10 Startups w/ Stock Grants That’ll Make You A Millionaire | Sara’s List 2024

All right, today is everybody's favorite episode. It is the Sarah's List episode. So we're talking about 10 companies that you can become wealthy with without having started it or invested in it or joined early. It's called Sarah's List, and I got a little presentation for you. If you're on audio, get over to YouTube right now because I have slides that are gonna be fun. So, uh, it's called Sarah's List. This is Sam's wife, Sarah.

Oh, that's hilarious.

She's on the COVID of My First Million. And the reason why is because she has an unlikely story, a story that I hadn't really heard. And when I heard it for the first time, it kind of shocked me, which is, I think when I heard this, she was about 30 years old at the time. She was a self-made millionaire. Uh, but she didn't start a company. She wasn't, you know, killing herself working 100 hours a week like we were. She wasn't paying herself scraps. She was getting paid a nice salary with nice benefits. She worked at a great company that had good culture. She didn't have to make risky angel investments and get lucky. She was not a high-profile exec that just got, you know, some huge pay package. And she wasn't lucky like the Facebook graffiti guy that just got a bunch of stock from, from Facebook and, you know, made $70 million. And so her story was almost incredibly boring. It was incredibly simple. And I just couldn't believe it. I was like, I'm trying so hard to make, make a million bucks here. That was such a better path. And so just to recap, you know, self-made millionaire, didn't start, didn't have to start the business, didn't have to do risk angel investing, wasn't a high-profile exec, wasn't the graffiti guy. Uh, what she did was she joined Airbnb. And so if you look at this chart, this is Airbnb's valuation over time. And there was a period when Airbnb started that was the high-risk period. That's the flat part of this curve. And to join Airbnb then you had to see something that was not obvious. You had to believe something that took a huge leap of faith. You had to work like crazy in a tiny apartment. There's a fun video, by the way, of them taking like midday dance breaks where they just played a bunch of— everyone stands up from their desk and they're dancing. You had to do weird startup stuff. There was a guy with stinky feet, probably. That's not even what we're talking about, right? She joined after it had crossed, you know, a $10, even, right, Sam? $20 billion valuation.

Yeah. And if I remember, like, they already had that huge office. Do you remember that huge office at 888 Brannan? And I imagine there was like 1,000 people plus working there. Like, it wasn't small.

And you and I were living in San Francisco at the time, and it was stupidly obvious. Like, you could have slapped me in the face and said, what's a company that's a winner? And I would have been like, Airbnb is a company that's a winner. It was like obvious at the time. I had friends at Uber, same thing. Uh, Uber was obviously a winner at the time where they were already multi-billion dollar companies, but because of the space that they were in and how dominant they were, it was clear that they still had room to run. And what we call Sarah's List is basically a, a function of using your time as your investment. Most people don't think of their job as an investment decision, but your time, your talent, where you're gonna spend 4 years working is an investment decision. You should be thinking about it like a venture capitalist, and especially if you're working in the tech scene. And so these are all venture, you know, venture-backed tech companies that we're talking about. So the criteria for Sarah's List. it's a company that has product market fit. It's just a clear, obvious, successful company. Uh, doesn't mean it can't fail, but it just means it has product market fit. It's not in the scrappy figure it out phase and, and, and, you know, wandering phase of startups. It's funded, it's growing, and you'd get a nice salary and benefits. They got oat milk in the fridge. Um, and that if you joined and you got a $200,000 stock package, so that's like, you know, getting 50 grand a year of stocks. Maybe you, maybe you got $150,000 salary and $50,000 of stock. That could become worth a million plus in the, in 5 years. So can it 5x in 5 years? We're not looking for max upside. We're looking for lowish downside and enough upside where you can turn, you know, a $200,000 stock package into, you know, $1, $2, $3 million would be the, would be the outcomes that we're looking for. So we did this once in 2021, 3 years ago. And before we tell you what we picked and how we did, we got to time travel back real quick. So let's do this fast. So back in 2021, this NFT sold for $69 million. Those are the good old days. Tom Brady was a football player. SBF was a hero. People cared about whoever these people are. It was a simpler time and the stock market was running up. It was on a 10-plus-year bull run. It had its peak in 2021.

For the listener, people cared about, quote, these people. These people was Prince Harry and his wife. Whoa.

Yeah.

See, I don't even know who it is.

Point proven.

Thank you.

I rest my case. By the way, did you know this? Sesame Street and 7-Eleven launched VC funds during this time, and so they had their own venture funds. Everybody was getting in on the game, but nothing lasts forever. And so since then, just to give you some data here, so since then, about 36% of startups who have raised money since then have raised at a lower valuation. That's not to count the companies that died or the companies that are avoiding raising because they don't want to raise down rounds. This is like transactions that cleared 1/3 of them are clearing at a lower price of all startups. It's even worse if you look at late-stage startups. So later-stage startups, which are the ones we're talking about, Series C, Series D, they're down between 30% and 60% on average. That's the— that's the— that's what you're seeing across the board. Sad news. 2/3 of employees right now that are working at these companies are working for options that are actually worth zero, and they probably don't even realize it yet, meaning they got a pay package of stock options at a $24 strike price. That stock is currently trading in secondary for $8. So all of their shares are underwater. Currently only 33% of the shares are in the money, as they say. All right.

So what did we pick?

We picked about 11 companies. I think we shared one company, but we had each picked around here. Here's how we did. So it's not great. All the stuff I just told you is basically our big fat excuses as to why it wasn't great. We both had two hits. So two things that did that did go up in a sort of step change way, you know, sort of a 3, 4x so far in the 3 years. Uh, I had 2 that were down, like valuation lower than it was previously. You had 3 that were down. And then there were some pushes. And a push basically is like, has the same valuation as it had before, but that's actually sort of a win because you beat the market. So you didn't achieve the Sarah's List dream, but you didn't take the huge write down that a bunch of—

You're wrong about Next Health. Next Health is wrong. NexHealth is wrong on here.

Oh, what is it actually?

Well, the word neck, there's two companies. One is Next, one is Nex. So I think you, you, there was a little confusing.

Uh, but someone in the research department's getting fired here.

No, just, they're just missing a T. Uh, Open Store and, uh, well, so Open Store is down.

It's unclear, but I mark it as down and it's a little intellectual honesty. I don't think, I don't believe that it has achieved its, its, its, uh, its status to be called up. We have it as a TBD. I gave it a, a less generous interpretation of down just to make my own grading harsher. This is not about them. It's about me grading my own picks more so.

And you think Figma's down too?

Well, Figma tried to— it's not a down, it's a push here. It tried to sell for $20 billion, didn't clear that. The transaction didn't go through. So that would have been a 2x. But then the last, I believe, round of funding— and this, by the way, this is not all very obvious. So companies don't always announce their valuations. There's leaked valuations to the media, which are not always true. There's valuations that come with a bunch of strings attached. So maybe you've got a, a good number, but there's all these caveats and liquidation preferences. And a lot of this was we asked people who own secondary stock marketplaces, we said, hey, what is this company trading at right now? And so it's incomplete information, right? We're doing the best we can here with private stock information that you don't, you don't always have.

By the way, Sarah, my wife, who this is about, had a job offer at Figma, like 3 months before their acquisition offer, which like it had that gone through, I, it, I believe it would've been a 2x return based off the valuation. So we almost, we almost had a mini hit again, but not quite.

Yes, exactly. All right, let's get to the 2024 picks. Uh, we're gonna try to do better now. The, the good news is the, the pick, any picks you made, anything in the vintage of 2021, like I said earlier, the, the all the companies basically got shellacked. Everything got re-underwritten. Everything got corrected. But now where we're at, I think we are at a less hypey period of time. And so this cohort of picks I think should be better. But again, not financial advice. Really, neither me nor Sam actually are trying to go get jobs. This is kind of like what we would do if we were going to get a job. Sam did this with Sarah when she was looking for jobs. So this is for fun. Let's just put that out there. We're not giving financial advice here.

So I have like 5 or 6, but then I got a bunch of other ones that were like, it's like scrap.

Like I didn't, quite get to.

What do you think is the— let's say we each bring 5 to the table. I bet you there's going to be at least 3 that we are overlapping on. What do you think?

Yeah, 2. I'm guessing 2 overlaps. And by the way, I'll say I think a good hit rate on this— good hit rate would be 6 out of 10. 6 out of 10 have a step up where 5 years later— we're not even 5 years after the 2021 ones yet. We're only 3 years in. But 5 years later, that they're sort of like a 4 or 5x in valuation. If 6 out of 10 did that, I think that would be a a great thing. I think 3 out of 10 would be sort of the lowest bar that I would accept. Hey, real quick, I want to talk to you guys. If you are new to this podcast, if you're new to business, I have a cool resource for you. So the folks at HubSpot who sponsor this podcast have put together a kit, a guide for people who are getting started on their entrepreneurship journey. And it has a couple of cool tools I want to call out. It's a free tool, by the way. This whole thing is free. You can just go download it. It is a solopreneurship guide. So for people who are going to be, you know, an army of one, how do you get started? What's the mindset you need? What are some tools that you need? What are some Communities you could join. They have some cool resources there. So if you're just getting started and you're a beginner in this journey of entrepreneurship, check out this kit. The link is in the description below. And thanks again to HubSpot for making this podcast possible.

All right, I'm gonna go first.

I'll start with an obvious one. It's probably one that you have too. OpenAI. And by the way, there are no bonus points for difficulty in business. The fact that everybody knows OpenAI, I'm not trying to give you a secret company, a secret stock tip you've never heard of. The point of this often is that the companies that are going to be big juggernauts are hidden in plain sight. So OpenAI, currently valued at $103 billion. It's doing about $3.5 billion a year in revenue already. The bull case. So what do you need to believe if you're going to join this company that you, that you think it's a serious list contender? It's the first credible Google competitor in about 20 years. It is something that actually could displace, replace search, which is like, you know, when people need an answer to something or they need help with something, where do they go? It's the fastest growing company ever. That's nice. So it took them, you know, 2 or 3 months to reach 100 million users. Uh, it's 5 times faster growing than the next fastest product ever. It reached $3 billion in revenue in the last, you know, in like 3 years, which is pretty crazy. And it's unique because it's an enterprise company, it's a consumer company, and it's a dev tools company at the same time. I think that's pretty, pretty unique and gives it a lot of upside. What you would be worried about if you were looking at OpenAI is it's probably the most competitive market on earth right now. You are getting competition from every— the most well-funded startups of the most brilliant people, as well as the biggest tech companies in the world, Facebook, Google, Amazon. Everybody is coming after this market. So that's the downside is will OpenAI retain their lead or not?

Yeah. Yeah. The problem with OpenAI— can you get a job at OpenAI? Not only is it the most competitive, like, Not only is it the most like competitive space, like I imagine they have to have one of the more competitive like job applicant pools. Dude, I read some crazy stat that Tesla has something like 50,000 people a day applying to work there. And I have to imagine that OpenAI, it's somewhat similar where they are just like inundated with applications.

Well, yeah, I mean, but we're talking our listeners, the cream of the crop here. This is the crème de la crème. So yeah, of course they get a job wherever they want.

So would, oh, will OpenAI 5x the current valuation? Yeah. I mean, yeah, yeah. That, that, yep. I agree with you. Um, all right. You want me to do one?

Mm-hmm.

All right. I've got one called Retool. Do you know what Retool is?

I know Retool. I use Retool and I wish that I invest in Retool. I tried to invest in Retool early on and I missed it.

I'm not a user of it, so it actually would be best as a user, uh, explain what it is.

So every technology company has the same situation that they would all homebrew a solution for. The situation is you need a backend admin panel. So you have this, I'm sure, with Hampton where, uh, oh, we need to add or remove a member or hey, this person changed companies. They're asking if we can update their, their thing or hey, can we change their membership status from active to suspended or whatever, whatever, some admin function that you need to do. And it doesn't come out of the box with whatever, you know, you're using 10 tools to run your business, but like, this is the, what's the tool for your business? And so Retool is a simple way to make the admin, you know, uh, panel for admin system for your, for your company where anybody in the company who's not a developer can actually go in and, you know, add, remove, you know, make changes to essentially the database. That's like the simplistic way of saying it. It's basically a backend tool for any business that you can customize and your developers can build once. So that anybody in the team can use. So it's an internal tool.

And here's this crazy stat. So the founder, his name's David. David, uh, David, David's a baby genius. So David is, David started this when he was like at the University of Cambridge when he was like 21 years old. And he's like, he's got one of these like stories where he basically before this business, he had a, um, a payments app that I think did okay, but whatever, he quit working on it. But like when you see like a 19-year-old kid do that, you're like, okay, you, this, and you have a payments app at 19.

18, you already won.

Yeah. And you're going to one of the best universities on earth. Like, all right, something is interesting here. He gets into YC, comes up with this idea, and here's this crazy stat. 50 or 60%, like 50, between 50 and 60% of all software in the world is internal-facing tools, meaning employees who use, uh, internal-facing tools.

That's a one-chart business right there.

That's a one-chart business. And not a lot of people focus on that because you kind of focus on things that you see and use versus things on the backend that you maybe you kind of get, you don't really touch that often, but the business has crushed it. And so they launched in 2017. Their latest valuation is $3.7 billion. They've raised $150 million from Sequoia and a bunch of other great companies. Listen to this growth. First 9 months, $500,000 in revenue. In 2018, they hit $2 million in ARR. In 2024, they hit around $100 million in recurring revenue. So it's got to be one of the faster growing businesses out there. And I've been watching interviews with this guy, David, the founder. Dude, he's amazing. He's, he's an amazing company. So at a valuation of 3.7, I think there's room to run. I think there's a 5 or 10x potential here. I mean, that's got to be a— they got to be a huge business, but the market is just massive. And I like the guy.

I think that's something we're gonna see in a bunch of these, which is that the CEOs seem to be remarkable in all these businesses. And that's just— if you're going to make a bet on a private company, you want to be at one with like, one of these all-star CEOs. My Retool story, I, two, two lessons learned here. One, invest in your P&L. So I had this problem. We had, we were always trying to build these things internally. The devs never wanted to work on it enough because it's an internal tool. So who cares? And when we got Retool, I was like, oh, this is great. This is a no-brainer. And so I, the first lesson I always, I always remind myself is the best place to invest is in your P&L, meaning look at your expenses and go figure out which of those companies you think other people— you wouldn't want to cancel and other people are going to have as their expense to go invest in that company. Retool was one of those. And then second thing was, I— once we got acquired by Twitch years later, so the first one was probably 2017, 2018. The second one was 2020 or 2019. I met Twitch and Emmett, who was a YC partner, was like I was at a meeting or he was coming to a meeting with me and he was running a little late and he's like, oh yeah, sorry, I was doing office hours with this YC company that just had, they just hit this point. He's like, there's this thing that happens where you go through YC, it's all good. Then you have after YC where, you know, you're just like, you're back to being like a normal struggling company. He's like, and then sometimes you hit this inflection point and shit just really starts to work. He goes, yeah, this company Retool, this is really starting to work. When you're, you know, when a really smart friend tells you that something is hitting an inflection point, like drop everything and go, go, go hunt that down. I remember at the time thinking I shouldn't invest in this. I saw the guy, David, in the cafeteria because he had just met with Emmett and wearing his Retool shirt. And I went up to him and I was like, nice shirt, love Retool. And then that was it. That was my, all I needed was that 30 seconds.

Was he like a little guy?

Like, how do I invest?

He was young. I think he, I think he was like a college kid almost. Yeah.

He looked like he just could have been any employee at the, at the company. He was wearing his own shirt anyway. So Retool, I like the pick. Valuation is high. So I think 4 or 5x is tough from there, right? To become a $15 billion company is tough, but I think it's a good, really good company. Um, all right, let me give you my next one. The next one, Mercury. You're nodding. Do you have this one?

It was on my, uh, I had it on my list and then I removed it because I thought you were going to pick them.

I, I did pick Mercury. So Mercury is a company that I use. So I'm a, again, look at, look at the tools you use that you don't want to change. Um, So I use Mercury for, I think, not 1, 2, but like 6 of my companies now. Um, it's just an amazing product. So the valuation is still in that sweet spot range where it's, uh, I think it's $1.6 billion right now. So the valuation is, as they're at, here's the bull case. Here's what you need to believe. It has a rare combination.

Well, hold on. What, what Mercury is just a bank that is built for small businesses and it's easier and simpler to use. It's basically just a normal bank, just easier and better.

If you're a startup and you need to have a bank account, which every startup does, uh, you can use a bank from like, you know, Bank of America or whatever, like, um, you know, some, some traditional bank where you're going to use their product and it's going to feel like, you know, a bunch of 50-year-olds hired some web shop to, you know, outsource this tool that they needed, like the second, like second, second-class citizen. Whereas Mercury is like, oh, a founder made this. I get it. It solves all of the founders, all of the problems that a founder would have. I get it. And it's true. Imad was a founder. Of multiple startups before he made this, and now it's like the best product for startups. So product's amazing. It has a rare combo. It's growing fast and it's profitable, which is great because a lot of the companies that get written down or the risk comes from they're not profitable, they're burning so much cash that if the growth ever slows, all of a sudden you get this huge discount in the valuation. So the fact that this is profitable means there's a margin of safety here. Silicon Valley Bank used to be the bank of, of choice for Silicon Valley startups. It imploded. It was a $34 billion company with $7 billion in revenue 2 years ago, and it imploded because they mismanaged risk. Nobody has really replaced them. I think Mercury is the best position to replace them. So if you think about like what's the shoes they could fill, they could fill the SVB shoes as a $30+ billion company. They're the category leader. I saw this great quote from a Sequoia partner. He said the category leader in any category Tends to get something like 75% of the revenue and 50% of all profits that are going to be in a, uh, in a market, which I, I don't know if those numbers are exactly right, but it's directionally correct, which is that the winners of every category take this lion's share of the rewards. And I think they have a good moat. I think they have a great brand. It's letting them get customers, you know, for free and regulatory moat as well, which is, this is not a simple thing that any, you know, any person could go start. There's a lot of obviously like financial compliance and regulation. Now, one thing to caveat, we call them a bank. That's because to the customer it feels like a bank. Technically, they're not a bank.

Who do they use?

So they use like Choice Bank, I think, and Evolve Bank underneath. So they're what we call like a neobank, you know, just like a finance platform, basically. And the bear case, the other thing that, you know, the worry would be, can they grow with their startups? So some products are great because you get them while they're young and you grow with them. And other products, you get them while they're young and then they graduate off you. And as soon as they become really valuable customers, they take their business elsewhere. I think they're going to be able to grow with startups, but that would be the risk here. I didn't find honestly much of a bear case. Do you? I don't know if you have a—

Yeah, I've got a bear case. I think I almost always bank with Chase because I've just always been afraid of, can I access that money? And it happened recently where a lot of people were using Mercury as— I mean, not to shit on Mercury. They were using lots of different things. And they couldn't get their payments out or their payroll out because the bank, the banks are working.

Bank.

And SFB was one of them. They're no longer in business because they're this huge company that mismanaged a bunch of stuff and it didn't work out. And so, yeah, I think that's a massive bear case. I think that the reason I bank with Chase is because if Chase were to go out of business and have the issue that Silicon Valley Bank had, America would basically go under.

Too big to fail.

Yeah. And I always knock on wood when I say that, but a little bit like that where it's like, you know, I think Chase is like I would have to look at the stats, but it's something like 5% of like Americans use it. So it's like a pretty big deal. And so, yeah, I think that's a bearish case as to why.

So I don't think that's necessarily a bear case because first of all, they have like, I think, $5 million FDIC insurance now. Like they offer like 20 times more FDIC protection than, than they, that they need to or than the average bank does. So I think they've, they've got some features that help with that. But the other thing is like, I think the proof is in the pudding with this, which is that if, uh, while it's understandable to say, oh, you know, I, I choose to go with a too-big-to-fail bank, if you just look at kind of where the startups are voting with their feet, this thing is growing so fast that obviously people are making that choice already. So it's not like a future scenario. It's like today that choice exists and people are making the choice to go to Mercury. So I don't see a reason why that would change later necessarily. Like usually when I think about a bear case, like What could go wrong in the future? Whereas what you're talking about, which is maybe people just prefer to use a traditional kind of 100-year-old bank because of the track record, they have that choice today and people are like choosing to do the other one. So, you know, I think that's less of a bear case.

Last weekend, because I'm a client at Chase, they gave me box seats to the US Open and it totally worked. I'm going to bank with Chase for as long as they'll have me, so long as I get tickets to the US Open. So as soon as Mercury like starts doing these wide-eyed perks. They ain't shit. Like, I want, I want a fucking fruit basket. I want a gift basket. If I don't give a gift basket, you don't get my business. I've changed, man.

I mean, I'll take a 20-piece nuggets from Chick-fil-A. Like, I don't, I'm not, I'm a simple man. I don't need the US Open. This is easy.

Oh my God. They took me, I got these like amazing seats to the US Open. And it worked. It worked. It looked like it worked. I get it. I fell for the trap. And so, but yeah, no, I think Mercury is a great business. I think the founder is pretty badass. So yeah, that one's good. All right. So you said that you were going to look at like the founders and, or no, sorry, you said you're going to use your P&L. So where you spend some of your money. I like that. I also do like, where do I spend some of my time and where do people spend some of their time? And so a tool that I'm playing with It's called Cursor, and I think Cursor's pretty amazing. And so, and I'm gonna tell you not my story, but the reason I've been using it, but there was this little girl, she's 8 years old. Her father's on Twitter and her father's a developer, I guess. And her father tweeted something out saying, I'm trying to teach my little girl how to code and we're using Cursor. And here's a FaceTime of her, like a Loom, like a screen record of her learning how to code. And within 12 minutes or something like that, She's built a website and she used Cursor. So Cursor is this really cool tool. It's got a lot of hype right now. It just kind of— the easiest way to describe it is it's sort of like Squarespace, Wix, or any of these other website builders, but it uses AI and you talk to it a little bit like a person and it makes it really easy to edit code. Now there's a bunch of pros and cons to this business. The pro is I think it's amazing. Like, I think that this tool is awesome. I've been playing with it. It's super good. Their latest valuation is $400 million. I don't think that that's insane. So that's like, there's opportunity there. I think that the con, and this is a big con, which is these website building tools, dude, their PE multiples are shit. So you look at like Squarespace, Wix, Weebly, do you remember all these? Like they don't trade that well, so they can do billions in—

Yeah, but I think you're pigeonholing it as a website builder. It's not a website builder. It's a, it's an IDE. You can code anything in case—

You can code anything in it.

Yeah.

But it's still, I think in that category in terms of, uh, you don't think it's in that category in terms of when you look at competitors?

Yeah, I think it should be, uh, GitHub Copilot, Replit category where it's a, where it's a coding environment where a programmer can become now an AI-assisted programmer. So however good you were, however efficient you were, however productive you were as an engineer, as a programmer, you can now be, you know, some multiple more, maybe it's 1.5x more productive, maybe it's 10x more productive as the AI improves. And so I don't think, because, you know, Wix and Weebly, these are like, you know, my sister needs a website for her preschool, so she goes to Squarespace and makes a website. She's not gonna, she's not gonna go to Cur— well, today she's not going to Cursor for that. And also those tools could never do what a Cursor could do where it could build full applications, you know?

Yeah, I feel you. I feel you. I still think that like, all right, so, uh, we use, I use Bubble, you know, Bubble. Mm-hmm. Um, Bubble's like an app builder. Uh, this is a little bit of a competitor to Bubble. And in my head as an investor, and potentially as a user, I think it comes into like, it uses, it's like the same churn as a small business or a website builder where you spend $10 a month and there's not always a massive reason to stay on the platform versus all the other competitors. Like it's pretty easy just to like up and try different ones. Do you know what I mean? And so for that reason, I think it's a little bit similar in the terms of, in terms of valuation.

Right. Um, okay. I have a, I have, I was, I looked at Cursor very close. In fact, they were on my first draft of companies to be on here, but then as I did more research, I went with another company that you'll see at the end of this.

So, okay. But what do you think about Cursor for a $450 million valuation? What do you think?

I think, I mean, I think you're getting high upside, high downside there because, uh, you know, that valuation is not based on, it's not based on revenue. Um, it's, it's based on like, you know, this, this vision of what the future might look like. And that's great. And I think Cursor is awesome right now. If I could invest in Cursor, I would totally invest in Cursor right now. But I think it is more risky than some of the other ones we've talked about so far.

I think that's true. They're at a $10 million run rate, I believe, or I don't know if it was run rate or that's actually what they did in revenue. But yeah, it's tiny compared to the valuation. What do you have then instead? What's your competitor do it?

I'll show you. It's my last one, but I can't rearrange the slides here. So you're going to have to wait on that. Um, when you told that story about that little girl, I thought you were pulling a Kamala Harris and you were going to say that little girl was me at the end. And I was pretty ready for that emotional landing. Instead you were like, that was just somebody's daughter.

I just follow grown men's daughters on Twitter. I don't know.

It was like, where are you getting your tech advice, dude?

It was, are you, did you see that video?

I did not see that one, but I've seen some kind of amazing things. Cursor demos right now, all the rage, dude.

All the rage. All right, keep going.

All right, my next one. I don't even know if you've heard of this company, Epirus. Do you know this company?

No.

Okay.

So I don't like that name. Epirus. Yeah.

Epirus. So this is a Joe Lonsdale company. It is a weapons company, a defense company. And I don't know enough about Epirus because it's a very secretive company. Um, and it's very private to tell you that this is the pick. What I actually did was I put this here as a placeholder, as a general strategy. So one thing I would do if I was interested in this kind of Sarah's List concept, finding a company I can go join. That the stock is going to be— my stock package is going to be appreciating, you know, rapidly. I'll get a 5x in 5 years. I think that the way Anduril hit for us last time, there are now like 10 more Anduril-type of companies that exist that are inspired by Anduril that are worth checking out. Anduril itself might still be a contender, by the way, um, but there are more companies. So Epirus is basically, uh, it's like long-range, you know, like defense weapon or whatever.

Dude, if you go to their website, it's Epirus Inc. It basically looks like some type of like electromagnetic thing that shoots like radio waves into the sky and brings down drones and planes.

That's exactly what it does. It's an EMP pulse that will take down, you know, a drone or a missile or something like that without being a bomb. Like you don't have to like, you don't have to bomb something. You could just disable it.

It's just magic.

There's a great story, by the way.

Is David Blaine the CEO? Because this looks magical. Like when I see like invisible rays.

That's such a good pickup line. I'm going to use that next time I'm trying to like talk to a founder. Be like, but are you related to David Blaine? Because this is magical. Is he your cousin?

Um, it does look like magic.

So he told the story where he's like, I was like, dude, how do you sell to these like 3-letter agencies? And he's like, it's very hard. You know, there's like decades-long relationships with the traditional companies. So I'm like, how do you do it? He goes, well, the big thing we always try to do is get to a bake-off. He's like, we have to get to a point where they're willing to do a contest of our product versus their product, because we can win on product. We have better product and engineering, but we don't have better, you know, good old boy relationships here. So we have to get to a bake-off. He's like, so we did a bake-off for Epirus, and basically everybody went to this field and they're like, cool, I'll line up and then, uh, you're gonna go first and we're gonna see how far away you can, you know, disable this and how effectively you can disable this drone. Uh, that was the test. And they lined up and he's like handing out binoculars and they're like, what was this? He's like, you're going to need these to see how far away we're going to be able to disable this thing. And then they like won the bake-off, won the contract and all this stuff. So I don't know about this company specifically. I don't know enough, but I would go interview at the top 10, like defense slash weapons companies, go talk to all of them and then use your judgment on which of them is the winner. I know in that basket there's definitely one or multiple winners that are, that are in this. I, but I, from the outside, dude, how do you even get that person?

So let's say you're Joe Lonsdale, which like, I guess that's kind of answered the, answers the question because he's a big shot. But if you're not a big shot and you want to get like some CIA buyer into a field in Texas to like show up, like to, to wow him, like who do you even phone call? You know what I mean? Like who?

I think there's multiple answers to this, but I'll just give you a couple of data points. So the very first thing is that there are bids, there are like RFPs that you can participate in. There are, there are like, you know, uh, the government has a process of procurement where they need to be able to go solicit proposals. So you can go look at those. You can go talk to those. The second thing is when we were at his house after we recorded the podcast with Joe, we were walking out and there was like 10 like senators there for lunch. And it's like, oh, this is how you build your network. You, you, he's like hosting a lunch for like 10.

Did he like bring you out the back door? Like, uh, like a business?

No, literally, well, because Elon was coming over and he was like, hey, it might be easier for you if you just want to go this way. And we were like, easier for you or easier for me? Like, uh, maybe for both of us. All right, good. Fair, fair enough. Uh, cuz I'm literally in my basketball shorts.

Did he hand you $20?

Yeah.

Like he handed you $20 and bought you a— and bought you an Uber.

He's like, don't forget your lunchbox. And then I like wandered off to a bus.

Yeah. Um, yeah. Was there apple juice waiting for you at the doorway out?

It's truly how it felt. And by the way, I couldn't have been happier with the arrangement. I did not want to be a fish outta water either. So I think that's one way. There's also a great story told on the pod about how Peter Thiel was telling them, like, dude, because when they started Palantir, he was like a couple years out of college. He wasn't that old yet. And he had a lot of kind of like the pride and hubris of a tech kind of genius type of person. And he is a genius type of genius level person. But going in and saying, you guys are dumb, we're smart, is not the answer either to sell to these things. And so they hired this guy, Alex Karp, who's still the CEO of Palantir. And one of the reasons why I was like, this guy was just like very, very good with relationship building, with networking, with being accepted by these buyers. And then he recruited like ex-government people to be like door openers, like warm handshakes to help them get in the room. And I think that that's how they got—

I want to do an entire podcast next time just on the New York Times article on Alex Karp. Very funny.

Very good. Very interesting.

Yeah, very good. Uh, all right. I buy into that.

I—

to me, working at Epirus or any of these national or these defense businesses, it's sort of like working at a porn company where like you, like probably most of the work might be like your mom.

You work in video entertainment.

Well, yeah, like most of the work is like normal, like just a normal job. It's boring. But then like you see the output and it's like, fuck, like death or destruction or like, like pretty like raunchy shit.

If you're working there, their tool, this Epirus tool, just in this case, is like a non-death tool. It's disabling the— you know what I mean, without bombing anything. But yeah, yeah, definitely some of the other ones are, are a lot more like, yeah, this is war.

Yeah, we're like, the output of this, whether it's right or wrong, uh, it's still like a— you, you, it's— you go to bed every once in a while, I imagine, with a heavy heart, even if you're doing everything right. Um, all right, I haven't— I have another one, and I am— you know that, what is that called, that, uh, midwit meme where there's people who are on like this The dumb guys are at the far end where they just don't think things, or how does it go?

You're on one of them. Let's just put it that way. You're showing that you got one of those sides nailed. There's the kind of the beginner, the caveman who's just like, you know, build product, talk to customers, right? And then the Jedi's also like, you know, I should just build a good product, talk to customers. And then the guy in the middle is doing like over-analysis, overthinking, over everything. But I feel like you did a good job, like, you know, uh, like, like a mime, you like acted out the meme. It was great.

I am what I am. Uh, I took that approach with a couple of these. Dude, have you heard of this company called Wiz?

I've heard of Wiz. I don't know what Wiz does. I looked at it and I was like, I don't understand this enough, dude.

All right. So check this out. So it was, um, Wiz is a cybersecurity company, uh, for enterprise, uh, companies. So, enterprise customers. So basically if you have, if you're using like large cloud tools, it, the tool, Wiz's tool like scans it and be like, all right, you have a potential threat here, here, and here for cyber security issues. It's the fastest company ever to get to $100 million in annual revenue. It took them 18 months. The guy who started it, now this is why, where like the mid, uh, that meme comes into play here because he's kind of amazing. I read this article about him a couple years ago and the opening line is, I guess his first name is Asaf, so he's Israeli. Um, and he was like an Israeli defense guy in the military. And it said, don't mistake Asaf's gentleness for someone who's willing to play by the rules. That was the opening line. I was like, okay, what does that even mean? Yeah.

It's like a Tinder bio. Jesus.

Yeah. All right. I'm interested. And so basically this guy, uh, he previously had another company that he scaled and sold to Microsoft. It was also a cybersecurity cloud company. He sold to Microsoft for $1 billion. He, uh, gets through his, um, his warmup company. Yeah. His warmup company's only 38 years old. He gets through his non-compete or whatever, spends time at Microsoft, things go well, and then he starts his next company called Wiz. So far they've already raised $2 billion, of which, uh, uh, $1 billion of that came in one round. And the company's only 18 months old, uh, which is absolutely ridiculous. Uh, they've done something. I think they're already at, uh, $350 million in revenue in just 3 years. $350, uh, annual recurring, uh, revenue in 3 years. Something like 80% of the Fortune 100 companies are already using the tool. So they've killed it already. Now here's where, uh, things get interesting. Their last valuation was $12 billion, but there was a rumor that Google was gonna buy them for $23 billion. And so there's all these rumors that this was happening. And so he sends an email to the entire company and let me read you a quote. He goes, The first line, let me cut to the chase. Our next milestones are $1 billion in ARR and an IPO. And he explains how they aren't accepting this offer from Google because they want to like make it big and be this huge thing. And I love this guy. I think he is just one of the coolest, like most interesting CEOs out there right now. What are you looking at? What do you think when you look at him?

Well, he looks not like what I thought. Um, actually your first line about like, don't let my gentle whatever, fool you. Like, I'm here to whatever, handcuff you to the bed. I don't know what he said, but like something like that. That's what I heard. He's, he just looks like a good old, it looks like a Midwest nice guy. Uh, when I look at these photos, I was really expecting a lot more hardcore looking of a guy, which is just from my Google image search.

Dude, when you see a guy wearing a t-shirt who sells to like suits or the NSA or whatever, like these like big, big shots, I think that like you are secretly very dangerous. Like, you know what I mean?

Um, and let me tell you something here. So, um, okay, so check this out. There's a part of the Wizz story that I think is pretty interesting. First of all, interesting pick. I think they have such a high valuation that you're really betting this is like one of the mega-cap tech companies to do this. Okay, fair enough. The thing that scares me is anything that grows this fast, you know, what goes up must come down in a way. This is not, it's not as Lindy. It's not as, you know, when something is a slow compounder, you actually trust it more than an explosive but not like, doesn't have a long track record.

Dude, but that's the goal of this thing is things that could 5x in 3 years. That's fast growth.

5 years. 5 years.

Yes. Whatever.

Yeah, true. True. But I guess what I'm saying is like, it might be priced in. I don't know. So let me tell you something that's interesting about this. So when I saw this company is growing so fast, there's a natural question of, Well, how, uh, have you heard about the story about this guy named Gili that's associated with Wiz?

No, but I'm in.

All right, so who is Gili? I don't even know how you say his last name. Ranan, Rananan, something like that. Gili Rananan, let's call him.

Dude, is it all these guys, by the way, they're Israeli like special force guys? Yeah, so they all—

this guy's ex-Israeli military intelligence. Yes, he also invented CAPTCHA. He invented WAF, which is web application firewalls. He did a bunch of other stuff in cybersecurity. He was a partner at Sequoia, very well respected in the cybersecurity world. And he started a VC firm called CyberStarts, and they're the first investor in Wiz. Now check this out. So let me just read you this excerpt. The numbers for the VC fund CyberStarts are phenomenal. The fund that specializes in cybersecurity, funded by Gil only 6 years ago. Uh, here's, here's how it goes. So 22 companies, combined value $35 billion. 5 of the 22 are unicorns. So a higher hit rate than YC. First and foremost is Wiz, who's breaking all the records. 4 of them were sold in the last 12 months. So, you know, like successful exits for a total amount of $1.5 billion. In the last 3 months, their companies have raised $1.8 billion, blah, blah, blah. His, his portfolio shows an IRR of more than 100%, which is, you know, unusual for even the best performing funds. Not a single company has failed so far in his portfolio, and it is currently ranked in the top 5 of all VC funds in the world due to these achievements. Okay, so then you say, well, hold on, what is— what's working? What's— what's actually happening here? And then you say, then there's something called the Gil Rananan model. And basically what he does is he's got this mafia of the chief— the CISOs, so the chief security officers at all these enterprise companies, and they're all in his pocket. They all respect him. They think he's got the Midas touch. He's done so much in the space he builds a relationship with them, but then he makes them essentially partners, like, I think, like, carry partners in his fund. And so what he does is he basically has this, like, a bribery network is what my understanding of this is. Not what they called it, but, like, corruption's awesome.

Corruption's awesome.

It's causing— so it is referred to as the Gil Ronan model. It is causing more— I got to stop saying this guy's last name because I'm probably butchering it— cause more discomfort amongst Israeli competitors and portfolio companies, which are all jealous for obvious reasons. It has reached the US where company executives who are purchasing cybersecurity systems are as committed to Gili as they are to their own company. And basically what he does is he goes to them and he, you know, wines and dines them with dinners and conferences. But according to several sources, he promises teams of fresh graduates, graduates from tech units, not only investment support in the startup but initial revenues of $2 million a year. This is usually their first year of revenue. Which is intended to boost them above their competitors and help them get the next round of funding. And the way he does that is by using his network of loyal, loyal CISOs. And so the first sales come from the loyal CISOs who work with the fund. It might be considered small money, but the jumps in the, uh, the jumps in fundraising for cybersecurity is, is difficult. If you can get to that $2 to $10 million range, you've like, you have escape velocity to get to the next round of funding and all that. He creates a mechanism that is difficult to compete with because the companies immediately jump to a valuation of $100 to $200 million, raise more money, and have more resources to compete later. The seemingly small purchase of $100,000 to $200,000 by the CISO will increase the startup's value dozens of times. This is known as the Gilly model. And I think what he says, there's something here about like the kickback that they get. So there's some, here's what he emailed them. It is difficult to predict the performance of the fund, but according to our forecast, the points you have accumulated in the fund so far are valued at X dollars. You can expect additional allocations in the coming years and in the new funds we will raise later. So it's kind of a, uh, you scratch my back, I'll scratch yours model.

I pick winners. I just thought this guy was awesome because he wrote cool emails and he is got a dope smile. Turns out, you know, there's a wolf backing him.

Yeah.

Well, a lot of 'em are from, uh, I think it's called Unit 8200, something like that. It's like the NSA of Israel. And so if you look at like some of the largest security companies, so it's like, uh, I don't want to talk totally outta turn here, but I think it's like Palo Alto Networks and all these like multi-billion dollar companies. They all came from that unit. And so it turns out with this guy, it's more of a— they're, they're, they're definitely working together, but I thought they were just working together because they were all from like the same crew, you know? It's like they all went to high school together. Turns out there's like a blood oath.

Neither you nor I know jack shit about this, but it sounds like a movie and we're pretty fascinated. That's— I think that's what's happening here. It sounds like some oceans of love and shit. And can I—

a big dummy like me came to the great conclusion as, uh, this fucking smart genius.

Yeah.

All right, what do you got?

All right, my next one is a quick one. Neuralink. So Neuralink is currently valued at $5 billion. It's got like pretty much no revenue. Here's the case. Elon, they put a chip in a guy's head and he's like playing video games on a Twitch stream now. Uh, it's pretty crazy. The first patient, they have a huge technical milestone.

Was he paralyzed or he had MS?

Yeah, he's a quadriplegic. Um, you know, so he can't, I think he can't move his arms or his legs, I believe. And now with his brain, he's just playing chess and use— he basically can use a computer with his brain now just by thinking.

Okay.

And he's like, wow, my life just got so much better. This is amazing. Um, and they successfully implanted the chip in the guy's brain and he can now use computers. It is incredible. I cannot believe more people are not talking about this. I'm gonna do a whole deep dive on Neuralink just 'cause I think that I'm blown away by the videos I've seen and the, the, the nerdy rabbit holes I've been down for it. Um, to me, this is a question of when, not if, meaning the next platform shift is probably glasses, but the one after that, or the, you know, the big one is just put the computer in the brain. That will happen. It's just, maybe it's 10 years, maybe it's 100 years. I have no idea. The other bull case is, look, even if this doesn't 5x in 5 years, you're going to be helping a lot of people out because all their initial customers are people who are, you know, severely disabled, can't see, and they're going to make them see. They can't hear, they're going to make them hear. They can't, move their arms, they're gonna make them be able to use computers. It's really incredible. So I think they're doing incredible work and that you're probably working with really smart people on a mission that matters and you're probably gonna make a lot of money doing it. The bear case, of course, revenue, question mark, question mark. You know, they have like one customer right now, right? So like it's gonna take time, long path to success. They're kind of at the, they made the first Tesla Roadster. That's where they're at in the Tesla journey right now.

Dude, but you're missing the whole point of this list, which is like, how do you like not like stress out all the time and like things like that and have a good job?

These companies need the, they need the personality hire. They need the guy who's bringing smoothies to the office. They need the guy who's a good time to be around. They need the guys willing to do the dirty work and, uh, go clean up the files and go organize things.

Do you think that Elon has a personality hired?

Yeah, I think he does, dude. I think he's got like literally like meme lords that work for him. So I think he's definitely got personality hired. I don't know, man.

I agree with you on so many things.

I know some dummies that work at Tesla. Let me put it that way. I have some like, who's this? Oh, my cousin works at Tesla. Then you meet the cousin. It's like, does he work like in the tire shop? Like, who's this guy?

Um, yeah, I feel that. But Neuralink's not that. How many employees do you think they have?

Uh, I have no idea. I would guess like probably like 100 is my guess or somewhere like plus or minus 50. Uh, I have no clue. That's too small to hide. Well, I, you're assuming, I didn't say Sarah's List is the chill life. It's not, it's not the vest, rest in vest life. I, I think maybe we have a misunderstanding there. Maybe Sarah wasn't doing as much work as I thought.

No, it was like a 40-hour work week. I, I don't know if Neuralink is a 40-hour work week. If it is, then I'm on board.

Okay. Fair enough. Fair enough.

Um, all right. Uh, I'll do, I've got 2 more maybe. All right. You had OpenAI. Now I wanna, I wanna vote with my attention a little bit. I use OpenAI every day, but you know what else I use a ton is Perplexity. Um, do you use that?

Me too. Me too. Yeah, I use Perplexity as well.

Now, how would I explain the difference between the two? I think Perplexity is—

Perplexity is when you need the answer to be right.

Yeah.

And ChatGPT is when you have a variety of random things and when you wanna brainstorm, it's not as important. Yeah. If I'm doing research for this pod and I need to say a number that's not gonna be, be wrong, Um, Perplexity is a better bet than ChatGPT.

So Perplexity, I think their latest valuation was $3 billion. They've raised $450 million. Uh, so it's already like very big, but I think the market's huge. I also think when I, I find like interesting stories about the founders and I love it. So what's the CEO of Perplexity? I know how you spell it.

Uh, Arvind, I think is his name.

Uh, Arvind. All right. So there's a funny story about Arvind. He grew up in the same area as, um, the Google CEO. And he grew up vegetarian and his mom wouldn't let him eat eggs, the Perplexity CEO. And he like grew up and like, no, you can't have eggs. And he's like, I need more protein. She's like, you can't have eggs. So he sees a YouTube video of Sundar from Google saying, yeah, I introduced eggs to my diet in order to like get more protein. And then the mother's like, okay, you may have eggs. And so the fact that— and he goes on—

is that where I thought you were going with the story?

He, he goes on. Dude, listen, he goes on to like have this story where like, they're like, dude, Sundar in my household was like God, where it was like, well, if he does this, then you must do this. Right. And so imagine being raised in such a toxic environment where you are either him or you are a failure. And so far he's doing pretty good. So like, that's again, that's like Sam being a dummy and voting on a company just because the, uh, the pattern matching, the founder's trying to like prove his mother, uh, you know, make his mother proud. That's a strong, that's a strong motivation. So no, but I do think the, the company is going to get significantly larger.

Like the episode of like Always Sunny where Charlie's trying to date and they're like, Charlie, what about her? She's great. She's got a good job. She's nice. She's, he's like, she doesn't like milk.

And it's like, what?

Charlie's like, no, she's lactose intolerant. It's like, you know, basically it's like, what are your, what is your criteria, Charlie? What are you doing here?

Is this a ridiculous pick or what?

No, I don't— I think a lot of people would say Perplexity, so I, I don't think your, your logic I think is ridiculous. I think you're, yeah, you somehow are landing at the same conclusions as the geniuses, but the way you get there is, uh, unique.

Uh, I would say, no, I, I, I picked it because, uh, I use it. I, I've like it in terms of getting, uh, in terms of valuation right now. Uh, $3, $3 billion. Uh, so a lot, but I mean, I don't know. It's like a fast growth space.

Perplexity also seems like a company that could get bought. So like, you know, OpenAI, ChatGPT is like aligned with Microsoft and Google's trying to do Gemini and all this stuff. But like if Perplexity keeps executing, you know, it's the way that Facebook bought WhatsApp for $20 billion, right? Like at a certain point, if you are a better version of their core product of one of these large companies, Google being the kind of the main one. You know, you're a very good acquisition target, even if your standalone business may or may not reach there. I have no idea, but like it gives you multiple outs. The downside is like, it seems like no tech company could do big M&A anymore. So maybe that path is not as realistic. But I don't think it's a bad pick. I think Perplexity is an interesting pick. Do you want to do your other one? And then I have one last one.

My last one is Traba. Have you heard about Traba? I've heard a lot about Traba because there's like a Traba, uh, there's like a Traba PR mafia that's out there and I, I'm not, all right, so let me start with, I don't, I'm not part of that mafia because I do not want to work there. I think it sounds miserable. Um, but there's a bunch of freaks who do want to work there. And if you are one of these freaks, this is a place to let your freak flag fly. Um, I'm not a fan of it.

And can you explain that? So I think it's kind of like, here's a simple explanation of the culture. Most tech companies are like, we value diversity and balance and we want, you know, well-rounded people. And Travis was like, yo, we're doing China in America. They're like, yo, we're working like the Chinese over here. Like, we're doing the 996 model. We're here to create a trillion-dollar company. We are gonna just like compete ruthlessly to get there. And that's pretty awesome.

Let, let me explain what it is and then we're, and then I'll, I'll, I have some of their, uh, I have a little bit from their deck. On when they onboard employees. But basically, Traba is, uh, software. I guess you would— you— it's not just software. You wouldn't categorize it as just software. It's, it's a little bit of everything, but it's a, uh, it's software and a way to get part-time or fast workers when you are a manufacturer or, or a big company like that.

Staffing. Industrial staffing.

Yeah. So it's software plus like actually getting the people to show up, uh, to, uh, to— if you're, uh, a big factory, if you're something where you need, uh, you know, 100 new employees or something like in a week to do X, Y, and Z, they make it really easy to find and get those people to actually show up on time. I think their Traba.com, their website, I think it like that's their tagline, which is get workers to show up on time tomorrow or something like that.

Traba.work.

Yeah, Traba.work. Sorry. Now here's the part where they're kind of interesting. So Founders Fund, who I do respect, they're like, this is probably our highest potential startup. And they've said that these crazy stories like they've showed up at the office at 10 p.m. And what we've noticed is like the office is still buzzing with people and it feels like the golden days of PayPal. And they have these values. These values are dream big, have an Olympian's work ethic, which is inspired by Chinese, uh, China's 996 mentality, which I'll talk about, have a growth mindset and be customer obsessed. And so basically they say dream big. We want you to be the number 1% in terms of ambition plus the number 1% of attitude, which is gonna allow us to get the number 1% outcome. We want you to have an Olympian's work ethic. And they basically, I think they explicitly said this on their website, we have a 9-9-6 culture, which means working 9:00 AM to 9:00 PM, 6 days a week. And there's like these interviews with these employees that are like, I really wanted that type of work culture and I Googled where can I find that? And you guys had it on your website. And so that's why I decided to apply and work there. And so they're pretty fucking insane.

Sucker born every day. It's like, I Googled where I could work the most hours and I found you guys.

Yeah, they're pretty insane. I think they only have like 150 employees. I think the valuation is something like, uh, $150 million, I think.

Uh, no, no, it's gotta be higher than that.

I, I, I don't, I, I, I only saw a handful of numbers, uh, on their valuation. Is it higher than that?

Maybe I'm wrong. Maybe, maybe it is.

The, the valuation isn't public. I think I was trying to like triangulate a bunch of old, uh, articles and I don't know if there's a current one out there, so I can't say exactly what it is.

Uh, yeah, all I'm seeing is the founder's fund, $22 million round, which, yeah, that would probably be more like what you're talking about.

So it could be worth more. I don't have the information. I just am doing a bunch of guesswork out of, uh, just articles that were live. Uh, but people say that it's growing like 5x per year, which is like huge. And a lot of smart people who, even though I think they're douchebags like Keith Rabois, they're behind, uh, the company and they're definitely smart.

Yeah. Uh, okay. All right. I like, uh, I like the pick here. I didn't realize their valuation was what it is. Looks like it's around $200 million. Yeah, I think this is a bet on people, right? So I think the people behind this company are pretty remarkable. They do seem like the Olympians of founders. Now, the market opportunity is difficult here because there's a lot of companies that get valued as tech companies that are actually something else. WeWork was valued as a tech company, but it's actually a real estate company. There's e-commerce companies where they're, you know, D2C companies where they were valued like they were tech startups, but they were actually, you know, selling suitcases and shoes and things like that. And eventually those corrections do come. And so I think the question here is like, is this a tech— is it a tech company? Or is it a staffing company that uses tech and started by tech people? And, you know, I'm not in the weeds enough to know. But I do know what you said, which is that they seem to have a very unique culture, it seems like very smart people are very bullish on them. And it seems like the founders are in that elite, elite level of both ambition and drive. And that's— those are good things to bet on in general. But you did definitely just hypocritically tell me that like 2 of my picks were too, too hard to work at. And then you picked like literally the one that's like, yo, our thing is that we're the hardest to work at.

Yeah. Yeah. All right.

Yeah.

Moving on. All right. What do you have?

All right. My top pick. My finale.

Drum—

I don't want a drum roll because it's going to seem anticlimactic because it's the same company I picked last time that is not— that was not a winner in the last one, meaning it didn't 5x. It's Replit. Oh man, I think I am more bullish on Replit than any, uh, any tech company right now.

Are you so bullish on it that if you could bet all of the money that you have into that company, you would do it?

No, I'm not foolish, but I would— I did invest in the company. And I then, on top of my fund investment, I wrote a personal check on top of that. It's probably the only one I've done that with. So, you know, my actions do line up with this, but I wouldn't bet all of my money on this because I don't need to do that. So here's, here's my case. So 3 years ago when we did this episode, Replit was at about a $1 billion valuation. It had 5 million developers at the time. It really had no like AI story or tailwind and revenue was small to nonexistent.

What was it then?

They don't announce, they don't say, but it's because it wasn't, it wasn't a priority and it wasn't meaningful. So now everything has changed except for the price. So the 5 million developers has become 20 million developers. No AI tailwind has become a huge AI tailwind and small revenue has become scaling revenue. He, Amjad, came out and said, 2024 is our, basically like has been our commercial year. Like revenue is scaling rapidly.

Dude, what's it do?

Okay, so what does, by the way, here's the, do you know the Replit story? It's kind of amazing to be honest. So the Replit story is Amjad grew up in Jordan, which is a place I've never been. And it's sort of this like, you know, the world is very large and there's people, there's talent everywhere, but the opportunity is not as evenly distributed. And so he used to code, he used to love programming. But he didn't have his own computer at first. And so he would go to internet cafes, basically borrow a computer, and he would code, he'd learn to code. But the problem with that was that every time you go to an internet cafe, you're going to a different computer, and you're not like, none of your stuff is saved from last time. And if you ever learned to code, like one of the first things you do is you first have to like set up your environment. And so you need like your IDE, you need to install all the packages for the language that you're going to be using. If it's Python, you need to install those files on your computer for it to work. And you need to save those somewhere. You need to host it somewhere. There's all these things that go into coding. And so he had this unique problem, which was he wanted to code and he was so disenfranchised where he didn't have his own computer that he was doing it at internet cafes for a while. And then even after that, you know, he worked at Yahoo briefly, like once he, you know, kind of graduated and he was still just sort of always annoyed with this, like, this like friction that it takes to get set up. And so he, as a side project, created this thing that was, um, it was called something else, REPL something at the time. And, uh, REPL is this like programming term, but basically what he wanted to do was he's like, can I make a cloud, cloud-based programming environment? Basically like my environment, but instead of it being local to my computer, have it be in the cloud. He, it's because he saw Google Docs. He's like, oh my God, Google Docs is amazing. This is, um, instead of having to have Microsoft Office, have the software on my computer, have the file on my computer, I can just go to any computer anywhere, go to a doc. The whole editor is built into the website, which is amazing. I didn't even realize—

got it—

websites could do this. And wow, multiple people can like edit the same Google Doc at the same time. This is incredible. Can I do that for coding? So that's where he started. And so, and so he built it as a side project for many years. So he worked at Yahoo as a side project. Then he worked at Facebook and it was a side project. He worked with the guy at Facebook on the team that the infrastructure team and the guy who created React, which is like now like, you know, the huge programming framework React. And somewhere along the way, like, Replit basically starts to get a little bit of momentum, gets like 100,000 users as his like side project. And it was— he worked at Codecademy and Codecademy was teaching people to code online and they discovered his project. They're like, dude, some random guy from Jordan created a programming thing that like all of our customers who are coming to learn at Codecademy they could just code in the browser. They don't need to have like their own thing. And so it's a side project for many years and he wants to make it a main project. You know, he's not taken very seriously. He can't raise any money for it. And he applies to YC 3 times, he gets rejected 3 times. And after getting rejected the 3rd time, he's pretty, you know, discouraged. He's like, all right, man, whatever, FYC, who cares? And, but the thing was that developers really thought this was cool cuz it was like kind of a technical achievement to do this. To do this, he had to like write his own compilers and write his own shit that like, would work in the browser. It worked with any language. And so, um, there was, for example, Atlassian created a competitor to this called Glitch. And Atlassian had like a good track record of like Trello and Jira. Like they built like developer-friendly tools. So Glitch comes out, huge PR move, raises a bunch of money, and they said it's coding in the browser. He's like, oh no, they're doing it. He goes, but they're like, it's all JavaScript because JavaScript is everything. And he's like, well, I made this choice, this technical choice to support any language. And these guys are saying it's all JavaScript. And initially they got this huge boost, but he started to notice that like this little language Python started to get really popular on Replit. And he's like, I think they're missing the boat. I think Python is the thing. And Python became the language of choice for machine learning. It became the language of choice for backend development. It became the, the language of choice for a bunch of like big waves. And he was the only one that could support Python. So Glitch ends up dying. That Atlassian company ends up, ends up failing on in it. He just keeps chugging along. And so along the way, he, he had this like kind of indie support. So it was used by a lot of students, a lot of teachers, a lot of coding boot camps, but that was kind of looked at like a toy, like, oh, that's cute, but those are just like beginners who have no money, who whatever.

Yeah. I'm reading about him on Hacker News. Like he was controversial there, but a lot of people loved him. Some people disliked him. Is he aggressive?

So early on he was really loved on Hacker News, not him, but like Replit was really loved. Cause it was like, kind of cool that you could do this. And it actually worked really well because he's, you know, a great programmer. And one person who was reading Hacker News really liked it. And that person was Paul Graham. Now, Paul Graham had retired from YC. He was living in the UK in this, like, mansion. And, um, he's not a part of YC anymore. And Amjad got rejected from YC 3 times. But Paul Graham was like, dude, I think this is awesome. And he tells Sam Altman, who's running YC at the time, he's like, you got to talk to this company, Replit. So he goes to meet Sam at, at the time was a hybrid office of OpenAI and Neuralink before OpenAI was a big deal, back when OpenAI was just a research nonprofit. And he meets Sam and Sam's like, hey, you know, I don't know anything about you, but Paul really likes your thing and he wants me to check this out. And you know what? You should just like talk to Paul. He told me, but like, I'm not the guy for this. You should talk to Paul. Here's his email. So Amjad ends up trading emails, like long emails. He said like, I should turn this into a book someday of like my emails back and forth with Paul, like the philosophical foundation of Replit, which was like, what if you could enable like 10 times more programmers in the world? Because this whole thing was about opportunity. So how do you make a programmer who doesn't even have their own computer, who doesn't know how to start, who doesn't know how to like get everything installed in their environment, all this stuff. How do you decrease all the friction? And eventually, and even in his initial like plan was like, we'll have AI that will help you code. It'll be your programming assistant. This was back before AI was a thing. It was like 2014, right? Like people weren't even talking about AI back then. And it's in his original slide deck. I have a, a slide here for you. Lemme show you. This was his master plan for his seed deck. We're gonna grow by building tools, signing up teachers and students. We're gonna build a simple network and an AI-assisted interface that blurs the distinction between learning and building. And eventually we'll become a platform where people come to learn how to code, code, explore, and host their code. Um, this is exactly what they've done. It's like the Tesla master plan 10 years later. This is his master plan 10 years later. They've done exactly this. The company's 10 years old now. More than 10 years old, basically. He, I think he started this stuff like before 2014. And so it was, again, it was a side project for a long time, only became like a full-time project. And there's like, he shared the email, like, hey, got rejected again from YC. Um, and he's emailing Christina, who was his first investor. Christina is the founder of Vanta, another company I was going to put on this list. She wrote the first check into Replit, um, as a scout. And, uh, Vanta is a company that you know, in 5 years has reached $100 million. She went through YC, but the way she did it was she just YOLO'd it. She just like moved to a city and he writes this email to Christina. He's like, got rejected again. Hard to raise money right now. I might just YOLO, just move somewhere low cost and just start building this thing. Um, that's that. And then maybe it was what I'll do. And so look at this chart now. So this is Replit developers year over year. It's literally like a perfect hockey stick. And Paul Graham posted this and he's like, the crazy thing about this is that This does, this is an impressive chart for any company, let alone a company where the users are developers, meaning all of these developers are gonna build things that they has their own user base. That is crazy. Um, and so this is the growth. So back when we did this in 2021, we were here and now we're here.

It's like, how many developers are there?

Uh, so GitHub has about 100 million users.

Wow. Wow. Wow. Wow.

By the way, GitHub, some crazy stats on my research of GitHub. GitHub is used by 90% of the Fortune 500. It probably has like the most enterprise penetration of anything besides Microsoft Office. Um, like Salesforce is 80%, GitHub is at 90%, which is pretty insane.

What did they, uh, get sold for?

So GitHub sold back in 2018 for $7.5 billion. And at the time they were doing about $250 to $300 million in revenue. GitHub now does about $2, is about a $2 billion run rate. And by the way, the fastest growing feature, the thing that makes up 40% of the growth of GitHub's revenue growth is Copilot, is the AI-assisted coder that now does, you know, a few hundred million a year in revenue already after, you know, just a couple of years profitably. And so that is the most successful, you know, AI, uh, implementation in any, in any company so far is GitHub's Copilot. It's a $300 or $400 million a year product.

Why do people dislike this guy? Is he aggressive?

Well, he said something which is just like, you know, uh, Hacker News is, you know, when you're the underdog, they love you. And then as soon as they hear your big funding round, they go and they just say how terrible you are. There's all— there's, there's, you know, whatever. There's people ever— I actually included, uh, this is part of my bull case. Yeah. So it says they raise this money, and then here comes this guy, B. Fineman, who says, this is another company I felt is going to implode. They don't do anything that's, that's interesting, let alone proprietary. Uh, the CEO is an ass and everybody knows it. He acts as if a browser, a browser REPL is going to change the world. I have no idea how their valuation is so lofty, but the core technology is so easily duplicated. Yeah, go ahead, go try it. Um, since the, uh, since the heavy lifting they used to do has become obsolete. So classic, you know, go read this, the launch of Dropbox and Airbnb and other companies like this. This is like, uh, you know, there's always one of these comments at the top of their, their, their posts that you want to frame. So check this out. This is the AI growth. So the thing, the criticism of Replit would have been, great, you're getting a bunch of developers, but they're all young. And how are you going to make money off of students and teachers? And I think the, the misunderstood part of this, right? Because if you want to find something at a low valuation, it's not that low valuation is just another way of saying misunderstood and mispriced. So what would be misunderstood here? What would you need to believe? The thing you need to believe is that this is a leapfrog technology. So like, I don't know if you've ever seen those graphs of like in Africa, it's like landlines, like landline adoption of mobile, of phones in your home was like really, really low. Or bank accounts was really, really low. It was like, you know, some, I don't know, 10% of the population had bank accounts and landline phones. But then, and so you would think, oh, if this is linear, you start with the landline phone, then you get a cell phone, or you start with a bank account, then you start getting mobile pay like Venmo or whatever. Um, actually those are easier to adopt because they're on your phone, they're quicker, they're lighter weight. And so cell phones and mobile payments became this like huge adoption. And Africa actually has a higher rate of mobile payments than America. It has a higher rate of cell phone adoption than America did at the time because it was, it was a leapfrog technology. It was easier to adopt the smaller thing, the newer thing than it was to adopt the old thing. And so, um, one of the things that Amjad said I really liked, he goes, Um, you know, people will— oh, the criticism of Replit is great beginner people use Replit cuz they learn how to code and it's just really easy to get started. And the criticism is that like, you're not gonna get like big developers to switch, you know, you know, 20-year vets to switch to, to Replit. And he goes that the better question is if I have 20 million, uh, you know, sort of earlier on in their, in their coding career coders right now, and this is a place where they can get started with no friction, build in any language that they want. They have AI Copilot built in. They can host it. They don't need to know how to set up their servers. And there's a community of other people that they can like, you know, borrow code from and share from and answer questions with. Why would they ever switch? Like you're saying people will never switch from that to this.

Yeah.

You're like, like these people will never switch back to, oh, actually go make your life harder. What did you, I think that's a great point.

What valuation did you invest in?

I think like $900 million.

Um, how'd you meet him?

I've never met him in person. This is a company I kind of admired. I used it and I went, you know, just looked at him and read about it and it just immediately was, it ticked my boxes. Uh, so by the way, this is kind of interesting. So JetBrains, which is another one of these, like the, the probably the most popular coding, uh, environment for like Java developers. It's a bootstrapped company that does $270 million in revenue. $100 million in profit, $134 million a year in free cash flow with 6 million users, um, $0 raised since it started in the year 2000. And so like, I think, you know, when you look at what is Replit's revenue potential, I think it's, it's a lot bigger than this because this has multiple things.

So what do you think they're worth right now?

What is Replit worth?

What do you think they're worth today?

Well, their last valuation was $1.1 billion.

I know, but what do you think is like if they were to raise again, it would be at what valuation?

You couldn't buy my stock. You'd have to pay, you'd have to pay like a $50 billion valuation to take my stock right now. Like, I would rather just hold the stock and see where it goes. Why? Because you're looking ultimately in tech investing for giant winners. I think a VC once, he told me, he's like, everyone's talking about unicorns. I want Godzilla. And he's like, basically a Godzilla company is a company that becomes worth $50 to $100 billion plus. And he's like, those are the ones that make your career. And so I was like, cool, cool branding.

He—

but, but what do those companies have? Network effects. This is a network effect business where it's a network of developers. It's growing like a staph infection at spring break. So it's growing really fast. Like, since the last time we did this Sarah's List, it's grown 4x in terms of the number of developers who signed up.

Should call the founder, be like, looks like you got a real ringworm on your hands. Congrats, dude.

Exactly. Like, I think it's mispriced and misunderstood. I think I think it gets discounted for being just something for beginner coders when I think actually it's like a Snapchat or whatever. It's a product where that's the generation you want is the people who are gonna be using this thing for the next, you know, 20, 30 years. It's riding a huge tech wave in that like it is perfectly positioned to ride the AI wave because AI programming is a thing. Yesterday, Sergey Brin was at the All-In conference and he's like, Yeah, I code with AI. Like, he's like, yeah, I got back into coding. I use AI. Basically, I just kind of tell the AI what to do. It's like, dude, the founder of Google is like, yeah, I wanted to build this thing, but I just, it's easier actually just for me to just tell AI to do it. And it kind of wrote all the code for me. It was awesome. He's like, then I showed it to my team at the like Google like AI thing. And he's like, he's like, I told them, I said, more of you need to be using this. And he's talking to like the top programmers in Google, which is kind of amazing.

Dude, this is awesome. I think you gotta ask this guy out for prom.

I think I just did.

I think you just did. Is this like you asking Taylor Swift? You know, like someone— this is, um, you've convinced me. What's the downside?

I mean, what, what is the downside? Uh, let's see.

I mean, you had that for every company.

That they're not gonna be able to make as much revenue as you think, that people will graduate off of Replit and decide that— are they remote?

Are they a remote company?

No, actually, another, another Sam bull signal. They're not remote. And not only that, they moved from SF to Foster City to like build their own cult there. And he's like, why wouldn't we? Why wouldn't we move 40 minutes out and, uh, just make— be like the kings of this little area and have like the best, the best environment without the problems of San Francisco, but still being in, uh, still being close enough to the talent density?

I think that, um, You used all this great logic and all these silly arguments and all these numbers and facts and data. You should have just told me that he wants to build a, a commune in Foster City and I would've been, I would've been on board. I do.

And he deadlifts. You like that? I know you like that.

Does he really deadlift?

Yeah, he's a powerlifter.

Yeah. I mean, powerlifter, power gains. Like it makes sense. I think my, my simpleton strategy can almost be as effective as yours.

If you look at the, our last, um, I think our lives would say yes, it does.

Right? Yeah.

Like, uh, there's no knock on that. I, I strive to be more like you. I think you, you have it right.

No, I'm only teasing. It's part of me is being simpleton just because I literally don't understand that. Like when you're explaining that to me, I'm like, I have to learn what all this means as we go. Um, yeah, it's fucking complicated. Did I ever tell you the story about, dude, these guys are geniuses, by the way. These guys are geniuses to like, and be able to invent things like this. I just think, I just like, I'm like, we're not the same.

Well, I wrote two words that I would almost never write in a slide deck. I wrote mission-driven and visionary for Replit. And those are so cringe. You can't, you're not even really allowed to say those unless there's an exception, which is this dude from Jordan who was like, God, I really wanna increase access to, for kids like me, built this as a side project when there was no money on the line, there was nothing for years, just kept kept tinkering away, building it, building it, building it. Um, in his master plan from 10 years ago in the seed deck was talking about how he's gonna have an AI assistant in your coding terminal that's gonna help you write the code. Um, and did exactly what he wrote, you know, 10+ years ago. That is mission-driven and that is visionary to me.

Well, mission-driven, being into mission-driven and, and, and visionary stuff, that's only cringe when it's not true. When it's true, it's awesome.

Well, it's because it, yeah, because it gets abused, right? It gets, it's like, gets used and abused by everybody. There's no, like, there's no, um, there's no earning that badge, right? You just get to use it if you want, which bastardizes it. But like, you know, you look at something like Neuralink or whatever, um, and you got to give credit to these people. Like, you know, when there's, there's videos of Elon talking like, you know, decades ago about the 4 or 5 like most important things to do. And he's like, you know, the, the advent of the internet. You know, creating clean, you know, sustainable energy future, creating artificial general intelligence safely. He literally was saying these things for so long.

You don't need to be mission-driven and a visionary on world-changing things to be intoxicating. Like, that makes it awesome. But you can, like, if I meet someone who's into something, like, relatively trivial, and they're passionate about it, I still, I get, like, turned on, you know what I mean? 100%.

Dude, the Nick Gray episode, it's like, This guy, his, his Rockets to Mars is like the 2-hour cocktail party, right? It is helping people toot their harmonica and have a good time for 2 hours and meet strangers and make some friends. And he is more into that than anybody I know, than, uh, than probably anybody that there is. Uh, he wrote a book about the thing for God's sake. And then on top of it, even though I literally don't want to do that, like I would, hate if I had to host one of those things. I love being around Nick because that energy is so, like you said, intoxicating is the perfect word for it.

Yeah. When I am— and so when I see a guy like this replit thing, I'm like, I don't really care about any of that stuff, but I care that you called your shot and I'm into it. During COVID when we all had to work from home, I got to hear Brian Chesky give these like monthly or weekly meetings and he was like in his bedroom and he looked horrible. He looked like shit. Because like his business was like on top of the world. And then it's like, I don't know if we're going to be in business. And I have like 3,000 employees and like travel is literally the worst thing on earth. Like Airbnb is paused. And I remember seeing his talks and I thought like, dude, I will, I want to fight for this guy. Like if I was on his team, he has got me bought in. And that, and so my point being is that mission-driven and visionary attitude that is actually really important when it comes to a value, how valuable a startup can get.

I think it is. If you're making your bet, which is what we talked about, basically taking your time and your talents and betting on one company, a super concentrated portfolio where you're going to— and you basically are getting a $100,000 to $200,000 bet that you get to make on a company when you, when you take a job at one of these tech companies. You might as well bet on the most talented, most driven, you know, mission-oriented, sees the future more than anybody else type of founder because it's their decisions that are going to trickle down. Um, I remember I made an Ethereum— and well, Ethereum is probably one of the best investments I ever made, and I made it more on the Sam criteria. I was like, this gangly ultra nerd who's saying words that I barely understand, this founder's got the thinnest neck I've ever seen.

I'm in.

And everything I read about the— I was like, so at like 16, he's like, or whatever, 18, he's writing articles for Bitcoin Magazine because he was so enthusiastic about it. And he was getting paid for Bitcoin, which at the time was like $12 per article. And that's kind of like how he, you know, um, he is— he's truly like of this. He didn't come when it was time to get rich. He was there before. And then I remember when Ethereum hit an all-time high, and everybody on Twitter was basically like Lambos and yachts and, you know, like pumping their bags. He posted a Twitter thread that was like, hey, this is great, but like, how many of the unbanked have we banked? How many people have we actually helped? How much of the mission are we actually doing? Like, yeah, the price went up, but who gives a shit? And that is, you know, the best founders do that when morale is low, like the Brian Chesky example. Yeah. They give you that confidence. They never let you get that low. They like bring you up. And when hype is high, they bring you back down to reality of like, what are we here to do? And when I saw that and I was like, this guy is— crypto is full of potential, but it's full of pumpers. It's full of, you know, people are going to take advantage of this. I at least trusted that the person who was stewarding that project was not, you know, to use bastard terms, they were here for the right reasons. Vitalik is here for the right reasons. He was there to actually you know, like help humanity and build, build a free economic system.

To use what terms? The Bachelor.

You don't, you don't know that? That every contestant—

I play sports. Everybody watches Bachelor.

You're like, I have triceps and biceps. My T levels are over 300.

I can tell you the difference between a barbell or a dumbbell bench press and why, why each is good. You could tell me all about, uh, the Golden Bachelor.

Yes, I can.

You're absolutely right. Priorities. All right. That's the pod. That was good. Thank you, Sean. Thank you, Ari. Thank you to everyone listening.