This Week in Startups - OpenAI drama, billion-dollar exits, and founder salaries with new co-host Alex Wilhelm | E1953

Starting point is 00:00:00 Let's face it, our industry's general hospital is OpenAI at this point. It is the soap opera of our industry. Yes. But like all good sitcoms, we started somewhere, things happened, and we ended up exactly where we started off to begin with. So there we go, ladies and gentlemen, Open AI part 495, I think. Next week, tomorrow on General Open AI Hospital. We need some dramatic shots.

Starting point is 00:00:22 Will Siam. I get, I get, I get this, tell all. When in doubt, talk about open AI, because there's always some. going on. This week in startups is brought to you by 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 sock to report fast. Twist listeners can get $1,000 off for a limited time at vanta.com slash twist. LinkedIn ads. To redeem a $100 LinkedIn ad credit and launch your first campaign, go to LinkedIn.com slash this week in startups. And Equinix. The Equinix startup program offers a hybrid infrastructure

Starting point is 00:01:06 solution for startups, including up to 100k in credits and personalized consultations and guidance from the Equinix team. Go to Equinix startups.com to apply today. Hey, everybody. Welcome to a very special edition of this week in startups. I am so excited that Alex Wilhelm is joining us today, not as a guest, but as our new co-host, and we've got a ton to talk about, you know, Alex has been on the program, God, at least a dozen times doing these roundtables, at least. And I've spent the last four or five years trying to get him quit TechCrunch and CrunchBase and join me here. And finally, he decided it's time. So welcome as co-host, not just guest. No, I'm incredibly excited to be here. I freaking love podcasting. I love business. I love

Starting point is 00:01:53 startups. I love talking about it. Honestly, Jason and I've been kicking it for a long time. And so now we're going to do it quite often. News roundtables, interviews, we have a whole slate of things playing for the show. It's going to be absolutely awesome. And it's great because you and I have a great back and forth of rapport on these subjects. You're a challenging person to do this with because your knowledge level is so high. Usually in these discussions, I'm up against somebody who maybe is deferring to me, hey, you have more experience. You have tons of experience in this. You've been covering this at TechCrunch, Crunch Base and everything in between. So it's just really great to have you here. And I'm really excited for a great summer, twice a

Starting point is 00:02:33 week, minimum news. And we'll do it live sometimes. And so if you have questions, join us in YouTube, LinkedIn, or Twitter. He's at Alex. I'm at Jason. Think about that. I mean, we both have our first names on X. Which is just evidence of our intense nerdery and the fact that we've been doing this for a very long time. I will try to live up to your kind, words. But the good news is there is so much going on already, even for this early in the week. Yeah. So why don't you tell everybody what's on the docket today and then we'll go right to our first story. Yeah. Okay. So first thing we're going to talk about today is open AI equity, clawbacks and essentially when you can talk smack about your former employer and how to do damage

Starting point is 00:03:12 control live, then AI revenue. We have some data on the consumer side. We'll talk about what's going on on the enterprise side of things. I'm a little bit surprised to see how well consumer is doing compared to business. We'll talk about that. Then there is a big deal in cybersecurity showing that there's a lot of consolidation going on, not a lot of IPOs, but we are seeing some movements in SaaS that I want to talk about. Then Jason wanted this in the show today. How much are founders paying themselves and what is reasonable? I think he'll have a couple of things he wants to say about that. And then venture interest in crypto. And then we're going to do a very quick tease and a reminder to everybody that this is Nvidia earnings week. Everyone's going to be tuned into that, Jason.

Starting point is 00:03:50 but I think we have to wait until Wednesday. Yeah, and I think we should probably go live right after that. That might be a fun thing for us to do because you and I love to geek out on the 10 Q's and kind of read the tea leaves in these product announcements and financial quarterly announcements. There's just so much information buried in those stocks. And it's a lot of fun because you have the scoreboard of the stock price, you know, as a backdrop as opposed to private companies where, you know, the valuations don't change all that often.

Starting point is 00:04:16 Let's get into this open AI equity issue because this brutal. This Donnybrook has been going all over Twitter and social media and tech meme. Everybody's got something to say about this because I think there's a wider issue here. And let's face it, our industry's general hospital is open AI at this point. It is the soap opera of our industry. Yes. When in doubt talk about open AI because there's always something going on. So there's two things going on here, Jason.

Starting point is 00:04:45 One, there have been a couple of exits from open AI, including on their post super alignment team. people thinking about privacy and safety. We'll get to that in a second. But when one of the people exited, Vox wrote a piece describing essentially an agreement inside their exit deals with their former employees that if there was any disparagement ever, they could get their vested equity clawed back. And why does that matter? And also vested versus unvested, how common is this set up amongst other companies that

Starting point is 00:05:14 you've seen? Yeah. So this is common and it tends to be reciprocal. So it's not as one-sided or as bad as it sounds. First of all, when you leave a company and it's on good terms, bad terms, whatever it is, a company can decide that, and you can decide, it's double opt-in here in America, and we're talking about the American market. Okay, it doesn't work out, whatever the reason, the company might say, hey, you know what, we'll give you six months of severance and we'll vesh your remaining two years of equity. All we ask is that you don't trash us publicly when we give you this podcast. of money or potential future lottery tickets. And the other person might say, you know what, screw you. I'm going to write a tell-all book, which they probably signed an NDA on the way in that they can't do that. But this is kind of like a confirmation at the end. Hey, you signed an NDA at the beginning to not trash us. We're not going to trash you. It's reciprocal. So therefore,

Starting point is 00:06:09 everybody tends to be okay with it. What's the reason why this one, I think, caught people's attention is twofold. One, the never-ending drama that is open AI, Sam being fired, rehired, did they discover, you know, general intelligence, all this kind of stuff, and that they could claw back and take back that money. That is the part that's got people a little bit tweet. What would be the reciprocal effect, Alex, if the company trashed you? So the company trashed you, do you get more money? Do you get something? In this case, no. So this is like a little bit overbearing. If it's your equity and you, earned it, they shouldn't be able to claw it back. But there does need to be some sort of,

Starting point is 00:06:51 something has to occur. There has to be a cost to crashing the company or a former boss if you agreed not to, right? And the company. So my question is, there's things that exist in legal terms and paperwork that we all sign and most of us don't read. And then there's what's actually applied in the market. So if this sort of setup is relatively common in terms of people writing it down and signing it, how common is this actually to see put into practice because Sam Maltman of OpenA.I. said, one, I didn't know this was happening. Two, we've never clawed back equity. Vested equity is just that vested. So to me, is this like a thing that was buried deep in the docs that no one even knew existed and therefore wasn't used and therefore

Starting point is 00:07:29 it's a PR issue? Or do some companies actually clawback vested equity, which to me doesn't seem right or fair? I have never heard about vested equity being clawed back. The only exception would be fraud. So let's say you stole something. You misreperate. presented your revenue numbers. You, I don't know, physically attacked another employee. I mean, like really crazy criminal stuff. You, you know, like dark stuff. I could see them trying to wipe out your equity. Even if you did that in the, let's say somebody went crazy and literally beat up somebody at work. I mean, that's never happened, right? But let's say that happened. Somebody loses their mind. If you tried to claw back their equity and got into a legal battle over it,

Starting point is 00:08:11 I don't think you'd win. Even in the case of a criminal assault charge. I don't think you'd be able to claw back their equity. So this is like more embarrassing and bad optics than it is reality to answer your question. I think also it was a bigger story because one of the people who left was on the safety and security side of things. And so people thought maybe they were being muzzled by this. And they're, you know, it's the kind of Sam Altman, Emperor Palpatine meme type thing that he's behind the scenes pulling all the strings.

Starting point is 00:08:38 In reality, I think there is some tension at Open AI about how to approach safety. I know you have a perspective on that. But I do think that this equity issue is going to get sorted and hopefully goes away because I think we should have robust healthy debate and not kind of people worried about losing their meal ticket, essentially. Because I don't know if you've heard this, Jason, but Open AI is worth a couple of dollars. So your equity does matter there. Yeah, people have been selling their equity in this nonprofit slash for profit hybrid. We can get it to that a bit at an $80, $90 billion evaluation. I think bribe capital did a secondary and let people sell it.

Starting point is 00:09:12 So this nonprofit or a theoretical nonprofit is, you know, people have a lot at stake. If 20% of it's owned by the employees, let's say 30%, I mean, it's $25 million, $25 billion sitting out there. Split up amongst, I think they have 500 or 1,000 employees. It's not that many employees for the amount of value created, especially given how fast they're growing. And we'll talk about that in a little bit. But I am just glad that this has been sorted out and we can put this particular episode of General Hospital behind us. But like all good sitcoms, we started somewhere, things happened, and we ended up exactly where we started off to begin with.

Starting point is 00:09:47 So there we go, ladies and gentlemen, Open AI part 495, I think. Next week, tomorrow on General Open AI Hospital. We need some dramatic shots. I get, I get Elya, tell all. I get that mixed up with House, and House is the one with the doctor who, like, did too much any drugs, but you discovered cool things. And the other one's more like this relationship-y. soap opera one, right? I just remember in the 80s my grandmother would watch these things.

Starting point is 00:10:16 It was just like a fascinating thing to me that some people stayed home during the day and there was like some sort of television, broadcast television targeted to addict people who were staying home with their kids. And I think that's what soap operas were. Well, that explains a lot about Generation X and how they were raised and what they consumed. Now we'll see a little bit of what happened to the TikTok generation. But I guess Gen X was the general hospital kids, if you Listen, a strong sales team can make all the difference for a B2B startup. But if you're going to hire sharks, you need to let them hunt and you can't slow them down with compliance hurdles like SOC2.

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Starting point is 00:11:30 I mean, it's my favorite trend on TikTok right now is they've summoned Gen X and like GenX is now coming out. and being like, we're the, somebody said, there was like, all started on this woman with pink hair said, like, I think if we could all agree, Gen X is the worst generation ever. And then every Gen Xer was like, we're latchkey kids. We were free range kids. We were kicked out of our house. Yes. You know, we bled on the streets, yada, yada, yada, we don't care about. And like, then the millennials got in between the millennials or whatever. And they're like, no, no, no, don't summon Gen X. Yeah, leave Gen X alone. They're crazy. They are very independent. And they've a lot of perspectives and they actually had some pretty good music to back it up.

Starting point is 00:12:12 Leave them alone. That's my take. The generation thing I think is useful as a fun like a rubric or heuristic or whatever, but don't get in between them because it is a lose, lose, lose, lose, lose battle. Now, what is not a lose, lose, lose, lose battle, though, is what's going on with OpenAI and their revenue in the wake of last week's announcement. Jason, I know you talked about this on, I think it was on All In and also on this show. I have played with GPT for, oh, have you had a chance to actually dig into it?

Starting point is 00:12:41 Yeah, I've been playing with Omni. And yeah, it's pretty cool. I haven't been able to get the Omni companion where it's running on your desktop and you can show it your desktop working yet because I have a corporate account and I guess it's not released in the corporate accounts yet, which seems counterintuitive to me. Okay. But the product seems like it's getting better and better. And they are working more on the user interface.

Starting point is 00:13:03 And I think that's like the most interesting part of this is we are now in the phase where building the language model and indexing the world's content and consuming all this content and being able to regurgitate it and give you some interesting, sometimes delusional results. Okay, interesting, fun to play with. But when you start getting into, you know, being able to turn it on, talk to it and have it understand what's going on around you, this gets really interesting. and I think consumers are starting to see the use case. And as you build that use case with consumers, then they're willing to pay for it.

Starting point is 00:13:41 If you pay $240 a year for this as a business person and you get but one good idea, let's say you and I as writers, we summarize a podcast, we ask it for background on, you know, NVIDIA's history and it gives us like reasonably good content or we give it an old, you know, in video and say summarize this in timestamp, but like, that kind of stuff is worth $2,400. You would give a research assistant who gets paid $30 an hour. Yep. You know that work. And so you and I being an editorial and journalism know, like researchers get paid $30,

Starting point is 00:14:14 bucks, fact checkers, maybe $40. And if it does that, man, that's pretty significant. And you will not churn? And that's really the issue is, will you cancel your subscription because you're not getting a lot out of it? I subscribe to everything. Claude, Po. this, and now I'm starting to look at it and saying, well, which ones do I actually need?

Starting point is 00:14:33 Right? And that's, I think, the phase we're going into right now is, do I need this? Is it essential? Or can I use the free version? Because now it's free when you do a Google search. It summarizes stuff at the top. And I think 3.5 is free without login. Yeah, but I mean, maybe it's just the inner nerd in my soul.

Starting point is 00:14:53 But like, if there's a new AI model, I must have it. Like, I'm not going to sit back here and be like, well, you know, it'll come. about in six months. Okay, like, Dune 2 came out. I have a small child. I have to wait to see Dune 2 until I chose up on my TV. And now I'm going to watch it this weekend. Very excited. But with things that I can control, I am going to buy them immediately. So I have a personal open AI account that I pay for. And my dad loves it, actually. So I got to take it with this. The spoken word element of GPD for Omni, fantastic. Like, I mean, if you brought that four or five years ago and showed it to someone, they would think it's fair.

Starting point is 00:15:29 It's impossible. There's no way. It is fantastic. I explain why this is better in your mind as a consumer than Siri. I don't mean to be a mean and unkind person, but Siri is hot garbage. And it has not gone better in, okay, here's how long Siri has not been good. I was living in Chicago while I was going to university. And one of the co-founders of Siri came to Chicago, where he was from, and gave a talk about selling the company

Starting point is 00:15:59 to Steve Jobs. Since that point, I do not think Siri has gotten materially better, whereas LLMs have been improving at a simply almost organic exponential pace. And so to me, the ability to talk to something that can understand what I'm saying and converse with me means that I am one step closer to being able to talk to my computer and do things very quickly that can accelerate my overall process. And that's why I didn't put it in today's show, but Microsoft's new co-pilot plus PCs are once again drifting in that direction. I can see a world where GPT4 Omni plus voice,

Starting point is 00:16:35 plus some stuff built into Windows, and suddenly your PC that you use can do a lot more. And hopefully our iPhones too. But that's why I'm excited about it because it's better and it's getting better faster. Yeah. And if you, I talked to Sam about this on All In, I think. The CB problem is the big problem with Siri and Alexa. You know, you're like, hey Siri, give me driving instructions to get to this place. I just activated my Siri or Alexa do this or okay Google do that. Yeah. And then you have to be like over.

Starting point is 00:17:07 And then it does this thing. And then your kid says, oh, do this. Don't play this song. Or like you get interrupted and it never works. And you're waiting 60 seconds for it to come back to you. If you have to wait more than three or four seconds, you could have typed it and you could have gotten the search result already. So that's what I benchmark it against. is this more suffering and pain than typing the address into ways, you know, or my Tesla's,

Starting point is 00:17:32 you know, Google Maps? And it turns out most of the time, Siri is slower than me just typing it in. Also, sometimes you'll be like Siri, give me directions to my spouse's work. And it'll say, okay, playing Kenny G now on Apple Music. And you're like, okay, great. I don't think that's quite what I had in mind. No. But a couple of data points on this.

Starting point is 00:17:51 So TechRunch had some news up about how. big of an impact this new model is having on Open AI. And the thing that really got me kind of going here was that they have seen net revenue on the mobile side, so ChatGPT Mobile, rise from about $491,000 a day to about $900,000 a day. Now, we all know that Open AI is a big company now. It's doing billions of dollars in run rate. But here is a dramatic increase in the amount of money consumers are paying from their own non-corporate accounts to use this stuff.

Starting point is 00:18:23 And to me, that shows that what we are talking about. about is not technology that will work in five years. It's technology that people are willing to pay for now. And that, to me, is the market of something that really does have, as we say, in the startup world, PMF. It just does. It's strong product market fit. And it's actually what we call deep in the industry market pull. So Andy Ratcliffe, co-founder of benchmark and Wealthfront, who's been on this program a bunch of times. He talks about market pull. That's when the market wants something and they're calling you saying, I'll take six, right? You open up your bakery and then somebody shows up and is like, yeah, I need a hundred baguettes.

Starting point is 00:18:58 You're like, what for it? It's like, well, I have a restaurant down the block. Boom, you got market pull. These baguettes are great. It reminds me of the iPhone. I skipped iPhone 14. I went from 13 to 15. Before that, I would buy iPhone 3, iPhone 3S, iPhone 4, iPhone 4S, iPhone 5, iPhone 5.

Starting point is 00:19:12 I mean, I bought every single update. So I think this technology is so compelling and moving at such a fast pace. I agree with you. You must keep buying it and playing with it. I have set my action button on the iPhone 15, which is that like button above your volume, it takes you directly into an app. When I press that, what it does is it takes me directly to chat chippy ting. Ah, look at that.

Starting point is 00:19:38 And the reason I did that was I really want to have this experience like her in the movie where I just talk and talk to it. And when I'm driving with my kids again, like, they'll ask me a question about like, Yep. Yes, okay. It's going to be okay, Chapman. It just told me they're experiencing heavy load. Speaking of a product poll right there, I mean, if they're saying, sorry, guys, we have too many people that want our stuff right now.

Starting point is 00:20:02 There's no more baguettes for you. Navigating the B2B maze can feel really tough, huh? You're trying to hit the mark with all those top tier executives. You want them to pay attention to your enterprise product. But where can you find all those big fish, the whales? The ones who call the shots and make the buying. decisions for corporations, for startups, and everybody in between. Well, here's where LinkedIn ads is going to solve that problem for you. And I've used this. It is one of my secret weapons.

Starting point is 00:20:31 LinkedIn means business. Business equals LinkedIn in people's minds. When you're on LinkedIn, you're in the business mindset. So you're going to really be thinking about business products and services. You're open to those opportunities. And LinkedIn recently passed a billion users. 180 million of those billion are senior executives, 18%. But hey, we all know about the 1%. 10 million C-suite executives. That's your CFO, CTO, CIO. These are the people who are always looking for a new product or service

Starting point is 00:21:01 to make their organization run better. But they are on LinkedIn. That's why LinkedIn's ad platform delivers two to five times greater return on investment compared to other social media platforms. So easy to understand why this is because this is where all the business people are and they're in that business mindset. Super easy, call to action. Make your B2B marketing everything it can be and get a $100 credit on your next campaign. Go to LinkedIn.com slash this week in startups to claim your credit. That's LinkedIn.com slash this week in startups. No spaces, no dashes. Terms and conditions apply

Starting point is 00:21:31 because they're giving you a hundee. It's been great when I'm in the car with my kids. We're driving to Tahoe or something on a bunch of time. They'll ask me a question about something and I'll be like, oh yeah, yeah, tell me the history of Ireland or tell me about this. And it's pretty fun, you know, to have that assistant there. And so, yeah, I mean, kudos to them. I think it's a million dollars a day. It looks like app figures are saying their revenues getting to. And that doesn't even count the enterprise side, which we have enterprise chat GPT at launch.

Starting point is 00:22:00 Yes. So we pay for everybody. So now that you're paying for your personal, you're going to have a launch address and you'll also have it from the company. I'm trying to actually make those two play nicely. Part of my day today was getting all my stuff turned on and set up and so forth. But, I mean, again, I'll happily pay for it just because my dad uses my account, my personal, and just can't get enough of it. And he is not a tech guy.

Starting point is 00:22:21 So that to me is another element of this works for folks who just want to do stuff and get things done. But here's my question that I don't have as good a visibility into as you, which is how well is the enterprise side of AI doing? Because when you think about every company in the last 18 months has been talking about adding AI or we've been doing AI for 10 years, et cetera, et cetera, et cetera. to me, I can easily see it in my life that consumers cannot get enough of this stuff and some companies like launch, sure. But how well is the enterprise side of like this new AI technology that's being imbued into every piece of software? How is that performing?

Starting point is 00:22:55 I don't know. Yeah, I think it's a mixed bag. Some people, you know, are just not going to use it. Like I remember when I started in IT in the late 80s, early 90s, some people at that time, boomers basically had an assistant. like what we would call a secretary with a PC and they had an office with no PC. Can you imagine going to work with no computer in your office? It's like, what did you do all day? I think you just wrote things down on paper. You wrote things on paper. You took phone calls and you took meetings.

Starting point is 00:23:26 Like, that's what an attorney did. And then typing was something that a secretary or the typing pool, literally there was a floor with just people who typed. And that was a career, typing. And proofing was a career. A lot of the things that we look at now are like, wait, I have grammarly and that makes my, I mean, it's incredible what Grammarly does. And you and I are writers. I don't know if you've ever had Grammarly, give you a suggestion. You're like, yeah, it's pretty good, actually. Nicely done. Today, for the first time I use Gramerly for the first time in five years, because again, setting up my computer for this show and stuff. And I was like, oh, actually, all right, fair enough. It's pretty good. Although it does not appreciate if you're speaking in

Starting point is 00:24:01 like shorthand in a note stock for a podcast. Sometimes it likes to say things like that's terrible grammar and I say, uh, no, but still, it's a bullet point. You know, it's, I'm trying to be terse here, grammarily. Yes. But I will say, going back to the consumer side of things, did you see the news that they have pulled one of the, uh, voice voices of the new , uh, GPT4. Oh. Yeah, they pulled Sky, uh, which is one of the women. And they said, this is not Scarlett Johansson's voice that we have deep. Instead, it is a actress that we have used to create this voice imprint, but they had to say, it's not Scarjo. And so I presume that there was a call from someone's legal team saying, hey, we think you have stolen our voice. But they're working

Starting point is 00:24:47 on that. But I got to say, I went through each of the different voice options and they're all pretty good. Yeah. Speechify is a cool product I use that will follow you around the web and read web pages to you. So if, you know, I sometimes, you know, it is we're on front of computers all day. I just like to have something read to me or I'll send it a PDF and it will read it to me when I'm on the treadmill, going for a walk or driving. And it's had this for a while. A voice that's presidential, they call it, clearly Barack Obama. And then they have one that's Gwennett Paltrow. And I was like, holy cow. And I asked Gwenneth, like, did you approve this? Yeah, I did it with them like four years ago. So you can have Gwyneth Paltrow read you the Wall Street Journal or a Barack

Starting point is 00:25:25 Obama-ish impersonator. But yeah, this will, I think on the enterprise side, it's a no-brainer when you're doing research. Like, if you were to ask it, I don't know, make me a marketing plan, right, for a new podcast or write a press release about Alex joining this week in startups. If you've never done those tasks as an employee, it's going to start you on third base, basically. I'm not saying it's like the finished product. But if it's starting you on second and third base, hey, how do I plan an event for 100 people?

Starting point is 00:25:55 about. And it's like, location, ambiance, theme, AV. And you're like, oh, I didn't think about ambience and theme. Or gift bag. I hadn't thought about that. So it's kind of making everybody bionic right now. And what I want to be able to do is have multiplayer mode. And we don't have that yet. But imagine you and I sharing a space, right, where we're talking to the AI together. And I think that's what Sacks is doing with glue AI is. It's kind of like Slack. But the AI's in the room with you. So if you and I were working on show notes, and let's say we're doing something like

Starting point is 00:26:31 the history of Blackberry, we decided we're going to do a retrospective on that, we could be talking to and say, hey, when was Blackberry formed and tell me about the funding and what were their initial products and how were they received? And it goes out to the web and gives us bullet points.

Starting point is 00:26:46 And you and I are in a thread with the AI. Now, you start to think about how valuable that is when the AI's on the Zoom call, the AI's in the Slack room or in glue AI. that's where I think this is all headed, which is the AIs are co-workers, right? And they're going to seem like not very sophisticated co-workers at first, like maybe C3PO to Luke Skyworker and Hans Solo.

Starting point is 00:27:10 And then all of a sudden they're going to seem like transcendent where they're like telling us what to do, right? And I think we're on that journey. I think it's going to be incremental, but quick. And so I think it's going to feel like we're going to look back in five years we've gone by and we'll have these amazing, But I bet you it's going to be kind of like a step function each time. But that's still really fast because we are doing really quick things here.

Starting point is 00:27:34 And so I'm just, I know there's worries about AI in a number of different ways, deep fakes and developing economies around elections and so forth, lots of things to think about. But fundamentally, technology has found a new path to go faster now. And after we've all gotten a little bored of mobile, a little board of new iPhones, I think it's great that there's something out there that is pushing the boundaries, making people a little scared and also hopefully giving us the next thing like that can help us do a lot more faster because we don't have enough people. So more productivity is going to help a lot. Yeah. I mean, doing more with less is going to be the theme, I think. If you look at to make this brass tax,

Starting point is 00:28:09 you know, Uber hasn't added employees. Like I think their net new employees is flat for three years. So, you know, people leave, people get hired, but just net net net. I think it's three years flat. I think Airbnb is very similar. But those companies are growing at 20 or 30 percent revenue. So if your revenue is going up 20, 30% year over year and your headcount stays the same, how is that efficiency happening? Well, software businesses should be efficient, but I think a big part of it is AI and globalization. And that means these companies are going to be able to do more with less, which means what happens to everybody else?

Starting point is 00:28:42 You got to go start more companies. You got to go solve more problems in the world. And God knows there's a ton of problems in the world to be solved. Okay, cloud computing has revolutionized startups over the past decade. You know that. But the reality is, hey, a full. cloud-based solution is not right for every startup. Sometimes, a hybrid solution is your answer. Like, if you're working with sensitive data, that can't be trusted to cloud, or if you need to connect

Starting point is 00:29:03 to multiple cloud providers at once, or maybe you just want a much more cost-effective solution. In that case, you need to check out Equinix. Equinix metal will give you direct access to physical servers, but you still get all the benefits of the cloud, so no need to rack and stack your own servers. No, Equinix provides on-demand infrastructure in over 25 major cities. And here's the best part. They have an amazing startup program for you. The Equinix startup program offers personalized consultations and guidance from the Equinix team. And of course, you'll get up to $100,000 in startup credits. So here's what I want you to do. Head to Equinix startups.com to apply, and when you apply, James from Equinix is going to reach out to you directly. That's equinix startups.com

Starting point is 00:29:50 to apply E-Q-U-I-N-I-X startups.com. I could come up with quite a list right now of things that are keeping me up in night. But the good news is

Starting point is 00:29:58 is that people are working on them and they are paying themselves as they do this. And this means I get to bring up my favorite topic, which is how much your founders pay themselves, Jason? We've never,

Starting point is 00:30:07 never answered this question once in the history of people talking about startups. So let's talk about some data from Pilot who collected a bunch of different bits of data from founders in different geographies

Starting point is 00:30:18 and different fundraising tiers. you might say, debunking companies so we can see a little bit better. And I pulled a bunch of the data for us here. I'm curious which of the numbers that we have in front of us sticks out to you the most as the most either insane or the most kind of like that feels right to you. Got it. Yeah. So Pilots a great accounting partner for a lot of our startups. And so they actually have data. So this is in this sort of zone where like Carda or Angelist release information in aggregate. And it generally is pretty accurate. It's not the whole picture. It's a subset, but this does look to me to be accurate.

Starting point is 00:30:57 Because when founders ask me this after they raise their seed round, what we say to them is, you should take the least amount of money possible to live without fear, you know, comfortably, so that as much money goes into the startup and the product and everything as possible, right? If you want max revenue with the least downside, you go work for corporate America, and they pay you, you know, as much as possible and you leave and you're a free agent. But when you're an owner, it's like owning the NBA team versus playing for the NBA team. One, you're trying to optimize for salary. One, you're trying to optimize for the value of the enterprise. So if you are optimizing for the value of enterprise and you raise a million dollars, well, you don't want to pay

Starting point is 00:31:36 yourself 500K. You want to pay yourself, you know, a five or 10K a month draw. That's what I typically see at startups. In the first couple of years, they pay themselves five, 10K a month, which equals 60 to 120K. Looking at this data, it turns that... I'm exactly right. Startups 100K to a million, 90K, max 600K. That 600K is like some weird abomination. Like nobody should be. Yeah.

Starting point is 00:32:02 It's a fat finger and someone when they're filling in the survey information been a mistake. That's my take of that number because if you raised 100K and you're paying yourself a $600,000 per your salary, you're going to have money for like 20 minutes, I think? Yeah. It doesn't pencil out. So, and then you look at the next one, $1 million to $2.9 million raise median founder sell you, a buck 25. And that seems right to me. In your startup, you should probably be like,

Starting point is 00:32:24 I don't know, the 10th most expensive person as the founder, the sales executives, you're also our developers, you're like savant product designer, UX, Wizard, like, they should all be getting paid 200K or 150K or 150K, you know, if you're a $5 million startup. But the thing that this doesn't take into account is also globalization and like hiring people offshore. or work from home people, remote people, which I think is the bigger story here. Founders generally are, are founders in Silicon Valley at least, generally half of them don't have kids yet and they're not married and they don't have mortgages, so their burn rate is low. Yes.

Starting point is 00:33:09 Now, once you have two kids, private school, a mortgage, you know, maybe you got a spouse or not, you know, now your nut might be 30K a month, 20K a month. And so an exception is generally made in those cases when somebody goes to raise money. If that person isn't well to do and they've already made their money, you know, VCs might be like, okay, we know going into this that this person needs to get paid 400K a year just to cover their nut. And it seems crazy. But those founders tend to be more seasoned. They raise more money.

Starting point is 00:33:39 They have an easier time getting to profitability. The sweet spot for founders actually is like 35 to 55 years old. Everybody thinks it's young people. It turns out like success rates are much higher in. that group and much lower in the other group. We just remember the Zuckerbergs and the gates. It makes for better movies if you have someone who dropped out of Stanford or pick another one of the schools. But what's interesting to me about this data is that it doesn't actually go up for a long time. So for startups that raise 1 to 2.9, 125k median, 3 to 5 million, 124K median.

Starting point is 00:34:10 And then for startups that raised 5 to 10, 150. So really, it stays flat for a long time. Although once you raise over 10, it does go up to 194, according to pilot. But really, it plateaus and stays. It's less elastic than I expected it to be. And this becomes a board decision when you get to those levels. Once you've raised over $3, $4, $5 million, you start to have a board. The board then manages compensation. When you're in year 4, 5, 6, 7, what you want to do as a board,

Starting point is 00:34:38 and this is a question that wasn't asked or isn't taken into account here, is what should you do after the founders are fully vested? It's year 5. Companies make it $5, $10 million in revenue. Yep. What you want to do is tie their revenue to the performance of the company. So everybody's a line, which is what Elon did with his pay package famously and then had it taken away and now they're trying to restate it, which is, hey, if the stock price goes

Starting point is 00:35:00 up, you hit this milestone. Dara from Uber has a similar thing. Like when it broke $100 billion, he got some great, you know, slug of equity. It's kind of hard to fake that. It's hard to fake your public market valuation because. the people who are buying that are the sharpest pencils in the class, right? They understand, like, the reality of this business. So what you really want to do is, um, as a board, make sure that you understand what the person's personal financial situation is. And then have it make it

Starting point is 00:35:34 so they're not distracted. I'm always in, you know, when we get asked for money, hey, can I get a raise? You know, the, the conversation or can I sell secondary? The number one goal is to keep the founder focused and the stress of running a business is enough. They don't need to have mortgage stress or private education stress or other stressors in their lives. Take that out so that they can just, you know, and then if you're starting a company or you're a young person, lower your burn rate. Like literally, if you've got a BMW payment and you got like a three bedroom, get a studio, you know, go public transport or, you know, get a use Prius for 10K, lower your burn so that you don't have to worry and be a slave to this nut that you're chasing every month.

Starting point is 00:36:24 Also, the thing people forget is that once you have a lower burn rate and you have more money saved, you have a bigger middle finger to give to anybody you don't want to work for, work with, listen to. I mean, it is the hack around the annoying bits of capitalism. So, yeah, keeping your burn rate low is fantastic. Although, if you say private school one more time, I'm going to start having nightmares on the show because I recently learned how much money you can spend on kindergarten in first grade. And it's about as much as I paid to go to university. It's kind of crazy, yes.

Starting point is 00:37:00 I'm a product of the public school system, and then I went to Boy Scout High School for like 2K a year in the 80s. And they gave a discount of like $500 less for each one student. So I think my older brother was $2,000. I was $1,500 and my little brother was like $500 or $750. They really worked with you, the Catholic school system. But yeah, it gets quite expensive if you go that route. And if you have multiple kids, it can, yeah, it can get crazy. I think of it this way.

Starting point is 00:37:26 I already pay property tax. Therefore, I should get just a public school down the street. It's free. Well, it's free. And this is why I think not to make this a political. show, but you and I have political things, so we don't want to not talk about them. I think the voucher system and creating competition for education is just a great idea. If you're paying taxes into this pool and the public school in your district isn't very good and you can get 14K

Starting point is 00:37:51 because I think the average is like 14,000 is what we spend in the United States, 15,000. I mean, some cities might be 20 and then some places in the south that might be 10, like lower cost of buildings and salaries. But why not give that to parents? and they're like, oh, because then it's going to crush the public system. It's like, well, maybe they need some competition if they're not doing so well. As long as there's similar accreditation standards across charter schools and normal traditional public schools, I'm sympathetic to that. But to me, it comes down to the implementation of it.

Starting point is 00:38:25 Because as I think you and I both know, when it comes to large, expensive government programs, if you don't get the details right, you can create a bigger mess. But I do think that I think the Providence schools are so bad the state took over. So a little competition wouldn't hurt. I don't think. I'm here for it. I'm here for it, too. All right, let's keep moving.

Starting point is 00:38:47 All right. So I grabbed a cybersecurity deal. Jason, do you know CyberArk or Vannafi, just offhand? I do not. Good. Because I had to look at the company's up. The reason why I put this into the show notes, one, it's $1.5 billion. deal. Essentially, CyberArc is buying Vonafi from Toma Bravo, so private equity. But the thing is,

Starting point is 00:39:10 I was going through all the releases. The company is doing about 150 million ARR, which means that this is a 10x ARR deal. And that means it's a double-digit ARR multiple. And founders used to get those for breathing back in 2021. Now, as we've seen, it's much harder to get and secure this, especially at scale. And so I was curious, why is this company, exiting for this dollar amount. And I did some parsing. So here's my hypothesis. One, nearly 100% recurring revenue. So this is a serious software business. This is not services. This is not crap. They're kind of pretending as AR. It's real. Quality revenue. Quality revenue. And then also a business that isn't too expensive because they said that it's going to be

Starting point is 00:39:54 margin accretive on a non-gap basis kind of from the get-go. So it's not a trash fire of red ink. And then also it adds 10 billion or 20% to the new parent companies, Tam, in their view. So future growth. Yeah, in these situations, the Acquirer has a thesis. They have a plan. And we don't know what their plan is. But let's say when CyberArc buys this, what they may have done is look at VNAFI's client list. They look at their client list.

Starting point is 00:40:29 The overlaps 20%. it's an 80% that they already have their, you know, sales team going out to lunch with and taking to playoff games and whatever. And when you introduce this new product, they've penciled out, oh, well, we can triple the revenue. Therefore, we can quote unquote, overpay for this. So when YouTube was bought by Google, they penciled it out and they're like, we already have servers. Like, we're going to save all this money on server infrastructure.

Starting point is 00:40:58 We got global. We can run YouTube to every country. We've already done that. We've got servers and teams in Korea and Japan and Australia and all over the place. When you buy a company, if you have a way to monetize it at a higher scale quicker than the original company, you can pay 10x, 20x. It doesn't matter. It's funny money because you'll just, boom, instantly put them through your distribution system and distribution really matters. We've seen this when Slack got bought by Salesforce.

Starting point is 00:41:28 Now, there's like, they took the two lists of, here's people who buy Salesforce, here's people who buy Slack. There are a bunch of people who didn't overlap. Those are potential customers. And the integration with Salesforce and Slack theoretically could get really tight. I don't think it did. But anyway, that's typically what happens here is the acquirer has some thesis like Facebook buying Instagram.

Starting point is 00:41:54 Okay, you cross-posed your post from Facebook, from Instagram to Facebook, all these old people on Facebook. We don't know what Instagram is. Now go open an Instagram. Okay, but I want to go back because you described 10X as part of the funny money bracket. I mean, Jason, 10X ARR was conservative like 18, 24 months ago. But now you're describing that as pretty expensive. Am I reading your comments there correctly that 10X is almost like an aspirational,

Starting point is 00:42:20 like ARR exit multiple for technology companies of scale? Because that's what it sounds like to me. Um, I think we're going to see the multiples in SaaS go back up as, yeah, I think we'll see that. Um, I think we bottomed out. And, you know, because there was a great SaaS consolidation that occurred. Yeah. Where, you know, during the down market of 2022 into 20, 23, when the market collapsed, two things happened. One, head count went down. Remember all those layoffs? Well, if you lay off 30% of your team or or like, you know, there's 30,000 less people or 40,000 less people working at Microsoft,

Starting point is 00:43:01 Facebook, Uber, Airbnb. Those people don't eat Grammally. Those people don't need sales force. They don't need, they're not in Slack anymore. So you have this incredible headwind that all of the SaaS companies felt at the same time. Then some CFO says, you know what? Boss wants to save some money. We've got 400 SaaS products.

Starting point is 00:43:21 It's going to be 200. Yep. And then they just go to everybody. can you do this feature in this product? And so something like Coda or Notion, if you were using, let's say, Asana, nothing wrong with Asana, great product. You can kind of do that in Notion or Coda.

Starting point is 00:43:38 So then the boss says, can we do that in Coda or Notion project management or to do list or whatever? Great, we don't need the full-strength version of Asana. We'll just go with that. Or vice versa. Asana does something that some other product does. And so that's where you're seeing

Starting point is 00:43:51 a lot of these SaaS products and adjacencies. Yep. and they want to be the last SaaS standing. I think that's dead on. And actually, when you go back and read this particular acquisition, this Vanofi deal, they said that it's going to help them create a unified platform for machine identity, security at enterprise scale, but exactly that. And also, Bessemer, a venture firm that I'm sure everyone listening to this is familiar with,

Starting point is 00:44:14 in the cybersecurity space, which is what we're talking about in this deal, said that the growing trend as major players are increasingly turning to product-only acquisitions to build platforms. And so everyone's trying to get a little bit broader, a little bit deeper, and so that we don't get bumped off as a point solution when the CFO says, hey, we are going from 400 to 200. And so it's almost like SaaS musical chairs leading to consolidation. That's great.

Starting point is 00:44:39 I'm sad that we're not seeing more startups go from zero to IPO because that's what I really want to see. But at least we're getting some deals out of it. We're learning from it. And so that's kind of why I wanted to talk about this. I think cybersecurity is especially ripe for consolidation. So I bet you, I don't know, lunch that we're going to have two, three, four more of these in the next couple of hours. Totally. Yeah. I think Palo Alto Network says a lot of acquisitions. A lot of these like what I'll call single and doubles.

Starting point is 00:45:08 You might call them tuck in acquisitions under a billion in revenue, way under Lena Kahn's radar. She's got bigger fish to fry. You know, and frankly, you know, like, it's kind of boring and you're not going to get any headlines going after this Israeli cyber company that's trying to make people safe. And it's a little billion dollar acquisition, $500 million. Who cares? We got Microsoft, Google. We got scary people who are impacting the world in their mind that need to be controlled and reigned in. Breaking news coming in about the Scarlett Johansson. Ooh.

Starting point is 00:45:42 Her voice. Maybe you could read this for us, Alex. Breaking news. We have a breaking news story here. This is a first for Alex's co-hosting here. It's in the Slack room. You can pull it up. Breaking news from Scarjo.

Starting point is 00:45:55 Breaking news from Scarjo. So, quote, last September, I received an offer from Sam Altman, who wanted to hire me to voice the current GP-T-Ptachy-4.0 system. He told me that he felt that by my voicing the system, I could bridge the gap between tech companies and creatives and help consumers to feel comfortable with the seismic shift concerning humans and AI. He said he felt that my voice would be comforting to people.

Starting point is 00:46:19 After much consideration, and for personal reasons, I declined the offer, which means the Scarjo has plenty of money because I'm sure Open AI was showing up with the dump truck money. Nine months later, she goes on, my friends, family, and the general public all noted how much the newest system named Sky sounded like me. When I heard the release demo, I was shocked, angered and in disbelief that Mr. Aldman would pursue a voice that sounded so eerily similar to mine, that my closest friends and news outlets could not tell the difference. Mr. Allman even insinuated that the similarity was intentional, tweeting a single word, quote, her, a reference to the film in which I voiced a chat system, Samantha,

Starting point is 00:46:58 who forms an intimate relationship with a human. Briefly, two days before the 4.0 demo was released, Mr. Alman contacted my agent asking me to reconsider. Before we could connect, the system was out there. Then she says, hire legal counsel, letters written to Altman, and then they've taken down the Sky Voice, as we mentioned earlier. Okay, Jason, I have views about this. Yeah.

Starting point is 00:47:21 You can be a scamp, you can be a rogue, you can skirt the rules when you are small, not famous, and not rich as hell as Open AI is. What were they thinking? Of course they were going to get in trouble for this. I mean, it's, we keep having these instances occur. And you remember the rumors of why Sam was fired the first time were, and we talked to about the scandaly on All In, were like, hey, this dealmaking, right? Like, he's a consummate dealmaker. I've known Sam for 20 years.

Starting point is 00:47:54 He is a great dealmaker. He talked Elon into put co-founding Open AI and putting like $50 million in. Right? And then he was in the Middle East, not raising $7 trillion. That was like a mistake by the press. They probably were looking at them. Tam, the total addressable market of chips, whatever, or the future projections of how many we sold. And they thought he was raising $7 trillion. But I think-

Starting point is 00:48:17 It's still a lot of money. He wasn't going there for- Yeah, he's probably raising a billion or two, right, to make chips or whatever, Favs and whatever. Putting all that aside, you know, if you're a great dealmaker, sometimes you can maybe, what's the word, Scarface would say, get a little high on your own supply kind of situation. And this feels like that, which is, like, like, okay, she doesn't want to say yes. She doesn't want what I would think is $25 million. I'm guessing they offered her whatever she got for Black Widow times two. I remember Scarjo had to sue Disney to get her Black Widow's money because they didn't

Starting point is 00:48:53 release it during pandemic. I think they went direct to video. There was that window of release and the royalties. If you ever want to figure out more about that, just look up Hollywood accounting, which I believe is a fancy word for fraud. But they like to play with the numbers. That way they don't have to pay out a lot of stuff. But anyways, yeah, he got a little high on his own supply here.

Starting point is 00:49:11 And then why do this is what I would be thinking. If she doesn't want her likeness and she made that or she wanted a higher price and you weren't willing to pay for it, why would you poke the bear? She is a high profile person. Yeah. And this is just a bad look to be leveraging a person's celebrity, making them an offer, calling them two days before, trying to get the offer done. and then being like, Yolo, you didn't do it.

Starting point is 00:49:40 We'll have AI make a fake voice that's similar to her. I say not cool. Not cool, Sam. You should just respect people's. There's a term, there's a legal term for this, which is a person's like right to their personality. And a lot of us in podcasting who have become a little higher profile have to deal with this, which is somebody will take a clip of me saying something.

Starting point is 00:50:01 This happened two or three times. And then they go run an ad. So I say something nice about a startup. up and then they will take it and then do a YouTube ad on it. And I'm like, hey, you can't do that without my permission. And they're like, but you said it publicly. I'm like, I said in the context of my show, you're using me for this other reason. That's not allowed.

Starting point is 00:50:21 And the way she phrased this was very specific. The confusion of the public is a test for this specific issue. When the public is confused, then you have a case. The reason she said, my family and friends all told me, congratulations on this deal, is she's setting up the lawsuit. She's going to want now a settlement and a settlement they will pay her. I am certain. Well, I mean, all they have to do is called 1-800 Saty and Adela and make sure that the check clears.

Starting point is 00:50:53 But, I mean, just an unnecessary mistake. And this goes back to your earlier, I mean, joke about them being general hospital, this never-ending soap opera. I mean, here is a second rate in the face for a company that didn't need to step on any rakes. They already have money and technology and momentum. And they're kicking Alphabet's butt right now for as far as I can tell. And they can't stop stepping on rakes.

Starting point is 00:51:19 And it's beginning to make it seem like, I'm trying to find a way to phrase this, Jason, without blowing up the internet. But like, maybe the board had a couple of reasonable points when they were a little peevish with Mr. Alton earlier. I'm not saying he should have been fired from the company entirely. but I mean, this is not a great look for someone who should know better because Sam's not 21. He's been around the block. He's run things before.

Starting point is 00:51:43 And the fact that he called her two days before, I think goes to show that there was some guilty conscience pricklings going on. And that should have been enough to pull the plug on just one of the voice models. They didn't even need this. They had like five others. Yeah. It's called the right of publicity. And you saw this come up with, I brought it up with ads and stuff. like that. But this happened with George Carlin's estate suing because somebody made a comedy

Starting point is 00:52:08 special with George Carlin. You can't just do this stuff, right? And the people making deep fakes, I don't want to even bring up Taylor Swift deep fakes because they're really disgusting and, you know, like it's, they're sexual in nature. And so it's super abhorrent. There's like two levels there. But the right of publicity is basically, I'm allowed to be Jason Galicanis or Taylor Swift or Alex Wilhelm, you could be who you are and not be used by other people in commerce. And part of the test is, again, is the public confused? And here, I think the public is confused. But it's just, it's such a waste.

Starting point is 00:52:44 But I mean, like, think about it. We were talking 10, 15 minutes ago about how cool technology is, how fast is moving, how we're excited about it. Where is it going to go next? What software is going to be baked into? How is it going to change our life? How are we going to work on it together? And then we have to talk about Scarlett Johansson and her likeness and royalties and that.

Starting point is 00:53:01 I mean, I just, I don't want to, but we have to because it matters. But it just, it just, he needs like, the Sam made me need like a new best friend to sit him down every like 10 days and be like, that stupid, don't do that. Everyone needs that person in their life. I have it. I presume you do, Jason. I have it. I, and I admit for a number of friends where they just say, hey, am I crazy? And I'm like, yes.

Starting point is 00:53:23 Yeah. This time, don't, don't do that. Ask your group chat, Sam. Yeah, go to your group chat. Hey, should I do this? And he's like, no. One wonders if this is an explicit strategy like Trump to stay in the media and then sell subscriptions.

Starting point is 00:53:39 So maybe like creating all this drama and chaos keeps you as part of the cycle? I don't know. You know what they said in their presentation the other week, Open AI, that 100 million people use chat GPT. They are the conversation already. I don't think they need any help. It's like if Metallica put out like a new like water brand. They don't need that to sell out of stadium.

Starting point is 00:53:59 just show up, play guitar, have some fun, and go away. In this case, make an AI model, sell it to me. Haza, don't get Scarlett Johansson. Don't turn the public sentiment against you for no reason when consumers are paying part of your bills. Maybe it's the best way to put it. I was just talking to Huberman about this because he has people using him talking about different nutrients or whatever in their ads.

Starting point is 00:54:25 So he'll talk about, hey, you know, you should this, you know, compound, whatever, good for this reason, it help you sleep, it help you build muscle mass, whatever. They make an ad. They put him in it. And he's constantly having to sue these people who are making, you know, different vitamins and pharmaceuticals of like, you can't use me in your ad. Just because I talked about vitamin D doesn't mean I'm a spokesperson for everybody. And you know what? He wins. And he's winning every time. So of course he's winning every time. I just hope it's enough money to matter. Young people don't do this. Like, I think some people don't understand the law. You're not allowed to use other people to make money without their permissionful stop, whether it's authors,

Starting point is 00:55:05 whether it's Disney, whether it's Taylor Swift. Trying to get us into the Open AI AI training data, fair use. Because I feel like you're bringing us slowly, slowly over to that part of the conversation. I just think there's a general lack of respect in our industry for content. And, you know, Sam, when he was on All In, talked about how music they didn't want to do any music. I don't know if you heard that conversation, but he was very delicate around music. and didn't feel it was fair.

Starting point is 00:55:31 I can tell you what that is. In our industry, it's known. Don't poke the music there. They will come down on you. Remember, Pelotom was using their music? They will try to get an injunction against you to stop your product from being sold in the market. They're hardcore.

Starting point is 00:55:45 They're not like content sites or newspapers which have traditionally been like, oh, I don't know if we should do a lawsuit whether the New York Times is doing it. They finally stood up. UMG and Sony will come and kick your door down and take your money. Absolutely. And I've seen it up close and personal with startups we have where like somebody uses music, you know, YouTube did it. Other people, you know, they'll have music in their system and they're like, oh yeah, you're using music. Here's your lawsuit and here's your settlement. And you're like, ah, I think I'll do the lawsuit. They're like, great. Go look up the Napster lawsuit. We'll be here for seven years.

Starting point is 00:56:19 Speaking of Metallica, I didn't think Napster and Metallic were going to come up on the show today. But hey, here we are. Speaking about things that are a blast from the past, though, I want to talk just for a second. about what's going on with crypto venture capital. Because it's coming back. And it's not super crazy. Yeah. So the data from Pitchbook indicates that $2.4 billion was invested into crypto companies in the first quarter of this year. And that's up from a crunch-based data point of $1.2 billion Q4 of last year.

Starting point is 00:56:49 So a pretty quick assent. And Coinbase is doing good. Regulatory clarity is coming around. Are we due for another crypto bull cycle? I don't know, but I never write them off, Jason, because I've been around long enough to not make that mistake. I feel like there's Bitcoin and everything else. So if we just talk, there's like Bitcoin in the exchanges,

Starting point is 00:57:12 then there's everything else. Bitcoin, store of value. It's a unique one-of-one technology in the world that nobody owns and that has survived the test of time. So if we put Bitcoin in its own little bucket, obviously if you're living in Venezuela or you're trying to get money out of China or Russia or you're doing some illegal activity or gray market activity. It's a wonderful thing to be able to store it, transfer it, put it on a thumb drive. It's magical. Then there's like

Starting point is 00:57:40 every other use case and the exchanges help you trade Bitcoin. Great. ETFs, yada, there's a business there. Everything else, you know, I'm struggling to find the use case where we're having something on a blockchain or NFTs or whatever actually pretty. provide enough value that it's worth the technical hurdles, right? So everybody keeps coming up with, I guess this Farcaster is like the Twitter, decentralized Twitter that they're trying to build a Jack is working on? No, that was Blue Sky. And then he resigned from Blue Sky. But there's another guy. Something, yeah. And then there's Farcaster. I forgot the guy's name, but he does a podcast and he's pretty smart cat. And like Farcaster, I should have him on the program at some point.

Starting point is 00:58:26 Yeah. It's trying to make like, distributed version of Twitter that nobody can ever, you know, take down, right? And is, you know, sensor resistant, whatever. I don't know that that's enough of a use case for people to do all these technical hard things to sign on and for it to hit scale. Like, in other words, the value of decentralization for money, if you're a money launderer or you're trying to, you know, fight against your currency being devalued, whatever it happens to be. like that's a really great use case and it's worth the squeeze. Call it Uber or book an Airbnb.

Starting point is 00:59:04 Like everybody told me Airbnb and Uber we're going to be disintermediated by crypto. Yeah. I said I was going to tokenize my house. Turns out I haven't. Yeah. Well, I mean, tokenizing your house is an interesting one. There is like this ability to take a home and then sell the shares in the home, right? And have it be a way for people to play the real estate market.

Starting point is 00:59:27 I think that's a thing. Isn't that just a real estate investment trust, aka A.A. REITs, aka I think we've already invented? Well, yes. And that requires a bunch of paperwork, just like venture fund requires a bunch of paperwork, et cetera. You know, in venture at some point, it will be legal to create a venture fund that's tokenized. And I will do it when it's legal and it's buttoned up. Imagine I raised $100 million from $100,000 people, $1,000 each, whatever it is. 10,000 people, 10,000 each. Do your back of the envelope math.

Starting point is 01:00:00 And then let's say that 100 million doubled in value. And you said, well, you know, I put 10K into that and I double my money. I have 20K right now. I'm going to sell my 10K to somebody else who appreciates the assets in that fund. And then I covered my basis and I'm free rolling on the other 10K. That would be amazing. Do you know how hard that is to do in venture? It's impossible.

Starting point is 01:00:18 Like people selling secondary in a fund. Oh, it's so hard. And have you been following this DX? YZ. I just had the founder. DXYZ fund stock. This is the destiny. Oh, yes. This is the thing that owns stakes that it's not supposed to have in private companies that weren't approved to be sold as secondaries.

Starting point is 01:00:40 Yeah. In some cases. And I talked about that issue. It's cool. To be clear. Yeah. Yeah. But I mean, this just shows how much the public wants to participate in the private market.

Starting point is 01:00:51 So, yes. I do think like an idea like this that was on a blockchain would be fine with me. if it's regulated and people aren't going to get scammed. The problem, of course, 99% of these things are scams, grifts, or incompetence, or some combination of those. Yes. And sometimes they're fun. No one has more fun than the crypto kids.

Starting point is 01:01:10 They invent a new meme token. There's bonk now, which is like a Shiba Innu offshoot on Solana. Okay. They have more fun than I'm having. I pay property tax. I don't know. But I will say, though, when you talk about tokenizing a venture capital fund, I can totally see a use case for that, but it's still an inherently financial use case of the blockchain.

Starting point is 01:01:31 And that to me is the limit around my interest in it. Because whenever I pull up a crypto-focused game, for example, it's always about NFTs and trading it. And no offense to the crypto folks out there, but that's not what I want. That said, though, you and I are perspectives. VCs are showing up and putting more money into this stuff again. And so I'm curious to see what comes out of this next way, because we have. haven't seen a new innovation like NFTs a couple cycles ago.

Starting point is 01:01:59 ICOs a couple cycles before that. So I'm curious what will be the thing that makes the souffle rise yet again? And frankly, I mean, Bitcoin is over 70,000 as we speak. It's up 6% today. Well, that is. Crypto does that. And Bitcoin's been around for 15 years and hasn't been hacked. Hasn't, it's like, it's really one of the most resilient things human.

Starting point is 01:02:24 humanity's built. Like, it feels like the Great Wall of China to me. Like, are we all going to die in a pandemic? And then, like, Bitcoin is still running. And like some alien species comes here a thousand years from now. And they're like, yeah, they're all gone. But hey, their Bitcoin servers are still running. And we have some archaeological evidence that humans were smart. They created this token. Okay. So, uh, uh, do you use, um, Fidelity Vanguard or any of those kind equivalent to online brokerage services? Sure. Sure. I know that all of my money, which is in those services, is at risk to one EMP, right?

Starting point is 01:03:00 Like, if you take out the computers, all my money goes away. It's the one thing that gold bugs do have right. But I think at the same time, if you take out all the technology to the servers and stuff, Bitcoin also grinds two-way halt. And so to me, it is,

Starting point is 01:03:13 I think, as you said, a store of value, I think it has shown the test of time because we're still talking about it. But it does have the same risks that I think other modern forms of money and value have to it. And it hasn't solved that. Because if you show up in the future wild west 2.0 when there's no water left with a USB stick with some Bitcoin on it, you're not going to get a drink.

Starting point is 01:03:36 I don't think. Going back to politics, I think if you want to win the presidential election, if you come out and say, as part of becoming president, I am going to solve the regulatory framework, presidential order straight down to the SEC. and we're going to fix this mess. And Americans will be able to trade in crypto and we're going to be the leaders of crypto in the world. You would get, you know, low single digit percentage

Starting point is 01:04:01 of these lunatics, young people who love draft kings and sports betting, stonks, Robin Hood, and crypto. And you say, listen, it's your money. You want to bet it on the Knicks. You want to bet it on Bitcoin or an ICO or you want to, you know,

Starting point is 01:04:17 bet it on GameStop. It's your money. You're free to do it. and here's like a sophisticated test, you know, take this test, learn about diversification and scams, protect yourself, and then have at it. I think that wins you a couple of points in the election. And I think Trump's going to do that, by the way. The election, right? Because in the U.S., it's always 4852. So this week, the House is going to take up the financial innovation and technology of the 21st Century Act, or what they're calling Fit 21, bipartisan, endorsed by the

Starting point is 01:04:47 blockchain association. Generally, a well-received thing, and one thing that it does, according to a House summary is, participants will have a clear process to determine which digital asset transactions are subject to the SEC's jurisdiction and so forth. And so essentially, they're trying to solve what you're saying. And I think the Democrats are coming around a little bit on this. If you, if you, I've been watching the tea leaves in the last 10, 14 days. I think this is turning around. And what I think that means is, is that the crypto, long-term believers, your Brian Armstrong, et cetera, are going to get most of what they want, which means that the U.S. is going to stay pretty much, I think, the global epicenter for

Starting point is 01:05:28 crypto talent and so forth, apart from tax havens and so forth out there. I mean, Singapore and other places were really, you know, trying in Dubai, other, you know, the Zerg, whatever that was, and Switzerland was trying to. Oh, yes. Remember that? Like, they were going to be the place. I think Montana or Wyoming were doing Dow. and I thought the Dow.

Starting point is 01:05:48 I don't know. Did you follow the Dow thing? Decentralized autonomous organizations. Yeah. What did you think of that? Jason, I was in Boy Scouts, and I have been a patrol leader. I have been a senior patrol leader. I have heard of the cats.

Starting point is 01:06:03 And that's why I was a little skeptical of Daos. Yeah. I love the idea. I love pure democracy. I love people working together. I love federating out power to the folks. But a Discord group does not. not a democracy making.

Starting point is 01:06:18 And so to me, the technology was never there to actually underpin the aspirations. Yeah. And so it just, it struck me as like modern day utopious, utopia. Yeah, sure.

Starting point is 01:06:31 Utopian? Sure. Utopian. English, I speak it. Utopian thinking. Yeah. That was great and I never really took off. And I don't think we've seen a Dow,

Starting point is 01:06:41 apart from maybe MakerDAO that has actually stayed around long enough to have this sort of impact people hoped that they were going to have. So cool, but, you know, not exactly interpoints way. It kind of turns into Lord of the Flies awfully quick, doesn't it? I think is your point. Boy Scouts and Lord of the Flies are like either end of the spectrum, right? You got like the Navy Seals, Boy Scouts, and then Lord of the Flies. That was a scout as well. Lord of the Flies and Boy Scouts are much closer to getting. It's feral children. Exactly. It gets a little crazy out there. I know we have to go, but like I'll just say this. Pay attention to the, um, the Cryptoregulatory

Starting point is 01:07:15 seen this week, everybody. There could be some important votes that could determine where venture capital flows, where founders flow, and where projects are built. So if you care about that, it's a big week. And then for market pull, we talked about, you know, two really great examples of market pull in our industry historically for founders who just want to study that. And one of the things, Alex, I'm really glad you're here, is you can, as a journalist and an editor in chief of all these publications over time that are at large, all these titles you had, you can start looking at the advice for founders and startups and maybe helping me tease out some of those topics for the audience.

Starting point is 01:07:50 Like market pull comes up all the time. How do you know you have it? Like Stripe and Twitter were like two of the, as canonical, I guess the word for that like examples of market pull that we've ever seen in history. Those things really drove, you know, people who were like, I need. I need some way to process payments that's cheap and fast and better. And it was like, oh, have you not tried Stripe? And I was like, wait, what is that?

Starting point is 01:08:19 And they just, boom, people sign up and start using it. You don't have to have a salesperson get on a call. And then with Twitter, it was like, do you want to talk to the world in real time from the sporting event or from your, you know, whatever? You know, and yeah, here is your publishing platform. It's funny how good of examples those are. Actually, I would go back free Stripe and talk about Square, back when it was called Square. I recall when they put out the very first little reader, you could plug into the bottom of your iPhone. Yep.

Starting point is 01:08:47 3G, I think back in the day. Yeah. I got one of those. I had no use for it whatsoever. I just wanted one because I knew that that was a, it unlocked a thing, which was commerce, essentially. And I also will never forget the first time I figured out what Twitter was for. I used a client called Whirl back in the day, like 2009, 2008. And I'm like, wait a minute.

Starting point is 01:09:08 I can just say as much as I want and other people have to listen to me. Instant, just full on addict, haven't stopped since. I will be on Twitter when the universe ends or X or whatever. And you're also, again, back to the, you know, your political framing. You're a free speech absolutist. Yes, you're based on my watching you on social media over the years. So a free speech in terms of government control, absolutely a free speech absolutist. I think we should be allowed to say fuck on television.

Starting point is 01:09:40 I'm a big, I do not want the government saying what I can and cannot say. At the same time, I do think the market will respond to certain speech. And I think people can flate the two. But when it comes to regulation, I'm about as closer to free speech, I'm as slow as as you can get. Yeah. It's so weird, like our generation, because I think you're kind of on the tail end of Gen X.

Starting point is 01:10:04 You consider yourself a tail end of Gen X? Don't shoot me, but I'm square in the middle of millennials. Okay. Because you come across, you present as a Gen Xer. So it's the hair. Did you have Gen X mentorship when you were growing up? Like, were you around Gen Xers? So I think that's the thing with some of the millennials is they kind of hung out with us because

Starting point is 01:10:22 we were the older kids, like in high school or whatever. So if you had a Gen X influence on you, you're like, you know what? If a bunch of idiots want to prove to us they're racist by, you know, putting on bedsheets and pretending they're part of the Kluflex scan and march down Main Street, great. now we know who these idiots are, and they've proven it to the world. I'm fine with like Kanye West going on Twitter, saying crazy stuff, and then getting suspended because you know what? Now we know that this person has mental illness, is an anti-Semite, and worships Hitler.

Starting point is 01:10:52 Like, the guy is obsessed with Hitler, apparently, and like, he's mentally ill. Okay, what more do you need to know? He's told you who he is. But importantly, you just said, Kanye West should be allowed to go out and say whatever he wants, agreed, and that private companies can then choose to platform or not platform that speech. Okay. That is literally how it's supposed to work. That is the government going away and the marketplace functioning speech.

Starting point is 01:11:18 Totally. What you don't want to do is let Bob or Jane tell you what you can and cannot say or here or whatever or how to run your business. That's what I'm afraid of. And I think that people want to be loving and caring towards each other and we end up trying to solve speech by limiting it. And what we end up with is a mess consistently. Because yes, no matter how much good faith you have in your government,

Starting point is 01:11:45 someone else is going to win an election down the road. And they are not going to agree with you and you're going to give them a big old stick. Yeah, exactly. Be careful because if you start tipping the scales and then you lose power, guess what? You just gave that weapon to the next administration and the next one and the next one. And who knows how they swing that kettlebell. It's going to swing away your head is what they're going to do.

Starting point is 01:12:07 Yeah, duck. All right, listen, this has been a great first episode. We'll see you all on the next this week in Startups. Everybody, go follow at Alex and welcome him as co-hosts of the show. Thank you. Give a short notes. Let's get him some follows here. And I'm at Jason.

Starting point is 01:12:22 Thisweekin startups.com is powered by podcast AI. You can search the entire archive of got getting close to 2,000 episodes. And we will be doing two news programs a week. Subscribe to the YouTube channel. This is critical and turn on the bell so that when we, go live. Hey, uh, you can know and get this breaking news and you don't have to wait for the show to be edited and come out the next day. Two ways to win. All right. Great job, Alex. What a great first show. I enjoyed this. Thank you. Absolutely blessed. Total blast. I'm so glad you're here.

Starting point is 01:12:54 Ah! Fun times.

This Week in Startups - OpenAI drama, billion-dollar exits, and founder salaries with new co-host Alex Wilhelm | E1953

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