back to indexE43: Innovative venture strategies, Zymergen's implosion, Square acquires Afterpay & more
Chapters
0:0 Big week for the besties: Friedberg's new raise, Sacks' new fund & more
16:30 Innovative venture strategies: internal mark ups, venture studios, deployment strategies
30:44 Zymergen's implosion: role of diligence, how to make deep tech sustainable, finding frauds
43:26 How personal risk impacts decision making on a grand scale, narratives and fundraising
59:12 Chamath & Jason share Theranos stories, Jason calling out frauds
67:36 Financial deplatforming, Square acquires Afterpay, Square's savvy move, fintech's future, Jack Dorsey's unique position of power
88:5 New Yung Spielburg banger: "Friedberg Index"
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he's optimizing the view now i'm optimizing for shade actually 00:00:03.280 |
i'm trying to get out of the oh christ you look like a i mean this dipshit showed up 00:00:12.240 |
he showed up to my beach club yesterday and it was basically like someone had taken a mummy 00:00:18.000 |
and then wrapped a mummy inside of a white sheet and then presented him at this 00:00:23.200 |
at this place oh he lathered in his like spf 500 and so i laughed at one point i said at one point 00:00:29.600 |
let's go for a walk and this had the nerve to grab his cell phone and a battery 00:00:36.240 |
pack for the cell phone i forced him to leave the phone he felt naked then i made him take 00:00:40.240 |
off his shoes and socks and then i tried to get him to take his shirt off we got almost 00:00:44.320 |
all the way there yeah that makes sense all right everybody here we go three two 00:00:48.080 |
let your winners ride brain man david sacks and instead we open source it to the fans and 00:01:02.320 |
hey everybody hey everybody welcome to everybody's favorite game show guess who's not in italy 00:01:11.680 |
with us today david sacks wearing sunglasses with the view of an ocean clearly on a nautical vessel 00:01:28.800 |
apartment in the center of florence and chamath is at his hideaway somewhere in the countryside 00:01:35.440 |
and friedberg is in front of a abstract piece of art two people high on crystal meth trying 00:01:45.920 |
to break into his car in san francisco i'm no i'm no longer a san francisco resident i'm 00:01:52.640 |
proud and sad to say after 20 years of living in the city i have relocated still in a not to a 00:01:59.040 |
nondescript location still in california but uh you're in the bay area enough in the bay area so 00:02:05.200 |
with us again obviously rain man the dictator and back from a week off the queen of quinoa 00:02:10.960 |
what ha tell us uh queen you had a big week you had uh some nice ink come out some press about 00:02:18.400 |
the production board raising some monster round and you took the week off 00:02:22.400 |
give us the feedback what what was it like taking a week off from the pod and uh now you're getting 00:02:27.200 |
press and you're becoming a public figure uh what's it been like for you the past week and tell 00:02:31.600 |
everybody what went down with this new fund you know my strategy was to take a week off from the 00:02:36.160 |
pod and then have the ratings go up and then i could quietly and nicely exit um as the as a 00:02:41.360 |
member of the cast but uh unfortunately i've been drawn as al pacino said just when i thought i was 00:02:46.160 |
out i am back in so uh it's i missed you guys so much for joining us today we're going to be talking 00:02:52.000 |
about the all-in pod and what it's like to be a part of the all-in pod and i'm so grateful that i'm 00:02:56.240 |
actually a part of the all-in pod and i've been a part of the all-in pod for the last three years 00:02:59.600 |
so i've been a part of the all-in pod for the last three years so i'm so happy to be here and i'm 00:03:03.360 |
so excited to be back and i'm so happy to be back and i'm so happy to be a part of the all-in pod 00:03:07.440 |
i missed you guys i actually listened to the all-in pod for the first time ever last week you 00:03:11.760 |
guys did a great job you've been complaining these other last 41 times without even listening to it 00:03:16.640 |
you know um i will say i listened to it while we're on it but this was um actually really 00:03:21.600 |
good and i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:25.440 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:27.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:29.680 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:31.680 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:33.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:35.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:37.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:39.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:41.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:43.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:45.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:47.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:49.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:57.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:03:59.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:04:03.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:04:05.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:04:27.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:04:35.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:04:37.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:04:39.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:04:41.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:04:45.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:04:47.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:04:51.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:04:55.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:04:57.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:04:59.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:05:53.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:05:55.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:05:57.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:06:37.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:06:39.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:06:55.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:06:59.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:07:01.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:19.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:21.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:27.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:29.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:31.600 |
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i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:35.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:37.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:39.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:41.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:43.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:47.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:49.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:51.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:53.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:55.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:57.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:09:59.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:10:01.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:10:03.600 |
i'm glad that we're doing this together and i'm glad that we're doing this together and 00:10:05.600 |
And this is the only thing I'm going to focus on. It gives an 00:10:09.220 |
investor a lot of confidence because it's like here's a really 00:10:11.380 |
smart guy who's done this before he's going to stay in this swim 00:10:14.040 |
lane and do something really specific here and now I can 00:10:16.720 |
understand how it fits into the rest of my portfolio. So I think 00:10:19.760 |
that there is a lot of value for investors in a bunch of 00:10:23.720 |
different ways. So I don't know, I'm super excited. 00:10:26.260 |
I appreciate that. I mean, I think like one of the things 00:10:28.780 |
that mattered to me, Jason, and the way I kind of frame it like 00:10:31.880 |
a lot of people think Oh, venture studio. It's about how 00:10:33.900 |
many things you crank out. That's like Y Combinators model. 00:10:36.400 |
For me, it's not about how many businesses you start, it's about 00:10:39.180 |
absolute value creation. So you know, you have to do the things 00:10:43.500 |
that you have the resourcing to do with the objective being to 00:10:46.840 |
drive business value as a whole. So that means doing one thing 00:10:50.760 |
doing three things doing five things. It's not about how many 00:10:53.040 |
things you know, whatever the right balance is. It's not about 00:10:55.680 |
just cranking out businesses, because each one of these things 00:10:57.820 |
we have to continue to be active. And we need to continue 00:11:00.720 |
to build. And when we start a business, we reserve a 00:11:03.840 |
good chunk of the business as equity for the team that works 00:11:06.120 |
on it. So it's not like we're 100% owners, right? We've got to 00:11:09.060 |
get the right people, they've got to feel like an act like 00:11:12.720 |
you wind up owning 50% or ballpark 40%. What do you think 00:11:16.260 |
it actually varies quite a bit. So you know, without getting 00:11:18.840 |
into too many details, I mean, you know, when we start the 00:11:20.640 |
business, we're the majority owner. And in many cases, when 00:11:23.160 |
we've brought in other investors over time, we get diluted down 00:11:25.740 |
and become a minority owner. So 30% or something like that, like 00:11:29.220 |
as if you did the series A or something, but but in many 00:11:33.420 |
you know, we want to continuously fund some of these 00:11:36.100 |
businesses, because it may not make sense to bring in outside 00:11:39.460 |
investors. And and we'll continue to be the majority 00:11:42.400 |
owner. And but we create an independent board, we make sure 00:11:44.580 |
that the team feels like it's an independent business. And we 00:11:47.160 |
give them a lot of infrastructure and tooling, 00:11:48.840 |
finance, HR, legal facilities, support, recruiting support, 00:11:52.420 |
etc. And obviously templates for how to succeed and playbooks and 00:11:56.660 |
so on. So that's a lot of what I would call our platform value. 00:12:02.760 |
By the way, David Sachs is an investor in TPB I don't know if you guys knew that. 00:12:17.360 |
Well, in other news, Sachs, this is like the victory lap episode. 00:12:23.580 |
Sachs, you announced you're closing $1.1 billion with a B in craft's third fund. 00:12:32.660 |
And explicitly talking about focus to Chamath's point, explicit focus on marketplaces and 00:12:39.420 |
Maybe you could explain how long it took you to raise the 1.1 billion. 00:12:54.420 |
It's going to be 612 million for venture, which is C series A series B and 510 for growth. 00:13:02.080 |
And yeah, we are focused on SaaS and marketplaces. 00:13:06.120 |
I kind of run the SaaS practice and my thesis is really the same as it was when I was doing 00:13:11.580 |
Yammer, which is apply consumer growth tactics to enterprise software, make it go viral inside 00:13:16.920 |
companies, sort of sell it bottom up through the average employee as opposed to top down 00:13:23.340 |
And then the other GP in the fund, Jeff Flohr is focused on marketplaces. 00:13:29.180 |
He was the founder CEO of StubHub, which was one of the first companies to do that. 00:13:30.840 |
And then we have a couple of other companies that are doing that. 00:13:31.840 |
Jeff is one of the original e-commerce marketplaces on the web. 00:13:38.640 |
And those are also, you know, I would say along with SaaS marketplaces are the best 00:13:47.120 |
And so we've just decided to focus on those two areas. 00:13:50.180 |
And that's kind of enough for the world for us. 00:13:53.720 |
And in related news, your project call-in, which is a podcasting plus casual audio application, 00:14:04.420 |
And I'm proud to announce that we had a small allocation for our syndicate, thesyndicate.com, 00:14:10.460 |
which is my syndicate, and then the all-in syndicate, which we created as a lark. 00:14:15.140 |
Between those two syndicates, my syndicate had 900 requests to invest over, I think, 00:14:28.160 |
So something like one in, I don't know, seven or six got it. 00:14:31.600 |
And then the all-in syndicate also filled up. 00:14:34.840 |
And then the all-in syndicate, no carry, no fees. 00:14:37.840 |
Everybody gets a free ride, thanks to David Sachs. 00:14:40.780 |
And that's our first all-in syndicate chipping away at my core business and eating my lunch. 00:14:47.840 |
And the all-in syndicate is going to be $250,000. 00:14:51.100 |
It's $250,000, $1,000 checks with no fee, no carry. 00:14:56.260 |
And the company is paying the administrative expense of that. 00:15:24.300 |
And I mean that sincerely, not just because you gave me an allocation. 00:15:31.120 |
If you miss the great conversation, it's gone. 00:15:34.860 |
And Clubhouse has really bad audio quality and the rooms are... 00:15:45.640 |
Then the show is syndicated to an RSS feed like a podcast. 00:15:49.240 |
So you can basically start your own podcast with no staff, no post-production. 00:15:54.960 |
You just talk and then it goes out to an RSS feed. 00:15:57.580 |
So we're thinking, David and I, of doing like a post-production. 00:16:00.880 |
And then, you know, we're like, okay, well, we're going to do a show after all in like 00:16:02.920 |
two days after just to talk to the fans and do like a little private group thing. 00:16:06.860 |
But it's kind of like a really nice overlap of podcasting. 00:16:11.460 |
Well, I was going to say it's basically long tail podcasting using social audio as the 00:16:24.880 |
Have we internally marked up the round four times like Andreessen Horowitz did with Clubhouse? 00:16:30.640 |
Let me ask, let me get Chamath in the conversation. 00:16:32.520 |
Chamath, what do you think of a venture firm making a seed investment at 100 million, then 00:16:38.400 |
a billion, then at 4 billion for a product that, you know, is largely sideways? 00:16:44.360 |
This is like internal three bets and marking it up 10x and then 4x. 00:16:54.700 |
I think the best venture firms shouldn't give a shit about any company. 00:17:04.320 |
Because if they're very savvy, they should be doing exactly what Andreessen... 00:17:10.740 |
You've seen the articles about Tiger, you've seen all these other folks. 00:17:14.420 |
The real question is maybe if you want, can you please explain what they're doing? 00:17:19.560 |
And what they're doing is, to me, if you understand the investing landscape makes a ton of sense, 00:17:27.300 |
which is technology used to be the small niche. 00:17:30.160 |
And so we used to only get, you know, when I started Social Capital, there was probably 00:17:35.160 |
25 to $30 billion a year flowing into venture, just in 2011. 00:17:40.920 |
Fast forward a decade, we have like $120 billion a year going into tech, and it's going up 00:17:48.940 |
And if you're the best brands, you're going to get the overwhelming amount of interest 00:17:53.860 |
from people who want to get into the asset class as the asset class expands, right? 00:17:57.720 |
So if all of a sudden, you know, you decided to... 00:18:00.160 |
Invest in private equity, when private equity was going bonkers, you're not going to take 00:18:05.060 |
as much of a shot on an emerging manager, you're going to want to take a shot on Blackstone 00:18:11.640 |
And that's what's allowed those folks, Carlisle, to scale AUM just unbelievably. 00:18:22.280 |
Similarly, there are these indelible brands in venture, and when everybody realizes they 00:18:31.920 |
Now, when they do that, you have to understand who these people are. 00:18:36.800 |
One, they are people like pension funds, and their hurdle rate, meaning, you know, what 00:18:43.900 |
are they trying to do better than in terms of a rate of return, is in the low to mid 00:18:59.260 |
So, you know, these guys have so much money that they would rather, when they spend an 00:19:01.820 |
hour meeting with you, they'd rather give you a $50 million check than a $5 million check. 00:19:06.680 |
A $5 million check just compounds their problems. 00:19:09.120 |
So, if you put these two things together, it makes a ton of sense for companies like 00:19:12.920 |
Andreessen to now focus on the velocity of money. 00:19:17.600 |
Raise a fund, put the money to work, raise a new fund in a very systematic way that everybody 00:19:22.780 |
can understand and can predict so that Andreessen can tell their LPs on a calendar, "Guys, I'm 00:19:28.600 |
"Guys, I'm going to be back to you in a year." 00:19:33.380 |
And I think if you look at it in that framework, it explains Andreessen, it explains Excel, 00:19:39.420 |
And by the way, it's a brilliant strategy because these guys still make 2.5% on the 00:19:46.400 |
They end up returning the market beta, meaning what the average market would do anyways, 00:19:54.760 |
So they'll still do a little bit better than the market, which means they'll be able to 00:20:00.600 |
Do you mean the public market or the venture market? 00:20:11.240 |
But my point is it's still better than the 5% or 6% these pension funds and other folks 00:20:16.220 |
So today, the goal of every fund that's successful that has a brand, David's included, should 00:20:29.120 |
And the thing that David has, which other folks don't, is David can help make things 00:20:32.360 |
work when they're not necessarily obvious, but then pound the money in and then raise 00:20:36.720 |
more money as fast as you can because then it helps the investor. 00:20:41.660 |
That's what they want and they're happy to pay you. 00:20:43.980 |
And then for you, the GP, you start to make enormous fees and the whole cycle works. 00:20:49.900 |
So for Andreessen, I think that's the calculus. 00:20:52.300 |
It's like, "Shit, if I can put 100 million in, that's 100 million less I have in my fund. 00:20:57.640 |
I'm 100 million closer to raising the new fund." 00:21:01.400 |
Now, the criticism has been, Friedberg, I'll go to you, it's bad hygiene for the same firm 00:21:16.640 |
So is that a warning sign for you that it's a bubble or it's kind of... 00:21:20.980 |
The worst case I've heard is like marking up your own book, self-dealing, whatever. 00:21:27.440 |
Well, if it were SpaceX, you would look like a genius. 00:21:38.940 |
And Sequoia has done this many times where they've been the lead in multiple rounds in 00:21:43.980 |
the company and they have high conviction in the quality of a business and they don't 00:21:48.720 |
And when you have high conviction and you can continuously buy more of the stock and 00:21:52.080 |
buy more of the company and be a bigger owner, and then it works out, you look like a freaking 00:21:58.200 |
And so I don't want to criticize the investing style of these guys. 00:22:01.960 |
I mean, time will tell if they made good bets or not as a whole. 00:22:05.660 |
You can kind of make the case maybe that they're trying to be asset managers and drive assets 00:22:11.400 |
But I think LPs are a little shrewder than that. 00:22:14.860 |
At the end of the day, the guys that are known for doing this like Sequoia and Founders Fund 00:22:19.180 |
and others have had incredible returns by doing exactly this. 00:22:27.200 |
You just have to do it with the right businesses. 00:22:28.200 |
And I think that will demonstrate the quality of your investing acumen. 00:22:32.440 |
All right, Sax, any further thoughts on that? 00:22:35.600 |
The marking up your own book, is that something you plan on doing with this new fund and having 00:22:41.020 |
And how would you look at, hey, call in starts getting some traction. 00:22:45.200 |
Does that mean your growth fund is going to go market up and take those shares? 00:22:49.720 |
Or do you think that it's better hygiene to have the market price it? 00:22:55.200 |
I mean, the growth fund does give us the idea. 00:22:57.200 |
We have the ability to double down at a later stage on our own early stage companies. 00:23:01.400 |
But you do have to be really sure when you do that, because it does, you know, it certainly 00:23:06.760 |
raises questions if you're wrong, right, that you wouldn't have with any other investment. 00:23:16.680 |
But you know, if Colin's a big hit, do we go raise, you know, a growth round? 00:23:21.200 |
And now I think what we might do in that case, because we incubated it is we'd let somebody 00:23:24.480 |
else lead the round, and then we would participate. 00:23:27.200 |
You have some third party setting the price, because we incubated the company. 00:23:31.940 |
And frankly, that's what we did with the round that you just participated in is craft participated, 00:23:36.960 |
but we did not set the terms, it was actually Goldcrest and Sequoia co led the round with 00:23:44.680 |
When you incubate a company like that, let me ask another technical question, because 00:23:48.520 |
the audience last week, or in the week before really responded well to us talking about 00:23:52.840 |
this as opposed to COVID and Delta variant, which we'll talk about at the end of the show. 00:23:57.200 |
For those people, you can basically turn off the show at 50 minutes or 75 minutes when 00:24:04.820 |
But and I'm hoping you're thinking right now about who's not in Italy, I hope we'll get 00:24:11.600 |
When you incubate a company like that, who owns the original founder shares, craft, the 00:24:16.680 |
organization, David Sachs, the individual came up with it. 00:24:27.200 |
We have a deal with our LP is that's called an LPA limited partner agreement. 00:24:32.280 |
And one of the things that was negotiated when I found a craft four years ago, was the 00:24:40.540 |
And and so it's all predetermined what I get as a founder, what what our funds get what 00:24:47.100 |
the LPs get, so there can be no argument about it later. 00:24:51.900 |
And this is this call it well, we've actually done. 00:24:59.880 |
You know, for me, it's really important to scratch that product itch, you know, I'm originally 00:25:05.240 |
And, and I, you know, I love investing in helping companies, but occasionally, about 00:25:10.220 |
I'd say maybe once a year, I get a product idea that I think is worth developing. 00:25:15.000 |
And so this gives us the ability to incubate it. 00:25:17.460 |
So we did it a few years ago with a crypto company called Harbor, we ended up selling 00:25:21.360 |
that company to BitGo, which just announced that the largest acquisition of a crypto company 00:25:27.200 |
is a galaxy is acquiring it for something like 1.2 billion. 00:25:30.980 |
So anyway, so Harbor, I think, will work out, you know, once that deal closes, and Collins, 00:25:36.680 |
the second one, there's a couple other things that are still, you know, they're too early 00:25:40.620 |
to talk about, but, but I think Colin will be the second one to launch 00:25:45.380 |
Chamath as an LP and a lot of funds, what do you think when somebody comes to you and 00:25:49.380 |
says, I want to in my LPA, my limited partner agreement, have the ability to incubate these 00:25:59.660 |
I mean, I don't really, you know, push back on a single term in any LPA, because I'm only 00:26:08.120 |
And so whatever terms they want, they get from me. 00:26:12.420 |
And you know, kind of just like, let them go and hope they get lucky, you know, I have 00:26:16.340 |
a very different approach to, to these kinds of things, because I'm not necessarily trying 00:26:20.420 |
to compound my capital, I'm just there to sort of enable folks and, you know, take 1% 00:26:27.200 |
If I really have an asymmetric view on a specific thing that they're doing, but otherwise, I 00:26:32.320 |
just take 1% sign the thing and, you know, wish them wish them the best and then try 00:26:40.740 |
And that's all I'm trying to do if I believe in what the how they're investing and the 00:26:46.640 |
You know, however they do it is up is fine with me, I want to go back to something which 00:26:49.340 |
is, I actually think it's not a question of hygiene. 00:26:53.520 |
It's really a question of governance, because when you do these things, and you mark these 00:26:57.200 |
The real question if a company stops working, is they tend to have too much money, and then 00:27:05.360 |
And the reason is because governance typically comes with board diversity and board diversity 00:27:09.600 |
comes with more and different investors who have different, you know, puts and takes at 00:27:15.740 |
any given point in time, that diversity is very helpful to keep everybody on the same 00:27:20.300 |
page and to actually get a decent outcome when things aren't working as much now when 00:27:27.200 |
You know, because like, you can just have Jim gets on the board of WhatsApp with Jan, 00:27:34.680 |
So as we're saying, when things are when things are good, nobody complains. 00:27:39.440 |
And you know, this may be a good jumping off point for, you know, we wanted to talk about 00:27:44.280 |
can say one thing for Zymergen, which is just look, I think there's all sorts of new models 00:27:48.540 |
now with with just sort of tech, and the money going into tech, the venture capital exploding. 00:27:54.020 |
There's all these innovative new models, I think it's all for the good. 00:27:57.200 |
And, you know, I think the CEO that I think is great is what Jack Abraham's done with Atomic. 00:28:03.100 |
You know, they've produced multiple unicorns out of there, because Jack is just a phenomenal 00:28:10.580 |
So he then, as part of Atomic comes up with the idea and then brings on a operating partner 00:28:17.200 |
And then, you know, he just partnered with Keith Raboy on OpenStore. 00:28:27.200 |
And we're seeing like the blending of these models, you know, it used to be that you made 00:28:31.260 |
the decision to become a VC and your career as a founder was just over, it was like this 00:28:39.240 |
And now you're seeing the blurring of these lines. 00:28:44.160 |
Because frankly, when you know, Keith, or, you know, what I'm doing with call in, we 00:28:49.180 |
remind people that we're still founders, and product people. 00:28:53.860 |
And you know, not just sort of semi retired guys. 00:28:59.040 |
And it's like, it's good for what we do as investors. 00:29:01.200 |
We saw it with Mike Spicer, who is a partner at Sutter Hill, he incubated it started and 00:29:05.020 |
was the original head of Snowflake, which was a massive... 00:29:10.700 |
So you know, he did pure storage, he did Snowflake, I think he did laceworks. 00:29:18.620 |
And just just just folks that don't know, Snowflake, you know, it's an enterprise software company, 00:29:24.260 |
So he's a venture capitalist, he started this company while working as a venture capitalist. 00:29:27.200 |
They brought on a great CEO, this incredible guy, later, who's Frank Flutman, who's a legend. 00:29:34.300 |
And the company just went public last year, I think, or the year before, and they're worth 00:29:40.180 |
And so it really highlights that while this guy is still operating as a venture capitalist 00:29:43.700 |
and a GP, he's been able to generate incredible returns for his fund, and build amazing businesses 00:29:50.920 |
So I mean, Spicer, Spicer is a perfect example, because I have known him since like the early 00:29:57.200 |
And at some point, Spicer started this consumer company called Bix. 00:30:02.140 |
And I was like, we were like an investor, I was a small investor in Bix. 00:30:08.900 |
And it was always curious, because like Spicer was clearly the smartest one in the room. 00:30:12.880 |
And it's like, he was kind of grinding this consumer thing. 00:30:19.020 |
And he basically said, you know what, fuck this, I'm going back to my roots, because 00:30:21.540 |
before that he was a pretty traditional enterprise guy, and he just crushed it. 00:30:27.200 |
Michael Jordan was finally like, fuck baseball, I'm going back to basketball. 00:30:30.920 |
And it's like Reid Hoffman and Neil Boussery at Greylock, right? 00:30:33.880 |
I mean, these guys are incredible operators, business builders, and they continue to do 00:30:38.280 |
that work while while being partners in the venture. 00:30:41.580 |
We have three directions we can go moving on Zymergen. 00:30:49.580 |
So for people who don't know, Zymergen went public at $31 a share in April, traded as 00:31:16.380 |
I didn't ask them exactly the way you said them. 00:31:19.220 |
But here is the quote of what happened on Tuesday. 00:31:22.140 |
Zymogen stated the following Zymogen recently became aware of issues with its commercial 00:31:27.260 |
product pipeline that will impact the company's delivery timeline and revenue projections. 00:31:32.720 |
Accordingly, the company no longer expects product revenue in 2021 and expects proven 00:31:41.880 |
They also announced that the founding CEO Josh Hoffman, who was on this week in 00:31:46.380 |
startups to maybe a month ago, stepping down as CEO will be replaced. 00:31:51.880 |
And Zymogen stock then dropped 70% on the news. 00:31:58.380 |
It was a straight IPO and the stock rate 80% yesterday. 00:32:01.380 |
80% a day after going public three months ago. 00:32:04.620 |
So I think Freeburg a good way to start would be what did they say they were going to do? 00:32:12.380 |
So Zymogen and a couple companies like them started around the same time. 00:32:16.380 |
Which is around 2014, 2013, 2012, that era, 2015 even. 00:32:21.380 |
And the promise of these companies is truly to be everyone wants to be this platform for 00:32:28.380 |
And what that means is they can take cells and in a smart way, edit the cells and get 00:32:36.380 |
And so you can kind of think about making materials like silk and leather and plastics. 00:32:41.380 |
And you can think about making food like egg proteins and milk proteins and so on. 00:32:46.380 |
And you can think about making industrial products, enzymes and things that might be 00:32:49.380 |
used in laundry detergent, other applications. 00:32:52.380 |
And so for years, we've gotten DNA sequencing cheaper. 00:32:58.380 |
We've now got other tools to basically screen cells. 00:33:01.380 |
So we have these, the set of tools where these synthetic biology platform companies popped 00:33:07.380 |
We're going to put all these tools together and build a platform for editing cells and 00:33:13.380 |
And we're going to get into all these markets." 00:33:15.380 |
And Zymogen, when they first started, they were like, "Oh, we're going to do this. 00:33:17.380 |
And they were like, "No, we're going to do that." 00:33:18.380 |
And they were like, "No, we're going to do that." 00:33:19.380 |
And they were like, "No, we're going to do that." 00:33:20.380 |
And they were like, "No, we're going to do that." 00:33:21.380 |
And then they started, they first started, were like several other companies like them 00:33:23.380 |
So they would go to big partners, like DuPont and say, "Hey, let us make a new enzyme for 00:33:26.380 |
And then we'll get a royalty on the back end when that product eventually goes to market." 00:33:32.380 |
They went after insecticidal products, they went after plastics and materials and all 00:33:38.380 |
And as is the case with a lot of deep tech, it turns out it's really frigging hard. 00:33:42.380 |
These tools might be there, but like we saw with the clean tech era where everyone thought 00:33:46.660 |
they could make oil from sugar cane 20 years ago using the same sort of approach to get 00:33:52.440 |
the unit economics, meaning can you make the product cheap enough, it's really, really 00:33:56.760 |
That means you got to get these cells to be just perfect and you got to get the systems 00:34:00.280 |
And so at the end of the day, they went through a lot of customers at Zymogen that paid them 00:34:05.540 |
And Zymogen didn't have anything at the end of the projects to say, "Here's something 00:34:09.020 |
that works that you guys are willing to pay for that you're going to go take to market." 00:34:14.920 |
And it didn't really have big breakthroughs for any big industry. 00:34:18.340 |
And so Zymogen, like other companies in the space, pivoted and said, "You know what? 00:34:24.920 |
So we're going to make our own products instead of just being a services company." 00:34:28.080 |
And as they started to get into that, they decided that their first big product would 00:34:30.760 |
be this kind of plastic for cell phones or what have you, protective film. 00:34:38.560 |
And in the meantime, what happened is it takes so much money to do all this R&D, to run all 00:34:42.380 |
these labs, to have all these robotic arms that they have that are moving test tubes 00:34:45.480 |
around hundreds of people building and running these labs. 00:34:50.700 |
And in order to raise money, as you guys know, you have to hype the story. 00:34:53.680 |
You have to say, "Look, we're going to change the world. 00:34:56.840 |
We're using synthetic biology to rebuild everything, yada, yada." 00:35:00.860 |
And the story resonates with me because I truly do believe that the potential is there. 00:35:04.200 |
But the timing and the sequencing of these things is hard, as is the case with a lot 00:35:08.020 |
of deep tech companies, when you get too far ahead of the curve, and you start saying, 00:35:12.380 |
"I'm going to do X, Y, and Z," but you can really only do A, B, and C today. 00:35:16.060 |
You raise money saying, "I'm worth billions of dollars." 00:35:21.280 |
And they eventually got into the trap that a lot of companies got into, which is taking 00:35:25.600 |
And SoftBank said, "Here's $400 million at a $3 billion valuation a few years ago." 00:35:34.480 |
And suddenly, they didn't have any products to show because deep tech is hard. 00:35:40.500 |
We better try and craft a narrative and get... 00:35:45.380 |
And a lot of what they had been telling people was coming, was coming, it's going to be here 00:35:53.980 |
They kept telling folks they were going to be X, Y, and Z months away. 00:35:57.700 |
And they were going to be able to hit these targets on the product. 00:35:59.700 |
And it turns out it was always a little bit further away, a little bit further away. 00:36:03.220 |
And then boom, they have a big board review recently. 00:36:05.640 |
And they look at the product pipeline and they look at where they are. 00:36:07.620 |
And they're like, "Oh, this really isn't going to work." 00:36:12.380 |
Because everyone was banking on this massive return. 00:36:14.720 |
And everyone missed the story, which is that they've been doing this for many years and 00:36:19.020 |
had to eventually abandon and pivot away from their business because no one was willing 00:36:23.420 |
So truly, they never found product market fit in their first generation of their business. 00:36:27.540 |
And they never found product market fit in the second generation of the business. 00:36:31.800 |
And it's really worth taking a watchful eye based on this learning, which is just a fundamental 00:36:42.380 |
And if you can't answer those two things, there isn't a business. 00:36:45.020 |
And then the third thing is how valuable is the company as a function of how much you 00:36:48.700 |
And so they really hadn't even gotten past phase one. 00:36:51.760 |
And everyone kind of wanted to believe the hype. 00:36:56.100 |
But it's really going to impact the industry broadly. 00:36:58.000 |
Because now people are going to say a lot of synthetic biology companies are smoke and 00:37:03.160 |
So a lot of folks in the industry are really concerned right now. 00:37:05.060 |
So to dovetail this with the previous discussion, Sachs, funding your own company over funding