Latest / trading places / TP3: ⁠sim desai hiive🐝 •⁠ emily zheng pitchbook⁠⚾️📓 •⁠ vlad voroninski helm.ai 🤖🚙 •⁠ bytedance 🫦🕺🏻-- [trading places] ep.3

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TP3: ⁠sim desai hiive🐝 •⁠ emily zheng pitchbook⁠⚾️📓 •⁠ vlad voroninski helm.ai 🤖🚙 •⁠ bytedance 🫦🕺🏻-- [trading places] ep.3 · trading places

• 0:00
  Our secondary is really the new IPO.
• 0:02
  I wouldn't say quite yet, but I do think there is a lot of
• 0:05
  growth. There's a lot of capital out
• 0:08
  there looking to allocate to these types of companies, they
• 0:12
  just need something to hang your hat on in terms of making a case
• 0:15
  to to invest. We're back in IPO season, baby.
• 0:20
  Let's go. All right, welcome to another
• 0:45
  episode of Trading Places. I've got my friendly dog
• 0:50
  podcaster here with me, but our special guest today is Emily
• 0:53
  Zhang from Pitch Book. And Emily is going to be telling
• 0:56
  us a little bit about what's been happening in the secondary
• 0:59
  market in the last quarter. And she just produced a really
• 1:01
  great report. And Emily, welcome to the show.
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  And can you tell us a little bit about what's happening in
• 1:07
  secondaries? Great secondary market has been
• 1:10
  getting a lot more traction recently and I think it's for a
• 1:13
  good reason. I estimate that the annual
• 1:16
  transaction volume for USVC direct signaries is $61.1
• 1:20
  billion and that's really notable, but. $60 billion.
• 1:26
  Amazing. Yes, that is really notable.
• 1:28
  And in fact it's it's a greater value than the public listing
• 1:32
  value over the last four quarters.
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  But our secondary is really the new IPOI wouldn't say quite yet,
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  but I do think there is a lot of growth.
• 1:43
  OK. Why don't you walk us through
• 1:45
  some of your report and maybe some of the more interesting
• 1:48
  slides and we can dive into the numbers.
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  I've got my partner in crime here, Aman Virgie, who is a
• 1:54
  notoriously big nerd CFO and went to some very overpriced
• 1:59
  schools that we won't mention, whose initials are Stanford and
• 2:03
  Harvard. Thank you for that.
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  I think the secondary mark is really important to see in
• 2:08
  context of the rest of venture. So this right here shows
• 2:12
  secondaries as a compared to. The primary, yeah, very thin
• 2:17
  slice of secondaries. Is that the the secondary slice?
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  Yes, the secondary slice is about 2%, which is I guess a
• 2:24
  little clever because secondaries, but it is still
• 2:29
  small relative to the overall Unicorn space.
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  And on the next slide, we see the comparison with public
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  listings and acquisitions. So it's about a third of total
• 2:40
  exit value of compared to like the past year.
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  So unicorns, a lot of them haven't raised since the
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  pandemic era. Almost half of them haven't
• 2:51
  raised since the 2022. So I think this is really
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  interesting because a lot of the value might not necessarily be
• 2:58
  accurate nowadays or potentially overvalued.
• 3:01
  And therefore we're seeing that reflection in the secondary
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  market because there's a, a big hurdle in the secondary market
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  is pricing transparency. And if you don't have access to
• 3:14
  like insider information or you don't like know the founders or
• 3:18
  the board, then you might not really know whether you're.
• 3:21
  Paying hard to diligence, hard to figure out what the numbers
• 3:24
  are. So if I look at this closely, I
• 3:27
  guess it looks, it looks like the large percentage of
• 3:30
  unicorns, I guess have raised in the last five years.
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  But you know, half of that was before 23 when we might say
• 3:38
  those numbers might have been a little crazy.
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  Certainly in 20 and 21, we would probably say they're a little
• 3:43
  crazy, maybe even into early 22. I wonder if there's a third
• 3:47
  group, so a third group that can't raise money and that's why
• 3:50
  they haven't raised. Yeah, I was going to get to the
• 3:52
  third group. Is they?
• 3:53
  Don't they? They?
• 3:55
  And they did. They did the good thing, They
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  kept their spend, they cut the burn and they decided to become
• 3:59
  a going concern in a self-sufficient business.
• 4:02
  And then which is good, but then I think there's a force group
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  that's, you know, that has got into some kind of distress or
• 4:07
  workouts and, and, and cannot or or will not raise and bite the
• 4:12
  bullet. And so they are that that's
• 4:14
  probably the, that's probably difficult group.
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  But if it's still alive, it's still ticking, then you know
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  they survive somehow. Yeah.
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  And I think Emily's observation that perhaps some of those
• 4:23
  companies are maybe not repriced since their last raise unless
• 4:28
  their VCs have proactively marked them down.
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  And I might be skeptical that there's a lot of VCs doing
• 4:33
  proactive markdowns. Yeah, haven't heard a lot of
• 4:36
  that activity. And so this group really shows a
• 4:40
  dynamic with companies that haven't raised since X number of
• 4:45
  years. So the companies that last
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  raised during the pandemic era, their median discount is about
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  like 50%, while if they raised in the last 18 months, it's more
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  about 5%. So what that really means is
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  that a recent primary round leads to more pricing
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  transparency and therefore more secondary activity because
• 5:04
  buyers are more confident in the pricing.
• 5:08
  OK, that does make sense to me. Although still, it does look
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  like there's some substantial number of companies being traded
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  that were priced in 21 and 22, right?
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  Yes, they are trading and that could be.
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  Just a big discounts. Bigger discounts, maybe LP's
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  just want liquidity and it's still a good company that has
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  like strong fundamentals, but LP's might have been holding
• 5:33
  this company for 10 years and need some liquidity.
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  So there is still a market, there is just at a lower price.
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  Yeah. I guess in the secondary market
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  we always say discount to what because although those might
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  look like big discounts, the question is if that's a discount
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  to a very optimistically priced round from 20 or 21, it may
• 5:54
  still not be the actual value even with the discount.
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  Yes, exactly. And Stepson released the
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  interesting report about like stop asking about discounts is
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  the title. And basically they're saying
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  discount shopping doesn't always lead to good bargains.
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  And I think that's, that's a great way to put it.
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  Based on that's data, the top 20 companies has over like 90% of
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  the transaction volume in 2025. Really.
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  The top four or five looks, the top five are half the market in
• 6:28
  leasing quarters, right. So this would be like an open AI
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  or a ASAC or and rock back or something like that.
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  I do think there's interesting buying opportunities outside
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  that top 20 to 50 that most of the retail market is not aware
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  of. Obviously it might be smaller
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  just from a size perspective because those top names are so
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  large. So this slide here really
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  emphasizes the tailwinds that we've been seeing from the Trump
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  administration focus on AI, crypto, national security And a
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  lot of investors, both secondary, primary and public
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  market investors are really enthusiastic because the support
• 7:05
  from the administration they think is going to help propel
• 7:08
  these sectors. And this chart here really shows
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  the dynamic between AI companies versus non AI companies
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  comparing their step up by series.
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  And across every single series, AI companies has had a higher
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  step up. So I think what you're telling
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  me is AI is more expensive than everything else, OK.
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  And this is talking about roofers, which is right of first
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  refusal for folks who are not familiar with that term.
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  It means whenever people are trying to buy secondary, the
• 7:38
  company usually has the right to override that trade.
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  And if it wants to buy the shares at the same price that
• 7:45
  are being offered on the retail market, then it can quote roofer
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  that trade and take it for themselves.
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  Correct, Correct, correct. And we're seeing a slight
• 7:54
  uptick, but it could have, could be higher actually.
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  But in general, I think the secondary strategy is no longer
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  going to be an afterthought for startups, at least I anticipate
• 8:07
  in the coming months and the coming years.
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  Startups can't really ignore this anymore.
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  It's becoming more and more common, even as like a
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  retention, employee retention opportunity, when companies like
• 8:19
  Open EI and SpaceX are offering liquidity periodically, it's a
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  really great way for startups to keep their employees and
• 8:28
  investors happy. Yeah.
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  I guess I'm surprised that numbers only 20% or even less
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  than 20% that that would indicate that most companies are
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  not roofing their their trades and that the secondary market
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  window is at least open. If we, if we believe that those
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  trades are dominated by the largest companies, the largest
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  companies are not generally rooferring unless they're
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  scaring people off from even trying.
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  I guess that might be the other thing that isn't captured here
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  is if they're too scared to even make the offer, then that
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  wouldn't necessarily be captured in this data.
• 9:00
  But still, I guess I would say that's optimistic for secondary
• 9:02
  buyers, right? 4-4 times out of five, four to
• 9:05
  five dentists will approve your secondary trade.
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  I guess four out of five dentists will get their
• 9:12
  secondary true to prove trade approved.
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  That's probably the more accurate description.
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  This slide shows VC secondary dry powder, so specific for VC
• 9:20
  secondary funds and it's grown by quite a bit.
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  There's a lot of demand here. Seems like it's good times for
• 9:27
  secondary funds to be raising. Exactly.
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  Well, there's a lot of money, you know, the sidelines here.
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  So there's that's got to be deployed into all these
• 9:35
  secondary into this vastly quickly growing market, which
• 9:38
  Emily pointed out still has a lot of room to grow.
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  So that that that makes sense, that makes sense.
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  And this is just the US, right? Emily?
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  There's more this. Is just more of the US just for
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  US. And it's also not only a good
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  diversification tool for existing VC investors, but also
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  for new investors like family offices and pension funds that
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  want exposure to venture but don't necessarily want all the
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  risks that come with primary VC. Secondaries are a good way to
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  dip their toe into the space. OK, and if I'm reading that
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  graph correctly, 25 and 24 are the Big Blue block on top.
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  Yes. Which is looks like more than
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  60% of the overall volume. Emily, are you going to be doing
• 10:19
  this report on a pretty regular basis going forward every every
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  quarter? Yes, I'll be publishing the
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  secondary MarketWatch every quarter and planning on
• 10:27
  expanding their research into GP LED and LP LED signaries as well
• 10:32
  in the coming years. So staying tuned for that.
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  And I will publish at least one Secondaries related report per
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  quarter on Pitchbook. And all of these are free to
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  read as well. So there's no paywall.
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  Oh, terrific. I know there's one other passion
• 10:48
  you have outside the venture capital and secondary market,
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  and I figured we'd give you a free plug.
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  But you're a fan and influencer at another consumer category,
• 10:57
  correct? Yes so I do nail art, I paint my
• 11:01
  nails and I do tutorials on Instagram.
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  My handle is amazing by Shea nails and I have over 120,000
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  followers there so wow. It was my pandemic hobby turned
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  side hustle so I really been enjoying that.
• 11:16
  Awesome. All right, well, I hope we send
• 11:18
  some readers your way for nails as well As for secondaries.
• 11:22
  Yes, perfect. Sounds good.
• 11:33
  Hi, welcome to the third episode of Trading Places Podcast.
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  We have with us today SIM Desai, who's the founder and CEO of
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  Hive, which is a secondary marketplace.
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  SIM, thanks for joining us for the show.
• 11:45
  My pleasure, Dave. Thank you for having me.
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  I'd love to get a little bit of your background and how you came
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  into the business of running a secondary platform and why you
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  chose to do that. My history is first as a lawyer
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  and then as a specialist in the secondary market for private
• 12:01
  equity. I started in that area and in
• 12:03
  way back in 2009 around the 20 teens the the secondary market
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  for these kind of big valuation late stage venture backed
• 12:13
  companies emerge out of nowhere with with the advent with
• 12:17
  Facebook and then eventually and then Twitter and then others.
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  And immediately there was, you know, those of us in the
• 12:25
  secondary market kind of recognize an opportunity because
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  these securities were inherently tradable, right?
• 12:31
  Like a share of Facebook was something that that was not that
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  hard to sell, right. There was a lot of different
• 12:37
  people who were interested in, in, in that back in though that
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  surge 2011 to 2013 time frame. There were not too many, you
• 12:44
  know, unicorns or companies that reached the level of profile
• 12:48
  capitalization that warranted a call it a traded market, but
• 12:53
  there were a few. And and you know, Facebook
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  really blew up in that regard and was perhaps one of the most
• 12:57
  actively traded private companies of all time.
• 13:01
  From there, the market kind of moved in fits and starts and,
• 13:05
  and didn't really start building up momentum again until the mid
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  20 teens. And around that time, 2015,
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  2016, we started to see that the market was really growing quite
• 13:17
  quickly. So you would see anywhere from 2
• 13:19
  to 400% growth per annum in terms of total transaction
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  volume and so on. And so it was a good place to be
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  starting around that period. Then a few years later, around
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  2019-2020, I started having the entrepreneurial ish and realized
• 13:33
  that there was a real opportunity to bring some degree
• 13:38
  of technology to this market. I think what the market really
• 13:41
  needed at the time was a central place at which to, you know,
• 13:47
  meet buyers and sellers, number one, right?
• 13:51
  And #2 to get price discovery. Or I should say, maybe it's
• 13:55
  price discovery first, then meeting buyers and sellers.
• 13:58
  But you can see how the two things are very closely related
• 14:00
  because as soon as you have buyers and sellers in one place
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  putting up their things for that they want to buy or the things
• 14:06
  they want to sell and a price, then you have price discovery as
• 14:10
  well as, you know, obviously a centralized marketplace.
• 14:13
  SIM you, you worked at a company called Setter Capital, which is
• 14:17
  a broker for secondaries, not just companies but also fund
• 14:20
  secondaries. Could you tell us a little bit
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  about your experience there and what does Setter do?
• 14:25
  And did any of that inform your experience since kind of getting
• 14:28
  started with Hive? Yeah.
• 14:30
  So you know, Center Capital was where I, you know, really found
• 14:34
  start discovered the, you know, the secondary market for venture
• 14:38
  backed trading. I started off as a, you know, an
• 14:41
  LP trader call it, meaning that I would trade interests and
• 14:45
  funds. That was the, you know,
• 14:47
  historical business line of of that company and you know when.
• 14:52
  When you say funds, that's not just venture capital funds,
• 14:54
  right? They also cover PE and buyout
• 14:57
  and. That's right.
• 14:59
  That's right. In fact, the overwhelming
• 15:01
  majority of the secondary market for LP stakes and funds or
• 15:06
  stakes, you know, limited partnership interests and funds
• 15:08
  is in the buyout space. So that is the vast majority of
• 15:14
  the capitalization of, of, of the private equity world.
• 15:17
  And it also the vast majority of, of call it the trading
• 15:20
  secondary market trading. And that's a really mature
• 15:22
  market that's that's been active for decades and has kind of
• 15:26
  reached a high degree of maturity today by compared.
• 15:30
  To most people in venture really understand that.
• 15:32
  I mean that was something that we noticed when we jumped in
• 15:35
  about 5-6 years ago was the secondary market in private
• 15:38
  equity overall and buy it specifically is quite
• 15:42
  established has been around for you know definitely more than 20
• 15:45
  years. That's right.
• 15:47
  I guess color capital and a bunch of other folks kind of
• 15:50
  maybe there was something that happened before that.
• 15:52
  I think the mid 90s was kind of where it seemed to take off and
• 15:55
  then certainly post 2000 and the crash was when another piece of
• 15:59
  it took off or is that is that accurate?
• 16:01
  Yeah, I think that's, I think that's pretty fair.
• 16:03
  And that market has had obviously a really high growth
• 16:07
  trajectory over time and, and but 100 billion more 100.
• 16:11
  And 50 billion. Say that again.
• 16:13
  Over 100 billion, maybe 150 billion is the annual market for
• 16:18
  private equity secondary. I I, you know, not sure that the
• 16:21
  stats are easy to come by, but that's what I've heard.
• 16:24
  Yeah, directionally, I think that's right.
• 16:26
  I mean, I don't have you know any independent verification,
• 16:28
  but I will say that that that sounds roughly, you know,
• 16:32
  approximately right in terms of annual trading there.
• 16:34
  Which which is arguably, you know, I don't know, three times
• 16:37
  the size of the venture secondary market at least
• 16:39
  substantially larger, right. Definitely, yeah.
• 16:41
  Directionally, at least three times.
• 16:43
  Yeah, Yeah. So what did you, what did you
• 16:46
  learn from working at setter and what did you see as an
• 16:49
  opportunity that maybe setter wasn't going after?
• 16:52
  Yeah. Look, I, I, I think that, you
• 16:54
  know, second the LP, the trading of LP interests in funds, be
• 16:59
  they buy our funds or other funds or venture funds was
• 17:02
  something that was amenable to this kind of quoting, quoting
• 17:06
  and trading format. Meaning that you could quote a
• 17:08
  price. People knew what it was like an
• 17:10
  LP stake in a Blackstone fund or, or, or, or Bain fund or
• 17:14
  Carlisle or, or KKR. So, you know, you had to quote
• 17:18
  the vintage and the price by reference to, you know, the last
• 17:21
  valuation and then another trader in the market would know
• 17:25
  what you meant by that, right. And so that's what makes for
• 17:28
  the, the ability to quote something is what makes for a
• 17:31
  tradable market. Historically, secondaries are
• 17:34
  associated in the, in the, in the LP market, the you know, the
• 17:38
  market for funds with discounts. But that said, there were often
• 17:43
  times some of the more highly sought after funds, you know
• 17:48
  call it the Baines or or the Carlyles or other of the more
• 17:52
  Nishi middle market buyout managers that that always
• 17:57
  generated strong returns would often price at even premiums to
• 18:01
  NAV or because they were known to for example mark their
• 18:04
  portfolios reasonably conservatively and so on.
• 18:07
  You could see premiums to NAV as well in that market, but on a
• 18:11
  more stabilized basis. Yeah, you you would often see
• 18:14
  especially buy our funds, you would rarely see them pricing at
• 18:17
  greater than a 20% discount only because, yeah, unless there was
• 18:23
  something wrong with the portfolio like something
• 18:25
  particularly known to be wrong or or troubling above either the
• 18:28
  portfolio or the manager, you you would see a relatively tight
• 18:31
  range. Right.
• 18:33
  Yeah. And I, I guess I was just
• 18:34
  contrasting at least in venture and I know there's been, you
• 18:36
  know, time frames in Venture that have been up and down as
• 18:38
  well. But it seems like the discounts
• 18:40
  and also the premiums in Venture are more widely varying than
• 18:44
  they are in private equity. Is that your experience or not?
• 18:47
  Not so much the case. Well, so the difference between
• 18:50
  venture and and private equity is that the, I should say direct
• 18:54
  the direct venture market and and the, and the fund market is
• 18:57
  that funds are valued by the managers every quarter.
• 19:00
  So there's always a reference net assets value to price
• 19:04
  against. And so the discount would be
• 19:07
  relative to that latest quarterly evaluation unlike, so
• 19:12
  unlike funds, start-ups don't have that kind of regular
• 19:16
  valuation cycle. So we don't really talk.
• 19:19
  So you could price a venture asset like shares of data bricks
• 19:23
  or something against the last funding round.
• 19:28
  But sometimes that funding round is years old, right.
• 19:31
  So correct, it's not typical for us to talk in terms of premiums
• 19:35
  or discounts to the funding round in the secondary?
• 19:39
  Or to the last round that has happened.
• 19:42
  Yeah. We we, we generally don't talk
• 19:44
  in those terms relative to the last round or any other round.
• 19:47
  Oh, you don't. OK.
• 19:47
  I see. No, we, we, we actually talk in
• 19:49
  terms of just an absolute price. Like I see the price per share
• 19:53
  of what's. What's been trading?
• 19:55
  What's it priced at lately in the market in the correct?
• 19:57
  Yeah. So when when you go on Hive,
• 19:59
  you'll see a price per share, that's the market price.
• 20:02
  You may be able to see also the, the valuation and price per
• 20:06
  share of the last round, but we're not necessarily quoting it
• 20:09
  as like a discount or premium because it's kind of arbitrary.
• 20:12
  You know, it would have depend on whenever that round occurred
• 20:14
  and it's not really a discounted premium relative to that round
• 20:17
  because so much may have changed since that time.
• 20:21
  It's similar to the public stock market actually, we, we just
• 20:24
  quoted as this is the price per share.
• 20:26
  This is the enterprise value of the company.
• 20:28
  Here is the dashboard of Hive. So if you were a user of Hive,
• 20:32
  you could come in here, you'd be able to see this, You know, at
• 20:35
  the center of the dashboard is this thing we call the high 50
• 20:39
  index, which is basically an equal weight index of the 50
• 20:42
  most what we call liquid stocks on Hive.
• 20:46
  And it's really meant as it's not a, it's not an investment
• 20:49
  product. It's, it's just meant as a
• 20:51
  barometer for really the direction of the market.
• 20:55
  You can see the progression from let's say early, you know,
• 20:58
  December of 2023 all the way today.
• 21:01
  You see obviously seems. Like there's been a lot of
• 21:03
  activity in the last year or two.
• 21:04
  Yeah, a lot, a lot of appreciation in in the in the
• 21:08
  market price of the of those securities.
• 21:10
  You can click into a company here.
• 21:11
  So here's this is crack it. This is one of the most this is
• 21:15
  a crypto exchange. It's basically a competitor for
• 21:18
  Coinbase, allows them to draw comparisons between Kraken and
• 21:21
  Coinbase and understand, you know, the valuation of Kraken
• 21:24
  versus Coinbase and thereby be able to have an opinion about it
• 21:28
  in the secondary market. As I mentioned, Kraken is a very
• 21:31
  liquid stock. So here's here's the historical
• 21:34
  price chart for Kraken on Hive. If you zoom in, you can see
• 21:37
  every one of these dots is a transaction.
• 21:39
  So there's been you. Know it's like there's been a
• 21:40
  lot of transactions. Yeah, literally hundreds of
• 21:43
  transactions in this stock. And as you can see here, there's
• 21:46
  been a a lot of appreciation in the market for this stock since
• 21:50
  the US election up to date. You know, that stock has gone up
• 21:53
  in value quite a bit in in the market.
• 21:56
  There's another interesting thing, though, that happened
• 21:58
  with Kraken the CEO, Arjun Sethi, who's also the leader of
• 22:03
  Tribe Capital. Yeah, Arjun is fantastic.
• 22:06
  Be a smart guy. Yeah, and, and, and he did
• 22:10
  something brilliant actually to that point, which was in the
• 22:13
  spring of this year, he decided to release Kraken's financial
• 22:17
  information on their website. So what that did was anytime you
• 22:21
  have information available in the in the in the public about,
• 22:26
  you know, about a company that dramatically enhances the
• 22:31
  liquidity of the stock. Transparency drives liquidity.
• 22:34
  Is that correct SIM? Absolutely.
• 22:36
  I mean, and, and especially into the, into the financials of the,
• 22:41
  of the underlying asset right, of the target company.
• 22:44
  That's what's happened here. As you can see that there's just
• 22:46
  a huge amount of interest in this name now, because as I was
• 22:49
  saying, you could take the the the information that Kraken's
• 22:53
  now disclosing about their own performance compared to its
• 22:57
  public competitors and say, well, hey, until the valuation
• 23:00
  of Kraken gets close to public competitors based on these
• 23:03
  multiples and metrics, I'm going to be a buyer in the pre IPO
• 23:06
  market, right, right. So those you can access the
• 23:09
  stock have that opportunity. By the way, Iman has joined us
• 23:14
  and hey, how are you? Iman's my partner Practical
• 23:18
  Venture Capital and my partner in crime on the Trading Places
• 23:21
  podcast. Great to great to meet you Iman.
• 23:23
  I would love to hear what what would you love to be able to get
• 23:26
  from start up CF OS now that you aren't getting from them readily
• 23:30
  in order to make this marketplace work?
• 23:31
  Is there any, you know, any, any process, any information you'd
• 23:34
  love to be able to get for them that?
• 23:35
  Would be my ask if CF OS is to you know, to work with us on
• 23:40
  these kind of high level disclosures that they can make
• 23:42
  to the world to the extent that they're interested in creating
• 23:45
  demand for their stock. Because I can tell you that
• 23:47
  there, there's a lot of capital out there looking to allocate to
• 23:51
  these types of companies. They just need, you know,
• 23:54
  something to hang your hat on in terms of making a case to to
• 23:59
  invest. Do do you see a pattern where
• 24:02
  companies start disclosing more information about, you know,
• 24:06
  6/12/18 months before they want to go public?
• 24:08
  Is that something that you you've seen in the market?
• 24:11
  There is a real trend now and there's I think increasingly
• 24:16
  some private companies who are planning to go public understand
• 24:19
  that there's a lot of value in creating a pre IPO market for
• 24:23
  their stock. Because what it enables them to
• 24:26
  do is get price discovery on their shares and then it enables
• 24:31
  them to have this sort of track record of both trading, but also
• 24:35
  a benchmark for pricing their ultimate IPO and you know.
• 24:40
  It's also practice for them and doing the public reporting while
• 24:44
  they're still private, I mean. That's right.
• 24:46
  Yeah, although it can't, although usually it's pretty
• 24:49
  bare bones. The pub, whatever reporting
• 24:50
  private companies provide while they're private is usually
• 24:53
  pretty bare bones and quite different from what a public
• 24:55
  company would provide. But but certainly, yeah, it
• 24:58
  does. It does a lot.
• 24:59
  It acts sort of as like public market training wheels.
• 25:03
  That's what I was just going to use that phrase actually.
• 25:07
  Yeah, it'd be, it'd be interesting if everybody sort of
• 25:10
  said, hey, 18 months before I go public, I'm going to start
• 25:12
  acting like a a public company, even though I'm still private.
• 25:15
  That would be a a real problem for some of these banks who have
• 25:18
  made such a business out of marketing companies.
• 25:21
  And trying to. Go through like a a price
• 25:24
  discovery process when they go I public, which is kind of often
• 25:27
  times quite arbitrary. I mean, we saw with Figma, you
• 25:30
  know, they, they were up 4X or something on day one, which is,
• 25:33
  you know, it looks like a success.
• 25:35
  The company left a lot of money on the table.
• 25:37
  Well, yeah, it's a it's, it's a real, it's a real problem for
• 25:40
  those who sold into that IPO, who sold significant amounts of
• 25:44
  stock. And so you know, you don't want
• 25:47
  to mispriced your round, right, like you want to or your your
• 25:50
  IPO you you want. To in either direction.
• 25:53
  Right. Yeah.
• 25:54
  And I mean, maybe you're fine leaving some money on the table
• 25:56
  to sort of create some excitement, but to to leave sort
• 26:00
  of 75% of the value on the table is is is.
• 26:03
  Kind of insane. Crazy.
• 26:04
  And well, I mean it depends on the flow too.
• 26:06
  I, I would guess they only floated 1015%, but still you
• 26:09
  don't wanna, you know, you want to do a billion dollar IPO and
• 26:12
  you could have had a 2 or $3 billion IPO instead.
• 26:15
  Right. And and, and, and the other
• 26:17
  problem is then there's other problems that you know, they
• 26:19
  only flow to 1015% as you say, but then there's a big let down
• 26:23
  after the six month lock up because the rest of the supply
• 26:25
  comes online. So this this lack of free IPO
• 26:29
  trading and like the arbitrariness of the pricing of
• 26:31
  these IP OS really leads to a lot of volatility.
• 26:37
  Unnecessarily possibly. People don't like volatility is
• 26:39
  not valuable, right? It is it's it's.
• 26:42
  Cost that is to some traders. Oh yeah, exactly.
• 26:46
  If you're playing the VIX, I guess maybe that's right.
• 26:47
  Yeah, yeah, who knows, Maybe there's a private market VIX
• 26:51
  opportunity in the future there. So that's right.
• 26:55
  What do you see as kind of behavior for folks who come on
• 26:58
  your platform? And I I'm guessing you have some
• 27:01
  folks who are, you know, occasional or one time buyers,
• 27:04
  but you might have some other folks who are more regular
• 27:06
  buyers that do you do you have any info or do you see that
• 27:09
  behavior? Yeah, yeah.
• 27:11
  So we've seen, we see a lot of. So the vast majority of the
• 27:15
  buyers on our platform are institutional investors.
• 27:18
  Oh, really? OK.
• 27:19
  Yeah, Yeah. So the the overwhelming volume
• 27:22
  of of of our of our platform is institutional.
• 27:25
  I think that's one thing that really differentiates us from
• 27:27
  some of the other platforms that are more retail.
• 27:30
  We also have, we also have individual investors accessing
• 27:36
  our platform, but our focus is not on accredited investors,
• 27:40
  rather it's on what's called qualified purchasers.
• 27:43
  Qualified purchases are essentially a tier of of
• 27:47
  investor individual investor that is you know one step above
• 27:51
  credit investors. So qualified person would
• 27:54
  generally be considered to be like very high net worth
• 27:57
  investors who are a bit more. Sophisticated million, 5 million
• 28:01
  in personal net worth, net worth and 25,000,000 in entity, yeah.
• 28:06
  That's right. Yeah.
• 28:07
  That directionally that's, I think that's one of the that's
• 28:10
  one of the tests. So, yeah, obviously people who
• 28:12
  have the wherewithal and the means to invest significant
• 28:16
  amounts into the private market, but also withstand a loss
• 28:19
  because, you know, pre IPO investing is very risky.
• 28:23
  It's not, you know, it's not all you know, it, it, it there.
• 28:26
  There are big losses in the in this game as well.
• 28:29
  In addition to the big wins we've had over 300 different
• 28:32
  companies have direct share trading on Hive.
• 28:37
  Most of the other players that are more retail oriented are
• 28:39
  only facilitating markets in in a very small handful of
• 28:43
  companies, let's say 20 or 30 companies.
• 28:46
  And so and then as a result, because they're they're
• 28:49
  facilitating mainly the hottest companies, they have got a more
• 28:51
  retail bent to them. Whereas Hive is providing
• 28:53
  liquidity across a much wider universe of companies and acting
• 28:58
  more like a wholesale market for, for this stock.
• 29:02
  And so, so that's, that's what I'd say in terms of where we see
• 29:07
  our, our very competition, honestly, like we don't really
• 29:09
  view the platforms as a major threat to us.
• 29:12
  We're we're really looking ahead to the larger financial services
• 29:18
  platforms like the banks and and and and large fund managers and
• 29:24
  other similar players in terms of our longer term competition.
• 29:30
  Is there a sense of kind of what a typical transaction size on
• 29:33
  your platform is? The range is all the way from as
• 29:36
  small as 25,000 US up to you know the largest transaction we
• 29:42
  did last year I think was 125 million.
• 29:46
  OK. Now the average transaction size
• 29:49
  is directionally about four or 500,000.
• 30:03
  Do you have a different group of people that tend to trade in
• 30:06
  ranges or these folks who are on your platform, you know, on a
• 30:10
  weekly basis, on a monthly basis, on a quarterly basis?
• 30:13
  Like what do you what do you see as kind of your whales and maybe
• 30:16
  you know some of the smaller animals, dolphins or fish, I
• 30:19
  guess I. Don't, I mean look there,
• 30:20
  there's different types, as you say, they're different types of
• 30:22
  animals. And some of these folks, smaller
• 30:26
  folks are very active. So individuals doing smaller
• 30:29
  transactions, especially individual sellers like
• 30:31
  employees and the, and those folks, they come to our platform
• 30:35
  and they self-serve. They put their listing up for
• 30:37
  sale and then a buyer comes and offers them.
• 30:39
  A lot of individuals and smaller funds are very active on the
• 30:42
  platform, using self-serving on the platform.
• 30:46
  But we, we also work with some of the big institutions, some of
• 30:49
  the big hedge funds, crossover funds, blue chip VCs and the
• 30:54
  like. And those often engage sometimes
• 30:58
  on platform, sometimes off platform, sometimes they use the
• 31:00
  platform for data and market insights.
• 31:03
  But then they work with one of our reps that who can give them
• 31:06
  more kind of white glove service, you know, on and quasi
• 31:10
  off platform. All transactions are ultimately
• 31:12
  reflected on our platform, but some of the larger institutional
• 31:15
  business happens you know is negotiated off platform and then
• 31:20
  gets processed through the platform.
• 31:22
  Have there been any substantial changes in where your sellers or
• 31:25
  buyers are coming from? I, I would guess maybe the
• 31:28
  buyer, you know, universe has expanded and the geographies
• 31:31
  have expanded. That's right.
• 31:33
  I mean, we, we continue to be focused primarily in terms of
• 31:36
  investors on North America and the US in particular.
• 31:41
  You know what we have seen is increasing interest from folks
• 31:46
  like so you know they traditional, but just taking a
• 31:49
  step back, the traditional players obviously in this market
• 31:51
  would be people like VCs, hedge funds, secondary funds and the
• 31:55
  like on the buy side. And then certain VCs on the sell
• 32:00
  side. Obviously those who are getting
• 32:02
  like long in the tooth with certain investments will want to
• 32:05
  realize gains and so forth. Then you've got employee sellers
• 32:10
  who are selling, you know, obviously common stock lots
• 32:13
  anywhere from a few 100,000 to a few million.
• 32:16
  But the emerging kind of groups of participants in this market
• 32:20
  would be folks like those qualified purchases I'm
• 32:24
  mentioning to you. So individuals who are larger
• 32:26
  individuals who want to get access to this space, their
• 32:30
  advisors. So you've got a lot of wealth
• 32:33
  advisors, Raas and the like, who are starting to say, hey, I need
• 32:37
  to offer a differentiated kind of offering to my customers.
• 32:41
  I need to show them unique opportunities to, you know,
• 32:45
  generate alpha or, or whatever. And so I want to, I want to be
• 32:50
  able to show them, you know, SpaceX or Anthropic or what have
• 32:54
  you, and that those folks are now starting to come here and,
• 32:59
  you know, they have their unique needs because they need to be
• 33:01
  able to package the product for their customers.
• 33:03
  And we're working with them on those types of solutions.
• 33:05
  So that's where I see sort of a lot of the growth is kind of
• 33:08
  like they called the US wealth space and then individual
• 33:11
  investors who are coming direct. How much of the volume do you
• 33:15
  see is in say the top 1020 names versus the top 50 versus the top
• 33:19
  200 or 300 that you cover? Yeah.
• 33:22
  So according to our numbers, you know 90% of the volume is in the
• 33:27
  top 30 to 40 names, so. 90%, wow.
• 33:31
  Yeah, OK. Yeah.
• 33:32
  And so it is quite concentrated, but you know, we are is seeing
• 33:36
  increasing breath. So like I said, you know, since
• 33:39
  our inception in in 2022, we facilitated direct share
• 33:44
  transfers in, you know, over 300 companies.
• 33:47
  So yeah, definitely the universe of of companies that are
• 33:51
  actively traded is relatively narrow, but but progressively
• 33:55
  broadening over time. How many of those top 30
• 33:58
  companies are AI companies versus not?
• 34:01
  If you look down the list today, the vast majority of those top
• 34:05
  companies are either sort of AI core AI plays or crypto plays.
• 34:13
  You know that that's kind of where a lot of the action has
• 34:16
  been. So just go looking down the list
• 34:19
  of the high 50 Kraken ripple Cerebrus, which is an AI chip
• 34:23
  maker competitor of NVIDIA. That's been a really liquid
• 34:27
  stock perplexity, which is obviously the the kind of the AI
• 34:33
  powered search competitor of Google consensus Sai quantum
• 34:38
  grok. I mean, these are all players.
• 34:40
  Brock is another chip maker, not to be confused with the XA is
• 34:43
  Brock, which I which is an well, I'm I believe.
• 34:46
  But then you're seeing, you're also seeing things like robotics
• 34:50
  companies, though, you know, figure AI, aptronic, other types
• 34:54
  of hardware companies, you know, obviously you know SpaceX and
• 35:00
  you see a lot of space companies.
• 35:03
  That are all. Popular.
• 35:05
  So yeah, those those would be like the main areas, you know,
• 35:08
  AI, crypto, robotics, space being some of like the hottest
• 35:14
  areas. I guess if I could maybe ask you
• 35:17
  a question for somebody who's coming new to your marketplace,
• 35:21
  like how should they be thinking about secondary investment
• 35:25
  opportunities? So I would say there's two
• 35:27
  things that investors have to be careful about #1 is the nature
• 35:31
  of the assets that they're, they're investing in.
• 35:34
  You know, these are, these are very risky investments.
• 35:37
  They have extremely high growth potential, but they also have
• 35:41
  the possibility of, of a big loss.
• 35:43
  And so, you know, I, I, I, I would suggest that either they
• 35:47
  are able to conduct their own investment diligence through any
• 35:50
  number of sources of information that they can secure or work
• 35:54
  with an advisor who can help them, you know, underwrite that
• 35:57
  investment and, and do that on their behalf.
• 36:07
  The second thing I would say is that there's there's a growing
• 36:11
  trend around so-called SPVS in this market and those are those
• 36:17
  are, those are single asset funds.
• 36:19
  So funds the reason they call them SPVS is SPV stands for
• 36:22
  special purpose vehicle. These are single asset funds set
• 36:25
  up specifically for the purpose of investing in a company,
• 36:30
  right. And so there's a target company,
• 36:32
  let's say, you know, take it Grok for example.
• 36:36
  We were talking about, you've got a target company.
• 36:38
  The fund sponsor then says, OK, I've got a deal lined up for
• 36:42
  this company. And then they go and market it
• 36:44
  to investors and they try to get investors into their fund.
• 36:47
  And it's, you know, it's a special purpose vehicle because
• 36:49
  it's set up specifically for that purpose of that
• 36:51
  acquisition. And then the investors come in
• 36:53
  and invest. I think that this area is
• 36:57
  exploding right now. I would say that the word of
• 37:01
  caution there is around diligencing the manager, right?
• 37:07
  There is extreme variation in the quality of these managers.
• 37:12
  There's a lot of folks out there, legacy folks who've been
• 37:14
  around this, around the block on this for a while who are not
• 37:17
  necessarily of the highest quality.
• 37:19
  They don't have internal. I think the things that you want
• 37:22
  to look for in a manager are, you know, do they have an
• 37:24
  internal compliance team? Do they have an internal legal
• 37:27
  team? What type of reporting are they
• 37:29
  going to provide? Do they have audited financials
• 37:31
  for their vehicles? Do they have any kind of regular
• 37:36
  communication channel? Do they, are they responsive to
• 37:38
  you after they have your money? You know, sometimes that's hard
• 37:40
  to tell until after they have the money.
• 37:42
  I I was waiting for the one that I think you might mention or or
• 37:45
  my dog, which is do they actually have access to the
• 37:47
  company of the inventory that they're marketing?
• 37:51
  Yes, well, there's no exact thing.
• 37:52
  So that's another step in the process, though.
• 37:54
  I mean, you know, you, you chuckle.
• 37:55
  But it's true, right? It's you need to diligence, you
• 38:00
  need to diligence the underlyings, right?
• 38:02
  I mean you need to understand. What are are there multiple
• 38:04
  layers of vehicles before you actually get to the real, you
• 38:07
  know, person who holds the position?
• 38:09
  Precisely. I mean, that is that is a
• 38:11
  really, and you're right. Thanks for bringing that up,
• 38:13
  Dave, because that is, you know, probably the most important
• 38:16
  piece of the equation, which is to understand what you're
• 38:18
  actually investing in. Are you investing in something
• 38:20
  that holds SpaceX or you investing in something that
• 38:23
  holds something that holds SpaceX or Yes, and that's
• 38:27
  something that holds something that holds something that holds
• 38:28
  something. Turtles all the way down.
• 38:30
  Yeah, Yeah, exactly. Or are you buying tokens, right.
• 38:33
  Do your diligence on the manager.
• 38:35
  Do your diligence on the structure, do your diligence on
• 38:38
  the underlying asset. What other question there that I
• 38:41
  think probably comes up a lot is are you buying common or
• 38:44
  preferred? And if you're buying preferred,
• 38:46
  what, what class of preferred are you buying?
• 38:48
  And do you, do you have an information about I guess you
• 38:51
  have some information about capital that's been raised, but
• 38:54
  you know whether the pref stack is any has any liquidation
• 38:57
  preference or not in it? Yeah, exactly.
• 39:00
  And so you know, professional investors and institutional
• 39:03
  investors are looking at the cap stack.
• 39:06
  They're, they are trying to understand where the security
• 39:10
  that they're buying sits in the seniority in times of rising
• 39:14
  valuations, which we kind of are in right now, Although I would
• 39:17
  say the breath of valuation rises is not that great.
• 39:21
  You know, like we were saying, there's a, there's a limited
• 39:22
  number of companies that are really getting the lion's share
• 39:25
  of capital right now. But you know, in times of rising
• 39:29
  valuations and if you're buying a momentum stock, you know, most
• 39:31
  people are not thinking about the seniority of the security.
• 39:34
  Is it A? Is it common or is it series B
• 39:36
  or? Everything's good.
• 39:37
  You're going to place preference stack, it's not going to matter.
• 39:40
  That's right. Yeah, as long as.
• 39:43
  And then Q1 of 22 happens. Yeah, exactly.
• 39:46
  Yeah. So that's right.
• 39:47
  And and so when, when the market corrects, when assets start to
• 39:51
  go down in value, that's when it matters.
• 39:53
  What was your seniority, right. So the later the series of
• 39:56
  stocks, so Series E is generally better, has a better risk
• 40:00
  profile than Series D and Series C has a better risk profile than
• 40:04
  Series B and and so on and so forth.
• 40:06
  So on the upside, is always. The same right, in terms of
• 40:10
  what's the outcome, but it's the downside risk that is quite
• 40:13
  different depending on what you're buying.
• 40:16
  How involved is Hive in prescribing that disclosure,
• 40:20
  that level of information? Do you let sellers list assets
• 40:24
  with open-ended descriptions or do you force them to provide
• 40:27
  certain levels of disclosure or to list in the marketplace?
• 40:30
  Or do you you evaluate managers based on other financials or
• 40:34
  not? Or do you do you force that as
• 40:35
  part of your application disclosure process?
• 40:38
  It's a great question, Aman. Just to be clear, larger
• 40:41
  investors can buy direct shares on our market.
• 40:43
  So then they're not the only option is not, is buying funds
• 40:47
  is not the only option for those who are buying into funds.
• 40:51
  There's two types of funds you can buy into what we call third
• 40:55
  party funds and and, and high funds.
• 40:57
  So high funds have obviously the, they have our brand beside
• 41:03
  them. We are, we, we've built what we
• 41:07
  believe is a very kind of sophisticated and rigorous
• 41:11
  regime around these funds in terms of, you know, the, the
• 41:14
  advisor and the reporting and the quality of, of compliance
• 41:18
  and investor relations and transparency and diligence that
• 41:22
  you get. Whereas third party funds are
• 41:24
  going to be quite variable, right.
• 41:25
  There's a lot of, so we do have third party fund managers who
• 41:28
  list on our platform to either raise primary capital for their
• 41:31
  SB BS or to facilitate secondary sales of one LP from their
• 41:37
  vehicle to another. And when you're looking at those
• 41:41
  guys, yeah, you do have to be careful.
• 41:43
  We have started to conduct some degree of diligence on those
• 41:46
  third party fund managers just as a basic form of diligence.
• 41:50
  But we and we and we share what we have with, with investors,
• 41:55
  but we always, we, we always tell investors that when it
• 41:59
  comes to 3rd party fund managers, they can't rely on our
• 42:01
  diligence. They, they need to do diligence
• 42:04
  that manager directly and, and that fund.
• 42:07
  And yeah, there it's, there's quite a degree of variability
• 42:10
  and quality there. Any other things that you think
• 42:14
  our audience or viewers should know about what's what's
• 42:17
  happening and what's changing in secondaries?
• 42:19
  Yeah. I mean, look, I would say the
• 42:20
  biggest trend we're going to see is the proliferation of these
• 42:24
  funds. You know, SP VS are kind of
• 42:26
  viewed as this marginal part of the market today.
• 42:30
  There's kind of an inevitability to SPV's in the current
• 42:33
  regulatory regime. One of the reasons they exist is
• 42:37
  the fact that you've got a 2000 investor limit on private
• 42:41
  companies. So private companies have more
• 42:44
  than 2000 shareholders. And that's why you don't see
• 42:47
  things like SpaceX or other companies that are really highly
• 42:51
  valued like the Stripes and those guys trading directly.
• 42:54
  Because if they allowed their stocks to trade directly, these
• 42:56
  50 billion, hundred billion, $150 billion private companies,
• 42:59
  they blow past that 2000 shareholder limit literally
• 43:03
  within days. So is is there any kind of look
• 43:06
  through requirement though for some of those like I've my
• 43:08
  understanding is it's not always just that the you know the level
• 43:11
  that's on the cap table. There may be a look through
• 43:13
  requirement for other vehicles as well.
• 43:16
  Yeah, there can there the the cap table might have to look
• 43:19
  through to the investors in an SPV in certain cases.
• 43:23
  It depends on different, different reasons you know
• 43:26
  whether the SPV was set up specifically for that
• 43:30
  investment, whether there is one LP in the SPV or the fund that
• 43:34
  is very large. So that can be that can be a
• 43:36
  basis upon which you have to look through.
• 43:39
  So it's. It's not a given opt out.
• 43:41
  If they can opt out investment by investment then that's also
• 43:45
  that also triggers a look through as well.
• 43:47
  Or just the general manager of the SPV.
• 43:49
  Just have discretion. Right, right.
• 43:53
  Yeah. And so the yeah, number of
• 43:54
  factors that go into it. So yeah, just because an SP VS
• 43:57
  investing. So from a company's perspective,
• 43:59
  just because an invest the SP VS investing, it's not a guarantee
• 44:03
  that you're only adding, you know, 1 shareholder to the cap
• 44:05
  table or that you know, they they'll only constitute 1
• 44:08
  shareholder. And so that's something to be
• 44:10
  cautious about. From the company's perspective,
• 44:12
  I do find the companies tend to be pretty lawyered up.
• 44:14
  So they know, you know, they know generally speaking, kind of
• 44:19
  what they can and cannot do from that standpoint.
• 44:22
  Beyond that, I would say one other trend that's worth being
• 44:24
  aware of in the in secondary market right now is around just
• 44:29
  the use of the pre IPO market by companies who are going public
• 44:34
  as as that testing ground that we were talking about, right?
• 44:37
  There's so much value in pre IPO price discovery, but it's not
• 44:41
  just price discovery, it is liquidity for folks and not
• 44:45
  having to be beholden to a six month lock up period after your
• 44:48
  public. It is, it is, you know, it's
• 44:52
  great for employees, it's great for investors and there are
• 44:55
  people who want to buy the stock, right.
• 44:56
  So I think that companies are starting to realize that there
• 45:00
  used to be this kind of scarcity mindset among private companies
• 45:03
  that almost like there was a 0 sum game, like there was only a
• 45:08
  certain amount of capital out there for them and that if they
• 45:10
  allowed secondary trading, that would take deprive them of
• 45:12
  primary capital. You know, anyone who's a a lifer
• 45:16
  in the financial markets knows that that capital is not scarce
• 45:19
  in that way. In fact the more liquidity there
• 45:22
  is for a stock, the more capital it attracts rather than the
• 45:27
  other way around. And so I think companies are
• 45:30
  trying to get used to that idea and seeing the value of
• 45:32
  liquidity pre IPO. So we'll we'll see a lot more
• 45:35
  companies especially in the last in sale in the two to three
• 45:38
  years before they go public allowing a market to exist.
• 45:43
  Yeah. And I wonder if that same
• 45:45
  statement you just made that, you know, liquidity is rewarded,
• 45:49
  transparency might be rewarded as well and whether there's some
• 45:53
  limited form of metrics. And you know, I don't know if
• 45:56
  there's a guidance for a quarterly statement by private
• 45:59
  companies, but I have a feeling that would, you know, probably
• 46:02
  give people more confidence in those companies as they're
• 46:04
  getting ready to go public. 100%, yeah.
• 46:07
  And we've been developing those types of guidance tools for for
• 46:11
  companies. SIM, thanks for spending some
• 46:13
  time with us today and I'm sure we'll try and get more
• 46:17
  information about what's happening on the Hive platform
• 46:19
  in the future. So hope to have you on the show
• 46:21
  and your products and and tools on the show on a regular basis.
• 46:24
  Thanks, Dave. Thanks, Aman.
• 46:25
  Appreciate it. It seems like the market's doing
• 46:36
  fabulous. I guess in the past week, we've
• 46:39
  had the Karna IPO go out. We have a few other IP OS on the
• 46:44
  horizon and we've had some secondaries happening as well.
• 46:50
  I guess their first item that we were going to cover today was
• 46:52
  the Revolute secondary. And Revolute is a new finance
• 46:59
  company, banking company out of Europe, not so new.
• 47:04
  I guess they've been around for a while.
• 47:06
  They're recently doing a tender offer at a $75 billion
• 47:11
  valuation. Aman.
• 47:12
  Do you think that's a good or or expensive price?
• 47:16
  Tell us a little bit about your perspective on Revolute.
• 47:20
  Well, let's, let's talk about what the company does first.
• 47:23
  I'm not going to give you the answer, Dave.
• 47:24
  I'm going to play lawyer and just lead you to where I think
• 47:26
  the the answer is you're right there.
• 47:28
  Finance company, a lot of Americans won't know them
• 47:30
  because they are in the UK. Now they do have a small US
• 47:34
  presence and they'll be a lot more familiar to our watchers
• 47:36
  and in Europe. Now Revolut, actually I just
• 47:38
  looked this up, does Revolut even have a banking license?
• 47:41
  It turns out they don't in the US, but they do in Europe.
• 47:44
  So I might even call it Revoluta Bank.
• 47:46
  But then if I said, hey, would you buy this bank at a $75
• 47:49
  billion valuation on 4 billion of sales?
• 47:52
  So with 20 times multiple and sales, I think every investor in
• 47:55
  their right mind would be like, no way banks don't trade a 20
• 47:59
  times sales. What what else do they do?
• 48:01
  And This is why I think Revolut is not marking themselves as a
• 48:03
  as a bank. They are actually a payment
• 48:05
  processor. They have a pre payment
• 48:06
  processing license here in the US.
• 48:08
  But PayPal is trading at 2 times sales right now.
• 48:12
  If I look, if I give a more charitable review of Revolut and
• 48:15
  say that they are some kind of a wealth management platform that
• 48:18
  also does payment process and in banking services, Schwab's at 5
• 48:21
  or 6 times sales. Like I don't, I don't know how
• 48:23
  you justify 20 times sales personally.
• 48:25
  I'm not, I'm not, I'm not sure that they are.
• 48:27
  I think they're a great business.
• 48:28
  I think they're growing quickly. They're making money, they're
• 48:30
  profitable. But I don't, I don't get 20
• 48:32
  times sales personally. OK.
• 48:35
  So I guess you're not a buyer at a $75 billion valuation is is
• 48:40
  there a number that you would be comfortable with?
• 48:42
  What do you think that number should be or could be?
• 48:45
  Let's say you're a payment processor growing at 70% year
• 48:48
  over year, kicking off 1020% profit margins, 4 billion.
• 48:53
  Could you, would you be comfortable with five times
• 48:55
  sales, 6 times sales, maybe even 10 times sales?
• 48:57
  Maybe that might be the, that might be the ballpark for a, you
• 49:01
  know, and that's, and that's like for a high growth, very
• 49:04
  profitable company doing great. I don't understand.
• 49:07
  I don't understand anything north of like a six to seven X
• 49:11
  revenue multiple. OK.
• 49:14
  All right. So it sounds like you're a
• 49:15
  little bearish on the on that particular one.
• 49:17
  How about the rest of the IPO calendar?
• 49:19
  What's what's happening? Our IP OS back, it seems like
• 49:23
  Corona has had a decent IPO and Figma had a pretty good IPO core
• 49:29
  weave and a few others like we're we're back in IPO season
• 49:31
  baby, let's go. It looks like we're back.
• 49:36
  Yeah. Just like for context, we had a,
• 49:39
  if you look at the 10 years before the pandemic, we were
• 49:41
  averaging in the US about 50 billion in annual IQ volume.
• 49:45
  We got the three times that in 2021.
• 49:48
  Last couple years have been pretty dry.
• 49:50
  We're like at a quarter tank or a half tank.
• 49:52
  But I think in the second-half of the year we're almost back to
• 49:55
  a a normalization. That's 50 billion a year.
• 49:59
  And the big one this week is Klarna, which is a another
• 50:03
  Fintech company out of Europe, but this one's got you know 3
• 50:07
  billion in revenue and and growing well.
• 50:10
  And this is not a $75 billion company unlike revolutes their
• 50:14
  price of 15 billion last week, they popped around 10% on the
• 50:18
  IPO day and day after. So that's pretty healthy I think
• 50:23
  trading at about 6 times revenue.
• 50:25
  So I think that those are all good signs and good metrics and
• 50:28
  it seems like a successful IPO. Seems like it's down a little
• 50:33
  bit from the IPO, but still mostly holding value And, and
• 50:36
  again, this, this IPO priced at the high end of the range, then
• 50:39
  priced beyond the high end of the range.
• 50:41
  I think even just a few weeks ago people were thinking about
• 50:44
  $35 a share or even less, correct?
• 50:49
  Yeah, they'd indicated 34 to 37 in the range.
• 50:51
  They priced at 40. The opening trade was around
• 50:54
  4647. We're filming this on September
• 50:57
  11th. They're they're now trading at
• 50:59
  4344. I think that's healthy and I
• 51:02
  think that's that's what I'd call a healthy pop in the
• 51:05
  market. My only knock on them, you know,
• 51:07
  we don't know these, these buy now, pay later companies are
• 51:10
  essentially credit providers. They have to make money in, in
• 51:14
  my mind, and Clara is not really profitable.
• 51:17
  They say they're profitable. They did four quarters of
• 51:19
  profitability in 2023 and then they kind of lost a little bit
• 51:23
  of ground at the end of 24 and they say they're profitable in
• 51:25
  25. But there was a one time gain on
• 51:28
  a divestment. So they're not really the little
• 51:30
  nod here. The Inigo Montaya just means in
• 51:32
  addition to his facial hair. I'm not sure when they use the
• 51:35
  word profitable. I do not think they know what
• 51:37
  that word means. But so they're not really I'll
• 51:40
  give them, I'll give them charitably, you know, let's say
• 51:42
  to make money next year and keep that growth up, you know, six
• 51:46
  time sales I think is a good healthy outcome for the company.
• 51:50
  I could ask you one more question.
• 51:51
  I think there's a comp in the public market for Karna, another
• 51:55
  firm called a firm, which is actually run by an old colleague
• 51:59
  of ours, Max Levchin, ex PayPal founder, who's been running the
• 52:04
  company publicly for several years now.
• 52:07
  How do you see Karna compared to a firm?
• 52:13
  I think they are. They're both great companies.
• 52:15
  The firm is a little bit a little bit bigger if they have a
• 52:19
  slightly better revenue profile in terms of the the the Knicks
• 52:23
  of companies, they're actually at a pretty healthy multiple as
• 52:27
  well. They're about, you know, 6 to 9
• 52:29
  times sales as well. So I think they are similar,
• 52:32
  similar space, similar quality company and and you know, I
• 52:36
  think they are actually is that a good, a good comp for Clara?
• 52:40
  And it looks like a firm's, well, I guess it's gone up and
• 52:44
  down over the years, but certainly in the last six months
• 52:46
  it's had a pretty steady climb. Or if we look at the overall
• 52:51
  window, they, they've kind of went out at a very high number.
• 52:53
  There's obviously some exuberance during 2122, but
• 52:57
  since you know, the last three years, I would say it really
• 53:00
  looks like the companies you know, continue to make quite a
• 53:03
  bit of progress. And definitely in the last six
• 53:05
  months it's been up about 75% in the last months from a stock
• 53:10
  price perspective. So do you.
• 53:12
  Are you a buyer of a firm? Are you a buyer of Klarna or you
• 53:17
  buyer? Both?
• 53:19
  So a firm on a relative basis, you're right after 21 when we
• 53:23
  got out of Zerp and money began to be expensive again, or at
• 53:27
  least having, you know, they actually had to pay for their,
• 53:29
  the money they were using to lend to consumers and merchants.
• 53:32
  Their, their business pretty quickly normalized.
• 53:34
  They've studied around 8 or 9 times sales.
• 53:36
  So if I had to buy Pharna at six times sales or a firm at 9 times
• 53:40
  sales, I think it is, I think I would probably lean in on on
• 53:46
  Klarna of those two, I think both are interesting businesses
• 53:50
  and you know, both are successful.
• 53:52
  But until you really make money in this consumer lending finance
• 53:55
  space and show consistent profitability, I don't, I don't
• 53:59
  know that I love the, the category in general.
• 54:01
  I think that's, it's just going to be competitive.
• 54:02
  And with rates being where they are, you know, and default rates
• 54:06
  being super low in this environment, now is a good time
• 54:08
  people running those companies. But the real tough part is what
• 54:10
  what happens when the economy turns down and and people start
• 54:13
  defaulting on these payments, Then then you know, that's when
• 54:17
  that's going to separate the boys from the men, as they say.
• 54:20
  Well, I, I would say I think Max is a pretty awesome person to be
• 54:24
  leading the company. But I, I do share your concerns
• 54:27
  that there could be some rough, could be some rough sailing
• 54:30
  ahead. We'll, we'll see what happens
• 54:32
  with the global economy and tariffs and other things.
• 54:43
  All right, we're here with the Valuation Corner, and Professor
• 54:46
  Aman Virgie is going to take us through an overview of Byte
• 54:49
  Dance. So I want to go through what is
• 54:52
  because a lot of people know tech talk, but a lot of people
• 54:54
  don't know the other properties. And so I'll take you through a
• 54:56
  bit of a, a variation of what we've done in previous weeks,
• 55:00
  more of a sum of hearts analysis.
• 55:02
  So I might try to sell you 3 different companies Dave and see
• 55:04
  if you're see if you're a buyer or not ready.
• 55:08
  All right, hit me. All right.
• 55:10
  So as as he said by Dance owns about 2/3 of his business is in
• 55:14
  China. We'll talk about that business
• 55:16
  in a second. And then they own TikTok, which
• 55:17
  is a global, a global company that many of our US users will
• 55:21
  be familiar with. About 2/3 of their sales are in
• 55:24
  China and that's growing at about 20% a year.
• 55:27
  And then their international business is about right now it's
• 55:30
  about 1/4 of their business growing at 63% year over year in
• 55:34
  in Q2 they didn't run a revenue as Facebook whereas Meta rather.
• 55:38
  So it is a big company, but doing a secondary evaluation
• 55:42
  right now at about 1/5 devaluation of of Meadow.
• 55:47
  So is it the same actually more more revenue but only valued at
• 55:51
  1/5? That's that's right.
• 55:53
  A little out of whack. You're all right.
• 55:56
  You're already a buyer, Dave. I haven't even, I haven't even
• 55:58
  finished selling with the company.
• 55:59
  You're already seeing. Hey, maybe there's a deal here.
• 56:03
  They have had a pretty good history in terms of their
• 56:05
  primary evaluations. Their the latest round is a
• 56:07
  little bit north of their 2024 round which was located at CO2.
• 56:13
  So that seems good. And then the black line is
• 56:15
  actually the secondary evaluations.
• 56:17
  They had some moments in 2021 when they were valued at nearly
• 56:21
  half a trillion dollars on the secondary market and then that
• 56:23
  kind of corrected in 2022 and 23, but secondary activity now
• 56:27
  is back in the 300 million. So they this is a chart
• 56:31
  indicating how they've done over over time and where the last
• 56:35
  round is. And it doesn't seem like a huge
• 56:37
  step up from the from the last price round from from CO2, which
• 56:40
  is interesting. But I I noticed that the
• 56:42
  secondary is trading at a premium, not a discount to the
• 56:45
  current. Route.
• 56:46
  That's right, that's right. They've been at A10 to a 30%
• 56:49
  premium each every step of the way to their primary rounds for
• 56:52
  ever since. Since 2021, anyway.
• 56:55
  OK. So let me start with their just
• 56:58
  their China business, OK? Their China business is right
• 57:04
  now they're on a run rate of about 125 billion this year from
• 57:07
  their China business. Wow.
• 57:09
  That's amazing. Most of that is, I'll call it
• 57:13
  TikTok, but it's the China version of TikTok.
• 57:15
  In my 11 year old, it was fluent in Mandarin talk.
• 57:17
  We had to pronounce this DOI yen.
• 57:20
  She'll make fun of my accent. That's that's primarily what it
• 57:23
  is. It's the Chinese version of tech
• 57:24
  talk. Very high levels of engagement,
• 57:26
  very high levels of user activity. 750 million users in
• 57:30
  in China, so about of the country.
• 57:34
  And then they have a couple of other properties that are doing
• 57:36
  really well as well. There's a news aggregator called
• 57:39
  Toe Qiao and then the biggest AI app in the country called Dubao.
• 57:44
  And if we add those three together, that's the China
• 57:47
  revenue. So for a social media company,
• 57:50
  you know, like a Meta or a Pinterest here in the US,
• 57:54
  they're getting 6 or 9 times sales.
• 57:57
  What do you think a reasonable valuation is on China?
• 57:59
  I know China is a very different market and has very different
• 58:01
  dynamics in terms of the regulatory complexity.
• 58:04
  But let's just pretend for a second that you can put a 2 1/2
• 58:06
  times sales multiple on that, OK?
• 58:09
  That's three, $110 billion implied market cap only for the
• 58:13
  China business. That's that's almost the entire
• 58:16
  valuation that they're being priced at is coming from the
• 58:19
  China revenue, which one would guess is not not at risk.
• 58:27
  All the other US regulatory decisions aside, the China
• 58:30
  business seems like that would continue regardless of what
• 58:33
  happens in the US. Seems logical to me.
• 58:36
  I am not a China whisperer. I don't know what what the
• 58:39
  government thinks or property or what the how you risk how you de
• 58:44
  risk the China investment. But my instinct is with you,
• 58:48
  like I think this business could all by itself be, you know what
• 58:51
  the what the company is worth. Even if I apply half the
• 58:54
  multiple that you know that Pinterest is getting in the US,
• 58:57
  right? But there's a lot more to and
• 59:00
  this is a lot more than just the TikTok, the TikTok business in
• 59:03
  China, DOI Yin, if you don't know what Tu Qiao is, it
• 59:07
  actually was the first app launched by Byte Dance.
• 59:10
  It's the most used media app in the world.
• 59:12
  They just aggregate content from journalists and this
• 59:14
  supplemented with lots of influencers.
• 59:16
  And so they are a very media aggregated a lot of success.
• 59:22
  They have impressively monetized this business.
• 59:24
  So the first, this is a bit of a, this is a 2023 chart, but
• 59:27
  that's a 23. They had monetized better in the
• 59:29
  first four years than virtually any other app on the planet.
• 59:32
  You can see how they monetize in year 4 versus say Google or
• 59:36
  Facebook and the average user spends 74 minutes a day on on
• 59:40
  this app, which is you know half again that what US users spend
• 59:44
  on Facebook. So this is an interesting
• 59:46
  property that is not fully priced into the company, I don't
• 59:49
  think. So would you consider Twitter or
• 59:51
  XA comp for that? Is that sort of the same type of
• 59:55
  application? I think so, although it's less
• 59:58
  social media and more media source from journalists and then
• 1:00:02
  you generate content, but that those are probably the direction
• 1:00:06
  of the right comps to be using. So that's the that's the China
• 1:00:10
  business, which which I think is at least two, maybe 3 excellent
• 1:00:13
  properties and growing and monetize as well.
• 1:00:16
  Now let's talk about the, the first thing you said, which is
• 1:00:19
  TikTok, which is a global app. So let me just forget about the
• 1:00:23
  red, white and blue, right? The 183,000,000 users in the
• 1:00:25
  United States just pretend that's worth 0.
• 1:00:30
  Can you buy the Internet property of TikTok based on what
• 1:00:34
  would you pay for the Rep for the international tech talk
• 1:00:36
  business? So Indonesia, Brazil, Mexico, a
• 1:00:38
  lot of Latin American properties, a lot of European
• 1:00:41
  users. There's over a billion and a
• 1:00:44
  half Maus in in that business. And that Business Today is
• 1:00:48
  rating about 35 billion in revenue, but it is about 20
• 1:00:53
  million comes from outside the US and 14 million from inside
• 1:00:57
  the US. And that is a that is a business
• 1:00:59
  growing at a 60% CAGR if I just applied.
• 1:01:03
  It so more than yet more than half is non-us.
• 1:01:07
  That's right. That's right.
• 1:01:09
  And if I just apply that 3X sales multiple to the non-us
• 1:01:12
  business, I think that could be worth another $60 billion in
• 1:01:15
  market cap. OK.
• 1:01:18
  Just based on their user engagement, based on the
• 1:01:19
  metrics, based on those social media comps.
• 1:01:22
  So that seems to me like another interesting property.
• 1:01:25
  And I think again, as you'd mentioned, the regulatory risk
• 1:01:27
  in the USI don't think that really effects a lot of their
• 1:01:29
  non-us properties. Shouldn't, yeah.
• 1:01:32
  So again, I think you'd be bullish just on the non-us
• 1:01:35
  business and the China business alone would probably imply a
• 1:01:39
  value that's greater than 330 billion.
• 1:01:42
  Yeah, that's right. And there's another angle to
• 1:01:45
  their to their user base, which if you're in the media business,
• 1:01:48
  you know that demographics matter a lot if you ask, like
• 1:01:52
  the head of CBS, Hey, what? How many viewers watched your
• 1:01:55
  prime time TV show yesterday? Then we'll know there were about
• 1:02:00
  two and a half million viewers yesterday and 1 million or
• 1:02:03
  800,000 were in the demo, right? Another demo in that demographic
• 1:02:08
  in that in that context means between the age of 25 and 54.
• 1:02:11
  And they know that's those are valuable users.
• 1:02:14
  Well, TikTok, the average TikTok user is about 25 years old.
• 1:02:19
  As my daughter reminds me, Facebook is a lot older than
• 1:02:21
  that, but it's in the mid to high 30s.
• 1:02:22
  She calls me an oldie for being on Facebook tech talk is a very
• 1:02:26
  young that is a much more demographically interesting
• 1:02:30
  audience for advertisers. And so and it's actually younger
• 1:02:34
  even than Instagram here in the US And so that seems to me like
• 1:02:37
  if I'm just trying to optimize for an advertising business,
• 1:02:39
  that's, you know, that is that is really valuable.
• 1:02:42
  So that's another plus I think in the the value of.
• 1:02:45
  Got it tech talk. So what you're telling me is any
• 1:02:47
  posting that I'm doing on Facebook is really, I'm, I'm in
• 1:02:50
  the grandpa grandma segments of the the Instagram post is kind
• 1:02:56
  of where the older adults are and TikTok is where the younger
• 1:02:59
  cool adults are or even not the adults.
• 1:03:03
  Even not the adults, yeah, half of them, half of them are below
• 1:03:06
  24 and about 1/4 of them are actually below the age of 17.
• 1:03:09
  But you know, Dave, you get them while they're young.
• 1:03:11
  Their lifetime value is a lot higher when you get them at the
• 1:03:14
  but the. Facebook Facebook audience we're
• 1:03:16
  we're over the hill boomers over here, I guess is what we.
• 1:03:19
  That is what my daughter does, Yes.
• 1:03:20
  Remember the old boomers? Well, that's not for a desirable
• 1:03:25
  demographic. It is, I think, I think it is
• 1:03:28
  because we spend all the money, but apparently they don't, the
• 1:03:30
  advertisers don't value it as as much.
• 1:03:33
  But then I think the US business is worth something.
• 1:03:35
  I don't think it's worth zero. I think they're just, you take a
• 1:03:37
  business that is at scale doing well, you know, 183,000,000
• 1:03:40
  users love it. There's obviously a regulatory
• 1:03:42
  risk in terms of how this business gets capitalized and
• 1:03:44
  structured going forward. But if you if you just think
• 1:03:46
  it's worth, you know, even $50 billion, I think you can
• 1:03:49
  convince yourself that between these three different areas,
• 1:03:53
  this is a 4 to $450 billion valuation and they're didn't
• 1:03:58
  tender offered 330 billion. So it feels to me like there's a
• 1:04:02
  potentially interesting opportunity here and and where
• 1:04:04
  they're. Tending seems like it's a steal.
• 1:04:06
  Seems like it's a steal. Well, that's, that's pretty
• 1:04:10
  amazing that a $330 billion company could still be
• 1:04:12
  considered cheap or a bargain. But I guess when you compare it
• 1:04:17
  to Meta again, sort of the same or larger amount of revenue
• 1:04:22
  maybe, I don't know what who's growing faster or slower and
• 1:04:25
  who's making more money. But still, seems like if the
• 1:04:29
  regulatory issues got cleaned up in the US, there's even more
• 1:04:32
  upside there than just the calculation you made.
• 1:04:35
  Yeah, so by Dance is growing faster than meta.
• 1:04:38
  They're not making as much money.
• 1:04:39
  They're only half as profitable, but I really do think if you
• 1:04:43
  just, if you just were to buy the China business, you're
• 1:04:46
  probably fine at 330 billion, give or take.
• 1:04:49
  The international TikTok business I think is very
• 1:04:51
  valuable. And so you're, to me, you're
• 1:04:53
  kind of getting the US business, the US TikTok business for free.
• 1:04:55
  And that that makes it interesting.
• 1:04:57
  Interesting. Yeah.
• 1:04:59
  All right. Well, that's a great valuation
• 1:05:02
  analysis and summary. Thanks again for taking us
• 1:05:04
  through it, Professor Virgie. Thank you, Dave.
• 1:05:15
  What are the features we have today as we're getting to speak
• 1:05:18
  with the founder and CEO of Helm dot AI?
• 1:05:22
  Helm is an autonomous driving software company that's creating
• 1:05:26
  software for other manufacturers to use.
• 1:05:28
  And today with us we have Vlad. Hi Vlad, how you doing?
• 1:05:32
  Hey, Dave, how are you? Very.
• 1:05:33
  Good. We also have Vitali Golem, who's
• 1:05:35
  an old friend of mine and also an investor in the company.
• 1:05:38
  Hi, Vitali. Hey, Dave.
• 1:05:40
  Hi everyone. And we also have my partner in
• 1:05:42
  crime, Aman Virgie, the less handsome but much smarter half
• 1:05:46
  of our team. Glad.
• 1:05:47
  Could you tell us a little bit about how you got Helm started
• 1:05:50
  and and then where's the state of the company today and then we
• 1:05:53
  can talk a little bit more about what's coming up?
• 1:05:55
  I started out working in computer vision AI now almost 20
• 1:05:59
  years ago during the DARPA Grand Challenges when I was part of
• 1:06:02
  the UCLA Computer Vision lab that was competing.
• 1:06:05
  Spent about a decade in applied math academia working on, you
• 1:06:09
  know, machine learning and kind of came back to the space about
• 1:06:12
  10 years ago and, you know, decided to basically move back
• 1:06:17
  to the Bay Area and start Helm AI essentially looking pretty
• 1:06:21
  broadly at the robotics space. It looked like self driving cars
• 1:06:24
  was definitely the right the right place to start.
• 1:06:27
  Vlad what? What is Helm doing?
• 1:06:29
  We're an AI software company focusing on autonomous driving
• 1:06:33
  and robotics. And essentially what that means
• 1:06:36
  is that we provide autonomous driving software.
• 1:06:39
  So L2 and L3 all the way through L4, which means L2 and L3 are
• 1:06:44
  essentially partial levels of autonomy where the driver is
• 1:06:48
  still responsible for taking over.
• 1:06:52
  And then L4 is, you know, fully autonomous driving.
• 1:06:57
  You know, we decided early on to focus on high end assisted
• 1:07:01
  driving, so partial automation for consumer cars because we did
• 1:07:05
  not think that, you know, pureplay L4 would really
• 1:07:10
  materialize and so much later, which de facto has been the
• 1:07:13
  case. And so, you know, we kind of
• 1:07:17
  decided early on to essentially become an automotive supplier
• 1:07:21
  and partner with companies like Honda is an example of a very
• 1:07:26
  early partnership for us. And sort of the we provide is
• 1:07:30
  essentially something that allows the legacy automakers to
• 1:07:34
  compete with, you know, Tesla and now the Chinese OEMs that
• 1:07:40
  all have, you know, fairly competitive autonomous driving
• 1:07:43
  systems, right. So like Tesla FSD is an example.
• 1:07:47
  The reality is that those kinds of systems are going to be
• 1:07:51
  expected by any consumer in the coming years.
• 1:07:55
  And so every OEM has to provide something like that.
• 1:07:59
  And so that means they really have to get more aggressive on
• 1:08:02
  software. Those are pretty difficult
• 1:08:06
  pieces of technology for an automaker to build on their own.
• 1:08:10
  And so we essentially build an independent version of something
• 1:08:15
  like Tesla FSD and then license that to the various automakers
• 1:08:20
  in a way that really allows them to create software
• 1:08:23
  differentiation for their cars. I mean, that's pretty exciting.
• 1:08:28
  I think you guys have already raised over $100 million to
• 1:08:31
  date. I think Honda has been a
• 1:08:33
  previous investor in the company and you guys recently announced
• 1:08:36
  A partnership with them to be building and licensing software.
• 1:08:40
  So I guess you might say that everybody who isn't Tesla on
• 1:08:43
  Waymo who's producing cars today is a potential customer for you
• 1:08:46
  guys. Is that correct?
• 1:08:47
  Yeah, absolutely. I mean even OEMs that are you
• 1:08:51
  know have their own in house development efforts can
• 1:08:54
  certainly be customers of ours. You know there there's always
• 1:09:00
  some segment that we can collaborate on and you know we
• 1:09:03
  also provide foundation models for testing and validation.
• 1:09:09
  So essentially on a large scale auto labeling and generative AI
• 1:09:13
  based simulation. So those can be tools that can
• 1:09:18
  help any end of the any of the in house efforts.
• 1:09:21
  But yeah, generally I would say kind of like the legacy
• 1:09:24
  automakers are our core customers.
• 1:09:27
  But yeah, I mean anybody working with autonomous driving
• 1:09:29
  technology is a companies we can support.
• 1:09:32
  Two of those larger partners, one is Volkswagen, but the other
• 1:09:36
  one is Honda. I know you've been involved with
• 1:09:38
  Honda for a while and are recently did and announced with
• 1:09:41
  him. But what can you tell us about
• 1:09:42
  the work you're doing with Honda?
• 1:09:44
  And maybe you can't disclose all the numbers, but are you, are
• 1:09:47
  you generating revenue from any of those partnerships today?
• 1:09:50
  Yeah, we're definitely generating revenue and we have
• 1:09:52
  been for for quite some time. Yeah, with Honda, we've had a
• 1:09:57
  number of announcements. You know, most recently we
• 1:10:00
  announced a major commercial agreement that's essentially a
• 1:10:04
  joint development toward mass production starting in 2027.
• 1:10:11
  But even before that, we were already, you know, going to be
• 1:10:15
  in production actually in 2026 where we're providing a certain
• 1:10:19
  perception technology for the Honda 0 series, which is the the
• 1:10:25
  high end, kind of high end flagship easy for Honda.
• 1:10:28
  We basically kind of went from, you know, being a perception
• 1:10:32
  supplier now to kind of a more expensive partnership.
• 1:10:36
  There will be additional announcements regarding that.
• 1:10:39
  But essentially it's, you know, a multi year agreement, fairly
• 1:10:42
  deep partnership that we're super excited about.
• 1:10:45
  But I mean, Honda's not the only customer.
• 1:10:47
  You know, we're also able to disclose that we work, you know,
• 1:10:51
  with Volkswagen and we actually worked with over half of the
• 1:10:54
  major, you know, OEMs and tier ones.
• 1:10:56
  And you know, I'd say we have pretty comprehensive coverage
• 1:11:00
  across the automotive space in terms of commercial
• 1:11:03
  relationships. How do you guys work with those
• 1:11:05
  companies? You, you create your own
• 1:11:08
  software and you do simulated training for them.
• 1:11:11
  Does that accelerate their ability to, you know, license
• 1:11:14
  and and do that work for themselves and their cars?
• 1:11:16
  We provide both the real time software that actually goes on
• 1:11:20
  the cars as well as, you know, the foundation models that I
• 1:11:24
  mentioned that are essentially addressing the entire data layer
• 1:11:28
  of the machine learning pipeline.
• 1:11:30
  So, you know, any data that's absorbed from the fleet that's
• 1:11:35
  out there collecting data, it needs to be labeled wrap for
• 1:11:38
  ground truth, for validation and for training.
• 1:11:42
  And you know, labeling data is super expensive and no one's
• 1:11:45
  going to just pay for that to be labeled by human effort.
• 1:11:49
  So you know, we have these large scale auto labeling pipelines
• 1:11:53
  that leverage large foundation models that have a very high
• 1:11:56
  degree of accuracy to essentially answer any question
• 1:12:00
  that the real time stock would be asking.
• 1:12:03
  But of course any real data that you collect is going to have the
• 1:12:08
  limitation that it's not evenly distributed across scenarios.
• 1:12:12
  And so you're going to want really kind of the same amount
• 1:12:15
  of data from pretty much every scenario, but that's impossible
• 1:12:17
  to get from just flea data. So this is where generative VI
• 1:12:23
  based simulation comes in. And that's something we've
• 1:12:25
  pioneered for the autonomous driving space in the last like
• 1:12:28
  year or so. And we've shown you can actually
• 1:12:31
  close the gap between real data and simulated data at the at the
• 1:12:35
  sensor level. So that that's a pretty, pretty
• 1:12:39
  big jump in value that you get from from simulation.
• 1:12:43
  And so combining those auto labeling and generative
• 1:12:47
  simulation pipelines, you can essentially answer any question
• 1:12:52
  about data when it comes to machine learning for self
• 1:12:56
  driving cars, which is a pretty, pretty big step in terms of
• 1:12:58
  actually putting the software in the car.
• 1:13:01
  There's, you know, a lot involved in terms of, you know,
• 1:13:04
  certain types of optimization and, you know, working with
• 1:13:07
  embedded systems in order to actually create something real
• 1:13:11
  time and then go through all the testing and validation to put
• 1:13:15
  her on the road safely. That's a whole other component.
• 1:13:18
  And so we, we, we do all of those things and but you know,
• 1:13:22
  depending on the automaker or tier one that we're working
• 1:13:25
  with, you know, in some cases we're providing some of that,
• 1:13:30
  maybe not all of it, but we aim to essentially be like a one
• 1:13:35
  stop shop for any kind of autonomous driving software
• 1:13:38
  needs. The telly.
• 1:13:40
  Maybe you can tell us, you know what got you excited to be
• 1:13:42
  involved with the company. In my time running investment
• 1:13:45
  bank in practice last decade focused on mobility in the space
• 1:13:48
  I've I've come across a lot of different different players and,
• 1:13:52
  and learn from, you know, some of the folks who pioneered this
• 1:13:55
  area. And there was a big, there was a
• 1:13:59
  big anticipation of a big scientific breakthrough of that
• 1:14:04
  would really provide a leg up and and how this actually.
• 1:14:07
  Works. It wasn't about collecting more
• 1:14:10
  data and processing more data out there because it's a very,
• 1:14:13
  very long tail, but it's a fundamentally new approach.
• 1:14:16
  And I think this generative AI generation of software
• 1:14:19
  companies, Helm being the leader in the tip of the spear, far
• 1:14:23
  ahead of others in the space particularly, is really what
• 1:14:28
  looks like will will actually solve the problem and, and make
• 1:14:30
  autonomy something that that is attainable.
• 1:14:35
  And like Vlad said, it, it's going to be expected from every
• 1:14:39
  OEM, every automotive OEM over the next half decade or decade
• 1:14:43
  to be able to roll this out. Otherwise it'll be like missing
• 1:14:45
  a steering wheel in a car, right?
• 1:14:48
  It's going to be an expected function.
• 1:14:49
  And they, you know, these are not software companies.
• 1:14:51
  So they fundamentally need the help to get there.
• 1:14:54
  They know how to manufacture and and build a supply chain, but
• 1:14:59
  they just can't build the software teams because this is
• 1:15:02
  really rare, really rare a skill set right now in the market
• 1:15:07
  that's being gobbled up by all the general AI players.
• 1:15:11
  So that's, that's why it's such an exciting opportunity because
• 1:15:14
  it's such a needed function. It's such a big, big transition
• 1:15:17
  to autonomy in the next. You know, it's always a year
• 1:15:20
  away, but realistically it's 5 to 10 years away.
• 1:15:23
  But now it's it's really we can see over the horizon and Helm is
• 1:15:27
  one of the leaders in the space so.
• 1:15:29
  Terrific. Well, glad.
• 1:15:30
  Thanks for spending some time with us today.
• 1:15:32
  Yeah, indeed. Tally, thanks for helping
• 1:15:34
  connect us with Vlad and with Helm and looking forward to
• 1:15:37
  investing in the company from Practical Venture Capital at our
• 1:15:40
  third fund. And hopefully some of our
• 1:15:42
  investors will jump in and join with us.