This Week in Startups - Startup Bracketology: selecting the world’s best private company with Acquired FM PLUS future of VC | E1191

Episode Date: March 26, 2021

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They'll make an offer within a week, close the deal within a month, and keep your business operating for the long term. Get in touch at tinycapital.com slash this week, and they'll let you know within a couple of days. Hey, everybody. Welcome to another episode of this week in startups. We've got a very special. crossover, collab, collaboration, whatever the Gen Z kids are saying today.

They love when you put two things together, peanut butter and chocolate, Nike and whoever. We're going to get a house in L.A. start doing TikToks. We're going to do a TikTok house. It's going to be a startup. It's going to be a venture house. We're launching today, a TikTok venture house. And it's going to be the most boring place on the planet. With us again today, the boys are back from Acquired FM.

Ben Gilbert. He's Gilbert on. the Twitter, G-I-L-B-E-R-T. He is the co-host of Acquired.fm., an amazing podcast that does very deep dives into startups and investing. And he's also, Ben, is also the co-founder of Pioneer Square Labs and PSL Ventures. A startup studio, NVC Fund in Seattle, David Rosenthal, is DJ Rosen-T. And he is the co-host, of course, of Acquired FM Independent Angel, investor, and startup advisor. Welcome back, boys.

It's so great to be back. Great to be here. How's life been? You guys are getting ready for the end of the pandemic, ready to move on. Get back to the real world. Me too. Roaring 20s. I'm in on the thesis.

I'm in. Give me the top two or three things you want to do in a post-pandemic world. No masks, no rules, no regs, just everybody vaccinated and ready to go. Top three things. I have two. They're super different. One, I want to go to a bar with my friends. Like, I just miss it so dearly.

The second one. So alcohol. so alcohol and socializing you know but like a real dive bar that would be the goal here the other is the exact opposite I cannot wait to go back to Disneyland I am like such an absurd oh like you went right before the pandemic too yeah like there was star wars ride it was incredible I got to go do it again but I haven't been to the new Star Wars land is it everything that it's cracked up to be it is unbelievable it is it is their magnum opus Ben um as a king of the nerds did you make your own

lightsaber and which chiber crystal did you put in it? I did not. Maybe maybe David I should

gamble on what? Kyber crystal Jedi Ben put into his are you a Sith Lord or are you a Jedi

Ben? Today I'm all black so I think I'm like Luke from Empire Strikes back sort of very neighboring on the well you got

you've got it sadly Ben's had a little carpal tunnel going on so Luke Skywalker hands. Oh, look, yeah, look at that.

Wow, that is a great Android-looking hand. Did you lose that to Count Ducco or Darth Vader? Very nicely done. So, yeah, Disney is something that's on my list to bring my girls. What's on your list? Well, I got Disney for my daughters and going to the movies with my daughter. So my reward for my daughter and secretly me was if she had a good week at school, we'd go to the movies.

And in fairness, dad's favorite thing to do is go to the movies or amongst it. So my little partner and I, crime and I would be like, she was like, is this okay for me? I'm like, great for me this movie, but. Yeah, you watch it. Yeah, I don't think I can take you to see it. But I, you know, a PG-13 movie I'll take her to see.

So I'm excited about the movies in Disney and also going back to Japan and getting on a flight and doing some speaking gigs. That would be in the short list for me. How about you? International travel for me. Got a particular place. And I will actually, you know,

almost international travel from San Francisco. really New York. I miss New York. Yes. I miss my mom and daddy. I was thinking about running through Central Park the other day. Oh, so great. It's the best. Cannot wait. All right. Maybe we'll do like a joint live pod. That'd be fun. Oh, that'd be sick. So let's go over the state of venture capital. You guys heard the all in podcast. We went on the all in pod. We did a little bit of talk about the future of it. Chumath put together a deck. And then our friends and partners over at Pitchbook, if you don't know Pitchbook, they keep track of all these deals. And then. And we've joined in partnership with them with the podcast to just share some of their data. They're not a paid partnership. We just, they gave us access to the data and we're sharing it. So the median early stage pre-money valuation continues to edge upwards in Q4 2020, ultimately reaching an all-time high of $35 million and bringing the yearly median to a record high of $30 million.

Now, that's interesting. We've got to parse that. This is their early stage pre-money valuation. That means before the money gets put in. So if 10 got put in, the 35 would turn into 45. But even just looking at this, I think that's a combination of seed in A. I think it's a combination of seed and a yeah. I think it's when a fund goes into it.

Let's follow up with the second paragraph. This figure is nearly double the annual median from just five years prior when the median early stage valuation barely eclips 15 million. The recent run-up and pre-money valuations reflects not only startups' abilities to command lofty valuations, but also investors' willingness, finance, promising early-stage ventures at higher valuations and for larger check sizes. It's fairly obvious, particularly as the median early stage deal size has reached an all-time high of 6.5 million in 2020. And that's like when you step off the plane at SFO, they just hand you six and a half million. Is that sort of...

Basically, yeah. I mean, right when you get past the first Starbucks, you can go ahead. Make a left at the Cafe X machine and pick up your briefcase full of cash. It is a little bonkers out there. what's the craziest to stripping out the valuations peak bubble early stage startup moment you've had in the last couple of weeks I got one but yeah I'll let you guys you got looks like Ben's got one he's ready to go he's just I mean it's just been one after another after another I mean give me the most egregious one that was

like heartbreaking for you to say no to or say yes to as the case may be well I there's been situations where I've seen um insiders want to lead the next round and get sort of feel like there's going to be pressure to do some crazy valuation and then just doing crazy valuations inside without that external pressure. I think people are frankly second guessing themselves based on the sheer amount of insanity out there. And so people are getting itchy, even absent external data to force them into those situations. And so to be clear, an inside round, that's when the three of us were investors in a startup, we decide, hey,

startups tripled revenue, let's quadrupa their valuation and give them another $3 million, $1 million each, as opposed to going out and saying, let the market value this company come back to us and we'll tell you if we want to beat it, participate, do our prorata, not do our pro rata. But Jason, I think the thing to underscore here is it's not a crazy market for everyone. It's a bifurcated market. There's 90% of startups, the fundraising market is behaving the way that it has for the last two, three years. And then there's 10% of startups where it's bananas town.

and you basically have a week where you're on the fundraising trail and you either get sorted into Hogwarts or you don't. I mean, it's, it's, it is like, um, the way I was describing it the other day to, to some portfolio companies who are, you know, debating do we go in fundraise right now is, uh, every VC is so inundated that everybody sort of wants to run their normal diligence process, the normal investment process. But the thing that keeps happening to them is somebody just keeps hijacking their week. And so the question when you're evaluating any opportunity is, is this one that I get to run my normal process on? Or is this run where I have to, is this one where I have to drop everything and completely change my plans and clear my schedule and, you know, freak out and go compete? And like, it's feeling like you never actually get to run your normal process. You're only ever in the crazy town part. David, what are you saying out there? Yeah, I mean, I would agree with all that. But actually, the most interesting thing, well, A, All in pot is so good. I think we said this last time we're on. You guys are just crushing it. Like, awesome to see.

I thought it was the end, the end of last weeks when, you know, you did the Chmata, I can talk about the state of venture capital. You kind of, I assume as a joke, you're like, I'm getting wetyourbeak.com. I'm putting it up for syndicate. Yeah. That's actually like, you guys are, I hope you really do that. That's what I think is super interesting because. Well, if you go to wetyourbeak.com, we have a form up, which just the type form I use for

our events and yeah, we're getting hundreds of pitches. I mean, most of them are like, I have an idea and Ken Chimoth take me to a Warriors game or whatever, but, you know, it's a, yeah, we continue. But yeah, seriously, like, why, I think you guys are really on to something that, like, if the four of you actually put together a syndicate or, you know, something, some sort of vehicle, like, would, and I'm a founder and I'm maybe an early, stage founder, like, would I rather take money from the four of you who have built in the number one technology pod in the world right now that you can talk about them? Or would I rather take money from a venture capital firm that's going to give me money? Exactly. I think, you know,

people are starting to realize, and obviously you guys have this built in as well, if you have a media channel, you can capture deal flow and you can promote the deal flow if you're at scale. The only rub for us is you know, Tramontz doing public market investing. And he'll dabble, I think, earlier stages. Sacks has his own fund, so it's not like he can pop up another vehicle. I have my own fund. And then Freiburg runs a startup studio. So I think what will wind up happening is, you know, if it's really early stage,

I'll wind up syndicating them and then including the other besties if they want. So like they could, you know, go in through my syndicate carry free. Or we could come up with some hybrid. but what we can't do is have them invest in a company outside of their fund and then their LPs are like, what happened? 2021 is looking up new beginnings means new opportunities to grow your business. If part of your strategy like mine is adding new team members, LinkedIn jobs finds the right person quickly.

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Okay, let's get back to this amazing episode. But let me ask you this. If you guys were, if you guys were starting over, you had the all-in pod, yeah. Would you do this? Seems like a no-brainer, right? It would be, yeah. I mean, I think everybody will eventually copy my

model, which is have a podcast and a syndicate. I think it's actually, I stumbled upon the best model. The podcast, you know, I copy. Andresen Harwitz is copying you. Well, they copy me all the time. I mean, they literally sit there and just, they literally have like five partners, like taking notes of what I'm doing. That's okay, though.

I keep changing it. You could steal the recipe, but, you know. They got a bug played with that neon sign, you got to do the work that's actually directly piped into. Absolutely. It's interesting. You know, I think, you know, I think, you know, equity crowdfunding is really interesting.

I don't know if you saw what happened with Sahel and backstage. Have you guys been following that? I'm curious your thoughts on any impact you think that will make. So with backstage capital, Arlen put the management company up and basically sold 10% of the management company, right? So the entitlement to future fees and carry. Have you ever seen anybody do that? So I know in 99 people were taking management companies public.

Really? They're, there have, well, private equity firms do this all the time, yeah. What was the number one example of a, of,

do you remember any venture firms doing? I remember startup studios, like IDEA lab was going to do it. And then Vertical Net, um, was like a startup studio, or CMGI, right? Which had done vertical net.

CMGI was like a, again, an idea lab, almost like a Y Combinator, except they originated the ideas or like science labs in New York, or in L.A. or beta works. But I think those,

that business model, startup lab business models having a hard time, I would wildly disagree, but that's because I have inside information. Oh, really? Well, I mean, aside from Snowflake, but I think, isn't it hard to find CEOs to staff these companies when the founder is the venture capitalist? And you're hiring that CEO? That last little bit is the thing that is make or break for the model.

The whole thing, at least we've found, is you have to do everything in your possible power to make that founder, the founder of the business. They hire the people. They raise the money. Their name is on the line. You know, they're signing up to be a founder of a business and not be a hired CEO. And at least half of what you guys are doing now is the founders come to you.

It's not like it's your idea, right? Like the founders bring the idea and start it. Yep. Yep. And of course, we're talking about Pioneer Square Labs, our startup studio. Yeah, 50% of it is founders bringing ideas.

50% of ideas we have that. Do you find easily CEOs or is that really hard to find a CEO? It is the constraining factor in the business. Got. Because to the extent that you partner with a B-plus founder, then why are you doing it in the first place? Correct. And so you have like a super narrow bottom of funnel.

For a startup studio, what do you think the average startup studio offers a hired gun CEO in terms of equity? 10%, 20%, 5%. What do you think the range is? Obviously, it depends on the person's experience and how far along the company is, but it can't be less than 5%, right?

I think if they're messaging it like a hired gun CEO, it doesn't matter what they're offering them because it's doomed to fail. But I will say to the extent where it's more like a co-founder, like the studio is a glorified co-founder. You know, it's a, for example, we're 22 people, largely engineers, designers, digital marketers, all that stuff.

I think by the time you get to Series A, it ends up looking just like another investor on the cap table. 20% then. Yeah, somewhere in there. Got it. We recently did it for the first time. We had growth university. And we were starting this because we wanted to educate our accelerator.

And the growth university program, we had somebody who wanted to run it, Craig Zingerline, who was an amazing CEO who had invested in before. So we'd been through the accelerator. And we said, we'll make this growth university with you. You run it. You're the CEO. We'll back it. We'll do the financing.

and we'll split it 50-50. So we did a 50-50, and then we just syndicated it. And I syndicated it to my syndicate and said, no carry. So we'll raise 5 or 600K. Nice. But you guys get a free ride.

And of course, it filled up real quick. And then I put 100K in from my fund, and I had to go to my LPAC, you know, my advisory committee, I guess. And I just said, is it okay for me to put 100 in from the fund? Or is it conflicted deal flow? Because I've never been faced with that

because when I raised the fund, we never said we were a startup studio. You then told everybody you were going to be a startup studio, so they bought into that already. Yep. Yep. Yeah, and you're right. The model has all these conflicts that you have to figure out mechanisms to solve for because you're simultaneously helping to sort of co-found and birth this business into the world.

And then 10 seconds later, you're evaluating it with your, you know, independent investor eyes. And you're saying, should my LPs have exposure to this company? And you have to be really careful about that and sort of create a system where, you know, you have the very best information you could possibly have to make that decision and your heart is in it. So it's 100%. Yeah. So venture capital is insane right now. I am thinking about taking a pause. I'll be totally honest. I have so many companies right now that I am thinking about shifting about a third of my energy to new investments to just redeploying it on the existing portfolio companies and helping them raise more money. And I'm thinking about taking another third of that and then focusing on M&A and selling

What do you think of my interesting strategy? Help me understand focusing on existing companies. Are you willing to pay the prices that these existing companies are getting in their step-ups? Are you saying, hey, can we reopen a note or something and I can just give you more capital at the same price? I'm thinking of going to my portfolio companies and then just assisting them in their process. Because I'm going to them and I'm saying, what you're raising plan? I'm like, I've got a year as a runway. I'm not doing it.

I'm like, I've never seen anything hotter. You should be raising now. And they're like, but we just closed our way six months ago. And I'm like, yeah, but raise now. Raise now. I mean, it's crazy out there. Just raise. I don't know if you heard like some Y Combinator company pre-launch got a $100 million

valuation. So now this club houseification of this arm race where you give people $10 million for 10% of their company before it's launched is now becoming an infection. If that's the case, if the market is illogical in terms of the valuations, the logical thing to do would be to be a seller of equity, correct? Absolutely. It's never been a better time to found a company. I just sold 10% of my position in one of our biggest holdings. I wouldn't say which one. But I was just like, this is just too rich of evaluation for me to not take the 10% idiot insurance. I think it depends on, it depends on your access to capital and your and your capital deployment strategy. Are you talking about shifting your dollars or shifting your time and energy? My time and energy. Right. I mean, it doesn't mean we're not going to be.

going to do the pro rata, but if we are looking at our, if we're all looking at our mutual portfolios and saying, do I want to add a company now at $50 million valuation, or do I take the five companies I invested in last year at a $10 million valuation and help three of them become $50 million companies? Right, right. Which is a better use of my time, of Ben's time, right, of David's time, of Jason's time. What's a better use of an early stage person's time? I'm just wondering.

I'm putting it out there. I haven't solidified this. I haven't even talked to my team about it. But the valuations are all, I'll give you my story. Company raises $12 million. Sorry, company raises $2 or $3 million at a $12 million valuation six months ago. They want me on the cap table. Or it's five months ago.

They asked for like $25 million. And I was like, what's changed in setting? They're like, nothing. I mean, we made product progress, but I'm like, is anybody paying for the product? Like, not yet. I'm like, so you want a two and a half extra valuation in six months? And they're like, yeah, but I think that's what we can get. And I was like, good luck, let me know.

Probably is what they can get. And I just said, you know what? when you get to a million dollars in revenue, come back because when you're at a million dollars in revenue, somebody will give you five times, which will be the valuation you're getting now. So, I mean, I think the thing is, though,

like what is it SaaS company? It's kind of like you guys were, I think this was Chemaas, part of Chmast thesis on, on all input was the middle layers of the capital cake are just getting squashed right now. Brutal. So like if you're, you know, and this is, you know,

this is the phone momentality. This is what driving it. But like, if you don't get into these companies, you're not, you're not getting in, uh, again. Um, I mean, like one of probably my best performing angel investment, uh, which is performing, best performing in terms of markups. Let's be clear, not in terms of revenue or anything yet. Um, you know, if you weren't in early, like, there's no room now, guys came in and

stuffed a bunch of money in and then they stuffed a bunch of money again in an internal round. and then they did bring in an external firm, but it was like a no deck, no partner meeting, no enough, just like heard you are raising, here's a term sheet. Could go wrong. What could go wrong here?

Jason, so the point that you were making earlier, if founders are like, should I listen to Jason or not? You know, if he's coming in and, you know, dedicating his time to helping me raise my next round

instead of going and finding new companies for his basket of diversified portfolio of equities, you want to raise, money when you can and when the wind is at your back and not when you have six to nine months of capital left. And I think a lot of people constantly, it's a natural feeling, feeling like, but I just fundraised. And but if the charts going up, like that doesn't matter. Go, go fundraise when you can. Okay. Let's, I agree with that. Let's take a pause for a second here and talk about the equity crowdfunding we saw. And I want to unpack both deals because both deals was

spectacular. Both deals were five million. It took, I think, Arlen, a week. But you just reached it today, I believe, with 7,140C, 7 investors. So great. And 5 million Sothill did in one day. But that's a $10 million business. And Republic announced their $36 million raised, but you could be sure that that was done three months ago. And they're just announcing it now.

So that probably predates this red hot market or the equity crowdfunding rate of raise and limitation. So that's where I think we have to start. The big change here, I believe, is that it's $1 million. It used to be a max of $1 million. And I did an equity crowdfunding on seed invest for inside, let the readers buy shares. It was great. I put in $250k of my own money during that.

So I had a lot of skin in the game, my personal money, not the fund. And so the max was $1.07 million. Now the max is $5 million. Annually, right? Annually. So there is no sponsor on this. There is no GP or syndicate lead. There is no partner.

In other words, if you're a founder and you go do this, you now have a direct relationship with your investors without anybody mitigating that. Is that a plus or a minus? And is that disruptive to VCs in Series A? Or is it disruptive to seed funds? Who loses if founders start realizing, I can have no adult supervision and just raise $100 from each of 5,000 people or $1,000 on average from 5,000 people? Wow.

Big Box authority questions. The first thing that comes to mind for me is, let's say I sell out $5 million and I do that, you know, there's 400 new people. My first question is like, do they actually all show up on my cap table or is there some sort of vehicle that manages all that? I think there's some sort of vehicle. I'm not sure exactly how that works. I'll be totally honest.

I know in a syndicate, you have an LLC. Right. So I'm not sure how that exactly works, but you may actually get all of them on your cap table. I'm not sure how it works. And then my second question is like, if that's Republican probably, probably, got to be on their page. And then the other issue that sort of comes up with that is like, let's say there's an acquisition that goes through.

A lot of times there'll be a provision that's like, we want to make sure that we get 95% of preferred holders. And sometimes people will say like, we want 100% of preferred holders. Oh yeah. Everybody signs off on this deal. Like, does this change that dynamic where now, you know, these will be a special class of shares that are preferred but not, you know, they can't impact decisions. So they're, you know, they're automatically subjugated to drag along rights. in a sort of much broader scale where they can be dragged along with everything. I think this is going to be like remote first companies. Like we were talking with Wade at Zapier about this. Like when they

started it was like, oh, you're a remote company. Well, that means, you know, if you were going to sell yourself, you're worth like half as much as if you had an office. Weirdos. No campus weirdos. Yeah. No kind bar weirdos. I think this just makes so much sense. Like, why wouldn't you get this, you know, VC dollars are so. expensive. They come with so many strings. The only thing that it didn't make sense previously was you had to do a lot of audits and it was a lot of work compared to selling to accredited investors. And credit investors are going to be like, I invest $10,000 and no diligence. Whereas if you're a civilian and you want to invest $500 or $5 or $50, it's really hard. It's called the CrowdSafe and it's one

item on the cap table. And I think there are a lot of people out there that are not just like, like, certainly there's some people that are going to do this in lieu of, you know, gambling or going to the track or whatever. And like, that's fine because you can gamble to go to the track, right? But I think there's a lot of dollars out there that like actually are fairly sophisticated, actually would like to do this, but just can't access the venture markets. I mean, you don't probably like, you know, all of Wall Street bets can show up for this. You know, like, like, David said very sophisticated. Raising money for a traditional venture fund, you know, you go, if you like worked with,

you know, Cambridge Associates, a great firm and the like, you know, There are like a lot of family offices out there, very sophisticated capital or small foundations and endowments that would love to invest in stars. But the reason they put money into venture managers is because like, how are they going to do it otherwise? I just love this 506C kind of situation. I don't know if that applies to equity crowdfunding, but, you know, the rolling funds that Saw Hill did and Angelis is doing, just that a whole ability to raise publicly, I think, is

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complex compliance rules. According to the deal memo, Shield addresses an $89 billion market with tools that automatically detect and alert on behaviors that lead to market abuse, employee misconduct, and information sharing. You can easily get in on Shield and other unique opportunities at our crowd.com slash twist. That's O-U-R-W-D.com slash twist. Let's talk about the value. In the case of Sahil, it's a $10 million company. I think it was $100 million value, pre-money valuation. that's not crazy, but it is rich.

It's 100 times earnings. It's 10 times top line revenue, I think, ballpark. 10 times top line for a SaaS company right now is way under market. I mean, I almost want to throw up saying that, but it's like half of what public company SaaS, you know, multiples are. Eight and a half times revenue for Sahel. So that seems like you might be able to make a profit. I don't know what their growth rate is.

that's the key. They had a big growth spurt during COVID for his business. Gumroad is the name of the business. That lets people sell digital assets, sort of like Substack does for newsletters, but for any digital asset. So I think it might be a slow growth company. Maybe it's growing up.

I'm looking at, I'm on their website on gum, what was the revenue from 2020 to 2019? It looks like if I'm reading this right there, GMV in 2020 was 143 million, which was up 2x from the past year. And they get like 10% of that or something, or 8% after whatever.

That's a pretty fairly valued deal. I think it seems reasonable. I guess with the growth rate, we'll see if they can 10x their investment. 9.2 million in 2020. But your question that I think you're getting at here is, is the 5 million from all the people who put it in, in aggregate, in some more valuable than if a venture firm put in $5 million? I wasn't actually asking that. I was wondering if they would get any kind of what we thought the chances of them having a return on investment. And we think it's reasonable that they could.

But I think your question is actually really interesting because all of those people become advocates for the company, right? You have 7,000 owners now. It's amazing. Which is amazing. I think I'm going to do it for inside.com again because we're profitable now and we have over a million dollars in the bank. But I mean, to get, and I think I might underpriced as well

because it's really interesting to have all those people rooting for you at $500 a piece. I kind of love that. Well, for you guys, you have a bunch of loyal readers, I'm sure, right? We have 400,000 emails in the database. Yeah. We convert 1% of those were good, which is what happened last time. So I think this could be amazing. Like if all the drivers or all the, you know, if all the DoorDash drive, imagine the early

days of Uber or DoorDash. What if DoorDash just did this every time but gave their drivers priority or Airbnb did it and gave the host the priority? We've talked about this before. It's incredible, right? Right. Because you're raising a Series C or, you know, I don't know. Like you guys said, like, sure, you're raising your A, maybe your B.

You want Sequoia on your cap table? Great. That makes sense. Yeah. The reason you see, like, who cares? It's just a financial transaction. Well, it's why you see people just pulling in like some random sovereign wealth fund or, you know, big family offices and then never really announcing who did the round, but just saying how much they raised. We had Rahulvora on our podcast to talk about how he fund raises for superhuman. And he was saying, well, every other round, I get a big name firm. And then I'll get like a family office or something just to give me that nice step up in valuation, basically the cheapest capital that I can find. in the middle. We own 2% of Superhuman. We're excited. Love it.

Hey, nice. Yeah, get that big quit. Well, we wrote the 500K check, you know, on a Sunday before he even launched it just on like a three-page deck. I was like, what's your idea? And he's like, I want to make like the most elegant email product. I was like, oh, that's amazing. I was like, uh, what's the business model? He's like, well, we're going to charge a dollar a day.

And I was like, you're going to charge $365 a year. for what Google provides for free. He said, yep. Let me think about that for a second. Over 10 years, they'll give you $4,000. Over 10 years, they give Google zero dollars. And somebody's going to do that. He's like, yeah, I was like, why would they do that?

He's like, well, we'll save them like 10% of their time and it'll be a better experience. I would pay for it. I mean, how much do I pay for Zoom every day? Like Google provides this for free too, and here we are on Zoom, and we've all paid richly for it. Exactly.

The other ridiculous thing that was, it was unbelievable nobody had figured out until now that directly impacts all of this is pipe and cap chase and Clearbank and like, yeah. Be careful with these folks because some of them are different than others. Pipe as an example is a two-sided marketplace. You're saying this because you're 50% of the all-in besties that are not invested in pipe. So you got a chip on your shoulder here. No, actually a pipe I like, Clearbank, I don't. It's not that I dislike Clearbank, but I just had to, I felt like they were being.

disingenuous about the, they wouldn't say the rate. And so I got in a little bit of a fight with them and I declined their advertising on this weekend startups because I didn't like the way they were doing their messaging, which was, oh, we only charged $6,000 for two months for, you know, 100K or 200K. And I was like, so you're charging whatever it was. I was like, you're charging 6% every two months, which is 36%, but it's compounding. So it's like 50%. Interest, like, no, no, we just charge a $6,000 fee.

I'm like, but if you called an interest, it would be a 50% interest rate. And then one of my companies used it and they had a very bad experience. So I was like, I don't know. Have you guys had any of your companies use Clearbank specifically? Not Clearbank, but actually a sponsor of the show of acquired is Capchase and they've been like awesome to work with.

We haven't worked with them as customers yet. But like I am in love with this business model. They're like they're kind of a hybrid. They're between those two. They're like pipe. So they're for the same companies as SaaS companies. software companies. But they have their own, it's not, it's a combination of their own capital plus they raise

on the capital markets, but it's not a marketplace. Cap Chase, C-A-P-C-H-A-S-E. Oh, that's interesting. I've never heard of them. Are they raising money at some ridiculous valuation that none of us can afford? I think they're doing well, so I would assume so. After what happened with Pipe, I would think that they're ready to go, but this looks cool. I believe they've only raised a pretty large seed round.

I bet they'll raise another equity round soon. They raised a big credit facility for investing in companies. Well, maybe we need to get our beaks wet. There you go. After those other guys that are in pipe. Look at this. They have their nice type form set up here. I'm checking them out.

All right. And then finally, to put a cap on these, in order for people to make a return on the investment in Arlenz fund, backstage capital, she sold 10% of the management company for $5 million. you get for that $5 million, according to the really convoluted chart. I don't know if you saw the chart of how the money flows,

but I guess she's got multiple entities, so they had to disclose everything. 10% of management fees, and can somebody on the team tell me how much she has under management? I think it's 10 or 15 million. Maybe it's $15 million. So 10% of the management company's returns

and their management fees. So putting aside management fees, because even if she had a $50 million fund and was getting a million dollars, 10% of that would only be $100,000 a year, right? So you would take 50 years to make the money to even break even. With these small funds, yeah, the enterprise value

is so much more in the carry. So let's do the carry exercise. If you, in order to get $5 million back on carry, how much return would she have to have on her? Depends what percentage carry, but if you assume, let's just say $25. 25%, yeah. So then you would need 50 million in the total carry pool. So you would need 200 million in return, which is not unreasonable.

200, let's see, 50 million is the value of the company. Five million is the amount that's been invested. To break even if you had 250 million, no, if you had 200 million, 25% of that would be 50 returned. So you have to clear 200 million. And if you had 15 million in carry to the fund, investment, you'd you'd have 260, you'd have to return, oh, here we go, seven million according to pitch book, five million for fund one, two million for the backstage accelerator. Let's round it up to 10 million. 10 million, she'd have to return 260 million on the existing,

which would be a 26x cash on cash fund. Wow, I was assuming she had more capital under management. So she has to really pick some winners. Well, fun two is open right now. Let's say fun two. Well, yeah, I mean, it's 20 million. The management company is going to manage

every future vehicle that she raised. So, I mean, the reason that you can comfortably assign a large value to a management company like that is that if she does 10 funds in the future in a studio and an accelerator and she launches a podcast and it's all under that umbrella, it's not hard to see how the discounted sum of future profits of everything under the backstaged umbrella could get to fees and carry. Totally. And revenue. The fees would always be de minimis, but let's just say the second fund wound up being 30 million. And that would be 40 million.

40 million turning into 200 would be a 5x cash on cash fund should have to have. It's a great fund, but that's doable. Basically more like 6x because you have to pay back the original 40. And small funds, I mean, as you know,

small funds are much easier to get those higher multiples on. Absolutely. Look at Saka, look at the first Medrana fund that I was part of. It's a $167 million fund, 2005 vintage, I think, and has now hard dollar cash returned over 1.3 billion to LPs with two pretty good portfolio companies still sit and unrealized.

I would take the Sahel deal in terms of just return on investment over the backstage one, but the backstage one, you're basically betting on the future and the Sahel one, you're betting on the what exists today. So depending on your risk and also depending on affinity, right? I mean, I think if you want to see change in venture and you're making the investment because you want to see change in the world and you're happy to just either lose the money or double your money, but you're not like trying to 10x it. Yeah, that's the opportunity here.

It's the affinity. Like it's not just the returns. You just want returns. Like there are plenty of things you can do to just generate returns. I will say the interesting macro trend that like this discussion, you know, of talking about the revenue loans or the revenue financing world. plus this crowdfunding world, plus solo capitalists.

And Jason, everything that you had talked about on the All In, where you're talking about that you've got these mega funds, you've got the sequoias of the world that are following along from Seed all the way through IPO. And they don't need the growth equity anymore after that. There's one sort of fund to help you.

It's very quickly following a trend that has happened in other areas on the internet, but took forever to show up to startup financing which is this duality, this chasm. And we observed it in media. Like we just did this New York Times episode. There's the New York Times, everybody who was smaller than the New York Times but had a big cost structure in the middle sort of failed. And then there's this thriving long tail of low cost structure businesses serving niches.

And I think there's nothing in between. Totally. And I think that like it's fascinating to watch it happen to capital where either you need to be large or you need to be small with a low cost structure and very differentiated. And it's like the middle is a tough, tough place to be. If you were me, would you make the syndicate into a platform and go head to head with Angelist? Ooh. Well, Angelist, you know, incredible innovators, they offer great products.

But they are monopoly in the space. Like they have ultimate pricing power. Like, you know, I have 7,000 members and we're adding 200, 100, 100 a week. Yeah. I mean, if you were to open it up to third parties on your infrastructure, that could be very interesting, especially if you're willing to price below Angel List. David, you're an angel investor. You don't have a fund, right? No, but I've considered it. I've thought about, I've talked to Angelists about doing a rolling fund. Well, if I went to you and I said, hey, bring me a deal and I'll syndicate it

and split the carry with you. Would that be interesting to you as an angel? Potentially, if it was a deal that required a lot of capital. Yeah, like a million dollars or two million dollars, series A type deal. More interesting for me, though, would be, but I don't know that I'm a specific case, because we have acquired and we have our own audience, most interesting to me would be, let me use your infrastructure. Yeah. Infrastructure is done by a sure fund management, which we invested in. They used to be the back end for Angelus, before Angelus decided to do it themselves with, I think, something called Bellwether, I think, is theirs. So, anyway, I'm just, I've been toying with the idea. I don't want to go

head-to-head with Naval, but I do think I could cherry pick, let's say, four angel investors to work with me and just say, when you have a big deal. If you do really good angel investors that didn't have a built-in audience that they could use to get the capital. Or back office, or they don't want to take the time to build, you know, 10,000 people onto their accredited investor list, all that. I was also thinking about maybe doing fund to fund with it, too. Like, so I have a friend who's doing raising a venture fund and she,

She was like, would you put $5 million in with your syndicate? And I was like, I've never thought about that. How would that work? Like, you could take a percentage of the carry or whatever. And I was like, huh. So I could do an SPV that was an LP in your fund and then wet my beak there. Interesting. Yeah, we're like searching around here and wondering if we've reached a top.

And I just heard you say that sentence, twisted my brain into a pretzel. And I think we may have found the answer. In the past, selling your business was miserable. We all know that. Months of negotiation, legal fees. And sometimes you'd have to watch. The new owners just trash the business. You spent all those years building.

And I have so many acquisition stories I can tell you. I mean, even when I sold Weblogs Inc. And I had 100 blogs, they kept consolidating them and consolidating them down. Until now, there's only two left in gadget and auto blog. And I just heard they're going to consolidate those down into Yahoo. It's so painful me to look back and watch all of that stuff get ripped apart. Well, now there's Tiny. I had Tiny's co-founder Andrew Wilkinson on episode 1174 back in February.

where he described their amazing new approach, Warren Buffett's style, if you will, to acquisitions. He's buying stuff up. He's doing this incredible roll-up. Andrew and his team started Tiny to become the buyer they wish they could have sold to, somebody who's fair, somebody who's fast, and, of course, founder-friendly. If you're looking for a new home for your internet business, they'll respond in a day or two, make an offer within seven days,

and close a straightforward deal in about 30 days. Tiny, T-I-N-Y, partners with founders to give them quick, straightforward exits that protect their team and culture. Get in touch with Tiny Capital.com. And they'll let you know within a couple of days if they want to buy your business. And for how much, you've got nothing to lose. Go ahead and visit tinycapital.com slash this week. Now we've decided to do something really fun. Everybody loved our Mount Rushmore.

Last time you boys were on. And we decided we're going to do Bracketology because of March Madness about who is the world's best price. a private company. Here's the criteria. We'll throw it up on the screen. We have four categories, Futurism, FinTech, consumer, and productivity. And we're going to do a bracketology here. You got, what do we got, eight on each side. And then, so 16 companies. Yep, four in each category. We're starting to the sweet 16. Sweet 16. So walk me through the factors we're thinking about considering here while we make this decision. Because you boys were very involved in this with producer Nick, right?

Indeed. Yeah, we don't want to take, this is, this is producer Nick's baby. but we were involved. Okay, well, Nick is not allowed to be on air, so you guys explain what we're doing here. Brutal. He doesn't want to. I would prefer to be on air more often. All right, so the criteria,

and we should talk about if we want to narrow this a little bit, because it actually would affect my picks. The criteria that we talked about is first and foremost founder bet. So how much sort of raw potential does the founder or CEO have? The second factor being, can this be a fendmg? Fang plus Microsoft equivalent company within the next 10 years. Can it be a trillion dollar? You know, this new class of companies we didn't previously think could exist until the last couple of years.

I like this idea is, can it be a trillion dollar company? Can it join the Fang, right? I love that. Yeah. And I think I'd like to make that the first and foremost. 100%. I'm doubt for that, too. I mean, that's all we care about is all of us just want to have a trillion dollar company

in our portfolio at some point, right? Totally. And for a while, like, as I was looking through trying to make my first, I thought about like, company's the hardest. I thought about like cash on cash. I thought about like remaining upside, IR, you know, this bucket of like, is it a good investment now?

And it's like, it just makes you pick suboptimal picks because you're like, well, where can I get, where is a little bit of a value bet here? Yeah. So let's just assume all these companies are all in our portfolio. We've wet our beak on all of them. Right. And now we're trying to decide. We're doing like a portfolio review.

Okay, that's fine. Right. So we're not looking at them from which one's undervalue, which one's overvalued. Just which one. is going to be the most important company. We're allocating our energy for the next couple years of in our portfolio. Which one are we going to get really behind and help? Let's start with futurism.

Because when we get really behind and help it, that's the thing that's going to turn it into a trillion dollar company. Absolutely. People are going to listen to our podcast and of a sudden it's worth a trillion. All right, Futurism bracket. First up, SpaceX, of course. Valuation is 74 billion. They've raised 6.4 billion.

My boy, Antonio, from Valor. my other boy, Jervitson from DFJ and Elon are all major investors. Sacks is also investor. Sequoia did. Okay, right. Rulof worked with Elon. Oh, good. Rulof worked with Elon was a CFO of PayPal.

Two billion in revenue, almost 10,000 employees. And they have a really great product that people are, I think, underestimating for me, the most valuable company, the most valuable part of the company is Starlink. Starlink, for sure. Do we all agree on that? completely. Starlink is going to change everything. People who

have it already and Elon showed it to me last year and the early prototype of it and boy, is it sick. I can't say anything else I know, but it is. It's awesome. If you watch the videos on YouTube, but people send it up. I haven't. It's awesome. Yeah. I mean,

I literally saw unit number one at the home base and it was quite spectacular to see what it's capable of. And I think there's cards to be turn. I don't want to, uh, there's cards that are going to turn over that will be even more mind blowing. I'll leave it at that. Is this like a, it's like a secret like button you push and like it's something awesome happens? I just think there's more cards to turn over. Let's leave it at that,

you know. Uh, so, uh, and then our number two, Rivian, uh, which is Tesla's top competitor in EV trucks. They got 27 billion dollar valuation. They've raised eight billion. Major investors include Ford and T-Roe price. Not that that was mean anything, but. necessarily, but Amazon and Jeff Bezos are also investors, that's right? Or is it Amazon or Jeff Bezos? Amazon's an investor and they have preordered 100,000 trucks from them that they're going to start to electrify their delivery fleet. Why don't you read me the next two? The next two are Anderrill, Andrewill, which is Palmer Lucky's new, although it's not that new company after Oculus, which is a defense contractor, a tech-enabled defense contractor, basically.

basically new age bowing. And this one's controversial for some reason, right? I remember when this farmer's controversial. Homer's controversial because allegedly, I want to say allegedly, because he won't come on this week in startups because he, on some episode of the news roundtable, we were making fun of him, he felt, or something. So he told me he doesn't want to come on this week in startups.

Well, I told him, I was like, number one, I don't even remember, but was it about the whole Reddit thing in your secret account? Who cares? Like, let's talk about your company. Like, seriously. I mean, you're Palmer's like a super fascinating guy. It's into cosplay. he created like the best VR company ever.

And now he's creating drones to protect the border. I don't know why everybody's so precious? Like we want, don't we want entrepreneurs protecting America and making weapons and systems and stuff like that? I think we want to have the best weapons and the best. I think the controversy is like there's, you know, they're using facial recognition and whatnot and tech, you know,

it is the mills. But, you know, look, like, it's either they're going to make it or Lockheed's going to make it. I mean, what's the big. deal. I mean, we're up against China. We're up against, you know, terrorists in the Middle East. We got domestic terrorists. I mean, we want to keep an eye on stuff. If his drones, you know, he's making the first American-made drones is what I understand. If those drones can capture somebody with an AR-15, you know, and help the police, you know, eliminate that target, in other words, blow their fucking brains over, I'm pretty cool with it. I mean, bleep that out.

And like the alternative is, you know, DJI is a great company with amazing technology, but there's no way the U.S. military is going to use DJI drones. So it's not going to happen. Nor are they going to have access to whatever the best ones are. Okay. Next up is Scale AI. I was less familiar with these guys, but I'd heard of them in the past. This is like the Uber for AI training is the tagline.

But lots of AI unstructured data training platform, right? Yeah, I mean, they're basically doing machine training for all the self-driving people. So I think they're the ones giving a lot of the vehicle companies white label data. to train like this is. Now, I don't think they're giving it to Tesla, but maybe the other ones are using their data sets. I don't think. I'm thinking should we, should we, should we do each bracket?

I think we should, right? So that's the future is a bracket. And then go to the next one. And then we can have the final four. Yeah. So that means we have to pick between SpaceX and Scale AI and Rivian versus Andro. Scales the bottom seed. Got it.

Okay. Well, this is pretty easy, isn't it? Well, no, the first one's easy. SpaceX is much more important than Scale AI, right? They dominate them. Yeah. And to be clear, I think we're doing this collaboratively, right? We're coming up with one bracket here.

I think what we should do is advocate for our positions and then decide. Because, like, realistically here. We're like the judging panel. So I think it's, if there's disagree with two out of three carries a day. Well, two out of three carries the day. I love it. So there's always going to be a winner. Perfect.

Got to be SpaceX. Gotta be SpaceX. Got to be SpaceX. That's a no-brainer. Okay. Rivian versus Andrew. So then you're going about the second tier electric car company. versus Palmer Lucky who created Oculus and who is doing military defense.

I'm going with Palmer Lucky because I think that he's supremely talented and I think that Rivian's in a commodity business. I agree. This one's tougher for me because I was less familiar with both of these companies. It's actually a good excuse to read up on Rivian a bit. Super interesting what they're doing. The Amazon deal is interesting. But like, yeah, at the end of the day, it's commodity business.

And I was just looking at like, why on earth would you buy one of these things? Cyber trucks are cheaper. and way cooler, get more range, and they have the Supercharger Network. Well, and as GM and Ford, you know, become competent in this area, they're going to have the economies of scale and the distribution.

Volkswagen. By the way, I knew this, but I hadn't focused on this. You can buy a freaking cyber truck for $39,000. It's bonkers. You know what? Elon got a... They're available to purchase now? You can buy them online.

You reserve. But the thing that's really interesting about it is that stamped metal. He got a special machine to stamp that metal. His vision was always, when he showed me the SpaceX factory,

he was showing me the metal cutting stuff and he's like, we're going to take this technology and bring it over to that factory and do the Model S and whatever. So this is what people

don't understand about his brain. What he learned in manufacturing and SpaceX is going into that cyber truck. He knows how to have materials come in one side of the factory and a product come out the other. Talk about first principle thinking.

I think a lot of people around Elon were very like, can we just use OEMs? And he was like, no OEMs. We are, we don't want to be dependent on anybody. And if you remember, Mercedes made the drive column for the model S and X. That's right. And they based off the CLS. But we had, we had Josh Clemente, the founder of levels on acquired. We're going to, we haven't released that.

We'll release that probably next week. And he was an early SpaceX engineer. And he talked about this. like, you know, just the difference between how SpaceX operators that there was a minor. Levels the glucose monitor company. Yeah, super cool company. We're investors in Nutrisense. They're number one competitor. Ah, nice. So that's interesting. That sounds like a great episode. If you want to listen to that, Acquired.fm is your domain, correct? Indeed. Okay. So do a Google search required. It's coming out next week.

Okay, so, Ben, you have a thoughts on this? You want to go with the bigger valuation? I'm going, anderil. Well, we're going, we're going valuation agnostic, because we don't, we don't care about. It's just the absolute value the final way. But Anderil, I mean, to me, it's like, Rivian is interesting, but will not build power as a business the way that, that Andrew will could. Like, Anderl is the higher beta bet. Rivian, I think, is safer. A hundred percent in agreement. That means now we have to decide SpaceX versus Andrew, for me, it's so easy. But this is a good, like, okay, so it's SpaceX. We knew space. Space is kind of like LeBron James, right? It's like, You know he's going to the finals.

If you don't give him the MVP, he's going to be like, why the F did you not give me the MVP? So here's an economic argument for why this company is going to be a trillion-dollar company. So I was reading into this. SpaceX. So I was looking into this Morgan Stanley. They won the bracket. We should save this for when it's going.

SpaceX clean sweeped three, three all the way. Andrew went three, O for three. Got it. Perfect. You wanted to say that about it. Posterity. It's happened. Yeah. So Morgan Stanley has this estimate that SoftBank will reach 300 or could reach

364 million subscribers by 2040, which is about 5%. Yes. He said SoftBank. He said SoftBank. I was like Masi Yoshi-San bought. Oh, dude, he's bringing the Vision Fund 3 is going to Republic. He's doing crowdfunding. Oh, okay. Well, then we're done. All right. Let's move through this here. I don't know. I must have had that in another note here. Anyway, so if Starlink actually can go and do that. 300 million accounts? Yes. It would be like Netflix. That's a great, which I think just cleared 200, 210 million or something.

I thought it was 250, yeah. So that's $91 billion in revenue at $25 a month, which is a very reasonable estimate of what people would pay for their internet. And the way that SpaceX has been able to do this, like a ton of people have tried to do this over the last 25 years, Teledic, Global Star, All these companies. But SpaceX got paid $20 billion over the last 15 years. by the government and other companies in the form of revenue, non-deluded financing, to tie in an earlier theme, to build the infrastructure to launch all these things. So it's like no one else can ever catch them

because no one else has been able to do this. On the Mount Rushmore in the last episode, I tried to talk my own book and make a case. But Jason, once you took Musk and jobs off the table, it was game over. Oh, is this a concession that Jason was the winner of last? I guess. I guess.

Wow. He's so good. He's so good. Yeah. I mean, he's unstoppable. Should we go to FinTech, consumer, productivity next? Are we going to go straight down the left? Let's go FinTech.

Yep. Okay. So we got Stripe, Plaid, Coinbase, and Robin Hood. I think we all know these companies, luckily, in this case. Stripe worth $100 billion going public. Robin Hood today, I think, announced Yum, their... Oh. Somebody reported the silent filing.

I don't know if they report a silent filing. Vlad confirmed it. Yeah. The confidential filing, which is a stupid name because it's not confidential that they file. It's not confidential. It's not confidential. Yes. But you would know because I don't know.

I don't, you know, when I'm under 1% on, when you're under one percent, you're not going to see you on the S one? No. No. You're going to be ringing the bell. This is what Jaycount wants to do. You know, I got invited. When you get vaccinated is go ring that bell.

You know, the crazy thing was, you know, Travis was going to have me come with them to ring the bell, you know, or just be there when the bell got wrong. But then he wasn't. and invited. And he, remember he was on the floor, but Darrow was up on the stage and it was a whole controversy. So I was going to go out and just, you know, be there to support my guy. And then it was like, oh, this is too awkward. Mommy and Daddy are fighting, whatever. And so, you know, he went in there and left or whatever. I think the first time you'll see me be there next to the founder will be calm.com if they ever go public, which I think is. Hey, I heard that

was the very first investment that the syndicate ever made and it turned in an over a hundred million dollar position. I haven't heard that before. Where did you hear that? Now you guys are trolling me. Okay. So Stripe versus Plaid, Coinbase versus Robin Hood. The first one, Stripe versus Plaid. I think that's an easy one for me, Stripe, right? They're just, yeah. Yeah. If we had been talking about potential future upside, Plaid's way undervalued right now, but I mean, Stripe. I mean, Stripe allows every piece of software, every startup I see, when they integrate payments, they integrate Stripe. It is the standard. It's like almost like as much of a standard as email, right? Like,

Because you can have your own stripe account on something like substack, right? You can bring your stripe account. And then when you leave, you take all those customer charges with you. Yeah, you're not going to say it against substack these days. No, no, I'm just making a, I mean, I'm sorry if your investors in it. I was just making a point that like, it's really interesting to watch Andreessen Horowitz versus media through the vehicle of Clubhouse. And I don't know how you guys feel about it. But they're the PR partner over there.

I forgot her name Marguit. Is it Margaret? Yeah, Margaret Weemakers. Margett. Like she is cutthroat and she's like, oh, we're not in any kind of debate with the media. And I'm like, Margaret. Margaret. You literally have two startups.

You gave tens of millions, if not hundreds of millions of dollars to go out and pay the top journalist to start clubhouse rooms and to give them quarter million dollar, a half million dollar advances to leave. legacy publications, you're trying to gut mainstream media, call it what it is, and own up to it. And she's like, oh, no, that's not what we're doing. It's pie, Jason. What?

This is no, this is growing the pie. It's zero sum. People don't need the 20th story about the Robin Hood IPO. They need the top three stories, right? And, you know, we'll see. I don't know, I don't know, I don't know what the guy's name is, Iglesias. Iglesias.

Eglacius. Did you see that they, what did they give them a quarter million dollar advance and then they took the rest of the revenue. Yeah, right. That's, that was terrible PR for them. That's good. They should just give him the money. Like that's,

I know. That's exactly what I thought. I don't know. He signed a deal. Like, and he got the security and the safety of leaving his job and getting a quarter million dollars in a guarantee. Their whole thing is like, come right for us and you make tons of money.

And then it comes out there like, oh, hey, by the way, we're keeping all the month. We're taking 70% of it. So for people who don't know, he got 250K in advance. and then he wound up, his publication, wound up making like 900K. So they took the rest. In the next year, he gets 90%. So he'll get 90% of whatever, it'll be a million dollars by then. He'll get 900,000.

They'll get 100. But if he leaves and goes to ghost or any of the other MailChimp platforms, he'll pay $200 a month. So he can pay $2,000 for what substack is providing or he can give them $100,000. So he's going to leave immediately. He'd be foolish not to leave. This is the reason why he should change the game now because I'm recalling back to our Oprah episode. Like this is the way these media contracts work.

You get your upfront. They do your distribution. You know, you sign the deal. So you renegotiate your contract later on. However, Substack is not doing his distribution. He's doing his own distribution. He owns the email addresses. He owns the Stripe tokens.

And so like at any given point, you can blow up the deal and go somewhere else. And so Substack doesn't actually have the leverage to hold them to this deal. Yeah. I mean, I think substack is totally screwed. Like, I think that anybody who makes over $100,000 or $200,000 on the platform is going to leave. And the whole point of these platform is to have the wells. The wells equal the revenue. So it makes no sense.

Stripe is- Mario Gabrielle, the generalist. He just went off platform to roll his own. Yeah, you can roll your own or ghost. I was looking at ghosts. I was like, oh, because right now I'm at war with Andreessen Horowitz, so I'm basically investing in the counter, all their competitors to all their startups. That's your investment thesis right now. Whatever they do, you go sign up the competitor.

I mean, I did Uber. They did Lyft, right? They did Clubhouse. I'm doing two or three other clubhouse competitors or adjacent products. And so I'm just doing the anti-profile. So I was like, oh, I'll just invest in Ghost. That'll be great. Then I can dunk on Andreson Horace.

Is it an investable entity? I thought it was just like a big open source. Yeah. So I'm looking for somebody who wants to take the ghost open source and make the WordPress. If that's you, Jason and Calacanus. And review would have been a good bet, but Twitter sends that up. Let's get the, let's get the, let's get the, Get going.

Let's go. Let's go. We're acquired FM plus the syndicate.com. Wait, Jason. Okay. So one thing before we move on from Stripe here. So we all were like, yeah, Stripe, Stripe, you know, versus Plaid here. Did you know, then I should credit Ian Sigelow, the co-founder of Greycroft with this fact,

Braintree processes more payments than Stripe? I didn't know that. Wow. Now, that will probably change soon, but they've been a juggernaut over. there and they haven't signed up developers the same way that that Stripe has but a huge chunk of PayPal's revenue comes from Braintree. Interesting. Doesn't change my opinion. Stripe's going to win this bracket. Okay, Coinbase versus Robin Hood. Yeah, let's keep going to keep moving. Coinbase versus Robin Hood. This is where it gets interesting. I'm obviously going to pick Robin Hood

because I'm an investor. And I like the idea of stocks and stonks over crypto, even though Robin Hood's, I think Robin Hood does crypto on the margins, right? does. So I like Robin Hood, but what do you guys think? I'm going Coinbase. I think this also was difficult, but I do think they both face a bunch of competition. I think Coinbase, though, faces less competition than Robin Hood as a pure play crypto exchange. Not that they don't, they, you know, Binance is huge and Gemini.

There's plenty of others out there. But I think Coinbase has done a lot to really try and centralize power within this. I mean, they're clearly the market leader in crypto. They're the market leader, but they're also, they're doing a lot. Like, they're taking on a lot of core crypto development work. They're adding tons of products. See, I think that crypto is not going to be as big as people think. And so I'm not as bull.

I'm a little, not as bullish on crypto. I think it's kind of overvalued. I think it's got a lot of risk factors, especially with sovereign cryptos, right? Like the E. Remmbi, I don't know what they pronounce it. Yeah, the digital one. The digital one is coming. So that's going to be interesting, you know.

I wouldn't be surprised if some countries say you can't use Bitcoin or if you use Bitcoin, we're going to charge you 20% per transaction instead of using the our sovereign one. So this, I guess, then, leads it to Ben. where are you going to go, Ben, Coinbase or Robin Hood? And why? So the way this boiled down for me was in thinking about what could be a trillion-dollar company, and again, there's only been four-ish in history, is that each one has to do something wildly unique and distinctive, reached a ton of people, create and capture a ton of value,

and be wildly defensible. Like, each one is the greatest business model of all time in the thing that they do. We'll articulate there. I like that. It's good checklist. I like it. Yeah, it's pretty good. It's it's rare air. It's rare air. So, to me, if Robin Hood had a shot here, then we should at least see like a half trillion dollar brokerage. Like, sure, they're better. They're disruptive, but they're not completely different than any other stock brokerage that's ever existed. They're going to add more interesting things. Are they going to hit all those checkboxes? I think it's more likely that Coinbase does because it's operating in a completely new, different disruptive area. All right. So you're going Coinbase. Coinbase wins a day.

Coinbase versus Stripe. For me, I'm going with Stripe on that one because I think Stripe and the business of business is better. I'm correct. You're going to Coinbase? I was going to Skype. Okay. So that I'm going to Stripe because I think owning every transaction or a large number transaction is better than owning crypto.

But I guess this is now a referendum on imaginary money versus real money. and the question with Stripe really to me is so I bet it'll be a trillion dollar company because it's not hard to imagine people's appetite for this company being 10 times higher than it is now even at the same performance metrics that it's at now like I think this thing if it IPO tomorrow could IPO at half a trillion dollars so you know there's a little bit of like what makes a trillion dollar company well what the market will pay for do we even know what their revenue is I'm like I don't know okay so but the but the the the the the con on Stripe that I always sort of look at out with a little bit of a crooked head is how is it defensible? Like, why would someone stay with Stripe instead of finding a way once they hit scale to process payments more cheaply and hire more developers and use a set of APIs that's not quite as nice? It is a little bit more expensive than their competitors. All right.

Very AWS-like in that regard. Yeah, interesting. Maybe that's the acquisition path too. Amazon buying Stripe or Google buying Stripe, a trillion-dollar company buys them, who would be the most likely purchaser of Stripe for 250 billion. Well, Amazon wouldn't do it. Google would be the most likely purchaser, but Amazon be the best fit. Interesting. So what do you boys go with? Stripe or Coinbase? I am going with Stripe on my, uh, on the market is a voting machine, uh, not a weighing machine argument. So David, what you say does not matter, but let's hear it anyway.

I know, I know. Well, I'm glad this is why I wanted to go last because I'm sticking to what I wrote down on my bracket, I had picked Coinbase over Stripe because I think for mostly combination of what you said, Ben, about what is the core fundamental defensibility other than running faster at Stripe? And for Coinbase, I think that we don't know like how big this market could get. It could get so big. And Coinbase has an opportunity to participate at every layer of it in a way that Stripe does not in an established traditional market. All right, here we go. Consumer bite dance, Discord, the chat app that Microsoft is supposedly going to buy for $10 billion, Epic Games maker of Fortnite, and Cloud Kitchens by Travis.

Hey, hey, your boy. Oh, my boy. So let's do bite dance versus Discord. David, you batted a cleanup last time. Give us your thoughts. Easy, bite dance. Discord's cool, but like, bite dance is a jugger. They're the most highest valued private company in the world right now. So they have the Chinese TikTok, TikTok, TikTok, Tataoia. Totiao. Totiou. Plus Lark. They are like, they are, you could almost think of them as like Google, like, just like

Google with like YouTube and they have so much all within China. And but TikTok, like people don't appreciate how important TikTok is. It is, I think the first truly global. So at scale social network like China plus the whole rest of the world. Not a social network, David. Not a social network. It's just social media company. Social media. There you go.

And then, Ben, where do you wind up on this one? Bite dance. I am going with Discord because I don't want to vote for a Chinese company because of their position. But I do think that they're letting your heart outrun your brain. No, my vote doesn't matter anyway. It's like being a Republican in California, which I'm not. But now we know how Sachs feels. You're getting closer, though.

You're edging closer. I've always been libertarian. really based on personal ownership and I don't know where I live anymore. Like I thought opportunity and like balancing the budget was a Republican thing and there are a lot of nutty things that are happening. Then staying out of people's private life like live and let live was a democratic thing but now they want to be involved in everybody's life. Like I don't get it.

All right. Epic Games does the unrelation in Fortnite. They've raised $3 billion. They're worth $28 billion in the last financing, Cloud Kitchens. It's worth $5, $6 billion. They've raised a bunch of money. and I think even the 700 million that we know about, we can assume that that might not be the only funding they've had.

I'm not on the cap table. I don't have any inside information. Is that true? I assumed you would have been invested. The problem was my friends who started at Diego, then Travis came in, bought out all the partners because he wanted to have control. Yeah, he bought all of it, right?

He bought out Chamath, everybody, bought the whole thing, and everybody made a great return, but he just was only going to do that if he could control the company. But I will probably wind up on the cap table. one way or the other. Maybe as an advisor or something, they'll get me involved. But when you do a late stage $700 million around when you're Travis, you know, with your former partners from the kingdom who did Uber, like, this is not for our zone of investing, right? He doesn't need anybody. Yeah. Yeah. So where did you guys wind up? So my view of Cloud Kitchens is a large part of it is

Travis wanting to diversify into real estate. And I'm sure it will be a very, this space is very interesting to me. But every time I think about Cloud Kitchens, that's the first thing that sort of comes to mind is like for someone who has billions in tech, it would be nice to be diversified should the economy shift gears a little bit. Yeah, they certainly wanted to buy up some real estate. I think they're done with that portion of the business. I went with Cloud Kitchens only because it's my guy.

And because I think a game like Fortnite and Epic games might be like a hit-based business. I'm not sure that they're going to be. Oh, you don't know enough about Epic. You got to go listen to our episode. Well, why? Because the Unreal Engine is used by so many people? The Unreal Engine. Epic also owns House Party.

They're like if you believe. They're taking that approach of the Chinese conglomerates, right? Yeah. Intent is the larger shareholder. Yeah. Makes sense. I'm going Cloud Citchens anyway because I think Travis is going to go buy Uber and put it together.

And I think he's going to run the. combined companies. So that's my prediction. That would be fascinating. Yeah, I have a feeling you guys might feel different. Yeah, I'm going Epic. You're going Epic? You're going Epic? Ben? I'm going Epic, but I actually don't think either of these will ever be a trillion

dollar company. Oh, interesting. Okay, so then it's Epic versus Bite Dance. Bite Dance. You're going to go bite dance, Ben? Bite Dance. It's so insanely defensible and already at scale. Yeah, I got to go bite dance too then.

It's not that. So then that leaves the SpaceX versus Bite Dance. But we won't do that yet. We should do the productivity one. we got Canva. Everybody knows that. Beautiful web design out of Australia worth a couple billion. Notion, beautiful wiki style, you know, publishing system, content management system.

Zapier, which makes you happier and let you do logic and all that kind of stuff. And, you know, king of the APIs. And then Figma for design tools. Canva versus Notion. Where do we wind up, boys? Also, this is fascinating to me that like the way it basically wound up is these verticals with Zapier being the horizontal bet. Are you betting on word processing, design, web, or the glue layer that holds it all together, the picks and shovels, which I find interesting.

Well, I'm going to go, I'll start this one off. I'm going to go within the Canva versus Notion. I think Notion has an ability to become like the standard for all document libraries or whatever. But I like Canva. It's a really difficult for one on me, but I'm going to give Notion the edge because I just think like Canvras for like design. And I feel like Notion is for everything. And Notion is going to become the central source of people's data. We're also playing with Rome, too, you know, for our internal organization. But I think one of these platforms will be like Slack and Discord in every organization. What's your choice?

I debated this. So I love Notion. Heavy Notion user do all my research for acquired in it. I went with Canva, though, because as much as I love Notion, I think it could be the future. I agree with everything you just said. I felt the exact same way about Evernote a few years ago. And I feel like these productivity, apps. They just kind of go through cycles and there'll be another one. And nobody really owns it,

right? Yeah, it's built in for free. It's really hard to be a long-term winner. And the network effects, frankly, are modest. I mean, it's once, the fact the matter is, each of us are dealing with seven different document tools in our life at any given time. So when one dies out and someone else forces us to introduce another one, then it's not that big a deal. Like, I'm not a notion user, but David is, so I'm sort of a notion user. I'm a heavy Google Docs user. I use Apple Notes. I use, you know, so you're kind of already in this weekly held tools basket.

So you're going with... It sounds like David's going Canva. I'm also going to go Canva. Okay. So I'm outvoted on that one. Canva advances. Zapier versus Figma, Ben, you started off this time. We'll go around.

I'm going happier. Zapier. Happier, Zapier. I think the glue layer is so powerful. I think they have enormous defensibility. I'm with you. 100% and it sounds like David is too. Plus one. Yep. So Zapier versus Canva is our next question to answer. Easy. Also, can I put a little aside here, we did not put web flow, nor did we put air table in here, which I think is interesting. And air table in particular, you could sort of make a case for. And I was sort of like thinking about, hey, should I email producer Nick and be like, dude, you got to get air table in there. I think the winner. So, and this is going to lead to why I'm picking Zapier to take it all here. I think the winner, I think the winner,

in the no-code tool space is Zapier plus Google Sheets. I think that is the database tool and the programming language of the no-code tools future. I have no-code founders now for people who don't know what we're talking about. It just means you use this off-the-shelf software instead of hiring developers to make your product or service. I'm seeing more and more no-code. I'm thinking about starting. I have a no-code newsletter at inside, inside.com slash no-code.

I'm doing a no-code conference at inside, online conference with all the platform speaking. And then I'm thinking like no code is going to be such a big thing. I might want to do like a no code course or a no code accelerator where, you know, people who are not developers get to build products and they're 1.0, get product market fit, then hire your developers. Right? I think the vast majority of companies should be started with no code these days. Unless you are coming up with a novel UI or solving a deep technical problem,

there is no reason. first version of your product can't be built without code. David, you're going to say something. Our friends over at Tiny, uh, Andrew and Jeremy and crew over there that's had started metal lab. They spun up a, a no code development agency. 8020. We are 80. Yeah. So just like, you know, they do metal lab for product design. Now they have 8020 for no code product development. It's fantastic. So then we're at Zapier versus Canva. And I'm going to go Zapier. Zapier all the way. Zapier all the way. So that means we have Zapier versus Stripe, SpaceX versus Byte dance. Let's go back to left-hand side. We'll go to Futurism versus Consumer. U.S. versus China.

U.S. versus China. Pretty clear I'm going with SpaceX because I believe in America and our American principles, but I also believe that SpaceX has the ability to touch every single person on the globe with a $25 a month product. And I think they will be the largest subscription service on the planet Earth. It will be, I think 250 is a light estimate. I can see 10% of the planet being covered by Starlink and having a paid subscription. I could see literally 700 million people, not one in 10, one in five people in the planet will have this, I believe. Or a subscription to-

Starship, they are, Ben, how many Starlink satellites do they deploy per Starship launch? 60 or something? The Falcon 9 can launch 60. Starship will be able to do 400. I mean, he's done. He's done. I mean, people don't realize he's done. They don't need that many thousand up there.

satellites launched at a time. Imagine, like, if you had said that 10, even five years ago, nobody would believe you. So I'm going SpaceX over people dancing in their underwear. What are you boys going with? Dancing in your underwear or giving, blanketing the planet with internet and becoming multi-planetary. I'm not trying to influence the judges. So I think you're, I think I've been trying to do an expected value calculation here. So I think you're exactly right. I have pretty reasonably high confidence that bite dance is going to be a billion dollar. company in not too long. Trillion dollar company. I'm sorry, trillion dollar company and not too long. However, it will never be a $10 trillion company. SpaceX will. Like, SpaceX has a very reasonable chance of being a $10 trillion company at some point. It's, you know, 20 years, 30 years. I don't know. Thought exercise here. If you could have either in your portfolio, we're not talking about valuations. We're doing this construct of Tesla or SpaceX. Which one are you, which one are you, when your beak on? Wait, wait. At the current valuation, we're doing, No.

It just would be in your portfolio. I think the better way to ask the question, David, is if you had to put half of your net worth into one of these two companies and hold it for 20 years, which one would you pick? Yeah. Yeah, because I'm trying to erase whatever you think about the current Tesla valuation. Let's just like put that aside, just like which company? Can I just say like two years ago, I was making this decision two years ago, which one would I want to put it into? I'll go SpaceX. It's a hard one.

It's hard. I think SpaceX is more speculative. and Tesla's got a much better likelihood, a much easier path forward from this point forward, whereas SpaceX still has like going to Mars is going to be fucking hard. But I think we know what Tesla's going to do, self-driving, robot taxis, like we kind of have the path there

of what's going to happen, energy, independent solar roofs, you know, redoing the electrical grid. It's huge business. But I mean, what if SpaceX finds something on an asteroid and starts mining and bringing it back and it's the new mineral we need, right? There are some things that we don't even know what SpaceX, what adjacent business of SpaceX is going to find. Well, only you know, but you won't tell us what they're doing in these Starlink. This is secret. No, I mean, all the Diss is they're going to take off. They've got

propellers. They've got to take off and they're going to put it this way. When, when, when Tesla's came out, they had a 200 mile range, but it was really like 125 and then 300 and 400, now 500. So this is why you think. So what do we think Starlink's going to do? Like Elon is very focused. on performance. He's always been very focused on performance. And he demands people break, he demands people break records. And he doesn't take, you know, I don't think Elon takes like, oh, no, that's the max they can do like very well when somebody says that. What do you mean physics? No, I mean, we'll overcome that. Well, let's try to, I mean, you saw the battery day. I mean, battery day was a little bit of a flop, I think, for press because is it too dumb to understand what

he was talking about in large part. Well, literally just like, let's land these fucking rockets. Well, I mean, I think people just don't understand battery technology. And for him, like, saying, like, hey, we're going to make batteries that last two or three times as long at half the price. Like, people don't understand exactly how big of a deal that is, right? So I now understand how you think 10 to 20% of the planet is going to use Starlink. I think so. Yeah. So what do you think? So SpaceX or Tesla? Which one are you? Um, this is a hard one. Okay. Especially, especially if it's in my retirement account. Right. That's why I put the 20-year window on it. Okay. So, SpaceX versus Bight Dance.

Let's let us nail this down. Who's going to the championship? I pick mine, SpaceX. I pick mine SpaceX. Okay. David, communist. I pick SpaceX, too. But I really struggled with this.

I think both of these companies are going to be Fing M-style companies. I'm very proud of you, boys, that you didn't go communist. Yes, I did stick with the U.S. But one quick thing on Bight Dance, just to, this is not just dancing in your underwear. They have the best AI recommendation algorithm technology in. the world, bar none, and that is hugely different. Yeah, don't go on TikTok at 1 a.m because you'll look up and it'll be 3 a.m.

I don't know who's had this experience, but it's just for, oh, for sure, it's scary. It's scary. That thing is so addicting. It's bonkers. And it's not just video. Totiao is, is, well, it's news, but it's every, they, the company applies this to more than just TikTok. They know how to get you to the next thing and keep you on.

Okay. So then it's Stripe versus Zapier. I think we all know which way we're going. David, you kick us off. Strip. Ben? Stripe. I'm Stripe 2.

So then it's SpaceX versus Stripe. We're going with Mars or your charge. I thought you wanted to pick for your sacks. The question is, can Stripe ever be a $10 trillion company? No. Yeah. I don't think so. I'm going to SpaceX.

Yeah, SpaceX. Okay, there we go. And Ben? SpaceX. All right. There you go, folks. SpaceX wins the private company. Bracketology.

This has been another amazing episode. Let's get some plugs in here. Acquired FM has a LP show. It's only a Hyundai. Go sign up. It is well worth it. You get your custom RSS feed, which allows you to get content.

Nobody else can get that the boys put a lot of time into these are smart boys. They do a great job. And I am commanding all my listeners who hear my voice to go sign up and give them a hundie. They deserve it. You know we have like a really good free show too. The free show, get that. That's free. And then you cheap bastards shoot the.

lock off your wallets. You're so great. You need to spin up, just like the tiny guys. You just spin up a marketing agency on the side here. Or cameos where podcasters can just pay you to like, be great. No, I mean, we just sell ads. I mean, basically when people buy ads for the podcast, I'm, you know, the ads that work on my podcast are ones where I think it's fast products that, you know, any product that's

over $10,000 lifetime value, it kind of works really well for it because you get one customer pays for it or one customer every two or three ads and you're good. I just think SaaS products and reading those when you're aligned. Who sponsors your product podcast? Same type of. Yep. Anything to plug? I did one plug for you.

On my end, we just closed a $100 million fund for PSL Ventures Fund too. So if you are a founder in the Northwest or can squint your way to being in the Northwest, I'd love to talk to you. I got two plugs. One legitimately, I swear you guys said this, say this on our pod. All in is my new favorite pod. I can't imagine anybody's listening to this and does not listen to all in. Watch it,

you watch it on YouTube too. Like, it adds to a lot of advanced. We're doing a lot of advanced graphics on it. So we're taking an hour or two in post to embed graphics. And we're doing that on this week and startups now. Nice. Yeah.

Super producer Nick. The man. Well, we now have two more people full time on the podcast team. Shout out Justin, producer Justin and Charles. Our studio director came back. And then other one real quick is the latest episode we just dropped.

unacquired on Recrum. A lot of people don't know Recruam out there. A lot of people know Roblox, but Recrum is the newest minted unicorn private company, newest minted Seattle Unicorn. It's fantastic. You got a list of, we had CEO. Recruh. Recruh is not the VR one?

Yep. Yeah, it's not just VR anymore. VR, iPhone, Xbox, PlayStation. Grooos, 600% in the past year. Just raised. So people. are really doing... Jason, if you liked Roblox

but felt you couldn't get exposure early enough, this is the company for you. But it's all VR, right? No, no, no, no. Oh, okay, so they're off the VR tip. That didn't work. No, no, no, it's also working.

They have essentially every VR user out there, plus like five million users on Xbox, on PlayStation, on iOS. So they're multi-platform. Multi-platform. What is their most popular game? So all user, no, it's all, Oh, it's that thing when you walk over here and you go to play chess over here, you play ping pong here.

But it's also a creator economy. So they have 15 million users. They have 2 million who are creators. So you can create directly. There's no separate coding to create. So everything is becoming a world with unlimited possibility. So we're basically in the William Gibson 100%. And you can sell what you make.

Wow. So that is like a Doro where they were like selling kimonos and like they were going to an important meeting. So the little 16-year-old girl in it was like buying her $100 kimono because she was going to go meet people. And you're reading this book 20 years ago and you're like, what idiot's spending $100 on? Is it snow crash? No, not snow crash. William Gibson. Snowcrash is what's his name? Oh, oh, oh, you're talking about William Gibson. William Gibson. Yeah, that's neuromancer. similar genre. But William Gibson did something called

the Bridge series, which was all tomorrow's parties. It was like a dystopian, San Francisco, everything's in VR. Bay Bridge has been totally, you know, like kind of Blade Runner kind of situation. Really good series. Iduru, Virtual Light,

and all tomorrow's parties, I think are that trilogy. The Bridge trilogy, I think they call them. It was really good. All right, boys. We'll see you all next time. Bye-bye.