This Week in Startups - Crypto accounting for startups | Finance Basics with Kruze Consulting’s Scott Orn | E1339

Episode Date: December 6, 2021

Crypto is reaching the mainstream, which has major implications for crypto and traditional startups alike. Kruze Consulting COO Scott Orn joins to discuss what regulation and taxes actually apply to crypto (3:17), recent improvements in crypto accounting infrastructure (8:24), appropriately documenting crypto holdings (21:25) and more! With crypto market capitalizations rivaling large cap tech companies, the IRS wants its due. This is a great crash course for properly documenting crypto and avoiding future fines.

Okay, we're back here on This Week in Startups. I'm your host, Jason Calacanis. I'm an angel investor in 350 companies over the last 11, 12 years, been doing this podcast for about the same period of time, actually. And one of the things that is the bane of my existence is people asking me the same basic questions over and over again. I try to be super helpful, but I decided what would be most helpful is if I could just give people a URL and say, go to this weekin startups.com slash basics, just like I wrote the book angel, so I could stop having the same conversation.

about how do you pick companies? I send them the book where I say go to Angel University and then ask me your question. So we're starting with questions on third base. Well, here we are. I wanted to do that for legal, accounting, HR, marketing, all this stuff. So we started the startup basic series. It's gotten incredibly well. And one of the great reasons it's gone so well is we have a series of providers that we use kind of on our short list when we fund a company. They'll say, hey, I need accounting, any legal, I need this. We give me short list. Hey, here's people we trust, and one of those people we trust, and we work with all the time is Scott Orne. He is the chief operating officer of Cruz.

Cruise. You can visit them at Cruise Consulting.com slash Twist. Welcome back to the program, Scott. We've been going through all these basics again this year. We did stuff on end of the year. And now we're going to talk today about crypto. When did crypto start hitting your customer base? And when did you start, when did you start first facing these accounting issues? And what were the first couple of accounting issues?

Yeah. There was a wave about four or five years ago with a lot of the ICO stuff, but that got a little crazy, a little too. It was almost like a gold rush and maybe not. I mean, there's definitely been some awesome companies and crypto tokens come out of that. But the difference now, we're seeing the second wave of probably the last nine months a year. And we're seeing like that like blue chip cereal founder along with like really smart young people who want to get into this category. So to me, this is like the next SaaS. This is the next consumer internet.

This has so much entrepreneurial energy behind it. And it's pretty exciting for us. And we've got, we don't have a ton. We've been kind of tiptoeing into crypto accounting. And now as the tools have developed, as we understand the tax ramifications for a lot of stuff, a little bit better now, we're starting to sign up some of these companies. So I'm excited to talk about this with you. So the ICOs were a bit of a disaster.

I saw that happening and I was like, gosh, knowing what I know, having gotten a quick education as an investor about accreditation laws, KYC and all this stuff, gosh, you break the rules at your peril. You are responsible and not knowing the law is not an excuse or a defense against breaking it. You as a founder have a fiduciary responsibility to understand the law, to understand what the rules are. you can't come into the chess game and say, I didn't know the queen couldn't do that. And, you know, I want my queen back. No, you go to jail if you screw up some of the stuff or you get a serious fine. You can be blocked from working at a company. You got to get this stuff right. Crypto, a lot of people think because you're doing something new that the old laws don't apply. Maybe you could speak to the old laws and innovations in crypto and how those align. I know you're not an attorney, but just in general, how you think about that. Yeah, you mentioned things like KYC or doing a securities offering, which the SEC actually regulates. And so I know you've done a couple episodes on this recently, with Coinbase and SEC kind of in this tug of war, so to speak. The SEC's modus operanda is to regulate.

Like that's what they do. And so they're seeing this giant kind of financial innovation center happening and they're kind of getting in there now. So the crypto stuff that I think is most compelling is this. is where crypto is really like a software tool. It's a tool for facilitating transactions, things like that. I think that's maybe the difference between the cycle. The utility coin, right? Exactly.

Now we're at the point where people are building applications. There is a token that is serving a purpose in the world beyond speculation. Now, there might be people speculating on the tokens, but there is a valid argument to say, this is like an airline mile. This is like mana in a game or a skin in a game, like a video game. It's being used for a purpose, in other words. And that is the major shift that's occurred. Yeah.

I totally agree. Yeah, you said it better than I can say it. Yep. So what do people need to know about how to categorize this? Because I had somebody on the program, I don't remember who. Gosh, we would have some of the crypto people on. But he had sold a bunch of tokens. And I said, well, if you're selling those, it's not an investment, right?

He said, this is not an investment. People are going to use the tokens. They're buying them. They're saying when they buy them, they're agreeing to buy these for the purpose of utilizing them to buy time on the network, whatever it is. I said, okay, great. So does that mean it's a profit for your company? It's like, yeah, we pay tax on it.

And I'm like, what's a tax treatment on selling tokens? So maybe you could explain that a little bit. How do you account if I sell 10 million tokens of Solana to somebody and they're going to use it on the Salana network? I'm just picking a random name out here. It's not an investment. You didn't buy equity, but you're buying them to use them. So that means there should be tax treatment, correct?

It's a great question. And there's kind of two ways I think about this. And I'm thinking about it from the company and the accounting and tax perspective. There are companies that get tokens, whether they're doing work or a company or a crypto network or paid in tokens. There's also companies that are buying tokens or buying crypto as a cash management tool. Right. And we can talk about those two scenarios. But those are kind of like passive ways of participating in the crypto world.

And the accounting treatment is actually pretty clear on that. And I can talk about that in a second. Yeah. The second component is crypto is our business, which I think is some of the stuff you're talking about. In crypto as our business, that's probably the biggest change we're seeing right now. Like so many companies are coming to us with crypto as a business. It's not a fundraising structure.

It is actually the way they're transacting. Yeah. It's a currency. and when you're doing that and the token is fluctuating price and going up, yes, that can be realized or unrealized gains. You can pay taxes on that if you're swinging in the profit. Probably one of the biggest for all those categories I just covered, the entrepreneur you were talking to was smart and was on the ball and knew they had to pay taxes.

It was actually, now that I remember, it was Salana founder, Anatoly. It was on the program and he said, yeah, we paid a big tax check. Why was this savvy for them to pay that big tax? Because, well, first of all, not paying it means you can go to jail. Jail? Okay. Yes, that's number one. Number two, oftentimes companies are surprised when we're doing their taxes like in March

and April. They're like, oh my gosh, I didn't know that if I sold that crypto and realized the gain, I have to pay taxes on it. And they have not paid the money. They spent the money. And they didn't pay. Yeah, exactly right. And they didn't pay their estimated taxes.

So they have a tax bill and they have penalties. Explain what estimated taxes is. So I sold. these coins in Q2, I never pay tax on it. Now, you're cleaning out my books at the end of the year, and it's February 15th, and I'm getting ready to get this tax bill paid. What does it mean I didn't pay my estimate? The IRS is smart, and they want their money kind of as the year goes, because they understand the concept of time value of money, and they can put take that money. They get paid, put it in the bank, get interest, so to speak, right? So they want you to pay

Q1, Q2, Q3, Q4, estimated taxes, like clockwork. So if you, you had that big gain in Q2, well, they're expecting a check at the end of Q2 or at least in Q3 to cover those taxes. They want to, you know, make interest on that, so to speak. So if you don't do that, they will actually charge you a penalty at the end of the year. So in paying your estimated taxes protects you from the other scenario, which you just covered, which is spending the money. Right? Like the worst hole you never want to find yourself in is owning taxes and not having the cash

to actually pay it. So SMA taxes protects you from the penalties, but also just make sure you're actually fulfilling your obligations. Right. Super important. Okay. Now, when you're investing in these, if you sell them, it's capital gains. We all know that. Is there infrastructure yet for managing all of this? Because everybody talks about the blockchain. I mean, this is pretty rudimentary. And QuickBooks and accounting software is nothing to do with the blockchain. So, and then you have all these transactions occurring. And, you know, you have people who maybe are earning crypto because they put servers on a network. They get paid in crypto.

If they get paid in crypto, do they owe taxes on that? Is that a profit? If they don't sell it? Because it's kind of like getting paid in equity in stock. Dude, what's the tax treatment on that? And that's a, let me tread carefully on that because I'm not a tax CPA. But if you are making, if you deliver it a service. If you're collecting payment for that, like revenue, yes, that would be taxable.

So that's, but that's actually, you mentioned the infrastructure growing around this. That's one of the things we're most excited about and it's allowed us to kind of get in the crypto accounting game in general is essentially QuickBooks, which is what most, almost all startups use for their accounting is not set up for crypto accounting. If you think about it, traditional accounting is on the bank ledger, right? money going in and out between the bank accounts and someone else, right? That's why we all talk about bank reconciliations. That's how QuickBooks is set up.

Well, crypto, by definition, is on a different ledger, a ledger in the sky, right? It's something you can actually evaluate, check, look at, but it's not a bank. And so what we're seeing is a whole new breed of accounting software pop up that is capable of essentially capturing those transactions off of a blockchain, letting you do just what we, you know, the usual accounting. That's fascinating. Yeah, vendor categorization. And then the best part is inputting that or integrating that into QuickBooks.

Because a lot of companies have a kind of normal operational business and then they've got this crypto happening over here, right? Yes. And so pulling those together in QuickBooks is really important. And again, as a taxi thing, it's almost like you're doing two sets of books. You are. And then you got to merge them. Oh, what is exactly.

But, but believe me, it's so much better. better now, like, you know, we're recording this in late 2021. Six months ago, these companies were, were just getting formed. They probably had like some developer running a cron job or something to give them some reporting. Totally. That's exactly it, actually. They were doing like this hacked report themselves, then trying to hand that to the account.

Yeah. So, yeah, and it could be wrong. That's exactly it. So what could go wrong, everything. Yes. And so now what's really cool, like hopefully we'll do this again next year. And you and I will be sitting here with like big smile. on her face.

Yeah. Because I'm like, we're seeing how fast these technology companies are innovating on the accounting side with crypto. And I'm like, it's going to be, it'll be ready by then. It'll be so much easier for everybody.

And when you talk to the founders, this is like one of those like little things in the, like the crypto founders in the back of their head. They know this, they have like kind of a weakness or it's not maybe being done right. And they want, they want a good accountant. Like we talk to them,

they're like, kind of like ask their. They're hoping we will take their business. And the cool thing right now is because these tools have developed, we can actually say yes. Now, we're still not saying yes to like 200 out of time. We're picking our spots and making sure our processes are developed. I want to do it with people who are highly ethical, running a tight chip and who have the resources to put the time in to do this correctly, I would assume.

That's exactly it. And people, yeah, you said it perfectly. And, you know, if you look at, you know, these new concepts of how to run a business, you know, you have these people who are running nodes on network to make it decentralized. They're getting paid. They're getting paid by the company or maybe the nonprofit that gets set up in Panama or something. There's a lot of weird stuff going on. Sometimes they create five things, putting aside the Panama nonprofit that manages 300 millions

in tokens that were sold and nobody knows who's on the board because they have security issues, like people who work at Goldman Sachs or Amazon don't have security issues, like they have security details for that reason. Let's put that aside for one second. When you run a company and you're paying vendors, you will ask them to sign a W-9, correct? And you will have some sort of, you know, hey, I paid this person a million dollars this year as a consultant. I paid this person $5 million a year. Don't these things, aren't these the analogous? And so are those people who are running nodes in Malaysia or China who are getting paid crypto, don't they need to get? some sort of, you know, KYC and knowing who they are?

Because this seems to be antithetical to decentralized, anonymous crypto land where anybody can participate. And you're saying, hey, we've got to put a throttle on this. You need to sign some tax documents before you can participate in the network. And that's what the SEC is saying. And so you do have to find, you know, if your company running a token or running this what exactly described, you're going to have W2s for your employees. You're going to have 1099s for all the contractors in the U.S.

And for people who are abroad, you were going to give them a W-A-B-E-N, which is kind of like the 1099, but it's for people in other countries. But it's definitely still the Wild West out there. Like you talked about the Malaysia node, like maybe they're getting the W-8 Ben. Maybe they're not. But if you are running your business, you, it's like you said, you have the obligation to do things correctly. You can't just like say you didn't know two years from now. So it's really good to do this stuff the right way. Protect yourself. Even if you, as long as you make a huge effort and actually can document the effort,

that's going to get you the benefit of the doubt with the IRS and I see. They're still going to want things to be done correctly. But not doing it at all is a fast- Ignoring it is a road to disaster. Because then if there is some mistake that you make, if you have shown good faith and you've paid your taxes as best, as you thought you should. Then when you go into the conversation, you say, look, we paid our taxes on the sale of these tokens. We put it into our tax returns. We paid quarterly in advance.

We want to do it right. We didn't know that this person set up 100 things in Malaysia and then actually they were based in the U.S. and they had a shell corporation. We obviously want to fix this and make it right. Tell us what we need to do. That's one conversation. And that usually goes a certain way with government agencies, correct? Totally agree. And by having, like, with this accounting software being developed, it's going to be so much easier to show a record and show all the transactions and who the vendors and who the categories are.

Like, that's been kind of, like, I do feel for a lot of the founders in the crypto world because, like, it was hard. It was beyond hard. It was arduous. Yeah. And so, like, sometimes you're tempted to look the other way, but doing it the right way is so important. And now you don't really have any excuse.

Like it's out there. You can do it correctly. And you know what to be a good, I think, analogy is before credit cards existed, people would submit expense reports. They would pay cash. They would have written receipts. And if they went and stopped at a restaurant in the southwest, everybody had the same receipt pads.

And it was common. I remember when I was coming up that people who worked in my industry had three or four receipt pads in their bags. And the waitress, when you went to that diner, would say, you want some extra receipts. and they would give you 10 extra receipts and you give them a nice tip. And then people would be like, I had lunch,

I had lunch, 20 bucks, 20 bucks, and you're taking the whole 20. So the people were kind of, you know, massaging their expense accounts back then and there was no paper trial because there was no credit cards.

Credit cards get introduced. Now they're imported. You have corporate cards. We talked about all the unique new cards that you can set per individual, per dollar amount, per month, whatever,

and it's all tracked. That's going to happen in crypto when it's all tracked. fraud and these things, you know, are harder for people to pull off. I totally agree. The other interesting thing... You like my story about the book of receipts? The waitress is giving you like an extra debt receipts.

I'm actually old enough to remember the book of receipts and how people do... Yeah, that is... I remember when we used to fix computers and laser printers, we got paid for taxi rides. We got paid for everything. And so what people were doing on their expense reports, they'd say, listen, kid, don't take the $6 taxi, walk, or hop the turnstile or, you know, whatever. and you made six bucks going there, you know, and you're making $10 an hour. Now you're making $16 an hour, you know?

And they were basically mentoring me on how to work this stuff. Yes, yes. Which in journalism is because of the salary is when I was in IT. Yeah. I was an IT guy. But, you know, the journalists people were doing it too. They would submit to their magazines a bunch of expenses. Hey, I went to Brooklyn to interview this person.

I took the subway. I took them to lunch, whatever. You know, and people build a receipt for $12 or $34. Who knows the difference, right? It's a much better place. Now there's like, especially if you're running the company because you're not paying for all that stuff anymore. Well, I mean, it's actually when you think about it. Did you ever work on a business that had miles or an incentive program that would be the analogous of the miles or points programs into accounting for that?

How did the IRS look at, you know, American Airlines miles or Bonvoy, you know, SPG points? Yeah. How do they look about owning it as an individual when you start to own millions of them and then people who were giving these away? what kind of tax treatment did those get? Yeah, Miles sit on the balance sheets of airlines, I believe. They do. Yeah, it's a liability, right? Yeah, exactly.

And that's why they've started deprecating them or they also have a major incentive to inflate them away, you know, by making it instead of 50K to fly to Florida. It's 100. Now it's 100. Now the liability goes down. Yeah. But yeah, there's, it's, it is analogous. But the, what's interesting is there's people, people didn't transact as.

as much in miles as they are with like NFTs or things like, like what we're seeing now is it's, it's financial innovation. It's amazing. Like, I'm sure you know some creators who are like issuing NFTs. And that's gonna be like an annuity or royalty for the rest of their life. Every time it's bought and sold. And that's what's so exciting about this.

And that's partially what's fueling the gold rush a little bit. But to even be able to do that like my 2000 brain, when I was investing in LAS in 2000, I never would have ever thought about any of this stuff being possible. It's why we're seeing so much entrepreneurial energy. Like people are building. It's inspiring. Let's face it.

It's super inspiring to think, hey, I'm Quentin Tarantino. I don't know if you saw this story going a little tangent here, but Quentin Tarantino took seven pages of the Pulp Fiction script that didn't make it into the script. He took pictures of them or whatever. And he made NFTs out and we're trying to sell them.

Now, the person who owns Pulp Fiction, Miramax, which I think is owned by Disney now, is suing him saying, hey, we own Pulp Fiction. He said, well, you don't own these seven pages that I never put in the script. These are my ideas that never made it in. And so you, but it is called Pulp Fiction and they own the IP for that.

So now we're going to have a little court case or whatever, some settlement. But what an incredible idea that now, if you think about it, every frame of the Empire Strikes Back could be sold. And, you know, whatever number of seconds and frames per second could be sold as an NFT. Who knows what the rights they get for that. Lucas gets nothing and, you know, I might buy a NFD of, you know, BobaFet from there if I... That sounds pretty awesome, actually. Yeah. Yeah. Sorry to give these ideas away for free on the pod, but, you know, now we've got to look at, because they do say in those agreements, I remember when I was a journalist covering this,

all derivative works. Yeah. Yeah. Known or unknown. So when he sold to Miramax, that contract says all future, all current platforms and future ones known and unknown in the world and boom, those characters are going to be, you know, sold as NFTs or whatever and the originators of them will get nothing. Yeah. Well, that's what fueled the streaming strike, you know, three or four years ago with the Writers Guild and all. They everyone had to work out house. But the cool thing is this is a new revenue stream for everybody and you hope that, uh, people can actually get together and figure out how to split it and not be like so greedy. They kill the whole idea. Yeah. I mean, and people have been selling these forever. Like,

You can literally buy, I'm looking at right now for 35 bucks, a still from a 35 millimeter print of the Empire Strikes Back. So people will buy an old print if they get their hands on it, cut up each cell, and make a memorialized plaque that you can put on your wall. And obviously, those old prints wind up in people's private collections are thrown in the garbage because they deprecate over time. So why not clip them up and give people some joy from them? what makes you nervous about crypto right now in terms of the regulatory environment or tax

treatment? Are there any red flags or things that you've identified that there could be more clarity on and that you hope to see more clarity on from either regulators or accounting best practices? And there's an accounting group that sets the like the gap standards and all that stuff. Have they started putting out crypto best practices yet? They have. The AICPA has given out some guidance. Some of the stuff that we could talk about is like some basic accounting. Like if you have a bunch of crypto on your balance sheet and it goes down, the guidance from those groups is to write it down. This is when crypto is not your business.

This is like the people who are paid in crypto or speculating on a cash management perspective. And then the guidance, it doesn't make a ton of sense, but it's an intangible asset. So they want you to take the write down, but they don't want you to write it up, which doesn't make a ton of sense to me, but that is the, I think,

the most conservative accounting guidance they're giving. That's different, again, than if crypto is your business, if crypto is your business, you are writing it up, writing it down,

that is, you know, all taxable. So I buy, I have 10 million in my bank account. I decide I'm going to put one million of my treasury into Bitcoin. It goes down 50%.

I decide this year, I'm going to take that loss, $500,000. I had a profit of $500,000. I'm going to try to not pay taxes that year, correct? Exactly. And we can, you can Tesla actually does this, right?

Tesla bought a bunch of crypto. It did very well for a while. And then it went down. And so you can actually read their financial statements. They took the loss. Yeah. Exactly. Exactly.

So that's a good lesson for startups in that like, crypto does go down. Like we're in this huge wave right now. And the fundraising climate is so frothy that companies that maybe were raising 5 million or 10 million before are raising 20 million. And sometimes they're looking around. saying like, what should I do with my money? So probably my biggest thing I'm worried about is companies not having a good cash management

plan, something that's board approved, speculating a little too much or reaching for yield and some of the Dow's and things like that. And then Armageddon happens. Yeah. But you know what I'm talking about, right? And all of a sudden. No, I mean, I had this recently. I had a company that raised, you know, a large, large, large, large round, like mega round

that you're reading about unicorn size round. and first-time founder is, what am I supposed to do with this, you know, tens of millions of dollars? And I was like, your job is not to speculate. You can put it into short-term treasuries bonds. Maybe some of them can go into revenue-back municipal bonds. You know, 10% of them, they might give you 4% versus whatever you're getting in treasuries. But our job is to grow revenue 2x year over year. That'll dwarf this.

That's not our business. That's the correct discussion, right? It's absolutely correct. And I'm going to cut that out and send that because I get that question at least once a week. You're not a money manager. You're not fiduciary. You are not, you know, people are not investing your company to speculate on cryptocurrency to be super careful.

I know it's tempting, especially like inflation is starting to take up so people get kind of nervous and they feel like they need to do something. It's just not why you were given the money. You were given the money by venture capital, so we're given the money by foundations and retirement associations and endowments and high net worth individuals who are doing that in the other part of the portfolio of which you are 5 to 15% of their overall mix. They don't want you mixing it up in that 5 to 15%. They want you focused 1,000% on that which you told them you would do, which is grow a high

growth company. Period. End of story. They have exposure to crypto. They have exposure to equities. They don't need more. And you can buy it personally if you want to. Use your personal bank account to buy some if you want.

exposure. If you want to dabble, go dabble. Don't use your company's bank account to do it. Definitely a bad idea. All right, listen, crypto is going to be this big open thing. Well, certainly next year when we get together and do this again in 2022, we should definitely update on what's going on in crypto because I'm fascinated with these Dow's and decentralized organizations, making bets. Like, that's like a fun structure. How is that all going to work? Oh, my lord. I mean, nobody knows, right? It is inspirational. Like, you use the exact right word. Like, I'm a finance nerd. I think it's amazing. I just think you. should use your personal money or money that you should be risk averse.

Totally. To not use risk averse money to play in that world. I mean, NFTs is the perfect example. You know, people were like, I'm buying them because I enjoy them. And I was like,

you're buying a board ape for 200,000 because you really, that piece of artwork speaks to you. How many pieces of artwork did you buy before your board ape? And they're like, none. I'm like, okay. So you saw this and that got 200,000.

but in the last 20 years you've never bought art. Okay, got it. If that goes down to- If that goes down to 2000, you're telling me you'll be just as happy? And they're like, no, I won't be happy at all. It'll be disaster. I lost 99% of my money.

I'm like, that means you are buying this for speculative purposes. Like, well, not totally. And I'm like, hmm, it does seem like it's totally what you're doing. And so that's where the disconnect happens for me. If you were buying these things for $100 or $500 or $1,000 or $1,000, even, And you didn't care if it's speculative or not.

Just like somebody buys a muscle car, they buy some Mustang from 1970 for $20,000. They like working on the weekends, like taking it out. They lose $1,000, $2,000 a year maintaining it. If it doubles in price and they broke even after 10 years, like, okay, whatever. But they enjoyed it. Like, I don't think that's actually what's happening with NFTs. That's like buying a $250,000 car, like, you know, some perfect Corvette. And it's actually a big number, right?

And you and I have had the benefit of going through the dot-com boom when we were young. And so you see that, like, we've experienced it. Like, I remember in eBay was $500 a share and things like that. That was the equivalent. And by the way, some amazing companies that changed the world came out of that. Yeah, the one out of 500 that survived. Yeah. And it was just one out of 500.

Like, to be clear, like, there were, there were so many public companies that went to zero. Like, the number of public companies that went to zero was shocking. or to like three cents on the dollar. Yeah, I was at Hamburger and Quist doing M&A for those companies as a young pup, you know? So, but I think this is the, the crypto trend right now is very exciting. And we're seeing like those people who you like bonafide founders who are getting into this. So I think they're going to create some amazing, yeah, super legit. So I don't want to take the steam out of this.

Like I think it's a major trend. Just be careful. And like you said, know why you're buying something. Is it speculation? Is it for fun? Is it because you're super excited about the... Yeah, yeah. It could be some combination of those things.

And, you know, the way it's perfectly analogous to what we saw in the Clone Wars, you know, back in the dot-com era, we're like old Jedi here with like missing limbs. But, you know, I can tell you about the Clone Wars. All of that energy was correctly placed. The internet was going to transform society. It was correctly placed. But the bets were placed poorly and the bets were placed at, instrumental odds on people who had no idea what they're doing. And the crater that was left was the

risk of ruin for many people. So the correct way to play it was to get as involved as possible, maybe make some intelligent bets, but avoid the risk of ruin. And if people don't know what the risk of ruin is, it's a gambling term for when you put all of your money into one bet or into a small number of bets and you have the actual risk of ruin. That's bad bankroll management. You can look at bankroll management as well. And it just goes to diversification and some of those other concepts that are super easy to understand. Going all in on one cryptocurrency is a road to disaster. Going all in on five, still a road to disaster. Going all in with a third of your net worth if you're super aggressive and don't care if you lose it, okay, that's a different story.

Yeah, it's good advice. My lord, I mean, if you have one of these board apes and you can sell it fractionally and you bought it for $2,000 and it's worth $250, would it kill you to take 10% off the table and lock in a 10x win? Like lock in the 10x win? Like lock in the 10x win? There's no shame in doing that. I sold Uber shares at, you know, 30 some odd dollars a share, was able to buy a home, you know, was able to put money into, you know, 529 accounts for kids' educations and, you know, sleep well at night. You know, the company Masayoshi-san wants to buy some at 40, whatever, you know, you sell a little bit here and there. You cover your bases, you lock in wins.

I sold a little comm, you know, doesn't mean I don't believe in calm. It just meant I bought calm at $4.5 million when it hit $2.50. and then a billion, the right thing to do is to just take 10% off or something in my mind and lock in some wins. Totally agree. And sometimes those founders appreciate it because you're giving a little bit of ownership up to the big institutions

who need it to come in. And so it's a, they did appreciate it in fact. They were very, it was, listen to the way I looked at a 90 game theory on the Masa Yoshesan investment, I was like, okay, Masa has investments in every Uber competitor.

If he doesn't get a nice piece of, of Uber and he's offering an extraordinary price, like giving them years and years of credit. If he gets that, what if he goes invest in Lyft? I mean, he's got like $50 billion sitting here, $100 billion from the Saudis and whoever else gave it to him. Like, do we want him giving a war chest to lift? Like, no, let's lock him in. Get him on our team.

He's got DD, grab. He's got all these other things. Man, just think of how M&A will go. And sure enough, all these great things happened where Uber got to own portions of other great companies because of it in Russia, Southeast Asia, and China. So you're going to be thoughtful. I think that's one of the things. People might have noticed this from the podcast.

I was really negative on cryptocurrency with the ICO phase. I was very into it 10 years ago when we first started talking about on the pod because I found it fascinating on a technology basis. Then the ICO has happened. I was like, this is a scam and a grift. And NFTs, I was like, this is a scam and a grift. This is manipulated. There's a core technology here that's interesting.

And now when I see people properly incorporating paying their taxes, And I see the DAOs and I see some of these NFT platforms and, you know, uh, you know, Jeremy O'Air, you're doing USDC, you know, like a legit entrepreneur doing a stable coin. That's auditable and all this stuff. I'm like, okay. Now, out of this huge underbelly, it's bifurcating. There's going to be offshore stuff that's Fugazi and weird. And you don't know if you're taking a terrorist money or a money launderer or drug dealers

or human traffickers money. And then over here, you're going to have the clean money and you're going to have the clean money. and you're going to have the clean infrastructure that's going to scale nicely. China's out of the game. The United States is regulating. These are great signs. An authoritarian country is out of Bitcoin

and the democracies are building frameworks to make this fair and to protect consumers so that people pay their taxes. This is a good thing, ultimately. That's a really nice summary. You think it's a good thing?

Oh, yeah, I love it. I love it. And you said, like, the market regulation can be good. Like, making sure things are done correctly gives everyone so much confidence long term. So that's why I think it's actually good. The SEC is involved. And you just want them, everyone to be constructive and get to a point where they preserve

the value, they let cool stuff innovate and actually happen, but make sure that everyone's protected as well. Yeah, I mean, it's such a no-brainer. Like, do you want people running a bunch of servers on your network, if you're providing some service and you need servers out there? You need some people to be doing hash or whatever for your new project. Do you want them to be in some authoritarian country using coal or some illegal, you know, labor or who knows what they're doing? And for what purpose, maybe you're paying them coins that are going to a nefarious human rights violating organization or some dictator that's making people suffer.

You don't want that. You want legitimate. And that was the great thing about Bitcoin coming out of China. Now that gave all the West control over this great promising technology. Wonderful. All right. Listen, this has been great. I just like talking to you.

Thank you, Jason. Chew in the fat, as it were. We'll do this again next year, hopefully. And who knows what's going to happen? I think Dow's are going to come up for sure. Yeah. Chrues Consulting.com slash twist. I can connect with Scott. He's on Twitter and all that stuff. You can find him. This being startups.com slash basics for all the basics. Thanks again, Scott. I really appreciate taking the time. Being so candid. You're very helpful. I mean, we've worked. I don't know which startups you've worked with of mine, but I'm trying to remember, but it was a long list. Well, Denssey just announced their latest, raise a couple days ago.

And you're working with density? Yeah, they actually just brought their accounting in-house, which is what happens with our clients. That's what we call it, like going off the college. And we totally encourage that. But like, I think they're a unicorn now. I think we can say that publicly. I think you can say that publicly.

They announced it. And that's a great win for both of us because we got to. Calm. Superhuman. There's a few others I'm forgetting, but I know we've worked together quite a bit. I mean, it's great. They all just talk about how great you and your team are. So thanks for supporting my companies.

And it's wonderful to have you in the program sharing knowledge. And one of the things with the startup basic series is I need people who can come on who aren't like, hire a professional, higher a professional. I'm like, here's an interesting question, hire a professional. I'm just like, you know, that's a one minute conversation. Like, here are 10 issues and a higher professional. It's like, well, can we unpack the issue? Of course you want to hire a professional. But like, let's unpack and talk with issues why they exist.

And you did a great job on this series. So everybody go watch the entire series. Thisweeks startups.com slash basics. All right. We'll see you all next time. Bye. Thank you.