E1064 News! Sam Parr & Zach Coelius on Barstool vs. Call Her Daddy, SoftBank's $17B loss & more!

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All right, everybody, welcome back to This Week in Startups. It is, what is it, May 20th, 21st when you're hearing this, Thursday, May 21st. And we're going to do another news roundtable. We're in the middle of the pandemic, but things seem to be winding their way slowly, circuitously here in the Bay Area to reopening. Who knows what that will look like? We'll talk about that as well. But we're going to cover the news because even during a pandemic, technology companies, media companies are extremely active. In fact, it feels like things are more active now than they've ever been. So business is continuing, and I'm really excited to have Zach Colius back on the program. He's a managing partner at Colius Capital. Uh, you can follow him on the Twitter @ZachColius, C-O-E-L-I-U-S, and he invests in startups. Uh, we do it together sometimes, and he's just a world-class investor and human being. Welcome back to the program, Zach.

Thank you.

Uh, and with us, uh, is Sam Parr from The Hustle. I spoke at his conference and HustleCon, I think it was called. And he has the Hustle newsletter and a new newsletter that's about trends, which we'll talk about. And have you been on the podcast, Sam?

No, no. We've hung out.

We've hung, but you haven't been on yet. Yeah. And I was like, huh? But you're, you're very active on the Twitter.

Yeah, I try to be. I think we have the same haters.

Well, I think it's because we're both capitalists.

And outspoken and sometimes obnoxious.

Okay, well, there you have it, folks. Welcome to the program, Sam Parr, your first appearance bringing the heat already. Let's get right into the news, huh? Shall we? Um, there is a, uh, podcast that is called Call Her Daddy, and it's published by Barstool Sports. Uh, everybody knows Barstool Sports because the guy who runs it Dave Portnoy, Portnoy I think is how you pronounce his name, is an outspoken obnoxious jerk as well. He's in the club. So the three of us should hang out and do jerk club at some point, obnoxious club. I know him because, well, you can't not know him because he's super controversial on Twitter, but I've seen him the last week or two day trading a $3 million position on CNBC and losing and winning $1 million at a time. He really knows how to get attention. Anyway, they have a hit show called, um, what is the name of the show again?

Call Her Daddy.

Call Her Daddy. I know I— they broke up. The two hosts are named Alexandra, Alex, and Sophia, and I guess it's a sex-themed comedy podcast. Uh, I listened to the first 10 minutes. It's absolutely unlistenable. They have the two most annoying voices ever I've heard in radio, but it's just like The Man Show but for women. Perfect. Got it. So I got about 10 minutes into it and I felt like my ears were bleeding, but I could understand the appeal, I guess. I think— is— now, do you listen to this, Sam, this podcast? You're a fan of the podcast, fan of Barstool?

I'm a fan of Barstool. I know all about Barstool. I know I'm a fan of their business. I know a fair bit about them. I've listened to the podcast a little bit. Same. Look, I'm not the target demo, but I get it. It's interesting.

So it's a really interesting story on a media basis, which Sam and I are both in the media business. They hired these two very talented people who built apparently a very successful podcast with 2 million plus downloads per episode and in the top 20 most popular podcasts on Apple at times. And both hosts made $500,000 in 2019. However, they were making up to $100K in advertising per show. Which is about $5 million a year. So I guess they were taking in 20% of the ad revenue if they were sold out. But anyway, if they weren't sold out, they're taking about a third, but they didn't take the risk on it. Obviously Barstool owned all the IP, and then a huge tell-all was released on the Call Her Daddy feed, which I did listen to, which is hilarious because Dave Portney clearly does not give any fucks about anything. And he basically walks through the entire sordid tale of them trying to negotiate with him. And they came to him with this, like, ridiculous request to get paid $1 million each, to get 90% of the merchandise, to get basically everything, and to own the IP, to which he told them to pound salt. And then I guess the punchline is one of their— one of the two host boyfriends was allegedly trying to get them over to Wondery, which is a bit of a disaster of a podcasting app platform that was trying to build the HBO podcasting, and that didn't work. And long story short, one of the two of them is going to come back and screw the other one. And it's still up in the air, which then put the podcast as the number one podcast on iTunes. So a cynical person would say Dave just— this is all a put-on and they just had this breakdown in contract negotiations or to go to top. But that doesn't seem like what's happening here. What do you— what's your take on all this?

Can I even—

yeah.

Can I even— I'll even simplify it. Let's simplify this into 3 sentences, which is 2— these 2 women start a podcast at Barstool Sports. Within 12 months, it shoots up to be one of the biggest podcasts in the world. One of the women's boyfriend works at HBO. He tries to go in their ear and say, hey, you're getting screwed. You need to get out of this deal. Both of them try to renegotiate. They end up getting in a fight with Dave. They end up fighting with each other. And Dave is announcing to the world what's going on.

Pretty much. It's a pretty good ringtone.

That's what's going on right now. I think— and then what's happening is the woman who's— the woman and her boyfriend, their name is Sofia and Suitman. They're calling this guy Suitman. They are looking like fools right now in the media because Dave just calls them out and he posts their fit pictures and he says how stupid and greedy they are. And long story short, what's going to happen, I think, is one of the women's going to come back and it's going to be a great deal. They're all going to do well. What's interesting is while all this is going on in the background, Penn Gaming, which is the company that owns Barstool, its stock crashed. It was at $30, it went down to $6 a share. Now it's gone back up to $28, $30 or so. It's almost back to where it should be. So Dave is winning because he just won $1 million in the markets the other day. They sold the company for $600 million in stock recently, and that stock now is back to where it was. And I think one of these women is going to come back and do the podcast.

So he's having a— he's had a terrible last week and an incredible this week, and he's super transparent and entertaining about it.

It's so fun.

Now tell me about the company that bought Barstool, because he's been doing Barstool for the better part of two decades, right? Like, this is a very old company.

17 years. It's 17 years old. The company that bought it was called Penn Gaming. When they bought Barstool, they were about a $3.5 billion valuation. They basically are just our casinos, and they bought Barstool because Barstool has a— the Their fastest— it's kind of like Justin.tv and Twitch. Their fastest growing— Barstool was only sports, but actually the fastest growing segment started small, but it was sports betting. Now it's quite huge. And once sports betting became legal, Penn goes, hey, we're going to— we're going to— we're going to— you're going to— this is like our version of Disney Park. So we're going to have like the Penn Gaming Barstool sportsbook over here, and then we're going to have the Dave Portnoy Pizza Bar over here, that type of thing.

Ah, so. He's their, uh, Star Wars or Marvel in this, uh, equation. And they were gonna literally put Barstool bar stools in casinos and they were gonna do all this online gambling.

And so that's 100%.

That's really, I think the meta story here is that online gambling combined with content could be a solution for the content industry. And I think NB— the NBA is getting into gambling as well. They wanna have in-arena wagering and all this kind of stuff.

And Barstool was already making about $110 million a year in revenue. It in itself is a great business. But the day it bought Penn Bottom, Penn stock went up $1 billion or so. I mean, it popped big time. So a lot of people think this is a good deal. It's super interesting. And the whole time Dave is just— he doesn't hold back. He tells everyone what's going— he goes, I'm broke now with Penn. This was 3 weeks ago or 3 months ago. I'm broke now with Penn stock going down in the gutter. Now I'm going to put $3 million in an account and and day trade because sports betting doesn't exist anymore.

Wow. And then it comes right back. All right. Any thoughts on this? Zach, sorry to drag you into this sordid mess that Sam and I are delighting in as media executives.

Anything to take away from— I'm watching and laughing and loving it. It's beautiful.

Keep it going. Did you see Donald Trump retweeted Portnoy yesterday? And Elon Musk said Portnoy should run for president or run for office.

Yeah, he's definitely entertaining. He's got a Trump-like spastic, you know, unfiltered nature to him.

He's a loose cannon.

It's a— you get to watch this guy have meltdowns and it's just exciting. Look, this is like our version of Kim Kardashian.

It was actually interesting. I think he came up in another episode where he said something about unions and he's like, if you bring a union to Barstool Sports, like, I'll fire everybody, whatever he said.

And then AOC hopped in. What's her name?

Andrew?

Yeah.

He goes, I'm going to crush you. He goes, if anyone talks to that lawyer, I'm firing you.

Which is literally the rule number one of unions organizing is people have the right in America to— Labor has the right to organize. You can't fire them for organizing. And he literally tweets that.

He has this Alex Jones umbrella, which is like, it's all entertainment. And in Portnoy's case, it truly is entertainment, and I think people understand that.

Yeah, except when you get pulled in front of a lawyer and you get in trouble for, you know, uh, actually having to explain that, right?

And you get kicked out of jail two different times for their, their skits. One time he broke into the NFL, uh, like a game, and they locked him up and he spent a couple days in jail. Another time he broke into the Super Bowl and they arrested him. So this guy's crazy.

Oh right, I heard about the Super Bowl thing. He, he went in a disguise but they found him, right?

Yeah. And then interestingly, Roger Goodell, the commissioner of the NFL, basically has banned all Barstool employees from the game. Well, the other day Roger Goodell auctioned off a chance to watch the football game in his man cave at his house. And Dave won the bid, and so he spent a quarter million dollars, and so now he's gonna be spending the evening with this guy who hates him. And so it's wonderful.

It's nice to see somebody out there just trolling. Yes, but yeah, no, that you cannot use the parody to get out of everything. Like, if you actually— Sanders, somebody actually commit a crime, you, you don't get to say parody. Like, you don't get to murder somebody or steal their car and say parody. That a judge will still put you in jail and you'll still be liable.

That's— he's paying the toll for my laughter.

All right. When we get back from this quick break, we'll throw it to Zack and talk about SoftBank's ginormous $17 billion annual loss when we get back on This Week in Startups. In uncertain times, supporting your community and growing relationships with your customers is a strategy that will be appreciated, remembered, and It'll be shared in good times and bad. Open and empathetic communication with your customers is key. It's critical. Email is and has always been one of the best channels for delivering these communications. We all know that. And email marketing is one of Klaviyo's core offerings. And when you leverage personalization driven by a 360-degree view of the customer, those emails will feel even more relevant, fostering a deeper and stronger relationship. Klaviyo truly understands how challenging it is for each and every entrepreneur to get their business off the ground, let alone navigate such trying times. If you're feeling overwhelmed with growing your business, especially in this climate, you're not alone. Klaviyo is here to help brands build relationships across any distance. So here's your call to action. Create meaningful, memorable email marketing moments that last a lifetime. Visit klaviyo.com/twist to start a free trial. That's klaviyo.com/twist. Twist. Okay, let's get back to this amazing episode. All right, welcome back to This Week in Dave Portnoy. Um, I kid, uh, moving on to additional business news. SoftBank reported a $17.7 billion annual loss overall, worst figures in its 39-year history. Uh, the $100 million Vision Fund went from the group's main contributor of profit a year ago to its biggest drag on earnings. The situation is exceedingly difficult. Our unicorns have fallen into the sudden coronavirus ravine, but some of them will use this crisis to grow wings. Masayoshi-san— a number of people reference my Pegasus blog post, uh, for this one, and there was actually a slide in the deck which we'll pull up on the screen in a moment if we can find it, with literally unicorns in a ditch going up and down, and then one of them flying over the chasm. Uh, Uber share price was responsible for $5 billion of the Vision Fund's losses. If you don't know, they bought privately at a price that is slightly higher than Uber's trading at now. And WeWork, of course, contributed $4.6 billion in those losses. WeWork is now valued at $2.9 billion, which is down over 90% from a peak that clearly it never actually achieved. SoftBank has invested more than $18 billion in it and owns most of the company. That is WeWork. Masayoshi-san says he regrets investing in WeWork, calling the move Foolish, which actually I didn't know, and another $7.5 billion loss given the rest of the portfolio. And SoftBank is finalizing a deal to sell $20 billion in T-Mobile to raise capital. So, Zach, what are your thoughts on the whole Masi— oh, there it is, the value of coronavirus. What's a little ridiculous about this is the issues for WeWork have nothing to do or had nothing to do with coronavirus. And I would, I would argue that the issues that WeWork have, has had were greater prior to coronavirus than after. And that's saying something. Zach, what's your take on this whole, um, let's call it 30-month experiment in the vision fund here in Silicon Valley? What's your, what's your take on it? How will we look back on it?

Yeah, I mean, there's a lot of very cynical takes. Be had.

Easy to be cynical. Yep.

It, you know, it's, it's easy to look at what happened and point a lot of fingers, but I think the lesson that I really sort of take away from this is that in startups, focus is everything. And especially when you have sort of a growth stage company where they've spent the majority of their time and attention, there's a really— it's really easy for executives inside the company to empire build and to run off and try to do new things outside of the core focus area of the business. By shoving way more capital into these businesses than the businesses needed and wanted and expecting them to grow at faster rates than they were growing at the point that SoftBank invested, I think they really created a strategic imperative for these businesses to expand focus and to enable executives to basically take that capital and run around and do crazy shit. I think it's pretty clear systematically across all of their investments that that's a really, really bad strategy. And so, you know, for me anyway, I look at that as a reminder of like, okay, great. We saw what happens if you try to go off, you know, from where your core is, keep it focused. Like if, and, um, yeah, I mean, poker analogy comes to mind here.

You know, you, you, you win a couple of pots, big pots, and then you start playing every hand, every hand, and you're playing out of position and suddenly you're thinking like, yeah, my, my 5-8 offsuit. This could be the one. Like, yeah, I'll play this under the gun. And then you start realizing like, well, why am I playing that hand? Do I have to play that hand or can I have a sip of coffee and check my SMS messages for a moment and not play, you know, 2-7 off and 10-5 because it's not going to work out. It just placed way too many bets and too many big ones. But if you're—

yeah, but it's more than— I think it's more than just the bets, right? I think if like, if you look at Uber, pre-Masa and post-Masa, if you look at WeWork pre and post-Masa, if you look at almost every business in a pre-post SoftBank involvement, you had pre-Masa, Uber was super focused. I mean, they were growing like crazy, but they were really, really focused on getting done what they needed to get done. And Masa went in there and said, here's endless money, do whatever you want. And by the way, I want you to do everything. And lo and behold, Uber went from super focused to super unfocused, and the consequences were pretty calamitous. Yeah.

But I don't think that that's like a thing about the strategy, because if you look at Masason's, if you look at his history, like have you, if you ever study SoftBank, like this is what they did. They were not focused ever, and it worked wonderfully.

No, no, yeah, but we're talking about the, I think Zack is talking about the impact on the founders to receive such a large amount of money. Yes.

I don't think, I don't think it's SoftBank's being unfocused because Masayoshi Son has always been unfocused, right? Like he's all over the place. But I think that the way that in order for him to enter into this point in the market and to compete with the existing growth investors, because of the nature of this market, he had to come in with more capital at higher prices. And when he did that, he drove up the expectations on those businesses and gave them a lot of capital to deploy. And so they had to move off of their organic growth rates that they were on with whatever their current focus was. And expand their endeavors. And they had— they all did it across the portfolio. All those businesses expanded their focus, and we all know what happens when you expand focus. Shit, it all breaks down.

Yeah, if you're working on 10 things, it's not as good as working on 2. I mean, it's, it's pretty obvious things are going to go better. Um, yeah, I, I knew something was up when I had Tina Sharkey on the podcast and Brandless, which I thought was a brilliant idea kind of like the Uniqlo of like delivered foods. And I was like, this is an idea that'll work. I could see myself getting into this, putting stuff on subscribe and save. You know, who cares what the box says? Just get me the thing that I trust, that I know is made to the highest standard for my family, and I'll just buy it from you forever. And they raised $200 million, and I think they got it in two tranches of $100 million. It eventually came out. But I just thought, that's a— that's an ungodly amount of money. How does anybody stay focused? And how do you look at an employee who says, I would like to have my salary doubled and say no, right? Like, you just can't have no frugality.

Can you—

can you raise these rounds and just not tell anyone? Because I know I've got a few friends who have raised like $30 million and they're able to kind of keep it under wraps. That seems like actually the best strategy is to take this $200 million from SoftBank and just not say a word.

Yeah, it's very hard to keep it quiet. Unless it's an inside round. And SoftBank's idea was, we're going to pick the winners, anoint them, and be very public about the amount of money, and that capital is an advantage. And we had Jeff on the podcast. That was their idea. Capital is an advantage. So, we'll give you so much capital that other people won't even come into the market. Other people won't even try to compete, right? That was their idea. And of course, it's not working very well at this point.

I mean, I think, I think you can basically say at this point, systematically it's failed. And the, there's a lot of different arguments for why, but I think focus for me, it was the one I really point to. Because if you look at Google or Facebook, I mean, especially in the early days, both of those businesses were just incredibly focused. I mean, you think about Chrome, Chrome seemed like such an obvious thing for Google to build, but they didn't build it for years and years and years and years because Eric was saying, No, no, no, stick to the knitting, stick to the knitting. And they waited until they were really established before they started branching out and doing lots of other stuff.

And other bets for Google has been money-losing net, and they really— the growth has come from them buying things that were— had great product market fit, and being fearless about buying it. They bought YouTube, and they bought Android. Right.

So Google Analytics.

Google Analytics. Yeah. I mean, there was a handful. And then if you look at Facebook, it's the same story, right? They just were bold about acquisitions. Apple, not bold about acquisitions. Amazon, bold about acquisitions.

Whole Foods.

Yeah. All right, let's move on to TikTok. I thought this was kind of interesting. I don't understand why we allow TikTok to be in this country as a Chinese company when in fact our social networks are not allowed there. I don't know how anybody considers this not spyware by the Chinese government. However, uh, an incredible wrinkle just happened. ByteDance is now trading at $140 billion, and they've poached Disney's former head of streaming as the new CEO of TikTok. Kevin Mayer was runner-up to replace Bob Iger, and he lost out to Bob Čipek, if I'm pronouncing correctly. He made himself a name— Kevin, that is— made a name for himself as the head of Disney's direct-to-consumer group and oversaw the launch of Disney+, which is extraordinary. He also played a role in all the acquisitions from Lucasfilm to Pixar to Marvel and 21st Century. And I guess the question here is, I guess, did Disney drop the ball on promoting him? Or what do you guys think about top US executives running Chinese startups or at-scale companies?

Can we even first talk about ByteDance? Is it ByteDance or BitDance?

ByteDance.

It's B-Y-T-E, and that would be a byte in typical parlance. Yeah.

Well, so whenever I— so I've read a fair bit about this company. How the hell did these companies get so big so fast like this? So like, because this was, I believe TikTok is just one of their like side products, no? Or it started—

they bought it from somebody and then rebranded it.

Musical.ly.

Musical.ly. Yeah. So yeah, I don't know. And I'm assuming this trades in China and I don't know how the valuations work in China of these companies. I mean, they could have a giant stock bubble over there as well. And I don't trust any of the numbers coming out.

It makes billions in revenue.

Yeah, I know they spent hundreds of millions of dollars 2 years ago or a year ago on marketing United States. I don't know if you remember Facebook and other people, you would see TikTok ads everywhere. And I don't know how wise it was to let them do that. But let me just say this. Do you guys think that America should let Chinese companies infect every American's phones and track them everywhere they go and have access to their cameras and microphones? Does this not concern anybody but me?

I, I still struggle with that concern from a, from a sort of like national security perspective because I'm not really sure what data that they're going to be able to collect as a result of that. I'm more sensitive, and I agree with you that not allowing U.S. companies to operate on an equal playing field in China But basically, Chinese software companies operating with carte blanche in the United States is pretty problematic. And I think it's another indication of the failure of, you know, the U.S. government to enforce trade laws effectively. There's— the Chinese have gotten away with a lot for a long time now, and we need to— they need to— we need to even that playing field.

Yeah, and I don't think that's even a Trump position. I think Even Bernie Sanders had a pretty hawkish position on this relationship, and I don't understand what American would want to work for a Chinese company. This Kevin Mayer is going to wind up being in a situation where he's going to have to turn over people for having an opinion in China who will then be tortured and put in jail. For Kevin Mayer, what are you thinking? Why would you go work for a communist country and a communist company.

Well, why do you think?

Money?

Yeah.

Opportunity. Yeah.

But I mean, he's definitely the CEO of one of the most powerful— it's like being the CEO of Snapchat at the moment. I mean, they're similar, similarly sized. It makes perfect sense why he would want to do that. But I actually think that young people have incredibly high bullshit detectors and they know that this is a Chinese company. And I think it does make a lot of them nervous. And that's the only reason why why they hired this guy, not for the content.

So then what Kevin Mayer is doing is then he is giving cover for a Chinese company, and that's something I would not sleep well at night knowing. If I was him, I would really think this through. I think it's a terrible career choice, to be totally honest. Why would you want to be subservient to the Chinese government in this regard, right? It makes no sense. And if you don't believe me, just look at what happened to Yahoo. Yahoo executives were put in an impossible position of having to have their employees go to jail and be banned from going to China because they had to turn over dissidents, they had to turn over people for religious beliefs. You're basically buying into communism if you go work for a communist— a company that is headquartered in a communist country. That's what Kevin Mayer is doing. Kevin Mayer is now a communist as far as I'm concerned. He's supporting a communist company. I mean, I don't know, I know that's funny for everybody to think about, but I would I would feel the same way about somebody who went to work, you know, for the Saudis and worked in a Saudi company that was, you know, anti-gay or anti-women or anti-human rights, right? That's what we're talking about here. You're talking about going over for money, to go sell out for money, which you can make here just as easily, just like the NBA selling out by, you know, you know, throwing Daryl Morey under the bus for supporting Hong Kong. Like, where is the morals of the American businessperson in relation to China, which is a very dangerous adversary for us to have and which tortures and imprisons people in the millions.

Do you let your children use TikTok?

No, I would never. No, I'm going to try to keep them off social media for as long as possible, number one, because it leads to depression, it leads to anxiety. So I want to keep them off of that as long as possible. And I would never let them on these social networks because I think they're going to be targeted, right? I think there's a lot of like bad psychological impacts. I think you can be targeted by predators and other stuff like that.

Do you use it, Zach?

Uh, no, I don't. I don't use TikTok. Um, but I have a lot of friends who do. I mean, it's a, it's actually a very well done product and their recommendation algorithms are probably at this point the best in the world as far as I can tell. So one of the things that's really interesting about the way their algorithm seems to work is it seems to be able to personalize the content to you as the individual within a very short interaction period, and to have a— has a very tight feedback loop, which from what I understand technically is very difficult to pull off. Um, back to your earlier question about why they got as big as they did as fast as they did, like, they really have innovated and built some pretty amazing stuff over there.

Yeah, I mean, it's an— it is amazing. I, I use TikTok. It's It's shockingly addicting. It's just amazing how these Chinese companies grow so fast. I just— the dot-com bubble in America was something interesting, but I've read a lot— I like to read a lot about the Chinese companies around that era, and they were even more epic. They— it got bigger faster and crumbled faster. And it's—

well, you have a billion people, right? And you have no accountability. Fraud could be rampant and you would never know. So the corruption over there, as much as you could look at situations like Theranos here or accounting fraud or whatever, over there the government literally picks the winners and the monetary system is managed and who knows what's reality. That's why people ask me, "What's your favorite Chinese stock?" I'm like, "I would never play in a rigged casino. That's like going to a home game." run by a bunch of like mafia guys. Like you don't know what you're up against. The deck could be marked. The other 7 players in the game could be playing from one chip stack. So it's 7 versus 1. Like, is a really bad idea. I mean, look at Luckin Coffee. They were claiming they had what, twice as many, how much, twice as much coffee being sold. And that thing became one of the fastest growing unicorns there ever. I would assume that most of the unicorns over there or a significant number of them are involved in some amount of what happened at Luckin.

Yeah, I still— there is definitely this, like, sense of admiration, though, I had from it. To me, it's like, it's like a love-hate thing, you know? Like, I disagree with a lot of what these guys stand for, but it's almost like being a boxer. It's like I fear them and I want to crush them, but I respect them. And I'm incredibly fascinated with a lot of these Chinese entrepreneurs, Japanese, like Masason as well.

Yeah, they, they really do want to dominate the world and build very large companies in China. Like that is the goal. Like, and they have this giant market. You think about the size of the market there is just, you're having over a billion consumers and having 4 or 5 consumers for everyone we have, even though our consumers spend more money in aggregate, they have a lot of consumers. Uh, any further thoughts on that, Zach? Nope. All right. When we get back from this quick break, We'll talk a little bit about Facebook launching Shops on Facebook and Instagram and partnering with Shopify and others. And if this will be a giant boost for the ad-driven business to get in on e-commerce when we get back on The Sweet and Sour Apps. As we navigate unprecedented times, Silicon Valley Bank believes that collective action is the best way to overcome the challenges we're all up against. This is why Silicon Valley Bank in partnership with Founders Pledge, has formed the COVID-19 Global Impact and Innovation Fund. This fund will deliver resources directly to organizations around the world that can help make the most immediate impact in the fight against COVID-19. Silicon Valley Bank has made an initial $1 million investment to fund this critical work and invites you to join them in helping those in need. Silicon Valley Bank continues to offer solutions that support small businesses and the innovation economy. For more than 35 years, Silicon Valley Bank has supported countless innovators with a passion for solving the world's biggest problems, and today remains committed to helping its clients and employees and our communities manage through these uncertain times. To learn more about the Silicon Valley Bank COVID-19 Global Impact and Innovation Fund, visit svb.com/impact. All right, welcome back to This Week in Startups. Zach Colius is with us and Sam Parr from The Hustle. And what's your— what's the name of your trend newsletter that's doing incredibly well?

Trends.co.

Trends.co.

Trends. We just call it Trends. Trends.co is the URL.

Beautiful. And that is a place to find the next big opportunity, the next big trend before it happens.

Yeah, so we have a team of analysts and researchers and we go out and we do research on interesting opportunities as well as case studies on cool companies.

Very smart idea. It's what, $200 or $300 a year?

$300. Prices are going to go to $500 in June.

All right. So get in there now while you can. Facebook is launching Shops on Facebook and Instagram and partnering with Shopify and others. User— users are now able to browse and buy products directly from a business's Facebook page or Instagram profile. Around 100— around 1 million businesses have already signed up, Facebook's VP of Ads, Dan Levy, said. 'While Facebook will charge small fees on each purchase, haha, the real monetization will come from driving more advertising. Shops can advertise on Stories as well. Facebook is partnering with Shopify, BigCommerce, Woo, and others. Instagram Shop to launch in the summer, and it will allow users to browse products directly from Instagram.' So, Zach, what do you think? Uh, did Zuck do it again, or will this be a fail? Is this going to be a big one, or is it going to be modest. Will you buy stuff from Instagram?

So I have a scar from one side of my belly to the other from where Zuck and his band of loyal men gutted me in my business in 2014. So I'm, um, uh, you don't trust him?

Well, you go to bed with Zuck, you wake up with your throat slit. Basically what you're saying.

Well, yeah, I mean, you're not the only person who feels that way. No, no, no, no, I'm trying to find the right metaphor because I don't think he slits your throat. It's more of like he welcomes you into your— his home, and he feeds you at his sumptuous table where food just comes in beautiful, amazing quantities, and you feel like a king, and you are truly crushing the world. And then you look over and there's there's a very poor replica of you sitting right next to you.

That's not fat and fit and trim.

It's sort of like you, but not quite. And it's kind of badly built. And then you realize, oh, I'm fucked.

I've been cloned. He clones you and then he just deletes you.

Well, no, they didn't delete us. That was the best part, was we saw it coming. We saw our clone. I was at a party and I met this Facebook engineer there and I was like, oh, what do you work on? He's like, oh, we built this. Dynamic Creative Engine, which is what our business did. And he told me all about it and I was like, oh, so they copied us.

Okay.

And then, then like shortly thereafter, one of their PMs was like, hey, so we're going to build this thing that's a complete copy of you and you can now use these really shitty APIs to do what you did better with your technology. What do you think about that great idea? And I was like, oh, we're screwed. And then they just slowly dialed the traffic back. So even though our business was growing really fast because the customers loved what we were doing, we just saw our traffic slowly dying. Yeah, they went to all of our customers and they were like, hey, you can keep working with our old great partner Trickett, or you can come work with us and get better.

So in this analogy, would it be Shopify, BigCommerce, and Woo that are making this mistake, and that eventually Facebook will just build a competitive version of Shopify and kill them?

Exactly. At some point, basically, Facebook will— like, the cool thing about Facebook is that the thing that Zuck's done, it's sort of an organizational perspective, it's super smart, is that the PMs over there and their teams are largely little independent sort of city-states, and they're all kind of feuding for power and control and sort of just generally achievement within the Facebook org. And so every single one of those city-states has an incentive to go find something to do. And so they'll look at— well, all those folks will look at the Shopify and be like, hmm, I'm gonna go copy that. And you can be assured that those projects are in the works as we speak.

How did their story end?

Oh, I died. Like, they killed us. For about a year, we were gutted. So my guts were hanging out. I mean, we had a pretty big business and we bled to death.

A lot of blood out with your— with your innards on your knees.

Yeah, slow, steady, sort of like—

I've been there.

When you get gutted, you don't die immediately. It took us about a year and then, and then you bleed out. Put out of misery.

Yeah, it would be easier if they just put the bullet in your head, but instead—

Oh my God, that would have been so much better.

No, no, they just like to slice you open and then talk to you as your guts are falling on your knees.

My favorite was they would lie to my face. It was so excruciating. They'd be like, oh no, we're not lowering your traffic.

I was like, guys, exactly what Matt Cutts from Google told me.

You know exactly what's going on.

Never trust Google or Facebook. Never.

Oh yeah.

As if you're, if you're in competition with them, assume this is why I tell my, the founders I invest in, I just say, do not meet with them. Never meet with them. And then at some point Y Combinator had made Facebook a partner and they got to get mentorship. And I said, anybody who lets Facebook into their accelerators lost their mind. And Paul Graham got a little upset at me, but he knew I was right. And then they wound up kicking them out eventually because In fact, that's what Facebook was doing. They just look at startups, they wait till you hit scale, they partner with you, and then all of a sudden, instead of a hug, you realize, well, I am with an anaconda right now that is squeezing the breath out of me and there's no way to get out of this grip. But you literally went to the anaconda's house. Don't go to the anaconda's house.

How often do you think that works versus when it fails? Because it, it, there's definitely examples of when it fails, but we don't know of all of them.

Yeah, I think it's, I think the key is, is that you have to basically delineate what's strategic for Facebook and what is ancillary because they, they, they're very focused as an organization, like hyper, hyper, hyper-focused. And so unless it really is strategic and it can drive, it can move the needle in a material way for their business, they're— you, you're, you're relatively safe in their home. Like they'll, they'll kind of let you sort of like be a little peon running around the corner. But if we were in the ads business, and we basically showed them how to build the engine that they have now. Now it's amazing, but when we started working with them, they had no idea what they were doing, and we were like, "Look guys, if you do this, it will work," and they did it and it worked. But yeah, if you're strategic, they will kill you.

What was their business thing? Didn't they have Facebook for Business that was gonna kill Slack and Yammer? That was the one? Yeah, but that's not strategic.

Facebook for Business?

It's not strategic. Workplace.

Workplace, yeah, what happened to that?

It's still around.

Yeah, well, they built it internally for their own use. It works pretty well, but it's not strategic for them.

I get pitched on that shit all the time. People, they're always reaching out to me. They're definitely selling it.

Yeah, they're trying to sell. Who are they competing with? They coming up against Slack? They're saying take Slack out and put Facebook for Business in?

Yeah, and to be honest, it's pretty legit. Like, it's a great product. Facebook's awesome. Like, the groups are the best right now. Facebook groups are the best communities on the internet. Now, the only problem is, is that people don't want to use Facebook because they, you know, this whole Zuck's evil thing. Like, normal people think that. So it's like this Facebook Portal. The Facebook Portal is fucking awesome, but people don't use that.

Yeah, I would never let that in my house. So you have one?

Yeah, but I have one right here sitting next to me because it's a great way to talk to my mom.

Hi, Zach!

Awesome.

Hi, Zach.

Yeah, look, he— yeah, like, yeah, let's, let's say that he's listening to me. I'm not gonna deny that it's an awesome product. All their shit's awesome. A lot of their stuff's awesome. But yeah, it is. You get it. Is—

I mean, talk about not being able to read the room. Can you imagine you're Zuckerberg and you just gave the entire democracy to Putin and Trump and you're like, got all this like Cambridge Analytica, all these lawsuits and craziness, and you're like, hey, we'd like to have the Muppets sell you a camera for your home. And we want it to be always on. It's like, read the room, dude. Like, you're the last person anybody wants to hear from on this subject.

But the thing is, that's not how their organization works. So it's not, it's not Zuck basically like masterminding everything. It's a team of really talented PMs who are very independent and who are allowed to run with ideas, who basically build things and do things. And that, I'm sure, was something that basically just came out relatively organically to get the kind of traction it is. I mean, the product is amazing. I mean, it's a great—

Let me ask you a question, Zack.

Yeah.

If these people are so supremely talented running these PMs and these groups and these FIFTEENS, why on earth would they waste their lives working for Zuck stealing other people's ideas? That's what I always don't understand. Why not, in a market full of free money, say, you know what, fuck Zuck, I'm not going to steal Shopify. That's low. I'm not going to steal. I don't want to come to work and have Zuck tell me steal Evan Spiegel's ideas. I don't want to steal Tobi's ideas. I don't want to steal, you know, Zack's ideas. I want to come up with my own ideas. I want to pursue my vision. And I'm just going to go down the street to Sequoia or Accel or Kraft, and I'm just going to get $3 million and start my journey or $10 million and start my journey making my own thing. Why do they do it?

I mean, you and I have an age-old debate on whether or not Facebook is evil or if it's different. I think it's different. I don't necessarily think it's evil, even with my scars.

Do you think its behavior is evil? How it operates is evil?

No, I don't necessarily think that it's evil in the way you think it is. Okay. And so we, you know, it's a debate. We'll have it almost every time on the show.

Well, what would you describe it as? Classless or? Low or sharp-elbowed? How would you describe stealing every single—

every idea? He's really putting you in this corner.

No, no, it's not a corner. I want him to describe it in his words. How would you describe stealing?

Would you say it's bad or horrible?

No, no, no, pick, pick. Is it cutthroat? I mean, you pick the word of what you think it is. How do you describe it?

I think Zuck plays on the playing field that I recognize as the real playing field, which is that he's a realist and he recognizes that power And the achievement of like real things is a zero-sum game. And as long as it's not like explicitly illegal, um, and I think as long as it's like considered to be in the fair— in the way that we think of Wall Street acting fair, which is like, I can kill my opponent, I can trick my opponent, as long as I can legally steal from them, I will. I think the Facebook team—

All is fair in love and war. They just cut through.

Oh, yes. If you look at Microsoft with embrace, extend, extinguish, if you look at the way that Google played in their ad business around really exercising their monopoly powers, if you look at any of these big successful winning companies, I think they all played by that realpolitik sort of like—

Apple does?

—art of war game against each other.

You think Apple does? I mean, it seems like an outlier. Amazon does.

I think absolutely Apple does. They don't, they don't play it in the same way, but I think Apple absolutely does.

Wait, so what are you angry about, Jason? You're angry that Facebook copies people?

I think the way they do it, where they relentlessly target a company for extermination and just copy every single feature like they did with Evan Spiegel, I thought was just so abhorrent. Um, and, and I have other problems with their behavior and how they handle users and data and defaults, but I'll put that on the side. But I thought stealing ephemeral messaging stories and doing it pixel by pixel was a level of unnecessary theft that I thought could have been actionable. And I wish Snapchat had sued them for stealing the stories format. I felt it was just so abhorrent to steal it that blatantly that it feels classless. It feels unnecessary. And it's— it was, it was an obsession beyond It was an obsession beyond reasonable for them to be like, "Hey, you wouldn't sell us the company. Now we're just going to release—" He had 4 versions, I think, of Snapchat before he actually got the Instagram folks to make it work. I feel like it's classless. I feel like they don't have class. I feel like it's stealing and it's unethical. Now, if he said, "We have a better idea for stories. Here it is. We're going to evolve it," but that's not what they do. To Zack's point, they literally just copy it. And they make a bad facsimile that eventually hits scale and it removes the other competitor. That's just my feeling on it. And I feel like Silicon Valley was slightly different before Zuckerberg and Facebook kind of took this approach. You know, Microsoft had it a little bit, but there was almost like a certain moral or ethical approach before Facebook. When I was in the industry that if you did something that was just a direct copy, you were kind of a scumbag and you would be an outcast.

Microsoft was the evil, evil empire that we all hated, and they were the worst. Absolutely. You could say that Microsoft Explorer relative to Netscape wasn't even a bad copy.

I put both companies in—

yeah, and they kill the better pieces.

I put both companies— I put both companies in the same bucket. for the— how's this any different?

I'm not even saying if I'm pro or against this, but how's this any different than Uber and Lyft?

Um, yeah, I mean, there were 3 or 4 people who came out all in the same year. Um, one of them was doing Lincoln Town Cars, one of them was doing pay your own price, like tipping, Sidecar. Uh, Zimrides was doing ridesharing in the classic sense. And yeah, I mean, there were— it's okay if 4 or 5 people— like, there were 5 or 6 social networking companies that all came onto the scene at the same time, and they all had kind of a different spin. MySpace let you be super creative, LinkedIn was only for business, and Facebook was kind of like the amalgamation of two of those ideas, you know, like the structure of LinkedIn, but with the— but for individuals. And so I kind of feel like that's different when the industry's nascent, 5 or 6 people are in a dogfight to iterate. What I don't like is when somebody hits scale that they just wipe out the competitive set by copying them. It was just slightly different. If that makes sense.

So, Zach, you're not angry at them for copying you? You just chalk it up to the game?

Yeah, no, I knew the dance I was doing, and I knew I was dancing with a— The devil. —informal, deadly partner, and I thought I was gonna be agile enough to basically, you know, hop out of the way with all those customers that they gave me and iterate on to the next thing. What I didn't realize is that when you start mainlining the Facebook crank, there's no way to get off of it. It's a dangerous, dangerous dance. I didn't understand it at the time. I was a baby entrepreneur.

I mean, this is one of the reasons why we dabbled in Facebook Groups, and it's really a great product, but then I was like, "You know what? Screw this. Let's just set up a Slack instance for This Week in Startups, and we'll invite everybody there because we can control it, and Slack's business is not in owning our data." It's not in owning our users, it's just in software. And so I really feel, a journalist contacted me, I won't say which major publication, but they said, well, they're doing a story about like the future of social networks. And I was like, I think the future is that people are getting frustrated with the public square because it's too toxic and they're gonna make micro communities. It's gonna kind of go back to smaller communities in Slack rooms or Discord rooms. And you kind of see like this whole little world pop up and it's really nice.

Clubhouse is like that. Which is? Clubhouse is like that.

Clubhouse is exactly like that, which is an interesting piece of this, which is, I don't know if I'd call them semi-private. Are you on Clubhouse, Sam?

Yeah, I was on. I've listened to you talk there.

Oh, right, right.

I did see you there. Yeah, yeah. Yeah, and we have, my company, we have over 100,000 people in a variety of groups, and I do have the feature of face— Which ones? So, Trent, I mean, Trent's, you know, we're getting— we have many, many, many thousands of subscribers and they're all there. And consistently people say that it's the best part of the subscription, their paid subscription. And people laughed at us when we use Facebook groups, but it has the high— I've been doing building communities for 10 years. If you create a community forum now, you're going to get 1,000 people and maybe 1 person will post. On Facebook, it's closer to 5 or 10% of people will actually post. The rate of engagement per 1,000 people is significantly higher than any other platform I've ever seen. Now, the problem that people consistently complain about is, oh, but I gotta use Facebook. So, but it— the Facebook groups is the hottest thing going right now, and you could tell because they advertise for it in BART. And anytime a company like Facebook buys outdoor advertising for a product, you know that's the thing they're going to be pimping out hard, um, and that's what they are. But micro communities, I agree with you, that sentiment is there, but no other platform comes close at the moment.

Yeah, it'd be great if somebody could figure out how to do micro platforms on a macro platform, which I guess is what Facebook's goal is there, right? Like Zuck said, we have to have these smaller groups so that people are not just, you know, getting the trending, trendiest stories, but, you know, smaller groups might result in a better experience.

You know what was interesting though was Meetup.com. When Meetup.com was for sale, I looked at the numbers. I got their deck and it was intriguing. I think that ultimately Facebook's going to crush them, but I think that they had a legit shot at trying that. Yeah, I'm good friends with Scott Heiferman.

He started that company, I think, 15 years ago, and I don't know what it eventually sold for. What do you think it went for?

$20 million, $30 million when it sold? Yeah, about 1x revenue. Wow. Maybe 2x revenue. Dude, they lost $25 million the year after WeWork bought them.

You know, I was going to look at it as well. I think Kevin Ryan is a friend of ours, a friend of the pod. And really smart cat. He— I've known him since the Silicon Valley days. He was the one who bought it. And it seems like a smart buy. Speaking of smart buys, AMC, the movie theater chain, which obviously is at zero in terms of revenue and close to bankruptcy according to reports, is dancing with Amazon, which is considering a bid for the chain, according to an article in Fortune. What do you guys think? Hot or not? Dope or nope?

It sounds like something the investment bankers put out there to try to get other bidders. Ah, trying to pump the price.

Now wait, Sam, you— so are you— you think it's dope or nope? Just on it. Awesome, Sam, you love it.

Why? Unpack. Um, I mean, going— this is so simple and obvious. I mean, it would just be exciting to go to the movie theater and see Amazon films out, which I think you can already, but just to have a more direct relationship with, with the audience, I think it's wonderful.

And they can make it part of Amazon Prime that your tickets are— you get 2 tickets a month with Amazon Prime, or 1 ticket, or you can get a subscription.

And you can buy more stuff there. I mean, this is a home run. How on earth does this not sound interesting? I don't know if it's actually gonna happen. I bet it could be totally a rumor. If I worked at AMC, I would make up that rumor too in order to find a buyer, but That would be amazing. This is a big, bold swing. I love Amazon at Whole Foods. Yeah. Yeah.

What do you think, Zack?

I mean, like, so now that they, they broke the embargo on first release films into people's homes and you think about the quality of home theater we all have now, huge TV, good sound systems, that's— that horse is out of the barn because the movie, you know, the production companies make so much more money if they cut out basically the distribution through the movie theater. And a whole bunch of people are going to be like, why would I go to the movie theater when I can do this in my own home? And so I think you're going to see a material, you know, 20-plus percent of the revenue that used to go into the movie theaters is going to move into direct home screening and for, for just released pictures. And when you do that, we've overbuilt the movie theater infrastructure that we have out there. We're going to have to deleverage that whole thing. It's going to be a disaster.

I have to say, one of the things I miss most about being in quarantine is taking my daughter to the movies.

Me too. I think you're on drugs, Zach. I still— I still think you're wrong. I think it's going to go—

a lot of people do think I'm on drugs and that I'm wrong all the time. So you're on drugs during this podcast taping?

How many gummies did you have? You are so off. The going to the movie theaters is wonderful.

So many people. I'll bet you $1,000.

Oh, there we go. Sushi.

That we see in the next, uh, let's call it— well, you need like— call it 3 years, we see sequential year-over-year declines in movie theater.

Oh, that's already existed in terms of people going.

Yeah, I think we're gonna see like— that's my argument, which is it like— because now that the horse is out of the barn in terms of like direct-to-home new release movies some percentage of the population is going to stop going to movies. I agree with you that going to movies is great, but what— I'm not going to go to the movie as much. There's something— watch a brand new movie on my home theater.

No, no, because not everyone's rich.

Like, I mean, we're— look at us, we're ballers. Like, not everyone has this fancy TV.

And oh yeah, they do, dude. You can buy like—

I might cut my 50-inch, but it's also about the experience of seeing a film on that giant screen with a group of people collectively. That's fun. For people who like other humans, Zach. Yeah, but, but we're not talking about—

we're not talking about the core of the value of the experience, because I agree with you guys, the core of the value of experience is good. It's amazing to go to movie theaters, but we're talking about is incremental growth or decline. And my argument is, is that, yeah, yeah, because the movie production companies have a financial incentive to sell it to you directly and cut out the middleman, and now they've done that, they're never going to go back. And now that that's happening then you're gonna see a percentage of the population just not wanting to go to the movie theater.

All right, what's your best idea? Everybody think about it for a second. Amazon now owns, Amazon owns AMC. What's your best single idea for to iterate on the product? A bold iteration on the product. Now for obviously for when they bought Whole Foods, you know, they're gonna do that checkout kind of thing. The grab and go will eventually come to Whole Foods and obviously they're delivering it as part of Prime. In getting that delivery. What is your big idea? When you're ready, raise your hand and I'll call on you. Sam, are you ready? Zack, do you have a great idea? Ready. I'm ready. Go ahead, Zack. What's your great idea for Bezos if you're the product manager, you're the GM of Amazon's new theater chain?

I mean, obviously you need to do dynamic pricing because you've got dynamic pricing, real estate that you've paid for. You've got, you know, all these empty seats, large amount of the day, dynamically price that and make it available to Prime members where you can basically for a dollar go see a movie at a certain off hour and just fill those seats. And then advertise on the front of the movies with all of your different Amazon products and done.

Sam, your best idea for—

Okay, Zack, I'll let you have the fancy pants answer. I'm more of a simpleton. Two words: flavored popcorn, baby. The margins on popcorn are massive. Just You just gotta have Parmesan, caramel, some 5 other varieties. You're just gonna go hard.

You're gonna lean into the popcorn.

Yeah, you make all your money on a bag of popcorn. If I can sell 10% more popcorn with flavored salts, I'm winning. All right, guys, these are—

They already have that? No, no, no, they have the little salt for $2 at the end. What Sam's talking about is next level. He's talking about you put it in a bowl, you mix it in, and then you give yourself that fresh caramelized or whatever they call that corn. What's the corn you get at the farmer's market? Kettle. Kettle corn, right? With a little sugar on it.

Whatever it is. Flavored popcorn, baby. Two words.

Flavored popcorn. Thank you, Jeff. All right. You're gonna love this one. It's gonna be in the next issue of Trends. Here's my big idea. Amazon Prime Unlimited subscription. For the movie theaters. The movie theaters are open, uh, and have many more showings than they currently, and you use your Amazon card or your smartphone to book a ticket. You scan yourself in, you don't need to have a staff there, and you go take your seat and you can see an unlimited amount of movies for X dollar amount, like MoviePass was, but you just take that Amazon Prime group, and if you just add $100, you get unlimited movies every year. Boom. And you take the entire catalog of other movies and other TV shows and you say, you know what, we have this new hit coming out, uh, Man in the High Castle. Season 3 of Man in the High Castle will debut for 2 weeks and you can go see it in our theaters anytime. Episode— and you can just check your phone and you'll see when episode 1, 2, 3, and 4— you could stay in the theater if you want to stay in the same seat and watch them back to back. You could stay and go at 12 o'clock till midnight and watch all 12 episodes. How dope would that be? Dope or nope, Sam?

I'm not sitting in a movie theater for more than 3 hours. Wow. I'm—

you, uh, what do you think for kids, teenagers, whatever, and the families, the ability to have like an Amazon Prime Unlimited?

I think it's amazing. I think all 3 things that we said is amazing. I think that this is— all right, put us in the game, Jeff. Amazon owning AMC is awesome. I love AMC. Yeah. Do you think this is actually gonna happen? Who knows?

Are you— do you have the AMC— oh no, I have— yeah, I have AMC Movie Club. Do you have that? Where you get one—

Yeah, I go to the movie theaters 3 times a month, maybe. Yeah, me too.

And so I get one free ticket every month, and then they keep them on account, and then you don't have to pay like the $3 or $4 in fees. You get 20% off at the concession. It's the greatest deal ever. Yeah, I love it. It's like their version of MoviePass, which failed.

I go to the theater all the time, and it's— it's It's packed always.

Yeah, I think with this, the number of movie theaters has gone down as they shutter. These ones come out. I always thought that HBO should buy one of these theaters, or Netflix, and then if, uh, Game of Thrones comes out on Sunday night, you could have on Thursday, Friday, Saturday Game of Thrones in the theater. So if you're really jonesing, go see Game of Thrones Thursday, Friday, Saturday and put 20 extra minutes in it. Or a behind-the-scenes thing. Can you imagine how great that would have been? How packed would the theaters have been on Thursday, Friday, Saturday with a Game of Thrones with an extra 10-minute or a mini episode at the end? It would be bonkers. How come these guys aren't thinking? You guys gotta think a little more creatively.

All right. What, you're saying flavored popcorn isn't interesting as, as dynamic? I think it's a dynamic thing. Or a Thursday night Game of Thrones?

I, if I had to rank the 3 ideas, Hmm.

I like flavored popcorn. I think that's—

look at flavored popcorn. Obviously flavored popcorn's number 1, so I'm just thinking he's number 2.

It's like buying a software company, just tripling the price of the monthly, the monthly subscription. Like this is just an easy win.

All right, everybody. Uh, thanks. Thanks again for tuning into This Week in Startups. Go ahead and follow our guests, The Sam Parr with 2 Rs, T-H-E-S-A-M-P-A-R-R. Founder of The Hustle, uh, unlikable, intelligent, charismatic, and a cool cat in my book. I don't care what any of the haters are saying on Twitter. Zach Kolius, uh, is Zach Kolius, C-O-E-L-I-U-S. If you're a startup, man, that's one of the people you want to get on your cap table early. Save him a slice. Average check size for you these days, Zach, what's the range? 500 to a million. 500 to a million, which means you're doing seed stage to Series A, correct? Yes. Pre-product market fit, do you make investments? Pre-launch?

If I know the people or I know the space. Got it.

So nobody's talking you into investing in their company if you didn't know them previously and you knew the space previously, but if you knew them before, you might make a bet early.

Well, I invest in lots of people I didn't know before, but after they've got the product working and there's data. Yeah.

What do you think? You seeing more deals now or less deals now in quarantine?

Oh, down 90%. Deal flow went through the floor. Like, I used to get, I mean, so many emails every day about new deals, and it's a trickle now. It's, it started to heat up over the last week or so, but, and I've got 2 deals. I just, I just syndicated one deal. It's going out on my angel list syndicate today. Um, and then I've got another one I did that Kraft is doing actually, um, that I'm co-investing with.

Um, that's a good one. But otherwise, man, DMs are open. Zach, DMs are open. Uh, let me ask you a question about this. Somebody emailed me, I've been getting this email a lot. AngelList now is funneling people to funds as opposed to individual syndicates. Can you still invest in individual syndicates on AngelList if you're a new angel, or do you have to join a fund now as an accredited?

So what, that's always been there. And so what they've done to sort of deal with the sophisticated investor problem is if you're a new investor joining AngelList, they'll route you to the funds before they'll let you basically participate in the syndicates. Why? I have 2,000 people in my syndicate. So it's— it's—

why would they do it that way? Why would they do it that way? And what's their thinking?

I don't think it makes any sense. I've always just said, look, make it so they can only invest a little bit of money in syndicates and let them learn. So expose them to deal-by-deal decision-making, small amounts of money. Then that's how you build up a track record and you learn to be a sophisticated investor. I mean, I find this whole sophisticated investor, like, is rule is just complete hogwash. Like, I mean, we sell them lottery tickets which are negative EV. Like, you can happily go buy a negative EV lottery ticket on the street and we'll steal your money. But if you want to go invest in a startup, now you can't do that.

Well, I mean, let's be clear about the difference. That's the government giving you that negative EV deal, not a startup company. But it does have to change, and the SEC says they're going to change it to angelless credit. They are working with the SEC among most of the platforms. And I'm hoping, I mean, part of the reason I wrote the book and I do Angel University was hoping to train people to learn how to pick companies and get defended by that. You, did you see the, uh, tweet storm about Giphy? Early stage investors were on some platform that no longer exists. And no. So anyway, platform, God, it'll come to me in a moment, but it's a platform that no longer exists. It got rebranded. but it was like an AngelList contemporary, you know, whatever, 10 years ago. Anyway, somebody who's a high-profile person who works at Slack, this guy Matt, who I've met before, uh, nice guy, uh, he put $2,500 in and he hasn't heard from the company in like 5 years, which is not uncommon for, you know, some of these, uh, platforms where they tell the people don't contact the founders or the founders don't give updates. One of the things I've tried to work against because it's kind of a bummer, uh, but they might have been wiped out because of the preference stack is basically And they're basically like, oh, angel investing is a fraud. And it's like, no, that company got overvalued and there was more invested in it. But interesting discussion to have. Okay. We'll see you all next time on This Week in Startups. Bye-bye.