Inside Substack’s $100M Push to Fend Off Beehiiv | E2153

27:04At a billion dollars, 20 times top line revenue for a high growth company, or 30 times top line revenue. That's what AI companies are getting, right? Or a fast growing SaaS. So that means they have to have 50 million in revenue, 30 million in revenue. Do we have any insight into Substack's revenue? Yep. So the reporting around the time of the round is that they were telling investors they had about a$45 million run rate, which would put them at a roughly 24x run rate multiple. So here you go, folks. You're learning here on This Week in Startups how I can do this back of the envelope math. So that means there's a group of people who believe this can get to in under five years, under 10 years, between those two numbers, five and 10 years, maybe five years, taking 10x revenue.

27:49Now, that's a big bogey. $500 million in revenue means at 10%, they have$5 billion in top-line subscription revenue. That's a lot of money. So right now, they have $500 million in subscription revenue, or$450 million based on that 10%. So$450 million in subscription revenue. That means do they have 1 ,000 pubs making$450 ,000 each? Do they have 500 pubs making a million each? I don't know. But you could actually back into that. You could look at their top pubs list, which somebody must have a list of, look at the paid subscriber base, and you can start to look at that. Another way of saying this is, are they earning that money for their publishers?

28:34And that's going to be their natural tension. If you're free press, there's no way at 10 million in revenue, let's say the free press was at 10 million in revenue. I'm picking a number out of the air. There's no way Bari Weiss is giving them 500 ,000 a year. You would be much better off using Beehive and deploying the other 400, hiring a full-time developer for 150K to customize it and be 3.5 % more profit. $350 ,000, that's going to be like five journalists, four journalists. There's no way you can afford to give that money to Substack unless they prove, hey, we're earning it. Now, the podcasting rub in the live streams is how I think they sold it.

29:16But we're right now sending this out to our Substack for the This Week in Startups Substack live on their new app. So I'm just testing and we test every platform. And I don't know that we're getting views. I don't know that anybody cares. I don't know if we went subscription for This Week in Startups, if it would ever match the advertising revenue in year 14 of this program. I don't think it could. Every time you turn on the news, it's about AI getting smarter and smarter. These models are writing perfect code. They're acing the world's most difficult exams. And it turns out they're also pretty good at making money.

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30:32Plus for a limited time, earn 1 % match on all IRA deposits, IRA transfers, and 401k rollovers. never too soon to get that retirement dialed in. So go to public.com slash twist today to fund your new account in five minutes or less. That's public.com slash twist. Disclaimer, pay for by public investing. Full disclosures in podcast description. So you're right, Jason. If they want to 10x their subscription revenue base, it's going to be a lot of work because they've already gotten a lot of the low hanging fruit, people that brought their own audience, et cetera. But people would think that the advent of the churning group on their cap table indicates that they're going to go heavily into advertising.

31:08And the company actually told the New York Times they're going to be doing that. So I think what they've done is they've said, look, Jason's right. We can't just keep taking 10 % of everyone's subs and then keep people around. Call the graduation problem. You get to a certain size, you leave. And then they're stuck with less people and slower growth. Okay, so you offer them an application, a mobile app that brings some other services and some distribution. That's a nice bonus. Then you mix in native advertising products where they centralize the demand and then federate out the money to the publications.

31:37Similar to Beehive, which is what they do right now. It's working great for them. So I think they told their investors, look, our free subscriber base is growing by, let's say, 2x the paid subscribers. We have this enormous audience that is uniquely positioned to attract a certain type of high-dollar advertiser because, let's be honest, it's not your average person who's reading sub-sec. It's probably people that are more educated, wealthier, and so forth. And I think they can see a path from here to that revenue mark thanks to advertising and growth in paid subs. So I can see it. It's ambitious, but I like that.

32:07They seem to be smart cats. So I give both of those teams, Beehive and Subsack, are incredible products. Patreon, I subscribe to three or four things over there. They're all legacy items. I'll say that. So it does seem like Patreon is falling behind these two product teams in a significant way. So sometimes being first means, you know, really qualified people look at what you built and say, I can do better. And they just make a much better product. I think they're good businesses. I don't know that it's a great investment, but the fact that they haven't given up and they're still grinding and adding new features, the top two platforms at least, I haven't seen new features on Patreon.

32:53The app feels very stale. Patreon's app feels incredibly stale. It doesn't work very well. Like when I go into it, I'm seeing very old posts, et cetera. But I do subscribe to Brett Easton Ellis, Red Scare, Blanco Lirio, and maybe one or two other pubs. And a lot of times I subscribe to pubs because I want to see them exist, like Blanco Lirio. I subscribe to his because I think it's important to have people doing analysis of plane crashes for safety reasons. So I'm like, this is like my little, if they told you donate$10 every time you buy a flight to make flights safer and it goes to this flight safety fund, I would do it, right?

33:30Everybody would or half the people would pay that$10. And so I feel like that's what I'm doing by having him out there. Blanco Lirio, highly recommend. Juan Brown, incredible. Like, I just love watching these videos because I learned so much about aviation. And like everybody, I have a natural fear like of dying in a plane crash because I take planes a lot. and watching him do these, I say to myself, I'm going to avoid these planes. I'm going to avoid these airlines. I'm going to avoid these situations. I'm not kidding. It's always the same thing. Pilot era, co-pilot communication, certain airports, certain conditions.

34:12And I'm like, you know what? If there's a flight during a snowstorm, I have said I'm not flying. I just move my flight. I can afford to do it. I have the flexibility to do it. I will literally move my flight and I don't take regional airlines. After watching his videos and hearing how regional flights work, et cetera. So anyway, I love Substack. I love Beehive and I even love Patreon. I love the whole category. And would I invest in it? Hmm. That's, I guess, the key because you would have to look at the price they paid and what the potential return is. A 10X return to me is interesting. In 10 years, I'd have to hear the pitch directly from the Substack team.

34:54Is Substack and Beehive, are they in the Twist 500? They're both in the Twist 500, yeah. These are companies that we've been keeping an eye on for, I mean, for ages because we use them. Let's have them both on. I'm going to give you the assignment to have them both on and hear the pitch directly from them. I remain impressed with those two teams specifically and their product velocity. So when I see two really great competitors adding features constantly, kind of makes me interested. It reminds me of DoorDash and Uber, Airbnb and VRBO, pick your poison of people going at it, Instagram, Facebook in the early days.

35:29So yeah, I'm a fan of both products. I'm a fan of both product teams in those cases. I wonder what's going on at Patreon. Well, one last data point, Beehive told the world that they're at 20 million ARR now. Wow. Pretty impressive. They're growing pretty quick. So they've caught up to half? When did Beehive start? Because Beehive started five years after Substack. So that's impressive that Beehive's catching up. Maybe that's what got Substack's butt in gear, respectfully, is the emergence of Beehive. And that's great for all content creators. And I love the idea of the ad network going out and selling it.

36:04That's what John Patel was doing with federated media. He didn't have the platform, but he was representing the advertising for Boing Boing famously. And I know this because I was doing Weblogs Inc and Nick Denton was doing Gawker at the time and we weren't part of that. And then he sold out like federated media, pissed off the Boing Boing people because they didn't get any of that money. And Boing Boing, I think at the peak was like maybe two thirds of their revenue. It was like their tip of the spear. And I remember the Boing Boing people were a little upset at him when he was able to sweep all that cash off the table in some sort of secondary transaction.

36:38I don't remember the details exactly, but I do remember a Boing Boing person being upset. It's just evidence that you and I have been doing this for a long enough time because I bet you half the people listening to us in this moment are like, what's Boing Boing? And I guess you have to be there. Still going. Boing Boing came up in my feed the other day. I will say this as well to end. I love the term graduation problem. So this is the graduation problem that you do a great job, your customers leave. eHarmony, number one graduation problem. We're going to make this one of our themes here, the graduation problem.

37:07eHarmony was really a challenge business because they were so good with their science of relationships, of finding a husband, that your 40 or 50 bucks a month, they were charging a lot at the peak, would go away because if they did their job correctly, do your job correctly, you lose the customer, you know, and job boards have this issue. And, you know, you're basically like, when do you get the person back? When they get divorced? Okay. Yeah. That could be 10 years and 50 % of the time it doesn't happen. So you lose it. The other graduation problem is ad rep firms. Somebody represents your advertising.

37:44They do a good enough job. You hire your sales team and then they go away. Yep. Well, all we need is more Coldplay concerts to ensure a better market for eHarmony to pull from and then everyone will wait. Yes. Okay. So who do you got on the next one? Next up, Lovable. We had Lovable on the show. February 3rd, 2025, episode 2080. The CEO, Anton Osaika, came on. And at that time, Jason, they were just a little Swedish company that had grown to 10 million in ARR. Now they're at 75 million in ARR and they just raised$200 million in around Led by Excel, $1.8 billion valuation. If you don't know what Lovable does, I'll catch you up.

38:21they are one of the leading lights of the vibe coding and use ai to build yourself an application game uh really fast product velocity to jason's prior point and a company that i really really like and they had raised just 22 and a half million previously so jason this is a huge increase in their capital base which has me slightly worried to be honest because it can be distracting to have that much money uh but really impressive i'm really happy for him and just shows that Europe can still build. Thoughts? Okay. Yeah, I think vibe coding is really interesting. These companies capture people's attention and we are in the sampling phase of AI.

39:00I'll pay for anything for a month or two. I'm paying right now$200 for like whatever, and Claude and ChatGPT. I think I'm paying probably, you know, I'm getting towards$1 ,000 a month personally for AI products, or I'm halfway there, more than halfway there. I pay for Grok. I don't know if I'm on the$40 or$50 plan. And because I feel like even at$1 ,000 a month, it makes me$1 ,000 better. Now, the franchise of Jason Calacanis is worth millions of dollars in revenue a year. So it makes no difference to me if I do that, right? If it gets me incrementally better for one speaking gig. That's a lot of money right there.

39:45So I have a reason to pay for it. But on All In this week, I had an interesting discussion with Gavin. I have put a... And I talked about it here before. I put a valuation on artificial general intelligence, not super intelligence, but general intelligence. General intelligence is what you and I and everybody listening does every day, a lawyer, an accountant, a podcast host, a researcher, a journalist, a programmer, general intelligence, writing the show notes. When you write the show notes, what percentage bet, or let's just take you out or I out of it because we're virtuosos in this category, but an average producer summarizing the Substack news story we just did versus Claude, I wouldn't be able to tell the difference.

40:35Today? Honestly, today. No. I mean, I did it the other day with a story. I hit the assistant button. It was a breaking story. And I put those notes into Slack. And those notes were as good as, you know, whatever, a 50, 60, 70K producer. Not as good as Alex with his domain expertise or me with my historical expertise or inside information, but essentially there. So I have now, my belief is there's a billion people in the West, in the modern world, in the developed world, let's call it in the West, where people make salaries of above$50 ,000 a year on average. There's a billion people on the planet who are going to pay for some amount of AI software.

41:20I just described mine. I'm the tip of the spear, but you might reasonably spend$50 a month,$25 a month. Doesn't seem like a lot of money. SaaS software, people are paying that amount. One billion people, $100 a month in spend, or$75 a month, something in that range, equals $100 billion per month out there, which is a trillion dollars a year. Yeah, that's the number that surprised me is that we got to a trillion pretty quickly. Okay. Billion people, 100 a month, trillion dollars times, you know, whatever, 12 months, you're at a trillion dollars, 100 billion times, you know, thereabouts, trillion dollars a year, 10 times that, it's a high growth category, equals a$10 trillion incremental business.

42:08It will eat away at some existing businesses, but I believe this is incremental spend largely. Why do I believe it's incremental spend? because I don't think anybody's like canceling Slack or canceling HubSpot to use these new products. These are new products that provide a new offering. Therefore, people are gonna be very frisky. I believe there's a trillion dollars in spend available for general intelligence. Now, super intelligence means it's doing novel creation and problem solving beyond what humans can do. Okay, what's that worth? If you create fusion energy, if you create the cure for cancer, you actually have an analogy for that.

42:51What have GLPs become worth? Ask Producer Claude, what is the GLP market worth in 2025, 2026? That new category in revenue in 2025, I think there's like 100 million people on GLPs already paying$2 ,000 each or$1 ,000 each. This is already. Yeah. So what does Producer Claude say? the revenue of GLPs are right now. I'm curious. That would be the novel super intelligence. Now, humans who are not super intelligence got there, but it took them a long time. About 63 billion in sales are expected next year, according to producer Clyde, growing about 18 % a year, more or less. Quite a lot of money, Jason.

43:31Times 10 to your earlier point, yeah. Yeah, so times 10, you know, it's trending towards a trillion dollars. This is half trillion dollars in value, unique value created just by GLPs. When those become pill format, you don't have to shoot yourself with a needle. Oh, then I'll do them, yeah. It'll be 10X, and people are gonna do them for things other than that. So that would be super intelligence. I'm gonna just take that off the table. There's$10 trillion at stake here. I believe a company like Lovable is part of that. That$10 trillion in market cap. So they are$1.8 billion valuation. If they had a 10 billion, if it's 10 trillion in market cap, 10 % of 10 trillion is 1 trillion, and then 1 % of it's 100 billion.

44:11So they're a fraction of that movement. Coding, vibe coding is going to be, that's gotta be on its own, hundreds of billions in market cap. So I would put vibe coding at maybe a trillion of the 10 trillion I just described. In other words, software development is a trillion of the 10 trillion. They are about a fraction of that. I think it's an easy bet for venture capitalists to make that they could 10X, I think at 100X from here. But they're going to have some stiff competition, and you're buying a group of people who have proven. Look at their traction. They went from 30 ,000 paying subs in February of 2025 to 180 ,000.

44:53That's this year. Really, this year, they've 6X. They've 4X'd, 4.4X'd their annual reoccurring from 17 million to 75. So that means they're valued at whatever, 25 times their sales. They are doing that, by the way, with only 45 FTEs. So back of the envelope, they're trending towards$2 million per employee. This is like an incredible run rate here. There's an amazing kind of split screen that comes up because we just talked about Substack raising roughly 24x run rate here, roughly 24x run rate, but growing a lot faster. So you can kind of see different bets, different timelines, different companies.

45:30Why do they have the same valuation? I think it's because of what you started off with, the sampling problem. How many of these customers are still going to be there in a year? Subsec has a much longer monetization history, so you can have a little bit more faith in the durability of its revenues. Here's the thing, though. We've been saying sampling problem, people will test anything for a long time now. And these companies are still growing. So I wonder if, is it time to start setting that concern down a little bit? No, it's probably increasing because you have artificial general intelligence and super intelligence as the possibility and the fear, a reasonable fear that what lovable does will be built into Claude and Grok and Gemini and Meta and Microsoft, Apple and Amazon.

46:22Amazon, actually, somebody emailed me, was like, by the way, we have our own language model. I was like, you do? I never hear about it. But Amazon actually has their own language model. Maybe you can look it up. So I think you'll see Microsoft, Amazon, and Apple have their own large language models in the next year, or two of the three. If Amazon already has it, I don't know that Microsoft is working on a large language model. They're obviously aligned with OpenAI. I would be shocked if they weren't covertly building one. Microsoft has made, I think it's the Phi PHI family of models. And then from Amazon, it's the Nova series, which we actually, I think we brought it up on the show as like an aside a while back, but we didn't double click on it because I think to your point, we don't know anyone who uses it.

47:03It doesn't show up on leaderboards. It doesn't show up on Open Router. Our friends don't use it. Like there's no. So here's what I'll say. Let's look at the leaderboard. You know, that we've been talking about whatever that leaderboard is with the collection of human tests and some number of those tests, you know, the answers ahead of time. And some of them, you don't know the. I'm sorry. You know the questions ahead of time, so they're easy to nail. Other ones, they present you with new questions each time, so they're harder to nail. And Gavin Baker was explaining that nuance to me. That's really what's at stake here is, are they able to answer new novel questions?

47:39Let's just look at that, the top 20, let's say. And as a concept, I just want to know when new entrants break the top 20 or ones we don't know. So just let's keep an eye on that as a concept. new LLM entrance. The Amazon Nova experimental model, the highest ranked one on the LL Marina data set, Jason, I just looked it up, is ranked 62nd. Okay. So that's work to do. Much work to do. But no matter who builds the best model, as long as Lovol gets to sit on top of them, they can do well and kind of take advantage of all that progress that we're seeing. Let's move on to the next... No, no, no. Think that through for a second.

48:16This is what Cursor has had as a problem. Cursor was built on Claude, right? if I remember correctly. Winsurf was. Winsurf was on Claude. What was Cursor built on? Cursor had... I think they also used Claude. ChatGPT. I think they were also Claude. So as explained to me, Claude now has their own AI assistant, AI coding assistant. So, you know, these wrapper companies that are working in coding specifically have a very unique challenge. the person you're building on top of wants your business they consider it a key piece of that 10 trillion dollar agi prize i've outlined and cursor there it is you just showed it right or you just showed the claude version the claude code that is now competing with cursor okay so then jason just to play devil's advocate here if you do expect the foundation model companies to go out there and try to take some of the market that other people are collecting cursors fast revenue growth, Windsurf's fast revenue growth.

49:17Does that mean that you're bearish on the potential success of non-foundation model coding assistant tools in general? I think that specific vertical is so key that the language models are going to want it. So I think it's going to be tough for Lovable and Cursor and Windsurf and these kinds of companies to actually make it work when the platforms themselves say, we want that business because there's so much revenue there. The fact that Cursor has 500 million, Windsurf got to 100, I think, more or less, and 75 here for lovable. The fact that these are high growth categories, it's kind of like, hmm, what's another high growth category that people said, you know what?

50:05We need to have this as part of our offering and bundle it. The example would be Slack. Microsoft said, it's got to be part of Office. It's too key. And Zoom is the other example. So they were like, we have to have Google Meet as part of the Google Suite. We have to have Microsoft Teams, which is what they call their video product. And what they call their Slack competitor is still Teams. It's one combined package that everyone hates. Yes. Yeah. I mean, it's just that Zoom is so flawless. It just shows you what a single, and then you look at Zoom Slack offering, it's so bad. I'm just like, it's so interesting focus as a founder.

50:49So if you look even at this day and era, this era, Slack has still carved a niche and Zoom has still carved an independent niche. Slack has huddles, which I'll use once in a while. And Zoom has a Slack competitor built into it, But they just can't seem to chew gum and walk at the same time, these two companies, and take each other's markets. But Office does seem to be able to extend, which would mean, if that trend continues, that a best of breed can coexist. So Cursor can coexist. Lovable can coexist. It's just going to be hard. And it's going to be such a headwind that Slack could not remain an independent company, right?

51:32I think Slack could have. I just think Brett Taylor won. Yeah. But I think, you know, Mark Benioff talks, he's very persuasive and he has a lot of money and they gave him a lot of cash for it. On the Zoom point, I just want to point out that Eric Yuan, the founder of Zoom, the CEO and a person that I've had dinner with and quite like, he was at WebEx, which got bought by Cisco and he was there for a while. Then he left to go build Zoom. So his background professionally is I make online video communication work. And that's probably why he's so good at it and not as good at taking on Slack. But I like that they're distinct because I have a best of breed in both things.

52:07I don't need my lawnmower to also be a blender, you know? So I'm fine with that. So both things can exist. It's just the headwinds will be severe. You're going to have to be, as we talked about on a product basis, all these things come down to how lightning focus can you be on the product? So when you see me obsessing about the product that is this week in startups, it's because I know you cannot survive if you're not paranoid and you keep making your product better, which is why I was like, I want to have three interviews and I want to know how big these things are. I want the Twist 500. I'm always obsessing about product because I know the audience is going to be looking at other products and saying, oh, are there other options for my attention and my time and my money?

52:47So if there's any lesson here for founders, be paranoid and obsessive about product. Everybody was thinking, oh, Grok is toast. They're falling behind. Elon's in Washington, DC. And then I watched him. I watched it because as I said here, I went up and spent a little time with him and I watched him get laser focused again. And then they drop Grok 4 and they leapfrog everybody and take the pole position again. That's just the nature of certain individuals can get so locked into product, it's so inspiring. When you're feeling scared, when you're feeling fear, when you have anxiety, you're falling behind, it's a very simple thing for founders to do.

53:28Lock into product, just get locked in, obsess over it. Do not stop thinking about it. Do not stop having meetings. Do not stop arguing, fighting, hand wringing. And all of a sudden what comes out the other side is something that delights a customer. It's not that complicated, folks. Substack, people thought that product was never going to work or whatever. And then I watched them. They launched that notes feature, that community feature, the video feature, Beehive, the same thing. They keep launching new features. And then Patreon doesn't launch new features. And now I'm like, Patreon's the afterthought to those two others when they were the original.

54:04And that's the fault of the product team over there of not being laser focused or at least not capturing our attention with really unique, cool features. The fact that I can go live in the Substack app right now, I'm like, oh, that's kind of interesting. I thought it was a newsletter app. Hmm, okay, got my mind just thinking about the product. So what are you doing to get people thinking about your product and believing that this is a product worth investing time in because the product team is investing time in it? People can laugh about this new Ani. I don't know if you played with Ani, the anime assistant inside of Grok.

54:42I don't have, I have the cheaper version of Twitter. I don't have the super. So anyway, there's this new avatar, Ani, you can pull her up. It's a Japanese anime, you know, in a, you know, like anime outfit. And she talks to you and it's going to be the interface, I think, for a lot of people's AI. It's an interesting experiment. It's not for me. You know, I'm a Claude, Deep Research Gemini, Comet. you know like i like the deep anime i don't like the anime assistant but i could see you know a lot of people liking to have a celebrity her scarlett johansson that's why sam altman went after scarjo to get her voice for uh opening eye and i mean what a dumb decision on both of their parts they should have come to terms scarjo should have asked for one percent of the value of opening i shares i bet you she would have gotten it man that would be because at the time i think the $30 billion.

55:41And I think she could have negotiated 1 % of that 300 million, which would be worth 3.5 billion. She'd be a billionaire just by licensing her voice. I'm telling you right now, Grok, Claude, anybody out there, give ScarJo 1 % of their company, she will make the company worth more than 1 % as the licensed voice and likeness. And ScarJo, you'll make more from that one deal than you would make from every movie you ever made times 10. So if she's getting paid 20, million for a Marvel movie, and they're not making any more Black Widow ones or Jurassic Park. I'm sure her ticket price is, what, 10, 20 million?

56:16You can look it up on Producer Claude. Man, she can make back. But here it is, Grok. And they're coming out with like, they've got two of them now. They've got a male one coming. These companions are an interesting modality that I think, not for me, but maybe they got 10 % more people to use the product or try that feature, and maybe they're going to become addicted to it and like it. So that's, so I don't care about people making jokes. Honestly, Jason, it does not really bother me. I think people should have fun. And honestly, I think we're a little bit prudish as a society. So this is all fine with me.

56:51But you said the word that really catches me, which is addicted to. And, you know, we were talking about Jeff and talking about people getting caught. They call it chat GPT psychosis. People turning to these services. So that is a theory for Jeff is that he's got a chat GPT psychosis. Yeah. And so when I see this Grok tool, I'm just completely divided in my mind because on one hand, it's harmless. Go have fun. On the other hand, some people who are less well-adjusted right now might become even more invested in AI friendships and AI models are not humans. They do not respond the way humans do.

57:29They are often a bit sycophantic and can kind of feed into what you're saying. And so I wonder if stuff like this in general, not pointing fingers at any one company, but could lead to more problems in that way. And it will lose some people. Guaranteed. I mean, but kids became obsessive with their Dungeons and Dragons character with TikTok. Kids are going to get obsessed or even adults who maybe have a vacuum in their life. They will get obsessed. And then the pendulum will swing the other way. right now, like the biggest trends, you know, in the world are people going back to doing things in person.

58:05So every time people get too addicted, it swings back the other way. I remember my friend created meetup.com, Scott Heiferman. And man, people were so addicted to online, their email, their Facebook, and he created this online to offline. And people became obsessive about that. I was obsessively going to bulldog meetups. There was a bulldog meetup in LA. And my wife and I, before we had kids, would take Toro, rest in peace, my beautiful first bulldog, to all of these things. Man, when you come up a hill and you see 30 bulldogs playing and you take your bulldog off leash and there's 29 other bulldogs there, it is like the greatest thing.

58:44So, yes, people become addicted to this. Society will create some ground rules on it. and then people have to become mature enough to understand you can become addicted to alcohol you can become addicted to out uh these pouches that uh these nicotine pouches i like use the promo code jacal it's always right by your computer every time you bring it up i'm always like how does he have it there that i realize you're just taking them all the time uh i don't i take them like maybe once every other day when i need a little pick-me-up and i want to get off caffeine i realize i'm taking a toxic amount of caffeine some days i was talking Speaking of - Toxic caffeine?

59:18No. Well, it turns out the sixth cup, you're starting to get into toxicity, I think. And so I was, I got to be honest with myself, maybe it's my ADHD and I don't take Adderall or anything. You know, a fifth and sixth cup is almost assured in the afternoon for me. And I'm three, four cups in by noon. Oh, yeah. So I am trying to stop caffeine at 1 p.m. That's my new thing. I did it yesterday. I'm going to do it today. and then what I decided was I'm going to pop an Alp in the afternoon instead to give my little pick-me-up. All right, listen, great show. I think we got enough show here for everybody.

59:55We didn't do the Uber mega move. There is so much more on the show today. Like this news cycle is nuts. Just to tell people what else we had, the Hadrian round, 260 million, precision manufacturing in the US. The house passed three crypto bills. Okay, I talk about that, by the way, on All In, so you can get that over at All In on the weekend with David Sachs who came on the show. open ai dropped chat gpt agent which brings together chat gpt operator and uh it's deep research product super cool trump wants to regulate ai via an executive order that's a bad idea that's not gonna happen we have some uh notes on the meta team jason that we've pulled together oliver and i worked on that we're gonna save that for the next time we're together because that's a lot of information um and then also uber is teaming up with both neuro and lucid motors to bring 20 50 ,000 cars to market starting next year.

1:00:44And I even did the math, Jason, of how many rides per day out of Uber's total ride share volume. Oh yeah, what would that be? So if you had 20 ,000, yeah, take me through your math and pull it up on screen here. All right. So I'll just walk everyone through the little back of the envelope we did for the show. And you can get the docket and follow along to all this great math we do thisweekinstartups.com slash docket. So here's my thinking, 20 ,000 cars, and they say over six years, let's just say 20K all at once for the sake of math. 75 % uptime, that leaves 25 % for charging, cleaning, repair, all that good stuff.

1:01:17Let's presume a 15 minute ride and a 25 % idle time in between rides. So three rides per hour. That works out to about 56 rides per car per day, 20 ,000 cars, that's about 1.1 million rides per day that they could do at full capacity. It works out to about 101 million per quarter. and that, Jason, is 3.3 % of Uber's Q1 ride volume. So if they get all these cars out right away and they were all working and all at max capacity, it's a dusting of market share. And this underscores your point you've made, God, I don't know, five times on the show that we're going to need a lot of cars. And this is a little bit off.

1:01:55My understanding is 40 rides a day is what to expect. So two rides an hour, you are correct, 20 hours a day. You got to take them off the road for a couple hours, clean them up, whatever. Um, so it's probably more like 40 rides a day is the more realistic expectation, but you're in the ballpark here. Um, the thing that's interesting about this is Uber put$300 million into Lucid, 300 million or in some amount into Nuro. Nuro has very good self-driving, but they don't make cars. It's going to be built into the Lucids. Lucids is owned by 53 % by the public investment fund, the PIF from Saudi Arabia.

1:02:35Saudis own 53 % of that company, Lucid. It makes a really great car that has competed with Teslas and other EVs. I was looking at a car driver's review of their SUV. So it's right up there. But let's face it, there are 20 incredible EVs right now. Tesla has the top four or five. but you have Lucid, Rivian, and the Volkswagen ID Buzz and their series, BMW series. So let's just say that EVs have been commoditized and the only thing is self-driving, which I think is the case. EVs are commoditized. Everybody makes a great one now. Mission accomplished for Tesla. They wanted to get more people making EVs.

1:03:19They did it. So then you're really just down to the driver software. NeuroDriver, Volkswagen Driver, Uber driver, Waymo driver, WeRide and Pony, they're all in the same zone of excellence. So then it becomes who can deploy these and understand the local market and the nuances of each one the quickest. In other words, who can roll it out per city the fastest? What people have learned is when Uber and Waymo, when Waymo went into the Uber network, their deployment curve, and I think you had this in a previous docket, but we didn't get to it. The deployment curve, the altimeter guy who looks at these, Atlanta and Austin, Waymo using Uber, it grew 50 % faster or even double in those markets by just being included in the Uber network.

1:04:12which means if you're in the Uber network, you're going to deploy faster than anybody, which means Uber is going to have 10 partners. I think they'll probably have 20 partners globally. And in any given city, three or four of those will be available inside of the Uber app. Is this the chart that you want to choose from? Yeah, that's the chart. So if you look at this chart, there's some blips there. With that green, by the way, is I think when the Los Angeles riots happened recently with the immigration ice raids, the same thing in San Francisco, and they had to take their cars off the market because they were being burned.

1:04:52But if you look at the ATX and the Atlantic curves, those are the ones to watch how quickly they're being deployed. And the deployment when you're when you're part of the Uber network is going to be much faster, which argues that Uber will be a neutral player for 20 different AV companies to either participate in or not. And I think 19 of the 20 will participate and one won't, which would be Tesla won't participate, everybody else will. And all this is going to do is take, we're looking at the percentage of rides here. I think the percentage of young people who don't get driver's licenses to look at.

1:05:35I was talking to somebody who, in my friend's circle, and they are having a hard time convincing their 15, 16, and 17-year-olds to go get driver's license. If you talk to any parent today, they're trying to get their kids to get a driver's license. The kids have no interest in a driver's license. That's really weird. Parenting has changed, Jason. The first time I could get in a car and drive away from my parents, I was like, get me out of here. Kids want to be on their phones in an Uber. Uber has teen. Waymo launched a teen version, which means your parents pay the bill and can see where you are at all times.

1:06:15So the nanny state, the helicopter parenting, safety of kids, that's very attractive to parents. I can't say I, you know, as much as I'd like to say I want to raise free range kids, I want to know where my daughters are and that they got home safe from the concert. While I want them to be able to go to the concert and have a little bit of freedom, I would like to know that they safely got home and know that, you know, the car's picking them up. So what everybody's looking at, Waymo versus Tesla versus Uber versus Lyft, that is not, they're totally missing the big picture. The big picture is 1 % ride sharing growing to 50 % ride sharing in a generation.

1:06:56Nobody's going to own their cars. Nobody's going to have driver's licenses. The idea of going and getting a driver's license would be the equivalent of getting your horseback riding certification. Pick a certification that's completely unnecessary now. That's what we're seeing here. It's a minimum of 20 ,000 cars. The thing people don't know is the PIF is one of the largest shareholders of Uber. I'm absolutely not shocked that those two companies have an agreement because why else would you pick Lucid? You could have picked a helicopter. Well, and they're not picking just one. Uber is going to buy as many of these cars and give them to their...

1:07:39Uber may or may not maintain these. They're going to give them to fleet managers because Uber, also people don't know they have fleet management software. So Uber would much rather have a fleet manager manage these 500 cars in Austin, 500 cars in Atlanta, 500 cars wherever, and then the fleet manager keeps the tire pressure, cleans the vomit. But Uber will do it if they need to. So I think what we're going to see here is Lucid, Nuro, merger, Volkswagen, Uber, merger, Uber, Tesla, merger. The consolidation in five years. Everybody right now sees all these different players in Fragmented. I've watched this movie so many times in my life, Alex.

1:08:23When it's this fragmented and the prize is 50 times the collective market cap in 10 or 20 years, maybe 20 years, 50 times, 50X in 20 years, usually you would double twice. So you'd be four times bigger. This will be 10 times bigger than the normal growth rate. So just let it sink in, folks. We're going to be sitting here in 20 years and 50 % of rides will be in an autonomous vehicle, not owned by the driver. All right. So just to put this into perspective and why Jason's not talking absolute nonsense here, because you're thinking these are big companies. How can they just buy one another? Well, let's just take Waymo, for example.

1:09:01Let's say Waymo went to buy, I don't know, Chrysler. They work with Chrysler on their minivans for their self-driving cars. Chrysler is part of Stellantis. Stellantis is worth$23 billion total. Uber's worth$200 billion. Even like Lyft, which is roadkill at this point, is worth$10 billion,$15 billion, I think. Less, but that's... Okay,$5-10 billion. My point is Alphabet's worth trillions. And so these car companies - And the Waymo unit, I understand, is worth 30 or 50 billion in the last valuation. That sounds about right. For an unprofitable company with but 2 ,000 cars on the road. So I think Tesla becomes, I think it's a two horse race right now.

1:09:39Okay. Tesla and Uber plus Waymo. Waymo plus Uber. I think Waymo and Uber are gonna merge. And much rather see my two favorite companies, Tesla and Uber merge, but Elon said he doesn't need to buy Uber, which it makes sense. I don't think he has to buy it, but if he did buy it, that would be$1.2 trillion in market cap. If Tesla and Uber were the same company right now, do you know what people would think who was going to win the gold and the silver and the bronze medal? It would be those two companies. They would win it all. They would run the table. So if Waymo, Volkswagen, and Uber were to combine, Volkswagen is the second largest auto manufacturer in the world.

1:10:30I think that's what's going to happen. And it's worth 46 billion euro. These companies are so cheap. Well, they're low margin businesses, and nobody wants to buy cars anymore. And they're hypercyclical. Yeah, and if you're wondering why there's so many cars, there was this incredible race to innovate in car technology that inspired everybody. Tesla did that. So now everybody has been inspired by Tesla. So now there's a lot of really great cars. I go on car and driver. I'm like, oh, I want an ID Buzz. I want a Corvette E-Ray. I want the new Tesla. I bought the new Model Y. Now there's going to be a YL.

1:11:04So I'm going to trade that in and get the YL at some point. I wouldn't have a third row. Long story short, 50 % of rides, 1 % rides Cherry now will be 50 % within 20 years. Model that out and then model out of the top five players right now, how they divvy that up. And then five new entrants, it's going to be incredible for humanity. And I think the PIF might be a little tired of running Lucid because they're doing a 10-1 stock merger. Reverse split? Reverse split. Yeah. Thank you. Because their shares got to$2 and most large funds, like hedge funds or whatever, or some of these, I understand they can't buy stocks under$5.

1:11:56At under$1, you get delisted. So they're going to do this reverse stock split. The stock will go from whatever it is now to 10 times. What is Lucid Trading at now? Five bucks, four bucks? $3.06. And that's - So it'll be a$30 share. Yeah, it went up 50 % with this announcement. Because they only make right now, I think 3 ,000 cars a quarter. They're expensive cars. They don't have an entry level car. It's a luxury car. It's 60, 200. Delivered 3 ,109 in Q1. That was up 58 % year over year. Revenue of about 235 million in the first quarter. Yeah. It's going to be awesome, folks. I mean, they're figuring this out.

1:12:34The other big news was the expanded territory in Austin of Waymo and Uber and Tesla. They both expanded their territory massively. And, you know, listen, Tesla's got the safety driver. It's the right decision. They should keep the safety monitor rather, not driver. They should keep that until, as I've said, 10 ,000 rides, whatever it is, 100 ,000 rides in the city, and then start taking them out. There's no reason, there's no shame in the safety driver game. Great episode. We'll see you all on Monday with three great companies and how much revenue they'll have in 10 years. Brought to you by Alex Wilhelm.

1:13:13He's x.com slash Alex. I'm x.com slash Jason. This week in startups.com slash Docket to get all this great research, the stories we didn't do, and we'll see you all next time. Bye-bye.