This Week in Startups - Jason's DTC investment thesis, Jokr looking to raise $50M, liquidation preference breakdown, witness in Elizabeth Holmes trial goes rogue | E1553

Episode Date: September 7, 2022

First up, Jason explains his DTC investment thesis (3:00), before he and Molly give some insight into the Bay Area heat wave (13:41). Then, Jason and Molly dive deep on reporting that instant delivery startup Jokr might be raising a new round with unusual liquidation preferences (25:50), then Jason breaks down what liquidation preferences are with some spreadsheets. To wrap, J+M cover a witness in the Elizabeth Holmes trial going rogue! (53:27) (0:00) J+M tee up today's topics (3:00) Holiday weekend catch up + Jason explains his DTC investment thesis (12:15) Notion - Sign up for FREE at https://notion.com/twist  (13:41) Bay Area heat wave, Burning Man recap (24:31) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://Squarespace.com/TWIST (25:50) Jokr look to raise between $35M-$50M from existing investors, why they have closed operations in the US, how immigration and labor plays into Jokr's decision (33:43) Lemon.io - Get 15% off your first 4 weeks of developer time at https://Lemon.io/twist (35:01) Breaking down liquidation preferences and why Jokr investors are looking for an unusually large liq pref in its upcoming round (53:27) A witness in the Elizabeth Holmes case has gone rogue! FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood Subscribe to our YouTube to watch all full episodes: https://www.youtube.com/channel/UCkkhmBWfS7pILYIk0izkc3A?sub_confirmation=1

Hey, everybody. Hey, everybody. We're back. I just got back from Burning Man. I am exhausted. And it's 100 degrees here. And Molly and I lost power. We have power this morning. It's officially the toughest week in the Bay Area because everybody has many, many people have come back from Burning Man. It's always our hottest time of the year. And that is no joke around here because nobody has air conditioning and our power doesn't stay on. And it's a short week. So just look for kind of a lot of chaotic energy. It's just going to be like a chaotic good kind of week. Well, here's your thing. When we're exhausted, we're still great.

So out of the frying pan and into the fire from Jacob and Molly, we're going to talk about DDC companies. I'm joining the board of a legendary direct consumer brand that you don't know about. That's not part of the Silicon Valley diaspora. And I'm going to reveal it today on the show. What else do we do? Yeah, this is a very exciting one. And then we're just going to go full spreadsheet.

because we do not need to make it easy on ourselves just because we're exhausted and potentially hung over. We're talking about Joker, potentially raising $50 million and a massive breakdown on a dirty little VC secret known as liquidation preferences. Super interesting topic that I have been trying to understand since I started. So yay. We are going to do the work and open a Google sheet and show you the impact of liquidation preferences. This is something that's very hard to understand. Most people just defer to their lawyers. And then when their payday comes, their check is a little bit shorter than they anticipated. And so we're going to break it down and give you every possible scenario. If you're a founder, if you're an angel investor, this is a must understand, not must

watch, must understand TV. Super tactical. So great. And as long as we're going tactical and spreadsheet and real-time math and percentage calculations. You know we had to follow up with a little bit of gossip. A witness in the Elizabeth Holmes trial going rogue. Boy, the tea has been spilled. Columbo makes an appearance on this episode. We're going to break it all down for you. It's going to be a great, fun, exhausted episode.

We got this. Stick with us. This week in Startups is brought to you by, Notion is one place for notes, docs, projects, and everyday work that goes way beyond a wiki. Get started for free at notion.com slash twist. Squarespace. Turn your idea into a new website. Go to squarespace.com slash twist for a free trial.

When you're ready to launch, use offer code twist to save 10% off your first purchase of a website or domain. And lemon.io. Need to speed up your product development without draining your budget, hire vetted engineers from Europe at lemon.io. Go to lemon.io slash twist to get 15% off for the first four weeks. Hey, everybody. Hey, everybody. We're back. Molly and I are both on 50% power settings. We've both gotten our asses kicked in the last 72 hours. But Molly and J-Cal at 50% is double any other tandem in the league.

Still 100% awesome. Yeah. Bring it. Yeah. We're going to get through this. Not okay Tuesday. And it's going to be an amazing show. It's going to be amazing.

All right. So just to recap here, Molly has a fan. She looks like she's living in like the 17th century in England, fanning herself in August. I'm wearing my Mexico resort wear because it's got full resort where. He's got full resort. But looking good.

Looking good, do I say. I got some lashes. On fleek. Is that what the kids say, Rachel, on fleak? Am I correct? Am I used to sleep? They do not. They do not say that anymore. They said that, what, three years ago?

It was in at one point. What would I, producer, Rachel, what would I'm at one point? What would I say if they were tight, if they were locked in, if they were dope, you know, like the words I would use as a Gen Xer? What would be a good word for me to use to describe Molly's absolutely exquisite lashes? I think on point is I still use I think on point I kind of like on point I don't know Nick can chime that's true that's amazing but on point kind of stays it's the sillier the word the shorter the shelf life I like it's the moment like it's been my experience like the moment you know those lashes of the moment yeah it's a vibe I like I like it's giving it's giving serving

serving whatever it is good yeah it's giving I'm pointing to something I used in the 90s 70s It's great. You live long enough to see yourself as a hero become the villain and your buzzwords come back in style. So I'm going to say on point. So here's what happens, dear audience. I'm like, you know what? I treated myself because I'm on Zoom and we're on video every day. And I just don't want to have mess around with my makeup and get like a rash from not taking it off right or whatever. I'm just I got myself lashes. And then Jason somewhat unexpectedly was like, oh, did you get lashify? I know all about that. And I was like, I'm sorry. What happened just now? So it turns out, I thought I was really girl in it up and he took it up a notch. I didn't. What happened was every month or every two weeks or so, a lashify box would come to our house, beautiful package. And then we would be getting ready to go out.

Oh, my wife looks great, but I couldn't put my finger on it. You know, like when somebody looks great. And you're like, I can't exactly. Our life is stunning. And she like, she stops the party. You've met her when she walks in. And then this is like a whole other level. And so I'm like, honey, you look really good.

Yeah, thank you. You know, no, no, you know, blinks her eyes. That's it. She's like, I just do. So that, exactly. And then I walk in, you know, to the bathroom at one point and she's putting, she's got like a little pair of like very funky looking tweezers with a curve in it. She's, get out. Oh, what's going on?

She's putting lashes on. And I said, oh, that's really. It's not lashify thing. I saw the box. She says, yeah, you know, this friend, we met at this party. She's friends with this person. Sahara is doing this company lashify. I said, oh, Sahara, she's great.

I remember meeting her. So long story short, Sahara has a love of Bulldogs, which I have. And she's a tremendous entrepreneur, it turns out. So I start talking to her about her business and she starts relaying to me what's going on. And this woman has created a business that would put to shame 99,

999 out of 1,000 businesses in Silicon Valley, off of her back, bootstrap, to a level of revenue that is beyond all but our, most elite portfolio companies in our portfolio here at launch. And I said, that's great. And she said, hey, I got questions about this, this, this, and this. And she's running a beauty, direct, and consumer brand. But without maybe some of the techniques that we see in our companies, just popping up

her Insta, and you can pull up her Insta and see, but she will do a three-hour live stream with thousands of people while she puts on her Flashify lashes. And she's got these all patented and incredible stuff. So I literally am announcing today I join the board of Flashify. And I do not do direct to consumer. I do not do beauty products. But I was like, here's an entrepreneur I can learn something from because she is a literal product genius, a literal marketing savant. And she's truly, I mean, that million followers is not done with any kind of silly games.

This is like done through sheer force of will. And she just innately knows how to do packaging. So when I go to LA, a lot of times I'll stay with Sahara and we will sit there and have a glass of champagne or wine and eat a nice hamburger or something and sit with our bulldogs and talk about lashify and what she's doing. And it's very extraordinary to me. So I feel very lucky. We haven't invested in the company yet. We might. They don't need it.

They're like wildly profitable. But it's just I'd be an interesting adventure to go on. And this will be by far in a way, the most successful. one of the most successful, top 10 successful founders I've ever worked with already. And certainly the most successful female founder who've ever worked with, you know, by a factor. And it's just great. Incredible. I'm like deep in the website about to order it.

So you've heard me say many times, Molly. Many? I don't do DTC. We have kind of, we have done it. I've had some amazing DTC outcomes, eight sleep amongst them, extraordinary with smarty pants, the vitamin company, which I did personally because, you know, was outside the mandate of venture with my friends. I created that company, Courtney and Gordon Gould. And that was a wonderful outcome, extraordinary, I don't know, 50X or 100X or something. But it's just very rare for DTC to work.

And there's really two vectors we've talked about here on the show. You have to have a transcendent product, like truly innovative, very distinct product. We look at 8Sleep. Obviously, it's that. Nobody ever made a smart mattress before. You did have mattress companies, Casper, et cetera, fantastic mattresses, fantastic delivery, but it wasn't smart. It didn't have this technology in it from these Stanford wonks. And then, of course, if you ever know, the Smarty Pants, they were the first gummy vitamin for kids.

This changed everything. It was like Flintstones. Yeah. Flintstones were like chalk, you know, and kids were like, ah, maybe. I mean, we came about these gummy vitamins. I'd say, who wants vitamins and three daughters would come running, line up? And then they started coming to me, we didn't have our vitamins today. And I'm like, well, this is a game changer.

You know, your kids asking you for their vitamins as opposed to me lining them up and saying, You can't have dessert or whatever, blah, blah, bah. You know, having to be stern with them about taking their mind. You guys are serious about your vitamins at your house. But seriously, that kicked off. Now even adults won't take vitamins if they're not gummy. I mean, like. Exactly.

And so here we are. Just two perfect examples. Lashify is like even, I think, more transcendent than that to get these lashes would be a $100 or $200 beauty experience. To do them at home could be a $25 or less experience. Yeah. And they, when it comes to aesthetics, they are a game changer. Like, they really do make the person wearing them. And by the way, they're used by both genders.

And they do make you incredibly beautiful, make one incredibly beautiful. And make you uncomfortable here on the call, call you beautiful, Molly. I don't know what the HR department jumping in here. I pay for it. I'm going to say great. I better look great. I want to. That's the whole point.

Thank you. Your boss, I would say you look beautiful, but I'll just say you look great. Great on camera, great aesthetics. I'll try to keep a professional here. It's, you know, I'm doing this because I know you're committed to a quality product here. Yes. I mean, look, I lost 20 and 30 pounds. I'm piglet eyes.

I mean, they just work. I mean, I just work. I have naturally stunning blue eyes. I mean, I just, you know, but I'll put lashify on. I'll do that now that I'm on the board. I might do a latchify day. We'll see if anybody notices. We'll see.

It's lovely. And I'm going to try them. And actually, even notice, Minaz is like, order. It's really easy. The other thing with, I look for a GDC company, is a really unique ability to market. And so if you look at Lashify, you look at Smart Apache, you look at Ate's Lead, you all have heard of these brands. You all have seen their marketing, whether you're remembered or not. If you pull up, if you Google any three of those, you start looking at them, aesthetically, you're going to start feeling something.

Emotionally going to start feeling these are brands that have really connected with people. Wobby Parker, $1.4 billion market cap right now, $1.4 billion market cap now. So these are incredible outcomes. best, Molly, of the DTC outcomes in that range. So it's a little different than, you know, investing in Uber and Airbnb, obviously, but still great businesses. If you can get it early. But there's still only two of those, too.

So. Yeah, but you could add a zero. You know, you start adding zero. Right. Gotcha. Gotcha. So the scale of outcomes, of course, is different for a D to C company, but you can have an incredible return if you get in at the right price.

So D to C companies need to be valued, not at $10 million in the C round, but, you know, two to five, 20 to 50 percent because they're out. outcome is going to be 20 to 50%, you know, of like some of the bigger outcomes, right? You can get to a billion or two, but you're not going to get to 10x that. You're not going to get to 20 billion. So just you have to be realistic. Entry price matters, yada, yada. If you are a startup, you need to sign up for Notion, N-O-T-I-O-N.

Notion is the greatest piece of software. I've used in the last couple years. I love Notion. And I just want you to go to notion.com slash twist and sign up for free right now. You go to slash twist, you get it for free. At my companies, inside and launch, we run the, entire companies on Notion, and I run my personal household on Notion. I run everything on Notion, including my own personal notes. Notion is the most amazing tool. It's like a wiki.

It's like a database. It's like a Google sheet. It's got tables. The apps work seamlessly across every device you have. Whether you're on your phone, your iPad, your laptop, your desktop, big screens on desktop, it is perfect. And they have thought about every single function in your life. Personal, private, public, business, accounting. sales, CRM, every single function in an organization or your personal life, and they've made gorgeous, stunning templates. If you were to just go to Notions template library and look at theirs, then you go Notion Library, you just type in Notion templates and then whatever keyword, O-K-Rs, to do, task list, whatever you're trying to do, employee reviews. Literally, it's built into

Notion. Notion.com slash twist to start for free again. Notion. Notion. What a great name. Dot com slash twist to take the first step to your organization dominating and being productive. And the knowledge base has arrived and it's gorgeous and it's beautiful.

And it's Notion. Notion.com slash twist. We are suffering here. We had you had power to go out for seven hours, I understand. Yeah. You're on an hour and a half sleep. You slept on a pool chair. I slept on the deck.

Yep. I slept on the outside desk. Jesus Christ. Not all night. Just like some of the night. No, I'm checking into a hotel after this for the next two nights because. Well, I mean, with the heat in the city tomorrow night. And I was like, you know what?

It's only 70 degrees there or whatever. I mean, I think it's 90 in the city, which is going to feel like 70. But like we don't, this is an adaptation, a climate adaptation story. Like the Bay Area doesn't have air conditioning writ large. Like most people don't. Explain that, the history of that. I think it's important for people to understand. We, right.

Like every, you know, it's funny, like Savino this morning, our president, Mike We were on a meeting super early and he was like, oh, but then the air conditioning came back on. I'm like, honey, no. It's still 90 degrees inside my house because there is no, the Bay Area doesn't. We have natural air conditioning in the form of the Bay. The fog rolls in and it stays relatively cool here. It's actually kind of a weird people consider it like a climate inequality thing because if you can afford to live in San Francisco or Oakland right on the water, you're not going to suffer the way that, you know, conquered and right. However, and this is very unusual.

Yesterday, it was over 100 in Oakland, and today it's going to be 100 in Oakland, and tomorrow it's going to cool down to like 95. And then when that happens, the power goes out because PG&E is terrible, and everybody in the entire Bay area is just a GD mess because no one sleeps. I've been here for six, seven years going on 10 now. And when I first got here, people were like, yeah, there's a week or two in September, late August, that's insufferable. But people generally go away for the week.

They go up to Napa, they'll go to Tahoe, whatever. They'll find some relief somewhere. But yeah, when you rent a place, like our office in the city that we don't use anymore, did not have air conditioning. And in fact, they don't even have vents in some of the buildings in San Francisco. For heat, they have little radiators along the walls that you flip a switch on. But there's no central HVAC unit. So the building we're in.

That was built, I think, in 2000 in the city, in Soma. And I blocked the loft there. It's like 3,300 square feet. They're like, yeah, don't worry about it. We don't have AC. There's no AC on the roof. We're never going to have AC. We didn't, they didn't put duck work in the building.

So the buildings in San Francisco, quite literally, do not have duck work. If you want heat, you have an electric heater that's kind of been flushed into the wall, but it's no different than the $30 electric heater. You buy an Amazon and turn on in your right. It's an electric radiation heater because the temperature here, I would say, is between 60 and 70 degrees, 300 days a year in the city. In Oakland, I'd say 60 to 80. you know, is our range.

Yeah, for 325 days a year. Right. And there might be 10 days like this, but now it's turning into 30 days like this. We have a 30 day run. And then the temperatures during those 30 days. I mean, they're in the far east bay,

which I sometimes, you know, like further out, like Dublin, Concord. They're talking about 120 degrees today. Like the temperatures that we're starting to see. Like, it kills people and kills dogs, you know,

and like pets are going to die. Might two bulldogs are suffering. last night, luckily one third of the house was air-conditioned. I had to, like, repositioned them in the house to the air-condition area. And they were panting. And I was, I did have, like, I was up at two in the morning repositioning dogs. This is after three days on the pli, a burning man. And you can hear it in my voice.

Let's stop talking about heat in your house and talk about heat in your tent or your whatever you would say. Well, okay, so you were on the planet. Let's be honest. Let's acknowledge there's a lot you can't say about your time on the plan. I'm assuming. Yeah. I mean, I don't want to. There was a good Instagram about it.

I mean, listen. DECC is dodging. Bobbin and we've in. It's a little. Luckily, when you're on the ply, I'm wearing ski goggles, essentially, and a bandana or a mask. So, but when I take it off, people do recognize me. A lot of people say hi, Molly. Fans of yours said hi to me and fans of this weekend startups and all in, everything else.

So I probably got recognized no less than 25 times in three days. And I have my mask on. Even with all your stuff on me. 80% of time of the mask on. Sometimes the sandstorms will come down. And, you know, you take it, you take a message. But just an amazing event, as always, as I tell people, if you're into art, if you're into music, if you're into community, it's absolutely, I believe the spirit of America in terms of, if you look at the principles, I encourage people to go type in the Burning Man principles and just spend a little time thinking about if the world worked like that. Now, I'm not some hippie-dippy guy.

I'm a kid from Brooklyn who is totally cynical about all of this. I know, I'm like, what? But radical acceptance of people is part of it, radical inclusion. And then the other principle that hits with me is this radical self-reliance. And so, you know, I was lucky enough to have a trailer. And when you have an RV slash trailer, you know, which I would say 25% of people there do. And so what you'll do is you'll make a camp with other people. You might rent two trailers, which are not cheap.

It might be, I don't know, a couple thousand dollars for a week, $5,000 to rent an RV in this country. And they probably charge you an extra 1,000 or 2,000 if you take it to Burning Man, because it's a special cleaning that you have to do because the playa dust is nuts. And when it kicks up, every aspect of your car is going to be covered with it. So you have to clean the engine block. You got to clean the tranny. You got to really do a deep cleaning on these things. Long story.

Short, you'll have enough gasoline, electricity, generators, etc. on your camp to have air conditioning, let's say, in two trailers and then 10 tents or something like that. So it was glamping for me. It was easier than my trip whitewater rafting in July that it went on. And so, you know, I'm tricking coconut wool. and fresh fruit. I stock the fridge with a ton of water pollen fruits. It was not that hard.

But when you're out in the desert, you can hear my voice, you're breathing in lungs of dust. The one thing I'll say is super notable, and we can find it on the internet. I did retweet it. And you can find videos of it right now, and we'll show it here. We'll throw it in post. Drones. They are now doing drone shows that include hundreds of drones in the middle of the desert. And they're sustained for hours.

They'll do a drone show for an hour or two, Molly, now. What? Seriously? It's better than any fireworks. The longest I've ever seen is like 30 minutes. They do them at the A's, you know, at the Coliseum now. Yeah. Yeah.

So now they're doing the Coliseum and something like that. And they're replacing fireworks with them. And they're more interesting, we're as interesting as fireworks right now, which is a very interesting corollary. So now in Tahoe and in Forest Territory, Napa, et cetera, instead of doing fireworks on July 4th, we're now doing drone shows. Yeah. This is the, this is the techno-cyberpunk future I wanted to live in.

It is. Here for it, Molly. Like all of this is such, all of this is climbing. adaptation in progress, like in process. And it's technology figuring out how to like, you know what, fireworks, just giant explosions in mega fire country is probably a no, but is it just as cool? And those drone shows are freaking amazing. Yeah.

Hopefully our producers have found like three of them right now on Instagram, but they were making the Burning Man. If you don't know, the Burning Man, it looks like a pagan kind of statue of a man with his arms raised, and they burn it at the end. And so they make it out of neon. And then they did a firework show for 20 minutes. It was incredible fire show, best I've ever seen. And then they burned the man with this giant, you know, explosions.

But then before and after that, they had a drone version of the burning man walking across the pliomali. So we're driving in an arc car or an electric bicycles, listen to cool music. That's like cyberpunk music. Like I was playing the Blade Runner Esper Edition on my art car. Yeah. And so I'm on an art car playing like the secret version of Blade Runner that never got produced. It's called the Esper Edition, if you want to look it up. and I'm not feeling much pain.

You know, me with my Vuv. You got a little Vuv-Clicoe popping. I'm like a maniac. People are like, is that J-Cal? I'm like, yeah. They're like, oh, I saw the Vub-Col bottle. It just happens to be what I like, okay? Don't judge me.

So I'm drinking Vuv-Clico with a giant straw like a maniac. Uh-huh. Sipping a Vov-Clico bottle on the playa, dressed like a maniac, playing the Blaine Runner Esper Edition, and there is a Burning Man walking across the playa. That's insane. made of drones.

And then it pulls out a cowboy hat and puts a cowboy hat on. You're just like, whoa, this is awesome. And it was great. I saw a bunch of friends. And, you know, like I tell everybody, it's a great thing to do. And the principles, I think, are super important. We talk about fly adaptation here. You're subjecting yourself to the harshest climate in the world, I think.

It's 110 degrees during the day with dust storms. You cannot breathe. When they dust storm, it whites out. I mean, it looks like tattooing. It's no joke. Like, you have to, if you don't have a mask with you and goggles, you need to get on the ground, cover yourself with whatever you have, hold a towel over your mouth. Or you will start having a coughing fit. And you might need to go to the hospital and get like asthma medication or an inhaler to get the stuff out of your laundry.

You might be hacking and sneezing black dust for a couple of days. So it's very hard. ago, I interviewed the CTO of Burning Man of the, you know, actual company. And it was such a fascinating conversation. And I was like, so basically you're, when you think about what you're qualified to do if you ever want to not do this job, you're basically qualified to be the CTO on Mars. Like the way that she described, you know, the sheer infrastructure challenge of doing that. And by the way, she's amazing, right? Like a six foot, something like we're the same height, like six foot tall Amazon, like big dreads.

like super punk rock looking. And she's like, yeah, I mean, you know, you're installing, you know, communications towers and like 100 mile an hour winds and dust is blowing you off of the thing. It's pretty nuts. Anyway, so if Mars ever needs a CTO, she's the lady. And then at night it drops down to 40. And so, and you have to bring every ounce of liquid you're going to drink. And every lounds of liquid that's going to come out, you're responsible for.

You know, so you need to bring in everything and you got to take everything out. And there is no store. There is a hospital. If you need something, if there's an emergency, but you're basically on your own. If you run out of food, you've got to go ask your neighbors. And so that's what that radical inclusion is about. Like, you know, if you are, if you have food or whatever,

you're kind of obligated to give it to the next person if they need it. So it's kind of beautiful. I highly recommend people check it out. And definitely read the principles and start backwards from there. And if you do go, my only piece of advice is join a camp. Don't go solo, do go online. I think the Burning Man website has all the camp information. And so you find people from your city, if you're in Arizona, if you're in Texas, you can find people in your city.

You go meet with them beforehand and you plan out, you know, okay, I'm going to do breakfast on these days. You do lunch, you do dinner. I'll bring the water. You do the porta-potties. I'll bring the medicine and, you know, make sure if we have emergency supplies and, you know, medicine kits and everything. So, you know, it's kind of beautiful in that way. I highly recommend everybody to do it. Got a lot of news to get you. Listen, Squarespace is the platform where you can build or sell anything. You all know it. I've talked about it forever a decade here on this week. and startups in partnership with Squarespace. We love it here.

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your first purchase of a website or domain. Squarespace.com slash twist for a free trial offer code twist for 10% off. Let's go right to the hard stuff. We were like, it's not okay Tuesday,

so we're going to go spreadsheet. We're going to go hard on spreadsheets. God. And liquidation preferences. This was your idea, so we're going right in. Okay, here's the setup, though, to where, how we get here.

One, Joker. So we've talked a lot about these instant delivery platforms. When we had the GoPuff CEO on, we talked, I think, about how Joker, the instant delivery startup had basically pivoted to only focusing on the Latin America market pulled out of the U.S. market. It's now in talks to raise between $35 million and $50 million led by existing investors at a $1.3 billion valuation. This is according to a scoop from the information's Aaron Wu.

Viewed a bunch of the fundraising documents. That would actually be not a down round. for Joker. Like, everybody's been very worried about these instant delivery startups. This would effectively be like

a flat round, a 1.3 billion dollar valuation compared to its most recent, which was December, which was 1.2 billion. Yeah. Jokers raised $430 million so far, which includes debt.

As I mentioned, pulled out of the U.S. market after heavy losses. Even after leaving the U.S. markets, it was still losing about $10 million a month. Yeah. As recently as July.

And then here's where the round gets kind of interesting and gets us into a little like bonus VC Sunday school, VC Tuesday school. Yeah. G squared and GGB Capital are both existing investors and they're leading the round and have a 1.4 times liquidation preference.

Lick prep, got it. Meaning that investors are guaranteed a 40% return in the event that the company is acquired or liquidated. Yeah. So. Yeah, I can explain this. First, right, like before we talk about timing

and whether that's what they are now planning on. Let's talk about how this works. Because liquidation preferences is one of those things I've read 50 million blog posts about and I just don't understand it. So first up, I think, even before we get to the liquidation preference, why did they leave the U.S. is also a very interesting question.

I think what we're going to learn right now is, and this is, you know, kind of goes beyond just, goes just beyond startups and cap table math. The United States, because of our anti-immigration policy, is unable to provide affordable labor to certain startups. And so with Uber getting, you know, people driving Uber or doing DoorDash are now regularly reporting $30, $40, $50 an hour compensation. We're talking four times, five times the minimum wage.

We were sitting here but five years ago when we had a much more before Trump and Biden really closed the borders. Both, you know, this is on both sides. It's not just a Republican thing. We have locked down the borders in a major way. We do not let people into this country anymore. And we have record low employment participation, 62% of people in the able-body area are participating in the labor force.

1999, it was upwards of 70%. So we've had 8%, 10% less people working in the workforce. Americans do not want to take minimum wage or slightly higher than minimum wage jobs. Things like Joker require entry-level employees. It cannot work in the United States, is my belief, unless you have the ability to pay somebody 10 to $15 an hour. Why? They can do one or two deliveries an hour.

We all know that. You can only do one or two deliveries an hour and you're getting paid 40 bucks. That means you're paying either $40 for a delivery or 20 best case if they do two an hour. And they're not doing three an hour. This is like barcicle that they can get to three or four an hour. So I think Americans now are going to have to get used to, we are not going to have the level of service that Korea, you know, South America, other places in the world have, because we don't have cheap labor anymore. And if that's the way it's going to be, you know what? The same situation is happening in Europe.

I mean, this is where it would be good to point out that the reason we don't have cheap labor is because we don't have cheap housing. We don't have cheap health care. Correct. Like, if wages don't keep up with the cost of living in the fundamental category, so, you know, I just want to say it's not only immigration and it's not, it's a whole bunch of problems that are going to be really hard to solve and will impact our competitiveness going forward. If we let two more, two million more people, three million more people into the country year, which is what I think we need to do. We need to let like two or three million people into the country a year to keep up with like what we want as a country. We would be able to have, I think, some of these services, but you are absolutely right in certain locations. New York, California.

Yeah, other places, maybe Boston, places where housing is absurdly expensive. The housing crisis definitely plays in. Cost of living never plays into this. And health care, actually. We're almost down playing health care. The cost of health care is like such a massive barrier. In the 80s, people didn't have health care. entry-level employees didn't have it, and entry-level employees lived multiple people to a housing unit.

And so I'm not making a judgment that that is how the world should be, but that's how the world was in the United States. And that's when we had delivery services. That's when we had some of these things. And that's what happens in other countries. So it's just the way America is going to be. It's going to look like Europe, where you just, you know, there's going to be a lower, the lowest we're going to be able to pay people. I'm thinking this country is going to be $25 an hour, $35 an hour. I think that's where we're ending up.

The whole minimum wage thing is an illusion. Like, I don't think anybody's going to want to get paid that. We keep immigration the way it is. Anyway. Like, there was a lot in there that I'm too tired to unpack, so I'm just going to write it down and come back to it later. Listen, I grew up in the restaurant business. You could hire dishwashers who were illegal immigrants technically.

Busboys were illegal immigrants. I mean, that's still happening. much less, much less. It's being cracked down on in a major way. It is not the average anymore. You know, it's not the standard. So, you know, depending on what you believe, you know, I believe in immigration, I think more people should come into this great country.

Yeah, I mean, I completely agree. Yeah, exactly. And I don't necessarily believe it just so that people will, like, bring me stuff. It'll be like, we will have a more vibrant economy. Like, when you say we're going to end up like Europe because of this, you mean we're just going to be a little bit stagnant or less innovative? I think it could lead that way. Yeah, I think it could lead the way.

Only because once you up the standard, standards only go up. You're not going to go to people and suddenly say like, you know what, we were paying your $25 or not. We're going to go down to $50. It just doesn't happen that way. It could. It would take a real crash of the economy for wages to deprecate and benefits to deprecate. It's really hard to do. And if we're going to lock the border down, we're going to have a million and a half people coming in, there's just no chance.

There's just no chance to have that level of work, which means just everybody's got to get used to paying $18 for. a hamburger. The idea of getting an $8 hamburger and the dishes were cleaned by an illegal immigrant and it was delivered by an illegal immigrant and you got this great deal. That's over, folks. Just pay more. You're going to have to pay more across the board. Now, let's get to Joker. So what that means is instance of delivery doesn't work here. The only thing that will work, Molly, as we dipped into on the last all-in, is robots. The only way is going to be robots. So the robot dishwasher. There was a dishwasher startup that cleans dishes by robotic. And there is those delivery little mini robots that look like R2D2 driving burritos to places. That will start

this again because those robots will be fine with $5 an hour. Right. Net net cost. And so you don't need to have immigrants. We're really getting into dirty little secrets about capitalism today, people. Yeah, I mean, the reality of capitalism. Like you don't want to go too far down that path exactly, but it's the truth. Like there are certain parts of what, of the American lifestyle that cannot be enabled without. Cheap labor. Cheap labor. You want to pay, you know, six bucks for an iPhone cable?

You know, it's going to be made in China, but people who don't have health benefits. Yeah. Can't have it all. Can't have it all. Okay. So there we are with Joker. It's not going to work here. Joker.

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slash twist. Now let's talk about liquidation. Yes. This is best explained by pulling up a spreadsheet. So we just made a quick back of the envelope here. A liquidation preference.

Most people, and I'll make this super simple for people. Kudos to our team, by the way. Shout out to Nick, our managing director, Ashley, our president, Mike, who I think just punted to Ashley like we all always do.

on questions of really complicated math. Okay. Ashley, Ashley. Thank you, Ashley. Managing your director here. And lawyers can typically handle this. And if I get anything wrong, forgive me, but you can look up liquidation preferences.

The liquidation preference, when I was an entrepreneur, I couldn't understand. I had lawyers explain it to me two or three times, and it was like, do I understand this? There's a lot of fancy terms in here. And I'm going to explain it to you just based on why this exists.

Because once you understand the why it becomes easy. There is a concept called a liquidation preference. A liquidation preference, it represents an investors right to get money back before the proceeds of a sale are distributed. Okay. So let's just do this through an example. The example I'll use here is, you know, a company called Uber in its first valuation, which was $5 million. Let's say people put a $500,000 investment. Let's say it was one investor just for simplicity sake. And that investor own 10% of the company, right? $5 million.

But in $500, the valuation is $5 million, and they have a 10% ownership. Just keep it very easy, peasy model. The $500,000 bought 10% of the company. Okay, now, if it was straight equity, they just earned 10% of the shares, and the company got sold, right? And let's say the exit value was $2.5 million. Well, 10% of $2.5 is $250. If it got sold for $5 million, well, then you can.

you get your $500,000 back. If you sold for $10 million, wow, you doubled your money. You sold for $50 million. You 10 extra money. Your $500,000 turned into $5 million. And then, of course, if you hit some huge $100 million valuation, you get $10 million back, you did 20 times your original investment, right? 10% of $100 million, pretty simply is $10 million.

Now, when you look at this, in the first, in the first scenario, a $2.5 million sale, the investor lost half their money. They only got back to $0.50 on the dollar, right? They got $2.50. Investors don't like that idea. So investors came up with a provision called the liquidation preference. So that in that scenario, they get a minimum of their money back. And then in the second scenario, they too got the minimum of their money back because it was 10%.

And that would be considered 1x. 1x times your money is the second scenario we're seeing here. I put in 500. 1 times 500,000 equals 500,000. Welcome back to multiplication. in second or third grade. And if I got back a million dollars, well, that's two times, right? So a one-x liquidation preference means you got your money back. But VCs, of course, want to get a return. And so they came up with this liquidation preference, which means they get their one-time's

money back first off the top. They sweep that money. They get their original investment back. That's a one-x liquidation preference. Then they get their 10%. So now let's see. look at this based on a liquidation preference. And this is called non-participating. There's non-participating this participating. I'll just do this by example. So here we go. We're now on the section in this chart. We'll put a link to this Excel. Here's a return based on a non-participation preference. What is the different? What does participation mean? Okay. Participation means you get your money back times liquidation preference or you get your percentage return.

Okay. Not both. You get one or the other. And that's to protect the downside. So here, if you look at the exit value of $2.5 million, if you had a liquidation preference, because sometimes you don't have a liquidation preference, but if you had a liquidation preference, one X is standard. So let's take the same scenario.

I put in $500k at $5 million, but the company sold for $2.5. So everybody's sad, right? People invested at $5 million, they bought 10%. And the company's only selling for $2.5. Well, what that means is if you had a 1% of 1% liquidation preference, you would take $500 off the top, or if you had a 1.5, you'd take $750 up the top, a 2x, you would take a million off the top, right? And you would get that at a minimum, or you would get your 10%. So, if you had a 1x liquidation preference, would you take 10% of 2.5, Molly, 250K, or would you take the 1x

your original investment? Which one would you take if you had to choose? Of course. Of course, you take the bigger number. Now, if it sells for 5, which one will you take? The 10% of 5,000, 10%, or one times your investment, 500,000. Right. Which would you take? Which 500,000 would you take? Right, totally. It doesn't matter.

It doesn't matter. Right. So out of $5 million cell, doesn't matter. Okay, now let's go to the $10 million sale. At a $10 million dollar sale, 10% of $10 million is $500,000. One X is $500,000. Which would you take, Molly? The 10%?

1 million or the 500K, 1X liquidation preference. My million for sure. Uh-huh. You take the 10%. Right? So when you do a liquidation preference is non-participating. the liquidation preference or the percentage is your choice, whichever is greater. So this creates what's called downside protection for an investor.

They don't have a chance of losing their money. And if the company were to sell for but $500,000, it was a short sell, as we call in the business. It was a disaster. Company gets liquidated. It sells for just 500. What would the investor get who put in 500? All 500. All 500.

What would the founders get? So well. Bup guess. Nothing. The founders and the team would get nothing. So this is just some magical thing that VCs came up with and started writing into contracts that basically means like we know our job is risky, but we decided we don't want it to be risky. Well, I mean, it could go to zero and most 70% of startups go to zero.

So they do lose in 70% of cases. What this was for is if out of 10 cases, there's one or two, you know, let's say there's six that go to zero. There's two that return a little less than the valuation it was at, some sort of short sale. And then they have two where they, you know, the liquidation preference and the participant. prefer, it doesn't even kick in. You just take your straight percentage. They would do that. So now if you get even more greedy,

you could add both of these things together. And when you add the both together, that's a liquidation preference participating. So here we go. In the case of a $2.5 million exit, if you get your $500 back, right, and then 10%, you get both of these things. Oh, my God.

So you put $500K in at a $5 million valuation. You're 10% of the company. But the company sells for $2.5. What a 1x liquidation preference would get you is one times your 500K, your initial investment back, you got the 500K back. Now, you get 10% of whatever's remaining, because now you're going to split the remaining proceeds after you got your 1X back, pari par su. Fancy word for on a percentage basis. Everybody gets the same amount based on their ownership of the shares. So you still own 10%.

So you get 10% of the 2 million remaining, which is 200K. So at a 1x and you look at the chart, you'll see here, we did a little formula, which you'll see there, which basically says one times 500 plus 10% of whatever it means. Right. So you're taking that total amount minus your initial investment, right? So the 2.5 minus the 500 initial investment and then times it by 0.1, which is 10% in a Google sheet or in Excel, which means you got 700 of the proceeds. 700 of 2.5 is more than 10, right? So this is how sometimes VC founders will get a little sticker shot. Well, I thought you want 10%.

It's like, yeah, but I have a liquidation preference. Right. And you did read your contract very carefully. Okay. Reach your contract. Now, if you were to sell the company for $100 million, 700K of $2.5 is approximately 30. Let me do the percentage here. Equal sum.

live one here, equal sum, 700 divided by the 2.5 is 28%. Okay? You see that? I just did a formula on the fly there. So in this case,

even though the VC bought 10% of the company, in the short sale, they got 28% of the return. See that? Yeah. 500K, they got back, and then they got back also 10% of the remaining 2 million.

So they did get net net 28%. 700,000 divided by 2.5 million equals 0.28 times about 100, you get 28%. That's how percentage work, folks. Okay, now let's say it's $100,000, $100 million sale. Well, they get the 500K back, right? So now there's $99,500,000 left. And the VC, we get their 10% of that 99 million, which means net net, they get 10.5 million. Now, if we do that same calculation, equal sum. we take the $10 million, we divide it by the $100 million sale, it's only 10.5%. Because the 500K represents such a small amount of the overall sale value. Does that make sense? Yep.

So in a huge, in a large sale, this liquidation preference is barely noticeable to everybody. It's a little pot sweetener. Instead of getting $10 million, they got $10.5 million. So they got that's 5% extra. Is that way it can be easy to sneak it into a contract? Like it's only a big deal. It's not a big deal. It's basically.

It's going to be de minimis. It's going to be de minimis. Yes. It's going to be de minimis in any kind of decent sale. You know, and we could take, you can literally look at the point at which it becomes de minimis. Like, if you look at the third scenario here, a $10 million sale with the VC owning 10% and having put 500K in, when they get back 1.5, which is 15%. So net net of all proceeds and a $10 million. sell, you doubled the value of the company.

Well, instead of the VC getting 10%, they got 15%. And by the way, they tripled their money. Kind of sucks for a VC. It's not a great use of capital to triple your money. To be honest, like, we're in it for the 10x, the 20x, the 50x. So this is something. But I see that you have some other columns here where our X gets bigger. Our liquidation preferences more than one time.

And so in this case, and by the way, the reason most people have not talked about this, the reason you and your first year of venture capital have not had to deal with this, is because in a great market, VCs are not asking for this because they think, well, all these are going to the moon and they're going to IPO. And it's going to be the fifth scenario of the five scenarios here. It's not going to be important for anybody. Oh, okay. So if it's not important, why would we do it?

In a down market like we're experiencing now, what does everybody think about? Going to zero. Or they get zero. Maybe not zero, but shorter sales. You literally hit the bullseye. Literally zero. Okay. People are scared of zeros.

People are working for the premise of how do I protect my downside? How do I take as many of those zeros and turn them into one X's so that when I have my $100 million fund, if 20 million of my $100 million just comes back, it sets a floor, right? And then I don't have to have as many outliers. So this is all of a sudden how the psychology in a market can change. The psychology went from NFTs, stocks, and private companies only go up to crypto is worthless and it never was worth anything. Stocks should be valued at 15 or 18 times EBTA and all that matters is the free cash flow. We went from like growth to free cash flow.

And then in startups, we're looking at how do I protect my downside? And you know what? This is what people in Boston and New York and D.C.s on the East Coast, who are very close to the public markets than they are the crazy California private market philosophy, they would always think about these downside protections and try to put in two X liquidation preferences. So for a company like Joker, when they can't close around, the VCs are like, you know what? Put a hundred million in this thing. And the public markets are, you know, a disaster right now. And this company doesn't have free cash flow and is burning money and only works in certain markets

and doesn't work in the best market in the world, the United States. We've better put some downside protection in here. So they may have asked for a 2X liquidation preference. The founders balked at it. They didn't want to piss off the founder. So they said, how about 1.4? Right. And we don't know.

We should be clear. So now, for those of you who are watching, Ashley, was nice enough to make us this same chart, but with Joker's actual numbers. And we should clarify before we start that we don't know if this is participating or not participating. We only know that they appear to have, but we can do it both ways and see how it would turn out.

We can just do this with the participating liquidation preference of 1.5. Right. So here we go. In that, when you have 1.5, right, or even two, in a 1.5 scenario, and the company gets sold for half as much, let's say 2.5 million,

well, you're going to get back 1.5 times your original investment. Original investment of 500,000 becomes 750, $50,000. So now of the 2.5, you'll lop off 750K. You have 1.75 left. You own 10% of 1.75K. You get another 175K on top of that. Boom.

925K goes to those VCs. And again, I'll just do a quick percentage there. I'm going to sum 925 and I'm going to divide it by 2.5. Now the VC has got 37% of the company's proceeds in that sale. It felt like they bought 10%, but they got 3.5%. point seven times that, 37%. Now you start seeing how these things can get legit. Now let's do the, you know, the great scenario.

It sells for $100 million. Okay, so we'll say, okay, we're going to equal some, you know, this number over here, which is $10,750. And we're going to divide it by the $100 million number. No problem. U.C.PZ. Now you're at $10.75, right? So you can see how in a big exit, it has no effect.

Right. You know, it's just a little pot's meat in here. the folks at the venture firm got somewhere between, you know, an extra, I don't know, where they got an extra 27% in the short sale and they got an extra 7.5%. Well, and you're on the seed example. So down at the bottom, click on the Joker example tab. Oh, is there actually ran? Yeah, she actually ran the numbers.

Oh, we did. Okay, so great. I didn't realize we did that. Okay, here we go. On Joker specifically, yeah, to see what will happen. So let's say 50 million on a $1.3 million value. 4% ownership. Let's say the company exits at 1.3, right?

And we'll go down to the... 1.3 billion. Exactly, 1.3 billion. So here we go. At $1.3 billion, at a $1.5 million, a $1.5 liquidation preference, they get 100, they get 50%, 1.5 times 50 million, which is 75 million, right off the top. So then there's 1.225 left, of which they get. get their percentage ownership in.

And so they get $197. $5 million, which would be four times their original investment. If they're doing the participating thing, yeah. If they're doing the participating. And I'll just do the percentage here. So if we equal sum that, then we're going to divide $197 by $1.3. They wound up with 15%.

Now, 50% if I were to put $50 million here, and I did equal some $50 million divided by the exit value of $1.3, Oh, that's that in dollar. Change that. Somebody's listening. Can you change that to percentage for me? Change that percentage. Ashley, can you change cell D20?

They got 3.85%. You see that? How crazy that is? So they literally are getting like four or five times. So the bigger the capital investment, the number, 50 million is a big number, the more painful this can be. And in fact, oh, my lord, you know, you start to get to a, 30 billion dollar exit, you know, it's not as high of a percentage. So you can feel a little bit

better at it. But yeah, with big numbers, this can be. So the bigger the number, the more important it is to have a liquidation preference. And it seems to me, the more likely that VCs are going to negotiate hard for a participating preference. They're not going to want to take the 75 million, for example, that they would get if they put in 50 million at a 1.4 to 5%. Yeah. I mean, if we look at this, you know, with a great. exit. Let's say Joker were able to get to it. And this is not going to happen. Sorry, it's not going to get to $30 billion. I could get to $13 billion. I can see a 10xing. I don't see it, 20xing. But it did. I mean, who knows? Anything can happen.

Markets can become irrational again or it could be, or maybe they figure something out and they become the standard and it becomes a total phenomenon. Yeah. They could get $3 billion back on that $50 million investment, right? Because they own 4% of $3 billion. And then they get that crazy liquidation preference. So, you know, it can be, um, it can be, um, it can be very significant. And the people who are putting in big numbers are taking a lot more risk. A VC putting in 500K is different than some giant megaphone putting in $50 million chip. And they have other options for that $50 million. They can be putting it into a dividend company that pays them 4%. And a company that has paid 4% for the last 30 years. And they have other options for big numbers like that, right?

They could buy a building that throws off cash flow in apartments like Adam Newman is doing. Rifka, no joke. We buy apartment. buildings, okay? Goodbye. That is amazing. And hopefully you all followed. If you, I know, seriously. I love that this is like the kind of thing that Jason's like, I could do that 50%.

I'm good. Let's go. However, that is in fact the most I have ever understood that. And hopefully those of you who just listened to it, I encourage you to go watch the video. Because it's not like the sexiest graphics, but Excel does the work. Excel tells you the story. Should we do one more story? Maybe this Elizabeth Holmes one?

Here's the dish. Elizabeth Holmes is now asking for a new trial, claiming that a key witness and former Theranos lab director, as in a key witness against her, showed up at her home saying that his testimony was twisted by prosecutors. In a court filing, Holmes's counsel claims that Adam Rosendorf visited her after the verdict and was upset over his testimony last fall, coming to her house basically being like, I was misquoted or, you know, they tricked me into saying bad things about you. Did you say the witness went to Elizabeth Holmes's house and knocked on the door? I'm super sorry.

I'm super sorry. I would never do you like that, Elizabeth. Like they totally took my words out of context and they twisted my testimony and it was all, it was all a lie. So the court filing comes after the judge last week, preliminarily rejected the attempt by Holmes's lawyers to throw her fraud conviction out. They told this version of events that highlighted the startup's accomplishments in that filing. The lawyers talked about its 15-year history, including regulatory approval,

its partnerships with Walgreens and Safeway. Like basically they made this filing that was like, no, no, no, you ignored all the years that Theranos was legit before it became clear that it wasn't going to work. And so they did the fraud to try to cover that up. But then there's this visit, this bonkers like meeting where. Dr. Adam Rosendorf. Yeah. He basically jumped the fence.

This guy has gone AWOL. Okay. He's a medical doctor who testified as a government. Yeah. He testified at the fraud trial that he quit the blood testing start up and discussed and went up to sort of. of his lab director at U biome, which collapsed as well. If you remember U biome. That did.

Uh-huh. Yeah. So he says, all due respect to Dr. Rosendorff, but this guy doesn't seem the most credible to begin with. I mean, he killed two startups. I don't know if it's his vault or not. Exactly.

Well, listen, clearly he's having me. Hope is a charm. Do not hire this dude. Clearly, he's having a tough time. He said his concerns were weighing on him to the point where he had difficulty sleeping. So he shows up, he talks to her partner. You remember she got this new partner, William Evans, that she has a baby with.

And he apparently... Her baby daddy. And apparently, Dr. Rosendorff says, to baby daddy, I tried to answer the questions honestly at the trial, but the government tried to make everything look bad. 2.2. There's a little list of eight things. The government made things seem worse than they were. He said, three, everyone at Theranos was working hard to do something good and meaningful. Four, Dr. Rosendor felt he had done something wrong, apparently in connection with Ms. Holmes's trial. He wanted to talk to her, Ms. Holmes. He thought a conversation would be healing for both of them.

Oh, geez. He further said both she and he were young at the time of the events, and these concerns are weighing on him to the point where he is having difficulty sleeping. Then he wandered away, attempted to leave the property and was driving the wrong way while attempting to leave. Listen, I don't know. He's like falling apart, shows up at her house. is like I made a terrible mistake

and they made me look bad and I'm really sorry and I really like you. Actually, I know what happened here. It's amazing. I actually ran into Dr. Rosentorf on the playa. He was on his way to bury men. He got started early.

He had a little emotional thing. And then I saw the sunrise with him, you know, at the temple. And we both mourned. I mean, he's having regret and guilt. Come on, dude. Like this man is having terrible regret and guilt. and that does not grow out a fraud conviction.

Like, I'm sorry, but as a legal matter, I didn't think my words, I didn't think my true story under oath about how the company went would be perceived as a bad thing is not, she is not getting a new trial. I mean, if he drove the wrong, if he drove the wrong way

and did something absolutely, let's be real here. We're not lawyers. We're not detectives. No. But you know, I have seen every Colombo episode twice. I do know this.

We know this. It's one, thing there, ma'am. He called you, and he didn't seem like he was okay. And the state of mind was, you know, the word you used was questionable. And then he showed up at your door 15 hours later and then drove down the street the wrong way. Was this person on any, perhaps some prescription medicine, or combined it with a cocktail? And that's what Colombo would think. Right. I'm not saying I think that. But Colombo. Distress. His voice was trembling, according to the filing.

The dude, Columbo He had his phone number to the camera, but he wasn't recording. He wanted to record. He's having a nervous breakdown. You know,

my wife, she says when I have a second all-fashioned, I too. Sometimes ask questions and have emotional responses. That's why I always keep it to one. Slow gin face. This kid was lit.

He was lit. That's what Colombo would say. He might have been lit, but also I think he's falling apart. And to me, it's just, frankly, more collateral damage. that she has done, right?

Like, this is, now this guy is having a breakdown because he had to testify to the true events at this company and the truth and the whole entire truth led to her being convicted. And then now he's like, oh, my God, I got her convicted. She has a baby. We all followed her. It was a cult.

And he's having, like, a breakdown over it. And that's on her. And sunny. I'm being a little harsh here. Most people in their lives do not get put in situations like this. Situations like this are incredibly intense for a human being to go through. To be brought into a federal, the highest profile entrepreneurial lawsuit since Bernie Madoff and Enron. This is like getting pulled into a horrible, horrible turn of events.

events, having your whole career defined for it, then you go to U-biome, that's another train wreck. I can understand the amount of pressure that this puts on a normal person. This is not the CEO of a company who opted in to having this amount of intensity model. This is a person who's probably a very kind doctor who cared about people and wanted people to be healthier. And then he gets pulled into somebody he believed in is now going to spend their life or some significant portion of their life in jail. And he put his whole being into this person's vision, which creates cognitive dissonance.

Oh, my daddy didn't love me, my mommy didn't love me, but I love my mommy and daddy. That's what happens here to people. It's called cognitive dissonance. They have to reconcile. Are my mommy and daddy horrible human beings? And they don't love me? or are they misunderstood and they do love me. This is the classic case of a child having to deal with the fact that their mommy or daddy

is a monster. Elizabeth Holmes is a fucking monster. Sorry to curse. She did all of this deliberately. She did this for her own financial gain. She did all of this for her own selfishness and her own narcissism. She wanted to be Steve Jobs. She wanted to be important so much that she, as a classic narcissist, this is my interpretation of events and also probably courts and a juries.

They looked at this and said, this insane narcissist risked people's lives not only for financial gain because she had plenty of the financial gain. She came from a rich family. She did it for her own ego. The worst of all possible scenarios. This person cared about their own fame, perhaps fortune, and importance in the way. world more than another human beings basic health care and right to live. The woman is a monster, a monster, and she should have the book thrown at her. But if you work for her, Molly- And I think she's still destroying this guy's life. Well, I mean, that I think is-

I'm playing her for this poor guy having this help now. Honestly, best point of the segment goes to Molly Wood. You can give your speech now. It's a terrible story. And the best insight for this segment goes to, going to rip the envelope open. Oh, I didn't expect this at all. Let me give my five-page speech out. Repeat me. Give your acceptance speech for best point. This is the best point.

More collateral damage. This person is going to be in therapy for the rest of their life. Every conversation they have is going to start with your time at Theranos and be backed up only by the train wreck of you by him. This poor guy. I know. Sorry. I know. I don't mean to curse twice.

It's terrible. It's too much editing. Okay. And John. Thank you, John. Sorry, John. somebody sent Johnny some liquid IV so we can get through this episode.

Anyway, I'm just saying we do appear to be in addition to all of that, maybe there's a sequel to the dropout coming. Please, please, Jesus. Although, again, not, I am not a lawyer. I would be astonished if somehow this would rise to the level of a new trial. This is not that, right?

I mean, the guy made his testimony. His testimony was, everyone was under tremendous pressure, working so hard to do something good and meaningful. there was a lot of pressure to show that it worked, et cetera, et cetera. All of that is true. And, look, boom.

You know how I've been talking about what a disaster nest is? Yeah. And I've been CCing Sundar. Yeah. Pretty good to have 500,000 followers. Hello, Jason. Beep, from the Nets team. We've noted you've had some challenges recently and wanted to see if you'd be open to chatting

about what's happening. We'd really like to tap out. So please let me know if you're open to chatting. Thanks. head of communication, Google, at Google, beep. I don't want to say the person's name. I don't want them to pick up.

No, don't. But I think maybe Sundar is like, please, somebody go help Jake out. Oh, wait, somebody's at the house. Oh, hi, Google. Oh, wait. Now, God, not God, not. All right, everybody, what an amazing show.

Molly, what else is on deck for the week? We have got some energy. It's 100 degrees in the Bay Area. The show's got some heat-induced, lack of sleep, post-burning man energy, and we're just leaning in. I listened to your interview on Sunday. with the algae company.

We had a great discussion about it. I was driving back from Burning Man, and I decided on my five-hour drive, my wife was asleep by listening to a couple podcasts. I was like, let me listen to Sunday and really just start thinking about our own performance. Leave us in the show, Nick, I'm the outro.

You did a great interview, and your interview was distinctly different than NPR, Molly, a public radio, Molly. You had a battery of questions for the algae CEO that were very investor design questions. And I was so impressed with your level up on your interview skills here six

months in. I mean, you've always been a great interview. That's never a question. Like, literally top 10. They were like journalism interviews and not investor interviews. It's happening. I'm not criticizing any journalists. But they don't, you were like, hey, how much you're charging, who are your customers? The sharpness of your blade was noticeable. Instead of having a one-sided blade, it had a two-sided blade. You were, you were cutting like a proper journalist cuts and, you know, the audience could clearly understand the business or understand the product and business. But then you flip the sword

and you were using that investor side of your sword and you were asking very specific things about who the customer was, the regulations, basically the questions we would have to get through in order to make an investment or any investment would. And that's what makes this program so much better than just journalists interviewing people. There's no offense to journalists.

We were both journalists before we were journalists slash investors. We had a specific mandate and audience and focus. And that's so great. It's working. And I also thought our ESG discussion was a really productive discussion in the middle. I might have, yeah, I think what it would be, I have never had a coach on our stuff, but I would like if there was somebody who was a good coach of broadcasters and broadcasting teams, I don't know if that exists in the world, but if they could listen to our discussion on Sunday

and say, here are a couple of pointers where you each could have passed the ball, CRISPR, or whatever, but I don't know what that exists. And we're already like, you know, a top podcast. So maybe I'm overthinking it. People call me to do that now. I know. I've done this many years of co-hosting, but that's the degree to which it doesn't exist. It's basically just like, who knows how to do that.

There must be somebody out there who would look at Steph Curry's shot in your eight or nine and Clay Thompson and be able to say, if we're Draymond and Steph, like the two of us, somebody could come and say, just great, great, great, great, great, great. You know, hey, you forgot this on this point or you could have asked to follow up to Molly or Jay Cal or we could just do it. The two of us could just sit. do a post-game session. With the team, with Nick and Rachel and John. Like, it's actually, it's good. We would do it. Sometimes we would listen to shows back and call it just a post-mortem.

And you listen back and you do like a little like, this could have been a little time. Yeah. I mean, maybe our team, even though they don't have the experience of having done it, they do have the experience of being an audience. Yeah. And I don't know if they could be honest with us. They might feel a little intimidated to tell us.

True. We'd have to give them a lot of leeway there. But if somebody knows of somebody who can listen to a Molly J-Cal interaction there and say, hey, Steph. Draymond, here's how you get said an even better screen. You know, I know you won the championship, but here's how you win the fifth, six, seven, one. We're open to it. Producers at this weekend.

I'll be in L.A. for the final code conference with Kara Swisher, hosting the poker game that does not exist. I can say now that I'm hosting the poker game that doesn't exist because it's the last one ever. We've been doing this poker game for 15 years at the D-Conference and Code Commerce, but it's going away. She invited me to do it, but I have to, I have a thing. You have, give a shout-out to that. I saw that. I am, yeah, I'm actually pretty excited about this. I'm being interviewed at the Commonwealth Club about the shift to climate investor.

Yeah, it's a big, you know, Commonwealth Club. It's a big thing, whatever. And it will be, it says part of their Climate One program, so it'll be distributed to 100 or something public radio stations also, but talking about capitalism saving. Who's doing the interview? The host of the Climate One podcast. Oh, great.

Fantastic. And is there anybody else or is it Solo Dola with you? This is me. Wow. It's just me. It's like an actual spotlight. I know it's kind of a thing. But I really wanted to come to code,

and it was the only time I'm ever going to get it to anyway. It's like a God doesn't get with both hands, you know? Anyway, well, listen, we're dividing and conquering. Also, I had to talk with Brad Gerson, with Best EBG. He wants to have a private event on September 15th and interview the two of us about storytelling on podcast.

Are you available on September 15th tonight? Absolutely. Okay, great. So Brad, I told Brad, I follow up. So there it is, Brad. You're listening to the pod. We're doing it. We're on for September 15th.

He just wants to interview us on storytelling, podcasting, and media because it's like, well, you guys represent media, podcasting and investing. The dream guest I've been wanting to talk about this. But that's a private thing. I think it's going to be just like that's somebody's house kind of situation. Love it. All right, everybody. We'll see you tomorrow. Wednesday.

I'll be in a hotel in L.A. And recovering from a late-night poker game. I'll be in a hotel. In San Francisco, recovering from. It's on the road week. I love this. We're mobile, folks. We're mobile.

We're on the move. We can work from anywhere. All right. See you tomorrow.