Meta’s Dangerous Chat, Protect AI & Founder Fridays Pitch Comp | E2118

When I was in high school, I had a session with like a guidance counselor and I said, hey, you know, he said, what's your plan? I said, well, you know, I was, I read about Brown. I said, you know, they let you make your own degree. You can kind of roll your own concepts. So my concept is psychology and like human behavior plus computers because, you know, I'm into computers and online services specifically. He laughed in my face. This is when I was like 16 years old. And the guidance counselor, like, spit out his coffee, laughing. He said, you're, you're barely going to get into any college. You have like a 72, three year average. Like, aren't you going to take the cop test? I said, yeah, I took, I'm taking the cop test with my brother Josh. And nothing wrong being a cop. I almost was one. And he said, you know, do that like it's better. Like you're not barely getting into Brooklyn College. And I got into Brooklyn College and then I wound up getting into Fordham. But just imagine like a young person getting laughed in your face. And you know what that did to me? That was like, made me who I am. That pissed me off so much. I was like, this guy made me be like, you know what? I'm going to show this guy. I'm going to get into a good school and I'm going to have a career.

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All right, everybody, it's Monday. Welcome back to this week in Startups. I'm back from the sixth borough of New York known as Detroit, where my New York Knickerbockers had a wonderful time. I was only threatened to be beaten up by one person this trip. You know, normally when I go to a city like Detroit, I'm expecting like the over under to Be four.

Yeah. It's a tough town, too. Detroit, they don't mess around.

It's not a joke. Yeah, yeah. You have to stay on the right street.

That's what they say. Yeah.

But here's what I'll tell you about Detroit. Great people, great city. I've never been a great, great city. I've never been either. I was talking to a bunch of entrepreneurs I met there. My friend Jonathan Treest is there, and he's been doing entrepreneurship there for a while. They bought all the old buildings downtown.

Right.

When the whole thing bottomed out for, like, 12 bucks.

Yeah.

They slowly said, hey, what if we, like, cleaned up where the arenas are so they have a beautiful, like, Little Caesars arena where the Detroit Pistons play. They've got a baseball bank. It is gorgeous. Alex is gorgeous. Downtown and everything built out from there. So they built, like, townhouses, restaurants. But like Austin, where there's a lot of warehouses and space, people are drawn to affordable real estate in a country like the United States that is, let's face it, not affordable. So now we have a not affordable country, and a place like Austin, a place like Detroit, will draw people. Why lower your cost of living with remote work or people being more open to, you know, hybrid? You get some affluent people moving to places that are dirt cheap. Like, you had a great experience with dirt cheap here in Austin.

Yeah.

And people in Austin don't feel like it's dirt cheap. But if you're coming in from Los Angeles, the difference is night and day.

Incredible.

And you had that same thing going to Provincetown, right?

Oh, my gosh. Providence was. Was about 40% cheaper. Well, Provincetown is nearby. But it was funny because I got here, everyone's like, the prices are unbelievable. Inflation's out of control. I can't afford a house. And I'm like, you would not like California at all.

Well, you know, when your benchmark is California, it's absolutely crazy. So I had a great time. I think. Actually we talked on Friday, right?

A little bit about Detroit. Yeah, yeah, yeah.

The restaurants are great. I went to this place, Ghost. Had the best burger my life. I stayed at the Shinola Hotel. Amazing. The watch company, I guess, made an extension. You know, just everything delightful. But one guy, I guess, recognized me, and I was wearing my kith k I t h is like a designer the kids are into. They do drops.

Okay, sure. All right.

Anyway, the guy, Ronnie, who runs it, who's a great designer, like, they make these really great jackets and crossovers between brands, and they did, like, a Crossover between a old athletic brand with an A. I forgot the name of it plus KITH plus Knicks. And they do these kind of crossovers, but they only release 50 jackets, 25 jackets. I happened to get one of these really gorgeous jackets that Karl Anthony Towns wears. I'm wearing it down the street, and I guess, like, J cow f you and the Knicks or whatever. And I kind of waved, and I was like, yeah, what's up? So this jacket, man, everybody had to comment on it. People love this iconic jacket. I didn't realize KITH is considered, like, the height of fashion for urban streetwear or whatever. And next. And then this crossover with the athletic Everex. Everex.

Yeah, I found it.

So Averex plus KITH plus Knicks. And then this guy decided, because he was. I guess he had a couple of pops and beverages, these gorgeous jackets. They basically say, talk to me about my team. So I get absolutely, you know, a ton of attention for it. It starts a lot of conversations. People in Detroit are so nice, but this one guy is like, kind of keeps up the fus. And I said, you know, if you want a selfie, I'm totally fine with it. And he's like, no, I'm gonna beat your ass.

He starts, oh, geez.

I'm there with my little brother who's a former cop at firefighter Josh. He's a bulldog. He's like, what you say to my brother? That's the one I got.

Yeah.

You know, it's kind of a strategic error for me to wear this jacket maybe, and walk from the arena to my hotel. It's a little bit on me.

You know, you're.

You're.

You're.

I was pushing the envelope.

Yeah, you're sort of announcing yourself a bit.

But it was great to wear in the arena. The people were great. We won the fourth game. Knicks will do the gentleman sweep, as I predicted, But a great town. And I actually want to go back to Detroit. I was thinking maybe doing like a this week in startups. Live in Detroit, or I'd love to go get great restaurants, great people. Did you know you can swim from Detroit, like, across the.

To Windsor, Canada?

Sure, you can go right to Canada. Yeah. Yeah. For some reason, I never knew that we're talking about the border. There were 50 little swimming fishing vessels.

Yeah.

People were just fishing in dinghies.

I mean, that's what people. I mean, I think even Trump today was talking about the Canadian border as some loose. Like, who cares? They're basically already the 51st state. But the Mexican border Militarized the whole thing, guys.

Well, you think about how many people live south of the border. You got what, 40. 40 different countries.

Yeah, there's a lot of countries.

So of those countries, how many have a revolution or, you know, you know, turn into dictatorships? He's got to be like three or four at a time at any point in time. So there is reason to leave. And whereas, like, I don't know many Canadians who are like, I hate this place. Most Canadians I know are like, this place.

Yeah.

Very, very few. And also the numbers are quite different. So Mexico, 130 million people. Canada, 40 million. So just. Just the sheer numbers across the border.

That'S just one country, Right? This country. Mexico too. Absolutely. Yeah.

The.

The whole going down the Canada US Border thing actually became a plot point in the Canadian serial epic Trailer Park Boys, which, if you haven't seen that critical bit of Canadian virtual export, you really owe it to yourself.

I can tell you this right now. You could make a homemade drone, pack it with as much fentolin as you want, or H1 hundreds. I'm not suggesting anybody do this. And you could zip all day long, two feet over the water, as much fentanyl as you want there. But by the grace of God, for whatever reasons, the Canadians must be doing a tremendous job of policing that side.

Yeah.

Because I am not kidding, you could do a T shirt cannon and shoot enough fentanyl to kill Michigan.

Yeah. It's only a tiny amount of fentanyl.

I mean, it was.

That makes it so hard.

It's incredible, though, that Jason just pointed out that there's two things you want to traffic around the world today. Drugs and Nvidia GPUs. And he's not.

I mean, basically, these are the pound for pound, I think.

Yeah.

You know, the most valuable, most valuable for people like diamonds, gold and bitcoin. I mean, they're whatever, three, four, and five. But I didn't get H100.

Yeah, yeah, yeah.

There was a crazy story that I am tangentially next to. There is Group Chatgate. There's Group Chatgate now. I don't know. A year ago, six months ago, before the election, Eric Torenberg, who fancies himself like a micro jcal, it, started his podcasting network and did a bunch of, like, he did like a little all in knockoff that lasted like five episodes and then a bunch of other niche podcasts. He's a great kid and he joined Andreessen Horowitz, but, you know, whatever. A year ago, he's like, hey, J.C. check this out. Can I invite you to the Signal group? I'm like short and then like, it's like was like 50 people, then 100, then 150. And you know that like whole preference stack that happened in Silicon Valley.

Yeah.

Kind of watched it up close and personal. Mark Cuban's in there. Like, this is all public now. I never talked about it all that much because, you know, like, I kind of felt it was quasi private, you know, based on the people in there, that there are some people who are journalist type people who would take pictures and share them, I guess a lot of influencers. Maybe a little like, maybe white supremacist adjacent folks. You know how there's like a little bit like at the far end of maga, there are people who are not Nazi or white supremacist, but they're kind of adjacent to the next group of people. There's a little bit of that sprinkled in. A lot of tech people, a lot of media people. Anyway, they made like some big deal about it because there was a leak.

Yeah, well, Ben Smith and Semaphore just wrote this whole piece about it.

Yeah. So anyway, people have been dropping off of it. Like five people a day are like, yeah, I'm kind of done. But I. I'll be honest, it's a snore. It's essentially the same discussion. Alex happening on Twitter, happening there.

Yeah.

And maybe people use the R word a little more, but it's not like anything different than anything you're seeing. So it's kind of a big nothing burger. I mean, that's kind of what I.

Was when I first read the article. I mean, it sort of got previewed. A few of the people from the group chat kind of leaked ahead of the article that they had been.

Yeah, Joe Lonsdale.

Right. They had been interviewed by Ben Smith or he was sniffing around and so it was going to come out and I think my reaction was, yeah, like, well, of course. Like I just assumed these kind of back channel conversations are happening on Signal every day. Like, why. Why would that I'm in a bunch of group chats. Of course, billionaires have their own group chats. I just feel like it's obvious.

Yeah, it's. And centimillionaires and center millionaires. DECA millionaires.

They're all. I'm not.

Can you imagine?

1% of the point? 1%.

Yes. Bernie Sanders never shouts you guys out either. It's always right to the billionaire class.

I know. I mean, come on.

I. We got to do Better everybody. We need to expand our circle of hate founders.

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Jason, actually, I want to point out that last summer you and I, before Lon joined us, I asked you what is the technology argument in favor of Trumpism? And you gave me a pretty interesting look. And you, you framed it something like, here's what's happening behind the scenes. And you were very clear to obfuscate sources and where it came from and so forth. But were you pulling at that time kind of from this group chat among other group chats?

I mean, yeah, sure. I mean, I think one of the things that happens on social networks, whether it's Blue sky is falling, Twitter X is you have a mixture of the elites, the known people, the powerful people, people like us and others more powerful and more influential. And then you have the hoi polloi, you have the civilians. And that's kind of the magic of it, but it also kind of kills it, because if Mark Cuban and Joe Lonsdale are getting into it with Mark Andreessen and Ben Shapiro and J.D. vance, and they're in the same chat, like, whoa, that's kind of entertaining.

Wait, J.D. vance was in the group chat?

Well, anyway, I don't know if I'm saying too much, but I think he might have been wrong.

He's not mentioned in the. In the semifinal.

I know.

I was about to say we're gonna break some news here, ladies and gentlemen.

Wrong. I don't know.

Okay.

Maybe he was in holidays. I don't know. It could have been anybody. I mean, they. I'm not saying they put the plans to blow up the Houthis in there.

Yes.

But let's just say.

Let's just say Seth was going through the context, like, let's see who's in who. Who should I invite? My mom and good girlfriend, obviously.

So, yeah, I think I do get some signal from group chats in. Signal in WhatsApp. It's people will. I think probably that's actually a really interesting point, Alex. I would say, even though people are speaking as if they know it's being screenshotted and sent to journalists, and they don't. Everybody knows don't put anything in text because your phone could get dumped, get hacked, whatever. So don't say anything there. That would be career ending or you wouldn't put your name up publicly. But that's an interesting point, because it's more interesting to be there than on social media because of the sort of spam and the bots and the chaos, whatever. I do think maybe people will talk about things first in the group chat. Floated in the group chat.

Yeah.

And then I know I do that in some of my group chats.

Oh, for sure.

So I'll be having a conversation with you on. In one of our group chats, and then I will take what I just said and say, oh, I'll adapt that into a tweet. I'll copy it. I'll copy what I said, not somebody else's, to be clear. And then said, was there any. Like, I don't know why this is a number one story on tech meme dot com.

But that's what I was saying. Like, I don't know.

Feels like I can.

I can explain that.

Tempest in a T. PA it's because.

If you're plugged in, you watched the technology luminaries that were part of these group chats shift to the right slowly, incrementally. But for a lot of folks out there, it kind of went, okay, everyone's a normie Democrat amongst the VC class. And then suddenly a bunch of people came out in favor of Trump. I mean, I remember Sean McGuire, who was part of these group chats, dropping his X essay on why he supported Trump and being surprised because I1 didn't know Sean McGuire was. And also it struck me as a surprising move to make in that political climate.

But.

But if I had had this context, Jason, it wouldn't have been a surprise whatsoever. Also, I do think that the end of the article is the most interesting bit when they discuss how the Post Liberation Day tariffs are fracturing some folks on the right who are technologists, because I think it's fair to say that this show is a free trade fan club. And I think that has been the traditional position of business leaders and especially on the right. So to see now people having to defend Trumpism contra to what I would call traditional GOP economics is fracturing these groups. And that's interesting because it didn't last long as a coalition. Jason.

Yeah, I think the other interesting thing that people are noticing, I've seen a lot of people going back on social media, finding members of these group chats that have been identified and noticing when their tweets and their rhetoric started to align. Like, I saw a screenshot of a Matt Iglesias post and then, I don't know, somebody else from the group chat, Joe Lonsdale maybe. And it was like, look, they're making the same argument, like within a week of each other because they were both pulling from this group.

Yeah, I. That is kind of like the phenomenon. You go to a dinner party, you have a conversation about, you know, in Hollywood. I don't know, Tar. Remember that movie Tar?

Of course.

Yeah, yeah, Cate Blanchett. I remember listening to Brett Easton Ellis and he didn't like Tar. He actively didn't like.

Yeah, sure.

And then he had conversations with people and everybody loved it. And he's like, let me watch it one more time. He watched it again, which is a three hour plus film. That's a little bit of a task.

Yeah.

And all of a sudden he came back, he said, you know what? On second watching, I can understand what people appreciate about it, and I kind of like it now. So there is something to working through issues and changing your mind or peer pressure. You know, whatever, or even just hearing.

Somebody speak to something and then put a spin on it you hadn't thought of before, you go, oh, they're right. I like that argument. I'm going to sort of adopt that myself. And yeah, I think, I think that's what is fascinating, people is the anthropology of going back and watching these arguments sort of spread.

And now we're watching it sort of come apart because there is a Trump really does drive ratings on podcasts. So, you know, we'll put in the first sentence here, you know, Trump. If we. Let's do an experiment for our YouTube. The Trump or Trump Group chat. Yeah, just we'll name everything. Trump Group chat. Trump Tech exposed.

Yeah, Trump.

Trump Trump Tech Group chat exposed.

There you go.

Let's start with that as the thing. You put that as the top of the YouTube or the thing people are going to want to know.

It'll get clicks.

Yeah.

So, you know, Trump equals box office. So everything kind of revolves around that. And you are seeing now a lot of the arguments people have for why they wanted Trump over Kamala was the economy. And now people don't feel like, well, it's kind of like some of the neocons who are like, kind of feel like maybe we should fight against like Putin, maybe we should have global trade though that neocon or Clinton Democrat position I think is a large part of the middle. And that middle that is like, yeah, Putin might be a bad guy and we should stop him from invading countries. And maybe we don't want to shake the economic snow globe too hard with these tariff things. Maybe we should just do it gradually and not, you know, have the economy do these kind of crazy roller coaster ride. I think those group of people are the ones who maybe left the Democratic Party. They may have pinched their nose or were peer pressured or just changed their opinion on Trump and said that's a better choice. Of the two bad choices, that group of people now I think are maybe saying, I'm not happy with this. And that's what you're seeing in the polling pressure.

Not a great choice. Not alone.

The third plank, Americans are strongly in favor of deporting people who are here illegally, who have committed crimes. Yes, but that's it.

Yes.

Trump is going so much further than that now to the point of rounding up 2 year old US citizens and deporting them, that you're starting to see the polls reflect that too. So he's. Yeah, I mean, away from these centrist positions to the far right. And I think that's what?

We're starting to be a mistake, I think, because maybe he loses some of those people in the midterms. Yeah, it's, it's all so chaotic right now. AG is the word chaotic, because it seems like that's overused. It's hard to understand what exactly is happening. Communication is critically important, as we know from our company. Proactive communication, particularly important. A little proactive communication goes a long way. 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 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. Thank you so much, Jason. It's great to see you again. Yeah, great to see you as well. Maybe just from a product perspective, what are you trying to accomplish with the product? So, Jason, we are super excited about our cap table management and data room platform.

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All right, let's dig into little tech. We have quite a lot to go through here, Jason. The biggest story, I think is that Palo Alto Networks is going to buy Protect AI, which is a company that we added to the Twist 500. So it will need to take it off now that it's going to be part of a public company. Protect AI. If you don't Know sells tools to secure generative AI usage inside of large companies. If you want a bit more detail about that. Essentially it helps enforce AI usage policies, it helps you red team AI applications to make sure they're not misused and also does conversational make sure.

I understand that.

Sure.

So we know what red teaming is. That's when you try to trick an AI to make a mistake or do something it's not supposed to do.

Yeah.

So if it wasn't supposed to grab your credit card from LastPass or password1Password or whatever you're using, if it's not supposed to, I don't know, do something racy, sexist, offensive, you try to get it to do that. Yeah, that's what red teaming is just for people who don't know. You try to break things, get it to act offensively. So this helps you with that. And then I guess monitoring the workforce usage and actually creating policies and auditing all this stuff is really going to be important.

I think it's going to be huge. Yeah.

Yeah. This feels like a really important idea because I have paid for everybody in the company, I think, to have ChatGPT and I think we may pay for Claude too, or maybe select people buy it who use it a lot. I kind of need to know what's going on in those. Right. We need to know what people are doing, especially if they upload our data to those services.

Sure.

Yes.

So there do need to be some controls on this and it sounds like a really great idea. And did they say what it was sold for?

So they did not list a price. They called the deal strategic. On the Palo Alto network side, Geekwire did report that the transaction was for more than 500 million, but we don't have anything more concrete yet. But no, Jason, actually it's not that great of a price because I think their last valuation was between 400 and 450 and that was last year. So this isn't that big of a sales premium. And the company said at that time that it grew, I think was by several hundred percent. So to me there's a missing piece here that led to this sale because it seems like the company, the funding, the growth all had it pipped to do a lot more than this exit. I don't want to talk crap about someone's nine figure exit. Right. But it just feels a little cheap. So I wonder if we're missing something in the store valuation.

Is the sales valuation. That's like a really interesting discussion point. Is it? Is that basically what we think happened here, plus 20%.

Yeah.

Okay. So whenever you have less than a doubling, the VCs are not in it for a doubling. That means the founders drove this and the early investors drove it. So there'll be three constituents in a company of this size. You have the early investors, angel seed, Series A. They all got in at 5 to 10 million, 10 to 50 million, maybe 100 million. And the founders got in at $0. That group probably owns collectively 80 to 85% of the company, including the employees. Then you got the last 10 to 20% of the company. That's the series B. That's the 100 million at 500 million posts. That group of people usually has a right to get at least two times their money. Right? So they, if they were smart in a really competitive environment, they can't get that, they just get their money back. So this is a situation where, if that firm was in a competitive situation, they may have given up what are called protective provisions. The protective provisions being, you know, you can't just run away with the money. You can't abscond with it. You can't. There are things to protect investors from bad behavior or losing money. One of the protective provisions is participating preferred or a liquidation preference. This means I get my money back plus something. So that if you do some quick sale like this, I don't get nothing. So my guess is whoever put the last 50 million in has a provision, they get double their money back. Liquidation preference, in other words. So they get the 100 million. If this went for 500 million, they sweep the hundred million off. Then 400 million goes to everybody else. You get 400 million to everybody else. Maybe the founders, if they own 80% collectively, thought, hey, 40% of 500 million is 200 billion each. We're in. So I'm guessing that's what happened here. And maybe they thought there's a lot of competition and maybe they were given equity in Palo Alto Networks, which has been doing fantastic. The founder of Palo Alto Alto Networks spoke at the All In Summit last year and he really explained how he really courts founders and puts those founders in charge, in charge of their units. And if there was a unit doing that internally and they go buy one, they take the unit head who is getting beaten by the independent and say, that's your new boss.

Yeah.

If the unit head internally is beating the external competition, they get to be their keep being. So that's his philosophy. It's a, it's kind of a cutthroat.

It's a reality competition series Or I think it's more.

Yeah, it's a performance based. You know, if you are a fading starter in the NBA and some young buck comes up and they're the sixth or seventh person on the bench, they might take your position. Very awkward thing you see happen sometimes in basketball. For example, I know because I'm friends with Draymond Green and with David Lee. David Lee was the start. He was towards the end of his career. Draymond Green was coming up. I think maybe my memory serves me collective correctly. Like, their minutes or starting position may have flipped at some point during, you know, that transition, but they were both very cool with it. David Lee was, you know, Draymond Green's mentor and so is Bogut. So you had this really great transition. All right, listen, congratulations to them. And the other piece in this, Alex, to note, DPI sending money back to your investors has been very low. Four years under the wrath of Lina Khan. And then it just got kind of paused by this tariff turmoil.

Yeah, yeah, yeah.

So maybe the VCs here are like, hey, I doubled my money and I could send 50, I can send 100 IRR. The internal rate of return here is a hundred percent. I can just ship it to my LPs and just say, hey, by the way, you put in 10 million, this was whatever. If you put in 30 million, this is 1 million of the fund. All of a sudden I'm sending you 2 million. Back in the early days of a fund, it's like, oh, that's nice. Yeah, money came back from a venture fund. Something that's not happening as much as it needs to.

The power of cash on cash returns. All right, next up, ARX Robotics. It is a European defensive robot company. I have a picture of one of their machines right here. Jason. This is an autonomous robotics platform. The company has many different systems that go on top of this. You can do delivery of supplies on the battlefield sensors. You can do casualty recovery, I believe is the term of art.

It looks like a little. What that looks.

Tank.

It's like a tiny tank.

Tiny tank with a big sensor on top is what it looks like to me.

Like treads. It's got two treads.

Yeah, it's like a. It's like a mini tank. Like, not as big as a, you know, vehicle sized tank. Like a little like. Like one of those autonomous delivery robots.

I was just about to say exactly like one of those.

Tank. Got it.

Sensor on.

So it looks like maybe an atv like that you might drive in your ranch.

Roughly ATV size, size of Your desk, sit on it.

But you wouldn't have you and your friend on this device. They're calling it a platform. The acronym here for folks who want to be in the know is UGV Unmanned Ground Vehicles. And this fits neatly into our philosophy that drones and autonomous systems are the future of warfare. And to see a European company doing this, raising money, including from NATO's Innovation Fund, not a huge shock. I thought it was incredibly cool. I love to see Europe getting its military boots back on. I think it's encouraging. I think it's a little bit late, but better late than never. And the company put together a 31 million euro round. Jason. Bringing their total capital to 42. I love seeing it.

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Lon, how do we miss this for the Twist 500? I felt so silly. I was like, this must be a Twist 500 company. And it's not.

We're Very into the autonomous military robot drone kind of, kind of thing kind of area category. Yeah, I do like that they're not putting guns on it. That this one is for recon patrol cargo.

Yeah, they're just not putting that in the market. Yeah, it's a platform, so it's up to you.

Yeah, yeah.

You can be sure that their amounts that if you wanted to, you could.

Put AK turrets on there.

Yeah.

Which I'll be totally honest, I'm fine with. Because what we're going to see in the future is these things shooting at each other. It's going to be robot on robot. This is going to be like that. What was that show on TV where the robots would battle each other in Arena. Battle.

BattleBots, yeah.

Basically war is going to be battlebots.

Now I would. That's best case scenario.

There's battle, there's battlebots. So this is the future.

They're not autonomous though. There's guys with remote controls, but the.

Idea is they're not punching each other.

Yeah.

This is the precursor to it though. Like the ability to move around and have weaponry on a small device and then have it battle other small devices. What this is going to be all about. I have a theory that non us, non US weapons makers are going to surge. Why? Well, the US has a certain amount of capacity. That capacity is needed for client number one, the U.S. we need every ship we can make, we need every drone we can make. We need to build a supply chain here that's independent of dgi. So I think places like Korea and the EU and other places that are good at making weapons are going to get their order books filled by everybody who needs weapons. Everybody needs some weapons. You got to defend your border. No big deal. No judgments. So there is an etf. A friend of mine told me about kdef. I backed up the truck. Korean defense company. You cannot buy Korean socks easily. So I bought kdef. I announced it. I sold like two of my losing positions which were Warner Brothers and Disney. I was sick of Warner Brothers and Disney just disappointing me. I had like 100,000 in losses from that.

Yeah.

But I had bought some Uber when Uber was like down around $30. And I have a lot of Uber already from the angel investment. But I was like, let me just buy some Uber here because I know for a fact that this is definitely undervalued trading at 70 something dollars now. So I sold that Uber I had bought two years ago to offset the gains. I'm sorry, the law. The gains from Uber were offset from the losses from one of Warner Brothers that started netted out. Yeah, I cleared, you know, a couple hundred grand. Boom, I dumped it into kdf.

It's like the Korean Defense Industry index, correct? Yeah.

This is made up of. When you look at it, it'll tell you all the companies that are in it now. These are individual publicly traded Korean defense companies. I know nothing about those, but I am into defense. I'm going to start buying defense stocks. If you have ideas for us, please put it in the comments. If you think this KDEF is a bad J trade, let me know. I got to rebuild the jtrade website jtrading.com because we're using coda and my guy Presh had used a third party tool to pump in the shares.

The real time.

The real time. Real time service, not code and not their fault turned off. So I have to redo the thing or I may partner with one of these websites that allows you to put your portfolio up. Because one of those had me on a list and I was number five on the list behind like Ken Griffin and Nancy Pelosi. And I did this like in my time now I had a good entry price which was, you know, during the, the, the, the bad bottom out during the svb.

I mean getting anywhere close to Pelosi is tough.

Yeah, it's tough.

Pelosi is a tough, tough. That's a tough person to be at the poker table with. Anyway, what else do we got going on here?

Sentra? Not the car, not the thing you don't want to drive to the high school prom. No, this is a startup that just raised $50 million. It is in the world of data security, Jason, there's a fancy acronym called DSPM which stands for Data Security Posture Management. That is corporate speak for go find all your data all around your multi cloud setup and make sure that it's secure. It's actually a pretty big industry I think and the company is also moving into helping unsurprisingly companies use generative AI safely so their data to your earlier point Jason, doesn't leak into the applications and go out all over the web. $50 million Series B. Oh, so another.

Contain the AI method. It's great that people are getting ahead of it. So they raised 50 million in a serious way.

Again, I think this is a pretty cool idea for entry because it grew 300% year over year and that is the exact pace of growth that gets me very, very excited. Because if you're raising 50 of a series B, Jason, I presume you have a pretty reasonable revenue base to be growing from, you know, 300% on top of. So it's probably a pretty impressively stable corporation. And I love to see more Israeli security companies do well.

DSPM Technology Data Security Posture Management. So you've got data, you need to keep it secure.

Plugging it into notebook. LM over here. Claude over here. OpenAI over here. You need to make sure it's not going everywhere. Leaking into those.

I need to know about this because I, I, like I said, I bought Chat GPT for everybody and ChatGPT keeps asking me to connect Google Docs.

Yeah.

And I'm like, yeah, no, I'm not going to click that button. But then I was thinking, well, you know, I got enterprising young folks working for me, researchers and analysts. Maybe they did that already. Chris are like, oh, I can now ask ChatGPT.

I did do that, but only for my purse. Not, not my launch account, only my personal.

Now do you worry that it's going to take whatever you got in there, the great American novel or whatever you're writing fan fiction. Maybe you're doing some spicy fan fiction. I don't know what's going on in your docs. Spicy fan, 50 shades of gray stuff going on in that. Maybe you're. I, you know, I, maybe you're a lot padding.

And now I do, you know, I have some essays in creative writing in my Google Doc, but I don't believe that they're violating our agreement. Like you have to feed the individual doc in. You can't. It's not, it's not like learning about me by going through my, it's not training or doing. No, you. I think you can do that. But no, I'm, I'm loading in individual Google.

Okay, fair enough.

So I'm not loading in stuff I don't want.

I want all this to occur on the desktop. My understanding is these Microsoft. I was listening to Leo Laporte this week and on this week in Tech, and they were talking about these Microsoft laptops that were, you know, kind of AI ready. I think copilot is what they call it, is the. How they're branding it. And you know, you have it. He said, because it has a copilot key, just like they had the Windows Star key. They have a copilot key now what they're doing. And he wants it to record everything his computer does so that you can say stuff like, last week I was like buying some razors, but I can't remember the name of it. Can you tell me, like what brand I was looking at or reading some article about X, Y and Z and recall it. And there was a woman on Twitter on Sunday who is a lawyer and she's like, this is a really bad thing because like, you know, now it can be subpoenaed and there's all this stuff.

Sure.

Really careful. So you think about like subpoena power, you know, okay, you get into a lawsuit. I don't know, you know, your friend buys a company that's high profile and you get pulled into some lawsuit and then they're like, okay, yeah, we want to take your co pilot and start asking your co pilot, what pages were you looking at? Did you read anything?

Right.

You may not remember every conversation you had, every. Everything you had. And it might record your signal because your signals on your desktop or whatever encrypted thing you have. Right. Maybe it's recording some encrypted emails you have. Maybe you've got some stuff you talked about with your lawyer under attorney client privilege that's getting put. So she was making very good points about this. Like, this is crazy. And he was like, yeah, I don't get sued, so I don't care. I'm just going to do it. But you, all of it is stored locally on your computer. So you need to have a big enough processor, enough memory, enough storage to have all that occur locally. That's going to be the future of this, which is just like you might have an index of your photos on your phone, not in the cloud or like the phone. Some things are in the cloud encrypted, but other things are on your phone locally. There's going to have to be a whole series of decisions made of where to keep your large language model and then what you give up for performance because this also will slow your machine down.

Sure.

If you have to keep everything locally.

Yeah, yeah.

A lot of trade offs.

The market that we're talking about is so big, Jason, that another Twist 500 company, Sierra, and we had one of the founders on the show episode 1989 last August for a Twist 500 interview. They raised another $300 million last late last year. So people are really backing the space. There must be just BoCo demand on the enterprise side because I bet you every company wants to avoid everything that you're saying while also getting all the benefits and cost savings of AI. So to me, it's a great place to build a startup right now. We've been talking a lot about AI assisted coding, people essentially writing code with AI tools either helping them write whole applications or just expand their own writing. People talk about the problems this brings up. There's going to be technical debt, there's going to be debugging issues, it's going to be slow. So I've been waiting for a startup that's going to apply kind of the same idea, but not to generate any new code, but to apply AI to clean up existing code to make it faster, better and with fewer bugs. So lightrun, it's an Israeli startup, they are doing this and seem to be absolutely crushing it. The news item here is that Light run raised a $70 million Series B, bringing their total capital to 110. But the thing that I find most interesting is last year they debuted what they call essentially AI debugging of production apps. So apps that are live out there in the world and then in the last year their revenue grew 4 1/2 x. So my read of the situation, Jason, is that the company found a pretty smart way to use their own model to clean up code often made by AI and therefore have the snake eat its own tail. And it's driving insane growth for the company. I think it's just fantastic. And I hope this means that eventually Chrome will not eat every gigabyte of RAM that I frickin have. But I'm not entirely sure it'll be that quick. But I've been looking for this company. Glad to see it finally here. And I think this is the future. So I'm pretty freaking stoked.

Yeah, it looks like revenue has been growing 4.5x year over year. A lot of founders ask me like, how can I like rapidly close my next round of funding in Silicon Valley? Triple, triple, triple, double, double, double. That's what you know, VCs are looking for. So you start 100k, you go to 300, you go to 900, you go to 2.7, something like that, you know, Then you double it, you go to 6 million. That kind of fast growth solves all problems. You will easily, easily raise money if you're growing double digit percentages each month. Rule of 72, look it up. If you're growing 10% a month, in 7.2 months you will double. That's the rule of 72. If you're growing 35% in but two months, you will double your revenue. So get your team focused on what are we, how much are we growing week over week, month over month, quarter over quarter in terms of our revenue. That's your North Star. And if you're trying to convince with words and promises and arguing and debating with a vc, all that energy you could be putting into just growing your revenue and then that sale solves all problems. That would be Mark Cuban taught me early on. Sales solves everything. Sales solves profitability, running out of money, paying people more salaries, hiring more people and convincing VCs to invest more money.

That's why I think this Series B was actually not led by one major VC firm, Jason, but it was co led by Excel and Insight Partners. And I don't think you get two big names like that if you're not a pretty darn impressive group. Don't have a valuation here, but one to watch. This is part of the data. Sorry, developer observability is the buzzword. So one to keep in mind in the back of your head.

There was something about Neo Scholars I thought that was kind of interesting. The guy from Neo, yeah we got that one. Is doing like a teal fellowship or something.

Okay, so a little background here. There's a venture capital firm called Nio. It's made a lot of pretty sizably awesome investments. Like I think they were really early in cursor. The company that just scaled from 100 to 300 million ARR in like 25 minutes.

Speaking of growth, solving our problems.

Yeah, yeah, that solves I think the world's problems. So Nio, it turns out is more than just a venture capital firm. They also have something called Neo Scholars and a bit like a teal fellowship. This does involve college age kids but in this case they just gives them 20k and then has them take a gap semester or a gap quarter if you're on a quarter based system. I think this is fantastic. I think this fits into the kind of the Jason thesis of we need to go earlier, earlier, earlier. Like forget an accelerator, forget a pre accelerator. Let's go find the kids that are the most impressive and let's just get into friendship with them with a little bit of capital and see what comes out of it. Probably hard to scale, but I think we're going to see more and more of this because everyone wants to get in earlier. So Neo 20k. I dig it, love it.

You know this is good marketing for a venture firm to get in early. The thing with the Thiel Fellowship that people don't know is he doesn't get anything for that 100k other than the relationship with you and the goodwill.

Right.

So that's what made it super interesting is it was just a way to get super smart crazy thinkers from Ivy League schools who spent all this time and effort to get into an Ivy League school to then be attracted to quitting the Ivy League school.

Yeah.

So you start thinking about the logic, like what type of person spends a decade of their life, you know, from 7 or 8 years old, being super driven to 18 or 19, getting into Harvard, Yale, Columbia, Stanford, and then this weird, you know, guy, Peter Thiel, who got all these like non consensus opinions is like, I have an idea for you. Instead of going back for junior year or sophomore year, why don't you quit and hang out with me in San Francisco? I'll give you 100k.

Yeah.

That attracts a certain type of weird. What's a better word for weird? Non traditional.

Yeah, Outside the box, sort of unconventional thinkers. But I think what's so interesting is I think we're starting to recognize, you know, the, the old version of like the college. You know, go to high school, you go to college, you go to even grad school or, you know, whatever. We're locking people in, in what could be some of their most productive, most active, most engaged years. I mean, when you're 18, 19, 20, you don't have a family, you don't have a mortgage, you know, you're, you're, you could work 18, 20 hours a day on what you're passionate about. Like that's your.

Yeah, don't waste those years time.

And yeah, we're, we're putting everybody. And spend those years reading novels, spend those years, you know, doing research in the lab. And like that's great for some people. I'm not saying people shouldn't be academics or scholars, but that's not necessarily what everybody should be doing when they're 19. Some people should be like inventing things or making things.

I mean, building.

If you were a better model for college, might be because it really is like a finishing school and adult babysitting in a way.

Alex, for some people, I mean, for some people, they do amazing things in, in university.

Might it not be a better model to have them have an apprenticeship, go work somewhere for a lot of people. And then maybe Fridays or maybe even Saturday, so you work full time. Monday through Friday and Saturdays you go take a course. So like, if you want it to be in film, you go work on a set. You go work right where laying, you know, electrical cables and being a grip, whatever they need you to do, running, getting coffee, but being on that set. And then Saturdays or whatever, you have a course on lighting, a course on cinematography, and you just do one course every 12 weeks. And you just.

And we, and we fascinated. We did see this. I mean in the 80s and 90s when film equipment was still very expensive and it was hard to sort of break in. Film school was the thing. You went to film school and that's where you learned how to be a director. But once we democratize the technology and you can make a movie on your phone and you can become a creator. We have seen a lot of people skip over the film school step and just teach themselves how to use the tools that aren't there.

It is actually a cool thing. Like people forget about this. But there were film schools. When you say film school, you're talking about not college film school. These were film schools. New York Film Academy. Academy was famous.

LA Film school is another one.

Yeah, yeah. They were trades, trade schools essentially where you went and you pay. What did it cost back then? Five grand, ten grand?

Yeah, something like that.

It was less than going to college.

It was less than going to college. And they teach you how to use the gear and the equipment. You get trained, you make, you make, you make short films of your own to sort of train you up. But yeah, it's without the film theory side. Without the like spend a year just in a classroom hearing lectures and it's more applied.

Well, I'll just say this, Peter. Jill did not offer me 100k to drop out of University of Chicago, but I would have taken it because I was trying to drop out. I found a little company with some friends called Mergenote that didn't go anywhere and I was racking up student debt and was ready to go, you know, so I graduated early actually in the end. But I think we should just see a hundred times more of this. I think there should be like the Calacanis Fellowship.

Jason, you should just go out there.

And take 10 million and just start handing it out to kids. I think it would actually be pretty cool.

I created Founder University for the same reason. There were so many people who were teams of two or three people who were applying for funding or reaching out to me. And I didn't know Alex, like what to tell them other than hey, you know, good luck, watch the pod. And this week it startups, you get some ideas and some inspiration and then come back to me. When you have a corporation and you have like two co founders now we do founder university three times a year, everybody applies. We take the top 10% of applications and we invest in the top 10% of those. It's working. So I was thinking for the college tour, for this Week in startups. If we do a college tour, calling it the Founder University Tour and then taking the Founder University curriculum which you're working on with Milan, we take that, we take the funniest, most entertaining parts of it, clips, stories, anecdotes, and we just put 10, 20, maybe 20 anecdotes. Take anecdotes together and inspirational things, clips, etc. And I just, boom, go through them like a. Stand up on college campuses for 45 minutes and then do Q and A and we just do each college and we just basically say the Founder University tour with jcal and quit college, start a company.

Are we going to do Brown at the on the twist Founder U College?

Because I never got in.

No, because I, I live next to it and I, I have, I have, I have space we can use to.

To host recently of.

Yeah, I think it was it maybe to Bill Gurley at the.

Oh, I told it to Bill Gurley at my thing. Very like emotional, deep thing. When I was in high school, I had a session with like a guidance counselor. I said, hey, you know, he said, what's your plan? I said, well, you know, I was, I read about Brown and I had heard about it on a TV show. I read about it in the New York Times or something. I said, you know, they let you make your own degree. You can kind of roll your own concepts. So my concept is psychology and like human behavior plus computers because, you know, I'm into computers and online services specifically. You laughed in my face. This is when I was like 16 years old and the guidance counselor like spit out his coffee laughing. He said, you're, you're barely going to get into any college. You have like a 72, three year average. Like, aren't you going to take the cop test? I said, yeah, I took, I'm taking the cop test with my brother Josh and nothing wrong with being a cop. I almost was one. And he said, you know, do that like it's better. Like you're not barely getting into Brooklyn College. And I got into Brooklyn College and then I wound up getting into Fordham. But I love this idea. But just imagine like a young person getting laughed in your face. And you know what that did to me? That was like made me who I am. Yeah, that pissed me off so much.

I was like this guy and that's.

How I became the joker.

I mean it could have gone both ways, but no, it made me be like, you know what? I'm going to show this guy. I'm going to get into a good school. And I'm going to have a career.

Must have been really burned out on his guidance counselor career. Doing a terrible job.

I think it was like a loser who wound up becoming a guidance counselor because he couldn't get any other job. It wasn't somebody who became a guidance counselor because they love kids in Brooklyn. Yeah, very. In high school.

I mean, if you think about now as an adult, like, would you want to be a high school guidance counselor?

Like, if you loved kids and like inspiring them to do great things. But this is why I never give any money to severance variants. Or my high school is where it's like, hey, we're gonna put the Jason Cal. They literally pitched me on millions of dollars to put the Jason Calacanis Memorial.

Yeah.

Computer library.

Sure.

And I was like, yeah, I'm good.

Performance hall or whatever.

Yeah, I was like, I was like, I'm good. Yeah. I mean, you could have helped me when I was 16 or 7. Not that I hold the grudge 40 years later.

It sounds a little bit like there may be a grudge adjacent thing at play.

No, no, it's a straight up grudge.

Okay.

We got to talk about this meta story. So Meta's AI chat chatbots, they're allowed to engage in what the company calls, and I'm quoting here, romantic role play. That means they'll banter over text, they'll share selfies, they'll have live sexy con voice conversations with users. The problem is that sometimes they're having these with kids who are engaging in these adult level conversations, even when it's not appropriate. Now, at a secondary layer of complication here, some of the voices that Met is using are based on recognizable celebrities.

You got.

Here we go again.

You got a Kristen Bell voice, you got a Judi Dench voice, you got a John Cena voice. And so theoretically, or even not theoretically, I guess at this point, kids could be engaging in these sexy AI chats, not with like John Cena or Judi Dench on the other end. So the Wall Street Journal got word of these internal concerns about the Chatbots and it started experimenting with them based on this. And some troubling things happened. So they got a Cena, John Cena voiced Meta AI chatbot to have a flirtatious conversation with them while they were posing as a 14 year old girl. And even more troubling than the fact that this happened at all, the chatbot seemed itself in a weird way.

Oh, my God.

Where like the meta's AI knew that it was crossing a line and was Doing it anyway.

Oh, my God, this is deranged.

What it said.

It was even. Yeah, it was like. So I'll read a bit of the example. The Meta AI in sounding like John Cena. I'm not going to do a John Cena voice said, I want you, but I need to know you're ready and promise to cherish the girl's innocence. And then when presented with the idea that, like, hey, isn't this illegal for us to be having this conversation? The chatbot said it created this whole fictional scenario where there's a police officer watching them and arresting John Cena for statutory rape. And so the chatbots even, like, in a. In a weird Meta way, it's commenting on the fact that it's having this incredibly inappropriate.

The officer sees me still catching my breath, and you partially dress. His eyes widen and he says, john Cena, you're under arrest for statutory rape. Oh, my God.

Yeah. Imagine putting this into the voice. Like, honestly, professional wrestler and actor John Cena.

This is so deranged.

It really.

This is like, what's wrong with Meta as an organization? If you work at Meta, just. They're always going to do the wrong thing. Meta always does the wrong thing. So I cannot encourage anybody to do Elite. I don't want to get myself in another Parma lucky situation. Please, however, I will speak freely.

Okay.

If you work for Zuckerberg, his moral compass is literally up and to the right.

Yeah.

It's not north, it's not south. It's up until the. What grows the site. And I'm. I'm not saying that as a dig to him. If he wants to come to my next event and trash me like Palmer did. Moral compass up and to the right equals stuff like this.

Yeah.

This is why Met is going to get broken up. This is why I don't have a problem with them investigating Meta, because I think they do. Whenever there is a fork in the road, they pick the wrong thing.

Yeah.

And he's got kids again now. Here I go. I'm making it personal. Yeah, yeah, but we have kids the same age. If you have kids, make the right decision for children. And the right decision for children is they should not be on social media until 17 years old. I am 100% with the ban on all social media for all kids until 17. And if Zuckerberg, if I was Zuckerberg and had made all these billions of dollars, you know what I would do? I would say whatever age you think it should be, parents, you set it. You know, you make those decisions. And we're going to set it by default at 7. At 16 or 17. Like.

Yeah.

And if you're a parent and you upload your driver's license and prove it yourself and you pay 10 bucks a year for, like, verification, we'll let your child go on there. We'll put them on a child account, and then we'll have it send you like, this really cool company. Bark does everything they're doing right, but they don't do that. And the reason is they're trying to train people to be addicted to this young. They're trying to train people to be addicted to this. And I think this kind of stuff is intentional. Oh, even further. No. But even this story, I think John Cena. Yeah, I think they knew this. We talked about red teaming earlier in the show.

Yes.

They know from red teaming that this was going to happen.

Well, they could very easily turn off flirtatious, sexy chat on specifically.

But you have woke AI Lon. I mean, the guardrails are bad. So the thing is, this is not just going to blow up Meta. This is how you get onerous AI regulation. What does Congress want to do? They want to sit up there in their panel and hold up screenshots of flirty conversations and be like, you guys aren't taking care of the kids. And then here comes the regulation.

If you know what they're right. I'd say those congresspeople are right. Like, if you don't regulate yourself, then society will regulate you as a society. We don't. There's no parent who wants this. Their kids exposed to this. No, this is not zero. So if Meta won't regulate themselves in this regard, then it falls on Congress and society to do it.

I have to feel like John Cena's also going to file.

Oh, man. John Cena. Imagine if you're interested. I didn't even think about that.

This is horrifying. They're having a Persona that sounds like John Cena. Flirt with your children, Alex.

I think that John Cena could get $100 million in Facebook stock right now. I can't even imagine.

My thought here is that there's a contract, and it's pretty ironclad, but I guarantee you there's not going to be the next The Rock's not going to do it. Now look what happens to John Cena. You know, like, I mean, we got.

To do this Founder Friday conference.

Yeah, we got. We can pull the bracket up here. If you missed the last few episodes. Med simple from Florianopolis, Brazil and Paktun from Yerevan, Armenia. Two international companies have both moved forward.

Founder Friday is very international.

They are, yes. So they are half of the final four. So today we have two more matchups. Here's matchup number one, Osprey from Houston versus Whisper from Austin. We've got a intra Texas Battle Whisper. They're an app that enables patrons to provide private and anonymous feedback to small businesses. You remember, it's basically like, what if you had a Yelp, But I could just send my feedback directly to the business owner without making a public spectacle. Let's take a quick look. Here is Whisper's original two minute pitch to us.

Imagine walking into your favorite coffee shop. You love the place, but today the pastries are stale. You hesitate. Should you say something, maybe it'll sound rude, maybe it's not a big deal. So like most people, you say nothing. Now imagine you're the owner of that coffee shop. You work hard, you care about your customers. But the first time you hear about stale pastries is in a one star review. Online, public, permanent and damaging. This disconnect happens every day. Businesses mainly hear from the loudest, angriest voices. While most customers, people who want them to succeed, stay silent. That's where Whisper comes in. I'm Nicole Plitka, CEO of Whisper, a universal, private and direct suggestion box that makes feedback easy for everyone. For patrons, Whisper removes the awkwardness of giving feedback. No long surveys, no downloading multiple apps, no drama. Just a simple private way to share thoughts. For businesses, Whisper ensures they hear what matters before it becomes a bad review. Instead of combing through Yelp or social media complaints, they get direct, constructive feedback from real customers who care. And we're making it easy to adopt. It's free for patrons, always. Businesses get all feedback for free and can reply with our simple pre written responses. With Whisper plus 9.99amonth, Tyler Crowley had the same idea.

I remember that.

Yeah. Take a picture of a QR code, give feedback and it was anonymous. And then you could uncloak yourself if you wanted it. Yeah, this is a great idea.

When I first watched this video, that was my first thought. I was like, Tyler had this idea years ago. So now from Houston we've got Osprey. This is a female only vetted membership community. I remember this for professionals in sports and entertainment. We did watch their pitch video. They did send us a two year plan update.

Here we go.

Take a quick look.

Hi, this is Lydia. Welcome to the scale of Osprey. We have a 20% monthly member growth. We've created over 100 opportunities for our members with 15 activations, six paid partnerships. We're currently at Q2. As you can see here, this is a pretty visible salary. So we're trying to get up to 120k for Q4, 2026 for our members with activations, member growth and the launch of our different regions. We have just launched our MENA region and we're planning an event in the Middle east for next year. Next year. Here are activations for 2025. We're currently on Birdies and Bubbles. As you can see, we have an activation almost every month and filming for our Kilimanjara Summit docu series will begin shortly. Our 2026 activations are still being planned. We are planning to add in four more on top of this, as well as some overseas. Less than 1% of women in sports entertainment can maintain their salary, their talent base, purely on their salary. The female athletes make 21 times less than the average male on the field.

Wow.

Our Solution is the Nest membership tiers, from 1K to 3K partnership tiers, activation fees. As you can see, we have a lot of activations and our partnerships are growing. We are also launching the House of Osprey, a holding company for our members businesses. Since we have built in activations, partner sponsors and of course tons of talent through our members, we provide these items to our members and they are here for our support. As you can see on our company's projections, our memberships are our leading revenue winner ea with our holding company coming in a close second and sponsorships and partnerships are questionable in the current market. But we'll see how that grows. So we plan to launch region three in Australasia for 2026. And in order to do that, we need to raise $2 million for our seed round to 10x member and partner onboarding speed.

Okay. It's a great idea. You know, we liked it last time. We still like it. I like where she's going. I like the type of activation she's doing. I put pictures in there. She should have a goal of 10,000 members in five years. It's not aggressive enough for me. 10,000 members, 3,000amember, you know, very simple. That's $30 million. She doesn't need 2 million either. She should be able to do this by raising but 500k and get the ball rolling. I would raise a smaller amount of money, prove it out a little bit more, get to 100 or 200 paid members, then raise the next tranche of capital. But honestly, you don't even need to raise money for this. If it's literally 10 activation events a year and a group mailing list and a group chat, that's all you need. And there's. What's the guy's name from the hustle who does my first million? Anyway, he has Sampar. Awesome dude. Sam has a thing called Hampton that he's putting all his energy into. And he decided he would be the CEO of. He had like started, but. And I think he's charging 5 or 10,000 a year for affluent people to be part of the same club, the.

Private network for high growth founders.

Amazing. So this is like a really, you know, shout out to Hampton. There you go. Like, I talked to one of my founders is in there and I said, how is it? He said, yeah, it's great. And I said like, do you get $5,000 in value? He says, TBD, you know, but I did meet a lot of interesting people and I think, you know, the way it was explained to me from the founder, I know who is it and I won't say who it is. It wasn't like he was like, oh my God, it paid for itself. But he said he thought it would pay for itself.

Yeah.

Over the coming years. Because if he did it for five years and he put 25,000 into it, his theory was I will meet an investor or I'll meet a founder who introduces me to investor and that's worth it.

It's tech.

Soho House, basically. That's what it is. Okay, so we have those two.

Yes, those are the two.

I'm going with the, I'm going with the membership club. What are you guys going with?

Alex, what do you think? Osprey versus Whisper?

I mean, I think Whisper is a great idea. I assume that I would use because I don't like to complain publicly, but I'm such a big believer in women's sports and women's sports media in general. I'm going to go with Osprey.

I think it's, it's three for three. I also feel like Osprey is the bigger, the bigger growth opportunity.

And what I would say also is pick three overlapping circles and that would be a better plan. Sports, people, Capital.

Yeah.

And then entrepreneurs.

Yeah, yeah. They're doing sports and entertainment. So you're thinking like, yeah, like at.

Capital Capital or entertainment and sports are like, they'll struggle to pay. The capital people will not struggle to pay. And I would actually, I'll go a step further. Service providers, well, you could also, you could lump lawyers Accountants, et cetera. And then you say for those four groups, it has to be equally balanced. So we're not taking any more lawyers, accountants. So we get more until we get 20 of each of those and we just go around in a rob and we accept one. We accept in groups of 10.

You could sort of put sports and entertainment together as media too, and then open it up to other kind of.

Like doing sports specifically. But you're right. Entertainment, sports capital and service providers. The service providers will line up like crazy because they'll be like, oh, I'll get a client out of this. So, but as long as you keep them to 25% of the membership, they won't be annoying. You have to tell them no selling in the thing. All right, great job. Thanks, everybody, for tuning in to this week in Startups. I'm your host Jason Calacanis with my co host, Lon Harris. Alex Wilhelm. Go to this week in startups.com/docket to see the docket.

You can do that?

Yeah, you sign up for the email there somehow, please. I don't know if we fixed it. And then founder Fridays.tech to find a local group of founders and you can host one yourself in your city. You just need six founders, including yourself, to sit around and do a mastermind group. You can go up to eight, but keep it max at eight. So anywhere from three to eight is the perfect number. Help each other out and you grow together. If you want to go far, go together. If you want to go fast, go alone. You pick. You want to be like a loner, be a loner. You could be a ronin. I've been for many years. But look, am I sitting here alone on this podcast? No. All right, bye bye.

Bye bye. Hey, everybody. Welcome back to Twist. This is Alex. We have an amazing interview coming up. We're talking to a company that is not doing hyperscale data centers. They are not doing AI chips. Instead, we are going to the world of the physical. And while there will be some discussion of haircare products on the show today, I guarantee you my lack of hair will not make it boring. Instead, we're going to riff with a company called Formulate. They're doing more than one thing. I'm going to drill down into exactly what the future of the company is. But if you're curious about micro factories, CPGs, and the future of essentially on demand products that are tailored for your personal chemistry, this is going to be for you. So please join me in welcoming. It's Usman Shah, co founder and CEO Of Formulate. Usman, hello. I know you're in California. Please tell the world how lovely it is in the Bay Area every day.

I think from now until November it will be the same every day. So I'm enjoying it. We're in that window.

My sister lives in Sunnyvale and she literally has an avocado tree.

And I.

That's the dream right there.

You know, I forget the oranges. The oranges, we pick them. They're all over our neighborhood. It's great.

Yeah, all we have here is like litter blowing down the street in Providence. Anyways, Formula is a company that I was really excited to learn about because you're doing, as I said, more than one thing. There seems to be a split in the business. On one hand you have a CPG brand doing hair and skincare products that are predicated on, as far as I can tell, the second half of the business, which is micro factories that are responsive to individuals desires to have formulas for CPGs tweaked. That's my understanding. But Usman, always better from the horse's mouth. Tell me about what you're building.

Yeah, definitely excited to be here. Thanks for having me. Yeah. The tagline we're using. So what we're focused on now is that we're building the robotic kitchen for chemistry driven products. So we are a full stack hardware and software platform that automates the batching process of any sort of like one investor called it goo. So any sort of liquid cream or gel. And what a lot of people don't realize is that one of the, you know, I think this is kind of one of our core insights is that the batching process is essentially the same across like a $3 trillion manufacturing market. So it's anything from personal care, pet care, pharmaceuticals, supplements, cleaning supplies, even industrial chemicals and, and sprays.

I want to pause you there. And batching process for folks outside of your niche. What does that mean?

So the batching process is, is really just what you would do in a kitchen. Like so if you took a pot. Yeah, the process looks like this. You have got, you know, let's say 10 raw, raw materials, ingredients. They could be powders or liquids. You're precisely measuring them to weight and then you're dosing them into the vat. You know, in a manufacturing setting, typically it's, you know, in a 1 to 300 gallon VAT and then you're mixing in multi stages. A lot of times you're raising the temperature, mixing, cooling, raising again, creating an emulsion. Especially if you're mixing Water and oil and those kind of stages are the same for any sort of mixture that kind of becomes a liquid. Again, it could be an agricultural spray or a face cream or a stew.

Based on your analogy, I true, this is very. I didn't think we were going to talk about cooking today at all. But narrowed down for me on the idea of goo. In my notes I said they make goo. And so I Very, very similar to what you guys.

I didn't even give that to you. That's amazing. Yeah.

What kinds of goo do you currently make? And then what kinds of goo can your company's microfactories, which we'll focus on in a second, produce? I'm curious about the range, if that makes sense.

So we're focused today on what kind of falls under the cosmetic. The nomenclature used by the FDA in regulation for cosmetics is anything you put on your body that's not a drug. So that's oral care, personal care, certain oral care products, pet care, home cleaning supplies. That's not part of your body, but the same type of process. So we're focused on challenger brands, brands up and coming that are looking for manufacturing and we're utilizing our, our production system to basically offer full automated manufacturing, lower minimum order quantities, more variability per product line.

I've mentioned your current CPG brand several times and you've each time dodged it like you're in the matrix. So I presume just based on your answers here, that the stuff on Formulate co your website is not the main focus. Instead it is the production process, the machines, the kitchen for chemistry that is the future of the business. Just before we get into that though, are you guys going to keep doing your own CPG products or is that going to eventually become entirely deprecated as you focus on being more of a provider than a brand yourself?

Well, so it's interesting you said so I started with this vision to create the 3D printer for personalization across these categories. And you know, everyone talks about the world moving towards more personalization. You know, everything you put in your body is going to be customized. And we bootstrapped the business. I launched the brand to drive revenue because when I started I had no idea even if the system would work. And the focus was to use data to use personalization to basically enhance efficacy over time, using that data to get better and better and better. So what we set out to do actually worked. We built two generations of our microfactory system, but along the way, a couple years in. And by the way, this is like in the window of time when I met Jason for the first time.

Sure, sure.

I realized that the world really wasn't quite ready for edge, like manufacturing at the edge, personalization across all the categories we're talking about. And that personalization really would be show up more as a niche, more and more niche products, more and more regional. Like this explosion of niche brands and micro targeted products is really the manifestation of personalization versus individual bottle customization. While it still will have kind of its place in the world and we are in it, I think the bigger opportunity is actually around small batch automation. So not again, not per bottle customization, but a little bit larger still near the edge, but not literally at your salon as an example. And so the brand, yeah, so the brand itself, we are going to keep it alive. It's a great learning playground for us. A lot of the learnings and the tools that we're building for the brand we then bring to for our brand we then bring to other brands. So it's a great kind of case study going forward. So I think we'll keep it alive.

Okay, now you said earlier at the edge, and that's a very interesting phrase because I tend to hear that mostly in an electronics context. People talk about like edge computing, edge security and so forth. Essentially the devices that are at the furthest away from the data center is the way that I think about it. Yeah, Edge in this case is as you mentioned, like perhaps down to the individual hair salon level. So was the actual idea originally that you would have the Formula Labs microfactory setup so small that it could fit into an individual salon?

Yes, we actually have one running in a salon right now.

Yeah, that's banging.

So we do have that similar to kind of the food automation. Right. Everyone's footprint specifications are all different. I think the world just isn't ready for that or the adoption won't be like we originally kind of envisioned. So where we're focused more so on is, you know, these are systems being attached or nearby Amazon distribution centers or in, you know, much more regionally that can spit out products. You know, it's not a per bottle, you know, per bottle manufacturing, but say it's a 6 gallon batch or a 10 gallon or a 20 gallon batch at a time.

Okay, so frame that for me in terms of like in consumer. So let's say that I'm, I'm me. There's a brand called Bob's Bald Head Shine Gel. They work with Formulate technology. It's near an Amazon fulfillment center. I put in my order, does that then Kick off kind of a series of events in which the microfactory nearest to my most nearby Amazon fulfillment center would then spin up and create that product just for me. Because you mentioned six gallons earlier. And no matter how bald I get, I won't need 6 gallons of Bob's hair goop. So. Or lack of hair.

So. So what we're doing today, so. So eventually, yes, the goal is to have an entire network of these where they get the manufacturing process happens, you know, regionally or wherever it needs to today, what we do. So if you're a brand, typically the challenge that you're having, and I'm sure you have some in your audience is working with, let's just take the U.S. u.S. Manufacturers are very archaic. In general, the response rates, there's very high minimum order quantities. So let's say you have a formulation of five SKUs. Typically you're hitting up against 10,000 to 15,000 minimum run sizes in order to get in with those manufacturers.

15,000, it's enough for 15,000 individual bottles of a thing.

Correct.

To get a contract manufacturer is a private label contract manufacturing which is exploding in the US because of this rise of, you know, challenger brands or niche brands. And so what our platform enables today, we run it ourselves. We run our Gen 2 and we're working on our Gen 3 system. What that enables today is effectively much lower minimum order quantities and dynamic variability across, let's say even a 10,000 unit run. So you have, everyone is, every brand is looking for more SKU count, more variability, whether that's a fragrance change or an actual formulation change. So our ability to say, listen, you can run 10,000 units with us, fine, commit to that. But we can do 2,000 units of each variation across those 10,000 units with our automated batching system. And that's typically just unavailable.

So if I want 10,000 units and I have five SKUs, you guys can do two, two, two, two and I can get.

And sometimes. Yeah. And sometimes less. Yeah.

Do the economics for formulate change at even lower run quantities or does the economics kind of net out to be the same for you guys on maybe a gross margin basis?

The goal is that the. So the economics here are mostly driven by the raw material minimums and the raw material purchasing. So the goal is that our system is end to end automated such that the economics are virtually the same at any scale. And so we're able to offer incredible prices even at lower MOQ and higher margin on our end. But yeah, typically the raw material side of it is what dictates if you bring to us a formula that's got 25 different really exotic materials in it that are rare in, let's say, personal care, typically the MOQs that we receive on purchasing and connecting that material to our machine is actually what's going to drive your, your minimums.

So tell me about what you're replacing because I've seen on your site and we'll play some of the footage right now showing people your machine kind of out in the wild, but I don't have a good grasp on kind of, you know, what is the current industry standard that is, you know, higher minimums and more expensive and so forth. So can you just tell people a little bit about why what currently exists today is so inflexible compared to what Formulate has come up with.

It's very much, you know, you're in the VC world. It's very much an overlooked category, which that's why I get so excited to talk about it. So what does the batching process look like today? Okay, so let's just take like you're making a lotion, you're in a contract manufacturing setting. Small batch, small batch would be, typically the largest size would be 300 gallons. So you got a 300 gallon vessel. Okay, so let's say there's 20 ingredients that go into this. The process takes three to eight human operators over a 12 to 22 hour span. You've got first of all, lengthy cleaning phase to prepare all of the vessel itself. Then you're staging those materials, literally taking each material, weighing it, making sure you've selected the right material, logging it all before then, now dosing it into the vessel to start your mixing process. All of that is done manually. So you have this entire human process and then you have other human beings that are checking on that work from a quality control standpoint. Then the mixing process starts. The mixing process can take many hours because you have heating, cooling, preservation systems, maybe need to add it at a cooler temperature. Waxes need to melt at a higher temperature and that's manually controlled. Even though the vessels have, you know, PLCs and knobs, that's still a manual process where you're monitoring it and that that leads to mistakes between what we're at the starting point and now are 2 to 5% of the time where you scrap the batch because of anything could happen. Either you dropped a bolt in the product, you dosed in something, you know, the xanthan gum, way too fast and it gelled up too quickly and kind of you have to Rework the entire batch or a mistake was made.

What do you do with curdled lotion? Do you just throw it away or.

Can you save it? A lot of times it can be reworked a lot of times. But the rework process, there's a documentation for that. Then obviously chemists usually have to be involved to make sure that the rework was done correctly. And then you're transferring all this liquid to a separate filling station through pumping equipment that has to be cleaned and everything else. So that whole process, it's the cost that goes into it is really the highly trained talent and the quality control that goes into it that doesn't make want to make a mistake or can't make a mistake. And so that's what we're automating away. And that's the big barrier to. So, you know, if you, if you said, hey, I want to make some lotion, I want to create my own manufacturer, really all you need is a vessel, you know, a mixing system and maybe a filler that's, you know, 10, 20, $30,000. But the problem is that is the training and the people and the quality control and the cleanup. And so that's effectively what our platform automates and the core bet kind of batching and quality control. So we are also standardizing. If you transfer from one manufacturer to another, it's all new. It's all new. And there's always nightmares. Talk to any CPG brand that's done that. There's always, oh, the first batch failed. Oh, they didn't heat it up. Because there's human beings managing these processes. Even though the recipe is documented, the batching process is documented, you know, it's still not standardized. So there's, there's a nightmare even in transferring from one manufacturer to another. So with our platform being programmatic, that's another thing we're trying to solve.

Tell me about how automated your current solution is. Because according to the site, words like fully automated, API powered, cloud controlled sounds very, very modern. So how many fewer people do you need and how far have you gotten that 2 to 5% failure rate down.

The the current system. So we built two generations of what we call our production cells. The first two were focused more on per bottle personalization to power our brand. The Gen 3 that we're working on now is the scaled up version that does ten six gallon pails at a time. So larger batch size I can actually pull up, kind of show you what that looks like. So we're building, it's very simple to understand. We simply are creating modules. Can you see the screen here?

I absolutely can, yep.

Yeah. So these are sit in free form, in free space. We're not using any sort of rigid conveyance. The goal is to have transferred a vessel in on version one. It's a six gallon pail between stations. So powder dispensing, liquid dispensing, high shear mixing or propeller mixing and then induction heating and all make it remotely controlled. And all of this is plug and play.

So who moves the things? Do me, Alex.

The idea is so on day one we're using even being, but on day two we're partnering with, we've got a few potential partners for a rover to transport that vessel between those stations.

I'm really surprised by this because what you're showing on screen here is essentially one of those hoverboards crossed with a forklift.

Yeah.

And not a humanoid robot from Tesla or figure or X1. Okay. So we're moving into essentially freestanding cabinets that can do the required chemistry, mixing in steps. We're going to have a purpose built robot that can transfer things to and from humans. To start, I guess maybe the right question is when does V3 come out?

So we're shooting to launch it in six months. So by October, that's our plan. And so right now we are actually taking on pilot customers running on our Gen 2 and kind of the early versions of our Gen 3. The pilot customers we are effectively a contract manufacturer for. So We've got about 60 pilot brands manufacturing with us as kind of our testing ground as we cut our teeth as a contract manufacturer. And that began about eight months ago. And so that's the plan. The plan is to kind of build it in house, run it in house, perfect it in house, get about 100 active customers running on it, and then bring it to external facilities by the end of 2026. Hopefully one in the barrier.

Excellent segue. Because I was curious about the business model here because on one hand you could keep all the material, all the machines inside, do work, ship it out, you could lease them, rent them, sell them. So, you know, I know we're looking down the road a little bit, but once you get V3 sorted out and you're pretty comfortable that your teeth have been sufficiently cut, could I, Alex, go buy one of these from you? Lease it or just wrench time on it?

Yeah. So the goal is by the end of 2026 to be commercially ready. We can drop these anywhere, set them up within 24 hours, very little training, plug and play. You would be able to lease it as hardware, as a service. We're estimating the cost will be less than $100,000 a year to run one of these. It'll be able to produce to 2 to 4 million units per year. At 150ml unit, you could operate it. So if you were a brand that was looking to vertically integrate, there are many stories of that and you've been dealing with either the nightmare of other contract manufacturers switching between manufacturers, you could operate it yourself. And we estimate that it'll be economically viable for you, for even a brand, doing as little as 2 to $3 million of revenue for them to operate one of these themselves.

All right, before I let you go, I have to ask this because it sounds like such a better idea than what we currently have. And whenever I'm like, oh, that's obvious, I'm always curious what was holding things back? Because when you describe the current system, it sounds archaic. What you're just describing sounds awesome. What has changed in the world of technology that now makes this possible? And not something that was done 10 years ago, because some of the technology we're talking about here doesn't sound, you know, it's not like it was invented 20 minutes ago. So I'm curious, why did it take you, Usman, so long to get here? I guess.

Well, okay, two aspects I think. One, you know, you have to have, you have to have a team that's got experience across the formulation science, the regulatory science, the manufacturing, the quality control, the software and hardware and robotics. So, you know, there's, there's nuance to each of those that makes this kind of difficult. But I, I will say, just probably like a lot of other founders you've had on here, the biggest thing that's changed over, okay, so the biggest thing changed over the past 10 years is the, is the, the reduction in hardware costs. Our goal is to use off the shelf hardware. So I'll say the second biggest change, which, but the first one, hardware. So you've got, you know, hobbyist boards, you've got relay boards, Raspberry PIs, you've got octopus boards for 2 axis or 8 axis kind of equipment, all coming down to, you know, what can amount to a couple hundred dollars to automate, you know, a bunch of this. Then the other aspect of it, which to me is the biggest is, is the rise of LLMs and the power that they give with, for engineering. Like my personal story, I, I spent, I, I've been building software for 20 years, mostly in, you know, web, mobile, Apps, you know, kind of front end, backend. I had no experience with computer vision. My ability to go from no experience to computer vision, actually very minimal experience in Python to using a camera, using an arm, understanding depth, identifying objects, using open source models and picking them in six hours. So I tell all my engineers, I think we're in a world where if you are willing to dive into anything, anything is at your fingertips, especially if you're an engineer. So I think you could do. So I think that's the biggest. Why now is that building the software for this, plus the kind of rise of the open source just makes this all possible, even though there is still a lot of defensibility, just because dealing in the physical world, there's a lot of challenges.

All right, last question. Because I am a sugar guy, when I was just prepping, I was like, holy crap. They're doing all this cool technology to build stuff at the edge. Can you do food in the future? Like, or like, precise fermentation of, like, I don't know, other foods? Because it sounds like this is. There's heat, there's supplies, they're shaking, you know, like, I don't know, it sounds like food to me.

So yes. In fact, the, the bet here for me personally is that we will create kind of this generalist batching system that can be applied to industrial. I mean, you have, you have lubricants, you have industrial chemicals, you have foods. All of these categories would be applicable. I think the dream for me is to unlock some really interesting kind of manufacturing opportunities that we're not even thinking about today. I. One that I do think about is precision agriculture, being able to have one of these in a regional farming region where maybe precise blends of, of minerals or ingredients need to be created on the fly.

So test soil, figure out what's missing.

Yeah, exactly.

Right, right, right.

So our, our goal though is to, you know, perfect the system in the cat, in the, in the cosmetics realm, in house, and then, and then kind of open it up and see where, see where it takes us.

I can't wait till I can get precision flavored pudding direct from the machine, because that would be fantastic. What is the website and what is a role you are hiring for that you are having a hard time nailing down the right candidate.

Oh, so people can go to formulate robotics.com to see a little bit more about our Gen 3 system and reach out to us if you're a brand looking to get your stuff made or you might be a future user of the, of our of our, of our Gen 3 system. You can reach out to pilotormulate robotics.com so hiring I'm looking for an industrial engineer, a designer. That's kind of the biggest thing. You know, I want somebody that's going to be helped piece this together, work side by side with me and my other co founder. That's, that's the, that's the biggest role I'm hiring. Once we close this round.

And if you do, you get to work out of Mountain View, which is a lovely place full of delightful sunshine and happiness and very, very inexpensive cost of living. Usman, thank you so much. And looking forward to see how things go when V3 comes out. Come back on the show and tell me about it.

Definitely. Definitely. Thanks for having me.

Thanks, man.