This Week in Startups - NEWS: Anthropic targets $20B+ valuation, Flexport chaos & more! | E1823

Episode Date: October 6, 2023

This Week in Startups is brought to you by… Embroker. The Embroker Startup Insurance Program helps startups secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off of traditional insurance today at Embroker.com/twist. While you’re there, get an extra 10% off using offer code TWIST. With Mercury Raise, startup founders no longer have to navigate roadblocks alone. Visit mercury.com/raise to get access to a network, connections, and advice. Mercury is a financial technology company, not a bank. Banking services provided by Choice Financial Group and Evolve Bank & Trust; Members FDIC. NetSuite. Once your business gets to a certain size the cracks start to emerge.  Things you used to do in a day take a week. You deserve a customized solution - and that's NetSuite. Learn more when you download NetSuite’s popular KPI Checklist - absolutely free, at NetSuite.com/twist. * Today’s show: Jason breaks down Amazon’s Anthropic deal and the state of AI mega-rounds (5:29), Flexport’s growing pains through the lens of founding CEO vs. hired gun (24:58), and DoorDash’s new stealthy “Dine Out” feature (44:52). * Time stamps: (0:00) Jason kicks off the show (2:42) Recap of Anthropic's big week (5:29) Amazon’s Anthropic deal and the state of AI mega-rounds (7:35) Embroker - Use code TWIST to get an extra 10% off insurance at https://Embroker.com/twist (9:04) Two major details in Amazon’s Anthropic deal (18:57) Strategic investors and Anthropic’s corporate structure (23:32) Mercury Raise - Visit http://mercury.com/raise to get access to a network, connections, and advice (24:58) Flexport’s growing pains through the lens of founding CEO vs. hired gun (35:17) Why Dave Clark being fired “for cause” instead of being allowed to resign matters (38:20) NetSuite - Download your free KPI Checklist at http://netsuite.com/twist (39:45) Flexport's offer to Clark (44:52) DoorDash’s new stealthy “Dine Out!” feature * Reuters article: https://www.reuters.com/markets/deals/amazon-steps-up-ai-race-with-up-4-billion-deal-invest-anthropic-2023-09-25/ The Information article: https://www.theinformation.com/articles/openai-rival-anthropic-in-talks-to-raise-2-billion-from-google-others-as-ai-arms-race-accelerates CNBC article: https://www.cnbc.com/2023/10/02/the-inside-story-of-dave-clarks-tumultuous-last-days-at-flexport.html * Read LAUNCH Fund 4 Deal Memo: https://www.launch.co/four Apply for Funding: https://www.launch.co/apply Buy ANGEL: https://www.angelthebook.com Great recent interviews: Steve Huffman, Brian Chesky, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland, PrayingForExits, Jenny Lefcourt Check out Jason’s suite of newsletters: https://substack.com/@calacanis * Follow Jason: Twitter: https://twitter.com/jason Instagram: https://www.instagram.com/jason LinkedIn: https://www.linkedin.com/in/jasoncalacanis * Follow TWiST: Substack: https://twistartups.substack.com Twitter: https://twitter.com/TWiStartups YouTube: https://www.youtube.com/thisweekin * Subscribe to the Founder University Podcast: https://www.founder.university/podcast

I have never seen a hired CEO and a founder go at it like this in history. Yeah. This is a one-of-one situation. I mean, if the CNBC article that came out, if the reporting there is right, this is crazy. This weekend startups is brought to you by Embroker's startup insurance program helps startup secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off of traditional insurance today at Embroker.com. slash twist. While you're there, get an extra 10% off using offer code twist. With Mercury

Rays, startup founders no longer have to navigate roadblocks alone. Visit Mercury.com slash raise to get access to a network, connections, and advice. And NetSuite. Once your business gets to a certain size, the cracks start to emerge. Things you used to do in a day, take a week. You deserve a customized solution, and that's NetSuite. Learn more when you download NetSuite's popular KPI checklist, absolutely free at netsuite.com slash twist. Hey, everybody, welcome to this week in startups. We're going to do a news show because you guys love when I do the news. And there's a lot of news with us, producer Nick.

Everybody loves producer Nick. You've heard him on the All-In podcast. He is the man behind the scenes producing five, six episodes a week. for you absolutely grateful audience members. You had a great summer. You did All-Star Summer. Congratulations, Nick. You got a lot of big guests.

Yeah, now it's time to ramp it back up for All-Star Winter. Well, we had a great run. And I think there's a bunch of people who couldn't make it over the summer. So, yeah, we take a second shot at them for the winter. And we're going to be four days a week in the winter. Is that correct? We're on the four-day-a-week schedule right now. We are four days a week for the rest of the year.

There will be some special little episodes dropping. on our days off from the great folks at Cruise Financial. We're doing a startup financial basics. So that'll be dropping on some days off. But yeah, generally speaking, will be four days a week. Which is a choice by me, just so the audience knows, because, listen, doing six days a week twist and all in, seven days a week, it was taking over my life. And there's no opportunity for me to get sick or to have time off.

If I take time off, I literally have to do six episodes the week before, which means 12 episodes in a week. like four times this summer. And that was nuts. So I'm trying to get some of my time back. So we'll be doing four days a week plus all in. So you're going to get me five days a week more than enough for y'all. But you know, the news is backed up. And I wanted to go deep dive into this anthropic thing. So why don't you chew it up first, Nick? Yeah, it was a really big week at Anthropic. A couple of things came out. So just so everybody knows, they're the startup. They're sort of like the fourth or fifth player in AI, right? So you have open AI, you have Google, you have Microsoft. Anthropic. And I would

say inflection to Reed Hoffman's company. They're sort of the next two up there in terms of the major players. Anthropic is led by Dario Ammodai. He previously led research teams at Google Brain and OpenAI. They have a chat GPT competitor. It's called Claude, and it's a chat bot based on Anthropics model, Claude 2, which launched in July. Claude 2 is known for its massive context window.

It can intake 100,000 tokens. That's the largest that I've seen or I can find right now. It's about four times larger than what the largest offering chat GPT has. And to explain that in English. Yeah. So if you, the context window is the amount of text that you can input for an AI chatbot to intake, right? So for instance, when I really like using Claude, because what we do at this weekend

startups is we find people's interviews, we transcribe them, then I take that entire transcription. I turn it into a TXT file. I upload it onto Claude. Claude can actually intake that like an hour or two hours worth of conversation and then spit back out to me, you know, the 10 to 15. 15 most interesting bullet points in like two seconds. It's absolutely incredible.

So if I was going to interview somebody on the program, you could find a previous interview, say, hey, what are the highlights from when they were on Tim Ferriss two years ago? Or they were on the speaking startups five years ago. And you can just paste right into it. Literally copy and paste. Literally copy and paste. Or you can do an attachment, right? You can attach an item now.

TXD file is what it turns into. But can you do a URL? Can I put a URL of an MP3 and say, transcribe this end? No. Tell me the five biggest. Okay, so that would take another step out of the process, and I think that's coming, right? Because we were talking about multimodal.

Yeah, exactly. Or multimodal. Here's an audio file. Here's a video file. And it would just have to process it first, right? That might take a little time. But it really is a great product. Claude.

aI is the product. And it's really great. Yeah, I use it more than chat chepti just again because of that context window. I think the barometer they use for it is they say it can intake, it can intake the entire not. of Great Gatsby and give you like Spark Notes basically, which is pretty amazing. Wow. Spark notes for those of you who are Gen X is also known as Cliff Notes, but in Nick's millennial

generation, they were called Spark Notes, just a programming note there. Okay, so what was Anthropics Big News, the makers of Claude? Yeah, earlier this year, they raised a bunch of money, $400 million from Google in February. And as part of that deal, they had this like pack to use Google Cloud, which will come up in a second. And then they had another deal a month later where they raised $300 million from Spark Capital at a $4.4 billion post. This was pre-revenue, I believe. So just last week, Anthropic announced this new deal with Amazon. And here are the terms. Amazon would invest an initial $1.25 billion into Anthropic. And then either party, Anthropic or Amazon. And Jason, I want to hear if this is

like a standard deal could trigger an additional $2.75 billion investment from Amazon, bringing the total to $4 billion. Both parties declined to disclose evaluation. As part of the deal, Amazon would start offering early access to Anthropics models to its AWS customers on this new platform that's called Amazon Bedrock, which is inside of AWS. Think of it as like a generative AI playground inside AWS where they offer a bunch of different models. Why are they calling it Bedrock? They should call it Amazon AI. Yeah. Terrible branding. A couple months ago, they announced that they wanted to be like the Switzerland of AI and allow all models. That's sort of what this is in product form.

Amazon did announce it was I thought was pretty interesting. LexisNexis and Ray Dalio's Bridgewater Associates are already using Claude through AWS. Oh, okay. So they did a little beta test. Okay, great. And Claude is, by the way, available now on AWS. You can go use it Claude too, I think. Lexis Nexus, for those who you don't know, is a legal system where lawyers,

and they've been using it for decades. It was around in the 90s when I was installing local area networks for lawyers. You could search case law. So all those case law is up there. So any time anybody filed something, whatever, it goes up into LexisNexis. So this would be incredible to put on top of Lexus Nexus one of these language models. Yeah, I think libraries use it for citations too. I remember learning how to use LexisNexis when I was like 10.

And their competitor is Westlaw. And via Reuters, Anthropic, as part of the deal, committed to rely primarily on Amazon's cloud services, including training its future AI models on large quantities of proprietary chips that it would buy from Amazon. So my question to you is, does this sound familiar? Yeah. Wait a second. Didn't Amazon do we deal with Nvidia and Nvidia? Does Amazon make chips? Apparently they're developing a proprietary AI chip. The first I'm hearing about this. So that's fascinating. All right, listen, we work with super early stage companies at my investment firm. It's called launch. I'm talking pre-series A, right? We're talking seed stage, friends and family. And you know what? At that stage, maybe they don't have insurance yet. In fact,

In fact, just recently, we had an amazing startup. They didn't have D&O insurance. If you don't know what D&O means that basically protects your directors and officers, directors, board of directors, officers, the people who run the company, your management team. So what do we do? We send them right over to Embroker. Inbroker is business insurance built specifically for startups. Inbroker's single application helps startups get four quotes for four lines of coverage in 15 minutes.

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Great job, in Broker. Okay, so there's two very unique things in this story. Let's start with the first. I love this. Either party can trigger another investment. So let's say Anthropic does terrible. And everything's a total mess and their product falls way behind other products in the market. They can demand $2.75 billion from Amazon for a failed product.

According to Reuters, yes, that is true. Or if things are going smashingly and they don't need money and they're just printing money hand over fist, things go great for Anthropic, Amazon could put a gun to Anthropics head and say we're buying, let's say this is out of $10 billion evaluation. We're buying another 27% of the company. I would say my guess is they can do that at a $10 billion valuation, or it could be stepped maybe. But I've never heard of a deal like that. It would normally be one-sided.

Amazon has the right. This would be called super pro-rata. Pro-rata you get to keep your percentage ownership, super-prorata you get to increase it. And so my thought here would be the valuation would be enough that this would increase their ownership. If they're investing 1.25 at whatever valuation this is, Do we know what evaluation this round occurred at?

It doesn't seem like this pop up. So here's the latest news. On Tuesday, just a couple of days ago, the information reported that Anthropics in talks to raise another $2 billion this time. This is reporting. They're targeting evaluation between $20 to $30 billion. According to the article, and they saw some fundraising materials, Anthropic is currently generating revenue at $100 million annualized pace.

So that would be a large. million out of the gate is pretty significant. And there was a report, chat GPT4, and open eyes, we're getting a bill, is that a billion dollars. So these things are being priced at a hundred times, if the secondary at 90 billion is true, let's call it 100x revenue, ballpark. So if they're making 100 million, a hundred times that would be obviously 10 billion. And this sounds like a $10 billion, five to $10 billion evaluation to me. People are ahead of their skis here, obviously.

these valuations make no sense. But in a hot market, you give people a lot of credit as publicly traded companies, they might as SaaS companies be getting 10 to 20 times top line revenue if they were high growth, high growth being they're doubling every year.

And these things do seem to be doubling every year or at least 50% every year. So congratulations to everybody all around. I think these early language models are doing fantastic because they have two swings at bat. You can make money from consumers. You know, everybody in our company pays 20 bucks a month for chat GPT4.

And you can make money because APIs are hitting these and people are building them into their products. So it's a wonderful business. It's a software business. It's a high margin business with the only exception being the amount of hardware you need to run these language models, which I think will go down over time. Yeah. So when I've read about Anthropic, most of their revenue comes from pay-as-you-go API usage.

And they have a small pilot program where they're testing like an end-esropic. enterprise version with select customers, sort of like ChatGPT Enterprise. But you think it's so makes sense. The enterprise is the big win, by the way. Enterprise is the huge win for all of this. The fact that I can't see as the CEO of launch or inside, everybody's chat GPT stuff and it's all in one place and it's learning from everybody

on the team. So if you asked a question about this week in startups, I asked a question, somebody asked a question about something else, that should all be going into the knowledge base and we should all be having discussions with our verticalized AI. But go ahead. You had a question. Yeah, so the reported valuation that they're raising at is between 20 to 30 billion.

And they say by the end of 2023, they'll be on like a $200 million annualized revenue pace. So at the best case, the cheapest price would be about 100 times revenue. And the worst case would be 300 times revenue. Compared to that to an AI, they were just, yeah, they're about 80 to 90 times revenue based on the Wall Street Journal report last week. So do you think that that sort of makes sense to you, that number? Because these are the top of the class in AI and they're really the only. game in town right now? It's ridiculous. I don't think there's any logic to it. It would take you, if these things double every year, it's going to take you a couple of doublings to get towards

reality. So you're probably giving them credit for three years of undone work, four years of undone work with a lot of risk and a lot of competition coming. So I think these are strategic investors, not financial investors. Strategic investors for Amazon to be able to sell their proprietary chips to a major player and get them to use them, they don't need to make any money on this investment. If they break even or lose half their money, they got somebody major to use their chips and to give them product feedback on it. So again, they don't need to make money on this. This is their lighthouse customer. Underperform Nvidia's and it's a strategic disadvantage for Anthropic to use them.

Isn't that a major risk? That would be the major risk ofthropic stake. And that's a really good insight. Yeah, I think that is a major risk. If there are chips suck. And then I wonder if in the contract, They have to say their chips have to be performant within X percent of the NVIDIA ones. So anytime you do strategic deals, things can get weird. This is an example of that. That's why in venture capital, we see strategics come along and want to invest in our startups that we're on the cap table of.

It's a major red flag. Great. They have different motivations. Yeah. It's that simple. Now, listen, the press reports are probably, I would just say any press report that's based on rumors. You should as a, and I'm not picking on the information here, any press, New York Times, information, Washington, I would assume that in 50% of cases, they have wrong information. And in the 50%

of the case, when they have right information about that, right? They might not have the full context. And that's how the press works. That's how it has always worked. So I'm not saying it's gotten worse necessarily. And, you know, these publications do the best they can. But being on the inside now, I can tell you how little information they actually have. If they got a leaked deck, that deck could be old. It could be a draft. It could have changed three times in the last three months because decks change. It could be somebody with an agenda giving them wrong information specifically.

It could be faked information. I've seen every single one of these things happen from both sides of the fences. Remember, I was a journalist for a long time running a publication, whether it was Engadger or This Week in startups or Silicon Island reporter. And I was on the other side, you know, as an investor being on the board of companies. I would say 90% of the time the information is incorrect in some way. 50% is, you know, directionally correct and 50% it's wrong. So anytime you're reading a newspaper or an information source, just understand that.

And I think they understand that and they would agree. Do you think this is a good strategic move by Amazon to sort of get early access for Anthropics new features? Yeah, cost them nothing. They'll make it all back on people using AI products. It's a no brander for them, I think, because if you've used Claude, it's that. good. And if they're competitive out of the gate with chat GPT4, they're not going to fall behind. So here we are. And I think you can assume there will be 10 competitors in the space making serious progress. I just got the pictures added to my chat chitb4, the multi-bodal today.

And I used it today for the first time. And I had like a piece of electronics that I need a special plug for. I took a picture of it. I said, what plug do I need? It nailed it. It's like, you have a model this. You need this. And I was like, okay, go buy it for me on Amazon. Give me the link and says, I can't do that, but just go to Amazon and search for this name, Power Charger, and you should be able to find it. So it was like, well, that's pretty scary. It's funny you say that too, because I noticed, so when we were on the show with Sunny the other day, he was actually using Code Interpreter, which is now called Data Analysis, I think, on Chat Chabit, to review the image of the guy wearing the trousers and the nice white jacket.

And remember you said the thing about the tortoise shell glasses, it didn't pick up on that? Yeah. So I got access to it yesterday, and I just sent the same image. I gave it the same prompt to like tell me about all the accessories and stuff in this outfit. And it actually saw that it said there are also Ford his shell glasses in his pocket. Pocket. So I wonder if it's a different like more advanced. No, no, no.

It's just listening across the web to every conversation occurring. It downloaded this week at startups and it fixed its own era. I mean, eventually it will be doing that, right? Eventually to be listening and it'd be like, oh, it's talking about me. I could have done a better job. Maybe you'll check that. No, I think it's every time it does its analysis, I think it's, doing it for the first time.

And so if you, if 10 people upload the same picture and ask for, you know, feedback, it's going to give you different answers. And in fact, I have taken it, I've uploaded a picture and three different times asked the question

three different ways and gotten three different answers. Yeah, well, and then every follow-up question you give it is, is part of the reinforcement learning, right? So if you follow up and you say, what about the, did you miss the tortoiseshell glasses?

It will understand, oh, I guess I did. A bad job. Oh, sorry. Sorry. Bad robot. Crazy.

Yeah. Poor bad robot. All right, listen, congratulations. Great job for both parties. I think it's a big win. And just another checkbox that these are going to be commodities very soon. Now, they may be revenue generating commodities, you know, like gold or diamonds are or wheat or oil. You know, I'm not saying commodities in a derogatory way.

I'm saying commodities in that you can get storage on the internet from a thousand different sellers. You will be able to get a language model, I believe, from hundreds of sellers next year and thousands in five years. This will be something that many people offer at increasing lower prices with different levels of offerings. And so this is great for humanity. Everybody's going to be trying different ones. Different ones will have different specialities or progress

and let the games begin. Great. Can I ask you one question about strategic investors, by the way, too, just in case, in Anthropics case. So now they have these two major strategics, Google, who was the earliest investor, and now Amazon who's coming in with potentially up to $4 billion. How did those two investors talk to each other, if at all? Well, it depends on if they have board seats.

And in this case, you said it was $400 million from Google. And it was another $2 billion that's coming from Google. Report. Yeah, so the question is, are they on the board or not? And did they negotiate board seats and was anthropic in a position to tell Google they didn't have a board seats? So now, let's say Google was on the board. and this Amazon deal comes up. That means Google would be in the conversation about this.

Should we take the money or not? Or they would have to say, hey, Google, you cannot be involved in this. We're going to because you're conflicted. You can listen to it, but you can't vote. Or we're going to have to do this around your back. You can see how awkward that gets. Now, let's say Google doesn't have this. And Amazon did negotiate a board seat.

Now you have the opposite. Let's say they both have board seats. And now you've got warring factions on your board. You can see how complicated this is going to get. the same thing happened when Eric Schmidt was on the board of Apple, and then Apple bought Android. And then there's a famous photo. You can look it up online of look up Eric Schmidt, Steve Jobs, together.

There's a famous picture of them at the Stanford Mall. And I think this was at the time this was going on. Yeah. And he felt super betrayed. And so, you know, there's literally a picture of him being like, And Steve Jobs is doing the WTF pose. He's like, well, what the hell? There it is from Gizmodo.

And so I think that this was taken around that time. And then Eric Schmidt eventually went off the board. Now, he, obviously, Google wasn't a strategic investor in Apple, but they had a pretty close relationship. And obviously, they had that very important search relationship, which has become at the center of the Google antitrust. So just research on Anthropic. Google, from earlier in the air,

the information estimates they own about 10% of the company. company. That's their estimation. Which would get you a board seat. Yeah. And here's just a paragraph from the information article from a couple of days ago. Investors would also be buying into a company with an unusual corporate structure. Anthropics founded in 2021 has an independent body of five individuals with no financial

stake in the company who can elect and remove a number of Anthropics board members. Anthropics said this group aims to align Anthropics goals with the interests of the general public. That's like a B corporation. So there's a weird hippie-dippy thing called a B corporation, a benefit corporation. The way corporations, like a C corporation, like a Delaware C, Delaware C has to do what's in the best interest of shareholders. A B corporation, a benefit corporation, is another designation that's done by a third party. And they're in the interest of the state admission. So the state admission was, hey, we're here to help you know, people get smarter.

And we want to help elementary school kids be better at math. Let's say brilliant.org came up with that. Our goal is we're a benefit corporation, brilliant.org, which we're investors in, brilliant company, by the way. Our goal is to make the world better at math. Well, then as the B corporation, they would have to take that into account, that stated mission, whenever it is, that the company states, and the best interests of shareholders equally.

as opposed to just shareholder interest. So if it wasn't a benefit corp, and then they said, hey, we want to get into, you know, we want to stop doing math. We want to start doing English.

Or we want to put 90% of resources into literacy. Well, then you'd have to say, wait a second. I thought we're a B Corp. We had this. We have to change our stated mission.

So this is kind of taking the benefit corporation and putting something weird into it. I think, I think, Anthropic, when they started to, there was a big marketing push they had around like, you know, what do they call it, constitutional AI.

I think they were the constitutional AI company where they were saying we're building like a better set of ways to make AI more fair or whatever. Whatever. I mean, listen, all this hand-wringing, you can tell these people are completely insincere. If they're selling their secondary shares at 90 billion, nobody cares about anything. Then do, Ray, me. Show me the dough-ray me, the money. Okay.

People want the dough. That's all that matters. Doe, me. Being a founder is one of the most amazing journeys you could ever go on. I suggest you do it. But you got to know it's going to be hard. And sometimes it's going to be a little bit lonely. But with Mercury Rays, you don't have to go it alone.

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All right. You want to talk about Flexport and our guy, Ryan Peterson? Yeah. And by the way, we invited Ryan on the pod. He might come on the pod. I was just even at that. But yeah, catch the audience up on this because I have never seen a hired CEO and a founder go at it like this in history. Yeah. This is a one-of-one situation. I mean, if the CNBC article that came out, if the reporting there is right, this is crazy. And we're going to get... Again, as I said, 50% is probably right. or directly correct and you can be sure there's a lot of genders sharing information with them on both sides and everybody in between keep going now let's tee it up for the audience flex port we know

is the logistics and freight forwarding startup yes that's done incredibly well and uh i am friendly i don't want to say i'm like close friends but i'm friendly with peterson yeah he's been on the podcast pals this well yeah acquaintances is pales pals is good yeah pals yeah yeah flexport obviously logistics freight forwarding startup they've raised over two billion dollars from Founders Fund, SoftBank, Andresen, a bunch of others, last value to $8 billion. The company and Ryan Peterson gained a lot of notoriety during the pandemic because of their insights on the global supply chain shortages. So I think even Ryan came on all in at one point.

To explain what was going on at the port of L.A., I think. Yeah, yeah. Then they were explaining how everything was backed up and then those shipping containers became super expensive. And that was when... Which was great for their business because they charge percentage fees. on the cost of shipping containers, right? So that was a bit...

No flat fees, percentage. That's why you go a percentage, not flat fees, because you never know when all of a sudden ticket prices can go out 5X. And all of a sudden, you're the beneficiary. No flat rate price of people. In June 2020, Peterson announced that he was going to step down as CEO and transition into executive chair at Flexport.

Flexport then hired Dave Clark, who's a former Amazon executive, and he's most known for scaling Amazon's logistics business. Right? So kind of legend in that space. Clark and Peterson worked together. as co-CEOs for the first six months of Clark's tenure, and then Peterson officially transitioned to executive chair in March. In the first half of 2023, this is according to the information, Flexports revenue dropped 70% year over a year to $700 million. And that was mostly because

the cost of a shipping container went from like the peak peak high of all time, and then it crashed down. Yeah, like $10,000 to $2,000. Exactly. Exactly. Which basically tracked with their revenue you drop. In July, so this is when it got a little bit interesting for me, because I remember this whole thing, Peterson announced that he was joining Founders Fund as a partner in July, right? And you kind of thought, oh, wow, this is of someone who's very notable in tech. He's clearly starting the next phase of his career. He's still involved as an exec chair, but this is clearly his next thing that he's going to do. On September 6th, a couple months later, Peterson announced that he was returning as Flexport CEO, and Dave Clark resigned on that same day. Peterson,

notably also rescinded 75 job offers due to what he called like overhiring issues at Flexport and he needed to get the runway tight and he needed to get things back on board. Ryan Peterson then started posting on X about sort of what he would do differently than Dave Clark. And it sort of seemed like you got the impression that Peterson thought Clark was running the business the wrong way. At least that's when I gathered. Some of those posts have since been deleted, which the CNBC article also noted.

And now here's where it gets kind of weird. So it was reported that Peterson and the board basically told Dave Clark either on a Zoom call, either you can resign tomorrow or we're going to announce that you're fired, which maybe you can say that's like a gentleman's layoff or something like that. Again, this is just reported. That's a gentleman's firing. The gentleman's firing. Yeah.

Clark resigned and the next day five of his key execs that he hired were also fired. Is that standard when a hired gun CEO leaves sort of a... it's kind of like when you take out a captain, when you take out the boss, who are the captain's going to be loyal to? You better take out the whole crew. Yeah. You know.

Right. Silvio's going if Tony's going. Yeah. You can't have your consuliary. He's not going to make the jump in all likelihood. Makes sense. Yeah. You remember when Junior got pinched, Bobby Bacchala was like the last man standing, right?

And then remember there was that famous scene at the pork store where he just told him like, hey, listen, Junior can still be the boss in name and he can keep the following, but I get everything else. And then Bacala famously says, to the victor goes his boy, and then he kicks him out of here. It's a great scene. So one major problem that led to Clark, Dave Clark's being ousted, again, according to CNBC, was financial projections to the board. So Dave Clark thought that Flexport was being way too overly optimistic.

Peterson and his team was kind of reluctant to pair back their projections. Clark eventually won, but it seemed to have, again, this is according to CNBC, pissed off Peterson in the process and some of the board members. Any response to that, Jason? Is that typical with CEO transition? Okay, the existing board members are going to be loyal to the founder always, right? You heard about founder-friendly culture here. So, you know, they're going to, they, you bring in an Amazon exec as a CEO for one reason and one reason. you want an operational machine who's going to aggressively hit targets.

And typically you're going to bring somebody like that in because you think, hey, the creative founder, maybe they're tired, they're exhausted, or maybe they're not an operations person who's going to sit there and just grind. And he was brought in there to grind and you're not there to grind it sideways. You're there to make it grow. And so if this person started sandbagging, maybe their comp was based on, you know, and their equity and their targets correlated with the management team's

bonus structure. Now, if the board gives them, says, hey, this is the board, including the founder, says, hey, here's what we need you to hit. Then that's going to be aggressive. And then the person would be like, you know what,

I want to sandbag this. I can't hit that. There's no way I can hit that. I can hit half that. And then what I do is they want to double it so they get into the bonus because anytime you do these bonus structures, let's say the goal was to hit $2 billion,

You said they were at $700 million this year. But let's say the goal had been $2 billion. You know, he negotiates it down to a billion. They hit $2 billion. They're probably going to get some massive bonus for anything above a billion in revenue. And I would you look up Dara, Kajar Shahi, from Uber. He had some crazy target of if he hit $100 billion valuation. He got some sick bonus.

And I don't think he ever got there. He came really close. So, you know, you want to incentivize. And it's a bummer if they don't hit it. It's fantastic if they do. You get the idea. Yeah. So I think that's probably what was going on here.

Now, big picture, if the thing was growing and he was hitting targets, and it wasn't for these, the recession looming consumers, the, what do they call the backlog, the supply chain, indigestion. There was a term for it we were talking about supply chain backup, whatever. Yeah. During COVID, all that. Yeah, the 900 ships waiting. outside the port to yeah all that um nonsense getting worked out was not good for the new CEO so i i would

attribute a lot of this not to either party being incompetent i would say this feels to me like the majority of this has to do what market conditions and big picture what i've seen in business is everything's up into the right champagne corks everybody's great high fives winning forgives everything you could be a jerk We could have gotten in a fight. I could have punched you in practice. It doesn't matter. You know, Draymond punches whatever that kid's name is in practice and they win the title. Everybody's great.

Hey, you know what? We went through the fire together. You lose. Okay, somebody's got to go. This is not working out, right? And so winning forgives everything. And listen, they were losing. It's got to be brutal to have your, if it's in fact true.

And again, you heard my disclaimer, 50% of stuff you read in the newspaper or you read online is not true. And the other 50% is partially true. So, you know, who knows what the truth is here, but the undeniable truth is the market changed dramatically. Yeah. So that's what we do know to be true. You know, wrong place, wrong time for a hired gun CEO to come in. Yeah.

I mean, it's like, this is like when Marissa took over Yahoo. You know, it's like, good luck. You know, like. Was that at the great financial crisis time? No, it was after that. But it just was, you know, Yahoo was in super decline. Yeah. You know, there's always this thing where, like, women get the CEO slot, you know, when things are in a turnaround, not when things are going up.

They've said that about Linda at Twitter slash X. Like, the only time women, and I don't think this is necessarily true, but when it's a turnaround situation, when it's hard, that's a tough thing to come into. Now, I don't know exactly when Dave Clark joined, but I don't know if they were on the upswing then or if it was clear that things were going to be challenged, you know, coming out of COVID, etc. Yeah, it was late 20, 22 that he joined. Yeah, so they knew. They knew. I mean, he knew well that they were in recession territory. Things were brutal.

He took the job, but maybe it was more brutal. But I saw also this stuff like Peterson. I don't know if we're ready to transition here, but Peterson came in like a raging bull here. Well, you mean Clark? No, not Clark. When Peterson took back over. did he come in like raging job offers he said get ready for layoffs

he basically came in and was like we need to cut you know I think Dave Clark was sort of growing it like a company that was maybe in 2021-ish era or 2019 and Peterson came in and was like runway is tight here are the layoffs that were expect layoffs where we're sending these job offers I'm so sorry and he actually did

he did a bunch of tweets about it yeah he was posting about her next he said you know obviously he feels terrible about rescinding the job offers but I put together some program to help the people out that were getting affected. Yeah. But I want to just bring one thing from the CNBC story that I thought was really interesting.

So according to the CNBC article, which we'll link in the notes, on September 13th, this was a week after Clark resigned. He resigned on the sixth, I think. Flexport's chief legal counsel contacted Clark and told him that his resignation actually was not accepted by the board and that the board had fired him for cause. Okay. just explain what for cause means okay yes um for cause and not for cause not for cause would be hey we're reorganizing you didn't do anything wrong for cause is you didn't do the job uh or

and in like a CEO position in that contract it is very detailed of what cause is defined as and cause can be defined as like really dark stuff like sexual harassment fraud stealing, mundane stuff, like not showing up for work, not doing the job. And so, for cause is extremely,

extremely detailed. Why is it extremely detailed? Because of situations like this. When you do get fired, for cause, it means that we don't want to pay you severance and that we don't want to pay you your bonus or vest you your shares.

Now, in the vesting of shares, these shares could be single trigger, double trigger. There's a bunch of nomenclature here. but just to explain it in layman's terms, if you were in the calendar year and you get fired,

if you get fired for cause, no more vesting of your options. Now let's say his options were vesting on a yearly basis or a quarterly basis or a monthly basis. Let's just say he was in, was he at year one or year two? He was probably right in between those two.

Starting year two, I think. Okay. So we don't know if he was, he probably had a one. year cliff is probably vesting monthly then, but let's say it happened before the one-year vest. You fire something in that 11th month for cause or for any reason, you let them go because you don't like them. They don't get that 12-month. They get zero shares in the company. That's why there's a one-year cliff. Let's say more likely he's on a monthly thing.

And let's say he gets fired not for cause. Or just change your mind. Hey, it's not a fit. And they don't have a reason to fire you. He may have one year of salary, maybe two, probably two, in his case. And he might have two years of vesting, which means he gets, let's say they offered him 5% of the company, you know, and he gets 1.25 of that every year.

He might be forward vested for one to two years. So he might have the 1.25, he got originally, one-fourth of 5%. And they probably don't want to give him another 2.5%. And it's not that they can't afford to give him the 2.5%. It's that they're really mad right now. Yeah.

And that's an anger and it's a personal thing. If he had done a great job and it wasn't his fault, they probably would have just given them the 1.25 or the 2.5 that he's supposed to get. I'm picking numbers out of the air. Usually hired CEOs get about five points at a company this size, I would guess. If it was a mega company like Google or Uber, maybe they get 1% of the company over time, right? All right, listen, scaling your business is hard. It's not just hard. It's really hard.

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So then on that call, he's offered Flexports Legal Counsel, tells him he's been fired for cause, and then he's offered a package of 2 million Flexport shares, which are, we don't know the price per share, but that's millions of dollars. if and only if he signs an NDA and a non-disparagement clause. Standard. Clark declines the offer.

Wow. He says no, right? I was like, oh, I was reading the article. I felt like I was reading great expectations or something. I was like, oh. This is such. That's crazy. Then, so this is September 13th.

If CNBC is to be believed, later that same day, Clark takes the stage at a supply chain conference where Peterson had spoken earlier in the day. We don't know if Peterson was still there in the audience, it didn't say. But Peterson had spoken earlier the day and actually said nice things about Dave Clark. And Dave Clark was in the audience for his talk. Yes, he was. He was in the audience. He was like first row.

Clark goes on stage and this is what he said. And I quote from CNBC, the only thing I really regret from the past year was I sort of picked the wrong founder. Basically, it was a place of extending my reputational halo to a group that, in my opinion, did not deserve it. largely because about half the team was let go last week on Friday, the most brutal non-severance packages I've ever seen in my life. It was about as disrespectful a way as humanly possible. How much money does this guy have that he can just turn it down? Or I guess he has the money

to fund a lawsuit or maybe he's got some goods. Well, if he's been, if he was one of an Amazon executive. Yeah, maybe he's got a billion dollars from Amazon. They don't care. They had a huge run-up from 2000. Well, maybe he thinks the $2 million, the two million flex-port chairs are not going to be worth anything, but this is as bitter and dark and crazy. I have never seen anything like this. Now, again, there are some things we know as facts here. He said, she said, these guys are fighting. They're saying nasty things about each other in public.

Okay, that's all facts. And then we also know that the shipping industry was challenged. The other thing we know, I'll be honest here, is, you know, Ryan is a great founder, super smart. and he's coming in and he's going to save the company. So I would say, you know, I think Peterson's got a really good shot at saving the company. Bummer for Founders Fund, they got a great partner in there. I guess bummer for Peterson, but better to save the company than lose his fortune because

I don't know how much he's sold in secondary, if any. I don't know if Peterson's cleared money. I would think he's sold 50 or $100 million. Maybe in that soft bank round, the soft bank put in like $2 billion or $4 billion, right? You would have think that he took some off. I would think he peeled off a hundy. I hope so. If two billion was coming in,

I could see him peeling off a hundy. And so, you know, the Masa Pio. As I said, the Masa Pio. And so if he peeled off a hundy, great for him.

But I think he's got a lot of pride, obviously. He's come back and he's become super vocal. And, you know, this happened with Travis getting kicked out of Uber. I hope someday Travis gets to, I'm not saying Dara's not doing a great job.

I think he's doing a great job. But someday, Darrow will, you know, want to do his next thing, I'm sure. And I would love to see Travis come back like Steve Jobs did. And, you know, this has happened a number of times in our industry. And I think he'll do a killer job here. And this is his Steve Jobs moment. So make the most of it, Ryan. Yeah.

Just wrapping up on the stuff from the article, Clark sent, had his lawyer sent a cease and desist letter to Flexport, basically asking the company to preserve and retain all communications involving his departure. That means he's going to sue. That's a preserved documents move. That's sort of what it was getting at, yeah. It's preserving documents. It basically means the lawsuit's coming. So we told you to preserve documents.

If you suddenly change your document retention policy, which you're allowed to do as a company, after we sent you that letter, not a good look. I don't know if it's actionable or not. But, you know, listen, this is Roshamon. There's always different views of who's wrong, who's right. It didn't work out. That happens.

And it got ugly. and it shouldn't get ugly. They should have had controls in place to not make this get ugly. Apparently, they did not. Yeah. I think Founder's one is okay, too, because I think they were the earliest investor in Flexport. Trace Stevens is on the board. You know, and they have a big position in the company as well.

Shout out of Trace Stevens, amateur boxer. Yeah. I'm saying out of that one. Sharing your boxing videos on the internet. It's a little thirsty. Let's keep going. I don't know, man. I have no qualms with anyone who I love those duck videos of him.

I think if you can fight and you can throw a good punch and you can... Fine. I'm going to start doing mine. I'm going to start releasing mine. I'm going to be in the over 50 category of... If I could dunk a basketball, there'd be a video of me dunking every day. That's fair enough. I did share my martial arts videos from my 30s on my Insta. And if I had videos of them, they would have shared the videos for sure.

But, yeah, now that I'm fit, yeah, maybe I'll start sharing my take one of no videos. So last story of the day, Jason, I guess you could call this a little big detail, maybe. DoorDash is testing a really interesting new feature that they haven't actually publicly announced yet. They're just testing it in some small markets, but they're testing it in San Francisco and obviously a bunch of people that are like Metro capitalists and stuff have been screenshoting it and sharing it on X. It's called Dine Out. And it's basically a rewards program that offers DoorDash users with cash, credit for dining out at local restaurants. John, if you could throw up the image here.

Oh, it's like a check-in. So there used to be two apps. One was called Go Walla and one was called Four Step. These became a big craze after South by Southwest one year. We were investors minor. I think I put 10K when I was first starting my major career into Go Walla, which was bought eventually by Facebook. And there was a mobile local social.

Moe-lo-so. Moloso was like an acronym that we used 15 years ago. And you would check in and it would automatically then tweet or Facebook, hey, you just checked in. And so I used to do this all the time when I was in LA. I would just check in everywhere. And it was like gamified. You'd get points or something like that.

Then people started showing up with the places I was checking in. So then I started checking in when I was leaving. But it was fun to kind of bookmark these places. But here, this isn't just bookmarking, is it? No, you're getting, you're getting cash credit. in DoorDash credit, right? So, you know, if you go and you eat out at this, like, right here, you see Pacific Catch on Chestnut Street in San Francisco,

you get a $20 credit. That's basically an entree, you know? Yeah, it's an entree. It's an entree. DoorDash credit to then use in the app. And these screenshots were posted on X by Olivia Moore, who is a consumer investor at A16C. My question to you, Jason, is why would DoorDash do this?

What is the reason they're doing? Oh, it's very simple. This is to lock in restaurants. DoorDash has a number of restaurants, and I think Uberrists does as well that are exclusive to their platform. It's not a lot, but they do try to become the preferred, if not exclusive provider. And if you've ever gone to a restaurant or somebody who works in one,

they'll have five terminals up and running. And you see them working them, and then they're startups that consolidate the five terminals into one. It's a mess. Now, what people will do is sometimes they'll simplify. Let's say you have too many orders. You're just like, I'll just use one or the other platforms. What this does is it creates a deeper relationship,

with those famous restaurants. And so that $20 is probably being shared that economics in some way. So let's say it's a $20 credit. I bet you the restaurant picks that up because they probably make on average $20 from somebody ordering online. So that just incentivizes people to try doing and become more loyal to a restaurant. So it's a no-brainer. And you actually nailed it when you said, oh, that's an entree.

What that means is when people do it Does that what I sound like? Yeah, oh, that's an entree. You know, like, whoa. You know, like, but that was just that like, the way you framed it is perfect. Because for somebody who is like thinking about the cost.

Yeah. Yeah, you're thinking about the cost of food. You got a family, you got a budget. And you're like, hey, whoa, that's the cost of an entree. That's significant. They put it at a dollar amount that's significant, is my point. I think that's being covered in some way buy the restaurant and maybe a little bit on DoorDish.

Maybe DoorDash waives their fee for that order or something like that, right? Now they got a deeper relationship. They have information on when you're checking in. And then eventually maybe DoorDash will have a loyalty program. And maybe when you sign into restaurants, it will work the other way. So if you've ordered online, you get a $5 credit to go to the restaurant or you get a free drink in the restaurant. All this does is meant as a loyalty to increase consumption. What is Lena Khan claiming with Amazon?

is that they created the Amazon program Prime in order to make people more loyal. Wow, congratulations. You're a genius. You just discovered airline miles and Costco. Like, if you're a Costco member, you shop a Costco more. If you have Amazon Prime, you shop there more. If you have DoorDash rewards, you're going to use DoorDash more often.

So it's just a way to increase loyalty for everybody. Yeah, I think it's brilliant. If they're trying to recruit certain restaurants to be DoorDash, exclusive and then they can say to the restaurant, not only does being a DoorDash partner or whatever they call it, increase delivery, we also now have a feature that increases your dine-in rates by 50% or 30% or 80% or whatever. I think it's a very powerful message. I love this feature. I love this when I saw this. It's a great feature because it matches real world and this is something I think I've been telling Uber with their Uber 1. They're going to really

keep pushing that. And I don't know if they're public with how many people are using Uber 1, but it's not insignificant. And I think Uber One saves you a lot of money and you get a lot of cool upgrades and they should keep following that string because we saw where Amazon Prime went with it. If you're an Uber One user, are you ever going to use Lyft? No. And I love two airlines, United and JetBlue Mint, which is like actually a class. It's like their business class or first festival mint.

And so anywhere I go, I try to do those two. And when I do those two, I love the service for both them, but I love the rewards too. because the United, you know, loungers are pretty good. And United goes to a lot of destinations from the Bay Area, and I build up my miles. And so all my credit cards are United. And I use Bonvoy, which is Marriott, which owns a bunch of brands, but they bought SPG, which was what I used previously, which I think was the W hotels, etc. So when I was coming up, I just always stayed at W hotels because those were hip and affordable.

And so I would always have a million Bonvoy miles, a million. million united miles. So, you know, if I was short on cash, I could just use my miles up and get free trips. Yeah. Which I, you know, and so I think these gamification things, these loyalty things, they work on humans. You know, if you play, if you've ever played a game like Farmville

or any game with gamification in it, it works. We all know that, right? So this is gamification. It's brilliant. Congratulations on the Doordash team. Very creative idea. And you know what? Sometimes the best ideas are sitting in the,

the graveyard of startups. And that's why startups kind of build on each other. This check-in apps, if you go back to the Foursquare days, and people thought Foursquare and Goalow were going to be multi-billion-dollar companies, I thought it was the future, was going to change everything, and it didn't. But here it is again, pretty cool. And then ultimately, what does Yelp do now?

And they already have the discovery built-in part. They have the discovery part of it. They have the restaurants ingested. That's why I love it so much. And this is a broader societal point. But I just think life is better when restaurants, are packed and people are moving and shaken. And there's nothing sadder than a Friday night, 7.30 p.m. and like half the restaurants on the street are closed down, which shout out San Francisco.

Great job doing that to your city because I remember leaving was so depressing. All of my favorite places were empty all the time. And it sucks. And I feel so bad for those people. And I hope that this gets some asses back in the seats. It's going to. And I was in New York, to your point. And when I I was in New York, I had one night where I had like a meeting and then I was free and I left it open. I could, you know, I got a lot of people to catch up with, you know, family, friends, business, colleagues, founders, LPs. And I just had, I knew I had this one night late, you know, after like a late meeting or something that I had online. And I walked up to Soho and I had like the three best restaurants that I had written, I had read an eater. So I go to the first one.

I look and it's empty. I don't want to be alone in there And then I went to my second choice Which I wanted to go to Balthazar And have the steak old pove which I love I go there, it's packed And there's a couple of seats at the bar Which is where I like to eat when I'm alone

I eat that steak old pov I share it on my Twitter So I agree with you We need these restaurants to be hopping And it's absolutely fantastic If they can get that going So just great job to those Team over there

I think it's a great idea And you know This is I don't know if you saw There was a report That Uber was going to launch a task rabbit type service. I don't have any information.

I think that's going to be a big one. So if I could click on Uber or you're with child right now, you have your babysitter cancel last minute. What would you pay for a last minute babysitter? I pay 50% premium. I mean, you'll see if you need a babysitter and you don't have anybody to come, you'll pay a little extra. And so I think that that like, you know,

there's many different places for Uber and DoorDash and Airbn be to go. You know, and I think this is where Elon's saying he wants X to be the everything app. I think you'll see DoorDash and Uber and Airbnb, you know, thinking about travel, transportation, and food. And you'll see X doing, I don't have any information here, but just publicly they've talked about having payments. Uber actually did a payment thing.

There's a thing called Uber Cash inside of Uber. I don't think it's become a thing yet because Apple Pay is so great and so ubiquitous that why would you need to open, why would you need to keep cash inside of Uber? But they did seed it a little bit. I don't know how it's going Uber Cash. I don't know if that one took off. But Uber's doing, I think, trains and some other things. You can do taxis in it.

Obviously, you can rent bikes through the Lyme network. And so all that stuff. And then if they had, you know, like manual labor or- Have they started flight booking yet, Uber? Because I saw an other day, they said something about like, oh, book your full, book the entire itinerary on Uber or something like that. Yeah, they're doing something.

Well, they were doing they were doing Blade built into the app. Yes. But yes, I think they were doing some flights in, they were doing some flights in Europe. So I think that starts in Europe.

And I think trains in Europe is a big deal. So I think you'll be able to book your trains and stuff like that. There's no reason you shouldn't be able to do everything. I should be able to take out my Uber app and take the New York City subway. I was on the New York City Subway. when I saw people using their phones.

Oh, it's the best thing ever. Yeah, that came in a couple years ago. Yeah, you just, if you have Apple Pay, you just put it right up to the thing and go, boop, boop. There's no more waiting online for cash or get the Metro card. I'm such an idiot. I just literally, I saw it and I just like, let me buy a Metro card to be faster. Oh, my God.

You look like searching old man. It had some weird logo. It didn't have an Apple Pay logo. It had some weird third party name. And I was like, I got to sign up for this and get the app for that. Yeah, but that's, that's bomb. Oh, I mean, it's the best thing ever. And then the worst part, I used to.

live in Hoboken, the path train doesn't have the Apple pay. So on the, to get the path back to the local, you got to fill back up the metro card. Like I'm in, you know, 1999. That was brutal. Anyway. Well, this has been a fantastic episode. And we'll be back tomorrow with an all-ass Jason episode. So we're going to do some ass Jason tomorrow.

Jason unplugged is what we're calling it. Jason unplugged. Absolutely. Chill vibes. Just takes. Just takes. Okay. Hot takes.

Just vibes and takes. Like the kids say. We'll see you all next time. Bye-bye.