EP 10: Interview with Ryan Breslow, The Silicon Valley Mob, Twilio Insider Trading and Why OnlyFans Can’t Find Investors

Foreign.

Welcome to the 10th episode of Three Cartoon Avatars. I'm your host, Logan Bartlett, and I am joined today by my esteemed co hosts, Nikita Beer and Zach Kukoff. How are we doing, guys?

Fantastic. NFT LA is underway. I've been on a bit of a bender the last couple days.

Did you pay for the four thousand dollar tickets that we talked about last week or did you get some vip?

I snuck into every party, got kicked out of multiple.

But the line where you're joking and being serious, I'm pretty sure you're kidding, but I don't know, maybe you actually were thrown out of parties.

I was thrown out of at least one. Are you hosting uninvited? But the funny thing is virtually every mansion in LA has been rented out. And I've learned that most crypto people do not own any real estate, they simply rent houses.

You mean real estate in the physical world? In the, in the metaverse, they own like tons of real. You know, they own plots of land and all that. I was Akita, actually. I mean, we'll, we'll, we'll maybe talk about this in a bit, but NFDLA broke news with the Axie Infinity thing. I think the guy was on stage actually talking about that. Was that, was that a topic of discussion over the course of the couple days? Like 625 million just disappearing?

I did not discuss anything related to crypto or web3@nftla whatsoever.

By the way, $625 million disappearing is actually an expected outcome of crypto. That's not an unusual situation.

Yeah, and I think crypto conferences are actually like their success or failure is determined by how little you talk about crypto. Right. It's like some inverse relationship of, of discussion and networking versus partying. This week, Axios reported that OnlyFans has held talks with different SPACs about a merger to take it public. Now, for those that don't know, OnlyFans is a content subscription plat millions of monthly users who's cumulatively paid out billions of dollars to creators. I say creators in air quotes because this is mostly adult entertainment. So for quick backstory here. But Only Fans was in the news last year. They tried to raise private, private capital to partially cash out the founder CEO, but didn't get traction because of the platform's explicit content. A number of VCs have, have Vice clauses that don't allow them to invest in things like OnlyFans subsequently announced that they were banning explicit material, hoping that that would secure investors. But they reversed course after Outrage from all their creators. After that, OnlyFans replaced their CEO with the CMO. And they've since tried to reposition itself to a broader platform content platform than just adult entertainment, including stuff like cooking, comedy, celebrities, UFC fighting. So Nikita, as, as our power user here, only fans, what's your perspective on this? You, you had mentioned before we started taping that you had actually gotten pitched on a potential investment here.

Yeah, so the most of my income these days comes from my only fans page.

Your feet. Right?

Yeah, it's from all my, all the E girls that follow me. They pay monthly. Yeah. So actually I, I was, the deal was floated to me by one of the, by a VC, one of the Tier 1 VC firms in the Valley. And they, they asked if I wanted to participate. And I, as far as I know there, there was quite a bit of competition to get money in and I, I, I, I don't, I don't think they were, I think the, at least the story being told about them struggling to raise is not totally accurate. What I do think was maybe the institutional investors had a diligence process and when it came to light that payment, some of the payment providers were pulling the plug. That may have jeopardized some of the leads being involved, but I think they had enough to, enough interest from, you know, for small checks, non leads for

people's benefit here like Axios also had an internal pitch deck from them when they were raising this round. And it's an amazing financial profile of a company. The numbers they had were they did $375 million in revenue in 2020 with 42% free cash flow margins. They generated $150 million in free cash flow. They were expecting the revenue to go from 375 to, to 1.2 billion last year in 2021. So I mean this is a, from a financial profile standpoint, it's an amazing business. Now from a morality standpoint, I think people have issues with it.

I do know, Nikita, to your point, there were a number of folks who were more junior tier one institutionals who were desperate to put money in. This is a like career making. If this were in any other vertical, it would be a career making investment. Right. For whoever put the money into it. In fact, there's one person I know who said he wanted to pitch it internally as a community app for men to connect with each other like that. There were a lot of people who wanted to put dollars into this thing. The challenge ultimately with a lot of these businesses is, you know, not only is There immense platform payment risk to the point that you both have made, like over time. If you look at OnlyFans actually operates in some ways like a multi level marketing scheme. You know, these women get a cut of all of the proceeds for all the women who they recruit on the platform. So ultimately you end up in this weird perverse incentive where your, your goal maybe as much as it is to produce content for the Nikitas of the world is also to actually get more Nikitas to sign up and create their own content for their legion of E Girls.

Are you saying, I mean, MLM, should they just rebrand as Web3 and then it would all be legal? Isn't that like the whole premise of Web3 is MLM?

Yeah, for now.

One of the interesting things here, I mean, Zach, I, I didn't realize that about the, about their business, but one of the things that I think is interesting is there's clearly. So they're talking about a SPAC and for people's benefit. I mean, they've been all over the news. But rather than run a traditional IPO process, what a, what a SPAC is is it allows a, a shell, it forms a shell company and it allows businesses to go public without, without the normal disclosures of an IPO process. Right. And so you're able to circumvent all the traditional filing and paperwork and IPO roadshow and all of that stuff. Now it's come under fire for all the kind of usery elements associated with it. The, the main one being that there's enormous financial benefit to people that start SPACs. And so that's why you see Shaquille O' Neal and Jay Z and Martha Stewart and Donald Trump and everyone kind of forming SPACs because it's insanely financially beneficial to them. And so that's been issue number one. Issue number two is that you're able, they exist under a safe harbor, right. And so they're able to make financial projections in a way that traditional IPO companies or traditional public businesses aren't. And so there's no recourse at all associated with the projections that they make. And so you've seen these companies go public and say, hey, we're going to be, you know, we're going to be doing $10 trillion of revenue in 2026. Right. And they can say whatever they want and there's no issue with that. Right. And so that's been kind of the two things that have been criticized from a SPAC standpoint as well. Now there's just a general Adverse selection that go along with the companies that are choosing to go public with spac. That said. Right, all those caveats. There is clearly an inefficiency that exists between the private market and what VCs are willing to fund. The traditional IPO process and the public markets. Right. And so OnlyFans is a perfect example where traditional VCs won't back this. But I guarantee if this company were able to get public, there would be tons of retail investors and even some public institutions that will actually back it. And so we've, we've had success with SPACs. DraftKings was one that similarly had some regulatory concerns or issues associated with it. Right. And there was an opportunity in the public markets that people realized, hey, public market investors are willing to take this level of risk that maybe a traditional IPO banker wouldn't take on. And so from a product standpoint, I think this makes a ton of sense for a spac. Like this actually could be the, at the tail end of this SPAC boom, we might get the perfect SPAC to go public here.

But it speaks to a bigger point, right? Which is like it's sort of ridiculous that ventures become the default funding mechanism for all sorts of businesses that for a variety of reasons, right, not just because of LP issues, but also business model risk, all sorts of different reasons perhaps ought not to be raising from venture to begin with. Like to me, this is as much as it is a vindication of the SPAC model at the exact end of the SPAC boom. I think you're right, Logan. It's also a bigger point that it's ridiculous that only fans went to go raise from traditional VCs in the first place. Like that doesn't even pass first muster as the place where that business, which is like, what is it owned by like three people, right? They're just pulling out tons of cash annually. Doesn't really make sense for them to go to venture to begin with. In some ways, this is feels like ought to be a private equity deal.

Nikita, you looked at the business. What was the reason at all for them to raise money? Was it just purely secondary to cash out one of the founders?

Yeah, so as far as I know, it was. I mean the company was acquired by a like famous kind of pornographer, Leonid Radvinsky. He bought it from this guy in the uk Guy Stokely? Oh no, no, he bought it from Tim Stokely and he, I think he was the majority owner. And the company is, I mean if you look at the free cash flow numbers, they're printing money and there was absolutely, I, I think no reason for them to need money for fundraising. But they, I think they also did need some like institutional validation. They, they were trying to build like a growth and product team because I mean the product is very rudimentary. It's. I, I mean I, I don't know how long you guys spend on only fans.

Couple hours a day.

Yeah, same. But from the I heard that they were trying to recruit product managers because it's a web based product. The content creators apparently aren't happy with it. And so I think getting institutional validation actually building a product team was kind of their aim. I only fans in general is like a very interesting product because like many other creator platforms, the vast majority of the money goes to a handful of creators. But all those creators aren't actually interacting with their fans. There's actually call centers effectively where they have like these kind of operators talking to the. It's kind of very dystopian if you think about it.

That's the saddest job in the world. I can't imagine a sadder job.

Yeah, you think you're talking to this beautiful woman, but you're really talking to some guy in a call center. A lot of them I think happen to be actually in like Nigeria. Um, and, and that's how these top creators manage their scale.

I can't imagine a sadder job than being like an L1 support engineer in a call center dealing with I hate to say it but like aggressively horny guys trying to talk to befriend women on OnlyFans or and trying to get

tips out of you by trying to

keep you on the hook. I like, I have to be honest, I would basically do any job before that. That's like the worst job in the world.

That was actually my first job in high school was only fans operator for

There will be there will be someday somebody will say that like the ice cream scooping of years gone by will turn into. Yeah, I started my career as an only fans level one support engineer.

That's how you break it. Break into the valley.

I actually have tears in my eyes from laughing. I you know, I mean it is interesting like when the axios had the data 300 creators on the platform do own do earn over a million dollars a year. Right. And so like it's interesting where when the platform itself is pornography, you know, everyone runs away from it. But the number of things in the Internet infrastructure that has been enabled by pornography is like if you remember back in the day, AKAMAI which was kind of the original cdn, was. I think some of the stats they had around IPO was like 60% was, was porn traffic on their, on their website. Right. And like a bunch of the video streaming technology that's, that exists on the web today was used for like, nefarious purposes. And so when it's at the infrastructure level, Right. For the most part, people are more willing to, to allow it to be. But when it starts to move to the application level, I think people have more of a problem with it. I think it's interesting in general that Silicon Valley gets to serve as the arbiter in a lot of ways of morality. Right. And I'm surprised there isn't a bigger fund that's out there saying, hey, we don't care if it's cannabis, we don't care if it's gambling, we don't care if it's pornography. Right. I'm surprised that there isn't. I know there's one or two that have popped up, but there's not one that's gone big and mainstream and, you know, raised an SPV to invest in only fans or something.

Well, we know there are Vice Ventures and others who have started that model, but it is hard. Like a lot of institutional LPs, and I'm speaking not of our LPs, but certainly generally in the space tend to run more conservative. So it's not a huge shock. I mean, it's not a huge shock someone hasn't scaled it.

I think it's, it's interesting though, how a lot of these decisions to pass on certain types of businesses, it's, it's only the perception that matters of the business. Many consumer companies grew from things that may have been in the gray area of the law, like YouTube was primarily pirated content at the beginning, and investors kind of look the other way as they sort of tried to fix that problem. And I don't think they ever did fix that problem until after the acquisition. So I, it's interesting how invest, I, I think investors navigate these kind of gray areas of, of, of business. But when it's overtly know pornography, there's. I can see why they can't do these sort of deals.

And by the way, Logan, to your point, far from like there being more scrutiny on Silicon Valley as the arbiter of morality, it feels as though, if anything, there's a public clamoring like, you know, in a world where you're not getting leadership from traditional political entities, and in a world where there aren't community entities that provide guidance for people. I can't say it's hugely shocking. People want to enact their version of morality via payment processors and advertising networks and et cetera, et cetera. It's, it's sad. Like, I don't love that that's the way that things have trended. But I'm not hugely shocked that in the absence of everything else, people look to what are some of the strongest institutions we have in the Valley and ask those to provide moral leadership for them.

This week, the SEC announced that they were charging three Twilio engineers with insider trading from the early days of COVID So this happened between March and May 2023. Software engineers accessed financial information from the company's data through a private group chat. They shared this information with others and their family, who then executed trades before Twilio announced first quarter earnings. Twilio stock skyrocketed with the earnings and way past estimates, and the group was able to generate over $1 million in profit. So it's interesting, the whole story itself, the fact that it's coming out right now. Nikita, you've worked in the heart of Silicon Valley at some of these companies. Maybe talk a little bit about the temptation that exists for, to trade on insider information.

Insider trading is like, pretty ubiquitous, like in biotech, because often there's an FDA trial that comes out or people know about it before what the results are before the public. But I think it's probably more common in tech because you have such a large number of people with access to performance dashboards, since it's in the ethos of Silicon Valley to have transparency across a company. So I think it's, it's probably happening more than we think. And it's also probably pretty blurry too, because sometimes, you know, you have domain expertise, you're, you're mingling with people working at these companies. In the case of the, this Twilio insider trade, though, it seems like they were, they're pretty culpable of insider trading. I mean, the one, one of the people involved literally sent a message that said millionaire right after he did the. Right after the stock jumped. So I think it's a little bit less defensible in this case. But I certainly think there's some unfair advantages being in Silicon Valley and trading tech stocks.

Isn't it nice for the SEC that people do crimes and then immediately send messages like, boy, do I love doing crimes.

So it's hard to know in Silicon Valley, often with these software companies actually how businesses are going to trade with their earnings. Just because you beat on, you know, bookings numbers or revenue number or net income or whatever it is, it doesn't necessarily mean that the stock's going to trade up because the CEO is maybe going to guide to some lower number. Right? So it totally makes sense that in, in biotech where things are much more volatile and an FDA approval could mean hey, we're going to, our stock's going to spike immediately. It makes sense that people actually can correlate individual data points with stock trading. Right. Versus in the software market. It's, there's much more ambiguity associated with how the stock is actually going to trade. And so this was interesting where it's this unique moment in time in Covid where no one knew what to expect. And obviously we know a bunch of companies now benefited from everything that was going on. So it's interesting these people had this like unique sliver in time that they were able to act on it. But I have to assume that rank and file employees that get access to some financial information aren't going to know how that's going to impact the stock price long term.

I actually remember the day that the Twilio Twilio skyrocketed. I think it went up almost 100%. So the option contracts probably were up thousands of percent. And I actually looked up what their traffic Data was using SimilarWeb, which is like a domain traffic intelligence tool and it's effectively public information. And I, I was thinking about making a trade there because I, I do, I do trade options sometimes but I, I had the same sort of thought process. Was, is, is this priced in? Because I think with a lot of high growth SaaS company or high growth, any high growth company, the Wall street does expect blowouts each time and if they don't go way above expectations so then this, the stock won't like have that, that spike. And so I, I, I, I withheld from making that trade. And I'm sure they were probably also kind of on the fence. I'm sure it was probably a small position which makes me kind of surprised that they would take that risk because apparently like from the SEC report they made a million dollars in profits. So it was probably a pretty small option trade. Like we're talking like 25 to $50,000 because I think the, those, those calls probably went up 20x I, I'm shocked that they would take that risk, that professional risk. And they, I mean they were doing fine as is just with their own employee grants. So why, why would they the trade off doesn't really make sense to me.

Yeah, I think that's, I think that's the best point, Nikita. You know, to me it's a real head scratcher if you're going to take that kind of risk and to be clear, you know, nobody should, but if you were going to take that kind of risk, you should do it for like a life changing amount of money. You certainly shouldn't do it for like the amount of money you could make as like a mid level Google engineer in like 18 months to two years. Right. Like that's, that's kind of a moment you're like really? You're going to throw away your life for two years? A comp.

That's what's interesting. I feel like just the risk reward here is so off. And Charlie Munger has a, has a quote that the cash register did more for human morality than the Congregational Church. And it's an interesting concept that like the ability to audit things in a meaningful way is, makes people more moral because they think they're going to get caught. Right. Are the risks worth the trade off? When you see something sitting there and it's just interesting that these people would say, be willing to say, hey, the upside of, let's say they made a million dollars here and at most could have made what two. But they're probably making $500,000 as is, as a Twilio software engineer. And so it's just, it's fascinating that these people were willing to take this level of career risk for that level of upside.

I mean you see it across all industries too. I mean a lot of government corruption scandals, if they, you know, like there's a mayor or some official where they, for a few hundred thousand dollars they'll bet their entire political career. So I think it's interesting because everything is incremental when you're trying to build your net worth. And so I can see the allure of why people get drawn into these sort of situations. But having said that, I mean the option order book is public so it's like, it's just as public as like the blockchain. So I, I, I wonder how like I, they maybe didn't realize that, how, how easy it is to see when a, when a trade because I've actually paid for that service before. There's a, there's a service called Flow Algo that can tell you the, the, the large option trades that are taking place. And it's obvious when something seems like, well at least it's obvious when something's fishy because you could see a large trade open right before earnings like five minutes before for huge amounts of money. So certainly the SEC looks into those things.

Totally. Yeah, it's interesting. I mean I have to assume, I don't know what your guys perspective is on how often this happens, right. If you look at those options as you mentioned, or like before a big M and A, there's almost always. People don't like to talk about this but there's always some level of activity spike that happens. Right. And you just assume that like there's no way of, of chasing all this down and all the specific things. And so in aggregate it's, it's just not meaningful enough to prosecute. And so I guess what's interesting here is I wonder how red handed these people actually got caught, right? Like what was the audit trail that led them to this? Because clearly it was a family member doing it. Right. But they must have done something just so egregiously stupid to get caught red handed here. Hey, just wanted to jump in here for a second and first thank everyone that, that already listens. We really appreciate all the support. It's been fun doing this over the last 10 weeks and we were thankful that people want to listen to us riff and joke around about the tech news every week. Second and ask just to like subscribe, leave a review, all that stuff, share with a friend. It does actually impact the rankings and our ability to, to, to continue to rise and that kind of stuff. And so we really appreciate anyone that does that. And, and also I did want to put in a quick plug. We are doing now video centric stuff. So if you listen on Apple podcasts or anyone that doesn't have video centric, we're, we're now doing video on Spotify and YouTube. So you should check that. Have an Instagram and TikTok in which we're posting highlights every week too. And so if you want to find that stuff, feel free to go to our website. It's 3Cartoon Avatars.com and you can find all that. Thanks everyone for doing what you've done. And yeah, look forward to bringing you more episodes. And here's a quick clip from episode seven of three Cartoon Avatars that sets up the context of the conversation with Ryan Breslow which you're about to hear.

I will say if we keep talking about him, one more week of talking about Ryan, we have to call him the fourth cartoon avatar. We basically rolled out the red carpet.

Do you think we can get him to switch his avatar? I mean if I would be. I would welcome him on at some point if we can get him at least to switch his cartoon avatar Ryan

make we will make a cartoon for you and get you on the pod. Please First Guest has to be well, this week we're excited to have one of our very first guests, a man who needs no introduction. But in case people are not aware, Ryan Breslow is the founder of a one click checkout company. Bolt was most recently valued at 14 billion. Ryan has a little bit of notoriety not only because of his role of founding Bolts, but also because of his tweeting, which we'll talk about in a little bit, and his public advocacy of a variety of things, including a four day work week Monday through Thursday, Y Combinator not necessarily being worth it, allowing employees to exercise early stock options, his conscious culture nonprofit and his community dance nonprofit which spreads dance to students who are underserved. And most recently, people who listen to this have probably seen his most recent thread about Stripe and why Combinator, the mob bosses of Silicon Valley. We'll definitely go into that a little bit more in detail. And Ryan as a result was basically and Ryan, tell me if you agree with this. Basically the main character of Silicon Valley for a week with that thread and a bunch of other responses and threads that came off it again. And since you moved into an executive chairman position at Bolt and you've launched a new startup called Love.com focused on solving the opioid crisis, that's a hell of a lot to accomplish. I'm sure I must have missed some things. You tell us, did we get it all right?

You got most of it. That was great. Great to be here.

We're really excited to have you on. And Logan and Ryan have been going back and forth a little bit too.

Let me give a little bit of background on how this actually came to be. So I frequently make Jo on Twitter about things that are going on in the tech world. I do the best I can to avoid being making jokes at the expense of founders and companies. It's not a great look, in my opinion, when you're a venture capitalist doing that. But I did make a few jokes about the different things some of the topics that Ryan was tweeting about. So on his original thread about YC and the mob bosses of Silicon Valley, I said I seriously wish Silicon Valley was that badass. One tweet When Kate Clark announced that there was love.com, there was. Her title of the article was Boltz Teams with Psychedelics Founder on Crypto Pharma startup. And I said, this seems like tech Twitter. Bingo. And then the final one that started our back and forth on this was a few weeks ago. Ryan's been a big public advocate for loans to start up employees to early exercise options. And with the market downturn, I said, remember a few weeks ago when people were advocating for loans to employees to early exercise options? Then someone responded, people, question mark. And I said, okay, well, one person, and Ryan, actually, to his credit, sent me a dm. And it was very mature in what he said. He said, just wanted to shoot you a note. I'm wondering why you've continued these tweets against me. I've recommended redpoint to a lot of founders. There's been some negative sentiment built up, and there's real implications. Applications always open to feedback and thoughts. And so we went back and forth for a little bit on that, and I said, hey, why don't we talk about some of this stuff on the podcast in general? So Ryan was kind enough to join us. So thanks, Ryan, for coming on.

It's great to be here, Logan and team, and excited to chat about all the above.

So, Ryan, when you reached out to Logan, I mean, Logan's a professional shit poster. I don't think I take many of his tweets seriously. But, I mean, during some of these other tweets, like the striped mob boss one, there were a couple people actually genuinely, like, trying to attack you and dunk on you, like Sean McGuire and stuff. Did you reach out to a lot of people that tried to kind of take you down?

Well, actually, a lot of them reached out to me, funny enough, and they're like, you know, it's just Twitter. I hope you don't take that personally.

Genius.

No, like what?

I would, like, never do that to somebody I cared about who I considered a friend. And I consider a lot of those people friends. So it's a very interesting dynamic to kind of, you know, I, like, definitely spoke up about something that I had experienced. So, like, you could say my tweet was an attack of sorts or at someone's expense. Like, you know, when you're. When someone you consider a friend is. Is taking shots at your expense, that's like a very, you know, personal thing. So, you know, I've tried to, like, you know, there are people on the other side of these. Of these comments, right? Like, if you're gonna say something, you better mean what you're gonna say. Real implications, you know, for their employees who are watching for their. For their teammates, for their investors and So I just, like, I firmly believe that you have to mean what you say. Obviously, there's a place for humor. And I don't, like, I don't take the responses too seriously either, but I definitely, like, like, what's up, you know, here? So.

So maybe we could add some levity to the conversation. So your. Your Twitter account has kind of exploded over the last, like, six months. I think you. You've got. You're at, like, what, 150, 000 followers now?

It's almost more than all of us combined. Yeah, yeah, Nikita's carrying the weight, but now we. We have someone. We have a real title belt holder here. Nikita.

You've been crushing it.

I've primarily shitposted my way to a hundred thousand. Um, I. I'm curious, like, so what was your aim when you started tweeting? Because I. I think you. It was like a. Kind of a recent thing that you started doing. Um, were you trying to build a brand with founders? Like, what was the.

Yeah, I. I think it's a furious. A few things. One is I had things that I really wanted to kind of share to a broader community, and I've been helping so many founders. Like, I spend, you know, a good chunk of my day just on calls with founders and have become a resource. And so I'm like, I gotta get these thoughts down and out. And so that's why I wrote the book on fundraising. It's why I wrote the book on recruiting, which I. So many founders reach out to me is like, become their, you know, their main guide for doing both of those things. And so I was just like, I gotta scale myself a little bit more. I'm repeating the same thing. So first is, I just wanted to get what was in here out somehow. And it was very rewarding to do that. And then, yeah, like, there's extraordinary benefit to having an audience from a purely business perspective. Like, the amount of customers we've gotten at Bolt because founders are like, yo, I love your content. It's helped me so much. Like, I just want to use Bolt without us having to pick up a phone or. Or touch our sales team is. Has been remarkable. So it's, like, had extraordinary, you know, hard business impact as well.

So our style of tweeting is totally different.

It's actually the. The opposite ends of the spectrum. I think you guys are on the. We. We have both ends of the Internet, Twitter right here.

Yeah. And so my favorite.

Our.

My favorite interaction that we had together on Twitter was you tweeted, want to grow Five times faster. Go on a meditation retreat. And then I replied, my wife went on a meditation retreat with her masseuse and never came back.

I remember that. That was a good one. I got like hundreds of retweets and likes. That was great.

Hey, so, so one, one question was just on the, the original one, I think that sort of brought so much notoriety and attention was the. The Stripe and the Mob Bosses of Silicon Valley thread. And you know, in full disclosure, Zach and I are investors in Stripe. So I guess we're, we're card carrying members of the, of the mob. So I would tread lightly with, with us given, you know what happens with people that get on the wrong side of the mob in general. But I'd heard is this something you had been sitting on for a while that like this was something you had thought of a. And maybe draft it out and we're sort of waiting to press publish on.

Yeah, I wrote it like two, three years ago and I was just like rummaging through my docs and my files. I'm like, wow, like now may be the right time to publish this. And so I just, I just decided, hey, like, and I always thought I'm like I'm gonna, I'm gonna publish this. When we're, you know, of kind of reach escape velocity as a business, we're like, I know we're going to absolutely crush it. And so, you know, a lot of people afterwards are trying to comment on our metrics and our business and we're building such a phenomenal business. I'm like not worried about that totally at all. And so it's just like I've got, you know, great kind of loyal backers or businesses absolutely crushing it. And you know, these are things that I still kind of continued to see and so decided it was time to post it.

Was it, was it by the way that you were like, hey, I, I'm going to be out the door. Because I assume you knew at that when you press send on it, you knew you were going to step down everyone to speculate that like, oh my gosh, the board came to him and, and I was like, there's no way that's how it played out that quickly. So was it that you knew you were going to, you were going to move to the step up to the executive chairman, as you like to say, and it made the most sense to press send right, right before all that happened?

Yeah, I think, you know, I think that like the timing was very coincidental. We were just kind of finishing our discussions Internally, this was my move that I initiated. I'm like, I've got to go just effectively close more deals. We've signed a lot of business in the last six months, and that's with me still having like, eight direct reports. And I'm like, I just got to focus 100% on deals as a leader. And so Maju had gotten more and more direct reports. One of the best leaders I've ever worked with in my career and probably will ever work with. And I'm just like, just, the rest of the company should report into you, and I should just go focus on growth and closing business. So. And I, you know, when the stripe thing came out, we were. The modu thing was being planned to take effect, and everyone was like, why don't you just push it out? And I was like, no. Like, I, you know, I actually think it, like, you know, people will speculate and it'll create a bit of a frenzy. And, like, you know, I think it kind of solidifies that. You have to go direct to the source for the truth. Right. So I kind of want to train the audience. Like, if you want to know what's happening with Bolt, you know, you come to us and we'll give you the truth. And. And we're not going to play into the kind of media speculation. And so I don't. I don't know. It was, it wasn't much more thought out than that.

What prompted the initial. The initial thread, like, you wrote it years ago. Like, what was the moment where, where you. Where that crystallized for you?

Yeah, it was just, I think, you know, we had raised a couple successful rounds. It was hanging out back there and just decided one day to do it. You know, I. So I firmly believe you have to speak your truth. Right. So I speak my truth to my company, to my team. I'm very transparent. And I, in general, also, I don't love how a lot of things happen in Silicon Valley. Like, there's just a lot of ego and just like, all the time, you know, you're battling ego instead of building with investors and, and, you know, it's just. It's unnecessary. Gets in the way of building. You know, most founders, when they get to this stage, they're spending 90% of the time managing the egos on their board. Right. Versus operating and building.

Ryan, I don't know what you mean. Nobody on this call has a big ego at all.

That's.

That's a. That's a strange thing for you to say.

That's why I came On, I'm like, these guys, the exception, you know?

You know, the only low ego VCs in the entire valley. And coincidentally, we're all on this one call right now.

Yeah, exactly. Just some. Just some mob bosses hanging out here and. Yeah, low egos.

So, Ryan, but what, what motivates every one click checkout CEO to have such a polarizing Twitter personality?

Good question. You know, part of the job description, it's kind of a crazy business, right, to say, we're going to do one click checkout, you know, and. And everyone's like, but, you know, what does that mean? You're like, we're just gonna do one click checkout. Very sophisticated to do behind the scenes. So this is a hard. This is a very hard company to explain to people, you know, because we go around Sandhill Road and we'd be like, we're doing one click checkout. And people be like, what? You know, you have no clue what you're talking about. And it's an extraordinary opportunity. I mean, and it takes really hard tech to build. And so it's a confusing business to understand because it's very simple at the surface, very complex behind the scenes, very complex market dynamics. Nobody understands where you fit in them in the ecosystem. And so you have to kind of have this polarity of a very serious side, right? And then there's also kind of like very, like, you have to have this marketing side of you that just says, we're doing one click checkout. That's what we do. You know, very simple. But why do you think it is

that, like, the two most prominent, right? Two of the most prominent, like, CEOs on Twitter, both are in one click checkout. That's kind of like a strange coincidence, isn't Is?

You know, I was, I'm not gonna lie, I was a bit inspired by Dom early on because he got a lot of following and a lot of attention. Like, he was the talk of the town. And I had been working on this business for like six years leading up to that, and, like, nobody knew what we did and no one was talking about us. And so if his business did really well, right, he would be the talk of the town. So he was talking the talk, but not walking the walk, right? And I was walking the walk, but I wasn't talking the talk and no one knew about us. So I had. My team was like, they were telling me, like, Ryan, like, we have this other company, we have way more customers, way more everything, but they're getting all the attention. Why don't we have any attention. And I'm like, guys, like, we're gonna walk the walk, but when we're ready to talk the talk, like, I'll step it up. And so they're like, do you know, they would keep pestering me like, why don't we make more noise? So one day like five or six months ago, I was like, all right, you want us to make noise? I'm gonna make noise. And I sat down and I'm just like, I'm gonna figure out this Twitter thing. And we just, it was just a full set.

And so, I mean, do you have any comments on. I'm sure you read the information article about how fast is struggling. They're round at a billion valuation, they're having layoffs. Is this a macro thing happening across all one click checkout companies?

Is that a roundabout way of asking how we're doing?

I mean,

wait, did you feel that

was rounded out, Brian?

Because we could be more direct.

Yeah. How are you guys doing? We're absolutely crushing it. We're signing more customers every month than like in the last several months. I don't know if you saw, but we, we just was fanatics. Who is one of the fastest growing online businesses in the world has, you know, mid tens of millions of shoppers that are going to be joining our network very soon. We have, you know, basically a dozen mega deals that haven't gone live yet that are all going live. So you wonder why, you know, we're not raising from, from, from dumb money. You know, if you look at our investors in our last round, like blackrock, H I G Schoenfeld, like these very conservative institutions that most people told me would never give us their money. You know, when you actually peel back the onion. In our business, we're building an extraordinary business. We have tech that's almost impossible to replicate. Right. Like so many companies have tried to do checkout, all have failed effectively except for us. We can actually scale a checkout flow. We can take over checkout flow across almost any tech stack, implement it and do it for some of the largest brands on earth.

Ryan, if you're, if you're signing all the platforms and you have all the brands, like, I'm just curious, you have the products, you have the customers. Did it frustrate you that you felt like the other competitor, we don't have to say the name, but the other competitor was getting more attention online.

I mean, it definitely woke me up to like, you know, there is some value, business value to attention. Right. Because they were actually Getting business. So we had to intercept a lot of deals and say, no, no, we also exist. Right. And when you go through a technical rfp, we'd crush it. But we needed to be in the door with, with as many businesses as possible. So that's what I realized is we have to be known. We have to be able to get a conversation with anybody. And that's when I started doing on Twitter. And it's worked amazing now.

It's really, it's really impressive how quickly you've. You've grown your presence and following and, and all that. I'll let the, the, the one that we were talking about earlier, the. The mob bosses thing, I mean, I love the title and branding around it. I. So in terms of the specific things that you were, that you think about, I was mostly intrigued. Clearly. It's great pr, right? And branding and all of that. Like having a foe and punching up against the Silicon Valley. Like, it's, it's such a galvanizing story. And I think that's why you got so many people so excited about it. But one of the, like, as the specific points themselves, I guess I'm interested. So you said, like, not getting into YC was the first one, but then ultimately they invited you. They did invite you in, right?

To reapply again. You had to reapply to give a business update.

Yeah, but they invited you, right? Or they wanted you to come on.

Not to join. They just said, you know, we liked your company. Come back and give us an update and we'll reconsider. You got it.

Okay.

And then the hacker news upvoting thing, like, you know, hacker news is a, is a. That's a black box. I know there was someone that responded in very specific, like, timestamps and, hey, you're an enterprise company and we don't like enterprise companies on hacker news. And I know, whatever. Like, I don't even want to get into that. The one that I'm most, I guess, in the backing of fast, that was, you know, we don't need to talk about them specifically, but supporting a competitor sort of seems like, I don't know, not mob tactics to some extent. Like, it's almost if. Why would they enable a competitor? So I guess I'm interested in. In that. But the one I'm most interested in is the, the competition and blocking out of fundraising. Right. Because I think to some extent, like, of all the points you made, that's the one that I think rang the most true in terms of, like, I could totally see that I mean, it happens. All the people say, hey, no, I don't want you to back XYZ thing. And so I actually believe all this probably happened in some way. Do you, do you view that as

like,

is that good business and just like a strategic move or is there something more malicious behind it in your mind?

I would say that it is more of a just a reality that exists than an ethical or unethical thing or a good or a bad thing. But they made, they're very intentional to get all the kind of tier one Silicon Valley investors in, even for small checks.

Redpoint, General Catalyst, all the really important ones.

All the important ones, right.

Well, there was one tier one listed in that sentence.

Yeah, everyone's in stripe some way or another. So, you know, I like, I'm pretty good at fundraising. I have a remarkable business. I wasn't able to raise a single dollar on Sandhill Road. I've, I've still, I've been there a hundred times, never raised a dollar on Sand Hill Road. Okay, I'm not complaining. Like, we still absolutely crushed it and have raised tons of money, but it just took, you know, I had to go to other ends of the earth to raise the money and I did and we were able to succeed, you know, and it made me a much stronger fundraiser, made me much more resilient as a founder.

Do you think the strategy was conscious? Because when I raised my first round of funding, I think I got about 50% coverage of Sandhill Road. And that wasn't even conscious. I was just filling up the round. I had Redpoint, Greylock, Founders Fund, basically everyone. And I mean, I think it's just like a natural part of filling up around as you, you know, you seek out people who will invest.

Right. I think it's, it's both conscious and unconscious. Some of it happens unconsciously. I'll tell you, every founder thinks about, oh, I'm blocking out investors from my competition. So it's very, it's very conscious. Like, I bet you thought about that when you got all these people involved and probably wanted to have as many logos involved. And there's a bit of a, like, the VCs all kind of go in on who they think the winner is going to be. And by doing that, you know, together they kind of block out competition and increase their, you know, odds of success. So it's just a dynamic that happens. Right. Whether it is conscious, unconscious, ethical, unethical.

That's interesting. I, I don't know if, if I think it's as conspiratorial as it is, there's definitely an insiders group, right? Like I, I, I, there's, there's a cool kids club and there's definitely a lot of people that are on the inside and have a ton of soft influence, right? And so I don't know if it's how much it is, you know, soft diplomacy versus like stick related to it, but there, there's definitely truth to this like cool kids group, right?

I mean, that's why it's controversial, right? Things that are, have truth are controversial. So if it was completely phony, it wouldn't have gotten all this attention.

Do you think that's true? Do you think that things, if it, you think if it was completely phony, people wouldn't have given it attention?

I think, yeah, I think it rang true to a lot of people. That's why I was so, it was so emotional, right? That's why, why do you think I got so much hate response? You know, it was like really hit people at their core. Like it kind of challenged their identity in a way. And so, yeah, so the other thing

that got, that got attention was the early exercise point. And that's where we started going back and forth. And I would say I found a broad passion for people that went through the last downturn that were like really passionate about the fact that like, hey, this is a bad idea. And I talk to people that there, they went bankrupt or their coworkers went bankrupt over this. And so I guess reasonable minds could disagree about this point as you and I have. Has your mind changed at all over the course of, you know, the last, whatever, three months as the market's turned down since maybe when you originally published it? Has. Has it changed your perspective on this or do you feel just as strongly as you did when you posted it?

No, I, I feel just as strongly. I understand the other perspective on this topic. You know, I think that I. A few things. So one early exercise is, should be done at every company. There's two distinct things. Early exercise and there's the loads. Right. So every company should allow early exercise to let employee decide if they want to buy in with their cash on hand and receive all the tremendous tax benefits that come with that. It's usually preserved for founders and executives.

But let's get into the loan component because that's actually pretty useful.

Yeah. So I generally think that like I see loans as a, as a privileged financial instrument. Right. And so if you can get loans to like hardworking good people who are diligent with their Money who are earning. Right. Who are high earners. You know, they can make intelligent decisions when they have, you know, special opportunities to invest their money. Right. And so like we're talking about tech workers here. Okay. Our workers are very like high paid, they're top talent, they could go work at any company, right. We hire, we have an exceptionally high talent bar. So we're not talking about an uneducated population or population that's under financial hurt. So the question that we're this begs is do we trust in them enough to make an educated decision on what to do with $50,000 and, or $10,000. Right. Or whatever the amount is. And you know, are they willing to take a loan out for, for some number, usually in the tens of thousands in order to multiply their upside by a significant amount?

I saw the $300 stipend for financial advisors and I guess inherently that can, they can whoever they're paying, right. Like it's probably not a sophisticated financial advisor that's been through a tech downturn and can speak to broad based tech multiples and all that. And so I guess the pushback that I've gotten or when people have talked about it, is can they actually internalize the risk they're taking on leverage? Right. And can they actually internalize the risk of the last 12 years? Listen, I'm 34 years old. Like the last 14 years has been all up into the right. And I've never seen these bankruptcies and I spend all day looking at companies. Right. And so can the average rank and file person actually internalize that and take on the risk when there's personal recourse?

Yeah. And you know, I believe in empowering the individual to make their own educated decisions, give them as much information as we possibly can. We wrote all the risks of the business, like we sat down as an executive team and wrote out all the business risks, even the most extreme edge cases and said you get to make a decision. And because I, if I were in your shoes, that's what I'd want. Right. And so it's a golden rule. All right. I only, this, this was hard for me to do, like to get the board to buy into it, to get legally done. This is, this is kind of new, charting new territory. But I did it because I'm like, if I'm an employee, I would want this option.

Did you get any pushback? You said charting new territory. Like, you know, Ted Wayne from Cowboy wrote like a blog post about it and obviously there's people through the bubble. Did you get any pushback from people that had seen this in the last or was, was most of the pushback from, you know, paperwork related stuff?

Yeah, most of the pushback was paperwork related. It was a lot of work to do.

Right.

And you have to, you have to run a tender offer. We did it through like a third party firm that ran a proper tender offer. So we did this as by the book as you can. It's a hard thing for us to pull off. We put a lot of work into it. Another thing that people don't realize is you're only taking alone on the 409 a price. And our 409 a to preferred value has had a huge gap and that gap narrows later but up until you're like series E, you're going to have a big gap. Right. And so you're not taking a loan on the full value, you're taking a loan on your 409A. So you have, most companies, you have a, you have 5x coverage.

But do you think, do you think the environment has changed? Because like, I mean maybe even three months ago a typical fintech company was trading at 4.40x revenue. But as of this last down, like going through this downturn like many are, you know, way below that and potentially the, the, the real value of the preferred shares today of many fintech companies are, might be below the FMVs. So do you think that fintech companies should maybe encourage their employees to exercise caution with exercising right now?

Of course, I mean you need to go into these transactions eyes wide open. But the company should revalue their stock. Right, right size it right size their 409A and then allow employees to do the transaction.

Have you guys thought about that? By the way, redoing like instacart did, redoing 409A.

We're always redoing our 409A. We've typically done it with funding rounds because we've had them so frequently that we're just doing it with each.

But yeah, just as a disclaimer by the way for people. So 409A is, is, is based off of for the most part the last preferred round. And it's typically to Ryan's point, there is coverage ratio somewhere between, you know, 5x to 3x 2x. It gets closer to 1 as you get closer to the IPO. And so that delta is kind of a spread that exists that should serve as a buffer from the risk ultimately. And so when they're raising as frequently as both has, you have mark to markets that are happening over time when the market downturns. Because one investor said this in December or January. Right. It doesn't necessarily mean that's what it would be in the public markets, which is what Nikita was alluding to.

And all. All are totally fair points. So I think this is a nuanced issue. Right? I don't. I was. I didn't think this was going to be a controversial tweet. I thought people would be like, oh, this is interesting, you know, but, man, I thought the other ones were going to be, you know, I knew the other ones would be controversial, but this one I had. I didn't expect it. I was just a casual tweet, you know, because we had done this like many months ago, like almost a year ago. I was like, oh, I need to write about it, you know, let others learn from it or use it if they find it interesting. So I just banged it out. I'm like, let's get this out to the world. And it was like, ended up being the most controversial.

I know you said you scheduled your tweets in advance, right? So you don't have to spend time on it. Do. Do you like, did that go out? You like, scheduled at the beginning of the month and that went out and you like, look at your phone and it's just like the world is set on fire. And you have, you know, all these notifications and you're like, wait, which tweet was that? Like, what exactly?

What are people so upset about now? Yeah, exactly.

Like, what. Wait, did I do a follow up mob post? No, wait, this is just an early exercise.

What went out?

What was that? Yeah, literally reaction, 100%. Like I was out to dinner or something. I'm like, my phone's blowing up. Like, what's going on over here? Because I knew. I knew the other ones were going to be controversial, so I was ready and I was, you know, on standby. But this one I was completely unprepared for.

That's funny. Well, good you've been generous with your time, Ryan.

Obviously, we're all super appreciative for you joining us today.

Yeah. Thank you for doing this. Anything that we didn't touch on. I know we didn't get to love dot com and we didn't get to. Yeah. A bunch of other stuff that we would. Miami and your. The dance nonprofit and. But anything else before we. Before you hop that you wanted to. I wanted to say thanks for doing this.

Of course. No, thank you guys for having me. I thought this was a great conversation. It's what I'm looking to have more of. And I think we just got to help each other out more, you know, like, totally. It means a lot to be the first guest appearance. We made history here.

Thanks, Ryan.

Thank you, everyone, for joining the 10th episode of Three Cartoon Avatars.

We were in danger of getting the Four Cartoon Avatars Avatar's territory, and so we've really toed the line on this one.

I'm really genuinely shocked. We've made it to 10 episodes. This show has been a complete net negative on all of our careers. So congratulation, guys. We. We've made it very far.

We did it.

Mission accomplished.

All.