SpaceX's Starship launch, Tiger Global's 20% markdown + Ask Jason! | E1726

0:00Hey, everybody. It's Friday, and I'm doing a solo news show today. I'm on the road. I am actually in Texas, and I just got to watch the Starship launch on 420. So I talk a little bit about that. And then we'll get into BuzzFeed shutting down BuzzFeed News, cutting 15 % of its employees, as well as Fox settling their Dominion voting system libel case for$787 million. And I'm going to take a little victory lap here. Remember I had said that Reddit and Quora should start charging for their data sets? Well, Reddit CEO has come out and saying and has said they're going to start charging AI models to use their data to train it.

0:38Finally, we'll talk about Tiger Global marking its huge$12.7 billion fund down another 20 percent and perhaps a little hand wringing and pain and suffering in the late stage of venture capital and what that means for founders. Also, I'm going to answer some of your questions. I think I have three or four great questions from the audience today. I'm going to answer at the end. it's going to be a great episode. Stick with us. This Week in Startups is brought to you by Pilot. Grow your business sustainably and operate more effectively. Pilot provides the most reliable accounting, CFO, and tax services for startups and small businesses.

1:16Head to pilot.com slash twist and get 20 % off the first six months. Issue is the all-in-one platform for creating and distributing beautiful digital content. Get started with Issue today for free or sign up for an annual premium account and get 50 % off when you go to issue.com slash podcast and use promo code twist. That's issuu.com slash podcast and use promo code twist and Linode. Apply to Linode's Rise program for founder-led early-stage startups and get a$500 credit, up to$120 ,000 in infrastructure credits in year one, cloud consulting, and so much more. Apply at linode.com slash twist.

2:05Welcome to the show, everybody. I'm in Texas. I was here for the Starship launch at Starbase, and it was an incredible day. I would say one of the most intense, amazing things I've ever experienced in my life. A true privilege to witness history. And this rocket ship that SpaceX launched is called Starship. And I'll just give you a quick overview of it. You can see it there taking off. And then this happened on Thursday. It was originally supposed to happen on Monday. And there were some challenges. And that got scrubbed. And they launched today, Thursday, when I'm taping this. Brief history, if you don't know.

2:46So the Falcon series of rockets is what SpaceX is most known for. And they have had 221 mission successes with that rocket. I believe it's the most successful rocket in history. And that's what you see them putting up satellites all the time and landing those reusable rockets on platforms. And they've had two failures, one partial and one total loss in the history of that program. So a tremendous, incredible record for the Falcon for SpaceX. 224 launches and for the first time in history, the ability to actually land these rockets and then reuse them. So according to SpaceX's website, 224 of those Falcons went off, 186 of them landed and 158 reflights.

3:36And this is the key to what SpaceX is doing. If the rockets become reusable, then you can lower the cost of getting to space. economics drives a lot of things in the world and getting to space uh faster and cheaper with reusable rockets is a critical piece of this but starship is a really different beast is the most powerful rocket that's uh ever been developed by humanity and it uh consists of two main parts you got the starship and then you got the super heavy booster starship is that really uh science fiction looking rocket on the top of the booster. It's about 400 feet high, and it's huge.

4:15You can put 150 ,000 metric tons into space, and that's the equivalent of 330 ,000 pounds. Tesla Model Y, that's about 4 ,600 pounds. It can carry 250 metric tons. The BBC made this chart just to give you a scale from the space shuttle to the falcon heavy the the really souped up version of the falcon rocket uh all the way to the saturn five uh and then the starship it is truly amazing and i got to witness this firsthand i was in the control center and it was an epic moment to see the the rocket launch uh of course the press was a little negative on it uh you can see some headlines here. SpaceX Starship rocket explodes shortly after launch.

5:05Some pretty cynical takes in the mainstream media. But the truth is, this is the largest rocket ever made. And success was defined really by just accomplishing two things. One, and SpaceX was pretty clear about this, Elon was pretty clear about it. Hey, can they get this thing off the launch pad? And when you see this thing in person it is unbelievable the scale of it but could they clear that launch pad and that is um that they cleared very easily and uh the the flight went on for i think over four minutes and then they did a uh planned uh you know if if the rocket doesn't uh reach its next stage when it separates then they have this plan to blow it up essentially and that's what they did the other goal is to survive what's called Max Q.

5:55This is like the stress test of the rocket can handle all that thrust. This thing has a lot of the engines at the bottom of it thrusting it into the air. This is a completely new platform. Nothing's ever been made like this. So this would be if you were in the space industry, a huge success. Now, if you're watching headlines on the news, it might seem like a complete failure. But typically when a new rocket is developed three four five six seven rockets uh it takes to get these things stable and into orbit and so this is the start of what will be a humanity changing platform and it really is a platform for putting large amounts of cargo into space and then elon's obviously stated mission is to get to mars so what we witnessed today shows i think a couple lessons for founders who listen to this podcast, rapid iteration and incremental progress, right?

6:49This has been almost two decades in the making. We're in the second decade of SpaceX and they just have been incrementally making these systems more powerful, more reliable, and bigger with bigger payloads. And that's what you really want to take away from this. And they will stack and rack another one of these very shortly is my understanding. I'm not going to speak out of turn here. I'm not giving getting inside information that you can't get on uh twitter and social media or from elon's handle himself if you follow him uh but this is the start of something very big and you're going to see some more of these rockets go off and it's super exciting so more to come but i can tell you just from a very personal place congratulations to spacex team i got to talk to a lot of them today and this week and uh some of them watch the pods uh which is quite nice and they are real heroes for humanity.

7:39The amount of effort and suffering and sacrifice it takes to have this level of innovation is truly impressive to me. And so congratulations to all my friends at SpaceX. Okay, listen, everybody, in the early days of your startup, you need to be focused on your product, your customers, even your team and building that out. But you can't forget about getting your accounting dialed in. As an early stage investor, I've seen so many accounting horror stories, people doing cash-based accounting instead of accrual. Maybe they forgot to do their tax returns. Maybe they paid employees or they paid contractors without having a proper payroll system in place and they didn't withhold the right taxes.

8:19I can go on for hours about accounting nightmares. But when you're a founder, you got to balance two things. You got to have a proper accounting system and you're going to need to run your startup at the same time. And you can't hire a CFO. We all know those come when you hit maybe 10 or 20 million in revenue. So I want you to take a look at Pilot. They've seen all these problems hundreds and hundreds of times. And they will handle your books for you from the start. When you get big enough, of course, you hire a CFO, you bring in your own accountants, you do it in-house, whatever you want to do.

8:47Pilot understands that. They want to help you right now. They want to dial everything in. They'll do it for a great price. Pilot is an amazing service that provides accounting CFO and tax services for startups. So here's your call to action twist listeners can get a 20 discount for the first six months at pilot.com slash twist that's pilot p-i-l-o-t.com slash twist for 20 off your first six months speaking of the media i told you we would see a series of media layoffs after the tech ones and today was a major one buzzfeed uh went public through a spack became worth billions of dollars It was worth billions of dollars in the private market.

9:28The media business, especially the advertising one, is incredibly difficult, especially in a down market. Also, BuzzFeed had a very expensive news division that had done serious investigative reporting. It was actually really well done. They had actually won a Pulitzer in 2021 when they reported on the treatment of the Uyghurs using satellite imagery. BuzzFeed, as a news organization, was backed by venture capitalists. And that is something you will rarely see. Venture capitals do not like to back content companies because they're low margin. They don't scale. They can get to hundreds of millions in revenue, but they don't typically get to billions.

10:07Now, technology might. So something like a social network, Instagram, Facebook, Google search, a technology platform that has advertising in it, YouTube, user-generated content, that works fine. But when you have to pay for the journalists who are not cheap, you know, journalists, probably at BuzzFeed averaging starting salaries 50, 60K and going up to 100. And maybe there are a couple of all-stars in there who get paid$200 ,000 or$300 ,000 a year. Well, they had another riff. Their stock's down to$100 million market cap. Just to give you an idea, I mean, they do a couple of$100 million in revenue.

10:42So they're trading at less than their revenue. And we talk about one times revenue, two times revenue. They're below that now. They're down 90 % since going public in December of 2021. They were valued back in 2016 at$1.7 billion. They should have, and they had raised$200 million from NBCUniversal. They should have sold the company at that point. But the news business is tough, and this is a cataclysmic event. But what I can tell you that's really interesting to me is when you look at how the media cycle works, every time we've seen the industry go through a recession, a depression, a correction, When people get laid off, they will then go start their own publications.

11:23And it happened with the web in the 90s and email newsletters. Then we saw blogs, which I was involved in with Engadget and Joystick and all these great blogs. And then podcasting, which I was also involved with. And even mobile apps. Mobile apps never really worked here in America. They do work in some other countries like Smarter News in Japan and China and some other places, Korea. News apps have become very popular. They're not popular here. Kevin Systrom's working on a new one. But this is an opportunity for all of those people who've been laid off, as hard as it is, to look and say, hey, maybe I can start a podcast.

11:57Maybe I can start my own media company. The secret to media is keeping expenses low. And what happened with BuzzFeed is they had venture money. And venture money thrown onto a business like this distorts it. And it makes it very hard to understand the fundamental economics of the media business, which are generally horrible. Now, solo media efforts like this podcast, right, which does a couple million dollars in advertising, if you can keep the staff size under 10 or so, yeah, you could build a profitable business, perhaps even a very profitable business, but you have to get rid of all the infrastructure.

12:31You can't have offices. You can't have layers and layers of management. And investigative journalism is some of the most expensive items that you can produce on the web because it takes six months and sometimes they don't go anywhere. You might have five people working on an investigative story and it just fizzles out or gets no traffic. Adding to this problem was BuzzFeed had an addiction and a dependency on Facebook. And Facebook rug pulled them, I believe, multiple times. So remember Facebook pages, Facebook stories, optimizing headlines, paying for Facebook headlines, and then doing what's called arbitrage.

13:06You buy a bunch of traffic from Facebook at one price and then you try to sell premium advertisers. And then at some point, Facebook was like, you know, we'll just keep the traffic here. And we don't need to send traffic to BuzzFeed. So they didn't have direct traffic to their own website. And the media business is hard. And it really is moving. When it gets this hard, you start to see unnatural acts occur. And it becomes largely entertainment and clickbait. Audience is starting to understand this. So this has turned into a really vicious cycle. It's not all publications, but many publications are fighting to get attention.

13:43So then they go with whatever the clickbaitiest headline is, as we just talked about in the previous story. Oh my god, the rocket ship blew up. But the goal of this was, of course, to just get off the launch pad. So this was an incredible success for SpaceX. But that's not as sexy as a headline or as clickable as a headline as rocket ship blows up, right? And we see this really has manifested itself most acutely in what we saw earlier this week, when Fox settled with the Dominion voting system for$787 million. Let that sink in. That's basically eight BuzzFeeds at the current valuation. This is a lot of money.

14:21The previous biggest settlement in the media space was$177 million in 2017 between ABC News and a South Dakota meat processing company. And this is four times plus that. And this settlement happened as there was about to be a defamation trial in Delaware. Fox acknowledged that the court had found tons of falsehoods that they aired. But Fox is not going to be required in the settlement to do apologies or retractions. As part of the settlement, I think Dominion wanted to get this huge check and they got it. A lot of the different folks at Fox had to testify, and there was a lot of discovery where they pull people's text messages, emails.

15:07And so if you look at just this settlement, wow, I mean, it is such a large number. Fox had$4 billion in cash on their books, so they're basically giving 20 % of their cash over to this voting system. I don't know how big the voting system company is, but I think this is the biggest dividend they're ever going to give to their shareholders. And they've been pretty quiet about the settlement. From Reuters, host Tucker Carlson and Sean Hannity, who had been expected to testify in the Dominion trial, did not reference the settlement during their primetime broadcasts. And this is something that we can all reflect on.

15:44Now, Fox News does not represent all media outlets. But television news specifically has changed over the last two or three decades. There was a time when the nightly news, Walter Cronkite, Tom Brokaw, Katie Couric, there was considered an honor and that this was a vocation. And it was an important service to the public that you get it right. Over time, CNN came out, MSNBC, which was originally a partnership between NBC and Microsoft. That's the MS in MSNBC. If you don't know that, you can look it up. And of course, Fox News. And it became entertainment. And so you went from reporting to opinion.

16:25And the audience was trying to parse that. Am I watching Walter Cronkite? Am I watching Tom Brokaw, Peter Jennings, somebody who's telling me really specifically what happened in the news well researched? Or is this just a talking head? Or is it an entertaining talking head? And really, the audience, I think, has now figured this out, calling it Fox News. I mean, if they just called it Fox Entertainment or Fox Opinion, they could just call Fox Opinion a network. And that would be, I think, a little more honest. Because when you watch these, and I'm not just saying it's Fox. I mean, MSNBC obviously has a ton of opinion folks and very little original reporting.

17:02A lot of times their original reporting is by having a New York Times reporter on the program. So this is indicative of something that's been happening in the media space. And it's why Twitter, podcasts, email newsletters, and other independent journalists are doing so well right now. It's because the audience wants to talk to a small number of people they feel they can trust. And they are trying to figure out what the motivation of that person is. So you're probably here listening to This Week in Startups wondering, hey, what's my motivation? I invest in startups. I'm passionate about it. I don't need to do the podcast every day.

17:35This amount of money I make from it is not life-changing for me. I do it because I love it. I have a passion for it. So you can infer from this, I'm an investor, passionate about startups, passionate about technology, and I enjoy doing it. Does that mean I am pro-technology? Of course. Am I pro-entrepreneurship and capitalism? Of course. But am I trying to entertain you and maximize the revenue and ratings? I'm not going for ratings here, obviously. If I was going for ratings, it would sound like maybe some other tech podcast where I'm being hysterical about technology and whatnot. So we try to just keep it 100 here, keep it a buck, keep it super serious and insidery.

18:16And always try to tell you the truth. Okay, listen, if you're running a sales team, you got a design agency, you got a media business, you know the hassle of one pagers, right? They never format correctly on mobile. You can't track them properly. It's a complete mess. I have worked in the media business for many years, three decades. In fact, I'm getting old. And nobody had figured this out until now. You have to check out Issue. It's issuu.com. Issue is the all-in-one platform for you to create and distribute beautiful digital content. It's not just one-pagers. Those are important, of course, but you can create marketing materials, magazines, catalogs, portfolios, and so much more.

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19:40As we keep moving here through the news, is that AI is changing a lot. And journalism is going to be greatly changed by ChatGPT4 and other language models. And they've been trained on large data sets. We saw Bloomberg release their own version of like a ChatGPT. And other people are doing that too. But I have to take a little bit of a mini victory lap here. You may remember on This Week in Startups and the All-In Podcast, I have been saying, hey, if you trained your language model on somebody else's data set, that would break their ability. And there's a very multifaceted, but pretty simple rubric here of what's fair use and when you can use people's data.

20:26If you create a derivative work out of somebody else's information and you impede their ability to then do that themselves, you are going to get dinged with a lawsuit and you will be stopped. Well, here we go. Reddit is going to start charging companies that use their data to train their AI models. Of course, Reddit's content comes from users. So it is user generated, which leads to the next question. Should those users who originally put it in, do they need to have permission and do they need to get paid well no when they posted it to reddit they said reddit gets to keep a copy of that for all time right that's the agreement you make when you use any of these networks uh like you know and you posted them the the portion who owns it whether it's core etc gets a license forever to use your content so be aware of that and so here's what i said back on all in episode 111 chat gpt and all these services must use citations of where they got the original work they must link to them and they must get permission that's where this is all going to shake out and i believe that's but forget about permission i mean you can't get a big enough data set if you have to get permission in advance right you should go out and negotiate it's it's going to be the large data sets quora yelp the app store reviews amazon's reviews so there are large corpuses of data that you would need like Craigslist has famously never allowed anybody to scrape Craigslist.

21:51The amount of data inside Craigslist as but one example of a data set would be extraordinary to build chat GPT on chat GPT is not allowed to because you as you brought up robots.txt last week, there's going to need to be an AI.txt. Are you allowed to use my data set in AI and under and how will I be compensated for it? And so this next clip, Satya Nadella, will answer this question from the Verge's Neelay Patel. It's not a great answer. Kind of obscurifies, but we'll talk about that after the clip. If I ask the new Bing, what are the 10 best gaming TVs, and it just makes me a list, why should I, the user, then click on the link to the Verge, which has another list of the 10 best gaming TVs?

22:37Well, I mean, that's a great question. But even there, you will sort of say, hey, where did these things come from? And would you want to go dig in Even Search today has that. We have answers. They may not be as high-quality answers. They just are getting better. So I don't think of this as a complete departure from what is expected of a search engine today, which is supposed to really respond to your query, while giving them the links that they can then click on, like ads, and Search works that way. In my mind, there's a terrible answer. He needs to address how they get paid. He punted the answer and just said, hey, listen, Search works this way.

23:10Will the rights to the data, will Google just say to Quora, hey, we'll give you a billion dollars a year for this data set if you don't give it to anybody else? They should. So he's kind of saying, hey, chat GPT and giving an answer is going to give a link, but they don't actually give links in these. They just give the answer. And so the question really should be, you need to pay the people who wrote that story. And back to the BuzzFeed story from earlier today, if they trained ChatGPT on BuzzFeed's content and BuzzFeed is struggling right now, well, maybe we can fix. So there's an opportunity here.

23:48Maybe we could give BuzzFeed$50 million a year. They get$10 million a year from five different language models who want to use their corpus of data every year. Maybe Reddit gets$100 million. Maybe Reddit says to their top users, if you contribute over this number of words, we're going to put you into this pool. and or if your content gets used more regularly by a language model again this is somewhat complicated but not unprecedentedly complicated because we have sampling in the music industry um there could be some money that is shared youtube shares revenue advertising revenue with its users and so why couldn't a language model and you know google should just if i'm google right now?

24:32Are we just doing exclusive content contract with Reddit and Quora for a billion dollars each for 10 years,$100 million a year and block Microsoft? What's going to happen when these lawsuits drop? Because I do think this will result in lawsuits is you could get an injunction against somebody like let's say chat GPT. If they did in fact use Reddit, which I believe they use Reddit, Twitter, they did everything. And Google's word has probably used everything. So if you are using that content, you can probably get an injunction and basically turn the service off. So this is going to result in some very large checks being cut by the people who have trained their models without permission.

25:14On Tuesday, Reddit said it planned on charging for access to the API. It was made free for developers and researchers for non-commercial use, but obviously of Microsoft ChatGPT, GoogleBard, they're using it for commercial. And according to the New York Times, 57 million people visit Reddit every day. It's a very large website. A small number of people contribute to it, but the CEO, Steve Huffman, who's been on this program, it's been a while, Steve, come back on the program anytime. I would love to talk to you about this. He says, more than any other place on the internet, Reddit is a home for authentic conversations.

25:44There's a lot of stuff on the site that you'd only ever say in therapy or AA or never at all. That's an interesting insight, actually. The Reddit corpus of data is really valuable, but we don't need to give all that value to some of the largest companies in the world for free crawling reddit generating value and not returning of any value to our users is something we have a problem with it's a good time for us to tighten things up so he's indicating there that the user should be cut into this i think and when he says it's a good time i think that has a lot to do with the fact that reddit was planning to go public and this would be an incredible story to go public with hey we have advertising revenue will have some sort of subscription or maybe a virtual currency they were playing with their red or gold.

26:28But really, if they can start dropping hundreds of millions of dollars in licensing fees to the bottom line, that could be extraordinary. Interestingly, Shutterstock sold some of its images and the data in those images to OpenAI, which was used to create the DALI text to image model. There are a ton of different lawsuits that have already been fired off. I've talked about them before here. And if you follow Elon on Twitter, he literally says to a tweet about Microsoft using Twitter, he says they trained illegally using Twitter data lawsuit time. So I don't have any inside information, but there you have it, folks, right from Elon himself.

27:09So this is going to be a lot of popcorn in the coming months and weeks. and it really is fair for these content sites to get paid and maybe we can fix journalism here maybe the new york times uh maybe washington post maybe cnn maybe fox if they did have a revenue stream that was based on high quality content as opposed to link baiting maybe they would do less link baiting and just focused on incredible content right because they wouldn't be worried about the advertising the eyeballs and chasing you know an extra 25 percent of people to click on a link that maybe isn't as accurate as the boring reality of most stories in life.