This Week in Startups - SBF buys the crypto dip, hedge funds short Tether, VC funding down, flying nuclear cruise mockup | E1495

Episode Date: June 28, 2022

First, we dig into the crypto contagion where FTX CEO Sam Bankman-Fried is stepping in to backstop crypto lenders (2:56). Then, we check in on the billions of dollars sitting in SPACs- remember those (39:27)? We do a quick hit on the venture market drying up in Q2 (54:27) before we get into our We Live in the Future: a mockup of a SkyCruise luxury airliner that uses nuclear power and never lands (1:16:36). (0:00) Jason and Molly tee up today’s show! (2:56) FTX CEO Sam Bankman-Fried seems to be acting as the crypto industry's personal backstop right now (11:25) Embroker - Get an extra 10% off insurance for your business at https://Embroker.com/twist (12:38) Reaction to SBF crypto bailouts/loans (17:47) Traders short Tether: According to WSJ, multiple hedge funds have shorted Tether in trades worth hundreds of millions of dollars (22:24) Lemon.io - Get 15% off your first 4 weeks of developer time at https://Lemon.io/twist (23:41) Tether’s CTO’s tweet storm (33:52) Thorne - Personalized, scientific wellness. Go to https://Thorne.com/u/TWIST (35:08) Gary Gensler clip: “tokens have key assets of securities besides bitcoin” (39:27) Well over $100B sitting in SPACs looking for companies to invest in (54:27) VC funding is down to the lowest levels since 2020 (1:16:36) WLITF: SkyCruise, a flying hotel that never lands (1:23:30) Coming up on This Week in Startups

Hey, everybody, it is Tuesday. Yes, we're just starting to climb the mountain. Just crawling our way up. This is pitch day. This is the hard day. We got our crampons and our ice picks out. And we're going to make it. Rocks are falling on our heads.

We're going to make it up this hill. And this hill is a big one. Today, we're going to dig into the crypto contagion. We have possibly a rescuer or maybe a vulture situation happening here. FDX CEO, Sam Bank. Ben-Freed is stepping into backstop crypto lenders and investors and Blackfire rallying to raise funds to avoid having their equity wiped out by FDX CEO Sam Bigman-Fried. Yeah, I mean, when the market comes apart like this, there are opportunities and people

who have a lot of cash. From what I understand, Sam has a big cash position that he may have sold crypto at the right time and built a cash position for just this type of moment. then we're going to check in on the billions of dollars that are sitting in SPACs. So as we remember, my friend Shamath had done a bunch of these SPACs, and then a lot of other people came in. Maybe their upwards of a thousand SPACs were created. Well, they have a time limitation on them.

And so we're going to talk about what happens if the IPO market doesn't open to all of those SPACs. Yep. And then we're going to do a quick hit on the venture market drying up in Q2. And who could be disproportionately affected by that? And then, of course, start up of the day. And everybody's favorite, we live in the future. Yeah, I mean, I saw this crazy mockup of the nuclear airliner that stays in the air for years with 5,000 people on it. Can't wait to talk about that.

So it's going to be a great show. It's going to be a great show. Stick with us. This week in startups is brought to you by Embroker. Embroker's startup insurance program helps startups secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off of traditional insurance today at imbroker.com slash twist. While you're there, get an extra 10% off using offer code twist. Lemon.io.

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To get started and take 10% off your first order, head to thorn.com slash you slash twist. All right. Let's get right into the crypto collapse already in progress. Updates include a new hero has arrived on the scene. FTX CEO Sam Bankman-Fried seems to be acting as the crypto industry's personal backstop right now. He is buying the dip big time and possibly some companies along with it. The big news Monday yesterday was that Crypto Lender Voyager Digital issued a notice of default to three arrows capital, which we talked about on a previous show after they failed to make a loan payment of 15,250 Bitcoin, roughly $300 million at current prices, and $350 million in USD for about $650 million total.

That's what they owed. They could not pay it. Voyager is publicly traded on the Toronto Stock Exchange, and then after this default, its share price fell more than 60% when it announced its exposure to three arrows capital. So to restore confidence that it's not going to go bankrupt, Voyager announced that it's drawn $75 million of this emergency $200 million credit line that was provided by Alameda Ventures, which is an arm of Alameda Research, which is a hedge fund founded by Sam Bankman-Fried, SBA. So Voyager was making loans to three hours capital. They had a bunch of leverage from what I understand. They get wiped out.

Now, Sam wants to buy it. And I'm wondering what he is buying. What is the core business of Voyager? Voyager is, let's see, well, it appears to be a lender. Lender, yeah. Of crypto and probably cash backed by crypto. Yeah. Let's do some of its numbers.

What is he going to buy? That's what I'm wondering why he wants it. I understand why he wants Robinhood. Right. I wonder if he wants its assets. Does he want its crypto assets? So like as of June 24th, Voyager had 137 million dollars of cash in crypto assets on hand. In Q1, it had a net loss of $61 million on revenue of $102 million. So the only thing I can think of that he might want is the crypto assets. Yeah, but he could just go buy those on the open market. So that was the one I couldn't figure out exactly what's going on here. Maybe some folks in crypto could explain what is the asset he wants to buy. buy here. You know, I mean, it's not a form of charity, obviously. If he's giving him this money as a line of credit, he's going to get something for it. I mean, do you think he just wants to keep the ecosystem healthy, though, like make sure Voyager doesn't go under? Yeah, to what end? I mean, if Voyager does go under, how does that affect him is I guess what I'm wondering? So, you know,

this is one of the things about this opaque industry, you know, and when you see somebody make a a major bet here, like this $250 million line of credit or $200 million line of credit, why would they do that is, you know, what I'm trying to figure out here. Because if it's because he wants the crypto assets, that's what can he just, he, Sam runs FTCs in exchange. You can just buy more Bitcoin or Ethereum. So. Sure.

But you could also, if you go with your contagion theory. Yeah. And Voyager goes under and somebody else goes under and somebody else goes under. And then it just takes this, it creates this huge. cascade that makes the whole system go to zero, he might be trying to say strategically, these are important cogs and I need them to stay functioning so that this ecosystem continues to flourish so that I make money on all these investments. Yeah.

So this is all related to that three hours capital and they provided a loan to them. So I guess this contagion is three hours capital to Voyager. And then I guess the theory of Sam is backstopping it for some reason to stop the contagion train. but still hard to understand. Voyager earns money by loaning out cryptocurrency then taking a spread fee on buy orders. If they buy crypto for less

than what an investor expected to buy it at, they take a fee. Total verified users on the platform were 3.5 million. So that's what it is. Voyager has a platform of users. So this is starting to make sense to me. What Sam is trying to consolidate

is maybe the user accounts. So he probably thinks crypto is going to rebound. This is 3.5. million user accounts. There was the reports that he wanted to do a takeover of Robin Hood. They have upwards of 20 million accounts. Now you have 23.5 million accounts.

I don't know how many accounts FTCs has, but maybe he's going to go around and just consolidate accounts across all the crypto accounts that are available to him to buy. Maybe. That would be a better theory, maybe. I mean, I think you could do either, right? I think either of them is reasonable. Either one, he's trying to keep this ecosystem alive because he, has a massive amount of capital invested in it.

And, and, and, and, and also, he can keep this ecosystem alive and start to lock up everybody who is part of it. Yeah, consolidate the customer. Right. Yeah. So if you can, if the math would be, if they have three and a half million, you could actually do this back of the envelope. If he gave them 200 million, they got three and a half million accounts, you could actually

put a value on the accounts. Let's say he expects them to default on this 200 million and he's going to the majority of the business? Because when you give these loans, the asset is the business, the user accounts, the IP, all that. So maybe he thinks

he can convert these credit lines into ownership, which is typically how they would work. You would default on them and he would get the asset. That is the perfect setup for the second part of Sam Bankrenfrize activities here,

which is that through his other venture FTX, he has agreed to provide a different distressed crypto lender, BlockFi, with another revolving credit facility, $250 million in this case. And then Coin Desk reported that Anthony Pumpliano, otherwise known as Pomp in the crypto world,

is trying to gather a group of investors together to put together an alternative rescue package for BlockFi because they say FTC's $250 million credit line would, quote, effectively wipe out all BlockFi shareholders, including Morgan Creek Digital. So there's some mechanism by which if Blockby takes full advantage of this $250 million, line of credit from Sam Bankman-Fried, he'll own everything. Yeah. So when you get into a distress situation, the most recent money in becomes the most senior money.

All the other money will get wiped out, moved to, you know, common share. So let's say, you know, they had raised, BlockFi had raised $500 million in their Series when they were valued at $4.75 billion. If nobody offers them any money and they're going to go out of business and Sam says, hey, I'll give you this $250 million, but it converts into equity, you know, at a, I don't know, $500 million valuation since nobody else will put money into this thing. Then I own half the company, but all the other shares then convert into common and they get wiped out or, you know, severely pushback.

So this is what we will see in startups as well. And this is when we talk about a downround or a recapitalization in the industry commonly known as a recap. A recap can occur, Molly, where. you just basically define new terms. We're going to give 90% of the company to the newest person for this 250 million. That's what they're offering us.

Everybody else goes down to 10%. So I've had these situations. And then your only recourse is to beat the worst deal out there, the worst and only deal, this horrible deal. If you won't beat that deal, what you're saying is I won't eat, there's a certain baseball auction to this,

which is like, okay, I'll pay $250,000, $250 million to own. 90% of this. Now you could say, okay, I'll pay 251 in to own 80% of this. I'll give a better deal. More cash, less ownership, and then the board can take that deal. But if there's no other deals and the clock is sticking, the other shareholders have no one to blame but themselves. And yeah, I mean, this is what happens in a really tight market. And this is why I remember everybody was saying sitting on cash? Oh, you know, if you sit on cash, you're stupid because you've got to get it into the market if you don't have it in equities. Stack paper people. Stack paper.

Yeah, and that's a true statement if the market's going up and, you know, there's inflation and the printing all this money. But in a market where everything collapses, man, having cash can be really a nice asset to buy things. I'm going to be very quick today. You need to understand what cyber insurance is. Obviously, this covers hacks, which happen more than you think, especially in these crazy times. You want to be protected so you want to have your cyber insurance set up. If you don't have business insurance, you've failed one of the first steps. of being a founder and having investors.

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After this news broke about these bailouts or loans, or acquisition attempts disguised as bailouts and loans, Pachy McCormick from Not Boring tweeted, comparing FTCS to a central bank is dumb, because at first it does start to sound like, oh, he's the Fed, right? He's just backstopping all of this. He's doing

quantitative easing. But he said, oh, no, no, FTCS is this crashes, Berkshire, at the height of the global financial collapse. Warren stepped in and made an absurdly good $5 billion preferred stock investment in Goldman. In 2011, he made a $5 billion warrant investment in B of A, a restored confidence, and made bank. Yeah. I mean, if you're willing to make these crazy bets, we call it catching a knife in the industry, if you're willing to try to catch the knife, which it could stab you, it could hit your foot,

it could hit your hand, it could slice your hand open, maybe it hits a vein, an artery, who knows, catching knives is, you know, possible, but it's also very dangerous, which is why the terms need to reflect that. So these terms, although they might seem sharky, where they might seem crazy, compared to what happened last year in terms of, you know, them being overvalued, if they're the only one, they're the only offer, by definition, it's a good offer. Because you only got one offer. By definition, is the best of the offers. Yeah. The best and only. I will say, FinTech investor, Justin Overdorf, seems to share my theory a little bit about Bankman Fried

just trying to rescue an industry in which he's heavily invested. He said, come on, in response to Pachy McCormick, one, did Berkshire and Buffett rely on Goldman existing, as in was Goldman Sachs a material input into their business? That is the case with Block 5 potentially and Voyager, with respect to Sam Bankman Fried and where all his money lives. And then he said, two, a $5 billion dollar Goldman Sachs deal didn't shape the confidence of an entire sector economy.

I actually think number two is somewhat debatable, but it's a good contrast. Yeah. Similarly, we remember Silver Lake, tried to catch the knife with Airbnb. Beginning of COVID, they put a billion dollars in, and that was with, you know, Airbnb's revenue going to zero.

So if you believe in the fundamentals of the business, if you believe the crisis will abate, you know, these are really interesting bets to me. So you don't think there's any self-dealing here. What is it called when you try and catch the knife, but you successfully do it, catching the handle? Yeah, I mean. Catching the hilt? Yeah, you caught the hilt.

Yeah, I like that. You hilted it. Yeah, they hilted it. They caught the hilt. That's a pretty good one. Anyway, this will be a story to follow and to try to unpack the, you know, motives here. Well, and then here, look at this. Blockfize investors include Tiger Global, SoftBank, N-EA, Lights, Beardt,

and paradigm. If we were to look, all of those firms have large cash reserves. They have large amounts of money. So they're going to let this go and they won't provide the 250 million credit line or a better deal. You know, that is, that speaks volumes in their confidence in this business. This to me is a vote of no confidence, either in the management or the sector. I would say it's probably the latter. So they just believe, after putting all this money in, Tiger, SoftBank, Eni, Lightspeed, and Paradigm, if they will not beat Sam's offer, I think they're saying they don't believe in the business or the crypto space itself to a certain extent.

And that we don't know, right? Because they're trying to create this alternative rescue package. So I guess the question is whether that goes through. If it doesn't, you're absolutely right. then these investors are basically saying, we're going to walk away and we're seeding the entire field to SBA. They're handing the keys back.

It's like, you know, we don't care what deposit we had on this house. We're just giving the lender the keys. It's like, given the keys, I'm not going to pay the mortgage. I'm out. Here's the keys. You go try to sell it. And somewhat related, SBF bought 7.6% stake in Robin Hood in May. I still have my shares,

which also has a significant crypto business and a really great brand and a really great product. it seems to me like he is just trying to round up as many accounts as possible. And that's a smart idea. Yeah, I mean, he may- Like what Zuckerberg did, right? He may turn out to be the ultimate shark in this story. Or he's going to wind up having a knife in each foot.

Or, slice his hand open. He's going to be like a magic show gone wrong when they throw the knives. Yeah. Well, you know, and FTX had raised like almost $2 billion. So I guess he's leveraging that and then, yeah. Yep. I know.

I mean, honestly, we'll see. It's going to be fascinating. SBF, if you're listening, come on the show. Come on the show. I bet my own tongue trying to say those words out loud. All right. Speaking of the crypto dip, Tether was back in the news again yesterday. Can't get enough tether.

Can't get enough tether. According to a report in the Wall Street Journal, multiple hedge funds have shorted Tether. In surprising news, in trades worth hundreds of millions of dollars, most of these short trades are being reportedly executed through Genesis Global Trading, which is one of the largest crypto brokers for professional investors, speaking of walking away and leaving the keys. Leon Marshall, Genesis's head of institutional sales, said to the Wall Street Journal,

quote, there's been a real spike in the interest from traditional hedge funds who are taking a look at Tether and looking to short it. Yeah. He said the main reasons, sorry, are because, one, it's a bet against the broader economy. So they just think there's going to be a drop generally that will affect tether and everything else. And then two, it's a bet against the quality of tether's reserves. Yeah. So this is a very interesting one. We've been covering this forever. And if you look at tether's market cap, which isn't a function of the price of the tether shares changing. It's just how many people own tethers, right? So if you look at the one-year chart for tether, you can see a year ago, you know, they had a market cap of $61.9 billion, $62 billion, let's say. That means there were $62 billion worth of tether bought.

It's not going up or down a dollar, right? It's pegged at a dollar. And they have some amount of assets that they've invested in with the money that people have given them for these stable coins, right? So stable coin is one to one with a dollar, hopefully. and people were using this more and more and more. So sometime around June 1st, they peaked at $83 billion in deposits, essentially, to buy these stable coins. And then when the market started collapsing, people really started to cash out.

These are one-for-one chips. So this would be like a bunch of people in a casino. know, there's $83 billion in chips in a casino. And people go, you know what, I'm going home. I'm leaving Vegas. I don't want to own these ARIA chips or the wind chips. So I'm going to get real cash. I'm going to give my chips back.

So this redemption started in, it looks like January 1st, May 8th. And man, what a steep drop. So if we could change that chart to a one-year chart, you would see this $83 billion going all the way down to $72 billion in June. and then now here we are almost hitting July, and they're down to 66 billion. So they've had almost 20 billion in redemptions. They claim that shows how great the company is. They have the cash to let people cash in their chips.

There'll be no run on the bank, is their position, that they have more than enough liquid assets to do this. And so that is, I think what people are betting on, is that they, like Luna, you know, depegged, that they'll depeg because their assets, maybe they have 20 billion assets, maybe they have 40 billion assets.

But if this thing, people, I believe the bet is at some point, they run out of the ability to share the assets and then people start selling their tethers for whatever

they can get on the dollar, like a classic run on the bank. And therefore, if somebody created a device to short it, then it would depeg and you would be able to get that difference. Well,

and like you were saying, if you want to be able to sustain a run, you need to have assets equivalent to the run. And so what these short sellers are saying is that they believe most of Tether's commercial paper holdings are backed by debt-ridden Chinese property developers. Tether says, no, no, no,

we maintain an equivalent amount of reserves that includes this commercial paper, corporate short-term loans, bank deposits, precious metals, government bonds, and digital tokens. As we have discussed at length, there is no way to verify that. Because this is totally opaque.

So nobody really knows what Tethers' holdings consist of. We should know that. They will not do an audit. They will not do an audit. They do an, what's called it, attestation, which attestation means somebody looked in a bank account, saw a number, and then said, okay, this is my understanding of it. Whereas an audit, they would actually look at each of the individuals, and they don't disclose what they had or, or, you know, how these things are mixed up. So you did say they own tokens.

How many tokens? Which of the tokens do they own? Exactly. How does change, right? And who knows? It's like government bonds and what commercial paper. Yeah, exactly. All of that is important to know because what if their commercial paper is trading at 50 cents on the dollar or whatever.

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But there's all these theories out there. But this guy, Palo, who's Bitfinex and T. Heather's CTO, he did a whole tweet storm, which maybe to me felt a little bit like trying too hard or maybe they've cleaned up their house. It could go either way. I mean, to me, this just sounded like you could almost word for word paste some Elon tweets onto Paolo's tweets, right, about shorts. Like he's like, these are, they're trying to cause further panic so that they make their money. He says, quote, I've been open about the attempts from some hedge funds that were trying to cause further panic on the market after the taroluna collapse.

It really seemed from the beginning a coordinated attack with a new wave of FUD, troll armies, clowns, etc. And then said, went on to address these specific concerns saying Tether's looking to cut its commercial paper exposure from $45 billion to $8.5 billion roughly over the coming months and says that many crypto hedge funds were taking much bigger risks than Tether itself ever took, actually. You know, FUD is a thing in the industry. Fear is uncertainty and doubt.

we should. Yes. So if you take a short position, then you put out your research and you say, here's my short position, here's my theory. You know, Tesla can't deliver the cars. They have the deposits for it. They're late, yada, yada. There's not enough batteries in the world, whatever. And then it's up to the company to actually deliver the cars. And, you know, eventually one side has to win. And I think what's happened here is, you know, he might be point. to this very small bet. If it's hundreds of millions, hundreds of millions in shorts,

let's just pick a number if it was 600 million, which if they were describing it as, if it was close to a billion, they would have said close to a billion. They said a couple hundred million. So 600 million sounds pretty good. 600 million, if you were to look at that, would be 1% short.

So having a 1% short position against you really isn't that big of a deal. Some might argue that's a healthy thing to have. people consider shorts in their best a way to protect investors from fraud in the market because they're willing to take this bet to push something down. Now, of course, they do have an incentive to spread the fear and get people to sell the shares. Exactly. So there is some truth to that as well. The thing that was very interesting about Paolo's, and we've invited him on the pod, but I think after his CNBC with Deirdre Bosa or the interview that they did, I think it was

him or somebody from Tether, I don't think they've done any media since then because it made the situation worse. But he said, Tether is looking to cut its commercial paper exposure from $45 billion to $8.4 billion over the coming months and says that many crypto hedge funds were taking much bigger risks than Tether ever took. So again, you know, pointing, but this would all be cleared up if they just simply, simply, simply did an audit with a firm that wasn't, you know, like on an island somewhere in the Caribbean. You know, just generally speaking, like get a big audit firm like Ernst & Young or whoever, you know, Price Workhouse Cooper or somebody.

And yeah. Yeah, I mean, it's if in fact Tether, who does all these things that look like banking was required to act like a bank and be audited and be regulated in some way and protect customer assets. and all of that, then probably a lot of this could be cleared up. And it wouldn't have to just be like poo flinging. Yeah. You know, people on the side.

Super, super easy for them to resolve. I've talked about other theories people have. These are theories that are on the internet from a bunch of different folks who cover this. One theory is that they, the reason they're so bold while being so opaque. So why would you be bold in making these, you know, statements while, also not wanting to share information. It's a weird conundrum, right? Like if you have the technology, Elizabeth Holmes, Theranos, show it. If you can deliver the cars, Tesla, deliver the cars, right? So when these market moments happen, you just can look at people's behavior. Like, did the cars get

delivered? Are people, you know, when you go to school drop off, do you see Tesla Model S's and, or do you see Model 3s, right? Because that was the big debate, I think. They never deliver the model three. Yeah. Well, when you start seeing model three's everywhere, I think we've answered the debate when you see your friends driving them and you see the sales numbers were done here. With Theranos, remember she was going to show the technology? It was that big grand moment. She was going to go to a

conference and then she canceled at the last minute. Yes, totally. And it was just a hand-wringing. So I think this is like one of these hand-wringing moments of put up or shut up. So why would, this is what I'm thinking on game theory, if you actually have more than enough money to cover it, you have over $60 billion is what they're saying. We have more than enough. So if it's 62 billion now, more than enough to me, it would be 70 billion. So we got the 65, 70 billion sitting around. You got more than enough to cover. Why wouldn't you be transparent? And if you were banned in New York from doing this and Canada and other places, you know, why would you not be transparent? Do you have a theory? I have one, but I'm just curious of you or if anybody in the, it was watching live here at YouTube.com slash this weekend or this week in startups.

dot com slash yt is that our quick URL i think so um why would well so you're saying if you had the assets why would you not show the assets but you still won't disclose the details of the assets what would be a reason for that right the the reason to not show them is you don't have them right so that's an easy one okay you're a lying assuming that you do and you don't want to show it then which is their position right are we also assuming that the assets assets are good? Because I feel like if you have the assets but you don't want to show it, it's because your assets are super sketchy.

Okay, so let's say the assets are bulletproof. They got more than enough. They've factored in some bad debt, you know, some of this commercial paper. They discounted some other things, you know, whatever. So let's just say they're more than good, which is what their position is. We're totally fine. We're more than good. But they won't show the details.

So let's agree with them. Okay, you're more than good. You're more than good. Well, we believe them is what I'm saying. Yeah. hard to do with Tether because of their behavior. But if we do believe Tether, you're completely telling the truth. Why would somebody telling the truth?

If Elizabeth Holmes is telling the truth, why wouldn't she show the machine? I think we learned that she wasn't telling the truth. With Elon and the Tesla Model 3, he was telling the truth. Everybody got the car. It won awards, yada, yeah. So now, in this situation, if people are spreading FUD. The only reason I can think that I would not show my perfectly good, amazing pile of assets is if I knew I was already in trouble and some fed somewhere we're going to seize them.

Okay. That's a good theory. So that's all I got. Your turn. No, I think you came close to now. Yeah. What if the way they acquired all those assets and have more than enough. Okay.

Was done in a way that maybe broke securities law or did something nefarious. So if I took your money as a money manager, right, let's just pretend tether's a money manager. I take your money, Molly. I say, hey, I'm going to get you, you know, I'm going to beat the market. markets do 7% a year, I'm going to beat it. Let's say I go to Vegas. I play in a poker tournament.

I do some blackjack and I come back and I've got, you know, 32% returns for you. And I'm like, here's your returns. And you're like, oh, yeah, can I see how you did that? And I'm like, yep, nope. Here's an attestation, not in details. So in this equivalent, what if they bet on a bunch of crypto, they weren't supposed to do that with your assets? What if they, you know, you were flipping stuff in a way that maybe,

was either shady gray area, outright illegal. Maybe a bunch happened in the U.S. that was illegal, but it was supposed to be over here. Yeah, totally. It will reveal. It is because it will reveal something. Exactly. Indeed, the assets exist, although I think we can safely assume they probably don't.

You know, you have to keep an open mind here because we don't have the information, but my God, when a company acts this squirrely, they're kind of feeding into it. They're not coming out and like just sharing it. The best thing for them to do would be say, hey, listen, everybody wants to talk about the Chinese commercial paper. Here's the Chinese commercial paper. Yeah. And actually, we've sold it. So just give us updates on a regular basis.

There's no Evergrand. There's none. There's zero. Evergrands, whatever it is. Yeah. 100%. Well, on this question, oh, go ahead. Well, I was going to say, maybe we should just touch on USDC and USDT.

So Tether versus Circle. Circle here based in the United States. This was the chart they were showing earlier. So will this flippening happen? and it looks like it's upon us. So since May 5th, Tether's market cap has declined by $16 billion down 20% from $83 billion to $67 billion. And during that time, Circles U.S.D coin has added $7 billion in market cap up 15% from $48 billion to $55 billion. So the flippinging's about to happen.

And which crypto investors are moving into safer assets. They're flipping out of Tether and into USDC because they see that as a safer asset. that USDA is run in the United States, is going public. They filed to go public. I don't think they have yet. And so that is, and it's run by a very trusted

U.S. founder, Jeremy Allaire. So, you know, they're kind of like, I think, pitching themselves as the really tight ship in terms of USC is doing more audit-like stuff. And I think they made, a commitment to only hold really, really tight assets.

So, yeah. But they did cancel their SPAC, but they're going to go public. So they're just going for like being a U.S. base as opposed to an international company. Yeah. Listen, dealing with your personal health and wellness can be daunting, probably being bombarded by ads on social media. And you have no idea where to start. I feel your pain. Well, that's why Thorn created a care system that's personalized, preventative, and holistic,

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So you're not dealing with anyone in the middle. Again, this is personalized health and wellness. To get started and take 10% off your first order, head to thorn.com slash you slash twist. That's t-h-o-r-n-e-com slash the letter you. slash twist today to save 10% and let them know you came from this week in startup, which is always good for the pod. And I think on that question of if it looks and quacks and walks like a bank, it's probably a bank. SDC chair, Gary Gensler was on CNBC squawk on the street yesterday, just FYI, talking about how most tokens do in fact have the makeup of securities, except he noted Bitcoin, which he said look like a commodity. So we're starting to circle in, starting to catch this snap here.

Yeah, the regulator side. Here's the double G, 25 seconds, see on the side. And many of these financial assets, crypto financial assets, have the key attributes of the security. So some of them, they're under the Securities and Exchange Commission. Some like Bitcoin, and that's the only one, Jim, I'm going to say, because I'm not going to talk about any one of these tokens, but sure. My predecessors and others have said, they're, they're come. Yeah.

So that's really telling. So, you know, we've been wondering and we've had these conversations, in fact, when I had Jesse from Cracken on, you know, he was like, just tell us. Just tell us what to do. Yeah, just make it clear. And so I think they've been clear that securities laws haven't changed. The crypto industry has been telling everybody, these are utility tokens, these are not securities.

I've been saying, well, if you're flipping them as a venture. capitalists and, you know, returning money to your LPs and the public are buying them and they're talking about them on message boards and they're not using the utility, but they're talking about them like their investments. Right. I think basically how people use them. And you're bundling them up and reselling and lending against them and assigning interest to them.

I mean, you were to fully financialize this product and turn it into, oh, what's the word again? A security. Yes. And so, you know, you can as a technologist, you know, and as an entrepreneur, you know, explain whatever theory you want, but you've got to convince the regulator that this is the case. And if the market is using your product in a different way,

you know, like if Airbnb wants to say we're not competing with hotels, you know, okay, you can make that claim. But if people are buying them instead of buying hotel rooms and you see hotel rooms plummet in Paris and Airbnbs go up, you may not be able to make that claim. Yeah, exactly. And so I think this is what my eyes can see is in fact the truth. I mean, it's just, it's so obvious to everybody who just is in being intellectually honest.

Now, if you really wanted your token to not be used for speculation like this, you would not want it listed on exchanges. You would just sell it direct to people who use it. So with airline miles, can you go into your Robin Hood account and trade your. airline miles? No. Not that I know of. Maybe someone can correct me if I'm wrong. I don't like, can't you.

I don't know. That'd be kind of dope. That would be so cool. I'm in. I want to buy so much. I got a million United. Then I got a million bomb boys I'm trying to use. I'd love to throw those two million up there and start trading them.

But if they did put those miles up there and they started trading them, like you can buy them direct, right? You can buy direct from the airline. But they're not creating a marketplace of these. I can't take a loan. against my million United Miles. Right. Right, to your point.

God, this is just getting better and better, though. I mean, I really want you to. Toby, where are you? Yeah. But I can't take my United Miles and just buy them. For Starbucks cash. Yeah, well, I think you can actually buy Starbucks cards. So they do have an exchange where you can trade it for non-cash assets.

And gift cards is one of them. And that's actually what I do with most of my points is I just buy gift cards and I give them on the holidays out to folks, you know, like service providers, whatever. Give my gardener a $50 gift card or whatever. try to be a nice guy, you know. And so I think that's the difference here. So, yes, just to be clear, that was the claim of a major U.S. crypto exchange.

I'm not sure if Coinbase ever got actually named as the one they were trying to lobby in the SEC. But that's what he's dancing around is XRP. That's a big controversy because that is the big one that is being litigated right now by the SEC. That's the canary in the coma. We'll see what happens with that case. Probably settled.

Let's talk about. about a whole other thing that looked, walked and quacked like a duck. Yeah. And appears to maybe be a duck. A different innovative asset class. Yes. That's in a little bit of trouble right now, SPACs. Yes.

Well over $100 billion is sitting in these SPACs, these special purpose acquisition companies, vehicles, blank check companies. It's just sitting there waiting to be invested. According to Bloomberg, though, SPAC momentum has slowed significantly, and IPOs are on pace this quarter to raise about $2 billion on 18 registrations. And if that forecast holds it, will represent a staggering decline of 94% from 299 company registrations to 18. Why are these deals?

Yeah, I mean, there's a bunch of more. Well, I mean, for people who don't know, SPAC special purpose acquisition company, It's just another way to get your company public. In this case, a promoter, like Chaboth was one of the promoters for his spaks, they go find a great asset. You trust that person. They find an asset. You put your money into the SPAC.

Then they kind of do this thing called de-spacking, where they basically say, hey, okay, now we're going to be a public company. All this money is going to go into the company. And they typically come out at $10 a share. I've talked about how this would increase the amount of inventory in the market. That's a good thing. We had half the number of publicly traded companies. It would be good for strong companies to go public. But like many things, SPAC seemed really easy.

And, you know, I think they cost $10 million to set up. So the promoters have to have some skin in the game. They have to put up this money to set them up. And it costs millions and millions of dollars in legal fees, etc. And then you have to go raise money and basically, you know, get people to participate in them. So they also have a time clock on them. And so specs themselves are not a bad or a good thing. It's just a financial instrument.

It's like saying, you know, a safe or a safe note or a convertible note. It's just a financial device. But the devil's in the details, which company are taking out? And does the public want and to have a market for IPOs right now? The IPO window is kind of closed right now. So the question is, with this violent swing, if the public doesn't want IPOs and institutional investors are kind of not, into equities right now and they don't want to put money to work. Well, then who's going to invest

in these SPACs when they do go out? And that means a lot of people who registered these, I think there are 709 active SPACs, and they're going to run out of time. So people have been doing some statistics on this. Because you usually have, I think, three years or something to find a company. So you create a SPAC, you have the pool of capital, you go buy the company, and then you announce it in DSPAC. Well, the clock's ticking. Because these companies, aren't, yeah, the deals are just not happening. Why do we think the deals are not happening? Is it because the market has lost confidence in the vehicle? I mean, I think it did become, like you said, a little bit too easy. It started to get this reputation as like, this is how

you skirt scrutiny. Regular IPO process. Right. Skirt scrutiny, really, into your governance and your finances. And then a couple of these high profile companies that did go public, like didn't perform that well. There's, you know, skepticism about the EB companies, for example, that went public. Yeah. So the basic problem, I believe, is that a lot of these private companies maybe aren't ready to be public because public investors are trading so frequently. They're not taking a 10-year horizon to mine. They're day-trading them, right? So if you're day-trading Jobi or desktop metal or really future tech companies, Virgin Galactic, I mean, just think about those three companies. Flying cars, VTALs, 3D printing metals, and I have desktop metal position. I still have my desktop metal position. And then Virgin. and galactic, you know, space tourism. These are really futuristic things. These are, we live in the future companies. Right.

You cannot buy those, like, and be looking at quarter to quarter data. You've got to be looking at decade to decade. And it does make a lot of sense for there to be a vehicle to do that. I just wonder, like, did the SPACs end up being somewhat abused? We'll see. You know, we had the Trump spec, right? So people started saying, hey, this is just an easy way to grip. And if you look at this, the Trump, what's it called, truth?

Trumpet, whatever the ball is. Yeah, the thing had a name Digital World, blah, blah, blah. And then there was a story that came out yesterday that said every single one of the board of directors has been issued a federal subpoena, all of them. Related to the SPAC. Yeah.

Related to what is effectively appears to be alleged financial malfeasance. Yeah. Polster was a SPAC, says Justin. Yeah. I don't know that. So, yeah, this Digital World Acquisition Corporation. Yeah, that is the name of the SPAC. I remember, yeah, so now it's down to, this one had actually held up, because remember, it had gone up to $907 a share, $97 a share, as recently as March 4th.

Their market cap is now 907, but it was three, four times that. So this thing had a very, very big market cap at one point. And, you know, going public is great if people are enthusiastic about your company. and then if the enthusiasm wanes and your performance is not great, you don't ship the cars, you know, it's really, really,

um, um, you live by the sword, you die by the story. As quickly as people can get excited and buy the shares, they can dump the shares that easily, whereas in private companies, you don't really have the opportunity to dump the shares.

Um, as we just saw with the, you know, some of the stories previously about crypto, like this whole machination needs to happen where you figure out how you're going to, uh, keep the company running and it's all these private market investors.

So just looking at the data and the clock running out, 118 companies are in definitive agreements. That amounts to 22 billion of the 181 billion, the combined trust of these SPACs. It means 591 are still searching for companies. That represents 158 billion looking for companies to take public. 37 of those, according to Bloomberg, who has all this data and has done the research, have less than 100 days before they need to return the capital.

So the clock is ticking on 37 of the 709 active SPACs. 93 have 100 to 200 days. So, you know, you're going to start to see every six months some of these things get canceled and the clock will run out and they won't have inventory. The vast majority of them raised between 100 and 500. million dollars. And there are still seven of these facts of more than a billion hunting. And we should. Yeah. I mean, I think it would be fair to say that when to point out that when Spacks were conceived and Shamatha was one of the early conceivers, as my understanding, we had a

pretty spicy interview on Marketplace about it back in the day. But one of the things that Spacks were created to solve for was the short termism. Right. Like the idea that like you said, not every company should be measured in this kind of quarter by quarter performance that it's all, that there could be a public market mechanism that's almost closer to venture, the ability to fund something that is an idea and potentially a great one. And then because there were not regulations around this, one that allowed it to exist, right? It could have been regular.

Spacks could have been regulated out of existence before they went anywhere, and that might have been bad. But because there weren't any really compared to IPOs, the promoters then found themselves in this position where they could take these huge deal fees and then only ended up buying super insignificant portions of the company. Like there were some where the promoters would take a $50 million fee, but only acquire 1% of a $500 million company. So their deal fee would be 10 times higher than what they invested in the company.

And all of that sort of combined, I think, the deal fees, the lower quality of the companies, the lack, again, much like crypto, the lack of transparency into how these things work combined to sort of maybe like put this stink on it. when it could have been a really important innovation and might still be. Yeah, and you know, you have all of these unicorns that, you know, are private companies in tech. Most of these SPACs work with tech companies, obviously. That's what the public was interested in. That's the inventory people want.

So Crunchbase has over 1,300 unicorns. They represent over $780 billion. Okay, so you put those two numbers against each other. You know, there's basically almost a SPAC for every one of these unicorns. if some of them are not in fact unicorns. And so you, I think that's an important question, like why would people not want to go public? Like, it's a great way to get money.

You get that money. I think the problem is it could cause chaos for your company. Because now your company is publicly traded. You have all the expense of being a publicly traded company. And now you have all the scrutiny. And then your employees are looking at a $1 or $2 share price and your company's worth $500 million or a billion. And in a private markets, it was worth double or triple that.

And you could quietly. build without scrutiny. So the scrutiny works both ways. You know, getting all that attention. Yeah. Could result in liquidation. The other thing that's going to be very interesting here is I think maybe it's another counter theory.

If the market does, you know, I believe the market is bouncing along the bottom right now. And, you know, yeah, we could still pull back 20%, but we could pop up 20%. It's going to be like this sort of bouncing along the bottom phenomenon as people try to figure out which companies are going to survive, which companies are going to thrive, and which ones are going to shut down. Maybe there is a case that some of these unicorns are actually pretty strong, but they can't get private market funding and actually they can cut better deals with the promoters.

Because if the clock is ticking, the promoter loses the $10 million it cost to set this up, that's got to sting a little bit and all that work and time. Maybe they could go and negotiate harder with the SPAC promoters, give them less carry, give them less shares, and basically have the upper hand. Because if these are all running out, then they could grind these promoters down to whatever they want, I think, if you're a strong company when you go public. So the market is, you know, this is one of the great things about a free market is it kind of sorts itself out. And even in a down market like this, there's opportunities. And so this might be an opportunity for some company that wants to go public to use one of these facts.

And that money's sitting there. And, but without consumers wanting to buy these companies, you know, you don't have the bag holders, right? And so you don't have the buy side, which means, you know, the stock is just going to slowly get liquidated as all the insiders who are working at these companies, who are early investors, clear their positions. Might be a great way to start investing. I mean, if you think about it, if these, if all these companies were public, these unicorns and they're all trading below value, you can freely trade them and have liquidity. that's like a really cool feature. I mean, people have talked for a while, Molly, about having a more fluid exchange

in private company. So what if you could trade private companies every month? So on the 15th of the month, every private company, Stripe, et cetera, had an offering and a price was determined and everybody could just trade it and out of it. What if that happened weekly? Well, here, what if it happened daily? I mean, like a stock market kind of thing? Like a stock market, but yeah.

But with less insight into performance of the company? Yeah. I mean, and with private companies, they could just represent some top line numbers and buyer beware.

If you're buying into private companies, you know what you're buying into. You have less rights, you know, you have less insights, but sure, money, you know.

Yeah. So people buying it to spacks, I said from the beginning, you have to understand, you're buying into very speculative companies and you have to be in them for the long term. So if you really did believe

in desktop metal, Jobi, Virgin, Galactic, and it gets crushed, you would want to own more of the company as you know whatever happened to the long-term stock exchange that was the eric grease project yeah i don't know if they should get him on and check in on that because i can't remember what

yeah i don't know if they're trading it that way it just raised a hundred million dollars today are you serious justin am i psychic yeah i am psychic so i guess twillio and assana are part of the long-term stock exchange and i guess they um when you make a deal to do those, you make a deal with a company to hold your shares longer. Right. It's the concept. So, you know, I still like his idea, but I wonder if consumers want it. I understand why businesses would want long-term shareholders, but it just maybe it's overly

complicated. I don't know. I don't know. I mean, honestly, it's, you know, sort of closer to, in theory, how most financial advisors tell people to invest, which is just like make bets and hold them. This is fascinating. it literally raised 100 or it was in the ticker today. Yeah.

Courtesy of producer Justin raised $100 million from James Walton, part of the Walton family. Interesting. That is fascinating. All right. We should have Eric back on maybe to talk about this because I have long thought that this was super interesting, but also not totally clear where he's going to go with that. Top four performers in SPACs recently. MP Materials up 259% CEO Jim Lititski. was at the Allens Summit.

You remember from talking about minerals. It might peak energy up 108, 9%. It was like, yeah, I bought a mine. Sure. Cerevel, therapeutics up 184, lucid motors, up 80%.

26 D SPACs are now down for, down more than 90%. Over 60 are down more than 80%. So that's just carnage. And yeah, I mean, if you want to play VC as a public market participant as a retail investor,

If you want to play VC, there's a reason why it's hard to get in VC and it's hard to keep your gig in VC. It's a hard business. And you know, you need to have 20, 30 bets and you need to get in at the right price. And here, maybe people got in at the wrong price and maybe they had three or four bets. And maybe they're looking at a one-year window and out of 10. So, yeah, I think people are treating these like public companies with much more proven, you know, And that's the things consumers were not educated onto how speculative these are. But I bet you there's going to be some winners in those ones that are down 90% or 80%.

Some of them are going to go private for sure. Some winners in the ones that are up too. Yeah, small number that are. I'm starting to see lucids in the wild. And every time I do, I get really excited because they're so freaking futuristic looking, the EBs. Let's keep talking about venture funding, shall we? Because a possible bloodbath developing there, VC funding is down to its lowest level. since 2020, a Bloomberg article yesterday gave some detail from CB insights from Q1 to Q2

using data just through June 23rd. So we should note that that could change a little bit as the month actually rounds out. But it was a, you know, the top line here is it was a deeper drop than they expected. From Q1 to Q2, the number of global VC deals dropped 23% from 9,000 to 6,900. The total amount of dollars. That's sequential. Q1 of 2022 to Q2. Not year over year. really like last quarter to this quarter.

And then the total amount of dollars invested in startups dropped 27%. They didn't specify the total dollar amount, but they did note that it's the late stage startups that are getting hit the hardest funding in series D rounds are beyond dropped 43%. Yes. So that's the new market participants, the Tiger Global is coming in, paying whatever price, not really being too discerning. Those people are out of the market.

And so that's why the percentage, of dollars is down so much. It makes total sense. And Pitchbook will have their Q2 at some point in July. We have a good relationship with them. We'll break that down when they release their data. Yeah. And then when we noted that we were going to talk about this on the show today, Overlooked BC founding partner Brandon Brooks on Twitter replied and said, I would love, Overlooked VC is not a descriptor. That's the name of his fund. It's the name of the fund. Yes, totally. I mean, it's just, yeah, when you say in a sentence, It's true. It really does sound just like some downs, but in fact, it's both.

Brandon is very overlooked. No, his firm is called overlooked for a reason. Yeah. Exactly. And said, in response to us, just in time, would love someone to address the outsized slowdown for Black Founders as well. The latest stats say only 1.2% of venture capital has gone to Black Founders year to date. Yeah. Is there anything that can be done? He asked to help the slow progress we've seen over the last year continue, as in there has been progress. It was very slow. Is this going to be one of the first places that funding drops off? And in fact, a few weeks ago, there was an article in Fast Company titled, After a Brief Streak, Venture Capital has ditched Black startups.

Yeah. So these numbers, you know, it's hard to parse the numbers perfectly here. The definitions really matter because some people will play games with, is the founder a person of color, or is there a person? of color on the founding team, or are there three or four founders, and what defines an actual founder? So if a founder has 1% and they happen to be black and the other two founders have 25%, are they actually a founder or not?

So there's a lot of detail work here that can be manipulated. And I get an up close and personal view of that sometimes when people are sharing their statistics. But it sounds like you're saying that that would get manipulated to the upside, suggesting more investment in Black Founders than there actually is, which is not a good story. Well, no, it depends. It depends on which side of the table you're on and what your agenda is in many cases. So let's say an accelerator that wants to have great numbers, they might look at, I think

I told my team to say, like, just make sure the founder owns more than if you're counting somebody as a co-founder, I think 5% is a minimum, you know, maybe 10% is at the earliest stages of a startup, of course, when companies, when they exit, you know, all the founders, if these three founders might own 5% or 10%. So I'm talking about very early when founders have a bigger piece. And then on the other side, people will look at the dollars. And the problem with the dollars, as opposed to the deals, I would encourage people to look at the early stage deals if you want to look for the trend, because the trend will be seen first in early stage deals. You can't have an underrepresented group close a series E because

those happening year five if, you know, we're looking at this or close their third fund. So what you have to look at is of new funds, of first-time fund managers, of seed stage companies, what is the percentage look like in turn? Yeah, look at what does the percentage look like of, you know, early stage founders, let's say series A and before or seed and before. That's where you'll see the trend happen. You're not going to see the trend in the dollar number because typically when we do these quarterly reports, one huge deal, like a Coinbase deal, or an Uber or an Airbnb private deal, or a Stripe private deal, those things can be a third of the money. So they really can throw the statistics. The dollars can be distorting. But would you, I don't know, as opposed

to the just number of deals. I suspect, though, that you wouldn't dispute that black founders receive a disproportionately smaller share of venture dollars. And that while there may have been progress, it would be sad to see that progress go away. Of course, yes, these two things can be true at the same time. And then there is the issue of, you know, I think a lot of folks are saying, I should be able to raise in my first fund from Harvard's endowment or this endowment. And I've talked about this on the show. Though, you know, Yale or Harvard or those places, they want to see three or four funds worth of data

before they take on a new fund manager. When you're doing a new fund, you do high net worth individuals. and maybe the long tail of family offices. That's typically how this is done for white males and for every other, you know, category of fund managers. So you can't kind of jump that process because those large institutions have a process where they had one new fund manager a year, two new fund managers a year. And I think there's a lot of hand-wringing about that.

Like, why isn't this giant endowment just putting money into work? in these new funds. It's just never how they've done it. They need to see three years, four years before they get past their board of directors, their investment boards. So if you're on your first fund, you can't expect to have Harvard in there. They've never done that or Calpers, whoever. Okay. I'm not sure what to do with that information. It sounds like I mean, right? Like true. And also, there have been new mechanisms for underrepresented founders and CEOs to raise money. Are you saying that those are going to go away? No, the, we've seen more new funds.

More new funds have been started in the last two or three years than probably in the last 20. So we have a massive boon of new fund managers who, you know, are not white guys from Stanford and Harvard. So I think we're seeing a lot of that. The other issue will be, I'm just telling you the nuances of the numbers and the store. Oh, yeah, totally. I get it. But I would say at some point, we don't want to be arguing. for like why that's the case and will always be the case and should be the case, right? The question is, is, has this small uptick in funding, are you saying that the small uptick

and funding doesn't exist or isn't a real, wasn't a real trend to start with? I think there's been a real trend. How to parse this in a way that leads to positive provocation and, and more funding for representative founders. Yeah. My theory of what's happened is because this has been such a prominent issue for the last decade, we've seen a lot of new fund managers funded. and I think a lot of people are going to wait and see how those fund managers do before giving them larger funds.

That is the normal process. So that is going to be one of the issues. There is another issue which people don't want to talk about, which is if you start a fund and you limit who you're going to invest in, that is not particularly attractive to people seeking a return. So if you start a fund to only invest in a certain demographic, fund managers I've talked to, who would never say this publicly, I'm talking about LPs, they don't like that strategy.

They want you to meet with every person possible and place the best bets possible. So when you create a fund that's only going to invest in a certain group of people, the sad truth is LPs are maybe going to put a token amount towards that, and that's literally how they look at it. Like, I know this is cynical, but maybe like they checked a box.

Like I did my part. I gave a little bit of money to this, but I actually don't believe in that strategy. and they won't say that publicly. And so that's part of what's going on behind the scenes. I'm not saying I endorse any of this. I'm just trying to be honest about the back channel that I see. It was really interesting, actually, when we had Monique Woodard on,

one of the things she talked about was that she would meet with LPs who were, there is like a, there is a need to check the box. And that she talked about having LPs who were frustrated that she was not only investing in black founders or underrepresented founders because they wanted, I think at the time I said, oh, they wanted the twofer, right? They wanted to get credit for both of those things at the same time, investing in a black venture capitalist and also by extension investing in all.

And she was like, actually, I plan to make the most money possible and invest in everybody I possibly can. And they were like, oh. Henry Pierre Jacques from Harlem Capital, great name, said on Twist, that they're focused on underrepresented founders. But if Zuckerberg walks in the door, they're not going to pass just because he's white. And he was sort of upfront about this. So this is, I think, one of the hard conversations.

Monique had the opposite with some LPs, where, you know, people want to do the right thing. Some people want to do it just to check a box. And then the nature of what we do is we're judged ultimately on our returns. So no matter what people say to you, no matter what they say on Twitter, at the end of the day, the reality is this is going to be based on numbers for all of us. and will certain people get the benefit of the doubt? Will certain people start on second base? Will certain people have a fraternity brother, a sorority sister, do them a solid and squeak them in ahead of time

or get them a bigger allocation? Of course, the world's unfair. Nobody's saying it's not. But ultimately, the numbers are the numbers. And so what we've seen is there are some women in the industry because 10, 15 years ago, we're talking about how underrepresented women were in the industry. There are some women who crushed it,

who now have billion dollar funds. And so there are, and I think two of the largest funds recently were both founded by new funds were founded by women. So there is this, let's call it 10 years, 15 years of this delay that we will see in which fund managers actually were able to make it happen and which ones didn't make it happen. And, you know, it's very random. Strategies matter, timing matters, luck matters. Yeah. I am fully confident that we're going to see a large group of people who are underrepresented, raise billion dollar funds 10 years from now.

But it is going to be a 10-year process, and that's how these LPs work. When they turn me down, when they turn Arlen Hamilton down, when they turn everybody in between down, they will basically have the same story. We want to get to know you for three funds. That's it.

And I listen to Arlen's, you know, podcasts, and I've had her on the show, and we're friendly. I don't know if we're friends. We don't like hang out socially, but we're friendly. And, you know, we get into it. sometimes. But she was just lamenting how like LPs have not shown up for her. But she has had a lot

of LPs and she actually called them out by name on her pod, which was highly not, I've never seen that before in the history of venture capital. So, but these are large LPs. And so, you know, she is kind of publicly challenging them to step up. So maybe there is something to, you know, what she's saying is like, well, why won't a large endowment? take more risk and make this change happen faster. And, you know, she might have a point there. Yeah. I mean, I think you have to, because I think all of that is 100% true.

And math, you know, as I have written on a post-it and I'm keeping next to my bed and thinking about all the time, math is a harsh mistress. Like, the truth about math is real. Yeah. And also, some people will be bailed out by their LPs or extended further benefit of the doubt than others. So when there is a pullback, it is very likely, and this is, I think, what people are pointing out, that underrepresented investors and or founders may get less of that extension. Yeah.

And it sounds like what Arlen is saying in some ways is, yeah, hi. I'm one of them, right? Yeah. And I have sympathy for her. She puts it out there. And it is hard to be a fund manager because you could have a fun that doesn't perform. you could get a lot of, just like founders get a lot of nose. Man, the number of nose I've gotten and the number of, you know, two meetings,

three meetings in with the largest endowments in the world for them to say, hate to say this to you. We know you're Jason Caliganas. We know you wrote the book on Angel Investing. We know you have the podcast. We know you hit Uber and com and this and that. We couldn't get there this time. We know that will, like literally, we know that might upset you and you may not let us in

next time because we know you're not going anywhere you're going to be successful, but we can only allocate a certain amount to venture. We're over-allocated. We're saying no to a lot of high-quality people who are really sorry. Like literally people were nervous to say no to me. I can hear it in their voices. And these are like not

you know, de minimis people in the world. These are like senior people and you know, they're like, we have to answer to this group of people. We have this board. We have this committee. We get to bring them, you know, two or three new requests a year. and we're getting a lot of nose.

And they're asking us to liquidate stuff and, you know, yada, yada, yada. Yeah, totally. There are lots. I would just say there are lots of realities at play here. My best advice for folks is to not give up and to go the syndicate route. If you're so good that you can just pull together these syndicates and you can say, I found a great company and you can email 100 people and I don't want to tell people that their suffering isn't real or that the world is unjust. I'm just telling you the path that I think

is the clearest path. So just to be clearer because I know white guy giving advice to everybody might be taken a certain way. And I'm not just saying like work harder, but work harder. It is literally like if you hustle and you do these syndicates, it is such a clear path. Because all you need to do is get 100 people to give you $5,000 and now you got a 500K investment. That's completely possible. Whereas convincing the giant, you know, $10 billion, $20 billion endowment, you have to get so much buy-in from so many people.

And they just might not like you. Yeah. And Arlen said this. Like, maybe it's me. You know what, Arlen? Maybe it's me too. You know, like we're very similar in that we're outspoken people. People may not want to associate with Arlen or me

or other outspoken people with sharp elbows who say, who get in fights with Parmer Lucky or, you know, who are outspoken and have a podcast every day. They may not want to take that on. They may want a quieter person. But, you know, you just got to put it in their faces. That's what I do. That's my approach.

I still got a chip on my shoulder. I know Ireland's got a chip on a shoulder. Her level of energy and dedication to her founders is extraordinary. And I think the world will rally around her, $5,000 checks at a time, just like it has for me, you know. And she's undeniably talented. And so I wish her the best and keep your chin up. She was saying she was a little down on her podcast.

That's terrible. I mean, the context here, which we didn't say, is that she had to lay off almost all of her team. Oh, sorry about that. Yes. Yeah. Yeah. So, you know. At backstage.

And she's been through this a couple times. I think 17 to 3 is down from 12 staff to 3, which is absolutely brutal. It's brutal. Yeah. And we're going to see this over and over. And she said she's also burnt out. So take care of yourself, first and foremost, you know, Arlen, and when you come up for air, happy to have coffee and talk strategy.

Anytime you have my number. And I am 100% certain. She will remain an incredible force in the industry. And sometimes you take a step back or two steps back, and then you come back and you just lap the whole pack. And all it takes is one. All it takes is one. So she's got 200 companies.

One of those is going to pop and the whole narrative changes. And you know what? Maybe it's the 200 first company. And that's how I think about this. Because I mean, looking back, like, did I know, I had a feeling about common, I had a feeling about density. But if you told me like a cab app and a stock trading app that was free and an email, competitor to Gmail that was a dollar a day and a meditation app, these were going to be my big winners,

I couldn't figure that out. Right? So I think this is the time, you know, be resilient and just keep doing the work and keep placing and those bets, man, the Com bet is the one that comes to mind for me. That was a $376,000 bet. I mean, $376,000, not a lot of money in venture. It's a nine-figure position. It's over $100 million in value.

You hit one of those, the world cannot deny you. Forget about the Uber's, you know. You hit one of those 250K slugs and becomes a unicorn. Marone, you know, this is a big deal. It can become a big deal. And then, you know what? You don't need anybody. I'm putting up two fingers here.

I'm pointing with my pointing fingers. You don't need anybody. That's one of the great things about this industry. You just need those 100 LPs. And she's got a syndicate. So everybody should join her syndicate. Just do a Google search for backstage capital. Syndicate.

Join her syndicate. Subscribe. And I wish you the best of luck. Yeah. It's going to be a hard time. A lot of people are going to go through hard stuff right now. This is another public service. Very true.

I feel necessary to say right now. I know it's easy to dunk. I am a super critical, candid person, I am very judicious with the dunks. I do not dunk on people just because they fell. If I'm going to dunk on somebody, it's like Elizabeth Holmes because they did something abhorrent or tether because I feel like they're doing something, you know, that is unnecessarily opaque.

You don't see me, or I might dunk on crypto bro saying have fun being poor and being gnarly, but just be careful dunking, you know. It's like a really dark time right now. And this is people's real lives, you know. Yeah. 100%. Yeah. Anyway, I'm sorry.

I'm getting a little emotional myself about this. I have strong feelings about it, you know. It's a legit. I mean, you're stressed out about us and your company and your team too. Like, everybody is terrified of that exact thing happening. And so it is only love and sympathy for those to whom it is already happening.

Because any of us, you know, there but for the grace go of God. Yeah. I mean, I am 51. I've seen this movie three times. I prepared both my companies for it years ago. I communicated that to our team. We're going to stay small. We're going to stay nimble.

We're not going to have some huge burn rate. I'm not going to raise a ton of money and have this, you know, get ahead of my skis. I'm going to keep these things very tight, focused SWAT teams at inside and launch. And yeah, now I'm like, okay, let's just be super focused going into the storm. Let's make sure we batten down the hatches. Let's make sure we got our provisions. We'll be fine.

But, you know, it's not everybody has that luxury. I have that luxury after two or three wins under my belt that I can, I mean, I could fund my companies myself personally. So, you know, I have like a backstop to a backstop to a backstop. But not everybody has that much, you know, if they're in the start of their career. So be kind to people. And, you know, we live in the future. So there's always this amazing things. The good news is the future is always coming. The future is always tomorrow. All right, we live in the future. We're going to end on a cool note. Cool note. The whole show was like things coming apart. Do you realize that?

was like, here's everything going down. But this is where the opportunity is. But this is where the opportunity is. My lord, we're seeing great companies. 57 companies my team did first meetings with us. We're open for business. We want to invest in companies at the right price with the right management teams with a great product, with great customers, maybe 25 to 250K a month in revenue.

That's our sweet spot. Reach out to Molly Wood. Reach out to Jason on Twitter. Let's go, let's go, people. I'm looking to do two deals a week. I'm looking for deals. deals. Just have some traction. Some traction.

Just something. Just like a little bit. Just a little traction that we can help you accelerate. Okay. To go from $8 to $12 to $22? That's growth. I mean, it is interesting. You know, people with, to belabor the point even more, you know, the people who were like,

oh, you have 25K a month in revenue. Oh, you're doubling it every six months. That's cute. Oh, you're going to get to, you know, 100K a month. month in revenue next year from 25K this year. You're going to Forexit. Oh, that's very cute. Those companies that were dismissed because they weren't, you know, writing white

papers or talking some big game. Those are the companies people now are like, tell me more. Tell me more. Oh, you're going to go from 25 to 100K a month in revenue? Could you get to 150 do you think? Great. What's your burn? Oh, wait, you hit profitability last month?

Oh, okay. Oh, really? Oh, tell me more. Now, if you put a million dollars into that company, you're like, well, this person is really, you know, good at spending money. They spend money wisely. That's kind of a cool person to give money to. And you have the downside protection.

They could make cuts that get them to break even their default alive. So for the founders who are grinding it and have actual revenue, congratulations. This is your time. To the bullshit artists, you're fucking find another sucker. Yeah, you find another sucker. If you didn't get any revenue turned on.

Yeah. Yeah. Okay. Okay. We live in the future. Take us through this one. So anyway, one of us could be finding and funding this apparently real thing. I'm sure you saw it. It's almost certainly not real. Anyway, but Futurism.com posted this video, a concept video of a flying nuclear cruise ship called Sky Cruise.

I think that this was literally like posted as an exercise in sci-fi imagining, but why not? Honestly, we can use it. Filmmaker and producer Hasham El-Gaily. is best known for making infographics and videos about scientific breakthroughs. His YouTube account has almost 500,000 subscribers. And he posted this clip, which will play, if you're watching us on YouTube or on Spotify. What's so awesome, by the way, about this video is how really made it look as a concept video. Yes.

It feels like, you know, the beginning of a science fiction movie. Like, it could be the fifth element or it could be, you know, Snowpiercer. I might not go to the bummer out. Which I don't. Yeah. So what it looks like, for those of you who are not watching, is it's kind of like a little bit Starship Enterprise meets maybe the Avengers

plane floating thingy. And it's got a spinning sky deck. And it's a super beautiful luxury hotel. And people are just standing by the windows as they like float over the sky. And I think in his video he described 20. electric engines powered by a small nuclear reactor that uses a highly controlled fusion reaction. So it's not fission based, right, which is the nuclear energy that we're all familiar with. It's fusion based, which is the nuclear energy that does not yet exist.

Yes. Leading again to the, you know, but what I love about this is you know I'm obsessed with fusion. Yeah. Because this is an imagining of what could happen in a world where you really truly had effectively unlimited energy. Yeah. portable that you could put into a reactor like a Tony Stark Hart. Yeah.

And plug into a freaking floating luxury hotel. And, you know, we are seeing a bunch of activity in transportation. Obviously, SpaceX has talked about using their rockets for point-to-point travel. Seems a little crazy. But, you know, after they, you know, they're doing a large number of these rocket launches. And over time with reusability, you know, maybe it could be feasible that if, You wanted to go from Texas to Tokyo or Sydney in an hour. You could literally take 300 people on the tip of a rocket.

Boom Supersonic is doing, you know, bringing back the Concord essentially. Sergei, Bryn from Google has got an airship company lighter than air. You had Regency on Sunday, right? Was it Regency? Regent. Regent. Sorry, Regent. Doing ferries that fly 50 feet above the water.

So there's a lot going on in this space. this seems insane because why would you want to stay in the air for a year? It doesn't make any sense. How much risk would there be in something this big? You know, flying around the world, like, it just seems unnecessary. I don't know what the mission here is. And when I say mission, not like a touchy-feely mission, but like the actual destination and goal. Like, I don't want to be circling the globe for a year or a year.

a week. I want to go somewhere and land. And what size runway does this need to take off for land? But it did remind me of two science fiction moments. Number one, the fifth element had a ship like this. That was a pleasure cruise.

So these are like cruise ships. Yeah, like a barge and pull up an image of that maybe. And then there was the aircraft carrier in the Avengers, right? And the aircraft carrier in the Avengers, actually, people wanted to build something like that specifically to launch

drone. So I think the defense department is working on something like that something like a an airborne aircraft carrier so other planes could fly off of it. But again, you need to have a lot of power to keep these things up in the air.

It's awesome. It's interesting. You are hilarious. I love how you're like, we're in the future and then you're like, I have a lot of questions about this BS right here. I'm not buying this. I mean, I do like the idea of electric engines. I think that's going to be great. We're going to have those in Cape Air bought some electric airplanes.

And then Regent has electric. So I think electric engines is one component of this. Fusion is the other. Fusion's the other interesting one. And the thing I don't like about these is I hate cruises. I have a couple of rules, you know, no buffets, no all you can eat, no cruises. These are things that I find abhorrent I never want to experience.

I don't want to be at an all you can eat buffet, people touching the food. It's not for me. All you can eat sushi. So this really is just an anti-cruise situation. I'm anti-cruise. And this gave me cruise vibes. Idea of conceptualizing what could happen

with portable nuclear fusion reactors that you can plug into and have this wonderful thing. And all Jason can think it's like norovirus, norovirus, norovirus. I just don't want. That's fair. I don't like the gen. I don't like large crowds.

around food. I like great food served intimately, you know, bespoke, crafted. It could be barbecue. It could be omel case, but no, no on the big buffet. Fifth Element cruise ship was,

that was really nice, though. I do like Fifth Element. All right, if you have any ideas where we live in the future, you find any interesting videos or stuff like that on Reddit or, you know, on the internet. I wouldn't say we want to live in the specific future,

but tell us more about the future the economy. Oh my gosh, send them to us. Producers. Let me go and my personal health. Yeah. Pretty good.

Fogood de Chow on a cruise ship served by TikTok employees. Which is, of course, the Brazilian meat that just keeps coming. And there was one cut of meat I found great. The idea of going and eating all the meat you can and getting the meat sweats and like having to not eat for like, like, my friends were like, yeah, we're not going to eat for two days. We're going to fast, and then we're going to go there and do all this stuff. And then at Fogo de Chau, you have a card. One side's red, one side's green.

So if you want meat, you flip the green card up. If you don't want to be bothered with more meat in your face, like slicing, just, they're just constantly assaulting you with different cuts of meat. It's over the top. Why are you laughing? It's not for me. You might love it. I I don't.

We're out. We are out. We have more amazing content coming for you. Tune in tomorrow. I'm going to chat about markets with Michael, Batnik, and Josh Brown. Subscribe on YouTube by going to this week in startups.com slash YouTube.

So we're going to do a live crossover, co-lab. We're going to answer some questions about the markets. And Molly, you have that's going to be a fun. When I've got an interview coming up that I've been trying to book for ages, I'm so excited. Thank you, producer Rachel, for making. This happened.

Om Connect, co-founder, Matt Dusterberg is this really interesting company that is, you know, TLDR paying people to save energy. If you have questions for that, that's coming up on This Week in Climate Startups. But tweet at me before 2 p.m. on Wednesday at Mollywood. It's just my name. We're going to do a lot of interviews in summer. So if you have ideas for founders, investors, or scientists or authors, you would like us to have for the summer series, as it were, for when you're at the beach and you're at this week in startups.com. We'll see you.

Day tomorrow. Tomorrow. Bye-bye. Bye-bye. All right, everybody. It's time for the plugs. If you would like to join our Twitter community where we have a little private community of 1,500 of us,

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starting up again. This is our 12 week program. It's essentially free if you come to all 12 weeks and we teach you how to start a company. We also have Angel University that I teach three times a year or so, angel. university for information on that. Also, my other startup inside has launched a job board. You can help me out by posting a job at inside.com slash jobs. And if you go to inside.com slash jobs and you post a job there, I might just retweet it for you and you'll help you get that position filled. All right. We'll see you next time. Bye-bye.