E146: Did the Fed break the VC model? Plus IPOs, M&A, revaluing unicorns & more
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Did you just finish a good cry because you have this witness rate here on your eye?

Oh, sorry, you get out of my cold pledge in my sona because, you know, I hit a new record low weight once sixty nine this week.

What's your temperature on?

I is a is and what i've been doing like fifty six, fifty eight. But great. It's okay. I mean, I always want IT takes like an another forty five degrees, forty eight degrees. I think .

it's unnecessary in the value in .

I consider an eighty degree pull to .

be a cold plunge .

I don't get in. This is like eighty five.

That's actually our beautiful parties at x is house. There is no difference .

between the house of.

We open sources to the fans .

and got this. Yes, it's fits. It's crazy.

And that I want, in my inference, zona.

I go in. You do the cold than the warm. I think you're supposed to warm and cold. No.

they say, end on a cold and say, and ending on, yeah, but I just do like a side.

cold, warm, cold.

cold, warm, cold.

Yes, what do you do? Like two minutes, ten minutes, two minutes.

or what you do? Yeah, exactly like one or two minutes called pledge, four minutes. You warm up, you get back to IT and then you jump back and you know IT works pretty good, you know have to send an energy level goes way up.

Have you ve been tracking your blood pressure?

I have not um but I have this uh executive health coach that are using and so that's where I got those ridiculous glasses, the blue lights on my sleeped Better I got some have taken some supplements are a meeting the giant.

Are you taking the.

and no such apples had in all time, time for mag. You guys IT just lose desire to me. No IT turns out. You know, even if fifty two, my testosterone is very high.

So that's what is your free test, test.

I don't have the number here, but they said it's the the high end of Normal. So as actually I be shooting up test, ask room the like now you're good, you're good. Just will send IT over the freedom as a great freeze. G OK.

a lot of people take testosterone in their fifties and six season. I had a couple of my friends in their early sixty start. H is at H, G, H, human grow. Yeah, he says, all right, not a good idea.

Seems like a really bad idea that off men, you stuff, I don't think is a good idea. I think you have to be careful with the off menu items.

I think you can get a prescription for IT.

Is that right? Yeah, I know this off menu items available to fluent people with the right doctors.

And I don't think a second audio mean you guys see basso. He's jack.

I haven't bring up anybody specifically, but he looks great. I think that's just all weight.

Is he onna be president?

I mean, if you had your choice right .

now between baths.

can take me know who you'd big.

I mean, listen, I was talking .

to some american people and the everybody's going in .

the best is of afford people.

I don't want to say who but the vake is. Now people are starting to talk the .

way I think he's hit the record, man. The VC is about to pass the santa he will be. I think if you look at the polling right now, new hampton r, he'll be the clear number two in about four between four and eight weeks from now. That's crazy. That's crazy.

And so I think if he becomes a clear number two, the the think of this, it's like then all of a sudden all these maga supporters are given trump and then trump with some small feature improvements that actually pretty meaningful, right? And then they're like, what do I want the eighty old trap? Or do I want the thirty eight like the super features? You know.

I can forgive all of his other issues when he tells me that he deal.

Five, five, five. Gosh, team .

beda, rush, declare.

And and the reason is I would love for IT to be R, F, K. And bite in a debate. And then trump and vivek in a debate so that I could really figure out between R, F, K and v VC who I would like to vote for.

But I think it's been pretty clear that the democrats have chosen to railroad or f case candidacy. It's unfortunate because I don't think we're given a real fair shake and really being able to evaluate him, even the the tractors like free. Bg g, you have some pretty significant things that you dislike about rk, which I think are fair.

They're never gonna get a chance to get air out because you're never gonna a get a chance to be put on a national platform where there will be really enough debate. And I think that's where amErica loses. So yeah, in that context, I would say that vivia has done more in the last month to convince me that he is fiscally responsible and that he has some intuition ons that I think R, F, K.

And trump and a lot of people in amErica share, which is just about the usefulness of the blob. And you know that there maybe needs to be a grand experiment where we deconstruct the blob. And i'm for that experiment, to be totally honest with you, to see what happens.

thanks. Where you have.

He's unhappy.

What I would say, I think it's too really in the process to say definitely. Ly, okay, this person has to be the person for me. I'm viewing candidates is either be acceptable or unacceptable, and the vague is acceptable to me.

I think the same is to the ones who are unacceptable to me or the ones who are esprit the ukraine war, because I think that avoiding the war three is to me the central issue of the campaign. So for me, this is a limit test issue. I can only support a candidate who would work to end this war, not one who had escalates.

Where does our fiscal emergency set for you in terms of priorities? So no world word. Three priorities. One is the fiscal emergency that we're facing priority two or is IT overstated by media banker others?

No, I I think it's important. But the problem is this is that in order to do something about that problem, you really need bipartisan support because they would be suicide for one party to try and do all the heavy lifting without the support of the other. And I just don't see in the near the mid term that you're going to get that kind of bypass in sport. No matter who is president, whether it's a democrat or republican, the only issue that for sure, the american president has unilateral direction over is our foreign policy. And so for me, making sure that the next president pursues a foreign policy that doesn't result in the destruction the other states, that to me is the overwhelming issue IT doesn't mean these other issues are not important.

Look at other customers. Let me share this poll for second. Just so we levels up with the audience poll ending september eighteen and twenty and twenty three.

For those you've not watching on youtube, trump, thirty nine percent and eight or thirty eight. Then the vake, thirteen percent, Haley, twelve percent, Christian, eleven percent, decentish, ten percent. That is a stunning .

Turner product. O U.

T, you know, no, I know it's just, but that's a very critical state, right?

And sex, what do you think about what dolius said on stage about the need to have a manhattan project style effort here that is bipartisan, comes to the center and tries to resolve this as the scale of an emergency? Is that realistic to kind of frame this as we are in a fiscal emergency, we have to get a manhattan project style fit under way to try engineering solution.

Well, back up first, why? I think you asked the right question to him, which is, is our declined a matter of physics, you know, due to forces we can control or is something we still have control over? And I think that that's a really good framing.

I think if you're in the bucket that we can do something about that, I mean, I believe that we can. The question is how and I think his view was that somehow you get all these eats together and you get them on the same page. I don't think that's how our system works.

I think what happens is you have elections, people compete against each other and then voters, society, who is right? And so one side has to defeat the other. And I think until we get some clarity from voters on the direction they want to go, I don't think there's going to be a resolution.

But to your point, there is no solution without bipartisan bipartisanship here. So what is the path to buy partisanship when IT comes to the fiscal crisis?

sure. When is the obvious thing be if one party wins with that as part of their platform, that IT becomes part of the winning platform and the winning formula? We just saying that's not even possible because it's too unpopular .

to tell people that they don't get free. I think it's political suicide for one party to engage and deep cuts, deep government, deep cuts of programs, especially popular programs he probed, cut the unpopular ones of the margins. But it's political suicide to cut anything important without having the other party on board.

There's been a couple of times we've been able to have this type of consensus. The one that always gets mentioned is when reagan and tip onion cut a deal and they're able to reform entitlements to make some changes, those programs and they kind of did IT, ARM and ARM, and that worked. And then the other time where I kind of happened, not through agreement up, but almost through lack of agreement, was when we had the cluster member when obama was president.

And what happened is the democrats and the republicans worked out a deal where if they couldn't agree, you would get equal t cuts in both military spending and social spending. The idea being that republicans, one of the military spending that are crates of the social spending, and that's ultimately what happened, is that they couldn't go and see you got this sequester, and we had suspending restraint for a short period of time. The problem now is that both republicans and democrats want more military spending.

I don't hear anybody really arguing for cutting military spending, except for maybe rocha at our event, but the democrat are completely on board with war now and then on the social spending, I don't think either party really wants to get social spending either or do entire reform. So there is no constituency out there for raining in the biggest sectors of government spending. So I don't see how it's gonna en, no matter who the president is. Well.

the forcing function will be the death service costs, which is just cross the trillion dollars a year just to pay the interest. And it's mounting, right? Thirty percent of our dead, I think, is coming up for refinancing in the next twelve months, and it's going to refinance a five percent rate that to the .

market to act just like consumers can ignore, afraid burking put their fingers in their ears and and I don't have to worry about my payments, then the payment show up and you've got ta worry about same things gna happen here in the U.

S. right? The federal budget will get naturally constraints at .

some point here yeah as the economy of someone said is something can go on forever IT won't so I think I think you're right freeburg that this will not it's not your barras is serb side I think yeah somebody can go on forever IT won't I think that that's where we're headed is we're going to have restraint imposed on us from the outside.

It's not going to come from washington to stop buying treasures.

Interest rest have .

to go up up in japan. I mean, their bond options have been very look warm and supposedly a lot of the money in japan is coming west looking for opportunities to get office. And we have an example that we can look to.

All right, let's get, we can get started here. OK so much to talk about, I think we got to give some flowers here last year, the sulton of sign ince, the principal ic. attacks.

The queen of kin wai was an absolute terror when I did the all, in sum, twenty two. And then this year, he was an absolute all. Start to light.

What an amazing job you did on the content. People are saying the content at all in some of twenty, twenty, twenty three is the best conference ever had. Bill girly are four minute of asia and that talk is on youtube.

You on us star linked in from forty thousand feet. He crushed IT. Toby was fantastic. Ray downing, Larry summers, s mister beef beast.

One of patrol, the boat test sisters, which we did a pretty good show, and you have to say a great job to sax and freeburg, who who held the line with the boat sisters in our group, chess. Brian armstrong, who am I missing here? I mean, what an incredible line up to now.

Look at polk. Rob Anderson, Jenny, just rot. Anderson.

extraordinary me. Just go around the home to make your what discussion or moment pick choice there for you was the most intellectually engaging and important at the summer. You get mentioned .

to a three view like I thought. Number one, were my outfits .

pretty great? I mean, you did. Do you have to change twice a day? So congrats on.

I like this. I A really good job.

but that I do agree. My great.

Did you can get the special shoes from Laura piano?

Oh my god, the king's catre loafers are, those are ridiculous .

on very. And I, yeah, yeah. Most .

incredible .

clouds.

There are most for something. And yeah. And then I get back .

to the beverly, his hotel, the sweet that freeboard book me a beautiful sweet. Thank you, freeburg. And there is a law .

freeboard shaped me on my room. Yeah.

I put the garage.

No, I got a room that was, well, it's very appropriate that these rooms exist, but it's handicap accessible, which totally find, except the problem is the the closet and everything is set for wheeler. Hy, why did you change your room? do.

And so, oh my. And then I thought all he just fucked me on purpose. He just tried the little pass of aggressive name check. So got to do .

in the group because I .

would never .

do that to you guys. Story I when I organized as some, but i'll make sure these details are perfect.

I fly on to max plain. He has gluten free and telegraph and made in the morning. And I stick him in a handicaps sable room, where you can even put back.

and I can put my clothes, except without a touching the grounds. So then I had to play them on the bed, and then I had to lay them .

on the same problems here. The audience right now is just triggered by the suffering that you went through at the beverly hill hotel.

My honest reaction was I thought the content was really inspiring. I guess it's kind of like I knew what I was going to get up front with so many of the folks because I knew them. But then where I still came away, where they exceeded my expectations, number one probably was grain.

Allison H. I could literally talk to him for eight hours a day, I feel like, and I don't know him well. So I felt I was stretching the surface of the things that he knew I could do an entire dinner, I think, where he could just walk through the cuban missile crisis, and I could just have their listening.

So and I thought he was unbelievably intellectually stimulating for me. Every time I sit down with toby, i'm just like in all of how smart and different tobi okie. And so I always kind of like walk away thinking, this is really one of the very special entrepreneurs of our generation, just in terms of his mindset.

Underwater, I thought Larry had the line of the summit. Larry summers, bury said. Self steem should come from achievement and not the opposite, which is that achievement should come from self a steam.

And he was talking about voguish, and sort of like the entire philosophy around that stuff right now. And I thought that that was really insightful. Those are probably the three moments I thought girl is obviously was super. But again, it's kind of like saying the obvious because I was just so master class, but the the from what I expected to what I got those rid of three that I thought we're the most inspiring, a net new positive for me.

Fantastic sex. Did you have any moments a aside from winneth patrol saying SHE was your favorite best other than that being the clear number one for you and crushing so in for us? Well I really .

hurt that because the um zum sound issues, we are technical issues during her interview and I got IT really hard to hear her a various points and I don't think you guys heard that either, right?

I heard I tried to ignore IT, I tried to block .

I I couldn't hear that. So I didn't know .

that yeah .

but we're actually .

on the road we talked about on the chat know what I mean that all of .

go go for a long here.

you know my husson, but with a little bonus intention is key, thinks I do know how the bay itself, but you letting do if so.

oh my god. SHE said no that .

his her husband thinks that SHE the .

David.

That's not a good situation because after that, what did you like sex beyond st you?

I won't also give credit to David tax who um showed up for every talk and freebies, said jack out an issue I said anything I can help he said, uh, well actually uh, the issue is I ask David tax to show up eight forty five for the run through in the he won't respond to me can you can you get touch with them? I said, let me tell you it's going to happen with David x programmes. Just start at nine.

He'll be here at eight fifty six. And if you get on stage for two added, three talks, you did Better than I did. And three birds team, which, god bless the production work team, they did an amazing job.

These wolverines are incredible. Shout out to Laura, Rachel and everybody on the team that they did a fantastic job. And sure enough, sx shows up in eight, fifty six goes on stage.

Any crushes IT. So great, uh, getting him on stage. But congrats showing .

up for they want me. I mean, I ask once the first speaker going on stage, yeah actually was ten am right?

Ten, ten.

So like, okay, my head, i'm thinking OK, i'll be there nine, fifty nine and I about what time do you?

And then there thirty five and they .

fired eight thirty for a soundcheck. And i'm like me.

jg, time for the center. I'm sorry. Is Jimmy today .

talking about .

the start show? Can we .

done luck? I thought the conference was amazing .

and exceed my expectations. Your conference succeed my expectations to jack out, but I think feeder took to another level and succeeded my my already high expectations. Yeah you know, highlights.

I mean, I think starting with ray di was the first speaker was really interesting. I think we got to go for what? Thirty, forty minutes with time. I felt like we could have gone for two hours to bring you back on the pot and you drill into that topic more two hours .

or dolla would be amazing because I think was really .

interesting is the way that he's looking at the grand sweep of history, right? He's thinking about not just a ten your business cycle or twenty five year debt cycle. He's looking at a two and fifty year empire cycle, I think is really interesting in that he thinks in that really big way.

I agree. Gram elson, really interesting. We could have spent two hours with him. Larry summers, these are all people I think should bring back on the pod for a long form conversation. I agree that bill gurley talk was one of those great ted style talks that I think you go viral. I think you think any .

people .

should watch that.

I mean, the people treating IT are incredible. And I was at a dinner party last night and everybody was talking about it's spread into our industry and it's starting to tip over into other industry is already .

the chest is really fun. I am a game day player that way, you know, I brought IT and manish win the game. No, what else? I know there are a lot of great moment. I'm sure forgetting .

about things I love, I love forever. The the parties were absolutely incredible.

We missed both of you guys that the crimes, D, J.

said that was amazing, by the way. I think no.

I I left right attend to fly back to the bear night .

that yeah shit crimes. Thank you to dry crime for doing that for me personal favor. The audience lost their minds set of incredible such a performance.

incredible. Yeah, people are losing their minds. Uh uh, for you free berg, best moments. Uh, on state IT was .

just great to be with everyone and go through. I mean, uh, honestly, I didn't source all these speakers. You guys did.

So I don't want to take credit for that. I think that was what I had hoped. You know, I went to ted for twelve years.

I started going to ted, I think, two thousand and seven, and I felt pretty disappointed over the the last couple of years. And I actually like spoke to the C. E.

O of ted instead. I'm marking to anymore because so much of this, the talks became kind of social justice type talk. Now that I won't I don't want to use that term because I do think it's all very well intention. And I think IT just became overwhelming that you would go to ted and you would basically feel bad about yourself and that IT kind of miss the element of the world is an amazing place. We should have a great degree of optimism with technology and worth taking us.

We should observe the greater cycle in the bigger perspective of things that are happening in the world, not kind of go into and who's done IT and who's to blame and ask for them kind of mentality, which I think so much. The stuff turned into at ted, and I was really hoping we could capture some of that. And so i'm really glad we got a lot of the speakers we did, and I had a couple hours to be able to to share you know those certain perspective. So IT was fun. I really enjoyed you did with the .

conference in terms of editorial direction is great. You level IT up certainly from last year, point ted out correctly and IT had a great amount of optimism, realism, and we didn't talk about superfluous virtual signal, social justice woke nonsense that really is should not be at the top of the agenda in my mind. I'm not saying that these issues are not important to some people, but I think prioritizing what's important in the world is what I got out of the conference. When you have people on this level speaking for for, you know, very long periods and not long enough, but you know that summer, you know.

ryan and .

many dogs, they really gave you a sense of this is what's important in the world right now this is the priority and and I came away from its so stimulated maybe just say, hey, you know, I want to travel more, I want to read more, I want to have more conversations and I have been basking in that like afterglow be so I just want to say, you know, once again, one extraordinary, uh, amount of teamwork, just as the moderator of our cortex felt.

Everybody did a great job move in the ball around. I think everybody was on their game. Everybody about the three of us very focused on just knowing exactly when to insert a great question.

So I felt like we were playing baseball like the warriors when they play prime baseball ball moved really well. Great questions. People picking up on themes, threats, theme from one talk to the other. And IT just may be a really excited for next year. So I just want to say a great job to each of you.

Thank you. Pack cacha backpack.

cher, listen, we can talk about ourselves all day, but people hate that. Let's talk about what's going on the markets.

We only get IT for forty minutes.

okay? Yeah, exactly. I, P, S, and I emini on fire. We ve had a ridiculous week. Six quarters of downmarket has suddenly turned into a bunch of Green shoots on the m.

In a front, cisco announced that requires its bunk for twenty billion dollars in in all cash deal. If the notes are correct here, it's about ten percent of this goes market value. Somebody did a trade where they they bought a bunch of options. And h, so that looked a little for gi. Congratulations to natixis on that trade, possibly .

largely don't forget your favor. Word allegedly.

allegedly, allegedly, perhaps I don't know. She's good at trades. So if somebody he's going to make money on that trade or somebody he's go to jail so congrats to rally instincts livio and r all I paled in the past week and year.

They found back to earth just crazy that twenty one months since the last significant venture back company went public, i'll leave out like the middle east n food company was a cover that went public and then the vacuum company that when public. But that's just in the past seven years. So we talked about this on the program we discussed, hey, we will know when the markets are back, if some of these companies are forced to walk the lying slash, get public, you know, and and fix our captors.

Les, and sure enough, instagram really kind of represents that most, most of the late stage investors in its start are underwater. The early stage folks absolutely crushed IT chaos. Listen, europe, uh, market expert here, you taking a lot of companies public, what do you think the last week means for the greater technology industry?

I don't think that this was the great reopening that we all were hoping for. I think it's important to understand the dynamics of bank LED traditional IP s in america, and the best way to understand them is the contrast to compare to how that same company would go public in europe or asia because it'll explain what what happened. And I think unfortunately, what has happened is not good for the market.

So typically what happens is when you construct the IPO, you're selling fifteen to twenty percent of the company. And when you do that, you go and you call hedge funds and you call these mutual funds. But what are called long on this, right? Meaning they don't short.

They just go on these big mutual fund companies. And you try to find a handful of people to anchor the IPO. So they take a huge piece of that, fifteen to twenty percent. And in european asia, the security of law says that when you get such a big allocation, you have to hold IT for six months, which means you're treated exactly the same as the employees who are typically locked up in a IPO for at least six months.

And so what happens is these firms do all kinds of diligence and when they buy something, it's because they really believe in IT and then they go long IT for, you know what is at least half a year. So it's it's a non trivial amount of time. So that's what happens in european asia, fifteen to twenty percent of the company is sold.

A handful of people anchor and your locked top s for six months. Now you need to look at how american appeals are done, which is why people have experimented with direct listings. We've experimented with backs.

It's because the fundamental architecture of IP s are broken. They're set up in a dynamic where is a head I win tells you lose situation for the bankers that run the IPO. Now, what happened in these three IOS?

Number one, IT was less than ten percent of the float. So highly, highly, highly concentrated, small amount of the of the was made available for sale. Number two, there really weren't anchors.

What happened was the allocation of that. Less than ten percent was smear across fifty or sixty different organizations. And the number three, there was no lockup, which meant that people could sell right away. And so what you saw with all of these companies was the exact same dynamic which was IT opened because they were such a small amount of supply IT traded up. And the minute that retail, which typically tends to be late to the game because they don't have access to these things, right when they started buying.

What was unique this time around is all of the neutral funds just dumped everything 嗯， and the hetch funds were like while we don't have a real allocation, our friends said in the group chat, he got a five or ten million dollar allocation in these appeals. These are twenty and thirty billion dollar hedge funds. Five and ten million dollar allocations don't move the middle.

So the hedged fund sold right away and got on the sidewalk and said, I don't care about this. The long old needs thought just enough to make the stock go up because of such a small supply. And when retail that then they just dumped at all.

And so unfortunately, what's happened is all three IP s within a few days have reached their issue Price. Now there at the same issue, Price may be slightly higher, but that is an unsuccessful dynamic. What could have been different? The banks could have forced these companies to sell up to twenty percent.

The banks could have found a few anchor buyers. The banks could have created a lock up structure for these anchor buyers. They did none of IT.

And so the result is a lot of downward pressure in a moment where the overhang of rates has have come back. And are forcing all of us to realize. And we'll talk about in the second that these rates are going to be higher for longer, which completely changes how you value this tech company. So net, net very poor IPO construction by the banks and the the grand reopening was a grand closing.

I think. okay. So just to put some numbers on that. Inter cards for was six point seven percent in cavities for seven point six. Arms almost hit the ten percent nine point four, but certainly less than the twenty percent that you would expect.

So then I guess to follow up question here, sax is why did these companies go out? And will we see the the other big ones go out, the stripes, uh, and some of the other backed up inventory? What's what's the back channel in our industry about the viability of other IPO? Is is gonna push a lot more people out to get liquidity even at discounted Prices even with the the heads winds that map points out? Or is just gonna a chilling effect and people going to say, you know.

let me wait till twenty, twenty five. So I think they went out because investors and others need liquidity and there's no point holding on and waiting for evaluation as something to come back. I mean, so you take inst the car for example.

Their last private round was at thirty nine billion. What's the market cap now? Around ten, nine. So it's great that they got out.

I think that at eight.

I mean, that look, it's sort of a Green shoot that they got out, but we're never going back to the valuation levels. So we had a couple of years ago during a giant serb created asset bubble. So I just think there's no reason to way and you look at softbank, they needed the liquidity from the r IPO.

yeah. So I think that's why these companies are going out is a kind of getting back to business as usual, just a brought out the question a little bit. What I think is interesting is that for the past year or so, we've been in a software recession.

IT really started in the first half of twenty twenty two. The markets creator, especially for growth stocks, there's a huge correction evaluation happening, especially the first twenty, twenty two. But then about a year ago is so starting amid twenty two and continuing through q two of this year, you saw a reduction in growth forecasts.

Everybody started forecasting down. There wasn't a single for me that I was in, in private companies that wasn't missing their numbers in reforest casting down. And you saw in the public companies as well.

I think german ball sub stack showed that the average growth forecast process companies for next twelve months have been cut roughly in half. So for the last year, year and a half, we've been in a software recession. And you could brought, say, A B to b recession.

We saw companies like matter, google all and so on, cut thousands of jobs, get tens of thousands of jobs, get much more efficient each. That meant they were buying a lot less software on a proceed basis. So I think we've been through call IT A B to b or enterprise recession.

But the thing that held up stronger than I think people might have expected over the past years been the consumer, consumer spending has kept the economy of flow. So the beat c part of the economy has been strong. Whether beat b is very weak. What I wonder about next is whether that's gonna flip. I wonder if the consumer is on their last legs.

Here you see artic card debt is at an all time high interest payments on credit card debt all time high mortgage is the rate now is approaching eight percent, so no one can afford to sell their house, which is a three percent mortgage, and then buy a new one at eight percent. So real estate transactions of graded, the commercial real estate industry is honest. Last legs, I think they're starting to throw the key's back to the bank is are forefoot buildings because they can't refine the attractive rate. So I just wonder if the consumer now is about to go through the type of pain and restructuring of their personal baLance sheet, the way that the enterprise segment of the economy .

over the past year feedback, your thoughts on what we're seeing here in terms of the IPO window companies getting out and the impact that will have maybe on how limited partners look at venture funds that's been frozen for eighteen months, limited partners. And i'm raising a fun right now publicly under five of success. So I can talk about IT and it's going great.

But man, it's a lot of meetings. And i'd say two thirds of the meetings having people are saying we're not ending managers. We're cutting managers and we're cutting commitments to managers. But we love to meet you know, just to start the relationship know so what what do you think this means overall for the limited partner G, P, S in the start up market start a turnaround or maybe just sideways for more?

I guess we should just put the volume in context. If you look at the slide, this is from earth and Young showing be A I P O activity by year, and this was through june thirty, earth. So if you assume kind of a steady state, you probably are onna commit at a volume that's less than twenty two and and perhaps even less than going back all the way to twenty nine with less than twelve hundred I P S.

During the year compared to the peak of twenty four hundred, which happened in twenty twenty one. If you go the next live and just look at the total dollar volume ways to the I P R proceeds thus far through june thirty of of this years, just around sixty billion, a compare that to a total of about uh hundred and eighty billion all of last year, four hundred and fifty billion and twenty twenty one and the IP s were talking about today. Instead, card clo are in total raised about five and a half billion dollars.

So you know, that kind of doesn't have a huge consequence on the dollar volume for the year. And then if you look at what's in the pipeline right now in terms of what's publicly filed as as ones there is basically nothing right now. So I think everyone's kind of sit around waiting to see how these transactions go before they decided put other stuff.

I think the big mistake is that we continue to treat IPO as this big yard stick. The real yardstick for a business is the performance of the business. And the valuation you get when you raise capital at some point in time is largely driven by market conditions, not necessarily by the performance of the business and the value business over time, the market will do its job and rightly value that company.

We've talked at length about how much value has accrued as a public company for apple, for microsoft, for google, ninety nine point nine percent of their total market value with realized post IPO so that the IPO transaction, I think it's a little too much weight and gets a little too much attention in terms of determining successor failure of a business and successor failure of the investors in that business. So I really hate this whole thing about does the IPO Price go up on a day? Is this really weirdly engineered thing that they try to do to drive psychology and marketing by banks, to go up the the banks, to try and get people to give them more capital or to give give more deals in the future?

Do you think that the I. P. M. Market Better served if banks were forced to be lot, or the the allocations were forced to be six months.

looked like the employee course, maybe longer. What if they, if they were locked for seventy or what do you think?

Well, where the float come from on day one. But why do you need a float? Yeah I mean, that's that's a good point. I I believe the dragged listing should be the way that you do this and then you do a um a follow on offering once you .

share the problem with the drug listing, as I found as a seller because I went through a handful of direct listings, I went through slack and I went through coin base, right? And in the slack direct listing, I only sold a small portion on day one, and IT turned out to be A A mistake. And the reason was because the pricing of a direct listing forces you to find the absolute highest Price at the open.

Now I we learned that. So then going into the coin base IPO, what all the venture investors did was distributed literally the day before and the day of the drug listing, right, so that you would get delivered your stock at the highest Prices that you could sell. I'm not sure that, that serves anybody any Better.

You know what I mean because then you get a lot of Price volatility and the Price just goes straights down. So I don't exactly know what the answers. I suspect though that getting companies to flow at least fifteen to twenty percent and doing a Better job of allocation so that you're right, David, removing the psychology of like IT has to go up a hundred percent on day one is success is the thing that actually catches these companies off guard.

Now we have even talk for a minute about whether any of us thinks the quality of installed in clavier and armor good businesses, and this is part of IT as well. We just spent fifteen or twenty minutes debating the stock Price that is completely divorced from the realty of these businesses. And that's a bunch of destruction that the banks create as well, that that is totally unnecessary. I mean, what do you guys think about this?

And just let me just respond to the direct listing point. I I just want to also point out spotify, what public via direct listing, the stock actually created up after the drug listing. IT went down a little bit after, but he continued to trade up, you know, into the twenty one era. And today it's trading add or above what IT was trading out during the draggle sting. So can I tell you why, though the performance of that business fundamentally drove interest from investors?

The thing with the spotify IPO was that I was still a very new vehicle. And so that direct listing was we were all learning as we went along. And at the end of the day, there was one bank that kind of not cornered the market but really became an expert on IT, and they use spotify as the example. So by the time spack and then coin base came along, the playbook was so tight that everybody knew how to play the game.

So I think a lot of the spotify post IPO behavior was a bunch of people figuring out what a drug listing men by the time that we actually dealt slack, and specifically when we dealt coin base, the bank was so sophisticated and telling us, here's what's onna happen, here's what you should do, what do you want to do? And obviously, we wanted to do. The thing that maximizes returns for our L P S.

So i'm not true that the spotify example will ever repeat in a direct listing. I think that the slack and coin base particularly will be the example going forward. You'll top take day one and then the thing, will speer down find a bottle?

What isn't IT ultimately about finding the real market value for the company? Doesn't doesn't the Price goes down or goes up that ultimately, the buyers that want to pay a certain Price will step in and buy and the folks that want to sell because they think the Price is higher than their mark ones.

I agree with you. I do think that it's really about business fundamental, but there is a lot of people that get caught up in the Price as what the quality of the businesses, not those people are, maybe not the most sophisticated people in the world, but they may lot noise for not knowing what's going on. And so they can be a real distraction to A C. E. O. Trying to own a business.

I remember in two thousand and eight, I think I ve told you guys the story. I was like november of two thousand and eight media was trading down the seven box and I saw dara at some event in march, yeah, march and he said he, our stocks at seven box. I can't believe that I really like everyone should be buying our stocks and that was well off of the Price that, that had been trading at in all three or four or five.

And sure enough, if you bought that stock, you know you would have made fifteen ex from there to where we sit today and even more if you sold at the top tac in twenty twenty one. So you know that's a that's a good chart. So look at where video was in, in march of all, nine was right around seven box. And I think that that was for me, like the first example, where I really understood that the Price where the market praise a stock shouldn't matter as much as the fundamental value of the business. If willing to be a long term holder, if you're win to say .

you willing to do the work and you work, yeah, most people are not willing to do the work. They want to look at a Price, and then they want to, in view all of their own psychological desires into IT verses. What are the actual ones in areas of a spread? He tell you.

yeah, but i'm like a pure efficient market guy. I feel like, you know, whatever shares to be people want to sell, you will to sell whatever people want to buy, to buy the market. And if the stock is too cheap, there's plenty of capital there to step in. And by the stock, if they think that too cheap and the market will find itself. So let's do the underwriting of installed.

If you guys investors and I am a fund that's an installed from the seat around. So I will do, I think, very well because of that. Let's play out. Thank you that that will be that will be a yi um for jack out will let you talk about revenue .

when IT trickles down all the way to use an L P.

What's the I guess you know if you take up the Carried twenty five or thirty percent less than what looks like to be.

again, fun first. So yeah.

that funds been paid back many times over already.

So you know what the multiple .

is on that fun for? Yeah IT IT was eight million invested. And that's .

their investment.

That's not your investment .

and investment. Two hundred hundred, two hundred and I will report back. But I think to see around invest going to be so.

So you're saying eight million will become one point six billion.

and they over a billion. We can actually have a charge here. Let's take a look. thanks.

A billion. One point six seems high to say a billion, but let's say the fun was what? five? six? Seven million. So for the L P, it's like a two x. I'm just saying that yeah, for the fun IT was one hundred expert for the L.

P S. A two X. I think that difference.

right? So it's two extra turns of your investment .

and meaning if I was a four exception, he saying that it'll become a success yes.

something like that.

yeah. I mean, it's a good fun and not just ging IT, but I just just set things, put things in proportion.

I think I think at this point that funds at twenty one x right now something in that range. So it's a pretty great fun in intent terms.

A total to twenty three acts.

Something to that effect is .

it's going to be .

pretty amazing. He thinks that was in and WhatsApp were also in the fund either before I will with IT pretty good fun. There were two funds um I won't say which for this is um with twelve and twenty four X I believe is the last time .

I checked what APP was a monster that was .

a really well you everybody learn from WhatsApp you know shut out to the security that only I think and they did around jm, a jim gets to they did every round so IT was an internal round for I think four rounds in a row. So they just made preempt of offers.

The reason what's up was a home run is was also capable, efficient, ah didn't burn that much. They didn't raise that much. So there's very little delusion, yes, for everybody.

I mean.

I think that car is many billion.

They after race, let's pull up this chart here. This is super telling to pull up people who made money. And I think this shows you what happens in a serve environment when people do not look at entry Price. The series c under water, no, a series y now underwater. Everybody from f on is kind of underwater, uh, and everybody from the series is underwater compared to the S M P five hundred two part free freeze work even.

And then everybody invested in twenty, twenty and twenty twenty one actually lost money.

General cats, S T don T O fidelity, although late stage folks even so I was in that late stage of series I in twenty twenty one IT was were three and nine billion. So but that environment.

he was a bad for all the late stage investors who invested to higher Price. I would argue that IT was bad for the companies, even their early stage investors, because these companies got so inefficient.

the dilution is dick. The illusion was ridiculous.

I also think you have to think about this in the context of what your alternative returns are. I think that we always look at these numbers, and we think we try to make judgments. But if you put yourself into the mindset of IT of an investor, it's actually the alternative of what you could have gotten and it's the spread between the two.

That's really important. So ny, you want to just throw up the image that I just sent you. This is an example that I saw an xs. I thought that this visualization, by the way, I I want to use this visualization in the future because he tries to real IT IT just paints a very is wonderful, uh, sports. What this picture shows is essentially, and this uses installed as an example, but you could use a different company.

But it's just basically shows you at every point in which you could have invested money in installed, what would the equivalent return have been had you just invested that seem amount money in the S M P five hundred? And the difference between that is what you would call the alpha, right? Because the S M P five hundred is the beta.

Mean IT is what the markets going to do. It'll be up ten percent, it'll be down four percent, whatever. And so by owning the market, you get that if you decide to not on the market and make an explicit decision like owning instated ard, then you get a different return stream.

And if you compare the two, you know how much Better or where he would have been. So what this charge shows, for example, is the series f investment twenty eighteen. If you had taken a dollar and put IT against, the card would have gotten thirteen percent.

But if you had put a dollar into the S. M. P. Five hundred, you would have gotten sixty eight in the series sea in twenty fifteen.

Had you invested a dollar in inter card, you would have made one hundred and fifty three percent, but the S. M. P would ever return one twenty one. The difference means that the series sea investor generated about thirty two percent alpha.

Now then the decision you have to make is that thirty two percent of incremental gain over the last seven years or eight years was IT worth IT if you're not liquid d and because you have to then solve for illiquidity and other things. And this is the math that I think all of the L P, S. Will be engaging.

They'll be doing these calculations. IT just goes back to what taxes point side, which is our business, Frankly, did very well in moments where we had zero interest rates. Our business now, when prevAiling great trade, five or six percent, and you can own those things or you can own structured credit for eleven to thirteen percent, our business unfortunately does not look so good. And when people do the calculations on what the true alpha of venture capital is, they're gonna come back with answers like this, which is it's not that great. And I do think that will impact how limited partners have an appetite to give all of us or you guys, folks that are that are accepting L, P, J, X more money because the alternative universe is more liquid, is less fall at all, and IT has roughly the same amount of return.

I can tell you what they are saying because i'm doing about a dozen L P meetings a week and i've got fifty more on the calendar to the end of the year. So i'm going to hit one hundred of these meetings. We're really saying two things.

One, we want to go earlier. We don't want to go later. As that shark proves, they're sudenly fascinated with the seed in serious rounds and they're looking for distinctly different strategies.

Uh, they're looking for some sort of edge. So the first two questions are how earlier you getting in and security at ten percent position in this company and then watch your edge. And literally the start of my pitch deck now when I walk people through IT is I have two podcasts.

One of them gets fifty million listens a year, the other one gets over fifty million listens a year. Those hundred million listens result in twenty thousand applications. I have larger yellow than anybody, with the only exception being recombination and that resonate with books.

Um but if you're somebody who's got a new fund and you're like what your what your edge here I go to you know some demo days that's not an edge. You have to have a massive competitive edge and a differential. You have to be differentiated in some.

Very incredible, believable way. And they are telling me the same thing. They're cutting two funds out of their twenty and then they're cutting their commitments to the week or ones of the other eighteen.

I have a question for all you guys. You had a wonderful question, which we never touch. Guys, what do you guys think about the ARM business model or the cavo business model? You guys had a chance to look at any those companies and think about p the facts.

And the new guys respond. The revenue is fifty percent year over a year, seven hundred sixteen million ad revenues, two hundred six million at on pace to make up twenty eight percent of their revenue. This is just the last quarter i'm talking about IT here and jin thirty sn income one hundred and forty teen and have six hundred thousand car shoppers.

Those are like the drivers you want to give them, like George ashes or ruba drivers, seven point seven month active orders. The red flags is that there are growth transaction volume, which is the value of all of the groceries in the in the begs, uh, is flat. But ad revenue is growing, means ad revenue is a just a massively larger percent of the total revenue, they think taking on track for a hundred million and revenue. So this starting to look not like A E commerce business, but more like a an advertising business. Thoughts, free burg or sex on the actual car business.

The amazon, by the way, has a dynamic two. Now have you seen the charge showing advertising on amazon? Compare the entire internet?

Yes, it's huge. And also uber blown past a billion. I believe. Here's what we know.

We know that advertising multiples, broadly speaking, have contracted, right? So I think that the market in general doesn't love that revenue quality because it's too lever to interest rates and the economy. So when the economy does well, more companies advertise.

When the economy doesn't too well, companies advertised less. That's number one. And number two, the ones I can systematically drive advertising more broadly.

The facebooks in the google of the world tend to get an increasing share. So advertising as a revenue stream, I think is is good and complimentary. Unfortunately, the markets don't necessarily love IT. And in the second thing, generally speaking, for these businesses that drive huge G T V gross transaction values is I think most people, when they try to find what they're worth, are very sensitive to the take rate. And what they typically do is they assume a falling take rate, which means what percentage of the transaction can you get.

And the reason why most people do that is that history has shown that these kinds of businesses cannot defend take rate for a very long period of time, whether for competitive pressure or whether it's because their suppliers actually develop more pricing power, take rate tends to decay. So said, you know, in grocery land, I think it's because walmart and amazon will try to do IT for much, much cheaper and or charge just be more aggressive in how much they they want to keep, which means it's lost that you can maybe necessarily passed through. I don't know the insecure business at all, but if I were starting to look at IT, that's where I would focuses. What are the assumptions on take rate? And if the take rate is going up and IT would be a little bit of a head scratching, I think that you have to model the help of the business with a declining team Green show.

I can actually build on that pretty easily. Having spent a long time in the advertising market. If this was very profitable advertising to math, IT would get a twenty five x uh, multiple on earnings that take about eight hundred million. You put IT at four hundred million and profits like if the other business didn't exist, they have four hundred million in profits of advertisers. The times by twenty, you get a bit that's exactly there market APP.

So IT, perhaps what you are saying is exactly what the market is, is actually cancelling out, uh, google, which obviously a lot of other technologies, I think twenty eight X, P and facebook is crushed IT out like a thirty five P E. But these are much different scale, and scale matters. This is not one or two billion in need. A little extra revenue on top of your business. That's the entirety, nineteen ninety five .

percent of working in favor in that if you compare to probably door dash or R B B, at least L B N B dash, i'm in a gas that that looks pretty cheap. Now I think of all the three businesses, dash probably has the biggest website, quite just like, again, farm's length. I don't I don't know any of these three stocks are just saying business model quality dash seems infinitely scalable.

L B, B, I think probably has long term issues would take because of this exact reason, which is competitive dynamics and pressure, regulatory capture. You're seeing that in new york for B N B. And another question is, what is the business outside united states look like for inter card? I don't know, but though that if I had to figure out what to pay for that, how I would kind of try to break the problem down sex.

Any thoughts on the the actual business here? Or you want to jump over the clivia?

Yeah I think, uh, club, is you the really interesting one, please, from my standpoint because the software business, I think Jason love can have to take here. He said that club as IPO be the ultimate yard's sick for six and twenty three and twenty four. Top growth, top margins, top founders can accrued past billion and A R whatever molt for the end of trading at you, most certainly. Thus I think it's trading IT about twelve .

times for revenue. So to one hundred ty, five billion. I have a sixty five million.

So yeah, so they're at six hundred and fifty million in arr, growing fifty six percent, that's amazing.

So every year .

so project that four they're poggin to be at a billion and A R next year. Hundred and twenty percent N R which is very good, specially considering that .

is from S M B.

not revenue. Your attention it's the way to think about that is if you just look at your existing customers going into next year, what percent of that suggestion base is gonna be there? And if IT was eighty percent, would be twenty percent of your customers are turning away.

If it's one hundred nineteen percent IT means you have expansion from your customer base. In other words, your customers are buy more. And there there will be some who turn, but the ones are expanding more than makeup for that.

And then theyve been very capital efficient nearly they have only born fifteen million today. That does not mean we've only raise ed fifteen million. They have raised several hundred million in various growth rounds, but they still got that money in the bank. So I assume they raised IT as a cushion in case they missed forecasters. Something like that .

yeah seems like a pretty strong business.

So I think his point is right is that they're kind of the ceiling, you know. So I think founders still have maybe unrealistic expectations from the days when suspects were being valid a hundred times they are are have .

you have this conversation sex with folks coming in for funding who have great business ses, or let's go good to great business somewhere in that zone or seven, eight, nine businesses, but their valuations are way off. And do you do you bring up? Y, here's what your company would be worth publicly. This is what your last round is and then trying to negotiate in between those two numbers because IT does seem like founders are bringing that up proactively in some meetings with me. They're are actually aware of public comes now and their kind of admitting, hey, I get that kind of situation .

yeah I think that expections have a just on .

this yeah which is healthy yeah when .

you're in a hot market, there's definitely a lot of sharing among founders of what's happening and where valuations are at. And I think the same things probably happening in the downmarket as well. So yeah, I think everyone's going more realistic.

Yeah, just to finish on clubby, I just want to give a shadow to toby lukie. The best thing that I saw about that was a shop. If I actually owns like a 1 percent of this company， which I think like if you look at the corporations, again, just doing an incredible job of building an ecosystem, not only just to be support these companies, but shop fy ends up on a huge nontrivial portion. I think shop I owned like eleven or twelve percent of cavo bin, I think with the sale of the flex port, deliver back to flex per day on thirteen or fourteen percent of IT, I suspect they probably on a nontrivial share of stripe. And I say it's incredible.

And if you do with some .

of the parts on on shop fy, their cash, cash and then cash quiz es are only valued at like two or three billion. So I feel like there's a ton of upside there just for free. Again, I don't known that haven't done work. I'm seems like seems like he's great. So I think .

that brings up .

a really little point, which is the only vulnerability or negative, I think about clovio s business is the fact that seventy percent of IT is on shop of fy. So that's a platform dependency. And whenever seven percent your business is on one platform, voice have, be afraid, getting the rock pulled out from under you.

By the way, that was paypal es problem back in the day twenty years ago, seventy percent our business was on ebay. Ebay had a competition, were costly, worried that they were going to pull the arrogant out from under us. If we could have made a business deal with ebay, we would never have had to sell the company.

IT would have been ideal. Ed, I think clever was really smart. Creating alignment was shop of the by letting them invest, giving them equity, doing A F share agreement.

And they will be smart to continue that rusher agreement into the future to take this risk off the table because investors do not like essential risk. You can have a perfect business. But if there are some hard to quantify risk of the whole thing, basically getting rug pulled that how do you just count that.

David, as an investor? You look at that and you're like, okay, I then Price this company as a function of sharp fy.

It's a good point. I mean, seventy percent of the business is shoplifting. The way I would look at IT is I would Price IT as a service business because shop fight over transact. Well, there are a transactional slash SaaS business club is is pear SaaS business. I Prices a SaaS business, but I would have to create some sort of discount for the chance that well, a shop .

fy ads of features.

How do you figure that out? That's a really complicated thing to figure out. Hey, agree. But I think that love of mitigate tes, the risks, they do this like .

resht agreement to really savy move for people who have insights into the market to own pieces of emerging companies and lock in that partnership. Uh, this was a little, Michael, a shed out at uber. Travis did this with all of the grabs D D.

eta. And then dara just slowly sold those positions and they were incredible cash, a creative to that stock and into running that business. Let's talk about care table for a second. Um this also trended on twitter with a tweet storm. If you don't know what air table is kind of like what is IT, it's like excel meets a database and it's more programmable. So if you wanted to have a bunch of this, a lot of small businesses use IT medium size businesses and they use IT to, let's say, instead of hiring somebody to build a database system. Uh it's like .

google sheet sand steroid to actually really a product .

I product I .

seen IT used like ten different ways. Some people use IT for tracking uh product feature requests uh and you know cases. Some people use IT for contact tables. Some people use IT for complex project management is super extensible, super easy to use and great collaboration tool about IT.

It's like a spread chief for words instead .

of numbers yeah yeah but you could also .

do numbers of yeah with a lot of great features that you can do really .

dynamic things within the first in with army approach of building these kinds of things that it's just cheaper and simpler er to build best in class versions of each of those use cases .

freeway that you allow certain businesses to have a very specific tunable version of what they need from color project management tool. So if you use a traditional project management tool, IT may be too overbuilt or IT may be too specific? Or is this tool allows you to build something unique for your platform? So that's what i've seen. A lot of teams use IT instead of other tools like gera or whatever for today.

Well, doesn't point. I just wonder that you get these small non scalable use cases because then if the company is successful, don't they then just migrated jura, for example? No, I do a lot like spreadsheet.

Basically, the reason people use spread sheet for so many different things because everyone's got their own representation of data and utilization of a spread chain. I think this is different. Extension of that, it's a cop about is a more feature.

actually think that cheap question is, is an excEllent one. I tweed, many years ago that the way I saw excel was the long tail of use cases that hadn't moved into a dedicated SaaS APP yet.

先 之前 的。

And that the way that if you wanted to be assess， found and you try to come up with ideas, find some really complicated uh, excel spread s sheet that's used to be different businesses and just figure out if you can move that into a saux. So for example, think about hard before carta. People just use a spread sheet for the captain and every company to and capable total, but they just move that into the excess up. So I think there's a lot of that.

And so at all is it's a visual representation of a database with some relational logic that you build into the the cells of the stretching.

this pattern of breaking apart, breaking apart. A major product was the playbook for crag list. People looked at crag list that, oh, there's couch surfing.

Make that airbnb. Oh, there's a right sharing. I'm going to L A. I have two extra seats that became like uber. So people display book .

out of that too, where every category and critics .

became dwell. Everybody uses for you, everybody .

cash encounters .

are what all .

actions .

necks. Aria really like me, you.

But I point I think the point that was the question that I was asking is exactly this, which is you have these beef top workflow, things that happen in exile, but then eventually you go to these systems of record that are purpose built to solve the use case. And if the use case is important enough, IT just seems that's what happened. I don't have a view because I ve never used the product, but I wonder whether part of this valuation reset doesn't reflect that .

dynamic IT is a dynamic uh the two companies or yeah two of three comes that represented best is there is a protocol koda um which is part wiki, part air table, part database in its programmable and notion. And now people are making tempers in notion, and then they're adding things like project management. So I ask my team to do project management for events.

And they tried base camp. They were looking at a sona and then somebody was like, you know, I just added IT to notion is good enough. It's not as good as those other two products, but it's good enough and we don't have to.

And the reason that you want to do is not because we're cheap and I don't want to spend money, another SaaS product, we don't want have to teach everybody a new SaaS process. We don't have to want to do the lagging for that. So I think that is a natural attention.

And people are doing both to fell. Some people like the best of breed, but are also seeing that I don't enough. You saw this a past week.

Slack added, I think during dream force, the ability to give you an AI summary of everything you missed and then zoom added A I summaries of calls so that feature that uh I guess, alter and some other people were doing that feature is now built in to zoom. You, you, you get a transcribe from zoom for free, and now you get a summary of the call for free. That is work that was done by somebody on the meeting, right? Somebody was responsible for being the no taker.

Sometime somebody was. So those are jobs that are gone. And I think that speaks to the bigger economy.

I had the city of kayak on this week. Start up this week. You'll come next week. He's was really great.

I asked him about hiring and the size of the company said that not hiring anybody in the next year or two because all my developers of thirty or forty percent year develops that I D L I developer who are turning into developing, we're just going to have increased margin. So what happened to our table? Air table had a massive valuation. Uh here's the tweet storm that somebody from C, B, N sights, this guy and on um I I think I follow him.

me did something happen or nothing?

They're most recently valued one point seven billion in december. The series, his d says not only is their table worth less than the one point seven billion, is likely worth less than the one point four billion in funding IT has raised to free birds from bringing this point up over and over about the over funding and cash is less than the value.

I know most of these unicorns are worth less than their total process. This is a good example. I've just been through this this week. I want I saw there's a company. The investment that I saw this happen .

can be on track to do.

Their big problem is they are doing over hundred million of A R R. It's, it's, it's a great product and one hundred fifty million r that's no small fee. The problem is the growth rate, I think only fifteen percent.

What do you do with the founder sex? Because this was my point earlier, is in these circumstances is still a good business. Investors are gonna to own your shares at some Price. Someone will buy new shares at some Price. But to do this transaction, given that the preference in the company, which is effectively debt, is greater than the value the company, the founders and the employees get their otherness stakes wiped out.

So if I think they're hope, I think there are only hope is to go public because that wipe out the pref stack and everyone basically just the present to the company if they don't go public. And if they found private .

investor do that, why would a prefer investor allow that APP?

Well, this is going to be a huge tension on the board. Is that if you're a common holder or if you are one of the early investors, the company you want to go public, you're a late stage e investor.

You don't want to give up your preference. But those late stage people's acx did not have blocker rights in many cases because the market market was so hot, they just put the money in out yeah I mean.

less they had a rest in the IPO. Yeah yeah.

But in many cases, but that's not a universal truth, right? In almost in the majority these cases, the preferring shareholders do have significant representation on the board. They do have the ability to influence whether not the companies is going to go public. And there's likely some middle ground that every company ends up having to meet at, which is we're going to recap the company in a way that we're going to give some shares, newly issued shares.

The I ore got drag, the loser and actually think they all just got dragged out. They didn't have a choice. My understanding of some of these light rounds during pigs erp twenty, twenty, twenty one from talking to bill girly, which people did not negotiate those rights, those rights, the blocker rights weren't available with the majority of common, says we're going public, you're going public and that's the that's the end of the story.

Here's here's the punch line to the air table. If you look at the ford Price to sales multiple seven eight x for an eleven point seven billion dollar valuation at one hundred fifty million A R R, and you compare IT to the trAiling Price to sell multiples in the project management space, monday is at twelve x plus assign a six point six x and smart at just around ax. So as a chAllenge.

yeah, well, to freeze x point. One of the downsides of taking all this excessive capital at these ridiculous situations is that IT produces a dynamic in your board room where your board members are more with each other. The late stage investors can be a worth, the early stage investors and the founders and who knows, who comes out on .

top of that thing, but it's not a healthy DNA. I don't guys.

i've couple of months on this exact scenario. Ying, you know, you can make donation. What is the dynamic and how does this work itself out? Invest.

invest a multibillion dollar valuation. The company is now worth twenty percent of evaluation, and the investors have more money in the company than IT is worth, and the company needs more cash. They can go public at this break because the markets are shut down.

No one is going to buy new shares. They can't raise cash by going public, so they have to raise cash in the private markets. So then the tough question is, okay, what's the value?

The company, in almost all of these cases, the C, E, O has been replaced or there there were some professional CEO. As a new option poll created equal to ten to fifty percent, the company new options are issued and around is done at a significant discount. Is a huge recap in a paid to play.

And all the other sort of stuff starts to play out that the original founders and the company get wiped out. Most of the management team leaves because their options are now worthless. And the investors who historically have been totally passive, late stage investors, have had to step in and try and take action in rebuilding and management team, which guess what, they're not necessarily good at.

And so IT ends up becoming this really nasty unwinding of the business because everyone thinks, oh, well, I deserve to get a fair deal because I put money in and I have a preference in this company. Founders don't want to see their ownership go down from twenty percent to two percent. Do like why would I keep working for two percent? I'm fully vested.

I'm going to leave the management teams like great to say and i'm get off for is left and right to go join other companies. And so it's a real kind of nastia and winding. And I think that's the scary scenario is likely gone to play out. And not all, but a good chunk of these companies that are there are still businesses. They have decent value to their business, but they just raise too much capital relative to the valuation of the business today.

If you looked at IT on a blank piece of paper, these businesses will look incredible at whatever the true valuation is today. But if you have the psychological hint sight bias of what the Price was two years ago, you just can't see that today.

I can get and structure there's like legacy structure in the yeah yeah meaning there's like this project.

I will say that the terms are so crazy good for the recap that investors are clawing their .

way into the recap hand.

But I mean, my god, nature that nate markets are healing.

That means for .

you to go public again. I think that when there's a recap and the founder is still running the company, there's a chance of IT being fair. But when they bring in a new CEO who then does a recap, they don't care, they don't care. They don't care about the investor care exactly and all these recapture into a disaster.

Well， it's recap or the you going to go at a business. So I mean, this is a force and function and everybody party too hard. I think it's time for everybody's favorite part of show, which is to give chmagh his flowers.

Here we go to mah. The fed spoke this week, and it's time. For chaos to take his Victory lap. Here he goes, everybody .

chamois. This is benji's doing .

charts of fire. This week, the fed said, to quote him on.

well, this, this is connection to the deep state for longer.

There is, there are out leading the back.

I sent my, I sent my talking points from six months ago to my deep, to our friend. Deep stay can keep up.

send the note .

and deep states sent to the fed. And the fed just .

cut and pace IT IT into.

And I understand why that .

rates will stay higher for long ger. And now he takes his Victory lab enough. The schematic said, rates will stay high for longer. The f said, right, stay here longer.

嗯， thanks.

O, K.

Well.

we going to give our charts of fire. What's in a here is metal in group by a.

who is obama giving the metal to? What's the real picture? So what is he .

giving IT to buy to?

I think he's to was. So.

oh, you are giving a battle to jump. So I think what happened this week is actually pretty important because I think the markets were really trying to force drone power to start the cutting cycle, and now they had to move the date at which they could expect cuts out by a year. And I think that we're only starting to see the reverberations of that.

You're gonna have to replace a lot of risk assets. So if you put IT all together, oil is creeping back up. So commodity Prices essentially are trending up.

I don't think that's gonna a big impact on inflation because of the way that owner equivalent rents in core C P. I is calculated because its calculated on this six month lag, this dumb nonsense of just how arcane our system works. But that's gonna Spike down.

So basically the fed like saying, we know all of this is happening. We're sitting on our hands. But the problem is that if you add another hundred basis points to your discount rate for an unprofitable SaaS company, my gosh, guys, you're taking like another turn in a half of market cap out of the business.

Like if you thought I was worth eight times, is now worth six and a half six times. So unfortunately, that's gonna hurt everything. That's not the top seven tech companies.

And everything else is just kind just kind of me, Andrea, long for a much longer time. So it's really good for the magnificent seven. I think it's really bad for everything else. And we're going to be a holding pattern for a while.

Crude oil, uh, is at, let's say, eighty nine dollars bar, you know.

getting back up. Member, member, this conversation I told my C, E, O guys, let's get enough cash to last to the middle five member, I was pretty clear about that to folks. I mean, get to get to default light.

But if you can't, please have enough money to the midst twenty five. I think that that was wrong. I think now you gotten be q one of twenty six and maybe even mid twenty six.

So now I have to go back to all these cees and radio, an entire justification for why we need to cut even more people, cut even more expense, cut more burn. I don't know where we're going to find another year of burn in most of these businesses. So I was wrong by at least a year, Jason, because of this. I think I got the words right, but I got .

the further translate this. okay. So the markets right now are definite taking a bath. The growth stocks are off significantly.

Expect them to be off more.

yeah. And the reason is because the market started a pricing rate cuts next year. And now the fed is saying that because inflation picked up a little bit, not coming down as much, we have higher energy Prices.

We may not get those right cuts. I think the the fed still maintains that will get fifty basis points rate cuts next year, but the mark was pricing and more. And I think people are starting wonder if we'll even get the fifty. So as a result of that, interest strates are gonna stay higher longer, which means that risk capital be less available. So valuations are onna go down or at least are not be racing back up like they used to.

When I was saying mid twenty five sex, that was because the four curves started join cuts in early twenty three, you know. I mean, so I was like, okay, let's assume there wrong by eighteen months IT turns out that that initial data point in early twenty two, my god, we were wrong by three years, not a year. And now, right, brutal.

And I think the factor here is that we're running almost two trillion dollar deficits in peace time. Well, I mean, we're not in a direct war, in a proxy war, but in relative piece time and in a relatively decent economy. So what happens if I do those things change. And what happens the long term rates as all of these dead issuances, you have to get raised as the fed has to keep selling more treasuries to fund our deficit debt at these higher rates, do long term rates keep going up based on the debt finance y needs to the federal government?

And and this is again where, you know, we made a huge mistake by politicizing this idea of raising money beyond thirty years. We made that mistake under the trump presidency because people reacted to trump saying, IT, but I was the smart st thing we could have done to give our kids and our grandkids a reasonable economy. And freeburg has been right all along about just like our spending is just going up and up and up.

And now short term, rita, really high, maybe we'll have enough political will to just get out of the fed way. And the fed can actually look at raising in durations past thirty years because if you believe that we're going, going to start in aggressive cutting cycle at some point and you believe we'll get back to like a two percent terminal rate, you could theoretically justify fifty, sixty year bonds had had much lower than thirty year. But I I don't see .

that happening. Here's them. A really good way, too, look at this, their prediction markets. This one call SHE, is when I use K S H. I.

Chances of a rate cut by may of twenty, twenty four, twenty nine percent chance. And these are people actually making bets on these things. And so IT has gotten pushed out and I guess seventy four percent chance by the fourth quarter, third, fourth quarter of next year.

People think there will be a recut. So where a year away from a ray cut, everybody needs to just take that off the table, which means the translation for founders, for GPS, is performance has to go up. You gotta beat five, six, seven percent or whatever people are going to get on those other instruments. Corporate debt, you know, ten thousand, twelve percent. You ve got a really hard bogie to beat here.

The alternative to that statement is that total capital has to go down in order for the capital remaining to have its return multiple increase, given that there's a generally set number .

of companies that are going .

to generally create a certain amount of value over the next couple of years. And the way to create that value is so if that's true, while saying if there's a bunch of start up, so we're going to make a hundred billion dollars of market value over the next five to seven years, you need to have less capital going into those .

companies in order for the capital to generate a higher .

turn which get fined. But more importantly, to be less L P money going into venture and there's gna be less capital available to fund start up in aggregate.

I see on a daily basis, you need to do more with lessons, a founder, you need to delight customers with less resources, spend less money on marketing and less money on teams, yes, and get a profitable, you've gotta be a stronger founder. I'm seeing IT across the board in the seat stage, two, three, four founders raising two, fifteen to a million. Instead of raising three to five.

I got to be honest, chicken, I thought that was much easier to kind of say the sky was falling this time last year just right now. And I think that people are a little bit, again, exhausted about hearing this message constantly of a cup more. It's like I think that they're exhausted and I see a lot of founders that are exhausted and and giving up.

There's a lot I can cut anymore. And now I do think we have to go back to them and say if doing our jobs right, okay, even outlook our now our strategic view was right, but the time scale of our analysis was wrong. And I think now you ve got a plan to mid twenty six. I didn't even know where to start, to be honest with that .

was actually what i'm saying as people are merging company and m is picking up because, hey, you got two companies doing five million each, but they're burning two million each year. Cut, have the team put one team with the other. And I think you're gonna see some of that portfolio consolidation happen to have sex.

I think one way to put IT is that we've had a regime change. Those are the words that we ve been using for a while. And specifically, we've gone from regime of capital abundance to a regime of capital scare.

And I think a lot of people are holding out hope that there is to be a quick bounce back because we've cut these interest rates and capital with start flowing again in a big way. And I think that the fed here is dumped a bucket of cold water on the market basic, saying we're not bouncing back to capital abundance anytime soon. We're going to be in this environment of more capable scarcity. And that's what I think the founders of the v season I have to take into account. Is this shift could be permanent or I could last a while.

I have is just what do you guys think .

is going to happen to the consumer? Because I I actually think that even though founders in many cases could cut more and they could have acted faster, I actually think that the B2B eco nomy has kin d of tak en its lik es. I mean, for the last year, we've been in this software recession, companies sharping their pencils.

They've been cutting costs any more efficient? Yes, you could say baby, have not done enough, but the consumer has still been strong. But what is the consumer going to do now that credit card rates and interest payments are at all time hires? They're going to they can sell their house.

No, here's what they going to do. They're gonna skip in iphone cycle instead of going from you know thirty to fourteen or fourteen fifteen, they're na go thirty to sixteen, teen to seventeen, they're just skip which that which I did for the first time and do I don't need to skip IT, but I was just like thirteenth good enough. They're going to skip upgrading your car.

You're going to keep your car for next to two or three years. And if you were thinking about moving your house, you're going to say, no, i'm going to make this house work. Uh, we're going to put .

two of the kids right. Think I think that very I think that's very well sad. And and the the other side of IT is that some of these industries where you have these large ticket purchases that drive consumer consumption, their backs are against the wall.

Look at the automakers that the deals that that the unions have proposed, the automated kers will cause them from. I thought I saw now and an analysis afford where ford would go. If you just did a perform and went back last couple years, they would have gone from, like, you know, thirty billion or profits to mind us seventeen billion of losses.

So that's a forty seven billion dollars swing in the p. nl. The only way they overcome that is with more expensive cars, which change into your point means that those cars are not going to get sold. I do think that you're gonna have a little bit of belt tightening in the in the consumer.

I think this is interesting. I think that you're right. That is the same time that the auto companies are facing what you'd expect to be reduced demand because no one can afford a car payment at these higher interest rates. The unions are going on strike.

This is existence .

of day that the the labor deal .

is an .

existential risk to the unionized auto industry in america. And i'm not a lining on whether the deal shoulder should not happen. I'm just making an observation. If the deal has announced happens and you sensitize to lantis G, M and fords piano to these new terms and then you compare that against non unionised, highly automated organizations like tesla in riva, it's gonna very difficult for the established auto industry to survive, right? And then if you'd layer on top of IT seven, eight, nine percent consumer lending rates for new cars.

forget about IT. And yet the fed forecast at the same mean, they are being hawker ish about race. They also said that they were expecting unemployment next year to be four point one percent, down from the previous expectation of four point five percent.

And they forecasts the economic growth will be higher. So I just don't understand how these convey ing forces. Aren't going to a create so much stress in the economy that .

something breaks. And these are idiot unions. Honestly, their timing is so dumb, whether it's the ones you know in hollywood or the carwell there. I shutting .

great for tesla. I mean, it's giving tesla the entire U. S.

Auto market. You tesler is lowering the Price. When I bought my model y long range, I think I paid seventy two for IT.

The old Price on this starts says sixty six. That car is now fifty three. That's down twenty percent of thirteen thousand. I'll save the model y long range, I think is the greatest vehicle ever made.

I paid fifty seven, I think for my model y long range. H oh, no, no. I think I sorry.

I I paid fifty seven. I paid this Price further model wide performance, the best car. And yeah, that'll be a forty thousand doll car in the next three years when you are.

And I looked at IT and I speaking of austerity measures, I was like, I have a model x. Do I get another model X? I think to go model, because the model x is than fifty percent more. And I I just prefer the model.

And I think this labor deal is going to put tremendous pressure on these established auto ob.

ms. China is now the world's largest exporter. From what I understand, that just happened.

They work. I looked at up fifty eight to sixty four hours a week factory. The U.

S. Factor workers want to work thirty two hours a week. They want to four day work week. I mean, I I don't understand the timing of these unions. I mean, they're just gonna move these factories .

to mexico or I think it's for the unions to ask for as much as possible on behalf of their members. That's like obvious and good because meaning, if you're collecting fees from those folks and you're doing a good job on their behalf, your job is to ask for as much as possible.

I get that where I see the breakdown is that IT just doesn't seem like there's enough numeracy between them and the companies that they're not negotiating against to really sit down and look at what the impact of this is because you may get a short term labor deal that you can celebrate, but IT may actually destroy the union members pension. Yes, the major for the company, and this is my concern, is that then that has to get bailed up by by the U. S.

Tax pair. And once IT happens in one industry, it's going to be very difficult to actually not do IT in in other industries. And the thing that needs to be understood is the risk that IT puts on those kinds of tail outcomes.

And I think that that's not well discuss nobody. The media is really talking about IT. They make IT A A moral issue of like what is the CEO pay versus what is and sure, but that's an important issue at some level. But if you example, like you have U. S. Senators gathering on about how they wear a suit, not look like a homeless bomb if this deal happens in that in a cyworld does what you should be saying what you should be saying is my team has done a financial analysis and here's what IT shows, right? They're not saying that this is crazy.

What you're saying is that the negotiation and also the political dimension of this, have become completely untethered from economic realities.

Yes, they are negotiating in the review mirror. They basically talked about whatever billions of dollars in profits the companies previously had during the serpent environment during the heyday. And yeah, this is time is off.

Just add to the list of latent problems in this economy. IT just feels to me like something about to break. But I mean.

if the, to your point, inaction you keep bringing up, like what happens with the consumer, I think they just slow their role, you know, station instead of europe location.

Larry summer said at the summit. He said that soft landing are like second marriages, the triumph of however experience, yes, meaning everyone's talking about a soft landing. Everyone's s banking on a soft lending.

The soft endings are actually exceedingly rare when you have very fast rate tightening cycles. IT generally has a very predictable effect on the economy. There's a lag, but the effect is very predictable, which is causes recessions.

And I would .

already been in a beat, beat the recession where started to come out of that. But I think the consumers have been hit yet and maybe that has to do this with all the stimulus they push through. Yeah, and that created some amount of cushion for the consumer. But I just wonder if that cushions run out now we're about to enter .

a new phase and what all of these strikes you, if you overplay your hand from moh, is automation. So this happened in new york just over ten years ago. The fast food workers wanted, you know, I think, was fifteen, twenty box on our, okay, seems reasonable.

And they replaced every cash year. You go to mcDonald's now, you're ordering on the APP or you're ordering on a key OK in the space. And we have an investment in a company called hello meter.

But this company does is pretty simple. They just study what's going on inside fast restaurants and then they just increase the speed at which people are getting served and they're crushing IT. Why people can hire people is not enough immigrants in the country anymore where we have an anti immigration thing going on here.

So unemployment too low and the the the salaries are too high. It's not working. A lot of restaurants are breaking because a thirty or forty dollar dishwasher is the difference between a, you know, a restaurant being profitable or not.

All right. Listen, there is apparently some potential major breakthrough in automotive e disease treatment with this new inverse vaccine. Let's go to our science correspondent, the sult of science himself, for science corner .

the taxi turns his calm. Tax.

tax going to take a up will be back, be back here.

I'm here. jeans. You wouldn't even let .

me get away with that. thanks. We resume shaming you. Do not leave you something.

I want to give you a shout out my super gut. I just had my super gut chocolate so good. I just got my super gott protein and the weight loss continues health. But my, my god, so good.

There was a paper published in the journal nature this week, which I thought was, were thailand inning sex? You're going to be quiz ed afterwards on exactly what I say during the this any implications for IT we've all heard of and no folks that have OTA immune conditions and some of us may suffer from them.

And auto mune condition is when our immune system mount an attack against the protein that exists in our body that is natively part of our body. Our immune system kind of mistakes that protein for being a foreign angie. So the term agent refers to proteins that the immunity stem views as invading.

And I need to go in attack. So when the immune system messes up and IT sees a protein in our body as being a foreign gen and starts attacking IT, you get these aumale conditions. And auto omi conditions, as you know, are very debilitating cost on the health system, on people's lives.

The top ten auto immune diseases is even .

type one diabetes. Multiple sal rosa, rita bell, showground, hush, a motors, fire data. These are all pretty in different ways to imaging diseases. So this team at university chicago in twenty nineteen, published paper where they actually took an ant gen, and I cos later IT, so basically attached some sugar molecules and carbon hydrate molecules IT, and presented IT in the liver. So they put IT into the blood.

IT showed up in the liver, and they were able to cause type on dibs to not develop in an animal model that was supposed get type on diabetes. So they did an extension of that work. And the team has gotten broader. And they just publish this week a much more substance of paper that highlights are pretty incredible technique that may potentially address a long list of other immune conditions. So they take the antigen, the protein that is.

are you say sorry in the type on example? Are you sing like the beta cells didn't get destroyed like I just stopped IT just stopped everything on the time yeah.

So the immune system has a lot of ways for self regulating. There are key cells in our body called tea, the regulatory t cells. Their job is to go find the tea cells and the anti bodies that are attacking our own protein matter their job.

And when they don't do their job, the antibodies and the t cells go and attack our own body. So t red cells kind of when they're turned off, they're doing their job. So IT turns out that when a protein is presented in the liver, in this this particular part of the liver, the main system recognizes that protein as being a safe protein.

And there's a regulatory process that gets kicked off that causes the immortals m to start to see that protein is being safe, IT should not be attacked, and t red cell start to develop and other system start to develop, that tell the whole immune system, stop attacking this protein. This is a safe protein. This is our body should not be a check.

This is like friendly fire. Like, do not like friendly fire. Do not attack this protein. So what they did is they took several and gents proteins and gay consolation that, meaning they put some in molecules on them, put him in the, in the blood, just with an I V hook up. They go into the liver.

And once there, in the liver, the immunity stem season and is like, wow, these are totally safe now. And they found, by analyzing all the different tea cells, the regulatory Patty that emerged that caused the body stop attacking that protein, and they were able to end M, S, using this in due system and animals. So basically that we have a known model for making multiple school rosses show up in animals.

And they were able to stop M S. In the animals by taking this particular protein that they use for M S. And they put IT in the, in the wever UID.

They did the same with an egg allergy, and they did the same with several other integers. This represents a very novel and seemingly super impact for, and powerful way to think about eliminating auto immune disease going forward is that we can take the antigenic. We now know the antigenic, the protein that causes almost all of these automated conditions, from thread data to lupus R A M S.

And we can take that protein like consulted, put in the navy, ends up in our liver, gets presented in our immune system, realizes I shouldn't be attacking this anymore and resolves IT. So IT opens up a whole new category of therapeutic pathways for a address all otto immune conditions. It's a totally new mortality is a very interesting approach.

You'll be studied more deeply. The folks will take this paper and try and start to develop very specific diabetics for very specific auto ing conditions using this approach. And hopefully over the next couple of years, we see some of these things have success.

interaction and go market. These automated diseases are typically some combination of genetic and environmental. So this is not attacking among that basis, is attacking them in in a different modality.

You there's two ways that we address automatic condition today. The first one is by presenting the other gent to union system before you develop unity. This is like when they give a little of pemex to kids that that you and prevent penalises in most auto mune conditions were past that point.

The the mune system has already developed t cells and antibodies to go to attack. So that doesn't work. The second way is immune pression.

And that's terrible globally. Suppressing meaning on the whole body. Turning off the immunity stem is not healthy in a lot ways, and that's the current of this.

So this is a new approach, which is we can actually reregulate the immune system to not attack itself, to not attack our own proteins by introducing that protein with with cocos lation, getting into the liver. And boom, this magic starts to happen, and we'll see what the side effects are as they start to try this on humans. We see we'll see what conditions are more effective than oh.

sorry for the stupid basic question, but how is the uh how how's a different when we put these to say like a you said these were monkeys or chimpanzees, so how are there in sis different than your inness?

what? sorry.

Anyway, let's keep going here. A great science corner .

i'm laughing at. How can torp that?

We, you punching IT up. You like to these .

workshops. I am just working .

on punching IT up.

We will try to get a Better and conditions.

new world, the worlds getting Better.

The refers to an approach to a theriot. And this modality is is a new modality. So it's a super exciting new kind of universe to be explored now on how we might be able to treat .

auto conditions ranging from time.

sex, you, that on the site fever.

What part of the body do you think IT is giving most impacted by these discoveries?

No, the amuse is. No, no, no. That's not OK me just so dumb about science. OK are here go .

OK here go fevrier.

I thought the only solution to M S. Was, uh, final transplantation through urines.

Yeah OK like the best because you can't did a little A A misdirection. We're gna rap here. Thanks to everybody who came, uh, bright armstrongs also did a great job. Elan did a great job. Thanks to everybody who showed up for us.

And if you want to watch all the talks, all the talks are being released exclusively on youtube and x so go to x and look at the all in uh podcast twitter handle and type all in podcast on youtube and you yet to see all these talks are available now. And ray from the unofficial al all in pocket metus s is doing a hundred fifty uh, meet up for the fans in all different cities around the world. So just do a google search of that for the certain of science and the world's greatest conference producer, the dictator in the arena, making IT happen. And for when IT, potter's favorite festing, give its acx my next time. Rainman give.

We open sources to the fans and they .

ve just got crazy with.

Why I try.

You should all just get a room and just have one big new George because like sexual attention. 我。

一定 只 给我。

你 那里。