00:00:00
sax is there something you object to
here the poker one and net worth no
00:00:03
i mean that's fine i don't give a [ __ ]
about longevity or quantum computing but
00:00:07
here's the good news david it's not
all about you there's four people
00:00:12
you could have two people who like the
topic and then you could just ask them a
00:00:15
probing that's fine it's fine just
tell me when it's over i'll do you know
00:00:39
hey everybody hey everybody welcome to the all
in podcast i'm jason calacanis and with us today
00:00:47
again the queen of quinoa david friedberg sans
his dog in the background sorry for those of you
00:00:54
who love his dog he's gonna walk he'll be back in
like 10. he'll be back and he'll be in the seat
00:00:59
uh and the rain man himself david sachs
ultra focused on sas and marketplace startups
00:01:08
and involved in some illegal trafficking of
red pills straight up from honduras to cuba
00:01:15
and then through miami making the red pills making
their way to california and finally daddy's back
00:01:23
the spackmaster himself bestie see
the dictator bank account replenished
00:01:32
he'll be rebellionized by firing on all cylinders
oh it's so so you know live by the spec die by the
00:01:40
spec that's what they always say in this
business but you know what we have been
00:01:43
absolutely inundated with i kid you not hundreds
of questions from you our loyal audience
00:01:49
and when this thing is over we are going on
world tour we'll see you in vegas we'll see you
00:01:55
uh in uh at the royal albert hall in uh london
and miami all cities are on the agenda let's take
00:02:04
our first question from you the audience to what
extent are you guys waiting how's everyone doing
00:02:08
all right answer the questions but it has a i mean
look at this guy he got his ass kicked and he's
00:02:14
back i'm doing really really great what about the
rest of you guys you guys played poker this week
00:02:19
who played poker it was a bloodbath well
although you know it's so funny because like
00:02:23
we played i played uh a very big game the week
before and then we step into our game which is
00:02:29
like i think still quite big but i could not
rub two cards together to make a hand and i
00:02:35
uh i went off like a rocket ship i just lost
it somewhere and just despite that despite
00:02:41
that every time i chamath and i were heads up
at hand he just smashed absolutely smashed me
00:02:48
and then i was like you know what i'm not going to
be bullied anymore and then i stand up to him and
00:02:51
he's got the nuts each time uh i was down i did j
cal i did run you over i mean the number of just
00:02:57
complete bluffs i ran on you oh the first and i'm
just like oh he's totally got my number tonight
00:03:03
after bluff after bluff after bluff and then i
showed him the nuts five times in a row it was
00:03:07
beautiful so i'm stuck a model y and i come back
and i win a used prius i'm just leaving it at that
00:03:14
i lost a mid-sized home in phoenix arizona i
think you lost the bentley okay don't cancel us
00:03:22
please uh sex did you play i wasn't there in
that game but i played in uh la game a couple
00:03:28
of nights ago and uh any celebrities yeah me
me sacks and oh god you guys don't count names
00:03:35
or podcasters no there was one there was one
unnamed celebrity we can't say what what but
00:03:40
no we can't say but we all want we'll just give
us a genre politician an athlete okay yeah i
00:03:46
won in in that game but i lost uh i lost in a
different game this past week and it wasn't pretty
00:03:51
yeah wait sexy sexy are you what are you playing
yeah i think he may be playing actually i mean
00:03:57
beep that out would you nick beep it out but we
could all laugh at him for being so precious oh
00:04:04
you i'm sorry do your lps think you're supposed
to be in san francisco investing in startups no
00:04:08
no they they know i go wherever the deals are
oh really miami what did you get a deal would
00:04:14
you get a deal on some croquettes and a cuban
sandwich two for one there's no copies there
00:04:20
when do you think you'll make an
investment in the miami-based company
00:04:23
do you think that'll happen any time what's
happened already has it happened are you in
00:04:29
i've invested in a miami company i've got like
six yeah i well there's some companies that are
00:04:35
moving to miami that i'm already in you know
chamath and i are both in pipe right and and
00:04:40
uh part at least the ceo the company just
moved to miami so that's two of four two or
00:04:45
four besties in pipe thanks by the way how
did you miss that j cal they they advertise
00:04:49
on your show and you didn't think to try to
access that the lp beep that we all share
00:04:55
wanted everything and he couldn't fit me in
and i was like how about a slice and he's like
00:04:59
is that lp me no there's another lp that sacks and
i share who got their beak significantly doused in
00:05:07
that one but i'm just gonna i'm gonna get the kid
to give me a 25 basis points and uh advisor share
00:05:12
so i'm getting a slice no matter what yeah good
good luck with that good luck with that good luck
00:05:17
the train's off the station the train's off
the station dude that that company's worth
00:05:21
a couple billion dollars in less than two
years of its existence good luck with that
00:05:25
jason okay well it's right we call it a making
i don't know what you guys are seeing but my god
00:05:31
early stage valuations went bonkers
i had one company that raised
00:05:35
that don't run it i have all kinds of
data okay right so today we're going to do
00:05:39
some audience questions and then we're going
to do the state of vc we're running through
00:05:42
a deck we're running through everything that is
changing right now in venture capital and early
00:05:47
stage investing and it is changing very quickly
here's a question from leonard uh oh musics to
00:05:55
what extent are you guys interested in longevity
in your opinion what technologies could help us
00:06:00
live longer and healthier lives freedberg that's
got your name on it why don't we start with you
00:06:04
um on this one i would uh point folks to read the
book lifespan by david sinclair who's a researcher
00:06:12
at harvard and he's done a lot of kind of leading
work on on basically calling aging a disease and
00:06:20
life extension so the book lifespan highlights
i think a lot of his research and findings
00:06:24
and paths forward uh for um for improving uh
longevity and basically you know it comes down to
00:06:32
what he defines as kind of an early switch
that evolved in evolutionary biology
00:06:37
in every cell in every living organism where
the cell is either in growth mode or repair mode
00:06:42
and the trick is can you get the gene to switch
on that puts the cell into repair mode and if
00:06:48
you do that the cell fixes itself and you and the
cell lasts longer and the organism lives longer
00:06:54
and so they've identified a number of genes that
trigger this in a number of compounds that trigger
00:06:58
expression of those genes and there's a
number of things you can do lifestyle-wise
00:07:03
to trigger these genes basically to get
yourself to live longer so fasting is a good one
00:07:07
and then there's a bunch of compounds that you
can take that mimic fasting on a cellular level
00:07:12
like metformin and rapamycin i'm on metformin
i think a couple of you guys are on metformin
00:07:17
right yeah yeah and then and then the nad
plus supplements um which you say mmn subs
00:07:23
yeah nmn nmn and nad plus um so there's two
there's two compounds nmn like nancy mike nancy
00:07:32
and then nr and those you can buy a product
called true niogen on amazon which which has those
00:07:38
compounds and you take about a thousand milligrams
a day and um anyway all of this stuff's laid out
00:07:43
in his books and it supports a lot of the research
that's being done obviously fasting and exercise
00:07:47
also trigger this gene expression and enable
kind of um measures of longevity uh to kind of
00:07:53
be showing up biologically but um i think i think
it's a it's an emerging field and there's a lot of
00:07:58
deep work going on and as people have highlighted
the the process of aging is a biological process
00:08:03
that theoretically we can stop and potentially
reverse and there's a lot of new work that's
00:08:08
being done in stem cell therapy that may kind of
elicit some new paths forward here so arguably
00:08:13
someone is alive on planet earth today that could
live past the age of 200. um so it's an exciting
00:08:19
field and lots of kind of path forward i'll uh
i'll tell you for what it's worth my regimen
00:08:25
um and oh god here we go thirst trap photo coming
in three no uh so so i i i do uh the following so
00:08:36
um i take uh a statin now it was 10 milligrams now
i'm at 20 milligrams um i take metformin and all
00:08:46
of this i take sort of in a preventative posture
um because my cholesterol wasn't super high
00:08:52
but it wasn't super low it's like sort of like
in the 160 170 180 but now it's sort of like 120.
00:08:58
um and then metformin i take preventatively as
well i'm not pre-diabetic um and then a couple
00:09:04
of vitamin d and some other stuff but then here
are these things that i do that i think could be
00:09:08
valuable for some folks listening uh there are
these places now that exist they're popping up
00:09:15
one company that you can check out is called
pre-nuvo p-r-e-n-u-v-o um they are in vancouver
00:09:23
they're in la they're in redwood city so
mid peninsula for those in silicon valley
00:09:29
and what you can do is you can get a head to toe
uh mri so you know there's no radiation you know
00:09:35
you could do these things you know every other
week if you wanted to it takes about an hour
00:09:40
and what happens is they can basically uh look
through your entire body um your musculature
00:09:46
your organs um from the literally from the tip of
your head all the way down to your ankles and they
00:09:52
can spot a lot of stuff that may not otherwise
uh be seen and so you know every three or four
00:09:58
years to get one of these scans you could see a
lesion um you could see the beginnings of a tumor
00:10:04
you know i did one a few weeks ago touchwood
it was great nothing nothing so much does it
00:10:08
cost um there's a range of prices um and i think
those prices will come down the range of prices
00:10:14
are from like 1500 to 2500 so it's not expense
it's not cheap sorry um but here's what they're
00:10:21
able to do they're building a corpus of all these
images where they're running uh machine learning
00:10:26
on it and they're getting better and better
at identifying anomalies and so as a result
00:10:31
of that they're able to actually take the mri
images and they can do fewer and fewer scans
00:10:35
to get the equivalent resolution so two things
will happen one is the scan time will come down
00:10:40
right so it was an hour and a half now it's sort
of right under an hour it can probably be as low
00:10:45
as 40 minutes which is relatively tolerable for
most people and then the cost will come down into
00:10:50
the hundreds of dollars because you'll be able
to very rapidly assess um so i do that and then
00:10:56
the second thing is for anybody with heart
disease in their family i really implore you
00:11:00
one of my friends actually is flying down from
toronto i'm taking him to my cardiologist in la
00:11:06
and there's a thing called heart flow
and what heart flow is is a contrast ct
00:11:11
which basically means they inject a dye and then
they put you under a ct and they they map out
00:11:16
your heart and you can literally see the calcium
buildup you can see the state of your arteries
00:11:21
um and you know what probably people don't
know is when you have a calcium score
00:11:26
you know most of us it's zero but when it
starts to be non-zero it doubles every year
00:11:31
and by the time it gets into the thousands you're
basically guaranteed to get some form of cardiac
00:11:35
issue um and so it doesn't seem like anything if
your cardiac score is 20 except it goes to 40 80
00:11:42
160 and all of a sudden within five six
years you're really in the red zone for a
00:11:45
heart attack or something um i've done it
twice now um every five years i do it um
00:11:50
and touchwood you know my my calcium score is
still zero um but in any event uh that's what
00:11:55
i do for longevity i kind of preventatively
at the cellular level with some drugs and then
00:12:00
just trying to catch cancer and heart disease
on the front end uh otherwise eat three balanced
00:12:06
meals and exercise and sleep a lot sax uh
you obviously don't care about longevity
00:12:12
uh any thoughts here i mean sax has looked like
he's a thousand years old since he was seven
00:12:16
no he was when he was in 12th grade he looked
like he was a vice president united states yeah
00:12:21
guys just just let just let me know when this
conversation is over i've been doing my email
00:12:29
oh it's so great all right end my life now i [
__ ] hate it you don't you guys like i just lost
00:12:36
two years right now sax has got an early spot
both on the rocket ship to mars and he's got an
00:12:44
inside vip to peter thiel's blood boy project
and so either way he's getting off the planet
00:12:50
or he's going to refresh his blood or both so
he's good all right action bias asks please
00:12:56
debate decentralization of monetary value ultimate
threat for insiders power erosion i interpret this
00:13:04
as a as a bitcoin question so yeah i think one of
the most interesting things happening in the world
00:13:11
today is this is what's happening with bitcoin
right it's and and you're seeing the price go up
00:13:16
because a bunch of institutional investors
on wall street are all getting into it now
00:13:20
it's gone from retail to institutional and
the narrative basically it's a really profound
00:13:26
narrative which is it's the separation of money
and state so if you think about like one of the
00:13:32
most important events in human history was the
separation of church and state where we no longer
00:13:37
looked to the state to determine you know what
religion everyone was going to be well what crypto
00:13:43
is introducing is this idea that the government
cannot control the money supply i think that's
00:13:47
what he's talking about with the decentralization
is that you could have a currency that everybody
00:13:52
in the world believes in that no government can
control that's the separation of money and state
00:13:57
now this is just really a narrative right
now i mean and who knows if it will actually
00:14:03
come true but the interesting thing is that if
everybody does believe in it it will come true
00:14:10
and so bitcoin's been sort of described as the
bubble that never ends because if everyone kind
00:14:14
of buys into this bubble it actually comes true
so i think it's very interesting and you're seeing
00:14:20
um because bitcoin is kind of perceived as the
antidote to inflation and money printing by the
00:14:28
government i think you're seeing it take on new
urgency now because the government just keeps
00:14:33
printing trillions and trillions of dollars of of
new money doesn't this threaten government so if
00:14:38
government um doesn't have control over monitoring
financial transactions and have control over
00:14:43
the accounts in which the financial assets sit
which is effectively the notion of decentralized
00:14:48
anonymized wallets then um how does the government
secure taxation which is requisite for their
00:14:54
ability to fund well they're good to fund the
state right and so what happens to the state
00:14:59
well so there's an enormous amount of leakage
that happens today in assets that actually
00:15:04
get financialized but in the gray market and i
think the the beautiful thing is on the one hand
00:15:09
you know we become less focused on like the m1 and
the m2 money supply like the physical printable
00:15:15
distributable money that we can see and touch and
it gets replaced with virtual currencies that are
00:15:19
tied to other things i think what the the the the
person who wrote the question is asking really is
00:15:24
more about defy and what's happening sort of like
on the ethereum you know 2.0 erc20 contracts all
00:15:31
that stuff which is sort of much more next-gen
i think than bitcoin and i think at some point
00:15:36
we should deep dive into it but what i would
say friedberg is all the leakage you have today
00:15:40
goes away in a world of defy because you will
financialize every single asset possible you know
00:15:47
you'll financialize your homes you'll financialize
your cars your watches your jewelry your art
00:15:52
you'll financialize every random thing maybe
even your career and how people will trade it
00:15:57
absolutely your career and and the thing is by
by monetizing it and financializing it you can
00:16:02
borrow against it you can trade it you can pull
forward value into the future against it but it'll
00:16:08
all be tracked and so as long as the government
then says listen we're going to enable it all
00:16:13
but there needs to be an off-ramp to taxation
and that's pretty simple because a physical house
00:16:19
exists in the world you can't hide the existence
of a physical house but it's not anonymized right
00:16:23
chamath and so i you know you want to track it i
mean that's the challenge is if no i'm saying if
00:16:28
it is anonymized then the government uh can't
track it and the government i think these are
00:16:32
these are two separate things some assets will
live anonymously and those are the assets that
00:16:38
don't need to exist in the real world but i
think what this will create is a world where
00:16:42
all of these assets that actually really exist in
the real world it'll be fine that it exists and
00:16:47
that people get taxed on it but it'll be much
more legitimate and i think it'll be simpler
00:16:52
and so i think people will trade off incremental
taxation for incremental monetizability i'll give
00:16:57
you an example let's use real estate there is no
reason why every single piece of land everywhere
00:17:05
around the world isn't written into a ledger with
knowledge of who owns it such that the person
00:17:13
that owns it could trade it could borrow against
it um could sell it uh yeah yeah yeah could it
00:17:20
fractionalize it even if you can't fractionalize
in the real world because your neighbors won't let
00:17:23
you set it up into four lots you could do that
online online and so today what will happen is
00:17:28
that you know that person has a level of wealth
and what they do instead take the united states
00:17:34
is they'd lobby lobby lobby to create all this
convoluted real estate tax law to make their life
00:17:39
simpler but if you actually unlocked the ability
to focus on revenue versus expenses you just
00:17:45
wouldn't focus as much on the taxation because
you'd say well i can make so much more money
00:17:50
if you judge just to you know sort of answer the
question here from the from the reader from the
00:17:54
listener i think you can really judge this based
upon how much it's being pumped by the people who
00:17:59
own it and they are absolutely dogged religious
about this it's like talking to and you know
00:18:06
person who's you know met jesus and now everybody
has to be a christian and you can also look at the
00:18:12
people who are opposing it i don't know if you saw
yellen um and then um christine lagarde she came
00:18:18
out against it yellen's come out against it india
might ban it and then you have obviously china is
00:18:23
coming out they're digital ones so i think it's
gonna be there's going to be a dogfight here
00:18:28
where governments are not going to easily give up
their control of this and there's many ways they
00:18:34
can make a bunch of red tape to slow this down
and in countries that are authoritarian they can
00:18:39
outright ban it let's take another question by
the way there's like three outcomes here right
00:18:43
i mean you could either see bitcoin for example
you know being banned and that's going to be ugly
00:18:49
um and obviously there would be significant
financial loss at this point i mean to sax's point
00:18:53
at some point there's so much asset value tied up
in bitcoin it's too big to fail sorry david banned
00:18:59
by who oh that that's chinese government this this
is what they're trying to do on some of the states
00:19:03
right and they're trying to make it illegal for
citizens to transfer money in and out of the asset
00:19:08
class i think i think it's i think it's a bigger
threat to countries that want to impose export
00:19:12
or currency controls and export restrictions
but but frankly if you're a country that's not
00:19:18
afraid of currency movements because you're not
trying to do something oppressive to your people
00:19:22
i don't think you have that much to fear here
i mean there are other ways of trying to hide
00:19:26
assets or hide money besides bitcoin and every
transaction every bitcoin transaction is written
00:19:32
into the ledger i think you have to be pretty
dumb to try and commit a crime with bitcoin
00:19:36
because there's going to be a permanent record
in the blockchain forever of that transfer and
00:19:40
then there's companies that that provide that do
kind of uh sleuthing and try to you know unravel
00:19:48
you think tax evasion in the united states
is going to be difficult um with bitcoin if i
00:19:53
accrue a bunch of value in bitcoin am i going
to be able to evade paying taxes on those gains
00:19:57
and convert that bitcoin into physical assets
by purchasing it from another bitcoin wallet
00:20:01
holder i mean how realistic is tax evasion
going to be uh and how much would because that's
00:20:07
ultimately what the u.s government would mostly
well so you would convert cash into bitcoin and
00:20:11
then you want to sell your bitcoin at some point
you're gonna have to sell it i mean there would be
00:20:15
a uh there'd be a a realization of what i'm saying
transfer to a seller of an asset of another asset
00:20:22
that's willing to accept bitcoin and receipt and
so to anonymize wallets i don't know i mean that
00:20:26
transaction is going to live on the blockchain
forever and it's going to live in the books of
00:20:30
whoever the seller is what are they selling you
a car a house whatever i mean that that transit
00:20:36
a watch i mean look if it's a personal item maybe
but if we're talking about a substantial asset
00:20:41
like a house or a company or
something they're going to
00:20:44
need to the other side of the transaction is
going to need to report the realization event
00:20:49
so you're going to have to have two people collude
to engage in tactics seems like a really stupid
00:20:54
thing to do legally incorporated businesses are
going to be mandated to do effectively identity
00:20:59
verification much like we have to do under the
patriot act with all the the financial totally
00:21:03
totally buyer yeah ultimately how the compromise
arises right yeah i'm not i i'm not that worried
00:21:09
about i i feel like this whole like silk
road type bitcoin will be used illegally
00:21:14
thing is like kind of a old meme about it that i
think that the fears are like greatly exaggerated
00:21:21
but the the thing that jumps out at me about all
the critics of bitcoin and i'm i'm not like a
00:21:25
pumper or whatever but i do i do own some um is
that the thing that like all these like critics
00:21:31
don't seem to understand is the technology that's
the common denominator whether it's like howard
00:21:36
marks or warren buffett or charlie munger or
whoever they're they're all like great investors
00:21:39
or whatever but they're not technologists and
blind spot yeah it's a blind spot and the thing
00:21:43
they don't understand about the technology is
that bitcoin is the first digital asset to ever
00:21:48
be created that you can't create infinite copies
of right so think about like a song or a photo or
00:21:56
a video or whatever anything that's digital you've
always been able to make an infinite number of
00:22:00
copies isn't that what the word digital means is
that it's infinitely copyable so how do you have
00:22:05
digital money that can't just be infinitely
copied but obviously that would destroy the
00:22:09
value and that was the genius of bitcoin is
that every transaction's written into this
00:22:15
ledger the blockchain is decentralized and nobody
over the last decade or so has figured out how to
00:22:21
counterfeit bitcoin how to make a duplicate how to
double spend bitcoin as long as that remains true
00:22:28
then bitcoin can serve as money if everyone
believes in it um the day that someone figures
00:22:34
out how to counterfeit a bitcoin how to double
spend it it's all worthless but a lot of people
00:22:39
have been trying over the last 10 years they've
never figured out how to crack it by the way
00:22:42
that's a great it's a great transition to the
next question sorry i don't interrupt you but
00:22:46
no it's a perfect transition and uh next up
adil says can one of the besties explain the
00:22:52
power of quantum computing and how it can change
industries like medical pharmaceuticals any good
00:22:57
companies that are leaders in quantum computing uh
i'll i'll i'll i'll take a cut at this one so um
00:23:04
and the reason um i pointed it out is because
a lot of people do talk about quantum computing
00:23:09
uh potentially being a path to cracking
the hashing functions in bitcoin mining
00:23:14
and potentially overwhelming the network and
effectively counterfeiting the the bitcoin uh
00:23:20
ledger um and so uh technically a quantum
computer is a computer that uses qubits
00:23:27
which is a a storage of a quantum state versus
a storage of a binary state which is a a binary
00:23:35
digit which is called a bit in traditional
computing classical computing a one and a zero
00:23:40
a one and a zero and a quantum or qubit a quantum
state can uh be a much more dynamic function
00:23:46
and so it's a it's a state that is a very analog
and very representative of kind of a much more
00:23:52
kind of broader condition than just a one or a
zero it could be a one to zero or neither right
00:23:57
it could have neither state as well about it as a
wave function and um and so a qubit can only exist
00:24:04
in a in a piece of matter uh where you can hold
the fidelity of a quantum state meaning it can't
00:24:09
be disturbed so right now all quantum computing
gets disturbed it all has some error-prone
00:24:15
context to it and so in order to use qubits to do
calculations we use what's called quantum error
00:24:21
correction on those qubits and so we adjust the
the qubits and the output to try and resolve it
00:24:27
a qubit with no errors is called a logical qubit
and the logical qubit has not been built it would
00:24:34
require very very very low error rates um and
there's a bunch of uh and and there's a bunch
00:24:39
of theories around when this is going to happen
when are we going to have truly logical qubits
00:24:43
um when does the error rate get low enough
that these qubits are are truly kind of useful
00:24:48
now there is an estimate that the number of
logical qubits needed to crack rsa 2048 which is
00:24:55
the big kind of encryption standard um which could
kind of break the whole crypto currency model
00:25:02
um it would require about 4011 logical qubits
um today the largest um the largest quantum
00:25:11
computer has about a hundred qubits that are
very noisy and so it's less than one logical
00:25:16
qubit and so we would need somewhere between a
hundred thousand and a million qubit computer
00:25:21
to be able to have enough quantum supremacy to
be able to tackle a project like cracking rsa
00:25:28
2048. and to and by some estimates and some people
have tried to estimate when this would happen and
00:25:32
the estimate currently by some researchers is that
this there's a less than five percent chance this
00:25:37
happens before the year 2040. so we're talking
somewhere between the year 2040 and the 2060
00:25:42
when we get a quantum computer that has enough
logical qubits to be able to crack a problem
00:25:48
like um you know rsa 2048 and basically make
all crypto fail and between now and then a
00:25:53
lot of people are working on quantum cryptography
which is new methods of encryption that are kind
00:25:58
of built for the quantum era and the quantum
frontier now what's more interesting is that
00:26:02
over the next 100 next 10 years or so the current
super noisy super low fidelity quantum computers
00:26:08
can be used to simulate quantum states which is
the condition of atoms and molecules and use that
00:26:14
to do better modeling of physiochemical properties
of material that's where the breakthroughs
00:26:19
will happen in the next decade so all the hard
discrete problems that we kind of theorize about
00:26:22
cryptography and other stuff that's decades away
in this decade we are already going to start to
00:26:27
see quantum computers have breakthroughs in how
material how atoms and molecules interact with
00:26:32
each other for example finding proteins that can
do a better job of having an enzymatic reaction
00:26:37
in the physical world where we can now
potentially pull nitrogen out of the atmosphere
00:26:41
to make fertilizer or or drugs or um or specific
protein targets that can go in the human body
00:26:48
and have specific functions by modeling what we
can't do with traditional computers today modeling
00:26:52
the quantum properties of those molecules
and how they interact with other molecules
00:26:56
and then building really cool predictive
models that we can then turn into products
00:26:59
and that's going to be chased really hard this
decade everyone's going to be going after it
00:27:04
and we already have enough compute power
i don't think that there's any leader in
00:27:06
quantum computing today these are all still
science experiments they're all breadboards ibm
00:27:11
google microsoft a bunch of research labs a
bunch of startups are all kind of basically
00:27:15
doing the same thing with different types of qubit
technology but they all have very high errors
00:27:19
they all have very low qubit computers and so it's
still unresolved who's going to come out with some
00:27:24
companies two companies to follow are d-wave
which was started in 99 so just to give you
00:27:30
an idea of how long people have been working
on this 22 year old company i know uh steve
00:27:34
jervison's been backing it for now in its third
decade and then ionic is that the other one i o
00:27:40
and q i i think like quantum facts right quantum
computing is like fusion yes it's like it's like
00:27:46
a technical problem that has attracted people
who've had more money than common sense um
00:27:53
and it's just basically a way to burn an
enormous amount of money over 20 or 30 years
00:27:59
and the problem with that is that you start to
build in technical craft anything that is still
00:28:03
in r d phase 20 years in needs to get scrapped
and rebuilt from scratch because everything has
00:28:09
changed including the people even the 20 year olds
that started are now in their 40s and have kids
00:28:13
and just have a competitive it's a great point
jamaat and so and so like you got to just scrap
00:28:19
these projects and start all over again because
the the problem is you need somebody completely
00:28:23
naive to look at this problem in 2021 and say well
okay how are we actually going to really solve
00:28:28
like the coherence problem i don't know how are
we going to build a gate array uh i don't know and
00:28:34
you have these very um formulaic ways that we knew
based on what technologies were available in 99
00:28:41
or 2000 to start with and i think that's probably
part of why we framed the problem as largely sort
00:28:48
of this thing of like okay maybe there's like a
integer factorization thing you can do and it's
00:28:52
like i don't know i'm uh i'm deeply skeptical
yeah well i agree and by the way this is why
00:28:58
sorry can i just say one last thing this is why
alpha fold beat quantum computers to the solution
00:29:05
of protein folding uh and and the reason was they
were just like ah we'll just take a different run
00:29:11
at it completely different people a completely
different technical framework and modality
00:29:16
and a completely different risk profile and
age as well a company to keep an eye on in the
00:29:23
fusion space commonwealth fusion systems um
wait zach what were you gonna say what i was
00:29:29
gonna say is that the main thing i was thinking
about while you were giving that dissertation
00:29:33
on qubits or god knows what is that is i would
never invest in this that's all i was thinking
00:29:40
is i would never invest in this yes you're exactly
on sas and markets that's exactly what church yeah
00:29:44
that's exactly what jamaa said definitely seven
kings and five aces look these are science fair
00:29:51
experiments you know with indefinite time frames
this is basic r and d that should be done at
00:29:57
universities these concepts are not ready for
commercialization exactly what they said about
00:30:02
uh ai and then now it's infected in every
company so no that's not true no because there
00:30:14
completely disagree with you because okay there
were there was a practical commercial revenue
00:30:19
generating opportunity for ai and machine learning
literally from the start of computing it it took
00:30:24
several iterations there's no use case for fusion
energy i mean of course there is no i'm not no but
00:30:30
it's it's still at the basic r d stage basic yeah
i will i'll partially agree with you jason in the
00:30:35
sense that i was not investing in ai 10 years ago
because i thought at that stage it was still in
00:30:40
the realm of science fiction but we just announced
two deals the last two days two seed deals viable
00:30:45
which is basically an ai voice of the customer
it slurps in all of your customer feedback and
00:30:50
then gives you answers and then the other one is a
copywriting one it's a copywriting ai called copy
00:30:57
dot ai which literally writes your site
trying to get a slice right now yeah now
00:31:01
yeah we we might give you a slice
jason stop being so skeptical but
00:31:07
yeah but but here's here's what's changed right
is these are seed companies with just a handful
00:31:14
of employees they're built on gpt3 so you had
this like basic like r d done it creates this
00:31:21
platform called gpt 3. it's like aws that's right
yeah you can now build companies on top of that
00:31:27
so i mean look it you know what i invest in are
the commercialization of of of new technology
00:31:34
waves um those technology waves happen because
of deeper r d what do you think about vr and ar
00:31:39
because it is the same conversation with vr and ar
like are these worthy investments or not i think
00:31:44
i think sax's point is such a good one because
what he's saying is um is what i think has
00:31:49
happened over the last century the government
the best role the government can provide is to
00:31:54
take on that technology risk that large capital
intense technology risk this was the case with
00:31:59
the manhattan project and we got nuclear energy
out of it it was the case with apollo project
00:32:04
we have the space industry as a result now and
it's what happened with the human genome project
00:32:08
and now we have an incredible genomics revolution
and arpanet and and that extensive early stage
00:32:14
de-risking requires an incredible amount of
capital that's very low returning it doesn't
00:32:19
return anything it's what saks is saying is later
is the the commercialization where do we have um
00:32:24
uh a heuristic a theory a best practice around
when something goes from a research project to
00:32:30
being commercially viable they're signals i mean
platform platformification seems like one that you
00:32:36
pointed out david if it's a platform and you can
use it easily yeah i think i i think i think you
00:32:41
can tell when the amount of capital required
to get it off the ground goes to something
00:32:46
reasonable like a few million dollars as opposed
to hundreds of millions of dollars whenever and
00:32:51
jason you've talked about this that any company
that's trying to raise hundreds of millions of
00:32:55
dollars or you know has a billion dollar plus
like evaluation before shipping a product
00:33:01
is presumptively fraud there's still too much r
d involved i mean look venture capital is a miles
00:33:08
milestone based investing model you take a little
bit of seed money you create a prototype you get
00:33:13
some proof then you raise a series a you get 10
million you get some customers then you raise 25
00:33:19
million and you scale the company and it's based
on milestones it's actually a very efficient way
00:33:23
of investing and when somebody wants to skip over
all those milestones they say no we need hundreds
00:33:28
of millions of dollars to launch this thing
you have to ask why is this is this idea really
00:33:33
ready for commercialization what's your mother's
response to that because you've done deep tech
00:33:37
investing and you've done i mean virgin galactic
would fall into that or no yeah so like how do
00:33:42
you think about deep tech investing tomorrow in
like where where like there's a role for venture
00:33:46
capital private market you know dollars yeah i've
done i've done a lot of deep tech investing and
00:33:50
my whole thing was i've always looked at at the
point where something is completely de-risked
00:33:56
technically and it's about then the exploitation
of a market otherwise it's exactly what david
00:34:03
said so i'll give you an example a company called
relativity space is now the second most valuable
00:34:08
private space flight company after spacex okay
yc company i love the series a um what were they
00:34:14
trying to do there they their their stated goal at
the time was we want a 3d print the entire rocket
00:34:22
and the entire engine and i said wow okay well
when we did the math and we tried to figure this
00:34:28
out and have the same launch capability as spacex
all of it comes down to okay well how do you want
00:34:33
to de-risk this and what tim and jordan's first
idea was well first we want to basically prove
00:34:40
that we can actually get a certain printing
capability done because you're talking about
00:34:44
these extremely you know energy intensive
extremely technical printers and effectively
00:34:50
writing printer drivers right and to be doing it
at a scale where you can hand that off to nasa
00:34:57
and they can take that engine literally strap
it down with chains called the hold down test
00:35:02
fire the engine and say it works doesn't blow
up doesn't blow up and i said to tim how much
00:35:08
does that take and tim was like i could probably
do that on 10 million bucks i said you're done
00:35:12
on 10 million dollars yeah and it was 100
million 100 the only person that would have
00:35:17
written a 100 million dollar check to de-risk
that doesn't understand what they're trying
00:35:22
to prove at that point in time because what he
was trying to prove was the the ability to use
00:35:27
the printer he wasn't saying i'm trying to
build a next generation rocket motor right
00:35:34
so similarly with virgin you know virgin got to
a point where it's like it had flown demonstrably
00:35:39
in the air so what did it prove it proved the
flight profile worked it proved the engine worked
00:35:45
it proved all the navigational componentry
worked and it proved the safety envelope
00:35:49
work which means that it could basically act as
a glider under all kinds of boundary conditions
00:35:55
that's an enormous amount of technical progress
and then at that point there i'm willing to
00:35:59
invest billions of dollars and so to david's
point you have to have a new model early too
00:36:03
like that's one of the things about being an
entrepreneur is figuring out how you stay alive
00:36:07
while you answer these questions and you came up
with a brilliant one or whoever was doing virgin
00:36:12
galactic which is people will overpay but virgin
was a 14 year process where richard branson to
00:36:19
his credit did exactly what david said here's
10 million dollars get to milestone one here's
00:36:25
25 million dollars get to milestone two he did
the exact venture capital model it's just that
00:36:29
he did it by himself i think what david is
saying which i agree with is you should never
00:36:34
short-circuit that and say here's 500 million
dollars pre-series a yeah sure you'll be working
00:36:40
at something for 20 years with nothing to [ __ ]
show for it as in fusion as in quantum computing
00:36:46
all right you'll end up with let you end up
with a a magic leap or theranose theranose or
00:36:54
it looks like it's a fraud but magic leap
just looks like it's technically incompetent
00:36:59
or it's too hard of a technical problem to
solve in the amount of time and the amount
00:37:03
right technical incompetence well i don't
know if it's incompetent this might be
00:37:07
it might be a 20-year problem as opposed to a five
but why are you taking this emotionally technical
00:37:10
incompetence is the opposite of technical
competence competence means you can do it
00:37:14
technical income okay okay you were saying that
that group of people is incompetent i'm saying the
00:37:19
word followed by the word incompetence technical
incompetence okay when you're saying it i'm
00:37:25
think you're describing the person not the problem
it could have been too hard to lift for them
00:37:29
so yeah okay well the last question is about
access to private equity but let's just go
00:37:33
into this stack here now one of the things we
wanted to talk to today chamoth had a good idea
00:37:38
venture capital is changing rapidly um the
last decade has seen more change in venture
00:37:43
capital than i would argue the four decades or
five decades that venture capital has existed
00:37:48
in other words more change um i'm gonna go
through some of those changes how it affects
00:37:52
the entrepreneur how it affects the investor
chamath was nice enough to put a deck together
00:37:57
and then i guess jason will figure out a way
to post this into the youtube or something like
00:38:01
that yeah you know what we'll put in the show
notes a link to this google presentation and
00:38:06
nick can pull up the slides when working and also
i think i think if folks can give us feedback this
00:38:11
is kind of a new thing for us we're trying to
experiment which is sort of this is like a half
00:38:15
teaching half discussion on something we all
wanted to talk about and hopefully you guys get
00:38:20
some value from it but uh tell us if it's not so
uh i i want to thank uh carmen collins on my team
00:38:26
who helped put this together but let me just
uh go through this state of venture capital um
00:38:32
so a couple of high-level points there's like some
really important trends at play the first is that
00:38:37
there really is now underneath a massive
change in the players in this game
00:38:42
founder demographics are changing slowly but
surely we're going to go into that in a second
00:38:47
traditional vc investors are getting disrupted
we're going to go that we're going to go into that
00:38:53
and then this model which i love of let me know
how i can be helpful quote unquote basically
00:38:59
eroding um and seeding ground to what we call solo
capitalists and we'll talk about that which is
00:39:04
probably the most disruptive trend in venture
second we'll talk about the inflation in the
00:39:10
amount of money that's going into these companies
which really means more money at higher prices and
00:39:16
why that's good in some ways and actually bad in
some other ways this goes back to david's point of
00:39:21
you know not being forced to generate milestones
sooner uh and then the third is that it's really
00:39:27
now a founder's market and i think this is really
important because you know you've seen an enormous
00:39:31
amount of dilution and lack of control for uh
founders and employee teams and companies and i
00:39:37
think that there are some really disruptive new
ways that completely usurp traditional venture
00:39:43
non-diluted forms of financing we'll talk about
that so let me just level set for you guys i asked
00:39:49
the following question what are the demographics
of the united states and here's what they are in
00:39:53
the united states today 59 percent of people are
white non-hispanic 12 and a half percent are black
00:40:03
5.8 are asian 18.7 are hispanic and 2.3 are
multi-race if you map that to vc founders
00:40:15
77 of vc founders are white 1 are black 17.7
are asian one point eight percent are hispanic
00:40:25
and two and a half are multi-race so amongst
multi-race asian and white you either are at
00:40:31
or over indexing your representative population
and blacks and hispanics this is not anything new
00:40:35
but massively underrepresented if you take it from
a gender females have lower representation among
00:40:41
founders but it's growing so the us is basically
50 50 male female female founded companies were 23
00:40:48
percent of all deal activity in 2019 that's that's
pretty good um up from 12 in 2010 although racial
00:40:56
diversity is still pretty lacking which we know
and then the young tech bro stereotype is cracking
00:41:03
uh which is this is incredible 2019 study in
the times showed that the average age of a tech
00:41:09
founder is david sacks what do you think it is the
average age of a tech founder median or average
00:41:14
mean or a median average average well i saw
i saw your deck so isn't it something like
00:41:19
it was surprisingly 35 40. 42. for example no
i'm seeing a lot i think i don't know just to
00:41:24
pause here for a moment what do we still
found a company you can what do we think
00:41:29
is given we you had the longevity question earlier
and then you have people you know generating
00:41:36
wealth and starting companies in their 40s 50s
and 60s who then underwrite it themselves right
00:41:43
until they get to product market fit and
then raise money what do we think is the best
00:41:46
zone for an entrepreneur in terms of having
a great outcome i've always thought that the
00:41:53
look i when i how old was i i was
31 32 when i started social capital
00:42:02
i mean this is a multi-billion dollar enterprise
i feel like i'm reasonably successful at it
00:42:07
but i was preparing for the first 13 or 14 years
of my professional career i learned some good
00:42:12
things i learned some bad things i learned tactics
that worked i learned strategies that didn't so
00:42:18
thirties or forties or well literally in my
50s in my experience for me and i think it's
00:42:23
for personal for everybody i was best positioned
to know what to do and at least iterate in my 30s
00:42:31
and i think in the absence of an idea that has
some network effect or something that's sort of
00:42:38
like supernatural outside of your own control i
think the older you are generally probably the
00:42:43
better prepared you'll be yeah i agree i mean i
did paypal when i was still in my 20s but i wasn't
00:42:49
the the founder of the company i was
recruited to it at a very early stage
00:42:53
i didn't really start yammer until well i guess i
started the predecessor company genie when i was
00:42:57
34 and then yammer pivoted into yammer when i
was 35. i mean absolutely that's that's like
00:43:04
that's like a good level of preparation you know
unless you have a spectacular idea for a startup
00:43:11
you should probably get some experience first 100
percent free burger any thoughts there on what's
00:43:17
the kill zone best time to launch companies
in your mind or investing companies or where
00:43:21
founders everyone's got their own path you
know i mean zuck and sergey and larry and uh
00:43:28
bill gates they started right out of college
without any experience but um i mean i worked
00:43:33
at i had two jobs uh in tech before i started
my first company in yeah um and so i had a lot
00:43:41
to draw from and that really informed me but i
think everyone's different i mean some people
00:43:45
if you have the idea if you have the idea by all
means do it in your 20s you know absolutely i mean
00:43:50
by by far the the greatest kind of like measure
of whether and when you're kind of prepared for
00:43:56
this is your ability to continue learning you know
continuous learning to me is one of the greatest
00:44:00
predictors of entrepreneurial success and all the
guys that have lasted for decades from bezos to
00:44:06
zuck to you know larry and sergey you know they
were continuously evolving themselves because
00:44:10
they were continuous learners bill gates is bill
gates is the penultimate example of this right
00:44:15
i mean this guy has reinvented himself a thousand
times that what you said is so important i'm gonna
00:44:19
change my answer i think i started social capital
when i was actually the most able to get out of
00:44:26
my own way and learn continuously yeah yeah you
know one thing i'd add to this is it's so much
00:44:33
easier to be a founder now today then i mean look
i i remember i joined paypal in 1999 that was my
00:44:39
first startup it was like really hard to get into
entrepreneurship in the 1990s you know the vcs
00:44:45
had tremendous power and control they would
routinely replace founders ceos you know
00:44:52
everyone had to go to sandhill road to get capital
it was hard to even know how to network your way
00:44:57
to sandhill road it was just much much harder
to be a founder it was much harder to raise
00:45:01
money it was hard to know what to do and then
i think actually one of the things that really
00:45:06
changed things was with blogging emerging in the
mid 2000s it led to a proliferation of information
00:45:13
where now you know other founders started blogging
investors started blogging and there became a
00:45:19
wealth of information out there so you could learn
how to do it and then of course you had incubators
00:45:23
and so on like yc so there became more of like
a playbook for just like how you actually get a
00:45:28
company off the ground when i graduated law school
which was 1998 i i knew i wanted to get into
00:45:33
business and entrepreneurship i really had no idea
how to do it and if it wasn't for a phone call
00:45:38
from peter thiel i'm not sure i would have gotten
into it you know but now now everybody knows what
00:45:43
to do can i ask you a question then so let me
let me give you a stat and i'll ask a question
00:45:49
what do you think that story would be david for
somebody that wasn't a white man so here's the
00:45:53
step here is the data the percentage of female
vc decision makers has grown by more than 2x
00:46:00
uh what that means is about firms over a billion
dollars about a quarter of them have at least two
00:46:05
plus female decision makers but 61 of them have
zero and 80 of venture firms still have no black
00:46:12
investors how do you correlate or intersect
that idea of ease of starting a company with
00:46:20
the pattern recognition of those folks and
the inability to sort of maybe map to people
00:46:26
with black skin or women i mean i think that what
silicon valley and what venture capital represents
00:46:33
is opportunity right and we have to extend that
opportunity to as many people as possible i mean
00:46:38
that's really the the key here is we do need
to make it as widely available as possible
00:46:43
by the way i mean one way to slice things is the
percent percentage of uh diverse representation
00:46:49
within the ranks of venture and private equity um
but there is a equivalent scaling in the number of
00:46:56
venture firms and the amount of venture capital
since you know saks and and you and i and all
00:47:01
of us kind of entered the technology industry
kind of early 2000 um and the number of firms
00:47:07
that exist today that are kind of micro firms and
scaled firms i think presents um a much larger set
00:47:14
of opportunity you're right there are still uh
standards um and there are still challenges in
00:47:19
diversity and kind of having access but there
is so much more access than there has ever been
00:47:25
um and that's really changed the landscape
i mean folks coming out of college can get
00:47:29
a million dollars that was kind of unheard of back
in 1999 or or the reality is like there's so many
00:47:35
incubators i mean it's not as if jason or yc or
any of these folks give millions of dollars right
00:47:40
jason like these checks are still really small
so the point is you can build something if you
00:47:45
have the skills to build something the the the the
gap right now is that there's a lot of people who
00:47:50
have ideas about what they want to do but they
have no skills and i think what we found in a
00:47:57
vibrant market like today i mean this is the most
vibrant i've ever seen it there's at least three
00:48:01
or four times as many startups to choose from
at the earliest stages and what we're seeing is
00:48:07
the number of vcs has not grown at that
level it has grown the number of players
00:48:10
has grown but not at that level therefore
the average quality of a deal has gone up
00:48:15
the average quality of a funded deal has gone up
but the average quality of a startup has gone down
00:48:21
does that make sense yeah so the ones that
get funded are better than ever but the one
00:48:26
the average is lower because there's so many doing
it and then just the best piece of advice i have
00:48:30
is when we talked about continuous learning is
if you are not building the product in some way
00:48:34
or selling the product in some way then what are
you doing at this startup like you either build
00:48:38
it or you sell it like there really isn't much
more there and a lot of people just have ideas
00:48:43
and no ability to execute you really have to be a
developer designer ux person marketer something uh
00:48:49
in terms of getting this product out to the world
what uh what do you guys think about this other
00:48:54
trend which i think is really important which is
the atomization of these firms so you know we're
00:48:58
moving from a world where people used to care
about name the brand sequoia excel uh and then
00:49:05
now they they named the person right and they'll
probably follow that person wherever they are
00:49:12
so what do we think about that there's a really
interesting tweet from eric taurenberg he said
00:49:16
founders don't want to raise money from
institutions as much anymore they want to
00:49:20
raise money from individuals and then if you marry
that with what's happening with angellist and
00:49:24
all this other stuff isn't that the trail of
breadcrumbs for how like vc just kind of in
00:49:30
some ways just kind of gets blown up the way
that it's normally been done i remember as a
00:49:34
founder um when i started my company in 2006
there was a lot of this conversation in as
00:49:42
sax pointed out in the blogger community blogging
community and with like various websites that
00:49:47
rated vcs and there was generally a trend in
the support network among ceos adventure firms
00:49:53
of talking a lot about make sure you
pick your partner don't pick the firm
00:49:57
and so this i don't know if this is necessarily
a new trench moth it's certainly something that
00:50:01
i remember being top of mind 15 years ago when
i started my first company and so much of it
00:50:07
was about make sure you have the right partner
because that's who's gonna be on your board that's
00:50:10
who you're gonna spend time with that's who's
going to recruit executives with you that's who's
00:50:13
going to be helpful in finding your next round of
funding for you um and i feel like that's that's
00:50:17
always been the case but you're right the brand
value of a firm has certainly become less useful
00:50:23
and folks have struggled to kind of figure out
i think a solution here i mean you see what
00:50:27
andreessen horowitz did they launched in 2009
and really focused on trying to be this kind of
00:50:32
full service provider to startups and i don't
know how much that matters as much anymore
00:50:36
as much as making sure you've got a great
partner from the firm that's helping you with
00:50:39
your business i i don't know it's actually you're
right freeberg that's a continuing trend what i'll
00:50:44
say is the top firms are still as attractive or
more attractive to founders the loser in this
00:50:50
i believe is the mid-tier firm or the lower tier
firms that actually none of the partners there are
00:50:56
all that great the performance is not that great
their value-add is not that great but when you
00:51:00
do get a sequoia or an andreessen when i put craft
in this as well when you get one of those all-star
00:51:06
vc firms to join your board specifically that is
the key when they join the board they own over 10
00:51:12
you are anointed in a way that is transcendent
you will get pounded with inbound from the
00:51:18
second tier and third tier firms who want to
triple your evaluation and give you 20 million
00:51:22
bucks it happens like clockwork in fact there
were a couple of firms like was it dag the one
00:51:28
sacks that would always follow on sequoia deals
and so there were firms that were built around
00:51:33
that was their lp pitch dags lp pitches we just
we will mark up every sequoia deal exactly so
00:51:39
i mean one you know it was one page so it's like
if you can't get into sequoia and you're willing
00:51:43
to wait an extra round don't invest in tag well
and then now i think the big trend here is those
00:51:48
firms in dreesen and sequoia are now full stage
where they have the late stage growth they have
00:51:55
a scout program they have a seed program they have
a series a program so it's a full life cycle it's
00:52:00
not those guys also it's just it's all these other
big crossover guys that have come down tiger co2
00:52:05
durable i think that's the biggest trend of the
last uh 15 years chamac and i think it is what has
00:52:10
enabled the proliferation of early stage
startups and enabled the valuation increments
00:52:14
and the capital that flowed in the early stage
is the um is the scale down from the big guys
00:52:20
i just want to kind of do a quick walk down
memory lane because when you guys said you
00:52:24
wanted to talk about this i kind of remembered i
got my series b term sheet in 2008 i guess it was
00:52:30
and um and or 2009 and i had three venture firms
uh andreessen was one of them that gave me a term
00:52:36
sheet uh and the interesting thing about at that
time with andreessen was they gave me a term sheet
00:52:41
i was trying to raise 30 million dollars and they
said we want to give you 40 million and they up
00:52:44
the valuation significantly and um and there was
a i ultimately went with coastal ventures but
00:52:50
there was this trend um that andreessen was kind
of imparting and i heard about it a lot from other
00:52:56
entrepreneurs was that they were going out and
offering more money than the founder was asking
00:53:01
for or seeking at higher valuations and it was
this trend towards saying like go grab the market
00:53:06
because the interesting thing about web scale
economics and um you know web scale businesses
00:53:11
is you get so much leverage and you can get
extraordinarily rapid growth i mean the rate of
00:53:16
growth could be infinite um and and the leverage
could be infinite and so if you do it at the right
00:53:21
round i think that's but so much of this was and
then obviously that so that was a huge step up and
00:53:26
i remember andreessen horowitz beginning 2009 kind
of started to build a reputation for doing this
00:53:30
of of kind of you know putting larger checks out
and saying go scale and then the big crazy thing
00:53:35
was the crossover guys started coming in and
offering bigger checks in kind of this proven
00:53:40
stage growth stage kind of funding and then
obviously the big step up with softbank and
00:53:44
softbank with the 100 billion dollar vision fund
and and ultimately what exactly did that disrupt
00:53:50
freeburg just hang on so when all these things
happened those large chunks of capital became
00:53:54
available and the valuation step-ups were so
significant for these later stage startups
00:53:58
that the money flowed down and more money was
raised in earlier stage venture that enabled this
00:54:03
proliferation of capital in this proliferation
of new startups and enablement of startups at the
00:54:07
earlier stage because of all the crossover money
that started to come in and the blitz scaling of
00:54:12
proposals and lots of money that was being thrown
at the later stage that to me felt like the reason
00:54:17
all of the earlier stage stuff proliferated
was because of the the amount of capital
00:54:21
the later state you're absolutely right and now
ten years later here's where we are in the early
00:54:26
specs are the next step champ because like totally
i think what you did is you know we pre-2009 there
00:54:31
was 10 billion dollars a year in specs then when
you started this in 2009 it stepped up to 2019 it
00:54:35
stepped up to 13 billion last year 80 billion was
raised in specs this quarter 100 billion in specs
00:54:42
and stacks are that you cross over investing it's
taking you know growth stage private equity style
00:54:47
risk in the public markets with this proliferation
of capital and we're seeing the benefit in the
00:54:51
early stage and founders and entrepreneurs are
seeing the benefit because there's so much access
00:54:54
to capital on the back end you can take more
risk on the early end and you can make more bets
00:54:59
and and i think you know i think it's the next
step up and we just keep seeing these step ups
00:55:03
yeah i tend to think that the growth stage is the
most troubled and challenged because at the early
00:55:08
stage you can get a guy like saks or jkl on your
board and you can grind and i think that that's
00:55:12
really important to get the product market fit and
at the public stage you can get somebody like me
00:55:17
and you know we can help transact and actually
help optimize and run the business for scale
00:55:21
and value but in the middle you have all these
weird dynamics that no longer maybe not don't
00:55:26
make as much sense so just to give you a sense of
it the average deal size okay so the typical round
00:55:32
is up 3x over the last 10 years 3x that that
is absolutely anecdotally in my experience
00:55:40
uh in late stage investors are doubling and
tripling down on these mega deals so that that
00:55:46
average round size is up 5x in the last decade
um the the typical pre-money on a growth stage
00:55:53
deal in 2010 was 100 pre this is for the top
quartile uh and it's now or sorry for this is
00:55:59
for the average it's now this is for a growth
stage yeah growth stage 100 pre is now 570 free
00:56:08
wow yeah it's getting crazy it's really it's
really really getting crazy tiger it says here
00:56:13
in the notes tiger global has announced the deal
according to pitchbook every 48 hours in 2021.
00:56:22
that's fabulous that's [ __ ] fantastic
what tiger i think has figured out is there
00:56:27
they started as public market investors
and worked their way down the stack right
00:56:30
so they're very familiar with the public market
valuations they're seeing that these sas companies
00:56:35
are you know we i remember 10 years ago when i was
doing yammer we thought that the best outcome that
00:56:40
you could have as a sas company was like a one to
two billion dollar exit that's why when microsoft
00:56:45
offered us 1.2 billion in 2012 we took it right
we're like we could work five more years maybe get
00:56:50
to a two billion dollar outcome well now you're
seeing what slack just got acquired by salesforce
00:56:55
for close to 30 billion it's pretty routine to
see sas companies ipoing it now 10 20 30 billion
00:57:02
and up and so the exits are just so much bigger
than anybody thought 10 years ago and we were the
00:57:09
optimists by the way there's a good tweet on
this by um it was jay malik basically he gave
00:57:14
some stats he said that uh if you're wondering
why everyone wants to invest or be a vc today
00:57:20
the stats from pitchfork provide an answer we had
43 billion in exits in 2010 we had 290 billion
00:57:27
in exits in 2020 so we had about 7x roughly
greater exits over the course of a decade now
00:57:34
the average deal size has grown 3x and there's
a lot more money going into venture capital
00:57:39
but the reason why you're having all this money
go in and all these new players is because
00:57:43
the outcomes are so much bigger and then he said
and i agree with this wouldn't be surprised if vc
00:57:47
hits 1 trillion by 2030. so we're seeing just the
i mean i remember 20 years ago when i first got
00:57:53
into the business you know like silicon valley
was a small little um concentric circle around
00:57:59
stanford and now it's spread to san francisco
and the entire bay area and to other cities
00:58:05
and it just keeps getting bigger and bigger it's
the digitization of every market right i mean
00:58:10
every traditional business every traditional
industry is being digitized in some way or
00:58:14
another and so it's no longer a tech enabler
of other industries it is the industry itself
00:58:18
we know that this the brand really matters in
the early stage because they anoint you and
00:58:23
they bring so much value in terms of working with
you to solve problems we know with spax whoever
00:58:29
and ipos whoever is anointing that really
matters right the sponsor but in the middle
00:58:34
is all that cash now move to a a game of who will
pay the most for the least rights in other words
00:58:41
series b to you know when you get involved
tomorrow is that just it's such a good point
00:58:46
you're so what you're now teeing up jason
is this next big category which is if it's
00:58:51
undifferentiated capital at some point you're
going to go to the logical conclusion which is
00:58:57
i don't want any dilution from this i'm happy
to take dilution in the series a when i get you
00:59:02
know craft or sequoia or benchmark i'm happy to
take dilution in the ipo because that's sort of
00:59:07
the necessary process of you know diversifying
the stock ownership getting you know my users
00:59:12
and my customers to be able to own the stock etc
etc but in the middle now you have these companies
00:59:17
like pipe and clearbank where now all of a sudden
you can grow jason in your bcd rounds and you have
00:59:23
zero dilution so if you're a founder you know the
best formula is going to be take series 8 and seed
00:59:29
capital from an expert single you know gp brand
person who knows that business category so well
00:59:36
right if you're starting a sas company you
should probably get your seed from saks you
00:59:41
know raise your a from some expert or what let
me say differently seed from j cal a from sax
00:59:48
and then go to pipe and clear bank and fund it
all based on your recurring revenue growth and
00:59:53
then go public via spec so just to give you some
uh data that i got from piping which means you
00:59:58
would just to give people an idea of what the cap
table would look like there you would dilute ten
01:00:01
percent in your your seed round twenty percent in
your a now you still have seventy percent of the
01:00:06
company and you just sell your yearly contracts
ahead of time to pipe and you're done by the way
01:00:10
can i can i tell the story about pipes so pipe um
yeah that's kind of grateful thanks for including
01:00:15
free break david david can i can i give the stat
from pipe and then tell the story go ahead sorry
01:00:19
you guys are all investors in this company
no not me and you david they let us our beaks
01:00:25
my beak is so wet can we get a profile
that beak let's see i don't know why
01:00:29
it is it is oh my lord it is people don't realize
it really is hold on let me compare it to this
01:00:37
okay it's a beautiful pretty i'll tell
you let me tell let me tell the pipe beak
01:00:40
wedding story because harry harry the
founders told the story he came in to
01:00:45
meet with me my office at kraft this is pre-koved
when people actually met in person um our our
01:00:51
principal who's based in la michael tam you knew
harry from his previous startup and brought him in
01:00:55
i i heard the pitch which is basically to advance
the the full value of these contracts for sas
01:01:02
companies and others but it was so obvious right
because if you're a sas company you spend roughly
01:01:08
about a year of of uh revenue on cac customer
acquisition costs but the customer only wants
01:01:15
to pay you monthly and so you have this huge
negative cash flow cycle so what if you could
01:01:19
just take that contract and monetize it right
away get the full value of the contract advance
01:01:25
then you can plow it into the next the next um
you know customer acquisition cost and you don't
01:01:30
need to dilute yourself with venture capital
i said yes to harry in like 15 minutes i think
01:01:35
it's the quickest i've ever given a term sheet
we invested 2 million in the company in a 12 cap
01:01:41
and we did the deal that day so within
nine months of launch pipe has connected
01:01:48
3 500 customers and over a billion plus of ar
to investors willing to purchase that revenue
01:01:55
uh to be clear it's a marketplace they're not
buying the debt anybody can go on the marketplace
01:02:02
and say i will buy slacks revenue for 91 cents
on the dollar but something more speculative they
01:02:07
might pay 85 so this is a brilliant thing
is that they're not they're not providing
01:02:11
the lending off their own balance i suppose a
clear bank which does in charge of six percent
01:02:14
i'm talking about your book unless you
guys share it i'm going to go to the video
01:02:24
yeah let's do it freeburg hey freeburg
let's launch a bio company together and
01:02:28
we'll block out these beaks go work on
your life extension we're working on
01:02:32
our monetary extension right here yeah
you need more money you need more money
01:02:37
so clearbank works with e-commerce companies so
what you do is you stitch in your connections to
01:02:42
shopify and stripe etc they're able to monitor
how well you do and then they'll basically help
01:02:47
finance you again non-dilutively so clear bank
companies captured 55 more growth in 2020 than
01:02:53
the prior year so even in the midst of
covet these companies did really well
01:02:56
they have revenue based financing they've invested
a 1.6 billion dollars to date and it turns out
01:03:03
that you know their investor composition eight
times more women funded than traditional vc by
01:03:08
the way i want to be clear i was also a series a
investor in clearbank i mean i am such a believer
01:03:14
in this middle section of venture disappearing
like when you have these growth rounds they're
01:03:20
undifferentiated and they shouldn't be dilutive in
any way shape or form the founders should figure
01:03:25
out how to grow non-dilutively the minute that
they have some semblance of product market fit
01:03:30
so then the dilutive the dilutive points are
the bookends yeah this is kind of the idea with
01:03:34
like indiegogo and some of the gofundme types or
not gofundme the other uh things where you could
01:03:39
basically pre-sell consumer products too right
where you could get funded in a similar way and
01:03:44
you could see the same transitioning into kind of
hardware businesses and other and other consumer
01:03:49
businesses right there's an even bigger there's an
even bigger trend that happened that i can talk to
01:03:54
which is equity crowdfunding cf but i don't want
to take you off your deck so do you want to keep
01:03:57
going on the deck or you want the only the only
last thing i say is that uh the other big thing
01:04:02
as friedberg says is like um so let me just
summarize so it's kind of like i think where we're
01:04:07
all going to is we see the venture capitalists
changing the financial stack yeah um it's going
01:04:14
from organizations and these amorphous amorphous
financial orgs down to individuals as that happens
01:04:21
i think what we're all kind of stating is it's
incredibly valuable at the earliest stages to
01:04:26
align yourself with a person that knows your
business or your market right and that's
01:04:31
worth some amount of dilution it's almost like
getting a quasi co-founder right so in the seed
01:04:36
in the series a but i think so that's one really
important point of what's happening in the market
01:04:42
the second thing that i think we're all saying
is why are we deluding ourselves to grow in
01:04:47
these middle rounds if you don't have to it's
unnecessary and there should be really clever ways
01:04:53
of non-dilutively financing yourself and as as the
market becomes more and more sophisticated there
01:04:58
will be more companies beyond pipe and clearbank
to be clear but the point is that every kind
01:05:03
of company that has product market fit should be
able to finance themselves non-dilutively in the b
01:05:08
all the way to the d and the e and then the third
thing which is sort of what friedrich says is this
01:05:13
last book end is then you have sort of the path
to going public and this is where the spac makes
01:05:18
a ton of sense because you have a very certain
cost of capital you can now architect a cap
01:05:23
table where the founder remains in control where
they and the employees are still more than 50
01:05:28
and you pull in the time of the ipo why is
that important typically today these companies
01:05:33
were taking 12 plus years to go public now with
spax they've come back in and they're closer to
01:05:38
seven and eight years the reason is back to that
argument of like if you want to be a winner take
01:05:43
most outcome the most important thing you need at
scale is money and the way that you get money is
01:05:50
by opening the kimono on your finances and showing
people who have lots of money why they should give
01:05:55
it to you and not something else and so by going
public in years six seven and eight that's where
01:06:00
you pull in the billions of dollars so you can
dominate what we're seeing is massive competition
01:06:06
in the financing of massively competitive
startup scenes in other words the
01:06:13
entrepreneurial ecosystem has never been this
vibrant and i want to point out one thing that the
01:06:19
sec has done that has is going to change things
dramatically i believe when syndicates first
01:06:25
came out everybody said they were stupid nobody
would ever do it first one we ever did famously
01:06:29
was com.com we put in 328 thousand dollars became
worth over 100 million we're on track this year to
01:06:35
do five deals a month 60 deals and we'll put 50
million to work this year at the syndicate.com
01:06:41
think about that my fund is 44 million that's over
three years so now the syndicate's gotten so big
01:06:46
um that she's just on the syndicate well exactly
so i i'm gonna tell my lps the next time around
01:06:51
let's have a discussion about this but anyway i
want to point out what republic.co happened this
01:06:55
week republic.co is equity crowdfunding this means
civilians can invest there used to be a cap on an
01:07:01
equity crowdfunding of one million dollars every
year and there's a lot of auditing and financial
01:07:07
review you have to do and you pay six percent to
whoever raised the money but it's it's um there is
01:07:13
no sponsor involved in this so as an investor you
don't get me as a lead or chamath as your sponsor
01:07:19
or sax on your cap table but you can go on
to republic now which has a hundred thousand
01:07:27
investors on it and gum road which is doing 10
million a year just raised 5 million in one day
01:07:33
sahil who was also running a rolling fund with
angellist and he has 8656 investors which means
01:07:41
people are putting in under a thousand dollars
each amazing and it's capped at 5 million now
01:07:47
then arlen hamilton who runs backstage capital did
a very non-traditional i'll say raise she's not
01:07:53
raising for her fund she sold 10 ownership was in
the process of selling 10 ownership in her venture
01:08:00
capital fund startup studio at a 50 million dollar
valuation she's selling 10 of it if you buy shares
01:08:06
in that you don't get carry but you get 10 of her
carrying management fees forever so it'd be like
01:08:12
buying 10 of craft or whatever the point is you
the vcs get uh boxed out of this and this imagine
01:08:20
if airbnb or uber decided [ __ ] it we're going
to let our drivers buy shares through this and
01:08:27
they said we're starting this crowdfunding for 5
million and they did it every year because you can
01:08:31
do the 5 million every single year so every year
you just allow folks who are in your stakeholder
01:08:37
pool you email them and then they buy in it's just
absolutely extraordinary can you explain the arlen
01:08:42
thing so she's sorry she sold 10. it's a little
complicated if you page down future earnings
01:08:49
yes so if you go to the flow of funds and that
link i sent for public.com backstage she is
01:08:56
took all of her different funds and said you can
buy ten percent for five million dollars you own
01:09:02
ten percent of essentially sequoia capital or
y combinator whatever you want to refer to her
01:09:08
um you know company as her holding company then
every time she gets management fees every time
01:09:14
she has distributions from her carry she's
going to give 10 of that to these folks forever
01:09:19
i don't know if that's a great idea but it's a
a new idea um i don't know if the investors in
01:09:25
that are going to get a massive return or they're
doing it because they want to support the cost
01:09:28
that's that's incredible my gosh it's so weird
it's so disruptive it's so disruptive wow it's
01:09:34
incredible well because it lets anybody really
spin up a new venture firm basically because
01:09:38
there are some startup costs to spinning up a new
venture remember she's been in it she's been doing
01:09:42
this for 10 years and really has gotten good for
have to say not a lot of traction um you know from
01:09:48
the the classic lps of the world um but now just
like we saw at gamestop just like we see with
01:09:54
bitcoin just like we see with nfts and robin
hood day traders there are new entrants here
01:10:01
and i think there's going to be a world
where i will be able to fire up a syndicate
01:10:06
and say i would like to raise 10 million but i'm
limiting it to 1 000 per person and 10 000 people
01:10:13
invest or i'm limiting it to five hundred dollars
so instead of you know going away for the weekend
01:10:19
or going to vegas and blowing a thousand dollars
somebody could say you know what i'll go to vegas
01:10:23
and blow 500 but i'm gonna put 500 in the next
startup i see and this is a democratization that
01:10:28
could change everything and make america so much
more competitive with what we're seeing in china
01:10:32
with jack ma disappearing and looking like i've
said i've said this before like like what's what's
01:10:37
crazy is like if you talk about like systemic
inequality and poverty it's like the government
01:10:42
loves to give poor people casinos sports betting
and lottery tickets yup but the idea that they
01:10:49
could invest a hundred dollars into a startup
is illegal even though startups generate 15
01:10:54
of your caker so even if what you did was you
gen you invested in the market beta of startups
01:10:59
let's just say that degrades it would still
probably be close to ten percent and the markets
01:11:04
yeah you'd be you you'd be out of the s p returns
you know over many many years eight percent so
01:11:10
25 percent better it's it's it would be incredible
with by the way 25 better chamath with the outside
01:11:16
chance of hitting a home run a grand slam and and
that's why i love this um all right so do we want
01:11:23
to wrap here or anybody have any closing thoughts
well i just think it's like if you think of like
01:11:27
that thing of like all the money flows changing
the other thing is like all the people are
01:11:32
changing and then what sac said before it's much
much easier because the technologies are changing
01:11:37
you put these three things in a soup and it
just seems like our best days are ahead of us
01:11:43
i think it's going to be amazing for
entrepreneurship all the answers are
01:11:47
out there if you want to start a company all
the skills are freely available to you uh you
01:11:52
can learn anything online i think the message
i really want people to understand is you know
01:11:58
you may you may believe that the world is filled
with inequality and racism and bad actors and you
01:12:05
would be right but what's also right is that every
skill can be learned capital is available now more
01:12:12
than ever and there is a clear path for you if you
just stop watching television and learn to be a ux
01:12:18
designer a sales executive a marketing or growth
executive or a developer you can change the world
01:12:24
and change your lot in life and be really [ __
] rich don't buy into this victim mentality it's
01:12:29
complete utter nonsense that crazy lefties are
saying everybody's stupid and nobody can learn
01:12:36
and i got a bag of red pills here and i have been
pounding them the world is a giant opportunity for
01:12:42
all of you i just i think it's time to announce
friedrich and i would like to announce that um
01:12:48
we've started a combination uh incubator and uh
early stage venture firm we call it paunch draft
01:12:55
and uh it's play on the words launch and craft i
think the punch is the punch is more just a just
01:13:01
what do you want so when we're going to launch
our first syndicate we got to get a deal here
01:13:06
somebody's got to find a deal i just i i never get
a million dollars you guys are doing deals left
01:13:10
and right jason you need to assign somebody to
figure this the [ __ ] out because i think there's
01:13:14
there are people there there are there are
there are folks listening to this podcast
01:13:18
who have great businesses what we should commit
to them is we will help you be the least deluded
01:13:26
and we will try to share the beak wedding amongst
all the other folks listening to this so if
01:13:31
you have a great company and you're thinking of
raising capital come to the one of the four of us
01:13:36
and we will hand roll a solution for you yes okay
let's just do it it's like it doesn't just do this
01:13:43
go to wet your beak okay hand roll hand rule we
will handle a solution that will allow the four
01:13:49
of us plus everybody else in the syndicate to
invest and then we will help you non-dilutively
01:13:55
grow your business for as long as possible
and then take it public okay i am setting
01:13:59
up wetyourbeak.com which is currently redirecting
to the all-in podcast it's going to be a typeform
01:14:05
and the typeform is going to let you i will dilute
your business but uh the rest of you guys can do
01:14:10
it anyway go to wetyourbeak.com and fill out the
form tell us a little bit about your business
01:14:16
and what and it will go to all four besties in
the database we'll share it what your beak is
01:14:20
the new database i bought the domain but your
beak.com from one of the yeah just said it now
01:14:24
this is the tenth time you've said it i get it we
can collectively we own it i i sh this podcast is
01:14:30
rapidly turning into a commercial for uh i think
we have good information now this is this is jay
01:14:35
cal's attempt to divert and steal my deal flow
yeah so it's talking about we're partners you're
01:14:45
who did i just bring six seven companies to the
other day craftventures.com do not that's the
01:14:52
that's a website that's the website all right yeah
okay don't email me give me a break man come on
01:14:58
man we're gonna go how many deals are we in back
all right listen we love all of the audience and
01:15:04
uh we love our besties love you bestie chamoth
love you guys love you free birthday i gotcha
01:15:11
love you sexy poo when are we playing cards come
on let's play cards every monday it's monday done
01:15:16
done i'm sending the invitation alright everybody
it's another all-in podcast if you want to rate
01:15:21
and subscribe or do anything like that sure why
not uh and uh shout out young spielberg thank
01:15:26
you for making all of our great tracks uh do
a search for young y-u-n-g spielberg in europe
01:15:32
uh in spotify buy his songs like his songs and uh
he's the greatest uh if you want series a funding
01:15:40
or seed funding david sachs if you want a spec
chamoth and if you want to fold some proteins and
01:15:47
um qubits yeah you want to do some cubits
uh get email freedberg somebody told me
01:15:53
that the quality of the show he calls it the
friedberg index if freeberg talks a lot it's
01:15:59
a great episode when freeberg demers and
doesn't talk a lot it's a [ __ ] episode
01:16:09
it's french for sleep it just means your wet
took a nap you're just it's french for sleep
01:16:15
you're just such a heathen more as in more
day a day as in sleep day more you could say
01:16:22
demure yeah he demured okay everybody we'll see
you next time on the olympics i love you guys
01:16:40
and they've just gone crazy with it
01:17:14
we need to get
