This Week in Startups - Uber profitable again, SBF guilty, Biden's AI EO + Motive's John Habeck | E1842

Starting point is 00:00:00 All right, everybody, welcome to this week in startups. I got a couple stories, new stories that I just wanted to give you my opinion and my hot takes on. Next two stories include companies that both signal a peak and the end of ZERP. But for different reasons. Uber was, of course, a Hoostercha for stay private longer, grow at all costs. And, you know, it's just one of the great investments of the last decade. and now the company that was considered a money loser forever, would never be able to make money, it was a broken business subsidized by VCs.

Starting point is 00:00:37 Well, now that company has hit profitability in three of its last four quarters. And according to reports, it's going to be joining the S&P 500 soon. This is incredibly important because if you join the S&P 500, a bunch of people have to programmatically buy your stock. On the other hand, FTX and Sam Bankman Freed, they were the poster child for the company, COVID-era crypto craziness that we saw, all the Stimmy checks, and then this entire crypto madness. Well, SBF, you know, was this millennial prodigy that was going to become the first trillionaire, right? And he was going to save the world. However, he got caught stealing $8 billion worth of customer funds and his entire empire collapsed,

Starting point is 00:01:13 as we've seen in the past week. And now he's facing 100 plus years in jail, not just similar to Bernie Nadoff. So let's talk about these two stories and how they signify the nail in the coffin for ZERP. It's the end of an era, as we say. And then we'll touch on Biden's executive order on AI in the discussion that the boys had and all in when I wasn't in town. This weekend startups is brought to you by Squarespace. Turn your idea into a new website.

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Starting point is 00:02:11 CLA's CPAs, consultants, and wealth advisors can help you get from startup to where you want to end up. Get started now at cLA connect.com slash tech. reported its Q3 earnings today. The shares are up, 4% after Uber reported yet another net profitable quarter. Full disclosure, I still have a big stake in Uber. It's worth noting. Uber shares have almost doubled this year in 2023. That's why I'm in such a good mood. It's up 97% year-to-date. Two things that drive my mood, how my Knicks are doing and how my Uber sock is doing, among other things. Uber's market cap is right around that $100 billion mark for the first time since 2021. And as I said in the intro, three of the last four quarters, they've been profitable on a net

Starting point is 00:02:59 basis. But Uber actually slightly missed on analyst expectations for its top line revenue because of some accounting changes and earnings per share results. But they did beat massively on its gross bookings. I mean, this is just extraordinary. Gross bookings. $35 billion, up 21% year over year. and then revenue, which is what they take, right? Bookings, a bunch of that money goes to the drivers. They take, you know, 9.3 billion of that. That's their actual revenue. That includes their advertising business. So they have a blended take rate of 26%. App Store, Apple gets 30%. Patreon, some of those services, substack, they take 10%. Uber gets 26%. Now, Uber did not disclose its ad revenue for this quarter, it mentioned there are now 445,000 ad merchants in the system.

Starting point is 00:03:53 That's up more than 70% year over year. Now, it's worth noting those are in two buckets, I believe. There are some where it's Monday night football or, you know, Netflix promoting to you when you're waiting for a ride for your Uber. They only accept really high-end ads for the Uber transportation app. Then there's premium placement. So when you open up Uber Eats and you're going to go shopping, It shows you the restaurants you always order from and the stores you always order from.

Starting point is 00:04:22 They can, a restaurant can insert themselves into that for a fee and try to intercept you and let you know about their offerings. So there's two ways for them to make money from advertising in case you didn't know. 2.4 billion trips. That's the B in Q3. That's 25% year over year. And the monthly active users, Uber has a name for this, monthly active platform customers. In other words, they have to do a transaction is $142 million.

Starting point is 00:04:47 Let that sink in. 15% year over year, 142 million people transacted on the service. Drivers earned a total of 15.9 billion, including their tips, in Q3, also up 24% year over a year. And they have, I think, 6 billion drivers in the network now. It's extraordinary. You compare that to McDonald's. You compare it to Walmart, Apple, Starbucks. Uber has more employees than they do. Now, of course, 80% of them, 90% of them are doing part-time. But it's still extraordinary. Q3 net income, $21 million, includes a $96 million loss from, unrealized loss from Uber's equity holding. So it's even better than that $221 million. That means their net income is more like $3.3. Free cash flow, $905 million. Unrestricted cash and equivalence over $5 billion. It's got a ton of cash. Uber is going to be a money printing machine. This is my prediction. They are going to start doing a share buybacks. If the stock is still underpriced, you really think this should be a $70 share. Most of the price targets out there are $67, 68, $69, $70, I think, and I'm sure that'll change.

Starting point is 00:05:57 But, you know, everything's undervalued. And the stock market wants you to prove to them that you can be profitable. They held Amazon to that standard. They hold other people to that standard. But once you get through the J-curve and you have a profitable company after making all those investments, well, then you can just turn the dial like Google does for ads or Tesla does with the price of their car. And, you know, these really strong companies can almost pick what they want their earnings to be, I think, in my mind. They can just say, hey, let's have this many ads on Google, let's make the price of the cars this price, or let's make the price of the rides, this amount.

Starting point is 00:06:33 And that is extraordinary. So we close the book on the ZERP era, out of control, investing and spending and blitz scaling. and now we are back to profitability, dividends, stock buybacks. Congratulations to Uber, Dara, and the team over there. And all of the alumni of Uber, congratulations. I believe the best is yet to come. They have some really cool products coming too. I love the idea of like an Uber assistant, like a task rabbit, take out your phone and get

Starting point is 00:07:06 somebody for 40, 50, 60 bucks an hour to come help you with either business or personal tasks, like a personal assistant type thing or a family assistant. type thing could be huge. And I know they're testing that. That's public knowledge. And just, you know, for some fun with numbers and charts, having been there from the beginning of this company before they even launched, looking at annualized revenue from 2014 to 22 here in this table, started out with $400 million in 2014. And then this year, I think they'll hit $40 billion or something like that. They're doing over $9 billion, as we said. If you just take that, let's just round up to $40 billion for $20.23, and you compare that.

Starting point is 00:07:44 that's 100 times what they were making in 2014, 100 times, not 10 times, 100 times. And this is one of the things about networked businesses, marketplaces. They can really sneak up on you how big they can get. And, you know, the other piece of it that's really interesting is the growth of Uber from last year to this year. If it winds up being, you know, they go up $6, 7, 8, 9 billion dollars. Let's just say it's $7 billion in added revenue. You know, if you look, they increased what they did in those three years, 2014, 2015, 2016. And if you took $40 billion, that would be the first six years of these

Starting point is 00:08:22 company reports here from 2014 to 2019. I think that's about $40 billion. So the last couple of quarterly updates here, when you start looking at the quarterly updates, you know, which really, it's big numbers are kind of confusing to the human brain. But when you look at how much these big companies, whether it's Google, Facebook, Apple, Microsoft, how much revenue they add, you know, in their later years, we can get to years 11, 12, 13, 20, 21, 22, they might be adding more revenue than they did in their first decade as a company. The percentage growth goes down massively in these companies, but the actual real number, billions of dollars in growth, is just mind-boggling. And this chart is super indicative of how

Starting point is 00:09:07 it's been for them. 2018 into 2019, they're growing, they're figuring it out. The blue part of of this bar chart is rides, mobility, they call that, and I call it rides, and then the red is delivery. Obviously, you have the pandemic, and then boom, you see delivery just explodes. It doubles. And then, of course, it sticks around, and DoorDash is also doing great. You can check out their earnings on your own, but these numbers have gotten very large, and it's very attractive. What's next for Uber? You know, I think it's getting too big to be bought. I always felt like Amazon, Apple, Google, you know, one of these companies would buy it when it was worth. 30, 40, 50 billion, they would put it in an offer for 60 or 100 billion. But now at 100 billion, it's going to be very hard for somebody to buy it, especially in the Lena Con era of no acquisitions. It would be amazing if Amazon owned Uber, I'm not advocating for this, but if you just think about

Starting point is 00:10:00 your Amazon Prime and then having some preferential treatment on Uber and then being able to use the Uber network to deliver from their warehouses and everything and, you know, your Uber rides, you know, Amazon Uber would be just an incredible, incredible product. And if, you know, Travis and Tim Cook hadn't gotten into it, I always thought Apple would have been an amazing acquire an extension for them. Although I don't know if they want to operate in the real world. They've never released the Apple car. So, and then for Google, it's obvious, you know, they have Waymo. And so Waymo is going to be part of the Uber network with what's happened with Cruz, which we're, we won't talk about today, but you can read the New York Times story.

Starting point is 00:10:40 and you can read the rebuttal from the CEO of Cruz. There seems to be a lot of human intervention in rides as much as every couple of minutes. Some human is intervening. So I think that combined with them getting their license pulled, there's some lack of disclosure here that is making people feel, I don't know, less trustworthy over self-driving. And then maybe people are starting to think it's 10 years out, not two years out. So, and Waymo, those cars are super expensive.

Starting point is 00:11:14 And in order to deploy a fleet of Waymo's is still going to take a decade. So human drivers, I think, have a decade behind the wheel for being the majority of rides. But over time, who knows? We might see, you know, Uber, when you open up the app, just like you can pick all different types of cars and services from Lincoln Town cars and black to pool and hex and green. you could take a Waymo. Consumers may not want to. Some consumers may only want to have nobody in the car. Maybe they'll be allowed in some jurisdictions and not others.

Starting point is 00:11:48 I suppose it's going to be jurisdiction by jurisdiction. So it's going to be a slow rollout either way. Could be 10 or 20% of rides in the next decade. And I think if Uber captures some number of them, it would be really much easier for Waymo, Cruz, and other folks to just be part of the Uber network and let people pick from there and just split a little bit of economics with Uber. And for Uber, which wants to be able to. to be the Everything app, it would be great for them to just have all those options in there,

Starting point is 00:12:14 just like in some cities that Uber allows you to get a cab. If your landing page is terrible, I'm out, right? Most consumers are. It's 2023. You can't have an ugly website. Stop selling for okay or good and have great. And great means you're using Squarespace. It's out of the box, beautiful. These websites have templates made by the world's greatest designers that are going to engage your audience, let you sell anything. And Squarespace, over the past decade has just added feature after feature on top of the gorgeous templates that are designed for mobile and the drag and drop web design with their fluid engine is just perfect, easy to use.

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Starting point is 00:13:37 it. Looking at the next part of this puzzle here as we end ZERP, SBF, Sam Bankman Fraud, I'm sorry, Freed, was found guilty on all charges. This happened last Thursday in New York City. We no longer have to say allegedly when talking about the $8 billion he stole from customers. Here are the official charges for which SBF was found guilty. Two counts of wire fraud, two counts of wire fraud, conspiracy, one count of securities fraud, one count of commodities fraud, and one count of money laundering conspiracy. There are also other charges that he faces, but because of his extradition from the Bahamas, those are going to have to be settled in another court case. Sentencing March 28th, 2024. That's got to be hard for him and his family between now and then. It's going to be a tough time to be wondering

Starting point is 00:14:28 how long are you going to be in prison. Possible sentence 115 years in prison. This will be at the discretion of Judge Lewis Kaplan. Reporters noted that he consistently seemed annoyed at SBF and his antics in the courtroom. SBF, of course, tried to defend himself and he testified. Maybe that was a mistake. Maybe it makes no difference. Maybe that was in order to help him on appeal. He was officially charged 11 months ago. So trial lasted five weeks. And that's your nail on the Zerp Coffin for crypto, I believe. There'll be plenty of other people who will get, you know, charged, et cetera. But this was the whale. This was the big one. Moby Dick, he's been taken out. And I think it's the end of the era. Of course, if you really want to dance on the grave of the Zurp era, we work is now bankrupt.

Starting point is 00:15:19 Isn't it amazing that this all happened within like five days of each other? I mean, it is extraordinary. Producers, almost joining S&P 500, SBF going to jail for. possibly 100 years and we were going bankrupt within five days of each other. It's just like, it's like poetry. It happens in threes. They always say that, you know, like you'll have some, you know, famous baseball player, pass away, an actor, and then, you know, some singer, right? It always happens in groups of threes. So there you have it. Uber is profitable. Nobody ever said that would happen. We were ghost bankrupt. And, you know, they're working out all their lease is crazy. And then finally, I wasn't able to make all in last week. I was busy with LP meetings.

Starting point is 00:15:58 still raising launch fund for it's going extraordinary more than halfway done but it takes time to raise these funds and I've been on the road like crazy doing meetings but the best he's had a really good take I think the strongest part of the episode was this discussion of the AI executive order that Biden put out there it's a convoluted 100 page document I've reviewed it and the summaries of it to just summarize it for you the document focused on what it calls dual-use foundational models the executive order defines These as an AI model that's trained on broad data. Okay, duh.

Starting point is 00:16:32 It generally uses a self-supervision, contains at least 10 billion parameters. Okay, it's got a certain scale. It's applicable across a wide range of context, whatever that means, it's general. And that exhibits or could be easily modified to exhibit high levels of performance at tasks that pose serious risk to security, national economic security, national public health or safety. I mean, give me a break. Like a Volvo that you drive down the street could put everybody at risk. Super vague, probably on purpose. It's just extraordinary that we can't close the southern border, but we can do this.

Starting point is 00:17:05 And companies building these dual-use foundational models are now going to have to report to the government. Activities related to training, developing, or producing these models, ownership and possession of the model weights. And results of any developed models performance in relevant AI red team testing, that's like doing bad things, creating bombs, etc. And the EO calls out large-scale GPU clusters. Companies or individuals that own large-scale GPU clusters have to report. support, any acquisitions or developments, including the locations of these clusters and the amount of total computing available. Freeberg gave a big rant. That was really great. And this point was awesome. We're only five years into this. And it's way too early to regulate. And if they do

Starting point is 00:17:44 regulate, why are we regulating these like little tiny techniques? Because they're all going to change, obviously. Why don't we just look at the outcomes? Like, did somebody commit a crime with this? Did they do fraud? Did they steal somebody's copyright or content? A great quote from Freeberg, come out and say, here are the standards by which we want to regulate you. This is a size that the model can be. These are the types of models you can use. It's going to look like a medieval literature in three years. None of this stuff is even going to apply anymore.

Starting point is 00:18:11 And he's absolutely right. The pace of change is nuts. You try to regulate something like this, you know, based on the techniques for building it or the cluster size. It's not going to work. Chamath actually wrote a substact blog, the case to regulate AI, if you remember back in May. but he mentioned on the pod that the EO didn't really address his concerns. He said this was a kitchen sink EO because it wasn't specific.

Starting point is 00:18:33 It's really convoluted. But he thinks people are trying to do the right thing. Sacks said he thinks the technique here is the administration is unconsciously trying to make it so arduous for companies to self-report that they eventually just give up and say, give us one agency instead of 20 agencies to do this. I think this is a lot of manipulation by people who are paying off politicians. I'm a simple guy here. I just say follow the money. You've got a bunch of people who have leads in the AI space. They're going to make a ton of donations.

Starting point is 00:19:06 They're going to give money to politicians to create regulations to pull up the ladder behind them. So some startup that I invest in that's got three people isn't going to have a team of 10 people to do all these regulatory requirements. And so this is classic regulatory capture as Bill Gurley gave in his awesome talk. I think that this thing needs to get ripped up by the next administration. and throw on the garbage and you can start over with a better framework. Next up, an awesome founder who is building an awesome product in an old, slow, boring industry, car dealerships. And I've invested in this company.

Starting point is 00:19:39 And I'm just going to start sharing on these news programs, some of the companies I'm investing in, because I want you to know, you know, how I think about investing. If you want us to invest in your company, us being the 21-person launch fund, you can go to launch.com slash apply. launch.co slash apply. You apply for funding. We have three different ways to invest, Founding University,

Starting point is 00:19:59 the Accelerator, or Direct. You fill out your form. We read it within 24, 48 hours, get in touch with you, schedule a meeting, and hopefully we're off to the races. So, stick with us. Okay, I got a funny story to tell you.

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Starting point is 00:21:15 which, you know, sometimes I break down and I buy one of those. Not a good choice for me. Now I make a better choice. House of Macadamias, they got a new product, macadamia milk. Get a free month supply of macadamia milk with any order at House of Macadamacadamia's.com slash twist. That's a free month supply of macadamia milk with the code Twist 20 at house of macadamias.com slash twist. All right, everybody, welcome to this week in startups. Our next founder's building in the car dealership space. Sounds pretty boring, right? Well, this is where a lot of the major businesses come from. So car dealerships are one of those big sleeping giant industries. Motiv is a

Starting point is 00:21:57 website builder for car dealerships. It makes it so much easier for shoppers to find and finance cars. Of course, this might sound like a tough industry to adopt software, but you'd be surprised at the size of this market and how much these dealerships can gain from a beautiful and intuitive website, John Hayback, is the CEO and co-founder. We're investors in the company. How are we doing, John? How's our investment doing? Doing pretty good. I'm trying to make you proud. And then people can go see the website, ridemotive.com. How'd you come up with the idea? How did you get your first customers? How's the business going?

Starting point is 00:22:34 So I got my start in the auto industry. I was in high school. I was the inventory photographer at a couple of dealerships in the hometown where I grew up. And through that experience, I kind of got like a bird's eye or like fly on the wall view of every facet of the business from like a participatory perspective. That was really helpful because it exposed me to the problems that dealerships face, which first of all, it eliminated this like preconceived notion that like dealerships are these small businesses. Even the smallest franchise dealership is actually quite large. I mean, we're talking seven figures and gross revenue annually and in larger cities.

Starting point is 00:23:18 I mean, these are like, you know, multi-million dollar net profit businesses per year. They're huge and their problems span far and wide across every department. And it was really energizing for me to see that basically anywhere you throw a stick, there's this massive problem to solve and a ton of budget to really devote to solving those problems. And so through my experience as the inventory photographer, I realized that dealership websites are not consumer-friendly at all. They are incredibly hard to navigate. They're loaded with these third-party tools and plugins and iFrams, you know, these chatbots that like bombard you from the second you get there. And, you know, in an age where almost every auto brand is like

Starting point is 00:24:07 trying to reimagine their consumer experience, the most important part of it, the actual retail experience is pretty poor still. So that was the initial idea. It's like, let's just make a consumer experience that's actually quite nice, something you would want to do. Shopify for car dealerships. Shopify for car dealerships, a simple platform dealerships can make and manage their website. And for consumers, it's like really easy to actually find a car. Like, ultimately, that's what you're there to do is like find a car. I know when I go to the Corvette, configurator, you know, at that website, a Chevy, it's going to be beautiful and amazing. But when you wind up at your local dealer and, you know, I was buying a suburban, we needed to have a car for Tahoe.

Starting point is 00:24:50 I think it's going to be the last gas powered one we ever have to buy, but it's kind of our escape vehicle. You know, we were going to three or four different dealerships trying to find it. All of them had a different experience. Then there was like the Chevy Suburban website. It's just confusing and ugly. And then I compare that to my experience by. buying Teslas and it's elegant and simple and app-like and really tight. So when you go to these dealerships, the thing I was confused about is they run very independently of the brands they sell, huh? And so they're, I don't understand exactly how that works, but I guess the larger brands

Starting point is 00:25:30 are not saying you have to use our software. They're saying the opposite. You have to have your own website. Yeah, it's very complicated. Franchise law is very complicated in the automotive space. And it sort of forces brands to operate at an arm's length when it comes to business decisions that the franchisee makes. And so that is why there is this massive software industry for auto dealers. First of all, the brands don't have necessarily the resources to create custom software that is perfectly tailored for what they need.

Starting point is 00:26:01 And second of all, you know, it's that sort of perry franchise problem that that allows this industry to exist. But more importantly, I think it's actually like by design an important way that cars are sold. I think at net net, it's actually pretty positive for both communities and for the auto industry, that you have these sort of independent entities that are trying to sell cars because ultimately they exist as like a consultant. You know, when you go in to buy a new car to your local Chevy dealership, they're there to help you through that transaction. They can buy your existing car. They can help you understand your financing situation. And comparing that to buying a car online like with Tesla, which is clearly sort of a very seamless experience if you know what you're doing.

Starting point is 00:26:50 But if you have a lot of questions, there's really not a whole lot of resources for you. There's no one for you to call. And so dealerships play an important role in that regard. think that's part of why there is room for sort of both of the models to exist. Yeah. And so you build this better mouse trap. How do you get your first dealership? Because here on this weekend startups, we're always talking about zero to one. Not zero to one, like, you know, not having a product, having a product, but from zero to one dollar. How do you get the first dealership to say, okay, I'm going to use this startup software?

Starting point is 00:27:26 I'm going to be the first person up the hill and to use it. Tell us that story. and how you lock down that first dealership? I think more philosophically, like, the problem has to be really painful for a startup to get their first customer with an MVP. The problem has to be very, very painful. Otherwise, you know, the customer will just use some more developed piece of software. And that was kind of our situation. Like, we had this, I mean, a hardly usable platform when we launched.

Starting point is 00:27:53 And we literally knocked on doors and approached a few local dealerships and saying, hey, you know, what do you think of your website? Would you be willing to give this a shot? And I mean, their loyalty to their existing sort of solution was was so minimal that they moved to us. When we had zero features and really zero capability, the only thing that we had was like a promise and a vision. And thankfully, like working with those early dealers allowed us to build a product that had maybe a greater mass appeal. What's interesting about our business, you ask how you go from like zero to one. What was interesting is how we went from like one to 10 and 10 to 50 and now 50 to 150.

Starting point is 00:28:35 Unique to our business, we have this flywheel where it's really quite elegant. Like we launch a website with a dealership. And at the bottom of the website, we have our logo and it says made by motive. Other dealers go to that website and they see, hey, that website looks better than mine. Who did it? They scroll to the bottom. They see that logo. They click it.

Starting point is 00:28:54 They submit a demo request. They sign up. and then we launched their website. Other dealers see their website, and it just sort of the flywheel starts to build its own momentum. And so really once we got like just a tiny bit of escape velocity, where we're just sort of bouncing off the ground, it started to pick up really on its own.

Starting point is 00:29:14 Oh, so the phone starts ringing, the email, the demos are coming in because other dealers see our website and the wild, and they reach out. It's a wonderful flywheel. Yeah. And it's kind of in some ways, like the perfect. market. One, nobody discovered it. It feels like some ancient, you know, uh, vestige or something dealerships, but they're not going away. They're going to be here forever. Correct. And these old

Starting point is 00:29:39 school dealerships have tons of profits. So they, and now they're probably getting handed down from generation to generation. Now you've got young people taking over for their parents who owned it. And they are like, why is this software so terrible? We need to upgrade it. And they grew up on phones. And they know about Tesla's website and how easy it is to order from Tesla or even Rivian. And they're like, hey, we need to catch up. And of course, they're going to go look and study. And like you said, you go from having to do the hard sell to order taking. Now, it's not exactly that easy, but what is the process of demoing for them and closing?

Starting point is 00:30:17 How do you, what have you learned about that process? Now that you get it out in the wild, you got that virality because it's got the logo on the bottom, powered by. how do you close them? What's the process from doing a demo to closing? Some best practices there you can share. Yeah. I mean, it's pretty simple on our end. The industry has consolidated pretty dramatically, the dealership industry that is. So, you know, there's sort of this idea that like every car dealership is independently owned, small business. A lot of them now are part of larger auto groups. So five, 10, 15, 30, 40, 200 stores in a single entity. And so a lot of times we'll have one of those auto groups to reach out and say, hey, you know, we're

Starting point is 00:31:00 unhappy with our current provider. You know, we'd like to do a demo for the whole group. And so we sort of get many rooftops in one deal. So our deal sizes can be quite large. But still, in that regard, they're fairly simple. So once we do the demo, usually there are many, I guess, stakeholders in that decision. I mean, to get set some context, over 95% of a car dealer sales on average come from website leads. Right. So this is like pretty core that are multi-million dollar business. And so it's a big decision to change websites.

Starting point is 00:31:35 It's like changing the building that you're in, you know, like moving addresses. It's a huge decision. So usually the owners involve general managers, marketing people, and then even salespeople, business development representatives. I mean, the whole company kind of gets involved in the decision, which does create some complexity in the sales process. But really like, it's for the better. because when everybody is bought into the solution,

Starting point is 00:31:59 then the rollout becomes like confetti in the air as opposed to this sort of situation where you're ripping out some technology that somebody liked and wasn't aware of the change. So despite the inclusion of a ton of stakeholders, it's pretty simple. Once they see the demo, we do maybe one or two demos and it's on to implementation.

Starting point is 00:32:18 All right, everybody. Stephen Estes is a principal at CLA. Clifton Larson Allen. This is a professional service provider that specializes, in CPA, Tax Consulting and Wealth Advisory. Welcome to the program, Stephen. Thank you for having me. Tell us a little bit about what a startup should expect to pay in terms of managing their taxes, managing their accounting, outsourcing the whole thing in those first couple of years.

Starting point is 00:32:40 You know, for the early stage startups, it really just depends on oftentimes a number of states in which they're filing in, which can be dependent upon where they have employees located. Got it. So when you have multiple employees with this remote work, that can trigger filing taxes in multiple jurisdictions. Correct. Right. Once you have an employee there and you're registering with that state, the state's aware of your presence. So if they don't receive a tax return, you might be getting a lot of notices for failure to file. Get started right now at cLA connect.com.com slash tech. Let them know your boy, Jake Howl sent you. CLA connect.com slash tech to get started right now. So how many dealerships are there here in the U.S.? And I know you've gotten well over, or let's just say hundreds, I guess. What's the most? march to kind of capture this market and how do you think about that. And then of course, with investors, then comes the big, oh, what's the Tam here? Right. What's the Tam? Now, as an early

Starting point is 00:33:36 stage investor, just to inform the audience, I don't have to worry too much about Tam because we're going to be the earliest investors. But now Series A, Series B investors, they might look at it and say, hey, is there an ability to get this thing to hundreds of millions in revenue or is it only going to get to 25 million in revenue? So how do you think about how many dealerships are out there and how big can this get? Right. So in the U.S., really North America, most car dealerships operate similarly to how they do in the U.S. So, you know, there is some sort of market expansion there. But in the U.S. alone, there's 17,000 franchise dealerships, which means a dealership that has a Ford sticker on its door or a Chevy sticker. And then there's about 40,000 independent, like, use car lots that

Starting point is 00:34:24 sell used cars and no new cars. So there's a pretty huge market, especially considering the deal size. But just looking at the auto software market alone, the average franchise store spends $40,000 to $50,000 a month on software and technology solutions. And thankfully, the industry is so specialized that our platform runs a butt to many other segments of the car buying process. So, I mean, really, to grow the market. there's not only sort of expanding the customer type, the ICP, but also sort of running ourselves

Starting point is 00:35:00 into these adjacent categories that we can sort of draw a circle around and say, okay, that's our next target. And then to sort of close the loop here, there are a ton of adjacent industries. I call them the wheeled vehicle industries, which is basically anything that has wheels is pretty similar to a car dealership, large tickets, RVs, ATVs, go carts, golf carts, whatever it might be. Motorcycles, whatever. nailed it. They're all kind of the same in terms of the core operating principles. So our platform fits in quite nicely with maybe just a little bit of retooling. So there's a huge market. Let's talk a little bit about your entrepreneurial journey. This is your third startup. I always tell

Starting point is 00:35:37 angel investors. I love founders who have a little scar tissue and they're on there. You know, Travis was on his third startup. You had two startups. I think both failed or both didn't return capital and you shut them down, yeah? Yeah, both failed more or less. Yeah, graveyard. Got it. What did you learn from each that has led to you to be so successful with this one, with motive. Well, I'd say I'm successful so far. You know, we'll see if I make it through it. I would invest if I didn't think it was successful so far. So definitely successful so far.

Starting point is 00:36:07 You're ringing the register and you have a product that people can't live without. Right. That's a, just by the way, most startups never build an essential product that people can't live without, nor monetize it. So you've got like, now scaling is the last piece here, right? and defending the franchise would be the, you know, the next two pieces. And, you know, can you scale it and can you go into other vertical? So I'd say you're halfway there.

Starting point is 00:36:29 Tell me, what did you learn from the first two and then, you know, that you took into this one? And how much easier is it just for people who are first-time founders? So they understand, like, hey, these are the hard lessons. And then here's how much easier it can get when you get to your third one. Yeah. There's a couple of like broad strokes notes here. I mean, for both companies that failed really, I made the, sort of raw startup mistakes that they tell you not to make.

Starting point is 00:36:55 Like, you know, you take forever to ship. You don't listen to customers. You know, you build things that you think you want and not what they want. And you spend wildly on dumb ideas. And looking back, if I had just simplified what I was trying to do to its essence and just like gotten very scrappy, I would have been way more successful. And I think both businesses could still be successful as someone did them today properly. But ultimately, it's just like start simple.

Starting point is 00:37:19 and I would have been a little bit more successful on those past ventures. So to unpack that, you didn't listen to customers enough. You needed to do more product discovery. And you were building products for yourself, maybe not for, you know, the actual customer base. And you were going slow. And going slow, explain why product velocity matters and then how you sped things up. What was the technique to get things to move faster and have product velocity? Yeah. I mean, so like as far as moving slow goes, I mean, it wasn't like we were unable to take action. It was like we were trying not to move quickly in a way, you know, like taking forever to make product decisions, trying to sort of like stick our finger in the air and say, okay, is this what the world wants? Instead of really asking what the world wants. And so that was where the failures came in. And by the time we realized that we were making all of the mistakes they say not to make, you know, it was way too late. So I mean, that that's really the thing is, is you need to like.

Starting point is 00:38:18 like, you know, fail quickly enough where you have time to correct it as opposed to trying to create this like perfect solution right away, which was just not going to work. Yeah. And then you asked what makes it easier this time around. I would say like getting the like getting your teeth cut on just like the general like operating functions of a business has really helped like understanding what a P&L is and like how you should run your accounting. department and like how your book should be done and like all these things that like really I was like pulling my hair out about in the beginning as if they were like the biggest problem like having a handle on that is really helpful because then you can just focus on like the core of making your startup work and not like how do I file for an LLC and so I think having those

Starting point is 00:39:06 failed startups beyond just learning to you know increase velocity was like getting my teeth cut on those like basic sort of organizing principles of running a company. tackling is you could get knocked on your butt because you could wind up having all of this operational legal accounting debt build up. You know, people talk about technical debt. You know, this other stuff, Croft builds up. And once you become a really solid founder, that's part of why we started Founder University, was to, and we're going to have our seventh cohort, so apply now at Founder.com university for a plug there, was because people didn't know, oh, I have to do an IP assignment.

Starting point is 00:39:48 Oh, I need to be a Delaware C. Oh, I need to have cash-based or accrual-based accounting, not cash-based. Oh, I need to do this IP assignment. Oh, I need to have an employee stock option plan. Oh, I need to do a 401B. You have to do all this stuff. It's nice to be able to have an opinion on those things after the first couple of times where it's like, you know, you don't need to like reinvent the wheel.

Starting point is 00:40:10 You don't need to innovate on how you form your C-Corp. No. Standardize everything. That's right. You just get it done and you get started with your business. Yes. Have great vendors who do it right, standardize it so then you could focus on, you know, your team, your product, and your customers. Well, that's another thing too, the vendor piece. It's like knowing who to install to do certain functions without having to like go through the process of betting vendors is is really nice.

Starting point is 00:40:36 So like having some some priors on like, okay, this works, this doesn't. Because really to say all of that is like I did not figure out how to actually create a successful startup by failing in the previous two. Rather, I'd do. just figured out how to like focus on doing that. Yeah. I mean, it's you if you don't have an AV person for your house or a handyman, let's say, and then you have a great one, the experience of trying to solve, you know, little things around your house could be absolutely cumbersome or it could be elegant and simple. And once you have the right vendor, everything just is easy. So, you know, getting those right vendors dialed in, not promoing for anybody here, but, you know, Cruz, uh, as but

Starting point is 00:41:15 one example of an accountant, they do such a good job for early stage that I always recommend them because I just don't want my founders to have problems. And there's like tons of other accounting services that do a great job for small and medium sized businesses, but you got to get that stuff right. Tell me as we wrap here, how do you study customers? What are your techniques for listening to customers and developing the product? Because you can get lost in the wilderness building tons of new features or you can study your customers and make the existing feature set better and better and better and increase their utilization and the value they get from existing stuff. So walk me through that. Particularly with my business, and I would say uniquely to my

Starting point is 00:41:55 business, there is a lot of customer communication. We play a really important role in this incredibly large industry and in this important place within the business. And so they contact us a ton to go through new ideas, initiatives, things that they want to do with their website. And so we're we're constantly getting feature requests, and so we have had to build some processes around how to prioritize those and how a decision is made when something gets done. I would say that the biggest thing that's been important for us is to not necessarily build exactly what the customer wants, but almost kind of let feedback accrue over time. I've never had a problem in this business in particular of getting feedback, but really,

Starting point is 00:42:44 It's like, how do you make it actionable? And by letting it accrue, you sort of let the dots connect naturally because sometimes you'll start to get similar or like adjacent feature requests from other customers of similar profiles. And you can start to sort of merge those in your head. Like, okay, well, this person wants to be able to do this function on the search results page and this person wants to be able to do this function on the vehicle detail page. How can we like knock out both of those birds with one really elegant?

Starting point is 00:43:14 primitive or one really elegant solution. And so on our end, we have a way of connecting all of these feature requests where rather than just sort of doing one-off features that aren't really coherent, we let them build up, and then we sort of aggregate them into light releases. So that's how we handle customer feedback. And what's also unique about our product is that a lot of the customer feedback comes from the business, but it's really a consumer product, right? Consumers are interacting with it. So we're able to like analyze what consumers do on our platform and work from that as well.

Starting point is 00:43:53 Awesome. Well, listen, continue success. Thanks for letting me invest in your startup. Hopefully we can be helpful to you on this journey or at least provide some capital and some support and, you know, reach out if you ever need help. And are you hiring right now? Or do you have any specific positions you need to fill? Because sometimes we actually help people find people here. Yeah, absolutely. Yeah. If you are a skilled operator or a skilled engineer, we would love to talk to you. Awesome. So, great job. And we'll see everybody next time. Oh, and how can people reach you? They can go to our website and apply on there or they can request a demo on our website as well. Ridemotive.com. Got it. Awesome. All right. And we'll see you all next time on this week in startups. Great job, brother.

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