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So you can message within this is messaging on Instagram.

I'm talking about Facebook. This is an Instagram feature. This is an Instagram feature.

He really likes the core products are in decline.

Yes, right.

And it's also a way to make them feel because remember, there was the revolt about how they changed the algorithm on Instagram to make it more tick tock, like, and so now they're like, Okay, well, then instead, we will give you this direct channel to communicate with your followers and make it seem more creator friendly. And they don't get to comment. That guy, I mean, I got to say it kills me. It just kills me that it's that he's just like, yeah, I'm just gonna I'm gonna steal this. I'm gonna steal that. I'm gonna steal this and whatever. But like, my God, does it work? And it's and he moves fast. Dude hustles and flows.

Well, messaging is such a great way for him to dodge regulation, honestly, because I think they're like, maybe a better word than decline. The business was in decline. Yeah. The products, yes, so the business is in decline. The products were growing. you know, depending on the market, either hitting their natural audience, or they did have a US Facebook decline, I think once. So this is, I think, for Katy Perry, or Rihanna, or Kim Kardashian, anybody like that, who doesn't want to have a conversation with their followers.

So I've been really working on it.

I have a new nickname. You know, I've been working on my nickname game like Trump.

It gets a little mumbly. Mimetic mark. Like I like alliteration and it is on the nose. Three M's. But I feel like names and nicknames stick better when they have more, you need like a harder consonant.

Well, you're like the sultan of science, the dictator. Yeah. sasshole, you know, I like to come up with a nickname here and there, but I realized I haven't pointed them outward enough. So mimetic mark. know, because his mimetic theory that Teal and all those folks were into. Yeah, that, you know, Peter Teal had a professor or something at Stanford. And he really believes Peter Teal in this mimetic theory, which is we do what we do, Because we want to... Rene Girard is the big influence. Rene Girard. And Peter, I guess, latched on to this theory early on that people copy each other in nature, part of evolution. You survive longer if you copy each other. You know, tribalism, whatever. Yeah. So, mimetic mark, you think that could stick? It's a little hard to say.

So anyway, I'll keep workshopping if anybody else... It's too bad that like Zuck is so good. You need something that goes with Zuck. It's too bad there's not a word that means copying that starts with a Z.

Ah.

Oh, that's amazing. I have not listened to this weekend's episode because I was busy cleaning my closets. I would just like to say, spring is upon us. Literally cleaning your closet. Literally spring cleaning. It's incredible. I've achieved like almost like closet zero. It's beautiful.

You'll have to work workshop that I somebody sent me the greatest one ever. People are like, Oh, I have another one instead of Sultan of science, you should do Sultan of science, silence. So this week, I that was a fan, a fan sent it to me. And I said, I'm gonna steal that. He's like, Yeah, that's why I gave it to you do it. And I was like, Okay, I'm gonna say in the first like, two minutes. And so I was like, Oh, the Sultan of silence. Just

I like, I will say, I really appreciate the fact that she gave everybody permission and was just like, you know what? I've sort of been torturing you and you don't have to do that. Three kids. Forget it. We're just trying to survive.

I saw like a headline that Marie Kondo Marie Kondo just gave up. She's out because you know why she has kids. You can't do it. I can't do it. I was holding my underwear and then stacking them in a certain way. I was doing the T-shirts a certain way. I was throwing away all the boxes and I can always reorder a cable. You know, I got kids. Yeah. Eff it. This place is going to be a mess.

I'm going to be talking to a bunch of like cool three cycle women investors while you're gone. Finally, yes. This is my time to talk to the ladies.

Alright, lots of good episodes as we wrap here coming up. I did an interview with Mark Schuster. You did one with the head of Niva. Yep.

One was an entrepreneur and invested over two cycles.

How many did we did we did we lock into so far for four? Fantastic. Now, Nick, just a producing note here. I'm curious, were we able to find folks who were investing over three cycles? Or were they like entrepreneur one cycle because it's still valid over three cycles.

I mean, it's still like one in 300. So yeah, probably. No. Yeah. Oh, it's so tiny.

Perfect. I think that was like, that's great. I mean, that's why I did it head on, you know, in the episodes, like, the number of women was probably one in 500 at that time.

Obviously. Yeah. Yeah. I don't know. We'll have to look. It's like every time I read it, it's like, oh, it got worse. Like lately, all the PitchBook emails are like, oh, it went down again. Oh, it was up for like a minute, but now it's back down.

It can't be one in 300. I think it's no one in 300 would be 33 basis points. I think the industry is probably five to 10% female now, which is still pathetic.

Oh, it's 16% though. Is it 16 now? Yeah. Female decision makers represent 16.1% of the national total in 2022.

the most important thing to look at, if you want to look at this, I believe is new fund formation of new funds, because all funds are going to die. They're run by oldsters. You know, it takes a decade for them to turn over the statistic to look at that nobody seems to be able to give me so if somebody out there has this, or somebody can tell pitch book or crunch base to do this one of funds formed in 2021 2022. And now in 2023, of new funds form fund ones, what percentage of diversity do they have, gender, ethnicity, etc. That's what I would like to see. Because that's where you're going to see the change is new fund formation, old funds, you know, you have to wait for somebody to die, nobody gives up the seat. As a venture capitalist, it's a hard seat to give up because it's so

Yeah, exactly. Because furthermore, they went on to say 95.5% of USVC firms have a majority male population of decision makers. So this seems to back up almost exactly what you're saying.

Okay, that's that's fantastic. 95.5% I like the qualifier of decision maker.

that like, if you want to be a female VC, like if you want to be a decision maker, you almost have to form your own fund.

Yeah.

March, right?

I mean, nobody would make me the editor in chief of a magazine, I made my own. Nobody would make me the head of my own fund, I made my own, you know, at some point, you can wait or you can create and that that is gender, ethnicity, independent advice, but it also in places where it's sticky, and it's hard to break in. That's a really good piece of advice is just make your own lane. To quote Kanye West, when he rapped, and he was cool. If you want to experience the J Cal experience, just to programming notes, follow me on Twitter, twitter.com. So Jason, I will keep tweeting there are two. There's a meetup, there's gonna be a fan meetup this week and serves and all in fan meetup on January 2 in Tokyo. January 3, I have my speaking gig at Future X, you can do a Google search for X, Japan or whatever.

Good job. You had a tough start to the year, man. You were sick forever. Like, it's time.

Not January, March, I'm sorry, March 2nd and 3rd. When I'm in Tokyo, there's gonna be two different meetups, if you want to say hi and take a selfie or whatever. January, March 2nd, and then March 3rd. And then I'm going to be in Niseko. Say hi. But you can watch me powder ski, hopefully some powder. And you'll see I'm going alone. I'm going to be working on my book a little bit. And yeah, just a little retreat, five day retreat for Jake. I'm doing something for me, Molly. I'm proud of you for me.

Everybody was like, oh, the economy's over. Everything's in a fall apart, whatever. Like, this is a great... We got the bounce. We got the sentiment bounce. Go enjoy your time. All right. Bye. We got this. See you online.

That three-week sickness kicked my ass.

So long. I barely recognize these guys.

Okay, everybody, it's Wednesday. It's been far too long, Molly.

Let's do it. We are back with the crypto roundtable at long last. Maybe our last one because the industry is about to get smothered. like a baby little flame in the woods, snow falling on it. No, there seems to be a crackdown. It seems like maybe the story of 2023 is going to be the crypto crackdown. And so we got our experts back to talk to us about it. Sonny Madra, co-founder of Definitive Intelligence and Vinny Lingam, co-founder of Civic and Waitroom for one-on-one video conferencing because running two companies at the same time is just the thing to do. It's just what you do.

Let's get started, Molly.

these days. I'm technically just chairman of civic at the moment. So I'm not running it operationally.

But listen, it's been a long time since you've been here, I think, with a little break, because everybody's been busy the holidays, yada, yada. But We woke up last week. And there was somebody who said like a week ago, and I think this was in one of our group chats. I don't know if it was in our poker group chat, Sandeep, Mr. Madra, or if it was in our twist one or the crypto one. But somebody like a rando is like, I hear there's going to be a bunch of crypto SEC actions. And then sure enough, next day, next couple days, we saw some crackdowns. So I think we need to unpack that. Did you see this coming Sunday?

Well, yeah, I mean, look, the one thing let's level set as we get into this conversation, right? Because, you know, you're dancing on the grave a bit early here, J. Cal.

I don't want to dance in the grave. I'll explain my position in a moment.

Which is a great and that's an outstanding question, right? It's sort of how a lot of times you might see, like, volleyball, nobody calls the ball between the FCC and the FTC, right? And those mandates might overlap. And in this case, you have these two agencies, the CFTC, which is really all about the trading. It's this relatively new federal agency that deals with derivatives markets, futures contracts, options, and swaps. Then you have the SEC, which is all about protecting investors, maintaining efficient markets, facilitating capital formation, and both of them seem to sort of fundamentally be saying. possibly rightly, we have possibly, we have some reason to come in here, there are aspects of the cryptocurrency universe writ large, that are 100% about swapping and derivatives and futures and the kind of financialization that we've talked about in this show for a year now. And you have the SEC saying, these are pretty clearly investment vehicles, in some cases, we are going to classify them as securities, because they seem to follow all those rules. So I guess what you're saying, Vinny, is maybe like both have jurisdiction or none, or this could get delayed, this sort of idea of enforcement as these two agencies fight it out.

Okay, just a level set here. I loved your definition, Cindy, there's the web three application level, there are crypto currencies, and then there's the blockchain, I don't think we need to define those things. Everybody understands what you're talking about. On this week in search, if you don't, you can look up cryptocurrencies, blockchain, and just a web free definition. I don't think that requires any definition on a show of this level of sophistication. However, Molly, being the expert you are on all things finance, perhaps you could catch us up on the mandate of CFTC. Yeah. And the difference between those two to then catch us up on Vinny's position that hey, which agency should be involved in this? What do we call it?

Yes. The Securities and Exchange Commission has a three-part mission, protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Got it. The mission of the FTC is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation.

Before we do that, can we step back for a second and maybe just, I think we have in the notes, the mission statement of each one, or maybe in the Slack, can you just read those so that we just level set with the audience? Because they hear SEC, they think they know what that is, they hear CFTC, and I couldn't read you off the top of my head the mission statements, but I think it's important to take from their website exactly what they said.

Yep. And then their mandate is, according to Investopedia, they're the federal agency that regulates derivatives markets specifically. Got it.

Got it. Okay. It's pretty clear.

This is why, first of all, I don't believe that two agencies can have jurisdiction. Because then who takes enforcement action when there is action? So I do think that that's a conflict. I think that staking should be defined into an entirely different... This is why I think we're missing an agency. We're missing a digital assets agency or something. Okay. And I think that If you think about what is staking, I own some Solana, and I go put it into a smart contract, and people who need to use that Solana pay me some sort of a return for using it. If you do native staking with the network, then I'm saying I trust a certain validator, and I will get rewards back from the network. I get a share of the reward, which is very predictable. It's not dollar denominated. I'm getting it in the actual currency that I'm staking. And then obviously, you have different types of staking. That's just the line. I have different types of staking, which you can pay the reward a certain rate of return for it. The quest… I mean, Like the SEC, I see their point. This is a way of making money, so to speak, but it's not money. It's not US dollars. No one's promising me a return in dollars. It's fixed in the unit of cryptocurrency I'm getting. So it's like I go buy seeds at a plant store. I plant a tree and it gives me apples, right? And then I take those seeds again and I go replant them, give apples. I'm not getting dollars growing off trees. I'm getting apples.

So your argument there and your definition of staking is you put something in you get more of it back. Sometimes it's transformed. We do we do know that happens sometimes it throws off some new currency or token. But it's not currency even though people paid currency to get it. Sonny, how do you define staking?

And so, let me just add to one second. I'll be even more like, put more finer point to it. If the returns are dollar denominated or any fiat currency denominated, I think that's within the jurisdiction of the SEC. If the returns are not denominated in the fiscal currency of a country or of a sovereign region, and it's denominated in the underlying asset rewards, like Bitcoin, for example, as well, if you're a miner, you're earning Bitcoin, I don't think that's under the jurisdiction of any government, because if I go and put in a X amount of my asset to earn a bit more of that asset, it's like me having a sheep and the sheep has a baby, right? Got it. It's a great analogy.

I think we understand it. Sonny, maybe you could try defining staking for the audience. Explain staking, what it is, and maybe why the SEC is taking these actions against stakers. Yeah, I mean, we just define it just to find stinger.

Yeah, I think that's true. I think it's a pretty nuanced and good take. Jason, what are your thoughts?

Finally, the SEC is proactively educating and discussing very complex issues with the American public. This is fantastic. So I am very pleased to see the two OG crypto peeps that we have here, Mr. Madra and Mr. Lingham. saying they like this video, I think that this is what the SEC needs to do. This is targeted at consumers. So although it's a little goofy, cutting the steak into three pieces and using a stock image, you know, and making it like a tick tock video. Well, that's how I love people consume. And those are the people who are attracted to this. And the SEC is meeting consumers where they are. We said before, hey, what is the mandate of the SEC? And you read Molly, from their website, protect investors, maintain fair, orderly and efficient markets and facilitate capital formation. Now the last one is about, you know, what we do for a living making venture firms and syndicates and something that let's put that aside. But a fair, orderly and efficient market means, hey, people need to be educated, and protecting investors, people need to be educated, they need to understand it. And it's delightful for me to hear our OGs here are crypto G say, Yeah, that's what we need to do. Now, Does it need a new agency? I think it needs an agency to do new things. We don't need a new agency, we need an agency to do new things. And the new things this agency needs to do is sit down with crypto people and say, tell us everything. And how would you like to proceed? And then say, here is how we already do this. we can only make so many changes to this because there's this Congress and you know, the public and they get to vote on things and they get to have a say here so we can make some changes. But generally speaking, you're going to have to play by this rulebook and this rulebook changes slowly. Listen, it's 2023. Closing business-to-business deals is going to be harder this year. You know this to be true because companies, hey, they're tightening their belt. It's the year of austerity and it's the year of focus. The last thing you want to do is slow your sales team down with a lack of integrations, right? These days, business-to-business buyers expect integrations. We expect our people management tool to work seamlessly with our payroll provider. We expect our CRM to work seamlessly with our accounting software. If it doesn't, it's a huge issue. But when you start a company, integrations are brutally hard. They take a ton of time. But Merge makes them way easier. merge is the leading unified API that allows you to launch integrations in days, not quarters. Think about that all of these integrations are out there. What if you could just have boom over 150 different integrations across five different categories, human resources, information systems, ticketing, it's all just built into merge so your developers can get back to working on the important parts of your product, Merge is the leading unified API that allows you to launch integrations in days, not quarters. That's all you need to know. So here is your call to action. Merge has unlimited integrations, and they charge based on how many of your customers use these integrations. So here's what they're gonna do. They're gonna give you five linked accounts for free today at merge.dev slash twist. Again, five linked accounts for free. There's just no cost to you. Free, you know what the word free means? Free, M-E-R-G-E.dev slash twist. I've been sitting here and a lot of this comes to my own personal jealousy of crypto. And I will put that out there. Absolutely. Honestly, I am incredibly jealous that capital formation for crypto companies can be done with anonymity, with global scale, with absolutely no fees. It's extraordinary what crypto has built. And I would like to deploy that at the syndicate.com to invest in companies, I would love for everybody to send me a fraction of a Satoshi and eat some garbage NFT, whatever, I don't care how they get the money in. And I could have a million people put in $1 each and then put a million into a startup. That is my ultimate dream. The SEC is a blocker. I can't do that. I can't ask 1000 a million people for $1 without doing a, you know, a crazy, crazy SEC public filing. But the two crypto people we have on right now could have that up and running in under 30 days, probably in a week.

That they did the Constitution.

And really fall under SEC facility capital formation. But so that that is my, my my bitter, my personal bitterness, as I've given this, I'm very bitter that I can't do this kind of stuff. And I am unable to break the rules at scale, because I have people who work for me, I have a family, I can't just go out there and break these rules, and stick it to the SEC. I want to continue to be free, and not in jail. But I'm actually considering when I watch this, like, maybe I should move to the ZUG. zig, wherever the hell that is. And I should just YOLO it and just not take Americans money and put this offshore. So the existing agencies, the old dogs need to learn new tricks. That's my position on it. I'm putting my cards out there. You can clip this, you can aggregate it, you can make a tick tock and dunk on me. I'm jealous. I want to see this vision occur. And I want the SEC to proactively engage this group. And I want this group to stop stealing from people.

But so Jason, I think it's a you have to be a little little, like, let's be a little bit more intellectually honest. Yeah, right. Let's do it. I'm here for it. So I'll ask you the questions. So why do you want to have a big fund and do capital formation with so many people?

Why do I want to have a capital formation with so many people? Yeah. Oh, it's, it's actually, that's such a great question. We could fund more companies that do take more risky bets, Okay, and do it with less cost, less time. And the people who make the bets would have less problems, they would have less damage if it doesn't work. And the majority of startups don't work, we would say 80% at the seed incubator stage don't work. So what if we made it 90% don't work? Well, if people are putting in 50k each that hurts, it can sting and their accredited investors, you get 20 of them for 50k, it will be much better. to have 1000 for 1000 10,000 for 100 100,000 for 10 or a million for $1. But the problem is speed. When we do this, we have to have people sign documents, we have to have them wire money, the wiring costs are greater than any than the cost of that they're investing. So we set a $4,000 minimum for the syndicate just because doing the tax documents for 10 years is so arduous, that 250 people versus 50 people in the tax documents makes a difference. and collecting 250 signatures versus 50 is obviously one fifth. So it's just that the speed and then also for the investors, more people could participate. And that would be more fair. So that I have that reason as well. Great question.

So as you as you're going through this thinking, you know, your argument really is that you can spread the risk across a wider base. Do you think you'd raise more money than what you can raise currently?

know, there is a gating factor, which is how much money the startup wants to take in. And so we wouldn't want to flood a startup with $10 million at $100 million valuation at that stage, let's say the company has no, no, no, no, I mean, saying the fun, the fun that you're running, right?

Or are you more SPV? Are you saying more from an SPV perspective?

from an SPV perspective, or even a fund formation perspective. Sure, we could have more people participate in funds. But just from it is to stick to the SPV concept, like one deal at a time, more people could participate, we wouldn't have to exclude 95% of the people in the United States, and we wouldn't have to exclude, you know, whatever percentage is on a global basis. And then that could make more people move up from poor to middle class, middle class, rich, rich to, you know, the rich don't have a problem, they have access already.

I struggle a bit with this, Jason, because I think one of the things I've learned as an angel investor is making lots of 10K, 25K bids, you get hundreds of these companies in your portfolio that you spread out. The administrative costs falling out, you don't keep track anymore. At this point, when you're in this high net worth individual, you just actually forget about it. You write the check. If it comes back, fine. Otherwise, you don't track it. You don't monitor it. the ones that do come back, if you're lucky, it's a 10x, you know, and then it doesn't, it doesn't really move the dial. Well, so you get a couple of those. That's great.

I think you get one in a lifetime if you're lucky.

I'm a big fan of crowdsource capital. I'm a big fan of opening it up for people. That's really the issue.

It's just you choose to they have access. Sonny, what do you think?

But now that to trade, they have to trust you as a picker.

Yes. And that's the great thing. You then would pick the fund managers, their fund managers would have their track records, they, you know, you would get to choose, hey, I trust Jason, I trust Molly, I don't trust this person, I don't trust that person. And they write a good deal memo, and they keep me up to date on it. You are outsourcing the management of that investment. Just like when you're buying Netflix stock, you're saying, Hey, I trust this management team. But Sonny, what are your thoughts on this and my confession of my jealousy and the overall reaction here to this action?

I mean, does he have to take this position on some level? Because this question of enforcement of exchanges and pooled staking is more existential for Coinbase.

I gotta get Brian Armstrong back on the on here, because this is a very calm discussion. Yeah, no, I do. I like I'm a fan of Brian's I have a I'm a fan. Come on, because he seems I think so. I think he prefer to come on all in. I don't think he wants to face me alone. In all cases, he actually came on the podcast before they were public. And then after they were public, he asked to come on all in all in past. You know, we don't really do guests all the time. I said, Hey, come on this week, sir, that he passed on that. So I was like, All right, you know what, you know, and then he decides he's gonna dunk on me. So I don't think he I don't think Brian and I'm just I'll say this directly to him. I don't think he wants to have a hard discussion one on one with me. think he wants to, you know, have it with the other three besties there. So he doesn't have to face my level of criticism. And, you know, he then pull up the tweet just from Brian, not mine, please. He decides when I say like, hey, you know, crypto needs to play by the rules. He's like, disappointing to see you duped by this, Jason, there is no way for crypto firms to come in and register. It was fake the SEC his own commissioner, Hester Pierce, who's been on this week in startups is great. She's very well spoken essentially confirms this. So I'm like, Come on, man, you don't need to dunk on me and tell me I'm getting duped. Did you guys see this thread with me and Brian, by the way? So I said to him, Listen, here's the facts crypto firms made up a new securities framework and ignored the rules. I believe that's true. Web three startups and their VC swept mountains of cash off the table from uninformed civilians. I believe that's a fact. And the SEC is here to protect civilians and many cryptos from around so they they force their hand around. Sorry, find out. We got got a little heated. Got a little heated. Is there about Brian's position? Right? I guess is the question, Molly. What do you think?

I'm going to go back to the framework we started with. Right. I, you know, I think the challenge is, you know, if you look back, the origins of Coinbase, it was to buy Bitcoin, which is, you know, turned into like a, a stable asset. Right. Not, not in the right way of like stable coins, but like a, at scale all over the world. The challenge is, you know, every time I go in the Coinbase app, they're promoting all kinds of different financialization of, you know, whether it's a staking product, an APY product, they're promoting, you know, going back to your point, Jason, they're promoting random tokens that, you know, are, we don't know the depth of like how much work the project has done, you know, what really exists. And so, From that perspective, I'm not a fan of that stance, right? Because, you know, they're sort of driving the casino of cryptocurrencies. And they, you know, and that leads to kind of Gary's point in that video, is that when people are doing that, and then, you know, they go under and you've either trusted them with giving your assets to them, and they've staked and done something with it. or they promoted you buying. So you believe you should be regulated.

11% of their revenue, somebody tweeted, I don't know if that's the exact number, but it's some double digit percentage of their revenue. So I understand that. And he's frustrated because he tried to go to the SEC. Remember that a couple years ago, he tried to meet with him, they refused to meet with him or they canceled the meeting. So what's fair about what do you think of the exchange overall Sunday? And then I'll go to you.

I think protocols. So there's a couple of things the regulation should cover, right? So the issuance of the tokens, there should be some regulations around it. For example, if it's just a mine token, then it's mine, right? So if you want to just connect commodity hardware, whatever it is.

You believe, and you believe that as well, Vinny, if you start, if you're doing this formally like this, it's not a distributed project where you're getting, you know, more baby pigs for the big pigs you put into the pool or baby sheep. I put 10 rabbits in, I got a bunch of bunnies out, I made

Yeah, yeah, yeah, exactly. So you mine it. By the way, there's really a framework for this right now. If you launch a cryptocurrency, even if it's a mine token, like a Solana or whatever else, or a state token, If you have a sale, you can do a SAFT to accredited investors. You can place those tokens with them. There probably should be some more clarity on what they can do with it and how they can do with it, how they can sell it, et cetera. That needs some more clarity, but that's already fine. I think the moment you get into the world of service providers, on top of the protocol, that's where there are some regulations needed. But if I, as a consumer, want to go and buy a token because I think that a certain token, whether it's Render or Filecoin or Solana or whatever, I like it, I'll get behind the project, and then I stake it and I earn more of those tokens, That's a long-term investment for me, right? So if I say I'm going to go buy 1,000 Filecoin, and I'm going to stake it, and in 5 years' time or 10 years' time, I'll have 1,300 Filecoin, and I'm doing it with the network natively, That should be my decision, because if I'm going to hold it anyway, I might as well get some sort of yield or return on it. Now, the issue really is, when you have these service providers in the middle, now they're taking a cut. Now they're also promising you to juice up the returns. Potentially, they're doing funny stuff like leveraging your tokens. They're taking cuts to you. Like Gary said very clearly, not your keys, not your crypto. I've always been a fan of that saying. It's really Jason. It's it's so nuanced. Okay, but but I think we have to understand like, it's the initial the ICO, the initial issuance. It's the protocol itself.

Mine token, like a mine token you use. Yeah, yeah, yeah. You do some compute, like Bitcoin is mined.

And I really like your tweet about the arrogance. No, no doubt about it. Like it has become unfortunately a little too easy to dislike crypto bros present company excluded because of this kind of sense of superiority. And like, you're all fools and you know, we're all getting rich without you. And I will confess to that kind of jealousy as well, especially after having lost my $300 worth of Bitcoin at $1 each.

It's the understanding of a reasonable position. I think this is a reasonable position. I think we might all agree, even Gary, it's like, I mean, it's so what what is causing this riff here, Molly, if you were to look at this, why is this so contentious right now in your mind, you know, just sort of looking at the field? Why do you think it's gotten to this point of contentiousness? I mean, I have my own theories. I'm sure the boys do too here. But yeah, here's your outsider as well.

Yes. I would have liked an FDIC to be behind my purchase. Um, consumer wouldn't. However, I think the reason this is so contentious is just because it looks like traditional banking and it's all this and then it's going to be, and it's so hard. Like Vinny, the thing you're a hundred percent right about in terms of regulators is that they have not historically been good at scalpel surgery. It's nuanced, yeah. It is really really nuanced because what we have here is sort of multiple entities within the host and we have to carve out some and leave the others and not kill the host and that is not a skill set like these guys are not good at whatever that old surgeon game is. That's not a skill set that regulators have. And I think there's probably a very reasonable fear that they're going to come in and just be like, radiation, just like nuke the whole thing. And that'll be the end of it. And I think Gary Gensler is presenting right now the position that he wants a scalpel approach, but it sounds like there's just not a lot of trust.

Um, I'm not, I'm not, you would have liked some regulation in your exchange to keep those bitcoins.

So let's look at Celsius for a second, right? Like Celsius was the poster child. It is the poster child of like, effectively, I guess, in some ways, staking is a little Celsius token thing and, and how they were promising ridiculous API rewards, etc. Like, yeah, and most of these rewards actually denominated in dollars, there's a promising like dollar based returns. So this is goes on to the stablecoin discussion, right? stablecoins should be read regulated returns on stablecoins.

Okay, this is when I I'm sorry to interrupt you. This is what I really want to understand. I got your position on staking. if it's decentralized, and I'm getting back, you know, puppies for having put these beautiful English bulldogs in I get it. It's no cash. There's no API. There's no central control. You didn't take custody. Great. You didn't take my bulldogs that just magically appeared on the blockchain. stablecoins are one for one. And the Howie test says like, hey, it's some group thing. And there's some expectation of gain with the stablecoin. There's no expectation of gain. So explain why stablecoins I happen to agree that they should be regulated. But I'm curious your position on why should stablecoins be regulated? Because people We're also upset about that, because I think the SEC came out and said, hey, we're going to make sure stable coins are also the word stable, right?

That's anti-crypto.

Attestations. It's a little bit of crap.

It's fascinating. People don't appreciate what, I tweeted about this a while ago, but like proof of results without proof of liabilities is meaningless. I can show you a bank account with a hundred million dollars in And you'd be like, Vinny's $100 million cash in his account. That's amazing. If I borrowed that, if I borrowed that from a bank, and I don't disclose my liabilities, I'm zero.

The whole point of crypto was just, you don't need to send me an accounting form. I look myself. So they're non-crypto people. That's been the problem here is that these intermediaries are coming in and they're breaking the crypto rules, which are, it's programmatic, it's transparent.

Jason took off the J trade specs, put them down. He backed away from the phone. It was a no-go.

Okay. I literally was going to J trade snap. And I looked at Snapchat, like, I don't know, six months ago, nine months ago, I was like, Oh, they have 5 billion in cash. I was like, Oh, this is great. And they're and they're like, only losing like a little bit. And then somebody's like, they got 5 billion in debt. I was like, Wait, where's that? And I'm like, Oh, the balance sheet. Oh, I got to read the balance sheet. It's like, Yeah, you got to read the balance sheet, dummy. Molly, you were on air with me and we're like, huh, let's, let's break this down. And it was like so much debt. I'm like, I've never heard of a company that small having that much debt.

Is it possible they get it? Exactly. Is it possible they get it?

It feels like the right amount of time. I know that our industry would like the these agencies to work faster, but I am looking up online bit USD is claiming to be the first stable coin launched in 2014. These things became hit, you know, tether came after them, etc. And then like staking pools. What does that like? That was I mean, proof of stake has been around since the beginning, right? That's 10 years, Vinny. I don't know what the first lending product was, but that's got to be five, six, seven years ago.

proof of stake? Yeah, probably. I mean, Ethereum kind of pushed the envelope on that.

So do you remember the first time you heard of a lending? Like, hey, lend us your stuff. We'll give you some API, we'll give you some extra tokens. What was the first one of those? 2017? 2017?

I think, Sonny. Okay. So like, these things, yeah, there was stuff like MasterCoin, and a few others factum. You know, a lot of the earlier blockchains play with instantiations of this, but they never really, they really took off. I think DeFi really took off in 2018, really, like when we started like a post bubble.

So looking at this, you know, my take on it is original crypto technology was just and sound distributed without a lot of grifting in the in between. You get a bunch of grifters in who try to centralize it and take advantage of it. They're getting smacked down. Some of them are good actors. I believe Coinbase is a good actor. I believe circles a good actor. Other ones are not good actors. I believe tether is a bad actor. I believe Luna was obviously a bad actor. We could all have our differences here in terms of which ones you think are good actors, bad actors. And now the SEC and other agencies have to sort through this mess. And we're sure gonna, it's gonna take them a little bit of time. Should they have moved faster? I guess. Should people have played by the rules a little bit better? Of course. And here we are. I think we're close to having a framework. I don't think we need a new agency, Vinny. I think the new the existing agencies have to learn the new tricks. And we're close. But I do think people like circle and Jeremy Allaire and Brian Armstrong should be invited they should be, I don't know, engaged civilly, and seriously by the SEC in these organizations, because I believe they are good actors, and they're trying to do it right. But they should also not have their employees front running. And this is where I was like, Hey, Brian, you know, don't tell me I'm getting duped. When your own employees are being convicted of front running or employee.

Just a defense here, Jake. Oh, that's like, could be just a bad actor within the business. Of course it's a bad actor. It wasn't a design of Coinbase to do that. It could happen anywhere.

But I think like then going back to the arrogance we're talking about, to go after people and tell them they're getting duped. For Brian Armstrong to tell me I'm getting duped is just insulting.

You're not wrong. You're not wrong when you say most of most of most of crypto is a most of crypto is a grift. Like most of it is a grift, especially especially if you feel that way.

Yeah, I feel that way.

But also, even within traditional finance, Vinny, right? To this day, right now, and I don't know, I wouldn't say most though, I wouldn't say most of Metro capital is a graph. No, no, no, no, I'm not saying that we're talking about a hugely regulated framework. There's this public company, which is like a sandwich shop out of New Jersey. Did you have you guys seen?

Disappointed in it.

When there's a bunch of money to be made, grifters are going to come in. And there was a lot of money to be made in crypto and a lot of grifters came in. But I'm going to take the really unpopular opinion here that I actually think Gary Gensler gets it. I think he 100% gets it. And I think he waited until the grifting was too big to ignore. until there was, yeah, but until there was until there was enough delineation, right? Like, I do not believe he is coming in trying to nuke all of crypto. I think he is attempting a scalpel move here. And it might be tough. And you can debate the timing of it. But like, the fact is, like, I see no sign that he that he and the SEC at this exact moment don't understand what they're doing here. What they seem to be saying is this financialization is BS. And now let's talk about sandwiches.

This is unbelievable, this story.

This is where you only ever trust Matt Levine on these topics, because Matt Levine frequently, constantly in his newsletter is like, everything is security sprawled. Which is the important part. It comes down to whether you get busted or not.

Well, yeah, I just I can't leave the audience hanging. Three men charged with fraud in $100 million New Jersey deli scheme. This is why I'm the world's greatest moderator because when I hear something that's just incredible, I have to stop the show. Just just recap it folks. Three men were charged in various crimes including the CNBC, including securities fraud in a scheme involving a small town, New Jersey deli. Your hometown deli that's the name of the deli was operated under an umbrella company called hometown internationally put the international there it makes it more formal. It became known as $100 million deli reflecting its own nurse bizarrely huge market value. James Patton, Peter Cook senior and Peter Cook jr. Never trust people with a senior and junior there with the same cooker I'm sorry, face stiff prison sentences and fines for allegedly manipulating markets and frauding investors. And the men were charged with fraud involving a company that was worth 100 million in the stock market finally having a small town New Jersey deli. It's incredible.

They were filing 10-Qs and all the stuff, right? And so, they were doing all right.

The deli, lauded for its cheesesteaks and Italian subs, had under $40,000 in annual revenue. Closed earlier this year.

I mean, um, it's only, it's only fraud. It's only fraud because a bank didn't start it.

Uh, this is incredible.

He looks like a poor man Steven Seagal.

Yeah, this is an incredible manager of a father-son dally charging in. There he is.

I mean, I see where you're going with this. Just to be clear, I have no inside information. I just want to be clear. I'm picking up what you're laying down. And if, in fact, you were said network and perhaps you had had a short video service that you inadvisedly killed not so long ago, anything is possible.

Any social network under 50 billion.

You already have alliteration. I'm just saying.

I think this would be like an incredible move.

I've got a run soon, guys. So we should probably wrap up.

I think it would be like really interesting if like a Twitter or a if a Twitter or a snap. I don't know if there's anybody else who's in consumer. that has a public entity already that this could be boom, right on the market would be worth 500 billion immediately. Can you imagine? 400 billion, 300 billion? Let's go. Incredible.

Vinny. You know something that we don't, Jake Halston? I don't.

You guys have no reactions. Sundeep, thank you.

Molly, what a peaceful show. Thanks, guys. Thanks for joining us. Awesome. Vinny Lingam and Sunny Madhra. Thank you. As always, we will be following 2023, the year of this careful, careful surgery.

I literally gave three disclaimers there. I think Snap's the logical place. You got Great founder, got a good CEO, get co CEOs going, you got the two of them, you immediately have scale. Boom, snap, just get to work. All right, everybody.

Yeah. Love it.

We got it. See you next time. Bye bye. Bye, everybody.

So Prince, you are the co-founder and CEO of Factored Quality, which is not a super sexy business. I talk to a lot of people I feel like in consumer. I actually, I know you very, I feel like through several ways, which I think is interesting. Like number one, I feel like I've met you just through like the New York tech ecosystem, but I've also met you because some of my favorite investors over at Dynamo, which is where I did my fellowship for venture capital, they invested in you. they're super interested in supply chain and mobility companies. So that was awesome. So I know you through two ways. Again, quality assurance, not a super sexy industry. Can you kind of explain what factor quality does and why quality assurance in general is like an industry you're looking at?

Thank you for having me.

I do have a question. So you kind of talked a little bit about, obviously, you guys are a global company, people are doing quality assurance everywhere. How are you training these people? If it's global? Is this something that like there's already like country by country there, there's like a test these people can be taking? Or is this something like a separate course, you guys have to teach people to become the people that are actually going in and doing those human quality assurance reviews?

Yeah, absolutely. Well, thank you for having me. I'm so glad that we could get to do this. So at a high level, Rachel, factored quality helps consumer goods brands across the world run quality control, testing and compliance on their global supply chains. So the part that we really play into is kind of in this hidden backend ecosystem of how products get made. Over the last couple of years, we've heard a lot about companies like Flexport on the freight forwarding bit and stored on the last mile fulfillment bit. What we can do is one step between before even both of those so we are specifically really interested in the process of how get products get made how factories are found to source these products and how do we ensure that brands can manufacture and procure high quality products that they send and customers like you and i all over the world. The way it specifically works is Factor Quality is a software plus technology enabled services ecosystem. We have a piece of software where brands go in and they basically tell us, hey, I'm manufacturing this product and I'm looking to import it into the US and sell it at these retailers. And we help them create quality control compliance or testing checklists to make sure that they're abiding by quality control or compliance or testing standards. And then We have an entire network of people who are trained and vetted quality control inspectors, so actual humans who go down to these factory floors all over the world in China and India and Europe and really anywhere that companies manufacture goods, who actually are going down to these factory floors, running through these checklists, overseeing production, and actually inspecting these goods. So our North Star vision is to ask the question, How can we make it as easy for a brand to find a factory to partner with anywhere in the world, and then start working with them and scale up their production without ever having to compromise on the quality of the product and without having to go out and fly out to these factories themselves. So that's kind of where we fit in.

Got you. And you mentioned another company, you mentioned Sword, which is actually also founded by a Gen Z founder around both of our ages, Sean Henry, which is crazy to think about both of you kind of in this, in this realm of things and being around my age, because I never think about quality assurance necessarily. This wouldn't have been a business that I was exposed to and thinking I could innovate in. What really inspired you to go down this path?

Yeah, great question. So in the past, most brands did kind of one of three things. If you were a brand in the US, say you were a skincare or cosmetics brand, and you were manufacturing in China, you would really do one of three options. You would either set up a team locally on the ground near your factory, or you would be flying out to your factory for most production runs to oversee the production runs and actually look at the goods yourself. or you would try and find a third-party trained and vetted quality control inspector in that region. So, this entire category of quality control inspectors is one that already exists. If you Google today, like, quality control inspections Shenzhen, you would come up with a list of 150 quality control inspection agencies and firms, and then there's a few multinational conglomerates or labs that also have these trained and vetted inspectors. Yeah, what we've basically done is gone out and built up long term partnerships and relationships with all those different inspection agencies and firms. So where we specifically fit is right in between with the brands on one end and with these inspectors on the other. And we think of ourselves almost like a digital broker, like a digital platform that sits in between those two sides of the equation.

Atlanta-based founder too, which is kind of cool.

Yeah, absolutely. And for what it's worth, Sean and Stuart are inspirations to me and to us. Yeah, just amazing people and an amazing company.

And Stored is another Dynamo portfolio company, I think, right?

Atlanta-based founder. And it's funny, we actually have a number of mutual customers and we're trying to figure out ways to also work together. Yeah.

And I knew you. I feel like I've heard of you when you were at Workbench, too. So this is cool.

That is true. Yeah. The connections are endless. Yeah. Very cool. So I think Sean, if I'm not mistaken, he got to start working in automotive parts manufacturing. So it's funny. I kind of also came from a similar direction. What I found is usually when there's folks on the younger end who are kind of entrenched in some of these B2B or enterprise industries, we usually come from the customer side of the equation and have had some experience there that made us think, hey, there could be a better way. So for me personally, I went to school in Cleveland, Ohio, I went to Case Western, I studied mechanical and aerospace engineering there. And I thought I was going to be an aerospace engineer for the rest of my life. And I started out initially working for NASA has a research center in the Cleveland area, and a number of, you know, suppliers and contract manufacturers in that region. So I was working in the kind of defense and aerospace ecosystem over there. And while you were in college, or were you graduated at this point, this was like, right towards the tail end of college, towards my senior year of college here, tail end, and then shortly thereafter, And so I was kind of working with NASA and I ended up getting pulled into a project where we were basically going through our supplier qualifications and basically saying, hey, look, we are manufacturing parts that are going to fly into space. These are kind of as critical from a quality or compliance standpoint as they come. And we found ourselves unable to answer sometimes simple questions of like, can we actually work with these manufacturers that we're already working with? And do they have the right documentation and quality control standards and compliance standards in place? So I ended up working on a team on a couple of projects where we were trying to digitize a lot of these old enterprise ERP systems that we had, and build in this intelligent layer. I just remember thinking, like, how crazy it was that, you know, the systems that we use to store and manage all of our information in these enterprises aren't actually intelligent and can't tell us the and can't answer these questions about our supply chain. So I left there and started a company called Workbench, which was building really a pure software layer to kind of do what we're doing now. We were almost like a modern ERP or a modern quality management system in certain ways. And through that process, took that company through Y Combinator, grew it a little bit, That was actually where I first met the Dynamo team.

So DoorsDev too, let's touch on them. So I'm a huge fan of DoorsDev. If you listen to this, we can start up to probably already know of some companies they work with because we have spoken to the people over at Magic Spoon, I believe twice on this podcast now. That's a customer and my favorite customer of DoorsDev is, and I believe they are still a customer, is Mischief, which is like our collective that comes out with stuff. So DoorsDev, If anybody's listening, really interesting. And by the way, ERP systems are something in tech. If you're really interested in the supply chain world, definitely something to look into because it seems like everyone's trying to innovate. Basically, ERP systems, Enterprise Resource Management, I think is what it stands for. freaking no one's happy. Nobody's happy with an ERP system. So it's awesome that you were able to kind of pivot over two-factor quality. I feel like that is such a great, great way to share your skills and really, really hone in on that. And is it difficult? And I want to go again, my first question to you was about, I believe, a global team. I have to ask you again about doing quality assurance globally, because I feel like that would just be Especially now with Gen Z consumers, people are really critical on where their products are coming from, if they're being produced in like ethical factories, anything like that. Have you noticed any shifts generationally with quality assurance or is this really just on a buyer side?

Exactly. And through Workbench, we had the fortune of meeting a really cool team right here in New York called DorisDev. So DorisDev is a product development and supply chain management agency. So they run supply chains for hundreds of consumer goods brands. So we were building supply chain management software, they were running supply chains for a bunch of these consumer goods brands. They've actually incubated one of their own brands, if you can see in the back here, a DTC humidifier company called Oh, can it be? Yeah, it was spun out of Doris dev. So we started working closely with their team. And at some point, we realized, hey, we can actually bring what we've built from the software layer together with what they've built from this managed services standpoint, and kind of build something that was at the intersection of the two. So not just serve as a system of record or a pure piece of software, but also help these brands actually run supply chain oversight, factory sourcing, quality control, and production management. And that was kind of the genesis of what led to Factor Quality. So that's the story here.

And how many people are currently on your team? I'm not talking about people that are just the people actually doing the quality insurance. But as your team right now, how big are you guys?

Yeah, I think... Especially globally too. No, it's a great question. I think there's two parts to the answer. I think one part is what we're seeing from... And buyer sides, right? So people like you and I and the preferences that we have for the brands that we buy from. And I think it was companies like Aperlane that really first pioneered this model of like, hey, let's actually show the end consumer how their product is being made. Where is the money being added on? And who are the actual factories that are involved in this entire production process? And what we're seeing more and more is people truly do care about the fact that their products are being made in high quality factories that treat their employees well, that don't have child labor, that have ethical working conditions and have environmental compliance standards in place. So I think that's one half of the equation, Rachel. I think the other half, and one of the big kind of impetuses that led us to starting Factored Quality was we sort of noticed this really big macroeconomic shift on the back of the last couple of years. And a lot of the challenges that have been happening at a geopolitical scale with shipping logistics, with tariffs, with the ability for companies to be able to source and manufacture products, in certain regions of the world. And what we realized was the brand that yesterday was manufacturing products just in, say, China, today is probably sourcing from factories in Vietnam and Mexico and Canada and India and Pakistan and all these other regions. And what we realized was it didn't make sense for a world in the future for these brands to build up teams or fly out to all these different countries every single production run. we really started Factor Quality to serve as these companies' eyes and ears on the ground at their local supply chains on behalf of them, so that they didn't have to incur these costs themselves, but could still source and do business with whoever they wanted from all across the world. So those are the 2 parts of my answer.

Got you. How difficult do you think it is to do a business like this on those are time zones that are pretty crazy. And I feel like quality assurance is one of those things where if there's an issue, it's a pretty time sensitive issue. How do you deal with that while being such a team that is so spread out?

Yeah, our core team is about 15, 12 of us, and then a couple of folks are in contract. And we're spread out throughout the US, Europe, and we also have a team in Hong Kong.

Awesome. And if you were going to change something about manufacturing in America, or I guess give me one prediction that we're going to be seeing within the next five years, what is one trend that you predict is really going to take off here? Yeah. In America, not globally.

Yeah, it's not easy for sure. And there's definitely a degree of complexity to this business. But I mean, I think if you would speak to Sean at Stored, or if you would speak to the Flexport team, or anyone else there, the kind of our pitch and kind of the line we draw on the sand is saying, look, these businesses are complex, but they're worth building, right? Because they truly solve a problem that people have and that the world needs. yeah, there's times where it's hard for us to schedule even at all hands and get everyone together at the same place, same time. But it's the consequence of manufacturing truly being a global effort. Manufacturing doesn't just happen in one region. It's the true origins of trade and how the modern economy was formed. And us having a global team and being distributed first is just a function to fit into this ecosystem that we're playing into.

Fun fact, my dad said if he wasn't doing his current job, and by the way, he still works in logistics, he would have started an injection, an injecting molding company and focusing on farm equipment. So there you go. Yeah, obviously, this has been a this is even an issue that people that have been in the industry, I guess, logistics industry a very long time are seeing. So Thank you so much, Prince, for coming on. What was the article that came out? What was the title of it? If people are interested in reading up about you and Austin, because I know you guys had a piece that came out together. It was really interesting.

Yeah, great question. I think what we are starting to see is, at least in certain product industries, some degrees of final assembly and production being done in the US. So even if brands are necessarily sourcing the raw materials or their individual components from suppliers internationally, we have seen some degree of a trend of people doing the final assembly, and then that last month fulfillment and storage, of course, at warehouses and distribution centers here in the US. And I think we'll see more of that. There's a couple of really cool companies that are building really cool advancements in also different manufacturing processes. So you and I, we both know Austin Bishop, who is one of the co-founders of Atomic. And Austin and I, we went to college in the same place. And his co-founder at Atomic, Aaron, still runs the company. And Atomic is doing something incredibly interesting in the injection molding space and trying to make it easy for us to build up injection molding capacity here in the US. So Lots of cool companies that are building a lot of this infrastructural advancement. But yeah, I think that's what we'll start to see more of.

Well, awesome. Thank you so much, Prince, for joining me today on OK Boomer. This is a really interesting discussion, definitely one that's a lot different than what we typically have. And if people want to find you on the Internet and ask more questions, where can they find you?

Yeah, absolutely. Austin and I, we recently co-authored a piece for Forbes about a month or so ago, talking about this kind of new wave of decentralization that we're seeing in manufacturing. I think a lot of the kind of two rhetorics that have been, you know, talked about a lot in regards to manufacturing is on one end of the spectrum, everything is coming back to the US. And then on the other end of the spectrum, everything is staying in China and staying, you know, overseas and is not going to come back to the US. And the sort of, let's call it like a prophecy or hypothesis of where the world is going, in our opinion, is it's really not as simple as that. And what we'll actually see is this kind of true decentralization of manufacturing. And we'll see bits and pieces of some types of manufacturing going to Latin America or going to South America or going to Europe or India. And then we'll see other pieces of manufacturing that continue to stay in China. I think Ryan Peterson from Flexport, he was on a news source recently and said, for their data, the US has actually done more trade than ever with China across certain product categories. And we've seen the same on the manufacturing front. So it's a very intricate and nuanced world that we live in, right? And it's not so simple as all manufacturing comes back or all manufacturing stays overseas. Again, part of the reason that we built Factor Quality is to be able to give brands the ability to manufacture where they want to, anywhere in the world they want to, but still feel like they have that degree of trust and visibility on what's actually happening on their production lines and on their supply chains without having to be in all those different regions. So that's... Yeah.

Great. Thanks, Prince.

Yeah, you can find me on Twitter, find me on LinkedIn or just go to FactoredQuality.com and send us an out there.

And that is a wrap on the week, everybody. Thanks for listening. We'll be back next week with more news and another great episode of ANGEL. I hope you have an awesome weekend. See you Monday. Bye-bye.

Amazing. Thanks, Rachel. Take care.

Actually, inside partners. Now it used to be inside.

Got it. Okay, so we tighten the name up. We got one word out. It's much more much tighter. It's good to see you. You joined insight back in 2000 with impeccable timing. Was it right before the bubble burst or right as it burst, that you took the job?

It was right before it burst, I joined literally January of 2000. It felt like the, you know, I think lots of people thought that they were going to retire and like, you know, by the middle of 2000, because their funds were all gonna make five and 10 times their money. And it was amazing how quickly things change. From our, I think, our annual meeting, my first annual meeting, which I was just listening to, it didn't say it was early 2000, I think, February, March, and that six months later, it was a totally different world. Yeah, it was quite a, it was a quite a time to join, I didn't actually get the, well, you could say the fun, but I didn't get to actually do the deployment. in 1999, when I got there, we actually had deployed a lot of capital and had a portfolio and the portfolio look great, like everybody's portfolio look. But then of course, the market changed a lot.

So the market changes dramatically stocks that are publicly traded in the internet space, started losing 9095 99% of their value $100 stocks became penny stocks. It was, in some ways, very similar to what we've just experienced in the past year. How did you and your partners at the firm approach this cataclysmic event? And what was the work you had to do? And then let's talk about how that relates to the work that we're all going to have to do here during this 2023 year of I think, cleanup and resetting of the market.

Sure. Look, we're going to hit all three over the course of the next hour. I think they're all different. Remember, the 99 one, it started really much more just with tech. Then 9-11 happened. Of course, it affected the broader economy, but it started with tech. In fact, I just pulled up some of the stats. If you looked at January of 2000 to December of 2002, S&P, the went down, peak to trough down 40, Dow down 27, but NASDAQ and software down 70, right? Wow. So I mean, it was a good reminder, just pulling up the statistics of like, how, and then when a big chunk of that really happened, the broader market actually held up pretty well until 911. And then you had an impact on the broader economy. I think, you know, look, the biggest distinction between the 99-2000 period and today was a few things. One, you had a lot less companies who actually had a business model. You had a lot less companies where even product market fit or the underlying economic model didn't really necessarily work. That's one. Two, companies were not as well capitalized as the companies were today. We'll come to that. For me, it was at the time, It felt like a miserable experience. But when I look back on it, it was probably one of the most important experiences to go through. Also, keep in mind, that cycle, Jason, you'll remember, really lasted a long time. It was a multi-year cycle.

contrary, it also had those two phases, correct? You just mentioned, we had the dot com burst, 70% goes out of the market. And then the black swan of black swan events of our lifetime 911, who could have ever imagined that the, you know, largest attack on American soil could would happen just on a crazy, beautiful September afternoon in New York.

I was in New York, and I remember sitting in the exact conference room I was sitting when it happened. But I think the challenge that you had back then is that really, what you had to go do... Because always, when things are good, we're all just cheerleaders, if we're being honest. But when things get tough, you really got to peel the onion back and see what you have. And what you generally find when you peel the onion back is maybe you have a little less than you thought. And in the 99-2000 time period, you probably had a lot less than you thought. And so really, while you were taking costs out, lots of times the companies had very little revenue. And so you could take costs out and reduce burn, but until you can actually create a business, it doesn't really help you other than reduce your period of cash out. And oftentimes, you're just trying to find a home. for these companies and try to find a reasonable place for them to go. Now, we were fortunate. I think that we were in Fund 3 at the time. We're right now, we're investing in Fund 12. We, from the beginning, had done both growth equity and some buyouts. And so we actually had this portfolio that ended up being ballast in a time when a lot of these business models ended up not really working out. And a bunch of those deals, it still took a lot of work. But we managed to claw our way back to basically a 1x on that fund. And I think there's a lot of... I mean, I look back on that time and I feel like I... Well, it wasn't... It was our worst performing fund, obviously. I look back on that time as being really important and I think it's been really helpful for me as we went through 2008 and then today.

What was the LP reaction when you put your head down, you work for years to just claw your way back, to give back every LP, you gave us, you know, a dollar, here's your dollar back. That was years of work to just return one X, maybe talk a little bit about how they felt about it. Because I would think they would be highly respectful of the seriousness of which you return that capital.

No, I think they were because if you looked at kind of what happened to NASDAQ over that period of time, it was down 50%. To be able to get to 1x, and of course, you can't eat relative returns and you can't eat... 1x doesn't give you a lot to do with. It also says that in a really unprecedentedly bad case, if you're able to get capital back, it actually gives people some comfort. around what the downside is. And, and the interesting thing is, keep in mind, and I don't think this is just true of insights, I don't want to make this about insight. But But keep in mind that at the time, the amount of penetration in the portfolio of recurring revenue models, close to close to zero, we had some, but relative to 2008, and certainly relative today, so we didn't even have the downside protection from the business model standpoint, back in 2000, by and large, that we have today. And so that I do actually think, you know, we get to talking about today kind of says that I feel like even better, that we've got some real recurring revenue businesses that gives us nice stability.

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Google wasn't in the game. But but and if you looked at the software businesses back then, with with some exceptions, you know, a lot of them were perpetual license companies, right? Then an economic downturn, perpetual license business gets impacted by far the most, right? That's much easier if your cable company came to you once a year in January and said, Hey, do you want to pay for your cable? Or do you want to pay for your Netflix, you might have a different view than what it just auto charge on your credit card. Yeah. And so I think What I would just say is that I think sometimes people underestimate. They look at these three things and they say, oh, like NASDAQ was down by this much or that much, and that's the way they compare. But I think what that misses oftentimes is how much evolution there's been in the underlying business models over that period of time.

Yeah, I mean, it's almost I think it's analogous to crypto. Maybe if you look at.com companies and crypto companies, the.com companies, we're just trying to figure out like, is there a product here? A lot of the crypto companies are just trying to figure out like, how do I even deliver a product, let alone have a business model other than selling

tokens, to reflect back to the challenge just on just on that kind of thing. I mean, the challenge that I think the, you know, the, you know, the crypto market is what they're trying to show is if you go back to 1999, and you say, Okay, a lot of people say the, the analogy for crypto today might be 1999, right, just the 1999 is kind of that market. What I often say is, look, what you had in 1999, and I'll use an example of a company that we were not investors in, like, say, Pets.com. I picked that one because I always see people joke about it. There's probably a company called Chewy, which has kind of gone after the same market in a much more interesting way. But if you were a user of Pets.com, it was a better user experience. Pet food showed up at your home, maybe at a discount. Now, the economic model made no sense. The shipping costs and free shipping and all that didn't make sense. You actually felt like you got a new way to buy things. It was a good experience, an economic experience, but a good experience. Chewy figured out how to make it economic. I think the question, first example, Web3, is how many Web3 companies actually can make the argument that it's a better experience, even if the underlying economic model is not yet proven? I think that's the question that that market's going to have to answer.

Alright, so let's fast forward to today. Interestingly, you gave us that little snapshot of the markets, how the you know, the S&P and, you know, wasn't as impacted as the NASDAQ, you look at today's numbers, S&P, down 22%, mega cap, tech down around 20%. But the growth stocks, you know, those have been down 50 to 80%. Your palate.

We have a client basis. Yeah, we have a concept for just SaaS companies that we use for our valuation. That's down 54%. Right? Where The Dow Jones is down nine, just to take the really large, right? So it's a, it's really, um, and of course we have to, even this market, I feel like there's two segments of it, right? Because there's a COVID and then kind of this kind of post COVID period. Um, so we talked about how there's got two segments of that 99 period different, but even here, right? Like I remember in March when COVID hit getting on the phone with our investors, and basically making a few predictions. One was, we don't think we're going to deploy a lot of capital in the next two years, or at least the next year. In fairness, I think I said the next year because we didn't know how long COVID would last. We expect liquidity to be very constrained. We expect the operating performance of our portfolio to be pretty challenged because the economy was shutting down. it's amazing, I was over three, right? I was about to say, wow, you missed one. Yeah, like you don't hire me as a predictor. And so because COVID had these impacts on spend that I don't think any of us really anticipated, right? Now, the interesting thing is, I was wrong on those predictions. But I think what we ended up what we are also ended up as a market being wrong on sometimes is we, we took some of those behavioral changes, and kind of extrapolated them out into the future. Again, I'm going to use an example of a company we're not investors in, but Peloton. We got to the mindset that, oh, it's great to work out at home. I guess everyone's going to work out at home all the time, or it's great to have Zoom so people are never going to get together again. turns out that actually, people like to interact in person turns out that people actually like going to gyms because it's social. And so I think that a lot of these behavioral e commerce, obviously, people went to e commerce. And we said, Oh, this is structural. Now, it's just a portion of the population is not going to go back to stores. Well, it turns out that people actually like going to stores. So some of these behavioral changes that we were wrong that demand was going to go down really quickly. And of course, you had the backdrop of a massive government stimulus. And we kind of have to talk about that both as it relates to fiscal policy, but also as it relates to monetary policy. Because you started with I think you said speculative asset bubble or something like that. You can't underestimate the impact that the rate environment that we've been living in has had, the magnitude of the fiscal policy that's gone into the system. We hit a lot of topics there, but there are two elements of this current.

period. Yeah, we learned something, I think, from that pandemic, which is, you know, when you're trying to figure out what the impact is going to be, the complete absolute shutdown, created a bunch of pandemic businesses, do those behaviors stick with us? Or are they transient behaviors? You know, you're going to find out seems like remote work, we still going to have a larger number of remote work. folks. So yeah, real estate, commercial real estate is going to be impacted for some extended period of time. But yeah, going to the gym, I think people still like going to the gym and socializing. So Peloton, maybe got a little overheated. And then this wildcard, what happens when you drop just a large amount of money and you airdrop money on every citizen, and they have access to Robin Hood, Coinbase, FTX, whatever it is, to buy stuff. And they're sitting at home with nothing to do. You can get these very weird behaviors. And now we're trying to parse those out. Cast AI audits and optimizes your cloud cost and performance for you, which the cloud companies don't do automatically, right? You have to do it. You have to take control of this and Cast AI is going to help you do that. They eliminate the stuff you're paying for, but that you don't use. And they search for less expensive hosting options within your cloud provider. And then you begin saving immediately. Listen to this on average cast a customer save over 60% on their cloud spend, you know how out of hand the bills can get right. The pricing uncertainty can really hurt your business, you get the surprise bills, but you can solve that right now with cast a high. Imagine what you can do putting that capital back into your business, right? Everybody's in austerity mode, everybody's in optimization mode, and Cast.ai is going to do that. It's priced for a tiny portion of what you save. So before you go and sign any multi-year cloud contracts or make any drastic personnel decisions, check out what Cast.ai can do for you. So here's your call to action. Cast.ai will give you a free cloud cost audit. which you can save. And a personal consultation. Visit cast.ai slash twist to get started. That's cast.ai slash TWIST for a free cloud cost audit today. And we met with the founders last week and they are really excited to help founders and listeners to this week and startups save on their cloud bills. So give them a call. Go visit cast.ai slash twist. you also get this weird behavior of people coming into your business. And you do a lot of like series B series C investing, I think, since you have large funds, you had a bunch of, let's call them venture tourists, you had a bunch of people playing the role of late stage venture capitalists. Tell me about how that impacted your business when we'll mention specific names here. But some people come in and say, Hey, what Devin does is super easy. we're going to just take what Devin does and other late stage folks, and we're just going to copy it. We're going to give 20% more money than they do. We're not going to require a board seat or governance. And we're just going to drop 50 million into, you know, whatever a company or two a week. for a year at the top of the market. Take us into that moment where the venture tour showed up and then started competing with you. And let's face it beating you on terms in many cases. And founders are like, well, if they're going to just airdrop us $50 million $100 million at a crazy valuation, we're taking it. Talk about that moment in time and then what it's left, you know, because it's left kind of a hole.

First of all, I'd say I think we have lots of really good competitors that we respect. You know, some of them are kind of traditional venture capital funds, some are more crossover funds. There's some, you know, public investors have been doing private investing for a long time. But I think what is true is over this relatively short period of time, you had a flurry of new funds that kind of came into this market, did not consistently been in the market. And I think that a few things happened. One, and I think we all felt it, I'm sure Jason, you felt it as an angel investor as well, right? I think the number of times where it was like, hey, we need to do a Zoom on Saturday because somebody's gonna drop a term sheet on Sunday. And if we don't drop a term sheet Sunday morning, We got into that kind of cycle. But I go back to one thing. I want to make a COVID point, which I think is really important, which is that if you look at it in retrospect, I think COVID reduced friction too much. I think there's a point in time where we all appreciated not having to get on planes, not having to go to board meetings in person. all these things that become a drag when you have a big portfolio, whether that be an angel portfolio or a series hit portfolio or growth portfolio. But that reduction in friction made it too easy to do deals as well. That actually partially enabled new entrants to come into the market because now with a pretty small team, you can actually talk to lots of companies and significantly reduce cycle time of an investment. And I think that certainly had some positive impacts, but it also had a lot of negative impacts. And I think the thing that everybody goes to always is diligence. Diligence. I have this... And one of the things, when we're talking to investors, I say is, if you pick five deals that we did over 21 20, 21, and 22, or pick one a quarter, and pick one from each quarter of each year, and then tear off the cover page, and then compare them. And I want you to put them in order of when they happened, because of course, the ones that happened in 21 must have thinner diligence packages, and we didn't do custom. You won't find it. Our process stayed consistent. Now, what it required us to do was significantly increased the size of the firm. So we tripled during COVID as a firm. We added Our operational team now... When I say operational team, I'm talking about the team that helps due diligence on portfolio, but also works with the portfolio companies post-investment, is the largest team at the firm. And if you go back to 2007 or 2008, it was probably one-eighth the size that it is today. So why is that important? One, I think it allowed us to, at a time when there was a lot of deals, still do the work that we're used to doing. But I think a more important thing... And this is where I think the biggest difference is going to be, particularly for firms that didn't really build out their team. Because right now, what companies need is they need help. When I say help, it doesn't always mean that you need 10 people there. But this is when the rubber meets the road. We all talk about value add, and we all talk about customer introductions. But right now, lots of entrepreneurs, a lot of companies are struggling. This is where they need help on rethinking their business model or rethinking their cost structure. I think that the firms like us, but there's others. who have significantly invested in their operating teams to help proportional to their portfolio. If you look at our professionals per portfolio company, the ratio has gone down, even though our portfolio size has gone up dramatically. Because we knew that as our portfolio size went up, we still wanted to make sure that we're able to do the things that we said we would do. I think that's the biggest investment we made. Jason, does that mean that if we pay too much for a company in 2021, that's going to change that? It doesn't. We should come to valuations. But what I feel like the risk in the market right now is you have a lot of firms out there with really large portfolios. where they don't have sufficient headcount to really work with the companies. You go back to 1999, and we talked about getting that 1X back. Well, that took a lot of work. It took a lot of time working with the companies, making changes. I think that we've made the investments to deal with that, but I do think that reduction in friction You have lots of times you show up to a board meeting, you haven't met them, you realize, oh, wow, Jason's a lot taller than I thought, or he's a lot shorter than me. It's that first board meeting feeling sometimes. But I think it reminded you also, wow, I didn't really get to build enough of a relationship with this person when there's problems. you need to be able to draw on that relationship capital. And so this is as much time as we can right now with companies.

This is critically important. You said earlier, hey, when things are going up into the right people are cheerleaders, investors are cheerleaders, everybody's high fiving. Now all of a sudden, somebody flipped the car over three times, it's on the side of the road. You know, people are injured, man, we got to get this car back on the road somehow. I mean, this is and the number of months of runway could be challenged. And some of the venture tourists, they didn't take board seats. And like you're saying, they had a five person team that was doing a deal a week. They didn't have an operations team, they've never run a company. And what I'm hearing from multiple folks, because we invest early series a seed rounds, even before that first money in founders who are like, these people are not returning calls. These people are MIA. these people are no longer at the firms. So you had somebody who put 50 million into your company didn't take a board seat, outbid everybody. Now they own five or 10% of the company, and they're no longer at that firm, they've gone and started a new firm, because all the investments they made were at the top of the market. And they said, You know what, there's no carry to be had here, I might as well start from zero. So this has led to, I guess, the old school firms, folks like us are going to have to roll up our sleeves and clean up the mess for everybody.

And I think that's what we get paid to do. You get paid to do that as an angel and we get paid to do that in the place that we play. But I think, look, we've been around now for 27 years. And I think the way... And I hope as a firm, we're around for another 27 years. I think that you often are going to get really judged by what happens when things are tough. It's easy to get judged when things are good. Look, the flip side is I always say, look, we're probably never as smart as we look when things are good. We're never as dumb as we look when things are bad. But I do think that this is a time... And look, the hard thing... We obviously have a lot of people we've hired. Many of them have not been to the last two cycles. you know, one of the things that I want to try to remind them is how valuable 1999 was for me, right? Yeah, like that, that yet didn't feel good during the period. And I actually think this will probably be shorter than that 1999 period. But what the skills you learn in times like this are so valuable, right? We can all we can all high fives when companies are going public. It's not that hard. No, it's, it's, it's way harder. to be able to have to figure out, oh, wow, we don't really totally have product market fit. Or, hey, our cost structure really makes no sense relative to our business opportunity. And we got to figure that out. And being there in the trenches with the team. And I think, look, we're not perfect. And I'm sure there are places that there are founders who don't feel like we've invested enough time. But I think if you generally were to call our companies, we're there for them. And we're kind of doing what we said we would do.

what's going to happen to the companies that raise that valuations 100 times revenue, 50 times revenue, we saw some SAS companies do that. So they're, they had 20 million in revenue, somebody came along, gave him a $1.5 billion valuation, they raised 150 million, they were spending too much money. Now they're not growing, they're flat, maybe some people, their product didn't have great product market fit had okay product market fit. So some people are canceling or So let's just say they're going to be flat year over year. And now the market's valuing them at 10 times top line or five times top line.

I think there's two categories, right? I think there's companies where, you know, where we can objectively look at it today. Let's say we were paying prevailing prices in 2021, whatever that price was. And that price is too high based on where markets are today. But the company is still growing at 80%. And we have a lot of those. Now, is the price still too high? Yes. But the amazing thing about compounding is 80%, you get big quickly. Yes. Now, when we were doing deals in 2021, we were assuming multiple contraction at exit of 50%. Now, multiples contract at 70%. Now, do I think that they will stay at 70%? I personally don't. That's a personal opinion. But Joe, the market overreacted up, I think it overreacted down. This data is three or four weeks old. So post the activists in Salesforce, it might not be correct. But directionally, a month ago, Honeywell, which is a 33% gross margin was trading a higher revenue multiple in Salesforce, which is an 80% gross margin. Okay, we can do a lot of analysis, but I think we can both probably say that doesn't make sense. Now, you could say maybe Honeywell is overvalued and Salesforce is fairly valued. That's possible. But I think that what you're seeing with these GoPrivates, as an example, is like a recognition that these companies have the potential to be significantly more profitable. And if you believe that the companies can be significantly more profitable, the revenue multiples have kind of overreacted to the downside. Now I'm not of the view, you know, you'll still be with people who will sometimes say, can't wait for things to get back to where they were like, well, that was probably the anomaly. And we're probably closer to normal today. And so, but when you assume, you know, a 50% multiple contraction, the key thing ends up being not the price you paid, but whether your growth underwriting was right. So, Where our growth underwriting was right, what I'll say is, if we pay too high a price, we won't do what we thought, right? Because multiples have come down, but we can do okay, right?

Yeah. We're in the game.

Now, where we were wrong, and we thought it was going to grow at 80, and we paid a price based on 80 and it's growing 10, well, that's a problem. And there, I think probably the more relevant data point is going to be, what's the preference stack?

Oh, boy.

and what's the preference stack? Are you able to deal that maybe gets people their money back or maybe gets people some fraction of their money back? I think the risk when those businesses just play it out, and particularly if they're still burning, is you're just probably having value erode. So I do think that you have to take a realistic view of what what is the long term growth rate?

And this is the triage you're doing internally, you're saying, Hey, let's look at the portfolio. Hey, this group, they're growing slow, massive overhang with the preference stack. The outcome here, it can't catch up to that valuation, therefore, and the preference stack is so high. And we got to we got to think about how this management team is going to have any kind of an exit. Because if the overhang is a quarter million dollar, a quarter billion dollars on some of these companies, and the company's worth 100, you know, how to how to the management teams, maybe you could explain to the audience how the management team, you know, gets motivated, how do you keep them in the game if the common is behind $250 million in preference? That's what's been invested, companies only worth 100. Now you got a management team that owns 50% of the common, and the employees, and the common is essentially worthless, because if it was to get sold, it would sell between 100 and 250 million.

point, look, I think a lot of us live this. You've lived it to in 99 2000, to a lesser extent in 2008 2009. So before I get to the answer that question, I'll make one other point, which is I do believe that there's going to be a very interesting opportunity, which is that you're going to have a lot of these venture funds that are going to need to get liquidity, right? Because they want to raise their next fund. They're not necessarily going to get the valuation they wanted when they sell. But some of these companies, like a 20% growth company with 80% gross margin, it's not a bad company. It's just not worth the multiple that you thought it was worth. But they can actually be pretty interesting businesses if you run them with more of a private equity mindset, right? So I do believe that you're going to see kind of call buyouts, get done with some of these companies where they're kind of interesting, slower growth platforms where you can do roll ups and kind of a in a market, right? We've done some of this, we haven't done it yet with the current class of companies, but I think you're going to see that. So I think you're going to see some types of exits we didn't necessarily see in 2007, 2008, or 99 and 2000, kind of a new class of exits. They're kind of a little bit more private equity driven. But to answer your question, look, I think We've all been to that movie. I think that the thing that we have to do is we certainly... We all have the benefit of having a portfolio. A founder typically doesn't have a portfolio. They might have some personal investments, but by and large, they have a portfolio of one. We have a portfolio of hundreds. I think the only way that you can... You can't expect people to work for free. Because the biggest thing a founder has is their time, right? And at some point, if the preference stack is in a way where they can never make any money, well, their incentive is to go start something else. Yeah, clean cap table. Yeah, clean cap table. So I think that what, what generally ends up happening, and I don't think we're through this yet, Jason, like, I think we're early still in the restructuring of these cap tables. So I think a lot more to come. But I think we're going to create management teams will end up with getting carve outs in some of these companies, where they're gonna have to participate in the exit from dollar one, and not after the press stack.

So the carve out for people who don't know, is when the board says, you know what the management team, we know there's a big preference stack. If this company gets sold, we're going to earmark 20% of the sale price, if it's 100, if it's 300, to go to the management and to go to employees. knowing that maybe the commons not going to participate. So at least you know, in a short sale, we're all steering in the right direction. Correct. That's kind of how this would go.

Correct. And you because you need to people have incentives. Look, there's no indentured servitude, you can't expect people to work for free. And one of the beauties of the American capitalist system is you can fail and start over again. And so expecting a founder to stick around just because they need to or should, is probably not kind of realistic after a period of time. So I think that like it happened in the past, it'll happen again. And there'll be some of these cap tables that will need to get restructured in it. I think rational VCs have been through this before, kind of know how to do that.

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Yeah, yeah. So so one thing I'd say is and look, one of the Look, one of the advantages of being one of we're often the largest cap, you know, balance sheet around the table, you know, on these deals. And one of the things I try to do with the companies I'm involved in early, particularly if you sense that there's going to be there's going to be a capital need is to say, Look, guys, like that, our advice would be that we really need to reduce the cost structure here. create a lot of runway so that if we need to raise, that we minimize the amount of money that we need to raise, because we're basically going to want everyone to participate pro rata. We might have more of the ability to participate pro rata because we're a bigger fund. But we're saying now, let's try to reduce the number so that we can all do that. Because if everybody participates pro rata, then you don't really need to do a cram down because everybody's ownership kind of stays the same. Um, I think so. That's phase one.

Hey, here's a realistic discussion. We're gonna put 10 more million more into this business. You on 10% I own 20% I put into you put in one and we go from there.

I think I start with that because I think it's really important that those conversations start happening now. Right? Where it gets where it's not good is when that conversation happens, like, oh, I'm gonna miss payroll next week. We like we need to have this conversation and it just never works out very well. Because every organization needs to get internal buy in if they're kind of going to continue to support a company, particularly one that might be trouble. So start those conversations early would be my strong advice. And then what generally happens is some set of but what's the issue? The issue is, everyone has problems in their portfolio, right? Anybody who says they doesn't have problems are probably not being totally upfront. Everybody is going to have to triage to some degree. Everyone is going to have to make tough decisions and say, well, these are the ones I feel great about and maybe these are the ones I feel less great about. You kind of want to smoke that out early to figure out who's going to play. Then you get to that point where the company actually needs the money and that's where the rubber meets the road. Let's use basic math, but let's just say that there's companies raised $25 million and the investors own, I'm just going for simple math, half the company, and it's three or four different investors. Now, let's just say that one investor ends up basically taking the entire round. Well, there's a few things they're probably going to do. One is they're going to say, well, I want to convert all the old preferred to common. because I want to have a clean preference stack. One of the reasons to have a clean preference stack, to be clear, because I know founders listen to this as well, is actually good for founders. Yes, the second part of what I'm about to say affects founders as well, but clean balance sheets are generally good. It's not great to have really complicated multiple preference stacks when markets are challenged. I would just say to management when you the founders, when you hear this, like, oh, we want to convert all preference, like that's not bad for you. Like that's, that's good.

That's not think I'd fight clean cap table makes the next person coming into invest, look at and go Oh, clean cap table. I can engage this I've heard back channel from a lot of investors. I was I love the company. I love the founder. It's such a mess. I don't want to be involved in uncomfortable discussions around the preference stack. I don't want to make people feel bad. And it's sort of like somebody who's selling their home. And they want to get $10 million for it, because that's what they heard it's worth two years ago. And now the market isn't there for it. And they just they won't take they won't accept it.

So I think that getting to that clean preference stack, getting to a clean cap table, I think, is good. Then the conversation is, okay, well, nobody else is going to participate but me, me being not necessarily Insight, whoever that person is, whoever that leader is. Well, then they're probably going to say, look, guys, the pre-money is whatever I want it to be. And I'm going to kind of take the majority of the company. And look, if somebody wants to be really aggressive, they can say the pre-money is zero and I own the whole company. They can say it's half or a third of what it was. It doesn't really matter. They're going to own a lot more than they were going to own before. Now, a smart person who does that is then going to go to the management team and say, I'm going to re-incentive you and we're going to create a new pool. So yes, you got diluted massively by my investing in the company, but we've cleaned up the cap table. I'm going to give you a new incentive. Yep. And now let's go try to create as much value as we can. And it's look, the beauty and danger of private investing is people can have very different views. Jason can think this thing, Devin is the next whatever, and I might think, oh, I hate the business model, and one of us will end up being right. Either I was right to not write the check, or you were right to write the check, but that's okay. We have different views, and we took our actions based on that. I think that one of the things I would caution against with founders and directing this more don't get emotional about this. This is kind of, I know it's emotional, but at the end of the day, once you get through it, I think it's cleaner for you as a founder or CEO if you're gonna stay in that business. And then the last piece of advice I'd give is, and I can't tell you that we've never done this, but generally when we've done it, it's because nobody else and the founders wanted us to do something with structure, but you're better off just doing a price round. If the company was worth X, Now it's worth 0.5x, it's just better to say it's worth 0.5x. We're in this market right now where companies have got so much capital on their balance sheet that they raised in 21, they don't have any incentives to change price. If they don't need the money, that's totally fine. But if you need the money, trying to do a flat round with multiple liquidation preferences, I was just heard about a deal yesterday, like, you know, 3x liquidation preference. It's not, that's not a flat round. And anybody who looks at the deal next time is going to look at that and say, you know what, that's not a flat round. I want a 3x liquidation preference too. And you're going to end up with more and more complexity in that cap cap table. So sorry for long answer, Jason, but that it's it's a very important answer.

And there's a lot of mechanics here. And founders are going to have to sadly, you know, sharpen their pencils and understand this. The good news is that the founders and the management team will always be taken care of by investors, new investors and previous investors, anybody in between whatever combination it winds up being. Because you need great management, and they need to be incented properly. So that's a, that's one thing that will never change.

And look, and the only thing I say to founders is, look, I know it sometimes feels like in these conversations, there's like the VCs, like, kind of paper shuffling their way to like, more ownership and all that. But Look, this isn't great for investors either. We're all having to reset our valuations. We're probably going to make a less return on that investment by doing that. But we all, I think all the high quality investors do feel a responsibility to their companies to try to do the right thing. I'm not saying everybody, but the vast majority of people that I deal with, investors that we're in, they all want to try to do the right thing. But emotion does get in the way.

Yeah, you know, the thing I'm seeing is even in had one or two instances where people were being a bit predatory, you know, unrealistic terms, I just said, these feel predatory. And these are bad for your reputation. Can we come up with something that's clean? And it was just really encouraging to hear you sort of reinforce that for people who are listening, for people who might be in those deals that I'm now is keep it clean, keep it simple.

So we can grow the company. I'll be the first to admit that we have some deals where there is, there is structure. But generally, the reason that there's structure is because there's a desire to kind of keep valuation kind of where it is, right. And, you know, generally, probably your investors already marked it down. So there's an artificiality to it all that I just think you have to be mindful of.

All right, let's look at a couple of portfolio companies. As we wrap here, you did the series a in one of my favorite companies, calm calm, maybe talk a little bit about finding that company. And just how extraordinary it was to find a company that had raised so little money, and had gotten to, you know, such incredible revenue.

You know, one of the one of the kind of amazing things about insight, and, you know, our kind of calling efforts and program is that we just We see a lot of these companies that have bootstrapped themselves. It's harder to find those these days. Yeah. But Calm was a great example of a company. What I liked about it was that it always happens that there's always some personal interest that engages somebody. Yeah. I had started to try meditating. Full disclosure, I was trying it on Headspace at the time. Yeah. One of the members of the team who sourced the deal came to me and said, hey, what do you think? He was at the time, probably a little bit of trepidation to raise a meditation company. I was like, sure. No, that seems really interesting. Let's get on the phone with them. Of course, you're an investor, so you know the company and you know the numbers. They had tremendous momentum and they did it with a really small team. And they were really good marketers, and they really built this brand initially on very small dollars. Subsequent to that, obviously, we invested. And since then, a number of other people have come into that investment. And we've actually done, as I think you also know, like an acquisition or two to really kind of broaden what we're doing. Because the challenge that they had, that Headspace and others had, is kind of what we talked about earlier. Meditation definitely had a COVID tailwind. Yeah, a lot more time. So okay, I'll meditate and a lot of anxiety. We all had a lot of stress and anxiety. So like, okay, I'll meditate. Look, we probably all have stress anxiety today, too, for a different reason. Yeah. All the reasons we're talking about today. But, um, you know, we have less time, like every we're trying to get back to the office, people are traveling more. And so they had to keep thinking about how do I how do they reinvent and as you know, they, you know, They probably do more of their usage around sleep today than it is about meditation and expanding into mental health and these other areas. It's been a super fascinating journey.

Yeah, great, great company. And just amazing how capital efficient they are. You know, we, we put $378,000 in when it was a four or $5 million company. And then the next thing we know, series a when you did it at 250. Yeah, it was like, you know, many years in between that I was like, Well, how did you do all this? It was like, well, we had revenue. Oh, really? You built up a revenue unique differentiated thing. It pretty miraculous when you see that because it does inspire you distro kid, my good friend Phil Kaplan. He has he's another bootstrapper. This is an incredible entrepreneur.

Bootstrap with like really high margins, right?

really distro kid how you found that and just the nature of the business.

One of our associates Bradford, who is also really into music, you know, came to me and he, he said, Hey, I think this company is really interesting. You kind of walked me through and by the way, when he first came to me, I was like, district in Bradford, it sounds like a company that's like $500,000 in revenue. This can't be like a big company. He's like, No, no, we didn't have the numbers this time. He's like, no, I'm pretty sure it's bigger than that. Then I call my son who's in college, but he's really into music, and he DJs and makes music. I'm like, what do you think this company DistroKid? He's like, oh, he starts talking to me about the different products in the space. I'm like, okay, so it seems like there's really a product here. At the time, they had bootstrapped prior to us, had raised some private equity capital. They had brought in an investor. They didn't need the money. The company was making a lot of money. But they had started getting a bunch of inbound interest from strategics and other parties. And so they said, Hey, we'd like to look at it. And so the timing ended up being great, because they were thinking about doing something, we started kind of cold calling them. And, you know, Philip, so like, yeah, he's a, he's like a product machine. I mean, yeah, you're doing a zoom call with him. And he's like coding while he's talking to you.

I mean, it reminds me of common that way about Alex and Michael, who are just such product driven founders. Focus.

Yeah. And the interesting thing about that is that, and that's well, so it's good. The good news in that is he spent so much time on product that we just think there's lots of other things that we can do with the company, right? Like, and there's so much more functionality to add. The price has always been the same, but you know, if we add more functionality, there's some competitors out there that charge a lot more for less. So I think we're just in, even though the company's a pretty big profitable company, I think we're still in like, very early innings of the district opportunity.

You, I don't know if you're still on the board of WeWork. But we were on the board of WeWork.