This Week in Startups - E1152: Keith Rabois on leaving Silicon Valley for Miami, Roaring Twenties 2.0, IPO spree & more

Episode Date: December 15, 2020

FOLLOW Keith: https://twitter.com/rabois FOLLOW Jason: https://linktr.ee/calacanis

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professional VCs. If you're interested in investing, you can join our crowd for free at OUR-CROWD.com slash twist. Hey, everybody. Welcome back to this weekend startups. I'm your host, Jafson Calacanis, and fan favorite of the show. entrepreneur, venture capitalist, and social media rabble rouser, Keith. Boy is back on the program for his.

It's like, we do a six-month checking. We just check everything, make sure he's doing okay. How are you holding up? I surviving. You know, like, it's a tough world for everybody at the moment, but we'll get through this. It feels like, let's start with the pandemic. It's 2020. It's December.

We are hitting a peak number of. of cases that are being found. Testing has really ramped up. You have 200,000 people who are being identified with COVID. Sadly, we're starting to hit records in terms of debts again, 3,000 a day, which you would expect because nobody seems to want to stay indoors anymore. And 80% of travel was the same for Thanksgiving. That was a little bit crazy.

But the good news is about 100 million people seem to have had COVID, if you believe the multiples on the 15 million have been diagnosed and you have, well, confirmed, and then you have some multiple of that. Some number may be naturally immune. And of course, two vaccines, 95%, 96% efficacy for the first two. And we're going to be doing 40, 50, 60 million of those shots in December, January, February. How do you look at the end game here, Keith? Well, obviously, over a medium term time horizon, let's call it two to three quarters, one should be cautiously optimistic, which is great. Because until very recently, let's say two, three, four weeks ago, it was hard to see a particularly

specific light at the end of the tunnel. And I think people are optimistic once they can see light at the end of the tunnel, the proverbial light at the end of the tunnel. And right now, based upon the progress with vaccines and, you know, as you point out, the level of infections that have already occurred, there is reason to believe that by the second half of 2021, you know, we'll be able to live much more normally. Yeah, I mean, I looked at and I think it's going to be actually Q2 because I think there's 100 million people who've had it or somewhere in that neighborhood. And if you look at the infection rate now, if 200,000 people are confirming a day,

it's got to be a multiple. So that's 1.4 million a week. You times that by five, four, something like that who didn't get tested. I think is reasonable. You're at 5, 6 million. And they're doing to deploy 10 million vaccines a week. It's 15 million. 150 million people in the United States don't have the vaccine yet. It's 10 weeks of vaccinations. I think we're done. Well, it assumes a linear ramp in supply, which probably isn't quite true. And you need two doses of at least the first two vaccines. And so the math is a little bit more complicated. But in any event, barring some unexpectedly bad development with the vaccines,

you know, by July, by the summer, things should be materially and meaningfully better, even though I've seen some reports today and I haven't had the time to study them carefully that suggests the time horizon will be longer like JP Morgan put out a report that suggests we're going to see a pretty substantial infection rate over the next summer. But fundamentally, there is some light at the end of the tunnel. People should be cautiously optimistic and careful currently. But this isn't going to be a five-year problem. It should really only be a matter of quarters. Which is what we're seeing. I think that would explain why the stock market, where people actually make bets and put skin in the game has been on a tremendous tear. There's a number of

reasons for that. Obviously, we're injecting a bunch of money into the system with stimulus and printing money. But you got to think people who are investing in the stock marketing companies like Disney or Uber or Airbnb or whatever the company is, they see that light on the end of the tunnel and they're assuming, hey, cruises are going to come back, hotels are going to come back, Uber's are going to come back, at least for riding in Uber's as opposed to getting food delivered. So does a stock market make sense to you in that regard that people are starting to price in, we're going to be out of this soon? Well, they've priced in the secular change from traditional industries into technology stocks for a long time. I mean, starting in late March,

actually early April, you could see signs where the transformation in society was accelerating from old school digital, old school analog processes to model. digital processes. You can see it in home selling and buying with Zillow and Open Door. You could see it in modern versions of food, entertainment, with Peloton, Zoom, to some extent, displacing real world meetings. So there's a fundamental ship that COVID accelerated. And the stock markets basically have been appreciating that, you know, since maybe two to

three weeks into the pandemic. The thing that's accelerated recently is more old school real world events. I mean, you can use like something like Eventbrite is a pretty good. proxy for what people in the public markets are betting about, you know, real world events resuming normal because fundamentally event rights basically been the business of ticketing in person, relatively sizable events. And that is a, you know, area that's been most affected by the pandemic where there hasn't been a massive shift to online substitutes. And so I think that's a good tracker. I, you know, Uber and Lyft, that's a bigger bet because I think,

there is a shift towards more suburbanization that Uber and Lyft are less well situated for. I think there is a shift to private ownership of cars because people have concerns about sharing space with drivers and other passengers. And so I'm not sure that I'd be betting on Uber and Lyft emerging nearly as strong as they were before the pandemic because there's some macro changes in consumer behavior that are underlying or inconsistent with the long-term hypothesis of those companies. Yes, if people aren't living in cities and cities are where there was a lot of density for it, that would make sense. And then it seems like people are moving to other cities. So it is interesting

that, you know, it might be New York and San Francisco have less Ubers, but maybe Miami, Austin, and other places have more because more, they're going to have more density. And, you know, who knows? Well, it depends whether people move to cities where there is density or suburbs where, by definition, there isn't. You know, one of the advantages of Nordash, for example, has been, they've always been focused on second-tier cities and suburbs. And so they've already proven their model works in less dense environments. And so there's a macro shift to more DoorDash-like environments than, let's call it, Uber concentrated grub-hub-like environments.

And I don't think that's going to reverse immediately after the pandemic. I think there's an appreciation basically of space. Like people appreciate and value the space they have, the flexibility of their space, the ability to have detached calls, entertain indoors with family and friends, the ability to set up a home gym, whether it's Palaton or resistance training. And that probably doesn't just go away immediately just because people get vaccinated. I think some things will snap back when people get vaccinated. I think, you know, the warring 20s, as other people have pointed out, may not have been completely accidental that it followed the Spanish flu of 1917. When we were learning,

American history, you know, when I was growing up, I don't think any of our teachers really linked the two. But I think there's reasons to believe that we could see some excitement, energy that resembles a bit of the roaring 20s when people feel the license and the safety to engage with other people at some scale, like birthday parties, anniversaries, weddings. I mean, there's a backlog of weddings. Like, I can name seven. I got like five weddings that have been postponed two or three times. I have currently sitting on. like seven weddings and, you know, I don't know when they're going to occur. And I, all of them are going to occur next fall.

Like August, September, October is going to be brutal. They're going to try, but the venues can't handle that. You know, there's only so many attractive venues. Oh, right. So there's, there's like things like that which will cause, you know, what feels like an explosion of activity when it's safe. It's perceived to be safe. It's politically safe to have large gatherings.

I think there is some fundamental shifts around conferences, not all conferences that used to occur or going to occur. not all sales meetings that used to be transacted by flying across the country in a plane for a three-hour meeting are going to occur the same way. I think people have shifted their or basically figure out new ways of calculating the value of their time and travel. And so we may see less business travel. But there are going to be people who want to go to concerts. There's going to be people who want to see musicians, listen to music and, you know, in a group, dance parties, things of that sort. When it feels safe, I think there's going to be a resurrection.

And I don't know if the movie theaters, like, in contrast, like, ever come back, like, because the high, the fidelity of a, you know, a home audio, a home media system is just so, it's so good. And the convenience is, is superior versus like a concert where realistically, there isn't a home alternative. You cannot have the same experience of going to a concert at home. Yeah, that just doesn't work. Like, yeah, but that is really interesting. I don't know if you saw Warner Brothers or HBO Max, that whole conglomerate, they're like, You know what? Fuck it.

The whole slate is going out. Wonder Woman, everything's going into our HBO Mac service. So they're, in a way, that's going to accelerate their competition with Netflix. And then Disney going all in on Disney Plus and being like, you know what? All this does is accelerate them to a better model. They're going to have a better growth trajectory. When we get back from this quick break, I want to talk to you about what other sectors are going to stick and which ones maybe revert back, especially the concept of going back to an office, which I am hearing one group of people,

I think it's people with kids who are like, I need to get back to an office. I can't take this anymore. And then I got another group of people who are like, I'm never going back to an office. I want to know what you think the standard becomes for the big companies and startups when we get back on this weekend startups. Listen up. We all know marketing budgets don't grow on trees, but the good news is right now. LinkedIn is going to give you a hundi, $100,

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LinkedIn.com slash this week in startups. Okay. Let's get back to this amazing episode. Welcome back this week in startups with your favorite guest. Yep. Keith Roan Boy is here. We did a double episode back in 2019, 904, 905. May he did 1057 and in August he did 1093 so three 20-20 appearances the fans just can't get enough of you deep.

Everybody's like you're, I think you're going to be like guest of the year this year. Oh, wow. We have to get three. You need a big trophy. I'm going to get, yeah, I'm thinking about getting like hoodies or blazers or something with like the number of times you've been on the pod. Oh, that would be cool. I like this. Yeah, like a blazer maybe, you know, like five episodes.

blazer. Let's talk about work from home because we're now getting to the point where this thing is going to wrap up in the next three, six or nine months, depending on if you're optimistic or pessimistic, but it's getting done by Q3, Q4. And people like, Reed Hastings are like, we're going back to the office. That's how business works. Zuckerberg's, I think, going to tell people, you've got to come back to the office, maybe some exceptions here or there. how do you think this shapes up? Did the big companies force people to come back to work or not? What's going to happen?

I think that larger companies are more risk-averse and the smaller companies are more likely to be co-located and work together. They have a more creative organization. They're typically creating, fusing new ideas from scratch and the in-person dialogue, the spontaneous sort of combustion that leads to innovative ideas is better than in-person. I think as an organization scales, it tends to be much more predictable. The roadmap is more obvious with a longer time horizon. And so it may be easier to partial things out, you know, and basically just measure people

by their productivity because you're not really trying to get that spontaneous spark. So I don't think there's going to be my first prediction is there will not be a one-size-fits-all solution for size of company. It may depend upon market, depending upon how linear is the plan. in the strategy versus how much creative energy and how many step functions. So, innovation, does the company need or does their culture support? So I think you're going to see a diversity there.

I also think you're going to see some hybrid models emerge that we really haven't traditionally embraced. I think more companies were either like a remote only company, like think like GitLab, which has been very successful or full time in the office all the time, think like Amazon, Apple, et cetera. And you didn't have too many of these hybrid models where people were at scale. like spending two or three days at home or two or three days in the office, I think the emergence of a hybrid model where people co-locate some of the time

and try to fuse that sort of simultaneous synchronous dialogue and spark of originality. And then people are allowed to pretty much be wherever they want another two or three days a week. I think there'll be versions of that that emerge and haven't really been tried before at massive scale. So and then I think people will watch and learn. learn, like, which is a value proposition in terms of recruiting people, which is a value proposition in terms of success of the company, like actually output metrics. And then, you know, there'd be another generation of people that learn the lessons of this kind of writ large social experiment of like, how are we going to organize our work and productivity

in the 21st century? This is going to unleash a lot of creativity. There's an unleashing a lot of, there's already a lot of creativity around tools, software, products and services designed for this new world order. but nobody knows what the right answer is. Personally, I'm not the biggest fan of remote only. I think there are cases where it can work and be successful. I would typically like to see early stage and mid-stage innovative companies more co-located.

I'd even be a bigger proponent of distributed hubs, sort of like what Stripe has, where Square Cash App uses this, where all the designers are in New York, the marketing team and product team. It's actually in San Francisco at the moment. and the engineering team is actually in Australia. So they have like different hubs, but you're basically tied to a location with colleagues that practice the same craft. That's fascinating.

So if you happen to find the greatest designer in Miami or Nashville or whatever, and they got a bunch of friends in design, they're the most respected person, why not make them the center of excellence? Yeah, center of excellence model. I think there's some merit to that because not all the centers of excellence are co-located in the same, you know, geographic region, there are areas where you can find depth of expertise

way outside San Francisco or the Bay Area, and you might as well take advantage of that. Yeah. And so I guess that takes us to our next super obvious conversation, which is your recent move to Miami, which you've been vocal about, and a number of other people have already Shervin's in Miami, a bunch of other people have moved to Miami. Obviously, Austin is the other premier destination for people leaving the Bay Area. We're seeing Reno, Seattle's pretty common as well. Seattle's very common.

I know the media has been tracking that, but as far as I can tell a reasonable fraction of people I know professionally or socially that have left the Bay Area have also migrated to Seattle. And it's really interesting to have been in the Bay Area for as long as you were.

I've been here for five or six years. And to see this golden goose, this incredible well of innovation, jobs, and this tax basis overnight because of the pandemic and for the mismanagement of the city to go away. What is your estimate in terms of post-pandemic what San Francisco, the city, the government, and the industry looks like? Well, it's been, to some extent, there's been a trend against the Bay Area and against San Francisco specifically for somewhere between three and five years. out publicly before, when we look at our portfolio, our founders fund of the most important

companies, and I'd measure that by like, you know, our caring value or our dollars invested, more than half of our companies over the last three to five years that are the most important companies in the portfolio are outside San Francisco in the Bay Area. And that's been true. So this is, this lags. This is an indicator that lags. Why do you think that happened? Was it just that San Francisco was filled up? No, I think there's some cultural reasons. I think there's some political reasons. I actually think there's some entitlement reasons, which, you know, certainly has been glossed over a little bit recently. But fundamentally, I think there was reasons that companies outside the Bay Area were thriving before the pandemic. I think it was hard for those.

I think it was harder for people who are sitting here, like myself, with strong networks here, to imagine abandoning the network effect of being here. Although we were making more and more investments outside the Bay Area and watching them succeed, it was still harder. to imagine ourselves, like, removing ourselves from, like, the center of the network. And then obviously, the pandemic caused a mental shift, if nothing else. People laughed voluntarily, sometimes on a temporary basis, but for a substantial about time, three, six, nine plus months, and realize that actually there are better places to raise a family, better places to enjoy living.

And they don't necessarily want to come back. And if a reasonable number of those people don't come back, then the argument for being in the Bay Area, which was always that there's a network effect of talent, basically atrophies or is completely eliminated. And so it did take like a massive tidal wave, you know, a macro shift or, you know, an unexpected black swan to clarify for people like me that were central nodes, you know, in a social graph, you know, of the Bay Area of Silicon Valley, that, you know, maybe things are changing. faster and maybe they can be rebuilt elsewhere.

I don't know if I would have had that epiphany absent this, you know, extraordinary one-time event. But then once you see people leaving and then you study the data of how many people are leaving and how many companies are thriving outside the Bay Area, you start questioning all the assumptions you've had previously. So let's look at a couple examples. What's probably the most interesting company in the last year? Probably Shopify.

certainly. In Canada somewhere. Yeah. Certainly not in the Bay Area, not in California. I mean, but they're not even in Toronto or Vancouver. They're in, I forgot. It's like Ottawa. Yeah.

They have some people in Toronto. But it's not even like the classic Waterloo, you know, engineering culture. The most interesting company I've been involved in the last year, let's say, has been a company called Fair. You know, I made seed investment, been funding them for like three or four years. They're going to be a very successful 10 to 100 billion dollar company. They've never had a single engineer in San Francisco. Headquarters is technically here, but they've never hired a single engineer in San Francisco.

Then I take another company that we invested in a February that we profiled before our LPs this year is in Berlin. It's called Trade Republic. So another one of the most high profile and important companies in our portfolio. Similarly, Founders Fund incubated a company called Anderil. in Southern California very consciously to remove itself from the day area to recruit different types of people, to have a different philosophy, and it's done phenomenally well. So you just start, and then I'm not even naming the companies that are a little bit more obscure, but doing it really well.

Like we have one in Houston called Rigup, New Bank in Brazil. Like all of these companies have been thriving. Palmer Lockhe left, right? He's his company. I don't know where his defense company. He's a co-founder of And so, yeah. I'm trying to get him on the pod, but you've got to talk to him for me. At some point, you know how I say crazy things on the pod?

I said something and I might have derided him slightly, but I'm actually a fan. And I want to talk to him about his new company because I'm a fan of defense tech. Perfect. Well, we can get him or as co-founder, Tray Stevens. He's a partner of ours at Founders Fund. We'll be happy to join you or maybe both of them. Yeah, absolutely. Whatever I said, it was probably 10 years ago.

I don't even remember. This is a story of my life. I say shit that I don't know. I insulted somebody. Guess what? Masterclass is giving Twist listeners the perfect gift for the holidays. You can get an annual membership to Masterclass and give one to someone else for free by going to Masterclass.com slash startups right now. Masterclass.com slash startups right now. Two for one. It is the perfect

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That's masterclass.com slash startups. I think some of this is, you know, just a function of the pandemic allowing you to take a step back and think. Yes, the pause. It's just a pause. It's a reflection. Like you have nothing else you've had more time to reflect because there's not much else to do versus like day-to-day life.

You know, traditionally, even for me, who tries to be somewhat conscious of what I'm doing, the day-to-day life is meeting with founder, go to board meeting, meet with founder, go to board meaning rinse and repeat. And so, you know, the pandemic puts a pause on that and you have more time to just say, like, is this what we should be doing? Is this the best way to do this? Is this really ideal? Et cetera. And so, you know, among a variety of reasons, decided to like escape the Bay Area. And once you start escaping the Bay Area, then you're unlocking like lots of interesting ideas of like, well, where could we go? Where should we go? What's the best place to go? What are the criteria even how should one filter things. And so that was kind of a fun exercise over like two or

three months over the summer is, you know, where does one want to be if one isn't trapped in the Bay Area? And I think a lot of people simultaneously went through the exercise, but what's more interesting in a network effect business is the more people that went through the exercise, the more likely people were to pull the trigger. The more people that pulled the trigger like me, the more other people are likely to pull the trigger. Yes. And I've even discovered there was a - You're inducing people because if they, there's a fear. of irrelevance. Yep.

You leave the Bay Area. You don't have, like, I met Vlad from Robin Hood at Antonio's Nut House. I went to some, my friend Addeo's stupid Founders Institute, and he's like, let's go drink beer with Elon at Antonio's Nut House. And I'm like, why do we have to go to Antonio's Nut House? A place to dive. It's so dirty. You know a place I'm talking about.

Oh, of course. We used to go there at Stanford. Like, when I was young. Can you, can we go to a place that? Yeah. We go, and this kid walks up to me, he's like, oh my God, you're Jason Gallagana. I said, yeah, tell me about your startup. He goes, we're quants.

We're going to create this thing where millennials can trade stocks. I was like, millennials don't want to trade stocks. They're on their parents' Netflix plan. He's like, yeah, that's the opportunity. I was like, what's the business model? He's like, free. I was like, listen, kid, are you be drinking? You want to let people trade stocks for free who have no commitment to anything.

they won't even sign a lease, get married, and you want them to trade stocks. He's like, yes. I'm like, there hasn't been a retail investor since the dot-com boom. He's like, that's the opportunity. I was like,

all right, fuck it, here's some money, go like. Fine, if you're that passionate about it, take my money, but that's the fear,

right? You have that fear, but now you're in Miami, and every board meeting that you and I would get our asses on fucking flights, we fly, listen,

and it would be nice, we fly business class, whatever, get a nice hotel, but literally, But literally every board meeting when we had to fly to them is what, 48 hours of our lives? Yep. Sometimes 72.

It's nice. It's nice to see another city. But it becomes exhausting to do that, what, 20 times a year you were doing it? Well, I mean, I was concentrating, historically, historically concentrated most of the board meetings in the Bay Area to minimize that. I had several board commitments in New York, but they were able to be batched together. And then in February, I added one in Berlin, which was a very substantial commitment because hadn't really ever committed to do. doing something like that before. So you could tell the quality of the company just by the level of commitment,

pretty solid of followers. The, the time and distance to travel to board meetings was an indication of we had found the best founder we'd ever met from Europe and said, like, look, if I have to get on a plane, you know, twice a year. Well, for realistically, four times, we're just going to make this work because it's that important. Yeah, but Berlin's pretty dope.

Berlin's, I've heard it's cool. I've never been. It's kind of cold. My tastes are warm. That's Miami. Now, it's going to be a lot easier to visit Berlin from Miami. So I'm kind of excited about that. And maybe that means we'll do more investing in France or Germany or, you know, somewhere. Or even South America. Yeah, South America definitely. New York is certainly easier, especially in a high response to be fast responsive, you know, like it's much easier just being in the same time zone.

And so I think there's opportunities that transcend just Miami QuaMaii, Although if you look, even recently, just this week, we announced a pretty material round where we led a major investment of $31 million into a company called Stored in Atlanta, founded by Teal Fellows. So the quintessential type of people that would move to Silicon Valley, 23-year-old Teal Fellows, founding a company that's growing in high velocity, five, ten years ago, they would either be told they had to start the company here or they must move it here. Yeah.

And they got to live with it. in like, I don't know, how close to the Presidio Founders Fund office can you be, right? That was the canonical advice from all top tier investors. And when we met the company, it was actually a feature, not a bug, that they were in Atlanta. And so, you know, Miami also makes finding investments in Atlanta. At Open Door, we basically built out our engineering team in Atlanta and had a great success. At Square, we had a component of our engineering team in Atlanta that worked on some of the more complex problems in engineering, technically deep infrastructure problems.

So I think there's opportunities to find new investments way outside the Bay Area and maybe being located in a different time zone with closer proximity will allow us to be more successful, more competitive. Also, if you think about it, you have so many companies who they want to come to the Bay Area because they want to be near the locus of power and the network effect, but the cost is so overbearing for founders. You know, like for you and I as investors, like, it's annoying how expensive the Bay Area is. It's a nuisance, but we get through it. But for a founder who's paying themselves a 5K a month draw and they've got 400K and angel funds, like they're going to just

burn through it in three months. They go to Miami. I was, we have maybe five or six investments in Florida, and they can hire people for 40 or 50 grand a year to do operations. You can't hire somebody in the Bay Area for less than 60 or 70. No, and even if you could, you wouldn't want to because they would be so stressed out about meeting their bills and budgets, and that's not very productive for them to be focused on work. So I think you want to pay people a salary where they can actually focus. And if you're trying to be too cheap for any environment, it's really counterproductive.

So I think that's true in the Bay Area. I also think there's other reasons like you find a greater work ethic often outside the Bay Area. There are exceptions. There clearly are high tempo, high alacrity, strong commitment to work, Bay Area companies. But you find on average maybe a better caliber of work ethic outside the Bay Area these days. And that is flipped because when it was the 90s or the 2000s here in the Bay Area, there were VCs who there's some famous VCs said, I can't remember,

but it was like before our generation, they said they could tell if the company, maybe it was John Doer or someone like that, they said they could tell if the company was going to succeed when they drove past the office on a Saturday or Sunday, and they look at how many cars are in the lot. Yep. Well, you may have seen,

Mike Moritz has published a few years ago, a couple essays in the Financial Times. Yeah, really good. Comparing Silicon Valley to China in the work, and particularly highlighting some of the work ethic degradation, And I think he made some of those points, and they're pretty stark. So I'm excited to find people that might be more tenacious with more grit, with a more consistent work ethic than on average. Less entitlement.

Yes, definitely less entitlement. Now, there's one perverse argument that actually a very smart founder was texting me yesterday that's pretty positive about the Bay Area. And he basically said, like, look, the people leaving the Bay Area are all the people you want to leave the Bay Area. Because the quality of life in the Bay Area is actually very mediocre. And so they're leaving to Denver or wherever and or Austin or wherever. And the people that are going to suffer through the quality of life degradation here are the people that actually really are ambitious and see why you may wind up with a positive skew. That's actually the best, most intellectually honest argument of heard for being sort of

positive about the future of San Francisco. So basically, if you're a masochist and you're willing to deal with the pain and suffering of a $3,000 apartment that gets broken into and your car windows get broken and you have to step over people who've overdosed and who are being given a, you know, being put in an ambulance because they're overdosing.

Yeah, you're probably sufficiently crazy to start a company. So that was his argument. And I was like, actually, you know, there's some internal logic there. It's actually not at all wrong. It's intellectually, it's the best argument in three months I've had with anybody

about like the potential of the Bay Area. I was like, oh, that makes actually some sense. But I'm having the same exact experience you had, which is, I hate it in person. I like meeting people. You're social. I follow you on your Insta. I see what's going on. You like to go out.

Sometimes you hit the club a little bit. You like a little dance music maybe once in a while. You got to have dinners. You're way overrating my social life. All I know is that once you come up on my Instagram once every six months and you're out of club. That's about right. I actually go out about once every six months.

months. So the other time is two times a day going to Barry's boot camp. That's true. The Berries is definitely something I do. Wait, is there Barry's in Florida? Oh, yes. There's three locations in Miami, two very conveniently located. And even better, they don't have London breed in Miami, so they're actually open.

They're OBS London. I mean, talk about insanity, but I had the same experience you had, which is, okay, now I'm stuck in my house. It's great that I get to spend time with my family. But I don't need any alone time. I'm not who I am. And I am so much more productive right now because I am popping off a board meeting with a New York company, with a Miami company, with an Austin company in the same day. And when you're on Zoom, people just get to the fucking point, I find.

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You might as well go do that right now, our crowd.com slash twist while you're listening to the show. I think that's true, although there is one big downside. And so I think for information sharing, a Zoom board meeting is incredibly effective. and efficient, like for all the reasons you just identified. I think, though, for a complex debate about a controversial topic, a Zoom call, whether it's an executive team Zoom call or a board meeting call, just does not work. Because there's just enough lag. Like, when you're having a vigorous debate with someone, it's the handoff in the comments

from a variety of people that gets stitched together into an interesting dialogue. And that's extraordinarily difficult to do on Zoom. So I actually find myself as a fair... You got an example of one that you can like sort of anonymize a bit of like in a conversation that didn't go well over Zoom? Yeah. Actually, what I actually wind up doing truthfully in Zoom-based board meetings is I'm actually quite passive vis-a-vis the level of participation I probably have in a real world board meeting

because I actually take like sort of stock before I make a comment of, is this point sufficiently succinct enough that if I make the point, point, people will understand it without having to go through several iterations and distracting 15 people. Whereas in person, you can kind of look at people's eyes. You can time the comment correctly and get in and out of a conversation pretty artfully. And so I've just found that I learn a lot through board meetings sometimes on Zoom. But in terms of driving a conversation, debating something with the team, really highlighting something a little less intuitive. I'll do it maybe at 30%, 33% frequency that I would have in a traditional board meeting.

So what I'll do instead, fortunately, is I typically spend time one-on-one with the CEO anywhere. And insofar as I have like feedback that's a little bit more complicated, I'll actually just provide the feedback either before or after the board meeting directly. And there's some virtue to that anyway, but there's some disqualification. but there's some disadvantages, which is the other board members don't hear it. And the CEO doesn't hear like a stereo surround debate nearly as frequently as they might be accustomed to or what might be ideal. So that's a disadvantage.

So when we do return safely to real world board meetings, I do intend to whether it's getting on a plane or whatever it takes, to attend board meetings in person, not by Zoom, as soon as other board members are also there. Yeah. It's really hard to have that like, you can't have that quick side comment or just like, you know, just as an aside bank, it's really difficult. It distracts people,

becomes a major candidate. I actually find the same thing's true of investing. So obviously I prefer to invest as early as possible in seed rounds, you know, before there's even a product, certainly before there's metrics. And it's still easy to do on Zoom for people I already know, which fortunately there's a reasonable number of people like that are in,

you know, some concentric circle of activities and investments I've already made. However, meeting someone from scratch and trying to assess them. No body language. extremely difficult on Zoom because you can't have this dialogue, the really fast interactive dialogue, which is allowing to see sort of like the person's processing speed, what do they focus on, what do they get, what do they rock, what do they not get, what questions do they ask,

extremely difficult to have that fast-paced conversation on a Zoom call. And so I'd like to get back to real world first meetings with founders of seed companies, but it's going to be difficult in the Bay Area because it's going to be politically unacceptable for at least three, four months. Yeah, you can't have meetings. You can do a walk and talk, but yeah, you lose that ability to sort of, I call it like, you know, like in tennis when you're volleying, you know, or gung pong, you're vowing back and forth and you kind of get a vibe for the person.

I can't get it on, on Zoom, but I can get on Zoom is if they've got really good metrics, they got their cohort data, you know, we can drill in, we can share a screen. My little secret that's been working well, because I do like to talk and have, vibrant debates and conversations and board meetings or everything, is I'll just slide into the chat section of Zoom, of Zoom, which I know is ephemeral and goes away. And I'm just like, you know, QQ, QQ, quick question. And I just put it there. Or just QC, quick comment. And I just put in a little quick comment. This sounds great. Or you might want to consider looking into this or here's a book I read about this. And I just leave it there for the founder. And then the founder was leading it will say,

oh, Jason, you commented on that book. Yeah, I actually did read that. But it doesn't break their rhythm. No, that's a smart idea. I actually think that's a really good sort of pseudo best practice for like Zoom-based word meetings with multiple people. I think the balling metaphor I really agree with. I think that's the best metaphor I've described of how typically I would like to have

conversations with CEOs, potential founders. And I found it, you know, incredibly difficult on a Zoom call. It's unfortunate. Even a walk to, for me, is not the best because I like to take notes. and it's really difficult on a walk. Also, you know, like to watch people's like expressions and eyes. Yeah. And really can't do that while you're walking.

So it walks for me are very effective for people I know well. Yeah. Because I can tell like the things I can hear, you know, in their voice and I kind of expect certain things and kind of read between the lines. Same thing for boards. Where there's a board meeting where there's a preexisting relationship among all the board members, it's not quite as bad on Zoom versus like you're working with a new executive, a new VC, somebody who doesn't have like these deep social ties.

So there's some board members who, you know, I've worked with for over a decade. And I think we can have a dialogue with the CEO on a board on a Zoom call relatively successfully because we can kind of read each other pretty well. And we may also use the chat function. Sometimes you screw it up and send it to everybody. Be careful. Yeah. I haven't really done it badly yet, but I'm definitely in board meetings.

I think like the Jeffrey Toobin, like nightmare scenario is like one nightmare scenario at Zoom that is just insane. But there is a more practical one. Yeah, the more practical one is like, oh, this board deck's awful. And they just send it to everybody. Oh my God. Why are growth this flat? Didn't he?

What are they doing here? How come they can't get this craft to go out? I've definitely watched a few of those. It's like, oh, we're going through our fifth sales leader in seven years. Wow. When does this tell us about the CEO? Yeah, I made a comment. I made a comment yesterday or two days last week that went to everybody.

But fortunately, it was the most innocuous thing ever. Thank God. You're like, have you seen Queens Gambit? A little bit like that, yeah. Yeah, that's, I mean, that's the other problem I'm getting the sense of is like, are people actually, what actually are people doing? when people are talking on Zoom and the other windows on their screens.

That's part of the problem too is just because of that, you know, distraction. Like when I go to a normal board meeting, I just put my phone upside down on the table and don't pick it up. And sometimes don't pick up for three or four hours

depending upon the pace or whatever. I put it on airplane mode. That's my little. That's even better. That's even better. And, you know, in Zoom,

nobody does that. So I think the concentration level also decay is to some extent. Yeah, but then you had the multitasking level. So when somebody's like, hey, you know, blah, blah, somebody else was like looking at the company page. And like literally I was on a board call and they had fired somebody and they had taken documents with them or some bullshit like that.

And then I was like, you know, I just Googled him and he's updated his LinkedIn and he's working at a competitor. And they were like, it was almost like real work, detective work while we're on the call. Like, holy shit, this guy stole stuff. And he's working for a competitor. time to drop like a legal letter. There definitely are some activities that you can do. Like, for example, I think sharing a screen on a Zoom call, a board member with a board

member or executive team can actually be fairly effective because unlike when you're presenting and you kind of have a base, you know, presentation, if you want to change and show someone some actual data, it's much more artful and less distracting when you're sharing a screen to just pivot to a different page and then have everybody see exactly like what cohort data you're looking at. So I found that to be pretty effective. effective, but there are a lot of downsides. It's nice because you're six inches away from or 12 inches away from like the deck,

as opposed to it's being projected on the wall. You know, so you kind of get this more intimacy on the numbers. Let's talk about the IPOs that are going on. It's been pretty amazing to see the world we grew up in over the last decade where nobody would go public. Airbnb and Uber taking their time, taking their time. Yuri Milner and everybody else throwing late stage money, don't go public. And then lo and behold, my bestie Chimoth and now Reed Hoffman and Mark Pinkus and

everybody else is doing SPACs. And now there is a way to get public quicker. You did Open Door, right? And was that with Chimath? Yeah, so Chimath and out of Bain really worked on bringing open door. into their SPAC, which is a transaction that hasn't technically closed, but you can sort of see the market cap, you know, because you can buy share. IPOB.

Yeah, IPOB. It should close hopefully next week. And it's been a very successful experience, both working with Chmoth and Adam and then be just the public market reaction. I think as of today, we're probably valued at like 13, 14 billion. So Chmoth got a great deal at five. Yeah. And when you go through this process, I don't want to talk specifically about anything that we get you in trouble, but just talking about the SPAC process, putting aside open doors process, just SPACs in general, keep you out of trouble. Make sure don't disclose any you're not supposed to. But tell us about the process and the window of companies that it's best suited for rather than a direct listing, like say, Spotify did or waiting like Uber and Airbnb did like waiting 11 years.

So let me start with first principle. First principle is I think waiting was always terrible advice. It's one of the worst pieces of advice that anybody in Silicon Valley has given for the last 15 years. And fortunately, some of the companies all been involved in didn't listen to that advice. I think realistically, only Bill Gurley and me were like sitting publicly critiquing the people dispensing this advice. I believe strongly that company should go public as almost as fast as possible. I wrote a whole chapter in a book that I highly recommended founders called High Growth Handbook, published by Eli Gill. The whole entire chapter is why to go public, why to go public as fast as possible,

and why everybody doesn't do that is like really sacrificing their company's potential. But that was a controversial view. Fortunately, in the last six months, it's become a very conventional view. Spax are a process really for a conference. companies that suddenly realized that Keith and Bill Gurley were right and hadn't really prepared for a traditional IPO, whether an IPO or direct listing. And they wanted to accelerate the process and find a way to do that. A SPAC can be a good vehicle to accelerate the process where the management team hadn't

really prepared properly. That isn't the really best feature of a SPAC, truthfully. The best feature of a SPAC at the end of the day is that legally, or a hardcore technology company that's really innovating on a deeply technical solution, they can guide years into the future about the revenue potential of the business. Whereas through an S-1 process or a traditional IPO process, it's extremely legally precarious slash virtually impossible to guide future years revenue. And so as a result of that, if you have a breakthrough technology that will have a market,

it's much better in many ways to be able to convince and articulate the market size to potential investors through a SPAC process than you would be able to do in a traditional IPO. Now, that said, it's not that different than a private fundraising. People have always done this in private fundraisings. So when people pitch us at Founders Fund, even when they're reinventing a rocket or reinventing manufacturing space, reinventing genetic sequencing, they're talking about the revenue potential in the slides in the presentation. So this is very similar to what you'd see in a private fundraising process.

It's just now possible to do it publicly. Right. And these are going to be earlier companies. We think your 5, six, seven is the window for these, which is what it used to be, right? I mean, before our time, but isn't that what happened in the 90s? Well, the 90s is actually the last. It reduced to like three, four, five, which may be a little fast. Yeah, it's $5 million, $10 million in revenue sounds a little too young.

That might be a little bit at the low end. But somewhere between four and seven feels pretty good for a high growth company that has predictability and it has medium scale. To me, medium scale is like somewhere between 35, 40, 50 million of revenue with predictability where you can talk in an educated and accurate way about the likely revenues, one, two, three, four quarters out. Then you should be a public company for the most part. But they don't have to be, correct me, if I'm wrong here, absolutely. certain and robust with 10 billion in revenue like an Airbnb or an Uber or, you know, something where, you know, you've got this massive footprint so that people can have an opportunity to have their public shares accelerate. When people bought Uber or when they buy

Airbnb, some of these companies are very fully richly valued. And there's not as much growth available to those retail investors. Well, to say, I mean, that's both true and false. I mean, Like, for example, if you had bought Shopify in the public market, you'd be very happy with your returns. If you bought, if you'd bought Tesla in the public markets, basically anywhere along the way, you'd be phenomenally satisfied with your returns. If you'd bought my old company PayPal in the public markets, as someone pointed out, like, well, even, even like recently, like, to show you how much I haven't touched my LinkedIn profile, on my LinkedIn profile, it cites like PayPal being worth 40 billion. It's only worth like six-x that. It's the last time I edited my LinkedIn profile. So,

you know, so like there's lots of opportunities for growth potential in the public markets. So I don't know if that's a real reason to prefer a SPAC. I think some of the other reasons are much more structural and fundamental, especially from a founder's perspective. When you have, when you lower the bar of entry, you make it more fluid to go public,

you also get, let's face it, some people maybe who shouldn't be running companies are going public. public putting products out there. We saw Nikola, Fisker, basically anybody who does anything that's in any way tangential to what Elon has done is able to ride his coattails and say, we're going to be the next Tesla. And you might have some product being put out there that, let's face it, these are not great companies or they're massively speculative. How does the, are you concerned the SPAC space, you know, for every Chimoth run or Reid Hoffman and Mark Pinkis,

on and people who are super qualified, you might have this like kind of, I don't know, low quality inventory maybe is a generous way to say it? Yeah, sure. But there's been low quality inventory available in public market for a long time, whether they're a large market cap, mid-lar market cap or small market cap companies. I don't know if that's new. And I think there'll be a flight to quality. I think there'll also be a way of gauging their reputation.

I mean, one of the things you can do with the SPAC is the SPAC sponsors are sort of endorsing a specific valuation, whereas the old school investment bankers are really not doing anything, truthfully. And so it's not like if you take your company public through Goldman Sachs and I'm not picking on Goldman Sachs, particularly just the quintessential investment bank. They are not like really doing anything. They're not taking real risk. They're not putting their brand behind your valuation.

Whereas a SPAC sponsor is explicitly saying in a memo form, we believe Open Door is worth X here's why, here's our logic, here's our investment logic. So I think there'll be sort of a sorting, a reputation sorting and ranking and ranking of SPAC sponsors based upon both their historical performance of other things they've sponsored in the public domain and then be the quality of their work because their work is going to be public. Their intellectual work is going to be public for everybody to consume and debate and cheat. Yeah, that makes total sense.

And then going back to the movement of capital and the movement of folks. folks, it's been amazing to watch Florida specifically. The mayor is engaging on Twitter as people are asking questions about, you know, which city they want to move in. And the mayor of Miami is literally responding to investors in venture capitalists at the same time that California folks are telling, you know, Elon Musk to fuck off. You have the mayor of Miami doing that. And then I just started to alert come up in my feed that Goldman is planning on moving asset management from New York City to Florida. When we look at the taxation in the United States and talent moving, what are your thoughts on what happens to the New York cities and the

Californians? Well, I think this is a very healthy thing. I think competition for government policy and quality governance is a very good thing. It's called voting with your feet. This is an old concept that Alexander Tocqueville wrote about, the founders in the federalist papers wrote about. So this is like centuries old as a concept. It's just actually much more feasible right now. It's also happened typically in Europe. Europe's always, because of the proximity and the cultural similarities of some countries, had a bit of this sort of amenability to competition by citizens voting and immigrating.

Whereas in the United States, at least by industries, it's sometimes been more painful and challenging. But with New World Order and a Transpans for Society, driven by the Internet, I think it's a lot easier. And you're going to see states and cities are going to have to compete for the best people, for the most talent. So it's very exciting that the politicians, whether the mayor or the governor, the Secretary of Commerce in Florida, they want high paying jobs. Like most people actually really want technology. Like technology is extremely popular or outside certain pockets of California. They want the jobs. They want the growth.

They want the high paying wages. that technology companies can afford. And they want the innovation because innovation benefits the citizens around them. And so it's refreshing to see this. This is true in Texas, too, maybe not quite as publicly, but privately. The governor of Texas is quite supportive of entrepreneurs, VCs moving there. I'm sure that, you know, the culture there and the environment politically is much better than in California and San Francisco specifically.

But in the modern world order, you see like, the social media presence of politicians is an important way that they compete for votes, attention and money. So like you see on the Democrat and liberal side, you know, someone like AOC, who in many ways is an obscure, you know, 28 going on 30-year-old who has like crazy views on most things, is pretty influential in the Democratic Party because of her ability to proselytize, really, frame things through social media. And so you're going to see other politicians competing on that basis as well.

I think this is, you know, the future. So, and I think you'll see it internationally across borders, but this is a very healthy, positive thing. I think it is going to be difficult for very high-tech jurisdictions to contain their talent. I mean, basically, this has happened with athletes. I know you're a big basketball fan, but for a very long period of time, athletes, when they choose, when they become free agents and decide, you know, which teams do you go to are very consciously aware of the various tax rates and, you know, Canada, or United States. of this state versus that state.

Some states have tried to, you know, tax visiting athletes to try to avoid, you know, avoid some of that sort of advantage. That's hilarious. So an NBA player who's situated in, you know, for the San Antonio Suarez Houston Rockets or Dallas Mavericks is paying 13% less tax or whatever it is, more probably 15%. Well, if you talk to any other agents, this is a very important consideration of both where they prefer to go to and how they negotiate their contracts. So for people who've had mobility and are, you know, clearly recognizable talent where there's options, they've always competed on this basis.

And you'll continue to see that. You know, so I think many people are doing the LeBron James thing of taking their talents to South Beach. Yeah. Seth Curry would be making like five or ten million more a year if he was in, if he was in Miami. And then just amazing to see there was Mayor Francis from Suarez from Miami, from Miami. was getting it into it with, is it Delian, the guy over it? Delian is a principal of ours at Founders Fund. Yeah, and he loves to mix it up on the Twitter.

You guys have a real mix-it-up culture, I guess. I think you get in trouble for that at another firm. But he was basically saying how, you know, they don't have, there's an issue with non-competes, I guess, in Florida. I didn't realize they were enforceable in Florida. And he's like, yeah, they should make those non-enforceable. And then I was like, yeah, that's a state law. Let's discuss it next week.

It's like, oh, okay. And then you have in- Yeah, the history of Silicon Valley was clearly affected by California's historical legacy of non-encompassing non-competes. If you read any of the histories of Silicon Valley versus Massachusetts and Boston, which had really dominated a technical innovation in the 1950s and 60s. So I think this is a legal regime that could be changed, should be changed. I do have some questions on whether it's still true.

is still as important. So, as I mentioned, one of our best companies is in Germany. They have a lot of non-competes. I don't know how it works in Australia or where there's been a lot of successful companies, Atlassian, afterpay, etc. I don't know, you know, in most of these European countries, I think, are actually pretty stringent. So there has been a lot of success, I think, Audian or Spotify, in markets where

there are non-competes enforced. So I totally buy the historical argument. I've read books that are, you know, basically almost exclusively dedicated to the history of Silicon Valley. And, you know, non-competes are clearly influential in that history. But I think it's obviously a good thing to change the law in Florida and other places that currently, obviously, in theory, could enforce a non-compete. But I'm not sure it's like indispensable as, or as indispensable was in, let's say, the 1970s. Yeah, it would be really interesting to see if a company,

even asked, because, you know, employees are getting more sophisticated now. They know what they're signing on the high-end employees. So sure. Executives are definitely familiar. Or another way to critique this view is Washington State actually does enforce non-competes. And last time I looked, two of the four most influential tech companies in the planet are in Washington. Yeah. I mean, and I think Microsoft and Amazon have some basic rules of the road around this. Like they probably limit your non-compete to a specific period of time, to a specific vertical, and if you are going to enforce it, you have to get paid, I think, is kind of the best practice. They actually have sued people, trying to sue people. So, you know, with that example of Washington,

you know, being a great tech corridor, really, I mean, Zillow is based there, travel companies like Expedia, they've clearly had a lot of success to technology in Washington. So I'm not so sure that it has to be reformed, but it certainly would be a good thing for my perspective, but I'm less convinced that it's indispensable. Yeah, I remember the last time I remember even reading about, I was, I was so fascinated by this in my early career when I was a journalist. I kind of researched it and tried to find examples. And the example I found, like the most prominent example that went to bat was a hairdresser

who had signed a non-compete. You couldn't work within 50 miles of the current hairdresser. and so she literally had to when she left the job, get a job over 50 miles away, and it was actually enforceable. I was like, yeah, that's crazy.

That's crazy. For a hairdresser, like how vindictive and stupid are you? So when you, on a go forward basis, how do you think you'll be able to meet founders? And do you think it's still going to be the Zoom culture for the early call and then the relationship building on the other end. Have you,

have you started to think about that? Because I certainly am thinking about. Yeah, I don't know. I mean, I prefer to do more real world meetings for the reasons we discussed, but I actually think founders are starting to enjoy the Zoom call because they can create efficiency in their process, which yields a competitive dynamic. So typically, you know, the proverbial trip to San Hill Road was very difficult to schedule. and align various firms and partners so that you could meet them all at the same time and all that it just never really happened. Maybe you could get half your preferred VC pitches

on the same schedule, but the other half just like logistical constraints. So in the Zoom financing post-march, everybody raises money in like the same week. And it creates a very positive feedback loop for the entrepreneur where they get more term sheets, higher valuations, faster, faster process. And so I'm not sure the founders are going to let us go back to real world meetings

as a default. But I strongly wish, you know, I hope and hope that we can. For later, for later stage money at companies, I don't think it'll matter as much. I think at that point, you are looking at like more like metrics, financials, spreadsheets, and that can be done, you know, remotely. What about LP meetings? You know, when, and I don't know if you were involved in founders funds, fundraising process. And I know, know that they have, I think you guys just kind of say, we're doing a new fund and it comes in. I don't even know if Ryan Sangerman's got to go on a road show anymore, right? But what are LP meetings going to be like?

Because I've talked to people who closed funds during this and they said it was amazing because, I mean, when you go ask an endowment or somebody to give you 10 or 50 or $100 million for your fund, you know, it takes a visit with a team and you meet with their team. And now that's occurring over Zoom too. Yeah, I mean, so we raised our last, uh, sort of series of funds prior to the pandemic. We did do our first annual LP meeting that occurred, you know, post-COVID in October. And we did like a high production, pretty thoughtful approach to it.

I think people were very satisfied. I think our LPs were actually delighted with both the content, the quality, the content, the quality of the production. And they did find it very efficient because they typically top to travel. And so I think all around it went very well. I don't know if we really want to do that every year. it might be good to have a mix of, you know, sort of a remote LP meeting and an in-person one where you can have a cocktail party chatter, you know, like the kind of soft gossip stuff.

Like, like, so there's things, there's benefits that we didn't really have. This is a very formal, very efficient process. It got people very educated about our portfolio, about our investment strategy, about what was working and what we thought about the future. But I'm not sure that it's a complete substitute and that we'll, stick with it permanently. Maybe we'll mix it up a little bit. One year, a little bit more remote, one year, maybe a little bit more in person. I don't really know. Prop 22 got voted down. And Newsom is on the brink of being recalled based on the number of signatures. I'm not sure

where the number is at today, but they were at 800,000 or something and they needed a million and change to actually recall him. Does it look like the hysterical, insane socialism in California, uh, anti-business, uh, is getting maybe some pushback? Well,

the prop 22 one, I think is a function of pushback. I think had that gone the other direction and Uber, Lyft, Dordash, Instacart either suspended or significantly curtailed operations here, I think normal American citizens of California would have been furious and they would have

taken out that wrath on politicians. But because the court stayed the impact until there could be this referendum and because actually these companies decisively win the referendum, I think that has alleviated a lot of pressure from normal people not being deprived of services that they depend upon and actually love and or depend upon. On the recall, that's going to be interesting. I think it will take an earthquake like some catastrophe or some unexpected incumbent being voted out of office before there's a significant change in the political culture

in California. So if Gavin were to get recalled and to lose, that would be a dramatic earthquake. If he runs for re-election in 2022 and loses, that'd be a dramatic earthquake. You know, things of that sort. Then everybody says, holy cow, you know, the sky's falling. We need to change our behavior. but absent like a macro crisis like that. So in New York City where you grew up, you know, we had this macro crisis around crime in the 1970s, 80s, New York was completely unsafe.

Like my parents wouldn't allow me to take the subway past 5 p.m. when I was growing up. Oh, my God. It was seriously dangerous. It was absolutely, like, the wrong stop. You die. No, it's absolutely, like, ridiculously dangerous.

And the city was in decay. We did have like blackouts and like ridiculous things that only third world country. Garbage strike. Yeah, only third world countries in California have. And, you know, It took that level of crisis, though, before people were willing to vote for a Republican for mayor. And, you know, as soon as they did, though, everything got better very fast. Like crime, prosperity, you know, everything changed.

And so I think California is going to have to go through unfortunately more of a crisis before there's an epiphany. And that may lead to a better, you know, better future. Yeah, it does seem like having all of one party running the show leads to a certain direction. And it's really amazing how out of sync the people in office are with the actual desires of the citizenry. I mean, people in San Francisco would like it to be a law and order city. And you have this person Chesa Boudin who just does not want to arrest the fentanyl dealers. And you could be completely compassionate about, you know, drug-related crimes and still have the common sense to realize fentanyl is a entirely different level.

of death than smoking cannabis or taking mushrooms or whatever's legal in Oakland. Like they won't even arrest basic fentanyl dealers. I mean, that's what I mean. I think you need a macro crisis before there's a transformation. And that's unfortunate because it's a very crisis by definition is very painful for everybody involved. But I think that's when things will start getting better is when there's a revolt. The revolt is generally caused by things being like just completely intolerable.

Do you think that people leave? leaving and losing the tax base has got a chance of being that because I'm seeing a lot of people I know who pay a lot in taxes leaving. And then I see the cost and the budget keeps going up. So my basic knowledge of a P&L is like if you don't have the profits from the taxes and your costs are going up, the burn rate could get significant. Is that going to happen, you think? Yeah. I think because of COVID, some of this is mass. and the state's going to have a hard time predicting it correctly. A lot of these people are leaving but aren't coming back.

And then hence, the tax revenues are going to be very different. And California, because it has such a high tax rate, a lot of levied against wealthy people, has a disproportionate share of their state budget that's predicated on very wealthy people paying these ridiculous rates. And so when those people vote with their feet and no longer here, it's going to have a tremendous effect. And typically what happens in Europe is the government has to go to an austerity program

because the state isn't allowed to run a deficit and some European nations aren't, especially as a function of the EU. And because of that, you know, basically have to cut services. That's what austerity basically is. But in a progressive political regime, you can't cut services because there's all your constituents, all they want is more services. And so this is why I think California is headed for crisis. The only question is really to pay some of it.

that. You've had like six or seven companies, either IPO or go IPO at this point. And then we just saw something incredible happen in SaaS. Slack get bought by Salesforce. Slack getting bought by Salesforce, is that a win? Because it was at $27 billion, it was an $800 million company, or is it a missed opportunity because they weren't able to grow and be independent and build the $250 billion company when you, and I don't know if you were an investor in or had Any exposure to it? Yeah, I'm not really an expert in, you know, like enterprise software tools and all the competitive dynamics there.

I think it's typically unfortunate, you know, when a company isn't independent, I think most companies sell out of fear. You know, it depends on what the fear is, but it could be fear of lack of growth, fear of competition, fear of internal morale, but fear like generally drives sales. So I don't think that's a good thing. That said, obviously they're acquired a significant premium. So it's hard to tell. what was driving that.

That's really not an area I pay all that much attention to. I'm not an investor in Slack. I did invest in Yammer back in the day. Unfortunately, David Sachs sold that one, you know, a little early. That could have been, you know, much bigger, obviously. But it was also significantly earlier in terms of time. And, you know, some of this may have taken more time to bake culturally when a tool like this was more popular.

But in any event, I think the IPOs, you know, are more interesting. milestones. I think typically once a company has an IPO, it stays independent for very persistent, a very long period of time. I haven't done the math recently, but it's probably something like 10 to 30 years, you know, in that zone of like, once you're a public, how long do you last? And so I think it's a very big milestone. It's not just a fundraising milestone. It says something about the permanence and durability of a company. So, yeah, I've been fortunate that in the last quarter have like six or seven companies. Palantir was a big one, yeah? Balleteers, you know, that was a very long time.

That was one of the companies that subscribed to the advice of don't go public forever. You know, fortunately, and you can look at the evidence right now. I mean, the public markets absolutely appreciate Palatier. They've been trading phenomenally well. Whatever fears they had, clearly, you know, were fiction. So, but in any of that. Airbnb is the same thing. You have exposure to that.

And that's going. When is that going out? That's soon, yeah. It's this week. Airbnb Beach. Oh, it is. This week. Yeah, yeah.

Jordan House prices today will trade. I think tomorrow even. I can't wait for DoorDash as an Uber as an Uber investor. Having DoorDash public now creates this two horse race. It's going to be great for both companies. Yeah. Well, I mean, I think DoorDash, you know, DoorDash is pricing, you know, at a very high price, meaning very popular, like investors really want DoorDash.

And it's because they've been dominating. They have been generating market share, contribution margin, retention metrics are phenomenal. So it's a really good, it's an extremely well-run company. People appreciate that. I think they announced the pricing today. So it'll- What is it going to be like a $15 billion company when it goes out? No, it's going to go out of 37, I believe.

What? Yep, I think it's price. The last private was like 15 or something? Yeah, it's a good deal for those people. Like, it was very obvious that this company was phenomenal. But a lot of people didn't appreciate it. But I'm pretty sure I read, at least read press reports about the pricing. And I think it trades tomorrow.

So it's going to be early this week. then I believe 24 hours later, Airbnb will price and trade. You know, at this point, barring a nuclear war, these companies, you know, are going to be public companies this week. And then, you know, a firm and open door are falling behind, you know, falling about a week behind on that kind of pacing. So I'm hoping to have those, you know, out trading plus or minus a week from, you know, tomorrow or so. Wow, I just added to, like you can actually add Airbnb to your watch list. Oh, cool. I didn't know you could do stocks that were not yet public,

but I guess the NASDAQ put ABNB, and they also put DoorDash up on. So you could actually put them on your ticker without them being trading yet. DoorDash is just dash, I guess. Yeah, I love that. Yeah, it's pretty cool. Well, IPOB is up 18% today, so, you know.

Incredible. Well done on that one. I remember when you first told me the idea. I was like, wow. People, what was that, like 2005? Something, yeah. Yeah, but yeah, the market's definitely appreciating some of these companies, which is really nice and refreshing to see, just looking at the stock ticker now, see if I can add them. But yeah, so it's very exciting for these companies, for the founders, for the teams.

Obviously, the investors are thrilled too. You know, that's part of the job of being an investor is to give people money, you know, generate returns over that, you know, 10 years later. I mean, that's the funny thing about venture is even though this quarter's been, you know, in some of the money, you know, it's a lot of money. some ways amazing. All these are decisions I made, you know, seven to ten years ago. It is so weird, isn't it? Like, it's surreal to like, I had Uber, desktop metal, Robin Hood, wealth front, data stacks, you know, and you have all these other ones.

We made these decisions in 2008, 9, 10, 11. Yep. Even the BC ones, like a firm, Open Door, Door, Dors, are all things I'm. in 2013. So it's like seven plus, you know, solid seven years later. So, you know, it is an interesting job and professional role in life when, you know, your true gratification in some ways comes seven years later.

And then, you know, you wonder about all this stuff in the middle. Like, it's kind of a very unusual human sort of process. It's like playing a hand to poker or playing like a chess game. You get like halfway through it. And they're like, yep, come back. seven years. Like, if you go to the movies, you watch half of the godfather. They're like, yeah, you'll see the end in eight years.

Come back and you'll figure out the list. Yeah, read a book, put it down, you know, halfway through. And then pick it up off the shelf seven years later with the two chapters. Yeah, I try to remember everything. Or start writing a book, maybe in a different way. It's like writing a book, initially halfway, put it away. It's like forget it on it for like seven years in some ways. I mean, but anyway, it's just a very long.

process. And it reminds you of how long the feedback loop really is to build an iconic company. And then you also do have to find ways to challenge yourself in the middle. To know, like, I went on a walk on Saturday with one of the CEOs of one of these four companies. And we're kind of reminiscing, but also talking about the future. And, you know, the thing I was debating in my own mind is how do I challenge myself to make sure I'm still finding the same caliber of founders. Yes.

Same caliber of companies in 2020, 2021, 2022 versus the compounding effect of running a company. I was kind of jealous of his job as CEO actually gets easier because the company develops momentum. It develops competitive advantages. So actually, in many ways, there are challenges to do. job absolutely, but it actually does get incrementally easier. Whereas, like, I'm sort of only as good as my last investment or last year's investment. Exactly. I got to find a way to stay sharp and compete and even measure just am I making good or dumb

decisions. Obviously, the decisions we made seven years ago were pretty good, but who knows what, does that mean that the decisions in 2020 or 2019 even or 2018 were good? Well, and then you think about, like, the open-mindedness and the optimism and the raw just boldness of believing in people, and then you have wins. And the wins become so big. I think one of the challenges is sometimes you look at a company

if you've had such a colossal win, whether it's Palanty or Airbnb or Uber or whatever it happens to be, then you have to go look at a new two or three person company and it's a mess and they don't even have their incorporation documents done. They didn't sign their IP assignments. A fucking thing is a disaster. Your diligence would be like vomit producing if a lawyer looked at it and you're like, how do I get up for this entire restart?

And, you know, that is the challenge you have as an early stage investor is you have to find meaning and joy. This is what I've come to in this great pause, Keith, because you and our friends, like we have this like therapy session. We do every three, four, five months about our jobs. I've realized it's the joy of meeting a founder and placing a bet before anybody else. and then watching and just being supportive and that, man, when it hits,

it is so wonderful to be the person who believed in calm, which 40 people said no to. Or when we did Uber, out of 21 investors, Misa Ayan and Saka, Saka met them on their own. Me Sion and first round did that $5 million round. It's just like, it's so out of 21 people who are at the Open Angel forum. How do you find meaning in all?

Like when you've obviously become post economically, you know, dependent on this? How do you find meaning in it? I think there's a couple of things that are really important. One is you remember the companies that nobody else liked and that your decision to fund made a meaningful difference in their potential, you know, of fulfilling their dreams. There are some companies when you invest and truthfully, there's a lot of other people that would have, should have, could have invested. and it's not as if necessarily your money made a material difference.

There's some companies that nobody appreciated that people have really strongly disliked that your ability, momentum, connections, dollars actually did fundamentally allow the company to prove some things and validate some things and become more of a consensus opinion. Those are the more psychologically rewarding companies by far, even if other companies might produce like large returns. If they're super popular, super hot, but you happen to sort of win. investment is less psychologically rewarding. There's other ways of VC where you can get psychological rewards from first class of companies

where they're popular. It's by being a good consigliary to the founder, helping the company hire, fire, strategize, prioritize. Like, there's definitely other ways to help the company. So, for example, I led to Series A for a firm, Max Lentgen's company that's going to go public probably about a week from today. There are a lot of people who wanted to invest and lead the series. say for Max's company.

Yeah. And think about, you know, Max already been extremely successful as a company in financial services. Like, the only question was not like, should we invest as a customer is like, you know, how how much can we get? Yeah. And how much to convince him to take, you know, KV, my money and, you know, appoint me to the board versus like other choices.

Yeah. So it's not like me giving him the, you know, whatever, 15, 16, 17, whatever million dollars made it possible. he was going to get the money from somebody, period. He's going to get the money on better terms from other people. So what I could do then is be useful and remember certain conversations that I had with the executive team either holistically or with him that may have helped clarify, you know, things and made the company a little bit better, a little bit sharper, a little bit more resilient

in certain places. And that, you know, is psychologically rewarding. But it's not because I gave them money. So you definitely have to remember, like versus when Airbnb, when I committed to invest, literally, there is nobody in the planet that liked the company, period. No, he, I think, I just, like, Brian introduced me to the company twice, the entire company, as the only person who actually liked Airbnb. Like, Paul Graham and the YCP people love the founders, which is very good judgment,

you know, clearly for sure, brilliant, but they didn't actually like the idea. Actually, I obviously, it was impressed by the founders, but actually, as soon as he articulated, the idea, I believed in it. And the founders, you know, Joe Nathan and Brian could tell the difference of like, no, no, you actually really like what we're doing. And so the same thing was true of Palantir, even though I actually wound up investing later,

when Joe Lonsdale and Peter first articulated it to me, I was like, oh my God, this is so obviously good. And Joe, as publicly said before that, I was the first person that wasn't a founder. I actually thought it was a good idea to try to do that. So those are obviously, you know, psychologically rewarding. Or I did write the first check to wish and wish it, you know. And wish, wish nobody right.

Everybody loved the founders, but they wanted social commerce. Well, they wanted these guys to chase an ad network because that was their background. Both Peter and his co-founder had had significant success at both Google and Yahoo building ad networks. And everybody was like, you should build an ad network. And I was like, no. Like, I want you to go chase a consumer. product that's predicated on, you know, leveraging some of your learnings. And if it fails, like, I'm fine if you can't make it work and you want to regress back into an ad network.

But I'm giving you money explicitly to go chase this. And everybody else was like, no, no, no, no, no, no. We'll only give you money if you promise not to chase it. So obviously that the world needs is like another ad network. Yeah. Yeah. I mean, that's right. Exactly. But anyway, so like, that's obviously. That's so meaningful. Yeah. That's obviously rewarding and cool. How do you deal with the losses? Do you get angry when you lose and it could have been avoided? You get frustrated or just are you able to sort of like, you know, compartmentalize the losses even when the founder screwed up or, you know, is bad execution?

Can you compartmentalize it? Or like me, do you get crazy and grind your teeth and have a hard time with losing? No, I don't get frustrated. there's an art to being an early stage investor, which is if you're not failing a certain amount, you're probably not taking enough risk. Like, you're not chasing ambitious enough things. Because by definition, let's start from first principle. The idea that two kids in a proverbial garage are going to change the world, or change in industry, think Elon and Tesla or one of these companies like Square, Stripe, et cetera, changing financial services or Robin Hood and brokerage

or Trade Republic in Europe. That's a pretty ridiculous concept and fairly irrational crusade. A certain fraction of them absolutely should fail. It's like saying you have a kid who's seven years old and your goal for that kid or the kid's goal is to play, you know, be an NBA All-Star. Yeah. A reasonable number of people that have that goal and actually have a lot of talent and a lot of dedication are not going to become NBA All-Stars. And if you just sit around bemoaning, not becoming an NBA All-Star, that kind of loses

sight of like how tall and ridiculous the odds are versus enjoying the experience of becoming a world-class athlete. Like, you can be a very proficient athlete. And not, you can win. Nobody can stop you. You can win the NCAA championship and still not be an NBA player or not being an NBA All-Star. And so I think you want to fail a certain amount.

And it's like baseball, which I'm a big fan of is nobody, like, nobody plays baseball, like thinks they're going to bat a thousand for the season. Like that's like it. I'm very happy at 40%. Give me 40%. People are swinging for the fences now, right? The whole game has changed. It has changed that way.

And that's changed a little bit of venture because of the size of funds. Like, you know, the proverbial success when we were growing up was like a billion dollar company. Yeah. These days, you know, truthfully, the funds, the funds that, you know, I've worked at and the funds I can beat with, they really need $10 billion outcomes to meaningfully move the needle. Well, if you have a $600 million fund, a billion dollar fund, and you're buying 20% of a company typically or 15%? I mean, it's got to hit $2 billion, and now you've returned half the fund. Yeah.

Congratulations. You ideally want to return the whole fund on, like, on your, now you need a $5 or $10 billion one to get past the hurdle. So you do have to kind of swing for the fences a little bit more like the baseball change where people are much more, you know, or the basketball three point shooting. Yeah, three point line.

I'm actually, Darry is going to come on the pod. Oh, cool. I definitely want to listen to that. But so in any event, I think that the things that probably are more, frustrated to me are actually not failures. It's the successes that don't achieve the ambition or the size or magnitude that could have. So it's more like a company's pretty successful,

but it could have been incredibly successful. Okay. So yeah, when you would PayPal and Yammer sell for one one hundredth of what they would be worth. That's hard to swallow. Not hard to swallow, but definitely a little bit more mentally, you know, sort of frustrating. It's like, oh, we'll maybe we could have made this bigger, better, you know, if we just changed this or done that or not hired this person versus the ones that actually fell, like, that's just part of the process of trying to change the world. Yeah. Failed experiment versus not selling too early and not having the outlier success.

Or not being willing to reinvent yourself and take the next stage. Like, you know, you see some of the afterburners like kicking in at Square. And that's a function of Jack's leadership and willingness to take risk. It's crazy. I was in a fund on Square and they distributed the, what did Square go out at, $15 or something? Yeah, like $3.5 billion or so plus or minus. It was like $15 or something. Yep, maybe even a little less at pricing because there's some stress, like $13 to $15, let's say.

So then it got distributed to me at like $50 or $60. I sold half because the venture fund that had it, I was an LPN. I guess they held it to distribute it because they knew that it was still growing. So I get it at $50. I sell half of them. And then I leave half of my account. And then I woke up the other day and looked at it. And I was like, what is happening to Square where you worked?

It's all Cash App, right? That's the change. It's really propelled the company's valuation. And that was a big, bold innovation that really was top down. Both bottom up, there are some champions internally that are proselyizing, but it's really Jack's commitment to bold ambitious bets and his desire to create a consumer success that led to that. And so that's why Square is so valuable in some ways. And so there are companies that win, there are leaders in companies that wouldn't have

taken that risk, that wouldn't have embraced the team, that wouldn't have created the cultural like sort of conditions to enable a team to execute on a creative app. And so that, the companies that don't do that, that could have should have, those are maybe a little bit more of a regret. What's the story with Jack? You worked with him. People think he's a little weird. You know, he's got the beard.

He goes to these like, he seems to do. show up for every time the government calls him, he actually goes. He's very thoughtful, but some people think he's a little out there. And, you know, the Twitter guys were giving him a hard time in one of the books that he wanted to make dresses or something. He's eccentric. He's eccentric, but brilliant. He's eccentric, but a great executor. How do you describe, Jack? Well, I've never met a very successful founder who's not a little eccentric. I think the people who change the world. I have an old expression adage that only disruptive people create disruptive companies. And so I think to some extent, if you want to transform the world and he's done that

at least twice so far, you need to have like a different perspective than at least most normal people because most normal people don't see things. Yes. See things are too rational in their own ways. And so I think everybody we know that's been successful has some of that. And what yields success, for people for extraordinary founders is typically they learn to compliment themselves with other people who have different skill sets and different interests and it's the collection as a whole. Like, you know, think of like Elon certainly, you know, is not your standard person. You know, almost none of the great founders I've ever worked with or the famous ones in history, whether, you know, you read about Steve.

All these people have, you know, quirk. They're eclectic to quirks to, you know, like very extraordinary at some things and less, you know, well-rounded and other things. But they learn to appreciate their strengths and complement things that they're not so interested in. What is his superpower, Jack's superpower? Jack's superpower is he actually is a first-rate design, engineer, and business strategist. So it's a combination. He actually understands all those domains quite, quite well. And so when you have that ability to triangulate between design experience,

software, technical innovation, and business strategy, you can create a lot of things. Almost no one has the Venn diagram overlap of all three. It's actually usually you're pretty good as a Fowler if you've got the Venn diagram overlap on two of them. Yeah. He's a very unique and special guy. All right. Well, you've got to go, but I just got to ask you, are NICs seem to have

got a new regime in there. We're drafting very well. We got a ton of picks, but no superstars came, but we got OB. Mitch seems, Mitch Robinson seems to be improving. RJ seems very good. I'm looking at this front line of OB, Mitch, and RJ and thinking this feels like we're projecting in the right direction, but we do have an owner who just can't seem to get out of the way. What are our thoughts on the Knicks? Yeah, I mean, I'm still moderately skeptical only because it's a a top-down problem is if you're going to build bottom-up, which is kind of like the way you were describing and then, you know, complimenting with a superstar at some point, you need to stay consistent with your strategy for a bit of time. There are fixes and it's hard to do with seller

accounts, but there are fixes that are more immediate. With an inpatient owner, as you're getting progress against a strategy, they tend to rip it up and strut and you go back to score one, which is why the NICs have basically not been very good since 2000. I mean, maybe me going to be going back to the East Coast will be good for the Knicks. Absolutely. Last time the Knicks were good. I was on the East Coast. Please.

Maybe this will fix things. I'm hoping. I mean, basically it's the only reason I'm working. I'm just like, if I can just get like 10 more Ubers, just keep working for 10 years. You can buy the Knicks. You can buy the Knicks, but the problem is. I want to syndicate the Knicks. The owner still needs to be willing to sell.

I mean, you can only buy what's, you know, you can't buy what's for not for sale in some ways. That's the problem is I think Bezos would buy it. I mean, that was the rumor was that Bayesos, just wanted to buy the Knicks and he could buy them. Done deal. Can you imagine Bezos sitting courtside? He would be like, yes, spend what you want and you guys make decisions.

I think he should retire from Amazon and buy the Knicks and fix the Nix. And then look at Utah. Jazz just got bought by Ryan. Yeah, more technology people will be buying sports teams. I mean, I think in Sacramento, just because you can create wealth. And traditionally, sports teams were owned by car dealership owners. like that was actually the most common occupation of people who own sports teams. And so I think the modern technology world will, you know, you have obviously Steve Palmer,

etc. There'll be more. Yeah, there'll be definitely be more of that, which is a good thing. But man, yes, I would be very, very, very, very excited to have Jeff by the next. I can just, I can't wait. I can't wait to read the memos. They're going to have a writing culture all of a sudden. I need a memo.

on how we're going to deal with club seats. I'll fly up. If he buys the next, I'll commit to flying up for half the home games. Absolutely. You and I will split some courtsides. All right, my friend Keith,

thank you so much for coming on the pod, being so honest and candid. We could have gotten into 100 other things, but I took you for 90 minutes, and you're a great guest, and just great at what you do. Keep it up and enjoy Miami. I'll see you there soon.

Say hi to Pitfall. Thanks. I'll say hi. Hopefully I'll get to say hello to Pat Riley. Yeah, exactly. Oh, yum, yum. I mean, that's quite a team, the heater. Man.

What's that kid? Who's the guard over there? Who was derided and then he just overperformed. Who's the guard? Jimmy Butler, yeah. Butler is just a beast. I mean, they were like, this guy's a malcontent. It's like, oh, no, he just wants to win and is telling everybody around him to work harder.

I mean, what a run they had. I love that. I know. I mean, Pat Riley was one of my heroes sort of growing up, and I've never met him. and hopefully moving to Miami will help. No, that's easy to solve. Hey, somebody who's listening to DePod knows Pat Riley. Can you put them to just somebody get me on a CC list?

I actually know who does. But now that I'm there, hopefully we can arrange this. The mayor definitely knows Pat right. Pat's the greatest. I loved Pat Riley as a coach. He was so hardcore, so serious. And like, man, whatever he did to get the, to create the first super team and get, you know, LeBron. and, you know, way to play together.

Oh, my Lord. He's old school. One of the books that I read at high school that was really inspirational for me was Pat's book, The Winner Within. And there's a lot of lessons in there that I, you know, kind of interwoved into my own career. Any big takeaway? What's the big takeaway? Yeah, the biggest one is he has this great quote that I sometimes recite,

which is you don't want to be the best of what you do. You want to be the only one who does what you do, which he actually was quoting, paraphrasing from Jerry Garcia of The Grateful Bad. But I remember reading this junior year in high school. and it becoming like a mantra for myself. I love it. Well, you are one of one, that is for sure. We'll see you soon, my friend,

and we'll see you all next time on this week's startups. Pleasure to be with you.