M&A Mania, Palantir Meme Crash + Office Hours with Hookhub | E2105

31:31We want to make it super simple for founders and startup operators to manage all sort of ownership and equity in the company and essentially prepare to raise. We want to make sure that everybody goes into these fundraising conversations well prepared, they're ready to share their cap table, and that they're ready to go through due diligence as they're trying to close their round. So from a product perspective, that is where we're laser focused. And that product is really well built, really strong attention to detail in the way that Fidelity is known and beloved for. So if you want an all-in-one equity management platform, Fidelity Private Shares, they've got you covered.

32:09Visit fidelityprivateshares.com. That's one word, no spaces, no dashes. Fidelityprivateshares.com. And hey, mention This Week in Startups. They'll give you 20 % off your first year subscription. Once again, fidelityprivateshares.com and tell them that you heard about it here on This Week in Startups. I have actually a slightly more generous take now on crypto people. And it's because I've been playing a little bit more poker lately than I had been before. And I just realized that the crypto crowd is just the poker community with a keyboard. i mean there's something to that yeah well there's a lot of that there's a lot of people in it who are actually anarchists there are people in it who are libertarians there are people in it who believe like you know the the state shouldn't be involved in currency they don't believe there should be speed limits you know all this kind of stuff so and then there's the big cleanup so i think what's happening in crypto is the big cleanup and circle going public will be part of the big cleanup where it's like we're going to replace the players who are below board or who aren't doing the proper dotting the t's and crossing the t's and dotting the i's we're just going to replace those folks over time in this administration with people who are above board and so that's the opportunity is to be an above board player and it's going to increase people buying treasuries which is one of the things this administration has a concern about so stable coins i think tether is one of the largest buyers of treasuries right now.

33:35If that was a house of cards, let's say like there's a 1 % chance that tethered truthers are correct or a 0.1 % chance. You know, it's like pull a card out of a deck and let's see if this thing crashes or has problems. What would happen to one of the large buyers of treasuries? Well, it dries up, but also they dump. And so there's a flooding of the market and that breaks the supply demand balance and then lowers prices. uh jason just to kind of back up what you said in its 2024 kind of report if you will tether said that it had 13 billion dollars in profits i mean that's unbelievable that is a staggering amount of money i i hope by the way that all the concerns are overblown i agree with you on the need to be regulated but holy crap that's a profitable business you want to kill tether you want to just totally annihilate the company in 10 seconds very simple circle says if you own usdc you get 80 of the interest that we get passed through so basically every year for every x number of circles you have we'll issue you another one because of the interest yeah and we'll take 20 of that so if we're making five percent we'll take a point you take four that's the end of tether boom and you know what if you're second to tether in the market right now, why wouldn't you do something aggressive like that?

35:01It's kind of like Robinhood. If you move your money into Robinhood, they give you this incredible bonus. You have to keep it there for a couple of years. Maybe you have to keep it for three, four, five years, but they'll give you some 2%, 3 % bonus for moving your money from, I don't know, Goldman, Morgan, Fidelity, wherever to them. That's kind of interesting and aggressive. And those kinds of things have always existed, but it doesn't exist in stable coins. It's kind of nuts that people use these stable coins and don't get the interest on their money. So somebody out there will launch somebody out there should launch a stable coin that distributes the money to the people who own it minus a VIG, a reasonable VIG.

35:39There are crypto rewards and I know there's some nuance here with Coinbase that I'm sure that I've forgotten the details of, but no one's being that aggressive. I do think though that as Circle tries to go public, it's probably not going to be working on new ways to give away 80 % of its revenue. But if I was someone who wanted to take down Signal and Tether sorry, Circle and Tether, my bad then I think that would be a great way to go about it. I will say it's going to be one hell of an IPO. Let's go. Isn't it good to be excited again about debuts, Jason? That's great. The thing I would encourage everybody to look at is also anti-money laundering and terrorism, human trafficking.

36:14Those three should be looked at deeply with any offshore stablecoins. If they don't have those, and I think the thing about this Genius Act, really great name. um you know i love the way they name these things um i would say we should have incredibly high requirements around anti-terrorism money laundering human trafficking if you get caught with your stable coin not doing kyc not having really tight controls i think you should be banned so i think tether if the goj and some of the investigations are in fact correct i think they would be banned day one not allowed day one and i think that would be the right decision for this administration to make i'll make a prediction i think this administration is going to have to make a difficult decision here because howard lutnik is involved with tether yep world liberty financial is onshore circle is onshore we've got a lot of people here who are in and around this administration and family who have exposure to stable coins.

37:22And then you have this genius act. Who's putting the genius act up? Mr. Haggerty and Mr. Scott of South Carolina on the Senate, and then also Gillibrand and Lummis. So four senators, two from each side of the aisle. So let's see. Let's see what their donations are, how they're conflicted, where this is all coming from. So I think we'll maybe put that on the docket for Wednesdays to double click on all this. All right. Elsewhere in IPO land, just very briefly for everyone out there who cares about equities. Jason Cerebus Systems, the maker of massive chips for AI inference associated with G42 and that AI push in the Middle East, has tinkered with its IPO.

37:58Now the G42 company is going to purchase stock in it that will not have votes, and therefore it's not going to run afoul of the Committee on Foreign Investment in the US. And reporting says that the IPO is going to go ahead. Love to hear that. CoreWeave went public last Friday. We talked about it live on the show. How did it do? Well, it was about flat on its first day and right as we were starting this show it was down about 8.8 percent and it's now down 9.5 so the stock market is selling off today but a pretty crappy day for core weave uh to endure so that's not so good it means that they top ticked their sale remember when they sell their shares you want to get the highest price possible having a bump on your ipo might feel good uh emotionally but if it's terrible for shareholders if the stock were to double on the first day.

38:46It means you sold a bunch of shares at half off. Here, they sold their shares at a 10 % premium. So good for them. They got 10 % more than the shares are fair market value. So the shareholders now have to make up that 10%, but they get to deploy that capital and do interesting things with it. And then they got a free 10 cents on the dollar. Yeah, they're going to pay off some of their debt. They're going to keep investing and growing. I don't think it's the end of the world when a company's IPO doesn't go quite as planned. But we do hear a lot about people leaving money on the table. Well, here's the opposite.

39:16They stole the table when they went public. Good for them. Finally, eToro, don't forget, has filed to go public. StubHub has filed to go public. And if you care about niche media in the United States, Newsmax went out with a reg A plus listing, which is very interesting. I just got to look into this a little bit, Jason. Clearly going public on the back of an election cycle, which is good for politically tinged news. But always fun to see more companies getting out. We love seeing more total public companies so that is the rundown there reggae is basically you can offer up to 75 million it's incredibly expensive if you don't hit tens of millions of dollars because you have to start filing and do a little bit more reporting so generally it works for people who have a good relationship with the with their customer base and their customer base wants to invest in it uh reggae is it's kind of needs it's one of these things that if we could allow an accreditation test you wouldn't need reggae uh and so it's it's kind of like gosh how do i say it it's kind of like split the baby between public offerings and private offerings and it just doesn't work as smoothly as it should i mean i feel like that's also true about specs and so my my immediate vibe when I saw this was, because it just seems like kicking open the back door to go around to the front of the building.

40:40It feels like an unnecessary complication on a thing that already works for companies that are mature and ready to go public. I've always felt like SPACs, and I said this at the time because a couple of my friends, a lot of my friends were doing them. And I always felt like those were dipping down into being an aggressive VC betting on crazy things. And if you're a VC and you're betting on crazy things, you're expecting 60, 70 % to go to zero. We're not return capital. And you're expecting your returns to be in the one in 10. So if you were to look at SPACs through the lens of a venture capitalist, if one in 10 performs greater than 10x over some period of time, it was worth doing.

41:19If they don't, and you're buying only one or two SPACs as a retail investor, that's the problem. You know, like Joby is this flying car company. And I, you know, some of my friends were investors in it, like Sky Dayton, et cetera. Always had an affinity for that company. One of our companies, Desktop Metal, went public 3D printing. It was, Desktop Metal was worth over a billion dollars in private markets. It's worth 150 or 250 million. 164. Yeah. It's like, it's worth 85 % less. Joby would be worth 10, 20, maybe worth 20 billion as a private company. I don't know what it's worth as a... 4.7. So it's also 75 % off.

41:58The public markets don't know how to do deep tech, crazy Hail Mary, you know, binary outcomes. And I think that's the lesson of SPACs, is retail investors are looking at quarterly reports. They're not taking a five-year view of these things of what if it works. I also think didn't one of the, I think a couple of actually, maybe more than one of the quantum computing startups went public. So you start going public with flying cars, space tourism, 3D printing and quantum computing this is like high risk investing folks those are the things that SPAC and I think the people who took them out I mean I think the CEOs of those companies are probably sitting there going you know maybe should have been private maybe should have stayed private Quantum SI I believe went out with a SPAC and it's currently worth$220 and it's worth$1.20 shared down from an all time high of over$20 so another similar kind of story 95 % off.

42:55Yeah. Or 95 % off the P. And that's the other problem is people go, oh, quantum computing. I'll give it a premium. This is the naivete of a retail investor. I'm super realistic. Nine out of 10 companies go to zero. Doesn't change my pulse. I go to those founders. Didn't work out. What do you got next? Because I know that every 100 companies or so, I'm going to hit a robin hood or a you know a calm or a grin or some company that's going to pay off 50 100 200 to one and then you know what if i hit an uber and it does 5 000 to one what if i hit a robin and it does three four five hundred to one you you can really make up for a lot of zeros the the retail investors started to think well of course it's going to be worth a hundred times this because it's deep tech.

43:48What they didn't realize is one out of a hundred of them might become worth a thousand X or 500 X. Sure. That's possible. Maybe it's even probable, but you only made one bet or you made three bets. You don't have enough surface area to hit one. This, I mean, accredited investors, sophisticated folks, let them play, keep the people who don't know what they're doing out. You and I are on the same page here. Just a little bit frustrating to see history constantly repeating itself. Jason, I want to move on to a segment that i'm very excited about because we have a guest dropping in today so today for office hours we are going to meet with hayley harrington from hook hub they are building the airbnb for rv parking yes you can find them at hook hub.co on instagram at hook hub rv or over on x at hook hub underscore rv uh please welcome to the program it's kaylee kaylee how you doing i'm great yeah it's good to see you again uh so you went through the launch accelerator uh which cohort?

44:4433, the most recent. The most recent one. And before that, did you happen to do Founder University or did you come directly? Nope, I did the university right before that. Awesome. And we invested in you, obviously, for the accelerator. I'm not sure if we did the Founder University 25k bet, did we? Not at the university, but the accelerator, yes. Did you ask us for that bet? Did you request it and we said no? Or did we offer it and you said no? I'm just curious. No, I actually didn't know it was an option for the university. So this is, Alex, the thing we're doing is sometimes we meet people who are pre-incorporation or they're just figuring it out.

45:19And so you are Airbnb for, explain the pitch. Absolutely. Yes. I'm the founder of Hook Hub. We are Airbnb for parking your RV. So we're a marketplace where you rent out unused land space for RV parking. Got it. So if I happen to have some land in the hill country in Austin, and I had a couple of spare acres, people could come and park their RV there and I could charge them for doing so. Is this for people who want to live in the RV there or store the RV or both? Both. Yeah. That's what we're all about is every form of RV parking. Got it. And what are people's current choices to park their RVs?

45:56So for short term, there are a couple apps, just vacation and there's RV parks. But for long term, there is no apps right now. So pretty much people are going on Google calling RV parks. that's the option and uh this doesn't exist on something like airbnb they don't offer airbnb uh parking on airbnb no got it so you have to build up supply and you have to build up demand there are rv parks there must be marketplaces or directories of rv parks no there is yeah there's apps out there where you can just you know find locations of rv parks got it so what you provide is another option. I can see here it's 60 bucks a night to park an RV.

46:38Is that about right? Is that the average price in America? What's the average price in America to park your RV? Yeah, so actually depends on area. It can range from 20 or 40 bucks a night up to 150. We do have lower rates when they stay longer. But yeah, just nightly tends to be higher. Does it need to have electrical hookups? Does it need to have internet? Does it need to have water hookups? How does all that work? So that's optional. The host can list with no hookups and get bookings. Of course, if you offer those, you can charge quite a bit more. So let me just back into the math here. If you were living the RV lifestyle and you needed a place to park in America for a month, you would be what's the average monthly?

47:15About$750 would be average. Yeah, that's pretty dope. If you think about it, Alex, from a the perspective of like somebody who doesn't have a home, they live in their mobile home for$10 ,000 a year. They can basically park all around the country. What a national parks charge for your RV parking. I'm curious. Oh, I haven't looked lately. Some of the rates are getting really high. If you're just doing nightly, there's like 100 plus. Really? So several times as much. Yeah. Yes. So you could be spending$3 ,000 a month if you're parking in premium places. Oh, yeah. So it's not necessarily if people are thinking about van life, which is another wrinkle to all of this.

47:56There's a new category van life that I want to get into because I'm always following trends. I'm like a trend guy. And van life is different than RV life. RV life, a lot of boomers, they're retired. They decide, hey, I'm going to go out for three months a year. and instead of staying in hotels i like to have my stuff and i think a lot of it is socialization you get to meet people other retirees and you can go to cool places and it's kind of like um i don't know the it's kind of like a harley davidson yeah kind of like americana you know being on the road thing i kind of dig that but tell me is van life playing any role here yet because that seems to be young people who are white collar workers digital workers knowledge workers who want to have their cake and eat it too.

48:43They want to have the beautiful retirement, but they might be on like a fire, financial independence, retire early kind of hybrid. So that's another trend Alex and I have been tracking. So how does van life play into any of this, if at all? Oh, it definitely does. Shockingly, it's almost half of the RVers now are the younger generation. They're the 35 to 54 year old remote workers. So yeah, Yeah, it's every year it's getting larger for the younger generation. And tell me about that cohort. Does that mean like the entire space has doubled or you're just getting a greater percentage of them? And how many people in the United States, let's say, are living this lifestyle?

49:24I don't know, half of the time or more. So it's 1.2 million Americans are living full time. There is more when you consider the snowbirds, you know, doing the six month thing. So the 1.2 million is just the 100 % of the timers. And so each year we are seeing growth still just overall in the RV market, more people switching to that life for all ages. But we are seeing the percentages based on age groups is shifting more and more to the younger. So it's the opposite of the Harley Davidson problem. When their average customer gets a half year older every year, you're going the other direction. Right.

49:57Jason, just to underscore the thing you're talking about, in 2024, there were 310 ,000 RV wholesale shipments up 6.5 % from 23. So even in a post-COVID world, we're still seeing this track up over time. So it seems pretty bullish as an overall just market to sell into, Kaylee. Yes. So how is the business going? How is fundraising gone? and any challenges you're having. You're an early stage startup here. Maybe, how's it going? How's the traction? Where are you strong? Where do you need help? Yeah, traction's good. So that's good. We keep going up in the right, about 20 to 30 % growth each month.

50:36So things are looking good. Yeah, yeah, things are looking good. 20 % month over month growth is what we consider high growth. Yeah, that means you're doubling every three months, right? Yeah, rule is 72, yeah. Yeah, so that's been good. But still, we have a lot of challenges as a small startup. So fundraising has been difficult due to the fact that we're not in a sexy market. Everybody's looking at AI. We're in the RV industry. Most people in the VC world don't really understand that industry. Got it. Okay. So you have to educate them like we just did. Now, we're cool hunters here, Alex and I.

51:08So we understand van life and financial independence. And we're tracking this kind of stuff. So you have to educate VCs on the opportunity. but there are VCs who love a good marketplace. Yeah. Right. And have you been able to identify that subset and talk to them about, Hey, here's the, here's the vision and why this is worth the time is in amongst the people who understand marketplaces. What's their objection? Is their objection? They're unsure of the growth rate. They think it's a small tam. Well, tell me, let's double click into that group of that subcategory of VCs, the ones who get marketplaces like me.

51:44Yeah, no, you're exactly right. So we've talked to a couple marketplaces, investors, and they're excited by the idea, but it does come down to that. They don't understand the market still. They're unsure the growth potential. They've told us that blatantly. So I keep sending updates showing them, you know, the market. Well, you know, I think this is where maybe sharing the growth of the market and having a vibrant build in public or social media. So have you gotten to the point of having a really tight social media designed around van life designed around featuring your customers featuring your hosts yet?

52:21Because that would, for a lot of investors prove there's something there is, you know, tapping into the Reddit, the subreddits, tapping into the Instagram tag van life. If I were to pull up your Instagram right now, would you be ashamed or would you be proud? Both. I would be proud of the content, but I just started. I mean, very recent. So, and I'm also getting a consultant. I'm getting a call with later today and they're going to help with our two-year strategy. Okay. And I see you've got 600 followers there and you're just starting. I'm going to give you a piece of advice. I believe that if you, the founder of the company, can master TikTok, youtube shorts and instagram reels which is all the same thing if you can master it i think that you're going to solve maybe three or four problems all at once number one you're going to solve uh investors because they're going to go to your social media and they're going to start there and they're going to see oh my god there's a there there there are people interacting here.

53:29Number two, you're going to solve supply because people, if you start featuring your supply on your social media, will want to be featured. Number three, you're going to solve demand because people who are looking for supply are going to find it there, right? Right. And number four, you could solve for employees and team members who are, you know, the best team members for this startup are going to be people who love living in a van. So if you found a marketing person who's a social media marketer who would join your team, who lives in a van, you could probably hire them for$1 ,000 a week. Probably the expectation of a social media manager who knows how to edit short videos, who works remote might be 50 or 60 or 70 can.

54:22That's probably their expectation. And then if you told them, here's your job, I want you to go to each of our customers and take pictures of them and to go interview them and to make shorts out of them and then interview people who are also living the van lifestyle, their brains would explode. Now you've got somebody who's living van life who gets to have a job geeking out about van life. And that person's waiting for you at the van life tag on Instagram or TikTok, and they're already making these videos and when you come to them they're going to think hayley's an idiot she's going to pay me for what i'm already doing how do i know this because when i was running weblogs inc we hired a guy named ryan who was an incredible commenter and uh he would comment underneath peter rojas's ryan block would comment under peter rojas's uh posts and annoy him by fact checking him and he would write longer comments than peter rojas had written in the blog post so we said hey you're writing 12 comments a day how about we pay you 10 bucks to write you know five posts a day he was like are you an idiot and i met another kid who was doing apple blogs at the time blogging was not a paid pursuit we did the same thing with him and we created a blog called wa the unofficial apple web blog t u a w and we got twa.com it was like a phenomenon for three or four years it was very popular blog and again somebody was writing about it on their tumblr and we hired them and they were like jake house an idiot and at that time we offered 250 a month to do 100 posts oh wow uh so it was three posts a day this was our first deal because people were doing it for free and people in fairness people were writing three sentence blog posts.

56:12You know, here's a cool video of somebody, you know, me doing something with their MacBook Pro. I think that if you had my money and you said, hey, JGal, could I spend it on this? I'd be like, I wonder if that would be the best use of proceeds, solving all those problems at once. Yeah, that's a great point. I've kind of, I've thought, I'd be honest, it's crossed my mind, but I've never just went all in on that. And I think it's time I just do that. Here's an experiment for you. Offer three different people you find, one on TikTok, one on Instagram, one on YouTube, $1 ,000 to do 10 videos over the next month and whichever one you like best.

56:50I love that. I'm going to do that. I'm going to keep you updated on how it goes. Well, I mean, then you're, but you have to learn these techniques as well. So you have to be watching van life and say, who does the best van life videos? I just found this over on Instagram. This is the current rundown of how popular the van life and van life associated tags are. Van life diaries, 2.8 million, hashtag van life, 17.8 million posts. I had no idea, Kaylee, that this was such a big deal. I thought this was just Jason and I dweebing out about not having to pay property tax anymore. Actually, and so that observation, Alex, very well done.

57:27The observation that you don't have to pay property tax, you should make, I kid you not, a post a week on that one topic. One of the things I learned about shorts is that you're not going after subscribers, you're going after the algorithm. So doing tax hacks, or property tax, now you can hijack property tax and tax optimization people. There's a whole expatriate thing and leaving America or leaving your country to go to the people who treat you best on a tax basis. That's a whole other genre. And so there was a concept called news hacking, which sometimes became distasteful. tasteful people would be like here's my sas product talking about i don't know russia's 9-11 russia's invasion of ukraine like you can do news hacking in a very dark bad way but there was news hacking of you know i am a security expert and andrew weiner's phone got hacked boom the day that hack happens we're sending a short article with five bullet points to a hundred journalists, Alex and I would get those.

58:32What we're doing here is trend hacking. We're doing tag hacking. And the tag hacking and trend hacking, you know, subreddit hacking is a very powerful pursuit. I wish you great luck with that. Any other problems or challenges I can help you with today? Well, that was wonderful. But we are wondering too, should I focus more on adding features for the user base? Or should I focus more on adding team members focused on growth, kind of like you brought up. You're currently growing 20 % month over month, which means you have product market fit. And you apparently know how to find customers, right? So you could go crazy and try to grow 40 or 50 % a month.

59:13The only problem with that is you might not have the customer support, you might get a low NPS score, etc. And you're having a challenge with raising money. You know, not a challenge. It's, you know, it's, this is actually what you're experiencing is the normal process. How many investor pitches have you done? Not just pitching to the people we introduce you to in the accelerator, we introduce you to hundreds of investors, you get to pitch them. I'm talking about direct one on one zoom calls for 2030 minutes with an investor. How many of those have you done ballpark dozens? Four or five? Oh, four or five.

59:45Okay, great. So I want you to add a zero to that and report back. So that would be the much better thing is to take this segment, share it with people. Hey, I was just on, you know, uh, this weekend startups with Alex and Jason. Here's the clip. Here's the deep link. Uh, we talked about a lot of the issues. I was wondering, you're a marketplace investor. If I could talk to you about my business and get some great advice from you, we're growing 20 % a month. So I don't want you to give your life stories to them. I was on this weekend. We're, we're a startup. We're a marketplace. I know you're a marketplace investor in these three other marketplaces.

1:00:15We're growing 20 % a month. We're dealing with a lot of challenges because of that growth. Here's a link to me on with J Cal and Alex would love to get 20 minutes to get some advice from you about marketplaces. So you're not asking for investment. You're just asking for advice. And you're sharing two bullet points, two main points. And you're going to try to say it in as short, as least words as possible. Number one, we're growing 20 % a month. We're growing 20 % a month, a month, five words. I was just on twist with J Cal and Alex, eight words. So you have two sentences, one's five words one's eight words and there's a link in each and then would love to get 20 minutes of your advice since you're an investor in a b and c that's another 10 words so we've kept the email to under 50 words we've done it in three bullet points then i want you to ping the person if they don't respond every 72 hours moving this up to the top of your list moving this up to the top of your list moving this up to your top of list okay on the fourth one i want to say um don't mean to be annoying i just really uh respect your track record in marketplaces and that'll be the last one you do the fourth one ping one ping two ping three and then the fourth one i want you to say sorry to be a bother uh just i really could use your counsel since you uh have done so much great work in marketplaces is there anybody else at your firm i could do a first call with and then we'll let it go for now every three days you're going to be annoying how uncomfortable do you feel about those four follow-up emails i don't mean i didn't realize the follow-up that often i i like wait like a week and a half i had no idea i want you to create a sense of urgency so i want you to create 20 targets i want you to send 20 emails and i want you to follow up on them with a personalized follow-up jason moving to the top of your inbox enjoyed you on uh this other 20 minute vc podcast so you're kind of showing it's personalized it's not like a thing any chance I could get 15 minutes of your time from 6 a.m.

1:02:14to midnight, any day of the week, Saturday and Sunday included, right? You're kind of, what you want to do is show that you're not, you're going to be relentless. And you know what? Relentless founders is what we like to invest in. So some, there's some VCs who are like, yeah, I'll respond if they ping me two or three times, or they go through somebody who knows me. So that would be, but I think you've got a great growth rate. I think mastering the social media piece with people, because how many people full time in the company now two three two full time perfect the third person if they were somebody living van life would serve as a proof point you could have them get on the phone with investors they would serve as a ambassador they would serve as an sdr sales development rep they could warm up leads they could be a customer success because they visit somebody man if you were like the more I think about this idea of tapping a van life couple or an individual, and it has to be somebody who's an extrovert.

1:03:12So somebody like Presh, who worked for me, who I don't know if he's an extrovert actually, but he plays an extrovert on social media. He's out there building his products in person. He's going for runs, videotaking himself, sharing his friends. You need somebody high energy like that. They might skew younger, but they don't necessarily. So they just have to skew that they're already doing the job. Paying somebody to do a job they're not doing already is hard. You're kind of pulling teeth. When I hired Alex, he was already doing podcasts and writing and geeking out about S1s. I didn't have to be like, Alex, read this S1, read this 10Q.

1:03:45He's like, I'm sorry, I can't talk right now. I'm reading a 10Q. That's why I'm still at dinner parties. Or maybe he doesn't get invited to that. I don't know. It could be either. I want to jump in here though, Jason. this employee, this number three, this van life, SDR, ambassador, content creator, how much equity should a startup give to an early peak hire who's a non-founder? I think this comes up a lot. And while we're here, let's take a moment. You can give them a point if they stick around for four years. One point. That'd be generous. It'd be generous. You could be generous with the third employee.

1:04:21Now, if they were the CTO and they were joining and they had done two other marketplace startups, it probably asked for 5%, 10%. Oh, wow. If they were getting less than market salary. So let's say the CTO who worked at another marketplace, not Airbnb, obviously, but maybe they did work at Airbnb and were one of the first 50 employees. They made a little bit of money. They may not want a$150K,$250K salary as a CTO. They may want to take a$100K salary or a$5K a month draw, you know 60k a year they might want to invest 250k you know to own five percent of the company at a five million dollar valuation and get five percent equity you know over five years and get to like a 10 ownership position so that's what you're kind of dialing in here this person probably doesn't care about the equity i'll be totally honest if it's a van life person what and they're optimizing for fire they would look at the equity as icing on the cake so you could probably get away with 25 50 75 basis points or a point if they're savvy they might want two points and they could if they were like chief marketing officer cmo level alex to your point yeah a chief marketing officer might ask for two points three points four points um and then here's the great news they're on a one-year cliff hayley if they suck or if you suck conversely and they don't want to waste any more time because they don't think that you're going to make this happen and the equities and grits, they quit, you quit them.

1:05:54Or if you can't quit each other, that means something good's happened and they get that nice 20, 25 % of their equity on 12 months in one day. So we've built that protection into startups. It's called the cliff. And the cliff exists for a reason. I think this is fantastic. If you want to learn more, like I said, it's hookhub.co, launch accelerator class 33. Kaylee, thank you. Thank you, guys. It'll be interesting to see if in time then life becomes so big thanks to things like starlink and project kuiper and so forth that people do kind of do the mass airbnb strategy but for rv spaces i can see that becoming a small business anyways i think the company is great i'm curious about their splits though i didn't get a chance to ask that but i wonder if they have like airbnb level revenue splits with hosts we'll see over time all right so this is a clip from andrew reed he was on i believe it's the tech uh bros podcast.

1:06:44Oh yeah, Tech Bros. They're the ones who do the ESPN thing where they put the logos of the sponsors along the bottom. Yep. So here is Andrew Reid from Sequoia on the podcast talking about how the Sequoia partnership works and how founders interact with it and how they get sometimes surprised. Here we go. Well, I hear often like, oh, Sequoia, I've heard it's really tough internally, like really sharp elbowed. The stakes are really high. It's a small team. Expectations on performance are insane. It's a consensus investment process as well, where you don't need to just basically close you, you got to close, if you're an entrepreneur, you got to close all your partners, correct?

1:07:17Exactly. And the partner meeting, I've seen some founders really rise to the occasion in the Sequoia partner meeting room. I've seen people just totally wilt. It's actually an amazing culture inside the building. Because of that, I think because the expectations are so high, the team is so small, right? I think this is one of the things that Doug has this presentation, he calls it the laws of physics, where one of the laws of physics is that fund returns are inversely proportional to team size and also fund insurance inversely proportional to fund size. You know, we've been very disciplined about keeping the number of people on the team and keeping the funds to like a relatively stable size and then working together to kick ass.

1:07:58All right. Yeah, great clip. That rings true. Having pitched the Sequoia partnership, having them invest in one of my companies, you know, that I ran as CEO and spending time with them and um you know them being an lp in my funds uh and me being an lp in their funds i've got a great deep relationship with them it is true the two important points there that doug leone the goat uh points out if you have too many people fund returns go down if your fund size is too high fund returns go down sequoia is a large organization but they have a seed fund and you know like series a they have a growth fund they keep the teams small high expectation culture and i do remember at one point going into a sequoia and i was like hey where's blind and they're like oh yeah he wasn't invited back to the next fund which is how you get fired as a venture capitalist no you don't get fired you were not invited into the next fund so you nailed it it's like and you know that's it that's just the nature of the business is um you do get a lot of runway but then you might not be invited back to the next fund if you don't hit the notes that you need to hit.

1:09:08Yes. Now, Jason, on the pitching point of this, founders wilting, founders rising to the occasion, what does a Sequoia partner meeting feel like? It sounds like they're all there at once, and you're pitching literally all the partners for the fund that you're looking at. I would say big ear, small mouth is how I would describe pitching to them. They are not going to say a lot. You might get one or two questions from one or two people, and then they will follow up. And I think, you know, they are looking for a certain archetypal founder or founders. Now, a great market size, great early execution, track record, those things can play into, you know, any of this, you know, in terms of decision making.

1:09:48But, you know, they're looking for very specific, you know, Peter Thiel, Elon, Chad Hurley, the Max Levchin, go down the line of intense founders who are super driven, Reid Hoffman, I'm going through the logos in my mind, Steve Jobs, the Cisco founders back in the day. So they're looking for highly driven, tankerous, chip on their shoulder, hardcore founders. And I think because they have such a high number of people applying, that they probably are okay leaving some good investments to other firms and going for the great going for the larry and sergey uh drew from dropbox yeah they're looking for really hardcore folks and you know what hardcore folks also myself sam altman probably didn't get great returns for them but still hardcore folks who they identify who they know have a certain amount of pride and doggedness they don't expect every investment to work out but they do want you know Tony Shea in the building, you know, they're Alfred Lynn, you know, who's now a partner there, or Ruloff was on PayPal, they're looking for hard driving chip on the shoulder entrepreneurs.

1:11:03And so having a bit of a chip on your shoulder probably is an asset. Zuckerberg famously showed up to pitch them in pajamas and did a whole pitch of why they shouldn't invest, you know, that kind of stuff. Well, I mean, it was also put up to it by Sean Parker, but the the whole, the whole four quadrant thing that don valentine said they're famously competent incompetent uh can you know easy to get along with difficult to get along with or sometimes difficult or challenging individuals highly competent challenging intervened individuals are the outliers in our business so you know pick somebody travis elon you know that may not be easy to get along with at times but they're highly highly capable that's what you're looking for that doesn't mean you know you have to be difficult in every decision.

1:11:51But sometimes that is a flag. And, you know, we have that sometimes, sometimes we'll have somebody who comes to the accelerator, like we, you know, have people here come on office hours, you meet them. And they want to make five changes to the standard documents. And we're like, yeah, we don't for the accelerator, we don't do that. But for a direct investment, we very well might change some standard documentation, because, okay, you know, we generally will advise them, like, these are the standard docs, you're going to make it more difficult for you the next time right so you know we suggest you do that but if they want to have in there that they can you know keep running or be on the board of this other company or they want to be an advisor to this venture firm you know raul has a venture firm he set up not that we were like he didn't have that when we invested but if somebody like raul was like i also want to do this venture firm with my brother or whatever my friend and i you know uh that's you know on you know a no-go if i can't spend five hours a week on it i'd be like okay fine right uh sorry josh wolf from uh lux capital says chips on shoulders puts chips in pockets i think is his summary of this cribbed it from sequoia yeah true yeah but i i can i just say there's a there's a little note of uh of shade in what andrew is saying there because if i think about who's raising the largest funds he's talking about and recent horowitz yeah yeah yeah i think all of those funds are going for the average venture returns and so what you'll see capital yeah yeah i mean it lets the the average venture return should be double the public markets if that does or even if it's 50 percent on the public markets and you're mark and dreesen and ben horowitz and you index the entire space and you're putting two billion three billion to work a year and you've got 20 billion under management you know what the management fees are on that.

1:13:42It's just a money printing machine. So that is a strategy to be essentially Vanguard funds of venture. Sure. In a way, Y Combinator and what I'm doing at launch, they're doing 500 investments a year and they're accelerating. I'm doing 100. We'll probably get to 200 in our next fund. That in a way is taking pre-seed or seed and making an index of those. Well, it turns out the pre-seed and seed index, if you actually succeeded in that and you indexed it, you would be the greatest fund of all time because they typically do 2x what venture does. So you might actually be able to establish a 3x fund, 4x fund, like that would be, or three and a half, that would be pretty juicy.

1:14:20So, you know, there you have it, folks. If you could institutionalize a 20 % year over year return and you can keep making the number go up, pretty great. Yeah, Warren Buffett will be calling you at that point in time because that would be... Yeah, but you get no liquidity, right? So that's what you're giving up, right? So if you get the Vanguard fund and an average is 7 % or 8%, uh or like whatever if it's a tech fund it does eight or nine percent like and you can come in and out of it as you please that's a feature in venture you can't and in venture you have to have a group of people who get the allocations from 10 different people so that you're in 10 different seed funds and that's what a fund to fund is for right so there are fund to funds that try to accomplish that test but you are going to not see your money for 5 10 15 years 15 yeah it's Well, you'll start seeing some, maybe if you're lucky at five, six, seven, you'll start seeing most of it between, you know, eight and 12.

1:15:16And you might see some stragglers at 13, 14, 15. If you're running Yale's endowment or the Ford Foundation or Sov and Wealth Fund, who cares? Like 15 years, 10 years, 20 years, it's all the same. You just, you don't need access to it because it's only five, 10, 15, 20 % of the portfolio. So speaking of venture capitalists and returns and LPs, Jason, can I show you the funniest comic I've seen recently about venture capital this is just just for fun if you're on the video version you see this if you're not uh it's a two-panel comic uh there's a man in a suit talking to a guy in a hoodie and the guy in the suit's labeled vc and he says to the founder you're just a rapper on an llm and then the founder turns around and says well you're just a rapper on an lp and this is niche humor jason but it had me absolutely rolling i loved it it's true um i mean it's sort of like saying youtube is a wrapper around s3 you know story yeah it's yeah okay sure you know netflix is a wrapper around uh fiber optics cables or you know whatever like sure all right everybody this has been another amazing episode of this week in startups he's x.com slash alex cautious optimism on uh substack and uh go spend a hundy pay for his newsletter is it a hundy a year it's a hundy a year or 10 bucks a month or whatever 10 bucks a month go get it and we'll see you all next time on this week in service bye-bye