OpenAI drama, billion-dollar exits, and founder salaries with new co-host Alex Wilhelm | E1953

25:15And I was like, holy cow. And I asked Gwyneth, like, did you approve this? She said, yeah, I did it with them like four years ago. So you can have Gwyneth Paltrow read you the Wall Street Journal or a Barack Obama-ish impersonator. But yeah, this will, I think on the enterprise side, it's a no-brainer when you're doing research. Like if you were to ask it, I don't know, make me a marketing plan, right? For a new podcast or write a press release about Alex joining this week in startups. If you've never done those tasks as an employee, it's going to start you on third base, basically. I'm not saying it's like the finished product, but if it's starting you on second and third base, hey, how do I plan an event for a hundred people?

25:55What should I think about? And it's like location, ambiance, theme, AV. And you're like, oh, I didn't think about ambiance and theme or gift bag. I hadn't thought about that. so it's kind of making everybody bionic right now and what i want to be able to do is have multiplayer mode and we don't have that yet but imagine you and i sharing a space right where we're talking to the ai together and i think that's what sax is doing with glue ai is it's kind of like slack but the ai's in the room with you so if you and i were working on show notes and let's say we're doing something like the history of BlackBerry.

26:33We decide we're going to do a retrospective on that. We could be talking to it and say, hey, when was BlackBerry formed? And tell me about the funding and what were their initial products and how were they received? And it goes out to the web and gives us bullet points. And you and I are in a thread with the AI. Now you start to think about how valuable that is when the AI is on the Zoom call, the AI is in the Slack room or in Glue AI. That's where I think this is all headed, which is the AIs are co-workers, right? And they're going to seem like not very sophisticated co-workers at first, like maybe C-3PO to Luke Skywalker and Han Solo.

27:10And then all of a sudden, they're going to seem like transcendent where they're like telling us what to do, right? And I think we're on that journey. I think it's going to be incremental, but quick. And so, I think it's going to feel like we're going to look back and five years will have gone by and We'll have these amazing tools, but I bet you it's going to be kind of like a step function each time. But that's still really fast because we are doing really quick things here. And so I'm just, I know there's worries about AI in a number of different ways, deep fakes and developing economies around elections and so forth.

27:41Lots of things to think about. But fundamentally, technology has found a new path to go faster now. And after we've all gotten a little bored of mobile, a little bored of new iPhones, I think it's great that there's something out there that is pushing the boundaries, is making people a little scared and also hopefully giving us the next thing like that can help us do a lot more faster because we don't have enough people. So more productivity is going to help a lot. Yeah. I mean, doing more with less is going to be the theme. I think if you look at to make this brass tacks, you know, Uber hasn't added employees.

28:11Like I think their net new employees is flat for three years. So, you know, people leave, people get hired, but just net net. I think it's three years flat. I think Airbnb is very similar. but those companies are growing at 20 or 30 percent revenue so if your revenue is going up 20 30 percent year over year and your headcount stays the same how is that efficiency happening well software businesses should be efficient but i think a big part of it is ai and globalization and that means these companies are going to be able to do more with less which means what happens to everybody else you got to go start more companies you got to go solve more problems in the world and god knows there's a ton of problems in the world to be solved okay cloud computing has revolutionized startups over the past decade.

28:52You know that. But the reality is, hey, a fully cloud-based solution is not right for every startup. Sometimes a hybrid solution is your answer. Like if you're working with sensitive data that can't be trusted to cloud, or if you need to connect to multiple cloud providers at once, or maybe you just want a much more cost-effective solution. In that case, you need to check out Equinix. Equinix Metal will give you direct access to physical servers, but you still get all the benefits of the cloud. So no need to rack and stack your own servers. No, Equinix provides on-demand infrastructure in over 25 major cities.

29:26And here's the best part. They have an amazing startup program for you. The Equinix startup program offers personalized consultations and guidance from the Equinix team. And of course, you'll get up to$100 ,000 in startup credits. So here's what I want you to do. Head to equinixstartups.com to apply. And when you apply, James from Equinix is going to reach out to you directly. That's equinixstartups.com to apply. E-Q-U-I-N-I-X startups.com. I could come up with quite a list right now of things that are keeping me up at night. But the good news is, is that people are working on them and they are paying themselves as they do this.

30:01And this means I get to bring up my favorite topic, which is how much should founders pay themselves, Jason? We've never answered this question once in the history of people talking about startups. So let's talk about some data from Pilot, who collected a bunch of different bits of data from founders in different geographies and different fundraising tiers, you might say, debugging companies so we can see a little bit better. And I pulled a bunch of the data for us here. I'm curious which of the numbers that we have in front of us sticks out to you the most as the most either insane or the most kind of like that feels right to you.

30:35Got it. Yeah. So Pilot's a great accounting partner for a lot of our startups. And so they actually have data. So this is in this sort of zone where like Carta or AngelList release information in aggregate. And it generally is pretty accurate. It's not the whole picture. It's a subset, but this does look to me to be accurate. Because when founders asked me this after they raised their seed round, what we say to them is, you should take the least amount of money possible to live without fear, you know, comfortably. So that as much money goes into the startup and the product and everything as possible, right?

31:14If you want max revenue with the least downside, you go work for corporate America and they pay you, you know, as much as possible and you leave and you're a free agent. But when you're an owner, it's like owning the NBA team versus playing for the NBA team. One, you're trying to optimize for salary. One, you're trying to optimize for the value of the enterprise. So if you are optimizing for the value of enterprise and you raise a million dollars well you don't want to pay yourself 500k you want to pay yourself you know a five or 10k a month draw that's what i typically see at startups in the first couple years they pay themselves five 10k a month which equals 60 to 120k looking at this data it turns out i'm exactly right um startups 100k to a million 90k max 600k that 600k is like some weird abomination like nobody should be yeah it's a fat finger and someone when they're filling in the survey information made a mistake.

32:05That's my take of that number because if you raised 100k and you're paying yourself a$600 ,000 per year salary, you're going to have money for like 20 minutes, I think. Yeah, it doesn't pencil out. So and then you look at the next one, 1 million to 2.9 million raised median founder salary,$1.25. And that seems right to me. In your startup, you should probably be like, I don't know, the 10th most expensive person as the founder, the sales executives, your all-star developers, your savant product designer UX, wizard, like they should all be getting paid 200K or 150K or 250K. You know, if you're a$5 million startup, but you're the thing that this doesn't take into account is also globalization and like hiring people offshore or work from home people, remote people, which I think is the bigger story here.

32:56Founders generally are don't are founders in Silicon Valley, at least generally half Half of them don't have kids yet and they're not married and they don't have mortgages. So their burn rate is low. Yes. Now, once you have two kids, private school, a mortgage, you know, maybe you got a spouse or not, you know, now you're not might be 30K a month, 20K a month. And so an exception is generally made in those cases when somebody goes to raise money. If that person isn't well-to-do and they've already made their money, you know, VCs might be like, okay, we know going into this that this person needs to get paid 400K a year just to cover their nut.

33:35And it seems crazy, but those founders tend to be more seasoned. They raise more money. They have an easier time getting to profitability. The sweet spot for founders actually is like 35 to 55 years old. Everybody thinks it's young people. It turns out like success rates are much higher in that group and much lower in the other group. We just remember the Zuckerbergs and the Gates. It makes for better movies. If you have someone who drops out of Stanford or pick another one of the schools. But what's interesting to me about this data is that it doesn't actually go up for a long time. So for startups that raise one to 2.9, 125K median, three to 5 million, 124K median.

34:10And then for startups that raise five to 10, 150. So really it stays flat for a long time. Although once you raise over 10, it does go up to 194 according to pilot, but really it plateaus and stays. It's less elastic than I expected it to be. And this becomes a board decision when you get to those levels, once you've raised over three, four or five million, you start to have a board. The board then manages compensation. When you're in year four, five, six, seven, what you want to do as a board, and this is a question that wasn't asked or isn't taken into account here, is what should you do after the founders are fully vested?

34:45It's year five, companies make a five,$10 million in revenue. What you want to do is tie their revenue to the performance of the company. So everybody's aligned, which is what Elon did with his pay package famously and then had it taken away and now they're trying to restate it which is hey if the stock price goes up you hit this milestone dara from uh uber has a similar thing like when it broke 100 billion he got some great you know slug of equity it's kind of hard to fake that it's hard to fake your public market uh valuation because the people who are buying that are the sharpest pencils in the class right they understand like the reality of this business so what you really want to do is, as a board, make sure that you understand what the person's personal financial situation is, and then have it make it so they're not distracted.

35:36I'm always in, you know, when we get asked for money, hey, can I get a raise? You know, the conversation, or can I sell secondary? The number one goal is to keep the founder focused. And the stress of running a business is enough. They don't need to have mortgage stress or private equity, private education, stress, or other stressors in their lives, take that out so that they can just, you know, and then if you're starting a company or you're a young person, lower your burn rate. Like literally, if you've got a BMW payment and you got like a three bedroom, get a studio, you know, go public transport or, you know, get a used Prius for 10k, lower your burn so that you don't have to worry and be a slave to this nut that you're chasing every month.

36:25Also, the thing people forget is that once you have a lower burn rate and you have more money saved, you have a bigger middle finger to give to anybody you don't want to work for, work with, listen to. I mean, it is the hack around the annoying bits of capitalism. So yeah, keeping your burn rate low is fantastic. Although if you say private school one more time, I'm going to start having nightmares on the show because I recently learned how much money you can spend on kindergarten and first grade. And it's about as much as I paid to go to university. It's kind of crazy. Yes. I'm a product of the public school system.

37:02And then I went to Boyce High School for like 2K a year in the 80s. And they gave a discount of like$500 less for each student. So I think my older brother was 2000. I was 1500. And my little brother was like 500 or 750. They really worked with you, the Catholic school system. But yeah, it gets quite expensive if you go that route. And if you have multiple kids, it can get crazy. I think of it this way. I already pay property tax. Therefore, I should get just to public school down the street. It's free. Well, it's free. And then this is why I think not to make this a political show, but you and I have political things, so we don't want to not talk about them.

37:40I think the voucher system and creating competition for education is just a great idea. If you're paying taxes into this pool and the public school in your district isn't very good and you can get 14K, because I think the average is like 14 ,000 is what we spend in the United States, 15 ,000. I mean, some cities might be 20 and then some places in the South, it might be 10, like lower cost of buildings and salaries. But why not give that to parents? And they're like, oh, because then it's going to crush the public school system is like maybe they need some competition if they're not doing so well as long as there's similar accreditation standards across um uh charter schools and normal traditional public schools i'm sympathetic to that but to me it comes down to what the implementation of it because as i think you and i both know when it comes to large expensive government programs if you don't get the details right you can create a bigger mess um but i do think that i think the providence schools are so bad the state took over so a little competition wouldn't hurt i don't think i'm here for it i'm here for it too all right let's keep moving all right so i grabbed a cyber security deal uh jason do you know cyber arc or venafi just offhand i do not tell me good because i had to like look these companies up the reason why i put this into the show notes.

39:01One, it's a$1.5 billion deal. Essentially, CyberArk is buying Vanoffee from Tama Bravo, so private equity. But the thing is, I was going through all the releases, the company's doing about 150 million ARR, which means that this is a 10X ARR deal. And that means it's a double digit ARR multiple. And founders used to get those for breathing back in 2021. Now, as we've seen, it's much harder to get and secure this, especially at scale. And so I was curious, why is this company exiting for this dollar amount? And I did some parsing. So here's my hypothesis. One, nearly 100 % recurring revenue. So this is a serious software business.

39:44This is not services. This is not crap. They're kind of pretending as AR. It's real. Quality revenue. Quality revenue. And then also a business that isn't too expensive because they said that it's going to be margin accretive on a non-gap basis kind of from the get-go. so it's not a trash fire of red ink and then also it adds 10 billion or 20 percent to the new parent companies tam in their view so future growth yeah in these situations um the acquirer has a thesis they have a plan and we don't know what their plan is but let's say uh when cyber arc buys this, what they may have done is look at Vanoffee's client list.

40:27They look at their client list. The overlap's 20%. It's an 80 % that they already have their sales team going out to lunch with and taking to playoff games and whatever. And when you introduce this new product, they've penciled out, oh, well, we can triple the revenue. Therefore, we can quote unquote overpay for this. So when YouTube was bought by Google, they penciled it out and they're like, we already have servers. We're going to save all this money on server infrastructure. We got global. We can run YouTube to every country. We've already done that. We've got servers and teams in Korea and Japan and Australia and all over the place.

41:08When you buy a company, if you have a way to monetize it at a higher scale quicker than the original company, you can pay 10X, 20X. It doesn't matter. It's funny money because you'll just, boom, instantly put them through your distribution system and distribution really matters. We've seen this when Slack got bought by Salesforce. Now they took the two lists of, here's people who buy Salesforce, here's people who buy Slack. There are a bunch of people who didn't overlap. Those are potential customers. And the integration with Salesforce and Slack theoretically could get really tight. I don't think it did.

41:46But anyway, that's typically what happens here is the acquirer has some thesis like Facebook buying Instagram. Okay, you cross post your post from Instagram to Facebook. All these old people on Facebook who don't know what Instagram is now go open an Instagram account. Okay, but I want to go back because you described 10x as part of the funny money bracket i mean jason 10x arr was conservative like 18 24 months ago but now you're describing that as pretty expensive am i reading your comments there correctly that 10x is almost like an aspirational like arr exit multiple for technology companies of scale because that's what it sounds like to me um i think we're going to see the multiples in sas go back up.

42:32Yeah, I think we'll see that. I think we bottomed out. And because there was a great SaaS consolidation that occurred, where during the down market of 2022 into 2023, when the market collapsed, two things happened. One, headcount went down. Remember all those layoffs? Well, if you lay off 30 % of your team, or there's 30 ,000 less people or 40 ,000 less people working at Microsoft, Facebook, Uber, Airbnb, those people don't need Grammarly. Those people don't need Salesforce. They're not in Slack anymore. So you have this incredible headwind that all of the SaaS companies felt at the same time.

43:13Then some CFO says, you know what? Boss wants to save some money. We've got 400 SaaS products. It's going to be 200. And then they just go to everybody, can you do this feature in this product? And so something like Coda or Notion, if you were using, let's say, Asana, nothing wrong with Asana, great product. You can kind of do that in Notion or Coda. So then the boss says, can we do that in Coda or Notion project management or to-do list or whatever? Great. We don't need the full-strength version of Asana. We'll just go with that. Or vice versa. Asana does something that some other product does.

43:50And so that's where you're seeing a lot of these SaaS products add adjacencies. and they want to be the last SaaS standing. I think that's dead on. And actually, when you go back and read this particular acquisition, this Vanoffee deal, they said that it's going to help them create a unified platform for machine identity, security at enterprise scale, but exactly that. And also Bessemer, a venture firm that I'm sure everyone listening to this is familiar with, in the cybersecurity space, which is what we're talking about in this deal, said that the growing trend is major players are increasingly turning to product-only acquisitions to build platforms.

44:23And so everyone's trying to get a little bit broader, a little bit deeper, and so that we don't get bumped off as a point solution when the CFO says, hey, we are going from 400 to 200. And so it's almost like SaaS musical chairs leading to consolidation. That's great. I'm sad that we're not seeing more startups go from zero to IPO because that's what I really want to see. But at least we're getting some deals out of it. We're learning from it. And And so that's kind of why I wanted to talk about this. I think cybersecurity is especially ripe for consolidation. So I bet you, I don't know, lunch, that we're going to have two, three, four, more of these in the next couple of quarters.

45:01Yeah. I think Palo Alto Networks has a lot of acquisitions. A lot of these, like what I'll call single and doubles, you might call them tucking acquisitions under a billion in revenue, way under Lena Khan's radar. She's got bigger fish to fry. you know and and frankly you know like it's kind of boring and you're not going to get any headlines going after this israeli cyber company that's trying to make people safe and it's a little billion dollar acquisition 500 million dollars who cares we got microsoft google we got scary people who are impacting the world in their mind that need to be controlled and reined in breaking news coming in about the scarlet johansson her voice maybe you could read this for us alex breaking news.

45:46We have a breaking news story here. This is a first for Alex's co-hosting here. It's in the Slack room. You can pull it up. Breaking news from ScarJo. Breaking news from ScarJo. So quote, last September, I received an offer from Sam Altman who wanted to hire me to voice the current GPTAT-T4.0 system. He told me that he felt that by my voicing the system, I could bridge the gap between tech companies and creatives and help consumers to feel comfortable with the seismic shift concerning humans and AI. He said he felt that my voice would be comforting to people. After much consideration, and for personal reasons, I declined the offer, which means that ScarJo has plenty of money because I'm sure OpenAI was showing up with the dump truck money.

46:27Nine months later, she goes on, my friends, family, and the general public all noted how much the newest system named Sky sounded like me. When I heard the release demo, I was shocked, angered and in disbelief that Mr. Altman would pursue a voice that sounded so eerily similar to mine that my closest friends and news outlets could not tell the difference. Mr. Altman even insinuated that the similarity was intentional, tweeting a single word, quote, her, a reference to the film in which I voiced a chat system, Samantha, who forms an intimate relationship with a human. Briefly, two days before the 4.0 demo was released, Mr.

47:04Altman contacted my agent asking me to reconsider. Before we could connect, the system was out there. Then she says, hire legal counsel, letters written to Altman, and then they've taken down the Sky Voice, as we mentioned earlier. Okay, Jason, I have views about this. You can be a scamp. You can be a rogue. You can skirt the rules when you are small, not famous, and not rich as hell as OpenAI is. What were they thinking? Of course they were going to get in trouble for this. I mean, it's, we keep having these instances occur and you remember the rumors of why sam was fired the first time were and we talked to him about the scandal on all in were like hey this deal making right like this he's a consummate deal maker i've known sam for 20 years he is a great deal maker he talked elon into put co-founding open ai and putting like 50 million dollars in right like um and then he was in the middle east not raising seven trillion that was like a mistake by the press they probably were looking at them tam the total addressable market of chips whatever the future projections of how many we sold and they thought he was raising seven trillion but it's still a lot of money he wasn't going there for yeah he's probably raising a billion or two right to make chips or whatever faves and and and whatever putting all that aside you know if you're a great deal maker sometimes you can maybe um what's the word uh scarface would say get a little high on your own supply kind of situation and this feels like that which is like okay she doesn't want to say yes she doesn't want what i would think is 25 million dollars i'm guessing they offered her whatever she got for black widow times two i remember scar joe had to sue disney to get her black widow's money uh because they didn't release it during pandemic i think they went direct There was that window of release and the royalties.

48:58If you ever want to figure out more about that, just look up Hollywood accounting, which I believe is a fancy word for fraud. But they like to play with the numbers. That way they don't have to pay out a lot of stuff. But anyways, yeah, he got a little high on his own supply here. I mean, why do this is what I would be thinking. If she doesn't want her likeness and she made that or she wanted a higher price and you weren't willing to pay for it. Why would you poke the bear? She is a high profile person. Yeah. And this is just a bad look to be leveraging a person's celebrity, making them an offer, calling them two days before, trying to get the offer done, and then being like, YOLO, you didn't do it.

49:40We'll have AI make a fake voice that's similar to her. I say not cool. Not cool, Sam. You should just respect people's, there's a term, there's a legal term for this, which is a person's like right to their personality. And a lot of us in podcasting who have become a little higher profile have to deal with this, which is somebody will take a clip of me saying something. This happened two or three times. And then they go run an ad. So I say something nice about a startup and then they will take it and then do a YouTube ad on it. And I'm like, hey, you can't do that without my permission. And they're like, but you said it publicly.

50:14I'm like, I said, in the context of my show, you're using me for this other reason that's not allowed. And the way she phrased this was very specific. The confusion of the public is a test for this specific issue. When the public is confused, then you have a case. The reason she said, my family and friends all told me congratulations on this deal, is she's setting up the lawsuit. She's going to want now a settlement and a settlement they will pay her. I am certain. Well, I mean, all they have to do is call 1-800-SATIA-NEDELA and make sure that the check clears. But I mean, just an unnecessary mistake.

50:56And this goes back to your earlier, I mean, joke about them being General Hospital, this never ending soap opera. I mean, here is a second rake in the face for a company that didn't need to step on any rakes. They already have money and technology and momentum and they're kicking Alphabet's butt right now for as far as I can tell. And they can't stop stepping on rakes. And it's beginning to make it seem like I'm trying to find a way to phrase this, Jason, without blowing up the Internet. But like maybe the board had a couple of reasonable points when they were a little peevish with Mr. Altman earlier.

51:29I'm not saying he should have been fired from the company entirely. But I mean, this is not a great look for someone who should know better because Sam's not 21. He's been around the block. He's run things. Absolutely. And the fact that he called her two days before, I think, goes to show that there was some guilty conscience pricklings going on. And that should have been enough to pull the plug on just one of the voice models. They didn't even need this. They had like five others. Yeah. It's called the right of publicity. And you saw this come up with, I brought it up with ads and stuff like that.

52:03But this happened with George Carlin's estate suing because somebody made a comedy special with George Carlin. You can't just do this stuff, right? And the people making deep fakes, I don't want to even bring up Taylor Swift deep fakes because they're really disgusting. and you know like it's uh they're sexual in nature and so it's super abhorrent uh there's like two levels there but the right of publicity is basically i i'm allowed to be jason calacanis or taylor swift or alex wilhelm you could be who you are and not be used by other people in commerce and part of the test is again is the public confused and here i think the public is confused but it's just it's a waste but i mean like think about it we were talking uh 10 15 minutes ago about how cool technology is how fast it's moving how we're excited about it where is it going to go next what software is going to be baked into how is it going to change our life how are we going to work on it together and then we have to talk about scarlett johansson and and her likeness and royalties and that i mean i just i don't want to but we have to because it matters but it just it just he needs like the sam may need like a new best friend to sit him down every like 10 days and be like that's stupid don't do that everyone needs that person in their life I have it.

53:15I presume you do, Jason. And I admit for a number of friends where they just say, hey, am I crazy? And I'm like, yes. Yeah. This time, don't do that. Ask your group chat, Sam. Yeah. Go to your group chat. Hey, should I do this? And he's like, no. One wonders if this is an explicit strategy like Trump to stay in the media and then sell subscriptions. So maybe like creating all this drama and chaos keeps you as part of the cycle. I don't know. You know what they said in their presentation the other week, OpenAI? That 100 million people use ChatGPT. They are the conversation already. I don't think they need any help.

53:55It's like if Metallica put out a new water brand. They don't need that to sell at a stadium. Just show up, play guitar, have some fun, and go away. In this case, make an AI model, sell it to me. Huzzah. Don't get Scarlett Johansson. Don't turn the public sentiment against you for no reason when consumers are paying part of your bills. Maybe is the best way to put it. I was just talking to Huberman about this because he has people using him talking about different nutrients or whatever in their ads. So he'll talk about, hey, you know, you should this, you know, compound, whatever is good for this reason, help you sleep, help you build muscle mass, whatever.

54:33They make an ad, they put him in it. And he's constantly having to sue these people who are making, you know, different vitamins and pharmaceuticals of like, you can't use me in your ad. Just because I talked about vitamin D doesn't mean I'm a spokesperson for vitamin D. And you know what? He wins. And he's winning every time. Of course he's winning every time. I just hope it's enough money to matter. Young people don't do this. I think some people don't understand the law. You're not allowed to use other people to make money without their permission full stop, whether it's authors, whether it's Disney, whether it's Taylor Swift.

55:07trying to get us into the open AI, AI training data, fair use? Because I feel like you're bringing us slowly, slowly over to that part of the conversation. I just think there's a general lack of respect in our industry for content. And Sam, when he was on All In, talked about how music, they didn't want to do any music. I don't know if you heard that conversation, but he was very delicate around music and didn't feel it was fair. I can tell you what that is. In our industry, it's known. Don't poke the music there. They will come down on you. Remember Peloton was using their music? They will try to get an injunction against you to stop your product from being sold in the market.

55:45They're hardcore. They're not like content sites or newspapers, which have traditionally been like, oh, I don't know if we should do a lawsuit, whether the New York Times is doing it. They finally stood up. UMG and Sony will come and kick your door down and take your money. Absolutely. And I've seen it up close and personal with startups we have where like somebody uses music, you know, YouTube did it, other people, you know, they'll have music in their system and they're like, oh yeah, you're using music. Here's your lawsuit and here's your settlement. And you're like, ah, I think I'll do the lawsuit.

56:14They're like, great. Go look up the Napster lawsuit. We'll be here for seven years. Speaking of Metallica, I didn't think Napster and Metallica were going to come up on the show today, but hey, here we are. Speaking of things that are a blast from the past though i want to talk just for a second about what's going on with crypto venture capital because i it's coming back and it's not super crazy yeah so the data from pitch book indicates that uh 2.4 billion was invested into crypto companies in the first quarter of this year and that's up from a crunch based data point of 1.2 billion q4 of last year so a pretty quick a cent and Coinbase is doing good.

56:55Regulatory clarity is coming around. Are we due for another crypto bull cycle? I don't know, but I never write them off, Jason, because I've been around long enough to not make that mistake. I feel like there's Bitcoin and everything else. So if we just talk, there's like Bitcoin in the exchanges and there's everything else. Bitcoin, store of value. It's a unique one of one technology in the world that nobody owns and that has, you know, survived the test of time. So if we put Bitcoin in its own little bucket, obviously, if you're living in Venezuela, or you're trying to get money out of China, or Russia, or you're doing some illegal activity, or gray market activity, it's a wonderful thing to be able to store it, transfer it, put it on a thumb drive.

57:38It's magical. Then there's like every other use case and the exchanges help you trade Bitcoin. Great. right etfs yada yada there's a business there everything else you know i i'm struggling to find the use case where big we're having something on a blockchain or nfts or whatever actually provide enough value that it's worth the technical hurdles right so everybody keeps coming up with um i guess this farcaster is like the twitter decentralized twitter that they're trying to build jack is working on no that was blue sky and then he resigned from blue sky but there's another guy something yeah and then there's farcaster i forgot the guy's name but um he does a podcast and he's he's pretty smart cat um and like farcaster i should have him on the program at some point yeah it's trying to make like the distributed version of twitter that nobody can ever you know take down right and is you know sensor resistant whatever i don't know that that's enough of a use case for people to do all these technical hard things to sign on and for it to hit scale like in other words the value of decentralization for money if you're a money launderer or you're trying to you know fight against um your currency being devalued whatever it happens to be like that's that's a really great use case and it's worth the squeeze call it uber or book an airbnb like everybody told me airbnb and uber were going to be just intermediated by crypto.

59:09People said I was going to tokenize my house. Turns out I haven't. Yeah. Well, I mean, tokenizing your house is an interesting one. There is like this ability to take a home and then sell the shares in the home, right? And have it be a way for people to play the real estate market. And I think that's a thing. Isn't that just a real estate investment trust, aka REIT? Yes. Aka a thing we've already invented? Well, yes. And that requires a bunch of paperwork, just like a venture fund requires a bunch of paperwork, et cetera. You know, in venture, at some point, it will be legal to create a venture fund that's tokenized.

59:46And I will do it when it's legal and it's buttoned up. Imagine I raised$100 million from 100 ,000 people,$1 ,000 each, whatever it is, 10 ,000 people, 10 ,000 each, do your back of the envelope math. And then let's say that 100 million doubled in value. And you said, well, you know, I put 10K into that and I double my money. I have 20K right now. I'm going to sell my 10K to somebody else who appreciates the assets in that fund. And then I covered my basis and I'm free rolling on the other 10K. That would be amazing. Do you know how hard that is to do in venture? It's impossible. Like people selling secondary in a fund.

1:00:21Oh, it's so hard. And I don't, have you been following this DXYZ? I just had the founder DXYZ fund stock. This is the destiny. Oh, yes. This is the thing that owns stakes that it's not supposed to have in private companies that weren't approved to be sold as secondaries. Yeah. In some cases. And I talked to him about that issue. And it's cool to be clear. Yeah. Yeah. But I mean, this just shows how much the public wants to participate in the private market. So yes, I do think like an idea like this that was on a blockchain would be fine with me if it's regulated and people aren't going to get scammed.

1:00:58The problem, of course, 99 % of these things are scams, grifts, or incompetence, or some combination of those. Yes. And sometimes they're fun. No one has more fun than the crypto kids. They invent a new meme token. There's Bonk now, which is like a Shiba Inu offshoot on Solana. Okay. They're having more fun than I'm having. I pay property tax. I don't know. But I will say, though, when you talk about tokenizing a venture capital fund, I can totally see a use case for that. But it's still an inherently financial use case of the blockchain. And that to me is the limit around my interest in it. Because whenever I pull up a crypto focused game, for example, it's always about NFTs and trading and no offense to the crypto folks out there, but that's not what I want.

1:01:45That said, though, you and I, our perspectives, VCs are showing up and putting more money into this stuff again. And so I'm curious to see what comes out of this next wave, because we haven't seen a new innovation like NFTs a couple cycles ago, ICOs a couple cycles before that. So I'm curious what will be the thing that makes the souffle rise yet again. And frankly. I mean, Bitcoin is over 70 ,000 as we speak. It's up 6 % today. So crypto does that. And Bitcoin's been around for 15 years and hasn't been hacked. hasn't, it's like, it's really one of the most resilient things humanity's built. Like, it feels like the Great Wall of China to me.

1:02:27Like, are we all going to die in a pandemic? And then like, Bitcoin is still running and like some alien species comes here a thousand years from now. And they're like, yeah, they're all gone, but hey, their Bitcoin servers are still running. We have some archaeological evidence that humans were smart. They created this token. Okay. So do you use Fidelity, Vanguard, or any of those kind of equivalent online brokerage services? Sure. Sure. I know that all of my money, which is in those services, is at risk to one EMP, right? Like if you take out the computers, all my money goes away. It's the one thing that gold bugs do have right.

1:03:05But I think at the same time, if you take out all the technology to the servers and stuff, Bitcoin also grinds to a halt. And so to me, it is, I think, as you said, a store of value. I think it has shown the test of time because we're still talking about it. But it does have the same risks that I think other modern forms of money and value have to it. And it hasn't solved that because if you show up in the future Wild West 2.0 when there's no water left with a USB stick with some Bitcoin on it, you're not going to get a drink. I don't think. Going back to politics, I think if you want to win the presidential election, if you come out and say, as part of becoming president, I am going to solve the regulatory framework, presidential order straight down to the SEC, and we're going to fix this mess.

1:03:53And Americans will be able to trade in crypto. And we're going to be the leaders of crypto in the world. You would get low single digit percentage of these lunatics, young people who love DraftKings and sports betting, stonks, Robinhood, and crypto. And you say, listen, it's your money. You want to bet it on the Knicks? You want to bet it on Bitcoin or an ICO, or you want to, you know, bet it on GameStop. It's your money. You're free to do it. And here's like a sophisticated test. You know, take this test, learn about diversification and scams, protect yourself and then have at it. I think that wins you a couple of points in the election.

1:04:31And I think Trump's going to do that, by the way. The election, right? Because in the US, it's always 48, 52. So this week, the House is going to take up the financial innovation and technology of the 21st Century Act, or what they're calling FIT21, bipartisan, endorsed by the Blockchain Association, generally a well-received thing. And one thing that it does, according to a House summary, is participants will have a clear process to determine which digital asset transactions are subject to the SEC's jurisdiction and so forth. And so essentially, they're trying to solve what you're saying. And I think the Democrats are coming around a little bit on this.

1:05:08If you, if you, I've been watching the tea leaves in the last 10, 14 days, I think this is turning around. And what I think that means is, is that the crypto long-term believers, your Brian Armstrong, et cetera, are going to get most of what they want, which means that the U S is going to stay pretty much. I think the global epicenter for crypto talent and so forth, apart from tax havens and so forth out there. But I mean, Singapore and other places were really, you know, trying in the, in Dubai other you know the zerg whatever that was and switzerland was trying to oh yes yeah remember that like they were going to be the place i think montana or wyoming were doing dows and i thought the dow i don't know did you follow the dow thing uh decentralized autonomous organizations yeah what did you think of that jason i was in boy scouts and i have been a patrol leader i have been a senior patrol leader i have herded the cats and uh that's why i was a little skeptical of daos yeah i love the idea i love pure democracy i love people working together i love federating out power to the folks but a discord group does not a democracy make and so to me like the technology was never there to actually underpin the aspirations yeah and so it just it struck me as like modern day utopia utopia utopia utopia yeah sure utopian sure utopia that english i speak it utopian thinking yeah uh that was great and it never really took off and i don't think we've seen a dow apart from maybe maker dow that has actually stayed around long enough to have this sort of impact people hoped that they were going to have so cool but you know not exactly it kind of turns into lord of the flies awfully quick doesn't it i think is your point boy scouts and lord of the flies are like either end of the spectrum right you got like the Navy SEALs, Boy Scouts, and then Lord of the Flies.

1:07:03I was a scout as well. Lord of the Flies and Boy Scouts are much closer together than you're thinking. It's feral children. Exactly. It gets a little crazy out there. I know we have to go, but I'll just say this. Pay attention to the crypto regulatory scene this week, everybody. There could be some important votes that could determine where venture capital flows, where founders flow, and where projects are built. So if you care about that, it's a big week. And then for market pull, we talked about two really great examples of market pull in our industry historically for founders who just want to study that.

1:07:33And one of the things, Alex, I'm really glad you're here, is you can, as a journalist and an editor-in-chief of all these publications over time that are at large, all these titles you had, you can start looking at the advice for founders and startups and maybe helping me tease out some of those topics for the audience. Like market pull comes up all the time. How do you know you have it? Like Stripe and Twitter were like two of the, it's canonical, I guess the word for that, like examples of market pull that we've ever seen in history. Those things really drove, you know, people who were like, I need, I need some way to process payments that's cheap and fast and better.

1:08:16And it was like, oh, have you not tried Stripe? And I was like, wait, what is that? And they just, boom, people sign up and start using it. You don't, you don't have to have a salesperson get on a call and then with twitter it was like do you want to talk to the world in real time from the sporting event or from your you know whatever you know and uh yeah here's your publishing platform how good of examples those are actually i would go back free stripe and talk about square back when it was called square yeah i recall when they put out the very first little reader you could plug into the bottom of your iphone yep 3G, I think, back in the day.

1:08:49Yeah. I got one of those. I had no use for it whatsoever. I just wanted one because I knew that that was a, it unlocked a thing, which was commerce, essentially. Yes. And I also will never forget the first time I figured out what Twitter was for. I used a client called Twirl back in the day, like 2009, 2008. And I'm like, wait a minute, I can just say as much as I want and other people have to listen to me? Instant, just full on addict, haven't stopped since. Yeah. I will be on Twitter when the universe ends or X or whatever. And you're also, again, back to your political framing, you're a free speech absolutist.

1:09:28Yes. Based on my watching you on social media over the years. So a free speech in terms of government control, absolutely a free speech absolutist. I think we should be allowed to say fuck on television. I'm a big, I do not want the government saying what I can and cannot say. at the same time i do think the market will respond to certain speech and i think people can flake to the two but when it comes to regulation i'm about as close to a free speech as you can get yeah yeah it's so weird like our generation because i think you're kind of on the tail end of gen x you consider yourself a tail end of gen x or like don't don't shoot me but i'm square in the middle of millennials okay because you come across you present as a gen xer um so So it's the hair.

1:10:14Did you have Gen X mentorship when you were growing up? Like were you around Gen Xers? So I think that's the thing with some of the millennials is they kind of hung out with us because we were the older kids, like in high school, whatever. So if you had a Gen X influence on you, you're like, you know what? If a bunch of idiots want to prove to us they're racist by, you know, putting on bedsheets and pretending they're part of the Klu Klux Klan and march down Main Street, great. Now we know who these idiots are and they've proven it to the world. I'm fine with like Kanye West going on Twitter, saying crazy stuff, and then getting suspended because you know what?

1:10:48Now we know that this person has mental illness, is an anti-Semite, and worships Hitler. Like the guy is obsessed with Hitler apparently, and like he's mentally ill. Yeah. Okay. What more do you need to know? He's told you who he is. But importantly, you just said Kanye West should be allowed to go out and say whatever he wants. Agreed. and that private companies can then choose to platform or not platform that speech. Okay. That is literally how it's supposed to work. That is the government going away and the marketplace functioning speech. What you don't want to do is let Bob or Jane tell you what you can and cannot say or hear or whatever, or how to run your business.

1:11:28That's what I'm afraid of. And I think that people want to be loving and caring towards each other. And we end up trying to solve speech by limiting it. And what we end up with is a mess consistently, because yes, no matter how much good faith you have in your government, someone else is going to win an election down the road and they are not going to agree with you. And you're going to give them a big old stick. Yeah, exactly. Be careful, because if you start tipping the scales and then you lose power, guess what? You just gave that weapon to the next administration, the next one and the next one.

1:12:02And who knows how they swing that kettlebell. It's going to swing away your head is what they're going to do. Yeah. Duck. All right. Listen, this has been a great first episode. We'll see you all on the next This Week in Startups. Everybody go follow at Alex and welcome him as co-host of the show. Thank you, Jason. Give us your notes. Let's get him some follows here. And I'm at Jason. This Week in Startups.com is powered by Podcast AI. You can search the entire archive of God getting close to 2 ,000 episodes. And we will be doing two news programs a week. Subscribe to the YouTube channel. This is critical and turn on the bell so that when we go live, hey, you can know and get this breaking news and you don't have to wait for the show to be edited and come out the next day.

1:12:45Two ways to win. All right. Great job, Alex. What a great first show. I enjoyed this. Thank you. Absolute blast. Total blast. I'm so glad you're here. Fun times.