Latest / trading places / Why LatAm Beats Other Emerging Markets, 2026 IPOs, & Discord Valuation | Guest Nathan Lustig | Ep19

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Why LatAm Beats Other Emerging Markets, 2026 IPOs, & Discord Valuation | Guest Nathan Lustig | Ep19 · trading places

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The way that we think about the Spanish speaking side of Latin
0:03
is that there's a certain number of very fundable founders and
0:08
opportunities per country. So Mexico and Argentina are the
0:13
next biggest, but Chile will probably have three to five per
0:16
year. When you look at the last 10
0:19
years and you'll compare emerging markets, Latin America
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is the country that had the most quantity of exits above $1
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million. I think eventually AI technology
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and capabilities bleeds into all these SAS and other companies.
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So there's the successful companies of the future.
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They may not be AI companies, but they will use AI to build
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better businesses. I think it's probably going to
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be a lot of market competition here for those companies that
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aren't in those top 203040 companies that get all the
0:48
attention. I do feel like as companies take
0:51
longer to go public, they're going to have to have some form
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of organized liquidity. Welcome to another very bad
1:26
episode of Trading Places are horrible, no good, terrible VC
1:30
secondary podcast. I'm still in Hawaii sort of on
1:35
vacation but sort of working. I'm on You've been in Jackson
1:38
Hole and. I think, yeah, I'm back now.
1:41
What's on your list of IP OS that are likely for this year?
1:44
I think it's going to be big for a couple of reasons and and
1:47
across a number, a number of companies.
1:48
So I'm showing a chart here that just shows the size of IPO years
1:53
going back. The just for some interesting
1:56
context, a lot of people don't know this, but the number of
1:58
publicly traded companies since about 2000 has been roughly cut
2:02
in half. It's we're down to something
2:04
like 4000 public companies, not 8000.
2:07
When I was running finance for PayPal and we were navigating
2:11
public markets at A1 in $2 billion market cap back in 2001,
2:15
2002. Now the bar for going public is
2:17
just a lot higher and as are the as is the run through scrutiny.
2:21
So if you look back on the last, you know, let's say 8 or 10
2:25
years, a good year for IP OS like 50 billion in IPO proceeds,
2:29
100 billion would be a really, really good year.
2:31
I think we've only had two years ever with 100 billion or more
2:33
in, in proceeds. The biggest one was 2021.
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I think this year could be over 100 billion easily and we could
2:40
be a virgin on 2021. And I think it starts with ACC
2:43
at this top three Open AI, Anthropic and SpaceX, all are
2:48
interesting IPO candidates. I think all are facing favorable
2:52
market dimensions and characteristics.
2:55
Any one of those could be the biggest IPO of all time, like
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raising 25 to $30 billion in IPO proceeds.
3:02
And then there's a bunch of companies underneath it.
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We've talked about our valuation corners and there's a number of
3:07
them that are in that have said they're confidentially filing a
3:10
number of them in our portfolio. We're talking to them I think at
3:13
least two and maybe three if that next group will go public
3:16
next year. And if that happens and we get a
3:18
couple of big wins, especially in categories like fintech, I
3:22
think it's going to be a, a flood of potential IP OS in 26.
3:24
So feeling like this is going to be the the, the most productive
3:27
IPO year maybe ever. I guess one point of caution the
3:30
the high watermark you just mentioned, 2021 was a great year
3:34
for IPO proceeds, not such a great year for IPO investments
3:39
for those investors. I, I would argue probably most
3:42
of those companies went public in 2021 are probably trading at
3:45
below their evaluations, some cases substantially below those
3:49
valuations. So I hope, I hope this is a
3:52
great year for IP OS, but I also hope it's a great year for the
3:55
investors in those IP OS. Yeah, I hope so too.
3:59
The quality of those put out some 21 IP OS.
4:01
You'll remember there was a lot of speculative structures that
4:04
came through the SPAC market had its had its moment in the center
4:08
and a lot of companies just should not have been public.
4:09
I think these ones on this list are all legitimate businesses.
4:12
They're growing, most of them profitable if not all
4:15
profitable, they're free cash flow positive.
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I think we're I think this is a much better class in terms of
4:20
the quality and durability of the companies than what we saw
4:23
in 2021 certainly than in than in 1999.
4:27
So I think it's a much, I think it'll be a much stronger cohort
4:30
in general. Relevant to all this enthusiasm,
4:33
we've had some stories recently about BC funds raising a ton of
4:37
money. One of those is Andreessen
4:40
Horowitz. They recently raised $15 billion
4:43
across several funds, and that included a bunch of different
4:48
funds. So American Dynamism Fund for
4:50
about 1.2 billion, and Apps Fund, another apps fund.
4:53
They've raised one previously for 1.7 billion.
4:56
Another infrastructure fund for 1.7 billion up.
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I own Healthcare Fund for 700 million and then another $3
5:03
billion for quote other venture strategies, which was not very
5:08
defined. I guess it's pretty great when
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you can raise $15 billion and 3 billion of it isn't even
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earmarked for any specific category that that would be a
5:16
pretty successful fundraising effort, don't you think?
5:18
I'm on. Pretty big haul.
5:20
I mean, if that's 15 billion, this is their latest set of
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funds. So in the, in a Goodyear,
5:24
American VCs are raising what, 60 to $100 billion in total
5:29
money. So they're raising 15% of all VC
5:31
money and not even telling you what they're going to invest in
5:34
for at least a portion of it. That's that's Mark.
5:37
I guess they got the track this, this moon shot category.
5:40
I guess they have a track record and breaking some new ground
5:42
there. So I guess that's what they're
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riding on. Yeah, I think Andreessen's had a
5:47
lot of criticism over the years of kind of the platform model
5:50
and raising too much capital whether they can make returns on
5:52
it. But at the same time, I think
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you have to give them credit for having a really big vision and,
5:56
and being a platform for multiple funds.
5:59
Again, we can talk about whether they're going to generate
6:01
returns on that capital or not. They have been, you know, pretty
6:04
successful in generating returns on their earliest funds.
6:07
I think the first 3 or 4 funds have all done well.
6:10
Oh yeah. And they're certainly in a large
6:12
number of companies. Yeah, I think.
6:15
The crypto funds done particularly well, yeah.
6:17
But their first three funds I think in terms of overall DPI
6:20
returns have also done quite well.
6:22
And they've obviously been an investor in a number of, you
6:26
know, Unicorn companies, even DECA corn companies.
6:29
But I think this puts them in a different category maybe
6:31
compared to others. I think the estimates are that
6:33
they are now managing close to $90 billion overall.
6:38
I think that's a head of Sequoia, which might be managing
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around $60 billion in a OMI think we're we're also hearing
6:46
Lux Capital has raised a billion and a half dollars.
6:49
Yeah, that's their 9th. But the biggest ever.
6:53
General Catalyst, maybe Founders Fund and Lightspeed are also in
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this category of having raised multiple billion dollar funds,
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you know, more than 10, twenty, $30 billion of assets under
7:03
management. There's there's probably, you
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know, a list of maybe 10 VC funds that are now in this multi
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10s of billions of dollar category.
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Really pretty different sort of strategy than, you know,
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traditional, you know, series A&B investors that might only be
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raising 200 and 52150 to $500 million funds and certainly
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different than all the smaller, you know, seed stage funds that
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might be, you know, raising 10 to $50 million funds.
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But what do you think about so much capital being raised and
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deployed well and also the concentration of that capital
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into a small number of VCs? It depends a lot on the manager
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and the strategy, I think. So take an example of somebody
7:42
who got really big really fast. You said Andreessen's at 90
7:45
billion. There's only one fund I can
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think of that might be more than that.
7:48
That would be the SoftBank. Yeah, I was gonna say you got
7:51
it. Which which didn't do so great.
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It didn't do so great, but they raised a lot of money really
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quickly, right? They didn't.
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They didn't, unlike Andreessen who basically invented the
8:01
Internet in 1995 and then steadily has been deploying
8:04
strategies into into platforms, into crypto, into AI, into
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health tech, like focused funds within areas that are sort of
8:14
adjacent to his expertise. SoftBank got there really
8:16
quickly, raised a lot of money and then threw a lot of money at
8:18
a small handful of companies like Wework where they tried to
8:22
use that capital as a weapon as opposed to, you know, relying on
8:26
technologies and founders. But I think Andreessen does
8:28
across thousands and thousands of companies now.
8:31
So his strategy might, you know, sort of make sense versus the
8:34
SoftBank 1. Ordinarily, I'd say, though, the
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the raising so much capital in over in a handful of funds and
8:41
you'll then they'll go after a small handful of companies.
8:43
They'll concentrate a lot of the bets into a small number of
8:47
elite private companies probably doesn't generate above average
8:50
returns. But I think the way that
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Andreessen or maybe founders fund would do it are going to be
8:54
sufficiently different and relying on these focused funds
8:57
where they they I still think they're a a a pretty good bet.
9:03
I don't I don't know about somebody who says I'm going to
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raise a lot of money to go after them later stage companies that
9:06
are pre IPO and then lead, you know, set the price at the
9:10
series C, series D, series E that that seems to me like the
9:13
strategy that would result in below average returns.
9:17
But I think there is certainly a pattern in 2020-2021 where
9:22
several firms were deploying $100 million rounds into multi
9:27
billion dollar funds. And I think there were probably
9:29
3 or 4 funds that did more than a hundred $100 million rounds,
9:33
basically deploying $10 billion or more.
9:36
Probably SoftBank, CO2, Tiger, I think there were a few others
9:41
there. Yeah, generally people probably
9:43
viewed that as writing too big a check.
9:46
At the height of the market, most of those funds did not
9:48
perform well at all. In this context, I think that
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Andreessen is raising a very large amount of money.
9:55
These are across 5 different funds for AI and defense.
9:57
They're all kind of in the range of a billion to 2 billion.
10:00
And I'm sure a lot of that is being deployed in later stage
10:03
checks that are 50 to 100 million and and up.
10:06
But there probably is some amount being deployed at 10 to
10:09
$20 million Series A and BS. So maybe it's not quite as
10:13
excessive as the SoftBank, you know, CO2 tiger era, but it's
10:17
still a big bet on, you know, venture capital overall, a big
10:22
bet on AI, probably a big bet on a few different categories like
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crypto and defence tech and, you know, life sciences as well.
10:31
And, and like you mentioned, I think there's probably at least
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5 or 10 other VC funds that have a similar, you know, multiple,
10:38
you know, single, single billion dollar, you know, digit sort of
10:41
funds. But it it seems like that
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capital is being concentrated in a pretty small number of firms.
10:51
I'd seen stats previously where, you know, 1010 firms were
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raising more than half the capital for the overall market.
10:57
I think Andreessen themselves probably raised close to 20% of
11:00
all capital in the market. Do you think that's a good or
11:04
bad thing? Well, to have a small number of
11:10
funds setting the terms, the valuations if I'm a late, if I'm
11:14
a late stage company and I, I know that I have only a small
11:17
number of companies or funds to go to, that's probably not a,
11:20
that's probably not a great thing for the market.
11:22
I think it's better for entrepreneurs to have different
11:24
choices and different funds they can work with, especially if
11:26
they have different funds with different expertise.
11:29
So, you know, I don't think the market is that concentrated.
11:32
I know it feels more concentrated than before.
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There's still a lot of funds in the game, a lot of ones, a lot
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of funds investing at the at the early stage level and able to
11:39
access companies. So it's something I'd be a
11:41
little bit concerned about, but you know, you also got great
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managers like the ones you mentioned, a 16 lux capital
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founders fund like these are very successful funds with a lot
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of track record. They're not tourists, They
11:51
haven't been, they're not new to the game.
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They, they, I would say they're all value added investors who
11:56
know what they're doing. So they've kind of earned their
11:58
they've earned their stripes. And I think that's, you know, I
12:00
think that's also a good thing. I've been the CFO of late stage
12:02
companies before. I love working with XL partners.
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QED There are there are other VCs that I don't love working
12:09
with. They won't mention them right
12:11
now for fear of offending anyone, but you know, those are
12:14
all the funds you're mentioning who are getting those big, big
12:17
numbers or have have done that because they are very, very good
12:20
at what they do and I think also very pro entrepreneur and
12:23
founder friendly. The skipper wanted me to be
12:27
skipper if anything happened to the skipper and I'm going to be
12:30
skipper because that's the way a skipper wanted it.
12:34
Any questions? On the other news fronts to
12:38
cover here, I think we've had some interesting stories about
12:41
China and particularly related to the Manus acquisition by by
12:46
Meta that was recent. What's that story about Alan?
12:50
Well, as I said, the company Manus, which is AIA gente
12:54
company, they, they the founders are Chinese.
12:57
They moved to Singapore. They then sold to Meta and it's
13:03
a, it's a bit of a innovative deal in that they're trying to
13:05
structure a like an M and a light type type deal in order to
13:09
get the IP but not necessarily make it a, a full acquisition.
13:13
The downside of this is the Chinese government, I think the
13:15
regulators are now looking at this and saying, well, did you
13:18
have any IP or any information that was built in China that
13:22
might have, you might have absconded with to Singapore and
13:24
then sold to the Americans? And is that going to violate
13:27
some kind of export control? So the Chinese regulators, I
13:31
think are now beginning to, they're seeing a lot of their
13:33
companies sell to Americans. They're seeing brain drain.
13:36
They're seeing people leave China to come to the US capital,
13:38
leaving China to come to the US. Increasingly it seems like
13:41
they're going to be looking at this stuff pretty hard and being
13:44
scrutinous to these types of acquisitions and mergers.
13:46
I guess this is kind of the opposite of the Byte Dance story
13:50
where the US was concerned about an acquisition that had Chinese
13:55
roots. Now we have a China concerned
13:57
about an acquisition of a Chinese company that sort of
14:00
seemed like it started in mainland China, then moved to,
14:02
you know, Singapore, now being acquired by AUS company.
14:05
So I guess both sides are starting to try and flex their
14:09
regulatory structures and limiting how much technology is
14:13
coming from other countries and whether they can keep control of
14:15
that technology. Yeah, it is a little bit of a
14:18
cat and mouse game. In the case of bike Dance, the
14:20
the US was essentially concerned that we that there was a
14:25
technology being used by Americans that China controlled.
14:28
And in this case, I guess the US government said, well, we're not
14:31
concerned that China control. It's a technology that's now
14:33
being sold to Meta. So the USI guess is pro, you
14:38
know, Meta acquiring great technology from China or from
14:42
anywhere else that'll make their company stronger.
14:43
But the Chinese government is, is now concerned by the other
14:46
side, which is do if, if they have their whoever, their,
14:50
whoever, their version is in China, who's like the regulator,
14:52
the AI czar who's like wanting to make China great again or
14:56
whatever their, whoever, their internal slogan is.
14:58
They don't want people leaving to America.
14:59
They don't want technology leading to America.
15:01
So now they're putting scrutiny on it from, from that side.
15:03
So I think any company that's raising now from Chinese
15:06
investors or acquiring Chinese technology has kind of got 2
15:09
regulators to deal with. Will, will the US approve it?
15:11
Or will there be some national security concern on our side?
15:14
And then what will the Chinese say if they're if they're
15:16
worried about their version of national security or I think
15:19
they're probably more concerned by brain drain than national
15:21
security per SE? Well, certainly there's a lot of
15:25
Chinese talent, particularly in AI, that's building great
15:29
companies both in China and the USI guess we'll see how much of
15:34
that technology is allowed to come into the US.
15:37
People too. There are hundreds of thousands
15:39
of Chinese students in Usus universities who are here on
15:42
visas, which I think the US generally ought to be and is
15:46
very supportive of. But, you know, that's the other
15:48
concern is just the Chinese government start to look at that
15:51
harder. Well, I think we should be more
15:53
supportive of talent from anywhere across the globe coming
15:56
to the US, but it seems like the current administration is maybe
15:59
restricting some of that immigration, perhaps for other
16:03
reasons. I want to switch gears a little
16:05
bit and listen to Bill Gurley on the Tim Ferriss podcast recently
16:10
talking about thoughts on the AI bubble, whether it's a bubble or
16:14
not investing in AI. Bill went to China, I think
16:17
maybe in the last two or three months with his daughter and had
16:22
some real eye opening, you know, stories to tell about how far
16:25
along the Chinese are in AI and auto and EV and battery
16:30
technology. But here I think there's kind of
16:33
an interesting take from listen to Bill talk about the AI
16:36
platforms, AI investing opportunities.
16:39
There's a weird reality out there right now and if this
16:41
could end if ever a bubble is popped or whatever.
16:44
But the institutional investors have 0.
16:48
Interest in non A ideals 0. It's more black and white than I
16:52
could be successful and. For people who do not know the
16:56
term, define it the institutional investor.
16:58
People who are paid both a a salary and a piece of the return
17:04
to be active investors of other people's money using other
17:09
people's money. But the reason that kind of
17:11
matters is if you Angel fund a deal and have any hope of it
17:15
raising money in the future if it's not AI related, right?
17:20
Now could die of neglect. There is no interest.
17:23
I can't state clearly enough how there's 0 inch and and I could I
17:29
could simultaneously make fun of that reality, but I could also
17:33
justify that reality. But it is the reality right now.
17:37
So it certainly sounds like Bill is suggesting that the entire
17:41
investing focus, at least for institutional investors is on
17:44
AIAI and nothing but AI, right? I don't know if that's good or
17:50
bad. What?
17:51
What does that mean to you, Aman?
17:53
The first thing it means is we have investments in non AI
17:56
company and, and and that concludes like traditional SAS
17:59
companies, for instance, maybe some, you know, fintech
18:02
companies that aren't using AI for what they do.
18:05
It'd be hard for those companies to raise at up around some
18:07
future evaluations from institutional investors because
18:10
AI is sucking all the oxygen out and Bill's he's lamenting that
18:14
and he's saying you ought to be that's that's not great and
18:16
that's probably doesn't end very well.
18:18
And I'm, I've inclined to agree with that.
18:21
The, the SAS companies in our portfolio, for instance, are
18:23
just having a hard time raise raising, but they have to get
18:26
profitable. They're happening to figuring
18:27
out how to become more capital efficient and, and do it without
18:30
increasing at, at, you know, at higher and higher up rounds.
18:32
So there was a positive in that. It's, it's creating better
18:35
entrepreneurs in the non AI side.
18:37
And if I take the the optimistic side of what Bill's saying is
18:40
that there's no interest in non AI.
18:43
I think eventually AI technology and capabilities bleeds into all
18:46
these SAS and other companies. So those, the successful
18:49
companies they feature, they may not be AI companies, but they
18:52
will use AI to build better businesses.
18:54
And as that begins to happen in the next year or two, then you
18:58
know, then they'll be fine. But certainly Bill, what Bill is
19:01
observing is that there's a rush to AI right now that's excluding
19:04
everything else. And that's that's probably not
19:06
good. Earlier part of that interview,
19:07
he was also talking about how Angel investors should be
19:11
careful and perhaps even avoid AI.
19:13
That the ship has already sailed and people jumping onto the AI
19:16
bandwagon now might be a little bit late, might be overpaying
19:20
for sort of what the opportunities are.
19:23
I was explaining this to AI, won't say who it is, but a
19:27
Silicon Valley CEO, very successful and he said what are
19:31
you going to do now? I said I was thinking of doing
19:33
an Angel investor. He goes why would you do that?
19:36
Do you think that's on target? What does he mean there by
19:39
having the retail investor Angel investor sit out the AI Boo?
19:43
I think what he's saying is, hey, you're not going to get the
19:44
next LLM BIG100X win that ship to sail.
19:48
Those valuations have have all been bit up the extent that you
19:51
see another great deal as a Angel investor, you're probably
19:54
going to have to go through an SPV, which has multiple layers
19:57
of fees and carry and maybe not direct access to the company,
20:00
all stuff you and I have talked about.
20:02
So he's, he's warning people about staying away from those
20:05
deals. What are you saying is if you
20:07
play with AI and you get and you're good at certain industry,
20:10
there are all kinds of areas, workflows will be disrupted that
20:13
you will be able to figure out because you know something and
20:16
you have a an area of expertise in an industry.
20:18
You are going to be AI fluent and literate because you're
20:20
using it and playing with it and finding that connection, that
20:24
Nexus between AI and what you do in terms of workflows or data
20:27
sets. Could be a really big win and
20:29
and find something that's going to be off the beaten path for an
20:32
anthropic or open AI to go after.
20:34
That's where that's where the money is to be made, which, you
20:38
know, that seems to me to make good sense as as investment
20:41
advice as a as an investor. Well, I think not to toot our
20:45
own horn too much, but there's some interesting secondary
20:48
opportunities that might be emerging in the market.
20:51
And I've shown a version of this sort of graph presentation
20:54
before. I think I was previously
20:56
recalling it as four horses. I've maybe outgrouped into five
20:59
groups. But if you look on the upper
21:01
right hand side, that private mag, seven group of companies
21:05
that that definitely includes SpaceX, Open AI and Tropic,
21:09
let's say probably, you know, Byte Dance, XAI, maybe you know,
21:12
a few others like Data Bricks or Stripe.
21:14
They're huge in value. Just seven companies, probably a
21:17
minimum of 2 trillion, maybe even up to 3 trillion or more in
21:20
value when they go public. And then that next group of
21:24
companies, 30 or 40 companies that are sort of DECA corns,
21:27
there's another trillion dollars worth of value there.
21:30
These are all amazing companies, but I think the the question or
21:34
the challenges for the retail investor is they're pretty high
21:37
demand. There's really limited
21:38
availability. You're probably paying a
21:40
significant premium to get into those companies.
21:43
Maybe you're even paying extra fees and carry in multiple
21:46
layers of vehicles to get into those companies.
21:48
I, I think there's definitely some big wins there, but there's
21:52
also possibly people overpaying to get into, into those wins.
21:56
And then if you look at the left hand side, I think there's a
21:58
whole bunch of, you know, busted unicorns, perhaps 500 to 1000
22:02
companies that were funded in the 20/20/21 era probably
22:07
haven't really grown that much since 3:00 or four years ago.
22:10
I would say they've raised a huge amount of money.
22:12
There might be some challenges on their preference stack.
22:16
And then there's also a whole bunch of smaller companies,
22:19
probably not more than, you know, 30 million in revenue and
22:22
these may never exit. So I think both of those two
22:25
groups have some risks associated with them around
22:28
either too much preference, too high evaluation or too slow to
22:32
ever exit. But right in the middle there, I
22:34
think there's probably 2 or 300 companies, we're calling them
22:37
Secret Stallions, where these are really great companies
22:41
probably doing 50 to 200 million or more in revenue, reasonably
22:44
strong growth, pretty likely exit and there are definitely
22:48
discounts available. These aren't as in as much
22:52
demand as those two groups on the upper right hand side.
22:55
It's really more of a buyer's market here and I think there's
22:58
really some great opportunities. Even though it's going to be a
23:00
big year for IPOSI think it's going to be a big year for
23:03
secondaries as well. Yeah, that makes a lot of sense.
23:06
If you if you go back to the horror movie analogy, the ones
23:09
on the left, those problem children are like The Walking
23:12
Dead. The, the zombies that need, need
23:15
money, have a hard time getting money to grow, probably aren't
23:17
growing fast enough to gain liquidity.
23:18
And you probably want to stay away from those.
23:20
And then the ones on the right are like the, I don't know, the
23:23
vampires and the werewolves, like everybody wants to be a
23:25
vampire or a werewolf and dressed up for that for
23:27
Halloween. And, and, and those costumes get
23:30
sold out and, you know, get over bed and you're looking for the
23:32
sweet spot in the middle, which is, which is really, I think
23:35
where, you know, investors like us tend to tend to want to
23:38
focus. These are companies that are
23:39
performing really well. And I get, and the thing maybe
23:42
that you haven't added that, that, that maybe as critical is
23:44
that can you use AI and that technology to make your business
23:47
more valuable and healthier and more profitable and scale or are
23:51
you going to be disrupted by it? And if it becomes a strategic
23:54
weapon because you're in a vertical red makes sense and
23:56
you're able to deploy that technology in a way that's
23:59
enhances your business, then that's going to be the, that's
24:02
the, that's the path forward for those companies.
24:07
Well, Mr. Kincaid, football was my game in high school.
24:09
I played the line. Oh, what position?
24:12
No position. I was the line.
24:15
There's been three big announcements in the last week.
24:18
Anthropic and XAI are raising new primary rounds, and Open AI
24:22
is setting aside a bunch of RSUS.
24:24
But starting with Anthropic first, Anthropic had been
24:29
rumored to be raising a pretty large round, and indeed now it
24:33
sounds like there's $10 billion they've raised at a $350 billion
24:38
evaluation. That's, that's almost double
24:40
their last round valuation from just a few months ago.
24:43
And the folks who are investing behind that are pretty large
24:46
investors, GIC, which is one of the sovereign funds out of
24:49
Singapore and CO2 management. Do you think that investment
24:53
valuation is reasonable? I, I'm not sure we know exactly
24:56
how much revenue Anthropic is making, but probably in the
24:59
order of nine, $10 billion, maybe more at this point, right?
25:03
Probably we covered them in evaluation corner probably about
25:06
10 weeks ago now. At that time, there were 183
25:09
billion in valuation. We thought they were, they had
25:12
said there was something like 7 billion in ARR over the summer.
25:16
So they're probably north of that.
25:18
So the 300, three, $50 billion evaluation now, which is a
25:21
little more than they were being rumoured at, that's something
25:23
like call it 35 times their ARR, which seems like, I guess that's
25:29
par for the course for if we, if we're comparing them to open AI,
25:32
then that's probably par for the course that both them and open
25:35
AI are growing really, really quickly, like at rates we've
25:38
just never seen before. It could, it could well be that
25:40
they double between now and the end of next year, which would
25:44
mean that they're really trading out something more like 18 to 20
25:47
times forward ARR, maybe more like 12 times, you know, 2027
25:52
ARR. So if they if they maintain that
25:55
growth rate or or is something close to that growth rate, then
25:58
I think it's AI think it's an OK valuation, but it certainly
26:01
seems expensive because a lot of things have to break right for
26:04
those revenue growth rates to continue for the next, you know,
26:06
next couple of years. Another AI company that's been
26:11
raising some money is XAI and Elon had been aiming to raise
26:18
$15 billion for this new round and that round had been reported
26:22
at about a 200, maybe $230 billion valuation.
26:26
It seems they've exceeded that raise.
26:28
They've actually raised $20 billion, not just 15 billion.
26:32
Again, I think previously we've talked about this company having
26:35
come on the scene fairly quickly and probably not anywhere near
26:39
as much revenue as maybe Open AI and Anthropic, perhaps 2 or $3
26:42
billion, depending how generous you are in their views of where
26:45
that revenue is coming from. What do you think about a $200
26:49
billion valuation for a company that's maybe only doing a couple
26:52
billion dollars in revenue? This is a tougher putt for me
26:56
and here's the reason why because so as you said, the
26:59
revenues are something like 3.2 billion in what they call ARR.
27:03
But I'll remind you that X dot AI acquired Twitter, the artist
27:09
formerly known as Twitter, now called x.com.
27:12
And so we know there was a couple of billion, maybe 3
27:14
billion in media revenue from Twitter, which was when you
27:17
know, and acquired it, they were public, they were making close
27:19
to 5 billion. So if most of that 3 billion
27:22
plus in in ARR is media revenue, not tech revenue, it's not
27:27
really the same thing as the ARR that we're talking about in the
27:29
context of anthropic and open AI.
27:32
So one thing the quality of revenue is lower and then two,
27:35
if I just do the multiple math again, 230 billion on evaluation
27:39
compared to you know, let's say 3 billion in in revenue.
27:43
We're still now we're talking to 70 to 80 times revenues, not,
27:46
you know, not 30, all of which sounds all those evaluations are
27:50
in the in the land of crazy. But 30 billion, you know, 30
27:53
times revenues is not quite as crazy as 70 times revenues.
27:56
So therefore, it seems like a little bit more of a challenging
27:59
story to grow into that, you know, to grow into that
28:01
valuation. They have a lot of great assets,
28:03
have a lot of lot of momentum. They've started, I think much
28:06
later than Anthropic and Open AI did.
28:09
They've only been around really for about a year as a as an AI
28:11
company. So, you know, maybe, maybe they
28:14
get to those levels of scale. And I don't really want to bet
28:16
against Elon. That has never never really
28:19
worked out for me when I've tried it.
28:21
But I've actually benefited a lot from Elon and his companies.
28:24
But even in cases where I thought, boy, that's a big
28:26
valuation. I remember thinking about for
28:28
PayPal, I thought of that for, for Tesla, I thought that for
28:31
SpaceX for a while, it's all kind of worked out.
28:34
And maybe, you know, maybe that investor group will, we'll
28:36
figure out a way to, to, to, to make this work.
28:39
But it it seems like a tougher one on the surface than say
28:42
Anthropic or even Open AI which are bigger businesses at scale
28:45
and and lower multiples. Well, wrapping up on the other
28:49
AI companies that are in the news, Open AI has recently
28:54
reserved $50 billion for Rs US for stock grants for their
28:58
employees. I think if we look at the
29:01
overall amount of equity that employees have after the
29:04
restructuring, now employees own about 26% of Open AI.
29:10
Open AI recently valued I think at 500 billion under discussion
29:13
for raising probably at 700 and 750 billion, $50 billion in
29:19
employee equity. I'm on.
29:20
Doesn't that seem like a huge amount of money?
29:23
Is that is that good for investors in Open AI?
29:27
Well, it's 50 billion. What do we say their valuation
29:31
was at 7750 is their most recent at least rumored valuation,
29:37
right? I think maybe 500 is the
29:38
official 750 is really where they're where they're planning.
29:41
So I guess in that context, it it feels like maybe a 10% or
29:47
maybe 7% of the company being set aside in options pools,
29:51
which is it's more reasonable than the than the 26% number,
29:56
which I think is also including vested equity and and prior
30:00
grants. Yeah, that's existing vested
30:02
equity with folks who are already in the company.
30:05
Yeah. So I guess if, I guess if a
30:06
company, you know, came and said for a late stage company
30:09
employees, but also founders and, and everyone owns 26% of
30:13
the company. It's not just they, this, this
30:14
one time employee pool. I think it's also a catch up
30:17
because they, you remember, they were restructured after the, the
30:21
deal with Microsoft. They had been a not-for-profit
30:24
and they had some for profit shares and structures which are
30:27
gonna have been flipped into this new equity pool.
30:29
So there's some catch up for that, I think.
30:30
And maybe in that context, it doesn't sound like it's that
30:33
high, but it 50 billion is, you know, that is a huge number.
30:36
Just for context. You wanna, you wanna guess.
30:38
So Meta is a company that's what, 15 times bigger in terms
30:42
of revenue and 1 1/2 trillion dollars for market cap.
30:44
You know what Meta spent on employee stock options and comp
30:47
between 2020 and 25? I'm gonna guess not that much.
30:53
It's. There'll be a fair guess.
30:55
It's about that much. I think it's about 66 billion
30:57
overall. So they're spending in one year
30:59
what what Meta spends in five. And so in that context, it's
31:03
it's a lot. For a company that's probably 10
31:05
times the size, maybe 20-30 times the size.
31:07
Exactly right. So it's it's, it feels like a
31:10
lot, but I think in the context of the catch up and the
31:12
restructuring, maybe it's maybe it's not quite and they won't
31:14
they probably won't do this again.
31:15
So it feels like maybe a, a, the headline is maybe overstating
31:19
the totality of what they're doing, but it certainly seems
31:21
like a lot, and it certainly puts an end to any rumors about
31:24
this being a not-for-profit. I think it's sort of speaks to
31:27
the competition level for talent that people are going after.
31:30
I, I wonder how many people that $50 billion pool is going to,
31:35
you know, that might be for Meta, you know, thousands of
31:38
people. I wonder if it opened the eye.
31:40
It's actually only hundreds of people.
31:45
Individual stock packages. I'd, I'd heard rumors of people
31:48
getting paid, you know, 10s of millions, even in a few cases
31:51
hundreds of millions, and maybe in one or two cases close to a
31:55
billion dollars for a single person, which seems almost
31:58
crazy, but I think that's the price of poker today.
32:04
Hey folks, the propellers. All fiction.
32:06
We can leave the first thing in the morning.
32:08
Yeah, it works just great. Watch.
32:15
I guess getting back to some worlds that aren't quite as
32:17
crazy. A couple of IP OS that have been
32:19
announced recently. Both Discord and Strava have
32:23
filed for IP OS. Discord's a company that's been
32:26
around for quite some time. I think their last round raise
32:31
back about four years ago was at a $15 billion evaluation.
32:35
They turned down some acquisition offers by Microsoft
32:37
at somewhere between 10 to $12 billion evaluations.
32:41
I think that was probably a high watermark and maybe this IPO
32:45
isn't going to be quite at the $15 billion level in the
32:49
secondary market. Maybe it's been trading at more
32:52
like, you know, 7 to 8 billion. But let's guess it's somewhere
32:55
sort of north of 7 to 8 billion, but probably South of that 12 to
32:58
$15 billion valuation. What do, what do you think about
33:02
that IPO I'm on? This is a company with 200
33:04
million monthly active users. You know, pretty, pretty widely
33:08
used by a lot of folks in tech. They were a little over over
33:11
$700 million in in revenue right now.
33:14
That last round they did back in 2021 at 15 billion.
33:18
At that time there were around 300 million revenue and growing
33:21
very, very quickly. But that was a 75 times revenue
33:24
type valuation that was set by Dragon ear.
33:27
It was at the height of the pandemic when these
33:28
communication platforms were all the rage.
33:31
I think your instinct is right. It probably won't get out at 15
33:34
billion. They might, they might, they'll
33:36
be lucky, I think to get to 10. I think 10 for them would be,
33:39
would be a win on 700 million in revenue right now.
33:41
That's, you know, maybe 1314 times their, their current
33:45
revenues. It's not a, not a profitable
33:47
company, but they do seem to be growing at 2530% a year.
33:50
I think it's, it'll be an interesting IPOI think it'll be
33:53
a good deal. I think they're the downside is
33:54
this very crowded market that they're playing in, in a lot of
33:56
different communications platforms and apps that are
33:58
going to be competing for attention.
34:00
And their product is OK. It's kind of a, it's a, I'd say
34:03
a very good product, but, but you know, even getting like 1012
34:06
working times revenues would be a big win for them.
34:09
So probably a down round from last time, but in the context of
34:12
2021 being the height of crazy, I think this is a good win for
34:16
the company. OK.
34:19
Another company that recently filed for IPO is Strava.
34:23
This is a app that tracks people who are, you know, fitness
34:27
enthusiasts, sort of in the same category of woop and aura, I
34:32
guess, primarily targeted at athletes.
34:34
They've filed for an IPOI think the numbers that we've heard
34:38
are, you know, profitable, strong growth, but less than
34:42
$500 million. I guess that probably means
34:44
somewhere in the three to $400 million range, more of a
34:48
consumer story. I don't know if we've got a
34:50
target valuation for the company coming out, but at least, you
34:54
know, it seems like they've got a pretty strong case for going,
34:57
going public. Yeah, I think it's OK.
35:00
It's not a huge company. They did a last round in in May
35:05
of this year at a $2 billion valuation, so or 2.2, I think it
35:09
was the final number. Goldman Sachs was in the was in
35:13
the lead as far as the investment banker group on on
35:17
that deal. And I think we'll be the one
35:18
that takes them public. This was a Sequoia company.
35:22
They're probably not, you know, 500 million in revenue there.
35:25
There's there's they've said publicly that they're targeting
35:28
500 for next year approaching 500.
35:31
They're probably somewhere in the mid to high three hundreds
35:33
right now, I would guess. So on the small side, I guess
35:36
for, for an IPO, but I think it high quality company, high
35:40
quality technology, if you're a fitness enthusiast, runner
35:44
running marathons and stuff like that, you'll know the company
35:46
and probably know the product. So they have their target group
35:50
of customers figured out. And I think we're have a pretty
35:53
low, low churn rate or a high retention rate within that that
35:56
customer group. So I think it'll be a modest IPO
35:59
and, and you know, a fine win for the company, But if they can
36:02
do it and and they can do it on 40 billion in revenue and get a
36:06
couple billion, $3 billion evaluation, that's a really good
36:09
sign for the IPO market for 2026 because that means that all
36:12
these middle market companies are fair game now.
36:17
All right. Our last story for the new
36:18
section this week is a story about g ^2 and NASDAQ announcing
36:24
A partnership. G ^2 is a pretty big secondary
36:28
firm and NASDAQ Private Market has been a secondary platform
36:32
because it sounds like the the partnership announcement is
36:35
really about powering liquidity for company tender offers,
36:39
providing more capital for companies who are trying to do
36:43
secondaries for their employees and early shareholders.
36:46
This is more of a partnership announcement, but do you think
36:48
this is going to be a big impact on the market?
36:50
Does this kind of a little bit more on the story of secondary
36:53
market evolution? What's your take on this one?
36:56
Yeah, I think it's the evolution of the market.
36:59
You know, Nasdaq's been around for a while, but this, this
37:02
private market product that they have, it's really been a product
37:05
looking for a solution for a long time.
37:07
You have to work hard to find companies that want to do these
37:09
secondary tender offers and create liquidity for employees
37:13
that come. That kind of comes and goes with
37:15
the market. When the market's hot, people
37:16
want to do it, but it's down last couple years, people
37:19
haven't wanted to do it as much. I think it's great for them to
37:21
find a partner like g ^2, but they have a lot of companies,
37:24
they've made a lot of investments and so they're
37:26
bringing inventory to the table. These guys have technology and
37:28
infrastructure that they're that they're providing.
37:30
That seems like a great partnership and a healthy
37:32
evolution now of the secondary market to make it a bit more
37:35
systematized and and automated and functioned a little bit more
37:38
in a in a standardized way. I think, I would guess that
37:41
these tender offers, these organized secondary offers are
37:44
going to become more popular in 26 and going forward.
37:47
Do you think that's accurate? Yeah, I think so.
37:50
You know, I think as the IPO markets begin to loosen, we've,
37:53
we've, we've certainly seen companies to the top of the list
37:56
being able to go public and enter this markets, maybe even
37:58
down to where Strava is, But there's a lot of companies that
38:00
won't be quite ready to do that. And so for them, a viable
38:04
secondary market is the an important way to get liquidity
38:07
for your employees and a way to motivate them, a way to have
38:10
their employee packages be liquid and not illiquid, which
38:13
is much better in terms of recruiting and retention.
38:16
So I think that'll continue to progress in, in 26 and beyond.
38:19
It'll be, it'll be a these kinds of partnerships are again, part
38:22
of like it's just a way to legitimize and make this a
38:25
standard part of the offering for the company, which is, which
38:28
is awesome for employees and for those early investors.
38:32
Yeah, I think it's probably going to be a lot of market
38:34
competition here for those companies that aren't in those
38:37
top 203040 companies that get all the attention.
38:40
I do feel like as companies take longer to go public, they're
38:43
going to have to have some form of organized liquidity for both
38:47
their employees and early shareholders.
38:48
And a somewhat regular, you know, tender offer maybe every
38:52
year or so is probably one way to ensure that people, you know,
38:56
don't get antsy and start looking for other jobs where
38:58
they can get more liquidity. Yeah, just haven't been in that
39:01
CFO seat before. It's a lot easier to tell in a
39:04
new employee coming in who has a four year grant.
39:08
In 3-4 years, you will be able to sell some of the shares you
39:11
have in this company, buy a car, buy a house, you know, to put
39:15
your kids through school. If the store to the company to
39:18
the employees says here are your shares, they'll be liquid one
39:21
day when we when we go public like we're some day now.
39:24
I mean in 15 years now, right when we were at PayPal, PayPal
39:28
was public in four years from 98 to 2000.
39:30
It was founded in 98. It was public by 2002.
39:32
So all the employees had a chance to take some money off
39:34
the table. That's just not true of these
39:36
later stage companies now. So employees going to work for
39:39
a, you know, for a company like SpaceX or Canva where the
39:42
company's CFO and CEO says we're doing tender offers every six
39:45
months, the valuation will move around.
39:47
There'll be some up runs and some down rounds, but at least
39:51
you'll have a chance to take some money off the table as you
39:52
rest. I think that's a big recruiting
39:54
carrot. So I think it's inevitable if
39:56
the market heads in that direction.
39:58
All right. Well, thanks for another great
40:00
news roundup, Aman. I guess we'll check out more
40:03
about Discord in the valuation quarter coming up this week.
40:06
All right. Thank you, Dave.
40:26
This week we have an amazing guest, Nate Lustig, who is the
40:29
General partner of Magma Partners.
40:32
We also have Karen Tenenboeim, who is a partner with Practical
40:35
Venture Capital out of Argentina.
40:38
And we're going to be talking a lot about Latin America,
40:40
investment strategies in Latin America, maybe a little bit
40:42
about the secondary market there.
40:45
Nate, welcome to the show. And wonder if you could give us
40:47
a little bit about your background and how you got into
40:50
VC? Sure, thanks for having me.
40:53
So I'm from the US originally, but I've been living in Latin
40:56
America since 2010, between Mexico, Colombia and Chile.
41:01
I started out as an entrepreneur in the US when I was in
41:04
university in Wisconsin. I had started two companies,
41:09
sold the first one, and then the second one is what took me to
41:12
Chile. Back in 2010.
41:13
I was in the pilot round of Startup Chile, which is a
41:18
government program from Chile that brought entrepreneurs to
41:20
the country. Because I was in Company 5 in
41:23
the program, they introduced us to really everyone in the
41:26
country from founders, VCs, family offices.
41:30
This is where I actually met you, Dave, the first time where
41:33
we got invited to give a talk, at least mine was in Spanish to
41:38
the president in month 5 when I didn't speak Spanish yet.
41:41
And is this this great, this great network and it was a great
41:46
experience. And I decided to stay what I for
41:49
what I thought was going to be about 6 months to learn the rest
41:52
of Spanish. But new opportunities kept
41:54
coming up and including creating a class called How to build a
41:58
startup at a Chilean University. And the students had to start a
42:02
company, go on to the world and start a business.
42:06
And by the end of the class, they said, you made me start a
42:08
company, now what do I do? And I realized that there was a
42:11
big space for investors and there was lots of well meaning
42:16
people doing investing 20/10/2011 in Latin America, but
42:19
not a lot of people that were either investing out of their
42:22
home city, so they're really local, or they were traditional
42:26
investors trying to get into VC. And so I put together the plan
42:30
for the fund I'd wished I'd been able to meet when I had my
42:33
company, which was the best practices from the US with the
42:37
on the ground know how to actually get stuff done in Lat
42:40
AM. And Fast forward to 2013, one of
42:44
the Startup Chile founding team members introduced me to a guy
42:48
named Francisco Science who had a Chilean family office who
42:51
wanted to get into tech to diversify, but also to give back
42:55
to the next generation of entrepreneurs in Lat AM.
42:58
And the two of us sat down. After three meetings, we said,
43:01
let's do this. We put up $2,000,000 of our own
43:04
money to start going and basically try to learn as fast
43:08
as possible. And this was back in the 2014
43:12
era of Latin where every US investor that I talked to said
43:15
like, you're crazy, you're going to lose money.
43:18
What, what are you doing? Come back to the States Because
43:21
there was only about $500 million invested in all of Latin
43:24
America BC in 2014 when we got started.
43:27
And that's how we we got going. And Fast forward to today, we're
43:33
just finishing our 4th fund. We invested in about 130
43:36
companies all across Latin America and have invested in
43:41
basically every country across Latin.
43:43
The world has changed quite a bit.
43:44
I guess there's been a lot of ups and downs over the last
43:47
10-15 years. But maybe could you tell us kind
43:50
of how that market has developed, how it's still
43:53
developing? Yeah, the industry's grown
43:55
really a lot. I like to think about it in a
43:57
few different phases. The phase one I was talking
44:00
about before, which is you're going to lose all your money
44:02
phase where people thought you were crazy to be doing deals in,
44:06
in Latin America. That lasted through about 2017
44:10
when there was a real noticeable pickup and both in quality of
44:14
founders, quality of companies, quality of VCs and global
44:18
investors started to take notice.
44:20
And basically from about 2016 till 2020, investment in lap
44:26
time doubled every year. So the next phase was the 2020
44:30
to kind of 2022 where things got crazy.
44:34
So we went from 500 million a year in 2014 to about 5 billion
44:42
a year and I think it was 18 or 19 and then 21 was the crazy
44:48
one, which was like 16 or 17 billion.
44:50
And that's where everybody in the world wanted to do lat MVC.
44:56
Then we got into the post zerp madness phase where everything
45:01
dropped back to about four billion a year in 2020,
45:05
2/20/2023. And now we're back up I think a
45:09
little bit higher, probably 2025 will end I would guess around 6
45:14
billion, maybe a little bit more.
45:16
That's a pretty good steady state, especially looking back
45:19
from 2014 to today, from 500 million to 5678 billion and back
45:25
in a phase where global investors are looking at LATAM
45:29
again. Just one sort of a side note
45:31
here. So Karen, you joined Practical,
45:34
I guess about two years ago. Maybe could you give us a little
45:36
bit of your perspective about the Brazil, Argentina pictures
45:40
specifically and and maybe a little bit about Uruguay if you
45:43
want also? So we are currently in a very
45:47
different moment that no one would have guessed it two years
45:51
ago, where Argentina became a more normal country to say so.
45:59
Less of a basket case at least, right?
46:02
At least, at least we're, we're on the on the good path.
46:05
What's happening here in Argentina is that there is
46:08
really good talent. The political difficulties and
46:12
economic difficulties have made a culture similar to what
46:15
happened in Israel, where you need to think from day one in at
46:21
least regional or global markets, right?
46:23
You can build for your local records only.
46:26
So that's how you have a company such as Marcal de Libre, now,
46:30
the most well built company in Latin America listed in, in the
46:33
US Globans, also a company that that started globally from day
46:40
zero out zero, a company that started selling in the US from
46:45
day one and got acquired by Okta for $6.5 billion back in the
46:50
day. So that's, that's something that
46:53
shaped the industry. I really created a good pool of
46:56
talent in the tech ecosystem and that's really notable from from
47:00
Argentina. And then Brazil has other
47:02
particularities as Brazil, it's the largest market in the region
47:07
and it's the most mature in the tech industry.
47:09
So it's a country that has most IP, OS and, and large M&A's and
47:16
more startups and more BCS out there.
47:19
Probably there are 20 years ahead than Mexico or the rest of
47:24
of Latin American countries. Something that's very, very
47:27
interesting about Brazil that you probably can't say this
47:31
about any other countries, that they have an innovative central
47:35
bank, something that it's probably ridiculous in every
47:40
other country, but that's the thing.
47:42
And they created pics which the system to direct payments and
47:47
that created. A little bit about pics, because
47:49
I think that's something that most people around the world
47:52
probably don't know about. And it's really transformed
47:56
payments in Brazil just in the last three years, right?
47:59
Yeah. So that the the central bank in
48:01
Brazil develop an infrastructure to do direct payments that go
48:08
directly into into accounts and that's an infrastructure that is
48:11
being used by every fintech in the country and that created
48:18
very good opportunities and it matured the payment industry in
48:23
general and that super. Fast, right.
48:27
It was like consumer adoption over 50% in like less than a
48:31
year or two or something like that.
48:32
Exactly. It grew crazily because it was
48:36
fostered by them, the central bank and and that's what it made
48:40
it work. When they have tried it, for
48:43
example, this in Mexico, I think also in Colombia and and it
48:46
hasn't worked. So here we have this very
48:49
interesting phenomenon that's going on that created many, many
48:53
opportunities and benefits start-ups in the fintech sector
48:57
to to grow and that will create many other opportunities.
49:00
So now we have the second phase on the surge of stable coins
49:05
that are already in. So fintechs are already creating
49:09
products of infrastructure for stable bonds to go around the
49:13
Pics payment ecosystem. So 80% of Brazilians use pics
49:18
now. It's bigger than credit and
49:20
debit cards combined. And that's just 2025 was $6
49:25
trillion of transactions, 6 trillion and it's free for
49:30
transactions for the consumer. There's No 3 1/2% credit card
49:34
fee, so obviously it's not a one to one comparison.
49:38
But if you assume a 3 1/2% credit card interchange fee on
49:42
all those payments like you would in the US, that's 200
49:46
billion in saved credit card fees, which is nearly 8% of
49:49
Brazil's GDP. It's a crazy amount of money.
49:52
And if you think about just like a simple thing, you know, you,
49:57
if you went to China 10 years ago, you would see everybody
50:00
with their QR code taking payments.
50:03
You couldn't pay with cash pretty much anywhere.
50:05
That's Brazil Now, there's still some cash.
50:07
But like when you're sitting in a traffic jam in the Uber and a
50:11
guy comes to sell you water, he's giving you his picks code.
50:14
This is a guy who, you know, makes very little money.
50:17
That's that's Brazil today. You wouldn't imagine that.
50:20
And one of the next phases, I think is that Brazilians will
50:24
demand to pay with picks outside of Brazil.
50:27
So in the neighboring countries is already a big business in
50:29
Argentina, it's already a big business in Paraguay.
50:33
I would expect to see it in the US coming forward similar to
50:37
like in San Francisco, New York, you sometimes see the WeChat or
50:41
Alipay in the hotels for the Chinese tourists.
50:44
I think that yeah, it's, it's a huge phenomenon.
50:48
And then the other thing that's really important, especially in
50:51
today's political world is its sovereign to Brazil, it's from
50:55
Brazil, it's central bank, nobody can touch it.
50:58
So if you look at Europe is just starting to think about doing a
51:02
new payment system because they don't like Visa, MasterCard,
51:06
Amex, being able to block who gets paid.
51:09
And I think that's that's a big trend that's going to happen
51:12
globally and PIX is a big part of it.
51:17
I am very suspicious. There is something rotten in
51:19
Denmark. What do we care?
51:21
We don't go anywhere near Denmark.
51:23
I guess when when we first started looking at investing in
51:26
Latin America, one of the things that struck me about the overall
51:29
market, Brazil and Mexico and the rest of the Spanish speaking
51:32
market was a lot of the startup investments were going into two
51:37
categories, e-commerce and fintech.
51:40
And you know, going back down to Brazil and Argentina a few years
51:43
ago, that still seemed to be the case.
51:46
Like the majority of venture capital, perhaps 7080% of it is
51:49
fintech related, maybe commerce, you know, is becoming a big part
51:53
of that now as well. But how do you see that sort of
51:56
changing? Or is that just accelerating now
51:58
with picks and with stable coins?
52:01
And do you see that being a continued area of emphasis
52:04
across most of Latin? I think so.
52:08
I think it makes sense that the first phase was in finance and
52:13
and commerce because it's the biggest parts of the economy.
52:16
And if you look at banks return on equity in Latin America,
52:21
they're still massively bigger than the US And if you look at
52:26
interest rates in Brazil, which have come down some with
52:29
competition from from new bank, I mean credit card interest
52:31
rates in new Bank started were 300, four, 100%.
52:35
It's just crazy. So there's still tons of room
52:39
for competition in pretty much all of the Latin American
52:42
economies in in finance and in commerce.
52:45
And so like a simple, a simple example of that was 2010 in
52:51
Chile. If you went to a busy store that
52:53
sold empanadas, you'd have to talk to three people to buy
52:57
something because you have one person to make the order, one
53:00
person to give you the ticket, another person to pay, and then
53:02
you go and do that. That's like not acceptable
53:05
anymore for consumers now that they've seen Uber, they've seen
53:08
Corner Shop, which was acquired by Uber, they've seen Nubank,
53:11
they've seen MercadoLibre. So they're demanding better
53:14
access to products and better quality of life.
53:18
And in finance and commerce, those are the two lowest hanging
53:21
free. And so that's, I think we're
53:23
only just scratching the surface of that transformation.
53:26
There's still a ton to go. Hey man, I know you probably are
53:31
quite familiar with MercadoLibre back from our eBay days.
53:34
In fact, I think today was an investor in MercadoLibre in the
53:37
beginning, right? Probably you're familiar with
53:41
Nubank, which I think is probably one of them both most,
53:44
you know, successful IP OS out of Brazil in the last few years
53:47
and and a huge company. What?
53:49
Why do you think there hasn't been more attention to Latin
53:52
America from at the very least US investors?
53:55
But I would say a lot of investors that aren't local.
53:59
So eBay was early in its expansion looking at
54:02
marketplaces and we had a successful investment in
54:05
MercadoLibre and then it's subsidiary with Mercado Pago.
54:08
And it was I think a good outcome from from our corporate
54:13
VC. But investors in Latin America I
54:15
think ran into one. There was just ongoing currency
54:19
risk, you know, devaluations, there was some instability and
54:22
local market. So where do you where do you
54:25
invest and how do you make sure you get the money back?
54:27
And then I think that's Nate suggested in 20202122.
54:31
A lot of that I think was fueled by SoftBank in Latsam, which
54:33
drove up valuations to very high levels and it kind of it went
54:37
away quickly. And I think the concern for at
54:40
least for corporate investors and what I think has been on
54:43
their minds is, is there, what does the liquidity look like for
54:47
investments in that market? They have been a couple, like
54:49
you said that have gone public, but is that enough of a IPO
54:52
pipeline to make sure they get my money back?
54:54
And then what if it's going to be local currency, what is the
54:59
US dollar equivalent? And how do we know we're not
55:01
going to get stuck with a devaluing currency?
55:03
So maybe I don't know that Nate and Karen, do you think you can,
55:07
does that sound right to you? And what do you think about
55:09
those two, the governance risk and the currency risk in those
55:12
in those economies or the liquidity risk I should say?
55:14
And and are those getting better or worse going forward?
55:17
I think the vast majority of investors that looked at LATAM
55:20
that were not from LATAM didn't go that deep on the analysis.
55:24
The vast majority of them, like if if we were lucky, they had
55:28
seen like Narcos on Netflix and that was their, that was their
55:31
frame of reference. And they just didn't really or
55:35
they, they'd been to Cancun, right?
55:37
That that's that was the level of at least like 50% of the
55:40
investors we would meet. And then though, and that's
55:44
gotten better over the last few years, I think as there have
55:48
been big successes like new bank is especially a good one.
55:51
Ricotta Libre's continued growth, but also a spotlight
55:55
being shown on a lot of the Latam founders that have done
55:59
well doing talks in Miami, New York, San Francisco.
56:02
There's a a Brazilian San Francisco tech week now that's a
56:05
big deal. Mexico tech week brings lots of
56:09
people. So I think, I think it's gotten
56:11
better. And then for the people that do
56:13
go deeper, I think that those are generally the ones that
56:17
they're worried about is liquidity and either currency
56:21
risk or political risk. And on the currency and
56:24
political risk, what what we think is that one, if you're
56:28
investing across Latin, not just in one country, you're, you're
56:33
pretty diversified. So in the last phase, last two
56:37
years or so, the Brazilian currency and Mexican currency
56:41
have been getting much stronger. And at the same time you have a
56:47
couple of dollarized economies like Ecuador, Costa Rica,
56:50
Panama, few other places then you have you've had historically
56:55
Argentina being crazy inflation and you have to be worried it's
57:00
gotten a lot better. There's still probably some,
57:02
some amount of risk, but if you're diversified between
57:05
Brazil, Mexico, Chile, most of the big companies are hand
57:10
Latin. They're not just in one country.
57:11
So I think there's some amount of diversified currency and and
57:15
political risk. And then the other one is
57:17
obviously we want better government everywhere, not just
57:20
in Latin America, all over the world.
57:22
It would be great if we had more efficient, better government.
57:25
But people in Latin America, they want the services that they
57:30
need. They need to buy e-commerce.
57:31
They need to improve their business processes.
57:34
They're going to use AI. Brazil is the biggest, I believe
57:37
it's the biggest per capita social media user in the world.
57:41
And so people are going to use these services.
57:44
And because so much stuff needs updating, my theory is that
57:49
you're just going to make money investing in those companies as
57:52
they grow over time, and you'll get a bonus if there's better
57:55
government. And the other interesting one,
57:59
which is borne out with the three huge winners from Latam,
58:02
which are MercadoLibre, Movile, and Nubank, is that you get much
58:09
bigger winners in Latin America because there's less
58:12
competition. And so if you find the winners
58:15
at the right stage, they can compound for much, much longer
58:19
than they might in other places because the winners just keep
58:23
winning. Do you think that it's a lack of
58:25
talent, a lack of capital, or other reasons why there's less
58:28
competition in such a growing market?
58:32
I think it's a little bit of all of the above.
58:34
So one is cultural. I think that once you start to
58:39
have a bit of a winner, people are more scared off from
58:44
competing against it than they might be in the US or in China.
58:49
A lack of capital and who the capital goes to is a big, a big
58:53
reason. So we did a, a study from all of
58:58
the unicorns and then all the companies that I think had
59:01
raised it was 100 million plus that we can link.
59:05
But basically the vast, vast majority came from elite
59:09
universities or management consulting or investment
59:12
banking. And if you look at the
59:16
competitors, the second and third or fourth ones, many times
59:21
they have as good of metrics or better as the one that's able to
59:25
suck up the capital. And so I think there's your
59:30
metrics speak to yourself, speak for themselves by like series B.
59:35
But before that, it's a lot easier to sort of optimize for
59:38
the, the background of the founder.
59:40
And so I think that that happens everywhere, but there's still
59:45
someone who's going to fund the non elite status founder in the
59:50
US, in China, in India. And a lot of time, I think
59:53
that's still a difficult thing and will get better as there's
59:57
more more wins and more capital. Did your father ever beat you?
1:00:03
Yes, he did all the time. And your mother led him.
1:00:08
She used to beat me too. Oh, you poor thing.
1:00:10
I was going to learn to play checkers.
1:00:14
I wonder if we could talk a little bit about prioritization
1:00:16
and sort of where you guys see opportunities.
1:00:18
From our perspective, doing early stage investment, I think
1:00:23
like Brazil is obviously the best market.
1:00:26
So you need to have some exposure there.
1:00:29
We went from maybe 5% capital allocated to Brazil probably be
1:00:34
like 35% in this fund and we hired someone in Sao Paulo last
1:00:37
year. And because you just have you
1:00:39
have to be there if you want to be in in Latin America.
1:00:43
And then the way that we think about the Spanish speaking side
1:00:48
of Latin is that there's a certain number of very fundable
1:00:52
founders and opportunities per country.
1:00:55
So Mexico and Argentina are the next biggest, but Chile will
1:00:59
probably have three to five per year.
1:01:02
Peru might have one to two, Uruguay will probably have two
1:01:05
to three, Ecuador maybe one or two, Colombia's probably 20,
1:01:10
maybe more. And so our job is to find all of
1:01:13
those, see them all and hopefully make the best
1:01:16
decisions on on those ones that fit our thesis.
1:01:19
And that doesn't mean that those there's only three or four
1:01:22
funded companies per year. There's way, way more.
1:01:25
But the ones that we think fit our thesis have the right
1:01:27
founders, right problems, that's our job.
1:01:31
And then as you get later on to like Series A, Series B, Series
1:01:36
C and later, it's all about the metrics.
1:01:39
And so you could find companies that are incredible across 3 or
1:01:45
4 countries, but maybe aren't in Mexico or Brazil yet.
1:01:48
You could find Brazil only, Mexico only.
1:01:51
And really, you just drill down to find who's making money and
1:01:55
who's growing at a fast enough rate.
1:01:57
I would add, even though Fintech captures most of the VC capital
1:02:03
and it's still hard and it's still a thing here, we went
1:02:07
through some phases, right? So B2C, it's already saturated.
1:02:11
We have very good winners there such as new bank, for example.
1:02:16
Then it came a face, a second face of B2B in Fintech, which is
1:02:22
still developing, but also pretty much very, very good
1:02:27
startups operating there. And now we are more in the
1:02:30
infrastructure phase. We're also the new wave of
1:02:33
stable coins we'll be adding to to that phase.
1:02:37
But as Nate was mentioning, I want to give an example here
1:02:41
that I think it's really good and it's actually one of the
1:02:44
companies that we invested in PVC, it's called MOTU that it's
1:02:48
out of Brazil very first going that provides affordable
1:02:52
motorcycle rentals and all type of financial services to these
1:02:57
gig delivery workers enable them to to work in the food delivery
1:03:02
industry, which is really big. And also with all the mostly
1:03:07
Venezuela immigration in countries of Brazil, they are
1:03:10
many workers out there. And this is a very, as we say,
1:03:14
tropical problem, right. Maybe this wouldn't be a huge
1:03:18
thing in in a developed market. That's something that I always
1:03:21
tell to US investors or foreign investors to also try to look to
1:03:26
the local problems, and that's also where the good
1:03:28
opportunities are. One mind blowing stat about the
1:03:31
motorcycles. So we were doing diligence on
1:03:34
motorcycles in Latam and there's more motorcycles in Colombia
1:03:38
than in the United States. And Colombia's about 1/8 the
1:03:43
size of the US, So it's I guess 7-8 times more.
1:03:47
Motorcycles, lower GDP, yeah, that's crazy, which isn't a
1:03:52
great example of something called vertical aggregation
1:03:54
where you really got, you know, three businesses in one.
1:03:57
You've got people producing motorcycles, they're doing
1:04:00
lending to, you know, sole proprietors, small businesses,
1:04:04
and they're doing logistics allocation, driver, you know,
1:04:07
jobs. And so in another country, you
1:04:10
might see a lot of competition in each of those three
1:04:13
businesses might be separate businesses.
1:04:15
I think meeting, getting back to Nate's comment about maybe you
1:04:18
don't see as many competitors in Brazil.
1:04:21
They've sort of taken those three businesses, packaged them
1:04:24
together. And I think other VCs in the US
1:04:27
would be say, hey, pick one of those, don't do all three, but
1:04:29
actually they've sort of made doing all three their moats,
1:04:33
right? And, you know, the reality is a
1:04:36
driver in Brazil can double their salary if they have a
1:04:39
motorcycle and can get a job, but they usually can't afford to
1:04:42
buy a motorcycle. They probably wouldn't qualify
1:04:45
for the loan for, you know, getting a motorcycle if the
1:04:48
finance was even available. But MOTU is going to help build
1:04:52
the motorcycle, lend to them and give them a job to make sure
1:04:55
that they can make the payments on the motorcycle.
1:04:58
And that's just been an incredible, you know, way to
1:05:00
combine those three businesses into something that you wouldn't
1:05:04
normally think of as a venture back of all business.
1:05:06
Like I don't I don't think, you know, manufacturing motorcycles
1:05:08
in the US isn't like right up at the top of things that you
1:05:11
would, you know, put money into. And I wonder if you kind of see
1:05:15
other opportunities for that vertical integration in
1:05:17
different business areas across LAT app?
1:05:21
Exactly. And this is one of the examples
1:05:23
that Nate was mentioning where you all are able to see this
1:05:28
type of company after we already have the a development in
1:05:31
fintech and e-commerce, right, because Motu operates with food
1:05:36
delivery startups that use Fintech solutions to receive the
1:05:40
payments. So that's.
1:05:42
And GPS solutions. Exactly.
1:05:46
That's where you you need to see the big picture, right The.
1:05:50
Opportunity for verticalization comes from the fact that there's
1:05:54
very little infrastructure around most of these businesses
1:05:58
in Latin America. So you have to build your own
1:06:00
infrastructure from day one, and that becomes the Moat that that
1:06:04
you were talking about. So that's number one.
1:06:07
And then the second is that Latin America is a trustless
1:06:09
society. So nobody trusts each other.
1:06:11
So you have to build the trust layer around your business.
1:06:15
And once you've done that, there's a huge difference.
1:06:17
I think that the the recent survey I saw was that people
1:06:22
prefer to go to the dentist in Latin America rather than walk
1:06:25
into their bank. And so if you build financial
1:06:29
services or build motorcycles with a trust layer around it,
1:06:33
you're going to win. And that becomes a huge Moat.
1:06:35
And I think it's, it's both of those pieces together as why you
1:06:38
can get the huge outcomes. Nate, I wonder if you could talk
1:06:40
about, you know, your focus on early stage versus what we've
1:06:44
seen with later stage. And, you know, maybe a little
1:06:47
bit of a teaser here as to why we're working together and why
1:06:49
you and Karen are starting to look at this, you know, later
1:06:52
stage secondary opportunity in Brazil.
1:06:54
And Latin companies sure so lot of time has always been anywhere
1:07:01
between 10 to 20 years behind the US market for for VC.
1:07:07
And so just as we were getting started in 2014, there are
1:07:11
already a lot of big winners in the US and you could sort of see
1:07:14
directionally where things were going.
1:07:17
The copy and paste model doesn't work, but you can see direction,
1:07:21
OK, these in the US and in China, this works.
1:07:24
OK, something like that's going to work here.
1:07:27
And so it's, it's sort of been easy to follow the, the trends
1:07:32
and you have to find the local, the local problem, local
1:07:35
solution. But from there you have at least
1:07:38
a NA North Star to to follow. And so we've been looking at
1:07:43
that on the early stage are what are the problems that are being
1:07:46
solved in other parts of the world?
1:07:48
What are the problems that are now local only problems that
1:07:52
could be solved with the techno technology advancements.
1:07:55
So I think like one example that I really like is Lat Am has
1:08:00
very, very little structured data compared to other places in
1:08:03
the world. And AI is perfect for fixing
1:08:06
that. So there's tons and tons and
1:08:08
tons of industries that are sitting on literally paper data
1:08:13
from the last 25 years or 50 years that you can do something
1:08:18
interesting with and there's lots of start-ups doing that.
1:08:21
There's also interesting regulatory advantages for for
1:08:27
startups. So for example, there's no HIPAA
1:08:30
in Latin America. So you can do a lot of things
1:08:33
with consent of people with medical data that costs ninety,
1:08:37
9999.9% less than doing the exact same thing in the US,
1:08:43
which gives an advantage. And there's a big trend of of
1:08:48
medical startups and insurance startups that I think are going
1:08:53
to be really interesting in in Latin America.
1:08:56
And then why we started working together.
1:08:59
And this is another place where a lot of time is at least 10
1:09:02
plus years behind is in is in the secondary market.
1:09:06
There just hasn't been much activity.
1:09:09
And if you look at Latam native secondary funds, there's
1:09:13
arguably 2 and one's really small.
1:09:17
We would need to have like 20 more to start to fill the gap.
1:09:22
There was a stat from Spectra, which is a big asset manager in
1:09:26
Brazil that does a lot of secondaries.
1:09:28
So from 2014 to 2022, there's only $800 million of secondaries
1:09:34
in Brazil. And that's crazy for the amount
1:09:37
and size of of the ecosystem. And so if you listen to a pod,
1:09:43
any podcast with secondary investors in the US, it sounds
1:09:48
like 2007, 2008 in the US. And so you need, you need that
1:09:54
growth in the secondary market, both in direct company
1:10:00
investments, but LP stakes, GP stakes, all of that needs to get
1:10:03
developed. And it will because when you
1:10:06
have 8 billion a year being invested, something needs to
1:10:11
happen to make it look like the US, right?
1:10:14
It's like water will find a way and money will find a way.
1:10:17
So there's a ton of opportunities for late stage
1:10:22
investments either from funds like ours that started and you
1:10:27
know, in our fun too. We're in year 9 now.
1:10:30
What do you do with your winners that haven't exited yet?
1:10:33
Same problem that exists in the US.
1:10:36
In the US you would go to the 567 big, big ones and you
1:10:40
probably get a deal done in LATAM.
1:10:42
The only those global big ones will do 30 to $50 million
1:10:46
checks. They're not going to do a $10
1:10:48
million check and the local ones can't fill fill the demand.
1:10:53
And then I think the the other interesting one is you have
1:10:59
employees, founders and angels that maybe haven't seen much if,
1:11:06
if any liquidity because I think there's been a bit of a taboo
1:11:10
for in Latam for 10 years. Yeah.
1:11:13
And there's there's a there's a taboo around that.
1:11:16
So I remember with one of our portfolio companies that neither
1:11:21
of the founders is rich and they wanted to buy a house after
1:11:26
having raised 15 or $20 million in a in a really nice round.
1:11:31
Their, their lead investors didn't want to let them take a
1:11:34
half, $1,000,000 secondary because they thought that's,
1:11:37
that's too much or a house in Latin America costs 200K in
1:11:41
their country. It doesn't, it's a lot more.
1:11:42
They're going to lose that edge. They're not going to be hungry
1:11:45
anymore. They're not going to try to keep
1:11:46
exactly. So there's a lot of taboo around
1:11:49
it. And I think that as we talk
1:11:51
about it more and there's, there's really a lot of
1:11:53
opportunities to do win, win deals with angels and and
1:11:58
founders and ex employees. What happened, professor?
1:12:03
Why was your sneeze, Gilligan? My sneeze?
1:12:05
Yes. You sneezed so hard your
1:12:06
feelings blew out and hit the ceiling.
1:12:08
You know, blew the monkey up in the air and solved the problem.
1:12:13
What's wrong, Gilligan? Nobody said goes intact.
1:12:18
When you guys are looking at companies or fund opportunities
1:12:20
right now, what kind of metrics do you look for, at least for
1:12:23
the companies, you know, how do you sort of think about exit
1:12:26
risk and growth and valuation when you're looking at these
1:12:30
later stage opportunities? I like looking at the underlying
1:12:35
metrics of the company and seeing companies that have been
1:12:38
pretty capital efficient, that continue to grow at a good rate
1:12:42
and have a path to continue compounding.
1:12:45
So there's a lot of really great companies in Latin America that
1:12:52
maybe didn't raise the 2 billion, $1 billion in the 2021
1:12:58
type range that have been efficient, have been growing,
1:13:02
continue to grow, and most of them are now profitable or at
1:13:08
least break even. I think there's a stat from one
1:13:14
of the last research from last year, I forget from who, but
1:13:17
it's like, I think 70% of the unicorns that got funded back in
1:13:21
20/20/21 in LATAM are now profitable, which is a big deal.
1:13:25
And so you have, you have companies that are real
1:13:29
companies generating real money, solving real problems that if
1:13:35
you project out are likely to be durable because of the lack of,
1:13:39
of competition. And so looking for those
1:13:42
companies that have already passed the clear product market
1:13:46
fit the the clear chance that you know, they could really be
1:13:51
supplanted by a rival in the in the near term and looking for
1:13:55
those that are already very likely to be the big winners and
1:13:58
then trying to find good entry points into them.
1:14:02
Karen, what do you, what do you think those numbers look like in
1:14:04
terms of revenue and growth and how do you guys think about, you
1:14:08
know, the time frame to exit that we're focusing on?
1:14:11
So mostly we'll be targeting companies doing more than $100
1:14:16
million annual revenue, at least break even that preferably
1:14:21
profitable, growing more than 4050% year over year.
1:14:28
And of course, looking at good units, economics there and
1:14:32
always seeking good and attractive entry points, which
1:14:35
is available out there because of the lack of buyers of
1:14:41
secondaries. That you're talking about
1:14:42
discounts, I guess, right? Exactly which is also favorable
1:14:46
to the sellers, right. And also we will also be
1:14:49
targeting the Series B companies that are doing probably more
1:14:54
than growing more than 50% year over year more in the stage of
1:14:59
$50 million revenue. But that how also a very good
1:15:04
upside potentially in the future.
1:15:06
So in this case, we think that in the next three to five years,
1:15:12
we we expect these companies to have a a liquidation event.
1:15:18
So this is our our strategy for for this fund right now.
1:15:21
And and something that is also very interesting to mention is
1:15:24
that to specifically explaining the opportunity of secondaries
1:15:29
in the region and why this is a good timing and momentum is that
1:15:33
90% of secondary transactions in Brazil, but could be translated
1:15:38
to other places in Latin America happen in the stages of the
1:15:43
primary rounds of the refund raising events of the companies.
1:15:47
That means there's almost no activity for secondaries itself
1:15:53
outside those primary rounds, which creates even more
1:15:57
opportunity to provide liquidity to the shareholders in between
1:16:01
rounds, right? Yeah, I think that's a strategy
1:16:05
that we look at here in the US as well, but it's even more
1:16:08
pronounced in Latin America. Even among large companies in
1:16:11
Brazil and Latin America, there's not a lot of pricing
1:16:14
efficiency for smaller secondary sellers that are isolated, you
1:16:18
know, outside when a formal tender offers going on, which is
1:16:22
usually happening when a formal primary offer is happening.
1:16:25
And so I, I think you sort of hit it on the head there.
1:16:28
We're, we're looking for, you know, exits within a three to
1:16:30
five year time frame. We, we also might have some
1:16:34
partial secondary sale opportunities in the next
1:16:36
upcoming financing round, which might only be a year or two
1:16:39
away. But that's still a good
1:16:41
opportunity for us to get a good discount when we're buying the
1:16:45
shares or the positions and, and hopefully an opportunity to
1:16:48
provide partial liquidity to our investors ahead of waiting for a
1:16:52
full exit or full IPO, which might be 3-4, five years off.
1:16:56
So. You're trying to be money
1:16:58
managers, right? Something some things unknown to
1:17:03
our industry. Yeah, I think it was basically
1:17:06
very surprising to see that there weren't more secondary
1:17:10
firms operating in all of Latin America as as Nate suggested.
1:17:14
I think we we came across Spectra, which is a very large,
1:17:17
you know, secondary investor buyer mostly just in PE.
1:17:22
And I think there's a smaller, you know, BC secondary firm
1:17:25
that's still just getting started in the last year or two.
1:17:27
But this is across all of, you know, Brazil, all of Latin
1:17:30
America, you know, with the exception of maybe occasional
1:17:33
secondary buyers, there's, there's not too many friends
1:17:35
with that specific strategy. Do you find the companies are
1:17:38
now inviting you into these conversations?
1:17:41
It sounds like as if their company is running a primary
1:17:44
round and a tender offer. That's that's great.
1:17:47
They're involved in the process that are managing the process.
1:17:49
Do you find like that taboo face, that education, that
1:17:52
willingness to work with new investors to provide liquidity
1:17:55
to existing investors? Do you feel like that is, it
1:17:58
sounds like you think it's moving in the right direction?
1:18:00
Are you getting any pushback from companies, the especially
1:18:02
the top ones that you want to get in on?
1:18:04
Or is it, is it now feeling like they're all willing to have the
1:18:06
conversation? And and, and it's it's that that
1:18:10
taboo face is completely over now.
1:18:15
It's definitely not over yet. There's still a bunch of
1:18:18
companies. There's still a bunch of
1:18:20
companies that think, hey, if I sell a discounted secondary,
1:18:24
it's going to affect my primary the next time I race.
1:18:29
You'll hear I don't, I don't want to reward an early investor
1:18:35
with when someone else isn't getting it might not be fair.
1:18:39
There's that kind of stuff. But I would say it's at least
1:18:43
half and half now because what, where we've been invited in more
1:18:49
recently is where there's an early investor that maybe has
1:18:53
been in for 15 years and wants to buy a house or got divorced
1:18:57
or whatever happened. They need money.
1:19:01
There's no, there's no other way for them to buy that house than
1:19:06
selling some of their, their shares.
1:19:07
And they're going to go bother that founder probably weekly
1:19:10
with WhatsApp. And so the founder will say, OK,
1:19:13
solve this problem for me, right?
1:19:15
And they trust us that we're not going to go and, you know, do
1:19:19
weird stuff with their data that we're not going to go and be
1:19:23
super public about everything. They want the problem solved.
1:19:26
And so I think that is something where a lot of the work starts
1:19:31
to starts to move. And then there's also others
1:19:34
that just say, look, now I want to reward those early investors
1:19:37
with some amount of cash and, you know, I want them to stay
1:19:40
with me for longer. But cleaning up the cap table
1:19:44
some is a good idea. And so I think there's still
1:19:47
kind of those three groups where it's reluctant because someone
1:19:50
is bothering them that they want to sell and they come to us to
1:19:53
help help solve the problem. There's others that understand
1:19:57
it now and want to do it. And then there's still a fairly
1:20:00
decent chunk that I think still is kind of reticent to do it.
1:20:03
And I think the hey, the the secondary market price is going
1:20:10
to affect my primary it. It's just not true for the
1:20:13
earliest small investors. You know, if, if my fund has 2%
1:20:18
of your company or 3% of your company doesn't have a board
1:20:21
seat, nobody cares if I sell half, nobody cares if I sell all
1:20:25
of it, right? They would care if I was your
1:20:28
lead investor and I'm on your board and I invested 2 years
1:20:31
ago, then yeah, there's probably a bad signal there.
1:20:33
But if I've been in for 10 years, nobody, nobody cares,
1:20:37
right? So I think that's that's one of
1:20:38
the biggest myths. Maybe that buyer is going to a
1:20:41
next round primary investor who is already buying the company
1:20:45
anyway. You know, I think a lot of times
1:20:47
we're starting to see secondaries where there isn't as
1:20:51
much primary capital being raised or some of that secondary
1:20:54
capital is taking the place of primary capital where the
1:20:57
founders don't need to sell, you know, 1020% of their company for
1:21:01
the next round financing. They might only need, you know,
1:21:04
to sell 3 to 5%, but you know, they're willing to, you know,
1:21:07
round up another 3 to 5% from either themselves or other early
1:21:11
employees or investors to make available for the round.
1:21:14
I, I wonder if you could comment a little bit, you know, some
1:21:16
things that we're seeing a lot more in the market here in the
1:21:19
US as you know, 22 big sort of trends 1 is continuity vehicles,
1:21:24
continuation vehicles and SPV's. And in many cases, those are
1:21:29
providing a form of liquidity where there's not a formal exit
1:21:32
for the company either via IPO or acquisition, but you're kind
1:21:36
of arranging a new set of investors to come in and take
1:21:39
over the positions of other investors and employees.
1:21:42
And you do that through either A1 time SPV or from a continuity
1:21:46
vehicle. Is that something that's common
1:21:49
in Latin America? I think it's very new, just sort
1:21:52
of getting started. I, I only know of 2 for sure and
1:21:57
maybe 3 funds that are trying to do continuity vehicles now or
1:22:01
continuation vehicles now. Don't know if they'll be
1:22:04
successful or not, but I think it's just starting.
1:22:09
And what about SPV? SPVS are more common and not
1:22:15
necessarily to just generate liquidity, but to for a lot of
1:22:20
the funds like us, especially when we started in our first
1:22:24
fund was only about 6 and a half, $1,000,000.
1:22:26
But we had another 15 in SPVS because the family offices we
1:22:30
raised from said, hey, I trust you with a half a million, and
1:22:34
if you bring me good deals, I'll trust you with another million,
1:22:37
right? And so I think really a lot of
1:22:39
funds started like that in Latin America because it was very,
1:22:42
very hard to raise LP capital. So I think there's a bigger
1:22:47
history of secondaries aside of there's a bigger history of
1:22:50
SPV's in Latin that's a little more advanced.
1:22:54
I think using them for liquidity is is new, but that people do
1:22:59
understand SPV's and have invested in them and they like
1:23:02
them. Yeah.
1:23:03
So I hear what you're saying is maybe SP VS have primarily been
1:23:06
used to lean into doing more deals, more follow on
1:23:09
investment. They haven't been used as much
1:23:11
to lean out as a way to provide liquidity for existing
1:23:15
investors. And maybe that's a new trend
1:23:17
that's starting to happen and you know, definitely where we
1:23:20
got started with this new project in the last couple of
1:23:22
months as well. I don't think there's anything
1:23:27
on this island hard enough to cut through it.
1:23:29
There must be something. Use your head.
1:23:31
Gilligan I don't think it's hard enough.
1:23:35
What do you guys see is kind of happening over the horizon?
1:23:38
If you had to sort of take your crystal ball out and guess, you
1:23:41
know, next 2-3, five years. What investment trends are you
1:23:44
seeing? It sounds like fintech's still
1:23:46
going to continue. It sounds like stable coins are
1:23:48
going to continue. I know that we've looked at
1:23:51
logistics companies as one other area.
1:23:53
Payments and lending companies are still high on the agenda.
1:23:56
Do you see a wave of AI coming in Latam just like the US or is
1:24:01
that not the case? Or is it a more practical, you
1:24:05
know, no pun intended, set of opportunities in existing
1:24:09
categories? It's going to be super hard for
1:24:11
a LATAM company to build an Anthropic or an open AI type
1:24:16
type company in LATAM. But I do think there will be
1:24:20
lots and lots of AI companies that do well in Latin America.
1:24:24
I think they're more likely to be doing things like training
1:24:30
data AI companies that it's way cheaper to do that from
1:24:34
Argentina meant much of AI is trained on Argentines fix it
1:24:39
responding to stuff like with scale AI and many others come
1:24:43
from there. I think there's new companies
1:24:48
that are, there was one in Brazil called Enter that just
1:24:52
raised really a lot of money from global VCs and looks like a
1:24:55
really interesting AI company. We have a portfolio company
1:24:59
that's doing sovereign AI hosting.
1:25:03
So all the data centers and all of the data stays in Mexico
1:25:07
because the government does not want that data to go to Silicon
1:25:11
Valley or wherever it might go. And the banks aren't allowed to
1:25:15
do that. And so there's going to be a lot
1:25:18
of AI stuff in in LATAM that comes from regulation.
1:25:23
We also have an interesting AI company in Columbia that's doing
1:25:29
disease identification and mitigation using 5 plus years of
1:25:34
insurance data from a big insurance company, which would
1:25:37
have been really hard to do in in the US.
1:25:40
So I think you're going to have that type of more applied AI in
1:25:43
LATAM rather than you're not going to have an open AI or or
1:25:49
an anthropic most like this. One thing I did what I could
1:25:52
have covered before we wrap up the is also, you know, what's
1:25:56
Uruguay all about and why is that interesting or special?
1:26:00
And that for me was an eye opener when I, when I came down,
1:26:04
you know, two years ago, all the, all the BCS that I knew who
1:26:07
were out of Argentina, Brazil, a lot of them had moved to Uruguay
1:26:11
and they were talking about it like it's another Singapore.
1:26:15
Because it's a beautiful country the with high quality services,
1:26:23
nice people, nature, really quiet Wait.
1:26:27
A second This sounds like you might be a little bit of a
1:26:31
Homer. Here, I'm not biased.
1:26:36
So you live in Argentina, but you're.
1:26:38
Yeah. OK, I was going to say the
1:26:39
reveal here is you're from Uruguay.
1:26:41
Exactly. It's very interesting.
1:26:44
I always joke that when I was at university, it's not that I'm
1:26:47
that old, but I probably never hear about the word startup when
1:26:51
I was at university. I do think that now 15 years
1:26:54
later, we got success stories such as the local, the payments
1:26:59
company Australia and NASDAQ that IPO a few years ago and
1:27:05
that well, also another company with Uruguayan founders is the
1:27:10
Idol Shah that was acquired by delivery Hero, the food delivery
1:27:14
startup operating in many countries in Latin America, also
1:27:18
a huge success. And and that led to a lot of
1:27:23
talent that was inspired to to go out there and create new
1:27:28
companies that we are seeing actually today a new I I company
1:27:32
raised their and the reason why else Argentinian millionaires
1:27:38
are moving to your way, it's because of tax purposes, but
1:27:41
that's also having a good impact in in the local industry.
1:27:46
So I think we're going to see more companies and and Uruguay
1:27:50
has the same factor. Argentina, the market is so
1:27:53
small. So they, they think globally
1:27:56
from day one. So that's, that's great.
1:27:58
That's the case of, of the local actually.
1:28:02
So that's, that's one thing. I think that's my, my big
1:28:08
prediction here. And it's good that it's going to
1:28:10
be recorded because then you can go after me if this is not
1:28:15
happening here. I see that in in 2027, I see 3
1:28:19
to 5 lamb companies doing IPO in in the US, pretty optimistic
1:28:25
about that. And that, that for sure is going
1:28:26
to be a good weatherfall for all the the rest of the companies
1:28:31
and the industry. And I also see more acquisitions
1:28:35
happening from foreign companies that are going to acquire the
1:28:39
category leaders in the region, definitely very large M and As.
1:28:45
I know we had talked before, there's been several examples of
1:28:47
big Brazil IP OS. There haven't been as many from
1:28:50
Mexico. But do you think that's likely
1:28:52
to change in the next couple years?
1:28:54
And any guesses as to who those candidates might be if they're
1:28:58
Mexican companies likely to go public?
1:29:00
So Mexico's first Unicorn was bit so back in 2021.
1:29:05
So it's been only four years now, right?
1:29:08
So it's, it's pretty early, but we are seeing also very good
1:29:12
companies and a new wave and a generation of Mexican founders
1:29:16
creating good companies and talent that already worked at
1:29:19
the tech industry. And there's companies such as
1:29:25
Kovac for example, doing marketplaces of of, of cars,
1:29:30
some other fintechs are super interesting.
1:29:34
So I think we are probably going to see start seeing good M&A
1:29:40
some probably one of these IP OS that I'm predicting it's going
1:29:44
to come at least from from Mexico one of them.
1:29:47
Hey, Karen, maybe you can also help with this with this
1:29:50
question. So in terms of the IPO market,
1:29:52
so it seems like there was a, there was a healthy trend of
1:29:55
companies up until like 2018 nineteen, you guys were talking
1:29:59
about like there wasn't, wasn't a lot of VC, but some companies
1:30:01
going public and we had a couple of examples like POG, Seguro and
1:30:06
MercadoLibre and and some good examples for then the IP markets
1:30:11
have been tough for a while, right?
1:30:12
The last three or four years really it's not, it's not fair
1:30:15
because it's been tough for everybody.
1:30:16
But now the market's reopening, it seemed like there was a good
1:30:20
backlog of companies for high quality that are, that are
1:30:22
potentially able to exit. What is the desire or the
1:30:26
temperature among the LATAM founders to go and list in, in
1:30:30
Brazil, which is I guess the biggest local exchange, the
1:30:32
Bovespa, or if you get enough revenue, enough traction, does
1:30:36
everybody really want to list in?
1:30:37
Are they like thinking about US listings and in the NASDAQ or
1:30:41
the, I guess the New York Stock Exchange to a lesser extent?
1:30:44
Yes, I would say that the main, the main reason is that there
1:30:48
was there was the first wave of Brazilian second companies that
1:30:54
were listed on the Brazilian stock market exchange.
1:30:57
And that that that didn't go very well to be honest because
1:31:01
of many issues that I, I won't get into the specifics.
1:31:04
But basically nowadays the yeah, the main option and and the only
1:31:09
one I would say for IPO it's it's the US NASDAQ or NYC.
1:31:14
But actually I think that Mexico is doing a good job, for
1:31:18
example, with Viva, which is the second largest stock market to
1:31:23
to also try to get more liquidity and trading for tech
1:31:27
companies. So I think we're going to see
1:31:29
more options because we need those options for those probably
1:31:34
not huge companies that would need more, more, more liquidity
1:31:39
events. But yeah, nowadays the the ones
1:31:43
that want to IPO look for for the metrics required in in the
1:31:47
US and there's an interesting report explaining this.
1:31:51
When you look at the last 10 years and you'll compare
1:31:55
emerging markets, let's take India, Southeast Asia and Latin
1:31:59
America. Latin America is the country
1:32:01
that had the most quantity of exits above $1 million and many
1:32:06
of them were acquisitions, right?
1:32:07
We're not IPO. So when when you compare
1:32:12
emerging markets, we are positioned better at least for
1:32:15
now. Yeah, very like a very strong
1:32:18
healthy success records with with M and a probably #1 IP OS
1:32:22
for the bigger ones #2 and a lot of your companies were building
1:32:24
towards the US and thinking about US governance and
1:32:27
compliance, which is great. The gossip says that and the
1:32:30
information we got that there are at least a backlog of five
1:32:35
to 10 companies preparing, getting ready for for that
1:32:39
fighting, right. So that's why hopefully I get my
1:32:43
British owner right and see those companies listed in the
1:32:46
US. It makes sense if the IPO market
1:32:49
reopens fully next year, it seems like there's a strong
1:32:52
stock log. Well tell tell your founders the
1:32:55
the when I when I worked on the public offering, we initially
1:32:58
listed on the New York Stock Exchange because we wanted to
1:33:00
ring the bell as well and turned out to be flipped for the
1:33:02
NASDAQ. We're just where most companies
1:33:03
go public and there's no bell in the NASDAQ.
1:33:06
You just hit a buzzer and it's and it's all computer.
1:33:10
Kind of Nate, just want to say thanks for giving us an overview
1:33:13
of the Latah market and what you guys are working on there.
1:33:16
And for folks who might be interested in learning more
1:33:18
about our Latin American investment strategy, I guess the
1:33:22
vehicle is currently called Exit Fiesta.
1:33:27
Where can they go to learn more about that Karen?
1:33:30
It's going to be in the comments of our broadcast and link to a
1:33:36
brief deck there. You can get a glance of what
1:33:40
we're doing. And then there's also my e-mail
1:33:43
and I can tell you more details of the opportunity that we're
1:33:47
doing here, which is actually the first time that it's being
1:33:50
done something like this. So we're happy to be tackling
1:33:54
the opportunity. We think it's very, very
1:33:57
interesting and the timing right.
1:34:12
Welcome to another evaluation corner this week with Professor
1:34:16
Virgie. We're going to be covering
1:34:17
Discord. Aman, can you tell us a little
1:34:19
bit about Discord and what it's worth?
1:34:21
Absolutely. So we're covering this
1:34:23
communication platform. Many of you will be familiar
1:34:26
with it Discord. It is hot on the heels of their
1:34:29
announcement of a filing this week that they are
1:34:31
confidentially looking to go public.
1:34:34
So I thought we'd talk a little bit about the company.
1:34:36
Is it a big deal IPO or small deal IPO or, or what that means
1:34:40
to the market? And then what valuation would be
1:34:43
soft circle for, for the benefit of our investors.
1:34:45
So let's talk a bit about the company.
1:34:47
It is a, it's a communication platform.
1:34:49
It's been around for quite a while now, almost a almost a
1:34:53
decade. Their last round was 2021 in
1:34:56
September, and they did that round at $15 billion.
1:34:59
That price was set by Dragoneer. That was a very aggressive
1:35:03
valuation back in 2021 in in late 2021.
1:35:07
You're right. Remember, that was the that was
1:35:08
the peak of the bubble. That's when a lot of companies
1:35:11
were getting priced at multiples of like 50 to 100 times
1:35:14
earnings. These communications
1:35:16
technologies were all the rage. All kinds of companies were
1:35:20
starting them. People wanted to be online all
1:35:22
the time, not talking to people, not meeting with their friends,
1:35:25
staying away from people because of the pandemic.
1:35:27
And so they benefited a lot from that hype.
1:35:30
You can see the evaluation that they done in December 2020 was
1:35:34
7.3 billion. So they had a big step up at the
1:35:36
end of 21 from December 2020. And even that was a big step up
1:35:40
from June of 2020 when they were at 3.7 billion.
1:35:44
They actually turned down a offer by Microsoft in 2021 at
1:35:48
the $12 billion valuation. And I, I guess the question for
1:35:52
us is, are they worth 15 billion?
1:35:54
Are they worth 12 billion? Did they, did they make a good
1:35:56
move by turning on Microsoft acquisition or, or something
1:35:59
given less than that? Well, let's talk a bit about the
1:36:02
product for a second. For those who don't know it,
1:36:04
this is a product that helps you to communicate in real time and
1:36:08
communities and with individuals.
1:36:09
It's very, very good in a couple of ways.
1:36:11
It's just a very seamless, intuitive integration of text
1:36:15
and voice and video. It's it's real time
1:36:18
communications. It has a very robust feature
1:36:20
set. The only negative I think on the
1:36:22
product, if you, if you've used it, you, you can probably relate
1:36:25
a little bit. It does feel like a very
1:36:27
overwhelming product. There's a lot of features and
1:36:30
maybe too many features to make to make it all that useful.
1:36:33
Kind of a, you know, resulting the result is kind of a steep
1:36:36
learning curve. They don't really have a lot of
1:36:38
customer service or very good customer service.
1:36:40
If you've ever tried, I think the inspiration for the company
1:36:43
and their brand is the Roman goddess Discord or Discordia the
1:36:48
the Greek goddess heiress. That goddess is all about strife
1:36:52
and chaos and just a lot of a lot of stuff going on that's
1:36:55
very confusing. This is the goddess who was the
1:36:58
original wedding crasher. She gate crashed the wedding of
1:37:01
Kelly and Fetus and threw the apple of Discord into the
1:37:04
wedding. And then everyone was like
1:37:05
fighting over who gets the apple and that eventually causes the
1:37:07
Trojan War. Anyway, that's Discord in a
1:37:10
nutshell. That feels a little bit like the
1:37:11
product. It's a very overwhelming and
1:37:13
potentially difficult product to use.
1:37:15
That's the downside. They do have a lot of users.
1:37:18
They began in gaming. That's the kind of where they
1:37:20
got their start. They have really no ads or spam.
1:37:23
And the algorithm is, is really designed around ease of
1:37:26
communication. It's not, you know, a social
1:37:28
network where it's trying to get you outraged and has some good
1:37:30
socializing and community features.
1:37:32
The the downside though, is it, it really is just another social
1:37:37
media app. And so in a very crowded
1:37:39
marketplace, what's their what's their angle?
1:37:42
If you think of other, other ways to communicate with your
1:37:44
friends and communities, you've got, you know, Signal and
1:37:47
Telegram and you've got WhatsApp and you've got Google Chat and
1:37:51
others that are very good at communication.
1:37:54
There are other collaboration tools out there like like Slack.
1:37:58
Gamers have other alternatives that they are now going to.
1:38:01
And then there are also places you can go to for communities
1:38:04
like Reddit and Facebook groups. So the question really, I think
1:38:07
as an investor is what what about the product works?
1:38:10
Do they have recurring revenue? Are they able to retain the
1:38:13
people that they have? And usually that shows up in
1:38:15
things like user metrics and engagement.
1:38:17
So a couple of good, good news metrics around them.
1:38:20
They do have almost 700 million registered users right now,
1:38:24
260,000,000 actives, about 38% of their monthlies log in every
1:38:29
day. So that's that's a sign of very
1:38:32
good retention and deep engagement.
1:38:34
And the average user spends 94 minutes on Discord, which is
1:38:37
like twice the time that people spend on Facebook.
1:38:39
So there's a lot of good stuff to to think about for their
1:38:42
users. In terms of the demographics,
1:38:44
it's mostly mostly male, but 2/3, one third male versus
1:38:48
female. It's a very young audience, the
1:38:50
25 to 34 distribution that that demographic is half their users.
1:38:54
And then they have a whole lot of users who are 16 to 2421% of
1:38:58
the users who actually 16 to 24 years old.
1:39:01
So it's a very, it's a very young distribution.
1:39:04
If you don't, if you don't know them, your, your kids probably
1:39:06
do. They're apparently reaching 51%
1:39:10
of the demographic of 18 to 24 year olds.
1:39:12
So that's, that's in terms of audience marketing and a
1:39:16
demographic that marketers want to get to.
1:39:17
That's, that's a very valuable piece of the puzzle.
1:39:20
And so if you think about the the ways that, you know, they
1:39:22
can monetize on a go forward basis between subscriptions and
1:39:27
advertising, they have a lot of a lot of opportunities Today,
1:39:30
they're only doing $3 per Mau. So their average revenue per
1:39:34
user is only $3 per monthly active.
1:39:36
That's probably twice what WhatsApp is.
1:39:38
But WhatsApp hasn't really monetized.
1:39:40
It's less than where Reddit is at.
1:39:42
So based on their user account and based on their current
1:39:45
monetization, there's probably some upside in the company.
1:39:49
So those are some of the, you know, some of the good news
1:39:51
potentials for the company. They do have a couple of ways to
1:39:53
monetize now. It's a freemium model.
1:39:55
Their premium subscription model is most of the revenue and then
1:39:58
they have a little bit of a advertising business that's
1:40:00
beginning to increase the overall value of their business.
1:40:04
If I just compare them to other people out there, there's again
1:40:06
a lot of people out there who are in the space and who are who
1:40:09
either have close to or significantly close
1:40:11
functionality where Discord maybe scores a little bit better
1:40:15
than some of the the competition.
1:40:17
They're not quite as secure. Or maybe they don't have a
1:40:21
reputation for security like then Signal or you know, one or
1:40:25
Telegram might have. But they do have a intuitive
1:40:27
product that a lot of people seem to like.
1:40:29
They do score pretty high for safety.
1:40:32
And so that's I think those are questions for them.
1:40:35
And so if I had to sum up where they're at in terms of their,
1:40:38
their evaluation for a product in a competitive marketplace,
1:40:41
decent user metrics, you know, growing reasonably well 2020%
1:40:46
year over year in terms of revenues.
1:40:48
Probably not the, the kind of runaway growth rate that you'd
1:40:50
look for in a gangbusters IPO, but you know, solid, decent, a
1:40:55
good community users that they've got that they're,
1:40:57
they're building into. I don't think we'll get to the
1:40:59
last valuation of $15 billion, which was 75 times revenue.
1:41:04
If they get out of 10 to 12 times revenue and then maybe
1:41:06
price up from there that you're probably looking at 8 to 9
1:41:09
billion in terms of their IPO evaluation with an expectation
1:41:12
that it'll trade up a little bit after that.
1:41:15
That's probably my, you know, my guess for where the, where the
1:41:17
market ends up. I think there's the key to the
1:41:20
IPO for them is going to be can they monetize at today's rates
1:41:23
or better layout for investors, how they're going to use
1:41:25
advertising and their engaged user community to monetize even
1:41:29
better than that, get closer to Reddit like monetization levels
1:41:32
than they're at today. And they could probably grow at,
1:41:34
you know, 20, thirty, 40% annual revenue for the next couple
1:41:38
years, which I think is kind of what you have to do to have a
1:41:40
good successful IPO for a company like them.
1:41:44
I wonder if there's any upside that might be similar to Reddit,
1:41:47
where there was some discovery of AI licensing fees and
1:41:51
opportunities. Discord is probably a pretty
1:41:54
good, you know, content platform similar maybe to Reddit or
1:41:57
Twitter or Meta, where there's a lot of information that might be
1:42:01
interesting or useful for AI platforms.
1:42:05
Yeah, that's a really good thought.
1:42:06
You know, I kind of missed the boat on Reddit a little bit.
1:42:09
You and I were looking at them a couple of years ago before they
1:42:11
went public and we thought at 15 to 20 billion valuation, it's
1:42:15
just another social media company.
1:42:17
It should trade like Meta on a multiple like Meta, 15 to 20
1:42:21
would be OK, but maybe a stretch.
1:42:22
And, and it turned out the price there and then then now worth 40
1:42:25
billion today and which is 112 times PE.
1:42:30
But it's not, they're not trading based on their current
1:42:32
metrics exactly. It's a, as you say, it's a
1:42:33
wealth for AI companies to learn from, to train their models.
1:42:37
And, and it seems like a Discord can do that.
1:42:41
Then, then there's a huge amount of upside in the, in the IPO And
1:42:45
it, they do have 260 million active users.
1:42:47
They're engaged, they're putting a lot of data on the platform.
1:42:49
They're very young, which I guess could be a good thing if
1:42:52
you're an AI company looking for that kind of a that kind of an
1:42:54
audience you're looking for primarily people in that 16 to
1:42:57
24 year old demographic or a little bit older.
1:43:00
So that that maybe there's a maybe there's a lot of data for
1:43:02
AI companies to to pull from. Yeah.
1:43:05
Well, it seems like at least during 700 million in 2024,
1:43:09
probably growing at about 20%. I know they're, they're probably
1:43:13
on their way to 809 hundred million, maybe towards a billion
1:43:16
dollars in revenue in the future.
1:43:17
But that growth rate is maybe not as exciting as you'd like to
1:43:21
see out there. It does seem like maybe they
1:43:24
should have taken that $12 billion offer from Microsoft 4
1:43:27
years ago, but it seems like they'll have a reasonable
1:43:33
acceptance in the market at least this year, 4 years later.
1:43:37
Yeah, I think that's right. I think they'll probably get
1:43:39
north of 12 eventually. I think taking that deal four
1:43:42
years ago would have been, you know, money in the hand, but
1:43:45
then I don't know what Microsoft would have done to the product.
1:43:49
And I do feel like Discord is a really interesting product and
1:43:52
has, you know, has built a really strong user community
1:43:55
with some affinity and a lot of interesting data.
1:43:56
So maybe there's more upside now that that makes it more valuable
1:44:00
as a stand alone company. It's a pretty cool company, a
1:44:02
pretty cool product. And it's, you know, it has a lot
1:44:03
of exciting features in it too. So I think, I think they'll do
1:44:06
OK. Well, I guess we'll see how the
1:44:08
IPO goes. Thanks for that coverage on
1:44:11
Discord, Aman. OK.
1:44:12
Thank you, Dave all. Right.
1:44:20
I, I noticed you're wearing a Frankenstein shirt there.
1:44:25
Is that relevant for any of our news this week?
1:44:27
What's coming back to life that we should all be all be scared
1:44:32
of maybe the IPO market? Good morning, good afternoon,
1:44:35
good evening and good night.