The Pinterest IPO

In the second episode of our APLUSS(Z!) IPO saga, we dive into the history behind the planet’s largest non-social social network, Pinterest. From The Pirates of Silicon Valley to the bloggers of Salt Lake City, the creation story behind this “productivity tool for planning your dreams” is far from your typical unicorn journey. Once labelled as the “next Facebook” by investors and press, ten years later both Pinterest-the-product and Pinterest-the-company are in fact anything but. Whether that’s a good thing or a bad thing… tune in to find out! Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Links Pinterest’s S-1: https://www.sec.gov/Archives/edgar/data/1506293/000119312519083544/d674330ds1.htmFun photos of the Pinterest early days from Leslie Kincaid: https://www.dropbox.com/sh/azy9xtxtq5l6r3y/AAC68OhprmVbauZreHPyLbn5a?dl=0Pinterest financial summary on Seeking Alpha: https://seekingalpha.com/article/4255230-know-pinterest-ipoCarve Outs Ben: Eugene Wei on the Invest Like The Best Podcast: http://investorfieldguide.com/wei/David: A-Rod interviews George Springer: https://www.youtube.com/watch?v=QOqgxmG4yc8

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

• 0:00Ben Gilbert?

  Oh, the users used to drop by the office. That's so crazy to me.

• 0:05David Rosenthal?

  I know. And the woman dressed up as Pinterest for Halloween.

• 0:08Ben Gilbert?

  Yeah. And, oh, here's ornaments for all of you. How many people work at your company? Great. I'll hand make you 25 ornaments.

• 0:16David Rosenthal?

  I know. So great.

• 0:30Ben Gilbert?

  Welcome to season four, episode five of Acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert.

• 0:39David Rosenthal?

  I'm David Rosenthal.

• 0:40Ben Gilbert?

  And we are your hosts. Today, we are talking about a company that is not a social media company. Or is it? Pinterest. For context, this is a company that has more users than Snap, though a little bit less than Twitter, is used by 80% of moms in America, and is actually a pivot of an early failed mobile shopping app. But we will get into that.

• 1:03David Rosenthal?

  Indeed, we will, as always, here in Acquired.

• 1:07Ben Gilbert?

  This is episode two of the A-plus IPO saga. We are proud to be coming at you. What, two days here after trading? It started trading on Thursday, and then yesterday, the stock market had the day off.

• 1:20David Rosenthal?

  Yep.

• 1:21Ben Gilbert?

  So we've got one day of data here, and we'll be, of course, talking about the entire story of Pinterest, but I had a nice little pop in the market as well that we'll touch on.

• 1:30David Rosenthal?

  Yeah, we've got, so far, we have the P and L of the A-plus.

• 1:36Ben Gilbert?

  Indeed, indeed. All right. So listeners, today, we are talking about a company's exit. And really, that's what we do on every episode of this show. But there are lots of company creation topics that David and I can't help but discuss. And as many of you know, we have a second show for that, The Limited Partner Show. So last week on the LP Show, we spent an hour diving into a required topic for every entrepreneur, the term sheet. We went through line by line, analyzing each term of a standard series seed term sheet, and of course, offering our editorial on each one. If you are interested in hearing us, to non-lawyers, try to put it in as plain of English as we possibly can, you should definitely consider becoming an LP. And we have a big announcement today. It's big news on that front.

• 2:21Ben Gilbert?

  We have heard from a lot of you that you wanted to listen to the LP show, but you weren't sure how it worked. So we decided to change the signup and offer every new person who joins a seven day free trial, just so there's no need to take the plunge blind. You can listen right here in the podcast player of your choice and sign up in two taps. Yes, only two taps by tapping the link in the show notes or going to glow.fm/acquired. Yes, note the new and official name of the company, Glow. And as the person who works on the product behind the LP show, I am selfishly very excited to see how well the new trials feature works. So please do not be shy to check it out.

• 2:57David Rosenthal?

  Yeah, big congrats to Ben and team for getting all that out.

• 3:00Ben Gilbert?

  Thank you, sir. All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF. Then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 3:21David Rosenthal?

  Yep, your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote unquote shadow AI running with no security review at all.

• 3:42Ben Gilbert?

  Right, and that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes and cuts the time that you'd spend on vendor assessments in half.

• 4:03David Rosenthal?

  In half? Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor and Snowflake all stay audit ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 4:22Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance and the work to earn and prove trust. We're huge fans of Vanta over here and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V A N T A dot com slash acquired for $1,000 off and just tell them that Ben and David sent you.

• 4:49David Rosenthal?

  All right, David, that is all I have before the illustrious history and facts. Haha, we're ready to dive in here? We are. Well, let's do it. So today, we start our story in the 1980s, mid 1980s, early 1990s. Special time for me, probably, probably it was a little bit later for you, but for you, Ben, too. We're all, all of us millennials growing up. And there was another Ben, Ben Silverman, who was growing up in the middle of the country in Des Moines, Iowa around this time. And I remember growing up, my parents always used to joke whenever they talk about like shipping me off to somewhere random when I was like being bad growing up,

• 5:32David Rosenthal?

  they'd say, you know, I'm gonna send you to Des Moines. Apparently, Des Moines is a really great place. Man. Anyway, Ben Silverman talks about how it is a really great place and it's going to play a big part in the story here. Have you been to Des Moines? I have not. No. That's awesome. It's actually really awesome. Yeah. Yeah. Is it part of the Quad Cities? Or is it? That, that is deeper than my knowledge on, on the area. On Midwest geography. Okay. Anyway. Regardless whether it is or isn't, Ben Silberman is growing up there around this time, and he is a, he's a middle child. He has two sisters, an older sister and a younger sister. He comes from a family of, of doctors, of MDs. Both of his parents

• 6:15David Rosenthal?

  are doctors. They are ophthalmologists in Des Moines. His grandparents were doctors, and both of his sisters would go on to become doctors later in life. So Ben thinks, you know, this is basically his destiny. He can't escape this. But he's a, he's, he's a quiet kid, and he actually says at a talk later that he wants to be known in life for the things that he makes, not the things that he says. Quite, quite in contrast to your typical Silicon Valley unicorn founder. This is gonna be a theme here.

• 6:46Ben Gilbert?

  Yeah, I was gonna say, listeners, like, Dave and I were chatting before the show. It actually takes quite a bit of research to find a lot of the best stories about Pinterest because they're a very sort of do the work and let the work speak for itself company, rather than beating a drum that many of their other companies do to attract talent and, you know, share the spotlight and be in the news a lot. Pinterest is just never really had that in their personality.

• 7:12David Rosenthal?

  No, totally. I mean, this is probably the, the most work we had to do researching the history of the company and founders, you know, in a long time. Not because there aren't great stories here. There are, we're gonna tell them. But, you know, unlike Airbnb or Lyft or Uber, you know, the, the founders, Ben and Evan and Paul just don't talk about them. But we found them nonetheless. So Ben's growing up, and he's, he's a quiet kid, likes to, you know, let, let his work do the speaking, and, and he's very good at work. He's a very good student, as you would imagine, coming from the family that he comes from. He also supposedly collected stuff. Hard to verify if this is true, or this was, this was added as part of the lore later. Feeling like I know Ben after watching basically

• 7:53David Rosenthal?

  every talk he's given over the last 10 years, in the last couple of weeks. I actually believe him. Famously, he supposedly had a bug collection, you know, like, where you, where you'd have a

• 8:04Ben Gilbert?

  Oh, that's awesome.

• 8:04David Rosenthal?

  and then you would pin bugs onto it. I remember, I think there was a Calvin and Hobbes

• 8:08Ben Gilbert?

  Yeah, oh, yeah.

• 8:09David Rosenthal?

  series about this. Yeah. So great. So Midwest. Love it. So Ben is a great student, Ben Silberman. Ben Gilbert was probably also a great student in high school.

• 8:20David Rosenthal?

  Silverman, though, goes to Yale and he does pre-med as he is destined to do. He majors in political science and does pre-med on the side. And, you know, I remember I had tons of friends, I was in college right around this time, too. Also do the same, you know, be pre-med but major in something else. And one day, though, Ben wakes up, it's his junior year and he talks about, he just kind of has this feeling that, you know, he's been doing pre-med and, you know, he's doing well, of course, but he's just not sure that medicine is right for him.

• 8:50Ben Gilbert?

  Not his destiny.

• 8:51David Rosenthal?

  It's not his destiny that he might have thought it was. He's interested in other stuff and in particular, and I can so relate to this because I was in basically the same moment in my life and history when I went to college. When he went to college was the first time he had his own laptop and his own, you know, dedicated broadband, high-speed connection to the internet. And he basically fell in love with it. He was like, this is so cool. This is the industrial revolution of our time. And, um, you know, I'm a young person, I see this and he gets access to it in school for the first time. And he just starts tinkering. He, uh, he builds a bunch of, you know, what he calls toys with friends while he's in Yale. He builds a website, uh, where you can try on eyeglasses.

• 9:33David Rosenthal?

  Remember, his parents are ophthalmologists, so he's in college, he builds this website where that you can virtually try on, on eyeglasses. I don't even know how he did this at the time with whatever web technologies were.

• 9:43Ben Gilbert?

  Yeah, because in like 2014 or whatever, when Warby Parker rolled it out, it was like, whoa, it's incredible.

• 9:48David Rosenthal?

  Yeah, he basically invents Warby Parker, just a little bit ahead of his time. So he's tinkering around with all this stuff and he decides, you know, I think I'm not going to go to med school, at least not right away. And so he goes and he talks to his other friends who were, who were at Yale and, uh, also liberal arts majors, but weren't pre-med and asks them, you know, what are you guys doing? And they're like, um, we're going to all these consulting interviews and investment banking interviews because that's what you did. And Ben says, oh, okay, cool. I should do that, too. He does the whole consulting interview circuit. He ends up, uh, getting an offer and joining a consulting firm, which I think has been acquired now. Uh, I remember these guys, Corporate Executive Board, they were based in Washington.

• 10:29David Rosenthal?

  DC and so he joins them. He moves down to DC after school and two big things happen there. Really important things that are important for the future of Pinterest. One, he gets assigned randomly, I believe, to the IT consulting practice within CEB. He's like, this is great. I love the internet anyway. I'm going to work on IT consulting related projects. And he gets really into it and he starts reading TechCrunch, which had just come out around. I remember this too. And he's reading about all these startups out in California, like Dig and Yelp was just getting started. This was the web 2.0 dawn of the web 2.0 era. And he's like, man, I really kind of want to be a part of this. The other really important thing that happens during his couple of years as an analyst at CEB.

• 11:14David Rosenthal?

  He meets his girlfriend, who would become his wife, Divya. And Divya worked also at CB in the HR consulting group. So Ben's in the IT consulting group. Divya's in the HR consulting group. And as the story goes, one night they're watching a movie in DC and they watched The Pirates of Silicon Valley.

• 11:33Ben Gilbert?

  Oh, yeah.

• 11:34David Rosenthal?

  I still have not seen. I need to watch this movie. It's so, I've heard it's so great. It's kind of, it's like a crime that I haven't watched this movie.

• 11:42Ben Gilbert?

  I'm not sure if it's more cringe worthy or more like legitimately awesome, but it has so much of both. That, yeah, I can't believe it was only ever a TV movie.

• 11:53David Rosenthal?

  I know. And it's about the

• 11:55Ben Gilbert?

  Steve Jobs and

• 11:56David Rosenthal?

  Steve Jobs and Bill Gates and the rivalry between them and Microsoft and Apple.

• 12:01Ben Gilbert?

  Highly dramatized in like whatever 90s or early 2000s, sort of like camera angles and lighting. And it's just so utterly dramatic.

• 12:10David Rosenthal?

  There's this ridiculous line in there. Ben talks about, he gives a talk that I'll reference later. Where he literally has a slide and he has this, this line, this quote on the slide. There's this super cheesy line in there that I think Bill Gates' character says, "There might be something going on in California." And according to Ben, this inspires him and Divya. And they're like, you know, what are we doing in DC? We got to move out to Silicon Valley and be where the action is. So they do. A little while later, this is, um, this is 2006, I believe. They move out to Silicon Valley, out to Palo Alto. Ben ends up getting a job at Google in ad operations. Divya gets a job.

• 12:51David Rosenthal?

  She wants to work at a startup, so she gets a job at a cool startup right off Calav in, uh, in Palo Alto. You may have heard of it. It's called Facebook. She joins them in 2006. She's the first HR, remember she was doing HR consulting at CEB? She becomes the first HR person at Facebook. Oh, I didn't know that. Which is pretty awesome. And is also going to have a huge impact on Pinterest. Ben works at Google for a little under two years, I believe. He really wants to do a startup, you know? He's like obsessed with TechCrunch. He's tinkering with all sorts of stuff on the side. And every night he's talking to Divya. He's like, oh, what about this? Like, I want to work on this. And again, supposedly they're, they're having dinner one night and, and Divya is just sick of this.

• 13:31David Rosenthal?

  She's working at a startup and she's like, Ben, you know, you might want to just either do this or, or just stop talking to me about it. And I could so imagine this. I, uh, Jenny and I have had many versions of this conversation. And Ben's like, you know what? You're right. So it's fall of 2008 at this point, and he decides he's going to leave Google. He's going to launch his own startup. He's going to live the dream. He has an idea and he's got a couple of friends that he's going to work on, work on this company idea with. And they want, he wants to build a website that holds your, that, that stores your medical history, your family's medical history. So not like an EMR, but a place where you can store, you know, what, what is your grandparents' family medical history?

• 14:14David Rosenthal?

  Your parents' medical history, you know, your siblings. And actually it seems, you know, really relevant. So it's fall 2008. He goes off to do this. He quits Google. He walks out and then like a week later, Lehman Brothers collapses.

• 14:27David Rosenthal?

  It's amazing. We'll get back later in the show to how impactful that event was on so many things in the world.

• 14:34Ben Gilbert?

  I think there's probably four or five episodes now where that's been a turning point in the history of each of these companies.

• 14:40David Rosenthal?

  Yeah, totally. And the most direct impact that that has on on young Ben Silverman and and the company that would become Pinterest is nobody else who he was talking about doing with this ends up leaving and joining full time. I think some some people may have been at Google, some people might have been friends. He's talked about that were in PhD programs. Everybody's like, nope, the world's falling apart.

• 15:02Ben Gilbert?

  Yeah, everybody go to cash, keep your job, don't do anything risky.

• 15:07David Rosenthal?

  Yep. And and so Ben's out there. He's all alone. He's he's quit. He's gone. So he goes and he goes out and he tries to raise money. He has this idea, this website he wants to build, but a nobody, no, no angel investors or early stage VCs at that point are investing in like anything, let alone some random, you know, ad ops guy from Google who's a solo non-technical founder.

• 15:30Ben Gilbert?

  Come on, the bottom's the best time to to buy. This is when you should be investing.

• 15:35David Rosenthal?

  I can't wait to do the Airbnb episode, hopefully later this year, where we tell their version of this story, which is also very similar. So he can't raise any money. He has no co-founders, no ability to build a product. He does a bunch of things just to kind of pay the bills and get by. Fortunately, Divya is, you know, working at Facebook and doing pretty well. So she keeps the keeps the the fledgling family afloat.

• 15:58Ben Gilbert?

  And they're still well, well, pre-IPO at this point. I mean, they hadn't found mobile yet. They hadn't. This is this is still.

• 16:04David Rosenthal?

  This is 2008.

• 16:05Ben Gilbert?

  Facebook's doing well, but it's doing well on venture dollars, not on its its real business model.

• 16:10David Rosenthal?

  Yeah, totally. So Ben ends up moonlighting. He he helps design a product and a company called MightyQuiz, which was a Y Combinator company. I forget, were they in the first batch?

• 16:24Ben Gilbert?

  It wasn't the first, but it was.

• 16:25David Rosenthal?

  Not the first, but very early.

• 16:27Ben Gilbert?

  Yeah.

• 16:27David Rosenthal?

  Very early batch. They might have been in the same one as Dropbox.

• 16:31Ben Gilbert?

  I think Dropbox was in the was Dropbox in the Reddit batch? Because Reddit, I think, was the first. Dropbox.

• 16:38David Rosenthal?

  I can't remember.

• 16:38Ben Gilbert?

  Yeah, it was. It was first two or three years.

• 16:41David Rosenthal?

  It was definitely early on. They powered trivia games for other websites out there. Doesn't work, of course, but that's how he gets exposed to Y Combinator. I was always wondering, Ben goes back and he does talks at YC Startup School and I started like Pinterest? Did they do YC? Didn't do what? But that's how Ben became involved with YC. He's doing this and he's looking for something to do. He comes upon, he realizes, you know, he loves this iPhone and the iPhone SDK had come out earlier that year in 2008. And it just started to open up to third-party applications because remember the first year, year and a half of the iPhone, it was only apps from Apple. There were no third-party apps.

• 17:20Ben Gilbert?

  There's iPhone OS 2 that had the App Store and SDK.

• 17:25David Rosenthal?

  Yeah. And famously, Steve Jobs was against the idea initially of having third-party apps on the iPhone.

• 17:31Ben Gilbert?

  But he Bezos-style disagreed and committed and they shipped it anyway.

• 17:35David Rosenthal?

  Yeah. How different history would have been if that had not been the case. So Ben sees this and he's like, okay, this might be the wave that I missed the sort of web 2.0 wave, but this might be the wave that I can ride to build a big company here. And so he hooks up with another friend from undergrad from Yale named Paul Skiarra, who, very random that Paul would end up becoming his co-founder because Paul lives in New York, is also not technical, but Paul had a very important aspect to his background and skillset.

• 18:09Ben Gilbert?

  He knew investors.

• 18:10David Rosenthal?

  He had been an associate at a venture capital firm called Radius Ventures in New York and he knew investors. And what was one thing that they needed? Money.

• 18:20Ben Gilbert?

  Money.

• 18:21David Rosenthal?

  Money. And Paul, of course, was also saw the opportunity that the opening of the App Store would unlock. Says, okay, great. We're going to build a company. We're going to build iPhone apps. They decide to call the company Cold Brew Labs because it sounded cool.

• 18:38Ben Gilbert?

  Like listeners, we try and pour over like, what's the real origin story? What's, you know, what is the company espousing? Ayo, this is like, this is all we could find, like it's that it sounded cool and they just rolled with it.

• 18:49David Rosenthal?

  Yeah, I mean, I think that was the actual story. Paul, though, because, you know, they need to raise money and Paul has all these investor relationships. They decide it's natural. He should be the CEO of the company. So he's in New York and Ben is, is out in Palo Alto and he's the CEO and they hit the fundraiser. They decide, well, first they decide what are they going to do to build iPhone apps? And they, Ben has this idea. I actually don't know whether it was Ben or Paul. They come up with this idea for a product that they call TOTE.

• 19:18Ben Gilbert?

  And we should pause here before diving into what TOTE is. This was like aha moment number one for me doing the research that Ben Silberman was not the initial CEO of Pinterest.

• 19:29David Rosenthal?

  Yeah.

• 19:29Ben Gilbert?

  I think that David, you even texted me like, whoa, did you realize this? This is just one of those things that ends up buried in the lore. That's the sort of super fun when we're diving in and trying to figure out what's going on. Ben, while the sort of visionary and, you know, the person that we chose to start the story with and in his upbringing, was not the CEO of the company.

• 19:47David Rosenthal?

  And despite having left his job at Google earlier and been searching around for a company to start, they decide that they're going to build this, this app called TOTE and release it on the App Store. How they got the idea for this? I don't know. The idea is that you get all these paper catalogs, you know, direct mail catalogs, sent to you in the mail for all sorts of things, you know, fashion, home decor, you know, pottery barn, what have you. Wouldn't it be interesting if instead of getting those in the mail, you could get them on your new smartphone device?

• 20:20Ben Gilbert?

  David, that is just what I want. Just what I want.

• 20:22David Rosenthal?

  Oh, man, I can't wait to read more catalogs.

• 20:27David Rosenthal?

  And so they decide they're gonna do this. But there's no like API for, you know, getting products and catalogs from companies. So they start getting catalogs and just like by hand ingesting the product data into, into the app, like typing in like, oh, here's this, you know, dress at Forever 21. It's priced at this, like, take a picture of it. Here's the picture.

• 20:47Ben Gilbert?

  Wild.

• 20:49David Rosenthal?

  So talk about doing things that don't scale.

• 20:51Ben Gilbert?

  And, and this is 2008, like there was zero evidence that anyone wanted to do anything that resembled shopping on mobile yet.

• 20:57David Rosenthal?

  Yep. End of 2008, beginning of 2009, they, so they think, okay, we've got this great idea. We're working on this product now. We're gonna, we're gonna go out and we're gonna raise money with, you know, our, our new great VC connections. Everybody turns them down. They meet with like everybody in Silicon Valley. People more or less laugh them out of the room, rightly so at that point in time. So they get so desperate. This is, this is later on in the spring.

• 21:21Ben Gilbert?

  And actually, David, I'll, I'll push you on rightly so, because if they had invested, they would have been the first investor in Pinterest. So it is interesting. It's like rightly so on, potentially on the idea.

• 21:32David Rosenthal?

  For this idea.

• 21:33Ben Gilbert?

  But.

• 21:33David Rosenthal?

  Yes. Well, and that's the, that's the art of, of early stage investing, which will, we'll get into more as we go here. So they're so desperate for money to pay the bills that they start applying to business plan competitions at colleges that they didn't even go to. They're just doing anything to try and get some money.

• 21:59David Rosenthal?

  And presumably also some money to, you know, pay some developers to actually build this because they can't build this. According to Ben, they go to several, they go to one, I believe this was NYU. I couldn't, I couldn't verify, but I believe this was NYU's business plan competition. They end up getting second place in the competition. So they don't get any prize money, but what they get for coming in second is a meeting with a VC. And that VC happens to be a VC in New York, a brand new firm that has just gotten started at this point in time, which, side note, must have been incredibly difficult to start and raise a first time fund in the middle of 2008, 2009. Man, it was hard enough doing it at Wave in 2017, 2018.

• 22:37Ben Gilbert?

  And David, to double down on that, imagine how hard that is. You're an early firm, you're making one of your first few investments and it's Pinterest.

• 22:46David Rosenthal?

  Yeah, exactly. Well, so these guys, First Mark Capital, which is now a great, much larger VC firm based in New York, they'd just gotten started. They were the second place door prize in this competition. And so they meet with Paul and Ben and this app called Tote. And for whatever reason, they take a shine to them and they say, okay, great. We'll throw you guys a couple hundred K. Like, let's see what you do with this. So First Mark becomes the first institutional investor in Cold Brew Labs. You can read the form D that gets filed. Paul signs it as the CEO of the company. They invest a couple hundred K.

• 23:24Ben Gilbert?

  And we do this part later, but just to sprinkle some numbers on this. Pinterest, their IPO price was at $19 a share. And when they opened trading, it was at 20, almost 24 bucks a share. These shares were bought for one cent per share.

• 23:40David Rosenthal?

  Yeah, so they do pretty well. And I believe First Mark still owns about nine, nine-ish percent of Pinterest. Man, the art of early-stage venture capital and betting on teams. Great investment there. With these resources, they, they hire some developers, they ship the app. But nobody really uses it because, you know, again, who wants to really be shopping catalogs on your, at that point in time, 3.5 inch iPhone screen?

• 24:07Ben Gilbert?

  There's a few things there. It's like, no one was conditioned to that behavior yet. Phones weren't rich enough in their functionality to sort of give you the confidence that doing things like shopping or booking travel or anything on them was, was like actually going to work and you, you had sort of the, the richness of the software required to do those things.

• 24:23David Rosenthal?

  At this point in time, you had 3G. I think you were past the edge days of the iPhone, but you know, loading high quality images.

• 24:31David Rosenthal?

  Still took a while.

• 24:31Ben Gilbert?

  Totally. You know, this was the era where trying to update your app took like two weeks. So, you know, anytime that anything was wrong, it's not like that we have sort of the number one, the update speed that we have today, but number two, the, the ability to change a lot of stuff on the server. I think the apps weren't that sophisticated yet and had just a lot of really heavy stuff on the client side. And so I think that not only were, was there only a small segment of people willing to do this crazy thing called shop on their phone, but then even more so, it was really hard to actually iterate on this thing.

• 25:02David Rosenthal?

  Yep. Hard on all fronts. So one day later on, a couple of months later in, in 2009, Ben is visiting New York. I assume he was visiting because Paul is still there and a mutual friend says to Ben, hey, there's this guy here. I know that I'm also friends with, you guys seem really similar. Like you should just like grab a drink. I think you would really like each other and meet while you're in town. The friend who, that the mutual friend was talking about is a architecture grad student named Evan Sharp.

• 25:31Ben Gilbert?

  And Boy, Pinterest really keeps finding the exact right people for these roles with just the right backgrounds.

• 25:37David Rosenthal?

  Exact right people at the right time. Man, as with all of these stories, it's so funny when you dig into them, you know, the number of just random events that lead to these incredible stories and companies being created. You know, the same thing with the Lyft co-founders meeting on Facebook.

• 25:52Ben Gilbert?

  So Evan was, he had an architecture background, but he actually had some super applicable skills from, from tech companies, right? Was he at Facebook?

• 26:00David Rosenthal?

  Not yet. Not yet. So he's just an architecture grad student in New York. Ben and Evan grab a drink. They're chatting and Evan's, you know, saying like he has, talking about how he, he loves, you know, he's so into architecture and design and he's curated. He has thousands of architectural photos and drawings and designs that he's saved online, but it's so hard to keep them organized and he's got this whole system. And, and they're riffing and Ben is like, oh yeah, like I love collecting things too.

• 26:29Ben Gilbert?

  I have a bug collection.

• 26:30David Rosenthal?

  Yeah, I had a bug collection and I and and I've had this idea of of, you know, I love tinkering with stuff. And like, one of the things I'd always wanted to build is is a product that would let you collect things online and save them and organize them. And they start riffing, you know, and eventually Ben's like, man, like, we're really, we're really in sync. You should come join me and Paul at Cold Brew and like, work on what we're working on on tote. And like, maybe we can, maybe we can move the product in this direction. Evan, though, you know, he's still in grad school and he's super passionate about architecture and design. And he does want to work in tech. He wants to be a product designer, but he's not super interested in a really early stage startup that doesn't have a lot of great prospects. So in fact, what he's interested in, and I don't know

• 27:14David Rosenthal?

  if he already had this lined up, but when he graduates from architecture school, he goes and he works at Facebook as a product designer. But he's like, you know, I like you guys. I don't think I want to do this full time and drop out of school, but but I'll work with you on the side. And I want if he didn't have the job at Facebook yet, I imagine this helps him in his interview process that he's working on the side with with a startup that would become Pinterest. So they they all start working together. And there was, you know, along the same vein, tote did have this feature that they already had in there that let people save items for later that they were browsing in the catalog. And the very few people who were using tote, they all seemed to be using that. And as when they talk to users, they seem to kind of like it. You know, and it

• 27:59David Rosenthal?

  makes sense. I was talking with with my wife Jenny about, you know, what she uses Pinterest for these days and likes. And the analogy that she said to me is, you know, Pinterest is like the online version of when you're reading a magazine and you see something interesting and you tear the page out or you fold the page down to save it for later. And that's literally what was happening in tote. And so they decide to focus on that and build out this feature a little more. And they combine it with, you know, sort of this broader idea like, okay, let's get beyond just shopping and catalogs, but kind of organizing everything that you come across on the internet. So Evan designs it in his free time. And he comes up with probably the most important unlock that really makes this happen. From a product standpoint, he comes up with the grid layout.

• 28:43David Rosenthal?

  Now, it doesn't seem all that remarkable. You go to Pinterest and everything is laid out in a grid of images. But at the time, this was really novel. The idea of laying out all these images in a grid in front of you. But there were a couple things. One, it was liquid and adaptable. So depending on the sizes of the images, the grid would readapt and make the images all look good instead of resize to fit in like very specific sized squares. The other thing that they didn't, I don't know if this was intentional or not, but the grid was oriented around vertical photos, not horizontal photos.

• 29:23Ben Gilbert?

  Interesting to allow more of them to be across the screen at once.

• 29:29David Rosenthal?

  Yeah, I imagine that's why they did it. And at the time, the first version of Pinterest was only on the web, not on mobile. And even despite Tote being, you know, coming out of Colt Brew labs to build mobile apps, they said this product needs to live on the web. Wouldn't even come to mobile until 2011. But then when it did, this vertical image prioritization was perfect for mobile.

• 29:54Ben Gilbert?

  I remember back in this time, when Pinterest shocked the world with what is canonically the Pinterest layout. There were so many little clones, like everybody tried to add a Pinterest style view to their product. Or you'd see on Hacker News, oh, Pinterest for X. And Pinterest meant that fluid layout. That was a sort of the board that was laid out in the, you know, adaptable, fluid way to layout images. There's sort of an interesting meta topic here that products get shaped using the technology available and what is easy using that technology. And so it makes sense that on the web for the longest time, what we saw were tables and what we saw were, you know, sort of articles that had inline

• 30:36Ben Gilbert?

  images. And it's not an obvious and easy thing to do in early HTML and CSS to lay something out in this way, and particularly to do infinite scroll and a lot of the things that we come to expect knowing that these layouts exist now. And it's fascinating to think whenever you're designing a protocol or a platform or a core technology, that you're really shaping the, you know, first five years or whatever, the first several set of use cases of what people actually do with it.

• 31:04David Rosenthal?

  Evan, he's an architecture grad student in New York who designs this and would go on to be one of the most influential, you know, Internet and mobile UI paradigms, you know, the last 10 years. Super cool. So they have this, they're pretty excited about this new version of the product. It's now November 2009, Thanksgiving, and, and over Thanksgiving, Ben and Divya are at Thanksgiving. They're watching TV. Ben had been, you know, trying to think about what are we going to call this new product? Cause tote doesn't make sense anymore. And of course, talking with Divya about it, they're watching TV. I assume at least most US listeners are going to remember the commercials that were all the rage at the time.

• 31:47David Rosenthal?

  The Dos Equis commercials with the most interesting man in the world. And those are commercials were so great.

• 31:54Ben Gilbert?

  How is this related, David? Where are we going?

• 31:57David Rosenthal?

  It's really, it's related because they're watching TV. A most interesting, a Dos Equis commercial with the most interesting man in the world comes on. And Divya is like, that's it. That's the name for the company. Pinterest. Cause they were talking about pin boards and the interesting man in the world. And that's when inspiration strikes. And that's where Pinterest is born.

• 32:18Ben Gilbert?

  Wow.

• 32:19David Rosenthal?

  Yeah. So I don't know what the moral of the story is there. Like spend more time watching TV with your loved ones.

• 32:25Ben Gilbert?

  That's it. I think, I mean, spend more time with your loved ones feels like a great lesson to take away from any of this.

• 32:30David Rosenthal?

  Yeah.

• 32:31Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team. And deploying them is no longer the hard part.

• 32:45David Rosenthal?

  Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like the risks are real.

• 32:59Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI control tower.

• 33:09David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent visible and secure in one place.

• 33:26Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 33:43David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 33:59Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 34:08David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. So, great, they've got a name for the product. They got this super innovative grid UI. They're ready to ship. January 2010, they launch, they email all their friends in Palo Alto, everybody that they know from Google, and Divya's friends at Facebook, and Evan, of course, is going to Facebook at this time. And nobody uses it. Everybody's like, what is this for? What am I supposed to do with this?

• 34:43Ben Gilbert?

  What's interesting to me, too, about this point in the story is, it's not like they had done an exercise and said, okay, who's our core target user? What is our ideal customer profile? You know, we all know today Pinterest is, I believe it's like 2/3 used by women. And they didn't come up with it and say, okay, what product can we build for moms? You know, it was very much, here's a thing that is very agnostic to who's using it and what they're using it for. And let's just see. I'm sure you'll get into this, but like, how did they find that the right use case and who the Real target user was.

• 35:21David Rosenthal?

  Yeah, well, so before that happens, though, they're trying to do everything they can to get their friends to use it to, you know, do growth hacking, you know, which is all the rage of the day. So what they, what they think is going to be really cool, they they go to the Apple Store. Ben goes to the Apple Store in Palo Alto. I don't know if he does this every day or just for a couple of days.

• 35:42Ben Gilbert?

  Can he just pull it up on all the computers?

• 35:43David Rosenthal?

  Yeah, he goes to the, he goes to all the computers and he changes the home screen to Pinterest. And all the computers in Palo Alto has precisely zero impact. They they apply to TechCrunch Disrupt and they get rejected.

• 35:58Ben Gilbert?

  Didn't they like pull some strings to like get in somehow?

• 36:01David Rosenthal?

  I guess First Mark was a sponsor and they pull some strings and they get them like a booth at TechCrunch Disrupt, but they're not part of, you know, the battlefield. Like it's, things, things are bad. Everybody's pretty down. But there is a ray of hope. And then some of the people that they'd been trying to get to use it, they were literally anyone they know, were Ben's friends back in Des Moines that he'd grown up with. And these people were like so far from Palo Alto techies, but they seemed to like it. And the other thing they had going for them back in Des Moines was Ben's parents and Ben's mom, you know, they're still ophthalmologists in Des Moines. They have all these patients and Ben's mom just starts telling all of her patients to use Pinterest.

• 36:40Ben Gilbert?

  This is like the equivalent of like when the Snapchat story where it was Evan Spiegel's mom was a teacher at school.

• 36:48David Rosenthal?

  No, no, no, his cousin, I think.

• 36:51Ben Gilbert?

  That's right. His cousin was.

• 36:52David Rosenthal?

  Was a high school student.

• 36:53Ben Gilbert?

  Student and they were using it to message. Yeah.

• 36:55David Rosenthal?

  Yeah, because iMessage and other apps were banned, messaging apps were banned. Yeah, so great. But they all had their iPads. This is like the Pinterest equivalent. So they start seeing this and they're like, oh, okay, interesting. I'm not sure if this was related or not, but on a whim, Ben goes to a conference in Salt Lake City that that January called the Alt Summit, which is a big women-focused design and blogging conference. I think a friend had suggested that he should go there. But I don't think he had really that much intention of, oh, this could be, this could be the promised land of our user base. He goes there, he's talking to everybody about Pinterest, gets a bunch of people signed

• 37:34David Rosenthal?

  up, they start using it. And then on the flight back from Salt Lake City to San Francisco, well, at the conference, he meets a woman named Victoria Smith, who's a blogger who lives in San Francisco. She has a blog called SF Girl by the Bay. She's actually moved to LA now, which of course breaks the hearts of, you know, all San Francisco people. But at the time, she lived in San Francisco. And so they kind of hit it off. And they're on the flight back and they decide like, hey, let's do a collaboration together. So Pinterest is gonna, gonna work with SF Girl by the Bay. And we're gonna do this thing called Pin It Forward, where Victoria will create a pin board with all the things that mean, quote

• 38:14David Rosenthal?

  unquote, mean home to her, things that inspire her of home. And then they're gonna tag another blogger and ask the next blogger to do, create a board doing the same thing for them, and then just kind of pass it around through all the bloggers that are in this, that we're gonna be at the Yalt Summit. And they do it. Sounds like a growth hack. It sounds like a growth hack. The bloggers get really into it. And they, of course, all have their, like, you know, small but rabid fanbases of their blogs. Their audiences love it. They start using Pinterest. Lo and behold, things start to turn around and the company starts to work. And so this is a total aside. This is like, this is 2010.

• 38:54David Rosenthal?

  A couple of years later, 2012, Pinterest is now a hot startup in the valley. I'm starting business school at GSB at Stanford. And in my electronic business class, we had this great professor, Heim Mendelson, he's like a total legend. It's an amazing name for our class. I know. Electronic business. He's like an old school guy. This is a holdover. But he's super smart. And he made us, like, the first week in class, do the same thing on Pinterest. And I never understood why he had us do this random assignment on Pinterest. And now I know. This is why. What, the Pin It Forward exercise? Yeah, the Pin It Forward exercise. But he didn't tell us. It was the Pin It Forward exercise. It was just like, all you guys, like, go create a Pinterest board of your hometowns and what like home means to you.

• 39:39David Rosenthal?

  And only now, years later, do I see where he got the idea for it.

• 39:42Ben Gilbert?

  It's interesting thinking too about why it made so much sense for bloggers because for them, whether it was part of their own process as a tool, so you can imagine it's kind of difficult to go and collect good links and good images and put them somewhere if you're trying to go look at 100 different websites and then write a blog post about sort of a synthesis of all this stuff. So it's both an interesting tool there, but then also it's probably the best way to showcase at that time, a set of things that you want your, your fans or followers to go and look at much better than, you know, making a separate WordPress blog post for each thing that you want to show off.

• 40:18David Rosenthal?

  Totally. There's, there's a great talk. Ben goes back to the Alt Summit in 2012. And that's where he has the, the slide that has the, there might be something going on in California in that talk. But one of the questions from the audience is this woman who says Pinterest is something like the best thing that has happened to my business and my following and the worst thing that has happened to my actual blog because I now do everything on Pinterest. Like, yeah, it's just so much, it's so much a better vehicle for if you're, you know, a design blog and you're sharing ideas and products that you find with people to use a service like Pinterest than it is to use a blog. The site starts growing about between 40 to 50% month over month at that point. It's

• 41:03David Rosenthal?

  still really small, but it really starts taking off and it sustains that growth rate for years.

• 41:08Ben Gilbert?

  And I mean, that's, that's a magic number for startups. If you're growing 10% week over week or sort of that 40, 50% range month over month. I mean, that is, you are a high growth startup and that is, that is how you know you're on to something.

• 41:21David Rosenthal?

  Yeah. All these angel investors that two years ago would, would barely even take a meeting with Ben, they start to notice that something's going on here. So in, in May of that year, Shawna Fisher, who was the head of M and A at IAC, she had started using Pinterest, probably heard about it from a blog and she loved it. She emails them and she's like, hey guys, I want to invest. Their minds are blown.

• 41:44Ben Gilbert?

  Catch me up. What, what year is this? This is after they were out of private beta?

• 41:49David Rosenthal?

  They're still in private beta and they would be in private beta for the next two years. So you had to, you had invites and you could invite your friends. So the site is still growing like crazy, but, and a lot of the invites were distributed via these blogs.

• 42:00Ben Gilbert?

  Ah, interesting.

• 42:01David Rosenthal?

  So Shauna Invests and then she introduces Kevin Hartz, who's the CEO of Eventbrite, co-founder and CEO of Eventbrite with his wife Julia at that point, and also a prolific angel investor in Airbnb and others. He Invests, friend of the show Scott Belsky Invests. And there's like serious momentum behind this company. This is a fun aside, but also part of the story. July, a couple of months later, they do the first real life Pinterest meetup with Victoria with the SF Girl by Bay, by the Bay blog at a store in Noe Valley called Rare Device, which is now moving to Hayes Valley, but is like right down the street from, from where Jenny and I live now in Noe Valley. Too funny. That's the first physical Pinterest meetup and Ben goes and all these people come out. It's not, it's

• 42:46David Rosenthal?

  not like a huge amount of people, but they're all like so engaged and they love the product so much. And they're talking about how all the things that each other is pinning on about their homes and about everything else on Pinterest is inspiring them to go do these projects. And they're supporting each other and working with each other on these projects. And Ben is like, this is it. We have figured out what Pinterest is, who it's for, and we're going to double down on this.

• 43:11Ben Gilbert?

  And at this point, Ben, Ben is doing things like giving out his personal phone number, giving out his address, saying like, hey, please reach out to me anytime you have any, any feedback, or he really started doubling down on building this sort of wildly intimate relationship with the Pinterest users around this time.

• 43:27David Rosenthal?

  Yeah. And meetups start happening all over the country. And so at this time, this is, this is great. Remember Divya was the first HR person, Ben's wife. Now, I don't think they're married yet, but a girlfriend, soon to be wife, Divya was the first HR person at Facebook. Ben is so inspired about how fast they have to move here. He copies, he gets a poster of Facebook's move fast and break things motto, and he makes that the Pinterest motto. And then redesigns it. They redesign it in Pinterest font and, and you know, red lettering and they posted all over the office.

• 44:00Ben Gilbert?

  So the opposite of Pinterest's like actual mantra as a company for years and years after that.

• 44:07David Rosenthal?

  Yep. But in the, in these very early days, this is when he realizes, okay, we got something here and we gotta move fast. So they've just raised this angel round. They keep growing. And then the next spring, they end up raising a $10 million, which was Series A from, led by Bessemer, which was a very large Series A for the time.

• 44:26Ben Gilbert?

  Which, which closed in May. I want, I want listeners, pay attention to the timeline here. This round closed in, in May. Just to continue tracking the share price here, that's at 17 cents a share.

• 44:36David Rosenthal?

  Yeah, 17 cents a share. Wow. And what was interesting about this, so Sarah Tavel, who's now, who's a great investor and now a GP at Benchmark, she was an associate at Bessemer at the time. And she had heard about, about Pinterest and she had found them and she had lobbied the firm to do it. And Jeremy Levine, the partner who ended up leading the deal, he was coming out to San Francisco one day for, to meet with a total, he writes a blog post, to meet with Minted, another company. And she'd convinced him like, hey, we gotta go down to Palo Alto. We gotta meet with these Pinterest guys. And Jeremy had like 10 minutes before his flight. He was like, okay, fine. I'll go down. And then ends up canceling his flight, staying and they, and they do the deal. But it was totally Sarah who founded and lobbied it.

• 45:19Ben Gilbert?

  It was supposed to be a longer meeting and then there was traffic because it was raining or something. And by the time he got down there, there was only 10 minutes for the meeting. And then of course, it's interesting enough that you just skip your flight.

• 45:30David Rosenthal?

  Yeah.

• 45:31Ben Gilbert?

  But yeah, like I, I think we should put a stake in the ground right here and say, just let's notice a trend of amazing women doing things like naming the company, like pounding the table to make the investment. I think Sarah should get a huge amount of credit for this, spotting it super early.

• 45:48David Rosenthal?

  Exactly. You know, it's, it's Divvy who comes up with the name. It's Victoria Smith and the Alt Summit that, which is all women focused bloggers and designers that come, you know, lands the, the product market fit for the company. It was, it was Shauna at IAC who was the first, you know, lead angel investor to recognize the potential of the company and want to invest. And then it was Sarah who found them and led to and pounded the table to do the Series A. At the same time, this is super fun. So SB Angel, Ron Conway's firm, they had passed on the company during the Angel round. Ben and I, a great friend of ours, Leslie Kinkade, was working at SB Angel at the time here in Silicon Valley. And Kevin

• 46:30David Rosenthal?

  Carter, who was also there at SB Angel, he was like, man, I think we might have missed this during the Angel round that had happened with Scott and Kevin and Shauna the past summer. And maybe we should like, see, you know, we don't really do Series A, but like, we might want to really try and take another look here. And so Leslie and Kevin lobbied within the firm that SB Angel, that, hey, we'd made a mistake. We should try and push our way into this round, too.

• 46:57Ben Gilbert?

  Kevin specifically was like, Leslie, what do you like, what do you think? This is a female focused site, or at least that seems to be the user base. So Leslie pulls together a focus group of three women, I think, at the firm, and basically went back to him and said, yeah, I know we passed, but there's, there's no way we can miss this.

• 47:13David Rosenthal?

  So SB Angel ends up coming in to the Series A as well. And then, this is so great, both Sarah and Leslie, Sarah leaves Bessemer, Leslie leaves SB Angel, go and join the company as early employees. And we have to give shout out to Leslie, too. She's helped us with a bunch of these stories and research here. And she's now, she now runs the office and is, and is chief of staff to the CTO at Convoy up in Seattle, which is another great company that will be an acquired episode someday.

• 47:42Ben Gilbert?

  Yeah. Thank you, Leslie. Thank you for the stories that are to come in this episode. And listeners, you can find links to some, some cool posts from Leslie's Instagram over the years, from 10 employees onward at Pinterest.

• 47:55David Rosenthal?

  Yeah, it's super fun. Go look at these, these pictures that Leslie has documenting all this, because I think this is the first time we've had like, actual visual accompaniments to the stories that we tell here.

• 48:06Ben Gilbert?

  Yep, across three different offices and yeah.

• 48:08David Rosenthal?

  Yeah, super fun. So we're now in July of 2011. They hit a million users. Remember, it's still not open to the public. You still have to have an invite to join. In August of 2011, they're listed as one of Time Magazine's 50 best websites, which actually meant something back then. Now probably less relevant. Remember, it was May when the Series A got done. We're still in August. And Andreessen Horowitz, spearheaded by Connie Chan, who was on the deal team at the time there, had gotten wind of all this great stuff that was going on at Pinterest. And they come in, Jeff Jordan and Connie come in,

• 48:48David Rosenthal?

  and lead the Series B. Just a few months later, in the company, there is $27 million at a $200 million valuation.

• 48:56Ben Gilbert?

  Yeah, for those keeping track at home, share price is now up to 72 cents. And in that time from May to August, the valuation goes from 40 million to 200 million.

• 49:06David Rosenthal?

  This is what happens when you hit that exponential growth curve. So they now have tons of resources. A couple of months later, though, in April 2012, a transition happens. And this really was, at this point, a long time coming and probably had de facto already happened, if not officially. Ben Silberman finally becomes the actual CEO of Pinterest in April 2012. Paul leaves the company very amicably, ends up doing a few things. And he is now actually the chairman of a electric, yeah, an eVTOL company, Vertical Takeoff.

• 49:38Ben Gilbert?

  No way!

• 49:39David Rosenthal?

  Flying cars company, yeah, called Joby Aviation.

• 49:42Ben Gilbert?

  Oh, that's awesome.

• 49:43David Rosenthal?

  Yeah, super fun.

• 49:45Ben Gilbert?

  It's an LP show prediction for the, what was it, from our 2019 predictions?

• 49:50David Rosenthal?

  Yeah, eVTOL becomes a thing. That spring, though, the growth just continues on a tear. So the 2012 presidential campaign is in high gear at this point in time. And Obama's running for his second term, and Mitt Romney's running against him. And both, actually, first and Romney, Mitt Romney's wife, and then Michelle Obama, joined Pinterest. And on the campaign trail, start, you know, building pinboards of their life and inspiration. And it is huge. Huge for, huge for the company in May. So we're now one year from when the Series A had happened. The Bessemer and SV Angel Series A. We're now in May of 2012.

• 50:32David Rosenthal?

  Rakuten, the Japanese e-commerce company comes in, leads $100 million investment in Pinterest at a $1.5 billion valuation.

• 50:39Ben Gilbert?

  Man, think about when you're raising money for a company and you're like, you're selling 20 to 30% of it. The leverage that they had to have at that point to say, sure, we'll accept $100 million, but it's going to be on the one and a half.

• 50:52David Rosenthal?

  For 1/15 of the company.

• 50:54Ben Gilbert?

  Yeah, wild.

• 50:56David Rosenthal?

  You know, when Leslie had joined, she had joined in November of 2011. So just a few months before, she was the 10th employee. So there were only like 10 people at the company.

• 51:06Ben Gilbert?

  Is this a good time to talk about the really forward looking investment in general administrative, creating infrastructure? Okay. So listeners, one thing that, if you remember one thing from this episode to take away, it's Pinterest thought so far ahead on a lot of things that most companies say, ah, we'll think about that later. Think finance, think HR, think people ops, think workplace, think culture. It was amazing, starting really at the, you know, very early on from the company that Ben wanted to build and also, you know, in bringing Leslie in an employee 10, really starting to invest ahead of their growth. Rather than, you know, a ship that's burning down and you're trying to patch it while it's on fire.

• 51:51David Rosenthal?

  Well, I feel like this is really where the story of Pinterest and the history of Pinterest diverges from a lot of your typical kind of Silicon Valley hyper growth company. They, they just, they'd done the A, then they'd had this crazy growth. They'd done the B a couple of months later. And like your average Silicon Valley company at this point would have been like, great, let's pour all this money into growth and like, go, go, go. And to Pinterest and Ben's credit, I think in the long term, but this really impacted the trajectory of the company. They said, now is the time to pause and build the foundation to support this hyper growth that we know we're going to go through. So yeah, they brought in Leslie as Site Operations Manager. They got really serious about hiring executives and they start bringing over,

• 52:34David Rosenthal?

  again, remember Divya is head of, was the first HR person at Facebook. They start bringing over some great, great, great people from Facebook to come in and build out all the infrastructure around the company. So a guy named Tim Kendall comes over and Tim had been an early Amazon guy and then had joined Facebook also very early, was head of all monetization within Facebook. He joins Pinterest in March 2012, first running product. He then eventually runs product engineering and all of, builds the whole ads business for the company. He becomes president of the company. They bring over Barry Schnitt, who was running marketing and communications at Facebook. He comes and joins Pinterest. Don Fall, who was running operations at Facebook, comes and does the

• 53:17David Rosenthal?

  same at Pinterest and really a whole suite of, and I remember I have lots of friends who also were at Facebook and moved over to Pinterest at this point in time. And they start really building out a lot of the senior management and functions to scale up the company. And all these people end up staying a really long time. So Tim is now CEO of a company called Moment, but he stayed about six years and built out all of these things at Pinterest. The other thing that they start really investing in and playing to their strengths is women engineers and women on the engineering team. And this becomes a huge asset. I mean, this is well ahead of, you know, all of the, all of the things we'll cover in the Uber episode.

• 53:58Ben Gilbert?

  The philosophy was our, our team across all functions should reflect our user base or, you know, trend much closer to that than most of the industry.

• 54:06David Rosenthal?

  So they have, an early Pinterest engineer named Tracy Chow really becomes an absolute leader in recruiting for the company and diversity and in engineering and in Silicon Valley more broadly. Pinterest has way higher percentage of female engineers than your average Silicon Valley company and is a huge asset to them.

• 54:25Ben Gilbert?

  It's interesting. I was looking at it right before this. It was, it hovers around 25, 26% of their, their engineering team right now.

• 54:31David Rosenthal?

  A fun story too, around all this time and right as Leslie was, was joining the company. So they had been in Palo Alto and their first office there, which you can go look at all our photos and they're great early photos. They end up moving to San Francisco and this was a huge moment at the time. I remember this like, cause Palo Alto was still headquarters of Silicon Valley and where startups were. And there were very few companies that were in the city and Pinterest moving up from Palo Alto to SF was the start of. Really the center of gravity shifting up to San Francisco. And it happened because Tim had just joined, Tim Kendall, and he had a friend who knew about, they were looking for a big office space to support all this, all this hiring they were gonna do.

• 55:12Ben Gilbert?

  Is this the chicken factory?

• 55:13David Rosenthal?

  Yes, he had a friend who knew about an abandoned chicken factory in Soma, in San Francisco, right next to the Caltrain station, like, perfect location. And, uh, and so they jumped on it and the Pinterest now, the core of what's now the Pinterest campus right around the Caltrain station there, started in an abandoned chicken factory.

• 55:34Ben Gilbert?

  There you have it.

• 55:35David Rosenthal?

  There you have it. So through all this time, though, and all these fun stories, there's no revenue. There's no business model. Like, the product is seeing tons of usage and engagement and growth. But they're not making any money, not a dollar of revenue. And, uh,

• 55:51Ben Gilbert?

  And they're even making noise about the fact that they're not. They're getting pressed for this. They're getting, you know, Ben Silverman's getting asked at conferences and his party line is, we want to be really thoughtful about this. We want to have something like measured growth or thoughtful growth. And we want to do monetization when we feel it is right for our, our users, which they toed for years after you would think they would start experimenting with monetization.

• 56:14David Rosenthal?

  Which is true and also fits their personality, but also they have a very traumatic experience with this. Right after the series B, but before Tim Kendall joins to come in and ultimately build out the ad and monetization platform, they were seeing that one, one of the things that started happening on Pinterest from the early days, and especially coming from the blogging community, is people posted pins and the pins were based on, they put affiliate links in them. So when you click through the pins to the link, it would be an affiliate link to whatever the retailer was that was selling the product. And then the bloggers or whoever posted the pin, they'd make a, they'd make a cut on that transaction. And so Pinterest definitely saw that this was going on. They thought, well, this is pretty interesting.

• 56:57David Rosenthal?

  It was probably designed as an experiment from the get-go, but they worked with a company called Skimlinks in early 2012 and they Without warning, they pulled all of the affiliate links, rewrapped them with skim links powered Pinterest affiliate links and Pinterest took over all those affiliate links that were running through the site. It caused a huge uproar and to Pinterest, Ben and Pinterest's credit, they, they pulled the plug on it immediately and they apologized. And actually, later on in 2015, they would kick all affiliate links, period, off the platform and just ban them totally. But it was so powerful and demonstrated the monetization potential and, and Pinterest's place in the commerce flow that for years afterwards, they were still getting

• 57:42David Rosenthal?

  checks from like that week or two that they had affiliate links on. They were still getting affiliate checks and it was like a very powerful way to prove the potential here.

• 57:54Ben Gilbert?

  Yeah.

• 57:55David Rosenthal?

  But then they bring, they bring Tim on and they don't do anything, Ben, as you alluded to, for, for the next two years around monetization after this.

• 58:02Ben Gilbert?

  2014 is when they started doing it?

• 58:05David Rosenthal?

  Yep. It was May, May 2014. They launched promoted pins and by this point in time, they had built all the product and engineering and ad sales functions and organizations to do this, right? They launched promoted pins. The first promoted pin is from Vineyard Vines, the, the East Coast fashion retailer. It goes well. They, they work, just like we talked about with Emily White on the, on the Instagram episode. They work with a few select partners to start. And then in December 2014, they opened it up to everyone and it starts working really well. So much so that in March of 2015, there's so much hype around the company. They were about

• 58:46David Rosenthal?

  to hit 100 million users. They've just launched this advertising platform, promoted pins. It's going well. They raise at an $11 billion valuation going from, they had raised a few times at successively higher valuations from the 1.5 earlier, but this is a massive jump up.

• 59:04Ben Gilbert?

  This is a pretty firm commitment to we're going to be a public company. It's really hard when you raise money at higher than a $10, $10 billion valuation to say, you know, we're on an acquisition track of some sort.

• 59:15David Rosenthal?

  Not just a public company, but like this is the next Facebook. You know, there are all these people that have come over, great people from Facebook. There's all this potential. The ad platform is working super well. User growth is going great. You know, think about this $11 billion valuation, March of 2015. And we'll get into the IPO just now.

• 59:33Ben Gilbert?

  So that's been four years.

• 59:35David Rosenthal?

  Yeah.

• 59:36Ben Gilbert?

  Four years since an $11 billion valuation.

• 59:39David Rosenthal?

  So things do continue to go well. However, user growth at this point, right after this, basically flat lines. And they had just hit 100 million users. But as we've been alluding to, they have started having a huge problem. They've saturated most of their core target market in the US. They do eventually start going internationally back in, starting in 2016, 2017, and that reignites growth. But they just can't get men to use the product. And it's still a big issue to this day.

• 1:00:11Ben Gilbert?

  Yeah, to flash forward to some, some numbers from the S1 listeners. So today in the US, they're up to what 250 million users.

• 1:00:21David Rosenthal?

  Globally.

• 1:00:22Ben Gilbert?

  Globally, but in the US here, it's 82 million. If you go and you look three years ago in Q1 of 2016, that was 65 million users in the US. So when you look at their very nice user growth, albeit not monetization growth internationally, and compared to the United States, international looks like, oh, great, a high growth company. US looks like, eh, okay, it's been pretty flat for a while.

• 1:00:44David Rosenthal?

  When they did that big fundraiser, the vision, like we were saying, was this is going to be the next Facebook. And I think what happens over the next couple of years is they realize, the market realizes, this is going to be a great company, but has a very specific target market that is not every person in the world.

• 1:01:02Ben Gilbert?

  A very specific target market and a very specific time and place for use, rather than all day, every day like Facebook.

• 1:01:09David Rosenthal?

  So that said, though, the monetization engine starts really working. By 2016, two years after they launched it, they did 300 million in revenue in 2016. 2017, that grows over 50%. They do 472 million in revenue. 2018, that grows hugely again. They do 755 million in revenue, which is a serious amount, especially given the, and speaks to the power of, like they saw with the affiliate link test, the power of where they sit in the commerce flow, that even though they have a relatively smaller user base compared to other big social networks, there's incredible monetization potential here.

• 1:01:50Ben Gilbert?

  Yep. If you think in like a Porter's five forces sense, they, they have a tremendous amount of power in this value chain from when the user sees something they're interested in, into where Pinterest can sort of steer their attention and how they can derive monetization from doing that. They go into great detail in the S1, but this isn't just point of purchase. It's awareness, it's reminding people about the product, it's steering them to a purchase, and then it's actually executing the purchase. So it is sort of all across the life cycle of you buying something.

• 1:02:21David Rosenthal?

  On the back of all this, just last month, in March of 2019, two very big things happened from the company, two very big announcements. First, Lesley Kilgore joins the board. Do you remember Lesley Kilgore, Ben?

• 1:02:37Ben Gilbert?

  I do, and I was trying to remember from where, so I went and looked her up on LinkedIn. I thought it was something where I like, may have known her personally or something like that. And then I looked up on LinkedIn and I was like, oh, previous acquired episode.

• 1:02:49David Rosenthal?

  Yes, it's almost like we know her personally. The acquired superhero with the writing shotgun alongside Barry McCarthy from our Netflix two-parter, Lesley Kilgore, who is the CMO at Netflix and-

• 1:03:02Ben Gilbert?

  Now on the board at Netflix.

• 1:03:04David Rosenthal?

  Yeah, yeah, I think that's right. So she just joined the board of Pinterest, which is awesome. Love it when, love it when the heroes and not Carl Icahn come back into these stories. And then, of course, second, on March 22, Pinterest files, publicly files its S1 to go public. And then, over the next week and a half, as we covered on the Lyft IPO episode, the Lyft IPO happens. We'll talk about that in a minute during narratives. But when Pinterest sets the range for its IPO on April 8, this is after the dip in trading from Lyft, they set it at $15 to $17 per share,

• 1:03:44David Rosenthal?

  which equates to about a range of $8.5 to $11 billion valuation below the last private round, which they had done another private round in 2017 that valued the company at $12.3 billion. So this is pricing below.

• 1:03:58Ben Gilbert?

  It is. And listeners, like, they've done a Series D, Series E, F, G, a G1 or something like that. And then they stopped counting the letters. But there's six rounds that are in this sort of $200 million, $300 million range of amount of money that they're, they're raising. They had that rapid acceleration in valuation and then continued to raise sort of hundreds of millions of dollars over and over again, somewhere around that price point for a while.

• 1:04:29David Rosenthal?

  As the user growth, especially domestically, was, was flatlining. So then, on this past Wednesday, April 17, they price the IPO at $19 a share above the range, and then equates to a $12.6 billion market cap, very slightly above the last private valuation. And then, on Thursday, they start trading and they pop up 28%, close at $24.40 a share, or a $16 billion market cap. So a nice, you know, nicely above the last private round, but still not a, not a 10x here.

• 1:05:03Ben Gilbert?

  The share price is now above where every shareholder bought. So, you know, we've only had one day of trading, and I think we can discuss this, but we saw sort of what happened with, with Lyft in the couple of weeks after they, they started trading. But from what we know so far, it looks like the strategy of pricing modestly and being below the last round and then letting the pop sort of happen in the market has worked.

• 1:05:27David Rosenthal?

  Yeah, as opposed to Lyft, which we saw increased its range during the roadshow several times, then priced above the roadshow, then popped big time on the first day, and then, of course, has been down since then. So.

• 1:05:38Ben Gilbert?

  If there's one thing we should probably learn for ourselves on acquired is it's very likely we'll see a pop on the first day, no matter what. And then it's, you know, in the weeks and months that follow that we should really be paying attention.

• 1:05:49David Rosenthal?

  Yeah, yeah. So, you know, I think we and everybody were very excited and still are very excited about Lyft and their IPO. But there was a lot of euphoria that has been tampered over the last several weeks.

• 1:06:02Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 1:06:15David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 1:06:32Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 1:06:47David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 1:07:11Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 1:07:30David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 1:08:00Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at logora.com/acquired and just tell them that Ben and David sent you. So let's go into narratives here. So listeners, what we decided to do in these IPO episodes is walk through what the bulls are saying and what the bears are saying. And that way, as we get into kind of our discussion, we can kind of have a baseline representation of both sides.

• 1:08:41Ben Gilbert?

  On the bull case, I think their growth rate relative to their comps of Twitter and Snap is really encouraging. They're growing much faster than Snap or Twitter. To put some numbers behind that, Pinterest grew its user base 23% last year. Twitter and Snap saw user numbers decline. And so when you think about sort of this tier of ad-based internet social, I think we can leave social out for Pinterest, but social-ish business models.

• 1:09:12David Rosenthal?

  Platforms.

• 1:09:13Ben Gilbert?

  Platforms, yes.

• 1:09:14David Rosenthal?

  Ad-based platforms.

• 1:09:15Ben Gilbert?

  Yes. Very interesting to compare there and very promising. The other thing is, and this is from a great financial summary on Seeking Alpha that we'll put in the show notes, if the growth rate for both revenue and expenses stays the same in 2019 as it did in 2018, Pinterest will be profitable. They'll earn pre-tax $65 million because of the way that the business is monetizing well. And user base continues to grow, especially internationally, more monetization domestically and then growth internationally. There's really going to be a business here and I think you got to really whip out your discounted cash flow models to try and understand is it is it worth 13 billion over some timeframe.

• 1:09:55Ben Gilbert?

  But contrasting this against other IPOs that we're seeing recently where there may not be profitability in sight. Wouldn't shock me if it happened in the next year, 18 months.

• 1:10:04David Rosenthal?

  Yep. Well, Pinterest is a classic case of the historic technology company business model of very high fixed costs that and basically zero variable costs that get leveraged over a large user base. And once that user base passes a point where the revenue from per user is is covering the fixed costs, everything above that is basically pure margin. Now, that is definitely not the case with marketplaces and especially real world marketplaces as we saw with Lyft and we'll talk about soon with Uber. But doesn't mean they're bad businesses, but it's just a very different business structure.

• 1:10:41Ben Gilbert?

  Right. Do you have anything else in in bowls before we go into bears?

• 1:10:47David Rosenthal?

  You know, I think the the the bull case, we alluded to this earlier, but you know, I think Pinterest actually does a really nice job in the S one laying this out. And and Ben has Silverman has always said this about it, that it is, you were joking about not a, is it a social network? Is it not a social network? You know, in the S one, they say Pinterest is the productivity tool for planning your dreams. Dreaming and productivity may seem like polar opposites, but on Pinterest, inspiration enables action and dreams become reality. Visualizing the future helps bring it to life. In this way, Pinterest is unique. Most consumer internet companies are either tools or media. Pinterest is not a pure media channel, nor is it a utility.

• 1:11:28David Rosenthal?

  It's a media rich utility that satisfies both an emotional and functional need, et cetera. We call it discovery. And I think that is perhaps one of the strongest bull cases here is that for product discovery, there is nothing quite like Pinterest in the funnel. You know, for Google, Google serves demand fulfillment better than anything known.

• 1:11:50David Rosenthal?

  To man, you know, Facebook also serves discovery to a certain extent, but I think it's not quite in the same way or as effective at it as Pinterest is. Pinterest is where you go to specifically look for something. At Facebook, you're being shown products as you're looking at other things.

• 1:12:06Ben Gilbert?

  The Facebook newsfeed is like the best ad format of all time, but it it can be a little disruptive.

• 1:12:12David Rosenthal?

  Yeah, it's like ads in a newspaper. Whereas to bring it full circle, Pinterest is like browsing a catalog where you are intending to to get inspiration and then act on that inspiration.

• 1:12:24Ben Gilbert?

  Yep. So the biggest bear case, at least to me, is that they will not be the only ones to own this market for long. We've seen Instagram before try to get into both commerce and a Pinterest style functionality of discovery. Both of them have not gone well. Their recent effort into commerce is much more serious and they've they've launched collections, which is going to look a lot like Pinterest boards. If Instagram can do to Pinterest what it did to Snapchat with stories, they'll be in big trouble. But I think to flip back to Bull real quick, it's a reasonable argument to make that Pinterest actually fulfills

• 1:13:04Ben Gilbert?

  a much different emotional need when you open that app than Instagram does. And Instagram may not be able to offer the same solution to that job to be done of getting inspired and collecting things in its format that Pinterest has been able to do by really solidifying its brand and this is what you go to Pinterest for.

• 1:13:25David Rosenthal?

  Yeah, I mean, totally too. Having gone and watched, you know, all these talks by Ben Silverman over the last few years, to his total credit, you know, he's been, if you were to listen to the narratives leading up to the IPO, he and Pinterest are talking about how Pinterest goal is not to get you to spend more time online, it's to inspire you to do projects offline and take action in the real world. That sounds like a soundbite he came up with to market Pinterest in reaction to everything that's happened with Facebook and Instagram and the rest of the internet over the last, you know, 24 months. That's not true. He's been saying that since 2012. And Pinterest has always been about that. And so, yes, the the potential mitigation to that to Instagram is like Instagram's

• 1:14:10David Rosenthal?

  cultural DNA and Facebook's business model is about the attention suck. And that is not the culture, neither the cultural DNA nor the business model of Pinterest.

• 1:14:19Ben Gilbert?

  The biggest reason to be a bear here isn't that it's not going to be a good business, or they're not going to be able to maintain the size of the business unless of course, you think that Instagram is going to come and eat all their lunch. It's that frankly, it's just the smallest of these online ad platform companies. And when disruptive markets are created, the biggest opportunities tend to get filled first and then the smallest, the smaller ones tend to get filled over time. So, you know, when we saw, let's take marketplace businesses, for example, and the sharing economy, if you look at what people spend in GDP, they spend on their house, they spend on transportation, then they spend on food. And you look at sort of Airbnb, and then you look at Uber and Lyft, and then you look at DoorDash DoorDash and Instacart.

• 1:15:03Ben Gilbert?

  And you know, when you see a new paradigm like online advertising, you know, you see the biggest ones that are taken are intent-based search. And then there's, you know, what we didn't realize was going to be such a big market, but social media advertising. And then there's this new thing that is, you know, I guess, discovery-based, or inspiration-based, or curation-based advertising, which is just smaller. Like, it's just not a bigger thing. I was going to wait to make this point in grading, but since we're already here, I want to make the point that when I first started researching, I was thinking, there's basically two distinct online advertising markets. They're social-based and they're search-based.

• 1:15:45Ben Gilbert?

  But Pinterest is really somewhere between there with the curation and discovery-based. And I think now I'm thinking about it more of as, more as a spectrum. And I think if you think about it as sort of a smiling curve, where there's way more value creation if you go pure search or pure social, there's, there's less in the middle, because frankly, you're not spending as much time there and you're not doing mission critical things there as much as you are during, during search. But, you know, it's still a, a super sticky product, a super useful product, and a product that monetizes well, it's just not one of the other two.

• 1:16:20David Rosenthal?

  Yeah. Well, I think this is building off kind of the, the end of history and facts here where we alluded to this. I'm not sure that it's not that the values, I think there's a ton of value in Pinterest and what they offer to advertisers and this discovery engine works incredibly well and is very unique. The, the problem though is, is just the product itself, the consumer product is a niche product, a very large niche. But, you know, we alluded to it in history and facts. There are 86 million ish MAUs in the US and a very, very, very high percentage of them are women and men, despite years of trying on Pinterest's

• 1:17:05David Rosenthal?

  part, just don't use the product in nearly as high a percentage. They've tried to fix it. I just don't know that it's fixable with what the product is. So thus, it's just a smaller market.

• 1:17:16Ben Gilbert?

  Everyone is aware that they need to search for stuff and a third of those or a quarter of those people are aware that they need to be inspired and, and curate stuff based on what inspires them.

• 1:17:28David Rosenthal?

  Yep. Hard to know if it is specifically men or women, or that's just the way the psychological profile of users of Pinterest tend to fall out. But there is a huge segment or segments of, of the population, at least domestically, that despite years of knowing about Pinterest, trying to use it, just really isn't going to become engaged and use it in the same way as the other segments. So, you know, I mean, I think when you really think about it, maybe this is the way to think about it with, with Pinterest. The market for the core Pinterest product is the same market as lifestyle magazines. And if you think about what is the life, the market for lifestyle magazines, there, it tends to skew heavily towards women, design magazines, home magazines, fashion magazines.

• 1:18:13David Rosenthal?

  There certainly are men that, that read lifestyle magazines, but just at a much smaller degree. And that is the market. That is where there is core fit with the Pinterest product. And I think it's had and probably will continue to have a very hard time expanding outside of that.

• 1:18:27Ben Gilbert?

  All right. So that's our bear case. Let's talk, how did the IPO go? So despite my pure burning hatred for this term, under corn.

• 1:18:39David Rosenthal?

  That's a terrible, terrible term.

• 1:18:41Ben Gilbert?

  They effectively had a down round IPO. And let's talk about sort of-

• 1:18:45David Rosenthal?

  Flat round.

• 1:18:46Ben Gilbert?

  Flat round IPO. Well, yes.

• 1:18:51David Rosenthal?

  Yeah, I think it was technically flat.

• 1:18:52Ben Gilbert?

  Okay.

• 1:18:52David Rosenthal?

  The share price was lower, but because there were new shares issued, the end market cap was higher.

• 1:18:57Ben Gilbert?

  Okay. So this has happened before, and we covered it well on the Square episode, where it was so significant of a down round of the IPO that it actually took, what? A year or more to climb back up to their last private valuation price? And so, you know, you saw people who had stock options at a strike price before the IPO, where then they actually had to wait years and years for that to recover from being underwater. So they actually had a compensation issue across the board at the company. That's not at all the case with Pinterest. Basically, you know, everyone is in the clear now. Now, of course, if you look and see that people bought shares at an $11 billion valuation

• 1:19:41Ben Gilbert?

  four years ago, and it's at 13 now, you know, that's not a phenomenal return like it is for any of these early investors, but I'm not sure that they could have done anything better. And I think it was probably smart of them to not try to make this an up round for vanity purposes.

• 1:19:59David Rosenthal?

  They obviously saw what happened with the aftermath of the Lyft IPO. And they swung the peddle them hard the other way in being conservative here.

• 1:20:08Ben Gilbert?

  It's interesting to know that we have another data point here of the public markets valuing companies within range of where the private markets have been. And I think like there was a lot of fear coming into this wave of IPOs that those two things were going to be dramatically, dramatically different. It doesn't feel like they are.

• 1:20:26David Rosenthal?

  No, feels like they were, they've been, at the very least, priced appropriately in the private markets, maybe appropriately a couple of years ahead of the curve, but not completely mispriced.

• 1:20:37Ben Gilbert?

  So I do think that's actually a great segue into what would have happened otherwise in talking about, so why did they go public? Could they have not gone public? Could they have done a direct listing? One thing that I found really interesting was that they actually have $600 million of cash in the bank and they've raised about a billion and a half over time. Their net operating loss right now after tax in 2017 was 126 million and last year was 63 million. So you know they're trending toward profitability. They actually probably didn't need to raise any money in this IPO.

• 1:21:13David Rosenthal?

  Yeah, this is really puzzling to me and we were talking about this before the show. So by those numbers, even if they maintain the same burn rate, which they won't because they're trending to profitability, assuming revenue keeps growing, they have years of runway still in the bank. Why did they just raise all this money and dilute themselves? This seems like a clear case for me for doing a DPO.

• 1:21:35Ben Gilbert?

  Yeah, David, it does feel like they totally could have done a direct offering here. They've got cash in the bank. They're gonna get profitable. I do wonder, are they gearing up-

• 1:21:47David Rosenthal?

  They have Leslie Kilgore on their board, you know, access to Barry McCarthy here.

• 1:21:50Ben Gilbert?

  And, you know, that went well enough that we're hearing rumors Slack is going to do a direct listing here in the near future. And so there could be two things going on. One is they feel that their ability to raise cash right now is on really favorable terms. So it's great to get that cash into the company for an unknown purpose. The other is maybe they're gearing up for some, some serious spend and they're gonna branch out into something that requires a lot of new cash, the same way that Stitch Fix used a lot of their cash from their IPO to actually start retail brands that are first party brands. So, you know, I'm not sure. This international expansion is interesting because it's growing really fast from a user perspective because they actually started caring about that in 2016, whereas they were

• 1:22:34Ben Gilbert?

  very domestically focused until then. But they're really not monetizing at any significance internationally. So it could be to spend aggressively on bringing advertisers into their international funnel. But it's honestly a little puzzling.

• 1:22:50David Rosenthal?

  I agree as well. This all would have had to be in the works long before the Lyft IPO. But, you know, the only other reason I can think of is just to be conservative as well. Make sure things go well because DPOs are still relatively unproven. But again, if you don't need the cash, like it, which to be clear, Lyft and Uber need the cash. And we'll talk about that on the Uber episode. But if you don't need the cash and companies have raised so much in the private markets, DPO really seems like the way to go. There's no lockup period. There's you're not diluting yourself. You're not selling more to the company. Has a lot of advantages. You can tell I'm of the Barry McCarthy school of thought here.

• 1:23:30Ben Gilbert?

  Yeah, well, you know, we've seen one DPO and here we are now asking like, we're looking at every deal going, why not, why not DPO? Why not DPO? I mean, look, they did the standard thing and they did it pretty well. And I think it's not like just because Spotify did it. That's a thing that everyone feels like is a, a one of two options they can pursue now.

• 1:23:51David Rosenthal?

  Yeah, yet, yet.

• 1:23:53Ben Gilbert?

  Yet.

• 1:23:53David Rosenthal?

  We'll see on Slack. Okay, so we move to our newly retitled next section.

• 1:23:58Ben Gilbert?

  Yes, so David, tell us about this retitling.

• 1:24:01David Rosenthal?

  Yeah, so, okay, this is ordinarily where we would do tech themes. But Ben and I were texting the other day and we love tech themes. It's one of our favorite parts of the show, but we realized that like, it's actually something more than that and tech themes kind of sells it short. So we're going to rename this section to playbook. And what's actually really interesting here is not just what themes in tech this particular company's story reflects, but what are like the actionable things that we can learn from this story that we can all put in our playbooks, you know, as operators, as investors? And we think this will be really cool and a good way in the spirit of Pinterest to catalog all the things we're learning from this show over time. Heyo.

• 1:24:46David Rosenthal?

  So we're gonna, this is gonna be our first experiment with playbook.

• 1:24:49Ben Gilbert?

  Yep. All right. So we focused on this one, but I just want to highlight it. What makes Pinterest different is a significant focus on building out infrastructure in the company ahead of growth in wild contrast to other unicorn cousins.

• 1:25:04David Rosenthal?

  Yep. I worry a little bit that people will take the wrong lesson from the surface level facts here, and this is one of the reasons we do this show. You look at the way Pinterest has carried itself over the last 10 years, and then you look at the way, say Uber or Lyft have carried themselves or Airbnb too. And like, there was definite craziness going on within those other companies and their markets are so much bigger and they will probably end up being bigger companies in the long run. Pinterest, the market is smaller. It's extremely well managed and will be a smaller company in the long run, but I feel like much better managed. The lesson is not don't manage your company well. The lesson is target big markets, one, and two, manage your company well such that you

• 1:25:48David Rosenthal?

  have the highest probability of succeeding within them.

• 1:25:51Ben Gilbert?

  Yep. It's a, it's a, it's a great elaboration there. Another point that I wanted to, I think this is really more a point of discussion. And David, we talked on the LP show about the downsides of being a tools business rather than a platform or a network or a marketplace. Pinterest is kind of a tools business in that it's much more about me and maybe a handful of other people I'm sharing a board with. And it's much less about communicating with other people, seeing what other people are up to. So it has, I think, less significant network effects. How, how do you juxtapose it sort of being a tools business, but competing for the very

• 1:26:36Ben Gilbert?

  same advertisers that these like strong, strong network effect businesses are competing for?

• 1:26:41David Rosenthal?

  Yes. Great. Okay. This is, this is one of my entries in the playbook here. You could debate on the network effects aspect and certainly social network effects in the way that Facebook, Instagram, you know, et cetera, have them. Pinterest does not, but I think they do have a very strong flywheel. We should do a whole LP episode where we've talked about this, where we just nerd out on like what we think the differences are between network effects and flywheels and whatnot. But the flywheel is Users add content and pins to the site. The more pins there are in the site, the more things there are that users, new users and existing users could get inspired by and then repin. And so there's a super strong flywheel where as people come on and they add content,

• 1:27:26David Rosenthal?

  that content drives more engagement from more users who add more content, which drives more users within the segment of people who find this whole thing attractive.

• 1:27:35Ben Gilbert?

  Even if it's not a super strong network effect, you can still have a super strong flywheel.

• 1:27:40David Rosenthal?

  Yeah, like, I don't care. I mean, well, maybe we should have an acquired pinboard. So in that case, I would care that you Ben are on the service. But if we don't have a reason to collaborate, I don't care that like you or like any of my other friends are specifically on the service. But I care that a lot of other people are because then they're adding content, they care about the content.

• 1:27:57Ben Gilbert?

  Right, right. And like, I don't mean to say there's not more network effects. I mean, you could imagine a way worse version of Pinterest, which is you can't discover anything that anybody else uploaded, like there's not a business there.

• 1:28:07David Rosenthal?

  Yeah.

• 1:28:08Ben Gilbert?

  Yeah, so it's a tool, but the backend of that personal tool is powered by the incredible amount of data and work that everyone else on the platform has done.

• 1:28:18David Rosenthal?

  What I think a lesson there is like, an interesting one of, to maybe modify the, from our LP show, you know, the lesson wasn't quite, don't build tools, but it was like, tools are limited. But if you can figure out how to make a tool that gets better for users as more people are on the service, it's sort of like Jake was talking about on, with his Coaching Networks thesis at Emergence, that can create a powerful flywheel.

• 1:28:40Ben Gilbert?

  Yep.

• 1:28:41David Rosenthal?

  Do you have more?

• 1:28:42Ben Gilbert?

  Nope, that's it.

• 1:28:43David Rosenthal?

  Cool. I had a couple real quick. One, I was just struck in the history and facts, like, and we talked about it, 2008 and the recession and the Lehman Brothers collapse, like, these massive events that happen in the economy and socially can have like such opportunity, you know, even in like recessions, like. Airbnb, and again, we've talked about this before and we'll cover it in depth on when we do an episode on them someday. Like what enabled Airbnb was the recession and specifically the housing crisis. And same in a much less direct way, you know, led to the history that led to Pinterest and led to the history that led to Lyft. Whenever these big events happen,

• 1:29:25David Rosenthal?

  it's always a good idea to just pick your head up and say, hmm, okay, what is this gonna, what retilling of the soil is this going to enable now? Both as an investor and thinking about starting companies. The other thing I wanted to, that I think this, this story illustrates is just the power sometimes of just not stopping, you know, like Ben's story and Tote and Cold Brew Labs and Pinterest and like doing the business plan competition. You know, it would have been so easy to just give it up, you know? And not stopping doesn't mean banging your head against a wall with something that isn't working. It means not giving up on the idea of like building something, period. Like pivot what you're doing into something that's going to work and listen to users and find product market fit. But

• 1:30:08David Rosenthal?

  just calling game over means literally game over.

• 1:30:11Ben Gilbert?

  Yeah, it's funny. It reminds me of a great quote. So Bo Lu, the CEO of Future Advisor, spoke at one of the first startup weekends that I organized like a decade ago or something. And I remember him saying, "The way to succeed is to just never admit failure." Like as long as you don't shut down, you haven't lost. And that's not fully true. Like that's a good way that you can have a, you know, small business that doesn't grow at all and just keep going. But like, I think what you're saying is if what you're looking to do is build something big and impactful, as long as you don't give up and build in the direction of what, what could catch, it's unlikely that you will do that for your entire life

• 1:30:53Ben Gilbert?

  and have something that never works. So just keep trying. And of course-

• 1:30:58David Rosenthal?

  Well, it's like, I think it's that there's two versions of giving up or failing. One version of it is what we are doing is not working. We have failed at that. We are going to give up doing that. That's great. Like when that's clearly the case, like you should do that and do that as soon as possible. But don't do the other version of giving up, which is saying, "And thus we are going to..." Call game over and shut down the company and like go get jobs somewhere, you know, as long as you still have the desire and the resources to keep going like,

• 1:31:31Ben Gilbert?

  Yep.

• 1:31:32David Rosenthal?

  Keep going.

• 1:31:33Ben Gilbert?

  Yep. And there's tremendous value in keeping a team together. You know, this is something I think that we realize at Pioneer Square Labs, the 25 of us that all sort of like systematically build companies over and over and over again is after you fail on a few things together, or maybe even succeed on a few things together, you know, in your small group, who's good at what? You have norms and communication patterns and operations around how you work together. And you get way more efficient at building together. So if something didn't work, like keeping the team together and keeping your processes intact and keeping your knowledge of what each other's competencies are is hugely valuable. And so I think for, for anyone considering a pivot, I mean, it's, it's almost like,

• 1:32:18Ben Gilbert?

  yeah, you bring some baggage when you pivot, but you bring far more value from being a team that knows how to work together.

• 1:32:25David Rosenthal?

  Yeah, it's almost like the playbook is if you think you need to pivot, you, you probably should have pivoted, you know, a month ago. But if you're thinking about shutting down your company and you still have a team you like and, and, you know, money in the bank or whatever resources you need to keep going, you should definitely not shut down your company.

• 1:32:46Ben Gilbert?

  Yep. All right. Grading. So the way that we grade these IPOs is rather than issuing A grade, we discuss what a few years from now, an A plus would look like versus, you know, say a C, D, or an F. David, I'll go first. I think an A plus looks like cracking international monetization. I think this company can continue to grow to become a 20, 30 billion dollar market cap company over time if they can figure out how to continue growth internationally and how to monetize internationally like they, they do domestically. I don't think it's a crazy playbook to do that, but I don't think there's a bigger success path than that.

• 1:33:29David Rosenthal?

  Yeah, it's funny. I was gonna say like the A plus to me is

• 1:33:33Ben Gilbert?

  Yeah, I suppose that's an A.

• 1:33:33David Rosenthal?

  They take this, they, yeah, I think that's an A. That's like an A minus to A. The A plus is they take all this money they just raised in the IPO and they have some vision that they are keeping secret for now and Ben isn't telling anyone yet about how they're gonna expand the market here. And they use this, these resources, whether through acquisition or, or investment internally to do that. That would be like, yes, that takes them to, you know, multi hundred billion dollar market cap company. I think it's really hard. Like, I have no idea what that vision would be. So, um, so I think that's hard. But yeah, so I, otherwise, I think the scenario you described is like, super solid, A minus to A.

• 1:34:12Ben Gilbert?

  You know, there's a possibility that they won't be able to monetize internationally like they, they can with the US. Um, or even that people start churning off of them because Instagram manages to launch something that, that sort of leverages their really close relationship with users to get them to start using a Pinterest like experience. Um, and you know, Facebook is a total shark at figuring out whether they have something there or not, uh, and, and rolling it out broadly. So my F there would be if, one, they can't monetize internationally, or two, uh, they get their legs cut out by Facebook.

• 1:34:44David Rosenthal?

  You know, one thing that we didn't, usually we find these things when we do our research. Um, but for whatever reason, we didn't this time, is, do you think Facebook ever tried to buy Pinterest? Or anybody else tried to buy Pinterest?

• 1:34:57Ben Gilbert?

  So Facebook did not, I, not that, not that I found, tried to buy Pinterest. There actually was a story very early on in New York.

• 1:35:05David Rosenthal?

  Oh, yeah, yeah.

• 1:35:06Ben Gilbert?

  Uh, where, yeah. Ben tried to encourage a magazine publisher to, to buy them, but the publisher declined to be the founders.

• 1:35:13David Rosenthal?

  This is back when they were totes, I think, right?

• 1:35:14Ben Gilbert?

  Yeah, it was like 2010 or something.

• 1:35:15David Rosenthal?

  Yeah, yeah, yeah. So that doesn't count. But, um, yeah, I don't know if that's because nobody ever did try to buy Pinterest, or their valuation grew so quickly, or just like, the company's so quiet and introverted that the stories never got told. But this is a rarity in that there aren't stories like this out there.

• 1:35:32Ben Gilbert?

  It's kind of interesting to think about, could anyone buy them? Maybe Facebook?

• 1:35:36David Rosenthal?

  Yeah, I mean, their valuation is, you know, they're a $16 billion market cap company. Of course, somebody could buy them. Facebook could buy them. Amazon could buy them.

• 1:35:45Ben Gilbert?

  Yeah, or I guess where would it make sense? Yeah.

• 1:35:47David Rosenthal?

  And also like culturally, you know, I think Pinterest would be very attractive to Facebook right now for lots of reasons, but could it work culturally within the company? I think that'd be hard.

• 1:35:59Ben Gilbert?

  Yeah. Well, I think Facebook needs to do something to change both public perception and retain employees. So it wouldn't strike me to see Facebook do something dramatic soon.

• 1:36:10David Rosenthal?

  And so the C minus D case, I think, is, is that they have fully saturated monetization in the US. They can't monetize internationally. And this is a break even 700 million to a billion dollar revenue business going forward.

• 1:36:30Ben Gilbert?

  Yeah. And frankly, like they just raised a bunch of cash. Like the way that we grade these acquisitions is when you acquire this asset, are you able to do something interesting with it? You know, with this IPO, it's like they've just raised all this money. What are they going to do with it? So I think, you know, I'd like to see them take a shot on goal with that.

• 1:36:49David Rosenthal?

  Seed IPOs. You gotta spend the money. All right. Should we move on to carve outs?

• 1:36:55Ben Gilbert?

  Yeah, let's do it. Mine is, I've done this podcast before, but there was just an exceptional episode, Invest Like the Best. It's a great podcast.

• 1:37:04David Rosenthal?

  So good.

• 1:37:05Ben Gilbert?

  Really good interview show. Recently I had an episode with Eugene Way. And Eugene wrote this great blog post, Invisible Assumtes, which shouldn't even call it. It's an essay. It's a half novel. And Eugene is super brilliant. And there's five or six very interesting takeaways from this Invest Like the Best episode. My favorite of them is applying blockchain theory to social networks. So if you think about what makes a blockchain work, there is proof of work, and then there is a reward for doing that work. And the reward is sort of synonymously the proof of work and a has an intrinsic value thing. And that proper

• 1:37:46Ben Gilbert?

  Gates out over a network and I had never thought before to use that paradigm to apply it to a social network. And so when you do something like post on Instagram, you're doing a proof of work and you're putting up that picture. That picture has, you know, value and you get likes and follows in exchange for doing that work. And the people who are the most successful on that platform are the people who are able to work within the constraints of that social media to basically do the most interesting thing within those constraints. And a successful social network happens when you are able to create a format that where

• 1:38:25Ben Gilbert?

  that proof of work is extremely variable. So the breadth of skill is you can do really crappy things with it and you can also do amazing, wonderful things with it. And also that the perception of the value of the proof of work is variable. And so it's not everybody agrees that that is the best picture. And everybody can sort of have a different interpretation of what high quality is. And a new social network can emerge when there is a toolset to do that proof of work, to make that profile, to do that image, whatever it is, that enables, and of course, I am, Eugene says it much more eloquently.

• 1:39:06David Rosenthal?

  I'm only even trying to follow along because of my respect for you and Eugene. Otherwise, you would have lost me at blockchain.

• 1:39:13Ben Gilbert?

  Sorry. Well, suffice to say, it's interesting fodder if you're thinking about how do new social paradigms emerge and what creates explosive growth, social network and what doesn't. And I think the comparison to blockchain is a

• 1:39:29David Rosenthal?

  A metaphor.

• 1:39:30Ben Gilbert?

  It's an interesting framework. Yeah.

• 1:39:34David Rosenthal?

  So great. So great. Patrick does an awesome job with the Invest Like the Best podcast. I love it. If you're an acquired listener who doesn't listen to that yet, you definitely are going to love it, too. So add it to your playlist. Okay, mine is, well, first, I want to underscore Ben, your carve out on the lift IPO episode, Bill Gurley's talk about running down a dream and finding and succeeding in a career you love. I did run not walk to go watch it, and it is so good. I sent it to so many friends, like, so great. I just have so much respect for Bill and every dimension, but so cool of him to like, do this talk, go do it at his alma mater at UT. It's really inspiring, no matter where you are in your career. So I would definitely want to underscore,

• 1:40:17David Rosenthal?

  if you haven't watched that yet, go watch it. But my my carve up for the week is similar. Somebody who has found a career that he loves and is succeeding at it is Alex Rodriguez, A-Rod. A-Rod's interviews on ESPN and on YouTube are so good. Like, I just love watching them. Whatever you think about A-Rod, the baseball player, like, A-Rod, the post-career, you know, video and television journalist and interviewer is amazing. Like, he's so smart. He's so dedicated to, was so dedicated to his craft of playing baseball and hitting, and now to being an interviewer, and just like, watching him nerd out with with other

• 1:40:58David Rosenthal?

  people who are also dedicated to their craft is is great. So every interview is great. One of my favorites is his interview with Astros centerfielder George Springer. So we'll link to that. He also has a great one with Giancarlo Stanton at the Yankees. And but you can't go wrong. Watch, search A-Rod on YouTube. You'll you'll you'll enjoy yourself.

• 1:41:20Ben Gilbert?

  Thanks, David.

• 1:41:22David Rosenthal?

  All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 1:41:28Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:41:39David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:41:59Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:42:11David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:42:22Ben Gilbert?

  Well, listeners, if you aren't subscribed and you like what you hear, you should subscribe. We'll be gloriously covering all of the big upcoming IPOs. And if you want to go deeper on what it's like to build a startup, get interviews with expert operators and VCs, and explore some of my personal beliefs, and I know David's as well, you should become a limited partner. You can go to glow.fm/acquired. Seriously, I promise you'll be overjoyed with how buttery smooth it is to get more acquired right here in your favorite podcast player. And as of today, everyone starts with a free seven-day trial. And with that, we will see you next time.

• 1:42:58David Rosenthal?

  Yeah.