Pod Insights Equity Podcast The inherent tensions within Venture capital About this episode This is our Wednesday show, the time of the week when we niche down to a single topic. Today? The issue of venture capital expectations in certain sectors where startups may not be the best fit. And what happens when they raise a mountain of capital.
Natasha and Alex had former founder and present-day indie journalist Vincent Woo to come on the show with us. Why? Because he's written extensively about Lambda School, one of our subjects of the day.
We started with Ro, and Natasha's excellent piece on the matter: Employees detail rising tensions at Ro as healthcare unicorn struggles to grow beyond first win.
Next we chatted Lambda School, which has a well-documented history of raising venture capital and attracting controversy. Most recently, Woo published a piece about the coding bootcamp's misleading claims on job placement. The company is perhaps a cautionary tale of how venture-level growth can struggle in certain sectors. Education is hard and may not scale like software.
At the heart of conversation was a question: In this time of high valuations and easy access to large amounts of capital, how can VC incentives lead some startups into a cycle of pain? We didn't land on a single conclusion, and that was kind of the point of the episode. Venture capital isn't inherently bad or good, but the money can come with a list of demands (and pressures) that cause risk-taking founders to make mistakes. A recalibration is necessary, but, as we talk about every week, the "up and to the right" market will take its time getting there.
It was good fun to focus on a single topic, but we're back with our news roundup Friday morning! Chat soon!
Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products.
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Transcript 0:11 Speaker 00 Hello and welcome back to Equity, TechCrunch's venture capital focused podcast where we unpack the numbers and the nuance behind the headlines. My name is Alex and I'm joined today by Natasha Moskowitz. Natasha, hello, how is life?
0:22 Speaker 01 Life's fine. I was trying to record this podcast from bed, but I couldn't find a stable place to put the mic. So I'm at my desk and I'm ready.
0:28 Speaker 00 That's because we care just enough to not do the podcast from bed, but not so much that we don't think about it. Welcome to Equity. We also have a friend with us today. We have Vincent. Whoa, hello Vincent. How are you doing?
0:38 Speaker 02 I'm doing great. How are you?
0:40 Speaker 00 Good. And the reason why we've dragged you along today on this adventure is that you have been an independent journalist that has written about Lambda School for some time, and you also run a thing called Coderpad. So just briefly giving you a plug, what's Coderpad?
0:53 Speaker 02 Coderpad is a technical platform for interviewing programmers. We sell it to really big companies in the Bay like Facebook at all who use us to interview people they're considering hiring. Full disclosure, I sold the business a couple of years ago, actually, but this is kind of what I'm actually best known for and not necessarily my reporting, which is sort of funny.
1:12 Speaker 01 Well, it's interesting because I feel like a lot of people do like the VC to journalist switch up, but I rarely see founders also being part-time journalists. So
1:21 Speaker 02 You see so much more often founders become VCs than anything else.
1:25 Speaker 01 Yeah. So why, why journalism? I mean, yeah, tell us how much you like our field.
1:29 Speaker 02 It's, I love journalism. I mean, I feel like more than anything, it's a reflection of my childhood psychology, you know, like, like an oppositionally defiant, disordered child ends up doing well in the workplace. Like, what are they best suited for after the fact? I mean, if you become a VC, you actually have to be quite good at making nice with a lot of people, like thousands of people. And I'm not very good at making nice. So I can make a much bigger dent by being How to put it impolite in a very particular direction this way. And it's also just much more satisfying, too.
2:03 Speaker 00 You're on the right show. And I brought all of that up because we are talking today about some internal startup dynamics. And I wanted to point out that not only is Vincent a journalist, also a founder. So he's been on both sides of the coin, and that makes him a perfect guest. Also, he's written a lot about Lambda School, which is going to come up in just a couple of minutes. But Natasha, will you please tell everyone the core thesis that we are exploring today?
2:23 Speaker 01 Yeah, so we're really looking at a topic we've probably teased throughout the past year and a half of writing about these massive startup fundraises and resulting valuations, which is, what does this do when things don't just go up and to the right? So our thesis is really looking at, in this time of high valuations and easy access to large amounts of capital, how can VC incentives lead some startups into a cycle of pain? How can things such as fast returns or recurring revenue not be realistic products for companies? And what does that do to their culture and business is kind of the topic?
2:56 Speaker 00 Yeah, because well, it's really fun to talk about how Slack had the fastest ARR growth of any company of all time. Turns out, there's only one of those, and everyone else runs something else. And to kick us off with this general thesis, we're going to talk about Row. You might know the company previously known as Roman, famous for making pills, and then it expanded into a host of other things. We've already made Vincent laugh at the show as a success.
3:16 Speaker 02 Can you say that?
3:19 Speaker 00 Can we say pills? Yes. My wife doesn't listen to the show anymore, so I won't get my ear lobe flicked for that.
3:24 Speaker 02 Great.
3:25 Speaker 00 Natasha, you wrote an amazing piece for TechCrunch, digging into some growth issues at Row, and I would say some ensuing cultural issues. So briefly, where did Row start? And then kind of what went wrong at the company?
3:36 Speaker 01 Yeah, so I wrote about Row because it's one of the most valuable privately owned health tech startups in the ecosystem today. Its latest valuation, I believe, was at $5 billion. And over the past few months, there's been several departures across a ton of their departments, like their head of data, head of partnerships, and head of product management. And those departures really triggered this broader story after I spoke to 10 current and former employees, and now dozens more since the story published, about how this business is really struggling to build into its valuation. So Alex, as you alluded to in the intro, Ro really started with erectile dysfunction pills. That was their main product that they were selling. And for people who don't know, Viagra recently lost its patent, so it kind of did a generically available version of that drug for a low cost.
4:19 Speaker 01 Since it's kind of done that business, a lot of its vision has evolved, like a lot of startups we know have. So it wants to be this vertically integrated place that people go to for their first call for any healthcare issues. We've seen them kind of expand into Rory, which is like a digital health clinic for women, Zero, a smoking cessation treatment, Ro Pharmacy, Ro Skincare, and a lot of even COVID-19 relief. So really saw the startup start in a very small niche and has said that it's going to expand elsewhere over the years.
4:49 Speaker 00 So my question is, there was this big growth round that they raised that we wrote about and people kind of remember. Did the product expansion come before or after that massive investment?
4:58 Speaker 01 Yeah, so I would say 2020 was an amazing year for them in terms of launching and promising a lot of new verticals for their consumers. They raised a 500 million Series D right after a lot of those plans were announced.
5:13 Speaker 00 $500 million?
5:15 Speaker 01 Yeah, $500 million also gave them that flashy valuation. And from what employees told me, that round was really used to trigger an acquisition spree. A lot of the venture capital was used to acquire three companies in a short period of time, Kit, Modern Fertility, and Workpath. So we kind of saw Ro go from promising a lot of things to raising a lot of money. And then, and I think this is where the tipping point was for a lot of employees, looking external to bring on some of the promises it had made.
5:44 Speaker 00 So essentially, it raised a bunch of money and then it went out and tried to buy what it they kind of promised. Vincent, how often does that happen to startups that are struggling with growth, just to go out there and kind of buy revenue?
5:53 Speaker 02 It's extremely uncommon, except among the winners that are so benighted by venture capital, right? Like, most startups are like, will never encounter this as even a remote possibility.
6:07 Speaker 00 Because you have to have enough money to actually go out there and do this.
6:10 Speaker 02 Right. It's sort of, I mean, this is like the perennial complaint in the valley, right? That like a certain, like, once you hit a tipping point of venture capital, like, it's pointless to compete against that war chest and you're better off buying in. Uh, I mean, you saw it happen with Uber for sure, right? Where you just get too much.
6:29 Speaker 02 I mean, this is what happened to WeWork too, right? Like, if you're, do you remember when WeWork bought Flatiron School? Another coding bootcamp?
6:36 Speaker 01 Oh, my God.
6:39 Speaker 02 Like, why, right? Like, they wanted a new vertical. They had pushed their margins to the limit in the particular vertical that they were already best in. They wanted to do everything else. And obviously, that didn't turn out so well for them. I think it's extremely unusual to have a vertical that comes in via acquisition ever pan out. I mean, there, you, it's much easier to name the exceptions where it did pan out, like YouTube, than, than every other occasion, which, like, immediately gone to the dustbin of history.
7:09 Speaker 01 Yeah, it's always a weird feeling to me when we celebrate acquisitions as like, you know, story is over, that is success, this was so smart, and now everything's going to be happy. I mean, in Ro's case, I think acquisitions became something that employees who left really, you know, cited as the key reason for their departure. It was the failure to integrate, but it was also just kind of a very bold proof point that, that Ro leaders knew things internally weren't going so well with their own product development efforts, so that they were turning external. And I think for some employees, that felt like a very, you know, weird external marketing versus internal success separation.
7:48 Speaker 00 So, so on that point, Natasha, one thing that stood out in your piece was the point that, like, the company hadn't put money into other things that weren't Ro, which was its kind of erectile dysfunction subgroup, if you will. And that a current employee said that last year, Roman was getting 2,000 new members a day, while Rory, which was its female-focused, kind of equivalent at the company, was getting four. And so it seems like they weren't seeing much progress with certain things. They bought stuff and it just didn't, I, why would they think that external? Purchases would make things better internally. It just feels disconnected to me.
8:20 Speaker 01 Yeah, I mean, I think when you have kind of like Vincent, what you were saying, when you have the luxury of having venture capital on your disposal, that can be the fastest way that you can at least performatively show that you are growing and thinking about things in an interesting way. The pitch of an ED company is not going to get you a $5 billion valuation, but the pitch of a vertically integrated patients first call clinic will get you a $5 billion valuation. And so I think that's where we saw a lot of Ro try and deliver. But for people who didn't read the story, just like a few other kind of details that kind of line into with with kind of the background before we get into the broader, before we get into Lambda School, is that, you know, Rory was for a long time, it is like Ro's women's health business.
9:04 Speaker 01 And because Ro wanted to be more than just their ED business, a lot of like, you know, a lot of spotlight was put on Rory, right? Like, we are no longer just a business for men. We are a business for everyone. And so the fact that Rory was not getting many investments, Rory's originally founder, Rachel Blank, left the company to start her own healthcare company. And I feel you can read in between the lines, even though, you know, she wouldn't say anything like that to me. And so I feel like we kind of have seen it not just be a growth stage issue for Ro, but really like this cycle of not investing in current things and then using VC money to kind of buy growth.
9:41 Speaker 02 Yeah. This might be two ways causal also, right? I give you like 80 plus percent odds that on the slide of the decks that they used to raise half a billion dollars, there was probably one that was like, here are the companies we're going to buy. You know what I mean? Like the investors paid for this story. It wasn't like, here's a bunch of money and then go figure it out necessarily. Like at that level of fundraising, there's a lot of coordination between the investor and the company regarding what outcome they want here. And they probably wanted this.
10:09 Speaker 00 Yeah. Natasha, just as a last data point for me, how much did the valuation go up in that round when it did hit $5 billion? Do we know the multiple from the preceding valuation to that that Series D level?
10:18 Speaker 01 I actually don't off the top of my head, but I will say like, that was the round that brought Ro from a startup to a growth stage company. It was a Series D nomenclature wise, but like internally, to give you guys a perspective of how that changed Ro's perspective on what their valuation could mean one day. That's when Ro leadership began to say, we want to become the Amazon of healthcare internally, and they would never say that externally. But that was the sort of growth. That they were going for after that round.
10:44 Speaker 00 So to summarize, single product that did very well wasn't going to take the company all the way to the stars. So they raised a bunch of money, tried a bunch of things, revenue kind of flatlined. And now we're seeing a lot of exits of the company. So here we're seeing the tension between venture capital incentives, which is growth, growth, growth and lots of money. And also the reality of, huh, well, we only have one hit. It's very hard to make a career off of one hit. That's why we have the term in music, one hit wonder. Turns out though, not a great business model. All right, let's pivot and talk about Lambda. Lambda School, of course, the famous slash, I would say infamous coding academy. It actually went broader than that at one point in time. Where to start with this? I went back through all of TechCrunch's coverage of Lambda School over the years, and it is really long. But we first wrote about it in 2017 and then we covered layoffs in 2020, funding for Lambda in 2020, layoffs in 2021,
11:29 Speaker 00 a legal settlement, and then getting sued again in 2021. So it's been, it's been hectic.
11:33 Speaker 02 It's a journey for sure.
11:35 Speaker 00 Vincent, tell people about the business model though. Tell me about ISAs and what was kind of the Lambda magic, if you will.
11:41 Speaker 02 Well, in order to tell you about this, I'd love to cast our minds back into the year 2017, 2018 roughly. And to answer the question, like fundamentally, like what is Lambda School? For readers who might not know, for listeners rather, Lambda School is kind of two things that are different from what's come before. At the time, in 2017, 2018, Lambda School was becoming one of the biggest remote only coding bootcamps, which is unusual. Most bootcamps at the time were in person. The other thing that it was becoming was a novel financing scheme for new students, right? Where they had this thing called the income sharing agreement wherein you didn't have to pay the school upfront to attend. You'd only have to pay them in the backend. If you got a qualifying job in the next five years, then you had to pay the school.
12:23 Speaker 02 And so these are the two things that really allow Lambda School to become a hit, at least in the eyes of venture capitalists. And what I want to draw your attention to is like, what I think really happened here, and you can see this in testimony that Austin Allred, the CEO, has given on the internet. He talked about just running a normal online bootcamp for a while. I think he was having trouble filling a certain class, like they had spare slots. And he said, I just like went on Twitter and asked if there were people who wanted to attend, who couldn't pay, but would be willing to pay us later. And he was shocked at this moment to discover he got like a hundred times as much interest as he'd ever had before. That's when Lambda School was born. Like that moment when Allred realized that there was a new way to get a ton of latent
13:08 Speaker 02 demand, that's what made Lambda School and that's what caused all subsequent fundraising. My general point with the story here would be, like Natasha's story, I think venture capital has a tendency to calcify the existing structure of the company at the moment that it enters the company. And because what Allred had done at this moment was sort of back the ISA, he took funding around that, right? He built out the organizational structure of the school around signing up as many people as possible under ISAs and like that became Lambda School. It's hard for them to be anything other than that now. And I think likewise, when you take a lot of fundraising and you have like a single vertical, it's really hard after a while to decide to become something totally different. The longer you go without venture funding, actually, the more flexible you are able
13:53 Speaker 02 to be as an operator.
13:55 Speaker 01 Yeah. No, I mean, it's kind of ironic that you bring up flexibility because obviously Lambda School is built on that for students, but it itself has taken venture funding and now is finding itself in a buckle. So you recently published a story about job placement rates at Lambda School and you've kind of been doing this for two years. So I would actually love for you to give everyone a background on, on the process, but also like what you learned about why Lambda School is fudging its job placement.
14:20 Speaker 02 Yeah, absolutely. The object level reality is that like Lambda School basically has been lying outright about how officious it is at placing its students. There's a ton of different evidence that's surfaced, some internal, some external, but the long and short of it is they're probably in the lower, I would say quartile performing bootcamp in terms of actually getting its graduates jobs. Now, they've found a lot of ways to misstate that publicly by like shrinking the number of students that count against it and at times outright fabrication. And the why I think is also a result of the growth demanded by venture capital. And I want to point out also here that like Lambda School is not alone. Many of the large surviving bootcamps themselves have also taken venture funding and they're
15:04 Speaker 02 all in a war of attrition with each other. They're all at the point now where any one of them has to pay a thousand dollars for a referral that lands an enrolled student from all the purportedly independent post-secondary education review sites that are out there. And they're all Stuck in this prisoner's dilemma effectively where none of them can go clean on their stats. They're all misreporting their placement numbers to a rather shocking degree. Depending on how you measure it, as bad as 2X misreporting. None of them can be the first really to, you know, break the faith because they all suffer, right? Like they'll stop getting enrollments and the rest of them can keep eating losses. Like it's a game of war chess, right?
15:46 Speaker 02 Like they have enough saved where, you know, they can afford to lose money for quite some time. Placing students not particularly well until not so many bootcamps remain. And I think that's where we are right now.
15:57 Speaker 00 There's a weird like incentive loop here because Lambda School raised its, I'm just going off crunch based data here. So it's seed round in 2018, 4 million. Is it series A in 2018, 14 million? Series B in 2019, 30 million. And then series C in 2020, 74 million, which implies a growing valuation, which implies the need to have more students go through. And given the ISA model of only kind of getting paid, once those students land a job, you have to kind of like, if you dilute your placement rate, you have to have even more students come in. And so you have to have this increasingly wide funnel. It seems that a lot of the issues have just come from them needing to kind of get more students through their system than they can at a placement rate that is amenable to their initial promise.
16:40 Speaker 00 And so the incentives from the money made their product worse for a lot of folks.
16:45 Speaker 02 Like rather than, the thing about Lambda School is it's weird that it's a combination of a novel financing scheme as well as a school. Right?
16:53 Speaker 00 Terrified. Like I don't want to hear those words together.
16:56 Speaker 02 There's a world where Lambda School only did financing, you know what I mean? Or only was a school. And I think it was just like this sort of accident that Austin Allred filled that class at that time in the manner that he did, that calcified this structure indefinitely. And it obviously has a very adverse selection problem for the school, right? Like the school is sort of incentivized now to get as many students in as possible and to just string along the ones that they don't think will make it with as little resource spending as possible. And then to place the portion of its students or to spend the most resources on career placement for the students that are most likely to get jobs. And if, and if that- At like trailing tale of students who are not doing that well, get any job in the next five years through any amount of self-study that qualifies, they'll still pay the school.
17:39 Speaker 02 So they're in a way like long trawling this like tale of students they hope to like profit off of one day. I think this is very strange adverse. Like if they were separate, if they were a financing institution and there was a different school, or they were sending students to different bootcamps where Lambda School, the financier was just paying for the bootcamp upfront, they wouldn't have this adverse selection problem, you know?
17:59 Speaker 01 Yeah, I think like this is why a lot of people have been so worried about ed tech bringing on venture capital and the incentives that come with it. I remember when I was covering ed tech's boom in 2020, Jemira Herrera, who we've had on the pod, you know, constantly was kind of bringing this like novel idea to me, which is what if some of these companies that are getting venture backing shouldn't have gotten venture backing in the first place? And Vincent, to your point of like this cycle that they're in, I mean, if it's expensive to serve your students and it takes a lot of time and it shouldn't be rushed and you should support the students that probably won't get a job after going through the program. Maybe you shouldn't have a grow fast and get cheaper over time dead weight on you.
18:39 Speaker 02 And I absolutely agree. And the other thing I want to add to that is like Lambda School and trying to do two completely novel things at once needs to have a breakthrough in both. And unless you think Lambda School has made like a fundamental breakthrough in online pedagogy, they're gonna be unable, almost by definition, to do better than what people have done before in this space. And I'd have preferred the school take longer and invest more in trying to find these breakthroughs. Because I mean, this is fundamentally what will bring value. The novel financing, it's fine. Like it's good. Like I think it's interesting. It's a fun experiment. But the thing that really will move society forward in the long term is a pedagogical breakthrough for the remote education age. And we're not there yet. Like no one's figured it out.
19:21 Speaker 01 But that deserves like a big valuation. Like if you do a pedagogical breakthrough, you deserve a high valuation. I don't know if you do if you're like in the current kind of like scale fast in a SaaS sort of way.
19:33 Speaker 00 Okay, but sans pedagogical breakthroughs in ed tech via digital platforms to remote classrooms, the broader point is that there are certain business types that may show a glimmer of venture style growth early. But then, once you scale that up, as you raise more capital, it doesn't quite work out the way you want. There's almost a hazard here in which, because there's so much venture capital available today, we've all seen the the rising sums and the new firms that are founded and rolling funds and super angels, et cetera, that I wonder if just a lot of businesses that should have gotten traditional bank loans or equivalently less growth focused capital are instead being put on the venture treadmill and they're going to end up either flaming out too quickly or stuck somewhere in startup hell, like Ro and Lambda School have found
20:18 Speaker 00 themselves. That's kind of like my my core read of these two situations is like, why did they raise VC? It's like putting nitrous oxide in a [__] Camry. Like, no, it's a sedan.
20:26 Speaker 01 And it's it's not just Ro and Lambda School. It's ed tech and health tech. Like, these are two sectors that have so many regulatory hurdles, so many processes and red tape around them, which I think for so long, VCs, and even I've drank this Kool-Aid of like, it's so exciting to see people just disrupt them. But do we think about what disruption means for the end users? In Ro's case, it's actual patients. In Lambda School, it's usually would be a low income student that couldn't afford a four year institution. And I feel like the end user makes these situations even more worrisome.
20:57 Speaker 00 Also, I think that the ability to shovel money into companies makes sense in certain areas of startup land, but less in other places. To give people an example of how this has changed, in the old days, if you made a new dollar of ARR, annual recurring revenue at a software company, it was worth like $4. Now it can now it can be worth $80. And so you can shove almost an unlimited amount of money through a SaaS startup, even somewhat inefficiently, and still generate lots of value for shareholders of all stripes because of the way the market values that revenue. As Natasha and I have learned via Udemy and some other ed tech companies that have gone public, you don't get that kind of multiple on ed tech revenues. And so frankly, you know, I mean, gosh.
21:36 Speaker 02 It's a dumpster fire. I'm actually, I'm, I'm, as a founder, I'm actually of two minds about this, right? Like, if any of my founder friends were in a situation where they could raise at eighty to one ARR, I would say, absolutely, you should take it, right? But the thing that happens, I think the, the novel negative feedback cycle we're trying to like, put words to here, isn't necessarily driven entirely mathematically. I think it's psychological. I think what happens is founders are strange human beings. They're a little psychologically fragile. And if you give them the right kind of positive reinforcement at the right time, you can almost completely change who they are. And I think what's happened is VCs don't just give money, they give social prestige.
22:19 Speaker 02 And if you are being rewarded for growing quickly at an early age, you will continue to do that. But there's no reason, actually, that you can't take a series A at a bonkers valuation that gives you, you know, you only give up ten to twenty percent of the company. Like, you could run the company as slowly as you like after that moment in time. Like, you could eat that war chest however you want. And that's what I would tell people in this situation generally to do. And I think that goes along with the adage that like, you should assume every round of financing you get will be your last.
22:49 Speaker 01 Yeah.
22:50 Speaker 02 I think it's when people forget to believe that that assumption truly is real, or to take it as seriously as that, that you get into weird situations where you find yourself trying to juice metrics as hard as you can in order to get the next round and allowing your mind to not really deal with seriously the fundamental question of what you're doing. Like, what is the sustainable version of this business that in ten years will still exist or not? And it's really hard for people to go through that thought process because they're used to doing the thing that they've become good at, right? Like, if you manage to raise a lot of money, you've developed a lot of skill and passion probably for the process of raising money. That feels like work. That's exciting. That's fun, but ultimately, it's illusory.
23:33 Speaker 01 I think a lot of hearts are in the right places, right? Like, health tech and ed tech both are full of people who want to do good. You could just do a different business if you wanted to make money faster. But I agree, like, I don't know how often people are sitting back and trying to unlearn some of the assumptions they've never been told are probably false. With Ro, for example, the company believes that it can turn an ED business into an end-to-end clinic. But if it's not succeeding on that, it's also okay. Like, they don't have to try to continue to do that. And I guess it's a little bit of like soul searching and psychological there if you need to like kind of dim that vision a little bit. I will say, like, with venture incentives specifically, I don't think they're good or bad. If you are a company that shouldn't be venture-backed and you get venture, it's not going to work very well for you.
24:18 Speaker 01 But I don't think it's anything about venture.
24:20 Speaker 00 Most of the time.
24:20 Speaker 01 Right. I just don't think it's venture specifically that's the issue here. I think it's like venture incentives with a company that shouldn't be venture-backed, with a founding team that is in this like, kind of on both sides of trying to pitch a vision that's not materializing.
24:33 Speaker 02 Can I make the argument on the other side of this also? That it might not be so morally neutral, actually?
24:38 Speaker 01 Yeah, please.
24:39 Speaker 02 And I don't know that I entirely believe this argument, but I think it ought to be made, right? Like, there is an argument that too much venture doesn't just affect whether one company will survive or do well or not. Like, it does actually affect the entire market. And it can erase other sustainable businesses if enough venture is deployed, right? I mean, the canonical example is Uber wiped out taxi companies everywhere, right? That are now starting to recover because Uber has had to adopt more sustainable pricing. But real economic damage was done by that, right? In the sense that there were people who were long loans on medallions, who went personally bankrupt and so forth, right? Like, there was damage done to the economic efficiency of the system through the introduction of unwise capital. That these companies don't exist in a vacuum, right?
25:25 Speaker 02 They exist among a field of players. They exist in an economy that is trying to find an efficient configuration to create value. And too much money can actually delay The system finding equilibrium. I think the funniest example of this is if you read Reed Margins' piece on pizza arbitrage. Oh, my God.
25:42 Speaker 00 Oh, my gosh. It's in the show notes on the site. We'll link to it, but it's one of the best things I've ever read, period.
25:50 Speaker 02 And I think it's really easy to read, haha, like DoorDash is so foolish. Look at those idiots. But it's also the other side of it is they obliterated all sorts of sustainable delivery options that might have existed. They obliterated goodwill with restaurants. Like, if there was a sustainable version of a national scale delivery app, it's going to be another 10 years before we can give an earnest go of it. You know what I mean? Like, they salted that earth, and that has cost. It's hard to say how much, and it's hard to say you should or shouldn't go for it, you know what I mean? Because you have to take risks, I understand. But, you know, there are externalities to everything that anyone does at this scale.
26:26 Speaker 00 And they're getting bigger because there's more money than ever in venture capital.
26:30 Speaker 02 Absolutely.
26:31 Speaker 00 The fact that Ro was able to raise a half billion dollar round, which is quite a lot of money, frankly, like just by itself, it's a truck of cash. Like, you could stack up a whole truck full of cash, and you wouldn't have that much money. Like, it's a lot. I mean, that means that that money wasn't used in other places. Those employees were eventually hired at a company where they ended up leaving and not having as much of an impact. And of course, every startup is risky. They're not all going to work. That's okay. But certainly, the amount of money is allowing companies to do more that is inefficient than they could before in certain areas where there is lots of an impact when it comes to venture returns. So I think Vincent makes a good point. The thought you make a good point. But I've also looked at the clock, and we're over time. We have to stop talking. But we will be on this topic as it comes up throughout, really, just the rest of the year and all of next year, because I don't think the venture capital world's going to slow down. So we're
27:15 Speaker 00 going to keep seeing companies end up occasionally in the Bermuda Triangle of venture capital world, which is when you reach, like, 50 million ARR, and you're not going anywhere. Because a company that loses money and isn't growing is worth nothing. All right. This is Equity. Bye.
Previous Equity Monday: The beginning of the end of ‘996’ Next Three quarters of record-breaking funding for female founders is a win Page updated October 14, 2026 · transcript and summary are machine-generated
