Firstmark Capital’s Rick Heitzmann is someone I turn to when I want to understand what public market activity means for private startups. Heitzmann’s got an ear to Wall Street from his offices in New York City, but he invests in private technology startups.
So I invited Heitzmann on Dead Cat with Tom Dotan and Katie Benner. We tried to make sense of this sudden downturn. Everyone has seen it coming for years. We just never knew when the party would end.
Building on my story “The Endgame” from last week, we talk about how rising interest rates — not a global pandemic — seem to be finally bringing the boom times to an end.
“We’ve entered into a new normal,” Heitzmann told us. “We’ve entered into a new period where capital is not free, where it’s going to be more and more expensive.”
Heitzmann reminded us why startup investors kept deploying money even as things seemed frothy. “In the last 18 months of a 10-year bull market, most of the money is made. That’s why people are always afraid to get off the treadmill,” Heitzmann said.
We all marveled at just how long this bull market has run, and we speculated about which companies might come to represent the excess when the dust has settled and the retrospectives are written.
“These quick delivery guys — that are all over the streets of New York, the Jokr’s, the Getir’s,” Heitzmann observed, “We saw Kosmo. We saw it didn’t work and then we just did the same thing with another $10 billion.”
“We saw this movie. Everybody died at the end,” Heitzmann said. “Now we’re wondering why in the sequel we think there is going to be a happy ending.”
Give it a listen.
Read the automated transcript.
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00:00:06
Welcome everybody. We're here with dead cat.
00:00:15
Is there newcomer? I'm here with Tom and Katie and
00:00:18
we've got Rick. Heintzman who is a Firstmark
00:00:21
Capital? We were talking about the
00:00:22
markets. I was like oh can you just come
00:00:24
on the podcast? Actually, just tell everybody
00:00:26
this because I feel like yeah you know I tried.
00:00:30
Try to for the newsletter, you know, accumulate bunch of views
00:00:34
from Smart, Venture, capitalists about what you know the public
00:00:39
markets mean, for the private markets because they're not
00:00:42
always sort of 121. And Rick is one of my go-to son
00:00:46
sort of translating. I think, you know, talks to
00:00:49
smart people in the problem Marcus.
00:00:50
Anyway, Rick thanks, thanks for being here.
00:00:53
Hey, thanks for having me on. This is awesome long, time
00:00:55
listener. So excited to be part of it.
00:00:57
And it's excited to be on be on the record for Yeah, I mean,
00:01:01
what is your eye level take away?
00:01:02
Or, I mean, do you think this is?
00:01:04
I mean, this is the hardest prediction to make.
00:01:05
But I mean, you think this will stick.
00:01:08
I mean, I think a lot of people we saw, you know, March 2020,
00:01:12
where it seemed like that, that was the end of the world.
00:01:14
And then everything rebound saw, somebody tweeting out that bill
00:01:17
girly has correctly predicted five of the last two recessions.
00:01:21
So there's certainly no shame in saying the word entering a bad
00:01:25
period. But what's your?
00:01:26
What's your honest take? Yeah, I thought will girly.
00:01:29
I Yeah, I can make it like to make predictions about girly but
00:01:33
I will make it slightly more difficult operations about the
00:01:36
market. I think we've entered into a new
00:01:39
normal. I am not going to call the
00:01:41
bottom because I think that's hard to do, and there's too many
00:01:45
things at work here, but I think we've entered into a new period
00:01:48
where capital is not free and it's going to be more and more
00:01:51
expensive even as the tenure is kind of popping up over three
00:01:55
percent. People are saying oh you know
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this is, this is Well, then we're still at historic levels,
00:02:02
so you're going to see dollars kind of trickle out a macro
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sense out of risk categories, out of it liquids and into more
00:02:10
liquid, you know, fixed income where they've been before, and
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that's just going to recalibrate the supply and demand for
00:02:16
venture capital and therefore make Venture Capital more
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expensive and more competitive for everyone.
00:02:22
Could we maybe back up for a second here?
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And just maybe set up for listeners like from a macro
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economic standpoint or are, you know, A financial industry
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standpoint. What were the parameters and
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environment that kind of LED towards the last 10, however,
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many years of venture capital Investments?
00:02:39
I mean like, what exactly were we working under that allowed
00:02:42
for so much Venture Capital to enter the industry at what you
00:02:45
say is cheap money. So, you know, compared to
00:02:48
compared to Historic levels. When I was in the 90s when I was
00:02:51
in college, they folks said, hey you had to have ten percent in
00:02:55
cash, 60% and bonds and 30% inequities all act.
00:03:00
He's in a small portion of that, could be a liquid equities and
00:03:03
what happened was both would stimulus put kind of in the
00:03:08
early 2000s. Post that recession and
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September 11th and then increasing stimulus and
00:03:14
concluded quantitative. Easing post the financial
00:03:17
crisis. We were seeing is unprecedented
00:03:20
new lows in the and the in the fixed income Market in the
00:03:24
high-yield market and what you could get for your risk free
00:03:27
rate. So your cost of capital, Capital
00:03:31
decreased tremendously. And so if you were an
00:03:34
Institutional money manager, if you were a pension fund a
00:03:37
foundation, someone like that. You said, well if I'm not
00:03:40
getting any yield and fixed income, what could I go and put
00:03:45
money in to get yield and as, you know, as more of that money
00:03:49
kind of trickled out of fixed income and trickled into
00:03:53
equities, you know, some portion of that trickled into venture
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capital and what we saw was interest rates Need to fall and
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there was kind of a self-fulfilling prophecy where
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culminated in the early days of the pandemic, I think April or
00:04:09
May of 2020 where interest rates were effectively zero here and -
00:04:14
in large parts of the world as correctly.
00:04:17
The FED said, hey we need to stimulate this and we need to
00:04:20
figure out what's going to happen on the other side of this
00:04:22
pandemic. We want to make sure the economy
00:04:24
doesn't crumble as well as everything else going on.
00:04:28
So money effectively became free.
00:04:29
A or even negative yielding and therefore people wanted to put
00:04:35
money in whatever was happening and there is no discount for
00:04:38
companies that weren't making a profit, but making a profit
00:04:41
later and therefore, tremendous dollars, transferred into risky,
00:04:46
but a liquid venture capital and the startup ecosystem on the
00:04:50
whole dollars from where, by the way.
00:04:52
I mean, where did you see kind of a new class of investors
00:04:55
during that period starts a enter, enter the, you know,
00:04:58
investment or LP or Whatever stage Market you're shaking from
00:05:01
everywhere. So you know, there are there
00:05:03
were firms that were allocating more dollars into venture
00:05:06
capital or private Equity as a liquid.
00:05:09
People call it Alternatives, liquids vcp was showing better
00:05:14
returns, right? Because you're seeing that same
00:05:16
supply-demand, Dynamic happening among the lp class and you are
00:05:19
seeing worse returns among fixed income.
00:05:22
So with that gradual transition and that's a self-fulfilling
00:05:26
prophecy, right? The more money you put into a
00:05:28
small asset Class the more that asset class is going to grow in
00:05:32
the more it'll create yields. Therefore, as interest, rates
00:05:35
are falling on the fixed income side and returns are growing on
00:05:38
the Venture Capital private Equity side.
00:05:40
It increases that that transition or increases the
00:05:43
velocity of that transition, right?
00:05:46
Saddam this down, even more. I means interest rates, were
00:05:49
low, people, loved risky companies.
00:05:52
With what produces the best risky.
00:05:54
High-growth companies Venture Capital people flooded in to the
00:05:58
private markets. And then the riskiest companies,
00:06:02
raising a lot of money. So then the good companies, you
00:06:06
know, sort of software businesses with high margins,
00:06:09
were trading at extreme multiples earlier and earlier,
00:06:12
because relative to sort of cash burning businesses, there was so
00:06:16
much appetite to get in them that they drove valuations foot
00:06:21
way up. Well put yeah, yeah.
00:06:24
Money has if there's no risk associated with capital and no,
00:06:26
yield required, people are just going to dump more and more.
00:06:29
R capital in and that could be startups or that could be crypto
00:06:32
or that could be an f and that's kind of how we saw during you
00:06:35
know the spring and summer of 2020.
00:06:38
Really up through most of last year.
00:06:41
These companies, raising these bunkers around especially like
00:06:43
fintech companies at insanely High multiples.
00:06:47
I mean I was covering media during the time.
00:06:48
So I was seeing this incredible rebound from, you know,
00:06:52
initially everyone fearing that there was going to be no money
00:06:55
in advertising to an abundance of advertising and companies
00:06:58
kind of Really looking like they were doing really great.
00:07:01
I mean it was this kind of 18-month Euphoria of what your
00:07:05
what we're talking about here, right?
00:07:06
Well, there's flooding in the system, the Fed was flooding the
00:07:09
system with money and therefore they were more consumer
00:07:12
companies being funded who wanted to spend that money on
00:07:14
Advertising. Traditional companies were more
00:07:17
than happy to spend money on Advertising because their
00:07:19
threshold to return on their investment on Advertising was
00:07:22
much lower. So every, you know, every part
00:07:25
of the economy dollars were slashing around and therefore
00:07:29
or, you know, everything was good.
00:07:31
Okay. Let's and just for context for
00:07:34
people. The NASDAQ Composite is down
00:07:36
24%, right now? Year-to-date, yep.
00:07:40
And then, as of today, it's down like two percent.
00:07:43
So that I mean and yesterday I'm talking about Thursday, it was
00:07:48
down in that terrified. Everybody was down about five
00:07:50
percent. So that's that's that's what's
00:07:53
got us scared. And and just to highlight one
00:07:55
thing, I mean, it is amazing. You know, if you're not in the
00:07:58
finance World, it Wasn't the pandemic.
00:08:01
The terrified the stock market. It was the FED moving to raise
00:08:05
interest rates. So it that is why this
00:08:06
conversation Roots around interest rates so much that,
00:08:09
that contrast pandemic. Nope, markets are fine, interest
00:08:13
rates, that drives company, prices and everything and that's
00:08:17
that's why we're sort of reacting at this moment.
00:08:20
I mean let's split into like with our private Market Focus
00:08:23
here and what this means for the private Market sort of the bull
00:08:26
case and sort of the bear case for you know in a good Situation
00:08:30
and a bad situation like to me in this in this, okay, things
00:08:34
are going to be okay? The okay Market is there's still
00:08:37
a ton of venture capital, there aren't sort of systemic risks,
00:08:41
you know. They're, I don't know, what's
00:08:42
the bull case. So there's a bull case is and
00:08:45
I'm an optimist, right? So I'm always pulling for the
00:08:48
bull case I'm always optimistic about what's going to happen.
00:08:51
So yeah, and I want this to happen in the worst way.
00:08:54
What you're seeing is that the digitization of every single
00:08:58
industry were probably In the early Innings now you're seeing
00:09:02
disruption happening every industry and whether it's a
00:09:05
shift to streaming and media or whether it's a shift to The
00:09:08
Internet of Things in railroad cars.
00:09:11
So you're seeing a gradual disruption of traditional
00:09:13
business practices. And disruption in the most
00:09:15
sincere way, I mean, people use Spotify you exactly you're using
00:09:19
Netflix, your parents use cable, and you're like, what's wrong
00:09:21
with you? Like there is a most people are
00:09:24
still using cable TV, there's still plenty of room for things
00:09:27
to shift, over to the disruption that most millennials.
00:09:29
Has already accepted as as meaningful.
00:09:31
Exactly. And people are finding jobs on
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their on their phone and they're rare, and they're ordering food
00:09:36
on their phone and all these things which are not only
00:09:39
disruptive, but are more efficient, right?
00:09:41
Your there's less, there's less aspects of the activity chain
00:09:45
and traditional toll takers who were resellers or losing value,
00:09:50
right? So you have to pay your cable
00:09:52
company who then turn around and pay ESPN for you to EXs ESPN.
00:09:56
Now you can just go on your phone and subscribe.
00:09:58
So a lot of This out of these elements of digitization are
00:10:02
creating a much more efficient economy.
00:10:04
And so, all that's good. There's High return on
00:10:06
investment and your, we still, we think we're in the early
00:10:10
Innings of that, and it's coming waves.
00:10:12
And I think the availability of free money led to a lot of
00:10:16
Entrepreneurship. It's coming democratize is
00:10:18
becoming Global and we're seeing great ideas come from
00:10:21
everywhere. So from a fundamental, most
00:10:25
macro basis digitization and the push for entrepreneurship Is
00:10:29
making everything work better than it did before, and that's
00:10:33
creating better companies than before.
00:10:35
And those companies are also able to use completely new, go
00:10:39
to market channels and reach more people more quickly than
00:10:42
ever before. So if we started a company and
00:10:44
we knew we were looking for chicago-based pizza makers, we
00:10:50
go on Facebook or Google and advertise immediately to all
00:10:52
those chicago-based pizza makers overnight and you know,
00:10:55
therefore business has become better and more efficient.
00:10:58
So that that's a Rate Tailwind there.
00:11:01
So these companies are getting started, you know, there's also
00:11:04
a much more evolved ecosystem in the funding of these companies
00:11:07
through their seed, investors incubator seed, investor series
00:11:10
a growth, all those things and all each element of that call it
00:11:15
Financial activity chain has been well funded over the last
00:11:19
period of time, you know. They're even the revolution rise
00:11:22
to the rest funds, it will to deal with the large parts of the
00:11:24
countries that were Venture Capital deserts individual
00:11:29
Industries. Actors have individual Venture
00:11:31
Capital firms are well capitalized and every make sure
00:11:34
maybe maybe you know we talked here about like d1's the world
00:11:37
like tigers, like firms can either redirect to the private
00:11:41
Market. I'm sorry from the private
00:11:42
markets to the public markets. That's where it's most
00:11:44
dangerous, right? Right, that PSI, right.
00:11:46
And we're still talking about the Brown case and they still
00:11:48
have tons of if you're Henry or if you're it's hard not to talk
00:11:52
about the the barricade. Yeah.
00:11:54
So, so we're still saying These Guys, these guys have a ton of
00:11:58
money and you know time Doing more at the series and series
00:12:01
pay level. So you know, you're seeing more
00:12:04
dollars and more parts of the ecosystem than you've ever seen
00:12:07
before seed and a are still, I would call them frothy, you're
00:12:10
still right? I mean, would you say that?
00:12:12
I think we just begun to see valuation expectations reset.
00:12:17
So usually it flows back through the system, right?
00:12:20
Because the feedback loop is longer the further you are.
00:12:23
If you're if you're trading a liquid stock you get feedback
00:12:26
every second of whether that was a good trade, if you're doing a
00:12:29
seed it Takes you years to get feedback and therefore this
00:12:32
adjustment takes longer to get feedback into your cycle and
00:12:36
decision-making. So we're seeing the reset on
00:12:39
pricing happen at the sea at the series a now and it'll probably
00:12:42
happen in the season series over the next quarter.
00:12:45
But you know overall the ecosystem from a very macro
00:12:48
perspective is great companies are creating value there.
00:12:52
You know, these companies are also more profitable sooner than
00:12:55
ever before, as there's a bunch of tools become Capital
00:12:58
efficient and it's a Old funded activity chain to get companies
00:13:02
from idea to the public markets in a relatively efficient way,
00:13:06
that's the bull case. So you're going to the bear
00:13:08
case, there's more companies than ever before and there's
00:13:13
going to be a lot less Capital. So there you know as Eric said
00:13:17
in the in the growth stage in the later stage companies,
00:13:20
there's probably you know eighty to ninety percent down from last
00:13:25
year, certain players have left the market completely that were
00:13:28
top 10 players. In the private markets.
00:13:30
Last year, other players are down significantly.
00:13:33
This is the third longest time without a tech IPO this Century.
00:13:38
I didn't know that after after, after the early aughts, and
00:13:41
after the global financial crisis and the big IPOs
00:13:43
coinbase, Robin Hood of 2021 are looking terrible.
00:13:47
So yeah, it are looking to and there's, yeah, there's a
00:13:50
hangover. So the people who bought the
00:13:52
IPOs last year, which also because their crossover funds
00:13:55
tended invested heavily in the privates last year or so.
00:14:00
Wow, the things I took out last year, I wasn't as smart as I
00:14:03
thought these things are down 70% on average and the things I
00:14:07
invested in last year thinking they were going public this
00:14:10
year. I'm either getting liquidity,
00:14:12
nor evaluation pop. I'm going to take a second and
00:14:15
figure out where this Market really is.
00:14:18
So I'm just going to sit, I'm going to sit and wait because it
00:14:20
doesn't feel like I'm missing out on anything.
00:14:22
As you know, I was everybody else is sitting on the market.
00:14:26
I can invest in anything I want including these these IP Rosa
00:14:29
last year that are on set. So they're so the late stage
00:14:33
Market is completely pause with very few deals getting done so
00:14:37
just to make that specific, if I'm a big investor and I'm
00:14:41
looking at Snowflake and data. Bricks snowflake is liquid, I
00:14:45
can exit it. It's been marked down data
00:14:47
bricks is, you know, presumably still valued at whatever it was
00:14:51
in August, you know, of last year.
00:14:54
And so, are you really going to do a big growth around now
00:14:57
obviously fundamentals? You know, how the companies
00:14:59
actually I mean matters. So there will be cases, where
00:15:03
people still invest in the private company, but you have to
00:15:05
overcome sort of a huge, you know, that this the fact that
00:15:10
you've really been marked down without that ever getting any
00:15:13
new shade, a flip. I mean for the first time in my
00:15:16
career, you know, going back to 20, 25 years last year, there
00:15:20
was a private company, premium, meaning that people were willing
00:15:23
to pay a premium multiple to get into private companies.
00:15:27
Or historically, there was always a private company disk.
00:15:29
Count for, as you said, Eric liquidity, right?
00:15:32
So you know, you're able to if you buy Snowflake today and then
00:15:35
side tomorrow you don't want to be in data infrastructure.
00:15:38
Software companies you could sell it if you bought data
00:15:41
bricks, if you let around at data bricks today you know
00:15:43
you're in that for a couple of years until they go public and
00:15:47
even after they go public because there's a lock-up and
00:15:49
everything else and with so much uncertainty everything from a
00:15:53
shooting War to a resurgent pandemic to political
00:15:57
Crosswinds. You know do you really want to
00:15:59
I'm going to lock up my capital for a year or two and most
00:16:03
people are saying no for all Dimitri's to me the big question
00:16:07
on the bear case and this sort of moving into Tom's World Nara,
00:16:10
is whether there will be a company that really, like blows
00:16:13
up or like particularly even if they don't blow up, if there
00:16:16
will be our expectations for what a company, like, Uber or
00:16:22
instacart. You know, we saw lift drop by a
00:16:25
third right after earnings this. So so Caldo de, oh, go online to
00:16:30
offline market, we've never the market.
00:16:32
They those companies have existed fully in this sort of
00:16:36
bullish period and we really have no understanding of what
00:16:39
the true pricing of this industry and seemingly
00:16:42
overnight. I think that was what those kind
00:16:44
of incredible about it is, you know, walk?
00:16:46
Yes. Yeah, it was the fourth quarter
00:16:49
of last year overnight, everything changed and you saw
00:16:53
it as part of the budgeting process last year and, you know,
00:16:56
entrepreneurs were whipsawed, you know, you said 30 days ago,
00:16:59
Most three, three, most important things were growth
00:17:02
growth and growth. Now, you're saying the three
00:17:04
most important things, our profitability unit, economics
00:17:08
and long-term sustainable business model.
00:17:11
And if I'm trying to create a budget, oftentimes, there's are
00:17:14
going in different directions. And therefore, I might need a
00:17:17
new team, a new thought process, everything and, you know, it's
00:17:21
easy for an investor, like me to sit there and just cross things
00:17:24
off on a piece of paper and rewrite my top three goals, but
00:17:28
to operationally Change. That is awful, right?
00:17:31
I mean, it's almost like that. Cartoonish depiction of Wall
00:17:33
Street Traders, we're like in one sense.
00:17:35
You see them all saying like bye?
00:17:36
Bye. Bye.
00:17:37
And they're running around with the papers and then like, you
00:17:39
know, the color changes on the monitor there, like, sal sal sal
00:17:42
and they don't really understand, you know, fully what
00:17:44
happened to them. I mean, was it was fascinating.
00:17:47
I covered the earnings for Uber Lyft and doordash in the last
00:17:51
week and it was very interesting seeing the media, the way that
00:17:55
the media tried to explain what had happened because you They
00:17:59
would say, oh, lift higher earnings report, you know, Bob
00:18:03
shall embarrassment as it in is just like, no, it was actually
00:18:06
pretty good. They like beat their numbers.
00:18:08
You know, the thing that really killed them is the fact that
00:18:10
they're going to be investing more in and Driver growth, which
00:18:14
like, soon to be great news last year when they were doing it.
00:18:17
And then hilariously Uber decides to move up their
00:18:20
earnings. Pre-market to kind of circumvent
00:18:23
what they assume, you know, was a very specific lifts disease
00:18:26
because they're like, well, they're they're bad, we have
00:18:28
great earnings and I think that's like the first time since
00:18:31
the financial crisis rise as klieman brothers.
00:18:34
Right? That did the banks.
00:18:35
Yeah, move us. Exactly after Lehman, Bryce's
00:18:38
Lehman Brothers collapse, every bank had to rush to the street
00:18:41
to tell him, right? I'm not dead.
00:18:43
Yeah, I had people from Uber. I can include those people from
00:18:46
over, like, kind of spitting to me being, like, Pool Lift,
00:18:48
really missed the memo on how to run a profitable company.
00:18:51
Yeah, and, you know, that clearly was like and then they
00:18:54
decided to move up their earnings.
00:18:55
Uber does their things dropped seven or eight per sec?
00:18:58
She drops 10%, Immediately upon Market open and then doordash,
00:19:03
which actually has a very strong quarter.
00:19:05
I thought a lot of their fundamentals with great.
00:19:07
They have you no good growth. They have better Ibiza than
00:19:10
ubereats even their down like sixteen percent right now and
00:19:15
it's I think it must just be maddening inside these companies
00:19:18
as they kind of optimized for a very specific style of
00:19:22
projection and and signaling to the street to suddenly be told
00:19:26
everything. What you've done everything that
00:19:28
you've done is wrong. Yes, an Operationalize that
00:19:30
probably takes a year of rethinking about that and
00:19:33
they're hitting the expectations.
00:19:35
They set out but someone moved the goalposts.
00:19:37
When you say that, somebody moved the goalpost, like how
00:19:40
much of a recognition is there that the goal post is being
00:19:43
moved outside of the valley and outside of the industry by
00:19:45
things like the Federal Reserve? And how much recognition is
00:19:47
there? That the reason those metrics
00:19:49
could have been important and the people could have focused on
00:19:52
those things is because the market was willing to both take
00:19:54
the risk and pay for them. And when I say the market, I
00:19:56
mean the broader Market is influenced by fixed.
00:19:59
Come commercial, real estate. I mean, so when we keep saying,
00:20:02
somebody move the goalposts, actually not like an unknown,
00:20:05
somebody it was. So it's probably Public Market
00:20:07
investors, right? And that's the, that's the key
00:20:10
linchpin that they said, you know?
00:20:12
Hey, I'm unwilling, we in a rising rate environment.
00:20:15
I'm unwilling to fund losses in the long term.
00:20:19
So I need to see some definitive point where you're going to be
00:20:22
profitable and I need to see what this business looks like in
00:20:25
a run rate and companies who didn't respond to that got
00:20:29
crushed. Rushed and then, you know, then
00:20:31
private crossover investors or growth investors said, hey look,
00:20:35
they're crushing people who aren't Pro focus on
00:20:37
profitability. We're never going to be able to
00:20:39
get our company public. Unless we're profitable, then
00:20:42
they go back to the board and say, hey, rest of the board.
00:20:45
Did you see these companies got crushed?
00:20:47
They're focused on growth. And we're support, says yes, we
00:20:50
have profits and we want to see us, and that's the same guy who
00:20:53
said growth. What do you want from me?
00:20:55
I'm 60 days ago. Yes, maybe just made from the
00:20:59
outside. It I mean, like I said, I'm not
00:21:01
in over the industry or just outside of the industry.
00:21:03
It actually looked pretty logical to me.
00:21:06
I mean, when you look at all these other points, Eric had
00:21:07
this great newsletter looking all the times when people said
00:21:11
the bear markets going to happen.
00:21:13
And the one thing that wasn't really happening in those other
00:21:16
supposed inflection points is the rate, environment was not
00:21:19
changing. And so, I think it was basically
00:21:21
almost in tandem with this stock Slaughter, you saw the Federal
00:21:25
Reserve come out and say not just that they're raising rates
00:21:27
but they were immediately. Lee starting to not raise rates,
00:21:31
but to take some of the other measures off the table, that
00:21:34
weren't rate. Raises that had artificially had
00:21:37
the impact of keeping us most of the era that I've learned
00:21:41
business in that, I don't even know what the opposite of
00:21:43
quantitative easing is called. It's like so many things were so
00:21:50
many things it, because so many things were implemented post
00:21:53
financial crisis. And then post pandemic and post,
00:21:56
post post whatever you want. It wasn't just great.
00:21:59
Going up and down, right? It was buying back your own
00:22:02
paper. It was you know, it was all
00:22:03
these sorts of Market manipulation it's like people
00:22:05
like Eric go into Rick, be like explain to me the time of
00:22:08
tightening. Well, you've never seen before
00:22:16
we haven't seen this since to since when 2010 - tightening.
00:22:22
I don't think we've ever seen because I think that there was
00:22:24
quantitative each other. Yes, that's created during
00:22:28
crunchy, beings was crazy are in the Financial crisis.
00:22:30
Absolutely. The help of the banks and they
00:22:32
said what main problem is, like a lot of things.
00:22:34
Some is good, more is better. That thing we used in the
00:22:36
financial crisis, we could use that again, the pandemic.
00:22:39
And if we use some of that before, let's just lather that
00:22:41
on everywhere. And now, they like, at some
00:22:43
point, we have to reverse that and they still really hadn't
00:22:47
reversed what they did in the financial crisis.
00:22:49
And now they have to reverse all that, but even a 50 basis, point
00:22:54
change in in the Fed rate, hadn't happened in 20 years.
00:22:58
Absolutely. 2000. So they're doing a lot of stuff.
00:23:02
Yeah, it was when people were like well rates, haven't moved
00:23:04
yet. So why is this downturn
00:23:06
happening? It's like, what wasn't just the
00:23:07
rates again to your point. All the things create around
00:23:10
quantity, using those things were being quietly, dismantled
00:23:12
and expectations drive, so much of it.
00:23:15
Also, obviously you have the effect for everything has been
00:23:18
implemented, but so look, very perfectly logical to me from the
00:23:21
outside. I was like, yeah, of course.
00:23:22
And we don't know the floor of this, but I mean, obviously, you
00:23:26
know, fed policy keeps a lot of people employed, they focus on
00:23:29
Unemployment, we got to enjoy sort of this booming economy and
00:23:34
I mean there is some culpability for investors where it's, you
00:23:37
know, you know, it's not like no one everyone in the world thinks
00:23:42
that YouTuber is a money-losing business, you know, there we've
00:23:45
gone, there are lots of, you know, it wasn't a secret and
00:23:48
that both these companies lost a lot of money.
00:23:50
And that there would be come a pivot point where people sort of
00:23:54
reoriented, their thinking and sort of short-termism and Hedge
00:23:59
funds, get paid once a year. There are lots of reasons and
00:24:03
incentives that drive people to chase, you know, growth that
00:24:06
will come to an end. Well though it's the old thing
00:24:08
that your turkeys go further and further out on the risk curve
00:24:11
before they get slaughtered. So people knew that eventually
00:24:14
we're going to have to build a profitable company or if it's
00:24:17
self-sustaining financial company and then you kept
00:24:20
getting rewarded for not I like the turkeys.
00:24:23
I also like swimming without shorts.
00:24:25
I think we should put together a full list of all of the
00:24:27
analogies made. For people who take Too much
00:24:29
risk. Yeah, that was, that was the
00:24:37
Warren Buffett. When the tide goes out naked.
00:24:45
Yes, yes. Yes.
00:24:46
We can write the three questions that the Precast analogy is
00:24:54
driving the situation. I mean, in my piece, which I'll
00:24:58
include a link to In the post with this.
00:25:01
I mean, I had to charge from Red point where they showed and a
00:25:05
private investment dollars after 2008 and private investment
00:25:10
after the.com crash. And the point is, basically at
00:25:13
this is 08, you know, there was resilience and.com, you know,
00:25:17
investment, really, really dropped Katie.
00:25:20
You were sort of making the point that a key.
00:25:23
Key question. There is the interest rate
00:25:25
environment. Yeah, and I like a nerd.
00:25:27
I was like, Eric, I really wish they'd overlay Did you know him
00:25:30
here? I made a note to myself, look
00:25:40
this up before the cast, but then instead, I got on the
00:25:42
phone, with all these people, for, for the other things I do.
00:25:47
But in May 2000 fed raised rates 50 basis points the last time
00:25:51
before, before this week, and so not only were was the tech
00:25:56
Market crashing, but people had a safe.
00:25:58
We had another Halfway up somewhere to go differently than
00:26:02
maybe the pandemic where they drop rates tremendously and
00:26:06
folks like well I'm not going to go there they're not going to
00:26:08
give me any yield I might as well stay here and see what
00:26:11
happens in growth right? And obviously the complicating
00:26:14
thing for Tech in the pandemic is also everyone moves to zoom
00:26:17
sort of the technology industry. Sees companies, he Revenue skip
00:26:21
ahead because people are adopting stuff faster.
00:26:23
Now we're coming out of the pandemic and we're seeing sort
00:26:26
of the opposite where tech people wanted To believe things
00:26:30
would be stickier than they are. And in some cases, you know,
00:26:32
we're seeing companies like hoppin where there are questions
00:26:35
about whether sort of the tremendous growth is really
00:26:38
sustainable. So there there are.
00:26:39
There are there are other obviously any time you try and
00:26:42
tell a big story about the overall economy.
00:26:45
There are lots of pieces of play play at once.
00:26:49
Can I ask a somewhat hypothetical question?
00:26:51
Sure. Because you mentioned 2000 and
00:26:54
the basis of my move then and we saw a couple of things.
00:26:58
Obviously, a market crash. And a big fraud, right?
00:27:00
And Ron Worldcom fast-forward, 2007, the feds like okay, this
00:27:05
housing markets, very overheated.
00:27:07
We have rates move, we have a big crisis, the momentum stocks
00:27:10
were weirdly banks at the time, but we see them get crushed big
00:27:14
fraud. Bernie Madoff.
00:27:15
Here we are in 2022. Rates are moving up, momentum.
00:27:18
Stocks are down. What's going to be the big
00:27:20
fraud? It seems like a Tom question to
00:27:23
you. Like who's our next Enron or
00:27:33
Bernie Madoff laughs? Like, that's the good stuff.
00:27:36
I mean we saw the Archer goes thing, right?
00:27:38
I mean there are only like, I don't know, like a slam dunk,
00:27:42
but it's definitely the canary in the coal mine.
00:27:43
I do think that Eric has a point there that I think that a lot of
00:27:46
people who are using margin loans are might be the might be,
00:27:50
they might not be committing fraud.
00:27:51
They might not be a maid off. They went up being Enron but
00:27:53
they might be using a lot more leverage than they let on and
00:27:57
that could be a hedge fund. It could be a private Be fun.
00:28:00
It could be a growth fund. It could be an individual that I
00:28:03
think you're going to see things blow up because interest rates
00:28:06
are going up and their collateral base is going down.
00:28:10
And there's going to be folks who could not have modeled out
00:28:14
that their collateral base is down 70%.
00:28:16
And there's going to be margin calls and I think that's going
00:28:19
to be the, the overuse of Leverage when people thought
00:28:23
money was free and therefore, they could juice their returns
00:28:27
is going to. I would say, is an obvious Isis
00:28:30
or sing the things I've heard you know, could be one of the
00:28:33
one of these great disasters. I mean, and there's always the
00:28:35
cynical argument that Things become crimes.
00:28:38
When they go really poorly, the government is unhappy when
00:28:41
sophisticated people don't make things work.
00:28:44
But I mean, yeah. Without talking about crime at
00:28:46
all, I mean, you can just see sort of the interconnectedness,
00:28:50
you know, I mean, we had SoftBank, oh, huge softbank's a
00:28:54
big investor in Uber dd-do, you know, Uber is a stakeholder and
00:28:58
Didi, you know? A lot of internet connectedness
00:29:00
in the big risky bets. Then we see tiger Global
00:29:04
takeover, invest deeply in Internet.
00:29:06
So, they're just these players who are willing to deploy a ton
00:29:10
of money. They were taking correlated
00:29:13
risk. So if the correlations go, the
00:29:15
other way, they're going to have sort of a big negative impact
00:29:18
that doesn't mean they're doing anything.
00:29:20
I mean that to me, I mean maybe that will change what's amazing
00:29:23
about this time. Is it feels like it was?
00:29:25
It's so obvious. There was no secret.
00:29:27
There was no like hidden. Nothing.
00:29:29
Like we work, which I mean we work was the case of sort of the
00:29:32
market can sustain it. The sort of collapse isn't
00:29:35
bringing the system down but to some degree you know we yeah we
00:29:40
saw it and people were just willing to take a risk because
00:29:44
what else what else were they going to do?
00:29:45
I don't know, in correlated concentration risk was that's
00:29:49
that was kind of having a caught at mispronouncing but our chain
00:29:53
has or kano's and it was they they were in 10 media companies
00:29:57
that they were highly. Highly correlated and they used
00:30:01
additional leverage and crowded people out and what might be an
00:30:04
illegal way. But, you know, if you're
00:30:06
SoftBank and you're using leverage and your have highly
00:30:09
concentrated, highly correlated positions.
00:30:11
If this thing on whines, you know what happens?
00:30:14
It's interesting to me. Also the Foreclosure of the IPO
00:30:18
and the effect that that's going to happen.
00:30:20
A lot of these companies to write because you know we saw
00:30:23
the whole spak craze from a couple of years ago being the
00:30:26
quick way for a lot of these companies to go public and
00:30:28
honestly. It probably good that this back
00:30:31
window, is entirely closed. Now during this period because
00:30:34
things could have been truly disastrous if you had a lot of
00:30:37
companies sort of immediately going public and you know
00:30:41
getting crushed by the new expectations of what a company
00:30:44
is. But I'm also interested in a lot
00:30:46
of these Venture debt rounds, that companies have been doing
00:30:49
these sort of like bridge to IPO rounds.
00:30:51
Like we saw go puff do one earlier this year.
00:30:54
Vice has this kind of onerous is a slightly different situation
00:30:58
but there's a very His relationship with tpg where they
00:31:02
you know gave them what's akin to like some sort of a
00:31:04
convertible debt. Round no vices in a really tough
00:31:07
spot right now. I'm, you know, I think a company
00:31:10
that sort of relied on that with the expectation that like, well,
00:31:13
it's not going to be a big deal because we can go public.
00:31:15
And, you know, these shares will convert.
00:31:17
They don't, it could get ugly very quickly.
00:31:19
Don't you think that even historically Square, which is
00:31:22
now block had. That is one of its reasons to go
00:31:24
public. They had structured debt that,
00:31:27
you know, picked at a high Interest rates the longer, they
00:31:30
wait to go public. And I think you're right that
00:31:32
people thought the window to go public after being open for so
00:31:36
long would always be 0 and now it's closed.
00:31:39
You know, the other thing you're not hitting on, but is a guy
00:31:42
tied to this is, you know, the things that make investors
00:31:46
invest and put more Capital out is feeling good in driving
00:31:49
returns, right? So if you have a company, go
00:31:51
public, you think you're smart because you invested early, and
00:31:55
therefore your, you want to invest more and that the
00:31:58
opposite True. So the lack of liquidity either
00:32:02
descend back to your limited partners or the ability to think
00:32:05
that you're really good at this and therefore you should do it a
00:32:07
lot more that that decreases investor confidence and
00:32:11
decreases LP confidence and that slows down the whole machine,
00:32:14
right? Keep thinking Katie back to your
00:32:16
question. I'm like what the next implosion
00:32:18
is going to be and using the analogies to Madoff or, or Enron
00:32:22
and Worldcom what connects all of those to me was the fact that
00:32:26
everyone who cover the space knew that These companies were
00:32:30
not sustainable, right? It was sort of like an Open
00:32:33
Secret. I mean maybe made off slightly
00:32:34
differently although I feel like it's a little different but I
00:32:36
think bear Stearns was probably a better because like taking
00:32:40
criminal like you know. Yeah but like people knew that
00:32:44
bear was over-leveraged. They knew that LeMans real
00:32:47
estate portfolio is over leveraged.
00:32:49
You know there was a sense that something was wrong but saying
00:32:53
that something's wrong when everything's going up.
00:32:55
As we know as reporters is the most thankless task ever because
00:32:58
nobody believes you And they make fun of you.
00:33:00
Okay? So like my guess is that it's
00:33:02
going to be a company or a group of companies that we all sort of
00:33:06
knew, were not sustainable that we all could tell as they were
00:33:10
raising money and more and more leveraged ways was a possible.
00:33:14
You know, like it had a clock ticking next to them, but
00:33:18
because things get getting pushed further and further out
00:33:20
during quantitative easing and this easy access to Capital, no
00:33:23
one really was concerned about it, but when it dies when it
00:33:26
implodes, when it becomes, you know, the next whatever.
00:33:29
Worldcom it will have been so obvious to all of us.
00:33:32
Yeah. And we will be embarrassed that
00:33:34
that was not the stories that we've been writing for the last.
00:33:36
I mean, if you have a lot of my coverage and when I was trying
00:33:38
to show in the piece yesterday, is that these companies got so
00:33:42
big people made so much money, they exited like they got away.
00:33:46
It's just like, the money has been made and not, I'm just
00:33:49
what's my point? Like, I guess in the case, where
00:33:51
Uber like, say, Uber is the test case or, you know, I think it's
00:33:56
Uber, could be, you know, like a five billion dollar company
00:33:58
instead of a You know our company today, that doesn't mean
00:34:00
it goes bankrupt or anything, but like if that, if that would
00:34:04
be the case, I still, I think they're all be.
00:34:07
These people will be like, I knew it, we were always like,
00:34:10
like a crock the whole time but it's like what.
00:34:13
But you didn't know that people would make a whole Fortune.
00:34:15
I mean, how long do companies stay humongous valuable
00:34:19
companies, you know, you understand the point I'm making
00:34:22
like, well I'm a guest in Bolt and bull markets though.
00:34:25
The rules home was always in the last 18 months of Above a
00:34:29
10-year bull market. Most of the money is made, so
00:34:33
that's why people are always afraid to get off the get off
00:34:36
the tread, right? You guys are an investor and
00:34:39
Postmates, right? We were so young.
00:34:41
Are you happy right now? Three billion sale?
00:34:44
It's an interesting. I mean, somebody was making the
00:34:46
point on totally different company slack, the slack sales
00:34:50
looking great. Now, there are these sales where
00:34:53
it's all American. A lot of things last year were
00:34:55
software, companies were selling at 50 to 250 times Revenue.
00:34:58
You feel Really good about that mean.
00:35:00
We Postmates, we sold to Ubers. We got a talk so we were able to
00:35:03
ride that up and then pick our exit point.
00:35:06
So that was quite nice. But I yeah, I would say that
00:35:09
you're right. The company is where you, you
00:35:11
know, you talk to people outside of our Echo chamber and they're
00:35:14
like, I don't understand how I could get a bar of soap,
00:35:16
delivered to me cheaper than going to Walgreens or CVS by a
00:35:20
guy who's going to drive here in 15 minutes and then you explain
00:35:24
what you do for a living in their life.
00:35:41
All over the streets of New York, the Joker's, the Getters
00:35:45
that you know, all those things are going to be like, oh, you
00:35:48
know, we saw Cosmo, we saw it didn't work and then we just did
00:35:53
the same thing with another right?
00:35:54
And the 10 billion dollars. Yeah, I mean that's been sort of
00:35:57
like the core of every story that The mainstream pubs write
00:36:00
about them is like, yes, all of these companies were
00:36:03
embarrassments during the early.com era, but this time
00:36:07
it's different. Yes.
00:36:08
Why we saw, we saw this movie, everybody died at the end.
00:36:12
And now, we're gonna, now, we're wondering why in the sequel?
00:36:15
No. Beings.
00:36:15
We give me a happy ending. This time.
00:36:17
Venture Capital firms, have more axis liquidity for longer
00:36:20
periods of time. They have a far so that right
00:36:22
helpful to the point like, you know, there's people who made
00:36:25
money at we work. They rode that up and said,
00:36:27
well, you know, I do Management and people made money there and
00:36:32
therefore it's fine or people made money and in some of the
00:36:36
ride sharing things and then we're going to see how much, how
00:36:39
many if you have to pay somebody to go get that bar of soap for
00:36:42
you. Someone has to pay for that or
00:36:45
you know, it's not going to work, right?
00:36:47
And I guess it gets down to the intrinsic value of the service,
00:36:50
right? If this truly is something that
00:36:52
a broad number, people want to do at an elevated price point,
00:36:55
then it's a good thing then I think there actually is some,
00:36:58
some larger value to it. It's just purely about it being
00:37:01
cheap and the second the price goes up, you are basically not
00:37:05
interested in it. Then it wasn't a great service
00:37:06
to begin with. It was just free money
00:37:08
essentially or a free service. I think that's kind of the
00:37:11
perfect storm here to write seeing at a moment.
00:37:14
Where the price for the bar of soap has to hit 14 dollars or
00:37:17
whatever and the consumers willingness to pay $14 go down
00:37:21
at literally the same moment when consumers might have been
00:37:26
happy to do it five years ago, like that seeing that At those
00:37:29
two Trends come together, I find really fascinating.
00:37:32
The funny thing we haven't talked about is crypto which in
00:37:35
Venture world has been sort of the the thing that still doing.
00:37:39
Well, you know, crypto funds have been raising.
00:37:41
There's been a lot of money made Bitcoin is down.
00:37:45
I think it's 20 plus percent so far this year, but but yeah,
00:37:50
it's funny that I don't know, right.
00:37:52
Now, people don't know whether there's a totally different
00:37:55
world where we say. Cruel this tends to be the last,
00:37:58
the last To go, right? Because the first the tends to
00:38:01
be the first ones, first people you tend to evacuate the
00:38:04
Tactical things, right? So you're able to say, you know,
00:38:06
software is a service. We know how this Stacks up, we
00:38:10
know how Revenue grows and therefore I could pencil out a
00:38:13
way to this type of exit in that period of time.
00:38:16
And if everybody rates, we know what someone's paying for it.
00:38:19
The things that are completely asymmetric crypto where you're
00:38:23
not, you can't pencil out what you think that crypto is going
00:38:26
to be worth or what nft is going to be worth.
00:38:29
People are still willing to take a symmetric risks on because no
00:38:32
one could pencil out that they're wrong.
00:38:34
So you're seeing, you know, people with risk Capital shift
00:38:38
to a symmetric risks or things that could still be big because
00:38:43
there's a lot of confidence in a space.
00:38:44
Do you have a piece of advice or like I guess if maybe, you know,
00:38:49
if I'm a sort of tech worker looking up for my next job?
00:38:53
I don't know. What, what advice would you give
00:38:55
them, right? Yeah, I was gonna say the
00:38:56
audience could be Tech, CEO Tech worker.
00:38:59
Our young BC, probably all different advice.
00:39:02
So, you know, the advice were giving around borders.
00:39:05
Now, you know, we had thought that 2020 and then obviously
00:39:09
2021 who's great times to raise money, wasn't, you know?
00:39:13
And I've been investing since the mid-90s, if, you know, if it
00:39:16
wasn't 1999, it was pretty close as, you know, an a, if not 8 +
00:39:20
time to raise Capital. So we advise people to, you
00:39:23
know, to people, react, to three rounds.
00:39:25
Some of them. Yeah.
00:39:26
Take the money of its Very, very cheap insurance.
00:39:31
So you take that money and then we talk about having a fortress
00:39:34
balance sheet that can withstand a lot of external turmoil.
00:39:37
If you have a fortress balance sheet, and have you been a not
00:39:40
necessarily having fortress on your balance sheet, should be
00:39:43
terrified, the exact opposite? Yes, you don't want that.
00:39:48
The, so you have a fortress balance sheet, you can withstand
00:39:51
Market turmoil and you eliminate Financial Risk.
00:39:54
And, you know, having been an entrepreneur in the early aughts
00:39:56
where there was no financing elimination of financing risk is
00:39:59
Thing that I think about a lot. And then being able to say, all
00:40:04
right, now you have a fortress balance sheet, how could you
00:40:07
make sure your team is great and you increasingly your hearing
00:40:11
very quietly? That folks are saying,
00:40:13
especially as returned to office is showing up that are the is my
00:40:17
team, great. If my team is not great, how do
00:40:20
I turn over the folks who aren't great?
00:40:22
And then I, how do I go out to people in the market and say,
00:40:25
hey I have a fortress Bounty, I have four hundred million
00:40:27
dollars in cash. I have A million dollars of
00:40:30
Revenue. I don't care.
00:40:31
If I can't get public next year, I'm going to get public and I'm
00:40:34
going to be one of the great companies that survive this.
00:40:36
You should be on my team with the All-Stars and they're
00:40:39
starting to do selective kind of rifle.
00:40:42
Shot hires of All-Stars from from companies where might have
00:40:47
been hard to take them out of because that All-Star might have
00:40:49
had a significant Found the courage to read between the
00:40:52
lines a little bit. Lot of poaching, a lot of work.
00:40:55
Well there, you know on Twitter know what he's going to say like
00:40:57
layoffs are good and You know, I don't want to be the person to
00:41:00
say that but there is a degree to which when everything's going
00:41:03
great, your company wants to be happy, your employees don't want
00:41:06
you to fire anybody but then kind of liars and during a
00:41:08
pandemic right? And but you know you you need to
00:41:12
be able good companies. Don't just keep everybody they
00:41:16
ever hired and they make mistakes and people don't work
00:41:18
out. And so this is an excuse to sort
00:41:21
of say who are the people that we want the company and that can
00:41:24
be good, good for companies and bad for.
00:41:28
So just what they're seeing. Be who they want to be on
00:41:29
companies and then so they're saying, hey, I'm going to build
00:41:32
an A Team. I'm gonna call the herd and
00:41:34
maybe do a layoff where different maybe in the past.
00:41:37
The strong companies are doing a layoff because they feel like
00:41:40
that they have a provision position of strength, either be
00:41:43
a strong, balance sheet or Market position.
00:41:46
And then you know we're saying wait until maybe the second half
00:41:49
of the year and then you could be aggressive on the acquisition
00:41:52
side because you're going to start to see we're already
00:41:54
starting to see a lot of companies have extra cash,
00:41:57
right? Because it was so easy to raise.
00:41:58
Some Will raise twice last year, but maybe only are now getting
00:42:02
the memo of hey unit Economics, work, and they're not going to
00:42:05
be able to refactor their business in time to do another
00:42:08
raise. We're seeing a lot of duress
00:42:10
distress sales already but there's going to be a lot more
00:42:13
in the second half of the year. You think sort of superteam
00:42:16
startups like merge with each other to try.
00:42:18
Or you think it's more when the challenge with Acquisitions has
00:42:22
been the antitrust situation and that there are a couple dominant
00:42:25
tech companies that can't buy and I'm saying less like know,
00:42:29
Less Google, buying something for tens of billions of dollars.
00:42:33
This is more. This is you know a Deca corn or
00:42:36
you know unicorn type startup who's able to pull in teams or
00:42:39
able to pull and product functionality, like, hey, we
00:42:42
always like this team but they said they wanted 150 times
00:42:46
revenue and now they're willing to take two times rope, right?
00:42:49
And because they don't have a whole lot of truth.
00:42:51
They're not into independently financeable.
00:42:54
And those teams that which, you know, create a fortress balance
00:42:57
sheet, build an A-Plus, Audi team and then go out and say,
00:43:01
hey, it's going to be two times Revenue.
00:43:02
I know that's not what you expected, but you could join
00:43:05
this team. We have all the capital we need.
00:43:08
We have a great team that you could be a key player on.
00:43:11
And when this thing all clears in two years, them IPO Market
00:43:14
opens, we're going to be a decided winner.
00:43:17
Do you think also there's going to be a shift towards more
00:43:19
salary based comp rather than equity-based if we're in a
00:43:23
market where it might take a couple of years for you know
00:43:26
shares to appreciate in a big way or there to be a strong?
00:43:29
Kind of exit opportunity. Oh, that's not what's happened
00:43:31
in the past. And frankly, you know, in other
00:43:34
downturns you've seen salaries that rear the remain relatively
00:43:38
flat but Equity comp, be go down just because, you know, Equity
00:43:43
cash comp is gone up a lot. And if you see a renormalization
00:43:47
in the, in the labor market, everyone's getting laid off
00:43:50
employees have left less bar. Just let her so they're going to
00:43:52
get paid less. Yeah, so I think people are
00:43:54
going to say, I'm going to keep my same salary bands which are
00:43:56
up 30% from two years ago. And you know, people are just
00:44:00
going to make less money if they don't believe in the equity
00:44:02
portion here. But if you join the super team
00:44:05
that's going to go public, you have a better chance of making
00:44:08
money as opposed to this company, which seems like you're
00:44:10
going to run out of money and so many instacart resetting
00:44:12
valuations. You think you'll see startups,
00:44:15
just try to artificially reset the valuation.
00:44:18
They give to employees. It depends mean that's a very
00:44:21
unique situation with a very high price and their whole comp
00:44:24
set of, you know, is was down in 7580 percent.
00:44:27
So that was It's a very specific.
00:44:30
Hey, I'm close to IPO every one of my Common Sense down
00:44:33
tremendously. It's going to be really hard to
00:44:36
recruit especially with a ton of preference ahead of me.
00:44:39
If people are bearish on the sector, we haven't seen, we've
00:44:42
seen that in the past that people have reset 49 out.
00:44:45
Maybe valuations, especially if the company has raised a lot of
00:44:47
money and has a lot of preference ahead of the
00:44:49
employees. We haven't seen any investors,
00:44:52
don't root for it. Well, no, we generally do
00:44:56
because we think the team, you know, if the team Is the most
00:44:59
important thing in a start-up and you think you're not going
00:45:02
to be able to recruit a great team, or you're going to lose
00:45:04
people because they don't think their Equity is going to be
00:45:07
worth that much. You know, you'd rather you'd
00:45:10
rather keep your best, your best players and you'd rather recruit
00:45:13
the best team. So, you know, most good
00:45:15
investors were actually route for a loaf or on any
00:45:18
presidential publicly. We want the most Fair
00:45:22
third-party value for an a price, but as a director, I'm
00:45:25
looking for that price to be low.
00:45:27
So people get excited about the equity.
00:45:29
The opportunity. What would you see?
00:45:31
If you could name a couple of companies as winners that out of
00:45:34
this period companies that you think are slightly under the
00:45:37
radar but because of their capital structure or you know
00:45:41
they're having a more sustainable business model could
00:45:44
surprise people and end up looking very strong in the next
00:45:47
two years. I still think that Healthcare is
00:45:51
an industry. It's going to change
00:45:52
tremendously and I think, you know, companies that are coming
00:45:55
at it and a holistic approach and Going to be winners in the
00:46:00
space. That can there's a glaring
00:46:02
consolidators in the space are going to be really important.
00:46:04
Now, one example is row or Roman Health that, you know, came out
00:46:08
of the gate, strong grew very quickly has an excellent team
00:46:12
and even in the last year, where there was less consolidation,
00:46:16
they bought a handful of companies that failed product
00:46:19
needs. As they brought build out their
00:46:20
full portfolio both in terms of delivery ecosystems as well as
00:46:25
and use your products. And you know I think that's a
00:46:28
good kind of case. Study or an example of you have
00:46:31
a big balance sheet, you're in a big Market, you've gotten to
00:46:35
millions of customers and now you're going to be able to use
00:46:38
that balance sheet. Not only defensively, but
00:46:40
offensive ly to build a really because that's what the market
00:46:43
reopen. How many, right?
00:46:44
Yes. Have full disclosure it spoil
00:46:46
their, their male fertility company, right?
00:46:50
They have male and female, that is proof.
00:46:59
Is generally recession-proof we also like we think the reopening
00:47:02
is going to be real. We'd like to travel sector are
00:47:05
being do as a form or folio company.
00:47:07
That put up, great numbers, everything around travel.
00:47:11
As consumers ships from people are traditionally 70% of
00:47:16
consumer spending is on services and that could be restaurants or
00:47:19
travel, or whatever it is. 30% is on hard Goods or home that
00:47:23
shifted during the pandemic. And I think there's a lot of
00:47:26
pent-up demand for that to shift back.
00:47:28
So, so, you know, we believe in, you know, restaurants reopening
00:47:31
travel reopening, etc, etc. Nice.
00:47:33
I like that, it's sort of like digital, you know, telemedicine,
00:47:36
but also travel. So it's like seeing people
00:47:38
remotely and also actually going and going to places.
00:47:42
Yeah, I think there's going to be a mix.
00:47:43
I think some of the IRL is obviously coming back and that's
00:47:45
great. And some of the things I think
00:47:48
wall still have zoom accounts forever.
00:47:50
Rick, thanks so much for coming on.
00:47:51
We really appreciate it. Awesome, saying everybody, thank
00:47:54
you for having me. Thank you.
00:48:08
Goodbye. Goodbye.
00:48:09
Goodbye, goodbye, goodbye. Goodbye.