This Week in Startups - Kanye's genius business model, Platform dependency risks, Pipe enters the movie biz + AirPals' Joshe Ordonez | E1392

Episode Date: February 24, 2022

First we discuss Kanye’s new “STEM Player” bluetooth speaker, and why he’s trying to diversify away from Spotify and streaming platforms (2:21). We continue with a discussion about platform reliance one founder saw his business destroyed overnight by Facebook (25:17). Then we cover Pipe.com’s recent acquisition which is bringing them into the media space (28:59)! Lastly, Molly chats with Launch Accelerator Cohort 24 founder Joshe Ordonez, the CEO of Airpals about her awesome messenger service startup (39:44). (0:00) Jason and Molly tee up today’s topics: Kanye’s genius move, the pitfalls of platform reliance, Pipe’s interesting acquisition, and Molly interviews another LA24 founder (2:21) Kanye’s genius move: diversifying away from streaming platforms (12:17) Notion - Go to https://Notion.so and use promo code TWIST to get $250 off its annual team plan (13:49) Possibilities opened by Kanye’s move, risks of platform reliance (23:55) Lemon.io - Get 15% off your first 4 weeks of developer time at https://Lemon.io/twist (25:17) Jason gives final thoughts on leveraging platforms, but owning the relationship with consumers (28:59) Pipe’s newest acquisition will help them bring non-dilutive capital to the entertainment industry (38:27) Vanta - Get get $1,000 off automating your SOC 2 at https://vanta.com/twist (39:44) Molly sits down with LA24 founder Joshe Ordonez, CEO of Airpals Check out Airpals: https://www.airpals.co FOLLOW Joshe: https://twitter.com/JosheOrdonez FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

Hey, everybody, hey everybody. We've got an amazing show for you today. First up, Molly and I are going to talk about Kanye's new STEM player, which is a Bluetooth speaker. It's brilliant. It's got a bunch of his content and his new album on it. And I think he's going to make more money on this than he would ever make, working with Spotify and the other streaming platforms,

a moment of complete genius from Kanye West. I can't believe it's taking us this long to talk about yay, if I'm being honest. This, of course. Yay all day. This conversation leads us to a discussion about platform reliance and how being to reliant on one platform could destroy your business overnight. Don't I know? Google Panda update, YouTube algorithm update, Facebook rug polls. We've got a lot of advice for you on this topic.

And it comes from battle scars that I've gotten in my companies and ones I've invested in. And then pipe.com has acquired a company in the media space to help people who are selling to the big streamers like Netflix get their money in advance so they can start working on their next project. project. Really brilliant idea. Congrats to pipe.com on that acquisition. And finally, because it is this weekend, startups. I sit down with LA 24, our accelerator cohort number 24, founder, Jose Ordonez, the CEO of AirPals and talk about her amazing startup, which is trying to do business to business messenger service, but the modern way. Absolutely. And if you want more information on our accelerator, it's launchaccelerator.co, and apply to the next one, we'll put 100K in, and then, hey, you never know.

you may wind up on the podcast like Air Pals. It's going to be a great episode. Stick with us. This weekend startups is brought to you by Notion. Notion is one place for notes, docs, projects, and everyday work that goes way beyond Wiki. Go to Notion.S.O and use promo code Twist to get $250 off an annual team plan. 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. And Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a SOC2 report fast. Twist listeners can get $1,000 off for a limited time at vanta.com slash twist. So I don't know if you all attempted to attend the live stream of Donda 2 yesterday at

stemplayer.com, but it went okay and probably weirdly sold a bunch of these little $200 speakers called the STEM player. So I'm obsessed with this story because Kanye, of course, has a new album out, Donda 2. And the only way for you to listen to that album other than the mediocre live stream from yesterday is on this $200 speaker, the STEM player. He's trying to, and this is very interesting because of our ongoing conversations about streaming. Kanye is trying to diversify his revenue stream away from Spotify and other streaming services. He's also, he says, trying to bring attention to how little musicians make on platforms like Spotify because, of course, when they first start out, lots of musicians are happy to have anybody listen, right? At all. So making any money

is better than nothing, which is how Spotify generally is able to pay so little. So, so basically Kanye is like, no, I'm not doing this. We'll talk about the economics of how Spotify pays artists in a minute. But I want to ask you, Jason, like, what do you think about this $200 device, which is preloaded with his album? It's genius. Yeah. I immediately saw this and said Kanye West is a genius. I believe he's a genius.

obviously he has moments of mania. I'm not clinically describing anything here. I'm talking about just straight up description of his behavior when he gets manic or mania. But, you know, I know a lot of artists, and they sometimes hit a chord. No, friend intended. Yeah, I mean, or, you know, like, you know,

if you look at his music, sometimes he'll have a bar that is so perfect, you just wonder if this guy is Bob Dylan. Dylan reborn, right? And his early albums to me are perfection, you know, late registration, graduation. This stuff is just, and people will look back on it and I think it'll be like, they'll kind of revere him like Bob Dylan in, you know, the early days. And this is such a transcendently brilliant idea.

Can you ask somebody to buy me three of these? Producers take a note. Buy me three of these and then seal them in a plastic box. and I am going to sell them for $10,000 each in 20 years. If Pink Floyd had done this with a, I don't know, let's say Pink Floyd decided to make a vinyl player or Dier Straits had decided to make a CD player. Yeah, with Dark Side of the Moon. Dark Side of the Moon or say making movies, brothers in arms. And you would have, instead of a million people buying your album, let's say you had a, when they sell,

those albums, let's just do a little back of the envelope mouth here. I think the average artist trickles down like two bucks when they sell an album. Somebody fact check me right now. Don't get about the CD era. They sell a million of these CDs. Let's say they make two or three bucks. It's two or three million dollars. Okay.

Now you sell something like this. You make $150 in profit. $150. How many do you have to sell? Right. And now we're talking about $10,000. which is 1%. Yep.

And that's compared to, by the way, what we think is maybe our producers triangulated some numbers from a various number of sources across the web and determined that the per stream rate at Spotify is probably something like less than half a cent

so that maybe a million streams might equal at best $5,000. And to be clear, this speaker has more than, I mean, this is the only way to get Kanye's new album. But it's a speaker you can use forever. It's a Bluetooth speaker you can use forever. And it's super cool.

It's got all these buttons on it that lets you actually isolate track. So there was a demo. I think on the website, now it's been all replaced with the video of the live stream from last night, the Donda 2 listening party. But somebody was isolating Michael Jackson just vocal tracks with it. That's why it's called STEM, because the STEM is the little pieces of audio that are embedded in every song. So then you can use that for remixing or just play it or just geek out to it. So it's so genius.

Costs no money to do that. I already ordered one. It costs no money to do that. So here we go. Now imagine somebody released the lead guitar of Mark Knopfler a couple of years ago. Somebody can pull up the YouTube video for us and we'll play just a quick little snippet of it here for the notice. I don't know if we can leave it in the original pod. I think we'll leave five seconds in the rich part.

They have the solo from Soltons of Swing. Somebody isolated it. Some engineer must have had it, the ISO track. And you hear Mark Knopfler playing lead guitar on Solton's of Swing. your mind gets blown. And for like two months, people were losing their minds over that somebody had released this. And, you know, here it is. I'll talk over it so that we don't get a violation here.

But it's very use because when you hear this, you just fast forward it to the halfway mark, you probably get like to a good point. And let's just see if we can all hear this. This kind of, who's connection is this, by the way? Whoever works for me and has DSL, I'll pay the extra 10 bucks to get you to. I mean, what the fuck? I mean, people right now are like, do you pay the producers? We're so sorry, everyone.

Are they at Starbucks right now? So anyway, way to kill the vibe. But it is super, I mean, this is interesting on a whole bunch of levels, right? One, yes. Kanye, as a money-making endeavor, doesn't have to convert many sales to make good money compared to what he would get on Spotify. But that's also not entirely the point. Like, there's the business decision itself.

and then there's this question of what it means for these streaming platforms, who artists have been coming for for a while. This could be a tipping point. This is one of those things that breaks people's brains open. So right now, Taylor Swift's team is in a room today looking at this saying, okay, remember she's re-recording everything? She's got a $500 version of this with five live performances and a bunch of other stuff. So when I sold my Angel book, I said,

guys, I want to do a companion podcast called Angel, and I want to include the first season or the first five episodes in the audio book at the end as a bonus. And Audible was like, awesome. Audible was stoked about this. And I think it's why that worked. So I'm looking at this, and I always said to myself, we have so many episodes of this podcast,

at some point I'm going to take them all down. And then just the first thousand episodes will be available on a thumb drive for, I don't know, What would you notice, what would you pay for the first thousand episodes on a thumb drive that I autographed and you just had all thousand with video and audio? What would you pay for a hard drive autographed by me with the first thousand episodes if I took the other thousand down? Would you pay $1,000? Would you pay $500, $300? Just put it in the chat.

I think people would pay $200 or whatever. And I just think it would be a cool thing to do. Yeah. It's sort of, it's like the Disney approach. Yeah. And we have this expectation, like consumers have this expectation that everything, is going to be available to us to stream forever, anywhere we want it. There might be some ads.

We'll skip them. And like the truth is that the economics of that don't always work out for creators. They just don't. And so you're seeing people start to push back on that concept to when they can afford to. Yeah. And also figure out scarcity in a digital age, which, you know, interestingly is sort of what NFTs are about. And I do think that there is without question something to this.

And it's a big, it's a big, big shift. Yeah. I mean, and the next move would have been for him to sell only 100,000 of these or only 10,000, and each one is numbered. Right. And one out of a hundred are autographed by him. And you randomly get those. And you could window it. Like, he could window it and say, and I don't know what the plan.

No one, no one of course knows what the plan is. This is available for streaming in other locations. But he could say it's going to only be, or, we're, whatever Taylor does, it's only going to be available. 30 days, 90 days. For 30 days exclusively on this speaker, and then it's going to go out to the rest of the world. Genius. Genius.

And then what happens is, what if he does this and he makes so much more money than being on Spotify that he says, you know what? Screw Spotify. I'm going to put like two songs on Spotify, get the other eight. So he could just drip out one song at a time, take it down, put two songs up. And now all of a sudden, if the top 10 artists were to do this, they could negotiate different deals with Spotify. They could say to Spotify, like, I'll do this.

I'll give you my album after 30 days if you take orders for these. And I'll give you $10 for everyone you sell. And I'll take the $140 of the rest of the profit. So they could, you know, Kanye could then negotiate with Daniel Lack and say, take it or leave it. You want my content. You got to sell this for me. Yeah.

And I have the serious XM app. And I guess these players have, a hard time making money, uh, with just subscriptions. And they have been popping up every time I, every other time I open the app, they pop up like, hey, buy tickets to this concert. So it knows your geo. Right. Right. Right. And so they're just upselling. And I guess they must make $10 per ticket when they sell them. So yeah, I mean, this is brilliant. Kanye's a genius. Yeah. I mean, the music, you know, we have this idea that the music industry is like done. Like it's baked and this is what it looks like now. No. Like artists have been mad about streaming for a long time. And this is,

the start of a revolution, I think. 100%. Startups need a central hub to store information and collaborate on work more than ever because we're all working remote across different time zones. People are making their own schedules. It's a different world, folks. We all know that. When we went fully remote in March of 2020, Notion became our internal knowledge bank.

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sold his catalog for $550 million in the publishing rights. Yeah. I think they could do things like sell these kind of devices with their entire archive on it. He would sell a million of them for $500 over time. It would be the ultimate collector's edition to have every album and then every bootleg. So I'm into bootlegs of like dire straits. So when I ski, I just go on YouTube and people post these full concerts. And I just bookmarked my makeup playlist and I listen to concerts. And from anybody who's an aficionado, that's eventually where you wind up with whatever band you're into is you wind up listening to the live concerts. And they own the rights to those live ones. Mark Knopfler sells all his live independent concerts on his website. So Mark Knopfler, if you're

listening, like he sells thumb drives at the concert when you're leaving. of that concert. So there's a service that does that. What I want is I want like the best three concerts from each tour. So just artists out there now, it just opens up any number of possibilities. Right. Or labels out there. Hello. Let's be honest, there's still a big middleman here. But it's so interesting because the theme of today has sort of accidentally turned into this question of letting a platform control your business. Yes. And interestingly, Jason responded to a viral thread yesterday about not being reliant

on anyone platform, right? I love a theme. Here we go. The thread was written by Joe Speezer or Spicer, probably Spizer. A serial entrepreneur, E.I is usually like an I pronunciation. Spicer, sure. Joe Spizer?

We're just called that. Serial entrepreneur and angel investor whose prior business was evidently killed after becoming too reliant on Facebook. Joe is not alone here. And he's agreed to come on the podcast next week. So consider this a little bit of a preview. Oh, is he coming? Great.

Awesome. And he, yeah, I mean, I hope that's correct in our notes here. Yeah, he'll come. Yes. He responded to me. Great. And it's such an interesting thread because he posted it yesterday and was like, this is the first time I've publicly talked about this in four years.

Yeah. And the, you know, the TLDR here, and we'll go through some of his specific points. But the TLDR is that he built a massive startup entirely on the back of that Facebook traffic. Yep. and the Facebook algorithm. Yep. And then Facebook changed the algorithm and the business died. I remember this time period because there was somebody who created a LinkedIn

competitor. Somebody can Google it for me. There was a LinkedIn competitor inside of Facebook. And then there was Zinga Poker and Farmville inside of Facebook. And what happened was the virality of Facebook and the amount of people were spending time there, if you played Zinga, you know, poker or whatever, if you invited people, they gave you more chips. So that viral loop went crazy.

and all of a sudden Zinga had tens of millions of members. This person got tens of millions of people watching his video and following his pages. If you remember, Facebook launched pages. Then what Facebook did is the classic rug pull. Branch out. Branch out was the name. And branch out had become worth like $100 million. It had 50 million members.

And then Zuckerberg turned it off in one day. Boom. And he didn't turn it off. What he did was, he said, if you want traffic, you have to pay for it. And people were like, well, wait, no, people subscribe to my page. and I paid a dollar per subscriber for my page because you told us we could promote our page. And I did an experiment like this.

You can look up Mahalo guitar lessons and Mahalo FitBod and we had done and actually somebody could pull these pages up and show us on the video. And we did a little experiment. And I met personally with the Facebook team. Like I'm talking top members of the Facebook team. And they were like, hey, what can we do?

I was like, well, we're putting our videos on here. We have a deal with YouTube. YouTube's giving us 55% and give us 55% of the revenue. Match YouTube's deal. And they were like, no, we're not going to do that. And I was like, well, you're at. asking us to pay to get followers to our page. And now we're not getting our organic followers to our

page. What's going on? And they're like, yeah, well, we're just like, you know, tweaking the algorithm. So people get a blend of things. And we had like 100,000 followers on some of these pages. And I very quickly realized, wait a second, we're only getting a thousand people are seeing the videos now. But in the beginning, 100,000, all of the people were seeing it. Yeah. And I was like, okay, I know a rug pull when I see it. So they're pulling the rug. I feel my feet like, I'm like wobbling. And I'm like, I look over, I see Zuck on the ground pulling the rug. And I was like, he's the guy.

I just stepped off the rug. Yep. I was like, I'm out of here. I told them straight up. I was like, I know what you're doing. You're getting us to pay for followers. And then you're going to make us pay to reach those same followers. And that's exactly what they did.

So all this free traffic was no longer free. And what's so interesting is, okay, so, you know, in the, we can dig into some of the specifics in this thread, but the company was called Little things, a female focused feel good entertainment company. And yes, it was built on the back of Facebook and the eyeballs. They had, you know, hacked, figured out how to use the news feed for these articles. Facebook was promoting it, right? Hosted them at headquarters profiled little things.

And then what's interesting. Same they made it with me. They hosted me too. And then what's so fascinating is that the change here, this is what I think is super important. The change here was not just that the algorithm change. randomly. It changed because, according to Joe, our high-level contacts at Facebook said Zuck didn't like the fluffy content we were producing and wanted to be taken more seriously. He wanted the country to respect Facebook and get their actual news there.

Previously, it was family and friends updates, feel good, viral content. So yeah, this is a business story, but it's also very much a publishing and editorial story. They pulled the rug because of an editorial determination. Again, according to Joe, we have no way to confirm this. We don't know. It sucks state of mind of what he was doing. That seems direction. That's a huge deal. Yeah. I think it's direction is correct because I don't know if you remember this, but it was getting a little annoying with Farmville and some of the games to constantly get mafia invites and Farmville invites in your feed. So there was a reason to throttle those because you had so many, if only 10% of users were playing Farmville, but they kept posting every three or four days to get more, you know,

mana or, you know, plants or whatever. It was just annoying. So they needed to throttle that. But this is, you know, the lesson here is never be dependent on one platform, which is why when we post our show to YouTube, we're on YouTube, but we also have podcasting feeds and we're experimenting with video on Spotify, but, and we have email and we were syndicating the video to LinkedIn. I never want to, as a content creator, be dependent on one platform. You want to work all the platforms and then build your brand. So people go directly to your domain name.

Direct traffic is what all VCs and investors look at as a proxy for, are there any number of users who are going directly to your site? So if you were Mr. Beast, are people typing Mr. Beast into Google search? And are they, does Mr. Beast, because when I talk to Mr. Beast, I was like, how many emails do you have? And he's like, what? And I was like, I told him this over dinner. I said, your job should be. Look at how many subscribers you have on YouTube and then judge yourself on the percentage of emails in your database as compared to your subscriber count. So if we have right now 190,000 subscribers for this week in startups, how many emails do we have? Do we have, I think we have like 15,000 emails. So we have maybe 8%. Great, I would like to have more.

So we have to build our email products up. Actually, with the launch ticker, we probably have double that. So that's just how I think about these things, is how many phone numbers and emails can you get to build a direct relationship. Yeah. I have 50,000 people on my personal email list. So that's great. And so keep building your list up.

And Fred Wilson wrote a blog post about this called Be Your Own B. In which he was saying, like, you know, the startups I'm in, forgive the language, the colorfulness of it. Like, you don't want to be Facebook's in this example. And he said, it be your own what he was saying was build your own platform

and have your own email lists. And so that was a very famous and then people were like, well, what about you're telling people to build? This is in 2012, I think he wrote this. Because there's a big controversy

about these rug pulling instances. YouTube had done some rug pulling and then they backtracked on it. So YouTube was doing this algorithm game and the top people, including myself, I wrote a famous blog post.

I'm not going to work on YouTube's farm anymore like Maggie's farm. Where I was just like, you know what? I don't want to be. be dependent on these platforms. In the YouTube case, I might have made a mistake because my YouTube channels have done so well. We own a YouTube channel called Exit.

If you go to YouTube.com slash exit, it has three million subscribers now. It makes, the Mahalo YouTube channels make $250,000 a year to this date. And I pivoted Mahalo to inside.com. And inside.com makes a quarter million dollars a year just off of, you know, defunct channels. And I've actually started posting videos to exit again with a partner. And it's actually doing pretty well now. every time we pose a video. So I kind of made a mistake on that one.

If I had kept going, I would have probably had a good exit with Mahalo if I just went all in on YouTube like other people did. It is interesting though, right? Because it's like there was a time when you did have to pick a platform and go all in on them.

And you could have made a lot of money on it. And then, you know, right around 2019 or whatever is when a bunch of them changed their algorithms, Facebook in particular. And so it wasn't, I don't blame, you know, at the time that Fred Wilson wrote that,

it was prescient and also not realistic for everybody trying to build a business. I mean, I guess the question is like, do you build a business in the most expedient fashion? Yes. If somebody had come and said, like, we don't want to build our business on the back of Facebook, even though that's an incredible opportunity and everybody's making tons of money, instead, we want to spend like a crap ton of money on Kappex and our own servers. Like, it's a good bet that somebody would have said to them like, Why? Why are you going to do that?

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that will go away and get burnt out at some point. So that's how I look at TikTok. We're not investing heavily in TikTok. There's some fan channels that have been growing this week in startups and raising awareness. But eventually TikTok will do the same thing to people and YouTube will do the same thing. Spotify might do the same thing to us at some point.

So the platforms are going to do what's best for them and we're going to do what's best for us. And so if at some point Spotify is, awesome for us. We'll spend more, like, I don't tweet Spotify links. I tweet the iTunes links right now. But if Spotify did something for us and they're like, hey, JCal, if you started tweeting the Spotify links, we'll promote you more. I'd be like, okay, let's dance. Let's have that discussion. But I like being independent. Test each platform, whichever one gets you the best results. Use that platform. But keep your, keep the other platforms in the mix. Right now, I think live video is best on YouTube.

I think YouTube is the best place to do it. So that's why we do it here. And we consolidate it restream to just do it here. But I think if LinkedIn were to give us more promotion and LinkedIn got us, you know, and got us 500 or 1,000 live viewers. So if anybody's a product manager at LinkedIn, if LinkedIn came to us and said, hey, we'll guarantee you a thousand live listeners, I would move the show to LinkedIn for a couple of months, right? Sure. But exclusively? Maybe. Yeah. I'm not sold on exclusivity. I think that's the real question that we're having here, right? If you build only on one platform or you destroy. only on one platform.

If your goal is audience, you limit your audience with exclusivity. You just do. And so the money can be worth it, but it might shorten your overall, like lifespan. Like your 15 minutes might go to 13. You could also negotiate for audience, Molly.

So let's say you have an average on Twitch. And then YouTube says, hey, we'll feature you. Now, YouTube doesn't really do that too often, but if LinkedIn might, because we're a business show. So if I was LinkedIn, I would be going to all the business shows

out there and saying, because they have a live product and it's pretty good and we stopped using it because we'd only get like a couple of dozen people over there and we get hundreds over here on YouTube because people have the YouTube app

and the subscription stuff works but if they said, hey, we'll pin you to the top of people's feeds in New York, L.A. and the Bay Area from 10 o'clock to 10.15 and we'll get you like to a thousand users and then we'll take the pin down.

I'd be like, okay, yeah, let's do it, let's try for three, six months and sure, why not? So you would have to negotiate that you would get three times as much traffic to then go exclusive. But you're right, Joe Rogan. It has to be worth it.

Yeah, it has to be worth it. And so it's a negotiation. I'm with Toby Zhang here. LinkedIn should give Twist $100 million for four years. We don't need money. I mean, that's the other thing. It's like, I'm looking, this show is profitable. It does well.

We sell out the ad. So we don't need money. What we need is to help founders and have great guests. Impact. You know, and impact. So that's what I've been thinking about is the impact of the show. And that's why I'm, really coveting the NOTES.

I feel like figuring out who the top thousand fans are, which we've been recording who the NOTES are, and then inviting them to real-world events and really working with them to be adjunct producers. I think that's the path to us climbing the rankings and building the audience. I mean, community is the, and this is again, this does go back to exclusivity. Community is the best investment you will ever make. When you build that army that cares about you and will follow you for years, decades even, you know, defend you on the internet.

Like, yeah. It's, and be your friends in the real world. You meet them and you're like, oh, we've been having a conversation for 15 years. Like, we just pick up where we left off last episode. It's amazing. Exactly. All right, everybody, as you know, we, or maybe don't. I launched something called the launch ticker, like over 10 years ago.

I had an associate of mine. Actually, it was Megan from TechCrunch. Megan Dickie. Am I getting her name right? God, it was so long ago. It was when I lived in L.A. and I told her, I hired her out of school, and I said, I want you to write in a Google Doc the top news stories because I'm spending too much time reading Tech News, and she would write

the tech news, and I had a monitor turned on its side, and she would write it in a Google doc for me. And I said, just write in one sentence what happened, and it's going to be called the ticker. And launch was the name, and the investment firm says it called LaunchTicker. And I just paid her to do that, so I didn't have to read the news, and I was up to date. And it was so addicting that I shared that Google Doc with a thousand VC friends and other CEOs. And like 300 people were in it live. And then I made it into a product. A number of people subscribe to it.

It makes a little bit of money every year. We break even on it. And it's called the launch ticker. And it's basically two emails a day. And then tech meme kind of crib the idea where they were rewriting the headlines. So what I told it was rewrite the headlines, take out the spin and just write it factually. So anyway, what we're doing is we're going to have the launch ticker become part of this week in startups because it's been kind of like this little isolated thing I'm doing.

So we're going to rebrand it maybe the This Week in Startups Ticker or the Startup Ticker. I'm looking for some ideas for names. But essentially it will be part of the This Week in Startups family. And the launch ticker is going to be where you'll see startup news. And today we have the top story from there. And this will be our startup of the day. So we're going to do our startup of the day every day in the lunch ticker and here on the pod. Pipe, which you know is a startup that helps subscription-based companies, thinkcom.com or FitBod or a SaaS

company. They help them get what's called non-dilutive capital. And you get this capital in advance. So if you have a predictable revenue stream, Molly, like let's say you were, I don't know, Slack in year one, and you had $50,000 a month in SaaS revenue, you could go to a pipe and there's competitors to pipe. I forgot the names of them, but we don't need to say them here. What they would do is they'd say, hey, here's 150,000 your next three months, or here's a year. Actually, the way Pipe does it is does a year. So they'll sell to other investors on their marketplace at Pipe your yearly revenue for 92 cents on the dollar.

Then you pay it back. That investor gets a dollar. You get 92 cents now. So you can deploy that capital now to make Slack better or to make com. com better. So Com maybe could have just sold $120,000 worth of forward-looking subscriptions and not needed an angel, right? It's really, really cool. Yeah, clever. And so it's a very cool company. It's been doing well. It became worth a couple of billion dollars and a number of bestie friends of mine. I think Sacks is an

investor. Anyway, pipe.com just announced that they're acquiring purely capital. Purely capital specializes, and this is interesting, in entertainment and media financing. So for all those little projects that are trying to get a documentary podcast off the ground, for example, I would imagine that this is potentially an option. They say the problem is that producers, creatives, and rights holders wait years to see the full revenue from their work. Payment terms from streaming giants

tend to be quarterly over three to five years for licensing content. So now they can close that gap by trading the three to five years of revenue and getting paid up front. Got it. If you had sold your documentary, I guess, to Netflix, you would be getting payments for the next five years.

They'll give you those payments up front to make your next documentary. is how I'm reading this. I guess so or even the one you're currently making. Maybe. Cool. I don't know. Yeah.

But I kind of want to know more. It's really interesting. Yeah, it's a great idea. I mean, these things, if you're a creator, getting money up front is helpful if you have to buy equipment. Yeah. Or you have to pay talent or something. And so, you know, the streamers or your SaaS customers are paying you monthly.

That's reasonable. And this is just a way to get it advanced. And I think the way this works is they take your contract. for your residuals, for your future payments, they sell it to somebody else on their site. So Pipe isn't buying it. That's kind of the magic of it is that it's a marketplace. So then people bid for what they think the max value of that is.

So for Pipe, I've had some of my subscription companies sell their revenue in advance, and they were quite happy with it because I think they got 89 to 92 cents on the dollar, which is pretty great when you think about it. I'm not sure where these investors are, but I guess they're happy to make 10% on their money. I guess so. It's interesting. Yeah, I mean, we could probably talk about this for a long time as long time media and content

people. That feels a little riskier because sometimes those projects fall apart. And then you might be on the hook for that money. To be clear, you have to have, this isn't like seed funding. You have to have a guaranteed revenue stream. And they're advancing against that. The chances of default are very low. If you do default, you still have to pay it.

Which is why it's a relatively low return like 10%. Exactly. So if you were Slack and let's say you lost half your customers and you still have this loan, you still got to pay it back. And so when Harry Hurst was on this podcast, we talked about this with the bad debt. I think the way they work against it is they only take companies they think are top flight. And so I think with this new acquisition of purely capital, they're only working with, you know, like the top streamers, Netflix, Disney, etc. So you're not going to find inventory on here as an investor that's low grade. Right. Everybody is deeply invested, no pun intended, in not having any deals fall apart.

Nobody wants that. Correct. And Harry said they will, when there's a default kind of situation, they're obviously in the best, the pipe.com has, it's in their best interest to fix things. They don't want to have people be bagholders or feel terrible. So, yeah, they go to work fixing it. Yeah. So they work that out.

So congratulations to Purely Capital. And if you want to sign up for the launch ticker now and see us work on this transition to it being the This Weekend Startups Ticker, which will be basically the same content. We're just going to kind of rebrand it and get the This Weekend Startups audience into it. It's twice a day. Paid is twice a day. Free is just the mornings, I think.

And so just go check out This Weekend Startups.com slash ticker, and the branding will start changing. And our guy, John Walton, who writes it every day is kind of going to be the fourth producer here at This Week in Startups, getting up early and giving us some story ideas. So give us some feedback on the ticker. If you sign up for the free one and let us know what you think of it, you can either go to launchticker.com or this week in startups.com slash ticker. We don't want to make it, Molly,

a promotional tool for this week in startups. We want to make it like an email that really gets you up to speed on startups and capital allocation. The concept here is to take the things we're doing on the show and embed them there. So I think we live in the future as a segment in the newsletter could be a great idea. We'd have, we live in the future in both properties. And they don't have to be in sync. So he could do a we live in the future segment every day, and then we could take the best of those and put them on the pod, right? So that would be a great first step, I think, and this integration is to have startup of the day and we live in the future as a segment every day in the ticker.

Love it. Okay. Well, speaking in a roundabout way of the startup of the day, you know that I have been interviewing members of our accelerator cohort, accelerator 24. Today, next up, right now, Jose Ordonez, the CEO of Air, pals, which is basically trying to do with them to the messenger service industry, what Uber did to mobility. It's super fascinating. It's sort of one of those cool, unknown business opportunities that right now is done with like flipboards cash and super slow, you know, quotes. And it's just, she's, she's all hustle. I love, I love this founder. It's a great company. I saw this business and I was like, yes, invest in this because if she figures it out, it's going to be a huge business. And it was a

business that Travis at Uber wanted to go after, which was moving big items, a TV, a computer, whatever, a sofa from point A to point B. But they just Uber never got to it. And it's a really arduous, painful thing to do. And it requires somebody to be just ultimately focused on just that. So if you're in a major city, how many times have you said, I want to move, you know, have this desk. I have a stand-up desk. Somebody bought it. Or I have an office in Brooklyn and I got an office in the Bronx, I want to move these things from point A to point B. How do you do it? There's never been a really good service. There's a bunch of like, I think they call it man with a van on Craigslist, a little sexist language, but you know, or two dudes with a van kind of situation and then that

doesn't feel very safe. So those are those are one-offs, but to be clear, what AirPals is going after is that thing where you are a business and you just need to move stuff around all the time. Maybe you're a production company and you need all that furniture, for example, to show up at a shoot or you've got a messenger documents that literally can't be sent digitally. And there's all these sort of business to business messenger services that are like sketchy or slow. And they're solving that problem, which is like business still involves a lot of stuff going places. Yeah. And so they've just made it effortless and, you know, press a button, get a quote and go. All right, everybody. Enjoy the interview. Listen, when you're the founder, it's fun to trade war stories with other founders. Recently,

Balloon CEO Amanda Greenberg, one of my awesome portfolio founders, told me how Vantas SOC2 solution helped her save an important deal in the final hours. If you don't know, Balloon sells a SaaS productivity and collaboration software package. It's brilliant. And when they needed 10 documents in place within 48 hours in order to close this deal, well, Vanta saved the day by supplying customizable templates and helping them through the process to close. So if you don't have your SOC2 tight, you can't close major customers.

And you know what? A lot of startups wait. Well, the waiting has to end. You have to work with Vantas compliant software to make it easier to get and renew your SOC2. They continuously test against technical and non-technical SOC2 requirements and they partner with over two dozen audit firms who have been trained to file SOC2 reports directly within Vanta. On average, Vanta customers are SOC2 compliant within just two to four weeks compared to three to five months without Vanta. And guess what? Vanta's such a great partner. They're going to give you $1,000 off your SOC2. for that Vanta. Here's your call to action. Get a thousand dollars off at Vanta.com slash twist. That's V-A-N-T-A.com slash twist. That's vanta.com slash twist for $1,000 off. Well done, Vanta. So the launch accelerator recently started. It's 24th cohort. And each week I'm sitting down with some of the founders to dig into their businesses a little bit last week in case you missed it. I interviewed Growth University founder Craig Zingerline on episode 1387. That's at the 38-minute mark. Next up on the program is Jose Ordonez, founder and CEO of AirPALS. Welcome, Hosei. Thank you so much, Molly. You actually pronounce my last name correctly.

Thank goodness. You did it, yeah. Hogey, tell us about AirPALs. What do you do? So we essentially help teams with our local logistics. We're at B2B marketplace for courier services and we handle a complex and business requirements. So like the upgrade or the evolution of the delivery platforms, right? And that's what we're doing and that's just the beginning. We're going to tap into suplain chain and other more fun stuff in the future. So what's wrong with messaging and career services now for professional shipping, basically? At the moment, the market is using legacy couriers that operate over the phone,

through emails, a lot of back and forth. And some of them are more innovative, but they're using all the shelf software, which limits us their ability to innovate, provide a very experience, scale. So that's what we're doing differently. Can you give me an example of a use case? Like, who needs this and when and what do they need to happen? Absolutely. So we have a bunch of customers within the fashion industry, fashion media, photo, a production, and they use our platform to move items that they need for their internal projects. Like for example, samples, materials, fabrics from the factory to the studio, photo equipment, other supplies that they need for their daily operations. So that's something that we're, you know,

focusing a lot in that vertical, but this expands across multiple industries. For example, we have customers in the healthcare system and corporations, tech businesses, and small organizations. And so you would think given the amount of money in this industry that it wouldn't be something that just happens with, you know, phone calls and fax machines. Like, are you essentially taking this extreme necessity and bringing it into the modern world, it sounds like. Yeah, absolutely. So I am a former producer and fashion designer, so I used to spend like around 2K on a three-week project. And that doesn't make sense. It's a lot of money.

It's a lot of money for the project, you know, affecting the bottom line of the companies. So that's why I wanted to create these, you know, essentially first to make the life easier for employees similar to what I was doing, production coordinators, project managers, assistants, and, you know, provide an affordable service to other companies that in the past couldn't afford these tools and these services. There is, in fact, a famous tweet that our producer Nick has been looking up as we talk that essentially says, find a business basically that's profitable. Here it is. How to get rich without getting lucky. Find a company that has a lot of profit, one, and two, a fax machine, and go compete with them. Yeah, exactly. And I, I, I,

also found another tweet. I don't have it handy, but I remember one B.C. tweeted, I can't believe it's 2022 and we still need to request quick quotes. So that's how, you know, most of our competitors operate. As a customer, you request a quick quote and it takes two days to get. Right. So we provide, the first thing we provide and our customers are loving is up front pricing, essentially bringing that experience that people have using in their personal life, like for example Amazon Prime or Uber, providing these same experience in a business setting. How do you do that? I've seen a demo and you're saying you're calculating this in real time with an algorithm.

What are the factors that go into calculating that real-time pricing? Well, we take a consideration multiple things. First, distance between point-to-point time, the parcel classification. That's the three main things. We also have other proprietary elements that we put into that formula, but those are the essential ones. And then a couple other differentiators for you before we get into your pricing structure, you also employ your drivers, right? Well, we have a hybrid model. We operate with full-time drivers and highly better contractors, which is something that we're testing is really working well.

This was conceived based on what we have learned over the past 12 years of on-demand marketplaces and also what we've been looking into the legacy couriers that, you know, those are businesses printing money throughout decades and they're still here. So they might be doing something right. So we're kind of like mining the best of both worlds. And that is allowing us to decrease operational cost, increase margins per route, and provide a better experience to the customer. Some other differentiators, this is not on demand.

This is not like calling a postmate to bring you a thing when you need it, right? You have these pickup windows so that you have some semblance of a schedule. Yeah, similar to Amazon, fresh, right? You set up pickup time windows or drop delivery time windows, actually. So we have the same approach. We integrate that into our technology.

So if you request an ARPEL, of course, is not going to arrive within three minutes because you work at a company from 9 to 5, you have the entire day to get that done, which works well. And on our end, you know, that is allowing us to increase the package density per route and essentially have more flexibility for the engines to run

and make things more efficiently. Of course, you know, on this relates to pricing, maybe we're going to discuss further, but we're going to offer, you know, add the benefits to the customers that have more urgency, like upgrades to make the order rush, right? Because we understand that a time window might not be working for everybody. And then talk to me about how the pricing works. It's a subscription model, right? So a company would sign up for this and just you'd be there, one-stop shop or all their messaging?

Not actually, but at the moment we are transaction-based. We charge, we take a commission for every order, 30%, which is higher than industry standards. We're launching subscription plans, but not like other companies have tried in the past and fail, because it's impossible to add a subscription based on something that has variable cost. Our subscription will unlock added benefits, like free upgrades, free cancellations, a discount member pricing for the customers in the plan, other features, like for example, multi-user accounts, things like that. So that's how the subscription is going to work.

We actually are piloting this with a real estate company here in New York. It's working well, and we're excited to finish building the features to start selling those. And another revenue stream that we're working on is enterprise contracts. We did a four-month contract last year with a high-profile customer, which the LTV was around 60K, right, within those four months. So we see a huge opportunity to integrate deeply into the operations of our customers. I want to go back to what you said a minute ago. You take a 30% it's a 30% take rate.

Yes, it is. And people are happy to pay that because it comes reliably and on time. How much higher is that than the industry standard? Well, actually, something that we're super grateful with the legacy couriers is that because they have higher cost, the price is super high. Right? So they set up a high ceiling for us to play around. So we're actually providing very competitive pricing. But, you know, still what we do is not something like we're, you know, transporting a $30 pizza.

So these are different things, different requests. So we have a lot of flexibility in the pricing. Right. And so overall, in the aggregate, customers might be paying less because they're getting a more reliable and reasonably price service. Yes, exactly. We are using technology to bring that cost a little bit down, and because we want to do these and make AirPOS like a habit-form platform, and we understand that budgets are a huge concern for our customers.

How do you see the TAM? How many companies are there out there who are doing this on a day-to-day basis who you think could benefit from this? So the TAM is actually growing. the total addressable market that the local couriers yield is around 113 billion. So it's a huge,

huge market, and this is just talking about the US. You know, this is a hyperlocal logistics is a huge issue for the entire world, actually. And as I said, you know, this goes across vertical. So fashion, healthcare,

tech, law firms, you know, in the past, people used to to hire messengers for documents, but now we're moving evidence for law firms, things that you cannot use Dropbox with, right? Not everything is digital, and we understand that we're bridging that concept

about a digital and physical workflow, right? And this is a huge trend that we're seeing, for example, remote workers, somebody working in LA for a New York-based company, but they don't need to come here to do physical things. They can hire an airport, right? They can place an orders, platform. This is also escalating. We see people overseas with operations in New York,

placing orders from outside the country. So this is unlocking the future of work too. So we can tap into other times as well. Yeah, I mean, I just think it's so interesting that there are a lot of people out there who don't realize that in the course of doing business, a lot of companies need to move literal stuff. Yeah, exactly. People believe that everything can be sold by software. Yes, it does. We're solving things with software, but there are things physically that cannot be done by software, right? So that's where we're doing. And then tell me about your team, because the team is somewhat remarkable, 100% Latinx American and 50% women? Yes, that's correct. So that's very important for me. I am a huge believer of diversity. My background is in sustainable design, so I used to

collaborate with people from different backgrounds, cultural and professional. And, I see how that impacts the product. So we are 100% Latinx American, people from Brazil. Most of the team is in Ecuador, which is my hometown, a home country. And in terms of females, you know, I do believe that having females in a tech product bring different changes. For example, logistics products are, you know, cold and boring. And these are, this is a platform that employees are using. and we want to make their job enjoyable.

So having females in the team bring a fresh perspective for what the logistics tech company should be doing. Tell me about some of your customers. There are some big names on this list. Yes. Since we launched, we were able to work with amazing companies ranging from huge nonprofits like the David Lynch Foundation, Chelfar, which is a Brooklyn-based fashion company

that is friendly right now. We have done things for Lyme, Google, Peloton, Bumble, public hotels, and the list goes on and on. So that's also part of our strategy. We are building relationships with companies that have a footprint all over the country. So in the near future, in the next year or so, we will be able to open new markets with these existing relationships. And how did you acquire those customers?

What's your go-to-market strategy? So they're feeling the pain. They're looking for a solution. So at the moment, we're leveraging SEO. and Google ads. Of course, this year we're going to explore other channels, but that's working really well. As well, we have a strong word of mouth traction.

And, you know, the network effect also kicks in. You know, when you're an employee sending something from your company to external studio, then other people gets aware of their platform. Yeah, absolutely. All right, well, so then give us the basics. You incorporated in February 2021, How have you been doing since then?

Yeah. So in our first year of operations, we generated 150K. And that was amazing, especially when there is a time where a lot of companies are pre-product pre-revenue. So we're super proud that we're able to achieve that milestone. We, our purchase frequency is increasing. As I said, AirPALZ is a habit forming a platform. So once you get it done one time, you see how easy it is.

how much time we are able to get you back on your day and customers start using it more and more. And then finally, the question that I'm asking all of our accelerator founders, because everyone wants to know, what is your path to $100 million? Great question. So first is geographical expansion. This is hyperlogistics for businesses is a huge problem across the U.S., especially for the most business-dance cities. and on top of that we're going to leverage enterprise contracts that as well will increase the predictable revenue that we can bring to the company

and that will be the first two steps to hit that number. Jose Ordonez, founder and CEO of AirPALS. Thanks so much for the time today. Thank you. Hey, everyone. Producer Nick here. I want to tell you about the SaaS Syndicate. If you're a founder of a SaaS company with a product and market,

our investment team wants to talk to you. head over to the syndicate.com slash SaaS, S-A-A-A-S, to apply to raise from the Sass Syndicate. And you can join Jason's syndicate of over 9,000 accredited investors at the syndicate.com. Producer Justin here, know a cool startup? Check out openscouting.com, where anyone can refer a startup to our investment team here at launch. Even if you don't know the founder, if you're the first to flag a company for us and we decide to invest, you'll get 5K in cash or 10% of our carry. Hey everybody, producer Rachel here. Are you an early stage startup that has product and market, some traction, and are looking to raise at least $500,000?

Apply today to Remote Demo Day for your chance to pitch to over 9,000 investors in Jason's syndicate. Submit your application at Remote Demoday.com. Our next event is on April 27th. And if you want to learn how to invest in startups from the world's greatest angel investor, and no, we're not talking about Chris Saka, then head to Angel. University to apply. The four-hour workshop costs $300 and all proceeds are donated to charity. To date, we've donated over $175,000 to various charities and you can see the full list at angel.university slash charity.