20VC: Kalshi's $1BN Raise, the Polymarket Feud, and the Battle to Replace Traditional Media

Tarek Mansour is the Co-Founder and CEO @ Kalshi, the leader in the world of prediction markets. Just last week, they announced their $1BN raise at an $11BN valuation. In total, they have raised $1.59BN from some of the best, including Sequoia, a16z, General Catalyst, IVP, Meritech, and more. They also last week announced exclusive partnerships with CNN and CNBC, marking their move into mainstream media and news. AGENDA: 03:28 Why Did Kalshi Need to Raise $1BN 10:35 Why is Kalshi vs Polymarket Such a Fierce Rivalry? 20:44 The Future of Prediction Markets 25:09 Why Does Kalshi Partner with CNN When They Could Replace Them? 26:27 Why Did Tarek Fight For the Rights of his Early Investors So Much? 27:25 What Makes Alfred Lin The Best? 29:19 Does Having Sequoia as an Investor Change the Game? 36:58 Are Teenage Founders Today Emotionally Ready to Lead Companies 38:30 Quick Fire Round: Celebrity Investors, Relationships with Parents

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

• 0:00Speaker 00

  I think this is kind of what happened with Kalshi in the election was a bit of a chat GPT moment for our industry. An industry truly becomes an industry when there's a rivalry. Without polymarket, we wouldn't have pushed our marketing and pushed our product as hard.

• 0:13Harry Stebbings?

  Did you ever cross paths with SBF? And what did you learn from observing FTX's implosion? This is 20VC with me, Harry Stebbings, and Kalshi is one of the fastest growing companies on the planet right now. In the last week, they announced their $1 billion raise at an $11 billion valuation. They announced partnerships with CNN and CNBC. And today, their founder Tarek joins me for his only interview following these announcements to give me the exclusive lowdown. But before we dive into the show today, are you drowning in AI tools? Chat GPT for writing, Notion for docs, Gmail for email, Slack for comms. And you're constantly copy pasting between them all, losing context and losing time.

• 0:55Harry Stebbings?

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• 1:40Harry Stebbings?

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• 3:01Harry Stebbings?

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• 3:45Harry Stebbings?

  You get daily accountability, data-driven insights from DEXA scans and blood work and a highly certified team backing you. If you're serious about performing at your best, physically and mentally, go to dailybodycoach.com/20vc. That's dailybodycoach.com/20vc and take the next step. You have now arrived at your destination. Tarek, dude, it is so good to have you on the show. I mean, holy cow, what a rampage Cowshy's been on, my friend. Thank you so much for coming back.

• 4:17Speaker 00

  Thanks for having me, super excited.

• 4:19Harry Stebbings?

  Dude, I gotta start on the main thing, a billion dollars. The first thing I have to ask, why does Cowshy need a billion dollars?

• 4:26Speaker 00

  That's a good question. What we've realized in the last, I would say, six to nine months, given the acceleration of what we've seen, is the opportunity ahead of us is maybe even bigger than we had all possibly imagined. There's a few symptoms of that. So one, Cowshy this year is, at this scale at least, I think the fastest growing company in America outside of AI. I think Anthropic is going faster, and I'm not sure about Mirko and Courser, but we're growing at that pace, at that rate. And number two, what we're seeing, which is even more important, the qualitative thing that we're seeing is there's a real and rare shift in consumer behavior. People are turning from passive watchers of events or news or sports or other things that they engage with in real life to active participants.

• 5:09Speaker 00

  That natural behavior of wanting to predict the future or debating about something is turning into activity on Cowshy. That is rare. When you see this shift in consumer behavior, I mean, you've seen it in Airbnb with the hosts and Uber with riders. When you're seeing a new class of people, in this case, prediction market traders, becoming a thing, that's indicative of a very, very massive opportunity ahead of us. And when you have a massive opportunity ahead of you, you wanna go big, you wanna bet big. And so we're really scaling up for that opportunity here.

• 5:36Harry Stebbings?

  What does a billion dollars get for you that you couldn't do without?

• 5:40Speaker 00

  I think, one, so, okay, we are at a point right now where, so we're growing incredibly fast. We are also profitable right now. And so it's a good question. I think the next phase is how do we build a global brand? How do we build a brand that people know, they talk about, they associate with, and how do we put the story of the company and the story of the brand out there? And so there's a lot of marketing that's coming, obviously scaling the team. So we're still 100 people. And number two is we're a financial market, we're a financial company. So as the volumes increase, as liquidity increases, you know, as a regulated, like we're federally regulated financial exchange, it's a little bit like a bank or some of the kind of regulated clearinghouse you hear about. You have reserve requirements and added capital on the balance sheet. Think of it a little bit as a safety cushion.

• 6:24Speaker 00

  It enables us to do things faster, like more capital enables you to do things faster in financial services. And that's usually a good thing.

• 6:30Harry Stebbings?

  Dude, do you agree with the concept of king making? That large, large amounts of money can anoint a winner in a category? Do you believe that that is a thing?

• 6:40Speaker 00

  At least for the college strategy, that's not how we think about it. Maybe I'll lean a little bit more on the other side, which is like a better product will trump any day. And we've seen this a bit like with DoorDash and Uber Eats, right? Like Uber Eats had, I mean, infinite capital to compared to DoorDash. But Tony Bell's a better product and 21, right? And so I don't feel too dogmatic, but maybe I'm a slight no on this one. What do you think?

• 7:00Harry Stebbings?

  I unwaveringly do. I think we're seeing it today where you're seeing VCs essentially choose a category and then just plow money in, knowing that if you build the right infrastructure, it massively increases your likelihood of success. If you have the right founders who are good resource allocators.

• 7:18Speaker 00

  Maybe with the if at the end, right? And but the problem is the if is a bit conditional, right? Like oftentimes a lot of money can create like inefficiency and like companies start making a bunch of unforced errors when a lot of money comes in. But if that if is true, I think, yeah, capital tends to be correlated with success. If the company is an A plus execution company.

• 7:34Harry Stebbings?

  Dude, how much of Kalshi's activity is sports betting? And how do you respond to people who say it's just a sports betting platform?

• 7:43Speaker 00

  It's pretty similar to what happened last year, actually. So last year, it was, you know, the question I was receiving is how much of the activity is elections? Obviously a lot, right? Like, how much of the attention right now is on the election? Like in terms of like what people were talking about in October 2024? And if you think about it, it's like, well, out of 10 tweets I see on Twitter, 9.5 tweets were about the election, right? Like, so maybe that will correlate with the volume on Kalshi and it did, right? It was it was exactly that. And you're seeing the same thing happen with sports, but like per unit of time, it really is about what is most on top of people's minds. So yes, Sunday, NFL Sunday is massive in America and that's on top of people's minds. But when there's a Fed decision, that's on top of people's minds and that's where the trading volume is. When there's a M'dani election, that's when the trading volume is.

• 8:27Speaker 00

  So the volumes will basically ebb and flow with whatever is in the news, whatever is trending on X, whatever is top of people's minds. And I think it's a matter of time till basically like, you know, we're seeing incredibly strong evidence or traction in the culture markets, for example. What's happening with Taylor Swift, movies and how successful they're going to be, anything around culture like that, that is massive unaddressed TAM right now. And it's a matter of time until like, you know, we scale the number of markets, we scale the liquidity, and I think those one day will be very big. So sports is very big right now, but I don't think it's kind of like, I think it's a moment in time.

• 8:58Harry Stebbings?

  It's funny, I spoke to pretty much every one of your investors, by the way, before this show, including Colin at Sandwich. He told me about investing back in 2019 because it was the biggest TAM he'd ever seen in potential. I thought that was an interesting and bold statement, which I completely agree with you when you look at the untapped element of movies to culture and everything in between. With that, you have people realize that untapped TAM and you see Robinhood come in with alternate products. How do you think about Robinhood's entry? I know Vlad pretty well. I'm always very impressed by their product suite. How do you internally think about that?

• 9:30Speaker 00

  Maybe let me answer that question generally and then specifically. So in 2024, we won the fight against the government. We won that, that we sued the government and then we won that fight in October 7, 2024. And I think that has accelerated prediction markets. That has really spearheaded them into the mainstream and this has continued into this year. And when you see this type of, like, I would say, success, I think this is kind of what happened with caution in the election is a bit of a chat GPT moment for our industry. Well, what happened with chat GPT and OpenAI is like everybody flocked, right? Like, you know, everyone was like, well, there's, there's a gold mine here. We're gonna go after it. That's happening in prediction market and I always think of it as like, I think there's two markets. There's either small markets that not a lot of people will care about or massive markets that a lot of people will care about as long as you live in a free, open market, in a free, open society.

• 10:15Speaker 00

  And obviously I'm running a free market, so I have to believe in competition, right? And so it's great, like this competition you're seeing from CME, from, you know, obviously DraftKings, FanDuel, from some of the offshore players, some of the startups, some of brokers is a sign that I think the opportunity had is massive. It's a very big opportunity. On specifically Robinhood, I mean, incredible company, amazing execution. I think Vlad has been able to sort of move into new products pretty successfully and, you know, they've been incredible partner of ours on the prediction market front. So I think them kind of pushing for more innovation in this space, I think is a very positive thing. You know, I think it's gonna make all of us get better and we're very excited about it.

• 10:51Harry Stebbings?

  Totally get you. I share that on Vlad. Just such a good dude. It's so funny dude. I had him on the show when the market cap was in the dumps. He was in the dumps and I had him on the show when the market cap was riding high and this man was like lighter than air. He was so happy. He was so positive. I was like, whoever says that your happiness is not correlated to market cap light. Why is the competition so intense with Polly Market? You know, we're great friends with Alex at Deal. The Deal, Rippling and you and Polly Market are similar in ferocity. Theirs probably even trumps you. But why is yours so intense?

• 11:26Speaker 00

  Here's the way I put it. I mean, there's a little bit of spectacle around these things. You know how like, when I got asked this question, I like, I think a little bit about boxing. You know, I always wonder like, do these boxers actually hate each other or like, are they doing it for the show, right? Like, do they go back and, you know, after they punch each other kind of in the weighing event or whatever? Do they go back, you know, in the back room and they sort of like, you know, hang with each other and, you know, I don't know, like, you know, dab each other and move on? I always wondered that and probably there's some truth to that. And look, I think people like rivalries and like they, you know, they, they scale them and amplify them and grow them. And it's more fun to watch a Calci Polly Market than to not watch a Calci Polly Market.

• 12:06Harry Stebbings?

  I get you, but like Rippling hate Deal and Deal hate Rippling. They do.

• 12:11Speaker 00

  I don't know if there's that. I mean, look, we've, we've had our differences and we've had real conflicts. There's no question about that. And I think both companies have made mistakes in the past. Maybe fortunately neither of us have escalated to that level, to the Rippling Deal level. But like, you know, we made a mistake last year with the, you know, the, both of us have been sort of playing games against each other for years now because we're competitors. And there was one last year that sort of, you know, they promoted, uh, and there's like a whole backstory to it. That was a mistake made clear to the team. Like, don't ever do this again.

• 12:42Harry Stebbings?

  Can I just, what do you learn from, you know, I specifically, for example, when I left my old fund, you know, I was very quick in leaving and I really left no time for transition. I was quite thoughtless in my old partner and I really regret that. I'm like, I should have given more time, been more thoughtful and caring. And with the benefit of hindsight, I would have done it differently. Benefits of age. When you reflect on the mistake that you mentioned there, is there a takeaway for you?

• 13:08Speaker 00

  The way I think of it is like, I think what I'm really, what I'm learning over time is that an industry truly becomes an industry when there's a rivalry. Because that rivalry will push you, will push you beyond the limits of what you thought you could get to. That's just how these rivalries work, like Messi, Ronaldo, right? They're both considered potentially the greatest of all time. Well, I think Messi is the greatest of all time, but this is a debate for another day, but like, but, and they live in the same era. And I think that's, there's correlation in that. I don't, or causation. I don't think this is just sort of like, they, they just happened to be born in the same time. You know, Tom Brady and Manning, Tom Brady kind of reflected on that back in the day. He's like, you know, we were like the most ferocious on the field and we fought each other. But then over time we got, in some ways he became grateful for that because he realized that without Manning

• 13:51Speaker 00

  being in there and vice versa, he would have never achieved what he achieved. And I think that's happening in prediction markets. Without poly market, we wouldn't have pushed our marketing and pushed our product as hard. And without us, they wouldn't have pushed their marketing and their product. And maybe also without us, the kind of the regulatory piece that we've unlocked as hard. And so that sort of infighting, I think, is going to push both of us to scale this industry and reach heights that we honestly wouldn't have been able to otherwise, which long-term is actually net positive for the customer. Like the net winner of all of this, the people that are happiest here is these early evangelists in prediction markets that now have seen their market grow from this sort of weird corner of the internet to like a massive industry, right? Like literally starting to look like a stock market.

• 14:34Speaker 00

  Do you respect Shane and Polly Market more than any other? I don't like relatives like that, you know what I mean? Like, I, I think, it depends on what you mean, right? There's like, you know, a lot of really great companies in the space. Especially like bigger companies, legacy companies. I respect CME a lot, even though they're like an incumbent legacy. But the, as a business, it's, it's really an incredible business what they've built. And the modes that they have, I think, you know, obviously some of the traditional players like Draskin and FanDuel, they have really effective, I would say like, marketing machines. They're like some of the best spenders of dollars on the planet. So maybe in an absolute terms, I mean, look, I think they, like Polly has done an incredible job at marketing. They build a good brand and we learn from that. And I think, you know, Kashi has gotten really good this year on that front.

• 15:17Speaker 00

  What do you not do in brand today that you would like to do? It's a great question. So, look, I mean, we, we, we announced, for example, the, the, so this, this week, we've announced, well, we found the first and then the second, large-scale news network partnership with the prediction market. So we announced CNN exclusive partnership and then CNBC, the same thing, the next day. Those have always been dream partnerships of ours and there's more to come. Because this idea of just like embedding prediction markets in the news. You know, there's like so much symbiosis here, which is like, the news can get better from prediction markets. Because prediction markets are like this sort of, think of it as like the news covers what's happening now. Prediction markets can extend the news to cover what's about to happen next. Which is kind of the next, sort of next iteration of news.

• 16:01Speaker 00

  And then prediction markets can benefit from the, the news because you can create that habit, which is like, I read a market, I read something about whether the Fed is gonna raise interest or the economy. I can maybe directly trade on it and put a position. And, and so they really gel really well together. There's obviously sports leagues, I think some, some authority figures and affiliates. But I actually think the bigger thing for us, that I think we, we're learning over time that we have to do, that we're doing, starting to do a better job at, is you've just got to tell the story of the company. And we haven't done as much of that because, you know, what, what I realize is the story actually resonates. And it resonates with our customers, it resonates with partners, but it also resonates with sort of like aspiring entrepreneurs. They're starting this kind of, whatever they're starting. Because when you look back at the story of Kashi, like, you know, the one thing I always tell people like, that I think is the thing that spiked for us.

• 16:44Speaker 00

  And and look, I think we're competent. I think we're smart. I think we have great strategy. We work hard, but I think it's resilience. I think we were so deeply committed to making this thing work. And in some ways, even for me, the the beautiful outcome here, maybe the outcome is is giving us a beautiful lesson, which is like, you truly can roll something into existence. You really can. And it's it's kind of amazing to see that play out. I mean, I've had my doubts over the years, obviously. But it really did work out, and I think we got to get that story out there.

• 17:09Harry Stebbings?

  I spoke to Don Stalter before this show, and he asked you, tied to that resilience, what was your lowest day? And what did your mind tell you in that lowest day?

• 17:20Speaker 00

  It's really hard. I've had so many low days throughout.

• 17:23Harry Stebbings?

  I'm saying like, so I'll tell you, we lost three anchors for our fundraise. And I had to call my mom up crying, walking through London in the rain. And she just told me the harder it is, the better the story comes out of it.

• 17:37Speaker 00

  Yes.

• 17:38Harry Stebbings?

  And I always remember that.

• 17:39Speaker 00

  One of the harshest moments in the history of the company. So, you know, we we spent three years to get regulated upfront. Then we got legalized for a few markets, finally could be able to launch. Then we got blocked about the launch, on the launch. And then at the end of twenty twenty one, we started working on the on doing the election market to get it in time for the twenty twenty two midterm election. You know, we had a team, we we bet an entire kind of two years on that. And then the government pocket vetoed, so they delayed their approval till past the midterms, to not give it to us in time. I think that was a, you know, the day that that happened, you could feel, you know, there's a sort of feeling that you know in the room that like some things change.

• 18:19Speaker 00

  Where like, people just lose confidence in you. Because when things like that happen, people oftentimes question the strategy. And they question the decisions. And so we lost a lot of the team over it. I I I could feel that like the trust and the faith in the company had kind of plummeted. It was zero at that point. So very similar, actually. I I it's one of those moments where you kind of walk out of the office and you actually feel physical pain in your stomach. You know what I'm talking about? Like, there's this like feeling of like hopelessness, that you're like, it is done, that we're not, this is it. And I also called my mom, uh, you know, and, you know, I was like, I honestly think this is it. Like, I, you know, this. This is this is the this is the end of the world. And then, you know, she's religious and she's like, well, don't worry. I asked one of the saints that I let, you know, popular in Lebanon. I was like, don't worry at all.

• 19:03Speaker 00

  I asked the saint, you know, you know, I I got the signs that I need. This company is going to be massive. Obviously, it's a very hard thing for me to kind of stand on. But like, the one thing that's always been very good about Luana and I is like, we have gotten so gut punched so many times in the history of the company. True, really hard gut punches. And we stood, you know, stood back up. And like that one, so we took a day to kind of recover. The next day we came back and we were like, we're gonna try again for the twenty twenty four election. And then we tried another year till the end of twenty twenty three. Then the government blocked it again. So that's the second time. And then uh gut punch, same exact deal, lost another big chunk of the team. You know, horrible kind of situation. You know, this was the moment where we're like, we're gonna try a third time. And this time we're gonna sue the government over this election market.

• 19:47Speaker 00

  So three years, just kind of going through that absolutely intolerable pain. Up until kind of, you know, obviously we got rewarded at the end of twenty twenty four, where we actually won. But it took three different trials and three different years. The hardest days of the stories that you tell. Did you ever like doubt your leadership? The answer is yes, right? So so at times, even even today, I mean, you always doubt like, you know, when you're building a company that's just going after a large market and, you know, first not working, then it starts working, then it goes back to not working. And then you do that ten times and then then it works really, really well. But then everything starts breaking and and this is maybe the phase we're in. And then you start fixing some of the things, but then more things start breaking. You have to continuously kind of shift yourself as founder and then CEO and evolve yourself.

• 20:30Speaker 00

  And there's always questions like, am I gonna be able to kind of do this next phase, right? And and like. What are you not sure that you're able to do today? I think that it's the time at a company where we need to evolve into sort of like i- into a more structured organization and build the right set of processes and systems in the company. And we haven't done that before. That's kind of the next big challenge, which is like, you know, am I gonna scale to the occasion? And, you know, be able to do it while, you know, keep accelerating the growth of the company and not sort of compromising the growth. And that that's a hard problem.

• 21:01Harry Stebbings?

  What function do you think is weakest today?

• 21:04Speaker 00

  That's a good question. And I think marketing in the beginning of the year was a lot of where I spent my time. I think like it's less about some specific department lacking, but more about like consistency now. How do we move that into like a scaled, consistent set of habits in the company rather than like a series of sprints?

• 21:22Harry Stebbings?

  Can I ask you a weird one, dude, which is like, if the world is financialized by Kao Shi, is that actually good for the world?

• 21:29Speaker 00

  I think there's two very important dimensions here. So the answer is unequivocally yes, yes. Like more free markets generally tend to more positive outcomes, always. But the thing that struck me is like the current financial markets, they don't relate to a lot of people. Trading stocks or options or futures, like people don't really understand them and the game is sort of rigged. It's rigged on behalf of like for Wall Street against mainstream, against the average person. Because you never can win against Wall Street on like where a stock is going to go or where an option is going to go because they have all the asymmetric information. The thing that got me excited about building this is like, actually, there's an opportunity to build a financial market for a market that relates to anyone, that anyone can relate to. And like one of my core beliefs, like everyone is an expert on something, like everyone has a reads the news about certain things or has passion about like specific something like

• 22:15Speaker 00

  like really the vast majority of people have specific passions or are really excited about specific vertical. And Kao Shi is really a way to kind of get them to participate in financial market on that vertical that is their home turf. Where they are not kind of facing somebody who has more information than them.

• 22:28Harry Stebbings?

  A hedge fund. I'm sure you've seen pro sports traders. They have every insight on every player and every injury and every weather wind pattern. The standards guy, girl betting on an NHL game on Sunday, I think you said, doesn't have that. Is it not just like increasing access to a different field where there are different pros?

• 22:48Speaker 00

  I think it's part of it. I mean, like, I don't think that Citadel and Wall Street has asymmetric information on, for example, our political process. And you saw with the election, like the best traders in politics, what bills is going to pass, who's going to win the election. They're people that love politics. They're not Wall Street. Like Wall Street is good and they can like get smarter over time. But where Wall Street is really good is seeing kind of like what hedge fund and mutual fund and whatever is buying. Which stock and they can know where a stock is gonna go better than the average person. But a lot of people have a lot of insight about politics. Why? Because they've been following politics for a decade or two. And you see in the numbers, these are some of the most successful traders on Kalshi. But there's another kind of facet to this, to this, which is very important, is that the prediction market user is not just a trader.

• 23:31Speaker 00

  Actually, if you, out of every hundred prediction market traders, users, maybe there's like one or two traders. They're actually trading on the market. But the rest of the users are getting informed about the world. It's really a form of news. It's a form of media. It's a way to basically come and like, get truth about what's gonna happen next. In a world where like, actually, it's been, it's been really hard to figure out what's happening. And you see this at the, every election, big election, people flock to Kalshi. Because you go on the traditional news networks and like, you don't know who won until five, six, seven hours after Kalshi, right? And that's extremely valuable. If you can see and get a little bit smarter about the future, we can make better decisions over time, allocate resources better, and manage risks better.

• 24:11Harry Stebbings?

  It's really interesting insight that one out of every a hundred is, say, a trader, or one or two is a trader. And the rest are what I call in social lurkers, you know, people that sit and watch on the sidelines. The question then becomes, and a lot of your investors ask this, why partner with a legacy media brand like CNN or CNBC? When you could actually own the vertical, you have the money, dude. You could build the media brand and the media platform and own the entire stack. Why partner with legacy? And how long before that legacy partnership becomes cannibalism?

• 24:42Speaker 00

  I think they're not mutually exclusive. You know, that's a fair question. I just think that like, right now, we're so early that it's hard to think about cannibalism or think about any of this as a zero-sum question, right? It was just so early. The percentage of people that understand, deeply understand prediction markets is still so small. There's so much education to do. And I think the news and partners like CNN and CNBC are really an incredible way to get people to, to understand what these markets are about. And at the end of the day, the mission of the company is like, we want to bring more truth to a lot of these processes, whether it's the election process. Right now, we're using polls and pundits and people say whatever they want. Or weather, or climate, or the economy, and how we make decisions about the economy. The best way to do that is like, put it in the places where people go and take that information,

• 25:25Speaker 00

  get their information about that. So imagine where election night coverage is informed by prediction markets, which actually work better than what we're doing today. That is actually net positive and the best way to do that as well. You know, let's go to the place where people are going to get their information about the election. And I think that news networks are an amazing way to do that.

• 25:43Harry Stebbings?

  Do you not think you can create the next news network?

• 25:45Speaker 00

  I think we can. They're not mutually exclusive. Like, I think we can, we can do both. And, I mean, even today, right? Like, there's not a single news network that owns all the audience. And there's some news networks like CNBC for finance and business, CNN is for politics. They're not mutually exclusive.

• 26:00Harry Stebbings?

  When you look at activity, what's more important? Is it breadth or is it like depth? Is there ninety-nine percent of trading and interest in a very small number of inventory? Or is that breadth massively important? You know, me and your team were talking before this about Luana and doing some PR in Brazil and just getting the brand in Brazil. Is breadth everything? Or is it having the one percent that everyone gives a shit about?

• 26:28Speaker 00

  It's a great question and we think about this a lot. You know, my mental model for this is you have to have breadth. Product diversity, making sure that people have enough content to engage with and markets that are related to the news or the things that they read on X is important. And it's a bit similar to X. If you go on X and read about one specific thing all the time, like, that's not gonna make a very interesting experience. You have to have diversity, even if there are specific topics that are the vast majority of the eyeballs. It's just really a balancing, a constant balancing act between the two.

• 26:54Harry Stebbings?

  We spoke about kind of becoming a news network and that, that also takes money. Don said, "You fought hard to protect early investors prior to, even when top-tier funds wanted to squeeze the shit out of us."

• 27:05Speaker 00

  That's, that's interesting. My mental model for this, we're playing a long-term, iterated, infinite game. There's a lot of rounds to that game and every decision is a round. And I think it's very important that throughout the game and throughout the rounds, you build a reputation that, where people can trust you and can trust that when you have a trade-off ahead of you, you will not be quick to basically, you know, kind of prioritize yourself and you're trying to kind of like do right by people to the extent you can. And it's the same. Same thing, like the people that believed in us early, right? Like even though maybe we don't need them as much right now. My mental model is you need them in terms of your reputation and doing right by them. That compounds. And if you're somebody that like does right by people around you, over time, people are gonna wanna work with you. And I think the best people, whether it's investors, partners, team members,

• 27:49Speaker 00

  wanna work with people that like do right by them.

• 27:51Harry Stebbings?

  Does Sequoia really move the needle in your company?

• 27:54Speaker 00

  Alfred Lin is incredible. Yes, yes.

• 27:56Harry Stebbings?

  Cause when I had Alex Bozzi on the show, he said that Alfred is the one person he doesn't have who he would most like to have.

• 28:04Speaker 00

  Yeah, I know.

• 28:04Harry Stebbings?

  Why is Alfred incredible and what specifically makes you say that?

• 28:09Speaker 00

  Alex picked me so often over the years about Alfred. Alfred is a very unique, very unique investor in many dimensions. But like a few things that I really appreciate and admire about Alfred. One, he's not the type of investor, he's kind of the antithesis of what you would usually imagine VC to be, which is like VCs love to make strong, simplistic statements. You know, you tweet something like, the way to win is like have a great team. And like Alfred's answer to everything is this sort of very nuanced, in the gray, uninteresting, uninspiring answer. But it tends to be the right answer. And most investors like simple kind of like structures and frames like, oh, you know, the margins aren't gonna get compressed, so the business is not gonna be very hard.

• 28:51Speaker 00

  And whereas Alfred is like, well, how is specific compression over time? It's actually gonna be slower than expected and then you're gonna grow. And it's kind of a lot of like in the gray, you know, math and nuance. But that helps push you to get to the right balance between this in every decision. So one is nuance. Number two is he's always, always a kind of counterbalancing actor. And the thing I learned with Alfred is every time, so if I go with him with idea A, he will argue for the other, for not A. And if I go with idea not A, he will argue for A, always systematically. He will always argue the other side, always. And this is to push me back to the middle, to push me back to like, hey, every decision comes with trade offs and every problem, solution comes with problems. And the last part is like, and again, it's kind of maybe there's a theme here.

• 29:35Speaker 00

  It's like when the company is doing poorly, Alfred is the most optimistic and will come and like be, be excited and push you. And when the company is going well, Alfred gets pissy. He just wants to make sure that you don't get over your head and you're like, you know, don't forget, dark times are coming again and like, you know, be careful. But he's really been there for us from the early, early beginnings. He's been a huge believer when at times where people really didn't believe, it was really hard to believe in Calhoun times. And he was just like always consistent.

• 29:59Harry Stebbings?

  One of the most bullshit statements I think founders say and is proliferated is, oh, you never want people who want to join your company because an investor is invested. I think that's utter crap. If Sequoia invests, it does increase the chances of success. It means you'll have another round of funding. It means more good people want to join, and people want to make money for their families and make money. And so it's completely logical that you would get more people want to join post-Sequoia investing. Do you agree with me? Or do you take the stance that don't take people who only join because of your investor?

• 30:34Speaker 00

  The best people want to win, right? Like, they want to join a winning team. And like, I think having great investors is one sign out of many others that you are on a winning team, right? So I think expecting people to like disregard that altogether, you're probably kind of like pushing out or excluding some people that are, you know, winners, people that really want to win. But at the same time, you have to be, you know, make sure you're picking people that are, they're gonna do whatever, you know, they're gonna really work hard and do whatever it takes to win, as long as they believe that this is kind of a winning company and a winning formula. So my answer is like, I don't think that people that like see having Sequoia on the cap table as a strong signal are bad people at all. Like, I think, no, but I think you still have to do the diligence in the interview. It's like, is this person just joining just for a free ticket on a ride? Or is this person joining to make that ride go accelerate even harder?

• 31:18Speaker 00

  And are they gonna do whatever it takes and work however hard to make it happen? If the answer to that is yes, then, you know, by all means, you should hire that person.

• 31:24Harry Stebbings?

  Which investor do you not have that you would most like to have? If Alex's was Alfred, who's yours?

• 31:30Speaker 00

  Well, the most recent round, Neil Madder came in in small capacity. I've always wanted to have Neil involved. He's just like such an incredibly smart, like such an incredibly smart person every time I talk to him.

• 31:40Harry Stebbings?

  Why did you not let Neil come in in a bigger capacity?

• 31:43Speaker 00

  It's not, I don't, it's not like a mostly me driven, like we just chatted like towards the end of the round. We just decided to do something small. I think, who would I really love to have? I have a lot of respect for Rivet and Mickey. I have a lot of respect for Founders Fund. I have a lot of respect for Ultimater. A lot of the crossovers in the public funds are also great.

• 32:01Harry Stebbings?

  Learning from people is very important. One of your investors asked something that they asked not to be attributed, which I'm honoring, but they said- Did you ever cross paths with SBF? And what did you learn from observing FTX's implosion?

• 32:15Speaker 00

  I gotta know who this investor is. Yeah, I mean, the answer is yes. So actually, the funny story is SBF, when I was a freshman at MIT, he interviewed me for Jane Street. And so I'd known him since then. And then when he came into the US with FTX, we met once. We were never really close. He was kind of cold towards us when things were going well. And I think we've got, she's had a history of people sort of looking down on us a lot. And, you know, we were a smaller company and we weren't as successful. We're having all these, like, we were like doing the regulated route. We're focusing on regulation. We're like, we want to do it right. We want to do it clean, compliant, regulated first. And in those years, it was very unsexy to be that company. You had FTX, like, everything was crazy and like all the unregulated offshore, like, like free for all.

• 32:57Speaker 00

  Like, those were the sexy companies. Those were the companies breaking rules and winning. And like, and we were seen as sort of the safe, boring losers, you know? Because we were committed. We were like, we are not going to do this unless the government approves it. I have always been unwavering in my belief, same with Luana, regulatory first. And the reason is because I think in financial services and healthcare, the only way to build something that will last the test of time and that will truly go mainstream is to work with regulators, to do it clean, to do it right. And so maybe the learning came afterwards, which was like, at times you have doubts, right? Investors are like, why are you not growing like FTX? Why are you not doing this? Maybe you should go offshore, you should do that. And you start doubting yourself and like, maybe the learning was like, honestly, just like, stay true to your approach. Like, if you really have high conviction,

• 33:39Speaker 00

  forget everything going around you, no matter the valuations, no matter what's building, stay true to your approach.

• 33:44Harry Stebbings?

  When did you stay true to your approach where you should have changed? For example, for me, I believed for many years that audio was our platform. We don't do video. People don't feel as comfortable on video. It should be audio. I was stupid and we should have moved to video much sooner. When did you stay true and you should have moved? And what did you learn?

• 34:04Speaker 00

  I think it was a little bit too, and this is going to sound a little bit unusual. I was too product driven for too long. I was always like, we gotta build the product and make it absolutely perfect. And it needs to grow, you know, and grow really fast organically. And then we Do more marketing and build a brand. And I actually think you have to build both together. And I think if I were doing it again, I would really be thinking about building both together. Your product is never going to be perfect, right? Like it evolves and it shifts and it improves over time. And the brand, you have to learn it. It's a muscle, right? The growth and marketing and brand is not something that you just turn on all of a sudden. It's like, oh, now we're ready to grow. It is a muscle. It's something you have to embed in your company. I've changed my mind on this, which is like, it's not like, maybe it's the Y C thing, which is build a great product and people will come.

• 34:49Speaker 00

  Build a great product, but build a great marketing engine and scramble to do both at the same time is now my best answer.

• 34:54Harry Stebbings?

  You think we've moved too far in that direction? When you look at the, and the distribution is everything, the rage bait. Everyone has videos and everyone has a podcast and the cluely, I'm going to take pictures doing obscene things. And do you think we've moved too far?

• 35:11Speaker 00

  Here's the way I would put it, right? If you take that statement to extremes, like maybe you should do marketing and not really focus on product. Well, that, that is definitely a recipe for failure, right? Like in the order of things, like, you know, build a great product, but make sure to think about your marketing motion early enough. Don't think of it like years late, which is what we did, which was a thing of mistake. The second is, you know, build a great product and then think about your marketing. The third is build a great marketing machine and then think about your product is my view. Because no matter the number of eyeballs and the number, you have to build a great product, right? Like there, you know, there's a lot of people that have had massive eyeballs. You see influencers and you see celebrities with mass eyeballs. You know, their tweets get tens of thousands, if not hundreds of thousands of likes sometimes. And they launch a product that doesn't really work, right?

• 35:51Speaker 00

  That's the age old story of, and so I'm not a believer of this whole like distribution first and that's all that matters. And no, I think you have to do, you have to have a great product. That's a precondition to success, but you have to also build in today's age. Because technology has become easier, right? It's, it's not, building tech is not the way it was 10 years, 15 years ago. You have to also build a good brand and build a marketing motion.

• 36:13Harry Stebbings?

  Cristiano Ronaldo announced last night that he was investing in perplexity. Clearly fantastic judgment as a fellow perplexity investor. My question to you would be, what celebrity would you most like to have in Kelsey?

• 36:26Speaker 00

  Yeah, well, it's a very good question for Luana because hers is Taylor Swift. And you know, it's funny because a lot of the coverage this week was like tying her to Taylor.

• 36:34Harry Stebbings?

  Now she's richer than Taylor Swift, apparently. She's richer than Taylor Swift.

• 36:38Speaker 00

  She's just younger. She's just younger. I mean, look, my, my, my almighty goat is Messi. We have talked to, I think we are talking to his team right now, so we'll figure something out. But I think he's the greatest athlete of all time. He's obviously great on the pitch and everything he's done. But like, he loves soccer more than anything on this planet and you can feel it. And you can feel it so heavily and everything around his life, right? Like, he's made it, he's become rich, he's become famous, he's... All he cares about is getting on that pitch and winning. And you could feel that hunger, like, you know, and the man never really spent obscenely. He's stayed with the same person, you know, was now his wife since he was like, I think 14. He has his family and that's his kind of like, you know, source of joy outside of work.

• 37:21Speaker 00

  But he is so deeply committing to getting that ball and scoring. And I love that. I love that so much because it was just never about anything other than the soccer for him and you could feel that.

• 37:30Harry Stebbings?

  You mentioned the humility there, the not getting distracted, the one partner focus. I'm a bit worried, dude. The youth of founders today is so much younger than it was even before. You know, I'm meeting 17 year olds with term sheets for $5 million every week. They're talented, absolutely, and their talent is here. But dude, when I was 17, my emotional maturity was here and I think most of ours was here. Do you worry that we are overestimating the emotional maturity of a generation of very, very young founders?

• 38:01Speaker 00

  I will say that each generation is more mature than the prior one. You can definitely feel like, I, I feel like so oftentimes I talk to, you know, 17, 18 year olds now. And like, they're more mature than I was when I was 17, 18. As you go through battles and as you go through the ups and downs, like it just humbles you, right? Like you have to go through some of that. I I agree with you that like maybe people that are coming at it, like younger people that are coming at it clean and the first thing they get, like first time they have an idea, they get five million dollar term sheet, they get like maybe a wrong set of expectations about what it takes, what are they about to get into and how good they truly are. And like, I think the one I have been lucky, like we really have a massive, we've always looked at ourselves as the underdogs and had like always a massive chip on our shoulders. Like our internal view of ourselves is not like we're these almighty beings or we're, we're always like, what are we doing

• 38:46Speaker 00

  wrong? Who's better than us? What are like, we, we think a lot more that way. And in some ways, it's a bit more tiring today, but it's, it's made us lucky because we have humbled each other over the years. We, we just stay very grounded on like what we're lacking at every stage of growth. And like, there's a lot of things we're lacking. There's so many great people out there, like truly, right? Like if you compare yourself to some of the greats, like they're all operating on such a different level and like there's so much for us to learn.

• 39:09Harry Stebbings?

  Dude, if it's okay with you, I want to do a quick fire round. So I pepe you with questions and you give me your immediate thoughts. Does that sound okay?

• 39:16Speaker 00

  Yeah, it sounds great.

• 39:17Harry Stebbings?

  There was a prediction market that should exist, but you're too scared to list.

• 39:23Speaker 00

  That's a great question. I think it's markets around like the evolution of geopolitical like conflicts and they can have a lot of utility, like that information could be very, very useful. But I think they have downsides and we always avoid markets that like, we try to make our market markets always orthogonal. You can never get paid or not paid based on something bad happening.

• 39:42Harry Stebbings?

  It's really hard, isn't it? Because how do you balance news and information and the benefits that come from transparency with the acknowledgement that with that is financialization?

• 39:52Speaker 00

  It's a dilemma for any technology. You see this in AI. I mean, that's technology, right? Technology comes with a lot of positives, but there's risks and you have to balance between the two.

• 39:59Harry Stebbings?

  Which founder brand in tech do you think has most brilliantly crafted? For example, I think the Colson's brand has been expertly crafted, phenomenally maintained. It's fantastic brand that they should be very proud of. I'm saying nicely, but that would be my brand that I aspire to. It's a Chanel brand of knowledge and premium.

• 40:21Speaker 00

  I think Eric and Cream have done a very good job at building a story and a brand around the founders, the team, how the company have come to be and the quality of their execution. Learning a lot from those two and others.

• 40:34Harry Stebbings?

  What's the biggest misconception people have about Kalshi today?

• 40:38Speaker 00

  One of the misconceptions is people sometimes think that Kalshi is gambling and it's not.

• 40:42Harry Stebbings?

  It's information and news.

• 40:45Speaker 00

  It's a very, very different model. And the reason why this, you know, there's it's financial market for two reasons. One, it has economic value. But the second one, the really core one is in gambling, there's a house. You walk into a casino and the revenue of the house is equal to its customers' losses. That's how they make money. They're betting against the house. In our model, it's an open, transparent financial market that is neutral. You know, Harry is trading against somebody else. And whether you lose or make money, we are not incentivized for either way. We make as much money either way. We take a transaction fee on top, whether you're the same one, whether you win or lose. And that's why we like the dynamic is much more akin to, you know, the New York Stock Exchange or traditional financial markets than like traditional like casino or sportsbook.

• 41:25Harry Stebbings?

  One piece of advice on hiring that is most controversial, unconventional?

• 41:31Speaker 00

  That's a great question. The vast majority of people are not in the top 10%. Most people that come through your door should probably not be at your company. I think people always forget that, like, you know, most teams are not great teams. It can be. Not everybody can be in the top 10%. The way to frame this as a contrarian or controversial take is like, most people are kind of mediocre. And not in a bad way in necessity, but just mediocre for the job that you're trying to hire them for. And so it's really, really, really hard to find the top five, 10 percenters.

• 41:58Harry Stebbings?

  I do not think you can only have A players if you have a company over 250 people. By definition, A players are extremely rare if you want to keep that high bar. Post 250, I don't think you can. Do you agree?

• 42:11Speaker 00

  I don't know. We're not at 250 yet, so we'll see.

• 42:13Harry Stebbings?

  What are you at today?

• 42:14Speaker 00

  A hundred and change.

• 42:16Harry Stebbings?

  What's the worst part about your culture?

• 42:18Speaker 00

  It's a great question. We're a little bit chaotic. It's virtue of like very flat, low on process, very low on politics. And just really focus on product, customer and shipping. It's like every decision is product, customer, shipping. Don't think about anything else. And when that happens, we are trading off the bane of not like. You're choosing, in my view, between two different pains. Either product velocity, so you either cave on product velocity or you cave on like chaos and organization in a company. I don't think you can get both.

• 42:46Harry Stebbings?

  I know you love walking meetings. What's the most memorable walking meeting and why?

• 42:52Speaker 00

  I do love walking meetings. How do you know that?

• 42:54Harry Stebbings?

  Dude, I stalked the shit out of you. You know why the show's done well and I didn't mean this arrogantly? It's just because most people don't prep. They don't really put the time in to get to know you.

• 43:04Speaker 00

  Oh, that's amazing.

• 43:06Harry Stebbings?

  You know, I spoke to twenty three people before this.

• 43:08Speaker 00

  That's amazing. That's amazing. Let me think. I think I've had so many walking meetings over the years, but I spent a lot of time just walking with Victor Lazart and just sort of thinking about a bunch of different things. I think Victor is incredibly smart. He's a very, very smart guy. We never just have an agenda. We just sort of talk about different sort of constructs and try to kind of build mental models of the world and what's happening. And he's just kind of always helped me think bigger and he pushes back on my thinking. We have a lot of walking meetings.

• 43:36Harry Stebbings?

  I love him. I think he's fantastic. He was brilliant on the show. Final one for you. Your dad was an entrepreneur. What unconventional lesson that you haven't shared before? Did you learn from your dad about entrepreneurship that you've applied?

• 43:50Speaker 00

  Well, my dad was actually a doctor. Then he kind of started a consulting firm. But one of the things that's a bit unusual, so I grew up mostly with single moms. So my dad was not super present. Yeah, I saw your tweet actually recently.

• 44:00Harry Stebbings?

  About broken relationships with fathers?

• 44:03Speaker 00

  Yeah, I actually, I was like, there's a lot of truth to that, I think. And you don't realize it like consciously. I think it's like a subconscious thing. I think it embeds some sort of chip on your shoulder that's very hard to embed if you had a same relationship with your father.

• 44:16Harry Stebbings?

  Dude, I so appreciate you. I so appreciate you putting up with me, pushing you on everything from poly market to your familial relationships. Thank you for joining me today, man.

• 44:25Speaker 00

  Thanks for having me. This was awesome.

• 44:28Harry Stebbings?

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• 45:12Harry Stebbings?

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• 46:37Harry Stebbings?

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• 47:21Harry Stebbings?

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