NEWS: Anthropic targets $20B+ valuation, Flexport chaos & more! | E1823

0:00I have never seen a hired CEO and a founder go at it like this in history. Yeah. This is a one-of-one situation. I mean, if the CNBC article that came out, if the reporting there is right, this is crazy. This Week in Startups is brought to you by Embroker's Startup Insurance Program helps startups secure the most important types of insurance at a lower cost and with less hassle. Save up to 20 % off of traditional insurance today at Embroker.com slash twist. While you're there, get an extra 10 % off using offer code twist. With Mercury Raise, startup founders no longer have to navigate roadblocks alone.

0:41Visit mercury.com slash raise to get access to a network, connections, and advice. And NetSuite. Once your business gets to a certain size, the cracks start to emerge. Things you used to do in a day take a week. You deserve a customized solution, and that's NetSuite. Learn more when you download NetSuite's popular KPI checklist absolutely free at netsuite.com slash twist. Hey, everybody. Welcome to This Week in Startups. We're going to do a news show because you guys love when I do the news. And there's a lot of news with us. Producer Nick. Everybody loves Producer Nick. You've heard him on the All In Podcast.

1:23He is the man behind the scenes producing five, six episodes a week for you. absolutely grateful audience members you had a great summer you did a all-star summer congratulations nick you got a lot of big guests yeah now it's time to uh ramp it back up for all star winner well we we had a great run and i think there's a bunch of people who couldn't make it over the summer so yeah we take a second shot at them for the winter and we're going to be four days a week in the winter is that correct we're on the four day a week schedule right now we are four days a week for the rest of the year there will be some special um little episodes dropping on our days off from the great folks at cruise uh financial we're doing a startup financial basics so that'll be dropping on some days off but yeah generally speaking will be four days a week which is a choice by me just so the audience knows because uh listen doing six days a week twist and all in seven days a week it was taking over my life and there's no opportunity for me to get sick or to have time off if i take time off i literally have to do six episodes the week before which means 12 episodes in a week like four times this summer and that was nuts so i'm trying to get some of my time back so we'll be doing four days a week plus all in so you're going to get me five days a week more than enough for y 'all but you know the news is backed up and i wanted to go deep dive uh into this anthropic thing so why don't you queue it up first nick yeah it was a really big week at anthropic a couple of things came out so just so everybody knows they're the startup um they're sort of like the fourth or fifth player in ai right so you have open ai you You have Google, you have Microsoft.

2:53Anthropic, and I would say Inflection too, Reid Hoffman's company, they're sort of the next two up there in terms of the major players. Anthropic is led by Dario Amodai. He previously led research teams at Google Brain and OpenAI. They have a chat GPT competitor. It's called Claude, and it's a chatbot based on Anthropic's model Claude2, which launched in July. Claude2 is known for its massive context window. It can intake 100 ,000 tokens. That's the largest that I've seen or I can find right now. It's about four times larger than the largest offering ChatGPT has. And to explain that in English.

3:25Yeah. So the context window is the amount of text that you can input for an AI chatbot to intake, right? So for instance, when I really like using Claude, because what we do at This Week in Startups is we find people's interviews, we transcribe them. Then I take that entire transcription. I turn it into a TXT file. I upload it onto Claude. Claude can actually intake that like an hour or two hours worth of conversation and then spit back out to me, you know, the 10 to 15 most interesting bullet points in like two seconds. It's absolutely incredible. So if I was going to interview somebody on the program, you could find a previous interview, say, hey, what are the highlights from when they were on Tim Ferriss two years ago or they were on the speaking startups five years ago.

4:08And you can just paste right into it. Literally copy and paste. literally copy and paste or you can do an attachment right you can attach uh an item txt file is what it turns into but can you do a url can i put a url of an mp3 and say transcribe this end no tell me the five biggest okay so that's that would take another step out of the process and i think that's coming right because we were talking about multimodal yeah exactly or multimodal here's an audio file here's a video file and then we just have to process it first right that might take a little time but yeah um it really is a great product claude.ai is the claude is the product and it's really great yeah i've i've i use it more than chat gpt just again because of that context window i think they the barometer they use for it is they say you can it can intake um it can intake the entire novel of great gatsby and give you like uh spark notes basically which is pretty amazing wow uh spark notes for those of you who are gen x is also known as cliff notes but in nick's millennial generation they were called spark notes uh just a programming note there.

5:09Okay. So what was Anthropik's big news? The makers of Claude AI. Yeah. Earlier this year, they raised a bunch of money,$400 million from Google in February. And as part of that deal, they had this pack to use Google Cloud, which will come up in a second. And then they had another deal a month later where they raised$300 million from Spark Capital at a $4.4 billion post. This was pre-revenue, I believe. So just last week, Anthropik announced this new deal with Amazon. And here are the terms. Amazon would invest an initial$1.25 billion into Anthropic. And then either party, Anthropic or Amazon, and Jason, I want to hear if this is a standard deal, could trigger an additional$2.75 billion investment from Amazon, bringing the total to$4 billion.

5:50Both parties declined to disclose a valuation. As part of the deal, Amazon would start offering early access to Anthropic's models to its AWS customers on this new platform that's called Amazon Bedrock, which is inside of AWS. Think of it as like a generative AI playground inside AWS, where they offer a bunch of different models. Why are they calling it Bedrock? They should call it Amazon AI. Yeah. Terrible branding. A couple of months ago, they announced that they wanted to be like the Switzerland of AI and allow all models. That's sort of what this is in product form. Amazon did announce, I thought it was pretty interesting, LexisNexis and Ray Dalio's Bridgewater Associates are already using Claude through AWS.

6:27oh okay so they did a little beta test okay great and and claude is by the way available now on aws you can go use it claude too lexus nexus for those who don't know is a legal system where lawyers and they've been using it for decades it was around in the 90s when i was installing local area networks for lawyers um you could search case law so all those case law you know uh is up there so any time anybody filed something whatever uh it goes up into lexus nexus so this should be incredible to put on top of LexisNexis, one of these language models. Yeah. I think libraries use it for citations too.

6:59I remember learning how to use LexisNexis when I was like 10. And their competitor is Westlaw. And via Reuters, Anthropic, as part of the deal, committed to rely primarily on Amazon's cloud services, including training its future AI models on large quantities of proprietary chips that it would buy from Amazon. Hold on. My question to you is, does this sound familiar? Yeah. Wait a second. didn't amazon do a deal with nvidia and nvidia does amazon make chips apparently they're they're developing a proprietary ai chip the first i'm hearing about this so that's fascinating all right listen we work with super early stage companies at my investment firm it's called launch i'm talking pre-series a right we're talking seed stage friends and family and you know what at that stage maybe they don't have insurance yet in fact just recently we had an amazing startup they didn't have D and O insurance.

7:53If you don't know what D and O means, that basically protects your directors and officers, directors, board of directors, officers, the people who run the company, your management team. So what do we do? We send them right over to Embroker. Embroker is business insurance built specifically for startups. Embroker's single application helps startups get four quotes for four lines of coverage in 15 minutes. They connect you with one of their expert brokers for unmatched service and that goes beyond your policy okay we use this at all of our companies it's easy peasy lemon squeezy and if you're not getting insurance you know at some point you're going to have to get it so let's make that point today right now this weekend tonight just go to in broker today with the code twist and you'll get 10 off their startup package how do you get the startup package in broker.com slash twist that's e-m-b-r-o-k-e-r.com slash twist, make sure you use that code twist for 10 % off that also more importantly than getting the 10 % off.

8:51That shows them that you're listening to this week in startups. So we love and broker, they've been amazing in terms of supporting our founders for years. And of course, this very podcast, great job and broker. Okay, so there's two very unique things in this story. Let's start with the first I love this. Either party can trigger another investment. So let's say Anthropic does terrible and everything's a total mess and their product falls way behind other products in the market they can demand 2.75 billion from amazon for a failed product according to reuters yes that is true or if things are going smashingly and they don't need money and they're just printing money hand over fist things go great for anthropic amazon could put a gun to anthropic's head and say we're buying let's say this is at a 10 billion dollar valuation we're buying another 27 of the company i would say that my guess is they can do that at a 10 billion dollar valuation or it could be stepped maybe but i've never heard of a of a deal like that it would normally be one-sided amazon has the right this would be called super pro rata pro rata you get to keep your percentage ownership super pro rata you get to increase it and so the my thought here would be the valuation would be enough that this would increase their ownership if they're investing 1.25 um at uh you know whatever valuation this is do we know what valuation this round occurred at doesn't seem like here's the latest news on tuesday just a couple days ago the information reported that anthropic is in talks to raise another two billion dollars this time at a tar this is uh reporting um they're targeting evaluation between 20 to 30 billion dollars um according to the article and they they saw some fundraising materials anthropic is currently generating revenue at a hundred million dollar annualized pace okay so that would be a hundred million out of the gate is pretty significant and there was a report chat gpt4 uh and open eyes were getting a bill is at a billion dollars so these things are being priced at a hundred times if the secondary at 90 billion is true let's call it a hundred x revenue ballpark So if they're making 100 million 100 times, that would be obviously 10 billion.

11:04And this sounds like a$10 billion five to$10 billion valuation to me. This people are ahead of their skis here. Obviously, these valuations make no sense. But in a hot market, you know, you give people a lot of credit as publicly traded companies, they might assess companies be getting, you know, 10 to 20 times top line revenue, if they were high growth, high growth being they're doubling every year. And these things do seem to be doubling every year or at least 50 % every year. So congratulations to everybody all around. I think these early language models are doing fantastic because they have two swings at bat.

11:42You can make money from consumers, you know, everybody in our company pays 20 bucks a month for chat GPT for and you can make money because API's are hitting these and people are building them into their products. So it's a wonderful business. It's a software business, the high margin business with the only exception being the amount of hardware you need to run these language models, which I think will go down over time. Yeah. So what I've read about Anthropic, most of their revenue comes from pay-as-you-go API usage. And they have a small pilot program where they're testing like an enterprise version with select customers, sort of like ChatGPT enterprise.

12:16But you think it's - The enterprise is the big win, by the way. Enterprise is the huge win for all of this. The fact that I can't see as the CEO of launch or inside everybody's chat GPT stuff, and it's all in one place and it's learning from everybody on the team. So if you asked a question about this week in startups, I asked a question, somebody asked a question about something else that should all be going into the knowledge base. And we should all be having discussions with our verticalized AI, but go ahead. You had a question. Yeah. So, uh, the reported valuation that they're raising at is between 20 to 30 billion.

12:47and they say by the end of 2023 they'll be on like a 200 million dollar annualized revenue pace so at at the best case the cheapest price would be about 100 100 times revenue and the worst case would be 300 times revenue compared to open ai they were just yeah they're about 80 to 90 times revenue based on the wall street journal report last week so do you think that um that that sort of makes sense to you that number because these are the the top of the class in ai and they're really the only game in town right now um it's ridiculous i don't think there's any logic to it um it would take you if these things double every year it's going to take you a couple of doublings to get towards reality so you're probably giving them credit for three years of undone work four years of undone work with a lot of risk and a lot of competition coming so i think these are strategic investors not financial investors strategic investors for amazon to be able to sell their proprietary chips to a major player uh and get them to use them they don't need to make any money on this investment if they break even or lose half their money uh they got somebody major to use their chips and to give them product feedback on it so again they don't need to make money on this what if this is their lighthouse customer underperform invidias and it's a strategic disadvantage for anthropic to use them isn't that a major that would be that would be the major risk anthropic stake and that's a really good insight yeah i think that is a major risk if their chips suck and then i wonder if in the contract they have to say their chips have to be perform it within x percent of the nvidia ones so anytime you do strategic deals things can get weird this is an example of that that's why in venture capital we see strategics come along and want to invest in our startups that we're on the cap table of it's a major red flag great they have different motivations yeah it's that simple um now listen the press reports are probably i would just say any press report that's based on rumors you should as a and i'm not picking on the information here, any press New York Times information, Washington Post, I would assume that in 50 % of cases, they have wrong information.

14:50And in the 50 % of the yes, when they have right information, they only have partial information about that, right, they might not have the full context. And that's how the press works. That's how it has always worked. So I'm not saying it's gotten worse, necessarily. And you know, these publications do the best they can. But being on the inside, now I can tell you how little information they actually have. If they got a leaked deck, that deck could be old, it could be a draft. It could have changed three times in the last three months because decks change. It could be somebody with an agenda giving them wrong information.

15:20Specifically, it could be faked information. I've seen every single one of these things happen from both sides of the fences. Remember, I was a journalist for a long time running a publication, whether it was Engadget or This Week in Startups, or Silicon Valley Reporter. And I was on the other side, you know, as an investor being on the board of companies, I would say 90 % of the time the information is incorrect in some way 50 is you know directionally correct and 50 is wrong so anytime you're reading a newspaper or an information source just understand that and i think they understand that and they would agree do you think this is a good strategic move by amazon to sort of get early access for anthropics fantastic move yeah cost them nothing they'll make it all back on people using ai products it's a no-brainer for them i think because if you've used clod it's that good and if they're competitive out of the gate with chat gpt4 they're not going to fall behind so here we are and i think you can assume there'll be 10 competitors in the space uh making serious progress i just got the pictures uh added to my chat gpt4 the multi-modal today and i well i used it today for the first time and i have i had like a piece of electronics that i need a special plug for i took a picture of it i said what plug do i need it nailed it it's like you have a model this you need this and i was like okay go buy it for me on amazon give me the link and it says i can't do that but just go to amazon and search for this name, power charger, and you should be able to find it.

16:42So it was like, well, that's pretty scary. It's funny you say that too, because I noticed. So when we were on the show with Sonny the other day, he was actually using code interpreter, which is now called data analysis, I think on chat to review the image of the guy wearing the trousers and the nice white jacket. And remember you said the thing about the tortoise shell glasses. It didn't pick up on that. So I got access to it yesterday and I just, I sent the same image. I gave it the same prompt to like tell me about all the accessories and stuff in this outfit. And it actually saw that it said there are also Portis shell glasses in his pocket.

17:15Pocket. So I wonder if it's a different, like more advanced. No, no, no. It's just listening across the web to every conversation occurring. It downloaded this week at startups and it fixed its own error. I mean, eventually it will be doing that, right? Eventually it'd be listening and it'd be like, oh, it's talking about me. I could have done a better job. Maybe you check that. No, I think it's every time it does its analysis, I think it's doing it for the first time. And so if you if 10 people upload the same picture and ask for, you know, feedback, it's going to give you different answers. And in fact, I have taken I've uploaded a picture and three different times asked the question three different ways and got three different answers.

17:50Yeah, well, and then every follow-up question you give it is part of the reinforcement learning, right? So if you follow up and you say, what about the, did you miss the tortoiseshell glasses? It will understand. Oh, I guess I did. I did a bad job. Oh, sorry. Sorry. Bad robot. Crazy. Yeah. Poor bad robot. All right. Listen, congratulations. Great job for both parties. I think it's a big win. And just another checkbox that these are going to be commodities very soon. now they they may be revenue generating commodities you know like gold or diamonds are or wheat or oil you know i'm not saying commodities in a um derogatory way i'm saying commodities in that you can get storage on the internet from a thousand different sellers you will be able to get a language model i believe from hundreds of sellers next year and thousands in five years this will be you know something that many people offer at increasing lower prices with different levels of offerings and so this is great for humanity everybody's going to be trying different ones different ones will have different specialities or progress and let the games begin great great for everybody question about strategic investors by the way too just in case in anthropics case so now they have these two major uh strategics google who was the earliest investor and now amazon who's coming in with potentially up to four billion dollars how do those two investors talk to each other if at all well it depends on if they have board seats um and in this case uh you said it was 400 million from google and it was another 2 billion that's coming from google report yeah so the question is are they on the board or not and did they negotiate board seats and didn't was anthropic in a position to tell google they didn't have a board seat so now let's say google was on the board and this amazon deal comes up that means google would be in the conversation about this?

19:38Should we take the money or not? Or they would have to say, Hey, Google, you cannot be involved in this, we're going to have because you're conflicted, you can listen to it, but you can't vote, or we're gonna have to do this around your back, you can see how awkward that gets. Now, let's say Google doesn't have this. And Amazon did negotiate a board seat. Now you have the opposite, let's say they both have board seats. And now you got warring factions on your board, you can see how complicated this is going to get. the same thing happened when uh eric schmidt was on the board of apple and then apple bought android and then there's a famous photo you can look it up online of look up eric schmidt steve jobs uh together uh there's a famous picture of them at the stanford mall um and i think this was at the time this was going on yeah um and he felt super betrayed and so you know there's literally a picture of him being like and he steve jobs is doing the wtf pose he's like what the hell there it is from gizmodo um and so i think that this was taken around that time and then eric schmidt eventually went off the board now he obviously google wasn't a strategic investor in apple but they had a pretty close relationship and obviously they had that very important search relationship which has become at the center of the google antitrust so just a quick research on Anthropic.

20:56Google from earlier in the year, the information estimates they own about 10 % of the company. That's their estimation. Which would get you a board seat. Yeah. And here's just a paragraph from the information article from a couple of days ago. Investors would also be buying into a company with an unusual corporate structure. Oh, non-profit. Anthropic founded in 2021 has an independent body of five individuals with no financial stake in the company who can elect and remove a number of anthropics board members anthropics said this group aims to align anthropics goals with the interests of the general public that's like a b corporation um so there's a weird hippie dippy thing called a b corporation a benefit corporation the way corporations uh like a c corporation like a delaware c delaware c has to do what's in the best interest of shareholders a b corporation a benefit corporation is another designation that's done by a third party.

21:53And they're in the interest of the stated mission. So the stated mission was, hey, we're here to help, you know, people get smarter. And we want to we want to help elementary school kids be better at math, let's say brilliant.org came up with that. Our goal is, we're a benefit corporation, brilliant.org, which we're investors in brilliant company, by the way, our goal is to make the world better at math. Well, then as a b corporation they would have to take that into account that stated mission whatever it is that the company states and uh the best interest of shareholders equally as opposed to just shareholder interest so if it wasn't a benefit corp and then they said hey we want to get into you know uh we want to stop doing math we want to start doing english or we want to put 90 percent of resources into literacy well then you'd have to say wait a second i thought we're a b corp we had this we have to change our our stated mission so this is kind of taking the benefit corporation uh and putting something weird into it so i think i think uh anthropic when they started to that they there was a big marketing push they had around like um you know uh what do they call it constitutional ai i think they were the constitutional ai company where they were saying we're building like a better set of ways to uh make ai more fair or whatever whatever i mean listen it all this uh hand-wringing you can tell these people are completely insincere if they're selling their secondary shares at 90 billion nobody cares about anything then do re mi show me the do re mi the money okay people want the do that's all that matters do re mi being a founder is one of the most amazing journeys you could ever go on i suggest you do it but you got to know it's going to be hard and sometimes it's going to be a little bit lonely but with mercury rays you don't have to go it alone.

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24:16And I'm super happy about this. If you're fundraising, you submit your pitch and you get in front of hundreds of investors who are looking actively to fund businesses like yours. And I'm in that database and I have found good companies in there. If you're looking for guidance, you can tune into unfiltered conversations with industry experts. And if you're craving some community, which I know you are, you can meet fellow founders and navigate similar challenges. So here's your call to action. mercury raise was created to help founders navigate obstacles so more startups can become success stories it's that simple they care and you can take your startup to the next stage with mercury raise by visiting mercury.com slash raise that's mercury.com slash raise all right you want to talk about flexport and our guy yeah and by the way we invited ryan on the pod he uh he might come on the pod i'll just leave it at that but yeah catch the audience up on this because i have never seen a hired ceo uh and a founder go at it like this in history yeah this is a one-of-one situation i mean if the cnbc article that came out if the reporting there is right this is crazy and we're gonna get again as i said 50 is probably right yeah or directly correct and you can be sure there's a lot of agendas sharing information with them on both sides and everybody in between keep going now let's tee it up for the audience flexport we know is the logistics and freight forwarding startup yes uh that's done incredibly well and uh i am friendly i don't want to say i'm like close friends but i'm friendly with peterson yeah he's been on the podcast uh house this well yeah acquaintances pals pals is good yeah pals um yeah yeah flexport obviously logistics freight forwarding startup they've raised over two billion dollars from founders fund soft bank andreason a bunch of others uh last value to eight billion dollars the company and ryan peterson gained a lot of notoriety during the pandemic because of their insights on the global global supply chain shortages so i think even ryan came on all in at one point uh to explain what was going on at the port of la i think yeah yeah then they were explaining how everything was backed up and then those shipping containers became super expensive and that was great for their business because they charge percentage fees on the cost of shipping containers right so that was no flat fees percentage that's why you go percentage not flat fees because you never know when all of a sudden things, ticket prices can go up 5X and all of a sudden you're the beneficiary.

26:37No flat rate pricing people. In June, 2022, Peterson announced that he was going to step down as CEO and transition into executive chair at Flexport. Flexport then hired Dave Clark, who's a former Amazon executive, and he's most known for scaling Amazon's logistics business, right? So kind of legend in that space. Clark and Peterson worked together as co-CEOs for the first six months of Clark's tenure. And then Peterson officially transitioned to executive chair in March. in the first half of 2023, this is according to the information, Flexport's revenue dropped 70 % year over year to$700 million.

27:09And that was mostly because the cost of a shipping container went from like the peak high of all time. And then it crashed down. Yeah. Like 10 ,000 to 2000. Exactly. Which basically tracked with their revenue drop. In July. So this is when it got a little bit interesting for me because I remember this whole thing. Peterson announced that he was joining Founders Fund as a partner in July, right? And you kind of thought, oh, wow, this is someone who's very notable in tech. He's clearly starting the next phase of his career. He's still involved as an exec chair, but this is clearly his next thing that he's going to do.

27:42On September 6th, a couple of months later, Peterson announced that he was returning as Flexport CEO and Dave Clark resigned on that same day. Peterson notably also rescinded 75 job offers due to what he called like overhiring issues at Flexport and he needed to get the runway tight and he needed to get things back on board. Ryan Peterson then started posting on X about sort of what he would do differently than Dave Clark. And it sort of seemed like you got the impression that Peterson thought Clark was running the business the wrong way. At least that's what I gathered. Some of those posts have since been deleted, which the CNBC article also noted.

28:16And now here's where it gets kind of weird. So it was reported that Peterson and the board basically told Dave Clark either on a Zoom call, either you can resign tomorrow or we're going to announce that you're fired which maybe you can say that's like a gentleman's layoff or something like that um again this is just reported it's a gentleman's firing gentleman's firing yeah um clark resigned and the next day five of his key execs that he hired were also fired is that standard when a hired gun ceo yeah listen if you yeah it's kind of like when you take out a captain you take out the boss are the captain who are the captains going to be l2 you better take out the whole crew yeah it's you know right sylvia's going if tony's going yeah you can't have your conciliary he's not going to make the jump in all likelihood makes sense yeah you remember when junior got pinched bobby bacala was like the last man standing right and then remember there was that famous scene uh at the pork store where he just told him like hey listen junior can still be the the boss in name and he can keep the following but i get everything else And then Bacala famously says, to the victor goes his boy, and then he kicks him out of here.

29:31It was a great scene. So one major problem that led to Dave Clark's being ousted, again, according to CNBC, was financial projections to the board. So Dave Clark thought that Flexport was being way too overly optimistic. Peterson and his team was kind of reluctant to pare back their projections. clark eventually won but it seemed to have again this is according to cnbc pissed off peterson in the process and some of the board members any uh response to that jason is that typical with okay the existing board members are going to be loyal to the founder always right you heard about founder friendly culture here so you know they're gonna they you bring in an amazon exec as a ceo for one reason and one reason only you want an operational machine who's going to aggressively hit targets and typically you're going to bring somebody like that in because you think hey the creative founder maybe they're tired they've they're exhausted or maybe they're not an operations person who's going to sit there and just grind and he was brought in there to grind and you're not there to grind it sideways you're there to make it grow and so if this person started sandbagging maybe their comp was based on you know and their equity and their targets uh correlated with the management team's bonus structure now if the board gives them says hey this is the board including the founder says hey here's what we need you to hit then that's going to be aggressive and then the person like you know what i want to sandbag this i can't hit that there's no way i can hit that i can hit half that and then they want to do is they want to double it so they get into the bonus because anytime you do these bonus structures let's say the goal was to hit 2 billion right you said they were at 700 million this year but let's say the goal had been 2 billion you know he negotiates it down to a billion they hit 2 billion they're probably going to get some massive bonus for anything above a billion in revenue um and i would you look up dara uh cashversahi uh from uber he had some crazy target of if he hit a hundred billion dollar valuation he got some sick bonus and i don't think he ever got there he came really close so you know you you want to incentivize and it's a bummer if they don't hit it it's fantastic if they do you get the idea yeah so i i think that's probably what was going on here now big picture if the thing was growing and he was hitting targets and it wasn't for these uh the recession looming consumers the the um um what do they call the backlog the supply chain uh indigestion there was a term for it we were talking about supply chain backup whatever yeah during covid all that yeah the 900 ships waiting outside the port yeah all that um nonsense getting worked out was not good for the new ceo so i i would attribute a lot of this not to either party being incompetent i would say this feels to me like the majority of this has to do with market conditions and big picture what i've seen in business is everything's up and to the right champagne corks everybody's great high fives winning forgives everything you could be a jerk we could have gotten in a fight i could have punched you in practice it doesn't matter you know draymond punches whatever that kid's name is in practice and they win the title everybody's great hey you know what we went through the fire together you lose okay somebody's got to go this is not working out right and so winning forgives everything and listen they were losing it's got to be brutal to have your if it's in fact true and again you heard my disclaimer 50 of stuff you read in the newspaper or you read online is not true the other 50 is partially true so you know who knows what the truth is here but the undeniable truth is the market changed dramatically yeah so that's what we do know to be true you know wrong place wrong time for a hired gun ceo to come in yeah i mean it's like this is like when marissa took over uh yahoo you know it's like good luck you know like was that was that at the great financial crisis time uh no it was after that but it just was you know yahoo was in super decline and you know there's always this thing where like women get the ceo slot you know when things are in a turnaround not when things are going up they've said that about linda at twitter slash x like the only time women and i don't think this is necessarily true but when it's a turnaround situation when it's hard that's a tough thing to come into now i don't know exactly when dave clark joined but uh i don't know if they were on the upswing then or if it was clear that things were going to be challenged uh you know coming out of covet etc yeah it was late 2022 that he yeah so they knew they knew i mean he knew well that they were in recession territory things were brutal he took the job um but maybe it was more brutal um but i saw also this stuff like peterson i don't know if we're ready to transition here but peterson came in like a raging bull here well clark you mean clark no not clark when peterson took back over didn't he come in like raging job offers he said get ready for layoffs he basically came in and was like we need to cut you know i think dave clark was sort of um growing it like a company that was maybe in 2021 ish era or 2019 and peterson came in and was like runway is tight here are the layoffs that were expect layoffs we're sending these job offers i'm so sorry and he actually did um he did a bunch of tweets about it yeah he was posted about something for he said you know obviously he feels terrible about rescinding the job offers but i put together some program to help the people out that were getting affected yeah but i want to just bring one thing from the cnbc story um that i thought was really interesting so according to the cnbc article um which we'll link in the notes on september 13th this is a week after clark resigned he resigned on the 6th i think flexport's chief legal uh counsel contacted clark and told him that his resignation actually was not accepted by the board and that the board had fired him for cause okay just explain what for cause means okay yes um for cause and not for cause not for cause would be hey we're reorganizing you didn't do anything wrong for cause is you didn't do the job uh or and in like a ceo position in that contract it is very detailed of what cause is defined as and cause can be defined as like really dark stuff like sexual harassment fraud stealing uh mundane stuff like not showing up for work not doing the job and so for cause is extremely extremely detailed why is it extremely detailed because of situations like this when you do get fired for cause it means that we don't want to pay you severance and that we don't want to pay you your bonus or vest you your shares now in the vesting of shares this these shares could be single trigger or double trigger there's a bunch of nomenclature here but just to explain it in layman's terms if you were in the calendar year uh and you get fired if you get fired for cause no more vesting of your options now let's say his options were vesting on a yearly basis or a quarterly basis or a monthly basis let's just say he was in was he at year one or year two uh calendar was probably right in between those two starting year two i think okay so we don't know if he was he's probably he probably had a one-year cliff he's probably investing monthly then but let's say it happened before the one-year vest you fire somebody in that 11th month for cause or for any reason you let them go because you don't like them they don't get that 12th month they get zero shares in the company that's why there's a one-year cliff let's say more likely he's on a monthly thing and let's say he he gets fired not for cause board just change their mind hey it's not a fit they don't have a reason to fire you he may have one year of salary maybe two probably two in his case and he might have two years of vesting which means he gets let's say they offered him five percent of the company you know and he had a five and he you know he gets 1.25 of that every year he might be forward invested for one to two years so he might have the 1.25 he got originally one fourth of five percent and they probably don't want to give him another 2.5 percent and it's not that they can't afford to give him the 2.5 percent it's that they're really mad right now yeah and that's an anger and it's a personal thing if he had done a great job and it wasn't his fault they probably would just give him the 1.25 or the 2.5 that he's supposed to get i'm picking numbers out of the air right usually hired ceos get about five points at a company this size i would guess If it was a mega company like Google or Uber, maybe they get 1 % of the company over time, right?

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39:59If and only if he signs an NDA and a non-disparagement clause. Standard. Clark declines the offer. He says no, right? I was like, oh, I was reading the article. I felt like I was reading Great Expectations or something. I was like, oh. This is such. Yeah. That's crazy. Then, so this is September 13th. If CNBC is to be believed, later that same day, Clark takes the stage at a supply chain conference where Peterson had spoken earlier in the day. We don't know if Peterson was still there and the audience didn't say, but Peterson had spoken earlier in the day and actually said, he said nice things about Dave Clark.

40:35And Dave Clark was in the audience for his talk. Yes, he was. He was in the audience. He was like first row. Clark goes on stage and this is what he said. And I quote from CNBC. The only thing I really regret from the past year was I sort of picked the wrong founder. Basically, it was a place of extending my reputational halo to a group that, in my opinion, did not deserve it. Largely because about half the team was let go last week on Friday, the most brutal non-severance packages I've ever seen in my life. It was about as disrespectful away as humanly possible how much money does this guy have that he can just turn it down or i guess he has the money to fund a lawsuit or maybe he's got some well if he's been if he was one of an amazon executive yeah maybe he's got a billion dollars from amazon you don't care they had a huge run-up from 2000 maybe he thinks the two million dollar the two million flexport shares are not going to be worth anything but this is as bitter and dark and crazy i have never seen anything like this and now again there are some things we know as facts here that he said she said these guys are fighting they're saying nasty things about each other in public okay that's all facts and then we also know um that the shipping um industry was challenged the other thing we know of i'll be honest here is you know ryan is a great founder super smart and uh he's coming in and he's going to save the company so i would say you know i think peterson's got a really good shot at saving the company um bummer for founders fund they got a great partner in there i guess bummer for peterson but better to save the company than lose his fortune because i don't know how much he sold in secondary if any i don't know if peterson's cleared money i would think he sold 50 or 100 million maybe in that soft bank round the soft bank put in like 2 billion or 4 billion right you would think that he took some off i would think i would think he peeled off a hundy that's my guess if if two billion was coming in i could see him peeling off a hundy and so you know masa as i said the masa p.o um and so if he peeled off a hundy great for him but i think he's got a lot of pride obviously he's come back and he's become super vocal and uh you know this happened with um travis getting kicked out of uber i hope someday travis gets to i'm not saying dara's not doing a great job i think he's doing a great job um but someday dara will you know want to do his next thing i'm sure and i would love to see travis come back like steve jobs did and then uh you know this has happened a number of times in our industry and i i think he'll do a killer job here uh and this is his steve jobs moment so make the most of it ryan yeah just wrapping up on the stuff from the article uh clark sent had his lawyer send a cease and desist letter to flexport basically asking the company to preserve and retain all communications involving his departure um yeah he's just gonna sue that's a preserved documents move that's sort of what it was getting at yeah it's called it's preserving documents it basically means the lawsuit's coming so we told you to preserve documents if you suddenly change your document retention policy which you're allowed to do as a company after we sent you that letter not a good look i don't know if it's actionable or not um but you know listen this is rashomon there's always different views of who's wrong who's right it didn't work out that happens and it got ugly and it shouldn't get ugly they should have had controls in place to not make this get ugly apparently they did not um yeah so i think founders one is okay too because they're i think they were the early earliest investor in flexport trace stevens is on the board um you know and they they have a a big position in the shout out trey stevens amateur boxer um yeah uh i'm saying that one sharing your boxing videos on the internet it's a little thirsty uh let's keep going i don't know man i i have no qualms with anyone who i love those zuck videos of him i think if you can fight and you could throw a good punch all right fine i'm gonna start doing mine i'm gonna start releasing mine i'm gonna be in the over 50 category if i could dunk a basketball there'd be a video of me dunking every day.

44:40That's fair enough. I did share my martial arts videos from my 30s on my Insta. And if I had videos of them, they would have shared the videos for sure. But yeah, now that I'm fit, yeah, maybe I'll start sharing my Taekwondo videos. So last story of the day, Jason, I guess you could call this a little big detail maybe. DoorDash is testing a really interesting new feature that they haven't actually publicly announced yet. They're just testing it in some small markets, but they're testing it in San Francisco and obviously a bunch of people that are like venture capitalists and stuff have been screenshotting it and sharing it on x it's called dine out um and it's basically a rewards program that offers doordash users with cash credit for dining out at local restaurants john if you could throw up the image here oh it's like a check-in so this is there used to be uh two apps one was called goala and one was called four step these became a big craze after south by southwest one year we were investors minor i think i put 10k when i was first starting my angel career into go lala which was bought eventually by um facebook and there was a mobile local social mo low so mo lo so was like an acronym that we used 15 years ago and you would check in and it would automatically then tweet or facebook hey you just checked in and so i used to do this all the time when i was in la i would just check in everywhere and it was like gamified you get points Then people started showing up with the places I was checking in.

46:09So then I started checking in when I was leaving, but it was fun to kind of bookmark these places. But here, this isn't just bookmarking, is it? No, you're getting cash credit in DoorDash credit, right? So if you go and you eat out at this, like right here, you see Pacific Catch on Chestnut Street in San Francisco. You get a$20 credit. That's basically an entree. Yeah, that's an entree. It's entree level. DoorDash credit to then use in the app. And these screenshots were posted on X by Olivia Moore, who is a consumer investor at A16T. My question to you, Jason, is why would DoorDash do this? What is the reason they're doing this?

46:42Oh, it's very simple. This is to lock in restaurants. DoorDash has a number of restaurants, and I think Uber Eats does as well, that are exclusive to their platform. It's not a lot, but they do try to become the preferred, if not exclusive, provider. And if you've ever gone to a restaurant or somebody who works in one, they'll have five terminals up and running. Yep. And you see them working them and then their startups that consolidate the five terminals into one. It's a mess. Now, what people will do is sometimes they'll simplify, let's say you have too many orders. You're just like, I'll just use one or the other platforms.

47:15What this does is it creates a deeper relationship with those famous restaurants. And so that$20 is probably being shared that economics in some way. So let's say it's a$20 credit. i bet you um the restaurant picks that up because they probably make on average 20 dollars from somebody ordering online so that just incentivizes people to try doing uh and become more loyal to a restaurant so it's a no-brainer and i you actually nailed it when you said oh that's an entree what that means is when people do it they get home and they're like yeah oh that's an entree you know like whoa you know like but that was just that like the way you framed it is perfect because for somebody who is like thinking about i think i'm their audience yeah yeah you're thinking about the cost of food you got a family you got a budget and you're like hey whoa that's the cost of an entree that's that's significant they put it at a dollar amount that's significant is my point i think that's being covered in some way by the restaurant and maybe a little bit on door dish maybe doordash waives their fee for that order or something like that right now they got a deeper relationship they have information on what when you're checking in and then eventually maybe doordash will have a loyalty program and maybe when you sign into restaurants it'll work the other way so if you've ordered online you get a five dollar credit to go to the restaurant or you get a free drink in the restaurant all this does is is meant as a loyalty to increase consumption what is lena khan claiming with amazon is that they created the amazon program uh prime in order to make people more loyal wow congratulations you're a genius you just discovered airline miles and costco like if you're a costco member it's you shop at costco more if you have amazon prime you shop there more if you have doordash rewards you're gonna you're gonna use doordash more often so it's just a way to increase loyalty for everybody yeah i think it's brilliant if they're trying to recruit certain restaurants to be doordash exclusive and then And they can say to the restaurant, not only does being a DoorDash partner or whatever they call it, increase delivery, we also now have a feature that increases your dine-in rates by 50 % or 30 % or 80 % or whatever.