This Week in Startups - Crypto crash updates, Sequoia’s structure, $ZM product expansion, Starlink & more | E1498

Episode Date: July 1, 2022

First, we cover an update from the BlockFi CEO denying that FTX is buying them for $25N (2:33), and we have a couple more crypto quick hits (5:51) before we touch on Sequoia's largest investments being down 70% (34:01). Klarna is raising way down at a $6B valuation (45:23), Zoom is looking to expand beyond video conferencing, (54:50), and the FCC approved Starlink to supply internet to moving vehicles (57:40). Finally, Rachel speaks with co-founder and CEO of Stages, Jared Downing, for this week's OK Boomer (1:08:23). (0:00) Jason and Molly tee up today’s show! (2:33) More info on BlockFi/FTX sale: CEO of BlockFi denied $25M sale to FTX (5:51) Crypto exchange CoinFlex having public feud w/investor who had a reported $47M loan from the company (12:34) Vanta - Get $1,000 off automating your SOC 2 at https://vanta.com/twist (13:44) More on contracts (17:40) CFTC charged Mirror Trading International for fraud over promise of passive income returning 10% a month (26:44) Helpware - Go to https://helpware.com/TWIST to get $1000 off your first invoice (27:54) OneCoin not on blockchain and had no real value (32:43) BairesDev - Go to https://www.baires.dev/twist and get $10k off when you sign your first contract (34:01) Two of Sequoia’s largest investments, Unity and DoorDash, have each fallen over 70% off their public peaks (45:23 Swedish BNPL startup Klarna is raising at $6.5B - 1/7th of what they were valued June 2021 (51:48) Breaking: BlockFi says it will be bought by FTX for up to $240 million (54:50) Zoom looking to expand outside of just video conferencing (57:40) SpaceX gets new FCC Starlink authorization for trucks and boats! (1:06:21) Producer Rachel tees up this week's OK Boomer segment (1:08:23) OKB: Jared Downing, co-founder, and CEO of Stages (a live-streaming platform) (1:28:43) Outro + Plugs (Bye Producer Justin! We'll miss you)

Hey, everybody, it's Friday. Yes, you made it to Friday, Monday, Tuesday, Wednesday, Thursday. So many great episodes, so much great news. But today is Friday, which means we're going into the holiday weekend. We will be doing a Sunday show, though, no Monday show. But I'm really excited for today's show. Molly, what's on the docket? Yeah, we got a variety show with a bunch of news.

A new little update from the BlockFi CEO denying that FTX is buying them for $25 million. Maybe not denying that they're buying them, but not 25, million dollars. I don't know. We'll see. We're going to discuss. There's a bunch of other crypto quick hits. We'll get through them quickly of just what's going on in the crypto contagion collapse. And then some talk about Sequoia and them holding their big winners in their public equities fund, the new Sequoia fund. And if that's a good idea or not, having this Evergreen Fund, obviously with the markets down, there's been some criticism. Yeah, kind of an interesting what do LPs want conversation? Zoom and other quick hits is looking to expand beyond

video conferencing is a competition with Slack heating up. I freaking hope so. I predicted that. I predicted that. And consumers will be the winners if that does happen. A few more quick hits. The FCC also approved Starlink for moving vehicles. That's amazing.

And Klona is apparently raising around at a $6 billion valuation. Remember, they were up in the $40 billion club. So that is quite a striking markdown if it's in fact true. It's going to be a great show. Stick with us. This week in startups is brought to you by Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a SOC2 report fast.

Twist listeners can get $1,000 off for a limited time at vanta.com slash twist. Helpware. Helpware helps you outsource the tasks that slow your team down. From data entry to world-class customer support, Helpware can help make you bionic. Go to helpware.com slash twist to get $1,000 off your first invoice. And BuyRace Dev. Hiring a team of experienced developers doesn't need to be hard, slow, expensive, or risky.

Go to buyrace.combe slash twist and schedule a 20-minute chat to get a development team, you'll love and get $10,000 off when you sign your first contract. Before we get into the crypto news, let's start with possibly a correction, or at least a publicly issued clarification. So after we recorded yesterday's podcast, this was where CNBC, and I think Pitchbook also reported that FTX was nearing a deal to buy BlockFi for $20 million, $25 million. The BlockFi CEO, Zach Prince, came out and denied the news, said lots of market rumors out there, I can 100% confirm that we aren't being sold for $25 million.

I encourage everyone to trust only details that you hear directly from BlockFi. We will share more with you as soon as we can. It seemed extraordinarily low. We did say that yesterday. We did, I think, give the caveat, if this is true, this is a report. So when something's a report, we always tell you which news source is from. So when we say it's from a news source, you as the listener should always say, okay, How did the news source get their information?

Sometimes it's a rumor. Sometimes it's a leak. And, you know, depending on the publication, some people run rumors very quickly. Other people need three sources. Some people will allow anonymous sources. Some people are now anonymous will allow anonymous sources if they're vetted. So you have to make those own decisions. We're a show that comments on the news.

So when a news story happens, we're giving commentary on that. So just so people know the rules of the road here, we're not calling BlockFi and checking on that. We're reporting on a report, right? So we're commenting on a report. Just understand that. And we give the caveats all the time, I think. Yeah. For people who don't understand how this works, Paul, lucky.

Although, I'm still going to go ahead and try to parse this tweet, commentary style, because the tweet does not say we are not being bought. Yeah, it's clear that there's a deal going on. We are not being bought for $25 million. So it seems to me that it's very, look, maybe he meant we're not being bought. but it seems like there's definitely a deal in the works. Sure. And maybe that specific number is in flex, but like one note he just said,

Jay Sudu just said would be hilarious if it's $26 million. Like, well, I think maybe what's going on here is there was the $250 million line of credit they were talking about. So I even said, well, maybe it's $250 plus $25, that would make more sense to me, $275 million.

Then you would be looking at, if it was a $5 billion company previously, you know, going for $500 million would be 10% going for $27,000. million would be about 5% of the original value. Crypto exchange losing 90% or 95% of its value makes sense. And there could also be a bunch of debt here, too, Molly. So we don't know about the assumption of debt.

So sometimes when you calculate a deal, there could be $25 million in cash, and there could be $250,500 million to pay off debt holders, right, and settle debts. So that's why these deals can be a little bit of a moving target. The assumption of debt is part of the price. So sometimes companies even get bought for their. debt. Somebody's got a billion dollars in debt. Somebody comes in and gives a billion dollars. They essentially are buying the company for a billion because the company has those liabilities. So that the price would be one billion. Yeah. But yeah, so we can say that this is the

official response from BlockFi. It's not denial of a deal. But the pricing, at least at minimum, still seems to be in question. What is not in question is that the crypto drama and collapse continues. The latest story today is that a crypto exchange, another exchange in trouble, basically. A crypto exchange called CoinFlex has paused withdrawals since last week. And they said that they had to pause withdrawals because a big investor reportedly had defaulted on a $47 million loan. It's led to like a public feud with this investor.

CoinFlex, in case you hadn't heard of it, is the 96th, the large. just crypto exchange by trading volume, according to coin market cap.com. So they're in the top 100. So they're in the top 100. Just right over the line. It's obviously the volume is down substantially since they paused withdrawals. And then CoinFlex CEO, Mark Lamb, last week tweeted Roger Vair, who apparently some in the media called Bitcoin Jesus owes CoinFlex.

I thought there was Michael Seller. I named Michael Seller Bitcoin Jesus. I know. And evidently that was taken. I don't know. This like never gets any less absurd. But yes, the CEO tweeted Roger Bear owns CoinFlex $47 million USDC or million USDC. We have a written contract with him obligating him to personally guarantee any negative equity on his CoinFlex account and top up margin regularly.

He has been in default of this agreement. Oh. And we have served a notice of default. Oh, okay. So, well, wait, shouldn't they then lick? Is this against his holdings? If they gave him a margin loan, why are they asking him for money? They should just liquidate his holdings?

Or did they move too slow and not do it programmatically? And they gave him enough space that they are now not able to liquidate? According to CNBC, there was in fact an agreement in place that prevented coinflex from liquidating bear, like typical accounts with negative equity, I guess, because he was a really big whale. Now, he seems to dispute this and tweeted recently some rumors have been spreading that I have defaulted on debt to a counterparty. Uh-huh. A counterparty.

These rumors are false. Not only do I not have a debt to this counterparty, but this counterparty owes me a substantial sum of money, and I am currently seeking the return of my funds. Okay. Well, this is what happens. When you have a collapse in the market, you stress test contracts. So most of the time, in an upmarket, this is just a micro lesson here on how contracts were most of the time you don't have to enforce a contract.

All the clauses in the contract are there for a reason, but most people do not have the experience of having to actually execute on a piece of that contract. So as but one example, you might have a non-solicitation. That's pretty normal in your employment agreement with your employer. Non-solicitation means you can't go to another company and then solicit other employees to go there. This never comes up. But when it does come up and some director of sales leaves a company or a CTO leaves a company and all of a sudden four or five other

employees do, you know, you then could have some serious ramifications for the person who is soliciting. In other words, you can personally hold them liable for the damages of those people leaving. The other company gets dragged into it. It's like an edge case, but this is what's happening in law right now. The edge cases are all going to be stress tested. I'll give you another one. In contracts for events, I always have really been detailed about what the force major and act of God clauses are. People are like, why do you care about the stuff? I'm like, well, I live through 9-11.

And I had an event during a hurricane one time. And in both of those cases, we had to have a negotiation with the vendors and say, listen, in our contracts, we have a thing that if we have to move the dates, we move the dates. And we all work together to move the dates. And we don't owe you the money. And we got our money back. So during COVID, we had a deposit down with a hotel. and I just basically knew that we were in the right

and we told them, listen, this is what we're talking about $20,000 here. Don't make us file. Just give us our money back. And they dragged their feet. And then I sent a legal letter and I said, this is going to just cost you. You're going to have to pay for our attorneys. It's going to cost you $10,000 in legal fees. Just give us our 20K back.

And of course, once I presented it to them as such, like the stuff is being filed on Monday, we got our money back. Because I said, look, it's in the contract here. We signed it. And then sometimes I'll even have people initial, specific portions of a contract so they understand it like this is a serious portion

so there's a little device I came up with for people who don't read and I will tell them in the email hey I'm sending you this contract I need you to read this portion in fact we were just having this with a contract for an event that takes place in Napa and

there is a concern about wildfires and so we're literally going down to what is the rating of the air quality the AQI and we're going back and forth with what's healthy what's unhealthy and I have to make a decision, do I want to assume this risk,

and then also getting insurance for events, yada, yada, and then you have to read those things. So what's happening right now? When the storm hits, whether it's for a conference or an employee who goes rogue and steals the database of contacts,

I had this happen one time, an employee downloaded our database of contacts for ourselves. Yep, and we caught them because it's pretty easy to catch people doing stuff like this. And yeah, We caught them and say how, and I just basically sent a letter to the employer who was

contacted, who they hired them, and to them and said, listen, the second any of these advertisers are on, you know, your, you know, properties, we know that you've actually contacted them and we're going to contact them. And if you hire this employee, we're going to sue you. And I take a pretty hard stance of stealing. And so the person got their job offer rescinded. And then I was left with the choice, Molly. sue a former employee or not. And I just said, write me an apology letter. And I will not sue you.

I literally made them write me an apology letter. Dang. And he's like, you're a maniac. I guess I am. What would you do to Roger Vare? Just kidding. Wait, who's that? That's the guy who supposedly owes this $47 million.

Oh, for him? I would make him write an apology letter. Yes. Right. Always write an apology letter. That's what's happening here. We're going to see this over and over again. Sorry to belabor the point.

This is my contracts matter. In an up market, nobody cares. Everybody's making money. Who cares? In a down market, these things matter. This is by getting educated to what each of those clauses in contracts are there for and asking somebody, can you explain to me in plain English, your attorney, your employer, your partner?

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The process is tedious, time-consuming, and expensive. But now there's Vanta. Vanta software makes it much easier to get and renew your SOC-2. On average, Vanta customers are SOC-2-compliant in just two to four weeks, compared to three to five months without Vantan. And they partner with over two dozen audit firms who have been trained to file SOC2 reports directly within Vanta. And congratulations again to Christina and the team at Vanta for raising $110 million Series B. What an amazing company.

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Your sock, too. So in this case, like the contracting question or the term in question is the one that says CoinFlex can't liquidate Roger Bear if indeed he doesn't meet his margins. Yeah, I mean, there's probably, here's what can happen to. He was probably like, I'm good for it forever. Here's what happens. You know, sometimes people say, you know, I want these special terms. I would like a week's notice to correct, right?

So let's say they said, okay, you can draw my stuff down, but I have 10 days to correct, 10 business days correct. Okay, so now we're getting into the nuance of that. How many days is it 10? Okay, is it 10 business days or 10 calendar days? And, you know, then they could liquidate him, right? So there might be something like that where he has X number of days or this could have been a verbal agreement. In other words, no agreement. Or it could have been an agreement over email, which is like not as good as a print one, but could be enforceable. So you really want to, any time, You have to do a contract or have an agreement. This is my advice to founders. Get it in writing and sign it. If you don't want to engage a lawyer, you can write, here's the understanding of our agreement in bullet points and send it to somebody in a doc you sign and you both sign it. It's just a memorandum of understanding between you and another party.

So, you know, I agree, you know, that we're going to start this company together. We're going to split the equity and we give 10% to our employees and we'll vest over four years. And you and your partner can just sign it on a piece of paper. paper, it would be binding. And maybe not as binding as a legal document, but it's still binding. So plain English contracts are better than nothing. Certainly better than verbal. So I bet there's like a verbal or an email agreement here and they're going to debate some

final point. And that's what the next three years in crypto is going to be. Exactly. And it's not going to matter. It's not going to matter. It sounds like now CoinFlex is going to raise capital to try to repay this 47 million debt regardless, sort of like aside from whatever. whatever is going on here because again,

he seems to be disputing this allegation. But CoinFlex is going to issue, this is going to go great, I bet. CoinFlex is going to issue a token with a 20% annual return. Come on, guys. Seriously, is this gas lighting now? That sounds so great.

I should get one. Absolutely. Let's go. Would you accept Luna as collateral? 20%. That's amazing. I mean, yeah, what's the, you know, Fed's interest right now?

you know, what does a mortgage go for now, 6%. Yeah, sure, this makes sense that it would be 3x plus a mortgage. Sure. Who am I loaning the money to? Is it a payday loan? I mean, come on, people. So people are going to come along and buy these tokens? You know the only one person is going to come in and buy these tokens.

That person is SBF. Listen, all these tokens are worth nothing. Stop buying tokens, people. They're not going to be worth any. The floor is zero. Your floor on your tokens is zero. Like, if you're doing this, you're literally betting on. on Pokemon cards.

Let's just be honest. I mean, I've been saying this from the beginning. If it doesn't have a use case, if it's not being used. Pokemon cards have intrinsic value, Jason. That's actually, you can sell that.

That was a joke. No, but you can't tell that. They do. There's nerd who love that stuff. I mean, the intrinsic value might be $1 each, one penny each, or $100 each depending on the level of nerditude.

I agree. They do actually have a floor value. I mean, you could use some. We like, we know you were kidding, Nick, but actually, my boyfriend's son has sold the Pokemon cards for up to $35. I have an imperfect one of the Pokemon.

A legendary Charzard is very rare. Very rare. Like, come on. And actually, the Pokemon cards make a lot more, Pokemon cards make a lot more sense to me than most tokens. And then a token that's going to supposedly have a 20% annual return from an exchange that has paused withdrawals. Okay, yeah.

Somebody take my money. Who do I make the checkout? to. The reckoning is underway in the crypto department as Jason has been predicting the next however many years are basically just going to be about the lawsuits. You know who's going to reap their crypto fortunes now? The lawyers. Yeah, it's going to be a lot of that. So if commodities future trading commission, CFTC charged mirror trading international for fraud. Is that the story we're talking about here? Yes, we are. Mm-hmm. So Mira. FTC promised what I don't even know what that is. Mirror promised.

What did they promise? Passive income. Okay, I like it. When I hear those words, like a dry cleaner, right? Or like a cuckaroos. How many cuckaroos do you? Cucaroos.

Allegedly, Mirror promised a passive income return of 10% a month. Wait, wait. Hold on a second. Not a year. Okay, there's no muni bond you could buy for 10% a year.

There's no, like, but you could buy a cuckoo. No, it's not a, Cuckeroos. I got my red flag. 10% return a month. A month. Which means every seven months you double your money. I love it. A month. Let's go.

Yeah. Forget time blocking. This is the rule. Somebody do a quick back of the envelope. What is 10% a month compound to a year? There's some way to do that calculation on an internet calculator, but it's a lot. So the CFTC came along and said, hey, that sounds like it might be a fraudulent

multi-level marketing operation that scammed investors out of billions of dollars. Yeah. Okay. So there you go. If your family member, producer Nick wants to know, asked you about an investment opportunity

with 10% returns per month, what would you tell them? I would take their phone away. I mean, I would tell them, this requires you having the backstop of breaking somebody's legs. Like, this only exists.

A 10% Vig only exists in money laundering, loan sharking. Like if you gave somebody $10,000 to gamble on the Jets and they were stupid enough to bet on the Jets or the Nets, then you could say to them, listen, every week you got to give me four points, two points on the money you owe me. So every week you give me $200 until you pay me the $10,000 back. That's not even the principal. And so, you know, 2% I think would be a typical Vig on 10 times, a high society out there, yeah, a week, which is, you know, about 10% a month. Yeah, so there you go.

That doesn't exist in the world. It doesn't, it's not real. It's not a thing, Molly. You can't get. Yeah. Why did people fall from this? How dumb are you fucking people? Because everybody wants to get rich quick and no one wants to work.

Yes, I know, I know. Just please. That's exactly why. I mean, even 10% a year is outrageous. Like a credit card company for somebody with credit, bleep that out as well, they could charge you 10 or 15%. Like, that would be bottom feeding. But, you know, this is, this is the realm of loan sharks.

So anyway, it just people, please, anything above what you would get on a loan, just think about what you pay an interest. You're the other side of the transaction. What's the most you ever paid an interest? 20% on some crazy stupid credit card you signed up for and you didn't read it. And then you saw the amount you were paying where you consolidated your loans. All credit cards now, by the way. That's all of them.

But yes. Really? Oh yeah, it's insane. I mean, I'm pretty religious about this, but 16 to 20% is standard for credit cards, even when interest rates are at zero. Just pulling out there's another idea, folks. Don't use credit cards. Don't use credit cards.

Just use quarter. No. That's free. That's free money. That's a rich man talking. You got to use credit cards. The rich man. Use credit cards.

You do spend what you can't afford to pay. Dude, if you use credit cards wisely and pay them off every month, they give you free money. That is free money. I just booked a whole trip to Mexico with points. Boom. Free. Yes, I do take that back. I do use credit cards all the time for businesses.

And I have a million Bonvoy points and a million United points. And I just never use them because I try to, you know, these days I don't always fight coach. And it's very hard to use those for a business class trip because they like United is so stingy. They're just like, yeah, you can use it for business class like on this flight at 5 a.m. But you can't use it on the 9 or a.m. or 10 a.m. flight and I'm just like, come on, just let me use these goddamn points. You should donate those to your staff as like an end of your bonus. That's a good.

I've heard of people doing that. No, no. We're in recession. Bonuses are over. Forget that. In other news, I found a legendary Hollow Charzard listed on eBay for $1,000. So a one? A Pokemon card.

Stop. Enough with the Pokemon cards. Enough with the 10%. I'm just saying, I'm doing Pokemon cards instead of crypto for sure. A thousand dollars. I do think that collectibles are a great. thing to spend money on if you get joy from them. So I totally understand if you got joy from, you know, I see Alexis Ohan, it's like, you know, he's like, here's my street fighter, you know,

Nintendo cartridge, and it's a loose site. And he's so happy. And I'm like, you know what? If, if you paid a hundred bucks for that and it made you happy, some people pay a hundred bucks for foie gras on their hamburger. It makes them happy. I don't care. Like, go for it. Put it on your shelf. Nerd out. If you like the baseball, cards. My friend likes to trade baseball cards. Like, yeah, go for it. I think that's fine. But you have to understand, 10% a month is a giant scam. And this is when you know we're at peak grift. You know it's awesome. When a crypto person makes the FBI's 10 most wanted list. I think there was some dot-com people who may have made this list in the in the dot-com era.

We have to do some research. But I want, if the noties in the audience can tell me in the chat, who are the most famous business people or tech people to make the top 10 FBI's most wanted fugitive list? This is rarefied air. It is. This is pretty special. The FBI announced this just yesterday. Ruja Ignatova, a Bulgarian woman, is wanted for her alleged role in running a cryptocurrency scam known as one coin. She is often referred to as the crypto queen.

Oh. She now... I think she spoke that NFT week last week, right, Rachel? Probably. Was she at Anato, New York? She is now, much like mint jelly on the lamb. The FBI says she defrauded victims out of more than $4 billion. What?

She started in 2014 and then disappeared in 2017 with at least $500 million. You know what? I follow her on TikTok. She's pretty good. Ruzha Ignatelva. I like want to know so much more about the crypto queen. I do. This feels like, Julio Flores in the chat, by the way, is like, what's her grift?

How did it work? I'm going to do that. This is it. This is the one. I think this is the one. I think this is the one we're going to produce our own short film on. Yes. I am going to produce a short film.

La is going to write it. Lawn is going to write it. It's just going to be a story of what she did before she was the crypto queen. This is my script. What she was doing before she became the crypto queen. how she found out about crypto, and then where she is now, just those three scenes,

but nothing about the grift. Just like, okay, she's working in this office at a construction company in Jersey City. Right? And she's in one of those containers. Some guy from the construction group comes, he delivers the coffee, and he takes out his, you know,

Coinbase app, he shows her Coinbase, or he takes out Mount Cox and shows her Bitcoin. She buys 10 Bitcoin. She gives her 10 bucks to buy 10 bitcoins at a dollar. It goes up to $300. She feels like a genius. And then she has an idea when she's, you know, out with her girlfriends at a club on Saturday night in newer. Yep.

And then boom, we flash to wherever she is now in Hong Kong, eating Peking Duck, trading flash drives with crypto on it. Amazing. Zen prophet already, he gave us the title, inventing Ruha. Perfect. Let's go. Come up with the titles, everybody. is going to be this week in startups production. I need a director and somebody,

I need to cast for this. It's going to be like my own goodfellas. So Lon, I need a short script. I'm putting a budget up today. Nick, you're going to produce as well. Executive producer credit for Nick. Rachel, you can get a credit too if you put, get in on this.

Rachel, I'll give you a part if you want a part. And I'm putting a, I want to be a, I want to be a MC. What would this cost to make a 10 minutes short? 10K. I can do this for 10K, right? about that. Okay, $10,000, lock it up.

If anybody wants to produce this. And we need the razzle-dazzle couple, definitely. They should make a cameo. The razzle-dazzle-cum. They should make a cameo. Razzle-Con. Razel-Con. Razel-Con.

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You can use Helper to do all that stuff. And it's going to scale up nicely with their teams because they've already pre-vetted everybody. You don't have to do all that work. So I want you to go to helpware.com slash twist. H-E-L-P-W-A-R-E dot com slash twist for $1,000 off. So, let's move on. So authorities say, I got to read about, I had to read up about one coin, because when you read up about Onecoin, which is the coin that she grifted all this money with.

Authorities say One Coin was one of the largest pyramid schemes in modern history. Although Inatova claimed it was backed by a blockchain, prosecutor said, there was none. She made up the price. The coins were not traded. One coin, but listen to this description and tell me how this is like substantially different. I mean, you know, considering most people aren't going to check a blockchain somewhere to make sure their coins exist. One coin, this is according to then FBI assistant director in charge William Sweeney, was a cryptocurrency existing only in the minds of its creators and their co-conspirators.

Unlike authentic cryptocurrencies, which maintain records of their investor's transaction history, one coin had no real value. It offered investors no method of tracing their money, and it could not be used to purchase anything. In fact, the only ones who stood to benefit from its existence were its founders and co-conspirators. You guys talked on All In about how transparency was the first thing to go once the middle men came into cryptocurrency. Yes. So this question of like, how could investors track their money on, let's say,

Three Arrows Capital or an exchange that's totally obscured? Hmm. I don't know. It doesn't sound that different. I mean, I get it that if a blockchain, a coin exists on the blockchain, you can trace it, but like most people aren't. Hmm. You know, listen, everybody who's listening, if you're giving your money to somebody and

you need to check the history of that person, this is like one of the simplest ways to do that and to ask questions and ask for documents. When you ask for documents or you ask for history on a person, you do kind of sound of your little background check. If it doesn't check out, it doesn't check out. It's that simple. Anytime you ask for documents, if there's like some delay or reason you can't get the documents, by the time you've asked the third time for the same documents, just like asking an interview subject for the third time, the same question and they won't answer the question. You kind of have your answer. You kind of have your answer. And the answer is guilty. This is my philosophy. You ask three times to get something. If you can't get the basic

documentation after three times, like I would just ask this person, where are you incorporated? Can you send me a picture, copy of your incorporation documents? And can I see your bank account statements? You know, if you were making a big investment, just like basic stuff and diligence. And so, and if, of course, if you see a return that doesn't make sense and you've never heard of anybody paying that interest rate, but it's paying off that interest rate, well, you're a pretty the proxy, right? Like, if you've paid 21% to a predatory credit card from some retailer or something,

okay, you know 21% a year is the upper bound in all likelihood. 10% a month is a lot more than 21%. So just do basic math, people. It's too good to be true. It is too good to be true. Stick to Pokemon cards. I just found one for $6,500. 2002. Pokemon legendary collection. Or another great way

to backstop is to simply put in the smallest investment possible. So if you said to this person, hey, oh, Great. I would like to put in $100,000. You want me to put $100,000 in? Great. I'll tell you what, I'll put in $500 now. And then can you get me this paperwork? And then I'll prepare $5,000 for, you know, Q2. And then if that works out, and I get a good return, and I can take that money out. I'll do $50,000 in Q3. And then always ask to get some of your return. This is the other backstopping test. So you got three backstopping tests here. As for documentation. Number two, go slow with your investments. Number three, when you do lock in a bit of a return, cash out. Stress. see if you can cash out. So I was in some hedge funds at one point and I had put like 250K into them and God bless them.

They had like two and a half times did and I say, great, I want my principal back. Give me the 250. Yeah. You know, and this was a super legit one. They were like, sure, do you want to keep going

or do you need the money for whatever? I was like, I just need money. Yeah, that's it. That's the reason. I was just like, I need money right now. Yeah, I'm making a deposit on something. I didn't. I just wanted to see if I could then play with the house's money.

And of course, then I just let whatever it was, 350,000, because they had just had such a great run for two or three years, and I put that money into something safer, and I'd let the other 350 ride, and it did great. So, yeah, stress testing and taking some money out is a great way to make sure that your investment is real. Or, and in this case, a Ponzi scheme, they would have used somebody else's money to give you your money back. This is what happened with Bernie Madoff. People who stress tested and took their money out. He really tried to talk them out of taking their money out, and he would win that discussion most the time, but other times people did take their money out and they got somebody else's money to pay

them back, exactly, which basically, again, like, given how many, which again is similar to when you hear about these exchanges, it's like they borrowed this from this person and from this entity and then this was the collateral and then it was the collateral again and then da-da-da-da, and they're paying you back with more. It's not dissimilar. When you raise a big round of funding like a series A or greater, you're going to be under a lot of pressure. You're going to be under pressure to scale fast and to meet growth demands. And guess what? You can't scale sales and marketing until you've got your product figured out. This is obvious. You got to nail product first. Well, buy raise dev enables you to scale your product team in just a few days. They provide Silicon Valley level engineering talent on

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That's right, $10,000 off your first contract. project at Byrezdev. That's B-A-I-R-E-S dot D-E-V-S-T-E-V-S-T-E-V. It's also linked in the show notes and welcome By-R-R-D-V to the This Week and Start-Ups family. All right, let's keep moving. Let's do it. It's a bit of a hard, bit of a, thank goodness, because otherwise it would have been a

hard pivot from Ponzi schemes to public markets. Yeah. And actually. And I think that's actually a good segue. Yeah. If in an unregulated market, crazy stuff goes down. In a regulated market, you can have weird stuff go down, but you don't have the massive contagion like we're seeing now in crypto.

Right. So now there is this sort of interesting debate that has come up about, you know, possibly the greatest private investing institution maybe ever, Sequoia. Eric Newcomer wrote a newsletter. Friend of the pod. About Sequoia, you know, being down. on its public market positions in Unity and DoorDash, like everybody. But of course, you know, Sequoia pivoted its main fund into an evergreen fund and is sort

of investing in private and public markets at the same time. And that led to a tweet from, hold on, I'm opening it, Martin Tobias, I think, saying, responding to this piece saying, I'm an LP in 17 venture funds. I hire those guys to manage private market risk. Sure. Some, he says, like Sequoia, have tried to manage public market risk as, well to increase their fees. I don't want my VCs holding public stocks.

That's my job. Sure. And I think this is just, normally this wouldn't, you know, it wouldn't be a huge story that Unity and DoorDash had fallen over 70% other than this kind of question, which is like, what do VCs do and what do their LPs want them to do? So here's the thing. LPs in Sequoia's Evergreen Fund, my understanding, they've been public about this, had the option to do this or not.

Yep. Most of them did. I think a very small amount didn't. So they had the choice to do it or not. And then second, they have a redemption period every year where they can take money out of it, or maybe it's every six months. So it's not like they don't have a choice here. They have the ultimate choice.

So if they do choose, so this person, if theoretically they weren't a Sequoia LP, would have had the choice. So really no harm, no foul here. If you are trusting Sequoia with private markets, great. If you trust more private and your public holdings, great. But you can pick. And so I think Sequoia is super savvy and they understand that. And if these companies grow, if a company is down 70, 80%, like in some cases,

companies are right now, in some extreme cases, it might be 90. But let's just say you have growth stocks down 60%. You know, if they're growing 30% a year, there is a path, you know, in the coming years for this to return. There was a point of time where Facebook traded, I think, at $17, right? And so a lot of people sold their whole positions. They got nervous and they sold it. In fact, I think Chamath is very public about the fact that he sold a lot of his Facebook locked in that huge win for himself and then put it into social capital, which then was another

win. So sometimes selling too early and as long as you put that money to work and something that you think is higher growth is a fine thing to do. In fact, when I sold some of my Uber shares, I was able to buy houses that appreciated in value and put it into other venture firms, whichever appreciated value. So you can't perfectly trade markets and they have choice, so no big deal. And these companies are still growing. The chances that Unity and DoorDash are not bigger companies now

than are not significantly bigger companies in five to ten years and have significantly better stock performing in five to 10 years is very low to me. I think that they're doing the right thing by holding those. I think there is this interesting question. There was also like a tiger global thing about this, right? About using somehow mixing its public and private funds and investments. Well, they were public traders who then dipped into private. So you have both things happening.

You know, people who are private saying, hey, we'll hold our public's longer. People were public saying, hey, let's get in on this private thing. It is two different disciplines. I think Sequoia is the rare firm that can manage both. I think it's easier to manage public as a private than it is as a public to understand privates. Yeah. Sequoia also has a family office, Sequoia Heritage, I think it's called, where they manage high net worth individuals.

and so they are used to managing public markets equities because they manage their own, right? All those partners got Google shares. They all got Unity shares. So they have to make their own decisions about that. Most of them hold them because they know when you have a world-class tech company that hits scale, it generally hangs around for a couple of decades.

So if you were a shareholder in Airbnb Uber, you know, DoorDash, Slack, etc. A lot of times these companies will hang around for 10, 20 years. Now, sometimes they get bought out like Slack does, but generally holding is historically been the right move. Well, I guess, so, and I don't have religion on this. I just think it's a really interesting conversation to have, like, from this perspective of an individual LP, for example, who's like, listen, holding might be the right move in the public stock, but I want to make that call. Like, I became an LP and a venture firm because I want a private market returns.

And you have that option. And so once they get them, Yeah. But then it's basically saying like, okay, cool, you have that option. Yeah. What if you're an LP who wants to be in Sequoia? And Sequoia is like, sorry, this is our deal. Like, no, no, they gave people the option. They were very upfront about that.

You don't have to do this, they said to people. You can remain an LP. You can remain an LP. Yeah, they were very clear about this. And I think they were very clear, you know, that the overwhelming majority asked them to do this. So this was something that I think their LPs wanted, which was more advice and more insights into which companies they should hold on to for the next decade. So if you were in Square for the private, if you were in Unity for the private moments and DoorDash,

that could really inform your public market decision making. And I think Sequoia isn't a better position to do that than most, the overwhelming majority of public market investors. Yeah. So do you think that this is just a model that's going to continue? Like big funds like this are going to move to a model where it's sort of like a all-inclusive financial management? Full lifespan of the investment. Sure, why not? Yeah, I could see other folks.

If it works for Sequoia, it's going to be a huge advantage because what could happen is over time, they just have huge positions in the largest tech companies, which is just great insight data, influence, et cetera. And then they're managing just a larger pool of capital. So yes, I think they will pull it off. But remember, they've been doing this for decades, so they have a lot of experience.

And so it's not like some newbie doing this. So a lot of people thought they could do everything. And, you know, doing everything all at once immediately is very hard. But if your firm is adding, like look at Sequoia just added, they were the, they were one of the original YC LPs. They had backstopped YC famously when YC couldn't raise money during another downturn. They just launched a YC competitor this year. You don't think they've been watching YC for over a decade. They could have done it in the first year.

They decided to wait. Then when they had the right moment where they thought they could add value, they did something thoughtfully. So you don't have to rush into every category. You can be thoughtful about it, right? And specialization in venture is great. And then adding adjacencies is great as well. You just have to be thoughtful about it, right? It's back to that like thoughtful.

Can you do it well? So anybody can launch a podcast about investing. Can you do it well as the question, right? Well, being a good. Every venture firm wants a podcast, half of them haven't updated in the last. last year, right? So, you know, it's like very easy. It turns out people, it's a lot of work.

We make this look easy. It turns out it's a lot of work. It turns out it's a lot of work. I think this move toward evergreen funds is really interesting. I remember, I think I read about, I think Homebrew did something similar, like became an evergreen fund, but it's their own capital with their own money. Yeah. Anyway, maybe it's a BC Sunday school.

Just like what that, because, you know, funds are, it just seems like the business is evolving. And it's super interesting. Innovation and venture has been amazing since I started working in it. because my two swings at bat. My first two big wins were both in brand new products. I was the first syndicate on Angelist and did Com as the first syndicate, which is still the biggest and best return of all syndicates in the history of the entire syndicate,

Angelist, or otherwise, until somebody can tell me a better one. And then I was the first Sequoia Scout. Both of these were crazy new innovative products. You've got to give rule off credit for Scouts. First, his creation, everybody copied. You got to give Naval. a ton of credit for syndicates. There had been syndicates and SPVs.

They were just done very privately. They weren't done with some crazy syndicate lead. And that was really Naval's incredible innovation to which I thank him. And I thank Rula for being the first gap. So there's a lot of these new innovative things. And I think it's great to try things. How does it start to change? Nick and I were talking about this earlier,

this question of how it starts to change like the metrics by which firms are measured and the metrics that firms value versus LPs. You know, like if you stay in, if you're in an evergreen, then IRR seems like it's not as big a deal. No, no, it will still be IRR. Cash in, cash out. That's what matters ultimately. How much cash did I give you?

How much cash did I take out? So if I put a million dollars into a Sequoia fund and they turned it into five million as a private market investment. And then they put, so that was the first 10 years. I had a 5x cash on cash after fees. Amazing. And, you know, Sequoia has put up funds that do even better than that. Then it went public.

and I kept in the Evergreen Fund and it went my five so I went one to five over ten years private I kept the five million in there and it returned you know again, four X and it went from five to 20 million so now I started with one million

and over 20 years I got to 20 million you know if you double your money in the stock market typically 7% a year every 10 years you double your money that one would have turned it to two after 10 years and four after the next decade so you would be comparing

you know for an outrageous fun like Sequoia, like just the most elite, going from one to 20 maybe, one to 15, one to 25, something in that range, as opposed to going from one to four. And that's what having access to elite assets means for people with compounding, you know, and I think

that probably historically is probably a true statement. So, all right. Yeah. Interesting. Interesting, interesting. And then speaking of just like, yes. There just was one comment from one of our producers,

producer Nick said, well, you know, if Sequoia sells and then some hostile, you know, takeover happens like we saw with Zendesk,

et cetera, that's a bad outcome for everybody. So if Zendes had had their VCs, staying on the board, supporting it, maybe even having more

money available to them, and they could defend those companies, that's actually really good for the, that's really good for the founders as well. So this could have

downstream effects of keeping these companies very focused. Like imagine if instead of Twitter there was an activist investor in Square that tried to kick jack out and mess everything up before the cash app acquisition, how bad that would have been for the company overall. And that's kind of the bet that they're making, right? Rolloff is saying he wants to just hold their ownership percentage so that they can stay on the board and keep making decisions, right? Yeah. All right.

Well, as long as we're talking about valuations, we cannot skip past this kind of astonishing story about Klarna, the Swedish buy now pay later startup. We've been covering kind of buy now, pay later and the drop in this space. But there is news now that Klarna is reportedly raising money at a six and a half billion dollar valuation, which is about a seventh of what that company was valued at a year ago in June of 2021. Yeah, it was in the 40 billion, I believe, was the number. And this is what we knew happened. We thought private market valuations would come down slower. So this is kind of matching, I think, what happened to a firm, Coinbase and some of the other really big pullbacks in the market.

So this is still in negotiation. Supposedly, it's $650 million is what they're trying to raise. And sure, it's a haircut. But again, if the firm is growing 30 or 40% a year, if it's a high growth company in that space, they'll be able to catch up, maybe not to the $40 billion one, but it could still be a great investment for everybody involved. And the people who invested at that higher valuation, Molly, have downside protection in all likelihood.

In other words, they get their money out first. And if the valuation comes down, they're going to be able to invest in this round. So, you know, they have the option to take their prorata in this round in all likelihood. And if you do a down round like this, there's a little bit of negotiation that occurs for those ones. The people who do get will take the brunt of this will be the employees and the founders who, you know, might have thought they had six times as much. much shares, but because they're the last to get paid, the common gets paid last in a sale, and the preferred stack gets paid first. So when people make these preferred bets, as long as you

believe the company's not going to go to zero and it's going to trade above that $6 billion valuation, you're pretty protected. So we did, yeah, we talked about this a little bit back in May because there were questions about just this whole space, right, in this valuation. The Klarna, a firm comp that producers did back then was that Affirms GMV was $8.3 billion, about 10% the size of Klarna, or rather Klarna is 10 times larger. Affirms operating loss was $380 million. We were doing this comparison because a firm is public and Klarna is not, so we couldn't quite, we didn't know for sure.

Buy now, pay later, I think is going to be more, my theory would be a more attractive product in a down market. riskier but more attractive right i mean they already have a payback problem yeah i guess has that become public the bad debt i don't know uh i don't think so i don't think that's public yet but we'll see that a firm is public so we should see that with a firm uh is going to have to release the you know the bad debt so that's something if anybody understands that's something to watch for is what does the bad debt look like here. I don't know. It doesn't seem to me like that's going to be a major problem. I'll be honest. I think they're going to be able to figure out which customers to offer this to and which

ones to not offer it to. They have a, I look up the story every time we talk about it. There was a story that suggested that it was like as many as one in four were in default on these loans. That seems incredibly high. It looks like Gen Z and Millennias are already defaulting on auto loans. Well, definitely see some of that. Just so you know a firm is down, peak to trow, and obviously it ran up pretty hot there, 90%. So they were trading at 10 times. They were probably a $50 billion company.

They're now a $4.9 billion company. So, yeah, I mean, that makes sense of why Klarna would come down in value. Yeah. Yeah. So the operating. loss, which is not at the end of the day. The net, because it's other expense that have to come out. A firms was 380 million.

Clarena had an operating profit of $1.6 billion. So 7 million customers active for a firm. And I think Klarna has 20 times as more. So if Clara goes public, I think it would be if they're trading at almost the same price, if it's a $6.5 billion market cap at this recent funding, that's pretty crazy. Clarna also has banking services they provide. So we're going to, this is going to be interesting.

I think Clarnia is going to go public, though. So it would be interesting to see how these two stocks. I think the bigger question with this is if Clorna is so much bigger than a firm and now their valuations are almost the same. Well, that's what sort of pointing out. Yeah. Yeah. Yeah. So now they have the same.

So now Clorna and a firm have the same valuations, Molly, or within a billion or so it seems, if this were to go. And one's 20 times bigger or 10 to 20 times larger in terms of customer. customers and revenue. So it's a very interesting moment in time. This is where price discovery is, you know, just takes a lot of time in a market. Yeah, we're weighing. I found the story. It was by Qualtricks on behalf of credit karma and determine that a third of buy now, pay later users miss payments. A third miss payments. But that's not necessarily bad debt. That's just missing a payment. So it'd be interesting to see how many of those results. It would be interesting to see what default rates are. Exactly.

The interesting thing, too, is, you know, you can do this so granularly. So, you know, if you are using this, they might let you do like two or three transactions at 50 bucks, 200 bucks or whatever. And if you don't pay back, they can just turn you off. And then I bet you the, I wonder how much the retailer has to assume some of this risk for the bad debt. So I know the retailers pay to offer the four payments, right? So they get the spread from the retailers who are trying to get.

get more people to buy stuff by offering payment plans. So I wonder if the retailers have to take on some of this risk if people default by offering the service. But pretty cool. And I think this is what Apple is going to do for all their products. You're going to be on a payment plan with them and they'll use their own money. As I predicted, they're using their own money, I think, as the bank, as it were. So, yeah. Quick update in the breaking news department. according to Axios, BlockFi says, BlockFi announced that it has agreed to an option to be acquired by FTCS for up to $240 million. So almost exactly what you were predicting with the line of credit. If performance incentives are met.

If performance incentives are met, which seems key. The acquisition would, yes, would include that. It would also receive a $400 million revolving credit facility from FTCS. Okay. That's the update as we're taking. So if you put those two things together, you know, it's whatever, $650 million, $640 million from FTCS to backstop this, which I think a lot of people are speculating, why is FTX want to backstop so much of this? And he said he wants to save the sector, right? He's been upfront about that.

Like, it's part of the reason he's doing it. So I wonder if FTX and Sam wasn't doing this, what would be happening in Crypto land? if he wasn't backstopping these projects. But it seems like he's backstopping for hundreds of millions of dollars. If he does that three or four times, it'd be low billions. Kenya, is that the only amount of fraud and or mistakes to be generous? I would be curious to know which apples he is just, you know, why he's deciding to pluck certain apples.

And probably your comments about user accounts are the most likely, right? like choosing filter, but it also does sort of feel like if you believe the space is not going to go to zero, yes, I understand rolling up user accounts on the cheap makes sense. But also, isn't it going to be a healthier ecosystem overall if like the bad apples just fall off the tree? Yeah, I mean, what you're trying to do or what the purpose of a down market and a flush out like this is to flush out the bad actors. Yeah.

Either criminal or incompetent, right? So you have a bunch of projects, companies that were run poorly, they took on too much debt, they didn't have good margins, whatever the reason is. So there's sort of incompetence slash weak companies, low performing companies that get washed out, which then sends those customers to the better companies, which then makes them even stronger. So that is a very good function. And then if there's five or 10 percent fraud or bad actors, you get them out as well. In this case, it might be, you know, just very large numbers of bad actors and very large numbers of incompetence or low competence, I guess, to be generous. The question is, is he backstopping certain projects because, you know, that directly impacts him in some way, right? So that'll be very interesting to understand as well in terms of his selection of projects.

Is it strictly based on opportunity or is it based on some contagion risk, you know, for him and for FTX? Yeah. Which I mean, honestly, like that's, I maintain that. that is, I still think that's what's happening here in a big way. I mean, I think it's also opportunistic, but I maintain that this is about preserving his fortune, ultimately. Yeah. Okay.

I don't know. And I guess we'll see. Lightning round. Bloomberg verge recording, as I had predicted, that Zoom would be looking for other business lines like going after Slack. Everybody knows Slack and Zoom are like two sides of the same coin. We use Slack's huddle feature a bit. We don't use their video conferencing feature.

It kind of sucks. Terrible. Huddles are pretty good, but there's no reason why SWAC can't have Zoom built-in free and just delightful and wonderful. The fact that it doesn't is kind of strange and it's a missed opportunity and it's also an Achilles seal. Zoom is saying explicitly now they're going to go into chat and make, you know, persistent chat part of the product.

Which is always the problem. Yeah, like that's been the part about Zoom that makes no sense. It makes no sense that Slack. doesn't have better video conferencing, and it makes no sense that Zoom doesn't have a persistent chat that you can keep in search. Like, you're having all these conversations, you're sending each other's links,

and then you hang up your Zoom call and it's gone. That just makes no sense whatsoever. Zoom itself could be more persistent if it was a full-fledged messaging app in addition to video conferencing. If we have a standing investor investment team call, podcast call, or, you know, I don't know, event call or marketing call, if you know you're having that call every Tuesday,

that room should stay up for in between, for Wednesday, Thursday, Friday, Saturday, Sunday. Right. And you talk in that. And then at any point in time, the Tuesday investment meeting can just hit a button and pop up a Zoom. You could have prep in there? Like everything, yes.

Everything. Yeah. I mean, this is like long overdue. Apparently we predicted it in February. All right. Let's see. Let's see. I don't see the video here.

Let's see if I got it right. 48 seconds. But I think Zoom will become a platform. I don't know if you saw they have the App Store now. I can see Zoom becoming in a way like AWS where like Zoom is your video conferencing layer on your computer and everything is kind of built on top of that in a way like Slack is. So I see it as a platform play. I mean, I love the idea of Zoom becoming a platform.

That's super interesting because you could imagine, I mean, it's one thing to sort of have APIs where it can plug in like you can schedule a Google calendar and it's like making a Zoom meeting. That's great. And has plugins with Calendly. But if it also started to incorporate more productivity features like messaging, more than just the chat, to do list. Persistent messaging would be the big way.

Persistent messaging, exactly. Like, if it started to be a little bit of a slack or a communications platform, then all of a sudden, that would be super cool. Like, Zoom with a better Slack is better than Slack with a better Zoom, if that makes sense.

Yeah, I mean, we know that. It's pretty, in fairness, it's super obvious. I know. I'm like, we seem really smart, but really like, this is a no-brainer. The fact that they're moving so slowly is the weird thing, because Microsoft, Facebook,

Google are moving pretty quickly to try to bring these two things together. Totally. Yeah. All right. Next lightning round, the FCC has author, I love this,

internet and moving vehicles, like sort of finally. The FCC authorized SpaceX to provide mobile Starlink internet service to boats, planes, and trucks. Starlink satellites, of course, are these low Earth orbit satellites that deliver high speed internet anywhere on the planet.

And evidently, were not allowed to sort of be part of connectivity on the move, but the FCC now has specifically authorized this new class of customer terminals for SpaceX's satellite system to expand the range of broadband capabilities to meet the growing user demands that now require connectivity while on the move, whether driving an RV across the country, moving a freighter from Europe to U.S. port, or while on a domestic or international flight. I think there are two different prices for this.

So if you want a Starlink for your house, that doesn't move, you pay one price, but if you want it for your boat or you want it on your RV, you get a different price. But having been on a couple of boats, having been, you know, on an RV, this is the constant problem. You know, like, you're on a boat, you don't have connectivity, on a lot of planes, you still don't have connectivity, and on a lot of, you know, RVs. You don't have connectivity. And so it kind of ruins the trip. But if you have... had it the whole way you're driving down to L.A. or you're going to Yellowstone. You know, the kids had high speed broadband in the back seat. Oh my Lord, it's such a game changer.

Totally. And on boats, I mean, this is one of the problems with boats. Everybody always invites me on these like, oh yeah, I got a yacht for the week here or whatever. I'm just like, you know, I can't be out of communication for the whole time. And then you only like get communication when you get to shore. This is going to be a real game changer for when people are doing cross-atlantic kind of boats and, you know, in terms of safety as well, think about how great this is. Like if you were going backcountry, people go backcountry, fly fishing, or whatever, you could literally throw, it's not that big, the Starlink.

If you went camping and you were going to go, you know, three or four days into the woods, you could totally carry one of these with you and you have a battery pack and a solar battery and you could bring high-speed internet with you. So people on Everest or you really start to think about the use cases here, going to, you know, Antarctica or whatever, if the satellites are covering those areas, and I think they are going to business, really. By the way, I'm cracking up at Best Tea and one of our, and the Nodigang saying, yeah, that's the reason I always declined yacht invites.

Me too. No, it's not that. Like, I'm not talking about super big yachts. I'm just for three cabin boats, right? These are not expensive. You can rent them out for $2,000 a day. And a lot of times people do these kind of little trips. They go scuba diving.

You go off, you know, California to go scuba diving. you know, for three days or whatever, you know, this is going to be incredible. Yeah. I mean, I think they're huge, like, their business, their safety. I mean, this is already, like, if you are in the backcountry for several days, like, you know, it's common to rent a really, really expensive, like, satellite device so that if you get in trouble, you can call for help. Those are crazy.

You know. They're crazy. Crazy expensive. And so, like, the idea that you could sort of have some version of this, I think, would be incredible. And it's, you know, it's interesting because, like, the biggest, the most. I love satellite radio. I'm like one of eight people I know,

but all the people I know who actually use satellite radio live in the middle of the country. Because satellite is, you know, where you can get stuff. So yeah. It's not even just that you can't stream. You can't get a radio signal. Oh, even a radio signal doesn't make it.

Yes, that's right. If you're in the middle of Montana, in the middle of nowhere, Montana, you're not even getting AM. You need satellite radio. And so, like, in terms of coverage of the whole planet, This is a super big deal. Yeah. Really interesting.

And they are raising their prices a bit. It makes total sense. The stuff is getting better and better. You know, I've had a lot of Zoom calls with people on Starlink's now. I'm seeing it happen more and more. And in the first wave of Zoom calls, it was kind of not perfect.

I remember I had Adrian Grenier on from his farm and he was on a Starlink a couple years ago. Maybe it was a year ago. And it would break up once in a while. Now it's kind of becoming rock solid. Yeah. So Starlink Reservant. presidential costs are $110 a month with a one-time hardware cost of $5.99.

Business costs are $500 a month with a one-time hardware cost of $2,500. RV, $135 a month. So they charge an extra $25 to be on the move, which makes sense, yeah. And the same hardware costs. So pretty great. And yeah, it was the, I like what they called it. It was like, better than nothing was the name of their beta. So they let people be in the banner like, listen, better than nothing.

But I saw Antonio Garcia Martinez was taking his starling in his car and then setting up a desk in the middle of the desert. I think that's like kind of a joke or like Instagram moment where he was just trying to see like the most outrageous places he could get high speed internet. This is going to just change everything. Right now, people make a lot of decisions for work on where they get high speed internet. If high speed internet's everywhere, my God, what is going to happen when a billion people on the planet who don't have access to YouTube, who don't have. have access to Wikipedia, who don't have access to banking or cryptocurrencies or stocks, or just information or communications, all of a sudden have it. Like $110 a month, yeah, that's more than a person living in an emerging market can afford.

But it's not more than the village can afford. If there's 200 people in the village and it's 50 cents a month each, it's a penny a day, two cents a day per person, it's actually not that much. And so very easily we're going to see a billion people come on. And those billion people have so little access to this information and this opportunity that this is going to change the world. Bill Gates, you know, really worked in the UN on getting people out of, there he is, there he is, Antonio's, you know, in the middle of his photo up in the desert.

You know, we, this is one of the great things during our lifetime. If you pull up the chart for people who are living in abject poverty, which I think the UN said is like under, I think it might be under $2 a day. Now it used to be under a dollar. the number of people living in like serious serious poverty went from 1.5 billion to 500 million in the last 20 years. It is amazing what can happen for humanity when you have this amazing capitalistic enterprise going on. It's just this is capitalism at its best. I can't help but think too that this is also certainly in the United States and also in other parts of the world.

And just an abject failure of 5G. Because really, like, this was supposed to be the promise of 5G. And I'm not saying 5G won't eventually occur, right? But the idea that satellite got there first when 5G has been, has existed and been in development for all of these years. And just the deployment isn't there is actually a weird failure of capitalism. Right. That's like these telcos and carriers, at least in the United States, just sort of like slow rolling

it. And yes, having to get block by block permission in some cases. And there have been some regulatory hurdles. But it was an opportunity and Starlink took it. Yeah. So here is the chart. You look at this from 1990. And you see Asia is the big beneficiary here of people living in poverty.

That's because of the iPhone, Amazon basics, you know, the just amazing amount of factories being built in Asia and receiving all this money from the West to build their products and services pulled a billion people or so out of poverty. incredible. Yeah. And then you see here sub-Saharan Africa still waiting and I think this is going to be the next big drop-off

when these satellites hit Africa, you know, we're going to just start to see that. Those numbers plummet as well. Yeah, that's good news. 5G, yeah, they seem to have been fighting

with each other of like who would pay for it, yada, yada, they just weren't as aggressively putting it out and let's face it. It requires a lot of backhoes and tax hours, et cetera. You know, and so to get 5G to remote areas is still,

you still got to run some cable, right? Yeah, but you don't have to have rockets. Right, but it doesn't. I mean, right, as an infrastructure play. Right. There's like, yeah, there's like a long range and a short range. And, you know, I mean, yes, there are, there are technical limitations that have caused at 5G not to be rolled out.

But even the fact that Starlink could leapfrog 5G in the United States, to me is a failure of the operator. of that technology. Okay, it's time for everybody's favorite segment. Okay, Boomer with Rachel reporting. Who do you got for us this week? Rachel. Today I got to talk to Jared Downing,

who's the co-founder and CEO of Stages. Here at the speaking startups, we've been talking a lot about marketing and different ways we can market the show. And so I was like, hmm, I want to see all different startups and in the space and see how other creators are deciding to pitch their podcasts in particular.

Because I find that, it's one place, podcasting in general, I find it's really difficult for me at least to find new shows. So how can we engage our community? Where else could we be marketing? And I thought, why not go to a startup? Stages is a platform. It lets users go live, entertain yourselves through like these little entertaining mini games like Uno and things like that.

And it's basically like a bunch of those pigeon games that you can do with your friends on iMessage all over in an app. My favorite is that I can share a screen with people so I can watch like YouTube videos with my friends. real time. Didn't I message add that feature? Is that out yet? We can watch videos together. They have like group FaceTime, but I'm not. Yeah.

And they might have a shared video. Next iOS update that's coming up. Very cool. This sounds like a much more individualized Twitch. Like not so hardcore, but like Twitch for you and your friends. That's exactly what I was thinking too. I like the idea of being a little bit more interactive with a community in general. I think the creator space is kind of moving towards that.

you already see the creator space becoming more and more casual where like initially you had celebrities say like, you know, 10 years ago, the Kardashians were it. Now we have the Dameleos where you're actually seeing like the insides of their houses with the first videos that they were making. Now I feel like we're moving like a step closer with this like creator economy where you're not just like watching these people become famous from the inside of their house, but you're actually watching them become famous or their platforms are blowing up while you're interacting with them in real time. So I'm interested to see where this space goes. Well, awesome.

All right. Jared Downing, co-founder and CEO of Stages. Take it away. Awesome. Thanks, guys. Okay, Boomer. I understood the assignment.

Thank you so much, Jared Downing, for talking to me today on this segment of Okay, Boomer. Jared is the co-founder and CEO of Stages, and I actually met Jared. Well, I was at a WeWork talking with Preston Adaberry, who if you guys remember, is the co-founder of the other gaming platform,

Smirk, who was formerly on OK, Boomer, a few months ago. So thank you so much, Jared. My pleasure. Thank you for having me. Great to be here. Awesome. So to start things off, can you explain a little bit about what stages is?

Yeah. So we're making the interactive live app. Basically, we think the barrier to entry to go live and actually be entertaining is really high. So in stages, you can go live and be instantly entertaining through these interactive mini-apps, games and tools like games like HQ trivia, tools like screen share or like bring a random audience member on stage.

So yeah, that's what we're working on. Very cool. Awesome. So when I first met you too, your name was Gamebytes. And you guys had to change your name because of some difficulties happening with the app store. I was wondering what your thoughts necessarily were on the whole Apple situation.

You could explain a little bit about what happened. Yeah, for sure. So, I mean, when we started working on this, we started with iMessage games. So basically we saw an opportunity because HTML5 games are getting really good on mobile devices.

You can have multiple games on one app. So, you know, we started making a iMessage gaming app where you can play games in iMessage, just like send a chat and go back and forth in a game of like cup pong or bowling, etc. Yeah, we changed the name

to stages, mainly to focus on like the live stream content element of our product. But also because, you know, like Apple you know, like for example, in the Roblox situation where Roblox

started referencing their games as experiences instead of games. Like, we just wanted to make sure we didn't run to any trouble there. Okay, got you. And I think it's really interesting because we've covered the whole gaming landscape before in the past.

And having to rebrand yourself seems like just it really, really sucks. Like you can't call yourself a gaming platform because there's so many other issues. And you kind of also explained to me before this, we were talking, what are HTML5 games and how do those differ from like the traditional apps that we see? Right. So HTML5, the web games.

You know, it's just basically a fancy word for web games. And, you know, basically it allows you to have multiple games or activities, they can be anything really, like websites, apps, without having to physically download it from the app store or from any sort of third party. So, like, if you use Snapchat, Snapminis,

those are actually HTML5 games. And even, like, the games and the minis are both HTML5. Got you. Got you. That makes a lot of sense. And I got to test out stages. It was super duper cool. Can you explain a little bit more, too, about

So who are you as mainly targeting, who would be downloading this? Yeah, for sure. So, like, have you, of course, you've used a Clubhouse and then there's TikTok Live, et cetera. So you have these influencers or content creators that, you know, go live and want to engage with their audience and create, like, engaging content. In Clubhouse, for example, like, they're, it's not, it's just audio chat, right? So, like, what we did in stages was make it so that you have, like, these interactive activities such as, for example, like, doing a poll or playing a game of Uri-a-uno with the audience, or bringing up a random person on stage by just pressing a button. The main point is, like, there's all these live-streaming apps, and it's a very fragmented market, but we think there's a problem with the level of interactivity between the actual hosts and their audience. So we're building tools to make that easier to do, whether it's watching YouTube videos together, Netflix together, or just playing games with other people as well.

Gotcha. I love this idea of kind of creating a more intimate area for influencers, for, like, talent to kind of connect with their audience. And I think actually podcasting, like podcasters, this would be a really unique use case. This is basically like a one-stop shop, right? Like I could, if I was looking to like watch YouTube with my friends, like I could, I could watch. that at the same time with them. So like my long distance friend group, because I went to college and PA. We kind of live all over the Northeast. This would be a great use case for that too. But then also like doing the games, is there any game that you have right now where it's not just two people? Like is there a group game that anybody could play? Yeah, for sure. So we actually,

so HQ trivia, it was that for people to don't know it was it was really popular a few years ago. It's a trivia game where you had 11 questions and at the end of it, the last person's standing would get a cash prize or if there's multiple people, multiple cash prices. But basically one interesting thing we did was actually build that entire experience. It's just one of the activities in our product. So it's not just a two-player game. Everybody in the audience can play. So as a streamer, I can create a set of questions and go live. and basically have everybody participate in my HQ trivia. And even give out a cash reward if you wanted to.

So that's an example. Another game is like actual multiplayer game is like Uno, where it's like you go around. Like you can have up to eight people in a game of Uno on stages and bring people up on stage to play with you. So as a content creator or whoever you are, like you can just do it with your friends as well. So the audience can watch and the people on stage can participate.

Got to. Okay, that makes way more sense now. Because I feel like your guys' path is super duper interesting also as from a founder perspective, which I feel like we actually sort of started with that. Because you're one of the first people that I've met that has co-founded a company as a young person with so many other people. So what was your guys's founding story? There's not one founder. There's not two founders. How many founders of there are there? And then how did you guys mean how this come to inception? Yeah, for sure. Okay, so, yeah, going back, we actually, so my team, we all worked together in college. Just we would build, we felt like maybe 10 apps throughout college. We met first year and a freshman year at the University of Virginia. And we just loved working together. We built social apps, games, et cetera. And then eventually, and also there was.

There's another co-founder, Alex Serretta, who actually also co-founded the company with us, but he was the director of entrepreneurship at the University of Virginia, a great guy. But basically, we applied to Y Combinator and ended up getting in with this idea. Or it was actually quite a bit different at the time. Like, how old were you guys? This was right after college. So I was, I must have been, I was 21. I want to say I was 21.

And how old are you right now? Like this was pretty recent. I was 24. Yeah. So it was a few years ago. We were summer 2019. Yeah. Nice.

Yeah. So, yeah, right after college, ended up getting into YC. We had applied like, probably like five, maybe 10 times before that. So, you know, to anyone out there,

definitely keep trying. But basically it got in and then, yeah, we got in on the, we always knew we wanted to work on social product and we thought HTML5 represented a really good opportunity on mobile to create platforms where you can have this different types of content in one app. So, you know, we started with chat games and actually, you know, like that our current product, like that's on the app store

right now, has like around 200,000 or so like monthly players and I guess all like organic because people just share it with each other. So started with that. And, And then, yeah, of all to this. But yeah, our team, super close friends from college. Awesome. And I also want to ask, going back to the game, Preston, speaking with a person who introduced us, we spoke a lot about what is a social media app versus what's gaming app versus what is a messaging app. And lately we've seen a pretty big rise in like that area of social media with apps like Be Real,

apps like Lockett, like are really trying to break into that space that. We've seen Snapchat kind of fall off in. Snapchat obviously has an amazing other use cases that they've been killing it in. But in the grand scheme of things, I think the place that is really like trying to get the break in is people are trying to become the next Snapchat here with those two use cases. Do you consider stages to be like a social media platform at all? Yeah, yeah. It is it is a social media platform. I actually listen to the podcast with Preston.

So, yeah, we think of it as more similar to something like TikTok, can we do a messaging app like Snapchat. So, you know, there's friends versus followers. So like in our products, you have to follow people. And like you build a following and you engage with our audience over time. Whereas Snapchat is more so for close friends. and we think that there's like a big difference there in terms of how we're approaching it always. Got you. Very, very cool. And how do you feel about the, kind of like this landscape going, you know, how you guys originated kind of in that gaming space. And gaming has really just done incredibly well.

Like in 2020 alone, there was $4.7 billion worth of investments that were followed into gaming startups. That was like almost a 193% increase year over year for 2019. but Stages still obviously calls itself an activity platform. Do you guys ever think that you'll go back to a strictly gaming app? Yeah, no. Okay, so I think the way we're thinking about it right now is games. We don't want to limit ourselves to games. I think we're more interested in building a social platform that has like activities

that people can interact with each other however they want to interact. Because, like, for example, an example of a non-game activity is something like if Zara wanted to build a shopping activity where they could, users could go live and do the whole checkout flow right in the app with their audience. That would be an example of something where people can go shopping together. So it doesn't, we're more interested in building the best platform for interactive entertainment and interactive and gaming. And a large part of that is gaming. But we think it's more broad than that. Yeah. I mean, like you kind of mentioned Clubhouse before.

And if you could give, like go back in time to like when Clubhouse was at his peak, when we were all still like locked up. And Clubhouse was like the only way we had to have like interesting conversations with people. What, how would you have run Clubhouse differently and where do you think they should have pivoted to? Yeah. Well, yeah. First, I think they've they've overall done a good job. but it's a great product.

I really like Clubhouse. But I think that, like, the main difference in approach that we're taking is around the individual versus conversations. So, like, in Clubhouse, the content is, like, the room names, right? So if you go in, it's like, okay, you scroll and it's like, okay, this room name might be interested in, I might be interested in this. So maybe I'll jump into it versus the approach we're taking. It's a little bit different in the sense that, like, it sounds like a nuanced point, but like, you know, we focus on, okay, Rachel is live and like you can add a title to the room, et cetera, but it's more so about you and you building your following and not so much so about the topics.

Because, yeah, yeah, in our opinion, like topics, they're really interesting when it comes to like big live sort of events, you know, when the war started. in Ukraine, that was, Clubhouse was a great spot to go to to get up to date with what was going on. But, you know, we're basically, the way we're thinking about it right now is that by focusing on the individual, you allow people to create relationships between streamers and their audience. And we, that's one of the big differences in approach that we're taking right now. Got you. So this also kind of reminds me of this app that I saw recently called Geneva, which is just like an organized group chat, but I've seen a lot of people like podcasters use it.

Do you know what Geneva is? I've actually, I've heard of it. I have not used it extensive. Actually, I think I just downloaded that the other day, but I have not used it extensively. It's for groups, clubs, communities, things like that, less, I guess, going about the influencer from you guys. So that I guess is the big differentiator. But I think it's really interesting when you have this sort of like place that is completely

focused on the not necessarily what you're going to talk about, but who is going to be there. Because I think traditionally what we've seen, especially like even going way back to when we were in elementary middle school, you know, used to make those like groups on Facebook, like event groups. So you and your friends could be like, I don't know, like marching band 2012. And it would be all your friends like in one group right on one page on Facebook. And you could all chat. And that few. feels like that was the first iteration of like, okay, you're there for the people. And as we got older and older, we started to see people like lifestyle YouTubers create their own versions of,

of these like Facebook groups. But they really are losing that interaction point where you are completely focused on the person that set up the group itself. So this is about the community building and reaching out with other followers that like are interested in those topics, right? whereas you guys, it feels like so geared toward that main, like the main celebrity, whoever's talking, whoever's that mean talent speaking. Do guys ever think that you'd pivot into a way where the rest of the community could like converse with each other more effectively? Right, for sure.

I definitely wouldn't throw out the idea of, you know, being able to create a group, like, for example. But I think it comes down to, you know, like more similar to how like TikTok, for example, has, you know, you have your TikTok creators. It's like how do you create a platform where the individual feels valuable and is given the tools to be able to engage with, to actually build their own following, etc.

Without getting lost. But yeah, no, we definitely wouldn't throw out the idea. Like, we definitely wouldn't throw out the idea of allowing for groups. But it's just about, like, what the focus is. Yeah. One group of people that I don't think are considered influencers yet, but I think could really be, is the resale market right now for Gen Z is incredible.

Like, I've seen a lot of people focus on, especially people, R-A-age, just like the importance, not only of trying to cut down on fast fashion, but also people just really like buying new stuff that are R-A-H. I just had a package, you know, that came during this call, and it was something that I thrifted online that I had to, like, get up in the middle of this recording and sign for. And on D-pop, there are these people that are, like, literally considered these main super users, right? Like, I'll go to these people's closets on Deepop,

but you don't really have this good interaction on their platform. And Deepop, for those of you who don't know, is a secondhand, like, online, kind of like similar to Poshmark, like, thrifting website. But the people that curated, like, the best closet, these girls are, like, seen as celebrities, right, on this platform. And the fact that there isn't a way to kind of, like, engage with them

them almost become like the new version of influencers unless they migrate like off that app and create something like TikTok. Honestly, even TikTok still doesn't have that like same form of intimacy. I could totally see something like stages kind of like parlaying into that. Totally, totally agree. You know, like one, yeah, one of the activities that we're excited about is like the idea of being able to shop together as well and like, you know, have the audience, for example, be able to check out right there.

and the app. If they want to buy the same things that the streamer is buying or vote on what the creator should buy or try on next. Oh, I like that. Shopping is a really big. There's actually an entire app. I actually can't remember the name off the top, but there's an entire app around just live stream shopping.

I'll send you a link after this. But one of the core ideas behind what we're working on is like there's, you have a lot of this, you have this fragmented market of live streaming apps. And it doesn't have to be that way if you provide a platform for people to just, like, build their own, like, influence and give them the activities, these HTML5 products, to do whatever is most valuable than them. Yeah.

And it's so funny that there's, like, Cleet app for shopping. Like, it's crazy how far we've gone because there's this one TikToker that I follow. and she's not that big. And if I remember her name, I'll have to plug her maybe over on Twitter. My Twitter's at underscore Rachel Braun. But she has a really good account where she goes to the real real,

which again is another second hand clothing store, and says, listen, I'm not going to buy these right now, but if I were going to buy clothing, like this, these are like the items. Like she goes through her likes. And like these are like the outfits I would make. I think stages would be so interesting with like the share your screen feature.

Because right now what she does, as she's like a person that stands in front of like a green screen, right? And it's honestly really difficult to see what she's pointing at sometimes of what she's talking about. And overall, she's like one of my favorite, like new creators. I don't even know if I'd consider her like up and coming because I don't even know if she's that popular, but I love the idea of her content, like really promoting like the real, real in general.

Molly likes this other platform where you can like rent clothing, rent the runway and I always get them mixed up, but she does it on the real real. And I could totally see her being like a use case for stages, which would be interesting. Thank you so much, Jared, for talking me today. Where can people find you if they wanted to talk more? My absolute pleasure. Yeah, you can find me on Twitter at Jared Downing underscore, I believe is my name. I mean, I'm just double-checking here.

Jared Downing underscore, yep, you can find me on Twitter. Yeah. Awesome. and where can people find? I mean, they better be. And where can people find stages? If you want to check out the beta, what I'll do actually right now,

I'll put a link in my bio. We're actually about to change the name of the Twitter, but if you go to the Gamebytes app at Twitter, I'll also put a link in there. But the ad will probably change. Very cool. So we'll go to your personal account. We'll go check out with Evers in your bio and go from there.

Sounds good. Awesome. Thank you so much, Jared. My pleasure. All right, everybody. Have an amazing July 4th weekend. Sunday school will happen and this week can climb it on Sunday. Definitely. So we'll be taken Monday off with the rest of the country,

but don't forget to follow Jason at Jason and me at Mollywood on Twitter because most likely, even though we probably shouldn't be hanging out on Twitter on a long weekend. It's possible. It's possible. And I got a bunch of people who pitch me their startups on bubble and I'm meeting with one of the founders. It was a very cool company. Use bubbles.com slash twist.

Use bubbles, plural.com slash twist to send me your pitch, Molly. Three minutes and under. Show me your product. Don't show me a deck. Just show me your product. Speak to me like a human being. And, you know, I love good product. You send it to me, Jason at calicanus.com or Molly at launch.

com. Send us a bubble and we'll watch your pitch and we might use it here on the show. So let us know if it's okay to use it on the show or not. and we'll see everybody on Tuesday with a lot of news, I'm sure. Enjoy the rest up, everybody. Have a great weekend, everybody. We'll be also in Thisweekin Startups.com slash TikTok to follow our TikTok account. We're experimenting there.

This week in Startups.com slash TC for the Twitter community and slash Discord for our Discord. If you want to talk. And shout out to our producer, Justin, who is going to consulting. We're going to miss your buddy. I'll see you in six to 12 months when you start banging your head against the wall. When people you're giving consulting advice absolutely make you lose your mind and you want to come back here. But you're always welcome. We love boomerang employees who crush it team members.

We'll take you back anytime. Anytime. Come on back. We'll miss you, buddy.