Latest / trading places / Anthropic Passes OpenAI ($30B ARR), SpaceX Lost $5B & How EquityBee Unlocks Employee Equity | Ep. 30

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Anthropic Passes OpenAI ($30B ARR), SpaceX Lost $5B & How EquityBee Unlocks Employee Equity | Ep. 30 · trading places

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More than 70% of stock options goes unexercised and employee
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lose significance amount of money or 10s of billions of
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dollars per year in the US alone.
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You know, most startups don't go public, and even the ones that
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do may take 10 or 15 years to go public.
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It's just a much Better Business model to have these recurring
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subscriptions. So I think that is an edge that
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Loop has. I don't know that Aura has got
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that figured out. Welcome to another horrible,
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terrible, absolutely imperfect episode of Trading Places, the
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number one VC secondary podcast, which happens to be the only VC
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secondary podcast. Hello Dave.
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How are you doing? I'm doing great.
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Special note to our readers, We took a week off last week
1:06
because the episode we were working on was just so powerful.
1:09
We couldn't release it without consulting with security
1:13
officials and making sure that it was ready for prime time.
1:16
So that's why we took an extra week off.
1:19
Yes, we had a sandbox that make sure we wouldn't break the
1:22
Internet. It was just, it was just that
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powerful. We are the We're the clod of
1:26
podcasts now. I guess before we get into tech
1:30
companies, it's worth talking about what's happening in the
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world. I guess we're not at war, kind
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of, but it doesn't seem like a mile is flowing or ships are
1:40
moving through the start. So this is a chart showing how
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markets have reacted to the hostilities.
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So the the chart begins at the end of January when we were
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hitting all time highs on the S&P 500 and the NASDAQ Composite
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and the Dow Jones as well. And then the hostilities
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discussion of hostilities began in February.
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You were there was there was a live fire in March and markets
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essentially went down by 10%. Those were the three hard lines
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on top S and D500, NASDAQ and Dow.
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So it went through a not a bear market, but it's a 20% move from
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the top, but a 10% correction and we've almost completely
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round tripped all the way back to where we were before.
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I think we're within about 2% of the market top right now.
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The equal weighted S&P 500 might be within 2%.
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The fully weighted market cap S&P 500 is within 3%.
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So almost there. Just for context, a year ago
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after Liberation Day, remember that that was April 2nd of 2025
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and the market dropped 20%. That was a bear market and then
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and then round trip and then some, but that was a much bigger
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move than what we've done now. So I think the, the good news is
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the markets are pricing in I think almost a almost a
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resumption to normal and or pricing in even though oil
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prices are quite elevated and there's some, as you said, some
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inflation impact. The CPI came in pretty hot last
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week about a three-point 3% annual rate.
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But a lot of that was because of this energy spike and I think
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we're expecting it to drift back into the mid twos.
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Probably doesn't mean we're interest rates are on hold for
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at least until September. So not, you know, not great, but
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at the same time not deep enough or long enough to really affect
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economic activity or the, or the corporate profits in general.
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So I guess that's good news. I don't know about that.
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I think I feel like these news stories maybe are we're not
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quite reacting to the reality, we're reacting to the narrative.
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And I sort of feel like the impact from tariffs is maybe
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more substantial than people realize, even though it wasn't
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as bad as people thought it might be.
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That's the last time I tried to wrestle a comet.
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Let's flip over to look at sort of our Power 20.
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Yeah. I don't think all this activity
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is going to throw off the IPO for SpaceX.
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I do wonder if it's going to affect the other IPOs.
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Interesting to see where Open AI and Anthropic are landing this
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week. We got some noise in the
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executive office of Open AI where some divergent on when
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people think the IPO will happen.
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Maybe the CFO is not as optimistic as Sam is about the
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IPO and she's now not reporting to Sam.
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I guess there's some changes and where the executive structure
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was. At the same time, there is some
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shake UPS related to the Open AI Stargate project and several of
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the folks who were involved in that are leaving.
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That's that's certainly not great news to have three of your
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people who are leading that project take off, which might be
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responsible for like $600 billion worth of capacity over
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the next five years. Which company will go public
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first? I think a lot of people had
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expected that Open AI would go first.
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Seems like that's now flipping to Anthropic going first.
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And then kind of the kicker to all of this is really, you know,
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the valuations for these two companies seem to be flipping
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when we look at the opening eye raise that just happened at
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north of 800 billion. But secondary market trades are
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happening probably if at all 20 to 30% lower than that.
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On the flip side, Anthropic, which recently raised at a $350
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billion evaluation, secondary market trades are happening at
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twice that number north of 700 billion.
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Wow. I think, you know, the recent
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news is that Anthropics revenue has really eclipsed Opening Eye.
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This is a information article for maybe just about a month ago
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where you could see Anthropic catching up.
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But I think according to recent stories, that's actually even
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flipped Anthropic suggesting they're now on a $30 billion run
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rate, which is ahead of Opening Eyes, $25 billion run rate.
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Here's a here's another graph that shows adoption of Anthropic
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products. And I guess pretty much since
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last fall, particularly with the release of Claude Code and
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Claude Co work, Yes, Anthropic's just been on a tear.
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Let's just assess what's going on with Anthropic for SEC before
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we get into the open AI rabbit hole.
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So Anthropic is definitely on a historic run.
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So at the end of last year, like at the end of 2025 there I want
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to call it their revenue run rate.
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They will use ARR or contracted ARR.
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I don't like using that term because it's not really
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recurring. It's just these are cancellable
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contracts and subscriptions that could be eliminated in 30 days.
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So the accounting in me has the HEEB GBS when you talk about
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annual recurring revenue, but let's just call it run rate.
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And in the last year they were at 9 billion.
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They are now they they've been reported in March they were at
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19 billion and now we're 30 billion and they're latest
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release that is incredible. They're adding.
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If you just think about what that means, this is a chart from
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Altimeter showing the revenue. They say ARR, but again, you
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know, I think Brad knows better than this, but he shouldn't be
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calling it ARR. Still.
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They added in the month of January about 4 billion in, in,
7:10
in monthly run rate, which is like the size of data bricks.
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In February they added between 7 and 8 billion, which is like
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data Bricks and Talentier put together in a single month.
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And remember I joked, what could they have done in a real month?
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February's not even a real month, it's only 28 days, barely
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counts as a month. What can they do in a 31 day
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month? And sure enough, here they are
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in March adding 10 billion in monthly ARR.
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That's the the top number in the right.
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So let's just play this forward for the next.
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And they've just done this by focusing on code and being
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enterprise focused, not getting distracted and executing the
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hell out of the game plan. If they keep doing a 7 to 10
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billion in monthly AR add or monthly run rate add between now
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and the end of the year, another 10 months, another nine months,
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they could exit the year close to 100 billion in revenue
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running. And so the valuation you're
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talking about, and I think on top of that, they've been
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constrained because they have 1 1/2 gigawatts of compute, which
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is their their biggest cost. So their gross margins must be
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rising very, very quickly. And I would imagine that we'll
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see them if not, you know, they're probably in the 30 to
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40% gross margin area now. They're probably going to be
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close to 60 by the end of the year if those numbers are right.
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And they only have 2500 people, which is, you know, which is a
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not a lot of people. When Google was at this revenue
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run rate, they had a hundred 100,000 people and these guys
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have 2500 to maybe 5000 people. So they could be profitable, you
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know, by the end of the year, whether it's sustainable
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profitability, whether they're consistently profitable, I don't
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know, but they could definitely be reporting some free cash flow
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positive numbers by the end of the year.
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So they I think are having AI think they're, they are
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definitely now the number one player in the space because they
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have surpassed open AI and revenue or probably they seem to
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have the momentum and, and the, and the, the kind of the
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positive mojo on the open AI side.
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I think they'll be fine. I think it's fair to say that
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valuation of 850 billion they just closed at is probably under
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pressure. There's raising a lot of money.
9:10
We've talked about some of the circularity in their deals and
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vendor financing and customer financing.
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A lot of the money come from Amazon and NVIDIA and SoftBank
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as opposed to, you know, pricing VCs.
9:21
That is something we'll have to figure out.
9:22
We'll have to figure out how to get free cash flow positive or
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or close to profitable by the end of the year.
9:27
They're about to release a new model.
9:29
Spud, from everything I'm hearing about it is just as good
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as Mythos. It's the first of a new
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generation of the of new models trained on or running on
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Blackwell, which is the NVIDIA GPU they're using.
9:41
So there's another act here. I think they'll be fine.
9:43
It is kind of interesting that a lot of people are leaving open
9:46
AI. You mentioned the Stargate
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folks, but he added all the noise from Sam leaving and
9:50
coming back and the board and then, you know, all the Mira
9:53
Marati and then Satsuka were leaving before and now you got
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the CRO and the CMO and the COO all out and leave are changing.
10:00
And Sarah Fryer, the CFO, like where does she report to?
10:03
That's just a lot of FUD, right? That's a lot of noise and in
10:06
front of an IPO that is weird. There's a there's a quote from
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Oscar Wilde. He said to lose one parent may
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be regarded as a misfortune. To lose both looks like
10:14
carelessness. I think I think they might be
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verging on carelessness. So this has questioned Sam's
10:19
ability to hold the team, maintain the team and, you know,
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get the right people. But I still think they'll be OK.
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But we're definitely it feels like we're at Max open AI FUD
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right now. Hey.
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Man, may you have all of. The powers all.
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Of the strength that dwell in the secrets.
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Of proof and knowledge. I can do.
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It looking at what's been happening in Anthropic recently,
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the Mythos release or the Mythos non release, I guess is really
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what's going on really so powerful that they couldn't
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release it to the public. I guess in testing, they
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realized that there was ability for this new model to find
11:06
security flaws in all kinds of software across the Internet,
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and that's at banks, at OS players.
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And there was some concern about it, just like opening up
11:18
security risks all across the globe, So much so that they had
11:22
decided to only release it to software organizations and maybe
11:26
One Financial organization in advance so that people could
11:29
plug leaks and holes. Federal Reserve Chair Jerome
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Powell and Treasury Secretary Scott Besant inviting bank
11:36
leaders to discuss the potential risks.
11:40
Are you worried this might create some risks in the
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financial markets? Among.
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It's good, I think that and propagated the release and took
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whatever it is 90 days, 100 days just to see what the impacts are
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and maybe allow Internet players to harden their systems.
11:54
I think it's prudent that seems, you know, that seems
11:57
appropriate. They could have just released it
11:58
into the wind, I guess, and and, and the Internet would have
12:02
borne the consequences. But when you have things this
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powerful, I think being thoughtful about it does make
12:07
sense. It's good to be prudent that I'm
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glad they're having the conversations and working with
12:10
the banks to make sure that they're not surprised by what
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gets released. Well, one other news item for
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Anthropic, it's been reported that although company raised the
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$350 billion valuation, secondary trades are happening
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at almost double that over 700 billion.
12:25
In recent news, Anthropic had just completed a tender offer,
12:29
but the employees didn't take up as much of that tender offer as
12:33
was expected. I think there was $6 billion
12:35
available. It seems like the employees are
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hanging on to their shares at only a $350 billion valuation.
12:42
They might feel like that's that number is too cheap.
12:45
Well, that's, that's interesting.
12:47
I, you know, maybe they know something we we don't.
12:49
The last projection that Anthropic put out had them at 30
12:52
billion in revenue run rate by the end of this year and they
12:57
got there by April 1st. So they are I think it's safe to
12:59
say they're well ahead of plan if they are actually going to
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get to 80 to 100 billion in in one state revenue, I'll say
13:06
revenue run rate by the end of the year and gross margins
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around 60% with you know, 5000 employees.
13:12
I can do the math and what that means for the business.
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I think that valuation of 700 billion is probably fine, maybe
13:18
even conservative. And so maybe there's employees
13:20
they're thinking, you know, if they know those, if those
13:22
financials are right, they should be holding on and they
13:24
should be looking at a $700 billion plus IPO at the end of
13:27
the year. And you know, I guess that's a
13:29
positive signal for the company. You got us into this Skeletor,
13:36
and whether you like it or not, you're going to help us get rid
13:38
of that monster. As you wish, he man it will form
13:42
an alliance not only until our task is complete.
13:47
Yes, there were some financials that were leaked for SpaceX
13:50
which indicated that including the XAI balance sheets, the
13:54
company lost $5 billion last year.
13:57
Now, that's in contrast to SpaceX prior to the XAI merger,
14:00
where it was making $8 billion a year.
14:03
Do you want an extra ten $15 billion in expense in exchange
14:06
for an interesting and sexy AI story?
14:11
Yeah, that's a good question. So they went from +8 from I
14:15
guess SpaceX prior was 18 1/2 billion in revenue plus 8IN
14:19
profit, most of that or maybe all that from Starlink.
14:23
Now they're -5 I guess and you're right.
14:25
So the math is that somebody, somebody is burning 13 billion
14:28
in cash and that's other XAI or it is maybe some acquisition and
14:33
merger costs in there as well. But so the question is, is the
14:36
13 billion worth it? I think Elon is also about to
14:38
release some amazing stuff in the second-half of the year from
14:42
from XAI and Grok and how that powers the enterprise.
14:44
So maybe that 13 billion investment will will be fine.
14:47
They're definitely bringing a lot of cash.
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And I guess that's just, you know, that's what they're doing
14:50
the IPO for. I think it'll be a really
14:53
interesting IPO if they try to raise as much as 75 billion in,
14:57
in cash. I mean, that is the biggest IPO
15:00
by 3X ever. It's also about the entire
15:03
amount that the IPO market raised a year ago in 2025.
15:06
So, and everything's got to, you know, got to grow, right?
15:10
The fact that, that 13 billion, that's a big sticker number from
15:13
last year. But I think there's going to be
15:14
a lot of good stuff in the second-half of this year.
15:16
And I think that burn rate will go down in the second-half of
15:18
this year. So I I I'll I'll wait and see
15:20
the final S1 and roadshow before I conclude whether it was worth
15:24
it or not. I guess it's possible that
15:26
SpaceX may become another meme stock to some extent
15:30
disconnected from reality, the same way the Tesla is really not
15:34
priced based on financials. Yeah.
15:38
The other lever Elon has is he could decide not to raise 75
15:41
billion, raise let's say 50 billion, limit the amount of
15:45
supply on the IPO, make sure there is sufficient demand to
15:48
control the float and then you can always do a secondary offer
15:51
later. So he's got some levers and some
15:53
I think some some ways to market the company properly to to
15:56
maintain that trillion dollar IPO price.
15:59
Well, I, I think there'll be plenty of demand, but again, I
16:01
wonder if the weight of actual financials do, you know, put
16:05
some pressure on the value of the company at least once it
16:08
starts trading and once there's more public visibility on those
16:11
financials. All right, our last story today
16:14
is really going to be about Core Weave.
16:16
And Core Weave is a company that went public last year.
16:21
Core Weave does data center provisioning for other companies
16:25
like Microsoft and Amazon and others.
16:28
And now Core Weave has just announced a deal with Anthropic.
16:31
And a few days ago they announced a deal with Meta.
16:34
Core Weave is now powering at least nine of the 10 leading AI
16:39
companies. So it seems like data centers at
16:42
data center provisioning are certainly at high demand.
16:45
Core. We've had been a company that
16:46
was maybe concentrated in just a small number of customers.
16:49
That seems to be broadening now. What do you think about Core
16:53
Weave and what do you think about the overall data center
16:55
market I'm on? They're announcing deals with
16:58
all the right players now, so it's got a broad customer
17:01
footprint. There is still going to be a lot
17:03
of constraints on data centers. Just getting them, I think
17:06
getting them built together and executed, getting them powered
17:08
to continue to be needs to be a, a, an ongoing difficult thing.
17:12
There's a number of states now, I think it's up to 11 that have
17:15
decided to put a moratorium on AI data centers.
17:18
I think Maine was the first one to pass a law that implemented
17:21
that, that ban or that moratorium.
17:25
And there's others, others in the way that's in federal
17:27
legislation winding its way through Congress.
17:29
I don't think we'll pass. Those are all the risks in it.
17:31
I think Corey was just been executing really well and you
17:34
know, the last set of deals is testament to that.
17:36
So we've covered them a little bit before.
17:38
I think this continues to be a a really great play.
17:41
It's one of the only pure, you know, AI plays in the public
17:44
market. So that's that's what you want
17:45
to do play AI aside from NVIDIA and maybe, you know, core weave
17:49
now there's just not not, not a lot of other place there.
17:52
So I think it'll continue to be an attractive asset in public
17:54
markets. Well, I think we'll probably see
17:57
a few more players in this market come public in the next
18:00
year or so. I think right now Navius is a
18:02
European company that's already public, but Lambda Labs,
18:06
Together AI, and Crusoe Energy are all companies that are doing
18:10
data center provisioning that are perhaps likely to go public
18:13
in the next 12 to 18 months. Yeah.
18:29
This week I have with me Oren Barzilai, the founder and CEO of
18:32
Equity B Oren, welcome to the show.
18:35
Happy to be here. Give us a brief introduction to
18:38
what Equity B is all about. At Equity B, we provide US
18:42
startup employees with the funding they need to exert the
18:44
stock options before they expire.
18:47
And by doing so we enabled these employees to participate in the
18:51
success of the company they have built.
18:53
In the US, employees join startup companies, they get
18:56
stock options overtime, the stock price appreciates and then
19:00
these employees are paper rich. But if they leave their company,
19:06
usually they have 90 days or limited amount of time to
19:08
exercise their stock options before these will expire.
19:12
And because the significant cost in to pay out of pocket to
19:16
invest in one liquid startup company, most employees cannot
19:20
afford to do that. Because of that, more than 70%
19:24
of stock options goes and exercised and employees lose
19:29
significant amount of money or 10s of billions of dollars per
19:32
year in the US alone. When you say people get stock
19:36
options, they don't actually own the stock right away, right?
19:40
They get an option that they can exercise or pay for, and I guess
19:44
they could do that at any time, but there's some expense related
19:47
to that. Is that correct?
19:49
It's correct, employees get an option to pay out of pocket and
19:53
buy the stock based on a pre specified strike price and
19:57
taxes, which can actually be very significant.
20:00
OK. And so this is kind of a big
20:02
issue, right, in that they have to make a decision about whether
20:04
they want to pay for the stock option, which might be an out of
20:08
pocket cost. And I guess there's a chance, a
20:10
pretty significant chance that sometimes the companies don't
20:13
always end in a positive outcome and then they're out there
20:16
exercise cost as as well as not getting any value of the
20:20
company. That being on the flip side,
20:22
they also don't want to leave the company and lose all of
20:24
their stock options. So you guys kind of help solve
20:27
that situation is that is that sort of it?
20:29
So if you think about it from the employee perspective, they
20:32
are being asked to exert the stock options, which is like to
20:36
invest in one E liquid startup company that they just left or
20:40
about to leave an amount that usually is higher than one
20:44
annual net salary, OK, sometimes significantly higher and they
20:47
simply can't afford that. You don't have the cash or they
20:49
can't afford the. Rent this might be multiple
20:51
hundreds of thousands or even single digit millions of dollars
20:54
in exercise cost in some scenarios, right?
20:56
Yes, to cover the cost which is strike and taxes, the average
21:00
employee needs about $200,000 and the largest check we wrote
21:06
to a single employee was 7.5 million.
21:09
That's a big number. What's kind of the profile of
21:12
the customer that you're working with?
21:14
When people are leaving the company, that is the majority of
21:16
the employees that approach us because they have limited amount
21:19
of time to exercise their stock options before they expire.
21:22
I see, but if? They don't exercise it then they
21:25
they lose all the stock options, right?
21:28
They lose everything, which can be painful, especially when you
21:31
see your company goes publicly getting acquired four years
21:34
after you left. Yes.
21:36
Also, some employees actually a lot are exercising while they're
21:40
still in the company in order to start the clock for long term
21:45
capital gains to become more more tax efficient or to lock
21:48
the value of their shares before during a significant
21:50
appreciation afterwards. Because I guess there's a couple
21:52
of scenarios if you know, if I stay at the company, some people
21:56
don't exercise until the company goes public and then they, I
22:00
guess they exercise and hold the stock and sell it immediately in
22:03
some cases, but then they don't get capital gains treatment.
22:07
That's just ordinary income, which can be twice as much tax,
22:10
I guess, or maybe even more than twice as much.
22:14
But then I guess some people want to exercise and hold those
22:18
options so they get a lower tax rate and maybe even cap or cap
22:23
or gains treatment. But in order to do that, they
22:25
have to have the money to exercise, and many of them
22:28
don't, right? Yes, they need to have the money
22:30
to exercise and they need to hold the shares for at least a.
22:33
Year, got it. And how is what you do different
22:35
than maybe other secondary platforms like Forge or Equity
22:39
Zen or Hive? First, Equity B is not a
22:43
secondary platform. When you mentioned these other
22:45
secondary platforms, when one buy secondary shares, what
22:49
usually needs to happen is that the company needs to approve the
22:53
the transfer and then the company needs to do what they
22:56
call our offer right of first refusal to offer their current
22:59
shareholders or at least some of them the ability to do the
23:02
transaction. And then if that clears out,
23:04
then they have a call. So which actually enables those
23:07
other investors to actually sell.
23:09
That process can take months. It's very cumbersome, correct, a
23:12
lot of friction. And then also the company needs
23:15
to know who's going to be on the cap table, who's going to
23:17
participate, what kind of rights you're going to have.
23:20
Because of that, most companies strictly prohibit any such
23:24
transfer. May not may not even be possible
23:26
for them to do any kind of sale. Especially for an average
23:29
employee, imagine the average soft developer or product
23:31
manager, their amounts are not even significant enough to most
23:34
of the secondary platforms, because not only their
23:36
requirements for the company, also the requirements for
23:39
lawyers and accountants. Just to justify yeah,
23:42
transactions that are in the hundreds or low millions
23:44
sometimes does not make sense. And for these employees, the
23:48
traditional secondary market is not really read about.
23:52
In other significant differentiator between equity B
23:56
and traditional secondary is that when an employee sell the
24:00
share in a traditional secondary, they sell the share
24:04
and equity B. The employee receives funding to
24:07
excel the stock options and upon exit event, they pay back the
24:12
investment amount and a certain percentage of their proceeds.
24:16
However, the employees still get to keep the majority of their
24:21
future shares. And because of that, they still
24:24
have a skin in the game because they participate in the success
24:27
of the companies that help build and they still participate in
24:31
that future exit. OK.
24:33
It's a big difference between US and a secondary deal.
24:36
Got it. And I guess this is accomplished
24:38
through the use of what's called forward contracts, is that
24:40
correct? Correct.
24:42
Equity B, we use forward contracts.
24:45
It's a type of a forward contract that we don't buy the
24:48
old share. We just provide our investors
24:50
providing with the capital they need to exercise and pay the
24:53
taxes. And upon the liquidity event,
24:55
they settle the contract by paying back that investment
24:58
amount and a predefined percentage of their shares.
25:02
How does that look from both the employee scenario, the company
25:06
scenario, and maybe from the equity V investor, you know,
25:09
partner scenario? Let's start with the employee
25:12
scenario. The sign up to
25:14
equityequityb.com, the provider details their information, their
25:17
documents and then usually we can give them an offer on the
25:21
spot of how much we can fund them.
25:24
They sign an agreement, they complete the process of a
25:27
background check, credit score check, etcetera, and we provide
25:31
them with the funding. They don't need to get approval
25:33
from the company. They don't need to go through a
25:35
long process with many approvals from different from the company
25:39
or buyers or somebody else. They can do it quite fast and
25:42
it's a frictionless process from the investor side wants to see a
25:47
specific opportunity that you would like to fund.
25:49
They can fund it immediately. They don't need to wait for a
25:51
long process of approvals from different parties.
25:55
And the best thing for the company is the company does not
25:59
have anything changed in their cap table.
26:01
No new investors are exposed to information rights, data rights
26:05
or voting rights or any of that different friction points.
26:09
So these employees are the companies that granted their
26:12
them with stock options and they want them to participate and
26:16
benefit from the future success of the company are built.
26:19
They are still are still part of the game, which is very
26:21
important and existing employees, other employees
26:24
actually see that those stock options are valuable.
26:28
It is creating a win win situation for the employees,
26:31
investors and over to the companies our.
26:36
Alliance is over, fools. Farewell, he man.
26:43
What kind of experiences you have that sort of led you to
26:45
start this kind of company and solution and how has it changed
26:48
over the years? I'm coming from a very deep
26:51
technical background. I was a mathematician and a
26:53
software developer. I started two companies before
26:56
Equity B Initially as a young entrepreneur, I started my first
27:01
company, hired my first employees.
27:04
I gave them stock options or equity.
27:06
I felt like I'm giving them a piece of my flash and they felt
27:09
like it's a lottery ticket, which was a very painful
27:12
experience. And then the company grew bigger
27:15
and many of these employees unknowingly became paper rich.
27:20
OK, that's suddenly, suddenly those stock options.
27:23
Over time, those stock options became very valuable, but these
27:27
employees still did not understand how valuable they
27:29
are. And then upon our first exit,
27:33
I've seen many of my previous employees who did not
27:36
participate or did not or left the companies before our exit
27:39
and could not afford the cost to exercise.
27:42
Back then the market wouldn't exist and many of these
27:46
employees were supposed to experience life changing events.
27:50
Unfortunately did not have the chance to do that, to experience
27:53
that or to get a piece of the pie.
27:56
I thought it's not fair and at the same time while I was still
28:00
in the company, many investors approached me as the founders
28:03
and executive to buy my shares, secondary funds, but not
28:07
approached my employees. OK.
28:10
So I have realized that there is some kind of opportunity here
28:13
both to all employees to exercise their stock options and
28:17
participate in the future success of the company that have
28:19
built to actually connect them with investors who are seeking
28:24
access to great fast growing companies and cannot get access
28:27
otherwise. Maybe if you can explain how you
28:30
how you match these offers and find the money to help these
28:34
employees exercise. We are a platform, we are a
28:38
marketplace. We don't investor online.
28:40
Initially when Equity B started, we just, we've created a
28:44
marketplace for accredited investors and over time we
28:48
started working with more experienced and sophisticated
28:52
investors. And right now we are partnering
28:56
with large asset managers like secondary fund like yourself and
29:01
those of us managers create dedicated funds of the equity
29:04
platform. They tell us exactly which
29:06
companies they want, what is their investment strategy and we
29:11
execute this strategy for our partners.
29:14
If you think about it in the public market, we have different
29:17
hedge funds with different strategies and they can just
29:20
share pick and decide which shares they would like to buy
29:22
and which companies would like to invest in.
29:24
In the private market before Equity B, that was impossible
29:28
because there is a company you want to invest in and there are
29:30
the companies that you have access to.
29:33
And equity B, we've funded employees from almost 900
29:37
companies, OK. And we have access, almost
29:42
investment access to almost any company in the US today, BC
29:46
backed company. And we enable our partners to
29:49
execute strategies that were impossible before, from a
29:54
dedicated AI fund to a dedicated cyber fund or an index like fund
30:01
with hundreds of different of different positions to create
30:04
diversification and more predictable returns.
30:07
Does every employee that lists on equity be get matched or get
30:11
an offer to buy? Or only some of them?
30:13
So the way that it works is each of our fund partners or our
30:17
Capital Partners, they have investment criteria and they
30:19
tell us which companies they want to invest in.
30:22
When employee signs up to Equity B, they provide the details and
30:25
immediately we know if they work in one of the current target
30:28
companies. By the way, if you Sign up today
30:31
and your company is looking at the target list of our
30:33
investors, it doesn't mean that your company is not great, just
30:37
me that our investors maybe missed it.
30:40
It might be relevant in two weeks or in a month and we will
30:43
get back to you then. But if you sign up and you fit
30:48
and your company fits one of the current Capital Partners, what
30:51
we call investment criteria, we are able to give you immediate
30:55
offer. If you accept both some
30:57
documents, we will complete the process and we'll get you funded
31:02
within days. OK.
31:03
What's kind of a typical transaction that happens on your
31:05
platform? We've seen employees that needs
31:09
10s of millions of dollars. So there are employees that
31:13
needs significant amount of money that are it's impossible
31:17
for them to come out of pocket. The average employee that we
31:20
find, we provide them on average about $200,000, OK.
31:24
And usually there are from a growth search company serious D
31:28
and above backed by a top tier BC.
31:30
So Series D maybe I'm guessing this is companies doing 50 to
31:35
100 million in revenue and up or are raising 50 to 100 billion in
31:38
funding? We, I would say these are the
31:40
majority of companies, yes. And are there certain sectors
31:44
which are more in demand than others?
31:47
Yes, obviously AI and the large foundation models are now in the
31:52
highest demand and obviously companies that are rumoured to
31:57
go public suit in the past months, basics of course is a
32:01
very, very high demand that changes wouldn't use, got it.
32:05
We have sophisticated investors that have a very strict criteria
32:08
and we have other investors that looking for the liquidity window
32:12
and pursue that and. The market conditions changed a
32:15
lot in the last couple years. We've launched in the US in
32:18
March 2020, OK, same time with COVID, so.
32:22
Tough, tough. Time to get started, beginning
32:24
with challenging, I know, but back then it was scary.
32:29
But very quickly everything started to increase very, very
32:32
fast. Yes.
32:34
And back then there were many accredited investors that were
32:38
just seeking access to the private market.
32:41
And obviously when the bubble burst with many of them
32:45
disappeared and it was a rough time.
32:48
What changed since then is now we see that the type of
32:53
investors that are coming into this market are way more
32:56
sophisticated. They are very savvy in the
32:58
private market. They are looking for specific
33:01
companies or they have specific strategies.
33:03
That's what they do. These are not any more random or
33:07
credit investors that do something else from the side.
33:10
These are sophisticated investors that spend most of
33:14
their professional life in the private market, and that's what
33:17
they do. When did you guys make this
33:19
transition or when did you start working with VC funds and
33:21
partners and how has that been going?
33:24
We've shifted to funds December 23 or very beginning of 24 when
33:29
we did the full shift. Since then, we've increased
33:31
significantly. I would assume that about 90% of
33:34
our volume right now are from the dedicated Capital Partners
33:37
and the rest is from the legacy accredited investors community.
33:41
How many transactions have you guys done over the last several
33:44
years and where are you seeing the most activity these days?
33:47
To date, we find an employee from all of those 900 companies.
33:50
We have completed more than 6600 investments on the platform.
33:55
So it's quite big. Obviously, today the highest
33:57
demand are the companies that either sought to IPO sometime
34:01
soon or the AI company. From the AI models to the hot AI
34:05
apps, these are the most sold after.
34:08
But obviously we have the spaces of the world, the neural links.
34:14
All of Elon's companies are in a very high demand or the other
34:17
usual suspects, theater breaks or stripes that are projected to
34:23
go public sometime in the near future.
34:25
Do you end up? Having more concentration in
34:27
just a small number of names, or is it pretty widespread?
34:30
It is pretty widespread because we work with multiple Capital
34:33
Partners and the different strategies.
34:35
What was? It another one of the
34:39
sorceresses travel corridors, except that one led to Snake
34:43
Mountain. What do you think are the bigger
34:52
issues for both the employees and the investors in trying to
34:55
figure out how they get a deal done and what are the potential
34:58
risks that they might be encountering when they're going
35:01
through that process? 1st, it's a very opaque market,
35:04
right? The private market is very
35:06
opaque. The under underwriting process
35:08
is challenging. Investors nor employees have
35:12
access to the full financials of the companies.
35:13
In many cases those deals can happen very fast.
35:17
So investor need to make decisions very fast.
35:19
Many times they need to base their decisions on other dealers
35:22
that other investors did and other price the companies.
35:25
And sometimes it's very hard. We see that even when the VCs
35:30
full information access completed diligence on the
35:32
company, still many not do great.
35:34
OK. So it's a very challenging
35:36
market. What do you see as kind of the
35:39
biggest mistakes or unknowns that people encounter when
35:42
they're first doing a transaction?
35:43
What parts do they sort of not always realize or understand
35:47
about what's going on? I think that there are the
35:51
obvious names that you know, the brand names.
35:55
I will not name any of them right now, but we can all guess
35:58
who they are. And at any given moment there
36:01
are maybe four or five company that everybody wants.
36:03
Historically, when we look on our returns, those companies do
36:06
well, but they're not doing amazingly well because they're
36:09
expensive. All investors are seeking the
36:11
same companies. The less obvious names or the
36:14
less known names are actually the ones that drives the best
36:17
returns. When we've talked to other
36:19
marketplaces that do secondary transaction, there tends to be a
36:23
lot of concentration into the top five to 10 companies.
36:26
That's that's typically more than half of the overall
36:28
transaction volume. And then it kind of falls off a
36:30
Cliff pretty precipitously after that.
36:33
Once you get outside the top 50 names, there's not very much
36:36
happening in a lot of those. Do you have to work harder to
36:39
try and find matches for employees that are maybe outside
36:41
the most popular names and? We have dedicated funds that are
36:45
looking for highly diversified portfolios so we can fund and we
36:49
are funding those employees as well.
36:51
Historically, some of these companies actually generated the
36:54
best returns. Having said that, obviously the
36:57
brand names attract way more significant demand.
37:00
What happens in a scenario where there is an exit, but it's not a
37:04
big exit? In scenarios where maybe it
37:07
doesn't cover the cost of the investment of the exercise or
37:10
tax cost, or where it just barely covers the cost, How does
37:12
those scenarios play out? In that in in a negative
37:15
scenario, employees pay back up to the amount they received upon
37:19
a liquidity event. OK.
37:21
When assuming that there was say in M&A and the price that the
37:26
employees received was lower than the investment amount of
37:30
the investors, in that case investor will pay back only the
37:33
amount that was received even if it's zero in case of a write
37:36
off. This is a risk that the investor
37:38
take when they provide funding to a certain company.
37:40
Employees should not pay out of pocket in that scenario.
37:43
Well, I guess for the employees, there's some risks as well.
37:46
Maybe they're giving up some upside in exchange for getting
37:49
the options. How do they think about taxes
37:52
and do they always know kind of what's going on with the taxes?
37:55
No, that is not a consequence. When we provide employees with a
37:59
capital to exit the stock options OK cover.
38:02
The capital is used to cover both the strike and taxes.
38:05
Usually the tax is the significant part and in that
38:08
scenario it's a cost for the employee.
38:11
So upon a liquidity event, they would pay taxes on in their
38:15
profits. I see.
38:16
And if it's a write off the loss so they will not need to pay tax
38:20
on that. Yes, exactly.
38:21
So it's not an issue. I guess maybe if you could give
38:24
us a couple of examples of things that have gotten, you
38:27
know, well for employees or investors and maybe a couple
38:31
that didn't go so well the. First example, before the we
38:35
work IPO, we work employees. We funded some of them, which
38:38
obviously obviously did not go well to some of our investors.
38:41
By the same time, we had employees that asked for
38:43
specific terms and they told us, I don't want to use equity, BI
38:47
will pick a personal loan, I will take a second mortgage on
38:50
my home because there is no risk here, OK?
38:54
And these employees unfortunately made decisions
38:57
that put him at risk that completely changed the course of
39:00
their financial life for them, for the families and children,
39:02
which is very unfortunate. So until you receive the money,
39:06
nothing is guaranteed especially now when also also right now
39:09
when we see some of those IP OS that when public and crashed in
39:13
the past six months before the local parity was over, some of
39:16
those results will not be great. Investors that diversify can
39:20
bear that risk, but employees cannot.
39:22
So that is the negative side. I would say that there are a few
39:27
scenarios that we are very happy and we are very proud of.
39:30
Give an example, there is when we started, it was back in the
39:34
early days, back in 2020, we had an employee, he was an immigrant
39:39
work at a quantum related company.
39:41
We provided that employee with about $300,000 to access their
39:44
stock options and I think it was several months, maybe a year
39:47
after their company went public, they received about $4.3
39:51
million. Well, our investors needed about
39:55
1.3 which is great return to our investors in that transaction.
40:00
That employee needed about $3,000,000.
40:03
The beautiful story is that that employee that was that
40:06
immigrated from India took some of this money to create a
40:08
nonprofit to provide dental care.
40:11
For kids back in his home country.
40:14
But I think I may actually know this person.
40:17
We have many cases. That not all of them are that
40:20
significant that created such a positive change in the world,
40:25
but for many even in their own world to participate in the
40:29
future success of the company. How built can be a life changing
40:32
event to send your kids to college, to pay off your
40:34
mortgage, to just create higher quality of life for you, your
40:39
kids, your future generations. We are very, very proud on what
40:43
we're doing in Equity B. And you know, being entrepreneur
40:45
is hard. Yeah.
40:46
So to be sad, to have something like this that help you wake up
40:49
in the morning and say that's what I'm fighting for, that's
40:52
what I'm doing in the world, that's just something that we
40:54
are very, very proud of. Yeah.
40:55
I had this experience myself personally about 25 years ago
40:59
when I was working at PayPal. And I was fortunate to be there
41:02
during the IPO and after, after I vested the first year and
41:08
maybe a little bit after that, I was able to buy my first house
41:12
or first condo in San Francisco. And I think I actually even
41:18
bought a car for, for some family relatives as well.
41:22
So it was, it was a pretty good story.
41:24
And I think that's probably, you know, a typical use case for a
41:27
lot of employees, particularly those here in the Bay Area where
41:31
real estate is pretty expensive, is, you know, the purchase of a
41:33
house or down payment of a house is a common expense that people
41:37
use for this scenario. Send the kids to college, you
41:40
know, maybe paying off some some debts that people have been
41:43
piling up while they've been working hard for these startups
41:47
for many years. One of my team members told me
41:50
that we had we had another employee that following a
41:52
liquidity event, he was the funds to buy a helicopter.
41:55
Helicopter so. OK.
41:58
It was a very successful, very successful exit.
42:01
I hope that they are very happy with that helicopter and it's
42:04
also a positive change in the world.
42:06
Any moment of happiness or that we can actually deliver those
42:09
funds and many of these employees to to get everybody
42:12
on, don't you? Ever feel like doing something
42:17
evil? Don't you ever feel like doing
42:20
something good? Well, I, I would say then when
42:23
we learned about the equity restore, we got pretty excited
42:26
about the opportunity to invest and actually not just invest in
42:30
some of the employee stock options, but actually invest in
42:32
the company itself. So I, I think we could probably
42:35
tell people that we just recently completed an investment
42:38
in the company and hopefully we're going to get the chance to
42:41
work with you guys on several transactions going forward.
42:44
So this is new and we're happy to have you guys on board.
42:48
But yes, we we've met through to create a dedicated fund and
42:51
during those conversations we decided to tighten the
42:54
partnership and we are excited about this.
42:56
So this is the first time that we announced it.
42:58
How do you work through, I guess, the founder and
43:02
management company boards of the company's relationships when
43:04
you're working with these employees?
43:07
So first, officially we work with employees.
43:09
Employees can decide to share with the company of the user.
43:12
Could it be or decide not to? It's up to them, OK, we would
43:16
say that some of the companies don't really care because the
43:19
employees still on the cap table they employ, the majority of the
43:22
upside is for them to decide. In other cases, the employees,
43:26
some companies actually encourage their employees to use
43:29
equity because that's how they retain talent and they show
43:33
their current employees that those talk options are valuable
43:37
without adding new names to the calf table or to be concerned
43:41
about are the investors right now, were they exposing
43:44
information we can vote, etcetera, etcetera.
43:46
So I guess that's where you guys are quite different than some of
43:49
these other equity marketplaces like Equity Center Hive where
43:52
the company really does have to get bought into the transaction
43:55
and has to, you know, make a decision about whether to
43:58
approve or not approve the transaction.
44:01
To run a company is very hard. You need to be laser focused on
44:03
to achieving your goals and if suddenly somebody comes up to
44:06
you and say, hey, I needed to approve this, you know, 300,
44:10
three, $100,000 transaction, most companies will not want
44:15
that distraction. They don't want to say no,
44:17
they're not bad, but they don't understand the risk of exposure.
44:20
So so they just say no. And when it's in the millions,
44:24
it's not relevant for most employees because of that.
44:27
And equity B, we are not targeting shareholders, we are
44:29
not targeting investors, we are not targeting LP positions.
44:33
We built Equity B and we are building Equity B specifically
44:37
to support startup employees and to fund the exercise of the
44:41
stock options of stock employees.
44:44
Well, you guys have been in business now for I guess over
44:47
five years you've you've done thousands of transactions.
44:51
It seems like things are growing for the company and what do you
44:54
see as kind of your next over the horizon for the next couple
44:57
of years? What's what's on your drawing
44:59
board for for the company and for the product offering?
45:03
Tech employees right now, they don't have a financial partner,
45:05
right? They if you learn you land in a
45:08
foreign city, you know that you're going to get an Uber.
45:11
You ever go to Brent, go to application, you want to get
45:14
your Airbnb, you have to go to Brent.
45:16
You need to buy shares, You go to Robin Hood, you need to buy
45:18
Bitcoin, you go to Coinbase. But when you're a tech employee
45:22
and your most significant asset right now is your equity, you
45:27
don't ever go to Brent. You don't you cannot leverage it
45:30
and you get you're not getting proper financial services for
45:32
this. We equity B using the certain
45:35
point for us. We provide you with the funding
45:37
and equity for those talk options and then we are building
45:41
additional financial tools to make sure that we will be your
45:45
best financial partner. You know, most startups don't go
45:48
public, and even the ones that do may take 10 or 15 years to go
45:51
public. I think SpaceX itself is now a
45:54
20 year old company, maybe more than 20 years old.
45:57
So, you know, like you said, there's, there's a lot of paper
46:01
millionaires who can't really use those assets to buy a house,
46:04
to buy a car to help put their kids through college.
46:06
And seem like there's a real need for 10s of thousands, if
46:10
not hundreds of thousands of people who work in the Bay Area
46:13
around the world for, you know, turning that equity into
46:16
liquidity that they can actually do something with.
46:18
We believe that there are millions of employees in the US
46:21
alone and we support employees across the country.
46:24
It's a very significant problem. We are trying to help everybody.
46:28
How do other funds get involved with Equity B and what's kind of
46:32
their experience as they, you know, want to find out about
46:35
what opportunities to invest exist on your platform?
46:38
If you are individual and investor that would just want to
46:41
do specific transactions and see what's available and you are
46:44
accredited, you can sign up at equityb.com and see what's
46:47
available. If you are more sophisticated or
46:51
larger investor, usually $10 million or above fund an asset
46:56
manager or a platform, you can contact Equity B.
46:59
What we do ask you what they're looking for.
47:02
What is your investment strategy?
47:03
We create what we call an investment criteria.
47:06
We spin out a dedicated fund for you.
47:09
When you define where you define the strategy, you define the
47:12
investment decisions, which companies would like to invest
47:15
in what terms? Based on the criteria, we find
47:18
the employees from the different companies you are looking for.
47:21
Great. We are in the very unique
47:23
position to execute investment strategies in the private
47:26
markets that you could not execute without us before.
47:31
Equity BI would say that from the investor perspective, when
47:34
we look on all of our track record between the funds are
47:37
creating investors all together in DPI actually cash paid return
47:41
to our investors. Equity B is all performing the
47:44
top 10% in every vintage since our incentive and I'm not
47:49
familiar with any other platform or manager that managed to
47:53
outperform the top 10% in every vintage.
47:55
And that shows you the structural advantage of the
47:59
Equity B investment solution and what we can do for our
48:02
investors. Terrific.
48:04
You're also a startup founder and you have employees who have
48:08
equity in your company also. So as a founder and
48:11
entrepreneur, Equity B is my third company and is the company
48:15
I'm most proud of because we see the positive change that we are
48:19
making in the world. And me and the entire team is it
48:23
something that we're very, very proud of.
48:25
And this is something that give us energy to grind every day and
48:29
to make it work in this very challenging market and went
48:34
together. Great.
48:36
Well, Oren, I'm really excited to be working with you as a
48:38
partner and investor and I I hope we get to have you back on
48:42
the show again sometime in the future.
48:44
Likewise, Dave, again I would say that we are very excited to
48:48
partner together board on the investment Inequity B and the
48:51
fund. Thank you.
48:51
All right. Thank you for having me and
48:53
thank you for your support. Thanks for joining us on the
48:54
show, ARD. Just think of all the other
48:58
things we could do for humanity by joining forces.
49:01
Not a chance. Muscle, brain.
49:03
I don't do things for humanity, I do them for me.
49:14
Welcome to another episode of Valuation Corner.
49:16
And this week I'm on, we're going to be comparing some
49:19
health companies, right? I thought we'd look at Whoop
49:22
today and compare them to Aura. So let me introduce you to
49:26
Whoop. They're they, they're a
49:27
developer of a wearable performance improvement device
49:30
that gives you personalized information to help improve your
49:34
overall fitness. They're relevant this week
49:35
because they just announced a new round at a $10 billion
49:39
evaluation. So they're in the news.
49:41
They've raised a billion for to date their last time they they
49:46
came to market was in August of 2021.
49:48
That was a series F that SoftBank LED.
49:51
And as a part of a new announcement on the new round,
49:54
they told us that they exited 2025 with over a billion dollars
49:58
now in annual bookings. So it's really them and Aura who
50:02
are the two leading brands in this wearables performance
50:05
space. So I thought I'd do a little bit
50:07
of a comparison of these two and see what they do and what they
50:11
do the same and different, and how this might shape up into two
50:14
really interesting IP OS towards the end of this year.
50:17
Let's start with what they do. So they're basically helping you
50:19
to track biometric data, sleep, heart rate, blood, oxygen, skin
50:24
temperature, stuff like that. And you use that information
50:26
with their app in order to get real time feedback on your
50:30
activity, your diet, and to make lifestyle adjustments in order
50:33
to improve that. They are a little bit different
50:35
going after different customers. I've talked to a handful of
50:38
customers this week just to get a sense for who likes what and
50:42
what what types of customers might go for each.
50:45
Let's start with Whoop. I think of them more as a
50:46
performance coach. They really are designed for
50:50
athletes and high performers who really want a lot of precision
50:54
on how hard they can push their bodies.
50:57
I'm typically in the gym everyday.
50:59
I work out with trainers. I do competitive Spartan races
51:02
on weekends. This feels like it's pretty good
51:05
for me. It's something you can actually
51:06
wear on your. I see you're wearing yours on
51:08
your on your wrist which is great.
51:10
You can wear it on your. I have mine here on my bicep
51:12
actually. Oh yeah.
51:14
OK. So you can you can run your
51:15
bicep, you can do it on your wrist if you're actually working
51:17
out or in in some kind of high intense activity.
51:20
You also have adjustments where you can put it in your
51:22
underwear. I don't like to wear things in
51:24
my underwear and so, but I don't judge teach each their own.
51:29
If that's if that's how you know that's how your body moves or
51:31
what you want, how you want to, how you want to wear it, great.
51:34
So that's kind of cool. They offer something called a
51:36
recovery score, which is just a way to talk about how your body
51:39
is performing under different stress.
51:41
They also do things like sleep activity.
51:44
I found that it kind of under reports my sleep a little bit.
51:47
I talked to the performance trainers and people use it and
51:50
it seems like the consensus is that it's not perfect on sleep
51:53
tracking the way they do activity that count calories,
51:56
but they also do like the count the strain that your, your, your
52:00
body is going through using cardio activity.
52:02
I think that's OK if you're a performance runner or a marathon
52:04
runner, that probably works better if you're like doing
52:07
lifting weights or something that's just high intensity.
52:10
I don't know that that as a tracker is, is as effective.
52:12
So I'd say it's, it's OK as an activity tracker.
52:15
A lot of gyms and and like concerts, doctors will do a
52:18
better job of tracking all this stuff, but it's pretty good for
52:21
what it does. Aura is more general Wellness.
52:24
They're focused on stuff like lifestyle, balance and long term
52:26
health. Much better I think on sleep
52:28
tracking. The Internet surveys seem to
52:30
suggest it's also a better sleep tracker.
52:33
Aura is a ring. You wear it on your finger.
52:35
That can be good or bad. I don't personally like to wear
52:37
rings. It also gets for me it's not as
52:39
comfortable and it gets in the way of when you're like lifting
52:41
weights or doing pull ups or push ups.
52:43
The ring can be a little bit of an obstruction.
52:45
I also happen to lose my ring all the time.
52:48
So you know, there's some downsides in terms of the fun
52:50
factor that maybe favor loop, at least for athletes or it does
52:55
provide a redness score. I think in terms of the
52:57
calories, it's fine. It gives you a step count, which
53:00
isn't maybe as thorough as the strain score that loop uses
53:04
using cardio activity, but it's more targeted for people who are
53:07
just focused on their lifestyle and and long term health.
53:10
So slightly different markets. If I had to rate them in terms
53:13
of what I would use, I would say give Aura the the win on being a
53:17
better sleep tracker. Woop maybe on activity tracker
53:20
comfort. You know, this is again, I
53:22
personally like don't like to wear rings as much, but if you
53:24
like to wear a ring, it's kind of easy to slip Aura on Woop
53:28
maybe has some more flexibility for athletes in terms of pricing
53:31
or is definitely a winner. You buy a ring for 300 bucks
53:35
upfront. You pay a subscription to get
53:38
access to your data, but it's only about 6 bucks a month.
53:41
Woop, you don't pay anything upfront, but it's between 17 and
53:44
as much as $30.00 per month for a subscription.
53:46
So you actually end up paying more for WOOP.
53:49
So I think if you're price conscious, WOOP may not be the
53:52
best way to go. I just went to their website
53:54
yesterday to look at what it would cost to to buy these
53:57
different plans for WOOP. It could go as high as 30 bucks
54:00
a month if you buy the kind of the fancy plan with all the
54:03
add-ons and, and access to your data.
54:06
But they're they're they're more advanced subscription products.
54:10
If you commit for 24 months and you can lock, you can get that
54:13
down to 17 bucks a month. And so that's the range of
54:16
pricing you're paying or you can go on their website right now
54:19
and buy the thing for 300 bucks, 300 bucks plus the subscription.
54:22
So overall, I think Aura might be a little bit of the have a
54:26
bit of an edge in terms of pricing.
54:28
Interesting story on Whoop a couple months ago.
54:31
Did you know that they got banned from the Australian Open,
54:33
the the tennis tournament because the three best tennis
54:36
players in the world were all wearing them and were asked by
54:39
the tournament to not wear them? And I guess they gave them an
54:43
this was sure enough, they turned this into a into a huge
54:47
marketing coup. If they, you know, they're
54:48
basically a performance device that athletes love and are
54:51
wearing at the Australian Open and shouldn't be a negative into
54:53
a positive, which I give them a lot of credit for in terms of
54:56
scoring a marketing win. So let's just go through the
54:58
comparison of Lupinora in terms, you know, who might be in a
55:00
better position to go public later on this year and where you
55:03
might want to play as an investor.
55:04
On the revenue side, Loop is just over a billion dollars in
55:07
bookings. Aura is estimating 1.1 billion
55:10
in revenue this year. So let's let's call that even
55:13
Steven. In terms of investors, Aura
55:16
raised from Fidelity at at $11 billion evaluation about a year
55:20
ago, October of last year, Loop just announced 10 billion, but
55:23
didn't have a strong, I think lead investor.
55:26
Did you have some celebrity investors like you know, LeBron
55:28
James and and the aforementioned tennis players?
55:32
Cristiano Ronaldo is an investor in loop.
55:34
So I know my 12 year old daughter will obviously buy a
55:36
Whoop now if he loves them. But if you don't go for
55:39
celebrity investors and you want financial investors, I think
55:41
Aura might have an edge there. Growth.
55:44
Both of them are talking about 100% revenue year over year
55:46
growth. So that's again, maybe even
55:48
Steven Whoop has sold about two and a half million memberships.
55:52
Aura has 5.5 million rings sold. So again, you know, or I might
55:56
have a little bit of a retail, maybe a little bit further along
55:59
in terms of the retail market and number of users, but Whoop
56:02
is more focused on athletes and performance athletes.
56:04
It seems like if I have to give one edge to Whoop, that might
56:07
make me think that their IPO would go better.
56:10
It gets back to the pricing. Remember I said Whoop is more
56:13
expensive. Well, the flip side of that is
56:15
they make more money per member. So between charging more for the
56:18
subscriptions, having recurring revenue around that, they're
56:21
monetizing at about $440 per member per year.
56:26
Aura is probably more like 200. So they sell you the ring for
56:29
300 and then have a minimal subscription fee if another 70 a
56:32
year and the time to get to you 3 year, three-year 4, they're
56:35
not monetizing as effectively. I know this the hard way from
56:39
Sonos, where as the Chief Financial Officer, I joined that
56:43
company in 2010. I bought a Sonos Zone player in
56:46
2011. I think I paid $399 for that
56:49
Sonos Stone player, and then I really didn't pay Sonos again.
56:53
I bought some more zone players in 2017 and 18 when we went
56:56
public, moved to a new house, maybe about another zone player
56:59
there, sold an old one. So I'm paying Sonos once every
57:02
seven or eight years. Contrast that with Spotify,
57:06
which is the music I listen to on Sonos.
57:07
I'm paying them $10 a month. I've been doing that for about
57:11
16 years. So you can do the math in terms
57:13
of who I've paid more, right? I've paid Sonos maybe twice in
57:16
the last 16 years. I pay Spotify 10 bucks a month
57:19
and do that 120 bucks a year for 16 years.
57:23
It's just a much Better Business model to have these recurring
57:25
subscriptions. So I think that is an edge that
57:28
Whoop has. I don't know that Aura has got
57:30
that figured out. I think Aura might be a little
57:32
bit better than an IPO because more people owned Auras and
57:35
there might be some retail bid for it.
57:37
But I think maybe Whoop is the is the better one.
57:40
But honestly, they're so close in terms of financials and
57:43
traction, and they're both really interesting spaces.
57:45
They have their niches figured out.
57:46
They're both getting some great marketing buzz around them.
57:48
I think it's almost too close to call, maybe because of that
57:51
recurring revenue bias that I have and maybe the fact that I
57:54
just like performance athlete stuff.
57:56
I might go for a loop over Aura, but I think they're both really
57:59
interesting place. Yeah, I I've tried both
58:02
products. I'm, I'm a current Whoop user
58:04
and have been for the last two or three years.
58:05
I was an Aura user for a couple years before that.
58:08
And I, I think they both are, you know, great products and
58:13
they both have their own markets.
58:14
I, I, they do compete a little bit, but I, I agree with you, I
58:18
think they're really serving slightly different markets.
58:20
More people are looking for data on wearables and fitness
58:24
information. And I think both companies are
58:26
likely to be successful and and that's why they're both, you
58:30
know, getting financed. Yeah, those multiples are kind
58:33
of rich, 10 times revenues, I mean a great company and Sonos
58:36
is less than two times revenues. A great company like Apple might
58:39
be 4 times sales, but 10 is rich.
58:42
I guess as long as they can double and double for the next
58:44
couple years, maybe they'll be, maybe they'll be fine.
58:47
The fact that Ora has raised money and you know, been able to
58:51
raise money from Fidelity who's a good anchor IPO investor
58:55
might, might be OK, but they are they do feel a bit rich, but
58:58
they seem to be executing and doing well and there's a huge
59:00
market for that stuff. So that's those are the
59:01
positives. All right.
59:02
Well, thanks for another week on valuation corner, Mark.
59:05
All right. Thank you, Dave once.
59:10
Again, you have fulfilled your destiny, he man.
59:15
Amen. Thank goodness you freed us.