00:00:00
i think jamaat's point is right though there is
uh so so much more liquidity available through
00:00:07
access to retail and international market
um participants um in in a public setting
00:00:12
than there is in a private setting and it
is because of this liquidity premium and
00:00:16
the easy access to putting capital in um it's
just extraordinary how much as i've watched
00:00:22
close friends and companies and companies i've
invested in i'm sure you guys have done the same
00:00:25
transition from private to public uh the
valuation jump is extraordinary like uh on
00:00:31
on a metrics basis right so whatever the metric
might be you get public there is this flurry of
00:00:37
of market participation as a result it drives
up there's a multiplex when i thought you're
00:00:41
be sorry can i just say something that's such a
such an important smart thing that friedberg said
00:00:46
so jason for example like all of us ha we're all
still in the private markets and i'm not trying to
00:00:51
take away from the private markets but what david
said is so important if you used to look at a sas
00:00:55
deal you'd price that sas deal 10 times arr right
then there's a little bit of inflation you know uh
00:01:02
the rates go up um the prices that people pay
go up now all of a sudden we're paying 12 times
00:01:07
15 times now it's 20 times if you're growing 100
rate over year so what's happened the market has
00:01:13
become more efficient and the excess return is
getting eaten up and so you're like okay well
00:01:18
that's still really good and you wait four five
six years and you think you're going to get paid
00:01:23
the crazy thing is like once that
company transitions to the public markets
00:01:27
i mean all of a sudden if you actually turn the
investor base over and you actually create a float
00:01:32
so that public market guys can buy it they'll pay
30 times that's right 35 times 40 times so there's
00:01:38
a massive multiple expansion so companies should
be going public sooner if you think about this
00:01:44
like if i'm trying to raise money for one of my
companies i'm gonna call on my 10 20 30 friends
00:01:49
that i know that are investors in private
markets and say hey guys do you want to look
00:01:52
at this company and maybe i'll get two or three
interested parties and maybe we'll kind of agree
00:01:57
on what a fair valuation would be if i could take
that same company and instantly make it available
00:02:01
to a million investors and all i need to do by the
way is raise 10 million dollars all i need is some
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small number of them to write a couple hundred
dollar check and i'm able to fill that that round
00:02:11
out the valuation as a result of the liquidity
available in that market is so much higher
00:02:16
because there everyone's gonna there's gonna be
much more participation in bidding and so you know
00:02:21
what i think chamoth has tapped into with the spat
vehicle and um what robinhood is realizing and and
00:02:27
i don't think that we all talk about this enough
but there's this massive massive massive market of
00:02:32
international investors of small of international
retail investors who are now rushing into u.s
00:02:38
equities freeburg didn't we see that in the ico
craze as well where you you i think if we took
00:02:44
anything from the ico craze it was and the global
appetite for risk and the dot-com boom before that
00:02:50
and i think we have to give bestdc a lot of credit
here for leading the smack movement i mean what's
00:02:53
your take on everybody copying you down this
backpack champ at this point i had desktop metal
00:02:58
as an early angel investment that just spacked um
i thank you yeah and they told me that thank you
00:03:05
for the markup um and i've been hearing like i i'm
get if i'm getting inbound as an angel investor
00:03:11
from i literally got a cold email from some high
profile people they're like hey can you do you
00:03:15
have anything for us to spack i mean this is like
the third or fourth time people are coming down to
00:03:19
my [ __ ] level of angel investing saying can you
introduce us to the calm guys can you introduce
00:03:23
them to robin and i'm like i think you can go
direct to them but what is your take on how many
00:03:29
specs have been created to juice like literally
single-handedly restarted the smack movement i
00:03:34
think i don't think you've ever got a record about
this uh i'm really proud of what we did when we
00:03:39
created this thing two years ago i said i want to
basically create a new way of doing ipos i called
00:03:44
it ipo 2.0 i reserved ipo a through z on the nyse
i i hope um uh to fulfill that and i think i will
00:03:54
um but taking a step back for a second in the year
2000 there were 8 000 public companies in america
00:04:01
on the american stock exchanges and in the year
2020 there are 4 000 so we've shrunk in half the
00:04:09
number of public companies while at the same
time we've you know 10x the amount of comp uh
00:04:15
the amount of capital and the number of people so
we don't have a large enough surface area in the
00:04:21
public markets that's why companies are better
off going public because they're going to have
00:04:25
a much more receptive audience of people that
are dying to own growth of any kind what's the
00:04:32
earliest and the media and that people should
go public well so so here's the thing so like
00:04:35
if you're like one of 30 companies in a venture
portfolio that's growing at 50 plus percent
00:04:42
you're one of 30. but when you go public you're
one of one you know when you're growing 50 60
00:04:49
you you become very unique all of a sudden
you're a sort of a one percent kind of a
00:04:53
company you're an outlier and so you get treated
you know incredibly well so that's the backdrop
00:05:00
i think a company should be going public around
year five year six um what revenue footprint uh
00:05:06
about 50 million you know at 50 million and when
they're doubling i think that they should be going
00:05:11
up and you know it allows them to build capital
slowly it allows them to basically contain control
00:05:16
it minimizes dilution um i think it's a really
powerful model and then on the number of spax what
00:05:23
i would say is i think it's really good that the
market is getting diversified i think what's going
00:05:27
to happen is like the the thing with spax is it's
going to be no different than in some ways the
00:05:33
banks that preceded us which is that there's going
to be a distribution you can go to goldman sachs
00:05:38
and that will mean some one thing you can go to
merrill lynch or b of a or ubs or jeffries it'll
00:05:45
mean other things you can go to allen and company
it'll mean yet another different set of things and
00:05:49
i'm sure there's going to be a you know an
organization that uh is all about cost some
00:05:55
is going to be all about relationships um so i
just think that's going to be the distribution
00:06:00
my personal perspective it's probably us and maybe
one or two other people who really dominate the
00:06:06
space and i'll and i'll tell you the only reason
why i say that i think it's going to be really
00:06:11
important when these people try to get these facts
done what they're going to realize is it's really
00:06:14
hard and it's hard for a couple reasons number
one is you have to marry operational insight and
00:06:21
public market sophistication and the founder will
get really smart about being able to figure out
00:06:27
whether this person is just a financial arbitrager
or if the person has enough operational experience
00:06:32
to deeply understand the business why you have
to translate it to the public markets well
00:06:37
that's one huge thing that i think that people
will um will start to will start to hone in on
00:06:44
anyways there's a bunch of other things
but um are you now competing with it
00:06:50
with the 50 million yeah yeah sure um i'm i'm cool
with that you know i invest well before that so
00:06:55
i'd be i'd be happy for you probably have a bigger
portfolio 50 million dollar investment yeah it
00:07:01
is it's great for for for me and jason and i you
know i i think chamoth deserves a ton of credit on
00:07:06
on this whole spac thing it is i don't know if
all the listeners um are aware of this but this
00:07:10
back thing's become a huge wave um there's a
ton of people creating them kevin hartz is a
00:07:16
new one reed hoffman has a new one they're you
know the east coast hedge fund guys pincus and
00:07:21
um and then the east coast hedge funds like
bill ackman whatever they're all creating them
00:07:25
so chamath has really started a wave here
and i think the appeal of a spac to a founder
00:07:30
i'll put in a plug of why i think it's a
good idea for a founder to consider this
00:07:34
is because you essentially what founders are used
to is doing you know private rounds right you
00:07:40
agree on a on an amount raise an evaluation and
it's a percent dilution and you're done that's it
00:07:46
and it's simple right and and when you ipo and
need to raise money it's not like that you have
00:07:52
to then work with an investment bank they'll put
together a book you do like a road show you do
00:07:56
this whole dog and pony thing you don't know how
much money you're going to get at the end of that
00:08:00
process or what the valuation is going to be and
then on top of that we know statistically bill
00:08:05
gurley's published all the stats the investment
banks are going to rip you off so you know so that
00:08:10
what a spac does is it prices like a late stage
private round you just agree with a spec promoter
00:08:17
on a valuation an amount raised and then on
top of it you get kind of a direct listing
00:08:22
along with it and all of a sudden you start
trading as a public company and so a spac is like
00:08:27
a combination direct listing plus private round
and i think that's going to be appealing to a lot
00:08:33
of founders as they start to discover this more
and more saks in a way you're saying it's going
00:08:37
to feel more like doing a series d then it does
a road show and yeah i think that comfort level
00:08:43
for somebody like robin hood or
com or data stacks or thumbtack or
00:08:48
any of these companies that you and
i are every company in your portfolio
00:08:56
this is i think this is going to be the new thing
for early stage investors is we're not going to
00:09:00
count unicorns anymore we're going to count specs
we're going to count public listings right and
00:09:04
and i think that's the other thing by the way the
other the other thing that i'll say to founders is
00:09:09
one is i think you need to you need to think
about do these people have the combination
00:09:15
of operational and financial acumen in the public
markets um and investing experience in the public
00:09:22
markets and the uh operational credibility to
describe the business and i think you can trade
00:09:28
off one for the other if one is so deep meaning if
warren buffett was doing us back you'd say well he
00:09:33
has no operational experience but he's so credible
in the public markets then you know that's all
00:09:39
that matters but you need to be super super deep
in one or have a really brilliant and thoughtful
00:09:44
level of credibility in the publics meaning an
early stage investor who isn't married to somebody
00:09:49
who can basically say i know how hedge funds work
i've made them money and i'm gonna make them more
00:09:54
money and mutual funds etc is troublesome the
second thing is for founders you have to really
00:10:00
make sure you understand what is in it for the
person that's doing this back i mean in every deal
00:10:05
i write a minimum of a hundred million dollars
personally and that's a lot and so i skip in
00:10:11
the game i feel very much at risk and so i take
a lot of time to make sure these things go well
00:10:17
and then the third is that for the spa person
what i'll tell them is they're gonna find
00:10:22
that there's a bunch of landmines um and i'm not
gonna you know say it up front because i think
00:10:27
it'll be fun for them to find out themselves
along the way but these things are hard the
00:10:33
first one took me two and a half years uh
they're hard yeah they're hard they're hard
