#455 Kate Clark and Amir Efrati on the Technology Industry

Kate Clark is a reporter for The Information, covering venture capital and startups, with a specific interest in fintech. Amir Efrati is the Executive Editor of The Information, which he helped to launch in 2013. In this conversation, we discuss The Information’s 50 Most Promising Startups, the 2020 biggest VC winners, who is leaving SF and why, and then we discuss Sequoia, A16Z, Cameo, Bunch, and Stripe. ======================= Smart investors know being early is critical to success in crypto. CoinList is where early adopters invest in, earn, and trade the best new crypto assets before they list on other exchanges. Try CoinList Pro and be first to trade on network launch. Sign up via coinlist.co/pomp and earn $10 in BTC after you trade $100. ======================= Crypto.com is the only all-in-one platform that allows you to BUY / SELL / STORE / EARN / LOAN / INVEST crypto all from one place. Join over 1 million users currently using the Crypto.com app. Download and earn $50 USD using my code ‘pomp2020’, or use the link https://platinum.crypto.com/r/pomp2020 when you sign up for one of their metal cards today. ======================= Pomp writes a daily letter to over 90,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

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

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano, most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Amir Afaradi is the Executive Editor of The Information, which he helped launch in 2013. Kate Clark is a reporter for The Information, covering venture capital and startups with a specific interest in fintech. In this conversation, we discuss The Information's 50 most promising startups, the 2020 biggest VC winners, who is leaving San Francisco and why, and then we discuss Sequoia, Andreessen, Cameo, Bunch, and Stripe. I really enjoyed this conversation with both Amir and Kate, I hope you do as well.

• 0:45Anthony Pompliano?

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• 1:29Anthony Pompliano?

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• 2:10Anthony Pompliano?

  Crypto, all from one place, crypto.com. Lastly, don't forget that I write a daily letter to over 95,000 investors about business, technology and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. All right, let's get in this episode. I hope you guys enjoy this one. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a

• 2:54Anthony Pompliano?

  particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 3:06Anthony Pompliano?

  All right, guys. Bang, bang. I've got two special guests today. I've got Kate and Amir here. Thank you guys so much for doing this.

• 3:13Speaker 01

  Yeah, thanks for having us.

• 3:14Speaker 02

  Good to be here.

• 3:15Anthony Pompliano?

  Absolutely. Let's just kind of go through both of your backgrounds. Maybe Kate, we'll start with you. Kind of what'd you do before you got to the information? And then what do you focus on there?

• 3:23Speaker 01

  Yeah, so I've been at the information for almost a year now. And before that, I was a reporter at TechCrunch, where I covered startups and venture capital. I'm on the same beat at the information, covering a lot of early-stage startups, covering a lot of fintech, covering all the venture capital funds.

• 3:40Anthony Pompliano?

  Awesome. And Amir?

• 3:42Speaker 02

  So I was for nine years at the Wall Street Journal, covered all sorts of things, including white-collar crime, and then later, technology. Not that there's a lot of overlap, but then helped to start this publication, the information, which is led by Jessica Lessin, who was a colleague of mine at the Journal, and we worked really closely together. So I still work for her. I started to work for her when we when we launched the company in 2013, and off to the races.

• 4:13Anthony Pompliano?

  Awesome. And so you guys recently put out this list, the 50 most promising startups. Maybe let's just talk through kind of why focus on a list and then what was kind of the criteria? And how did the list come together?

• 4:25Speaker 02

  So we wanted to focus on more under the radar startups. There are plenty of companies that are getting wildly, wildly high valuations very, very quickly in their life. And then others that are, that are choosing to take a different route and maybe not raise as much money. Probably because they're really good businesses to begin with and they don't need the money. But there are plenty of young companies that we wanted to spotlight in really important areas that perhaps just don't get enough, just don't get enough light. And for me personally, just speaking personally, there are a lot of examples in the kind of enterprise artificial intelligence realm, essentially companies that are helping companies, other companies,

• 5:06Speaker 02

  make better use of their data or prepare that data for, for machine learning models to process them and improve different, you know, aspects of the businesses that they operate. So there's just a lot of action, a tremendous amount of action. And we wanted to focus on companies that have raised about a hundred million dollars or less. In some cases, very, very little Zapier in enterprise software, Zapier is our favorite there. They've only raised 1.5 million in equity and debt. And they are definitely one of the most interesting enterprise software companies in the world. And very few people have heard of them because they just stay super low. And then in some cases, you have companies that have raised a lot more than that.

• 5:51Speaker 02

  So we, we extended our parameters for this list of the most promising startups to companies that have raised, that have launched three years or, or less. So companies that were founded three years or, or less. So that, that's our, that's how we, that's how we did it. And really we, we, you know, we, we just get a lot of really good response when we focus on metrics of these companies, how startups are actually performing. A lot of very young startups get attention, but we don't really know what their growth rates are, what their revenue is, what are the challenges, the challenges that they face? And we just really wanted to hone in on that and get a really good response when we do it.

• 6:33Anthony Pompliano?

  And so is it fair to say that the $100 million in capital raised mark and the three-year mark, that was your attempt to define a startup? Because it seems like, you know, when WeWork was like $15 billion at one point, it would be like startup WeWork. And it was kind of hard to see like, where does startup end? And do you become like a real company?

• 6:52Speaker 01

  I don't think anyone really knows where startup ends. I think for me, I still consider companies pre-IPO fair game if you're like a startups reporter. But yeah, I think our goal is there's so much noise in the market right now. I think more than ever, even during during the pandemic, when you would think startups wouldn't be doing as well. And so we thought if we spent a couple of months, like, looking through hundreds of companies, we could probably come up with a list and confidently say, these are the startups that are actually truly startups early in their lives that, you know, we think that our audience should be paying attention to.

• 7:26Anthony Pompliano?

  Got it. And Kate, you've obviously focused a lot on fintech. There's a number of fintech companies on the list. Kind of what are you seeing there? Are there any specific companies that stick out to you as companies that people should be aware of and kind of paying attention to as we go into 2021?

• 7:39Speaker 01

  Yeah, I mean, all the companies that we put on the fintech list, I think is about eight are amazing companies. I'll say, it was really difficult to narrow it down because every company right now is is is a fintech company in some way. And it's kind of the joke that the fintech investors will say is like, every company is a fintech company. So like, how could you shoot? How can you choose just five or 10? And I tried to pick, you know, companies that sort of represented the ecosystem, which is diverse in terms of like, companies that are and what they're doing, whether they're helping small businesses, whether they're creating a virtual card, or whether it's something like Robinhood. And one of the companies on this list actually is called Trade Republic. And it is very similar

• 8:20Speaker 01

  to Robinhood. It is essentially Robinhood targeting the European market. It's already doing phenomenally well and, you know, growing really, really fast. So I would say my big takeaway was, you know, the fintech market is enormous right now. There is more money than ever has been going into that category, going into it from venture capitalists. And I think that there are just so many different problems that these entrepreneurs are trying to solve. And hopefully, they're not, you know, competing with Stripe, which is the monster that pretty, pretty difficult to defeat right now.

• 8:54Anthony Pompliano?

  Absolutely. And Amir, obviously, when you look at from the investor standpoint, kind of who the big winners on the list are, Andreessen and Sequoia both kind of lead the list in terms of their number of their portfolio companies on there. I think Sequoia had eight and Andreessen had seven. Is this a product of the best, get the best deal flow and therefore that should be expected? Or is this just them proving, you know, this is why they're the best is because they're finding companies that either others can't get into or they're picking the right winners?

• 9:22Speaker 02

  Well, it should be mentioned that a few of those from Sequoia are actually from Sequoia Capital China. So we had a part of this list, 10 or 11 companies are based in China. And I think Sequoia Capital China was in three of them. Andreessen was actually more interesting. Andreessen Horowitz is more interesting in the grand scheme of things here because they invested in some of the companies that are based here and they don't have like a, you know, Chinese cousin or Chinese version. So it was Andreessen Horowitz proper. And they really stick out because they have a couple of partners, one of them is named

• 10:03Speaker 02

  Martin Casado, probably be great to have on the pod, who really focus on enterprise software, but with a machine learning back. And they really understand how the ecosystem, how there's this ecosystem springing up of different tools to help data scientists or machine learning experts make, you know, make their companies better. And they've been investing in this, in this area for years. And there are some other firms that are a bit, you know, they invest a little bit in the earlier stage, like Data Collective is one, or Costano Ventures is another that also do this. And so Andreessen in this case

• 10:42Speaker 02

  has really kind of been ahead of, ahead of the curve in many respects. So I can probably pull up some of the companies that they invested in that are, that are on our list. But, but yeah, they really seem to have the kind of AI space, which I realize is very hyped up. And we're not talking about general artificial intelligence or anything like that. We're talking about much more basic uses of machine learning that can actually make a difference to companies that are not named Google or Facebook or Amazon and so on.

• 11:14Speaker 01

  I think also, oh, sorry. I was just gonna say another takeaway for me seeing Sequoia and Andreessen on this list so much is just these firms, I've gotten really aggressive at seed and series A really early stage. And we've talked about that a lot. And you know, you're seeing it pay off. These these firms obviously have the best deal flow because they have the best reputations. They're not new to this. So I think that was interesting to see. I mean, they're clearly in the best companies already. They don't just do, you know, those big rounds, those growth stage, growth stage investments.

• 11:45Anthony Pompliano?

  Absolutely. Two of the companies that were on the list that I thought would just be fun to talk about. One is Cameo and the other is Bunch. With Cameo, we've had Steven on the podcast and it seems like they've really kind of gone from what I think a lot of people looked at as almost like a toy at first, right? It was like, what do you mean? You're gonna pay for like these videos? To now, all of a sudden, he's, you know, on Twitter, talking about like, we're gonna help people monetize their time and do it with the most famous people in the world. How do you guys evaluate that type of business? And you know, how much of that is, hey, they're just getting started versus they're already a pretty big company? They've raised a lot of money and we're kind of seeing what they'll look like in that final state?

• 12:21Speaker 02

  Well, we were, we were surprised to do here that, you know, their kind of gross sales are gonna hit $100 million in 2020. And that means that they are gonna take in, on a net revenue basis, $25 million. That did surprise us. We didn't realize it was that big. However,

• 12:44Speaker 02

  you know, another company that came up, which is a very unusual company, whose founder you should also have on is OnlyFans. And there is going to be a merge here because OnlyFans is also monetizing people's time and they have a long tail of people, including, you know, people in the adult entertainment industry, of course, who are doing that. Cameo started with, you know, mainly kind of B-list, C-list celebrities, some of whom are lovely people, some of whom are criminals, you know, from, from the Tiger King. And they, yeah, they, there's definitely going to be an overlap here. And you're right, it's one of those companies that

• 13:24Speaker 02

  at first, you think it's kind of like jokey and cute. And then, you know, over time, and then, you know, certainly. Somebody like Steve realizes what's happening and what the possibilities are. So we definitely like it. We think it has a lot of potential. But OnlyFans gross sales this year, I think, are going to be 2 billion. So that's really going to be the big fish in this market of monetizing people's time. So I think Cameo is very, very focused on OnlyFans. And there's, of course, room for multiple companies to exist in this area.

• 14:00Speaker 01

  Yeah, I think we'll see Cameo. I mean, the company's only worth 300 million. I say only because that's a valuation that actually surprises me. I think they'll be north of like 1.2 billion probably in a matter of weeks because they're probably in the middle of fundraising because everyone is. So that'll be interesting to see kind of who, which investors go after Cameo and make it into their next round.

• 14:21Anthony Pompliano?

  Absolutely. And then what about Bunch in terms of kind of a different type of business? But what are the thoughts there?

• 14:28Speaker 02

  That was a much simpler calculation, I think. You know, you have this service called Discord for hardcore gamers, right, to talk to one another. Bunch is, and it's a very young company, I think, like launched like three years ago. That's just a community-based chat service for mobile games. So it's the mobile game version of Discord. And, you know, games in the pandemic period, I mean, it's, you know, my colleague Tom talks a lot about it, just such a good business. And this is going to, obviously, one of the areas that's just taken off. And Bunch has just benefited from that tremendously.

• 15:09Speaker 02

  So I don't think, that was one of the companies, one of the few companies I don't think we had revenue data for, for the 50 companies that we wrote about. I think we had revenue data or growth data on at least 40, 42, 43 of them. And we did not have revenue for Bunch, but I actually think they may be pre-revenue. Let's see. Yeah, I think that was probably the case. I don't think they've monetized yet. So that was, that was an issue, but their users. Is is growing tremendously and I think it's just, you know, Tom, my colleague, Tom Dutton

• 15:51Speaker 02

  just calls it a no brainer. And the plan is that they're going to generate revenue through in-app purchases. You got to customize the experience that people have with the app and add features and in terms of how they chat with one another. And then eventually the company is looking to do kind of branded content and events in the in the app. But it's really just a bet on mobile gaming taking off. And that's a great bet to make.

• 16:13Anthony Pompliano?

  Absolutely.

• 16:13Speaker 01

  Some of these decisions were a lot easier than others. I think this is probably a good example of one. And there are a couple on my fintech category that were more straightforward. But I think especially when you see some of these that were just accelerated so much by the pandemic and I bunch clearly, you know, people playing more games, people looking for that social interaction. That company, I imagine, I didn't do the reporting on this company, but I imagine has grown quite a bit during COVID. So that coupled with the fact, you know, that Discord has done so well, I think, makes it pretty, makes it a pretty obvious choice.

• 16:43Anthony Pompliano?

  Yeah, one of the things that stuck out and Amir, you mentioned it earlier, is that about 20% of the list is in China. And so there's been tons of debate on Twitter, obviously, of like, you know, what founders and investors are leaving in, leaving San Francisco, moving to San Francisco, who's going to LA, Miami, Austin, you know, we can go around the world almost, Tulum, right? The whole nine yards. Talk to me both about just like geography in general. Should people read into the fact that there's 20% of the list on, from China? And does that play into some of this more like mobile type of workforce, just given COVID and the lack of need to go to an office? Or kind of how do these things all relate to each other?

• 17:21Speaker 02

  It's two separate thoughts. And Kate, Kate can talk about the kind of US side of this. We've always been focused on China. We have a four person team in Hong Kong that focuses on Chinese companies. And there are a lot of very good reasons to do that. It set us up very well for the rise of ByteDance, which runs TikTok, which is just a version of a, of, you know, a service that they already have in China that's massive. And we cover all the biggest companies there, Alibaba and up and comers like Pinduoduo, which is another huge e-commerce player. But on the startup side, we're also able to follow all of the trends that oftentimes

• 18:05Speaker 02

  they start in China and then they end up around the world, especially when it comes to innovative business models. You think about monetizing video. That is something that companies in China did very well much earlier than companies in the West did. And it's really similar with every other type of business. What's interesting right now with respect to the Chinese companies on our list of the top 50 most promising startups is that a lot of them are enterprise businesses. They are not consumer businesses. The action in China right now in the earlier stages of venture investment have very little

• 18:48Speaker 02

  to do with consumer startups. There are some direct-to-consumer startups in the commerce area, people who are going direct in selling makeup or selling other goods. But a lot of the action is in things like robotics or marketplaces that help companies find designers to help them create ads or branding. There's certainly a category of company that is using advanced forms of machine learning to diagnose various illnesses, looking at x-rays or other health data and coming up

• 19:30Speaker 02

  with a better idea of what's actually wrong, finding some patterns. And then industrial robots is really the core area that we focused on in this list. So many companies. Are developing robots for various purposes, whether they're aiding warehouses and making warehouses more efficient, or they are actually aiding in the testing of new drugs such as or vaccines in the case of COVID-19. So there's just a lot of action there. But Kate can talk a little bit about what's happening in the Bay Area, which is definitely, as you pointed out, the hottest topic on Twitter. And I think, you know, I think we take a little bit of a more measured

• 20:11Speaker 02

  view. But when I was hearing about people like Drew Houston, who runs Dropbox, leaving the Bay Area, you know, it's hard not to take notice. You know, it's not, it's not just because people are looking for tax shelters or states like Florida and Texas that don't have, you know, state, state income tax. It's a, it's definitely a bigger issue that that has taken off during COVID. But Kate, Kate can talk a lot more to that.

• 20:35Speaker 01

  Yeah, I mean, half of our list was San Francisco Bay Area companies, but I don't think that that's any indicator that, you know, San Francisco is, is going to be any, is going to be less important in the future. Like, we don't know yet, because people are leaving now. So we won't, if we do this list in four years, we'll have a better sense of like, okay, how significant is the Bay Area? But I think it's undeniable at this point that the debate is, is fair. You know, early in the pandemic, when I was asking questions about, you know, people abandoning San Francisco, I got a lot of responses that were like, no, they're not going anywhere. Why would you ask that? Or, or this comes up every year,

• 21:16Speaker 01

  it's not a story. And now it's clearly a story, and people are talking about it, yes, on Twitter, but also offline. And people are moving to, for some reason, Miami and Austin have really, well, because of obviously tax purposes. But Miami and Austin have really become the hotspots and I think every day you see more people doing it. And I know I've spoken to people who don't want to share online that they're doing it, but they are moving. So I mean, I think it'll impact the San Francisco Bay area. I think what will happen is most companies that are very, very, very early will still want to build in Bay area because there are just higher density of entrepreneurs and investors. And I do think that will probably stay true. But I think anyone that is experienced

• 22:00Speaker 01

  or later stage in their company, you know, somebody that sold a company and just is well-connected, there's probably not going to be a big reason for them to be in the Bay area long-term. And I think that's kind of what a lot of people that I'm talking to are agreeing on.

• 22:13Anthony Pompliano?

  Yeah. And what's so interesting, I think, is there's obviously the tax conversation. There's like a weather conversation, if you will, as I look in, it's snowing out here in New York and it's not snowing in San Francisco. But also, it seems to be like there's a critical mass conversation as well, right? It's like, yeah, some people in the early part of this adoption cycle might have moved for taxes or because of COVID or whatever. But now, like, where's the tipping point, right? Like, how many people have to move to Austin or have to move to Miami before it becomes like that's just the same thing as moving to San Francisco five or 10 years ago, right? Because it's just like this critical mass. Any thoughts there? Is it a number of people? Is it certain types of people? Like, if all the VCs move, then all the companies

• 22:55Anthony Pompliano?

  move or vice versa? Like, how do you just think about like, what makes this a sustainable trend versus maybe just something that's happening during COVID?

• 23:02Speaker 01

  I mean, I think it's a hard question to answer. And I don't know, because we haven't really seen it happen in the past. You know, we've seen conversations about second-tier hubs. You know, you have Seattle, you have Atlanta, but we've never seen those companies reach a point of maturation that, you know, comes anywhere close to the Bay area. I suspect just because of the history of San Francisco, you may never really have something comparable. But, you know, if you imagine a scenario in which Every key investor is no longer in the Bay Area. There may be less of an appetite amongst founders to move here, but then you know, you still have these accelerator programs that in theory will probably go back to in person that are connected. And there are a lot of people who actually like San Francisco a lot and don't want to move.

• 23:45Speaker 01

  So I guess I have a hard time really imagining a scenario where there is this huge tipping point of enough people being in Austin, Texas, which is so different from San Francisco, that it really becomes like some replacement of SF. But that's kind of just my personal take.

• 24:01Anthony Pompliano?

  It's got great barbecue and cheap beers, though. So you know, that's their selling point.

• 24:05Speaker 02

  That's a hot summer. I think it's important to talk about the distribution of employees and how that's going to change. And there are, there have been companies, Zapier actually, the company I mentioned earlier. And for people who don't know, like, it's a little bit, it's a little bit difficult to explain, but it's basically software that kind of helps make the connections between different types of applications so that they can talk to each other. So if you want to like automatically save every email attachment you get to Dropbox, or you want to send all of your human resources forms to DocuSign, Zapier helps you do that. So they're, they're pretty critical, you know, under the hood type of, of service.

• 24:50Speaker 02

  They started in 2011. They are one of the oldest companies on our list. They have always been, I mean, the three founders are based in the Bay Area. They all moved out here and they were actually part of the Y Combinator accelerator. But they have hired people in a distributed fashion. They're, they don't have an office. I don't think they've ever paid rent. So there are going to be more companies like that. And Cameo, you mentioned Stephen earlier, they have become officially a fully distributed company permanently. So they are planning to just, you know, hire people remotely from here on out. Now, not every business can do that.

• 25:33Speaker 02

  You're in the robotics realm and you need people in a, you know, specific area. If you're developing autonomous vehicles or whatever it is, yeah, you need like a group that's together. There's no, you can't replicate that virtually very easily. So we're just going to see a lot, a lot more of that. And companies have a lot of incentive to do it. It's much cheaper to do it this way. You can run a company much more efficiently and be much more profitable faster if you do it this way. So I think that's actually a bigger driver of, of, of kind of what, what we're all talking about here. There isn't a cheaper way to do business than, than there ever was. So I think that's really gonna, gonna drive it. People see what's possible now. Some of that will continue. We don't know how much will continue, but definitely some.

• 26:19Speaker 01

  Well, I think what you're saying is like, as those companies scale to, and they really do need to hire a lot of employees. That's really when you need to go elsewhere. But I think maybe the really early days and like the, you know, going through Y Combinator, raising your first round, maybe where San Francisco is still a really significant and important ecosystem. But yeah, as you, as it gets more and more expensive, why not go elsewhere or go fully remote?

• 26:42Anthony Pompliano?

  Absolutely. And in terms of, if we kind of think of from the investor seat, there's two things that I think are happening, right? One is obviously there's this move from, hey, I want to meet people in person, warm intros, all that kind of stuff. To now there's this more like digital first world, making investments across Zoom. I think that that's like pretty well documented and most investors, while maybe they thought that was going to be a big deal, seemed to kind of have made the transition just fine. But also there's been a whole bunch of, I'll call it gyrations in valuations. Cause it seems like certain sectors are seeing an explosion in valuations and then maybe other sectors that are becoming less hot are not. And so how do you guys think through this comparison between public markets and private market valuations?

• 27:25Anthony Pompliano?

  We were joking before, we're recording this on the day that DoorDash just went public. And literally if you refresh the page like every 20 minutes, they've added like billions of dollars of market cap. So how do you just think of like that valuation component in the private markets and compared to the public markets?

• 27:40Speaker 01

  I mean, both are, both are incredibly robust.

• 27:44Anthony Pompliano?

  Robust is a great, is a great word to use there.

• 27:46Speaker 01

  Yeah. So I mean, you know, as we all know. Public markets do help determine private market valuations and you're seeing both reached kind of insane levels. I mean, I just was talking to a seed investor before this call who said, if you are an alum of Robinhood, Stripe, or any other company, Airbnb perhaps, like you're gonna get a valuation of like thirty million to a hundred million with no product or, you know, hardly an idea. And even if you are somebody, he said, that's somewhat experienced, but maybe not an alum of one of those companies, you're still gonna command a pretty high valuation. So that's what we're seeing like from seed all the way to pre-IPO, which is, I mean, Stripe is reportedly raising at a hundred billion dollar valuation. Like, I don't know,

• 28:30Speaker 01

  I think it's, it's hard to imagine that it's going to persist through 2021 like this, but with that said, I think it will. So I'm really curious to see where valuations go next year. But, um, but yeah, I would just say both are really crazy right now.

• 28:46Speaker 02

  It's confusing. There, of course, the macroeconomic issues here where, you know, interest rates and inflation play into, play into what's happening in the public markets. But I think because of what has happened, especially with companies like Google and Facebook and Apple and Amazon, I think a lot of the assumptions a decade ago that all of us in the press and, and many investors and many operators had about how big these companies could be with the core businesses that they had were just way off. They ended up having markets that were much, much, much bigger. And, you know, you have some similar arguments being made now,

• 29:31Speaker 02

  especially with regard to enterprise software, cloud software, cloud infrastructure. People like Aaron Levy, you know, the CEO of Box, who's an excellent tweeter, if you don't follow him already, you know, talks about this all the time. And I think there's definitely some truth to that. There's also, you know, what's different about the private markets in tech versus the public is also just a very limited group of companies that have traction that you can invest in. And there is an incredible willingness right now on the part of a lot of the money that's chasing private tech deals to just be out of the money for a while in the sense of

• 30:16Speaker 02

  putting money into work at these companies at a supremely high valuation and just not worrying about it for a while, even if it seems like too high of a price, hoping that it'll work itself out. There's just so much money chasing so few deals. And maybe that's what you're seeing with DoorDash right now. People just want to park their money somewhere and it seems like a good spot. But we, you know, we wrote this story, not to belabor the point, we wrote this story about the 100X Club, which is the software startups that have these incredible valuations despite, you know, little to no revenue, especially in the cloud-based software world. Companies like, you know, Loom, which is a video communications tool, and Postman, and some others.

• 30:59Speaker 02

  I mean, even Notion, you know, with the productivity software app that you probably have heard of, has a pretty lofty valuation. And, yeah, I just think it's a really unique period of time. And I, you know, I don't think any of us can say whether it's ridiculous or not. I think DoorDash at $72 billion valuation, that requires a lot of profits to make sense. And I don't know that they're close to showing us those profits, so.

• 31:30Anthony Pompliano?

  So as you guys think about kind of the winners of 2020, I've seen that you've published a couple of pieces just around like the venture capital returns, and some of them were company specifics. Like I think Airbnb, I saw one where you kind of went back and said who invested when and kind of who's going to profit the most. But also just for the year 2020, how do you guys think about the big winners? And it seems like Andreessen and Founders Fund and Sequoia again, kind of come up in conversation there. But just what are the thoughts and kind of how do you see that?

• 31:59Speaker 01

  Yeah, I mean, we just did a piece on the VC winners and it's very clearly this year, founders fund in Sequoia. So it's not, it's the usual suspects. It's not surprising, but it is amazing to see these firms kind of like landing on top with, in Sequoia's case, you know, a 20% stake in multiple of these multi-billion dollar IPOs. We calculated at least, I think, around 15 billion in returns and that's not including, you know, the way that these companies are popping day one. And I, I'd have to be updating that story every minute to, to in real time, tell you what Sequoia's returns are. But, but yeah, I mean, I guess it wasn't really, it wasn't surprising to see who we did see on that list. It also included GGB Capital and some others that had just really lucrative

• 32:40Speaker 01

  early stakes. But again, I think the lesson is just this multi-stage strategy. You can see it play out in real time for Sequoia. They've gotten a lot more aggressive early stage. They've even gotten, you know, they're getting more aggressive across all stages. And that's how they're really maintaining such huge stakes. And again, just getting in early, that's really the most important. And if you can get the seed in Airbnb, you know, you're going to make a lot of money.

• 33:07Anthony Pompliano?

  Absolutely. Amir, anything to add?

• 33:08Speaker 02

  Yeah, I mean, we, we pointed out that they had a chance to lead the Series C deal for Airbnb on top of the other rounds that they led, but they were acting too slowly and Brian Chesky at Airbnb got, got pissed off and went with, went with founder's fund. So that definitely cost them, cost them a bit. But just to hammer home this point that Kate made, venture firms or, or private tech investors are going earlier and earlier and earlier and, and paying more and more and more in terms of prices and increasing the sizes of the rounds. And, you know, Tiger, Tiger Global is, is one of the firms that Kate's written about a lot, that it's being super aggressive. Another is

• 33:51Speaker 02

  Co2 Management, like hedge fund that also does a lot of private tech investing. You know, they're, they're actually very, very competitive with one another and they are chasing early stage deals like crazy because they, they want to get into the next, you know, Airbnb or what have you, or, or snowflake as soon as possible. And that's just, that's having a massive, massive impact on the private stage.

• 34:15Speaker 01

  Which is crazy because those are multi-billion dollar hedge funds turned venture capital funds that are like, I mean, they're literally going after $3 million financings and, and, and not even, they're not necessarily winning. I mean, sometimes they are, of course, but Co2 is one that we've seen, I, I believe, more active than ever. Um, maybe, you know, maybe they were just as active last year, but before that, not at all. And in the super, super tiny early stage rounds and some, you know, initially it's confusing to see so much of that. But I think we understand when we see these IPOs and we see these stories kind of come to an end for these, not, you know, not necessarily an end, but like, kind of, we can understand why seed is as competitive as it is now.

• 34:58Anthony Pompliano?

  Absolutely. And, and it also feels like there's this belief, you know, take the hedge funds, for example, like they have all the public market data, they should be able to see things that venture capital funds might not see, or, um, you know, hey, if I'm going to buy the company on the IPO, why don't I try to buy it in the round before? And you saw, you know, fidelity and a bunch of these people doing that. And then they just kind of worked their way down. Uh, it is surprising, though, to see the $3 million kind of seed round, right? To, to imagine that a, a multi-billion dollar hedge fund is competing at that stage. But again, if you get in at that stage, then you kind of have an option on, you know, information and, and, uh, you know, kind of first rights, or at least first look at a lot of things that happen to the company from there. I want to end, uh, talking about Stripe. It's come up a couple of times in

• 35:40Anthony Pompliano?

  conversation. Uh, they seem to, one, have built like the elephant in the room, uh, but two, they also seem to be bucking the trend and not interested in going public at all. Uh, I saw today somebody tweeting, uh, calling SPACs, uh, SPAC PO now, which is just, you know, the, uh, the most recent way to get into the public markets. But it seems like Stripe has no interest in that. They're raising, uh, money has been reported, uh, at very high valuation. How do you guys see that business? And is this kind of a once in a generation company that we can expect, you know, one day to be in kind of the, the conversation with Apple and Amazon and, and others? Um, or kind of, how do you look at this?

• 36:16Speaker 01

  Yeah, I think so. I think it's a once in a generation company. And I think Patrick and John Wine that they've been giving out lately is just that they're in the first inning and they don't want to go public as such an early-stage company. I mean, they're incredibly mature. They have, what, like a dozen well-developed products and compete with everyone in fintech ecosystem, but they do have a lot of access to capital. And I imagine that there are many, many investors who are going to continue to be willing to give them those pre-IPO dollars. And eventually, I imagine they will go public. I mean, we saw Palantir was, what, 20 years old when they finally IPO'd this year. Stripe is, I think, you know, pushing

• 36:58Speaker 01

  10. I think they recently turned 10. We may not see them go public for five or six years. I think it probably will be sooner, but I'm not holding my breath. I think they're they're taking their sweet time. They know they have many, many options.

• 37:11Speaker 02

  It depends on how many of their employees they they let sell sell stock and kind of relieve some of that pressure through secondary sales and others. And Kate, I'd be remiss if I didn't mention your excellent story about Stripe also being a fantastic venture investor in and of itself, which I think I think matters here, too, right?

• 37:30Speaker 01

  Yeah, I mean, it shows you how how incredibly mature this company is. I mean, they they're at the point where they're essentially a corporate venture capital fund, yet yet, like we discussed earlier, kind of still a startup, right? Like, we don't really know what they are. They've kind of created their own category. And I don't know if investors are readily admitting it, but they are beating out venture firms, big ones, for deals in in fintech companies and in companies founded by Stripe alums. And I know there are many deals I don't know about. There are many I do know about. I think they are just very active, and I don't see why we're going to see them slow down. I know John Colson recently did an interview where he said they're they they can they

• 38:12Speaker 01

  plan to continue doing investments, and their goal is to grow the GDP of the internet, which is a very broad statement that I don't, you know, could really mean a lot. So I think we may even see them become a little bit more more generalist outside of fintech. Patrick and John Colson, also Angel Invest, too. We saw them do Rome, which was that note-taking app that has gotten a lot of attention. And they valued that company at 200 million. And that was a company that was just launched its product. So, yeah, it's really interesting for me, I think, to see a company like this behave like a venture capitalist and do so many things at once.

• 38:47Anthony Pompliano?

  Absolutely. I want to leave the listeners with 2021 predictions, if you will. Is there one thing that both of you either believe is going to happen in 2021 or are paying attention to as something that other people could learn a lot from, from watching?

• 39:03Speaker 02

  I can speak to things like mobility and autonomous vehicles. For instance, we mentioned SPACs earlier, and I think we've already seen a couple of LiDAR sensor developers go public in that way, Bellodyne and Luminar. Bellodyne's revenue was shrinking when it went public. Luminar does not have revenue, and their SPACs both did very well, relatively speaking. So Luminar is worth $2 billion on paper now. So yeah, this is a pretty unique period of time. And I think that for especially some of the weaker players in

• 39:47Speaker 02

  autonomous vehicles that are trying to develop prototypes that work, you will see, you will see some of those go out next year as SPACs and try to tell a story, whether it's in automating semi-trailer trucks, or, you know, small little sidewalk robots, or even passenger vehicles, which obviously there's not a huge market for, you know, Uber-type services, but it will come back and they will, they will try to make their, make their case. So I think you'll, you'll see a lot of that. For, for those of your listeners who have Teslas or care about Tesla, which I imagine is a lot of them, you know,

• 40:23Speaker 02

  this, this whole quote unquote, full self-driving bent by Elon is, I think, a pretty misleading type of marketing to do, because these cars are not ever going to be fully self-driving if the person who is behind the wheel is actually responsible for the behavior of the car. So that, that is something that I'm, I'm focused on. You know, there's this beta out for, for people to test this full self-driving software on city streets as opposed to highways where Tesla autopilot features were, you know, automated steering and braking were first launched. Now they're trying to do it on city streets. So those are some of the things that, that, that I'm watching in particular.

• 41:08Speaker 01

  Um, yeah, I definitely have some. My editor recently told me that my 2021 predictions were not very interesting, and that is because I suspect a lot of what's happening now is going to continue. Like, I think, you know, we saw record investment, we saw record fundraising, I think we're going to see it again. Um, we saw a company, we saw these sectors be accelerated by COVID, ed tech, remote work, software, financial services. I think we're going to see that continue. Um, the only thing I have to offer that's maybe a little bit more unique is I think we will see perhaps a record year of fintech exits. I mean, we do know Robin Hood is, is planning, I think, a Q1 IPO. There's others like Chime that are IPO ready. And I know that there are fintech companies that are very interested in going the SPAC route and, you

• 41:50Speaker 01

  know, Ribbit Capital, which is amongst the best fintech firms, has their own SPAC. So I think we'll see a lot there. But otherwise, I really think even getting a vaccine and even say, say the second half of next year is like normal, I still think, you know, even pre-COVID, the venture capital ecosystem, the startup ecosystem was doing phenomenally well. So I just suspect that it'll continue in that direction.

• 42:14Anthony Pompliano?

  Absolutely. That's fantastic. Uh, I ask everyone the same two questions before I end it. Uh, the first is, what is the most important book that either of you have read?

• 42:23Speaker 02

  In our lives? Yeah.

• 42:25Speaker 01

  Oh, I don't know.

• 42:26Anthony Pompliano?

  I know, I know I've got a good question. When Amir starts looking off in space and scratching the back of his head, I'm like, all right.

• 42:34Speaker 01

  I'm like staring at my bookshelf right now, because it's right in front of me.

• 42:40Speaker 02

  Oh, man.

• 42:41Speaker 01

  I could say my favorite book of 2020.

• 42:43Anthony Pompliano?

  Okay.

• 42:44Speaker 01

  Um, Educated, which is, I don't, yeah, do you guys know it?

• 42:48Anthony Pompliano?

  Yes.

• 42:48Speaker 01

  I can't think of the author's name, but, um,

• 42:50Anthony Pompliano?

  Polina was telling me about this. She said it's fantastic. Yeah.

• 42:54Speaker 01

  Phenomenal, phenomenal read about, um, a woman growing up in Idaho in an incredibly conservative and religious, uh, family and kind of her journey out of that. Um, a lot of amazing lessons.

• 43:06Speaker 02

  Gosh, I probably have to say the autobiography of Malcolm X is still at the top of the list for me after all these years. I still think about it a lot, the journey of that man in particular and all the twists and turns it took. So I think that's still number one for me. It's a very difficult, yeah, it's a very good question. I should have been prepared for it.

• 43:30Speaker 01

  Yeah, I need like a week to think about that. So in a week, I'll send you an email.

• 43:35Anthony Pompliano?

  All right. Second one's easy, easier and more fun one. Aliens, are you a believer or non-believer?

• 43:41Speaker 01

  I believe in life on other planets. Like, yeah, yeah.

• 43:47Anthony Pompliano?

  Okay.

• 43:48Speaker 02

  1,000%.

• 43:49Speaker 01

  Not like the green alien that you see. Yeah, absolutely. Believe in.

• 43:53Anthony Pompliano?

  But somewhere out there, there are, there's other intelligent life.

• 43:56Speaker 01

  Yes.

• 43:57Speaker 02

  Somewhere, yes.

• 43:58Speaker 01

  Yes.

• 43:59Anthony Pompliano?

  Awesome. Where can I send people to find you guys on the internet or find out more about your work at The Information?

• 44:05Speaker 02

  Just www.theinformation.com.

• 44:09Speaker 01

  Yeah, and I'm at Kate Clark Tweets on Twitter.

• 44:12Anthony Pompliano?

  Awesome. All right, guys, thank you so much. We'll have to do it again in the future.

• 44:15Speaker 01

  Thanks so much.

• 44:17Speaker 02

  Thanks for having us.