This Week in Startups - Q1 venture capital review, Twitter breaks, BeReal's new take on social & more | E1437

Episode Date: April 19, 2022

All-news show. First, we go over PitchBook’s Q1 Venture Monitor report where VC fundraising is high, but portfolio exits are down (3:08). Then, we discuss how the incoming CNN CEO Chris Licht and Chris Sacca are both taking a Twitter break (33:35), and touch on Alex Jones' InfoWars filing for bankruptcy (44:33). Our startup of the day is new social app BeReal (53:55). (00:00) Jason and Molly intro today’s news stories (03:08) PitchBook and the NVCA released Q1 2022 Venture Monitor, results are staggering (12:32) Notion - Get started for free at https://notion.com/thisweekinstartups (13:49) Q1 US VC funds raised combined $73.8B, more than half of 2021’s total of $131.5B (23:13) Microsoft for Startups Hub - Apply in 5 minutes, no funding required, sign up at http://aka.ms/thisweekinstartups (24:30) Investing in supercycles (32:23) Wealthfront - Get your first $5,000 managed for free, for life at https://wealthfront.com/TWIST (33:35) Twitter breaks (44:33) Alex Jones’ InfoWars filed for bankruptcy (53:55) Startup of the day: BeReal FOLLOW Jason: https://linktr.ee/calacanis FOLLLOW Molly: https://twitter.com/mollywood

Hey, everybody, hey everybody, happy Monday. Got an all new show for you today. How's your weekend moment? It's good, right? Happy Easter and Passover, everybody. It was a nice holiday weekend full of fun and flowers. And evidently it's snowing in a lot of states. So sorry, everyone.

Sorry. But spring here. We're excited to you back and it's spring here. And actually, we're starting off with, we're being true to our startup DNA here. We're going to actually start off by going over some fascinating numbers from Pitch Books, Q1, venture monitor report.

TLDR, fundraising is high, but exits are down big time. A lot of conflicting data. We're going to sort it all out and try to make sense of it both for capital allocators, but most importantly for founders out there who are wondering what their next funding round is going to be like. And then we talk a little bit about Chris Saka and CNN's new CEO, both announcing a Twitter break. Are you burnt out on Twitter?

What's going on with the Twitter ecosystem? Yeah, did we, did Elon Musk make us all wake up and realize that Twitter kind of sucks now? Maybe. Maybe. Make Twitter great again. And then we're going to talk about de-platforming and the financial incentives that can cause people to get more extreme. And also how those financial incentives can drive them to the end of the road. We're going to touch on Alex Jones Info Wars filing for bankruptcy.

Thank God. About time. The worst person on the planet as far as I could tell. It's like Putin, Alex Jones. Okay. And we always love to, again, back to our roots. It's in the name. We're going to do our startup of the day.

It's a new social app that's going absolutely bonkers. They're in the middle of, I think, a giant negotiation for a giant funding round based on what I've seen in the app and certain people being inside the app. I think you're going to see a big funding announcement any day now. From Be Real. B-E-R-E-A-L. It's a really fresh take on social and photo share. It's going to be a great show. Stick with us.

This week in Startups is brought to you by Notion. Notion is one place for notes, docs, projects, and everyday work that goes way beyond a wiki. Go to Notion.s.o and use promo code, Twist, to get $250 off an annual team plan. Microsoft for Startups Founders Hub. For the challenges you face as a startup founder, Microsoft for Startup's Founders Hub is here to help. The platform provides founders with free resources like Azure Credits, development tools like GitHub, mentorship resources, productivity software, training, and so much more. The program is open to all and takes five minutes to apply with no funding required.

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Lots of news to go over. And Pitchbook and the NVCA, that's the National Venture Capital Association, have released their venture monitor for Q1 of 2022. Results pretty interesting, perhaps even sagering. Molly, you want to run us through the number? Perhaps even staggering. Yes, this raises this. It goes back to my question from one of our early VC Sunday schools.

Did I get into this business at a terrible time? I'm going to choose to believe it's an interesting time. The major takeaways in super plain English before we get into number numbers are the following. The value that venture capitalists saw from exits, meaning IPOs or acquisitions, was down over 80, 80%, from Q4 to Q1. That may go into staggering territory. the total amount of capital invested in deals over $100 million, which Pitchbook calls mega deals, which have been like on the rise over the past several years, was down about 37%. So the headline from these numbers is that it seems like these massive deals have slowed down and the window to go public has closed very quickly. However, and this is good news for us, it seems like seed and early stage financings didn't dip as much as these later stage mega rounds.

Okay, so a couple of notes here. Fortunes are made in the down market. There's a collected in the up market. So we were through a tech super cycle of approximately 12, 13 years, right, since the financial crisis that happened in 2007, 2008. We've been on this steady uptick, and it's been pretty amazing. Obviously, everything got repriced in the fourth quarter of last year, and there have been little pullbacks over this last super cycle, the most notable one being COVID, that crazy

dip in the, was that Q2. end of Q1, beginning of Q2 of 2020. And now we're seeing this repricing of stocks going back to the average price to sales, price earnings ratios. So also in all of this, you did have a lot of IPOs. You had a lot of backed up IPOs starting with the Uber and the Airbnb IPOs. And once those got out the door and WeWork was another big question mark amongst those. The market then said, okay, we got the big ones out of the way.

Now let's work down the list. okay, we got to Coinbase, we got to Lyft, we got to DoorDash. And it, you know, just was a nice orderly putting of product out to the public markets. And then you had SPACs and then you had too many SPACs and then you had maybe some companies that should have been staying private a little bit longer. The pendulum maybe swung to having too many of those go public. Interesting. Who do you think should have stayed private longer?

Well, I mean, if you look at any company who is doing deep tech, maybe Joby in the Vitol space, a desktop metal, which we were in, those both spacked, those, I believe, and they both went out early. And should they have waited to year 10, 11, 12? Maybe that's too long, but is year four, five, or six, too early?

You know, it's really company by company dependent, but yes, maybe too many things that were too speculative. All of those EV companies, the entire cohort, went too early. about that over and over again. So the public markets need time to digest. There's a little bit of turmoil there. There's a lot of risk factors, headwinds, potentially, and we've listed them before,

inflation, Ukraine, and COVID. So as those things sort themselves out and the repricing occurred, it means the IPO window is going to be closed for all but the most resilient, anti-fragile, strongest companies. So that's what we're seeing in the public markets. what that means is people may not be selling as much stuff or those things that do get sold will be acquisitions, right? Not selling of shares to the public, but companies buying other companies. Of course, there's headwinds there because now there's a lot of scrutiny.

So people like Google or Apple are probably reticent to be buying things that are above $100 million just to not fire off any kind of salvos from Lena Con and the FTC. So it's a unique moment in time. There are headwinds in both of those exit areas. But everybody raised a lot of money. Right. I mean, I would say that's the other thing. There's tons of great companies.

There's still plenty of money. So a little bit more in the numbers department, Q1 in 2022, saw $33.6 billion in exit value from IPO, SPACs, acquisitions, etc. That was down 82.5% from Q4. That was a really big drop. However, the total amount of capital invested in Angel and seed deals in Q1 was up 4%. over Q4 to $5 billion. The total number of deals went down about 14.5%. And the total amount of capital invested in early stage deals in Q1 was down 28% from Q4.

But despite all of that, in Q1, USVC funds raised a combined $73.8 billion, just in Q1, and that is already more than half of 2021's total of $131.5 billion. So it's not a more abundant industry. It's more like the dynamics seem to be changing. And maybe as we've been talking about, like, maybe it won't be like the housing market where there's a super hot bidding war and you have to like close, you know, your funding round on a company in a day and a half and it'll like return to some

take a breath. Yeah, that's already happened. We see that, you know, the time to evaluate a company is moving closer to realistic as opposed to, hey, you have to put your money in. You're not going to be able to do any diligence. We're oversubscribed, et cetera. And then these crazy large rounds, which people were doing at a pretty high clip, putting $100 million in, companies going to go public, you know, valuations are absurd.

Therefore, you really don't need to do as much diligence. You can just write the check and it'll all work itself out. I think maybe a little more discipline is coming to the market. And so people are just not going to suspend disbelief. They're going to be a little more rigorous. And that means if you're a founder, you're going to just need to make sure you have as much runway as possible. And your next round will be harder to close than your last two or three rounds in all likelihood on average. And that's probably healthy for everybody.

And if you did raise a mega round and your valuation was 50 or 75 or 100 times your revenue, yeah, you might need to fill into that valuation. and you may need to take your time doing it. So some interesting changes here. The thing I've noticed about this industry is great companies can be born any year. And great investors just have a process. They refine their process. And you can adapt it to market conditions.

But I think it's important to have a really thoughtful process for how you like to invest. We have a very thoughtful one that we're even refining more. So in a down market, it's a great chance to refine your process and think about what's working, what's worked in the past, and what still applies. Because sometimes what you did 10 years ago just doesn't apply now. And other things, they apply even more. And that's the art of investing. And cycles come, cycles go. I think you just got to keep investing through the cycles.

When you see it's a hot cycle, we passed on a lot of deals for valuation, and we took advantage of selling. So the last couple of years, we were selling 10 or 20% of some winning positions. We got pretty lucky to sell some of those pretty high. We missed other ones. It's not a perfect science. But in a hot market, taking some chips off the table, locking in some wins, always a good idea. When the market's down, I think like it is now where it's confusing, really working with your startups, figuring out which ones are the strongest, doubling down on the strongest,

and maybe the ones that are in the middle of the pack, maybe having some, mentoring some, you know, heart to hearts about, hey, this could be headwinds would be more difficult for you. And then for the people who are struggling, you've got to have a really sober discussion. Listen, if you don't have, if you can't clear market, you've been racing money for six months. You got three months of revenue. You got three months of runway. You're not going to get to break even in that amount of time. Okay, it's time to think about layoffs. It's time to think about shutting the company down or selling it and having an orderly process, right? And there's no shame in that. Most startups are going to fail. What happens during headwinds

like this is the ones that are going to fail, they'll fail like in groups, a large amount of pruning at a time. It's almost like you have a boom bus cycle in a lake. Imagine a lake that has too many fish. And then there's not enough algae. The big fish eat the smaller fish. They steal their employees. Employees start leaving the small companies because they know there's only a certain amount of runway left. And the ecosystem kind of goes through a boom bus cycle, classic boom bus cycle. Too many fish in the pond. Big fish eat the small fish. Now you got, you know, less fish in the pond. Oh, spring has sprung. Now there's, you know, a more vibrant thing. More babies are made. You get the idea. Startups need a central hub to store information and collaborate

on work now more than ever. That's because we're all living in this crazy remote world. Everybody wants to put all the information in one place, and that one place is now Notion. Documents, projects, all that stuff, it kind of goes in the same place on what you can consider a wiki. When we went fully remote in March of 2020, Notion became our internal knowledge bank. We even used it for external purposes. You know, like when we did this series on This Weekend Startups called the Startup Checklist. Well, we just put it at this weekinstarups.com slash checklist. And that is all hosted on Notion. On Notion, every team from engineering to sales can work together seamlessly, and they have 500 integrated apps, including things like

Google and Slack, collaborate in real-time and tailor workflows to your needs, hundreds of thousands of teams worldwide, are already delighting their employees with Notion. Notion is now a worldwide community of millions, and they're creating templates and tutorials, so the product is continually improving. Just go to notion.s. And use the promo code Twist, and you will get $250 off their annual team plan. That could be a couple of months for free, So it's pretty great for a growing startup like yours. That's notion.s.o and use that promo code twist during checkout for $250 off. I wonder too, actually, Yogesh, one of our noties was making the point that there are a lot of new funds.

And in fact, we see that in even in these fundraising numbers, right? That the USVC funds raised almost half of 2021's total in just one quarter. What does a potential pullback mean for, new fund managers, if anything, or does it just become harder to become a new fund manager overnight because maybe LPs get more cautious? That's an interesting question. So if you're a new fund manager, you're going to deploy your money in a down market where you have more time to evaluate companies and it's more sober and everybody's focused on revenue.

So that's great. You're not going into a market where you're an unknown quantity. You're up against, you know, known quantities and people with track records. So you're losing deals and you're getting not the pick of the litter. You're drafting in the second round, not in the first round. That's the challenge of being a first time fund manager. People don't know who you are. Maybe you have to pay a higher price to beat people.

Well, now you'll just be able to be more thoughtful and deploy your capital during a down market. And even if there is a recession, two quarters of negative growth in GDP is the official definition of that, which is possible, maybe perhaps even probable in some people's minds. You just keep investing through it. And here's what happens. If you raised money in a down market as a company, you might be able to deploy it when there's less competition for employees or marketing dollars

but there's a peculiar thing happening here Molly the economy has like sections of it that are doing really bad and that are concerning and then another section that's still crushing it tech is another section that's still crushing it so you know until we see people stop buying their iPhones or stop watching Netflix

and stop using TikTok advertisers stopped wanting to go to the internet first for, you know, marketing. Like, I'm not sure companies stop wanting to be more efficient with SaaS software. I'm not sure we're going to see dramatically less competition. And the other thing with raising funds is there's so much money on the sideline looking for alpha, looking to beat the average return. But what do you think happens there?

Okay, I'm looking at the stock market. Okay, the prices came down, but they're still high. They're on the higher end of normal. so maybe I should put some money into venture and try to find the next, you know, Coinbase or Airbnb rather than buying Coinbase in Airbnb. Maybe I should try to bet earlier. Really true because what we have been seeing is that there is so much money. And I think that's why you've seen such an increase in alternative investment vehicles

and money just sort of like looking for a home because there's a lot of it. And although the stock market was going up and up and up, it sort of, there were still this like chasing bigger returns. And if we find ourselves in a position where the stock market kind of plateaus or there is a, you know, it's sort of continued correction. I could imagine that people will be like, okay, well, this is a great time to pursue these riskier investments. And then on top of that, just in the like macroeconomic universe, I saw a poll today that, of course, I can't remember because it just like went by really fast on the internet. But that essentially said there's like a 35% chance of a recession, most likely. because we're sort of imagining like we always tend to do that the economic moment that we're in right now is going to be the economic moment that we're in a year from now.

And in fact, there are all these huge externalities, not least of which are COVID and supply chain problems. And should supply chain problems ease, then a lot of the economic factors we're seeing now that seem to be like leading us down the road toward a recession might. go away. Like, we honestly don't know for sure. And, you know, we might have like one of these recessions where there's still jobs available. Yep. And it's short. You know, it's just two quarters. And so, you know, it's, you kind of find out when you're in a recession afterwards. Like you don't even know until the time after. Right. And again, you know, the spikiness of this inflation issue and people's ability to withstand it. I know this sounds crazy, but, you know, they were talking today on CNBC about, oh, yeah, some places are, you know, going to have higher bills for air conditioning, higher bills for gas and heating, higher bills for driving your car. All of these things, it sounds crazy, can be mitigated by consumers on the margins.

So if your gas costs 10% more, you could travel 10% less. I know this sounds silly. If your gas is 10% more and you drive 85 miles an hour, you could drive at 65 or 70 miles an hour and reduce your, increase your gas efficiency by 10%. You could buy an electric car. I feel like you might mean me. Well, if you got a bunch of daughters running around your house

and they have the doors open and the air conditioner on at the same time, you know, you get the idea. But no, I mean, it's totally true. And no ways to mitigate and humans do find them. Totally. And a huge part of the reason that we've had supply chain issues is not just the literal supply chains. It's that Americans just kept buying a mountain of crap during the pandemic because they were

bored. And I mean, so like, no politician will ever come along and say, you know what you could do is like buy less and travel less and do, you know, need less to keep up with the Kardashians. You could just live your life and enough is as good as a beast because that's like the apparently the worst political message you could ever send, but that is also 100% true. It's supply and demand on the emotion side.

As about one example, I wanted to get like an SUV capable of like, you know, before the cyber truck, really, you know, eating up the snow in Tahoe. And I, you know, I was like, I'll just go buy this new defender or maybe I'll buy a Wrangler. They just weren't available for the last two years. And they wanted 15K of a sticker.

And I was like, you know what? I'm going to go with my Model Y and my Model X and put snow tires on them. So I took a much cheaper choice, was very happy with that choice. And now I'm sitting here with sometimes. I'm like, you know what, I'll wait another year or two. I can get another year or two out of this car until the cyber truck comes. So I'm literally like, and here you go, substitute good.

Producers is on fire today, by the way. If you're not watching the video, they all say it was Goldman Sachs. They went and found that poll immediately, the 35% one. So yeah, this substitute goods. Yeah. And microeconomics, two goods or substitutes if the product could be used for the same purpose by the consumers, this, that is. the consumer perceives both goods as similar or comparable,

so that having more of one good causes the consumer desire less of the other good. So you can have your desire filled another way. We saw this, you know, people during the last recession, I remember this very acutely during the 2008, they were talking about how Europe was suffering so greatly after the great recession. And I was like, why is Europe getting hit so hard? It's like Americans are looking at the, you know, it's not cheap to go to Europe in the summer. And a lot of Americans do that or they try to do it once every 10 years.

And it's $25,000 to bring a family over there. $50,000. You know, five or six people, plane tickets, hotels, trains, food. It's a big ticket item. So let's just say some middle class families like this is their Yolo trip and they've allocated $4 or $5,000 per person to go to Europe, right? That's what it cost, $2,000 for a coach ticket in the summer. And so they got $25,000.

And they're like, hey, you know what? We can go to the Grand Canyon. We can drive. We can rent a Winnebago for 10. Bank to 15. Not spend the 15. Let's do that. And you have a lot of staycations occur during that time period.

And people had just a good at time. So I think that's what we're going to see a little bit of this, like, creative adaptation. And it's not like we don't have jobs in a little here. So what that does is. And salaries have gone up. Real salaries have gone up. Big time. I mean, inflation has too.

And it's eaten up a lot of it. but still, like... Yeah, I mean, so it's not like the economy is... Like, it's not like it's a fade accompli. Yeah. That we have to have this happen. Humans adapt. And the fact that we're in Americans complaining about these supply chain issues,

but we're not changing consumption, it just tells you something. Like, if people are complaining about their gas bill, but they're not driving less or driving the speed limit, or they're not buying high gas mileage cars, it's like, You're not buying high gas mileage cars. You're still buying trucks. Obviously, you're not doing that bad if you've got the audacity to buy a 20 mile per gallon car when 50 mile per gallon cars are 55s are available for the same price or less.

Which is what Europeans do. They buy the, you know. So I think that's what, from what I understand, you can't buy an EV now. So because of all those gas problems, $7 gas in California, the EV sales are going bonkers. Apparently, that's true. Yeah. Used ones. Used ones.

I know. I just had a coffee with someone. I was like, yeah, just get like a Kia Niro or a Hyundai Kona. And she was like, you're adorable. Have you looked for one of those lately? And I was like, no, luckily for me, I locked in my EB a couple months ago. Because yeah, you cannot get, you cannot get them. By some estimates, over 90% of startups will go out of business in year one.

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validated to sign up and access the benefits. Nope, it's truly open to any founder. And it's not about who you know. Any founder at any stage can get up to six figures of value by signing up at aka.m. slash this week in startups. Once again, aka. dot MS slash this week in startups to get six figures in benefits right now. When you get to a certain point, you've lived through these super cycles, you kind of are at

peace with them because it's not like I'm going to stop angel investing in companies. I invested in Uber right at the bottom of the market. I invested in, you know, calm at the bottom of the market. Yum, yum. Yeah. And just keep investing in great companies. And the earlier you are, the less it matters. Because at the inception point, like a 10-person company with $2 million in the bank,

like, does it matter what's going on in the stock market? No, it matters what their five customers think of their product. They just have to focus on their customers. So block everything out if you're an early stage founder. And if you're early stage investor, you can look for value, right? Look for value. I think that's one of the things I'm going to do over the next year or two, not to tip our cards too much. But in our internal meetings, our team has been looking at our existing.

portfolio and is anybody in our existing portfolio tripling their revenue year over year? If they are, why are we investing more money in a company we already know? If we know that company's good, we trust that management team, and now they're thinking about doing a series A or they did the series A, they're thinking about doing a series B, maybe we can sneak another million or two million dollars and own another 5% of the company or whatever it is, 2%, 10%, and just, you know, as we say, or SACS has said, ride your winners. I think that's a really good batting strategy. Is that it's a zag, right?

Everybody's zigging to early stage. Everybody. You see Tiger taking these masks, like, because it is hard on a relative basis to make back enough money on a massive investment to get what your investors want. And it's easier in some ways to do it early stage. So everybody's zinging early stage and you're basically like, let's zag to the middle, to midstage, which and, you know, a version of growth, which I think is brilliant because so many startups are going to all of a sudden, I think, come out of early stage and there's

going to be a trough. Certainly, I've been talking to climate tech investors about this, how there's like a little bit of a trough between you can have a million dollars and you can have 50 million dollars. And right in the middle is where there's like a little bit of a death zone. Yeah. And so a great place to be. Let's zag over there. Well, if you think about it like being taking a head coaching position in the NBA, you know, if there's a team that's, you know, in the seventh or eighth seed. They got some draft picks. They got cap space.

They got to the first, you know, they got to the playoffs for the first time. It's like, huh. Well, there's an intriguing prospect. Like, they did some things to get there. They're not there yet. They're not a championship team yet. But maybe we coming in could help make them a championship team.

And so in that analogy, I think looking for companies that it's not a clear winner yet, but they're showing signs of being a winner. So let me explain what that means. They doubled their revenue. They added a couple of good executives, but they need to add more executives and they need to triple their revenue.

Okay. Tripling's going to be really hard, but if you're already doubling, it's not that much more. So, okay. And, oh, you got two good executives. They need three more. Okay, how did you get the last two?

Oh, you worked your ass off to get them? Huh, I wonder how we're going to get the next three. All right, you're going to have to work your ass off to convince people. Okay. So we're going to have to work harder and you're going to need a little bit more resources to to work harder too and work smarter. Great.

It could be a great investment. So long way of saying, if you're out there and you went from 500K to a million in revenue this year and other VCs are saying no, we might say maybe. Let's figure out if you have a way to do better than doubling your revenue. You have a strategy that you think could work. Sometimes it's just stopping doing something that's not working. A lot of times I'll see a comprehensive. with like they got four projects going on.

I just had this conversation over the weekend with the founder I love. And they've got four business models they're pursuing. And things are growing, but none of them are, you know, it's kind of stalling a little bit. And I was like, if you could only do one thing, I did the Franks Sluutman, one thing. What's the one thing? And they were like, this marketing channel. And I was like, you want to make a plan for taking all the budget of these three other things and then putting it in the one thing? They're like, we didn't think about that.

I was like, yeah, I know. That's why Slupt Men is, you know, Snowflag is doing so good. So I just, I pulled the sloop. I need to pull a sleut. I have a company. I need to pull a slew with it. I'm not even on a board or anything. This has been, by the way, a bonus episode of VC Sunday school in some ways.

And also maybe cut that part out where we just invented a new strategy that's going to crush all those other. Here's the other thing, too. When you think about you're very competitive, you know, and that's great. It's one of the reasons why I think it's working out so well with you here. You have a little bit of that fire. We don't have to beat everybody. We need to look at our process and then figure out how we can just be 20% better in five different things and then we're twice as good. Yeah.

And so, you know, the New York Knickerbockers two years ago got these. I'd love to have this company on the pod, by the way, if we can find back into it. But there's a company that's incredibly expensive that puts cameras in the, the practice facility, and then they can work on your arc of your shot and your mechanics and get people to be better three-point shooters through this AI combination technology that analyzes your shot. And like all the nicks, like every single nick on the team got like between one and seven percent better at shooting threes, which just meant collectively they just, at some point they,

two years ago when we had our big run and got to the fourth in the east, they had just become like really dynamic at hitting threes and these were people who were not three point hitters. So what they did was again, talking about my like hasn't figured it out yet, they just said, what if the entire team got slightly better? Right. And we just tried to make everybody better at threes. That was their strategy. So we're looking at companies. Okay. They're shooting three is okay. Okay. Their growth is okay. It's not great. Can we make okay good or maybe some okay and good people good and great? You know, just try to move the whole cohort over. You see that with free throws as well. Some folks are a free throw specialist for

the teams just to make them slightly better. I love that. I mean, granted, it is weird. I wish I could go back in time and tell me that there would be a point where Jason Calicanis would tell me, hey, you don't have to beat everyone. You just have to be 20% better than everyone. Because I didn't totally see that coming, that I'm like the gunner in the room where it's like, no, no, no, I got to kill everyone. And Jason's like, no, no, no. We just, the way you win is to be more strategic and thoughtful. Like, I'm just saying, it's a minor role reversal.

At this level of what we're doing, this big of a team with this much deal flow, like it's decade two of our investment organization. It's going to be process, a sustainable process. Yes. That gives us some, you know, massive compounding advantage. And we know what those compounding advantages could be. One of them is this very podcast. So can you keep compounding your advantage, right?

And this podcast, you know, reaching more people and people saying, hey, we want to, uh, we'd like to work with Molly and Jason. And then, oh, yeah, you'd like to come on the pod with Molly and Jason. This kind of is just but one of like maybe six or seven advantages we could, you know, keep improving, right? Yeah. By the way, Noah, um, basketball is the name of the company. And I actually interviewed Dr. Rachel Marty Pike. She's a data scientist who like came up with this. She would be, you should have her come to all in.

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There's an interesting development occurring on the heels of, of the whole conversation about whether Elon Musk is going to buy Twitter and how the offer to buy Twitter has exposed Twitter in so many ways, right? We talked about this last week, about how it's exposed the business model, the sort of like more abundant state of things. And also maybe the fact that it's not that useful for people or that it's just this like journalism playground that is not good for journalism. So yeah, Dean McKay from the New York Times say to reporters there, whatever that weird thing was that he said tweet less but maybe don't but like talk to people on the phone

pick up the phone do reporting yeah so then today Monday two developments one Chris Licht who is the incoming head of CNN he's the guy replacing Jeff Zucker and he was he's the guy who sort of revived the CBS morning show and maybe also

protected Charlie Rose for a while but whatever unrelated Chris Licked is starting his job at CNN on May 2nd and announced that that will be his first day in the office at CNN and his last day on Twitter saying, quote, Twitter can be a great journalistic tool, but it can also skew what's really important in the world. I'm logging off and looking forward to working with the incredible team at CNN.

And also today, Chris Saka announced a Twitter break as well. saying if there was ever a time to take a break from the site, who-hoo boy, I'll miss a lot of some of a bunch of a handful of many of an assorted group of you. He wrote. I'm about to start mine because I'm going to be finishing the book this summer. And, you know, I'm getting ready for that for the spring.

And, yeah, I'll probably do my little curtail for three months or something like that where I just go into take it off my phones and only use it on the desktop. And then I'll have the producers, you know, fire stuff off through buffer or whatever when we want to promote the show. But yeah, I think a break is healthy. It's an addiction.

It's a real lean forward. And if you're writers, if you're doing journalism, you can put a lot of your effort into Twitter and then not into your podcast, your book, your fund, your company. So there's a time to dial it up and time to dial it down. If you're a nobody and you want to meet everybody and build a network,

by all means, be on Twitter for 10 hours a day. We've seen all these new fund managers or all these new CEOs leverage it to become known, et cetera. And then there's a time where you actually have to do the job. People criticize the fast CEO, too much tweeting, not enough on the company. Sure. I mean, I think if you go back on it and recapture one hour a day of Twitter time, great. But maybe in the beginning, the one hour of Twitter time or like maybe spending an extra

hour on Twitter would have gotten him more employees, would have gotten him more customers, would have gotten him more venture. So there is the perfect example, like Dom from Fast or Macs. the VC, like there are people who have used this to build a crazy network, get a ton of attention. And then there's people who already have too much attention like Chris Saka, who has to deploy hundreds of millions of dollars into carbon and maybe there's not enough entrepreneurs, or maybe there's, he's wasting time on Twitter that he could deploy meeting with his founders and helping them become more successful.

Or maybe it's just making you furious and ugly cry on a Monday morning and you have to stop and ride the bike for a while because it's like also, you know, I mean, I don't, I think there's we're starting to confront these real questions about whether it is good for our health, our discourse, and our news. And I'm really curious to see, like, I wish there was a way to measure what would happen to, let's say, CNN, right? If everybody got off, if every reporter got off of Twitter, would all the stories change? Because you do start to think that there is a truth that isn't there. I think there's a lot of things that journalists find themselves shocked by because you live on Twitter and you think, oh, everybody knows this. Here's an idea for Twitter in the New York Times.

create CNN.com or slash chatter or CNN.com slash chatter and tell everybody we're going to take through a 30 day experiment. We don't want anybody in our company spending any time on Twitter because we're putting our content there. We want you to spend your time on slash chatter. And we're going to do this. It's going to be a hundred day challenge. Nobody is allowed to tweet. And we're going to do it for 100 days. I'm going to see if anybody goes to this page to watch our chatter. We're just going to reply to each other and putting up a message board there. we're going to have the community there. Let's see what happens.

Yeah. And you know what? I think it could be quite compelling. It might be really compelling to see certain folks just chatting it up over there as opposed to on Twitter. So sure. And then, you know, it would certainly be better for people's mental health. I think the Twitter bot solved problem getting solved.

I think it would make it 50% less arduous or annoying to be on Twitter. It's 90% of the hate I get or 90% of the, you fat Greek, you bald and bastard. I'm like, mom, stop. Thank you very much. Good one. But also, what? That happens? Well, no, people will come at me.

And it's always in that little bottom section, you know, the little bottom section, like other stuff that might be a little crazy. And I'm like, yeah, I want to view that. Yeah. Show me those. And it's like, oh, click. Yeah, no click that. If you get rid of the bots, or we start moving people as we discuss.

last week to only my followers can reply. Right. I think you will change forever how it feels to be on the platform. I think the communities are starting to be really impactful. I'm noticing people wanting to because what people build on Twitter is communities of people that they like to talk to, right? There's all kinds. There's insert noun here Twitter.

There's like epidemiologist Twitter and there's law Twitter and there's black Twitter and there's lithium Twitter. I know this because I'm in a Twitter community that's all of. about like lithium and band battery resources, not the, not the mental health treatment, but the battery mineral. Oh, the band. That's a good. I think it was good of my era.

Yeah, totally. Or was lithium. No, that was the name of the Nirvana album. Oh, those names of Nirvana. Isn't there a band, yeah? I don't know, probably. I'm sure there is. But anyway, I'm definitely noticing that although Twitter was late to the game and the idea

of, you know, would like God help us Facebook groups, which went horribly wrong, but Twitter communities, people are like, oh, I. I'm into this because it's an actually useful way to engage with content that you want, with people that you know are smart by curating a specific community. Oh, now the Nodies are like, what about sodium batteries? I know I'm up on, I'm into all the battery tech. Bring me your battery tech. It's really interesting to me to see the This Week in Startups community on Twitter,

which has 691 members. You know when these, and then the All In Podcasts, one is 3,000 now. When these communities start getting spammed, that's when you know that they have value. Because the spammers are like, okay, well, there's a place to get some action. So all-in podcasts got hit with porn spam over the last two weeks.

But what do you mean by value? I feel like the value actually is like the teeny little lithium and batteries, minerals extraction community that doesn't have any spam. Well, you, it, there's enough traction. It has enough traction that spammers are drawn to it. So I put it on, you have to be approved to be a member. And then I turned that back off because it was like once one spammer finds out that there's a community that's open, boom, boom, boom, boom, boom, they all go in.

And so we had both communities get spam. This being startups got spam by somebody just trying to like do links to their like, you know, content farm or something. And so I was like, okay, well, that's easy to spam, easy to fix. You just give the notie gang where you just give fans of the community and give them moderator access. I agree. these things are going to become really nice little communities. I like the idea of people being able to watch in on them,

but not participate, or you can join them. I like these, like, get more rights over time, so I think people should join them. You should be, you have to read it for five days. Then you can post,

and it sends you a little note, hey, you're now allowed to post. You've visited the community for three days. You've read a bunch of tweets or something. Was that? that wasn't there was that part of the deal with dig back in the day that you could build up like some karma and then you could get more the more points you got from upvoting or commenting or something then you could start to become a am i making this up was there something like that i think people had tried those as like

um batten down the hatches moments so if the site was getting too much spam they would just hit a button where only people who had been on the site for more than six months could post right so when you We get these like farms and stuff like that. What I did on inside.com, which is very much a beta product. If you go to inside.com slash new, maybe you can pull it up here for people who are watching. This was the approach I took. So if you go to inside.com slash new, what we find is almost everybody who comes to a social news site, which is like Reddit, hacker news dig.

What you'll see is the first thing they do is they start submitting press releases. And so see this one says low quality score. Oh, yeah. Look at that. Love it. So we actually publicly put why it was rejected. So we kind of trained folks. And then if you look at there, there's a comment there.

And if you click that headline, you would go to the story. And you could see the guy Frank Vito from Bull Capital did this. And I just wrote him back. So there's a comment there. And I wrote to him, hey, listen, we're not doing press releases right now. We may do a press release thing in the future. Now, if you go back a page, you'll see most people will just, it keeps going down, see self-promotional. People come.

They try to use the site for self-promotion. So scroll down a little bit more. And so you can kind of shape people's behavior by putting that self-promotional. Then they get a note, hey, it was self-promotional, put something that's not about you. And then what will happen is maybe one out of three will become incredible contributors to the side. They're like, oh, okay, I thought I could send my own stuff. And then they realize, like, oh, somebody else could submit my stuff. So I could ask a friend to submit, but I don't have to submit my own.

And you kind of just change the incentive. And so I think that's active real names and active sorting of new people, a moderation of new people. Then what happens is if we accept them and we move them from new to the main site, if you get to five accepted stories, we're going to let you just post to the main site.

So you kind of earn. And if you just do that really well with the first cohort of people, maybe you can set a tone, I think. But communities take active management. That's what I've learned. And there's no active management. management on Twitter, there's just, yeah, this anonymous, anonymous names just causes chaos.

Yep. Agreed. Well, speaking of ramifications, and I want to go to our startup of the day because I'm super excited about it, but I think this Alex Jones story is really worth talking about. And the reason I would like to talk about it is because I think it's really a great example of the law and policing of content, both working. So Alex Jones, for those of you who are. don't know. And many of you

might actually not know because he's been one of the folks who's been D-platform, I think rightfully so. Because this person is horrific. He might be funny or entertaining at times. Obviously people are not all one thing, but this is from Reuters in the fall of

2021. He was found liable for damages in a trio of lawsuits last year filed after he falsely claimed that the 2012 Sandy Hook School Massacre was a hoax. Each of the plaintiffs turned on the settlement offer in court documents. The so-called offer is a transparent and desperate attempt by Alex Jones to escape a public wrecking under oath with his deceitful profit-driven campaign

against the plaintiffs. The memory of the loved ones lost to Sandy Hook. And he was deleted off of YouTube at 2018. Now, if you're YouTube, there's no world in which you want Alex Jones doing conspiracy theories about parents losing their children at Sandy Hook and calling it a false flag. I mean, this is not why you created the platform. Is it freedom of speech? to do conspiracy theories, I guess there's a way to do them where like, what if this happened,

right? But, you know, YouTube gets to make a decision about this, and then the law gets to make a decision with this. Law takes a long time, right? But there are laws about what you can say and what you can't. Alex Jones is suffering from that

because saying these things causes massive emotional damage to these people, and judges are finding that correct, and he is going to be bankrupted, but that might be a five to 10-year process. and not everybody can afford the fees to do it. And then the platform also, you know, what was it, four years before all these judgments came down?

Or 2018? Yeah, so three, four years before it came down. They did the right thing by deplatforming him, or at least the right thing for YouTube and the business they want to run and not have advertisers near insane stuff. But Alex Jones has still been publishing on his website. The web is still open.

He can still do his website if you want to Google him and find him. So I don't know. I just thought this was like a good example of both things can work. with an extreme person. And sometimes the law has to handle something and the platform maybe doesn't have the, you know, doesn't need to get involved, right?

If I'm like, I think Nancy Pelosi, Donald Trump, whoever's an idiot, I would never vote for them. Like, the law doesn't need to get involved from that. Right. But there is, speech does have legal issues that come up. Oh, yeah, absolutely.

And I also, and I think this is an example of the distinction that we've been trying to make between speech and reach. right? Like, you can go anywhere you want on the internet and say stuff. You don't have an unfettered right to reach people with that stuff, like, either algorithmically. And I think the key in that sentence there was when they talked about the profit-driven campaign, right? Like, he doesn't say this stuff because he thinks it. I mean, there may be a version of reality where Alex Jones is so far gone that he believes all the weird alien that he says on the podcast all the time and thinks that Democrats are aliens and they're eating babies. And, you know, But what really happens is that algorithms promote this stuff. And so it starts out like baby crazy. And then it gets to full on Sandy Hook conspiracy that is causing people real harm.

I mean, parents who had children murdered in that shooting would be getting death threats and have stalkers showing up at their house. And it was because of, you know. So I think this is like a really interesting example of where you, one, can take away the financial incentive with deplatforming. Like, you're just not going to make money. you don't have a, you don't have the right to like reach whoever you want and have our algorithm promote this. Yeah. And then the law can do its work,

which also takes time. But yeah, I mean, it, like I think what you just said about how communities take active. Yeah. Shaping is like, that's really what this all is about.

Like a community where nobody does anything. And nobody ever intervenes and nobody stops the worst behavior gets, turns horrible. It's horrible. And that is why, by the way, ironically, you see people leaving Twitter because they're like, this is a cesspool

of like misery, outrage. Yeah. You know, an algorithmic promotion. I'll say, I'll give Saka, if he's going to leave, I say he will tweet again within I'll set the over, under out a hundred days. Take the over the under, 100 days.

Can he last? When will his next tweet from his account be? I'm going to say under. A hundred days? You're going to say under. Okay, you took the under. Yeah. Well, there we have.

It's hard to leave here. It's hard to give up. And to your point about how pernicious this problem is, according to testimony, by 2014, Alex Jones was making more than $20 million a year in revenue. Which means the more outrageous the stuff you say, the more subscribers you get, the more the algorithm picks you up, the more attention you get. And since these platforms give the ability to monitor, potentially and they might have

not let him monetize you know I know he was selling product right like he was selling supplements Oh yeah there's still is there's merch there's a whole you know There's a whole different ways to do it So it doesn't have to be the platform giving you advertising To do that is the point

But the more crazy you are The more You know the worst predictions you make The more outlandish the predictions you make The more outlandish the nonsense you do With regards to conspiracy theories The more viewers you get the more monetization you can do.

So it became a playbook. It is a total playbook. That's such a great way to put it. And that's 100% why I think it's so important to focus on the technology that amplifies this speech and encourages this speech and the financial incentives that make the speech get so much worse. Yeah. Yeah.

I mean, and these things could be, you know, algorithm one. You know, let's call it the, you know, delightful algorithm. You know, you can pick your algorithms like. you pick lenses is the eventuality for Twitter and for Facebook, either through regulation or through opportunity, because it would be a better product. Or consumer demand. Yeah.

Let's say, you know, you start with a delightful one. And then you stumble upon an Alex Jones tweet because somebody sent it to you. And you're like, wow, I never saw this. And it's like, it says on Alex Jones's tweets, you're using a delightful algorithm. Delightful algorithm takes out people who have. have a history of doing conspiracy theorists or violent language or whatever as per, you know, this standard. And if you would like to, you can pick the chaos algorithm.

Right. We'll show you the most chaotic, insane joker-like people in the world. That's what I want. I just want, you know, when you have a, and now you have. Yeah. And it's just let me scroll left and right. I can see the chaos. I could see the delightful.

I could see the polarizing, I could see the funny, and the algorithms can rank funny. The algorithms can rank retweetable, heartwarming, whatever. And just let people start to understand their algorithms. I think that's going to be what the next decade is about. Tell me why you're showing me this. And let me change that algorithm. I want control over what you're showing me. Consumers understand it now.

Isn't that amazing? Consumers had no idea what was happening. They had no idea what Twitter was showing them or Facebook. And now they're like, I know you're f***ing with me. I don't want you to fuck with me anymore. And I know you're just doing it to make money. Yes. There's no rhyme.

You are just doing it so that somebody will stay here long enough to click an ad. Right. Or on Instagram. You ruin society so that people would stay here long enough to click an ad. Congratulations. Or we want to increase our time on site at Instagram, our time in app. And we know that you've been looking at all. these thin people and you hit the Thin Inspiration tag, you've obviously got an eating disorder.

Well, let's double click and triple click on that. Let's use that as our vector for keeping you on the site. Let's feed your anxiety about your weight. I'm not talking about myself here. I mean, I'm probably a weight loss, but I'm not. Because eventually, you'll click an ad. Eventually, we'll show you an ad for some pants. Like, there's a pant that, like, has a buttlet.

I get, I literally get ad for Spank's pants. Great. Thanks, Instagram. I think they're doing all women in their 40s. That might be, it might not be. I think so too. That actually stopped too because it's just like 40. That one stopped though because all I ever click on other jewelry ads. So that's all I get.

But yeah, I mean, I completely agree. I think we have to like and we just have to keep. This is why at least I insist on this laser like focus on the technology and the money. Because I think the speech conversation is such a distraction. Because the speech wouldn't have ever gotten so bad. If it didn't, if it wasn't so effective. of the algorithms. All right.

Let's do our startup of the day. Let's do it because, ironically, our startup of the day is trying to solve for some of these problems. Absolutely. The startup of the day today is Be Real. And I've been using it, Molly, producer Rachel, Chief of Staff Press, are all fans who Be Real. Explain what it is and how it works.

And we'll pull up some screenshots and videos while Molly explains it to everybody. Yeah, it's a social media app that is, I was calling it the wordification of social engagement once a day, be real, sends you a notification that's like, hey, what are you doing right now? Take a picture. And you stop and you take a picture. And it posts, and this is an important thing for you to know for people who may have accidentally focused, for example, or posted a picture of like their bank account up on their computer screen. It posts a photo from the front camera and the rear camera simultaneously because it just shows what you're doing in that exact moment. And you can't, what's so interesting about it is one, it only happens once a day.

really meant to be like, what are you doing right now? And then, too, you can't see any of your friends posts until you post. So it doesn't have that sort of just like go and scroll up and down and feel bad about yourself. And you can only see other, you can only see your friends. You can only see your friends if you do one. Yes. So it's participation gating. I just made that up, but you have to part.

You have to give to get. Yep, exactly. You have to give to get. You can't just go there and browse and be like, my friends are doing so many cooler things. Right. Because really all your friends are doing is exactly what you're doing, which is like looking at their computer or working or maybe out on a walk.

You can't be real? The first time I did it. Yeah. I was like, okay, let me go to the window. I'll take a little selfie of myself. I'll look in the camera,

put the trees behind me and I don't have to show this, this absolutely mess of a bedroom. I take the picture. It's like, oh no. The main picture is the mess of a bedroom. There's a title of a picture of me. I was like,

okay, delete that one. How do I delete this? Oops. They really need to explain that to you. But it's cool because you can tap. Like, you can tap to make the front camera fixture bigger. Oh, you can. And you can post it that way.

There's sort of like little things that you can. But for whatever reason, this is totally working. I mean, I know a new social network or a new thing comes along like pretty often. But this one, monthly active users on Be Real have grown 315% since the beginning of the year. It ranked fourth in downloads in the U.S., the UK and France for Q1, 2020. VCs are circling this thing big time. Of course. Like currently, there's no.

obvious mechanism for money making. I'm sure that there will be ads at some point. Or, but right now it's just fine. I think right now we're all into it because it's just a fun thing that takes no time. It's super quick and easy. And yeah, delightful fun.

We're all positive. No ads. I think just having and not have ads is the key. Yeah. Because that screws up the whole incentive. And then you can just make it so maybe like filters or videos when they, because they don't have, it doesn't seem to have.

video yet, but maybe they'll make video a premium feature, or maybe you could have groups as a premium feature, or you can have so many people in a group, or you can be in so many groups, or maybe there'll be a dating aspect to this, you know, where if you want to be part of the dating pool, then you pay to DM people. So, you know, like, maybe like meet new people could be a tab on it. Yeah. And if you're into meeting new people, that's your thing. You pay five bucks a month. Yeah. Part of the, you know, wider pool of people in your area. So, but congratulations to the people who made it. We invited the founder on, but I guess they're not doing press, which means they're in the middle of closing around. I can translate a VC for you. All the VCs are

circling. When they say they're like really busy building their product, that's what it is. Nobody's busy building their product, too busy building the product to come on this week and start and get more users for their product. What's happening is they're deep in negotiations for a month to round. So I bet they raise $20 million for 15% of the company. You'll see 100, million dollar round. When something gets this kind of, here's the thing, it's very rare and social for something to hit a chord. And this hit a cord, 99 out of 100 do not, where maybe it's more like 499 out of 100, 500 do not. So this is like one in a thousand, one in 500. When it does happen, the VCs are like, oh, product market fit has been met. Here's 20 million. We're placing a bet.

Interesting. Yeah, it's like you got two beautiful cards in. I guess it's true. It's like the last time this happened was Clubhouse and look how much it raised. So you're probably right. And if you were in the angel round and you paid $100 million, you're going to be up no matter what. Now, if you pay the billion or the $4 billion, you're not up on the $4 billion.

You might be sideways on the billion. I mean, if it did get sold, it could be low billions, I guess. We'll say, I don't know. Try it before it gets ruined. It's really fun. Hey, everyone. Producer Nick here.

I want to tell you about the SaaS syndicate. If you're a founder of a SaaS company with a product and market, our investment team wants to talk to you. Head over to the syndicate.com slash SaaS, S-A-A-A-S, to apply to raise from the Sass Syndicate. And you can join Jason's syndicate of over 9,000 accredited investors at the syndicate.com. Producer Justin here, know a cool startup? Check out openscouting.com, where anyone can refer a startup to our investment team here at launch.

Even if you don't know the founder, if you're the first to flag a company for us and we decide to invest, you'll get 5K in cash or 10% of our carry. everybody, producer Rachel here. Are you an early stage startup that has product and market, some traction, and are looking to raise at least $500,000? Apply today to Remote Demo Day for your chance to pitch to over 9,000 investors in Jason's syndicate. submit your application at Remote Demoday.com. Our next event is on April 27th. And if you want to learn how to invest in startups from the world's greatest angel investor, and no, we're not talking about Chris Saka, then head to Angel. University to apply. The four-hour workshop costs $300 and all proceeds are donated to charity.

To date, we've donated over $175,000 to various charities, and you can see the full list at angel.university slash charity.