WEBVTT - Jason Calacanis On the Expensive Lesson Coming to Silicon Valley 0:00:10.200 --> 0:00:14.440 Hello, and welcome to another episode of the Odd Lots podcast. 0:00:14.480 --> 0:00:18.000 I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, we've been 0:00:18.040 --> 0:00:22.840 talking a lot about tech startups VC, but you know, 0:00:22.920 --> 0:00:25.560 this space is so big and it's so opaque because 0:00:25.560 --> 0:00:27.880 we don't really know what's going on with VC fund 0:00:27.960 --> 0:00:30.280 of performance. They don't really know what's going on with 0:00:30.360 --> 0:00:34.520 startup earnings or most likely startup losses, that I feel 0:00:34.560 --> 0:00:37.240 like it can never hurt to get more perspective. Yeah, 0:00:37.320 --> 0:00:39.920 we've had this conversation before. You know, it's easy enough 0:00:39.920 --> 0:00:42.120 for a publicly listed stock. You just look at a 0:00:42.159 --> 0:00:44.239 line on a screen and you get some sense of 0:00:44.280 --> 0:00:47.720 how things are going much much harder in venture capital world. 0:00:47.840 --> 0:00:51.400 And then, just to add to that, you also have 0:00:51.560 --> 0:00:56.560 this really interesting culture and dynamic around VC and angel 0:00:56.760 --> 0:01:00.480 investing where it seems like everyone is incentivized to pour 0:01:00.600 --> 0:01:03.160 more money into stuff and to get the valuations up. 0:01:03.480 --> 0:01:06.080 And then the question is what happens when that dynamic 0:01:06.319 --> 0:01:09.280 starts to go away or at least becomes a little 0:01:09.319 --> 0:01:11.880 bit more challenged, which is what has happened over the 0:01:11.920 --> 0:01:15.720 past few months. Right, all kinds of interesting dynamics publicly 0:01:15.760 --> 0:01:18.200 listed companies like Amazon or Facebook. They might come on 0:01:18.240 --> 0:01:21.360 struggling times, but I don't think anyone really doubts the 0:01:21.440 --> 0:01:24.560 viability of the business with startups. Of course, some of 0:01:24.560 --> 0:01:27.199 these companies may just not have business models that work. 0:01:27.640 --> 0:01:30.880 They may be a long way from anything resembling profitability, 0:01:30.920 --> 0:01:33.319 and have might have to make tough decisions about growth 0:01:33.400 --> 0:01:38.120 for survival. All kinds of sort of tricky questions arise 0:01:38.280 --> 0:01:41.679 in the private tech world that you just don't see 0:01:41.840 --> 0:01:45.640 when we're talking about public stocks exactly. So let's talk 0:01:45.640 --> 0:01:47.840 about it more. I want to jump right in. We 0:01:47.920 --> 0:01:50.920 have a big guest today. We're gonna be speaking with 0:01:51.120 --> 0:01:55.640 Jason Kellacanis. He is a popular podcaster on the All 0:01:55.680 --> 0:01:59.000 In podcast. He is an author, he's an angel investor 0:01:59.080 --> 0:02:02.720 who has done over three deals over eleven years, very 0:02:02.720 --> 0:02:07.840 outspoken on former journalist, former journalist, former blogger specifically over 0:02:07.920 --> 0:02:10.760 many years, and he's going to talk to us about 0:02:10.760 --> 0:02:13.519 the state of the world. Jason, thank you so much 0:02:13.520 --> 0:02:16.360 for coming on. Odd lots O big fan of the show. 0:02:16.400 --> 0:02:18.679 Thanks for having me. You know I d M do 0:02:18.760 --> 0:02:21.440 you you know a while back about having you on, 0:02:21.639 --> 0:02:23.280 and then I looked in our d M history. We 0:02:23.320 --> 0:02:25.120 haven't really talked to much, but I saw like in 0:02:25.200 --> 0:02:27.639 like two thousand nine, You're like, Hey, I'm going to 0:02:27.680 --> 0:02:30.560 be in New York and meeting some people for dim sum. 0:02:30.600 --> 0:02:31.840 Do you want to come? And I don't think I 0:02:31.880 --> 0:02:34.640 responded or I definitely didn't go. But I should have 0:02:34.639 --> 0:02:37.440 because you've had like a pretty great like thirteen years 0:02:37.520 --> 0:02:39.480 or ten years since then, so I should have been 0:02:39.520 --> 0:02:41.760 this such a humble brag. I was too busy to 0:02:41.840 --> 0:02:45.560 respond to the big angel investors m me to grab line. 0:02:45.560 --> 0:02:48.120 I blew it because you've you know, I'm here, but 0:02:48.240 --> 0:02:51.960 you've had a good This is uh, this is my 0:02:52.040 --> 0:02:56.440 credo as an angel investor. Actually, I have twenty or 0:02:56.480 --> 0:02:58.800 so people in my investment company, Launch and the syndicate 0:02:58.880 --> 0:03:02.040 dot com. Yeah. The first thing I teach new investors 0:03:02.280 --> 0:03:06.880 is never underestimate anyone, because we will see people from 0:03:06.919 --> 0:03:10.920 you know, a random assortment of beginnings and weird products 0:03:10.960 --> 0:03:14.680 and terrible ideas and and uh, all of a sudden 0:03:14.680 --> 0:03:17.200 they changed the world. And so you know, if you 0:03:17.240 --> 0:03:19.680 if you look at the first version of like uber 0:03:19.760 --> 0:03:22.320 the app, Travis hated it, and I was like, really ugly, 0:03:22.400 --> 0:03:25.800 and you know, he was just beside himself at it 0:03:25.880 --> 0:03:31.200 Wash you invested in it. I think that round was 0:03:31.320 --> 0:03:34.240 four and a half million dollars. Yeah, five million dollars 0:03:34.680 --> 0:03:36.760 something like that. In Calm dot com was worth five 0:03:36.800 --> 0:03:41.120 million dollars. When we invested, Density was around four million dollars. 0:03:41.160 --> 0:03:43.720 Density dot ioh that's another unicorn we invested in so 0:03:44.200 --> 0:03:46.560 and that cohort. When I started angel investing was right 0:03:46.600 --> 0:03:49.760 after the Great Financial Crisis two thousand nine, two thousand 0:03:49.760 --> 0:03:54.000 and ten. What happened was I um was running a 0:03:54.000 --> 0:03:56.200 company called Mahalow dot com which is now called inside 0:03:56.240 --> 0:03:57.960 dot com. It's still running to millions of dollars a 0:03:58.000 --> 0:04:01.280 year in revenue. And Sequoia rule off Botha, who was 0:04:01.320 --> 0:04:03.720 the latest partner there. He was he had just started 0:04:03.720 --> 0:04:06.200 as a partner there, working with Michael Murritz and Doug Leoni. 0:04:06.880 --> 0:04:08.480 And they said, you know, you introduced us to all 0:04:08.520 --> 0:04:11.200 these really cool companies. Would you be a scout for us? 0:04:11.200 --> 0:04:12.680 And I said, how did that? How would that work? 0:04:12.760 --> 0:04:14.000 And they said, well, we'll give you money and then 0:04:14.000 --> 0:04:16.440 we'll split the returns. And I said, well, don't you 0:04:16.520 --> 0:04:19.640 get and two percent? Like management? Vie said, oh, we 0:04:19.640 --> 0:04:22.800 get more than that. We you know, we're pretty good 0:04:22.800 --> 0:04:25.040 at this but this is gonna be small potatoes. So 0:04:25.240 --> 0:04:27.440 we're just gonna ask you and uh Sam Altman and 0:04:27.880 --> 0:04:30.080 you know this other person to be Scouts for us. 0:04:30.360 --> 0:04:32.800 And Sam famously did Stripe as an investment in the 0:04:32.839 --> 0:04:35.240 Scouts program, and I did Uber and Thumbtack and a 0:04:35.240 --> 0:04:37.119 couple of others, and three of the first seven deals 0:04:37.160 --> 0:04:40.040 I did became unicorns. So you mentioned Credo at the 0:04:40.160 --> 0:04:42.480 very beginning, and before we had this conversation, I was 0:04:42.520 --> 0:04:45.680 looking on your Twitter account and you tweeted something that 0:04:45.800 --> 0:04:48.720 intrigued me. You referred to a basic technique that you've 0:04:48.760 --> 0:04:51.400 learned in the dot com era. Trust the founder, but 0:04:51.520 --> 0:04:54.400 believe the product and customers. What did you mean by 0:04:54.440 --> 0:04:57.719 that and how is it relevant? Now? That's a great question. 0:04:57.960 --> 0:05:01.080 So you know, when you're journalist, which is where I 0:05:01.080 --> 0:05:02.880 started in the nineties, when I was coming to the 0:05:02.920 --> 0:05:05.880 dot com era, people were really well media trained. They 0:05:05.880 --> 0:05:09.120 were spinning, you know, really crazy yarns, and I was 0:05:09.160 --> 0:05:11.440 just trying to figure out, like, is Scott Karnet from 0:05:11.440 --> 0:05:13.960 About dot Com the real deal? And is you know, 0:05:14.120 --> 0:05:16.560 this woman from my village the real deal? Or are 0:05:16.560 --> 0:05:20.920 they you know, Charlottean's and you know, is this double 0:05:20.960 --> 0:05:23.400 click thing that Kevin O'Connor is doing, is it real? 0:05:23.760 --> 0:05:25.360 You know? That was kind of the job of a 0:05:25.440 --> 0:05:29.560 journalists asked questions and then maybe when we actually used 0:05:29.560 --> 0:05:32.240 the products and when we actually talked to customers or 0:05:32.279 --> 0:05:34.719 we talked to employees, we actually then got the ground truth. 0:05:35.240 --> 0:05:37.000 And so it was that skills that I learned as 0:05:37.000 --> 0:05:41.120 a journalist doing Silicon Only Reporter, my second magazine when 0:05:41.120 --> 0:05:42.880 I was in my twenties in New York in the nineties, 0:05:42.920 --> 0:05:46.200 which was awesome New York in the nineties was fantastic 0:05:46.800 --> 0:05:51.280 um and so got a very similar conversation on all thoughts. 0:05:51.360 --> 0:05:54.440 Just recently about clubbing, we had the Globe dot Com 0:05:54.440 --> 0:05:59.640 CEO Stephen patter Not. Yeah, I got some good stories 0:05:59.640 --> 0:06:03.960 about those guy, do not I covered them. I'll tell 0:06:03.960 --> 0:06:05.800 you that for in a second. But anyway, you have 0:06:05.880 --> 0:06:08.600 to look at the reality of what a startup is. 0:06:08.720 --> 0:06:11.360 A startup is a group of people a founder plus 0:06:11.400 --> 0:06:15.240 whoever they can recruit, building a product that then has 0:06:15.400 --> 0:06:21.040 some contact with customers. And when evaluating startups, it's important 0:06:21.040 --> 0:06:23.240 to meet great founders and hear what they have to say. 0:06:23.640 --> 0:06:26.440 I would argue it's more important to use the product 0:06:26.520 --> 0:06:29.480 and talk to the customers. And that has been something 0:06:30.200 --> 0:06:32.719 that in crypto as one example, or the dot com 0:06:32.720 --> 0:06:35.400 era as another example, or in a boom market that 0:06:35.440 --> 0:06:39.159 people forget and so you know you can trust but 0:06:39.279 --> 0:06:42.720 verify as a really good management philosophy. And this is 0:06:42.760 --> 0:06:45.280 my philosophy of startups, which is, yeah, sure, talk to 0:06:45.320 --> 0:06:47.480 the founder, but don't forget to talk to the customers, 0:06:47.480 --> 0:06:48.960 and don't forget to use the product. Can I ask 0:06:49.000 --> 0:06:52.560 a question about now that you've seen several cycles of 0:06:52.560 --> 0:06:55.880 booms and bus and participated them, and if my memory 0:06:56.560 --> 0:06:59.760 is correct, and tell me if I'm wrong. My memory 0:07:00.080 --> 0:07:03.799 is that your Tech magazine in the late nineties either 0:07:04.080 --> 0:07:06.600 you held onto it too long. You didn't sell at 0:07:06.640 --> 0:07:08.360 the top, and so you had a chance to make 0:07:08.800 --> 0:07:10.960 the same amount of money, but you held on too 0:07:11.040 --> 0:07:13.480 long and then it went to zero. And then you 0:07:13.520 --> 0:07:16.800 did another media thing in the early two thousand's weblogs, Inc. 0:07:16.840 --> 0:07:19.800 Which kind of competed with Gawker. And I kind of felt, 0:07:19.840 --> 0:07:22.160 like Mimi felt was at the time you sold too early, 0:07:22.360 --> 0:07:26.920 or that you overcorrected from the magazine experience because you're like, well, 0:07:26.920 --> 0:07:29.840 I just gotta get some Is that correct? And sort 0:07:29.840 --> 0:07:32.520 of like, what did you learn about climb and bus 0:07:32.520 --> 0:07:35.600 from those experiences? Yeah, as many um folks who have 0:07:35.760 --> 0:07:38.560 gotten rich said, you know, like how did you get rich? 0:07:38.640 --> 0:07:41.720 Selling too soon? Uh? Is like a really good credo 0:07:41.800 --> 0:07:44.800 as well. You learn these heuristics over time. And so 0:07:44.920 --> 0:07:47.320 Alan Meckler had offered me twenty million dollars for selicon 0:07:47.400 --> 0:07:49.720 HOI Reporter, you know before the boss. I didn't take it. 0:07:49.760 --> 0:07:51.880 I was just a poor kid from Brooklyn. But you know, 0:07:51.920 --> 0:07:53.800 I still like in our report it was at eleven 0:07:53.800 --> 0:07:56.200 million dollars in revenue at seventy five employees, and I 0:07:56.240 --> 0:07:58.760 built it off my credit cards. So I was kind 0:07:58.760 --> 0:08:01.920 of on a rush. I had done New York, you know, 0:08:02.000 --> 0:08:04.600 to the nines, like you know, it was on Charlie Rose, 0:08:04.840 --> 0:08:07.600 had a ten thousand word New Yorker profile. I mean 0:08:07.600 --> 0:08:10.400 I had checked every box in terms of you know, 0:08:10.480 --> 0:08:13.560 feeling my oats as a you know, the next media mogul. 0:08:14.160 --> 0:08:16.120 You know, I felt pretty good about things. And then 0:08:16.160 --> 0:08:18.080 the dot com bust happened, and I wound up selling 0:08:18.240 --> 0:08:21.200 the assets of Silicon Reporter to dal Jones and got 0:08:21.200 --> 0:08:23.640 two years of salary. They fired me a week after 0:08:23.680 --> 0:08:25.000 I sold it. To them and paid out my two 0:08:25.080 --> 0:08:27.440 year contract because they didn't want me there because there's 0:08:27.480 --> 0:08:29.520 too much of a too much trouble. And then I 0:08:29.560 --> 0:08:32.160 started weblogs, Inc. And when I started weblogs, Inc. The 0:08:32.200 --> 0:08:34.160 goal was to create a hundred blogs and put ads 0:08:34.160 --> 0:08:36.440 on them. And the idea of putting ads on blogs was, 0:08:37.280 --> 0:08:40.240 you know, antithetical to the concept, and people like Dave 0:08:40.280 --> 0:08:41.840 Winer and other folks were like, Hey, you can't have 0:08:41.880 --> 0:08:43.920 ads on blogs, and I was like, I think we 0:08:44.040 --> 0:08:47.960 could on a weblog have ads. And Nick Denton and 0:08:47.960 --> 0:08:50.600 I started going at it, competing against each other, and 0:08:50.679 --> 0:08:52.880 a O L offered me thirty million dollars for an 0:08:52.960 --> 0:08:55.320 eighteen month old company, and I was like, well, that's 0:08:55.320 --> 0:08:56.840 ten million more than I was going to get for 0:08:56.840 --> 0:08:59.680 Silicon Reporters. So and I only have one investor, Mark Cuban, 0:09:00.240 --> 0:09:01.680 and I was like, yeah, I'm going to secure the 0:09:01.720 --> 0:09:04.199 bag and uh, you know, that's how I got my 0:09:04.240 --> 0:09:06.000 first chip and it was one of the greatest trades 0:09:06.000 --> 0:09:09.080 I ever did. Now Denton wound up selling for a 0:09:09.160 --> 0:09:12.840 hundred fifty million, but then gave it all to UH 0:09:14.559 --> 0:09:17.599 Computer Tel And I would guess via, I'm going to 0:09:17.720 --> 0:09:20.880 guess that Nick and I did about the same on 0:09:21.080 --> 0:09:23.600 exits for that, except he spent ten years of his 0:09:23.640 --> 0:09:25.840 life on it in two years on a trial, and 0:09:26.120 --> 0:09:28.520 I did it for eighteen months. So there's also the 0:09:28.600 --> 0:09:32.800 value of time. What was the transition like from journalists 0:09:32.840 --> 0:09:36.360 to angel investor? Because I imagine journalism probably gives you 0:09:36.440 --> 0:09:39.720 a decent set of skill sets to do due diligence 0:09:39.720 --> 0:09:41.679 on a company and do your research and you know, 0:09:41.920 --> 0:09:43.720 go out and meet and talk to people. But on 0:09:43.760 --> 0:09:46.080 the other hand, I imagine there's quite a bit of 0:09:46.360 --> 0:09:52.920 maybe culture clash between really cynical journalists yeah, and optimistic 0:09:53.080 --> 0:09:55.600 changing the world Silicon Valley types, or at least that's 0:09:55.600 --> 0:09:58.960 how I imagine it. That is actually the perfect summary. 0:09:59.200 --> 0:10:01.360 And I is just talking to Molly what about that 0:10:01.400 --> 0:10:05.480 today because she just did this transition. So I would say, 0:10:05.520 --> 0:10:08.520 if you're a good journalist, like you know, really good 0:10:08.600 --> 0:10:11.560 journalist who knows has answered questions, knows how to understand 0:10:11.559 --> 0:10:14.800 a story, triangulate the truth by talking to multiple sources, 0:10:14.840 --> 0:10:16.480 I think you start on second base. I think you're 0:10:16.480 --> 0:10:19.480 basically of the way there, and if you have a network, 0:10:19.520 --> 0:10:20.920 you might be six of the way there. If you 0:10:20.920 --> 0:10:22.920 had a brand, you might be sixty of the way there. 0:10:23.600 --> 0:10:25.640 So the only thing you have to learn it you're 0:10:25.640 --> 0:10:30.080 exactly correct. As journalists, we're telling stories, and yeah, we 0:10:30.080 --> 0:10:32.720 want to be cynical. We want to really assume that 0:10:32.760 --> 0:10:36.280 what's being told to us is some percentage of the truth. 0:10:36.360 --> 0:10:40.439 But Raschaman style, like the Kurosawa film, there's usually three 0:10:40.520 --> 0:10:42.439 versions of the truth, yours mind and the actual truth, 0:10:42.559 --> 0:10:44.560 or there could be even more versions in a story 0:10:44.640 --> 0:10:47.920 that's super complicated, like say their nose or whatever. So 0:10:48.679 --> 0:10:51.880 you start triangulating the truth and that goes back to, 0:10:52.120 --> 0:10:55.160 you know, the tweet that you quoted earlier, which is, hey, 0:10:55.240 --> 0:10:57.800 for me, there's really three things here. There's the team, 0:10:57.920 --> 0:10:59.719 there's the product as customers that it can also be 0:10:59.760 --> 0:11:02.680 compared letters in there. So you start triangulating around those things. 0:11:02.800 --> 0:11:05.800 You do have to switch from and it happens organical 0:11:05.840 --> 0:11:08.719 because when you start working with founders and backing them, 0:11:08.800 --> 0:11:10.920 you then put yourself in a position of power. You 0:11:10.960 --> 0:11:13.040 put yourself in a position to be the person who 0:11:13.160 --> 0:11:16.120 is not telling their story but enabling their story, and 0:11:16.160 --> 0:11:18.320 then you move from the sort of cynical approach to 0:11:18.320 --> 0:11:22.120 this optimistic approach. Now, the fact is half of the 0:11:22.120 --> 0:11:25.640 founders you'll meet will be some version of incompetent, not ready, 0:11:26.160 --> 0:11:29.800 you know, delusional, or you know, in some small percentage 0:11:29.840 --> 0:11:33.040 of the cases, you know, frauds, crooks, Charlatan's, and then 0:11:33.040 --> 0:11:36.040 the top half will be earnest, qualified and you know, 0:11:36.120 --> 0:11:38.280 ready to change the world. And so your job is 0:11:38.320 --> 0:11:41.400 to figure out which which group you're betting on and 0:11:41.440 --> 0:11:43.120 making sure that you invest in the right group. And 0:11:43.120 --> 0:11:45.320 you're not gonna get it right every time, but you 0:11:45.360 --> 0:11:48.120 do have to come to it with a radical optimism. 0:11:48.200 --> 0:11:52.640 And so you are basically making a long list of 0:11:52.679 --> 0:11:54.680 things that can go wrong in a business, and then 0:11:54.800 --> 0:11:57.199 a short list of things that can go right. And 0:11:57.240 --> 0:11:59.240 then if you're really trying to go for an outli 0:11:59.360 --> 0:12:03.720 or success a meditation app or you know, a cab company, 0:12:03.800 --> 0:12:06.280 which were my two biggest hits to date, you're going 0:12:06.320 --> 0:12:08.320 to have to say, Okay, I'm gonna rip up the 0:12:08.320 --> 0:12:10.640 list of what could go wrong and just assume the 0:12:10.679 --> 0:12:14.000 founder will figure out ways to navigate that with their team, 0:12:14.120 --> 0:12:16.120 and then look at what could go right. And if 0:12:16.120 --> 0:12:18.000 you figure out what can go right, then you could 0:12:18.080 --> 0:12:21.040 hit a hundred x a thousand x two thousand x 0:12:21.040 --> 0:12:24.520 investment and that power law is what venture is about. 0:12:24.760 --> 0:12:29.960 You mentioned power law distribution, and this is something that 0:12:30.000 --> 0:12:32.000 has come up a number of times when we've been 0:12:32.000 --> 0:12:35.280 talking about VC lately, this idea that the model basically 0:12:35.320 --> 0:12:38.520 rests on. You know, you throw money at a bunch 0:12:38.520 --> 0:12:41.480 of companies and you're really hoping that one of them 0:12:41.720 --> 0:12:44.840 will hit it out of the park. And I guess 0:12:44.880 --> 0:12:48.120 my question is, given the current dynamics, you know, it 0:12:48.120 --> 0:12:49.680 seems like some of the froth is going out of 0:12:49.679 --> 0:12:53.400 the market. Is that sustainable, Like should you always be 0:12:53.559 --> 0:12:56.640 aiming for the biggest company or could it make sense 0:12:56.720 --> 0:13:00.439 in VC land to maybe aim for not unit horns, 0:13:00.559 --> 0:13:04.720 but like nice looking horses with medium growth trajectories that 0:13:04.800 --> 0:13:09.800 do well but aren't necessarily superstars. Yeah, it's just not 0:13:09.920 --> 0:13:13.000 possible to make the single and double concept work. Um. 0:13:13.040 --> 0:13:15.440 Single and doubles is what public market investors do or 0:13:15.520 --> 0:13:18.719 late stage investors do, and all the frauth's out of 0:13:18.760 --> 0:13:21.679 the market, and we've we've now cut into the we're 0:13:21.679 --> 0:13:25.720 now pouring out the cappuccino. So it's really been quite 0:13:25.720 --> 0:13:30.000 a contraction. Now. It's it is unbelievable how hard this 0:13:30.040 --> 0:13:33.559 has fallen for certain companies and how far it's corrected, 0:13:34.000 --> 0:13:37.559 and that's the best time to invest. So absolutely, I'm 0:13:37.640 --> 0:13:40.400 I'm not happy about a downturn, obviously, but I am 0:13:41.160 --> 0:13:45.720 extraordinarily optimistic about the returns will see on the companies 0:13:45.760 --> 0:13:48.360 we invest in over the next three years. This is 0:13:48.400 --> 0:13:50.200 going to be the best possible time to put money 0:13:50.200 --> 0:13:52.520 to work, and I'm I'm redoubling my efforts trying to 0:13:52.559 --> 0:13:54.960 invest in twice as many companies in the coming years 0:13:55.000 --> 0:13:57.959 because valuations have come back down to reality. And I'd 0:13:58.000 --> 0:14:00.000 say two out of three companies I wanted to invest 0:14:00.000 --> 0:14:02.520 sent over the last two or three years. If I 0:14:02.559 --> 0:14:05.600 didn't invest, the number one reason I didn't invest was 0:14:05.640 --> 0:14:08.480 because of valuation. The companies just the math didn't make 0:14:08.520 --> 0:14:11.880 sense to invest in a company that has no product 0:14:11.880 --> 0:14:14.480 in market at a fifty million dollar valuation, or if 0:14:14.480 --> 0:14:16.760 it's crypto, it might be a hundred to a billion 0:14:16.800 --> 0:14:20.440 dollar valuation, which just defies logic. And you know, I 0:14:20.440 --> 0:14:25.200 grew up with mentors like Michael Mritz, Doug Leoni, Bill Gurly, 0:14:25.480 --> 0:14:28.600 you know, George Zachary, people who had been in the 0:14:28.600 --> 0:14:30.560 game for a long time. And then my contemporaries and 0:14:30.600 --> 0:14:33.880 I chum up David Sachs, etcetera. You know who who 0:14:33.880 --> 0:14:37.000 grew up investing together. Over the last decade, we all 0:14:37.600 --> 0:14:41.400 looked at revenue and customers and try to build models. 0:14:41.560 --> 0:14:44.080 And the last two years people throw that out the 0:14:44.080 --> 0:14:46.600 window and it just didn't make sense to a lot 0:14:46.640 --> 0:14:49.680 of us. So I spent the last two years raising 0:14:49.680 --> 0:14:52.680 money for my existing portfolio and selling positions and existing 0:14:52.720 --> 0:14:56.240 companies largely and mean still investing in the earliest stages. 0:14:56.280 --> 0:15:13.080 But now I'm it's young um time. All right, I 0:15:13.120 --> 0:15:16.240 have a thousand questions, But since you mentioned cham, I'm 0:15:16.240 --> 0:15:17.960 going to ask you a question that's kind of about him, 0:15:17.960 --> 0:15:20.480 but it's actually much more about a lot of investors 0:15:20.680 --> 0:15:23.160 these days. And I think you've even talked about it 0:15:23.240 --> 0:15:25.920 on one of the All In episodes. But we're in 0:15:25.960 --> 0:15:30.200 a moment where, thanks to crypto and I guess thanks 0:15:30.240 --> 0:15:33.880 to SPACs as well in the case of Chama, a 0:15:33.960 --> 0:15:40.800 lot of vcs are invested in publicly liquid assets. Cryptocurrencies 0:15:40.800 --> 0:15:42.920 are the most common. But of course, you know, Cham 0:15:43.240 --> 0:15:46.560 for much of one brought all these spacts, would talk 0:15:46.560 --> 0:15:52.120 about them, They've all done basically terribly in many cases vcs. 0:15:52.480 --> 0:15:56.160 You know, throughout history, vcs were invested in companies that 0:15:56.360 --> 0:15:59.200 public retail just didn't have access to for several years. 0:15:59.560 --> 0:16:02.520 Now in any of them are invested in cryptocurrencies that 0:16:02.560 --> 0:16:04.760 the public can trade. Do you think this is a 0:16:04.800 --> 0:16:09.720 problem that so many investors historically VC type investors are 0:16:09.760 --> 0:16:14.720 basically either tacitly or explicitly pumping their bags on social 0:16:14.720 --> 0:16:18.320 media for retail. Good question, Yeah, it's a great question. Um, 0:16:18.360 --> 0:16:20.960 it's really two different groups. So I'd say SPACs and 0:16:21.000 --> 0:16:24.360 crypto are very different, and I'll explain why. So let 0:16:24.360 --> 0:16:26.520 me start with crypto because that's where the problem is. 0:16:26.960 --> 0:16:31.960 So crypto has created an entire shadow, in my mind, 0:16:32.320 --> 0:16:38.800 illegal stack um that is skirting securities regulations. I believe 0:16:39.440 --> 0:16:43.960 the overwhelming majority of tokens are securities, but they're being 0:16:44.040 --> 0:16:48.280 dumped onto retail investors, and this is being done explicitly 0:16:48.320 --> 0:16:51.040 by venture firms. I won't mention any names who are 0:16:51.120 --> 0:16:54.960 buying into companies early getting into tokens, and then those 0:16:55.000 --> 0:16:58.760 tokens are being listed on exchanges and the public can 0:16:58.800 --> 0:17:02.400 buy into them. The public is buying into them a 0:17:02.440 --> 0:17:07.080 common enterprise in order to get a financial gain. They 0:17:07.119 --> 0:17:10.080 have no interest in using those tokens for any utility. 0:17:10.200 --> 0:17:14.720 These are not Chuck e Cheese tokens. They're not United Miles. 0:17:15.119 --> 0:17:18.840 We all know what's going on here, and to then 0:17:18.920 --> 0:17:23.320 liquidate your position in the second or third year of 0:17:23.400 --> 0:17:25.959 the crypto company. I'm not going to mention any specific 0:17:25.960 --> 0:17:28.359 companies here or firms, but you don't need to be 0:17:28.400 --> 0:17:31.160 a genius to just look at the activity out there. 0:17:31.920 --> 0:17:34.320 This is going to blow up in the faces of 0:17:34.480 --> 0:17:40.000 the venture community. Regulators are very permissive in our country. 0:17:40.040 --> 0:17:42.720 Our country, generally, our legal system is you're innocent until 0:17:42.800 --> 0:17:45.320 proving guilty. But I think there's a lot of guilty 0:17:45.359 --> 0:17:49.760 parties that you know, flipped securities and called them tokens. 0:17:50.359 --> 0:17:55.119 And I think the sec Justice Department is in the 0:17:55.280 --> 0:17:59.560 first inning of taking action against these companies. And sure 0:17:59.600 --> 0:18:01.959 it would be better if they had given us clear guidelines. 0:18:02.200 --> 0:18:04.920 But having been in the room for these discussions over 0:18:04.960 --> 0:18:08.840 the past five years, people suspended disbelief. They shopped for 0:18:08.880 --> 0:18:11.840 attorneys who told them what they wanted to believe about 0:18:11.920 --> 0:18:14.600 tokens and the how we test that. You know, listen, 0:18:14.640 --> 0:18:16.119 I'm no lawyer. Don't take advice for me. I'm just 0:18:16.160 --> 0:18:20.000 a kid from Brooklyn. This was actually the ultimate irony, 0:18:20.080 --> 0:18:22.040 which was that like, if you went to a regulator 0:18:22.080 --> 0:18:24.359 and asked permission, they would often tell you know, but 0:18:24.440 --> 0:18:26.520 if you just went ahead and launched it after doing 0:18:26.560 --> 0:18:32.280 your own legal study, they usually wouldn't say anything. Yeah, 0:18:32.520 --> 0:18:36.200 so people knew Tracy that what they were doing was fughazi. 0:18:36.359 --> 0:18:38.560 They knew that this was a grift. I have no 0:18:38.640 --> 0:18:42.080 sympathy on anybody who gets their risk lapped or gets 0:18:42.080 --> 0:18:46.000 a speeding ticket or worse, because I would like to 0:18:46.040 --> 0:18:49.800 see accreditation laws be changed so that people can take 0:18:49.800 --> 0:18:52.840 a test just like a driver's test or in the 0:18:53.040 --> 0:18:57.360 few states that have gun owner test gun permit tests. 0:18:57.480 --> 0:19:00.000 We could just educate people. Maybe it take a three 0:19:00.000 --> 0:19:03.359 our course, you take a fifty question tests, doesn't have 0:19:03.400 --> 0:19:06.200 to be a series seven. But hey, this is diversification. Hey, 0:19:06.240 --> 0:19:08.439 these are risky assets, these are non liquid assets. This 0:19:08.520 --> 0:19:11.240 is preferred shares, these are common shares. You know, here's 0:19:11.240 --> 0:19:14.359 how governance works, here's how boards work. Just so you know, 0:19:14.400 --> 0:19:16.760 a normal person who's not in the top six percent 0:19:16.800 --> 0:19:19.080 of the country who are credit investors, could participate in this. 0:19:19.960 --> 0:19:21.760 That's what the SEC needs to do. That's what our 0:19:21.800 --> 0:19:23.760 government needs to do. Have a path for people to 0:19:23.800 --> 0:19:26.680 be educated to participate in these things. What the country 0:19:26.720 --> 0:19:31.399 doesn't need is for sophisticated investors to then create a 0:19:31.440 --> 0:19:35.280 path for people to circumvent the securities law and then 0:19:35.600 --> 0:19:38.920 flip tokens. I have spent the last five years being 0:19:38.960 --> 0:19:43.320 criticized because I've said all along, you know, if you 0:19:43.400 --> 0:19:46.040 can't use the product, if you can't talk to the customers, 0:19:46.119 --> 0:19:48.639 you know, calling back to your asking me about that 0:19:48.680 --> 0:19:52.199 tweet I did, and my experience as a journalist. If 0:19:52.240 --> 0:19:54.480 you can't talk to the customers, you can't use the product, 0:19:55.119 --> 0:19:58.000 then it's probably either a fraud where it's a pre 0:19:58.080 --> 0:20:01.760 launch company. You and I think the majority of these 0:20:01.760 --> 0:20:05.399 tokens that are being sold are either pre launched companies, 0:20:05.400 --> 0:20:08.640 which would value them at three to ten million dollars, 0:20:08.800 --> 0:20:11.360 or their frauds or they're run buying competence, or their 0:20:11.480 --> 0:20:15.400 frauds run buying competence. It's some combination of those three buckets. 0:20:16.000 --> 0:20:19.280 And I invest in the first bucket pre launched companies 0:20:19.400 --> 0:20:21.720 or you know, about to launch m vps all the 0:20:21.760 --> 0:20:26.119 time in my accelerator. But I don't take the shares 0:20:26.160 --> 0:20:28.520 of those companies and put them on a listing and 0:20:28.600 --> 0:20:32.000 tell people have fun staying poor if you don't buy 0:20:32.000 --> 0:20:34.439 these tokens and you don't get it, okay, Boomer and 0:20:34.440 --> 0:20:38.040 all this other bullshit that these very sophisticated investors did 0:20:38.160 --> 0:20:40.359 to the public. So I don't have strong feelings on 0:20:40.359 --> 0:20:43.359 a shoe, but it's a complete utter grift. Do you 0:20:43.359 --> 0:20:46.760 think there's gonna be a criminal response in some cases? Certainly? 0:20:46.880 --> 0:20:49.199 You see, you think the regulators are only in the 0:20:49.240 --> 0:20:51.720 second ending, so that would imply that there's a lot 0:20:51.720 --> 0:20:53.960 more coming, Like what is this? Look? Yeah, I mean 0:20:53.960 --> 0:20:56.159 these it's just a little f t Alwa was flipping 0:20:56.160 --> 0:20:59.639 and grifting, you know, property Justice and the Southern District 0:20:59.680 --> 0:21:03.760 Company York and Florida's you know district attorneys, Like there's 0:21:03.800 --> 0:21:06.800