Rippling Targets $16B, Market Chaos, TikTok Timeout, and Office Hours | E2107

What this means is all the independents, all the moderates, let's call them Clinton Democrats, you know, business people who quickly bent the knee to kind of smooth things over with Trump. You know, those people were kind of doing that in a very pragmatic way. Mark Zuckerberg being probably the ultimate example of it. Right. He bought a house in D.C. now he banned Trump from reaching billions of people and that now he's all in on Trump. I think those folks, if this becomes cataclysmic and it's affecting their business, they could be pragmatic and say, you know what, maybe we should have more balance in the other, you know, arms of government. And maybe tariffs shouldn't be done by emergency edict, which I think is how they're being executed now. And they should be done through the Congress. And of course, there are people doing that. So all this chaos for startups means fundraising is going to get harder. Selling into customers, especially like Fortune 500s, is going to be harder. There will be only one thing that's easier. Can you guess?

I was going to say hiring, because there's going to be more people. Ah, yes. Nailed it.

It's going to be easier to hire people. So look for the purple hiring rings on LinkedIn. It's my best advice.

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All right, everybody, welcome back to American Independence Week here on this week in startups and globally. It's Friday, April 4th, and the stock market at the time of this recording is now down 20% since Trump's inauguration. I believe the Nasdaq's down 20. Some of the other indices are down probably low double digits. So I don't know, 12, 15, 20%. I'm not sure if that's even from the peak of the Trump bump, But just from January 20, I was looking at it and this is a very unique moment in time, I think you would agree, Alex because you and I study markets and you're not to make any of this political. But I can't find people outside of the administration who thinks that this tariff thing was either well executed or is a good idea. And I've asked on Twitter, I said, please, is there somebody out there? Yeah, I mean, I understand the justifications people are doing inside the administration. I saw the different interviews my friends at all and did when they were there. You know, that's kind of the bubble, right? Let's be honest, let's call it what it is. If you're a major donor, if you're part of the administration, if you're in there, you know, they're lockstep, as they should be. The Biden administration was lockstep, Obama administration. You don't want dissent from inside the House second guessing stuff. That's just not how business works or government specifically. Politics does not work that way. These political parties really like to be lockstep. But my Lord, I've never seen a situation where something so important, dramatic, consequential, has been done with so many different versions of what's happening and interpretations of it. I don't know what's your, what's your read on this and any data points you want to bring to, to bear here?

Let's start with a couple data points and then I'll dive into some other stuff. Cloud stocks that we track via the Bessemer cloud index, trades under WCLD are off 30% from recent highs, Jason. So that's, you know, 10% a correction, 20%'s a bare market. 30%. I don't think we have an actual word for other than catastrophe. And for folks out there who are curious, why do we care about kind of a sub index of the technology world? Well, a of lot, lot of startups are effectively cloud companies and so this is an index they trade against. It's kind of a comp for them. So if it goes down, harder to exit. Each Magnificent Seven company fell under the $3 trillion mark that was above it. So that's kind of just kind of makes you feel bad, Jason. Now on the point of who is defending this, I read your tweet and I, I read through a good number of the responses. I did see one person who we like and it's Anthony Pompliano.

Okay, well, I mean he's no finance expert, but he is a crypto expert and I think he. Let me just give us the bullet points of his justification for it or why he thinks it's brilliant.

He's been saying that it's already working. I didn't actually. I have not read enough of his stuff lately to dig deep into his viewpoint, but he has been consistently beating the drum in favor of tariffs as an American policy point for weeks, if not months now. He actually said in his response to Jason that I'm not very notable, but I really do think that this is. I'm tempted to have him on the show. He offered to come on. I'm tempted to just to bring them on next week, just be for himself.

You'll be able to have him come on and see what he thinks of it, especially given that it's caused so much chaos amongst the most elite finance people on the planet, of which I'm in a number of group chats with and friendly with. The consensus is if there is a strategy here, it's been incredibly poorly communicated. Yep. And executed.

Yep.

And that if the strategy is this 4D chess that I think the administration has outlined and you can just take them at their word. Trump has been planning to do this since, you know, the 80s or 90s. He's been very consistent about tariffs, that this is a grand negotiation. So chaos is the desired outcome. That is where a number of people have landed. He's trying to create market turmoil. He's trying to get the Fed to cut rates next. And then he wants to get this 10 year down below a 4, handle 4% so they can refinance $9 trillion. And then he will relent after they do that, and then the stock market will come roaring back in time for the midterms. But Ben Shapiro was on all in this week and he was like, they're going to lose the midterms. This is incredibly unpopular. If you do something this seismic to the stock market, all that people are going to remember is the result of it. Right. And nobody. And listen, the reason Biden lost, I think most people, or I should say Kamala lost. But the overriding. Yeah, the overriding criticism was inflation. Inflation, inflation. Well, get ready, folks. Inflation 1.0 is challenging. I mean, I don't know what happens to an iPhone or a pair of sneakers if you have to make them here.

Well, the market has an opinion about that. Jason, did you see what happened to Nike's stock in the last couple of days?

Tell me. I mean, I did see the Restoration Hardware and I shared a clip. Basically. Restoration Hardware was on an earnings call and when they told him how down his stock was, I think this must have occurred Wednesday night if it was after the market.

All right.

Was down 25%. Take a list in this race. And I like, where's our stock now? I mean, I guess, I guess, yeah, the stock went down, you know, based on some of the numbers we reported. And then it got killed because of. Oh, really? Oh, okay.

So first of all, what's rule one when you go on television, Jason?

I mean, you're not supposed to say, you know, there's a selection of words.

There's a very small selection of words. So I bring that up not to be funny, but because that goes to show how Gary Friedman, clearly someone who does call into television quite often.

Well, actually, I don't think that was a call. And I think that was his earnings call.

Oh, that was actually on the earnings call.

That was the earnings call. Well, that's worse. This is the, you know, Carl Cantonia shout out to my friend over at cnbc. This is them replaying his literal earnings call. And, you know, the background here is where does Restoration Hardware make furniture? We really don't make furniture in the United States. I hate to break it to folks, but there are places, Vietnam, India, Indonesia, Pakistan, lots of places where furniture is made at scale, at incredibly high rates, low labor costs and low inputs and lumber and, you know, fabrics that are cheap made in mills there for jobs. Let's face it, with 4% unemployment here in the United States, we probably don't have the scale and the number of people to work in that factory and make your sofa, your couch, your side tables. You know, it's going to the lowest cost place in the world. As you know, free markets tend to do so.

Comparative advantage. Jason, it turns out it's a great thing in international trade to allow us to be richer. Now, I do want to make one more point about the. Who's in favor of this? I was going back through YouTube clips of Milton Friedman and he had a funny point. He says, you know, if you get two economists together, they'll always give you three opinions, so don't ask them any questions. But he said the only thing that economists can, generally speaking, agree on, like the point of consensus, is that free trade is good and trade barriers are bad and tariffs being a form of import tax, are a trade barrier. So I just, it's interesting to me to see the economic thought that I grew up reading as part of the intellectual Chicago School of Economics is now Persona non grata on the American right. It's, you know, long standing intellectual home. And that that is a shift that I'm still digesting to your point about. No one knows what's going on. But that, that threw me for a loop. Things have changed so dramatically so quickly.

So I, you know, I don't even care about political parties, I'll be totally honest. And the fact that they keep flipping roles where, you know, the Democrats were against globalization, they wanted to keep the jobs and the factories here, the globalist Republicans wanted to send them over there, and now they flipped where the Republicans have picked up that mantle and want to bring back these jobs, etc. The truth is, Americans like cheap goods. It has made the average American's life so much richer to not have to buy a USB C cable for $40, but to be able to buy one for $4 and then you get to have like an extra cable in your car and an extra cable in your, you know, side table. It's a stupid example, but it is a relative, you know, an illustrative example of abundance. Hey, founders, I want to share with you an experience I love. It's when I get an ad that is relevant and not some nonsense. Like the other day I got an ad for a fund management platform and it was like a new one I'd never heard of. I clicked on the ad because, well, I manage four venture capital firms. We scheduled a call with them and it was amazing. How did this happen? Well, I was on LinkedIn because I like to share links from the podcast this week in startups right on LinkedIn. In fact, we live stream to LinkedIn three days a week and we get a great audience over there. And I happened to be presented with this fund management platform and it was a direct hit. Like, I mean, talk about hitting the bullseye. If you're in business and you're making a product or service, it's really to find customers in the business, to business space. And doing B2B advertising is hard, but LinkedIn makes it so easy because, you know, their tools let you target people by job title, industry, company size and more. So this fund management platform obviously was looking for people in venture capital who had a fund size and a number of people, maybe 10 people, maybe 50 people. And they found me, they got me. They split the arrow. Boom, right on target. And there's two things you really need to know about LinkedIn going into 2025. First, they broke a billion members. And 130 million of those billion are decision decision makers. And 10 million of the billion are C level executives like myself. Where can you get to those people? It's really hard. And the second thing you need to know, LinkedIn makes an impact. B2B markers report two to five times higher return on ad spend or ROAS return on ad spend. You should know that acronym. Compared to other social platforms, 79% of B2B marketers say LinkedIn is the best platform for paid media. LinkedIn is going to let you build the right relationships, it's going to drive results and you're going to reach your customers in a super respectful business environment. It's not a place where people are dancing around saying inappropriate things or debating politics. Nope. LinkedIn equals business. Business equals LinkedIn. Start converting your B2B audience into high quality leads today. We'll even give you a hundy $100 credit on your next campaign. Go to LinkedIn.com thisweekinstartupstclaim your credit. That's LinkedIn.com thisweekins startups terms and conditions do apply in this sort of abundance capacity. Are we going to take away that abundance and tell people, you know what, if you like having four pairs of sneakers, you're going to go to one and you're going to buy it in America and it's going to cost three times as much. So you know, Nike stock getting killed, Lululemon getting killed. All of these people build this stuff overseas. And you know, to bring this back to startups, we have many startups who build hardware in China, in Shenzhen specifically, we have ones who do it in Vietnam, who do it in India. There's, you know, many places you can, you can send your work. This has basically created chaos in the supply chain and when there's not a predictable market, everything freezes. And so my word of encouragement for startups is just keep building, just keep focus on your customers and try to block this out as best you can. Unless on a tactical basis you're literally making, I don't know, some hardware device and you have to then work your supply chain. You gotta figure out where to get pieces from. You gotta figure out if that piece is gonna cost three times as much and if you're gonna pass that on to the customer, those folks you're going to be in grind it out chaotic territory. What you might want to do is lower your expense basis so that you can weather the storm. This could be literally a three day storm. Like on Monday, if the stock market goes down another 10%, I think they're going to claim victory and find an off ramp which they probably have already have planned. Going to be great. Vietnam and India and these countries have given us everything we want and now we're, you know, lower the tariffs on these people. And now we're going to focus on the next group. And these tariffs, as you can see, we're going to work through them. We're going to do 10 a day for 10 days. We'll be through the whole thing in two weeks. Like literally Trump could say that right now, stock market comes back 20%. We literally would catch up. They have that offering anytime. I predict they will take that off ramp at, let's say the Nasdaq being down 35%. Something in crash territory. Right. 10% drop correction, 20% bear market. Yeah. I think you start getting into like crashes at some point. That's probably what's going to happen. So if I had to take a.

Guess, I was thinking through the startup implications of this because this is not a macroeconomic show, even though today I do wish that it was, that we.

Could just talk about this, geek out a little bit. Macro. It's okay, I'm, I'll allow it. It's kind of like a big topic, so.

Yeah, sure, absolutely. But I was reading a lot of commentary from folks, you know, Gavin Baker, Jim involved from Altimeter, and I kind of packaged up what I think the consensus for startups. So startups today are staring down probably longer sales cycles because CIOs and so forth are going to be a little bit more conservative. Probably some pricing pressure. People want to make sure they're conserving cash, a return of the venture liquidity crisis. That means their investors are going to have probably less available capital because I don't think people are going to be racing to go public right now, Jason, or racing to sell.

Well, in fact, I just saw come across our chat and the newswire that Klarna has paused its planned ipo. So there you have it. That then creates the liquidity crisis for venture NLP is they feel poorer. So that's a really important thing to point out. Your point about who made the point about CIOs and not wanting to. I want to make sure we give credit to that, that they're going to be on pause.

Yeah. Jam and Ball from his blog, Clouded Judgment. He wrote, quote, every CIO is now going to be more cautious. Budgets won't be as loose. Everyone will, quote, batten down the hatches to some extent. That means tighter budgets and a real, quote, growth scare in the market.

Got it. So this is a legit thing for startups to understand and for people who just, you know, understanding markets. Business people are fine with competition, they're fine with pricing pressure, they're fine with Talent wars. They're great with technological innovation and disruption. That is like the great parts of the game. The worst part of the game is when somebody says, I'm changing the rules of the game. Because you can't play the game if you don't know where the three point line is. Like, how do you take a three point shot if you don't know is is there a three point shot? Maybe there's not a three point shot anymore. Maybe it's a four point shot and you got to shoot it from half court. People need to know the rules. They adapt to the rules. What we have right now is chaos. And the chaos causes everybody to slow down. What happens when there's a bunch of fog on the road? Unless you're driving a car with LiDAR, as we talked about two weeks ago, you slow down, right? Slow down. Sometimes you pull over. I don't know if you've ever had that happen in fog, but maybe once or twice in my life the fog was so dense, I said, not safe pulling over. Going to wait. Going to wait it out. Yeah. Happened in a snowstorm. So this is kind of approaching that point. Jam and ball. Smart guy. Works for my bestie Brad Gerstner at Altimeter. I think that's what you know, he's probably pointing to. And he's correct. Now the CIOs say, you know what, we're not going to implement and take on that project because we don't know if we have customers or if our revenue is going down or our supply chain. So now everybody starts slowing down, cascading, you know what the next piece to that puzzle is? Cuts. So I haven't heard anybody talk about this yet, but I'm a business owner. I'm an investor in businesses. As I just said, if you have a supply chain issue, maybe you need to lay off 20% of your staff. Furlough, which is like kind of like a pause.

Sure.

And that's pulling off to the side of the road. So you could see a restoration Hardware, Lululemon and Nike in the next two weeks, if this doesn't get resolved, announce a round of layoffs. So literally, nike might cut 20% of their employees. So this is second order and then third order effects or consequences. Klarna is a second order consequence. But Klarna not going public. The third order consequence is the LPs don't get a distribution. The LPs decide, I'm not going to invest in your next fund or I'm taking my 25 million commitment down to 5 or 10 just to keep the relationship. Al right. Which is what happens. So here we are.

How many times in your life, Jason, have you seen kind of back to back 5% declines in the NASDAQ? I can think of a couple times.

Like 911 COVID911.com bust great financial crisis. Those would be the four that stick out. In 80, 1987 we had Black Friday, right? I kind of remember that a little bit because my dad had a bar and Wall street guys hung out there and they all lost their job shortly thereafter, couldn't pay their tabs, all that kind of stuff. You know, hot shots in Armani suits all of a sudden couldn't pay their tabs to my dad. And the third order effect is his business wound up, his bar wound up shutting down because the whole economy crashed. People couldn't afford to buy, you know, go out on a Thursday, Friday and Saturday night and spend 50 bucks or 100 bucks on dinner or drinks or whatever. So, you know, we're in a. We're in a. This could become cataclysmic. This could, you know, result in one of these massive, massive sell offs and layoffs. And then I guess you have to ask yourself, for what reason? And Brad Gerstner had an interesting tweet. VIX spiking highest fear level since COVID Now things start to break the danger. With shock therapy approaches in complex systems, it's impossible to model the negative reflexivity. Time to make some deals and move on before we cause a recession and lose support for tax reform. So, you know, and he's like fully 100% on board with Trump and Doge. I'm not 100% on Trump. I am 100% on Doge. I am 100% on like reciprocal, thoughtful terrorists. I don't know anybody who's not. And so this is, I think, what you're starting to see. And then of course, Gavin, who is balls and strikes, has always been. He did a really long post and you know, he started to. He's getting a little more vocal here. He basically is saying, listen, geopolitically, nothing matters more than winning AI. I think we all agree on that. AI is going to define, you know, who WINS China, the U.S. somebody else. These tariffs as constructed essentially guarantee that America will lose AI by making America the most expensive place on earth to build AI data centers. Semiconductor exemption was irrelevant for AI data center semiconductors coming to America in Finnish goods from Taiwan and other Asian countries, servers, storage systems and networking switches. By the time we have developed the capacity to Domestically produce these systems. We have lost the AI race. I'll just leave it there. This is actually now we're in a second and third order effect. If you can't bring these in here, you can't build data centers. Third order impact, no data centers, no bueno for AI. And then if other folks are forced now because they don't have the US market, they find other customers. Now you have the Chinese silicon companies doing partnerships with Vietnam, India, Pakistan, Russia. Pick your country and maybe the EU wants an off ramp or and they want an excuse to do a deep partnership. Canada wants to do a deep partnership with Russia and China. So this is the, dare I say, foolishness of how this was executed. You could literally give a group of people who maybe had some pride in, you know, not wanting to partner with despots and dictators. Yeah. And you know, like, look at Germany. They, they had no problem partnering with Putin for cheap oil. India has no problem partnering with him with Putin for cheap oil. And they kind of like us look at China as a rival. But maybe they're like, well, if we don't have America as a partner, I guess we'll take the next best thing, which is China. Founders, if you're serious about raising money, you need to set up your business the right way. Tight is right, and it all starts with having a registered agent. Investors simply won't fund your business if it isn't structured correctly. Before a VC can wire you the first dollar, they're going to check, is your company incorporated, Is it in good standing and compliant? 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Notes about Europe at the very bottom of the show. Didn't think we get there, but we have talked about Project Europe. We had Harry Stebbings on the show. We've discussed how there does seem to be a movement inside of the continent to, you know, reduce regulation, bolster, bolster technology investment. And I think Cherry Ventures wants to build the first trillion dollar European company. Shout out to them for all that. Couple of interesting things to add on to what you said, Jason. One, Macron is calling for a pause in European investment in the United States. Now, that's mostly a symbolic statement from a national leader, but I do think it goes to show the sentiment in Europe about working with the US Economically, this could harm the ability of some American companies to sell into Europe. And then there's also some brewing tension between European regulators and the Trump administration. Zuckerberg is lobbying for some reprieve there, you might say, but I think that it's going to be tough to get concessions out of a block, if you will, that we are kicking in the shins repeatedly. And this is going to harm immigration, it's going to harm our ability to sell. There's going to be technical technological restrictions. It just feels, Jason, like an unnecessary sharp move that could have been done smaller, more tailored, more carefully and would have had a potentially positive impact versus trillions of dollars of wealth being deleted in two days.

I think what this means is all the independents, all the moderates, let's call them Clinton Democrats, you know, business people who, you know, either retroactively, quickly bent the knee to kind of smooth things over with Trump with their donations to the inauguration, to crypto, to whatever, you know, however they bent the knee and, you know, kind of made amends with him. You know, those people were kind of doing that in a very pragmatic way. Those were pragmatists. I would say Bezos from Amazon is a pragmatist in that regard. Tim Cook is a pragmatist. I don't think that they're enthusiastic about working with Trump. They obviously weren't in the first term, Mark Zuckerberg being probably the ultimate example of it. Right. He bought a house in D.C. now he, he banned Trump from reaching billions of people and then now he's all in on Trump and he went down there and sort of made amends with the UFC guy. I think those folks, if this becomes cataclysmic and it's affecting their business, they could be pragmatic and say, you know what, maybe we should have more balance in the other, you know, arms of government and maybe tariffs shouldn't be done by emergency edict, which I think is how they're being executed now. And they should be done through the Congress. And of course there are people doing that. So all this chaos for startups means fundraising is going to get harder. Selling into customers, especially like Fortune 500s is going to be harder. There will be only one thing that's easier. Can you guess the one thing that'll be easier?

I was going to say hiring, because there's going to be more people. Ah, yes, nailed it.

You know this. It's going to be easier to hire people. I mean, if you get laid off from Nike and you were making, you know, some six figure salary and you were, you know, in marketing or you were in, you know, e commerce and you worked in their E commerce store and their app, they might shed hundreds of people, hundreds of people who worked on the Lululemon website, technology, marketing, and they might be like, you know what, I don't have a job, I got some severance. Sure, I'll take a flyer on a, you know, so look for the purple hiring rings on LinkedIn. It's my best advice. And then you can tell them, listen, I know you made a fortune over there. You made 100,000. How about you make 60,000 here and I give you 100,000 in equity so you're, you know, if it works out, you get this huge bonus and, you know, whatever. So this is going to be disastrous if it continues.

I know our show is not. Alex asks Jason questions, but we went through it well. I mean, I think people do want to hear from you. So I do try to elicit things that I think people might want. 2021, 2022, grow at all costs. Raise hella money. Go fast, go Fast, go fast. 2022, 23, slow down, get close to profitability, then AI, acceleration, spend, grow, et cetera. If you're a startup today who has been tracking, you know, sentiment about how to handle your burn rate, would you expect people or would you recommend that they try to pull Back on burn. Or maybe new investment that could increase burn. At least until we have some picture of what the new normal is. Or is that too conservative and people should just be going for it.

If you have under 18 months of Runway, you should always have a plan to get back to 18 months of Runway. So let's say you're at 10 months of Runway. You should have the. And you're like, oh, my God, I got so much interest. We're going to easily raise around.

Mm.

You should always have in your back pocket, okay, I'm burning 100,000. I have a million in the bank. I can cut to 50,000amonth by doing these three things and get to 20 months in the bank. This is in case of fire. Break glass, Plan B. Got it. You should always have that. And I have that. I always have it. I always keep, you know, I don't know, a year or two of Runway in the bank. And I could always backstop our operations with my own personal money, which I have some of the. So, you know. But if you're a founder who doesn't have the ability to say, you know, let me just grab a million dollars over here and float the company for, you know, 10 more months of burn or whatever it is, you know, in this example, I'm using the classic 100k a month in burn. Yeah. I would say by next Friday. I would say a week from today. You should make that decision. If it's this chaotic, you should go to your board, you know, one week from today, and say, I want to extend our Runway from. I'm going. And here's how you execute it. You say, if we cannot get a deal closed to do a bridge to get to 20 months of Runway, I'm going to make these cuts. So you talk to your board. You say, would you like to do an internal round? I want to put another million dollars in the bank at the same terms as the last round, or we tripled our revenue. So I'll meet you halfway. 2x the valuation, not 3x. I just need to put another million in the bank. Are you interested in that opportunity? Let me know by next Friday. Right. If you don't get back to me and you don't sign a term sheet, because I'm the term sheet. And the convertible note are in your signature package for review with your team. If you don't sign it by next Friday, then I'm going to start making cuts. And that's just, you know, my duty as the person 2025 is going to be the year that Voice AI really breaks out. Voice AI is going to change everything. And this technology is perfect for building a chatbot or automating customer calls and basically creating these next gen voice experiences. But building with these tools is so difficult. It's just a bear. It's going to take your developers months to build and test anything, even basic. Unless you use VAPI V A P I, this is the fastest and easiest way to integrate voice into your products. It's just the most simple API you've ever used. It helps you build, test, and deploy voice agents in just minutes. And you can create ultra realistic AI voices and customizable personalities. I like that part. All with real time response speeds. You know, it'd be great. Maybe I just demo it. Okay, listen to this. Hey, Jason, it's great to be on your podcast. It seems like Vapy has figured out how to be very low latency. Maybe you could talk a little bit about why that's important. For sure, low latency is crucial for a smooth user experience. Right. It makes conversations feel more natural and engaging.

People expect real time interactions, especially with the voice assistants.

At Mappy, we've optimized everything to keep that response time around one second. It's like having a chat with a friend, not waiting for a robot to catch up. Can you do other voices and personalities? Right now, I'm rocking my CEO's voice.

But with Vapy, developers can bring their own voice models.

So if they want to add some.

Walk and flare or any other personality, they totally can. I mean, who wouldn't want a little.

Drama in their AI conversations? Just think of me as your friendly AI buddy. Keeping it real. If you want to give it a spin yourself. And trust me, you should just head over Vapi AI slash Twist and Twist listeners will get 1000 free minutes per month for life. That's F R E E free. What an amazing price. Again, that's V A P I A I slash twist. What I find is the founders are wishy washy. They don't make definitive, crisp plans. Ah. And then you have to go to your team, and then you have to say to your team, here's what's happening. We have 10 months of Runway globally. This looks really shaky. So here's what I'm doing. There are 30 people in this company. We're laying off six people. They're getting this, you know, modest amount of severance because you're a startup, you don't give.

You don't have that much cash.

So they're getting two weeks severance. Like one week for every year of duty, you know, whatever, you know, it's a hard reality, but it's better than everybody getting no severance, which I've seen happen as well. Really not good.

No.

So you say to everybody, here's what's going to happen. These four people for performance and because we're extending our Runway, but these are the four weakest people out of the 30. Then I need six more people. If you want to leave, you can take this two week severance. If not, I'm going to just have to make those cuts. Let me know. We're going to be 20 people, we're going to be one third less salaries and we're going to cut spending on marketing by 50%. So it'll be 20 people doing this. When I explain that to you, if you were at TechCrunch and the person came into, let's say it's an independent company or you're at Crunchbase, which was an independent company, how do I sound to you as a leader?

Very, very, very. Having had touched grass like, this is not a time we're going to coat things in candy. Things are bad. We're going to move quickly. There's not going to be a lot of discussion. There's going to be some offers on the table. I'm trying to be upfront and fair. I would just pair it with. And I'm reducing my personal salary by 50% for the next six months because I'm not here to profit while you suffer. But I also think that I like that actually.

Yeah, shared, so shared suffering.

Yeah.

Startups are inherently cash constrained. Like that is the game they run at a burn. And so there's just not the same. Like Google lays off a thousand people and gives them seven months severance and.

A pat on the head.

Like you're not going to get that, but you knew that going into the startup game. So I think treat them like adults, be upfront, be clear about why you're doing this and then make sure you give glowing recommendations. Everyone you lay off.

Yeah, I mean, there's all these standard practices. So my gut tells me there's a 50% that chance that happens and a 50% chance Trump sees another two days of this and he says, unbelievable. Vietnam gave us everything we wanted. Great people in Vietnam, you may have heard of Vietnam. Very simple.

It's the place he didn't like before, but now he likes a lot.

Incredible. Great leadership. They make great, great factories in Vietnam.

Yes.

Anyway, there we go.

I'm, I'm just Thinking a lot of the founders who are watching this, I guess stay tuned because we're going to be talking about every single thing that happens.

Monday will be the telling day. I think this weekend is going to be one of the most eventful weekends in our country's history.

Yeah, Jason, before we jump in and do our first office hours with the startup, I just want to bring up a little note to everybody. Amidst the chaos, there is some positive news to bring up. So Rippling company we talked about a lot. In the case of the deal spy mess, Bloomberg reports that they are in the process of working on around a couple hundred million, probably at a valuation of 16 billion, which is notably up from their 13.5 billion valuation they got to last year and the information reports that they grew to about 570 million ARR and they ended 23 with 350 million ARR. So 63% growth according to my math over a 15 month period, lower than I expected from a company adding billions in valuation. But clearly a company at scale and you can still raise money in this market, you just have to be a outstanding market leading company that just kneecapped a rival very publicly.

Market leading is the key word in your recap there. If you are the market leader, if people perceive you as the number one, you pay a premium for the number one. 28 times RR is roughly two and a half times market rate. Right. I think it's 10 times ARR might be like what public SaaS people get on the Bessemer index you were referring to previously. So you get a premium for being high growth there. If it's 63% growth on your back of the envelope math and again that's back of the envelope over five quarters, maybe it's 40 year over year. If they're growing 40 year over year, that's a high growth company in the public markets, obviously.

Absolutely.

But for startups it's not, you know, triple or double. So you know, the reality is 20, if it was public today, it'd probably trade at 15 to 20 times there.

I would have said 17. So right, right in the middle of where you're, you're guessing.

Perfect. So let's just give them the benefit of doubt. 18 and so they're trading at, you know, 50% more. A 50 premium to what the public market valuation would be. And the way that's justified by investors is again market leader Parker Conrad is a beast. Like just it is what it is like he's fierce, bold, great entrepreneur. You can say what you want about the SEC stuff, but we talked about bending rules, breaking. Sometimes you go off the rails. I think he's probably learned a lot from that. And, you know, it happens. So everybody moves on. And, you know, the deal thing is a cell phone by what I think is one of their top rivals.

So, yeah, yeah, no, I mean, it's a great, It's a great time to go back to your investors and say, hey, not only have we been growing while our competitor was cheating, we exposed it and we've ruined their brand. Give us more money, because that pitch would work on me in a heartbeat.

The crazy thing is, you know, like, now we. In all this chaos and listen, it's. It's hard to even do a podcast about technology and startups without having the constant overhang of what this administration is doing pretty fast. Isn't the TikTok ban today? Tomorrow. Tomorrow that would be the number one story in the world.

We would have done three segments on it, brought on an expert and a lot of. Yeah, I literally had to go back and look up the date that. It's April 5th. So tomorrow. So today is theoretically the deadline. Keep in mind that TikTok was banned for a hot second before Trump said, we're not going to enforce that law. There's no liability. Put it back up. Eventually, TikTok returned to the markets. The number of suitors has expanded. Amazon threw its hat into the ring a couple of days ago.

Love that.

Lovin apparently is also. I wonder if this is just a PR tactic. I don't think anyone thinks they're going to be able to afford it, but the main consortium is.

I mean, they're worth 70 billion, so they're worth the same price as TikTok. What is the price going to be for TikTok? I don't think they sell just the US version.

The current sticking point with answering that question, Jason, is that we're not sure about the fate of the algorithm. So the latest reporting that I saw is that the Trump administration, and this is from, I think it's abc, is working on a deal that would allow China to maintain control of the algorithm that would be the leased to the US entity. However, I went back to the actual text of the bill, the law in question here, and it says that a qualified divestiture which would allow it to not be banned in the US does not allow for cooperation with respect to the operation of a content recommendation algorithm or an agreement with respect to data sharing. So I don't think that's a legal thing. So I think the Algorithm has to.

Go with it and then that or some law changes or. Yeah, they figure out some way to do it when I don't think you need the algorithm. I'll be totally honest, looking@the x.com for you algorithm, the Instagram algorithm, I think there's probably no difference where it's, you know, plus or minus 5 or 10% from the best of breed. Okay, for you algorithm.

Now stop, stop, stop. Jason, we got, we just got. This just happened. The team just sent this over to me.

Oh, no.

Breaking news from NBC. Quote, President Trump is expected to extend the deadline for TikTok to find. How can he do that?

He can't do that. There's a law, you know, as we've talked about, you can just do things and then it's up to courts to enforce that. And so maybe he just does it, and then it's up to somebody in our government, in another branch of government to enforce it. Who knows? So there's your breaking news story.

All right, let's.

I mean, I think part of this is back to the tariff issue because again, there's no way to get around this. It's just impacting everything. The TikTok deal and the Taiwan issues, the AI issues, the IP issues and the tariff issues are all one giant set of issues. And so the grand reconciliation with China, all of this could be energy. And listen, you can be Democrat, Republican, never Trumper, always Trump or whatever, put it all aside. The, the modus operandis of Trump is to put a lot of energy into something, create what one person might call chaos. I might describe it as chaotic, you might describe it as other people might call it brilliant. In the art of the deal. Doesn't matter what we all frame it as. This is what he does. And maybe a lot of this tariff stuff has been designed to hit at the same time as the TikTok ban and some grand reconciliation. What if next week, okay, Xi Jinping and Trump, or in the next. What if they announce over the weekend Xi Jinping and Trump are going to meet or JD And Xi's number two are going to meet.

Sure.

And then Trump's going to China, Xi's coming to America, or they're both going to Saudi Arabia or they're both going to Moscow, who knows? And that the grand reconciliation is here. There's going to be reciprocal clean tariffs. There's going to be some, you know, agreement on one China, Taiwan, and we go back to strategic ambiguity and TikTok has been divested and everybody's happy again. Stock market not only recovers these gains, it goes 20% up from there. And here we are. He's a hero. That might be. No, it sounds crazy.

No, I. Look, I'm. I. All of my money. Well, most of it's in the US Economy. Like this. This is very much impacting me. I'm just. I think there's. There's a. There's a. A theme in people like you and I to look at things that appear to be sclerotic and crazy, and we tried to put them in such an order that they make a lot of sense. If you go back to the coverage of the April 2 tariffs, keep in mind that no one knew what they were going to be until the last possible second because they were still deciding. It's just difficult for me to believe in 4 or 5, 6, and 7D chess when the principal players don't really have a plan, because I think if you're going to be that clever, you have to be thinking not one step ahead, but six. So.

All right, I think we have a guest. We have a guest.

Yes, we do. All right, so today on office hours, we are going to meet with Luke from Pod Engine. Pod Engine builds podcast research and media monitoring tools. Jason. That all use AI. You can find the company at PodEngine AI. Please welcome the program, everybody. It's Luke.

Hey, how's it going?

Good, good.

I like the flags.

Oh, thank you. Yeah, that's Texas and that's America. And. Yeah, I'll put the Chinese one here after we do the. After we do our big settlement with China. So we're investors in your company. It's going well. Tell us a little bit. Educate the audience on what you're building and why. And let's talk about any questions you might have. This is office hours with jkow.

All right. Yes. I'm. I'm Luke. I run a company called Pod Engine. You guys invested in us about a year ago. Yeah. And what we do is we're an intelligence platform that helps businesses grow through podcast sponsorships, guesting, and analytics. But how's the business going? I guess we're finally. Feels like we're coming out of the darkness a little bit. And we have some signs of early product market fit, which we're very, very excited about. Last quarter for us was great. We doubled revenue.

Hey.

So. And actually this quarter, we're on track to triple it. And we've actually almost quarter over quarter tripling.

Yeah.

Which means you're growing 20% month over month on thousands to tens of thousands of Dollars in revenue, I would take it.

Yeah, yeah. Thousands seem to be tens of thousands. And so pretty excited because we're about to close our first enterprise API, which will be a five figure deal.

Amazing. A year. Five figures a year, which is great.

Five figures a year. Yep. Probably like low to medium five figures.

Okay, so you mentioned three different ways in which your database and engine can help people. So for stepping back one step, I remember when we met you had this really great idea, hey, if you're an advertiser or a marketer, you could figure out which podcasts have the topics you like because you have the transcripts. You've essentially built the best database, I think, in the world of podcasts. And how do you take all that intelligence and data and make it work for consumer. You make it work as a business, who needs it? Well, if you're an advertiser and you're Oracle Cloud and you want to figure out, hey, what are some good startups where, what are some good podcasts where people are talking about startups, they could find places. Yeah, that was the first.

Yeah, yeah, exactly. And sort of, that gets to sort of both the challenge and the question I have for you, which is there's so many use cases for this. And so for example, I actually prepared for this interview using our own platform. So what I did is we have a guest prep feature that's we've been working on for a little bit. Basically we looked at the past transcripts, analyzed it with AI, did some deep analysis, and I got a nice three page PDF which is. These are questions that usually come up. These are questions that sometimes come up. This is the type of stuff to prepare for. So the verdict will be out in about 20 minutes. If I do, if I do a half decent job, but if I do a decent job, it's partly thanks to the POD engineering, But that, but that kind of gets the heart of the, of our challenge, which is, you know, we can, we can do amazing reports for, like you said, businesses and brands about sort of podcast strategy. What are competitors doing? What are people saying? What are people talking about? We can do reporting analytics for individuals. We can do it on the B2C side and there's all of these different use cases and they're pulling us in a million different directions. Some of those use cases, there's lots of long tail, which be, you know, 100 bucks a month kind of thing. Some of the use cases, right. For example, guest booking services and agencies, we're talking thousand, $2,000 a month kind of, kind of size. And so we were struggling with this a lot last quarter. So what we decided to do is we took down all the pricing off the website and we really focused on just one ICP because we got a small team, and that was agencies who have a dedicated podcast function. So basically they are either finding podcasts for their CEOs or people to go guest on, or finding podcast to sponsors.

How many of those have you landed?

We're up to. We're up to about 15.

15 is amazing. And how many are there in the. In the United States, in the English speaking world, do you think if you had to do a bottom up? Tam, there's a certain number of people who work in PR and PR equals podcasts. So maybe you just do the total number of public relations executives and you times it by 50%.

Yeah. So I mean, that's where like, it's interesting when we looked at purely just. There's agencies that are just purely focused on podcasts.

Yes, I know. They torture me.

Yeah. So there's at least a couple hundred of those of, of decent size that are doing it in the US and then when you kind of look at companies who have individuals or PR agencies that are kind of doing this for them, again in the thousands.

Okay, okay, so that's amazing. And they'll pay $10,000 a year, $1,000 a month to have five of their people inside it asking questions and doing prep. Something in that ballpark.

Yeah, yeah, exactly. And it's not just finding and asking questions. I mean, I think that's where sort of you've got like the layer one kind of features, which is, you know, your search. Right. And your analytics. So we pull in 12 different data sources. We have 100 different data points where we're kind of calculating. We transcribe all of our own podcasts. We do about 25,000 transcripts every single day. And that's so. So it's a ton of data. But I think what's really exciting and what really sets us apart from all of our competitors is starting to layer actual AI automation on top of that. Because at some level, you know, if, for example, if I want to go on a podcast and talk about my business, I want to talk about, you know, podcast sponsorships, guest booking. The. The search part is actually fairly straightforward. And what happens is a lot of that gets outsourced to sort of low cost workers or people doing it.

You might use an Athena assistant for this, right? Yeah, that's what I do. I'll have an Athena assistant look at A podcast, figure out who the guests were, put it into a database for me, and boom, we're done.

Yeah. Or like, for example, my use case today of guest prep, either I would have an assistant do it or I just wouldn't do it because, you know, who has the time to listen to hours and hours of podcasts and prep. So by using sort of, you know, AI and agentic stuff, we're able to sort of unlock new use cases, lower the cost of entry. And so that's really, I think, the value, the real value add in starting this business a year year ago versus starting it 10 years ago.

So I think you have figured, you know, a really important thing out, which is you need to have at least one ideal customer profile. You found it and you've converted it. So though, if you were to email 10 people who had a podcasting agency or a podcast agency group within their larger group, how many of them would take a meeting and do a demo with you of 10? If you outreach to them, you email them three or four times. You email three or four people at the company of 10 of those companies you mentioned, there are hundreds of them. How many would take the meeting so far?

Yeah, and that's an awesome question. I think that that gets the heart of why I think we have some product market fit now. So we launched this. We launched our very, very first embarrassing MVP beta in last year about six months ago. We sent out a lot of emails. We didn't get a lot of meetings. Out of the meetings we got, we converted in three months to customers, which was horrible. Now, so, like last month, I think we. We probably had about 30 meetings. And out of those 30, we're almost 50% conversion.

What's the denominator of the 30 of attempted meetings to get to 30? Whether a hundred outreach or a thousand.

Outreach, it's pretty low. We're very targeted with outreach. It's probably, you're talking sort of, you know, the low hundreds.

Okay, great.

We really, really focus on this is what you.

This.

There's an art to pipeline management here. And as the founder, understanding your pipeline is critically important. So let's say it was 300 and you got meetings with 30, that's 10% conversion. Now, out of those 30, if you were to get 50%, 15 to convert to a paid trial. Oh, my Lord, what an amazing thing you've discovered here, which is there's something wrong in the top of the funnel getting 300 to 30. So we can work on strategies for that. But there's something going tremendously right. From 30 to 15 or 30 even to let's say 6. If you were to convert 20% of demos, really robust. Right. To get the credit card. So you can look at each part of that funnel and ask yourself why these things occurred and then how to enhance them. I could look at those 300 going to 30 meetings and I could tell you how to get those 272 triple the number of meetings. What is your technique to get somebody who obviously could use the product to take a demo call? What's the technique that works best so far?

Classic founder led, sort of very targeted, relationship based, cold outreach that doesn't scale. But. But does a really. But does a really good job of unpack.

Relationship based.

One of the nice things for us right now is most of the agencies, most of the customers are pretty small businesses. You're talking, you know, five to 30 people.

So it's easy to find the person.

On it's easy to find the person.

And find them on Instagram or Twitter.

This is something. I don't think people really talk about this that much but like founder to founder, if you could kind of find another founder, they have a lot of time for you because they know the struggles that it is to start and run a business. And so when we get them on the phone a lot of times they'll take the meeting just because they're like. We kind of lean on that, you know.

Got it. I think an interesting thing to do here is the fact that it's got friction is totally fine. What happens, as explained to me by the co founder of Benchmark who created Wealthfront, Andy Ratcliffe. Do you know who he is? He teaches at. So I'm gonna have my team send you the Andy Ratcliffe episodes here on this Week in Startups. We have a public facing website created by Podcast AI, a sister company in our portfolio that is not trying to do what you're doing, but they're. They do websites right where we have our transcripts. He explains like the phases of sales and the founder led sales. 1. You're doing consultative sales. You're kind of understanding what their needs are. You're explaining your capabilities and you're kind of meeting somewhere in the middle. Then you kind of get your first two or three salespeople dialed in which you have no salespeople now, right?

There's not right now perfect.

You don't need one right now. But when you get that first salesperson, they'll do some of that consulting stuff. But you'll have built a playbook here's the things people respond to, here's the examples, here's the collateral. Go do the playbook. And then, you know, every two weeks you look at the playbook and you iterate on it and then you move to the third one, which is your industry standard. People call you up, they ask for the price and they go, that's too expensive. You have a little dance around the pricing and then you're just taking orders. How many seats do you need? What's your budget? Do you want a two year deal? Do you want a one year deal? Do you want to pay quarterly? Do you want to pay a year upfront and get a 20% discount? You're, you know, it's a. We know you're on the lot. We know you're buying a new Toyota Prius. You had three Toyota Priuses before in your family. We're just going to give you the fourth one right now. So you're in that first part and there are techniques in that first part to ramping that up. But if you're doubling quarter over quarter, stay focused is the key. And then maybe get that salesperson on now and have them teach you the techniques.

How do you balance? Sort of. So you know there's two kind of strategies. Right. One is what's working is working pretty well. Let's just scale that out. Let's sell more $500,000, $2,000 a month kind of things versus there is because we get a lot of inbound of people who just want, you know, give me the search, give me the data, give me an API for usage based pricing or 100 bucks a month or 150 bucks a month, which we could do kind of self serve on the website. But what we found is that anchors are pricing to be much lower. When we have that on the website.

I think you could spend a year doing what you're doing and get to a million in revenue. Once you're at a million in revenue, you have three, four, five team members. I think if I remember correctly, you'll be wildly profitable and then everything's possible. So profitable. Everything possible. Raising money, hiring great talent. So I would really think about that.

And Alex pulled up the website and this is sort of how we've kind of addressed that is we kind of split it up into sort of use cases up from on an in, from an inbound perspective because the business in every individual really is that sort of lower, lower tier pricing.

Yeah. And there's like all kinds of a B testing you could do on this page, putting A video on this page with you talking and walking people through a loom or asking them to sign up to look at the loom so you can schedule a call. You could a B test looking at a loom so you could send, you know, a hundred people to the page that has the loom video that walks them through it and then a hundred people to this page. Well, you already have the data on this page and how it converts. So this is where, you know, just slowing down to speed up sometimes works. But you know, as an investor in your company, I would love to see you see if, if you doubled quarter over quarter. Can we triple? It's a small number. Maybe we can triple. And I think if you're growing with this base and you're learning and then you can invest that money into the product, everything will become possible. I was going to ask you about, is there a free version that people can do or a self serve version? I don't know that you need to have that. What you could do. Do you have alerts set up and agents set up yet?

We have alerts. I mean basically this guest prep feature will be a great kind of free sort of tool, right, to sort of get people.

I think another thing to consider would be an agent and an alert and an agent is the same thing. So I would take alerts and rename them podcast agent and give it like a little spy or whatever and say competitive intelligence, recommended podcast listens and recommended ones to guest star on or advertise on. Whatever it is, you pick one of those three, you set the agent in, the agent sends you an alert if you set up that alert and as part of that funnel, hey, we set up an alert for you to look for, you know, let's say the person was in E commerce or fashion. We set up an alert for you, Gwyneth Paltrow at goop. We set up one for you where they mentioned Gwyneth Paltrow. They talk about goop, they talk about these four GOOP competitors or they mention high priced items that match the items in your store. So we took your hundred items in the store, we organized them and we created an alert for things similar or actually just discussions of things in your store because I think the things in her store are not necessarily made by her. So we took your 10 of your items from your store and we made an alert for that. An agent for that. Sorry, stop saying alert. Say agent. And if you'd like to turn this agent on, let me know. And here's what it would look like here's a Screenshot, screenshot worth 100 words. Short looping video loom worth a thousand words. You know, being able to turn on this agent and be agentic, the podcast agentic agent, you know, blah, blah, blah, here's what it accomplishes and you set it up. You could actually do that and make it auto magical. Auto magical is before they get sent to the high profile person who does podcasts for Gwyneth Paltrow because she has her own podcast. She's always talking about podcasts. You review it, put a little polish on it and then send it.

Right.

A little reinforcement learning before it goes out. So you, you know, oh, maybe I order this and I put this candle a little higher and I put this, you know, beauty cream a little lower. Whatever you think is the right thing to do. And then that would might convert more people. Click here to see the results of it. Right. So I mean, if you send it to me and it's a vanity search, hey, every time somebody mentions this week in startups all in or your top portfolio companies, click here. I'm going to click it and then I'm going to be like, yeah, turn it on for a couple weeks, boom. Oh yeah. You know, let's set up a call and I'll walk you through how to set it up and we'll tweak it together. So those are the funnel breakers that make things move through the funnel faster that you could probably do.

So you think sort of, you know, some level it's keep doing what we're doing and from a, from a the customers until we sort of saturate that. But then really start focusing on, on top of funnel now. Now we feel pretty good about our conversion.

Is that you feel great about your conversion from demo to paid.

Yep.

Then maybe it's the funnel from first contact to demo that needs some tweaking. That's where what you do as a team member is you say to your co founder or somebody who works here, you're going to work on demos to sell. I'm going to work on getting those leads to you. And you can look up the science of this. There's a whole science to it where you're tracking where the leads are coming from. Those are funnels and attribution. And then you're studying where do we convert best. And then you could understand the dollars. Some people find trade shows are incredible. So when I invest in a founder and I'm like, how do you get customers? They're like, oh, there's three legal trade Shows in the United States. There's this one in Atlanta, there's this one that travels. So we do it in these three cities which are, you know, easy for us to get to and are the most popular. And then there's this virtual one that occurs in Europe and we attend those. We can't afford to sponsor them, but we attend them. We get the attendee list and then we try to host like little off the grid dinners or coffees with people while we're there. We don't go to any of the panels. We just immediate. It's like literally somebody explained to me their strategy and it was brilliant because it was $25,000 to sponsor, but it was $500 to go and you got the attendee list and they just tried to get coffee with people constantly and set up little, you know, offshoot events that they would try to get, you know, small numbers and then they would look at the total cost. It cost us $10,000 to go. We got a hundred leads. It's a hundred dollars a lead and boom.

Nice.

This is a wonderful place to be in because getting product market fit with any set of customers is hard. And here you are, you've raised money, you built your product, a great team, and now you have product market fit at least with some group of customers. The thousand people who pitch us, maybe 100 actually build the products. Out of the hundred people who actually build their products, we invest in maybe one of them. Of the hundred that we invest in, maybe 50% of them get some level of product market fit and paying customers. So, you know, when you start looking at how far you've gone, you're like one in like 2,000 companies that get to product market fit. And here you are hand wringing about it. That's why you're a good entrepreneur, right? Only the paranoid survive the fact that you're wringing your hands. Am I doing the right thing here, man? I can tell you, 99% of people never get off the bench. You had the chutzpah.

I think I may get off the founder and a terrible CEO. That's why. Because I think what you're. See, you can't, you can't be quite as pessimistic.

Listen, it's okay to be pessimistic. Take a victory lap. Every time you get a new customer, take a victory lap. Ring the gong, you know, spend 15 minutes celebrating it and then back to the grindstone, right? Then you can be pessimist again. But do celebrate the wins, the fact that you're getting you know, dozens of people to take these demos and you're converting, like double digit percentage of them. This is all great stuff, brother. You should really just celebrate this weekend. If you got a partner or a team member, just go out and celebrate how much great stuff you did and make a good plan Sunday night of how you're going to really stay focused when staying focused is so hard for founders because there's so many distractions. It really is. You know, the startup game at the stage you're at is about relentless focus. If you can be relentlessly focused on that funnel, you're going to crush it. Now you may not have the brain structure for it. I've seen people who are idea people who get to the point you're at, and they just start speaking at conferences. They start a micro venture fund syndicate, they do a nonprofit. They do everything but stay focused and double the revenue, you know, the next month. Just stay focused on that, and then you'll be able to raise unlimited amounts of money. And, you know, right now, the bogey is really like a million dollars a year. Things really change when you're at a million dollars, or I would say 500,000 in profitable, break even. So either a million losing a little bit or 500 and clearly profitable. Chef's kiss. The world is your oyster. There are a dozen seed funds who are going to take a meeting with you immediately and just want to know, what did you figure out? What did Luke figure out?

Right.

Well, the good news, Jason, is I used to play poker for a living professionally. So I. So I think probabilistically, and I said to my wife and my co founder at the end of this quarter, but I think we're finally over 50% that we're going to get to half a million in profitable.

So that's it.

I mean, you're right there, and then we're off to the races.

Yeah. So don't start drinking at the poker table. You see that happen. Somebody wins three hands, and all of a sudden they're having a, you know, a vodka and Red Bull, and you're like, what are you doing? All right. Continued success, Luke, and let me know when you're in Austin and we'll. We'll get some barbecue.

All right, awesome. Thanks, Jason.

Take care, Alex. All right, more breaking news. Alex, looks like we got a truth social post coming in from el presidente. What does it say?

It says, this is an update to the breaking news from earlier in the show. It says, quote, my administration has been working very hard on a deal to save TikTok, all caps, and we have made tremendous progress. The deal requires more work to ensure all necessary approvals are signed. So he's going to sign an EO to keep TikTok up and running for an additional 75 days. And then it goes on to discuss tariffs and the upcoming deal. Again, Jason, my question is very, very simple. By what legal right does he get to say that the law doesn't matter?

Yeah, I mean, if we're going to have a constitutional crisis, I don't think we're going to have it over this. I think this would require somebody, I think, to take legal action against him or whatever. So is this the one we're going to go to bat on, you know, to try to enforce, you know, some controls here? I think the bigger issue is going to be the tariffs. And we'll see. The Republicans are already starting to break ranks on the margins with these and saying maybe this should be something done by Congress. And, you know, so I, I think they're going to let this one slide because it's not. This is not a make or break issue, but we'll see. And I think the thing that's going to be interesting, I'm going to go ahead and predict that the sovereign wealth fund gets started with one third to half the shares in the TikTok entity. And I'm going to say right now, I think Bezos is going to win it. Here's the thing. Trump collects billionaires. Trump collects people, no different than I do. I kind of like people. He's a people person. People say I'm very Trump. Like, at times, I like people. He likes people. He's got to spread the wealth. He also has to punish Zuckerberg. So is the punishment to Zuckerberg by making Bezos, who wouldn't give Kamala the endorsement or wouldn't even let the Washington Post do an endorsement. Who bought? You know, Bezos has had a place now in D.C. for a little bit. Bezos came to the inauguration. His fiance was in the room. Huh. Remember?

Oh, I vividly remember that meme.

That was funny word there. I was pretty interesting. I think other people's partners weren't in the room. Is a little weird. And so, you know, here we are. So congratulations. I'm predicting it now. Bezos and Amazon win. And it's going to be great for Amazon and for the market because really, what is TikTok, you know, at its core, I think it's like a front for people to buy stuff. I think the shopping piece of it is so Critical. And then that solves so many problems with shopping and, and you know, what these tariffs and E commerce do to the overall economy. All right, next on the program, we're doing another office hours with JCal. David from Abacus is here. They build AI tools for the financial services industry. You can go find out more about the company at Go Abacus. G O A b a c u-s.com welcome to the program, David. Hello. Hello.

Thanks for having me.

Of course. Now, I have a tool that we use, the really simple sentence. And the really simple sentence is a way for founders to explain what their company does. I have one here. I think we wrote it, but why don't we have you do the really simple sentence exercise about your company?

So Abacus is generative AI for regulated industry, banks, credit unions and insurance companies. That's what we do.

So the simple sentence my team has Abacus helps financial services companies access their own information and handle customer queries with AI tools.

Yes, yes, I like that one too. So let me talk about how we do that. So regulated industry, think a bank, a credit union or an insurance company, they need three things. They want to use LLMs, but they don't trust cloud solutions like OpenAI or Claude or anything like that. Right. So they need three things. The first is they need an on prem model. Right. So they have complete control over their data. The second thing, they need assurance on the answers that they're given. Right. Make sure they're accurate. And the third thing, they need response control, the ability to control the responses. So Abaqus provides all three of those things. We like to say Abacus is where AI meets assurance. And so we provide that platform of products to those industries.

So your customers are going to be, for example, a bank stock trading platform who would be like the ideal customer profile here for Abacus.

Yeah. So think of a bank, a credit union, an insurance company, all those types of institutions are examples of folks that would Abacus.

Got it. So what's your question for me? We're here in office hours. A good chance for us to maybe work through an issue or two. What are the issues you got?

So one of the things, Jason, that we deal with a lot when we talk about the company and the ecosystem is one of the questions we get a lot is competition.

Right.

There's lots of folks in this area and personally, I don't worry a ton about competition. Right. I'm just keeping my head down moving forward. It's on my radar, but it's not keeping me up at night. What Are your thoughts on that? Because there's so many players in AI, there's so many options. What are your thoughts on the competitive landscape?

At the earliest stages of a startup, you need to obsess over three things. Your team. You have the best people on your team. Do you need to fire somebody? Do you need to add somebody? Do you need to do professional development? Do you need to have a sit down with somebody and say, listen, you're doing a good job, I need you to do a great job. Are you committed to doing a great job? Because you're putting in 40 hours a week, but we're not going to compete in this space. I need you to put in 60 hours a week. Are you up for that? So you know all those difficult team questions and development of talent, that's like job number one in year zero of a startup because that team then makes a product. So job number two is really being able to have a product team that can quickly iterate on a product and product can solve all of your problems. When you have a really great product that solves a problem, you don't even need to market it. You just send people a link and all of a sudden you're in business. And of course the third thing to obsess over is customers. Nowhere in that framework that I talk about in founder, university or the accelerator do competitors come up. And there's a reason, because you are not even at the point where you're in the NBA playing against LeBron James or Steph Curry. You're not on the court yet. Yeah, let's get you on the court here. Getting on the court means you have a product in market, you got five, 10 customers and that would be like somebody who's learning how to shoot a three pointer and has a 20 shooting average and they need to get it up to 35, 40% to be competitive. And you know, they're worried about Steph Curry versus LeBron James last night. You're not even, you're not even on the court. Let's get focused on those three things. So if I were to ask you to grade yourself on a scale of 1 to 10 on each of those categories and you can't give yourself an eight, go ahead and grade yourself objectively. Or how would somebody who's your co founder or a team member grade you?

Yeah, I think, I think for team, I'm going to give my team a 10. I think the best team and I love them to death. And we've worked together like crazy.

Okay, you previously worked together.

Yeah, we were previously working together. We had a relationship at the corporations we worked at, and then we all left, and now we're working together on our startup.

I'm going to pause you there for a second. When you said 10, I was like, not credible. But he's pumping up his team. I'll say right now, actually, your 10 rating is credible. One of the things we have in our secret 13 Reasons to Invest in a founder or a startup is a serial team. And a serial team is one that's worked together before at another company, at another startup, or, you know, they. They were in the same fraternity, sorority, whatever, poker group. Why? They have that familiarity. They have trust. You know, just like the Knicks today have a bunch of Villanova guys, I guess, with, you know, Brunson and Bridges and Hart. And they did have divincenzo, and that's why the team gelled so, so well. And anybody coming on the team has, like, a nice, solid foundation. So when you add somebody, you have a culture. Great. How about your product and product velocity? Where are you at there?

So for product, I'm going to be a little bit more harsh because, Jason, we are moving so fast. I mean, I have been in software for a long time, but I've never seen things move this fast. And now with vibe coding, you know, it's even faster. So I'm going to give us a seven, because I think that we just have to move faster, Jason.

Got it. Okay. So you do an okay job, you do a fair job, but you don't do a good or great job yet. So there's work to do. And you can give that to your team, since you have trust in the team and say, hey, we need to get better at this. And then in terms of customers, your ability to delight customers, to understand customers, to spend time with them, to obsess over them, all of that customer centricness. Where do you put yourself on a scale of 1 to 2?

That's going to be pretty high, Jason. Let me tell you why. I'm going to give it a nine. And you're probably going to be like, yep. Yes. And so this is why I meet with our customers every single week.

Right? Okay.

Not only do I meet with them, but I constantly am asking them to tell us what needs to be there so that way we can get to the next level in terms of what's going to make their life easier. One of the things I tell all of our clients in our contracts is I don't want you to use abacus if you don't absolutely love it. I'm not here to take your money. I'm here to give you a product that you love, that delivers value to you. And I really mean that because it's an extension of the product, is an extension of my reputation. It's extension of abacus. And I want people to really love using the product.

Product.

Does that make sense?

I think you've objectively, you may have elevated your scores a little bit. I might take one point off of each, but you're a positive, enthusiastic. So I can't take that away from you. But I think you've identified what you need to focus on. And now if we were to add competitors there, you know, in a vibrant market where people can vibe code and previously, what did we call it? The. When you could roll your own websites, you drag and drop stuff. There was another term. Oh, yeah, no code, right? Yeah. So there was like a no code revolution. And, you know, a lot of people could start making things. Vibe coding is very similar. People could start making things I paid for. I forgot what the services that let you build stuff. And I said, oh, I want to make this service annotated.com because I own the domain name annotated.com, i started it, and I just forgot that I had started vibe coding. So, like, it's one thing to be like, you know, and I could put out my little annotated.com service and, you know, have a 1.0 and then distract you. Somebody who's got, like, some perfect annotation software out there on the web.

Right.

And you're like, oh, my God, Jake, I was doing something there. Come back when you're here next year. This is what I with podcasting, you know, like, yeah, I always tell people, okay, you know, come back and talk to me when you hit episode 100. Right, right. That's when you get good at it. I'm, you know, it's episode 2000 something here of this week in startups, and I had done a podcast before that and a radio show before that, and then all in just hit episode 222. So, you know, like, call me when you get to 100. 200 episodes under your belt, and we can have a really thoughtful discussion about how you're doing as a podcaster. I think you're doing everything right. I'll be honest. You have revenue? These customers are starting to pay.

Yes. We have 125,000 in monthly recurring revenue.

Yep. I mean, I love you.

Nine enterprise clients. Oh, I love you.

Look me in the eyes. Look me in the eyes. I love you. You broke a million in ARR. Now you have my interest. Pique my interest. When are you going to be in Austin for barbecue?

You want.

Have you written a two year plan?

You know, Jason, I have to tell you, I was a big plan person, two year, five year, but then this is. This thing happened to me and maybe it's, maybe it's user error. Every time I'd write a plan, everything changed so fast and in ways I couldn't expect. At the end of the two years, it was nothing like I had thought. So I had to really rethink my whole two year, five year writing out. This is what I want. Because what I oftentimes found, everything changed by the time I got there.

Okay, this is such a great observation. In a dynamic industry with a dynamic team, of course things are going to change. You haven't started doing board meetings yet, right?

Not yet, but we're, we're almost there.

Okay. So you're at a really interesting crossroads. You're going to have to make a decision about if we do have product market fit at Abacus, which it feels like we do. You know, is it light product market fit, Is it strong product market fit, Is it, you know, reasonable product market fit? It's clearly reasonable product market fit because a million dollars is a lot of money to it. You can't fake it. So there's some reasonable, perhaps even strong product market fit. So the next phase for you, I think, is to start quarterly board meetings, one hour. Create a plan with your team, a very lightweight plan, number of customers, amount of revenue, and you really want to set a goal of tripling revenue year over year.

Yeah.

And the reason I think you were probably correct about planning last year and might be wrong about it this year. Right. The same issue you could be right for the looking backwards and wrong going forward. You're now flying a plane at a higher altitude, burning more fuel at a higher speed.

Right.

When pilots start, they put them in the Cessna 172 or something. It's a very predictable plane. If you put it in the sky and the pilot dies, it just flies until it runs out of fuel. It flies itself. It's like a workhorse. It's just hard to mess up. Then people get into like a cirrus with a joystick and it's faster and it's a turbo prop. And then they wind up in one of these light jets and like a Phenom 100 and now they're going 400, 500 knots. It's like each time you move up the risks, the, the inputs and what's at stake kind of goes up. You have to pay attention to more things. And then my friend Sky Dayton, who started, you know, in this 172 and then I started flying in a Cirrus 22 or something with him, it's the parachute plane now he flies a Falcon. You know, he's like a pilot and he could fly a Falcon, which is like a substantial jet. And this is, we've known, we've been friends for 25 years and this is like, I don't know, maybe he's 20 years into being a pilot. I think the point being you're now upgrading from the serious 22 and now you're starting to get into a jet. You're not in a fighter jet, you're not in the Falcon, but you know, this, this is going faster, there's more at stake, etc.

Right.

What does that mean? You got to get through the checklist, you got to make sure the fuel's in there, you got to be thoughtful about the weather conditions, the height, traffic control, you know, just the Runway because you're going faster speeds. And that means that planning is going to be helpful. Why did in order to triple revenue, you can't be winging it. You've got to be saying, okay, we're going to triple revenue by tripling the number of customers or we're going to double the number of customers. And then with this subset of customers, we're going to double their spend. So we're going to add a million that gets us to 2, and then some number of the customers in the 2 million are going to double their spend to get us to three. That means you need to have somebody who's on the land and expand team who's expanding and doing customer success. And then you need somebody else who's putting top of the funnel in and then you need somebody else who's closing those and onboarding them and make sure you have customer success so you don't churn. And now you got to be really thoughtful because when you do this two year plan, you're going to say, okay, we want to go from 1 to 3 to 9. Well, what do we need in terms of sales reps? If we know a sales rep can convert this many people, okay, we're going to need this many salespeople. Oh, every three salespeople, we fire one, we keep one and one quits. That's the nature of salespeople, by the way. You know, There are salespeople who are bad, and they just bounce from custom from, you know, startup to startup because they suck. And. But, you know, everybody always gives a salesperson a chance. And so maybe they're just good at getting the job, but they're shitty at doing the job. And then one's incredible, and you can't keep them because they get a new offer, or they decide one day that they don't want to be sales, they want to be the president or chief operating officer, which does happen as well, especially with the talented ones. And then you find one who just. Just right. Goldilocks, right? Too cold, too hot, Just right. Which means if you need three great salespeople, you might need to hire 7, 8, 9 to get to the Goldilocks zone. These are conversations I have, you know, now that I'm kind of in my oh, I'm not Yoda phase yet, but I'm kind of Obi Wan phase. I fought in the Clone wars, and I've seen people tell me, I hired three salespeople. They're going to do $3 million each. We're going to hit nine. And I'm like, how many salespeople quit? Right. Well, we've hired 10 people. I'm like, how many sales people have now three. I'm like, okay, so you retain 30% of your salespeople. You're telling me if we hire three more, we're gonna hit the number. They're like, oh, yeah, I probably should have to hire six. I'm like, or 10. Right? 10 to get to here. And then how many can you reasonably onboard at a time? And do you have a strategy for onboarding? Once I realized this, when we hire researchers for our venture firm, I like to hire them in threes, knowing that one's going to excel and make it to analyst, One we're going to fire and one, it's not going to be the right shot for them, and they're going to quit. So I just tell the team, if we need three more of these, you know, essentially analysts who become associates, just hire three researchers every three months, and in nine months, three of them will excel. If we get to, you know, the second chord of three, and it turns out we did great, and we're keeping two out of three. Okay, well, then we have abundance and awesome. But I'm planning on reality. So that's where you're at. We started this discussion with competition. Yes. You know, like, worrying about competitors is generally for suckers. And you can see what happens if you get too obsessed with it, with the deal versus rippling brouhaha. Did you watch that?

No, but I've heard that's the one.

Where they put the spy in and.

Oh yes, yes, yes.

Yeah. The whole spying thing, like that's where people get too obsessed, right. That they literally start doing illegal stuff. Here's like, generally speaking, if you want to lower your anxiety about competitors, very simple thing to do. Watch their webpage, watch their social. There are AI tools you can do. Take your top five competitors and just have it send you alerts when any webpage on their website changes.

That's terrific.

If you were to watch our fund, when you see founder, university website change, it means a change in strategies occurred and the leader has said, change the website so you'll be up to date on it. You get the founders, the top salesperson on social media and you have all of their LinkedIn, Twitter, Instagram posts saved. You can use like a zapier to do that and have it send it to a slack room. So, you know, I've, I've had situations where I needed to monitor somebody, like a stalker or like a vibrant individual. And literally I just told somebody on my security team, just take their social media, put it into a slack room, keep an eye on them. Boom, high class problem.

That's smart.

Like, yeah. So these are just ways for you as the founder, if you do have anxiety about competitors, to just monitor them. This is not corporate espionage, it's intelligence. Right. Competitive intelligence is a category you can roll your own. Nobody on the team needs to even know you did this. You just go, you find a web page tracker, you set up a zapier. It might not work for Twitter anymore, but you could write a script to do it, I think. Or you could just have somebody on your team who you want to do competitive intelligence. You say, visit these places every day for 15 minutes and just write us a little report. What's this company up to?

That's terrific advice. That's absolutely terrific. I haven't heard that before. So I'm. That's. I mean, that's a really easy way to scale.

I fought in the Clone Wars.

Well, I could tell.

This is terrific.

A lot of scars. I never lost a limb. I lost one to Dooku and then the other three to me. So take it. These are all Star wars analogies that my co host Alex doesn't get. But that's just a way for you to do. Now there, there are some dark arts in between. When you're ready to talk about dark arts, I can do that conversation, but that's one we won't have on air.

Okay, that's awesome.

There are some dark arts. There are some things that could lead you to the dark side, Right? I'll tell you about those privately. David, continued success. Did you go through our accelerator or do we directly invest?

So LA33. And then I also, I went through Founder University as well, which I will say both are fantastic programs. When I started, before I started Founding University, I didn't know anything about venture capital. I didn't know anything about the ecosystem, you know, and it was just such a great program to go through because it really prepared me. And then the accelerator is like the advanced version of that.

What'd you learn or accomplish in the accelerator vs founder university? Compare and contrast that. You know, compare Founder University experience to accelerator experience. Just tell us like the Yelp review of each.

So Founder University, you know, I spent a lot of time watching videos with you in them, right? You explaining what's a startup. What's great about Founder University is you don't assume we know anything. You talk about how to come up with a name, how to come up with a website, talk about the basics. And so I didn't feel there was ever a point where I didn't know something or, you know, and I had that continuous support from, you know, we meet every week, you know, and so I got the continuous support from the team. And it just, I mean, I could tell with my friends. So I have friends who are also trying to start companies and they didn't go through Founder University. And I could tell that I was accelerating faster than they were because I started to learn faster, I knew more. And that's because I had this shortcut, right, which was access to videos created by you explaining all this stuff. Right. So that's Founding University.

Right.

So then the accelerator happened. And that's where you're really taking all the stuff you learned in Founder University and you're applying it. Okay. You learned about venture capital, you learned about a pitch deck, you learned about how to present certain information a certain way. Now you're going to have to go out and do it. And not just one. I'm not sure everyone realizes about the accelerator. You're doing this every week. So you're pitching to VCs and the accelerator brings all of these VCs in their network to the accelerator that we probably wouldn't have access to otherwise. Every week you're pitching to them. So by the end of the accelerator, you are so good at pitching. It's Unbelievable. And so it's just really a fantastic program to go through if you're trying to get your startup off the ground or you're trying to learn about startups. I even thought, Jason, I wish there was a program. I talked to other VCs and they say we couldn't do what Jason does. And I said, well. And I said, have you ever looked at his program? And they said, no, we've never seen it. And I often thought it'd be great if you had something for fellow VCs to teach them how you, how you construct this. Right.

Because I think the way you do it, I'll be honest, the challenge for what I do is that there's only so much of me to go around. And when you decide you want to scale this stuff, Paul Graham had the same issue. My friend David Cohen, who runs Techstars have the same issue. Once you hit more than 10 investments a year, you just can't be reasonably available to 100, 200, 300, or in the case of Y Combinator, they were at 450 a year. I think, think Techstars at its peak was doing the same or more across many programs. And so it breaks most investors brains and to run a Jedi Academy, they could be a Jedi and have, you know, a squad of Jedi, you know, 6, 7, 8, which is how venture works. You're a GP, you have, you know, 10 boards max, you're on and you just work with 10 founders. What I've tried to do is scale it through media. So that's why office hours exist. You and I talk, you give me your biggest problems on the air. You get a little promotion for this, people learn about the company and then we can take this video, clip it and put it into the founder University archive and say, here's Jason talking, right. About competitive intelligence. So right there, host doing this. And that's why my friend Lon Harris is back in the fold here. He's going to take this, work with Kelly and Lucas at Founder University and make this a module. So the thing is, you got to hear me in a structured way talk about branding and how to pick a name. You might have been, you know, focus. They may have told you to go watch Raul's Product Market engine video and maybe two or three other versions of Product Market Fit.

Yep.

Because you know, there's different philosophies of this and you know that scales, but it becomes very annoying for GPS and funds to have to maintain relationships at scale because, you know, I am an extreme extrovert, is My superpower. I took the Myers Briggs which is astrology for men. You ever take the Myers Briggs?

Yes, I have.

ENTP or entj. What are you?

I think I'm entj.

Yes. Okay. That's like Steve Jobs and you know most founders fit in entj. I was ENTJ and then entp. I'm, I'm super excited about your success. Thank you so much for the kind words about the programs and I would love to host you and the management team here in Austin. I'm going to start doing Tuesdays I think are going to be the day ask people to come in Monday. We do a working session on Tuesday. You can you know bounce on Wednesday or do whatever the heck you want here but you know, get a couple of hours with the team team and I'm going to try to put together four companies every Tuesday to come and have barbecue and then Brian together where you each present under Chatham House rules where you know, you don't share stuff so everybody's in the portfolio and then you'll be with people who have 500 to 2 million in revenue. So you're. When we have this discussion about competitors and two year plans, everybody's kind of sinking on that and we. Let me be kind of open ended and just actually also for fun because I get great joy in seeing people succeed. Great to spend some time with you David and everybody go to. Is it go Abacus? Yep.

Go Abacus.

Yep. Well, I can tell that you're in the JCAL branding school because I always like one word and then I always tell people after you get your one word if you can't get the domain name go Abacus. Get Abacus. Try Abacus. Fake it till we can get abacus.com and if we never get abacus.com it's not the end of the world because people will find things on Google search. Great job, brother. Can't wait to spend some more time together.

Thank you Jason very much.

Thank you. Cheers. Anything else we need to get to on the docket or we should just wrap.

I want to just say two quick updates on news items that we've been discussing. We talked earlier about can Trump actually delay the TikTok deal? Well, Charles Cook, reporter over at I think National Review says no flagrant violation of law. There's one data point and then finally from I think it's a Bloomberg update, a ByteDance spokesperson did say that they are in discussion with the US government regarding quote potential solutions for TikTok US agreement. So we are making progress on that front. We'll see what happens, everybody. But we are watching the coming live just as you are.

Okay. And we will continue the founder Friday brackets on Monday. Apologies, we couldn't get it today. We had two office hours. They were both great. And we'll see everybody on Monday. He's X.com Alex. I'm X.com Jason LawnsX.com Lons and we will see you all on Monday on this week in startups. Bye Bye.