This Week in Startups - Inflation cools, how Waymo handled a crash, and the next startups to go public | E1965

Episode Date: June 12, 2024

This Week in Startups is brought to you by… Eight Sleep. Good sleep is the ultimate game changer. The newest generation of the pod, the Pod 4 ultra has arrived. Head to https://www.eightsleep.com/twist and use code TWIST to get $350 off the Pod 4 Ultra. Zendesk. The best customer experiences are built with Zendesk. Qualifying startups can join their Startup program and get Zendesk products free, for six months! Visit http://www.zendesk.com/twist today to get started. CLA. Innovation takes balance. CLA's CPAs, consultants, and wealth advisors can help you get from startup to where you want to end up. Get started now at ⁠https://www.claconnect.com/tech * Todays show: Alex Wilhelm joins Jason to discuss Waymo crash implications (3:53), Apple's AI announcements post-WWDC (17:17), inflation cooldown (27:21), and more! * Timestamps: (0:00) Jason and Alex kick off the show (3:53) How Waymo handled a crash and self-driving car standards (8:08) Eight Sleep - Head to https://www.eightsleep.com/twist and use code TWIST to get $350 off the Pod 4 Ultra. (10:04) Car safety technology (17:17) Apple's AI announcements and stock impact (25:41) Zendesk - Get six months free at http://www.zendesk.com/twist (27:21) Inflation update: Recent CPI data and its implications (33:34) High interest rate environment and venture capital (40:48) CLA - Get started with CLA's CPAs, consultants, and wealth advisors now at ⁠https://claconnect.com/tech (42:12) 10 companies most likely to IPO * Subscribe to the TWiST newsletter: https://www.ticker.thisweekinstartups.com * Subscribe to This Week in Startups on Apple: https://rb.gy/v19fcp * Mentioned on the show: https://www.reddit.com/r/SelfDrivingCars/comments/1cxo27o/waymo_car_crashes_into_pole/ https://www.theverge.com/2024/6/12/24175489/waymo-recall-telephone-poll-crash-phoenix-software-map https://techcrunch.com/2024/02/13/waymo-recall-crash-software-self-driving-cars/ https://techcrunch.com/2024/06/12/waymo-second-robotaxi-recall-autonomous-vehicle/ https://www.cnbc.com/quotes/AAPL?qsearchterm=aapl https://www.bls.gov/news.release/cpi.nr0.htm https://x.com/ashugarg/status/1800658425040253309 https://www.cnbc.com/quotes/US2Y https://www.wsj.com/livecoverage/fed-meeting-fomc-interest-rate-decision-cpi-inflation-june-2024/card/traders-firmly-expect-a-rate-cut-in-september-q8qGgjh8jorUx56RBpK8 https://kalshi.com/markets/ratecutcount/number-of-rate-cuts#ratecutcount-24dec31 https://www.cnbc.com/2024/06/12/fed-meeting-today-on-interest-rate.html https://www.crunchbase.com/organization/databricks https://www.crunchbase.com/organization/gusto https://archive.is/fGJav#selection-2217.0-2226.0 https://www.crunchbase.com/organization/shein-b79e https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001514587&owner=exclude&count=40&hidefilings=0 https://www.crunchbase.com/organization/turo * 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: (8:08) Eight Sleep - Head to https://www.eightsleep.com/twist and use code TWIST to get $350 off the Pod 4 Ultra. (25:41) Zendesk - Get six months free at http://www.zendesk.com/twist (40:48) CLA - Get started with CLA's CPAs, consultants, and wealth advisors now at ⁠https://claconnect.com/tech * Great 2023 interviews: Steve Huffman, Brian Chesky, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland * Check out Jason’s suite of newsletters: https://substack.com/@calacanis * Follow TWiST: Substack: https://twistartups.substack.com Twitter: https://twitter.com/TWiStartups YouTube: https://www.youtube.com/thisweekin Instagram: https://www.instagram.com/thisweekinstartups TikTok: https://www.tiktok.com/@thisweekinstartups * Subscribe to the Founder University Podcast: https://www.founder.university/podcast

If you launch a crypto project, maybe instead of a free market, if you want to be able to do it in the United States, you have to state your position on the project's website. You have to disclose all the owners above 1%, how they're affiliated to each other, just like in an IPO, you see like the major holders. And then if they want to sell their tokens or move them, they have to file and say, hey, I'm going to be selling these, just letting you know, because obviously, I have inside information because I'm writing the code. I'm writing the code under which this token works. I mean, you want to talk about an advantage. The advantage of somebody who's writing the code of how the project works, that's like being like, I control how the money is printed,

how the diamond mine extracts diamonds and you're the buyer of the diamonds or you're buying into the system, but you don't even know how the printing machine works. Maybe I can print a billion dollars, maybe I can print a million. You don't know. This is all about disclosures, and I think a regulatory framework would be a really, really great step forward. This week in startups is brought to you by 8Sleep. Good Sleep is the ultimate game changer. The newest generation of the pod, the Pod4 Ultra, has arrived.

Head to 8Sleep.com slash twist and use code twist to get $350 off the Pod4 Ultra. Zendesk. The best customer experiences are built with Zendesk. Qualifying startups can join their startup program and get Zendesk products free for six months. Visit Zendesk.com slash twist today to get started. And CLA. Innovation takes balance. CLA's CPAs, consultants, and wealth advisors can help you get from startup to where you want to end up. Get started now at cLA connect.com slash tech. All right, everybody. Welcome to this week in startups.

We're live across all channels, Twitter, LinkedIn, and of course, YouTube. Go search for this week in startups on YouTube. You can follow my partner in crime here, Alex Wilhelm. He's Alex on X.com slash Alex. I'm at Jason. We're going to be going live with news three days a week. That's our goal. And this is the first week we've done it.

Congratulations, Alex. It took a couple of weeks, but here we are. We are doing our third news program of the week. It feels fantastic. I love podcasting because I am a yapper, I think, to use the modern vernacular. And so I just love doing this. And the cool thing is, we're talking about this just before the show, is that unlike many summers in the past, when news was slow down, everyone would go on vacation, kids are home. No one's really working.

Things are so busy still in technology that we actually have to cut a lot of stuff from today's show docket. So, we're back, man. We're back. And I think it's going to be, you know, they had that hot girl summer that Megan the Stallion did. Then they had hot boy summer. I'm calling it right now. It's hot tech summer. Okay?

We got big docket energy today. And it's hot tech summer. We're going to be with you the whole way through. The docket today, I know I had sent you a couple of items. There was this waymo crash. Yes. You got the Apple post WWC glow and performance I want to get into. Mm-hmm.

And then, you know, you know, you know, you know, you know, it was just a little bit more. And then you ought to talk about inflation and it's cooling. And then we got, hey, we really are into this twist 500.com. We're going to be tracking the 500 most important private companies. So if they haven't gone public yet, they're not Uber, DoorDash, and Google, we're going to be covering them as part of this database project to track the top 500. Today we're going to start with our top 10 startups most likely to IPO. But let's get into the docket.

What happened with Waymo? So this was interesting to me because self-driving cars have gotten a lot of bad press lately. And so it was really good to see, I think, Waymo being incredibly proactive. So go back about a month, a Waymo self-driving taxi ran into a telephone pole. And we have a picture of it coming up now if you're watching the video. And it's a crash that you definitely don't want to see from anybody. But I do think that self-driving cars are just held to a very high standard, Jason. And so we'd expect them to be flawless.

Some mistakes like this are a big deal. The news is that this week, Waymo has executed a software update for all 672 of its cars. This is technically a recall because it's an update. It's software. So to me, doesn't really meet that threshold. But that's quick. A couple of weeks, new software, patched the issue, be proactive about it. I love it.

Yeah. You're absolutely correct. These are held to a higher standard. There was nobody in the car. The car was coming for a pickup. It was in an alleyway. And in the alleyway, instead of the phone poles being. on the sidewalk where they belong,

they were in the road. There were some lines, but this was an edge case. So when you hear about self-driving or any new technology, edge cases are super important. You'll hear people talk about five-nines. That means the reliability of a system,

99.59.5-9s would be 99-9-9. So when you have a data center, you want it to be five-nines. When you have a 911 call system or a military satellite, these things need to have really good uptime. That's what we're seeing with self-driving. That's why

these things aren't on the highways yet. The cost of this accident on a highway would have been death, dismemberment, you know, it could have been catastrophic. But if these things are going on average, probably 20 to 35 miles an hour, the chances of death at those speeds is incredibly low. Now, are you going to break your leg or could it kill a dog or a child, of course? Yeah. But here, eight mile per hour crash into a phone pole, I want to see these kind of accidents. These are the accidents we want to see now. A little tiki-tacky, and then hopefully these systems become more reliable. And to your point, higher standard.

There's a much higher standard for robotaxies than a taxi driven by a human, 30, 40, 50,000 people dying every year from drunk driving, distracted driving and speeding and reckless driving. You know, we know the short list here. These things don't have that. So it'll be a 10-year process, I think, for us to trust these things fully. But people are trusting them in San Francisco and Arizona, despite this, you know, tic-tackey, eight-mile-per-hour fender bender, I guess is the best way to describe it. So I wanted to bring it up for that reason. Yeah.

I mean, the pole looked fine. The car looked dinged. You know, it wasn't like it ran into it and split the Jaguar eye pace in half. It wasn't going 90. It was down an alleyway on an edge case. It hit it very slow. but still, to weigh most credit, got on it quickly,

proactively went ahead and did the recall, didn't get forced to by the government, which I think is a way to show good faith up. As opposed to what happened with Cruz, which was bad faith, right? Yes. Cruz, man, I mean... What a disaster.

I mean, just summarized for the audience. Yeah. Yeah. So, Cruz got in trouble a couple months back because one of his cars hit a pedestrian and dragged him for 20 feet. The extenuating circumstances are that a different car

hit the pedestrian first, knocked the person into the way of the cruise car, which then dragged them. Talk about the edge case of an edge case, right? Yes. But there's a saying in politics, it's not the crime. It's the cover-up. What did cruise do? Cover-up is worse than the crime, yeah.

They submitted a video that didn't include all the footage, and then they got in trouble for it. And now they are slowly tip-doing their way back to market. Waymo, on the other hand, being super smart here. This is their second recall of the year, by the way. They also had a recall back in February after a couple of the last. Lwamos ran into the same towed pickup truck in Phoenix. So clearly, again, not good.

But have you ever seen a 16-year-old with a suburban? Especially if they've been smoking weed? I mean, that's terrifying. So I'm just less scared of these cars than I am of children driving multi-tonned vehicles at 80 miles an hour down the highway, as if that makes great sense. You've heard me talk about how great my sleep is. Sleep is a superpower and my superpower is eight sleep. They've got the amazing pod that you add to your existing mattress.

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So here's what I want you to do. Get the sleep you deserve at 8Sleep.com slash twist and use the code twist to get 350 bucks off of the Pod 4 Ultra currently shipping to the U.S. Canada, UK, Europe, and Australia. I love this product so much. I designed to invest in the company. literally was that guy who I was driving recently and a kid in an old, like, classic BMW pulls out of their driveway without looking like, and it just almost takes out my car

and the two people who were on a hike on the street. And I got out and I just talked to the guy and I just had great compassion. I said, hey, what's your name? I was names? You know, 17 years old. I said, you got this great classic car. It doesn't have a review mirror in it. It doesn't have a backup camera or beam.

beams. So if you got a cool car like this, just make sure you go extra slow out of the driveway because, man, if that kid had been there, you'd be in jail right now. Or if you hit my car, your parents probably take your BMW away from you and they probably wouldn't fix it. So I'd had a nice conversation with them because I just saw myself, you know, when you're 18, 19, 20 years old, your frontal lobes are not fully developed. You're going to make stupid decisions. This is why the technology in a Tesla needs to be replicated in all cars. It must be standard, which is you can speed limit the car and you know where it is. And some people, Tesla doesn't have this one, but I did bring it up with Elon. I'm going to remind myself to bring it up with them again,

geo-fencing the car for the teenager key, because you give keys now in a Tesla by person, not just by car. So you can give a key, you can speed limit it, but it should also, and I don't know if they have this yet, but it would be a very cool feature to geo-fense it. The car is not allowed to leave the peninsula. It's not allowed to leave. It's not allowed to leave. Brooklyn. You know, so you can have that conversation with a kid, but if it does leave Brooklyn, you know, it's on the Brooklyn Bridge. My parents didn't know we were going to Manhattan with their car. It would send them a text message. And so I am really in favor of trust, but verify, and there's a great piece of software for, you'll deal with this now that you have babies called Bark, B-A-R-K.

It monitors kids' phones and devices. And, you know, if a song or a YouTube video has something in it, That's inappropriate. It sends mom and dad a text message. It tells you how to have the discussion with your kids about the topic. And then it also does like these educational things. Like, hey, by the way, this emoji is for cannabis. This emoji is for sex. This emoji is for this.

And so it's not like a nanny. It's more like a guide on the side, best friend. Like, hey, you know, or a guidance counselor. It's kind of like having a guidance counselor. So I just want to give a shout out to the Bark team, B-R-K. Okay. Jason, I have so many thoughts about this. So first of all, the geo-fencing thing for cars is one of those things that my first thought

about it. I'm like, that's an amazing idea. And my second thought is, how would I have liked that growing up? Man, that's tough. We were free range. You got to remember. We were free range. And we probably took a little too much risk, which made us strong as Gen Xers.

We've had this conversation. And we have claimed you in the Gen X draft. I talked to the millennials. We won that trade. So we gave up, you know, so. some some annoying gen Xers to get you. I don't know if it was on a lot of small. All the Smashing Pumpkins fans.

Yeah. Gave away some smashing pumpkins friends. No one's going to get you. But I do think like there's a good balance here. And the one I like is trust but verify. So I think it should like, hey, you're leaving Brooklyn. And it fires off a notification to you, mom and dad on the same thread. Oh, that's really.

Yeah. Just wanted to make sure everybody's in sync with this. Like, I just think. those kind of things are cool. And I set speed limit regulators on all of my cars, just so nobody gets speeding tickets, and everybody gets reminded to be safe. So, you know, everybody can make their own thoughts on this. And for our family, I don't mind a little bit of spicy language in music or I don't mind

a movie having a little cartoony violence in it, like fallout the TV show. But, you know, I do want to know about drug mentions or sex or maybe, you know, some other things. suicide, self-harm, all of that stuff, depression. And so I do think, like, there are tools, and we just need to get to a 16-year-age limit. We talked about this on the show Monday, I think. Yeah, Monday. When we talked about, what was the startup called? Fizz.

And I didn't get any reaction from them yet, but I just want to, I thought about it afterwards, because I was a little harsh. Was I harsh? You were emphatic. I don't think you were unnecessarily hearts. I think you actually said what you thought, and I can see how the people might think that you're trying to. Okay. You weren't grandstanding because it was heartfelt.

If you had been insincere, it would have been too much. Got it. So, yeah, I just want, I'm collecting on my thoughts two days later, I just want to say to the FIS founders, you're welcome to come on the program and I'll talk to you about it. Alex and I will do a quick conversation with you. Sure. Come on any time. Maybe you have some learnings from this.

And to my friends who are investors in the company and the, I was a little bit strong. I take back none of that. Zero. You know what you're doing. You're the adults in the room. So as the adults in the room, I stick my position. Earlier today,

I was on X and I was going through my mentions and I ended up running across or my notifications or whatever the hell they call it now. And I did run across an EAA investor who was, I think, on the FIS board. So he follows me. So definitely people are aware. So anyways,

FIS crew. You got the follow. Come on the show. Let's talk about it. I'm not sure we'll talk about it. Yeah, yeah. Really quickly, though. So Waymo is now in four cities, Jason.

If you don't know, it's Austin, S.F. Phoenix, and L.A., everybody. Fantastic. To me, this just goes to show that they're ready for more. I just want Providence to be on the list. So my question to you is, how do I get my little potent town on Waymo's radar, so I don't have to drive? It's not going to happen in New England. I apologize. You've built the grid system in a very strange way.

So Manhattan, good grid system. parts of Brooklyn good grid system, but you know, you go to Austin, you go to Phoenix. You know, some of these places have perfect grid system and they need a grid. The better the grid, the less education is the better. You got a lot of back alleys. It's also not coming to Spain. It's not going to be in Barcelona. It's definitely not going to be in Florence.

I mean, in Italy, yeah. Yeah, I mean, in Italy, like you're driving with two cars on a sidewalk half the time in a tiny little car and knocking mirrors off. So, you know, those are the places. that'll be last, the places that'll be first, perfect grid system. Phoenix is perfect because there's no pedestrians. Places with pedestrians, no bueno. Places without pedestrians, great.

And one of the things we need to do as well is making cities better for pedestrians. I don't know if you've been to, have you been to Hong Kong before? I have not been to Hong Kong. I've been to Shanghai, but not Hong Kong. Yeah, so in Hong Kong, you know, it's a very dense city, obviously.

Absolutely. They have walkways for humans. And then they'll have streets with no walkways for humans, just cars, or a barrier between the humans and the cars. And they experimented with this in Manhattan in Rockefeller Center area by putting up metal things because pedestrians and tourists would just wander into the street and get clipped. So they just kind of corral humans. And I think that's really how we have to design cities, more of like the highline kind of experience.

Well, you can have your kids running around off leash. No problem. They're not going to get clipped. a bike or a car. And that really is what we have to start thinking about is taking back areas for pedestrians and then separating them from the cars, especially the self-driving ones, because then you just remove the number one concern we have, which is like child getting hit by a car. Hey, there's been a lot of afterglow for the Apple. Let's let's let's hit that real quick. Yeah. All right. So when we talked about Apple, Jason was super positive about the overall

results. He said this might be a seminal moment in the future of technology. And the market says, not to gas you up, Jason, but I do think that mostly they agreed with you. So we have a chart here of Apple share price. If you look at the lowest point, that is, I do believe, before WWDC talked about AI, and then the last two days are the post AI glow, as you said.

This is a lot of money, because when we're talking about Apple, we're talking about trillions of dollars. So if my math holds up, it's about $300,340 billion dollars in additional market cap for Apple since it dropped all of its AI news. Incredible.

It was about 199, 250. And when I wrote the notes for the show, it was 215. Now it's actually up higher. It's to 1960. Yeah, it's good trade. So did you, did you buy more? I didn't put it more. I have a nice Apple holdings over at jatrading.com, but I'm going to start trading here.

Now that I got you here as my partner in crime, I'm going to start putting some trades on. I'm going to rebalance the portfolio this summer. I kind of placed a lot of bets in the bottom of the market and to kind of learn. And then somebody told me I could start my own ETS. So I'm thinking of taking my J-trading and making an E-T-F out of it, and then people could buy my E-T-F, the J-trading ETF, and then you could, if you wanted to, trust my lunacy. Set alongside me. So anyway, somebody had stopped me on a flight recently and was like, oh, my God, you need to start an ETF for J-trading.

I was in the Austin airport, get in my brisket at Shout-out Salt Lake, broken tooth-worthy. And so, yeah, I'm thinking about putting that in there. I, you know, I got demolished by Warner Brothers, demolished by Disney, my Twilio went sideways, everything else, boom. And so there's a lot of lessons there, you know, Warner Brothers, Disney, I'm sorry, Warner Brothers and Disney, I thought those companies had really great potential, but think like, it's, they're struggling, they're both struggling. Yeah, media is tough.

Find out streaming economics are particularly difficult. I mean, if you want to think about it in a kind of crude sense, software or anything delivered digitally is having kind of a hard time right now. But in Apple's case, given that people expect this new AI set of services to sell more hardware, this is effectively a hardware boom. Because as it turns out, and this was a surprise to me, you have to have an iPhone 15 pro or the future generations to actually run Apple intelligence on your device, which means that my iPhone 11 is now it has to go.

Like I just, I can't. You're four gen behind? Wow. That's shocking. Behold. Behold my phone. just don't particularly care. We have a chart coming up.

If you're watching the stream, we have a list of all the different devices that can run the new stuff. The good news is only iPhones are restricted adjacent. So if you have an old M1 iMac or, you know, MacBook, you're fine. Yeah. Yeah.

Okay, cool. So it's just your phone's not going to make it. I've been sweating that new M4 iPad. I have no reason to upgrade my iPad. But it's just looks like it's sexy and thinner. And they may have me, I don't even. even know why I have an iPad on being honest.

I just kind of like to travel with both. Sometimes I like an app. But I may upgrade just for the heck of it. I love these things, yeah. I have an iPad Pro that I bought. I bought the keyboard for it. And I haven't upgraded it in years because I just don't use it.

You don't use it. You like to write on your desktop. I mean, I collect mechanical keyboards, which I think it kind of details my entire stance on this sort of thing. Although I do. run an Apple magic keyboard on my work computer because I love those just for

lots of typing, but I just don't have a use case for it. And so when Apple drops the new M4 iPad Pro, it looks incredible. It's such an achievement. But it's like a Ferrari engine in like a right. Like you just, like what are you going to do now that you couldn't do with the N3

chip? If they continue to put an an angled operating system on it, I don't understand what the point of making it the most powerful computer in their lineup is. If I could run MacOS on it and put a mouse with it, I'd pretty great. If I could have windows on it, I can tab between windows a little bit easier. Like, I hate this concept of like split window.

It's like, it's almost like they're purposely making the iPad, like I said, ankeled or restricted in some ways. Yeah. I don't know what the word is here. They're handicapping it. Maybe I can't say that because of the abelist. I think I can say handicapping it. So then they're handicapping it.

And like, hey, why can't I run it with MacOS or give me like the MacOS feature so I can have a mouse with it I travel with and et cetera. I'm loving my Dell. I got the Dell like latest latitude. Man, it is awesome. And then I have a Dell desktop over here. So I, you know, I'm like you. I go Mac for when I'm recording podcasts. I go Dell for everything else.

So I think the reason why Apple has not harmonized its operating systems between screen, sizes is actually due to Indreason Horowitz. And I can explain this. So, Andreessen Horowitz has Steven Sonofsky as a board member, a board partner. Steven Sonovsky was in charge of the Windows 8 project, if memory serves. Windows 8 was how Microsoft tried to harmonize tablet and desktop. It failed. And everyone made fun of them for it.

So essentially, I think right now, no one has a way to bridge the touchpad mouse interface that we all know and love on our desktop computers or our laptops and the kind of touch-centric tablet world. And until someone figures that out, I mean, Apple is just going to be making the best possible hardware with very little to run on it. But investors don't care. Apple's now, once again, the most valuable company in the world. It was $3.3 trillion when I checked before the show, probably $3.4 now. So ahead of Microsoft, ahead of Nvidia. I don't think it actually beats a RAMCO, but that's cheating.

So shout out to Apple for ones that can kind of be on top. And I want to know how this is all going to work in China. But I know we need to move on. But I'm curious how Apple's AI stuff actually will function. in more closed digital markets, Jason. Yeah. I mean, you have to obey the local laws at all times or you cannot participate. So that's always been a challenge for American companies to make those hard decisions.

And, you know, Google has chosen not to operate in China. They don't want to have their data services be used to collect dissidents and send them to reeducation camps, to put it mildly. Apple is there and they will claim they don't have to round up dissidents. And the reason is because ICloud runs through a third-party company there. So there's a data company that runs ICloud. That means if you're an Apple user there, Apple can say like, oh, no, we don't cooperate in collecting dissidents and sending them to re-education where they lose 40 pounds in six weeks. It's like a spa plus re-education in China.

Yeah, you kind of like get weight loss plus torture plus every education. Yes. They can just point to the cloud provider and say, yeah, we don't do it, but the cloud provider does. So it's pretty gnarly when you think about it. Now, you can make your own moral ethical determination. Should we engage and have less worse because we're intertwined and maybe move slowly, ever so slowly, towards human rights on a global basis, or should you just not participate and drive a wedge between the two countries?

You know, it's... Well, we tried the former for a long time. I mean, I think there was a great expectation that the internet and, you know, a more capitalist system was going to lead China away from a more authoritarian government. And up until the current premiere, I think that was kind of on track. But it just goes to show the power of, frankly, ideology over how things run. But just to make a point about the Apple partner, not the only company that does that. Microsoft, of course, worked with if memory serves, 21 Vianut when they brought Azure to China.

So working with a local digital cloud provider is a, I think, a smart way for U.S. companies to have a hold over there, but not really get too deep into it. So that's just kind of how that plays out. All right, startups, when you're a business, you know, it's crucial to treat your customers right. Unreasonable hospitality should be your goal, right? Great book. And you know who's great at helping you get delivering unreasonable hospitality? Zendesk, we use it, we love it. The Zendesk suite arms your business with all the tools you need to deliver exceptional customer experiences. And it's made just for startups. And they care about startups. It's built so you can build strong relationships with your customers through amazing support experiences and without growing your headcount. do what, Shopify, Squarespace, Uber, Instacart, and JCal does. Rely on Zendesk. They're your partner.

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Good news. Jason, finally. Inflation. It's finally, it's doing things that we want, kind of. So the data came out today. Yeah. So inflation, bad. Less inflation.

Good. I think, start there. So the CPI, the consumer price index data came out today from the government that it was unchanged in May and was up 3.3% in the last 12 months. It was down from 3.4% in April. and April also saw 0.3% growth. So definitely a better month reading and a better year over year reading. I was pleasantly surprised by this.

I had been disappointed by inflation data a lot lately. And so to me, to have better than expected results, I mean, breath of fresh air, open door, a nice breeze, I'll take it. I was surprised. You know, it's important for folks to realize when we talk about inflation slowing, that doesn't mean it's going down. Okay. It means the rate of increase is, you know, is what we're talking. about here. So it's still going up 3.3%, which means if whatever you paid for a loaf of bread or

your Starbucks, whatever it is, if you paid 10 bucks for something last year, it's going to be $10.33 and $33 this year. Okay. Doesn't seem like a big deal. We can absorb that amount of inflation. Why can you absorb that amount of inflation? Well, real wages. Real wages have been up. Employment's been very low. So there's a dual mandate by the Fed. They have an unemployment. They have an employment target, and then they have this 2% mandate for inflation. They want to see it at 2%, and they want to see something called full inflation. That's the Fed is supposed to be independent. Why does all this matter?

Well, interestingly, how we loan money should be correlated with these two interests. For some reason, that's what we came to in terms of loaning out money and what rate it should be at. It obviously got out of control because you had two administrations in a row. that spent money like drunken sailors. Trump went crazy. And then Biden went crazy. Yes. Printing went brr.

So this is literally a non-partisan issue. Money printing machine went brr-dr. And it's existential now for our country. At some point, it becomes existential because the interest payments are so high. Yes. But why, I was wondering, why 2%, not 3%, or 1%, or 4%, it turns out, I did the research. this couple months ago, because we're having a back in the like macro days of all in when we're

trying to figure all this out. In the 90s in New Zealand, an economist picked 2% as a target. Everybody adopted it. There's no rhyme or reason behind 2%. The person felt that was the right number. They guessed. They estimated. It was a guesstimate.

So is the right, is 3.3 crushing? No. It's trending down. Now, why does this matter for startups then becomes the big issue? And I think that's like a whole, I mean, I think you understand why as well. But maybe you could explain to the audience why this is worth even paying attention to if you're a startup or a VC. Yep.

I just want to throw in one little note on the 2% target because I've thought a lot about this too. And the way that I've explained to myself is the reason why we want some inflation. Now, it doesn't have to be 2% over none is you really don't want to be dancing on the edge of deflation because then prices. fall, companies shrink, it becomes harder to service your debts, for example. Inflation generally makes it easier to service your debts better for the economy. But, you know, I'm not going to sit here and say that one to one point five is not superior

to two. Don't have a view there, but definitely you want to be above zero to avoid, frankly, what China's dealing with right now, which is deflate. All right. So, oh, here we have a chart right now up on the screen of inflation historically. This again shows the rate of change. So the rate of change has decelerated, but we're still going up. Oh my gosh.

inflation was so low for so long. Wow. I forgot how good it was. Look at that. Yeah. I mean, it was a pretty spectacular rise there post-pandemic. So, you know, when you look at 2020, you know, obviously we were all locked in our homes. Then money got dropped on our heads, stimulus, and we obviously did too much. Now, in hindsight, if this gets back down to 2.3, 2.2.1, whatever, which is trending towards, uh, what will be, looking at is saying, you know what? We save the economy of the United States and the global economy. So as crazy as this felt to be on a roller coaster, maybe mission accomplished. And so I know people don't like to give credit to anybody for anything done by the government and everybody

hates everybody. But we might look back on this and say, you know what? Yeah, we may have spent overspent. Surely we did. Maybe we reacted too slow. pretty confident we reacted too slow with the rate hikes, but maybe, just maybe, also that ends well. We'll have to see. But now, why does it matter that we were late with the rate hikes? Why do rate hikes matter? Why does inflation matter for startups?

As inflation rises, the government will try to cool the economy by raising the price of money, which is effectively just raising how much it costs to loan and borrow. And so people then have to be a little bit more conservative because money is just more expensive. As interest rates go up, as the first. Fed looks to combat inflation. What we see is assets that are correlated with growth and risk see their value decline because other assets like treasury bills or high-grade corporate debt are more attractive because they start to yield more. And so what we see is things like tech stocks go down. Now that matters from startup founders because, Jason, public comps matter for how

you price around. Sometimes it matters more than other times. But when we do see rates go up, We do see tech stocks come down and therefore we do see limited exits in the IPO market like right now, for example. So it's all correlated. I know if you're probably a seed stage founder, you don't care because you're like 10 years out from an exit, but you probably care if your VC's LPs have any money. And when the stock market goes down, well, they have less. So it's all the same kind of bowl of spaghetti. I think it's really important to understand it so that you can ignore it.

Once you understand it, it demystifies it in a hundred a high interest rate environment, like you're saying, you know, an LP, a limited partner who has money. When I was in the Middle East, I was meeting with one sovereign wealth fund. We're just talking shop, but it didn't raise money from them or anything. And they said, we are getting 12, 15% on corporate debt. So corporations paying their debt are paying us 12 to 15%. Venture historically pays that number, but it's illiquid and it's not guaranteed and it takes 10 years. So if we can be an instrument that have more liquidity, thus the name of the conference,

and that are guaranteed, and that payoff quicker, okay, I think maybe we'll go with that. So that's why you see, only one in six first-time venture funds have been able to raise their second venture fund of late.

The risk capital has been taken off the table. Everybody's getting conservative, and people are just going to put their money in savings accounts. Even for somebody like me with a modest family office compared to these other ones, I have to look at things and say, do I build more businesses or do I retire, sit on this money and collect five, six, seven percent? And this is one of the John Galt, you know, Atlas shrug kind of moments for an economy. If you make it too easy to just sit

on your money and collect a coupon, or you make it too arduous to build a business because of red tape, then what happens to business owners or, you know, capitalists in a system is they might just say, not worth it. I'll just sit on the sidelines, which by the way, when I went to Europe and I talked to very rich families, they don't invest in venture, they don't start new businesses, they take their existing businesses and they nurture them and they just, you know, stabilize them and care for them very deeply, whether it's their, you know, farm or winery or hotel chain, or pharmaceutical company, whatever it is, they are caretakers of these existing businesses

and they don't take risk, which is why in those economies should have massive unemployment and you have this like, you know, kind of trending towards socialism kind of or socialism light kind of economies. In our economy, super vibrant, people want to take risk, people get greedy,

in a good way, they get optimistic and they want to take risk. So we just have to be very careful here that we don't clench up and make it so, rich people, rich endowments, rich institutions don't want to take risk. And they don't want to put money into venture capital right now because they're like, you know what? Yeah, venture capital.

I'll just put in a coupon. I'll just buy the S&P and be done with it. Right. And that's a dangerous place for our economy. My money market funds. The next Uber or Coinbase. Yeah. My money market funds are yielding like, what, 5% right now?

Just like so my family's emergency fund, just sitting there in fidelity is just every month just paying me lots of money. And I'm just looking at that. like, gosh, this feels like cheating. But why would I take more risk with that money when it yields so much? And so, again, back to the point about why this matters for startup founders, if we see interest rates come down, which we're now expecting to see and we'll get to them just a second, it could imply that people need to try a little harder and therefore more money for VCs, more money for your company, et cetera. Now, Jason, um, rate costs for this year. Stock market's on a

tear today, right? Stock market is on a tear today. When I looked, the Dow Jones was up a little bit, but the S&P was up at point and the NASDAQ was up 1.7 percent, which, For a single day movement in the stock market, 1.7% is a lot. So, very positive reaction there. And the reason why is that people are now expecting for rate cuts to come. So we have a chart from the Wall Street Journal. We're going to put on the screen right now showing the change in expectations from the 11th to the 12th. And basically what we're seeing here is that about 20% greater chance of a rate cut in or before September and to this year, according to traders.

So it seems like, Jason, the chance of us getting a rate cut this year is darn good. and I think that's going to be the starting gun for a return of the IPO market eventually. I think we just need to see the pressure begin to fall a little bit. Throw another 1x on every SaaS multiple out there that's public. Just create a little buffer zone for these companies to try to get out. Makes sense. I'm not sold on two cuts this year, though.

Curious what you think. Yeah, I mean, it does feel like they've got it under control and then one wonders if they have it under control, then are they going to keep it higher for longer? You know, as the saying goes now, everybody's heard that over and over and over again. So keep it a little higher for a little longer just to make sure,

but then you could risk maybe speeding into the turn a little bit too much and flip the car again where, you know, you start to cause damage. And so that's what we have to just be careful here because these systems seem to be very delicate. And so if we don't cut and then people start losing jobs and people have run out their savings, we have an economy that's to their consumer. And so what you saw today was a lot of consumer stocks went up because people are like,

oh, rate cuts happen. People can buy homes again. People can buy cars again. People can plan a vacation again. What was starting to happen after the two YOLO summers post-pandemic, 2021, 2021, and 2020. It was like three yolos in a row. Remember when people started to get the vaccine in 2021?

They're like, let's go. You know, we could all be dead soon. Then 2022, they're like, yeah, let's keep going. Last year was great. We were making up for lost time. We lost a year or two. And then 2023 happened. And now 2024.

And I think like last year, people were like, maybe not Europe. Maybe Disney. You know, maybe I'll go to San Diego, not Cabo San Lucas, whatever. You know, they just, they maybe looked at the budget and said, you know, instead of a 15K family vacation, we'll go for the 8K, you know, depending on what station you're in a life and how much you spend on your vacation. Sure. And so cars have been kind of frozen. Homes have been frozen all because of interest payments. When you have these high interest rates and you're paying an extra 100, 200, 300 on a mortgage or end or car payment and or some other variable credit card debt you might have, and all adds up.

to clenching and lack of spending. And so I think the reason you're seeing the consumer stocks go up today is people think, okay, yeah, maybe the interest rates are coming down, the variable interests, maybe people have a little extra spending money. And unemployment stayed low. That's the other thing. Quite low. The last employment numbers were quite good.

But to show just how excited people are, to Jason's point, about what this could mean for the economy, shares of Zillow were up 12% today. Oh, that makes sense. percent because everyone's going, oh, thank gosh, because once we get the first rate cut, we are in a rate cutting cycle. And like we've been in a rate tightening cycle for a long time. I think, gosh, to turn the page on that and start something else. And that could unlock quite a lot of stuff.

I'm very excited about this. All right, everybody, welcome back to the program. Stephen Estes is with us again. He's a principal at CLA, they're a professional services provider. They specialize in CPA, tax consulting, and wealth advisory. His areas of expertise lie in VC-backed startups, VC funds, high-growth startups with complex tax issues in multi-state and international filings. Welcome back to the program, Stephen. Hey, thanks, Jason.

Appreciate it. The last couple of years, it's been a little bit rocky in startup land after the bubble burst, post-Zerk. Tell me, what are founders sweating right now? What's keeping them up at night? I'll take the low-hanging fruit here and safe funding. Before the pandemic, VCs were just printing money. And the last four years after the pandemic have been a bit of a roller coaster. in terms of capital availability.

And I think things tightened up right after. And then in 2022, 23, capital seemed to open back up. Now we've got inflation and interest rates are higher. So we're kind of back in a position where money's tightened up because investors can get a good return someplace else. Gone are the days when an Ivy League degree and an idea on the back of a bar napkin would get 10 VCs lined up to invest in a seed round. Absolutely.

They're being asked to do more with less and anything they can do to defer the need to raise again for as long as possible because the valuations out there just aren't what they used to be. All right. You need a trusted advisor. Tax is accounting. You don't want to play games of this stuff. Get it right. Get a great partner like CLA.

Go to CLAConnect.com slash tech and let them know. Your boy, Jake Al sent you once again, CLA connect.com slash tech. Do you think that one or two rate cuts will be enough to fully resurrect the IPO market? Because I think we're going to need like breed. Yeah, I think great companies can IPO and companies that are. are forced to walk the plank, an IPO. You know, like, and so I think, you know, when we look at Maple Bear, aka Instacart,

they were forced to walk the plank. It was just getting untenable. They had private market valuations, $30, $40 billion. And then they settled into this $8 billion market cap. I don't know where it's exactly at today. But you'll pull it up. I think they are, 9.1, right? And I think they were trending towards a billion dollars

in advertising revenue. So I just think it's an ad business. I give it eight, nine times. I think Reddit has a similar amount of ad revenue last time we did it. And they were also $8,9 billion. So I think all the profit in Instagram comes from advertising, but they got out. They're going to grow 30% of their 40% a year, maybe their advertising revenue. It's just going to be like a media company is the way to look at it.

Kind of like a media company that delivers your groceries. But better than a media company, though, because they do. don't have expensive cost to generate that advertising inventory. Actually, you could actually note that probably it's gross margin positive to generate that advertising inventory that then has very high margin revenue on top of it. I like Instacart. You used to use it. You used to cover the company.

It was really small. I'm not about they're doing. Um, I don't, you know, I live. Or you enjoy going. You enjoy shopping. They put a Trader Joe is literally like a three minute walk from my house. Well, that's nice. That's a nice thing to be able to walk to Trader Joe's is delightful.

with the kids. I put the kid in the stroller. I put the groceries underneath. It's lovely. The kid gets to like see the aisles and throw things. Fantastic. She gets to drop her bare. Then I have to go find it and see where she dropped it.

Yeah, exactly. So long story short, you know, Reddit got out the door. Instacart got out the door. These were not perfect companies by any stretch of the imagination. But hey, almost decokorns bouncing close to a decacorn. So the market's ready. I think the market's ready right now. I think, you know, when we talk about that risk capital,

you know, for the right company, I think you can do a float right now. Is it going to be like gangbusters? Is it going to, you know, go to either of those companies went to 20 billion? So they'll be muted IPOs. So I think muted IPOs will happen. Maybe that's a good thing. Maybe that's a good thing. They get out there, they get liquid, and then it's up to that management team to impress under the microscope.

So Stripe's going to go out. AdGen's going to go out. What else do we have? There's a, we, we, this is a good time to go into the twist. We have 10 companies you think are most likely to IPO? Yeah, so I have a list of 10, and I thought what we could do is I'm just going to, I'm going to make a pitch. I'm going to say a company name, a data point or two, how much they've raised,

and then you tell me if I'm insane or on the money. Okay, I like it. Okay, all right. Here we go. Data bricks last round, rest $500 million, $43 billion valuation. And at the end of the last fiscal year, January 31 of this year, 1.6 billion in revenue up about 50% year over year. Big AI story, super smart CEO, everyone likes them.

Huge market. They raise like $4 billion. Eventually, that pressure has to make them go public. So I think that they are like the canonical example of a late stage startup that needs to get out. They need to get out for sure. It's an 11, 12 year old company, I think. Right around there. Yeah.

Yeah. And Databricks is like the, dot com of the Apache Spark open source project it's a Bay Area company yeah they've raised a ton but their last funding round

were they 30 40 billion like this was like a peak Zurb valuation no no no that their last round was 2003 so they raised at a 43 billion dollar nation last year up from 38 in their prior round got it which is essentially sideways maybe a 10% lift so they kind of were overvalued probably in 2021. Maybe now the valuation's getting close.

There's all kinds of protections on that last round. So we talk about protective provisions. That means whoever invested in that round is probably guaranteed a certain amount of return, whether it's a 10% return or a 1.5 return. They're going to get some minimum return. So you don't have to cry about those people who worry about them if the thing goes public for 20 billion. I don't know how much revenue they have. Do we have an idea of what kind of revenue did it was a lot?

six last fiscal year. So I mean, 10 times revenue, 20 times revenue top lines? I can see it at 15 times. Well, but AI, which is everyone's freaking out about. They built their own LLM, pixie dust. I can see them getting out of 30, 35. Everyone's pretty happy. And oh my gosh, go public.

You're over a day. If your company's old enough to go to middle school, I think you should debut. Yeah, over. I mean, what I've heard is a billion dollars. if you got a billion dollars in revenue, you go public. I think they can be done at $250,500, but people are saying a billion now because Maple Bear, I think, was 800,

Instacart was $800 million when it went public, I think. So it is what it is. I think they're big enough they should go, and I just really would like to stop talking to the CEO every time I must have to dangle one number in front of me. Just put them all out there. Let's go. Enough of that.

Let's go. Let's get a nice one. Next. Now, on Monday, we talked about some first companies for the Twist 500. There was a bunch in the HR tech payment space that we quite liked. I picked one for our list of most likely to IPO. I picked Gusto because I spoke to the CEO.

I know they had 500 million in trailing revenue as of last April. So they're definitely big enough. They just seem like a very serious mature company that has its stuff together. So I presume they have their accounting in order, et cetera. They've raised 750 Jason. Oh my gosh. Another one of these, get out. Like go.

Yeah. These competitors to ADP, Rippling, I think, is the big one. And Rippling's trying to kill, like, all of the companies in this because they also have IT provisioning in theirs, HR management. You know, they kind of added expense accounts, like Expensify. So what they try to do when they sell you, like Rippling, or Augusto, Gusto, is they try to say, hey, listen, you got five SaaS vendors doing HR payroll, taxes, this, that,

the other thing. Consolidate your SaaS into one buy. It's a really good pitch, especially to a CFO or a CIO, hey, we can use one system. You know, very much like NetSuite is one system that, you know, when you grow up, you can kind of get six, seven different business functions with one piece of SaaS software. So I think that's the great SaaS consolidation play, Gusto, and then rippling behind them. Those companies definitely should go public. Yeah, I didn't pick rippling because nascent. It just feels more nascent. And I, this is definitely a gut decision by me when I was putting this list together. Could have picked Rippling, could have picked deal, could have picked remote. There's a number

of companies in this space that are doing well. But if I had to like bet on the horse that we go out first, which is kind of the game here, I'd say, I'd say gusto. Yeah, why not? And if they have 500 million in revenue, that's on the lower end of going public, but it's a good number. Yeah, it depends on the growth rate. trailing last April. So you throw on 20% more growth. It's 600 run rate, 650, you know.

Yeah, they're getting there. Yeah, they're getting there. All right. Next one's a bit of a curveball. Jason, are you a coin base user by chance? I am not. You are not. All right.

I have a Coinbase account. I should take that back. Our family is. We have some stuff in Coinbase. Yes. Yes. I think I have like $37 in Coinbase from testing various things. I bought an NFT back in an NFT moment.

Just to you get Gary Hans out there and get him. But not the only game in town Cracken is said to be raising a $100 million pre-IPO round, looking to close that this year. And the news is via Bloomberg, they're going to go out in early 2025. And I don't think we're going to see so many IPOs between now and then that that won't put them in the next 10. So I like it. One to two billion in revenue this year, it's a little bit hard to value because of a variable trading revenues can be. But Coinbase's current price sales multiple is 16.6x.

So if they did a billion in revenue, 16 billion, they did two, it could get 32. So quite an impressive company that hasn't raised much money, as I could tell. So I think Cracken looks amazing. Yeah, it makes total sense. And there's two corollaries on the market, Robin Hood and Coinbase. So, yeah, why not jump into the mix there? Absolutely. Cracken seems like a no-brainer to go public.

Yeah. And I think they've cleaned up there. A lot of the legal issues are starting to be cleaned up. And I think Trump in his absolute, brilliant ability to meet with somebody and then flip his position, has realized, I don't know if you heard my call that he was going to change his position on EVs, and literally 12 hours later he did. Not that I have inside information, but sometimes...

I think he might know someone who does EVs. I know a lot of people who are, you know, EV adjacent. Anyway, it was pretty clear to me, based on what I saw publicly, Trump would flip his position on that. because of everybody he was courting. He's also flipped his position on crypto. As per Sachs and Chamat's big fundraiser last week. So, you know, I think we're going to see a crypto-friendly regime in Washington in all likelihood, 60% chance, 70% chance of that in November.

And if that happens, then you just might get an executive order down to Gary Gensler. Hey, we got to figure this out. now, come up with a framework, tell people what it is, execute on it, and let's stop with, like, telling people what they did wrong 12 years ago, tell them what they did wrong eight years ago. It's really hard. And I get his position, which is, hey, we're here to protect consumers. There's a rule book, but crypto doesn't fit into the rulebook perfectly. There is an argument there that it's, you know, in some cases it does.

In some cases, it doesn't. like Bitcoin's not controlled by anybody, therefore, who do you go to to regulate it, right? Or, you know, some of these utility tokens do have value. There's got to be some safe harbor or framework for it. And also for the people who want to buy it. And I've talked about this a zillion times here. Just give people a sophisticated investor test and then put this crypto stuff in a box where you have to have insurance, a board of directors, and some controls at each stage of the way.

So when your crypto project breaks 10 million, you know, under 10 million, you have very few regulations. It's a sandbox. Over 10 million, it hits another threshold of regulation when you hit 100 million, another threshold, 500 million, a billion. And as these projects get bigger, the insurance requirement, the board requirements, the auditing requirements go up. So you don't have a tether situation where somebody's got $75 billion. $110 billion and nobody knows if it's in Chinese paper or where it is and there's an attestation but not an audit

like attestation, sure, up to $10 million. Over $100 million. I think you can afford an audit. I think you can afford an audit way less than $100 million AUM, but I'm with you on that. The thing is everything you just said to me is very reasonable. I would actually probably be, I'd probably vote for that as it was without China. change. I think I'm slightly more, these are securities in some cases than not, but whatever. If you took your opinion, wrote it down, and then showed it to Brian from Coinbase, I'm pretty sure it would not be well received. And that to me is the issue. I think they think you're too conservative. Ah, they want to be a total free market. Small C conservative, not like

Trump conservative Democrat, but like, I'm being too risk averse and they want to take more risk. they want to take more risk. But my retort to that is you may take as much technology risk as you want, but when you are working with consumer accounts, you have to play by the rules. And I just, I don't think that's a bad position to take. But it's interesting how your relatively crypto-friendly,

I think position is still insufficiently radical for where a lot of folks are in the industry. And I wonder if they're going to end up letting the perfect be the enemy of the good, you know, and want everything and then get nothing. And so I think there's, a great compromise to be had here because Bitcoin is clearly a commodity and some tokens are clearly securities.

So yes. And they're being, I think also when you liquidate them, you know, this idea that like a venture capital firm can back a crypto project, buy these tokens, dump them on retail, you know, I'm not talking about any specific venture firms, but, you know, there could be venture firms out there that eventually when these audits occur might have cleared positions. And that's part of the problem. Nobody knows. Nobody knows.

And so, you know, if you're a venture firm, if you're the founders, there should also be rules in place. If you launch a crypto project, maybe instead of a free market, if you want to be able to do it in the United States, you have to state your position on the project's website. You have to disclose all the owners above 1%, how they're affiliated to each other, just like in an IPO. you see like the major holders. And then if they want to sell their tokens or move them, they have to file and say, hey, I'm going to be selling these,

just letting you know, because obviously I have inside information, because I'm writing the code. I'm writing the code under which this token works. I mean, you want to talk about an advantage. The advantage of somebody who's writing the code of how the project works,

that's like being like, I control how the money is printed. how the diamond mine extracts diamonds and you're the buyer of the diamonds or you're buying into the system, but you don't even know how the printing machine works. Maybe I can print a billion dollars, maybe I can print a million.

You don't know. So this is all about disclosures. And I think a regulatory framework would be a really, really great step forward. And you can do it on both sides. More ownership from the crypto side and then more responsibility from the individual side.

Certainly more than 6% of this country should be allowed to participate in alternative assets. Oh, agreed. But to give people an example about why this stuff matters, there's a new story today. I'm just going to read a headline filings. Michael Dell plans to sell 10 million Dell shares worth $1.3 billion. After selling $1.6 billion in shares earlier this year, Dell sold $1.7 billion in 1999 before the bubble burst.

As a potential Dell investor, wouldn't you like to know what Dell himself is doing? And Jason, the stock market works is highly liquid. it's worth a billion dollars. You can build lots of wealth in a system that has some regulatory oversight. Throwing one more name in the crypto conversation, Circle filed privately to go public this year. We haven't seen the actual public filing yet. That'll come. They do the Circle Stablecoin doing quite well, the second biggest one out there.

Clearly a candidate, lots of revenue there. And then the other one that's in the super easy bucket, it's Turro, the car rental service. They actually filed to go public back in 2021. and have been doing quarterly S1As ever since, making them the most public private company in the world because they keep dropping new gap financials for us. Thank you, Turrow. We love it.

Pull the trigger. It's time. So those are kind of like gimmies. And then Shien, the company from China is going to list in Europe. I'm curious when you think about that company. You know, as a consumer, you know, this is the fast fashion company. company, you buy something, you wear it to Coachella, you wash it twice, and then it's a rag,

and you can use it in your kitchen to mop up coffee stains. I think it's terrible for the environment. I think it's kind of gross, just as a concept, disposable stuff. It's kind of like anti-everything I think about now as a parent to children and somebody who cares about about planet Earth. I'm not virtue signaling here. But when I buy stuff, you know, I buy my Danor boots, D-A-N-N-E-R. You buy a pair of Danor Mountain Light boots. You're going to have them for your life. I buy Crocket and Jones, my shoes.

They're from England. They ain't cheap. Those are $1,100 shoes. They'll last to 20 years. When you sold them twice in those 20 years, they'll look as good in year 20 as they do in year 10 as they do in year one. Your Daner boots, they're going to get more character with age. You can give them to your kids, right?

And if you rip them up on the side, they'll stitch them together. I buy Briggs and Riley as my luggage. Why? it's really well constructed. It is not disposable. And if you break something on it, you send it to them, they repair it for you,

no questions asked. Or if you take a picture of it and send it to them, they'll say to you, okay, it's broken. We'll repair it. Or here's a $150 discount on a new version, which has the four wheels,

not the two, if you want to go that route, but it's up to you. I love stuff. La Crucée. I use those, La Crucée. I'm going to give that to my daughters.

They can fight over it. And they'll have, memories of mom and dad cooking in that from their childhood, and then they'll give it to their kids, and you could get it relacquered. So I just like thinking about things that are built with craftsmanship, because that speaks to me, and it's good for the planet. I hate disposable fast fashion. I think it's, like, really bad for the earth. And I hate this Chinese, you know, obsession with lowest price disposable stuff, not the Chinese people, but the Chinese market, right? Yeah. And she ended up.

course, competes with Temu and some other companies in the space. While Jason and I share a perspective on this company, the American consumer does not agree with us. And the company had, according to the information, $32.2 billion in sales last year, up 40%,

which was actually faster than the 37% growth that had the year before, and had about a 5% profit margin, 1.6 billion. It's going to list in London. The only fly in this oint is that Marco Rubio, a senator from Florida. really doesn't want them to be able to list because he thinks that they are doing bad things as a company. There's allegations of use of forced labor, derived cotton, that sort of thing.

But I mean, how could that not be true? I mean, look at this. You see my screen? I do. $11? $11 for a dress. $9 for a dress. I mean, what are we talking about here?

This makes no sense. What are they made out of? Plastic? I mean, tissue paper? I mean, that's insane. You tell me. This is nuts. Look, okay,

2.2,000 sold recently. That's insane. Wow. I take you back. This is awesome. I mean, yeah, but the only problem with this is,

you know, you buy this $10 shirt here. Mm-hmm. It is going to be destroyed after two washing. So, you know, like I think what people are literally doing

is they're buying $200 worth of clothes, going on their cruise, going to Coachella, and then this stuff is gone. So I think, this is the most random collection of things I've ever seen. Is there any rhyme or reason to these fashion styles, prints? Or is it just a big hodgepodge? It's fast fashion. So this other thing is the IP here is they just constantly are stealing. So anybody does anything interesting. The same factory that made, you know, the Lora Piana men's shoes, you know, like these casual loafers, you know, you could pay $800 for Lora Pianas. You could pay $300 for, you know, something in the middle, you know, maybe Johnston Murphy's got it for a buck

25 and then here you can buy it for 12. For as a joke, I bought a pair of these ones that compete against the Laura Pianas that they were nice enough to send me a pair of. That costs like $1,200 those crazy loafers. And they were so

terrible. They smelled like chemicals. I bought it off of TikTok just to see how the store worked. They came like three weeks later in a really weird bag directly from China. at this smell. And then when I took them off, I had like the color of the blue paint on my foot. Yeah. So this, that's going to be a no for me.

With poison. It's my bet. If you don't have kids, you haven't had to learn about materials and how you can ingest, um, things that impact your indocrine system. And there's a reason why kids play with wooden toys, for example.

Uh, so don't, maybe don't shop on Shian or Temu for your children's toys because it's probably not going to have the right lead. levels. But it's going to list. And that brings us to just a couple more names for this list. We talked about chime on the show on Monday. I think it's an IPO candidate bringing that back, Stripe, of course. And then I was just reading some stuff, Jason, and people are talking about the chance that Intercom might go out sometime soon. And that's news to me, but I know you have

the CEO on the show recently. Yeah, CEO last week. Yeah. And he was also got barbecued for going to the Trump fundraiser. He got barbecued on X as well. You know, SaaS is the, you know, the multiples have never been worse in SaaS. The headwinds have never been worse. And people are really down on SaaS, which I think means it's probably an opportunity. I mean, when we want to talk about blood in the streets, you know, and making a bet here, I think the SaaS companies are being counted out because, oh, we're just going to talk to, you know, a chat GPT and it's going to solve these problems. I do think they'll also benefit from being able to make better software at cheaper prices.

with less people, therefore their margins will go up. So my feeling on this has always been the efficiency of these companies will maintain the earnings and the quality of the earnings while there might be headwinds in other parts of the business. So, you know, Google could run their ad network with a thousand employees total, you know, literally get rid of 90% of the people there. And if it was on set it and forget it mode, right? They weren't adding new features, et cetera.

They're talking about the maintenance of it. Yeah, yeah, I agree with that. You know, you start looking at, you know, the sales forces of the world or Quilios of the world, Zen Desk of the world, which is from private. You know, those companies got really fat. They had really expensive sales teams. And, you know, people were frisky in a low interest rate environment to buy any software. You just basically, you know, if your company was growing 30, 40% a year and people were like, we're going to increase our SaaS spend 10% a year. Okay, great.

We're growing faster than our SaaS spend. We're growing faster than our headcounts spend. Okay, maybe we should spend more. Maybe we should, what if we were more efficient? And so everybody had that optimistic thing. So if you came to your boss at when you were working at TechCrunch and it was like, you know, a private equity firm owned it. You said, hey, you know, we're going to get this new SaaS software.

It's going to make everybody on the team 10% more effective. They would look at and go, okay, it's going to cost us, you know, 10,000 a year and 25 people are going to be 10%. Okay, $10,000. We get quarter million dollars in value. from the efficiency, go for it. But, you know, maybe that didn't always play out. Maybe people spent too much.

So I think... I just, everything you're saying is dead on until you got to the private equity, listening to employees suggesting that there's something that we could buy and use money for that would help. Because in my experience, that's not the case when you're owned by private equity. It's a no to everything. Well, I mean... And, you know, to be clear, I do think that the private equity from Apollo, that

owns Yahoo that owns tech runch. Actually, as far as private equity goes, was a reasonable steward. But yeah, it's not, it's not, I got a, I got a really nice new laptop when I joined the show. Thank you, Jason. And I don't think I would have gotten the same level of processor if I had gotten one from the Apollone. Yeah, that makes sense. One last thing. And then we're going to wrap.

I think we should throw an AI model company into this IPO conversation. Oh, okay. Sure. Why not? They're getting big. So my question is, who do we like? Because there's anthropic. There is Mistrawl over in France.

Of course, there's Open AI, but who do you, I mean, cohere sure is in the mix. There's a lot of names. XAI just raised a bunch of money. So who do you think is the first to get out? I'm torn. First to go public. You know, I think these companies have a long road before they go public. I think it's going to be like a five-year spend and deployment cycle to get their infrastructure

up and build it. So I don't see them going public anytime soon. I think they're going to take a long time. and I'm really wondering, you know, where the revenue is going to come from. I do think a lot of these are going to start to look like AWS more than they look like Siri. More than they look like a $20 co-pilot from Chad GPT, they're going to kind of look more like AWS, where enterprises are sending big jobs, you know, developers are, you know, hooking into them. So I wouldn't be surprised if X.a.ai, Claude, which is anthropic, right?

and a bunch of these started to look more like AWS, GCP, Google Cloud, that is, and Azure competitors rather than what we saw because I think Siri, Microsoft co-pilot, that's a large percentage of users. I think Chrome will have this built in. So I think Chrome is a secret weapon from Google. Imagine Chrome having a bunch of AI tools built into it. That's coming as well.

So I really think the consumer is going to get this for free. Yeah. Okay. Free to close to free. That does take this out of the IPO conversation. But of course, we are going to have a bunch of those names in the Twist 500, which we are currently building. If I'm going to be honest, hugging face, I think is a very interesting company. They are kind of like the GitHub of this.

I could see them getting taken out or bought. I think they're like the ultimate M&A candidate right now because all the developers are hanging out at Hugging Face. So I'll pick Hugging Face. and X. A.I. as my choices. Who are your two choices to add to the Twist 500?

Oh my gosh. Well, Databricks, honestly. Just even though I said, that's a little bit of a cop-out. But I bet you lunch that Databricks buys hugging face

if anyone does. Okay. Because they're building their own LLMs. They're a multi-model company. They're really leaning into AI because they already store everyone's data. What do you want to do if you wanted to get people to be building on your platform,

you buy the tool the builders use. And if you're right about a hugging face being the GitHub of this or the GitLab of this, that makes a lot of sense to me. Okay. Almost a lunch bet. I don't know where that is, but I'll,

$100 max, $100 max, 100 bucks lunch. You can double that. I just don't want to accidentally go and, oh, like a 4K bill because you're drinking like something like something from a basement. I topped it out,

a lunch at 100. Yeah, so I'll go with that. I'll go with hugging face. and XAI, you can go with data bricks. And I think we're starting to round out the Twist 500. It'll be up and running at Twist500.com shortly. And then you can join the newsletter, ticker dot,

this week in Startups.com. We'll put it in the show notes. But, you know, this is the first week. We're starting to discuss these things in the newsletter. And then over time, we will figure out the value of the newsletter and how we incorporate the Twist 500 into the show. It might be having them on the show. It might be ranking them eventually by category.

Right now we're just building the topics and who are the obvious people in each of the categories, right? So we just, today, most likely the IPO is obvious. And then they obviously belong in their own verticals, whether it's crypto, marketplace, consumer, AI. We have a bunch of categories on there on the CODA database that we're putting out, which is public. So you can watch us as we build this. I'm going to add the new names from the show today into that. So by the time you get this in your podcast feed, that should already be up there. And, of course, as always, Jason on X.

Alex on X. We do this all the time. We're on YouTube, any podcast platform you like. We will always be coming back. And if you have a beat, AlexW at launch.com. Hit me up.

And go ahead and write a review of what you think of the new show with Alex. Give us your thoughts. Write a review on iTunes or podcast player of your choice. See you all next time. Bye bye. Bye bye.