This Week in Startups - GPU clusters, venture trends, and the robotics startups we’re most excited about | E1977

Episode Date: July 10, 2024

This Week in Startups is brought to you by… Tech Domains. Don’t miss our “Jam Session with JCal” contest! To apply and get more details go to https://jamwithjcal.tech brought to you by .tech domains. Vanta. Compliance and security shouldn't be a deal-breaker for startups to win new business. Vanta makes it easy for companies to get a SOC 2 report fast. TWiST listeners can get $1,000 off for a limited time at https://vanta.com/twist OpenPhone. Create business phone numbers for you and your team that work through an app on your smartphone or desktop. TWiST listeners can get an extra 20% off any plan for your first 6 months at https://www.openphone.com/twist⁠ * Todays show: Alex Wilhelm joins Jason to discuss news that a16z has built out a GPU cluster that it rents to its portfolio companies (4:22), Q2 venture trends (31:02), robotics startups (57:39), new TWIST500 companies (1:11:51), and more! * Timestamps: (0:00) Jason and Alex kick off the show (4:22) Venture capital firms building AI GPU clusters and a16z's “oxygen” (10:09) .Tech Domains - Apply for the Jam Session with JCal contest today at https://jamwithjcal.tech (11:13) Where this leads the industry (20:21) Michael Ovitz's influence and venture capitalists' work ethic (30:10) Vanta - Get $1000 off your SOC 2 at https://vanta.com/twist⁠ (31:02) Q2 venture capital funding trends and strategies for struggling companies (37:00) OpenPhone - Get 20% off your first six months at https://www.openphone.com/twist⁠ (38:23) Global AI funding trends and current state of venture capital (57:39) Teleoperation robots, remote work arbitrage, and ethical considerations (1:11:51) Robotics companies' funding, the future of AI and robotics, and the TWIST500 * Subscribe to the TWiST500 newsletter: https://ticker.thisweekinstartups.com/ Check out the TWIST500: twist500.com * Subscribe to This Week in Startups on Apple: https://rb.gy/v19fcp * Mentioned on the show: https://www.theinformation.com/articles/andreessen-horowitz-is-building-a-stash-of-more-than-20-000-gpus-to-win-ai-deals?rc=g3wfdp https://infogram.com/global-quarterly-ai-funding-through-q2-2024-1h0n25okznz5l4p https://infogram.com/global-venture-dollar-volume-q2-2024-1hnp27eewj9on4g https://www.cnn.com/2020/09/14/business/robots-japan-supermarkets-spc-intl/index.html https://www.reddit.com/r/overemployed https://www.athena.com/#Elite-Assistants https://nypost.com/2024/04/09/us-news/nyc-restaurants-use-zoom-cashiers-from-philippines * Follow Alex: X: https://x.com/alex LinkedIn: ⁠https://www.linkedin.com/in/alexwilhelm/ * Follow Jason: X: https://twitter.com/Jason LinkedIn: https://www.linkedin.com/in/jasoncalacanis * Thank you to our partners: (10:09) .Tech Domains - Apply for the Jam Session with JCal contest today at https://jamwithjcal.tech (30:10) Vanta - Get $1000 off your SOC 2 at https://vanta.com/twist⁠ (37:00) OpenPhone - Get 20% off your first six months at https://www.openphone.com/twist⁠ * Great TWIST interviews: Will Guidara, Eoghan McCabe, Steve Huffman, Brian Chesky, Bob Moesta, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland * Check out Jason’s suite of newsletters: https://substack.com/@calacanis * Follow TWiST: Twitter: https://twitter.com/TWiStartups YouTube: https://www.youtube.com/thisweekin Instagram: https://www.instagram.com/thisweekinstartups TikTok: https://www.tiktok.com/@thisweekinstartups Substack: https://twistartups.substack.com * Subscribe to the Founder University Podcast: https://www.youtube.com/@founderuniversity1916

What are VCs known for doing in the summer and the winter? It is not hard work and graft. It is mostly skiing and hot air ballooning. Correct. They're known for doing nothing. Yes. Now, I gave a big speech to, you know, one of our young guns here. I call them the young guns, the ones who come from out of school.

Doesn't mean we don't hire older people. We do all the time. But look, we hired you, Alex. I mean, you're ancient. I never miss you, almost 35. on this show again. Just getting roasted. Get roasted.

I'm scared of turning three. You're supposed to be supportive. Well, that's just my number's turned around. In a heartbeat, I would give up. I would literally give up every dollar I have to be 35 again. I literally would go back down to zero for 30 to be 35 again. Every single dollar. This week in startups is brought to you by dot tech domains.

Don't miss our jam session with JCal contest. To apply and get more details, go to Jam WithJCal.Tech, brought to you by dot tech domains. Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a sock to report fast. Twist listeners can get $1,000 off for a limited time at vanta.com slash twist. And open phone. create business phone numbers for you and your team that work through an app on your smartphone or desktop. Twist listeners can get an extra 20% off any plan for your first six months at openphone.com.

All right, everybody. Welcome back to this week in startups. I'm Alex. He's Jason. X.com slash Alex. X.com slash Jason. And news three days a week. That's our goal.

This week, I think we're two. We're still doing the interview shows. We're still doing the liquidity pod every other week. I think we'll be the pace for that. We're still doing AI with Sunny, so we're trying to figure it all out. Shout out to our sales team here at launch, the venture firm and this week and startup that produces this week in startups because they keep selling the show out. And that gives us the ability to keep investing in it and make sure you are subscribed

on all the podcast apps, YouTube, all that kind of good stuff. We got a great rundown today. Alex has been working with the team. You know, there's about six, seven people on the team here. So what's on the docket today, Alex? And then welcome back. Happy Tuesday. Today's Tuesday. Yeah, July is going too fast. My birthday is coming up in a couple of weeks.

And I'm not, I'm not excited. I'm turning 35, which is not. Milestone. Yeah, it's kind of like the, you're actually middle aged now moment. But that's not what you're hearing you're there. On the pod today, we have a venture capital firm that is building its own AI, sorry, GPU cluster. I want to talk about why they're doing that costs and also services. Then venture capital trends from the second quarter, including notes on where evaluations are today. The data actually shocked me, so I can't wait to talk about that. Then one of J-Cal's favorite things, remote work arbitrage, and we're going to segue

from there into robots and the Twist 500. Lots of videos there, so get excited for that. And I recently learned that you can watch this podcast in video on Spotify. If you didn't know. Correct. We were part of the video. Yeah, we're part of the video. I guess Daniel from Spotify invited us to be part of the video.

beta, like a couple years ago, so we've been doing it. We used to have to do one RSS feed for, like, on iTunes, you can actually get a video version of the show as well, because they separate it. Ah, okay. And Spotify kind of came up with their own system to put them together, but it's proprietary. And I told them, listen, I don't like this.

I told Daniel straight up, and I C-Ced his B-D guy when they invited us. I was like, I don't like you creating your own standards. Please respect the RSS standards. We have a video one. We have a regular one. Just do it from those. And they were like, no, we built our own thing. And I'm like, God damn.

it, Daniel. If you keep breaking our, if you break the standard, I'm going to call you out on it all the time. So, and he's like, what do I care? And I'm like, I'm like, I'm fair enough. But please, Spotify, don't break RSS standards. Don't break the podcasting standards. That's what got us here. Yes, podcasting works because of RSS. And if you don't know, RSS stands for real simple syndication. It's literally designed to be simple, basic, easy to use and works everywhere. If you create a new system, it's going to be worse. But let's start with what's going on at Endreson, Horvich. We have talked over the years about how venture capital firms are expanding into services, hiring, business development, et cetera, et cetera, et cetera.

I never thought I would see a venture capital firm put together 10,000 GPUs as the information is reporting, that they then rent back to their startups, I presume at a very low cost. It's a project called Oxygen and it's the first I've heard about it and I'm blown away by this. So first impressions from you. It's a great idea that they stole. this idea was pioneered by Daniel Gross, who founded a really, really interesting company called Pioneer Labs. I think he's a really, really, really smart cat. And what they did at Pioneer Labs is they kind of gamified startups or really more like product launches.

And like you could kind of score points, move up a leaderboard for releasing products and having product velocity, which has always been product velocity, the key to startup success. how quickly can iterate on your product. That gets you more shots on goal, et cetera. So he kind of gamified that and created a competitor to Y Combinator. He since shut it down because he's working at one of the AI companies. He co-founded an AI company, I think, with Ilya. So we'll get to that in a second. But what they did was they created something called the Andromeda.

Is that how you spell pronounced Andromeda? If that's not right, I've been saying it wrong my entire life. Okay, great. Cluster. So this was Nat Friedman and he got a bunch of GPUs together, clusters of Nvidia H-100s, and they did this back in the day. And, you know, it got a ton, a ton of press. So here, I'll share it, there you go.

So there's a little bit on it. Here is the hacker news on it. Andromeda cluster, 10 exophlops for startups from Nat and Daniel. You know, they launched it in June of 2023. So why is this important? Well, the same reason why getting credits from Azure, AWS, Google Cloud, Oracle, and other folks has been so powerful. If you give startups, you know, 100,000 in credits, 50,000 in credits, they start, it really does help because they would have to spend that. So you're kind of letting them experiment.

If they do succeed, they're going to be very thankful to you, and maybe they'll buy more clusters from you. So this is just a little piece of candy. It's a little added benefit to your, you know, consider this like your Amazon Prime of venture, your Uber One of venture. You got a couple of extra features. One of the features is you're with A16C. You haven't built out your cluster yet. You can use theirs.

If you're going to be a going concern, you're going to have your own cluster, obviously. Or you're going to use AWS. But this is a nice little piece of marketing candy. They stole from Daniel Gross and that. So I was like, do you give credit? But you mentioned it there, right? Like people have offered HR services like recruits. like recruiting.

Sequoia Capital is known for being great recruiters. People did product days. I remember Sequoia as well when I was a Sequoia CEO. They had a product day where they would have some major company, Google, IBM,

Walmart, whatever, come to Silicon Valley and they would have 10 of their companies come and pitch them for 20 minutes each. Yeah, it's like, okay, and for Walmart to come to Silicon Valley and meet 20, you know, a bunch of Walmart, mid-exexexecs to come and meet 20 startups is like, they don't even know these startups exist.

They would maybe be able to find three or four of them on their own. So to curate that for them is really magical. So this is really nice of Andreessen Horowitz to do. Big win for founders, big win for Andreessen Horowitz. So I think it's a give them a plus on this. It's not cheap, though. That's what I keep thinking about because their cluster, which they're going to scale to 20,000 in time,

does include Nvidia H-100s, which are expensive. Now, I get Endreson being the central purchasing point because they have a lot of money, They have a lot of friends. I'm sure they have connections at Nvidia. They got access. They got allocation. Great. But it's a pretty big capital outlay to buy all those chips and then keep them around

and then also let people access them. They've built essentially their own personal, what, core weave, it sounds like? So it's not inexpensive. And so my question is, are they funding this out of fees, like management fees? Or where's the capital is coming from? Good question. You know, these go for $25,000 a GPU ballpark and $100, I think. So anyway, you start doing back of the envelope math.

This is a nine-figure investment. They have $20 billion under management, something in that range. I remember when they hit 10. I remember when they had $15. So anyway, if they have $20 billion under management and you get a 2.5% or 2% and 20, 2% management fee, you know, it's a lot of money every year coming in. $400 million. And some of those funds are sunset, so they're out maybe half.

or one percent, and some of them might be front-loaded with two and a half, who knows. Anyway, they get hundreds of millions of dollars in management fees. This will probably cost them, you know, some amount per year because you would spread the cost over 10 years. Yeah. And who knows what kind of round-tripping craziness they're doing here? We talked about round-tripping. Yeah.

Maybe this is like, maybe they're clusters on one of their investments, or maybe they're splitting the cost. Maybe they let you use a certain amount and then they'll charge you, you know, costs. So maybe you get like, you know, an allocation. I see this as, you know, like marketing and PR. Yes. More than anything. And so if you're some team and you can get a meeting with them and they're like,

hey, by the way, do you want to play with our clusters? And they're like, sure, I'll play with your clusters. There we go. Boom. Okay, founders, the jam sessions with me. J-Cal contest is heating up. I've seen a ton of interesting submissions so far. We've picked two winners and we're looking at.

for three more. If you are a founder with less than $2 million in funding and you have one of those awesome.com.com domain names, head to Jam with JCal.com and tell us all about what you're building. If you win this contest, you get to come on the pod this week in startups and pitch me what you're working on and then I'll give you some unfiltered feedback in real time and you'll get your company mentioned on the number one startup podcast in the world. We're partnering with dottech domains because super innovative startups already use them. Names like Rabbit.T.Tac, aurora.com and 1x. Tech, heck, even our own Founder Fridays. That tech use this amazing new domain name.

So here's what you do. Very simple call to action. You tell me about your awesome. Dot Tech domain and startup. Apply for the Jam session with JCal contest today at jam withjerkal.com. We're picking the last three winners soon, so get in there. All right. I'm going to explain this using Jason Style Logic.

So roll with me. You're interested in Horowitz. You have $200 million a year in inflows. Just call it half of the total figure we thought of. That means you have a lot of capital to play with. You spend, I don't know, $25, $30 million a year on this cluster. You get into one or two more hot deals that pay out $1520 in your capital in. This is break-even or profitable with only a couple of winners out of it.

So as long as this actually does help your deal flow and getting access to either a lead check or a big check into other companies, the math can bear out. And it turns out Andrews and Horowitz, unsurprisingly, is doing tons of AI deals. Just since June, they've done Hebia, which was a $130 million round, Decagon, mistral, Valor Labs, and of course, XAI. Now, they weren't lead in all those, but it does go to show that they have the deal flow, they have the money, and they have the cluster. The only thing we don't know is, is the cluster driving the deal flow or not. But I wonder if anyone's going to compete with this.

Do you see Sequoia stepping up to do some work playing? No, I mean, you can rent. this stuff. So I think this is like a short-term PR win. You know, there, I, my belief is that, um, we will be overbuilt with hardware and infrastructure pretty quickly. Now, I am in the minority in that belief, but I've seen this movie before with fiber and server builds out and storage buildouts. When people see all that profit and they see all that money being spent, a bunch of people rush in to capture that money. And then what happens, the margins get burned away. So, So while I still think in Vida is just a tremendous company,

they'll have a lot more competition. Open source software, other software solutions will reduce the need for more clusters. They will become more efficient, I believe. I could be wrong. Obviously, we're an uncharted territory here, so I leave the possibility that I'm wrong, and I am in the minority on this. But I think we might get to an overbuilt situation in the next, you know,

call it two to five years. and if we're overbuilt, then I think it's going to be like storage. Like, do you hear startups talking about storage anymore? No. Did we hear people talking about storage in 2005 to 2010? Yes. Dropbox.

YouTube, Google Photos, iCloud, everything was about how much storage, how fast was it, backup speeds. And now it's kind of all been abstracted, hasn't it? So I think we'll be, we'll stop discussing this hardware, a shortage and this hardware push probably, you know, towards the end of the decade. It'll be forgotten.

Goldman has already said in a recent research report that actually the chip shortage, the fact that people couldn't get even H100 that they wanted to buy them is easing already. Now that could be because Infinity has new hardware coming out that's going to be better. But I'm curious if that shows that the arc here might be a little bit more compressed than we might otherwise think. but, you know, the depreciation on these things has got to be crazy once the next generation comes out. So I wonder if you could even put that out over a 10-year time horizon or you'd have to do five years, at which point it gets a lot more expensive because money's expensive now. You know, there are in a lot of these things when people do press releases, you and I as former

journalists doing random acts of journalism here in commentary, you know, we've all been part of this where they, you read the details of announcements and it's like, oh, up to 20,000, clusters or, you know, eventually 20,000. It's like they may have 100 right now. And they may have said like, okay, yeah, if we keep raising more money on the management, if we keep seeing demand, we'll add to it, the price of that. So who knows what they're actually spending on this? Maybe they spent 10 million on it so far.

And if they win a couple of incremental deals, then they add the next set of clusters, the next set of clusters. And who knows if they're like standing, did any of the details say they were standing this up themselves or are they just renting them at AWS or Google or Oracle and they have some relationship with Dell or somebody. I think that they're hosting it themselves, but I will double check that and get back to you on it. But here's a question that I have thinking about Andreessen Horowitz and its scale.

Because you just mentioned their AUM, there's overall size. And I think they went the RIA registered investment advisor route over time. So is, is Andreessen too big for the Venture game? Is that why they're doing stuff like this to kind of just, they feel like they're overfilling like the Venture Cup, if you will. They're doing so much more. I wonder if we should not really consider them trad VCs anymore. They're not traditional VCs in that they've gone for scale.

When you go for scale, you hit the average, right? The good news is the average in venture is better than most averages. So if you can deliver a beta, the average, with a chance of alpha, when I went out and raised this last fund, one of my LPs said, you know, you're doing 100 startups a year. And I said, yeah, you know, I think we'll get to 200, you know, by the, you know, by the company. the next fund, I don't want to rush it. I'm not like trying to trace the 450 investments but that YC are doing. I want to do me.

You know, I make a hundred is the right number. So I keep track of it two new investments a week. You know, it makes sense on average. But, you know, I do want to keep growing. And they said, well, the seed stage does better than the Series A stage, right? So we've seen people try to get in earlier. Now, doing that means a lot more work. So you've got a front and center view now because you're on the inside and you came to the

off-sites and you know, you're involved in what we're doing under, you know, obviously as an employee of the company, under NDA and everything. So what I learned from that LP was, hey, if you just tell everybody you're going to hit a nut surface area to hit the average. The average for returns, you know, call it cash on cash, multiple moik, multiple uninvested capital, is like three and a half for, you know, early stage. And then when you get to series A, it goes down to two and a half three, and, you know,

goes down from there. So, hey, listen, you know, you, if you could actually make a convincing

argument that being average and being an index fund of seed stage, which is what Y Combinator is, right? It's a, it's a,

mutual fund. It's kind of cool. Because then as an LP, you're like, well, they may not hit this crazy outlier, but they may not

also return half my capital back or 1x. So kind of good, because these LP is like predictability. That's what they're looking for. And Indreason Horowitz has created a product for sovereign wealth funds, for endowments. That feels predictable.

So great job to, you know, Ben and the team over there and Mark, because they created the index. And so if you want to put a billion dollars to work or $500 million to work and venture, you know, going to Sequoia, if you can get in or going to Indreason, well, you're going to hit the average. With Sequoia, you're going to do better. And with Andreessen, you're going to hit the average. Sequoia may not have room for you to put $500 million in and Dracin takes the $500 million, right? So let's say, Sequoia takes your $100 million, but they don't take $500.

And Andreessen takes the $500. Now you're like, well, I'm going to get a better return on my $100 from Sequoia. Great, I'll do that. And then I'll put the $400 with Andreessen. It's not going to, historically, they're not going to hit the same returns as Sequoia, but they're going to hit the industry average or better.

Hopefully. And you still think that, that they'll hit the industry average or better given the size of their funds. kind of hard not to because they have a great brand. There are great people like David Ulovich and others working there who have, yeah, David's great. And people respect them.

And, you know, they, they had a really clever idea when they started it. We're only going to hire rich people who are founders. Spite. Okay. And you know what? The back channel during the DEI era of Silicon Valley was, you know, now we're in the MEI era. and we had this conversation last week

that was a very productive discussion. Now that like DEI is out of favor, but in the DEI era, people were like, and DREC or her, it's only hires white men. That was like the vibe for partner. Yeah. And remember he talked about partner washing, like everybody's a partner.

Oh yeah. But, you know, if you only hire CEOs who have already been successful, that means they were successful and started their companies 10, 15, 20 years ago, like Ben or market. So when you looked at the composure

of their actual partners, not the partner washing that everybody's doing in Silicon Valley, you had, you could see it was, you know, going to tilt a certain way

because we had such a dominance of, if you look at the big exits, how many weren't men, you know, historically over the 20 years. So, but the reason they did that was they didn't want to have to pay them big salaries.

Ah, I was going to ask, why is this? So when David Ullovich comes there and, you know, whatever David's worth, I don't know his personal net worth, but he did fabulously well,

David doesn't need a million dollar salary a year. I don't know what they pay everybody, but my understanding was they just told everybody, just take a little bit of cash, you're in it for the carry. That will take that cash and we'll build the HR department. We'll build this cluster.

We'll build marketing. We'll build PR. And he was very, Indriason was very enamored and influenced by Michael Ovitz. So Michael Ovitz was there for a bit. Have you read the book? Who is Mike Ovitz?

I have not read that book, actually. Just read. It's a great read. It's one of my favorite reads. Long list. of business books I need to get to. It's not a long read either, and it's a great audio book for when you're walking with your weight vest. So put your weight vest on, get that zone two workout now that you're a 35-year-old old man. Uh, not, not for another 13 days, okay? Okay. All right.

You're not counting down at all. You put it all together. I think they then move those all those management fees. They don't need them. Like Mark and Teresa is not in it for the management fees. Even if they have hundreds of millions of manage fees, it's not going to move the needle for him. He doesn't need money. He's post-mone. He's post-mone. So if you only hire post money, you're in a good place. So there's different strategies. When I'm building my firm, I don't hire post money people. I hire young guns.

Not that we do it based on age, but I hire people based on, I hire a lot of people out of school. Why do I like to hire people out of school and give them their first chance to be a venture? Because they haven't been corrupted with the venture capital system. The venture capital system teaches bad lessons. Double click on that because I could, I could unpack that different ways. but I don't know exactly what you want to hone in on when it comes to that. So keep going. What are VCs known for doing in the summer and the winter?

It is not hard work and graft. It is mostly skiing and hot air ballooning. Correct. They're known for doing nothing. Yes. Now, I gave a big speech to, you know, one of our young guns here. I call them the young guns of the ones who come from out of school. Doesn't mean we don't hire older people.

We do all the time. But look, we hired you, Alex. I mean, you're ancient. I never mentioned my own on this show again. Just getting roasted. Get it roasted. I'm 503. You're supposed to be supportive.

Well, that's just my numbers turned around. In a heartbeat, I would give up, I would literally give up every dollar I have to be 35 again. I literally would go back down to zero for 30 to be 35 again. Every single dollar, you could leave me with zero dollars and if I could be 35 again. I wouldn't swap you all the money in the world to give up 18 years. So the reverse of that makes sense. Absolutely. Yeah, yeah, yeah, yeah.

Okay, no, I hear that. Oh, but going back to Venture, young guns. So when you have the young guns, you know, I was just telling one of our up-and-comers who I just thought has great potential. I said, can I ask you a question? Like, how serious are you about this? Deadly serious. I said, great. You want to be really legendary at this?

Yeah, I said, can I ask you like, did you have like a big weekend? Did you go to a rave? did you go away for the weekend? Did you have tons of like things to do? No. I said, if I was you, when I'm having brunch on a Saturday, when I'm having my brunch on a Sunday, pop out your laptop,

send, do 90 minutes of work, 90 minutes while you're eating lunch, having your coffee. I said, you do that every Saturday and Sunday. Just put it in that 90 minutes on a Saturday, 90 minutes on Sunday. I said, you will look to me as the founder of the firm, much different than the other 11 people on the investment team or any firm you're at because I will see this activity on the weekend

and I'll be like, whoa, you really got an edge on not only your competitors inside our firm but against other firms. I said it's the easiest thing in the world to win adventure. Work hard because the rest of the VCs are taking off six weeks. They're all in Italy right now. The joke amongst LPs is

they're following their GPs on Instagram and the LPs are in the office because they work at Harvard or Calpers and they get four weeks vacation a year and they're like, I just gave this person $10 million LP commit a $50 million LK commit and I can't keep track of all the places they are. They're in Ypresa, they're in Greece, they're here,

they're there, they're Coachella, they're at this thing, stagecoach around everything. So this means, though, going back to the end of recent point about hiring people who are effectively post-economic. It means then that you need to find people who are wealthy, going to be good at venture, and are not caught up in the venture capital way of life because I presume Andresden doesn't run a relaxed venture capital from.

I would say they do run a relaxed venture capital farm actually. Really? Oh. Yeah. And the reason I would say that is because here's what happens. As you, if you are truly successful in your career, you have a network, you're great at signaling, and you're efficient. So somebody, like we'll go back to David Ulevich,

since I don't know any of the other partner's teams there, but, and David is friend, uh, or overfriendly. So, you know, you get someone like David, he's got a crazy network. And he's built businesses himself. So when he can actually, I don't know, David, I think works hard, but let's just say somebody in his model did take off two months a year or even three months a year. When they are effective, they're going to be definitely effective and they're going to have

deal flow in their network. That's the most elite. So you can make up for it with those kind of advantages. Got it. But there's a big trow in between. Yeah. And what is in that valley between the truly elite people who have established networks and are really good at what they do? And I would put myself in there because I do have a pretty big network because of the podcast and just hustling for 30 years.

And a young gun is people who are actually young guns who are acting like they're David Ulovich or Rulov or me or Sacks or Chimoth or. or pick the person or Jim Breyer, you know, you have people who are truly successful at it. They have the networks established. You can't play the role of senior VC without having paid your dues. That's what got venture into trouble. Yeah, well, the trough, then,

the way to get across the trough is just endless work. I think is the summary there. And actually, this, I know we need to talk about... No substitute for hard work is a phrase for a reason. No, this is correct. We need to get on to Q2 in a minute, but this has actually been something that I've been thinking about personally

because, you know, having a second kid and I've been here long enough now that I feel like I have my feet underneath me and I got to know everybody and working on my newsletter. And I, and then it hit me that I right now actually lack big goals for what's next. Because I've been, I mean, when you have a baby, as you know, your life gets shattered into a thousand pieces

and suddenly your focus is everywhere but like advancing your career because you're doing diapers at 3 a.m. But I'm kind of almost, I think, figured out how to handle kids. And so I almost need to set new big goals. So I'm glad we talked about this. But yeah, very simple goals for you, which is, you know, showing up for three podcasts a week, it's going to build your profile.

And you have a great start to that. I would set a goal for doubling your follower account or just doubling your views per tweet. Just whatever the views per tweet are, just try and double them. That's exposed. So I double your views per tweet. Forget about the follower account because that could be spots and other nonsense and you can game it. Just double the view. account per tweet, which means you actually look at them and then decipher what tweets work

and what don't. So you're being thoughtful about your tweets as opposed to, you know, how most people do their tweets, which is, I just thought of an idea and I tweeted. And then I would just set milestones for the number of paid subs, 50, 100, 250, 500, and then put that on a calendar and then divide it by the number of weeks. And so if you said, hey, I got to get to a thousand paid subs in five years and you know it's going to you know the first 50 are the hardest the next hundred is easier the next 150's easier and the next 250s easier you can actually just sort of map that out that's how I would do it because I put that I call that brick by brick and that's how I built my career I my philosophy is bird by bird Ann Lamont shout out if you've ever have you read

Anne Lamont's book bird by bird no uh so in Lamont we read very different books is what I'm I'm a non-fiction guy. And I'm mostly a fiction guy. Yeah. So bird by bird by Ann Lamont is the subtitle, some instructions on writing in life.

Published 1994. And, you know, it's basically about doing things one step at a time. And it was because it comes from a story of Lamont's brother was trying to write a report on birds.

And the father advised him to tackle it, bird by bird, one small step at a time. And then you break down, and her general philosophy, break down larger, large projects like we're talking about, into smaller ones. It's simple but profound. And then, you know, it's like a little bit about sort of how perfectionism, I always tell people don't let perfect, you know,

be the enemy of progress. Yeah. Ah, okay. Perfection is the enemy of progress is the way I've said it. I know there's other ways to say it, but don't, don't, perfection is the enemy of progress. You get that first, and you actually did it with Biancate, because she's doing the twist newsletter,

and you just said, you know, the first, hitting the published key the first time, it gets easier each time is what you said. That's a very Am Lamont thing. The first time you hit the publish key is scary and hard, and each time it gets 1% easier. You're in the rhythm, right? So cautious optimism.

That substack.com. Is that the, uh, that URL would work, yeah. Go ahead. Go to cautious optimism. And, uh, yeah, I have to pay, are you accepting payments yet? Because when I first signed up, you didn't. You can give me money if you want.

I got to decide if I want to be a foundational member or a... Oh, no, no, no, that's fine. I may have to be a foundation member for two hundred. I'll just... You're not offer free. You were about to offer free. Don't ever offer free. I will not comp you.

Don't comp anyone. No comps. All right, let's keep on. I did call my mother-in-law. Listen, a strong sales team can make all the difference for a B-to-B startup. But if you're going to hire sharks, you need to let them hunt. And you can't slow them down with compliance hurdles like sock. What is SOC2?

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Stop slowing your sales team down and use Vanta. Get $1,000 off at vanta.com slash twist. That's Vanta.com slash twist for $1,000 off your sock two. Q2 numbers are coming out. If you don't know, every single quarter, a lot of venture capital tracking firms, your pitch books, your crunch bases,

et cetera, compile lots of data. We use this to understand what's going on in the market that we can't see directly. And there's quite a lot going on that I want to dig on. First of all, it turns out in Q2 that venture capital totals were actually up a little bit.

So CrunchBase News says $79 billion invested globally in the second quarter, up 16% compared to the first quarter of this year, and up 12% from a year ago. Does that match what you saw in the market in the second quarter? Looking at the funding reports from these different places, crunch base, I think, your alma mater, has pretty good data because it's not unlike some databases that are more closed, it's a little more open.

So I tend to think it goes a little bit bigger than the other ones. Am I correct in that? Yeah. It does. It tends to encompass a little bit more. And we have pushbook data here as well. But just the improvement from Q1 and the improvement from the year. I would say anecdotally, I'm seeing a pulse.

Okay. So signs of life. I wouldn't say we're up and running and, you know, breaking net speed. It used to be coming out of the accelerator, we would have seven companies. And five of them would raise money. within the six months, during the accelerator or in the next six months.

Got it. Sometimes we'd have all seven, like in Pigserv, all seven. And the two who didn't raise money, usually one of them was because they chose not to and one of them couldn't clear a market.

So the hit rate was pretty amazing. It was basically, and the one who didn't raise money was typically they were strong. So they were making money, and they were like, I want to stop and raise money. I want to keep building

and grow my valuation. So call it six out of seven could. Then during, when the whole market collapsed, I think we had a class were only two out of seven raised during the class. And the other ones were like, I can't even get meetings because VCs were licking their wounds.

They were just circling their portfolio and doing triage. I can say right now, my time was 80%, 90% triage, 10% new, 20% new. And I think it's kind of like 50-50 now. So that's what you really have to look at is the percentage of free time, a founder, a GP, a general partner has, to dedicate to new deals.

You do have to place bets, but because the fund is supposed to be deployed over four years is kind of the primary investment cycle. That's where you're planting the seeds and then you're reaping the returns over the next six years and helping them grow and then raising the next fund. People were taking that four years

and they were deploying in one and a half two. That upset LPs because that means they were coming back twice as fast, which means they're not being as thoughtful by definition, right? So I'm trying to tell our team, hey, let's slow down. if we have this many applications, meet with the top X percent,

instead of doing 120 new meetings a week, which is where we peaked, we did 120 meetings, new meetings in one week. That's like a 6,000, that's a 6,000 meeting rate for the year. I said, at scale, I want to hit 5,000.

So we kind of exceeded my goal. And I said, hey, for the summer, I want you to go down to more like 30 meetings a week, you know, like drop it down, and then I want to have the summer of portfolio. So I have everybody right now in the firm,

meeting with all of our portfolio and then categorizing them into a very simple process, one, two, or three. And there's the first time I'm talking about it. I like simplicity and I like challenging the team to, you know, do these kind of projects. So I told everybody, July, I want this done. We started in June.

I want to meet with every founder and get a candid assessment of every single portfolio company from fun one to the most recent one. And then I want you to give me a capsule and we'll talk about the company. One is they're growing, like gangbusters or raise, you know, year over year, two, three, four, X or more growth.

Number three is they've run out of money and they can't clear market. And they're kind of on, you know, sometimes founders call it going into cockroach mode. You know, they got 200,000 in revenue, a million in revenue. The business isn't dying, but they don't, they can't raise capital. They're kind of trapped. And, you know, you get a good number of companies like that. And usually those companies have to be sold. they need to maybe do some management changes,

get reinvigorated or shut down, right? Liquidate. And that's a process for founders because it's emotional. And then there's a big product market fit triangulation going on in group two, which means their revenue spiky. They might have 12 or 24 months of runway,

so it's not like they're imminently going to go out of business, but they're not tripling revenue year over year. If you're tripling revenue year over year, you're going to clear market with investors, or you're going to hit break even. So we really don't have to worry about you. We just have to give you support to grow faster or get to profitability, whatever it is. Group three, you're kind of sitting like in hospice in some cases and like, hey, this is going to get wound down. What's our plan to wind it down?

It's kind of, it's tough. And I spend a lot of time on that, actually, even though it's most people, most VCs consider that a waste of time. I spend time on that because I like to be there with the founders at the end if I was there at the beginning and hold their hand and say, hey, it's going to be okay. And let's take a year off and then or a month off and then let's talk about your next company because I do think. Exactly. A second or third time founder, man, hell hath no fury like that second or third time founder because they're like chip on their shoulder or they're broken forever. They're not going to start another company. It usually goes one of those two ways.

say from Lux, chips on shoulders, puts chips in pockets, I think is his I love it. He loves to say that. To your point, if your company just failed and you're pissed off about it, I bet you your next one's going to do quite well. But then I take it in July that everyone's working with the companies in bucket two

that could use some help with some product market fit or customers, etc. Okay, juggling multiple devices and apps to run your business is a mess. We all know that. Open phone is here to make that simple. I have an open phone number. I use it to communicate with founders.

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My sales team loves it. Why? Because they get to keep their private phone number for their private phone number. And then they have all of their business stuff tracked in one location. So if they need to make a phone call to somebody they talked to last week, they can see their call history, click on it, send a text message. and start a phone call with that person. And the ops team uses it.

When we have people calling, they have questions about their investments, LPs, etc., we have a round robin phone number. So it will forward the call to two or three people on our team because we like to have really good customer support. And all this is easy to do with open phone. It's super affordable at just $13 a month. But Twist listeners get an extra 20% off of any plan for the first six months at openphone. What if you have an existing phone number with another service?

No problem. Easy, peasy. Lemon squeasy. Open phone is going to port them over at no. extra cost. So head over to openphone.com slash twist, start your free trial, get 20% off. You're going to love this product. It is so affordable and it's so elegant. Just to the product team at Open Phone, great job. I look at products all day long and yours is elegant and simple and powerful. Well done. You can help all three groups. It's just different strategies. With group one,

we can put them into our whisper network and introduce them to top tier VCs and say, this is one of our breakout companies that aren't raising right now. I just want you to know about them. And so that's that whisper network we created inside the firm. In group two, yeah, you want to say, hey, what are you doing? What experiments are you running and talk to them about product market fit, maybe get them more focused. A lot of times it's a focus issue. They're working on four different projects.

You know, one is their original idea. Two are like, you know, like projects that you never should have started. And then this other one is the one that's actually going to be the winner in the company. So in Uber's case, that was UberX. Yeah. Not Uber Black. Uber Black, it's great. But UberX became this like breakout global.

product. And so, you know, then in group three, I have a new idea that I've been workshopping, which is I'm going to bring a group of them together. I'm going to probably, I'm going to start doing some retreat in Austin. So I'm going to do like a retreat in Austin where I bring together a bunch of those folks who are struggling or can't clear market with investors but have some revenue, which is a struggle in and of itself because it's kind of like a trap, because you can't shut it down because it's got a million in revenue or two million and you can't raise money because it's only growing 10% a year. It's like a real trap. and see if we can come up with strategies for that group.

And the strategies for that group, I think, are going to be helping them find a soft landing, M&A, sell the assets, shut down, whatever it is. Or my other idea is, what we might have four D to C brands, and two of the founders are burnt out, and we've created a D2C holding company with the two founders who are actually inspired and say, hey, why don't we just have whichever is the strongest company

with the best cap table by the other three companies, everybody gets some equity in those and then see if we can clean up things there and create a new opportunity if they don't want to do what's eventually going to happen which is an M&A sale, you know? Yeah.

I wonder if you should just put together like a special fund just for like the got to a half million, one million in ARR and aren't growing very quickly and like do like micro PE for those companies. And it's like literally the smallest PE possible just put them all together.

There were people doing that. Like there was I think it was Tiny Corp was doing like Andrew Wilkinson's was trying to buy a bunch of companies and put them together and so yeah they have gone out and yeah here's Tiny

I don't know if you know Tiny but he's a smart cat he's good at building businesses and Tiny.com he actually got Tiny.com. He actually got Tiny.com. So they started in 2007 and seems like he

They wanted to kind of do the Warren Buffett thing. They have 11 companies they founded, 40 that they majority own, 90 to have minority investments in, 900 global employees and 19 head office team. So they're kind of like a holding company. This is a brilliant idea. I'm going to look more into tiny because this is, I've thought of this several times. Well, you know, laying there in bed, trying to go to sleep. Like, what would I do if X situation happened?

But Jason, I do want to bring us back quickly to the Q2 numbers because there is quite a lot to talk about. So we have a chart. of global AI funding through the second quarter of this year, chart's under there. And as you can see, there is something going on here that is relatively indicative of some interest amongst the venture capital world for AI shares.

Now, this chart that we're going to look at here is, in fact, influenced by the XAI round, a $6 billion series B. So that's in there. But I think that this jump in the amount of capital dispersed in the second quarter is nuts. This is just crunch-based data into AI startups. And I thought it was going to be more. A thousand deals,

20 billion. Looks like 23 billion or something. Yeah. The deal number will go up because deals tend to lag a little bit. The biggest deals with the most dollars get announced first and then the seed deals kind of fill in. So expect that to go up. But oh my gosh, that's an enormous amount of capital for one quarter for one overall sector.

It is. It's because of the clusters like we were talking about before to dovetail with the Andreessen Hart's one. Yep. There's very few times where. building companies requires massive and venture require massive capital outweighs. We've seen it historically.

We saw it in the wars, the competition between Uber and Lyft, DoorDash, and other ones supposed to make those consumer subsidy wars, I'll call it the consumer subsidy wars, like the Clone Wars. That was indicative of like, let's use capital as a weapon.

And here again, capital as a weapon, you need massive infrastructure. You're a big company like Apple, Amazon, Microsoft, Google, Facebook, and you can't do M&A. So what do you do? You do those two deals we've talked about where you buy teams and you skirt around

LenaCon. Adept and inflection AI. Yep. Thank you. Or you just build huge clusters and you beat people on infrastructure. And so, you know, it's rare that you have to have massive capital outlays and use capital as a weapon. I can only really think of those two instances

where capital as a weapon worked. The only third time you could argue were the talent wars of the 2000s. And so when Google started just hiring everybody and letting them hang out Huli style on the roof and vest, that was capital as a weapon as well. We're just going to hire people for 250K and you knew many of them here in the Valley. Oh, yeah. I had friends that were making a lot of Google money when I was in my mid-20s.

And I was like, you don't seem to be that stressed ever. How is this possible? Because my job was very stressful when I was that age in San Francisco. good. Now, before we move on to Twist 500, because I'm going to bring back that idea of capital as a weapon in just a second. But we have a table here that shows median U.S. venture capital pre-money evaluations by stage. I just want to touch on this Jason because the numbers once again blew my mind. So what this shows, this is pitch book data, their first look for the second quarter. It shows us that as time has gone by pre-seed, seed, early stage VC and late-stage VC median U.S. pre-money evaluations are. at all-time highs this year. And we've heard a million dollars for pre-seed. Mm-hmm. 2014, 1.4.

Seed 4.6 in 2014. 12 million. Now, that tracks for me. The Uber and Thumbtack data stacks rounds were all five, under five, five million or under. Wow. So I did all three of those for a $15 million dollar valuation and look like, that would be the equivalent of like the seed round now. Now, of course, you know, the, the tech economy has grown significant.

significantly and the exits are larger. I'm just saying that it's like when I look back in time and I realized like Microsoft went public and they'd raised one million in VC and so forth. Like things used to be so cheap compared to where they are now. And early stage VC, the meeting was 12 million back in 2014. Now it's 45 and then late stage went from 30 to 68. But the thing that just shocked me is these are higher than last year and they are higher than we saw in most cases even in 2021.

And if you read Twitter, everyone's complaining. about, you know, failing to make market and struggling to raise. And so the thing that I just kind of wanted to ask is, in your view, is this the impact of AI enthusiasm skewing the market's numbers for all startups? Or is it just better out there than I thought, just given what I've heard from founders that I know and plays and such? So remember, there's the group of causing correlation and survivorship bias. These are the valuations of the companies that did clear market.

So by definition, they're the strongest. And so for the strongest to go from 2019 for $4 million to a 50% increase in 20, 24 over 5 years, it's not exactly shocking to me. It's a decent, you know, 50% more. And so what you have to ask yourself is, is the prize that much bigger? Where I get concerned is early stage and late stage VC, those two moments. I think for those folks, if they don't have product market fit and you invest it at $45 million, it's incredibly hard to return your fund.

So I make all of our, from the young guns to the managing directors, when we make every investment, I have them do a very simple calculation. I'll do it with you here live on the air. Sure. We're going to invest in a company at the $6 million valuation.

Let's say we put in $600,000. Sure. Let's do it a $5 million valuation, $500,000 in a $50 million fund. Okay. We put $500,000 in. It's 1% of the $500,000. fund.

$5 million valuation. Now, we own 10% of the company. So if that company becomes a unicorn, we will have returned 10% of that $100, that billion, which is $100 million, we will have doubled the fund, not so fast. You're going to get diluted because they're going to do multiple rounds of funding. So you just take that seed stage, early stage investment. Whatever your ownership is, assume you're diluted by 50%. Okay.

It could be as little as 30. It could be as much as 60 or 70, depending on how capital efficient the founders are. Let's pick the number 50%. What that means is in order to return the fund, if we invest 1% of the fund and we own 10%, we're going to get diluted to 5 to return the $50 million. We need a unicorn to return the fund.

Now, let's do the same math for somebody who invested at a $50 million valuation, and they put in $5 million, they own 10%, and they get, they have it out of a $500 million fund. It's a $500 million fund. They own 10% of the startup. Startup exits for a billion.

They own 10%. It's $100 million. They get diluted by half. They get back $50 million. They've now returned 10% of their fund for hitting a unicorn. This is why I was asking about Andreessen Horowitz earlier.

It's so much harder to return venture-style money. It's very hard. Once the base gets large. I mean, it's... Entry price matters. I tell this to everybody all the time. entry price matter. So just do that back in the envelope.

In order for Andreessen, or in this fictional case of the $500 million fund, which is like a Series A fund would be like in that range, 400, 500, 600, 600, like a classic Fred Wilson fund at, you know, Union Square. So you look at something like that and, yeah, they have to hit a $5 billion company. No, they have to hit a $10 billion company. A decacorn. A decacorn. if they own 5% of a decacorn,

it's $500 million to return the fund. But how many deacorns are there? Not that many. And if you return the firm once over and your cash on cash returns are 1.0x. You're out of business. You're out of business. You're not able to raise you're $500 million.

You've got to hit two to stay in business. You've got to hit three to grow. There you go. Rule of thumb. And that's why nobody believes in venture right now. We are in the darkest days of venture. in my career since dot com era

this is the darkest time it wasn't as dark during 2008 everybody saw that as an opportunity because that was like this real estate idiots gave the last the last 5% of mortgages they gave were to people who should never

have bought homes right it was like we all knew what happened there so they created a housing crisis they should have never given those people mortgages those people should have been renting or they should have bought smaller homes and they shouldn't have bought three of them

they shouldn't have had people who were like cabaret dancers in Vegas buying free homes on fake paperwork I gotta say that was one of the funnier scenes in the big short great thank you for getting the reference I got the reference you you twisted it slightly but I'm gonna let it pass by like I just I like to do cabaret dancers oh I see yeah special cabaret dancers might say yes I have read the big short so there you go business book that we both read Now, I had the data for you and what you just said. So according to, once again, pitchbook data, we don't have this pulled up, but I have it right here.

U.S.-based VCs have raised $37.4 billion so far this year. That's down from $81.5 billion last year. So it doesn't sound that back because we're halfway through the year. It's on a 75, $76 billion run rate, down a couple. What people have to keep in mind is in 2022, VCs in the U.S. raised $191 billion, and they raised $177 billion in 2021. So right now, you're right. This is a very, very tough time compared to prior norms. It'll be interesting to see who's left standing after this particular round of venture chairs stops because it does look extinction level for a lot of firms that maybe didn't hit that 2x that you mentioned and are certainly not going to hit the 3x that they would need to expand. It's going to be tough. I mean, we could take the whole number and say what the industry has to return to double. I mean, there's an interesting.

So I do that math. And then I look at the. exit market and I see no one going public. I don't see a lot of big M&A and the numbers just don't make sense to me. But I've learned that the old quote about the market staying irrational longer than you can stay solvent is so true because I was worried about this back in like 2016. I'm like, where are all these unicorn IPOs? And we're right back to it and everyone's still investing. So I must be missing a trick somewhere in how this works. Did you say it was 37 billion was raised in one year? 37 billion raised thus far this year. Last year. Last year.

your U.S.-based VCs raise 81.5. So that 81, if it got deployed over four years, would be 20 billion deployed a year. But anyway, in that vintage of $80 billion getting deployed, that's got a return, let's call it, two and a half. 80 times two is 160, add another 40 for two and a half. You get $200 billion. $200 billion.

Okay, that's just, you know, an Uber and a DoorDash put together. seems reasonable. O contraire, my frere, you don't own 100% of the company. You do not. You own 30% of the company,

maybe 40. Let's be generous and say the VCs own 40% of the company. Sure. They did own 40% of the company and everybody else on 60,

40% of 200 most 80. So, you know, and then how many Ubers and DoorDashes are there? There aren't that many, right? And so.

It's venture math is tough. This is why when we talk about VCs taking time off. I'm always like, your job sounds hard, not easy. You think this would take like all your time. Like, you wouldn't have time to be in a beat time. Why do they have a lack of sense of urgency is the question you have to ask?

It's the top, well, my guess is it's the time horizon that it's very hard to be graded. Bingo. Two things. Time horizon. And then there's a second one. There's actually three I can think of. After time horizon. So what makes it, what would lead a person in the pursuit of venture capital to not have a sense.

of urgency. One is the time horizon. You know, it's like, oh, my God, I'm not going to find out if I have winners until you're six, seven, or eight. Okay, what's the second thing? What makes it really cushy to have this job?

Well, you get paid management fees whether you're doing well or not. That's number two, is you get those, those incredible management fees that, you know, kind of make it, yeah.

And I think, well, just. Because I was thinking ego just straight up. Yeah, there's something around, I was going to say entitlement. Okay. But there's a thing where you don't get fired from this job.

You just fade away. You get kind of managed out. Okay. You get a window seat. You stay on your boards and such. Yeah. Nobody gets fired in this industry. I mean, you might get fired if you, like, punch somebody or did something horrible.

And even then, it's like a golden parachute and you're spending more time with your family, whatever the press release says. I'm going to go farm alpacas in New Mexico. Exactly. Yeah. Did it change a career? So like, when's the last time you heard, Andresen-Hiroitz fired three of their partners for a lack of performance.

Tell me the last venture. You've never heard of one. I've worked at Crunch base and TechCrunch. Yes. I've never heard of a VC. And now you work at this week's terms. Actually, that's not true. I have some friends who are investors.

and occasionally we speak off the record as friends. And I have heard about how people get left off the next fund. Got, for example. Not invited to continue. Yes. But unless you literally knew what was going on inside that firm, it would be completely opaque to the outside. Because we're not,

I'm not getting the key man contracts. You know, I'm not seeing that. Yeah. So when it changes, it's hard to see externally. So yeah, it's funny,

though, because VCs love to tell founders, hire fast, fire fast, doesn't seem to apply. Are you saying vCs are hypocrites? Well, I'm saying humans. Hold on.

I need to put my pearls on so I can clutch them. Oh, my dear. I'm not trying to single them out as hypocrites. We've also discussed politics on this show, so this does come up occasionally. But I mean, there is something that I've enjoyed about that. Yeah. I mean, it's for something that I believe should be a much more intense,

I'm trying to create intensity and urgency inside my firm. and it is counter to how the industry works. Remember I said, I'm not recruiting from like XVCs. It's for this reason. They think they can just F off. They can frack off for four years, make 20 bets, and not be accountable to those bets. I'm now looking at,

I gave each person on the investment team, they're the primary contact for a certain number of companies. And they are responsible for pulling those companies through. So I found a precursor to exit. the precursor to an exit is a pull-through. What's a pull-through? A pull-through is when one of your companies gets funded by another venture firm

at a valuation or a cap on a note that's higher than the one you invested. We invested at five in like in a fictional case before, and then somebody else invested at 10 on a convertible note, and then somebody did a Series A at 30 or 40. That's something we can actually track in low single-digit years. two, three, four years.

We can actually track that. And I'm looking at the stats for my team. I'm keeping those stats starting this year. And I remember I said before, one of our big things in July is to do like a massive portfolio review. They're giving me the capsules of everyone. I'm saying, what's your plan for this company? And how do we get this company to pull through

and help the founder get to that next round of funding or help them shut the company down if they don't think it's, you know, if it's impossible to save and help them with their next company. And so I found something pull through. And I am looking at that like a hawk. Yeah. This strikes me as the venture capital firm equivalent of the advice you gave to the venture

capital analyst you were discussing earlier about working on Saturdays and Sunday. If you do the extra work, you will probably have the extra result. Speaking about extra work, you and I have decided that we're doing the Twist 500, which means that we now get to add a whole bunch of new companies. Let's do it. But if you don't know everybody, the Twist 500 is our growing, list of up to 500 private market companies that we think are the most interesting, innovative, or just fun to talk about.

Mostly we're focused on quality. We'll throw a couple of weird ones in there. But today we're going to talk about robots. Because, Jason, one of your favorite topics is remote work arbitrage. And we recently saw something that is beautiful, which is, and we have the video clip of this, a robot being used via teleoperation to stock shelves. And I'll bring this all together in a second. But John, can we bring up the video of the teleoperation robot, please?

Here we have one nerd sitting in a chair with an oculus on and a robot. You can see him moving. Now, Jason, you want to talk about this particular seven foot tall shelf stocking robot. It's a nightmare-looking robot. It's for some reason they made it black with a very thin waist and like a really thick chest with like pointed ears. I mean, it looks like something from Black Mirror. And it is putting bottles on a shelf of soda pop and iced tea. In Japan, it looks like, with a remote worker.

And this is, you know, it trended on X.com. I remember we're talking about it. It turns out this is an old clip. But I thought this dovetailed with remote work arbitrage. Remote work arbitrage, RWA. Okay. And this is something. you and I have talked about on and off the show for a while.

Remote work arbitrage. There's that Reddit where people are, I always call it overworked. It's overemployed. Over-employed. So everybody's looking at remote work from home or a globalization and saying, how do I optimize? So here's over-employed on Reddit. Over-employed tells all kinds of story to tell.

Some of them are true. I'm sure many of them are fake. Developers mainly, but sometimes marketers, working from home, having three jobs, and then figuring out when they have to be on a stand-up call and they're on two at the same time, how to arbitrage that, and how to deal with if they get called on.

But they have two laptops open, and they're working the two jobs. They're on two zooms, and they know how to angle them. And if they get called on, simultaneously they say, I'm having an internet problem. Let me reboot.

They reboot one computer. They finish what they're talking on the other one, and they say my internet went out. And boom, they got to reset the router. Anyway, they got the whole list of possible excuses. Oh, I spilled my coffee on my keyboard. I'll be right back. And then they have a keyboard.

They're stained in coffee. Like, they have all kinds of dashially tricks. So that's the employment side. Okay, now let's go to the employer set. Do you remember? I think you were co-hosting at this time. There was a chicken shop making chicken sandwiches or something on the east side of Manhattan. And people went in there and there was a Zoom call and they're like, what?

Oh, somebody left their computer on with a Zoom call. And then this woman from the Philippines is like, can I take your order? Yep. We have the video of that. Here is the chicken shop. And here is the woman. And you know it's Zoom because they haven't taken away the little bar at the bottom that shows for Zoom options. Well, it's a little, it's a little bootleg.

You know, it could be. It's kind of bootleg. It's not refined. It's hacked. They hacked it together. Yes. This is hacked together. This blew my mind.

And then there's also another example that we were talking about before the show, which is remote humans, remote EAs. You love to talk about Athena. but we've now seen teleoperation of robots. We've seen people zooming in across the world to do face to face and then also back of office help. So to me, the overall thing here is that remote unlocks quite a lot as long as you're not lying to your employer and trying to collect multiple page apps.

Let's call it what it is. Capitalism, arbitrage. When I see overworked, overemployed, you know what I see? I see entrepreneurship. I was confused by your so much. unhappy with them. I'm like, these are something

great employees to me. I'm not super, I mean, I think it's unethical, right? Okay. Okay, it's obviously unethical.

There's a bunch of issues with it where you could get sued and then there's, you know, IP issues. This is a plethora of issues. And it does create a little bit of chaos and mistrust

that would ruin remote work for everybody. So there's that. Putting it all aside, if you're a developer and you can do three jobs and people are happy with your output and you're as a manager too stupid to manage people correctly and say,

this person's working three hours and the other six hours they're working for two other companies and you're not smart enough to know that, then, you know, I think it's on the manager, right? I think the problem here is there's a reason why there's, I've, I've never heard of a journalist having two full-time jobs at the same time. I've never heard of a lot of industries. I think the reason why developers pulled this off is they have built a culture in which people will leave them alone to work because they demanded protected time to have deep work focus.

And to be clear, that makes a lot of sense. I'm totally here for it. But it also creates the ability for them to be less responsive and have it be totally normal. So there's a lot of blame to go around here. The thing that I wanted to talk about, though, and the reason why I wanted to have all these different examples is, to me, it seems that the idea of teleoperation of robots is going to become quickly posse. I still think we're going to have humans zooming into things. I still think we'll have humans doing remote work from the Philippines or from the U.S. or from wherever.

But the teleoperation robots, I think, is going to get squeezed out because it turns out there are so many companies today working on humanoid and humanoid-style robots that were adding to the Twist 500. Optimus is one. Human is one. So they're studying. What's your 100% correct? So there's one issue of robotics and then the other issue and learning.

And then the other issue is just arbitrage. Should we got these arbitrage? charge examples. Athenawow.com if you want to get like a free month, I think, or a couple of weeks free from my friends over there. I'm an investor in Athena. And we have two Athena assistants working. It's $3,000 a month, $36,000 a year.

You can swap them in and out. They're trained. If you don't like the one you're working, which you just swap them out with another one, they're unbelievably good. And, you know, what I found is people who are taking those what I'll call operations jobs. They're not just EAs.

They're kind of like operations people. When I hire operators in the U.S. market, they cost twice as much. So they're going to cost 50, 60, 70, 80,000. If it's in a major city, it might be even more, 90, 100, 120 in San Francisco. And most people are not looking to stay in that job. They're looking to use it as a springboard. So now you're paying two or three times as much. And then the reward for finding somebody great is they leave to go to another job. So you have to replace them every 12 months or nine months or 18 months. And then if you ask them to do certain things, it might be above or below their pay.

in their mind, Americans are hard to manage because we are one of the most successful, driven countries in the world. For other countries that are emerging and frontier markets, the idea of getting a job with an American for $36,000 a year is just mind-blowing. It's a lot of money, a lot of markets. I mean, the Athena assistance, from what I understand, they don't get the whole 36, but they're the 0.1% of knowledge workers in the Philippines and wherever they're based. putting all that aside, I do think,

you know, there's something happening here where, you know, everybody in this global free market because of how good Zoom is, you know, look at us here,

co-hosts in a show from random states. It used to be, we'd have to be in the same city. Remember those days? If you wanted to be a podcast or you had to move down at life? I kind of miss those days.

Sure. I do miss getting paid at my job to walk places. I used to like walk to meet that's kind of fun, actually. Yeah, because I would go outside

and I would like walk down the street. And then I would sit and order a coffee, talk to somebody, and then I would go back to the work. Now I just, like, hop between Zoom calls and my life's worse. But, yeah, anyways. Anyway, you're talking, speaking to the socialization issue, which is very real, and it's having an impact on people. So anyway, this is a trend.

We're going to keep looking at remote work arbitrage. Yes. Remote work arbitrage. If you have examples of it, email us, you know, give us examples. Any remote work arbitrage on either side of the equation, We're kind of interested in it. I think I'm seeing it myself.

I was doing, I talked about this with Sunny on the AI episode this week or last week, where I was looking to hire people in Austin for a job. And I asked it to give me the high, low, and average hourly rate of this position. It was a domestic position. And I said, put it in a table and give me citations. It did it.

Now, this would be a knowledge workers, job last year, a knowledge worker at $30, $50 an hour. In fact, I might have used my Athena assistant to do that for me. Right. And now the Athena assistant can do that as well. So the last piece I'll say on the RWA is what I'm seeing at Uber, Airbnb, Google, Facebook, and others, which is 30% growth, 20% growth year over year. Same number of employees.

I want everybody to think about that. can you get can you grow a firm 30% year over year, 50% year over year, but keep the number of team members the same? I think you can. And I think it's happened for three years in a row now. Part of that was these organizations were bloated. So you're getting rid of all these VPs and middle managers and product managers who maybe they should have never been hired again to dovetel the other story where he said

people were using capital as a weapon at Google to hire talent and keep them from working somewhere. else. They literally, the co-founders of Google did that as an explicit strategy. If we hire you, you can't work for a potential search engine competitor or an advertising network competitor until Facebook came along and started out betting them for people. Offering even more money, exactly. Even more money. But Facebook and Google are going to have the same number of employees for five years, I predict, and they're going to have their revenue go up. I think the number of employees at Google and Facebook, five years from now, will be the same number of employees, but the revenue will have done.

I think the way that I would phrase that bet is revenue double staff goes up by 30%. Okay, fine, sure. Yeah, but I mean, but your point stands. I'm not undercuting that just that there is rising efficiency. And this, I presume, trickles down to startups. People now probably expect higher ARR per FTE at your average SaaS company. I'd say it starts with startups because startups are resource constraints, so they have no choice but to be efficient.

That's always been their gig. And so we see companies like Podcast AI as but one example. And they just do so much with so few people. And so I think we're entering the age of, it's almost like stand-up comedians or a solo guitar acts like Bob Dylan. I've always been enamored by those. Why? Jerry Seinfeld or Kevin Hart,

I'm friendly with Kevin Hart. and I went to see him when I was in Dubai. And I was talking to him after the show. And I'd seen him before the show, and I'd seen him after the show. Hung out with him in the green room. It was very nice. He's just such a really charming guy and talented.

And I just was enamored by how he could go to Dubai, do three shows, just him. Now, he has friends in our entourage or whatever if he wants to, have people around. Oh, we mean on stage, it's just him. It only requires him. Yeah. It only requires him.

He could literally get off a plane, private jet, commercial jet, go somewhere, and entertain literally 10,000 people at $200 a ticket, on average, $100 a ticket, whatever it is. Jerry Seinfeld, probably more. I don't know who's the king of the- Dave Chappelle. Dave Chappelle. I mean, there's these comedians who can just pack rooms. And then there's, you know, if, you know, Jack Johnson or, you know, Grimes, a DJ. Now, a DJ might need a stage show and there might be a little bit more to it. But even still, a DJ could just show up with a thumb drive and a dope set and just crush it.

So I think that's kind of what startups are when compared to the big companies. The big companies have infrastructure. They have a campus. They have all this stuff. When they move, they move, you know, they take big steps like a giant prontosaurus, like some giant dinosaur. They just lumber. But when that foot lands, it shakes the earth. like AWS launching a product, right?

And startups are like the Raptors. You know, little pack, zip, zip, zip, slaughtering what's around them. And so the AI stuff, that's where I learned about Athena, actually. I was looking at the startup, and I just saw startups talking constantly about having an Athena assistant, instead of having the proverbial jack of all trades

or Jane of all trades or they, them of all trades. Thank you. Thank you. Yes, I'm trying to be inclusive. And the chief of staff role, this essentially replaces. I mean, well, what do you need that role for? So the age of efficiency is here and there's a lot of remote work arbitrage. And I think this is a trend for everybody to just be aware of. I don't know that it results in dramatically less employment. I think what it results in is a global balancing of salaries. So just. Oh. Yeah. Well, interestingly enough, the RTO movement is the biggest movement is the biggest, I think, piece against a harmonization of salaries around the world. Because then it says that you have to be in San Francisco to make San Francisco money versus making it available more broadly.

But that's another here and or there. That's return to office for those of you return to office. Return to office. Yes. No, that's what we're here to do is to make sure of, I listen deeply to what you're saying and just make, I channel the audience. And I heard RTO and I'm like, oh, return to office. I wonder if they know that. So return to office is a thing.

We talked about it last week. Yeah. And we're going to talk about that. Let's wrap. Yeah. Let's do it. So we have 10 companies that have raised a combined. $2 billion and we have a table I'm going to show you here to run you through the names of these firms.

So I have ranked them by capital raised. These are the companies we've added so far in the robotics category. Figure, Brian Machines, Agility, Bear 1X, Collaborative Sanctuary, Apptronic, Minty, and Oversonic. And Jason, I'm going to show you a tiny clip of each one until you why I think they are fantastic. Shall we go? Let's do it. I love this. Figure.

Let's do figure first. This is the figure bought inside of a BMW. plant picking up a piece of car. I don't know what that is, some sort of component. And it's showing how it looks like a floorboard to me. Thank you. I'm glad someone here knows what it is. And there's going to be some text coming up here that says it has a less than three

centimeter tolerance. That is not great. But I do think that we are still seeing these robots improve very, very quickly. Figure has raised $854 million. And I think it's probably the best known startup doing humanoid. robots that are powered by AI. Of course, Tesla has its own and so forth, but not a startup, not in the same way. So, yeah, this is figured.

Now, let's go to Bright Machines. Bright Machines is the second best funded company that we've added in the robots category to the Twist 500, $437 million raise. And they are doing robotic micro factories informed by AI. So not humanoid robots, but modular micro factories that are powered by AI. I think this is one of the coolest. things I've ever seen, period, and they're doing various different types of manufacturing with them.

This is like the thing you see in the three body problem television show, like high-end manufacturing and like on site, not off in some different country or somewhere else. This is like in your warehouse. I think this is just- These are tethered. They cannot go walk around a factory. They're locked in some portion of the factory on the assembly line. Got it.

And then we have agility robotics. Now, this bad boy. looks human, humanoid. Okay, cute. That's generous. Yeah, I like the big eyes.

Big eyes always make you look cute. That's like a classic Disney thing. But watch it, watch how its legs function. So unlike along these robots that are trying to be literally like humans, this is what I would call human-ish. Might be cheaper.

Designed for warehouse work. A lot of these robots, by the way, are designed for in warehouse activities because we don't need humans probably carrying all those boxes. I think it's adorable. The company has raised $178 million.

And as it says, there are different effects. It has horse legs. The knees are backwards. So for some reason, horse legs and it looks like a minotaur. It's a minotaur, Alex. It's the bottom half is horse legs and the top half is human. Isn't that a minotaur? No, that's a centaur.

A centaur. A minotar. Oh, yeah. Well, a minotaur is human down. then a bowl up, I think. Maybe. Anyway, it does look like it is some Greek mythological animal. The cute version.

Then we have bare robotics. And this is another one that I'm really excited about. So Jason, just, I want you to just watch 10 seconds of this and tell me how adorable these robots are. Because this, when I was prepping this, this made my date. Okay. Okay. So they're little R2D2s with four, one, two, three, four, three or four trays. And they're zipping around with.

food on them. I've seen these. There is a movie theater chain. There's one in the Hillsdale Mall in the peninsula here in the Bay Area. They're closed at that mall and they put the food into it and it drives the food to each of the individual theaters. And then there's a runner in each theater who takes the food from that there. And so when you're walking to the movie theater, that hallway has these type of robots. These things do seem like for room service at hotels would be epic. And when I was at Disney, I went to like the pizza and pasta place.

You know how kids are. We were by Space Mountain and Star Tours. And they had reconfigured the cafeteria that you, because they have a Disney app now that has ordering in it like toast that startup. And we should probably put toast, make a note about toast. And instead of like having people order food, you order in your app, then it tells you to go to a certain stand and your, food is being assembled there. So the Cloud Kitchens movement, the Toast movement, because of

a lack back to the labor arbitrage that's occurring, they're arbitrage charging. What Toast does in terms of labor arbitrage is they take the labor that was the business's responsibility and they put it on the consumer. So let's make a note of that type of labor arbitrage. And so that's what's happening here. This robotic is part of that labor arbitrage. Eliminating. There's a version of this called the the Butler, the Butler, B-T-L-R that I say. saw a thousand years ago when I was at Tech Wrenching my first stent and it was designed to do room service. But the reason why I like bear robotics is it's raised $176 million. So it clearly has enough of a commercial footprint to raise big boy capital.

So I think it's I think it's going to be in and around the world. All right. Next up, one X technologies. Another humanoid robotics company raised 136 million. These are on wheels and they appear to be a little bit like those wavy guys. You see it like a car lot. They just seem oddly stretched. I'm sure this is lovely.

They cleaned up some coffee in this video. Just another example of a well-funded humanoid robotics startup. Moving on. So here the robot is going to sort individual things onto two different trays. And the whole stick here, the reason why they have the clock in this shot is that they say can do it about as fast as a human. Now, clearly, it's a test. It's a demo, et cetera.

But I think it shows dexterity and speed. And that speaks well for the whole industry. Next up, Aptronic. This is a special shot. Jason, I went through their entire YouTube channel, and I found you the one in which it shows them shooting the video of the robot. So this is the behind the scenes version of it. I pick it because Aptronic has raised about $30 million, and they built a robot that can walk and can do things. So I wonder if the barrier or the barred entry into this humanoid robotic space is maybe a little bit lower in dollars raised terms than I expect.

And then two more, Menti robotics. Here's the mentee walking around someone's office following directions. She just says, follow me, Menti, bots, and then the bot follows. And then it takes, I think, scans the office she's walking through to make a map of it for itself. And then finally, we have Oversonic Robotics. They've only raised $5 million euro as far as I can tell. I think they're Italian and it's going to, I think, get some other international kind of names on the $1,200. So that's 10 companies, $2 billion raised, mostly working on humanoid robotics.

The thing that I took away here is AI plus robots is going to be awesome because they can think more, they can do more, they can just be more varied. And also, there's a ton of different ideas about how to build the best robot. Electric systems or pneumatic systems, how to handle the effectors, their hands.

So much cool stuff here. This got me super stoked about what's going to be coming the next couple of years. I just can't wait. I think it's a great start. If you have more robotics companies for us, then just hit us on Twitter, X.com slash Alexx.

So Jason, give us your suggestions. We're starting with 10. It gives a really good overview. What I saw in there just general observations is, you know, these things are slow. They're very slow. Yes. But they don't need a break. So if they're half the speed of a human and a human works an eight-hour shift and humans make

mistakes and these things theoretically don't make mistakes or at scale, they won't make mistakes, they can beat us. If they're half the speed of us, they can beat us just by working 24 hours a day or 23.5 hours a day. like the CafeX machines do. And the CafeX machines are faster and they are perfect. So that's the thing we realized when we did CafeX eight years ago.

They told us like 40% of Starbucks orders have a mistake in them. Either they're cold or they got it wrong or whatever. I believe that. And that was like an internal Starbucks number. They quoted us like from some internal report. Like we got to get our, you know, we got to get orders tighter.

Now, I'm sure doing app orders, again, putting the work arbitrage on the consumer. there it is. Make the consumer do the work is a great insight. These things have to be faster. They are going to show up soon. And everybody's trying

slightly different footprints. You have to wonder, like if two arms are good, why not have four arms? But what they're trying to do is make humanoid robots, I think for two main reasons. One,

the general applicability goes way up when they have the human form factor. the world is designed for humans. Yes. Therefore, any job that a human can do, these would have the footprint to do them, whether it's, you know, doing dishes or making a latte or working in a factory.

So, okay, mission accomplished there. That's why they're doing it. And I think maybe the second reason is so that they get adopted by the public. The public accepts them, right? Public acceptance, I think, is if these things look like us, they act like us. They are friendlier than us. I think that's a big part of like the,

when they steal our jobs and they take our work, we'll be like, oh, we used to do that work, but you do it really nicely. You've got really big eyes, as Jason pointed out. Yeah, big eyes. So you kind of look like a Pixar, Disney character. So I'm good with it. You can take my job.

I'll just sit home and listen to podcasts. I'll just stay home and collect my UBI or universal basic income. I'll collect my UBI. But this is really, I think, great collection. I think a great start. And some companies are going, it's a harder task to build a human one and it's a harder task to use an LLM or

general AI. It's going to take longer to do those, but when you do succeed, it can do many things. That's why I'm excited. These are not, this is not a dishwashing robot. It's going to be a humanoid robot for your house that you can ask to do things. And some of these

examples that we just saw do have the ability to chain different actions together to do a complex, I guess the robot equivalent of answering a query, which is doing actions to fulfill the ask. Tell me what there was that famous humane. It was like, give me something to eat. And it looked at a bunch of stuff in front of it.

And it took from a bunch of non-edible items, the apple, and handed to the person. So it was kind of like, oh, yeah, an LLM could do that. Or, you know, if you can ask an out, you can take a picture of what's in your fridge right now and say, what can I make? And ChachyPT4 and Claude and all these other ones can do that. You can take a picture of a bunch of food. And I'd be like, you could make. Fetuccini Alfredo, you could make lasagna. You know, it would actually tell you what you can make based on the ingredients,

which means robot plus LLM means you could tell the robot, what do we have in stock? What can you make me? And it's like, well, I can make you. If that union happens on the timeframe we expect, and at the quality level we anticipate, it's going to lead to an entirely different world for everybody. So I'm hoping that that pays off.

And that's why, by the way, just in those 10 companies, as I said, $2 billion invested. Not a huge shock. Before we wrap, we are talking also about housing and construction startups for Friday. We're going to be back for March 200. So we'll do the same format. 15 minutes, 10 companies, a little bit of commentary. We get them in there.

We've already had 60 submissions. I think 60 or 70. And some of them, I'm already pulling them into spreadsheet. Some of them have multiple votes. We're going to get extra attention to the ones they get the most community love because that often gives us a great signal for what people like in the market. lots to say there. So I'm AlexW at launch.co. If you have a construction tech, a housing tech, or a robotics tech company, let me know we'll talk about it on the show. Awesome. All right,

it's been an amazing episode. Founder Fridays are coming up and you can go to Founder Fridays.com. Are you doing a, um, are you doing like an outro for every episode now, Alex, or is the team doing that? I know you're executive producer now. So I have been doing the bumpers for all the, uh, Liquidity Summit things, but I can definitely, I can take the outro. We've been trading off essentially the outroes, but I can do it. I think we should do like a little package at the end of the show just of like all the things to remember. So FounderFraud is that tech is a good thing to remember.

Quist500.com is a good thing to remember. TWI Startups. Stubstack.com. Bianca is doing a multiple time a week newsletter now where she's going to talk about the show and the things we're working on. So you can just stay up to date. Don't forget to subscribe on YouTube. and hit the bell, post some comments on YouTube.

We're going to start reading those on air. Best comments on YouTube, we will surface on air. So do you want to do one question? Yeah, let's do a question live. Why not? All right. Now, Jason, we're going to go ahead and do one very standard question, and then we're going to do a silly one just for fun.

So really quickly, from Sezaku 85 on YouTube, this is for Jason. In your view, what is the most interesting AI company you have backed this year? Putting you on the spot. I love doing this. God. Yeah. You know, I think podcast AI, because I love podcasting, you know, just have really amazing product velocity. And so I'm pretty enamored with that company.

So I go to podcast AI. They're doing really interesting things now. Like, you know, we spend a lot of time on the docket. They're making it so you can just do your docket with podcast AI. So let's say you were doing a corporate podcast. You could put in all of your inbound. like your blog, social media, whatever, keywords, and then we'll say, hey, here's things for you to talk about on your podcast.

Pretty neat. So you take the docket process, right? We have the Twist 500. You can go to Twist500.com. Imagine taking all that data and just saying, hey, go find us the latest news on these companies and put it into a docket and then rank it by what's most important. Now, AI is going to do like a 40, 50% job, but it'll get 10% better every two or three months. So I think maybe a year or two from now, you could actually,

actually do the docket for a popular podcast or 80% of it, you know, or have like a starting point, right? So I love podcast AI. There's another one called Jenny AI, J-E-N-N-I dot AI. And this is for academics and, you know, a lot of people in, here's the thing, it just helps you write and do citation. So again, very verticalized AI. So if you were writing your paper, college, academia, it's just going to really do a great job. Stanford uses a pen uses at Oxford businesses. So just for writing, citing and editing, you and I are Word sells. Um, really, really great product. Versus shape rotators. That was a weird week on Twitter. All right. Um, and we're going to grab one more just for fun. Donnie Waller. Hi, Alex and Jason. I'm a solution architect at Twilio segment. I own Twos.

Starting a video called segment recipes that is a tech cooking show with a colleague. Is buying an AI laptop a good idea to run my own video models. Now, AI laptops are a relatively new Microsoft invention as part of the Windows 11 umbrella, and I want to know if they're any good. So, Donnie, yes, buy one, use it. And if it's terrible blog, I'd do video about that. But I mean, if you're a Solutions Architect at Twilio, you can afford the laptop. Don't overthink it.

Go out there. Buy good tools. Yeah, I think if you're going to do any type of models, you're going to do it in the cloud for now. And it's not that expensive and people are giving it away for free. So just apply to Andreessen Horowitz and get some of their cluster. They'll give you $5 million and a free cluster. So all the way back to the third of the show. That's how we do it. It's called a callback. Shout out Kevin Hart. All right. He's Alex. I'm Jason. We'll see you next time. Bye bye.