This Week in Startups - E1151: Tech stock deep dive with Alex Wilhelm & Beth Kindig: Airbnb & DoorDash IPOs, Zoom’s pricing power, post-pandemic outlook, top picks & more

Episode Date: December 11, 2020

FOLLOW Alex: https://twitter.com/alex FOLLOW Beth: https://twitter.com/Beth_Kindig | https://beth.technology FOLLOW Jason: https://linktr.ee/calacanis

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Twist listeners get three months free at gusto.com slash twist. All right, everybody, welcome to this week in startups. It has been a crazy week, month, and year, obviously, not only because of the pandemic and the election, but because we have so many companies that are going public. And this is a complete 180-degree change from what we've seen over the past decade where founders were taking the horrible advice to stay

private longer, so they didn't have to deal with reality, scrutiny. And they continue to receive just incredible amounts of funding with very little governance. And that can get you into trouble, as we've seen with WeWork and Uber and other companies that in some cases blew up like we work. In other cases, had a rocky road to their IPO. But today, at the taping of this on December 10th, 2020, we have two huge IPOs that have occurred this week, both DoorDash and Airbnb. And the results have been absolutely stunning with me to discuss these issues and more Alex Wilhelm of the Equity podcast over at TechCrunch, Senior Editor at TechCrunch, calling in from somewhere in the Northeast.

That's correct. Providence, actually, where it's not warm. So I'm here from the frozen Arctic is what it feels like. And how is the pandemic spike in Rhode Island? Is there one? It's bad. Yeah. We're among the worst in the native. on a per capita basis. So my wife hasn't let me out of the house in a couple weeks. And so that's not going to change until probably June. So I'll be literally in this chair until Q3. So that's exciting.

Crazy. Well, stay safe. And yeah, when it gets cold, everybody's forced to go inside. And then everybody decided to yolo for Thanksgiving. And here we are literally in the final ending of the game. Yes. And people decided like, I don't know what analogy to use. But I was talking to a front of mine.

Like, this is like dying on the way back from a war. Like, we know the vaccines work. They're coming literally tomorrow or next week. Yep. And the war ends and people start dancing in a minefield on the way back to the boats. And it's like, no, no, no, wait until you get back to shore to dance. Like, don't get yourself killed. We'll stay safe, obviously.

Beth Kindig is with us. She is Beth underscore Kindig on the Twitter. And she is a tech stock analyst with the newsletter, Beth. dot technology. Nice use of the new top level domain names, Beth. Welcome to the program for your first appearance. Thank you. So let's start, Beth, with what we saw today, Airbnb made it out, and DoorDash was yesterday. Both of them essentially doubled. And so Bill Gurley is probably having an absolute meltdown right now that these were underpriced. And there was massive demand for these two companies? Maybe what are your initial thoughts on this unbelievable spike? I mean,

I don't think anybody thought Airbnb would be getting close to $100 billion or DoorDash would be worth $40 billion. These are crazy valuations for these companies. What are your thoughts? Yeah, I think there is always a lot of risk when everything's been priced in and a lot of consumers, a lot of investors on the public markets, they use DoorDash, they use Airbnb, they're very familiar with the name. So I think it's been fully priced. What we really try to do is we try to find opportunities that maybe are lesser known. So I would say the bigger news for us this week was Luminar, which is a LIDAR company that's partnered with Mobile Eye and Volvo. And then we also really like C3, which is Enterprise AI. We think that they could, you know, really eat a lot of

market share in the future. And these are not as talked about. So for us, DoorDash and Airbnb came out the gate and they are certainly fully priced, I think, at this point. So there's a lot risk because when we've done a ton of analysis, we've, we use our own money for this with our fund. Most, the large majority is in almost every single stock trades at its opening price again after the lockup period. So you see this initial excitement the first six months, employees and insiders and whatnot can't sell their shares. And then after six months, the lockup expires and you start to see it return back to an opening price. We've seen this with super strong stocks. CrowdStrike was, you know, immaculate.

And so was Zoom video on their S-1 filings. And when they came out the gate, you know, it shot up. But after the lockup period, they both went either at IPO opening or below. So that's just some of the things. We always try to give an edge and we try not to get to exuberant over these big names. But certainly, you know, they both clearly have a big addressable market. And when you mention those sort of retail investors, people who love the, products themselves. That was like the original, I forgot the guy who was, you know, wrote some of

those beat the market books, but his basic premise was buy what you know. Like if you love Disneyland, go to Disneyland, if you love the gap, buy the gap. Well, here we are. Robin Hood traders, you know, there's some number of them, 15 million of them or something like that in the market. Alex, I'm curious your thoughts on how much of DoorDash and Airbnb have to do with retail investors who are new to the market, who are putting in orders maybe without a price on them and they just say, I want to own this because, you know, stonks, as the meme says, go up. So one thing that that I learned over the summer I was talking to, I think it was the CEO of Lemonade after they went public in like, you know, June, July, whatever it was. And I was just riffing

with him because they also had a very good first day. And I was like, you know, good job. But also, you know, what the heck is going on? And he emphasized the importance of brand to me. And, you know, as a person who opens an S1 and scrolls pass all the words to the income statement immediately because I don't want to hear your hype. I just want to see the results. I was very perplexed by this. But I really think the brand point resonates with the investors you're talking about. I think the Robin Hood crew do want to own shares and companies they know.

I think the difference between this and those old books you were talking about is the number of investors out there that are willing to make bets is much larger. And I don't think the float of any of these IPOs has gotten much larger. So we're seeing probably a greater imbalance in supply and demand in these early couple of trades. So I'm very sympathetic to what Beth said about let's see where we are in six months. I don't think these companies left 50% of the value on the table. I think they're just artificially inflated in the short term. So a great first day, but I don't think it's inherent that their value has gone up this much in such a short period of time. And neither of these were direct listings.

If they had been direct listings, then there would not be a lockup, correct, Beth? Correct. And we've actually been, you know, Slack and Shopify both were, I'm sorry, Spotify. Sorry about that. Spotify and Slack, they were both direct listings and they did not perform that well. I mean, we were Slack investors. We actually got in pretty low during the March sell-off. So I'm certainly happy to see what happened recently.

But it took a long time. You really had to stick it out with Slack and Spotify as well. They, I believe they opened around 185 and it was back down to 120. And it took a long time for them to break the 185 again with the direct listing. I think that liquidity in the beginning can really weaken the strength of the stock. I prefer lockup periods for everyone, for everyone involved. So you prefer the lockup. so that you don't have a rush to the exits.

Right. But you still have a rush to the exits after in that six to 12 month period. So I guess that would, the counter argument would be why not allow just everybody to take the medicine early and kind of get to the ground truth quicker? There's something I think that builds confidence when the stock doesn't immediately plummet, like right out the gate. And the other thing is there's more price action. to analyze.

So most of the market is run on machines. There's a lot of technical analysts out there. Goldman Sachs is not just buying great companies. They're looking at the technicals and the price action. So when you have more history, you can determine a little bit better as to where the stock price is going to go. So just looking at these numbers today and putting them into a little bit of context, DoorDash has a $59 billion market cap with $1.9 billion in revenue.

So that would be 30 plus times. top line revenue for 2020. Forget about earnings on these for a moment. Airbnb is over 100, or was over 100 today in terms of the market cap with $2.52 billion through the first three-quarters. So if we were to add another, whatever that is, $800 million, you'd be at $3.5. So that would be 33 times. So they're both trading somewhere in the 30x top line revenue. That's, That's a bit disconcerting, yes, Alex? I mean, look, I think we've all become more and more accustomed to high SaaS revenue multiples because SaaS revenue expands over time.

It's highly durable and incredibly high gross margin. Cool. Not every company deserves a SaaS-like multiple, let alone a rich SaaS-like multiple. DoorDash is currently valued like a software company that's in the top five software companies in the world. It doesn't have the same gross margins. It doesn't have the same proven revenue repeatability. and you know what, it's coming to this IPO off the back of a very impressive year,

to be totally honest. They've done amazingly well, but there's a lot of question marks about what happens to their sales growth when the pandemic ends and we can all go outside again. So, you know, I look at this valuation and I'm very excited for DoorDash and the investors and the founders and the employees. It's all great. Good job. But I think when Beth said fully priced in, I think she was being a little bit modest.

I think it's actually probably just flat out overvalued at this price. I see no real reason for it. Beth, is there a price? if you were to put a multiple on these two specific companies, just, you know, 10x, 20x revenue, that they would become attractive to you. If right now they're 30 and change times top line revenue, what number would be attractive to you?

What would be tolerable to you? Two numbers. Yeah, so I'll buy the 30X if I know that they're going to be growing 60% to 100% the following year. And the problem that we're reaching with Airbnb DoorDash and some of the ones that I'm even invested in is that they're going to be harder cops, basically. And so the institutions and the analysts, they all kind of know that. So you're seeing a little

bit of a cooling off with any of these stocks that were able to put up triple digit growth. You're seeing like Shopify, Zoom video, a lot of these data dog. You're seeing them cool off because the analysts just don't know how to gauge the harder comps next year. When you've grown 100%, 300%, can you multiply on that larger revenue base? So it's all about the forward. I will buy a 30x company, but I think we're in a period of time where it's more risky than ever before to buy 30x tailwinds from COVID companies. And then the 20x is actually pretty comfortable for me if it's in the 55% or higher revenue growth range year over year. All right. When we get back from this quick break, I want to talk a little bit about what we saw from Zoom specifically and what we think will happen

going forward. And if the Slack exit, if we can infer something from what's happening in the market if those investors and management team wanted to take the cash and run with it as opposed to try to stay independent, which they probably could have done. But it seems to me that maybe that's a bit of a tell of where the market is heading when we get back on this weekend startups. Okay, snowmen and ugly sweater. Some things about the holiday season will never change, even when everything around us has. So when your small business needs to ramp up for the year and you're probably doing your planning just like I am right now, you're going to need to hire the right people quickly to execute on your plans and LinkedIn Jobs is here to help. LinkedIn Jobs

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Beth Kindig is here. She is a tech stock. analyst. She invests her own money, correct? Correct. We have a fund. Yep. You have a fund. And so you are literally making bets and you can read her newsletter at beth.com. She contributes to Forbes MarketWatch, Fox and other news platforms. But let's face it, everybody's going direct these days. Alex Wilhelm's been on the podcast. So many times I can't even count them. And he is a senior editor of TechCrunch and does their equity podcast. And I mean, you're basically the guy who dives into the S-1s when they get published. And so life has been a bit crazy. More S-1s in the last month than probably the last 10

years, right? Yeah, yeah. I joke that it's better to be busy than bored. But I think we've really stretched that to the max. And on the, you know, being the person who dives into the S-1s, most people don't like to do that. I happen to be a freak in that I enjoy reading them. So that's all landed in my lap because it's not, you know, drudgery. So, yeah. I do it. Yeah. And you have a favorite section you like to go to, just the balance sheet, just the revenue? I like to go there first. And then I like to do second, I like to go fiddle around with their non-gap metrics and try to figure out what they're doing to lie to me. Because every company has their own warped view of reality about what's actually fair for their business.

And it's always complete crap. And if it's a SaaS company, go read the net dollar retention section and figure out how they're making the numbers look better than they actually are. It's always fun to see how they're trying to get around the truth. So there's a little bit of accounting that goes on that could be creative in this gap accounting. Give us an example of, you know, something egregious, something reasonable, something maybe conservative or in that range when you're looking at how they do their accounting with in relation to this, you know, let's say the last two years of public companies. Yeah, I think we've seen more companies begin to report stats that we tend to throw around in the startup world like ARR. If you go back in a couple of years,

I think was harder to get ARR written down on your S-1. But companies now like CrowdStrike, which we'll get to later on, now both report, you know, gap revenue and also ARR growth in their earnings. So it's become a bit more standard. And I'm totally comfortable with that neutral about it. What I don't like, for example, that I think is too loose is when companies discount lost customers and then only discuss net revenue retention of customers that didn't churn because you're just deleting the bad news and only keeping the good news and claiming that you're giving me real numbers, which is, you know, bad. So to translate that for people who don't haven't heard these terms, annual reoccurring revenue would be if you are Slack and people are paying whatever it is, $100 per seat,

and you've got a million people, you've got $100 million in ARR. But what you're saying is, if 10% of those were to churn and now you're down to whatever it is, 900,000 members, the net retention of the existing people who are still using the product is kind of intellectually dishonest because you really want to include the people who churned.

Yeah. So let's say, you know, you have 100 customers and, you know, 90 of them pay you $110 next year, not 100. And then you tell me your net revenue retention is 110% because you've not counted the customers that churned. To me, you're being disingenuous. And we see a lot of companies try to take what I think are startup-ish metrics and bring them into the public world. Back to your point about going public being important for scrutiny. and that always makes me a little bit mad. If you're a seed stage startup, we'll talk about the idea. If you're a Series C, I want to know about gross margin improvements.

And if you're going public, I want gap numbers, you know. So the standards get higher as you get older as a company. I just like to see just straight up gap stuff. I mean, it's standard for a reason. It's good. Yeah. And for those people who don't know, generally accepted accounting principles, which are a bit of a moving target because they do change over time.

And then people do lobby to change them. I remember back in the day, AOL. was trying to say their $300 acquisition price could be spent over 10 years or something. And they got themselves in all kinds of trouble with those creative moments. Beth, what are you seeing in terms of creativity in accounting now? That would either be a red flag or, I mean, maybe even an opportunity where, you know, some group of people are being conservative and their companies are getting dinged for it. Yeah, I guess I'll take the opportunity to talk about one of my pet peeves is when, you know,

like Snowflake is an awesome product. and I absolutely think the management is incredible. It's only six years old. And so when you look at the growth rates, people will say, we've never seen any tech company have these growth rates, which isn't actually true because if you adjust, many of the other companies have gone public

that went public in their eighth year, ninth year, whatever, 10th year even, they were growing at the same rate as Snowflake is now or even higher. So that's one thing that kind of is a little bit of a pet peeve of mine because Jason, I know you know this and Alex, you too, like startups at tech startups and the younger you are the faster you're you're going to grow the higher your growth number you have a small revenue base and year six for nearly every company out there is going to be better growth rate than year eight or nine so I think adjusting the age

of the company is really important when you're trying to do an apples to apples comparison so I'll just throw that one out there because that's been top of mind yeah so I mean the concept here is you've got a company like a, you know, even if you took a first year, a second year startup that had hit a million dollars in revenue and they grew 300% and they hit 3 million in the next year. It's only two incremental million whereas a company doing a billion dollars growing 20% a year. You know, now they're putting $200 million into if they were at a, or if they were at a billion dollars in revenue, $200 million. It gets harder and harder to clear that hurdle as time goes on, correct? Correct. And Snowflake in year eight or nine, you know,

know, I'm going to just say is it will probably be, you know, number six, seven or eight as far as like the top growing tech company on the markets. Crowdstrike is still very high up there for its eighth year and ninth year. If you adjust it for its sixth year, it grew faster than snowflakes. So did Zoom Video. I actually Slack did as well. So there's quite a few of them that. If you were to adjust it to what was their growth rate in the sixth year, they were higher than even Snowflake. So I think that's really important because when you're around a lot of startups, you know that piece.

and I don't think the public markets are fully aware of that. So, Alex, when we look at Slack, which was at $800 million in revenue, they're doing about $200 billion a quarter. They're growing 50, 60% year over year, which a pretty great growth rate, but they sold for $27,000. $27.7, yeah. Yeah, so we're talking about almost 30 times revenue again. Seems like this 30x top line is becoming a number for some reason.

Maybe it's the breaking point, or it's the upward balance. What do you take from them selling now if they've got a business as growing 50%? Why not continue to grow, try to be like Zoom and try to own this platform and maybe even acquire other companies? Why be acquired? It's hard to read Stewart, the CEO's heart on this. I'll just say that what Zoom has done, I think, is the edge case. I don't think most companies could accelerate as much as Zoom has and be as operationally excellent as Zoom has. So I don't want to say if Zoom succeeded, why did Slack fail to stay independent? Because Microsoft is coming after both of them. But I think Microsoft is coming after Slack a bit

more directly. Now, Microsoft Teams, the competing product to Slack does include video chat. So it is kind of going against Zoom a little bit as well as Slack. But I think it's mostly a contra Slack product. And my suspicion is that Microsoft's very deep enterprise sales channels we're just presenting an increasing level of friction to Slack and its ability to sell and grow. So if you're Slack, what you want to do is partner up with someone who already has deep enterprise relationships. And I was talking to Sapphire Ventures, Jai Das, about this on an interview we were doing. And he said, you know, if you're Slack, even if you're Slack, it's hard to get a CIA to sit down

with you. But if your Salesforce, they already are on all those phones. They didn't know all those people. They can just call them up and get the meeting like that. So maybe you need a big brother, essentially, to help you grow, contra-exam. Microsoft, well, Microsoft is coming after you. So I can see it. Stuart is now incredibly wealthy. The company's exited. He gets to relax in Mark Bennyoff's shadow and grow as fast as he can. I kind of understand the, from that perspective, I kind of get it.

A little bit of skittishness. Hey, there's too much risk. There's too much headwinds. I'm hesitant to call Slack in any capacity skittish. I think this must have been a decision based on how can we go to war with the most weapons versus we're going to lose. You know, they've been great. And I've been a Slack user forever. And I like the company and the product, but I understand the logic of trying to go to some place that has much deeper enterprise relationships if you want to sell larger receipt count deals and also just defend yourself against Microsoft. And in fact, they only had 87 companies paying over a million dollars a year, which, you know,

like that would be pathetic for a Microsoft or Salesforce or Oracle to have like that small a number of the Fortune 500 paying such a pittance for a product that is so, let's face it, transformative to an organization. Beth, what are your thoughts on that, Sal? And, you know, what, how does that go down? Is it top down pressure from the founder or the board to the founder or just everybody's sitting there going, this price is crazy. We should just take it. Yeah, I think this year really started to separate Slack and Zoom a little bit. And I think maybe this is where Slack got to thinking, like acquisition would be a good idea. So Zoom jumped from an enterprise company to being also a consumer company with COVID.

And that blew open this new addressable market that I'm a Zoom holder. I've been a Zoom bowl for a long time. So I just want to put that out there. But Zoom basically has completely blown open their addressable market because they're going across consumers. And then due to the fact that it's Zoom phone and Zoom web video conferencing, telecoms globally are starting to partner resume now. So Racketon, Deutsche Telecom.

So Slack doesn't really have that mobility. across consumer and as far as getting integrated with very large global corporations on messaging, if you will, that's not likely. Messaging seems to be very localized and, you know, I would have to look at the numbers, but Zoom, on the other hand, is going global. They're now consumer, which is really the jackpot. All things are consumer, with the exception of Microsoft, which technically was kind of a long time ago, a consumer operating system if you look at it that way.

But in general, what I'm trying to explain here is that Zoom is kind of in a league of its own where I think Slack was getting surrounded by Microsoft Teams, accelerating Enterprise versus Enterprise was getting really tough. I actually was wondering if Amazon and AWS was going to start integrating with Slack because I know that they're a big customer there. I really like the name of the product escapes me right now, but where enterprises communicate with each other through the messaging system. Slack Connect, I believe is what they call that. that is really intriguing to me. And I think that's for Salesforce with the hordes of data that Slack has. It could be a very decent price tag. Yeah, that's going to be a huge win.

Those cross organization rooms have become super dynamic for me. I mean, we have a couple of boards now that have, we'll just start a room for a board of a company and then invite that company and invite the other board members. And then all of a sudden we've got this persistent channel to talk about board issues. It's just sitting right there and it works great. When we get back from this quick break, I want to understand what happens to Zoom post-pandemic because this seems to be a huge risk factor

if it is in fact going as a consumer play, and that's a big part of this. Our consumer is going to still pay 15 bucks a month or 180 bucks a year, whatever it is, for a product that they can get for free in Skype and Google Hangouts and many other places when we get back on this week at startups. Hey, listen, before you grow your company,

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Six-H-H-H-H-H-O-P-E-P-E-T-T-T-E. Six-HU-HU-H-H-HU-W-E. You're going to be all set if you're a startup, and then it's just very affordable from that point on. Go ahead and visit charthop.com slash twist to build your dream team today. Welcome back to this week in Starkey. at Beth Kindling, Kindig, sorry, and Alex Wilhelm are with us. He's Alex. He's got his first name. Beth, somehow you relate to the party.

You have Beth underscore Kindig, K-I-N-D-I-G. What is going on? How do you not have at Beth? Who is at Beth on Twitter? Beth. That's not technology, yeah. It's a prerequisite to be on this podcast that you must be in the first name club. What is going on?

You can only have like six guests then, Jason. I mean, that's going to be a really, really small circle of people. It's like you and I and three other people. Yeah, Veronica Belmont, Ryan. Jack. Jack. Yes, we're now going to limit to first name club. I literally, it's, I also wound up getting Jason on Instagram.

And I didn't know that anybody can DM each other on Instagram. And then I found like, I'm not big in the Instagram game. I'm a 50 year old, like tech dude. I mean, like literally I post my, my daughters and whatever meat I'm smoking. Like, that's my, that's my Instagram life. But I just realized they had like thousands. of people asking me to buy on Jason on Instagram. And some of them were like famous Jason's, like comedians or whatever.

And yeah, it was pretty hilarious. So Zoom gets this incredible tailwind, unexpected of the pandemic. Every school is a Zoom school. Every party, weddings, dystopian birthday parties, book clubs. But these products are available for free. in other places, Zoom somehow beat Google Hangouts and Skype and other free services, which to me is just a real tribute to Eric's, you know, I mean, he was at this, he was at WebEx before this or something.

Cisco. Cisco. So, you know, he's got a lot of DNA in this space. He obviously built the best product, but I'm not sure that product's going to be able to hold off free options from people like a Facebook or people like Amazon or whoever else wants to make free versions of this. And every iPhone has FaceTime built into it. So if Apple decided suddenly to make FaceTime cross platform, I mean, oh my lord. I mean, I know they wouldn't do that, but I'm putting the idea out there for Tim Cook if he wants to add a hundred billion in market

gap. I don't know if he needs it. So as a shareholder, what do you think, Beth, about Zoom post-pandemic? So when you look at consumer behavior, I think they're clearly choosing Zoom. I mean, the numbers couldn't be better. And actually in their earnings reports, accounts over 10 are growing like 400 plus percent. So they're very strong in the paid larger accounts. And then when you look at consumer behavior, it's really hard to change consumer behavior. And I would say, you know, I went through this on Roku for many years as well because everyone says Google, Amazon, et cetera.

And what I would say is look deeply and look deeply at the management team that, could take those tech giants on and execute so flawlessly that they came out ahead. Rather than saying, what if that changes? I would say, I'm going to assume that we'll continue. And so for me, like when you, I mean, you know, Google Hangouts, I can't even remember when that was launch. I feel like it was 10 years ago or something. Skype has come and gone for whatever reason.

Those aren't the right products. I mean, I know the reason it's the friction. It's the fact that they want you in a walled garden. So Google and Microsoft, they want to trap you in. You've got to download their software. You've got to give them your emails and set up an account, et cetera, et cetera. And that's not what people want. People want to just click a link.

Boom, I'm in. And I don't want to be part of a Waldgarden. And Zoom doesn't need you to be part of a Waldgarden because they don't really have, you know, extra products that data and that PII is going to be informative for. So to me, I think Zoom is executed really well. And I am on the side of, I will assume that will continue because I think that leadership did a great job already. What if there are a large number of unsubscribes when people go back to school in September and you see some churn like that?

How would the market interpret that? Yeah, I think that there could be, it's actually interesting because in their last earnings report, we did have some shelter-in-place let up, you know, in Q3. It wasn't nearly as strong of a shelter-in-place. And they said their churn was much lower than they expected. So we're not seeing on the granular level any evidence that Zoom's position is, being challenged depending on locket, you know, shelter in order place or shelter in place orders and things like that. And then it's that higher level international expansion that I think is really

going to hedge them is they're already being adopted by these telecoms. And I think that where cloud and the telecoms come together is a really interesting space. And because as you drive around, like we don't actually need hardwired phones ever anymore at all. We can completely run phone through the cloud. So telecoms. are aware of that, I think they're starting to partner with Zoom to make that a seamless integration. Alex, what's your long-term concerns in a post-pandemic world? Because if we look at the vaccine numbers, 40, 50, 60 million is the current trajectory for December, January, February. Probably conservatively 75 million Americans have had COVID. And if you add those two shots,

that's another 60-70 million. You already had 150 out of 330 million. Americans, of which would be all the high risk and frontline workers, plus there might be some built-in immunity for another 20 to 50 million Americans. By March 1st, more than 50% of the country is going to be through this, which means spreading is going to be really hard if people are wearing masks and going out. And so we're going to see the numbers plummet. I predict March 1st. We will see the number of cases and debts absolutely just drop off a cliff. We'll hit 200 debts a day. I believe in March, you can clip this and remind me. Shame me later. shame me later.

Well, I think it could have been, sadly, we were under 200 deaths for some days in August, I believe. And we just refused to wear masks like idiots. And people went Yolo because they just don't understand science. But if we get down to under 200 deaths a day and it's, you know, 90% old people who haven't gotten the vaccine, this is going to be over, I think April 1st. Some people debate, you know, summer or next year.

what about DoorDash's surge and Zoom surge? Do you think that those stocks are going to get meaningfully clipped in terms of revenue and then how would the market react to that? Or are they going to figure out other things to do and, you know, they'll be stable? Yeah, I think I'm a bit more bullish on Zoom than DoorDash in that context. And just to be clear, just because Beth has been disclosing, all my money is in very boring index funds. So I have no position in these things we're talking about. Vanguard, super low.

Well, front. Actually, Fidelity. zero cost. So even lower than low, I pay nothing. I love it. I love it. That's because I'm just, I don't think I'm smarter than the market. I aspire to Beth's confidence and ability to find trends. I'm much more behind the curve, sadly. Well, no, Beth, I mean, on that note, if you're not an active manager who is spending 40 hours a week or 20 hours a week minimum managing a portfolio, Alex is doing the right thing, right? Yes. Yes. We actually have a larger team. So there's two finance guys on my team. It's not just myself. And so we take it really.

seriously. Yeah. But for somebody who is even a civilian but who works in tech journalism, you're much better off just being in a low-cost index fund or no-cost index fund. We're killing it right now. We're actually going to come out with our results and they're getting voluntarily audited out of a place in San Francisco. So we think it was somewhat of a football team where everyone had a specialty and they came

together to share it. So we are absolutely beating index funds in the market, except for ARC. We're trailing ARC. We're trailing ARC innovation ETF. Okay. But answering Jason's question about Zoom and DoorDash. So the reason why I'm more bullish on Zoom is my family has had a chat on Zoom on Sundays every single day, every single week, sorry, since the start of the pandemic. And we don't use a personal paid account.

We use my wife's work account, hopefully saying that won't get her in trouble. And so I think a lot of the consumer behavior is going to stay because my parents aren't going to move 3,000 miles closer to me. I think there's a lot of this behavior that we picked up is going to stick. Now, with DoorDash, on the other hand, though, there's a really great substitute. for this. I can, instead of paying DoorDash, a bunch of money to order food, I can go outside. And I think there's going to be a lot of that, not just because we've all been locked in and repent up to go out, but because going to a restaurant's lovely. I want to get out of my house. I've been in there so much. I don't want to eat more dinner on the couch in front of the television.

But Zoom, on the other hand, makes my life bigger. I'm not going to get rid of that. I'm not going to get rid of the connections it brings me. And I think Beth's point about the growth in accounts of 10 or greater is the key metric to watch for them. Because if that keeps growing. They have a lot of, I think, built in later growth because those accounts will continue to grow back to our net dollar retention argument from earlier in the show. So I'm optimistic about Zoom. Also, Eric, the CEO is brilliant. And I think they have the right customer first perspective. DoorDash, I mean, I can't knock it because it had a great year, but I'm less certain that people are going to keep paying that much for dinner when they can go down the street. Yeah, I mean,

there's going to be a YOLO roaring 20s. Like, we've never seen. in our lifeline. You agree with that, Beth? People are going to just go out to whatever remaining restaurants are still open. Whoever makes it to the other side are going to be, it's going to be hard to get a reservation in the summer. Let's put it that way. Every hotel, every flight to Europe, it's going to be bonkers. Yeah, I'll be going out just to support the restaurants, you know. I mean, I want these restaurants to stay in business. So I'll just do it even for that, let alone the fact that it'd be nice to get out of the house. Also, Zoom, it would seem to me is underpriced in the enterprise.

they're super cheap for an enterprise product. If you look at how much we're using it, everybody's using it for at least 10 hours a week, 20 hours a week. So that means every month you're using it 40, 50, maybe 100 hours a month on Zoom. You're paying $15? I mean, that's- The gross margins are good.

I mean, the gross margins are good so they can afford to sell it cheaply. I mean, how can you compete with rock solid and cheap? I mean, Google Meat didn't take off. off because it's not as consistent. Skype was inconsistent. I mean, the secret sauce for for Zoom is that it just works every time. I never load Zoom and wonder. I always know. Once in a while, you'll get somebody who will have their audio, they'll have, they'll be on Wi-Fi. You know, it's like these people who are on like Wi-Fi from the router's 10 years old and they never set it up and they don't take any responsibility for their Ethernet cables or anything like

that. Beth, you think they could charge more, correct? I do. And the management had a great comment in the last earnings call where they said, we choose to give away free accounts because we don't have to spend on sales and marketing that way. So you can look at the gross margins. You can look at the operating margins, but this company is extremely profitable too. As far as tech growth goes, that bottom line number is very, very impressive and it grew like 900% this year. So the EPS and the profitability. So I think their operating margins are around 20%. I remember right. I have to look that up. But I know that as far as their peers in cloud software, their top line is good and strong. Their bottom line is too. So that's pretty rare.

All right. Here's a quick question before we go to break. Think about it. If Zoom doubled their prices and added some persistent chat, you know, like a new feature, like basically build in Slack, which is the obvious next thing for them to do is you leave your Zoom open the whole time and there's just folders and you can click any one of those folders. And that equals a group of people who go on a call, they add that feature, they double their price. I want to know how many customers you think they lose when they double the price when we get back on this week in startups. 2020 has proven to be a year of many things and 2021 is the year you are going to switch to a better payroll program. And Gusto is the way to do that. Gusto wasn't just built for small businesses.

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Welcome back to this week in startups. We're chopping up all the tech news with Alex and Beth. And when we went to commercial, Zoom seems to have a clear path to incorporating a Slack-like feature. We could have a, you know, Alex for your family gathering. Why isn't there a folder on the right-hand side of Zoom? and you leave Zoom open all day. And when you click that folder, everybody gets a call. And then you have your Wednesday meeting

where your morning editorial meeting at TechCrunch. Or Beth, you have your end of day meeting with your investment team. They could very easily add a Slack-like functionality. They could do it in their sleep, Eric. And I have to say, I'm very impressed with Eric because I was super critical of them rooting people's devices and running the videos in some cases through China

and using a bunch of Chinese developers. And I was like, I would never use this software when it first come out. Like, the Chinese are obviously spying on everybody. Like, if you have servers in China, Chinese, Xi Jinping's got the keys. So, and he, like, well, anyway, I'll leave it at, I was, contact was made with me to explain, like, that these things were going to change very quickly. And he didn't respond quickly.

But my question, Beth, if they added these Slack-like features and they doubled the price, what would happen? How many customers would they lose? If any? What percentage of customers would they lose? Yeah, it kind of reminds me of the Netflix question, which was like, I remember when it was like five bucks and then it was ten bucks and now it's 15. And I think when you have this kind of traction and this level of product market fit that when the time is right, I don't think the time is right right now, but I think that they could increase their prices. But I really like what Zoom's doing too is Pinterest is starting to integrate with Zoom for creative hobbyist demonstration.

So, you know, if you're on Pinterest and your fashion designer or something, you would integrate. They're integrated with Zoom and they're going to hold fashion classes or fashion presentations. So I think Zoom actually has that developer flywheel where like, what is everyone else going to do with Zoom and their apps? You know, and that's something that I'm really keen on. The API. Yeah, to the API, yeah. All right.

So if they did double it, let's just say they went crazy and they decide to double it in, you know, January 1st, they double the price. You know, in three weeks, they double the price. What percentage of users do you think they lose? I think they'd keep the majority of them. I don't think people are going to leave Zoom. Exactly. Yeah, that's where I'm at.

Like, I took the long way, but that's what I, yeah. What do you think, Alex? 15%. 15%. Yeah, I would agree. Think about this way. Like, we all use some streaming music service. I'm a Spotify user and have been for a million years.

They charge me something stupid, like $10 a month. You don't know, do you? Well, no. See? I mean, this is how cheap these services are. When you don't even remember, I have the family plan for Spotify, which is I do 15 bucks a month. And I just gave it to my brothers, my mom.

And I think two of them used it. But I'm like, this is such a ridiculous sale. I used to buy 20 CDs a year for 20 bucks each. And this is $180. My whole family gets all music all the time. Yeah. So if they raised that, if they said now, Alex, it's now $40 a month, I would be like, well, that sucks.

All right. I wouldn't even blink twice about it. That to me is a non-negotiable service. I'm essentially, I will pay anything Spotify asks of me. And I wonder how close Zoom is getting to that point. Because Netflix has become like electricity in a house. You have to have it back to best point. So like I wonder if Zoom has reached that threshold.

And if so, how much defense that'll give them? But I think it's going to be a lot. Pricing power is crazy in that product. When, how long have you been on Amazon Prime, Alex? Oh, I mean, I can't recall not being on it. So I mean, ages. Year one. Do you remember what you paid year one?

I don't know what I'm paying now. Introductory price. How much does it cost? You don't know what you pay to read. originally and you don't know what you pay now. Beth, how long have you been on Amazon file? I love this. I think about four years. I want to say it's 99 a year. Do you remember your first price you paid? I feel like it was 99 a year. Yeah. Okay. The introductory price was 50 to 60 bucks and it's 150 bucks a year now. Okay. And the reason none of us actually even know what we pay for

it is because it is such tremendous value that we wouldn't, I mean, who would ever not have two-day delivery they've boiled the frog, right? And it's, you know, I, I wonder about DoorDash to the discussion we're having here is, does DoorDash have that same thing where I kind of feel like the pricing on DoorDash and even Uber eats and some of these things? I do hear people who are affluent saying, well, it's kind of expensive. Maybe I should go pick it up. I mean, that was us last night.

We were running late for dinner and I didn't want to cook and I had book club with my dad and Liza had a thing and, you know, just, I was like, I'm just going to order Indian food. And it was like, so, like, it was supposed to like 50 or 60 bucks for us both to eat Indian food in our house. And I was like, okay, but like, maybe we don't need that. Maybe we, I just felt to me like all of a sudden it was like 20% more money than I wanted to spend on dinner because I was going to get at home on the couch in front of the TV where I always am. What about you, Beth? Have you had that like, I mean, listen, we have people on the call right now who are, you know, are not price sensitive. for the extra 20 bucks it costs to have dinner brought to the house.

But they've actually kind of charged what the real cost is, right? And the real cost is not de minimis. Do you even think about the cost now, Beth? I'm kind of in the same boat where even like my OTT connected TV. Like I have so many apps that I'm paying for. I think I'm paying one that I used to for cable, Amazon Prime, Netflix. But when it comes to DoorDash, for some reason, I always look at that price. And I'm like, that doesn't feel right.

We actually pick up a lot. So because of that, it's like, I don't mind tipping the driver and I want the driver to be paid well. But it feels like there's extra junk fees in there that I'd rather not pay $20 for delivery. So, yeah, I'm kind of in that camp. I am not price sensitive, but I do look at those numbers sometimes. And I'm like, and you know what I realized? I was having, I had somebody on the podcast who, Chow Now, and they provide software, enterprise software to restaurants.

And they charge like 500 bucks a month or something. a restaurant and you want to basically have the software of Uber Eats or DoorDash, you can have that, but you don't, you have to bring your own delivery service, right? And what I realized when I started doing the back of the envelope math, because I grew up in the restaurant business, do you know who is doing, you know what delivery people were getting paid prior to DoorDash and Uber Eats and Grubhub? They were getting paid like $20 a shift for a 12-hour shift off the books. They were typically illegal immigrants who were being. taking advantage of, they would be given 10 or 20 bucks in cash, and then they would get

a buck or two of a delivery, and they would get whatever tips they had. So they would probably net out to five to 10 bucks an hour off the books, or if it was a slow night, they might only go home with 25 bucks. That's kind of how the industry worked. So you had this underground economy that was subsidizing food delivery. And now you have, these companies have to do it by the books. And even doing it by the books with gig workers, it's really expensive to do. It shows up. I mean, whenever, you finish clicking the food items and then the actual bill comes up in like uber eats for example which is what i use there's like more lines than i expect and i feel vaguely annoyed by that especially

because i know there's markup built into the food prices because i'm ordering from restaurants i used to go to and i'm like wait a minute i'm paying every direction here and the restaurant isn't doing that well and the delivery driver isn't really making mint i feel like instead i'm kind of just helping the company that's doing the least work they're not driving the car they're not making the food why is DoorDash worth $60 billion when all the restaurants are closing? And to be clear, the company's arguments about why this is not as bad as I'm making it out to be. But like that does, that song plays in my head consistently when I execute these transactions. All right.

Let's look at some of the bets that you're making, Beth, that you think might be sleepers or undervalued in this crazy market. Fubo TV? First I'm hearing about this, sports betting integration. Founded in 2015, Q3 revenue 61,000, 47% percent. increase year over year. So they're on this like $200 million run rate, $2 billion market cap. That's only 10 times their run rate. Yeah, and their forward is actually forward revenue growth is 70% next year.

So they're guiding for that already. What I like about Fubo is so Connected TV and OTT apps, they're actually reaching like a hype that 2021 through 2024 are going to be golden ears for, you know, Yoroku and those kinds of companies. And Fubo is relatively unknown. The reason why the majority of the people continue to subscribe to cable is for live sports. And actually PricewaterhouseCoopers did a study and nine out of 10 people who have cable today kept it for sports. And eight of those, eight out of 10, would cancel it if they could replace their live sports.

These are not like your casual home team, you know, football fans that could just do the fragmented ESPN Plus. So what Fubo does is it aggregates all sports, live streams, and you can get that for about 60 a year. year. That's really exciting on its own because there's so much statistics and so many trends supporting the life sports audience. But the bigger catalyst is the sports betting. And I really like the backers on this one. You have Disney and you have Sky Media. I've actually done, I was actually a DC Scout for Sky Media about 10 years ago. And these guys are great when it comes to sports betting. There may be the world's best company when it comes to sports betting. It's a 20 billion market in the UK. So when you're taking those kinds of strong backers and you have that kind of a trend

and you have the right year for it, I think that $2 billion market cap is so low that it's worth a look. And we now have sports wagering. The Supreme Court said, wagering's going to be, what was that in 2018? They said, hey, sports wagering is legal. States want to do it. They can do it. And lo and behold, the NBA, the league that had been dogged by the most gambling scandals, you know, Donahey, the referee and Michael Jordan potentially having to take a year off because of sports betting. And they are embracing it more than anybody, it seems. Like Adam Silver wants to put a team in Vegas, which would have been foreboden in the,

you know, just under Stern in the NBA. I think there's 10 states right now where it's legal. And then other people use VPNs to get around that. But I think over time, it's kind of like, some of the other cannabis or some of the other ones that are kind of in limbo between how many states have approved it. But again, like I really like the Sky Media backing, and I think that they're the ones to get it done.

Yeah, any thoughts on this wagering space? Are you seeing a lot of these companies, you know, getting backed? Because we as venture capitalists typically have no wagering in our documents, no drugs, no wagering, no porn in terms of what we can invest in. Draft Kings has done well in the market this year. But again, I really like Fubo better because I like the fact that it's also the streaming channel for the live sports. So you'll get that $60 a month. And then you have this catalyst for the revenue growth.

I like that combo a lot. Alex, any thoughts on wagering? I mean, I'm surprised isn't that you would construct yourself so heavily with your LP agreements. It sounds like some sort of like, you know, inquisition agreement there. As a bad poker player, I'm a fan. of friendly wagering. And I think that best point about Sky is really good because Sky is fantastic. I'm a F1 fan. So I watch a lot of Sky F1 and they're just a tremendous organization. So with her thesis, I would concur. I will say I don't see a lot of startups in my neck of the woods that are working on this. I think because of what you just said, the capital sources that they would usually turn to are pretty dry. That may change in time. I think cannabis is now backable by more groups of people. And I'm sure this will follow in that vein. But currently, it doesn't come up enough for me to have much of a thesis on it other than I like sports and I like gambling. Yeah, I mean, basically it's a other jurisdictions now

are becoming the funding sources. So if you look at cannabis, all the Canadian, you know, Canada had the federal had the national referendum. I happened to be there the week before it happened at some, speaking at some event. And literally people were just throwing edibles and smoking in joights everywhere. It was hilarious. But they all went public on the Canadian markets because Canada was like, yeah, we'll take that business. And here we are in America. Only 18 states of legalized sports betting. I'm not sure we are where we are at the cannabis national referendum. Twilio, man, Jeff's done an amazing job at acquiring companies. Send Gride in segment. Beth, thoughts on Twilio and their potential as a company, overvalued, appropriately valued management.

I think Twilio is going to be a big surprise over the next five years, and it's because of the pivot that they've done, which has been somewhat underreported. So they did these acquisitions at SendGrid segment. They also have Flex the Contact Center, and they're really transitioning from cloud communications and APIs over to becoming a data company. And I believe, in my opinion, they're doing it just in time as things become more decentralized towards the edge. Twilio being on edge devices and being that close to the customer as a touchpoint is really nice. positioning for them as edge computing starts to be built out. So I think the Twilio that we knew over the last 10 years, that's a great start. And I think COVID really helped them.

But I think the Twilio over the next 10 years is going to look very different. And I love a pivot when you go from having that strong foundation over to leveraging the data that, you know, you can control and is the first party data. And they're basically saying like, hey, rather than have, you know, centralized data management platforms, which Adobe Oracle offer, why not get closer to your customer, get in their inbox, get on the contact center or whatever AI bought you have serving them and run some data and really figure out how to market them and create publisher segments and increase your ROI. And that to me, like, I can just see that vision and I'm pretty

bullish on that right now, especially after the last earnings call where they really pieced it together, which was this Omni Channel marketing play. So in a way, a more technical hub spot. Yes. And more kind of, yeah, exactly. Any thoughts? I mean, you've covered Jeff for a long time, Alex. Any thoughts on his performance as a CEO?

We saw him as a product-driven CEO and now becoming, I would say, an acquisition empire building. I'll call it empire building. You went from product to empire building. Any thoughts on Jeff in that transition he's made? Yeah, a few all of a sudden have way more money to spend. I mean, the value creation of toy has been epic. I mean, the company has done very well since its IPO.

And so you have tons of liquid currency to play with. Why not go out there and buy the things you want, accrete revenue? And as best said, build out a much better and bigger product feature. I mean, if you can grow your TAM and accelerate your growth at the same time, huzzah. What I'll say about, Jeff, I talked to him a month or two ago at TC. The only concern that I would have is he wrote a book and I have it. I need to read it.

But I always get worried when business people start writing books. What are you doing with your time? Why aren't you doing what you used to be doing? Are you a guru now? Are you Mark Benny off junior? Because we already have Mark, and I don't need any more of that. I'm sure the book's lovely. I'm sure they're going to keep executing well.

But, you know, when companies get sufficiently large, which is kind of the point that I'm making. Like when they build a building, right? Like when you start building like the Apple campus or the Salesforce tower, I see it in startups when they start having arguments over the reception area and like the kitchen. And I'm like, can we get off the kitchen and the reception? area and just put up a folding table and get back to the product. Like there's always some moment in the board meeting where the two founders are fighting over the lunchroom and the new campus.

And I mean, it's, yeah, it's a little bit of a tell. Apple built that enormous spaceship campus down in Cupertino. And then they launched $550 headphones. So obviously it's worked out incredibly well for them because that's the most brilliant product choice I've ever heard in my entire life. That was sarcasm, by the way. Yes, it was dripping. Do you think when we see the,

The most in a, I mean, the M1 chip, is it M1, the one they put in the new chip? I mean, that does seem to be a really good sign that they understand the flaws in the desktop product line, which is it crashes spinning wheel of death. But then you see like these like silly things, like $550 headphones and you're just like, what are they doing over there? Are they just trying to ring every ounce of margin? And where's the new innovative product? Where's the AR glasses?

I think the M1 might be. No. I think the M1 is sufficiently interesting that it's going to change things up. I mean, I'm on a MacBook Pro right now. I have gaming PCs as well because I'm a dork. But I mean, like the M1's the first chip that's come out in time immemorial for me that I've actually wanted to go buy a machine just to use because it is that efficient and that interesting.

So I think all the headphones and all the jokes we made about how many pairs of AirPods we've all bought over the last couple of years is what funded that. So they've taken that cash flow and put it to good use. Now, there needs to be an M2 and M3, it needs to be as impressive, and maybe Intel will stop being Intel for five, ten years, kind of get back on track. I'm not optimistic about that personally, but no, I think Apple's going to be great. But back to Twilio, because I've drilled us. I'm sorry. I concur with best generally bullish take on the company, given the history and the business plan. I think it's good.

All right, tell us what C3.AI is, Beth. First I'm hearing of this company. It's Enterprise AI, and they work with a lot of the vertical. that I think are really interesting, manufacturing, oil and energy. My understanding is they're just using AI software to make those industries function more efficiently. The founder, I believe, is from Oracle, right, Alex? Tom Sebel. He's from Oracle.

Tom Sebel. Yeah. So, you know, a lot of people really follow Tom Sebel as, you know, they think that is really strong backer. I like them a lot because we've been covering AI and the AI economy is. just it's going to be so large that it's almost hard for us to imagine. We have a target number of about four times larger than mobile. And mobile brought us, you know, Apple, Google, Facebook, et cetera. So if you think about the native apps and all that.

So we are looking for a lot of AI entries right now. And if we look at this company, $41 million in the most recent quarter, $165 million run rate, $12 billion market cap. So playing our fun little game in terms of multiples. It's a pretty juicy multiple. It's a very juicy multiple. It's second to Snowflake, I think, and I believe both Snowflake and C3 are valuations

we have literally never seen before in the markets. But it's on a small revenue number, so growing into it would not be as hard. Is that your thesis, Beth? This one's lumpy because I think it was the last quarter. They only had 16% growth, but in the past they've had up to 70. It's just really lumpy. It's newer.

But I'm mainly investing in the product at that point. Do you, Beth, feel good about SPACs and companies getting public earlier? Or do you think there's an inventory problem vis-a-vis Nicola, Fisker, and a bunch of people who are obviously unqualified to run businesses? We entered one SPAC so far, which was Luminar. It was a flyer. It broke all of our rules. And we went ahead and did it because on my team, I have a technical analyst that will get us

back out quickly if the market turns on it. But overall, I would say I stay away from them. It goes back to kind of that beginning comment that the majority of super legitimate, longstanding startups and tech companies that go public tend to trade below their opening price six months later. I think these SPACs are going to follow minimum of that similar trends, keyword being minimum. So we don't like to see a lot of loose rules for public markets. And the SPACs have found an interesting loophole.

there's a lot of inventory on the market. We have been very conservative with the exception of Luminar. That's the LiDAR company, correct? Yes, that's the LiDAR company. And the idea there is they will be selling to the self-driving car companies of the world or for smartphones and gadgets or both? Autonomous vehicles mainly, they're partnered with MobileE. If MobileI was a Pure Play, I would actually invest in them.

They come with Intel, though. So not investing in Intel. But I've mobilized the ADAS system. They use cameras. They're going to create redundancy and team up with LiDAR and run both so that it's very safe on a redundancy level. I think Elon Musk has had his debate about this. And they're saying there's no debate. We're going to use both so that, you know, this vehicle is just very safe.

I like that partnership with MobileI. I like the Volvo and Daimler partnership. But I, you know, of all of the entries we've done, that is probably the most speculative one. Just because it's almost pre-revenue, I think, had about 18 million. in revenue in 2019. So I think that if you're going to get into SPACs, if you're going to do this, you should be doing it daily

and you should be experienced, basically. This is not for the casual investor. And the quality seems incredibly highly variable. And when you look, Alex, at the promoters, for every person who's a Chimoth or a Reed Hoffman or, you know, Mark Pinkis, people who we know have, you know, and have built actual companies, right, and who know what they're doing,

it seems to me that every retired person ex-celebrity or somebody with a waning following and nothing to do living in Miami Beach or some other tax jurisdiction or a place where you can't have your home taken from you because of the domicile laws. That's when I get a little worried. There's some weird promoters out there promoting this stuff,

and I think the inventory is suspect. What do you think, Alex? Yeah, I mean, SPACs are just ICOs for the public markets. And, you know, when I was learning about all this stuff, they were called blank check companies. And they were used to float trash. So, you know, I'm not shocked that we're seeing Nicola, which went up because idiots bought it and it's going down because it was always run by dorks.

I mean, I mean, my God, what are we doing? The public markets are super frothy. You can do a lot of fun things in them today. But, you know, mostly the companies that even I've heard of that are going public via SPACs are not that great. Metromile in the insuredex base. If you look at its year-over-year revenue, it's down sharply.

If you look at Open Door, which is going to public via SPAC, its numbers aren't super enticing. These are just second-rate companies going out via formerly exotic methods. Or young companies, I think, in some of those cases, like to see.

There's so much money in IPOs right now. Why wouldn't you just go public? We just spent, you know, 20 minutes at top of the show explaining how much demand there is for IPO shares. there is a ludicrous amount of demand for them. Everyone's raising their range, pricing above it and exploding. If that's not attractive to you, you're probably not ready to go out because everyone's

managing to do well. Like, C3.AI is up like 150%. And this is the first time I've disagreed with Beth, I'll show. The revenue has been flat for three sequential quarters. And I know it's up 17% year over year, but like, it's been really flat for a while. I was surprised to see it do what it did, given how many times it's turned in $41 million in revenue. Beth, any notes?

Yeah, I think it's just really looking into the future on enterprise AI software. And it's overall, I think that I completely agree with you, Alex, if you look only at the fundamentals of trailing, that it makes absolutely no sense. We have been wanting to get into the enterprise application layer for a long time. And we think this could be it. So we are investing in the trend. And like I said, it does require watching the market very, very closely, which I don't do. that's what my partners do.

So with that one, especially, I think that, again, you have to be somewhat experienced to be watching the market. For sure. I understand your thesis, but from my, the way that I look at the market, it doesn't make a lot of sense. But from that end, I get it. I'm really curious about what happens to that company. It's going to be a fascinating kind of like business case, I think, of the next, you know,

six quarters or so. I'm stoked. Yeah. And we're going back to the future in a way where retail investors are going to get to participating companies that are earlier in their product market fit, earlier in their more probably accurately, their predictable revenue phase, right? So this means more risk, which could mean potentially more reward. Let's talk about, as we wrap here, 2021, what top IPOs are you most intrigued by and or tracking Beth? A really, really like UI Path. I think

this coming public in the first half of the market. It's made a lot of the top list for top growing companies. Deloitte had it up there. It's number one, I think, in 2019. It's joined snowflakes. I'm sorry, Snowflake on Forbes. It's on Financial Times. It grew about 400% over the last two years.

So that's combined two years. And it is automation processing software. So kind of robotics automation. So it gets rid of the menial tasks of loan processing or accounting or receivables, things like that. And it basically gets rid of some of that, you know, redundancy in certain positions. And the Fortune 500 has really embraced that company.

And your number two? Well, I guess I'll comment on Roblox. We're not entirely sure we're going to enter. But what I like about Roblox is the age group that you can get some exposure to in your portfolio. So it's the under 13. Snap has that going for it, which is how do you get exposure to that age group without Snap?

And, you know, the one thing I guess, you know, Roblox has had, I think, 90%, you know, you're over your revenue in the most recent quarter. Gaming, though, I think you can ride that wave a little bit, but obviously kids are going to go back to school. And I think they really are going to go back to school. I think you could argue that some office workers may go into more of a hybrid mode. But so, and I've been through boom and bus before gaming. When I first got started, Zinga was the big company, Greene out of Japan, Supercell.

and it was a boom bus cycle, you know, a pretty heavy boom bus cycle. So I guess if you're going to ride that wave, you've got to be prepared to get off whenever it's time. But yeah, I think Roblox is one that has a lot of traction. That audience seems to really like that. It's the nature of a hit-based business, correct? Yes. It's very hard, unless you have such a massive portfolio like EA or in the IP space, Disney with Marvel and Star Wars and Disney and Pixar.

You really need to have a wide enough collection of assets. that when Star Wars, you know, falls out of favor, Marvel picks up for it or vice versa. And then your third? Boy, I can't think of a third right now. I mean, in general, we actually try not to enter IPOs until the lockup period is expired. Got it.

For what it's worth? Yeah. Alex, what are you looking at? Well, I wanted to say UiPath, but I did my homework for the show second. So Beth got first crack at the Apple. All right. So that's okay to have a little. What do you like about UIPath?

I like in the short term. We like consensus. Because it's such an amazingly quickly growing company. Robotic process automation or RPA is something that I didn't fully grok until it had already become a thing. And so I've been super impressed with the company's ability to execute and expand revenue across a large swath of enterprise companies. What I'm concerned about longer term is RPA becoming commoditized and baked into other

platforms that can offer it essentially as part of a bundle. But in the short term, it's an amazingly, it's a company that's executing amazingly well. And that kind of growth, just because of what we've seen this year with how investors treat growth, it's going to be very attractive to people that like to get into IPOs. So that's why I think it's going to be a hype offering. And I'm looking forward to writing about it. Okay. And then what is your number one after that?

Stripe, for sure. Stripe, stripe, stripe, stripe, stripe. People said that it might raise money at like a hundred billion dollar valuation. Crazy. Yeah. But I mean, like they're doing hundreds of billions of dollars a year in processing 2.9% plus 10 cents, whatever, and they just announced an entire suite of banking as a service products, which other people can use to plug into their platforms. So they just greatly increased their TAM by doing that,

and they were already huge in growing and doing well. And what I hear from the edges is that it's currently relatively well run. So growth, scale, product expansion. I mean, it's hard to hate on it. And sure, it's expensive. I don't think it's going to be a cheap stock. But like if I was picking a company to fall in love with, you know, pre-S1, I think this might be it. And you also had D.D. on your list, the Uber of China, which does Uber still own their 17% of D.D. I think so. I think they still have that stake. The reason why I put D.D. in there is because I think they're expanding into groceries. And I think we've seen grocery delivery have better economics than we expected. And given the mass scale, it's possible across D.D.'s network in China, it could be an attractive play.

I would want to see the numbers before I told any of my friends to buy a share. Not that I would do that anyways, but I'm just very, very curious about that one. And so when we do get the numbers, it's going to be a fascinating read. And yeah, it looks like in September, Uber was pursuing a partial sale of its $6 billion stake in DD, which was at 15.4% when Uber obviously decided that they didn't want to go into a never-ending war in China and authoritarian company that picks the winner of the war. Yeah, it just feels like a different era. I mean, remember, when Dede and Uber was like a hot thing and the Chinese venture capital market was the biggest story of the world back in like late 17, early 18. I mean, it's funny how much things have matured,

slowed down and seemed to like almost ossified since then. Fewer new players at the top end. I don't know. I got to think that people are after what happened to Alibaba and the, because the IPO was pulled, right? The Ant Financial IPO. The Ant Financial, yeah. The Ant Financial rather, Yeah. So what happens now with that? And then how do people look at the Chinese market, Beth, do you think? I mean, would you want to place bets in a market that's kind of run by a king? It's tough because we've had geopolitical tensions with China for about two or three years. So I think if you stay out of the China market, you could miss a lot of opportunities. We actually own Baba. We were waiting for Ant Financial.

We covered it for our site in August. And so we were pretty disappointed when they pulled it. Because what does Alibaba own like 40% of that company? I can't remember what the windfall is, but it's substantial. and yeah I mean ant financial as a product I mean I don't think you could have a more successful product I mean every human in China uses ant financial to the point where they won't even accept cash over aunt financial alley pay and whatnot so to us that you know that we were that was worth the shot and we're still in Baba but we actually just initiated in another Chinese company

a neo is a great stock out of China this year so it's tough because I can see a lot of people say it's too risky, but on the other hand, there's been some decent gains. So I think it's going to geopolitically get cleaned up with Biden. Pete Buttigieg, they're saying is going to possibly be the ambassador there. Do you think they'll take a moderate or engagement stance? Or do you think they're going to be pushed to kind of put their foot down about democracy vis-a-hung-hong and Taiwan? I would like to see us be strong with China because, you know, I really like the fact

we moved Taiwan semi-tri-you know, Taiwan-Semis. semiconductors out of, you know, we're moving them over to Arizona because we need more manufacturing from the semiconductor foundries and whatnot in this country because that is what AI and 5G are going to be run on. And in general, China cannot have our best interests in mind and we cannot have China's best interest in mind if one of us is going to be the bigger economy. It's going to be run on AI and 5G. And so I think I would like to see us have a strong stance myself. Alex, we are seeing a generation that kind of doesn't believe in capitalism or is anti-capitalism or feels capitalism needs to be constrained, broken up, etc., etc. And now we've got this competitor in China, as Beth is saying, the war we face is not going to be one fought in all likelihood with tanks and submarines, but AI chips and five-difes.

routers and towers. So what is your take on capitalism in America and our chance of winning the economic war with China? This is why I love this show and it's why I keep coming on. It's like, we're going to talk about tech stocks. And it's like, now explain American democracies to me and how capitalism will work. But great question. I think a lot about this. Here's my take.

So I think capitalism in America is totally fine. And if you're worried about that, you are an idiot. we may see two or three percentage points higher on the top marginal tax rate. If that's your definition of socialism, go look up what it means and then get back to me. Now, on the China front, they're making a series of mistakes. They are antagonizing every partner that they need regionally and also in terms of trade. So Australia and India are great examples of this rising tension. And inside of China, you cannot be at all critical of anything that's happening.

And that's what the founder of Alibaba ran into, Jack Ma, with the financial IPO, if you dug into what happened, he gave a speech and was gently, very gently critical of certain elements of the financial regulatory regime and how it pointed the country towards the future. And that was enough for Xi Jinping to yank the entire IPO. That means there's crazy. Yeah, it was already sold all the shares. It was going to raise like a bath, I forget, like $30 billion, something crazy like that. It was going to be a blockbuster event for the country and for capitalism inside of China. Instead, they turned it into a symbol that one person is in charge and only one person's view matters.

That is not how you run successful economy. So if you want to think about the competitiveness of the Chinese economy versus the U.S. economy, there's going to be the U.S., which will be largely unchanged because of the power of corporate interests inside of Congress or China, which is run by Z. I know where I place my bet. Now, we've got to get Trump out of the White House and we've got to get rid of the crypto-fascists in our government, but I think we'll pull it off in January, and I'm very bullish in America.

And I think the fear that Jason and I say this with affection, that the old their generations have in this country of the Gen C folks being socialists, if they're really concerned about that, they could go about doing things like raising the minimum wage and allowing for universal health in this country like every other damn industrialized nation. We don't have to live in the Stone Age. That would be a nice negotiating position. I agree. And I've been tweeting about this like $15 an hour.

I mean, Amazon went to 15. Walmart went to 11 or 12. And McDonald stopped fighting minimum wage increases. And they're not pro minimum wage increases, but at least McDonald's. I'll stop fighting it. Beth, let's talk big picture geopolitical. You've heard Alex's position on it. Do you think China, who's got a better capitalistic run at this war? America or China? Is there an edge? And if you were to give the edge on a percentage basis, would you make it 60, 40, which way or the other? 70, 30, which way or the other? And we'll end on that. The percentage we think

of who's going to win under the lay my odds as well. I'm going to go 95% America. And it's because we have the technology. I mean, we are leading and we continue to lead. And they follow, you know. So they are a strong follower. They can definitely rip us off and create the same technology that we created. But we're leading at Nvidia, for instance, is a gem. It's a gem for this country.

They their chips are super powerful. They accelerate AI. And, you know, AMD is also a gem. I just think that even Qualcomm, right? I mean, Qualcomm is in every single 5G smart. smartphone and Huawei is dying to get. What do we need to fix to ensure that we win? Are there things in this country that we need to fix?

Yeah, I think we need to bring any kind of manufacturing that in regards to technology needs to come back overseas. Yeah, hopefully Apple you're hearing this. And I think it can come back over, you know, back over into our country and this side of the world with robots. I mean, that's the whole thing for me is like we don't need to offshore manufacturing when we can use robots here and people can have great jobs. and, you know, automate this process.

So 100%. And even if the manufacturing just becomes less dependent on China, and we put it in Vietnam, India, Pakistan, Sri Lanka, Philippines, and any other number of places, which Japan is actually subsidizing their companies, they're giving them incentives to get out of China before this whole mess blows up. I think we are 80-20 versus China. I'm not as bullish as you, Beth, because I do think if we were, to have a highly socialist, liberal Elizabeth Warren type or Bernie Sanders type make it to the White

House, which I don't think they will. But if we were to go on that side, I do think that there could be such an anti-corporate conglomerant movement like we see with the AG's trying to fight Facebook in the Review Mirror, that it could cause us to lose a little bit of our entrepreneurial edge. But I do think there's a significant chance of civil unrest and civil war inside. of China. When I say significant, I mean low single-digit percentage, but man, the outcome of a civil war like we saw in Hong Kong, you talk about millions of people getting in the streets. What if tens of millions of people in the streets of China just say, enough of this bullshit, we're not going to be told what we want to do anymore. And, you know, you can only run over

so many people with tanks as they learned in Tiananmen Square. And you cannot run over 10 million people. I mean, this could become chaos in their own country. And I think that's the risk factor for the planet. We have to steer China towards at least some form of basic human rights in terms of Uyghurs and people being able to access information. And there seem to be our engagement now seems to have enabled their bad behavior. And certainly the administration has given the green light to them to behave poorly. Alex, give us your percentage.

955 from Beth, 80, 20 from J-Cal. I think we're doing prices right pricing, so I'll go 95.001%. Okay. Just to pull ahead a little bit. So we're feeling really bullish. Explain.

You know, I mean, remember back when it was going to be Japan that was going to take over to the U.S.? This actually predates me a little bit. So I wasn't actually around for this, but I actually remember the 80s. Yeah,

they bought Sony, Columbia Records, Rockefeller Center, and they started buying all the real estate in Hawaii. I was only here for half of a year of the 80s, but it was a great half year, I have to say. But I think there's a lot of similar fear

here. And if you go back just two years in our little world, Jason, of startups and venture capital, people were raving about the, you know, 996 that you work like nine to nine, six days a week in China. And now they're going to eat our lunch, they're going to crush us and, you know, et cetera, et cetera, et cetera. You know, not really. Doesn't really happen. And I think it's going to keep happening. I think, I think, rising central government in China, like if you're worried about, you know, Elizabeth born becoming president and enacting some, you know, modest critiques of M&A behavior, think

about a country in which you don't have the, the ability to contest anything. I mean, that's not a business climate that's going to win. Now, China does have a lot more folks than we do, and that's going to lead to, you know, more economic output. I think we're going to lose the GDP war, but I don't think we're going to lose the per capita GDP war and the, and what I would call the freedom dividend of having a functional press and the ability to have to send.

And just to throw in one little note, then I'll shut up. I think what's happening to Hong Kong is catastrophe. Yeah. I mean, and Tibet and Zyangering. And I think the human rights mess here should make you think twice about supporting companies that are supporting that government. And if you're not willing to put your morals where your money is, fuck you. I agree.

I mean, look at the NBA. It's like there, you, you can't be in the NBA and be, you know, a proponent of Black Lives Matter here and then take Daryl Morey and make him a sacrificial lamb for saying freedom in Hong Kong. You can't have it both ways just because, and I was kind of disappointed in some of the NBA leadership where they were like, hey, everybody shut up about China. And it's like, I understand it's 20% of your revenue, but is it worth 20% of your revenue to lose your soul over being able to say people have basic human rights?

I would just rather give up the 20%. Give up the 15%. And then you look at movies being made. They're changing the end of movies. You can't have a Chinese villain in a movie anymore because then you can't play in China. And they've banned a number of American actors from ever, their movies ever playing. If you just type in American actors banned in China, you'll see there's a list of people who, and then those, I think Richard Gere is one of them.

And Richard Gere's career went down because Hollywood is sewing on the take. So you look at the NBA and you look at the Hollywood, two of the most virtual signaling groups in the world. And, you know, they're on the right side of history with some of that virtue signaling, obviously. But they won't stand up for people in China. It's bullshit. I think the people that are making those choices aren't the ones who care about Black Lives Matters. The players consistently in the NBA are showing up defending their fellow citizens,

arguing for racial equality and crackdown on police violence, those are not the same people that are making the choices about China. And LeBron wouldn't say anything about China. They threw Daryl Morey under the bus. I was very disappointed in LeBron. So to be clear, Jason, absolutely. I just want to make sure that we're putting the onus of blame in that particular situation on people who own the teams,

who are not, by the way. Yeah, no, I mean, they couldn't bring it up either. They basically did a blackout. They just said, listen, nobody can talk about the subject. If we keep going, it's going to be 20 minutes, and people are going to be irked with us that we didn't. and shut up. Yeah.

Any final thoughts, Beth? As we wrap up. I agree with everything. You guys have said. Yeah. There you have it, folks. Great job, Beth. Any plugs?

Any where we can find you guys. The newsletter is beth. Dot technology, correct? I have a free newsletter. There's stock tips and stock analysis that comes out for free every week. And then we have a $65 a month premium subscription where you get access to the portfolio and the trades that we're making and really in-depth research. Love it.

And Alex, obviously, everybody to go right now in search since you're in your podcast player for the Equity podcast. And you will hear Alex there. And Alex, do you have a substack? Have you quit TechCrunch to do your substack newsletter yet? No, I'm trying to have kids.

So the idea of having paternity leave sounds nice. No, I'm on Twitter at Alex and say hi. That's it. Okay. There you have a folks. We'll see you all next time on This Week in Starves. Bye-bye.