A Startup Is Trying to Buy PayPal… Craziest Deal of 2026! | E2312

23:41Eric Bahn:And right now the best hammer that we have in our hands is like these AI tools where we can just like constantly vibe code things that we can do with our data outreach that's a little bit more automated even a little bit of deal assessment as well so it's a fun place to be there's a reason why i'm actually in my garage right now it's because i can't fucking afford like a nicer office but um yeah it's a cool place to be and i'll just make another comment too about something that we're kind of dodging it's like it's amazing how ass backwards the vc industry is right now in the sense that most people, as Jeff is saying, are not actually using these tools in a big way.

24:18Eric Bahn:I think the majority of VCs have not touched cloud code once. Wait, no. No, no, no. That's impossible. No, I really do think so. I mean, they may have opened it and put, like, how do I make a brisket or something like that? But I think they're not actually committing anything to GitHub or Vercel or anything like that. They're not actually producing real software. And it is crazy how much pen and paper I'm still seeing during these meetings with other VCs, you know, and versus, and I'm not sure how any of this is getting transcribed into like, you know, institutional knowledge and data and so forth.

24:50Surely the people telling me that everyone needs to be AI native and move twice as fast. Those are the people who are leading the charge in their in-person interactions, right? They wouldn't be talking to walk without walking to walk.

24:59Eric Bahn:My boomer parents, like my dad was a smoker and he was a doctor. She was also like, you probably shouldn't smoke, you know? And, you know, like, you know, say what, like do as I say and not as they do kind of situation. I don't even mean to poke fun. It just, it surprises me that the people who are often writing very large checks into technology companies haven't, it's like not test driving a car before you buy Ford. It just feels a little bit, do they have people that tell them what's cool and what's not? Is that like a job in VC now? Like to be like a whisperer or kind of an amanuensis to an elderly VC who doesn't want to learn?

25:34Is that what, is that the Renewed Venture Capital job path? Because I think that would be a good one. Jeff, you should take that. Yeah, I think to Eric's point, it actually amazes me because using the software and the tools is actually a great way to win the deal. And so that's happened to us. We like BetterAuth, which we invested in last year. Yeah. We just built a simple web app and user authentication and went to the second meeting, showed the founder what we had built with their infrastructure. And suddenly you're on the cap table. And by the way, that takes with Cloud Code like five minutes now.

26:10Yeah. It's not like that was a six-month project. No, it literally took us five or ten minutes, and the founder, he was amazed, right? And so it's almost faster than reading the deck to actually use the product. And I don't know why that is. I think there's a rat race within Venture where you stack your calendar, and you have like zero time to experiment or think. And that's just sort of like the culture that exists within most venture firms. About going and using AI technologies, one of the things that's come up quite a lot is what to do at the startup level regarding models and evals. And I don't want to beat to death again the idea that, yes, open source models are improving and the gaps closing to closed source and all that.

26:53But there's been some interesting commentary lately about how startups shouldn't just bring their own intelligence in-house, but also design their own evals around it. Because no one knows their company better than them. and that makes good sense to me, but it also seems to be technically tricky and demanding quite a lot of startups that may not have those kind of in-house AI chops. So Jeff, in your portfolio, how are you guiding companies to not only avoid vendor model lock-in, but also to ensure that they are doing the right evals for their use case and not just depending on some benchmarks that SpaceX AI or Anthropic put out?

27:28Yeah, I think this is a really new conversation and quite frankly, like over the past two or three years, there hasn't been a ton of startups who focus on evals. Like it's really just about keeping up with the competition and showing revenue and growth. And so there's been, like this is like a more recent conversation, just frankly due to the number of startups who have gone absolutely destroyed by OpenAI and Anthropic. And so I can count maybe on one hand how many teams in our portfolio that are pre-series A are building their own evals. It's a really small number of companies. But there is, I think, a new conversation around having more openness to using things like open source models just because you don't want to be destroyed by giving your data to the larger foundation model companies.

28:27So I would say it's a very small number of companies at this point who do their own evils in-house. I want to get Eric on this, but Jeff, on the point you just made about seeding your data to the major AI labs, I went through every major AI labs data use policy. And they all say, we don't trade on your data. We don't trade on your prompts. We don't trade on your outputs. But then Satya Nadella, the CEO of Microsoft, said that even how frequently you're doing tool calls can be information that is useful. So to me, this conversation is less about seeding your data to the AL apps, but really the meta data.

29:02Is that correct? I just I'm literally just trying to understand this whole problem better. That was exactly it's the tool calls and being able to see even the customer spend within your platform. You can tell who's inflecting within your customer segments, and it's pretty easy to, without ingesting their data for model training purposes, to kind of have directional data to where you should spend time internally. So what you're saying is that Stripe's going to become the world's best VC firm in time. That's what I just heard. They're already pretty good. They are, in fact, because if you don't go public, you can do whatever you want.

29:42Eric, custom evals and how your portfolio companies are approaching this. I know that Hustle Fund has like 65 ,000 portcodes. So just maybe kind of a pastiche, if you will. Just blend it all together.

29:52Eric Bahn:Don't be hyperbolic. We only have 700 portfolio companies, right? Oh, I'm so sorry. No one gives a shit. At PreSeed, it's such a zero to one thing. Like the only thing that these companies are trying to do is get to product market fit. And they'll use any model that's cheapest and available to them. So open source is becoming more of a common thing that they're discussing just for the sheer cost of it. But I'm constantly being begged for, do you have any Anthropi credits or OpenAI credits or whatever? They'll use whatever they can. Now, I think this problem starts to become real after product market fit.

30:24Eric Bahn:And you actually have a true business and a real sense of we have to now create boundaries and emote. So I can understand why at the enterprise level, this is an acute issue. But at least in the pre-seed world, it ain't no thing. No one's really talking about this in our portfolio. But you invest at the pre-seed level and the companies keep growing. So I presume you have some visibility into what the same cohort are doing at Series A and beyond. Most AI tools can give you business insights, but they can't actually do anything about it. That's the difference between AI that talks and AI that acts.

30:59Eric Bahn:But rippling AI is built differently. It's the only AI built on your live global workforce data. So HR, IT, and finance are connected from day one. That means it's not just surfacing insights, but you can actually take actions across your entire organization. Let's say you want to focus on talent retention. Just ask Rippling AI, who are my top performers this year? You'll instantly get a workforce report, comp ratios, performance reviews, engagement metrics, all the data you need. Then Rippling AI will recommend a retention strategy, including a 10 % spot bonus for your top performers. So don't settle for AI, that's all talk.

31:36Eric Bahn:Head to rippling.ai slash twist and get the only AI built to give you full visibility across your startup and take complex actions across your entire organization. That's r-i-p-p-l-i-n-g dot a-i slash twist. Sign up for exclusive access today. Yeah, yeah, yeah. And barely having these conversations, but they are starting to happen. So the way that I'm sort of trying to wrap my mind around this, and I think, Alex, you're a Formula One fan, right? I am indeed. Zim, Zim. Yeah, exactly. So spa this weekend. So I kind of view it like this, which is, you know, all the cars right now, if you think of each car as different kinds of frontier models, are within like percentages of each other, right?

32:18Eric Bahn:So you got your Red Bull, you got your Ferrari, whatever, and Mercedes, and maybe someone's a Nassim Martin in the back. They're all kind of close to each other, but that's fine, and that's sort of publicly known. But what the teams don't want to share is their pit stop strategies for the next race, like the racing line they're going to take, like tire management and so forth. And that's kind of how I'm viewing these evals, which is once you get to that level of the pinnacle of motorsport, that's the stuff that really starts to make huge differences, I guess, alongside of the car, which is probably the biggest one.

32:50Eric Bahn:And the companies that we're sort of dealing with that preceded hustle fund are still like in their entry level Miata spec racing thing where like, you know, none of this stuff is like that relevant. But it's starting to happen. You can start to see around Series A too, just like whether we should use some of the capital that we have now to invest in more of a moat around like evals. And that's barely starting to happen. Okay, so we're hitting this one right when it begins. But going back to your F1 analogy, I think the argument about the need for custom eval is not really in a protective sense, but in a way to better understand how a model applies directly to your business case.

33:26It's not like we're just talking about their pit stop strategies. I think the cars are running on different tracks. And that's why I think the scores being 1 % off between the leading models, sticking to the analogy, don't matter as much. Because if something is much better for your company, or you can tune it, post-train it, fine-tune it, whatever, then you can move a lot faster. I guess I thought this was going to become more quickly a requirement to survive, given what Jeff said about the number of companies that OpenAI and Anthropic have either accidentally or purposely stepped on. And that seems to be happening pretty frequently.

34:00So to me, any defense sounds like the right way to approach this, Jeff. But am I being alarmist? I think when you're an early stage founder, as Eric said, one, if you start a company, you view yourselves as being different than OpenAI and Anthropic for a variety of reasons. Like there's nobody in like an accelerator cohort who is a, you know, AI native application or company who's starting to come in and saying, hey, like Anthropik or OpenAI is going to beat us if they want to. And so there's like a naive, it's almost like this like blissful, naive approach to building a company that you have to have.

34:38And then, you know, secondly, I think you can convince yourselves like when that does happen, we'll have enough scale or defensibility that they won't be able to compete with us. And so I don't think like the early stage founder psyche just isn't geared towards worrying about this problem until it actually is a problem, which is normally when you do have some product market fit. Okay. So it sounds like this is more of a late stage point that it'll be curious to see or interesting to see how far down the startup age this goes in terms of what people do it. But I think we're going to need just better and easier tooling i looked up there are companies that will help you with you know internal ai evals but they seemed much more enterprise tuned so maybe someone should build that for like series a companies or earlier i think that'd be super interesting

35:24Eric Bahn:yeah jeff you and i can vibe code that this weekend it's a good idea yeah let's talk about that for a second you had a funny tweet eric that was like everyone in silicon valley staying up to the glow of their laptops until they run out of fable five fable five access um how much better has Fable been for you and Elizabeth compared to preceding models for Vibe coding work because it seems about the same to me, but I'm not doing difficult work with it. So I'm not quite sure that I'm getting full bang for my token. It's great. I mean, like the stuff that's doing right now is going across all of our code bases, refactoring things, showing like where we've been inefficient and so forth.

35:56Eric Bahn:And, you know, Opus was insanely good too. But I think just the level of sophistication of just like, oh, you know, this is not very refined code. You know, here's what we're noticing and things like that. It feels like the exact same kind of feedback that a senior engineer used to give me when I was working at some of these big tech companies. So this is AGI. I think it's actually happened within coding, at least in this domain. It's amazing. What's the next sector where we reach an AGI-ish level of performance? Jeff? I've never heard someone say pass before with such a bunch of confidence. All right, Jeff, you tell me.

36:31I mean, I think it's going to take a while, but it seems like the model companies are shifting their focus towards physical AI. And in some ways, that's a recognition that they're pretty close to AGI on the coding front or on, you know, kind of on these more digital native use cases. So I think that will be interesting because those new domains, whether it's robotics or anything physical AI, require you to spin up whole new teams. OpenAI already has a robotics team. And so I think that's the next narrative is going to be, hey, we conquered coding and now we're going to, you know, focus on the physical world.

37:08Okay. Well, we'll see. I'm very bullish on that. we've had the CEOs of OneX and a lot of the humanoid robotic firms on and also some purpose built robots like Dusty Robotics and so forth and they all seem to be making such quick progress that it seems to me we're going to get to that being not solved per se but to maybe a modern self-driving level of sophistication in the next couple years and that's going to be just super duper exciting Alright, I want to talk about startup clusters. A company called Oak, Oak.id, just announced 60 million in funding and they came out of stealth and they're working on essentially a shared identity layer for agents and humans, which a couple of companies are working on.

37:50And so one thing I'm seeing, Eric, it seems that there's a lot of capital chasing newly discovered problems that we run into like, oh, now we have agents, we're going to need to integrate them into identity. Oh, we have a lot of agents now, we need to orchestrate them. And then like six to 10 companies get spun up to work on that. They raise money. They all seem to kind of go pretty quickly. in prior cycles, did we see this level of intra startup competition for new possible problem spaces? Because it seems to be more crowded and faster than before.

38:19Eric Bahn:I think you're framing it the right way, which is these are VCs in some ways are offering a solution for a problem that they're trying to find. Right. So if you're like this large, this is my interpretation where you're saying, like you have these mega funds. So you raise like billions of dollars and your LPs know that AI is hot right now. So now you're finding like this very niche set of areas on the AI stack that you want to invest in. I'm not even really paying attention to this specific space that you describe what Oka is doing. So I don't have any real knowledge of it. But what I suspect is happening is that, you know, you're trying to put money to work.

38:56Eric Bahn:And there's just so much capital sitting in these mega funds. So I hear about this news like all the time. It's just like a crazy amount of money. I have no sense of like what the TAM is or whether this is going to be like subsumed in some sort of like broader kind of governance model or whatever. But like, it's a funny thing because this feels almost like driven by just like, I have all this money, like how I'm going to put it to work, at least on the venture side of it. So maybe not answering your question. No, no, that's close enough. Jeff, do you agree with Eric that we're seeing maybe more startup clusters form with higher levels of funding strictly because higher AUM firms need to get that capital to work?

39:33I think it's primarily because there's so many nub problems that exist. And it's really, I think once any company has traction, that's known faster than ever. And so then the cluster forms. It's like, you know, it's, and you kind of like repeat and rinse that cycle. So I don't know if it's necessarily like VC driven. It's just like, there's like such obvious problems, especially within software that people spend time on. It's actually to the physical AI conversation. I find the clusters are slower to form within physical AI than software, which to me is an advantage. These are hardware companies to build.

40:15There's normally a hardware and software component, and often they're within very kind of like old traditional industries. And so there's an advantage if you actually like look outside of Silicon Valley to find companies where often this kind of like fast follower effect doesn't exist, which is if you look at like, we've done eight investments over the past year, and I think one of them has been in Silicon Valley. Wow. I think six of them have been in Los Angeles. And so we, as a firm, believe that, like, you know, some of these, like, old sayings are very true. And the one that always comes to mind is Peter Thiel, competition is for losers, right?

41:01And if you believe that quote's true, there's a lot of losers out there who are, you know, who are other capitalizing companies or starting companies. that, and so I think that's kind of like something we just think about a lot. We don't want to be existing or investing in categories that are easy to follow into. Yeah. One of your partners wrote a post talking about this, and they said, you know, agentic coding doesn't make software less valuable, but instead it, quote, moves the value to software solving the hardest problems it can reach. And it sounds like you're saying that to get to a point where you don't have instant fast follow competition, you have to either go pretty far afield or literally get some wrenches out.

41:44That's fair. And the partner in question mentioned General Intuition, Alfred and Erebor as examples of places where they're working on solving data friction, iteration friction and deployment friction. So applying that, Jeff, to the companies you backed down in L.A., why were they the right choices for Chapter One right now? Yeah, I think starting with Erebor, so they're obviously building a new bank and to the earlier fintech conversation it feels so obvious to us that fintech and banking is one of the categories that you can't fast fall into and because there's regulatory reasons and also trust and security reasons why fintech should be a i guess like a hotter category today and so when we see a company like airborne get their banking license fastest ever in the US.

42:34They have Palmer Luckey. They have this amazing cap table to kind of like consolidate AUM into very quickly. That's like a pretty easy investment for us to make. And then if you look at general intuition, I don't know if you guys have followed their journey, but they had this company called, or it's called Metal TV. If you're a gamer, you probably know what it is, but you use it to clip your video game highlights and they've found a way to use that data to train physical world use cases around defense drones etc and that's just like a data bet is you have this really unique data set that they have access to fairly unobvious and then you have a team based in primarily the uk they can recruit really well out of deep mine they're not within this silicon valley think tank and so you have people who are doing really unique things with unique data sets.

43:32Alpha was another kind of hardware software bet. Teams being out of Tesla working on a fairly unobvious solution to helping car manufacturers integrate software more efficiently. So, yeah, I think it's a combination of data, regulation, and team that we look for and often that exists within regulated industries or really difficult industries to build within. Chapter one is based down in LA, right? Yeah, I think it's a pretty generous term because we have a distributed team, but I'm based in Los Angeles. I grew up, I'm actually today in Menlo Park. And it's funny because people think of me as being like this LA investor where I really, I've spent a lot of my life in the Bay Area.

44:18But I live in Los Angeles now and spend most of my time there. Yeah, but you say the Silicon Valley think tank. To me, you're describing in very polite terms, essentially an epidemic of groupthink. Um, I think, I think there's a culture that exists within the Bay Area, which becomes very insulated. And you can just, like, I actually like to just compare it, like, what billboards do you see when you drive on 101 versus any other city? And, you know, if that's what's standing at your face, when you're driving to the office every day, then you get to the office, and you're talking about, I don't know, like different AI, AI topics all day long.

44:58and that becomes all you think about. And to me, like that can, there's a cost to your kind of like originality of thought that exists in that environment. And so I'm careful. I love the Bay Area, so I don't want to, like there's all these Twitter wars. It's like Bay Area versus LA or Bay Area versus New York. I truly don't care. Like, I just think that's like, people do that for clickbait on Twitter. But for me, I do my best work when I'm not living in the Bay Area, at least at this point in my career. Yeah. Yeah. Eric, I'm curious what your thought is about this, because on one hand, people say, you know, if you have ambition, you have to move to the Bay Area.

45:35But we are seeing a lot of cool companies being built, not just around the United States, but also around the world. And I could list off some names that I like. But how do you avoid that kind of like poison thinking by supping too long and too deep at the communal well of thought?

45:49Eric Bahn:Well, first of all, Jeff is totally wrong. The real answer is Miami, right? Everyone should be there, right? You're otherwise you're a loser. All right. Wait, wait, wait. I have a take about that before you actually give your real answer. My thought about the Miami thing is that people just liked sun and partying. And so they're like, we'll just take our laptops there and buy nice houses. And then it'll be just as good because we're the people that matter. Blah, blah, blah, blah, blah. Anyways, you were saying. Okay. First of all, I'm going to roll that back, that joke, which is, you know, one of our best companies that Jeff and I share is Flex, this bank that we so briefly touched on.

46:18Eric Bahn:They're based in Miami. They're doing real work. You know, there's a mantra within our fund that we see at Hustle Fund, which is that great hustlers look like anyone and come from anywhere. full stop. And I really just truly believe just like Jeff does, which is, you know, you can build great companies anywhere. There are multi-billion dollar businesses built in Wisconsin, you know, or in Indonesia, like, you know, markets with very different kind of parameters and so forth. So I guess when it comes to groupthink, you know, it's hard to escape this bubble. I live in Silicon Valley. I've been here for 26 years and all my friends, all my neighbors workers work in Silicon Valley companies, right?

46:54Eric Bahn:But I think one superpower I do have is I'm not from here. I grew up in Detroit. And a lot of, I think my friends are still based in the Midwest these days, and I catch up with them. So there's an element of touching grass. But this is kind of like the fun part of the job as a VC is like now I'm realizing it is a necessary part of the job to touch grass, you know, to get out of this bubble, like travel a little bit or go to some of these exciting hubs like Chicago or Atlanta, they're a little bit more overlooked because you surely do find founders who are less Kool-Aid, if that's a verb, into a very specific way that companies should be built, have a very different kind of approach for how they're building or burning capital and so forth, and they can build great businesses too.

47:41Eric Bahn:So yeah, I subscribe to what Jeff is saying. Yeah, I kind of came of age in the Chicago tech scene back in the early days of Uber and kind of during the Groupon boom. And it was so cool, but then it didn't seem to have that staying power. Then everyone kept moving to Silicon Valley. And it seems like such a missed opportunity to build something with a different perspective, a different LP base, a different local industry focus that what could have been. It just didn't quite bear out that way. And if you're listening to Eric talk and you're thinking, Overlooked, man, we should build a venture capital firm called Overlooked Ventures.

48:11Too late. Someone already did that. So that brand is - Yeah, that was Jane's fund. Yeah, it's taken. Okay, but let's, leave the bubble and talk about something else. Now, Jeff, you're maybe best known for your time at Tinder, during which it became the number one grossing app on the iOS App Store, which is legitimately an amazing accomplishment. And Eric, you just put some money into Sage Haven, which is a play on, I think, Safe Haven, which is a texting company for kids. And it struck me when I was just thinking about this, that you guys have kind of more consumer bona fides than most VCs that I talk to.

48:44And I'm curious if you think that there is maybe right now a dearth of consumer-facing startups just because everyone wants that sweet, sweet B2B AI markup. And Jeff, why don't we start with you? Yeah, I think it's probably been the biggest surprise of this AI wave so far that we haven't seen more consumer companies that actually leverage AI in interesting ways. I think I caught up with Josh Allman last week, who obviously joined A16Z and is a longtime friend and him going to a16z i think is actually just a great catalyst for more people to build it's um it's funny i think the natural inclination you know you flock to like building a vertical ai company and then you realize two or three years later that maybe that's not easier than building a consumer company and um and so i think i think it's just go it will happen and um i've been i personally like i've been spending a of time trying to think about what the form factor might look like that actually makes because the first iteration of consumer ai companies was like let's take instagram use the feed put some like generative content in and hope that humans like to to just like 100 consume generative content i think that's just so far from what people want every day and even the the x algorithm change yesterday was interesting as a everyone's clapping but like that to me was a sign that people actually do want to connect with real people and real content.

50:12And so we got away from kind of like what the core value of consumer should be because AI was, it felt like this new superpower that people were trying to experiment with. And now I do think we're going to get more consumer startups. And there's also a lot of really cool things happening within consumer hardware now as well. I was literally just going to ask, do you think these next breakout consumer companies are going to be hardware or software first? I think both. And we had talked about how much easier it is to iterate within hardware today than it was many years ago. And, you know, I think the wave of consumer hardware startups that have actually succeeded over the past several years is very understated.

50:53So if you look at Whoop or anything kind of like health-based, that category has been awesome. What hasn't been as great is consumer social, consumer marketplaces. But if you look at consumer health, I think there's been really amazing examples of companies that have really broken out over the past couple of years. And now, you know, we'll see what the next wave looks like. Is that because the incumbent companies in healthcare were so, going back to the word, ossified that you could just move around them pretty quickly, whereas the companies in social and other parts of technology are a bit more quick moving?

51:28I mean, like, I'm not saying that Meta is nimble, but Meta has managed to give a pretty strong lock on a big chunk of consumer social for ever. I think it was, to me, like companies addressing a new zeitgeist that incumbents weren't paying attention to. And so if you look at consumer health, like that's a big, chunky category that people are willing to spend money on. And you have a lot of income that's aging who want, you know, want better products. And so to me, it's more so like, hey, health seems like such an obvious category if you just look at like Miles' hierarchy of needs, which that's like the most basic way to find consumer startups.

52:12And that was why I actually joined Tinder a long time ago. I was like dating. That's pretty high up on that list. And all these companies are really terrible. It seems like this is a pretty good place to build a consumer company. And we're just getting back to that now. I'm actually really excited about like AI native fintechs or AI native, like anything that involves money and AI, I think is going to be awesome. And if you like, there's been some great examples of, of companies who are, you know, like giving your agent a bank account and letting them basically be your financial manager, I think is, is going to be a really, it's like, someone's going to nail that.

52:52I don't necessarily think it's going to be Robinhood too, just because their product stock is so busy at this point. So yeah, I'm pretty pumped about everything that's happening right now. Eric, first of all, just give us the quick TLDR on why Sagehaven and then the broader question about consumer-focused startups being possibly the next wave.

53:11Eric Bahn:Yeah, so I don't do a lot of investing in consumer and I'll be also really clear that Sagehaven wasn't the deal that I led within my team, but I do have good context about it. I was a product manager at Facebook and Instagram for several years. So, you know, had some experience here. You know, Sage Haven, think of it as like a very safeguarded way for parents and those in your community to message your kids. Right. And it's sort of like a parallel stack for iMessage that's designed for safety for your children. So I have an 11-year-old, I have an 8-year-old. I'm really worried about who's able to communicate with my kids.

53:51Eric Bahn:And this is a really nice solution to create those kinds of guardrails. So I'm also really bullish on consumer AI too, even though we don't invest as heavily in this space. I like the Maslow's hierarchy framing that I think Jeff is putting together here. Because I've been thinking a lot actually about the X algorithm change that happened a day or two ago. and like how suddenly so joyful the feed feels. Like all my old friends I see, I can see Alex's shit posts. No, it's so true. I've had more fun on Twitter in the last 24 hours than I've had in the last six months. Correct, yeah. I think like it's almost coming back to like pre-Elon days in terms of like how the feed feels.

54:32Eric Bahn:And as I've sort of been processing this, like just taking like that example, just social networking, I think people like it. You know, from like 2005 to 2015, let's call it, It was a much more joyful experience to be on all these kinds of platforms. But then it kind of turned into this extraction phase post-2015, where especially tools have accelerated the company's ability to rage bait you into getting more doom scrolled into the content, extracting more of your data to do all sorts of interesting monetization and so forth. And we're starting to find that kind of pushback. And with the ex-algo change yesterday, I kind of discovered that I really needed that.

55:12Eric Bahn:of just like, oh, there's a place where I can have fun again, because that's just something that I need. So who knows whether X is going to be the ultimate platform for that, but there's got to be better tools with this current environment that can be created by some startup or some company to do that joyful thing, but hopefully in a way that balances extraction in a way that isn't harmful. And I'll just leave this last caveat to you of just maybe the need in terms of a new socials in this AI world thing is, I think the majority just qualitatively of XPMs I know from Meta are really militant about not letting their kids use social media, including with my kids.

55:53Eric Bahn:Just because like we saw like what these tools were doing and like the addiction and all stuff. So that's always like the crazy irony of these kinds of products. You don't get high on your own supply. The most insane and radicalizing thing for me and self-critical point was watching my children discover what a phone is. And then their interest in stealing mine from my pocket and running away. That's everyone. We try to have a low-screen household. The children don't have iPads. They watch very little video content. Usually during a tough diaper change, they can watch Brock and Toad for a minute.

56:27But not much. And they're just desperate for it. and it's made me really look in the mirror and ask myself, why am I so plugged in? And the answer is Twitter and the industry that we live in, because I don't think technology has ever evolved faster in terms of what we need to stay on top of than right now. So I feel the need to be plugged in, but I mean, I don't want my kids to live a life on a digital treadmill like that. And I'll just ask this because we're here now, Eric, what's your take on the restrictions on social media access we're seeing both at home and abroad, the right move?

56:58Eric Bahn:Yeah. I mean, I think the UK or some European countries have like at least 16. Yeah. I support that. I think even 18 potentially. I mean, if, if we're not allowed to give our kids cigarettes because we think it's harmful for their health, I think that should be allowed. That should be a hundred percent. Yeah, exactly. Yeah. You know, exactly. Uh, true child of the nineties. Uh, you are over there. Um, but, uh, yeah, I mean, 1989, baby. There you go. Five months ago. Oh yeah. Yeah. Yeah. So yeah, I remember the eighties very vividly actually so um it's harmful you i mean i really do think that um you know brains are developing especially for men until we don't stop developing until we're like 25 or 26 and then maybe women a little bit earlier and you know this is the reason why like like marijuana is like sort of dangerous like you don't you don't it's fine i think if you're a fully formed adult because your neural pathways are mostly mostly there but like i'd be really frightened if my my son started taking like gummies pretty regularly now because I think it's going to fuck up his mind.

57:59Eric Bahn:And I think it's just a similar kind of snow crash moment where like something about these data and this consumption is really messing with human brains. And there's probably enough evidence and scientific support for that at this point. So 18 and older. I think that's all pretty reasonable. I didn't think though of cannabis gummies as the prompt injection of young minds, but there you go. So, Jeff, I want to extend this point to somebody else. There's a lot of talk right now about AI regulation, trying to get this right. And I don't think we need to argue about the exact last one or two things that have happened.

58:30But directionally, from where you said slightly outside of the Silicon Valley zeitgeist, which I think kind of leans in one particular direction when it comes to this point, what do you think we should do at the national level, which is, I think, the real question today, to ensure that not only do we have a non-cybersecurity destroyed world, but also ensure that startups don't end up regulated out of the cutting edge? Because that's my real concern is that we're going to end up just granting too much power to incumbents and squash the little guy. Yeah, I think it's a huge, big question to unpack.

59:03Look, I'm like, I'm the most pro-America person you can probably meet. And my biggest concern is that you have people, especially today with a lot of the data center buildups that do not have the right information. And there's just going to be, you know, some of it's self-inflicted to be clear. There's been a lot of kind of like scary visions of the future that the biggest companies have been portraying around job loss. and it hasn't felt very productive for the industry. I think it's, and so, and that's just, you know, I was actually pretty shocked that Dario and Anthropic, like a lot of their early comms, to me, even being in the industry were really scary.

59:53And so now you ask the kind of like general American public to support AI and you already shot yourself in the foot. Repeatedly, yeah. And so I think it's important to look at the bigger picture, which is if we don't figure out how to create a more positive narrative around AI and to take on these big infrastructure projects, we will fall behind. And that does come at the expense of national security. And ultimately, I think I don't know how it's going to play out because it doesn't seem to be making a ton of progress. and you read this in the news every day or you just talk to young people, right?

1:00:36People graduating college and their views on AI are really negative. Yeah, but they're also enormous hypocrites. There was a recent study from Brown, which is up the street from where I live here in Providence, and a professor gave out a midterm. It was a take-home. Everyone did really, really well. They didn't believe it. They gave an in-person midterm. Nearly everyone failed. And so to me, there's an irony to the college kids saying, you know, we want authenticity in life. If we really want to be real humans, we want to paint on our hands. And then they cheat like mad on their homework and don't learn anything.

1:01:05And I think that points to just people are going to use AI a lot because if even the haters are using it, then it's going to be ubiquitous. But more on the regulation point, I want to pin you down on this. I'm curious what you think is the right way to decide what counts as a model that we might want to have some oversight of or if we should even have that at all. Because I think we're seeing China possibly restrict open-way models from release. And there's rumblings of an executive order on open source AI here in the States. All of this has to be pretty worried. So where do you stand? Yeah, I mean, I'm pretty anti-regulation across the board.

1:01:41Mainly, I don't trust that the people who have decision-making over which model should be available to the general public, Like, you know, at least going forward, how do you keep continuity kind of like over multiple administrations with different political beliefs when you have committees who are determining which AI models should exist? And if you go to Washington, D.C. and you spend time with the people making these decisions, they often are pretty far from the metal in terms of what's actually happening. And so not to get overly political, but I think the last administration was having to deal with a lot of new innovation.

1:02:32and that oversight actually cost us a lot of time in terms of the amount of time that went into educating that group and ultimately the policies that they were trying to enact were by their nature very anti-AI in many cases. Haven't we ended up though exactly where everyone thought Biden was going to take us? With the federal government having unwritten rules about restrictions of AI, opaque standards, a lot of having to go kiss the ring to get stuff out the door open ai being told they can't release certain things anthropic fighting with the government it seems like everyone's like if we have biden 2.0 i'm not trying to say they're right or wrong then we're going to end up here and i feel like we've ended up here anyways and so i i what what could the current administration have done differently because the only thing that i can see is they'd have to say like we're not going to have control over mythos level models and i don't think any administration would say that so to me i wonder if it's less partisan and more just the technologists are too far from the government, Jeff.

1:03:35I think that's totally fair. And if you do go to DC, you see the Anthropic and OpenA have huge, teams in DC now, like massive teams. I don't think this is discussed often enough, but you have what would look like big headquarters in DC now, trying to work with both parties to create new policy. And it's one of those actually pretty impossible questions to answer sitting where I am in Menlo Park today just as a venture capitalist. But I think this should be a bipartisan topic where we all come to the table and have some shared point of view on doing what's right for the country. And I hope that happens.

1:04:24I hope so too, because it would be really unfortunate if tech's recent shift to the right kind of since the the last presidential election a little before ends up turning ai into something that is inherently partisan because then we're just going to make very little progress as a country and you know we're going to have president aoc and then we're going to have president i i don't know um yeah ping pong ping pong and that's not good neither extreme is probably the correct place to be all right um why don't we end on something a little bit more fun than making Jeff explain his politics live to the entire internet.

1:04:58Why don't we give him a slight break? Yeah, thanks for doing that, Jeff. Yeah. So Eric, I have your criminal record pulled up here and I wanted to go... Kidding, kidding. So some fun things to wrap up with. One, Eric, Charter Space. This is a startup, as far as I can tell, that is providing insurance for launches and in-orbit activities. I don't know if this is one of your deals per se, but I thought it was an incredibly cool company. So I'm just curious, What is the hustle fund thesis on backing space related companies and do they fit into your precede formula?

1:05:28Eric Bahn:Yeah. Well, first of all, thank goodness for the American laws that juvenile records get expunged at the age of 18. So there's nothing to look up at this point. So charter space, right? This is a insurance underwriting for space missions, right? I like to think of this company as Lloyd's of London. So back in like the 17th century, this company formed for maritime insurance because there's these ships that are going out on these crazy excursions of discovery and trade. And if cargo was lost or the ship got lost, you know, there's a way for these businesses not to lose all their money through this insurance product.

1:06:03Eric Bahn:Right. And, you know, our bet is that more people are going to want to do more things in space, that there's going to be more payload that's sent to space or maybe habitats or something, you know, like data centers, whatever it's going to be. It seems like the chart is moving up and to the right in an exponential fashion in terms of what is being launched into space every day. And also, we have seen so many catastrophic videos on Twitter, on Reddit, whatever, of payloads being lost from wonderfully huge explosions on the launch pad or something like that. You can say Blue Origin out loud. Jeff Bezos won't come by and slap you in the head.

1:06:40Eric Bahn:Yeah, but I applaud this early days of brave explorers trying to do this kind of stuff. Hell yeah. I also want them to continue to be in business to make these kinds of risks. So we're really excited about Charter Space and that we think that this is the right time for a company like this to be formed. And it's yet to be seen whether we're too early or Charter Space is too early in this bed. Wasn't Lloyd's originally a coffee shop? Lloyd's of London? Yeah, when people aggregated and met to talk about this stuff. and then I think it became a business after that. Yeah, so my understanding of the history was that there was meetings taking place at the coffee shop.

1:07:17Eric Bahn:I didn't know if it started as a coffee shop, but all the underwriting was taking place just like a startup would, like starting their company, drinking coffee at Pete's Coffee or whatever it is. So I know that was where originally the work was getting done and then off into the races. Yeah, I was thinking if it was like old school cafes to Lloyd's, maybe it's like group chats today to... to... It's the original Coupa Cafe, I would say, the Bay Area reference. 10 points for that. All right. And then Jeff, I was going through your portfolio. And one thing I noticed is that the number of crypto infra and usefulness bets you have is pretty cool.

1:07:53So the graph, Starkware, MoonPay, Lighter, Layer Zero, and others. You've had a pretty good foot in the crypto world. And I think that as we've talked about AI and just ad nauseum for the last couple years, it's really fallen off people's radars. So what's the state of crypto today? What are people building that's cool? And when is the next crypto boomlet going to come to make us all feel guilty about not loading up on Bitcoin now that it's about 60k per coin? Yeah, I think crypto is one of those really misunderstood industries where you actually do have real great founders still building within the category, but the markets on the liquid side are depressed.

1:08:31And And frankly, I think there's just been a lot of founders who have found other places to spend time as well with AI and deep tech and everything else. If you look at the roadmap to most big fintechs, stablecoins have been for the past three years a huge part of the focus. And that's going to keep happening going forward. The things that are most interesting right now are bringing, you know, there's been a lot of, it's called RWA, but real world assets. So bringing new equities and new forms of assets on chain, which enables global access, 24-7 trading, gives you the ability to lend and borrow against those assets, which is pretty cool.

1:09:17And that's been a big focus for Robinhood, if you've seen the roadmap as well. What hasn't happened in crypto, what's not happening today are like these big, you know, like society changing projects. If you look at things like DAOs or the ownership thesis, I think a lot of that has changed quite a bit. And so there's a move towards more institutional use cases, which for a lot of people building crypto, especially younger people, is frankly really boring. Even though that's probably where the most value will be created. But if you're like, hey, you're going to go build better financial technologies for the top 10 US banks, that's a very different pitch from, hey, we're going to change the way that society thinks about owning companies.

1:10:13So I think a lot of the enthusiasm for crypto has gone away, despite the fact that there's been a lot of progress being made. Can I just say that I think it's really, really funny that for a while DAOs were a venture-backable category? Because DAOs are, and correct me if I'm wrong here, decentralized autonomous organizations, right? Yeah. The funniest part about DAOs, I don't know if you remember or sign of this, but there were VCs, and this was like a totally real thing. you would go on uh like a call like this and you'd have like 200 members of the dao and the vcs would have to pitch the entire dao on why they should take the vcs money for the next funding round and it was just like the it was the funniest thing seeing vcs have to have to like explain what they do to people who hate vcs and uh man and it's like this yeah it's like a public it's like this public forum it was so funny and proof of love obviously proof of love uh and you realize how inefficient dows are or any organization where there's like 200 decision makers who have loud online opinions right right that's what i'm saying like what what has been the pitch since snaps ipo when they went out and gave zero vote shares to the public it's founder control centralized decision making we call it founder mode now but i mean a dow is the opposite of that like if you think about it it's literally like everyone gets a like oh man that's that's that's a historical quirk the idea though of vcs pitching 200 furry avatars to get allocation though and thus requiring them to have actual riz that's funny to me because not every capital

1:11:52Eric Bahn:allocator is funny alex has an excellent soundbite by the way i do what i can um we i've actually a lot of fun today you guys were great thanks for coming on um but let's give you guys some some time to do some plugs. Eric, where can people find you and their firm online? And is there a startup you're looking for to back that you haven't get found? Yeah. So my website, hustlefund.vc. You can follow me at Eric Bond, E-R-I-C-B-A-H-N. Companies that I'm hoping to see. I think that we're generalists by design. So I think about founder archetypes. I love teams that hustle hard. We define hustle as great execution meets high velocity and chasing after a large market.

1:12:33Eric Bahn:And I'm actually really biased towards founders who are good front of the house people who know how to sell. So moats are difficult, but I think the ability to sell and close is the best moat, especially at the early stages. So come check us out. Hustlefund.vc is a good place to begin. All right, Jeff, send thing over to you. Where can people find you online? And is there a company you're looking to back and haven't found it yet? Yeah, I'm JMJ on Twitter. Chapter1.com is our firm's name. I'd say companies really coming back would be, you know, we're obviously doing a lot within deep tech and that world.

1:13:09We still do a ton within fintech. We still do some crypto investing. And AI tends to make its way into every pitch. So there's AI in everything. But yeah, one company we had talked about earlier that I'm very interested to find in back would be this like agentic finance future company um which i'll explain to himself maybe alex is building oh no no i was quite literally itching my face i oh you were i thought you were saying me i thought you were saying me no no that was not a signal that was literally i was trying to i was trying to be demure about it and not bother you sorry um but yeah i would say you know on the whole we want founders who are building serious companies solving serious problems and and would love to meet.

1:13:56Yeah. All right. Well, guys, this has been This Week in the Startups. My name is Alex Wednesdays, Beauty Adventure Capital Roundtables. We're back on Friday. We'll see you then. Goodbye.