Latest / trading places / TP7: Turner Novak 🍌🧢 | Prediction Market 📈 | Gold Rush💰 | OpenAI's $500B Valuation 🙀

Transcript

TP7: Turner Novak 🍌🧢 | Prediction Market 📈 | Gold Rush💰 | OpenAI's $500B Valuation 🙀 · trading places

• 0:00
  I mean, it's all both. Followers don't mean anything if
• 0:02
  you make good content. The algorithms were put in front
• 0:04
  of people. Most people don't realize that.
• 0:06
  And then we saw crypto come way off.
• 0:08
  But the interesting thing is gold has hit a new record.
• 0:11
  Thursday and Friday it's over $4000 an ounce. $500 billion
• 0:16
  value racer for open AI. What's driving that?
• 0:19
  Who's behind it? All right, we're here with
• 0:45
  another episode of Trading Places, a very bad podcast about
• 0:49
  BC secondary among. We've got another big week of
• 0:53
  news, huh? What's going on?
• 0:55
  Not so much on the IPO market, but a couple of premier rounds,
• 0:59
  a couple of prediction market raises and then some very big
• 1:03
  macro news that involved China and Trump and tariffs and crypto
• 1:07
  crashes and all kinds of stuff going on here.
• 1:11
  So let's let's start out with our first sort of IPO story.
• 1:17
  I guess we have Navon which updated a filing.
• 1:20
  Is that that correct? Yeah, they actually did 1 better
• 1:24
  than that. They they are pricing their IPO.
• 1:26
  So they will be trading sounds like next week.
• 1:29
  They had done their filing couple weeks ago.
• 1:31
  They had told us they're doing 600 million in revenue and
• 1:34
  growing at 30% year over year. So there's some pretty healthy
• 1:37
  growth metrics for a SAS company.
• 1:39
  They're in the business travel space, they're doing a lot of
• 1:42
  the back end automation for frequent travelers.
• 1:45
  And yesterday, they announced that they're pricing their IPO
• 1:48
  at 6.4 billion, so about a 10 times revenue multiple.
• 1:53
  Yeah, that's kind of where we thought.
• 1:54
  I think based on what we had talked about a couple of weeks
• 1:58
  ago, their last round in 2022 was a 9 billion valuation.
• 2:01
  So it's a bit of a down round from where that round was, but I
• 2:04
  think 10X sales given this current market's pretty good.
• 2:06
  So not too crazy reasonable pricing, maybe just adjusting
• 2:10
  the previous private market round pricing.
• 2:15
  How much in revenue? You said 300 million.
• 2:18
  Little over 600 million in the last 12 months.
• 2:20
  Yeah. Yes, Again, we're seeing this
• 2:22
  trend of IP OS happening with companies doing typically not
• 2:25
  less than 4 or 500 million in revenue, usually a little bit
• 2:28
  more than that. Moving on here.
• 2:31
  Our next item is Reflection AI, which is raising $2 billion.
• 2:38
  Yeah, they announced an $8 billion evaluation, which for a
• 2:41
  one year old startup is pretty good.
• 2:43
  They're actually talking about raising at a $5 billion
• 2:45
  evaluation per the Financial Times.
• 2:47
  But I guess, you know, demand was very strong and and so
• 2:51
  they're they they bet the. Over again is behind the
• 2:56
  investment here. So continuing to see like NVIDIA
• 3:00
  putting money into data centers, AI company needs anything that's
• 3:04
  going to be helpful for their infrastructure.
• 3:07
  This is an open source at these are Google DeepMind alums and so
• 3:11
  it's the I guess it's I think it's Nvidia's first big bet in
• 3:14
  the open source AI French your model territory.
• 3:17
  So if NVIDIA is partying with its 1999.
• 3:21
  Well, there's been quite a bit of excitement about open source
• 3:25
  models curiously from China that that's a little bit weird to say
• 3:29
  that China's leading open source boom.
• 3:32
  But I guess because of, you know, them playing catch up
• 3:35
  mode, I guess they've been trying any and all different
• 3:37
  techniques. Next up, we have a company
• 3:39
  called Base Power. This company is raising a
• 3:43
  billion dollars at a $3 billion evaluation to deploy home
• 3:47
  batteries. And this is a Texas company, is
• 3:49
  it not? Yeah, they are.
• 3:51
  They seem to be right in that speed spot of home energy
• 3:53
  services and like they're like installing and operating large
• 3:57
  batteries in their in customers houses.
• 3:58
  So any energy provider right now is something a pretty good story
• 4:01
  in the market and this is this is one of them.
• 4:03
  And this is led by some legit investors addition Capital,
• 4:07
  Capital G which is part of Google, Elad Gill, Lightspeed
• 4:11
  Rabbit, Thrive and Velour. Some of those same investors had
• 4:16
  been involved in our previous round just six months ago with
• 4:19
  back in April, there was a $200 million round that I think
• 4:23
  valued the company at a billion dollars.
• 4:25
  And now we're back, we're at a $3 billion valuation in just six
• 4:29
  months. Kind of crazy, huh?
• 4:31
  That's sad. That's great progress for six
• 4:33
  months. Our next story is about Calci
• 4:36
  and Polymarket. These are two companies that are
• 4:38
  in the prediction markets and Aman, what would you predict
• 4:42
  about the valuation of prediction market companies?
• 4:47
  Well, that was part of being I got to I got to put a Cal shoe
• 4:51
  position up and see what they answer it.
• 4:54
  I'm not sure really excited by it.
• 4:55
  I think it's it's a it's a long run.
• 4:58
  It's a long run trend to be professionalizing these wisdom
• 5:02
  of crowds markets. There's a there's a great book
• 5:04
  called the wisdom of crowds if you if you haven't read it by
• 5:07
  Sir Wecky. And he talks about this
• 5:09
  experiment that Francis Galton ran over 100 years ago with like
• 5:12
  a getting people to wait of the, the weight of an ox.
• 5:16
  And like the crowd, basically no one got it right in the whole
• 5:18
  crowd out of 1000 guesses, but the crowd got it to within 1 LB
• 5:21
  of what the ox weighed and the experts were off like the five
• 5:24
  farmers that they had to do when we're off.
• 5:26
  And so this great insight about professional crowds putting
• 5:30
  money on things to actually predict things, being smarter
• 5:32
  than experts is I think it's a great trend.
• 5:34
  But before Cal, she and Poly Market weren't allowed to
• 5:37
  operate in the USI think that was just an overhang on their
• 5:39
  evaluations. And it seems like they've been
• 5:41
  given the green light to do it. Cal, she's been operating in the
• 5:43
  US since early this year, especially in sports markets.
• 5:47
  And now I think Poly Market's coming.
• 5:48
  So I think this is a a really, I think it's a great category and
• 5:52
  a great trend. And both these companies had
• 5:56
  significant markups in a very short period of time.
• 5:59
  I think Cal, she is now raising it a $5 billion evaluation, but
• 6:03
  was raising it only a $2 billion evaluation a couple of months
• 6:06
  ago. Polymarket now being valued at
• 6:09
  $8 billion after being valued at only $1 billion a month earlier.
• 6:14
  Like that is just an incredible markup in a very short period of
• 6:18
  time. Again, legit investors putting
• 6:20
  money into both of these companies.
• 6:22
  The more recent valuation here is from a division of the New
• 6:26
  York Stock market, the Intercontinental Exchange.
• 6:29
  But still that that is a crazy amount of money going into two
• 6:34
  companies at valuation step UPS that are very, very significant
• 6:37
  in a short period of time. So certainly seems like
• 6:41
  prediction markets are a new thing, or at least the
• 6:44
  regulatory changes have made it a more valuable new thing.
• 6:48
  Yeah, that polymarket is founders fund backed.
• 6:51
  They had been up at 1.2 billion in really and over the summer, I
• 6:55
  think July and August is when they announced the deal.
• 6:57
  This 8 billion valuations today is a it's an 8X step up in the
• 7:01
  last two months. It is the New York Stock
• 7:03
  Exchange. So this is strategic.
• 7:04
  It's a strategic, not a financially oriented investor.
• 7:08
  And maybe that says something about a partnership coming.
• 7:10
  But the New York Stock Exchange that justifies such a big step
• 7:13
  up. Maybe part of it is just
• 7:14
  probably markets now got all clear to go to the US and and
• 7:17
  maybe the step up is as simple as that.
• 7:19
  But that is a, that is definitely, as you say, new news
• 7:22
  and and suggests this, these companies are they're going to
• 7:25
  be here to stay and they're going to be disrupting, I would
• 7:27
  imagine DraftKings and FanDuel and all the sports betting
• 7:30
  markets too. Somewhat notable here,
• 7:32
  Polymarket had secured an undisclosed investment from 1789
• 7:36
  Capital in August, a venture capital firm backed by Donald
• 7:39
  Trump Junior. Now it all that.
• 7:42
  Has something to do with it. They got the blessing of the
• 7:46
  king. So I guess that, I guess that
• 7:48
  helps. My gosh.
• 7:50
  Yeah. Well, it certainly seems like
• 7:54
  we're having some collusion and broad daylight here, at least
• 7:57
  some What what was the expression?
• 7:59
  No conflict, no interest. There's certainly seems like
• 8:03
  there's a lot of conflict and a lot of interest going on here.
• 8:07
  Oh, well. So I would certainly predict the
• 8:11
  prediction markets are going to be big, just as I predicted.
• 8:18
  All right, sort of our last big point in the news cycle here is
• 8:21
  a macro picture news item. And this is really starting, I
• 8:26
  guess with China announcing some kind of ban on rare earth metals
• 8:31
  or rare earth material usage in products that has an impact on
• 8:36
  the US, particularly on US defense supply chains.
• 8:39
  I guess this announcement was made on Thursday or Friday by
• 8:42
  China earlier in the week, I think.
• 8:46
  Yeah. And then there was a retaliation
• 8:49
  by Trump with additional tariff announcements.
• 8:53
  I think that was stated at 100% tariff increase.
• 8:58
  Yeah. Something very significant and
• 9:03
  that triggered a pretty significant change in crypto
• 9:08
  pricing, correct? Yeah, it's the all the markets
• 9:10
  sold off right quick on Friday. The S&P was down like 2 1/2
• 9:14
  percent, NASDAQ was 3 1/2% and Bitcoin I think at one time was
• 9:17
  down 20% and it ended down maybe 12.
• 9:21
  And a whole bunch of altcoins, Etherium and altcoins were down
• 9:24
  closer to 20%. So it was just a, I guess the
• 9:27
  markets meant risk off after, you know what, four months in a
• 9:30
  row of, of trading up. It took a little bit of a pause.
• 9:33
  And I think there was also some selling on the downside that
• 9:35
  built because people were leveraged and then that kind of
• 9:38
  compounded in a bit of a, a Friday afternoon route.
• 9:41
  So that's, that's, I think that was the, that was just the, the
• 9:46
  kind of the panic trade that followed those announcements
• 9:48
  that you're talking about. At some point on Friday, the
• 9:50
  price of Bitcoin dropped over $20,000, correct?
• 9:53
  Yeah, that's right. Cryptocurrency dropped by
• 9:56
  $20,000 in a single day. I guess for folks who are
• 9:58
  levered either in, you know, Bitcoin or Ethereum or SWAT or
• 10:03
  anything else, they got hammered.
• 10:05
  Lots of people lost a ton of money.
• 10:07
  There was announcements that several people committed because
• 10:09
  they lost so much money. There was a potential
• 10:13
  announcement about somebody who made over $100 million on some
• 10:17
  kind of pre announcement insider trade bets.
• 10:21
  OK, we're suggesting that this might have been inappropriate
• 10:26
  use of information before the public announcement by Trump
• 10:29
  about the tariff. But I I would argue that's not
• 10:32
  news that's been happening. Somebody is just, yeah, I guess
• 10:39
  people making money off of insider trades before Trump's
• 10:42
  announcement seems to have been a continuing news story in the
• 10:46
  last 6-8 months. So much so that that's not
• 10:49
  really in the news anymore. The scale of it you're saying,
• 10:53
  you're saying somebody made 100 million shorting Bitcoin in
• 10:56
  advance like an hour before the announcement.
• 10:57
  I mean, that's the scale of that.
• 10:59
  They're pretty big. The reports on how much money
• 11:01
  were made by that truck kept going up and up and up.
• 11:03
  It was like somebody had made $70 million in like 30 minutes
• 11:06
  and then like over $100 million in an hour and then $200
• 11:09
  million. So I'm not sure exactly when
• 11:12
  they closed out the trade and how much money was made, but a
• 11:15
  lot of money was made by at least some account on a short
• 11:19
  that had been placed before that Trump announcement.
• 11:24
  Pretty, pretty crazy. I'm Mr. X Gimme Gimme.
• 11:29
  Thank you folks. And now I'm off to expose more
• 11:34
  secret conspiracies. What?
• 11:37
  What's your thought about how all this is affecting, I guess
• 11:41
  other macro stories, the price of gold, etcetera?
• 11:44
  Yeah, I think the, the the trade we saw they described on Friday
• 11:48
  was this risk off trade. But you really suggested it
• 11:51
  began with those tariff announcements cascaded into
• 11:54
  public markets and then and then we saw crypto come way off.
• 11:58
  But the interesting thing is gold has hit a new record
• 12:01
  Thursday and Friday. It's over $4000 an ounce.
• 12:04
  I love gold. The look of it, the taste of it,
• 12:10
  the smell of it, the texture, yeah.
• 12:14
  I'm just sharing my screen here. You can see what gold has done
• 12:16
  over the past. This is a 50 year chart, but you
• 12:18
  can see recently gold has been hitting new records and has
• 12:21
  outstripped the S&P 500. And it's a little bit of a, it's
• 12:26
  been very correlated to crypto. But on Thursday to Friday, as
• 12:29
  crypto crashed, gold if anything strengthened.
• 12:32
  I think there are a couple of things going on with gold
• 12:33
  specifically. It just seems like there's new
• 12:36
  new buyers, new demand coming for gold.
• 12:39
  First of all, one of the big new buyers is the China Central
• 12:42
  Bank, which is now sitting on 74,000,000 ounces of gold.
• 12:46
  It's one of the biggest holders of gold in the world.
• 12:49
  They've been increasing the reserves for the last 11 months.
• 12:51
  So this is a trend that kind of goes back, I guess, to the Trump
• 12:54
  election maybe a bit. Before they've been selling off
• 12:58
  U.S. dollars and and treasuries. I guess it's been making a treat
• 13:02
  for gold in exchange for U.S. dollars and treasuries.
• 13:06
  Yeah, selling U.S. dollar denominated treasuries, buying
• 13:08
  into gold to lessen their dependency on the gold complex.
• 13:12
  Other banks are doing that too. The BRICS countries are doing
• 13:15
  it. I think that started around 2022
• 13:17
  and the Biden administration put sanctions on Russia, kick them
• 13:21
  off of SWIFT, flag certain organizations and seized dollar
• 13:23
  denominates that. So this is a long running trend
• 13:26
  that I think is, is continuing. Another one that's I think
• 13:30
  another major source of demand for gold and, and maybe also at
• 13:34
  play this year is Tether, which is the biggest stable coin
• 13:38
  issuer in the world. They've been talking about a
• 13:40
  $500 billion evaluation as well, which we'd referenced before.
• 13:44
  And they, they have launched and are seeking capital for a new
• 13:47
  tokenized gold fund. So they're creating a lot of
• 13:49
  demand for gold as well, which had come from retail investors.
• 13:53
  But anyone who is looking for this, this stable currency
• 13:57
  backed by gold is going to be a major factor as well.
• 14:00
  And so I think between those two things and maybe maybe a few
• 14:02
  other macro factors like just the the US.
• 14:07
  Government deficit spending and maybe a little inflation as
• 14:11
  well. Perhaps just overall uncertainty
• 14:14
  and who's driving trade and gold.
• 14:19
  Just like people are trying to flock to stable things and I
• 14:23
  guess gold is the only stable thing.
• 14:26
  Is well, I guess gold, silver, you know, Bitcoin, these are all
• 14:30
  non central bank controlled things.
• 14:31
  I guess one way to think about the 50% increase in gold this
• 14:34
  year is that's AUS. When I say it's gone up by 50%,
• 14:37
  I mean in U.S. dollars it's up 50% in Armenian DRAM or Swiss
• 14:41
  francs or the Kuwaiti dollar, it's only up 25 or 30%, right.
• 14:45
  So the dollars in U.S. dollars also that's.
• 14:47
  Great, because the US dollar has dropped in value, that's even
• 14:50
  more exacerbated. Yeah.
• 14:53
  Pretty interesting. I don't know if we're used to
• 14:56
  all these big macro stories happening at the same time as
• 15:00
  tech, but definitely a pretty volatile week for news.
• 15:13
  All right, welcome to another episode of Trading Places, a
• 15:16
  very bad podcast about secondary.
• 15:18
  Today with us we have Turner Novak, the founder and managing
• 15:22
  partner of Banana Capital. Turner, what's going on?
• 15:25
  What's bananas lately in your world?
• 15:27
  I'm going to Disney World in a couple days.
• 15:32
  Go to Disney World. There's like a whole world like
• 15:34
  I guess my, my wife's on Disney TikTok and like all her
• 15:37
  algorithms are basically trying to get us to spend money at
• 15:41
  Disney World at this point and. Oh yeah.
• 15:43
  She's she's done a good job of like, I think our trip, the
• 15:45
  reason we're going is just because it's super cheap to go
• 15:47
  right now and it's our that kids birthdays and stuff.
• 15:50
  So we just locked in, I don't know, like 90% off what you
• 15:53
  probably would have paid. Wow trip super cheap points
• 15:57
  from, from all this stuff and then, you know, cheap tickets
• 15:59
  and all that stuff. So should be fun.
• 16:03
  Cheap prices? Why is it super cheap right now?
• 16:06
  Is there something? I guess school is kicking back
• 16:08
  in. Is that why?
• 16:09
  Yeah, it's like third week of school.
• 16:10
  Like you probably shouldn't take your kids right now so just did
• 16:14
  it over a long weekend. Low seasons, probably monsoon
• 16:18
  season in Florida. The weather is probably going to
• 16:20
  be a little more dicey than usual.
• 16:22
  The times it perfectly. That sounds like you have
• 16:23
  something to teach me about how to get there.
• 16:25
  Max bang for the buck. Maybe there's a secondary market
• 16:27
  for Disney tickets that we're not aware of.
• 16:32
  Well, Turner, thanks for joining us today.
• 16:34
  I guess you're no stranger to podcasts.
• 16:36
  You've been doing your own podcast for quite a while right
• 16:38
  now. Well, could you tell us a little
• 16:40
  bit about how you got into venture, why you got started?
• 16:43
  Why did you choose such a terrible asset class to jump
• 16:45
  into? I mean, I actually thought it
• 16:47
  was the best asset class. That's why I started doing it.
• 16:50
  I think the if you look at the data, the top performers have
• 16:53
  the best returns, like across every other asset class.
• 16:55
  And then I was like, oh, I think I can be pretty good.
• 16:59
  So that's like, it is at a super high level.
• 17:01
  Yeah. I just grew up on the Internet
• 17:02
  as a kid, played a lot of video games.
• 17:04
  My mom had a small business growing up and also didn't have
• 17:08
  any money. So it kind of inspired me to
• 17:11
  like, huh, you have a business, learn how to make money.
• 17:14
  So went to school for accounting and finance during the
• 17:16
  investment club, kind of go down the rabbit hole of investing.
• 17:20
  And then I worked in endowment for about 3 1/2 years before
• 17:23
  that. Did a job doing credit.
• 17:25
  You basically lending money to companies that are the opposite
• 17:28
  of tech companies. Stable cash flow.
• 17:30
  Sometimes they're shrinking. They got assets you can repo if
• 17:35
  if they can't pay back the loan, But most of them can just learn
• 17:39
  a lot about investing. And yeah, I just kind of figured
• 17:42
  this whole VC thing just seems super interesting.
• 17:45
  I think I'd be pretty good at it.
• 17:47
  And the one the one issue that was kind of running into as I
• 17:51
  live in Michigan and you know, that's probably not the ideal
• 17:57
  location to be in if you're. Just kind of not the center of
• 18:00
  deal flow, I would guess. But yeah, there's some deals
• 18:03
  going on. Yeah, and I think I, I what I
• 18:06
  did, I sort of writing online, tweeting a lot.
• 18:09
  I used to post a lot of serious stuff and I make a lot of memes
• 18:12
  and just kind of evolved into, I think one of the things I did
• 18:18
  was, I mean it's kind of fantasy VC portfolio.
• 18:20
  It's kind of like fantasy football for, you know, start up
• 18:23
  investing. Then I had a fake 1,000,000
• 18:25
  bucks fake invest in some companies.
• 18:28
  Super long process, probably took me about two years, but got
• 18:31
  a bunch of interviews, ended up taking an internship at a fund
• 18:35
  for summer, joined another fund. And then in the process of kind
• 18:38
  of raising that fund, I just had people that really wanted to
• 18:41
  give me money. And it kind of hit a point where
• 18:44
  the universe is like telling me you got to start your own thing.
• 18:46
  So that's the the Super abridged quick version that of course is
• 18:51
  a lot more complicated and not as fun as I just made it sound.
• 18:54
  And so after you were at that endowment, you got a chance to
• 18:58
  work at a couple of other VC firms.
• 19:00
  And kind of what, what kind of roles did you play there and how
• 19:03
  did you decide to jump into doing your own thing?
• 19:06
  The first one I joined, it was called a four Capital, that kind
• 19:09
  of a precede fund based in San Francisco, invest mostly in the
• 19:13
  US, maybe a little bit globally. And yeah, I mean, they're just
• 19:17
  like, they're like first check investors, like you got a
• 19:20
  literal napkin or a PowerPoint and they'll go back you a lot of
• 19:24
  people say that they actually did and they actually do so
• 19:28
  learned, learned a lot of working with them.
• 19:30
  And you know, you're just, I mean, I was technically, I was
• 19:33
  an intern was my title. I was technically working 8
• 19:35
  hours a week, but I end up quitting my job at the endowment
• 19:38
  and work for them full time. It actually, it probably took a
• 19:42
  day to convince my boss on Metro that was a good idea because
• 19:46
  they they couldn't pay me more than 8 hours of work.
• 19:49
  But I just kind of convinced them I'm going to do it.
• 19:52
  And so then we ended up we sold with the house that we lived in.
• 19:56
  I couldn't afford my mortgage payment anymore because I took
• 19:58
  an 80% pay cut. So we kind of sold the house.
• 20:00
  So we lived in. And then I also had a rental
• 20:02
  property because you can buy real estate in Michigan for
• 20:05
  relatively cheap. And that was kind of my initial
• 20:09
  when I graduated college, it was scoop up.
• 20:12
  Houses for with little like a low down payment, live in it and
• 20:15
  then move by the next one rent it out and so I just kind of
• 20:18
  cash out of everything that I owned and made a bet on myself
• 20:23
  to go on a non venture. That's a pretty substantial
• 20:26
  commitment. I guess you, you mentioned Anna
• 20:28
  Mitra Banerjee, I think I met him before he was an LP and 501
• 20:32
  of the early funds and had been working at Twitter and I think
• 20:35
  maybe Yahoo before that. So he's he's certainly been an
• 20:40
  experienced operator. And what was it like working
• 20:44
  with him? And how do you kind of think
• 20:45
  about, you know, their thesis and did that inform what you're
• 20:49
  doing today? Or is it different or similar
• 20:51
  or, I don't know, feel like something you took something
• 20:54
  from? Yeah, I think so.
• 20:56
  I think probably the biggest take away is just what problem
• 20:58
  are you solving? That's that's probably the
• 21:00
  biggest thing you need to need to fix something for someone.
• 21:03
  People don't just give you money and and you know the kindness of
• 21:06
  their heart signed $1,000,000 contract and like, why are you
• 21:09
  the cash, right? Like you got to find something
• 21:12
  that's wrong in the world. You got to find a big problem
• 21:14
  when you got to fix it. And you know, that can just kind
• 21:18
  of be a hard concept to grasp at first.
• 21:20
  I think right. Like you look at a spreadsheet,
• 21:23
  you look, you listen to podcast, you look at tweets and you just
• 21:27
  think what's kind of the current thing?
• 21:29
  If we just kind of make something that kind of fits in
• 21:31
  there like we should do a start up, you know, I just don't think
• 21:37
  that's the right way to do it. You got to you got to think
• 21:39
  through like what is it a big massive problem in the world
• 21:42
  that only I can fix hopefully and have the right kind of
• 21:47
  positioning in the market with the team.
• 21:50
  Good wedge in like this is can expand into a lot more overtime.
• 21:55
  I don't think the Tam really matters.
• 21:57
  The market really matters necessarily.
• 21:58
  It's like what can you make from a customer?
• 22:00
  Figure out a customer that can spend a lot of money.
• 22:02
  That's a big problem that you can fix and you can defensive
• 22:06
  defensively position yourself over time to kind of expand into
• 22:10
  to solving that problem and more problems make yourself stickier.
• 22:14
  That was probably, I guess at a super high level.
• 22:16
  I think what I learned from Garave, the other GP of the four
• 22:20
  was the importance of follow on financing.
• 22:23
  He was an early investor and a company he was at founder
• 22:27
  Collective. And I think they did the seed,
• 22:30
  the seed of Uber and Cruise. I know he was kind of involved.
• 22:34
  I don't know how attribution works and all this stuff, but I
• 22:36
  know he he learned a lot from those experiences.
• 22:38
  And one of the big takeaways was the importance of fall on
• 22:41
  capital. You know, you can, there's two
• 22:44
  ways to look at it. You can invest in a great
• 22:47
  business, you know what, whatever, but at the end of the
• 22:51
  day, if you if you can't raise more money, is it venture backed
• 22:54
  startup not a good position to be in on the other side, you can
• 22:58
  have an absolutely company doesn't solve a single problem,
• 23:03
  but but you raise capital and it solves a lot of your problems,
• 23:06
  right. So I don't think that's
• 23:09
  specifically like the only thing you should do when you're when
• 23:12
  you're building a startup or investing, but it's something to
• 23:14
  think about is like following financing is a pretty important
• 23:16
  piece of the pie that I personally didn't quite think
• 23:21
  about it enough. I think if you're thinking, if
• 23:22
  you're playing the game about getting a lot of markups and
• 23:24
  raising your next fund, it's a huge component.
• 23:27
  And I think if you're, if you're maybe like eschewing that, you
• 23:31
  start to forget about follow on financing, like, oh, it doesn't
• 23:34
  matter. Like we're just going to
• 23:35
  bootstrap for 10 years. But you know, I, I think it's
• 23:38
  like there's a happy medium. So that's probably one of the
• 23:40
  biggest things I learned from him was just the importance of
• 23:42
  like downstream investors are about to support this thing.
• 23:45
  And it might be an IPO. Like what are the public markets
• 23:47
  think of this? It might not be the series ABCD
• 23:49
  investor. It might be like, if this is a
• 23:51
  public company, it needs to be profitable or it needs to have
• 23:54
  extremely high growth with really strong underlying
• 23:57
  fundamentals and there's some kind of happy medium there.
• 24:00
  But yeah, I think it's probably easy to overlook that.
• 24:04
  Yeah, you know, and then if you don't overlook at, you know,
• 24:07
  thinking about, yeah, cool, there's a lot of follow on
• 24:09
  financing, but you're actually solving a problem.
• 24:11
  So I think those two lessons, it's like, are you actually
• 24:13
  solving a problem for people? And is this an investable theme
• 24:17
  or asset at the end of the day? I think those two things are
• 24:20
  probably 2 of the bigger things I think about on a daily basis
• 24:22
  now. You, you talked about sort of
• 24:24
  solving a problem. We're finding the problem that
• 24:26
  you're uniquely positioned to solve from from AVC perspective.
• 24:31
  How how did you think about your thesis and did that, you know,
• 24:35
  develop over time? What what was kind of the aha
• 24:37
  moment that you decided, OK, yeah, this is this is my bag and
• 24:41
  I know what I'm going to go after.
• 24:43
  It definitely evolved over time. I think kind of the current way
• 24:47
  I describe it to people is if you talk to pretty much any
• 24:49
  startup founder, the two hardest problems right now are
• 24:52
  distribution and recruiting. And I, I really didn't
• 24:57
  necessarily go out and say I want to become an influencer and
• 25:00
  I want to create podcast episodes that help people hire
• 25:04
  10 candidates from the episode. It's kind of an iteration
• 25:08
  process over time to get that. But that's ultimately what the
• 25:12
  pitch is to to a founder I was. Going to say, is that, is that
• 25:14
  what you're doing? Because that sounds pretty
• 25:16
  helpful. If you can source 10 candidates
• 25:18
  from a show, that's amazing. Yeah, it was.
• 25:20
  It was actually kind of amazing. The I had one of My Portfolio
• 25:23
  companies on talked about the round.
• 25:25
  They just raised the product a little bit.
• 25:28
  It's like stuff you'd say to potential customers, also to
• 25:31
  recruits, to candidates, maybe just to other investors.
• 25:35
  And yeah, about 15 months later, he, you know, we, we weren't
• 25:38
  specifically talking about this, but he just mentioned, Oh yeah,
• 25:40
  we hired like over 10 people from that episode.
• 25:43
  I was like, wait, what? That's.
• 25:45
  Insane. Yeah.
• 25:46
  So you weren't even planning on it.
• 25:47
  That was just something that happened tangentially.
• 25:51
  Yeah, I mean, it's like an adjacent thing, right?
• 25:53
  But like, you didn't think, you know, we're going to put this
• 25:55
  together and you're going to hire a bunch of people.
• 25:57
  Like it's kind of hard to promise that from a from a
• 25:59
  podcast episode. But yeah, I guess the if you
• 26:02
  make good content, people will listen.
• 26:05
  And for for a lot of start-ups, like the biggest problem is just
• 26:09
  getting people to pay attention. And so I think for whatever
• 26:12
  reason, people pay attention to what I'm talking about.
• 26:15
  And so I've just continued to kind of lean into that to the
• 26:17
  point where, you know, I'm not the only one who does it, but I
• 26:21
  think I'm probably one of the, I think I am the best if you're
• 26:25
  looking at a certain slice of the market.
• 26:27
  All right, I think you got to believe you're the best if
• 26:30
  you're going to put yourself out there, turd.
• 26:32
  I think you're probably somewhat well known for a particular
• 26:35
  style of posting, whether that's comments, blogs or or your
• 26:41
  podcast. I, I, I guess I won't use the
• 26:45
  term that from the industry. How would you describe it, that
• 26:48
  particular style of putting yourself out there?
• 26:52
  Are you, are you not allowed to swear on the podcast?
• 26:55
  No, no, I just thought, you know, I probably swear a little
• 26:57
  too much. So I think I'm on was always.
• 26:59
  On it. Dave, we need to turn that down
• 27:01
  a little bit. All right, anyway, ship posting,
• 27:02
  let's dive in. What is ship posting?
• 27:12
  What's that all about? Did you start it?
• 27:15
  I I would say you're you're certainly in the top most well
• 27:17
  known people doing it. But tell me about how did that
• 27:20
  become a thing and was that, you know when you first got started
• 27:23
  the thing or not? Yeah, I mean it, it definitely
• 27:26
  wasn't. I used to make more serious
• 27:28
  content and it's really just I was trying to get a job and
• 27:31
  venture, like I was trying to get hired and my first job, like
• 27:33
  I was an intern, right. Like it, it wasn't like it was
• 27:37
  the Super high status thing. And then I kind of evolved to, I
• 27:43
  had a friend who ran a meme account and it's, you know, I
• 27:47
  start coming up with ideas and helping them.
• 27:49
  And I just realized who was paying attention to that?
• 27:52
  Who was liking and retweeting it versus who was paying attention
• 27:56
  kind of the more serious stuff. And I mean, it really comes down
• 27:59
  to like a lot of founders just get a lot of energy from poking
• 28:05
  fun at the venture industrial complex, I would say.
• 28:10
  And it just became a really good way to build kind of trust at
• 28:13
  scale. And, you know, you kind of have
• 28:16
  this combination of insights and entertainment.
• 28:18
  I kind of call it edutainment. That's kind of how I I think
• 28:21
  about all my stuff. And yeah, you're like the CEO of
• 28:24
  a public company, just like DM. You want to chat like it happens
• 28:27
  a lot more often than you'd think, especially if you're
• 28:31
  making insightfully funny content on the Internet and.
• 28:37
  I just want to reference that there is actually a Wikipedia
• 28:40
  article on posting this is. This is not us making up this
• 28:44
  term, this is an actual thing. I I haven't checked to see
• 28:47
  whether you're referenced on this on this article.
• 28:50
  I hope not. I hope I'm not on there.
• 28:52
  Well, I mean, first of all, this isn't unique to just Venture.
• 28:55
  I guess we probably see it in Venture, but it's probably, you
• 28:58
  know, generic for the overall industry.
• 29:03
  When when do you think ship posting got started in Venture
• 29:06
  And literally were were you a pioneer of that or did you join
• 29:10
  the fray? Jump on the the ship posting
• 29:13
  bandwagon hasn't worked. Yeah, I mean, I I probably
• 29:17
  contributed to it. Come on, Sir.
• 29:20
  I own this baby like you started it right?
• 29:24
  I mean, I, I think it in, in some element as like I, you
• 29:29
  know, I, I'm, I've kind of always just been an outsider and
• 29:31
  like, there's no real like social pressure, like I don't
• 29:34
  really care what people think. So it's like sacred things.
• 29:37
  So yeah, I think I think the biggest thing was I was, it kind
• 29:40
  of reaches tipping point where I was like, OK, well, I think my
• 29:43
  advantage is the Internet. I'm not going to happy hours.
• 29:46
  I'm not going to like, you know, private event dinners.
• 29:49
  I, I do host those sometimes and you go to them sometimes.
• 29:51
  But the majority of time, like my advantage is that I can
• 29:55
  probably get more distribution on the Internet than you.
• 29:57
  And I think there's a, when I thought about just kind of the
• 30:00
  supply demand of just content, there was just a severe lack of
• 30:06
  entertaining and non dry and boring things.
• 30:09
  And so I just kind of continue to lean into it, continue to
• 30:13
  work. And I don't know, I probably
• 30:17
  wouldn't say this is like the best strategy to start with
• 30:20
  today. Like I think you generally want
• 30:21
  to say like, did you take a too? Many shit posters are already
• 30:25
  out there. That space has been filled I.
• 30:27
  Guess I mean it it will the the The funny thing is is it just
• 30:30
  works like people. People like humor.
• 30:32
  I mean, the guy who's the president of the US is a shit
• 30:35
  poster, the richest guy in the world shit poster.
• 30:38
  So, I mean, you can argue, you can argue with it either way.
• 30:44
  It just, it just works. I think people take themselves
• 30:46
  too seriously. Yeah, I think it's if if you're
• 30:49
  serious about what you do, but you don't take yourself too
• 30:52
  seriously, if that makes sense. Like you're very intentional and
• 30:55
  you there's, you know, there's a method behind what you're doing.
• 30:59
  But I think, yeah, some people just take themselves way too
• 31:01
  seriously. And there's an opportunity to
• 31:02
  kind of, you know, position yourself kind of anti to that.
• 31:08
  And that's that's probably kind of what I did initially.
• 31:10
  Honestly, I mean, it wasn't really that complicated.
• 31:14
  It was just 2021. There'd be a funny, a funny
• 31:17
  video and you could just like make a joke about how like this
• 31:20
  is Tiger sending term sheets to founders AT100X ARR.
• 31:23
  And it's not that insightful to say, but everyone kind of got
• 31:27
  the joke and it was a funny video and you get 1,000,000
• 31:30
  views from that. And you just do that every day.
• 31:34
  And you know, I'm kind of, I'm making this sound super easy,
• 31:37
  but it's like essentially what I did.
• 31:39
  And I think, you know, I think a lot of investors are kind of
• 31:44
  social creatures. There's a lot of FOMO.
• 31:46
  There's a lot of whatever, you know, you kind of want to be the
• 31:49
  topic of discussion. You kind of want other people to
• 31:52
  know that you're doing something.
• 31:54
  And I think it's kind of hit hit this point where people kind of
• 31:58
  realize how important distribution is.
• 32:01
  We we have these startups that don't really have a product yet,
• 32:03
  but they're getting a million views, So they're able to raise
• 32:05
  a bunch of money. I mean, just imagine if you have
• 32:07
  a real product underneath that, like how powerful that can be.
• 32:11
  So those are just kind of some of the things I've sort of, you
• 32:14
  know, evolved into overtime. Like I think I think there's a
• 32:17
  real lack of actual good content on the Internet.
• 32:22
  And I think there's a lot of not just in with shit posting and
• 32:25
  memes, but just in general. You know, if you just think
• 32:27
  about how somebody thinks about creating content, you might
• 32:30
  think that people are watching every single thing that you post
• 32:35
  or people see every single thing, that single thing that
• 32:37
  you post. But in reality, most people
• 32:39
  don't see what you post. So you should actually post way
• 32:41
  more often. And I'll give a kind of an
• 32:43
  example I like to use, like if your goal, which is kind of make
• 32:46
  this super simple, what if your goal is to just go viral,
• 32:49
  whatever that means. We just get a bunch of views on
• 32:51
  something and you're like, OK, I'm going to post, you know,
• 32:53
  once a week in the hope of going viral.
• 32:56
  And you think just on average, yeah, on average, it happens to
• 32:59
  a 10% of the time. So, you know, you post 10 weeks,
• 33:03
  you'll go viral one of those times.
• 33:04
  So it might take you 10 weeks to, you know, quote UN quote, go
• 33:06
  viral. Let's say, all right, I have
• 33:08
  one. Instead of once a week post
• 33:10
  every day, you'll go viral within 10 days.
• 33:13
  Or what if we say, OK, you should just post 10 times a day.
• 33:16
  You'll go viral every single day and going, you know, quote UN
• 33:20
  quote, going viral is not probably not an end goal to
• 33:23
  have. You probably need like some type
• 33:25
  of bottom of funnel, whether it's like a product of some kind
• 33:29
  or, you know, whatever to kind of close out that bottom of the
• 33:32
  funnel. But it's, it's good brand
• 33:34
  awareness just generally speaking.
• 33:36
  And unless you have actual good content.
• 33:39
  So instead of going viral time percent of the time, you go
• 33:41
  viral 30% or 50% of the time. So literally like 2345 times a
• 33:45
  day, people are just seeing your thing and they, they know you
• 33:47
  exist. And then when you show up in
• 33:49
  their inbox and let's say you're an investor, you're like, hey,
• 33:52
  product seems cool. Want to chat sometime?
• 33:54
  Like they already follow you. They've, they've, they've gone
• 33:56
  to know you over the past year. Yeah.
• 33:58
  So I think whether whether it's memes or shit posting or maybe
• 34:02
  it's a different type of, of content, I think it's kind of
• 34:05
  the power of it. I think a lot of people are
• 34:06
  waking up to it. I think you look at like the
• 34:08
  Cluely guys. Like I think the joke with
• 34:10
  Cluely is like, people don't actually know what the product
• 34:12
  is, but you know they exist. At Cluely, we hire specifically
• 34:15
  for autistic people. You know, there's a lot of.
• 34:17
  Companies that view autism, is this like shortcoming or
• 34:20
  something? But like truly I've I've seen
• 34:23
  the the higher the autism the better the code quality.
• 34:26
  And I think there's there's, there's definitely examples of
• 34:28
  this. It's just kind of taking what's
• 34:30
  kind of happening on the consumer Internet and bring it
• 34:32
  over to B to B in a way we're all kind of, we're all
• 34:35
  influencers, just you know, B to B influencers.
• 34:38
  We're influencing CEOs instead of 13 year old kids in marching
• 34:42
  markets or whatever or you know, so.
• 34:46
  Well, I think that's what's kind of interesting is that, you
• 34:48
  know, a lot of this stuff probably happened for the
• 34:50
  broader Internet way, way earlier, but but you started
• 34:54
  pretty early. I think, you know, 20/17/18
• 34:58
  maybe I don't remember when I exactly started following you,
• 35:01
  but I think you and like Logan Bartlett's another person that
• 35:05
  sort of does this. And I think the VC brags
• 35:08
  account, maybe VC starter kit way back, you know, so probably
• 35:11
  was before COVID, I think 27 to 1819, maybe there was people
• 35:15
  dabbling. But I, I noticed there was an
• 35:18
  article of on the information that stated from 2019 talking
• 35:21
  about can you mean your way into venture capital.
• 35:25
  So at least, you know, by 2019 someone was starting to think
• 35:28
  about, oh, is this an actual strategy to get into VC?
• 35:32
  And probably at that point there weren't that many people doing
• 35:35
  it. But now it seems like it's a
• 35:37
  much more, you know, widely accepted or about why they
• 35:41
  accepted, why they copied, you know, form of trying to get
• 35:43
  attention. But I, but I do think you're
• 35:45
  right is that you have to have you have to have some substance
• 35:48
  there after you get their attention with the, you know,
• 35:50
  the shit posting, you actually have to have some real value
• 35:53
  substance to offer or at least at least you know somebody, I
• 35:57
  guess. Yeah.
• 35:58
  Why are you even here? Oh, I came here to tell you that
• 36:00
  you're a meme man. I'm a meme man.
• 36:02
  What are you talking about? Speak English, boy.
• 36:03
  A meme. An Internet phenomenon.
• 36:05
  Oh, OK. Maybe if we could talk a little
• 36:08
  bit about what themes you're investing in and what stuff you,
• 36:11
  you know, care about or what do you feel like is your unique
• 36:14
  angle into a venture or whatever version of, you know, tech
• 36:19
  companies you like. Yeah, yeah, I'm just trying to
• 36:22
  back people who want to build public companies.
• 36:23
  That's kind of the the one cent summary of it.
• 36:26
  When you got to do a billion in revenue, you got to find a real
• 36:29
  problem. You got to you have race fall on
• 36:31
  capital, I guess you know, going time to the earlier part of the
• 36:34
  conversation, but just build a real business.
• 36:37
  And I think you can read all the blog posts about what's
• 36:41
  happening in AI or whatever industry.
• 36:44
  I tend to really just focus more on all I think this person can
• 36:48
  figure out how to solve a problem for the customer that
• 36:49
  they're going after and build a big business around.
• 36:53
  That's kind of the, the core of what I do and I probably like a
• 36:55
  a sweet spot is, is founders who can benefit from the
• 36:58
  distribution. I mean, I probably have people
• 37:01
  with similar fund size. I probably have the strongest
• 37:03
  value prop there. Of course, if you, if you talk
• 37:08
  to A16Z, they have, I don't know, dozens of people doing
• 37:12
  what I do essentially. They also have much different
• 37:17
  much of A product that they offer.
• 37:19
  So I probably don't really compete with someone like them
• 37:23
  at the end of the day. So you just kind of think about
• 37:26
  what's kind of in the strike zone of a kind of like a mega
• 37:28
  fund. That's just probably not what
• 37:30
  I'm investing in. That's usually how I think about
• 37:32
  it. I think the food systems really
• 37:36
  fucked up. It poisons us.
• 37:37
  Consumers are taking health in their own hands.
• 37:40
  Healthcare is 20% of GDP and it's kind of a scam.
• 37:42
  And it's basically just, you know, a, a Ponzi scheme to help
• 37:46
  old people, you know, maybe being a little critical and
• 37:50
  summarizing my views. I think that just generally
• 37:57
  education is kind of messed up. It's another one of those
• 38:00
  things, you've got a trillion dollars a year in the US and
• 38:02
  education. And there's, there's probably a
• 38:07
  lot of ways to make that better. I, I guess I would say there's a
• 38:10
  lot of opportunities to improve that.
• 38:12
  A lot of teachers that do amazing.
• 38:14
  I think teachers are great. You think of housing, young
• 38:19
  people basically can't afford housing in this country town of
• 38:22
  one of those areas. Like how do you invest in
• 38:24
  housing as a venture investor? I'm not sure, but I think it's
• 38:27
  one of the biggest problems in the country right now.
• 38:30
  You look at what young people are talking about, they're not
• 38:33
  having kids. It's because people can't afford
• 38:35
  to buy a house and get married. A lot of these problems are kind
• 38:39
  of downstream with that, I think.
• 38:42
  You go to these topics or maybe more from the the consumer
• 38:47
  angle, but you you mentioned B to B as kind of area.
• 38:49
  Do you, do you feel like you learn more towards consumer or
• 38:53
  enterprise Oregon, somewhere in between in terms of, you know,
• 38:56
  problems that you like to go after?
• 38:58
  Yeah, it's probably in between. I mean, I probably do more
• 39:00
  consumer investing than the average VC.
• 39:02
  I've still invested in some, you know, down the fairway B to B
• 39:05
  SAS things. I just there, there's so much
• 39:08
  that's been sad about all those problems.
• 39:11
  I'm probably pretty good in terms of helping people know
• 39:13
  that you exist versus some of the other investors out there.
• 39:17
  But you can read all their blog posts about maybe what you
• 39:20
  should build or you raise your growth round from them.
• 39:23
  But that's that's generally, I feel like there's I just don't
• 39:26
  have anything you need to add 'cause there's just so much out
• 39:28
  there. How do you sort of feel, I guess
• 39:31
  you, you have both, you know, some Twitter following, you have
• 39:35
  a, you know, obviously a YouTube and podcast following and other
• 39:38
  channels. But do you specifically think
• 39:41
  about those type of channels when you're kind of trying to
• 39:44
  work with startups? Or is it more just random, you
• 39:47
  know, that you have these different ways to get, you know,
• 39:50
  in touch with people or potentially, you know, hook them
• 39:52
  up with either investors or customers?
• 39:55
  Oh, yeah. I mean, I think they all kind of
• 39:56
  work initially. It was just that a lot of people
• 39:58
  that followed me on Twitter started the e-mail list to just
• 40:02
  kind of have another channel. Elon bought Twitter and the
• 40:05
  thinking was, I don't know what's going to happen here.
• 40:09
  I definitely should continue to diversify.
• 40:12
  The thinking about 2 1/2 years ago when I started the podcast
• 40:14
  was the importance of short form video.
• 40:17
  Most people see your your short form like pretty few people
• 40:20
  probably listen to this full podcast.
• 40:22
  If you post clips, more people are probably going to watch the
• 40:24
  clips in the actual long form. I think chasing social status is
• 40:28
  probably a little bit of a little bit of a drug that a lot
• 40:31
  of people get addicted on. So you want to What do you mean
• 40:33
  yourself? Look.
• 40:34
  Good. I don't.
• 40:35
  I don't look at that at all. I never look at like followers
• 40:38
  or likes or. I mean, it's all bullshit.
• 40:40
  Followers don't mean anything if you make good content.
• 40:43
  The algorithms were put in front of people.
• 40:44
  Most people don't realize that. I mean, there's people with 1000
• 40:48
  followers on Twitter that are getting more views than, you
• 40:52
  know, the, the New York Times Twitter account, which I think
• 40:55
  has like 15,000,000 followers. Like it means absolutely
• 40:58
  nothing. And so I think is a, is a
• 41:01
  founder having somebody who understands how this stuff works
• 41:04
  when you're doing early distribution and kind of like
• 41:07
  fighting for attention in not just the algorithms, but also
• 41:10
  privately too. And just that I trust with
• 41:13
  people. I think that stuff's kind of
• 41:15
  helpful. So well, I think the other thing
• 41:17
  is, you know, I mean, I have a media business I make money
• 41:19
  from, you know, most, most of these CS kind of see their
• 41:21
  content as a cost center. They have an intern, they just
• 41:24
  throw at it like, hey, or like they hire, they hire a marketing
• 41:27
  person who was like a, you know, product marketing manager at the
• 41:31
  SAS company. And just like, hey, let's do
• 41:33
  some take these four channels and just do some marketing stuff
• 41:36
  for us for the fund. And I just I'm not sure that
• 41:40
  works quite as well as having somebody who is, you know,
• 41:44
  directly involved with it. That's kind of spearheading at
• 41:46
  all. So I think it's just kind of
• 41:47
  again, one of the things that made me different.
• 41:48
  So but but yeah, I mean, you think about Facebook, like
• 41:52
  Facebook pages. Have you ever seen a post from a
• 41:54
  page on Facebook? Probably not in a long time, but
• 41:58
  that used to be all the rage. I mean, the platform is dictate
• 42:00
  how these things work. So I think the most important
• 42:02
  thing is building the DNA to understand what they're
• 42:05
  prioritizing, which is usually how they make money.
• 42:09
  So one of the interesting things on Twitter right now, if you
• 42:12
  this is, this is kind of changing, I think, but for a
• 42:15
  long time, Twitter monetize with replies.
• 42:18
  So getting replies to your, to your post actually had a way, I
• 42:22
  think the algorithm said it was like a 37 times bigger impact
• 42:25
  than a retweet. So if you, if you wanted to get
• 42:27
  a lot of distribution on Twitter, it was getting people
• 42:29
  to reply to your stuff. It wasn't even getting people to
• 42:31
  retweet because Twitter makes money from showing ads in the
• 42:34
  reply. So they want people to reply.
• 42:36
  And if you have a lot of replies, they can show ads in
• 42:38
  it. So they'll source the tweet in
• 42:40
  the post to more people so that they can view the ads.
• 42:43
  So I think it's really just about understanding how the the
• 42:45
  the nuances of all these things, like what they're prioritizing
• 42:48
  at the moment and just having like the DNA of whatever you're
• 42:51
  doing to shift to kind of do whatever they're prioritizing.
• 42:57
  If you think about Twitter, you know, five years ago, or maybe
• 43:00
  supposedly like 10 years ago, it was all.
• 43:03
  Text. No one posted video on Twitter
• 43:05
  and nobody posted images versus if you, if you're listening this
• 43:09
  right now, you have your phone in front of you.
• 43:11
  Pick up your phone and open the the Twitter or the Axe feed and
• 43:15
  just start screwing and just make a note while I'm talking.
• 43:19
  How many of these posts are text only?
• 43:22
  How many of them have an image in them?
• 43:24
  How do they have a video in them?
• 43:26
  I haven't done this in a couple months but it's probably only
• 43:30
  like 10 or 20% of the post. Maybe 30% are text only.
• 43:34
  The majority of them have probably maybe a picture, but
• 43:38
  most likely a video. Like half the feed is video.
• 43:41
  And if you think about most people think of Twitter, it's
• 43:43
  for posting text, but in the at the end of the day, like they're
• 43:46
  actually trying to show video. So if you just say, OK, this is
• 43:48
  what Twitter is prioritizing, I should be posting more video,
• 43:51
  doesn't matter how many followers I have.
• 43:53
  That's what Twitter wants people to see.
• 43:55
  So yeah. So I think I think the whole
• 43:58
  concept of followers is kind of like an outdated, an outdated
• 44:01
  thing. They call these algorithms
• 44:03
  prioritize things like retention on the platform, the time you
• 44:06
  spent watching it, if you contribute to how they monetize.
• 44:09
  And that's like ultimately what you need to be doing.
• 44:11
  I think what what follower shows is like, it's like a crude
• 44:14
  social capital or like a crude virality over time where, you
• 44:19
  know, I have, I don't know, 190,000 followers on Twitter.
• 44:23
  And it's just because I've gone viral a bunch and a bunch of
• 44:26
  people see my stuff and they've decided to follow.
• 44:28
  But you know, if you look at my average tweet, he might get 10
• 44:31
  or 20 or 30,000 views. Lot of these those accounts
• 44:34
  don't check anymore. A lot of notes in my tweets.
• 44:37
  And then you have one that's spiked where you get like
• 44:38
  1,000,000 views on it. So you get a bunch of people who
• 44:40
  aren't actually following you that see it.
• 44:42
  And that's just because that was good content that the platform
• 44:45
  knew that people wanted to watch.
• 44:47
  So I think it's all, it's all kind of nuanced.
• 44:49
  It depends on the platform. They're all different.
• 44:50
  They all prioritize different things, be at the end of the day
• 44:53
  just knowing, knowing what you're kind of trying to do and
• 44:56
  what the platforms want. I guess maybe follower count is
• 45:00
  maybe more the result of your actions, not necessarily a
• 45:02
  predictor of how the next, you know, post or content is going
• 45:05
  to work. I guess I was wondering when you
• 45:08
  said, you know, go viral, maybe if you can talk a little bit
• 45:12
  about what do you see as, you know, when you produce a, a
• 45:15
  video podcast on YouTube, you know, what's, what's a good
• 45:19
  versus a great outcome, you know, within the first week or
• 45:23
  month? And, and do you measure that by
• 45:26
  views or do you measure that by something else?
• 45:28
  I don't know if there's, you know, engagement over time when
• 45:30
  people watch the videos or something like that.
• 45:34
  I don't know, I think it's, it's, it's hard to measure
• 45:37
  because you can get a million views on a video.
• 45:39
  Like you think about like someone like Mr. Beast, you
• 45:42
  know, he gets like 100 million views on his video, but who's,
• 45:45
  who's watching the video and what does he gather?
• 45:48
  I mean, there's a reason he sells candy bars, right?
• 45:51
  Because that's, that's the audience.
• 45:54
  You might also say, you know, for me, it's much more like the
• 45:58
  CEO, like CEO of like a company that, you know, does a billion
• 46:02
  in revenue and they make a lot of decisions.
• 46:05
  Like that's a pretty valuable person to watch and then have
• 46:08
  their trust. Or, you know, like a really
• 46:11
  sharp kid who's 19 in school and he wants to go get a job at
• 46:15
  startup and he's looking for some place to join.
• 46:16
  And he sees his video for this interesting company and he
• 46:20
  decides to join it because he he liked the the way that the CEO
• 46:24
  answered questions and talked or whatever.
• 46:26
  It seemed like an interesting problem.
• 46:29
  So I think it just depends on really what you're doing.
• 46:33
  Sounds like your belief is not all viewers are equal and not
• 46:36
  all views are equal. Yeah.
• 46:39
  And like there's a lot of people that are super successful that
• 46:41
  don't even have social media. Like they have a private
• 46:44
  conversation. It's like a one-on-one.
• 46:47
  That thing got one view but they raised X amount or sold whatever
• 46:51
  contracted to a customer like so there's 2 ends of that spectrum,
• 46:55
  right? I I guess if the CEO of
• 46:58
  Salesforce is the person you're trying to produce a podcast for,
• 47:02
  you only need one viewer to listen or or watch.
• 47:05
  Yeah, cut a clip and throw it on LinkedIn and run targeted ads on
• 47:09
  his e-mail address or or his title, right?
• 47:12
  Like that's probably the best use of money versus, you know,
• 47:15
  trying to make a mystery video to get.
• 47:17
  Something. Is that something you've done
• 47:19
  before? Have you done specific targeting
• 47:22
  for like groups of people or individuals?
• 47:24
  I've never done it, but I do have portfolio companies that
• 47:28
  that have like have actually done that and and it I mean, I
• 47:32
  think it works. I can't.
• 47:32
  Tell you my whether I have nuclear weapons or not, I think
• 47:35
  that's what I hear you say. Yeah, I mean, I, I think it
• 47:38
  works, right. Like if you're, let's say you
• 47:40
  sell a product to a certain industry, just target the people
• 47:43
  in that industry like pay 1000 CPMS like like you're, you're
• 47:47
  it's like super concentrated leads.
• 47:50
  And a lot of a lot of this marketing is just other people
• 47:54
  knowing that if you do something that it stands for certain thing
• 47:57
  like with trucks, like with, with, with cars, right?
• 47:59
  So you see an ad on TV for like a like a big truck that can like
• 48:03
  climb up a mountain and like pull a massive 10,000 LB boulder
• 48:08
  or whatever. You're not going to go to the
• 48:11
  you're not going to buy from that video of like on the in the
• 48:15
  ad in the Super Bowl. And you're also probably never
• 48:18
  going to tow hundreds of thousands of pounds with your
• 48:21
  truck. But when you see someone who has
• 48:24
  a truck that that was on the Super like you know that that's
• 48:28
  why they bought it and they know that you know that that's what
• 48:31
  they can do with the truck. The.
• 48:33
  Advanced full size Chevy No wonder when it comes to pickups,
• 48:38
  America's having a change of heart.
• 48:41
  The heartbeat of America. That's the day, Chevy truck.
• 48:47
  I mean, I think that's a lot of what marketing is, is just
• 48:49
  building some sort of shared belief around something that
• 48:52
  people can kind of know what they kind of stand for, mean,
• 48:55
  mean. So, you know, if, if you're
• 48:58
  selling you an industry, there's like 1000 people that matter,
• 49:01
  just target them all, have them all see it, they'll talk with
• 49:04
  each other. I mean, I have like the most
• 49:06
  niche esoteric product that's absolutely crushed it with that
• 49:10
  strategy. It's like the weirdest customer
• 49:12
  that's actually super valuable customer that has never had a
• 49:15
  product that treats them like this and they all love it.
• 49:18
  And there's a they've just done a really good job building up
• 49:20
  all the social proof around being cool for using the product
• 49:25
  because the products like 10X better.
• 49:27
  But also they've done a good job of kind of amplifying and and
• 49:31
  kind of making the customers talk and and talk about using it
• 49:35
  and then look cool from using it.
• 49:36
  So. What do you think about YouTube
• 49:38
  is just a natural discovery platform?
• 49:40
  Do you feel like people find you from that Channel directly, or
• 49:44
  is it more that they're finding you from Twitter or other links?
• 49:50
  I think it's rediscovering. So I think a common thing on
• 49:53
  YouTube is, oh, it's the funny guy from Twitter's on YouTube,
• 49:57
  right? That is, that is like.
• 49:59
  So you get on to their radar, you know, through Twitter, but
• 50:01
  then once they watch you on YouTube, maybe it shows up again
• 50:04
  on YouTube when they go and hang out there.
• 50:07
  Yeah, I also get some comments on YouTube that are just like,
• 50:10
  wow, you're getting such a great guest for only having a couple
• 50:13
  1000 subscribers, like such an underrated channel or something.
• 50:17
  I'm like, yeah, Oh my. Gosh, yeah, so terrible.
• 50:20
  Yeah. I think if you just look at the
• 50:21
  data, I think has kind of changed.
• 50:24
  It just changes all the time. But I probably get about 70
• 50:26
  million kind of views on Twitter in a year.
• 50:30
  And YouTube, I don't know, if you think about like impressions
• 50:34
  on the thumbnail, it's maybe like a million a year or
• 50:37
  something. Well then then you just think
• 50:43
  about this whole trend of like start up launch videos.
• 50:47
  I'm sure you guys have seen kind of even the commentary around
• 50:50
  this has been like that's kind of the default go to market now
• 50:54
  is like you when you announce the company or launch it, you
• 50:57
  make a video because the algorithms prioritize it.
• 51:01
  So like, you know, maybe used to be like write a post and link to
• 51:05
  the the press release. And if you did that today, we
• 51:08
  just get naked in the feed like you can't do that.
• 51:11
  So you see everybody does videos now because that's what the
• 51:14
  platforms prioritize. And it's it this point, it's
• 51:18
  gotten become a meme where like why, why are you watching
• 51:21
  without a video? Or there's just like whole
• 51:25
  across the industry, like everyone does the same thing.
• 51:27
  It's a lot of the same agencies that do it.
• 51:30
  I I think it's like one of the probably 1 of the like
• 51:34
  overlooked big expenses that in most start-ups budget.
• 51:37
  Like if you if, if we were to like pull up the average budget
• 51:40
  of a seed stage start up on the screen right now, I think the
• 51:43
  number that would shock the most people is the amount of money
• 51:45
  they spent on producing video content and.
• 51:51
  On on average because you think it's too low or too high.
• 51:53
  But what? Do you?
• 51:54
  I think it's way higher. I mean, some companies are
• 51:55
  spending six figures on their launch video.
• 51:58
  That might be like 10% of the pound in some cases.
• 52:02
  Which? Is like, yeah, it's like kind of
• 52:04
  insane. Do you do you think that's good
• 52:07
  spend? I guess I wonder how many of
• 52:09
  them are effective at really getting the audience that they
• 52:12
  hope with that spend. It just depends.
• 52:14
  I mean it depends are you looking for customers, are you
• 52:17
  recruiting, are you trying to raise capital different,
• 52:21
  different positioning around it will lead to different results
• 52:25
  and like different, different groups having interest in what
• 52:29
  you're doing. So I mean, it can be both good
• 52:32
  and bad. I think the thing to understand
• 52:34
  is it's the reality is like you kind of you kind of have to
• 52:37
  realize that's that's sort of the game that's being played.
• 52:39
  I think like a part of the issue is we're in a pretty niche
• 52:42
  industry. Like people just the average
• 52:44
  person just doesn't care about venture secondary discussion.
• 52:49
  There's probably like 10,000 people in the world who actually
• 52:52
  care about that. Oh, maybe not even 10,000.
• 52:55
  That's a lot. Yeah, that'll be great.
• 52:56
  Yeah, I mean like a Jason, right?
• 52:58
  Like someone working in like a family office in Singapore who
• 53:03
  is kind of remotely thinking about this and like, Oh yeah,
• 53:05
  it's kind of like if you get 1000 views on that, you got like
• 53:08
  10% market share of all people who care about this.
• 53:11
  Like I think that's pretty good. So I think it depends on how big
• 53:15
  the, the ultimate audience is like like Mr. Beast will get a
• 53:18
  video that gets 200 million views instead of 300 million.
• 53:21
  And that's like bad for him, right?
• 53:23
  Like he's like disappointed in that.
• 53:24
  So I think it's really you want to think about it as just kind
• 53:27
  of like market share of, you know, total, total addressable
• 53:31
  views for the audience or something like if we're, if
• 53:33
  we're making up metrics, I think it's just hard, It's hard to
• 53:36
  really measure the stuff. I think a lot of it is
• 53:38
  consistency too. You just got to keep doing it.
• 53:40
  Put yourself out there. Well, I'd be remiss if we didn't
• 53:43
  ask you a little bit about secondaries and any of your
• 53:46
  personal experiences with that. And I don't know how long you've
• 53:50
  been doing Venture and whether that's come up in the past.
• 53:53
  But I think you mentioned there might be one or two experiences
• 53:57
  you can talk about. I don't know if you can share
• 53:59
  those specifically or if you have some general outlines of
• 54:02
  how you think about secondaries either buying and selling.
• 54:07
  Yeah, it's, I think secondaries are pretty interesting.
• 54:09
  Like they drive, they obviously drive some liquidity for early
• 54:11
  investors. But also I think there's only a
• 54:13
  few companies that actually matter.
• 54:15
  Like I have one company that I get emailed about all the time
• 54:20
  and it's like the one I probably wouldn't sell.
• 54:23
  So it's kind of like, you know those.
• 54:26
  Are the best companies that people want to buy?
• 54:28
  Yeah, right. Yeah.
• 54:29
  So it's like, would you really sell them?
• 54:31
  I don't know. I mean, I, I get the whole you
• 54:35
  it, it's good to drive liquidity to your LP's and there's
• 54:38
  certain, I think if you can return the fund by selling 2530%
• 54:43
  of a position kind of a thing, you probably just should like,
• 54:46
  it may make sense. Like even even on like a, if
• 54:50
  you're pretty sure this is still a 10X from here, like you
• 54:53
  probably should just sell and lock in something because just
• 54:56
  put portfolio management like I think that kind of makes sense,
• 54:59
  right? So I think you were having, you
• 55:01
  had a podcast, you were interviewing Michael Kim from
• 55:04
  Sedona Capital, where you guys had some pretty interesting
• 55:07
  conversations about how much to sell and when and what was
• 55:10
  meaningful, right? Where has the returns come from
• 55:13
  in venture? What like specific companies or
• 55:16
  strategies? Like what ultimately drives most
• 55:19
  of the returns in the industry? Yeah.
• 55:21
  You know, obviously historically it was IP, OS and really large
• 55:24
  acquisitions. I'd say in the last five years
• 55:26
  it's actually been secondaries. Really it's also important that
• 55:30
  if you're going to do a transaction like that, that it
• 55:32
  returns a meaningful part of your fund.
• 55:34
  So generally the the transactions that we've seen
• 55:37
  have returned anywhere from like.
• 55:38
  Half to more than the entire fund by just doing a 2030%
• 55:42
  secondary. Yes.
• 55:44
  I think that those are roughly the numbers he kind of talked
• 55:46
  about. I mean, I think it's, it's all
• 55:49
  kind of nuanced, right? Like, yeah.
• 55:52
  Well, there's a lot of different factors, I guess.
• 55:54
  Do you, do you care or do you think about like how fast the
• 55:57
  company is growing when you, when you're thinking about
• 55:59
  something like a potential sale or maybe like, hey, is this
• 56:03
  valuation ahead of where it should be or behind where it
• 56:05
  should be? And does that affect that you're
• 56:07
  thinking about whether you would be more or less likely to be a
• 56:09
  seller? I think one way to think about
• 56:11
  it is like what is the end outcome probably look like?
• 56:14
  Like if this were to go public, this is probably going to be the
• 56:16
  price. And if somebody wants to give
• 56:19
  that to me five years earlier probably makes sense because if
• 56:23
  you just think of, you're thinking about your average
• 56:26
  precede CDL that you might be considering exiting down the
• 56:30
  road, you you're probably going to need 100 X at least to make
• 56:33
  that conversation kind of makes sense based on fund size,
• 56:37
  portfolio construction. So somebody will give you 100 X
• 56:40
  today and you get like a, you know, you can lock in like a
• 56:42
  600% IRR on that single position versus waiting another five
• 56:46
  years. And maybe it's only a 60% IRR,
• 56:49
  right? Like you, you, you three extra
• 56:51
  fund in four years instead of doing it in 10 years.
• 56:54
  I think it's a pretty good call. It was a good decision, but you
• 56:58
  know, you don't always get that opportunity.
• 57:01
  So yeah, I think maybe maybe it's like belief in individual
• 57:05
  company, but also sector as a whole.
• 57:07
  Like I have one fund, I'm an LPN, I'm just a friend's fund.
• 57:11
  Sold a bunch of shares in this pretty hot AI round that was
• 57:15
  announced. He's like, it's just way
• 57:17
  overextended. Like you think you returned like
• 57:19
  40% of the fund by just selling most of the position.
• 57:24
  And it's, you know, it's one of those cases where they're
• 57:26
  probably not the first place player in the space.
• 57:31
  Who knows how this is all going to go.
• 57:32
  I think it was, I think it was kind of the right call in that
• 57:35
  one position. So I think interesting.
• 57:37
  But then the other end of the end of the spectrum, it's like,
• 57:41
  I probably wouldn't be buying secondaries in that company.
• 57:43
  Like I, I think that's just an interesting conversation to have
• 57:45
  is like, I'm trying to sell you this thing that I'm trying to
• 57:48
  get out of at the same time. So I think, I think it gets
• 57:51
  easier when there's a round happening and maybe you're
• 57:54
  selling it to like the lead or I guess sometimes there's funds
• 57:57
  that specifically specialize in picking off pieces as part of
• 58:01
  part of those rounds. I did have one incidents where
• 58:05
  we had a pretty big kind of sale lined up around the time of a
• 58:10
  round happening that would have significantly returned one of my
• 58:13
  funds multiple times over. We ended up not being able to,
• 58:18
  to get the deal done for a couple different reasons.
• 58:22
  But you know, I think it's something I would that I that I
• 58:24
  wanted to do and it kind of got to the one yard line on.
• 58:29
  So I think it's, it's like a, it is one of those cases where you
• 58:32
  kind of thought you're maybe pulling forward some returns.
• 58:35
  I think that's the way I think about it is like, you know, if
• 58:39
  you can get 90% of what you think you're ultimately going to
• 58:41
  get in half the time, it's probably worth it honestly.
• 58:45
  But then again, like I mentioned earlier, it's like to the other
• 58:47
  side of the table, you know, I, I think it's, it's tricky to buy
• 58:52
  secondaries like you kind of got to be getting a good deal on
• 58:54
  them, so. Yeah, I think you're kind of
• 58:56
  looking. For some distress of some kind
• 58:58
  or something. Yeah, I think there's, there's
• 58:59
  some 0 sum scenarios when you're buying and selling secondaries.
• 59:03
  But I, I think sometimes also there's just different, you
• 59:06
  know, different views on liquidity and how long people
• 59:09
  have been holding the position that might make that amenable to
• 59:11
  both sides. Yeah.
• 59:13
  I guess one thing to ask is I don't know where you're at.
• 59:16
  Your first fund is, is that maybe 678 years old now?
• 59:21
  I'm not quite sure when you first started.
• 59:24
  The beginning of 2021, so the worst possible time you can
• 59:28
  imagine. Well, I hope you were investing
• 59:32
  as companies were in more valuable sort of bargain
• 59:36
  basement prices, but. I mean, I didn't give it, but
• 59:40
  no, no crypto which no, no significantly more probably real
• 59:48
  products then then you would kind of expect based on that
• 59:52
  vintage. So you know, I feel good about
• 59:53
  it. There's some good, really good
• 59:54
  companies in there, so. Well, given that you're only
• 59:57
  maybe four or five years in with your first fund, I, I would
• 1:00:00
  imagine you don't feel a lot of pressure right now about
• 1:00:03
  thinking about secondary sales for and, and maybe your
• 1:00:05
  companies are still going and compounding is, is there a time
• 1:00:09
  I guess where you're starting to think about, hey, I should be.
• 1:00:13
  You know, showing DPI or returning.
• 1:00:15
  You know what? What is kind of the time frame
• 1:00:16
  that you think about as when you need to start having some
• 1:00:20
  results to show? I think what's what's textbook
• 1:00:25
  is like fun three. People say like by the time
• 1:00:27
  raising fun three you should have some DPII don't know if I
• 1:00:31
  necessarily agree with that. I think it's just like depends
• 1:00:33
  on how fast. You're raising, I guess too,
• 1:00:35
  whether that's, you know, three years, if it's three or four
• 1:00:37
  years between funds, that might be a long time.
• 1:00:39
  If it's one years between funds, that's pretty fast.
• 1:00:41
  But yeah, I guess I might say by your 7 to 10, there's probably
• 1:00:45
  some pressure to show some results at that point that
• 1:00:48
  maybe, you know, you don't have to show 1X, but maybe you might
• 1:00:51
  want to be somewhere on the table towards 1X.
• 1:00:54
  You probably want a position in that first fund that's like a
• 1:00:57
  real asset. Like you could liquidate it.
• 1:00:59
  Like you could say this company's doing 220 million in
• 1:01:03
  revenue and it in line with comps or like in line with like
• 1:01:08
  the round they raised six months ago or, or, or the round they
• 1:01:11
  raised right now. It was priced by like reputable
• 1:01:14
  funds. This position, I, I could sell
• 1:01:16
  it and return the fund if you want, but we're not doing it
• 1:01:19
  because it's still growing 4 acts a year at 220 million
• 1:01:23
  revenue. And I mean, it's kind of like an
• 1:01:26
  IPO candidate in a couple, I mean, might be in like 2-2
• 1:01:29
  years. I guess at that point, I, I
• 1:01:30
  literally just made all those numbers up.
• 1:01:31
  But you're probably hitting a point like you probably wouldn't
• 1:01:33
  quite sell there, but, but you can probably say like, Hey,
• 1:01:36
  there's a really strong secondary demand for this thing.
• 1:01:38
  And this is, this is what it's worth.
• 1:01:40
  I think that's probably the the most important thing.
• 1:01:43
  I think people who probably only look at DPII don't know.
• 1:01:47
  I mean it just it just depends, like certain people want
• 1:01:49
  different things. I think that's a real use case
• 1:01:52
  that you just suggested there. If you had a company doing 200
• 1:01:54
  million in revenue, you know, maybe that's still, you know,
• 1:01:58
  from an IPO perspective these days.
• 1:01:59
  I think we, we were just looking at some numbers that came out
• 1:02:02
  from Pitchbook and I think the average IPO this year has been
• 1:02:06
  an $800 million in revenue. And I don't think there's too
• 1:02:09
  many that are less than 500 million right now.
• 1:02:11
  So, you know, if companies are doing 200 million, let's say
• 1:02:14
  it's growing 3040%, you know, you might still have 3-4 years
• 1:02:17
  before it's going to get to an IPO size outcome.
• 1:02:20
  But you know, it's probably, it's probably got real progress
• 1:02:22
  that you can, you know, count on and measure.
• 1:02:26
  I guess that that is kind of the issue that I think we're
• 1:02:28
  starting to see with a lot of VCs funds is, you know, 1020
• 1:02:32
  years ago, you might have looked at that as, hey, this company's
• 1:02:34
  ready to IPO and maybe it'll return my fund.
• 1:02:37
  Now you might have, you know, you might have 2X your TVPI on
• 1:02:41
  paper, but you know, it might still be 3 years from an IPO and
• 1:02:46
  you know, what do, what do you think about there?
• 1:02:48
  Do you think that that's something you would consider
• 1:02:50
  selling if you had, if you had three X your TVPI on paper, you
• 1:02:56
  know, would you sell a third to book 1X if the company's still
• 1:02:59
  growing at thirty 4050% or would you let that ride?
• 1:03:03
  I think it depends on the rest of the portfolio.
• 1:03:05
  I think it's important to just return capital.
• 1:03:08
  I think it's important to like get the 1X and say like, hey,
• 1:03:11
  yeah, I didn't completely fuck this up.
• 1:03:14
  Just what? Athletics is like gave your
• 1:03:17
  money. Back milestone for for many
• 1:03:19
  reasons yeah return money for them also get the clock, you
• 1:03:22
  know, ticking on your carry I guess also.
• 1:03:24
  Yeah. I mean, I think that's a piece
• 1:03:26
  of it, I think. I mean, I think also like IP OS
• 1:03:29
  don't perform that well too like on on average usually like
• 1:03:33
  throughout history, of course during zerp that that changed a
• 1:03:37
  little bit. But generally speaking, like
• 1:03:38
  most companies underperform after the IPO.
• 1:03:41
  So you know, sometimes actually holding post IPO to to the point
• 1:03:46
  about like accelerating returns, like if you can, if you can sell
• 1:03:49
  in a secondary round going into an IPO at like a similar IPO
• 1:03:53
  price might make, might make sense.
• 1:03:57
  Of course, that's super easy to just look at a stock chart and
• 1:04:00
  said, oh, you should have done it here, you should have done it
• 1:04:02
  there. But I think it's something to
• 1:04:03
  consider. I mean, I think, I think certain
• 1:04:05
  funds have a regulatory and financial setups where they can
• 1:04:08
  like do options and stuff like that to kind of hedge a little
• 1:04:12
  bit going into those things. That's not something I've ever
• 1:04:15
  done, but it's an option. I think I.
• 1:04:18
  Think that's, that's probably a little bit restricted.
• 1:04:21
  I think if you're AVC and an IPO, usually if there's, you
• 1:04:24
  know, contracts you have to sign that say you're not going to do
• 1:04:26
  any options trading or anything. But, but I do think you bring up
• 1:04:30
  a point that's pretty relevant because you know, both with us
• 1:04:34
  personally in our funds and I know this is true for a lot of
• 1:04:37
  folks. You might have a company right
• 1:04:39
  now that is, you know, tradable on the secondary market.
• 1:04:42
  And historically speaking, I think, you know, people you
• 1:04:45
  would hold onto an IPO when it came out of lock up, which is
• 1:04:48
  usually six months, you probably would distribute shares in that
• 1:04:51
  company, you know, usually pretty soon right after that
• 1:04:54
  lock up comes off. But now you have companies
• 1:04:57
  staying public for 15 years or more, which might be way past
• 1:05:01
  your normal, you know, fund life cycle.
• 1:05:04
  And they also might be might be somewhat liquid pretty much on a
• 1:05:08
  on a regular basis if it's one of the big names.
• 1:05:10
  And I guess you have this, you have sort of a decision to say,
• 1:05:13
  well, do am I holding on to an essentially liquid position that
• 1:05:17
  I can sell on the secondary market?
• 1:05:19
  There's no reason for me to necessarily wait until IPO or
• 1:05:23
  after a lock up to get liquidity back to my investors.
• 1:05:26
  So maybe, you know, these days the the secondary marketplace is
• 1:05:30
  essentially, you know, a new IPO marketplace for people to get
• 1:05:35
  that liquidity at least on a partial basis.
• 1:05:38
  Yeah, that's fair. I can definitely see that.
• 1:05:40
  I like to your point, I think it's just like the top there's,
• 1:05:42
  there's always good assets out there.
• 1:05:45
  Don't like, I think people are like, oh, you know, IPO market's
• 1:05:47
  dead. It's like it's not really dead.
• 1:05:50
  Like it's just. It seems like it's come back to
• 1:05:52
  life in the last couple of months, at least with Figma and
• 1:05:55
  Corey and a few others. I mean, you can, you can always
• 1:05:57
  go public though. It's just that you might get a
• 1:05:59
  better price if you're private. And maybe that makes sense.
• 1:06:01
  And if you're an early investor and you want liquidity, you can
• 1:06:04
  complain about it or you can just sell your shares until the
• 1:06:07
  until the liquidity. I don't know.
• 1:06:09
  I mean, there's always, there's always options.
• 1:06:11
  That's I think that's the interesting thing that I like
• 1:06:12
  about the way the market's evolved as an early investor is
• 1:06:15
  it's like, OK, I've got a position.
• 1:06:17
  I have 120 acts in. And it's not like I can't do
• 1:06:21
  anything about it. Like if it's a good business,
• 1:06:23
  you can just say like, hey, Dave, like you want to buy half
• 1:06:25
  this thing for me and like talk to the founder, like we'll,
• 1:06:29
  we'll kind of figure it out. I mean, it's a lot more
• 1:06:32
  complicated than that, but but there's options that are out
• 1:06:34
  there and they they used to not be there.
• 1:06:37
  But I, I think probably these days with a lot of conversations
• 1:06:40
  we're starting to have with people is about whether they
• 1:06:42
  give their investors that option.
• 1:06:46
  And, you know, you might do that via some type of continuity
• 1:06:49
  vehicle or possibly an SPV where you know, hey, it might be 1012
• 1:06:53
  years into your fund and you've got a position that's worth a
• 1:06:57
  fair amount. And, you know, maybe you could
• 1:06:59
  go to your existing investors, say, hey, do you want liquidity
• 1:07:01
  now or do you want to roll into a new vehicle that's going to
• 1:07:03
  tack on another three to five years.
• 1:07:06
  And maybe there's even a way for you to get people a little bit
• 1:07:09
  of both worlds where they could say, OK, I want to sell, I want
• 1:07:12
  to sell a third of my position, but I want to keep the other
• 1:07:14
  2/3. And, you know, historically
• 1:07:16
  that's been a decision that's been made at the fund level by
• 1:07:19
  the GP. But I I wonder through the use
• 1:07:21
  of SPBS and continuity vehicles, if maybe we're better off
• 1:07:24
  putting that decision back into the hands of investors at at
• 1:07:27
  least after 10 to 12 years. Yeah.
• 1:07:30
  I think it depends on what you kind of initially promised.
• 1:07:32
  Probably initially like your point of, you know, we said it
• 1:07:36
  was this period, this is what the the docs said.
• 1:07:39
  You mean I need to come up with a new plan?
• 1:07:41
  You probably said 10 + 2. But now that it's 15 years in,
• 1:07:46
  yeah, I, I think there's going to be a lot more exploration of,
• 1:07:49
  you know, SPVS and Cotter vehicles for liquidity.
• 1:07:51
  But it still seems like we're still seems really the early
• 1:07:54
  stages of that with a lot of fund managers, yeah.
• 1:07:58
  I think it's like the interesting thing that's kind of
• 1:08:00
  evolves up to some of these business models of these like
• 1:08:03
  people who are directly on the cap table of these like high
• 1:08:05
  frequency secondary companies. It's almost being like SPV
• 1:08:10
  facilitators in a way where it's like if you own direct early at
• 1:08:15
  SpaceX, shares probably shouldn't ever sell your
• 1:08:19
  position. You should just like help enable
• 1:08:22
  this like SPV economy of like multiple layers.
• 1:08:24
  I mean, that is something to unpack about what's the correct
• 1:08:28
  way to do that. But that's that's used to be
• 1:08:30
  kind of a thing that's happened. I think there's I think there's
• 1:08:32
  a lot of valid and potentially scary reasons that that might be
• 1:08:37
  OK or not OK. I think single layer, single
• 1:08:41
  asset SP VS I'm not too worried about.
• 1:08:42
  But there was a comment by Bill Gurley and I think some other
• 1:08:47
  posts by Samir Khaji and Chris Harvey about like, I, I don't
• 1:08:51
  know, they were talking about 6 layer vehicle.
• 1:08:53
  Yeah, I 6 layers two or three. Yeah.
• 1:08:56
  Well, yeah, I don't know if that's real or whether they were
• 1:08:58
  just doing that, but definitely, I think 2:00 and 3:00 layers
• 1:09:01
  exist, but you're not always sure what's on the other side of
• 1:09:04
  that. And you know, how many fees and
• 1:09:06
  carry layers are you paying into or.
• 1:09:07
  Yeah. Like like I, but I think we're
• 1:09:10
  there. You could, yeah, you you could
• 1:09:12
  maybe argue a two layer if it's depending on the company and the
• 1:09:19
  correct and like aligned fee structure.
• 1:09:22
  I think triple layer is just kind of like you can't really
• 1:09:24
  explain that. And I think that's when it kind
• 1:09:27
  of starts to become a meme. And like 6 layers is like, you
• 1:09:29
  know, the Silicon Valley show is like, is like real life at that
• 1:09:34
  point. Yeah.
• 1:09:36
  ROI. ROI, you know.
• 1:09:41
  What that stands for? Return.
• 1:09:43
  On investment? Nope.
• 1:09:46
  Radio on Internet. That's that's insane.
• 1:09:50
  I didn't know that was a thing. I didn't know you could do that.
• 1:09:51
  Like you'd think the fund admin in like the fourth layer would
• 1:09:54
  be like this is this we can't do this.
• 1:09:58
  Well, I think your your point about, you know, maybe
• 1:10:00
  maintaining the entity that's on the cap table, whether that's
• 1:10:03
  your initial investment or an SPV, but offering fractional
• 1:10:07
  liquidity to some of your underlying investors, you know,
• 1:10:10
  could be a win win where, you know, maybe you as the fund
• 1:10:13
  manager, what actually even that more and follow on in the
• 1:10:17
  company. But maybe some of your investors
• 1:10:19
  might want to take a little bit off the table.
• 1:10:21
  But I think you know the the win there is if you don't have to
• 1:10:24
  change your overall aggregate position on the cap table, but
• 1:10:27
  maybe you can get different sets of investors you know to swap in
• 1:10:31
  or out depending on their risk profile and you know what level
• 1:10:34
  of cost basis they have. Yeah, 'cause I think there's two
• 1:10:37
  ways to think about a round. Let's say you're the, there's a
• 1:10:39
  round the company's valued at a billion.
• 1:10:41
  That might be a great exit point for someone who got in at 5
• 1:10:44
  million post. That also might be a great entry
• 1:10:46
  point for someone who doesn't it's.
• 1:10:49
  Going to go to like. 100 million in revenue.
• 1:10:51
  Yeah, exactly. So, you know, it's all, it's
• 1:10:54
  all, it's all nuanced. Well, Turner, thanks for
• 1:10:57
  spending some time with us. This was really great to hear
• 1:10:59
  your experience in kind of running your podcast and your
• 1:11:03
  sort of meme accounts as ways to get benefit for your companies
• 1:11:07
  and and also for yourself. It's impressive that you're
• 1:11:10
  actually making money with your media enterprise.
• 1:11:13
  Yeah, so it's surprising me too, so.
• 1:11:17
  Well, look forward to catching you more on the Peel and hope
• 1:11:21
  that we'll get you back here on the show sometime in the future
• 1:11:24
  as well. Yeah, definitely.
• 1:11:25
  That's a lot of fun. Maybe when you're off doing a
• 1:11:28
  big secondary. Yeah, we'll, we'll talk about it
• 1:11:31
  on the pod. This week we're going to be
• 1:11:43
  covering Open AI Aman, $500 billion valid racer for Open AI.
• 1:11:49
  What's what's driving that? Who's behind it?
• 1:11:53
  What do you think that number represents?
• 1:11:54
  It is that is that crazy or not crazy?
• 1:11:57
  Well, that's the that's the topic of the week.
• 1:11:59
  We're going after the the big daddy today, Dave.
• 1:12:01
  This week Open AI officially announced its $500 billion
• 1:12:05
  evaluation that does that does make it the biggest, most
• 1:12:07
  valuable private company in the world.
• 1:12:10
  See how long they hold that record for.
• 1:12:11
  I feel like every week there's a new king of the hill and maybe
• 1:12:14
  SpaceX or Tether will will beat them.
• 1:12:15
  But this was a employee secondary share sale.
• 1:12:19
  They did a $6.6 billion deal led by NVIDIA and it seemed like
• 1:12:25
  there was enough money for 10 billion, but only 6 points and
• 1:12:29
  worth of employees came forward, so they didn't.
• 1:12:30
  They didn't. Tell as much what they could
• 1:12:32
  have, right? That's right, that's right.
• 1:12:34
  There were there were supply constrained, not not demand
• 1:12:38
  constrained. It's still a big step up from
• 1:12:40
  before the last round in March of 2025 S just six months ago
• 1:12:43
  now was 300 billion. And so they, they definitely
• 1:12:46
  made a lot of progress on the business and, and raised a ton
• 1:12:49
  of money and now declared the, the new round.
• 1:12:52
  Let's talk a bit about the, the, I'll give you a bit of the bull
• 1:12:55
  case and then maybe the concerning case about open AI
• 1:12:57
  and what this means. So if you look at their
• 1:12:59
  revenues, this is from Sacra, they're at a $13 billion ARR run
• 1:13:05
  rates, a little bit over a billion a month is what they've
• 1:13:07
  been saying, tremendous progress.
• 1:13:10
  And so in, in any of these rounds, the way that I think
• 1:13:11
  about it is what's forget about the past, because the, the
• 1:13:14
  valuation is a discounted machine of cash flows for the
• 1:13:17
  future. So what is the future holds and
• 1:13:20
  if you double the ARR, I know they're going at 700% year over
• 1:13:24
  year, but just assume they double ARR next year and then
• 1:13:27
  the year after that I think they could be at a $50 billion run
• 1:13:30
  rate in you know 2020, seven 2028.
• 1:13:34
  So now we're talking about a five times sales to get there.
• 1:13:39
  I mean they have 800 million users right now on a monthly
• 1:13:42
  basis they'll be over a billion I think by the end of the year.
• 1:13:44
  But even assume they they're at today's MA US, they're talking
• 1:13:47
  about 40 to 50 bucks per user ARPU, average revenue per user,
• 1:13:52
  which you know what compares pretty favorably to Meta it.
• 1:13:55
  Compares pretty crazy to imagine.
• 1:13:57
  Yeah, I don't know if you have an instinct on how they monetize
• 1:13:59
  search. I mean Meta monetizes mostly at
• 1:14:02
  on advertising. Alphabet is mostly advertising.
• 1:14:05
  Neither of them charge their users anything Open AI to date
• 1:14:08
  hasn't charged. Open AI has, you know, possible
• 1:14:12
  ideas about monetizing on actual transaction sales as well as a
• 1:14:19
  search advertising or what equivalent look like search
• 1:14:22
  advertising and potentially other API based usage as well.
• 1:14:26
  So I I would not be surprised that they could even push that
• 1:14:29
  number higher than $4050 per user.
• 1:14:33
  You know, kind of depends on what kind of behavior we see
• 1:14:36
  from users, right? Right now, most people are
• 1:14:39
  probably using ChatGPT for, you know, query response type
• 1:14:44
  searches. I don't know if they're using it
• 1:14:46
  for purchase behavior, but that's certainly where I think
• 1:14:49
  they might be headed in the future.
• 1:14:50
  Yeah, why not? There's got to be some
• 1:14:52
  e-commerce. I'd say Meta in general has kind
• 1:14:54
  of done OK on e-commerce, but not not great.
• 1:14:57
  It seems like Google's done great on e-commerce and open AI
• 1:15:00
  can definitely lead to transaction revenues and and
• 1:15:03
  leads and provide information about products that people want
• 1:15:06
  to sell. Meta really has been able to
• 1:15:08
  pull that off and it's it's not a meaningful part of their
• 1:15:11
  revenue. I don't know, Dave, if you've
• 1:15:12
  bought this new, new Meta glasses, those, those are pretty
• 1:15:14
  cool. But it seems like there are 80%
• 1:15:17
  plus, you know, advertising a bit of payments that might be
• 1:15:19
  another possibility for open AI in the future.
• 1:15:22
  For sure. I think you're right.
• 1:15:24
  You could go north of where Meta is and and maybe of north of
• 1:15:27
  where Google is if their searches are better.
• 1:15:29
  So I feel like there's a good bull case here based on the
• 1:15:31
  revenue trajectory. I think all these companies are
• 1:15:33
  going to be not just sitting on their laurels and just based on
• 1:15:37
  advertising revenue. I think they are all going to be
• 1:15:39
  trying to get into transaction based new and more, you know,
• 1:15:44
  purchase behavior, pre purchase behavior.
• 1:15:47
  Those those glasses. I think for Meta AI is
• 1:15:49
  definitely like, hey, what do you what do you buy when you see
• 1:15:52
  something? You know, sure could be pricing
• 1:15:54
  of those things that come up. So again, I think given the
• 1:15:58
  amount of user distribution that Open IO already has and the pace
• 1:16:03
  of growth, it's not at all that much of A stretch to see them
• 1:16:06
  getting to Meta levels or Alphabet levels of usage or
• 1:16:11
  revenue in the. Future, I'd agree.
• 1:16:13
  I think they're, I think the future on revenues and the the
• 1:16:15
  performance of the fundamentals will be really good.
• 1:16:18
  But let me give you the concerning case and let me just
• 1:16:20
  start with a bit of a backdrop on what happens in market tops
• 1:16:24
  and peaks. And we've seen this in bubbles
• 1:16:25
  before. And I'll quote from George
• 1:16:27
  Soros, who was a phenomenal investor at a coin, did a really
• 1:16:31
  good job breaking down the theory of reflexivity, which you
• 1:16:35
  can look up. And basically, it's a point at
• 1:16:37
  the market peak when you've got a shared distorted reality, kind
• 1:16:41
  of a shared perception of the market by market participants
• 1:16:44
  that doesn't correspond to fundamentals.
• 1:16:46
  And that collective hallucination to use of to use
• 1:16:50
  the term affects the fundamentals because it bids up
• 1:16:53
  prices. So an example of this is
• 1:16:55
  something I think that is happening right now with this a
• 1:16:57
  collective market distortion and things not being priced
• 1:17:01
  properly, which we do see at at top of this markets.
• 1:17:05
  Let's just go through just to make this real for you.
• 1:17:07
  Let's go through the last three weeks of announcements from Open
• 1:17:09
  AI and let me just show you what I mean and how this market
• 1:17:14
  distortion reality that Soros talked about could happen.
• 1:17:17
  So Open AI announced a $300 billion deal with Oracle where
• 1:17:21
  they're buying computing power over five years.
• 1:17:23
  So 60 billion a year. They are, they are, they don't
• 1:17:27
  have the cash right now to buy that, right?
• 1:17:29
  And Oracle doesn't have the capability to deliver on that,
• 1:17:33
  but the dealer Nets. And so it's a, it's a
• 1:17:34
  prospective deal. Oracle can deliver the computing
• 1:17:38
  power for the most part, but they're missing one really
• 1:17:40
  important part of the AI supply chain.
• 1:17:43
  They need to buy billions of dollars of chips in order to
• 1:17:46
  build data centers and build Oracle Cloud.
• 1:17:50
  Now Dave, who was the market leader in AI ready GPUs.
• 1:17:54
  I'm pretty sure that would be NVIDIA.
• 1:17:57
  That's right. They just 2 1/2 years ago,
• 1:18:00
  NVIDIA was generating 25 to 30 billion in revenue.
• 1:18:04
  AMD was generating 25 to 30 billion in revenue.
• 1:18:08
  Two years later, AMD is about 30 billion in revenue.
• 1:18:10
  So a little bit up and NVIDIA is closing in on 200 billion in
• 1:18:14
  revenue. So they have for the last two
• 1:18:15
  years, they have just run the table and nominated the space.
• 1:18:19
  So Oracle is and they've announced a deal with NVIDIA to
• 1:18:21
  get the chips from NVIDIA. Again, Oracle doesn't have the
• 1:18:24
  money yet to buy the stuff from NVIDIA.
• 1:18:27
  But let's you know, let's set that aside, OK, Dave, who was
• 1:18:30
  the leader of the last round, the secondary shares sale and
• 1:18:34
  open EI, who was the leader? Who, who, Who priced that round?
• 1:18:38
  I believe that was also NVIDIA. Aha.
• 1:18:43
  So unless I'm very much mistaken, the same dollar bill
• 1:18:46
  starting with open AI is going to go to Oracle.
• 1:18:48
  Oracle is going to send the money to NVIDIA and NVIDIA is
• 1:18:50
  going to round trip it back to open AI.
• 1:18:53
  And you would think the market would look at this and say, wait
• 1:18:55
  a second, I got it. So you're setting the same
• 1:18:56
  dollar round and round the Mulberry Bush, right?
• 1:18:59
  So I'm not going to give anyone credit or create a valuation
• 1:19:01
  bump on any of this stuff. I I understand.
• 1:19:05
  I understand Mon Frere, Mon Frere.
• 1:19:07
  I think all three companies are more valuable because of that
• 1:19:10
  circular trade. Oh my goodness.
• 1:19:13
  So let's go through with how the stocks, you're right.
• 1:19:15
  That's you're, this is how the market actually traded.
• 1:19:17
  Oracle on the news went up 25%. It's given up a lot of that
• 1:19:21
  since and maybe after Friday's route, it gave it all back.
• 1:19:24
  But under on the announcement, it went up in market cap by over
• 1:19:26
  100 billion. NVIDIA is up over the same two
• 1:19:30
  weeks and we know that Open AI is just doing an up round from
• 1:19:33
  their last round. So reflexivity, right?
• 1:19:35
  This is the market looking at the dollar going back and forth
• 1:19:38
  and deciding all three components are more valuable.
• 1:19:42
  You know what this automotive is?
• 1:19:43
  Rising. It must be good you.
• 1:19:47
  Know what this reminds me of? There's a great video from The
• 1:19:49
  Three Stooges. And Speaking of money, how about
• 1:19:51
  the 20 bucks you owe me? Oh yeah?
• 1:19:53
  Well, I only got 10, so here's 10.
• 1:19:55
  I owe you 10. Thanks.
• 1:19:56
  Hey, MO, you owe me 20. Well, here's 10.
• 1:19:58
  I owe you 10. You owe me 20.
• 1:20:01
  Here's 10 I owe you. 10 Here's the ten I owe you.
• 1:20:03
  Here's a 10 IOU. Here's a 10 IOU.
• 1:20:06
  Good. Now we're all leaving that.
• 1:20:08
  It talks about how the modern banking system works and it's
• 1:20:10
  like a dollar $10.00 bill going back and forth between Larry to
• 1:20:13
  MO to Curly and back to Larry and how all three of these guys
• 1:20:17
  end up paying off their debts. And somehow somehow the same
• 1:20:20
  $10.00 bill that started off in Larry's pocket goes right back
• 1:20:23
  into Larry's pocket and all of them think they paid off their
• 1:20:26
  debts. That's a little bit of what's
• 1:20:28
  what's going on. So so just to recap.
• 1:20:32
  That it's really that crazy. I mean, like, I guess what we're
• 1:20:35
  saying here is Nvidia's producing chips, Oracle's
• 1:20:38
  building out data centers. Open AI is using software
• 1:20:42
  running on those data centers and those chips and everybody is
• 1:20:46
  benefiting. Open AI is getting more
• 1:20:48
  customers and usage. Now, whether they're making
• 1:20:51
  money on that, you know, customers usage, that might be
• 1:20:54
  questionable, but there's no question more people are using
• 1:20:57
  Open AI, more people are paying open AI, yes.
• 1:21:00
  And so in turn, Oracle's getting, you know, usage from
• 1:21:03
  data centers, Nvidia's getting usage from it's chips.
• 1:21:06
  So I do think it's a positive and virtuous cycle for everyone.
• 1:21:11
  The question is probably just are the valuations and free cash
• 1:21:15
  flow that's coming from this, you know, reasonable or not?
• 1:21:19
  Yeah, I think that is right. There's no doubt there's value
• 1:21:21
  being created. But if I had to just recap the,
• 1:21:23
  the concerning case, maybe the bear case, open AI is it's,
• 1:21:28
  there's no doubt there's a deal between Open a open AI and
• 1:21:30
  Oracle. That's a win win.
• 1:21:31
  But open a open AI is saying, I want to spend 300 billion to buy
• 1:21:34
  these chips. They don't have the cash.
• 1:21:36
  And this is a just a cash forecast for open AI.
• 1:21:39
  So the green bars are here's how much they've raised or
• 1:21:42
  announced. And then the red is the cash
• 1:21:44
  burn just based on what they've announced.
• 1:21:47
  And you can see that there's a huge cash deficit they're going
• 1:21:49
  to have in the next three years that they have.
• 1:21:51
  Wait a second. A month.
• 1:21:52
  Sam is out raising money as we speak, and you know, given that
• 1:21:57
  he hasn't raised money yet for 262728I, I'm going to guess that
• 1:22:01
  Sam can keep ahead of those red bars.
• 1:22:05
  Yeah, I think. You're right, raising more green
• 1:22:06
  bars ahead of those red bars. Yes, and if, if you can do it,
• 1:22:11
  you know, the concern is it's going to raise a huge amount of
• 1:22:13
  money. It's dilutive to everybody.
• 1:22:15
  I guess all that's going to be preferred stock or maybe a
• 1:22:17
  Microsoft partnership money. And so they'll all be ahead of
• 1:22:19
  the common shareholders, the employees who just sold in this
• 1:22:22
  deal. And we don't know what that
• 1:22:23
  preference stock looks like. And they're because they don't
• 1:22:27
  have the money yet to spend. Oracle doesn't yet have the cash
• 1:22:30
  to spend and Oracle is the other one that's a bit of a concern.
• 1:22:32
  If you look at all the on the publicly traded exchange,
• 1:22:35
  they're just about a maybe 2025 AI stocks that I would say have
• 1:22:38
  generated most of the returns in the market this year.
• 1:22:42
  Oracle by far is the most indebted of those companies over
• 1:22:45
  a 500% debt to equity ratio compared to like, you know, 50%
• 1:22:49
  for Microsoft and and like 15 or 20% for Tesla and for NVIDIA.
• 1:22:55
  So this is open AI that is promising money.
• 1:22:57
  They don't have yet to build capacity.
• 1:22:59
  Oracle doesn't have yet, by the way, that that compute is going
• 1:23:03
  to take the equivalent of 2 1/2 Hoover Dams, which we don't have
• 1:23:07
  for nuclear power plants, which we don't have.
• 1:23:09
  It takes energy and power that's not yet built.
• 1:23:12
  And Oracle doesn't really have the, they don't have to go raise
• 1:23:14
  this money somehow either through debt or through equity.
• 1:23:17
  And they're already very leveraged.
• 1:23:18
  So I think the bear case, as you say, is, hey, it's these are,
• 1:23:21
  these are great deals that are being announced, not yet a lot
• 1:23:23
  of economic value being created, some financial engineering, but
• 1:23:27
  that's also dependent on power that's not yet there.
• 1:23:30
  And it's just, it's the valuation, the pricing
• 1:23:32
  reflecting all that future dilution or not.
• 1:23:34
  And it's, it's hard to tell, but it does feel like just to use
• 1:23:37
  that Soros phrase again, we're at a market top where there's
• 1:23:39
  some, there's some shared dilution and reflexivity
• 1:23:42
  happening. And it's easy to see that these
• 1:23:44
  valuations while, you know, while they've been up and to the
• 1:23:48
  right so far. But I think there's a good
• 1:23:50
  chance of a draw down somewhere in the next couple years of the
• 1:23:52
  reset the pricing, but there's a lot of value being created.
• 1:23:55
  So, you know, I think that's the positive.
• 1:23:57
  I think this is a pretty easy case for NVIDIA.
• 1:24:00
  I mean, they're, they're certainly the winner in almost
• 1:24:03
  all of these scenarios because their chips are still being
• 1:24:05
  bought substantially. So now there's, there's customer
• 1:24:10
  concentration risk where maybe half of Nvidia's revenues are
• 1:24:14
  coming from only three or four customers.
• 1:24:17
  And that's certainly some risks. There's there's some risks for
• 1:24:19
  Oracle in that they're trying to gain more share in the AI data
• 1:24:23
  center hosting, but probably also, you know, buying a, a set
• 1:24:28
  of revenue or business from open AI that's probably thinner
• 1:24:31
  margin than their previous business has been.
• 1:24:35
  So they're expanding their overall revenue, but they're
• 1:24:37
  probably decreasing their overall average margins.
• 1:24:41
  That's maybe a little bit risky. Open AI, you know, hey, they're,
• 1:24:45
  they're shooting for the moon. All of this.
• 1:24:47
  I I think the realization is just with all of these bets,
• 1:24:51
  there's really, you know, no way for any of these folks to hedge
• 1:24:54
  their bets. At least for many of them.
• 1:24:57
  This is a binary bet on getting to AGI or at least being the
• 1:25:02
  leader, you know, with some significant advantages in
• 1:25:05
  artificial intelligence. And, you know, yeah, these folks
• 1:25:08
  might be overspending. They might be spending, you
• 1:25:10
  know, money they don't quite have yet.
• 1:25:12
  They might be spending it unprofitably, but we can afford
• 1:25:16
  to not spend it. They they have to be in this
• 1:25:19
  race. At least several of those
• 1:25:21
  countries have to be in this race.
• 1:25:25
  Yeah, I think that's well said. I think NVIDIA is probably in a
• 1:25:27
  great position because they are at the center of the AI gold
• 1:25:30
  rush. You know, I think you're right
• 1:25:31
  that Oracle and others, they have the cash, they have the
• 1:25:34
  ability as long as they can make the bet to be in the game.
• 1:25:36
  There's more. There's asymmetric upside and
• 1:25:39
  the. Credits here too.
• 1:25:41
  AMD is bet in the house on, you know, on the space as well, and
• 1:25:44
  that was the deal that they had with open AI.
• 1:25:46
  That's I bet the company trade because they think they're
• 1:25:48
  either they're either in it or, you know, as I said before,
• 1:25:51
  they're not they're they've not fallen so far behind NVIDIA that
• 1:25:53
  it's a it is time for them to take a more aggressive posture.
• 1:25:56
  So that's also going to create, you know, support for these
• 1:25:58
  valuations. Yeah.
• 1:26:00
  And I think you could also make the case that, you know, private
• 1:26:03
  credit for AI data center build out and all these other
• 1:26:06
  companies is well funded. There's plenty of people willing
• 1:26:08
  to provide that credit. There's plenty of legit, you
• 1:26:12
  know, BC firms and others that are making this, that on an
• 1:26:15
  equity basis. There's plenty of other lenders
• 1:26:17
  making it on the debt basis. So I, you know, although I agree
• 1:26:22
  you worry whether the trade is a +1, I don't think any of these
• 1:26:26
  companies are going to slow down and making these bets.
• 1:26:28
  Yeah, and you're right, there was a lot of smart money going
• 1:26:31
  in. Well, I guess we'll have to see
• 1:26:33
  how all these bets pay off. But again, I don't think there's
• 1:26:36
  any lack of money being invested either on a debt or equity basis
• 1:26:41
  on chips and data centers and AI.
• 1:26:44
  So probably more of the same coming in the future, at least
• 1:26:47
  until somebody decides to take their foot off the gas pedal.
• 1:26:52
  Well said.