WEBVTT - Howard Lindzon on What’s Really Going on in the Tech Plunge 0:00:10.800 --> 0:00:15.160 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:15.200 --> 0:00:20.120 I'm Joe Wisenthal and I'm Tracy Alloway. So, Tracy, there's 0:00:20.160 --> 0:00:22.919 obviously a lot going on these days in the world 0:00:22.920 --> 0:00:27.800 of macro and markets, but one thing that we've seen distinctly, 0:00:27.880 --> 0:00:31.400 particularly since the middle of November, is tech stocks have 0:00:31.480 --> 0:00:35.199 just been getting absolutely hammered. Yeah, so I was actually 0:00:35.720 --> 0:00:39.120 away last week. I guess we should say we're recording 0:00:39.120 --> 0:00:42.479 this on February seven. Uh, And apparently I missed a 0:00:43.080 --> 0:00:46.199 massive sell off in tech and then a little bit 0:00:46.240 --> 0:00:48.559 of a rebound. Is that what happened? Yeah, I think that. 0:00:48.600 --> 0:00:50.720 I think that's fair to say. I think he was 0:00:50.840 --> 0:00:53.640 last Monday. I'm started losing track of the days. We've 0:00:53.640 --> 0:00:57.960 had some really brutal sessions, and we had weakness in 0:00:58.440 --> 0:01:00.360 I think it was like two Mondays ago or something 0:01:00.400 --> 0:01:02.360 like that textor just got killed anyway, but we've had 0:01:02.400 --> 0:01:06.240 some brutal sessions. Everything that's sort of like growthy, like 0:01:06.319 --> 0:01:09.040 people like betting on the future Big Time got hammered. 0:01:09.280 --> 0:01:12.640 Also had some specific names like Netflix really got wrecked 0:01:12.720 --> 0:01:14.800 after earning his Facebook and a lot of trouble like 0:01:15.400 --> 0:01:18.280 and a striking fact that I saw from Bank of 0:01:18.319 --> 0:01:22.679 America is that in January, like so called value stocks 0:01:23.120 --> 0:01:27.000 had their best outperformance relative to growth since two thousand 0:01:27.200 --> 0:01:30.400 and one. So we're talking like two decades, a two 0:01:30.440 --> 0:01:34.240 decade historical reversal here. Yeah. So the thing I find 0:01:34.280 --> 0:01:36.480 weird about all of this is this is kind of 0:01:36.520 --> 0:01:40.640 what everyone predicted would happen. Right, For many, many years, 0:01:40.680 --> 0:01:44.119 everyone complained about valuation of tex stalks, and once interest 0:01:44.200 --> 0:01:46.600 rates start going up, you know the air is going 0:01:46.640 --> 0:01:48.919 to get kicked out of their tires. And that seems 0:01:48.960 --> 0:01:53.240 to be exactly what's been happening. But part of me 0:01:53.280 --> 0:01:57.800 also thinks the explanation can't be that simple. Well, the 0:01:57.800 --> 0:02:00.240 other thing is like, okay, you can predict it, because 0:02:00.280 --> 0:02:01.960 it doesn't you know good. You could say like, oh, 0:02:02.000 --> 0:02:04.560 look at all these overvalued text talks and look at 0:02:04.560 --> 0:02:08.640 the multiples, etcetera. But meanwhile you're like stuck in value 0:02:08.639 --> 0:02:11.480 for three years and all your clients have deserted you, 0:02:11.800 --> 0:02:16.399 and then finally January two comes across. But what good 0:02:16.440 --> 0:02:19.000 did that do you? And I don't think anyone has 0:02:19.080 --> 0:02:21.560 some like great way of like timing these things, So 0:02:22.160 --> 0:02:25.799 what good did these predictions? Absolutely right? So anyway I'm 0:02:25.880 --> 0:02:29.000 very interested in what exactly happened, whether this is the 0:02:29.200 --> 0:02:33.520 end of a sort of era like for years, anything cloud, anything, 0:02:33.520 --> 0:02:36.560 software as a service, anything, growth just absolutely crushed it. 0:02:36.639 --> 0:02:39.400 So hey, I'm curious whether this is the end of 0:02:39.400 --> 0:02:40.919 that for the time being, or whether it was a 0:02:40.960 --> 0:02:44.120 blip and be what is happening on the private side, 0:02:44.160 --> 0:02:46.600 because we know that you know, it's like would you 0:02:46.639 --> 0:02:48.920 pay as much for a late stage round or or 0:02:48.960 --> 0:02:51.600 even in early stage round if the I p O 0:02:51.680 --> 0:02:53.359 window is much worse? And we know that recent I 0:02:53.440 --> 0:02:55.280 p O s got killed, We got a lot of 0:02:55.280 --> 0:02:59.680 SPACs that de spac one got killed. And so also 0:02:59.720 --> 0:03:02.880 what is I mean for private markets in growth and VC, 0:03:03.040 --> 0:03:07.919 etcetera when we see such ructions in the public market. Yeah, 0:03:07.960 --> 0:03:10.920 it might be a situation where you know, an ill 0:03:10.919 --> 0:03:15.520 liquid asset like a private share turns out being like 0:03:16.000 --> 0:03:18.440 a better bet in this environment, just because it's harder 0:03:18.480 --> 0:03:20.519 to get out of whereas you can press a button 0:03:20.560 --> 0:03:24.240 and sell down you know Google or Facebook, Slash Meta 0:03:24.360 --> 0:03:26.160 or whatever, but it's harder to get out of a 0:03:26.200 --> 0:03:29.000 private company. So yeah, I'm curious to see what's going 0:03:29.000 --> 0:03:32.239 on with valuations there. I love that and It's totally true, 0:03:32.280 --> 0:03:35.520 this idea of like the illiquidity premium, because you can't, 0:03:35.720 --> 0:03:40.120 you can't. The psychology, the psychological impulse to sell doesn't exist. Anyway. 0:03:40.480 --> 0:03:43.240 I'm very excited about our guest. He is an active 0:03:43.280 --> 0:03:46.480 investor in public markets and private markets. He's an entrepreneur. 0:03:46.640 --> 0:03:49.320 We've had them on before, and he knows everything that's 0:03:49.320 --> 0:03:52.560 going on this world. He's all the all the conversations 0:03:52.600 --> 0:03:54.560 with all the movers and shakers and can tell us 0:03:54.560 --> 0:03:57.240 what's up. We're gonna be speaking with Howard Linson, who 0:03:57.320 --> 0:03:59.920 is the general partner at Social Leverage. He's the fun 0:04:00.080 --> 0:04:03.440 or of stock Twits, a crossover investor of public and 0:04:03.560 --> 0:04:06.880 private market. Always has a finger on the pulse. Howard, 0:04:06.960 --> 0:04:09.760 thank you for coming back on oud. Luck Hey kids, 0:04:10.120 --> 0:04:13.760 how are you? We're doing great? So what happened Let's 0:04:13.760 --> 0:04:16.159 start like what happened over the last month. What happened 0:04:16.160 --> 0:04:19.800 in January? In your view, what happened in January is 0:04:19.920 --> 0:04:24.159 obviously prices went down. But what like what Tracy was saying, 0:04:24.279 --> 0:04:27.360 this is the most other than two designated the most 0:04:27.400 --> 0:04:32.240 predicted hold back in history, right, I mean, if we 0:04:32.320 --> 0:04:35.520 really look, it's easy in hindsight and I play an 0:04:35.520 --> 0:04:41.799 incredible corp dead person on Twitter. Three. I do free 0:04:41.839 --> 0:04:45.120 corporate deav work for every tech company. I think there's 0:04:45.160 --> 0:04:47.880 a couple of private market let's call him big Bang. 0:04:48.839 --> 0:04:54.120 And in the first one was obviously that we work 0:04:54.760 --> 0:04:57.920 soft Pink Big Bang And you know, you know, it's 0:04:57.960 --> 0:05:00.120 kind of like the in Ron thing, like when you 0:05:00.160 --> 0:05:04.400 work in soft Bank. When that imploded, right, I think 0:05:04.440 --> 0:05:07.760 a lot of us, including myself, if I'm gonna made 0:05:07.839 --> 0:05:12.760 one prediction, it would have been, Okay, that is the 0:05:13.160 --> 0:05:17.279 that's the end. People will will take stock. You know. 0:05:17.320 --> 0:05:20.479 It's kind of like a warning like our end run, 0:05:20.839 --> 0:05:22.960 you know what I mean. It was like no one's 0:05:22.960 --> 0:05:25.320 really watching. It is a great idea, and I still 0:05:25.400 --> 0:05:28.520 pick it up what went on. You know, we know 0:05:28.600 --> 0:05:32.159 soft Bank has been slopping in the past, and so 0:05:32.200 --> 0:05:34.880 if you had asked me, if you had told me 0:05:34.960 --> 0:05:38.960 there'd be twenty soft Banks as a result of soft 0:05:39.000 --> 0:05:41.200 Bank we work, that's just not wouldn't have been on 0:05:41.240 --> 0:05:45.320 my Bingo card. And so you've got from Andresen to 0:05:45.440 --> 0:05:48.559 Tiger to co to two D one to soft Bank. 0:05:49.279 --> 0:05:54.200 Everybody now is in a race to index the private markets, 0:05:54.640 --> 0:05:57.600 not at the seed level, but you know, if you 0:05:57.640 --> 0:06:01.720 can take two and twenty and hoard all the money 0:06:01.760 --> 0:06:04.720 at the late stage market, I mean that's a pretty 0:06:04.720 --> 0:06:07.880 good market to corral versus Vanguard charge and quarter basis 0:06:07.920 --> 0:06:12.680 point right. So you know the macro environment of money printing, 0:06:13.279 --> 0:06:18.080 the the tech mantra, Look, if you're not in tech, 0:06:18.120 --> 0:06:21.200 you're stupid. Combined with then COVID, which like just push 0:06:21.400 --> 0:06:25.760 forward this digital everything's digital, Like oh my god, like 0:06:25.839 --> 0:06:28.200 we you know, you're in an accident, you touch yourself. 0:06:28.200 --> 0:06:30.040 I've been in bike accidents. You touch your stuff. I 0:06:30.080 --> 0:06:32.480 can't believe I lived. And I think that's the way 0:06:32.520 --> 0:06:37.440 we were in May and June and July of everybody 0:06:37.480 --> 0:06:39.520 called their companies. You know, I was calling all our 0:06:39.520 --> 0:06:42.880 companies and we were like going remote. People were laying 0:06:42.960 --> 0:06:45.719 up of their staff no matter what in the in 0:06:45.800 --> 0:06:50.120 the because because you were allowed to. And things started 0:06:50.160 --> 0:06:52.160 going upward to the right if you were a digital 0:06:52.200 --> 0:06:55.560 first business, from healthcare to to finance. Obviously with the 0:06:55.640 --> 0:06:59.720 Robin Hoods and crypto and so everybody just as we do, 0:07:00.440 --> 0:07:05.560 started projecting things in this new ramp. You know, here 0:07:05.560 --> 0:07:08.640 we are November of last year, right, start creeping up 0:07:08.720 --> 0:07:13.040 and valuations now are coming down. The difference this time 0:07:13.280 --> 0:07:15.640 is a supply and I've been writing about the supply 0:07:15.720 --> 0:07:18.600 for the last year. You covered it with SPACs, you know, 0:07:19.520 --> 0:07:21.120 and we covered it with I p o s and 0:07:21.160 --> 0:07:23.800 direct listings. You have all this supply coming at a 0:07:23.880 --> 0:07:27.800 time where no where you're going to dump it. And 0:07:27.880 --> 0:07:30.280 we've seen what's happened in the public markets with anything 0:07:30.320 --> 0:07:34.120 new there's just no bid. And so if you're a 0:07:34.200 --> 0:07:39.960 public company that is not index in February of there's 0:07:40.000 --> 0:07:43.280 no bid because there's too much supply coming into time 0:07:43.320 --> 0:07:46.240 when all the all the crossover funds went left into 0:07:46.280 --> 0:07:50.040 private markets the public markets, if you're not index, just 0:07:50.080 --> 0:07:53.320 there's no natural buyers, it seems right now, especially in 0:07:53.320 --> 0:07:55.680 a rising interest rate environments, you kind of had a 0:07:55.720 --> 0:07:58.040 perfect storm. You can't look at one thing you have, 0:07:58.120 --> 0:08:00.600 but this perfect storm that led to the last four months. 0:08:01.560 --> 0:08:04.240 We hear that term perfect storm quite a lot on 0:08:04.320 --> 0:08:07.320 the show, I feel like recently. But if I could 0:08:07.360 --> 0:08:10.360 ask a really basic question, because I think it's one 0:08:10.400 --> 0:08:12.760 of those things we all assume but we don't necessarily 0:08:13.640 --> 0:08:16.120 think that much about the mechanics of it. But can 0:08:16.160 --> 0:08:19.360 you walk us through why exactly are rising interest rates 0:08:19.880 --> 0:08:23.880 bad for text stocks, and you know, particularly text stalks 0:08:23.920 --> 0:08:27.760 at very very high valuations. You can probably blame it 0:08:27.840 --> 0:08:32.560 on Excel. I mean, if everybody was still it would 0:08:32.600 --> 0:08:35.120 take a few months for people to update their spreadsheets. 0:08:35.440 --> 0:08:38.120 You know, there's no textbooks for crypto. There's a textbook 0:08:38.160 --> 0:08:41.200 for for stocks, and then the stock textbook world. You 0:08:41.200 --> 0:08:44.959 plug in a higher interest right, and you pulled back 0:08:45.280 --> 0:08:49.679 cash flows and their lower and that's basically it. I mean, 0:08:49.760 --> 0:08:53.000 we can argue about everything else, but there's a textbook, Joe. 0:08:53.120 --> 0:08:55.960 Does that make sense to you? Trace? I don't know 0:08:56.040 --> 0:08:59.000 another reason, Tracy, what's your answering? I mean, I guess 0:08:59.040 --> 0:09:05.400 like cash flows, opportunity cost maybe. I just think it's 0:09:05.600 --> 0:09:09.800 we have a system of analysts. Obviously spreadsheets. It's easy 0:09:09.840 --> 0:09:13.120 to update spreadsheets, send them around. People look at the 0:09:13.160 --> 0:09:16.280 numbers and go slap, and they slap you know, a 0:09:16.400 --> 0:09:18.920 discount on it, and then look at the sector and go, 0:09:19.040 --> 0:09:21.240 you know, we're taking this from sixty times sales to 0:09:21.320 --> 0:09:24.760 thirty times sales. That's really and it's just one person 0:09:24.840 --> 0:09:27.920 tips and then slowly tips and it's the way markets work. 0:09:28.000 --> 0:09:33.280 I mean, this is a complete evaluation adjustment. I don't like. 0:09:33.520 --> 0:09:37.080 I just don't see the software stocks not growing. They're 0:09:37.120 --> 0:09:41.480 just not much has changed other than just how people 0:09:41.640 --> 0:09:45.480 are feeling about the future. And in the public markets, 0:09:45.480 --> 0:09:47.600 this happens really quick. I used to think it would 0:09:47.600 --> 0:09:49.880 happen much quicker in the private markets. The private markets 0:09:49.920 --> 0:09:53.199 are very crowded, and I can sit on my hands 0:09:53.200 --> 0:09:55.080 as a scene investor. Now we have a large sheet 0:09:55.120 --> 0:09:57.000 funds and we've been doing this a long time. But 0:09:57.040 --> 0:09:59.040 if I sit on my hands, the best companies are 0:09:59.040 --> 0:10:01.200 still going to get funded. They'll get funded at higher 0:10:01.200 --> 0:10:03.760 evaluations and the and the returns won't be as good 0:10:03.800 --> 0:10:06.120 along the line for all the people writing those checks. 0:10:06.679 --> 0:10:11.040 But you know, that is what's created this private market 0:10:11.120 --> 0:10:15.120 that seems to be ignoring for now what's happening in 0:10:15.160 --> 0:10:17.880 the public markets. Used to be Sequoia would write a 0:10:17.960 --> 0:10:20.040 letter or somebody would write a letter saying, after the 0:10:20.080 --> 0:10:24.840 stock market movement, say winter rest in peace. Private markets 0:10:24.840 --> 0:10:26.840 here we are in two thousand two. No one's writing 0:10:26.880 --> 0:10:29.559 that letter, but the letters being written by the public market. 0:10:47.440 --> 0:10:49.760 You know, I want to go back to how you 0:10:49.920 --> 0:10:54.400 characterize the and recent Horwitz is the code twos and 0:10:54.440 --> 0:10:57.440 the soft banks. I thought that and the Tiger globals. 0:10:57.480 --> 0:10:59.920 I thought that that was really fascinating. This character is 0:11:00.000 --> 0:11:04.640 ation is essentially like, how can we become the index 0:11:04.760 --> 0:11:07.440 fund so to speak, of private markets? And if you 0:11:07.480 --> 0:11:12.600 can capture that late stage market at at enough breadth, 0:11:13.080 --> 0:11:16.400 you can more or less kind of have a public portfolio, 0:11:16.520 --> 0:11:20.360 but with much better fees than anyone can for an 0:11:20.360 --> 0:11:22.960 actual public Talk a little bit more about that, because 0:11:22.960 --> 0:11:25.840 I don't know, like I don't think I like appreciated 0:11:25.880 --> 0:11:29.160 the degree to which that is what they've been aiming 0:11:29.400 --> 0:11:33.199 to accomplish. But that feels like very interesting. Talk a 0:11:33.200 --> 0:11:35.240 little bit more about like what you see as their 0:11:35.280 --> 0:11:40.240 real goal here. I mean these are opinions, strongly strong 0:11:40.280 --> 0:11:43.040 opinions loosely how but you can see it happening, right, 0:11:43.040 --> 0:11:45.200 Like it goes back to we work, like the fact 0:11:45.240 --> 0:11:49.440 that they didn't die and the tigers looked at themselves 0:11:49.559 --> 0:11:51.720 like those idiots can do this. We can do this, 0:11:52.000 --> 0:11:54.360 and we can do it with like a better research. 0:11:54.400 --> 0:11:56.120 You know, soft Bank was made fun of at the 0:11:56.200 --> 0:11:58.959 time for like going you know, it was a mess, 0:11:59.160 --> 0:12:02.079 and everybody I called I wrote about it because everybody 0:12:02.120 --> 0:12:05.880 had soft Bank in their in their funds. Right, we 0:12:05.880 --> 0:12:08.200 were in a company called Wag. We write the first 0:12:08.240 --> 0:12:10.439 child dog walking app, which is now doing this back. 0:12:11.160 --> 0:12:14.480 But we invest in the company at a four million valuation, 0:12:14.559 --> 0:12:16.680 which is what seed investors supposed to do in like 0:12:16.720 --> 0:12:19.720 two fifteen. Right. It's a hard idea of the uber 0:12:19.760 --> 0:12:21.840 of dog walker. You know everything the way it works 0:12:21.880 --> 0:12:25.000 at this age level. But that made sense. You take risk. 0:12:25.400 --> 0:12:27.080 You know you've got Google Maps, you've got all the 0:12:27.080 --> 0:12:31.720 app developers. You can build a dog walking app, no problem. 0:12:31.800 --> 0:12:33.960 But then shot Bank comes in like a year later 0:12:34.040 --> 0:12:38.520 and goes, we'll give you three hundred million at whatever valuation, 0:12:38.559 --> 0:12:40.040 and if you don't take it, won't give it to 0:12:40.200 --> 0:12:44.440 Rover down the street. Right, and that and people already 0:12:44.480 --> 0:12:46.439 forget that, But that was going on. Soft Bank was 0:12:46.520 --> 0:12:51.040 just trying to take the market. It was genius, evil 0:12:51.600 --> 0:12:55.560 and flawed, Right, depends if your moss. It's not flawed 0:12:55.600 --> 0:12:57.680 at all because you know the end game, but it's 0:12:57.800 --> 0:13:00.400 it's flawed for guys like us or people of gus 0:13:00.480 --> 0:13:03.560 at the seed stage, who now are locked into a 0:13:03.640 --> 0:13:06.640 cap table that's got a buying areau comes. So if 0:13:06.679 --> 0:13:09.720 a young company takes three million very early on in 0:13:09.760 --> 0:13:13.400 their valuation, the steed investors only outcome if they're not 0:13:13.400 --> 0:13:15.600 allowed to sell it, and we weren't at that price 0:13:15.600 --> 0:13:18.040 because that's what they do, They lock up the cap table. 0:13:18.400 --> 0:13:21.680 Is I p O or zero? And so for seed investors, 0:13:21.760 --> 0:13:23.960 I hated it. I wrote about it. I hated the 0:13:23.960 --> 0:13:28.640 whole idea that we were being held hostage, right, and 0:13:28.679 --> 0:13:31.240 I wrote stuff like there should be a softbag clause 0:13:31.280 --> 0:13:35.200 and we see uh deals that says the SoftBank comes 0:13:35.240 --> 0:13:38.079 under your cap table later we get to sell right, 0:13:38.200 --> 0:13:40.280 Like this stuff wasn't doesn't get talked about because the 0:13:40.280 --> 0:13:41.720 press doesn't want to cover it. But those are the 0:13:41.720 --> 0:13:43.640 things that we're blogging about and talking about, like what 0:13:43.679 --> 0:13:46.120 did they do to our cap table? Where we were 0:13:46.200 --> 0:13:49.800 going along nicely building a business. SoftBank comes in and 0:13:49.880 --> 0:13:52.640 slaps three hundred million with like an ultimatum that if 0:13:52.679 --> 0:13:54.680 you don't take it, it it goes to the competitor, and 0:13:54.720 --> 0:13:58.520 now I'm locked in to this company forever or ride 0:13:58.520 --> 0:14:00.760 it back down to zero. And so it's very rare 0:14:00.760 --> 0:14:02.760 that a company like WAG can then go clean it 0:14:02.880 --> 0:14:05.240 up like they bought out soft Bank. They fired a 0:14:05.280 --> 0:14:07.280 bunch of management after they pissed through a lot of 0:14:07.320 --> 0:14:09.560 the money So if you had told me that there'll 0:14:09.600 --> 0:14:13.040 be twenty of these now invading cap tables, this is 0:14:13.040 --> 0:14:15.600 what I warned about or other people like Fred I'm 0:14:15.679 --> 0:14:18.600 sure talked about quietly, but just weren't writing about it 0:14:18.600 --> 0:14:21.680 because you don't want to piss off the late stage investors, 0:14:21.760 --> 0:14:23.640 right and you don't want your entrepreneurs to hate you 0:14:23.720 --> 0:14:27.240 because you're telling the truth. But there was no real 0:14:27.400 --> 0:14:29.720 risk to SoftBank and doing this. So if soft Bank, 0:14:29.960 --> 0:14:34.120 so everybody copying the same playbook, and what's the real 0:14:34.240 --> 0:14:37.360 risk to Tiger um if they're wrong on ten of 0:14:37.400 --> 0:14:39.480 these that they put a hundred or two hundred million 0:14:39.560 --> 0:14:43.320 in two not really much risk. Here's why. If I'm 0:14:43.400 --> 0:14:46.640 Tiger and a company goes sideways for a few years 0:14:46.680 --> 0:14:48.760 and then needs capital later, they're going to rewrite the 0:14:48.760 --> 0:14:51.880 cap tables, So who loses the early investors? So I think, 0:14:51.880 --> 0:14:55.840 and not enough speed investors have really thought through the 0:14:55.880 --> 0:14:58.320 mechanics of what could happen even if you take this 0:14:58.400 --> 0:15:00.440 late stage money from a code to do you one 0:15:00.560 --> 0:15:03.000 soft Bank of what could happen in five years even 0:15:03.040 --> 0:15:06.280 though your company is doing well when they need more money. 0:15:06.560 --> 0:15:09.200 So that's why I've been sitting on my hands just 0:15:09.240 --> 0:15:13.880 trying to figure out which founders really can appreciate that. 0:15:14.160 --> 0:15:15.720 And so there's gonna be a lot of great companies 0:15:15.760 --> 0:15:20.520 that take money from these index late stage bcs that 0:15:20.520 --> 0:15:24.600 that that they're good business. It's not, but they're not 0:15:24.640 --> 0:15:27.960 good enough. And maybe the public market isn't ready for 0:15:28.000 --> 0:15:31.360 these not good enough businesses, as we're seeing from All 0:15:31.480 --> 0:15:34.840 Birds to nerd Wallet. Are they really meant to be 0:15:34.880 --> 0:15:38.800 public so young? And so you have this perfect strom 0:15:38.800 --> 0:15:44.080 of a lot of supply high valuations and the private 0:15:44.080 --> 0:15:47.120 markets are liquid, but only at certain levels. Can you 0:15:47.120 --> 0:15:49.480 talk to us a little bit about how the dynamic 0:15:49.520 --> 0:15:54.240 that you just described actually impacts valuations of private companies 0:15:54.280 --> 0:15:56.840 because I imagine, I mean, you have the big players 0:15:56.880 --> 0:15:59.720 out there, like a soft bank, basically a big whale. 0:16:00.120 --> 0:16:04.080 They come in make a big injection at a large valuation, 0:16:04.320 --> 0:16:07.720 and that squeezes prices higher, and I guess they're able 0:16:07.760 --> 0:16:12.040 to book higher prices as well. But maybe just walk 0:16:12.120 --> 0:16:14.320 us through like the details of that process and what 0:16:14.360 --> 0:16:18.480 does it take to actually get a knock back on 0:16:18.600 --> 0:16:23.880 private valuations when you have these big players squeezing things higher. Yeah, 0:16:23.880 --> 0:16:26.040 it's good, and it's the ultimate question that I have 0:16:26.200 --> 0:16:28.760 to think about because when we write a seed check. 0:16:29.320 --> 0:16:33.360 When I was a kid, seed stage was one of three, 0:16:33.840 --> 0:16:36.240 you know, and Joe knows this because we were seed 0:16:36.240 --> 0:16:39.720 investors and Alley Insider and and and Henry Blodgett at 0:16:39.760 --> 0:16:41.760 the time got a good valuation which was like a 0:16:41.800 --> 0:16:43.880 six million pre money at the time. That was like 0:16:44.000 --> 0:16:47.120 double what was normal. But that was a great entrepreneur 0:16:47.560 --> 0:16:50.280 was like, you know, the world was different. So the 0:16:50.280 --> 0:16:52.360 biggest the biggest thing I can think of, and this 0:16:52.520 --> 0:16:54.760 is just from my own eyes and ears, Tracy and 0:16:55.040 --> 0:16:59.280 and Joe's in two thousand seven running around the text 0:16:59.280 --> 0:17:03.680 stars and why Combinator, and there were a hundred seed funds, 0:17:04.080 --> 0:17:07.920 you know, from Jeff clad Fred Wilson, Rob Ehremberg, Patrickoff. 0:17:08.080 --> 0:17:12.080 There was like you knew the seed investor right, and 0:17:12.160 --> 0:17:15.600 there were a thousand companies a year, let's say, and 0:17:15.720 --> 0:17:20.320 you flash forward too, there's a thousand seed funds out 0:17:20.440 --> 0:17:24.160 raising capital right now and a hundred thousand companies a year. 0:17:24.880 --> 0:17:27.639 So really, you know, the tech booms just you know, 0:17:27.720 --> 0:17:31.920 the cloud and software, you know, the in the deflation 0:17:32.000 --> 0:17:35.440 and starting a company has created this this market where 0:17:35.480 --> 0:17:38.800 you have and then you have COVID, which distributes all 0:17:38.800 --> 0:17:40.960 the talent around the world in different weird ways that 0:17:41.040 --> 0:17:44.080 will be feeling forever. And so you have and then 0:17:44.080 --> 0:17:46.320 you have sub stack, which create everybody thinks they can 0:17:46.359 --> 0:17:48.359 be a venture capitalist. And then you have market and 0:17:48.440 --> 0:17:51.359 greesm Uh and all these smart people that have been 0:17:51.359 --> 0:17:54.280 in the industry for so long working the system, and 0:17:54.359 --> 0:17:58.439 you have this incredible change in the market where the 0:17:58.640 --> 0:18:04.359 seed investors are the new startups right, And and we've 0:18:04.880 --> 0:18:06.640 what we've done, and I can only tell you what 0:18:06.680 --> 0:18:09.000 we've done. I can't tell you factually what's going on. 0:18:09.080 --> 0:18:10.960 The data is in my in our eyes and years 0:18:10.960 --> 0:18:13.199 of social leverage what we've done and said we were 0:18:13.200 --> 0:18:15.880 good seat investors, and maybe maybe we weren't so good. 0:18:15.920 --> 0:18:19.040 It was just there wasn't a lot of supply. The network, 0:18:19.240 --> 0:18:22.399 though big was contained. You read Fred Wilson's blogger, you 0:18:22.440 --> 0:18:25.159 read tech Meme and you read tech Crunch, and you 0:18:25.200 --> 0:18:28.679 were in the know and everything with Silicon Valley or 0:18:28.720 --> 0:18:32.280 New York or maybe Berlin, uh and Beijing was still 0:18:32.280 --> 0:18:35.080 working back then, so you could you could structure your 0:18:35.119 --> 0:18:37.639 business in that way. Along comes covid and all this 0:18:37.720 --> 0:18:44.040 money and now and some stack and Twitter and TikTok, 0:18:44.160 --> 0:18:46.119 and everybody wants to be a venture capitals. You know, 0:18:46.160 --> 0:18:49.880 there's thousands of employees that have there's thousands of employees 0:18:49.880 --> 0:18:53.479 that have left Uber, Pinterest, Snap, Twitter, Postmates, you know 0:18:53.640 --> 0:18:58.280 like door Dash, that have experience, that have five million 0:18:58.320 --> 0:19:00.680 in the bank. They don't want to go work for 0:19:00.720 --> 0:19:03.280 another startup because of COVID. They set up a sub steck, 0:19:03.320 --> 0:19:05.199 they use the network, they go raise three to four 0:19:05.280 --> 0:19:09.359 million dollars, they set up an angel list syndicate, and 0:19:09.400 --> 0:19:11.960 they're in business as a fund manager and no one's 0:19:12.160 --> 0:19:14.400 they've had no mentoring, they've had no idea what cap 0:19:14.440 --> 0:19:16.400 tables look like, or they know what cap tables look 0:19:16.440 --> 0:19:19.200 like from their from their very narrow experience of Uber 0:19:19.280 --> 0:19:22.359 or wherever they were at. And they think there's infinite growth, 0:19:22.440 --> 0:19:25.280 and they write checks that make no sense because you're 0:19:25.560 --> 0:19:28.879 you know, seaed investors are holding for for ten years. 0:19:29.080 --> 0:19:31.240 Robin Hood did great and it was eight years to 0:19:31.280 --> 0:19:35.040 get public. So so I don't and so an interest 0:19:35.080 --> 0:19:37.600 rates just take up a little bit. In the old world, 0:19:37.640 --> 0:19:40.800 when they were only a hundred of US seed investors, 0:19:40.840 --> 0:19:43.359 we could call each other and go uh, not collued, 0:19:43.440 --> 0:19:46.719 but just say these prices are silly, and now who 0:19:46.760 --> 0:19:49.040 are you gonna call? Everybody's right and checks from every 0:19:49.040 --> 0:19:51.800 corner of the earth at every angle, whether you've left 0:19:51.840 --> 0:19:54.640 Plaid or all these fintech companies now Square and PayPal, 0:19:54.680 --> 0:19:57.880 there's just thousands of people that think they can write check. 0:19:58.119 --> 0:20:01.840 And by the way, maybe they should. I'm just saying, 0:20:02.000 --> 0:20:04.560 so the end has not been written here. It's just 0:20:05.240 --> 0:20:09.360 we have this new private market that's not digesting the 0:20:09.400 --> 0:20:11.840 public market information. There's a lot of young people in 0:20:11.840 --> 0:20:14.439 the private markets that have never traded a stock, and 0:20:14.440 --> 0:20:17.840 so they don't even care what the multiples are in 0:20:17.880 --> 0:20:20.360 the public markets. They're not thinking about that because they've 0:20:20.359 --> 0:20:25.000 never had to connect the dots. I find it's totally fair. 0:20:25.040 --> 0:20:28.040 There are already so many like interesting dynamics that you've 0:20:28.080 --> 0:20:31.040 teased out for us. So obviously there is the incredible 0:20:31.119 --> 0:20:34.080 like supply boom on public markets last year with all 0:20:34.119 --> 0:20:36.840 the I p O S inspects, including yours, which I 0:20:36.880 --> 0:20:38.920 wanna get to and find out what's going on there. 0:20:39.400 --> 0:20:42.800 There's the dominance of the late stage funds that are 0:20:42.840 --> 0:20:45.199 essentially trying to create index funds more or less for 0:20:45.240 --> 0:20:49.560 private markets. And then as you've just described this explosion 0:20:49.680 --> 0:20:52.159 of people who are ready to write seed checks and 0:20:52.160 --> 0:20:54.119 you just see them on Twitter. I feel like everyone 0:20:54.160 --> 0:20:56.840 I follow in the last year and a half became 0:20:57.240 --> 0:20:59.040 an angel investor. I was like, I didn't even know. 0:20:59.080 --> 0:21:01.359 We were disappointed an odd lots stuffesn't have a seed 0:21:01.359 --> 0:21:04.199 fund that I already would have written the check one day, 0:21:04.440 --> 0:21:07.800 one day, one day. So I want to like, there's 0:21:07.840 --> 0:21:09.800 so many different angles here that I want to explore. 0:21:09.800 --> 0:21:11.480 But one thing I'm very curious about it is like 0:21:11.720 --> 0:21:15.879 when COVID hit in March and then very soon there 0:21:15.920 --> 0:21:18.359 after stocks started going up into the right, but people 0:21:18.359 --> 0:21:20.800 were talking about like these so called like COVID winners, 0:21:20.840 --> 0:21:23.359 like these things. Okay, the world is going to change 0:21:23.359 --> 0:21:26.679 and there are some winners, and like Zoom Video, for example, 0:21:27.320 --> 0:21:29.400 was a COVID winner and its stock went to the moon, 0:21:29.440 --> 0:21:31.960 and we're like all gonna be working from all around 0:21:31.960 --> 0:21:33.440 the world and people are going to use zoom and 0:21:33.440 --> 0:21:35.880 it's gonna except the Zoom video is now like it's 0:21:35.880 --> 0:21:38.119 gave up, given up all of it. Right, It's not 0:21:38.240 --> 0:21:39.919 just like giving up a bunch, it's given up all 0:21:39.960 --> 0:21:42.720 of it. And for whatever reason, despite all the work 0:21:42.760 --> 0:21:46.080 from home, etcetera. Would have been to like the COVID 0:21:46.280 --> 0:21:49.119 winners thesis, because it turns out that in retrospect a 0:21:49.160 --> 0:21:51.760 lot of these like so called winners, the stocks actually 0:21:51.800 --> 0:21:54.560 are now like acting like COVID never happened. And some 0:21:54.600 --> 0:21:57.760