$100T is managed by "human duct tape" | E2308

This Week In Startups is made possible by: Northwest Registered Agent https://northwestregisteredagent.com/twist Vanta https://www.vanta.com/twist Sentry https://sentry.io/twist Today's show: *There are $100 trillion in global assets sitting on top of what Hanover Park co-founder/CEO Chris Hladczuk calls "human duct tape": armies of accountants in offices patching together work from various legacy tools (QuickBooks, Excel) that are holding funds' own data hostage. Can all of this be replaced with AI? Find out how their startup went from overseeing $1B to $20B in assets in just 15 months. PLUS, we flash back to March 2020, when Jason and Figma co-founder/CEO Dylan Field broke down the design tool's initial go-to-market strategy, made some WILDLY inaccurate COVID predictions, and considered anxiety about "SaaS burnout" years before the category went full apocalyptic. Guests: Chris Hladczuk on X: https://x.com/chrishlad Hanover Park: https://www.hanoverpark.com/ Dylan Field: https://x.com/zoink Figma: https://www.figma.com/ Relevant Links: Turner Novak on X: https://x.com/TurnerNovak Banana Capital: https://www.bananacapital.vc/ Emergence Capital: https://www.emcap.com/ Lux Capital: https://www.luxcapital.com/ Susa Ventures: https://susaventures.com/ Bill.com: https://www.bill.com/ METR: https://metr.org/ Granola AI note taker: https://www.granola.ai/ Vanta: https://www.vanta.com/ Foo Camp on YouTube: https://www.youtube.com/c/foocamp TechCrunch Mahalo coverage: https://techcrunch.com/2014/01/27/inside-mobile-news-launch/ Timestamps: 0:00 Hanover Park & the fund admin problem 3:32 Why funds outsource instead of building 5:44 Why fund accounting is so complex 10:38 The "one-click migration" goal 10:48 Northwest Registered Agent - Get more when you start your business with Northwest. In 10 clicks and 10 minutes, you can form your company and walk away with a real business identity — Learn more at https://northwestregisteredagent.com/twist 13:51 Context vs. intelligence gaps 16:11 No PMs, No Designers 20:46 Vanta - Get $1000 off your SOC 2 at https://www.vanta.com/twist 23:18 This is a $100T opportunity 25:36 Flashback w/ Dylan Field of Figma 29:15 Sentry - Your team should be focused on shipping features — not chasing down bugs. New users can get $240 in free credits when they go to https://sentry.io/twist and use the code TWIST 31:22 Pre-AI enterprise security worries 36:30 SaaS overload and SaaS burnout 37:30 The evolution of Figma pricing 42:38 The rise and fall of Mahalo dot com 51:38 The work-from-home revolution begins Subscribe to the TWiST500 newsletter: https://ticker.thisweekinstartups.com Check out the TWIST500: https://www.twist500.com Subscribe to This Week in Startups on Apple: https://rb.gy/v19fcp Follow Lon: X: https://x.com/lons Follow Alex: X: https://x.com/alex LinkedIn: ⁠https://www.linkedin.com/in/alexwilhelm Follow Jason: X: https://twitter.com/Jason LinkedIn: https://www.linkedin.com/in/jasoncalacanis Thank you to our partners: (0:00) PARTNER - AD BLURB (0:00) PARTNER - AD BLURB (0:00) PARTNER - AD BLURB Check out all our partner offers: https://partners.launch.co/ Great TWIST interviews: Will Guidara, Eoghan McCabe, Steve Huffman, Brian Chesky, Bob Moesta, Aaron Levie, Sophia Amoruso, Reid Hoffman, Frank Slootman, Billy McFarland Check out Jason's suite of newsletters: https://substack.com/@calacanis Follow TWiST: Twitter: https://twitter.com/TWiStartups YouTube: https://www.youtube.com/thisweekin Instagram: https://www.instagram.com/thisweekinstartups TikTok: https://www.tiktok.com/@thisweekinstartups Substack: https://twistartups.substack.com

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  How did we end up in a world with $100 trillion in assets and a terrible fund management stack?

• 0:06Speaker 01

  It's human duct tape, legacy services, businesses that are running the entire backbone of these 100 trillion of global assets. They're buying QuickBooks, they're buying Bill.com, they're buying Excel. And so you end up in this like crazy situation where you're stuck with a bunch of human middlemen that that are holding your own data hostage. B2B SaaS was dead, but everyone was like, you're insane. You want to go build financial info for the most complex investment firms in the entire world and you've never done this before?

• 0:30Speaker 00

  This week in startups is brought to you by Sentry. Your team should be focused on shipping features, not chasing down bugs. New users can get $240 in free credits when they go to sentry.io/twist and use the code twist. Vanta, compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a SOC 2 report fast. Get $1,000 off for a limited time at vanta.com/twist. And Northwest Registered Agent. Get more when you start your business with Northwest. In 10 clicks in 10 minutes, you can form your company and walk away with a real business identity. Learn more at northwestregisteredagent.com/twist. Hello and welcome back to Twist. My name is Alex.

• 1:14Speaker 00

  Now, on a recent episode, one of our venture capital roundtables we do every Wednesday, Turner Novak of Banana Capital gushed over one of his portcos. Now, that's not a very rare occurrence. VCs do love to come on the show and talk about their investments. But in this case, we actually looked into the company and questioned, got them on the phone to learn more. And it turns out it's a very interesting startup, showing where AI meets traditional software and services. So to tell us about bringing AI to the world of fund ops, please join me in welcoming to the program. It's Chris Halonzik, the CEO and co-founder of Hanover Park. Chris, how you doing?

• 1:46Speaker 01

  Let's go. I'm pumped for this.

• 1:48Speaker 00

  I'm pumped for this too. Okay, so here's my thing. When I think about lots of money, which funds have, I think about the ability to pay for strong services and to really have a good operational backbone. But what you told me is that in the world of fund ops, the technology is outdated, there's too many people involved, and you call it a kind of duct tape operation. So how did we end up in a world with $100 trillion? And assets and a terrible fund management stack.

• 2:13Speaker 01

  Well, it's human duct tape where you basically think about like legacy services businesses that are running the entire backbone of these hundred trillion of global assets are sitting there with a bunch of humans in Kentucky. They're buying QuickBooks, they're buying Bill.com, they're buying Excel and that CFO has to ask them, hey, can you send me some data and get access to my own data? And they're literally like, that's insane in 2026. And so we looked at this and we're like massive untapped legacy services market with very low tech penetration. And run by, you know, a bunch of fund accountants in a room that are delivering financial reporting every quarter.

• 2:46Speaker 00

  So tell me more about the data question because one thing I've heard a lot about from companies in kind of the AI moment is people want to have access to their data. It's my data. At the same time, a lot of SaaS companies want to hold on to that because it's kind of their secret sauce. But in this case, it sounds like funds often have their data stored in Kentucky, as you said, and don't have regular and easy access to it.

• 3:05Speaker 01

  That's the crazy part about this. So fund administration, traditionally you pay this fund admin. They have the service provider with a bunch of accountants that are doing your financial reporting. And they basically go and say, okay, we're going to buy access to QuickBooks and we're not going to give you access to it. Actually, you're not going to be able to have your own data. And so then you have to email them and say, hey, guys, can I have my own data for this random report I need to repol when I need to go fundraise for my new fund? And so you end up in this like crazy situation where you're stuck with a bunch of human middlemen that that are holding your own data hostage. And so, you know.

• 3:34Speaker 00

  Why? Like, why, why, why is that a service people would pay for? To me, that sounds like giving someone money to slam the door in your face. So why, why wouldn't these funds, which have a lot of AUM, just build their own internal stack? Why, why outsource it to someone who hates you, I guess?

• 3:46Speaker 01

  Traditionally, it's like, it doesn't even matter because all they're doing is delivering some output, which is that financial reporting that goes to your limited partners every quarter, your Harvard endowments, your Yale endowments. You know, I went to Yale, so I can say that. And so like, they're just delivering an outcome. And so in 10 years ago, CFP was like, I don't really care. They just do the work. It ends up being great and it ends up being fine. And now we're in this moment where your data is a hundred times more valuable because this is like the backbone for every investing decision you've ever made. Right? And so that's now we're in this moment where everyone's like, I need my data back.

• 4:16Speaker 00

  All right. So tell me about the actual kind of. Stack and what you're replacing from the various services that a fund buys. Cause I presume they buy a lot more stuff than just, you know, help with fund administration.

• 4:27Speaker 01

  When we started in 2024, we made this contrarian bet that I said the following. B2B SaaS was dead. We were going to go build this idea of an AI native services company in 2024, which was super contrarian, which is that we wanted to own the end to end outcome and not just build another tool that was going to get commoditized by Claude and ChatGPT. And so we started by saying, hey, we're going to go build an ERP for a fund. That in 2024, my investors started laughing at me, right? I won't say Turner was laughing at me, you know, he probably would say, but everyone was like, you're insane. You want to go build financial info from the most complex investment firms in the entire world and you've never done this before. And so we started by building the unsexy like core like system of record for the fund. On top of that, we said, okay, then there was a bunch of humans that were clicking buttons to actually do the accounting and financial reporting and capital calls and distribution.

• 5:12Speaker 01

  Said, how can we build AI agents on top that learn from every single thing for a fund? Right? So the key problem you're solving is like, say you have a person that's your accountant, they're doing your accounting and then they leave in six months and say, hey, wait, all the things you taught them about your fund now go away. And so building agents with memory on top is actually the way you solve that problem. And then lastly, now we have all this data for your fund. What are the things we can do to weaponize it? Right? And so now you have portfolio management and monitoring and LP port. And there's like a stack that sits on top of the system of record for the fund is kind of how we think about it.

• 5:42Speaker 00

  Let's start with the ledger component of this because you said it's very complex. And some investors were looking at you like you're crazy because why would you go out and tackle with something that's not hard? To me, from where I sit, it isn't so complicated.

• 5:51Speaker 01

  Of course, it's super easy, right?

• 5:53Speaker 00

  Well, no, no, no, no, hear me, hear me out. I'm not trying to be coy or wry. I'm just going to say that like, you know, when I think about how, how we handle like high frequency trading, that seems like a much more difficult system. Can I keep track of what's going on than a fund that might make an X number of investments per quarter? So talk to me about the complexity of this and how long it took to build the ledger in question, because that sounds like the foundation for everything here.

• 6:12Speaker 01

  Totally. So think about Blackstone and think about like hundreds of billions of assets with tons of different, you know, entities that need to talk to each other. Think about QuickBooks, you have one entity, right? At one time, you know, with Blackstone, you might have hundreds of entities in a single fund. And all of those entities have different ways you allocate profit and loss, all the different partners. In these funds. And so when Harvard endowment rates $100 million check into an entity, you have to allocate all the different costs and expenses and different funds. And everyone has different economic terms. And so think about the combination of tons of legal entities that need to talk to each other, tons of weird profit and loss allocations, and any weird stuff the lawyers want to dream up that they're going to toss into this thing called a limited partnership agreement to do that. And so herein lies the the fund levels of complexity and our job is to capture that somehow.

• 6:55Speaker 00

  So I'm thinking about a ton of contracts, like an absolute mountain of PDFs and dockies signs, speaking loosely. How do you guys convert the written word here into the rules and kind of guidelines for the ledger system to understand? Is that done by humans, the translation process? Or is that something that AI can now handle based on its ability to reason?

• 7:16Speaker 01

  So if I take this in a different direction, imagine I go to Blackstone, they're not a customer, far from it, or we're only 20 billion of assets right now. See, I go to the CFO of Blackstone and say, hey, here's all these magical things we can do for you. He's like, oh, my God, that sounds amazing, but isn't it going to take forever to get my all my data into Hanover Park? Isn't that going to be the worst thing in the whole time? So we built these long horizon agents to do financial data cleaning at scale that capture all that ontology, to quote Palantir, map that to a set of work. I got to quote Palantir, right?

• 7:46Speaker 00

  Okay, fine. No, no, no. Now you're in trouble. Now I'm going to call you on this. All right, define ontology for me, something that Alex Karp has yet to do once.

• 7:53Speaker 01

  Wait, should I pull an Alex Karp and say, I'm not going to define ontology? We're going to have to like, search this?

• 7:58Speaker 00

  You have to bounce in your chair while you do it. No, I'm serious. Like, for the people out there, for for people for whom that is merely a buzzword, they've seen earnings report ontology, maybe a working definition for how Hanover Park thinks of it will be useful.

• 8:09Speaker 01

  Totally. So it's like, you know, the way in which the fund does their work and how they capture the associated information tied to a legal document for a given limited partner, portfolio, company, etc. We take that information, we then translate that into a way in which our general ledger operates, right? So that's like the simplest definition and we can make it, we can make it more complex.

• 8:29Speaker 00

  Oh, that's fun. Let's make it more complex.

• 8:30Speaker 01

  Oh, boy. So beyond the simple stuff of like how the limited partner relationship is with a given fund, it's like, how is the relationship with the underlying portfolio companies? How is that portfolio company, you know, relationship from a given set of legal entities? Maybe you have tons of different funds that are investing in the same company. How do we want to capture that, analyze that? And then like, that gets into the fun data that sits on top of like the core G L, which is not only is Hanover Park tracking cost and fair value and fun simple stuff like that, but we're tracking like, what's the post money in Uber's latest round? I gotta say Uber because I'm on this week in startups, right?

• 9:03Speaker 00

  Jason gives you five extra bonus points and a high five.

• 9:05Speaker 01

  Yeah.

• 9:06Speaker 00

  No, okay, I appreciate that. Now, you mentioned the long horizon agents. I think that was the quote. A lot of people are making noise about agents that are able to do tasks over a longer time period. I think M A T R does a lot of work on how long agents can work independently. Now, in your case, why do they need to be so long horizon? And also, how much have they improved in the last maybe six months? Because it does seem that we've seen a pretty rapid increase in agenda capabilities from what I can tell. So I'm curious how that's kind of manifesting inside your operations.

• 9:35Speaker 01

  For us, when we thought about what are the biggest problems with the company? You know, step one is how do you get hundreds of thousands of documents for a given set of funds? If you have 20 billion of assets and you've 25 years of history, trust me, there's a lot, there's a, there's a lot of noise in there, right? So, so I think it's like, getting all of that data into Hanover Park is like a massive set of technical challenges. And if you're an amazing engineer listening to this, these are the types of fun things that we have, right? So it's like, you know, those, I gotta

• 10:02Speaker 00

  hanoverpark.com/jobs, I presume?

• 10:05Speaker 01

  Slash careers, toss that in there.

• 10:07Speaker 00

  I'm sorry.

• 10:08Speaker 01

  Come on, we're a little upscale from that.

• 10:09Speaker 00

  Hey, go for it.

• 10:10Speaker 01

  So, so look, like, we basically have to take all that data, you drop in 300,000 documents, you need to somehow map the ontology. I'm gonna, I know you're gonna make fun of this. Take all that data, extract, analyze, you know, inception to date for the entire set of funds and all their vehicles and get that data into Hanover Park. So then we can do the next quarter of financial reporting, or we can do the next capital call. So that's like, when we think about that process, traditionally, if you said Blackstone, hey, do you want to migrate to Hanover Park? It'd be like, I'll See in 24 months. I'll see you in two years. We say, I call it the one click migration future.

• 10:44Speaker 00

  How close are we to actually it being a one click migration future?

• 10:48Jason Calacanis?

  Okay, so you've identified a real problem and you put together a solid solution and a business model that you believe in. So you're all set to launch your new company, right? Not so fast. If you want investors and potential customers to take your new business seriously, you need to consider forming a Delaware C corp. And that's where Northwest Registered Agent comes in. They're going to give your new company a real identity. That means an address for your public filings, a domain, a custom website, a business email, and of course, a phone number. And that's going to take just 10 minutes and 10 clicks. They don't charge hidden fees. Customer service is available around the clock. They're not overwhelming your inbox with spam and they make it easy to cancel at any time. So get all the advantages of a Delaware C corp.

• 11:32Jason Calacanis?

  Independent regardless of where in the U.S. you're operating from. Visit northwestregisteredagent.com/twist for more details and the links are in the show notes.

• 11:41Speaker 01

  We got data of a venture capital fund from call it like 20 different entities. They got a handful of funds. We're not talking Blackstone size at this point.

• 11:50Speaker 00

  But some SBVs, Fund 124.

• 11:52Speaker 01

  Yeah, exactly. So they had some stuff, right? We took that data. We got that data. We launched their limited partners six days later.

• 11:59Speaker 00

  Six days later. And just to be a brat, any mistakes, errors that had to go back and be corrected? Or was that kind of a clean, clean sheet of paper once the migration was done?

• 12:08Speaker 01

  Of course, as with any workflow where the importance of accuracy is everything, especially given the institutional LPs that are logging in Hannover Park. We of course have a team that's reviewing those outputs, right? But like if we're, if we're clicking a button and it's taking 12 hours, we have, you know, all that time for then the team to do the actual review.

• 12:25Speaker 00

  So it sounds then, and we'll get to the CPA point in a minute. It sounds then that the current world of AI models, AI agents and harnesses thereof are sufficiently intelligent to handle what Hanover Park needs today to ingest large amounts of data and to kind of define the ontology. Was that true a year ago?

• 12:42Speaker 01

  Definitely not. This is all, oh my God, I literally was joking with my CTO. Cause I saw there was this internal joke at the company. Where I said, we're building a one click migration. I said this 12 months ago and I had engineers laughing at me. They literally were like, good Joe Chris, haha, funny, whatever.

• 12:58Speaker 00

  Don't build it yourself.

• 12:59Speaker 01

  Yeah, exactly. Exactly. They said they were laughing at me and I literally said, one click migration, one click. And literally, and we released it three weeks ago and that engineer, by the way, we love him, JT. He literally came to me and said, you were right. And so that was only, that was only possible probably three to six months ago with like Opus 4.6.

• 13:16Speaker 00

  Opus 4.6. Okay. So kind of in, okay. So right now we're at Opus 4.8. We're at, whoa.

• 13:23Speaker 00

  Model releases are now a little bit, it's uneven, but you don't need to have Fable 5 to make this work essentially. You can do this with Opus 4.6 technology. So you're not losing edge in the current market with the restrictions going on that we're seeing.

• 13:36Speaker 01

  Look, it was actually funny. So Fable 5 is out, you know, the team says this is magical, et cetera. And literally then I have someone come to me when Fable 5 gets disbanded or stopped and they start crying to me. They're like, I literally, I love Fable 5. What is this? What am I doing? You know, et cetera. So trust me, we like it. I think that the gap is, is less of a intelligence gap and more of a context gap is the way I think about like the context of the complexity of a given fund that we need to actually understand versus are the models good enough? However, when we think about reducing human in the loop and getting closer and closer to a one click versus six days versus look, if I'm migrating large funds, not going to take six days, maybe it's 30 days, right? To get that closer to one click, of course I want better models.

• 14:18Speaker 00

  Does that impact your economics at all though? Because look, one thing that you and I talked about during our, our first chat was just how big the world of funds is. I was asking about TAM and you're like, Alex, don't be silly. It's enormous. Now, when we think about the, the improved model intelligence, what does the incremental, what does that gain you? I suppose, and what does it unlock? Because I, I get the better models is better, but how?

• 14:42Speaker 01

  So, I mean, there's, there's a lot around like, we're not just doing fund admin. I think like, I joke, I said Stripe for payments, Ramp for expenses, Hanover Park for investments. Ramp was a credit card company at one point. Remember that?

• 14:52Speaker 00

  It was a corporate expense charge card company. Oh, I remember.

• 14:56Speaker 01

  Yeah. Remember they're an AI, they're now an AI finance lab, right? Like if I think about like, yo.

• 15:02Speaker 01

  If I think about, look, like, financial infrastructure for the investment firm, AI fund admin is obviously massively important piece. Like, we understand the importance of what we're doing on there, but like, the ability to layer these things on top and build this intelligence layer to help CFOs make better decisions, like, there's obviously a bigger prize here.

• 15:18Speaker 00

  Well, we're kind of getting towards where I wanted to go in a minute, but I want to loop back to the CPA point, because some people listening to this are going to say, whoa, I'm not ready to get agents run all of this for me, and you guys are aware of that, and you have some CPAs in the loop to review outputs from the AI systems. What I'm curious about is what the kind of like, number of CPAs you need per billion dollars of AUM looks like today, and how that ratio changes as the company scales, gets more data, improves its own internal models, etc.

• 15:46Speaker 01

  Look, like, I think it's incredibly important, when you think about 10,000 institutional LPs in platform, including large institutional asset managers that everyone knows, like, we need to have incredible CPAs that are crushing it, that are tier one, reviewing associated outputs, and handling edge cases, right? Maybe AI hasn't seen something before, and we want to make sure that the Blackstone fund accountant can come in there and be like, hey, this is a more complex thing that we need to think about from a product perspective. I would say, more uniquely too, we have a very unique AI org design, I call it, which is, we have no product managers, we have no designers, we just have engineers shipping codes sitting alongside fund accountants. And so, part of the fund accounting job here is to actually help us inform the product. And so, that's kind of how we think about. So, part of your job is obviously the fund services component, but part is actually the

• 16:31Speaker 01

  product piece.

• 16:32Speaker 00

  You put the accountants next to the engineers?

• 16:35Speaker 01

  Yes.

• 16:36Speaker 00

  That's got to be a very interesting room to work in.

• 16:38Speaker 01

  Oh, it is fun. I'm looking, there's a few of them. There's a Muhammad Ali picture in the background. We got, you know, 50 people here in New York City, and we're having fun.

• 16:47Speaker 00

  But, as you guys do, continue to build the product, learn more, figure out edge cases, you know, improve, does the number of CPAs you need to, to, to, kind of like, service the marginal billion dollars in AUM you bring in, go down? Or does that stay relatively static because people want to have that? I'm trying to figure out, what's the role here of the CPA long-term? And is it more of like a, makes the humans feel better thing? Or if it's a requirement to make the product work thing?

• 17:11Speaker 01

  I think it's- A consigliere to the CFO. I said that a consigliere to the CFO is like, there is, you can quote that.

• 17:19Speaker 00

  Certainly, mafia references. Let's go to Sicily. Okay, keep going.

• 17:23Speaker 01

  So, consigliere to CFO, it's like, there is complex advisory that the CFO values of like, hey, you know, we're doing this weird cashless offset thing that we haven't seen before. What do your other clients do? How do you think about this? What is the approach you've seen from experience? And like, that is high value advisory work? Not, did you book this journal entry correctly? Right? By the way, 95% of fund admins, did you book this journal entry correctly, by the way? And so if we're doing, if we're automating those lower value tasks and we're delivering real time data versus delayed quarters and quarters, because that's when humans are doing it, then we can be the consigliere.

• 17:57Speaker 00

  Tell me more about, about real time data, because earlier on, you discussed how, you know, you're building a system that has applicability, I think, kind of broader spaces than just doing kind of like AI first fund operations. So, once you have all these, these firms and funds onboarded and you have this flow of data about kind of the state of global investment, what can you do in a product sense, both for existing customers and also maybe breaking that out as a data product? Because to me, Karto's data blog has done a fantastic job taking a relatively staid business and turning it into something that I have to absolutely pay attention to.

• 18:30Speaker 01

  We're, so I'll make the commitment to customers on this call. Like, we are laser focused on data integrity, not sharing your data with others, being incredibly focused on that and ensuring that your data is segregated and your data is, you know, is not shared broadly. And like, this is actually a commitment that customers ask me. They're like, hey, like, look, I want to make sure my data, all the alpha that they have from their own fund level data, like, we are not sharing that. And so I might be, I might be bucking the trend here, but I'd rather than be like, you know, keep their data silent.

• 18:59Speaker 00

  Even in aggregated, you know, de-anonymized, blah, blah, blah, blah, all that, that's not.

• 19:04Speaker 01

  Not something we're focused on right now.

• 19:06Speaker 00

  Well, that's disappointing for me as a journalist.

• 19:07Speaker 01

  Yes, that's okay, though. That's good. You know, I got it. You know who's my boss at the end of the day? The CFO.

• 19:14Speaker 00

  Yeah, well, I mean, that's, that's true of every company, though.

• 19:17Speaker 01

  CFO of an investment firm.

• 19:19Speaker 00

  Yeah, there you go. All right. Okay, so business model time. Now, I know you guys charge, I think it's BIPs off of AUM versus SaaS. Why is that the right approach for Hanover Park compared to more of a traditional SaaS approach? I know you said, you know, B2B SaaS is dead, but why in this case?

• 19:36Speaker 01

  Yeah, we've, we've kind of taken the business model of the existing industry and our vision for this is how do we deliver a premium product and service with an all-in-one bundle that is incredibly transparent from a pricing perspective? If you think about a legacy fund, Adam, if we zoom all the way out, you might want to do a capital call, you might want to do a distribution. They're going to say, actually, if you do four capital calls, not three capital calls, we're going to charge you per capital call.

• 20:00Speaker 00

  Ugh.

• 20:01Speaker 01

  Right?

• 20:01Speaker 00

  That's like the old SaaS plans on cell phone.

• 20:03Speaker 01

  Or even more, oh, if you do things that are outside our quote unquote scope of services, we're going to charge you some sort of extra hourly rate, right? And so there is a lot of random hidden opaque fees that live in the market today that we've completely said, actually, here's the all-in-one bundle that we're laser focused on, right? That you can have, that is obviously competitive and we can talk about that as well, to be thoughtful of as well and bundle everything else in.

• 20:26Speaker 00

  So have you guys talked it all publicly about how many BIPs you charge off of AUM? Or should I just do a kind of a guess?

• 20:33Speaker 01

  Yeah, we don't. I'm not sharing that information either. I love, I love this. Alex, like in the pre-call, Alex was like, hey, like, you know, what's your revenue? I'm like, come on.

• 20:42Speaker 00

  I asked it way more slyly than that, but I have, I have one more for you.

• 20:46Jason Calacanis?

  The AI revolution isn't just creating new tools and new products. It's reinvented the entire landscape when it comes to compliance. Startups face an intricate patchwork of overlapping rules and regs from the EU, the United States, federal agencies, everywhere. It's coming at us from all angles. And if it sounds like a lot for you to track while you're also trying to build your business, well, you're right. And that's why you need a reliable, trusted partner like Vanta, V A N T A. Vanta's AI-powered platform automates your entire compliance process. Whether you're preparing for a SOC 2, running an enterprise GRC program, or doing an audit, Vanta is going to worry about the security. So your team can focus on building great

• 21:31Jason Calacanis?

  Products. That's why some of our favorite companies like Ramp and Writer, and they're both doing great, are spending 82% less time on their audits by working with Vanta. Whether you're a fast growing startup or a global enterprise, Vanta is here to help you automate your security and compliance and earn and prove trust. So get started today at vanta.com/twist. That's V A N T A dot com slash twist.

• 21:55Speaker 00

  If Hanover Park took, for example, 25 bips off their AUM and they have 20 billion in AUM today, that's about $50 million a year in run rate, just to kind of put a, put a marker on it. The number might be 50, it might be 15 bips. We don't know. Chris can't tell us. But that's just a data point for folks because the 20 billion AUM number I think is a little bit in the clouds for folks. But when you kind of think about it in revenue terms, it's quite a lot of money. Now, you were at $15 billion in AUM in March when you raised your last round, 27 million, and you were at 1 billion AUM 12 months before that. So you've gone from 1 to 20 in essentially 15 months. What does the future of growth of the company look like? How many people are on your, your list to bring on to Hanover Park in the future?

• 22:35Speaker 01

  Look, I think, I think we're, so today the team's 50 people. We've been scaling the team exponentially. We doubled the team in the past quarter as we think about scaling and being ready for the future. You know, all we care, I told the team the other day, I said, there's only one thing that matters at the end of the day. In an industry where people generally, you ask a CFO what they think about their fund admin and they start cursing at you because they're upset. If we build a product and service where they are a raving fan of Hanover Park, nothing else matters. Right? And so that's the focus.

• 23:03Speaker 00

  Yeah. So I mean, in terms of growth, does this company grow its AUM like 2X a year? Or is it more like 20? Cause I know there's $100 trillion in assets out there. You guys only have 20 billion of them, which to me implies you have years of hyper growth ahead of you.

• 23:18Speaker 01

  There's a lot of opportunity to launch new products and services, new asset classes, new geographies. There's, there's a lot going on there, but I'm not going to give you a growth target.

• 23:26Speaker 00

  What, what does the applicability of the model you've built now or the product you've built now translate to, let's say commodities? If you're moving, you know, elsewhere in the world of finance, because I presume those are quite different than, you know, firms that are doing venture capital investments. So is there a lot of work you'll have to do to? Tune Hanover Park to fit other asset classes?

• 23:44Speaker 01

  Me and my co-founder CTO talk about this almost daily. It says, how do we build an ERP that's extensible and modular to every asset class in the world? Today, we're focused purely on closed-end funds. Think venture capital, private equity, and private credit. There is a massive market there. We're really excited about that. We're obsessively focused on delivering to those customers, but we think about the future of what does Hanover Park look like in five years, 10 years, 20 years? And we think about extensibility.

• 24:08Speaker 00

  I'll be curious to see what the Hanover Park for the oil market looks like. You know, that would be, that would be very interesting.

• 24:13Speaker 01

  HP, HP Oil. Okay. Rockefeller.

• 24:16Speaker 00

  No, why not? I mean, well, it worked out pretty well for them, I heard. One last question for me then. So let's say you kind of solve the, the asset management game and you have built this kind of financial operating system for how a business kind of deals with money in and out and so forth. To me, that feels pretty generalizable. Do you guys ever think you'll end up kind of like butting up against companies like Ramp and taking on more of the customer of the fund, like the startups themselves, any of their business operations? Or do you plan on staying pretty much entirely focused on just the asset manager's side of the equation?

• 24:49Speaker 01

  We're focused on asset managers. There's 100 trillion out there. As you, as you've said a few times, there's a, there's a lot of room to run and we're focused on the asset manager for now.

• 24:57Speaker 00

  All right. Well, in six months, when that's no longer the case, come back on, tell me about it. And we'll be keeping a tab on your AUM number and one day I will squeeze the BIPs number out of you. But Chris, thank you so much. What's the website and is there a role you're looking to hire for? I see you have a tweet looking for a chief of staff.

• 25:14Speaker 01

  Hanoverpark.com. Very simple, straightforward. You can go to our careers page. You can ping me on Twitter at Chris Hlad if you're interested. Email me. I'm not going to put my email in this, but [email protected]. Just did it anyway. You can ping me. Yeah, we're hiring a chief of staff. We're in hypergrowth. If you want to go parachute into special projects and figure some stuff out, join us.

• 25:34Speaker 00

  All right. Thank you, Chris. We'll talk to you in six months.

• 25:35Speaker 01

  Talk soon.

• 25:36Speaker 03

  All right. Welcome back to Twist. We are here. I'm joined by Alex Wilhelm. Alex, how you doing?

• 25:41Speaker 00

  Oh, fantastic, as always.

• 25:42Speaker 03

  I am Lon Harris, of course. Jason, not here, but he's in this classic Twist clip that we're about to take a look at right now. This comes from the memorable date, Alex. I feel like everybody remembers where they were when this episode came out. March 27th, 2020.

• 25:59Speaker 00

  Yep.

• 25:59Speaker 03

  Yeah.

• 26:00Speaker 00

  Yep. What was going on around then, Lon? What was the news item? And I can't recall exactly.

• 26:04Speaker 03

  A week which will live in infamy. There was, people were getting sick, that hospitals were getting overloaded in New York. There was this coronavirus, this novel coronavirus out there. I don't know if you remember it. A little disease we call COVID. And it was, it was brand new and we will take a look at one point during this segment of some fascinating, very wrong predictions for March 2020 about where that was all going and what was going on there. But I don't, we're not trying to bring you down. We're not trying to depress you.

• 26:35Speaker 00

  No.

• 26:36Speaker 03

  This is a fascinating interview, barely touches on global pandemics, which I realize is, they're all global. Dylan Field, the co-founder and CEO of Figma, is Jason's guest on this March 2020 clip. And what's so fascinating and a theme I think Alex will come back to a few times while we're going back and reviewing highlights from this. So fascinating to look at a clip from, you know, the, the peak SaaS era when, you know, that, that was what all of the huge tech companies were doing. They were all selling the software. That was the, the hot venture category of the time. And to look at it now from the sort of SaaS apocalypse perspective, when AI is kind of filling all of these roles. And yet Figma, you know, still very much a player in this world.

• 27:20Speaker 00

  Absolutely. I mean, they went public recently. They're worth, I think, $13 billion today. But this clip comes two years before Adobe offered $20 billion to buy the company. So we are going very far back in time. This is before Figma became the Goliath that is today. Before it became the market crusher, back when it was more of a question mark instead of an exclamation point.

• 27:39Speaker 03

  Figma, for those of you who don't know, they're a SaaS company providing a collaborative platform for UI and UX design and product development. So basically in the pre-AI era, this was a place where designers could go and sort of lay out what they wanted to do with a new feature or a new webpage or a new product. And sort of get it all together in terms of the architecture and the design and make everything look nice. In a collaborative workspace today, obviously now it's had to be dressed up with all sorts of AI tools. They recently launched an AI agent that allows you to build with it, sort of vibe code your designs, which is they're hoping going to open up the design process to people who aren't naturally designers,

• 28:20Speaker 03

  maybe people who aren't even creatives, so that the whole company can kind of participate together in the process of putting these products and designs together.

• 28:29Speaker 00

  Because there's nothing, a designer wants more than more cooks in their kitchen.

• 28:34Speaker 03

  Yeah, they were, they were still sort of a scrappy startup in this era. And I think that's what's so interesting to sort of look back. So we're going to jump to about 20 minutes into the interview. Jason has Dylan explaining the bottom up go to market strategy that Figma was employing. Basically allowing people to start using the product within companies. You don't have to sign up your entire organization right off the bat. It's not a thing everybody needs to use. You can allow it to sort of gather some organic heat within enterprises. And then team members can share it and evangelize with other team members. And that's how they grow. So let's take a look, starting at 21 minutes in, at Dylan discussing how they go to market from Figma.

• 29:15Jason Calacanis?

  It's the worst nightmare of every founder. You've built a product, everything's working great, then real users start flooding in and suddenly it all breaks. What a disaster. You need to get it back up and running and you gotta do that fast. You're looking like an amateur. That's why you need a partner like Sentry. Applications can break in many different ways, but Sentry sees everything. You'll get all the relevant details like stack traces, commits, releases, and even the developers who push that problem code in the first place. With Sentry, you're not going to be jumping around between different tools, trying to figure out what happened. And Seer, Sentry's AI debugging agent uses all this data and context to identify the root cause of the problem and suggest a fix.

• 29:55Jason Calacanis?

  It can even take a look at your code before it ships and warn you if any problems are likely. Try Seer and Sentry for free. If you're a This Week in Startups listener at sentry.io/twist, use the code TWIST for $240 in Sentry.

• 30:12Jason Calacanis?

  Make sure you use that code, make sure you use that URL, sentry.io/twist, so they know your Uncle J Cal sent you.

• 30:19Speaker 04

  Your organization are able to adopt it and they're able to spread it without having to be, to necessarily get a lot of buy-in from others around them. And, you know, if you're able to do that on a credit card and people are able to be empowered to actually get their own tools, hopefully they're able to first trial Figma, for example, for free, and they can go like have a purchasing conversation with somebody if they need to. That's like our ideal scenario is they're not even being paying for it and they're like, this is actually really good, like let's go bring this into the organization, let's have this entire team on this. And for what it's worth, we also see a lot of people spread Figma when they change jobs. They'll bring it with them.

• 30:56Jason Calacanis?

  Yeah, of course.

• 30:57Speaker 04

  So, you know, people are hopping between jobs every few years and they're, they're bringing the tools they like. But anyway, so to go back to the question about bottom up and legal and sort of what the buy decision looks like, we're seeing a range of behaviors right now. There's definitely a ton of companies that need to spend multiple months or whatever evaluating software, go through rigorous process, especially at larger corporations. And we've got a great, amazing sales team that's like able to partner with them on that.

• 31:22Jason Calacanis?

  Got it.

• 31:22Speaker 04

  We also suggest.

• 31:23Jason Calacanis?

  What is their main concern? Like, what are they trying to accomplish with all that friction?

• 31:27Speaker 04

  So, I mean, like, uh, security is a big one. So, uh, I want to make sure that if you are a cloud provider, that you're going to be as secure as possible. And so that's something that like, for example, we've gone through like the SOC 2 process now, which is.

• 31:39Jason Calacanis?

  Explain what that is.

• 31:39Speaker 04

  It's basically just a process to make sure that you're able to be as secure as possible, uh, even though you're hosted in the cloud.

• 31:45Jason Calacanis?

  So you have all of my designs, I'm, I don't know, Nike or something and I'm building a bunch of apps and stuff. I have to trust that your people are not looking at my designs, leaking it or selling it, or the Chinese government or the Saudi government hasn't put a plant into Figma like they did at Twitter. The Saudis actually did this, you hear that, sir?

• 32:04Speaker 04

  No, I did.

• 32:04Jason Calacanis?

  Crazy.

• 32:05Speaker 04

  Yeah. And so there's SOC two, I was simplifying before.

• 32:08Jason Calacanis?

  Yeah.

• 32:09Speaker 04

  Incomes as a wide variety of controls, everything from like hiring, offer approvals, all the way to like, how are your servers run and what are your run books for those?

• 32:17Jason Calacanis?

  Oh, really?

• 32:17Speaker 03

  Yeah. A lot, a lot of interesting stuff going on there. I mean, the thing that jumps out to me, Alex, so much about this is we're, we're still having these same kinds of discussions in the AI. This was obviously the pre-AI era. People were not worried about Figma training models based on their data. They were just worried about Figma looking at their data, getting inspired, building competing products. You know, like it was a, it was a different time and yet it was so much of a similar concern.

• 32:46Speaker 00

  Well, also it's interesting because at the time, if you're concerned about, say, Nike stealing your designs, you're thinking about kind of a one-off. Like you're stealing that set of designs in the AI era. If you steal everyone's information, you can create a model that can replicate them at scale.

• 33:00Speaker 03

  Right.

• 33:00Speaker 00

  With frequency. So it's actually, I think, a higher risk now, but it's interesting that it was still so important at the time. But going back to the top of that clip, Lon, the whole concept of bottom-up sales was kind of a Dropbox invention. If you go back in startup history.

• 33:14Speaker 03

  Yeah.

• 33:14Speaker 00

  The idea that people would just buy something, start using it, then their company would say, oh my gosh, we have 28 users of Dropbox. We need to manage this. Sign up for an enterprise contract, revenue flows, everyone's happy. And that was an engine that powered SaaS for a long time. It lowered customer acquisition costs, provided a lot of strong net dollar retention.

• 33:30Speaker 03

  Right.

• 33:30Speaker 00

  All those acronyms, CAC, NDR, that investors used to love. But today, fast forward, you know, six years, and we're still talking about people bringing AI tools into their company.

• 33:40Speaker 03

  Sure.

• 33:40Speaker 00

  Driving usage, wanting to run, you know, enterprise control.

• 33:43Speaker 03

  I mean, granola, I feel like is the most recent example where even, I think we had a VC on the show talking about it, where it's like, they decided to invest in granola because so many people around the office were already just using it without being asked or told. It just, these things sort of catch on on their own. And that's always, I mean, that kind of word of mouth viral spread is always going to be more powerful than your boss emailing you like, hey, install this tool and start using it. It's like, that always feels like a chore.

• 34:10Speaker 00

  No, it's the other way around. Whenever a CEO tells me to use a tool, I just presume it's dumb. I'm just like, oh, it came, it came from above. Oh, God, someone bought this and now it's been rolled out to me nine months later with half the implementation that it needed, you know? Uh, but if a friend goes, hey dude, are you in a hurry? Use this. It'll save you seven steps instantly.

• 34:26Speaker 03

  Exactly. I'm reminded, I'm reminded of the late, great, uh, gummy search. One of my favorite AI tools that no longer exists where it was a way of just like cruising through Reddit and like zeroing in on exactly the five posts that you wanted. It was revolutionary and I never would have tried it except a different person who worked on a podcast was like, hey, if you're not using gummy search, it's the best way to find Reddit posts like.

• 34:47Speaker 00

  We have a lot of internal tools. We passed around behind the scenes to make, make twist happen. Uh, one more note from me on this.

• 34:52Speaker 03

  Sure.

• 34:52Speaker 00

  He was talking about how at the time, you know, he still had to go in the enterprise sales process, go to a company and it could take months to get purchasing orders and you know, all that stuff. Which is still true to a degree, but the vibe that I got from him was companies not in a hurry. And I think a difference between that era and today is every company today is sprinting, trying to figure out what's next, what to reinvent, what to cut, what to invest in. And so I, I wonder if he's seen kind of the enterprise buying process for AI today versus SaaS then become compressed. I wonder if it's a faster cadence process today.

• 35:25Speaker 03

  Yeah. I mean, I feel like it's, it's one of those situations where it's like SaaS led the way, like these guys figured out how to sort of worm into enterprises and get people excited about what you were doing. And now AI is like taking that model and, and replicating it and making it faster and tighter and more efficient. So what used to take months now takes weeks or days. I, I think that's what we've seen is everything's sort of, they figured it out and now it just got like massively compressed.

• 35:50Speaker 00

  Uh, and speaking about things that got massively compressed, don't forget there was a company called Delve. I think its reputation was compacted after its, um, alleged scandal. Let's say we covered it on the show a lot. I'm not going to go back over it, but I just love that Dylan's walking Jason through and Jason already knew, but walking the audience through. What is SOC two? Why does it matter? Some things, no matter if it's the SaaS era or the AI era, do not change. And that is you will have to get SOC two report.

• 36:12Speaker 03

  Yeah. And, and it, and no, it's never a thing that companies are excited about doing or looking forward to. You, you just find another provider and you sort of, you work with the, the Vantas of the world to sort of take care of it.

• 36:23Speaker 00

  I was about to say, I'm going to, I'm going to throw a bone to our sales team. This is not in the script, but, uh, vanta.com slash twist. If you want to save a thousand dollars off your SOC two report. All right. Next clip. Here we hear a lot about SaaS overload and SaaS burnout, really key concept at the time as tools proliferated. Let's see what the two had to say at the time.

• 36:38Jason Calacanis?

  Burnout. I, during this COVID crisis, said, that's it.

• 36:44Jason Calacanis?

  Give me a list of every single SaaS product.

• 36:47Speaker 04

  Yep.

• 36:48Jason Calacanis?

  Then I said, there's a website called privacy.com and another one where you can set. Cause I just saw a SaaS provider just whacked us for $1,200 and I guess they had increased their price. And they assumed we had all these accounts. They were doing kind of the gnarly thing where they charge you for accounts, but not usage.

• 37:09Speaker 04

  Yep, dirty.

• 37:10Jason Calacanis?

  And that really upsets me because I like Slack's model where they're just like, this is how many people you use. So I never.

• 37:15Speaker 04

  It's very divisive because some people like Slack's model and some people don't. I like Slack's model too. We're not doing it for Figma because we've actually heard people that said they don't like it.

• 37:22Jason Calacanis?

  Got it.

• 37:23Speaker 04

  Cause it's variable cost.

• 37:24Jason Calacanis?

  Explain the, um, explain the, the issue to somebody who doesn't understand what we're talking about right now.

• 37:30Speaker 04

  Yeah. So Slack's model is that you've got active user pricing. Now, the question is like, okay, is there enough trust to know that there's an active user? We've definitely looked at the model for Figma and it's something that I think could be really interesting. To me, it incentivizes the right behaviors. Like if you get to the point where anyone can become an active user and then you only charge the people that are using the service actively. That seems like a good thing. It seems very easy to talk about, right?

• 37:57Jason Calacanis?

  So in Slack's model, if you are in a Slack room and you open Slack and the green light goes on, you get charged that month. Even if it's for 30 seconds.

• 38:07Speaker 04

  Yep.

• 38:07Jason Calacanis?

  I wonder if there's a like a minimum threshold, like.

• 38:10Speaker 04

  There probably is. I don't know what it is because I've always, I think like the sort of flip side of it for us at least. Is in Figma, like if you try to rip Slack out, like you'd have like people protest, you know?

• 38:20Jason Calacanis?

  Of course.

• 38:21Speaker 04

  It just can't, not even.

• 38:22Jason Calacanis?

  So here, but they don't turn your account off. It's only if you use it. So for Figma, the equivalent would be if I clicked on a link and I opened Figma.com and I looked at something on Figma.

• 38:32Speaker 04

  Right now, so viewers are free on Figma.

• 38:34Jason Calacanis?

  Okay.

• 38:34Speaker 04

  So editors are the only ones we charge for.

• 38:36Jason Calacanis?

  Great. So if you edit something.

• 38:38Speaker 04

  But we're not doing that yet. Right now it's like, right now it's like, okay, if you're an editor, you know, you can kind of restrict it before your next period. And if you restrict it, we kind of, we just assume that you're in good intention and not trying to cheat our system.

• 38:50Jason Calacanis?

  But if somebody came to you and it's like, hey, you have, you billed us for three editors for the last six months, you would give them a credit, right?

• 38:54Speaker 04

  Yeah. If we thought it was like really clear that it was wrong. But, um, but also, you know, if it's like, depends on the case, by case basis too.

• 39:02Jason Calacanis?

  This is what you gotta do is you gotta build, the SaaS industry now has to build trust. And when they.

• 39:06Speaker 04

  I completely agree with that.

• 39:08Jason Calacanis?

  They don't send a monthly notice of your bill by email. They should do that. They don't send the monthly recap of who used the product and Slack is the gold center. They send you your monthly utilization every month.

• 39:18Speaker 04

  Yeah. So I love that about Slack is the trust part.

• 39:20Speaker 00

  So Lon, I love so much of that clip, but first of all, it really strikes me how thoughtful Dylan is about pricing, trying to understand what his customers want. He's even applying a pricing model to his company that he doesn't really favor, but he's listening to his customers and saying, okay, this is what they want. I absolutely love this clip. I think it just shows the difference between a leader who does only what they want, or a leader who does what they think is best, but also has at least one ear to the customer.

• 39:47Speaker 03

  Yeah. I mean, we talk a lot, I think, about whether the incentives for a company and its users are like aligned. Like a lot, a lot of businesses are, you know, like ramp. That's like their whole thing is like, we, you want to spend less money. We also want you to spend less money. Unlike a credit card, like our interests are aligned. And I think that's, that's what's sort of interesting about this is you would normally think of these kinds of SaaS companies as, well, they're, it's adversarial. They want you to have more team members using more of their product for more time so that you're spending that much more on the product every month and you can't extract your business sort of out of it. But I think, yeah, this is sort of like, well, what if we sort of played on a more of an

• 40:29Speaker 03

  even playing ground so that everybody felt good about how much they were spending in their Figma budget. And obviously, again, a huge conversation that people are having right now, only about tokens and compute and AI. Like everything in this clip comes back to like, the SaaS industry and the AI industry are really, it's, it's not so much AI SaaS apocalypse destroying this old industry so much as it is just kind of like disrupting it with some new kinds of tools.

• 40:57Speaker 00

  I think also the progression in how startups charge for things really did ding the SaaS model. Because in the old days, you know, as Jason said in that clip, you get a new contract, say every year or every three years, depending how long you sign up for. And they go, good news. We added all these features and it costs twice as much. Good luck ripping it out of your life. And you're just stuck eating the price.

• 41:14Speaker 03

  Yes.

• 41:15Speaker 00

  Now for startups, that was. Net dollar retention. It was companies spending more over time, that magical SaaS revenue growth that everyone just loved. And then things began to change. So I think the movement from selling software in a box to selling hosted software on a per seat basis, then to active user pricing, which is what they're discussing in this clip.

• 41:34Speaker 03

  Right.

• 41:34Speaker 00

  And then from there, we've gone today to usage based pricing, tokens, as you said, and people are now saying the next progression is going to be outcome based pricing. What did you do for me with all that code, with all that tokens?

• 41:45Speaker 03

  Right.

• 41:45Speaker 00

  And then charge me for that. So I think this is one step along a larger journey that we've been seeing, but I just love to see how we're talking about it at the time because I can't recall the last time someone said, we have to cut our SaaS spend. That doesn't come up.

• 41:57Speaker 03

  Right.

• 41:57Speaker 00

  Instead, it's exactly what you said. It's, dear God, did you see our Claude bill?

• 42:00Speaker 03

  Yeah, that's right. It's token maxing. There was no Figma maxing back in the day.

• 42:05Speaker 00

  No, I mean, what is that? 13 extra seats that you pay for? Okay. Email the CEO, get a credit, whatever. But you can't email Dario and say, Dario, can I take back that $10 million in tokens? Man, I didn't mean to. It was a big accident.

• 42:17Speaker 03

  Yeah.

• 42:17Speaker 00

  No.

• 42:17Speaker 03

  We didn't end up shipping any of those products. They were just, they just looked nice.

• 42:22Speaker 00

  As a very inefficient AI user, I'm sympathetic to people who are complaining about it, but also like, you gotta pay for the servers one way or the other.

• 42:28Speaker 03

  Exactly.

• 42:28Speaker 00

  Now, we're going to get back to this interview and we're going to go back in time to one of the first things that I knew Jason for, which was, and I think it's fair to say, his ill fated search engine, Mahalo. Now, Lam, weren't you part of that product to some degree?

• 42:41Speaker 03

  I was employee number three at Mahalo. Funny enough that you should say. This was the first job that I ever got. I was working at a video store in Rancho Park, California, a small community in Los Angeles. And I saw a Craigslist ad. They were looking for writers slash researchers for this new website. So I went to what I later found out was Jason's pool house in Brentwood. And I interviewed with Mark Jeffrey, still a frequent friend of the pod, now of Stillcore Capital. He was the sort of the editorial director, the chief technical officer of Mahalo, I guess you could say. And so, yeah, the idea was Mahalo was this alternate to Google. Cause to take you back in time, folks.

• 43:26Speaker 03

  In 2007, this was around the time people first started to notice, you know, Google results, they're kind of not as reliable as they once were. Originally, when Google first launched, it was like a magic trick. It finds exactly what you want. But over the years, there would be a lot of ads at the top. They were pushing a lot of the best results down. Or there were a lot of these like content farm SEO pages that were crowding out the best stuff. So Jason's classic example back in the day was, what if you search Paris hotels? The old Google would give you, your top page would be here are 10 great Paris hotels that are good options. Or maybe Yelp or TripAdvisor or something. But now you would get all these like travel blogs and like, you know,

• 44:11Speaker 03

  random ads, whoever paid to be on the first page of Google. So that was Jason's observation. And the idea was, we were going to have all of these, I'm sorry, I'm caught, okay. The idea was, we were going to have all these like random writer researchers, guys like me, who were screenwriters or creative writers or people in LA who needed writing jobs. And they were going to do the research and make the perfect search results page by hand for things like Paris hotels. The first page I ever made for Mahalo was for Bob Dylan. Uh, you know, so you put a little bio at the top and here are the 10 best YouTube videos. And here's a little history and here's a great interview you did with Rolling Stone. And here's another recent piece about whatever. And you know, we'd sculpt those.

• 44:54Speaker 00

  Yeah, yeah, yeah. So Lon, let's see the story about how Jason Calacanis's idea for luxury communism for partially employed Hollywood screenwriters worked out.

• 45:03Speaker 03

  Well, I do think there's one more vital piece of context for this clip. I didn't mean to get into a whole story time. The vital piece of context here is that for a while, Mahalo actually worked because we started ranking well in Google for these pages. We were doing SEO correctly. We were writing about popular topics like musicians and destinations or whatever. So for a while, it was a sustainable business, thanks to Google, the thing we were trying to replace ultimately. Uh, and then, now Jason, you can hear describe what happened, the downfall, the reason it stopped working.

• 45:38Jason Calacanis?

  We're like a high school kid.

• 45:39Speaker 04

  Yeah, I have a Mahalo mug, or rather, my mother has Mahalo mug.

• 45:43Jason Calacanis?

  That is hilarious. Thank you for my PTSD. Mahalo was like my failed startup. That got to 10, we were at $10 million a year.

• 45:51Speaker 04

  Wow.

• 45:52Jason Calacanis?

  In run rate. Before Google just said, mahalo, ehow, how stuff works.

• 45:58Speaker 00

  Yeah, it was a big change.

• 45:59Jason Calacanis?

  Answers.com, you all are too, ranking too high and off. And they took 80, 90% of our traffic overnight. Then they took the answers from our websites and put them in the one box five years later. And now, when you go to Google and you type in how many people died of coronavirus, they put the number up top.

• 46:23Speaker 00

  Yep.

• 46:23Jason Calacanis?

  That was literally the idea for mahalo.

• 46:25Speaker 00

  I'm sorry to trigger this.

• 46:27Jason Calacanis?

  And I look back on it and I just think, wow, they, what a sinister group of people. Matt Cutts and these guys lied and said, we were web spam. When we did everything according to the books, we, we would index pages only when they hit 400 words or more. Cause they were like, oh, there's too many stubs in there. Like people are coming to landing pages that aren't filled out, like a short Wikipedia page. So we're like, fine. I told Matt, well, just no index, anything under 400 words, everything above 400 words, then we'll index it, we'll just break the software to do that.

• 46:55Speaker 00

  Yep.

• 46:56Jason Calacanis?

  And he lied to my face and they literally, if there's somebody who wants to do an antitrust, just go back in time to them pushing Yelp down, putting ehow, mahalo, everybody else out of business, or moving them down the page and anchoring them and then replacing them with the one box. And the sinister thing is, they use their technology to find the answer on your page and then put an abstract on the top. And if you opted out of that, they wouldn't index you. So they gave you no choice. It was like one of the most sinister moves in the history of, it taught me a lot about business, which is, you know, when you're up against one of these big companies, they will lie to your face and it doesn't matter who you knew. I knew Surga, I know Larry, I knew Marissa, I knew everybody at the company.

• 47:40Jason Calacanis?

  And I called them all and I was like, I have to lay off 100 writers who are working from home for $15 an hour because you just took 80% of our revenue away and we've been partners for years. What are you guys doing? And they were like, yeah, we don't know who's to charge them.

• 47:53Speaker 00

  So Lon, it seems like there was a good idea, it didn't end up working out and Google somehow had the ability to pull the strings and platforms had a lot of power. Things have changed so much in the last six years.

• 48:03Speaker 03

  I mean, what was it like, knowing what I know now, when Jason hired me to do Mahalo, I knew very little about how the internet works, or like, I had never heard the term SEO, like, I used the internet, uh, but I was not, I was a movie guy, I was not a tech guy. Um, so it sounded like a really good idea to me when I first heard it, I was like, oh yeah, Google does kinda suck a lot of the time, these pages are a lot better. But what I didn't realize, like, the big lesson we learned at Mahalo, that I think is interesting, and then I will stop distracting everybody, uh, was that most of the big search terms in any given day are not actually things like Paris Hotels, or Bob Dylan, they're things that are trending right now, like, that's what everybody was going to Google and searching

• 48:47Speaker 03

  for, whatever the scandal of the moment was, whatever the hottest pop song was, or on Super Bowl Day, they're looking up the big Super Bowl commercials that are just on TV. So, we were race, constantly racing against the clock to make pages in time, to catch the tail of, you know, Google trends and rank highly for them, and so, it was, I don't think ultimately it was like, very sustainable, but, for a short time, it really was working, and we got enough SEO lift from those pages to make it profitable as just kind of like a destination site on the internet to look things up.

• 49:21Speaker 00

  So, Mahalo walked, so Grokopedia could run.

• 49:25Speaker 03

  Right, I mean, and I think, um, Jason listed us with a lot of like, you know, sort of lower quality, like, eHow, and how stuff works, which are kinda content mills, like, there were a lot of competitors like that that were just churning out, we had like, freelance writers getting paid pretty handsomely by the hour to really write good quality pages, so I don't think we were, we weren't trying to do like, you know, like, we got swept up in that, like, low quality garbage spam site, sort of, call, and I think that's what Jason's objecting to, is like, we were, we were really trying to make better quality content than that, the whole idea was to make better pages than Google, like, that was the concept.

• 50:05Speaker 00

  Well, I don't think that was a very high bar to cross, but what Google has done is consistently optimize for monetization.

• 50:10Speaker 03

  Right.

• 50:11Speaker 00

  User experience be damned, and I think we've all kind of seen. The result of that, which is today, Google has essentially thrown in the towel and gone, what if it's all just AI?

• 50:17Speaker 03

  Right. What if we And so, you know, that's exactly what Jason is already complaining about in this clip. Like, Google was basically scraping and looking at everybody's website, taking the information, putting it at the top of the page in their own results. So you didn't have to leave Google and you didn't have to click away. And now they're just, you know, Gemini is just the most sophisticated version of doing that ever, where now it literally can just explain everything to you, having been trained on the entire corpus of the internet, and it doesn't need to link you to anything.

• 50:45Speaker 00

  Frankly, I think the most important company in the world is whichever company beats Google at AI. Because if Google ends up owning the AI market as well as the historical search market, then I think they've become essentially the arbiter, not only of truth, but of speech.

• 50:58Speaker 03

  This is sort of

• 50:58Speaker 00

  A bit much for a single company.

• 51:00Speaker 03

  This was honestly Sam and Elon's, like, OpenAI original spark of an idea. Like, they were, they were like, "Google can't control this. We need to come up with a better system."

• 51:11Speaker 00

  Well, I mean, Google doesn't come off looking great in Jason's story. So maybe they were right to think that Google, the company that dropped the "Don't be evil" slogan, may be up to some shenanigans.

• 51:21Speaker 03

  It is. I think we all can concede that it is possible. And I mean, we were not the only company that got wiped out in that. I think the Panda update is what Google called it. Like, thousands of businesses were just, like, decimated overnight because Google decided to, like, change the algorithm, change how PageRank worked, and flip a switch. So it really was, like, so much power collected in just the hands of a few people. It is kind of scary.

• 51:44Speaker 00

  Thinking about things that scare us, Lon, why don't we rewind the clock to everyone's favorite public nightmare? The COVID crisis. Now, at the time of this clip, we knew a lot less. So we're not here to just poke fun.

• 51:55Speaker 03

  Oh, I am here. I'm here mostly to poke fun.

• 51:58Speaker 00

  Lon is here mostly to poke fun. I'm here to provide, that's my job. I thought I was the funny one. Anyways, here's a clip of Dylan and Jason talking about COVID before we knew much in the early days of lockdowns.

• 52:11Jason Calacanis?

  Now that you're a work from home company and you obviously did not, you were not all in for work from home. You believe in people being in the office and collaborating.

• 52:19Speaker 04

  I think it's great for people to be in physical spaces together.

• 52:21Jason Calacanis?

  Yeah. So you, you were not bought into this like other people are.

• 52:24Speaker 04

  Bought into that. Let me define that more. So I think bought into the possibility of it, but still think there's great benefits to being in an office.

• 52:31Jason Calacanis?

  So how does that change when this crisis ends in, I think, April 15th?

• 52:37Speaker 04

  Oh, man. I think that'd be awesome if it's true.

• 52:39Jason Calacanis?

  I think, well, Apple's opening their stores in the first two weeks of the rumor, and I don't know if it's been confirmed yet, but I heard some inside information. They're going to open Apple stores in the, in the first two weeks.

• 52:48Speaker 04

  Yep.

• 52:49Jason Calacanis?

  I think restaurants are going to start opening again April 15th or so in that timeframe.

• 52:53Speaker 00

  Sadly, no.

• 52:53Jason Calacanis?

  I think Trump said something like, we'll be back for Easter. So I think people are going to get the test results back. We were sitting here on the 24th. I think people, last week was peak fear.

• 53:03Speaker 00

  Oh, man.

• 53:04Jason Calacanis?

  In my mind. It could be this week for people, but I was, I was experiencing peak fear last week.

• 53:08Speaker 00

  Bummer.

• 53:08Speaker 04

  I don't want to be a downer here, but should I be?

• 53:12Jason Calacanis?

  Yeah, do it. Dylan, nobody knows. I mean, that's one thing we've learned here is nobody knows.

• 53:17Speaker 04

  I think that we're going to see, I hope that for California and for other places that have put more restrictive measures in place earlier.

• 53:22Jason Calacanis?

  Yeah.

• 53:23Speaker 04

  That we'll see, you know, sort of like the stabilization, the fact that you're talking about and hospitals won't be overloaded. I don't think that means that we can all just go back to work and go back to the way we were living before.

• 53:35Jason Calacanis?

  Huh.

• 53:35Speaker 04

  Because I think we'll see a second wave effect.

• 53:37Jason Calacanis?

  Right.

• 53:37Speaker 04

  Where there still is the virus out there and we'll start to see it spread again. And then hospitals will be overloaded then. So I think the.

• 53:46Jason Calacanis?

  So what do you think? You think San Francisco, is there a chance San Francisco Bay Area, San Mateo County, et cetera, says two more weeks of this, four more weeks of this?

• 53:53Speaker 04

  I think it could be a lot longer potentially. And I think there could be.

• 53:55Jason Calacanis?

  All the way to May or June?

• 53:56Speaker 04

  I don't know. I'm not sure. But it's, I think that there's also potential for if we start to see people disregarding the orders, I wouldn't be surprised if we see enforcement. And I think people aren't even thinking about right now.

• 54:07Jason Calacanis?

  Yeah.

• 54:07Speaker 04

  But it's, I wouldn't be surprised.

• 54:08Jason Calacanis?

  That would be civil unrest on a level that would be disturbing.

• 54:10Speaker 04

  I don't know. It depends on sort of like how people think about the situation. But in any case, going back to

• 54:15Speaker 03

  Yeah.

• 54:16Speaker 00

  So Lon, this reminds me, just I had this conversation with my mother in law. We were at my in laws house. It was March around this time, probably plus or minus two days. And we were all sitting around trying to figure out what was going on, what was going to change. And at this time, no one in the States wore a mask ever. If you saw someone wearing a mask, you thought they were robbing a bank. Like, it was that, that rare. So we were getting used to wearing a mask here and there, trying to figure it out, like, are cloth masks good? Remember those days, you know, buying them on Etsy? And so we're sitting around talking about this and I'm like, you know, maybe a couple of months. People say maybe a couple of weeks. My mother in law goes 18 months and we all looked at her like she had just fallen off the planet. Like, we just didn't believe it. And then it was 24 months.

• 54:54Speaker 03

  No, yeah, I mean, Jason says, I think what like, it sounds crazy to hear now in retrospect, but in March, we all thought June was like outside, maybe, maybe.

• 55:07Speaker 00

  Unbelievably far out.

• 55:08Speaker 03

  Maybe we're still, we're still doing some of this stuff in June, but that would be like, anything longer than that was considered like, you're hysterical, you're paranoid, you're a hypochondriac, like, no, and I clue myself, like, nobody thought it was going to last beyond May or June. It was, it was unthinkable to us that it could get that bad.

• 55:27Speaker 00

  Yeah, I'm glad that Dylan was a little bit more bearish.

• 55:32Speaker 03

  A little bit.

• 55:33Speaker 00

  Amazing, almost prescient when he said, you know, if we go back out, there'll be a second wave. I mean, there was more than two, but he was looking ahead there.

• 55:40Speaker 03

  Yeah.

• 55:40Speaker 00

  Yeah, it's interesting how the COVID moment changed so many people's thinking patterns.

• 55:46Speaker 03

  Yes, it really.

• 55:47Speaker 00

  You know, it does seem to have been a moment of, of real change and a lot of people didn't take the lessons that I took from it.

• 55:54Speaker 03

  It is, it is also interesting to go at the very beginning of the clip where the people want to work remotely revolution. It, in our minds and sort of pop culture memory, that and COVID are inextricably tied. Like, that was what everybody started working from home because of COVID. And then it just kind of never all fully went back to normal and people got used to it or whatever. But at the very beginning, you could see way before anybody would be thinking about like COVID is going. To permanently change the nature of work in America. They were already having that discussion of like, what do you think about this work from home revolution? So like, it does kind of go back and clarify like, these were actually like COVID accelerated a trend that was already happening,

• 56:38Speaker 03

  which was telecommuting and like Zoom and apps like Skype at that time or whatever. Were allowing more people to work remotely and it was already a conversation was going on. Do you think your team could do as good a job from home as they can in an office? And then COVID just massively like lit a rocket under that revolution and now everybody works from home.

• 56:59Speaker 00

  Yeah, I find it really funny because I had already been working, you know, from home for a half decade at that point in time. Here and there, I'd had some office jobs, I had some non-office jobs. So I lived both sides of that coin and people were talking about working from home as this revolutionary idea. And I was like, well, no, it's just, it just work and there's just not someone sitting next to you. But it became this enormous touchdown of people doing the day in the life videos on TikTok back in the day.

• 57:21Speaker 03

  Yeah, yeah.

• 57:23Speaker 00

  Ah, man, people really blew up some comfy jobs, didn't they?

• 57:25Speaker 03

  Yeah, for sure. The last.

• 57:27Speaker 00

  Never tell people when your job is easy, they'll give you more work or fire.

• 57:32Speaker 03

  Yeah, it's, no one needed to know how much time you're spending every day refilling your Stanley mug, I don't think.

• 57:38Speaker 00

  Yeah, no, we don't need that. Also, Dylan, when you see this, we'd love to have you back on. Come on the show soon. We love to talk about where things are now and your AI agent. But Lon, an excellent trip down memory lane. We're going to keep pulling out these epic moments when we can. We do them here and there, but Lon and I have the time. But I love that you found this one. I love Dylan. I love Figma and I hope that they just crush it because they've had two good quarters in a row. And I'm watching those earnings.

• 57:58Speaker 03

  There you go. Thanks, everybody for joining us. We'll see you next time.