All-In with Chamath, Jason, Sacks & Friedberg - E62: Elizabeth Holmes verdict, fraud origins & takeaways, navigating 'The Great Markdown' & more

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Happy New Year. Happy New Year. Happy New Year. Guys, listen,

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Karen? Happy New Year. Candle Karen’s are going to be

Karen. Candle Karen’s are calling it right now. The DMs

are coming. You guys wanna hear about poker last night? Oh,

did you go? So, I go down. I take my eight-hour drive down

south to and I pull in and you know, the security guard

greets me nicely as always. I walk in and I walk towards the

poker room and everyone’s in there with the door open like

someone just got shot. Masks on freaking out and Chamath is

inside the house and I wave and he’s like, get in here and then

I go in. He’s like, oh, who is positive? Max, the dealer

tested positive and everyone been hanging out in the poker

room with no masks on. Uh oh. And so, you know, they’re super

spread out. The only the only two people that were exposed to

Max we sent home. Yeah. So, everyone starts freaking out.

It shuts the shuts the poker game down. Chamath kicks

everyone out, sends everyone home, and then he’s like,

alright, let’s go have dinner inside. You know, we’re we’re

not, we’re gonna, we open up all the doors. We’re gonna kind

of Lysol the room tomorrow. We all go in and have dinner or

you know, Chamath and I go in and have dinner with Matt and

the kids and then Chamath starts thinking, you know what?

It’s okay. They were only exposed for a few seconds. Let’s

call Phil back. Okay, let’s call back. Let’s call Keating

back and then they all come back for dinner and at this

point, it’s become like a dinner party and then a couple

of glasses of wine in and then it’s like, you know what? The

room’s probably safe. I mean, the whole poker night went

through the entire cycle of psychology of COVID. The the

whole pandemic is like, oh my god. Get everyone out. Lock up

and then by the end of the night, it was like, you know

what? Let’s go in the room and just play poker and give each

other COVID. They got to acceptance. They got to

acceptance. They went through the whole emotional cycle of

the pandemic in one hour. Does anyone know anyone who’s a

serious case of Omicron? No. I mean, I know dozens of people

at this point and they all say it was a cold. Yeah. Dozens of

people and that’s just for Jake. I was on social media.

Jake, I was on social media giving everyone the update

like, oh, I sneezed today. I’m oh, I still tested positive.

He’s like showing his positive test.

But I was doing that as a service. My superfans, my

stans were concerned. It’s the only good test result J Cal’s

ever had. Yeah, exactly. It’s the only positive. That’s true.

Don’t let your winners ride.

Rain man, David Sachs.

And it said, we open sourced it to the fans and they’ve just

gone crazy with it. Love you guys. Nice queen of quinoa.

Elizabeth Holmes has been found guilty on four counts of fraud

faces 20 years in prison for each guilty count they would be

I understand served concurrently. Most people I hear

speculating four to 10 years and then I think you can get 15%

off for good behavior. Again, I’m no expert on that. But

that’s what I read. Guilty counts were two counts of wire

fraud and two counts of conspiracy to commit fraud. She

was originally charged with a total of 11 counts of fraud.

Four were guilty for we’re not guilty. Three were a split

verdict. The jury said they were unable to come to a unanimous

unanimous verdict on three of the counts after more than 45

hours of deliberation quote from the Wall Street Journal article

juries were persuaded that Miss Holmes conspired to defraud

investors. This outcome could be significant because it means

hundreds of millions of dollars of there are no investors that

there are those investors lost could be taken into consideration

during her sentencing is big numbers. The jury was split

however, on which of the six investors who testified were

defrauded the jurors convicted Miss Holmes on three counts.

These included $100 million from the family office of former

educator, ed education details J. Cal’s doing it for the

audience. So anyway, thoughts on the legal technicalities of

the case, counselor sex? Well, we’ve talked about this before.

I mean, I think so at the end of the day, she was convicted on

the counts related to deceiving investors. She was not on the

counts related to patients. I think that makes sense in that

her obligations to investors are very clear. Whereas I think

the the patient related duties are I mean, she had them, but

it’s a little bit less clear. So I mean, look, it’s what we’ve

always said here. As a founder, you can be as messianic as you

want to be, you can promise, you know, anything about your

vision and what you intended to the future. But what you must

do is be accurate about the current state of your business,

you cannot lie about the deals that you’ve made about the

current capabilities of your product. And she was putting,

you know, logos of customers she didn’t have in her deck, she

was lying about the military being a customer. So she simply

exactly misrepresented where she was at that time at the at

when these investors invested, and that was the red line she

should not have crossed. And I think in that sense, it’s a

pretty simple case. I think, you know, the part of this, again,

you know, the piece of this that’s interesting, is not the

case itself, but really the media coverage, because the

media wants to portray this case as an indictment of Silicon

Valley. And the thing you keep hearing over and over again,

none of us were involved.

Well, it just factually, yes, exactly. We weren’t involved.

But what you like, so there’s not a single person in Silicon

Valley, I think, who put in a single shekel into this thing,

who actually does this as a real job, Tim Draper. Well, he

doesn’t put in a little bit money as an angel. And then he

didn’t put a single dollar in after that, I’m saying, you

know, you didn’t come to social capital or graph ventures, or

to Sequoia, or to TPB, or to Google, to raise money for this

thing. None of that happened. You know, Saks is right, like

the the summary of the Wall Street Journal, Nick, you can

post it, because I put it in the group chat, basically

summarize the fraud. And it’s exactly what Saks says she

affixed the logo of specifically, I think it was

Pfizer, that had not validated their own assist technology in

materials she presented to investors. So she’s basically

like Pfizer said, this is a go. And apparently, that wasn’t

true. She gave the false impression that the devices were

used by the US military. That’s what got all these military

folks to sign on board and support it. That wasn’t true.

And then and then she, the biggest coup was that she

signed a deal with Walgreens and Safeway to include its

devices in hundreds of stores. And then many investors saw

these contracts as an endorsement of the technology

and growth potential. But basically, those folks did no

diligence and bought the hype. And so it was just a whole

cycle of this thing that basically fell apart because

the test didn’t work. Freeberg. What are your thoughts as our

life science guru? What’s most interesting to me is how does

this get to this point? If you’re Elizabeth Holmes, you’re

19 years old, and you start telling your story, and the

more grandiose the story you tell is the better the reaction

you get is, it becomes reinforcing, and the behavior

extends a little bit further and a little bit further. Every

time she told a story about how incredible this tech was, it’s

just one drop, you take one drop, it can measure everything.

When she simplified it and reduced it to that, and it was

such an incredible statement, and she saw the reaction from

people, she’s like, wow, that works. Let me repeat it. It’s

like any good salesperson, they figure out what sells, and then

they sell it, and then they repeat. And what’s interesting

to me that, you know, you talk about the media, but when she

went out and told her story, and got incredible press coverage,

because she was a young female doing something that was going

to save lives. There was this altruistic Steve Jobs esque

kind of combination here. The media wrote a glowing review of

her. And then she said, wow, look, they said something great.

Let me go do that again. And she got a bigger media piece

written a bigger media piece. And the more she said, the

bigger she said it, the more she claimed she could do, the

bigger the story got, the more coverage she got. And the whole

thing became this kind of reinforcing cycle. And I do

think that the press coverage that she got, as she was

building this business, which helped her raise capital helped

her attract employees helped her get Walgreens and Safeway to

the table, allow her downfall, it allowed her to build the

business. But it’s exactly what created the narrative that

wasn’t true. And so the coverage that the press gave her and we

see this every day, you guys all see these top 50 companies.

And we all know, having met a lot of these companies, as you

go down that list, this, this 20 companies are total scam

companies, or fraud, they’re not going to work, they’re grifters,

all the stuff that you guys might say about the quality of

those businesses. But the press reporter isn’t doing diligence,

they’re not a no, you know, it turns out all the diligence was

done after the fact. And then it’s like, well, maybe we should

go do some diligence. Oh, wait a second. Because the press

coverage has now created this hype story about who and what

she is. The diligence actually pays off, because you have

something to take apart. If she was just a nobody startup that

raised $30 million, and they’re still trying to figure out their

way, there would be no value in any reporter doing diligence on

her and trying to figure out what was actually there. It was

because the story got big, that it gave everyone including John

carry you an incentive. He’s the Wall Street Journal reporter

who broke all this and incentive to go in and take this thing

apart. And so it’s really unfortunate, and it’s really

self reinforcing that the press coverage that created the

circumstance here, ultimately also enabled them the press to

take the thing apart, and you know, land land this woman in

jail. And I’m not saying she did nothing wrong. But I’m just

saying that there’s a system here. And the system is set up

in such a way that she manipulated the press. Yeah,


let me ask you a question, you freeberg. And then I got a

question for Saxon Shema, her basic premise, that one drop of

blood could get you hundreds of results. Let me just ask you a

question freeberg. At what point would one drop of blood or so a

nanotube be able to at our current technological, you know,

ramp, be able to give us 100 different data points on a


every time you’re generating a data point, you’re running

what’s called an assay, which is a measurement of something.

The question is, how much of a molecule are you measuring

against what volume? Is there enough of that molecule in that

volume to give you a statistically good reading. And

that is a function of how precisely you can measure that

thing. So there are there are great advances happening right

now in a domain in life sciences of hardware technology

called microfluidics. This is the manipulation of Pico leader,

you know, very, very small volumes of liquid, and then

being able to run chemical assays using biochemical

techniques, which we now have all these amazing new kind of

tools like CRISPR and other things that would allow us to

get a much more precise measurement with a much smaller

volume than has ever been possible. So we can manipulate

small fluids, we can measure them. So there’s nothing today

that would physically say, we cannot do many of the things

that she claimed to have been able to do. But there are

there’s a stacking of technology assets that need to be done to

make that happen in reality,

take a guess, each of those assets are very different. So

look, you could do it with cholesterol right now, you could

do it with blood sugar right now. But you couldn’t do both.

You could, theoretically, you could put them into a device

and do that. No, the reason the reason why lipids work, can you

do 400 things we cannot, we cannot, I’ve actually funded

three of these businesses, and I’ve poured almost 100 million

dollars of money into it, and they’ve all failed. And the

reason is exactly what he said, you can do cholesterol because

lipids are big enough, you know, and so you can basically

build an assay that can pick that off with a drop of blood,

you can do a reasonably good job with pretty large error bars on

sugar. But all of this other stuff where you’re going to

replace like a, you know, a CBC, or these broad, you know,

profile panels that we all get once a year to assess our

health. Today, I don’t think that that’s necessarily within

reach, it’s not within technological reach. And it’s

not because people aren’t, you know, smart enough, it’s just

that not enough of this investment is happening. Because

then you go back to this whole idea where the funding cycle

needs to see a big payoff for the capitalists to want to get

involved in this thing. And there really isn’t, you know,

it’s not as if, like quest and lab core are printing $400

billion of revenue and profits. And so it’s not like there’s a

massive economic incentive to run in. And so even when you

know, we have tried and multiple occasions with completely

different teams of incredible people, every single time we

have failed. So there’s a physics law here, that’s just

not physically possible. She made this claim.

And don’t don’t make it broad. There are things there are

molecules, there are pathogens, there are things you can

absolutely detect small molecules, molecules, you can

you can detect with a drop of blood, you know, magic counting

how many blood cells you have in your whole body, you know,

using an estimate from a single droplet of blood, because you

know, we have these machines called flow cytometry machines

where we sort blood cells. And then it’ll tell you how many

red blood cells you have, and how many different kinds of

white blood cells, that’s a big part of your annual checkup

that you’ll typically get, you know, you need a good amount of

blood to get an accurate reading on how many blood cells there

are using even just using lasers, and you know, these

sophisticated machines, can you reduce that down to a droplet

physically, probably not right. And so there’s some, it’s not

universal to say this is possible, it’s not possible,

there are elements that are absolutely possible, some of

which are being done today. And there are some things that are

going to be very hard to pull off.

Got it. And she was making these claims as early as 2003

when it was founded. So we’re talking about 19 years ago. And

we’re saying here, it’s not going to be possible to do

hundreds of these things, maybe in our lifetime, we’re talking

about decades from there may need to be some significant

breakthrough. Saks, let me ask you a legal question. I was on a

podcast, and I said to them, why haven’t the prosecutors had

Bill Maris, who is a friend of freebergs who helped me get him

on the podcast. He was great. Thank you for that. David, on

this week and startups, very smart guy, very smart guy. And

he came out publicly when he was running Google Ventures. And he

said, we looked at it a couple of times, he’s referring to

their nose. But there was so much hand waving, like, look

over here, that we couldn’t figure it out. So we just had

someone from our life science investment team go into

Walgreens and take the test. And it wasn’t that difficult for

anyone to determine that things may not have been not be what

they seem here. Now, Saks, I was on this podcast, the dropout

which I think is an ABC News one. And I said, why didn’t the

prosecution bring up, you know, GV, let’s assume Sequoia and

recent and, you know, the 20 top firms in the valley, who said

no, and they all said no, because she wouldn’t show them

due diligence. And I asked them, why didn’t the prosecutors

bring up those 20 firms and compel them to testify about why

they didn’t invest to give the counter example. And she said,

I don’t know. Wouldn’t that have been a much better strategy to

say, here are the credible people who didn’t invest?

I’m not sure I see the relevance of that, because Elizabeth

Holmes crime was not promising something that she couldn’t

ultimately deliver on. It’s okay to fail in Silicon Valley.

One of the best things about Silicon Valley is that we don’t

punish failure. Her mistake was making misrepresentations to

the people who did invest.


If anything, actually, what Elizabeth Holmes maybe should

have done was call up some of those firms. And they could

have said how easy it was for them to figure out that they

shouldn’t have invested. Maybe that would have been a way to

kind of muddy the waters on her side.

I was thinking that they would have said, hey, she wouldn’t

show us the technology. And when we did our independent

diligence, she wouldn’t let us diligence we did outside back

door diligence. It failed.

There were red flags all over this thing we had talked about

in our poker games way before this thing went off the rails.

The fact that there were no major VC firms involved who

had expertise in biotech who could do the diligence.

It was all sort of, it was basically family office money

of people who weren’t in Silicon Valley, writing big

checks, whether it was Rupert Murdoch or the DeVos family or

what have you. There were just red flags coming off this

thing, which is why Silicon Valley was not by and large

duped by it. The people who were duped by it were the people

that Elizabeth Holmes was able to sell the patina of Silicon

Valley to, and the media, because the media, what we’ve

seen over and over again is they don’t fact check stories

when they fit their priors. The prior here is that, you know,

what the media want to believe is that the next Steve Jobs is

going to be a woman. And so when Elizabeth Holmes served that

up to them wearing the black turtleneck, it was too good a

story for them to fact check too heavily. And so they ran with

it in the same way, in the same way that, you know, the

ivermectin hoax that Rolling Stone ran with was too good a

story to be fact checked, because they want to believe

that the MAGA people in Oklahoma were eating horse paste.

I mean, no, there’s, there’s 100 better examples of just I

mean, just to be generic sacks of other startups that we all

know are total nonsense, and total nonsense. There’s like up

about them. There’s a there’s a fraud in biotech going on right

now that a David and I, David and I saw up front. I mean, it’s

like, this stuff is crazy. It’s really, really great.

So look, I mean, I think the moral of the story for

entrepreneurs, I mean, I think there’s a couple of takeaways

here. Number one, you got to be really clear with the present

state of your business. It’s okay to talk about your grand

vision of what you’re going to do in the future. But you cannot

be inaccurate in any way with respect to your current numbers

and partnerships, and deals and current capabilities. I think

number two, I think, when you start working with the media in

this way to promote your company, you’re playing with

fire. Because the media really has two kinds of stories, they

build up and they tear down. And when they’re done building you

up, they’re going to tear you down, because that’s the only

story left to write. So if you’re gonna go court the media

in that way to try and get publicity, you better be really

careful how you do it. And you better be really accurate. And

you better not give them cause to later regret pumping you up

because they will tear you down even harder if you do that.

I think I think the more important danger that I just

like to speak generally to for a second is to not let other

people do your thinking for you. The investors that came

into this business came in under the assumption that this

was a real business, because the press had written about it.

And the press wrote about it because the general had joined

the board. And the general joined the board because his

buddy, George Schultz said, Hey, you should meet this lady.

And the whole thing ended up becoming this roundabout, where

no one actually did any original thinking and no one

did any actual diligence. And the whole thing ended up being

I’m sorry, you know, now you’re talking about actually how

Silicon Valley works. So that’s fucking bullshit. Yeah. Okay.

You don’t think these dopes run around thinking of Sequoia

benchmark, social capital, craft, invest, I’m just plowing

the money. And of course, they do. They don’t even think

social proof, they assume that we’ve done our job.

You think they’re doing principal diligence, these guys

like the Silicon Valley ecosystem.

This is also how the Bernie Madoff scandal, you know, got

so far ahead of itself. No one actually went in and did the

of those. Everyone assumed that because someone else has is in

this thing, and because someone else is involved, or someone

else, something nice has been written about it or said about

it, it’s worth backing and like the lack of original thinking

and business and life in general, I think is, you know,

one of the biggest, you know, risks that each of us takes.

And it’s why it’s really important to learn how to think

for yourself. I have deep respect for early stage

investors, because they have to get in and make some critical

decisions. Some people make those decisions about the team,

right, the psychology of the co founders. Sometimes it’s about

the end market. And sometimes it’s about a deep analysis of

the traction. But you have to honestly, let’s be honest, there

is a valley of funding between the Series A and maybe the D or

the E, where I really think a lot of folks just look for

signaling value based on who the Series A investors were.

I’m not sure they making but I’m not sure that those family

offices were any worse or any better. Like, maybe the DeVos

family looked at Rupert Murdoch and said, he’s smart. So I’m in.

Yeah, that’s exactly what happened. That’s so different

than all the Series B and C firms and say, Oh, benchmarks in

admin. Totally. It’s the exact same thing. Totally. I literally

had a situation and I think I brought it up in a previous

episode where I was working on a deal. It wasn’t like a major

check for us. It was, you know, a six figure check. And they

said, none of the other firms are asking for diligence. Why

should we give it to you? And I was like, how much are they

crazy? And they were putting in more money than I they were

putting seven figures in crazy. And I said, when you ask for

diligence, now that some of these founders look at you,

like, how dare you? Yeah, exactly. They will know in this

case, they were insulted. And they said, we’re not giving you

diligence. And they and we walked away. It’s like visiting

the house. Yeah, like buy it without this company that Dave

and I called called, you know, well, David was calling it

Theranos 2.0. But this couldn’t even explain gross revenue. They

couldn’t, they didn’t, it was like gross revenue, asterisks.

And it’s like, if there’s one metric on a P&L that can never

have an asterisk ever, the top line, the top line, gross

revenue, the money that came into your bank account, how many

checks came in, I get EBITDA, I get gap, I get it. Okay. But

gross revenue, asterisks. What are we talking about? Open the

register and count the money. And so I just remember asking

the simple question, like, um, can you just take the asterisks

away and just this is a company that two of you were looking at

together. You and I have talked about many times. Oh, really?

You’re Theranos 2.0. Sir, that’s what this guy and I and I

learned a lot about Delaware law. I don’t know if you guys

have talked about this company. Yeah, well, you in the text,

you’re like, I’m shorting. Yeah, we’ll tell you in a minute.

We’ll tell you. All right. Yeah, you know what it is. But

anyway, I’ve been getting a big lesson here about Delaware law.

There’s something called a section 220. Have any of you

ever had to file one of these? It worked out really well. Sorry,

go ahead.

Any of you aware of what a section 220 is or heard of this

before? Basically, in a Delaware corporation, if you’re a

shareholder of any size, not just like a board member with 10%,

or whatever, if you feel there’s malfeasance going on, you can

file this 220 in Delaware. And according to this, a great

Scandinavians article on this, the the Delaware courts are

taking it very seriously that if there’s any accusation of any

kind of malfeasance, especially financial, any shareholder, even

tiny can get all of the books. And in detail, not board minutes

not top level P&L, like detailed financials. And so for people

who are running companies, and if you’re involved in private

companies, too, or this is in private companies, look up

section 220 of the Delaware general corporate law, I

remember at Facebook is because we had these vagaries of having

to control shareholder count, or stuff like that. And

information rights. Yes, we actually kept the financials on

a physical computer that was not connected to the internet. So

the people that wanted it, had to come to our office. And then

we remember them in like a windowless room without their

phone or something. Is that I think that’s, that’s, that’s how

they avoided people filing 220 requests. And so just something

for people to be aware of on both sides of the table, that if

they’re shenanigans going on a company founders think, well, I

don’t have to give any information to my shareholders.

It’s not true. And it’s not true. Whatever you have an

information rights, whatever your lawyers wrote, is not above

section 220 in Delaware. So just keep that in mind. I got a case

like that right now going on, where founder won’t give you

information. Well, it’s not the founder, but there’s a company

that just sold and they won’t tell the shareholders like the

terms of the deal. What? Yeah. How’s that possible? Good

question. But it’s it just reeks of fraud. I’m not going to say

the name yet, because I’m hoping that they’re going to start

acting in a more kosher way. But it’s the most egregious thing

I’ve ever seen. All you have to do is talk to your attorney at

Wilson Fenwick, or whatever one of the cohort of

management of the company. They’ve engaged in a sale, the

salesman publicly announced we have reason to believe it’s in

the hundreds of millions, and they won’t tell anybody the

terms. Yeah, file a 220 file 220. And you know what, they’re

public. So then the crazy thing about these 220 is is it used to

be that all of the information had to be private yet to sign

like non disclosures, whatever. And now, in certain

circumstances, I think it’s in the best interest of all

shareholders, the 220 information can be public. And

so that is just like a sniper shot to anybody who is doing

any kind of shenanigans. We had a company in the same situation

who wouldn’t tell us about a sale. And then I have a call

with the board because I own 7% of the company. This is years

ago. And I said, Can you explain to me what happened here?

And they’re, they’re like, yeah, well, we’re doing the sale and

blah, blah, blah. And it turned out the bankers were taking 40%

of the sale, whatever. And I was like, Okay, well, I’m not

going to approve this. And you need my approval. Let’s talk

about how we can make this work, because we have outside funding

that the company’s turning down to do a sale that everybody’s

losing their money on doesn’t make any sense. And they said,

Well, we can’t really do that, because we’ve already sent the

eight employees over to the new company that’s buying it. I was

like, What do you mean, like, we ran out of money to pay them.

So they all moved over to the payroll of the new company. I’m

like, you haven’t closed the transaction yet. Well, it was

crazy. Like, there’s some weird stuff that happens to private

companies. Yeah, this stuff is always at the peak of when

there’s a correction, right? I mean, this may be a good segue

to talk about what’s going on. It’s a great segue. But it’s

like that level of grift happens right before. You know,

basically, we have to rewrite valuations, you know, because

of entrepreneurs, entrepreneurs just take so much. Well,

there’s just a small, small percentage of them, but they

just take so much leeway in pushing the boundary. And, and

sometimes it’s other board members who are acting their own

interest. But I solved this problem really easy. I called

the CEO of the public company that was buying them and

explained the situation. He’s like, talk to my CFO, a friend

of the pod, whatever. And they said, How do we solve this with

you? I said, Well, this is how much money I have in this, the

value of your company, how would you like me to be an advisor to

your company for the same amount of that value in shares?

Oh, so you grifted? So no, that’s great. So basically, you

got bamboozled. And so you bamboozled everybody else by

letting them use my leverage. And then they said, Okay, we’ll

make you an advisor. Then I took the advisor shares. And I wrote

a letter and pledged them to my investors. And my investors are

now three x their original investment. And I said, I’m not

letting it go. I’m not signing the paper until I get the 250k

that my investors put in period. And then they did it. And now

I’m up. But let’s segue. crazy market pullback, the great

write down has occurred charts from altimeter. Our friend

Brett Gerson, and I assume show a major regression to the mean

for tech stocks as index median enterprise value next 12 months

expected revenue, yada, yada. This includes people like Adobe

data dog, Shopify, Twilio workday. And as you can see

here on the chart, which will pull up, sacks, explain to us

what’s happening here. Well, it’s a major regression to the

mean on value on public company valuations in both sass, but

also more generally, the high growth stocks have corrected

more than the indices. So that would imply that there might be

more correction to come against the indexes. I think the growth

stocks have already taken the bulk of the hit. But what

triggered it this week is I predicted and you guys had

similar predictions on just a few weeks ago, that this would

be the 2022 be the year of the correction. And it really began

in November, you had the Fed, you had Fed governors make some

hawkish statements about the about inflation, not being

transitory about the need to raise rates. Then we had the, the

Fed Open Market Committee meeting, this was in, I think,

around December 15. And they announced what they were going

to do on rates. And now this week, the minutes of that

meeting were released. And it basically, it said something

that was completely different than what they announced to us

three weeks ago. And so the market basically just seized up

and went into convulsions. And specifically, what they said,

you know, in mid December was that they were going to taper

faster, they were going to end Q1, sorry, they’re going to end

QE at the end of Q1 instead of Q2. And then we’re going to have

quarter point rate hikes in Q2, Q3, Q4. That was the plan for

  1. And then there was additional guidance that they

were expecting three more quarter point rate hikes in

  1. And two in 2024. So that was sort of the three year plan

that was laid out. Then we find out from these minutes, and I

guess these minutes weren’t leaked or anything, they

published them after like a three week revise and extend

remarks type period. But what we find out is that they’re what

they were talking about was having a rate hike as soon as

Q1. And not just ending QE, but actually shedding assets, which

is like the opposite of QE. So instead of basically going out

there and creating money, shrinking the balance, yeah,

shrinking their balance sheet. So instead of going out and

buying bonds, they’re going to sell their bonds, which will

reduce the money supply. So look, if that was their view

three weeks ago, why didn’t they announce it? I mean, my

problem with this is it makes the Fed look like they don’t

know what they’re doing. Because they announced something just

three, three and a half weeks ago, that’s completely at odds

with the statement they just put out. So either something

changed in the last three weeks, and there’s been no data, or

they don’t know what they’re doing.

Just so you know, they have a little bit of a track record of

this. So in 2018, it looked like there was going to be

inflation. And Powell tried to get ahead of it. And he raised

rates and the the market completely collapsed. And they

were looking, I think, at Chinese data at the time. And

it looked like you know, China was turning, you know, going

crazy, then China completely turned over. It was a complete

head fake, the economy wasn’t rip roaring, inflation didn’t

exist. And they basically just curtailed a lot of investment

and destroyed a bunch of value. So this time around, I think

they’re very sensitive to not correcting too quickly. But then

the opposite thing happened, which is they probably waited a

little too long. And now, you know, we’re correcting too

slowly too late into the cycle. And we’re just sort of

digesting that reality. And so I think that, you know, we’re

probably to be honest with you, like, actually, like, we’ve

puked it all out, for the most part, in my opinion, you have

to remember, right? Like, the big difference between now and

even 10, and frankly, more importantly, 2030 4050 years

ago, is how many computers are involved that trade, how much

passive money is involved that owns assets, and how much of

this stuff is sitting on the sidelines still in money market

accounts and munis. So if you look at those markets, there is

a ton trillions of dollars waiting to find a home. And

what we’ve now done, and Brad’s charts show this is, we’ve

basically chopped the head off of all of these fast growing

growth multiple, the underlying companies have not changed once

until, right, these companies are still growing by crazy

amounts, like snowflake is still an incredible business.

Unbelievable. But the multiple that one was willing to pay has

been there is has been very much rerated, as is a bunch of

other companies. So let me ask you a question. If we’ve gone

from these 5060 70 multiples time sales, and now it goes back

down to 20. Is that dare I say a buy signal? Well, all those

trillions of dollars start moving back in because who wants

to be in a money market? I don’t I don’t know. And I can’t

really call these things. But one really smart person that I

talked to this week, you know, he actually liquidated

everything in October, and November.

And, you know, and I don’t know, we talked about this on the

pod. But you know, I was feeling so much tension at the end of

last year, I actually, when I look back on q4, it was probably

the most difficult quarter of my professional life. And just

trying to manage risk. And I exited a ton of positions, all

my pipes, you know, my third party pipes, I basically sold

off except for one, you know, I generated some liquidity and

other places as well. And I was glad that I did that. In part,

because I saw, you know, what he was doing, and in part, because

you know, Jeff and Ilan were selling. And I thought, I mean,

this is just this is crazy to sit on the sidelines and, you

know, be the bag holder here. Going into q1, I talked to the

same guys. And what he said to me, which I think is very smart

is, you have to really look at the first and second derivative

of the 10 year bond. Because when that stops moving, like the

10 year bond is this beautiful barometer of the collective

wisdom of every single investor in the world, about what they

think about long term growth and inflation. And it’s a really

important market. You know, we’ve talked many times look at

the 10 year break, even if you want to understand where

inflation is going, we started to talk about that seven months

ago. And if you look at that, the rate of change, so the

volatility in the 10 year yield is slowing way down. And if that

continues to hold, that means that people are really saying

there’s a small amount of real inflation, a reasonable amount

of transitory inflation, and we’re about to kind of wash most

of it through the system with, you know, 100 basis points of

rate hikes. And if that’s the case, then you may see a quick

pullback, you know, in q1, and we’re back to the races again,

because of all this other money that’s going to say, I got to

get back in. And if you look at all these corrections, in the

world of computer traded algorithms, and ETFs and passive

money, and it’s all the snapbacks are so fast, you

correct 20%. And then you whip it back and you go. So I don’t

know. I mean, that’s one view based on the past. But when you

have these big swings, remember, it’s not that every

issue moves perfectly in sync with every other issue. So there

are these call it over adjustments that happen within a

cohort. So within a group of companies, some of them will

trade down much farther than others, the multiple will

compress much further than others. And there’s certainly

opportunities within as there is in any market that’s moving

quickly to find businesses that now are prices mature, non

growth value businesses, and they’re profitable and growing.

And there’s a bunch of those out there now. And that wasn’t

the case a month ago.

I don’t think a single thing in the last quarter has changed in

the underlying fundamentals of the majority of businesses that

are public. And I actually think for the most part, nothing has

really materially changed for the majority of private

companies. All that’s changed is what you’re willing to pay in

the future for it. And the one thing that hasn’t changed is

what you’re willing to pay in the future for the private

businesses. So the real question, you know, for sacks,

and, you know, for the active investors in the private

markets, which I don’t know what to think about is, will the

haircut that we’ve all taken in the public markets, spill into

the privates, and it’s starting, it’s starting, it feels to me,

it’s not just about what’s going to happen with new emerging

growth companies. But I mean, you guys correct me if I’m

wrong. But there are hundreds of companies that have raised

billions of dollars at valuations that if they look in

the public markets, now, they are never actually going to

achieve if they were to go public in the next three, four

or five years based on their projections.

So to your point, so what I’m saying, yeah, there are 900

unicorns right now, 900. And so once you get to look, it’s one

thing to be a $200 million company and sell to Microsoft or

whatever. But when you’re a billion dollar company, there

are very few buyers.

I just want to point out, there’s a huge disincentive for

an investor or a shareholder of VC or private equity firm to

take a big write down on a company like that. And so there

is always this push to what do we do next? And it creates this

certain certainly I can tell you, yeah, I’d love your point

of view, but you’re this really like unhealthy tension. Because

to take a write down on 900 unicorns is going to cause a

write down of hundreds of billions of dollars across all

VC portfolios in aggregate, because they’re not going to end

up going public.

Well, sorry, just to finish your thought, because the end

market is only to go public. There are very few exits. Yeah,

there are no and not billions of dollars, because you have to

think one or two sidelines. Okay. You know, even if you look

at like visa, nobody’s allowed to buy these companies. I have

an example that I can tell you, I don’t know, mid tier, maybe.

But my point is, when you have 900 companies with a billion

dollars in plus, they have to go public, they have to go

public. And so you can’t go public into a valuation

framework that values you at 30 to 40% less of your last

private mark, right? Yeah, it doesn’t work. You did have to

use tomorrow. So this is an important question, because

isn’t that going to be the case that all these VCs with the

2015 2016 2017 2018 2019 vintage are going to end up

having their day log up these great marked books right now,

you know, the books are all marked to three x, you know,

multiple on invested capital, and now they’re going to end up

having these liquidity events that are going to come in at

shockingly low valuations. And there’s going to be this great

rewrite down and retrenchment. I can tell you, there’s a couple

of examples. One is the athletic yesterday, which had raised

money at 500 million just two years ago, just sold for about

500 million to the New York Times. And those investors

basically put money in, and they got their money back. It’s

a push. So I think you’re gonna see a lot of these. No, I’m

agreeing with you. Yes, I’m going to give you the examples.

And there’s also your acquisition by a tier comp

acquirer. And so there’ll be plenty of those that occur. So

there’ll be a lot of pushes, I think is my prediction of those

900 unicorns. And then for a lot of these SAS companies, you’re

saying you’re you think that a bunch of them are going to sell

for under a billion dollars, and the VCs because they have

preference, they’re going to get their money, correct, correct.

I think it’s going to be a lot of these pushes where I don’t

know what is it in blackjack, David, when you’re playing those

three hands, and you get a push, like, and it’s like, okay, I’m

gonna live to fight another hand. Now, which we’ve seen

sacks do a number of times. And then for the SAS is where sacks

I’m interested in your position, because we saw in SAS, all of a

sudden, the private market 30 4050 6070 times top line. And

now it’s gone back down to 2030 40. So those companies now

basically have three the public markets have but I don’t think

the private market has happened already. Everybody’s pausing

and so for the people who raised that 50 x, congratulations, you

did the right thing. If you have enough money to fill in that

valuation, congratulations, though, I mean, it seems like

they’re saying it is pretty tough position now. Yeah, you

know, you just raised money at a billion dollar valuation with

10 million of revenue. You’re like, let’s say let’s say, I

mean, like, what are you gonna do? What are you gonna do in

your next round? Because you’re burning 100 million a year now,

or 40 million or whatever it is you’re burning.

Almost all the companies I’ve seen in this exact situation

you’re talking about have that 20 million, they got a billion,

they raised 100 million or 200 million. And they’re basically

now saying, Okay, we got to make this last until we can catch up

to that valuation and get to 50 to 75 million. So I think you I

would take that deal as a founder and as an investor,

because it takes out the downside. And now you just have

to worry about catching up to the valuation and you have four

years of runway. They’re not gonna

know. Those companies do not those those companies absolutely

do not have four years of runway, I will bet dollars to

doughnuts, they have two years or less. And most of these

companies have 18 months, which means they got to be raising in

six to nine. No, correct. They’re changing. They’re

changing their spend. And they’re changing their spend.

They’re not firing anybody. You’re not hearing about layoffs

at startups. Okay. All right. You’re not hearing about it. But

maybe they’re changing their forward looking growth plans.

What are you seeing, sex? I’m telling you what I’m seeing.

What do you think? I think that the trickle down effect is

inevitable, but I’m not sure it’s fully kicked in yet. It’s

going to take a few high profile deals to land at, say, 50 times

ARR instead of 100 times ARR in order for everybody to know that

there’s a new valuation level. So if you look at the

altimeter chart on set public SAS multiples, let’s see, I mean,

Nick can pull it up. It basically it’s the SAS index, it

shows median expected value to next 12 months revenue. And

during this sort of late 2020, early 21 period, it got as high

as about 15 times the historical average. Yeah. Well, for next

12 months or revenue, which is sort of that kind of makes

sense. So historically, it’s around eight, right? So

basically, all the valuation levels doubled. And now they’ve

come down to about 10 times. So you could say that if it fully

reverts to the mean, we still got like another negative 20% to

go. I don’t know if that’s going to happen. I mean, I think there

has been a greater recognition that SAS businesses are some of

the best businesses to own, right? It’s they are subscription

software businesses, great gross margins, they just keep

compounding. So maybe it will stabilize at 10 times. But I

think what we can say with 2020 hindsight is that the record

price levels we got to the public markets in 2021 were sort

of unusual and unique, and probably the result of this

incredibly expansionary fiscal and monetary policy was coming

out of Washington. Now, has it trickled down to the again, VC

markets yet? I mean, the way that that has to happen is that

the latest stage investors, the crossover investors who invest

in both public markets and private markets, they have to

to pay, they have to start paying less for the latest stage

growth companies. And then, you know, all the downstream VCs are

going to start paying less as well. Because, you know, if you

know, the markups are lower, you have to take that into account.

So, look, all of this is underway right now. I mean, I

gave a Bloomberg interview in December, and I think I went on

Maria Baromo show around that time as well. And I kind of

warned that all this was coming. And yeah, we’re in the

midst of a giant rewriting, because we’re realizing that so

much of the peak values we are seeing in 2020 and 21 were the

result of artificial liquidity. And it’s what you guys

predicted, you know, it’s one of our big, you know, I guess my

big prediction for business losers this year were asset

classes that were highly dependent on liquidity, you

guys predicted crypto would be one of those clearly, it’s

taken a massive hit. I mean, have you seen how much the

crypto markets are off just in the last week? So it’s so much

for them being uncorrelated. No, it’s highly correlated. Look,

the coin is going to be uncorrelated. So the markets are

like a sponge for liquidity. And the more liquidity there is

out there, the more money can flow into a more speculative

asset class. But look, my objection to this, I mean, is

that if you look at the Fed’s actions, I mean, I think

Chamath is right that they waited way too long to react.

And during the crisis, they overreacted. I mean, they

pumped what I mean, we on a previous pod, we showed the

assets between underreaction and overreact. Yes, exactly. And

now they’re I think they’re in overreacting again. I actually

think they nailed it in mid December, they nailed it by

giving us business certainty around what the new rate

environment was going to be. And just three weeks later, in

the minutes to that very meeting, they completely

undermine the certainty or the, the greater level of certainty

and predict the predictability that they had provided markets,

they’ve now introduced massive uncertainty. So it’s just it’s

unbelievable. It’s like they’re pilots and like, they stalled

the plane. And then they’re like, Oh, let’s pull back. Well,

no, there’s more, they’re kind of pulling out the manual and

learning in real time. Yeah. And it’s like, you need to just

point the nose down a bit and add a little bit of speed. So

you get some lift, like it’s really as tragic that the

performance of our government at every level over since COVID

at the last, you know, since 2020. I mean, it’s been

abysmal. I mean, first, you have the self inflicted wound of

lockdowns. I mean, the economy is going to take a hit no

matter what, because highly at risk people would have stayed

home and reduce their economic activity. But instead of just

protecting the at risk people, we had to lock down the entire

economy, we padlocked Elon’s factories, and on and on. So we

basically shut down the whole economy for no reason. And

states like California kept it going way longer than they had

to. So then the government just prints, like 5-6 trillion and

the Fed doubles the size of its balance sheet. And then now

they’re abruptly getting off drugs. I mean, look, they put us

on drugs, and now they’re going cold turkey. And so I think

there’s actually like a much greater risk now of the economy

going to recession this year, because of the Fed’s over

reaction this week. I mean, they had they had the Goldilocks

scenario down about three weeks ago, and I think they’re going

to take the thing now, or there’s a much greater risk of


Best advice for founders, private companies in this

turmoil. What’s your best advice, fam? You’re a founder,

you got, I don’t know, 18 months of runway right now, you’re

going into this, you know, slush, and you want to know what

should I do? What should I do?

I think Paul Graham’s advice makes the most sense here, you

need to focus on being default alive.

Define what that is, just for people.

Yeah. So, you know, Paul Graham wrote this great essay, as part

of what he’s a founder of Y Combinator. And, you know, he

has this very simple, you know, framework of looking at

companies, which is your default debt or your default

alive. And when you’re losing money, as a company, and you’re

burning enormous amounts of cash, your default debt. Now,

if you’re growing fast enough, default debt is a great

strategy for value creation. But at some point, everybody

around you will expect you to be default alive. And what that

means is that the cost of what you do, are less than the

revenues you bring in when the result or profits. And even

then, that’s not good enough. I don’t know if you guys saw, but

you know, if you look inside of big tech, I was shocked to find

out that, you know, for example, you know, companies like

Microsoft, specifically, and Apple, you know, these guys

traded huge forward multiples, right, for enormous

profitability. But companies like Facebook and Google for

the same level of profitability, you know, trade almost a third

less in terms of multiple. So even when you’re that good,

it’s not good enough to be default alive. That’s how hard

this game is over very long periods of time. And so when you

have a moment to really understand how to be default

alive, and you don’t take it, I think it’s a huge disservice

because we don’t do enough of that kind of coaching that

really inflicts that kind of discipline and expectation

setting. I remember I have a large climate investment, it’s

actually the single largest investment I’ve ever done. And

so I sweat the details pretty significantly. And you know, I

was with the team in in November, December, for board

meeting and setting up 2022. And my whole thing was, guys,

you have to get default alive, you have to get contribution

margins to be in a certain band, you were we are going to

target this level of free cash flow generation this year. And

there’s no ifs, ands or buts about it. And what’s great is

the entire team embraced it more marching towards that. But

if they didn’t, and they’re like, No, we’re just going to

grow at all costs again. Oh, my God, I would be freaking out

right now. free bird. What do you have to add to that as

advice to founders who have not been through this before I

built my business, my Climate Corp. We raised around in

November of 2007, we raised 12 and a half million dollars, and

then the financial crisis hit in 2008. And I’d say 2 things

were really important. Number one was just keep building. So

if you’re building a great business, it doesn’t matter what

the market perturbations are, you know, the market will value

you at what they’re going to value you at. And if you’re a

good business, there’s going to be money available to you. The

second piece of advice is one that I know has been said over

and over again. But you know, never raise it a valuation

beyond, you know, what you’re reasonably going to be able to

kind of deliver returns on at some point in the future,

because otherwise, those nasty dynamics emerge. You know, you

could raise money at some crazy high valuation, that’s not

always the best thing to do, because then the expectation of

the investors coming in at that valuation, or they want to make

three times that money, or four times that money, and it pushes

you to do something unhealthy, like bend more than you

otherwise would stretch for a bigger outcome, and put your

entire company at risk. So you know, two things to me have

always been just stay focused on building your business, don’t

let you know, kind of market conditions drive your decision

making. And second,

define what, for you is the best practice of staying focused on

your business, because that is a very general term. What is

Freeberg, if you’re going to say the top three things of

focused on your business, tactically means,

I have a simple rubric for value creation in a business,

you know, number one is, can you make a product? Number two is,

do people want to buy your product? Number three is, can

you make a positive gross margin selling that product to those

people? Number four is, can you make a return on the marketing

dollars you have to spend to generate that growth profit?

Meaning, you know, can LTV exceed CAC? And number five is,

can you scale the amount of money you deploy to grow your

business, such that as you grow, the return goes up, not

down? If those are the five kind of things you can accomplish in

that order, you can build the next Google. And so and then the

sixth thing is, can you be a platform, which is meaning,

meaning, can you transition to being a multi product company

that gets leverage out of the user base or the technology that

you’ve built? And so you know, if you can think of revenue

streams, multiple revenue streams using the same customer

base or multiple products, or you know, whatever. And so if

you can achieve those six things, in that order, every

step of the way, every increment you can make across that

spectrum drives significant value as a business. Ultimately,

what the multiple on your business will be is purely going

to be a function of what else is going on in the world, things

that you cannot control. And so if you’re driving your decisions

about building your business using that first rubric, good

for you, you’re going to succeed, you’re going to have

money available to you. Awesome. If you’re driving your

decisions based on what the market is telling you to do and

what the market is saying is available to you and money and

all that sort of stuff. You know, you’re setting yourself

up to basically be, you know, are you also saying to be

independent of valuation? Yeah, I’m always of the opinion that

you shouldn’t raise money beyond your into evaluation that

you’re not comfortable saying in different market conditions,

or what have you, I can return multiple. I don’t think any

founder has ever, you know, most of these founders were not

around in 2000. And they were 2008 or two, but even 2008 was

less important in my mind, because it was it was it was

fast. And again, we had government stimulus. So you

know, like, I think 2008 was an aberrational moment. I was I was

in the middle, you know, inside of Facebook when and I was like,

what the hell is going on here, the government’s going to step

in. And, you know, with tarp printing a trillion dollars,

whatever it was, it didn’t affect you guys. It didn’t

affect us at all. Yeah, but you were the most powerful company

or not at that time in 2008. Well, you’re not a lot of cash,

right? No, no, but we were here’s the thing with that

people don’t realize with Facebook, Google was profitable

from day one to Yep, we were always default alive. I want

every single person listening to this to understand this. Okay,

we sold poker ads for party poker in big banner ads on

Facebook, and we made money. You got the bag, you got your

independent were profitable. Okay, so I don’t buy this

argument. That argument of unprofitable growth is a

vestige of fund dynamics and VCs who want to raise larger and

larger funds to blind their pockets with fees. It’s a

function of what I mentioned before, which is if you can

think about the context of a portfolio of those bets, it

makes sense. But if you think about your business, it doesn’t

make sense. In 2000. That didn’t make sense. You could not run

an unprofitable growth business, the money would not have been

there, right. And the real reason is that was a market

check, meaning you had people reallocating capital, because

risk rates were different, you know, you could put money at 6%

in us 10 year bonds. Now, obviously, you can’t do that

today. So maybe this cycle is just the new normal. And so,

you know, maybe you can always be default debt and be able to

raise money because the incentives exist. But I wonder

when that stops. And so I don’t know,

Google was an incredibly cash efficient business. I think

they’ve raised under 50 million as a private company that

never used any of it. Because Google, the first the first

thing Google did is they did a massive search syndication deal

with AOL that paid them hundreds of millions of dollars.

And that funded the business. If you can sell ahead of your

customers in terms of delivering the service or the product to

them, you’ve got the most beautiful business in the world.

That’s the definition of bootstrapping Google, even

though they raise venture capital, effectively bootstrap

the business by getting customers to prepay getting

people to prepay for cars. I wrote this in my annual letter

like two years ago, but Facebook, Google, Apple,

Microsoft, and Amazon raised collectively less than $250

million. Yeah, I mean, what? Yeah, so I mean, I agree with

what a lot of what you guys have said. I mean, so I agree with

Freeberg that recessions or downturns are actually great

times to build startups, because innovation doesn’t stop. And

you know, so PayPal was predominantly built after the

dot com crash. Yammer was prominently built after the

2008 sort of great recession. So it’s absolutely doable. And

some things actually get easier in a downturn. There’s like way

fewer startups getting funded. And so like talent gets easier

to recruit. So, you know, things loosen up in, you know, in

terms of the company building side. The only thing that

really gets harder in a downturn is fundraising, right? This is

and by the way, I think it’s a good practice for founders not

to care what happens in the public markets, the NASDAQ

early stage founders, right? Because the only time that

really touches you is when you need to access the capital

markets, right? And then you will be subject to the

downstream impact on VCs of what’s happening in the market.

So, so the only thing that really gets harder is

fundraising. And this is where I think Tomas advice comes in. I,

I personally think that trying to achieve default alive status

is too high a bar. I mean, it’s a wonderful thing if you can do

it. I mean, Facebook did it, Google did it, the very best

companies did it. But I know very few SaaS companies that

could continue to grow if they had to be cash flow positive, I

mean, at an early stage. So the metric I use is burden

multiple. I wrote a blog about this once. It’s basically just

how much are you burning for every dollar of net new AR you’re

adding. So in other words, like if you’re burning a million

dollars, you know, over whatever period of time, a month,

quarter, year to add a million dollars of net new AR, that’s

actually pretty good. So a bundle of like one or less is

amazing. I’d say even up to two is good. So in other words,

like if a SaaS company can say add 10 million of net new AR in

a year and burn 20, I think VCs will fund that all day long,

even in a recession to your payback. Yes. But when you start

getting to burn multiples of three, four, five, six and up,

that’s when like VCs are going to wait a second. Yeah, you’re

that growth is right. You’re not efficient, just efficient, but

it starts to raise questions about your product market fit

because you’re effectively spending too much money to grow.

So like, why is a growth that hard, right? Like market pull?

Yeah, no more. Yeah, exactly. No market pull. I think it’s a

good way of putting it. So I do think you have to show like in

a downturn or in choppy waters, you have to sharpen the pencil,

get more efficient about your burn, look at your burn

multiple. And then I think, you know, if you have the

opportunity to top off your war chest, like that’s smart, you

know, and don’t wait too long. And be frugal. I mean, God, the

amount of like, crazy spending I’m seeing in some startups and

unnecessary spending if you’re spending something and it’s not

going into product, it’s not going into marketing. You know,

it’s not going into sales. And it’s not, you know, just you

really have to ask yourself, why am I spending money on going to

this conference going to that conference on this office space,

like really be frugal. I know that it’s when you have all this

money sloshing around, you’re looking for things to spend it

on, but stay focused. Yeah, I mean, don’t spend 7500 on that

unless you’ve got tons of cash laying around. And we will be

getting back to the people who applied, we’re going to go

through and somebody is going to approve you.

Let’s add one other thing to this, which is you’re right that

like most founders have never even seen a downturn, because

the last big one was a great recession of 2008 2009. So many

founders were even around back then the most the most read the

real one was 2000. That’s right.

It froze, I would say it froze to that 2008 was what, like 12

to 18 months of choppiness. And I would say a lot of companies

couldn’t raise money had to do down rounds had to do multiple

liquidation preferences. It was gnarly on some cap tables during

that period. And if you don’t know what multiple liquidation

preferences are, as I understand, but there was no

real market check. The market check was really in 2000. And

you saw it was a multi year slog. It was a bloodbath. You

had to be vaporized. Yes, people you had to be default alive.

Absolutely, absolutely. Yeah. But I would say a third of the

startups went away in 2008. I don’t think we’re running into

that again. So you know, let’s not create a sequoia graveyard

kind of story. But you could. Nobody knows the point.

Look, it’s a it’s a probability of getting your business funded,

right. And that’s kind of lower. It’s not like, but here’s the

thing what I what’s shocking to me. It’s like, I don’t

understand why people think you can grow infinitely forever.

It’s just not true. Even the best businesses in the world

after 15 or 20 years are barely growing at 20%. People forecast

Facebook and Google. Those are the two best businesses in the

world. But it isn’t a question of what kind of growth feces

are willing to finance. No, what I’m saying is, if you know

that your terminal growth rate, if you are one of the best

companies ever created ever is 20% in 20 years, it doesn’t take

a genius to do a line of best fit between now where you’re at

100% in 20. And realize that at some point, if you don’t figure

out how to make money by selling what you’re selling,

there’s a lot of people who will be smart enough after enough

historical data has come through the transom, or come

over the past to realize that these things are not that

fundable. And this is what’s shocking to me. It’s like that

data is hiding in plain sight for anybody to look at. It

doesn’t make sense unless you believe that those those growth

rates of 40 5060% are sustainable for 30 years or 40

years, we’ve seen zero examples. And you have to look

at these canaries in the coal mine. Because if if the best

companies in the world can’t do it, you’re you have to really

scratch your head here or ignore it, whatever.

That’s fine. Just wing it. Yeah, it’ll work out. Don’t worry

about it. Don’t worry. Just add like around it’s fine. One of

those features will work and save the day. There’s some

magical feature. Did you see Andreessen announced that they

raised $9 billion or something today across incredible

congratulations. They’re building a Colossus. Yeah, I

mean, there’s gonna Silicon Valley in terms of capital is

um, you know, seeing kind of power returns itself, right?

There’s going to be a few firms that are going to, you know,

control 80% of the capital should go public. Andresen

Tiger, Tiger Global, you know, whatever happens. I don’t know

if Tiger should I mean, there’s a few that’s a market. But I’m

just saying like, if you look at the aggregate capital that’s

being deployed into private markets right now, in probably

two years, 80% of it’s going to come from three firms or four

firms. The problem is if you’re running that much money, you’re

insane to not take your GP public because it’s the only

way like no, you’re not really generating carry at that point

because you’re generating a market beta return. So you’ll

do okay. But when you’re sitting on 2030 40 billion of imputed

wealth by being the owner of the GP of Tiger or Andreessen,

you’d be insane to not go public, I think the odds are

going to be pretty high that Andreessen will go public,

right? I mean, they’re certainly setting themselves up to be a

lot more than just a capital allocator, right? It’s never

happened. Well,

TPG just thought to go public, they’re going out, KKR’s public,

Apollo’s public, I’m talking about Venture though.

No, but I mean, like Venture’s never scaled up to the point

that private equity has until now. And now that they have,

it’s very likely, it’s very likely that you’ll see Andreessen

be the first, I don’t know them, you know, very well, but

Sachs, you were gonna say something?

Yeah. Well, I think it’s a super interesting point, because

if you talk to the previous generation of VCs, what they

will tell you who retired, right, is when you ask them,

well, did you get anything for your partnership share in the

firm, not just in a fund, but in the firm, they’ll tell you,

no, they basically just gave it away to the next generation

of partners, even though they built the firm. And it’s

because of what, historically, the belief on the part of VCs

was that there was no value to VC firms, other than just

their interest in each particular fund. But you’re

right, like if they do achieve a much greater level of scale,

and they can go public, then there is actually value in the

firm itself.

If you look at the terminal valuation of Blackstone as

indexed to AUM, you know, once you pass a couple hundred

billion of AUM, you can trade toward 0.1, 0.2 times. And so,

you know, if you have 50 billion of AUM, there’s $10 billion

market cap there. And if you, you know, if you’re Andreessen

or Horowitz, I mean, that’s $5 billion that just appeared out

of nowhere, why would you not do it?

Right. It’s a little bit like Goldman Sachs, they always said

that we’re a partnership, we’re never going to IPO because

And then they did.

And then they did. And same thing with did CAA do it too?

No, I guess.

No, what happened with CAA was Ovitz sold his position to go to

Disney, so there would be a conflict, but he could have kept

it and the like residuals they were getting from projects

they packaged were incredible.

Didn’t the RE manual one?

It did, Endeavor did.


How are they trading? I haven’t even looked at Endeavor.

I’m not sure.

But let me tell you, like, it’s actually, but think about if

you’re not like the current, like partner owners of the firm,

but you’re like on a partnership track there and you’re working

your way up to partner.

Like by the time you get to partner, it’s going to be a very

different economic equation, because instead of getting your

one over n share of the pie, when you eventually become

partner with n being the number of partners or some version of

that, now the company is owned by the public and the public or

the board of directors is determining your salary.

And maybe you get a salary and bonus and some, you know,

essentially options or equity participation, but you’re not

going to be a true owner anymore because the firm is gonna be

owned by the public.

Wait a second.

What if we take each of our businesses, put them together

and then take them public as all in capital?

Then we get the bank.

I’m good, I’m good.

I’m good.


We got the startup studio.

We got the accelerator.

We can’t even agree on a conference.

So I don’t think we’re recombining.

We can’t even agree on the flowers at a conference.

We can’t agree on the decor and food for our one day event in


That’s because the amount of work you guys want to do is

slagging me in a slot and a chat.

No, what we want is someone to do the work.

We want to hire a professional.

I have been doing conferences for 25 years.

Stop saying my people.

I know.

And you know what’s gonna…

Thank you for tuning in.

You know what’s gonna happen?

You launch Yammer at my conference and I put the fix in

for you to win.

Thank you.

TechCrunch was a beautiful conference, but for all in

summit, is it just the case that we want people to show up and

there’s gonna be a stage and people talking on stage in this

whole conference, or do we want to create a more magical

experience, a la Davos or a Sun Valley or something like that?

All right, everybody.

Thanks for tuning in to episode 62 of the All In Podcast.

We’ll see you at the All In Summit.

And if you want to do us a favor, please go ahead and

subscribe and rate us on Apple.

We could really use that.

And thanks to Spotify for including Daniel.

Shout out to Daniel.

Thanks, Daniel.

He included us in their video.

So now if you’re on Spotify and you’re listening to the pod,

you can click a button as of this week and watch the video

or you can watch the video on YouTube.

It’s nice.

He emailed us and his team and then I cc’d him on the email.

He’s the best.

Yeah, I think it would he be good for what do you think about

having him in Mr. Beast?

He’s super, super, super.

Here’s my idea for a trio him, Mr. Beast.

And then one other person to do a media trio.

Future of media.

What is your what is your assignment?

What is your idea?

You don’t even know the third person.

I mean, I’m putting it out there asking for a suggestion for

Mr. Beast.

This is our conference impresario.

Oh, my God.

Well, those are two great guests on the stage at the same time.

Let’s figure out who besides Jekyll is going to produce the conference.

OK, you guys are unbelievably.

Bye bye.


Bye bye.

We’ll let your winners ride.

Rain Man, David Satterthwaite.

And instead, we open source it to the fans and they’ve just gone crazy with it.

Love you, West.

Ice Queen of Kinwan.

I’m going all in.

Let your winners ride.

Let your winners ride.

Besties are gone.

That’s my dog taking a notice in your driveway.

Oh, man.

My avatars will meet me.

We should all just get a room and just have one big huge orgy because they’re all just


It’s like this like sexual tension that they just need to release somehow.

Wet your feet.

Wet your feet.

We need to get merch.

Besties are gone.

I’m going all in.

I’m going all in.