Do Kwon Guilty, Powell Pivot & OpenAI’s $12B Run Rate | E2168

One thing called the Anchor protocol was offering a 20% yield, Jason, on people who held UST within its protocol. Then a lot of money got pulled out of Anchor and then suddenly a lot of people wanted to burn their UST in exchange for Luna. That led to a decline in the value of the stablecoin and then that led to a massive print on the Luna side, devaluing the Luna token. And then you had kind of a death spiral down to effectively zero and tens of billions of dollars were lit on fire. This week in Startups is brought to you by AlphaSense. Get deeper insights into your business with the power of AI search and market intelligence. Start with a free trial@alpha-sense.com Twist Bolt. Don't be left behind. Build apps quickly without knowing how to code with Bolt New. Try it free at @Bolt New Twist and Miro. Help your teams get great done with miro. Check out miro.com to find out how.

Hey, everybody. Welcome back to this week in Startups. I am your host Jason Calacanis. I've been doing this for 14 years and I'm just getting started with me, my partner in crime, Alex Wilhelm.

Hey, hey.

Incredible journalist and man, it's going to be your day to shine. Alex, I know this is your favorite, one of your favorite days. It is when the Fed speaks. Alex is excited. I mean, listen, we all get excited about different things.

It's true.

Me, it's the Knicks, poker and skiing in Japan.

And for you it's factorio Jerome Powell speeches in poker. So we overlap a little bit, at.

Least a little bit on the poker. That's right. That's right. Okay, so tons of things on the dockets today and but I think maybe we just start with what did Jay Powell say to today? Because this does impact startups. I'll explain why after Alex tells us what's going on in the markets.

Yeah, so the chance of a rate cut, Jason, from the Fed has risen. That's the headline. The context is that today during a speech at Jackson Hole, a yearly speech that Jerome Powell, the head of the Fed, has given for several years in a row now, he said that when we put the pieces together in the near term, this is a quote, risks to inflation are tilted to the upside and risks to employment to the downside, creating a quote unquote challenging situation. However, he thinks that, quote, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance. That is Fed speak for there's probably a small rate cut coming in September. That's what the market wanted to hear. That's what the President wanted to hear. And so stocks are up and according to FedWatch, everyone is now pricing this into their forecasts.

Okay, so our friends at polymarket are really good. Shout out to my guy Shane, also a Nick fan. We're going to have him on the pod soon, so let's put that in there. I want to get Shane on this week in Startup soon. Just talk overall about the business. He's crushing it over there and I know that in the United States we're going to be able to participate in Polymarket soon. I don't know if that has that started yet. Does anybody know?

Not to my knowledge. But I did see that was coming, which is going to be big because even Robinhood's doing something with prop betting and sports and such. I really feel like the worlds of making an investment or bet are getting more merged and also just more open.

Yeah. And you and I, I think, are for that. Generally speaking, we both like the idea of thinking in bets and so, you know, you're going to have skin in the game. Here's the Poly market for Fed rate cuts. This is chances for September 7th and what the Fed decision would be. And we see some spikiness there at the end. I don't know if we can change it to one day I for the chart because that would be a really illustrative. So what we're seeing here, I'll describe the chart for those of you listening is up until, I don't know, about 10am or something. Yep.

The speech started at 10am in Jackson Hole and that's when the, the text of his prepared remarks came out. So people instantly traded off of that.

Got it. And so what did we see there? What, what popped? Is it the 25% bps?

25% bips. This is why I said, Jason, a small rate cut, 25 bips is 25 basis points, which means 0.25% for folks out there who don't speak Fed. And that's the smallest amount of cut or raise that the Fed can do at any particular meeting.

It's the middle that went from whatever, 60 to 80% or 79% to be precise. Yeah, yeah. All right, so we're going to in all likelihood, the Sharps here, the Sharpe Betters, they're usually right. And then what do we have for October then? So October must have changed, I think, during this. And yeah, there it is zooming into.

The one day here it's narrowed quite a bit. Between a 25% bips decrease and a no change. I think, Jason, what we're seeing here is people are expecting that if we do get a cut in September, there might be a slightly lower chance of there being another cut in October. We'll of course have to see. More data will come in, but that's how I read this particular poly market.

Got it. Okay, so let me break this down of why this matters. You know, if you're a founder, you hear people who are market participants like myself who have, you know, if you have a family office like I sort of do now, or you're a thoughtful person like Alex, who has a nest egg that he manages for his family. You know, we're going to be talking about this. Why? Well, if you make it easier to borrow money, then people will borrow money. If it's expensive to borrow money, they won't. So what are the downstream implications of that? If you're an affluent person, you will make more bets. I made two bets in the last month that I will announce here today. I put $200,000, not a totally significant amount of money for me, but still a bet on a late stage high profile growth venture fund. I also put $200,000 into or committed $200,000 to a crypto fund which I will be a consulting partner on and I will announce that in two weeks. So I put 400k to work on extremely speculative private markets. Now these are thoughtful bets where I haven't made a fund bet probably in a year and I've made two now. So that would lead you to have questions, Alex, I'm sure.

Oh, absolutely. So first of all, why, why now? Why? And then also why increase your leverage by that particular amount?

Okay, so these were the amounts offered to me. In the case of the venture fund, I was offered a 250k and that was the max I was allowed in that extremely high profile growth fund, which you would know by name. I won't say it here. I would have to clear that with them, make sure they're okay with it.

But does it start with an S?

I can't say, but you know, could be any of, any, any consonant. Probably is a good guess. So, you know, I just thought I have the opportunity put a little what I call a wealth bomb into a growth fund, which means probably not going to see any returns from that between five and eight years. A growth fund would be less than an early stage fund. And so that means I am feeling long term confident. It means I have the ability to feel like the Economy is strong, whereas last year I might have been like, you know what, let's just wait and see what other opportunities there are. Maybe I'll be in a more protective provision. And on the second one, I feel like with crypto regulations finally becoming more clear, thanks to the czar, David Sachs and his public. I don't have any, like, private information here. Just if you see the crypto bills in progress, it means crypto will be regulated, which means the opportunity will become more clear. And I have an executive I've known for 20 years who put, you know, a significant amount of money of his own skin in the game into this fund to go after this specific vertical, which is a very specific vertical in crypto. So I thought it's time for me to get off the sidelines. I mean, we do own millions of dollars in bitcoin. That may be time for me to get off the sidelines and start dipping my toe and learning. So the 200k bet there is what I would say, a learning bet. If you look at, what is it? Druckenmiller, who says he places the bet and then learns and does research, he had this famous quote where sometimes he makes a small bet to kind of get skin in the game, get his attention. And he makes a small bet on something he has an instinct about, you know, knowing if it goes to zero, it's not going to cause any damage, but it will heighten his learning. Yeah. And Druckenmiller said this at some point and sort of what I do, I will place a 25 or 125 gay bet into startups in order to learn about the vertical they're going after, to learn about the customer base and to learn about the founders. I think a lot of people are feeling really strongly about the US economy and that means it trickles down to their participation as LPs and funds. It also trickles down into their ability to write a check as an angel check for 25k to 100k and take a flyer. If you look at two major holdings for me, they would be Uber and Robinhood. And if you put those two on a, I don't know, two year chart. Sure, if you don't mind. You know, I am personally feeling flush, therefore I take my risk. And the other businesses I have, like podcasting, are doing well as well, all in founder, university, et cetera. So just to use me as a base study, sure. I'm feeling like I want to play some bets and therefore I am making those bets. Obviously, lots of people are worried about AI coming for their jobs and, you know, it's not entirely unreasonable. But that's not the only story for some people, hey, AI is going to make them a lot better at their jobs and these individuals are the ones who are going to thrive in the next wave and they 10x their productivity. Enter Miro's Innovation Workspace. From a company that's been helping teams collaborate and brainstorm for over a decade comes an AI powered workspace that is not just going to take your ideas to the next level. It's going to help you progress from unstructured data and a bunch of random notes to product briefs and prototypes in just minutes. It's a solution that will keep us all organized. And it isn't just moving these things around, it's turning them into polished charts, slick diagrams, well designed slides, and it's a massive time saver. Quickly start developing your next project without spending hours perfecting the ideal question or prompt. No, your whiteboard is Miro's prompt. So help your teams get great done with Miro. That's miro.com to find out how. Because I think the US economy strong now, that was my next question, which.

Was the why, Jason? Why now? And it doesn't be that the economic strength is pretty good. So just looping this back to the Fed. You're not concerned about the inflationary pressures and the issues in the labor market. You think that with a rate cut and a little time, things are going to boil off okay?

I think the Fed has a really difficult job here because it's pretty clear there's a confluence of events. What I would say is they're driving, they're responsible for driving a car on a highway where leadership is increasing the number of turns and rain on the track. So if this was Nuremberg, like the Trump administration has added complexity to the track that he's got to run on. He's got to make sure the car doesn't flip, he's got to make sure he doesn't overturn going into a turn at a high velocity. So inflation is going up, not down. Jobs are going down, not up. And tariffs are a wild card. So that's like the oil slick on the track. So you got oil slicks on the track and you got the two different mandates going in two different directions. This means difficulty for the drivers. And that's my take on it. I do think inflation will go up. I do think we're going to have jobs be challenged. Which means this rate cut could make the stock market or is making the stock market go up, as we saw today. Yep. Which means rich people will get richer.

Speaking of which, here's that chart you asked for, Jason.

Sure. So, you know, if you were to look at me with two major holdings I have, as people know, I was the third investor or fourth investor in Uber, that's now a meme. And Robinhood, I invested. So both of these, I invested at pennies a share and, you know, their prices are above pennies a share. And yeah.

So.

I think that these two companies were undervalued for a significant portion of time and are catching up to their actual value. And if you look in 2002, I put a trade on in the public market for both of these shares. I bought Uber at $30. And then when it two and a half, I sold my public position. It not my private position from when I was an angel just to offset some losses I had with Disney and Warner Brothers. And I was just sick of holding those shares because I just lost faith in the management of those companies and just the headwinds against those industries with TikTok and YouTube being capturing and podcasts and capturing a lot of their attention. So I cleared out those positions, but I kept the Robinhood position, which is now as a private market. I think I'm up a half million dollars in that. That not going to clear it because I think Robinhood is not fully valued yet. I think It'll be a $200 share and I think Uber is going to be a $200 share in three within three years. So I'm keeping both of those positions on. Wow.

Well, yeah, I can see how you feel pretty confident because if I was holding the stock at what is that, $10 a share, that went up to 110 and I was holding it in volume, I too would feel darn flush.

Yeah. So feeling a little flush, but also humble enough to know these things could come down 30% for sure. If they do, it's probably an opportunity for me to buy more. And so I think these are very strong companies. I'll stick with them. And you can look at the, you know, if you want to consider it bullying from the Trump admin. From Trump to Powell, if you want to consider it haranguing, if you want. Let's say you believe Trump's in the right and there should be a rate cut. Okay. Whatever you think about that interpersonal play, there's going to be a cut and that will have the. That will unstick the real estate market moderately. And it's obviously unstuck the public Market. So here we go, folks. I gotta play the game on the field. If the DJ says I'm playing for another two hours, I'm gonna dance. So here we go, folks. Let's dance. If you're running a startup, go to rich people and raise a half million. Top off your last valuation. Best advice. And you know what some founders are going to be like. I don't want the delusion. You know what? If the market corrects and you had a chance to put 500k or 5 million into your startup at a solid valuation, your last valuation, a good valuation, or even a juicy valuation, why wouldn't you give yourself another six to 18 months of Runway? That's my best advice. And that's how startups should look at markets going up. Rich people have discretionary money to invest in their startups.

Yes. Also, there's the correlation between interest rates and technology valuations, Jason. When rates are high, tech valuations are low. So you can see the general bullishness here could help everybody in the tech space, which is good times. But you know who it's not going to help? It's Do Kwon, who we've had on the show before and recently pled guilty in a massive crypto fraud case. I thought, Jason, as we dig into the story before we go into the back history, we might watch a couple of the clips from your interview with him.

All right, this is interesting. I had Do Kwon on. He was trying to explain to me and I haven't watched it since, and shout out to our second felon who appeared on the program before they were a felon and then became a felon. So we have, I think we have two of those historically. Nicola, who has been pardoned, and then Do Kwon. Both these individuals were on the pod and in both of these interviews, just to give myself a little pat on the back, I was skeptical. Yeah, I threw a couple of little jabs at them to try and get the truth because I had suspicions that when somebody can't explain to me what they're doing on a business level. And listen, I'm not an investigative journalist, but the Nicola tape from that interview was in his trial as evidence. And I don't know if we were evidence in the Do Kwon one, but I was massively confused with where the money was coming from. Play the clip.

Terra USD is in sort of a burgeoning class of stablecoins called algorithmic stablecoins. While the currency remains itself pegged to a fiat currency like the dollar, it's not backed explicitly by a dollar in the bank account. Instead, it uses a set of game theoretic incentives that live on a blockchain to make sure that the currency retains its value against the dollar. The idea is that for every Terra stablecoin that's issued, you need to burn a dollar's worth of an ecosystem token called Luna and vice versa. When you're looking to redeem one TerraUSD, you can burn that TerraUSD and then mint $1 of Luna at any given time. When TerraUSD, due to increase in demand, starts trading slightly above a dollar, let's say a dollar and ten cents. And Arbitrager has an incentive to burn a dollar's worth of Luna and then mint one Terra USD and then sell it into the markets for 1.$1, thereby capturing a 10% ARP spread and the reverse direction. The same is true if TerraUSD is trading at a discount. You can buy it and then swap it to a dollar's worth of Luna and then capture 10% ARP that way.

Okay, Alex, you are a finance journalist. Explain to me what he just said in plain English, like I'm a 12 year old. All right, if you can. Yeah, no, it's totally fine for you to say I don't understand what he.

Said, but I do. It's just hard to explain to a 12 year old because it's relatively complicated. Okay, let's start with how most stablecoins work, which is I go to Jason Stable, I give you a dollar of US currency, you give me a dollar token and then you invest my dollar that I gave you into treasury bonds or corporate debt or whatever you want. That's going to keep it nice and safe and have it grow a little bit. I then have a digital representation of the dollar that I can take around the Internet and use as I will, and it stays very close to its $1 peg because you, Jason, are willing to exchange my little token on the blockchain for my original dollar. Back and forth, very simple, one to one backing. This is called, this is how Circle's USDC works and how Tether's USDT works.

Now this is different, right? Usdt Tether has been cleaning up their act. According to reports, yes.

I was trying to avoid getting hit with all the tweets about how I'm spreading FUD about Tether again.

Well, they had tons of legal action against them in different markets. So we don't have to sit here and speculate. We can just say, look at the history of Tether. Look at the attestations, look at the critique of it probably feels to me like a lot of valid critiques and actions where they were banned in certain jurisdictions for not having as tight an audit as people believe they should have. Now in this case, instead of owning a Treasury and being audited, Do Kwon was doing something else which I could not understand during this interview. You don't need to share your specific vision with a team of developers anymore. Nope, you just go to Bolt New and anyone can build a web application quickly and without being an expert code monkey. Nope, you don't need to have any previous experience writing code to get started. Just go to Bolt New, tell their AI what you want to build in plain English and boom, you're on your way. You can use Bolt New to design a stunning world class landing page for your company, upgrade your CRM, build a consumer facing app, or do what we're doing. We're creating a community website, a portal for all of our angel investors. Your competitors are also using these cutting edge tools to ship their products faster than ever before and to brainstorm new products before you have to hire a bunch of developers to build them and spend a year. Right. This is like a really interesting way for for you to test your ideas and to put them into production. Try Bolt New for free at Bolt New Twist. That's Bolt New Twist. Make sure you use that URL specifically and tell them that your Uncle Jason from this week in Startup sends you.

Yeah. So they had two tokens that were in play here. One was ust, which was their stablecoin, which is supposed to be pegged at $1. And then they had a token called Luna that was associated with their terraform blockchain. So the idea was you could buy a UST a tether token for a dollar's worth of Luna and therefore if the value of UST went up, people would therefore take their Luna, burn it, which is get rid of it and convert that into UST tokens because they were getting a little bit of a value bump the ARB spread that he said. So essentially as UST would deviate from its its peg, people would either buy or sell those tokens to get rid of Luna to balance it. So as long as people had belief and faith in Luna, you could in the the value of UST relatively stable by balancing them around the $1.

Luna had no intrinsic value. It wasn't a stable coin. It was a crypto project of nebulous core value, not dissimilar than Ethereum, Solana or xrp Absolutely. This is the value of those, is whatever people perceive the value to be.

And the idea was with an algorithm that allowed people burn Luna to get tether, or. Sorry, to get ust, or to burn UST to get Luna, keeping it at a dollar. It would just stay. The problem was there was a lot of incentives that were put onto the market to help to get people to essentially hold UST. One thing called the anchor protocol was offering a 20% yield, Jason, on people who held UST within its protocol. Then a lot of money got pulled out of Anchor, and then suddenly a lot of people wanted to burn their UST in exchange for Luna. That led to a decline in the value of the stablecoin, and then that led to a massive print on the Luna side, devaluing the Luna token. And then you had kind of a death spiral down to effectively. And tens of billions of dollars were lit on fire.

Allegedly, according to these lawsuits.

Allegedly, according to these lawsuits. Please don't sue us, et cetera.

Yeah. And this is UST, which is TerraUSD, not to be confused with USDT, which is the tether ticker symbol. So what has happened? I guess. Should we play my perplexity, your Q and A? Yeah. Okay. Yeah, so let's see if I could, because I was confused, and I'm still a bit confused, but you're actually helping me kind of get my head around it. There was this other amorphous project token that somehow backed all this up because it had no value in the world, it just evaporated.

To make one point a little bit clearer, the way that I understand it is you could always trade a UST token for $1 worth of Luna. And so that was the mechanism that made people want to arbitrage back and forth to keep them stable. Anyways, here's Jason asking Do Kwon a couple of questions.

There is a coin called Terra. You can buy that. Where? And then where does Luna exist? Is this Luna is your currency or it's some open Standard?

Yeah. So TerraUSD, you can purchase it from a number of different exchanges like Bitfinex, Kucoin, and lots of different service providers for Luna. It's a currency that sort of provides for network security of the overall Terra blockchain.

So.

So you can sort of think about it as a stability counterpart to Terra USD. And it also trades quite widely on various different exchanges.

And the price of Luna changes, but the price of Terra does not.

Yes.

So when I go onto one of these exchanges and I deposit fiat into them, they would give me Some Lunas or some Terras.

Yes.

And then if the Terra price changes. Why would the Terra price change if it was pinned to a dollar?

Normally it wouldn't, but it's just that most of these cryptocurrencies trade on order books, right? So if there doesn't happen to be ready inventory available within the time period that you need it, then that case due to supply and demand, if demand, demand curve starts to shift, then that case the price is going to inch up.

But why wouldn't you, as the person who controls Terra, just print more Terra?

Oh, so we don't actually print Terra. So anybody that has Luna tokens can burn it to mint Terra. So it's a very decentralized redemption and mint mechanism.

So if I own Lunas, then I can make my own terrors. If I make my own terrorists, people could be trading them. They could start to grow in value. And if there weren't enough supply, like there haven't been enough supply of bitcoins or ethereum tokens, they could go up in price. But then there's an incentive to then burn tokens. That's the part I don't understand when.

The incentive to burn tokens manifests is if there's too many people that are selling TerraUSD so it starts to trade at a discount to a dollar. You can buy one Terra USD at that discount, let's say 10 cents, and then you can swap it on the blockchain against $1's worth of Luna token. So for example, Luna right Now is around $7. So if you swap in one terra USD, it's always going to give you 1/7 of a Luna at that current market price.

Now, Jason, does that help you? Because I'm curious.

I mean, here's what I'll tell folks. I'm not a PhD in mathematics or markets I don't have. I mean, I've taken a macroeconom course on my own from MIT and Stanford that are on for, I think I took both of them that are online for free on YouTube to try to sharpen my blade in understanding all this. But at a certain point things become too complex to understand and distributed and unregulated means I'm out. So when it hits a level of complexity that I can't build a mental model around and there's no regulator involved, that's just a number of red flags for me that says I'm out. Now, with Bitcoin, I did get comfortable with that. It's a deterministic algorithm that tells you exactly how many coins there'll be. I did have concerns for some time that it could be exploited. Hacked 51% of the servers and maybe a bad actor could take over the project. They did have concerns about it that it was able to be resilient enough to weather. So we felt okay. Having a small percentage of our net worth extremely low single digits, like, okay, sure, we'll try it, see what happens. But this one to me just was like blaring alarms. Similar to when Nicola was telling me he was building a Badger pickup truck that would be electric so that he could get retail investors to buy the stock. And that was his motivation as opposed to building a product or service in the world that people needed. So I'm a simple guy. I'm fine putting money into a venture firm to QQQ to buy specific companies that provide a product or service to the world that I can understand. And I can understand the customers here. I couldn't understand the customers. I couldn't understand who was regulating the game. And it was too complex of a system for me to hold a mental model of and be able to explain to other folks. And when you were struggling to explain it to me or said just outright like, yeah, it's hard to explain this to a 12 year old. And you add that it's unregulated and it's offshore. Just felt to me like, why would I participate in this? It's just like me playing in a poker game where they tell me, yeah, we're going to have like Deuce 7 and the suicide queen is wild and everybody's got to play a bomb pot every two orbits. And you're like, okay, this feels like I'm getting angle shooted. I just want to play no limit or plo, right? Yeah, yeah. And everybody gets into a poker game like that where somebody's angle shooting some crazy, you know, some, some crazy angle against the other players. And when that happens, I just say, you know, I'm going to sit out in orbit. You guys have fun. I'm going to go call my wife and check in on the kids or I'm going to. I'm going to go have a steak sandwich and call it a day while you guys play, you know, these crazy games. So I guess what's happened since is that he was arrested. I remember he got picked up in Montenegro or like some Bonneville in area, getting on and off a plane in Europe and then I guess the Koreans picked him up. The key to running a successful startup or maintaining a profitable portfolio, we all Know the answer? It's data. If you don't understand your numbers and you're not watching them like a hawk, well, you're flying blind. But how can you be sure you're getting the best and most accurate information to make decisions and that you're looking in the right place? The answer is AlphaSense. This is the world's most trusted AI platform for market intelligence. Currently in use by over 6,000 leading companies, including 88% of the S&P 100. AlphaSense's expert domain specific AI has been trained on over 500 million business documents like earnings reports, equity research, expert interviews, filings, and more. The faster and more efficient your team gets at the research, the more founders you get to meet, the smarter and more informed bets you get to make. So it's time to accelerate your entire process with deep research from AlphaSense. So here's your CTA. Start your AI search and market intelligence journey today and get deeper insights to, to power your business. We're even going to start you out with a free trial. Go To Alpha hyphen sense.com backslash twist to get started.

He was, he was arrested in Europe and then extradited to the United States. I think this was a multinational effort. And then the latest, just to kind of bring everyone full circle here, is that he pled guilty to one count of, and I'm quoting here, conspiring to commit commodities fraud, securities fraud and wire fraud. And one count of quote, committing wire fraud in connection with fraudulent schemes at Terraform. And it's a $19 million adjacent forfeit from him and up to 25 years in prison. Of course, he probably won't get 25, he'll probably get three. Now the question then became, and I wasn't sure about this, how do you get in trouble for just having a bad idea? Right? Okay. They had this idea for a stablecoin that was algorithmically backed. It didn't go out. Well, that doesn't sound illegal, it sounds stupid. Well, it turns out there's a bit more to this just to let people know they were doing things like saying they had a partnership with a thing called Chai that was run transactions on their blockchain. That wasn't true. So some of the real world use case was fake. They claimed that the Luna foundation guard, which was set up to help defend the Luna Token, was independent. It wasn't. And so there was actual false representations as well that were part of this. So it was a real crime.

So what you get people on and what he Pled guilty to isn't necessarily creating a crypto project. It seems like it was under the false claims and then maybe not following exactly securities law. Am I correct there? Was there a securities law portion of this or it's just unclear what he. Because it seems like he just settled and said, okay, I'm guilty.

Well, the first count did include securities fraud as one of the things that he pled guilty to. So I think it's under that umbrella. One last thing, Jason, you mentioned at the top crypto regulation as why you feel confident in putting a small wager into a crypto fund. I was curious what the Genius act, the stablecoin focused legislation that passed recently, had to say about algorithmic stablecoins because their reputation went from high to low in the wake of this catastrophe. So I went back to the text for us today and all it calls for in the Genius act is a quote, study on non payment stablecoins, a group that it says includes endogenously collateralized payment stablecoins. What's that? It's a stablecoin that quote, relies solely on the value of another digital asset created or maintained by the same originator to maintain the fixed price. So they're going to investigate this idea and it may in the future be allowed under the bill, but I think everything else is going to be one to one. Back to. We can close the chapter, close the book on this chapter.

And this word is endogenously endogenously collateralized payment stablecoins where the word endogenously end O G E N O U S L Y an adverb meaning in an internal self generated or self originating manner. And in business economics or science it refers to something that originates from within a system. So in finance, an outcome is endogenously determined if it arises from the economic model, not influenced by external forces. So this seems to be the key term of art here, that is in the Genius act to protect against this kind of shenanigans. If I may use another term of art.

Yes, shenanigans is. Is as serious a term as endogenously. Well, here on Twisted is. Yes, it took me a while.

It seems like they were shenanigans. And this is why the stablecoin stuff has been brought onshore and tightened up is to get rid of these things. So I guess my thesis maybe is playing out, which is Gensler told everybody, play by the rules or get arrested, which is what happened here. And now Sachs in this current administration are saying, here's the rule set, the new rule set, follow it or get arrested and to try to protect Americans, which is the job of our agencies and you know, the executive branch and the House and everything to pass these laws. So feels like we're going in the right direction by onshoring the stuff. And then Americans need to understand if you're participating things that are offshore, you're really taking risk. And if you're participating in things you can't understand and explain to a 12 year old, there's something like that I would consider like a screaming red flag on fire. Like if you took the red flag and you waved it for people and then dipped it in kerosene and lit it on fire, that's kind of what you're seeing here. Boom. Like just you can sit this one out. Folks like don't get greedy right now. It's incredible. You can get 5% or 6% from a Robinhood, from a coinbase or from your bank on a cash holding. Because to the first story today, the interest rates have been high and now those interest rates, if they come down, you're going to be getting paid 2 or 3%. Maybe people will be like, you know what, I'm not going to stay in cash. I'm going to have other, I'll have some more market participation. I'll move out of cash because I want to get the 7% gain on average, not the 2 or 3% and people will start making those trades. So this is all important for people to understand. If you're building a crypto company or you're raising money.

Absolutely. Next up, Jason, let's talk about OpenAI. They recently had their first billion dollar month putting them on a $12 billion run rate. I wanted to bring this up because we discussed on the show back in June when they announced they reached a 10 billion annual run rate. So for me I think going from 10 to 12 in it's a little hard to tell. One to two months is the timeline is incredibly impressive. That's 20% growth in less than a quarter which is startup style growth. Frankly Jason, that we would love to see from a series A or B company but in this case from a company at a 10 figure run rate which struck me as very impressive. 11 figure run rate, which was very impressive to me. What's kind of crazy as well is that in an interview with cnbc, their CFO Sarah Fryer said still that quote, the biggest thing we face is being constantly under compute which means that they could grow faster if they had more GPUs which at some point they're going to have enough, right?

I guess, yeah. And Sarah Fryer is the same. She was the CEO of Nextdoor, I remember. And before that she was at Block, formerly Square. So she's got a pretty great track record. The CEO track record Nextdoor did not do well during her tenure, but obviously Square did exceptional during her tenure. And the question Ben, I would have is the profitability of this revenue. So what are they spending in Capex? What are they spending to deliver this? And then what is the breakdown between hits to their API versus consumer? And I remember it was majority 60, 70, 80% at some point of this revenue. We could probably ask producer Claude if they can find us more information on this breakdown. They also have 700 million weekly active users. Wows, I guess instead of Daos and mouse. So maybe they have 500 million DAOs. So if you have 500 million people using your product and you're making a billion dollars, you're making $2 per user. But I don't think they're making the $2 off those users. They're probably making. If that billion was 50 50, they would be making a dollar off every user, which would be in subscription revenue because they don't have advertising yet and their subscription is 10 or 20 bucks a month. So you could actually back into how many paid subscribers they have. Do they release their consumer subscribers?

I never released consumer subscribers, but I do recall they went from 3 to 5 million business customers over again a single digit month timeline earlier this year. I've asked producer Oliver to ask producer Claude for the stat that you pulled out there. Yeah, but what I want to add though, that they did discuss Sarah Fry in the same interview that there was, quote, an acceleration in plus and Pro subscriptions. So that means that the consumer stuff that you're saying is doing well is still doing well. But she also highlighted nice momentum in the enterprise and quote, great momentum with developers. So in theory, this is hitting kind of all the major AI groups right now. The opposed GPT5 OpenAI world. There seems to be a disconnect between GPT5's reviews on Twitter X and how they're playing in the market, the models. So maybe things are a little better than we thought.

Well, I think that this could add. I think they could add 100 million in advertising per month out of the gate. A billion. I think they. Well, no, I think they'll get to 500 million a year. So I think they had 40 million a month in year one for advertising. We made a bet on when they would have advertising in the previous Episode. Yeah, I don't know if we have that documented.

It's in that. No.

Okay, so we will get that. Yeah, let's get that here. Because I think this is an important thing to look at is when they release their advertising product, because right now the free users are not being monetized. They're used as a funnel to try to convert people to subscriptions. But you can use a number of free products And I think 90% of people are not going to pay for this. 5 to 10% will, which is probably what probably similar to YouTube. So YouTube has over 100 million paid subs, I believe. And if YouTube has a 2 billion or 3 billion users and 100 million paid subs, you can get to that 5% of people might convert to paid. So we could actually back into of the billion people who use the product a month or 800 million who use it a month, based on the 700 million use it a week, 500 million using it a day, let's say it's a billion people use it a month. If you converted 5%, you get to 50 million. 50 million times 10 bucks each. 500 million, which kind of would be half that number. So we could start to approximate and back into a 5% subscription rate. So of 2 or 3 billion eventual users, yes, there might be 100 million paid.

I think that's going to change a little bit, though. They're recently announced a ChatGPT Go subscription in India. That's about five bucks a month once you do currency conversions, clearly targeted at a different price point for a different market. And just to go back to your point about our wager, Jason, we had a bet over under was at 12 months for when OpenAI is going to bring advertising to ChatGPT. I took the under on that and I believe you took the over on.

Okay, so let's make sure we have that in there. And we're making a calendar. So there'll be this week in startups.com calendar will be our Google calendar that you'll be able to look at and see all the great things that happened in the history of this week in startups. We're going to put our past episodes on there so you can see like how many what happened on this day years ago, who came on the show, you know, the Travis episode, et cetera. So we'll put the notable anniversaries on there of original appearances by famous people like Do Kwon or infamous people like Do Kwon and famous people like Travis first episode, all that good stuff. So Producer Oliver is going to get on that with our Athena assistants. If you want an Athena Assistant, go to athena.com athenawow.com to get a couple of weeks or months off since I'm an investor and partner with them.

Okay, next up, Anthropic's upcoming funding round has doubled in size from 5 billion to $10 billion. Jason? Yeah, at some point the numbers get so large that I kind of lose touch with them. Yes. But the company was reported to be looking at 5 million at a $170 billion valuation. Now it's going to be 10 billion. The company has seen its revenue scale from about a billion to about a $5 billion run rate this year. So not as big as OpenAI. Jason. But 5x in a year, half a year, is very, very impressive. And I pulled some data on this. The number one model on LM arena today in aggregate is actually Cloud Opus 4.1, besting GPT5 High and Gemini 2.5 Pro.

Yeah, and so we're starting to get a revenue, a mental model of revenue for large language models. So you got 12 plus 5, 17. Xai is probably doing 2 billion. So now you're at 19. Maybe Gemini is doing a bit. So we're starting to look at maybe in 2025 there'll be $25 billion in revenue for this category or more. So then you times that by 100 and you get to a couple of trillion dollars. And I have put this market size at a $10 trillion prize. $10 trillion prize means eventually a trillion dollars in revenue and times 10 for a fast growing category price to sales ratio. So we're going to have a mental model here sometime at the end of next year of what the space is worth. Then we're going to start in 2027 looking at the profitability of the space and any hand wringing about, oh, it's a bubble. Will be worked out over the next 24 to 36 months as analysts start to say, okay, let's get to brass tacks. Who's going to pay for all this infrastructure? Where's the revenue going to come from? Okay, Meta wants to put $75 billion into infrastructure this year. How do we get that? How do we get double that number back? Or if that's 75 billion you spend this year, does that last three years, five years, seven years, as we talked about previously? So how are you going to amortize that? Or is it going to be 75 billion dollars a year for 10 years and you're going to be putting 750 billion to work. How do you get a trillion dollars in revenue out of that? Well, if the ad network works better, if people spend more time, because the for you pages on Instagram, Facebook and threads and WhatsApp are that much better. Okay. There's multiple ways to generate revenue. Now we're going to have advertising, increased engagement, causing more advertising. So you can put that together, then you have consumer subscriptions and then you're going to have API calls. I don't believe the space is overhyped in the mid to long term. It's probably underhyped in the long term, appropriately hyped in the midterm and overhyped in the short term, which is just how technology works, folks. We're sitting here overhyping self driving today and we're under hyping it long term. And in medium term it's probably appropriately hyped.

Did you see the MIT report that 95% of Enterprise AI pilots. Yeah, this is kind of where I thought we were going to go with this, which is people are saying, oh my gosh, right now, you know, complicated AI pilots in enterprise aren't generating much value, therefore this is all going to go to zero, which I don't agree with whatsoever. I think that what that says is it's very hard to get enterprise AI. Right. But there's so many people working on it. Models are getting better. Jason. I'm not that concerned about it in the medium term.

We had a long term. Yeah, we had a long term. We had a big discussion about this at the top of the all in podcast, which you'll drop at the same time when this episode drops. I think, and I think the conclusion is pretty clear, enterprises are not the best people to execute on new technology. Startups are, and we're seeing game on the field. Our startups are getting massive value out of this. They know how to execute. And then you have to ask yourself, peeling back the onion, is a large language model, generative AI just generically going to replace Salesforce or, you know, pick a product or service today? The answer is obviously no. However, will Notions AI or Slack's AI provide extra value and get you to upgrade? The answer is yes. We just upgraded both of those products to the AI versions. And when I look at the notion AI, it's really nice at recapping stuff for me. And the recaps in Slack I think are underwhelming, but I'm using them. And so those applications, the narrower the application, the greater the output or the greater the potential I think today. And so that same study said, like two out of the three verticalized software products were not being kicked out. So if you were to use an investment like ours in tax GPT, a company incubated that one is getting tremendous value and people will, you know, cancel that product when you drag it from their dead, dying hand. Because when you can make an account in 10% faster during tax season, they can actually sleep or they can do 10% more tax returns and they can make less errors. So coding copilots, tax copilot, legal copilot sales copilot sales tools like Rilla Voice, which we're investors in, that help you understand who's a better salesperson and why, based upon their actions in a zoom call or whatever it happens to be. Or Granola, which we started using internally, which is a similar product just for keeping meeting notes and huddle. Now in the advanced version, huddles on Slack. We'll give you an AI summary. All of those things are doing wonderfully, brilliantly inside the organization. So I think the MIT study confirms that big companies doing wide projects are going to mostly fail at the early start of the technological curve. Much like the first volley of apps from corporations sucked. And then United Airlines app is brilliant today. I don't know if you've used it recently, but it is awesome. It allows you to change seats or return a flight or book a flight. Like almost, I would say 80% to the elegance of Uber. Or doordash. Not quite there, but close. Close enough that it's highly functional and you get really great alerts like which baggage carousel your bags are on. This sounds stupid, but now I trust the app. The app is. The United app is essential to me. And I open it up and I look at what baggage claim are we going to be? I don't go to the board, you know, at baggage claim anymore. I have that information while I'm walking from my gate to baggage claim. Stupid example. But it took these guys 15 years bleep that out to get there. That's how incompetent large corporations are.

It's true. And as a United flyer myself, I can attest to this. Just to give an example of what you're talking about, Jason, before I came over to Twist, I was at TechCrunch, which is owned by Yahoo, which is owned by Apollo. Anyways, big company, right? Thousands of employees, lots of offices. They installed Glean on our intranet. Glean is a company that this year raised 150 million at a 7.2 billion valuation. It's a big enterprise facing AI product. And what they did was they turned your home screen of your browser into a glean page, which didn't do anything. But I know that the idea was to bring together our corporate information to reduce IT desk calls, but I didn't need that. And so what I got was an enormous rollout of a product that did not work for me in any manner of speaking. So I can see why these pilots are struggling. But I agree, I'm still incredibly bullish on a medium to long term timeframe, even if there will be some chop in the near term. But that's always the case in a gold rush.

Yeah. And the reason why small companies beat the big companies, AKA enterprise companies, is because they're more nimble, they're more focused, and it's not a side hustle, it's the hustle. Whereas all these AI pilots are done by an experimental group. The CEO has some funny money in a budget somewhere. The CFO says, yep, give this person 10 million, give that person 5 million, give these three people 2 million each. Let's see what they come back with. And if we can actually impact our business, it's funny money to the organization. They're making billion dollars in revenue. They carved out 20 million to do some pilots, which they always do, and they're just there to learn. So it's great that MIT did this, but people are over reacting and over indexing on it, so that's fine.

All right, Jason Canva is up next. They are executing a tender offer, a secondary share sale for their employees. And this matters for us because their valuation is going up from $32 billion set last year to $42 billion. And for people who were around in 2021, the valuation of Canva did reach $40 billion before going down as the ZIRP era kind of came to a close. So they are now back above their previous valuation high. And I think this is mostly down to Figma's outstanding IPO we saw quite recently.

Yeah, 100% correct. Yeah. Figma's had an incredible run as a public company. It's obviously come down, I think, correct, from the public market valuation it peaked at. It has, yeah. And we can pull up that chart in a second. And you know, They've got over 3 billion. Canva's got over 3 billion in revenue and quarter billion monthly active users. It is one of the great success stories of this era and it is the most successful startup to ever come out of Australia with the notable exception of Atlassian and I Think Atlassian's public market cap is bigger. But two extraordinary companies to come out of Australia and the spirit of those founders and entrepreneurs in Australia is extraordinary. You can put them heads up against American companies no problem. And they actually trounce the European companies in my mind most typically they're dogged and they're awesome. Okay, so looking at the share price peaked at 120 is now at 77. What's the market cap of Figma then? I guess currently and then market cap revenue. So Figma's market cap is 38 billion and we need to get their revenue.

I did the math beforehand, Jason. They have a, currently a 39x price sales multiple. And so if you applied that multiple to Canva's $3.3 billion annualized revenue as of June, Canva will be valued at about 129 billion. So I, I'm not sure what to make of the discrepancy between the two companies valuations. Perhaps public market investors are too enthusiastic and private conservative.

But I, yeah, you nailed it. And Figma will do a billion in revenue in 2025. 1.1 billion. So Canva does three times as much revenue as Figma. Wow, that's. I didn't realize that they were three times bigger. This is an important lesson for founders, Alex. Figma is for professionals and Canvas for consumers and prosumers, you know, but I would say not exactly like the professional product designers tool that would be Adobe and Figma. So really bold move by the team at Figma which has been able to. The team at Figma has been able to figure this out. Consumers buying a product can get very big, but people like to go enterprise because enterprise buys early and often easier to sell into. Very easy to target. So you can play the long game like Figma has, I'm sorry, like Canva has and capture that market or you can capture the enterprise market. But they're both huge markets. Design tools are a huge market. Who knew?

So producer Claude lets us know that in Q1 of this year Figma's revenue was 228 million. Jason. And then in the second quarter just about 250 million on the Figma side.

Of the billion dollar run rate.

Billion dollar run rate. Thank you producer Claude, from our friends over at Anthropic. All right, next up, Neuro raises a bit more. So Jason, I think it was back in April, Nuro, the self driving company that Uber is partnering with along with Lucid to create their own self driving taxi, raised a series e of about 100 million. They've added about another 100 million to that, bringing it to 200 million. And this is when the Uber money has come in. Uber pledged to make a nine figure investment into Neuro. And so here we are, the company is now worth $6 billion. And in theory, Uber, Neuro and Lucid Jason are going to get about 20,000 self driving cars out in the world starting 26, which means we'll see 10,000 in 2028, which means that in the medium term, to your earlier point, it's a good time to be bullish about self driving.

Yeah. And really the story here is Nvidia's involvement. Nvidia has a self driving platform. It used to be called Nvidia Drive, I believe, but I think it's called Thor or Drive. Thor or Drive agx. They have a couple of different platforms here and what they do is they provide the hardware suite, training data and it's modular if you want it to have self driving. Level two, level three, eventually level four, you can use some portion of Nvidia's hardware stack to keep the car in the lane and to do adaptive cruise control which would be like those two things together is considered level two. Autopilot on Teslas is considered level two. Stays in the lane. You still got to be active obviously, and it keeps your, your distance, you know, with that adaptive cruise control. FSD Level 4 is what Waymo has and what Tesla is trying to achieve and will have achieved when they take the safety drivers out and when you can sleep in your car. What's going to happen here is Nvidia is building a stack that any automaker can put on their cars and are starting to do. The Chinese automakers are using this stack. So you'll have a company like Neuro which will do the software for full self driving, but they'll use the hardware stack. And what that means is they're going to run the price down and the power up. And the ability to buy a car without the hardware for self driving will become impossible in about five years. Just like buying a car without seat belts, air conditioning, electric windows will become impossible. Right. It's like hard to buy those things unless you're buying like a retro throwback car like that slate plastic Doc Auto.

But just to clarify here, Jason, there's two ways that things become baked into cars over time. One is consumer preference air conditioning. I'm not going to get into a car with that one. And another is rear view cameras which are mandated by law. You think this is going to be consumer preference versus a federal mandate.

Consumer preference for in the short term. And it will be law in three to five years. I'd say you're not going to be able to buy a car that doesn't have lane control, that doesn't have auto braking when a ball goes in the street, which I don't think is mandatory right now, but the rear camera is mandatory. So the question is, when will the auto industry accept $1,000 in additional cost per car to have these advanced safety features? And I'm guessing you can start to have these advanced safety features in that thousand dollar range right now. Maybe 2000. It's not full self driving compliment, but yeah. And that's that tension between the automotive companies trying to be profitable and lower the cost of cars and then the public good of giving you lane departure data. Like why isn't that standard? Feels to me like lane departure warnings should be absolutely standard given the fact that young people and older people too are on their phones, constantly switching podcasts, checking their text messages and all this other shenanigans. This stuff will all be a requirement in five years, I'd say in the western world. And yeah, we should look into that over time. So according to producer, Waymo is also by the way, going to be selling these packages into Toyota. So if you do a quick search for Waymo Toyota partnership, this one went way under the radar. But Waymo will become an oem, original equipment manufacturer to the number one or two car maker in the world, which I believe is Toyota and Volkswagen. Second, these are the car make manufacturers who make 5, 10 million cars a year. And there it is.

Yeah, yeah, this is going to be enormous. By the way, Jason, we did pull from producer Claude that the automatic braking system that you were discussing is not currently mandatory, but it will be required in all new cars and light trucks sold by September of 2029.

Correct. And if you want to see a really interesting tweet, let me give you this one to pull up Bill Gurley, who was the Series A investor. I did the seed round, Shervin did the B for Uber. Here's a tweet from him in 2020 where Bill Gurley says the people that predicted full self driving by 2020 are ones that don't truly understand the complexity of the problem. This is still many, many years away for technology and who knows how long for regulation. But the broader press keeps biting on the bait. Greater article, and this is from May 14, 2020, and Bill had the inside information on this. We're sitting here in 2025 and the only person actually running a robotaxi service is Waymo. And then the ones in China. China, obviously regulators little more frisky. But the next shoe to drop is going to be public reaction to these technologies. Excuse me. Through the lens of job loss. If you type in Wuhan self driving car protests, what you will find is in Wuhan of Wuhan Covid laboratory fame. I don't know why this city keeps coming up is it's big.

I mean, I think it's big.

Yeah, but I mean it's not. I know. I thought Shanghai or Beijing would be the places we'd be reading about self driving cars, but here it is. Taxi drivers in Wuhan protest against robo taxi expansion amid fears for jobs. I don't know what the date of.

This is, but this was from April 3rd this year and was updated later that day. Jason, the reason why I think that you might see more protests in Wuhan versus Shanghai or Beijing is that they're not Shanghai or Beijing. And so there's probably less oversight at the CCP level because they're less politically sensitive. Like if you tried to do a little protest in Tiananmen Square right now, how's that going to go over in Wuhan? You're a little bit out of the.

Radar if you maybe, yeah, maybe that's why they did it. Yeah. So it's, it's really interesting how this is shaping up. I'm going to stick with my prediction, which has been within 36 months, a dozen players will achieve, you know, full self driving Autonomy for under $50,000 per car. So that means maybe by 2029 there'll be 12 major players with $50,000 cars. And then it's just regulation and protests that determine how quickly these things get on the road. And so if you were placing a bet and I have placed these bets, I think you could look at Volkswagen, Toyota, Waymo, Tesla obviously, and Uber. We ride pony. You know, all of these companies are going to get there within the same window, which then means it's deployment and regulations and we'll start talking about things like the depots. And I sent you a video of some folks who found the depot for Waymos. This is where the rubber is going to meet the road. Keeping these cars clean, charged, safe, the tires inflated, all this kind of cleaning the puke out of the backseat. All of these issues are going to be 20, 30% of the story in each of these cities. It's going to take an army of people to staff.

The. Here's a shot of this just from the video Jason, you show people what you're talking about. This is the place where I believe they get all charged up and made pretty. It looks very much like a car dealership.

Shockingly. Supercharger station. Yeah, either of those.

Anyways, that's what's going on there. I do want to point out though that the protest point is material. I want to show you a picture Jason. So there's a discussion in Boston about whether to allow Weibo and self driving cars in. You won't believe who is protesting. Check this out. This is from Boston.com and it shows a picture of people wearing shirts that say App drivers union wrong way mo. And so what we're seeing here is after people protested against Uber and it's changed to the taxi industry now drivers are protesting to protect their jobs at Uber and against the new thing. So this I think lets younger and lives in doordash.

Yeah, so this is a great find. I think this will become a societal issue. Every self driving car is six gig economy workers and four full time workers. So just keep that in mind folks when you hear about plans for 20,000 self driving cars from Uber or Volkswagen having tens of thousand or Waymo hitting tens of thousands or Tesla potentially hitting 100,000 because they can make cars quickly and EVs aren't selling. So if EVs have kind of hit a ceiling amongst consumers then all that capacity can go towards robo taxes which is what Elon has said he's focused on. Yeah, the, the, the market will expand though. We will go from 1% of rides being 1% of rides being ride sharing to 20 or 30% and the pie will grow because people will take more rides if rides were half the cost they are today, which is I think will be the end state. You know your $40 ride from the airport will go down to 20 to your house. The awesome 20, the $20 ride to a 25 ride to dinner go down to 12. So instead of 50 bucks round trip from dinner it'll go to 25. It'll be significant who can afford that and who chooses to do that? Because maybe it's better to just be in the back of your car when I drive to my office, you know, in that drive I like it, I like spending 20, 30, 40 minutes in the car but when it gets to 40, maybe less so and if I could be on my phone and have a full self driving car that I own or be in one and then what's going to happen is these drivers are going to move out to the burbs. So all the current Uber drivers and Lyft drivers and doordashers will move to the suburbs and the country to get rides because the robo taxis will perfect downtown Austin and San Francisco and some parts of the peninsula. But they're not going to get to Napa for a while. They're not going to drive to Tahoe. So that's will be a phase of this is the humans will do the long hall drives or the they'll relocate themselves outside the city centers. So brave new world folks. Get ready for it. We have a founder question. I love a founder question on a Friday.

All right, so from our friends over on Reddit, we are asking about how to handle equity splits.

Which subreddit? I guess we got to figure out which subreddit it is so people know.

This is from Jivi31 on the startups subreddit.

Okay. And so after I answer it, producer Oliver, please go clip it and upload the clip there and just say, hey, I'm a producer. Jason answered this and let's see if they let us do that. Maybe I don't want to do it for marketing or promotion, but I do want to give them the answer. So here we go.

So they ask. Hi everyone. I'm starting a startup with a technical co founder. We didn't talk anything about how we'd split the company. Warning bells are already going off. He came up with the idea. I worked on ground and developed it. I thought 50, 50, but now he isn't ready to give me 50 50. I've been handling business marketing while he handles the tech and development. I'm not a tech guy, but we both need each other to win. I was working as a freelancer on a contract basis, but now I work in this full time and he has a full time job as well. What should I do now? Jason, I'm sure you have some thoughts about this.

Yeah, life's a negotiation. It's good to have this negotiation. So that if I was starting a company with a technical co founder and I've got the gravitas I have at my age and you know my stature in the industry, I might say I'll give you 20, I'll take 80. Or if it was three people, I might say, I'll take 50, you guys take 25 each. Early in my career, if it was just me and Brian Alfie, we split it. Okay. Yeah, simple, easy. If the person doesn't want to split it, you have to ask them, okay, what are you going to do that, you deserve 2/3 and I get one third. Can you explain that to me? And then let them make their best case and then you can make your best case. And this is a great thing to do because it sees if you can take a complex dynamic negotiation and get through it. If you can't get through it and you don't accept the value they put on your contribution and you feel it's insulting or lower, and you make your best case and the person says, take it or leave it, you can take one or two. You can take a multitude of things from their position. One thing might be, this is a hardcore CEO who knows how to negotiate. And they're right. They have a better track record, more connections, and they are contributing more. Therefore, great. They're not a pushover. And so my 1/3 to their 2/3 is going to become worth more. Because when they negotiate with the venture capitalists or for our acquisition, they're going to fight the same way they just fought with me. Great. I would like to. If Zuckerberg's a lunatic or, you know, somehow you were able to be a co founder of a company that Travis was doing or Elon was doing, you'd be like, okay, Yeah, I deserve 5%, you deserve 95%. So here we go. And. But if they aren't contributing that much and they're delusional and they want to put you under their thumb for whatever reason, or yeah, you just think it's not equitable, you say, great, I have other opportunities, so I'm going to pursue those other ones. And you, as the person here, who's the business person, who, you know, doesn't, who believes they should get 50, 50. If you're actually that baller, go find another co founding team that wants to split equally and then you can tell the person, you know, I, I appreciate that you think you're worth twice as much as I am, but this other group of founders doesn't. And I'm going to take that other opportunity unless you feel we can come to a better term. And I like that, I like that tension. Because there will be other decisions you have to make, like your salaries, the CEO salary, or the CTO. The CTO might have 500k offers to work at Google doing AI, and the CEO might say, I'll take 2/3 of the equity, you take one Third, I'll take 100k draw, you take a 300k salary. And so some people sometimes are salary driven, some people are equity driven. So there's another nuance to it. How much cash do you want to take out of the company? And then you should also look at future equity, future cash compensation after we raise our Series A and we get 10 million. Okay. I want to pop up to 300 as the CEO, and I'm okay with you popping up to 500 as the CTO. I mean, those are big salaries for a startup. But let's just say you get some crazy $20 million infusion of cash in your Series A. You could justify it, I guess. There you go. So I would pre negotiate the salary bumps in the future years if you raise money or you hit profitability.

Last thing I'll say, if you have to write down, we didn't talk about anything about how we'd split the company, you made a mistake. Please do not wait to have these conversations until the last possible moment. Talk early, talk often. Yep, it's very important.

The other problem here is if they've both been working on this and it's unclear, then the person who set up the company owns 100% of the equity. So if you didn't negotiate this, now that person can just fire you. And if there's no documentation and they set up the company and they've been paying you, they can just fire you at any time. So that's why before you start working on stuff, you got to be clear about this. Before you write one line of code, you have to say, what's our intent here? Because the person who again founded the company, named the company, you know, they by default own everything you own zero until you write you know those things. So, yeah, they may not, they also may not be formed. And if it's a project, then who. When you organize the project, you're going to have to get an IP assignment from the other person. So that further complicates this. This is where an angel investor, a board member, an advisor who has been through it before, can help you work with, through these issues. So if I was an angel investor in this company, I'd sit them down and I'd say, here's my perception, here's what I think is fair. And that's where you can get a third party to maybe explain it and then also be the grown up in the room and say, okay, even if you're not going to use this person, you still need to give them 5% of the equity that you can buy back at this valuation or some cash compensation to get them to sign an IP assignment. If not, the company's not fundable because now you've got this Overhang of somebody who wrote code. The. Wrote the code base and doesn't have an agreement, which happens.

Do you want to deal with that?

Yeah.

Do you want to deal with that 15 years down the road or whatever? I mean, no.

Remember the Snapchat? Snapchat. I'm going to ask Claude, third co founder, lawsuit resolution producer Claude will get this information to me. So they did settle. The lawsuit involving Snapchat's third co founder, Reggie Brown, was resolved through a high profile settlement. Brown, who claimed to have originated the concept for Snapchat and was pushed out early, filed a lawsuit against Evan Spiegel and Bobby Murphy in 2013, alleging he was unfairly excluded from the company's profits. The legal dispute concluded in 2014. The confidential settlement. The details remain private until Snap's IPO filing. Here we go. Brown received a total of 157 million in cash from Snapchat. The payments were divided between 50 million paid in 2014 and 107 million paid in 2016. The current valuation of Snapchat is what. And what is Evan Spiegel's stake?

$12.18 billion. As of today, Snap shares are up 2% to $7.20. I don't know Evan Spiegel's ownership offhand, Jason, but I will get that for you right now.

Yeah, I'm happy in it myself. Evan Spiegel's ownership percentage is approximately 30 to 33 million shares. And Snap has 1.28 billion. So he owns roughly 2.6% of outstanding shares. That's a very small percentage. That does happen. But the SEC says he owns. He remains a 10% owner. Oh, because he has voting shares.

They have super voting shares. So Evan and Bobby have 96% of SNAP's voting power. Didn't Snap go public with shares that got no votes? Famously, yeah.

This is why people are having a hard. This is why the stock is depressed, I think, is because of this ownership voting issue. But if they own 6% of 12 billion, they own collectively 600, 750 million. I don't know if this is correct or not, but this is a closely. Yeah, this is a tough one for us to determine here on the fly.

Yeah, there's a lot of voting rights that come into this, but Snap is a company that has famously had very, very highly skewed voting percentages towards its founders, just as Meta is the same way. Meta is effectively controlled by Zuck still. So founder friendliness. It still exists in 2025.

There it is. All right, everybody, we'll see you on Monday this week in startups.com docket. If you want to get involved in the docket, we'll have calendar and bets up over the weekend. Hopefully we'll get those landing pages going for those. And he is cautiously optimistic. Cautiousoptimism News.

There you go.

I got the URL Cautiousoptimism News if you want to hear Alex's take on his optimism. And he's X.com Alex I'm X.com Jason. We'll see you next time. Bye. Bye.

Bye, everybody.