did you just finish a good cry because you had this wetness right here on your eye oh sorry I just got out of my coal Plunge in my sauna because you know I hit a new record low weight 169 this week oh hold on my way what's your temperature on oh I don't want to say it's embarrassing I don't want to say no what is it I've been doing like 56 58 that's great it's okay I mean all these
lunatics like I don't know they're at 45 degrees 48 degrees I think it's unnecessary you get the same value I think of 15. my two-year-old does 56. it's good it's really impressive I consider an 80 degree pool to be a cold Plunge unless it's like 85. there's no difference between them [Music] if it's not the temperature [Music] [Music] fits it's crazy and then I went in my
infrared sauna so now I've been going in you do the cold then the warm I think you're supposed to be warm then cold no they say end on uh cold and so yeah yeah I just do like a site cold warm cold cold warm cold yes what are you doing like two minutes ten minutes two minutes or what do you do yeah exactly like one or two minutes cold plunge four minutes you warm up you get back to it and then
you jump back in yeah it works pretty good you know I have to say my energy level goes way up have you been tracking your blood pressure I have not uh but I have this uh Executive Health coach that I'm using and so that's where I got those ridiculous glasses the blue lights and my sleeps better I got some I've taken some supplements uh I'm eating estrogen estrogen bro levels are at an all-time high for
hanging out with you guys it just oozes odd to me no it turns out you know even at 52 my testosterone is very high so that's why because you're a free testosterone I don't have the number here but they said it's the the high end of normal so I was like should I be shooting up testosterone they're like no you're good you're good just we'll send it over to Freeburg I said all right
great send it over to freyberg it's all good A lot of people take testosterone in their 50s and 60s and I've had a couple of my friends in their early 60s start H is it HGH human growth yeah is that right not a good idea seems like a really bad idea that off menu stuff I don't think it's a good idea I think you got to be careful with the off menu items I think you can get a prescription for it is that right yeah
yeah I know there's something off menu items available to affluent people with the right doctors and I don't think it's a good idea I mean you guys see Bezos he's jacked I didn't bring up anybody specifically but he looks great I think that's just all weights is he going to be president I mean if you had your choice right now between Bezos and Bob Iger who would you
try then Biden I think we know who you'd pick I mean listen I was talking to some affluent people and they everybody's going to some affluent people I don't want to say who but if Vivek is now people are starting to talk Vivek I think he's hitting the right chords man Vivek is about to pass to Santas he will be I think if you look at the polling right now New Hampshire he'll be the clear number two
in about four between four and eight weeks from now 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 are actually pretty meaningful right and then they're like well do I want the 80 year old Trump or do I want the 38. right with
like the super features you know I can forgive all of his other issues when he tells me that he's going to cut the government the federal government by 75 75 my gosh sold so you're right so you're on team Vivek I want to continue to gather a little data there's no rush to make a declaration right now give me a little bit of time come up are you with Vivek yes I and and the reason is I
would love for it to be RFK and Biden in a debate and then Trump and Vivek in a debate so that I could really figure out between RFK and Vivek who I would like to vote for but I think it's been pretty clear that the Democrats have chosen to Railroad rfk's candidacy it's unfortunate because I don't think we're given a real Fair Shake in really being able to evaluate him yeah even the the tractors like
Friedberg you have some pretty significant things that you dislike about RFK which I think are fair they're never going to get a chance to get aired out because you're never going to 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 Vivek has done more in
the last month to convince me that he is fiscally responsible and that he has some intuitions that I think RFK 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 sex where you at
he's unhappy what I would say I think it's too early in the process to say definitively okay this person has to be the person for me I'm viewing candidates as either being acceptable or unacceptable and Vivek is acceptable to me I think desantises too the ones who are unacceptable to me are the ones who would escalate this Ukraine war because I think that avoiding world war three is to me the central issue of
the campaign so for me it's just a litmus test issue I can only support a candidate who would work to end this war not one who had escalated where does our fiscal emergency sit for you in terms of priorities so no World War III Priority One is the fiscal emergency that we're facing priority two or is it overstated by maybe event or others no 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 yeah because it 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 to midterm that you're going to get that kind of bipartisan support no matter who is president whether it's a Democrat or Republican the only issue
that for sure the American president has unilateral discretion 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 of the United States that to me is the overwhelming issue it doesn't mean these other issues aren't important but look at how simple numbers are let me show you this Paul for a second just so we
level set with the audience poll ending September 18 2023 for those of you not watching on YouTube Trump 39 is that or 38 then the vague 13 Haley 12 Christie 11 DeSantis 10 percent that is a stunning Turner yeah that's probably because it's New Hampshire Jake Hill but you know no I know it's just but that's a very critical state right I mean exactly what do you think about
what dalio 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 that 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 effort underway to try an engineer a solution well let's back up first of all I think you asked
the right question to him which is is our decline a matter of physics you know due to forces we can't control or is it 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 it I mean I believe that we can the question is how and I think his view was that somehow you get all these Elites 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 decide who's 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's no solution without bipartisan
bipartisanship here so what is the path to bipartisanship when it comes to the fiscal crisis I'm not sure wouldn't the obvious thing be if one party wins with that as part of their platform then it becomes part of the winning platform and the winning formula or we're just saying that's not even possible because it's too unpopular to tell people that they don't get free money I think it's
political suicide for one party to engage in deep Cuts deep government Cuts deep cuts of programs especially popular programs he'd probably cut the unpopular ones at the margins but political suicide to cut anything important without having the other party on board there's been a couple of times where we've been able to have this type of consensus I mean the one that always gets
mentioned is when Reagan and Tip O'Neill cut a deal and they were able to reform entitlements and make some changes to those programs and they kind of did it arm and arm and that worked and then the other time where it kind of happened not through agreement but almost through lack of agreement was when we had the sequester remember 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 Cuts in both military spending and social spending the idea being that Republicans wanted the military spending the Democrats wanted the social spending and that's ultimately what happened is that they couldn't agree and so you got the sequester and we had some spending 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 argue for cutting military spending except for maybe rokana at our event but the Democrats are completely on board with war now and then on the social spending I don't think either party really wants to cut Social spending either or do entitlement reform so there is no constituency
out there for reigning in the biggest sectors of government spending so I don't see how it's going to happen no matter who the president is well the fourth thing function will be the debt service costs which is just crossed a trillion dollars a year just to pay the interest and it's mounting right 30 of our debt I think is coming up for refinancing in the next 12 months
and that's going to refinance at a five percent rate because that's where the markets are at just like consumers can ignore it Friedberg and put their fingers in their ears and say la la la la I don't have to worry about my payments then the payments show up and you've got to worry about them same thing's going to happen here in the US right the federal budget will get naturally constrained at some point here
but yeah as The Economist service Stein once said if something can't go on forever it won't so I think I think you're right Friedberg it's not Yogi Bears I think yeah if something can't go on forever it won't I think that that's where we're headed is we're going to have restraint impose on us from the outside it's not going to come from Washington people stop buying
treasuries interest rates just have to go up to what's happening in Japan right I mean their bond auctions have uh been very um lukewarm and supposedly a lot of the money in Japan is coming West looking for opportunities to get Alpha so we have an example that we can look to all right let's get we can get started here we have so much to talk about I think we got to give some flowers here last year
the Sultan of science the prince of panic attacks the queen of quinoa was an absolute Terror when I did the all in Summit 2022 and then this year he was an absolute All-Star and Delight what an amazing job you did on the content people are saying the content that all in Summit 2023 is the best conference ever had Bill Gurley got a four minute ovation that talk is on YouTube Elon Musk
star LinkedIn from uh forty thousand feet he crushed it Toby was fantastic Ray dalio Larry Summers Mr Beef Beast Gwyneth Paltrow the bow Tes sisters which we did a pretty good show and I have to say a great job to sax and Friedberg uh who who held the line with the bow Test sisters in our group chess Brian Armstrong who am I missing here I mean what an incredible lineup Nicole Polk Rock Anderson Jenny just Rob
Henderson I mean extraordinary let me just go around the horn chamac your what what um discussion or moment pick your choice there for you was the most intellectually engaging and important at the summit you can mention two or three if you like I thought number one were my outfits pretty great I mean you did do an alpha change twice a day so congrats on that I like this Fortune a really good job with
that I do agree I agree did you guys get the special shoes from Laura Piana oh my God the king's cashmere loafers yeah those are ridiculous I'm wearing them as we speak actually I wore them they're out of night and I can you wear them yet socks yeah yeah those are the most incredible shoes clouds ten pairs or something and yeah and we got four special for us yeah then I get
back to the Beverly Hills Hotel the sweet that freyberg booked me a beautiful sweet thank you Freeburg and there is a Laura shafted me on my room what what yeah let me put you by 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 fine except the problem is the the closet and everything is set for
wheelchair height why didn't you change your room dude and so all Mike and so I thought oh he just [ __ ] me on purpose he just tried to control your little passive aggressive name check so all right you guys got some work to do in the group therapy chat I would never do that to you guys don't worry when I when I organize this Summit I'll make sure these details are perfect I fly onto
moth's plane he has gluten-free Nutella crepes handmade in the morning and I stick him in a handicapped accessible room where he can't even put his bag I mean and I can't put my clothes except without it touching the ground so then I had to play them on the bed and then I had to lay them on this is my first world problems yeah the audience right now is just triggered by the suffering
that you went through at the Beverly Hills 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 Graham Allison oh I could literally talk to him for eight hours a day I feel like and I
don't know him well so I felt like I was scratching 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 sit there listening so I thought he was unbelievably intellectually stimulating for me every time I sit down with Toby I'm just like in awe of how smart and different Toby lootkey is
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 underrated I thought Larry had the line of the summit Larry Summers Rory said self-esteem should come from Achievement and not the opposite which is that achievement should come from self-esteem and he was talking about wokism 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 girlie's obviously presentation was superb but again it's kind of like saying the obvious because it was just so master class but the the from what I expected to what I got those were the three that I thought were the most inspiring and net new positive for me
fantastic sax did you have any moments aside from Gwyneth Paltrow saying she was your favorite bestie other than that being the Claire number one for you and crushing soul-crushing for us I've never even heard that because the uh sound issues we had technical issues during her interview and it got really hard to hear her at various points and I don't think you guys heard that either right
I heard it I tried to ignore it I tried to block it I couldn't I couldn't hear it so I didn't know that yeah well congratulations can we uh can we chew that up right here no we're not doing Victory Laps on the Pod we talked about this on the chat no I mean that's awesome go go for it I want to hear it yeah oh my God no is that his her husband thinks that she is attention oh
oh this is not good David is incredible oh the husband's jealous that's not a good situation for you sex after that what did you like sex be honest you I I want to also give credit to David sacks who um showed up for every talk and Friedberg said uh Jake out the issue I said well anything I can help he said oh well actually uh the issue is I asked David sax to show up at 8 45 for the run
through and he um he won't respond to me can you can you get in touch with him I said let me tell you what's going to happen with David sacks program's going to start at nine he'll be here at 8 56. and if you get him on stage for two out of three talks you did better than I did and friedberg's team which God bless the production board team they did an amazing job these Wolverines are
incredible shout out to Laura Rachel and everybody on the team there they did a fantastic job and sure enough Zach shows up at 8 56 goes on stage and he crushes it so great job uh getting him on stage but congrats on showing up first well they wanted me I mean I asked when's the first Speaker going on stage yeah actually it was 10 a.m right 10 a.m sorry 10 10 10. so I'm like okay in my head I'm thinking okay
I'll be there at 9 59. [Laughter] look I thought the conference was amazing it exceeded my expectations your conference exceeded my expectations too Jake out but I think fever took it to another level and yes he did exceeded my my already high expectations yeah you know highlights I mean I think starting with Ray dalio as the first speaker was really interesting I think we only got
to go for what 30 40 minutes with him I felt like we could have gone for two hours yeah I'll have to bring it back on the Pod and you know drill into that topic more two hours with dalio would be amazing because I think what's really interesting is the way that he's looking at the Grand sweep of History right he's thinking about not just a 10-year business cycle or a 75-year debt cycle
he's looking at a 250-year Empire Cycle I think this is really interesting that he thinks in that really big way I agree Graham Allison really interesting we could have spent two hours with him Larry Summers these are all people I think we should bring back on the Pod for a long-form conversation I agree that bill gurley's talk was one of those great Ted style talks that I
think should go viral I think it has you know I think 200 million people should watch that yeah I mean the people retweeting it are incredible and I was at a dinner party last night and everybody was talking about it so it's it's spread into our industry and it's starting to tip over into other Industries already the chess was really fun I am a game day player that way you know I I brought it and managed to win
the game else I know there are a lot of Great Moments I'm sure forgetting about things I love that I love that yeah the parties were incredible right now the parties were absolutely incredible we missed both of you guys at the Grimes DJ set that was amazing by the way I think chamato's there for that weren't you there no I left right at 10 to fly back to the Bay Area early night yeah I
got it yeah she Grimes thank you to Grimes for doing that for me a personal favor uh the audience lost their minds Santa Monica she was incredible she's such a performer it's incredible yeah people were losing their minds uh for you Freiburg uh best moments uh on stage it was just great to be with everyone and go through it I mean honestly I didn't Source all these speakers you
guys did and so I don't want to take credit for that I think it was what I had hoped you know I went to Ted for 12 years I started going to Ted I think 2007 and I felt pretty disappointed over the last couple of years and I actually spoke to the CEO of Ted and said I'm not going to go anymore because so much of this the talks became kind of social justice type talk nonsense I wouldn't I
don't want to use that term because I do think it's all very well intentioned 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 missed the element of the world is an amazing place we should have a great degree of optimism with technology and where it's taking us we should observe the greater cycle and
the bigger perspective of things that are happening in the world not kind of go into them who done it and who's to blame and US versus them kind of mentality which I think so much of this 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 had a couple hours to be able to share you know those
sorts of perspectives so it was fun I really enjoyed what you did with the conference in terms of the editorial Direction was great you leveled it up certainly from last year as Tremont pointed out correctly and it had a great amount of optimism realism and we didn't talk about Superfluous virtue signaling 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 you know when you have people on this level speaking for for you know very long periods and not long enough but you know that Larry Summers and and you know they really gave you a sense of this is what's important in the world right now
this is the priority and I came away from it so intellectually stimulated that 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 after glow so I just want to say you know once again what an extraordinary uh amount of teamwork just as the moderator of our quartet I felt everybody did a great job
moving the ball around I think everybody was on their game everybody you know I'm talking about the three of you guys we're very focused on just knowing exactly when to insert a great question so I felt like we were playing basketball like the Warriors when they play Prime basketball ball moved really well great questions people picking up on themes threading themes from one talk
to the other and it just made me really excited for next year so I just want to say a great job to each of you thank you back at you yeah back at you listen uh we could talk about ourselves all day but people hate that let's talk about what's going on in the markets yeah we only did it for 40 minutes perfect okay yeah exactly IPO is an m a on fire we've had a ridiculous week six quarters of down Market has suddenly
turned into a bunch of green shoots on the m a front Cisco announced it acquired Splunk for 20 billion dollars in an all-cash deal if the notes are correct here it's about 10 of Cisco's market value somebody did a trade where they they bought a bunch of options and uh so that looked a little fugazi congratulations to Nancy Pelosi on that trade possibly and actually don't forget your favorite
word allegedly allegedly allegedly perhaps I don't know she's good at trades so if somebody's going to make money on that trade or somebody's going to jail so congrats to shkreli instacart clavio and arm all ipoed in the past week and you know they've Fallen back to Earth just crazy stat 21 months since the last significant Venture back company went public I'll leave out like the Middle
Eastern food company was that Cava that went public and then the vacuum company that went public but that's just in the past seven days so we talked about this on the program we discussed hey we'll know when the markets are back if some of these companies are forced to walk the plank slash get public you know and fix their cap tables and sure enough instacart really kind of represents that
most most of the late stage investors in instacart are underwater the early stage folks absolutely crushed it chemov listen you're you're uh Market expert here you've taken 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 IPOs in America and the best way to understand them is to contrast and 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 an IPO you're selling 15 to 20 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 onlys right meaning they don't short they just go long 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 15 to 20 percent and in Europe and Asia the Securities 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 an 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 along it for you know what is at least half a year so it's a it's a non-trivial amount of time so that's what happens in Europe and
Asia 15 to 20 of the company is sold a handful of people anchor and you're locked up for six months now you need to look at how American IPOs are done which is why people have experimented with direct listings we've experimented with spax it's because the fundamental architecture of IPOs are broken they're set up in a dynamic where it's a heads I win tails you lose situation for
the bankers that run the IPO now what happened in these three IPOs number one it was less than 10 percent of the float so highly highly highly concentrated small amount of the of the company was made available for sale number two there really weren't anchors what happened was the allocation of that less than 10 percent was smeared across 50 or 60 different organizations and
then 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 there was 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 mutual funds just dumped everything hmm and the hedge funds were like well 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 IPOs these are 20 and 30 billion dollar hedge funds five and ten million dollar allocations don't move the needle so the hedge fund sold right away and got on
the sidelines and said I don't care about this the long onlys bought just enough to make the stock go up because of such a small Supply then when retail stepped in they just dumped it all and so unfortunately what's happened is all three IPOs within a few days have breached their issue price now they're 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 20 the banks could have found a few anchor buyers the banks could have created a lockup 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 it
in a second that these rates are going to be higher for longer which completely changes how you value these tech companies so net net very poor IPO construction by the Banks and this the grand reopening was a grand closing I think okay so just to put some numbers on that instacart's flow it was 6.7 and clavia's Float 7.6 arms load almost hit the 10 9.4 but certainly less than the 20 that you
would expect so then I guess the follow-up question here sax is why did these companies go out and do 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 IPOs is this going to push a lot more people out to get liquidity even at discounted prices even with the headwinds that jamath points
out or is this going to have a chilling effect and people are going to say you know what let me wait till 2025. so I think they went out because investors and others need liquidity and there's no point holding on and waiting for evaluation that's never going to come back I mean so you take instacart for example their last private round was at 39 billion what's the market cap now
around 10. nine nine so it's great that they got out I I think I know it's at eight today two said eight I mean that look it's sort of a green shoot that they got out but we're never going back to the evaluation level so we had a couple of years ago during a giant zurp created asset bubble so I just think there's no reason to wait and you look at SoftBank they needed the liquidity
from the arm IPO yeah so I think that's why these companies are going out is it's we're kind of getting back to business as usual just to broaden 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 2022 the Market's Creator especially for growth stocks there's a huge correction evaluations
that happened in especially the first half of 2022 but then about a year ago so starting in mid-22 and continuing through Q2 of this year you saw a reduction in growth forecasts everybody started forecasting down there wasn't a single board meeting that I was in in private companies that wasn't missing their numbers and reforesting down and you saw it in the public companies as well I think German
ball sub Stacks showed that the average growth forecast for SAS companies for next 12 months have been cut roughly in half so for the last year year and a half we've been in a software session you could brought say a B2B recession we saw companies like meta Google and so on Cut thousands of jobs tens of thousands of jobs you know get much more efficient yeah each that meant
they were buying a lot less software on a per seat basis so I think we've been through call it a B2B or Enterprise recession but the thing that's held up stronger than I think people might have expected over the past year has been the consumer consumer spending has kept the economy afloat so the b2c part of the economy has been strong whereas B2B has been very weak what I wonder about next
is whether that's going to flip I wonder if the consumer is on their last legs here you see their credit card debt is at an all-time high interest payments on credit card debt all-time high mortgages the rate now is approaching eight percent so no one can afford to sell their house which has a three percent more mortgage and then buy a new one at eight percent so real estate
transactions have cratered the commercial real estate industry is you know on its last legs I think they're starting to throw the keys back to the bank and start forfeiting buildings because they can't refi at a 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 sheets the way that the
Enterprise segment of the accommodate over the past year Friedberg your thoughts on what we're seeing here in terms of the IPO window companies getting out and and the impact that'll have maybe on how limited partners look at Venture funds that's been frozen for 18 months limited partners and I'm raising a fund right now publicly under 506c 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 I'm having people are saying we're not adding managers we're cutting managers and we're cutting commitments to managers but we'd love to meet you know just to start the relationship you know so what do you think this means overall for the limited partner GPS and the startup Market star of 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 Ernst young showing the IPO activity by year and this was through June 30th so if you assume kind of a steady state you probably are going to come in at a volume that's less than 22 and and perhaps even less than going back all the way to 2019 with less than 1200 IPOs during the year compared to the peak of
2400 which happened in 2021 if you go to the next slide and just look at the total dollar volume Rave so that IPO proceeds thus far through June 30th of this year is just around 60 billion compare that to a total of about 180 billion all of last year 450 billion in 2021 and the IPOs we're talking about today instacart clavio arm in total raised about five and a half billion dollars so you know that
kind of doesn't have a huge consequence on this 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 s1s there's basically nothing right now so I think everyone's kind of sitting around waiting to see how these transactions go before they decide to put other stuff I think the big mistake is that we continue to treat IPOs as
this big yardstick 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 of the 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 99.9 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 success or failure of a business and success or failure of the investors in that business so I really hate this whole thing about does the IPO
price go up on a day it's this really weirdly engineered thing that they try and do to drive psychology and marketing by Banks the banks to try and get people to give them more capital or to give them more deals in the future do you think that the IPO Market would be better served if banks were forced to be locked or the the allocations were forced to be six-month flock like the employees of
course maybe longer what if they what if they were locked for 70. what do you think well where would the float come from on day one but why do you need a flip yeah I mean that's that's a good point I I believe the direct listing should be the way that you do this and then you do a um a follow-on offering once you're sharing the problem with the direct listing as I've found as a seller because I went
through a handful of direct listings I went through slack and I went through coinbase coinbase right yeah 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 [Music] now I we learned that so then going into the coinbase IPO
what all the Venture investors did was distributed literally the day before and the day of the direct listing right so that you would get delivered your stock at the highest price so 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 straight down
so I don't exactly know what the answer is I suspect though that getting companies to float at least 15 to 20 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 haven't even talked for a minute about whether any of
us thinks the quality of instacart and clavio and arm are good businesses and this is part of it as well exactly you just spent 15 or 20 minutes debating the stock price that is completely divorced from the reality of these businesses and that's a bunch of distraction that the banks create as well that are that is totally unnecessary I mean what do you guys think about these businesses let me just
respond to the direct listing point I I just want to also point out Spotify went public via direct listing the stock actually traded up after the direct listing it went down a little bit after but it continued to trade up you know into the 2021 era and today it's trading at or above what it was trading at during the direct listing 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 it 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 used Spotify as the example so by the time Spock and then coinbase 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 direct listing meant by the time that we actually dl'd slack and specifically when we dealed coinbase the bank was so sophisticated in telling us here's what's going to happen here's what you should do what do you want to
do and obviously we wanted to do the thing that maximized returns for our LPS so I'm not sure that the Spotify example will ever repeat in a direct listing I think that the slack and coinbase particularly will be the example going forward you'll top tick day one and then the thing will spear down find a bottom and then why does that matter what is isn't it ultimately about finding the real market value for
the company yeah it doesn't matter it doesn't matter that 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 will want to say I agree with you I do think that it's really about business fundamentals but there's a lot of people that
get caught up in the price as what the quality of the business is now those people are maybe not the most sophisticated people in the world but they make a lot of noise for not knowing what's going on and so they can be a real distraction to a CEO trying to run a business I remember in 2008 I think I've told you guys this story it was like November of 2008 Expedia was trading down to seven bucks
and I saw Dara at some event in March Yeah March and he said hey our Stock's at seven bucks I can't believe it I mean like everyone should be buying our stock and that was well off of the price that it had been trading at in 030405 and sure enough if you had bought that stock you know you would have made 15x from there to where we sit today and even more if you sold at the top take in
2021. so you know these yeah that's a that's a good chart so look at where Expedia was in in March of 09 it was right around seven bucks and I think that that was for me like the first example where I really understood that the price where the market trades a stock shouldn't matter as much as the fundamental value of the business if you're willing to be a long-term holder if you're willing to
say and you're willing to do the work and you have to do the work yeah most people are not willing to do the work they want to look at a price and then they want to imbue all of their own psychological desires into it versus what are the actual ones and zeros of a spreadsheet tell you yeah but I'm like a pure efficient mark never shared should be a cell they should be able to sell
whatever people want to buy should buy the market and if the stock gets too cheap there's plenty of capital out there to step in and buy the stock if they think that it's too cheap and the market can find itself so let's do the underwriting of instacart then were any of you guys investors in instacart no they're already I am in a fund that's an instacart from the seed round so I will do I think
very well because of that let's bleep that out thank you uh that's that will be a that'll be a yum yum for jaycal but let's just talk about Revenue when it trickles down all the way to you as an LP what's the real multiple I guess you know if you take out the carry 25 or 30 percent less than uh what looks like to be um the whole fun first so yeah that that fund's been paid back
many times over already so that do you know what the multiple is on that fun for you yeah it'll it was eight million invested and uh no that's their investment that's not your investment yeah what if you look at your investment is that investment is going to be uh 200x 100 or 200x somewhere somewhere in that range I'll I will report back but I think the seed round investors are going to be
hold on so so you're saying eight million will become 1.6 billion I think it's over a billion we can actually have a chart here let's take a look uh let's assume it's a billion 1.6 seems a little high let's say a billion but let's say the fund was what five six hundred million for the lp it's like a 2X I'm just saying that yeah for the fund it was 100x but for the lp it's a 2X I
think that's a big difference right the Fun's already in the black so mitigating factors okay so it's two extra turns of your investment uh meaning if it was a 4X Jason he's saying that it'll become a success yeah yeah something like that yeah I mean it's a good font I'm not disparaging it but I just I'm just trying to set things and put things in proportion I think I think at this point that fund's at 21x
right now something in that range so it's a pretty great fund in in terms of total because let's go to 23x something to that effect yes it's going to be pretty amazing what else was in there Instagram and WhatsApp were also in the fund either before it or with it so they were it's a pretty good fun there were two funds uh I wouldn't say which firm this is um what 12 and 24x I I believe is the
last time I checked them WhatsApp was a monster that was a really well everybody should learn from WhatsApp um and you know shout out to the Sequoia team douglioni I think and um they did every round Jim Gastonia they did every round so it was an internal round for I think four rounds in a row so they just made preemptive offers the reason WhatsApp was a home run is because it
was so Capital efficient yeah I didn't burn that much they didn't raise that much so there's very little dilution yep for everybody let's pull up this uh chart here this is super telling to pull up you know who made money and I think this shows you what happens in a certain environment when people do not look at entry price the series C underwater no no seriously not underwater everybody from F on is
kind of underwater uh and everybody from the series C is underwater compared to the S P 500 to your point free uh free bird even and then everybody who invested in 2020 and 2021 actually lost money General Academy DST D1 T row Fidelity all the late stage folks even Sequoia was in that late stage that series I in 2021 but it was worth 39 billion Not only was it bad for all the late
stage investors who invested at too high a price I would argue that it was bad for the companies and even their early stage investors because these companies got so inefficient the delicious yeah yeah the solution 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 the 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 Nick do you want to just throw up this image that I just sent you this is an example that I saw in axios I thought that this visualization by the way I want to try to use this
visualization in the future because it tries to really it just paints available this picture shows is essentially and this uses instacart as an example but you could use it for any company but it just basically shows you at every point in which you could have invested money in instacart what would the equivalent return have been had you just invested that same amount of money in the S P 500 and the
difference between that is what you would call the alpha right because the S P 500 is the beta meaning it is what the Market's going to do it'll be up 10 it'll be down four percent whatever and so by owning the market you get that if you decide to not own the market and make an explicit decision like owning instacart then you get a different return stream and if you compare the two
you know how much better or worse you would have been so what this chart shows for example is the series F investor in 2018 if you had taken a dollar and put it into instacart would have gotten 13 but if you had put a dollar into the S P 500 you would have gotten 68 percent in the series C in 2015 had you invested a dollar in instacart you would have made 153 percent but the s p would have returned 121. the
difference means that the series C investor generated about 32 Alpha now then the decision you have to make is that 32 percent of incremental gain over the last seven years or eight years was it worth it because you're not liquid and because you have to then solve for illiquidity and other things and this is the math that I think all of the LPS will be engaged in they'll be
doing these calculations it just goes back to what Sax's Point said which is our business frankly did very well in moments where we had zero interest rates our business now when prevailing rates are at five or six percent and you can own those things or you can own structured credit for 11 to 13 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 going to come back with answers like this which is it's not that great and I do think it will impact how limited partners have an appetite to give all of us or you guys folks that are that are accepting LP checks more money because the alternative universe is more liquid it's less volatile and it has roughly the same amount of return I can tell you what they're
saying because I'm doing about a dozen LP meetings a week and I've got 50 more on the calendar until the end of the year so I'm going to hit 100 of these meetings they're really saying two things one we want to go earlier we don't want to go later as that chart proves they're suddenly fascinated with the seed in series a 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 early are you getting in and securing a 10 position in this company and then what's 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 50 million lessons a year the other one gets over 50 million listens a year those 100 million listens result in 20 000
applications I have larger deal flow than anybody with the only exception being Y combinator and that resonates with books um but if you're somebody who's got a new fund and you're like what's your what's your Edge yeah I go to you know some demo days that's not an edge you have to have a massive Competitive Edge and a differentiate you have to be differentiated in some very
credible believable way and they're telling me the same thing they're cutting two funds out of their 20 and then they're cutting their commit commitments to the weaker ones of the other 18. I have a question for all of you guys you had a wonderful question which we never touched guys what do you guys think about the arm business model or the clavio business model have you guys had a chance to look at any of
those companies and think about that yeah I'll meet you up the facts and then you guys respond the revenue is up 15 year-over-year 716 million ad revenues 206 million that's on Pace to make up 28 of their revenue this is just the last quarter I'm talking about it right here end of June 30th net income 114 million they have 600 000 instacart Shoppers those are like uh the drivers you can
think of them like doordashers or Uber drivers 7.7 million monthly active orders the red flags is that their gross transaction volume which is the value of all of the groceries in the in the bags uh is flat but ad revenue is growing this means ad revenue is a just a massively larger percentage of the total revenue they think they can you know they're on track for 800 million in ad
Revenue so this is starting to look not like a e-commerce business but more like a an advertising business your thoughts Freiburg or socks on the actual car business yeah Amazon by the way has that Dynamic too now have you seen the charts showing advertising on Amazon compared to the entire internet yes it's huge and also Uber's 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 levered to interest rates in the economy so when the economy does well more companies advertise when the economy doesn't do well companies advertise less that's number one and number two the ones that can systematically drive
advertising more broadly the Facebooks and the Googles of the world tend to get an increasing share so advertising as a revenue stream I think is is good and complementary unfortunately the markets don't necessarily love it and then the second thing generally speaking for these businesses that drive huge gtbs 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 it's for competitive pressure or whether it's because their suppliers
actually develop more pricing power take rate tends to decay so said in 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 less that you can maybe necessarily pass through I don't know the instacart business at all but if I were starting
to look at it that's where I would focus is what are the assumptions on take rate and if the take rate is going up had it would be a little bit of a head scratcher I think that you have to model the health of the business with a declining growing share yeah 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 25 x multiple on earnings let's take that 800 million you put it at 400 million in profits like if the other business didn't exist so you have 400 million in profits of advertising times that by 20 you get 8 billion that's exactly there market cap so it perhaps what you're saying is exactly what the market is is actually penciling out uh Google which obviously has a lot
of other Technologies I think a 28x PE and Facebook is crushed it like 35 p e but these are much different scale and scale matters this is not one or two billion in you know a little extra revenue on top of your business that's the entirety 90 95 of that I think what's working in favor of instacart is that if you compare it to probably Uber and doordash or Airbnb at least Airbnb Dash I'm gonna guess
that it looks pretty cheap now I think of all the three businesses Dash probably has the biggest upside quite just like again arm's length I don't I don't own any of these three stocks I'm just saying business model quality Dash teams infinitely scalable Airbnb I think probably has long-term issues with take because of this exact reason because just competitive Dynamics and pressure
regulatory capture you're seeing that in New York Airbnb and then the question is what is the business outside the United States look like for instacart I don't know but if I had to figure out what to pay for that's how I would kind of try to break the problem down sax any of your thoughts on the in the actual business here or do you want to jump over to clavia yeah I think uh clavio's
the really interesting one at least from my standpoint because it's a software business I think Jason lemkin had the take here he said that clavio's IPO will be the ultimate yardstick for SAS and 23 and 24 top growth top margins top Founders gonna Cruise past a billion and ARR whatever multiple they end up trading at you home is certainly worth less I think it's trading at about 12 times for
Revenue last quarter they did 165 billion that's 165 million sorry yeah so they're at 650 million in ARR growing 56 percent that's amazing so year over year 51 every year so you know project F4 they're probably going to be at a billion in AR next year 119 nrr which is very good especially considering that is folks yeah it's not Revenue retention 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 subscription base is gonna be there and if it was 80 it would mean 20 of your customers are churning away if it's 119 it means you have expansion from your customer base in other words your customers are buying more and there there will be some who churn but the ones who are expanding more than make up
for that and then they've been very Capital efficient apparently they've only burned 15 million today that does not mean they've only raised 15 million they've raised several hundred million in various growth rounds but they've still got that money in the bank so I assume they raise it as a cushion in case they missed their forecast or something like that yeah it seems like a
pretty strong business but 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 SAS businesses were being valued at 100 times ARR have you had this conversation sax with folks coming in for funding who have great businesses or let's call them good to Great businesses somewhere in that zone they're seven
eight nine businesses but their valuations are way off and do you do you bring up hey here's what your 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 actually aware of public comps now and and they're kind of admitting
hey I get it kind of situation yeah I think Thunder expectations have adjusted on this yeah which it 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 thing is probably happening in the down Market as well so yeah I think everyone's getting more realistic yeah just to finish on clavio
I just want to give a shout out to Toby Lukey the best thing that I saw about that was that Shopify actually owns like 11 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 does Toby support these companies but Shopify ends up owning a huge non-trivial portion I think Shopify owned like 11 or 12 percent of clavio
amazing I think with the sale of the flex Port deliver back to flexport they own 13 or 14 of it I suspect they probably own a non-trivial share of stripe and it's incredible you're right if you do some of the parts on on Shopify their cash and cash and then cash equivalents 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 own it
I haven't done the work but I'm just saying seems like seems like it seems great Travis yeah so I think that brings up a really interesting point which is the only vulnerability or negative I think about clavio's business is the fact that 70 of it is on Shopify so that's a platform dependency and whenever 70 of your business is on one platform you always have to be afraid of
getting the rug pulled out from under you by the way that was PayPal's problem back in the day 20 years ago 70 of our business was on eBay eBay had a competitor we were constantly worried that they were going to pull the rug 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 I think clavio is really
smart creating alignment with Shopify by letting them invest giving them Equity doing a REV share agreement and they would be smart to continue that rev share agreement into the future to take this risk off the table because investors do not like existential risk you could have a perfect business but if there's some hard to quantify risk of the whole thing basically getting rug
pulled then how do you discount that David as an investor you look at that and you're like okay I then price this company as a function of Shopify that's a good point I mean 70 percent of the business is Shopify the way I would look at it is I would price it as a SAS business because Shopify is more of a transaction well they're a transactional slash SAS business clavius is a pure SAS
business I price is a SAS business but I would have to create some sort of discount for the chance that you know well Shopify adds the features how do you figure that out that's a really complicated thing to figure out yeah I agree but I think that clavio mitigates the risks extent they do this like rupture agreement it's a really Savvy move for people who have insights into the market to own pieces of emerging
companies and lock in that partnership this was Emil Michael a shout out at Uber and Travis did this with all of the grabs DDS Etc and then Dara just slowly sold those positions and they were incredible cash a creative to that stock and to running that business let's talk about care table for a second um this also trended on Twitter with the Tweet storm if you don't know what
airtable is it's 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 it uses it a lot of small businesses use it medium-sized businesses and they use it to let's say instead of hiring somebody to build a database system uh or it's like Google Sheets on steroids it's actually a really good product it's a really sick product yeah I've seen it
use like 10 different ways some people use it for tracking uh product feature requests uh and you know task lists some people use it for contact database some people use it for complex project management it's super extensible super easy to use and great collaborative Tool uh if you think about it like it's like a spreadsheet for words instead of numbers yeah yeah but you could also do
numbers so yeah with a lot of great features that you can do really Dynamic things within the spreadsheet do you guys believe in this Swiss army knife approach of building these kinds of things or do you believe that it's just cheaper and simpler to build best-in-class versions of each of those use cases Friedberg that you just I think it allows certain businesses to have a very specific tunable version of
what they need from call it a project management tool so if you use a traditional project management tool it may be too overbuilt or it may be too specific whereas this tool allows you to build something unique for your platform so that's where I've seen a lot of teams use it instead of other tools like jira or whatever for traffic well that's a good point I just wonder that you get
these small non-scalable use cases because then if a company is successful don't they then just migrate to jira for example no I view it a lot like spreadsheets basically the reason people use spreadsheets for so many different things is because everyone's got their own representation of data and utilization of a spreadsheet and I think this is just an extension of that it's
the cult big about it is a more feature-rich spreadsheet tool I actually think that Jamal's question is is an excellent one I I tweeted many years ago that the way I saw Excel was the long tail of use cases that hadn't moved into a dedicated SAS app yet that's interesting yeah and that the way that if you wanted to be a SAS founder you're trying to come up with ideas find some
really complicated Excel spreadsheet that's used across so many different businesses yeah and just figure out if you can move that into a SAS app so for example think about harda you know before Carter people just use a spreadsheet for the cop team and every company totally had a half tablespoon totally but they just move that into specific Sasa so I think there's a lot of that and so and all a spreadsheet is
it's a visual representation of a database with some relational logic that you build into the the cells of the spreadsheet and this this pattern of breaking apart breaking apart a major product was the playbook for Craigslist people looked at Craigslist and said oh there's Couchsurfing make that Airbnb oh there's a ride sharing I'm going to La I have two extra seats that became like
uber so people this Playbook has an original of that too where every category on Craigslist became its own dedicated Marketplace yeah yeah it was one well you know so everybody uses yeah free break everybody uses something different that's interesting when it comes to you that's the one that comes first Craigslist was a huge dating product before dating apps came it was
casual encounters or missed uh what was it called misconnections misconnection is hilarious freedoms like me you the numbers I think the point though the question that I was asking is exactly this which is you have these beefed up workflow things that happen in Excel 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 like that's what's 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 the two companies or yeah two or three companies that represent it best is there's a product called Coda which is part Wiki part air table part database and it's programmable and notion
and now people are making templates in notion and then they're adding things like project management so I asked my team to do project management for events and they tried base camp they were looking at Asana and then somebody was like you know what 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 they want to do is not
because we're cheap I don't want to spend money on another SAS product we don't want to have to teach everybody a new SAS product we don't have to want to do the logins for that so I think it is a natural tension and people are doing both Tremont Phil some people like the best of breed but you're also seeing it I don't know if you saw this past week slack added I think during dreamforce
the ability to give you an AI summary of everything you missed and then Zoom added AI summaries of calls so that feature that uh I guess otter and some other people were doing that feature is now built into Zoom you get you get a transcript 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 me being the note taker sometimes somebody was so those are jobs that are gone and I think it speaks to the bigger economy I had the CEO of kayak on this week in startups this week it'll come out next week it was really great and I asked him about hiring and the size of the company said I'm not hiring anybody in the next year or two because all my developers are 30 or 40
better I got Junior developers that are acting like senior developers I got senior developers who are turning into 10x developers we're not hiring we're just going to have increased margin so what happened to airtable airtable had a massive valuation uh here's the Tweet storm that's somebody from CB insights this guy Anand uh who I think I follow him did something happen or nothing well
they're most recently valued at 11.7 billion in December their 2021 series app his thesis not only is their table worth less than 11.7 billion it's likely worth less than the 1.4 billion in funding it has raised to freeburg's been bringing this point up over and over about the overfunding and cash in is less than the valuation most yeah most of these unicorns are worth less than their total prep stack and this is a
good example I've just been through this this week I went I saw there's a company I was an investor in that I saw this happen contract to do their big problem is I mean they're doing over 100 million of ARR it's a it's a great product and 150 million of ARR that's no small feat the problem is the growth rate I think it's only 15 what do you do with the founder of sex because this was my point earlier
is in these circumstances it's still a good business investors are going to want to own these shares at some price someone will buy new shares at some price but but to do this transaction given that the preference in the company which is effectively debt is greater than the value of the company the founders and the employees get their ownership Stakes wiped out so if you
want to I think you know I think their only hope is to go public because that wipes out the prep stack and everyone basically just owns their percentage of the company if they don't go public private investor do that why would a preferred investor allow that to happen well this is going to be the huge tension on the board is that if you're a common holder or if you're one of the
early investors of the company you want to go public if you're a late stage investor you don't want to give up your preference but those late stage people sex did not have blocker rights in many cases because the market was so hot they just put the money in without yeah I mean unless they had a ratchet into the IPO but yeah yeah but in many cases but that's not a universal truth right it in
almost in the majority of these cases the preferred shareholders do have significant representation on the board they do have the ability to influence whether or not the company 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
founders yeah that in doordash I think they all just got dragged out they didn't have a choice my understanding of some of these late rounds during Peak zurp 20 20 21 from talking to Bill Gurley which people did not negotiate those rights those rights the blocker rights weren't available and If 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 uh Ford price to sales multiple 78x for an 11.7 billion dollar valuation at 150 million ARR and you compare it to the trailing price to sales multiples in the project management space Mondays at 12x plus Asana 6.6 acts and smartsheets at just around 8X so it's a challenge yeah well to freeburg's point
one of the downsides of taking all this excessive Capital at these ridiculous valuations is that it produces a dynamic in your boardroom where your board members are at war with each other the late stage investors are going to be at war with the early stage investors and the founders and who knows who comes out on top of that thing that's not something Dynamic I don't know if you guys have but I've got like so many
anecdotes over the last couple of months on this exact scenario playing out an amalgamation of those you know without talking about specific ones but you know you can make yeah what is the dynamic and how does it work itself out investor invested a multi-billion dollar valuation the company is now worth 20 of that valuation and the investors have more money in the
company than it is worth and the company needs more cash they can't go public at this rate because the markets are shut down no one's 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 of the company in almost all of these cases the CEO has been replaced or they're with some professional CEO so
there's a new Option pool created equal to 10 to 15 of the company new options are issued and a round is done at a significant discount and there's a huge recap and a pay to play and all this other sort of stuff starts to play out that the original Founders in 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 a 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 20 to 2 percent they're like why would I keep working for two percent I'm fully vested I'm Gonna Leave the management team's like wait a second I'm getting offers left and right to go join other companies and so it's a real kind of nasty unwinding and I think that's the scary scenario that's likely going to play out not all but a good chunk of these companies that
are there are still business Services 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 would look incredible at whatever the true valuation is today but if you have the psychological hindsight bias of what the price was two years ago
you just can't see that you get it totally can't get it and by the way I will say and there's structure there's like Legacy structure in the cap table from yeah yeah meaning there's like this prep stack I will say that the terms are so crazy good for the recap that investors are clawing their way into the recap round well that means oh my God nature markets are healing that's means we're
in the end game right that's part of what's happening it's totally predatory it's totally predatory is like 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 oh yeah they don't care they don't care they don't care about their audience
exactly and all these Recaps turn into a disaster yeah well it's recap or you're going to go out of business so I mean this is a forcing function and everybody partied too hard I think it's time for everybody's favorite part of the show which is to give chamoth his flowers here we go the FED spoke this week and it's time for Fortune moth to take his Victory lap here he goes everybody is this
evangelis yes evangelis doing Chariots of Fire this week the FED said to quote Shema well this is this is but interesting connections to the Deep state for longer there he is there's shrimach leading the pack I sent my I sent my talking points from six months ago to my deeps up to our friend deep State [ __ ] deep style sent the note and deep statement sent it to the fed and then fed just cut and pasted it
into them will stay higher for longer absolutely we don't care who cares I don't think anyone understands what it is that jamas said that he's taking the Victory lap on once you see the subject that rates will stay higher for longer and now he takes his Victory lap all right enough of the shenanigans chamat said rates will stay higher for longer the FED said rates will stay higher for longer at the end
congratulations Jamal you got it right thanks okay we're going to give our chariots a fire [Applause] can you sell the metal in the group chat this is when Obama who is Obama giving the medal to what's the real picture here it's Obama is he giving it to him well I think he's getting it I thought it was so so I think what happened this week is actually pretty important because
I think the markets were really trying to force Jerome Powell 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 reprice 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 going to have a big impact on inflation because of the way that owner equivalent rents and core CPI is calculated because it's calculated on this six-month lag this dumb nonsense of just how arcane our system works but that's going to spike down so basically the fed's like saying we know all of this is happening we're sitting on our hands but the problem is that if you add another
100 basis points to your discount rate for an unprofitable SAS company my gosh guys you're taking like another turn and a half of market cap out of the business like if you thought it was worth eight times it's not 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 gonna just
kind of meander along 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 in a holding pattern for a while crude oil uh is at uh let's see 89 a barrel yeah it's it's you know I told remember remember this conversation I told my CEOs guys let's get enough cash to last through the middle of 25. sure remember
I was pretty clear about that to folks I mean get to get to default alive but if you can't please have enough money to the mid of 25 I think that that was wrong I think now you got to be q1 of 26 and maybe even mid 26 so now I have to go back to all these CEOs and redo an entire justification for why they need to cut even more people cut even more expense cut more burn I don't know where we're gonna 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 timing wrong yeah just to further translate this okay so the markets right now are definitely taking a bath the growth stocks are off significantly expect them to be off more yeah and the reason is because the market starts at
price in rate Cuts next year and now the FED is saying that because inflation ticked up a little bit it's not coming down as much we have higher energy prices we may not get those rate Cuts I think the FED still maintains that we'll get 50 basis points or rate Cuts next year but the market was pricing in more and I think people are starting to wonder if we'll even get the 50.
so as a result of that interest rates are going to stay higher longer which means that risk Capital will be less available so valuations are going to go down or at least they're not going to be racing back up like they used to when I was saying mid 25 sax that was because the forward curves started showing Cuts in early 23. you know what I mean so I was like okay let's assume they're wrong by 18 months
it turns out that that initial data point in early 22 my God we were wrong by three years not a year and a half it's brutal and I think the X Factor here is that we're running almost two trillion dollar deficits in peacetime well I mean we're not in a direct War we're in a proxy war but in relative peace time and in a relatively decent economy so what happens if either of those things change
and what happens to long-term rates as all of these debt issuances you have to get raised as the FED has to keep selling more treasuries to fund our deficit in debt at these higher rates do long-term rates keep going up based on the debt financing needs of the federal government and then this is again where you know we made a huge mistake by politicizing this idea of raising money Beyond 30 years we made
that mistake under the Trump presidency because people reacted to Trump saying it but it was the smartest thing we could have done to give our kids and our grandkids a reasonable economy and Friedberg has been right all along about just like our spending is just going up and up and up and now short-term rates are really high maybe we'll have enough political will to just get out of the
fed's way and the FED can actually look at raising in durations past 30 years because if you believe that we're going to start an aggressive cutting cycle at some point and you believe we'll get back to like a two percent terminal rate you could theoretically justify 50 60-year bonds at much lower than the third year but I don't see it happening here's um a really good way to
look at this there are prediction markets this one call she is when I use k-a-l-s-h-i chances of a rate cut by May of 2024 29 chance and these are people actually making bets on these things and so it has gotten pushed out and I guess 74 Chance by the fourth quarter third fourth quarter of next year people think they'll be already cut so we're a year away from a rate 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 got a Beat five six seven percent or whatever people are going to get on those other instruments corporate debt you know 10 11 12 you got a really hard bogey 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 well I'm saying if there's a bunch of startups that are going to make 100 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 that Capital to generate a higher return which is on your day-to-day basis means what Freebird explain on a day-to-day basis on a daily basis it means there's gonna be less companies that are going to get funded but more importantly it's going to be less LP money going into Venture and there's going to be less Capital available to fund startups in
aggregate by significant amount on a daily basis you need to do more with less as a Founder you need to Delight customers with less resources spend less money on marketing spend less money on teams yeah and get to profitability you've got to be a stronger founder I'm seeing it across the board in the seed stage two three four Founders raising 250 to a million instead of raising
three to five I gotta be honest Jacob I thought it was much easier to kind of say the sky was falling this time last year right now and I think that people are a little bit again exhausted about hearing this message constantly of like cup more it's like I think that they're exhausted and I see a lot of Founders that are exhausted and giving up there's a lot of giving up they're like they're like I
can't cut anymore and now I do think we have to go back to them and say if we're doing our jobs right okay even okay now are strategic viewers right but the time scale of our analysis was wrong and I think now you got a plan to mid-26 I don't even know where to start to be honest with that conversation actually that what I'm seeing is people are merging companies and M A's picking up
because hey you got two companies doing five million each but they're burning 2 million each a year cut half the team put one team with the other and I think you're going to just see some of that portfolio consolidation happen go ahead 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 a
regime of capital abundance to a regime of capital scarcity and I think a lot of people were holding out hope that there's gonna be a quick bounce back because we'd cut these interest rates and capital would start flowing again in a big way and I think that the FED here has dumped a bucket of cold water on the markets basically saying we're not bouncing back to Capital abundance anytime soon we're going to be in this
environment of more Capital scarcity and that's what I think just Founders and VCS now have to take into account is this shift could be permanent or it could it could last a while it could last five ten years sure we're seeing a lot of the question 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 economy has kind of taken its licks I mean for the last year we've been in this software recession companies have been sharpening their pencils they've been cutting costs and getting more efficient yes you could say maybe they haven't 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 highs they're going to they can't sell their house no here's what they're going to do they're going to skip an iPhone cycle instead of going from you know 13 to 14 or 14 to 15 they're going to go 13 to 16 for 14 to 17. they'll just skip which which I did for the first time I don't need to skip it but I was just like this 13 is good
enough they're going to skip upgrading their car you're going to keep your car for an extra two or three years and uh if you were thinking about moving your house you're gonna say you know what I'm going to make this house work uh we're gonna put two of the kids in order 100 right I think that is that is I think that's very I think that's very well said 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's that the unions have proposed to the automakers will cause them from I thought I saw an out an analysis of Ford where Ford would go if you just did a pro forma and went back the last couple
years they would have gone from like you know 30 billion of profits to minus 17 billion of losses so that's a 47 billion dollar swing in the Ford p l the only way they overcome that is with more expensive cars which Jason to your point means that those cars are not going to get sold I do think that you're going to just have a little bit of belt tightening in the in the consumer I
think this is interesting I think you know traumath you're right that at 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 demanding oh I think this is existing higher wages yeah for a four day work week how does this one day work week I think that the
the labor deal is an existence risk to the unionized Auto industry in America and I'm not opining on whether this deal should or should not happen I'm just making an observation if the deal as announced happens and you sensitize stalantis GM and Ford's p l to these new terms and then you compare that against non-unionized highly automated organizations like Tesla and rivian it's going to be 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 meeting they were being hawkish about race they also said that they were expecting unemployment next year to be 4.1 percent down from their previous expectation of 4.5 percent and they
forecast the economic growth would be higher so I just don't understand how these countervailing forces aren't going to create so much stress in the economy that something breaks and these uh idiot unions honestly their timing is so dumb whether it's the ones uh you know in Hollywood or this car strike while they're shutting that's great it's great for Tesla I mean it's giving Tesla the
entire U.S auto market yeah Tesla is lowering the price when I bought my model y long range I think I paid 72 for it the old price on this chart says 66. that car is now 53. that's down 20 a 13 000 saves the model y long range I think is the greatest vehicle ever made I page 57 I think for my model y long range oh no no I think I sorry I paid 57 I paid this price for
the model y performance the best car and yeah that'll be a forty thousand dollar car in the next three years well you know and I looked at it and I it's speaking of austerity measures I I was like I have a model X do I get another model X I think I'll just go with the model y because the model X is I don't know 50 more and I I just prefer the model I think I think this labor deal is
going to put tremendous pressure on these established Auto ovms China is now the world's largest exporter from what I understand that just happened they work I looked it up 58 to 64 hours a week Factory workers the U.S Factory workers want to work 32 hours a week they want a four day work week I mean 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 reasonable 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 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 that Union member's pension yes it may destroy the company and this is my concern is that then that has to get bailed up by by the U.S taxpayer 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 discussed nobody in the media is really talking about it they make it a a moral issue of like what is the CEO pay versus what is the ratio of multiple yeah and yeah sure look that's an
important issue at some level but if you if for example like you have U.S senators blathering on about how they'll wear a suit and not look like a homeless bum if this deal happens in that and it's like well that's not 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 Mira they basically talked about whatever billions of dollars in profits the companies previously had during the serp environment during the Heyday and yeah it's just timings off just add it to the list of latent problems in this economy
it just feels to me like something's about to break but who knows I mean if the zero points asks you you keep bringing up like what happens with the consumer yeah I think they just slow their role you know staycation instead of your conversation what Larry Summers said at the summit he said that soft Landings are like second marriages the Triumph of Hope over experience yes meaning everyone's talking about a soft
Landing everyone's banking on a soft Landing but soft Landings 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 it causes recessions and then I would know you've already been in a B2B recession we're starting to come out of that but I think the
consumer hasn't been hit yet and maybe that has to do 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 what all of these strikes you if you overplay your hand chamoth is automation so this happened in New York just over 10 years ago the
fast food workers wanted you know I think it was 15 20 bucks an hour okay seems reasonable and they replaced every cashier you go to McDonald's now you're ordering on the app or you're ordering on a kiosk in the space and we have an investment in a company called hello meter what 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't hire people there's not enough immigrants in the country anymore we have an anti-immigration thing going on here so unemployment's too low and the the salaries are too high it's not working a lot of restaurants are breaking because a 30 or 40 dishwasher is the difference between a com you know
a restaurant being profitable or not all right listen there's apparently some potential major breakthrough in autoimmune disease treatment with this new inverse vaccine let's go to our science correspondence the Sultan of science himself for science corner the taxes turns his camera off wow he'll be back oh he's back I'm here or I'm here jeez you wouldn't even let me get away with that nope
uh we were Zoom shaming you do not leave you could learn something sucks my super gut I just have my super gut chocolate oh so good I just got my super protein and uh the weight loss continues Health boosting my gut is so good there was a paper published in the journal Nature this week which I thought was worth highlighting sex you're going to be quizzed afterwards on exactly what I say during this this and the
implications for it we've all heard of and know folks that have autoimmune conditions and some of us may suffer from them an autoimmune condition is when our immune system mounts an attack against A 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 antigen so the term antigen refers to proteins that
the immune system views as invading and it needs to go in and attack so when the immune system messes up and it sees a protein in our body as being a foreign antigen and starts attacking it you get these autoimmune conditions and autoimmune conditions as you know are very debilitating cost on the health system on people's lives the top 10 autoimmune diseases rheumatoid arthritis
even type 1 diabetes multiple sclerosis irritable bowel Sjogren's Hashimoto's thyroiditis these are all pretty in different ways damaging diseases so this team at University of Chicago in 2019 published a paper where they actually took an antigen and glycosylated it so basically attached some sugar molecules and carbohydrate molecules to it and presented it in the liver so they
put it into the blood and it showed up in the liver and they were able to cause type 1 diabetes to not develop in an animal model That was supposed to get type 1 diabetes so they did an extension of that work and the team has gotten broader and they just published this week a much more substantive paper that highlights a pretty incredible technique that may potentially address a long list of autoimmune conditions so
they take the antigen the protein that is are you saying sorry in the type 1 example are you saying like the beta cells didn't get destroyed like it just stopped it just stopped everything on the dime yeah so the immune system has a bunch of ways for self-regulating there are T cells in our body called t-reg cells or regulatory T cells their job is to go find the T cells and the
antibodies that are attacking our own protein that's their job and when they don't do their job the antibodies and the T cells go and attack our own body so T-Rex cells kind of when they're turned off they're not 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 immune system recognizes that protein as being a safe protein and
there's a regulatory process that gets kicked off that causes the immune system to start to see that protein as being safe it should not be attacked and t-reg cells start to develop and other systems start to develop that tell the whole immune system stop attacking this protein this is a safe protein this is our body this is like friendly fire right like do not it's like Friendly Fire do not
attack this protein so what they did is they took several antigens proteins and it glycosylated them meaning they put some you know molecules on them put them in the in the blood just with an IV hookup they go into the liver and once they're in the liver the immune system sees them and it's like whoa these are totally safe now and they sound by analyzing all the
different T cells the regulatory pathway that emerged that caused the body to stop attacking that protein and they were able to end MS using this induced system in animals so basically that we have a known model for making multiple sclerosis show up in animals and they were able to stop Ms in the Animals by taking this particular protein that they use for Ms and they put it in the in the liver through uh IV
they did the same with an egg allergy and they did the same with several other antigens this represents a very novel and seemingly super impactful and Powerful way to think about eliminating autoimmune disease going forward is that we can take the antigen and we now know the antigen or the protein that causes almost all of these autoimmune conditions from thyroiditis to lupus to
ra to Ms and we can take that protein glycosylated put it in an IV ends up in our liver gets presented and 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 addressing all autoimmune conditions it's a totally new modality it's a very interesting approach it'll be he studied more deeply folks will
take this paper and try and start to develop very specific Therapeutics for very specific autoimmune conditions using this approach and hopefully over the next couple of years we see some of these things have success gain traction and go to market these autoimmune diseases are typically some combination of genetic and environmental so this is not attacking them on that basis it's
attacking them in a different modality you know there's two ways that we address autoimmune conditions today the first one is by presenting the antigen to the immune system before you develop autoimmunity this is like you know when they give little bits of peanuts to kids and yeah that's how you present prevent peanut allergies in most autoimmune conditions we're past that point the
immune system has already developed T cells and antibodies to go and attack so that doesn't work the second way is immune suppression and that's terrible globally suppressing meaning on the whole body turning off the immune system is not healthy in a lot of ways and that's the current you know kind of Best in Class so this is a new approach which is we can actually re-regulate the immune
system to not attack itself to not attack our own proteins by introducing that protein with with what's called glycosylation getting it 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 others uh sorry for the stupid basic question but how is the uh
how is it different when we put these into say like uh you said these were monkeys or chimpanzees so how are their anuses different than Uranus what sorry anyway let's keep going here great science corner I'm laughing at how contorted that you go you punch it up to these workshops let me work on punching it up we'll try to get a better Uranus anyway it's super cool autoimmune conditions the world's
getting better the tournament refers to an approach to a therapeutic and this modality 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 autoimmune conditions ranging from time okay let me try hold on yeah that's on the science one free bird what part of the body do you think is going to be most impacted by these discoveries now
the immune system no no no that's not good okay here we go you guys are just so just tell them about science okay all right here we go okay here we go Freeburg I thought the only solution to Ms was uh fecal transplantation through Uranus yeah uh a misdirection there with the fecal transplant and then we came back to get that done we're gonna wrap here thanks to everybody who came uh Brian Armstrong
also did a great job Elon 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 podcast Twitter handle and type all in podcast on YouTube and you get to see all these talks uh available now and Rey from The Unofficial all-in podcast meetups is
doing a hundred fiftieth uh Meetup for the fans in all different cities around the world so just do a Google search for that for the Sultan of Science and the world's greatest conference producer the dictator in the arena making it happen and four [Music] favorite bestie David sax moderate we'll see you next time bye bye we'll let your winners ride Rain Man David attack [Music] besties [Music] oh [Music]