This Week in Startups - Best of This Week in Startups: Week of September 21st, 2020

Episode Date: September 26, 2020

E1112 Emergency Pod! Nikola fraud allegations: https://rb.gy/tduluj E1113 featuring Loom's Joe Thomas: https://rb.gy/mh7x57 E1114 #AskJason: https://rb.gy/rkr4xq E1115 Emergency Pod! Media corporations collapsing: https://rb.gy/kxfa42 Follow Jason: https://linktr.ee/calacanis

Attention everybody. Attention everybody. This is an emergency podcast, an emergency podcast. Trevor Milton has left Nicola. That's right. You all know that we had Trevor Milton on this week and start us back in July, episode 1090. And the company had gone public through a SPAC, special purpose acquisition corporation that we've been talking about a whole lot here in the Silicon Valley. And I went on after that podcast, I went on CNBC. And I said, listen, remember? my rule about sunicorns if a company is valued at over a billion dollars before it launches its product then there's a good chance it's either a fraud or it's going to zero we're going to do a little forensic here of the interview i just did a couple of months ago and these answers were a little bit weird and this one is weird because i asked him why nicola would pursue both hydrogen and electric and he kind of had an answer for that. You know, electric works better.

The city hydrogen works better on the road. Okay, maybe I'll give him the benefit of the doubt on that. I'm not sure if that's actually true. But why would he create a consumer pickup truck, the Nicola Badger? Why would he go into competition with Tesla cyber truck or the Ford F150? I mean, these are big competitors to go up against. You're going up against the old guard and the avant-garde Tesla. That doesn't make a lot of sense.

Why wouldn't you just focus on one thing? that succeed tend to focus on one thing and do it really well. Well, let's roll the tape and hear Trevor's answer to that. So now you've got all this cash on the balance sheet and you've got all this runway. But you, this building a network of hydrogen chargers and coordinating the building of hydrogen trucks and satisfying a bunch of customers seems like an awful lot of work. And then, I'm not sure exactly the date you announced it, what date did you announce that you're going to take on Ford's F-150 pickup truck and Elon Cybertruck and the Rivan,

Rivan is the other. Rivian. Rivian. Sorry, Rivian. So now you decide, F it, I'm going to create an F-150, the best-selling car in the United States, I think, and obviously the best-selling truck. Why would you take on more work? That's a good question.

Yeah. So here's the reason why. Our trucks are a gravy train with money. That's where all the money comes from, is our big. semi-trucks, right? The problem is 90% of Americans will never own a semi-truck. And so your portfolio of investors can be very limited. And we wanted to go and build a company that's going to be worth $500 billion trillion over, say, 10 or 15 years. And if you're limiting yourself to 10% of the market, you'll never do it.

No matter how good your numbers are. The reason why people love Apple, everyone touches their product. Why do they love Google? Everyone touches their product. So what I did is I knew day one, you know, once we started coming out, we had all this great. gravy train coming in from the semi-truck program, my question was, okay, that's great, but I'll never touch the average consumer. So therefore, 90% of investors will probably never invest to me. So I needed to touch the consumer. And so the truck is for the profit, the semi-truck, the pickup trucks for the consumer. And the consumer is the one who is part of the Robin Hood portfolio is part of the family office or whatever. And that's where all the valuation the company

comes from. All right. This is super weird. And you could actually, I'm watching myself, which is very weird. I'd never watch my own podcast. I hate the sound of my own voice. I hate watching myself on the podcast because I'm watching and I'm seeing like maybe I should ask the question a little bit better. I can always improve the questions. And thank you for those of you say I'm a great interviewer, but I can't stand watching me interview somebody because I just think about how to make I could make it 10% better. But this is bizarre. First of all, he's saying the trucks are his gravy train. The truck's not even out yet. So how is the truck your gravy train? That was like why I was perplexed. But then I realized when he said, we're trying to build a trillion dollar company.

I was like, okay, this person's delusional number one. Like, okay, but fine, you want to build a trillion dollar company? I hope all the founders I invest in from com.com to Robin Hood to wealth front to Steezy and FitBot all hope they build a trillion dollar company, which I'd be amazing. But it's also a little crazy when you don't even have a product out to start talking about having a trillion dollar valuation. And then to build a product specifically to bait Robin Hood Traders, full disclosure, angel investor in Robin Hood, that's a flex. But to actually bait people into buying the stock and the family offices who might invest in the company, that kind of puts you in the realm of stock manipulation. In other words, you're building a product. I think that

the most uncharitable explanation of this is we're going to build an unprone, profitable or break-even consumer truck for the explicit purposes of getting people to buy the stock. Well, that feels to me like stock manipulation, doesn't it? That would be the equivalent of, I don't know, Google saying we're going to make a Robin Hood competitor and feature so that we can get more people to buy Google stock. That would be a weird thing to say. And this was such a weird thing to say. It kind of threw me for a loop. You can see it in my face where I'm like, what the F is this person talking?

talking about. This is so weird. And he literally, I didn't ask him to name check Robin Hood. I didn't ask him to talk about stocks and, you know, appealing to a wider birth of a wider footprint of consumer retail investors as well as professionals like family offices. So that was really weird. And the CEO and co-founder of Loom is Joe Thomas and he joins us here today on This Week You can start up. Hey, Joe, how you doing? I'm doing great, Jason. Thanks for having me.

You're going to get this question about defensibility all the time. I could give the stock answer for you, but I want to hear how you answer it. So here comes jerk, Jason. I'm a partner at some jerk ventures. And, hey, so Joe, you know, I saw there's 72 competitors and there were three in the last Y combinator class and the TechStars class had one. And, you know, they're valued at $5 million or $10 million. and I could own 20% of that business.

And they said they have a better product than you. And they're going to make it free. So how is this defensible? Go ahead, Joe. Are you talking to dipshit jerk Jason V.C.? How do you defend your existence versus competitors? Oh, man. I mean, this is, this is.

What's the best practice here? It's been a fun question to answer over the course of time, too, because, you know, you get different flavors of it. In the earliest days, it was truly, like, why doesn't this product exist? And why isn't somebody like a Zoom or a Slack going to build this in house themselves? And so how I always answered it is the fact that you have to believe, and what I think we did a really good job of, is picking early investors that believe that this is a missing mode of communication at work. Like this is a massive opportunity. And in order to get this right, you just have to focus on building a best in class product.

And that takes disproportionate resource allocation to our video infrastructure is the most performant that exists for any asynchronous video recording. and sharing. And then the second part of defensibility, if you have a best in class product, is you need to build a best in class brand around the product as well. So do folks look to you as being the thought leaders and the next kind of brand

trust? And then the third part of this is there could be death by thousand paper cuts, but usually there's one or two winners in a space. And the one or two winners, particularly in B2B SaaS, are those that can serve the larger organizations. And so, So if we can be the market creators and market leaders in this space, then we can start to grab the biggest customers in the world.

And as long as you grab those, there's pretty high switching costs. It has to be a 10x better solution for a new entry to come in and steal the material market share from Lume. And so the question that we had to answer was less about kind of like the small upstarts that are copying us, which now we've kind of created an ecosystem below us that there will probably be more and more over time and more about how do we make sure that we're not just a feature and that we're truly a product and independent business. So if I can translate, the needs of an individual user, like you needed to make a one-off video and you downloaded snagget because you typed in screen recorder and capture and they bought

the first Google AdWords and they paid six. bucks for that user to acquire them. That's not the same use case as, I don't know, Palantir or, you know, let's pick another company that's not as charge, but, you know, GE needs to create looms for education across all these different groups and they have 7,000 employees who could potentially use it. They have a different need. And you're servicing that need, which is to organize and to authenticate and to protect 7,000 users making 10 videos a month, 70,000 videos and a million videos over a year with 100 million views, correct? Absolutely.

Yes. So I think that this is where, you know, that inherent virality that I touched on too is really defensible in comparison to this Nugget to the world too, where, you know, you take a link and you share it with somebody else as a result of creating that content. It pulls you into the loom ecosystem. So we're actually able to, like from a unit economic. perspective spread within organizations much, much faster because to date, we still haven't spent an assent on paid marketing and we're growing faster than we ever had before.

Hey, everybody. Hey, everybody. It's another this week in startups and I'm doing something I love to do today, which is talking to you, the audience, founders, investors. All right, the next question comes from Derek. Derek asks, what will the startup venture capital landscape look like in 2030, have we seen the end of Silicon Valley as a startup investor hub? Will Silicon Valley change locations? It's a great question. I think about it a lot. So there will be, if history is any guide, more options for funding and funding will continue to spread around the world. There is a global appetite for risk. People want to have access to private companies. and the SEC is creating a path to accreditation for non-accredited investors.

If you don't know what that is, out of 100 Americans, four or five of them are accredited by the definition of the United States of making $200,000 a year. Basically, you can look it up. They're going to allow the other 95% of people to be accredited, the SEC, is going to allow them to be accredited by the nature of taking a test or having a degree or working in the field. And they're just starting that process. My hope is that angel. University will become a course that if you take that three or four hour course,

you will be able to be an accredited investor. Please, SEC, consider that. Because if you take that three hour course, I believe you're qualified to spend your own money investing in startups. When that happens, 20 times the number of people will be able to invest. Now, they will be the bottom 95% of the net worth in the country. So, you know, they're not as loaded as that top 5%, but still, it's money. And then already in England as an example,

anybody can invest in startup. So they have all these great crowdfunding sites here. Crowdfunding, equity crowdfunding on Republic or Seed Invest is a little bit complicated. It's a little bit of extra work to raise small dollar amounts. So a lot of founders don't bother doing that. But my vision for the future of Silicon Valley is, yes, it will be companies can be based anywhere. And now something I didn't consider is that investors could be based anywhere. It used to be the concentration of investors in Silicon Valley made it very difficult to be a world-class

investor and not be in Silicon Valley. I do think that you're going to be able to be a world-class investor by 2030 and be in a different location, as long as you have access to the deals here. But the triangle hole that Silicon Valley and the Bay Area had on capital is slowly being erased. So will it go away completely no? But I do think people are going to leave San Francisco because it's poorly run, Mayorjason.com. And so since it's so poorly, run and so expensive, you're seeing it collapse right now in the pandemic and during a recession. So you will see people moving to either low tax states, high freedom states, low regulation states to build their companies and places that are high functioning cities that are great for

young people that have low crime and high nightlife and fun. So Nashville, Miami, Reno, Salt Lake City, Park City, Austin, Houston, Houston, There's going to be a lot of these cities that are cosmopolitan to some extent, have great nightlife, have low tax treatment, have great housing at low prices, great housing stock. And young people want to be there. And rich people who are sensitive to wealth taxes, et cetera, might flee to those places. I've seen people leaving the United States or going to Puerto Rico. All the crypto kids went to Puerto Rico to try to save on their taxes. So as an example, I don't think that that's going to be the standard, but I do think it's on people's mind.

and I've thought about it. You know, if people don't feel the need to be in Silicon Valley, well, then I don't have the need to be here. So maybe I'd rather be in Austin or Park City and or maybe split my time between, you know, based in Austin and get that cool, you know, kind of city and have a horse ranch. I've been thinking about it. I'll be totally honest. I've been up front about it.

I've been thinking about maybe living in Miami. It's a cool city, nice and warm. And then maybe spending my winters in Park City or somewhere like that and skiing. So, you know, once you get to a certain point in your life, if you do not, if you don't have to be here and the pandemic shows you don't have to be here, well, that's a game changer. And so I think everybody's going to consider, hey, during this great pause, what do I want my life to look like? And the exodus from San Francisco is very real. The exodus from New York, I think, is more modest. I think when the pandemic wanes in, you know, the second half of 2021, hopefully, or maybe earlier, get a vaccine or just, you know, we hit some sort of low.

level of base herd immunity, if that's possible. Knock on what it is. I think you will see New York rebound very quickly because it's such a fucking cool place that people are not going to not be attracted to New York. But San Francisco, San Francisco is basically like a borough. It would be like one of the weird boroughs. It'd be cooler. Like San Francisco, if it was in New York as one of the five boroughs, which is basically

its footprint, it would be somewhere between like the Bronx and Staten Island. It would be like Brooklyn's the coolest, Queens the second coolest. maybe then San Francisco. It would be Brooklyn's the coolest. Manhattan is the second coolest. Queens. San Francisco, the Bronx, and then, oh, my,

I might even say, San Francisco, yeah, would only beat Staten Island, hands down as a cool place to be. I'll be totally honest. It would be like right in the middle of the pack of the boroughs. So it's really not that great of a city.

I'll be totally honest. It's like a kind of a nice, cool borough. It's kind of like, you know, it's Queens. San Francisco is kind of, of like Queens in terms of how cool it is. It's not as cool as Brooklyn, obviously. It's not as cool as Manhattan, no. Kind of like Queens. So you can take it or leave it. No offense to Queens, but you can take it or leave it. I mean, I don't think anybody ever woke up and was like, you know,

where I want to live, Queens. You know, like you were born in Queens. You might say like, Queens is a pretty good deal. I like Queens. Queens is dope. You know, I lived here. When people like Queens, they're kind of like, I'm kind of surprised. I actually like Queens. Queens is cool. nobody's ever saying that. Like San Francisco. San Francisco did have a cool moment, I have to say. In the late 90s, when I came to San Francisco, it had a very cool like counterculture kind of vibe.

So even like the kid from Brooklyn was like, whoa, this is different. Look all these like hippies and like there's this gay culture and there's this hippie culture. And there are these anarchists and then there are these like technologists who are kind of like the hippies. And everybody kind of got along and there was art. and like they were doing like funky food and you can go out to Berkeley and see this really cool food and Oakland was all these dope warehouses and people lived in giant warehouses for 500 bucks a month

that had giant backyards and you know like it was totally illegal it was like cool and dangerous and fun and then it just became like expensive and sanitized you know and it was just I think it's I think the crash of San Francisco that will occur in the next decade is going to result in San Francisco potentially becoming cool again because what might happen is it's so, dangerous and it's, you know, collapsing that the collapse might make it attractive to artists and,

you know, avant-garde people again where they're like, wow, I can just buy the storefront and live here for $1,000 a month and a 2,000 square foot storefront, you know, somewhere in San Francisco. We'll see. It's up in the air. But I think the more likely scenario for San Francisco, the city specifically of San Francisco, is that Google and Apple just buy up all the real estate. Facebook, they just buy up all the real estate. And it becomes a, corporate town. I think it's going to become a corporate town. So it's going to become even more boring and one-dimensional. It's going to be all Google, Apple, Facebook executives. That's my prediction. It's an emergency podcast. The media industry is collapsing on itself and journalists are

leaving to start their own newsletters. Yes, that's right. Journalists are leaving. But I don't think that this can become a situation where the top half of journalists leave to start their own newsletters, because there will be subscription burnout. People can get five newsletters. People can get 10 newsletters, but that's probably the upper band of this. And so I don't think you will see the next 25 writers leave Vox or The Verge or Engadget or wherever it is to start their own newsletters. Because simply put, I don't think everybody can get to 2,000 paid subscriber for five bucks a month or a thousand for five bucks a month, whatever it takes to kind of to cover that. But you could get to, you know, hundreds, and it could be part of a salary.

And I think that that becomes super viral. So to sort of wrap this up in a bow, journalism has always been a hard business. I've run publications for a long time. It's now become really hard to run an ad-based business because Google and Facebook get better advertising results than a website like Vox. or, you know, Vice or BuzzFeed.

And those publications have a lot of overhead. If you think about how many salaries they have, a company like Vox or Vice or BuzzFeed, they're probably, the journalists are probably 50% of the budget or two-thirds of the budget, but there's going to be a large portion of the budget, which is overhead, office space, operations, and management. And what happens here is you're taking,

out a whole layer of management and cost and offices, etc. And that lowers the cost massively, which that means you don't need to be as profitable. You don't need to make as much money for the company to hit break even. And I think viewers are going to like this. The one problem you're going to see is somebody like Andrew Sullivan or somebody like Barry Wise or somebody like Casey Newton. They might be bummed like Howard Stern. was when he went to satellite radio, Howard Stern's audience went from tens of millions a day to low millions a day. So Casey, if he gets to 2,000 paid subscribers, is going to go from two or 300,000 people, I'm guessing, reading every Vox article to maybe 1% of that. So your

influence is going to plummet, which is one of the reasons why I made this podcast free, was because I wanted everybody to hear it, and we went ad-based. So it's maybe some people are annoyed by, you know, having to hear me read two or three ads. Hopefully I do them in a fun way. And they're interesting and targeted. But I do think I wanted to be more relevant. And so when we tested with this podcast doing Patreon, I realized in order for Patreon to work, I would need to make the overwhelming majority of my content paid. You have to be, I would say, 75 plus percent behind a paywall in order to get people to pay and probably ideally 90% behind a paywall.

So in order to make this week in startups work, I'd have to take the 140 episodes a year and make 120 of them, 130 of them, like behind the paywall. By the way, Tim Ferriss did this last year. He said, I'm going to get rid of advertising. I'm moving to paid. And then he quickly flipped it

because if you're at scale and you're making, I don't know what he charges per ad, but I'm going to guess 15. $25,000 in ad easily. You know, it's very hard to make that up with consumers paying. And who wants to limit their audience size? All these great artists want to do. So this is where I think Casey Newton or Andrew Sullivan will be less influential in the

public sphere because they're only being read by one or two percent as many people. And if they try to reverse that and they put content out, every time they put content out freely, then people have their fix of Andrew Sullivan or Casey or whoever. it is, and they don't feel the need to pay. Just like if I made half the episodes of this week in startups paid, you'd be like, well, I only listened to half of them anyway, so, you know, you produce too many. I'll just listen to the ones that are free, which is the challenge in this whole free versus paid. And I think, you know, these legacy media companies, they've been in trouble since Craigslist got rid of classified ads, since print went away. And now it's just going to get

harder and harder. And we've already seen the layoffs of Vox, BuzzFeed. Everybody's been laying off vice laid off a bunch of people. And I think a lot of the journalists at these organizations want to do advocacy journalism. So I think that media corporations will ban substack. So if you want to write for Vox or you want to write for advice, they're going to say you can't have a substack. You have to get approval for that, just like you can't do a podcast. And that will lead to even more people may be considering leaving. And it's going to be very interesting to watch.