M&A Mania, Palantir Meme Crash + Office Hours with Hookhub | E2105

I'm going to throw something out there. You love talking about Uber and Doordash kind of joining up.

All right.

Instead of paying for Reddit, which by the way, 18.8 billion today. So what, 25 to take it off the table? Probably. Jason.

Yeah. You got a 30% premium when you take a company. Yeah. Maybe even 50% sometimes because it spikes when the rumor comes out. And then you have to beat that number after it. Yeah.

So call it 22. I don't know, 3 billion short. Or, or you could buy Substack. Right. But yeah, everyone's going to freak out. Oh my God, don't train against my data. So here's what you do. You buy Substack and then you tell everyone you, you can keep your current deal with Substack. No training off your data. We're taking a 10% cut. But if you let us train off of your substack, no cut at all.

Yeah. Or how about if you let us train against it, we'll give you 110% of whatever your subscription revenue is. So you got a million in subscription revenue. We'll, we'll give you 100k on top of it if you publish on this regular schedule. And we like your content. So. Yeah, that's a great idea.

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Welcome back to this week in startups. I'm your host Jason Calcanis. With me, my co host, Alex Wilhelm.

Hey, hey.

X.com Alex. I'm X.com/Jason. We have a full docket. It's Monday, March 31st. The first quarter is about to end.

Yes, sir.

My lord, that went quick. And with it my ski season 33 days didn't hit the 41. Guess there's always a chance I might be able to jump on a last minute ski trip. But it's seeming like it's over. Everything's starting to melt. What do we got in the news today? Man, there's so much going on.

I thought we talk about Palantir just for a hot second.

Oh, sure.

We have riffed on this company ad nauseum, especially back when it was at or near all time highs. And what's changed is that the company is now in a bit of retreat, as you can see here from this chart made by the fine folks over at Sherwood. We were covering the company when it was doing this right here, taking a look at it and going, what's going on? And people told us this would be.

The stock going from 100 to $121. It went parabolic sometime, I guess, you know, when Trump started his Trump's inauguration, it looks like literally 1-20-ish. It went from $60 a share up to 120. It doubled.

It doubled. And essentially what is that, Jason? Less than a quarter? About a month. Month and a half, looking at that chart.

Yep. And so it's come back down to earth now. We're trading at about 80.

Yes.

And the 50 day moving average is. Yeah. I mean, there seems to have been this incredible hope that the stock market would rip under Trump. Then Trump said, remember I said those things about tariffs? Wasn't joking. I'm going to literally create market chaos until April 2nd, which I guess is our new Independence Day.

It's not going to be what everyone hopes, I don't think.

Okay, so Palantir's. I think it's Wednesday, April 2nd. And so Palantir is a great company. They have great products. I think they were growing 30 or 40% year over year, if I remember correctly, on a 2 or $3 billion run rate. So this is a legit company. Alex Karp is just goat level CEO. They're doing important work in the world. But sometimes a stock becomes a meme stock. And I can tell this because anytime we talk about it, hundreds of accounts will come into my replies. And now they're even paying the $3 donation to charity to reply. If I were to mention Palantir has the highest price to sales ratio we've ever seen. Right. I think it was something like 80 at the peak. 70 or 80 price to sales ratio.

Incredibly high.

Yeah. If it's doing 2 or 3 billion in revenue and it's worth $80 billion, you know, you start to figure out what that price to sales ratio is. That would be 40 if we were to do that. Exactly.

Just for fun, Jason, I just pulled up the Bessemer cloud index for folks on audio and I sorted it by essentially its current revenue multiple. It's actually enterprise value divided by annualized reven. But at the absolute peak of all the cloud companies that decimal tracks Palantir is at 59.3x. The next highest is 21.3. So even though it has come down, it's still incredibly expensive and the average.

Looks like it's 12. Right. So here's what happens in markets. I'm not a market expert, a private market expert, but public markets generally what happens is if a market retreats like we're seeing because of the tariffs and just the general non predictable market we're in, I would say is a gracious way of saying it. Like it's hard to know what is going to happen.

Yeah.

Because of that lack of predictability, the market constricted, the chances of a recession went up. Everybody's just a little bit on edge. And the Trump bump went to companies that were, you know, in his orbit or military etc. This was already a meme stock, like company or a meme stock and a real company. So who's going to take it on the chin first When a market retreats? The highest valuations get corrected first.

Yep.

And the, the ones that might be the lowest will lose the least because I mean, if you compress to three times, four times, five times, your sales people are going to be like, huh, there's no compression left. That's actually a buy. So that's all this is just reversion to the meme. If you see, I always do this when I'm at a basketball game because of the threes. If you see a team shooting 50, 60, 70% from three, you can be sure it's going to come back down to the League average of 35% or whatever it is on a team basis. If a team is shooting 10% from three, you know, at halftime, yeah, it might go back up to 35%. Reversion to the meme. The mean is a known thing.

So I think reversion to the meme should actually become part of our lexicon because at some point I presume Palantir will go back up due to market enthusiasm. So perhaps we're going to need both terms, frankly.

Or maybe sometimes people go, okay, that was fun, let's go on to the next meme stock or let's make another stock into a meme. Either way, you know, if you owned a bunch of shares of a stock, that becomes a meme stock, what your best bet to do, as far as I can see, is to sell it and then to buy the ones that are the great Companies that are at the lowest enterprise value by run rate or just price to sales ratio.

Sure.

And so if there were people who were lower on the list that you felt as strongly about the management team and the product and the growth, maybe that's a better buy. So the market giveth, the market taketh away. Let's keep going.

Yes, it does. Well, the biggest news that came out in the last couple of days, Jason, I think definitely was the combination of X&Xai, two private companies, one social media, less talked about category for startups in the last, I don't know, 10 years. And then of course the other hand is the AI company, which is all we've been talking about for a while. I thought it would be good to just touch on this, the mechanics a little bit. And I think people might be curious about an all stock deal between two companies and how valuations are kind of sorted out. Now here we do have kind of one person and the same collection of investors taking two companies that they've owned and putting them together. But the all stock transaction, Jason, to me just seemed like a great way to get these two companies brought together quickly and without excess faff on the, on the transfer of money side between individual investors. For folks who don't know, Elon Musk, who owns both companies, said over on X that XAI has acquired X. So the AI companies buying the company formerly known as Twitter and the deal values XAI, the AI company at 33 billion. So essentially 45 billion minus debt. Jason, your first thoughts?

Yeah, I mean we knew this was going to happen. I predicted it on the show that we would start to see AI companies buy content companies. So if you were Sam Altman looking at this, why not buy Reddit? I'm not sure Reddit's market cap right now it's probably 15 billion. I know it had peaked and it was, I think it went public at 7 or 8 billion. And I said back then, why hasn't ChatGPT, Gemini, Claude, with these sky high valuations, just gone on a purchasing spree? They should buy Quora, they should buy Reddit and then make it unique to that platform.

Yes.

When you are using xai or using x.com formerly known as Twitter and you hit that grok button and it gives you context, my lord, it is a great experience. I frequently will come across some term, I don't know, somebody's tweeting about something, I don't know any of the context. Click on that button, get the context, having that real time data and then blocking that Real time data from competitors is going to be a massive advantage to X AI. Yeah. So it's a great, you know, it's a great combination in terms of the mechanics of taking two private companies and putting them together. There's a drag along feature, a certain number of shareholders have to vote for something and then everybody gets dragged along. So I think once you hit and it could be different for every company because it's in the sort of bylaws of the company that everybody agrees to. When you get 60, 70, 80% of people to agree, then the companies can merge. And the 20% of people who don't sign off or don't agree, well, they signed an agreement that these kind of transactions are subject to the majority wanting to do it. So obviously the majority wanted to do it in both cases. And I think this just locks in Xai as a top, call it three or four player in the marketplace instantly. Right, There'll be top three player in the market instantly. This is the power of M and A. And this speaks to the end of the wrath of Lina Khan. All right, founders, let's talk about your website. Yes, I know it's embarrassing. Yes, I know you're too busy to upgrade it. Well, if you're going to launch something new or you need to give your brand a refresh, which I know you do, you need Squarespace. It's the all in one platform that makes building a stunning professional website ridiculously easy. Whether you're selling products, offering services or showcasing your portfolio, like I'm going to do with one of my kids, they want to go and do artistic things in the world, so I'm going to make them a nice, beautiful Squarespace site when they apply to college. Squarespace gives you everything you need to grow. And you know what, obviously you've heard me talk about how beautiful Squarespace's templates are, but now you can get a fully customized website in minutes with their AI tool called Blueprint. Here's how it works. You just answer a few questions and then you get a beautiful bespoke website in minutes, personalized layouts, visuals that are going to stun your customers and voila, you're done. Want more control? Choose from award winning templates and use intuitive drag and drop tools so you can make it your own. Easy peasy lemon squeezy. You get to do it the way you want to do it. So here's your call to action. Just fall in love with Squarespace like I did squarespace.com twist for a free trial and when you're ready to Launch, go to squarespace.com twist to get 10% off your first website or domain purchase. That's squarespace.com twist, the longest running partner for this week in startups because they were a startup and they still build their product with the enthusiasm and the cutting edge technology of a startup founder. We love you, Squarespace. I don't think that these kind of private market transactions come up on the radar of the government typically anyway, because there's no public company involved in such a fragmented market. But I do think we're going to just see M and A, M and a M and A. And I talked about mid market M and A countless times in the last year that that would be the big win because when you have mid market companies merge, what do they do? They challenge the max seven. So this is great. This is exactly what I was thinking. You know, Reddit getting bought by ChatGPT, Quora and Reddit merging and then creating a Chat GPT competitor. Even better. This is what you want to see in the market doordash and Uber merging or you know, Amazon spitting out Zoox and merging it with Uber or Lyft, you know, some combination of those will make for, you know, $250 to $500 billion companies with real revenue. And it's just great for investors as well because now the investors in each of these companies have a greater chance of success. They wouldn't have voted for it if it wouldn't increase the chances of success. So that's what you have to think what's going through their minds. And I guess they just didn't want to have the, the fair market value that Twitter went through go down when it got purchased, right, for 44 billion. And then Xai has been on a chair. And the way you value these things is what are they able to raise money at? And I think they said X.com was raising money at the previous valuation. So probably what happened was you had money being raised at certain valuations. If the market says those valuations make sense, 80 and 45 billion or whatever it is, you put those two together, the market has said the market participants have pinned them at those numbers and then it's a go, right? Everybody feels comfortable with it.

I think also an important thing to keep in mind here is how the companies were already operating almost as a conjoined entity. I mean having Grok on X makes perfect sense if you think about them both from the perspective of Musk, but they were distinct companies. So to see that kind of tight integration super interesting. Clearly XAI wants a distribution mechanism and a data source. X supplies both. But actually I was paying part of X's bills because XI was able to raise more money more recently than X has been.

So that would be for servers. You're saying they were paying its servers or something?

I think actually I was. The reporting was helping IT stay current on its bills, so it could have been as much as helping it service the debt.

So this is another interesting wrinkle in all of this. If the other thing to look at is the downside, if you don't do this, what's the impact on both companies? Well, Meta is going all in on using their customers and their community's data to inform Llama, I would think. Right. Like Meta now has an AI search box. So if you're using Instagram or Facebook, they kind of force you to use it even if you don't want to. Yep. So then that means for Xai, Claude or any, any other independent language model, if you don't have a social network to feed you real time news, you're at a disadvantage.

I mean this is. I hate to keep bringing up the same couple of talks from the Liquidity Summit last April, but like, I think it was Antonio Gracias who said like, look, X has a unique data source in the world. That's why his company was backing xai. And so like, I do think that X by itself had a relatively low ceiling for how much it could become worth because I think Snap's trading has something like three times sales. Jason, going back to your price sales ratios, but AI companies can be valued at bajillions of dollars, so there's a lot of good stuff here. I'm curious to see how much enterprise adoption Grok gets because when we think about the two the leading model companies in the U.S. grok's models are often up towards the top of, you know, LLM arena and all this other ranking lists, but I don't hear about as many companies using them in production, Jason.

I don't know that they have really pushed their enterprise efforts. I think that's something that maybe ChatGPT has been way ahead of since Sam worked with the startup community at YC and comes from that sort of. Yeah, space.

So it's a $33 billion deal essentially for X, which means that it has surpassed the $32 billion that Wiz sold for bringing us another pretty enormous deal. Sure, it's all stock, shirts, Elon's companies, but like, I don't know, we wanted more M&A we wanted to see more dollars in flight. Well, here you go.

Yeah. I retweeted I saw somebody had a chart about M and A so far this year.

Yes.

Which I Guess is from CB Insights or Charter. And we're at 54 billion for Q1. Last Q1 we were at 2 or 3 billion. Q1 before that, 2 or 3 billion Q1 before that we had a. Must have had something big in 2022 that was 38 billion. So you know, this chart kind of speaks volumes. We're going to have at least in the last four years a record first quarter by. Yeah, looks like 50% almost. So this is trouncing 23 and 24 and greatly exceedingly.

Yeah, I think the important thing to keep here is that sure it's fun to see the X deal be worth slightly more than the the Wiz sale. But the Wiz deal was a pure startup play. It was a venture backed upstart company from the Israelitech scene that had a lot of, you know, private capital into it. You love to see it. Whereas X had also like some Saudi money and it was slightly less venture and more private market. So I think the Wiz deal is full. We should just take all of it as a yes in that chart. So I love that data point.

Yeah.

Enough Jason, to actually change the tune amongst venture capitalists regarding liquidity or just a good taste to start the feast.

There were a lot of VCs in X.com, i believe Sequoia and some other ones, Joe Lonsdale. So they're all going to be now in X. I, I think that's a nice update to send to your LPs. So in a private market transaction being able to say like hey look, we had a social media investment that's now an AI plus social media investment. That's awesome. What this also does for freedom of speech and you know, all the challenges that X has had with advertising is now eliminates that business model because you have the business model people paying 20 or 30 bucks a month for Gro. So this is one of the, you know, if you double click on this a bit, one of the great things that could come out of the large language model era of consumers paying 20, 30, 40 bucks a month, you know, and executives paying that amount for a large language model is some amount of that could go towards content creation and will. So we've already had the, you know, people who are doing reinforcement training but now why not just buy the New York Times, why not buy the New York Post why not buy Vox? Like, Vox's value has always been like, I think they probably haven't increased in value in five or six years. Probably.

No.

And then we see, like, you know, Yahoo's selling TechCrunch for spare parts, and it's becoming. It's probably going to be like an SEO play. It's kind of like the end of the. The brand, in my mind, if it's going to be part of, like, the PC Mag, Ziff Davis diaspora. All of this means there is actually a viable future for content. If you can get a language model to say, you know what, hiring 30 journalists to work on TechCrunch and feeding that into the LLM. Okay, that's only 5 million a year for the whole group and their office space or whatever. Yeah. Seems de minimis to me. So content as a front for LLMs is a really interesting idea. What if, like, TechCrunch were to break even while feeding? If you bought the Vox, you know, collection of sites, or Penske's collection of sites, all of those collections of sites could actually wind up being worth something to a large language model.

All right, I'm going to. I'm going to throw something out there. You love talking about Uber and DoorDash kind of joining up. All right. Instead of paying for Reddit, which, by the way, 18.8 billion today. So what, 25 to take it off the table? Probably. Jason?

Yeah. You got a 30% premium when you take a company. Yeah. Maybe even 50% sometimes because it spikes when the rumor comes out. And then you have to beat that number after it. Yeah.

So call it 22. I don't know, 3 billion. Sure.

Or.

Or you could buy Substack. Right. But yeah, everyone's going to freak out. Oh, my God, don't train against my data. So here's what you do. You buy substack and then you tell everyone you can keep your current deal with Substack. No training off your data. We're taking a 10% cut. But if you let us train off of your substack, no cut at all.

Yeah. Or how about if you let us train against it, we'll give you 110% of whatever your subscription revenue is. So you got a million in subscription reven. So we'll give you 100k on top of it if you publish on this regular schedule. And we like your content. So. Yeah, that's a great idea. So this is one of the great things about M and A becoming vibrant. And this is where regulation kills innovation. You start thinking about like, gosh, I wonder what DoorDash is trading at. Price to sales, it's probably like low single digits, 4 or 5, 6%. Right. And then what is a self driving company like Waymo trading for? What is Uber trading for? These things are probably trading for, you know, Airbnb three, four or five times their revenue. If they're trading for three or four times their revenue, man, somebody with a Waymo valuation could come in and be like, hey, Waymo plus Doordash and Uber equals the winner trillion dollar company. Whereas the three of them together might be worth 250 million.

Yep.

You put those three companies together, I think they're valued doubles or triples immediately because the market would give them a premium for winning the market.

Okay, so this is really interesting actually. I know this is not a public market show, so we'll keep it short, but DoorDash's current price sales ratio is 7.3 pretty high, whereas Airbnb's is 7. So they're very, very close actually in terms of how the market has ended up netting them out in terms of a revenue multiple. Uber, by the way, a little bit lower. 3.6, but that's still.

Yeah, it's a lot lower.

Yeah, yeah. I'm just trying to think about if I agree with.

That's the self driving hand wringing. If the self driving question got answered definitively, it would spring back up to seven. So I think that's all you're seeing there is people are like, okay, are cyber cabs and Waymos going to. How quickly could this possibly be rolled out and what impact would it have?

Yeah, what's amazing is at Uber is 3 1/2 x price sales trailing. By the way, the company is still worth 150 billion. So if there is a 2X hiding in there, Jason, it's not just a billion $2, it's $150 billion, which is an enormous sum.

Yeah, that's what it should be actually. I think that's, you know, listen, I'm speaking my own book here. I have exposure to Doordash as well, by the way. So it's not like I'm. And I have exposure to way more because I'm a Google shareholder. So I have exposure to all of them. I do think this is the era of M and A. That's going to be really interesting is just let people under 250 billion merge with each other, create better products and services. America wins, you know?

Yeah.

Salute.

I'm here for it.

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Behind the USDC stablecoin. We've had Jeremy Allure on the show a bunch. We have heard that this company's going to go public back in 20, 21 and 22 via SPAC. No, filed privately to go public last year. We waited. Nothing happened. Well, Fortune reports, Jason, that Circle is now going to work with JP Morgan, Chase and Citi on its long expected ipo. Thank you, Dodd. Timing not entirely clear right now, but Circle, and I'm going to quote here, quote aims to publicly file paperwork for the offering in late April. So that means we're less than a month away from finally getting our admits on Circle's public S1 filing. Two things to keep in mind here, Jason. One, crypto is enjoying a deregulatory spring, you might say. People are being forgiven, charges are being dropped, cases are being left behind. That's good. The other thing is we've been talking about the stablecoin boom here on Twist every month for as long as I can recall. And so I think right now the market is hot for exactly this type of company, looking towards the future of finance. So even though the market's choppy right now, I think it's a great time to list. I think this is the right time.

It'S perfect timing for them. They are a trusted audited US Based. I don't have any exposure to the name. So just to be clear, like I'm not talking in my book or anything here and Jeremy Lers, you know, a serial entrepreneur who's well known there is something called the Genius act which you'll be hearing a lot more about. The question is who will be able to create stablecoins in the U.S. this is going to become the big question when this stablecoin act gets initiated. If it happens, we're going to need to look at should Tether be allowed to service American companies or go public here? I don't think Tether should be even allowed to buy Treasuries. Now I know that's a controversial statement, but if they have a sordid past where they've been banned in many regions and people have all these claims of, you know, the attestation as opposed to an audit, if you are going to have billions of dollars of Treasuries and you would allow people to magically move money around, I'm going to go with let's make sure that this operation is extremely tight. Tight is right. And so financial markets should not allow, this is my personal belief, outside actors to operate at scale in markets that should require audits. So this is going to become, I'm just giving you like a little heads up of what we'll be hearing people talk about in the coming months. It's going to be whatever world liberties, stablecoin, Circle, stablecoin, all the domesticated ones, all the ones that are audited and above board, maybe even Stripe will, you know, instead of just having that tool for them, will have their own. Is Robinhood and Coinbase, both of them are going to have Stable coins or not? I'm not sure.

Coinbase is very close with Circle and usdc. It's kind of their house. Stablecoin, if you will. So I don't think they're okay.

So you know, I did a tweet about this the other day, you know, in the Tether truthers who, you know, believe there are some shenanigans going on with this company and then the Tether long people, which I don't know how you're a long tether if it all just equals a dollar.

Yep.

You know, these companies are going to need to be regulated and taxed or have audits. They don't have audits at Tether. I think they have attestations or if they call them audits. I'm not sure. We would consider them audits to the, you know, definition of American companies. And this stuff all needs to be onshored and the companies need to be registered here. You should not have people introducing financial devices in this market. Back to tariffs. There should be a massive tariff on anybody who wants to bring a financial product into the US that's not, you know, a US based company, and that's not a US based company, as best as I can tell. So get ready for a big Showdown.

So the genius act is the guiding and establishing national innovation for US stablecoins of 2025 act. Okay, so there you go. I've not read this, Jason, but I will now that you brought it up to me. Is this coming up in your conversations that you're having on the group talks?

I just hear people buzzing about stablecoins a whole bunch. So I won't, you know, I won't get into it too much, but people see stablecoins as a massive opportunity because when you buy a stable coin, if you buy $10,000 in stable coins and you just hold them, I'm making the interest on your stable coin, so I'm making the 5% on your stablecoin. So you're giving me $500 a year for being your custodian. Okay, seems fair. But if you have a billion in stable coins and you're like some, you know, giant company like Coinbase, let's say they, let's say Coinbase kept a billion stablecoins. Should coinbase be giving 50 million a year to somebody for that or should they create their own?

Yeah, I think they actually create their own. I mean, the number of stable coins out there of scale is not that high. I have a chart here, Jason. I'll just throw up on the video. For everybody who's watching, this is a chart from the block. They have a great data service showing kind of the current scale of stablecoins. There's two main players. There's Tether and then there's usdc. But if you look at the top.

Of the chart, tether is blue USDT and they have how much?

About $145 billion.

Wow. So 145 billion, 5% of that.

It's an insanely good business, but it is, it is dependent on interest rates. So essentially you could think about the value of Circle's business being its net interest margin, which is predicated on essentially tight monetary policy. The looser the Fed gets, probably the.

Less profitable if it goes down to 2%. 2% of 100 billion is $2 billion a year. And this is where Tether. There were all these claims against Tether because Tether wasn't showing where the money was and that they might have had Chinese paper, as in private loans to Chinese real estate companies. That was always the big rumor. Maybe they cleaned it up. Maybe it never happened. Nobody knows because you don't have Ernst and Young or KPMG or some notable firm here in the US signing off on it. But they were probably getting paid 15% on that Chinese paper. They at some point wouldn't say if they had Chinese paper. Then they said they didn't. So what I read into, got rid of it. Cleaned it up maybe. Maybe cleaned it up. But if they were making 15% on 100 billion. 15 billion. And they have been making claims like a public company quarterly and they're on Twitter, but they're all in different weird jurisdictions. That's the other thing that Coffeezilla and other folks who have investigating it. There's a Tether person on Twitter. I forgot his name. I had him on the program. No Paolo. Is he the CTO or something?

Who's one of the bosses?

Yeah, yeah, he's one of the top five or something. No, there is a anti Tether person who has been investigating them for a long time and this kid's been like deep into it. He's part of that Tether Truth. Truther.

I've seen him in my ads.

Yeah, yeah. So he's, you know, like they basically have been really studying like where are these people based? And like they went into like their previous companies and like a lot of people in crypto, colorful backgrounds, color backgrounds, you know, different interesting things they did previously. This advertisement is paid by Fidelity Private Shares. All right, founders, we all know cap tables, due diligence and of course managing investors is a huge headache. But there's a very simple solution for you. Today we're talking with Kristen Kraft, an old friend of mine and she works at Fidelity Private Shares, a new group over at Fidelity. You've heard of Fidelity before And they have a mission to help startups simplify equity management. They're going to save you money. They're going to give you better service. Welcome to the program, Kristen. Kristen.

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I have actually a slightly more generous take now on crypto people, and it's because I've been playing a little bit more poker lately than I had been before and I just realized that the crypto crowd is just the poker community with a keyboard.

I mean, there's something to that. Yeah, well, there's a lot of that. There's a lot of people in it who are actually anarchists. There are people in it who are libertarians. There are people in it who believe like, you know, the state shouldn't be involved in currency. They don't believe there should be speed limits, you know, all this kind of stuff.

So.

And then there's the big cleanup. So I think what's happening in crypto is the big cleanup and circle going public will be part of the big cleanup where it's like we're going to replace the players who are below board or who aren't doing the proper dotting the T's and crossing the T's and dotting the I's. We're just going to replace those folks over time in this administration with people who are above board. And so that's the opportunity is to be an above board player and it's going to increase people buying Treasuries, which is one of the things this administration has a concern about. So stablecoins, I think Tether is one of the largest buyers of Treasuries right now. If that was a house of cards, let's say like there's a 1% chance that tethered true truthers, you know, are correct or a 0.1% chance, you know, it's like pull a card out of a deck. And let's see, if this thing crashes or has problems, what would happen to one of the large buyers of Treasuries?

Well, that dries up, but also they dump. And so there's a. There's a flooding of the. Of the market. And that breaks the, you know, supply, demand balance and then lowers prices. Jason, just to kind of back up what you said in its 2024 kind of report, if you will, Tether said that it had 13 billion in profits.

I mean, that's unbelievable.

That is a staggering amount of money. I hope, by the way, that all the concerns here are overblown. I agree with you on the need to be regulated, but holy crap, that's a profitable business.

You want to kill Tether? You want to just totally annihilate the company in 10 seconds? Hit me. Very simple. Circle says if you own USDC, you get 80% of the interest that we get passed through. So basically every year, for every X number of Circles you have, we'll issue you another one because of the interest.

Yeah.

And we'll take 20% of that. So if we're making 5%, we'll take a point, you take four. That's the end of Tether. Boom. And you know what? If you're second to Tether in the market right now, why wouldn't you do something aggressive like that? You know, it's kind of like Robinhood. If you move your money into Robinhood, they give you this incredible bonus. You have to keep it there for a couple of years. Like, maybe you have to keep it three, four or five years, but they'll give you like some 2%, 3% bonus for moving your money from, I don't know, Goldman, Morgan, Fidelity, wherever, to them. Wow, that's kind of interesting and aggressive. So. And those kind of things have always existed, but it doesn't exist in stablecoins. It's kind of nuts that people use these stablecoins and don't get the interest on their money. So somebody out there will launch. Somebody out there should launch a stablecoin that distributes the money to the people who own it, minus a reasonable vig, crypto rewards.

And I know there's some. There's some nuance here with Coinbase that I'm sure that I've forgotten the details of, but no one's been that aggressive. I do think, though, that as Circle tries to go public, it's probably not going to be working on new ways to give away 80% of its revenue. But if I was someone who wanted to take down Signal and Tether. Sorry, Circle and Tether. My bad. Then I think that'll be a great way to go about it. I will say it's going to be one hell of an ipo. Let's go. Isn't it good to be excited again about debuts? Jason?

The thing I would encourage everybody to look at is also anti money laundering and terrorism, human trafficking. Those three should be looked at deeply with any offshore stablecoins. If they don't have those. And I think the thing about this Genius act, really great name. I love the way they name these things. I would say we should have incredibly high requirements around anti terrorism, money laundering, human trafficking. If you get caught with your stablecoin, not doing kyc, not having really tight controls, I think you should be banned. So I think Tether, if the DOJ and some of the investigations are in fact correct, I think they would be banned. Day one, not allowed day one. And I think that would be the right decision for this administration to make. I'll make a prediction. I think this administration is going to have to make a difficult decision here because Howard Litnick is involved with Tether.

Yep.

World Liberty Financial is onshore. Circle is onshore. We've got a lot of people here who are in and around this administration and family who have exposure to stablecoins. And then you have this genius act. Who's. Who's putting the genius act up?

Mr. Hagerty and Mr. Scott of South Carolina on the Senate and then also Gillibrand and Lummis. So four senators, two from each side of the aisle.

So let's see, let's see what their donations are, how they're conflicted, where this is all coming from. So I think, you know, we'll maybe put that on the docket for Wednesdays to double click on all this.

All right.

Elsewhere in IPO land, just very briefly for everyone out there who cares about equities, Jason Service Systems, the maker of massive chips for AI inference associated with G42. And that AI push in the Middle east has tinkered with its IPO. Now the G42 company is going to purchase stock in it that will not have votes and therefore it's not going to run afoul of the Committee on Foreign Investment in the US and reporting says that the IPO is going to go ahead. Love to hear that. Core weave went public last Friday. We talked about it live on the show. Well, it was about flat on its first day and right as we were starting this show, it was down about 8.8% and it's now down 9.5. So the stock market is selling off today, but a pretty crappy day for Core Weave to endure. So that's not so good.

It means that they top ticked their sale. Remember, when they sell their shares, you want to get the highest price possible. Having a bump on your IPO might feel good emotionally, but it's terrible for shareholders. If the stock were to double on the first day, it means you sold a bunch of shares at half off. Here they sold their shares at a 10% premium. So good for them. They got 10% more than the shares are fair market value. So the shareholders now have to make up that 10%. But they get to deploy that capital and do interesting things with it. And then they got a free 10 cents on the dollar.

Yeah, they're going to pay off some of their debt. They're going to keep investing and growing. I don't think it's the end of the world when a company's IPO doesn't go quite as planned. But we do hear a lot about people leaving money on the table. Well, here's the opposite. They stole the table when they went public. Good for them. Finally, Etoro, don't forget, has filed to go public. StubHub has filed to go public. And if you care about niche media in the United States, Newsmax went out with a reg A plus listing, which is very interesting. I just got to look into this a little bit, Jason. Clearly going public on the back of an election cycle, which is good for politically tinged news, but always fun to see more companies getting out. We'd love seeing more total public companies. So that is the rundown there.

Reggae is basically, you can offer up to 75 million. It's incredibly expensive if you don't hit tens of millions of dollars because you have to start filing and do a little bit more reporting. So generally it works for people who have a good relationship with the, with their customer base, and their customer base wants to invest in it. Reggae is. It's kind of needs. It's one of these things that if we could allow an accreditation test, you wouldn't need reggae. And so it's, it's kind of like, gosh, how do I say it? It's kind of like split the baby between public offerings and private offerings. And it just doesn't work as smoothly as it should.

I mean, I feel like that's also true about SPACs. And so my, my immediate vibe when I saw this was because it just seems like kicking open the back door to Go around to the front of the building. It feels like an unnecessary complication on a thing that already works for companies that are mature and ready to go public.

I've always felt like SPACs and I said this at the time because a couple of my friends, a lot of my friends were doing them and I always felt like those were dipping down into being an aggressive VC, betting on crazy things. And if you're a VC and you're betting on crazy things, you're expecting 60, 70% to go to zero. We're not return capital. Yeah. And you're expecting your returns to be in the 1 in 10. So if you were to look at SPACs through the lens of a venture capitalist, if 1 in 10 performs greater than 10x over, you know, some period of time, it was worth doing. If they don't, you know, and you're buying only one or two SPACs as a retail investor, that's the problem. You know, like Joby is this flying car company and I, you know, some of my friends were investors in it, like sky, Dayton, etc. Always had an affinity for that company. One of our companies, Desktop metal went public. 3D printing, it was. Desktop Metal was worth over a billion dollars in private markets. It's worth 150 or 250 million.

164.

Yeah, it's like it's worth 85% less. Joby would be worth 10, 20, maybe worth 20 billion as a private company. I don't know what it's worth as a 4.7. So it's, it's also 75 off the public markets don't know how to do deep tech crazy Hail Mary, you know, binary outcomes. And I think that's the lesson of SPACs is retail investors are looking at quarterly reports. They're not taking a five year view of these things of what if it works. I also think, didn't one of the, I think one, a couple of actually maybe more than one of the quantum computing startups went public. So you start going public with flying cars, space tourism, 3D printing and quantum computing. This is like high risk investing, folks. Those things that spac and I think the people who took them out, I mean, I think the CEOs of those companies are probably sitting there going, you know, maybe should have been private, maybe should have stayed private.

Quantum Si, I believe went out with us back and it's currently worth 220, Jason. And it's worth a dollar twenty a share down from an all time high of over 20. So another similar kind of story of 95% off.

Yeah. Or 95% off the peak. And that's the other problem is people go, oh, quantum computing. I'll give it a premium. This is the naivete of a retail investor. I'm super realistic. 9 out of 10 companies go to zero. Doesn't change my pulse. I go to those founders. Didn't work out. What do you got next? Because I know that every hundred companies or so, I'm going to hit a Robinhood or a, you know, a comm or a grin or some company that's going to pay off 50, 100, 200 to 1. And then, you know, what if I hit an Uber and it does 5,000 to 1? What if I hit a robin and it does 3, 4, 500 to 1? You can really make up for a lot of zeros. The retail investors started to think, well, of course it's going to be worth a hundred times this because it's deep tech. They didn't realize is one out of 100 of them might become worth a thousand X or 500X. Yeah, sure, that's possible. Maybe it's even probable. But you only made one bet.

Yeah.

Or you made three bets. You don't have enough surface area to hit one.

This, I mean, accredited investors, sophisticated folks, let them play. Keep the people who don't know what they're doing out. You and I are on the same page here. Just a little bit frustrating to see history constantly repeating itself. Jason, I want to move on to a segment that I'm very excited about because we have a guest dropping in today. So today for office hours, we are going to meet with Kaylee Harrington from Hook Hub. They are building the Airbnb for RV parking. Yes, you can find them at hookhub, co on Instagram @hookup rv or over on x@hookhub underscore rv. Please welcome the program. It's Kaylee. Kaylee, how you doing?

Doing great. Yeah, it's good to see you again.

So you went through the Launch accelerator, which cohort?

33. The most recent.

The most recent one. And before that, did you happen to do Foundry University or did you come directly?

Nope, I did the university right before that.

Awesome. And we invested in you, obviously, for the accelerator. I'm not sure if we did the founder university 25k bet. Did we?

Not at the university, but the accelerator, yes.

Did you ask us for that bet? Did you request it and we said no, or did we offer it and you said no? I'm just curious.

No, I actually didn't know it was an option for the universe or the. Yeah, the university.

So this is Alex. The thing we're doing is sometimes we meet people who are pre incorporation or they're just figuring it out. And so you are Airbnb for. Explain the pitch.

Absolutely. So I'm the founder of Hook Hub. We are Airbnb for parking your rv. So we're a marketplace where you rent out unused land space for RV parking.

Got it. So if I happen to have some land in the hill country in Austin and I had a couple of spare acres, people could come and park their RV there and I could charge them for doing so. Is this for people who want to live in the RV there or store the RV or both?

Both, yeah. That's what we're all about is every form of RV parking.

Got it. And what are people's current choices to park their RVs?

So for short term, there are a couple apps. Just vacation and there's RV parks. But for long term, there is no apps right now. So pretty much people are going on Google calling RV parks. That's the option.

And this doesn't exist on something like Airbnb. They don't offer airbnb parking on Airbnb.

No.

Got it. So you have to build up supply and you have to build up demand. There are RV parks. There must be marketplaces or directories of RV parks.

No, there is. Yeah. There's apps out there where you can just, you know, find locations of RV parks.

Got it. So what you provide is another option. I can see here it's 60 bucks a night to park an RV. Is that about right? Is that the average price in America? What's the average price in America to park your rv?

Yeah. So actually depends on area. It can range from 20 or 40 bucks a night up to 150. We do have lower rates when they stay longer, but yeah, just nightly tends to be higher.

Does it need to have electrical hookups? Does it need to have Internet? Does it need to have water hookups? How does all that work?

So that's optional. The host can list with no hookups and get bookings. Of course, if you offer those, you can charge quite a bit more.

So let me just back into the math here. If you were living the RV lifestyle and you needed a place to park in America for a month, you would be. What's the average monthly?

About 750 would be average. Yeah.

That's pretty dope if you think about it, Alex, from a. The perspective of like somebody who doesn't have a home, they live in their mobile home. For $10,000 a year, they can basically park all around the country. What do national parks charge for your RV parking? I'm curious.

Oh, I haven't looked lately. So the rates are getting really high. If you're just doing nightly, there's like 100 plus.

Really?

So several times as much.

Yeah.

Yes.

So you could be spending $3,000 a month if you're parking in premium places.

Oh, yeah.

So it's not necessarily. If people are thinking about van life, which is another wrinkle to all of this. There's a new category, van life, that I want to get into because I'm always following trends. I'm like a trend guy. And van life is different than RV life. RV life. Lot of boomers, they're retired, they decide, hey, I'm going to go out for three months a year and instead of staying in hotels, I like to have my stuff. And I think a lot of it is socialization. You get to meet people, other retirees, and you can go to cool places. And it's kind of like, I don't know, the. It's kind of like a Harley Davidson.

Yeah.

Kind of like Americana, you know, being on the road thing. I kind of dig that. But tell me, is van life playing any role here yet? Because that seems, seems to be young people who are white collar workers, digital workers, knowledge workers who want to have their cake and eat it too. They want to have the beautiful retirement, but they might be on like a fire, financial independence, retire early kind of hybrid. So that's another trend Alex and I have been tracking. So how does van life play into any of this, if at all?

Oh, it definitely does. Shockingly, it's almost half of the RVers now are the younger generation. They're the 35 to 54 year old remote workers.

Okay.

So yeah, we're, it's every year, year, it's getting larger for the younger generation.

And tell me about that cohort. Does that mean like the entire space has doubled or you're just getting a greater percentage of them? And how many people in the United States, let's say, are living this lifestyle? I don't know half of the time or more.

So it's 1.2 million Americans are living full time. There is more when you consider the snowbirds, you know, doing the six month thing. So the 1.2 million is just the 100% of the timers. And so each year we are seeing growth still just overall in the RV market. More people switching to that life for all ages. But we are seeing the percentages based on age groups is shifting more and more to the younger.

So it's the opposite of the Harley Davidson problem. When their average customer gets a half year older every year, you're going the other direction.

Right.

Jason, just to underscore the thing you're talking about, in 2024 there were 310,000 RV wholesale shipments, up 6 1/2% from 23. So even in the post Covid world, we're still seeing this track up over, over time. So it seems pretty bullish as an overall just market to sell into. Kelly?

Yes.

So how's the business going? How is fundraising gone and any challenges you're having, you're, you know, an early stage startup here maybe. How's it going? How's the traction? Where are you strong? Where do you need help?

Yeah, traction is good. So, so that's good. We're keep going up in the right about 20 to 30% growth each month. So things are looking good. Yeah, yeah, things are looking good.

20 month over month growth is what we consider high growth. Yeah. That means you're doubling every three months, right? Yeah. Rule is 72.

Yeah, yeah. So that's been good. It's still, we have a lot of challenges as a small startup. So fundraising has been difficult due to the fact that we're not in a sexy market. You know, everybody's looking at AI. We're in the RV industry. Most people in the VC world don't really understand that industry.

Got. Okay, so you have to educate them like we just did. Now we're cool hunters here, Alex and I, so we understand van life and financial independence and we're tracking this kind of stuff. So you have to educate VCs on the opportunity. But there are VCs who love a good marketplace.

Yeah, right.

And have you been able to identify that subset and talk to them about, hey, here's the, here's the vision and why this is worth the time is. And amongst the people who understand marketplaces, what's their objection? Is their objection they're unsure of the growth rate. They think it's a small tam. Tell me, let's double click into that group of that subcategory of VCs, the ones who get marketplaces like me.

Yeah, no, you're exactly right. So we've talked to a couple marketplaces investors and they're excited by the idea. But it does come down to that. They don't understand the market still. They're unsure the growth potential and they've told us that BLATANTLY So I keep sending updates, showing them, you know, the.

Market well, you know, I think this is where maybe sharing the growth of the market and having a vibrant build in public or social media. So have you gotten to the point of having a really tight social media designed around van life, designed around featuring your customers, featuring your hosts yet? Because that would for a lot of investors prove there's something. There is, you know, tapping into the Reddit, the subreddits, tapping into the Instagram tag van Life. If I were to pull up your Instagram right now, would you be ashamed or would you be proud?

Both. I would be proud of the content, but I just started, I mean, very recent, so. And I'm also getting a consultant I'm going to call with later today and they're going to help with our two year strategy.

Okay. And I see you've got 600 followers there and you're just starting. I'm going to give you a piece of advice. I believe that if you, the founder of the company, can master TikTok YouTube shorts and Instagram reels, which is all the same thing, if you can master it, I think that you're going to solve maybe three or four problems all at once. Number one, you're going to solve investors because they're going to go to your social media and they're going to start there and they're going to see, oh my God, there's a. There, there, there are people interacting here. Number two, you're going to solve supply because people, if you start featuring your supply on your social media, will want to be featured. Number three, you're going to solve demand because people who are looking for supply are going to find it there. Right? Right. And number four, you could solve for employees and team members who are, you know, the best team members for this startup are going to be people who love living in a van. So if you found a marketing person who's a social media marketer who would join your team, who lives in a van, you could probably hire them for a thousand dollars a week. Probably the expectation of a social media manager who knows how to edit short videos, who works remote, might be 50 or 60 or 70k. That's probably their expectation. And then if you told them, here's your job, I want you to go to each of our customers and take pictures of them and to go interview them and to make shorts out of them and then interview people who are also living the van lifestyle, their brains would explode. Now you've got somebody who's living van life. Who gets to have a job geeking out about Van Life. And that person's waiting for you at the Van Life tag on Instagram or TikTok. And they're already making these videos. And when you come to them, they're going to think Hayley's an idiot. She's going to pay me for what I'm already doing. How do I know this? Because when I was running Weblogs Inc. We hired a guy named Ryan who was an incredible commenter and he would comment underneath Peter Rojas. Ryan Block would comment under Peter Rojas posts and annoy him by fact checking him. And he would write longer comments than Peter Rojas had written in the blog post. So we said, hey, you're writing 12 comments a day. How about we pay you 10 bucks to write, you know, five posts a day? And he was like, are you an idiot? And I met another kid who was doing Apple blogs at the time. Blogging was not a paid pursuit. We did the same thing with him and we created a blog called twa, the unofficial Apple web blog. T U A W. And we got twa.com. it was like a phenomenon. For three or four years it was a very popular blog. And again, somebody was writing about it on their Tumblr and we hired them and they were like, Jake Howe's an idiot. And at that time we offered $250 a month to do a hundred posts. Oh, wow. So it was three posts a day. This was our first deal because people were doing it for free. And in fairness, people were writing three sentence blog posts. You know, here's a cool video of somebody, you know, making, doing something with their MacBook Pro. I think that if you had my money and you said, hey Jake, Al, could I spend it on this? I'd be like, I wonder if that would be the best use of proceeds solving all those problems at once.

Yeah, that's a great point. I've kind of. I thought, I be honest, it's crossed my mind, but I've never just went.

All in on that.

And I think it's time I just do that.

Here's an experiment for you offer three different people, you find one on TikTok, one on Instagram, one on YouTube. A thousand dollars to do 10 videos over the next month. And whichever one you like best, I.

Love that I'm gonna do that. I'm gonna keep you updated on how it goes.

Well, I mean then you're. And, but you have to learn these techniques as well. So. As well. So you have to, you know, be watching Van Life and say, who does the best Van Life videos?

I just found this over on Instagram. This is the current rundown of how popular the Van Life and Van Life associated tags are. Van life diaries 2.8 million. Hashtag van life 17.8 million posts. I had no idea, Kaylee, that this was such a big deal. I thought this was just Jason and I dweebing out about not having to pay property tax anymore, actually.

And so that observation, Alex, very well done. The observation that you don't have to pay property tax, you should make, I kid you not, a post a week on that one topic. One of the things I learned about shorts is that you're not going after subscribers, you're going after the algorithm. So doing tax hacks or property tax now, you can hijack property tax and tax optimization, people. There's a whole expatriate thing. And leaving America or leaving your country to go to the people who treat you best on a tax basis, that's a whole other genre. And so there was a concept called news hacking, which sometimes became distasteful. People would be like, here's my SAS product talking about, I don't know, Russia, 9, 11, Russia's invasion of Ukraine. Like, you can do news hacking in a very dark, bad way. But there was news hacking of, you know, I am a security expert and Andrew Weiner's phone got hacked. Boom. The day that hack happens, we're sending a short article with five bullet points to 100 journalists. Alex and I would get those. What we're doing here is trend hacking. We're doing tag hacking and the tag hacking and trend hacking. You know, subreddit hacking is a very powerful pursuit. I wish you great luck with that. Any other problems or challenges I can help you with today?

Well, that was wonderful. But we are wondering too, should I focus more on adding features for the user base or should I focus more on adding team members focused on growth? Kind of like you brought up.

You're currently growing 20% month over month, which means you have product, market fit and you apparently know how to find customers, right?

Yes.

So you could go crazy and try to grow 40 or 50% a month. The only problem with that is you might not have the customer support, you might get a low NPS score, etc. And you're having a challenge with raising money. You know, not a challenge. It's, you know, it's. This is actually what you're experiencing is the normal process. How many investor pitches have you done? Not just pitching to the People we introduce you to in the accelerator, we introduce you to hundreds of investors. You get to pitch them. I'm talking about direct one on one Zoom calls for 20, 30 minutes with an investor. How many of those have you done? Ballpark. Dozens.

No, four or five.

Oh, four or five. Okay, great. So I want you to add a zero to that and report back. So that would be the much better thing is to take this segment, share with people. Hey, I was just on, you know, this week in startups with Alex and Jason. Here's the clip, here's the deep link. We talked about a lot of the issues. I was wondering, you're a marketplace investor, if I could talk to you about my business and get some great advice from you. We're growing 20% a month, so I don't want you to give your life story to them. I was on this weekend. We're a startup, we're a marketplace. I know you're a marketplace Investor. In these three other marketplaces, we're growing 20% a month. We're dealing with a lot of challenges because of that growth. Here's a link to be on with Jcal and Alex would love to get 20 minutes to get some advice from you about marketplaces. So you're not asking for investment, you're just asking for advice and you're sharing two bullet points, two main points and you're going to try to say it in a short, as least words as possible. Number one, we're growing 20% a month. We're growing 20% a month. A month. Five words. I was just on twist with JCAL and Alex. Eight words. So you have two sentences, one's five words, one's eight words and there's a link in each. And then would love to get 20 minutes of your advice. Since you're an investor in A, B and c, that's another 10 words. So we've kept the email to under 50 words. We've done it in three bullet points. Then I want you to ping the person if they don't respond, every 72 hours. Moving this up to the top of your list. Moving this up to the top of your list. Moving this up to your top of the list. Okay, on the fourth one I want to say, don't mean to be annoying, I just really respect your track record in marketplaces. And that'll be the last one you do. The fourth one, ping one, ping two, ping three. And then the fourth one I want you to say, sorry to be a bother, just I really could use your counsel since you have done so much great work in marketplaces. Is there anybody else at your firm I could do a first call with? And then we'll let it go for now. Every three days you're going to be annoying. How uncomfortable do you feel about those four follow up emails? I don't.

I didn't realize the follow up that often. I like wait like a week and a half. I had no idea.

I want you to create a sense of urgency. So I want you to create 20 targets. I want you to send 20 emails and I want you to follow up on them with a personalized follow up. Jason, moving to the top of your inbox. Enjoyed you on this other 20 minute VC podcast. So you're kind of showing it's personalized. It's not like a thing. Any chance I could get 15 minutes of your time from 6am to midnight any day of the week, Saturday and Sunday included? Right. You're kind of. What you want to do is show that you're not. You're going to be relentless. And you know what? Relentless founders is what we like to invest in. So Some, there's some VCs who are like, yeah, I'll respond if they ping me two or three times or they go through somebody who knows me. So okay, that would be. But I think you got a great growth rate. I think mastering the social media piece with people because how many people full time in the company now? 2, 3.

2 full time.

Perfect. The third person, if they were somebody living Van life, would serve as a proof point. You could have them get on the phone with investors. They would serve as a ambassador, they would serve as an SDR sales development rep. They could warm up leads. They could be customer success because they visit somebody. Man, if you were like, the more I think about this idea of tapping a Van Life couple or an individual and it has to be somebody who's an extrovert. So you know somebody like Presh who worked for me, who. I don't know if he's an extrovert actually, but he plays an extrovert on social media. He's out there building his products in person. He's going for runs. Videotaping himself. Yeah. Sharing his friends. You need somebody high energy like that. They might skew younger, but they don't necessarily. So they just have to skew that they're already doing the job. Paying somebody to do a job they're not doing already is hard. You're kind of pulling teeth. When I hired Alex, he was already doing podcasts and writing and geeking out about S1s. I didn't have to be like, Alex, read this S1. Read this 10Q. He's like, I'm sorry, I can't talk right now. I'm reading a 10Q.

That's why I'm still trying dinner parties.

Or maybe he doesn't get invited to that.

I don't know.

It could be either.

I want to jump in here, though. Jason, this employee, this number is three. This Van Life SDR ambassador, content creator. How much equity should a startup give to an early keeg hire who's a non foundry? I think this comes up a lot. And while we're here, let's take a moment.

You can give them a point if they stick around for four years. One point.

Okay, that's great.

That'd be generous. It'd be generous, right? You could be generous with the third employee. Now, if they were the CTO and they were joining and they had done two other marketplace startups, they'd probably ask for 5%, 10%.

Oh, wow.

If they were getting like less than market salary. So let's say this CTO who worked at another marketplace, not Airbnb, obviously, but, you know, maybe they did work at Airbnb and we're one of the first 50 employees, they made a little bit of money. They may not want a, you know, 150k, 250k salary as a CTO. They may want to take 100k salary or a 5k a month draw, you know, 60k a year. They might want to invest 250k, you know, to own 5% of the company at a $5 million valuation and get 5% equity, you know, over five years and get to like a 10% ownership position. So that's what you're kind of dialing in here. This person probably doesn't care about the equity. I'll be totally honest. If it's a Van Life person, what? And they're optimizing for fire, they would look at the equity as icing on the cake. So you could probably get away with 25, 50, 75 basis points or a point. If they're savvy, they might want two points. And they could if they were like chief marketing officer, CMO level. Alex, to your point.

Yeah.

A chief marketing officer might ask for 2 points, 3 points, 4 points. And then here's the great news. They're on a one year Cliff Haley if they suck or if you suck, conversely. And they don't want to waste any more time because they don't think that you are going to make this happen in the equity. They quit, you quit them. Or if you can't quit each other, that means something good's happened and they get that nice 20, 25% of their equity on 12 months in one day. So we've built that protection into startups. It's called the cliff. And the cliff exists for a reason.

I think this is fantastic. If you want to learn more, like I said, it's HookHub Co launch accelerator class 33. Kaylee, thank you.

Thank you, guys.

It'll be interesting to see if in time then life becomes so big thanks to things like Starlink and Project Kuiper and so forth, that people do kind of do the mass Airbnb strategy, but for RV spaces, I can see that becoming a small business. Anyways, I think the company is great. I'm curious about their splits, though. I didn't get a chance to ask that. But I wonder if they have like Airbnb level revenue splits with hosts.

We'll see over time.

All right, so this is a clip from Andrew Reed. He was on, I believe it's the Tech Bros. Podcast.

Oh, yeah, Tech Bros. They, they're the ones who like, do like the ESPN thing where they put the logos of the sponsors along the bottom.

Yep. So here is Andrew Reed from Sequoia on the podcast talking about how the Sequoia Partnership works and how founders interact with it and how they get sometimes surprised.

Here we go.

Well, I hear often, like, oh, Sequoia. I've heard it's really tough internally, like really sharp, elbowed. The stakes are really high. It's a small team. Expectations on performance are insane.

It's a consensus investment process as well, where you don't need to just basically close you. You got to close. If you're an entrepreneur, you got to close all your partners, Correct?

Exactly. And the part, you know, the partner meeting, I've seen some founders really rise to the occasion in the Sequoia partner meeting room. I've seen people just totally wilt. It's actually an amazing culture inside the building because of that. I think, like, because the expectations are so high, the team is so small.

Right.

I think, like, this is one of the things that, you know, Doug has this presentation, he calls it the laws of physics, where one of the laws of physics is that fund returns are inversely proportional to team size and also fund returns inversely proportional to fund size. You know, we've been very disciplined about keeping the number of people on the team and keeping the funds to like, a relatively stable Size and then working together to kick ass.

All right, yeah, great clip. That rings true. Having pitched the Sequoia Partnership, having them invest in one of my companies, you know, that I ran as CEO and spending time with them and, you know, them being an LP on my funds and me being an LP in their funds, I've got a great, deep relationship with them. It is true. The two important points there that Douglione the goat points out. If you have too many people, fund returns go down. If your fund size is too high, fund returns go down. Sequoia is a large organization, but they have a seed fund and, you know, like Series A, they have a growth fund. They keep the teams small, High expectation culture. And I do remember at one point going into a Sequoia meeting, I was like, hey, where's Blank? And they're like, oh, yeah, he wasn't invited back to the next fund.

Which is how you get fired as a venture capitalist.

No, you don't get fired. You were not invited into the next fund. So you nailed it. It's like. And you know, that's it. That's just the nature of the business is you do get a lot of Runway, but then you might not be invited back to the next fund if you don't hit the notes that you need to hit.

Yes. Now, Jason, on the pitching point of this, founders wilting founders, rising to the occasion, what does a Sequoia partner meeting feel like? It sounds like they're all there at once and you're pitching literally all the partners for the fund that you're looking at.

I would say big ear, Smallmouth is how I would describe pitching to them. They are not going to say a lot. You might get one or two questions from one or two people and then they will follow up. And I think, you know, they are looking for a certain archetypal founder or founders now. A great market size, great early execution, track record. Those things can play into, you know, any of this, you know, in terms of decision making. But, you know, they're looking for very specific, you know, Peter Thiel, Elon, Chad Hurley, Max Levchin, you know, go down the line of, you know, intense founders who are super driven. Reid Hoffman, you know, I'm going through the logos in my mind, Steve Jobs, the Cisco founders back in the day. So they're looking for highly driven, cantankerous, chip on their shoulder, hardcore founders. And I think because they have such a high number of people applying, that they probably are okay, leaving some good investments to other firms and going for the great going for the Larry and Sergey Drew from Dropbox, they're looking for really hardcore folks. And you know what hardcore folks also myself, Sam Altman probably didn't get great returns for them, but still hardcore folks who they identify who they know have a certain amount of pride and doggedness. They don't expect every investment to work out, but they do want, you know, Tony Hsieh in the building. You know, they're Alfred Lynn, you know, who's now a partner there, or ruloff was on PayPal. They're looking for hard driving, chip on the shoulder entrepreneurs. And so having a bit of a chip on your shoulder probably is an asset. Zuckerberg famously showed up to pitch them in pajamas and did a whole pitch of why they shouldn't invest, you know, that kind of stuff. Well, I mean, it was also put up to it by Sean Parker, but the, the whole, the whole four quadrant thing that Don Valentine said, they're famously competent, incompetent, can, you know, easy to get along with, difficult to get along with, or sometimes difficult or challenging individuals. Highly competent, challenging individuals are the outliers in our business. So, you know, pick somebody. Travis Elon, you know, that may not be easy to get along with at times, but they're highly, highly capable. That's what you're looking for. That doesn't mean, you know, you have to be difficult in every decision. But sometimes that is a flag. And you know, we have that sometimes, sometimes we'll have somebody who comes to the accelerator. Like we, you know, have people here come on office hours, you meet them and they want to make five changes to the standard documents. And we're like, yeah, we don't, for the accelerator, we don't do that. But for a direct investment, we very well, very well might change some standard documentation because, okay, you know, we, we generally will advise them like, these are the standard docs. You're going to make it more difficult for you the next time.

Right?

So, you know, we suggest you do that. But if they want to have in there that they can, you know, keep running or be on the board of this other company or they want to be an advisor to this venture firm, you know, Raul has a venture firm he set up. Not that we were like, he didn't have that when we invested, but, but if somebody like Raul was like, I also want to do this venture firm with my brother or whatever, my friend, and you know, that's, you know, a no go. If I can't spend five hours a week on it, I'd be Like okay, fine.

Right, sorry. Josh Wolf from Lux Capital says chips on shoulders puts chips in pockets. I think is his summary of this.

He cribbed it from Sequoia. Yeah, true. Yeah.

But can I just say there's a little note of, of shade in what Andrew is saying there. Because if I think about who's raising the largest funds, he's talking about Andreessen Horowitz.

Yeah, yeah, yeah. I think all of those funds are going for the average venture returns. And so. Yeah, yeah. I mean the average venture return should be double the public markets. If that does. Or Even if it's 50% on the public markets and you're Mark Andreessen and Ben Horowitz and you index the entire space and you're putting 2 billion, 3 billion to work a year and you've got 20 billion under management. You know what the management fees are on that? It's just a money printing machine. So that is a strategy to be essentially Vanguard funds of venture. Sure. In a way, Y Combinator. And what I'm doing at Launch, they're doing 500 investments a year and the their accelerator I'm doing 100. We'll probably get to 200 in our next fund that in a way is taking pre seed or seed and making an index of those. Well, it turns out the precede and seed index, if you actually succeeded in that and you indexed it, you would be the greatest fund of all time because they typically do 2x what venture does. So you might actually be able to establish a 3x fund. 4x fund like that would be. Or three and a half, that would be pretty juicy. So you know, there you have it folks. If you could, if you could institutionalize a 20% year over year return and you can keep making the number go up pretty great.

Yeah, Warren Buffett will be calling you at that point in time because that would be.

Yeah, but you get no liquidity. Right. So that's what you're giving up. Right. So if you get the Vanguard fund and an average of 7 or 8% or like whatever, if it's a tech fund, it does 8 or 9% like and you can come in and out of it as you please. That's a feature in venture you can't. And in venture you have to have a group of people who get the allocations from 10 different people so that you're in 10 different seed funds. And that's what a fund to fund is for. Right. So there are fund of funds that try to accomplish that test. But you are going to not see your money for 5, 10, 15 years.

15? Yeah, it's.

It.

That's.

Well, you'll start seeing some, maybe if you're lucky, at 5, 6, 7, you'll start seeing most of it between, you know, 8 and 12. And you might see some stragglers at 13, 14, 15. If you're running Yale's endowment or the Ford foundation or sovereign wealth fund, who cares? Like 15 years, 10 years, 20 years. So all the same, you just, you don't need access to it because it's only 5, 10, 15, 20% of the portfolio. So.

Speaking of venture capitalists and returns and LPs, Jason, can I show you the funniest comic I've seen recently about venture capital? I pulled it up for us. This is just, just for fun. If you're on the video version, you see this. If you're not, it's a two panel comic. There's a man in a suit talking to a guy in a hoodie and the guy in the suit's labeled vc. And he says to the founder, you're just a rapper on an LLM. And then the founder turns around and says, well, you're just a rapper on an lp. And this is niche humor, Jason. But it had me absolutely rolling. I loved it.

It's true. I mean, it's sort of like saying YouTube is a wrapper around S3, you know, storage, Seagate. It's. Yeah, okay, sure. You know, Netflix is a wrapper around negative optics cables or, you know, whatever. Like, sure. All right, everybody. This has been another amazing episode of this week in startups. He's x.com Alex Cautious optimism on Substack and go spend a hundy pay for his newsletter. Is it a hundy a year?

It's a Hyundai a year. Or 10 bucks a month or whatever.

10 bucks a month. Go get it. And we'll see you all next time on this week in Terms. Bye. Bye.