partnerships now that we've got the machine humming, the core product, the team in place. Like how do we just get more distribution through partnerships and really get started and get integrated in all of these moments of culture?

Yeah. I mean, it'd be amazing if like Megan the Stallion, Will Smith, Britney Spears. Like there's all these incredible dancers to get them. involved and do their dance moves would be sick. Absolutely. Yeah, we're barely scratching the service of what's possible. It's only so much you can do, right? I mean, this is one of the things.

There's so many ideas. I think that's like part of being a good board member. And we've been lucky enough to be spending this time together. Focus, focus, focus. You know, we always talk about focus and it's like you really can't do 10 things. You can do two. You might be able to do two and two experiments or focus on one or two core things and two or three experiments, but there's a point at which you're not actually doing anything that scales.

And the core business, you know, there's still 10x and then 100x. That's one of the things I loved about Com and Uber is they stayed really focused on the core. And then every three years, they launched the second category, you know, Uber X, UberPool, Uber Eats, you know, whatever it is. Uber trucking, you know. All right, listen, continued success. Everybody check out Stee-E-Z-E-Y. Remind me to do this X-Hit thing. We got to just do 20 dance videos where people do dance work.

Yeah, let's do it. It's a crossover. It'd be great for both channels. All right. We'll see you all next time on This Weekend Service. Bye-bye.