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It is now $199 a year, $19 a month. I have a discount. You can get it for $150 a year. I think if you go to newcomer.co right now.

Oh, there you go. Get it for $150. And what is that like? You do two a week, three a week? How many drops is it?

Yeah, so it's a I've got like a weekly like podcast out that I just relaunched that comes out once a week. And then I tend to publish once a week myself. And now I have like, like I just literally, while we were preparing for this published a data post that we're starting to put out once a month. Right. So it's sort of, it's, it's a mix, you know, it's not like sort of a morning brew thing where you're getting like an aggregation, like I'm doing reporting. And so then when I've got a scoop, I publish it. When I have an interview, I publish it. But the podcast comes out Tuesday mornings.

fascinating. I think it's a good place to start here in our discussions, a lot of news going on, and we'll get to your latest scoop. But it is really interesting how independent journalists are becoming sustainable. let me just ask it outright. Without saying your salary, but the the compensation you had at the information Bloomberg as you were working up as a journalist, versus running your own company similar, more less, plus or minus 10%. Where does it wind up?

I'm at two years, six months. Definitely a year out, I was making more than I was at Bloomberg. Now it's becoming a business to the level I think some people in media discount. I've hired a chief of staff. I mean, if you think about my business right now, I have like three revenue lines basically, right? I have subscription, which for the first two years was all my revenue. And so that's some, some people pay, you know, one 50 year and then a small, I raised the price recently. Um, so you can sort of do the math. I have like 2,300. So that's like 400, you know, top line basically from subscription revenue. And now I'm doing sponsorships. I just had Vanta sponsor my podcast. He sponsored seven episodes. I won't say how much they paid, but you can sort of do math on that. And then I'm doing this Cerebral Valley AI conference March 30th. And that's going to be huge. I mean, that's going to be, I said in the journals, that's like more than a third of my revenue for this year.

So it's fantastic. So you could hit a million dollars in year three or so of doing this possibly.

I think, I think that'll happen.

fantastic. Congratulations. Awesome. Feels good.

The big question is busy, you know, it's, I'm like, ready to, yeah, well, it does change your mindset, right?

From being an employee and being like, blah, blah, blah, you know, union leader employee, we need to fight management. I don't think you were that, but you did see that with your compatriots, this like anti management, and you're the owner, right? And now you're like, Oh, my God, running a business is hard. How does that change? If it does at all? how you look at the people you're covering, who are business creators, because now you're a business creator. And does it change how you look at businesses in some way? And business leaders?

Yeah, I mean, I think there's a lot on just sort of, I don't know how a company company operates and like focus. I mean, I think one thing that's funny to me is just, you know, I think as a reporter, I would look at all this sort of self-help leadership type advice and sort of laugh at it. Yeah. Especially for like business leaders, because it was like, you know, shouldn't you be worried about like, you know, I don't know, complex financial advice rather than just like how to maximize your schedule. But now that I'm like running a business on my own and just like very busy, it's like, Oh, actually like the optimization of like my time and my own ability, like output work is actually like probably the most important lever in my business overall. And so then I have much more appreciation for a while. Why you just sort of go back to the fundamentals of like, Oh, how do I, how do I make sure I'm as productive as I, as I need to be in all that? Um, so I have more empathy for that.

You have more empathy too. Yeah. That's good. I think this is going to I think the substack podcast revolution is call it independent journalists, because some of them are using other platforms, Patreon, this existed before substack. And they're competing nicely, I think. And then there's people who are now creating SAS based solutions. that are maybe not the 10% that Substack takes. Substack takes 10% plus the 3% credit card or the 3% is blended into the 10.

No, Substack takes 10%.

And then yeah, Stripe facilitates the actual payments and takes like, yeah, so yeah, so when you start getting to big numbers right now, 40k, or whatever, 50k, you know, four or $5,000 for your hosting companies, not outrageous. But you hit a million, you start thinking 100k. Maybe you start look at other options.

But a lot of my, like I'm saying, a lot of the revenue is conference and then sponsorships. I would say, I mean, right now I think Substack is super worth the money. I mean, they draw, I mean, you, you set up a Substack, right? I mean, I think the recommendation feature is driving a lot of growth for me still. Oh, the recommendations are working.

Yeah. And that's why the free list is you know i have more than 50 000 free subscribers and that's that's the crazy thing is i think they figured out the referral system and so i've been getting all these free which you know if you just use a generic mail provider you're not getting that and then i looked at and i was like i have a bunch of lists that are infrequent founder university has a list, the accelerator has a list, the fund has a list, the podcast has a list, I have a personal list, and we really don't use them that often, maybe once every couple of months. So we're paying some sass fee to manage those, which is fine, but they're infrequent use. It's not like we're some retailers, I don't wanna say spamming, but blasting all the time about discount codes. So I was like, wait, it's free to use substack. you're not charging. And yeah, I'm getting free subscribers. So it's just a no brainer. Just park them over there. I had them parked at review to on Twitter. And that was great. But I guess they're deprecating it. So you know, I like the idea of like the Twitter bio having the one click. That was a really cool innovation. But that went away. I just like the idea that you can get some free subs. Um, but yeah, if they keep it to 10%, it's a low enough take rate that I think they're going to balance like, Oh, I'm getting free subscribers and some convert the referral system. You might just be like, you know what? That's a, that's a fine VIG to pay. All right. It's definitely good.

Well, just the last thing I'll say, I mean, you know, the anchlor and then also Barry Weiss have started to build publications on them. I'd be interested to know what the, if the take rate's the same on those, because... Oh, if they negotiated a different rate? Because if you start building an actual business, I feel like the dynamics must be different, but I'm not sure.

mean, it's pretty portable. So I think the the point at which you're going to have to think about this, and maybe Casey has to think about this Newton, right, Casey Newton. Yeah. So some of those folks when they hit a million, if they have 5000 10,000 subs, which you'll hit at some point, I think when you hit a million dollars, and you're paying 100,000 10,000 a month, you start thinking, I could hire somebody at full time and use some of these other platforms. And maybe that makes more sense. And I think that's why Sam Harris was on Patreon for a while, he moved off of it. And he didn't have to pay the VIG and he didn't have to worry about having somebody turn him off. Although Substack seems pretty committed to freedom of speech. In fact, they might be a little Yeah. This Week in Startups is supported by First Republic Bank. Tomorrow's innovators need funding today, and no one knows that better than private equity and venture capital firms. First Republic bankers understand the fast-paced nature of your business and are ready to quickly and efficiently meet your firm's unique needs through all market cycles. Best of all, you'll be partnered with an experienced banker who will serve as your single point of contact. That means you can reach out directly by phone, email, or First Republic Secure app. When you're too busy to leave the office, they'll even come to you. Experience the difference a true banking partnership can make. Visit firstrepublic.com today to learn more. That's firstrepublic.com. Member FDIC and equal housing lender.

Mario at The Generalist just moved back to Substack, which was interesting after going off. I mean, ease is something people undervalue. Sometimes it's just like, this works, like worry about the other parts of your business. Yes. That's certainly valuable.

That's where take rate as a, as a general concept, you have to provide more value than you're taking. That's why I think Apple is in crosshairs for people, hey, 30% is too big of a take rate, people are like, this isn't fair. We're not going to offer Spotify, or some epic games for at night, you can't buy stuff, right? You got to go direct to the website to buy it. It's just too large of a take right now. If it was 10%, those people would be like, okay, right? Whereas a small person might be like, you know, calm calm or fitbots, some other apps we've invested in, like you're happy to pay it. Thanks for featuring us once in a while. I do also like subset has an app. I know it's a little controversial, because people can experience your newsletter without the email, I guess. I don't know if that's, I think Casey was the one who pointed that out. Like, I don't want to be bundled.

It doesn't worry me as much. I mean, I think anything to make the reader experience better. And right now, we're all very dependent on like, Gmail, right? You know, like, Gmail filtering, I don't know, it's, I'm happy for, you know, my readers to be able to find the newsletter, however they want.

I thought the chat was interesting. Did you use the chat feature yet?

I haven't, you know, with Casey, I am actually in a discord group.

Yes. You know, I joined that as well. I forgot the name of it, but I just didn't like my channel.

My, my community isn't very active. I would not call it. I think Casey's has been more of a success. Mine. I don't know. I haven't really invested in building the community, but then I didn't, I didn't want to play around with the chat feature.

know, the pro I do I put I turn the chat feature on and it was kind of interesting that dozens of people showed up to say hi. But it was interesting. I think it's got potential like to turn a mailing list into a community is kind of a clever idea. Right? I think that over time, people will like that if there's a purpose. But I think what's going to happen with substack over time is you have the fear of people unsubscribing because the newsletter is not intelligent enough or not insightful enough. that is a fear that I think drives performance. Right? Every time you hit that psyche, right. And I was just reading this, like, business insider, you know, super link beady, obviously. And I was just admonishing a writer over there. I was like, they were dunking on sequoias fun performance. And I was like, Have you not heard of the J curve? Like the I told him, I was like, you look dumb. like, and he's like, Well, I did put in here that these are young funds. I was like, Yeah, but look at the headline, look at the tenor of the story. You're obviously dunking on them and saying, like, Oh, mighty sequoias like doing poorly. I was like, you kind of look dumb. I'll be totally honest, you look uninformed. And you look link baiting. It's not a good look. And it's like, but I guess it gets clicked. So it works. But if you were to do that in an email newsletter, you might have three people on subscribe, paid subscribers, like, Oh, this person is dumb. Speak to that, like you are.

I'm and I'm not speaking to that story specifically. I mean, it seemed what I'm describing is challenged with their public holdings. I don't know enough about the new phone.

Well, everybody else. Yeah.

Yeah. Yeah. The But yeah, I mean, I feel like the value of the newsletter is that every piece is delivered to your readers' inboxes as equal to the prior pieces, right? At Bloomberg, it really felt like, even though we had a big audience, stories were sort of fighting for a spot on the homepage or on social to be valuable. Whereas for the newsletter, every piece matters, and therefore, I'm much more apprehensive about sending a piece that feels unusually weak, because everybody's gonna see it and it's gonna be embarrassing.

I think that's a very healthy dynamic. I think this is like, you know, we had a talk on debt count, dead cat bounce, which is the previous name, just dead cat, the old name.

Yeah, exactly.

Old name, the dark, dead cat bounce podcast. I mean, that's what you're talking about. The dead cat bounces as a finance.

That is part of what it references, but it actually references a conversation between Mark Andreessen and Mark Zuckerberg. Oh, where Mark Marc Andreessen text, Marc Andreessen texted. Yeah, no, no, no. It's spycraft. Marc Andreessen texted Zuck and said, the cat's in the bag, the bag's in the river, which is some really like obscure spy reference. And then Zuck replies back. Does that mean the cat's dead? And so we just thought it was funny. It came out in a lawsuit. It has to do with Andreessen helping Zuck get like more founder control over Facebook.

And so yeah, that was dead cat. I felt like that was either. like Mark Andreessen's finest moment or worse. I couldn't figure it out. I was like, wow, this dude is really on the side of founders. He's negotiating against the other board members to covertly coach Mark on how to manipulate totally the comp committee to let him go become a senator or something and still maintain control of the

company. I just I just love it. You know, I'm all about insiders. And like, Silicon Valley works based on actual human beings. Like, I just have to read Hoffman for my new podcast. And like, that's like a dream. And so I feel like that, that whole Mark Andreessen, Mark Zuckerberg saga, it's just funny to me. It's just like, oh, the people, you know, their machinations are really deciding, you know, who controls like one of the, you know, 10 biggest companies in the world.

Yeah, exactly. I love it. Alright, well, there's a little preamble for you folks. Okay, now, you just published on newcomer.co. Go subscribe, everybody. 150 bucks. You published a scoop. Scoop. On Stripe. So, tell us what's the latest on Stripe.

Uber was the only one. I think it's got to be top three, at least. For sure, yeah. So yeah, amazing. And it's at a $50 billion valuation down from 96, which had been the peak for Stripe. Cut in half. But this is not money for Stripe to use to run its business. All the money is basically going to be used to help resolve this expiring restricted stock unit problem that Stripe has had. It granted these options. And since Stripe hasn't gone public, some of the options are going to expire for early employees. So they need to help those employees deal with the options, pay the tax bill, The tax bill might be about $3.5 billion, and then the remainder of the $6 billion will mostly be used as an actual tender offer, basically, to buy the shares and let some employees and ex-employees see some money.

So the tender offer means that thrive capital general catalyst a 16 z founders fund who are reportedly participating around they'll buy some shares from those employees, so they'll own some common shares. This is exactly what Masayoshi San did with Uber. bought put in some shares at a very high valuation for preferred, this doesn't seem to be happening here. But or maybe it will. And then also did the secondary. So I'm guessing some percentage of this is at a preferred price. And some of it's buying that secondary. Or the company's buying back the secondary.

I think, I mean, yeah, some of the details, it's not clear, you know, not yet. I mean, Goldman Sachs and JP Morgan have been sort of steering stripe through this. And some of the Goldman private wealth alliance are also invested.

Well, their revenue has slowed a bit over there. But they're still growing 85% year over year for their net revenue. Well, that was 21 to 22 net revenue grew 85%. But yeah, what what's is it? Are they growing fast? Or are they growing slow?

Well, I think it's the combination. The information reported that they lost some $500 million last year, which for a company that I think had bragged about how profitable it was, was worrying. The gross revenue grew 27% last year to $14.3 billion. And yeah, I think the year before had grown sort of much more than that. So it was sort of a shocking slowdown. Because obviously, if you're investing at $50 billion for a company that you don't know when it's going to go public, and you're a venture firm, so you want to see big returns, you're hoping for $100, $150 billion company to come out of this. In which case, you need to see continued growth and sort of profitability. And, you know, I think in particular, you know, Adyen is this public company that Stripe gets compared to a lot and Stripe had just let its headcount balloon. And so then if you looked at, you know, revenue to headcount, I think in particular, Stripe looked more challenged. And so they, they cut 14% of the employees in November. Yeah. 4,000 to 8,000 employees from 2021 to 2022.

Right. I mean, that's a lot of headcount to add. And they did the riff, right, cut up 1100 employees. I've been dealing with business insurance for three decades, I am on the board of a bunch of companies, I watch people who don't have insurance, get themselves into trouble all the time. Switching providers has always been a nightmare. It's too expensive takes too much time. And often, it doesn't even guarantee better coverage. But now, you can make switching radically simple with Embroker. Yes, Embroker is the perfect destination for industry-tailored commercial insurance. It's business insurance specifically for startups. Embroker's single application helps startups get four quotes, one, two, three, four, for four lines of coverage in just 15 minutes. They connect you with one of their expert brokers for unmatched service that goes beyond your policy. And listen, Embroker is such an amazing product. I use it. A lot of my startups use it. It's so easy to use. So try Embroker today. with code twist and get 10% off their startup package at imbroker.com slash twist. That's E-M-B-R-O-K-E-R.com slash T-W-I-S-T and use the code twist to get that 10% off. It's meaningful. Every dollar counts right now. We love you, imbroker. Thank you so much for supporting this podcast for so many years. What do you think generally? What's the back channel? I mean, we talked about it a lot on this week, startups and all in about the layoffs. What's the you know, when you kind of, I think straddle as we talked about at the top of the show, say, the maybe antagonistic, anti tech press, the, you know, sub sack insider kind of new state of journalism. Yeah, what is the actual truth to how these layoffs are being perceived by the rank and file in Silicon Valley? Do they understand it? Are they upset about it? What's the are people in a culture of fear now, and scared for their jobs?

I mean, I feel like, obviously, everybody has a different opinion. I think there are some people that I've seen almost like lampooned for they get laid off and then they still write some tribute to their years there and sort of totally understand it, sort of the capitalist. And then I think you see sort of people who work at Google and come to see it as sort of like a birthright. And then as soon as They have people leave there. It's like, how could they do this? So there's clearly a range of opinions. I mean, personally, yeah, I do think layoffs are part of business. And some of these companies just hired so much that the companies need to be able to lay people off. And there's certainly an was an amount of, you know, entitlement amongst some of these tech employees that they should be able to earn, you know, hundreds of thousands of dollars a year, forever. Yep. I think the Facebook case in particular, which I'm sure, I think you guys have talked about on all in, I mean, it's just, you know, managers, managing managers, managing managers, or whatever. That was Zuckerberg's great quote, right?

Right. And he's like, yeah, this has got to stop. And we're going to consolidate down. And if you want to be a manager, maybe leave.

Right. And I mean, yeah, I don't think anybody wants to work for a company where managers are managing, you know, it's just like at some point, productive people want to work at companies where they're surrounded by people who feel like they're doing the work.

I might, you know, I've come to the conclusion that it takes two to tango. I think Google created this culture of entitlement, because they had the money printing machine. I think Silicon Valley copied it because they had no choice because it was an arms race. And there was a talent, you know, war going on. And Google explicitly led that talent war by saying, you know what, we'll hire people to let them hang out on the roof and drink in the quad is I know, like in Silicon Valley in Hooli, right?

Well, we'll hire you for you to give up on your dreams. You see with us, you know, exactly.

That was that was the explicit strategy, Eric, as vocalized to me from the top of the company. And, you know, people other people copied it. But they didn't have the money printing machine. So then that gets you into a bit of a trap. People basically are going really fast. And they just went flying off the cliff.

Right. And I mean, you can see why people are upset. If they do give up on their dreams, they think they're gonna get this money year after year, you you sort of set a norm, and then people expect it. And, you know, it's a hassle, you're pretty far along on your career to go find another job.

So there's, you know, I wonder what happens to this group of people, let's say who didn't have jobs that were essential. who now find themselves having maybe gotten paid three times what they were getting paid maybe five years earlier, right? So they were working in marketing or sales or PR, let's PM design, let's call it a non highly technical AI developer or top sales executive position where like they're super valuable and coveted even to this day. And they got to 400,000, 500,000 in blended comp between stock and base. And they started their career just five, six years ago at 100. Have they did they hit peak salary compensation for their careers are getting laid off at 3540 years old, right? I mean, that's, that's a possibility.

Yeah. I mean, hard to know, right?

just think that's and then I think there's two things that are headwinds now for talent. One is everybody insisted on continuing remote work. You know what happens when you insist on remote work and you're highly paid? Your managers learn what your output is, right? because they have to figure out your output because they can't actually see you doing work. They don't see you at a desk. They can't manage by like, policing the prison yard, you know, like walking around the open workspace and making sure you're there early and you stay late, which is how managers kind of manage managers. They would just look at literally the number of cars in the the parking lot and the badge is coming in out. Well, now your managers got to evolve, they got to look at your commits, your code commits, they got to look at your sales, they got to look at what you wrote in your end of day report in Slack, what you said in the stand up, you were going to get done and what you actually got done. And then they put it against something in Canada, or San Paolo, or Singapore. And they're like, wait a second, we have offices around the world. And we're paying people different amounts of money around the world. And I can hire five people for the class of this person. Remote can be helpful to the employee.

And then AI. Yeah, AI, but remote can be helpful to the employee too. I mean, there's so much wasted time at the office. I agree. I mean, I love Bloomberg, but you just feel productive talking to your colleague, you know, like hearing their problems, whatever, but it didn't necessarily get you anywhere towards work, they would actually like increase Bloomberg's revenues, you know, I mean, so if you cut out some of that, your employees are, I don't know, happier, maybe more productive.

I feel like nobody likes to commute and everybody likes to live in low cost place. I think it just, I think what's happening is we're going through a great reset of salaries and compensation. So this great reset in tech and business and media is, you know, going to be impacted by two major forces remote work, global remote workforces. So I think if you were highly paid in the United States, and lowly play lowly paid in Manila, I'm just thinking of like, the biggest Delta, right? A writer in New York, a writer in Manila, a sales development rep in Manila, a sales development rep in, you know, Los Angeles or New York, or San Francisco. So there's a huge delta in your salary. I think one person's salary goes up massively once comes down modestly or moderate moderately, right. And so that like global price, you want to work at home, we don't care if you're in Hawaii, or you're in Manila. this is what we pay for work. And then when AI starts doing the work, I think that's the other thing. I don't know what your thoughts are now of how much this is applicable, but you and I are writers, right? And like, you ask chat GPT in this nascent version to make you a punch list of what should be on a marketing program. Like you can do in notion now it's built in. And you're like, make me a checklist of what I should do in a marketing plan. And it's like, okay, that's a pretty good starting point.

Right. Well, you know, I was preparing for my interview with Reid Hoffman, you know, the LinkedIn co founder who just stepped off the opening board. And so I was talking to chat GBT, and like asking him for question advice. I thought, on the one hand, it was a very useful tool to think through things. It knew generally, this is somebody who thinks about blitzscaling. He was at Microsoft. It's smart enough. You could ask the questions and not look like an idiot. On the other hand, I was talking to it. I was trying to tell ChetGBT, have you ever watched Joe Rogan? Or I could have said, have you seen All In? ask straight questions. You know what I mean? Yes. Sometimes you give a rant, and then you ask a question. Sometimes you ask short and sweet. Sometimes you're annoying. You ask a range of different types of questions, and at least I wasn't able to evoke from it the questions that I wanted. Now, I do think some of that is just like there's going to be all this human language engineering of the machines to get out the output you want. You know what I mean? Right. But, but yeah, I, I, I definitely, I think it's going to be very hard to predict which jobs actually get replaced because people want to say, you know, other people's jobs get replaced, not mine. You know, everybody sees, I don't know. It's hard to predict.

Like, uh, this is hilarious while we're talking just to show you the power of like this technology in its most early state, I decided to, uh, type in the doing an interview with the prompt I gave was what question should I ask read Hoffman on a podcast ask questions in the voice of Joe Rogan. All right, folks, we got a legend. We got a legendary Silicon Valley entrepreneur investor in the house today. Correct. He's both read Hoffman. Explanation point read. Great to have you on the show. Pretty nice. Let's start with your journey. You had an incredible career as an entrepreneur investor. Can you walk us through your journey? How you got started and some of the biggest challenges you face along the way? I mean, that's a generic college.

There's no spice.

Yeah, no spice. But if you were a college kid learning how to do sure, a podcast, they would be like, yeah, asking about their career. You co founded LinkedIn. Okay, getting more specific is now the world's professionalism. What is the original inspiration behind LinkedIn? Pretty good question. Original inspiration question.

But they're very old. Yeah, yeah. It could Yeah, they're very generic.

The generic today. But if you said, you know, if I think the interesting thing is, you're going to be able to say, those questions are pretty generic, can we get right, something a little more spicy, and it's gonna be like, okay, spice it up.

I mean, I'm extremely bullish. To be clear, I think this is huge. I mean, it's regular people on the street, I feel like I go to the gym locker room, people are talking about it. You know, like there are lots of things, crypto or whatever, that Silicon Valley gets itself hyped up about that nobody else cares about. This is something, I mean, my fiancee uses it just like it's not, you know, to think about what emails she should send. You know, it's, I think it's already very useful.

I'm trying to figure out what's more shocking, that she does it for email or that you have a fiancee. Hey, welcome to the All In pod. I feel like I could do a pod where I break the chops a little bit. Yeah, my favorite is we've gotten to the point in which and look at these, like this gave me like more questions than it kept going. I didn't ask it to keep going. But it just kept going. Yeah. What advice would you give aspiring entrepreneurs who are just starting out? That's a good one. You're involved in a number of philanthropic endeavors, including black lives matter movement and the fight against climate change. Tell us more about your philanthropic work.

It's not bad. I think it's very safe. This is where I'm almost with the Elon's of the world or whatever. I feel like I worry that it's just like, I already hate bland corporate speak with humans. I don't want this AI machine to just there's no spice in that. Like what?

Yeah, I just feel like boring. Right. I mean, right. If chat GPT and if Microsoft is making chat GPT safe for that use case, totally understandable. Right. But then again, like, search engines have like, filled with porn and hate speech and every possible corner. So if it is being compared to search, there should be a safe search filter at some point we say, Hey, let this thing rip. I want to ask it. I don't care about safe words, racism, sex, whatever isms. I don't care about filtering this. I don't care if it's off color. Let it make jokes in the style of whoever's the most offensive, right? Like, tell me some offensive jokes.

Yeah, I, on the one hand, I'm supportive of, you know, more unrestrained. On the other hand, I do just worry and I don't know what the solution is to this. They're very psychologically persuasive, you know, like the whole episode with like, Sydney and being that, you know, Kevin Roose, New York Times. Yeah. Ben Thompson wrote about. Those are smart people. I feel like there's a lot of pull to it. I think we're very close to a situation where people take these chatbots seriously. I mean, that was the whole Lambda encounter with that Google engineer. And so then if you have people interacting with super dark bots, they can be led into dangerous places. I think that's what...

Okay, imagine this. You got an idea for a great tech startup and you think it's going to change the world, but you got a problem. You just don't have the engineers that you need to make it come true. Why? Well, it's obvious. It's hard to find engineers. There's a lot of competition. And hey, you're trying to keep your burn rate low. You need to conserve cash. Now, imagine you had a partner who could provide you with more than 1,000 on-demand developers, right? As many as you need. And these developers were all vetted experience result oriented. And they were incredibly passionate about helping you grow your startup. And what if they charged, you know, competitive rates, things that you could afford? Does this sound too good to be true? Well, let me introduce you to lemon.io startup shoes lemon.io because they only offer handpicked developers with three or more years of experience. and who have strong portfolios. In fact, only 1% of candidates who apply to work with lemon.io get in a couple of our launch founders have worked with lemon.io and they had an amazing experience. And listen, I have used outsourced full time teams for decades, whether it was way back at weblogs, Inc. Mahalo on to inside.com at launch, This is the way to do it. Go to lemon.io slash twist and find your perfect developer or tech team. And you can do that in 48 hours or less and twist listeners get 15% off for the first four weeks. Stop burning money, hire developer smarter, visit lemon.io slash twist. I think what we have to understand is we've passed the Turing test. in many cases, right? And we've crossed the uncanny valley. So the Turing test by Alan Turing in 1950, like if you were to ask, you know, the computer or a human to give you an answer to a question, would you be able to tell the difference? Like, you can't tell the difference here that that just that one I did about the questions, if I asked an intern or a producer to come up with questions, and they came back with that, like, okay, good start. right. You know, you could totally fool me or anybody, unless you had like, unless it makes mistakes, which it seems to do pretty frequently. And the tone passes the uncanny valley, because it did feel like a little bit like Joe Rogan ask without the spice. So a lot of this leads to massive funding. Let's talk a little bit about this deluge of funding. Yeah. And what you're seeing out there.

Right? I mean, OpenAI is obviously the elephant in the room. OpenAI has an extremely complex structure. It's sort of a nonprofit. It's sort of for profit. Microsoft has a deal with them that we don't totally know. I just say that to say, okay, it's possible. OpenAI is the Facebook of social, but all these venture capitalists know that they didn't get the Facebook of social, and now they're off looking for the social trend. There's a question of which other companies will be able to really make a ton of money off this or be as valuable as OpenAI. I think some of the key contenders right now are other people building large language models. Anthropic, the information out of story that they're raising 700 million dollars in a round led by a spark. I think they said the valuation was like 4.1. So that Anthropic is X, you know, open AI people. So they would be more of a direct competitor. Similarly, I've reported on this company, character AI, which is sort of a mix of building its own large language models. And then also, you know, building these kooky sort of character things, you know.

But there's tons. Making images, yeah. Right, right. So that's really interesting. If you were to look at those first two, these are gonna have overlap already. They're massively funded. There's a limited amount of talent in the space. I hear AI developers go for low single digit millions a year. That's, you know, the good ones, one, two, three, four million a year. That's what you're hearing. Total comp cash in?

I don't know. That's a good, I should do a story on sort of the individual comp. And I also want to do a story on just like, I feel like there are certain key researchers that make some of these companies are relevant if they have them and not if they don't. So it's definitely, it's like basketball. I mean, it's like a star driven industry.

It is today, Brad Gerstner said on the all in pod last week, when he sat in for free Berg, that yeah, Google was paying somebody 4 million in stock in cash. So that makes sense. If you got a whatever trillion dollar company, give a couple million dollars in equity. And this is the future of the company where you have to protect it from potential, you know, competitors, you got to protect the kingdom. So that's two. And that's, both of them are at, one's at 4 billion, one's at a billion, both of them hundreds of millions of dollars. What else has been invested in?

Were you, Stability's out there raising around right now. I think it might've been Fortune said they were looking for 4 billion.

Perplexity, that was another one.

Yeah, that was, I scooped it. NEA. Oh, you did, okay. I scooped it, NEA was doing it. And then I think Insider followed up with some of the details. I mean, there are a ton, you know, I just published like a market map So it depends. You know, there, there are a lot that battery ventures have put together. I mean, basically it depends, you know, they're the big players who are doing the models and then their company, you know, you've probably heard of Jasper, which is sort of sitting on top of some of the models and saying, how can we use the language prompts to really make it useful in particular cases. I think there's a, there are rivals like this company writer. I'm interviewing the Repl.it CEO and Hugging Face CEO at my conference on March 30th. There's so many. Runway is this company that was used in everything, everywhere, all at once. Are you following that? You have you seen that movie? I have seen it. Yeah. Yeah. So like, you know, it was this tiny design team. And they they used runways like video production tools, which is generally AI to build some of this stuff.

Extraordinary. That's wild. Yeah. It does seem to me, we are now going to have 25 well funded competitors in each of these spaces, right? Their products are going to be non differentiated. And it's going to be a race to the bottom in terms of the cost. per API use. So I think this is like the Uber versus Lyft versus DoorDash versus Postmates kind of battle where VCs are now going to be funding these services at below cost, because these things do take a lot of servers. And chat GPT seems to have made their API. They might I read that they made the cost like 10x cheaper. So they are just undercutting the entire market. Somebody is going to make this API just free as part of like some, you know, long term play to build maybe the language model. But how do you think this all shapes out? If there are 2550 people making You know a i start ups for copywriting and twenty five fifty four images twenty five fifty four making you know.

Characters and films right so many successful companies and that was my. Original plan with opening that sometimes we see only one big company come out but but i mean i do think it's like a huge technological transformation like we're saying i mean it's a case where. you could see why generative AI, large language models could be applied to a bunch of software as a service businesses. It's like, okay, maybe you do make Figma plus AI. It doesn't seem as crazy to say, okay, we're going to try and compete with all these really valuable incumbent businesses. At the same time, I think there's sort of this challenge of like, like notion or Quora, I think are both sort of unicorns, they're pretty far along, I was put them in sort of almost like last era, that are now trying to race into the generative AI space, so they don't get disrupted. So their venture firms are going to have all these sort of old portfolio companies that are trying to dive in. And so I think there's a really big question of just whether you know, whether sort of incumbents or sort of middle ground incumbents can can implement this technology or whether it reminds me of when cloud and mobile came out, there were some folks who could make the jump from cloud and mobile.

If you look at Yammer, Saksis company, they didn't make the jump when they were at Microsoft to mobile. and neither did hip chat. And then slack was mobile first, and they won the day. And then you look at, you know, mobile operating systems, you know, and the impact that had on productivity software, or cloud, and you have people running away with it, and then can other people catch up in time. And Microsoft Office is a fine mobile cloud operating system, but Google Docs, you know, has taken significant market share as well. So

I'm curious what you think about this as an investor, if I'm allowed to ask a question.

Yeah, you can ask me questions anytime.

I mean, so obviously software multiples have collapsed, right? But meanwhile, we're seeing these AI companies raise insane valuations and it's hard to even know what the fundamentals underpinning them are. Yeah. I mean, I don't know, how do we reconcile that? And also, like, do you think, I guess one theory of the world, independent of the technology is just there are all these funds with all this money. And they're eager for any story to be able to deploy capital, they're paid to deploy capital. We just saw it was a founders fund, I think they returned some money to investors, right?

So it's not even returned, because they hadn't drawn the money down.

They said, just said, push it to the next fund or

Or Yeah, we'll just we'll make the size of this fund smaller, because the companies are not asking for more money. They're not asking for giant valuations. Therefore, we can be more efficient. So maybe some of their top LP said, You know what, we're doing so poorly. Do you think you might want to make this a little smaller, so we don't have to make as many commitments because our public portfolios and some of our other portfolios with you are so down?

So that could have been a back and forth discussion.

My sense is they're they do well, but they have the all in strategy for whatever their top investment is. So it is super binary. I'm an LP and a couple of founder funds. Yeah. And so without speaking about it, you know, insider information, Brian Singerman has always said, you know, we just want to figure out what is our high conviction bet that we have in that fund and put like a large percentage of the fund into that, like I did with SpaceX. So I think they've been rewarded for, hey, make some bets, whichever one's the biggest, just plow a large percentage of the fund into that and then move on to the next fund.

And they exit positions at the peak, whereas others like held on, I think, did sell some positions.

That's right. Yeah.

So, but my question was just, this idea that investors are paid to deploy capital, they want an excuse to deploy capital. And this is a good one. Like, do you you see that as a persuasive? Like, do you think there's what I would say you have a fund?

Yeah, so it's you're getting close, you're close. And as a person who's outside as a journalist, you're actually keying into something. it's not that they're paid to deploy. And they need to put the money out there, they know they're going to find an investment, what they need is high quality investments that they think will return and allow them to raise their next fund. That's really what goes through everybody's minds. And I'm raising my fourth fund right now. And I'm doing it publicly. And I'm taking a year to do it because I want to kind of democratize venture capital a bit. And it has made me go back to launch fund one launch fund two, which were like on paper, five x funds, and I got to turn that paper returns into realized return. So I'm like, in that mode as an investor, now five x is extraordinary. That puts you in like very elite standings and but it's down from my Sequoia Scout performance. But I think now it's like really highlighted it for me. You know, I got to be really cutthroat about how I deploy capital. every bet matters, every follow on investment matters. Because things don't always go up into the right, right. And I think that's what's going through people's minds is, oh, man, if I deploy capital in 2021, and 2020, will I even get that money back? Will I be able to return one x? maybe two x right and stay in the game and get my next fund. Now, I think LPS are reasonable. They know there could be a vintage that performs better or worse by definition. So they'll they'll stick with people who have multiple funds. But yeah, people are looking for things to invest in. That doesn't mean they're going to make stupid bets, though. I think it's top of mind for people that entry price matters, right? Right. And so even though you're seeing all this like crazy stuff on the margins, last like three, four or five investments we made and we're seed fund, we're all at five to $15 million valuations, I think in 2021, they would have commanded two to five x that in terms of generative AI companies? Well, one of them was, but it was a previous founder who were just seeding, you know, with a kind of prototype, you know, hey, here's what we're thinking. And it's, you know, first money in, okay, figure it out. Go try and find product market fit. So those are high risk bets, but at lower amounts. And so I think that's the, the strategy people are going to deploy. And you'll see what you're saying.

The one thing I'd point out is like 2021 was an environment where you could be a talented investor by seeing where the momentum was. People were momentum investors. And so you could play this valuation game. It's like, this is a company that's going to raise at a higher valuation. And with generative AI, there is a sense you can get into the hot deal. You can be pretty confident that there will be more money afterwards to market.

remember what Bill Gurley always says, and I think he quoted it from somewhere else, you can't eat IRR, right? You can't eat the statistic that we use the rate of return. So you have to actually get that return. So I think a lot of neophyte investors were excited to do momentum investing in private markets, but never realized, wait, I have to exit And there's no person to mark this up or sell my shares to in secondary. So therefore, what is this actually worth? And I think 2023 2024. These companies go out to market to raise and they raise that lower valuations. And then those vintages, they thought they were I had people who had invested in their funds, and they're like, Oh, we're at three x. And I'm like, wait, I just signed up. Like, yeah, we made four investments. And they're all up in six months. And I'm like, so your fund is up your three x on paper. in one year. Okay, that that's what a fund does overall. So let's see the exits, right, right. I mean, literally, if you were three x after a year, as you on your first fund, the intelligent thing to do would be to sell everything immediately, and lock in a 300% IRR, right, for your career and have a three x fund as your first fund, that would be the logical thing to do. Did anybody do that?

Some people, I think they're like, homebrew, right? Did they sell out? You know, there are funds that I think that most people held on to their winners.

I did try to in 2021, you know, I didn't go out looking for secondary opportunities. But when secondary opportunities came in, I did take advantage of them. because I was like, why not lock in some wins here when we're up massively. And that was smart, because the first fund already returned its principal, you know, already passed that hurdle. And the second fund is the halfway there, or 60% of the way there. And that's fantastic, too. So that's really the big lesson that's going to happen is what's life like in a normal circumstance without the three years of craziness we saw right speaking of three years of craziness. The big news on Thursday shares of Silicon Valley Bank have plummeted more than 60%. Bank went from trading at a $16 billion market cap yesterday to a $6 billion market cap today. Ouch. For context, SVB claims that nearly half of all us venture backed tech and life science companies bank with them. I believe that to be true, actually. Anecdotally, I see that and on Wednesday, their CEO, Greg Becker wrote a letter to shareholders saying quote, while VC deployment has tracked our expectations, client cash burn has remained elevated and increase further in February resulting in lower deposits than forecasted. Okay, this is a bellwether quote. So what this means is VC deployment is tracking nicely. Okay, they expected that but the client means startups, cash burn remained elevated and increased in February, which results in lower deposits. So they have people's bank accounts. What they're saying is startups are still spending too much money. Right? that anecdotally, I also think is correct. VCs are going slow founders are still burning cash too fast. Your thoughts?

I mean, it's the the SVB stock price is crazy. I mean, it really like the debates about whether we went through a.com type experience. Obviously, there are lots of differences. But yes, we'd be stock price is definitely one that makes you like do pretty shocking version, though. Yeah, hit max. It looks like Bitcoin. That's it. Yeah, exactly. I don't know. The market seems to know more than I do because that is a very sharp fall. I think there are questions about the value of their holdings.

Well, Reuters notes, just to that point that SVB sold 21 billion of its securities portfolio CNBC noted that mostly consisted of US Treasury bonds and the company estimated that the fire sale would result in a post tax loss of 1.8 billion essentially the bank is reworking its balance sheet and incurring a large loss from doing so to ups to offset that loss as we be announced a plan to raise a $2.25 billion round in a share sale, of which 500 million was already committed by General Atlantic, a venture firm, private equity firm, a full stage fund.

And right before I came on the call, I saw TechCrunch had published a story saying some, you know, investors are advising their startups like whole money from SUV that obviously would, you know, run on the bank run would be the nightmare situation. So even if nothing is really fundamentally wrong, I don't know either way. But you know, people can get scared. And then that creates its own problems.

So if people were to remove their cash from Silicon Valley Bank, that could be a problem. Or if they were if they have a Silicon Valley Bank, debt facility, a wise thing to do would be to pull that down. So you have it maybe if you had the option. And, you know, this is something that I have had a problem with in early stage startups, which is early stage startups would raise 3 million, 5 million and add a million and a half in venture debt, and then they would just tack it on to their spend. And they would be like, Okay, well, I, I raised 5 million. Right now 30% of that is venture debt. So 5 million, I'm going to burn know, 400,000 a month. So that means I have a year of runway. And it's like, Nope, you have like nine, eight or nine months of runway. And now you're in debt for that last million and a half those last three or four those last four months. actually on the hook for and people started using venture debt, not for like building a factory or equipment, and paying it back over some reasonable amount of time, they were using it to fund runway normal operations. Yeah, that's not a good idea, especially if you don't have product market fit or a stable revenue stream coming in. And I think that's also a potential problem here. For people who gave venture debt to and Silicon Valley Bank wasn't the only one giving venture debt.

I think the broader issue beyond Silicon Valley Bank is just that there are a lot of startups that raised hundreds of millions of dollars that haven't really felt the pain yet. We've seen lots of layoffs, but I still think the fallout for private companies is pretty slow. The public market reacts, you see it, the valuations fall, but we haven't seen sort of bankruptcies that you might, right. And so I still think that there's a lot of potential pain ahead of us. And just, and some of these companies, we just won't hear much about anymore. You know, I think there will be companies that raise hundreds of millions of dollars that just sort of fade from the headlines. I don't know, you just, is that too doom and gloom or?

Um, you know, if you, um, so to your point, Eric, um, is it too much doom and gloom? there are some companies that raise that large amount of money without product market fit. That is a challenge. That is a serious challenge. If they did have product market fit, and there's a there there, in other words, they have 50 million in revenue, 30 million in revenue, well, they could just lay people off until they get to break even or, you know, have infinite runway, and they'll figure it out over time. And that will lead to some hand wringing amongst VCs on the board, but not the risk of a zero. And so that is the question for a lot of these companies is, okay, if you invested in the company at a billion dollars, and they had, I don't know, 15 million in revenue, and you overpaid, let's say 10 million in revenue, so you paid 100x, you really should have paid 10x or 20x, it'd be 100, 200 million, $200 million company, 20x, let's say it's high growth. know, okay, then the company and the company's not growing. Now you got a problem because can it grow into the valuation or not? And how does it grow into the valuation? It just might be three, four or five years of what I'll call indigestion. To use a term, you know, like, just how do we get through this? Like, it's slogging, you know, like, you got to march through a swamp. And so hopefully, the people who are on those boards, and who made those bets are willing to march through a swamp for a year or two. Some of them might not even be there yet. I think some of the folks who are at some of these farms, you know, the TPG tigers of the world, I think some of them you know, left some of those firms.

So then you have to retire if you made all your money in 2021.

Or if you think that fund can never return and get you carry, you might be like, okay, start a new firm. So I think some people did that some more quotes came in from the Silicon Valley Bank CEO, New York based venture firm USV this week, Unisquare Ventures, Fred Wilson sent an email to founders advising them. This is from the information who always likes to get credit or they dunk on me an internal is keeps his hardware. I know I always give them credit. And then they just try to dunk on me in public. I'm just gonna like quote the insider. Business Insider rehash of stolen re aggregation of this New York based venture firm, according to Business Insider, New York based venture fund, the information usv this week said that email to founders advise them to only keep minimal funds in cash accounts at SVB. that is funds up to 250 k SUV is in a severe cash crisis. The email read do not accept any offers from SVB to keep your money there. Even if they dangle 5% in front of you. It said, Oh, he was being noted had reached out to many of its portfolio companies earlier this year saying it had expected such a situation representative from declined comment. Whoa, that's pretty intense. Some vcs. So thoughts on Fred Wilson's position there.