Latest / trading places / OpenAI $830B vs Anthropic $380B: The Future of Private Market Pricing with Tyson Hendricksen | E24

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OpenAI $830B vs Anthropic $380B: The Future of Private Market Pricing with Tyson Hendricksen | E24 · trading places

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  It is going to be the biggest round of all time and I mean not
• 0:02
  just the biggest proud round, but it it dwarfs the biggest IPO
• 0:06
  of all time. When we first started noticed
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  there was no pricing, you couldn't get pricing, There was
• 0:10
  no one was publishing pricing. It didn't exist.
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  And so we started publishing it publicly.
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  We do real time stuff. Yes, I think we all agree AI is
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  going to have impact, but like is this over concentration in
• 0:22
  1023 names really the story or is that you know sort of just
• 0:26
  everybody buying the most visible brands?
• 0:53
  Hello and welcome to Moviefone. Hello, and welcome to Moviefone.
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  No, actually, I think the story is welcome to Trading Places,
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  the very worst, most terrible, horrible VC podcast on the
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  market. Aman, you're wearing the
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  opposition's jersey there. What is going on?
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  True opposition. I'm a I'm a dual citizen, so for
• 1:19
  purposes of ice hockey. I'm a trader.
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  Pick a side here buddy. I do.
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  In hockey, I pick Canada and everything else I pick the USI
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  actually do have an American jersey for ice hockey.
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  The reason I'm wearing all this time in Italy, FEFE Olympics.
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  And so I get to pick and choose. Oh my.
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  Gosh. You're.
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  At the. Olympics.
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  The the problem is when I've got the ice hockey game tomorrow is
• 1:43
  the gold medal game. So we're filming this on
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  Saturday the 21st and probably the most watched ice hockey game
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  of all time is going to be tomorrow right here in Milan
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  where I'm going to be rooting for Team Canada.
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  But you know it's going to be. It's one of those.
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  It's going to be. Great, you know, a great Olympic
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  tournament with all kinds of comebacks and everyone going
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  overtime and nothing's for certain.
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  So I'm just hoping for a good game and I think it'll be super
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  exciting. So, Aman, what's happening in AI
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  news this week? It's another big week for
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  raising rounds for opening Anthropic, right?
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  Yeah, Open AI is now very close to finalizing the $100 billion
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  new round, which would be the. $100 billion.
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  I wonder what that is in Italian lira.
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  We're gonna use that currency anymore.
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  It's all EUR over here. It is going to be the biggest
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  round of all time. And I mean, not just the biggest
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  prong around, but it it dwarfs the biggest IPO of all time.
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  It's over 100 billion. NVIDIA is now locked in for 30
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  billion. Amazon has already said they're
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  in for as much as 50 billion. And SoftBank and Microsoft and
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  others are entered as well. So it looks like that round's
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  going to get done at 8:00. 30. We'll cover that more evaluation
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  corner and talk a bit about that.
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  And then their biggest competitor in Tropic is right on
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  their heels is now they're done with a new round at a $380
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  billion evaluation. So the the big two just keep
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  getting richer and they keep pulling in a lot more capital
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  than any other private rounds in the history of of venture or
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  private equity. Who would you say as a head
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  right now in that race? The the winner is really depends
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  on whether you're talking about consumer or whether you're
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  talking about business enterprise side.
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  What we've seen so far, just looking at the biggest IPO
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  dollars of all time and comparing where, where these two
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  stand. The biggest IPO to date has been
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  Saudi Aramco at 25 billion. Opening AI broke that record
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  with 40 plus. Now that they're going to 100, I
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  think that's not the lead in terms of fundraising and they
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  have to lead on the consumer side.
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  So that probably puts them in the, in the first in first
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  place. But Anthropic is gaining on them
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  in B to B. And it seems like over the last
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  couple of years opening AI has lots of market share there.
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  So I, I would actually make the case that on a valuation basis
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  and in terms of who's got the lead in terms of the, the
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  business segment, Anthropic might be the might be the better
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  bet at 380 than Open AI at at 8:30.
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  Our next item is Stripe is raising again at a higher
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  valuation, right? This is a tender offer.
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  They are, they have not declared any primary in this round.
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  So it's just a, just a secondary offer.
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  It seems like they have and they'll be able to do this very
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  successfully. Their, their, their last round
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  that they've done prior to this was at 106 billion.
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  Before that they were at 91 billion.
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  They've done a pretty good job of maintaining those valuations.
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  Now they're talking about $140 billion for an employee tender
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  offer. And it looks, it looks to me
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  like they are continuing to do things like apply for a banking
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  license. They're winning the payments
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  game. They're broadening the
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  franchise. They're all, they're doing all
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  the things that you'd expect them to do in order to, in order
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  to broaden out that fintech franchise.
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  And because evaluation is steady or going up, they don't really
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  need to go public. They're creating liquidity for
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  the early investors, their employees.
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  They're probably more actively in a more organized way than any
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  other company out there. So it may be a long time before
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  they go public. They seem to have an A permanent
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  alternative figured out. So this is a case where I think
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  we really are seeing a company that may never go public.
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  Like they have plenty of access to capital from private markets.
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  I think unlike Anthropic or Open AI, they don't need to go raise
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  money. Maybe unlike SpaceX, they're not
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  trying to build data centers in space.
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  So I wonder if Stripe just remains private forever, which I
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  guess means that the tender offers and secondary sales are
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  the primary method of liquidity for employees and investors in
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  Stripe, right? If you can pull it off in the
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  private markets, they are one of maybe a handful of companies
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  that that can. One challenge with being a
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  private company and just doing private tender offers is a lot
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  of times when investors expect up into the right rounds.
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  They don't want to be, they don't want to see down rounds
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  and companies reducing the evaluation of what they've
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  invested in. Most companies aren't like
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  Stripe are able to provide liquidity, but they're not able
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  to guarantee up into the right rounds all the time.
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  So you just have to manage it in a really careful way.
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  Now Stripe has done one major down round.
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  You can see on the chart they had a, they had a peak valuation
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  around 100 billion in 2000, 2020 one, they got reset into the mid
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  50s, I think it was a 55 billion valuation.
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  But since then they've been able to raise money and go up and to
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  the right. So as long as you can pull that
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  off, I think there's a lot of value to being private, trading
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  liquidity through these tender offers, letting early investors
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  get out learning, letting employees get out, receiving
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  their option prices. But when you have to do a real
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  down round to reset, I think that's when it gets complicated
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  and public investors know prices go up, prices go down, they can
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  trade it. So they're a little bit more
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  resilient that way. So I guess as long as strike
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  keeps going up and to the right, they can pull it off.
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  I don't know they can do it forever though.
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  Me, I'm a vanilla Man Ray. We have no interest in a
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  milkshake that contains no milk when we had sawdust to the
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  hamburgers. While we're at it, frozen French
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  fries, OK, another item we have is another big company,
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  Databricks is completing another funding round.
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  This was a little bit a week ago, but they completed $5
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  billion in funding, 2 billion in new deck capacity at $134
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  billion evaluation. The company's been growing
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  quickly, 65% year over year growth for a big company now
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  doing more than 5 billion in revenue, 5.4 billion and
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  prepared to go public, quote, when the time is right, UN quote
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  by CEO Ali Gozi. So what's the story on Dana
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  Bricks and why is this important for a secondary market?
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  Well, they're also I think in a position where like Stripe they
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  can go public whenever they want to.
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  I think they have decided to stay private for a while longer.
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  We had looked at them in our valuation corner and we had said
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  they compare favorably. They're similar size Snowflake
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  in the public markets. But the valuation they just
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  closed down here is 134 billion snowflake's at 60.
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  And so if they were, if they were to take their chances in
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  the public markets, I don't know that they could get 134 with the
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  current sapphire. A little lower valuation, right?
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  I would think so I guess the plus they have on snowflake,
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  they're a little bit bigger, they're 5.4 billion in in in
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  revenue or think ARR technically and snowflakes in the mid fours,
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  but they're growing a lot faster.
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  So 65% growth versus Snowflakes around 29% last quarter.
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  So I guess the question is you know what if that growth rate
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  with that with that command $134 billion valuation, 25 X AR
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  multiple. I don't know of any company is
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  right now in the SAS space that are at 25 X.
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  Multiple, that's a public company, yeah, but I guess
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  Palantir, maybe they do want to stay private there for a little
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  bit longer. Yeah, the fact they can get it
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  down 134 and offer liquidity their employees, that seems like
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  a better deal than they get in today's SAS markets in the
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  public's. Our next story is another
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  primary around this is Harvey AI raising 200 million at 11
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  billion and Harvey's been raising money pretty quickly.
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  Ahmad, what do you think about that valuation just months after
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  8 billion, It's raising at 11 billion.
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  Yeah, they were, they last round was just a few months ago in the
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  fall at 8 billion from Andreessen, which is a great
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  investor and I thought a good valuation.
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  But this is at 50 times plus AR and they're raising at 11
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  billion. So they're already, you know,
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  jumped their valuation by 3 billion from last time.
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  I don't know, the whole legal space is in turmoil.
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  There are a lot of legal companies in the public space
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  that are cloud native and SAS companies like, you know, CS
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  Disco and others like that. And they have, they have not
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  done well because of the primarily because of the threat
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  of AI. And I guess, you know, Harvey is
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  a is a play on the disruptor. And it's just that as that space
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  has become completely opened up by the just tools that Anthropic
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  is is launching that makes in house legal easier.
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  No one's safe in the public markets.
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  And apparently, you know, Harvey is the one that's going to it's
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  going to put all those guys out of their misery.
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  So I don't know, it seems like a really rich valuation to me
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  though 50 times plus, you know, on a multiple basis for even for
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  a company doubling every year seems.
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  Yeah, I think over 50 X AR is pretty high, but the quality of
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  investors here is also amazing. You've got, you know, Sequoia
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  and GIC and this round previously I think you've had
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  Kleiner Perkins and COTU in the round.
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  So it's really premium investors.
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  Andreessen Horowitz was also in the evaluation.
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  So I don't know a lot of the big guys who are, you know, the top
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  VCs are leading these rounds and making bets.
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  So I don't know if I want to second guess all those folks.
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  Now, I'm sure they know what they're doing and the folks out
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  there who are, who are in the space that are doing legal work.
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  So there's a bunch, there's a bunch of companies that are
• 10:30
  doing legal work like CS disco or, you know, Thomson Reuters, I
• 10:34
  think their, their their shares are down thirty, 4050% year to
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  date. So they, the the evaluations are
• 10:39
  moving from them to these disruptors and it just feels
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  like it's the law is going to be one of those areas where AI will
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  very quickly displace the work that's been doing.
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  So you know, Harvey is definitely benefiting from that.
• 10:53
  You. Don't want to save a bundle?
• 10:54
  Not like that we're talking. About the same great taste.
• 10:57
  Same great taste while boosting the bottom.
• 10:59
  Line. It's called a milkshake ray.
• 11:01
  Real milk. Now and forever.
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  I understand. All right, a little bit of macro
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  news and kind of a big story. The Supreme Court struck down
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  Trump's tariffs, or at least the emergency tariffs use.
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  And the decision was six to three.
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  A couple of those Supreme Court justices that voted against
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  Trump were appointed by Trump, and he wasn't too happy about
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  that, right, Aman? Well, he was so you know, I
• 11:31
  guess he's, I guess he's a little bit bitter about that,
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  but you're right. He's the one who he's the one
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  who appointed them. I guess it's a tough decision
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  for him, but it's one that we talked about and we predicted.
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  Let's just go through the some of the details because I want to
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  make sure we're talking about the legal principle and then
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  also like what comes next with tariffs.
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  So it's a six, three decision. There are three conservatives in
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  the majority. That was Robert Spare and
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  Gorsuch and they kind of said what I think you and I had had
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  suggested was how this would come out, which is they've
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  offered a legal principle of the major questions doctrine, which
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  says, hey, if Congress is going to give power to the president,
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  they got to be really clear and specific in what they do.
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  And in this case, they just didn't just didn't do it.
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  And those were the three conservatives in the majority
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  who ultimately carried the day that they were joined by three
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  liberals in the in the majority. But those 3 liberals have not
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  signed off on major questions, so they are much more tolerant
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  of a president having unbounded executive power.
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  And just in this case, they were like, this is not what Congress
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  meant to do with this law, Ayyappa.
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  And so it was a very limited ruling because you have the
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  majority is essentially 2 different factions with two
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  different views on this major questions doctrine.
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  Then there's a minority of three justices who are more on the
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  conservative side who do believe in the major questions doctrine.
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  They are saying, yes, you do have to be specific.
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  Congress does have to be specific to give the president
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  powers, but in this case we think they did.
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  We think Ayappa does give people enough direction enough the,
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  enough direction to the president to be able to impose
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  tariffs. And so there's really three
• 13:00
  different factions to the court. And you know, the, the result in
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  the in the near term is the Ayappa tariffs got struck down.
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  The baseline tariffs that came out on Liberation Day a year ago
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  are illegal. And that is going to provide, I
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  think the short term, you know, probably short term benefit to
• 13:16
  importers into the markets. On the downside, though, here's
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  what I think is going to happen next.
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  Because the court didn't really have a clear majority on the
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  major questions doctrine and there was a split in the
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  conservative faction. It's entirely possible now that
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  the that there's a road map for Trump to put back most of his
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  tariffs. That chart I have on the right
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  to shows all the different trade authorities they've been granted
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  by Congress over time. It's the court did not go out
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  and say the president cannot put tariffs on unless they get a
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  very clear marching order from Congress.
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  They split on that question. So what now they will do is
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  they'll just say Ayappa's tariffs, they are illegal.
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  Trump will probably come back and say, well, I'm going to
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  reapply all the tariffs again and I'm going to use one of
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  these other 3 or 4 trade authorities.
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  Section 122 of the US Trade Act in 1974 lets me do most of one.
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  What I want to do this in limitations.
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  These these tariffs are temporary.
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  They only last 150 days. They will Max out of 15%.
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  It's not as broad and sweeping as what I appa would have given
• 14:11
  him, but he can probably do most of what he wanted to now using
• 14:14
  this other trade authority. And I suspect that will come
• 14:16
  back in front of the court. And if that section doesn't
• 14:18
  work, then there's going to be a few other sections you can rely
• 14:20
  on. So I think it's a short term win
• 14:22
  for markets and the short term set back of the administration.
• 14:25
  I do agree with the decision. I, I wish they'd been a bit more
• 14:28
  definitive in providing guidance as to what tariffs may or may
• 14:31
  not be applied by a president or what circumstances.
• 14:34
  This court doesn't do that. They're very conservative and,
• 14:36
  and it was very narrow ruling. So I think it's a small win for
• 14:38
  the market. They'll probably help tack a
• 14:39
  little bit, but it'll be a short term win.
• 14:43
  So isn't it the case that Trump is still imposing up to 10%
• 14:47
  tariffs and he has a six month window to do that?
• 14:50
  So I think I'm almost immediately in response to this,
• 14:53
  Trump said, hey, we're still going to do tariffs at 10%.
• 14:55
  And, you know, that may be a temporary action, but there's
• 14:59
  still tariffs in the mix. And then there's selective
• 15:02
  tariffs in particular categories.
• 15:05
  By the way, if you don't know much about the this 1930 Tariff
• 15:08
  Act and Section 338, which I think will now will now become
• 15:11
  everyone worries about if you're I'm going to date myself.
• 15:13
  In the 1980s, there was a movie called Ferris Bueller's Day Off.
• 15:17
  Bueller, Bueller. Ben Stein is the professor
• 15:24
  talking to Looking for Ferris Bueller.
• 15:26
  He's giving an economics lecture and Ben Stein was a real
• 15:29
  economist, was talking about the Tariff Act of 1930, the Smoot
• 15:32
  Hawley tariff fact. So this is now going to become,
• 15:35
  in addition to boring everyone in the 1980s in high school,
• 15:37
  this now become the tool with by which the president puts back
• 15:41
  some or most of his tariffs. So it'll get back into popular
• 15:44
  culture, which I like. Alan, you are the worst economic
• 15:47
  nerd of all time. Bueller, Bueller.
• 15:55
  Bueller, Bueller. He's sick.
• 16:01
  OK, we'll end on this topic with a with a picture.
• 16:03
  I'm sure you won't appreciate, but I just want to like do this
• 16:07
  to rile you up a little bit. So here's a picture of all
• 16:10
  three, all nine justices and how they voted.
• 16:13
  You can interpret that and how you wish.
• 16:15
  But any surprises here on who voted no and who voted yes?
• 16:20
  And I think the liberal voting, you know, to, like, reject
• 16:24
  Trump's tariffs is not maybe a surprise on partisanship or
• 16:27
  principle. But what about the conservatives
• 16:29
  who voted against Trump? So Barrett, Gorsuch and Roberts?
• 16:35
  Yeah, no real surprises. I don't think I'm a little
• 16:37
  disappointed in the six conservatives for not getting
• 16:41
  closer to a common position. So the three here were in the
• 16:44
  majority. So Roberts, who wrote the
• 16:45
  opinion, Gorsuch, who I think I'm personally closest to and
• 16:48
  understand his logic the best, and then Barrett, they all said
• 16:52
  major questions doctrine. If Congress is going to give
• 16:55
  power to the president, it has to be clear and specific.
• 16:58
  And they were principled on that.
• 16:59
  That was they they ruled that way when Biden was in power, the
• 17:01
  ruling that way with Trump. They're like, you didn't get
• 17:03
  explicit consent or approval from Congress on tariffs.
• 17:07
  So that's why these are illegal. The other three conservatives
• 17:10
  who were either Trump appointees and they guess Kavanaugh or at
• 17:14
  least in the case of Alito and Thomas generally tend to vote
• 17:17
  with with the president. They were more sympathetic to
• 17:20
  the president and they were like, OK, we agree with major
• 17:23
  questions doctrine. You're supposed to offer a a
• 17:26
  very clear directive to Congress in this case.
• 17:30
  We think there's enough there. We think Congress gave enough to
• 17:32
  the president that he can apply tariffs if not on IEPPA, He
• 17:35
  hasn't with his other authorities.
• 17:37
  He checked the wrong statutory box.
• 17:39
  They'd be more deferential to the president.
• 17:40
  I think the weird ones are actually the liberals in the in
• 17:43
  the majority. They have typically been very
• 17:46
  supportive of broad presidential power in this case that we're
• 17:49
  not. And maybe that's because that's
• 17:51
  Trump. Maybe that's just because I
• 17:52
  think to be fair to them, they're being more principled
• 17:54
  than saying this trade authority is very clear.
• 17:56
  The the law gives the power to regulate commerce to the
• 17:59
  president doesn't give the power to pet tariff.
• 18:02
  A tariff is a different thing than a regulation.
• 18:04
  We're not going to look past that and we're going to we're
• 18:06
  going to force Congress to be explicit here.
• 18:08
  In other cases, they've been a lot more tolerant when Congress,
• 18:11
  you know, speaks in kind of a loose way and gives the
• 18:13
  president a lot of power to do things like school closures
• 18:16
  during COVID or emergency shutdowns and a lot of that
• 18:19
  stuff, student loan forgiveness. They were very open to
• 18:23
  presidential power and authority.
• 18:24
  Not here. I think they've been a little
• 18:25
  more inconsistent. But maybe, as you say, there's a
• 18:27
  partisan reason for it and maybe why they came out, why they did.
• 18:31
  But the the the three and the majority of the conservatives
• 18:33
  were definitely standing on principle.
• 18:35
  And that's exactly how I would have expected them to vote.
• 18:39
  I think a lot of people were pointing to Gorsuch and sort of
• 18:42
  writing this opinion here and he kind of tried to give this a
• 18:46
  little bit of a, a soft landing against Trump.
• 18:49
  But many, many people were quoting the Gorsuch sort of
• 18:53
  write up of this on, on both the the right and the left.
• 18:56
  And I kind of agree with you. It seems like he's the one who's
• 18:59
  kind of being pretty principled in in his decision here.
• 19:03
  Yeah, I think I think they well I think he and Roberts and and
• 19:07
  Verdar as well. I think gorgeous Gorsuch's
• 19:09
  principles go further than what anyone else in the court has
• 19:13
  said. He would probably go one step
• 19:14
  further than the others in saying it is actually impossible
• 19:18
  for Congress to delegate the power to tariff to the
• 19:21
  president. You just can't do that.
• 19:23
  Non delegation is it is an important principles separations
• 19:25
  of powers. If, if the Constitution gives A1
• 19:27
  power to Congress, they can't hand it over to the president.
• 19:31
  The other eight. I think if he, if he taught the
• 19:32
  other 5 conservatives and, and, and said, you know, some full of
• 19:36
  sodium kind of all and said, what do you think about this?
• 19:38
  I think they would probably say we kind of agree with, with
• 19:41
  Borsich that this non delegation is important is an important
• 19:44
  point. But Roberts is very incremental.
• 19:47
  He's like, I don't want to take that on if I don't have to.
• 19:49
  I'd rather just resolve this case the way that it came out,
• 19:52
  solve this case, and then when it comes back around again,
• 19:54
  we'll solve that to the next case.
• 19:56
  But I don't want to make any big, broad, sweeping principles
• 19:59
  and change, you know, precedent unless I really have to.
• 20:01
  So it's a more careful approach. It's the Roberts approach.
• 20:04
  It's a more incrementalist approach.
• 20:05
  But Gorsuch, I think, is laying out a non delegation principle,
• 20:08
  which is even if Congress tried to delegate the power to tariff
• 20:10
  to the president, they can't do it.
• 20:12
  It's in the Constitution. You can't just give up the power
• 20:14
  of the president. You don't have a country.
• 20:17
  Not only is it in the Constitution, you could argue
• 20:19
  it's one of the founding principles of the Constitution.
• 20:22
  The reason we had a revolution was because we were being
• 20:25
  unfairly taxed by Great Britain. The whole Tea Party thing, no
• 20:29
  taxation without representation. These tariffs are really almost
• 20:34
  a tax, if not exactly a tax on consumers.
• 20:37
  That wasn't set up by Congress. It was set up by, you know, this
• 20:41
  case almost executive ordered by the president.
• 20:43
  I think they are attacks. I think most, most economists
• 20:45
  see it that way. I think the court has has pretty
• 20:47
  much said said the same thing. Certainly the majority said the
• 20:50
  same thing. They said this.
• 20:52
  Anytime you're paying money into the Treasury, it's a tax,
• 20:54
  whatever you want to call it. You can call it a license fee.
• 20:57
  The conservatives in the in the descent made a, a distinction.
• 21:00
  That's not a tax. These are license fees.
• 21:02
  Congress has delegated license fees and import quotas and
• 21:05
  controls. But anytime you're paying money
• 21:07
  to the Treasury, I do think it's a tax.
• 21:09
  And that's how the majority saw it.
• 21:10
  So that's where Gorsuch could come out.
• 21:12
  I think the liberals, you know, would would also, they also in
• 21:15
  this case they agreed. But Gorsuch is the it's the most
• 21:18
  principled, and the others have been a little more
• 21:19
  incrementalist in this approach. Well, on the subject of taxes, I
• 21:23
  guess we'll wrap up our news section today by talking a
• 21:26
  little bit about an upcoming webinar we're going to be doing.
• 21:28
  We're having a webinar on Thursday the 26th and actually
• 21:32
  also the following Wednesday, 4th of March.
• 21:36
  The seminar webinar is called Found Money, Why Smart investors
• 21:38
  Never Donate cash. We we've covered this topic
• 21:40
  before in one of our early earlier podcasts with Daniel
• 21:44
  Blake from UI Charitable. He's pictured in that image.
• 21:47
  They're looking a lot sharper and smilier than I am.
• 21:51
  But this webinar is going to be at how you can take illiquid
• 21:53
  assets and donate them in order to get tax deduction.
• 21:58
  And also how within that DAF you can still manage those illiquid
• 22:02
  assets to hopefully greater, you know, returns that you can then
• 22:06
  use for charitable causes. You know, things that you care
• 22:10
  about out of your donor advice fund.
• 22:13
  So look forward to having people who might join us for that
• 22:15
  webinar. We're having one this week on
• 22:17
  Thursday when the episode comes out and the following week on
• 22:19
  Wednesday. All right, thanks for a great
• 22:21
  news session I'm on. I look forward to that
• 22:23
  evaluation corner coming up where we'll dive into anthropic
• 22:26
  and open AI. All right.
• 22:28
  Sounds good. Thank you, Dave.
• 22:40
  Today we have Tyson Hendrickson from founderceoofnotice.co.
• 22:44
  Tyson, welcome to the program. Thanks for having me.
• 22:46
  Yeah, it's really great. It's a pleasure to be here and
• 22:48
  I'm excited to chat with you today.
• 22:50
  That's great, I noticed you got some flames in the background.
• 22:53
  I think that's the everything is fine meme with the dog.
• 22:57
  Yes, coffee. Is that a reflection?
• 23:00
  Is that a reflection on the current market conditions?
• 23:01
  Tyson, It's really it's. Really funny.
• 23:03
  It's, it's actually, it's funny. I set this as my background when
• 23:07
  we pushed our initial product like 2 years ago or three years
• 23:10
  ago. And it just seems like it always
• 23:11
  fits either the markets are crazy or things are crazy in the
• 23:14
  company or whatever. So yeah, it's all the things I'd
• 23:17
  love to. Hear a little bit about you know
• 23:19
  your background and how you got to doing notice after.
• 23:22
  Stanford actually, I actually trained for the Olympics in
• 23:25
  track and field for a few years. There's a long distance router
• 23:27
  that was like amazing. Yeah, it was, it was, it was 20
• 23:30
  years ago and like 75 lbs ago. So definitely not something I do
• 23:34
  anymore. But but yeah, I was, I had, I
• 23:37
  had hopes and dreams and then I they were met with injuries and
• 23:39
  disappointment. But after that I did, I actually
• 23:42
  did some stand up comedy for about a year and a half in the
• 23:44
  Bay Area, which was crazy experience.
• 23:46
  Yeah, you. Know you're you're kind of funny
• 23:48
  Tyson funny looking, but don't quit the.
• 23:50
  Funny looking for sure. Yeah, funny looking was my only.
• 23:52
  That was my go to Yeah, I did that and then helped to kind of
• 23:55
  restart an early social media company that was a friends of
• 23:58
  mine from school and it was unfortunately not called
• 24:00
  Facebook. And then I did a project
• 24:02
  learning how to kind of how to code for a while.
• 24:04
  And it was it was basically like a coupon site that was
• 24:06
  generating money to do microfinance loans because I was
• 24:08
  really interested in social cool stuff and how come you make
• 24:11
  things better. And I I had a friend, Matt
• 24:13
  Flannery, who founded Kiva and I was late night.
• 24:16
  Yeah, yeah, he's awesome. So I was so.
• 24:18
  You you spend time trying to make the world better.
• 24:21
  I did, I did yeah. I was, I was chatting with him
• 24:22
  late at night over beers in the mission and I was getting a hard
• 24:24
  time out, micro fans failing. I was like, oh, they just borrow
• 24:26
  money to buy shampoo and stuff. And I was just trying to piss
• 24:28
  him off. And and he he's like, you don't
• 24:30
  know, you've never been there. And so I was like, well, I'll go
• 24:32
  tomorrow, I'll go, I'll go next week.
• 24:34
  And and so I booked a flight to Uganda and he just responded
• 24:37
  like 3 in the morning and said you need, you need, you know,
• 24:39
  you need shots, right? And I was like, oh, and I had to
• 24:41
  get like 10 shots and whatever. Anyway I went to Uganda and and
• 24:44
  spent some time there and ended up going back and spending what
• 24:48
  I thought would be a year. I was ideas and none of them
• 24:50
  worked and I end up being a pineapple farmer and doing some
• 24:53
  things in northern. Uganda.
• 24:54
  Yeah, yeah, yeah. And a peanut.
• 24:57
  Trader a peanut trader down the. Rabbit Hole.
• 25:00
  Beau Shred. Yeah, I was, I was, Yeah.
• 25:02
  It was that it was actually a really good experience because
• 25:04
  it kind of like separates you from this like, tech persona.
• 25:08
  I got to keep up with my classmates and do this stuff.
• 25:10
  And it's like, well, that's gone now.
• 25:11
  You know, this is on. You're on some different Rd.
• 25:13
  No one knows where this goes. And so, so I did that for, for
• 25:17
  about 5 years actually. I just want to try and like help
• 25:20
  make things better. And what I found when going over
• 25:22
  this microfinance works, but there just isn't, it's not
• 25:24
  permanent capital. And it's like hard to make big
• 25:26
  investments and there's human capital.
• 25:27
  There's always other things that are kind of missing.
• 25:29
  And so I end up creating a farm that hired a bunch of people and
• 25:31
  kind of help bring a cash crop to a new region.
• 25:33
  It was really, it was really fun, but there was no one there.
• 25:35
  It was all, it was all Aid and Development work, right?
• 25:37
  There was no one doing anything with business.
• 25:39
  So it was a it was, it was an experience.
• 25:41
  So anyways, when I came back, one of my buddies, my closest
• 25:45
  one of my closest friends, I was staying at his house and he had,
• 25:47
  you know, helped Co found Palantir and he's kind of having
• 25:49
  a hard time in the secondary markets.
• 25:50
  And he was like, well, you should really do with this
• 25:52
  because I didn't have the energy to start another company.
• 25:54
  So he's like, you should, you should help me with this.
• 25:56
  So I kind of fell into it that way and I just didn't lie to
• 25:59
  him. I didn't lie to people.
• 26:00
  And so I got recommended to other people because I wasn't a
• 26:03
  liar. That was like a really low bar
• 26:04
  in the market back then. Oh, I've been doing this whole
• 26:07
  thing. Hey, I I'm not lying to you.
• 26:10
  And so apparently I was good at that.
• 26:11
  And yeah. And then from there kind of
• 26:14
  built a little business doing that.
• 26:15
  And then, you know, kind of became pretty, pretty obvious
• 26:19
  some of the challenges in the private markets and at that time
• 26:21
  especially. And and so I started notice to
• 26:23
  try and solve some of those problems.
• 26:25
  And that's that's kind of what brings me to today.
• 26:28
  So you were around for the early days of pound here.
• 26:30
  It sounds like I I met Joe a little bit at PayPal and another
• 26:34
  friend of mine, Jason Portnoy was early CFO over there.
• 26:37
  I don't know how big they were when you were sort of hanging
• 26:40
  out with them, but that's there were a lot smaller more.
• 26:42
  Now, Yeah, yeah, yeah, yeah, for sure.
• 26:44
  Definitely. What, Sir, did you take away
• 26:46
  from that that sort of led to Federus and eventually notice?
• 26:50
  Because I wasn't from outside, I think I kind of got an
• 26:53
  understanding of what it's like for other people that are near
• 26:55
  the market, right? You don't know anything, you
• 26:56
  don't know anybody. And so you have all those
• 26:59
  conversations with people who waste your time and people
• 27:01
  promise you stuff they don't have, and you just kind of go
• 27:04
  through this process that's really painful in time because
• 27:06
  yeah, I know, I know. Never happens.
• 27:08
  What are you talking about? I'm sure you've never
• 27:10
  experienced that. And, and, and so, yeah, just
• 27:14
  kind of realized how fragmented the market was.
• 27:16
  You know, Forge was around back then, it was called something
• 27:18
  else and equity ZEM was there and, and they were doing and
• 27:21
  probably still are doing single digits percentage of the volume,
• 27:24
  right. It's not like the public markets
• 27:25
  where there's two big markets in the US and that's it.
• 27:28
  You know, this was this was they were doing a tiny amount of
• 27:31
  volume. Most of it was being done either
• 27:33
  bilaterally or through these independent brokers that had
• 27:36
  relationships. And so that was kind of the
• 27:38
  realization was about if we could if we could aggregate all
• 27:40
  that data together from all these independent folks who
• 27:43
  aren't platforms, you know, we might actually be able to get a
• 27:45
  pretty good picture about what's going on.
• 27:47
  And that kind of led me down the path of of starting notice.
• 27:51
  Got it. I, I've, we've talked to a few
• 27:53
  other folks on the program that might be in related areas.
• 27:56
  We got sucked at actually just before they were getting
• 28:00
  acquired by Morgan Stanley. We talked to Hive and I guess
• 28:05
  they haven't necessarily been acquired yet.
• 28:07
  We were talking about the Forge acquisition by Schwab.
• 28:10
  There's been been a lot going on in the space.
• 28:13
  We also talked to Cap Light and I think you guys have a
• 28:16
  somewhat, you know, similar relationship to the market, but
• 28:18
  maybe slightly different customers.
• 28:20
  So could you tell us a little bit about how you fit into that,
• 28:24
  you know, set of players, how you're similar are different and
• 28:27
  who your primary customers are? Our approach first and foremost,
• 28:31
  like I think a lot of the platforms out there will try to
• 28:34
  really target institutional stuff, right.
• 28:36
  They want to work on the bigger deals because it's a traditional
• 28:38
  service model and the fee percentage is the same whether
• 28:40
  you're doing $100,000 deal or $100 million deal.
• 28:43
  So, you know, maybe the fee goes down a little bit on $100
• 28:44
  million deal, but you're trying to target the bigger volumes,
• 28:47
  which is why people build data tools and platforms in high end
• 28:51
  services for this clientele and everyone's kind of kind of jam
• 28:55
  in there and, and, and compete for that business.
• 28:57
  And so I I don't know for sure that's what cap light does, but
• 29:00
  I think that a lot of what they do is institutional in nature,
• 29:02
  which is great. I think they do a lot of kind of
• 29:04
  broker to broker connecting as well.
• 29:06
  It's kind of similar to a Zambato etcetera.
• 29:08
  And I think they have a business there where they'll where
• 29:10
  they'll take fees in the middle there.
• 29:11
  Our approach like a little bit different.
• 29:13
  We we have a very small team and we really just want to be like
• 29:16
  data first. So we started out as a data
• 29:19
  platform, which means that we focused on product, we focused
• 29:22
  on going to the very depths that you need to go to, to understand
• 29:26
  capital structures and all these nasty things that we would never
• 29:29
  have built if we just wanted to sell stock in the marketplace.
• 29:31
  Like we would just if we want to sell stock, we just build a
• 29:33
  price chart and be like, all right, here we go to the price
• 29:35
  chart, you know, buy the stock. And so that that's the one thing
• 29:39
  is we're really product focused. And I think the second thing is
• 29:41
  that we've always wanted to be very open.
• 29:43
  So, you know, when we first started noticed there was no
• 29:46
  pricing, you couldn't get pricing, there was no one was
• 29:48
  publishing pricing. It didn't exist.
• 29:50
  And so we started publishing it. We published it publicly.
• 29:53
  We do real time stuff and and anyone can use notice without
• 29:56
  any signing up. We don't we want to be available
• 29:58
  to everyone as a public utility. And I think that's kind of the
• 30:01
  core of what we do, which influences, of course, then who
• 30:04
  are our users and who are our customers and how do we fit?
• 30:07
  And I really just kind of see it as this free tool.
• 30:10
  If you could only get stock prices for public companies if
• 30:13
  you are a millionaire, like, you know, come on.
• 30:15
  It's just, that's kind of how it, how it, how it was right.
• 30:18
  And, and Even so I, you know, even even pitch book or
• 30:21
  something that's like 20,000 a year just to know about
• 30:23
  financings, you know, and, and so we just kind of make a lot of
• 30:26
  stuff free and then we, we have a paid version of the product as
• 30:30
  well. But over time, like our user
• 30:33
  base has grown and we now have between like 150 and 300,000
• 30:36
  people a month that use notice, which is like way more than we
• 30:39
  ever thought. You know, we didn't, we didn't
• 30:42
  know we'd have that many people using notice and the vast
• 30:45
  majority of them are like, hey, it's really cool you have this
• 30:48
  paid data, but I, I'd rather buy the stock than buy the data.
• 30:50
  Can you help us find the stock? And so that's kind of the
• 30:54
  direction that we've been moving now is, is closer towards
• 30:57
  helping to facilitate these transactions, but just doing in
• 31:02
  like a very careful way where we're not, there's just some
• 31:05
  nuance. So like we're not hiring a bunch
• 31:07
  of young brokers and saying, hey, Dick, you want to do a deal
• 31:09
  work with us. We have the best pricing all the
• 31:11
  time for all the companies come work with us in this 22 year old
• 31:16
  person who has been working this job for a month.
• 31:18
  We don't say that. We actually we have this network
• 31:21
  of 90 of the best brokers in the plant that we work with.
• 31:23
  Some of these guys are like two person teams transacting more
• 31:25
  than a billion dollars a year, right.
• 31:27
  These are. Big.
• 31:28
  Institutional like they have tons of special relationships
• 31:31
  into big GPS and etcetera, etcetera and instead we just say
• 31:35
  hey can we work with you and so if someone wants to buy the
• 31:38
  stock we go work with them and we get them.
• 31:41
  We don't we can't always help you.
• 31:42
  We can't always have the best price, but it's it's kind of
• 31:44
  like we want to be the connective tissue between all
• 31:46
  these different little moats that exist in the private
• 31:48
  markets and we don't want to just be another Moat.
• 31:51
  And so we're very open. I guess this is probably the the
• 31:53
  way to frame it. Yeah.
• 31:54
  I mean, I guess it feels like there's some open source vibes
• 31:58
  here in, you know, kind of the way that you go after this.
• 32:01
  And does that give you advantages or disadvantages in
• 32:05
  some areas where these other folks are charging, you know,
• 32:08
  more significant dollars going after only institutional
• 32:10
  customers? Sounds sounds like you have, you
• 32:13
  know, more lightweight structure, but more, you know,
• 32:15
  ease of working with people in multiple different areas.
• 32:18
  Just does that give you a big advantage or do you feel like
• 32:21
  there's? Yeah, I think it's to be
• 32:23
  determined. I, I, I obviously I think, I
• 32:25
  think it's given us advantage to date, right.
• 32:27
  We have we spend $0.00 on marketing with a five person
• 32:29
  team and we have a bunch of people using the site, which is
• 32:31
  pretty good. I think we're we're able to
• 32:34
  really get a good picture, I would say like a consensus
• 32:36
  picture of the market because we're working with brokers all
• 32:39
  over the world and because we're not a broker dealer ourselves,
• 32:41
  because we're not directly calling into their customers,
• 32:43
  trying to compete with them, they have no problem giving U.S.
• 32:46
  data, right? Like the big marketplace is
• 32:47
  trying to get data from the brokers.
• 32:49
  Brokers are like, I'm not going to give you data.
• 32:50
  You're just going to destroy me with it, you know, so, so it's,
• 32:53
  it's like, you know, I'm not going to hasten my own demise,
• 32:56
  you know, And so I think I think we do get the benefits of like a
• 33:00
  better content flywheel. And the other thing that we do
• 33:02
  is we'll actually rank the brokers.
• 33:04
  So we'll rank the brokers based on their trade volume and
• 33:06
  recency. And we'll say, hey, here are the
• 33:07
  top 3 brokers in this name right now.
• 33:09
  Interesting. No marketplace is going to do
• 33:11
  that because these brokers are competing with you.
• 33:13
  So it just gives us the ability to do like a lot of transparent
• 33:16
  things that really encourage these folks to give U.S. data
• 33:19
  and give it to us in a timely way.
• 33:21
  And then we can kind of feed that back to them with, I mean,
• 33:23
  sometimes people just go work with them and we don't get paid.
• 33:25
  That's fine. Sometimes they want to work with
• 33:27
  us and and and we can share the fees with them.
• 33:29
  And that's that's kind of the business and how it's been
• 33:31
  evolving. I want to take the future.
• 33:35
  I want to win. And you don't get there by being
• 33:37
  some aw shots nice guy SAT. There's no place in business for
• 33:40
  people like that. Business is war.
• 33:43
  It's dog eat dog, rat eat rat. Can you give us a little bit of
• 33:49
  a walk through of the product and kind of what the core use
• 33:52
  cases are? I assume it's like, hey, I want
• 33:53
  to find out what the price of this privately traded company
• 33:56
  is. That's the main use case and
• 33:59
  all, right, so we're looking at the blue line is thenotice.co 50
• 34:04
  index. Yes, the red line is the Invesco
• 34:07
  QQQ trust. That's a public, you know,
• 34:09
  index. NASDAQ, yeah.
• 34:11
  So you're crushing the public index well.
• 34:13
  Click on click on the Max like this is the interesting thing.
• 34:15
  So click on the Max and the timeline down below the chart,
• 34:19
  just Max it out. So like, look at 2021, look at
• 34:22
  the gap between the privates and the publics.
• 34:24
  This is not a tradable index. This is a benchmark that we do
• 34:27
  and it's weighted. So a lot of the other guys in
• 34:29
  the space, it's a good example. They'll do like an index just to
• 34:32
  like try and illustrate how the private markets are operating.
• 34:35
  But they'll do them as equal weighted indexes because doing a
• 34:37
  weighted index means you have to know the historical valuations,
• 34:40
  which is really annoying to like calculate estimated share counts
• 34:42
  and stuff. No one does it.
• 34:44
  We do it. And when you look at the
• 34:45
  weighted index, you can see 2021 was a crazy time and now look
• 34:48
  where we are now. So it's right.
• 34:51
  It's a fascinating. Situation, big, big, big
• 34:53
  separation of private and public companies starting I guess right
• 34:58
  around the end of 2020. And you know, the whole crash
• 35:02
  thing didn't really happen maybe until around here.
• 35:05
  I think that's when we really started seeing, you know, the
• 35:08
  SVB blow up and stuff collapsing.
• 35:10
  Yep, Yep. And then it looked like, you
• 35:13
  know, starting around mid 23, everything kind of tracked
• 35:18
  together. Surprisingly for tracking, that
• 35:21
  was the a year that was the. Bottom, that was the bottom.
• 35:24
  The private markets, I think if you ask a lot of people, they
• 35:26
  would say that was the valuation resets kind of stopped going
• 35:30
  down and started to go back up again.
• 35:32
  And then I guess starting in maybe just a little over a year
• 35:37
  ago was when we started seeing that separation again and then
• 35:39
  boom, it just really took off again.
• 35:42
  And this is kind of the AI insanity, I guess.
• 35:44
  So that's a really interesting chart to sort of look at and see
• 35:48
  those differences. Maybe talk to us a little bit
• 35:50
  about, you know, how you come up with these popular companies,
• 35:53
  biggest movers and then brokers. Sure.
• 35:56
  Yeah. So the brokers, it's all based
• 35:57
  on trade volume and recency. I mean, the, the core kind of
• 36:00
  thing that we want to try and collect from the market is, is
• 36:03
  completed transactions and want to verify those trades and make
• 36:06
  sure they actually happened. We want to collect open bids and
• 36:09
  offers. It's really the market activity
• 36:11
  data because that, you know, when things will start to
• 36:13
  happen, we'll see it kind of in the order books and then we'll
• 36:15
  start to see it in trades and then we'll see it in financings,
• 36:18
  right, financings will happen. And so, you know, popular
• 36:21
  companies, just those are just companies that are most viewed
• 36:23
  on the platform we cover. We have about 8000 companies in
• 36:26
  the database. We're pricing about 1200 in real
• 36:29
  time and that's like every three, every 3 seconds during
• 36:31
  the day, taking into account public and private comps and all
• 36:34
  kinds of stuff like that. It's very sophisticated, but and
• 36:37
  that's all freely available. So you can just go look up any
• 36:39
  company you want and you can see what we think the price either
• 36:43
  is because it's based on private market activity data or if it's
• 36:45
  not very liquid right now, what it might trade at if it were to
• 36:48
  trade right now. That's kind of the way we
• 36:50
  approach it. Well, there's a couple of
• 36:52
  companies on here that I'm sort of interested in.
• 36:54
  Obviously everybody wants to know Anthropic, SpaceX, Open AI,
• 36:57
  but I think Andrew has been moving pretty rapidly lately and
• 37:00
  we have a small passion in Andrew ourselves.
• 37:04
  Let's take a look at that. And I guess here's maybe our Max
• 37:08
  and I guess not too much attention, but maybe starting
• 37:11
  around, you know, again, two years ago, perhaps definitely,
• 37:17
  you know, in the past year kind of gone that.
• 37:19
  So did you know that was going to happen?
• 37:22
  Were there any signals in the market that sort of gave you
• 37:24
  indications that things were going to take off did like
• 37:27
  trading volume? Yeah.
• 37:29
  This is the price, but did trading volume take off before
• 37:31
  the price took off? Trading volumes there.
• 37:33
  I think with Andrew, the the key that you would look at is just
• 37:36
  like what's the, what's the excess demand?
• 37:39
  So what's the aggregate volume of bids versus aggregate volume
• 37:42
  of offers and what's the delta there?
• 37:44
  And it's like the most demanded company that people just can't
• 37:48
  find. And so, you know, it doesn't
• 37:50
  always mean that the stock's going to do well, but it does
• 37:53
  often tend to to kind of move, move up in those cases.
• 37:58
  And so you show people that you could get this for, I guess
• 38:02
  you're sort of lead Gen. for them in a way, right?
• 38:04
  Yeah. I mean, you know, I think, I
• 38:06
  think that there's like kind of there's the multiple schools of
• 38:07
  thought here, right. So like a lot of the bigger
• 38:09
  platforms will say, hey, we're with an asset, we're like we're
• 38:12
  the NYSE for private markets, right.
• 38:13
  And I think they kind of think it's going to go that direction,
• 38:15
  just kind of anonymous people transacting through a platform
• 38:18
  and execution happens immediately and stuff like that.
• 38:21
  And we kind of think of it more of like real estate, you know, I
• 38:23
  mean, there's certain folks that know a lot about a certain asset
• 38:27
  or a neighborhood and they might be really active there.
• 38:30
  And then there's certain folks that are active over here.
• 38:32
  And it's not like any one person or one platform can always have
• 38:36
  the best price for all companies at all times.
• 38:40
  It's, it's really a patchwork. It's kind of our view.
• 38:42
  And So what we'll sort of do that through the network.
• 38:45
  You could actually, you could actually do the Elon chart.
• 38:47
  You could do, you could do Tesla, SpaceX, Neuralink, Boring
• 38:50
  Company if you wanted to, right? Right.
• 38:53
  Oh, so I can do Publix as well here?
• 38:55
  Oh. Yeah, definitely.
• 38:57
  Definitely SpaceX has done better than Tesla in the last
• 39:01
  last month or so. That's really cool.
• 39:04
  So our biggest move is based on price or volume or both.
• 39:07
  It's price, it's price driven. So it's big jumps in price.
• 39:09
  Often times it's driven by new financing rounds or new trades
• 39:13
  or tenders that are up. Just kind of a way to highlight,
• 39:16
  I like to folks like what's what's moving the market?
• 39:18
  I mean, the vast majority of people that use notice will
• 39:20
  check out certain companies they care about or they'll create a
• 39:22
  portfolio or they can put in, I bought stock on this day, I sold
• 39:25
  stock on this day, or I have this equity grant On this date.
• 39:28
  This equity grant will track vesting, will track the
• 39:31
  approximate value that will calculate your IRS.
• 39:35
  I bought, I sold, I bought, I sold, whatever.
• 39:36
  We'll do all that for people and then we'll kind of break it out
• 39:40
  at the short class level and all kinds of stuff like that.
• 39:41
  So people will kind of use it to sort of track liquidity.
• 39:44
  So when liquidity does come to a name that maybe not may not be
• 39:47
  as liquid, they can move quickly on that.
• 39:50
  Got it. Ken was also a position we have
• 39:52
  in our portfolio. So I have a vested interest in
• 39:54
  this one. There's actually a seed round
• 39:56
  investor in the company 14 years ago.
• 39:58
  It's been a long road. Amazing.
• 40:00
  Hopefully there's an IPO coming later this year.
• 40:02
  I think that might happen. But interesting to see kind of
• 40:05
  their path over the last few years.
• 40:07
  You know, definitely see peak in the market, you know, in 21, but
• 40:11
  they've kind of gradually gotten back almost to that peak, I
• 40:14
  think in the last year or so. I guess this is kind of relevant
• 40:17
  because you know some of the stuff that's happened in the
• 40:19
  market recently, SAS, SAS crash, SAS Apocalypse, you know, the
• 40:23
  Figma price. Actually, I think today is Figma
• 40:26
  earnings, right. So that's, it may be
• 40:28
  interesting. I wonder if we can check that
• 40:31
  out. So what do you think has been
• 40:33
  happening with SaaS companies? And yeah, we can sort of see
• 40:38
  very precipitous drop after the IPO.
• 40:42
  Yep, I guess now below their IPO price.
• 40:45
  Yes, I guess it's interesting that that's not having an impact
• 40:49
  on Canada so much. In fact, they're in the opposite
• 40:52
  direction. Almost.
• 40:53
  Well, I would say the there yeah, there has been impact on
• 40:56
  Canva. Canva's a super demanded name.
• 40:57
  But you know, we've had opportunities recently where,
• 41:01
  you know, if you look at, if you take away the Figma comparable
• 41:04
  on this chart, you can see kind of Canva on a dollars per share
• 41:07
  basis. If you just like click out the
• 41:09
  the Figma there. But anyways, basically they, you
• 41:11
  know, there are folks that are that are interested in in in
• 41:14
  transaction that we've talked to around 1800.
• 41:17
  But but then, you know, the buyers have kind of retraced a
• 41:22
  little bit just given the fears about the public comps, the
• 41:25
  questions like how well does, you know, we understand that Cam
• 41:28
  is doing a lot with AI. Well, is it doing more than
• 41:30
  Figma? Is it doing more than Adobe?
• 41:32
  Is it doing more than these other guys?
• 41:33
  And is it going to be positioned to win in that environment?
• 41:35
  So you know, we've seen that with other, I would say any
• 41:38
  private company that has pretty clear public comps ish.
• 41:41
  You know, buyers, what happens in these situations is buyers
• 41:44
  want a lower price, sellers want the same price, spreads blow
• 41:47
  out, nothing trades. Our price will move because
• 41:50
  we're looking at public comps and we're saying, hey, we think
• 41:52
  it's probably worth less now because of what's happened to
• 41:54
  public markets, right? What do you think?
• 41:56
  Happened that caused that big jump just in the last 30 days
• 42:01
  like that seems. That was that was a lot of order
• 42:03
  book activity. And so we're seeing kind of like
• 42:07
  bid and offer activity up there. And we when we see that we kind
• 42:11
  of start to expect the trades are going to land around that,
• 42:13
  around that range. You know, we'll have to see if
• 42:15
  they materialize. You know, there's a bit of a lag
• 42:17
  on these trades 30 days or something where they take time
• 42:19
  to process etcetera. So.
• 42:21
  I guess the last thing was kind of this list of brokers.
• 42:24
  And so right now this is maybe a profile, but do you have more
• 42:27
  than just that top 9 as Yeah. We do.
• 42:31
  We work with about 90 brokers and we take trade data from
• 42:34
  them. We kind of verified those trades
• 42:36
  happened and then we sort of ranked these brokers based on
• 42:39
  their trade volumes and activity so that, you know, the market
• 42:42
  can understand who they should talk to about certain names.
• 42:46
  You know, who should you talk to about this?
• 42:47
  And, and we, we currently do a lot of that for the notice
• 42:50
  members. They'll say, hey, I want this, I
• 42:51
  want Canva, and we'll use this list to kind of reach out to
• 42:54
  these folks in succession and figure out who to work with on
• 42:57
  these things. But yeah, I mean, it's, it's
• 42:59
  really, it's, it's about the content flywheel.
• 43:00
  Like the brokers give U.S. trade data and then we use that data
• 43:02
  to rank them. That ranking really boosts them
• 43:04
  a couple 100,000 people a month see that you're one of the top
• 43:06
  brokers. It's not bad for business,
• 43:08
  right? And so it encourages, yeah, it
• 43:11
  encourages that that data. Do you have?
• 43:13
  The biggest mover, what if I'm a little guy on the brokers, but
• 43:16
  I'm moving up the charts? Do you have that sort of like we
• 43:18
  don't have that we. Don't have that yet, but we
• 43:20
  could, we could do it. I mean, the yeah, we don't have
• 43:22
  that yet, but we'll, you know, we can, we'll work on that,
• 43:24
  Dave. We'll build that for you.
• 43:25
  We'll put it out there for you can look for little guys.
• 43:28
  And how about like by security, do you have a list of brokers
• 43:32
  who are the tops in that? OK, I guess I see.
• 43:34
  Yeah. Right there.
• 43:35
  Those are the top couple folks for Stripe right now and that's
• 43:39
  kind of cool. If you reach out, if you want to
• 43:41
  buy it or sell it and you reach out to us, we can help connect
• 43:44
  with all those folks and we work with the other platforms and
• 43:46
  stuff too. Really it's kind of like, you
• 43:48
  know that remember that old thing where it was like when
• 43:50
  banks compete you in, what was that?
• 43:51
  Was that like or something? Do you remember that?
• 43:54
  You know what I'm talking about, Like it was like a lead Gen. for
• 43:57
  credit cards or something. It was like when banks compete,
• 43:59
  you win, you know, or something like that.
• 44:00
  This is kind of like that where like if you talk to us, we're
• 44:03
  going to go get competing opportunities from the network
• 44:05
  and we're going to present them to you and you can kind of
• 44:07
  decide what you want to do. But it's not a coordinated
• 44:09
  thing. It's LendingTree.
• 44:11
  That's LendingTree, yes, so. There's like it's, it's a
• 44:13
  competitive environment. These guys are trying to win
• 44:15
  deals and they got to bring their best opportunity and put
• 44:18
  their kind of best foot forward. It's not like you talk to me and
• 44:21
  I'm, I'm going to bring you one opportunity from my pool and
• 44:24
  that's all I'm going to show you.
• 44:25
  I'm going to show you 5 things and you can decide if any of
• 44:28
  them or any are are going to be good for you or not, you know?
• 44:33
  Hi, welcome to McDonald's. May I take your order?
• 44:35
  Yeah, give me hammer and French and rice and a.
• 44:38
  Coca-Cola? That'd be $0.35 please.
• 44:44
  Well, what has kind of changed the most for you over the last
• 44:47
  couple of years? Are you seeing more of a
• 44:49
  concentration into a top names? How does that affect the rest of
• 44:53
  the market and you know, after we get outside the top 20, top
• 44:56
  30 companies, what does that space sort of look like?
• 45:00
  Yeah, it's, it's a great question.
• 45:01
  I mean, certainly we're seeing concentration.
• 45:03
  I mean when I was when I first started, there would be like 100
• 45:06
  or 150 companies that people would call you and ask you
• 45:08
  about. And now it's now it's 10 or 20,
• 45:11
  right. And so I think before, you know,
• 45:16
  back then, way back then, there were all kinds of stuff where
• 45:18
  there was like local delivery and, and mobile and all these
• 45:21
  kind of waves happening at the same time.
• 45:23
  And everyone you, you would decide kind of what you wanted.
• 45:25
  And now there's just one thing and it's AI, right?
• 45:27
  And so as a result, you're going to get concentration.
• 45:30
  There isn't anyone over here doing something else that you're
• 45:33
  like, I'm going to invest in a non AI company, you know, like
• 45:35
  no one is thinking, do you think?
• 45:37
  That's justified or do you think that's over the top?
• 45:40
  Like, I mean, yes, I think we all agree AI is going to have
• 45:43
  impact, but like is this over concentration in 1023 names
• 45:48
  really the story or is that, you know, sort of just everybody
• 45:52
  buying, you know, the most visible brands?
• 45:56
  Yeah, like I, I think it's even before the AI wave, it was
• 45:59
  SpaceX right there. There's always been a bit of a
• 46:02
  power law in the private markets.
• 46:03
  And I think you've seen the public markets too, right.
• 46:05
  So I don't think that's anything new.
• 46:07
  I do think the concentration here and the unwillingness to
• 46:10
  kind of go off the path, I know you guys do that, right?
• 46:12
  You go look for hidden stuff. Yeah.
• 46:14
  And that's, that's a key value proposition, right?
• 46:16
  Secret Stallions is our keyword key phrase and you know, Private
• 46:20
  Mag 7 is probably more than half the market.
• 46:23
  You know, those seven companies, Maybe it's only 6 now because
• 46:26
  let's say I just got rolled in, but that's like.
• 46:29
  Probably. $3 trillion if you believe valuations, maybe more.
• 46:34
  And then the next group of like you know we call them premium
• 46:37
  deca corns, prima donnas sometimes, but that's another
• 46:40
  30-40 companies, you know canvas in there, probably a bunch of
• 46:43
  other companies that are between say 5 to 50 billion in value in
• 46:47
  that group. That's probably another trillion
• 46:49
  dollars and you probably can't get discounts with those
• 46:52
  companies either, maybe a little bit, but probably not very much.
• 46:55
  And so it's really you're not getting any bargains buying
• 46:58
  secondaries in those first two groups.
• 47:00
  In fact, you may not be able to get any access whatsoever unless
• 47:04
  your ticket size is large enough.
• 47:05
  You're, you know, in some kind of SPV, maybe within an SPV
• 47:09
  within an SPV. But you know, we sort of feel
• 47:13
  like the next 2-3 hundred companies after that, these are
• 47:17
  still companies doing 5000 million, maybe 200 million or
• 47:20
  more in revenue growth is good. We feel like they're going to
• 47:24
  get to an IPO or a large exit. There's no, you know, demand for
• 47:29
  those companies and and as a result, we can get pretty good
• 47:32
  discounts. Yeah, especially if the seller
• 47:35
  is, you know, maybe a smaller seller and there's not a recent
• 47:38
  primary round or recent tender that's gone on there.
• 47:41
  They may be limited financials. So I think that's where we
• 47:44
  really feel like there's some bargain hunting and some value
• 47:46
  going on, but it just seems like the market is totally focused on
• 47:51
  10/20/30 companies and lots of momentum.
• 47:54
  Fundamental evaluation analysis kind of out the window.
• 47:57
  I don't know, sure, sometimes hard to justify being Warren
• 48:01
  Buffett in a market where everything's kind of going to
• 48:03
  the moon. You know, I, I hope someday the
• 48:07
  market wakes up and realizes fundamental evaluation is still
• 48:10
  there. But if you're betting on Elon,
• 48:12
  you're not betting on, you know, traditional valuation analysis,
• 48:15
  I think you're betting on the future.
• 48:17
  That's true. Yeah.
• 48:18
  Look, I think, I think the concentration is there.
• 48:21
  It is. It is.
• 48:22
  It's. One of those things where where
• 48:27
  you know, these, these, these these AI companies are doing
• 48:30
  incredible stuff, but but there are opportunities to go outside
• 48:33
  that for sure. And we we don't see a ton of a
• 48:36
  ton of people, you know, kind of kicking the tires outside the
• 48:39
  normal names. But one of the things to
• 48:41
  realize, you know what you already know, it's like a lot of
• 48:43
  these big LLM companies, they're raising these giant rounds, like
• 48:46
  the $40 billion round from opening a last year.
• 48:49
  And a, a huge chunk of that actually gets kicked out into
• 48:51
  the secondary market. And that's kind of a new thing.
• 48:53
  Like it's not truly secondary. I mean, you're, you're going
• 48:56
  into an SPV, it's going into the primary.
• 48:58
  That's not a secondary trade. It's really so primary round
• 49:02
  that is, you know, syndicable to the retail market.
• 49:05
  Yeah, exactly. Probably even in a step up to
• 49:08
  whatever the number was, like, I think we totally, you know,
• 49:11
  primary rounds get raised and then a 30% Jack up, you know,
• 49:15
  that same asset within 30 days, you know, for the traded
• 49:20
  secondary, which I guess is great for brokers because
• 49:24
  they're just, you know, betting on the transaction, not
• 49:26
  unnecessarily the, you know, the future value.
• 49:29
  But I, I do feel like that's a little, I feel like it's a
• 49:32
  little bit problematic when, you know, some people are like, oh,
• 49:35
  hey, I don't have to pay any carry.
• 49:36
  And I'm like, yeah, but you know, you're not getting any
• 49:38
  extra value from the person that's selling you that stuff.
• 49:41
  If totally if all their money is in the day of the transaction,
• 49:44
  they do not care about, you know, the end game.
• 49:47
  Yeah, it's interesting. I mean, it's, it's the 00
• 49:50
  vehicle with the one time upfront fee.
• 49:52
  You started to come around like 18 months ago really.
• 49:54
  I thought it kind of really became more of a thing and you
• 49:57
  know, I, I think from 5. To 10%, like sometimes 10.
• 50:00
  Totally. Yeah.
• 50:01
  And that's actually not awesome for brokers because if they want
• 50:04
  to put their fee on top, now they're saying, hey, come get
• 50:06
  this great 00 vehicle. It's 14% one time, you know, and
• 50:09
  people are that's not very palatable.
• 50:10
  So I think it's interesting though, because I have.
• 50:12
  Heard from China is for some people they are willing to pay
• 50:15
  that. Sure.
• 50:16
  I guess that's what's a little insane about it, yeah.
• 50:19
  Anyway, it's but at least they're getting primary, at
• 50:21
  least they're getting like liquidation preference and
• 50:23
  they're, you know, they've got some downside protection there.
• 50:26
  Maybe you know, like I mean it's not like they're buying common
• 50:28
  with these crazy markups. But anyways, yeah, so the
• 50:31
  concentration is there, but but that absorbs a lot of the
• 50:34
  liquidity in the market when hey, I can go chase after some,
• 50:37
  do a bunch of work like you guys do and chase some company that
• 50:39
  maybe people don't know about or I can just flip 10 million into
• 50:41
  the open AI round. Which ones well.
• 50:44
  I think it's really two very different customers.
• 50:47
  So for folks who just want big brand names, you know, great.
• 50:50
  There's lots of people competing for that stuff.
• 50:52
  I do think you're definitely paying for premiums.
• 50:54
  You're paying for multi layered access.
• 50:56
  You might have to write a really big ticket to sort of get
• 50:58
  access. I think for the folks that are
• 51:00
  in, you know, I don't want to say the long tail, but the next
• 51:04
  two 3-4 hundred companies, it's much tougher because all the air
• 51:08
  is getting sucked out of the room of those other names.
• 51:11
  So we're actually seeing better discounts, better bargains in
• 51:14
  that group of companies than maybe two years ago because
• 51:17
  there's so much focus on everything that's only AI, only
• 51:21
  SpaceX, only, you know, defence tech sort of stuff.
• 51:23
  And so that's. Great.
• 51:25
  And I will see one. Mid tech company that's growing
• 51:27
  at 4050%, you know, potentially outside the US.
• 51:31
  Nobody cares about that. We're like, this company is like
• 51:33
  minting money, you know, cash flow.
• 51:36
  It's crazy. And hey, if if you're one of the
• 51:38
  employees in one of those companies and Dave comes
• 51:40
  knocking and he offers you liquidity, you need to talk to
• 51:42
  him because liquidity is not an easy thing to come by in this
• 51:45
  market unless you're in a very small handful of companies, so.
• 51:49
  One other question, so we're probably going to have equity be
• 51:52
  on the show in a few more weeks and they're doing employee
• 51:55
  forward contract financing, which is a little bit different
• 51:58
  than the Equizen Forge Hive marketplaces where those are
• 52:02
  transactional, company needs to prove it has to pass a row for,
• 52:06
  you know has to sort of hit them in a price.
• 52:08
  The employee forward contracts might be restricted, but seems
• 52:11
  like it's a little easier for the company to say yes to those
• 52:13
  because it's not affecting the price of the company.
• 52:16
  What do you think about that whole market and do you see
• 52:18
  growth in that area? I do think there will be growth.
• 52:22
  We're seeing an increasing number of people that are
• 52:24
  comfortable or they say at least that they're comfortable doing
• 52:26
  forward contracts. I think that there's yeah, it's
• 52:28
  kind of two things, right. It's like I really want this
• 52:31
  name and this might be the only way I can get it.
• 52:33
  Therefore, I'm willing to go out on the limb a little bit here.
• 52:35
  We don't transact a ton of forwards just because a lot of
• 52:38
  stuff that we do is I would say currently at least institutional
• 52:40
  in size, we are down market plant kind of product is coming
• 52:43
  a little bit later this year. It's it's, it's complex and
• 52:45
  you've done some complicated stuff.
• 52:46
  We talked a little bit earlier and you were telling me some
• 52:48
  stuff you've done that's. Kind of our specialty as we like
• 52:51
  to do the crazy, weird, interesting stuff that other
• 52:53
  people don't. But it does get and.
• 52:54
  That's a huge edge. You did some stuff.
• 52:56
  Well, I think helping sellers figure out how to transact is
• 52:59
  kind of our specialty, particularly some 5 to $10
• 53:02
  million transactions. And again, I, I think because
• 53:05
  those folks don't have a lot of options, you can get a really
• 53:08
  good deal as a buyer. And I've been on the other side
• 53:11
  of that table where I've been trying to sell a complex asset
• 53:13
  at a smaller transaction size. It's just tough when there isn't
• 53:17
  a lot of market activity of buyers for those assets and you
• 53:20
  will give people a bargain or discount or maybe some kind of
• 53:23
  structure that's advantageous. And it's unfortunate too,
• 53:26
  because if the issue were to allow these things to trade,
• 53:28
  then their employees would be able to sell at a much higher
• 53:30
  prices. And so, but there is absolutely
• 53:32
  a discount I think. That's what's going to happen.
• 53:35
  I mean, I think there's an article in the Journal just
• 53:36
  recently, it talked about more people, you know, having demand
• 53:40
  for liquidity because companies are staying private longer.
• 53:43
  And also those companies needing, you know, retention
• 53:48
  with these employees, if they're really, you know, valuable
• 53:51
  employees who are, you know, experts in AI or experts in, you
• 53:54
  know, other defense tech, space tech, you know, they're probably
• 53:57
  not going to want to join a company that doesn't have a
• 53:59
  regular tender offer or some other like employee liquidity
• 54:02
  program or somebody's going to be too tight fisted about, you
• 54:06
  know, giving them liquidity in the company.
• 54:08
  Totally, Yeah, I, I agree. I think that trend is going to
• 54:11
  continue. I mean.
• 54:12
  I think I'm talking my book and we're preaching to the choir
• 54:15
  here, but we see the secondary market expanding in every
• 54:19
  possible path. But I think, you know, employee
• 54:22
  liquidity as one driver, you know, is pretty big.
• 54:28
  I think, you know, other investors and fund managers
• 54:31
  wanting liquidity is also, you know, big.
• 54:32
  And we're just seeing such a long time to IPO now.
• 54:35
  You know, immediate time is 11-12 years and they've been
• 54:38
  stretching to 15 years in a few cases.
• 54:40
  Canvas, I think going to be, you know, 1415 year old company
• 54:43
  coming up soon here. Do you see kind of any change in
• 54:47
  the future to that? Does the whole AI trend have an
• 54:50
  impact on the life cycle of companies going public, or do
• 54:53
  you still think it's going to be a long, long time for companies
• 54:56
  to get to, let's say, 500 million in revenue to go public?
• 55:02
  Yeah. I mean, certainly the trend
• 55:03
  would say they're they're going to stay private for a lot
• 55:05
  longer. I mean, maybe the trend reverses
• 55:07
  at at the public markets are super receptive.
• 55:10
  I mean, I think I think there's going to be the first AI company
• 55:12
  out it's going to do very well, right, probably right.
• 55:14
  I mean, even the ones that are 10.
• 55:15
  Well, right Who? Knows the first 3-6 months.
• 55:18
  I don't know what happens after they start reporting numbers and
• 55:21
  you could see there's. Demand, there's demand for the
• 55:23
  asset, right? Like these private companies are
• 55:24
  in demand, you see out of public vehicles, Destiny XYZ, we're
• 55:27
  just talking trades at multiples of NAV Yeah, there's public, at
• 55:30
  least retail demand for these assets.
• 55:31
  And so, and that could be that could be something there.
• 55:34
  But I just think the challenge will just be kind of weathering
• 55:36
  the storms that come to the public markets and the private
• 55:38
  markets. You can just pretend the price
• 55:39
  is unchanged and everything's fine.
• 55:41
  And just like my background and, and, and and that's difficult,
• 55:45
  right? Like it's a difficult thing to
• 55:46
  do. And when you can raise 40
• 55:47
  billion or 100 billion in private markets?
• 55:50
  You know, well, I think that's what I sort of wonder about
• 55:53
  because, you know, the best, the big difference between public
• 55:55
  and private markets has always been that you can tell a story
• 55:58
  in the private markets, but people are going to look at the
• 56:00
  numbers in the public markets. And maybe that diverges for a
• 56:03
  little while. But, you know, I believe what's
• 56:06
  the adage in the long run, the public market is a weighing
• 56:09
  machine, not a voting. Yeah.
• 56:11
  I just wonder, you know, Elan's certainly pushing the limit of
• 56:15
  what the storytelling can do. You know, when you look at the
• 56:18
  fundamentals of a company like Tesla and you look at, you know,
• 56:21
  the PE ratio and you know, Tesla's sales kind of got
• 56:26
  crushed in Europe and, you know, in Canada in the last year, but
• 56:30
  stock price seems almost unaffected.
• 56:31
  Now. He's talking a story about, hey,
• 56:33
  Tesla's not about cars, it's about robotics and full self
• 56:37
  drive and all that stuff. But but he's telling a story
• 56:39
  that's really about the future and not even just like three
• 56:42
  years in the future, but ten years in the future.
• 56:44
  And I just don't know how long that can last.
• 56:47
  And probably not too many people can do that.
• 56:50
  I feels like elevating your story beyond the actual numbers
• 56:54
  is a temporary, not a permanent, you know, thing in the public's
• 56:57
  public markets. At least not I.
• 56:58
  Think you're right? Yeah, I hope it's not just
• 57:01
  storytelling. I hope that we really do look at
• 57:03
  fundamentals for for some of these companies.
• 57:06
  Yeah, just when you cross that threshold, right, I mean early
• 57:08
  on, of course everything storytelling and then you got to
• 57:09
  cross some threshold where the you start to realize the the
• 57:12
  vision and that that line seems to be moving back a little bit.
• 57:17
  Here you are. What's this?
• 57:20
  Your food. No, no, no.
• 57:23
  I just ordered. And now it's here.
• 57:27
  Well, are you guys going to be able to give us notice for when
• 57:29
  the market changes? We'll do that for sure.
• 57:31
  Yeah. And I think, like, it's having
• 57:33
  some interesting effects. Like, you know, employees are
• 57:35
  leaving a company and they have some amount of time to exercise
• 57:37
  their options. And do I exercise or not.
• 57:38
  And, you know, we've had folks that have thanked us because
• 57:42
  they checked pricing and realized that their options were
• 57:45
  worth nothing. And they're just about to spend,
• 57:47
  you know, $50,000 their life savings to buy worthless stock
• 57:50
  on the way out the door after working at a company that was
• 57:52
  basically a zombie. And there's a lot of those
• 57:55
  companies that are out there from 2021.
• 57:57
  And it's, it's, it's kind of hard for these people to
• 57:59
  understand capital structure because they're just too busy
• 58:01
  doing other stuff. And, and so I think that stuff
• 58:04
  like that is, is, is pretty, pretty killer.
• 58:06
  And then, you know, there's certainly cases where we've had
• 58:09
  issuers, I thought companies would be really mad at us.
• 58:12
  Like I thought initially the companies were really, really
• 58:14
  mad at us for putting out pricing because they didn't want
• 58:16
  people to know that their price was going down or something.
• 58:20
  We've had issuers that reach out and like I've talked to CFO who
• 58:23
  are like, hey, our price is too low on your website.
• 58:25
  And I'm like, OK, do you have any day you can give me that
• 58:27
  will help me to understand what the price is?
• 58:29
  And sometimes they go, yeah, yeah, I'll give you data.
• 58:31
  And then they don't, which means they don't have anything they
• 58:33
  can do refute it. And sometimes they give me their
• 58:35
  trades and we put the trades in and the price adjusts and it's,
• 58:37
  it's amazing. So that that's, and then and
• 58:39
  then and then another group contacts said, hey, our price is
• 58:42
  too on your website and it's I can't hire anybody.
• 58:45
  And I'm like, well, I'm sorry. Do you have any data you can
• 58:47
  give us to help us fix this pricing?
• 58:49
  And he's like, I don't have any they can give you.
• 58:50
  I'm like, OK, well then good luck with hiring.
• 58:52
  Like it's, it's, it's labor allocation, right?
• 58:55
  Like people that don't know these markets like you do, Dave,
• 58:58
  or like I do, they think that this company and this company
• 59:00
  are the same, but there's tremendous demand for this
• 59:02
  company and no demands. No either.
• 59:04
  I mean, I think we're the land of the blind.
• 59:06
  The one eyed man is king. But, you know, sometimes I can't
• 59:09
  always tell, you know, where things are AT and, you know,
• 59:12
  financials are not widely shared.
• 59:14
  We do our best to understand what's going on in companies and
• 59:16
  hopefully at least top line, if not bottom line.
• 59:18
  But sometimes, you know, capital stack is not clear.
• 59:21
  Sometimes, you know, there's more debt out there that you're
• 59:24
  not always aware of or liquidation preferences.
• 59:27
  And I really feel like that's tough for us even, you know,
• 59:30
  though it's our job. And I can't imagine the retail
• 59:33
  market or even some of the institutional market always
• 59:35
  knows what's going on with that stuff and.
• 59:38
  Well, when you really. Do feel like people look at like
• 59:40
  the numbers and look at your screens like, oh, this is just
• 59:42
  like the public markets. I'm like, no, it's not.
• 59:45
  It's not at all like the public market.
• 59:48
  No, it's not. Prices frequently, that's for
• 59:49
  sure. It doesn't trade as frequently.
• 59:51
  The transparency is limited. There's a lot of missing
• 59:54
  fundamental analysis because you don't have, you know, quarterly
• 59:57
  reporting to look at. It's much more like, hey, what
• 1:00:00
  did somebody else do recently? Not like what's the actual
• 1:00:03
  fundamental performance of the company.
• 1:00:05
  It's really hard to get that. Yeah, it's true.
• 1:00:07
  But I do think the secondary market provides an important
• 1:00:10
  function to the primary private market in the same way that you
• 1:00:13
  might say the shorting companies in public market provides a
• 1:00:17
  little bit of interesting pricing signal to public
• 1:00:20
  companies too. It's not quite the same, but
• 1:00:22
  there is some you know, thinly traded volume might not be an
• 1:00:25
  accurate price all the time, but it does give you a little bit of
• 1:00:28
  signal. It definitely does, yeah.
• 1:00:30
  I mean, we, we see that time and time again.
• 1:00:32
  I mean, it's not always, we're not always right.
• 1:00:33
  We're absolutely wrong, like a fair amount of time because
• 1:00:37
  there is there isn't enough data.
• 1:00:39
  Like we do our best with everything.
• 1:00:40
  We use all kinds of stuff. We I mean headcount data and all
• 1:00:43
  kinds of stuff. Let me.
• 1:00:43
  Ask you, let me ask you something.
• 1:00:45
  This this is a fun conversation I've been having with several
• 1:00:46
  people. Do you think you can use
• 1:00:48
  prediction markets to source data on private companies?
• 1:00:52
  And how does that sort of factor into, you know, it's not really
• 1:00:58
  insider trading because these are private companies.
• 1:01:00
  But if employees at companies are betting on prediction
• 1:01:04
  markets and providing information that's otherwise,
• 1:01:07
  you know, confidential, what do you think about that?
• 1:01:10
  Is that is that legal? Illegal is are we going to see
• 1:01:14
  people fired because they're doing prediction market
• 1:01:16
  trainings in their own companies?
• 1:01:18
  Is that a source of information or an edge for brokers or
• 1:01:22
  buyers? I think you can absolutely
• 1:01:24
  source information. I, I think you, it is possible
• 1:01:27
  to source information from prediction markets for sure on
• 1:01:29
  anything, right. If you have long term enough
• 1:01:30
  user base. I think it gets weird with
• 1:01:32
  securities, you know, of course, like the regulatory stuff and
• 1:01:35
  things like that and and they're private companies, but how do
• 1:01:37
  you consider something materially, you know, non public
• 1:01:40
  information like if, if the if the shareholder.
• 1:01:42
  You know, if it's not insider trading, if it's not a public
• 1:01:44
  company, right? Like it might be a
• 1:01:46
  confidentiality breach, sure, but sure, employees doing comfy
• 1:01:50
  agility breach and I find the information on a, you know, a
• 1:01:54
  public website. Totally.
• 1:01:56
  I think, I think it would be something kind of similar what
• 1:01:58
  we've seen order books before big moves, right before big
• 1:02:01
  funding rounds, we start to see a lot of bids that are a lot
• 1:02:03
  higher than the current private market price.
• 1:02:06
  And then before down rounds, we see a lot of large institutional
• 1:02:08
  size offers because hey, I just got to this board meeting.
• 1:02:11
  Oh my God, let's take 20 million off.
• 1:02:13
  You know, that kind of stuff happens.
• 1:02:14
  We still see that leak through the order books and maybe
• 1:02:17
  prediction markets would be a more efficient way to do that.
• 1:02:18
  Who who knows? It's it's hard to say.
• 1:02:21
  Well, I, I think it's certainly possible that you might get
• 1:02:24
  participants in prediction markets who work at the
• 1:02:27
  companies where that information is confidential.
• 1:02:30
  So like, I do wonder what happens if, you know, possibly
• 1:02:35
  those companies are breaching their employment agreements,
• 1:02:38
  confidentiality agreements. I don't know if anybody finds
• 1:02:41
  out about it. I don't know what the
• 1:02:42
  implications are downstream for other people using that data,
• 1:02:45
  but I just I can't imagine that it's not going to happen.
• 1:02:48
  Well, Tyson, it's really been great chatting with you and
• 1:02:51
  thanks for speculating on all the things going on.
• 1:02:53
  It was, it was really interesting to see kind of about
• 1:02:55
  those companies and how the pricing is matched up against
• 1:02:58
  public markets versus private markets and certain privates
• 1:03:01
  versus others. Let's, let's hope those flames
• 1:03:04
  in the background don't get too much higher.
• 1:03:05
  I think we. No.
• 1:03:08
  It might be just fine right now, but it might not be just fine in
• 1:03:10
  a few words. But once you realize there's
• 1:03:13
  flames in the exit, you just have to get comfortable, right?
• 1:03:15
  There's nowhere to go. You can't get out.
• 1:03:17
  You're just, you're just going to be here.
• 1:03:18
  You might as well enjoy it. All right, welcome back to our
• 1:03:34
  valuation corner. And this week with Professor
• 1:03:36
  Aman Virgie straight from Milan, Italy.
• 1:03:40
  And Aman is rooting for the opposition there.
• 1:03:43
  What a traitor on Canadian dual side citizen.
• 1:03:46
  Come on, Aman, pick a side here. Pick a side open AI or
• 1:03:50
  Anthropic. Which one are you on?
• 1:03:53
  That's our topic for today is Open AI raising money, Anthropic
• 1:03:57
  raising money. We can talk a bit about the
• 1:03:59
  details of both those rounds and then let's pick one.
• 1:04:02
  Dave, I think we got to pick a winner.
• 1:04:03
  We had a I'm rooting for Canada. I'm a dual citizen, so I'm
• 1:04:06
  rooting for Canada and hockey. I'm rooting for the US.
• 1:04:09
  And. And everything else, I'm here in
• 1:04:11
  Milan, I'm here with my kids are watching the gold medal game
• 1:04:13
  tomorrow. So I don't know who's going to
• 1:04:15
  win. And I kind of think we should
• 1:04:17
  just do our years of service and pick a winner.
• 1:04:19
  Open AI, Anthropic, which one to be thinking why?
• 1:04:21
  Well, let's talk about Open AI. So they are the market leader
• 1:04:25
  now I guess have been for a while of the LLM platforms.
• 1:04:29
  This week they are just finalizing the details of $100
• 1:04:31
  billion new round at an $830 billion evaluation.
• 1:04:35
  Some of the some of the numbers out there show that post money
• 1:04:38
  as much as 8:50. We'll talk about why in a
• 1:04:41
  minute. These guys have raised $64
• 1:04:43
  billion so far, most of it now from Microsoft, Thrive, SoftBank
• 1:04:48
  and a few others. This is a huge step up from
• 1:04:51
  where they were before. The last time we covered them on
• 1:04:54
  valuation Corner I guess was in the fall, October 25.
• 1:04:57
  They just done this massive employee secondary sale of 6.6
• 1:05:00
  billion and that was at a $500 billion evaluation.
• 1:05:03
  So within four months, you know they're already up 60% in terms
• 1:05:07
  of their evaluation. And before that, their last big
• 1:05:10
  primary was March of 2025, SA year ago and that was at a $300
• 1:05:14
  billion valuation and that was at the time the biggest round of
• 1:05:17
  all time. So within the space of a year
• 1:05:19
  now, they've almost tripled in valuation.
• 1:05:23
  This chart shows the amount of money they're raising in green.
• 1:05:27
  I'll just say it's epic. No, no other private company in
• 1:05:30
  the world raise as much money as the green.
• 1:05:33
  So give them credit for raising money.
• 1:05:35
  But look at all the red, Dave. This is the current and then the
• 1:05:38
  projected cash burn. This is Money going out the door
• 1:05:41
  that they expect to do since 2029.
• 1:05:43
  In the future of mine, we don't have to worry about that today.
• 1:05:47
  That's that's 3-4 years down the road, right?
• 1:05:50
  Well, if you. Don't worry about future cash
• 1:05:53
  flows. Then I guess as an investor,
• 1:05:55
  your job's real easy. All you have to worry about, you
• 1:05:57
  know, is the is the current. But you know, these investors
• 1:06:00
  are clearly thinking about the future.
• 1:06:01
  They're thinking about the future.
• 1:06:03
  The fact they're raising all the green is good.
• 1:06:04
  But the fact they're spending all the red, I would argue is
• 1:06:07
  not good. It means they're going to have
• 1:06:08
  to keep, they still have to keep raising even after this round in
• 1:06:10
  order to keep up with the, the cash burn.
• 1:06:13
  So that's, that's one concern with open AI.
• 1:06:17
  I want to put this in context a little bit like to, to burn $100
• 1:06:20
  billion over the next New Years. If that's what they're
• 1:06:23
  projecting, that is a lot of money.
• 1:06:24
  So if you look on the far right, these are the biggest corporate
• 1:06:27
  burns in history as far as I can tell.
• 1:06:29
  I'm sure I'm missing a company or two along the way, but my
• 1:06:32
  research would suggest they're them burning $100 million.
• 1:06:34
  It's just never been done before.
• 1:06:36
  Meta on their whole Meta initiative on virtual reality
• 1:06:41
  and ARVR, they have burned to date something between 73 and
• 1:06:45
  $76 billion. OK, so opening AI is going to go
• 1:06:48
  above even Meta? That's a lot of money.
• 1:06:50
  Yeah, right. But but they.
• 1:06:52
  Had that cash flow to spend it on.
• 1:06:54
  That wasn't necessarily debt they were spent.
• 1:06:56
  No, it was their their own cash flow.
• 1:06:58
  That was their own money. They earned it.
• 1:06:59
  That was CapEx. A lot of that money had been out
• 1:07:02
  of profits, so they could afford it.
• 1:07:04
  But it just shows you how much money they they spent on it.
• 1:07:07
  And even then opening AI will jump that shark SpaceX at 10
• 1:07:11
  billion, the very, very first iPhone pretty cool and important
• 1:07:14
  piece of technology did it almost by Britain even the whole
• 1:07:17
  way. So almost no burn.
• 1:07:19
  Just to put that 115 in context like the the Marshall Plan after
• 1:07:23
  World War 2 in today's dollars, this is on the left.
• 1:07:26
  The Marshall Plan about $150 billion in in today's dollars,
• 1:07:29
  kind of a big deal. Apollo missions putting, you
• 1:07:32
  know, men on the moon over what was that 1314 years, $260
• 1:07:35
  billion the the big the Great Wall of China, $100 billion
• 1:07:42
  opening. Why over over three years will
• 1:07:44
  outspend the Great Wall of China.
• 1:07:45
  You know how long it took the Great Wall of China to get
• 1:07:47
  built. I want to say it's like 2000
• 1:07:49
  years. So the point is a lot, a lot of
• 1:07:51
  money in a very short amount of time versus these other huge
• 1:07:54
  accomplishments like is it is it really worth it This is now the
• 1:07:57
  question we should be asking ourselves with respect to open
• 1:08:00
  AI. It's.
• 1:08:02
  A pretty big bet. Yeah, it is.
• 1:08:05
  Well, let's, let's stack up Open AI versus Anthropic now.
• 1:08:07
  So on the consumer side, I guess the good news for open AI is,
• 1:08:10
  you know, what are you getting for all this money, right?
• 1:08:12
  They have nearly a billion active users, 35 million paid.
• 1:08:15
  They are the lead player among consumers now by far.
• 1:08:18
  And that's a very valuable price.
• 1:08:20
  On the business side, they are #2 behind Anthropic.
• 1:08:24
  Anthropic is far less prevalent on the consumer side, probably
• 1:08:28
  around 20 million customers right now for quad AI assistant,
• 1:08:32
  a lot more than that, but they're in the in the coming
• 1:08:34
  years for sure. But about 300,000 business
• 1:08:36
  customers and they're number one in the business side.
• 1:08:38
  So if I look at the ARPU for open AI and think about, you
• 1:08:41
  know, is it worth it? I guess I'd start with active
• 1:08:44
  users and then can they make money off of them?
• 1:08:46
  Today they're making 15 to 20 bucks a year in ARPU from their
• 1:08:49
  consumers. Now Google's at 60, Meta's at
• 1:08:51
  60. So I can definitely see how Open
• 1:08:53
  AI can build a much more valuable franchise.
• 1:08:55
  So they can monetize anywhere near what?
• 1:08:59
  Google. Were at and Meta are able to do
• 1:09:01
  Entropic does have a valuable business franchise.
• 1:09:04
  I think they are around $40,000 in their, I wouldn't call it
• 1:09:08
  ARPU. This is just their ARR divided
• 1:09:10
  by the paying customers, their businesses.
• 1:09:12
  Some, some of those paying customers are are paying direct
• 1:09:15
  fees. Some of them have licenses, some
• 1:09:17
  of them are now bringing in other people in the platform.
• 1:09:20
  Take Salesforce an example. Salesforce monetizes maybe 6
• 1:09:23
  times higher than Anthropic, Azure four to six times the size
• 1:09:26
  Anthropic. So there's also runway for
• 1:09:28
  Anthropic to monetize more. The question I guess is, you
• 1:09:31
  know, for both of these guys, can they monetize over what time
• 1:09:34
  frame and just the multiple justify it.
• 1:09:36
  Open AI is now at 20 billion in ARR.
• 1:09:39
  They're multiple at the new round is about a 4142 X.
• 1:09:43
  Could they get to be a $50 billion business, Dave?
• 1:09:46
  If they can monetize like Google and Meta, then they can just
• 1:09:49
  based on their current, you know, user rates and then you're
• 1:09:52
  paying a multiple on let's say 2028 revenues or the potential
• 1:09:55
  revenues of 1617 next. I mean, that still seems like a
• 1:09:59
  fairly generous multiple and a lot, a lot has to go right at
• 1:10:03
  the same time. And Fropic is a 27 times sales
• 1:10:06
  multiple based on their latest round, they're at 14 billion in
• 1:10:09
  ARR, they're raising up $380 billion evaluation.
• 1:10:13
  They are, you know, over the next couple of years, if they
• 1:10:15
  can get to be 80% the size of Salesforce, they then they have
• 1:10:19
  a kind of a similar multiple on those revenues going forward.
• 1:10:23
  So I think it's kind of a, you know, kind of a similar bet.
• 1:10:26
  The concern I have with open AI now and maybe why I might, I
• 1:10:28
  might, I'll tip my vote. I think I'm bleeding towards
• 1:10:30
  Anthropic is a better vet. And here's why the latest round
• 1:10:33
  for open AI, look at the lead investors.
• 1:10:36
  Amazon is the biggest one, right, $50 billion from Amazon.
• 1:10:40
  NVIDIA now says they're in for 30 billion.
• 1:10:42
  It looks like SoftBank wants to come in for up to 30 billion.
• 1:10:46
  So they're already at the $100 billion and they haven't even
• 1:10:48
  talked about the biggest investor, Microsoft to, I'm sure
• 1:10:51
  we'll be in for some of it. So the whole round is being
• 1:10:53
  taken up by strategics, right? Not financial investors, not
• 1:10:56
  venture capital. These are the people you're
• 1:10:59
  investing behind. And that's important because if
• 1:11:00
  open AI is something bad happens to open AI, Amazon is a really
• 1:11:04
  big customer giving them all their cloud computing.
• 1:11:06
  NVIDIA is giving them all their chips.
• 1:11:08
  These are the big stakeholders who will begin to pick and
• 1:11:10
  choose assets that they want in a in a bankruptcy or a workout.
• 1:11:14
  Amazon will say where NVIDIA will say we'll want those GP us
• 1:11:16
  back. Microsoft will say, you know,
• 1:11:19
  all those models that you've built and all their AI talent.
• 1:11:22
  I want them to come work for Microsoft so they have
• 1:11:24
  protections that normal investors don't.
• 1:11:27
  Contrast that to Anthropic. Now they have, they do have
• 1:11:30
  financial investors, their last round that they just closed.
• 1:11:33
  Look at the leads CO2, GIC, Dragoneer, Founders Fund.
• 1:11:37
  I think as an investor, you or I would want to be investing with
• 1:11:40
  that group. Their last round, Lightspeed,
• 1:11:42
  Fidelity, iconic, great investors and they're not
• 1:11:44
  strategics. They are very much aligned with
• 1:11:47
  where you or I would be as a secondary investor or you know,
• 1:11:49
  the folks listening on the pod. Then profit does have
• 1:11:52
  strategics. Amazon was one of their early
• 1:11:54
  backers. In fact, maybe their, their
• 1:11:55
  biggest earlier backer was Amazon.
• 1:11:57
  The total $8 billion in at very early rounds at a $19 billion
• 1:12:01
  evaluation. So they're they've made a
• 1:12:02
  tremendous investment, making a lot of money.
• 1:12:05
  And then Alphabet was their very early investor.
• 1:12:07
  And so they do have strategics and do have people in it who are
• 1:12:10
  customers or vendors. But on the left side's important
• 1:12:13
  because those are the latest investors who are pricing the
• 1:12:15
  round. And that says a lot when you get
• 1:12:17
  to invest behind that group. I think you're much safer as an
• 1:12:19
  investor than investing with the Amazons and Googles or Nvidias
• 1:12:23
  who have, you know, potentially other, other motives.
• 1:12:26
  And the last thing you're. Seeing that those those
• 1:12:28
  companies going different directions, right and Tropic
• 1:12:30
  started with strategic investors, but now has more
• 1:12:34
  recent financial investors opening at kind of the opposite
• 1:12:36
  started with some financial investors, Khosla and others,
• 1:12:39
  but the strategics are leading the more recent rounds.
• 1:12:42
  That's exactly, that's a really good point, yes.
• 1:12:44
  And Tropic absolutely started with Alphabet as their biggest
• 1:12:47
  investor in Amazon. And you can argue, but those
• 1:12:49
  are, you know, those are strategics with ulterior
• 1:12:51
  motives. But the last two rounds, exactly
• 1:12:54
  as I said, that's smart money who is purely financially
• 1:12:56
  motivated. So the, the trajectory for where
• 1:12:59
  they're raising money is, is kind of what you want to see as
• 1:13:01
  a financial investor. Whereas all the money now that
• 1:13:04
  open AI is raising is, is not from the VCs.
• 1:13:07
  I don't want to say smart money versus dumb money.
• 1:13:09
  It's not quite right. Amazon and Google aren't dumb
• 1:13:11
  money, but they're not aligned with the financial investors.
• 1:13:14
  And the other thing on the trajectory is this.
• 1:13:16
  This is the market share on Enterprise LLM.
• 1:13:19
  So the yellow line is Anthropic. You can see that they have gone
• 1:13:22
  from around 12% share two years ago to 40% share today.
• 1:13:26
  And Open AI has gone the other way from from 50 down to 27.
• 1:13:30
  And then you have, you know, Mehta and Llama and a few others
• 1:13:32
  that are that are taking share and in the space.
• 1:13:34
  But for the most part, those are the two leaders.
• 1:13:36
  But Anthropic is gaining and Open AI is losing.
• 1:13:39
  And, and Google is also catching up there too, which is kind of
• 1:13:42
  interesting. So yeah, it definitely seems
• 1:13:45
  like Anthropic has been getting a lot more positive news in the
• 1:13:48
  last six months and seems like their revenue growth has been
• 1:13:51
  great. They're not spending quite as
• 1:13:53
  fast as Open AI as you suggested.
• 1:13:56
  They have financial investors leading their rounds.
• 1:13:59
  Really does seem like, you know, whether whether or not you
• 1:14:02
  thought Open AI was in the lead, Anthropic's been catching up and
• 1:14:06
  I guess we'll see more of more of those two competing, I guess,
• 1:14:09
  you know, through Super Bowl ads by Anthropic, they were sort of
• 1:14:13
  taking shots at Open A is new ad model.
• 1:14:16
  So what are you in in the camp of Anthropic then?
• 1:14:20
  And the valuation, you know, you're paying 830 for open AI
• 1:14:23
  and 380 for Anthropic open eye probably, you know, a little bit
• 1:14:26
  ahead in their business. But are you, are you in the camp
• 1:14:28
  of Anthropic? Is the better is the better bet
• 1:14:31
  or do you feel like open AI is the better bet?
• 1:14:33
  I think, I think I gave you my answer because of trajectory and
• 1:14:35
  maybe some of the yeah in composition.
• 1:14:38
  But what do you think? I think kind of a surprise here
• 1:14:42
  that we agree on this one. I'm probably, you know, if I had
• 1:14:44
  scarce dollars to put to work, I'd probably be butting the mud.
• 1:14:47
  Anthropic versus open AI on the open AI story.
• 1:14:50
  I do think Sam will find a way to raise money and pay those
• 1:14:55
  bills one way or another. I think 1 interesting news
• 1:14:59
  development was a guy named Peter Steinberger had been
• 1:15:02
  working on a project called Open Claw about enabling AI agents to
• 1:15:08
  do stuff and interact with each other.
• 1:15:10
  There was a heated little competition to acquire that guy
• 1:15:14
  and that foundation. I think between Meta and Open
• 1:15:16
  AI, Open AI sort of won that battle.
• 1:15:19
  And I actually saw Peter Steinberger in person a few
• 1:15:23
  weeks ago at a bull book conference up in Frontier Tower
• 1:15:26
  in San Francisco. There was a a conference on open
• 1:15:28
  claw, 900 people were standing outside to get into this, you
• 1:15:32
  know, event that could only actually host 3 or 400 people.
• 1:15:36
  A whole bunch of like crabs and lobster there for people.
• 1:15:39
  So the whole thought theme was around, you know, crustaceans
• 1:15:42
  and everything. But I think the open project,
• 1:15:47
  open source community got a lot of attention for people, this
• 1:15:50
  idea kind of like a swarm of, of AI agents working on your
• 1:15:53
  behalf. And it seemed like, you know,
• 1:15:56
  there was a buzz about who could acquire that talent and open AI
• 1:15:58
  won it. So Sam still seems to be like
• 1:16:01
  making moves. You know, he's kind of a master
• 1:16:04
  of both fundraising, political theater and headlines, probably.
• 1:16:07
  I would say, you know, Dario Amadei is more about substance,
• 1:16:11
  less about the sizzle. And so he's just heads down
• 1:16:13
  making stuff work. But Sam always seems to pull a
• 1:16:17
  rabbit out of his head one way or another.
• 1:16:19
  And I just wouldn't be betting against Sam the same way I
• 1:16:22
  wouldn't be betting against Elon.
• 1:16:24
  Yes. But on the fundamentals, I like
• 1:16:28
  I like anthropic for sure. I just think there are risks in
• 1:16:30
  there that if I had to, if I had to pick 11 bet like I got to
• 1:16:33
  pick one between Canada and the US, there's only one gold medal.
• 1:16:36
  I think. I think I'd pick Entropic and
• 1:16:38
  just, you know, root for an exciting game all.
• 1:16:41
  Right, we're going to wrap up our evaluation corner.
• 1:16:44
  We'll plug our webinar coming up just one more time here.
• 1:16:47
  We're doing a webinar on Thursday.
• 1:16:50
  This is called Found money, Why smart investors never donate
• 1:16:53
  cash. And we'll explain how to set up
• 1:16:55
  donor advice funds, how to donate illiquid asset like
• 1:16:58
  startup stock or VC funds or even other, you know, more
• 1:17:03
  interesting assets like crypto into your own donor advice fund,
• 1:17:06
  How to get a tax deduction for that.
• 1:17:08
  And then how to manage your donor advice fund to, to grow
• 1:17:11
  bigger when you're invested in private companies and venture
• 1:17:14
  funds. Again, we're doing that seminar
• 1:17:17
  on Thursday, February 26th at 11:00 AM Pacific and also the
• 1:17:23
  following week, Wednesday, March 4th at 11 A Pacific.
• 1:17:26
  We'll include the links here for people to check out and sign up
• 1:17:29
  for those webinars if they'd like to learn more about sending
• 1:17:31
  money on taxes and donating their illiquid assets into their
• 1:17:34
  own donor advised funds. Well, thanks a lot for another
• 1:17:38
  great valuation corner, Professor Virgie.
• 1:17:40
  And I guess enjoy that upcoming Olympic medals game.
• 1:17:46
  I think you're rooting for the wrong team there.
• 1:17:48
  Again, I'm going to be rooting for the USAUSAUSA.
• 1:17:54
  Good for you. Hopefully we'll have another
• 1:17:57
  Miracle on Ice AIS. Yes, AIS, exactly.
• 1:18:08
  That's what you say, but if you were doing it, would you tell us
• 1:18:11
  that you were doing it? Yeah, that's I would tell you, I
• 1:18:13
  would tell you. Forever.
• 1:18:14
  Because I mean, who? You're the oddest guy.
• 1:18:15
  Who else? Is listening?
• 1:18:16
  Who else is listening, right? It's just us, right?
• 1:18:19
  Smack, oh smack. He's like, yes, me, me and my
• 1:18:22
  mom and. My mom's listening.
• 1:18:25
  Your mom's listening, That's it, no.
• 1:18:26
  No, I'm just kidding.