Who are the billboards for?

0:04Today on Great Chat, we talk about marketing stunts in tech, the all-time greats, when they work, and when they don't. Also, the Anthropic IPO, Google Equity Raise, and the SpaceX S1. Exciting times. I'm Helen, and this week I'm joined by Angela and Ashley. Great Chat is brought to you by Mercury, radically different banking loved by over 300 ,000 entrepreneurs. We use Mercury to run this podcast and love recommending it to other founders and fund managers. It's free to get started. Try it for yourself. Visit mercury.com to learn more and apply online in minutes. I am in Tokyo right now and there's a typhoon headed our way.

0:44So, you know, I human traffic myself to Tokyo to have in-person meetings, but we may just do them virtually because there's a typhoon and it won't be safe to travel. What do you mean you human traffic yourself? Oh, that's just Angela's lingo. That's just my lingo. I was like, you check yourself into like check-in luggage and then you throw yourself into the, yes, the check-in bag. I was like, is this a new travel hack? Should I try it? Yeah. How do you get the miles? Man, I wanted to ask you both what the vibes were in San Francisco post-anthropic confidential filing, but I guess neither of you is there.

1:23I think I was in the air. I think I was flying to New York when that announcement happened. Did the plane erupt in cheers? Oh, my God. I was just asking somebody at breakfast this where it's like, I mean, we are also, right, comparing the SpaceX IPO and then Propag IPO. But it's just sort of like, say what you will about the SpaceX IPO, but like Elon Musk is a household name. And they've been, you know, SpaceX has been around for like 15 years, more. Yeah. I don't even know if like retail investor, like does the average retail investor, can they name Dario Amode? Even people who use Claude, right?

2:01Like do they know so much about the company? Like I don't know. Do they know Andropic makes Claude? Maybe not. We are truly about to find out the extent to which we like live on different planets, right? Like I think this is like the moment. I was thinking about this too, Han, because my biggest lesson from like the, you know, by comparison, much, much smaller IPO that I was part of early in my career is like, oh my goodness, like there is nothing like an IPO to like stress test your messaging and like how people perceive you. And I think these companies, and especially Anthropic, have only begun to do the baseline, like broader positioning work.

2:40Like maybe their Super Bowl commercial was kind of the first coming out to a mainstream audience. And it was very insidery. That like probably went over most people's heads. It was very much for a super insular type audience. And so, I mean, as incredible as the businesses, I think they just announced 47 billion ARR. Revenue run rate. Yeah, run rate. Annual run rate. Oh, did I say something different? Well, I feel like the way that they're accounting right now is like we're all a little bit like, oh. The way everyone's accounting right now is a little weird. And then there's like CARR, contracted ARR.

3:19Yeah, that just means they haven't collected on it. Yeah. Yeah. But anyways, yes. But in comparison to SpaceX, if you look at like the valuation. The business is bigger and it's growing faster than SpaceX. But Elon is this very known entity, especially given his political dalliances over the past year or so. Well, Angela, you dug in. We're not investors in SpaceX, but just the way that everybody has talked about it for so long with such bated breath, I was expecting, I guess, something more exciting on it. I mean, I'm not trying to dismiss what they've accomplished. I mean, it's a huge business and it's incredible what they've built, but just it wasn't growing as fast and it wasn't as big as I thought and nor as profitable without sort of the last minute addition.

4:05So it kind of left me scratching my head. Like, why were people so excited about SpaceX for so long? But maybe that's just because we have these AI companies in comparison. Do you think we're warped now? We're like only 29 billion? Yeah. I mean, what was SpaceX's growth rate? It was something healthy, but it wasn't like jaw-dropping AI companies. Yeah, exactly. And then the other one, the margins weren't great, right? But isn't the IPO that crazy TAM picture? So many pictures of rockets. I know, I know. So many, so many pictures. But isn't the whole data centers in space thing And then like the how like the reliance on compute going forward plays into this whole sort of future value of SpaceX thing.

4:55Isn't that like how we tie it together? I love the long term incentive plan triggers for Elon. So between like the 12, 500 billion equity enterprise value increments between one and seven trillion, there's also strategic objective vesting, which I really appreciate. Oh, yeah, yeah. What was the detail there? Those were a million inhabitants in a permanent human colony on Mars. So not temporary, permanent human colony. And then also the completion of non-Earth-based data centers capable of delivering 100 terawatts of compute per year. And I think my favorite part of those two sentences was capable of delivering versus actually delivering.

5:43So I just I love I love everything. I love everything about that long term incentive plan. Good for Elon. Elon definitely wrote that himself. And can you imagine being the person like reviewing. Editing. Like being like, like, do I comment? Do I do I push back? I'm like, no, no, no, it's not worth it. We'll just leave it in. suggested edits in google docs yeah well so the my head immediately goes to wow one million permanent residents that's more than like the whatever 750 000 people that live in san francisco so like do they have representation do they pay taxes to who do they have to get to mars on a spacex like starship like infrastructure yeah who covers the cost of that honestly i think the tam slide isn't big enough.

6:35Saying things like that is how we get Elon on this podcast. My other favorite tidbit, which I'm sure a lot of people picked up on, but I've been living under a rock, was the disclosure around the anthropic contract, which made a lot of headlines. But it's actually, you know, cancelable by either party within 90 days after the initial three month term, which is just very interesting because most of the other compute contracts we've seen are quite long dated. And that can lead to all sorts of like speculation about what it would mean if either party were to cancel it. Like if Anthropic canceled it, does it mean that like compute has gone down and their demand has gone down?

7:17So would they just never cancel it because they would never want to signal that demand has gone down? Or like would, you know, SpaceX cancel it because Cursor suddenly like, you know, needed all this compute and it was actually a pot. So it's just interesting all the game theory you could play out. The timing almost seems like Dario and Elon were like, listen, this is both our Achilles heel for our respective IPOs. So let's make an agreement where you get compute. We need a bigger revenue growth story. And then we'll just punt and we'll see if it makes sense to keep going because this gets them to the other side in theory of their IPOs.

7:55I guess people are saying Anthropic might actually even do like a summer IPO, which is pretty unusual. But these are unusual times. And so, yeah, just like two gentlemen coming together and solving each other's narrative problems. I think they've been working on the IPO, Anthropic's been working on the IPO for quite some time from an underwriting standpoint. But then just from like an external comms, like what a company does and what a company looks like when they are on the path to going public or filing S1, like they've been doing all of the things. And so it's one of those things where like when you say summer IPO and that's unusual, like yes, but I actually think we're living.

8:39Yeah, we're living in completely unusual times and I can see this happening. They have their own center of gravity. Like it doesn't matter. Timing doesn't matter. But like the rolling thunder of news. The war in the Middle East doesn't matter. It's like the normal rules of IPOs do not apply. But the rolling thunder of news and the like sort of like quarterly releasing of the numbers that they had never done prior to like, you know, six months ago, like it's all extremely intentional. And, you know, so my bigger question now is sort of like all the companies that aren't aren't matching that, aren't doing that right now?

9:16Like, what does it mean for them? And so much, I think, hinges on how successful this will be. And the question that I had was like, usually you go public because maybe you've exhausted private market appetite or you have to raise an enormous amount of money. Like this one, what is the strategic value, right? And we talk more about this on the podcast and like the, you know, like what are the optics? Like, how do you own the story, like all these things. But like going public when there is unlimited demand for Anthropik in the private markets, when you compare them to like a Stripe or a ramp or like these companies that are like doing very well, well capitalized, also seemingly unlimited demand in the private markets, you know, Anthropik could have a very successful path staying private.

10:02So what is really the incentive to go public quickly? Is it the compute? I'm sure the investors don't mind. No, of course. But I think the investors do great as they stay private too, is my point. Well, the bigger funds aren't selling into these later rounds, right? Smaller funds can do that. I don't think a lot of the mega funds are taking out secondary. And so this is an ecosystem that's and starved for liquidity. I don't think you would push Anthropic to do something unnatural to pull forward that timeline, but I'm sure there's a lot of enthusiasm for a real exit. Helen, your point around they've sort of been operating a little bit like a public company from a reporting standpoint, or at least from putting out those revenue numbers, is a really interesting one.

10:55And they may also just feel they have a lot of predictability in their model and their forecasting. That is usually one of the things that you want to feel before you go public so that you're not playing a game of over forecasting for one quarter and then coming in under all of that stock volatility. And so even for such a young company, they seem to have quite a bit of predictability. And then of course, with Mythos release coming, I'm sure they see a real, maybe even inflection point on top of what they're already seeing and feel confident that they can have a great revenue story through the end of the year.

11:35I mean, I guess there's always a possibility that the economics of compute and AI change dramatically. And do you want to navigate those while you're a public company or a private company? That is a very interesting question. And I can make the case in either way, go out and have that liquidity moment before anything really massive happens or whether that is a private business. I was chatting with someone recently and they were saying that Dario is probably one of the most ardent supporters of scaling laws. I I mean, he was on the original paper. Like he's like just been such a champion of that.

12:16And I think if you look at Anthropik's sort of history of how much compute they've secured, like even he has wildly underestimated like how much is needed. So it's just like a reminder that even though everything is so crazy, there was a point in time when like the most bullish of bulls like underpredicted what the curve would look like for AI. And it just makes me wonder what the trajectory of all these companies are going to be. But that's like a little bit of like my like AI, like I'm into the AI world saga. Well, that's a good segue to Google. They're selling, what is it,$80 billion worth of equity to fund compute.

13:04And Berkshire Hathaway took 10 of that. most people's takeaways were, one, like they just updated their CapEx projections in April. So like not so long ago, they updated it to a higher range. And I guess the speculations around like why now? And is it because they think that like maybe these IPOs are going to change the dynamics and availability of compute? Do they want to, do they know something that we don't, Is it a future Gemini model? Are they preparing? So I don't know what you guys thought or what your takeaway was on seeing the equity raise. Yeah, I mean, my inbox was full of notes overnight in terms of what the conversation was, especially among public market investors.

13:54And to your point, I think it was kind of confusion, because it's either one, CapEx is going to be a lot higher than what, you know, people are currently modeling. And that raises just a natural question of like, will the return on that incremental CapEx spend be useful, which is a question that haunts all of these companies. And it's also I think we shared the tweet sometime ago on the pod about how all of the companies free cash flow is going towards CapEx. And so what was going to happen? And in fact, they chose to issue equity instead of debt, which is like a very nerdy finance point. Usually the cost of equity is so much higher than the cost of debt, especially for a company like Google.

14:36Like you would just issue debt here. The fact that they chose to issue equity, does that mean they think that actually it's cheap to issue equity because the stock price is so overvalued? And so it's just interesting. There's just like a lot of game theory around like what not just the raise, but the instrument that they use to raise the capital signify. So, yeah, it's a moment for all of all the finance nerds to put out their conspiracy theories. One of my favorite little side side notes to all of this craziness from yesterday with the anthropic confidential filing is Sam Altman was on CNBC. And I launched that interview.

15:19Shout out to Sally. I know. and like people were like oh this this is must have been strategic from open ai and i'm like are you kidding me that's like the most nightmare like anytime this is the risky thing about broadcast is like you kind of never know what's gonna happen live when you're scheduled and for a slot and so i have a note note to sell to see how sam did and i'm sure i'm sure he handled it but it's like it's It's one of those really funny things where anything can happen on any day and you will be asked about it. Like, you know, there's no way CNBC couldn't ask Sam for his thoughts on anthropic confidentially filing.

16:01So just, you know, fun chaos on a daily basis in this industry. Our big topic this week is inspired by Angela, who landed back in San Francisco after her world wouldn't travel. And she's like, what the hell is this? She sent a photo in the group chat of a airplane flying around San Francisco with a banner. To be fair, I'm like driving down Unipro, Sarah, about to get on the 280. And there's like a bus shelter that has just like Monaco and like dollar sign. And then there's like I like drive by a bus like 20 minutes later that has like Monaco. And then like the next day I'm like walking through the Presidio and there's a plane like pulling a banner that says Monaco.

16:44I'm like, what is happening? Angela, you specifically were being targeted. Yeah, because everyone knows you buy that. It's in the south of the city. It's like different neighborhoods. It was just following me around San Francisco. Yeah, yeah. Totally wrong audience. They wasted their marketing dollars in the wrong audience. And now look, they're getting free awareness building from Great Chat. So what an investment. Like it was worth the plane, the bus, the billboard. Actually, guys, I signed them up as a sponsor. That's why we're talking about them right now. Oh, there we go. I mean, the metric here that they're looking for is branded search, right?

17:22Like if you're surrounding somebody, right, like Angela just described, how many people type in to their Google or their actual URL bar, monaco.com. And so that is how you measure a lot of these out-of-home activations. Or book a trip to Monaco. Maybe that counts too. That is a hot take I have on the riskiness of making your company name a country. You're never going to beat them on SEO. It's working. It's working. Whether that ultimately converts, I don't think in this case, yes, but I think that was the intention. But that got us thinking about like marketing stunts generally in tech because it does feel like we are in this sort of creative era right now.

18:09You know, I think we've seen previous iterations of this, like what Angela just described. Brex really like did a lot of billboards pretty early on. And now it seems like billboards are the norm. And then there was Brex who also did like the Brex Cafe. and, you know, people kind of poked fun at that because I think that closed not after very long. And now there's like Corgi Cafe and there's Cursor Cafe and now there's a Corgi bus that takes you all around Fideye, you know, between the cafes or between like Caltrain and the cafe. And the story behind that is pretty funny. And it's just sort of like, well, is that what it takes right now, right?

18:48In this very saturated moment where everybody's fighting for attention among the pretty small group of people in San Francisco, frankly. It's very, very noisy. And so it takes like a marketing stunt to be able to really break through. So that's kind of the main topic for today. But, you know, I think that the things that I was thinking about, like in preparing for this segment was like, what are some classic like tech marketing stunts? you know the ones that i sort of went back to were like early 2000s sales force would just like rogue show up at their um competitors like annual conferences and do like some guerrilla marketing thing out front like they paid a bunch of actors i think to like protest or picket outside of oracle open world pay actual paid protesters like the favorite conspiracy theory was a real thing Yes, yes, yes, yes.

19:41And that's a stunt. And it got coverage. It just threw a wrench in the big event for that enterprise marketing team. Siebel was the behemoth in that space. Aaron made all of us read behind the cloud when we joined Vox in the early days. That was also required reading for us at Dropbox as well. You know, tech is not, and I say this all the time, like an industry that's known for great marketing because it's tech, like the tech sells itself, like the performance and all of that is so much a part of the story, a leading part of the story. But like I think right now we are hearing and seeing a lot more sort of like stunt like activities.

20:23Like on this podcast, we brought up Roe, giving away eight sleep mattresses for new accounts created as long as you keep a certain balance. And, you know, just sort of brought up this question of like, was that a marketing stunt or is that just like a really interesting sort of like cost per acquisition calculation? I think both. Yeah, totally. But I don't know. Like, are these are you guys going to these pop ups? Are you going to these cafes? Like, Angela, are you taking riding the Corgi bus to and from meetings? Like, how are these meetings only in the Corgi cafes? Is this just a free version of Chariot?

21:03Like every 10 years, is there a company that brings back like the shuttle that runs around San Francisco? As a Muni enthusiast, like I am such a fangirl of San Francisco Public Trans and why I think it's, you know, the best city. It's insane to me that we have all of these like privatized transportation, but, you know, it's a cool branded moment. I was thinking about this and like I feel like the best stunts become campaigns or they're like more directly tied to the product or ethos of a company like the Salesforce no software campaign. Like that was like a multi-year rallying cry, you know, and you would see like this software crossed out everywhere.

21:53And yes, they do these protests and it was like a whole, it was a whole thing. And it was designed to create, manufacture this rivalry that would make people who otherwise wouldn't care about this software category care, right? And so it like put Salesforce on the map as this like plucky small startup against this behemoth in this space. And so I think it was very successful in that way. Another one that came to mind, speaking of one of our favorite pod topics, remember when Elon launched a Roadster into space? I think it was 2018. 2018 and like that was like that was such a flex because it was like I built this car and I built the thing that launched it into space and now he has like five more companies I mean isn't that somewhere in the S1 like or there was there was speculation that he was gonna put Tesla inside the I mean probably um who knows but on IPO day maybe we'll launch a hundred Teslas into space Google had a famous billboard in 2004 that had like a puzzle, like a math puzzle on it that only like, you know, people who were worthy of working at Google, like engineers who were working at Google would get.

23:11And so that became like a big moment for them was kind of like, look at how nerdy and smart we are. And so it was like a sort of a really tied directly to their culture. and then the last one and I'll shut up but um remember IBM had Deep Blue play like the best chess player in like 1997 and it won and so what did we did it win maybe yes that's right that's right it actually doesn't matter but it was like this like seminal moment that showed off this technology and like so these are stunts I don't want to I don't want to diss today's startups but Like these were stunts that were like deeply connected to like products, technology, the culture of these companies, like even with Elon's like personality and ego.

23:55And I feel like a lot of what I'm seeing from startups today feels a little bit like spaghetti at the walls. Like it's like, to your point, Helen, traditional channels are super saturated. AI has made content so easy to produce that our feeds are all full of constant promotion and so you have to do these sort of like bigger wackier things to break through but I haven't seen an example of something that feels really like core to the brand maybe the the best example was Anthropics like cafe with the what was it like keep thinking or I forget a year ago yeah we're coming up on a year anniversary of that it was like in direct contrast to some of the conversation around ai and so it felt like oh yeah let's slow down let's have a cup of coffee let's think and so i liked that because it felt very reflective well this it's not that i i thought was genuinely creative like was you know i think ramp does a really great job i think that they have a very creative marketing team and that that is supported you know, up and down.

25:02Oh, they did that thing with, was it Kevin from The Office? Yeah. And I think that that was smart. And then they tied it with their like Super Bowl campaign or something like, you know, they're taking risks. They were early on the TBPN sort of like sponsorship. And, you know, I think that that creativity is rewarded. And I love to see more of it. So this is by no means like a takedown is just sort of like an observation or of this moment in time where I think that for the first time tech has to start thinking like the way commodity industries do. And what I mean by that is like the best marketing, you know, is typically done by CPG companies, retailers, where they are aware they're basically pushing the same products on shelves.

25:51Totally. I've lived in that world at Glossier. Like any one product you have, you're competing with, you know, thousands of other SKUs. So marketing is the differentiator initially. Right. So it's really got to be about how the brand of that product makes you feel. And so watching tech companies, startups in this moment sort of scramble and figure that part out is so awesome, in my opinion. And we benefit as, you know, residents of San Francisco, seeing like what messages are being prioritized. And aesthetically, I'm just going to say, when I'm in San Francisco, I'm just like, whoa, like billboards everywhere.

26:30Yeah, I had a founder visiting San Francisco recently, and I had to just be like, when you take the Uber from SFO to the city, it'll just be crazy, the number of billboards. And they're like, he's like, nothing could have prepared me for that. I'm like, yeah, it's just like a normal thing that we accept now. But it is truly, truly jarring. I guess I would just, Helen, I love your optimism and I probably should be, I should, I should find my way into that as like an early stage investor because we're only supposed to be nice. But I would just push startups to like, just take it one step further.

27:03Like what is not just like, I see a lot of really lazy billboard slogans. I see a lot of really bad airport ads. It's just kind of like the thing is the end in itself. And to me, they are all canceling each other out, because it's just like nothing is really breaking through. And I think this is why like, people are also rage baiting and like, these debates around work life balance, because they know how to get attention. But I do think a lot of this right now feels like it's more for investors it's more performing runway and traction and like trying to give this feel of like look how much money we have to spend on on like marketing because we're doing so well and like there's nothing wrong with that but like the difference between like a mediocre ad or you know stunt and a breakthrough one is and not to say the latter is easy but it is like night and day and like yes i'm not going to remember any of the shit that i've seen over the past couple months well so so here's the thing like i started my career doing outdoor advertising and so the the experience that angela described is actually ideal you want to surround the buyer you want to surround the buyer you want to do what monaco is doing what brex did when they when they bought like 60 billboards around Soma.

28:28You just buy up all the inventory and you do not want to do what the majority of these AI companies are doing, which is buying one billboard. Because when you buy one, you have to ask like, who is that for? And, you know, I remember being like a very young person on the creative agency side and like this senior media buyer that I got paired up with when we were doing like the media buy and the placement across like a couple of cities, they said, well, you always want to put a billboard between the CEO's home and their office so that they see it. And I remember that. And right now, whenever I see like a single billboard on one on one, and there's like not another one anywhere else in the Bay Area, I just recall like what that media buyer told me.

29:15Yes, exactly. And like, you know, I think that there is some truth to that. And it does feel like you're being left behind if you're not doing it. I mean, I remember being at Plaid and, you know, one of the founders had had dinner the night before with one of the Brex founders. And they came to me and they're like, why aren't we doing billboards? And I was like, let me tell you how auctions work. Like, so Brex bought up all of the inventory in Soma, which was very smart because like they are targeting startups. Right. And so they bought them very cheaply. I think it was like$300 ,000 for all of that inventory for like a several month period.

29:49It was so smart. And the ROI they got from that was astronomical. I know two heads of marketing that took the Brex job after that billboard campaign where they were measured on having like marketing campaigns that would beat the ROI of those billboards and both of them failed, right? And it's like they were never set up to succeed in the first place because you got a really, really good idea there. But I think this is to the point of like these auction based pricing, right? Like that factors into the ROI of these campaigns. And when you're late to them, the prices go up. It's like there's competition for the inventory.