This Week in Startups - Jason Unplugged: IPO market, WaPo tactics against Dave Portnoy + Live Q&A | E1815

Starting point is 00:00:00 The point of raising interest rates is that they want a certain number of people to lose their jobs. It's crazy to say that out loud, but that's the truth. They want unemployment to go up. They want unemployment to go up so that the economy cools down and there's not so much money. Why would they want to do that? Because inflation is a worse in their mind, out of control inflation will do more damage. And that's really where we're at as an economy. So nobody can predict this perfectly, but I did predict it would be six quarters plus or minus two.

Starting point is 00:00:28 and here we are in seven and we're turning it around. This week in Startups is brought to you by Masterclass. Learn from the world's best minds. Anytime, anywhere, and at your own pace. Get 15% off an annual membership to Masterclass at Masterclass.com slash startups. Masterworks is the first company allowing investors exposure into the blue chip artwork asset class. Twist listeners can skip the work. wait list by going to masterworks.com slash twist. And Coriant, real wealth requires real solutions.

Starting point is 00:01:08 Coriant provides wealth management services centered around you. For more information, speak with an advisor today at coriant.com. Hey, everybody. Welcome to Happy. I'm at your boy, JCal. Long time. Yes, I know. We stopped doing live because, you know, we had made a decision here at this week and start when we stopped doing news with Molly every day. I wanted to get back to, hey, no, these, I wanted to get back to doing more interviews with All-Stars, two types of All-Stars, people in the industry, you know, like Darmesh from HubSpot or Rulaw from Sequoia, because y'all missed that, right? You miss those kind of old school.

Starting point is 00:01:52 And then I tried to do all the new founders coming out. So we've been doing that. We had All-Star Summer. I don't know if you guys have seen Scott from Atlassian or Darmesh from HubSpot, CEO of MongoDB, Nikesh from Palo Alto Networks. Man, do we get a lot of great folks. And so what I've been thinking about, you guys tell me what you think. Whenever a breaking news story happens in tech, what I've been thinking about doing,

Starting point is 00:02:19 now that I know I have the passwords and everything to the YouTube channel and Zoom is so easy, I don't even need to have my producers do this. I can just turn on live and then just talk about some breaking news story or take questions from you. Nikesh was dope, yes. And so let me just say hi to my noties. Adam, you're first. Of course, Mohammed. Hi from London.

Starting point is 00:02:40 Adam. Yes, you're winning. Jeremy, you're definitely notie. Brandon, Nodie for sure. Nick Nodie. And who else is here? Tim. Hey, what's up from Virginia?

Starting point is 00:02:51 Let me say hi to some other people. Shantanu. Nikesh was dope. I agree. I don't know if there's a top news story. Y'all want me to give you a quick reaction to. Nick, is there a top news story happening right now in the world? Yeah, the Splunk acquisition was pretty big today.

Starting point is 00:03:07 And I think your thoughts on the float for the three major IPOs that we saw. Maybe you could go back into those notes. That I think was a pretty interesting take that did not get to expanded on it all. We definitely touched it, but not. We didn't go into it. We didn't go too crazy. Or the big insider trade. Quote, alleged insider trade.

Starting point is 00:03:27 Alleged insider trade. Made the best deal of all time. Or, yeah, if someone was... Yeah. Grots to Nancy Pelosi was my joke. Yeah. But isn't that the silliest? Like, it can't really...

Starting point is 00:03:36 That can't be real. Because that would just be so... It's so obvious. Yeah, no, of course it couldn't be. And, you know, anybody who is doing this kind of insider trading stuff is truly an idiot because you will get caught. I never understood how any person could ever do those trades. Because I think, you know, it's all tracked and you'll get rude.

Starting point is 00:03:54 reversed immediately. But the big news, of course, today was Cisco planning to acquire cybersecurity company Splunk in cash for 157 per share. That's a 31% premium on Splunk's closing price puts the deal at $28 billion. I think this is a really interesting thing that's happening. If you have large companies, Cisco is a very large company, obviously, and smaller companies are going to be not priced at a premium. People are looking for growth. They have a lot of cash on the sidelines. And you're going to see a lot more M&A. My email box is filled with founders with companies that have $500,000 to $20 million in revenue. And they're all considering, because of the headwinds against raising money, they're all considering, hey, maybe it's a good time for me to cash in my chips.

Starting point is 00:04:49 Now, of course, in a town market, you want to build, not sell your company. And great companies are bought, not sold. In other words, once you tell people you're looking to sell your company, they assume there's something wrong with it. And so I think M&A activity is going to be really, really El Fuego in the next year. But we also had three companies go public. And that is a very interesting moment in time. These companies are in a lot of ways being forced to go public because they've been around for over 10 years. We saw three of them in the last week. You had Arm and Masayoshi-san had no choice but to get that company public because he needed

Starting point is 00:05:28 to get distributions to people like, you know, the LPs who are in the Vision Fund. So Arm went out. I think they priced their shares at 51. They raised close to $5 billion, $50 plus million, $1 billion valuation. It jumped 30 percent, came back down to Earth. So I guess in some ways they priced it well. Clavio, they priced at $30 a share. They raised a half billion dollars.

Starting point is 00:05:56 They've got a $9 billion valuation. That's a great company. They're doing something like $600 million plus a year, 51% year over year growth. They've got a bunch of free cash flow and just profitable, great company. Clavio has a large percentage of Shopify stores using them if you don't know what Clavio does. They study all the data of your customers and they send them customers. communication. So if you love a particular brand of clothes or you're, you're, and you're getting

Starting point is 00:06:26 customized marketing from them where they know, oh, hey, this is your gender. You like to buy jeans and t-shirts from us, but you don't care about jackets and shirts. They're going to just update you intelligently. And so it's a really, really great business with a lot of lock-in. So once you install clavio, it's, you know, it's not super expensive. And it's going to increase how much conversion you have, those kind of tools, even in a down market, they become more valuable because each person is saying, hey, if customers are going to spend less, let's try to get the fat cats in our system to just spend a little more. People are just really focused on revenue because they don't have the ability to raise money.

Starting point is 00:07:07 We all have self-doubt. I can promise you, if there's 100 people in a room, a hundred people have some level of insecurity. You can't have any self-doubt about your commitment and conviction to do this. You might have self-doubt about your ability to succeed, to raise the money, to attract the right people. Those are two different issues. That voice you just heard is one of my personal heroes. Oh, my Lord, Starbucks CEO Howard Schultz. I'd love to get him on this podcast, but you know where you can get them right now on Masterclass. And he breaks down everything about leadership. Masterclass does these incredible courses and they get the greatest people in the world like Chris Voss on negotiations. You may have

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Starting point is 00:08:29 off an annual membership, masterclass.com slash startups. Now, Instacart, that's a really interesting one. We're an Instacart family. We use Instacart. We use Uber, eats and we use DoorDash. We use all three of them. We use them kind of in different modalities. I like Uber Eats when I need something quickly. You know, you need a gallon of milk. You need some eggs. You need some cheese, hot dogs, whatever you're cooking that night. Ice cream, it comes so much faster than Instacart. But when you want a big order, Instacart works pretty well. And so we've just been in the habit of using Instacart. Problem is they're not growing that much. Revenue is up 15% year over year. Their ad revenues up 20% year over year. But it seems like that they're not.

Starting point is 00:09:13 they don't make any money off groceries. Groceries are the worst business you could ever be in. And so I think, you know, the real red flag on that business is that the gross transaction volume is flat. The ad revenue is growing. Does that sound familiar? You know, basically what that means is over time, ad revenue is going to account for a larger percentage of their total revenue.

Starting point is 00:09:38 They're doing $800 million in ad revenue a year. that's not insignificant. I think Uber passed a billion. Obviously, Amazon has tens of billions. So what we're seeing is consumer packaged goods are a major advertising category. That money is spent on TV. Would you rather, if you were trying to sell, you know, Coke Zero, if you're trying to sell your Coke Zero, where would you like to spend money on the Super Bowl, on an NBA game during some TV show,

Starting point is 00:10:10 on YouTube, or would you rather spend it when I am checking out with my cart and say, hey, would you like a case of Coke Zero? Oh, we have Coke Zero, you know, Cherry Coke Zero. We have Vanilla Coke Zero. Doing that kind of advertising that's connected to your shopping cart is so much more powerful. And so I think Instacart is going to be very similar to Amazon. There's multiple ways you can advertise on Amazon.

Starting point is 00:10:38 You know this because when you two a. a search and the top row is sponsored and then you're trying to find the first organic row. It's incredibly frustrating as a user. But sometimes the advertisers are actually the best products. And so you'll see the Amazon choice and the sponsor, just like when you do a Google search, sometimes people will buy the ad for their own name. Like Volvo will buy the ad for Volvo and then you'll have the Volvo organic search result. If you can get closer to the transaction, that's a much more powerful and

Starting point is 00:11:09 trackable ad. So I think Instacart's business should be to try to make no money, make zero dollars

Starting point is 00:11:18 on sales, and then really just go after Amazon, try to get as much share of cart as possible. So then, instead of people

Starting point is 00:11:27 doing the end cap at a store or doing the Super Bowl ads or TV ads, just that little ad that pops up at the end

Starting point is 00:11:37 when you're checking out, that's, when it says, hey, do you want to add these three items? That's an ad. People don't know it's an ad. They think it's just part of Instagram. That's an ad.

Starting point is 00:11:45 And when you first open the app, you'll see offers. And so I have been with ice cream on Uber Eats. It seems like the CPG brands are offering buy one, get one free ice cream. And so, you know, my girls like to eat ice cream. We're watching TV. We have a little ice cream. It's a little tradition in our household. When I saw two for one, I just was like, okay, I'm going to buy eight pints of ice cream.

Starting point is 00:12:07 I was going to buy four anyway. but I'll buy the ones that are, you know, buy one, get one free. Those ads are not the stores, to the best of my knowledge. And that's not Uber Eats or Instacart trying to get you to spend more money. Those are the CPG brands trying to move more product. But then how do you value Instacart? Here's how I'd value it. 25 times.

Starting point is 00:12:29 Let's say they make a third of the ad revenue is profit. So if they make a billion dollars, that's 350 million. in profits. 20 times that, 30 times that is how you would value an ad business. In other words, 20 or 30 times earnings. If you look at Google stock price, it's 25, 30 times their earnings. I think Facebook is 30, 35 times their earnings. That's called the price earnings ratio, as you know. My guess is that right now, Instacart has, let's call it, I'm going to round them up to a bill. let's call it two, three hundred million in profits. Let's make, let's be generous, make it 300 million. 300 million times 25 percent or times 25, right? You know, you're starting to get to that

Starting point is 00:13:21 six, seven, eight, or, you know, 30 times earnings, 25 times earning, 20 times earning, 20 times, that would be six billion, 30 times 300 million, be nine billion. You know what they're trading? I think they're trading out like exactly eight billion. I think that's how the market is valuing them. If you want to compare their 800 million to Amazon, Amazon's got 40 billion. So there it is. I think that's a really great way for you to look at that business. So big week for IPOs. What does that mean for the startup market? It means that the people who are the LPs in Kostla, Y Combinator, Sequoia, Andresen Horowitz, those are the big. beneficiaries, they did the early rounds, the seed series A and B of Instacart. Those folks

Starting point is 00:14:13 are sending money to LPs. Who are the LPs? It could be someone like Ford Foundation. It could be somebody like Harvard. It could be someone like CalPERS. It could be high net worth individuals. It could be a sovereign wealth fund like Wobodala. Anyway, those people are getting money back. When LPs get money back, then they feel confident enough to put more money to work in venture. And thus the cycle begins again. But right now, limited partners haven't gotten a lot of money back because it's been a two-year drought of IPOs. All of a sudden, three IPOs in a week.

Starting point is 00:14:44 If you were in the Vision Fund and you were kind of bummed out, getting billions of dollars from Masayoshi-Joshi-San for Arm feels good. You know, if you're a Kostla or Y Combinator or Sequoia or Andreessen Horowitz, L.P. Hey, getting some Instacart shares feels pretty darn good. Getting Clavio shares feels pretty good. And that builds the confidence that Silicon Valley. and the tech industry and venture capital and accelerators and angel investors can actually identify companies that scale and change the world.

Starting point is 00:15:14 I would add to Jason, Vision Fund LPs got an extra, extra nice gift because SoftBank, the entity, the main company acquired 25% of arm from its own Vision Fund at a $64 billion valuation, so higher than what it went out at last month. Yeah, so they got to double-deb. It's a really good point. Yeah, basically paying Vision Fund LPs with shareholder dollars, which is great. Listen, here's what's happening. It's such a really good point is everybody who's in the capital allocation game wants to get more of their LPs money so that people, you know, trust the ecosystem more.

Starting point is 00:15:58 And when things crash, you know, trust and concern, you know, people don't feel good about certain stocks. They don't feel good about the stock market. They don't feel good about venture. And that's what happens when a market bottoms out. And that trickles down all the way to startup. So that's what's happening. Jason, do you have any thoughts on the Dave Portnoy calling the Washington Post journalist yesterday? Yeah, you know, that's interesting.

Starting point is 00:16:20 You sent me that, Nick. And it really felt scummy that the Washington Post were targeting the advertisers first and saying, you know, that Dave Portnoy is problematic. It felt like they were doing that to damage Dave Portnoy and damage Barstool Sports and to get those sponsors to cancel their sponsor agreements for his pizza festival. And then they want to go to him and get a comment at the last minute. That's kind of dirty.

Starting point is 00:16:54 And I think that there's probably a very strong internal discussion going on at the Washington Post about, hey, our job is to, you know, when we have a story like this, maybe start with the person who is in question. And you say, hey, Dave, these things, people felt were misogynistic or, you know, you use these terms, you know, 12 years ago. And, you know, maybe those things are not politically correct right now. You have to ask you as just like, why is this story important to the Washington Post right now?

Starting point is 00:17:28 That's what I felt like really weird. And the way they're doing it seems like they were using a. tactic to damage barstool sports. Now, I don't think they're direct competitors, but it felt like vindictive, virtue signaling, woke, whatever. And you have to ask yourself, like, okay, if there was a star, you know, Dave Portnoy is an actor, basically, right? He's a persona.

Starting point is 00:17:49 If you had an actor from 10 years ago or 20 years ago, and in a show, they used a term that was not politically correct or acceptable today and the, you know, society's changed over 10 or 20 years. So I'm just sort of taking Dave Portnoy out of it. And then that person is, you know, in a commercial for T-Mobile or that person, you know, did a skit or a comedy bit on a talk show, whatever. And, hey, that's not politically correct now. And then they go do a movie and you try to get them canceled on Disney. It just felt, I think, to people like the woman was gleefully trying to set up a situation where they were trying to damage the business.

Starting point is 00:18:26 And you heard Dave Portnoy used the term torches, a tortuous interference. And what that is is a fancy word for, you're trying to damage my business. You're trying to interfere with my ability to do business. So I think the lawyers at Washington Post, when they hear that discussion going on, they're like, uh-oh. This does feel like maybe we're not playing it straight. And this is why media has lost credibility is because it feels like they're trying to take people out as opposed to inform the public. Now, I don't know if that's the case with this writer.

Starting point is 00:18:58 I don't know if it's just sloppy reporting. You want to play the clip where she specifically says the tactic that she uses? She kind of says the quiet part out loud. Yeah. So this is where it kind of breaks down. It was like all the way at the end, she was talking about the tactics of journalists. And that is, to your point, Nick, saying the quiet part out loud, which is journalists do have tactics. And one of the tactics is to try to bait people, to taunt people to get them to talk.

Starting point is 00:19:24 And then at the last minute, try to get a no comment from somebody. And so we'll just play this like a minute. I think it's like nine minutes or something. Go ahead. It's nine minutes and 20 something seconds. But everybody listened closely because he's obviously using a cell phone up to a microphone. So she's much lower than he is. Okay.

Starting point is 00:19:43 Say I have not made my mind up about you. Then why would you include that in the email to sponsors? Because I was hoping for a dialogue with them. You know, sometimes you have to say something like, this is like, you know, it's sort of a reporting tactic when you want someone to respond you kind of have to indicate that there might be something negative and then you get them to engage that's all i was trying to do i really wanted them to engage with me that is a sad state of journalism if that's a tactic that you have to what i would say is make up something about somebody there might be

Starting point is 00:20:16 there might be something negative and so you want to give people a chance to respond yeah you can see by day's reaction it's like she doesn't know if it's true the negative stuff and she's trying to bait some sponsor into responding. Really dirty tactics. Washington Post needs to talk to that journalist. I don't know which journalist is. They might be Pulitzer Prize winning. But the fact that he said that out loud,

Starting point is 00:20:39 you know, kind of confirms what a lot of people suspect, which is the thumb is on the scale. It just doesn't feel good. I don't think these journalists understand that we don't want to feel manipulated. And that's like one of the themes of the past, I don't know, decade is whether, whatever organization is,

Starting point is 00:20:56 We don't want to feel manipulated by the government, by a health organization, by the Fed, you know, or by media. Just tell us the truth. That's what we want. Just tell us the truth. And if we want opinion, we'll watch an opinion show. But, you know, the Washington Post is supposed to be really, really, you know, great journalism. And I think this is a tactic that you might expect that, like, you know, the new. of the world or some Rupert Murdoch, you know, gossip publication, not the Washington Post.

Starting point is 00:21:33 And, you know, it's the same thing with The New York Times, very similar tactics where you feel like they're really trying to destroy somebody as opposed to just inform the public. And so it's, it's sad for me as a journalist. There's two factors that are contributing to this. One, there's a generation of journalists who think it's their mission to do advocacy, right? They have to be advocates and they have to try to get an outcome as opposed to just informing people. And the second piece is they've had their business destroyed by competitors, online competitors, whether it's Google, Facebook. We're just talking about Instacart in their advertising business, all of that advertising,

Starting point is 00:22:12 also Craigslist, Facebook Marketplace, that took the classifies in the advertising business away from the publications. And so the fact that they've had their advertising crushed is a, is a, big part of the story here too, I believe. Listen, public markets can be volatile. Don't I know that? Uber shares, 15. Oh, 60. That is why many people like to diversify their assets to be safe. And if you're looking for a unique asset class to diversify with, hey, what should you do? Take a look at blue chip art. I have, I have some investments in art. And I do those investments through MasterWorks. Blue Chip art has historically been uncorrelated with the stock market. Okay? and Bloomberg reported that as equities dipped last year, our prices and expenditures actually

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Starting point is 00:23:38 So go to Masterworks.com slash twist. That's Masterworks.com slash twist to skip the wait list. Past performance doesn't guarantee future results. See important disclosures at masterworks.com slash twist. CD. I'll take a couple of questions from folks in the chat room. Let me take a look here at the questions from JD. Do VCs ever go back to previous business trends or does everyone focus exclusively

Starting point is 00:24:03 on the it thing like AI today? Great question. What you would do is you would take the new platform change and then you apply it to everything that came before it. Okay. That's an example of that. CRM systems, customer relationship management. Salesforce. Salesforce did that in the cloud. Before that, we had software that, you know, you would

Starting point is 00:24:24 client service software, you would install a server and you'd have all that in a database. Then, you know, mobile comes out. And so somebody makes a mobile experience. So you have superhuman on mobile is, you know, better than Gmail or Gmail replaced, you know, you'd do a client that you would buy. And so with AI, I think AI is an opportunity to look at every existing business. and I had this discussion with the CEO of Kayak recently. You'll get that episode soon. And when I had the CEO of Kayag on, I was asking him like, hey, what do you think about AI? And he wasn't particularly enamored by it right now.

Starting point is 00:24:57 And I thought, hmm, I don't know if I agree with that. I think really the AI is going to change how we book flights, restaurants, etc. I think you're just going to talk to and say, hey, what are, I'm going to New York. What are five restaurants I'd really like based on, you know, the things I favorite it in Yelp and places I've been to before. I said, oh, we know you like sushi. We know you like burgers. We know you like ethnic food.

Starting point is 00:25:22 Here's, you know, a great Ethiopian place to get your ethnic food. Here's a great burger joint. And here's the best sushi place. And then it tells you the times that they're available. And you say, yeah, looks good. You know, book one for Monday, one for Tuesday, one for Wednesday, at 7 o'clock. It looks at my Google calendar. It knows, oh, I have a late meeting.

Starting point is 00:25:42 So that night I want dinner at eight. And it just does it for you. And so that's how you should think about it, is what existing businesses can you disrupt with this new technology, whether it's mobile, whether it's cloud, whether it's AI, great question, or, you know, Google, the Apple goggles that are coming, what do they call Vision Pro or whatever, that's going to change things too. So we'll see. How do startups outside Silicon Valley access VC funding, or do you just have to make the journey

Starting point is 00:26:09 there? There are VCs in New York. There are VCs in Miami, but I do think if you're a first-time founder, you will will get a lot more attention. I would say probably 50 times the number of meetings if you just move here and place your company in the peninsula, you know, whether you're in San Carlos, San Francisco, San Jose, you place your company there, and then you can just go have coffee with these VCs or come to their office. And people are starting to be in offices again. So I would say you get 50 times the number of meetings and it's a numbers game. Now, if you are a breakout

Starting point is 00:26:45 company in Salt Lake City or Austin, VCs will fly to you. So that's the nature of it. If you have a great company that's growing 3x year over year, you're going to get funded if you're in Boise, Idaho, you know, like Shopify. They were in Ottawa, I think, originally. So it doesn't matter where you are if you're in the top 1% of startups. If you're not in the top 1% of startups, you have a massive competitive advantage being here. I heard you say, this is beer script, I heard you say you believe we still have six months of this down market. What makes you arrive at that prediction? How do you think the transition will go?

Starting point is 00:27:18 Hockey's slow. I've said from the beginning because I looked at the three, I looked at the two previous down markets I lived through dot com and Great Recession. These things tend to last six quarters plus or minus two. So the shortest they'll be as three or four quarters. The longest they'll be as like maybe nine, six, seven, eight, nine quarters. you know, two years. So somewhere between, you know, half a year and two years is the historical norm.

Starting point is 00:27:49 And what we've seen, we've got six quarters behind us. And I almost finished the seventh quarter of downmarket chaos. And it feels like green shoots, right? We've had three IPOs in the past week. We've got M&A happening. We have companies that cut off and laid off a bunch of people now saying, oh, maybe I'm going to bring somebody back. And that's what you had happened with.

Starting point is 00:28:11 Salesforce. She said they're hiring people back and they may have some boomerang employees. As long as consumers are strong and we have the lowest unemployment of our lifetime, then they'll have money. If they have money, they have confidence. If they have confidence, then they spend money and we're a consumer-driven economy. And businesses, if they see consumers continue to spend money and there's competition for employees, they're going to compete. But the reason I think things are soft and might be changing.

Starting point is 00:28:38 is because I have a number of job descriptions out because my two businesses launch and inside are doing so well. And then I also have some domestic positions, you know, like nannies and stuff like that. I have seen a dramatic change in the number of qualified people applying for jobs. And then, you know,

Starting point is 00:28:57 some people will apply for a job on LinkedIn. Then they'll write me a personal email if they can back into its launch and then they go find the CEO. And then I also have people email me and say, hey, I'll work for you for free for three months, prove myself, et cetera. I'm starting to get those.

Starting point is 00:29:13 I won't call them desperate emails, but I'll call them, you know, I really need a job emails. And I've been there myself and the other part of my career, you know, needed a job once or twice. And I'm seeing a lot of that. So I think the labor economy is softening. And then that means, you know, if there aren't as many consumers going crazy after three Yolo summers, they probably won't spend as much money, will they? If they don't spend as much money, then inflation should go down because people are going to lower the prices of cars like Tesla's doing.

Starting point is 00:29:47 They're going to lower the price of hotel rooms and flights. And this idea that like, it's hard to get a flight, hard to get a hotel room, hard to find a car, which, you know, it has been for the last couple of years. All that's going away, that's kind of healthy. That's the slowdown. That's the point of raising interest rates. The point of raising interest rates is that they want, a certain number of people to lose their jobs. It's crazy to say that out loud, but that's the truth. They want unemployment to go up. They want unemployment to go up so that the economy cools down and there's not so much money. Why would they want to do that? Because inflation is a worse in their mind, out of control inflation will do more damage. And that's really where we're at

Starting point is 00:30:27 as an economy. So nobody can predict this perfectly, but I did predict it would be six quarters plus or minus two. And here we are in seven and we're turning it around. What that means for startups, you got to get to break even, have a path to break even. You got to have a lot of options available to you. If your startup is losing, you know, $100,000, a million dollars a month, you're not going to get funded unless the growth is amazing. And, you know, it's hard to grow right now because, you know, it's a tough market. Zach asks, since you invest in so many companies each year, how do you find Alpha and separate these startups from each other? Great question. We have a database. We have 20,000 applications

Starting point is 00:31:08 a year. We meet with 3,000 companies a year. We have 19 full-time people at the company. I'm hiring three more researchers, analysts. I hire researchers and analysts kind of out of school. I think the starting salaries are like 60k, so it's not a super job, but it's not a terrible job. And then we ask them to do 500 meetings per year. That's 10 meetings a week, minimum. Some people do 15. That's three meetings a day, writing coverage of every startup. Then we write a lot of small checks. So we have 25K checks we give to founding university companies. We have 100K checks we give to launch accelerator companies.

Starting point is 00:31:46 100 million people listen to my podcasts between All In and the Speaking startups. Then you have 20,000 applications and 3,000 meetings. When the meetings have certain characteristics and I have 12 characteristics I like in startups, like builder founders, product velocity, a growth rate above 2x. I love world-class design. I like certain markets that are high gross margin. If a startup has three of the 12 characteristics I'm looking for, the team will take a second meeting. Other people will look at it.

Starting point is 00:32:21 And then we have two investment team meetings a year. And then people will tell me, hey, we should make this investment. And then we as a group decide. If it's a follow-on investment, we invest in the top 10% of our portfolio. So it's a competition. if the top 10% of our portfolio is growing 3x and above and yours is growing 2x, you just might not make the cut. Why? We'll have a certain amount of dry powder as an investor.

Starting point is 00:32:46 I need to put it into the highest performers I have access to. And so that's an important thing for people to realize. And our ownership percentage in winning companies, we'd like to own 10 to 15% of the best companies in our portfolio. When I was an angel, we owned under 1% of Robin Hood and Uber. But then we started to own 2%, 5%, 10% of companies like Com or Superhuman or Grin or FitBod. And so when we saw a company start to get to tens of millions in revenue, we really started to build that position. And so you want to make a lot of bets and then study them through their monthly updates and just looking at the statistics, being board members, board observers. and then you plow the, you plow basically a third to half of your fund, if you had a hundred

Starting point is 00:33:33 million dollar fund, which is what we're raising now, you want to put maybe 50 million of that fund into the highest performers, 50 million into the first bets. So it is a competition, and that's how you do what's called portfolio management. Great questions. Our friends at Coriant provide wealth management services centered around you. Coriant's goals are to exceed your expectations, simplify your life, and help you establish a legacy that lasts for generations. Coriant has been helping high achievers just like you enjoy their lives more fully, preserve their wealth, and provide for the people, causes, and communities they care about. They're one of the largest integrated, fee-only U.S. registered investment advisors, and Coriant

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Starting point is 00:34:45 That's coriant.com. Which question do you like best next? I know that we've got a lot of questions coming in here. There's a good question about why you're doing the Cloud Kitchen incubator that I think would be interesting. Great, yeah. So why don't you pull up the landing page? So my friend Travis, obviously, is doing Cloud Kitchen. He had done Uber. I'm involved with the company. And we think there's an opportunity to support food entrepreneurs, people who want to build a brand. So what we're doing is we have a very small fund. I would call it a micro fund. I'd call this an experiment.

Starting point is 00:35:20 And we have this curriculum from Founder University. The Founder University curriculum teaches software companies, marketplaces, fintech companies, etc., how to go. grow a business really fast. Now there's that opportunity inside of Cloud Kitchens. How does a Cloud Kitchen work? Let's say you have an amazing product. There's this thing called Milk Bread, which I had this incredible French toast when I was in Tokyo. And so, Nick, if you do a search for milkbread, Los Angeles, you'll see like it's a bit of a phenomenon in L.A. And there's somebody who's got a Cloud Kitchen that does this milk bread. Here it is. And so they have this plush loaf of Japanese bread, it's done in a ghost kitchen. Cloud Kitchen is the name of Travis's company and Diego's company. Ghost kitchen is what people call it. What is that to just

Starting point is 00:36:09 level set with people? Imagine you had a warehouse at the intersection of the 405 and the 10 or, you know, the 380 and the 101, if you know that interchange in San Mateo or in San Francisco, where the drivers could pick something up and then get to a large number of people very quickly. And that was cheap real estate. And then in it, you build little, you know, eight by eight, 10 by 10 kitchens. And then instead of you having to go find a kitchen, has somebody who's making this milk bread or let's say you want to make a Katsu sandwich place or a salad place or a boba place, instead of getting a storefront for $10,000, $20,000 and having to outfit it, what if you could for $3,500 or $4,500 a month, be in this location where the drivers are sitting outside. And then when

Starting point is 00:36:58 you finish making an order, you just take it and you hand it to somebody at the front desk and they take it from there. Now you've eliminated like a third of the work, you know, on a daily basis, and then you've eliminated long-term leases and building out kitchens, putting in a stove, et cetera. And then Cloud Kitchens also has software. So what if we gave $50,000 to people to start one of these? So imagine you're a chef, you work at a restaurant, you work in the appetizer place, and you just think, you know, I don't want to work here anymore. I want to be my own boss. I make 50 grand a year working at this place.

Starting point is 00:37:32 Well, we give you 50 grand and you take the year and then you go build this Cloud Kitchen. And I think we're going to get people a couple of months of free rent in a Cloud Kitchen. We're just meeting with folks now. This Cloud Kitchen's effort, we might build the next great American food brand, you know, whether that's a donut shop like Krispy Cream, whether it's, you know, sweet greens for salad or what's the Starbursts? chicken that we used to get at the office or Bel Campo burgers. I think we have an opportunity to build some of those businesses. So it's a little bit of an experiment.

Starting point is 00:38:04 We'll probably do two cohorts of seven, 14 companies, and see how it goes. So I like to experiment and I like to work with my friends. And I think we might be able to build some really huge lasting businesses. Let's see. From Darien, do you believe that there should be garrails on AI or should there be as little regulation as possible to help spur innovation. It's a great question. I don't have an exact answer. I do think that open source is a really great way to mitigate this so that we can see what it's doing. I think people explaining what the AI is doing is a good idea. And, you know,

Starting point is 00:38:44 we have an existing set of laws that exist around intellectual property and crimes. And I think, you know, in talking to Nikesh from Palo Alto networks, I think that podcast is out already. You know, he was talking about these sophisticated actors are using AI already. So we're going to need AI to combat AI. So, you know, now AGI, like the general intelligence concept, where it just can think for itself, you start plugging that into robots. And there are general robots.

Starting point is 00:39:18 You look at those Boston dynamic videos. Yeah, that would be pretty scary if somebody, created or got one of those robots and then just told it its mission is to kill as many humans as possible. Now, you think that's crazy, but terrorists blew up the World Trade Center. There are evil people in the world. And evil people luckily are generally stupid and not capable. And then once in a while, like Al Qaeda, they become super hyper capable and they come up with really clever ways to do evil things in the world. And that's the big fear. So I think it's valid. I don't think we're at the point where we need to stop AI development. I think we need to be thoughtful about it. And I really

Starting point is 00:39:57 like the fact that Elon talked to Schumer. And I think Elon was the driver of that meeting that we saw last week. So, or, yeah, almost two weeks ago, et cetera. So I think being thoughtful and having these conversations early and often is going to be good. There's also employment displacement that's going to happen. And so I think preparing everybody for that is wise. I just had the CEO of Kayak. We did an interview. He said he's not hiring anybody because his developers that are junior are becoming senior so quickly with co-pilots and the senior people are becoming 10x developers. So everybody's getting so good that professional development is better than anything else they could be doing. Bob G, the OG, says, which areas do you recommend founders to cut burn

Starting point is 00:40:45 that impacts growth the least. Yeah, great question. I think people spend a lot of money on marketing, and that is something that founders can learn to do themselves, and they don't need to have a huge marketing department. I think outsourcing as much as possible, whether that's your servers, your HR, your accounting, can really control costs.

Starting point is 00:41:09 And I think hiring people at reasonable salaries is also the way to do it. as an example, I was talking before about researchers and analysts. We hire a decent number of people in Canada, and then my other company inside hires a lot of writers in Canada. Why? They're just as good as Americans. They stay at companies twice as long, and there's a 25% difference in the currency. So, you know, we get arguably people to stay twice as long, and we save a minimum of

Starting point is 00:41:33 25% on salaries, which means you get an extra person, you know, for every three or four people that you hire. So be thoughtful. If you're going to have a remote team, You know, you could get some of those gains. And then you just have to have real hardcore startup employees. So if you have people who are phoning it in and they want huge raises, you're going to just have to be more cutthroat and just say no to raises until you get to profitability.

Starting point is 00:41:59 And I have a Slack room where every single bill comes into. And I just go into that Slack room once a week. I see all the bills coming in. I standardized everybody on the same credit cards and the same bank stuff. So it just gets piped into there. I think we use Zapier to do it. And if I see something that I don't recognize, I just ask, what's that? Is it essential?

Starting point is 00:42:20 If it's not essential, let's get rid of it. So essentialism is great. SOS asks, when should have found- Sorry, we got a super chat question for $5. I think you should answer. Oh, really? Oh, that's completely unnecessary. But okay.

Starting point is 00:42:34 Super chat question, Hamza. Thank you for the five bucks. I don't know what I'm going to do with it. But, okay, great. Interest is forbidden in Islam. But I really want to invest or create an investment group for startups without interest. This is possible to you. Okay, that's something I was aware of that interest is religiously not tenable.

Starting point is 00:42:57 So, but startups, when you do a note has an interest rate on a safe, it does not. So I think you would be safe with a safe because it doesn't have an interest rate. and on a convertible note, you do have it. So I think the way to do that would be to waive your interest or to donate that interest to a cause for Islam. And then it would not be, if we're looking at the spirit of the religious law, it would not be interest. It would be a donation and you would be in the clear.

Starting point is 00:43:37 But you'd have to talk to your imam, I guess. and have a thoughtful discussion about that. You know, some people are how they interpret things as very literal, and some people interpret things in the spirit of the law. So great question. And I will take questions first from people who do super chats, yes. Although I don't want people, I don't think I want people doing super chats because, but whatever.

Starting point is 00:44:03 I do super chats all the time for Nick's fan TV, but I'm a super fan of the host and I want them to keep doing it. but I will take super chats first because that seems most fair. From Bob G, how do you advise founders to solve disagreements internally? It's a good thing for investors and board members to do. I think division of labor is very important. Who is in charge of what?

Starting point is 00:44:25 Having one CEO who ultimately makes the decision, emotional maturity and self-awareness is important. I think having the discussion, hey, you believe X, I believe Y. Let's steal man each other's positions. and let's, you know, argue each other's side and then a place a bet. And so Annie Duke's book, Thinking of Betts, good book, a great thinker. You could say, I am 80% convinced that we should be a business to business company, 20%

Starting point is 00:44:54 I think we should be a consumer company. And then your co-founder might say, well, I'm 50-50. So, okay, let's spend the first year being an enterprise company. If we hit these specific notes, then we'll keep going. If we don't and we don't get traction, then we'll switch to my idea. And then you just codify that and write that down. And so you make it more of a bet and you're honest about it. And then you can go back and if you've documented it,

Starting point is 00:45:22 have a really thoughtful conversation about who was right and why and what was your thinking. Here's a question. Oh, board members, if you have a disagreement, go to your board members and try to de-escalate it, try to get down to understanding and having empathy for the other person's position and then make a quick decision and be willing to reverse it. From Tovare, Hey, Jason, thanks for doing this. My question is,

Starting point is 00:45:44 what is a book that you've read recently that you would highly recommend could be any type of book? Okay, great question. Unreasonable Hospitality is a book about 11 Madison Park. I highly recommend it. That's it. Go take a look at it. Do you think the UK underperforming when it comes to unicorns and big impact on startups if so why? UK is a smaller country.

Starting point is 00:46:04 You know, if you got a fraction of the number of people as America, India, China, you will have a fraction of the number of unicorns. Also, you know, there's different societies view entrepreneurs differently. America, we've typically celebrated them. And for a period, China was celebrating them. Now they're not. So it really is up to society to decide if they want to celebrate entrepreneurship and innovation or if they want to vilify it.

Starting point is 00:46:31 This is one of my main concerns about America right now. It's that we're vilifying people. And it's really crazy. Okay. I think that's enough questions for now. I didn't think I missed any. It's nice to get 100 people to pop in and say hi. And if I do it more often, more people will come.

Starting point is 00:46:45 So if you did see this, give a thumbs up. And then where the subscribe button is, I'm sure you're subscribed to this. You can hit all and you'll get a notification when I go live. And so maybe we'll do some more. Now that I know how to do it, I just pop up Zoom. And then I just hit that button, Nick, and I'm good. and I don't ever have to talk to you or anybody. I can just do it when I want.

Starting point is 00:47:04 I think I want to go rogue. You know, this is the thing I saw with what my friend, you know, at Nix Fan TV does CP the franchise. And he's built up quite naughty and he gets like a thousand people every time it goes live. And listen,

Starting point is 00:47:19 I get like whatever is, 127 watching now. I think at the peak we were getting, what, 400? Yeah, four to five. And then if it was something important, it would be like 800 to a thousand range.

Starting point is 00:47:28 Live. It's pretty crazy. It was like, Apple or the day that Elon bought Twitter. I remember we went live. That was crazy. We had a lot of people in that one. Great. Awesome. Okay, I'll start doing that.

Starting point is 00:47:39 All right, everybody. I will see you next time. I'm going to go watch Ashoka with my daughters and make them dinner. Love y'all. Peace.

This Week in Startups - Jason Unplugged: IPO market, WaPo tactics against Dave Portnoy + Live Q&A | E1815

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