Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. So, Tracy, there's
Speaker 1: obviously a lot going on these days in the world
Speaker 1: of macro and markets, but one thing that we've seen distinctly,
Speaker 1: particularly since the middle of November, is tech stocks have
Speaker 1: just been getting absolutely hammered. Yeah, so I was actually
Speaker 1: away last week. I guess we should say we're recording
Speaker 1: this on February seven. Uh, And apparently I missed a
Speaker 1: massive sell off in tech and then a little bit
Speaker 1: of a rebound. Is that what happened? Yeah, I think that.
Speaker 1: I think that's fair to say. I think he was
Speaker 1: last Monday. I'm started losing track of the days. We've
Speaker 1: had some really brutal sessions, and we had weakness in
Speaker 1: I think it was like two Mondays ago or something
Speaker 1: like that textor just got killed anyway, but we've had
Speaker 1: some brutal sessions. Everything that's sort of like growthy, like
Speaker 1: people like betting on the future Big Time got hammered.
Speaker 1: Also had some specific names like Netflix really got wrecked
Speaker 1: after earning his Facebook and a lot of trouble like
Speaker 1: and a striking fact that I saw from Bank of
Speaker 1: America is that in January, like so called value stocks
Speaker 1: had their best outperformance relative to growth since two thousand
Speaker 1: and one. So we're talking like two decades, a two
Speaker 1: decade historical reversal here. Yeah. So the thing I find
Speaker 1: weird about all of this is this is kind of
Speaker 1: what everyone predicted would happen. Right, For many, many years,
Speaker 1: everyone complained about valuation of tex stalks, and once interest
Speaker 1: rates start going up, you know the air is going
Speaker 1: to get kicked out of their tires. And that seems
Speaker 1: to be exactly what's been happening. But part of me
Speaker 1: also thinks the explanation can't be that simple. Well, the
Speaker 1: other thing is like, okay, you can predict it, because
Speaker 1: it doesn't you know good. You could say like, oh,
Speaker 1: look at all these overvalued text talks and look at
Speaker 1: the multiples, etcetera. But meanwhile you're like stuck in value
Speaker 1: for three years and all your clients have deserted you,
Speaker 1: and then finally January two comes across. But what good
Speaker 1: did that do you? And I don't think anyone has
Speaker 1: some like great way of like timing these things, So
Speaker 1: what good did these predictions? Absolutely right? So anyway I'm
Speaker 1: very interested in what exactly happened, whether this is the
Speaker 1: end of a sort of era like for years, anything cloud, anything,
Speaker 1: software as a service, anything, growth just absolutely crushed it.
Speaker 1: So hey, I'm curious whether this is the end of
Speaker 1: that for the time being, or whether it was a
Speaker 1: blip and be what is happening on the private side,
Speaker 1: because we know that you know, it's like would you
Speaker 1: pay as much for a late stage round or or
Speaker 1: even in early stage round if the I p O
Speaker 1: window is much worse? And we know that recent I
Speaker 1: p O s got killed, We got a lot of
Speaker 1: SPACs that de spac one got killed. And so also
Speaker 1: what is I mean for private markets in growth and VC,
Speaker 1: etcetera when we see such ructions in the public market. Yeah,
Speaker 1: it might be a situation where you know, an ill
Speaker 1: liquid asset like a private share turns out being like
Speaker 1: a better bet in this environment, just because it's harder
Speaker 1: to get out of whereas you can press a button
Speaker 1: and sell down you know Google or Facebook, Slash Meta
Speaker 1: or whatever, but it's harder to get out of a
Speaker 1: private company. So yeah, I'm curious to see what's going
Speaker 1: on with valuations there. I love that and It's totally true,
Speaker 1: this idea of like the illiquidity premium, because you can't,
Speaker 1: you can't. The psychology, the psychological impulse to sell doesn't exist. Anyway.
Speaker 1: I'm very excited about our guest. He is an active
Speaker 1: investor in public markets and private markets. He's an entrepreneur.
Speaker 1: We've had them on before, and he knows everything that's
Speaker 1: going on this world. He's all the all the conversations
Speaker 1: with all the movers and shakers and can tell us
Speaker 1: what's up. We're gonna be speaking with Howard Linson, who
Speaker 1: is the general partner at Social Leverage. He's the fun
Speaker 1: or of stock Twits, a crossover investor of public and
Speaker 1: private market. Always has a finger on the pulse. Howard,
Speaker 1: thank you for coming back on oud. Luck Hey kids,
Speaker 1: how are you? We're doing great? So what happened Let's
Speaker 1: start like what happened over the last month. What happened
Speaker 1: in January? In your view, what happened in January is
Speaker 1: obviously prices went down. But what like what Tracy was saying,
Speaker 1: this is the most other than two designated the most
Speaker 1: predicted hold back in history, right, I mean, if we
Speaker 1: really look, it's easy in hindsight and I play an
Speaker 1: incredible corp dead person on Twitter. Three. I do free
Speaker 1: corporate deav work for every tech company. I think there's
Speaker 1: a couple of private market let's call him big Bang.
Speaker 1: And in the first one was obviously that we work
Speaker 1: soft Pink Big Bang And you know, you know, it's
Speaker 1: kind of like the in Ron thing, like when you
Speaker 1: work in soft Bank. When that imploded, right, I think
Speaker 1: a lot of us, including myself, if I'm gonna made
Speaker 1: one prediction, it would have been, Okay, that is the
Speaker 1: that's the end. People will will take stock. You know.
Speaker 1: It's kind of like a warning like our end run,
Speaker 1: you know what I mean. It was like no one's
Speaker 1: really watching. It is a great idea, and I still
Speaker 1: pick it up what went on. You know, we know
Speaker 1: soft Bank has been slopping in the past, and so
Speaker 1: if you had asked me, if you had told me
Speaker 1: there'd be twenty soft Banks as a result of soft
Speaker 1: Bank we work, that's just not wouldn't have been on
Speaker 1: my Bingo card. And so you've got from Andresen to
Speaker 1: Tiger to co to two D one to soft Bank.
Speaker 1: Everybody now is in a race to index the private markets,
Speaker 1: not at the seed level, but you know, if you
Speaker 1: can take two and twenty and hoard all the money
Speaker 1: at the late stage market, I mean that's a pretty
Speaker 1: good market to corral versus Vanguard charge and quarter basis
Speaker 1: point right. So you know the macro environment of money printing,
Speaker 1: the the tech mantra, Look, if you're not in tech,
Speaker 1: you're stupid. Combined with then COVID, which like just push
Speaker 1: forward this digital everything's digital, Like oh my god, like
Speaker 1: we you know, you're in an accident, you touch yourself.
Speaker 1: I've been in bike accidents. You touch your stuff. I
Speaker 1: can't believe I lived. And I think that's the way
Speaker 1: we were in May and June and July of everybody
Speaker 1: called their companies. You know, I was calling all our
Speaker 1: companies and we were like going remote. People were laying
Speaker 1: up of their staff no matter what in the in
Speaker 1: the because because you were allowed to. And things started
Speaker 1: going upward to the right if you were a digital
Speaker 1: first business, from healthcare to to finance. Obviously with the
Speaker 1: Robin Hoods and crypto and so everybody just as we do,
Speaker 1: started projecting things in this new ramp. You know, here
Speaker 1: we are November of last year, right, start creeping up
Speaker 1: and valuations now are coming down. The difference this time
Speaker 1: is a supply and I've been writing about the supply
Speaker 1: for the last year. You covered it with SPACs, you know,
Speaker 1: and we covered it with I p o s and
Speaker 1: direct listings. You have all this supply coming at a
Speaker 1: time where no where you're going to dump it. And
Speaker 1: we've seen what's happened in the public markets with anything
Speaker 1: new there's just no bid. And so if you're a
Speaker 1: public company that is not index in February of there's
Speaker 1: no bid because there's too much supply coming into time
Speaker 1: when all the all the crossover funds went left into
Speaker 1: private markets the public markets, if you're not index, just
Speaker 1: there's no natural buyers, it seems right now, especially in
Speaker 1: a rising interest rate environments, you kind of had a
Speaker 1: perfect storm. You can't look at one thing you have,
Speaker 1: but this perfect storm that led to the last four months.
Speaker 1: We hear that term perfect storm quite a lot on
Speaker 1: the show, I feel like recently. But if I could
Speaker 1: ask a really basic question, because I think it's one
Speaker 1: of those things we all assume but we don't necessarily
Speaker 1: think that much about the mechanics of it. But can
Speaker 1: you walk us through why exactly are rising interest rates
Speaker 1: bad for text stocks, and you know, particularly text stalks
Speaker 1: at very very high valuations. You can probably blame it
Speaker 1: on Excel. I mean, if everybody was still it would
Speaker 1: take a few months for people to update their spreadsheets.
Speaker 1: You know, there's no textbooks for crypto. There's a textbook
Speaker 1: for for stocks, and then the stock textbook world. You
Speaker 1: plug in a higher interest right, and you pulled back
Speaker 1: cash flows and their lower and that's basically it. I mean,
Speaker 1: we can argue about everything else, but there's a textbook, Joe.
Speaker 1: Does that make sense to you? Trace? I don't know
Speaker 1: another reason, Tracy, what's your answering? I mean, I guess
Speaker 1: like cash flows, opportunity cost maybe. I just think it's
Speaker 1: we have a system of analysts. Obviously spreadsheets. It's easy
Speaker 1: to update spreadsheets, send them around. People look at the
Speaker 1: numbers and go slap, and they slap you know, a
Speaker 1: discount on it, and then look at the sector and go,
Speaker 1: you know, we're taking this from sixty times sales to
Speaker 1: thirty times sales. That's really and it's just one person
Speaker 1: tips and then slowly tips and it's the way markets work.
Speaker 1: I mean, this is a complete evaluation adjustment. I don't like.
Speaker 1: I just don't see the software stocks not growing. They're
Speaker 1: just not much has changed other than just how people
Speaker 1: are feeling about the future. And in the public markets,
Speaker 1: this happens really quick. I used to think it would
Speaker 1: happen much quicker in the private markets. The private markets
Speaker 1: are very crowded, and I can sit on my hands
Speaker 1: as a scene investor. Now we have a large sheet
Speaker 1: funds and we've been doing this a long time. But
Speaker 1: if I sit on my hands, the best companies are
Speaker 1: still going to get funded. They'll get funded at higher
Speaker 1: evaluations and the and the returns won't be as good
Speaker 1: along the line for all the people writing those checks.
Speaker 1: But you know, that is what's created this private market
Speaker 1: that seems to be ignoring for now what's happening in
Speaker 1: the public markets. Used to be Sequoia would write a
Speaker 1: letter or somebody would write a letter saying, after the
Speaker 1: stock market movement, say winter rest in peace. Private markets
Speaker 1: here we are in two thousand two. No one's writing
Speaker 1: that letter, but the letters being written by the public market.
Speaker 1: You know, I want to go back to how you
Speaker 1: characterize the and recent Horwitz is the code twos and
Speaker 1: the soft banks. I thought that and the Tiger globals.
Speaker 1: I thought that that was really fascinating. This character is
Speaker 1: ation is essentially like, how can we become the index
Speaker 1: fund so to speak, of private markets? And if you
Speaker 1: can capture that late stage market at at enough breadth,
Speaker 1: you can more or less kind of have a public portfolio,
Speaker 1: but with much better fees than anyone can for an
Speaker 1: actual public Talk a little bit more about that, because
Speaker 1: I don't know, like I don't think I like appreciated
Speaker 1: the degree to which that is what they've been aiming
Speaker 1: to accomplish. But that feels like very interesting. Talk a
Speaker 1: little bit more about like what you see as their
Speaker 1: real goal here. I mean these are opinions, strongly strong
Speaker 1: opinions loosely how but you can see it happening, right,
Speaker 1: Like it goes back to we work, like the fact
Speaker 1: that they didn't die and the tigers looked at themselves
Speaker 1: like those idiots can do this. We can do this,
Speaker 1: and we can do it with like a better research.
Speaker 1: You know, soft Bank was made fun of at the
Speaker 1: time for like going you know, it was a mess,
Speaker 1: and everybody I called I wrote about it because everybody
Speaker 1: had soft Bank in their in their funds. Right, we
Speaker 1: were in a company called Wag. We write the first
Speaker 1: child dog walking app, which is now doing this back.
Speaker 1: But we invest in the company at a four million valuation,
Speaker 1: which is what seed investors supposed to do in like
Speaker 1: two fifteen. Right. It's a hard idea of the uber
Speaker 1: of dog walker. You know everything the way it works
Speaker 1: at this age level. But that made sense. You take risk.
Speaker 1: You know you've got Google Maps, you've got all the
Speaker 1: app developers. You can build a dog walking app, no problem.
Speaker 1: But then shot Bank comes in like a year later
Speaker 1: and goes, we'll give you three hundred million at whatever valuation,
Speaker 1: and if you don't take it, won't give it to
Speaker 1: Rover down the street. Right, and that and people already
Speaker 1: forget that, But that was going on. Soft Bank was
Speaker 1: just trying to take the market. It was genius, evil
Speaker 1: and flawed, Right, depends if your moss. It's not flawed
Speaker 1: at all because you know the end game, but it's
Speaker 1: it's flawed for guys like us or people of gus
Speaker 1: at the seed stage, who now are locked into a
Speaker 1: cap table that's got a buying areau comes. So if
Speaker 1: a young company takes three million very early on in
Speaker 1: their valuation, the steed investors only outcome if they're not
Speaker 1: allowed to sell it, and we weren't at that price
Speaker 1: because that's what they do, They lock up the cap table.
Speaker 1: Is I p O or zero? And so for seed investors,
Speaker 1: I hated it. I wrote about it. I hated the
Speaker 1: whole idea that we were being held hostage, right, and
Speaker 1: I wrote stuff like there should be a softbag clause
Speaker 1: and we see uh deals that says the SoftBank comes
Speaker 1: under your cap table later we get to sell right,
Speaker 1: Like this stuff wasn't doesn't get talked about because the
Speaker 1: press doesn't want to cover it. But those are the
Speaker 1: things that we're blogging about and talking about, like what
Speaker 1: did they do to our cap table? Where we were
Speaker 1: going along nicely building a business. SoftBank comes in and
Speaker 1: slaps three hundred million with like an ultimatum that if
Speaker 1: you don't take it, it it goes to the competitor, and
Speaker 1: now I'm locked in to this company forever or ride
Speaker 1: it back down to zero. And so it's very rare
Speaker 1: that a company like WAG can then go clean it
Speaker 1: up like they bought out soft Bank. They fired a
Speaker 1: bunch of management after they pissed through a lot of
Speaker 1: the money So if you had told me that there'll
Speaker 1: be twenty of these now invading cap tables, this is
Speaker 1: what I warned about or other people like Fred I'm
Speaker 1: sure talked about quietly, but just weren't writing about it
Speaker 1: because you don't want to piss off the late stage investors,
Speaker 1: right and you don't want your entrepreneurs to hate you
Speaker 1: because you're telling the truth. But there was no real
Speaker 1: risk to SoftBank and doing this. So if soft Bank,
Speaker 1: so everybody copying the same playbook, and what's the real
Speaker 1: risk to Tiger um if they're wrong on ten of
Speaker 1: these that they put a hundred or two hundred million
Speaker 1: in two not really much risk. Here's why. If I'm
Speaker 1: Tiger and a company goes sideways for a few years
Speaker 1: and then needs capital later, they're going to rewrite the
Speaker 1: cap tables, So who loses the early investors? So I think,
Speaker 1: and not enough speed investors have really thought through the
Speaker 1: mechanics of what could happen even if you take this
Speaker 1: late stage money from a code to do you one
Speaker 1: soft Bank of what could happen in five years even
Speaker 1: though your company is doing well when they need more money.
Speaker 1: So that's why I've been sitting on my hands just
Speaker 1: trying to figure out which founders really can appreciate that.
Speaker 1: And so there's gonna be a lot of great companies
Speaker 1: that take money from these index late stage bcs that
Speaker 1: that that they're good business. It's not, but they're not
Speaker 1: good enough. And maybe the public market isn't ready for
Speaker 1: these not good enough businesses, as we're seeing from All
Speaker 1: Birds to nerd Wallet. Are they really meant to be
Speaker 1: public so young? And so you have this perfect strom
Speaker 1: of a lot of supply high valuations and the private
Speaker 1: markets are liquid, but only at certain levels. Can you
Speaker 1: talk to us a little bit about how the dynamic
Speaker 1: that you just described actually impacts valuations of private companies
Speaker 1: because I imagine, I mean, you have the big players
Speaker 1: out there, like a soft bank, basically a big whale.
Speaker 1: They come in make a big injection at a large valuation,
Speaker 1: and that squeezes prices higher, and I guess they're able
Speaker 1: to book higher prices as well. But maybe just walk
Speaker 1: us through like the details of that process and what
Speaker 1: does it take to actually get a knock back on
Speaker 1: private valuations when you have these big players squeezing things higher. Yeah,
Speaker 1: it's good, and it's the ultimate question that I have
Speaker 1: to think about because when we write a seed check.
Speaker 1: When I was a kid, seed stage was one of three,
Speaker 1: you know, and Joe knows this because we were seed
Speaker 1: investors and Alley Insider and and and Henry Blodgett at
Speaker 1: the time got a good valuation which was like a
Speaker 1: six million pre money at the time. That was like
Speaker 1: double what was normal. But that was a great entrepreneur
Speaker 1: was like, you know, the world was different. So the
Speaker 1: biggest the biggest thing I can think of, and this
Speaker 1: is just from my own eyes and ears, Tracy and
Speaker 1: and Joe's in two thousand seven running around the text
Speaker 1: stars and why Combinator, and there were a hundred seed funds,
Speaker 1: you know, from Jeff clad Fred Wilson, Rob Ehremberg, Patrickoff.
Speaker 1: There was like you knew the seed investor right, and
Speaker 1: there were a thousand companies a year, let's say, and
Speaker 1: you flash forward too, there's a thousand seed funds out
Speaker 1: raising capital right now and a hundred thousand companies a year.
Speaker 1: So really, you know, the tech booms just you know,
Speaker 1: the cloud and software, you know, the in the deflation
Speaker 1: and starting a company has created this this market where
Speaker 1: you have and then you have COVID, which distributes all
Speaker 1: the talent around the world in different weird ways that
Speaker 1: will be feeling forever. And so you have and then
Speaker 1: you have sub stack, which create everybody thinks they can
Speaker 1: be a venture capitalist. And then you have market and
Speaker 1: greesm Uh and all these smart people that have been
Speaker 1: in the industry for so long working the system, and
Speaker 1: you have this incredible change in the market where the
Speaker 1: seed investors are the new startups right, And and we've
Speaker 1: what we've done, and I can only tell you what
Speaker 1: we've done. I can't tell you factually what's going on.
Speaker 1: The data is in my in our eyes and years
Speaker 1: of social leverage what we've done and said we were
Speaker 1: good seat investors, and maybe maybe we weren't so good.
Speaker 1: It was just there wasn't a lot of supply. The network,
Speaker 1: though big was contained. You read Fred Wilson's blogger, you
Speaker 1: read tech Meme and you read tech Crunch, and you
Speaker 1: were in the know and everything with Silicon Valley or
Speaker 1: New York or maybe Berlin, uh and Beijing was still
Speaker 1: working back then, so you could you could structure your
Speaker 1: business in that way. Along comes covid and all this
Speaker 1: money and now and some stack and Twitter and TikTok,
Speaker 1: and everybody wants to be a venture capitals. You know,
Speaker 1: there's thousands of employees that have there's thousands of employees
Speaker 1: that have left Uber, Pinterest, Snap, Twitter, Postmates, you know
Speaker 1: like door Dash, that have experience, that have five million
Speaker 1: in the bank. They don't want to go work for
Speaker 1: another startup because of COVID. They set up a sub steck,
Speaker 1: they use the network, they go raise three to four
Speaker 1: million dollars, they set up an angel list syndicate, and
Speaker 1: they're in business as a fund manager and no one's
Speaker 1: they've had no mentoring, they've had no idea what cap
Speaker 1: tables look like, or they know what cap tables look
Speaker 1: like from their from their very narrow experience of Uber
Speaker 1: or wherever they were at. And they think there's infinite growth,
Speaker 1: and they write checks that make no sense because you're
Speaker 1: you know, seaed investors are holding for for ten years.
Speaker 1: Robin Hood did great and it was eight years to
Speaker 1: get public. So so I don't and so an interest
Speaker 1: rates just take up a little bit. In the old world,
Speaker 1: when they were only a hundred of US seed investors,
Speaker 1: we could call each other and go uh, not collued,
Speaker 1: but just say these prices are silly, and now who
Speaker 1: are you gonna call? Everybody's right and checks from every
Speaker 1: corner of the earth at every angle, whether you've left
Speaker 1: Plaid or all these fintech companies now Square and PayPal,
Speaker 1: there's just thousands of people that think they can write check.
Speaker 1: And by the way, maybe they should. I'm just saying,
Speaker 1: so the end has not been written here. It's just
Speaker 1: we have this new private market that's not digesting the
Speaker 1: public market information. There's a lot of young people in
Speaker 1: the private markets that have never traded a stock, and
Speaker 1: so they don't even care what the multiples are in
Speaker 1: the public markets. They're not thinking about that because they've
Speaker 1: never had to connect the dots. I find it's totally fair.
Speaker 1: There are already so many like interesting dynamics that you've
Speaker 1: teased out for us. So obviously there is the incredible
Speaker 1: like supply boom on public markets last year with all
Speaker 1: the I p O S inspects, including yours, which I
Speaker 1: wanna get to and find out what's going on there.
Speaker 1: There's the dominance of the late stage funds that are
Speaker 1: essentially trying to create index funds more or less for
Speaker 1: private markets. And then as you've just described this explosion
Speaker 1: of people who are ready to write seed checks and
Speaker 1: you just see them on Twitter. I feel like everyone
Speaker 1: I follow in the last year and a half became
Speaker 1: an angel investor. I was like, I didn't even know.
Speaker 1: We were disappointed an odd lots stuffesn't have a seed
Speaker 1: fund that I already would have written the check one day,
Speaker 1: one day, one day. So I want to like, there's
Speaker 1: so many different angles here that I want to explore.
Speaker 1: But one thing I'm very curious about it is like
Speaker 1: when COVID hit in March and then very soon there
Speaker 1: after stocks started going up into the right, but people
Speaker 1: were talking about like these so called like COVID winners,
Speaker 1: like these things. Okay, the world is going to change
Speaker 1: and there are some winners, and like Zoom Video, for example,
Speaker 1: was a COVID winner and its stock went to the moon,
Speaker 1: and we're like all gonna be working from all around
Speaker 1: the world and people are going to use zoom and
Speaker 1: it's gonna except the Zoom video is now like it's
Speaker 1: gave up, given up all of it. Right, It's not
Speaker 1: just like giving up a bunch, it's given up all
Speaker 1: of it. And for whatever reason, despite all the work
Speaker 1: from home, etcetera. Would have been to like the COVID
Speaker 1: winners thesis, because it turns out that in retrospect a
Speaker 1: lot of these like so called winners, the stocks actually
Speaker 1: are now like acting like COVID never happened. And some
Speaker 1: of the big winners are actually like brick and mortar
Speaker 1: places that we were sort of gave up for. What
Speaker 1: happened to that trade? Yeah, I call it the great
Speaker 1: round trip. I've been writing about this for a couple
Speaker 1: of months where I've just been plotting slowly all these
Speaker 1: companies are doing what we this crazy thing on a chart,
Speaker 1: you know that the analysts quickly we're describing as a
Speaker 1: new mobile digital revolution. Everything was pulled forward. That was
Speaker 1: the famous term. And by twenty everything was pulled forward.
Speaker 1: And so from Shopify to PayPal, to Square to robin
Speaker 1: Hood to all the clones, to docusigned to Zoom to Peloton.
Speaker 1: And now we've got to go back and look at
Speaker 1: those humps or those sell it right and up in
Speaker 1: the quick getbacks. We've gone up and come right back down.
Speaker 1: And this is how markets work. But there are companies
Speaker 1: like Zoom. You and I were all the three of
Speaker 1: us around a Zoom right now there are companies that
Speaker 1: have those margins because business will not go and the
Speaker 1: stark just got ahead of itself. And there are those
Speaker 1: businesses like Peloton who started to believe their own or
Speaker 1: whatever we want to call it. And they were great
Speaker 1: founders and great teams that saw growth that was just
Speaker 1: like and even I rominant like. There was just this
Speaker 1: growth that they had to deal with. And you also
Speaker 1: had this moment of growth where companies that were built
Speaker 1: in the physical world had to go remote. And now
Speaker 1: that's becoming a pain because they piled on all this
Speaker 1: growth and all these new people by zoom. But they
Speaker 1: weren't built for a remote world. They were built for
Speaker 1: a trans They were built for this transition. And now
Speaker 1: that growth may not be there and one of all
Speaker 1: these people on these distributed zoom chains supposed to be
Speaker 1: doing all day. So now you're going to have to
Speaker 1: see which companies. And that's the way the markets work.
Speaker 1: They overshoot to the upside and do the downside. And
Speaker 1: I think from this great rotate left from this great
Speaker 1: giftback that I talked about, there will be some winners. Peloton, No,
Speaker 1: we'll not go back to one six people. Let's not
Speaker 1: kid ourselves, but Kozoom hit all time highs if they
Speaker 1: can solve dealing with Microsoft and Google. Yes, so you've
Speaker 1: got to find the brands and the margins and the
Speaker 1: companies and and the growth that will you know, get
Speaker 1: back on you know, some kind of semblance. And so
Speaker 1: there will be future winners here. And you're seeing traders
Speaker 1: lean against certain things because they're new at this or
Speaker 1: they're having fun and they think everything's going to zero.
Speaker 1: And you see it with Snapchat, where not every stock
Speaker 1: is the same and not every management's the same, and
Speaker 1: some companies will do fine going forward. So there's from
Speaker 1: the from this volatility comes great opportunity. Not all these
Speaker 1: all the charts that look the same, Square, PayPal, Docu,
Speaker 1: sign Zoom, robin Hood, they all look the same, but
Speaker 1: they won't look the same going forward because everything is
Speaker 1: being lumped together because by the way, we're doing this
Speaker 1: at a time where analysts have been cut to bare
Speaker 1: bones too at the bank, so there's no uncovering these stuff.
Speaker 1: So that's another part of this perfect storm is wall
Speaker 1: streets thin, and they love having profits, and no one
Speaker 1: likes the research anyways, so onto doing research. So this
Speaker 1: was going to be my next question. Actually you mentioned
Speaker 1: the idea of all the stocks sort of getting or
Speaker 1: a bunch of the tech stocks getting ahead of themselves
Speaker 1: in and all kind of moving together as one. But
Speaker 1: can you dig into that a little bit more? Why
Speaker 1: why did that happen? Did did people actually believe these
Speaker 1: valuations were justified? I've never heard anyone actually say that,
Speaker 1: but you know, and if if they didn't, like why
Speaker 1: was everyone comfortable with the run up last year and
Speaker 1: they're not comfortable this year? Was it purely getting on
Speaker 1: board with momentum? Yeah, I think when there's group think
Speaker 1: and everybody's you know, watching the same thing or listening
Speaker 1: to the same people in watching the same stocks, Definitely,
Speaker 1: it's just herd mentality in a different way of digital
Speaker 1: heard mentality. The first time we've seen it and then
Speaker 1: you had I don't want to overthink it because you
Speaker 1: can just look at the charts in Hindsteining. That's what happened.
Speaker 1: I know that what happened and what's going to look.
Speaker 1: You've now got to go back through the the squares
Speaker 1: and paypals and robin hoods in docu signs and zooms
Speaker 1: and all the round trippers from COVID and say, wait
Speaker 1: a minute, Okay, now there's opportunity here. There's some of
Speaker 1: these that will be around for thirty years with reasonable
Speaker 1: growth rates that are being thrown out. The people that
Speaker 1: do the work here will make some some money. But
Speaker 1: it was kind of like everybody was given money at
Speaker 1: the same time with the same apps, with the same voice,
Speaker 1: and it worked. It was a lot of fun, and
Speaker 1: you couldn't have predicted when it would end. But you know,
Speaker 1: in hindsight they all look the same. So it's very
Speaker 1: much sounding like you're talking in past tense, like something
Speaker 1: has changed, but I want yeah, so let's I woant
Speaker 1: have drilled into that more, and like what actually you're
Speaker 1: seeing private markets because okay, we have the public market
Speaker 1: sell off that it implicitly is going to affect the
Speaker 1: late stage index funds, and soft Bank has publicly traded.
Speaker 1: We've seen what happened to their stock, and we know
Speaker 1: that I think it was Tiger had a pretty awful
Speaker 1: last three months. Of course, none of it surprising. And
Speaker 1: then you've all these employees and you mentioned like this
Speaker 1: new wave of angels or seeds seed check writers who
Speaker 1: came out of the shopifyes and squares and etcetera. They're
Speaker 1: all have seen a big wealth hit, especially if they're
Speaker 1: still employed or still on a lot of stock. So
Speaker 1: what are you seeing today at the early stage level,
Speaker 1: and what is or what isn't filtering through from those
Speaker 1: public markets to like writing checks right now here in
Speaker 1: February two, Well, I started seeing this in t I mean,
Speaker 1: I just look at our data. I can only tell
Speaker 1: you a social coverage. So Gary, Tom and I have
Speaker 1: been writing a check a month for ten years, twelve years,
Speaker 1: and we'd always say we can't, you know, in the
Speaker 1: private markets. You know, I can only tell you what
Speaker 1: we do. We would paddle and we would talk to
Speaker 1: smart people, and we have smart LPs from Fred Wilson
Speaker 1: to Roger Ainburg to Christian Like, we have smart LPs
Speaker 1: that we can call on. And you know, I always
Speaker 1: used to say, you know, you can at the seed
Speaker 1: stage level at five great founders walk into your office
Speaker 1: or you get pitched in a row. You can't like
Speaker 1: time the market. You can't just say well, we just
Speaker 1: wrote three checks, can't write two more. That's not the
Speaker 1: way investing works, if you're even on the trend space.
Speaker 1: This is why all stocks started looking the same if
Speaker 1: you're a trend investor just got aboard and worried about
Speaker 1: it later and use your money management to get you out.
Speaker 1: In the private markets, you can't use money management. You're
Speaker 1: in for ten years. So so I think that's what
Speaker 1: we've lost. So we would always huddle every week and go, man,
Speaker 1: shouldn't we slow down? But after ten years they just
Speaker 1: always looked the same. We'd write twelve checks a year,
Speaker 1: they'd come in batches or you know, equally distributed, and
Speaker 1: then by like mid like when COVID hit, I was like,
Speaker 1: I'm not writing to check pencils down like zoom on,
Speaker 1: pencils down. I don't even know what. How do you
Speaker 1: invest in a company without having met the founder? But
Speaker 1: people started doing it. And as uncomfortable as I was
Speaker 1: because I didn't write check through the first year of
Speaker 1: COVID or the first six months, my partner Gary was
Speaker 1: very comfortable doing it. He's younger and more native to
Speaker 1: the web, and his network was such that he was
Speaker 1: seeing stuff in the price that he was comfortable within,
Speaker 1: companies that he was comfortable with, and he wrote a
Speaker 1: bunch of checks and you to be incredible at the
Speaker 1: early stages of COVID along came one when everybody felt
Speaker 1: comfortable writing on Zoom, and the prices were such that
Speaker 1: every time I got a call from a founder, I
Speaker 1: was just sitting out. You know. We went from like
Speaker 1: y CE ten million dollar valuations to like non y
Speaker 1: C twenty and thirty million dollar valuations and just saying
Speaker 1: no didn't mean a deal wouldn't get done. Deals are
Speaker 1: getting done. So I look back at our numbers from
Speaker 1: one and we wrote two checks. So there's a data
Speaker 1: point from twelve years of It's not like I'm scared,
Speaker 1: and it's not like I'm not looking as hard and
Speaker 1: my network isn't as big. It's just nothing was lining
Speaker 1: up for us. But that didn't mean deals weren't getting done.
Speaker 1: It was a record year in venture capital. But so
Speaker 1: I don't think we know yet. The long term repercussions
Speaker 1: were just and I see it. If any Tiger check
Speaker 1: infintech that was written last year's down, they may not
Speaker 1: say that, but like, look at Square, look at PayPal,
Speaker 1: look at Robin Hood, if YouTube, look at Tiger, look
Speaker 1: at anything. So they're sitting on whatever. Vintage one was
Speaker 1: a disaster right now, but it's early. But I think
Speaker 1: the return is now going forward from all that, even
Speaker 1: if these companies recover, you have to make back of
Speaker 1: your money into these valuations. And this is what I
Speaker 1: go to earlier. Maybe Tiger doesn't have to make it
Speaker 1: back because they can put in more money later and
Speaker 1: change the cap table, whereas the seat investors can. So
Speaker 1: I don't think we've seen the true problem in private markets,
Speaker 1: and that will be LPs finally saying, man, you know what,
Speaker 1: concorder letters for four years and nothing's working, and so
Speaker 1: could take a couple of years for LPs to finally
Speaker 1: say I'm stuck here and I haven't seen any markups
Speaker 1: or any returns of capital. So the lack could be
Speaker 1: huge at the seeds. And you know, that's what I
Speaker 1: have to worry about, what my partners and I have
Speaker 1: to tell my helps. This is why we're not writing checks.
Speaker 1: Just to writing checks just because you can. Is not
Speaker 1: the business. You write checks into great founders with great
Speaker 1: teams and good TAM just because of TAM's big is
Speaker 1: not good enough. And I think we're seeing a lot
Speaker 1: of investors in best on TAM. So two things here.
Speaker 1: You sort of teased it just then, but like one,
Speaker 1: how do you think venture capital behavior could change in
Speaker 1: the future given this experience, and to how patient our
Speaker 1: LPs when it comes to sitting out of the market
Speaker 1: for you know, a year or part possibly a couple
Speaker 1: of years. You know, Joe mentioned in the intro this
Speaker 1: idea that well, everyone knew that publicly traded tech stocks
Speaker 1: were overvalued and they would probably get hit when interest
Speaker 1: rates started to rise. But on the other hand, you're
Speaker 1: sort of forced into them because if you didn't buy,
Speaker 1: then you missed out on years of performance. So is
Speaker 1: it a similar story for venture capital or are people
Speaker 1: more willing to um kind of wait it out. It's
Speaker 1: a coyote in the road running right. The legs are
Speaker 1: spinning over the cliff. We don't know if the cliff
Speaker 1: how far, how far the clip is. It took forever
Speaker 1: to get family offices and people comfortable, and then you
Speaker 1: have the incredible angelist product, and you have some like
Speaker 1: I said, you have Twitter and all these people networking
Speaker 1: and thinking their deals are the best. People are the best.
Speaker 1: So so it took an incredible amount of ton to
Speaker 1: onboard all these people. It will take much longer than
Speaker 1: people think for people to look at their statement and
Speaker 1: say wait, Matt, this is stupid. I could have just
Speaker 1: bought the q q Q or the spy and have
Speaker 1: the quidity. I don't think what people are factored in
Speaker 1: because they weren't public market investors until is how hard
Speaker 1: it is to get q q Q type returns that
Speaker 1: we've had the last ten years. Like the y Q cues.
Speaker 1: You know, the triple cues have returned like twenty percent
Speaker 1: a year for the last ten years. I mean, what
Speaker 1: is wrong with that? Why are people like shutting that
Speaker 1: at a time when I'm not saying make sure rushing
Speaker 1: the QQQ, But I've always said, like, what's wrong with
Speaker 1: twenty percent a year even with the volatility, because you
Speaker 1: get the liquidity. Now people are like chasing twenty percent
Speaker 1: a year in the private markets where you're locked up
Speaker 1: for ten years. I mean, that just makes no sense
Speaker 1: to me. And so I think it makes sense for Tiger,
Speaker 1: who is saying, listen, we can go to our pensions
Speaker 1: and offer them eighteen or twenty three percent a year,
Speaker 1: you know what I mean to get latest and I
Speaker 1: get that pitch, and that's the pitch. They're just going.
Speaker 1: Look at the q q ques. If we could have
Speaker 1: got you all the q q q s before they
Speaker 1: went public, all these companies before they went public. By
Speaker 1: two three years, isn't that end? You know, you can
Speaker 1: sell them on the unsuspecting public and get liquidity in
Speaker 1: two years. So you're only gonna be locked up for
Speaker 1: two three years instead of ten. Everybody signed up for that,
Speaker 1: and that will take a while for it to filter
Speaker 1: back too, because it's not it's not like, Okay, so
Speaker 1: I'm sitting on my hands because I've done well enough
Speaker 1: and I've seen enough markets, but not enough people are
Speaker 1: sitting on their hands and saying, guys, you've got to
Speaker 1: pay me for this ten years that I'm your partner.
Speaker 1: I'm not just tweeting about you. I'm I'm helping you hire,
Speaker 1: I'm helping you recruit. I'm taking huge risk. I'm not
Speaker 1: going to invest in your seed stage company unless I
Speaker 1: have ten or fifteen percent. In two thousand and six,
Speaker 1: it was like thirty percent to bc as we're taking
Speaker 1: and now here we are in two and seed deals
Speaker 1: are getting done for four percent, five percent, and that's
Speaker 1: just too far the other way. So the pendulum's got
Speaker 1: to swing back somewhere closer to you know, seed investors
Speaker 1: get fifteen to twenty percent of the company, and we're
Speaker 1: not close to that. You know, we've been talking a
Speaker 1: lot about valuations and the behavior of markets and investors.
Speaker 1: We haven't talked much about fundamentals. But I am curious,
Speaker 1: like you know, all these cloud companies, how much has
Speaker 1: the has their growth essentially or in part been essentially
Speaker 1: their revenue is another startups costs. So it's like you
Speaker 1: have the tons of new companies flooding the market all
Speaker 1: the time, flush with cash from all these seed stage
Speaker 1: checks and all these companies they launched, and then they
Speaker 1: have to go out and like buy their like suite
Speaker 1: of cloud products to operate the business. I think it's
Speaker 1: sort of well known that like Y combinator companies, for example,
Speaker 1: often otherwy combinator companies are their first set of customers.
Speaker 1: Are you concerned that a sort of slowdown in market,
Speaker 1: slowdown in financing actually does translate into a real world
Speaker 1: You know what our tam or our trajectory of revenue
Speaker 1: is not going to be what we what we thought
Speaker 1: it was in this environment of a cooler activity. You know,
Speaker 1: it's the question, right, you're trying to projective this is
Speaker 1: that's right, that's right, um, and so we're all should
Speaker 1: be thinking like that. But no, I mean, obviously it
Speaker 1: can happen again. So I'm not saying, you know, take
Speaker 1: my advice. I'm just saying I'm super bullish on the cloud.
Speaker 1: Here's why, because you do have real effects from cold,
Speaker 1: you do have distribution out of Silicon Valley and founders
Speaker 1: moving across the globe, and they are not scared by failure.
Speaker 1: That failure, that that that failure mentality to Silicon Valley
Speaker 1: is something right, there is less shame and a startup
Speaker 1: that fails as there should be, like we need progress.
Speaker 1: So I'm not buying the scenario even if rates doubled
Speaker 1: from here, I am buying valuation retracement because there's more supply.
Speaker 1: You know, if you go from a hundred angel investors
Speaker 1: to a thousand angel investors, is that just putting money
Speaker 1: out there? So you're gonna have startups? I think, what
Speaker 1: would you have to ask a question, what's gonna what's
Speaker 1: gonna take for a bunch of Howard wins and social
Speaker 1: leverages to sit on their hands? I don't know that yet.
Speaker 1: Right right now, I'd like prices to come down, but
Speaker 1: just because I would want them to come down doesn't
Speaker 1: mean they will, you know, which is why we're investing
Speaker 1: in other funds and social leverage, and we launched an
Speaker 1: emerging manager fund in case we're wrong. Right, Like in
Speaker 1: my religion, we called schmuck insurance. And in schmuck insurance language,
Speaker 1: the hedges to the upside, meaning I'm trying to hedge
Speaker 1: in case I'm wrong and too conservative. Right. Whereas you
Speaker 1: in the old days with in a non cloud world,
Speaker 1: in a land based world, hedges made more sense because
Speaker 1: there wasn't infinite growth. Right To get your customers around
Speaker 1: the world took a lot of phone calls, took a
Speaker 1: lot of travel, took a lot of set up right,
Speaker 1: just to set up an office. Today you're up and
Speaker 1: arounding in forty countries overnight. If there's demand, the product
Speaker 1: market fit so so you have to factor that stuff
Speaker 1: in as well. So I don't think we're I think
Speaker 1: we're in a place where there's just a lot of
Speaker 1: good businesses. They're just priced wrong. Beyond clouds, where do
Speaker 1: you see opportunities At the moment, there's opportunities everywhere. Stuff
Speaker 1: is priced right. You have to you have to get
Speaker 1: investors that say, okay, I can make money if you're
Speaker 1: not new in the corn, meaning you know in the
Speaker 1: old days. You know, we your investors in LifeLock, which
Speaker 1: sounds like a great company, but in the end it
Speaker 1: was bought for two billion dollars, but it was still
Speaker 1: a home run for us. Or golf Now or or
Speaker 1: or Buddy Media or Alley Insider, which were sold for
Speaker 1: way less than a billion dollars but would help people
Speaker 1: return their funds, you know. And now because of pricing,
Speaker 1: you need decacorn for some of these seed funds, mathe
Speaker 1: Matt and they're not doing the math, but I'm doing
Speaker 1: the math for because I've seen the math in my
Speaker 1: own portfolio for people to return their funds. So this
Speaker 1: is still, like I said, going to come down to
Speaker 1: LPs opening their statement and saying, well, I couldn't just
Speaker 1: bought the q q Q or the slide, just like
Speaker 1: investment buyers get fired now weekly because there's so many
Speaker 1: r A s and there's so many people that can
Speaker 1: offer indexing and asset allocation that people are moving their
Speaker 1: accounts all the time, and that will venture and that
Speaker 1: can't You can't just move your account if you're in
Speaker 1: a fun seed fund you're stuck with the person, and
Speaker 1: so that's going to create a lot of bad will
Speaker 1: and a lot of tension that no one's really talking about. Howard,
Speaker 1: last time we had you on, I think it was
Speaker 1: like last summer, summer or maybe spring, and you were
Speaker 1: doing a spec and we've seen every spec, most of
Speaker 1: them anyway, get obliterated when the sell off. What's happening
Speaker 1: with yours? What's what's what's happened, what happened with the
Speaker 1: social leverage is what's the give us an update? I
Speaker 1: don't think I can tell you. I mean, I'm really
Speaker 1: glad we have a great team. When we sat on
Speaker 1: our hand, we were just like, hey, you know, as
Speaker 1: I talked about it on your show at the time,
Speaker 1: it was so did you ever buy a company? We
Speaker 1: had done a few offers, We've learned the route, and
Speaker 1: I'm very excited about our team and what we're doing.
Speaker 1: We have not won a deal in the past. We
Speaker 1: still have a year ago, and we feel really good
Speaker 1: about where the markets are because everybody, like I said,
Speaker 1: it is excited to just sell spacts just because the
Speaker 1: previous batch have been a disaster. So so the short
Speaker 1: sellers are in control there's no bids. Just like I said,
Speaker 1: if you're not index and you have a bad reputation
Speaker 1: and people, you know, the mob has has no turned
Speaker 1: against facts, you have a seller's market. So I think
Speaker 1: part of our just like with our seed funds and
Speaker 1: social leverage, we just sat on our hands last year
Speaker 1: and we're very excited that the power has shifted. Right
Speaker 1: if you're if you're a company that's growing, that needs
Speaker 1: to be public, you know, to tell your story and
Speaker 1: to raise capital in a different way. Now the market switches,
Speaker 1: so those three billion dollar valuations become one billion because
Speaker 1: you know, as much as we make fun of spacts,
Speaker 1: now the spacts, you know, the good spacts have some power.
Speaker 1: So I just think you're going to see some interesting
Speaker 1: deals out of the rubble, is what I would say.
Speaker 1: And not everybody should have a spact, just like not
Speaker 1: everybody should have a seed fund, just like not everybody
Speaker 1: should have a venture capital fund. I mean, it does
Speaker 1: feel like much in the same way that very high
Speaker 1: tech valuations have come down as everyone predicted. It does
Speaker 1: seem like a lot of the criticism about SPACs over
Speaker 1: the past year or two seems to have been born
Speaker 1: out at least looking at, you know, the share price.
Speaker 1: What do you say to two critics of SPACs or
Speaker 1: people who say that, well, you know, the past year
Speaker 1: kind of proves that these things are opportunist market vehicles
Speaker 1: that are taking advantage of investors. Well, taking advantage of
Speaker 1: investors is a bit of a comedy, you know. And
Speaker 1: I'll say this because I'm on every side of the
Speaker 1: table here and watching sports this weekend, and we can't
Speaker 1: trade crypto in New York. You can't, you don't have
Speaker 1: nobody can get a crypto license in New York. But
Speaker 1: like DraftKings and Famduel are on all day talking about
Speaker 1: thirty to one yolos to your college kids. So we
Speaker 1: can't protect everybody. People at some point have to be
Speaker 1: adults in this country, and we can't just fire everybody
Speaker 1: and shame everybody and stop allowing people to invest. In
Speaker 1: some cases, unfortunately blow the family nest egg. So I'm
Speaker 1: very pro stack. It's a feature, not a bug. It
Speaker 1: has become a bug because guess what COVID people were
Speaker 1: Board banks needed to make their numbers. There's a thousand reasons.
Speaker 1: It's not just Chamas fault or this person's fault. There's
Speaker 1: bad behavior on every different leve from investors to syndicates,
Speaker 1: to bankers to promoters, and the market just got too
Speaker 1: much supply. That's facts will be around for a hundred years.
Speaker 1: But we're definitely in a world where crypto now exists
Speaker 1: and the new promoter sits in the discord room and
Speaker 1: a person with a great network and monitorze with a
Speaker 1: great financial network and monetized their network without doing this
Speaker 1: back right, it just comes down to the economics, and
Speaker 1: good deals will get done with great teams of great companies,
Speaker 1: and these are the times they get done when no
Speaker 1: one wants to do a deal, like good luck trying
Speaker 1: to get a pipe done today. But that's when you're
Speaker 1: supposed to do deals, because now prices come down to
Speaker 1: a point where both sides of the tables sit down
Speaker 1: and go as if we want to get this deal
Speaker 1: done and we wanted to trade the above ten, why
Speaker 1: are we having this discussion unless we are all allowing
Speaker 1: to do that. So I think that that is needed
Speaker 1: to happen, And there's always gonna be a certain percentage
Speaker 1: of facts, a low percentage that work because to every
Speaker 1: company can be a winner. Are you I mean you
Speaker 1: said you bid for some deals, you didn't win them.
Speaker 1: You're probably happy, huh that the winners cursed. I'm guessing
Speaker 1: you have your price. The bid goes in and you're
Speaker 1: like so far away, You're like, I don't even know
Speaker 1: why we're doing this, and so you sit on your
Speaker 1: hands and you risk losing this again. But people don't
Speaker 1: understand the risk here, like we risk losing our eight
Speaker 1: to ten million dollars that we put up as a syndicate.
Speaker 1: Some people rushed because they're so want to save their
Speaker 1: eight million or turn their eight million into fifty and
Speaker 1: to do any deal. That's what happen. Those are the incentives,
Speaker 1: but there is risk and hundreds of millions of dollars
Speaker 1: could be lost if deals aren't done. And what investors
Speaker 1: should do is talk to management. Look see the s
Speaker 1: ones A man, how hard is this? You know what's
Speaker 1: so funny is everybody's complaining, but there's never been an
Speaker 1: easier time to do due diligence. So at the same
Speaker 1: time as everybody's up on arms and want someone to
Speaker 1: pay the price for all their mistakes, let's be honest,
Speaker 1: Like Tracy, you and I can get on the phone
Speaker 1: on Twitter on a zoom and really narrow in on
Speaker 1: some things and then go do our due diligence and
Speaker 1: get better due diligence and golden stacked. So there's no
Speaker 1: reason why someone has to buy it. No one told
Speaker 1: you to buy us back. And if that person told
Speaker 1: you to buy us back, I mean, be careful of
Speaker 1: that person. You were a pre I p O investor
Speaker 1: in robin Hood and have talked about a long time
Speaker 1: another I p O that's done. Uh, it was terribly
Speaker 1: It's also like, you know, part of the zeitgeist in
Speaker 1: a very big way over the last two years in
Speaker 1: terms of retail investors, and so many retail investors have
Speaker 1: now actually seen in a bear market in a way
Speaker 1: that man for a while they hadn't seen a lot
Speaker 1: of money. What is the future in your view? A
Speaker 1: just real quickly, do you still own robin Hood since
Speaker 1: we've been talking about it, But more importantly, what it's
Speaker 1: going to become of this movement like or this this
Speaker 1: this meme or this thing of like the retail mania,
Speaker 1: Like where do you see it going now after the
Speaker 1: pain of the last year basis? I mean, how much
Speaker 1: time do you have you have to three hours? You
Speaker 1: know you could you know you could take a few
Speaker 1: minutes like what's going to happen or do you do
Speaker 1: you own robin Hood still? Yeah, of course, so you know,
Speaker 1: let me do full discover your seat ambassadors. Huge, huge,
Speaker 1: This is everything that we wanted to see happen in
Speaker 1: o A. You know, the goal was to disrupt with
Speaker 1: Twitter and start to its because I always thought that
Speaker 1: the trays and shrubs, we're going to be disrupted with better. Uy.
Speaker 1: This is a UY thing. Right when the iPhone came along,
Speaker 1: it took forever for robin Hood two fourteen. People like, like,
Speaker 1: people need to realize Intact List is seven years behind.
Speaker 1: Still KRYPTI was like a joke and even today you
Speaker 1: can still call it a joke about most people do
Speaker 1: not me. But so you it took seven years for
Speaker 1: robin Hood to exist in an iPhone world, right, and
Speaker 1: so we're at the beginning of the beginning of the beginning.
Speaker 1: I'm not saying robin Hood is gonna win, but I
Speaker 1: do own schmock Insurance, meaning I don't run the company,
Speaker 1: not on the board, and no insights that are that
Speaker 1: are going to blow people's minds here other than it's
Speaker 1: still a twelve billion dollar company that was started in
Speaker 1: two thousand and fourteen, and we can argue whether it's
Speaker 1: worth twelve billion. I'm long so at twelve billion, I
Speaker 1: know my consurances to the upside. But in full disclosure,
Speaker 1: when it got to one bit, you know, we invested
Speaker 1: a ten million valuation post money. When it got to
Speaker 1: one billion, it was not hard for me to sell some,
Speaker 1: and I think I stupid. I feel for that. And
Speaker 1: then I got to five billion and we sold something.
Speaker 1: It got to fifteen billion, and we sold some because
Speaker 1: we're seed investors, right. And the great thing about this
Speaker 1: bowl market is their liquidity down the food chain now,
Speaker 1: but it's not being used properly and people are are
Speaker 1: actually making mistakes with all this opportunity. But Social Leverage
Speaker 1: was a seller into those rounds on the way up. Okay,
Speaker 1: So we treated the product of markets like the public markets.
Speaker 1: When you can sell, you should sell some, and when
Speaker 1: the founders sell, you should definitely sell some. Literally, but
Speaker 1: you know what I mean, and and so, and that's
Speaker 1: why I get mad at the soft banks of the world.
Speaker 1: Now they pay the founders out some money, and the
Speaker 1: and the sea investors can sell. So there's all these
Speaker 1: like tricks that the later state vcs now have that
Speaker 1: I think screwed the seat investor, and we've gotta be
Speaker 1: really careful about that. So it's a public company. Was
Speaker 1: Robin Herd worth fifty billion? I mean that should have
Speaker 1: just been the discussion, Not like I hate Robin and
Speaker 1: their evil. It's not their fault, it's the stuck with
Speaker 1: fifty billion. That's the media fault, the public's fault, lack
Speaker 1: of competition. But you know, we're an investor in a
Speaker 1: company called Alpaco which is now powering the next Robin Hoods,
Speaker 1: and I can tell you from their numbers that I'm
Speaker 1: not going to share that there was going to be
Speaker 1: a thousand Robin Hoods, right, just like there's a thousand
Speaker 1: gambling apps. And in the next warm Buffet could be
Speaker 1: in Eastern Asia or it could be in Brazil because
Speaker 1: they're going to have access to the same markets that
Speaker 1: warm Buffett had access to. So this is not a
Speaker 1: not at all. Over the question is who's the winner?
Speaker 1: And for me it's more a question is it with
Speaker 1: Robin hood I always loved their attack on you know,
Speaker 1: Gray means stop like the sec you know in China,
Speaker 1: like Gray means go like, worry about it later. Guess what,
Speaker 1: now they're worrying about it. In the US, Robin had
Speaker 1: did what I think is the right thing and god
Speaker 1: approval by the SEC. Now the SEC is showing how
Speaker 1: awful it is because I can't make decisions and they're
Speaker 1: holding out the one example whereas crypto doesn't ask for
Speaker 1: a permission right and we'll beg for forgiveness. So if
Speaker 1: you told me that it was easier for coin based
Speaker 1: or f t X to become robin Hood than it
Speaker 1: was for robin Hood to become Crypto, I wouldn't have
Speaker 1: taken that bet three years ago. Today, my only thought
Speaker 1: is coin base and ftx have done a much better
Speaker 1: job in a world where it's easier for them to
Speaker 1: become brokerages and it is for robin Hood to become crypto.
Speaker 1: So that's the only change in my thinking is that
Speaker 1: you know Base and that's why I owned some coin
Speaker 1: based and some f t x is that it's easier
Speaker 1: for them in a world of api s to become
Speaker 1: robin and then vice versa, and so that is affecting valuation.
Speaker 1: Howard is always a treat to speak to you, and
Speaker 1: once again I feel like because you have your you
Speaker 1: know so many different parts of the market is uh
Speaker 1: unique insight, and uh, thank you so much for coming
Speaker 1: back on odd Loves. I read about this every day
Speaker 1: and bits and pieces, including about my cross statea on
Speaker 1: my blog. But hopefully I won't get canceled. I think
Speaker 1: I said a lot of I don't think I said
Speaker 1: anything too crazy, didn't you didn't say anything bad? Thanks Howard,
Speaker 1: Thank you Howard. That was great, all right, Thanks Tracy,
Speaker 1: Thanks Joe, Tracy. Do it a lot there, you know,
Speaker 1: just to start one thing is like I thought Howard's
Speaker 1: point about how the trickle down effect from public markets
Speaker 1: will probably hit, but it might take maybe even years
Speaker 1: as LPs sort of slowly realized they're not getting the
Speaker 1: return as they expected from a liquid investment. I thought
Speaker 1: that was like a really interesting point. You sort of
Speaker 1: like walk through the mechanics of like, you know, how
Speaker 1: long the late stage investors can sort of keep things afloat,
Speaker 1: but the you know, there's not that sort of like
Speaker 1: instant feedback that would cause the selling. Kind of interesting
Speaker 1: perspective on private markets that I hadn't really thought of
Speaker 1: before totally, And I mean it is one of those
Speaker 1: times when liquidity can actually be quite beneficial in some senses.
Speaker 1: The other thing that struck me was the idea of
Speaker 1: um or the impact of the big players coming in
Speaker 1: and kind of squeezing the entire capital structure and valuations,
Speaker 1: because again, that can be a source of strength for
Speaker 1: a while if you have these big players like a
Speaker 1: soft bank or a Tiger who are able to hold
Speaker 1: on indefinitely at these really high valuations. But I guess
Speaker 1: the big question mark is if something happens to one
Speaker 1: of them, then things can change very very quickly. It
Speaker 1: feels like no, exactly right, And you know some of
Speaker 1: the things you pointed out about how like you know
Speaker 1: they can create liquidity for the founder while not creating
Speaker 1: liquidity for the seed stage investor. Super interesting just in general,
Speaker 1: like also like I haven't really thought about that, even
Speaker 1: though it's obvious in retrospect, like just the sheer number
Speaker 1: of people like writing seed stage text and you do
Speaker 1: see them like on Twitter subject, like so many people
Speaker 1: there are investors in the way that I hadn't seen,
Speaker 1: especially like pre covid totally. And I guess, well, we
Speaker 1: know quite a few people, especially in the crypto space,
Speaker 1: who keep getting offers and almost have to like fight
Speaker 1: investors off. At this point, we should start an adjacent
Speaker 1: fund somehow. Maybe a lot seed money coming soon. Yeah. No,
Speaker 1: it's always great talking to uh Howard, great perspective and
Speaker 1: um I learned a lot. Shall we leave it there,
Speaker 1: Let's leave it there. This has been another episode of
Speaker 1: the All Thoughts Podcast. I'm Tracy Alloway. You can follow
Speaker 1: me on Twitter at Tracy Alloway and I'm Joe Why
Speaker 1: Isn't All? You can follow me on Twitter at the Stalwart.
Speaker 1: Be sure to follow our guest Howard Lindson. He's on
Speaker 1: Twitter at Howard Lindson. Follow our producer Laura Carlson at Laura.
Speaker 1: I'm Carlson, the Bloomberg head of podcast for Francesca Leavy
Speaker 1: at Princestera Today, and check out all of our podcasts
Speaker 1: on Twitter under the handle at podcasts. Thanks for listening.