EP 12: Dan Primack Talks Musk/Twitter, Zach Weinberg Explains Founding a $2.1B Co & Owning Nightclub

Foreign welcome to the 12th episode of Three Cartoon Avatars. I'm your host Logan Bartlett and I am joined today by my esteemed co host Zach Kukoff. And pinch hitting this week for Nikita Beer, I'm joined by Zach Weinberg. We're batting a little bit out of order here. So we're going to go in immediately into Elon Musk's bid to acquire Twitter because we were lucky enough to have Dan Primack from Axios join us. And so we're going to, we're going to dive right into that and then we're going to back up and go through Zach Weinberg's background. But for folks that don't know, he was the founder of Flatiron Health, which sold the Roche for $2.1 billion, as well as Invite Media, which sold to Google for 81 million. So we'll, we'll talk through all that. If you hear two Zachs on the podcast, that's, that's the other Zach that we're, we're talking to as well as once we immediately hit done recording on the podcast, there was news that Thoma Bravo is potentially considering an acquisition of Twitter. So you will hear us talking without that incorporated. That broke right when we finished. So just a little context there. We're going to dive right in with Dan here. Also, Dan talks at a speed that's going to sound like 2x and so just know that we didn't adjust his audio. He just talks at that speed. So this isn't Dan Primack on meth. This isn't us messing with his audio. It is as fast as I've heard a human talk outside of Bone Thugs in Harmony perhaps. And so just know it's not something wrong with your, with, with your audio device. Thanks everyone for listening. So just a quick background. It was made public that last week that Elon had bought a 9.2% stake in Twitter. This morning, we're recording this. On Thursday, he made an offer to buy Twitter for $54.20 a share, valuing the company at roughly 43 billion DOL. This represents a 38% premium to Twitter's April 1 closing price, which was the last day of trading before his stake in the social media platform was made public. Twitter said that its board would review the proposal and any response would be in the best interest of all Twitter stockholders. Earlier today, the board met and it was said to the information that they viewed the takeover as unwelcome, citing a person familiar with the matter. Elon also has spoken on TED about The matter, he issued a poll publicly asking whether or not the Twitter users should be the one to vote on whether or not the take private actually happened. So joined today by not just Zach Weinberg, but also Dan Primak. Dan, you've been talking about this all day. Any opinions, quick takeaways from the wild day that is following Elon Musk?

Yeah, I think, for starters, I think Elon's odds of buying Twitter, at least the way he wants to buy it, have been going down progressively since this morning when I first heard about this at 6 or 6:15, when it was like, oh, you know what, maybe he's got a shot at this. And, man, it doesn't feel like it right now. For starters, investors don't believe it, right? There's this massive spread between where it closed the day trading and where Elon is offering to buy it. And secondly, this poll he put out at about what, 4:15 Eastern this afternoon, which wasn't about Twitter users, it was Twitter shareholders. He basically said, who should decide if I get this company or not? Should it be shareholders or should it be the board? Two things about that. First, it feels a little bit desperate. Like that's not the sort of thing you usually post if you think you're about to win. It's kind of like, hey, guys, get on my side. And then secondarily, it does seem to reflect that Elon, who is being advised by Morgan Stanley, like real bankers who understand these things, he doesn't seem to have a great understanding of how M and A works.

Right.

There is a way to let shareholders vote on this. Launch a tender offer. It is hard, it takes longer, you have a low probability of winning. But the way Elon did it was he asked the board to accept or to reject this offer. Elon went to the board. Thus the board gets to decide. That's how this works.

What do you think's actually coming? Like, where do you think he's coming from in this? Do you think he actually thought he was going to be able to buy the company or was he taking his ball and going home because the board didn't agree to the structure of him coming on board when he rejected that seat on Sunday?

I mean, I. Let me start with the obvious caveat. I'm not in Elon's head. All I can do is based on what he's done today and what he said today, including at the TED Talk. And I thought, the TED Talk or not TED Talk? It was an interview with Chris Anderson. And Ted, I thought it was interesting because he hasn't thought all of this through. And that's, to be honest, not a total knock on him. He kind of admitted it in part on the strategy stuff at the company. He clearly hadn't thought a lot of that stuff through. But also as of a week ago, just a week ago, he had no interest in buying the company. He apparently told Chris Anderson he didn't want to buy the company and he agreed at first to join the board with a 90 day standstill on even making an offer for the company. So this is all very new. Usually if you're going to launch a 50 billion or a $43 billion takeover offer, you know, if you're a private equity firm or strategic, there's a lot that goes into that. There's a lot of conversations. Elon, it appears really decided in the last couple of days that he was going to do this and there wasn't a massive amount of prep work.

Dan, what do you make of the Twitter board's poison pill rumors that are now coming out, you know, as of the last like hour before we of this?

I mean, that wouldn't surprise me. That's, that's the thing you generally do when an activist is coming at you. Right? That's kind of. Leslie Picker on CNBC Today called that, you know, activist defense 101. And she's right. That's exactly what it is. There's, you know, it's interesting, there's a bunch of people, and I'm seeing this on Twitter, of course, who are saying, wait, if he's offering $54 a share and the stock was trading kind of in the high 30s or 40s, you have a fiduciary responsibility as the board to accept this. That's not necessary. That's only sort of true. Yes, the board is fiduciary, that has fiduciary responsibilities. That's true. But that doesn't mean the board always has to accept the highest offer or an offer to the stock. You'll see often when there's a competitive bidding process for a company that's officially for sale, that they will take a lower offer because they think maybe it's got a better chance of closing. Maybe they think it's better for other stakeholders like employees and users and for the company itself. They do have a fiduciary responsibility that is a part of it, but it is not. It's not just that the board's like, oh, you offered a penny more than the other guy. And thus, ipso facto, you get the company.

And just to Level set. A poison pill. A poison pill is a way for a company to issue new shares at a discount to existing shareholders to make it more dilutive and difficult for a takeover to actually happen. And so just a level set on what that is. And to the fiduciary point, I mean, some of the considerations to this right there, Twitter's board's getting sued one way or the other. Right. It's definitely happening. They're already in the, you know, probably fending that stuff off or preparing for it. But from a fiduciary responsibility standpoint, one thing that they have to be thinking through I assume is like, where is this financing actually going to come from? Right. And it's funny to watch in the TED interview, he still is, he still is trying to claim that the funding secured thing was actually thought through and he had the funding because the share, the lawsuit with the SEC is still ongoing. But it's clear like there's no way he went from Sunday not joining the board turning that down to actually having thought through a full acquisition by whatever it is Thursday. Right?

Yeah.

And he said a couple things in the TED talk or I keep saying that in TED interview about that one was he said he hopes that as many shareholders as are legally allowed to roll over into the private company would do so. So for example, earlier today we learned that Vanguard is now actually the largest outside shareholder in Twitter. They kind of leapfrog Elon by a little bit. They own about 10% of the company. So he's basically saying Vanguard, Elliot, other mutual funds and hedge funds join me in this. But simultaneously he said, I don't care about the economics of Twitter. In other words, he views Twitter as a public utility. He wants to be this kind of free speech square. He doesn't really care about the business of it. But that's antithetical to what a Vanguard cares about or what a, you know, what a hedge fund cares about. Those are purely profit driven organizations. Those two things just don't match. If there's no way that you as a hedge fund or a mutual fund can go with a guy who says, I don't care about the business, I just care about the utility of the product, even if you love them and like you just can't do that. And then there's the question of, okay, so how does he finance it? Maybe for example, he would have to leverage some of his Tesla stock or sell some of his Tesla stock. If he's going to do that, that has an impact on Tesla. And he chose not. I don't think he's made a decision on that because I don't think he knows how much money he really needs. They're also last thing. There's some reports coming out late this afternoon that Morgan Stanley might help him finance the bid with some debt, but we have no idea how much debt they could actually put together.

Do you think this opens up Twitter to other bids and if so, like, how do you think about who the other bids might be?

I don't. I know Mark Cuban tweeted that today that, you know, the Google and, and maybe he said Amazon but Apple are kind of talking to their, or Facebook or talking to their lawyers about, you know, could we get this through antitrust? I think that's the problem. I don't think they could get it through an antitrust review right now. I mean, you know, Facebook can't get, you know, has having problems in the UK with Giphy. I think it would be very, very hard. And there's not really somebody else out there with this kind of cash to do it who doesn't happen to have an affiliation with a company like Facebook or Amazon. You know, remember, you know, Salesforce took a real hard crack at it a couple of years ago. That's one that maybe could. And Brett Taylor, who's the co CEO of Salesforce is obviously chairman of Twitter. So there's some real ties there, but I don't think anyone's going to try to get it for this sort of price. And as somebody said, yeah, Twitter's board's getting sued no matter how this works and there's nothing they can do about it.

You know, it's interesting on the Salesforce point specifically, if you go back, I was going back and reading through it and I mean if you remember, all the shareholders were like, what the fuck are you doing to Benioff? As that was going on. And Benioff now claims he told this story after the fact, that he was, it wasn't. He thought about the shareholders, but he also slipped and fell and cut his leg and viewed that as a sign that maybe he shouldn't buy, shouldn't buy Twitter, which is an interesting revisionist history of it all. And then Disney was the other one, right? Disney was the one that went really deep for a long time. But are we facing the point that some people are getting so fabulously rich and politics are getting so polarized and these platforms are utilities that we are going to have Elon Musk and Peter Thiel or just Jeff Bezos or someone? Obviously we've seen it with Washington Post and some of these smaller media companies, but these big social networks, I guess Twitter is the one that stands out that someone actually could do it. But is it possible someone teams up with Elon and says, hey, the two of us will go in together and do this?

That's possible. I mean, I don't think any of that's new though, right? Like, I mean go back 100 years, right. Almost all the newspapers in America, which was, you know, pre television, that that sort of how we all or everybody got news, right? Newspapers that was owned by the richest people in the country, those papers were owned by the richest people in the country, the hearse, et cetera, as a for means of influence. And even right now, the reason that Elon or anyone in theory can buy Twitter is because it's really the only or one of the only social networks that doesn't have founder control. Right. Like, I mean Zuckerberg controls Facebook slash Instagram, slash WhatsApp. Right. I mean, you know, years ago when it was private, he turned down Yahoo's offer to buy it single handedly when the board wanted to do it. If somebody came today and said, mark, we'll give you a trillion dollars for Facebook or $5 trillion for Facebook something, you know, something obvious, he can say no. He can give the middle finger to the board if he wants to. That's true today.

Yeah. Interesting. Elon actually was able to work that in that mark Zuckerberg the 14th is still going to be controlling Facebook in whatever, in 200 years or whatever it is.

But Dan, even outside of financial control, is there some sort of founder gravitas? Do you think Jack regrets giving up the seat for the lack of founder gravitas he would have had? Perhaps if you're still running it. And Zach, other white Jewish Zach, I'm curious to get your point of view here too.

I'll give mine quickly, which is when you say giving up his seat, that's kind of like talking about, you know, do I regret getting out of the car after somebody pushed me out of it on the highway? I mean, sure, but I mean like Elliot, Elliot the activist. I mean they spent two years trying to get Zach Jack out of that company and they ultimately succeeded. It would be fascinating to know where Jack's head is at on this because one hand he is friendly with Elon, on the other hand he's not. And on the third part, the whole, you know, Trump got kicked off the network while Jack was running it. And I know he says he delegated that to somebody Else, which by the way, is its own kind of unforgivable sin. Not kicking Trump off for keeping him on. But you're the CEO of the company. That should be all you have to have a say in that. The buck stops with you.

Probably the single most defining thing that's happened in Twitter's history was kicking the President of the United States off the platform. And for him to say he delegated it is. Yeah, I mean, it's kind of malfeasance right there. Zach Weinberg, you had an interesting theory when we were talking about this earlier that all of this is an ends of diversification for, for Elon from a, from a financial standpoint.

Well, first, the most important question is how did you know I was Jewish?

I'm not.

My name is Zach Weinberg. I assume you went to Camp Vermont. I assume you were an a pie. There's only so many options there.

I mean, you're not wrong about any of those things, but just good guess. No, I. Look, he's a, he's an entrepreneur. He's got like an ultra concentrated stake in Tesla, which if you look at its actual earnings potential when you get rid of those, like government credits for electric vehicles, doesn't look as great. He's a very sharp guy and he knows, like, it would be nice to have an excuse to cash 40 or $50 billion of my stake out, but if I'm going to do that, like Tesla shareholders are going to ask what is going on. And so if you create a nice little smokescreen that gives you a logical reason as to like, why you should shell $50 billion of your stake. It's a pretty sweet deal. It's a great. I don't think he really cares about buying this company or not, but it's a really good way to say, you know what, I'm selling my share to make this bid look more real.

Dan, what do you think about that?

Yeah, I mean, Tesla stock was down about what, three and a half percent today or something like that? Because there's obviously some concern about it. I will say the only disagreement I have with Zach is I think he cares. I don't know if he cares about buying Twitter per se. I think he legitimately cares about his view of free speech and social media. I think that's something that actually does animate him. I don't think he has thought through what any of that really means. And I'll also add, I don't think Chris Anderson really pressed him in a good way on that particular, you know, the, the you know, the word Chris kept using was obnoxious tweets. The word harassment never came up in that conversation. I think he does care about it. I think it's fun and sexy and candidly, very, very rich people have always liked having a way to, you know, to control, if not America's discourse, at least the. The terms of that discourse. And I think there's no country or company in America that's more important to the, to the discourse or maybe the global discourse or even the. The practical application of politics, like the way politicians communicate with voters.

I mean, to be clear, I think he wants to own it. Like, there's no question he wants to own it. It's a great place to park $50 billion. I think there's this, like, beautiful secondary benefit of diversification for somebody who's got, what, 20 some odd percent of one of the most overvalued companies in the world. Not that Tesla is, is a bad company by itself.

SpaceX. Yeah.

Great business. Right. But is it worth a trillion dollars? Like, no, probably not. I think he's well aware. He was the one saying it was overvalued about, I don't know, 500% ago. So, you know, this is a great opportunity. I love it. I think the whole thing is phenomenal. I. Kudos to him for just like, deciding to do this probably yesterday and having a bid today.

Yeah, I mean, it's the whole thing, like, the whole process and how this came to be. Someone said this is sort of the problem with, with Elon. And I was listening earlier. Dan, you were moderating a Twitter space, and it's similar to Donald Trump in a lot of ways of like, do you take him at his word in a very literal sense, or how much of this is like eight, eight moves ahead chess. And you sort of oscillate back and forth between what's just impulsive, childlike, you know, whatever mindset versus what's actually a strategic game here. And I feel like the Occam's Razor here is that he just. He kind of wants to own it and maybe he can. And so he made an impulsive decision, talked to a banker and said, fuck it, let's do it. The interesting angle, which I don't. We talked a little bit about before we got on this, but the Silver Lake angle in all of this is interesting. Right? Because. So. So William Morris or Endeavor was a shared board seat between Egon Durbin and Elon Musk.

Right.

It was funny when the funding secured things, Silver Lake never offered up any financing itself. But they were advising Elon, quote, unquote, on that whole process. And so it's pretty clear these. These guys are close now. They made an investment in Twitter, what was it, 18 months ago, a year ago, to. Along with Elliot. Right?

Elliot, yeah, yeah.

And so now. So now Egon, like, is both in the boardroom, but presumably pretty close with Elon. And so I wonder, like, is it possible there's a fox in the hen house there that's actually influencing this from the inside, saying, hey, Alan, you might as well do it. Or again, back to your Jack Dorsey thing. It's hard to know who's on what side in this sort of Game of Thrones battle that's going on.

Right.

Jack, obviously probably views Egon Durbin of Silver Lake as, you know, one of the king slayers. Right. One of the people who came in and stabbed him in the back. That's it. You know, this goes back to the. As the day progressed, right. We did the Twitter space about 11, about an hour before Elon did the thing at TED. And the problem is, you know, Egon represents a private equity firm, and a private equity firm, you know, above all else, wants to create returns for its investors. It's a financial instrument. That. That is what it is. And Egon is that right? He's not a. He might be a vision guy to a certain extent, but ultimately he's a financier. A financier. Elon has said he doesn't care about the finances. Elon, you know, one of the issues here, which, you know, Elon didn't raise and didn't get brought up really, at ted, there was a lot of talk about edit buttons and, you know, would you de. Platform or platform people. Twitter is an ad business now. You could come up with another business for it. But he hasn't. He hasn't said, we're going to replace ads with subscriptions. And here's why. I think that'll work either way. Egon and Silverlight would have to be in on the financial vision because as I said, Silverlight's private equity firm, at some point they would have to get their money back. Either Elon would buy it from them at a profit, they'd bring it again public, and thus it must be worth more or there'd be someone else to buy it, which, again, has antitrust problems. So, like, if Silver Lake's involved, they must know something that Elon hasn't shared publicly. And by the way, they might.

And that's what's interesting is when Silver Lake obviously did the big Dell deal and it was Michael Dell and Egon Durbin, and they were talking all that through. It was just accelerating the path that they were already on. Right. This would be kind of a wholesale change, going from an advertising focus business to a subscription business. And some of this stuff is in the work. Like they have Twitter Blue and, you know, the subscription business that now they're charging for Tweetdeck and all that. But I mean, going from whatever, 10% of revenue and knocking out another 90%, it just doesn't feel practical that, that it's going to happen. And so clearly, if this is like a util. Utilitarian or like a, an idealistic move by Elon for a social good, that's not going to align to your point with a. A very literal private equity.

It would also be hypocritical for Silver Lake because when Silver Lake took Dell private, they did that in partnership with Michael Dell. And if you remember this, Blackstone tried to get in and buy it instead. And all the words that came out of Silver Lake was, wow, look at this. You know, private equity now is supposed to work with management. We're not supposed to. We're not the, you know, barbarians of the gates. We're not corporate raiders anymore. Look what Blackstone's doing. They're going against management. They're. Well, that would be, in this case, what Silver Lake would do if it teamed with Elon. This is a hostile bid.

Yeah. And he's closer to being Carl Icahn as well. I mean, literally, it's like closer to being the person that's agitating for change. Right. Against the founders, against the management as a whole.

Yeah.

Do you really think he has a plan? Like, he doesn't have a plan, Elon? Yeah, of course he doesn't have a plan. He doesn't understand software and advertising businesses. He doesn't understand subscription businesses. He's a visionary hardware guy. But at the end of the day, I think he just kind of sees like a bunch of lazy people who don't show up to the office and thinks he can make them show up to the office and produce better work.

Like, it's.

I don't think it's more complicated than that. He views them as inefficient, and they are. It's a fairly inefficient organization because Jack kind of let it run that way for a long time. And the new CEOs got a lot of cleaning up to do. It's hard to unwind that.

And by the way, if you ever go read Michael Dell's book that. If you ever go read Michael Dell's book about the whole Take Private. His whole thing with Carl Icahn was that he didn't actually have a plan, right? And so he kept being like, I'm going to call her bluff. I'm going to call her bluff. I'm going to call her bluff. He has no strategy. He's just trying to get a higher share price. And so in this case, like, there are weird parallels to the narrative that Elon clearly hasn't thought all this stuff through.

Zach, how much of a plan do you really need here? Right? Like every year, Twitter's revenue goes down somehow. They have the highest value set of users in the world, addicted to it, and yet they continually make less money. They did a year prior. From where I'm sitting, the idea that you can just get people to show up to the office and work marginally harder seems like as. As good a plan as each Twitter board has, which seems to be rearranging deck chairs in the Titanic here.

Is that actually.

But they're not. No, that's not true. Their revenue goes up, their profits have gone up. They're a profitable business now.

I actually think we talked about this last week, but I actually think Twitter has made more foundational changes in the last five years to set this. It was a big monolithic application, and now they've carved off a bunch of little pieces of the product. And so I actually am excited to see where they go over the next couple years, if they're allowed to execute on it now. We'll see if that's allowed to happen. But, Dan, what's your bet? I know you have to hop here in the next. When we're talking about this in six months time, in a year time. Is Twitter a public company or a private company?

I think it's still a public company, but, man, I think there could be some changes. This is going to be a very hard thing for this management team to deal with because, as somebody said, like, they have a lot of work to do, right? They've got a lot to do. And this is a massive distraction for employees, for them, for, like, it's just this massive distraction. And I don't think Elon's not the type to simply take his ball, go home and move on to something else. He's going to keep hitting them, and he's going to hit them from their own platform, which is brutal. Right? He's. He's not going on talk shows doing it. He's doing it on Twitter.

The best part about that for him is he owns 10% of it.

For now. For now.

You know, he's like, bringing attention to this thing. He now owns, what, $5 billion of it. Seems like a great business model to me. The guy's got it, like, figured out. Just bring attention. Buy up some shares. Bring a whole bunch of attention to it. Maybe I buy it, maybe I don't. At least I get to diversify my Tesla shares. He's kind of genius.

The other, the other thing about that. Two other quick things about that. One, we don't know how much stock he really has. Right. He disclosed 9.2 a couple of weeks. He might have bought more since then. And on the other side, this kind of. On the Elon defense side, there's a lot of people who were tweeting today, oh, this. The offer was just a pump and dump scheme. If it was, it didn't work because the pump didn't happen. The price today didn't go up.

Yeah, good. Well, Dan, thanks for joining us. Go. Go educate some youth and maybe we can do this again sometime. But this is fun. Thanks for doing it.

Thank you, guys.

Zach, you might know from Curry Bio, which is his. His new company, you might know him from Flatiron Health, which sold the Roche for 2.1 billion. You might know him from Invite Media, which sold to Google for 81 million. Or you might know him as a New York City nightclub owner or because he had one of the OG Twitter beefs with Keith Ravoy at the beginning of the pandemic. So, Zach, thanks for coming in and co hosting with us, and I will try to figure out how to coordinate two Zachs on the podcast.

Thanks for having me. By the way, it's not Curry Bio like a dish that you eat. It's Curry Bio, like Marie Curie. She was a scientist. I don't know if you've ever heard of her. She won two Nobel Prizes, that whole thing.

Does she play for Tennessee football? Because otherwise I don't think Logan would know.

Yeah.

Oh, yeah, yeah. Offensive line.

Oh, Curry got it.

You can call it Curry bio. You could call it Masala bio if that's really what you want.

But yeah, yeah, in Tennessee, we actually say Curry, y', all, is how we talk about it.

He listed a bunch of places you might know Zach W. From. You may also know him from a PI camper, ma etc. Etc.

The Jewish institutional, the 92nd Street Y after school program.

That's right. That's right. The. Any jcc. Really?

Also chess tournaments. Lots of chess tournaments.

Really?

Yeah.

I. I'd risk cancellation for laughing too hard at Jewish jokes on this. On this podcast. Zach and Nikita will go back and forth about being Jews and I'll. I'll laugh along and then the ACL might come in and cancel. ACLU might come in and cancel me for some. Yeah, we're gonna.

We have the ADL on speed dial every time Logan gets too excited about the jokes.

As a Jew, you're allowed to give a pass. We. We grant you a pass.

I will laminate a card from.

Yeah, exactly.

Good. Well, Zach, thanks for coming on. Maybe. Maybe give a little bit. I know I gave. People probably know you from the nightclub, but maybe give a little bit of background on yourself. And I know Invite Media was an interesting story when you were, what, 21 years old or whatever, and then starting Flatiron, so maybe you can just give the quick high level on all. What led you to. To your Twitter beef.

Yeah, it would have been a lot more interesting if it started as nightclub first and then like upgraded there. But it.

No, that self actualization, though, I mean, you were really like. You were. That was. That was what you always dreamed of, right?

Yeah. Any sort of like Jewish kid growing up in New York City who doesn't get let into any bar or any nightclub because I don't look cool. Right. I'm like the last on the list. I have to show up at 10:30 before it opens to get in, you know.

What are you doing here? We don't open for another 12 hours.

Give the bouncer 50 bucks. It's always your dream to go in on a nightclub. So I own a nightclub, which is an interesting story in itself and something I will never do again. But it's been fun. Yeah. My background, I've been a founder entrepreneur my whole life. First in software at a company called Invite Media that we sold to Google in 2010. It's part of DoubleClick now. So if you know DoubleClick bid manager, that was our original software product.

I'm told your dad still gives you a hard time for selling too soon. Like sends you Google reports and show you how much revenue is being made. Is that true?

You know, there's a small little company called the Trade Desk. I don't know if you've heard of it. It's worth like $30 billion. That was kind of like the direct competitor. And at the time, you know, it felt like the only option was Google. And kudos to Jeff Green, who I. I know I haven't talked to in a while, but I obviously know him from back in the day for building what we could have done and didn't. Part of it is like we had no idea what we were doing. So when we sold it, I was 21, maybe 22. My co founder was 22. And so part of why we sold it, frankly to Google at the time was just not really having a plan for how to scale an organization in a company. And I got to Google for two years, which was great. Watched like a real company that was run. Decided to want to go back and do startups again, but definitely not in advertising.

It's a shame nothing works. Worked out for you after that invite media sale. I mean, you went from the famously

difficult world of advertising to the famously easy world of healthcare, where it's just money falling off trees.

Of course, you know, you say that, but I will say, like, one of the things that drew me to healthcare, besides the fact that it's cool and it's fun and interesting, is that there really weren't any software people in it. Yeah, there were a lot of really smart people in software and in advertising working on very stupid problems, but they were always really smart. And I was found in the room. You know, you could look at a problem and there'd be 20 people who would have the same idea. And in healthcare was not the same. Felt like we had at least a little bit of an edge and that's what became Flatiron Health. So we left and that was.

This was when you founded Flatiron. So take us through the timestamps of selling invite media to Google and then starting Flatiron.

We sold it to Google 2010, summer of 2010. We left two years later in 2012 to start Flatiron.

You still have vacation for that time on your LinkedIn, by the way. That made me. I gotta chuckle looking that up.

Just trying to represent it accurately. Yeah, and then I took an actual vacation besides the normal work vacation. We started Flatiron. And actually to Google's credit, I'll give them, you know, they backed us with Google Ventures. Flatiron. We started 2012, we sold it to Roche in 2018. And that was a slightly larger deal. It's about $2 billion deal. And then I was at Roche for three years starting a nightclub on the side as a passion project, if you will, because definitely not to make money, that's for sure. Horrible business to be had.

Well, both you and Nat, your co founder, both like picked their passion projects and his seems to have turned out to be far more lucrative as a the trading cards. It seems like it's going quite well for him.

Yeah, no need to rub it in.

Yeah, I sound like your dad again. Yeah. Maybe tell us a little bit about Flatiron and what I mean it's such a fascinating company getting going in healthcare in the New York tech ecosystem in the early days. Talk us through what you guys were doing, why you found that opportunity. Yeah, maybe give us a little bit on that.

Yeah. We went on a little adventure to find a problem that we thought was interesting that a bunch of software guys could actually do some damage on. And we ended up finding this interesting thesis which was that in the electronic health record, like in the doctor notes and the physician reports and the radiology summaries of cancer patients, there was a lot of like really interesting hidden data that could be used to improve treatment, better design trials. There were like a number of use cases for it. But the problem was a lot of that data was stored in like PDFs and Word documents and images and things like that. And we actually came to the thesis cause I kept hearing physicians complain about I put things in to the EHR and I can't get them out. And that always like what do you like get what out and what do you mean by get it out? And you'd have to like poke and poke and poke a little bit. And we eventually realized that what people were saying is unstructured data is a problem. And that was the little bit of the aha moment. I had seen Google and others work on this problem at scale. Like how do you do unstructured data processing using humans, but using computers to make those humans more efficient. And that was the thesis. So Flatiron was a two sided company. One side we worked with cancer centers across the country to help them in their day to day. We had access to the underlying data in a privacy compliant way. We used clever software and a large human team to process that data. It was about 2,000 people at scale and then had biopharma. So think like large pharmaceutical companies, people building oncology drugs, cancer drugs on the other side of it. And that was the business model. And one of them ended up buying us, which was Roche. So it's a interesting, fairly niche business. It's really specific to oncology, it's really specific to a certain type of data set. But it was a fun experience and obviously a good outcome.

How did you go about actually finding that problem? I know when we've talked the past it was something about like Going to find experts that actually knew what they were talking about. And you did it. I mean first at invite, right College, you were 20 years old or whatever, right? To do that. Like I, I'm 34 and still don't know anything. So I don't know, like how did you actually find out anything as a 20 year old to actually start a company around? And then how did you port that over to Flatiron and go, I mean the notoriously similar end markets of digital advertising and healthcare, like how did you go about building expertise in both the

sister businesses really at the end of the day, no, look, you know, my theory is like I've never been better at finding like coming up with an idea than anybody else, but what I can do is talk to people. And we just were relentless about finding experts in the area, getting in front of them, pitching them an idea, listening carefully to the feedback that they gave and asking follow up questions. And that's how we did it. We spent about 18 months during that vacation time at Google. That's actually really what I was doing. I wasn't on vacation. I was traveling around the country talking to physicians, folks in pharma, folks at payers, just asking questions. The best thing I ever learned in all this is like once you have an idea, however shitty that idea may be, and trust me, our first ideas were like very shitty, just pitch it. And then we would hear from people like, well this doesn't work and here's why. And like those threads were interesting and we would pull on them and kind of get a little bit deeper into the weeds. We learned the terminology, we built the network. Uh, and one thing, Nat and I had a good little tag team going was, you know, one of us would be talking, the other one would be taking notes and vice versa. And every meeting we would ask for three intros, we'd get a follow up meeting. I just think of it as like systematically working through social networks and it's tedious, but it works. It just takes a fairly long time. Uh, so it's kind of like the only thing I've ever been good at actually is that. So I just try and do it

more often and now maybe give a little bit about, you're running I guess, two types of VC funds and so give us a little bit about both.

Well, one is not, one is not a fund very explicitly so myself, Nat, my co founder of Flatiron, and invite our former cto Gil, who ran all of engineering and pretty much all the important stuff at Flatiron and then A fourth, Amit Avner, who I know from my ad tech days. The four of us have been angel investing for a while as individuals, and we had an idea to pool the capital, turn it into a brand and do it more systematically. And we brought on two people full time. Olivia Benjamin from Bain and Zach Goldstein. A third Zach from Union Square, who work with us full time on this. So it's kind of a branded family office meant to be doing seed and series a investing with founders. So that's kind of the, that's the tech dollars, if you will. And then this new business I'm working on, the Curry Bio, or whatever we're going to call it, I have to

rebrand it after chicken tikka masala. Bio, I understand.

Yeah, exactly. Named after the famous dish, is focused in biotech and specifically in therapeutics. So I have decided to drop all of my software completely and work on a business that has literally nothing to do with engineering, at least software engineering. And I guess I'm a glutton for punishment, so this will be fun.

So, as, as always seems to be the case, crypto is very much in the news this week. So the Midas list coming in number one overall was Chris Dixon, who runs Andreessen Horowitz's crypto fund. The list was littered with other crypto oriented investors. And then Eric Newcomber got his hands on three separate fundraising decks. One for Paradigm, one from Pantera, one from Blockchain Capital, and then also had a bunch of information about the AUM and returns for a bunch of these different funds. And so I'll just tick through some of the stuff that Newcomer in particular took away. But I think one of the things that was interesting was just the level of returns and scale that these firms have gotten to. So Paradigm, as Newcomer reported, is now at 13.2 billion assets under management. Andreessen Horowitz has 9 billion in AUM for just their crypto fund. He also reported that Andreessen Horowitz went through their most recent crypto fund. I believe it was three. They went through that in six months, deploying $2.2 billion and have now raised their other a newer crypto fund, Paradigm, who's a very notable investor in the space. Their returns are currently boasting a, I think 700% IRR and their, their net DPI dollars paid in capital. So like what they've already returned to their limited partners is currently sitting at a 6.9x which is just absolutely insane. So I think we knew the returns in this crypto world were absolutely crazy and that's why all the money's been flocking to it and the number of big funds that are being raised. But I think just to see that the scale and magnitude of all this, not to mention have a Midas list number one investor come in from crypto only orientation, I think it was all just a little jarring to me to see just how much money is getting made here. Zach Weinberg, I know you have some opinions about the crypto industry in general and VCs profiting from all this stuff.

So many thoughts. One thought is how much diligence can you do to deploy $2.2 billion in six months?

Not a lot.

I'm sorry, what do you mean by the word diligence?

This thing you're supposed to do, which is to figure out if the company actually does something useful. It takes a while. It's usually.

I don't think so.

Company was where. Where that broke down as well. So. Yeah. So these are, these are tokens. I don't know if you've heard of them. Yeah, God, no.

I just like. Well, you said the key word here, which is token. And like, to me, the most interesting thing about that. We're leaving my like philosophical beliefs about crypto aside for a second. There was a point in that article, I believe, which was about a decent percentage of the returns being driven by the coins, not the equity. Right?

Yeah. And I've heard anecdotally that a lot of these firms have no interest in the equity and the governance associated with the companies. They much prefer to have these liquid tokens that are available day one to trade.

So let me just kind of play that back for you for a second. So I go to this company, I write them an equity check that doesn't really matter because I don't care about it. I get a first look distribution at a coin that nobody else can buy, and then I take that coin and I list it publicly so that retail can buy it and bid it up.

Yeah, that's right.

Does that sound like a security to you? Because that sounds like a security to me.

Yeah. And when you say it in that tone, it sounds like a little Ponzi scheme. MLM ish. So can't just say good things in

a bad voice and suddenly they become bad facts.

That's not. I thought that was the branding. Look, I, I'm not, I'm not suggesting they're doing anything wrong by any means, but I think it's pret that these tokens are securities and if they're not being regulated as such today they will be because they're being monetized just like it.

Yeah, it's a good point.

I don't like. I don't know if you guys do crypto. I mean, I always look at crypto investing as is it, is it an interesting enterprise software idea and that's what drives me to be interested or not. But the idea that you're essentially buying the equity but you're getting the coin value, there's just something that doesn't sit right about that to me because you're passing that risk off to the right retail at the end of the day. Am I wrong?

Yeah, it's like the meme stockification of venture in some ways, right? Like ultimately I haven't written any crypto checks out of the mostly enterprise and slight healthcare work that I'm doing. And the challenge, like finding a crypto company that has actual traction and interesting usage enterprise is basically impossible. It's the camel through the eye of the needle in some ways, right?

Yeah, well, it's the hammer kind of looking for the nail. I think everyone agrees this is like very interesting utility, but the reason you're not seeing equity value appreciation in mass is because it's all like speculation on the token side. It's not like big contracts or in general being landed for some utility. Right?

Well, well there are big, some big contracts being landed, but they're, they're like service contracts, they're not software contracts. And that's like, in some ways almost worse.

It's like other people talk through that distinction. Like what, what, what you mean?

Yeah, yeah, it's, it's, you know, big co X hiring some interesting crypto company to do like effectively consulting work for them. Right? Not building at, not actually selling a repeatable software product. And the challenge that, in my view, at least with a lot of these contracts, is it's almost like a derivative of speculation, right? It's like you can speculate directly on the token or you can speculate that someday this technology will be interesting. And if you're flush with cash, better to hire a company to do some consulting work for you at low six figures right now to basically custom one off build something rather than ultimately buy the token itself. The token, to Zach Weinberg's point, still ends up hitting retail investors because the IBMs of the world are making good money selling ridiculously unuseful custom implementations to random Fortune 500s.

And to be clear, like, I'm all for speculate all you want on a token on A coin. I don't really give a shit about what you're speculating on. But if you are passing that risk off to a retail investor without proper disclosures, and they're not an informed investor in this process, that's why we have the sec. That's why we have rules. Because people used to do this and take advantage of the average person financially, and it just hasn't kind of like come full circle yet. So to me, it's not about right or wrong. It's just follow the rules. And the rules are very far behind the speed of this market because the technology is somewhat remarkable. And there's your challenge right there.

The one interesting thing about this whole wave of new crypto specialist venture funds. You know, we talked about this on previous episodes. Like, venture is such a commodity that ultimately the only distinguishing feature is brand. There's no, like, actual enterprise value in a venture.

The guy doing a podcast is explaining that to me.

Is that, yeah, shockingly enough, it turns out the incentive structure for doing a podcast and the incentive structure of the way you succeed Adventure, that Venn diagram is just a circle, Zach.

There's not a lot. Three cartoon coins coming next.

Yes. So what I think is interesting about this is there's this foundational disagreement, right? If you remember back in December when Marc Andreessen and Jack Dorsey into their little Twitter, like, spat back and forth, and then Chris Dixon weighed in and they were blocking each other. And that was kind of the beginning of Mark Andreessen coming back on Twitter and all the block memes and all that stuff. And it was. The root of the whole thing is basically, you have two sides of this argument, right? On the one side are people like Jack Dorski that are bitcoin maximalists, that say, hey, we all have to rally around Bitcoin, because that's the only way this is going to be able to replace the fiat currency and provide all the utility that we see in the future. Right? And then on the other side are Marc Andreessen and Chris Dixon, who have profited in a very meaningful way from all these different coins. And Bitcoin as a technology has a ton of limitations from what you can actually do from a utility standpoint, right? Like the. The amount of energy that it consumes, the amount of, like, you can't actually trade NFTs or things like that using Bitcoin, Right.

That is being worked on right at the end, like, like Lightning Network will expand the speed and the utility. You know, you'll see that being chipped, sure.

But the core of it's never going away. It's going to this will problem going forward, even if some meaningful portion of folks shift over to lightning, etc. Etc.

And so I think what Jack Dorsey says, he said on Twitter is that the crypto is being controlled, Web3 is controlled by VCs because all these firms are making so much money off of these pre investment, you know, tokens that they're getting, right? And that it's not actually, it's. It has this very interesting kind of ethos of democratization and decentralization because the technology has all that, but the profits aren't actually accruing to the individuals, right? The profits of all these new coins are accruing to a small subset of privileged buyers, right? Which is this weird paradox that exists in the crypto ecosystem.

It's odd that the multi level marketing scheme kind of like accrues value to the top, which is exactly by design, I mean the whole decentralization thing, and I'm not an expert in this, but can you name me one successful scale, decentralized organization in the history of the world? Like successful maybe what the United States of America is that are like efficiency

example there we're talking direct democracy versus representative democracy, right? Like daos are direct democracy, which is terrible. I mean I just, there's no way that ever works.

Every time I hear about some like egalitarian society, it always ends up as an HBO special about some cult leaders, you know, like in jail for.

That's right.

That's what I was like is, I feel like the answer to any question like that is like someone comes back with well what about organized religion, right? And I, I don't need like that's just like the end all argument. Then you, you, you either cancel yourself one way or yeah, that, that, that seems like the answer. But no, I agree. I mean the thing is we're reaching this technology, technology scale that's, that's unprecedented, right? And connecting. We've talked about this in the past, but like maybe all the weirdos in the world weren't meant to connect with one another. Like maybe that like space and time constraints were actually good to keep the weirdos from your local town, like from TedX, connecting to the weirdos across the country, right? And so now we're faced with like very fundamental primitives of like human nature and all this stuff. And so I feel like in a similar way we are reaching like this stuff was impossible in the past, right? And it took, it took you know, whatever months to cross the Atlantic via boat. And so now we're, we have all these new problems that, that are actually occurring for the first time. I don't know, it's. I would hope they're going to be figured out in some way, but who knows, right? It doesn't seem like, like it seems like it's going to the thing that profits the most and not what is the most idealistic, which is maybe human

nature in general and also maybe the job of VCs. Right, sorry. Like the job of, of Andreessen is not actually to fund the revolution, it's to return capital to LPs. I mean, we can, you know, try to dress it up much as we'd like. And I think it's, it's a lovely thing to do that. But ultimately if, you know, we just, we just ragged on Elon for 30 minutes for getting on stage at Ted and saying he has no profit motive to buy Twitter. We can't then turn around and say, gosh, but wouldn't it be nice if Mark Andreessen had no profit motive when Chris Dixon invested in Coinbase?

Zach, I can be exactly as hypocritical as I want to be and talk out of both sides of my mouth. And you can't do anything.

Our podcast, on our podcast, we don't have to be.

Yeah, this is going to get edited out because I will not be called out on hypocrisy on my own podcast here.

What's the phrase? Staircase up, elevator down, Something like that. Right? We are in that staircase up. And it's a great time to be a crypto investor because really what you're monetizing is your early access and that's a valuable thing.

And Zach, you know, to your point a second ago, like, it's so interesting, we were talking about brand a minute ago in venture, like there's no enterprise value in venture firms, right? There's only the brand of the fund itself, in some cases the brand of the investors. And so you see this like in real time, these crypto funds where you can have two, you know, super bright guys start Paradigm, and suddenly that's the hottest crypto fund in the. And they're beating huge firms routinely, right? Like it does feel like the moments to capitalize on brand in a way that, you know, the large multi stage funds, certainly not mine or Logan's large multi stage funds, I mean, the other large multi stage funds are a beat or two behind on.

Well, call me like a capitalist purist for a second, but I would love

to call you that Zach.

At least I think in most cases I am. And I would view like investing in a company in some reasonable way, supposed to be like the future cash flows of the business. Like, that's kind of what you're supposed to be investing in. Some theoretical world where interest rates are a little higher.

Sure. If you're like, into numbers and stuff and like fundamentals. Yeah, I guess, yeah.

Early stage ventures have a lot of that. But I understand conceptually that some people care about that.

Income statements and things like. And there's this thing actually out there called an EBITDA multiple that's not a revenue multiple. I'm not sure if you've ever seen that before.

No, not at all.

Never.

I've never actually seen a company make money.

Curie, right? Is that right? Yeah, it's similar.

We exclusively monetize our recipes, actually. So.

Yeah, good.

Ah, there.

But I look at it, it's like, okay, if you're investing in these businesses, which have no real ability to monetize from like a revenue stream standpoint, you're really investing in the coin. Like just it. There's something about how we think about these businesses and what you're actually investing in and who is allowed to invest in these that feels very uncomfortable. And there. I'm not suggesting, again, anybody's doing anything wrong, but you have to think when someone takes a serious look at this, they're going to look at this as like a speculative nature bet that's being passed off to people who don't understand it.

Yeah. Oh, for sure. And that was a conversation when we had Ryan Breslow on a couple weeks ago, we had a conversation about, like, what level of sophistication and risk should you allow your individual employees to take? Right. And this was around loans for early exercise into early stage companies where you're already employed. And so I think there is this philosophical question that Robinhood, the trading app, has brought on of like, all this democratization and access, but the. The playing field isn't totally level from an information standpoint, from an access standpoint, from all that. And so, like, it's not. We. We might have a utopian view of what could be, but the game on the field is definitely slanted in one direction. And so I. All these, these coins and. And tokens and all that. What am I? A favorite tweet I saw was the difference between Bitcoin and Ethereum is that Bitcoin is a pyramid scheme, while Ethereum is a platform for pyramid schemes. And heck, people really like platforms and I think that's like a funny, it's like a funny take on just some, all this stuff. And I had a tweet that I think is probably what actually got me blocked by Chris Dixon. But it was like, what does your cryptocurrency say about you? And I was going through it, I was like, dogecoin shit posting. Drug dealer, ethereum, business minded drug dealer, bitcoin boomer, drug dealer. And I got like the crypto community very up in arms about that. But in general, like these, all these things end up being these, these brands that like, you know, in the same way organized religion, the same way, sports fandom, the same way, whatever. It's like people identify around these different currencies in such a weird way. And so, I don't know, I mean, we're in this very weird time here.

If you have to.

This is your second time mentioning organized religion. Do you just not want to raise another fund or like, what's the motivation here?

Wait, is, is. I thought I said a few weeks ago, religion's out these days anyway.

If you have to pick, besides monetizing bitcoin via religion, the, the use. The use case that holds and let's leave like digital gold out for a second, which I think is proven to be somewhat viable and we'll see how big. But the actual like real use case, besides storing money in bitcoin versus gold,

what is it it besides drug dealing or including?

I, I was told by the police that the drug dealing on the, on, on crypto rails is a bad idea. Right? It's all like tracked and everything.

So you saw what happened to Razzle Khan. You know, she, she was trying to get out like $2 billion, $3 billion and got cut with it. I mean, I think it's interesting, you know, the NFT phenomenon. I, it's, it's, it's a very interesting thing that's going on right now. And at the end of the day, what is value and what people actually ascribe to these different things. And if people worth something, then I guess at a fundamental level it's worth something. Like I can't really draw a distinction between what, you know, a replica of the Mona Lisa versus the Mona Lisa itself versus the right to owning a JPEG like says about you and the value of it. I, I think is this a conversation

they're having at the Twitter board level? Like, what is value? What does it really mean to be worth something?

What does it mean to deliver value for shareholders these days? Anyway, that's fine.

Were we just one big nft?

Well, to bring it back full circle, I think we saw this week that Jack Dursley's first NFT went on sale. The tweet of the NFT of his tweet went on sale. And the guy was thinking he was going to raise $50 million for for it. And I think the top bids came in at like $280 or something. Right.

Which, in fairness, is $280 more than I would have paid. So that is worth something.

Yeah.

Only business worse than that is a nightclub.

Thank you, everyone, for joining the 12th episode of three cartoon avatars and bearing with the different cuts. And thank you, Zach Weinberg and Dan Primack, for coming on as well. I think we'll make this a more regular thing incorporating guests going forward. And so, yeah, I really appreciate everyone listening.